Laxmi India Finance
- Laxmi India Finance is coming out with a 100% book building; initial public offering (IPO) of 1,60,92,195 shares of Rs 5 each in a price band Rs 150-158 per equity share.
- Not more than 50% of the issue will be allocated to Qualified Institutional Buyers (QIBs), including 5% to the mutual funds. Further, not less than 15% of the issue will be available for the non-institutional bidders and the remaining 35% for the retail investors.
- The issue will open for subscription on July 29, 2025 and will close on July 31, 2025.
- The shares will be listed on BSE as well as NSE.
- The face value of the share is Rs 5 and is priced 30.00 times of its face value on the lower side and 31.60 times on the higher side.
- Book running lead manager to the issue is PL Capital Markets.
- Compliance Officer for the issue is Sourabh Mishra.
Profile of the company
Laxmi India Finance is a non-deposit taking non-banking financial company focused on serving the financial needs of underserved customers in India’s lending market. As on March 31, 2025, its operational network spans across 158 branches in rural, semi-urban and urban areas in the states of Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh and Uttar Pradesh. The company has the widest reach in Rajasthan in terms of being the company with highest number of branches amongst its peers for the period ending FY25. It has recorded second highest return on net worth in FY25 among the peers compared. Its product portfolio includes MSME loans, vehicle loans, construction loans and other lending products catering to the diverse financial needs of its customers. Its MSME lending fuels economic growth and promotes financial inclusion by supporting small businesses and entrepreneurs, with over 80% of its MSME loans qualifying as Priority Sector Lending under RBI guidelines.
It has leveraged technology across its operations and throughout the customer life cycle, including loan origination, underwriting, collections, post- disbursement monitoring and customer service. The share of retail credit in total systemic credit has been steadily increasing from 21.6% in FY19 to a projected 32.1% in FY25. This growth reflects the rising demand for consumer loans, including home loans, personal loans, and auto loans, driven by factors such as increased income levels, higher consumer spending, and greater access to financing. This favorable market environment, combined with its technology-driven approach, positions it well to capitalize on the growing demand for retail and MSME credit.
It has diversified sources of funding and have access to funds from 47 lenders, including 8 public sector banks, 10 private banks, 7 small finance banks, 22 non-banking financial companies and financial institutions as of March 31, 2025. It raises debt through several instruments such as term loans from public sector banks and private banks, non-convertible debentures (NCDs), working capital demand loans and overdrafts against fixed deposits. It caters to a diverse customer base across various demographics, income levels, occupations, geographic regions, and credit histories. As on March 31, 2025 its customer base includes 37.10% of first-time borrowers, demonstrating its focus on financial inclusion and providing opportunities for underserved population.
Proceed is being used for:
- Augmentation of its capital base to meet its future capital requirements towards onward lending
Industry Overview
The Non-Banking Financial Companies (NBFCs) sector in India plays a crucial role in the financial ecosystem of the country. The sector has undergone remarkable growth, establishing itself as a significant player within the country's financial landscape. Non-Banking Financial Companies have emerged as critical pillars of financial support for a significant segment of the population, including Small and Medium Enterprises (SMEs) and those historically underserved by traditional banking institutions. Displaying impressive agility and efficiency, NBFCs have adeptly catered to the diverse financial needs of borrowers, leveraging their widespread geographical presence, deep understanding of various financial requirements and prompt processing times. NBFCs are increasingly adopting digitisation to enhance operational efficiency, elevate customer experiences, drive cost savings and ensure compliance with regulatory standards. Despite facing stiff competition from public and private sector banks and Microfinance Institutions (MFIs) across market share, customer acquisition, asset quality and technological innovation, NBFCs have spearheaded innovative digital initiatives.
The asset quality of NBFCs sector improved in FY24, indicating effective resolution of bad assets. Gross non-performing assets (GNPA) ratio was 3.5 per cent, while net non-performing assets (NNPA) ratio was 1.1 percent in FY24. This trend continued in the first half of financial year 2025 (H1FY25), with gross NPA ratio declining to 3.4 per cent while net NPA ratio remained 1.1 per cent at end-September 2024, reflecting a consistent focus on risk management and operational efficiency. Besides, at end-March 2024, the NBFC sector maintained capital to risk-weighted assets ratio (CRAR) of 26.9 per cent, well above the regulatory requirement. Under the SBR, NBFCs [except core investment companies (CICs)] in the upper layer are required to maintain common equity tier 1 capital (CET 1) of a minimum of 9 per cent of risk-weighted assets, within the overall CRAR of 15 per cent. At end-September 2024, CRAR of the sector stood at a comfortable level of 26.1 per cent.
