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<ul><li>The top 10 states contribute a substantial 85.2% to the <keyword id="1959744" type="General" weightage="20" keywordseo="gross-loan-portfolio" source="Orion">gross loan portfolio</keyword> (GLP).</li><li>Average balance per borrower for Bihar, Tamil Nadu, and Uttar Pradesh were ₹27,200, ₹26,600, and ₹26,300 respectively.</li><li>The <keyword id="401725" type="General" weightage="20" keywordseo="microfinance-sector" source="Orion">microfinance sector</keyword> is predominantly dominated by the Eastern region, accounting for 32.7% of the market.</li></ul> As of March 2023, the microfinance sector has a total outstanding portfolio of ₹337.6 thousand crore, which reflects a 6.6% quarter-on-quarter (Q-o-Q) growth and a 17.9% year-on-year (Y-o-Y) growth. Non-banking financial companies (NBFCs) remain the dominant players in the market, holding a portfolio share of 37.3%, followed by banks at 33.1%, and small finance banks (SFBs) at 16.6%, according to the MicroLend, the quarterly publication on microfinance lending by credit Bureau CRIF Highmark. There has been an improvement in the PAR 30+ DPD (Portfolio at Risk with 30 or more days past due) from 3.8% in December 2022 to 2.2% in March 2023, the report adds. How the states performed The top 10 states contribute a substantial 85.2% to the <keyword id="6838489" type="General" weightage="20" keywordseo="gross-loan" source="Orion">gross loan</keyword> portfolio (GLP), with Bihar surpassing Tamil Nadu to become the leading state in terms of GLP. Uttar Pradesh, and Bihar have recorded the highest growth rates of 15.9%, 14.6%, and 13.5% respectively. When considering the average balance per borrower, Bihar, Tamil Nadu, and Uttar Pradesh have figures of ₹27,200, ₹26,600, and ₹26,300 respectively. The microfinance sector is predominantly dominated by the Eastern region, accounting for 32.7% of the market, closely followed by the Southern region at 27.0%. In terms of market concentration, NBFC microfinance institutions hold a significant share of 48.0% in the Central region, while SFBs have a concentration of 22.3% in the South. Portfolio ticket size growth The portfolio consisting of ticket sizes ranging from ₹50,000 to ₹75,000 has experienced a Y-oY growth of 40.3%, and a Q-o-Q growth of 12.2% as of March 2023. On the other hand, the portfolio with ticket sizes less than or equal to ₹15,000 has witnessed a Y-o-Y degrowth of 28.2% and a Q-o-Q degrowth of 16.2% during the same period. As of March 2023, loans falling in the ticket size range of ₹30,000 to ₹50,000 have the highest share in terms of both value and volume on a Y-oY basis, accounting for 47.5% and 45.4% respectively.

Bihar surpasses Tamil Nadu to top average borrower loans in the country

<ul><li>The <keyword id="113684" type="General" weightage="20" keywordseo="microfinance" source="Orion">microfinance</keyword> industry’s gross loan portfolio has shown an increase of 23.5% on yearly basis to ₹2.93 lakh crore as on June 30, 2022 from ₹2.37 lakh crore last year.</li><li>According to the Reserve Bank of India, a microfinance loan is defined as a collateral-free loan given to a household having annual household income up to ₹3 lakh.</li><li>Among states, Tamil Nadu is the largest state in terms of gross loan portfolio followed by Bihar and West Bengal.</li><li>The microfinance industry began in India in the 1980s taking inspiration from Bangladesh.</li></ul>The Indian microfinance loan industry today serves 6 crore unique borrowers having 11.8 crore loan accounts with a portfolio of ₹2.93 lakh crore as of June 30, 2022 says a report by Microfinance Institutions Network (MFIN), the microfinance industry association at its the 42nd issue of its Micrometer report. The loan growth story among credit providers has been healthy in the last one year. The portfolio outstanding at NBFCs grew highest at 38.4%, microfinance NBFCs at 36.6%, small finance banks at 28.5% and banks at 9.9% during the period. It is worth knowing that the microfinance loan industry began in India in the 1980s taking inspiration from Bangladesh, which made successful reforms by distributing loans to the underprivileged and women in the region. According to the Reserve Bank of India, a microfinance loan is defined as a collateral-free loan given to a household having annual income up to ₹3 lakh. For this purpose, the household shall mean an individual family unit, i.e., husband, wife and their unmarried children. “The sector now caters to nearly 6 crore women entrepreneurs and is playing a critical role in inclusive growth as well as furthering the mission of Digital India,” Dr Alok Misra, CEO &amp; director at Microfinance Institutions Network (MFIN) said. The ₹3 lakh crore industry has grown 23.5% in the last one year The overall microfinance industry’s gross loan portfolio has shown an increase of 23.5% on yearly basis to ₹2.93 lakh crore as on June 30, 2022 from ₹2.37 lakh crore last year. A large portion of such small loans are distributed by banks, microfinance NBFCs and then small finance banks. And the rest of the portfolio is served by NBFCs and <keyword id="499387" type="General" weightage="20" keywordseo="microfinance-lenders" source="Orion">microfinance lenders</keyword>. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Loan providers </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Loan portfolio </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">% of overall portfolio </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Banks* </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1.12 lakh crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">38.4% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Microfinance NBFCs </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1.02 lakh crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">35% </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Small finance banks </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹49,646 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">16.9% </td></tr></tbody></table>(*These are 12 banks that hold the largest share of portfolio in micro-credit) The loan disbursals more than tripled in Q1 FY23 with ₹22,745 crore as compared to the Q1 FY22 with ₹6,279 crore. “During the first quarter, the sector was occupied with the implementation of new harmonized regulations of the RBI. Despite that the growth has been good and credit quality of post-Covid disbursements are at 95% plus. During the remaining period of FY 22-23, riding on robust branch expansion, pent up demand and conducive policy, the sector is poised for sustainable growth,” Devesh Sachdev, chairperson at MFIN said. Among states, Tamil Nadu is the largest state in terms of gross loan portfolio followed by Bihar and West Bengal. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">States </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Gross loan portfolio </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Tamil Nadu </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹38,276 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Bihar </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹37,412 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">West Bengal </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹33,116 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Karnataka </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹25,258 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Uttar Pradesh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹24,820 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Maharashtra </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹22,352 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Madhya Pradesh </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹17,808 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Odisha </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹17,297 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Rajasthan </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹13,467 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Kerala </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹11,606 crore </td></tr></tbody></table> SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/corporates/news/the-adani-effect-ambuja-cements-rallies-40-in-one-month-analysts-suggest-good-days-ahead-for-the-cement-industry/articleshow/94366341.cms">The Adani effect: Ambuja Cements rallies 40% in one month – analysts suggest good days ahead for the cement industry</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/stock-market/news/markets-pare-losses-as-fed-rate-hike-of-75-bps-is-in-line-with-expectations/articleshow/94365544.cms">Markets pare losses as Fed rate hike of 75 bps is in line with expectations</a>

