Some more notes from Q1 FY18 Conf Call
PAR 60 is around 5.2% of overall portfolio. Loans where even a single installment was not paid are already written off. Also most of PAR 90 is also written off. There is no restructuring of loans to longer duration for stressed assets, they are simply delayed payments. RBI does not allow even penal interest for delayed payments. Total write-off was around 4.5 Cr.
65% of total assets are new assets created post demonetization. Most of the MFI loans are 14-month tenure product. In order ro remain competitive, we increased duration by 2 months (from 12 to 14 months) so that installments do not go up. The average ticket size is 23k. For the first time clients, the average loan size is 18-20k. Then the ticket size can go from 20-30k in subsequent cycles. Around 72% of new loan disbursements are to fresh clients.
Cost of Funds
The current cost of funds is at 14.4%. We expect to exit the year with 40 basis point reduction in the cost of funds. Actual average interest rate on loans is around 12.5%. The additional cost is attributed to cost of cash collateral, bank processing fees etc. Most of the term loans are for 2-3 years from banks.
We have raised 15 Cr of sub-debt which shall take care of all the growth plans for FY18. We are open to have a strategic investor at attractive valuations.
The loan tenure ranges from 12-24 months. 80% clients have loan duration of 24 months. These funds are used for inventories, part of working capital. In rural areas, some of the loans are used to buy buffaloes etc.
The MSME clients are mature clients who do not want to go for group model. Further they prefer monthly repayment cycle compared bi-weekly repayment cycle. Our underwriting are little bit strict in this area and hence yields are higher at 30%. The lending is done based on a percentage net positive cashflow and we consider many things in calculating net cash flow like lifestyle, expenses etc.
These are unsecured loans in essence as no client will usually submit collateral original documents for the loan of 50k to 1.5L.
The disbursements in month of July are already at 32.5 Cr.
We expect to exit FY18 with following contribution - GJ 50%, MP 20%, UP 20%, MH 10%.
The company expects to exit FY18 with following AUM targets ->
MFI - 270 Cr (Disbursement of 425 Cr)
MSME - 75-80 Cr
2-Wheeler - 90-95 Cr
The target AUM for 2-wheeler segment has been increased. This is due to several factors like - we have cut interest rate by 100-200 basis points for our customers due to competition. We have changed our relationship metric with dealers where they make more money if they give us more clients as a dealer plays a significant role in customer’s decision in selection of financing institution. We also have recruited some experienced sales people.
We have opened most of our branches in Q1 FY18. We expect to open only 4-5 branches in the rest of the year.
The recurring capex per branch is approximately as follows ->
rent = 1.5L/year, Payroll = 60k-1.1L/month, Travel = 20k/month.
The branch breaks even when we have around 600-800 clients and it takes anywhere between 4 to 8 months. Since recurring capex per branch is reasonably low, we have separate branches for all 3 divisions.
Disc - Invested