Detailed Rationale

Crisil Ratings has assigned ‘Crisil BBB/Stable’ rating to Rs.100 crore non convertible debentures of Moneyboxx Finance Ltd (MFL). Also, Crisil Ratings has reaffirmed its rating on the existing non convertible debentures and long-term bank facilities of MFL at ‘Crisil BBB/Stable’. 

 

The rating reflects MFL’s comfortable capital position and extensive experience of the promoters in the financial services industry. However, these strengths are partially offset by small, albeit improving, scale of operations and average earnings profile.

 

MFL’s overall assets under management (AUM) was Rs 837 crore as on December 31, 2024, as against Rs. 730 crore as on March 31, 2024. The present business model is structured to primarily cater to micro enterprises.  The company follows a branch-based business model and currently has 160 branches in tier III and below cities across 12 states. The company initially started operations in Rajasthan, and then gradually expanded its footprint in others states such as Madhya Pradesh, Haryana, Punjab, Uttar Pradesh, Chhattisgarh, Bihar and Gujarat Further, in current fiscal, it expanded to 4 southern states - Andhra Pradesh, Karnataka, Tamil Nadu and Telangana.

 

Since inception, the company had been able to maintain asset quality with 90+ days past dues (dpd) below 1%. However, 90+ dpds increased to 5.6% as on December 31, 2024, from 0.6% as on March 31, 2023. The increase in delinquencies during fiscal 2024 and 9M FY 2025 was due to a series of socio-political issues and stress across the unsecured sector. Crisil Ratings believes asset quality metrics remain susceptible to sudden upticks during periods of stress given the inherent borrower profile and high exposure to livestock (66% of the portfolio). However, it is partly mitigated by the company’s focus on essential sectors and increasing focus on secured lending.

Analytical Approach

While arriving at the rating, Crisil Ratings assessed the business and financial risk profiles of MFL on a standalone basis

Key Rating Drivers & Detailed Description

Strengths:

• Comfortable capital position: Capitalisation metrics are comfortably supported by regular capital infusion. The promoters have demonstrated their ability to raise capital from investors by raising Rs 270.33 crore equity since inception including Rs 91.72 crore in first half of fiscal 2025 (of which, promoter and promoter group made an equity investment of Rs 11.53 crore). In addition, another Rs 84.72 crore equity will be raised by the end of fiscal 2026 via conversion of share warrants, which will further strengthen its capital position. Raising capital at regular intervals has resulted in net worth increasing to Rs 264.9 crore as on December 31,2024 against Rs 168.9 crore as on March 31, 2024. Reported gearing also remained comfortable at 2.0 times as of December 31, 2024 (2.6 times as on March 31, 2024). The company has indicated that steady state gearing will be maintained at 4 times in accordance with portfolio growth. Nevertheless, given its growth plans and the asset segment in which it operates, the ability of the company to keep on raising sufficient capital, while maintaining gearing at a comfortable level, will be a key rating sensitivity factor.

 

• Extensive experience of the promoters and management in the financial services industry: The leadership team at MFL is experienced and its expertise has not only allowed the company to establish a diligent risk management framework in-house but also set up an efficient post disbursal follow-up process. The company was founded by Mr Mayur Modi and Mr Deepak Aggarwal, who have extensive experience in the financial services industry. They have more than two decades of experience in companies such as HSBC, JP Morgan, Bank of America, Deutsche Bank and KPMG. Other members of the leadership team have an average experience of over 20 years in their respective fields. The company, through its lending practices, is largely retail focused and has been enabling financing to new-to-credit customers, rural & semi-urban areas and strives to provide sustainable livelihoods related to financing products for its customers.

 

The experience and understanding of the promoters have enabled the company to put in place comfortable risk management systems. MFL has adopted a branch-based model with most of its operations from origination to disbursements happening digitally. Furthermore, it has a proprietary credit risk model used to evaluate credit decisions. The company leverages its on-ground presence for loan monitoring.

 

Weaknesses:

• Moderate earnings profile, constrained by elevated credit costs and operating expenses: The company reported PAT of Rs. 6.5 crore on total income of Rs 147.1 crore for nine months of fiscal 2025 with annualized return on managed assets (RoMA) of 0.9%. For fiscal 2024, the company reported a PAT of Rs 9.1 crore (RoMA of 1.4%) on total income of Rs 128 crore as against loss of Rs 6.8 crore for fiscal 2023. The earnings profile improved during fiscal 2024 backed by improvement in operating expenses, although it continued to remain high. The operating expenses in proportion to average managed assets was 10.1% for fiscal 2024 (12.1% during fiscal 2023) and 10.0% for nine months of fiscal 2025, attributable to branch set-up and expansion costs.

