Customers willing to pay but with a time lag: Ujjivan Financial

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In the backdrop of demonetisation, Ujjivan Financial posted a steady set of third quarter earnings where its net profit fell 39.8 percent to Rs 44 crore quarter-on-quarter (QoQ) and its net interest income stood at Rs 229 crore, up 2.9 percent (QoQ).

India’s booming non-banking financial companies (NBFCs) sector hit a speed bump due to the government’s surprise cash ban and were widely expected by the Street to post subdued earnings for the third quarter of this fiscal.

Speaking to CNBC-TV18, Sudha Suresh, CFO of Ujjivan said that monthly collections have picked up strongly in January and there has been an encouraging trend in terms of repayment as customers are willing to repay but with a time lag.

She further said that the company have started new customer acquisitions in certain regions and sees provision write-backs in the next 3-6 months.

Below is the verbatim transcript of Sudha Suresh’s interview to Reema Tendulkar, Prashant Nair & Abhishek Kothari.

Prashant: Have you taken a provision this quarter, if yes, how much and why?

A: The Reserve Bank of India (RBI) has indicated that we could look at the assets which are overdue in the demonetisation period of November and December. Ideally we could treat this as stranded assets.

However, Ujjivan has always had a very conservative provisioning policy and that has also been recognised as one of the best practices and Ujjivan looked at affected portfolio and reviewed it both in November and December and January and we have taken conscious call in terms of putting up an extra provision for these assets and not looking at them, taking the benefit of RBI’s guidelines which said that we could indicate this as stranded assets specifically for the overdue for November and December.

Prashant: How much have you provided an also if you can tell whether your collections are weekly or monthly and if you can clarify whether there is a possibility that this provision can be return back and how quickly?

A: We would like to indicate that our collections are on monthly basis and during demonetisation period a lot of support was given to our customers who faced a lot of hardships in terms of getting the new currency.

So on one hand we ensured that we give some time to the customers and the repayments have started flowing in and it has been very encouraging trend that we have seen across post demonetisation in November. We have encouraging trends both in December and January particularly in January we are seeing some encouraging trends in terms of repayment and collection efficiency.

Looking at write back in terms of provisions assuming that they are on an access mode, we would definitely take stock of it in the next three-six months and see how the collection efficiency is there in terms of overdue and in case we have a robust provisioning, we could always look at write back.

Abhishek: This provision is entirely on your gross non-performing asset (NPA) or the NPA formation. There has been no provision with respect to the state interference that was happening in Uttar Pradesh and Maharashtra?

A: We have taken a call on affected portfolio and it is across because Ujjivan is pan India presence with all 24 states. So wherever there is an affected portfolio, we have seen how the trends are and what are the behaviour and then we have taken a conscious call on the affected portfolio in terms of overdue.

Reema: Could you give us a breakup on a month-by-month basis on disbursements as well as collection efficiencies for October-November-December and January to get a sense of what recoveries looking like post demonetisation?

A: On an average we were close to disbursing around Rs 600 crore per month. In October we maintained the same run rate but in November, post demonetisation.

We had to look at how to spread this information to our customers and monitor in terms of collecting only in the new currency and at this juncture we thought it is prudent not to acquire new customers. So to that extent we had some amount of disbursements which came down, in fact most of the microfinance institutions (MFIs) turned to SSB who were not able to disburse; Ujjivan was able to disburse almost Rs 553 crore in the month of November.

So, whatever collections came to us and which was in the new legal tender, we ensured that our valued customers with a good track record, with repayment record and who had requested for sanctions of new loans – those were duly sanctioned and they were able to avail.

Therefore, in the month of November we had about Rs 553 crore of disbursement. In the month of December we had about Rs 415 crore of disbursement. So we took a call in terms of new customer acquisition where we did not acquire or do any disbursement but however, to our existing customers with a good track record of repayment, we continued our disbursements.