SCUF’s, AUM grew by 7.7% YoY to INR 296bn in 4QFY19 predominantly led by growth in SME (14.8%YoY), 2Ws segment (6.9%YoY), and Other Non-gold loans (4.3%YoY). Consequently the loan mix was noted at SME segment (60%), Two Wheeler (18.2%), Loan against gold (9.2%) and Others (12.6%). Overall disbursements remained flat YoY (up 44.3% QoQ) in 4QFY19 at INR 66.1bn, given the higher base in 4QFY18. During the quarter, disbursements were largely seen in SME and in 2W segment, constituting 45% and 20% respectively of the overall disbursements. Total Borrowings of the company stood at INR 225.7bn as at 4QFY19, growing at 10.5% YoY. Currently, bank borrowings constitute 59% of the overall borrowings and ~24% comprises of market borrowings. In 4QFY19 the average cost of funds spiked by 57bps YoY to 9.01%.
We expect the return ratios to improve going forward with credit quality expected to be maintained at current levels (aided by uniform underwriting practices) and cut down in opex by employee reduction. However, due to increase in cost of funds, near term pressures remain on NIMs and disbursement growth. The stock is currently trading at 1.3X P/ABV of FY21E. We give the stock a BUY rating with a target price of INR 2,000, assigning a P/ABV of 1.5X on FY21E.