CSL Finance Limited - Transition To NBFC

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steady set of results from csl given the circumstances. income up 59% pat up 44% yoy. but qoq is flat/slightly down.

long term loans and advances jumped 70% since march. but ST fell 28%. so overall loan book growth in H1 was only 12%. they have stated that given current liquidity conditions, they are focusing more on SME and smaller builder floor loans over the chunkier developer funding. inflows from developer loans will be used to fund the other 2. balance sheet growth could be lower due to this, but this approach looks more prudent. growth in these 2, along with LAP is quite healthy. developer book has reduced by 28cr over mar18 (ie 16%) and hence the overall slower loan growth.

their cash holding went up from 2.7cr to 13.3cr, which is almost 60% of their incremental borrowings in this period. looks like they held on to giving out loans to conserve liquidity.
cash and Loans+advances went up 16%.

heartening to note increase in no. of employees from 96 to 135 and increase in branches from 12 to 18 in this Q. all hirings at key levels are done. focus will be on improving branch productivity.
it looks like once this temporary slow phase is over, company is likely to resume its past growth.
stock is priced at 1x book and 10x earnings.

discl invested and added recently.

5 Likes

These numbers are on the predictable lines except the fact that their disbursements have fallen by 17cr qoq (~20%) while AUM is flat qoq. They are raising cash levels and in absence of increased bank funding how would they leverage BS and increase RoE?

I was checking the results and presentations of the company. I could not find NPA figures for the same. Is it lapse in reporting or I just missed the figures somewhere.

It might be a lapse in reporting. If I recall management said that they were <1%.

the gross npa are 0.02% …its almost nil

Yes, the reason is Promoter is very very careful in lending.
Track record of quite a few years despite being a small NBFC.

For last two days volume has been in higher side and delivery volume above95%. Company has clarified their all current financial status in last concall. Nothing much scary to me. But the price behavior makes some concern coz i entered at high price. 10% of my portfolio. Anything market knows that i dont.

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Good set of numbers midst of all negatives in the sector.

Total Revenue increased by 46.27% to Rs 15.81 Cr in Q3 FY2018-19 as compared to Rs 10.81 Cr in
Q3 FY2017-18
Net Profit increased by 29.79% to Rs 6.61 Cr in Q3 FY2018-19 as compared to Rs 5.09 Cr in Q3
FY2017-18
AUM increased by 23.85% to Rs 322.29 Cr in Q3 FY2018-19 as compared to Rs. 260.22 Cr in Q3
FY2017-18
Net Interest Income (NII) increased by 18.52% to Rs 11.05 Cr in Q3 FY2018-19 as compared to Rs
9.32 Cr in Q3 FY2017-18

Q3 Presentation: https://www.bseindia.com/xml-data/corpfiling/AttachLive/e929769a-f4ae-4356-9010-9e55cb5ceaaf.pdf

good set of number but disappointed with no disclosure on NPAs… the disclosure norms needs to be improved.

it’s heartening to see how this company has been able to maintain its head above water amidst all the mess. they are constantly shifting their large ticket wholesale loans to small ticket higher yielding SME and school financing loans. thus while the valuations have come down, at the same time the riskiness of the book is coming down due to increase in SME and school financing. its like a positive double whammy.

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Credit costs have been coming down for last 2 quarters.

Q1 FY 19

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Source: http://www.cslfinance.in/wp-content/uploads/2016/10/Un-audited-Financial-Quarter-ended-30.06.2018.pdf

Q2 FY 19

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Source: http://www.cslfinance.in/wp-content/uploads/2018/11/Unaudited-Financial-Result-for-Quarter-30.09.2018.pdf

Q3 FY 19

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Source: http://www.cslfinance.in/wp-content/uploads/2019/02/Unaudited-Financial-Result-for-Quarter-31.12.2018.pdf

I agree that NPAs should be disclosed in presentations even if it is 0 or close to 0. Its better to have everything in one place rather than pulling it out of several documents.

Company is on the right track. Even real estate market appear to be bottoming out. If they did well when RE market was bad, I think they should do well when it is recovering. SME portfolio is growing but I am little skeptical of this business. They don’t have core competency or track record in that business.

Overall, I think this story is likely to play out slowly over next 2-3 years. Company is selling at below book value which looks attractive. There may be hiccups along the way but low leverage and strong asset quality should provide some downside protection.

6 Likes

One concern with CSL Finance is its low liquidity in stock exchange. Trading volume is extremely low in both the exchanges. Price of such stock can easily be manipulated. A buy/sell order of even a few hundred shares can lead to stock hitting upper/lower circuit.

@Gaurav152 Is that you who converted 1,00,000 warrants to shares yesterday?

During this quarter

CSL Capital (Promoter entity) bought 3K shares approx
CSL Employee Welfare Trust and Employee Rajeev Mehra(COO) sold a same number of shares i.e. 15750 each respectively (co incidentally??? Aah no)

@Yogesh_s … By Any chance Do you know why they have kept Employees welfare trust out of Promoter group and they are using this amount for any CSR?

Results on 16th May…too short notice

Results out

Considering Liquidity issues in country results are not bad… But in absence of issues QoQ growth would also have been there

Important comments on same

AUM growth was restricted to 15%, due to liquidity squeeze and volatile market
conditions. It was a big challenge to raise funds at competitive prices in the second
half of the fiscal year
• Cash flows of wholesale segment are strong and can be used to fund the growth of
the SME retail segment
• Company’s low leverage is maintained with capital adequacy at 66% providing a lot
of scope for additional fund raising

4 Likes

overall this company is very good , interesting to see how management behave next couple of month ,as of now they are very good at managing risk.

2 Likes

Anyone attended yesterday’s conf call? Please do share notes.

Focus is on SME
Last 6 months have been difficult due to liquidity issues
Cost of borrowing was up by 50-100 bps due to same
But company is cautious on borrowing more with high cost
Wholesale segment providing enough cash flows to find some growth
Not difficult getting more borrowing as the NPA and leverage are one of the lowest in industry
SME yields are little lower than wholesale segment
Yields (IRR) target remains 16-18 pc
Productivity has been lower in last FY and focus is on improving productivity per branch (per SP). Increasing sales force as well.

Conference call transcript

@sammy11 any concerns on selling of Rajeev Mehra? And CSL employee trust as well? It’s continuous since last few months