dhanuka commercial ltd management Management discussions

Indian economic review

Indian economy achieved a robust real growth rate of 7.2% for the fiscal year ending in March 2023, after registering a growth of 9.1% in FY22, primarily due to the base effect.

The Indian economy effectively rebounded from the impact of the COVID-19 pandemic by implementing financially sustainable measures and undertaking significant reforms. The pandemic-induced disruption also offered an opportunity for India to partially decouple from the global economy, mitigating the risk of a recession caused by external contagion. Additionally, the presence of a substantial number of small enterprises and self-employed professionals in India played a crucial role in sustaining demand and facilitating a resilient recovery, thereby reducing vulnerability to the global economic slowdown.

Amidst global uncertainties emanating from the war in Ukraine, high commodities prices and rising interest rates across markets, the banking and non-banking financial service sectors in India remained resilient as noted by the RBIs Monetary Policy Committee (MPC) in April 2023.

The MPC increased the repo rate six times, by an aggregate of 250 basis points in the current rate tightening cycle from May 2022 to Feb 2023 to fight inflation. This pushed borrowing costs to a level of January 2019. The RBI raised its growth forecast for the year beginning in April 2023 to 6.5% from 6.4% and lowered its inflation forecast to 5.1% from 5.3% during June 2023 monetary policy announcement, taking into account a normal monsoon, amongst other factors.

Report Rate Hikes During FY23

Due to rising inflationary pressures, the RBI has been reversing its accommodative monetary policy stance. As of February 2023, the benchmark repo rate has been increased by 250 bps to 6.5% from the base level of 4% in October 2020. CRISIL Market Intelligence and Analytics (MI&A) expects the upward movement in interest rates to lead to NBFC debt being re-priced at a higher cost. However, borrowing costs for NBFCs in Fiscal 2023 was still below pre-COVID levels.

enhanced Indias financial inclusion and helped fuel the credit cycle in the country.

The growing importance of the NBFC sector in the Indian financial system is reflected in the consistent rise of NBFCs credit as a proportion to GDP.

Rising share of NBFC Credit in GDP (at end-March)

Indian NBFC sector review

The Government of India and the RBI have been constantly reviewing the financial sector and implementing policy reforms to facilitate the growth and reach of the banking sector. The Indian banking industry has recently witnessed the rollout of innovative banking models like payments and small finance banks. In recent years, India has also focussed on increasing its banking sector reach and promoting financial inclusion, through various schemes like the Pradhan Mantri Jan Dhan Yojana, Pradhan Mantri Mudra Yojana, and Pradhan Mantri Jeevan Jyoti Yojana. Schemes like these coupled with major banking sector reforms like digital payments, neo-banking, a rise of Indian NBFCs and fintech have significantly

According to CRISIL MI&A, NBFC credit grew at a CAGR of 9.70% during FY18 to FY23 and it expects NBFC credit to grow at 12%-14% between FY23 and FY25. In FY23, credit growth improved significantly and is at par with pre-COVID levels. NBFCs share in the overall credit increased from 12% in FY08 to 18% in FY23 and is projected to remain stable in FY24. CRISIL MI&A believes NBFCs will continue to play an important role in the Indian credit landscape, given their inherent strength of providing last-mile funding and catering to customer segments that are not catered by banks.

Profitability (ROA) of NBFCs improved in FY23 led by declining credit costs according to CRISIL MI&A. The decline in credit cost was on account of gradual recovery across sectors with the waning impact of pandemic and improving collection efficiencyaiding it. Despite increase in borrowing costs, the overall profitability of NBFCs improved in FY23, primarily on account of lower credit costs due to contingency provisioning buffers created over the course of the previous two financial years.

Main regulatory updates

Regulatory developments, such as the Reserve Bank of Indias (RBI) prompt corrective action (PCA) framework for NBFCs, have contributed to a more balanced regulatory environment between banks and non-banks. The revision of Income Recognition and Asset Classification (IRAC) norms in 2021 has further levelled the playing field for NBFCs. These policy reforms aim to bolster corporate governance, fostering sustainable growth within the sector.

