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    CSL Finance

    CSLFINANCE
    Financial Services·29 May 2025
    Management Summary

    CSL Finance concluded FY25 with a year of consolidation, particularly in the SME Retail segment, while the Wholesale vertical demonstrated resilience. AUM grew 25% YoY to ₹1,195 crore, and NII and PAT also saw double-digit growth. However, the company missed its AUM target due to industry challenges, leading to increased slippages and higher provisioning. Strategic adjustments, including tightened credit policies and branch expansion, were implemented, and a dividend of ₹3 per share was recommended.

    Highlights

    5

    • AUM grew 25% YoY and 5% QoQ to ₹1,195 crore.

    • Net Interest Income (NII) increased 21% YoY to ₹146 crore in FY25.

    • PAT grew 14% YoY to ₹72 crore in FY25.

    • Expanded lender portfolio by adding 9 new partners, totaling 32.

    • Board recommended a dividend of ₹3 per equity share.

    Concerns

    5

    • Missed initial AUM target for FY25 due to dynamic industry environment.

    • Slippages increased, leading to GNPA and NNPA rising by 2 bps and 9 bps respectively in FY25.

    • Higher provisioning, write-offs, and increased operating expenses impacted PAT.

    • Negative carry on excess liquidity affected NII performance.

    • SME Retail vertical experienced consolidation, shifting AUM mix to 34:66 (SME Retail:Wholesale).

    What Changed2

    vs Q2 FY26

    Guidance items9 → 16 (+7)Risks discussed3 → 6 (+3)

    Key financials

    Single quarter

    08 metrics
    1. 01AUM₹1,195 Cr+25%YoY
    2. 02Loan Book₹1,157 Cr
    3. 03Net Interest Income₹146 Cr+21%YoY
    4. 04PAT₹72 Cr+14.0%YoY
    5. 05GNPA—+0.0%YoY

    Capital allocation

    3
    high confidence
    CategoryHeadline
    Debt

    Debt disclosed

    Cost 11.2%

    Dividend

    ₹3/share (final)

    Liquidity

    Liquidity disclosed

    NII performance was impacted by negative carry on excess liquidity maintained during certain parts of the year. Access to debt funds has improved with a larger portfolio of 32 lending partners. Debt funds are sufficient for next 1.5 years.

    Guidance & targets

    16
    CategoryTargetPriority
    AUM Growth
    AUM growth
    20-25%
    		Medium
    AUM Mix
    SME Retail to Wholesale AUM mix
    50-60%
    		Medium
    Recoveries
    Recoveries from write-offs
    Decent recoveries
    		Medium
    Operating Costs
    Operating costs
    Normalize
    		Medium
    Operating Costs
    Employee cost as % of revenue
    Come down
    		Medium
    Provisioning
    Provisioning and write-offs
    Subside
    		Medium
    SME Retail Growth
    SME Retail growth
    Return to growth track
    		Medium
    SME Retail Growth
    SME Retail growth
    30-40% year on year
    		Medium
    Profitability
    Profitability metrics
    Improve
    		Medium
    Dividend
    Dividend-paying policy
    Continue
    		High
    Cost of Borrowing
    Cost of borrowing
    Benefits from RBI rate cuts
    		High
    Average Yields
    Average yields
    Some moderation
    		Medium
    Branch Network
    New branches stabilization
    Stabilize and become profitable
    		High
    NII Growth
    NII growth
    Higher than last year's 15%
    		Medium
    Leverage
    Leverage (Wholesale)
    1.5 to 2 times
    		High
    Leverage
    Leverage (Retail/Initial Phase)
    3 to 4 times
    		High

    What to watch in Q1 FY26

    5

    SME Retail growth trajectory

    Coming financial year
    CurrentConsolidation in FY25, AUM mix 34:66 (SME Retail:Wholesale)
    TargetReturn to growth track, AUM mix rebalancing towards SME Retail

    Why it matters

    SME Retail is a key growth area, and its recovery is crucial for overall AUM growth and profitability.