India’s microfinance loan portfolio stands at ₹3 lakh crore with 6 crore unique borrowers

(Eds: Adds inputs, corrects designation of an official in last para) Patna, Feb 22 () The Bihar government on Monday presented a Rs 2.18 lakh crore budget, with no new tax and a thrust on infrastructure and social sectors, besides giving a fillip to entrepreneurship. Presenting the revenue-surplus budget in the assembly, Deputy Chief Minister Tarkishore Prasad, who holds the finance portfolio, proposed to create a separate department for skill development and entrepreneurship. The decision would ensure better coordination for running ITIs and polytechnic colleges which are now run by the labour department and the science and technology department respectively, he said. Prasad also reaffirmed the government's promise of creating 20 lakh employment opportunities, in private and public sectors combined, by the time it completes its term in 2025, and to this end, a sum of Rs 200 crore has been allocated for the industries department. To encourage entrepreneurship, grants will be given by the government for startups which could be to the tune of 50 per cent of one's project cost or up to Rs 5 lakh in addition to loans of up to Rs five lakh at a nominal one per cent interest rate, he said. Women entrepreneurs will be given special incentives in the form of interest-free loans of up to Rs 5 lakh, he said. Prasad, who took over as Deputy CM in November last year, said in his maiden budget speech that the highest allocation of Rs 38,035.93 crore has been made for education, followed by Rs 16,835.67 crore for rural development, Rs 15,227.74 crore for roads, Rs 13,264.87 crore for health and Rs 8,560 crore for energy. The deputy chief minister said an allocation of Rs 4,671 crore was made for the second phase of 'Saat Nischay' (seven resolves) programme, implemented immediately after the Nitish Kumar-led NDA's return to power. Kumar had, in 2015, announced the first phase of Rs 2.7-lakh crore 'Saat Nischay', and promised to implement the second phase during the assembly polls. Promotion of entrepreneurship, enhancement of skill, improvement of irrigation facilities, strengthening of health infrastructure, better connectivity and development of clean and prosperous villages and cities are some of the components of the seven resolves. Addressing a press conference after presenting the budget, Prasad said, "We have not imposed any new tax. We have presented a budget of Rs 2,18,302.70 crore for 2021-22, which is Rs 6,541.21 crore more than the current year's estimates of Rs 2,11,761.49 crore. The revenue surplus is estimated at Rs 9,195.90 crore." The state's fiscal deficit has been estimated at Rs 22,510.78 crore in the budget, which is 2.97 per cent of the Gross State Domestic Product, estimated at Rs 7,57,026 crore, the deputy CM said. "We have kept the fiscal deficit target within the three per cent limit," he said. Lauding the "balanced" budget, Chief Minister Nitish Kumar said in a statement that it has been prepared, keeping in mind the interests of all sections of people in the society. He also expressed confidence that the budget will keep up the growth momentum in the state, which has witnessed double-digit annual growth rates since 2004-05. Other highlights of the budget include proposals for setting up of universities devoted to imparting higher learning in medical, engineering and sports. Rajgir, one of the state's most popular tourist destinations, has been proposed as the site for the sports university besides an international cricket stadium and sports academy, Prasad said. He also announced that solar street light will be installed in village roads under the second phase of "Saat Nischay" scheme for which Rs 150 crore has been allocated in 2021-22. He declined to comment when asked whether the state government will consider a proposal to lower sales tax on petrol and diesel to provide relief to the people. Responding to a query if the government will make any proposal to bring the petroleum products under the GST regime, principal secretary, finance, S Siddhartha, who was present at the press conference interjected, saying "we are not taking up any such suggestion for discussion." AR NAC BDC BDC

Bihar govt presents Rs 2.18 lakh crore budget, no new tax, impetus to entrepreneurship

