I attended the earnings call and also went through the company presentation which was released by company after announcement of the Q4-FY2017 results. Following are some points I was able to register in my head
1- Company reported loss of 42.5 crores in Q4. For the complete year company reported profit of 24.87 crores. The diluted EPS for the year stood at 7.15. The standalone AUM as on 31st March was 3617 crores and consolidated AUM was 4067 crores.
2- The loss reported in Q4 was primarily driven by unrealized interest of 30 crores and higher provisioning (1.75% including securitized standard assets now vs 1% excluding securitized standard assets) of 26 crores.
3- The collection in UP has come back to 97-98%. The important point to note is the money that is being paid by the customers is first accounted for the older months. For example, if a customer has pending EMIs for Nov, Dec, Jan, Feb, Mar and Apr, and he pays some money in May for the first time since Oct-2016 then it would be accounted for Nov-2016 collection. So in the presentation you would see the collection numbers are poor for recent months but better for earlier months.
4- Bihar, Punjab and Uttarakhand are doing well with collections. Bihar is close to 100%, and other two are above 98%. The one area which is still performing badly is Amaravati. Company has about 3% loan book in this area. The collection efficiency in this area is 50% and slowly improving.
5- There is possibility of write off in the Q1-2018 as well. However equally fair possibility is there for write back in Q2-2018. Q2 results would show Satin getting back on the growth track.
6- Fresh loan disbursement in the Feb and Mar was more than 900 crores. Company has raised more than 1300 crores from the market since Demonetization.
7- Target for loan book by end of FY18 (31st March 2018) is 5500 crores.
8- The company is focusing on digitization and aims to reduce the operational cost involved in loan processing. The net impact of this should start reflecting from Q2-Q3 of this financial year. The operational cost should go down by more than 100 basis points.
9- Company is also focusing on going cashless. More than 20 branches have adopted cashless disbursement so far.
10- Company is going to remain primarily focused on MFI business. Company believes that it has handled very well a)Demonetization b)situation arising because of political interference from Elections in UP, Punjab and Uttarakhand, and c) Loan waiver schemes in the past 6-7 months. The growth opportunity in MFI is big and Satin is better equipped now to exploit it.
11- Company is evaluating some strategic move. The nature of this move and the timings were not disclosed.
Overall H P Singh sounded positive towards the future. However the recent past has seriously dented the share price. Only the real growth and going back to 99.9% collections would heal the wounds of shareholders.
Disclosure: I am invested in Satin. My views may be biased. This is not a buy or sell recommendation.
Cheers,
Krishna
Thank you Krishna for putting the gist. The qtr was expected to be bad, but not this bad. 
Anyways, collections are improving, which is good. But now there will always be a sword hanging over MFI companies with farmers agitating now in Punjab and Maharashtra for loan waivers. This could also happen in states that are going into election in next few years. UP has set a very bad precedent here.
Obviously, MFI industry is going through a rough patch in India, but i still believe it has a very long runwayâŚreason being, there is no alternate institution which can fill the gap with MFIs being absent. (Banks cannot fill this gap for obvious reasons). But, at the same time i think there might be some structural changes as far as MFI companies are concerned to deal with this recurring problem.
Digitization will reduce disbursal costs a bit, which is good. This will be a theme going forward.
Raising money has not been difficult for the industry despite tough times. Promoters putting more along with some marquee names taking stake at much higher levels give confidence about the bright future of the industry.
Q1 can be bad again due to more write-offs as you saidâŚthere can be impact in q2 as well, but might be compensated by write backsâŚso this might not be the bottomâŚstock can fall more. Whatâs important is improving collection efficiencies further along with some sort of insulation to these governmental populist interventions. This is a very important sector for a growing economy like us.
Whats wrong with Satin? Stock is seeing continuous selling while other MFIs are relatively stable ( SKS, Ujjivan, Arman etc.). Any views?
I recall here that I am invested in Satin from 350+ rs and will now add more around 230 which I see as technical good support
Also , this quarter performance was very bad and same I had told to users before investing in this scrip and I expect it to be bad in next quarter too
yearly EPS is now come down to 7+ against 20+ last year that 's why share price is falling so much . Even it goes sub 200 level it wonât be surprise as with bad quarter and ongoing MP farmers issue , demand has suddenly vanished for MFI
Why this MFI is only falling is because of bad performance and more exposure to North India
From Q2 FY18 I expect revival in this counter so people with long term investment can consider it as accumulation zone
Good luck to you. BTW, some people say - never average on the downside OR never catch a falling knife.
