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Upside 36.9%
Stock data
Sector: Financials
Sensex:
52Weekh/l(Rs):
Marketcap(Rsmn):
Enterprisevalue(Rsmn):
6mAvgt/o(Rsmn):
Bloombergcode:
BSEcode:
NSEcode:
FV(Rs):
Divyield(%):
27,867
325/121
1,463
12.7
PricesasonSep30,2016
Stock performance
EarningsGrowth
RoAProgression
B/SStrength
Valuationappeal
Risk
ARLFIN
531179
ARMANFIN
10
0.5
LowHigh
1 2 3 4 5
SENSEX
150
100
50
Sep15
Promoter
FII+DII
Others
AFSL
200
Jan16
May16
Sep16
28.1
25.0
46.9
Absolutereturn(%)
1M
1.0
3M
4.3
1Y
36.2
Financial summary
Y/e31Mar(Rsmn)
Totaloperatingincome
yoygrowth(%)
Operatingprofit(preprovisions)
Netprofit
yoygrowth(%)
EPS(Rs)
Adj.BVPS(Rs)
P/E(x)
P/BV(x)
ROE(%)
ROA(%)
FY15
189
22.9
103
61
36.7
10.7
66.5
23.8
3.9
17.0
4.9
FY16
253
34.1
135
80
30.5
14.0
84.9
18.3
3.0
18.0
4.8
FY17E
367
45.2
194
112
39.7
19.6
100.7
13.1
2.5
20.3
4.7
FY18E
530
44.2
287
163
45.1
22.7
160.4
11.3
1.6
18.3
4.7
FY19E
733
38.2
402
225
38.5
31.5
184.4
8.1
1.4
17.6
4.7
1992
1994
1999
2006
2010
2012
2014
Incorporation
IPOofRs.40mn
Started2wfinancing
Started3wfinancing
PilotedMicrofinance
Createdasubsidiary,NamraFinfor
scalingMicrofinance
Exited3wfinancing
998
886
900
771
457
445
457
Q2FY15
600
Q1FY15
651
529
300
Q4FY16
Q1FY17
32
60
64
64
68
70
57
Q1FY17
60
MFIAUMShare
100%
80%
50
50
40
1,200
Q3FY16
36
2wAUMshare
50
1,600
Q2FY16
36
Q1FY16
40
30
43
Q4FY15
Q3FY15
Q4FY16
(%)
1,200
Q3FY16
(Rsmn)
1,306
1,168
Q2FY16
2,000
AUMgrowth(RHS)
(Rsmn)
Q1FY16
AUM
1,500
Q4FY15
Q4FY14
A deeper analysis of the MFI AUM growth in the past couple of years
reveals that growth has been contributed by both increase in client base
and rise in average ticket size (ATS). Since FY14, the book has grown by
nearly 3x on the back of 1.7x growth in the live customer base and 1.6x
increase in the loan ATS. AFSL has increased the range of loan amounts
offered across cycles, taking into account the swelled up loan
requirement on account of inflation and the regulatory liberalisation of
income threshold for qualifying borrowers and loan amounts for first and
subsequent cycles. In recent times, the company seems to have caught
up to many of its larger peers to some extent, as the ticket sizes offered
by AFSL were much smaller till FY14. The portfolio shift to longer
duration products over the past few quarters has also increased the
average loan amount per borrower. Presently, AFSL offers loan amount
in the range of Rs. 15,000-30,000 under its 14-month product and above
Rs. 30,000 in the 24-month product. In terms of loan cycle, the first
cycle tickets are in the band of Rs 14,000-18,000 and the second cycle
ticket range is Rs 18,000-25,000.
51
53
52
60%
39
30
20%
17
520
49
47
48
10
723
911
1,149
0%
1,723
FY12
50
Q3FY15
20
Q2FY15
26
Q1FY15
400
26
Q4FY14
40%
800
FY13
FY14
FY15
FY16
InterestIncomefrom2w
18,000
(Rsmn)
FY14
FY16
(Rs)
15,000
120
36
33
36
42
Q4FY14
Q1FY15
Q2FY15
Q3FY15
52
3,000
Q1FY17
Q4FY16
Q3FY16
Q2FY16
Q1FY16
Q4FY15
Clientbase
ATS
AUM
(%yoygrowth)
79.6
80
69.6
57.5
60
42.9
42.2
40.9
Equitas
Ujjivan
SKS
Satin
Arman
Chart 6: MFI AUM growth has been driven by increase in loan tickets
in the recent past
100
6,000
11,362
34
58
67
7,727
34
67
15,873
91
89
30
13,248
29
31
12,468
31
9,000
28
11,961
60
20
16,557
31
32
12,000
11,434
39
15,739
90
8,253
150
40
24.3
20
7.7
2.9
0
FY15
FY16
Q1FY17
600
The 2-wheeler loan portfolio has been growing at a steady pace of 810% pa and constitutes ~30% of the overall AUM currently. The
business is being originated from five branches (four in Gujarat and one
recently opened in Indore) and more than 50 dealer locations. AFSL has
developed strong bonds with most dealers that enable it to secure a
good share of the business at each location. Quick turnaround time and
flexibility offered in repayment terms are key factors that attract
customers. The verification and disbursal process is completed on the
very same day of loan request, provided all documents are in place. The
interest rate charged by AFSL is not among the cheapest in the industry
given its higher funding cost. The yields in this business have been under
pressure with intensified competition from captive financiers.
