Satin Creditcare Network Limited (SATIN) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Satin Creditcare Network Limited Q2 and H1 FY '21 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Just note, this conference is being recorded. I'll now hand the conference over to Mr. H.P. Singh, Chairman and Managing Director of Satin Creditcare Network Limited, to give his opening remarks. Thank you, and over to you, sir.

Thank you. Good morning, and thank you for taking your time out and joining us today to discuss our Q2 and H1 FY '21 earnings performance. First of all, I hope you and your near ones are safe and healthy. The fight against COVID-19 has been a long one, but the recent news of Pfizer's COVID-19 vaccine of being more than 90% effective gives us a strong hope that we will fight this out soon. These have been one of the most challenging and uncertain times for all of us economically as well as mentally. Q1 FY '21 was majorly a washout for most sectors and companies due to subdued demand on account of COVID-19 and nationwide lockdowns thereafter. However, we witnessed progressive recovery playing out across sectors due to COVID-19-related concerns, moderating with each passing day. Also lifting up of lockdown restrictions in major parts of the country, coupled with festival around the corner, makes demand scenario look promising across sectors. Microfinance being a part of this ecosystem is also expected to benefit from this positive momentum. We saw a significant revival in the sector with lockdown restriction easing out as most of the borrowers are residing in the areas where there was no major impact of the pandemic. Also majority of our borrowers were engaged in classified essential sectors of animal husbandry and agriculture-allied activities. So there was no major impact on their incomes. We believe that the company's performance in Q2 has been decent as many KPIs showcased a positive trajectory. We saw a significant improvement both in terms of our disbursement as well as our collection activities. Our disbursements for the quarter stood at INR 632 crores as against INR 54 crores in Q1 FY '21, which is a big positive. Also, our collection efficiency improved from 62% in June to 94% at the end of September 2020. We expect this momentum to continue in the coming quarters. At Satin, we have always kept our fundamentals right. And our focus on setting up right processes and adopting this new normal work changes had helped us to sail through these difficult times. For the period gone by, we have undertaken several new initiatives to successfully aid our staff and borrowers when physical movement was restricted. During the first quarter, we have successfully launched a new customer service app to increase digital and financial awareness among customers and to help them connect with brand SATIN. Also, customers were encouraged to pay their installments through various digital apps like Google Pay, PhonePe and PayTM. In addition, we have also launched a new product called Pragati Loans, with the main purpose to rebuild borrowers' income-generation activities impacted due to COVID-19 and also help them reduce monthly cash flow -- cash outflow on their loans. With such initiatives, we further endeavor to bridge this socioeconomic well-being of the low-income households by financing them on a sustainable basis in order to improve their livelihoods, establish identity and enhance self-esteem. Now let me run through the financial and operational highlights of our company. Our AUM has seen a growth of 6.7%, which stands at INR 7,667 crores as compared to INR 7,182 crores a year ago. As on 30th September, we have a base of 31 lakhs plus customers, which is one of the highest in the industry. By the way, our disbursements stood at INR 632 crores as compared to INR 1,819 crores in Q2 FY '20. Disbursement growth got impacted on account of nationwide lockdowns, which caused halt in the operational activity. However, we saw a gradual improvement in the disbursement activity and expect coming quarters to be much better. As of 30th September 2020, 100% of our disbursements are made through cashless mode, while cashless collections stood at about 11%. Net interest income for Q2 FY '21 stood at INR 185 crores as against INR 218 crores in Q2 FY '20. For Q2 FY '21, our pre-provisioning operating profits stood at INR 80 crores as compared to INR 91 crores in Q2 FY '20, while PAT for Q2 FY '21 stood at INR 16 crores as compared to INR 54 crores in Q2 FY '20. For the quarter, profits and return ratios were impacted due to higher provisions made on account of COVID-19 pandemic and other external factors. For Q2 FY '21, our cost-to-income ratio stood at 57%, whereas Q2 FY '20, it stood at 58.3%. For Q2 FY '21, our OpEx-to-GLP ratio stood at 5.3%, whereas for Q2 FY '20, it stood at 7.1%. We constantly endeavor to reduce our cost-to-income ratio as well as OpEx-to-GLP in the coming quarters. As