Assets under management (AUM) stood at Rs 1277.02 crore, with the MSME loan verticals contributing 76.34% and vehicle 16.12% end March 2025. The customer base comprises 35,568 customers, including 18,596 active MSME customers and 12,423 active vehicle loan customers.

Its operational network spans across 158 branches in Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh and Uttar Pradesh. AUM jumped 33% and customer base 49% during FY2025. The AUM increased at a two-year CAGR of 36%, driven by an increase in volume of loans with strong growth in disbursements and accelerated branch addition. The MSME AUM grew at a CAGR of 36.5% and vehicle financing AUM grew at a CAGR 47.2% from March 2023 to March 2025.

The company leverages technology across operations and throughout the customer life cycle, including loan origination, underwriting, collections, post-disbursement monitoring and customer service. The company has a centralized, technology-enabled collections infrastructure that spans all business verticals. There is a dedicated collections team of 357 personnel to track repayment schedules, payments, and loan defaults, ensures timely collections, and reviews customer accounts.

The company caters to a diverse customer base across various demographics, income levels, occupations, geographic regions, and credit histories. The customer base includes 37.10% of first-time borrowers, demonstrating focus on financial inclusion and providing opportunities for the underserved population. Leveraging significant operational experience, the company has set up stringent credit quality checks and customized operating procedures that exist at each stage for risk management.

The credit rating has improved to ‘A-with a positive outlook’ by Acuite Ratings as of the date of this Red Herring Prospectus from ‘BBB+’ by Acuite Ratings during FY2022. The average cost of borrowing has reduced from 12.24% at end March 2023 to 12.02% at end March 2025 which is driven by credit rating upgrades.

Total borrowings of the company were Rs 1137.06 crore

Deepak Baid is the promoter and MD of the company with over 20 years’ experience in the financial services sector.

The capital adequacy ratio of 20.80% of risk-weighted assets is well above the requirement of 15.00%. The GNPA ratio of the company stood at 1.07% and NNPA ratio at 0.48% end March 2025.

The Offer and the Objects

The initial public offer (IPO) consists of fresh issue of 1.045 crore equity shares to raise Rs 156.80 crore at the lower band of Rs 150 per share (face value Rs 5 per share) and Rs 165.17 crore at the upper band of Rs 158 per share.

The issue also has offer for sale (OFS) of 56.39 lakh equity shares from promoter and promoter group to raise Rs 89.09 crore at upper price band. The promoter shareholding will decline to 60.5% post- IPO from 89.1% pre-IPO.

The issue is to be made through the book-building process. It will open on 29 July 2025 and close on 31 July 2025.

The net proceeds from the fresh issue will be used for augmenting the capital base to meet future capital requirements. The issue will bring the benefits of listing the equity shares on the stock exchanges, including enhancing brand image among existing and potential customers and creation of a public market for the equity shares in India.

Strengths

The MSME segment contributed 80.96% of revenue and 76.34% of AUM in FY2025. The MSME sector is underpenetrated and provides strong growth opportunities with a huge unmet credit demand, formalization and digitization. As per the Udyam portal, more than 6.4 crore MSMEs are registered under Udyam portal.

The company has access to diversified sources of capital including public sector banks, private sector banks, small finance banks, other non-banking financial institutions, together with NCDs and direct assignment of loans.

The company has developed a comprehensive credit assessment and risk management framework to identify, monitor and manage risks inherent in operations. It has implemented stringent credit quality checks and customized operating procedures at each stage for comprehensive risk management.

49.31% of secured customers have a CIBIL score above 650 at the time of origination, while 37.10% of customers are new to the formal secured lending ecosystem.

The focus is on collateral-backed lending and 98.81% of the loan portfolio was secured. The secured MSME loans have an average Loan-to-Value (LTV) ratio of 43.79% while secured vehicle loans have an average LTV ratio of 73.21%.

The write-off of loans remains negligible, demonstrating effective loan recovery and monitoring processes.