The main regulatory developments during FY23 were:

  • Scale-based regulations (SBR) were introduced by the RBI on October 22, 2021, with a view to develop a strong and resilient financial system. The SBR approach renders the regulation and supervision of the NBFCs to be a function of their size, activity and perceived riskiness. These regulations were effective from October 01, 2022. The regulatory structure for NBFCs as per these regulations comprises four layers: NBFC - Base Layer (NBFC-BL), NBFC - Middle Layer (NBFC-ML), NBFC - Upper Layer (NBFC-UL), and NBFC - Top Layer (NBFC-TL). The Base Layer includes non-deposit taking NBFCs below the asset size of Rs 1,000 crore.
  • RBI vide its circular dated April 19, 2022, notified the specific disclosure requirements in the financial statements to specific NBFC layers. These disclosures are in addition to and not in substitution of the disclosure requirements specified under other laws, regulations, or accounting and financial reporting standards.
  • RBI vide its circular dated May 13, 2022, allowed scheduled commercial banks (SCBs) and small finance lend money to Non-Banking Finance Companies (NBFCs) and NBFFC Micro Finance Institutions (NBFC-MFIs) respectively for the purpose of on-lending to the priority sectors on an on-going basis.
  • The guidelines on digital lending were introduced by RBI on September 02, 2022, with the principle that the business of lending can be only carried upon by entities which are governed by the RBI or have the permission to do so under any other law. These guidelines aim to make the lending process unambiguous and fair.
  • RBI notified the requirement to obtain Legal shall be extended to Primary (Urban) Co-operative Banks (UCBs) and Non-Banking Financial Companies (NBFCs). It was instructed that the non-individual borrowers enjoying aggregate exposure of Rs 5 crore and more from banks and financial institutions shall be required to obtain LEI codes in accordance with the timeline.

Company Overview

Moneyboxx Finance Limited (Moneyboxx or the Company) is a BSE-listed, non-deposit taking Non-Banking Finance Company (NBFC-ND) registered with the Reserve Bank of India. With the aim of driving financial inclusion and providing tech-enabled, cost-efficient, and transparent financing to underserved micro enterprises, it started lending operations by openingitsfirstbranch in Rajasthan in February 2019. Since then, it has successfully scaled up its presence to 61 branches across six states as of March 2023: Rajasthan (16), Haryana (12), Madhya Pradesh (14), Punjab (8), Uttar Pradesh (8), and Chhattisgarh (3).

The Company caters to the credit needs of micro entrepreneurs by providing unsecured business loans from Rs 70,000 to Rs 3 lakh for a tenure up to 36 months and secured business loans up to Rs 10 lakh for a loan tenure ranging from 12 months to 84 months.

Diversified Operations

Moneyboxx has diversified operations across six states with a network of 61 branches as of March 2023. During the year, the Company further improved its geographic presence by expanding its operations in existing states and entering into Chhattisgarh.

Operations FY20 FY21 FY22 FY23
Branches 11 22 30 61
Gross Disbursements (Rs crore) 33.91 55.44 112.32 341.21
Cumulative Disbursements (Rs crore) 34.08 89.51 201.83 543.03
AUM (Rs crore) 29.28 61.88 119.05 338.11

Assets under management (AUM) of the Company stood atRs 338 crore as of March 31, 2023. During FY23, the Company added 31 branches and expanded its product offering by launching secured business loans. The Companys AUM is well diversified across geographies with a focus on essential sectors, lending stability to portfolio quality.

Mar-22 Mar-23 Mar-22 Mar-23
AUM by States * Rs ( crore) (% share)
Rajasthan 39 95 31.9% 27.7%
Madhya Pradesh 30 92 24.5% 26.8%
Haryana 28 70 23.4% 20.3%
Punjab 24 61 19.6% 17.7%
Uttar Pradesh 1 18 0.5% 5.2%
Chhattisgarh - 8 - 2.3%
Total AUM 121 344 100.0% 100.0%

Driving financial inclusion

Moneyboxx is transforming lives and driving financial inclusion by providing credit for income generation opportunities to micro entrepreneurs in important and essential segments (livestock, kirana, retail traders, micro-manufacturers) in Tier-III and beyond places. It has transformed the lives of more than 75,000+ borrowers (including co-borrowers) with cumulative disbursements of Rs 543 crore up to March 2023 and is driving financial inclusion with Companys unique borrowers being women and 34% new-to-credit.

