MOSL: BHARAT FINANCIAL INCLUSION (Neutral)-Biting the bullet-stressed loans pool largely stable
​Bharat Financial Inclusion: Biting the bullet; stressed loans pool largely stable
(BHAFIN IN, Mkt Cap USD1.7b, CMP INR787, TP INR769, 2% Downside, Neutral)
- BHAFIN reported 4QFY17 net loss of INR2.35b, driven by a provision hit of INR3.35b. The company chose to make adequate provisions on the stressed loans pool, which have remained stable since the last analyst update.
- Collection efficiency trends have been stable. Collection efficiency in the due month remains at 90-92%, and continues to inch up every month. Collection efficiency of November seems to have stabilized at 98.5%.
- Underlying stressed pool of assets continues to decline. Total overdues have declined consecutively every month from INR10.7b as of 3QFY17 to INR7.1b as of 4QFY17. Total overdues (net of accounts that have been paid once in past two weeks) have remained stable at ~INR3.6b since the last update in March.
- BHAFIN incurred provisioning expense of INR3.35b in the quarter (50% provisioning on 8-25 week overdues and 100% on 25+ week overdues), providing for 57% of on-BS NPLs as well as for 100% provision on the first loss on the managed loans portfolio. We believe BHAFIN could incur provisioning expense of INR2.3b in FY18.
- Disbursements were up 32% YoY to INR39b in the quarter, driven by an increase in average ticket size from ~INR17k to INR22k. We believe this could be due to higher share of loans to existing borrowers.
Bharat Financial Inclusion Limited, formerly SKS Microfinance Limited, is a non-banking financial company-micro finance institution (NBFC-MFI). The Company is engaged in providing micro finance services to women in the rural areas of India enrolled as members and organized as Joint Liability Groups. In addition to its business of providing micro-credit, the Company uses its distribution channel to provide other financial products and services to the members. Programs in this regard primarily relate to providing of loans to the members for the purchase of mobile handsets, solar lamps, bicycle and sewing machines, among others. The Company provides door step delivery of its services through center meetings in villages. The Company offers loans mainly for income generating activities and not for personal consumption. The Company has presence across approximately 20 states, covering over 100,000 villages and catering to approximately 69.7 lakh women members.
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