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This is the 7th post in our quarterly result update series for Q4FY21.

In this post, we’re sharing the latest updates of the stocks from our watchlist. Please don’t treat this as a buy recommendation. We find these businesses interesting and we may build position (or buy more of those that are already in our portfolio) in them in the future. The purpose of this post is to bring clarity to our understanding of the businesses we are tracking.  We make our notes on the quarterly results and conference calls. Putting it up here makes it easier for us to refer them at a future date.

You can see the earlier updates here.

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Please click on the read more button for more details on each stock.


AU Small Finance Bank

AU had a decent quarter with 39% PAT growth & a good rise in disbursements in Q4. But it also saw the GNPAs rise swiftly to 4.3% with the withdrawal of the Supreme Court directive. The bank has also seen collections rising above 120% in Q4. The bank remains committed to maintaining its current spending levels in tech and expansion. Despite the rise in GNPAs and the corresponding decline in PCR, the management remain confident that the bank has enough provisions to tide over the current situation. It remains to be seen whether AU will be able to maintain its robust growth momentum with the advent of the 2nd wave of COVID-19 in India and how will the company’s digital journey pan out. Nonetheless, given the company’s good performance record, its robust customer engagement, and its prudent management of its AUM, AU Small Finance Bank remains a good small finance stock to watch out for.

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Bandhan Bank

Bandhan had a mixed quarter with good YoY growth in deposits, but PAT declined a lot due to extra provisions. The company has taken out provisions of Rs 1503 Cr in Q4. The situation in Assam is proving to be a dampener in the company’s collections in Assam which is still having collections of only 83%. The bank is seeing a good response in the conversion of high vintage group loan customers to individual EEB loans. It remains to be seen how the Assam story plays out in the medium term and how the 2nd wave of COVID-19 plays out in the key states of WB and Assam for Bandhan. Nonetheless, given its consistent growth momentum in recent years and its rapidly expanding customer set, Bandhan Bank remains an interesting company to keep track of the microfinance and small finance banking industry in India.

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CreditAccess Grameen

CAGL has delivered a good Q4 performance which saw robust GLP, revenue, and disbursement growth but profits remained subdued due to high provisioning. The company rising collection efficiency till March but it is expected to drop due to the rise of the 2nd wave of COVID-19. The complete integration of Madura Microfinance is expected to be done in H1FY22. It remains to be seen whether the company will be able to come back to its pre-covid growth rate of 30-40% CAGR given the possible integration issues with MMFL and how the 2nd wave of COVID-19 will affect near term operations. Nonetheless, given its strong market position and exemplary operating and risk management practices, Credit Access Grameen remains one of the must-watch stocks in the Microfinance sector for any interested investor.

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Ujjivan Small Finance Bank

Ujjivan SFB has had a down quarter with a 9% revenue decline and pre-provision profit decline of 17% YoY. But it also saw its highest-ever disbursements in a quarter which shows that growth is coming back. The bank continues to see uncertainties in Assam. Ujjivan has seen encouraging results in its digital initiatives and the smaller loan segments like affordable housing and MSE. The company has also seen a good bounce back in collections, but they have gone down due to the 2nd wave of COVID. It remains to be seen how the situation in Assam pans out and how will the bank cope with the disruption caused by the 2nd wave of COVID-19 in India. Nonetheless, given the bank’s industry position, its wide geographical reach, and its rising digital transactions, Ujjivan Small Finance Bank is a pivotal Small Finance Bank stock to watch for, particularly given its current valuation of less than 2 times book value.

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