For some strange reasons, numbering in Q& A disappeared after I pasted from word file… Apologies
Anil…Iam not able to buy this scrip through icicidirect, on placement of order on 29/12/2013
( even after expiry date ) still it shows
" order are not allowed during expiry for periodic call Auction enabled scrips"
how do I place buy order.
Apart from already asked-
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What %age of customers are repeat customers? Do customers come back to you as they grow bigger?
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How good is the pricing power? Can you pass on the increased cost of borrowing to your customers easily? Or they talk about switching as you try to increase rates?
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How is the competition doing? Who are your biggest competitors? Can you compete when big players enter the market? What are your USPs?
{ Manappuram is coming into this SME lending.
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How many defaults have you seen in your history? How do you try to reduce NPA & defaults?
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What makes you confident of lending without collateral?
Please mark these 2 questions as important because i cannot understand how they lend without any collateral or there is something wrong in my understanding of finance business…
Doing finance business without collateral is still something i cannot digest…
Reproducing some information about their recovery process and data points from their AR of 2013. As per this they had 0% write-offs in 2013 and collections have shown improvement over previous year.
The Company recognises the threat of erratic customer repayment leading to a probable asset-liability mismatch, lower profits and debt-traps. Moreover, where the funded machine represents the only collateral, it becomes imperative to invest in stringent loan recovery systems. Over the years, the Company developed a strong collection vertical through an enhanced focus on employee training. It also established a code of conduct to be stringently followed by its collections team. The Company segregated default cases under various baskets for rigorous monitoring. Collection teams were incentivised at the individual and group levels to motivate timely collection. The team engaged with customers across the loan tenure through multiple channels. The Company contacted every customer well before the installment due date through tele-callers and field executives leading to timely inflow of installments.
Maintained collection efficiency at 98.60% in 2012-13 as against 97.72% in 2011-12.
Despite an increase in the loan book; write-offs as a proportion of assets under management was 0.00% in 2012-13 against 0.01% in 2011-12
Mobilised almost 97% of collections through banks, reducing the inward cash float as well as the risk of carrying cash. For the remaining 3%, Company
executives collected payments or customers effected over-the-counter.
Please find few more questions below:
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In AR 2012, Company targeted to end FY’2013 with 23 branches covering 158 SME clusters but company ended FY’13 with 15 branches and 137 SME clusters actually. Can you please explain in details on main reasons behind slowdown in expansion? Was it due to internal challenges within company or due to external factors like challenging economic scenario?
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Management indicated that they are targeting to open 5 more branches to end with 20 branches in FY’14. Are we on track for this? How many branches and SME clusters do we have so far?
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What % of business coming from repeat customers?
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How much business does top 10 machine manufactures gives?
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As mentioned in Annual report Net interest margin increased to 5.21% as the yield on assets increased on one hand and borrowing costs declined on the other end". Since liabilities are taken for longer duration and assets are lended at shorter duration, whenever interest rates are increasing it helps company expand NIMs and it’ll decrease it’s NIMs on decreasing interest rates. What steps are company taking to protect NIMs? What’s minimum NIM company is targeting to have [in extreme interest-rate scenarios]?
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What’ll be average ticket size of loan?
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Salary of MD Mr.Sanjeev Goel is increased from Rs.30 lacs to Rs.66 lacs in FY13. If we consider last 4 years, diluted EPS growth is 42% CAGR but employees expenses grown at huge 75%. Can you educate us for this disproportionate growth between earnings and employee expenses?
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Company is planning decentralise operations to reduce disbursement turnaround time. How are management planning to overcome risk which will come at cost of decentralisation?
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The Company works on the days-past-due (DPD) model under which payment dues beyond 90 days are transferred to the legal team for legal recourse. What’s total dues pending as on Dec’13?
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The Company enjoys credit delivery arrangements with SIDBI, facilitating loans under the subsidy scheme. However it disbursed ONLY 5 cr. Why intec is not able to leverage this credit arrangements relationships?
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Can you please seggregate loan portfolio of each of industries verticals? [Auto-Engg, Printing-Packaging, Plastic, Pharma, Food processing]
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Overdues EMIs and other receivables shootup from 6.37 Crores in 2012 to 11.1 Cr. in 2013. Can you please elaborate on this overdues receivables?
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Goodwill arising on account of amalgamation of Unitel Credit Private Limited with Intec Capital Limited is 2.5 Crores. Can you please enlighten more on this goodwill? Any plans to amortize it in near future?
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Staff Recruitment & Training Expenses is up from 9 lacs to 21.5 lacs… While there’s in headcount of just 18%, why recruitment & training costs are more than double? Did company initiate any new interesting training which didnât exists [if so, more details please]?
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What are biggest challenges Intec is facing at the moment?
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In AR’13,Company mentioned that they are present in 137 SME clusters with 15 branches. How do you define SME Clusters around branches?