of 30th September, ROA is at 0.8%. Coming to our collection efficiency, we have seen significant improvements in repayments and collections month-on-month. The collection efficiency trends are as follows: April, it was 3%; May, 17%; June, 62%; July, 85%; August, 86%; and September was 94%. Our on-book gross NPAs stood at 2.9% as on 30th September 2020. On account of COVID-19 outbreak, we have made adequate provisioning of 3.9%, bringing our net NPS to minus 1% in September 2020. This is subsequently -- substantially better than our NLP of September 2019 of 1.8%. We endeavor on achieving steady growth without dampening our portfolio quality. On geographic expansion, our total branch network now stands at 1,255 branches, which is one of the highest in the industry. Our strong branch network is spread across 377 districts. In continuation of our digital and innovative initiatives, all our branches and customer houses are geo-tagged, which have significantly reduced our undue dependency on loan officers while optimizing the day-to-day activities. We have a strong business and risk team in place, which follows a very cautious approach in selecting the newer geographies and opening up and closing our branches. Recently, we have expanded our geographical presence in Sikkim, which takes our total state and union territory count to 23 now. Our diverse presence across the 6 states, coupled with well-penetrated branch network, has helped us as a strong pan-India microfinance player in the industry. Our scattered presence across districts has also helped us to mitigate portfolio risk to a large extent. As on 30th September 2020, 96.6% of our districts have less than 1% of portfolio exposure, which we aim to bring it down further in the coming times. We have seen a significant reduction in our portfolio risk -- portfolio at risk in terms of average exposure per district, 0.27%, in H1 FY '21 as compared to 0.45% FY '17; exposure to top 10 districts, 15% in H1 FY '21 versus 27% in FY '16; and our exposure to top 4 states continue to be 46.3% (sic) [ 56.3% ] in H1 FY '21 from 77.3% in FY '17. Further, it has been our constant effort to bring down AUM per state nearly to 20% to further avoid fairly large portfolio default. We continue to be one of the leading microfinance players in terms of customer base, well-penetrated branch network across states and 76% rural exposure. Our well-thought diversification and -- helped us sail through testing times and also leverage our idea of cross-sell products. Till now, we've been able to disburse close to 1,70,000-plus loans under the product financing category, which includes loans for bicycles, solar products, home appliances, consumer durables and water and sanitization. On liquidity, our capital -- and capitalization, our capital base has been strong with CRAR of 32.3% and well above the regulatory requirement. We have a healthy Tier 1 capital comprising of 24.92% of the total capital base. Liquidity has never been a barrier to us. And we have an excess -- a diversified lender base with 61 active lenders. We maintained a healthy balance sheet liquidity with INR 1,962 crores of surplus funds as on 30th September 2020. We have undrawn sanctions worth INR 1,063 crores as on 30th September 2020. In addition, we have successfully completed rights issue, which will further help in augmenting the capital base to meet future capital requirements and funding requirements for growth of the business and operation and general corporate purposes. Our structurally-positive ALM also adds to our advantage. An update on our subsidiaries. We are looking forward to growing our secured lending portfolio through our subsidiaries, thus diversifying risk while achieving a better product mix to achieve the next leg of growth. All our subsidiaries have been making good progress. Satin Housing Finance Limited, which mainly caters to customers belonging to middle and low income groups in peripherals of Tier 2 and below cities has now reached an AUM of INR 164 crores, having presence across 4 states. SHFL has 100% retail book comprising of 85% affordable housing loans and 15% of LAP. Satin Finserv Limited, our MSME arm, has reached an AUM of INR 120 crores. It's CRAR as on 30th September stood at 90.53%. SFL business aims to focus on secured retail MSME lending, wholesale lending to small NBFC MFI and others. Our business correspondence services under Taraashna Financial Services Limited has reached an AUM of INR 639 crores. As of 30th September 2020, the company operates in more than 7 states through 201 branches. The company has more than 3.5 lakh active loan clients. BC arrangement with IndusInd Bank continues to make rapid strides, with AUM reaching INR 473 crores as of 30th September 2020. We endeavor to achieve a balance sheet between microfinance and non-microfinance loans. We expect 1/3 of our portfolio comprising non-MFI loans. Thank you, and I open the floor for questions.

