Mumbai: Bharat Financial Inclusion Ltd on Monday informed the investor community that 4.5% of its gross loan portfolio is under risk of slipping into bad loan in the fourth quarter. In a quickly arranged investor call, the management said that portfolio with more than 8 weeks overdue stood at ₹ 383 crore or 4.5% of the total loan book which is higher than 0.2% reported in the third quarter.
Striking a cautious stance since the last investor meeting, the management of Bharat Financial said that they expect overdues to be repaid only in 3-4 months as against the earlier projection of March end. The management also highlighted that 60% of the overdue portfolio pertained to Uttar Pradesh and Maharashtra. They also added that around 1300 centres witnessed zero repayment since demonetization. Collections in these states had dropped after local political leaders misinterpreted the Reserve Bank of India’s 90 –day guideline on bad loan classification for a loan waiver scheme.
“BHAFIN recognizes NPA at 60 dpd and as per their provisioning norms of 50% on outstanding amount would imply provisions of 2-2.5% in our view. As per our recent channel checks MFIs across India is seeing weak collections as compared to their expectation at the end of Dec’16", said Parag Jariwala, banking analayst of Religare Institutional Research in a note to investors.
As per the company’s presentation, collection efficiency till date stands at 95.5%. For the managed portfolio where the company has provided a credit guarantee of 10%, the collection efficiency is lower at 88.6%.
“The company has not provided for shortfall in Nov and Dec’16 as provisions triggers after 45 days. We expect managed portfolio to see write-off of ₹ 380mn in Q4FY17," Jariwala added in his note.
Bharat Financial has been in talks with several players including Indusind Bank and Ratnakar Bank to sell majority stake in the company. The company had however clarified to the exchanges that the news is merely market speculation. “The Company explores various options from time to time and will make an announcement in accordance with the relevant regulations as and when a transaction, if any is approved by the Board", the company added.
The stock which had gained nearly 9.6% since the start of February, is now trading at ₹ 802.50 as of the closing price on Monday.