    SME Retail is expected to return to the growth track following the consolidation in FY25.

    Risks & concerns

    6
    RiskSeverity

    Increased slippages and asset quality deterioration

    Slippages increased in FY25, leading to GNPA and NNPA rising by 2 bps and 9 bps respectively, primarily from SME Retail and Suvidha loans. — Management acknowledged

    medium

    Missed AUM targets and slower growth

    Fell short of initial AUM target due to dynamic industry environment and tightened credit policies. — Management acknowledged

    medium

    Higher operating expenses due to branch expansion

    Increased operating expenses from recent branch expansion, expected to normalize as branches mature and contribute to AUM growth. — Management acknowledged

    low

    Negative carry on excess liquidity

    NII performance could have been stronger if not for negative carry on excess liquidity maintained during certain parts of the year. — Management acknowledged

    low

    Industry-wide slowdown and concerns about overleveraged borrowers

    Overall slowdown in the industry, increased slippages, and concerns about overleveraged borrowers became more prominent. — Management acknowledged

    medium

    External conditions impacting repayment behavior

    Elections, strong heatwave, and monsoon impacted the segment, which is in the lowest strata of the population, affecting repayment behavior. — Management acknowledged

    medium

    Q&A highlights

    8

    “No, no, no. I don't know, Sir. Neither it was 9.4 ever. We never had 9.4, and neither it was 10.8. Our weighted average cost of borrowing was 11.12, and it went up to 11.22.”

    Management corrects the analyst's figures, clarifying the actual increase in cost of borrowing and its relation to the rating upgrade.

    asked by Sanjay

    2 min read6 chapters

    Detailed Narrative

    01

    Q4 & FY25 Performance Overview

    CSL Finance reported a year of consolidation in FY25, with AUM growing 25% YoY and 5% QoQ to ₹1,195 crore. The loan book stood at ₹1,157 crore at year-end. Net Interest Income (NII) for FY25 increased 21% YoY to ₹146 crore, and Profit After Tax (PAT) grew 14% YoY to ₹72 crore. However, the company fell short of its initial AUM target due to dynamic industry conditions.

    02

    Asset Quality and Credit Policy Adjustments

    Asset quality saw some deterioration, with GNPA and NNPA increasing by 2 bps and 9 bps respectively in FY25, primarily from the SME Retail segment and a pilot project. In response to industry challenges🌐 and increased slippages, CSL Finance tightened its credit policies, made structural adjustments to teams, and improved systems. The company expressed confidence in making decent recoveries from write-offs over the next 12-18 months, starting from FY26.

    03

    Funding and Lender Relationships

    CSL Finance significantly expanded its lender portfolio, adding 9 new partners to reach a total of 32, enhancing access to debt funds. The weighted average cost of borrowing for FY25 was 11.22%, an increase of 0.10 bps. The company expects to benefit from RBI's recent rate cuts, with effects accruing from Q1 FY26. The current borrowing mix is 72% from banks and 28% from NBFCs.

    04

    Branch Network and Operational Efficiency

    The company added 14 new branches in FY25, bringing the total to 43, and plans further expansion in FY26. While increased operating expenses impacted PAT, management expects these costs to normalize as new branches mature and contribute to AUM growth. The focus is on improving employee and branch-level efficiency, with new branches expected to stabilize and become profitable within 9-12 months.

    05

    Strategic Outlook and AUM Mix

    The SME Retail vertical underwent consolidation, shifting the AUM mix to 34:66 (SME Retail:Wholesale) for FY25. Management is cautiously optimistic💬, expecting Wholesale to continue performing well and SME Retail to return to growth. The long-term target is to rebalance the AUM mix to 50-60% for SME Retail within 18-24 months, with overall AUM growth of 20-25% as a bare minimum.

    06

    Dividend Policy

    The Board recommended a dividend of ₹3 per equity share, reaffirming CSL Finance's commitment to its dividend-paying policy and value creation for stakeholders. This decision reflects the company's confidence in its financial health and future prospects despite a year of consolidation.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.