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

Ladies and gentlemen, good day, and welcome to Satin Creditcare Network Limited Q4 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 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] Please note that this conference is being recorded. I now hand the conference over to Mr. H.P. Singh, Chairman and Managing Director of Satin Creditcare Network Limited. Thank you, and over to you, Mr. Singh.

Thank you. Good morning, everyone. Hope you and your loved ones are safe and healthy. Thank you for taking our time to discuss our Q4 FY '21 and FY '21 financial performance. We have issued a detailed press release and investor presentation for the quarter and full year ended 31st March 2021. We hope that you've had a chance to review and understand it. We are living through unprecedented times. However, I'm thankful to the support and efforts of our people. Microfinance sector is synonymous with resilience. Continuity of operations, along with health and safety of our employees, have remained our top priorities as we navigate through this crisis. We have left no stone unturned in cooperating with and following the prescribed measures issued by the authorities in order to mitigate the widespread of the virus and the impact on business. Our employees and staff have been strongly adhering to guidelines. Highlighting our performance for the quarter and year gone by. FY '21 was a challenging year for microfinance industry due to the pandemic and subsequent lockdowns. However, business witnessed a strong recovery with the decline in cases reported, the introduction of the vaccination drive and gradual lifting of the imposed lockdown restrictions. And improved economics in the area have helped spur our business with a sharp uptick in disbursement in half -- the second half of FY '21. During second half FY '21, we disbursed approximately INR 4,190 crores, which signifies progressive growth momentum. Growth in disbursals led to growth in AUM since the second half FY '21. As of 31st March 2021, our AUM stood at INR 8,379 crores, registering a growth of 3% year-on-year and 6% sequentially. More importantly, our collection efficiency, too, saw a sequential improvement quarter-on-quarter. Overall, the collection efficiency for FY '21 stood at 94%. Additionally, we witnessed a month-on-month improvement in repayments and collections. Collection efficiency back to pre-COVID levels, clocking 105% in March 2021. We witnessed significant reduction in the number of nonpaying clients from 11% in September '20 to 1.3% in March '21. The improvement signifies our robust underwriting and collection framework as well as the resilience of our customer base. For FY '21, our net interest income stood at INR 742 crores while our pre-provisioning operating profit stood at INR 292 crores. Adopting a conservative approach, we have prudently recognized total provisions and write-offs of INR 289 crores to account for the asset quality risk posed by the COVID-19-induced disruption and other external factors. With this, our cumulative provisions stand at 5.1% of our AUM. Though FY '21 was filled with challenges, the company demonstrated the resilience in times of adversity by taking thoughtful steps to mitigate the impact and overcome the challenges faced by the businesses -- the business as well as the industry. We adopted a cautious approach while disbursing new loans, as our primary focus was to arrest asset quality stress. For FY '21, our gross NPA stood at 8.4% and net NPA stood at 3.3%. Additionally, the company has adequate liquidity and a strong balance sheet position, which makes us well positioned as agile to achieve growth over the medium to long term while the demand remains strong. Moving on to our capitalization and liquidity position. Our capital base continues to be strong with a capital adequacy ratio of 25.3% which is well above the regulatory requirement. In addition to that, we have proactively taken steps to augment our capital position by successfully raising INR 120 crores. We are rights issue of partly [indiscernible] position. Of this, we have already received approximately INR 90 crores. The balance amount will be called as determined by the Board. During FY '21, the company raised debt of INR 4,312 crores, including direct assignment transaction of INR 743 crores. Also at quarter 1 of FY '22, the company raised $5 million from Development Bank of Austria through external commercial borrowing channel and raised INR 25 crores from a private bank. Liquidity-wise, we continue to remain in a comfortable position with cash