Capital First expects to grow by 25 percent over the next 4-5 years and promoters are not looking to offload their stake in the company as they believe in the long-term story, says V Vaidyanathan, Executive Chairman of Capital First.
Speaking to CNBC-TV18, Vaidyanathan said that the company’s loan book will grow to Rs 20,000 crore and SME business has bounced back to normal post demonetisation.
He said that the company is not looking at inorganic opportunities and the market in private space is growing at 20 percent year-on-year (YoY).
He added that company’s rating was recently upgraded to AAA status. Margins have improved by 100 basis points as cost of funds have come down by 50-75 basis point in last six months and borrowing from the bonds are cheaper by 90 basis point than the bank rate and the company has replaced bank borrowings with bond borrowings.
Algorithmic based lending has increased from 10 percent to 25 percent and helped open up new segments of the market at a much lower cost, he said.
Below is the verbatim transcript of V Vaidyanathan's interview to Latha Venkatesh, Sonia Shenoy & Anuj Singhal.
Anuj: How has loan growth shaped up over the last couple of quarters especially in light of demonetisation and has that made you change any targets or you think you are at par with the kind of rates that you have seen?
A: In the beginning of the year we had anticipated growth of 25 percent which is what we had given as guidance to the market and we are very much aligned with growth of 25 percent.
Latha: The rule that Reserve Bank of India (RBI) put out yesterday that loans above Rs 20,000 will have to be given in non-cash form. It has been interpreted that not just gold loans but any loan above Rs 20,000 ought not to be in cash - that is what some people are reading the rule as. Will that affect your life at all?
A: Not at all because we finance small entrepreneurs and small consumers but 100 percent of all are lending and disbursals are in the form of credit to the customer's bank accounts. So it doesn't affect our life. I think it is a very welcome development.
Sonia: Coming back to demonetisation impact, a large part, a big chunk of your portfolio comes from the small and medium enterprise (SME) segment and that was one of the hardest hit post demonetisation. Has that segment bounced back well and what are the trends that you have noticed there?
A: That segment has bounced back very well. Just to share some numbers - in the month of December we saw that the disbursals that we were doing on month-on-month basis, was down 30 percent as compared to what it was in pre-demonetisation that is in October but that has sharply bounced back. It has already come back to neutral territory as in it becomes equal to the October number already in the month of February. So we think that this is pretty much behind us. It was a bit of a passing shower. Even anecdotally speaking to many entrepreneurs, people are saying that business is almost back to normal.
Anuj: It is a season of acquisition at least that is what the market is abuzz with, anything that you are looking at in terms of any inorganic opportunities?
A: No, we are not looking at any inorganic opportunities. The way we look at it is that in our space, let me say most private banks and other NBFCs, the whole market which is largely in the private space, is growing comfortably at about 20 percent year-on-year. For us, considering that we are coming off a small base, for us to grow at 25 percent and to reach a loan book of about Rs 20,000 crore this yearend should be quite comfortable.
The other thing which we haven't talked about is relevant for your investors to know is that last week or maybe couple of days ago Capital First has got upgraded to AAA status. However, all our existing borrowings, bonds issued by us, which were at AA, are upgraded to AAA. So that is good news for our people.
For entire interview, watch accompanying video.
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