­­Established track record of lending in vehicle financing through a wide branch network and collection points
SRFCPL commenced lending activities in 2008 upon receiving its NBFC license. The company started the lending business with two-wheeler financing only and gradually since 2010 has diversified its product mix to four wheeler financing, financing LAP towards SME borrowers and microfinance lending. The company is promoted by Mr. Ganesh Bhattar and his son Mr. Gaurav Bhattar (MD & CEO) who have been engaged in two-wheeler financing since 2004 through a proprietorship concern. The promoters are supported by professionals with significant experience in various functional areas. With the support of able management, SRFCPL has associated with ~600 dealers and intermediaries for supporting their forays in two-wheeler segment. The extensive experience of the promoters has helped the company to sustain the business growth during economic downturn. The company’s operations are currently spread across eight states namely Chhattisgarh, Odisha, Madhya Pradesh, Jharkhand and have recently expanded to Maharashtra, Rajasthan, Andhra Pradesh and Uttar Pradesh and operate through a network of 206 branches as on March 31, 2024. SRFCPL has a major presence in Chhattisgarh and Madhya Pradesh with ~76 percent of the AUM as on March 31, 2024 spread across various districts in these two states.
Acuité believes that SRFCPL’s business profile will continue to benefit from the established presence in the area of operations backed by a wide network of branches.

Adequate capital position
SRFCPL’s net worth stood at Rs. 257.11 Cr. as on March 31, 2024 (provisional) as against Rs. 196.90 Cr. as on March 31, 2023. The increase in networth is attributable to regular capital infusions from the promoter group as well as internal accruals. The company’s leverage indicators stood at 3.77 times as on March 31, 2024 (provisional) as against 3.38 times as on March 31, 2023. SRFCPL reported a adequate capital adequacy ratio (CAR) of 23.49 percent, comprising Tier 1 capital at 21.41 percent and Tier II capital at 2.08 percent as on March 31, 2024 (provisional). Further, the company has demonstrated resource raising ability from both banks and large NBFC/FIs, with total debt of Rs. 975.24 Cr. outstanding as on March 31, 2024 (provisional). Further, SRFCPL has engaged into co-lending arrangements with SBI which will fuel portfolio growth. Acuité believes that the infusion of debt and equity capital will together stimulate the business growth and in turn improve the financial risk profile of the company.

Improving business volumes & healthy profitability metrics
The rating draws strength from persistent improvements in disbursements, SRFCPL has disbursed Rs. 735.83 Cr. for FY24 as against Rs. 642.92 Cr. for FY23 and registered an AUM of Rs. 1076.43 Cr. as on March 31, 2024. Further, SRFCPL’s profitability indicators are healthy marked by growth in Net Interest Income (Total Income net of Interest expense) from Rs. 116.52 Cr. for FY2023 to Rs. 160.12 Cr. for FY2024 (provisional). The Net Interest Margin (NIM) remained healthy at 13.56 percent as on March 31, 2024 (provisional). The PAT for FY2024 (provisional) stood at Rs. 48.21  Cr. (P.Y: Rs. 35.05 Cr.) with a RoAA of 4.51 percent. The experience of the top management and their active focus on maintaining robust collections has supported the company’s financial and operating performance.
Acuite believes that the company will be able to sustain its profitability and asset quality metrics on the back of its ability to raise and deploy funds at competitive spreads across various asset classes.

­Moderate asset quality and geographic concentration
SRFCPL’s product mix comprises of two-wheelers financing, secured and unsecured loans towards MSME borrowers and personal loans towards government employees. Based on AUM of Rs. 1076.43 Cr. (as on March 31, 2024), two-wheeler loans comprised ~44 percent of AUM, followed by secured and unsecured loans towards MSME borrowers of ~46 percent , personal loans towards government employees comprising ~10 percent. Gradually, the share of loans extended towards MSME borrowers is increasing. SRFCPL’s overall borrower profile typically has dual income profile in terms of salary and agriculture income; these borrowers belong to mid to low-income segment in rural areas. SRFCPL’s overall GNPA and NNPA levels stood at 2.56 percent and 1.97 percent as on March 31, 2024 respectively (2.70 percent and 2.22 percent as on March 31, 2023). The provision coverage as on March 31, 2024 stood at ~23 percent. SRFCPL operates in 8 states namely Chhattisgarh, Madhya Pradesh, Odisha, Jharkhand, Maharashtra, Rajasthan, Andhra Pradesh and Uttar Pradesh. Of the total AUM, Chhattisgarh accounts around 34 percent, followed by Madhya Pradesh around 42 percent. However, the company has started expanding into newer regions with a view to ameliorate the concentration risk. Acuité believes that containing additional slippages while maintaining the growth in the loan portfolio and ability of expanding operations in others states will be key rating monitorables.