Bharat Financial Inclusion Q3FY17 Concall Summary

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Financial Highlights

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  • P&L is not affected and is Rs. 34 Lacs due to dispensation in Q3.
  • Mid-term loan MTL ticker size has increased from Rs. 10755 to Rs. 25421 with an average offtake of Rs. 20704.
  • Approx. disbursements of 3000 crores, AUM has also fallen from Rs. 9000 crores to Rs. 8500 crores Q-o-Q.
  • Took hit of Rs. 20 crores on the securitization front in the P&L.
  • BFIL has a 70 crores unamortized loan processing fee in balance sheet
  • NIM has decreased from 10.6% to 10.1% because Rs. 14 crores loss on short collection.
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Strategies and Challenges:

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  • Banks have reduced the MCLR which has reduced the cost of borrowing for BFIL by 35 to 50 basis points.
  • BFIL will be retaining the benefits by reduction is cost of borrowing in the upcoming FY.
  • BFIL provided android tabs to all loan officers to do cashless disbursement of loan thus reducing the turnaround time by 10%.
  • Shifting to Tabs, E-sign, E-KYC and involvement of Aadhar based biometric identification helped in achieving instant disbursement of cash.
  • The biggest execution challenge with BFIL is about scaling 9422 sangam managers, about 226000 centers every week.
  • Focusing on BHIM 5.0 version which involves transaction based on Biometric Aadhar.
  • BFIL is following a 3C’s strategy going forward, targeting on customer delight, competitive advantage and cashless transactions.
  • Their securitized portfolio is Rs. 917 crores and managed portfolio is Rs. 723 crores.
  • The lag is not seen in whole of Maharashtra or U.P., but in certain parts of it, for example the lag is in Nagpur and Amravati region in MH and Western U.P. has been a problem.
  • In rural India, there is not much options for microfinancing so, borrowers must go back to money lenders and borrow at higher rate of 48%. This makes BFIL a preferred lender for rural India.
  • BFIL involves JLG model and they meet their customers 4 times a month which is far greater than the competition.
  • 80% of the centers are Rural as compared to the industry level of 42%.
  • Loans are turned into NPA only when they are overdue more than 60 days.
  • BFIL send 30 lakh messages to its membersand used leaflets to target its customers, focus on different pockets to communicate that they are willing to meet in person to the customers.

 Market Share and Growth:

  • Demonetization led to negative growth of 6% Q-o-Q in the portfolio.
  • In Q3FY17, 38% YoY growth in GLP which is 33% from increase in number of borrowers.
  • Factoring an increase in ticket size of 10% in 2018.
  • BFIL is expecting a growth of 50% as the demand is high even after considering demonetization.

Forecasts and Expectations:

  • BFIL is Expecting to disburse 3300 crores in Q4FY17 and to maintain the portfolio at Rs.8500 crores by March ’17.
  • The portfolio will remain flat as BFIL will be disbursing its collections, but in the next year 50% portfolio growth is expected.
  • Overall collection efficiency is first 20 days have improved in the affected geographies.
  • Renewal ratio of loans is about 75% to 80%.
  • BFIL is expecting a 30% increase in customer base from March 2017.

Operational Highlights

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  • BFIL offers 19.75% interest rate, the lowest among the private sector MFIs and they are operating at a spread of 8.7%.
  • Cost to income has jumped to 49.5%
  • BFIL has the account details of about 50% of its clients and 23.5 lakhs of which were sourced through UID and 7.8 lacs were NEFT enabled.
  • The tenure for the Mid-term Loan MTL has also been increased from 50 weeks to 75 weeks.
  • The contribution mix of MTL as a % of GLP has changed from 28% to 23% in Q3.
  • Overall customers added in this quarter is 4.7 lakh compared to 7.9 lacs in Q2.
  • 75% of the term disbursement is to existing customers.
  • Weighted average maturity of their loans is 5.8 months with 55 lakh active borrowers.
  • Around 1.6 lakh centers still working at 100% collection efficiency in Maharashtra and U.P.
  • Bureau rejections are in the region of 25%.
  • 23 lakh accounts are sourced on ABPS front.

Demonetization Impact

  • In Bihar, Chhattisgarh, Jharkhand and Orissa 99% of the normalcy has been achieved and the 1% of the payments were not been made because of lack of currency generated during the phase.
  • 90 days limit is given to the women living in border areas of Maharashtra, Madhya Pradesh and Karnataka, but still 80% is the repayment rate of the women living in the north region.
  • Disbursement was effected due to lack of cash in the system.
  • Repayment rate will take few months to come back to normal.
  • Going cashless, they have started disbursement directly into the bank accounts.
  • Collection efficiency has improved to 97.5% and excluding U.P. and Maharashtra it has become 98.9%. Previously it used to be 99.9% pre-demonetization