NBFC bullish on lending to schools
ISFC hopeful of disbursing loans worth Rs 300 cr in next academic year
Hyderabad: Covid has hit almost all the sectors and schools are among the worst-hit. Many schools have seen a drop in fee collection and they have put plans to expand or improve the infra on the back burner. This is also resulting in some schools defaulting in repaying their loans.
However, many schools will invest significantly in the coming academic year to augment the infra to reach out to the students effectively. This opens up new opportunities for financial institutions that lend to schools, Sandeep Wirkhare, MD and CEO of Indian School Finance Company Private Limited (ISFC), a non-banking finance company that lends to educational institutions, told Telangana Today. “We are hoping that we will disburse about Rs 300 crore worth loans in the coming academic year. This is about 20 per cent higher than what we normally lend on an annual basis in the pre-covid times. The increase in the loan requirement is mainly due to the pent up demand,” he said.
The company started its operations in December 2008 from Hyderabad. ISFC focuses on affordable private schools, playschools, private degree and vocational colleges, coaching centres, teachers and SMEs catering goods and services to the education segment. It has served about 5,500 schools in about 13 States in the last 10 years. It covered about 500 schools in Telangana. The total outstanding is about Rs 375 crore. “The loans we give are used for expansion and creation of an infrastructure in the schools. Quality of education offered is dependent on the infra a school has,” said Wirkhare adding that the company impacted more than 35 lakh students indirectly so far.
The average loan size is about Rs 30 lakh. ISFC lends at 16 to 18 per cent while the cost of funds for it is about 13 per cent. It taps banks and NBFCs for its funds. “We are digitising operations and will pass on the reduction in our expenses to schools,” he said about the company plans. “The year has been tough for the schools as the fee collections have been hit badly. However, signs of recovery were seen in December. We feel that the NPAs will be about 10 to 12 per cent, the same as in the banking industry. Some restructuring is being done but not many schools are keen on using the restructuring window. Write-offs will rise but that will not be a concern as there will be some pent up demand next year. Also, the opportunity is huge as only about 25,000 schools of the over four lakh unaided schools have access to institutional finance,” the official said.
“We are thinking of offering interest-free loans to parents which they can repay that in EMIs. Schools will share a portion of their fee collections with us in lieu of offering interest-free loans to parents. We will also extend loans to the school teachers. The schools may or may not stand guarantee for the loans but that will be defined by the ratings the schools enjoy,” said Wirkhare.
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