MOSL: BHARAT FINANCIAL INCLUSION (Neutral)-Up-fronting provisions-stressed loans pool declines
Bharat Financial Inclusion: Up-fronting provisions; stressed loans pool declines
(BHAFIN IN, Mkt Cap USD1.7b, CMP INR789, TP INR820, 4% Upside, Neutral)
- BHAFIN reported 1QFY18 net loss of INR371m, driven by a provision hit of INR1.76b. The company up-fronted bulk of the provisions which it plans to make for the year. We view this as a key positive.
- Collection efficiency trends have been encouraging. First month collection rate improved from 91% in November 2016 to 92% in April and 96.2% in July. Collection efficiency on a lagged basis also witnessed an improving trend.
- Interestingly, the company disclosed collection efficiency trends on loans disbursed over Jan-Jun 2017 across geographies. The minimum cumulative collection efficiency in any state is 99.7%.
- The pool of overall stressed loans continues to decline. Total overdue portfolio declined QoQ from INR7.12b to INR5.55b. The company now holds provisions of INR3.94b as against INR4.64b of 8 weeks+ overdue loans.
- Number of loans disbursed increased 8% QoQ, while total disbursements declined 4% sequentially.
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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