<ul><li><keyword id="81680" type="COMPANY" weightage="20" keywordseo="MM-Financial-Services">M&amp;M Financial Services</keyword> is hitting the market with a ₹3,089 crore rights issue, today.</li><li>Business Insider caught up with the Vice Chairman and Managing Director <keyword id="284481" type="PERSON" weightage="20" keywordseo="Ramesh-Iyer">Ramesh Iyer</keyword> in an exclusive chat and posed the following questions. </li></ul>M&amp;M Financial Services, a non-banking finance company with a market capitalisation of ₹15,000 crore (over $2 billion), is hitting the market with a ₹3,089 crore rights issue. Existing shareholders will get rights to buy additional shares in the company at a cost of ₹50 a piece, a discount to the current market rate of a little less than ₹130. This kind of fundraising is usually undertaken to shore up capital and increase the net worth of the company. <div type="image" title="M&amp;amp;M share fin" msid="77212373" hostid="261"></div> However, this says a lot about what the company believes are the prospects in the near term. Business Insider caught up with the Vice Chairman and Managing Director Ramesh Iyer in an exclusive chat and posed the following questions. You can watch the entire interview here. <div type="twitter" handle="BiIndia" handlename="Business Insider India🇮🇳" image="http://pbs.twimg.com/profile_images/1232926719016718336/sfffJHNV_normal.jpg" favoritecount="6" retweetcount="0" status="#HangoutwithBI | @BiIndia's @iyer_sriram in conversation with @ramesh_md, VC &amp; MD of @MahindraFin as investors prep… https://t.co/bQBjcyl9k7" createdat="1595842176000" id="1287681535068344321"></div> These are the edited transcripts of the interview. What do you make of the market reaction that the stocks have been tumbling down for the past few days? Why aren't investors excited about this? So, I am not too sure the market going down has anything to do with the Rights (issue). I think there is mixed news coming around on what's happening in rural (areas), how the market is panning out, if there's going to be a next moratorium, right? And, if the moratorium was not to be there, how do the NPA’s and the industries start to perform? So, I think it's all at the back of the performance and not anything to do with the Rights Issue. What is the goal of the rights issue? So clearly it boosts the capital base but the overall money is about ₹3,100 crore, which is at the current level equal to one-months disbursement. So, don't look at it from a cash flow perspective, look it from a cash boost perspective. Straight away from the 15-17% capital adequacy you go to 19-20% adequacy level, which gives you phenomenal leverage capital and gives you room space for growth in future. And, for some reason, you know the market conditions turn negative because of COVID. And (if) COVID turns much larger than anybody imagines, then it also addresses your insolvency issues and you remain absolutely strong. So it's a stitch in time or preparing for the worst and aiming for the best? I think when we discussed the need for capital and Rights Issue as a format in April, obviously, we thought we should prepare for the worst. Because you know the lockdown has just begun and nobody had a clue on how long it will stretch and the moratorium got announced, and you know everything is going negative, no sales happening. That's why everyone wanted to be prepared for the future. As came May and June, and then we started seeing the phenomenal revival of the rural market. The pitch turned to that if things are getting better, you will have a phenomenal opportunity of taking the growth of 35% (YoY), and that, again, will need capital. So you are gunning or 35% growth again this year? Not this year, this year is out of the question. I think nobody will talk about growth this year. I think everybody should look at … if it's beginning to happen. If you look at March volumes, it will be at 50-60% of the previous year. Because you have already lost a quarter without doing much in the market. And, July and August are not going to be kind of very aggressive. Anything that will happen will happen post-October. Any growth anyone is taking is I guess 2021, 2022, 2023 kind of a story. I think FY21 is gone, you will have much smaller volumes, and all of ourselves will fight to keep ourselves afloat. Let's talk about cost-cutting and the changes you are making? Cost of funds has definitely come down as you said. And, you know, even pre-COVID, if you look at our Q2, Q3 last year also. We have said that we will also focus on various cost initiatives, and we look at line item wise. For a company like ours, we will not have only one line item completely cut by, and that will save a lot of costs. So are you shutting down branches? No, we are not. So what we are actually doing is we have looked at each line. For example, we looked at the branch rent rationalising. So we renegotiated rent, we have moved to new places and all kinds of stuff. The second is all the peripherals attached to the branch like securities or weather BPO services, below the line advertising and funding exercises, the travelling and conveyance expenses. So if you use a little more technology and digital, you will be able to bring down conveyance cost. On the people front, our belief has been very different and very strong. We think that if at all you are talking of people cost that should be the last to look at but can't be the starting point. We have cumulatively 2 million customers from whom we have to recover money. So you need people for that, you may not grow that year, but you need people for what you have done already. And, branches are on that also. Each branch will have 3000-4000 customers to manage. You can't just shut a branch looking at some few thousand rupee cost. Once the market revives, some of those expenses will return. But our own understanding is that at least about 20% of the expenses come down from the previous year, even if things were to return to absolute normalcy. Your NPAs level is around 10%. Is that correct and if that is correct, where do you see this by the end of March? So two things have happened while the gross has been a little higher than March, but the net has been lower than March. So we have taken a little aggressive position based on the geographies and based on certain product behaviours and segments, there have been some higher provisions. So as we progress you the next six months, which is normally the good six months, we would not see a decline in the gross NPA, and we will maintain our stance on aggressive provisions. And, we will have a very close look