With the results for Q1 FY18 are just around the corner, I felt it is apt to summarize the Q4 FY17 results for small finance banks. I have looked at the results for Ujjivan, Equitas and Satin Creditcare. I also squeezed in AU Bank numbers as well. I have written a detailed review of Ujjivan Finance for Q4 FY17 at the below link. In case you have not read it, I recommend you to have a look at it

Ujjivan

Q4 FY17 (Crores) Q4 FY16 (Crores) % change As a % of revenue for Q4 FY17
Revenue 340 298 14.1%
Expenses 298.22 205.42 45.17% 87.7%
Profit before taxes 34.60 84.30 -58.9% 10.1%
Tax 15.25 29.39 -48.11% 44% (as a % of PBT)
Profit after taxes 19.35 54.91 -64.76 5.69%

Equitas

Q4 FY17 (Crores) Q4 FY16 (Crores) % change As a % of revenue for Q4 FY17
Revenue 398 319.58 24.53
Expenses 230.98 119.57 93.17% 58.03%
Profit before taxes 10.95 72.90 -84.97% 2.75%
Tax 4.04 26.16 -84.55% 36.89%
Profit after taxes 6.90 46.77 -85.24 1.73%

Satin Creditcare (Standalone results)

Q4 FY17 (Crores) Q4 FY16 (Crores) % change As a % of revenue for Q4 FY17
Revenue 164.8 173.0 -4.76%
Expenses 225.6 147.5 52.99% 136%
Profit before taxes -63 25.5 -346.63%
Tax -20.4 8.7 -335.13%
Profit after taxes -42.5 16.3 -360.46%

Observations

  • Revenue growth
    • Ujjivan has a revenue growth of 14.1%.
    • Equitas had a higher revenue growth of 24%.
    • Satin came in third with a negative growth of 4.76%. I see another disappointment in the revenue numbers for Satin. About 16.5% of the revenue for Satin comes from interest earned on fixed deposits and mutual funds! A company which is in the business of lending earns 16.5% of its revenue from non-lending activites.
  • Expenses: Expenses was an altogether different story
    • Ujjivan: Expenses for Ujjivan was relatively less at 45%. The employee expense increased by 42%, provisioning is down by 12% and other expenses shot by 73% predominantly due to SFB expenses. As I mentioned in my analysis for Ujjivan, I am relieved to see the provisioning numbers have reverted back to the mean.
    • Equitas: Expenses for equitas seemed to be all over the place. On looking into details for Q4, I notice that employee expenses shot up by 68% Y-o-Y, provisioning for bad loans shot up by 150%, other expenses shot up by 102%!
    • Satin Creditcare: The expenses for Satin credit care rose relatively less compared to Equitas and Ujjivan. The major reason for the increase in expense was the 327% increase in provisioning from 9 crore to 40 crores. The other major chunk was the finance cost which increased by 36%. The surprising part about the increase in finance cost is the fact that revenue from loans grew by 10% but finance cost grew by 36%. This seems to indicate that Satin could have borrowed more for non-lending purpose.
    • Summary: With respect to expense numbers, Ujivan came first with relatively low expense growth of 45%. Satin came second with growth in expense of about 52% and Equitas came third with growth in expenses at 93%. These rankings are merely based on the numbers. But I was disappointed with the quality of expense for Satin. They seemed to have spent a lot of money paying interest on loans not taken for lending activities. Also their provisioning was way higher. So I would rate the companies as: (1) Ujjivan (2) Equitas (3) Satin
  • PAT: With respect to PAT numbers all the three companies were in RED.
    • Ujjivan came first with a negative PAT growth of 64.76%. The absolute PAT number was 19.35 crores.
    • Equitas came in second with a negative PAT growth of 85.25%. The absolute PAT number was 6.90 crores.
    • Satin came in third with a negative PAT growth of 360%. Satin, in fact saw a loss of 42.5 crores.