[Operator Instructions] We take your first question from the line of Harish Kumar Gupta from Nirmal Bang Securities.

Sir, I have one question. Like, in this quarter, you have provisioned around INR 49 crores. So -- like, this kind of provision are expected in how many more quarters? Or I think -- we are done for the time being?

See, we have a very dynamic situation month-on-month. The only answer I can give you on a positive note is that on a month-to-month basis, our collection efficiencies -- and our collection efficiencies are going up. Now keeping that in mind, I think we probably look at maybe the same thing or maybe lesser than what we have already provided for. But I probably cannot give you a very correct answer. But the only thing which I can leave you with is that we are having a positive collection efficiency as well as disbursements on a month-to-month basis from the September quarter onwards.

Yes. So basically, that's why -- that's what I am surprising that you are -- you have given provision more than last quarter, whereas your collection efficiency is much better than other microfinance companies. Other microfinance companies' collection efficiency is around 90%. And in September, you were having 94%. So why you are not confident on your, like, portfolio and you are providing more than, like, what other -- your peers are doing?

So the question is not being confident. I think that is probably not the right statement to make. But the fact of the matter is that we are very conservative as an organization. So for us, we have always felt that providing more, as what not was our history earlier, is probably a better thing to do in these kind of uncertain times.

We have next question from the line of Siddharth Oberoi from Prudent Equity.

Sir, we can see the trend in collection efficiency is very good till September. Yes, I wanted to know if there is -- if the trend is actually continuing post September? Or was that like an aberration or something?

So as I stated earlier, so the trend is positive from the September quarter onwards. That is what we are looking at, and that is what is actually happening on the field. We believe in terms of both the collection efficiencies as well as disbursements. We have a very positive outlook going from September onwards. And that trend continues till date, I can probably say that. But again, the point is the fact of the matter is that we are looking at increasing trend and looking at how we are able to be conservative in our whole approach rather than probably being very aggressive in our outlook. So that is what we are trying to really look at.

So effectively, the collection efficiency is probably getting better in -- probably in October, November or something like that?

Yes. So as what you rightly said, it's not an aberration that it was just limited to September quarter. The only thing is that, that is positive from September quarter onwards also.

All right. Okay. And also, I have another question. Your capital adequacy ratio is very strong. The Tier 1 is also very strong. So in terms of lending, are you being extra cautious? Or do you think now from this quarter onwards, it'll be probably more aggressive in lending?

So to be very honest, we were only lending to our existing customers earlier during those very uncertain times. We did not take a ploy to actually look at -- for new customers. But after the quarter of September, we are -- have also now started looking at new clients also, which are now being disbursed from our -- from -- by us. So earlier, the reason why we were very cautious was because we really didn't know how many lockdowns will come, how will the whole thing pan out to be. And the way we were looking at income efficiency levels and the income-generating activities probably getting back into the normal shape, so for us, the cautious trend was to only disburse to our existing customers. Now from September onwards, we have started adding new customers also. So that is also one of the biggest positive, which is happening in the field also.

All right. Okay. Also regarding this provisioning that you have done, you have been -- like you've probably over-provisioned more than what is mandated, maybe you're cautious or whatever. So is there a possibility that maybe a few quarters down the line, there is a write-back, back to the profits of these NPAs? Is there a possibility?

So Siddharth, traditionally, we -- as an operator, we are probably the only ones who have huge write-backs after write-offs also. So -- and this has been -- amply been proved after demonetization. So for us, demonetization happened in 2016. But even till date, we are still trying to look at write-offs and the clients who have reached 500, 600 par. So for us, that is how our DNA has been there. And what you have said probably is that if you look at the longer run, I can say for sure that the way we've handled demonetization and the write-backs after that, we will be able to bring back also whatever has been write-offs during this period of the pandemic. And we are very confident and very sure, we've got separate teams which just work on write-offs and this thing. So we are very sure that in the longer run, yes, definitely, there'll be a lot of write-backs. And I'm emphasizing the word a lot of write-backs because that is how we probably played out earlier also.

[Operator Instructions] We have next question from the line of Rohan Advant from Multi-Act.

