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From high-touch lender to fin-AI company

Speaking to ET Now, Agarwal said the company has deployed two Nvidia chips to run proprietary AI models internally, marking a shift from a traditional high-tech, high-touch lending model. The results are already visible in the numbers: cost of funds has dropped from around 12% three years ago to 10.3%, beating the company’s own 10.5% guidance, while yields have simultaneously risen roughly 10 basis points to 17.04%. Agarwal credited this combination — falling costs and rising yields — alongside ongoing AI-driven efficiencies for the company’s ability to defend its margins going forward.

Asset quality: A “collection first” philosophy

On concerns that rapid loan book expansion could hurt asset quality, Agarwal was firm that Paisalo treats itself as “a collection business first and a lending business second.” He pointed to a multi-decade track record since the company’s 1996 listing, during which asset quality stayed below 2% except during the Covid years, when it briefly rose before being brought back down within roughly six quarters. The company’s underwriting model functions more as a rejection filter than a disbursement engine, he said, with incentive structures across the organization weighted equally toward collections and growth.

No fresh equity needed for expansion

Despite pursuing aggressive growth, Agarwal said Paisalo does not need new equity capital, citing a comfortable 35% capital adequacy ratio and underleveraged 2.2x debt-to-equity position. Instead of diluting existing shareholders, promoters have been steadily raising their stake through open-market purchases — now at 46-47%, up from a low of about 26% four years ago. The company also has a $50 million foreign currency convertible bond outstanding, of which $44 million remains unconverted at a strike price of roughly Rs 48. With the stock now trading above that level, Agarwal expects meaningful conversion activity, and possibly full conversion, within the current financial year.

Four pillars driving 24-25% loan growth

Agarwal outlined four growth levers underpinning the company’s three-year AUM, revenue, and profit-doubling target: the shift to AI-led operations, aggressive distribution expansion, new product launches, and continued cost-of-capital optimization. Distribution has grown more than fivefold since 2017, expanding into 12 new states in the last three to four years to reach 5,299 distribution points across 22 states. Six new products were launched in the most recent quarter alone.

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AI is already doing the heavy lifting

The scale of AI adoption at Paisalo is substantial. In just two quarters, the company processed around 160,000 loan applications through AI-enabled onboarding, alongside 125,000 servicing cases and 225,000 risk management cases handled by AI systems. It has also run roughly 250,000 quality checks across audit, credit and operations functions using AI, while scaling from zero to two AI bots and five outbound voice bots handling 350,000 multilingual calls daily in Hindi, English, and Marathi.

Opex to stay elevated near-term, then ease

Agarwal acknowledged that operating expense ratios will likely hold steady or edge up in the medium term as the company continues investing heavily in in-house AI and IT infrastructure, including a revamped sourcing app and business correspondent platform expected later this year. However, he expects opex efficiencies to materialize meaningfully over the longer term as AI-driven automation scales across the organization.

OpenAI is weighing up handing the US government a 5 per cent stake worth $43bn (£32bn) as Sam Altman moves to shore up relations with Donald Trump ahead of the ChatGPT maker’s blockbuster stock market debut.

The offer, first reported by the Financial Times, has been tabled in recent discussions with the White House as the company prepares for a $1tn flotation in New York, a listing that would rank among the largest in corporate history.

Trump has made no secret of his enthusiasm for the American taxpayer taking stakes in the leading AI developers, describing the prospect as a “beautiful thing” that would make the public rich. “There’s something very interesting about it, where it almost becomes a partnership with the American public,” he said last month. “You make them partners in this revolution. It would be a beautiful thing. It would make them rich.”

The logic behind the proposal is as much political as financial. Handing the public a direct interest in AI’s upside is seen as a way of blunting the growing backlash over the technology’s impact on jobs, a concern Altman himself has wrestled with publicly, and the relentless spread of energy-hungry data centres. Altman has previously floated the idea of a public wealth fund holding stakes in AI companies, and reports suggest he envisages rivals such as Anthropic, Google and Meta ceding similar holdings through a government vehicle.

OpenAI is currently valued at $852bn, putting a 5 per cent stake at roughly $43bn. Should the flotation hit its $1tn target, the government’s paper gain would be immediate, a point unlikely to be lost on a president who has boasted about the returns from Washington’s 10 per cent stake in Intel, taken last year at $9bn and now worth more than $60bn.

Quite where any OpenAI shares would sit remains up for debate. JD Vance, the vice-president, has said Trump favours a sovereign wealth fund, while others in the administration have suggested parking the holdings in “Trump accounts”, the investment accounts for children being established by the president. Bernie Sanders, the left-wing senator, has gone considerably further, arguing the public should own half of the AI companies outright.

The talks mark a striking shift in Washington’s posture. Having initially taken a hands-off approach to AI, the White House has become increasingly interventionist in recent months, blocking the release of Anthropic’s most powerful systems and forcing OpenAI to restrict access to its latest models, moves made against a backdrop of intensifying competition from China.

Anthropic, for its part, has proposed special taxes on the AI sector to fund a “digital dividend” for the public, a rather different route to the same political destination.

OpenAI, whose staff shared a $6.6bn payout in a secondary share sale last year, was approached for comment.

Jamie Young

Jamie is Senior Reporter at Business Matters, bringing over a decade of experience in UK SME business reporting.
Jamie holds a degree in Business Administration and regularly participates in industry conferences and workshops.

When not reporting on the latest business developments, Jamie is passionate about mentoring up-and-coming journalists and entrepreneurs to inspire the next generation of business leaders.

For months, policymakers, businesses and trade watchers in Washington had been bracing for a turbulent spring and summer around the future of the USMCA, the trade pact binding the United States, Canada and Mexico.

But, to quote former UK Prime Minister Harold Macmillan, “Events, dear boy, events.” The war with Iran has dominated Washington’s attention, stripping away much of the political heat that was expected to surround the pact’s renewal.

Instead of a noisy fight over the agreement’s future, the USMCA has slipped into the background. The Iran conflict has absorbed the White House’s attention and, in practical terms, has become one of the best developments for keeping the trade pact out of the headlines.

Earlier this year, there were concerns the US might use the renewal window to force a confrontation with Canada and Mexico, or even threaten withdrawal. President Trump had already cooled on the deal he once signed, raising questions about how aggressively Washington would approach the next phase.

But with foreign policy dominating the administration’s agenda, the US has taken a more measured approach. It has confirmed it will not extend the agreement for another 16 years, while stopping short of more dramatic action.

Part of that restraint reflects a belief inside the administration that the trade relationship has already been reshaped.

US Trade Representative Jamieson Greer argues the White House’s tariff strategy has fundamentally altered North America’s economic ties, changing the balance with Canada and Mexico in ways that make a more confrontational approach unnecessary. But if trade does become more politically driven, the US auto industry could be the biggest loser.