How CAPITAL FIRST Was Built: Vision & Strategy | Making It Big | Season 8 Ep#3

Summary

The story of Vaidyanathan, founder of Capital First, is one of resilience and transformation. In 2010, he took on the challenge of turning around a struggling NBFC, Future Capital, with a vision to create a technology-driven financial institution. Despite facing numerous setbacks, including high NPA rates and financial struggles, his persistence paid off when Warburg Pincus invested in his idea. Over the next seven years, Capital First grew rapidly, serving millions of small businesses and consumers, and becoming a leader in its field. Vaidyanathan’s journey is a testament to the power of risk-taking, perseverance, and staying focused on one’s goals.

Takeaways

• 😀 Vaidhyanathan took a huge risk in 2010 by leaving a top role at ICICI to join Future Capital and transform it into Capital First, despite the company's troubled state.
• 😀 Capital First uses technology to provide financial services to small entrepreneurs and underserved consumers, significantly impacting over 4 million lives.
• 😀 Despite the challenges faced in the early years, including high NPA rates and lack of investment, Vaidhyanathan's perseverance and optimism helped turn the company around.
• 😀 Vaidhyanathan's strategy to focus on small and medium enterprises (SMEs) was a key factor in Capital First's success, allowing it to fill a gap in the financial market.
• 😀 The company grew rapidly, achieving a 27% CAGR in assets under management (AUM) and a 40% CAGR in profit after tax between FY 2013 and FY 2017.
• 😀 Warburg Pincus invested in Capital First after a chance meeting with Vaidhyanathan on a flight, believing in his vision and commitment to his business model.
• 😀 Vaidhyanathan's commitment to being positive, persevering, and maintaining a strong network of goodwill played a critical role in the company's recovery and success.
• 😀 The management buyout in 2012 helped Capital First refocus and pivot to a successful retail financing business, specifically aimed at small businesses and individual consumers.
• 😀 The company's business model stands out by leveraging technology to serve a traditionally underserved market, distinguishing it from other NBFCs in India.
• 😀 Vaidhyanathan's story underscores the importance of seizing opportunities, staying committed to your vision, and always being open to the possibility of success, even in difficult times.

Q & A

What was the key challenge faced by Vaidhyanathan when he took over Future Capital in 2010?

When Vaidhyanathan took over Future Capital in 2010, the company was in a bad financial shape, with a high gross and net NPA, and a loan book of ₹935 crore. This made it a risky venture, but Vaidhyanathan was determined to transform it.

How did Vaidhyanathan's background in retail banking help him succeed in transforming Future Capital?

Vaidhyanathan's experience in retail banking, particularly his time at ICICI Bank, equipped him with the skills needed to understand consumer financing and build scalable business models. He leveraged this knowledge to focus on financing small and medium enterprises (SMEs) and consumers, areas traditionally underserved by the financial system.

What role did technology play in the success of Capital First?

Technology played a critical role in Capital First's business model by enabling the company to efficiently finance small entrepreneurs and consumers, especially in underserved and unbanked regions. This technology-led approach helped scale the business and reduce operational costs.

What was the impact of Capital First's model on small entrepreneurs and consumers?

Capital First's technology-driven model successfully transformed the lives of over 4 million people by providing financing options to small entrepreneurs and consumers, areas previously neglected by traditional financial institutions.

How did Vaidhyanathan's perseverance help him overcome the challenges between 2010 and 2012?

Between 2010 and 2012, Vaidhyanathan faced numerous rejections while trying to raise capital. Despite these setbacks, his unwavering belief in the potential of his business and his determination to succeed kept him moving forward, eventually leading to a successful partnership with Warburg Pincus.

What was the turning point in Vaidhyanathan's journey to success?

The turning point came when Vaidhyanathan shared his vision with Warburg Pincus during a flight to Delhi. The firm was impressed by his passion and conviction, leading them to invest in Capital First after a positive reference check from Deepak Parekh.

How did Vaidhyanathan's business model differ from traditional financial services?

Vaidhyanathan's business model focused on providing loans to small entrepreneurs and consumers using technology, rather than engaging in traditional wholesale banking or wealth management. This approach helped Capital First tap into an underserved market and achieve significant growth.

What does Vaidhyanathan believe is key to succeeding in business?

Vaidhyanathan emphasizes the importance of going after one's ideas wholeheartedly, taking calculated risks, maintaining a positive attitude, and building goodwill with people. He believes that success comes from persistence, focus, and ethical practices.

What was the role of goodwill in Vaidhyanathan's journey?

Goodwill played a significant role in Vaidhyanathan's success, as it helped him build strong relationships with key people who supported his vision. His network, built over years at ICICI Bank and CitiBank, proved valuable in overcoming challenges and securing crucial investments.

What were the key financial achievements of Capital First between FY 2013 and FY 2017?

Between FY 2013 and FY 2017, Capital First's assets under management (AUM) grew from ₹7,500 crore to ₹19,850 crore, representing a CAGR of 27%. The company's income grew at a CAGR of 46%, and its profit after tax increased from ₹63 crore to ₹239 crore, reflecting strong business performance.