ICL Fincorp
Company Background: Established in 1991, ICL Fincorp is an NBFC mainly dealing in gold loan business. Its AUM comprises of 90% business from Gold loan. The company also deals in other segments like Business Loan, Vehicle loan, Property Loans, health insurance (tie-up with Liberty Videocon) and more.
ICL Fincorp’s promoters own a reasonable 49.79% of the stake in the company as of FY20. This share has increased from FY19 when it was at 38.47%. This indicates that the management is positive on the performance of the company going forward. The promoters raised their stake in their last round of fund raising at approximately Rs. 20 per share.
Business Performance: ICL Fincorphas been growing well, as indicated by its branch expansion. It has more than doubled its branches from 77 in 2016 to 163 in 2020 in a period of just 4 years. The company’s corporate license for Insurance Business is in the final stage of processing and is expected to be implemented by the end of December, 2020. This will generate additional income. The company has acquired 74% stake in Salem Erode Investments, which will increase its footprint by 157 branches across 5 states in South India. The company has an ambitious plan to scale up the branch network to 1000 branches by 2022.
Listing Plans: ICL Fincorpis now eligible to be listed on the BSE under the reverse merger mechanism, after it acquired a substantial 74% stake in Salem Erode Investments(a BSE listed NBFC).Its managing director Mr. KG Anil Kumar informed BusinessLine (click here to read the article) of their intentions to get listed and also confirmed the approvals obtained from SEBI and RBI.
Covid Impact: The company’s operations were impacted from 25th March 2020 to 14th April 2020. However, post that, the business and recoveries, both have improved and the company does not expect any substantial impact on credit quality of the loans. Infact, management was contemplating a policy to offer moratorium to its customers but the response from branch staff and recoveries never required them to offer it. Gold prices shot up in the pandemic and proved to be a boon for the company. ICL fincorp has strategically lowerd its LTV to 70% to safeguard itself and is not expecting as risk of NPA from gold loan accounts and they have been periodically maintained below 1% with regular auctioning of gold articles.
Financial Performance:
During FY20, assets under managementof ICL Fincorpgrew by 31% and the growth of on-balancesheet assets was 36%. The business AUM (including on book and assigned and net ofprovisions) in FY20 was Rs. 249 croresversus Rs. 189 croresachieved in FY19. The company’s Earnings per Share stood at Rs. 0.15/- mainly due to equity dilution carried out during the year.
A brief financial snapshot is given below:
| Particulars | FY20 | FY19 | % Growth |
| Interest Income | 568,757,303 | 488,812,246 | 16% |
| Other income | 1,458,862 | 5,447,103 | -73% |
| Total Revenue | 570,216,165 | 494,259,349 | 15% |
| Expenses | |||
| Finance costs | 259,292,671 | 201,807,120 | 28% |
| Employee benefits expense | 150,370,555 | 126,127,227 | 19% |
| Depreciation and amortization | 55,668,641 | 44,837,100 | 24% |
| Other expenses | 96,606,986 | 117,574,086 | -18% |
| Total Expenses | 561,938,853 | 490,345,533 | 15% |
| Profit before Tax | 8,277,312 | 3,913,816 | 111% |
| Tax expenses | 2,545,579 | 3,768,810 | -32% |
| Profit After Tax | 5,731,734 | 145,006 | 3853% |
For detailed annual report of FY20, please click here (Link – https://iclfincorp.com/annual_report)
Future Outlook:
The company’s growth plans are solid, the business model mainly based on gold loan is expected to play out well but an important element of risk is the acquisition of Salem Erode Investments. Any acquisition has potential to create synergies or cause hurdles. Fortunately the target acquired is net debt free, has been growing profits and provides a listing for the parent, thereby offering better prospects to raise funds at better prices for its future growth.