results of INR 1,469 crores as of 31st March 2021. Further, we have undrawn taxes worth INR 143 crores. Our structurally positive ALM also adds to our advantage. On our geographic expansion front as on 31st March 2021, our total branch network stood at 1,257 [ spanning ] about 388 districts. Our total state and unit territory count is at 23 now. Our diverse presence across district state coupled with a well-penetrated branch network, has helped us emerge as a strong pan-Indian microfinance player in the industry. As of 31st March 2021, 95.8% 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 in terms of average exposure for district, which stood at 0.26% in FY '21 versus 0.45% in FY '17. Exposure to top 10 districts stood at 14% in FY '21 versus 27% in FY '17. Exposure to top 4 states stood at 54% in FY '21 from 77.3% in FY '17. We continue to be one of the leading microfinance player in terms of customer base, well-penetrated branch network across states and with 76% of rural exposure. Our well [ paved ] diversification has helped us sail through these unprecedented times and leverage our idea of cross-selling products. In FY '21, we have been able to disburse close to INR 67 crores under the product financing category, which includes loans for bicycles, solar products, home appliances, consumer durables and water and sanitation. Considering the surge in cases in April 2021 with the advent of the second wave of the pandemic, we expect the statewide lockdown to influence the quarter 1 FY '22 performance. Since collection officers are finding it difficult to reaching out to customers, we have already witnessed a marginal drop in collection efficiency for the month of April 2021, which stood at 93%, greater the adversity, bigger the opportunity. Given the nature of this pandemic, opportunities are immense to cope with the challenge of cash collection, driving financial inclusion and boosting cashless transition, SCNL has made loan repayments more seamless for its customer by introducing UPI auto pay. SCNL is the first player in the microfinance segment enabling customers to repay their loan via UPI platform. We have also facilitated our digital ecosystem across all our branches in India, and our efforts will enable us to improve our collection efficiency in the coming quarters and transform Satin into our digital-focused financial institution. As of 31st March 2021, our cashless collection stood at 8% while we have successfully implemented 100% cashless disbursement across all our branches. Now to give you a quick update on the performance of our subsidiary through which we are looking forward to growing our secured lending portfolio. Satin Housing Finance Limited has 2 successive profitable quarters despite challenging business environment. PAT for FY '20 stood at INR 1.4 crores. Our book comprises of affordable housing at 79% and LAP at 21%. AUM stands at INR 226 crores and disbursement for our FY '21 stood at INR 118 crores. Equity infusion was INR 15 crores done -- during FY '21. CRAR stood at 90.2% and SHFL has credit rating of CARE BBB stable with 0 delinquency. SHFL witnessed at an AUM growth of 63% for FY '21, which is impressive in the current business environment. Satin itself has 2 consecutive profitable years with PAT of [ INR 4.8 crores ] for FY '21. SFL AUMs stands at INR 131 crores. The total net worth stands at INR 107 crores. CRAR for Q4 FY '21 is 81.4%. SFL is operational in 8 states with 15 branches and 1,725 active loan clients. SFL had an AUM growth of 18% for FY '21 and has credit rating of BBB- stable. Our AUM under business correspondent services offered by Taraashna Financial Limited has increased to INR 748 crores. As of 31st March 2021, the company operates in 7 states, 217 branches. The company has more than 3.9 lakh active loans currently. The company added 2 new partners for business correspondence and started sourcing loans under Nai Roshni for SCNL as well as SFL. Altogether, the contribution of our non-MFI lending portfolio has increased to 8% of the total AUM, in line with the company's endeavor to diversify risk while achieving a better product mix to achieve the next leg of growth. Our long-term endeavor remains to achieve a significant contribution from our secured lending portfolio in the coming years. Going forward, we believe that there will be a pickup in consumption as the curve flattens, vaccination rate improves and the local restrictions start to ease out, which should be a positive momentum for us as well as the entire industry. On that positive note, I would like to open the floor for questions. Thank you.

