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Q3FY12 – Rural demand supports disbursement growth
• PAT registered growth of 28.1% Y-o-Y mainly supported by low cost to income ratio as new staff
intake was low.
• Margins were lower Y-o-Y as cost of borrowing was high and margins improved 20bps
sequentially as the company was able to pass majority of the increase in cost to customers.
• Asset quality remained intact as Gross NPA stood at 4.1% in Q3FY12 vs 4.0% in Q2FY12.
• The company has branch network of 592 and plans to take total branch count to 600 by Mar’12.
Result Highlights
Business growth supported by rural demand
Disbursements have grown 38.8% Y-o-Y in Q3FY12 as the company witnessed major demand from
rural areas. The company is witnessing strong demand in used vehicle, construction equipment and
commercial vehicle. AUM stood at `194.6 bn growing by 40.1 Y-o-Y in Q3FY12. We expect the
growth trend to continue as good monsoon is expected to increase fund flow towards these areas.
Margins improve sequentially
Due to high borrowing cost margins have come down for the company on a Y-o-Y basis to 5.1% in
Q3FY12. On other hand margins improved sequentially by 20bps as the company was able to pass on
the cost to customers.
Profitability supported by low operating cost and low provisions
PAT grew 28.1% Y-o-Y mainly on account of low operating income as new staff intake was low and
as the company tried to exploit the potential from its current staff strength. As the company was
able to maintain its asset quality, the provision cost remained low which again added to PAT
growth. Low provisions also led to PCR coming down to 74.4% in Q3FY12 vs 81.6% in Q3FY11 and
75.3% in Q2FY12.
Valuation & Viewpoint
The major factor that helped the company to sustain business growth is its presence in rural and
semi urban areas. High borrowing cost has impacted margins drastically but as interest rate cycle is
expected to turnaround this would help the company to improve margins. The company is expected
to clock 23.6% RoE and 3.7% RoA in FY13E. At the CMP, the stock is trading at 1.9x and 1.6x Book
value of FY13E and FY14E respectively.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Q3FY12 – Rural demand supports disbursement growth
• PAT registered growth of 28.1% Y-o-Y mainly supported by low cost to income ratio as new staff
intake was low.
• Margins were lower Y-o-Y as cost of borrowing was high and margins improved 20bps
sequentially as the company was able to pass majority of the increase in cost to customers.
• Asset quality remained intact as Gross NPA stood at 4.1% in Q3FY12 vs 4.0% in Q2FY12.
• The company has branch network of 592 and plans to take total branch count to 600 by Mar’12.
Result Highlights
Business growth supported by rural demand
Disbursements have grown 38.8% Y-o-Y in Q3FY12 as the company witnessed major demand from
rural areas. The company is witnessing strong demand in used vehicle, construction equipment and
commercial vehicle. AUM stood at `194.6 bn growing by 40.1 Y-o-Y in Q3FY12. We expect the
growth trend to continue as good monsoon is expected to increase fund flow towards these areas.
Margins improve sequentially
Due to high borrowing cost margins have come down for the company on a Y-o-Y basis to 5.1% in
Q3FY12. On other hand margins improved sequentially by 20bps as the company was able to pass on
the cost to customers.
Profitability supported by low operating cost and low provisions
PAT grew 28.1% Y-o-Y mainly on account of low operating income as new staff intake was low and
as the company tried to exploit the potential from its current staff strength. As the company was
able to maintain its asset quality, the provision cost remained low which again added to PAT
growth. Low provisions also led to PCR coming down to 74.4% in Q3FY12 vs 81.6% in Q3FY11 and
75.3% in Q2FY12.
Valuation & Viewpoint
The major factor that helped the company to sustain business growth is its presence in rural and
semi urban areas. High borrowing cost has impacted margins drastically but as interest rate cycle is
expected to turnaround this would help the company to improve margins. The company is expected
to clock 23.6% RoE and 3.7% RoA in FY13E. At the CMP, the stock is trading at 1.9x and 1.6x Book
value of FY13E and FY14E respectively.
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