Laxmi India Finance IPO review (May apply)

•    The NBFC having focused on serving the financial needs of underserved customers, MSME.
•    The company posted steady growth in its total income and net earnings for the reported periods.
•    It is operating in the Rajasthan, Gujarat, MP, UP and Chhattisgarh
•    It dominates Rajasthan with highest number of branches. 
•    Based on its recent financial data, the issue appears aggressively priced.
•    Only well-informed/cash surplus investors may park moderate funds for long term.

ABOUT COMPANY:
Laxmi India Finance Ltd. (LIFL) is a non-deposit taking non-banking financial company focused on serving the financial needs of underserved customers in India’s lending market. As on March 31, 2025, its operational network spans across 158 branches in rural, semi-urban and urban areas in the states of Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh and Uttar Pradesh. LIFL has the widest reach in Rajasthan in terms of being the company with highest number of branches amongst its peers for the period ending FY25 (Source: CARE Report). It has recorded second highest return on net worth in FY25 among the peers compared (Source: CARE Report). Its product portfolio includes MSME loans, vehicle loans, construction loans and other lending products catering to the diverse financial needs of customers. Its MSME lending fuels economic growth and promotes financial inclusion by supporting small businesses and entrepreneurs, with over 80% of its MSME loans qualifying as Priority Sector Lending under RBI guidelines.

As of March 31, 2025, LIFL’s assets under management (AUM) stood at Rs. 1277.02 cr. with its MSME and vehicle loan verticals contributing 76.34% and 16.12%, respectively. As on March 31, 2025, its customer base comprises 35,568 customers, including 18,596 active MSME customers and 12,423 active vehicle loan customers, demonstrating a growth of 48.78% from 23,906 customers as on March 31, 2024.

LIFL has been systematically expanding branch network over the years by focusing on deepening its reach in the existing markets, entering new geographies, and increasing penetration in potential regions. Its branch network has grown steadily from 119 as of March 31, 2023 to 135 as of March 31, 2024 to 158 as of March 31, 2025. Its AUM increased from Rs. 686.77 cr. as of March 31, 2023 to Rs. 1277.02 cr. as of March 31, 2025, representing a CAGR of 36.36%. Its MSME AUM grew at a CAGR of 36.52% between March 31, 2023 and March 31, 2025 and vehicle financing AUM grew at a CAGR of 47.23%.

The company has leveraged technology across its operations and throughout the customer life cycle, including loan origination, underwriting, collections, post- disbursement monitoring and customer service. The share of retail credit in total systemic credit has been steadily increasing from 21.6% in FY19 to a projected 32.1% in FY25. This growth reflects the rising demand for consumer loans, including home loans, personal loans, and auto loans, driven by factors such as increased income levels, higher consumer spending, and greater access to financing. (Source: CARE Report). This favorable market environment, combined with its technology-driven approach, positions LIFL well to capitalize on the growing demand for retail and MSME credit.

It has diversified sources of funding and have access to funds from 47 lenders, including 8 public sector banks, 10 private banks, 7 small finance banks, 22 non-banking financial companies and financial institutions as of March 31, 2025. It raises debt through several instruments such as term loans from public sector banks and private banks, non-convertible debentures (NCDs), working capital demand loans and overdrafts against fixed deposits.

As on March 31, 2025 its customer base includes 37.10 % of first-time borrowers, demonstrating LIFL’s focus on financial inclusion and providing opportunities for underserved population. Its customer acquisition model supports this broad reach through a multi-channel distribution network consisting of a strategic mix of LFIL’s on-ground sales team for direct sourcing, its network of direct sales associates and referrals generated through in-house developed Laxmi Mitra app. Leveraging its significant operational experience, the company has set up stringent credit quality checks and customized operating procedures that exist at each stage for risk management.

LIFL has a centralized, technology-enabled collections infrastructure that spans all its business verticals. As on May 31, 2025, a dedicated collections team of 357 personnel tracks repayment schedules, payments, and loan defaults, ensures timely collections, and reviews customer accounts. All loan repayment statuses and overdue payments are tracked and recorded directly on its collection’s app on a real time basis. Company’s collection efficiency for the period Fiscals 2023, 2024 and 2025 stood at 98.92%, 96.69% and 96.76%, during Fiscals, respectively, representing the ratio of collected amounts to total current dues for the relevant period. As of March 31, 2025, lit had 158 branches and 1434 employees on its payroll.

