SATIN - SATIN CREDITCARE NETWORK LIMITED Share Price

In the recent earnings call, management provided a positive outlook for Satin Creditcare Network Limited, highlighting their emphasis on long-term value creation and strategic resilience amid the challenging microfinance environment. For FY25, the standalone Profit After Tax (PAT) stood at INR 217 crores, with INR 41 crores reported in Q4 FY25. The company achieved a year-on-year AUM growth of 7%, with managed credit costs at 4.6%, within the guided range of 4.5% to 5%.

Management emphasized the comprehensive implementation of "Guardrails 2," ensuring responsible underwriting practices, which they believe will enhance asset quality and transparency. They noted a significant improvement in Portfolio at Risk (PAR 1), which declined from 6.8% to 4.9%, and PAR 90 at 3.7%. This improvement was most notable in their top four states "” Uttar Pradesh, Bihar, Assam, and West Bengal, which together constitute 61% of their portfolio.

Also significant was the company's robust provisions of INR 280 crores, representing 3.3% of their portfolio, well above RBI's requirement. Satin aims to continue focusing on operational efficiency while managing customer acquisition and credit risk judiciously.

They hinted at potential growth, assuring that there will be an increase without providing specific guidance, stating, "we are looking at credit costs," preparing for the upcoming financial conditions. The mention of 1,568 branches, expansion in retail MSME loans, and a consolidated revenue growth of 16.1% to INR 2,602 crores further reflects a strong positioning.

Overall, management conveyed confidence in navigating the future with resilience and strategic execution, reinforcing their commitment to sustainable practices and financial inclusion for rural India.

Here are the major questions and their respective answers from the Q&A section of the earnings call transcript:

1. Question: "Can you quantify the interest reversals for the quarter? Is the entire yield dip in this quarter because of that, or is there any other factor?" Answer: "The interest reversal for Q4 FY '25 was INR 15.5 crores, and for the full year, it stood at INR 27 crores. The yield decline is not solely due to these reversals; the gross yield also includes various income streams like DA income and treasury income, which can fluctuate quarter to quarter."

2. Question: "How should one think about cost to average assets going ahead, considering operational costs were slightly higher this year?" Answer: "Currently, our primary focus is on maintaining good asset quality, which has led to increased operating expenses. We believe this elevated level is temporary, and while costs may settle slightly higher than previous averages, we're confident that operational efficiency will improve in FY '26."

3. Question: "What are the trends in securitization demand in the market, and how much do you plan to securitize in the coming quarters?" Answer: "Securitization demand is stable, and we're currently making strategic decisions on how much to engage in direct assignments. The typical range is about 22% to 25%, but we opted for fewer transactions this quarter in favor of funds raised through other means, with no significant investor demand issues experienced."

4. Question: "What are your current commitments regarding ROA and how do you see that improving in FY '26?" Answer: "Our main focus is on maintaining a positive ROA despite sector pressures. Containing credit costs is crucial for improving our ROA, and we anticipate that as we stabilize operations, these metrics will enhance. However, I'm hesitant to provide specific growth guidance until we analyze the first quarter's performance more thoroughly."

5. Question: "Can you provide any guidance on credit costs for FY '26 given your recent performance?" Answer: "We're refraining from giving specific guidance on credit costs until after the first quarter. Historically, we've provided clarity after assessing initial quarterly metrics. However, I'm confident that our credit costs will be less than what we managed last year."

6. Question: "What has been the impact of your recent guardrails implementation, particularly on rejection rates and collection efficiency?" Answer: "We've seen rejection rates increase by about 3%, which we anticipated. However, this hasn't adversely affected our collection efficiency, which remains stable. For overall performance, it's more prudent to evaluate metrics over longer periods rather than single months."

7. Question: "What were the write-off and slippage figures for Q4, and how do they compare year-on-year and quarter-on-quarter?" Answer: "The write-off for Q4 was approximately INR 38 crores, down from INR 41 crores in Q4 FY '24. Slippages this quarter were around INR 32 crores. Year-on-year, our write-offs continue to reflect a positive trend as we've managed to reduce them compared to previous years."

8. Question: "Can you clarify why your consolidated PAT was lower than standalone PAT?" Answer: "The discrepancy arises from revaluation adjustments of our investments in subsidiaries and changes in tax rates affecting capital gains. While the standalone figures show gains, these are neutralized in the consolidated returns."

Each answer is structured to reflect the perspective of the company's management during the call and stays within the character limits specified.