Release Date: February 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Satin Creditcare Network Ltd (BOM:539404, Financial) successfully completed an equity infusion of INR250 crores through QIP, which was oversubscribed by nearly double the issue size.
- The company's long-term credit rating was upgraded to A, stable by ICRA from A-, stable, reflecting strong performance.
- AUM grew by 39% year-on-year on a consolidated basis, reaching INR11,074 crores.
- The company achieved its highest-ever profitability of INR308 crore in nine months FY24, up by 428% year-on-year.
- Satin Creditcare Network Ltd (BOM:539404) expanded its footprint with 94 new branches, bringing the total branch network to 1,386 in 419 districts.
Negative Points
- Despite the positive performance, the company faces external risks such as potential macroeconomic challenges in rural areas, which could impact growth.
- The company's debt-to-equity ratio stood at 3 times as of December 31, 2023, indicating a significant level of leverage.
- There are concerns about the financial health of rural households, which could affect the company's future growth and repayment rates.
- The provision coverage ratio is currently at 61%, which may need to be increased to better cushion against potential future credit losses.
- The company is still dealing with issues in specific districts, such as Gurdaspur and Amritsar in Punjab, which could affect overall portfolio quality.
Q & A Highlights
Q: Up to what level are you comfortable with your internal processes, whether at the HQ level or branch level, and what kind of growth can you handle comfortably without exposing us to process-related risks?
A: We are well poised to handle growth of about 30% to 40% comfortably without compromising on quality parameters, thanks to our robust processes and technology enablement. (H.P. Singh, Chairman, Managing Director)
Q: Given the macroeconomic indicators showing stress in rural areas, how do you justify the industry's growth projections of 30%-35% for the next few years?
A: There is a difference between credit demand and demand for FMCG products. The emphasis on schemes like Mudra loans and increased rabi acreage will enhance income levels, supporting credit demand. (H.P. Singh, Chairman, Managing Director)
Q: Will the recent credit rating upgrade impact your cost of funds, and will you pass on the benefits to customers?
A: We expect to reduce our cost of funds by 25 to 50 basis points, and we plan to pass on these benefits to our customers while maintaining our margins. (H.P. Singh, Chairman, Managing Director)
Q: What is your outlook on OpEx costs given your expansion plans?
A: We aim to bring down OpEx below 5.5% in the next six to nine months, despite opening new branches. Our long-term target is to reduce OpEx closer to 5%. (H.P. Singh, Chairman, Managing Director)
Q: Can we expect steady-state disbursements of INR1,000 crore going forward?
A: Yes, achieving INR1,000 crore in a single month was a significant milestone, and we aim to maintain this momentum. (H.P. Singh, Chairman, Managing Director)
Q: Where do you see your credit cost going ahead, especially given the slight increase in delinquencies reported by peers?
A: We have guided for a credit cost range of 1.25% to 1.5% for this year and 1.5% to 1.75% for the next year. We aim to stay within the lower range due to our strong underwriting capabilities. (H.P. Singh, Chairman, Managing Director)
Q: How are you assessing the quality of new growth and new customers being onboarded?
A: We use extensive data analytics and scorecards to assess customer acquisition, ensuring better portfolio quality and lower credit costs. (H.P. Singh, Chairman, Managing Director)
Q: What is the status of your Assam portfolio's collection efficiency?
A: Our Assam portfolio has a 100% collection efficiency with negligible PAR numbers, indicating strong portfolio quality and growth. (H.P. Singh, Chairman, Managing Director)
Q: What is the growth trajectory for your non-MFI business, given the recent fundraise?
A: We aim to grow our non-MFI businesses, including housing and MSME lending, by 50%-60% year-on-year to reach a significant scale. (H.P. Singh, Chairman, Managing Director)
Q: Do you plan to increase your provision coverage ratio, given the good financial performance this year?
A: We have increased our provision coverage ratio from 54% to 61% and aim to further increase it to 75%-80% once we get clarity on the Assam portfolio recovery. (H.P. Singh, Chairman, Managing Director)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