Credit demand spurred post demonetisation, says Satin Credit
thanks bro, appreciate your advice, btw I am still bullish on company fundamentals
Demonetisation could cause capital erosion for MFIs, NBFCs and SFBs in FY2018
Punjab joins farm loan waiver race, to write off more than Rs 20,000 crore credit
While the following post is not entirely linked to the future prospects of Satin, I am posting this anyway, as I believe this thread could be a good study on the mistakes we do in not recognizing the risk appropriately and we could possibly learn from it. Request moderators to let me know if this thread is inappropriate here. If so, I will remove the same. Due respects to the members who posted, I am of course writing with the benefit of hindsight.
The thread was started on Oct 2015 but the first time the political risk was pointed was in Jan 2016 by Vinay Arya. Again in Mar 2016 , Rajveet Singh pointed this out but concluded that âIt is very area specific which can be across state (less possibility in current times) or smaller area in a village or taluka. The amount of loss in such an area of village or taluka level is generally very small.â The next time this risk was discussed was in Jun 2016, but then the focus seemed to be more on âhigh growthâ.
While demon created a double impact, again, with the benefit of hindsight. we should have probably stressed and discussed more on the risk that with 41% exposure in UP, 13% exposure in Punjab and a naturally high debt equity ratio, this was a very high risk bet with only growth getting priced in, not the risk.
The lesson for me here is (I could be wrong though)
a. Diversify across industries, whatever we believe is the prospects of the industry or company
b. Keep reiterating the risks so that we donât get carried away in a bull run and be sure what risks are significant, structural and could lead to significant price erosion
c. If we sense that the risk fructifies, sell
One question I am not able to get the answer for is that the risk here appears to be a permanent reality (This is not going to be the last farm loan waiver). Given this fact, what should be our thought process be when evaluating a similar company for investment. How do we factor in this âriskâ which really appears to be a near 100% probability event. Are there some models that help us understand and evaluate this?
Satin does not lend to farmers. None of its loans are farm loans. As per management, despite farm loan waivers, the credit discipline among its borrowers is intact. They understand that their loans are not farm loans and hence not waived.
I dont think Satinâs current woes are related to farm loan waiver. This has more to do with demonetization and its prolonged effects seen in UP. In other parts of the country, currency situation became normal by Jan but took another two months in UP. Thus, we should wait for Q1 results to see any fresh slippages emerging due to farm loan waiver.
Besides, I for one feel that at current price level, stock has been deeply corrected. After equity infusion from ADB in Aprilâ17 at an average price of 410, BV per share stands at 170. Also, promoters have been issued warrants at the exercise price of 441 Rs per share. Other institutional investors such as MS and DSP have invested at much higher price range than CMP. Long term story of MFIs are still intact. 8/10 SFB licenses from RBI should be taken as vote of confidence in the industry. Moreover, as a 5 year corporate banker with 2 prominent private banks, I can easily vouch the much deeper risks lie in the longer duration loans than fast moving loans (less than 2 years) being disbursed by MFIs. MFIs loans draw their strength from high touch point nature of lending. For example, many PSBs did (so called) secured lending to Ola/ Uber drivers, secured by hypothecation of vehicles. Majority of those drivers come from interiors of the country. However, as incentive system of ola/uber deteriorated, drivers are surrendering their vehicles and going back to their home towns as repayment is not viable anymore. Residual value of a commercial vehicle (special with 1 lac or more Kms in delhi) is next to nothing. But in an investorâs view, this is secured lending, compared to high touch point MFI lending where loan officer has much deeper understanding of the borrowers.
Status: Invested at avg price of 285.
PS: I am a newbie investor and came here on this forum by sheer luck 1 month back. Has been a great experience so far.
Welcome Mayank! Thanks for sharing your views on vehicle finance for OLA/UBER drivers.
Will be able to distribute Capital First products through our outlets: Satin Creditcare
Satin declared results and it is bad as expected.
http://www.bseindia.com/xml-data/corpfiling/AttachLive/1db42006-9774-42a8-8181-1e765b690032.pdf
Income at 212.54 crore - 9% UP
Expenses - 331.37 crore 147.38 crore as provisions and write off (69% of total income! of this Q!)
Loss :118.83 crore
Believe the RBI dispensation would have ended and they would have taken a call to take entire provisions this quarter. Need to get finer details and specifically see the collection efficiency levels in the impacted states. If they have reached near normal levels, that would be taken as a very positive development. Need to check on management commentary for specifics.
Growth seems to be back on track as per MD H.P. Singhâs latest interview:
With the company well capitalized and a loan book target of 1/4th the size of Bharat Financial, this stock is a serious player in Microfinance and well poised for the next leg of growth.
I am concerned about their NPA levels and hope this quarter will give some guidance regarding that front. I only hold tracking level and planning to add more based on this quarterâs result.