Thread by @banglani

April 2020. India was in the middle of the harshest lockdown in the world. The economy had ground to a halt. Millions of Indians were in danger of slipping into poverty because of the loss of jobs and business.

To help tide over the crisis, the RBI announced a moratorium on loan repayments. From April till June, people and businesses didn't need to pay their EMIs.

This was a relief to borrowers, but to banks and other lenders, it was a potential catastrophe. Bajaj Finance reported a 35% first-default on their entire loan book, even before the moratorium came into force.

Bajaj had the financial heft to deal with such numbers. A small fintech lender would go bankrupt within months. One with a total equity of ₹14 Cr? Might as well close shop then and there.

@anandlunia and I were on the board of one such fintech company, Propelld. It was hardly even a company. Rather, it was three friends from IIT Madras who had little financial training but one big idea - to fund the education of those who couldn't afford it, profitably.

Needless to say, Anand and I were panicking. The company had exposure to some of the most vulnerable borrowers during the pandemic - children of shopkeepers, auto drivers and schoolteachers. There's no way they would be able to continue servicing their education loans.

I turned to other, more experienced investors for advice. The guidance was clear and unambiguous:
"Stop giving new loans, now"
"Don't throw good money after bad"
"Everybody in the team should be knocking on doors to collect EMIs"
"Don't think of growth; live to fight another day"

In an emergency board meeting, we passed on this feedback to the founders: let's freeze all new lending and focus on collecting existing loans.

Now the Propelld founders - Bibhu, Victor and Brijesh - are the nicest, politest, geekiest entrepreneurs you'd ever meet. If you stepped on their toes, they would apologise to *you*.

That day, they showed us the difference between polite and timid.

To our surprise, they flat out refused to stop lending. Bibhu said "Anyone can lend in fair weather. You backed us for our underwriting, so you got to trust us when the waters are choppy." Brijesh wanted to grab market share because "the banks are scared sh*tless".

It was incredible. The sky was falling and these boys saw that as an *opportunity*? They were *excited* at the prospect of a bloodbath in the industry?

Some of that excitement rubbed off on us. My colleague @Aditi1289 and I chatted afterwards and confirmed that we both felt a bit thrilled at the prospect.

We agreed to go for it.

We're still fiduciaries, of course, so we decided to monitor defaults weekly. Any sign of stress, and we would pull back.

But otherwise, Propelld would gun for growth. In the middle of a global economic meltdown.

And how they grew. In 18 months their monthly lending grew 80x. They attacked new and difficult markets like supplementary education and exam coaching. They launched a new payment product for coaching centers. Through three waves of the pandemic, they never let up.

All the while their credit remained strong. Bajaj declared a 35% first-default; Propelld had 3%. Even that, they chased down relentlessly to less than 1% within 90 days. The mood in our weekly calls went from fearful to cheerful. In July, we gave them more money to chase growth.

Today, Propelld announced their Series B financing of $35M led by Westbridge Capital. India Quotient and Stellaris are investing more in this round.

livemint.com/companies/star…

This is a story of not only grit and tenacity, but of unbridled optimism. Of three minds that were truly without fear. Bibhu, Victor and Brijesh.

It's a long journey of course,and they're just getting started. But there's nobody I trust more to deliver on this promise. Geronimo!