at understanding what's happening in the market. And, if we start seeing things are not improving as we think, then we may take higher provision, whichever is necessary. COVID is now spreading beyond cities, is that something you are taking into account yet? I think it is important to look at rural from a very different perspective. We are seeing UP, we are seeing cases, we are seeing Bihar, we are seeing cases. But is it concentrated at one place, no, unlike major cities where it is concentrated in numbers. In rural it's a very wide number like in some villages 2 cases and in some other villages some few cases, so it does not affect the overall economic activity of that place. So even as we speak and we are also seeing this number going up in different cities, but that's not affecting the local activity completely, because it's not concentrated and the activities are spread across like farming, that is not going to be affected even if some cases are there. What has been the trend like for M&amp;M Financial Services? In June more than 40% of the people who opted for the moratorium have actually repaid their instalments. My understanding is you will see from the fourth quarter, i.e. January onwards or maybe for October, you will start seeing good trends but Jan onwards one can start seeing the infra cash flow coming in. And that should do good for the rural. What have your collection trends been like? From April to May, it was double of April. April was a disaster at 14-15%. It went to 25% or 30 in May. And went up to upwards of 77% in June. And, July good news is that as we see our numbers. It is equal or better than our June number. It's holding up very well. Does that seem like a level that's going to continue for some time? I think July-August enrols no major activity even in normal time, when monsoon is around the economic activity comes down. The real test will be what happens in the third quarter— post the monsoon. How does the festival season pan out - when the activity begins to happen. And when the monsoon ends, what's the outcome of the monsoon? Is the yield likely to be good? I think the third quarter will be the test, and you will start seeing post-November money will start coming in, stretching till February. What happens if the government goes for another lockdown and another moratorium ? What at least we see from a retail customer perspective is not all of them need a 90-day moratorium. Some of them need a restructuring of the loan because they need a smaller EMI because their income has shrunk and they are not able to repay so much, Some of them want a much extended period of debit. Some of them want a shorter moratorium; maybe a 1-month moratorium because let's take a farmer, he may say my money is going to come in November, right, so please give me 30 or a 45-day moratorium, not a 90 day because I don't want to bear that interest. So, if you were to take it this way then my point of view would be— restructuring would be a good approach where an institution can look at each customer and segment and then look at what is required. For example, a heavy commercial vehicle operator, 90 days may be insufficient because he may start earning only post-January or whenever because currently, he has no volumes to carry, Right? So, now you have given 90 days, he will consume that 90 days, and again he is going to be not able to pay it, once he opens up in January. So, if you put all of this together at least at the retail level, our understanding is if you give a restructuring which is a responsibility of the company to see to whom you want to give and what kind of a restructuring you want to give and put in place an approved process by which you will be monitoring it. But that is a risk, right? But then, there is enough ring-fencing, they have said that freeze the accounts as of February 29, and they should be standard account on that. There should not be more than two instalments outstanding on that day, they should not already be an NPA account, so there is a very clear ring-fencing which has happened. It is then ultimately the responsibility of the organisation - whom do you give what kind of restructuring and what kind of a time frame. So, you know that's what the ask is, or a request is that if it can be considered on a restructuring basis with responsibility. Have you made any change in the term of the assets whom you were lending to, in a post COVID scenario? Not because of post-COVID, I think it's an outcome of an absolute volume for each product. If April was no sales month. May saw more tractors sales and less vehicle sales and June continued that way. If you look at the monthly disbursement. I think 45-50% of the disbursement went to tractors. And, the balance went to other vehicles. But on an overall, where the book is concerned, one month doesn't tell the balance. What is your current mix like? So about 17-18% is tractor, another 25% would be <keyword id="45224" type="DOMAIN" weightage="20" keywordseo="Mahindra">Mahindra</keyword> auto parts. Then cars about 28%, then pre-owned vehicles about 10% and then small commercial vehicles and commercial vehicles all together will be 8-10%. I think SME has dropped to around 1-2%. Is it a concern on heavy reliance on the automotive sector because of the trouble that the sector is going through? I think that's not the right thing. It is divided between urban and rural again. I think what you don't see is an auto demand. It's not an urban phenomenon. If you talk to any OEM (original equipment makers e.g car manufacturers), they are all talking of rural revival. Dealerships have improved. Actually, the real constraint for the auto current is supply. They are not able to make vehicles available to the dealership while there is sufficient demand for small cars, pickups, small three-wheelers, this kind of product. And the inventory levels at the dealerships is at its lowest. I think if they can make sufficient vehicles available, I think there is enough demand. SEE ALSO: <a href="https://www.businessinsider.in/business/corporates/news/tech-mahindra-sees-sharp-slowdown-in-all-verticals-except-media-and-entertainment/articleshow/77197985.cms" data-type="tilCustomLink">Tech Mahindra sees sharp slowdown in all verticals except media and entertainment</a> <a href="https://www.businessinsider.in/india/news/escorts-earnings-only-show-that-calling-a-rural-recovery-right-now-would-be-pompous-all-eyes-will-now-be-on-mm/articleshow/77200867.cms" data-type="tilCustomLink">Escorts earnings only show that calling a rural recovery right now would be pompous⁠— all eyes will now be on M&amp;M</a>