Sir, [indiscernible] maybe if you could give us some state-wise color on collection efficiency, which states are lagging and which are leading? Second was, sir, this calculation of 94%, how is the numerator calculated? Is it all payments received or only payments for the current month and not including any arrears or advance EMIs in the numerator? And the last question, sir, this 94%, is it a combination of more customers paying, but some of them paying partly and some of them paying fully. And so by customer terms, is it higher than 94%, if you could give some breakup on that?

So to give you an answer on the first question of yours. As per state, see, this is an overall percentage, which we have given you. There will be some states where there will be minor aberrations, which will be there, which probably have to be taken into account overall. I can give you, for example, now the festival season was probably on now. Now there is probably more festival activities in North as compared to maybe somewhere else. That's one. We had elections in a few states. So technically, we had something happening in Punjab, where there were farm bills -- the farm bill activities going on across over there. So there will be aberrations. That is the reason why the average overall pan-India is 94%. On a state-to-state basis, we are on top of these states, which are probably lagging behind below the national average. And we're looking at them very closely, and we have deployed additional resources wherever it is below the national average. But yes -- definitely, yes, there will be some minor differentiation between different states as such. But overall, it's 94%, and that is what we're looking at. But in the other states, depending on the actual average, we are putting in additional resources as well as additional staff and additional workforce to probably look at how we are able to improve the collection efficiency. Rest of the 2 questions, I think Jugal will just give you an answer on that.

So collection efficiency, we have taken the total collection against past dues and the current month due and the denominator is total demand for the months. So this is how we have collected -- we have calculated the collection efficiency.

Okay. Okay. So if someone has paid for the past or has paid future EMIs in advance, that will form a part of the numerator, right?

Not the future EMIs. Just the current month -- due month or the past due months, not the future EMIs.

The past EMIs. Okay. Got it. Okay. And the last question on part-paying customers, if you could answer that?

So it is the total collection coming in from these customers whether somebody has paid part payment or full payment, that we have considered, but we have not considered the future, in case, somebody has settled the loan or there are some prepayments, et cetera, that we have not included in the collections.

Okay. No, in your presentation, you said that most of our borrowers have started paying. So I just wanted to by a borrower count, what percent of borrowers would be paying? And by value terms, it's 94%. That's what I meant by this question.

So we are focusing more on value right now. We are encouraging people to pay on time and those who have the ability to clear their backlog, et cetera. And most of the customers have started paying, but yes, there are some nonpaying customers, which we are following it up.

[Operator Instructions] We have next question from the line of Sarvesh Gupta from Maximal Capital.

Sir, and congratulations on a decent set of numbers. So first question is this 94%, it is excluding the prepayment collections. Is that right?

That's right. Yes.

So including that, what would be the number for September?

That has no meaning. We are not tracking that because somebody is coming and settling, giving the future payments, et cetera, taking a new loan because in microfinance, a customer comes when there are a few installments left out, they settle their sort of the previous loan and take the new loan. So that percentage will have no meaning as we do not normally track that because the money has come, but the customer has taken the new loan. So I think the right way to calculate is that somebody who is paying against the past dues or the current month due versus what is due because people have missed during April, May, June, July. And so that's how we are tracking this.

So this is including the past dues and the current month dues?

That's right. That's right.

Okay. Now how many of your customers haven't paid a single EMI till now?

So we would have close to about 10% of our customers who have not paid us a single installment. And on a daily basis, we are trying to track them and trying to get the installments from them. It's about close to about 10%.

And how many would have paid all EMIs or are basically more or less regular?

I think we don't have that figure handy at the moment. But what we are tracking on a daily basis is the nonpaying customers. So we are tracking them on a daily basis and trying to get the installments from them. So that is what we are following.

So basically, anyway till September, we had a moratorium, till the end of August. And September, when we see like around 90%-plus people are paying around 94% of collections, so that actually answers your question.

Okay. And what is this number for October? And now I think even for your November month, the cycle would be over. So what is the equivalent number of 94% for October and November?

So we don't have a very clear-cut number, but -- because there is a festival advance, which also comes in during October. But overall, what we've been able to identify till now is that, yes, there is an improvement from the September numbers. That is the only thing which I can probably tell you.

