New age NBFCs have taken a step forward to combine technology with their operations to scale up their business under the Fintech umbrella. Online vendors are funded via tech progressive NBFCs, P2P lending is augmented through NBFC aggregation, NBFCs are investing in structured products offered by Fintechs and so on. Micro Lending via Fintechs as well as Micro Finance companies is on the rise too.
CSL Finance Ltd., a BSE listed realigned NBFC shifted its focus gradually from 2011-12 from capital market operations to SME lending in the NCR Region and plans to expand to Tier-2 and Tier-3 cities in the Northern part of the country. The loan book has grown from 32crore in FY12 to 160cr in April17 and the company has completely stopped its capital markets activity from Q2 FY17 to focus on the organised and unorganised SME lending sector. The methodical shift of business with the constant loan book growth and close to zero defaults till date is clap worthy for a company which was an investment focussed family run business 5 years back.
CSL also has a high promoter holding of close to 75% which is considered a positive sign in case of nano caps but may not be the best of parameters for a growing NBFC which needs to be driven by a professional and focused management. The company has managed to surprise even on this front with a strong management team in place hiring individuals with a strong lending background. One concern which is often highlighted by other shareholders as well as other bloggers is the high salary withdrawn by the Chairman which almost amounts to 6-7% of net profits when the company has been parsimonious in distributing dividends. The strong rate of growth in profits might make the salary look meagre but the concern hovers on the mindset rather than amounts.
Another important structural change by the company was the simplification of the promoter structure by eliminating multi level holding and merging its holding company with itself leading to individuals directly holding the company. Thus the dividend of Re.1 for shareholders for the first time :). The movement towards external borrowing from Kotak, SBI and AU Financiers is another gradual shift towards core focused lending business. The revenue growth would not be an important parameter due to elimination of the capital market business but the strong loan book growth over the past 5 years and the stable profits in past few quarters are key metrics which summarise the performance of CSL Finance. The future loan growth as the dragons of Demonetisation are fading away could be close to 20%+.