DAR Credit & Capital Ltd. IPO: Key Details

Dar Credit and Capital

• Dar Credit and Capital is coming out with an initial public offering (IPO) of 42,76,000 equity shares in a price band Rs 57-60 per equity share.
• The issue will open on May 21, 2025 and will close on May 23, 2025.
• The shares will be listed on SME Platform of NSE.
• The face value of the share is Rs 10 and is priced 5.70 times of its face value on the lower side and 6.00 times on the higher side.
• Book running lead manager to the issue is GYR Capital Advisors.
• Compliance Officer for the issue is Priya Kumari.

Profile of the company

Dar Credit and Capital offers three primary types of financial products: (i) Personal Loans, (ii) Unsecured MSME Loans, and (iii) Secured MSME Loans. The company specializes in offering credit solutions to low-income individuals, particularly those in class-four (Group D) employment role such as cleaners, sweepers, and peons working in municipalities. The company also extends credit to small-scale shopkeepers and vendors, with a strong focus on empowering women entrepreneurs. With extensive experience in the financing and investment sector in India, the company has built a deep understanding of the market since its inception. In addition to its headquarters in Kolkata and regional office in Jaipur, it operates through its branch offices across West Bengal, Rajasthan, Bihar and Jharkhand also Camp Offices are set up in the States of Madhya Pradesh and Gujarat.

Over the past 30 years, the company has developed a profound understanding of the financial needs of underbanked and underserved customers. Throughout this journey, the company has not only gained insights into customer behaviour and requirements within this segment but have also implemented various initiatives to enhance the customer experience. These improvements have been driven by measures such as the adoption of digital sourcing and the digital disbursement of loans. 

In line with its vision, the company has been constantly upgrading its technology platforms. A significant proportion of its sourcing and collections across assets and liabilities are digitalized using mobile phones / tablets, with an emphasis on Straight Through Processing (STP) while incorporating fraud and regulatory checks. PAN validation, e-KYC, Credit Bureau Data checks supporting multiple bureaus, and checks are fully automated using a robust integration layer. 

Proceed is being used for:

• Augmenting the capital base of the company
• Meeting the general corporate purposes
• Meeting the issue expenses

Industry Overview

India has a diversified financial sector undergoing rapid expansion both in terms of strong growth of existing financial services firms and new entities entering the market. The sector comprises commercial banks, insurance companies, non- banking financial companies, co-operatives, pension funds, mutual funds and other smaller financial entities. The banking regulator has allowed new entities such as payment banks to be created recently, thereby adding to the type of entities operating in the sector. However, the financial sector in India is predominantly a banking sector with commercial banks accounting for more than 64% of the total assets held by the financial system. The Government of India has introduced several reforms to liberalise, regulate and enhance this industry. The Government and Reserve Bank of India (RBI) have taken various measures to facilitate easy access to finance for Micro, Small and Medium Enterprises (MSMEs).

As of March 2024, AUM managed by the mutual funds industry stood at Rs 53.40 lakh crore ($641.75 billion) Inflow in India's mutual fund schemes via systematic investment plans (SIP) from April 2023 to March 2024 stood at Rs 2 lakh crore ($24.04 billion). Equity mutual funds registered a net inflow of Rs 22.16 trillion ($294.15 billion) by end of December 2021. The net inflows were Rs 7,303.39 crore ($888 million) in December as compared to a 21-month low of Rs 2,258.35 crore (US$ 274.8 million) in November 2022. Another crucial component of India’s financial industry is the insurance industry. The insurance industry has been expanding at a fast pace. The total first-year premium of life insurance companies reached US$ 32.04 billion in FY23. In FY23 (until December 2022) non-life insurance sector premiums reached Rs 1.87 lakh crore ($22.5 billion).

India’s financial services industry has experienced huge growth in the past few years. This momentum is expected to continue. India’s private wealth management Industry shows huge potential. India is expected to have 16.57 lakh HNWIs in 2027. This will indeed lead India to be the fourth-largest private wealth market globally by 2028. India’s insurance market is also expected to reach $250 billion by 2025. This will further offer India an opportunity of $78 billion in additional life insurance premiums from 2020-30. 

Pros and strengths

Quick and efficient loan processing along with flexible lending practices: As an NBFC, the company is known for its streamlined processes and quick decision-making, which often leads to faster loan approvals and disbursements compared to banks. This agility is particularly beneficial for businesses needing quick access to working capital or individuals seeking immediate financing. The use of digital platforms and technology in the loan application process further enhances the efficiency of loan disbursement, reducing paperwork and turnaround time. The company has greater flexibility in its lending practices, allowing it to cater to a wider range of customer needs.

