 "BFIL: QIP to aid book value expansion")
Bharat Financial Inclusion Ltd (BFIL), formerly named SKS Microfinance, has launched a qualified institutional placement (QIP) to raise Rs 750 crore at a price not below Rs 769.95 a piece (with a maximum five per cent discount on this price in select cases). This issue will lead to a seven-eight per cent dilution in promoters’ stake, besides expansion in the company’s equity capital.
But, as an analyst puts it, “Post the QIP, BFIL’s book value will also increase 29 per cent for FY17, and 20 per cent for FY18.” The money raised will allow BFIL to fund its business growth. Thus, it is not surprising that the stock price, too, cheered this development and gained four per cent on Friday to Rs 846.
The company’s microfinance lending business is growing at a robust pace, and the momentum is likely to continue. The management has retained its forecast of growing its assets under management (AUM) by 40-50 per cent over the next few years. Not surprisingly, the Bloomberg consensus estimates peg the company's earnings per share to grow at a compounded annual rate of 46 per cent over FY16-18.
Currently, BFIL is the only microfinance institution (MFI) globally to offer loans at sub-20 per cent interest rates. As its key MFI peers namely Ujjivan Financial Services, Equitas Holdings and Janalakshmi Financial Services start their journey of transitioning to a small finance bank, the field is likely to be wide open for BFIL, believe analysts.But, as an analyst puts it, “Post the QIP, BFIL’s book value will also increase 29 per cent for FY17, and 20 per cent for FY18.” The money raised will allow BFIL to fund its business growth. Thus, it is not surprising that the stock price, too, cheered this development and gained four per cent on Friday to Rs 846.
The company’s microfinance lending business is growing at a robust pace, and the momentum is likely to continue. The management has retained its forecast of growing its assets under management (AUM) by 40-50 per cent over the next few years. Not surprisingly, the Bloomberg consensus estimates peg the company's earnings per share to grow at a compounded annual rate of 46 per cent over FY16-18.
This is because these companies will now increasingly focus on building a deposit franchise and growing in segments other than microfinance. In the process, their growth is likely to slow for at least a couple of years. Agreed, its peers' borrowing costs will come down once they build their low-cost current and savings account (CASA) deposits franchise. But this will take time, which can be used by BFIL to brace for a potential increase in competition. Till then, the Street remains positive on the stock.
BFIL’s presence in the under-penetrated segment of microfinance, lowest lending rates among peers, healthy return ratios and strong balance sheet are its strengths. BFIL will continue to be a pure-play on the high-margin microfinance segment and will continue to post healthy growth. It is trying out new technologies to drive cost efficiencies and employee productivity. The company’s field officers carry tablets and disbursements are increasingly non-cash.
BFIL is also piloting biometric KYC for faster turnaround. These are some positive steps that will rub off well on the business. At current levels, the stock trades at 3.8 times the FY18 estimated book value and has come off from peak valuations of four-five times witnessed recently.