Education-focused non banking financial company (NBFC) Auxilo Finserve secured Rs 470 crore led by Tata Capital, Trifecta Leaders, and Xponentia Fund earlier this week. The sizable funding for the seven-year-old firm came with two-fold growth in its scale in FY23.
The operating revenue for Auxilo Finserve grew to Rs 174 crore in FY23 from Rs 86 crore in the fiscal year ending March 2023, according to its annual financial statements filed with the Registrar of Companies.
Established in 2017, Auxilo Finserve offers student loans for pursuing education within India or abroad. It also extends loans to educational institutions for infrastructure and working capital requirements.
The company makes money through processing fees and interest received on the loan disbursements accounted for 97.5% of the operating revenue. This income surged 2X to Rs 169.7 crore in FY23 whereas commissions and processing fees increased 2.4X to Rs 4.3 crore.
The company also made Rs 17 crore from non-operating sources.
Interest costs on borrowing from commercial banks formed 61.2% of its total expenses which spiked 2.8X to Rs 95.5 crore during FY23.
Its employee benefit and IT cost grew 29% and 20% to Rs 32.5 crore and Rs 6 crore respectively. The company also incurred Rs 3.7 crore and Rs 3.9 crore towards legal/professional fees and business sourcing costs.
Akin to its growth, Auxilo Finserve’s overall cost flew 2X to Rs 156 crore in the previous fiscal year (FY23). Significantly, its profits also shot up two-times to Rs 25.7 crore during the same period. Its ROEC and EBITDA margin improved to 7.49% and 20.41% during FY23. On a unit level, the company spent Re 0.90 to make a single rupee of operating revenue.
Auxilo claims to have funded over 7,500 students across over 900 universities in over 25 countries. During FY22, the company’s loan book (asset under management) stood at Rs 769 crore comprising education loans of Rs 605.70 crore (78.73%) and institute loans worth Rs 163.60 crore (21.27%). While the company did not provide the breakup for FY23, its loan book stood at Rs 1,691 crore in the last fiscal year.
Auxilo has raised over $100 million across equity and debt since its inception and it competes with well-funded firms such as Grayquest, Avanse Financial, Financepeer, Propelld, Leap Finance and Eduvanz. Leap Finance scooped up $75 million in its Series D round in June 2022 whereas Propelld bagged $35 million in Series B in February and Financeeper raised $38 million in April last year.
Avanse and Peak XV Partners-backed Eduvanz mopped up $98 million and $12.6 million in their latest funding round respectively.
While the rush into education loans is justified, considering the massive outgo’s on education, particularly for studying outside India, the entry of so many players is also likely to lead to obvious effects of competition, be it lax credit appraisal or worse. Bear in mind that in this segment, credit appraisal can also be affected by the kind of course being financed for the student. Irrespective, higher education has a long runway ahead of it in India, and it remains to be seen which of the firms break out of the pack. The erstwhile leader , HDFC Credila was recently sold for a reasonable discount to its loan book, and the deal possibly sets a benchmark for established firms.
