Delhi-based Zouk Management Advisors Pvt Ltd has shut its business of lending to small- and medium-sized companies and has pivoted to become an enterprise software provider for financial institutions, its co-founder and CEO said.
"We were in the SME lending marketplace space and we weren't very happy with the adoption of technology within Indian SMEs. We wanted to focus on a tech-driven business, not just a tech-enabled business," Ash Narain told TechCircle.
The lending business under Zouk Loans was set up in August 2015 and was bootstrapped with funds raised from friends, family and private investors. The firm shifted its business operations to pure-play enterprise software in April 2016 and rebranded to Zouk Tech.
Zouk's decision to stop online lending comes at a time when India's financial technology, or fintech, sector is rapidly growing. Scores of startups such as Capital Float, Lendingkart, Indifi, Loanbaba, IndiaLends and Capzest that operate digital lending marketplaces or peer-to-peer lending platforms have come up in recent years and have attracted funding from angel investors and venture capital firms. Capital Float and Lendingkart target SMEs—like Zouk did—and raised $25 million and $32 million, respectively, in Series B funding over the past two months.
Narain said the credit ecosystem in India is mostly offline and cannot be automated in its present form. A number of functions in the transaction closing process require a feet-on-street model, which requires significant manpower, he said. "We were already employing 50 people and we would have had to scale to 150-200 people," he added.
Another major problem in online lending, according to Narain, is the sanction-to-disbursal ratio, "We had sanctioned Rs 120 crore but disbursed Rs 25 crore, which is only about 20%," he said. This is because SMEs make exploratory financing requests and do not intend to take a loan, he added.
Under Zouk Tech, the firm builds workflow automation and buy-side discovery tools for financial services firms. Buy side refers to financial institutions including private equity funds, mutual funds and insurers that buy investment services.
Narain started Zouk Tech along with Akash Bansal, an IIM Ahmedabad alumnus who is the company's COO; Himanshu Gupta, a former Snapdeal executive who is chief product officer; and Raj Kabir, technical architect at Zouk.
Zouk Tech's flagship product is Bazooka, which is a workflow automation tool that automates various parts of a transaction closing process. Bazooka has two versions, one for debt-focused players and the other for equity-focused firms, Narain said.
Besides Bazooka, Zouk Tech has image recognition technology that can read and analyse financial documents. It also plans to roll out B2B automation tools in coming months.
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