Management expects this portfolio to grow at 12-15% pa in the coming
years aided by cyclical acceleration in industry volume growth and
increasing addition in business from the newly opened Indore branch.
20.0
116
10.0
4.0
0
FY13
0.0
FY14
FY15
FY16
577
(Rsmn)
516
500
454
469
498
507
504
557
555
566
Q1FY17
171
Q4FY16
30.0
Q3FY16
200
Q2FY16
40.0
289
Q1FY16
50.0
47.0
300
Q4FY15
60.0
400
300
200
100
Q3FY15
400
Q2FY15
70.0
69.2
100
80.0
532
Q1FY15
500
Q4FY14
(%)
83.9
(Rsbn)
90.0
MFIbranches
2wbranches
(no)
5
60.0
48.0
4
36.0
3
5
24.0
61
55
3
39
12.0
22
25
FY12
FY13
30
0.0
FY14
FY15
FY16
Q1FY17
MadhyaPradesh
Maharashtra
UttarPradesh
2wbranches
(no)
5
2
4
60
48
18
4
36
24
12
31
37
0
Q4FY15
Q1FY17
100%
Urban
18
0.2%
18.2%
80%
60
Gujarat
60%
MadhyaPradesh
40%
82
Maharashtra
20%
81.7%
40
0%
Arman
Source: Company, IIFL Research
(%)
36.3
35.0
28.9
28.0
24.1
21.0
18.0
17.5
15.3
14.0
9.3
7.3
7.0
Uttan
Pradesh
Gujarat
Maharashtra
Madhya
Pradesh
Kerala
Odisha
Karnataka
0.0
TamilNadu
Industry
MFIAUMShare
4,500
(%)
(Rsmn)
3,600
75
82
80
75
68
2,700
90
60
57
45
4,046
1,800
30
2,839
1,893
900
15
1,168
651
FY15
FY16
FY17E
FY18E
FY19E
Chart 16: Low Avg. AUM/Branch for Arman offers scope for better
utilization
150.0
(Rsmn)
12.0
120.0
(%)
119.8
10.0
90.0
9.7
9.9
8.4
8.2
8.2
8.0
7.8
FY15
FY16
FY17E
FY18E
FY19E
8.0
83.5
71.5
65.3
6.0
60.0
4.0
30.0
20.0
2.0
0.0
Ujjivan
Equitas
Satin
SKS
AFSL
FY13
FY14
NetNPA
(Rsmn)
4.2
(%)
18.5
18.0
17
16
3.5
16
13.1
12
9.6
12
2.8
11.5
10
2.1
8
1.4
4
0.7
0.0
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
GrossNPA%
NetNPA%
(%)
1.6
1.6
1.4
2.2
(Rsmn)
NetNPA%(RHS)
1.7
GrossNPA
20
1.2
2.0
1.5
1.6
1.1
1.2
1.0
1.1
1.3
1.3
FY18E
FY19E
1.1
0.7 0.7
0.8
1.2
0.4
0.8
0.4
0.2
0.2
0.1
FY14
0.0
Q1FY16
Q2FY16
Q3FY16
Q4FY16
Q1FY17
FY15
FY16
FY17E
1.5
(%)
1.4
30.0
YieldonAvg.AUM*
30.0
1.2
1.2
1.0
CoB*
(%)
25.0
28.7
28.3
27.1
1.0
25.8
25.1
10.3
9.5
FY18E
FY19E
20.0
0.9
0.7
15.0
0.6
13.5
10.0
0.3
12.5
13.0
11.5
5.0
FY14
FY15
FY16
FY17E
FY18E
FY14
FY19E
Spread and NIM to remain stable; capital raise likely in early FY18
Cost of funding for AFSL has been on the decline. It has fallen by 100bps
since March 2016 and is likely to moderate further over the medium
term on account of a) improvement in credit rating to BBB in August
2016 and b) improved availability of bank funding. Earlier, the company
was heavily reliant on Financial Institutions from whom the funds were
coming at a higher cost. The recent upgrade in the credit rating has
come on the back of strong growth in the consolidated loan portfolio,
sustained high profitability and gradual diversification of operations. With
growth momentum and progress on portfolio diversification to continue
and a likely augmentation of equity in early FY18, the credit rating of
AFSL could get enhanced in the next year also. This should enable the
company to maintain a healthy spread notwithstanding shift to lower
rates for MFI loans and persistence of yield pressure in the 2w segment.