[Operator Instructions] The first question is from the line of [ Shreyas ] from Spark Capital Advisors.

Just wanted to check this 8.4% NPA that we have, is it possible to provide a split between how much is the -- from the pre-COVID book and how much is on the post-COVID book?

My own sense is technically, if you really look at it, this is all the post-COVID book. This is technically very little which could probably be the pre-COVID book. So majority, the post-COVID book.

And is there a possibility, sir, that you're considering in terms of also restructuring some of these post-COVID advances under the restructuring 2.0 guideline? If yes, could you give us a sense of what that quantum could be like?

It's too early right now to probably have a quantum to be looked at. But definitely, yes. As compared to the previous first wave and the second wave, the difference probably lies in the fact that there was a moratorium in the last wave, and this time, the moratorium has not been there. But yes, definitely, yes, the [ DPD ] in the earliest, this thing has probably been there. And there is -- because of lockdowns, I think that there was some income-generating losses, which did happen to be borrowers. We might look at it, restructuring, definitely in a more positive frame of mind rather than what the first wave had. But the quantum right now, I think leads us not to probably hazard against where it will go.

And sir, if I may could sort of squeeze in one last question. Could you, sir, give us a sense of how your 30-plus book looks like? And if there are state-specific concerns on collection efficiency going into April and May? That's the last question from my end, sir.

Technically, 30-plus is also not very significant in turn because we lockdown, if you really look at it, probably had 1 month complete lockdown. And I would say, some sales definitely did had a 1.5 lockdown. But in fact, whenever -- [ because ] we were able to do some collections on that lot. So my own thought process and the way it is, 30-plus would probably be, again, be significantly less than what probably 1 to 30 will probably carry on.

And any view, sir, on state-specific collection efficiency issues? Anywhere where you're seeing a lot of stress where you believe the collection efficiencies are expected to be lower than 75% from May and June?

See, [ Shreyas ], you will have to probably look -- not look at this as probably a stress scenario. You have to look this from a lockdown scenario. There's a difference between the stress building up and the lockdown scenario. Thankfully, what we've encountered during this collection cycle of our -- post the -- during the lockdown as well as now the opening up, the intent remains perfectly fine. So our sense is, it's only because of the lockdown and the logistical measure that we were not able to reach them and get the collection is where the part -- in the early this thing has come in here. So it's not a stress, but it's definitely, yes, a logistical issue which probably relates to the [ DPD ] in the early numbers.

The next question is from the line of Rishikesh Oza from RoboCapital.

Just had a question regarding the credit cost. So like have you taken all credit cost in March? And also, if you could give the credit cost for the second wave?

We made the provision based on the ECL model and depending upon the past trend for 5 years, we have made enough provision. There were very positive collection trends from December onwards until second, third week of April. So all the sort of the provision that is required till 31st March has already been taken care of. And just to answer you -- your question on the credit cost for the second wave. See, too early to hazard, I guess. But the best part of the whole thing is that because of technical issues and the secured as what it was, our sense is it will be the early numbers which probably will be affected in the second wave rather than the NPL levels. So in terms of credit costs, our own sense is that I think it will be lesser than what it was as -- compared to the earlier wave, which was there where I think it was a long period of moratorium, lockdowns and things happening across. Fairly and thankfully, this has been a very short period of lockdown. So our sense is the credit cost will not be as difficult and as negative as what it was earlier.

[Operator Instructions] the next question is from the line of [indiscernible] from Axiom Investments.

My question is regarding marginal cost of borrowing. Can you please tell me the marginal cost of borrowing in quarter 4?

Most of the sanctions are in the range of 11%. The cost of borrowing is broadly stable. It has not gone up, not gone down. So broadly around 11%.

Yes. Another question is related to Satin Housing Finance Limited. Can you give me your vision of what do you see in terms of AUM in 1 year to around 5 years? I mean what is your target on SHFL?

See, SHFL, to be very honest, is an outlier in our subsidiaries. So being an outlier, I think the way it has panned out in the last 3 years with 0 delinquency, and I can probably give you that -- in spite of the fact that lockdowns and all is still there, they're still on an effective collection efficiency. Our own sense is that SHFL will probably be one of the strongest subsidiary of ours, which probably takes the Q in doing a ramp-up in terms of our growth. It grew by about 63% even in this pandemic and during this year, which was probably more difficult to probably navigate. Looking at that, if we grew by 63% in a difficult year, our own sense is that in the next 5 years, probably we will have a very healthy growth looking forward.

And the last question is related to vaccination. Sir, do you have any sign of data regarding what percentage of employee are vaccinated either with first dose or second dose? Or something like that?

So what we are doing technically for the last 1 week, once the lockdowns have started opening, all our regional offices are actually doing the drives to get our employees vaccinated. In fact, we had in about 8 regions, this Sunday that the vaccination drive was going on for all our employees in the field. The head office is having a vaccination drive today. So if you really ask me, the targets set by our HR department is that by July -- and we really want to vaccinate all our employees, [ the end ] how the strong -- each one of them gets vaccinated by July end.

[Operator Instructions] The next question is from the line of Vishal Rampuria from JB Capital Markets.

So I've got 2 questions to ask you. One is that past 2, 3 years, certainly taking a lot of steps to improve the process and the technology usage. So can you help us understand where we are in terms of those process? Are we getting the required benefits? What was envisaged when those things were rolling out or started with? This is the first question to start with.

