About Laxmi India Finance Limited

BUSINESS OVERVIEW

Laxmi India Finance is a non-deposit taking NBFC focused on serving the underserved segments of India's lending market. As of March 31, 2025, the company operated through 158 branches across Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh, and Uttar Pradesh, with the widest branch presence in Rajasthan among peers (Source: CARE Report).

The company offers a diversified product portfolio, including MSME loans, vehicle loans, construction loans, and small-ticket personal and business loans, with over 80% of MSME loans qualifying as Priority Sector Lending under RBI guidelines.

Founded on the legacy of Deepak Finance & Leasing Company, Laxmi India Finance was consolidated in 2011 after the acquisition of DFL. As of March 31, 2025, Assets Under Management (AUM) stood at ₹12,770.18 million, driven primarily by MSME (76.34%) and vehicle loans (16.12%). The customer base reached 35,568, up 48.78% YoY.

AUM grew at a CAGR of 36.36% from FY23 to FY25, supported by a rise in disbursements to ₹7,185.34 million in FY25 and branch expansion from 119 (FY23) to 158 (FY25). MSME AUM and vehicle financing AUM grew at CAGR of 36.52% and 47.23%, respectively.

Distribution is driven by an extensive on-ground sales force, tele-marketing teams, direct sales associates, and digital channels, ensuring last-mile financial inclusion. The customer base includes 37.10% first-time borrowers, showcasing a strong focus on underserved populations.

The lending model spans:

• MSME Finance: Secured loans against property.

• Vehicle Finance: Loans for used commercial/personal vehicles, tractors, two-wheelers, and EVs.

• Construction Loans: Loans for purchase, renovation, or construction of homes.

• Others: Unsecured small-ticket loans and wholesale lending to NBFCs.

Operations are fully technology-integrated across loan origination, underwriting, collections, and customer service. Tools include Loan Origination Software (LOS), Loan Management System (LMS), CRM software, and a mobile sales app, enabling faster disbursals and fraud mitigation.

As of FY25, net worth stood at ₹2,574.65 million, up from ₹1,523.27 million in FY23. Revenue from operations rose to ₹2,457.13 million in FY25 from ₹1,295.29 million in FY23. Funding is diversified across 47 lenders, including public and private sector banks, small finance banks, and NBFCs, raised via term loans, NCDs, and overdrafts.

The company maintains a centralized, tech-enabled collections infrastructure with 357 personnel, supported by a real-time collections app. Collection efficiency remained robust at 96.76% in FY25, following 96.69% in FY24 and 98.92% in FY23.

Laxmi India Finance is strategically positioned to benefit from the rising demand for retail and MSME credit, as retail credit’s share in systemic credit is projected to grow from 21.6% (FY19) to 32.1% (FY25).

As of May 31, 2025, the company have 1470 employees and out of these employees, 678 and 357 employees are part of our sales team and collection team, respectively. The Banker to the company is AU Small Finance Bank Limited.

INDUSTRY ANALYSIS

Credit Penetration in India: Overview

India’s Credit-to-GDP ratio stood at 93.6% as of September 2024, significantly lower than developed economies like the US, UK, and Australia, where the ratio ranges between 140%–200%. This gap underlines the tremendous potential for credit expansion in India. Scheduled Commercial Banks (SCBs) dominate the credit landscape, yet their traditional lending frameworks leave mid-sized and lower-rated entities underserved, creating opportunities for private credit and NBFCs.

India’s rural and semi-urban markets remain underpenetrated. As of December 2023, India’s credit-to-GDP ratio touched 100.9%, reflecting ample room for growth, especially in states like:

• Rajasthan: 37% (FY22) → 41% (FY25)

• Madhya Pradesh: 32.9% → 36.6%

• Chhattisgarh: 33.6% → 39.3%

This increasing trend indicates rising credit reliance and economic activity in these regions, positioning NBFCs as key enablers of financial inclusion.

MSME Finance: Sector Snapshot

The MSME sector is a cornerstone of the Indian economy, contributing significantly to GDP, employment, and exports. Often referred to as the growth engine, it supports inclusive industrial development and generates employment at low capital costs, second only to agriculture.

