Good morning, ladies and gentlemen. Welcome to Satin Creditcare Network Limited FY 2022 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal the operator by pressing star then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. HP Singh, Chairman and Managing Director of Satin Creditcare Network Limited. Thank you, and over to you, sir.
Thank you so much. Good morning, everyone. Thank you for taking the time to discuss our financial performance in Q4 and FY 2022. I hope you and your family are safe and keeping healthy. I'm hoping you've already got our quarterly results and investor presentation. Those who haven't seen them yet can do so via our website and stock exchange. Early signs of economic recovery were visible in the second half of the year with the complete lifting of lockdown restrictions and significantly larger vaccination programs across the country. As previously stated, the company has taken a well-calibrated and careful approach in disbursing new loans with a strong emphasis on collection. We took the correct steps at the right time to reduce the risk of portfolio delinquency while maintaining asset quality.
Our GNPA for the year stood at 8% with an adequate provision of 6.7%. Our well-thought-out business acumen, combined with robust underwriting measures, has enabled us to remain resilient even in times of adversity faced by the business and the industry. Our AUM for the year ended 31st March 2022 stood at INR 7,617 crores. Going forward, as the economy returns to normalcy, we estimate steady state AUM growth of 20%-25% for microfinance, allowing us to reclaim lost ground. Housing and MSME will grow at a much faster pace. To achieve this outlined growth over the medium to long term, the company is well capitalized with a CRAR of 27.8% and a balance sheet liquidity of INR 1,291 crores.
The company has successfully raised INR 225 crore by way of allotment of equity shares and fully convertible warrants to the promoter and non-promoter entities in January 2022. The company has received INR 75 crore against allotment of shares in Q4 FY 2022. Cases have begun to decline and more people are being vaccinated, our collections are gradually returning to pre-COVID levels. One big positive is that most restrictions have now been lifted in the major parts of the country where we operate, and we are seeing a significant uptick in our collection efficiency on a sequential basis. Overall, the collection efficiency for Q4 FY 2022 stood at 100%. This improvement signifies our robust underwriting and collection framework, as well as the resilience of our customer base.
In the near term, the RBI's new regulations will provide a more stringent and stronger framework with a level playing field for all lenders. This directive, along with the framework such as scale-based regulation, income recognition and asset classification, strong corrective action and information security, will ensure the industry has healthy growth in a risk-adjusted manner. We, as one of the industry's leading players, are expected to rebound strongly. Now going through the financial and operational highlights of the company. Our AUM on March 31, 2022 stood at INR 7,617 crore. Our average ticket size of MFI lending for the quarter stood at INR 40,000. As of March 31, we have a customer base of more than 28 lakh.
Our disbursement for the quarter stood at INR 1,900 crores as compared to INR 1,348 crores in Q3 FY 2022 and INR 2,376 crores in Q4 FY 2021. Our assigned portfolio stood at INR 1,204 crores. Standard loan disbursement for the quarter stood at INR 1,622 crores as compared to INR 1,085 crores in Q3 FY 2022 and 2,084 crores in Q4 FY 2021. We are seeing disbursement activity to pick up as more population is now vaccinated and the economic activity is returning to normalcy. As of 31 March 2022, 100% of our disbursements are made through cashless mode, while cashless collections stood at 6%. We have also adopted website payment options and UPI auto-debit.
NII for FY 2022 stood at INR 755 crore as against INR 742 crore in FY 2021. For Q4 FY 2022, our pre-provisioning operating profit stood at INR 76 crore as compared to INR 110 crore in Q4 FY 2021. PAT for FY 2022 stood at INR 21 crore against a loss of INR 14 crore in FY 2021. We have made provisions of INR 345 crore on account of the COVID-19 pandemic and other external factors. Our cost to income ratio stood at 67.6%, while our OpEx to AUM stood at 6.4% for FY 2022. We hope to reduce our cost to income ratio as well as OpEx to GNPA in the coming quarters. Coming to our collection efficiency.
Our collection efficiency trends include, excluding Assam, are as follows: Q1 FY 2022, 84%, Q2, 90%, Q3, 97%, and Q4, 100%. We are seeing improvement in repayment and collection month-on-month. Collection efficiency for the quarter stood at 100%. We have a well-diversified customer base, a well-penetrated branch network across states, and 73% rural exposure. Our on-book GNPA stands at 8% and provisions of 6.7%. Our restructured book stands at INR 925 crores, which is approximately 18% of the AUM, out of which approximately 70% clients are paying due dates. Our total operating costs has remained consistent since FY 2020 at about INR 400 crores. The elevated cost to income ratio is because we follow a calibrated approach of not chasing high growth during the pandemic.