Yes. So Vishal, I probably cannot have a direct correlation with the operating cost, which probably has come down because I think if I do that right now, based on technology, I probably will not give -- be giving you a very honest answer to it, and because there was lockdowns, there was probably dip in the expenses as compared to what it was. Just a simple factor that travel is being restricted, I think if you really look at the expenses on it, [ Vishal ]. But definitely, yes, still the fact was that the operating cost did go down by about 1% with us. But having said that, I think, Vishal, what we are, as an endeavor, doing it in Satin is that we do retake our processes compared to what the environment actually behaves. And the environment not to say the least, has probably been very challenging at every point of time. So you have to really change your attack every 6 months into the way it is going on. And now having said that, definitely, yes, the thing which I said earlier that we are probably the only institution to get it to UPI 2. But the process really works in a longer run if you look at it. But the benefits start arising maybe in a shorter spurt year-on-year. But yes, we are very definitely looking at digitizing completely our operations as well as digitizing our process. It's a thing which keeps on happening across everything. It will definitely, yes, at some point of time, lead to more optimum efficiency as well as maybe a clear cut, not increase in the operating cost or maybe a decrease in the operating cost.

So I understand your point that last year was difficult year because of COVID, and your cost metrics completely went into haywire. So forget about the cost metrics. I'm only asking you about the operational efficiency, which was the key reason why Satin went into change in your process, investment in your technologies. Are you seeing improvement in your operating efficiency, whatever the -- whatever be the key parameters which you would have set out for yourself for the company, are you seeing improvement there or not? That's the key question to understand.

Vishal, we are seeing an improvement. That is the reason why I said. But you cannot technically look at the year gone by with a year which was reversed to that. There's a difference. So that is what I said. Now technically, if you really ask me today, the whole spurt is on collection efficiencies as well as collection metrics. We've added close to about 1,000 guys into our field. If you look at the optimum efficiency, definitely, that -- if you really ask me in terms of the borrowers being done by our loan officer, it will not be commensurate to the way the second wave and the pandemic is behaving. So it is not a very clear year in terms of where everything is stable that we will really be able to do that. But having said that, because the environment needs changes, because of the pressure on the asset quality, we definitely increased our feet on the street. But the moment it gets stable across whatever we've brought in as process and technology, definitely, there is a huge uptick in terms of the advantages which will flow in through that.

Okay. My second question to ask you is that what is the incentive scheme for the field officer? People who are involved in disbursing loan at the ground level? Also people are involved for the collection also?

Vishal, what do you want to hear on that? Incentive schemes are not based on disbursements or anything. It is based on the -- definitely, the number of borrowers serviced as well as it is based on the asset quality. So that is where portfolio [ quality ] where the incentive scheme works for the senior employees.

And last thing is that in last quarter gone by, the operating expense ratio has increased to 6.37% as showing your PPT. Any one of expense to call out in this quarter?

As I said earlier, we've added more feet on street because the stress in the asset quality is there and to reach out to each and every borrower and look at and motivate them to get back into the collection efficiency mode as well as to get their collection. That is why the feet on the street has been increased. That is one of the main reasons why there is a spurt, slight spurt in terms of the operating cost.

So you are saying that more expenses coming because of the investment in the recovery team? Okay.

Yes.

Okay. So one last question to ask you. Yes, one last question is on the nonpaying customer. So this nonpaying customer, 1.5% as on March, does it also include your off-book also?

No. This is on-book.

So what would the number -- what including off-book?

I don't have a clear number. Basically for off-book, technically for us is DA, which is there -- as you very well know, DA is not our -- technically our book and our portfolio. So we -- technically, we have the numbers, but I think we can probably provide you off-line, the off-book numbers also.

The next question is from the line of [ Risha Bhatia ] from [ CIAT ].

My question pertains to comment wherein you mentioned that you -- the stress is mostly due to collection and inability to collect and less due to the intent. I'm wondering how much of a role rural monsoon -- [ COVID ] and a rural monsoon would have in aiding your ability to collect, not just from the collection point of view, but also from the ability to pay. And so that -- and does the current COVID scare in rural India significantly affect the ability to pay in terms of [indiscernible] to our business?

