KOCHI: LuLu Financial Services has turned profitable for the first time since its inception, posting a modest profit of Rs11 lakh in the first half of FY25.
This marks a turnaround from its previous losses of Rs3.09 crore in FY24 and Rs2.31 crore in FY23.
The company, which primarily operates in the gold loan segment, had assets under management (AUM) of Rs55.9 crore as of December 2024, with gold loans comprising 95 per cent of its portfolio.
Personal loans
It now plans to diversify into personal loans, targeting a 15 per cent contribution to its loan book. However, its operational costs remain elevated as it works towards achieving scale efficiencies.
LuLu Financial Services lends against gold with an average ticket size of Rs1 lakh and a tenor of six to twelve months.
The pace of disbursements remains crucial for loan book growth. Given its relatively young operations – it began in November 2021 – the company is still establishing its presence across economic cycles.
Scaling up
The company has been expanding its footprint, growing from 18 branches in March 2023 to 35 by December 2024 – 18 in Kerala and 17 in Tamil Nadu. It aims to reach 50 branches by December 2025.
While its expansion remains regionally concentrated, the promoters’ deep market understanding in these states supports its growth strategy.
LuLu Financial Services has strong parentage by virtue of being a part of the Abu Dhabi-headquartered Lulu group. Its operations are spread across three continents, with vast experience in the retail, commercial real estate and hospitality sectors
To bolster its financial base, LuLu Financial Services had planned an equity infusion of Rs25 crore before March 2024, but the process faced delays.
It secured Rs8 crore in the first quarter of FY25, with the remaining Rs17 crore expected before March 2025.
Funding and operational challenges
The company’s funding remains largely dependent on overdraft and cash credit facilities from banks, which accounted for 52 per cent of total borrowings as of December 2024.
Non-convertible debentures (NCDs) made up another 33 per cent, with the top three lenders holding 43% of its funding base. To diversify its liability profile, LuLu Financial Services is in discussions with banks to explore a business correspondence model.
While its operations are gaining traction, the company’s expenses remain high due to investments in branch expansion, personnel, and technology. Operating expenses rose to Rs6.9 crore in FY24, up from Rs3.07 crore in FY23.