ISSUE DETAILS/CAPITAL HISTORY:
The company is coming out with its maiden book building route combo IPO of 16092195 equity shares issue worth Rs. 254.26 cr. (at the upper cap). The issue consists of 10453575 fresh equity shares (worth Rs. 165.17 cr. at the upper cap), and an OFS (Offer for Sale) of 5638620 equity shares (worth Rs.89.09 cr. at the upper cap). The company has announced a price band of Rs. 150 – Rs. 158 per equity shares of Rs. 5 each. The issue opens for subscription on July 29, 2025, and will close on July 31, 2025. The minimum application to be made is for 94 shares and in multiples thereon, thereafter. Post allotment, shares will be listed on BSE and NSE. The issue constitutes 30.79% of the post-IPO paid-up equity capital. From the net proceeds of the issue, the company will utilize Rs. 143.00 cr. for augmenting its capital base. (The RHP has a figure of Rs. 177 cr. for augmentation of its capital base, but at our instance of error, it got modified by addendum to RHP on 25.07.25)

The company has reserved 106928 equity shares for its eligible employees, from the rest, it has allocated not more than 50% for QIBs, not less than 15% for HNIs, and not less than 35% for Retail investors.

The sole Book Running Lead Manager (BRLM) to this issue is PL Capital Markets Pvt. Ltd., while MUFG Intime India Pvt. Ltd. is the registrar to the issue. Prabhudas Liladher Pvt. Ltd. is a syndicate member.

After issuing initial equity shares at par, the company issued/converted further equity shares in the price range of 15 – Rs. 250 per share between March 2012, and August 2024. The average cost of acquisition of shares by the promoters/selling stakeholders is Rs. 5.00, Rs. 17.94, Rs. 24.92, Rs. 30.40, Rs. 31.94, Rs. 32.73, Rs. 37.89, Rs. 71.09, and Rs. 78.32 per share. 

Post-IPO, its current paid-up equity capital of Rs. 20.91 cr. will stand enhanced to Rs. 26.13 cr. Based on the upper cap of the IPO price band, the company is looking for a market cap of Rs. 825.83 cr. 

FINANCIAL PERFORMANCE:
On the financial performance front, for the last three fiscals, the company has posted a total income/net profit, of Rs. 130.67 cr. / Rs. 15.97 cr. (FY23), Rs. 175.02 cr. / Rs. 22.47 cr. (FY24), Rs. 248.04 cr. / Rs. 36.01 cr. (FY25). 

For the last three fiscals, the company has posted an average EPS of Rs. 7.26 (basic) and an average RoNW of 14.01%. The issue is priced at a P/BV of 2.57 based on its NAV of Rs. 61.57 as of March 31, 2025, and at a P/BV of 1.95 based on its post-IPO NAV of Rs. 80.86 per share (at the upper cap). 

If we attribute FY25 annualized earnings to its post-IPO fully diluted paid-up equity capital, then the asking price is at a P/E of 22.93. Based on FY24 earnings, the P/E stands at 36.74. Thus, the issue is aggressively priced. 

The company has posted interest margins of 9.27 % (FY23), 9.23% (FY24), 9.73% (FY25), its RoTA margins of 2.40%, 2.57%, 3.00%, and its RoNW is 11.51%, 12.80%, 15.66%, respectively for the referred periods.

DIVIDEND POLICY:
The company has not paid any dividends for the reported periods of the offer document. It will adopt a prudent dividend policy, based on its financial performance and future prospects.

COMPARISON WITH LISTED PEERS:
As per the offer document, the company has shown MAS Financial, Five Star Business, SBFC Finance, Ugro Capital, CSL Finance, Akme Fintrade, and Moneyboxx Finance, as their listed peers. They are trading at a P/E of 18.0, 18.9, 34.5, 13.9, 9.93, 9.26, and 438.0 (as of July 25, 2025). However, they are not truly compared on an apple-to-apple basis. 

MERCHANT BANKER’S TRACK RECORD:
The BRLM associated with the offer has handled 2 pubic issues in the past two fiscals, out of which 1 issue opened at a premium of 41.78% on the date of listing.