Varthana

Varthana is a leading Indian NBFC specializing in education finance for affordable private schools and students. The company operates across more than 15 states, offering loans for school infrastructure, student education and digital learning solutions. By focusing on underserved communities, Varthana enables schools to expand and improve quality, impacting over 4 million students. With strong revenue growth (INR 284 crore in FY24) and a diversified loan portfolio, Varthana stands out for its tailored products, technology-driven processes and commitment to financial inclusion in the education sector.

Core Products and Services

• School Loans: Flexible term loans for infrastructure, technology upgrades and capacity expansion, specifically designed for affordable private schools.

• Student Loans: Financing for higher education, vocational training and certificate courses, with streamlined processes and integrated partnerships with educational institutions.

• Value-Added Services: Digital classroom solutions, STEM labs, ERP systems and advisory support to help schools improve operational efficiency and educational quality.

• Financial Products: Insurance, investment options and financial planning services tailored to the education sector.

 Business Model & Revenue Streams

• Core Revenue: Primarily generated from interest on loans provided to affordable private schools (B2B) and students (B2C).

• Additional Streams: Includes loan processing fees, commissions from financial products and technology platform fees.

• Portfolio Mix: In FY24, student loans made up about 12% of the total loan portfolio; the company targets a rise to 35% in the medium term.

• Customer Segments: Main focus is on schools (B2B), but the student loan segment (B2C) is expanding quickly, especially in smaller cities.

• Pricing: Employs a risk-based interest rate model, typically ranging from 12% to 20% based on borrower profile and collateral.

 Top Clients & Partnerships

• Diverse Partnerships: Collaborates with leading names like GMS Aviation Training Institute, Vedantu, Cloudthat, Guvi, Crio, Sonix, Cognico and Intellipaat, ensuring a strong presence in both traditional and digital education sectors.

• Strategic Alliances: Works closely with Opportunity EduFinance and Eupheus Learning to deliver comprehensive school development programs and digital learning tools, especially in Tier III and IV cities.

• Low Client Concentration Risk: Serves over 11,000 schools across more than 15 states, with no single client dominating revenue, supporting portfolio diversification.

• Operational Model: Utilizes a hub-and-spoke approach for broad geographic coverage, minimizing reliance on any single region or client group.

Future Outlook & Strategic Priorities

• Risks and headwinds: Regulatory changes, credit quality management and rising competition in the education finance space are key challenges. The company’s asset quality has improved post-pandemic, but credit costs remain elevated at around 4% of managed assets.

• Management targets: Varthana aims to raise the student loan segment to 35% of total assets under management, improve operational efficiency through technology investments and maintain a capital adequacy ratio above 28%.