So let me answer on the monsoon first. So as per the current way, I think the projections are being made where the monsoons are going to be normal, which all bodes well for the ability for the customer to really repay. Since we operate in about 76% in the rural economy, so that is a positive sign which is there. The second is the scare of the second wave. The scare of the second wave probably has died down to a large extent also in the COVID since the numbers, if you look at even the urban space, have been going down drastically. Similarly, the way the states have unlocked and things are opening up, the scare, which was there in the larger part of May, I think, is not there once the lockdown happened. Definitely, yes, we are looking at it and the improvement is happening in the last 1 week or so, 2 weeks or so, once the lockdowns have eased up. And we're looking at far more positive impact on the collection efficiency also going forward.

So the credit worthiness is not significantly affected. And even if it is, it could be repaired by a good monsoon or the procedure of a good monsoon?

Yes. We technically also hope so.

The next question is from the line of Sarvesh Gupta from Maximal Capital.

Sir, first question is on the credit cost. We have roughly provided for around 4% of the [ consol ] book. What were the write-offs in this year, sir?

Just close to about INR 150 crore or so in value terms. Roughly half is the write-off, half is credit cost provisioning.

So this INR 300-odd crore is inclusive of that write-off schedule?

INR 300 crores is...

That is over and above the...

That is over and above. That is the provision line in the balance sheet.

Yes. So INR 450 crores in total, right?

So there was something in the beginning of the year also. So the way to look at it is that we have around 3.96% as a credit cost for the year, and the outstanding provision line in the balance sheet is about 5.1%.

5.1%. Yes.

Okay. And now you are saying that -- so from Q4 of FY '22 to FY '20 to FY '21, maybe this was a slightly more bigger figure than this INR 450-odd crores. But you are saying that in FY '22, we expect a lower sort of credit cost plus write-offs.

Yes, we hope so. We ought to be ready. Therefore, I said, technically, we are looking at a younger DPD, which is probably coming up. So our own sense is that it would probably not reach the NPA levels, and that's what our thought process is as the initial things look like. So yes, what you said probably -- should probably hold true that the credit cost would probably be lower than what it was during this year.

And then just to add, the -- when we are expecting the economy to grow close to double-digit when we are expecting a normal monsoon, all those things will overall impact the livelihood of all the borrowers and in turn their repayment capacity.

Understood. And sir, because your top state, which is UP, never really had some sort of a big COVID scare as such, right, so -- at least in the official numbers. So how is the behavior of the borrowers in UP and Bihar? I mean these 2 states seem to be the least severely affected by COVID second wave. So how have those worked out in May and June?

So honestly, the numbers probably do not say what probably is there. The scare was all across India in every state. But having said that, I think UP and Bihar has been more resilient in terms of our bounce back. And in fact, that is probably [ helping them ] even in the pandemic world -- the first wave also. And thankfully, our largest geographies have probably been far more resilient and far more -- are able to really bounce back much better than probably the...

So just to add, UP, Bihar, Punjab and [indiscernible] have 54% of the AUM had a collection efficiency of 98% throughout the year.

Understood. Understood. And any guidance on the loan book growth for this year that you are targeting?

So there's no -- not any guidance which we are giving. But we are saying that we will remain very muted in terms of our -- in our growth projections because we still have to -- the main focus is on portfolio quality and building up our processes and technology. I think that is where our main focus lies right now.

Okay. Now with regard to the new regulations, which are just -- I mean the draft has been announced. So in case that draft [indiscernible] sustainable impact on our NIMs and hence, the ROAs in the business. Do they have any impact?

See, I probably will not be able to give you a right answer on this. But yes, it does have a positive impact in terms of our ROA and NIMs because the margin cap -- technically, the draft regulation say the margin cap goes away. And also in terms of the 2 lender loans and all that probably is taken away. So it becomes the level play field even for the NBFC MFI to operate in this segment, which earlier was probably more skewed towards the banks and the other institution. So my sense is -- I can't hazard a guess, but yes, it will be a positive impact on the ROAs as well as the NIMs.

The next question is from the line of Nidhesh Jain from Investec India.

Can you share some more data in terms of asset quality in the microfinance segment as of March '21 in terms of part 30, part 60 [indiscernible] if you can share that?

I would first like to disclose that the stock exchange means -- as said in one of the previous answers that our numbers are well under control and much better than the previous quarter. We will -- in case we share, we will first share it at the exchange and then with outside.

Also, asset quality in the housing finance and MSME finance. I understand these are a smaller part of the business. But if you can share how the GNPA number in these 2 business as of March 20.

So housing finance. That's what I said, it's delivered delinquency numbers in...

[indiscernible] SFL.

And in SFL, it's...

1.5%.

