Established track record of promoters
Mr. Deepak Baid, Managing Director and Promoter of LIFPL, has over two decades of experience in the financial services industry and has played a vital role in building the company's current scale and presence in Rajasthan. The Board of Directors comprises Mr. Deepak Baid (Managing Director), Mrs. Prem Devi Baid (Director), Mrs. Anisha Baid (Director), Anil Balkishan Patwardhan (Independent Director), Mr. Surendra Mehta (Independent Director), and Mr. Kishore Kumar Sansi (Independent Director). They have over a decade of experience in the financial services industry. The company has onboarded Mr. Yaduvendra Mathur (an independent director) to further strengthen the board. Over the years, LIFPL has successfully expanded its operations to 119 branches across Rajasthan, Gujarat, and Madhya Pradesh. The company’s AUM has grown to Rs. 686.77 crore as of March 31, 2023, as compared to Rs. 531.60 crore as of March 31, 2022.
 
Acuité believes that the company’s growth prospects will be supported by the promoters experience in the industry along with their demonstrated track record of resource-raising ability.

Adequate financial risk profile with a diversified funding mix
LIFPL’s net worth stood at Rs. 152.75 crore as of March 31, 2023, and it reported an adequate capital adequacy ratio (CAR) of 23.10 percent, comprising Tier 1 capital at 22.64 percent. The company has a strong lender profile, comprising banks, both private and public, and financial institutions. LIFPL has demonstrated access to funding from both banks and large NBFCs and FIs and has been able to obtain disbursements of Rs 446.37 crore for FY 2023 in the form of term loans and NCDs. LIFPL’s financial risk profile saw a marginal improvement as reflected by PAT levels of Rs. 15.45 crore in FY2023 as compared to Rs. 14.80 crore in FY2022. The company incurred higher opex of 6.77 percent on account of branch expansion. The company opened 26 new branches during FY23, expanding its branch network to 119 branches as of March 31, 2023, as compared to 93 branches as of March 31, 2022.

Acuité believes, going forward, that the ability of the company to mobilise low-cost funding through debt or sub-debt and its ability to deploy the funds profitably will be key factors to monitor. Fructification of new branches resulting in an improved earning profile would also be a key rating monitorable.

Susceptibility of asset quality to seasoning and concentration risk
LIFPL forayed into the lending segment in 2011, but has commenced extending loans against property since 2015, with an average tenure of up to 5 years. The company’s loan book has grown significantly to Rs. 686.77 crore as of March 31, 2023, from Rs. 531.60 crore as of March 31, 2022. Further, the company’s operations are concentrated in Rajasthan, with 89 percent of the portfolio outstanding as of March 31, 2023. The company has started operations in Gujarat and Madhya Pradesh and plans to increase its presence. The occurrence of events such as a slowdown in economic activity or the shifting of activity to other geographies could impact the cash flows of the borrowers, thereby impacting their credit profiles. While Acuite takes cognizance of asset quality challenges in the MSME sector, LIFPL has been able to maintain its on-time portfolio at 94.74 percent with a GNPA of 0.57 percent as of March 31, 2023. The GNPA and NNPA levels stood at 0.57 percent and 0.31 percent as of March 31, 2023, respectively, as compared to 2.84 percent and 1.89 percent as of March 31, 2022. The company’s ability to maintain its asset quality given the low-seasoned loan book and increased presence in the newer geographies will remain a key rating monitorable.
Acuité believes that any significant deterioration in asset quality will adversely impact the credit risk profile and will remain a key rating sensitivity factor.