From September 2019 to September 2023, commercial credit to MSMEs grew at an 11% CAGR, with a 13.6% CAGR from Sep-21 to Sep-23, post-Covid recovery. Excluding legacy NPAs (10% of the portfolio in 720+ DPD bucket), MSME credit stood at ₹25.7 trillion as of Sep-23.

Despite facing challenges such as limited access to credit, rising borrowing costs, and infrastructure gaps, the sector holds immense potential. With government support, digital adoption, and increasing demand, MSMEs are expected to drive India’s journey to a $5 trillion economy, with their GDP contribution projected to rise from 30.1% (FY23) to 40–50%.

Auto Financing: Growth Engine for Credit

India’s automotive sector contributes ~7% to GDP and significantly influences commodity, banking, and energy sectors. As the largest manufacturer of two-wheelers, three-wheelers, and tractors, India’s vibrant auto supply chain supports a robust financing market.

Auto financing has become central to vehicle ownership, particularly in semi-urban and rural markets where NBFCs dominate due to their agility, localized expertise, and flexible loan offerings.

• Vehicle financing accounts for over 50% of NBFCs’ retail loan books.

• NBFCs’ auto loan exposure is projected to reach ₹5.5 trillion by March 2025, reflecting 15.8% YoY growth.

• Asset quality has improved, with GNPA falling from 6.3% (FY20) to 3.7% (FY25).

Used Commercial Vehicle Financing: Rising Momentum

Post-Covid supply chain constraints led to a surge in demand for used commercial vehicles (CVs), driven by cost-effectiveness and operational flexibility. SMEs increasingly prefer pre-owned CVs, enabling better fleet management at lower capital costs.

NBFCs play a pivotal role in financing this segment, offering:

• Quick turnaround times

• Smaller ticket size loans

• Innovative models like lease-to-own

However, challenges remain, including valuation risks, resale volatility, and regulatory considerations. Increased demand has prompted lenders to review Loan-to-Value (LTV) ratios to mitigate overexposure risks.

Automotive Sector Outlook

Domestic auto sales rose 7.3% YoY in FY25, supported by:

• Urban demand

• Replacement cycle

• Scrappage policies

• Robust exports (up 19.2%)

India is poised to become the third-largest auto market by FY26, supported by rising incomes, favorable demographics, 100% FDI in auto, and Make in India initiatives. The CV segment is projected to grow 4%–6% in FY26, bolstered by infrastructure development and budget allocations.

Passenger Vehicle (PV) Segment

The PV segment represents 18% of India’s automobile industry by volume. Growth has been driven by:

• Post-Covid rebound (CAGR 15.9% FY21–FY24)

• Premiumization of demand

• Consumer shift toward SUVs and EVs

Sales are projected to grow 2%–3% CAGR between FY25–FY27, with rising rural penetration and urban aspirations. Multi-Utility Vehicles (MUVs) have gained popularity due to their versatility and premium appeal, creating new credit opportunities for NBFCs.

Two-Wheeler (2W) Financing

Two-wheelers account for ~75% of domestic auto sales. FY25 saw 9% YoY growth, driven by:

• Harvest income

• Marriage season demand

• Youth adoption

• Festive sentiment

However, sales remain below pre-Covid levels, particularly in entry-level categories, affected by inflation and high ownership costs. By FY27, volumes are expected to reach 239–253 lakh units, implying 10.5%–13.5% CAGR from FY25.

NBFCs dominate the two-wheeler financing market, leveraging regional networks, flexible terms, and tech-driven models. Credit growth is projected at 16%–18% CAGR (FY25–FY27), supported by rural consumption and digital penetration.

Wholesale Lending: Large-Ticket Growth

Wholesale lending includes loans to corporates in manufacturing and services sectors. Post-pandemic, revival in infrastructure, aviation, and real estate has contributed to a rebound in wholesale credit.

NBFCs involved in wholesale finance cater to:

• Infrastructure

• Real estate

• Renewable energy

• Large SMEs

• Financial intermediaries

These NBFCs offer structured solutions like term loans, working capital, and project finance, backed by deep sectoral understanding and quicker execution compared to banks.

