Company is guiding for a loan book of 19,000 Cr for FY 19 and 40,000 for FY22. For FY 19, it translates to a growth of 3257 Cr of additions to existing loan book and a growth of 28% thereafter for 3 years. In comparison, addition to loan book has stagnated at around 2,475 Cr for last 3 years and growth has steadily dropped from 41% in FY15 to 18% in FY18. Chart below shows what company has achieved and what it is projecting.
Source: Company Presentation and author’s calculations.
Part of the loans disbursed make up for rundown in loan book due to loans that matured or prepaid. for FY 18, 5,207 Cr loans were disbursed and this resulted in a net addition of 2430 Cr to loan book. We can safely assume that about 5,207 - 2430 = 2,777 Cr loans ran down. This is approximately equal to loan book as of FY12. Essentially, FY 12 loan book ran down in approximately 6 years. Assuming a run down period of 7 years for future calculations, we can estimate how many loans will have to be disbursed to reach that magic figure of 40,000 by FY 22. Table below has the math.
Source: Company Presentation and author’s calculations.
Note,Disbursal for FY 19 is calculated based on rundown period of 7 years while for FY 18 this is 6 years.
Based on the table above, company will have to triple its disbursements in 4 years. In order to achieve that, it will have to at least double number of offices even if you assume each office will disburse approximately 40 Cr worth of loans from current level of 30 cr/yr. Office productivity has stagnated over last 4 years.
Overall, disbursal target looks like a tall order.
Source: Company Presentation and author’s calculations.
I hope company has enough plans in place to achieve these ambitious targets. I think these targets are little stretched. Over last few years, loan book grew rapidly because rundowns were limited. Going ahead, this will prove to be a challenge.
Disc: No position, interested.