With CAR at ~23% on consol basis, AFSL seems adequately capitalized
to drive a brisk portfolio growth in the near term. To continue the growth
momentum in FY18/19, the company intends to raise capital in the
coming 6-12 months. We believe that AFSL could raise Rs.400-500mn by
diluting 20-25% equity.
FY15
FY16
FY17E
(%)
18.8
18.3
17.6
18.0
16.0
16.4
Spread*
17.3
17.5
17.3
15.6
15.6
15.6
FY17E
FY18E
FY19E
16.2
15.3
14.0
12.0
10.0
FY14
FY15
FY16
10
(%)
6.0
37.0
33.8
35.0
28.0
RoE(RHS)
25.0
(%)
5.0
31.8
26.9
26.4
RoA
(%)
20.0
20.3
4.0
21.8
16.0
21.0
3.0
14.0
2.0
7.0
1.0
0.0
17.0
18.3
18.0
17.6
15.0
10.0
FY14
FY15
FY16
FY17E
FY18E
FY19E
5.0
4.6
4.9
4.8
4.7
4.7
4.7
FY14
FY15
FY16
FY17E
FY18E
FY19E
0.0
11
Income statement
Balance sheet
Y/e31Mar(Rsmn)
EquityCapital
PreferenceCapital
Reserves
Shareholder'sfunds
Longtermborrowings
OtherLongtermliabilities
Longtermprovisions
TotalNoncurrentliabilities
ShortTermBorrowings
Tradepayables
Othercurrentliabilities
Shorttermprovisions
TotalCurrentliabilities
TotalEquitiesandLiabilities
Assets
FixedAssets
Noncurrentinvestments
Deferredtaxassets(Net)
Longtermloansandadvances
Othernoncurrentassets
TotalNoncurrentassets
TradeRec.underloancontracts
Cashandcashequivalents
Shorttermloansandadvances
Othercurrentassets
TotalCurrentassets
TotalAssets
FY16
69
50
385
455
458
0
3
461
334
0
619
35
987
1,953
19
14
FY17E
69
50
478
548
707
0
4
711
516
0
956
45
1,517
2,825
23
17
FY18E
84
50
1,049
1,133
905
0
5
910
660
0
1,223
59
1,942
4,036
28
20
FY19E
84
50
1,238
1,322
1,349
0
6
1,355
984
0
1,823
76
2,883
5,610
34
24
4
263
68
367
20
107
1,459
0
1,585
1,953
5
383
88
516
26
155
2,128
0
2,309
2,825
8
542
114
713
33
276
3,014
0
3,323
4,036
12
748
148
967
43
443
4,157
0
4,643
5,610
Y/e31Mar(Rsmn)
IncomefromOperations
Interestexpense
Netinterestincome
Noninterestincome
Totalopincome
Totalopexpenses
Opprofit(preprov)
Provisions
Profitbeforetax
Taxes
Netprofit
FY16
407
(154)
253
0
253
(118)
135
(14)
121
(41)
80
FY17E
574
(206)
367
0
367
(174)
194
(24)
170
(57)
112
FY18E
785
(255)
530
0
530
(243)
287
(41)
246
(83)
163
FY19E
1,063
(330)
733
0
733
(330)
402
(61)
341
(115)
225
12
ProfitabilityRatios(%)
NIM
ReturnonAvgEquity
ReturnonAvgAssets
Pershareratios(Rs)
EPS
Adj.BVPS
DPS
Otherkeyratios(%)
Cost/Income
CAR
TierIcapital
GrossNPLs/Loans
CreditCost
NetNPLs/Netloans
Taxrate
Dividendyield
FY16
FY17E
FY18E
FY19E
34.1
34.1
31.9
30.5
49.7
48.1
42.4
17.6
18.0
4.8
45.2
45.2
43.2
39.7
45.9
54.5
44.7
17.3
20.3
4.7
44.2
44.2
48.0
45.1
41.6
28.0
42.8
17.5
18.3
4.7
38.2
38.2
40.1
38.5
37.9
49.0
39.0
17.3
17.6
4.7
14.0
84.9
1.4
19.6
100.7
2.5
22.7
160.4
3.0
31.5
184.4
4.0
46.5
29.3
26.4
1.2
1.0
1.1
33.9
0.5
47.2
25.8
21.8
1.4
1.2
1.1
33.9
1.0
45.8
36.0
31.8
1.6
1.4
1.3
33.9
1.2
45.1
31.0
26.9
1.7
1.5
1.3
33.9
1.6
13
Recommendationparametersforfundamentalreports:
Buy=>15%+
Accumulate=5%to15%
Reduce=10%to5%
Sell=>10%
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