AU Bank

AU Small Finance bank got listed recently. I could not get their Q4 FY17 numbers. However I got their FY17 numbers. Since they are not comparable to the above numbers from the other three companies, I am listing them separately below. For the entire financial year the revenue grew by a healthy rate of 36%. Expenses were in line with revenue growth. PBT saw a decent growth of 46.59%. In FY17 the company sold off some of its subsidiaries including housing finance arm “AU Housing finance” and earned about 670 crores. The PAT numbers below exclude this one off windfall.  AU bank seems to have had a good year. Since the quarterly numbers are not known, we cannot judge the pain of demonetization faced by AU Bank.

FY17 (Crores) FY16 (Crores) % change
Revenue 1387.43 1015.48 36.62%
Expenses 914.44 692.83 32%
Profit before taxes 472.99 322.64 46.59%
Profit after taxes 305.11 211.61 44.18%

Disbursements

The table below shows the disbursement of loans by the three companies for Q4FY17 compared to Q3FY17. Clearly Satin managed to lend more whereas Ujjivan and Equitas have disbursed less compared to Q4 FY16. In absolute number terms Ujjivan disbursed more compared to the other two, but then Ujjivan is a larger company compared to the other two hence it is expected from Ujjivan.

  Q4 FY17 (Crores) Q4 FY16 (Crores) Growth
Ujjivan 1406 2089 -32.7%
Equitas 1036 1524 -26%
Satin Creditcare 170.9 155.8 9.66%

Cost to Income

Another important metric is the cost to income. The table below shows the cost-to-income for the three companies. Clearly Ujjivan performed better than the other two. Equitas came second and Satin was a distant third. Similar pattern can be seen for previous financial year. This clearly shows that Ujjivan is able to consistently cap its costs.

  Q4 FY17 (%) Q4 FY16 (%)
Ujjivan 76.99% 48.77%
Equitas 80.4% 54.5%
Satin Creditcare 151.17% 58.86%

GNPA and NNPA

The below numbers are after applying the RBI dispension clause of 90 days due to the effect of demonetization. Clearly Ujjivan had better numbers compared to Satin and Equitas. GNPA Numbers for Equitas were not very clear to me. If what I quote below are correct, then the numbers for Equitas are way higher as they already include the RBI dispension.

  GNPA NNPA
Ujjivan 0.28% 0.03%
Equitas 3.53% 1.47%
Satin Creditcare 0.46% 0.25%

NIM

The table below shows the net interest margin for the three companies. Equitas has better NIM for Q4 FY17. Ujjivan has the second best numbers followed by Satin.

  Q4 FY17 Q4 FY16
Ujjivan 8.61% 12.65%
Equitas 9.8% 11.2%
Satin Creditcare 5.14% 11.70%

Summary

  • It was a disappointing quarter for all the three companies. Their Revenue, PAT and disbursement numbers are down.
  • Among the three, personally I felt Ujjivan performed better followed by Equitas and Satin in that order.
  • Au Bank got listed recently. Their FY17 numbers are encouraging (even without considering the one off gain).
  • I believe that the SFB were just coming out of demonetization when they are seeing the after effects of farm loan waiver. Ideally the waiver should not affect SFB business but then human sentiments cannot be predicted. I get a feeling that these companies will face issues at-least for another quarter before things may get better (Hopefully).

References

  1. Ujjivan Finance Quarterly Results Q4 FY17
  2. Ujjivan Finance Investor Presentation Q4 FY17
  3. Equitas Quarterly Results Q4 FY17
  4. EquitasInvestor Presentation Q4 FY17
  5. Satin Creditcare Quarterly Results Q4 FY17
  6. Satin Creditcare Investor Presentation Q4 FY17
  7. Au Bank Announcements

Disclaimer

I am not a SEBI registered research analyst. The information provided above is my subjective view based on what I have read on different websites, annual reports, and quarterly reports of various companies which I assume to be accurate. The above information should not be treated as an offer/advise to purchase a specific stock/investment instrument. Since these are my subjective opinions, I could be wrong in my understanding or presentation of information. I do not claim that the above information is complete or can be relied upon as such. I cannot be held responsible for any loss or damage caused due to any inadvertent error in the above information. I will not be liable for investment decisions made by readers of this article based on the above information. I am not an investment advisor. I may or may not have position in the above company. Please consult your investment advisor for all your investment needs.