Synopsis
Paisalo Digital is aggressively pursuing a technology-driven strategy, aiming to double its loan portfolio in three years while maintaining a healthy net interest margin. The NBFC leverages AI and Nvidia chips to reduce funding costs and increase returns. With a strong focus on asset quality and no immediate need for new equity capital, Paisalo is poised for significant AI-led growth, expanded distribution and new products.
ETMarkets.comSantanu Agarwal, Deputy Managing Director, Paisalo DigitalPaisalo digital is undergoing a technological overhaul aimed at maintaining its rate of 6.5% net interest margin while doubling its loan portfolio over the next three years, according to Santanu AgarwalDeputy Managing Director of the NBFC.
From high-sensitivity lender to fin-AI enterprise
Speaking to ET Now, Agarwal said the company has rolled out two NVIDIA chips to run proprietary AI models in-house, marking a shift from a traditional high-tech, high-tech lending model. The results are already visible in the figures: the cost of financing fell from around 12% three years ago to 10.3%, beating the company’s forecast of 10.5%, while yields simultaneously increased by around 10 basis points to 17.04%. Agarwal credited this combination – lower costs and higher yields – as well as continued AI-driven efficiencies for the company’s ability to defend its margins in the future.
Asset quality: a “collection first” philosophy
On concerns that the rapid expansion of the loan book could harm asset quality, Agarwal insisted that Paisalo sees itself as “a collections business first and a lending business second”. He pointed to a decades-long history since the company listed in 1996, during which asset quality has remained below 2%, except during the Covid years, when it rose briefly before falling again in about six quarters. The company’s underwriting model functions more as a rejection filter than a disbursement engine, he said, with incentive structures within the organization focused equally on collections and growth.
No new capital is needed for expansion
Despite aggressive growth, Agarwal said Paisalo did not need new equity capital, citing a comfortable capital adequacy ratio of 35% and an underleveraged gearing position of 2.2x. Instead of diluting existing shareholders, promoters have gradually increased their stake through open market purchases – now at 46-47%, from a low of around 26% four years ago. The company also has a $50 million foreign exchange convertible bond outstanding, of which $44 million remains unconverted at a strike price of around Rs 48. With the stock now trading above this level, Agarwal expects significant conversion activity, and possibly a full conversion, in the current financial year.
Four Pillars That Drive 24-25% Loan Growth
Agarwal outlined four growth levers that support the company’s three-year goal of doubling assets under management, revenues and profits: the shift to AI-enabled operations, aggressive distribution expansion, new product launches and continued cost of capital optimization. Distribution has increased more than fivefold since 2017, expanding to 12 new states over the past three to four years to reach 5,299 distribution points in 22 states. Six new products were launched in the most recent quarter alone.
AI is already doing the heavy lifting
The scale of AI adoption in Paisalo is considerable. In just two quarters, the company processed approximately 160,000 loan applications through AI-based integration, as well as 125,000 service cases and 225,000 risk management cases processed by AI systems. The company also completed around 250,000 quality checks across audit, credit and operations functions using AI, while growing from zero to two AI bots and five outbound voice bots handling 350,000 multilingual calls in Hindi, English and Marathi daily.
Operating expenses will remain high in the near term, then ease
Agarwal acknowledged that operating expense ratios will likely remain stable or increase slightly over the medium term as the company continues to invest heavily in internal AI and IT infrastructure, including a revamped sourcing application and business correspondent platform expected later this year. However, he expects operational savings to materialize significantly in the long term as AI-driven automation expands across the organization.
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