It is safe to assume that we shall achieve the planned growth with the same cost, as the ratios will come down with increase in efficiency and productivity. During the quarter ended March 31st, 2022, the company has sold certain NPA loan assets amounting to INR 53.14 crores to an Asset Reconstruction Company, ARC, at the sale price of INR 53 crores, wherein companies holding 85% of the security received under the trust incorporated by the ARC. As with the provisions of Ind AS 109, the said sale is not meeting the criteria of de-recognition and will continue to be shown as financial assets of the company. As of March 31st, 2022, our total branch network count stood at 1,224 branches, which is spread across 404 districts.
We have a total state and UT, UTs count of 23, which makes us a well-diversified pan-India microfinance player. As of March 31, 2022, 97.3% of our districts have less than 1% of portfolio exposure. We have seen a significant reduction in our portfolio risk in terms of average exposure per district, 0.25% FY 2022 versus 0.45% FY 2017. Exposure to top 10 districts as a percentage of AUM, 14% in Q4 FY 2022 versus 21% in FY 2017. Exposure to top four states contribute 0.25% in Q4 FY 2022 from 77.3% in FY 2017. Our well-thought-out diversification strategy has enabled us to sail through difficult situations and capitalize on our ideas of enriching our clients' lives through financing of various products.
We were able to disburse nearly INR 83 crore during FY 2022 under the product finance category, which includes loans for bicycles, solar products, home appliances, consumer durables, and water and sanitation. An update on subsidiary. Business correspondence services under Taraashna Financial Services Limited has reached an AUM of INR 724 crore. As of March 31, 2022, the company operates through 158 branches and has more than 3.5 lakh active loan clients. Satin Finserv Limited, our MSME arm, reached an AUM of INR 166 crore with three consecutive profitable years. Satin Housing Finance Limited has now reached an AUM of INR 318 crore, including GA of INR 26 crore, having a presence across four states with 3,585 customers. SHFL has a 100% retail book comprising 68% affordable housing loans and 32% of NPA.
The company has 15 active lenders, including NHB, PAR of 60.19% and gearing of 2.1x. Total equity stands at INR 101 crores. The company has nil G, nil GNPA after more than four years of operation, including the pandemic. SHFL has two consecutive profitable years in the challenging business environment. At their respective meetings, the board of directors of the company's two wholly owned subsidiaries, Taraashna Financial Services Limited and Satin Finserv Limited, considered and approved a draft scheme of arrangement for amalgamation of Taraashna Financial Services Limited, transferor company, the Satin Finserv Limited, transferee company, and the respective shareholders and creditors. The scheme under Section 230-232 of the Companies Act, 2013. The company has filed the first joint motion application before the Honorable NCLT bench, Chandigarh, in January 2022.
The said first motion application reserved and allowed by the said Honorable NCLT on hearing dated April 6, 2022. Before we begin taking questions and answers, I would want to emphasize that as a responsible company, we are always working to enhance the lives of our stakeholders by encouraging financial inclusion. We are guided by our long-standing commitment to help the underprivileged in society. We are well-positioned to achieve growth and recoup lost ground in the next quarters, propelled by our sincerity, compassion and long-term mission of delivering assistance where it is most needed. With this, I would like to open the floor for questions. Thank you.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question on the line is Rajiv Mehta from YES SECURITIES . Please go ahead.
Yeah. Hi, sir. Good morning. Congrats on good performance. Sir, I just wanted to understand the performance a little better. So in terms of, you know, PAR disclosure, if you can tell me what was the PAR 30/90 bucket as of March, and how that bucket has moved between December and March?
PAR, let me look at the numbers, you know. I think it's,
PAR 30 was around 10%, you know, end of December, which has improved to about 9% now.
Okay, 9%. Okay. Of which, 8% is PAR 90, right?
Yes, yes. Yeah.
And this PAR 90 being 8%, could you give us a split? Because we used to report non-paying clients, non-paying customers in last quarter, which was about 3 odd percent as of December. Of this PAR 90, 8%, how much is non-paying?
The non-paying technically would be around the same range as such, because you know what we have really looked at is that in terms of our restructured book.
Mm-hmm.
About 70% are regular and about 30% are irregular. Now, irregular would also probably have somebody who would be non-paying, but non-paying remains in the same range of the total AUM of about 2%-3%. Is that what the range remains within range for him, absolutely.