EXCLUSIVE: M&M Financial Managing Director gets candid about the rights issue, the bleak prospects for this year and why there should be no more loan moratorium

Finance Minister <keyword id="19916618" type="General" weightage="20" keywordseo="Nirmala-Sitharaman" source="keywords">Nirmala Sitharaman</keyword> on Tuesday announced <keyword id="20404375" type="General" weightage="20" keywordseo="income-tax-relief" source="keywords">income tax relief</keyword> for the <keyword id="20071167" type="General" weightage="100" keywordseo="middle-class" source="keywords">middle class</keyword>, a Rs 2 lakh crore outlay for <keyword id="22517841" type="General" weightage="20" keywordseo="job-creation-schemes" source="keywords">job creation schemes</keyword> over the next five years and a spending splurge for states run by her party's new coalition partners as she unveiled <keyword id="20509939" type="General" weightage="20" keywordseo="Modi-3-0" source="keywords">Modi 3.0</keyword> government's first budget after the general elections. With rural distress and unemployment being blamed for BJP losing its majority, Sitharaman in her seventh straight budget provided Rs 2.66 lakh crore for <keyword id="20027688" type="General" weightage="20" keywordseo="rural-development" source="keywords">rural development</keyword> and maintained spending on long-term infrastructure projects at Rs 11.11 lakh crore to boost <keyword id="19900794" type="General" weightage="20" keywordseo="economic-growth" source="keywords">economic growth</keyword>. She abolished 'angel tax' for all classes of investors in startups, cut customs duty on mobile phones and gold and simplified capital gains tax. She, however, raised the securities transaction tax (STT) on futures and options of securities, which led to tanking of stock markets. "India's economic growth continues to be the shining exception (in a world that is gripped by policy uncertainties) and will remain so in the years ahead," she said. "In this budget, we particularly focus on <keyword id="19898684" type="General" weightage="20" keywordseo="employment" source="keywords">employment</keyword>, <keyword id="20374219" type="General" weightage="20" keywordseo="skilling" source="keywords">skilling</keyword>, MSMEs, and the middle class." Besides Rs 2 lakh crore provided over a five year period for schemes and initiatives to facilitate employment, skilling and other opportunities for 4.1 crore youth, "I have made a provision of Rs 1.48 lakh crore for education, employment and skilling," she said. For Bihar, where assembly elections are due next year, the finance minister announced spending of Rs 60,000 crore on infrastructure projects like expressways, power plant, heritage corridors and new airports. The support to Bihar, whose ruling party and BJP's partner JD-U has been demanding an economic package and special category status for the state, is in the form of capital projects but not subsidy or cash dole. Similarly, for Andhra Pradesh, whose ruling TDP recently joined BJP-led NDA, she allocated Rs 15,000 crore in financial aid through multilateral agencies. A similar request for support to Bihar will be expedited, she said. For the middle class, she raised standard deduction -- a flat deduction from total salary earned by an employee in a year before calculating applicable income tax rate -- by 50 per cent to Rs 75,000 and tweaked tax slabs for taxpayers opting for the new income tax regime. This will lead to taxpayers under the new tax regime -- which offers lower rates of taxes but permits limited deductions and exemptions -- saving up to Rs 17,500 in tax annually, she said. To spur employment, the Budget provided for incentives for companies, including paying for one-month salary for first-time employees, incentive at specified sale to both employee and empower with respect to their retirement fund contribution in the first four years of employment and reimbursing employers up to Rs 3,000 per month for 2 years towards EPFO contribution of each additional employee. Also, a programme to improve skills as well internship for students and subsidised loans for higher education will be provided, she said. India's official unemployment rate in urban areas is pegged at 6.7 per cent but private agencies put it at much higher levels. Buoyed by robust tax collections and a higher-than-expected dividend receipt from the Reserve Bank, Sitharaman said the government's fiscal deficit -- the difference between the total revenue earned and total expenditure -- will be trimmed to 4.9 per cent of the GDP in 2024-25, below the 5.1 per cent figure estimated in the interim budget she presented in February. She reduced gross market borrowing marginally to Rs 14.01 lakh crore. The Budget for 2024-25 fiscal (April 2024 to March 2025) allocated Rs 1.52 lakh crore for agriculture and allied sectors, aid for building 3 crore affordable housing units in urban and rural areas, provided credit support to small and medium businesses, raised small loans to Rs 20 lakh for small business, proposed setting up 12 industrial parks, and provided for setting up a Rs 1,000 crore venture capital fund for space sector.

Modi 3.0 1st Budget: Tax relief for middle class, Rs 2 lakh cr job scheme

<ul><li>Average balance per account witnessed quarterly growth of 0.8% and grew 5.2% Y-oY as of December 22, 2023. </li><li>The top 10 states constituted 84.6% of the gross loan portfolio as of December 2022. </li><li>Portfolios of ticket size ₹50,000-₹75,000 witnessed Y-o-Y growth of 45%.</li></ul>The growth in <keyword id="12055556" type="General" weightage="20" keywordseo="microfinance-lending" source="Orion">microfinance lending</keyword> in the <keyword id="84064" type="General" weightage="20" keywordseo="rural-market" source="Orion">rural market</keyword> outpaced that of urban markets according to data from CRIF High Mark. While rural markets grew 23.8% annually as of December 2022, the same in urban markets was at 14.6%. The Indian <keyword id="113684" type="General" weightage="80" keywordseo="microfinance" source="Orion">microfinance</keyword> lending sector witnessed a quarterly (September to December) growth of 5.5% and an annual growth of 20% as of December 2022, says the quarterly publication MicroLend by CRIF High Mark. This sector’s live customer base grew by 4.8% and 11.9%, on a quarterly and annual basis, respectively. <cmsannotation type="cmsannotation" annotationid="Average balances and lender exposure" comment="subhead2" text="Average balances and lender exposure">Average balances and lender exposure</cmsannotation> In December 2022, there was a quarterly growth of 0.8% and a year-on-year growth of 5.2% in the average balance per account, while the average balance per borrower saw a quarterly growth of 1% and a year-on-year growth of 8.5%. Additionally, the report shows that 5.9% of borrowers have dealings with four or more lenders. Among the major states, Tamil Nadu has the highest proportion at 10.6%, while West Bengal has the lowest at 1.5%. <cmsannotation type="cmsannotation" annotationid="How the geographical regions fare" comment="subhead2" text="How the geographical regions fare">How the geographical regions fare</cmsannotation> As of December 2022, the gross loan portfolio (GLP) of the top 10 states accounted for 84.6% of the total. Uttar Pradesh, Bihar, and Karnataka experienced the highest quarterly growth rates of 11.1%, 9.0%, and 7.5%, respectively. The average balance per borrower for the top states Tamil Nadu, Bihar, and West Bengal was ₹53,600, ₹54,000, and ₹44,200, respectively. In terms of regional dominance, the microfinance sector was led by the Eastern region at 32%, followed by the South at 27% as of December 2022. <cmsannotation type="cmsannotation" annotationid="Portfolio: Lender type mix" comment="subhead2" text="Portfolio: Lender type mix">Portfolio: Lender type mix</cmsannotation> As of December 2022, <keyword id="6355260" type="General" weightage="100" keywordseo="nbfc" source="Orion">NBFC</keyword> microfinance institutions (MFIs) dominate the market with a portfolio share of 35.7%. NBFC MFIs saw a Q-o-Q growth in gross loan portfolio (GLP) of 7.5%, which is significantly higher than the 1.5% for banks and 5.6% for small finance banks (SFBs). In terms of year-on-year growth, NBFC MFIs had a growth of nearly 28.2%, while banks had a growth of 6.2% and SFBs had a growth of 17.5%. Loans with ticket sizes ranging from ₹30,000 to ₹50,000 accounted for 47.8% of NBFC MFIs' portfolio, as compared to 38.4% for banks and 49.7% for SFBs. <cmsannotation type="cmsannotation" annotationid="Portfolio: Ticket size mix" comment="subhead2" text="Portfolio: Ticket size mix">Portfolio: Ticket size mix</cmsannotation> The data indicates an increase in loans with higher ticket sizes. Portfolios with ticket sizes ranging from ₹50,000 to ₹75,000 saw a year-on-year growth of 45% and a quarterly growth of 9.6% as of December 2022. However, portfolios with ticket sizes greater than or equal to ₹15,000 witnessed a year-on-year decline of 27.2% and a quarterly decline of 2.4%. The share of portfolios with higher ticket sized loans of greater than ₹50,000 increased from 31.8% in December 2021 to 35.2% in December 2022. Moreover, as of December 2022, loans with a ticket size ranging from ₹30,000 to ₹50,000 had the highest share in both value (45%) and volume (42%). The share of loans with a ticket size between ₹50,000 and ₹75,000 increased from 18% in December 2021 to 22% in December 2022. SEE ALSO: <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/india/news/us-visa-rules-ease-now-h-1b-visa-holders-spouses-can-work-in-the-us/articleshow/99110481.cms">US visa rules ease: Now H-1B visa holders' spouses can work in the US</a> <a target="_blank" class="c-link c-message_attachment__title_link" href="https://www.businessinsider.in/business/news/meet-the-tigers-elephants-rabbits-and-turtles-of-the-e-commerce-jungle/articleshow/99109220.cms">Meet the tigers, elephants, rabbits and turtles of the e-commerce jungle</a>

