The second quarter numbers have been relatively better than last years although the profits are stable on a sequential basis. What were the key profit drivers?
The business picked up in the second quarter. The basis on which we set up our branches and begun to focus on growing the business is now taking shape as against last year where we were tackling the effects of demonetisation. We are in a good track and moving in the right direction.
What has led to the margin expansion? Can the margins be sustained at 11-12% range despite rising costs?
We have higher cost funds which we had borrowed earlier when we were a macro finance institution and part of that was repaid. We replaced it with deposits which were at slightly lower cost and that will continue for the rest of this financial year. We should be able to contain the growth in market interest rates and build that into the overall profitability.
What is leading to improvement in asset quality? What are the key factors?
We have taken care of all the provisions last year based on which we cleaned it up. We are back to the traditional asset quality levels that the micro finance business has been known for during a normal business environment. The net NPA is now about 0.3% and that is a very comfortable level.
Which states are showing better collections and recoveries according to you?
We had some problems in a couple of states. We are seeing steady recoveries in Karnataka and Maharashtra, UP and other states where business was doing well. It continues to do well in West Bengal and Tamil Nadu.
You deposit book has jumped 10% quarter on quarter. Where do you see the deposit book by the end of FY19-FY20?
In FY19, we expect our deposit book to reach about Rs 7,000 crore in terms of both retail and wholesale deposits. We have 367 full bank branches as against 180 last year. The growth in the bank branches will help us to mobilise deposits in the field.
Were there any hiccups in growth for you in the quarter gone by because of the recent liquidity crisis?
We are a small finance bank and we are regulated by RBI. We have also got a scheduled bank status. All of this helped us to manage the situation in the financial markets. In the early stages, when the NBFC crisis started, people were trying to understand who is an NBFC and what is the current situation, etc, to understand the market. That has now settled down. We are seeing that liquidity is not an issue and we are able to manage the business going forward.
What gives you the confidence of expecting AUM growth of 30% to 35% for FY19? Which states and segments will drive that growth?
Traditionally the second half of the year has always been better in terms of our business than the first half. That is the natural way in which our business grows. The festive season is in the third fourth quarter. As it comes towards the end of the financial year, things pick up. These two quarters generally are better than the first two quarters and that itself has a natural tendency to grow the business.
Now, we have got all our staffing and all our branches are going to be ready to grow the business. All these factors help us to grow faster in the second half and then going forward into the next year into we are well placed to take this whole thing forward. So I think the fact that we have invested and the fact that we have built a base is something that the market should understand is that we have put in place the infrastructure that is needed for the growth.