Highlights:

The company has maintained positive liquidity gaps in all buckets till 1 year after factoring the effect of moratorium. Given the Covid-19 pandemic and difficult situation in the debt market, the company maintained higher than normal liquidity, remaining comfortably placed to meet all obligations of the coming months.

The company maintained liquidity of Rs 15485 crore including liquid assets of Rs 8468 crore, undrawn bank lines of Rs 5017 crore and back up line of Rs 2000 crore from L&T.

The company rigorously monitors early warning signals, concentration on early bucket collections and strong Stage 3 resolution efforts has helped the company to achieve reduction in Stage 3 assets.

The asset quality improved in Q4FY20, as compared to Q3FY20, even without considering the DPD freeze. GS3 declined to 5.36% end March 2020 from 5.94% end December 2019 and 5.90% end March 2019.

The company continues to maintain strong capital adequacy of 21.60%

The nationwide lockdown due to Covid-19 led to a slowdown in the disbursements and collections, across the country. While this had minimal impact on the operating performance of Q4FY20, the profitability for the quarter was impacted largely due to the incremental provisions taken to strengthen the balance sheet against the after effect of the pandemic.

As per the company, substantial pre-planned disbursements in infrastructure finance were paused due to increasing risk perception. The retail disbursements were completely stopped in the end of March 2020 due to point of sale being closed during lockdown.

The impact of Covid-19 on the book was mainly to the extent of reduction in disbursements post lockdown in March 2020.

Lower disbursements, lower fee income and cost of maintaining higher liquidity, resulted in reduced Q4FY20 NIMs + Fees to 6.87%, as against 7.29% in Q3FY20.

The company has offered the option of moratorium to all customers for installments falling due between 1 March 2020 and 31 May 2020 across businesses.

The company has created additional Covid-19 provisions of Rs 209 crore corresponding to 5% of 1-90 days past due (DPD) book availing moratorium in March 2020. The company also created enhanced ECL provisions of Rs 105 crore on stage 2 assets, considering possible emerging stress in the economy after the lockdown is over.

The above provisions are in addition to the existing macro prudential provisions of Rs 350 crore, taking the total additional provisions to Rs 664 crore (0.75% of standard book).

The company continues to maintain top rating, despite multiple downgrades across the sector.

The company raised a record long term fund of over Rs 28000 crore in FY2020 from diversified sources with Rs 9400 crore raised from new sources. The company has raised Rs 7250 crore in Q4FY2020. The share of CPs have declined to 6%.

Despite the increase in share of long term borrowing, the company has reduced the cost of funds. The weighted average cost of funds improved to 8.43% in Q4FY20 from 8.53% in Q4FY19 and 8.54% in Q3FY20.

The company is the second largest financier of farm equipment finance in the country with an increase in market share to 15% at the end March 2020 from 14% at the end December 2019.

The company has become the 5th largest Two-Wheeler financier with an increase in market share to 11% at the end March 2020 from 9% end December 2019.

The company expects Tractor and 2W sales for the industry to decline in FY21, as the loss of business in the first two months would impact the full year performance.

The company is the third largest micro loans provider. The repeat customers is 51%, while new customers account for 17% of the portfolio. The indebtedness limit for a borrower has been lowered to Rs 70000 from Rs 80000. The Assam MFI book has declined by Rs 280 crore yoy to Rs 534 crore end March 2020. The entire MFI loan book is under moratorium.

In home loans segment, the company has raised share of salaried customers to 64% from 48% a year ago

The company is the market leader in Renewable Energy financing.

The company has improved asset quality with the reduction in gross stage (GS) 3 advances and improving provision coverage ratio to 60%. The net stage (NS) 3 advances have declined below 1% in the rural loan book end March 2020.

The disbursements were negligible in the first 45 days of the quarter ended June 2020.

As per the company, the rabi crop output is strong and economic recovery would undoubtedly be led by rural India.

As per the company, 75% of the portfolio belongs to the orange and green zones.

Credit norms have been tightened across products, at least until there is a lingering uncertainty.

The company has not asked its lenders for a moratorium.

In April, a small increase was reported in moratorium availed across segments.

In the real estate book, 28% of the portfolio is under moratorium on account of significant prepayments. However, a substantial increase is expected in the moratorium percentage in April and May.

Another 5% provision would be taken on 1-89 dpd moratorium accounts in Q1FY20.

The collection efficiency currently stands at 33% for farm and 50% for two wheelers.

Some green shoots have been observed, with a few areas opening up in the country.

The merger of lending subsidiaries makes ALM and liquidity management more efficient. However, no tax benefit is possible from the merger of subsidiaries under Ind-AS.

Two large exposures in the de-focused book (one HFC and one power generation company) are largely covered.

The defocused book dipped 50%, while the company expects to further reduce in FY2021.