Analytical Approach

Crisil Ratings has assessed the standalone financial and business risk profiles of Salem Erode Investments Limited and has factored in its strategic importance to, and the strong financial support expected from ICL Fincorp Limited.

Key Rating Drivers & Detailed Description

Strengths:

Strategic importance to, and expectation of strong financial support from, the parent ICL Fincorp: SEIL operates as subsidiary of ICL Fincorp; ICL Fincorp (parent) presently holds 75% stake and expected to hold this stake going forward. Being a subsidiary, SEIL is strategically important for ICL Fincorp and therefore is expected to receive strong managerial, operational and financial support from its parent on an ongoing basis and also in case of any distress.  As far as brand name sharing is concerned, ICL Fincorp shares its branding with SEIL in its public documents and announcements. Hence, there is strong moral obligation for ICL Fincorp to support SEIL given the shared name and brand. Furthermore, there has been commonality in promoters with Mr Kuzhuppilly Govinda Menon Anil Kumar (promoter and MD of ICL Fincorp) holds position of managing director on the board of SEIL and Mrs Uma Devi Anil Kumar (Director).  In terms of product profile, both SEIL and ICL Fincorp operate in similar segments, i.e. offering loans against gold jewelry. SEIL operates out of 38 branches, which helps in enhancing both brand and scale of its parent (ICL Fincorp).

Adequate capital position: Given the small scale of operations, the capital position is adequate for the current and planned scale of operations. The net worth and gearing of the company stood at Rs 19.38 crore and 0.7 times as on March 31, 2025, respectively (Rs 24.08 crore and 0.8 times as on March 31, 2024). The company has maintained a Capital Adequacy Ratio (CAR) of 63.97% in the fiscal year 2025 as compared to 49% in the previous fiscal year. However, the ability of the company to infuse additional capital to support the growth of the company will be key monitorable.

Weaknesses:

Moderate scale of operations: The company is primarily engaged in gold loan financing and lending to ICL Fincorp Limited, through Intercorporate Deposits (ICD). Given the small scale of operations, loan portfolio was modest at Rs 13.5 crore as on March 31, 2025, as compared to Rs 16.8 Crores in the previous fiscal. The degrowth is account of the company entirely concentrating on gold loans, which contribute to 100% of the loan portfolio, which was 52% in the previous fiscal. As on March 31, 2025, the company’s loan book consists of 100% gold loans The company is operating out of thirty-eight branches, in the states of Tamil Nadu and Odisha. The ability of the company to scale up the portfolio will be a key monitorable.

Modest earnings profile: The profitability metrics of the company remained modest because of its small scale of operations and high operating expenses. During fiscal 2025, the company reported losses of Rs 4.95 crore with a return on managed assets (ROMA) at (11.2%) as compared to losses of Rs 1.8 crore during previous fiscal. The company’s operating expense was increased from 9.9% in fiscal 2024 to 15.2% in fiscal 2025.Going forward, the ability of the company to improve its overall profitability will remain key monitorable.

Key Financial Indicators

Annexure - Details of Instrument(s)

# Yet to be issued

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