This restructuring, I mean, it's a large number of 18%. Where is this 18% lying between, say? One is that we have a PAR 90 portfolio of, say, PAR 30 of 9%. This restructuring will have a significant overlap with this number, right?
Uh.
Restructuring is below PAR 30.
That's what I said. When I said that 70% are paying regular, that probably does not come into the-
Okay.
Hello.
Okay. Okay.
You get my point?
Yeah. Understood. Also on the fact that, you know, we did not choose to make an incremental provision in the quarter, right? We would have also some write-off, right? How are we looking at, you know, adequacy of current provisions that we are holding, and then whether how would incremental provisions play out or credit costs play out in the next few quarters given our current, you know, PAR, mix?
I think, you know, Rajiv, it has to be looked in totality of the disbursements too, along with the AUM, you know.
Right.
Our sense is that the P&L doesn't get affected further on now from here, you know.
Okay.
I think the provisioning and I think is still adequate enough for us, barring the write-offs and all, which will come in the due course of time, you know.
Mm-hmm.
From the balance sheet, this thing across over there. If I give you an overall picture, the biggest pain is probably now behind us, you know, for us to concentrate more on growth rather than, you know, the, you know, continuously for the last two years, you know, concentrating and talking about portfolio quality and the, this thing. These numbers probably I think, my sense is, are behind us, you know. It's only a question of time before the disbursement and the growth kicks in. The moment that starts kicking in and which has happened positively in the last quarter as such.
Correct.
I think, you know, all these numbers will become technically far more irrelevant as what they were relevant in the last two years, you know.
Okay. Sir, you've given us some sense about how you are looking at growth, which is about 20-odd percent in MFI and much faster in other products. From a credit cost perspective, would you want to kind of anchor our expectation for FY 2023 to a certain number or a certain range?
I would not like to bet on a number, to be very honest, you know, with constraints of being listed entities and all, you know. I can probably give you that the GNPA numbers will be significantly lower than what they are right now, you know. FY 2023 would probably be that what we should really look at, you know.
Got it, sir. You also spoke about cost to income improving. I would assume that we have got all the capacity already built for growth, right? Do you think that a 20% growth for next two years will not require much of an incremental investment, and that is why the numbers will swing on the cost matrix?
Absolutely. Rajiv, bang on, you know, what you said is absolutely right, you know, that's what we've also stated, that with the infrastructure already being there, it was already there, but the infrastructure was maybe inclined more towards collections rather than dispersing and which we rightfully wanted to do also.
Mm-hmm.
Now for us, since everything is behind us, the cost remains the same tactically, but the income levels and the asset quality starts improving. The cost to income will definitely have a
Correct. Just one-
Definitely with the regulations also now kicking in with the RBI circular, I think the yields will also probably pop up, you know, because of risk-based pricing now being enforced.
Got it. We would have raised our yield by, lending rates by?
About 1.5%, you know.
Okay.
Kind of 1.5%.
Okay.
Given that rate over by a percentage point.
Yeah.
Maybe different.
Uh.
Rajiv, so what we have done is we have now come to a range of yield, the lending rates.
Mm-hmm.
wherein the lower rate of lending is also reduced by 25 bps, and then we have, we can go on up to 25%. That is what the range here we have.
Completely risk-based.
Net-net we will have 100-150 bps of increase in our overall yield.
Sure. Got it, Aditi. Just one last thing. If you can share credit cost trajectory for housing finance subsidiary in the last two, three years, how the credit cost has moved. I understand the NPA is nil, but could you also share how the credit cost is moving there?
You know, we have made broadly a little less than 1% provision on the entire book, and it is now almost three full years of operations and with the GNPA. So, it's a very, very granular retail book and we are focusing totally on quality. So, 1% still is provided for in the books.
Okay. Got it. Thank you for answering all my questions.
Thank you, Rajiv.
Yeah. Best of luck, sir.
Thank you so much.
Thank you. A reminder to the participants, anyone wishing to ask a question, may please press star and one. The next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.
Good morning, sir. I had two questions. One is a follow-up to the previous questions. You had mentioned GNPA of 8% and then 3% of the customers are not paying and so, and you are also projecting that the GNPA will come down. Of course, one would be the denominator effect, but on the numerator itself, would you expect that the balance 5% would be in a position to pay going forward? Or is this still very, very high amongst your customer base? That's question number one. The question number two is in terms of the sale to the ARC.
