Satin Creditcare Network Ltd (SATIN) Q2FY27 Concall Transcript - Sep-2026 Qtr
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Moderator: Ladies and gentlemen, good day, and welcome to Satin Creditcare Q2 FY '27 earnings conference call. As a reminder, all participants' lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star, then zero, on your touchtone phone. Please note, that this conference is being recorded. I now hand the conference over to Mr. Pratik Matkar from JM Financial. Thank you, and over to you, sir.
Pratik Matkar (JM Financial): Thank you. Good morning, everyone, and welcome to Q2 FY '27 earnings conference call of Satin Creditcare. First of all, I would like to thank the management of Satin Creditcare for giving us the opportunity to host this call. From the management team, we have Dr. H P Singh, Chairman and Managing Director, and the senior management team. I would now like to hand over the call to Dr. H P Singh for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, sir.
H P Singh (Satin Creditcare Network Ltd): Thank you. Good morning, everyone, and thank you for joining us for Satin Creditcare Network Limited's H1 FY '27 earnings call. When we spoke in May, we said that FY '26 had tested the sector and separated the institutions that are structurally sound from those that were not. In July, we said that the test was behind us and that the question that matters now is who is positioned to grow in a way that holds up when the next cycle turns. Q2 is further proof that we were we are not just emerging stronger from the last cycle, but building the resilience to grow sustainab- sustainably through the next.
H P Singh (Satin Creditcare Network Ltd): alongside our 21st consecutive profitable quarter. On a consolidated basis, H1 PAT stood at 299 crores against 98 crores in the first half of last year. This performance reflects the philosophy that guides us: dream big, deliver bigger. The first half of FY '27 reflects the progress we have made in strengthening our underlying business and positioning Satin to capitalize on the evolving microfinance landscape. Following a challenging period for the sector, improved borrower indebtedness, industry guardrails, and greater credit discipline, they have contributed to a more conducive operating environment. However, we remain cautious that the sustainability of this recovery will depend on prudent underwriting, responsible customer selection, and consistent collection performance. At Satin, we have remained focused on these fundamentals while pursuing our growth opportunities. We want to address two important points which were discussed in earlier quarters. The first is the monsoon. We had earlier indicated that the revised outlook warranted caution on rural cash flows over the subsequent 2 to 3 months. That period has now passed and the recovery has now been very encouraging. Assam, where four districts were severely impacted by floods, has almost fully recovered with no discernable impact on our credit costs. 42,394 borrowers were granted a moratorium, and nearly 90% have resumed repayments during the moratorium period itself, reflecting the gradual restoration of livelihoods. This is also a very positive indicator of our robust underwriting, thus resulting in negligible impact on credit costs. As a genuine customer-centric gesture, we have decided to pass on the entire insurance payout that will be received under our NatCat insurance program to the affected customers. Importantly, we didn't need to utilize any portion of the management overlay for this event, reflecting the resilience of our portfolio and the effectiveness of our risk management framework. The second point is geographical diversification. We want to address concerns around Karnataka and Maharashtra, which have both been viewed as stressed states this year owing to the drought conditions. Our exposure is negligible. Karnataka and Maharashtra account for 1% each of our on-book portfolio. This leaves us well-protected from stress in these markets and allays concerns about the possibility of asset quality being impacted. Also, as of now, we have not witnessed any stress in repayment in these states. Consolidated AUM reached 16,589 crores, growing 31% year-on-year. Standalone AUM stood at 13,608 crores, up 23% year-on-year. Consolidated disbursement for the quarter stood at 3,697 crores, up 41% year-on-year, taking first-half disbursements to 7,192 crores, up 48% year-on-year. Consolidated profit after tax for the quarter was 176 crores, up 231% year-on-year and 43% sequentially. Standalone profit after tax was 172 crores, up 231%. Consolidated PPOP grew 53% to 324 crores in the quarter and 43% to 590 crores for the half year. Consolidated ROA for the quarter stood at 4.5% and ROE at 22.8%, and on adjusting the buffer, adjusted ROA was 5.5% and ROE at 27.7% respectively. I shall discuss this in detail in a while. Our operating expense ratio was 6.6% against 7.2% a year ago. Cost to income improved to 41.6% from 49.8%. Standalone return Standalone return on assets for the quarter was 4.9% and return on equity 20.6%. For the half year, reported ROA stood at 4.3% and ROE at 17.8%. ROA after adjusting the management overlay stood at 6% and ROE at 25% for the quarter. On the asset quality, we delivered a very strong quarter in terms of asset quality. What is remarkable is the phenomenal reduction in slippages.
