Strategic importance and ownership benefits from CIL & group synergies; experienced management
Choice Finserv Private Limited is the subsidiary of Choice International Limited (CIL), wherein CIL holds 97.34% stake in the company. CFPL benefits from common management, shared brand, and strong operational and financial synergies between the group companies. Choice International Limited was incorporated in 1993 and is engaged in providing financial services. It operates through the segments of NBFC services, Broking & Distribution, Advisory services, and IT Services Business. The company generates majority of the revenue from Broking and distribution services. It offers services like equity trading, commodity derivative trading, financial planning, currency futures trading, fund distribution, advisory, and structured products. The company conducts its business operations mainly in India. As on December 31, 2024, the group has 5 subsidiaries and 13 step down/ jointly controlled subsidiaries.
The management team is led by Mr. Kamal Poddar, a Fellow Member of the Institute of Chartered Accountants of India, is the Managing Director of Choice International Limited. He is involved in all the strategic decisions of the group. Mr. Ajay Kejriwal (Executive Director- CIL), who has experience of more than 15 years in financial markets. He possesses extensive experience in understanding the financials of companies and fund management within division. The BoD consists of 12 members, out of which 7 are independent members. The management team has more than two decades of experience in capital markets and has developed strong expertise in securities market trends, compliance and business development strategies.
Acuité believes, that the company’s consolidated business profile will be supported by expertise of seasoned professional managing the operations and established track record of operations.
Comfortable capital structure
At group level, Choice group’s capitalization levels were comfortable marked by tangible Networth of Rs. 563.22 Cr. as on March 31,2024 (excluding revaluation reserve and intangible assets) as against Rs. 406.39 Cr. in FY2023. Overall gearing levels of the group remained low with debt majorly comprising of short term borrowings (secured). Gearing of the Group stood at 0.81x during FY2024 as compared to 0.51x during FY2023. CFPL (standalone) also has adequate capitalization levels marked by Networth of Rs. 230.16 Cr. as on March 31, 2024 (Rs 218.63 Cr. as on March 31,2023) and a gearing of 1.29 times as on March 31, 2024 (0.61 times as on March 31, 2023). At a Standalone basis, the CRAR for CFPL stood at 46.85% for FY 2024 (87.49% for FY23) . For the period 9MFY2025, the networth of CFPL stood at Rs 232.34 Cr. with a gearing of 2.00 times respectively. The CRAR for the same period stood at 37.19%. Acuité believes that the company’s comfortable capitalization levels will support its growth plans over the medium term.
Earnings profile and AUM growth
Choice Group reported total operating income of Rs.750.68 Cr. in FY 2024 from key business verticals as compared to Rs.389.19 Cr. in FY2023. The total operating income for 9MFY2025 stood at Rs 657.38 Cr. while it reported a PAT of Rs 109.34 Cr. for the same period.The businesses at Group level are categorized as Equity & Broking, Insurance Broking, Wealth Management, Retail Loan Distribution, Management Consulting, Government Advisory and Others. For 9MFY2025, the Broking business contributed Rs 422.13 Cr. followed by Advisory services (Rs 160.79 Cr.), NBFC services (Rs 77.41 Cr.) and others (Rs 25.92 Cr.). The group reported total revenue (not adjusted for inter segment revenue) of Rs. 759.34 Cr. for FY2024 where Broking business contributed Rs. 356.13 Cr. followed by Advisory services (Rs. 224.38 Cr.), NBFC services (Rs. 86.09 Cr.),Insurance business (86.44 Cr.) others (Rs. 6.30 Cr). The Group reported PAT of Rs. 130.86 Cr. for FY2024 as compared to Rs. 60.07 Cr. for FY2023 . At the Standalone level, CFPL had a AUM of Rs 481.91 Cr. for FY24 as against Rs 235.83 Cr. for FY23 mainly through its on book portfolio. In Q3FY25, CFPL acquired the retail lending portfolio of Paisabuddy Finance Private Limited and Sureworth Financial Services Private Limited, the corresponding AUM of CFPL for 9MFY2025 stood at Rs 822.95 Cr. CFPL reported a PAT of Rs. 1.52 Cr. for FY2024 as compared to Rs. 3.75 Cr. for FY2023 (Rs 15.83 Cr. for FY22). For 9MFY2025, CFPL reported a further decline in PAT of Rs 0.21 Cr. The decline in the PAT Y-o-Y from FY22 was on account of large scale branch expansion which significantly increased the operating expenses. Hence, Acuité believes that despite an improvement in Choice Group earning profile, the ability of the CFPL to sustain profitability will depend on its operational efficiencies and ability to grow without impacting the asset quality levels significantly. |
Moderate Asset Quality levels
CFPL has reported an on time portfolio of 91.63% for FY 24 as against and on time portfolio of 99.25% for FY23. The same stood at 87.98% for the period 9MFY2025. The Gross NPA and Net NPA both stood at 0.04% in FY23, these have deteriorated to 2.17% and 1.92 % respectively in FY24. The Gross NPA and Net NPA for 9MFY2025 stood at 2.81% and 0.0% respectively. During Q3FY25, CFPL acquired the retail lending portfolio of Paisabuddy Finance Private Limited and Sureworth Financial Services Private Limited through a slump sale as a result the Gross NPA saw an increase however the Net NPA is zero because of the extensive provisioning done by the company. However, Acuité believes that CFPL’s ability sustain the growth in its loan book, while maintaining sound asset quality level in the near to the medium term will be key rating monitorable.
Risks involving general economic and market conditions
Broking is a highly volatile and cyclical business with the presence of a large number of established players who provide significant competition to the other fragmented and small players. The company's operating performance is linked to the capital markets, which are inherently volatile as they are driven by economic and political factors as well as investor sentiments. Also, revenues generated from businesses like broking, wealth management, private client broking and investment advisory business, are directly related to the volume and value of the transactions. Any adverse market movement (downturn) would result in decline in transaction volumes leading to a decline in the group’s revenues received from commissions earned from such businesses. While the Group continues to benefit from its business model the level of activity in the equity, commodities and F&O markets will be key determinant of its revenue profile and future growth trajectory. Given the competition from larger brokerages and technology-focused new entrants, the ability of the group to grow its brokerage revenues on a sustainable basis will be a key monitorable. Acuité believes that the level of activity in the capital markets will continue to be a key determinant of its revenue profile and future growth trajectory. |
