Creditacess gramin has customers having loans from 4 plus lenders at 12 % of the book as of Q2 concall. GNPA NNPA as of Q2 is 2.4 & 1.4 leverage is 2.74
Now coming to Arman it has 1.8 times leverage. as of Q1 nil customers who have taken loans from 4+ institutions. Gnpa nnpa 2.7 & 0.18 as of Q1. 4% of the loan book as provisioned.
So from this comparison Arman seems much better than creditacess. I like Muthoot Microfinance after Arman due to valuation & gnpa nnpa Compared to creditacess. They have published Q2 numbers.
Once Arman posts Q2 numbers we can have better picture.
Both Muthoot and CA mgmt saying by Q3&Q4 things should improve. Arman too in Q1 concall said same. Now need to wait for their result and concall.
Let see how they report their gnpa and npa this quarter.Credit access grameen management has very well handled the covid and demonetization. Large promoter holding with only 10 % retail holding gives me a confident.
No 4+ lender in case of arman things that I need to check.
Low promoter holding is restricting me towards Arman. How is your perception regarding the same.
Will love to hear your opinion sir.
I also like the conservative nature of the management of Arman and indeed I was stunned to listen the previous con-call where they mentioned they have nil customers with those taken loan from 4+ lenders, specifically after listening to the con-call of CAG where they mentioned how the delinquencies are higher (in their portfolio) among those having 4+ lenders. So that gives me more conviction about Arman. Waiting for the Q2 results tho.
Credit access grameen mentioned about stable Q3 and things to improve from Q4 onwards. So this makes me ask a question since majority of the AUM Arman has in the MFI division and Arman also mentioned in the previous quarter con-call about how due to abundant of availability of lenders people are now not willing to attend JLG meets and other things. So I’m a bit conservative when we can see the growth in disbursements and thereafter profitability unless we see some consolidation on the supply side. So going forward I believe we can see some muted quarters for the best case scenario. Also the cycle has turned negative from last quarter only (i mean this is my understanding feel free to counter).
But yeah I agree about Arman being the best among best because of how Alok Patel works and how they have consistently came stronger after each crisis. That makes me want to bet on Arman even more. Planning to buy in tranches till the cycle reverse(given thesis doesn’t changes)
It won’t be proper to compare q2 of CAG with q1 of Arman to check the leverage. Arman did qip in Dec 23 and hence its leverage is understandably lower and Capital Adequacy higher.
Secondly, on >4 borrowers, all the MFI lenders and SFBs have burnt their fingers. Everyone seems to have been chasing growth at the cost of asset quality. If this is not ever greening of loans, then what is this? Irony is none of these players are new entrant in the sector. They all have credible mgmts with existence of >20 yrs, to say the least.
Thirdly, to the best of my knowledge, almost all of MFIs have reported q2 numbers except Satincare and Arman. Some mgmts are expecting worst will get over by q3 and growth to resume from q4 others like ujjivan are saying pain to continue for next 2 quarters. The q2 of equitas reported the same pain and 16% of their AUM (MF Loans) has eaten away the PAT, in credit cost. To me, it appears, this pain won’t settle in next 6 months, and may take longer to settle down and report growth.
Fourthly, it seems there are no formal system of assessment of income levels of these mf borrowers. So, there are left to best judgement and assessment of each of these MFI. Their underwriting skills will get tested this time again.
Lastly, on technicals, stocks of all MFIs and SFBs are in stage 4 decline though fundamentally all are trading below with long term averages.
In lending institutions you should not check promoter holding they need to raise fund for growth. Equity dilution at high valuation is a good thing. So promoter holding is not a valid criteria to look for here imo. Arman raised funds near high valuation.
On technical front Arman and CAG both are near bottom of a long term ascending channel if you switch to weekly.
Satin posted numbers yesterday as expected gnpa nnpa numbers increased.
I am waiting for Arman result. DCB Bank mgmt is telling this MFI situation will take 1 year to resolve…
Best we can do is add in tranches as stocks won’t fly in a single quarter. When we will see improvement in numbers we can go ahead with our picks. My picks are Arman, Muthoot and CAG.
Arman Debt to Equity is low it’s very good that they raised fund near high valuation peak. Around 2300 rs. So they are ready for when the cycle turns. This is how they operate. They do provisioning aggressively and write off. Then when things improve they fire all the guns. One can watch SOIC video on Arman Finance how they did in past crysis like covid and demonetisations.
Results of Arman are out. GNPA IS 3.74% and NNPA is 0.64%. On comparing with CAG its GNPA is 2.44% and NNPA is 0.76%. Looking at numbers , I think CAG is much more brutally hammered in comparison to Arman. Is there any other thing which market is seeing and I am not seeing for comparison between CAG & Arman. Will love to hear counter views.
I too believe that GNPA is realistic comparison rather than NNPA, which is a function of how much pain these managements choose to route to PnL, in the form of credit cost. CAG is a market leader in the space and on relative basis, their asset quality, underwriting skills and recovery mechanism, inspite on a higher asset base, appears better. While saying this, I haven’t gone through the Satincare numbers.
Nonetheless, all the listed peers in the space have been badly thrashed and perhaps in bottoming process, may be in next 6 months or 1 year. Whether or not time to start buying, everyone has his own reasons depending upon the respective risk appetite but as we used to hear very often, good news and good price, are never on same side.
You might consider Muthoot Microfinance GNPA here too… gnpa 2.7 nnpa 0.97 price to book 1.01
It being a newly listed company market might not give it high valuation. But as the cycle turns positive whenever it happens good rerating can happen here
so, counting your chickens before they hatch? Just, on the lighter side… Sector is not on downhill towards ground zero, perhaps the rules of the game will change… Can be a good bet, to look to start accumulation, in sip mode, in dip mode depending upon risk appetite each investor has, after all investing is a game of probabilities.
MFIN a self regulatory organization ( SRO) recognized by RBI for the NBFC-MFI has issued the below lending norms as applicable from Janaury 1st:
Single MFI client barrowing limited to 3 lenders as against the 4 lenders at present.
Cap of 2 lakh as maximum loan amount for a barrower.
No lending to client who has not repaid an outstanding of over Rs.3000.00 for over 60 days as against the 90 days at present.
Lenders not to levy any other changes except processing fee and credit life insurance.
Interest loans will be closely reviewed by the boards of regulatory entities to ensure that the efficiency gains are passed on to barrowers.
Target to seed PAN for 50% of barrower account by March 2025.( currently voter ID is the primary ID of the barrower).
How far these guidelines will be followed by lenders yet to be seen as it will effective from Jan 2025. Looks like this will have impact on loan growth in short term but it will be good for the sector in long run.
Discl: not invested.
This will reduce competition from PE backed smaller players who had no regard for risk. As Prof. Sanjay Bakshi said in a recent interview, with each bad cycle in MFI the big players got bigger and stronger and the weak hands folded.
The good ones were already following such practices or close to 90% and will grow accordingly. Those guiding up to 40% will be in trouble. IYKYK.
If the guidelines are not followed then RBI will enforce them in due time. Overall, positive in the medium term for survivors and thrivers.
