The exposure to Reliance Capital arrangement was Rs.25.36 crore as of 31st March 2016, though we don’t have the figures after that. This amount appears as a Contingent Liability in the company’s FY-16 Annual Report. These loans will shift to Satin if they remain overdue for more than 90 days, which means beyond mid-Feb ‘17. Thus, given Satin’s size, the financial impact of this arrangement will not be very significant if the situation normalizes by then.
1 Like
Sorry did’t realise it was different from tha Tarashana agreement. However exposure seems low (~25 crores) so won’t impact your profits by much even if 100% loans go bad.
I think its important to avoid noise and focus on the one thing that really matters - Satin has 40% exposure to UP which is going to elections and is among the worst affected by demonetisation. It will see political interference and lower collections.
Satin concall today at 3 PM 022-39600663
BJP Central govt is paying special attention to UP rural populace as elections are due in feb march 2017.Otherwise it will be suicidal for them.
Hearing availability of 500 rs notes through post office in rural areas is improving.
6 Likes
Thanks a lot Vivek for sharing concall details
notes from concall
- intent of borrower is there to repay the loans.
- Western UP area is facing problems, eastern UP belt is fine
- Western UP form 20 percent of portfolio.
- Overall collection efficiency is 50% since demonetization, Punjab and Bihar are reporting decent collection ( more than 60 percent).
- Loans are given taking into consideration income of entire household, also the EMI amount paid is small compared to the income.
- 300-350 crore is the monthly disrbusement to borrowers, which has stopped since demonetization announcement. It is going to start from November 28th again. Hence instead of the regular amount the disbursement this month ( Nov) were only around 15 crore.
- Tarashna - forms 10 percent of our portfolio, hasnt been affected by demonetization.
- Long term impact is great for demonetization as market will shrink to fewer organied players.
9.Borrowers are not requesting for disrbusements, even if borrowers are not paying they are attending the attendance meeting. These two are good sign on their intent. - HP Singh is highly confident of the growth figure for AUM of 40/50 percent for FY18.
- RBI has increased the number of days after which a non performing loan will be considered as NPA.
7 Likes
Thanks for the minutes of concall. Covers most of the point.Satin investors should all listen to the concall on Researchbytes.A very confident eloquent grounded technocrat CA promoter answering the questions in a frank manner duly acknowledging the ground reality.Its most important to be honest and accept the reality and take appropriate action. No wonder 3 consecutive 10% UC after the concall.
3 Likes
True, have been fans of the calm and thoughtful answers they have provided over the years, but I would want everyone to watch out for UP (as I have been saying for a while now). They are seeing political interference in Western UP which will only get worse as we get closer to election. Expect lower disbursements and higher NPAs. Stock seems to have reacted nicely (which I don’t mind because I picked a bunch at the lower circuit of 325) but the story will take 6 months to recover so will see bumpy recovery.
1 Like
Market price will reflect collection and disbursement trends near term
De-monetization has challenged many business models in their current state- for example real estate transactions, day to day vegetable and Kirana store transactions and in general all other small value transactions where cash plays out as mode of exchange. Among the listed companies and sectors, MFIs are one among those which got impacted the most. De-monetization brought the disbursements to stand still and repayments to very near to the red line. I have heard the con call of Ujjivan and Satin to understand the impact, and how these companies are coping up. I have also read multiple articles and spoken few customers of MFIs. I am writing down some of the key points based on my understanding
1- Both companies mentioned that the repayment has been picking up by every passing day. Ujjivan stood at 66% while Satin at 55% as of 23rd Nov.
2- Ujjivan has started disbursements and Satin would have started it from today. They see this move to bring customers closer to companies because they believe that ’ a friend in need is a friend indeed’.
3- Sating explicitly mentioned that they would move towards complete cashless disbursements in next 6-8 months.
4- Satin and Ujjivan both mentioned that they have seen politicians involving themselves in the western UP region. I read another report today which called out that some pockets in TN and MP and Maharashtra have also seen non-political heat.
5- The relaxation from RBI on classifying loans as NPA is being seen from two angles. One that some folks are seeing it as liberty to not pay on time or not pay at all. Second view is that it is helping downplay the politicians involving themselves and bringing down the heat. My own view is that we would see a mix of both these and in couple of months things would start flowing as normal.
6- I read an interesting article today which shows the silver lining for the MFIs in this mayhem https://www.pgurus.com/going-cashless-with-microfinance/ . I largely agree with the author and I think the company which adopts cashless sooner would have advantage.
7-There have been multiple views floating on the impact on the MFIs. Many of these views have taken extreme positions. For example de-monetization would completely disrupt the business of MFIs. Others say that all incremental money collected by government would be distributed to bottom of the financial pyramid which in turn would do wonders. My own view is that none of these would happen. Our banks have not been able to penetrate a major portion of the population even 69 years after independence. In fact to certain extent this is the reason why MFIs exist. This is not going to change over-night. Government would not set bad precedence by distributing money and put undue pressure on banks and even RBI.
