11 February 2021
3QFY21 Results Update | Sector: Financials
MAS Financial Services
Equity Shares (m)
52-Week Range (INR)
1, 6, 12 Rel. Per (%)
12M Avg Val (INR M)
46.9 / 0.7
1269 / 448
TP: INR1,020 (+19%)
Muted 3QFY21, focus remains on asset quality
MASFIN’s 3QFY21 PAT declined 25% YoY to INR362m (9% miss). The
miss was due to lower topline on account of sequential run-down in
AUM. In 9MFY21, it delivered 15%/9%/17% decline in total
While disbursements improved QoQ, they were still ~80% of YoY levels
(in line with the management’s guidance). As a result, consolidated
AUM declined 4% QoQ/ 15% YoY to INR53b. The loan mix remained
largely stable with the share of MSME/SME loans at 60%/31%.
The share of off Balance Sheet loans declined sharply to 33% from 42%
QoQ. However, the company has DA sanctions worth INR10b.
Yield on loans (calc.) declined ~200bp QoQ to 13.4%. While this was
offset by an 80bp decline in the CoF, overall spreads fell 130bp to 5.2%.
MASFIN reduced BS liquidity from INR16b to INR10b sequentially. Yet,
this is quite healthy at 30% of loans.
The expense ratio improved from 1.6% to 1.3% YoY.
From 92% in Sep’20, collection efficiency improved to 96% in 3QFY21.
GS3 ratio (pro forma) was largely stable at 1.7%.
MASFIN incurred ~INR40m of COVID-19 provisions during 3QFY21,
taking the total provisions to INR560m (1.7% of loans).
Over 0dpd loans increased marginally to 6.2% from 5.9%.
The management expects INR8-10b of disbursements in 4QFY21. It is
confident of achieving 20-25% AUM growth once normalcy sets in.
Restructuring to be ~1% of the loan book
The average ticket size of SME loans more than doubled QoQ to
– AUM has been flat for the past eight quarters at
INR2.7b; GS3 ratio (pro forma) stood at 36bp.
Tier I ratio stands at 30%. RoA/RoE for 3QFY21 was 3.1%/13%.
AUM runs down; on-book spreads contract
Financials & Valuations (INR b)
EPS Gr. (%)
RoA on AUM
Div. yield (%)
Shareholding pattern (%)
FII Includes depository receipts
Collection efficiency close to pre-COVID levels; GNPL ratio stable
Key highlights from the management commentary
Valuation and view
The company operates in a tough environment, with a large exposure to
the MFI/MSME sector. The MFI sector is among the worst hit by the recent
pandemic, with collection efficiency far below pre-COVID levels. The
management is focusing only on collections and recalibration of
underwriting processes in FY21, while growth has taken a backseat. We
expect 20% AUM decline in FY21, followed by 15% CAGR over FY21-23E.
Collection efficiency at 96% is encouraging. Total provisions of INR1b (~3%
of loans) on the Balance Sheet are largely adequate. We cut our EPS
estimate by ~7% to factor in lower AUM growth, partially offset by lower
credit costs on account of healthy collection efficiency. The company is
likely to deliver 4-4.5% RoA/15-16% RoE over the medium term. Maintain
Buy with a TP of INR1,020/share (4x FY23E BVPS).
Research Analyst: Alpesh Mehta
Investors are advised to refer through important disclosures made at the last page of the Research Report.
Motilal Oswal research is available on www.motilaloswal.com/Institutional-Equities, Bloomberg, Thomson Reuters, Factset and S&P Capital.
14 January 2020