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Debt/Equity ratio of Intec is around 3-4 times while other NBFC is leveraged 8-10 times of equity. Why intec is not increasing leverage rather than infusing funds through equities?
Thanks & All the best for management meeting.
1 Like
Intec Capital has submitted a revised schedule of open offer.
http://www.moneycontrol.com/news/announcements/intec-capital-updatesopen-offer_1020259.html
Open offer price has not changed though.
Company has entered leasing, how does it differentiate itself with other leasing companies which have not made money for shareholders.
It is easier to for a small company to adapt co-operative approach to protect business quality and collections, through co-operative approach and feedback sharing among RMs, but as you grow, how do you aim to protect business quality in the longer run, in the larger scheme of things.
As you decentralise the credit process, what are the checks in place to prevent fraud.
Who bears the risk and who takes care of recovery, in case of default by a customer seeking credit under CDA scheme, “wherethe Company sources the proposal incompliance with all the due diligenceand SIDBI disburses the loan directly tothe client”.How does company earn from this arrangement?
Also, please request company to disclose GNPA and net NPA every quarter as per best practises followed by other NBFCs.
[ Comment too short ]
Hi Donald,
Any updates from your meet?
We did have a meeting. However this had to be a high level restricted discussion - open offer was still on. The responses seemed in line with our expectation of a differentiated story - but we were unable to take things to logical conclusion.
We did ask to send the full (all of 9 pages) questionnaire by email for an in-depth understanding of the business and the challenges before it. We were welcome to send that, but not assured of a response.
My sense was Management is not too keen on opening up. We will try for another meeting subsequently, let’s see.
The presence of a “Trading Terminal” on premises was disconcerting. They had a broking license before which has been surrendered long back - but because of certain client relationships they still do some trades - was the response offered.
Few things
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No incentives to management to meet retail & HNI investors.
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For next 2 years atleast they do not need funds. The way they have spent time on their Annual report shows that they are very conscious of their image and brand building as they continue to need funds in future from PE
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If one goes back to annual reports of Shriram tranport and Shriram City, their disclosures and interaction with investors increased once they achieved certain scale…
I will repeat my point, that its a HIGHLY scalable business model, with reasonable risk of 50% or more losses. So position limit needs to be limited.
1 Like
Hi Donald Sir,
It will be really great if you can share more details.
Thanks, V
Hi Vishal,
No Sir business, please.
Intec Capital is way down our priority list, right now. So a detailed update from me is going to take time. {Any of the others who visited - feel free to capture the 15-20 min discussion in bullets if you like]
The business has a good portfolio right now, but I think scalability issues will crop up once the AUM reaches 3x or 3000 Cr plus. (Will be difficult to find customers?) There are many more NBFCs where scalability is plainly huge. Asset financing and specifically machinery financing can never match upto individual financing 
Besides a single product NBFC (other than Housing Finance) isn’t risk diversified enough. They only lend to a few specific industries. There may be issues with a specific Industry that bogs things down, Regulations, and others. So personally for me Intec is off the radar, unless I get educated otherwise, by others taking this forward.
Also although volumes are usually decent, it’s very very hard to buy even small quantities on the counter. Need to think, why is that??
1 Like
Donald,
Regarding scalability, when Shriram transport can build a portfolio of 55,000 crores just around CV finance, why can’t Intec reach even 10,000 crores, in 4-5 years. I dont think scalability will be issue, maintaining asset quality can be. They are yet to expand in other parts of the country, opportunity is immense. Agree that it is very illiquid.
recently heard this conversation at a friend’s small factory. They purchased some one year old machinery costing 30 lakhs for only 6 lakhs. Even they say that when a factory closes down some middleman will purchase machinery at almost iron scrap rate. They will store it sometimes like even for 1 year advertise & sell it for a profit.
So it seems resale for factory machinery will be a lot difficult if an another buyer who had use for the same machinery is not found within the time.
I would suggest investors to even look at delivery data and volumes.
There was a time it had only 5% delivery volumes.
Now at times it trades 80k shares a day.
With 94% shareholding with promoters and total number of shares in float should be 5-7 lakhs. How can it trade 5 lakh shares in a week.
I gave the tip a miss at 50 bucks last year seeing 5% delivery. The stock is double !!
May it have great fundamentals but its a circular traded one. So money made may not be because of fundamentals but the operation by promoters. Will you call that luck or skill or fundamentals is a tough call.
Regards,
Nooresh
2 Likes
This definitely looks like a operator-driven play. And Shriram Transport has HUGE penetration in tier 2/3 towns, to actually reach out to their customers. Plus, they do a lot of business with unbanked customers (so pay and accept cash) which not many others can match!
Shriram Transport, from an NBFC perspective, is in a completely different league. It is not easy for others to come and replicate that very easily.
2 Likes
intec share and stock brokers ltd. has been in trouble before