Okay. Now sir, now at the end of the moratorium, you would have restructured the EMIs for all the customers who haven't paid, maybe till end of this financial year. So what is the total collection -- excess collection that you require to make because of this? And against that, what is the total provisions that you have taken?

This, to my mind, has no meaning with due respect because we have offered moratorium to all the people who have missed the installments. Now the keeping track of that, somebody who has paid it for April, May, June, July, probably has no meaning. What we have done is that the customers who are genuinely impacted because of COVID, et cetera, and have not paid till 31st of August, in line with what the industry in general has done is, we have offered moratorium on that. And now we are keeping track is that after moratorium, what is due and whether customers are paying or not. Somebody who has missed it in June, there is no point going and asking him to make that payment. So this is how we are tracking because that probably will confuse our own team and to the customer.

No problem. Now with this 10% of the customers who haven't paid at all, so what is the -- if you can give some subjective color, what is happening on this book because this is still a sticky sort -- I mean, what we realize is that these customers sometimes become sticky in terms of not paying. So this 10%, what are you hearing? What is the strategy here? And what have you been seeing currently on this portion of the book?

So I think for that, what I can probably tell you is you have to understand microfinance dynamics in a far more detailed manner. What happens during this pandemic, and this is what we are seeing now, what you see as par 30 and par 60 and par 90, which was earlier, pre-COVID levels are not the same anymore. So anybody technically who missed -- has not paid you for about 60 days, still pays you, which never used to happen before the pandemic opened. So that is where the difference is. At the starting, we had a higher number in terms of our nonpaying customers. But in the last probably a month or so, and we are now in the festival season, so I won't take that into account. But yes, that number has also started dropping down basically over there. And -- so our sense is that we are looking at these customers who have not paid us. We are following it up from them. And it will be only a question of time before they also start paying us. So you have to look at the stickiness and the portfolio quality not related to what this pandemic brings because this is an extremely a different and a volatile situation. This is a very uncertain situation. And what you look at our portfolio at risk previous to this is different from the portfolio at risk which you'll find it now. I hope that answers your question.

Yes, sir. And finally, one more data point, if I may. Sir, what is the total COVID provisions that you have taken as of now as a percentage of your AUM?

So we have made a total provision of 3.9% against a gross NPA of 2.9%. So there is an overall 1% provision in excess of our gross NPA number. If you see Slide 26 (sic) [ Slide 23 ] in our presentation, that gives a trend for last few years in terms of how the provision coverage ratio has gone up, how the par numbers have moved up.

So total 3.9% COVID provisions you have made?

See, the total provision, there's no specific provision for COVID. We have taken a conservative approach in terms of how we have increased our provision coverage ratio. It used to be around 77-odd percent in March '19. And slowly, we have increased it quarter-on-quarter. In March '20, it was about 103%. And now as on today, we are standing at about 134%. So because of, so to say, the overall, so to say, situation, we feel that this is a provision required on the overall book right now.

We have next question from the line of Harish Kumar Gupta from Nirmal Bang Securities.

Sir, can you please tell me, like, what is the cost of funding right now?

Sir, cost of funding is consistent around 11% the marginal cost of borrowing. We have seen some reduction in cost here-there, but overall cost of funding is around 11%.

Okay. Okay. And like if situation improves as -- for -- like related to COVID, then can we come back to [Technical Difficulty] 40% next financial year?

Sir, your voice was not clear.

Can you repeat the question again, please?

Yes. So basically, if COVID situation improves from hereon, can we expect the -- our, like, normal growth of 40% next financial year?

See, giving a percentage is probably not the right way to really look at it. But yes, definitely, as I mentioned earlier in one of the questions was that, yes, we've started adding new customers also from this month onwards, and it's a positive this thing, besides our existing customers who are due for their next loan of disbursement. But yes, definitely, there will be a growth. What percentage, we can't hazard a guess, right now, but yes, there will be a growth, definitely in the next year.

Okay. And I think...

Sorry, including this quarter. I think we are seeing a lot of traction happening during this quarter in terms of disbursements. So including this quarter, I think we're looking at a bit positive in terms of part disbursements.