Beyond-lending Impact Initiatives

In addition to directly offering loans for income generation opportunities to the underserved micro entrepreneurs, Moneyboxx offers job opportunities to the local talent, contributing to the inclusive growth of the local economy. Moreover, as part of its impact initiatives, the Company employs full-time veterinarians (impact officers) in branches to counsel livestock borrowers on cattle health, nutrition, and breed improvement to enhance milk yield. The Company is also promoting sustainable farming efforts, which will significantly income. These activities include free distribution and upkeep of fruit-bearing trees to dairy farmers or borrowers with agricultural land through CSR tie-ups and internal contributions. The effects of these initiatives will be significant and long-lasting: improvement in borrowers income, the protection of the environment through soil conservation and improved air quality, and the sustainability of food sources. The Company has planted 3,400 fruit-bearing trees, provided free vet consultations to 5,700+ livestock customers and diagnosed 61,000+ cattle health up to March 2023.


Small business loans under Rs 10 lakh: Severely underserved segment

Micr ofinance borrowers at the bottom of the pyramid, the average loan amount is less than Rs 50,000, are adequately served by over 230 lenders (including MFIs, NBFCs and Banks). However, such a small amount of finance is inadequate for acquiring income-generating assets or working capital to bring about a significant change in their incomeprofile. Secured loans of over Rs 10 lakh are also aggressively pursued by Banks and NBFCs. However, the ‘Missing Middle segment, unsecured/secured business loans of Rs 1 lakh to 10 lakh, is severely underserved due to problems in assessment of income in the absence of ITR/GST/Banking/books of accounts, inadequate credit history and imperfect collateral.

55% of the Fintech lenders are also unable to serve this segment due to lack of adequate data and minimal digital footprint, and addressing this segment requires on-ground presence for understanding the borrowers, their cashflows and effective underwriting & collection efficiency.

The underserved ‘Missing Middle segment presents a huge market opportunity. The market for residential property backed secured MSME lending is estimated at Rs 22 trillion as per CRISIL Research. Given the huge unmet credit demand and addressable market of Rs 22 trillion, micro enterprise lending presents a huge opportunity. While competition from large banks and NBFCs, and any changes in regulation could be potential threats, the borrowers segment has high entry barriers, and the policy and regulatory agricultural framework continues to be supportive given the thrust of the government on promoting financial inclusion.


Moneyboxx addressing the missing middle customers

Mone yboxx has successfully served this relationship-assisted branch model and leveraging technology with fully digital processes and proven underwriting and scalability. The Company has been able to successfully design its systems and processes to map the customer journey end-to-end ‘fully digitally, including income and credit assessment based on deep industry understanding, analytics, and automation, thus, overcoming peculiar issues in lending to this segment.

The Company follows a ‘phygital business model with on-ground presence for better understanding of customers while leveraging technology to the fullest extent in digitising processes and applying IT in decision-making, reporting and analytics.

The Company has established a strong presence in six states with sixty-one branches and achieved AUM of Rs 338 crore with robust and best-in-segment asset quality metrics.

Our Unique Approach

Direct-to-customer: Reaching out to customers directly without third-party agents, hence focussing on relationship-using based business and not product-based approach

Digital approach: Completely digital processes, right from onboarding to credit assessment to approval, disbursement, collection, reporting and analysis and fully leveraging IT for effective and efficient delivery of credit

Strong underwriting capabilities and unique credit methodology: Robust credit underwriting backed by non-traditional & non-financial alternative data sources and sector-specific inputs. In-depth analysis of target customers enterprises for segmental understanding and unique methodology for a diverse set of micro enterprises covering livestock, trading, services, and small manufacturers


Moneyboxx Finance Limited FY22 FY23 %YOY
Branches 30 61 103%
Active Customers 11,468 27,579 141%
Employees 313 735 135%
Business (Rs crore)
Disbursements during the year 112.32 341.21 204%
AUM as of March 31 119.05 338.11 184%
Income & Profitability ( Rs crore)
Total Income 23.31 50.44 116%
Profit (Loss) Before Taxes -6.52 -9.94
Profit (Loss) After Taxes -3.72 -6.80
Fund Raise (Rs crore)
Equity Capital raised during the year 14.42 48.39
Debt raised during the year 89.99 235.17
Debt repaid during the year -37.48 -96.59
Capital Position (Rs crore)
Equity as of March 31 34.51 76.40
Debt as of March 31 91.40 231.37
Subordinated Debt as of March 31 6.60 6.63