Indian Non-Banking Financial Companies sector’s outlook is optimistic in coming future, driven by an anticipated easing of regulatory pressures and a favorable interest rate environment. Reduction in the repo rate is likely to help NBFCs reduce borrowing costs, pass it on to the customers potentially increasing credit demand. As a result of lower borrowing costs, the system’s liquidity may increase, influencing purchases and leading to an increase in manufacturing activities and overall economic growth. Further, India’s economic growth and rising per capita income are expected to drive growth in financial requirements, opening new avenues of growth for NBFCs. Also, increased formalization and urbanization will present opportunities for the sector. The sector remains well-positioned to leverage its fundamentals and capitalise on emerging opportunities in a gradually stabilizing economic environment. Besides, margins of industry are likely to improve in coming future as the asset quality of sector improved in first half of financial year 2025, reflecting a consistent focus on risk management and operational efficiency.
Pros and strengths
Focus on MSME financing: Over the last three Fiscals 2025, 2024 and 2023 the revenues generated from MSME financing constituted 80.96%, 75.37% and 83.64%, respectively. The company’s MSME financing vertical represented 76.34%, 73.94% and 76.16% of its overall AUM for the Fiscals 2025, 2024 and 2023, respectively. It caters to diverse business requirements and provides support to entrepreneurs. The MSME loans sanctioned by it typically varies in the range of Rs 0.05 million to Rs 2.5 million and are secured by mortgage of residential or commercial property. The relatively smaller ticket size of financing which is secured by tangible assets facilitates mitigation default risk. As on March 31, 2025, it had 18,596 MSME customers, and its secured MSME loans have an average LTV ratio of 43.79%.
Access to diversified sources of capital and effective cost of funds: The company’s well-diversified funding profile underpins its liquidity management system, credit rating and brand equity. It has historically secured, and seek to continue to secure, cost effective funding through a variety of sources, including public sector banks, private sector banks, small finance banks, other non-banking financial institutions, together with NCDs and direct assignment of loans. Also, it has established strong relationships with its lenders which has enabled it to maintain an average tenure of 4+ years with its top 5 lenders, secure repeat funding from 80% of lenders, and increase credit limits by 7.20% YoY with its top 5 lenders.
Comprehensive credit assessment: The company has a credit assessment and risk management framework to identify, monitor and manage risks inherent in its operations. Credit management is crucial to its business given its focus on underserved financial segment. As a lender, its lending decisions are contingent on its evaluation of the ability of the individual and the business to service the loan, and the basis for such assessment is a combination of credit history and present cash flows. The company’s risk management committee has developed comprehensive risk management policies, addressing credit risk, market risk, liquidity risks and operational risks. It has implemented stringent credit quality checks and customized operating procedures that exist at each stage for comprehensive risk management.
Hub and Branch model streamlines operations: The company operates on a hub and branch business model, strategically designed to enhance efficiency, reduce costs, and expand its reach. This model serves as the backbone of its operations, enabling it to optimize resources, improve customer service, and tap into underserved markets. At the core of its structure are hub (disbursement) branches, which serve as hubs for files can be checked and disbursement advice raised. Each hub facilitates disbursement of surrounding branches. This increase efficiency with time and reduce operational cost to serve branch customers. These hub branches are equipped with key decision makers, including credit managers, business development managers, operations teams, and collections teams. Strategically located in rural and semi-urban areas, these branches focus on sourcing new loans and providing doorstep services to customers.
Risks and concerns
Dependent on its top 10 lenders for a significant portion of borrowings: The company is dependent on its top 10 lenders for a significant portion of its borrowings. The company has borrowed 53.94%, 62.27% and 52.30% from top 10 lenders in FY25, FY24 and FY23 respectively. It cannot assure that it will be able to maintain the liability profile and business levels, or that it will be able to significantly reduce their concentration in the future. As on March 31, 2025 the amounts raised by way of secured non-convertible debentures comprised 2.41% of its total borrowings, which are taken on high rate of interest ranging from 11.49% to 15.04% which may adversely impact the cost of borrowing and lead to increased cash outflows.
