Oxyzo transforms SME financing with cash flow-aligned lending solutions

Small and medium enterprises (SMEs) have few dedicated institutions that they can turn to, especially in the private sector. But Gurugram-headquartered Oxyzo is a pioneer in this regard, offering cash flow-aligned lending products for buying key raw materials such as metals like steel, aluminium, copper, zinc, polymers, chemicals, and agro products (foodgrain and spices).

Started in 2018 by husband-wife duo Asish Mohapatra and Ruchi Kalra, Oxyzo Financial Services, the lending arm of B2B commerce unicorn OfBusiness, is a technology-enabled NBFC that caters to SMEs and emerging corporates in the core sectors.

Over time, the fintech has expanded its product suite to cater to multiple requirements of SMEs. It also facilitates wider services beyond lending. For example, it helps in raw material purchases and technological solutions.

The seven-year-old fintech firm has grown its assets under management from Rs 4,700 crore in FY23 to Rs 6,700 crore in FY24 and intends to maintain a 30%-plus growth rate going forward.

The fintech firm’s net profit rose 47% to Rs 290 crore in FY24, from `197 crore in FY23, and its revenue jumped 59% to `904 crore in FY24 from Rs 569 crore in FY23. It closed FY24 with a gross non-performing asset ratio of 1%.

Oxyzo’s loan book climbed to Rs 6,850 crore by the end of the September quarter of FY25, compared to Rs 6,600 crore at the end of the March quarter of FY24. In a ratings note, ICRA said it expects the company to grow its loan book in the 15-20% range in the medium term.

Mohapatra says, “Oxyzo has always been focussed on keeping a control on its operating costs and credit costs to be able to provide tailored working capital solutions to SMEs in the core sectors of the economy, manufacturing and subcontracting, at the right prices.”

In May 2022, Oxyzo became a unicorn when it raised its first round of external funding. OfBusiness has a close to 75% stake in Oxyzo.

A customer of Oxyzo can also buy from the OfBusiness group. Kalra, the CEO and Co-founder of Oxyzo, says, “A lot of our customers bid for tenders, so we have built something that you can call, in a way, Google for tenders. Our customers can go and avail themselves of those services. They can sign up for free; they can have a paid membership wherein they can get all the tenders matching their profile. Similarly, if customers want to use their borrowings to buy raw materials, they can use the OFP platform.”

The company borrows from various sources, including private and public sector banks, larger non-banking financial companies, development finance institutions, and capital markets through multiple types of instruments. “All of Oxyzo’s sourcing is to build the AUM on its own balance sheet,” says Mohapatra.

The bulk of Oxyzo’s lending is to the SME segment, with an average ticket of around `2.5 crore across secured and unsecured lending. Around 70% of its loan book is secured and has a very negligible share of loans that have not been repaid on time, the company says. The unsecured part forms 30% of the loan book. Of that, 0.9% have been due for more than 90 days. ICRA also pointed out in its credit note that the group has around `360 crore as cash in hand and around `362 crore of unutilised funding lines.

Most of Oxyzo’s customers are banked enterprises but still have creditors funding their working capital. Oxyzo comes in as a partial replacement for high-cost creditors by providing them financing at an average yield of 14-15%. Hence, the major competition of Oxyzo becomes informal trade credit.

The company has raised a total of `1,963 crore of primary equity since inception to support its business growth and is backed by marquee private investors like Alpha Wave Ventures, Tiger Global, Norwest, Matrix Partners, and Creations Investments.

Going ahead, Oxyzo is preparing for a public listing. Mohapatra says, “Currently the parent, OfBusiness, is planning for an IPO in the next 12 months. Oxyzo shall be planning an independent fundraise in the private market in the coming 6-12 months in the equity side.”

Clearly, there’s a lot more to come from this fintech company in the future.

Source:– https://www.businesstoday.in/magazine/deep-dive/story/oxyzo-transforms-sme-financing-with-cash-flow-aligned-lending-solutions-458453-2024-12-24