Top corporates embrace supply chain finance to strengthen dealer ecosystem
Large corporate groups, including Reliance, Adani, L&T, JSW, and Hero, are seen entering the supply chain finance (SCF) segment, either via their own non-banking finance company (NBFC) or through partnership with other lenders, industry executives say.
“A lot of large conglomerates are entering SCF space to cater to their own ecosystem of suppliers and dealers. Reliance with Jio Financial Services has recently launched SCF. We helped them launch recently, and Jio will become large player because Reliance has largest SCF ecosystem,” said Raja Debnath, Chairman and Co-founder, Veefin group.
“We also helped L&T Finance, and they will get live anytime now. Jindal Steel Works is also getting into SCF, catering to their own ecosystem. Adani and Hero are doing the same thing,” Debnath said.
Veefin is a global SCF platform, which conducted $2.5 billion of monthly disbursals in FY24, and is eyeing to double the volume in current fiscal.
In the SCF (Supply Chain Finance) ecosystem, buyers—typically large corporations—agree to have their suppliers’ invoices financed by a bank or external financier, often known as “factors.”
Why is SCF booming?
Arun Poojari, CEO and Co-founder of Cashinvoice, mentioned that in the past four years, nearly all major banks in India have ventured into the SCF space. Additionally, global lenders like MUFG, HSBC, and SMFG are also offering SCF products to their clients.
There are primarily two triggers for lenders tapping SCF space: lower cost of customer acquisition and stable asset quality of portfolio due to secured nature of the product.
Recently, Poojari said, NBFCs have started hiring especially for growing SCF business.
“We did around ₹10,000 crore plus transactions in FY24, and this financial year we are looking at crossing ₹25,000 crore.” he said.
Further, Debnath noted that while Indian banks were earlier dealing with only top 300-400 corporates for SCF, now NBFCs and small finance banks are targeting the next top 500-2,000 corporates, leading to higher demand from lender and supplier side.
“The benefit for borrowers using SCF will be a lower cost of funds, and they won’t have to spend time searching for working capital. We aim to build a ₹8,000 crore to ₹10,000 crore supply chain finance portfolio, but it will take us about 4-5 years. We have already launched the product and have an ₹800 crore portfolio,” said Y S Chakravarti, MD and CEO of Shriram Finance.