Laxmi Finance IPO: Fresh Funds To Slash Borrowing Costs, Rural Expansion On The Horizon
With 158 branches, the company has over 35,000 customers across five states in rural and semi-urban areas of the country
Jaipur-based Laxmi India Finance Limited, a key player in the MSME and vehicle loan segment, is poised for significant expansion as it opens its Initial Public Offering (IPO) for subscription.
In a conversation with NDTV Profit on Tuesday, Managing Director Deepak Baid expressed strong confidence in the company’s growth trajectory. He highlighted that the fresh capital raised through the IPO is expected to substantially reduce the company’s cost of borrowing, which in turn should lead to improved margins.
Credit Cost, Rating And Loans
Outlining the strategic benefits of the IPO, Baid stated, "The key benefit from the IPO is a reduction in our cost of funds. Our rating will also improve, enabling us to approach bigger banks for better costs." He said that future expansion will primarily focus on secured lending, building on their existing model where their loan book is robustly secured by collateral.
The company, which has 158 branches, its own sales teams, and over 35,000 customers across five states in rural and semi-urban areas, emphasises its unique approach to credit.
"Our way of credit is different as our customer base falls in the Rs 2 lakh to Rs 24 lakh range. In the MSME section, consumption of money is mostly for business expansion," Baid explained, detailing how their clients are often shop owners in various local businesses.
The company leverages loans to drive growth, with joint family systems often playing a key role in repayment. Baid explained that in such settings, multiple family members are involved and collectively contribute to EMI payments.
IPO, Outlook And Expectations
To instill investor confidence ahead of the IPO, Laxmi India Finance has proactively increased its provisions, despite strong bad debt recovery and collateral. The current system in the company relies on property or business documents as collateral, bringing down the amount of bad debts recorded.
With the IPO funds, the Baid said the company aims for growth, projecting Net Interest Margin (NIM) around 15% and credit costs to be brought down to single-digit figures.
The total IPO issue size stands at Rs 254 crore, valuing the company at Rs 825 crore, with a lot size of 94 shares per bid.
