Micro-finance firm Equitas Holdings, which has got RBI approval to convert to a small finance bank, has posted a strong first-quarter result with a profit growth of over 63 per cent. The asset under management (AUM) growth has been 48 per cent year-on-year while loan disbursement has grown 32 per cent. Speaking to Bloomberg TV India , Equitas Holdings CEO HKN Raghavan says the company has been cautious in not increasing the loan ticket-size as it operates in a segment that lacks individual credit assessment. The lender is looking to increase its business in second-hand commercial vehicles, SMEs and affordable housing, he said. Excerpts:

What have been the key highlights during Q1?

The AUM growth was cent year-on-year, disbursement growth 32 per cent, net interest income (NII) has grown by 52 per cent and profit after tax (PAT) has rose by 64 per cent. This is reflecting an improvement in efficiency.

Was is your net interest margin (NIM)?

Our NIM is around 12 per cent. It’s about 8 bps more year-on-year.

What’s your outlook on NIMs? Do you see some kind of moderation coming in?

The NIM is high because of equity infusion, and the gearing is low at 2.8 times. Further growth will be driven by better and improved gearing because of which there could be some moderation in the NIM.

Your credit costs have cooled off year-on-year…

Credit costs have cooled down and things are definitely better. The portfolio quality has improved. The increase in credit costs is because of the recognition of the NPA period. The NPA has to be aligned with the RBI’s recommendation. So we have moved from 150 days to 120 days of recognition. But otherwise, the portfolio quality remains same and credit cost is under control.

For a four-year relationship, your loan ticket size is about ₹35,000 compared with the industry average of about ₹40,000 after a one-year relationship. How does this impact your conversion ratio?

In terms of the loan ticket-size, Equitas is always cautious about increasing the ticket size as the industry in which we operate lacks individual credit assessment. It will have an impact on the conversion. But I think, given the opportunity this sector gives us, it will not really impact much.

What’s your outlook for the micro-finance segment?

All micro-finance firms will continue to grow at the current pace. Used commercial vehicles provide a very good opportunity because the market size is close to ₹1.9 lakh crore and 55 per cent of it is serviced by informal players. The SME segment also offers an opportunity of about ₹1 lakh crore as the NSSO (National Sample Survey Organisation) survey says 57.7 million clients require funding. In case of housing, it will be a tapered growth. We have reworked our strategy to focus on affordable housing with a ticket size of ₹25 lakh.

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