Shalibhadra Finance is a very niche NBFC focusing on financing New & Used Two wheelers, Auto rickshaws, Four-wheelers & consumer durables catering to mainly rural, semi-urban & other under banked geographies of Gujarat, Maharashtra & Madhya Pradesh.

Shalibhadra Finance Ltd

Current Market price on the date of publishing this report- 160 Rs

Introduction

Incorporated in 1992, Shalibhadra Finance is an asset finance company focusing on rural, semi-urban & other under banked geographies of Gujarat, Maharashtra & Madhya Pradesh. As on 31 March 2019, company had a network of 36 branches. 

The company offers wide range of customised retail products such as financing two wheelers, auto rickshaw, cars & consumer durables. It has conceptualized simple & speedy, small cap, asset financing products with high yields.

As of latest data aviailable from the company website Shalibhadra Finance has an Asset Under Management (AUM) of over 111 crores, staff strength of more than 120 employees,  Branch network of more than 40 branches and more than 1lakh+ customers.

Business 

Two Wheeler Loans

Company specialises in offering loan for purchase of new two wheelers across various brands. These loans are offered through Tie ups at various selling points in rural & semi-urban areas where there can be even customised product to enable quick delivery of vehicle to customer. The loan Tenure ranges from 6 to 30 months and the ticket size of each loan is around Rs. 30,000 to 90,000.

Used Two wheeler Loans

Company offers loan against pre-owned two wheeler’s as well as for purchase of second hand two wheelers. These loans are  offered directly at the branch offices as well as through tie ups with second hand dealers & other selling points. The loans are normally disbursed within 48 hours from application thereby making it very popular in rural markets.

Additionally company also has an alternative, a very convenient option where the loans are offered against Gold in order to meet emergency financial needs. The Loan Tenure ranges from anywhere between 6 to 24 months and the Loan size is between Rs. 15,000 to 75,000.

Used Three / Four Wheeler Loans

Company also offers loans for Pre-owned three/four wheeler. These loans are offered directly at the company branch offices as well as through tie ups with second hand dealers & other selling points. Even these type of loans are also normally disbursed within 48 hours from application. The Loan Tenure ranges anywhere between 6 to 30 months and the Loan size is around Rs. 30,000 to  1,50,000 Rs.

Consumer Durable Loan

Company offers loans to purchase consumer durables. These loans are offered through Tie ups with various selling points in rural & semi-urban areas. The Loan Tenure of this loan ranges anywhere between 6 to 30 months and the loan size is around Rs. 5,000 to 35,000.

Financials

For the year ended March 2022

• Net Sales stood at Rs 22.31 crore for the year ended March 2022 up 6.7% from Rs. 20.90 crore in March 2021.
• Net Profit stood at Rs. 6.02 crore for the year ended March 2022 up 71.5% from Rs. 3.51 crore in March 2021.
• EBITDA stood at Rs. 15.20 crore for the year ended March 2022 up 14.3% from Rs. 13.29 crore in March 2021.
• Shalibhadra Fin EPS had increased to Rs. 12.03 for the year ended March 2022 from Rs. 7.02 in March 2021 registering 70% increase.
• Company has consistently high operating margin of around 70% for several years.
• Interest cost as a percentage of total revenue stood at around 30% and that of EBIT stood at around 46%.

For the Quarter ended June 2022 – Q1FY23

• Net Sales stood at Rs 6.18 crore in June 2022 up 21.02% from Rs. 5.10 crore in June 2021.
• Quarterly Net Profit stood at Rs. 1.71 crore in June 2022 up 55.87% from Rs. 1.10 crore in June 2021.
• EBITDA stood at Rs. 4.06 crore in June 2022 up 22.66% from Rs. 3.31 crore in June 2021.
• Shalibhadra Fin EPS has increased to Rs. 3.43 in June 2022 from Rs. 2.20 in June 2021.

NPA’s

• TotaL provisions and write off stood at 1.93 crores as of Mach 2022 down 27% from 2.68 crores in March 2021.
• Total Bad debts written off as of March 2022 stood at 1.25 crores down 41% from 2.12 crores in March 2021.

