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CSL Finance Ltd.

BSE: 530067 | NSE: | Series: NA | ISIN: INE718F01018 | SECTOR: Finance - Leasing & Hire Purchase

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Annual Report

For Year :
2018 2016 2009 2008

Chairman's Speech


Dear Shareholders

I am happy to connect with you through this letter and share some of my thoughts on the year that just went by. Last year has been a year of a New Beginning for the company and has been the first year of working as a pure lending NBFC. The government has done lot of structural reforms during last two years which had lot of impact on the way businesses were done especially in the SME Sector. Demonestisation, GST implementation and formalisation of the economy has far reaching impact on our economy. This has created both unforeseen challenges and opportunities for the NBFC''s. NBFC''s are gaining market share both in retail and corporate lending. FY 2017-18 was good year for NBFC''s. The stress on the banking sector balance sheet due to higher NPAs continues to hinder lending at the PSU''s Banks. This has created new opportunities for the NBFCs to grow. On the flip side NBFCs faced challenges in terms of borrowing from banks, with increased caution in the sector and their limited ability to fund additional loans. Overall business scenario remained encouraging for the industry.

It gives me great pleasure to share that year FY 2017-18 has been remarkable year for our company. We achieved several milestones. It was our first year as pure play NBFC after we discontinued our non-core operations last year. Our performance during the year was quite encouraging. Our foray into Retail SME lending is scaling up well and the progress till now is quite encouraging. Some of the other major milestones achieved are

- AUM of our company has increased substantially by 108.37% from Rs.135.46 Crores as on 31st March, 2017 to Rs.281.31 Crores on 31stMarch, 2018

- Revenue from our lending operations increased from Rs.23.55 Crores in FY 2016-17 to Rs.41.36 Crores in FY 2017-18

- PBT increased by 50.67% from Rs.17.11 Crores (only from lending operations) in FY2016-17 to Rs.25.78 Crores in FY2017-18

We are continuously adding talent to our company and our employee strength has increased from 22 in FY2016-17 to 82 in FY2017-18. Human resource is the most critical part of any organization and especially for a small company like ours. It is important to have a motivated team, whose goals are aligned towards the long term success of the company. We have taken a lot of HR initiatives to provide encouraging environment for individuals to learn and grow. A formal HR department has been built and we are working towards achieving these goals by implementing a human resources management solution.

On behalf of the company, I would like to thank Mr. Sandeep Kumar Lohani for his contribution to the growth of the company. He had joined us as the CEO heading our foray into MFI. Post demonitisation we chose not to venture into microfinance, and he moved on to become our Chief Strategy Officer. He has recently resigned and moved on to pursue other growth opportunities.

I am delighted to share that our SME segment is performing well. In first year of our operations, AUM in SME segment has reached to Rs.16Cr in FY2017-18.

Currently we are present in 4 states - Haryana, Punjab, Rajasthan and Uttrakhand with 12 operational branches. We are focusing on secured loans to traders and small businesses. Another focus area is school loans in Tier 2 and Tier 3 cities. We have carefully setup offices across the cities in such a way that we cater not just those specific towns and cities but also the sub-urban villages in the immediate vicinity of th ese cities. We are further expanding our presence to Gujarat, and expect to open more branches in next financial year.

Our wholesale credit business remained robust and grew substantially. AUM grew by 109.71% from Rs.126.45 Cr in FY 2016-17 to Rs.265.19Cr in FY 201718. Due to our robust domain knowledge and risk management by operating in known geographies our portfolio has performed well and we expect to continue on our growth path in this segment.

During this year, we ran down of our lending exposure in loans originated by 2 fintech companies namely Finomena and Happy Rupee. One of the company faced abrupt closure and the other decided to voluntarily discontinue its operations. We started a collections operation with 8 member team based out in Bangalore. Our collections team did remarkably well inspite of difficult circumstances and we were able to run down our 8 Crore loan exposure with total write off Rs.41.34 Lakhs. There were a lot of experience gained from this effort and gave us more comfort around scaling up our retail loan portfolio over time.

Another lesson that we took was that we have stopped unsecured lending in our SME loan book. Our total unsecured loan book is now Rs.2 Crores, which is less than 1% of our loan portfolio.

I am also very happy to share that the company has raised Rs.53.50 Crores from some marquee investors by way of preferential allotment in September 2017. Our Capital Adequacy Ratio (CAR) stands at a healthy 65% as on 31st March, 2018. The high CAR gives us ability to grow our balance sheet substantially in the coming years. This year we were able to raise debt of Rs.60 Crores from SBI, AU Small Finance Bank at competitive rates.

Post Mehul Choksi scam at PNB bank, PSU banks have effectively stopped lending. This has added to our challenges in raising debt. The tightening liquidity has effectively increased the interest rates and that has negatively impacted our spreads. We feel that this is a temporary phenomena which will get sorted out as the banks get recapitalised and the NPAs issues get resolved over time. We are working on starting new lines of credits with various financial institutions and private sector banks at competitive rates. We are actively looking to diversify our borrowing and build a credible track record for sustaining our growth in the future.

We are rated BBB by CARE Ratings. We expect that with improved financial performance our rating will further improve and help us in reducing our interest cost.

The banking sector is facing serious problems of bad assets and high NPAs. We are acutely aware of the risks in the system and we are building our lending book with a focused approach of reducing our risks and serving our customers by reducing our turnaround times. We are building a centralised credit team and taking a consistent approach to credit analysis. In our wholesale lending book, we visit our borrower''s site on a monthly basis to check the project progress and to see if the milestones are being met. We look for early warning signals that help us initiate appropriate actions. As a company, CSL Finance shall continue its endeavour to keep its credit costs low by choosing customers selectively, close monitoring of customers financials and high standards in underwriting.

We are very optimistic about the growth in NBFC sector in the coming years. Going ahead our focus would be on building our Retail SME loan book by expanding geographically in North & Western India. We plan to foray in Gujarat in the coming year. We are building a new product line in the school loans business and expect this to grow substantially over time. Our aim is to build a quality loan book with a focus on low delinquency rates. We also aim to keep our operating costs low and use technology to streamline our operations.

We continuously aim to keep improving our products offering and streamlining processes to maximize the utility of services for our customers.

We are working on multiple fronts to improve our systems and processes. As part of that exercise we are-

1. Implementing a new loan origination platform - Finnone Neo. This is a leading loan origination platform which is being used in number of banks and larger NBFCs. This is state of art lending solution which will bring lot of benefits right from reducing our turnaround time to providing us with significant Analytics. This implementation has come at a significant cost, but we are confident on leveraging its benefits over time.

2. We are Implementing HRMS 1 Solution for managing our human resource functions which will help us with managing our growth better.

I would like to thank our employees for their relentless efforts in growth of the company. I also express my gratitude towards our shareholders and lenders who have shown faith in CSL Finance and supported us in this journey.