Moneycontrol Bureau
Shares of Bharat Financial Inclusion, the micro lender, fell nearly 9 percent as collection efficiency remained lower and disbursements declined after demonetisation. Analysts are also worried about fears of likely farm loan waiver in Uttar Pradesh ahead of elections and Maharashtra government recommendations to probe alleged violations of RBI guidelines.
With maintaining negative stance on the sector with a sell rating on the stock, Religare Capital Markets says given incremental growth under pressure and concerns looming over its asset quality, it is unlikely for the stock to trade at high valuations. It has corrected around 27 percent post demonetisation.
According to the presentation released by Bharat Financial, collection efficiency with 4 weeks lag stood at 97.7 percent.
This indicates that a majority of the collection shortfall post demonetisation is being recovered gradually but the situation has not completely returned to normalcy as on time collection efficiency is still low at 82 percent and cumulative collection efficiency has improved only marginally to 91.2 percent for the period November 11 to December 15 from 89.3 percent for the period November 11 to 25, Religare Capital Markets says in its research note.
The brokerage house says UP and Maharashtra are two problematic states for the company as around 37/24 percent of centers in Uttar Pradesh/Maharashtra have zero collections.
Collection efficiency in Uttar Pradesh/ Maharashtra with 4 weeks lag stood at 93/96 percent. However, what is important is the cumulative collection efficiency. Cumulative collections (November 11 to December 15) are still lower at 74/83 percent, respectively.
Bharat Financial is reporting that centers with full / partial collections have gone up from 95.8 percent to 98.6 percent. There is no break-up of centers with full collections and partial collections.
Religare believes that centers with partial collections also indicate weak trend. Lot of centers should be reporting partial collections, it says.
The brokerage house feels collection of 100 percent will be difficult. Micro borrowers dependant on activities such as tourism, agriculture, FMCG goods etc may see their income getting impacted for 2-3 months without any substitution at a later date. It will be difficult for them to repay completely even if cash situation normalises in the next 1-2 months (their cash flow would have got impacted for 3 months).
Therefore 2-3 percent credit cost is not ruled out even if situation is back to complete normalcy. Massive defaults by overleveraged borrowers in the state of Maharashtra / Uttar Pradesh is also likely as new disbursements will be very slow, it says.
According to Religare, with a SIT (special investigation team) probe in Maharashtra and political parties encouraging borrowers not to pay their dues in Uttar Pradesh, micro financial institutions will find it difficult to grow in these states.
Bharat Financial has around 21 percent exposure to Uttar Pradesh/Maharashtra as on Q2FY17 and over the last two years these two states have contributed to around 22 percent of incremental growth in asset under management (AUM).
At 14:45 hours IST, the stock was quoting at Rs 570.80, down Rs 32.85, or 5.44 percent amid high volumes on the BSE.Posted by Sunil Shankar Matkar
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