CONFERENCE CALL - from Capital Markets
To continue focus on strong growth
Equitas Holdings conducted concall on 09 May 2016 to discuss financial performance for the quarter ended March. PN Vasudevan, MD of the company addressed the call:
· The company has 3 subsidiaries - Equitas Microfinance providing group loans to the customers having no formal documents of income, Equitas Finance offering loan for used commercial vehicles and micro and small enterprises (MSE), Equitas Housing Finance providing loans in the affordable housing segment
· The company has recently launched another subsidiary Equitas Technologies Private Limited which would provides technical platform connecting entities interested in transporting their loads and truck owners. The company would soon start its operations.
· The loan tickets size stands at Rs 3.5 lakh for used vehicle loan segment, Rs 1.7 lakh for MSE loan segments and Rs 12000 to 20000 for microfinance.
· The lending rate stands at 22.5% microfinance, 18% to 22% for used commercial vehicles as well as for MSE loans.
· As per the RBI regulation, 90 days over due bas NPA recognition norms applies to the microfinance companies, while the company is classifying its microfinance loan based on 30 days overdue basis. Housing finance company has been recognising NPAs on 90 days overdue basis basis.
· However, the company has shifted to 150 days overdue basis NPA recognition norms in the commercial vehicles and MSE loans segment in June 2015. The company expects to shift to 120 days NPA recognition norms by March 2017. However, the company will have to recognise NPAs on 90 days overdue basis, immediately on conversion to the bank.
· The company has the network of 549 branches at end March 2016. The company has added about 40 branches in FY2015.
· The company expects to consistently improve opex to asset ratio from 10.9% in FY2013 to 7.1% in FY2016. It expects to reduce opex to assets ratio to 3% to 3.5% in the near term.
· The customer base of the company stood at 27.44 lakh. The loan officers count stood at 1008, while collection officer count was at 1500 at end March 2016
· The stock of repossessed vehicles has come down to 220 vehicles at end March 2016 from 360 vehicles at end March 2015.
· The PAT of the company increased 28% to Rs 46.8 crore in Q4FY2016 and 57% to Rs 167.1 crore in FY2016.
· The provisions of the company increased to Rs 59.1 crore in FY2016 from Rs 50.4 crore in FY2015, mainly lead by increase in standard asset provisions to Rs 17.65 crore in FY2016 from Rs 10.3 crore in FY2015.
· The company has improved RoE to 13.3% in FY2016 from 11.15% in FY2015, driven by increased leverage and improved efficiency. The company expect to continue to improve RoE, while raising leverage.
· The company has continued to maintain NIMs at 9.5 to 9.7%
· The ending rate for microfinance has been reduced in FY2016 to 22% from 23.5%, driven by decline in the cost of funds to 11.3% in FY2016 from 12.07% in FY2015.
· The employee cost of the company increased in FY2016 mainly on account of Rs 9 crore of provisions for employee benefits due to change in Bonus Act, while the senior level recruitment to take care of Small finance Bank also contributed to the rise in operating expenses.
· The loan book of the company increased 11% QoQ and 53% yoy to Rs 6125 crore and March 2016 over March 2015. The company proposes to continue focus on strong loans growth.
· Microfinance loan Book stood at Rs 3283 crore (up 53%), used vehicles at Rs 1510 crore (up 28%), MSE at Rs 1087 crore (up 113%) and Housing Finance at Rs 246 crore (up 37%).
· GNPA ratio of the company stood at 1.3 4% at end March 2016 up from 1.08% at end March 2015.
Small Finance Bank
· The company has applied for final Small Finance Bank (SFB) licence with the Reserve Bank of India.
· The merger of 3 subsidiaries is pending with the Madras High Court order which is expected in short time.
· The banking operations are expected to be launched by the end of 2016
· The SFB would focus on four major areas – first, it would focus on growing existing loan products, while may also add couple of new loan products such as loan against gold which will be mainly a banking loan product than a NBFC loan product.
· Secondly, the SFB would focus on building strong retail liabilities.
· Thirdly, the SFB would be offering third party products such as insurance, pension etc
· Fourthly, the SFB would strongly utilise technology to improve efficiency and customer experience which would in turn help to improve risk control and reduce cost.
· The SFB would be 100% subsidiary of the holding company. As the SFB has to be listed within 3 years, the company may consider the option of reverse merger.
· As per the company on conversion to the SFB, about 400 branches will be converted to the liability branches and rest will be the asset branches.
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