New Delhi, Apr 9 (KNN) Avendus Finance has plans to begin its financing services for small and medium enterprises (SMEs) by lending to vendors, dealers and distributors of mid-market businesses.

A senior company executive informed the Press that the KKR-backed Avendus Finance, a Non-Banking Finance Company (NBFC) plans to enter SME financing.

Sandeep Thapliyal, Managing Director and Chief Executive Officer at Avendus Finance said that having the well acquired knowledge of the mid-market ecosystem, the SME business have been conceptualized around high quality mid-market businesses.

He said that the company would provide financing to SME on the strength of the mid market anchor by looking at the mid market businesses and their value chain-the vendors, the distributors and dealers.

He further added that many banks and NBFCs have built their businesses in the top end corporate segment of the market but no one has managed to segment the mid-market supply chain the way Avendus is looking to do.

“Lending to a Maruti dealer or a Tata Steel dealer, for example, is a business which every bank wants to do, as part of their channel financing business,” he added.

With SME financing, Avendus Finance will able to diversify its business and add another pillar of growth for the business which is expected to start by June.

Commenting over the size and capacity, Thapliyal said that opportunity in SME lending is humongous and the ability to scale up is higher than in the structured credit.

Talking about the challenges that SME faces while getting loans, he said that smaller vendors of mid-market business or dealers, don’t necessarily get adequate credit from formal channels and, therefore, they need to tap into informal channels of credit which are inherently expensive.

Quoting the contribution of SME in Indian economy in numbers he said that Of the almost $2.65 trillion Indian economy, the portion of SME output is almost a trillion dollars, across services, industry and agriculture.

Due to limited availability of formal credit for SMEs , they largely depend on PSUs thus seeing the current trend of slower lending growth of PSU banks, it is creating a large opportunity for new lenders to enter and gain market share.

Avendus Finance Plans to disburse loans of Rs 50 lakh to Rs 2 crore in the form of working capital loans to SMEs.

Thapliyal expects Avendus Finance to build a book of around Rs 8,000-9,000 crore in the next five years in its SME financing business.

Avendus Finance will close 2017-18 with a loan book of around Rs750-800 crore and expects to close the latest financial year with a book size of Rs2,000 crore, across structured credit and SME financing.

Avendus Finance provides customized financing solutions for mid-market businesses such as growth financing, sponsor financing, recapitalization, asset financing, bridge funding, acquisition financing, pre-IPO financing and project funding. (KNN/YV)