Sharp improvement in collection efficiency; Cautious on growth
* MASFIN posted 1QFY21 PAT at INR356m (7% miss). While NII was largely in line, lower-than-expected opex (35% below est.), led to a 10% beat in PPoP (INR775m). The miss on PAT was largely on account of higher than estimated provisions (INR299m v/s est. INR200m).
* Entire provisioning during 1QFY21 was toward contingent provisions for COVID-19. It stands at 1.6% of balance sheet loans. Jun-Jul’20 collections (in value terms) stood at 74%/87% (v/s ~45-50% in Apr-May’20).
* Other highlights: (a) Stable AUM YoY, which declined 5% QoQ, (b) GNPA/NNPA stable at 1.4%/1.1%, and (c) Tier I ratio was a healthy ~32%.
* Overall earnings and balance sheet growth are largely in line with expectations. We await clarifications regarding the sharp drop in opex post the management concall tomorrow.
AUM declines QoQ; Share of assignment increases
* Due to the lockdown and lack of visibility, disbursements did not occur in Apr-May’20. Disbursements executed in Jun-Jul’20 stood at INR1,080m/878m.
* Overall AUM declined ~5% QoQ to INR56.5b (1%+ YoY). AUM mix was largely stable during the quarter. Share of off-balance sheet loans increased to 45% (up 74bp/800bp QoQ/YoY).
* AUM mix was largely stable QoQ, with the largest share coming from Micro and SME loans at ~61% (65% a year back) and ~30% (25% a year back).
* Borrowing profile remained unchanged sequentially with direct assignments leading the mix at 50%. As at Jul’20, liquidity stood at INR13b (excl. CC line sanctions of INR7b). Further, it has INR11.3b of term loans and direct assignment sanctions in hand. The company has not opted for moratorium from any of its lenders.
Asset quality stable QoQ; COVID-19 contingency provision at 1.6%
* Moratorium was offered to all customers – 26%/13% of customers (by value) under moratorium v/s ~51%/ 55% in Apr-May’20.
* On the balance sheet, GS3/NS3 is stable sequentially at 1.41%/1.14%. In the HFC subsidiary, GNPL ratio was largely stable at 36bp.
* The quarter witnessed significant change in ATS across products. While it increased by 14%/35% in Micro enterprise/CV loans, it declined by 46%/5% in SME/2W loans.
Valuation and view
* MASFIN is operating in a tough operating environment with large exposure to micro loans/MSME sector. Thus, asset quality and business growth are the key monitorables. Historically, the company has managed liquidity well with higher sell-downs, which was reflected in 1QFY21 earnings as well. It has one of the best capitalizations amongst NBFCs with Tier I of ~32%. We wish to review our estimates and TP post the analyst call.
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