In terms of percentage, the gross NPA has reduced to 4.24% from 4.99% and in terms of the NNPA, it has come down to 1.04% from 1.38%. So that’s largely an improvement and we do expect that maybe by the financial year-end, we will be looking at GNPA anywhere in the range of 3.5-3.8% and the NNPA well below 1%.
Ujjivan Financial Services has completely absorbed the impact of demonetisation on credit costs, managing director and chief executive officer Sudha Suresh told Shritama Bose after the financier posted its first quarterly profit on a consolidated basis in FY18. The company plans to end FY18 with a gross non-performing asset (GNPA) ratio of 3.5-3.8% and net NPA (NNPA) of under 1%, she added. Edited excerpts:
Despite your income growing, your profit has dropped. Why is that?
The year ago, the demonetisation impact had not settled in. So, we were a profitable MFI (microfinance institution) and then quarter-on-quarter (q-o-q) results were fairly good. It’s only after December 2016 that we had the impact coming in and in the calendar year 2017, quarter-on-quarter, you could have seen that we have taken the impact of credit cost, which was because of demonetisation. Therefore, you might have observed that we also had a Q1 and Q2 loss in this financial year and it is only in Q3 that we have seen a profit for the quarter. That is because we have largely taken in the impact of credit-cost hit in the first two quarters.
What were delinquency levels like at the end of December 2017?
With the kind of collections going on and also the repayments, we are seeing that the overall PAR (portfolio at risk) in absolute terms has reduced to Rs 384 crore, as compared to Rs 445 crore in September, which is the last quarter. In terms of percentage, the gross NPA has reduced to 4.24% from 4.99% and in terms of the NNPA, it has come down to 1.04% from 1.38%. So that’s largely an improvement and we do expect that maybe by the financial year-end, we will be looking at GNPA anywhere in the range of 3.5-3.8% and the NNPA well below 1%.
What has disbursement growth been like in the calendar year 2017?
There were curtailed disbursements during the first quarter because of the impact of demonetisation. Then, slowly, we started pegging the disbursements in branches where the collection efficiency was good and repayments were at normal levels. Over the period of two quarters, a lot of confidence came back, customers started paying regularly and, therefore, our disbursements also picked up to the extent that in the third quarter, we had very robust disbursements of about `2,134 crore for the quarter and that’s an improvement of about 9.21% over the last quarter and an increase of about 28% year-on-year. We see disbursements, which have picked up in the second as well as in the third quarter, to continue to trend upward in the fourth quarter. With this, we would see that business is also back to normal levels and our portfolio growth is bound to happen steadily over the next few quarters.
What was the microfinance book size at the end of December?
The MFI book stood at about Rs 6,030 crore. We had micro-individual loans at about Rs 673 crore, we had the MSE (micro and small enterprises) book at about Rs 163 crore and the housing finance book stood at about Rs 228 crore.
Your net interest margin (NIM) is over 11% now. As you mobilise more deposits, will margins sustain?
We’ll have to wait and watch what kind of trend emerges on interest rates and funding costs in the next few quarters. But, overall, we have had substantial reduction in finance cost, predominantly because we pre-paid a lot of our high-cost legacy loans and also, we are able to raise deposits, including certificates of deposit, which is institutional deposits, at fairly cheaper rates. So that has helped in a reduction in our average cost of funds. Probably this trend will continue for some more time.
How much has your cost of funds come down by?
Our average cost of funds is currently at about 9.3% and, if you look at the last financial year, ended March 2017, it was about 10.4%. So it has already come down by 101 basis points over the last nine months.
What was the size of your retail and bulk deposits at the end of December?
Largely, we are still on a strategy and plan of doing wholesale deposits. So, I think, overall, in terms of our deposit base of Rs 2,437 crore, we have more than Rs 2,000 crore as wholesale deposits.