Tag - AUM

08 Mar

Disbursement growth will be higher than AUM growth– CHOLAFIN

Update on the Indian Equity Market:

 

On Monday, Nifty closed 0.1% higher at 14,956. Within NIFTY50, UPL (+7.1%), GAIL (+4.3%), and LT (+3.4%) were the top gainers, while INDUSINDBK (-2.2%), SHREECEM (-2.2%), and BAJFINANCE (-2.1%) were the top losing stocks. Among the sectoral indices, PSU BANK (+1.6%), MEDIA (+1.0%), and METAL (+0.8%) were the top gainers while REALTY (-1.1%), FMCG (-0.5%), and FINANCIAL SERVICES (-0.4%) were the top losers.

 

Disbursement growth will be higher than AUM growth– CHOLAFIN

 

Excerpts of an interview with Mr. D Arul Selvan, Executive VP and CFO, Cholamandalam Investment and Finance (CHOLAFIN), aired on CNBC-TV18 on 4th March 2021:

  • Commercial Vehicles (CV) replacement has been delayed by about 2 years now due to a series of factors such as axle load norms, BS6 implementation, and covid-19 impact. Mr. Selvan expects the replacement demand to kick in as CVs have to be replaced sooner or later. February 2021 itself saw good growth across CV segments.
  • Disbursements will have good growth in FY22E, but the AUM growth will not be the same. During the moratorium period, disbursements dropped but AUM was not impacted in the absence of repayments. Now as repayments also happen, disbursement growth will be higher while the AUM growth will be lower.
  • CHOLAFIN is adequately provided and won’t see higher credit costs. The collections are also improving. February as a 28-day month generally has lower absolute collections. However, collections in February 2021 have been marginally higher than January 2021.
  • Selvan is seeing that the earning potential of customers is improving and they are now able to service loans comfortably.
  • CHOLAFIN’s 4QFY21E RoE should be significantly better than FY20 reported numbers and directionally, the RoE would now improve.
  • Mr Selvan expects that the NIMs will be stable. NIMs could have marginally improved but CHOLAFIN is now scaling up on M&HCV segment which has lower NIMs. M&HCV lending business has a lower yield but it is compensated by much lower operating expenses and lower loan losses.

 

Asset Multiplier Comments:

  • CV cycle recovery has been a matter of debate between industry players for some time now. Some companies seem to be banking on the hope that CV recovery is here, while some players think we are still some time away from the upcycle.
  • Lenders across board have been witnessing improvement in collection efficiency. This is attributable to opening up of the economy post lockdown.

 

Consensus Estimate (Source: investing. com and market screener websites)

  • The closing price of CHOLAFIN was ₹ 537 as of 8-March-2021. It traded at 4.5x/ 3.8x/ 3.1x the consensus BVPS estimate of ₹ 119/142/171 for FY21E/ FY22E/ FY23E respectively.
  • The consensus target price of ₹ 444/- implies a PB multiple of 2.6 on FY23E BVPS of ₹171/-.

 

Disclaimer: “The views expressed are for information purposes only. The information provided herein should not be considered as investment advice or research recommendation. The users should rely on their own research and analysis and should consult their own investment advisors to determine the merit, risks, and suitability of the information provided.”

By Cholamandalam Investment & Finance, NBFC , , , 0 Comments Read more...
01 Oct

AU Small Finance Bank (AUBANK): No liquidity issues with the banks or the large NBFCs

Update on the Indian Market:

On Monday, NIFTY closed 0.3% lower at 11,477 points. NIFTY reported September 2019 gains of over 4%. Amongst the NIFTY 50 Stocks, BHARTIARTL (+6.9%), HCLTECH (+3.6%) and UPL (+3.3%) were the top gainers while YESBANK (-14.4%), INDUSINDBK (-6.1%) with other banks dragged the NIFTY down. In the sector-wise performances, IT (+1.9%) and FMCG (+0.3%) were the only gainers while PSU Banks (-3.5%), Private Banks (-2.7%), Financial Services (-2.1%), Media (-2.1%) and Pharma (1.9%) were losers for the day.

AU Small Finance Bank (AUBANK): No liquidity issues with the banks or the large NBFCs

Key takeaways from the interview of Mr Sanjay Agarwal, MD & CEO, AU Small Finance Bank; dated 26th September 2019 on CNBC TV 18:

  • In the meeting with the Smt. Nirmala Sitharaman, Minister of Finance and Minister of Corporate Affairs, India; Mr Agarwal mentioned that the representatives of the banking fraternity accepted that there are no liquidity issues with the banks or the large NBFCs.
  • AUBANK operates in around 150 districts and 10,000 villages. There are no liquidity crises in any of the areas where AUBANK operates.
  • In 1QFY20, AUBANK reported 44% in growth in Assets Under Management (AUM) and 40% in disbursements v/s RBI financial sector growth rate of ~10%. The deposits increased by 100% YoY.
  • AUBANK has been able to deliver the target they had set. Personal vehicle sales have suffered. The commercial vehicle segment is cyclical and will turn around in due time.
  • AUBANK already has a business strategy in line with the Finance minister’s advice of increasing the presence in the field.
  • Mr Agarwal mentioned that the money is available for customers who meet the requirements of eligibility of credibility.
  • Recent tax reforms from 35% to 25% will lead to growth in the margins.  AUBANK is yet to decide on how it is going to utilize the benefit arising from these reforms; whether for Capex or for improving the Return on Assets (ROA).
  • AUBANK has a small presence in the gold loans segment but is growing at ~80% YoY. Consumer durable loans too, form a very small part of the advances and is expected to grow at ~80-90% YoY.

Consensus Estimate (Source: market screener website)

  • The closing price of AUBANK was ₹ 661/- as of 30-September-19. It traded at 4.7x/3.9x /3.2x the consensus book value for FY20E/ FY21E/ FY22E of ₹ 140/168/206 respectively.
  • Consensus target price of ₹ 699/- implies a PE multiple of 3.4x on the FY22E book value of ₹ 206/-
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