Overview:
Srestha Finvest Ltd. is an evolving Non-Banking Financial Company (NBFC) that has rapidly diversified its business operations, shifting focus toward the booming renewable energy and water management sectors. Historically involved in general financing and investment activities, Srestha Finvest is leveraging its NBFC Investment and Credit Company license to provide secured lending for sustainable projects.
The company is transforming itself by expanding into high-growth sectors like green technologies, as reflected in its improved financial performance, partnerships, and strategic investments.
Key Business Developments and Strategic Moves
- Partnership with Felix Industries:
A pivotal moment for Srestha Finvest came in June 2024 when it signed a facility agreement with Felix Industries Ltd to fund renewable energy and water recycling projects. Under this agreement, Srestha committed to investing ₹25 crore over the next 1-2 years to support Felix Industries’ projects in clean energy, water management, and waste-to-energy solutions ​(Dalal Street Investment Journal).
This agreement allows Srestha to actively enter the fast-growing sectors of clean water access, recycling, green infrastructure, and e-waste management, setting the stage for a diversified lending portfolio focused on sustainability.
2. Launch of Srestha Greentech:
To further solidify its commitment to sustainable finance, Srestha Finvest has launched a wholly owned subsidiary, Srestha Greentech, dedicated to financing and lending for green energy and renewable technologies. This marks an important step in the company’s strategy to establish itself in emerging and eco-friendly sectors, opening opportunities to lend to companies engaged in green technologies like solar power, wind energy, and waste recycling​ (Dalal Street Investment Journal).
-
Rights Issue for Expansion:
In July 2024, Srestha Finvest announced a ₹48 crore rights issue to strengthen its capital base. The company offered new equity shares to existing shareholders at a face value of ₹2 per share, further expanding its equity capital from ₹66 crore to ₹116 crore ​(Zee Business). This capital infusion will fuel its expansion into higher-margin segments, especially in the renewable energy and sustainable finance domains. -
Strong Financial Performance:
Srestha Finvest’s quarterly results have been remarkable, showcasing a 6,947% surge in net profit and a 1,600% increase in sales in the June 2024 quarter​ (MoneyControl). These improvements stem from enhanced operational efficiencies, higher profit margins, and a strategic shift toward high-growth lending sectors. The company reported a net profit of ₹31 crore in Q1 FY24-25, compared to a net loss in the same quarter of the previous year signalling a strong turnaround. -
Operating Profit and Asset Expansion:
The company has improved its operating profit margin to 96.43% in FY24, capitalizing on better capital management and cost controls​ (Screener).
Its total assets grew to â‚ą193 crore, up from â‚ą92 crore in the previous fiscal year, out of which there was a 50 crore contribution from the equity capital segment (which now stands at 116 Crore, which potentially is a lot and may lead to a slower growth in the EPS, as the bottomline grows). The Company seems very reasonably (maybe even undervalued) at a P/B of 1.09, P/E of 4.6 and EV/EBITDA of 4.4
Opportunities for Growth
- Renewable Energy and Water Recycling:
With India focusing heavily on environmental sustainability, Srestha Finvest is well-positioned to tap into the rapidly growing renewable energy and clean water sectors. Its partnership with Felix Industries will open doors to projects in waste-to-energy, water recycling, and green infrastructure, aligning with government initiatives and regulatory incentives. - Leveraging Srestha Greentech:
The creation of Srestha Greentech further emphasizes the company’s commitment to sustainability. This subsidiary will help capture the immense growth potential in solar, wind, and waste management sectors, where government and international funding opportunities are abundant. - Underserved Credit Markets:
As an NBFC, Srestha has the advantage of catering to the growing credit needs of small and medium-sized enterprises (SMEs), especially in sectors where traditional banks have reduced lending due to stricter regulations.
Risks and Challenges
- Regulatory Risks:
As an NBFC, Srestha Finvest operates under the regulatory purview of the RBI. Changes in regulations, such as increased capital adequacy requirements or stricter lending norms, could impact profitability. - Credit and Market Risks:
Expanding into new sectors like renewable energy brings inherent credit risks, especially if there are delays or failures in project execution. Rising non-performing assets (NPAs) in these sectors could negatively impact financial performance. - Execution Risk in New Ventures:
While entering the renewable energy and water sectors offers significant upside, it also carries execution risks, especially as these projects require specialized knowledge and long-term capital commitments. Any missteps in project selection or financing could strain the company’s resources.
Conclusion
Srestha Finvest Ltd. represents a compelling investment opportunity, particularly for investors looking for exposure to green finance and business turnarounds. The company’s strategic pivot toward renewable energy, water recycling, and green technologies, supported by its partnership with Felix Industries and the creation of Srestha Greentech, sets it on a high-growth trajectory. Its improving financial performance and capital raise will provide the necessary resources for expansion. However please also be remain cautious of the associated risks (particularly, execution risk in the case of a strategic shift, and the inherent regulatory risks that comes along with investing in such sectors)
Disc: Invested