Okay. Okay. And like in one of the -- somewhere I saw that our yield is around 17%. So is my understanding correct that our yield is around 17%, 18% overall?

We have 10% margin overall in the business. So we are maintaining that. The yield percentages are, so to say, not, so to say, right reflection right now because in the past, we have done some direct assignment transaction, and recently, it's competitively less, et cetera. But RBI prescribes a 10% margin in microfinance. We are maintaining that.

We have next question from the line of [ Agastya Dave from CAO Capital ].

Singh Sahib, one question I had. I'm getting stuck on this 10% number where your borrowers have not repaid. So that is by value or volume of customers?

This is the number of customers.

So if I look at your gross NPA stood at 2.9% and it amounts to INR 133 crores, I believe. So what would you say, if the worst-case scenario plays out, what would be your gross NPAs? And then as of now, as things stand out, [Foreign Language] what would be your realistic peak of gross NPAs?

See, again, what I said, we are concentrating -- now if you look at the bucket of our 10% nonpaying customers, this bucket diminishes on a daily basis because these are being worked upon, and we are getting installments from them on a daily basis. Now looking at this bucket and if you really talk about, the outer guess is somebody will say, okay, fine, this 10% doesn't pay. But that's not how the game is. Our people have started paying. In fact, this 10%, I can probably hazard maybe a hypothetical guess that this will probably be less than 10%, if I look at the November end quarter -- or November end month as such. So on the overall, I think the industry says it's about -- they say it's close to about -- some hazard a guess between 3% to 5% is -- that is what the industry says. I'm not hazarding a guess because that is probably not the right reflection of how things are. Putting things in perspective, again, for us, as I stated earlier in my remarks to a question also was that we've had traditionally a long history of write-backs. So that gives us comfort that we've got a specialized team, which only works on write-backs from the write-offs. And in case we have -- hypothetically, this also number is probably, which is maybe slightly higher than what it should be as compared to what the pandemic really brings on. But our sense is that having a 10% nonpaying customers, who are also paying on a regular basis, now once we start engaging with them, will also give us probably that kind of a ratio where we can say that the range would always depend in toto, for a long term, close to about 3% to 5%. But I can only hazard a guess. I probably will not have a very good number of what we are trying to say. But the fact of the matter is that we are looking at to breaking these -- we call them the ZCC customers, which is the zero client customers by December end quarter. If we are able to get these down to maybe single digits and very low single digits, then probably I think the credit cost would also remain between the range point of 3% to 5%.

3% to 5%. And sir, so just a clarity -- a clarification here. The 10% number, as you said, was number of people. But this 3% to 5% number, again, are you talking the comparable number, which is like 3% to 5% number of people or 3% to 5% of the loan book?

Yes, yes. So apple-to-apple, I'm comparing apples-to-apple basis.

Right. Right. And sir, any sense you can give on what this number is as a percentage of loan book?

This number is 10% -- we've got about 30 lakh customers. So you can take a 10% of that. So it's close to about 3 lakh customers.

But the value would be like proportionate business like on a pro rata basis, you can take that, let's say, this could be 10% of the portfolio as well? Or is it like smaller ticket items, and hence, it would be, let's say, instead of 10% of AUM, it's closer to like 5%, 6% of AUM?

So the volume also will be closer to that range of 9% to10%. There would be, of course, a lot of customers who would have maybe just a few installments left, some would probably have -- would be in the middle of their loan. But average, I think you can probably take the same amount of -- practically, the same percentage of value on it.

Got it, sir. So one final thing, as things stand now, right, are we 100% certain that we will not see a demon-like situation where we -- where our NPS spiked up to like 15%, 17%? Have we avoided that as of now? And second question related to that is why is -- why has this panned out relatively better in terms of asset quality for the industry as such compared to demon? Why haven't things gone for a toss? Or are we looking at this picture probably a bit sooner than we should because the moratorium was till August and we will see the NPS now? So any comment on that, sir, that would be very helpful.

