Oxyzo Financial Services, which started as a purchase finance platform to support buyers transacting through B2B marketplace OfBusiness, has entered a new business, acting as an intermediary between lenders and small and medium enterprises (SMEs).

In partnership with a clutch of banks, non-banking lenders, corporate houses and family offices, it is placing close to $200 million (Rs 1,630 crore) of structured debt every month on a debt marketplace it has set up for SMEs to avail of funds. Oxyzo earns a commission for this service.

In order to ensure the quality of the borrowers on the platform, Oxyzo has shortlisted them from its existing SME and enterprise customers who have been doing business with it for seven-eight years. It had earlier been directly funding these customers.

“Many of our customers have achieved a scale where they have much broader financial requirements. Through the debt and capital markets platform the idea is to meet these requirements,” Sharma said.

The platform helps its clients tap the capital market for long-term funds, access supply chain finance solutions from banks and NBFCs and raise working capital.

Currently, Oxyzo is offering around Rs 400-600 crore of debt market funding through non-convertible debentures to the customers on the debt financing platform.

The platform takes mid-market SMEs to the capital market, which otherwise was out of bounds to them. For this, it works with a network of brokers and sub-brokers to reach out to more than 60 banks, family offices and large corporations.

“Such networks were mostly available for NBFCs and fintechs, but now we are replicating this for SMEs and enterprise clients also,” said Sharma.

Partnerships have also been built with around 20-25 lenders for supply chain finance and working capital products. Oxyzo helps connect its SME customers to this lending network.

“We operate on a take rate model, where we charge our SME clients a commission for this service,” Sharma said. “If a lender wants us to monitor the portfolio too, we charge them on the AUM managed on the platform.”

With this, Oxyzo, which has built a Rs 5,578 crore loan book as on March 31, 2023, is now taking a step further to cater to the larger credit requirements of its clients, and is generating a fee income for the OFB Tech group.

Scale and profitability

Currently, the company is hitting a monthly revenue run rate of a million dollars. It aims to contribute around 12- 15% to the overall profit of the group this financial year.

Sharma said in the current financial year, which will be the first full year for this service, the new marketplace aims to report a profit in the range of Rs 30 crore to Rs 35 crore.

Oxyzo reported a net profit of Rs 197 crore on total income of Rs 562 crore in fiscal 2023.

At the group level in fiscal 2022, the Asish Mohapatra and Ruchi Kalra-founded OfBusiness reported a net profit of more than Rs 200 crore on revenue of over Rs 7,200 crore, as per data available with Tracxn.

In March 2022, Oxyzo raised $200 million from Tiger Global and others on its own at a valuation of a billion dollars, taking it to the unicorn club.

Currently, 76% of its loan book is secured with almost 80% of its business coming from purchase financing.

Disrupting relationship-based business

The business of providing supply chain and working capital funding has traditionally been driven by relationships between business owners and the local branch managers of banks or NBFCs. Oxyzo’s attempt is to digitise this space and grab a small chunk of this large corporate debt market.

This market could easily see disbursals of $1 billion every month, said industry insiders, who are watching how Oxyzo performs here.

“Retention of customers might be a challenge. Banks will be happy to use this channel to source new clients, but getting follow-up funding rounds through the same marketplace might be difficult,” said the founder of a fintech lending platform aware of the debt marketplace.

Another top executive at an NBFC pointed out that these businesses get done over a relationship of trust. Banks prefer to do physical checks, reference checks for underwriting such SMEs. And given the ticket sizes of these loans are much bigger, the cost makes sense too.

From a group business perspective, it makes a lot of sense for Oxyzo though. Given it is helping build a stronger relationship with clients it is already exposed to.

The fintech founder cited earlier said Oxyzo could cross-sell some other products to its clients and keep them stick to the OfBusiness platform for their business operations.

The fintech founder cited earlier said Oxyzo could cross sell some other products to its clients and keep them stick to the OfBusiness platform for their business operations.