Bharat Financial Inclusion (formerly SKS Microfinance) has reported strong Q1 earnings with a four-fold jump in profit. Speaking to Bloomberg TV India, BFI President Dilli Raj said the company plans to significantly grow its loan disbursements to ₹16,500 crore and asset under management (AUM) to ₹11,000 crore in FY17.

Can you take us through the quarter? What led to a big jump in profit?

The first and foremost driver of the profit growth is a growth of 10 per cent in the portfolio outstanding on a quarter-on-quarter basis. Actually, the average growth is 16 per cent for the quarter. The second reason is that there has been a reduction in cost to income from 47.5 per cent to 45.7 per cent.

Financial cost has also been substantially reduced. Apart from this we have recognised MAT for the quarter at ₹32 crore, as we have been disclosing over the last two to three quarters. And we also had a transitory provision of ₹96 crore of MAT, which we did not recognise last year and we have chosen to decide from now on. These are the drivers of profitability.

Your AUM and loan growth are forecast at 76 per cent and 59 per cent, respectively. Can you tell us where these growths are coming from? Do you expect to maintain this kind of a momentum in the coming quarters as well?

If you look at last year’s results, for the whole year we disbursed around ₹12,088 crore. We have given guidance for this year at ₹16,500 crore of disbursement. AUM was ₹7,677 crore last year end. We see it moving up to ₹11,000 crore by the year end.

Your cost of borrowing has also come down this quarter. Give us an outlook of that going forward.

We see the cost of borrowing for the buyers reducing at least 25 to 50 basis points irrespective of betting on the anchor rate reduction. We had ₹2,700 crore of securitisation last year. This year, we think we will do somewhere around ₹3,500 crore. The total mandated debt programme is about ₹10,000 crore and 35 per cent of that will come from securitisation.

You have a policy of maintaining your tier-I at about 23 per cent level. Is there any fund raising plan on the cards?

We have got the approval from shareholders to raise up to ₹750 crore. Our capital adequacy ratio is right now at 23 per cent. But we have a self-imposed financial obligation and we would always maintain 5 per cent excess CAR over the RBI mandated ratio. At an appropriate time and in a window of opportunity, we will launch the capital raising plan.

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