Auxilo Finserve Achieves Rs 174 Cr Revenue and Rs 26 Cr Profit in FY23
Auxilo Finserve, an education-focused non-banking financial company (NBFC), recently secured a substantial funding amount of Rs 470 crore. Prominent investors, including Tata Capital, Trifecta Leaders, and Xponentia Fund led the funding round. This investment is a significant boost for the seven-year-old firm and reflects its strong growth in recent times.
In the fiscal year 2022-2023 (FY23), Auxilo Finserve witnessed remarkable expansion, with its operating revenue surging to Rs 174 crore. This substantial growth marks a two-fold increase compared to the previous fiscal year, where the active income was recorded at Rs 86 crore. The company’s impressive financial performance is evident from its annual financial statements filed with the Registrar of Companies.
The sizable funding and impressive revenue growth indicate the company’s robust performance and increasing prominence in the education finance sector. With the fresh capital infusion, Auxilo Finserve will likely strengthen its position further and expand its offerings to support students and educational institutions in accessing financial assistance for academic pursuits.
Auxilo Finserve, founded in 2017, specializes in providing student loans for individuals pursuing education in India and abroad. Additionally, the company offers loans to educational institutions to support their infrastructure and working capital needs.
The primary sources of revenue for Auxilo Finserve are processing fees and interest earned on loan disbursements. In the fiscal year 2022-2023 (FY23), these income streams accounted for a significant portion of the company’s operating revenue, contributing to 97.5%. The company’s income from interest on loan disbursements saw an impressive 2X surge, amounting to Rs 169.7 crore in FY23.
In addition to interest earnings, the company also generates revenue through commissions and processing fees. These fees increased by 2.4X in FY23, reaching Rs 4.3 crore. As Auxilo Finserve continues to witness substantial growth and gain traction in the education finance market, its revenue streams reflect the increasing demand for its services among students and educational institutions.
By offering a wide range of financial products and services tailored to the education sector, Auxilo Finserve plays a crucial role in facilitating access to quality education for students and supporting the growth and development of educational institutions.
Apart from its operating revenue, Auxilo Finserve also generated Rs 17 crore from non-operating sources during FY23. These non-operating sources could include income from investments, interest on deposits, or other miscellaneous sources of revenue.
However, the company also faced increased expenses in various areas during the same period. Interest costs on borrowing from commercial banks accounted for a significant portion of its total expenses, comprising 61.2% of the expenditure. The interest costs saw a substantial 2.8X surge, reaching Rs 95.5 crore in FY23.
The company’s expenses related to employee benefits and IT costs also grew during this period. Employee benefit costs increased by 29% to Rs 32.5 crore, while IT costs rose by 20% to Rs 6 crore.
Additionally, the company incurred expenses of Rs 3.7 crore towards legal and professional fees and Rs 3.9 crore for business sourcing costs during FY23.
Auxilo Finserve’s growth in the previous fiscal year (FY23) was accompanied by a doubling of its overall costs, which reached Rs 156 crore. Despite the increased expenses, the company’s profits also saw a significant 2X rise, going Rs 25.7 crore during the same period. This improvement in profitability reflects the company’s effective management of its operations and financial performance.
The company’s Return on Equity Capital (ROEC) and Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) margin notably improved during FY23, reaching 7.49% and 20.41%, respectively. These metrics indicate the company’s efficiency in generating profits and managing capital.
On a unit level, Auxilo Finserve’s operational efficiency is evident, as it spent only Re 0.90 to generate a single rupee of operating revenue, showcasing its ability to control costs effectively.
The expansion of its loan book further illustrates Auxilo Finserve’s impressive growth. In FY22, the company’s loan book (assets under management) amounted to Rs 769 crore, with education loans accounting for Rs 605.70 crore (78.73%) and institute loans comprising Rs 163.60 crore (21.27%). While the company did not provide the breakdown for FY23, its loan book stood at Rs 1,691 crore in the last fiscal year, indicating significant growth in its loan portfolio.
The company’s successful funding of over 7,500 students across more than 900 universities in over 25 countries highlights its commitment to supporting students in pursuing education domestically and internationally. Auxilo Finserve’s robust performance and expanding loan book demonstrate its position as a critical player in the education finance sector in India.
Auxilo Finserve has raised over $100 million through equity and debt since its inception. This substantial funding has enabled the company to grow and expand its operations in the education finance sector.
In the competitive landscape of education-focused financial services, Auxilo faces competition from well-funded firms such as Grayquest, Avanse Financial, Financepeer, Propelld, Leap Finance, and Eduvanz.
Leap Finance, in particular, secured a significant amount of $75 million in its Series D funding round in June 2022, enhancing its position in the market. Propelld also made a notable impact by raising $35 million in its Series B funding round in February, while Financepeer secured $38 million in April of the previous year.
Avanse Financial, backed by Peak XV Partners, raised $98 million in its latest funding round. Similarly, Eduvanz, supported by Peak XV Partners, also mopped up $12.6 million in its latest funding round.
The rush of multiple players into the education finance market is justified, considering the significant expenses in pursuing education, especially for studies abroad. The increasing demand for education loans to support students’ aspirations for higher education has led to the emergence of various financial firms catering to this segment. While this expansion is positive for students seeking financial assistance, it also raises concerns about the potential effects of competition.
With numerous players vying for a share of the market, lax credit appraisal practices or a race to offer more lenient terms to attract borrowers is possible. This could lead to potential risks in the loan portfolio if not managed prudently. Moreover, credit appraisal in this segment can be influenced by the nature of the course being financed for the student, as some fields of study may have higher employability prospects than others.
Despite the competition and potential challenges, the market for higher education loans in India has a promising future, given the increasing aspirations of students and their families. The demand for quality education, particularly overseas education, will likely continue growing.
As the competition intensifies, it will be interesting to see which firms stand out and establish themselves as educational finance leaders. The recent sale of HDFC Credila, a former leader in this market, at a reasonable discount to its loan book may serve as a benchmark for established firms in the industry.
Ultimately, the success of these education finance companies will depend on their ability to strike the right balance between offering accessible financial solutions for students while maintaining prudent credit practices and risk management. The firms that can effectively navigate these challenges are likely to emerge as prominent players in the education finance sector in India.