The segment is benefiting from the National Infrastructure Pipeline (NIP) and fintech-led innovations. However, it carries risks including asset-liability mismatches, sectoral concentration, and cyclical downturns.

BUSINESS STRENGTHS

1. Strong Focus on MSME Financing
MSME financing contributed 80.96%, 75.37%, and 83.64% of total revenue in FY25, FY24, and FY23, respectively, with a consistent share of over 73% in AUM. Loans range from ₹0.05 million to ₹2.5 million, secured against residential or commercial properties, with an average LTV of 43.79% and 18,596 MSME customers as of March 31, 2025.

2. Diversified and Cost-Effective Capital Sources
Funding is sourced from public and private sector banks, small finance banks, NBFCs, NCDs, and direct loan assignments, ensuring cost efficiency and liquidity resilience.

3. Robust Credit and Risk Management Framework
Lending decisions are based on detailed credit history and cash flow evaluations. A structured risk management framework ensures credit quality across the underserved segments.

4. Extensive Rural and Semi-Urban Penetration
A growing network targets rural and semi-urban markets, supported by both direct and indirect channels. Credit demand in these areas remains underpenetrated, offering long-term growth opportunities for NBFCs.

5. Efficient Hub-and-Branch Model
The hub-and-branch structure streamlines operations, reduces costs, and increases reach. Hubs manage disbursements and oversight for surrounding branches, enhancing service efficiency and market coverage.

6. Experienced Leadership and Governance
Led by a seasoned Board with four independent directors and a professional senior management team with sectoral expertise. Strong governance practices and employee development initiatives drive operational growth and talent retention.

BUSINESS STRATEGIES

1. Geographic Expansion
Expanded operations to 158 branches across 83 districts in 5 states as of March 31, 2025, including 23 new branches in FY25, to deepen penetration in key customer segments. This aligns with industry expectations of 12–15% YoY NBFC credit growth, driven by rising demand in retail and MSME loans.

2. Cross-Selling Through Existing Network
Aims to leverage the current branch network and customer base to drive cross-selling across business verticals, improving customer retention, increasing revenue, and lowering acquisition costs.

3. Technology-Driven Efficiency
Ongoing investments in IT infrastructure target enhanced customer service, operational efficiency, digital underwriting, and cost optimization. Technology integration spans sourcing, credit assessment, disbursement, and collections.

4. Borrowing Cost Optimization
Focuses on reducing reliance on high-cost term loans by leveraging improved credit ratings to access funds on better terms, thereby lowering the cost of capital and enhancing financial sustainability.

5. Loan Book Diversification
Recently executed a business transfer agreement to acquire a retail loan portfolio worth ₹533.34 million, covering 1,750 customers and 2 branches. This move supports diversification and accelerates growth in the retail lending segment.

BUSINESS RISK FACTORS & CONCERNS

1. High Dependence on MSME Sector
A significant share of revenue is derived from lending to individual borrowers registered under the micro category on the UDYAM portal. Any adverse developments in the MSME sector or changes in government policy may negatively impact business operations and cash flows.

2. Regulatory Oversight and Compliance Risks
As a registered NBFC, the company is subject to routine inspections by the Reserve Bank of India. Non-compliance with RBI’s directives or failure to implement corrective actions may lead to penalties or operational restrictions.

3. Exposure to Economically Vulnerable Customer Base
A large portion of lending activity is directed towards mid- to low-income individuals in rural and semi-urban regions. These borrowers are more susceptible to economic downturns, increasing default risk and affecting financial performance.

4. Geographic Concentration Risk
A majority of Assets Under Management (AUM) and branches are concentrated in the north-western region of India, particularly Rajasthan. Any region-specific disruptions could adversely impact revenue and operations.

5. Cash Recovery Risk
The company receives a considerable share of recoveries in cash, exposing it to risks related to fraud, theft, and misappropriation by employees, agents, or third parties.

Summary:
Laxmi India Finance faces concentrated risk exposure due to its focus on the MSME segment, economically vulnerable customer base, and geographical dependence on north-west India. Regulatory scrutiny and reliance on cash recoveries further compound its operational vulnerabilities.