Finance / Shares Pledged

Promoters created pledge of 3lakh shares on 16th July 2022 where the value of shares in agreement was taken at 4,73,25,000 which is around 157 Rs per share agaainst which company had taken loan of 3 crores which would be utilised by the company for meeting its working capital requirements.

Distinctive Competitive advantage.

Two-wheeler sales are picking up post the pandemic. There is sizable opportuinity for the companies to grow into these category. However despite high competition into this segment where all banks as well as NBFC’s and even some startup do finance, Shalibhadra Finance has an distinctive competitive advance. These advantages are its presence and quick financing.

Shalibhadra Finance’s primary goal for expansion is to expand slowly in niche markets with limited competition. As a result, the company may quickly gain presence on the ground. Furthermore, with little competition, the company can dictate terms of credit, such as negotiating rates to shift the scales in its favour when it sees heightened risk of financing.

Obtaining finance from a bank can be a time-consuming process that necessitates a large number of paperwork, as well as meeting specific risk limits to ensure the bank of repayment. This is another significant advantage of Shalibhadra Finance. Unlike banks, it can streamline the process and provide customers with easy funding without the need for extensive paperwork. To compensate for the greater risk, it may request a higher rate of interest from consumers, which is usually acceptable rather than going through the lengthy process of obtaining a loan from a bank.

Future Plans and Outlook

Due to various norms put in place by RBI for Two wheelers financing business, Shalibhadra Finance has great opportunity to tap this market. 

The Indian rural landscape is rapidly changing, presenting various growth opportunities. The rural customer (>75% of the population) is becoming more market savvy, and aspires for a higher life quality. The objective of the company is to grow its customer base to over 1,05,000 customers, 50 branches and a vehicle finance portfolio of Rs 125 crores by March 2022. 

Shalibhadra Finance Limited plans to concentrate further on smaller but upcoming towns to avoid margin competition. Customers of the company are generally salaried class, agriculturist and self-employed. This industry is growing in double figure rates and competition from other NBFC‟s and banks is practically non-existent due to relatively small & wide market and high service oriented business. 

Sectorial Outlook

In India, two-wheelers are one of the most popular ways of transportation. When compared to other modes of transportation, two-wheelers make it easier to navigate through heavy traffic, park, and travel small distances. Furthermore, two-wheelers’ smaller proportions, reduced bulkiness, and lower costs make them popular among all social classes in the country.

In the Indian two-wheeler market, loans finance 75% of purchases. Banks and NBFCs hold 60% and 40% of the two-wheeler loan industry, respectively. According to Statista, the Indian two-wheeler lending industry is predicted to increase at a compounded annual rate of 11% or higher. This segment is expected to be valued $12.3 billion by 2025. As a result, the overall picture for the two-wheeler lending industry appears to be extremely bullish.

Retail disposable income in India has increased dramatically during the previous 25 years. However, the year 2020 was an anomaly, when revenues at all levels fell owing to the global pandemic. Retail disposable income fell by around 3.41% from Rs 206.75 million in 2019 to Rs 199.69 million in 2020, according to Trading Economics statistics. However, when the Indian economy eventually frees itself from the restraints of the COVID-19 second wave, personal earnings should begin to rise again. According to industry analysts, the Indian economy has almost recovered to pre-pandemic levels by March 2022.

Indian 2-wheeler loan market value 2019 – $6.7 billion

Expected CAGR of the 2-wheeler loan market – 11%

Projected Indian 2-wheeler loan market value 2025 – $12.3 billion

Source – Statista

Conclusion

Shalibhadra Finance is a very niche NBFC focusing on financing New & Used Two wheelers, Auto rickshaws, Four-wheelers & consumer durables catering to mainly rural, semi-urban & other under banked geographies of Gujarat, Maharashtra & Madhya Pradesh. Company has presence as well is planning to expand its presence where there is negligible competition which gives company two distinctive advantages. Thus with a market-cap of just 80 crores accompanied with enthusiastic and passionate management shalibhadra finance is worth exploring for long term.

Users are requested to please read the points mentioned at the beginning of this report.