Strong growth in Disbursements & AUM

The Company reported robust business growth in FY23 led by branch expansion and higher productivity. Disbursements more than tripled to Rs 341 crore in FY23 from Rs 112 crore in FY22 driven by branch expansion (addition of 31 branches in FY23) and strong improvement in branch productivity. AUM grew by 184% to Rs 338 crore as on March 31, 2023, in comparison to

Rs 119 crore as on March 31, 2022, led by strong business growth and lending partnerships. Total Income grew strongly by 116% to

Rs 50.44 crore in FY23 compared to Rs 23.31 crore in FY22, in line with strong growth in business and AUM.

Achieved profitability in Q4 FY23 with Growing Scale & Improving Productivity

The Company reached an inflection point in Q4 FY23, posting profit after taxes of Rs 0.42 crore compared to a net loss of Rs 2.70 crore in Q3 FY23. This was achieved on the back of growing AUM, rising branch productivity with maturing operations, and improved funding visibility from banks and co-lending and BC lines, supported by ‘ACUITE BBB- Stable credit rating. The Company has strong unit economics (NIM spread of over 15% in Q4 FY23) and proven underwriting capabilities leading to low credit costs. Declining marginal costs of borrowing, improving branch productivity with vintage and increased share of secured lending business, and the benefit of operating leverage with growing scale of operations are levers for further improvement in profitability. in Q4 FY23 with Growing Scale

Operational efficiency has been consistently improving with growing AUM. Operating expenses as a percentage of averagein AUM declined from 24.5% in FY21 to 19.8% in FY22 and further declined to 15.4% in FY23. Lower Opex of 14.5% drove the improvement in profitability in Q4 FY23 compared to Opex of 19.5% in Q4 FY22.

Improving Operating Efficiency Annual Quarter
(Rs crore) FY21 FY22 FY23 Q4 FY22 Q4 FY23
Operating Expenses 11.17 17.94 35.31 5.12 10.45
Closing AUM 61.88 119.05 338.11 119.05 338.11
Average AUM 45.58 90.47 228.58 105.20 287.46
Operating expenses % of Average AUM 24.5% 19.8% 15.4% 19.5% 14.5%

Robust Underwriting & Strong Portfolio Quality

Moneyboxx has best-in-segment asset quality and low credit costs due to its robust underwriting standards, strong efficiency and focus on essential sectors (livestock, kirana, retail traders, micro-manufacturers). It has strong asset quality metrics with low Gross NPAs and low credit costs. Gross NPA of 0.59% and Net NPA of 0.30% as on March 31, 2023 remained stable compared to Gross NPA of 0.62% and Net NPA of 0.31% as on March 31, 2022. Credit costs including write-offs and changes in ECL provisions was 1.48% of average AUM in both FY23 and FY22.

Asset Quality 31-Mar-22 31-Mar-23
Gross NPA (90+ PAR % of AUM) 0.62% 0.59%
Net NPA 0.31% 0.30%
Loan write-offs (Rs crore) 0.96 2.47
Loan write-offs as % of average AUM 1.07% 1.08%
Credit costs (Loan write-offs & Changes in ECL provisions, Rs crore) 1.34 3.39
Credit costs (as % of average AUM) 1.48% 1.48%

Strong Capitalisation and Diversification of Funding Sources

Capital Position 31-Mar-22 31-Mar-23
Equity (Rs crore) 34.51 76.40
Debt (Rs crore) 91.40 231.37
Subordinated Debt (Rs crore) 6.60 6.63
Leverage Ratio (TOL / Owned Funds) 3.41 3.67

The Company remains adequately capitalised with Leverage ratio (TOL/Owned Funds) at 3.67 times as of March 31, 2023 compared to 3.41 as on March 31, 2022. The Company has raised adequate equity capital over the last four years to fund its expansion and maintain a prudent capital structure.

Equity Capital of the Company increased from Rs 19.03 crore as on March 31, 2019 to Rs 76.40 crore as on March 31, 2023 supported by equity capital infusion of Rs 74.45 crore from FY20 through FY23 in four rounds of private placement and issue of warrants. During FY23, the Company raised a total of Rs 48.39 crore of capital including Rs 3.36 crore through issue of warrants to promoters.

