Detailed Rationale Crisil Ratings has reaffirmed ‘Crisil BBB-/Stable’ rating on the existing bank loan facilities and non-convertible debentures of Dhara Motor Finance Ltd (DMFL). Crisil Ratings has withdrawn its rating on non-convertible debentures of Rs 18.39 crore basis independent confirmation that these instruments/facilities are fully repaid and bank facilities of Rs 294.56 crore following a request from the company and on receipt of no objection certificate from lenders. Additionally, Crisil Ratings has also withdrawn its rating on the fixed deposit since the company has fully repaid these and provided independent confirmation on the same. This withdrawal is in line with Crisil Ratings’ policy on withdrawal of ratings.
The rating reflects the extensive experience of the management in the vehicle financing and transport businesses, the company’s adequate capital position and stable asset quality. These strengths are partially offset by modest scale of operations, regional concentration in revenue and average, though improving, resource profile.
Assets under management (AUM) of the company stood at Rs 226 cr as on September 30, 2025 (Rs 239 crore as on March 31, 2025). This is broadly comprised of Three-wheeler loans (24%), four-wheeler loans (35%), MSME loans (38%) and Machine loans (2%). DMFL reported a PAT of Rs 2 crore in the first half of fiscal 2026, with annualized average return on managed assets (RoMA) of 1.5% as compared to Rs 6 crore and 2.3% respectively in fiscal 2025. The networth stood at Rs 73 crore and gearing at 2.6 times as on September 30, 2025 as compared to Rs 71 crore and gearing of 2.8 times as on March 31, 2025. The internal accruals have also supported the capital position. |
Analytical Approach Crisil Ratings has evaluated business and financial risk profiles of DMFL on standalone basis. |
Key Rating Drivers - Strengths Experienced management The company is promoted by Mr. Gajendra Singh (Managing Director) and his family members, who have extensive experience in the transport and vehicle financing businesses. The company has been profitably operating in vehicle financing in North India for over three decades, demonstrating resilience through multiple business cycles. About 70% of its customers are repeat customers, reflecting a strong reputation and loyalty.
With a robust network of dealers and management’s deep market understanding has enabled steady referral business and resilience, even during challenges like the COVID-19 pandemic. The promoters have established a trusted reputation in the region of North India and continue to drive consistent growth.
Crisil Ratings beliefs that DMFL benefits from its proven ability to scale operations while maintaining asset quality.
Adequate capital position Capital position is adequate for current scale of operations, with networth of Rs 73 crore and gearing of 2.6 times as on September 30, 2025 as compared with Rs 71 crore and adjusted gearing of 2.8 times as on March 31, 2025. As on September 30, 2025 overall CAR and Tier 1 CAR were 27.06% and 29.08% respectively, significantly higher than regulatory requirement reflecting robust financial health and conservative approach to risk management. Stable accretions have supported networth during the year. With stable accretions and moderate growth plans, the company is expected to maintain gearing at less than 4 times. The firm has also collected around Rs 12 crore of Director’s Deposit which can be converted to equity when required. Further, when required, the company will also explore avenues for capital raise from external investors, to support growth.
Stable asset quality Gross non-performing assets (GNPAs) stood at 2.9% as on September 30, 2025, as compared with 2.1% as on March 31, 2025. Asset quality deteriorated temporarily in H1-FY26 mainly due to seasonal impact of sugarcane harvesting in western UP region, however it is expected to rebound over next few quarters. The management has a focused dedicated recoveries team. The GNPAs have remained at 2-3% during the past five fiscals. The company has displayed strong recovery abilities, which supported asset quality even during the pandemic. As per the Company, 70% of its borrowers are repeat borrowers, reflecting company’s ability to effectively assess creditworthiness of its borrowers resulting in mitigation of risk.
However, the company’s portfolio reflects a significant geographical concentration, with 61% of AUM in Uttar Pradesh, 24% in Uttarakhand, 9% in Delhi & 6% in Haryana as on September 30, 2025. While the company aims to decrease concentration, the same is expected to happen gradually.
Crisil Ratings believes that over the medium term, the ability of the company to maintain asset quality while scaling up operations will remain monitorable. |
Key Rating Drivers - Weaknesses Modest scale of operations and regional concentration in revenue Despite being in the asset-financing business for the past three decades, growth and revenue were lower than that of other asset-financing non-banking finance companies (NBFCs). Due to intense competition from banks and other asset-financing NBFCs, the company has not been able to scale up its loan book substantially. Assets under management (AUM) of the company stood at Rs 226 cr as on September 30, 2025, which de-grew from Rs 239 crore as on March 31, 2025, on account of strategic call by the promoter to first decrease the cost of borrowing by repaying costly debts and then later focus on growth.
The company continues to have regional concentration, with Uttar Pradesh and Uttarakhand accounting for around 85% of the portfolio making it susceptible to regional economic cycles and local market risks. Though it has begun expanding into other geographies, their contribution to the revenue remains small. The ability of the company to raise funds at competitive costs and scale up their operations, while also decreasing regional concentration will remain a key monitorable.
Modest albeit improving, resource profile The company had outstanding borrowings of Rs 187 cr as on September 30, 2025. The overall cost of borrowing reduced to 11.7% (annualized) as on September 30, 2025 compared to 13.2% as on March 31, 2025, on account of repayments to high interest lenders and the board’s strategy to rely on internal funds, director’s deposit and loans from PSUs at lower rates. As on September 30, 2025, the resource mix consisted of CC (14%), Term loan (81%) and NCD (5%).
While the company has few PSUs as their lenders, the fund raising this fiscal has been minimal given the focus towards first repaying costly debt and then initiating talks with PSUs for new lines. Ability of the company to raise sufficient funds at competitive rates will determine the growth trajectory and hence will be a key monitorable. |
Liquidity Adequate As on November 30, 2025, the company’s liquidity profile is adequate supported by Rs 13 crore cash and cash equivalents, unutilized working capital limits of Rs 4 crores and one month liquidity cover for debt repayments and operating expense of 1.0 time (assuming zero collections). |
Outlook Stable DMFL will continue to benefit from the extensive experience of the management and maintain adequate capital position with stable asset quality over the medium term. |
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About the Company Incorporated in 1990, DMFL was registered as a deposit-taking NBFC with the Reserve Bank of India. The company is classified as an asset-financing company and is engaged in the financing of vehicles. It started out with financing of private cars and light commercial vehicles and then ventured into financing three-wheelers and business loans, and second-hand light and medium sized commercial vehicles, in Uttar Pradesh. The company has diversified into financing of earthmoving equipment, medical equipment and industrial machinery. It has 29 branches (including head office) in north India. |
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