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Analyst Meet / AGM - Analyst Meet

Expects 45% AUM growth and 50% PAT growth for FY2017

SKS Microfinance

06-May-2016, 10:11
SKS Microfinance conducted an analyst meet on 05 May 2016 to discuss company financial performance for the quarter ended March 2016 and prospects. Dilli Raj, President of the company addressed the meet:
Highlights:

The company continues to maintain its lead as the most efficient microfinance institution in the world, post its distinction in November 2015 of becoming the first private sector MFI in the world to charge a sub-20% interest rate. The company do not expect any further reduction in lending rates for next 2-3 quarters.
The Company's marginal cost of borrowing declined to 9.2% in Q4FY16 from 9.9% in Q3FY16, while its weighted average cost of borrowing (historical) also eased to 11.1% at end March 2016 from 11.5% at end December 2015 (10.2% in FY16 - the lowest in the microfinance sector; 11.9% in FY15).
Reduction in the cost of boring was driven by overall decline in interest rates. The company has also witnessed sharp decline in cost of securitization transaction to 8%. As per the company, the spreads on securitisation deal compared with the bank term loans have widenedto as much as 250 to 300 bps compared with the normal levels of 150 bps.
The gross loan book of the company excluding the states of Andhra Pradesh and Telangana galloped 84% to Rs 7677 crore at end March 2016 from Rs 4171 crore at end March 2015, while surged 24% over Rs 6177 crore at end December 2015.
Loan disbursements jumped 63% to Rs 4066 crore in Q4FY2016 over Rs 2494 crore in Q4FY2015.
The company has targeted about 45% gross loan portfolio growth and net profit growth of 50% for FY2017. As per the company, the AUM growth will be driven by growth in customers base and ticket size.
In the next three years, the company is targeting to increase its customer base by 25-30% annually, while ticket size is targeted to be raised by 17% which would together drive the AUM growth by 45% annually.
The company proposes to increase its customer base mainly driven by higher recruitment of loan officers.
The gross portfolio spreads of the company declined on sequential basis to 9.6% in the quarter ended March 2016 from 10.1% in the preceding quarter, while also fell from 9.8% in the corresponding quarter last year.
Net NPA ratio declined to mere 0.04% at end March 2016. The capital adequacy ratio for company was strong at 23.1% at end March 2016.
The company has completed securitization transactions worth Rs 1621 crore rated as 'AA (SO)' and asset assignment of Rs 507 crore in Q4FY2016.
The Company added 8.45 lakh borrowers during FY16, and ended the year with a borrower base of 46.37 lakhs. Employee strength increased by 24% to 11,991.
The un-availed deferred tax benefit of Rs 357 crore and a minimum alternate tax (MAT) credit of Rs 97 crore will be available to offset tax on future taxable income.
The Company's Cost to Income stood at 48.3% in FY2016 down from 61.1% in FY15. The company expects technology initiatives to help improve operating efficiency, thus the company expects to further reduce cost to Income ratio to 40% ahead.
The company has proposed to change its name to Bharat financial inclusion Limited. As per the company the higher rural presence has led the company to change its name.
With the new regulation requiring banks to meet priority sector lending targets on quarterly basis against on annual basis currently, would help the company to reduce its cash balance requirements as securitization deals would take place throughout the years instead of only in Q4 currently.
The company has always remain well capitalised and held healthy liquidity on balance sheets.As per the company, the capital adequacy ratio will be maintained above 20% at any point in time. Board of the company has approved capital raising of about rupee 750 crore which is most likely to be conducted in Q3 or Q4 of FY2017.
As regard to the emerging competition from Small Finance Banks, the company don't expect any change in its strategy.