Rating Rationale

Key Rating Drivers & Detailed Description

Strengths:

Comfortable capitalisation: Networth was healthy at Rs 319 crore while gearing stood at 3.8 times as on December 31, 2024 (Rs 296 crore and 3.3 times as on March 31, 2024). The capitalisation of the company is supported by capital infusion of Rs 156 crore since inception from family, promoters and institutional investors such as Maj Invest and Amicus Capital Partners. The company also plans to raise equity in the near term, which will further support capitalisation. Gearing is expected to remain below 4 times over the medium term on a steady state basis. The capital adequacy ratio was comfortable ~22% as on December 31, 2024. The capitalisation of the company will likely remain comfortable backed by internal accrual and timely equity infusion.

Experienced promoters and management: Set up in 1990, BFL is among Nagpur’s oldest vehicle financing NBFCs, promoted by Mr Maroti Gendaru Jawanjar. He is the executive chairman and has industry experience of over 36 years. The company is currently run by the second generation of the promoter family, Mr Sandeep Jawanjal (Managing Director) who has been associated with the company since 2006. The senior management of the company consists of people with extensive experience in the financial services industry. The company’s leadership with decades of industry experience, along with healthy relationships of the promoter, places the company in a strong position. It enjoys a solid reputation for its trusted brand and credibility. Moreover, it will likely benefit from the presence of institutional investors (Amicus Capital Partners and Maj Invest) on its board. Crisil Ratings believes the experience of the senior management will stand BFL in good stead as it scales up its portfolio.

Diversified resource profile: Registered as a deposit-taking NBFC with the RBI, BFL has access to public deposits, which accounted for ~17% of overall resources as on December 31, 2024. The remaining 83% of the resource profile consists of term loans (68%), non-convertible debentures (6%), cash credit or working capital demand loan (2%) and pass-through certificates (7%). In terms of banking relationships, the company was largely dependent on a few bankers. However, it has now established relationships with multiple bankers. Access to public deposits has enabled the company to maintain competitive cost of borrowings. On average, the company raises deposits at 9.0-9.5%. The deposits are granular, with the top 50 depositors accounting for ~11% as on December 31, 2024. Going forward the ability to raise funds at competitive rates will remain a key monitorable over the medium term.

Weaknesses:

Average asset quality: The 90+ days past due (dpd) stood at 3.3% as on December 31, 2024, as against 2.8% as on March 31, 2024. Adjusting for writeoffs, the same stood 5.7% as on December 31, 2024, as compared to 5.4% as on March 31, 2024. Gross non-performing assets were also high at 5.0% as of December 31, 2024, which stood at 4.5% as on March 31, 2024, and 5.0% as on December 31, 2023.

The collection efficiency has been healthy, averaging 99.9% for the last 12 months ending December 2024. While the company has put in place strong risk management systems and collection infrastructure, its asset quality metrics remain inherently vulnerable to slippages. As the company scales up operations in newer geographies, the ability to improve and maintain healthy asset quality metrics will remain a key monitorable.

Improving earnings profile; sustenance to be monitored: During the first nine months of fiscal 2025, the earnings profile for the company improved with profit after tax (PAT) and return on managed assets (RoMA) of Rs 24 crore and 2.2%, respectively, as compared to PAT and RoMA of Rs 22 crore and 1.8%, respectively, for fiscal 2024. Profitability was supported by an improvement in the operating expenses (as a % of average managed assets) to 6.0% (annualized) in 9MFY25 from 6.4% in fiscal 2024. Further, credit costs also saw an improvement to 2.5% (annualized) in 9MFY25 from 3.2% in fiscal 2024. However, profitability has been low in the past with RoMA of 1.6% and 1.8% respectively for fiscal 2023 and fiscal 2022. Going forward, the ability of the company to sustain the improvement in profitability with growth in operations will remain a key monitorable over the medium term