Agastya, I can just give you maybe the generalized comment because we've seen demon probably to the worst extent as an organization also. I can only probably say that, yes, I think you should be happy that it's probably not the way it was worse what was in demon. And I can just probably go back into my memory and probably tell you, we were 70% impacted in demonetization as compared to 20%, 25% of all our peers. Having said that, see, I think you probably -- everybody is -- to be very honest, jumping on to the numbers right now. I think what you have to probably give it some time before you finally see. As I give you a -- just a simple example for you that this 10% customer of ours was probably when we started in September mid when we really came into being as such, this probably was 14%, has come down to about 10%. So that is how things will start improving. But if you really look at the initial hitches which will be there, I think that will be there for some time before finally things settle down because things have started coming back into shape. The center meeting has started happening. The boys are now on the ground. They're meeting clients. There could be also be clients who haven't had possibly income-generating activities being hurt to a certain extent and they're coming back to normalcy. These things will not happen in probably in a quarter or maybe a couple of quarters. There will be slight tails which will be there. But I think the overall positive sense, which we also look at, is that it's not that worse, which you rightly said as what demon was. So we've got a lot of hope in that, and we are looking at the positive things which are coming in, and that is what we are all looking forward. And for us, 10% is probably -- to be very honest, if I gave you that, if we really work hard towards it, and we've got teams which are working on it, probably this 10% number will also vanish.

Great, sir. One final question, which I forgot, sir. If you get all the money of the rights issue, what would be the capital adequacy? That's my final question, sir.

As compared to today, I think our capital adequacy would be...

32% right now.

INR 90 crores more.

So we would be close to about another 8 [Foreign Language].

INR 1,500 crores...

Mathematically, a tough question. You'll have to ask Shakuntala Devi to answer that question.

I was empirically getting stuck there. That's why I asked. It's okay, sir, I'll contact your IRs later.

We had INR 1,500 crores in Tier 1 and Tier 2. We had another INR 122 crores, basically. So it will be INR 1,620 crores as compared to our...

INR 1,500 crores is Tier 1 only.

Sorry, INR 1,500 crores is Tier 1.

[indiscernible]

So on the whole, it will add another 10% to it, close to about 10%.

Right, sir. Around 35% then?

Yes.

We have next question from the line of [ Dwanith Chawla ] from DN Trading & Company.

My first question is I wanted to know what is our net borrowing rate or the rate at which we are getting funded? And sir, doesn't it make sense for us to refinance moving, in a sense, that interest rates overall are lower? I know that our interest rate on net margin is fixed at 10% above of our less borrowing rate. So does that idea actually make sense for us? And secondly, I wanted to know in terms of loan growth, since you haven't had any...

Sir, your voice is not very clear. Is your first question about the cost of funding?

Yes. So my first question is around cost of funding and whether it makes sense for us to refinance, knowing that we have a fixed margin above our cost of funding as the lending rate, right? And second question is with regards to the fresh loan growth. Since we haven't had any price disbursements up till this quarter, going forward, what kind of growth are we expecting in new customer acquisitions?

So on cost of funding, as I said, that our cost of funding is around 11%. And then it is broadly stable. It should have gone down a little bit. But since we have 10% margin, so we are broadly borrowing money at this rate. As far as refinance facility is concerned, it is dependent on the lenders' preference whether they want to do a assignment or a securitization or want to give around more funding, et cetera. And we take a call depending upon our overall funding position at that point in time. So sir, this is how we are. And in terms of loan growth, as Mr. Singh...

Sorry to interrupt, sir. Sir, that's what my question is that -- is it going to -- is refinancing actually going to make a material impact for us because -- since our lending rate -- at the rate at which you are giving out the loans is actually just on margin above the funding rate, right?

Sir, in refinance, we get slightly better margin. So from that perspective, in case we get opportunity depending upon the overall funding needs, et cetera, we take those calls. In DA, the margins are slightly better besides the capital benefits. The margins are slightly better than the on-book borrowing. And in terms of growth, as we said on the call earlier, that things are improving. The second quarter disbursement was much better than the first one. And the third quarter is going to be much better than the second quarter in terms of disbursement. So things are improving, and we will take the call as we move along. But disbursements, surely, are picking up.

So I mean -- I know you have said that -- earlier that you cannot give exact percentages. But at least, can you give us an indication that what happened in FY -- can we reach the level of growth, which we reached in FY '19, '20 in 2021?

