Satin Creditcare Network Ltd - Reaching out!

Thanks Neerav and v4value. This is great information.

V4value and other boarders,

I wonder about your views on the relative valuation of Satin compared to BFI(SKS). I am unsure if comparing Satin with Ujjivan or Equitas is appropriate given that they have Small Bank licenses and because of that going forward the inherent businesses are not completely comparable. That is the reason I picked BFI. I also picked BFI because it is market leader.

With BFI comparing on PE would be dicey because of tax benefits enjoyed by them. In that light the key parameters in my view should be P/BV, P/core earnings per share(excluding tax benefits), NPAs, AUMs and ROEs. Qualitatively IMHO we should compare relative penetration of the market where they have dominance, institutional holdings, management pedigree (honesty, what they predict vs what they deliver, corporate governance etc.) and key macros risks. What is your view? What are some of the important things that I am missing.
I am trying to come up with a model where I could gauge the relative (under/over)valuation of Satin with the market leader.

Thank you.

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Expect better margins in FY17: Satin Creditcare “We have a very robust growth based on this tier I capital. So, our tier I capital with this infusion goes up to about 22 percent”, HP Singh, Founder and MD of Satin Credit Care told CNBC-TV18.

Interview Link:

http://www.moneycontrol.com/news/business/expect-better-marginsfy17-satin-creditcare_7590681.html

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Key takeaways for me from the interview:
Business execution remains good - expansion, growth…implies credit quality having no issues
Rating upgrade next catalyst to structurally reduce cost of funds

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Was on the ground in rural Gujarat (about 40km from mani nagar). No electricity when I was there, but no signs of distress , met women who were MFI borrowers and were using 20-25k MFI loans to buy buffalos and sold milk to Amul. Payback was less than a year on a buffalo purchase. Had examples of women in their 4th / 5th cycles who had bought multiple buffalos, put their kids to schools.

Also saw a center meeting which started with a pledge on how they will be sincere about saving and repaying money (was almost like a religious meeting) . Amazing how all women had bank accounts, mobile phones and Aadhar cards.

Felt pretty good about the quality of MFI borrowers. I am sure there will be local events in states, but structurally the industry feels like it’s in a very good place…

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Heard similar feedback from a friend who toured up and Bihar. Will be good if any UP members could add scuttle butt…

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Hi Krishna,
Any updates on the comparison with BFI?
Best Regards,
Vishal

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Krishna, Vishal there has been good discussion on Satin vs SKS valuation on this thread. Please go through prior posts. Nothing has changed imho on relative basis in past 2 months.

Satin has recieved rating upgrades on its various borrowing avenues. Bbb+ to A-.
Shd help in bringing down its cost of funds.

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This will be a very nice roe kicker. Glad to see the key elements of the thesis playing out

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Rating revised one notch upward.
http://www.bseindia.com/corporates/anndet_new.aspx?newsid=b4386105-ee44-4139-a7f1-a2afdaa8f57e

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Crisil research Note on Satin Creditcare published on 21st October 2016.

Satin-Creditcare-Network-Ltd.pdf (174.3 KB)

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HP Singh gave an interview to CNBC today. Following are the key points
1- Because of CARE upgrade cost of funds would come down by 75 to 100 basis points.
2- The benefit of lower cost of funds would be passed to end customers.
3- Company is on track to meet the AUM and PAT guidance given for 2016-17. Want to recall that AUM was to grow at 60% and PAT at 100%.
4- Q2 has gone well. Results would be out before 9th Nov.
5- Average ticker size is 24-25K.
6- Contribution of UP has come down to 38% from 80% five years ago. They are working on further bringing it down.

More details can be found here http://www.moneycontrol.com/news/business/expect-075-1-declinecostfunds-satin-creditcare_7817561.html

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Fundamentally all the elements of the thesis - QIP, Taransha merger, ratings upgrade, growth and retruns - have played out very well. Wonder why the stock is languishing :frowning:

There was a detailed report which I saw yesterday on RB for Satin made by Crisil. Now it is not available. I think it was paid report.

Disc: Invested in Satin.

Detailed report for satin made by crisil is available on satin’s website.

http://www.satincreditcare.com/pdf/20151021_Satin%20Creditcare%20Network%20Ltd_IER_InitiatingReport.pdf

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Just waiting for Q2 results I guess. There is a beautiful 3 year run way here for this company, after that it will depend on banking license playing out.

I do see some turbulence near term though because of UP elections. EC rules prohibit cash movement which restricts ability to disburse for about a month (Happened in TN for Equitas). If stock dips after a soft quarter (post UP elections) I will buy more…

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Hope the impact is less as they migrate to cashless collection. From teh crisil report:


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Hi Bala,

Apologies if you have already posted an updated version of your industry data file, but could you post that again. i was trying to build an industry data for all 5 players but if you have done that already, it will save me a lot of time. Thanks a lot.

Robust performance of Satin continues.

Q2 Results

http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/7E147D8D_7931_4FBB_9A19_3553E84A370C_144548.pdf

Press Release
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/243EAE71_1B0A_4C46_A46C_AAE6CBB2A7C4_173836.pdf

Investor Presentation
http://corporates.bseindia.com/xml-data/corpfiling/AttachLive/339FEF1F_4ABE_4D72_BD48_2E0ADDC78267_110943.pdf

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Thanks Milind. Good to see that so far management of Satin has been walking the talk. Along with growth they have been able to maintain good asset quality as well. One orthogonal but related thing I wanted to share from my side is that I looked at Centrum earnings estimates for Granules, Ujjivan and Satin. Although I strongly felt looking at them that they would be completely wrong, I waited for the actual results to come. In all three cases they were off mark by a big margin on multiple parameters. I am not sharing it to get points for my own estimation skills but I wonder how a brokerage firm having full focus on such things could go so consistently wrong. Anyway this is something for future to be careful about, and not pay a lot of attention to estimates & targets given by these reports.

V4value,Milind, peguy and others,

What is your view on the impact of ongoing currency cleaning process on the business of Satin in short, medium and long term? I do think that over the next couple of weeks there would be impact on the business where cash transactions are happening, and after that there would be enough liquidity. Overall within the quarter things would balance out and net we would not see tangible impact of this measure in the quarterly results. Over the medium and long term, this cleaning process and digitization of transactions would only help. What’s your view? Besides UP elections, do you see any other head winds over the next few months?

Cheers,
Krishna

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