H P Singh (Satin Creditcare Network Ltd): efficiency was 99.8%. Coverage has strengthened sharply across every bucket. Stage three coverage is now 91% against 85% in June. Stage two coverage has gone up from 21% in June to 62%. Our on-book provisions stand at 263 crores against gross NPA of 197 crores and against a provision requirement under RBI norms of 152 crores. In other words, our provisions exceed our gross non-performing assets and net NPA on this basis is negative. Our overall provision coverage ratio is 133%, up from 115% in June. We also recovered 16 crores against write-offs during the first half of this financial year. On trade cost, our reported figure for Q2 FY '27 was 2.47% against 4.83% a year ago. For the half year, it stands at 2.77% and excluding the overlay, 2%. Both are below the 3 to 3.5% range we guided for FY '27 and we feel confident to maintain this momentum. Now, the part that matters the most, you know, in July, we told you that we intended to keep building our buffer through the good quarters. We have taken the management overlay from 36 crores to 50 crores this quarter. Excluding that overlay, our trade cost for the quarter would have been 0.99%, and our standalone ROA and ROE would have been 6% and 25%, rather than the 4.9% and 20.6% we have reported. Our consolidated ROA and ROE for the quarter would have been 5.5% and 27.7% for the quarter and not the reported 4.5% and 22.8%. We have therefore absorbed roughly 100 plus basis points of ROA into the balance sheet and we had every opportunity to declare more stellar profits. We said in July that we would keep on doing this, and we have done it. We will continue to disclose both the reported and the adjusted numbers every quarter, so that you can see exactly what we're choosing and appreciate our prudence. We are aiming to build a cycle-proof return profile and a buffer built when the credit experience is benign, the means to achieve the same. First, there are two operating developments this quarter. First, we have adopted the Gramin score for credit evaluation of our microfinance customers alongside pin code level risk scoring with early warning indicators. This give us, gives us a bureau validated, rural calibrated view of borrower quality at the point of underwriting, layered on top of our own internal policy. Our sourcing to disbursement ratio stands at 34%. Secondly, cashless collections have reached 25% of total collection and we want to be precise about how. This has happened organically through customer adoption, rather than through any mandate or incentive from us. Disbursements remain 100% cashless. Non-MFI portfolio now stands at 20% of consolidated AUM against 15% a year ago, and we are on track to achieve the target of 30% by 2030. Satin Finserv continues to be the standout with AUM of 1,761 crores, up 184% year-on-year and 29% sequentially, now across 140 branches in 16 states, with 19 branches added during the quarter. GNPA improved to 3.07% from 3.49% in June, with CRAR at 26.94% and net worth of 461 crores. Disbursements for the first, for the half year were 967 crores. Satin Housing Finance stands at 1,219 crores, up 19% year-on-year, with CRAR at 57.67% and gearing at 1.70x across 59 branches in 22 states and net worth of 370 crores. We have slowed origination in housing for two quarters while we rebuilt the sourcing and underwriting process end-to-end, and we have grown the field team from 370 to 512 during the quarter in preparation. Satin Technologies continues to commercialize through the quarter, with its core banking platform progressing through customer UAT, and Cathrito Labs, in which we hold a 68% stake, advancing its quantum-safe cybersecurity offerings towards certification. The HRMS platform remains live in production with an expanding customer base. Satin Growth Alternatives has achieved the first close of its Category II AIF in a record time of 4.5 months after getting the license, with institutional and high-net-worth LPs being onboarded against a strong deal pipeline, and the first deployment has already been done. The benefits of diversification are becoming clearer. Our subsidiaries are still scaling, with each carrying a fixed-cost base before reaching optimal portfolio size. SFL has nearly tripled in a year and is approaching the scale at which operating leverage should become visible.
