What inspired you set Auxilo?
Before Auxilo, I was CEO of a company called, ‘Avanse’ which is into the similar segment of education loans. I find the segment’s business opportunity very interesting. I found the sector very niche and when you are funding the students you are able to help them fulfil their dreams. Banking sector is quite tough to get the finance for education. And also when you are funding the students, it’s not like you are funding a housing finance or personal loan, its actually making an impact in the society. It’s like giving back to the society and helping nurture the future talent of our country. Such an initiative gives Auxilo an immense satisfaction to be a part of this noble cause.
What are the safeguards you would like to deploy as it’s a high risk sector?
It’s a high risk sector due to the kind of perception created by the banks. If you are focused player in the higher education segment then you understand education very well. Then it becomes a safe sector to dive in. If you see the existing companies apart from Auxilo, the NPs are very low – almost a negligible amount of .1 or .05.
You cannot treat it like giving a personal loan or giving mortgage loan. Banks will not be able to do looking at the large gamut of things they have a process and since they do not have an understanding of education. Our primary focus is to explore the student potential and help them pursue their goals. However, the remaining criteria’s like running through the CBIL comes later on. Our foremost priority is to assess the potential courses in order to decide the loan eligibility.
What size of loans do you provide?
We do not have any upper bar as such. Students going abroad can take home somewhere between 15 lakhs to few crores or crore plus also. There is no specific upper limit. If we see potential in a particular course with respect to the job the student might be able to secure or an enhancement resulting in helping the student to get placed at a good position. These criteria help to decide the size of the loans to be disbursed.
What type of courses does Auxilo fund?
We fund the mundane traditional courses like engineering, medical and management. We are open to new-age courses like music technology or robotics. As per our assessment our focus is on understanding education and providing the much needed funds depending upon the potential of the course it holds in the market. We also scrutinize the career prospect the course holds in the current scenario and accordingly the sanction is made.
How do you support the educational institutions?
The demand for loan in higher education segment is quite high. Even there are higher demands from schools for educational loans. There are more than 4 lakh affordable schools in India which charge fees ranging from Rs 12,000 to 25,000 a year with an intake capacity of 500-600 students. They require small ticket size funding from 10 lakhs to 1 crore for upgrading their infrastructure or upgrade their classrooms, providing hygienic facilities or building a digital classroom. Banks may not provide them the required loans. However, we support these schools in terms of funding so that they can upgrade their infrastructure and enhance their quality of work. So, that they move ahead in the curve of providing quality education at the primary level. This is a business opportunity and a big opportunity as in India we have large number of schools. And when you are working in the primary education segment, helping the school to grow in size and quality becomes a noble cause.
Being a financial institution we have decided that we will be financing across the education ecosystem wherever the need arises. Right now we are stepping into two segments into education loan (domestic and abroad both) and affordable schools as the prime category. Tomorrow we might take up the initiative of funding the school fees or supplying education.
How is the educational loan scenario in India?
The scenario in the student loan segment is quite promising. Lot of students are going abroad to pursue higher education and also in domestic colleges to study. With the rising fees, funding has becomes an essential component. Students want to fund their own education or a course. We might look at funding the school fees segment in this year. Right now we are doing something for the schools that require funds for upgrading their infrastructure and other basic facilities. There are 5 lakhs schools in India. Education is very important for Indians with the gross enrolment ratio growing at an exponential rate in the higher education and primary education segment. The potential is lot in the school segment. These are not the premium schools. So here small funding makes a lot of difference. The opportunity is very huge in this segment as the promoters are focused and enthusiastic in funding their schools.
Banks do not provide them loans as these schools are located in tier II towns and banks usually provide loans to higher education or colleges – keen on financing big ticket size funds. So the help comes from companies like us.
Are you funding the schools or educational institutions in tier II and tier II towns?
Yes, we are. We have branches in major cities – but the funding happens to the schools in the neighbouring towns of these cities. All tier II towns are our major targets in terms of funding.
What are the challenges in the educational loan segment?
It’s not an easy segment. Here we have to assess the financial assessment and the potential of the course and process the students’ future income. Majorly we have to consider the financial parameters of the co-borrowers. Assessment area is much different as compared to the mortgage loan. Auxilo provides 50 per cent unsecured loan with no mortgage. Depending upon the risk factors and the future potential of the courses, the security depends in terms of educational loan.
What’s your vision for Auxilo in the next few years?
Auxilo wants to get into financing HR. We have to get into bringing the education expertise into the core of financing education segment. Will work towards making Auxilo number one financial institution in the country.