Just about 1.5 percentage.

1.5%?

Yes. It's there in the presentation. But yes, these are the numbers.

Sure. And lastly, do you see a possibility of capital raise in this coming financial year? Or do you think we are adequately capitalized? What is the tier 1 ratio that we have as of March '21.

Well, tier 1 is close to 20%. Overall, we are at 25%. In fact, we are not anticipating a very aggressive growth for this year. We feel that, at present, capital adequacy is sufficient for our business plan. We have to receive another INR 30 crore out of the right issue proceed, that should come sometime in second quarter. So I think we don't need capital right now. We don't need too much capital to support growth of our subsidiaries, et cetera. They are also well capitalized for the time being. So no immediate plans, but we sort of decide as we move along.

The next question is from the line of Shreepal Doshi from Equirus Securities.

So sir my question was with respect to collection efficiency against the billing. So what would that number be for Feb, March, April, May and June?

I don't think that will have any meaning because when there were overdue, so we'll allocate first due, first collection. So when there are sort of a high number of past lines, And then you have allocated to the previous month because the way we look at is what is the billing for the month versus what is the collection for the month, including arrears. But we don't include prepayments in that. So to that extent, this number is quite reflective of how many clients are paying over live clients. This is a better and direct reflection of the collection business.

You said the cumulative collection efficiency for FY '21 is 94%. So have we not counted the amount of moratorium time period and then only accounted for the remaining time period?

The moratorium was a -- there was no demand during the moratorium period. So when we have given moratorium, that means that there's no billing for that period. The customer who could means that has been taken in billing as well as in collection. But once we have given the moratorium, that is not considered as amount due because that is what the entire purpose of moratorium was.

Okay. Sir, we -- given for customers, nonpaying customers, what would be the number of -- what is that number before partly paying customers?

So we have given that number last month -- last quarter, as -- so to say, we have a 105% collection for the month of March. So most of the customers have started repaying and paying only on a month-on-month basis in the month of March.

But the other thing also, I think partly paying technically would probably be not that big basically. I think -- which will be there. So this is 1.3%. We can probably look at maybe some slight uptick in terms of partial repayment. But we don't have the numbers right now. Probably can do it off-line with you at some point in time.

Sir, given the write-off numbers to be INR 150 crores for the year, what is our write-off strategy? I mean as you now -- how many days do we tend to write it off? Or one, was it a proactive measure to write-off already?

So we continue to keep making efforts in the time we decide that the cost of recovery is more than the recovery itself. We continue to keep making effort, and we have collected around INR 13 crore out of the write-off amount. So we normally write-off it from the books when it is 480 days plus, but make adequate ECL based on our trends, et cetera.

Okay. So [indiscernible] is the write-off? Got it. And sir, like first on the other businesses like housing and the MSME business. So what is the -- I mean I know earlier participant also asked what are your thoughts on the -- after, say, 2025 sort of a number wherein -- what kind of AUM number you're looking at? And what kind of ROA, ROE businesses are these going to be like? And in future, do we plan to split these businesses into a separate entity, like separate district or sell it off? So just give some -- if you can just give some color on those lines.

See, we are building it up, to be very honest. And right now, if I hazard any guess, I think it'll probably be too speculative to look at it. But the thought process is, since both these businesses are profitable right now for us ever since inception, I think we are looking at maybe a significant growth in both these portfolios as well as the companies. How things pan out definitely, yes. But I can just probably hazard one statement to you is that, yes, we would look at monetizing both the subsidiaries of ours at a certain point of time, that is what our thought process is. But once it becomes very significant enough to look at -- and we are building this up in the same level to look at it. So we will definitely look at how we monetize that in a better space for -- to get the benefits even for the parent company from both these entities.

Can you give some color on the ROA, ROE sort of business models that we're building for these 2 new businesses?

See, I'll be -- it's very -- it's too early in our life to probably do that. But the stress is overall, good growth and portfolio quality. I think that is what we are probably constantly looking at or building it up. ROAs, again, will probably be looked at, how our growth happens and how we are really looking at. But MSME definitely is a high ROA growth level trajectory. Housing, yes, to a certain extent, has also an ROA trajectory, but maybe slightly lower than what MSME would be. But yes, the idea is, again, to really monetize both these assets of ours in the times to come so that the benefit also goes back to the parent company as well as building these businesses to a certain scale.

The next question is from the line of Vivek from DSP Mutual Fund.