H P Singh (Satin Creditcare Network Ltd): and 26.5% a year ago. Net worth stands at 3,437 crore, up from 3,243 crore in June. Total on-book borrowings were 10,033 crore, with a leverage ratio of 2.9x, down from 3.2x. We raised approximately 2,630 crore during the quarter and 5,630 crore across the first half, and we hold undrawn sanctions of roughly 4,600 crore, with liquidity of 2,235 crore as on 30th September. Our marginal cost of borrowing reduced by 65 basis points year-on-year to 10.28%. We also continue to be supported by a broad lender base of 69 active lenders, with our 10 largest lenders accounting for 55% of borrowings. The promoters have committed 100 crore through warrants, and the first tranche of 25 crore has already been received by the company. This investment was made at 260 rupees per share, which was 17% above the SEBI pricing formula of 222 per share. On guidance, let me set out where we stand against FY '27 guidance we gave you. On standalone credit cost, we guided 3 to 3.5%, we are at 2.8% for the half year, and that is after adding to our overlay, rather than releasing it, we are ahead. On standalone return on asset, we guided 3.5 to 4%, we are at 4.3% for the half year on a reported basis, which is above the top of the range, even absorbing after absorbing the 50 crore buffer, we are ahead. On consolidated AUM growth, we guided 20% to 25% for the full year. We have grown 9% in the first half, which annualizes to roughly 19%. We're approaching the range, rather than inside it, and we want to be straightforward about that. The second half is seasonally our stronger period for disbursement, and on the basis of our current pipeline, we expect to land within the guided range for the full year. Our long-term target of 32,000 crores of consolidated AUM by 2030 is unchanged, with 30% from non-microfinance business. We have now achieved 50% of that target. We serve 34.1 lakh clients across 2,075 branches, 27 states and 5 union territories, 608 districts, 4.1 lakh centres and 1.14 lakh villages through 18,978 employees. We added 1.9 lakh new clients during the quarter, taking the first half to 4.2 lakh new client additions. This stellar performance is delivered by a stable leadership team, with over 10 years of average vintage, and our field leadership of 200 personnel at Regional Manager, Zonal Manager, Circle Head and Business Head levels, with nil attrition. As always, our priorities remain unchanged. We will continue to focus on profitable growth rather than growth at any cost, further strengthen portfolio quality, expand our diversified lending businesses, improve operating efficiency, and deliver sustainable long-term returns to our shareholders. Thank you, and I will now hand back to the moderator to open the floor for questions.
Moderator: Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press "*" and "1" on their touchtone telephone. If you wish to remove yourself from the question queue, you may press "*" and "2". Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Deepak Poddar from Sapphire Capital. Please proceed.
Deepak Poddar (Sapphire Capital): Yeah. Am I audible, sir?
H P Singh (Satin Creditcare Network Ltd): Yes, sir, you are.
Deepak Poddar (Sapphire Capital): Yeah. Okay, okay. Thank you very much, sir, for this opportunity, and many congratulations for a good set of numbers. Sir, just wanted to understand in terms of geographically, I mean, is there any micro market I mean you alluded to some of the points in your opening remarks, just wanted to dwell more. Any micro market that we are facing any issue as such in any of the states? Yeah.
H P Singh (Satin Creditcare Network Ltd): So, Deepak, you know, I highlighted our the drought condition state, you know, which are there, you know. And and as I told in my remarks, you know, that these are states, you know, which has got a very negligible portfolio. Also, along with that, we are not facing any stress up till now in the repayment, which is there. So, I think, you know, there is currently no micro state or a major state or anyone where we see a stress. Assam floods, we have already indicated to you that we're already very positive on that. That during the repayment period, you know, we've got 90% of the repayments, which have already started, you know, which is a very, very encouraging sign. So, I think, you know, it's boding well, in spite of the fact that there are a couple of hiccups, which is there in drought as well as, you know, monsoon, which is there. But there is absolutely
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