LFSPL to commence operations in H2, FY23
By CL Jose
KOCHI/November 07-2022: A non-banking financial company (NBFC) from the Lulu stable, Lulu Financial Services (India) Pvt Ltd (LFSPL), is all set to enter the Kerala’s lucrative gold loan business, along with other activities.
Though the plan is to stay low profile initially, LFSPL will likely scale up, before long, its lending operations in the state, which is currently dominated by large players such as Muthoot Group companies, Manappuram Finance, Kosamattam Finance, and thousands of money lenders in the unorganised sector.
Most banks are also increasingly expanding their gold loan portfolio, which is not only remunerative but at the same time relatively risk-free.
Moreover, gold loan business is one area that doesn’t require much capital due to the risk-freeness of that asset class.
Bouquet of loan products
A CRISIL report said LFSPL is planning foray into multiple businesses such as gold loans, working capital loans, personal loans, consumer durable loans and supply chain financing with their primary focus being gold loans considering its immense potential in South India.
LFSPL though was incorporated in January 2018, was granted the Certificate of Registration in March 2019 by the Reserve Bank of India (RBI).
The company is owned entirely by the promoters through the holding company, Lulu Financial Holdings Ltd (LFHL), which is a part of the Lulu group promoted by Yusuff Ali.
According to the report, “LFSPL’s management team has rich experience in the financial services industry. The managing director, Adeeb Ahamed, who is also a board member of the $8 billion Lulu group, established the first Lulu International Exchange branch at Abu Dhabi and has been instrumental in overseeing the strategic and rapid growth of the company’s physical and digital network in 11 countries.”
Another financial services entity from the storied Lulu Group is Lulu Forex Pvt Ltd (Lulu Forex), the Indian arm of Lulu International Exchange LLC, the foreign exchange (forex) and money remittance company with presence across Arabian Gulf, India, Bangladesh, Philippines, Hong Kong
Though RBI has issued the licence as early as March 2019, LFSPL plans to commence operations from the second half of the current financial year (fiscal 2023).
The delay in the commencement of full-fledged operations, according to CRISIL, is primarily due to the pandemic-led disruptions.
As the company is still in initial stages of operations; its portfolio was modest at Rs4.8 crore as on June 30, 2022 (Rs 6.1 crore as on March 31, 2022).
However, the association with the multi-billion-dollar Lulu group provides an advantage of being able to use the existing branches Lulu Forex, for scaling up operations, the report added.
LFSPL plans to initially concentrate on the branches in Kerala, post which they will slowly diversify to other parts of India.
Around 50 per cent of the portfolio is expected to be concentrated in Kerala till fiscal 2024.
Equity infusion
LFSPL was yet to raise any kind of debt as on June 30, 2022, considering the fact that its operation is expected to start only in the second half of fiscal 2023.
The company received an overdraft limit of Rs5 crore from the Federal Bank in August 2022. It plans to expand operations through the above limit as well as the planned equity infusion of Rs 25 crore by December 2022.