I think most of my questions were answered, so I'll just ask a larger macro question. In terms of the resilience of your customers, it has been extraordinary in terms of how they've -- collection efficiency has picked up, and you don't see it in urban India. So there seems to be like a 2 India story is going on. So could you please just spend a couple of minutes to explain the macro part of the story? How -- what gives you the confidence the customers will come back so strongly because they already have? That's my question, sir.

See, if I give you a prelude into the first wave, when it was 4 months of complete moratorium and not being there. In fact, our thought process was also that once you start being there in touch with your customers, and it's a high-touch point game that there will be challenges in terms of the collection efficiency bouncing back. But rightfully and thankfully, it did. Similarly, what we feel even now, since the biggest part of microfinance is the high-touch mechanism of our customers, and we do biweekly collection. Our sense is that once you are able to motivate, meet the customer, look at the level bringing him back into the system of collection efficiency as well as the credit bureau as all related aspects to it. I believe the factors are probably far more positive to get a better rate of collection efficiency and lower credit cost. But definitely, yes. The installments are less as compared to probably the way it pans out in terms of a the higher ticket size loan. My own sense is all these factors put together, rural, normal monsoons, all these factors which bunch together give us probably that confidence that, yes, whatever happens, and we've been seeing from demonetization onwards. So it's not been any year which has been a lull. Demonetization, then the pandemic for 2 years in a row. So 3 out of 5 or 4 out of 5 years have probably just been that. But still, the resilience of the customers to come back and be there in the system is probably noteworthy to look at the portfolio quality in that context.

Sir, since you've had many years of experience, would it be fair to say that the steadiness of cash flow has improved over a period of time since that is -- now this is a boring pattern, but the income streams has become larger and more steady compared to the past? Or is it still very volatile?

See, I believe it's not volatile. What happens is, and I think that's probably the best thing about it, not 1 stream of income which comes from a household in the rural space. There are at least a bare minimum 2 to 4 streams of income which come in. So even if there is kind of a lockdown or a pandemic or something like this externally, which happens, there could be a challenge in 1 stream of income, but making all 3 streams of income probably just go down, and for you not to repay, is one of the key issues which is there in terms of repayment. I can't say about the intent issue. But definitely, yes, that is something which is probably not factored in the cash flows, which are probably [ broken ]. But yes, definitely, yes, the cash flows do bolster up in terms of 3 or 4 streams of income for the household that the collection efficiency keeps on happening the way it is.

The next question is from the line of [ Amit ] from Aditya Birla Capital Limited.

Yes. I'm not from Aditya Birla Capital. I'm just a retail investor. So sir, my question related to the small finance bank license. Just if you can throw some light on that. In the past, I think the group had indicated it would be to going for that license. So just wanted to get some color on a, the interest; and b, the timing.

See, again, I can't give you anything on this. Right now, the efforts and everything is on collection efficiency and asset quality. I think for us, maybe the next 6 months or a year is cut out to look at all this. I can't give you any concrete thought process of what we are looking at in terms of SFB or any kind of this thing. Right now fully concentrated on looking at this. So maybe when the opportune time comes, I think we might take a look, but nothing as of right now.

The next question is from the line of Dian Sachdev from [indiscernible] [ Go Asset Managers ].

First of all, good that you all have created enough buffer or capital liquidity provision in tough times. So good. My question pertains to what is the average yield on different assets across different segments,if you can just give me some sense on that?

So when we are pricing our product, we maintain the 10% margin. So our cost of fund is around 11, and then including -- so are you talking about microfinance or talking about housing and other business?

Yes. Microfinance even microfinance and housing business.

Okay. Okay. So while being the pricing in microfinance, we maintain the 10% margin. So we're lending close to around -- a little over 21%. So there has been some yield loss because of overdues, et cetera during the last year or so. In terms of housing or blended yield, it's close to around 14.5%. And SME, we broadly lend at 22%, 23%.

Okay. And within housing is there a still small subsidiary, but how much is retail and how much is nonretail?

So everything, 100% is a very, very [ granular ] retail book with a good mix of salaried, nonsalaried, over 85% of the clients are a -- I mean taking it to their own usage, et cetera. A very small LAP book. It's a very, very [ granular ] retail affordable micro housing portfolio quality.

