July 26, 2012 / 16:32 IST
Moneycontrol Bureau
Delhi-based
SE Investment (SEI), engaged in giving loans to small and medium enterprises halved its loan ticket size from Rs 10 crore to Rs 5 crore. According to Sunil Agarwal, managing director of the non-banking finance company, the measure was aimed at maintaining its asset quality at a time when the economy is going through some stress.
"We are taking every possible measure to secure our loan portfolio. We have reduced our ticket size to 5 crore from 10 crore earlier. There is a huge demand for SME loans now. In the last three months, we have seen people approaching us for loans to repay their existing cheaper borrowings. We have decided to give loan only for business need, not for any other purpose. In current circumstances, we will not give loans to repay an existing loan," the MD told moneycontrol.com.
In an economic gloom, SME is perceived to be the most vulnerable sector for loan defaults. At a time when banks are experiencing higher degree of loan restructuring cases, SEI's managerial capability to maintain its asset quality needs to be closely watched for the rest of year (FY13).
During April-June quarter, the lender wrote off loans of about Rs 5 crore as compared with Rs 2 crore a year back. As a management policy, SEI does not encourage the practice of mentioning non-performing assets. Rather, it writes off the loan amount if it slips into non-performing asset category.
SEI offers interest rates in the range of 18-21%. SMEs that had taken loans with interest rates in the range of 13-15% typically are now looking to repay their old debt after taking fresh credit at a higher rate.
Meanwhile, the company on Tuesday reported more than 9% year-on-year growth in its first quarter (April-June) net profit at Rs 190 crore on the back of elevated employee costs coupled with the higher cost of borrowings.
"There has been an increase in employees' cost and finance cost," Agarwal said.
"Due to annual hike in remuneration, the employee cost upped to Rs 171 crore from Rs 107 in Q1, FY12. However, we have not recruited more people. Similarly, the finance cost, which includes cost of borrowings and others expenses as well, rose marginally from Rs 18.2 crore to Rs 18.60 crore y-o-y basis. The borrowing cost jumped 29% quarter-on-quarter."
The lender's total loan book expanded more than 20% y-o-y to Rs 1,028 crore. During the quarter, it disbursed around Rs 271 crore loans. Most of the loans, according to the company’s MD, are collateral based. It does not accept tradable collateral and gives trade and business loans against properties, machinery and personal assets.
The cost of borrowings currently stood at 13.50% on an average. The total banks' borrowing is at Rs 480 crore as on date. The deposit-taking non-banking finance company also mops up funds through public deposits but to an extent of around 5% of total resources.
"S. E. Investments Q1 results were in line with our expectations. The company has demerged its wind power business in Q4FY12 and, hence, the financials are not strictly comparable with the previous periods," Crisil Research said in a note. Earlier, it assigned a fundamental grade of 2/5, indicating that its fundamentals are moderate relative to other listed securities in India.
