ValuePickr Forum

CSL Finance Limited - Transition To NBFC

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

While I am not sure how many shares he holds and what part of that he has sold, Rajeev Mehra quit sometime in Q4 and hence is not a company key man any more. I am also not sure how much to read into his selling and same for CLS Trust.

One positive angle could be selling shares in market to subscribe to stock options, which would be at lower cost. This has happened in the past when the promoter permitted the then CEO to retain his options at the time of his leaving the company (about 2.5-3 years back). This was because of the good relationship and that they parted amicably. Same could be the case with Rajiv also, albeit this is just guess work.


Thanks @sammy11. I was not aware about him quitting.

The company came into my notice as it is selling below book, typical from Graham’s era of investing. Now one thing we all know about financials is that it is very important to know the quality of the book, only then we should look at PB etc. Given that the company has had extremely low NPAs so far, can anyone shed some light on the following:

  1. How come it is able to maintain such low NPAs especially given that it operates in real estate developer financing, MSME loans etc? What’s it secret sauce?
  2. Is the approach in Q1 above scalable? i.e, can the company repeat this over and over the course of its journey to become much larger in size, and yet maintain the quality of its book?
  3. How prone is it to disruption? I read the con call transcript and the MD mentioned that the company is most active in the SME segment where the entities/people don’t even have GST registrations/PAN, so fintech would stay away from it. But can this be relied upon from CSL’s point of view?


Small uptick in results QoQ…which is good sign in turbulent times…

Management continues to focus on reducing wholesale book exposure…


Did anyone attend the AGM?

Hi, any updates on CSL? No activity on this for a few months now…is this affected so much by NBFC liquidity

P/BV looks attractive

As per the last concall the companies has not been able to raise funding from banks in the current turmoil…however as long as the book is strong and not impaired, which has been true till now, this company is a must keep in one’s watchlist…the company has shown its ability to keep a good book on the assets side…once they are able to raise money from banks …the company should do well


A lot of info has already been gathered and discussed above on this thread.
I stumbled on this company by chance and got interested and read through last 7~ years of AR and some basic checks. Gathered some notes along the way for my own understanding and reference.
Please ignore the information if it’s repetitive.

Current Market Cap: Rs. 152 Crores


From the latest AR, which is pretty good compared to the past few years AR


Strengths & Risks:

Product lines:

Current biz structure:

Journey of company:

Opportunity ahead: Large.
NBFC sector, in general, has a long way to go, to help the inclusion of the Indian population and serve the under and un-served population of the country.

Financial performance:
• ROE (TTM) 12.67, Avg. ROE 5 and 3 years = 12.81 and 13.16% respectively.
• Current P/B = 0.71 ( Something I won’t read too much in to ), has to be looked at in conjunction with a lot of other parameters.
• Rated BBB in credit rating agency.
• Have a low D/E equity of 0.7 and CAR of 66%
• The below screenshot captures the Sales, PBT, PAT and Loan book growth. In my opinion, we should not look at any one parameter in isolation. Please note the CAGR column is for only when they have consciously lent out money and have moved away from the arbitrage situations, prop investments, etc -

KMP Remuneration:

Note: back in 2015-16, the Promoter salary jumped to 90 lacs from 30 Lacs, which was a significant jump, but at the end of the day with in acceptable range…

Shareholding pattern:
Promoter holding was at ~75% until they mid 2017, when they issued convertible warrants and equity to raise capital and brought their holding down to 60%. Still a high holding percentage. ( source: Phreakonomics )


Valuational Rationale: Although i have seen people regularly use the Price to Book as a good metric to say its cheap or expensive, that is largely insufficient. I have highlighted a few points above in the financial performance section which have been to be looked at holistically…before determining the approx value range for the biz.