Microfinance lending shows strong growth in 2022, NBFC MFIs dominate the market

<ul><li>The Varanasi-based bank aims to raise as much as ₹500 crore via the initial public offering. </li><li>The IPO opens on July 12 and will close on July 14. </li><li>The bank plans to use the net proceeds towards augmenting its tier-I capital base to its future capital requirements. </li></ul><keyword id="4093871" type="General" weightage="100" keywordseo="utkarsh-small-finance-bank" source="Orion">Utkarsh Small Finance Bank</keyword> has fixed a price band of ₹23-25 a share for its public issue, which will open on July 12 and close on July 14. The Varanasi-based bank aims to raise as much as ₹500 crore via the initial public offering, and the bids for anchor investors will open on July 11. Investors can bid for a minimum of 600 equity shares and in multiples of 600 equity shares thereafter. The bank plans to use the net proceeds towards augmenting its tier-I capital base to its future capital requirements. “They (capital requirements) are expected to arise out of growth in the bank’s assets, primarily the bank’s loans/advances and investment portfolio and to ensure compliance with regulatory requirements on capital adequacy prescribed by the RBI from time to time,” the bank said in its Red Herring prospectus. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Particulars </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">FY23 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">FY22 </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">FY21 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Total Income </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,804 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹2,033 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹1,705 crore </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Net Profit </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹404 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹61 crore </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">₹111 crore </td></tr></tbody></table>Source: RHP About the bank Utkarsh commenced operations in 2017 and its product suite includes a range of deposit products including saving accounts, salary accounts, current accounts, recurring and fixed deposits, and locker facilities. As of March 2023, the lender's operations were spread across 26 states and Union Territories with 830 banking outlets serving 3.6 million customers majorly located in rural and semi-urban areas primarily in Bihar and Uttar Pradesh. The bank's gross loan portfolio has grown to ₹13,957.11 crore as of March 31, 2023, from ₹8,415.66 crore as of March 31, 2021. Its disbursements increased to ₹12,442.89 crore in fiscal 2023 from ₹5,914.01 crore in fiscal 2021. Also, deposits surged to ₹13,710.14 crore from ₹7,507.57 crore during the period. Risk factors The bank said in its RHP that it is subject to inspections by regulatory authorities, including by the RBI and non-compliance or adverse observations may have a material adverse effect on its business, financial condition, results of operation or cash flows. The bank’s former auditors, <keyword id="17956647" type="General" weightage="20" keywordseo="haribhakti-co-llp" source="Orion">Haribhakti &amp; Co. LLP</keyword>, Chartered Accountants, have been debarred by the RBI India from undertaking audit assignments for entities regulated by them for two years, with effect from April 1, 2022. “A significant portion of our advances in the microbanking segment are towards customers located in the states of Bihar and Uttar Pradesh, and any adverse changes in the conditions affecting the region can adversely impact our business, financial condition, results of operations and cash flows,” the bank said in its RHP. The bank has received a show cause notice from SEBI regarding alleged non-compliance of provisions of Companies Act 2013. It may result in penal actions, the bank said, adding that its non-convertible debentures are listed on BSE. “Our profit after tax declined from ₹111 crore in FY21 to ₹61 crore in FY22. While our profit after tax was ₹404 crore in FY23, there can be no assurance that we will be able to maintain profitability in the future,” the bank said. (With inputs from PTI)