My humble view is that in the near term there would be pressure on MFIs and in fact we are already living through it. But this is easing by every passing day. Over mid to long term I expect this move to streamline and make MFIs more lean & efficient. The smaller ones may perish and the stronger ones may prosper.
I am invested in couple of MFIs and my views may be biased.
Cheers,
Krishna
11 Likes
just to add, in a chat with NDTV the MD of Ujjivan fig has stated that the repayments have moved up to 75% +
Had talked to ED of Arman fin. , Aalok J. Patel last week. Collection rate is up at 80%. Although this isn’t a pan-india MFI. It’s a relatively small MFI.
See the collection rates on demonetization slides 6-8 of sks ppt below. Shows the resilience and willingness to pay of these small borrowers
Satin CEO in call had mentioned their intention to Start disbursement to send a strong message. The message will be in JLG if u pay we disburse ( see sks disbursement policy). This will further ensure quick normalization of disbursement
1 Like
Spoke to the branch manager of a large MFI.
Things are normalising fast except for UP, Amravati in Maharashtra and parts of MP.
UP is seeing a lot of political interference with local MLAs and MPs and even Maulvis interfering and asking borrowers to not pay. I will be very cautious on Satin till UP elections are done. Equitas and SKS are better insulated given low exposure to UP.
Best holistic updates we will get are from top managements. All MFI have been quite active recently with interviews. Lets track them, they come almost daily now 
Collections rising but Q3 disbursements may be hit: Satin Credit
Thought I should update since I have been a bull on this stock for a while now. I sold a significant portion of my holdings at the 450 levels and moved to equitas/SKS. All incremental reports I was getting from UP were very poor (spoke to 3 center managers and also priority lending guys at axis, yes and IndusInd). Satin is clearly the worst hit MFI and so will see the most impact in the next 3-6 months. I will however re-enter the stock in a big way for sure given its underlying value and management strength.
6 Likes
depends on how well they recover from the effect of demonetization and how much of an adverse effect the UP elections have on the company. If the they are able to recover within a couple of quarters and the UP elections dont have much of an adverse effect on the collection than perhaps this could be the best opportunity to enter!
I got an opportunity to speak to one of the officials of Satin over phone on 16th December. In about 30 minutes of our conversation the person from Satin patiently heard my queries and responded to them. Following is a short summary of my findings
1- On an overall basis the repayments have started picking up. In most of the areas including eastern UP, Bihar, Punjab, Haryana and other regions the repayment in November was encouraging given how it looked right after demonetization announcements. However western UP was one region where it was bad.
2- In some part of November and first week of December there were incidents reported in western UP area where small time political leaders involved themselves and tried to create a rumor that government is going to waive off loans. This is inline with what is reported in this article http://economictimes.indiatimes.com/industry/banking/finance/borrowers-in-maharashtra-mp-and-up-stop-repaying-mfi-loans-on-waiver-rumour/articleshow/55730710.cms. To some extent the RBI relaxing the NPA classification caused some of the customers to believe that there loans are going to be waived off. Of course it was misunderstood.
3- Satin’s five layer of management has been actively working on the ground to sensitize with customers that they have to pay back the money and there is no loan waive off. They have met the government officials, put posters and spoken about it in the meetings with the customers.
4- MFIN has been playing an active role is protecting the MFIs and educating customers. Officials from MFIN have met CMs, DMs and other top government functionaries to educate customers that there is no loan waiver.
5- Starting sometime near December 5th there have been messages even on the radios to educate customers about RBI notification. The main point being driven through this is that loan takers should pay back.
6- Over the past ten odd days things have been improving on the ground. However MFIN and Satin have to consistently work to ensure that situation becomes completely normal.
7- There has been renewed focus on moving to cashless as soon as possible. There should be needle mover changes happening in the next six months on this front.
8- Disbursements of loans have started however the money being disbursed is only the collected money from the repayments.
9- Given the beating the stock price has got over the last five weeks, investors have been inquiring with Satin to take fresh positions.
Please note there is fair possibility that some of the information provided by me would not be factually correct because of communication challenges and other reasons. I own Satin and my views may be biased. This is not a buy or sell recommendation. Please do your own research and apply judgment before any transactions.
Regards,
Krishna
14 Likes
Sorry, to me it isn’t a pricing question at the moment but a business exposure question. I will wait for UP elections to get done and see collections data post that before re-entering. SKS data came out yesterday which highlighted UP was the worst performing state in their portfolio. 74% collections in UP in the past month vs 91% national number.