Release Date: February 14, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sammaan Capital Ltd (BOM:535789, Financial) successfully raised INR 7,500 crores through a rights issue, which was over 2x subscribed.
- The company reported a profit after tax of INR 303 crores for Q3 FY 2024, up from INR 291 crores in the same quarter last year.
- Net interest margin remained stable at 4.9%, and ROA increased marginally to 1.6% from 1.5%.
- Retail disbursals under the asset-light model grew to INR 7,200 crores in 9 months, with cumulative disbursals of over INR 18,000 crores in the last 2 years.
- The Honorable Delhi High Court dismissed a PIL against the company, which had previously caused significant market cap and value destruction.
Negative Points
- The company has faced significant litigation and allegations, which have impacted its market cap and shareholder value.
- Despite the positive results, the company had to dip into additional reserves to the tune of INR 700 crores to manage provisions.
- The net worth showed a reduction of about INR 200 crores due to the provisions made for AIF investments.
- The company has a high gross NPA ratio, although it has materially declined year-on-year.
- There is ongoing uncertainty regarding future provisions and credit costs, as the company is still deciding on its strategy for managing the wholesale book.
Q & A Highlights
Q: Congratulations, Gagan on the great business results and the success of rights issue. Can you share your thoughts on the transformation to an asset-light model and its market reception?
A: Thank you, Craig. The transformation to an asset-light model has been monumental. Despite the market's focus on balance sheet growth, we believe this model will be appreciated over time. We are committed to this transformation and appreciate the support from stakeholders like NWI.
Q: Can you explain the accounting for the AIF provisions and the ESOPs issued?
A: We dipped into additional Section 29C reserves for the AIF provisions, amounting to about INR 700 crores. Regarding ESOPs, the increase in share capital is reflected in the securities premium account, and the corresponding cash is received from ESOP holders.
Q: What is the rationale and usage for the funds from the rights issue?
A: The capital will help us restart growth by leveraging our distribution and credit appraisal capabilities. We aim to hold and securitize assets, requiring capital to break the logjam and grow disbursals. This capital will also help reduce cost of funds and improve cost-income ratios.
Q: Are there any residual impacts expected from the December '18 circular regarding AIF investments?
A: No, we have fully complied with the provisions required by the December '18 circular. There will be no residual impact.
Q: Can you explain the significant increase in other income this quarter?
A: The increase in other income, from INR 15 crores to INR 60 crores, is primarily due to an income tax refund and the interest on that refund.
Q: What should we expect for net provisions in Q4 and the next two years?
A: Provisions will be a matter of strategy. We aim to recover INR 7,000 crores to INR 10,000 crores over the next 24 months. We will provide more guidance on credit costs along with our Q4 earnings.
Q: Is the 15% ROE target after factoring in write-backs?
A: Yes, the 15% ROE target factors in everything. We expect the net worth to grow by INR 6,000 crores to INR 7,000 crores by then.
Q: Can you provide more details on the net worth changes and the impact of ESOPs?
A: The net worth has remained stable with a minor reduction of about INR 200 crores. The ESOPs have added to the securities premium account, and the corresponding cash is reflected on the asset side.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
