The asset quality of SE Investments, which focuses on small finance and works with low-income families to provide financial solutions, has been quite good on a year-on-year (YoY) basis, is the word coming in from Sunil Agarwal, managing director at SE Investments.
The company’s asset under management (AUM) currently stands at Rs 961 crore versus Rs 870 crore YoY, he says. He expects a 40 percent jump in AUM in the current financial year.
Agarwal says the company will look at enhancing borrowing.
Below is the verbatim transcript of Sunil Agarwal's interview with Reema Tendulkar & Sumaira Abidi on CNBC-TV18.
Reema: Let’s talk about this Jan to March quarter. It has been tough one, your sales are down about 10 odd percent. Can you walk us through what the margins were in this quarter as well as how the asset quality look like?
A: Asset quality on a year to year basis is quite well against a write-off, done-off because we follow a 100 percent write off of Non-Performing Assets. And against say a 100 percent write off of 23 crore done in last financial year we have done about Rs 19 crore in this year.
Sumaira: Can you take us through what your assets under management look like and what has been the growth this quarter?
A: On the year end we have a assets under management of Rs 961 crore against Rs 870 crore last year. So, we have grown by Rs 90 crore and the 100 percent assets are standard because of the write off which we have been doing we are now sitting on an invisible assets of about Rs 80 odd crore wherein the recovery efforts are fully on, arbitration\\'s are on and these we will be definitely be able to recover this money in couple of years time. So on the assets side whatever we say is an 100 percent standard asset, there is nothing which is further to be written-off or has a chance of any doubtful recovery.
Reema: Your Assets under management (AUM) have gone up by close to about 10 percent in FY15 to Rs 961 crore. What is the expected growth in your AUMs in FY16?
A: This year we are posing a growth of at least 40 percent in the assets under management. This is because for last two years we were not really trying to grow, we were trying to consolidate, we were trying to ensure and you know the economic conditions of the country were in different manner. Now since the new government has stabilized and we think that things appear to be much better. If you are looking at the quarter to quarter thing, quarter-end December in rural was not as good as the quarter which ended in March has been. So, we are definitely expecting a 40 percent jump in assets under management in the current financial year. That is what our target is and that is what we definitely wish to achieve.
Sumaira: And this is something that you had even reiterated to us when we spoke to you a few days back which is when RBI had expanded the loan limit for microfinance institutions (MFIs) units but can you give us a sense of a timeline about whether this would be in the first half of FY16 itself?
A: For a finance company most important is to arrange the money which is to disburse. So, that is the reason we had decided to make sure and we worked very hard to make sure that the audited results are out as early as possible so within 11 days time-frame the company has been able to post its audited result. We would be approaching the financial institutions whom with we bank, they are nine nationalized banks. Within next seven to eight days with our fresh proposals for the financial year 2015-16 and if things are good to us we will be able to sign up our enhanced facilities within the first quarter so the quarter two we can expect the results to be visible.
Reema: So, you will require enhanced borrowing so do you have the board approval for the same or will you be seeking it and how much will you look to increase your borrowing limit by?
A: Currently the secured borrowings of the company are about Rs 410 crore against a net worth of Rs 510 crore so we are actually even not 1:1 kind of a ratio. We are definitely looking to grow it by at least 100 percent borrowing this year so that we at least are something like 1.6-1.7 times of our net worth in terms of borrowing. For a finance company up to four five times is normal but for years together we have been consolidating. We have not grown the way we should have in last two-three years time. Starting 2012 our AUM have remained almost kind of flat so this year definitely the company is changing gears we are definitely looking to raise more borrowings and go all out in market with a zeal to grow.
Sumaira: So, in that case can you leave us with some sort of a guidance for FY16, what are the kind of margins that you hope-right now you are under sub that 70 percent mark so where do you think margins could stabilize for this year as well as any sort of profit guidance that you could leave us with?
A: We are working on those numbers — I would not be comfortable to quote something which we have not really worked out so probably in couple of days time our profit guidance for the next year would be ready. We are working on the projections for the current year; by the end of the day today we are having an internal meeting to take those numbers.
Reema: So, in this enhanced borrowing that you are looking to do, has the cost of debt come down?
A: Cost of debt will start coming down from the first week of April, that is what after the RBI governor intervenes so two of our banks have reduced rates marginally and we expect that the cost of borrowings will be down because for banks also the challenge is to find good people whom they can lend. We have a 22-24 years track record with all of our banks so they are very comfortable in dealing with us. Never ever there had been any kind of issue with any banker on any point.
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