I am in the process of evaluating this and will keep this forum posted…

For those interested, here is the much-respected Bharat shah’s guidance on valuing NBFCs - link:
Parameters to consider:

  1. ROE
  2. P/B
  3. derive the Earnings yield.

Using that as a starting point for the yield & consider the below in conjunction and arrive at a value…

  1. Capital efficiency

  2. Likely growth rate ( with size of opportunity )

  3. Credit losses over a period of time

  4. account for payout ratios if any ( given that money earnings are their raw material for the business )


My notes from the 2019 AR:


Found this interesting and not sure if folks here had a chance to review this important point -
On competition intensity and the opportunity set in front of the company & how & why the competition wont erode away the margins for CSL: (From the conference call in June, 2019)

How is the competitive landscape in SME? how and why is that we are different? ( In SME we have been pretty well even in this year based on very reasonable growth on the SME side but overall if you look at all the NBFCs and even banks are trying to focus more on SME. So how is the competitive landscape there, is it more to do that the opportunity level on the SME is so huge, it is so untapped that even such competition all the banks will continue to do well on NBFC. Sir, if you can just throw some light on the SME segment?
Answer: When we say SME, it is a wide space there where even from a ticket size from Rs.5 Lacs to Rs.2 Crores is categorized under this segment.

  • We have an average ticket size of around Rs.5 to 7 lakhs we are focusing in Tier II, Tier III cities and primarily our target audience are those people who are in unorganized business, they are not having any banking and so not filing even GST returns or income tax returns.
    So that is the segment; still not too many companies are focusing on and when we say SME …

  • The larger NBFCs - they are more focused on those SME businesses where the ticket size is more than Rs.50 lakhs to 2 Crores and there those companies are filing GST return and are doing business mostly from through banking. So that is the difference between where we are in and where the larger or the bigger banks are.

  • You see this is the segment which is still untapped nobody has looked it is only during last two, three years where the NBFCs have started focusing in these segments and these segments primarily lived out of informal borrowing and with the GST coming and with the demonetization so a lot of in the informal Lenders has I would say literally vanished and now they are falling back on raising their capital or their borrowings from the NBFCs. So it is still a very huge, large untapped segment and there is a huge scope to grow in the segment which we are focusing, we are primarily focus in Tier II, Tier III cities.

1 Like

This is a good article (paid) which showcases the growth of an nbfc in exactly the same business as csl finance. There is huge opportunity and can be highly profitable if executed well on risk adjusted basis.

Results for Q2 And Half Year Ended as of 30/9 are out:

decent set of numbers. need to see if there’s an investor presentation


I think there is a considerable debt reduction

This is really turning out to be good thing due to recent uncertainty.

Instead of getting new customers aggressively promoters are doing debt reduction so to raise new money at better rates i think.

The presentation should be out early next week. Half yearly conf call is also going to happen next week.

Very Detailed presentation indeed.

1 Like

Q2FY20 Earnings Call Highlights


  • Bamboo Capital Partners
  • Naredi Investment
  • Prudent Value Partners
  • Turtle Capital

Business Overview:

  • Revenue at Rs 15.1 crore vs Rs 14.6 crore YoY
  • NII at Rs 11.9 crore vs Rs 10.8 crore YoY
  • PAT at Rs 7.3 crore vs Rs 5.9 crore YoY
  • AUM at Rs 317 crore vs Rs 313 crore YoY
  • Capital Adequacy Ratio remain strong at 70%
  • GNPA at 0.9%, NNPA at 0.2%

ConCall highlights:

  • CSL does financing to those projects which are near completion and 80-90% units are sold, where cash-flow is almost certain
  • CSL provides loan on the basis of cash flow
  • CSL does unsecured lending only towards schools and rest is all secured
  • Focus of the company has been shifted towards SME retail lending from wholesale lending
  • Contribution of SME retail is gradually increasing; company is aiming to increase the mix of SME retail in overall AUM to 50-60% in next 3-4 years
  • CSL is not growing its wholesale book as perception of credit rating agencies and lenders have turned cautious on the wholesale lending segment
  • Ticket size for school business is higher compare to other SME business. Manappuram, ICICI also entered into this space
  • CSL is focusing to improve the profitability of the existing branches; post that company will add more branches
  • Average yield on SME lending is around 18-20% and average tenure is 5-7 years
  • CSL currently disbursing Rs 4-5 crore on a monthly basis in SME segment; company is targeting to increase it to Rs 10 crore per month
  • Company has been scaling down wholesale LAP book as there is no certainty of cash-flow
  • LTV is below 45%, but in few cases it goes up to 50-55%

Thanks for sharing the concall highlights. Did they face any issues with payments of existing clients…? Defaults or anything if they highlighted?

what are there plan to increase the AUM, as AUM is almost flat compare to last year