Utkarsh Small Finance Bank IPO to open on July 12 – All you need to know

<ul><li>The IPO received stellar response from QIBs on the last day of the issue</li><li>Retail and non-institutional investors also showed extensive interest in the issue. </li><li>The bank plans to use the net proceeds towards augmenting its tier-I capital base to its future capital requirements. </li></ul> <keyword id="4093871" type="General" weightage="20" keywordseo="utkarsh-small-finance-bank" source="Orion">Utkarsh Small Finance Bank</keyword>’s ₹500 crore IPO was subscribed 101 times over on the last day of the issue on Friday. The IPO received a stellar response from QIB on the last day as their portion was subscribed 125 times over the shares on offer. Non-institutional and <keyword id="6416579" type="General" weightage="20" keywordseo="retail-investors" source="Orion">retail investors</keyword> too showed strong interest in the issue. Utkarsh <keyword id="6382595" type="General" weightage="20" keywordseo="small-finance-bank" source="Orion">Small Finance Bank</keyword> had fixed a price band of ₹23-25 a share for its public issue, which will close on July 14. It plans to use the net proceeds towards augmenting its tier-I capital base for its future capital requirements. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Category </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">No. of times subscribed </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">QIBs </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">124.85 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Non institutional investors </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">81.64 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Retail </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">72.10 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Total </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">101.91 </td></tr></tbody></table>Source: BSE Healthy growth in loans and deposits Utkarsh commenced operations in 2017. It operates across 26 states and Union Territories with 830 banking outlets serving 3.6 million customers majorly located in rural and semi-urban areas primarily in Bihar and Uttar Pradesh. Its total income was at ₹2,804 crore in FY23, which grew by 37% over the year before. Its FY22 net profit however was a blip and fell to ₹61 crore, even as it recovered in FY23 to ₹404 crore. The bank's gross loan portfolio grew to ₹13,957.11 crore as of March 31, 2023, from ₹8,415.66 crore as of March 31, 2021. Its disbursements increased to ₹12,442.89 crore in fiscal 2023 from ₹5,914.01 crore in fiscal 2021. Also, deposits surged to ₹13,710.14 crore from ₹7,507.57 crore during the period. The bank said in its RHP that it is subject to inspections by regulatory authorities, including by the Reserve Bank of India (RBI) and non-compliance or adverse observations may have a material adverse effect on its business, financial condition, results of operation or cash flows. Incidentally, its former auditors, Haribhakti &amp; Co. LLP, have been debarred by the RBI from undertaking audit assignments for entities regulated by them for two years, with effect from April 1, 2022. The bank also received a showcause notice from markets regulator Securities and Exchange Board of India (SEBI) regarding alleged non-compliance of provisions of Companies Act 2013. Hold or sell after listing? Most analysts recommend subscribing to the issue on account of attractive valuations as compared to its peers but are divided on how long investors should hold on to it. “At the upper price band, the company is valued at a P/B of 1.39x with a return on net worth of 20.22%. We believe that the company is fairly priced and recommend a Subscribe-Long term rating to the IPO,” said Anand Rathi. SBI Securities also admits that it’s fairly priced compared to its close peers on similar valuation parameters. “We recommend investors to subscribe the IPO for listing at cut-off price,” it says. “Considering its resilient performance post Covid, consistent growth in loan book and deposits, healthy return ratios, best cost to income ratio, pan India presence and promising industry outlook, we assign a “Subscribe” rating on a short to medium-term basis,” says an IPO note by Geojit.

Utkarsh Small Finance Bank IPO subscribed 101x as QIBs make a beeline for it

<ul><li><keyword id="4093871" type="General" weightage="20" keywordseo="utkarsh-small-finance-bank" source="Orion">Utkarsh Small Finance Bank</keyword> stock listed at a 60% premium in line with grey market expectations.</li><li>The issue was subscribed 101 times with stellar response from QIBs.</li><li>The bank plans to use net proceeds towards augmenting its tier-I capital base for its future capital requirements. </li></ul>Utkarsh Small Finance Bank stock made its debut on the bourses at ₹40 which is a 60% premium over its IPO price – matching grey market expectations. After a brief slip up in the morning trade, the stock closed at ₹47.94 – that’s a 92% premium over its IPO price of ₹25. The company’s marketcap stood at ₹5,253 crore as per data on BSE. The ₹500 crore issue that received stellar response from investors was subscribed 101 times, with qualified institutional buyers (QIBs) subscribing it by 124.85 times over. The issue has fixed a price band of ₹23-25 a share for its public issue, which will close on July 14. It plans to use net proceeds towards augmenting its tier-I capital base for its future capital requirements. <table style="border-width: initial; border-style: none; table-layout: fixed; width: 468pt;" class="redcator-table-advance"></colgroup><tbody><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Category </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">No. of times subscribed </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">QIBs </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">124.85 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Non institutional investors </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">81.64 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Retail </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">72.10 </td></tr><tr><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">Total </td><td style="border-left:solid #000000 1pt;border-right:solid #000000 1pt;border-bottom:solid #000000 1pt;border-top:solid #000000 1pt;vertical-align:top;padding:5pt 5pt 5pt 5pt;overflow:hidden;overflow-wrap:break-word;">101.91 </td></tr></tbody><tbody></tbody><tbody></tbody></table>Source: BSE Hold or sell after listing? Most analysts had recommended subscribing to the issue on account of attractive valuations as compared to its peers but are divided on how long investors should hold on to it. “At the upper price band, the company is valued at a P/B of 1.39x with a return on net worth of 20.22%. We believe that the company is fairly priced and recommend a Subscribe-Long term rating to the IPO,” said Anand Rathi. SBI Securities also admits that it’s fairly priced compared to its close peers on similar valuation parameters. “We recommend investors to subscribe the IPO for listing at cut-off price,” it says. “Considering its resilient performance post Covid, consistent growth in loan book and deposits, healthy return ratios, best cost to income ratio, pan India presence and promising industry outlook, we assign a “Subscribe” rating on a short to medium-term basis,” says an IPO note by Geojit. Healthy growth in loans and deposits Utkarsh commenced operations in 2017. It operates across 26 states and Union Territories with 830 banking outlets serving 3.6 million customers majorly located in rural and semi-urban areas primarily in Bihar and Uttar Pradesh. Its total income was at ₹2,804 crore in FY23, which grew by 37% over the year before. Its FY22 net profit however was a blip and fell to ₹61 crore, even as it recovered in FY23 to ₹404 crore. The bank's gross loan portfolio grew to ₹13,957.11 crore as of March 31, 2023, from ₹8,415.66 crore as of March 31, 2021. Its disbursements increased to ₹12,442.89 crore in fiscal 2023 from ₹5,914.01 crore in fiscal 2021. Also, deposits surged to ₹13,710.14 crore from ₹7,507.57 crore during the period. The bank said in its RHP that it is subject to inspections by regulatory authorities, including by the Reserve Bank of India (RBI) and non-compliance or adverse observations may have a material adverse effect on its business, financial condition, results of operation or cash flows. Incidentally, its former auditors, Haribhakti &amp; Co. LLP, have been debarred by the RBI from undertaking audit assignments for entities regulated by them for two years, with effect from April 1, 2022. The bank also received a showcause notice from markets regulator Securities and Exchange Board of India (SEBI) regarding alleged non-compliance of provisions of Companies Act 2013.

