Better debt ratings may help Satin Creditcare lower the cost of funds in Q4 FY24, says Chairman HP Singh

HP Singh_Satin Creditcare Network Limited -

Microfinance company Satin Creditcare Networks is likely to see a reduction of up to 20 basis points (bps) in the cost of funds in the January-March quarter due to improvements in the long-term debt ratings in December, Chairman and Managing Director (CMD) HP Singh said in an interview with Moneycontrol.

In December, rating agency ICRA upgraded the company’s long-term debt ratings to ‘A’ from ‘A-‘ earlier due to profitability metrics. “If it falls, then it may fall to 11.25 percent and maximum to 11 percent. My sense is that it will be stable at around 11.25 percent,” Singh said during an interview.

In the October-December quarter, the cost of funds for the company was in the range of 11.23 to 11.50 percent, which Singh expects to come down to a maximum of 11 percent in the next quarter. The benefit of the reduced cost of funds will be passed on to the end customers, he said.

“Once the cost of funds goes down, we will pass on the benefit to end customers for sure. We will pass it fully as long as our net interest margin (NIM) is protected,” Singh said.

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Fund-raising

The company raised around Rs 7,470 crore in the first nine months of the current financial year, which was up 56 percent year-on-year (YoY). In the corresponding period last year, the company had raised Rs 4,799 crore.

In the third quarter (Q3) of the financial year 2023-24 (FY24), NIM stood at 13.60 percent, lower than the 14.09 percent recorded a year ago. But it is higher on quarterly basis. “We expect NIM to remain stable at 13 percent next quarter,” Singh said.

Disbursement in Q4 FY24 is likely to grow by 43-44 percent, Singh said. "Overall, we have grown about 40-odd percent so far. My sense is that we will grow by around 43-44 percent by the close of the year,” Singh said.

The company’s disbursement in Q3 FY24 grew by 41 percent on-year to Rs 7,445 crore on a consolidated basis. Of the total disbursements, Satin Holdings MFI Company disbursed Rs 6,881 crore, Satin Finserv Ltd Rs 321 crore, and Satin Housing Finance Rs 244 crore.

Similarly, the consolidated assets under management (AUM) of the lender rose 39 percent on-year to Rs 11,074 crore. Of this, the major share of AUM is Satin Holdings MFI Company, worth Rs 9,811 crore, followed by Satin Finserv and Satin Housing Finance, worth Rs 657 crore and 607 crore, respectively.

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In the October-December quarter, Satin Creditcare Network's net profit doubled to Rs 108 crore from Rs 55 crore in the year-ago period. This came on the back of healthy business expansion and lower credit costs.

The lender's gross portfolio jumped 44.3 percent on-year to Rs 9,811 crore. Its gross non-performing assets (NPA) ratio declined to 2.4 percent at the end of December from 3.92 percent in the year-ago period. The company had on-book provisions of Rs 146 crore as of December 31, 2023, which was 2 percent of the on-book portfolio. The provision required as per the Reserve Bank of India (RBI) is Rs 117 crore.