Majority of its AUM are concentrated in the north-western region: Its business is heavily concentrated in the north-western region of India, with a significant majority of its Assets Under Management (AUM) and branches located in the state of Rajasthan. The remaining branches are spread across the states of Gujarat, Madhya Pradesh, Chhattisgarh and Uttar Pradesh. This geographic concentration exposes it to regional economic, social, and political risks that could adversely affect its business, cash flows, and results of operations.
Operate in a highly regulated industry: It operates in a highly regulated industry and it has to adhere to various laws, rules and regulations. The company has a certificate of registration from the RBI to operate as a NBFC-ICC, categorized as a NBFC-Middle Layer and is regulated by the RBI. Accordingly, legal and regulatory risks are inherent and substantial in its business. As it operates under registrations obtained from the applicable regulators, such as RBI, it is subject to actions that may be taken by such regulators in the event of any non-compliance with any applicable policies, guidelines, circulars, notifications and regulations issued by the relevant regulators. Any failure or alleged failure to comply with the applicable laws, regulations or requirements could subject it to increased costs, inspection, audit and enforcement actions by the relevant authority; suspension and revocation of the relevant license or approval.
Rely on it credit ratings to access debt markets and financial institutions: Credit ratings reflect an independent agency’s assessment of its financial stability, operational performance, strategic positioning, and ability to fulfil its obligations. The company being NBFC is heavily dependent on its ability to raise funds from the debt markets and other financial institutions. The cost and availability of capital depends in part on its short-term and long-term credit ratings. As of March 31, 2025, and for the previous three Fiscals, its credit ratings have not been downgraded. While its credit rating has improved to ‘A- with a positive outlook’ by Acuite Ratings, it cannot guarantee that its credit ratings will improve in the future. If it was to experience a downgrade, it could lead to higher borrowing costs and limit its access to capital and debt markets, ultimately harming its net interest margin and overall business operations.
Outlook
Laxmi India Finance is engaged in the business of Non-Banking Financial Company. The company offers MSME loans, vehicle loans, construction loans, and other lending products, supporting small businesses and entrepreneurs, with over 80% of MSME loans qualifying as Priority Sector Lending. The company’s Hub and Branch model streamlines operations, reduces costs, and increases customer accessibility, driving business growth and market expansion. On the concern side, majority of the company’s Assets Under Management (AUM) are concentrated in the north-western region of India and any adverse developments in this region could have an adverse effect on its business, cash flows and results of operations. Moreover, it operates in a highly regulated industry and changes in the laws, rules and regulations applicable to it may adversely affect its business, financial condition and results of operations.
The issue has been offering 1,60,92,195 shares in a price band of Rs 150-158 per equity share. The aggregate size of the offer is around Rs 241.38 crore to Rs 254.26 crore based on lower and upper price band respectively. Minimum application is to be made for 94 shares and in multiples thereon, thereafter. On performance front, the company’s total revenue from operations increased by 41.92% to Rs 2,457.13 million for Fiscal 2025 from Rs 1,731.37 million for Fiscal 2024, primarily due to an increase in interest income to Rs 2,313.12 million for Fiscal 2025 from Rs 1,647.85 million for Fiscal 2024. Moreover, the company’s profit for the year increased by 60.25% to Rs 360.05 million for Fiscal 2025 from Rs 224.68 million for Fiscal 2024.
The company recognizes the potential for cross-selling opportunities between its business verticals. By targeting its existing customer base, it can enhance customer relationships through diversified product offerings, increased revenue, improved customer retention rates, and reduced customer acquisition costs. This strategic approach enables it to leverage its existing customer relationships, build trust, and deliver financial solutions. It intends to maximize its existing branch network’s potential to expand its customer base and increase its gross loan portfolio. As of March 31, 2025, its gross loan portfolio per branch stood at Rs 80.82 million. It aims to increase its gross loan portfolio per branch through cross-selling additional loan products to its existing customers, acquisition of new customers through existing branches and the increasing loan ticket sizes to low-risk, existing customers.