Strong underwriting process and risk management strategies: The company employs a strong underwriting process and robust risk management policies that are integral to its commitment to maintaining financial stability and safeguarding its clients’ interests. The underwriting process is meticulously designed to assess each applicant’s creditworthiness comprehensively, utilizing advanced analytics and data-driven insights to evaluate various risk factors effectively. This thorough evaluation not only helps it to make informed lending decisions but also ensures that it credit to individuals and businesses that demonstrate the capacity to meet their obligations. Coupled with this rigorous underwriting, its risk management strategies are tailored to identify, assess, and mitigate potential risks across its portfolio.

Strong understanding of local markets: The company has developed a profound understanding of local markets and regional economies, which empowers it to assess the financial needs of local businesses and individuals with greater accuracy and effectiveness. This localized expertise enables it to craft financial products that are not only tailored to meet the unique requirements of its customers but also resonate with their specific contexts and challenges. By maintaining strong relationships with its clients, it fosters trust and loyalty, which are essential for long-term partnerships.

Risks and concerns  

Geographical constrain: The company operates its business operations from its registered office in West Bengal. However, the company has its presence five more states in India. These states contribute to a substantial portion of its revenues for the period ended December 31, 2024 and year ended on March 31, 2024, 2023 & 2022. Any factors relating to political and geographical changes, growing competition and any change in demand may adversely affect its business. The company cannot assure that it shall generate the same quantum of business, or any business at all, from these states, and loss of business from one or more of them may adversely affect its revenues and profitability.

Rating given by Care Ratings “CARE BBB-” is considered to have moderate degree of safety: Securities with this rating are considered to have moderate degree of safety regarding timely servicing of financial obligation. Such security carries moderate credit risk. Further in future it may downgrade with rating if (i) it is unable to raise resources for growth in scale of operations. (ii) Significant decline in liquidity position due to impact on collection efficiency. (iii) Deterioration in asset quality with Gross NPA (180+ DPD) above 3.00% on sustained basis. (iv) Significant deterioration in its scale of operation with ROTA below 1% on sustained basis. Further, the company’s rating may get upgrade if it sustained growth in scale of operation and improvement in profitability with ROTA above 3.00% on sustained basis.

Credit monitoring and risk management policies may not be adequate to control its NPA: The company’s credit monitoring and risk management policies may not be properly designed or appropriately implemented. In addition, it may not be able to anticipate future macro-economic developments, which could lead to an increase in its NPAs. There are several factors beyond its control which may affect its ability to manage NPAs. These factors include developments in the Indian and global economy, domestic and global macroeconomic and political factors, changes in customer behaviors, their loan repayment capabilities and demographic patterns, government decisions, natural calamities, widespread diseases, changes in interest rates and changes in regulations, including with respect to regulations requiring it to lend to certain sectors identified by the RBI, or the Government of India. In addition, the expansion of its business may cause its NPAs to increase and the overall quality of its loan portfolio to deteriorate. If its NPAs increase or provisioning levels deteriorate, it could have an adverse effect on its financial condition and results of operations.

Outlook

Dar Credit and Capital is a Non-Banking Finance Company (NBFC) offering three primary types of financial products: (i) Personal Loans, (ii) Unsecured MSME Loans, and (iii) Secured MSME Loans. The company has quick and efficient loan processing along with flexible Lending Practices coupled with strong understanding of local markets. On the concern side, the company’s top two states contribute its major revenue for the period ended December 31, 2024 and year ended March 31, 2024, 2023, 2022. Any loss of business from one or more of these states may adversely affect its revenues and profitability. Moreover, Rating given by Care Ratings “CARE BBB-” is considered to have moderate degree of safety, therefore, in future it may give Challenges to the business.

The company is coming out with a maiden IPO of 42,76,000 equity shares of Rs 10 each. The issue has been offered in a price band of Rs 57-60 per equity share. The aggregate size of the offer is around Rs 24.37 crore to Rs 25.66 crore based on lower and upper price band respectively. On performance front, the revenue from operations of the company for fiscal year 2024 was Rs 3,204.88 lakh against Rs 2,479.27 lakh for Fiscal year 2023, an increase of 29.27% in revenue from operations. This increase was due to increase of loan disbursement. Moreover, profit after tax for the Fiscal year 2024 was at Rs 396.83 lakh against profit after tax of Rs 293.00 lakh in fiscal year 2023, an increase of 35.34%.

Digital Transformation enable the company to enhance its operations, reach more customers, and offer a seamless experience to the loan processing. By adopting digital loan originating platform, it provides the borrowing process faster and more accessible. Advanced technologies like AI and machine learning allow its team to assess borrower creditworthiness accurately, even for individuals with limited credit histories, opening financial access to underserved segments. Automated processes such as digital KYC streamline customer onboarding and loan processing help it to expand its product offerings and reach. Together, these innovations position it as agile, customer-centric financial providers in a rapidly evolving market. The company is in the process of implementing a mobile application for the loan underwriting process by leveraging AI technology.