Given the fact that they're, you know, they are retail loans, would the collection efforts still be done by you because, you know, the ARC might not have the ability to reach out to those customers and collect the money? That's all, sir.
Yeah. Vivek, you know, I'll answer the second question first. You know, for us, the pandemic as well as maybe before the pandemic, you know, we had taken a very conscious call to have a separate collection team which actually focuses on larger DPDs, you know, efforts. We've got a very strong force which actually goes and collects from the delinquent customers. You know, delinquent, which I mean to say is anything which is a GNPA for us or an NPA from us, you know.
We've had good results, you know, in the past also and in the current case also, which probably leads us to believe that we will be able to manage to get a large number of these borrowers back into the fold and get our collection efficiency back. This probably also gives you a particular answer or to the first question also. We are trying our level best. You know, we are not somebody that wants to write off. You know, in fact, you know, we've gone down to about 600 days DPD also to get money from those clients, you know. Our efforts will keep on continuing, at least for the next three to four years, even with all these GNPAs being there across.
That's what the basic resilience in our whole system is there. A complete force which really looks after the collection, and we don't leave it even till the time it is five years past due, you know. For us, that will give us probably an answer to the non-paying and the paying clients. You know, our field force is specifically targeting these non-paying customers as well as those partial paying customers, even those who have moved into NPA. We hope to get very positive results for this in the near future, you know. I cannot give you a timeline, but it's a slow process of bringing these customers back and the collection efficiencies in these buckets back into the fold as such.
No, I understand, sir. I just, you know, in terms of the economic health of the customers itself, do you see an improvement that their cash flows and their core business and so on? Because they've all gone through tremendous distress, I presume.
Like, whatever had happened was the first year of the pandemic. You know, I think, you know, the second year probably is the bounce back in terms of the economic activity, even in the rural, areas as such. Technically the income levels are back to normal. Only thing is how we are able to really comprehend and get the money, the collection back into our system, you know, and it's a slow process. You know, once you've had a overdue installment of about, let's say, 15 or 20, you know, you can't expect the borrower at that level of the society to probably give you those 15, 20 in one go. It'll happen slowly and steadily. That's the only pain which will get elongated a little bit, you know, which will keep on bothering us for some more time.
That will be taken care of in the next couple of quarters for sure.
Thank you, sir, and wishing you good luck.
Thank you so much, Vivek.
Thank you. A reminder to the participants, anyone wishing to ask a question may please press star and one. The next question is from the line of Siva, a retail investor. Please go ahead.
Hello. Good morning, sir.
Morning, sir.
Good morning. One question regarding your sale of 13,000 accounts to Asset Reconstruction Company now, sir. Hello?
Yeah, yeah.
For what, for how much it was done, sir? Your sale of 13,000 accounts to Asset Reconstruction Company. So, INR 53,000 crores has been dispensed, disposed to Asset Reconstruction Company. How much it was sold off, sir?
Well, sir, there are some, you know, interest which has to come in future also. Now the regulation has changed. We have changed it for INR 53 crore. We have received upfront around INR 8 odd crore in balance based on the portfolio performance during date over a period of time. We have not derecognized those portfolio out of our book.
Okay. Okay, sir. Another question from my side is that, what are initiatives taken from our side to encourage our employees and our customers for cashless UPI payments, sir?
Siva, we have all the tools which are there, you know. We have website payment, we have a QR code on our loan card, we have UPI, we have a customer service app where you can actually make a payment from there. We have all the tools which are there to make a cashless collection.
Yes, sir. I should appreciate you, but you were the first one to initiate the UPI. Congratulations, sir, with HDFC Bank. To initiate our customers so that our cashless gets improved year quarter-on-quarter. Any initiatives taken from our side?
Yeah. We've got a separate team which is working on the customer behavior. You know, it's very difficult for the rural customer to actually get into cashless collection mode because the banks are far away for them to deposit money in the bank and then, you know, for us to do cashless collection through that is something which is a bit challenging. But we've got a separate team in the head office as well as in the regional offices which is working solely on improving the cashless collection. Our sense is that it is at 6%. We'll keep on increasing slightly bit by bit in the near future, but it's a change in the customer behavior, which will take some amount of time, which is going to be there.
Okay, sir. The last question regarding Taraashna Financial Services, sir. Hello?
Yeah.
Yeah, yeah. Last quarter we have write off of INR 10 crore, sir. This quarter we have write off of INR 7 crore. You know, what is the situation you are running in Taraashna Financial Services? It is over or it is still?