But the other thing is when you look at the presentation, I think the number of customer in microfinance has reduced over the last 3, 4 years or so from 35 to about 30 lakhs, as our loan -- gross loan portfolio has gone up from about INR 7,000 crores to INR 8,000 crores. So can we assume or interpret this as the average ticket size rising per customer?

So this is mainly related to the inflation, which is there. Technically, the inflation cost take care of the thing, but it broadly remain in the range of about 30,000, 32,000 [indiscernible] odd. And majority for the last couple of years, we're looking at repeat customers largely rather than acquiring new customers. So that is where you'll see probably a difference. So there could be still some proportional happening across, that's the reason why I think there's a slight dip in -- and I don't that was 35, [indiscernible] . I think the highest we went was up to about 32 lakh customers, which is now down to about 29.5 lakh odd.

Okay. But we can elucidate the average ticket has gone up there, a more seasoned book combination [indiscernible]?

Yes, it's more of a season book, more repeat customers coming in. Slight uptick in terms of the average ticket size.

Okay. And sir, you mentioned about the collection on a digital -- on UPI platform. How much of the disbursements is also online completely instead of loan officers physically bring the KYC, et cetera? So I'm talking about not only the disbursement, but also the online KYC without having to face of the customer. Is there anything in the system?

Yes. So the disbursements are completely online straight the bank accounts. KYC also, we do a centralized share service, this thing where KYCs are digitally marked with the Election Commission's website, so it's done there. So I would say probably the maximum part is all digital in terms of -- except for the fact that yes, the loan officer does have to bring in the borrower, and they have to bring in customers. We are trying to also do a lot of system checks in that where we are able to build up completely digital marking of KYC as well as collection. But still some time over where we are able to do e-KYCs and all. I think we are not technically allowed to do e-KYCs and all. So the moment that comes through, I think we are -- technology will be fully compliant address and [indiscernible].

The next question is from the line of Shreepal Doshi from Equirus Securities.

Just had one more question, sir, which was with respect to what measures did we take during the second wave in terms of did we give any EMI holidays or repayment holidays to our customers? Or the normal collections went on as it is?

No. So no holiday which was given. Technically, wherever there used to be curfew, which used to happen at -- during the afternoon until the evening, we used to do the collection since the early morning. Wherever we were able to reach the customer where the branch was not infected, our employees are not expected, we could probably do a little bit of that. But where there was complete lockdowns, we were not able to reach them. That is where a large part of the problem did lie. So that is how during the complete lockdown days in various states, that's almost panning out.

The next question is from the line of [ Shreyas ] from Spark Capital Advisors.

One last question from my end, sir. In relation to your portfolio in Assam and West Bengal, given that most of the peers [indiscernible] sort of have spoken about the risk on the portfolio in those 2 states. Could you direct any, sir, without any number guidance on what your views are on additional increments in [indiscernible] for those states and the portfolio risk, if at all in that case?

So Assam, I think it's still a lot of conversation which is going on with the state government in terms of what they deem to probably give it as loan waivers and everything, but nothing which has probably been concluded. And our sense is I think there -- the impact will probably be around -- our own sense is it will not be that big in terms of where it probably go, and we've provided a lot of it in our balance sheet. Having said that, there is no disbursement right now which is taking place. In fact, the disbursements have stopped in Assam since the last -- my sense is about 6 months or 6 to 8 months. It has probably been stopped over there. So that is where Assam stand. West Bengal. Because of lockdown, it's still going on. The thing is that we've done sufficiently appeal for that, but nothing which probably gives us a right of concern in technically West Bengal. But yes, Assam, we're just waiting for the state government measures to probably come in terms of the bill and the loan waiver, which we did talk about. So we'll see once that can come in. And a large part of our Assam portfolio is also under assignment. So that is one factor which we are also looking at in a -- maybe in a positive frame of mind.

Thank you very much. Ladies and gentlemen, that will be the last question for today. I will now hand the conference over to the management for closing comments.

Yes. Hi. Good morning, everyone, and thank you for taking out time and coming to attend our call to this morning. I hope we've been able to address earlier query. For any further information, please get us with me. My name is Aditi, and I head the Investor Relation for Satin Creditcare. You can also get in touch with Strategic Growth Advisors or SGA, who are our IR advisors. And I would like to again take this opportunity to thank everyone for joining the call. And I'm sure we'll weather this crisis together and emerge stronger. I wish everyone a great health. Thank you. Bye-bye.

Thank you very much. On behalf of Satin Creditcare Network Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.