Having recovered from some of the asset quality woes of the December quarter, Mahindra Finance returned to profitability in Q4. In an interaction with reporters, vice-chairman and managing director Ramesh Iyer said the company has been seeing growth across products and geographies, with the exception of rain-deprived Karnataka and Tamil Nadu, where the company has slowed down lending. Edited excerpts:
How were disbursements and collections in Q4?
We have had a 23% growth in disbursements and overall market share for us has grown, but the balance-sheet composition has not undergone a substantial change. If you look at Mahindra Auto, it was at 28% and has remained there. If you look at tractors, it was at 15-16%; it has remained in the same vicinity.The car has been 30-32%. CV (commercial vehicles), LCV (light commercial vehicles), construction as a combination was about 6-7%. Pre-owned vehicles was about 9-10%. But one segment which has registered growth for us, is the SME segment, which has registered good growth. It is more than 5% of our book and the combined book has grown by 14%.
Karnataka is a state which has not done well even in this round for us and Tamil Nadu has been an average state, compared to any other state. If you look at the other big states, whether it’s Bihar, UP (Uttar Pradesh), Rajasthan, Maharashtra, MP (Madhya Pradesh), they have all been growing, in terms of business as well as collections.
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You had availed the Reserve Bank of India (RBI) dispensation for small-value loans in How have recoveries from those accounts been?
We did take benefit of the RBI dispensation on about 32,000 contracts worth Rs 600 crore. In this quarter, out of these 32,000 contracts, 24,000 have been fully resolved. About 4,000 contracts are registered as part-payments. If somebody had to come out of NPA in this quarter, the minimum they should have paid is five instalments, even assuming that they were just a borderline case of NPA. They had two EMIs outstanding in November. If they had not to go into NPA, which is a 120-day thing, they would have to pay for November, December, January, February and March – five months. Those that have paid a part of that — these 4,000 — are the ones which will possibly get solved in this quarter. The other 4,000, which is about 10%, remain unsolved. This would be around Rs 62-63 crore and they have been provided for.
What was overall asset quality like?
Our gross NPA number is at 9%, which is probably the lowest over the last so many months and if you were not to take the dispensation benefit in the third quarter and look at your gross NPA, we had reached something like a 13% level. So, it’s actually come down from 13% to 9% and out of that, we have 12,000 vehicles of the NPA account in our custody, where the customers have surrendered back the asset or we’ve taken it back. If you were to adjust it for that, our gross NPA is 8.1%. We have a 62% cover. Therefore, the net NPA against 9% is 3.6%, but against 8.1%, it goes to 3.2%. So we are exactly at last March’s levels.
Please explain the change you have made in your provisioning mechanism.
In the first quarter of last year, we had taken credit for some portfolio of assets which were 100% provided for. By the RBI guidelines, one could take the value for an underlying collateral and take credit for it. We were not resorting to that practice in the past, but once this got 100% provided, we made certain estimates of what could be the realisable value and after applying various filters of discounting, we did take a benefit of about Rs 190 crore. It was taken in June and after this nine-month experience, even though out of those nine months, for six months there was no activity. But we still believe that the progress on that portfolio possibly calls for taking up provisions back into the book. So in this quarter, we have taken an additional Rs 110-crore provision out of that.
If you look at this quarter’s result in itself and if you were to adjust for the demonetisation, Rs 40-50 crore and this additional provision, if you were to normalise for it, even profit is in line with last year’s fourth quarter.