It's akin to what Satin is going through. I think it's majority of the pain is over now, and we don't have any much more pain which is there and even in Taraashna Financial Services.
Okay. Thank you so much. Good luck for the future, sir. Thank you.
Thank you, sir.
Thank you.
Thank you. The next question is from the line of Ronak Singhvi, a retail investor. Please go ahead.
Hi. Good morning. Good morning, Mr. Singh, and the entire team, and congratulations on a fantastic sort of turnaround this quarter. I have a couple of questions primarily around the strategic initiatives which I guess you guys have taken, specifically around this investment you've made in a fintech company called Jay Kay Financials , which is under the brand Rupyo. How is it aligned to Satin's future strategy? It will be helpful to understand that. Second question is around the subsidiaries, the housing finance or MSME lending business. How are we looking to monetize it? Because I see this reference that it is not getting valued in the market. How do you intend to sort of get the valuation?
Are you looking at raising funds at the subsidiary level, or will you continue to sort of infuse capital from the holding company level? Thanks.
Ronak, let me answer the second question first, you know, because, you know, for us, I think, you know, the holding company right now is looking at infusing capital in these companies only because, one, they are well capitalized right now, and we feel that, you know, probably, I think, you know, I can say it point blank, and I think it's not been well monetized, not by us, but by the entire investor community, who's not been able to really see the value which we've been able to bring across, even during the hard days of pandemic as well as the demonetization, and we actually started this in subsidiaries, you know.
Our own sense is once they reach a critical mass, which probably they are reaching faster than anything, you know, because housing is about INR 320 crore, you know, with the percentages of growth which we are looking at as well as the MSME company, which is finally going to be merged with our BC company, which is going to be at least in the range of about INR 724 crore and INR 156 crore, you can add up together. The balance sheet becomes fairly large enough for both the subsidiaries to be really looked at, you know. Our own sense is we are just waiting for a critical time, where we will actually be able to realize fully the potential value of these two subsidiaries.
I think that is when we would really look at monetizing that. But now it is ultimately for, you know, everybody else to probably give it up, because we've been giving this commentary for a long period of time for people to really understand the value of these two subsidiaries. Now, moving on to the first question. Fintech for us is probably a play which we are more interested in terms of looking at digitizing our operations, both front end as well as back end for the operations as such for the parent companies, parent company as well as the subsidiary, you know. That is what we are more interested.
Today for us, an acquisition of a customer is completely digitized. Work in process for the back end completely from our cash book and branches to various other forms of the HR software, the expense management software and various other software which are working in the company. It's completely a digital operation, you know. Our last piece, which is probably going to take us some more time in terms of actually delivering the fintech value to the outside world from our side is the cashless collection part, you know. The acquisition is getting completely digitized, and it is about 70-80% digitized. The back end operations are 70-80% digitized. It's only the cashless collection, which is the third form of our intervention as an organization, which has to probably go through that process of getting completely cashless, you know.
The moment that is done, I think we'll be a fintech player by ourselves to be looked at as a complete digitization process where the added advantage which a normal or fintech player does not have is feet on the street, you know. We have that added advantage also attached with us along with the fintech business. This investment in Rupyo was just to see our product basically, which is advance against salary. We just wanted to invest a minor investment across it. We actually fund them in terms of giving out loans to customers for the salary part also. That's just a business play, nothing in terms of how we look at it, because we look at it our own company to probably see how fintech really works out.
Sure. Thank you. Have you sort of disposed any product, any loans through Rupyo?
Yes. A couple of loans. A few loans, you know, yes.
Okay. You're trying to scale it more from a business perspective?
Yes. From the business point of view. Yes.
Sure. Thank you, Mr. Singh. And thank you.
Thank you. Ladies and gentlemen, that is the last question. I now hand the conference over to Ms. Aditi Singh, Head Strategy, for closing comments.
Yeah. Hi. Good morning, everyone. I thank everyone for joining this call this morning. Thank you for your words of encouragement. I hope we've been able to address all your queries. For any further information, you can get in touch with me. My name is Aditi Singh. I'm Head Strategy for Satin Creditcare. You can also reach out to Ms. Shweta Bansal, who's DGM IR working in my team. Thank you all. Stay healthy. Stay safe. Bye.
Thank you. Ladies and gentlemen, on behalf of Satin Creditcare Network Limited, that concludes this conference call. We thank you for joining us, and you may now disconnect your lines. Thank you.
Thank you.