The company has deeper regional penetration in semi-urban and rural areas supported by a mix of direct and indirect sourcing channels. The rural and semi-urban credit market in India is significantly under-penetrated, presenting a substantial opportunity for growth.

The hub-and-branch model streamlines operations, reduces costs, and increases customer accessibility, driving business growth and market expansion

Weaknesses

The business requires substantial capital and any disruption in sources of funding or inability to secure funding on favourable terms could adversely affect liquidity and cash-flows.

The MSME segment contributed a significant portion of AUM and revenues and any adverse development in this sector or in government policies affecting this sector could affect business.

The company serves customers from mid to low-income category in rural and semi-urban areas, who are vulnerable to adverse economic conditions.

MSME customers are faced with various risks such as business failure and economic fluctuations which can lead to increased defaults and they are often considered to be higher credit risk customers.

The first-time borrowers constituted 37.10% of the aggregate customer base. Many customers may not have credit histories or formal income proofs, like tax returns, which makes it hard to assess their creditworthiness.

The business is heavily concentrated in three states with Rajasthan accounting for 57.6% of AUM, Madhya Pradesh 22.2% and Gujarat 15.2% at end March 2025 and any adverse developments in these states may affect business.

The AUM from used vehicle financing constituted 93.92% of the AUM from Vehicle Loans and any adverse development in this sector or in government policies would affect the business.

Valuation

Laxmi India Finance is a small sized financier focused on MSME and vehicle finance with presence in the north-western states in India. The company exhibited better earnings show in FY2024 and FY2025. It recorded a strong 38% CAGR growth in revenue and a 50% growth in net profit for FY2025 from FY2023. The AUM of the company increased at a two-year CAGR of 36% in FY2025.

The EPS on post-issue equity works out to Rs 6.9 for FY2025. At the price band of Rs 150 to Rs 158, the P/E works out to 21.8 to 22.9 times of EPS for FY2025.

Post-issue, the book value (BV) will be Rs 79.9, while adjusted BV (ABV) net of net NPAs works out to Rs 78.9 per share at the upper price band. The stock is being offered at price to Adj BV multiple of 2 times at the upper price band.

Among peer NBFCs catering to SME finance, SBFC Finance is trading at P/ Adj BV multiple of 3.9 times, Five-Star Business Finance at 3.3 times and MAS Financial Services at 2.4 times. CSL Finance, which is similar in AUM size to Laxmi India Finance, is trading at 1.3 times of Adj BV.

In terms of PE, SBFC Finance is trading at 34.5 times EPS for FY2025, while MAS Financial Services is trading at 18.8 times, Five-Star Business Finance at 10.8 times and CSL Finance at 9.8 times.

On profitability front, the RoA of Laxmi India Finance was 3.0% in FY2025. Among peers, the RoA of Five-Star Business Finance was strong at 8.2%, CSL Finance at 6.5%, SBFC Finance at 4.3% and MAS Financial Services was at 3.1%.

The RoE for Laxmi India Finance was 15.7% for FY2025. The RoE of Five-Star Services was at 18.6%, MAS Financial Services was at 14.7%, CSL Finance 14.2% and SBFC Finance at 11.4% for FY2025.

Laxmi India Finance posted strong 33% year on year growth in AUM to Rs 1277 crore end March 2025. The AUM of SBFC Finance surged 28% to Rs 8747 crore, while that of Five-Star Business Finance increased 23% to Rs 11877 crore, MAS Financial Services 19% to Rs 12100 crore and CSL Finance 16% to Rs 1195 crore at end March 2025 over March 2024.

The GNPA ratio of Laxmi India Finance was at 1.07% end March 2025. Among peers, the GNPA ratio of MAS Financial Services was at 2.44%, SBFC Finance 2.74%, Five-Star Business Finance 1.79% and CSL Finance at 0.46% end March 2025.

The NNPA ratio of Laxmi India Finance was at 0.48% end March 2025, while that of SBFC Finance was at 1.51%, MAS Financial Services 1.62%, Five-Star Business Finance at 0.88% and CSL Finance was at 0.34% end March 2025.