Capital Raise (Rs crore) FY20 FY21 FY22 FY23 Total
Equity Capital 11.65 - 14.42 45.02 71.09
Warrants - 3.36 3.36
Total 11.65 - 14.42 48.39 74.45

Warrants: 11,70,000 fully convertible warrants were issued to promoter directors on a preferential basis at an issue price of Rs 115 per warrant on September 30, 2022. The warrants are convertible at the option of the warrant holder, in one or more tranches, within eighteen months from the date of allotment into equivalent number of fully paid-up equity shares of the of Company. Out of the totalFunding Rs 13.45 crore amount of warrants issue, Rs 3.36 crore (25%) was received in September 2022.

The Company continues to improve its funding profile with an increasing share of low-cost funding from banks in its funding mix in FY23. The Company was supported by 23 active lenders as of March 31, 2023 including five banks compared to 18 lenders as of March 31, 2022. Addition of notable lenders during FY23 included State Bank of India, IDFC First Bank, Utkarsh Small Finance Bank, Tata Capital Financial Services Limited and Manaveeya Development & Finance Pvt Ltd (Oiko Credit).

Debt (Rs crore) 31-Mar-22 31-Mar-23
Banks 10.23 57.00
NBFCs/Funds/FIs 74.17 154.21
PTC Securitisation 6.99 -
NCD - 20.15
Total 91.40 231.37

Liquidity & Asset-Liability Management

The Company has a prudent approach towards management and had a comfortable liquidity position as on March 31, 2023. In terms of asset-liability position by time buckets, it had positive cumulative mismatch across time buckets. The Company borrows funds at fixed and floating rates and lends at fixed rates with periodic review of its lending rate considering the trends in market interest rate, its cost of funds and competition.

Human Resources

Mone yboxx recognises the significance of its capital and considers employees as crucial stakeholders for the organisations success. For employee retention and development of human capital, Moneyboxx has various employee-centric initiatives such as internal publications and circulars, performance updates, feedback and surveys, learning and development initiatives, employee engagement programmes, career development opportunities, responsive grievance handling processes, regular trainings for skill development, work-life balance, flexible work-from-home and leave policies.

M oneyboxx follows the motto ‘One Team,of One Dream wherein regardless of their job title or position in the team, they are valued for what they bring, do, and have to say. Its the diversity of people and their views, ideas and experiences, and valuing these differences that make us stronger.

The Companys headcount increased from 313 in March 2022 to 735 in March 2023.

Risk Management

W e have a strong risk management framework through we identify the risks associated with our business and also deploy mitigation measures. Credit risk is one of the main risks, for which we have a strong risk management framework right from the loan application to disbursement and collection.

The key elements of our risk management framework include:

Robust Credit Underwriting: Use of non-traditional and non-financial alternative data sources and sector-inputs

Strong Risk and Compliance Culture: We believe in supporting growth plans commensurate with strong risk and compliance culture Div ersification: We strive to spread business and portfolio across diverse sectors and geographies in order to mitigate concentration risks

We recognise that risk is an integral part of business and are committed to managing the risks in a proactive and efficient manner. Accordingly, we adhere to a Risk Management Policy which includes identification, assessment and control of elements of risk, which the Board may view as threats to the existence or performance of the Company. The Company has also constituted a Risk Management Committee in line with the new scale-based regulations to frame, implement, and monitor the risk management plan for the Company from time to time.

Internal Controls

Mon eyboxx has adequate internal controls and operating processes that are envisaged to protect assets and business efficiency. The Company has established strong and well-entrenched internal control procedures commensurate with its size and operations and relevant to its broad domain of the lending business.

The efficacy and adequacy of internal controls execution are driven by the ethos of striving for constant improvement. The Company conducts internal audit through its internal audit team and its report is duly placed in the audit committee. Audit Committee reviews the internal control system and looks into the observations of the statutory and internal auditor. This includes review of policies and procedures adopted by the Company for ensuring the specific orderly and efficient conduct of its business and fixing responsibility against all the controls.

The management tests the controls across processes and redressal of any deviations in business operations is undertaken. The Audit function provides reasonable assurance regarding the effectiveness and efficiency of operations, safeguarding of assets, reliability of financial records and reports and compliance with applicable laws and regulations.