I think you should appreciate that. As on today, things are improving for sure, but there are a little bit of uncertainty on the overall economy. And we are focusing more on portfolio quality right now, of course, focusing on disbursement, et cetera. But given a choice, we want to create a quality book right now rather than focusing too much on AUM growth. But disbursements are picking up, and we'll take a call as we move along, how the things will pan out. The numbers are still increasing in some geographies. So we are taking those calls, seeing the situation in specific geographies and disbursing.

We have the last question from the line of Rajiv Mehta from Yes Securities.

Sir, if you can help me with collection efficiency in West Bengal and Assam. And the context is that I see the proportion of these 2 states increasing in the overall portfolio, while I've seen the overall portfolio also declining, but these 2 states have gained share. And if you can help me with the collection efficiency in these 2 states?

West Bengal and?

Assam.

I don't think so that there is an increase in the share. In fact, if you look at the AUM, the AUM has gone down.

Yes, gone down, right?

Yes. So if you look at the percentage share, definitely, then, yes, it will be more because the AUM has gone down. But I can give you just maybe a small example in terms of this thing. Yes, West Bengal, the collection efficiency was probably hurt because of the local trains to Kolkata not being running. Now since the last 1 week, the local trains have started running, the collection efficiency, which was previous to the not running of the trains, is much better than the last week when -- once these trains have started running. Now by giving you this example, I can tell you that whatever, if you look at in terms of state efficiencies, collection efficiencies, probably -- is not probably the right way. There would be some reasoning or the other, which is there, as I gave you the example of West Bengal, where we are working where the local trains were not running, that will probably be there. Similarly, in Assam because of the ensuing elections, which is going to happen in -- some time in April, May next year, there will be, yes, definitely somewhere where there would be aberration in terms of lower collection efficiency. But we are looking at it very deeply, different states, and we looked at by more respectively as compared to the other states where -- which have normal collection efficiency over the national average. So we are on it basically. That's what I can tell you.

Okay. Okay. And one question for Jugal. Sir, I can see a direct assignment income of INR 44 crores in this quarter. So what was the underlying transaction because the portfolio assigned has actually come down by 15% on a sequential basis?

So there are 2 reasons for that. One, of course, we have done a securitization transaction of about INR 100 crores during this quarter. The other thing is that the tenure of the existing DA book has also gone up. So there is some additional income because of that. So it's a combination of both.

And the overall total assignment book has started going down because, for us, I think, monthly, it's diminishing. So overall, the overall book for DA will also be now going down.

Correct. Correct. And sir, just the last question on the liquidity availability because now, as you said, things are improving, disbursements have picked up in second quarter, and possibly, month-on-month, you would want to grow your disbursements and even portfolio. But can liquidity be a constraint for us in terms of growth? Because while we have liquidity on the balance sheet, but we have been maintaining those levels since a long time. So what about incremental liquidity availability to the extent that you want to grow?

See, Rajiv, to be very honest, liquidity in terms of the pool of lenders we've got, in terms of the products which we've got in DA, securitization, in the sense, all that put together, we feel that we technically do not have any challenge in the liquidity even in the coming months. So even if our portfolio starts growing and we come back to the growth phase, which we would surely very soon, I think liquidity will not be a bigger challenge. We've got more lenders who we've been able to associate with as we've been able to raise ECBs as well as entities from foreign investors also in the past few months. So I think, for us, that's absolutely no challenge.

Ladies and gentlemen, that was the last question. I'd now like to hand the conference over to Ms. Aditi Singh, Head of Investor Relations and Corporate Communications, for their closing comments. Over to you, ma'am.

Good morning, everyone. I take this opportunity to thank everyone for joining this call. I hope we've been able to address all your queries. And sure, if you want to discuss anything else, you can always get in touch with me. You can always get in touch with our IR advisers as well who are Strategic Growth Advisors. Thank you all, and wishing everyone a very happy Diwali and a prosperous New Year. Stay healthy. Stay safe. Thank you.

Thank you very much, ma'am. Ladies and gentlemen, on behalf of Satin Creditcare Network Limited, that concludes this conference call. Thank you for joining with us, and you may now disconnect your lines.