Utkarsh Small Finance Bank stock closes 90% above its IPO price

It seems that India’s slowing <keyword id="35050" type="CITY" weightage="20" keywordseo="gdp">GDP</keyword> growth in 2017-18, in the wake of demonetisation, an overhaul of the tax regime and a decline in manufacturing and investment, has had an adverse impact on the financial strength of its states. According to <a href="http://www.careratings.com/upload/NewsFiles/SplAnalysis/Study%20of%20State%20Budgets%20for%20FY19.pdf">a report by CARE Ratings</a>, a credit ratings agency, 14 out of 24 states recorded a decline in their net financial position, as per latest estimates, in the year ended March 2018. Of the 14 states that recorded a revenue surplus, which occurs when revenue receipts are higher than revenue expenditure, eight saw a lower surplus than the year before, including <keyword id="6357713" type="COMPANY" weightage="20" keywordseo="Uttar-Pradesh">Uttar Pradesh</keyword> (₹185.2 billion), Bihar (₹14.5 billion) and Odisha (₹88.7 billion). However, a revenue surplus isn’t an obvious indicator of financial strength. Many states which record surpluses like Uttar Pradesh, which has the highest surplus, <a href="http://www.prsindia.org/uploads/media/State%20Budget%202018-19/Uttar%20Pradesh%20Budget%20Analysis%202018-19.pdf">spend less than their budget estimates </a>on agriculture and education, resulting in lower expenditure. Meanwhile, 10 states recorded a revenue deficit, out of which 6 experienced a higher deficit than the previous year. These include Rajasthan (₹201.7 billion), Tamil Nadu (₹183.7 billion) and <keyword id="13126" type="COMPANY" weightage="20" keywordseo="Maharashtra">Maharashtra</keyword> (₹148.4 billion). Assam recorded the highest deficit at ₹233.5 billion, compared to a mere deficit of ₹1.4 billion the previous year, as it significantly <a href="http://www.prsindia.org/administrator/uploads/general/1521201654~~Assam%20Budget%20Analysis%2018-19.pdf">overshot its budgeted expenditure</a> on agriculture, police resources, education and health. Spending beyond their means Another cause for concern is that more states are spending beyond their means. The number of states with a <keyword id="6365485" type="DEFINITION" weightage="20" keywordseo="Fiscal-Deficit">fiscal deficit</keyword>, the difference between total revenue (excluding borrowings) and total expenditure, that is larger than 3% of GDSP (a state’s gross domestic product) has increased from 10 in 2016-17 to 14 in 2017-18. The 14th Finance Commission recommends a maximum limit of 3% on state fiscal deficits. In fact, 5 states actually had a deficit ratio higher than 3.5%. Bihar stood out as the state with the worst ratio, at 7.5%, partly owing to <a href="http://www.prsindia.org/administrator/uploads/general/1519878666_State%20Budget%20Analysis%20-%20Bihar%202018.pdf">higher spending on pensions, education and rural development. </a> India’s states are increasing the amount they spend on asset creation, in lieu of future growth and development. Around 14 out of 24 states reported a higher capital outlay, or the money spent on infrastructure creation and fixed assets, as a percentage of total expenditure. Goa had the highest allocation, at 27% of total expenditure, followed by Jammu &amp; Kashmir and Bihar. It bears mentioning that Uttar Pradesh, Maharashtra and Punjab all extended generous loan waivers last year. However, as shown below, it seems that only Maharashtra can afford the waivers. Maharashtra and Uttar Pradesh have the highest <keyword id="44647" type="ORGANIZATION" weightage="20" keywordseo="debt">debt</keyword> levels Maharashtra, India’s richest state, had the highest level of outstanding debt with ₹4.07 trillion, closely followed by Uttar Pradesh, one of India’s poorest states, with a debt burden of ₹4.06 trillion. This is roughly equivalent to the cost of 306,000 Lamborghini Gallardos. However, given its high GDSP, Maharashtra has a debt-to-GDSP ratio of only 16.3%, well below the Finance Commission’s maximum permissible limit of 25%, while Uttar Pradesh has a debt ratio of 29.5%. The reports show that 8 out of 19 states had a debt-to-GDSP ratio over 25%. Punjab and Jammu &amp; Kashmir had worryingly high debt ratios, at 41% and 46.4% respectively. Along with West Bengal and Haryana, Punjab spends more than 20% of its revenue receipts on interest payments alone, which results in lower development spending. Only four states - Karnataka, Telangana, Odisha and Chattisgarh - proved to be efficient at managing their debt obligations. In addition to having a debt-to-GDSP ratio of less than 25%, these states also allocated less than 10% of their revenue receipts to interest payments. An improvement in 2019? In light of their declining financial strength, India’s states will focus on fiscal consolidation and cost control in the current fiscal year. Only 7 states are budgeted to have a revenue deficit in 2018-19, out of which 4 expect to reduce their revenue deficit. West Bengal, Assam and Andhra Pradesh, all of which recorded a revenue deficit last year, expect to record a surplus or a neutral balance in 2018-19. Meanwhile, all the 14 states that recorded a revenue surplus last year, expect to do so in 2018-19 as well, with 9, including Gujarat, Uttar Pradesh, Chhattisgarh and Bihar, planning to increase their surplus. These states will continue to count on the generosity of the central government for grants-in-aid and tax revenues. According to PRS Legislative Research, a think tank, <a href="http://www.prsindia.org/uploads/media/Analytical%20Report/State%20of%20State%20Finances%202018.pdf">states derive 46% of their revenue</a> from the central government’s coffers. Grants account for 20% of state funding while the states’ share of central taxes account for 26%. Given their dependence on the central government, it isn’t hard to see why so many voters in state elections favour the party that is in power at the centre.

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