Expect 0.75-1% decline in cost of funds: Satin Creditcare

In an interview to CNBC-TV18, HP Singh, Founder and MD of Satin Creditcare spoke about the latest happenings in his company and sector.Below is the verbatim transcript of HP Singh's interview to Reema Tendulkar and Nigel D'Souza on CNBC-TV18.Reema: What benefit will this upgrade from Care have to the company's financials?A: This rating upgrade will definitely bring our cost of funds down in terms of our lending from different financial institutions and we will be able to pass on this lending in the cost of funds to our ultimate borrowers. So their cost of borrowing will probably also go down from hereon.Reema: How much do you anticipate -- the cost of funds and therefore lending as well to come down?A: We are thinking of close to about 0.75 bps to about 1 percent coming down in terms of our cost of funds and that same will be passed on to our borrowers. So ultimately the borrowing cost will also come down by about 0.75 bps to about 1 percent.Nigel: Could you give us some more details? The calculated margins that we have are roughly around 8-9 percent and so you are saying that it will not make any difference to those margins going ahead. Also can you take us through your current borrowing mix, how much are you taking in from banks, what is the exposure to NCDs, term loans, break that down for us?A: In terms of our borrowing mix, we do about 30 percent which is securitisation from different institutions. The 70 percent mix of the balance of term loans comes -- 50 percent from about banks and the rest comes through again from NCDs and all. So this is how the borrowing mix pans out to be.In terms of the margin cost, we will probably be able to even get somewhat little bit better margins in earlier before as our operating cost technically would remain the same. So the cost of funds going down will primarily be the objective from where we are able to pass it on to our borrowers in terms of value added tax (VAT). However, there will be a slight dip in our operating cost. So our margins will slightly improve from hereon besides the qualitative institutional placement (QIP) amount which has come in.Reema: How has the quarter been for you and what is the forecast looking like because you do have some sort of a concentration risk considering most of your operations are in UP, Bihar and MP, how have things been for you? Any headwinds that you would like to call out?A: For quarter results, we have our board meeting on the November 9 so the quarterly results would probably be out by then but it has been a good quarter for us to look at it.In terms of headwinds, I probably don’t think -- our concentration risk is also going down across the period as we grow into other territories also. So probably even the concentration risk is slowly absolving and that is also one of the reasons why the rating upgrade has also been instrumental in giving us that upgrade. So probably that will also be start coming down in terms of our complete concentration in these geographies as such.Reema: Anything apart from that that you like to call out?A: I would say that probably from where we take on -- in terms of our business strategy and we are probably moving ahead in the right direction and as per the guidance given by us, we are probably on the right path to fulfil all those guidance, which we have clearly enumerated earlier.Nigel: What is going to be your AUM growth? What is your targeted AUM growth in the last five years has been phenomenal? What is your exposure to UP as of now and could you tell us what is your current ticket size?A: Average ticket size is close to about Rs 24,000-25,000.In terms of UP, our exposure has been going down since the last five years. So moving from a tight position where we were at about 80 percent in UP, we have come down closely to about 38 percent now currently which will also keep on reducing as we move forward.In terms of our AUM growth, we have given a guidance of 60 percent. We are fully on track of that and probably once this quarter results come in, we will probably be able to signify and show that we are on the track for this kind of a growth this year.