Analysts at CLSA say MFI is among the fastest growing retail segments and has emerged stronger with each crisis. MFIs’ strength lies in their customer base. Focused on the unorganised sector, they lend to essential supply providers such as vegetable sellers, fruit vendors, small kirana store operators, who faced a cash-flow crisis during the lockdown, but bounced back with some working capital support that the MFIs offered. CreditAccess grew its loan book by 54 per cent year-on-year (YoY) to Rs 11,724 crore in June quarter (Q1), while Spandana’s grew at 37.4 per cent to Rs 6,835 crore. However, on a sequential basis, loan growth was flat for both MFIs as disbursals took a hit.
As for profitability and asset quality, Spandana fared better with net interest margin (NIM) of 15.5 per cent (down 100 basis points or bps YoY due to excess liquidity buffer) and gross non-performing assets (NPA) ratio of 0.6 per cent, up 64 bps YoY and 28 bps sequentially.
CreditAccess’ NIM remained flat at 12.6 per cent, while its gross NPA ratio shot up to 1.63 per cent from 0.55 per cent a year-ago (it was flat sequentially). Net NPA ratio for both MFIs was zero. Spandana carries a provisioning buffer of 3.1 per cent of its total book, while it is 2.1 per cent for CreditAccess. The key risk though would be the 13-15 per cent of inactive customers (neither availed fresh loans nor repaid earlier ones) at both MFIs, who pose asset quality risk, according to analysts at ICICI Securities.
CreditAccess’ foreign parentage and superior liability profile places it above Spandana in terms of valuations, at 3.1x FY21 estimated book compared to 1.3x of the latter.