 

While the earnings profile has been supported by improving costs of funds with MFL being able to raise incremental funds at around 12% during nine months ended December 31, 2024, increased credit costs in current fiscal has led to a constraint on overall profitability. The company had been able to maintain low credit costs until fiscal 2024. However, following the stress in the portfolio, the 90+ dpd increased to 5.6% as on December 31, 2024, from 1.5% as on March 31, 2024, which also led to increased credit costs. The credit costs in proportion to average managed assets for the company increased to 2.9% for the nine months of fiscal 2025 as against 1.1% for fiscal 2024.

 

The asset quality remains susceptible to risks inherent in the unsecured segment, though company is increasing focus on secured lending. Furthermore, as most of the portfolio growth has come during the last 1-2 years, going forward, the company’s ability to improve its earnings profile driven by improvement in portfolio quality and operational efficiencies kicking in, will remain monitorable.

 

• Small, albeit improving, scale of operations: Overall AUM for the company grew to Rs 837 crore as on December 31, 2024 (Rs 730 crore as on March 31, 2024), however the scale of operations remain small. Nevertheless, AUM remains well-diversified across twelve states with a focus on essential sectors. The current loan portfolio mix comprises 66.0% towards livestock, 16.6% towards trading, 7.7% towards kirana, 6.7% towards manufacturing and 3.0% towards services and operated out of 12 states. Apart from geographical diversification, MFL has also diversified its product mix between secured and unsecured segment. The company has started offering secured business loan against property (LAP) from fiscal 2023 and its share in total AUM has increased to 38% as of December 31, 2024, as compared with 6% share as of March 31, 2023. The share of secured loans is expected to further increase going forward. Crisil Ratings expects the pace of growth to remain healthy over the medium term, with the company’s enhanced focus on geographical expansion. However, the ability to scale up operations, while showcasing improvement in asset quality and profitability, remains a key monitorable.

Liquidity: Adequate

Liquidity position is adequate as the company has total debt obligation and operating expenses of Rs 87.3 crore over the next two months (Feb 2025 to March 2025) against which it had Rs 48.3 crore of liquidity buffer as on January 31, 2025, including cash and bank balance of Rs. 25.19 crore and investments in liquid mutual funds of Rs. 23.11crore.

Outlook: Stable

Crisil Ratings believes that MFL will benefit from its experienced promoters and management and will maintain its comfortable capital position over the medium term. However, sustainable improvement in asset quality metrics and earning profile remains a key monitorable

Rating sensitivity factors

Upward factors:

• Sustained asset quality with NPAs remaining below 2%, while the company scales up its portfolio
• Stable earnings profile with return on managed assets (ROMA) of over 3% on steady-state basis
• Further improvement in the capital position through raising equity capital and gearing remaining below 4 times on steady state basis

 

Downward factors:

• Any adverse movement in asset quality with 90+ days past due (dpd), impacting the earnings profile
• Moderation in capitalisation metrics with adjusted gearing beyond 4 times

About the Company

MFL is a non-deposit taking, base layer non-banking financial company (NBFC-BL) registered with the Reserve Bank of India (RBI) and listed on the Bombay Stock Exchange. It is promoted by Moneyboxx Capital Pvt Ltd and provides small-ticket business loans to micro and small enterprises. MFL commenced commercial operations in February 2019. As on September 30, 2024, the company had 141 branches across twelve states. All branches are present in tier III and below cities.

Key Financial Indicators

Particulars	Unit	Dec 2024	2024	2023
Total assets	Rs crore	783.0	669.2	330.9
Total income	Rs crore	147.1	128.0	50.4
Profit after tax	Rs crore	6.5	9.1	-6.8
Gross NPA (% of own book)	%	5.6	1.5	0.8
90+ dpd (% of AUM)	%	5.6	1.5	0.6
Adjusted gearing	Times	2.3	2.9	3.1
RoMA	%	0.9*	1.4	-2.3

*annualized

Any other information: Not Applicable