Recent Posts

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India Credit Cards / Personal & Business Loans / Simpl Pay - Substitute

« Last post by komal on July 03, 2020, 10:50:51 AM »

Founded in 2015 by Nityanand Sharma and Chaitra Chidanand Mumbai-based Simpl Pay partners online merchants to offer their customers the option to pay for all their purchases over a billing period in a single transaction (i.e. defer their purchase related payments) while making their payment experience faster and convenient in comon to cards and wallets.

They are a layer like your Credit Card but eliminate the Risk of Credit Card Frauds that may happen over the Internet Transactions.

The initial spending limit is set by default, and can be extended based on the spending behaviour and repayment pattern of the individual customer. Billing periods typically work over a 15-day cycle with an additional 5 days of grace period to settle the bills. Simpl claims to have transaction failure rates of less than 1% compared to 20-30% for other payment methods.

As of Oct’19, the company claimed to be processing more than 2 million transactions per month. Some of the platforms that the company offers its payment options include Bigbasket, Zomato, Dunzo, Fassos, Freshmenu and Rapido, among others.

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Experian-Equifax / How Credit Card Companies Earn ?

« Last post by komal on June 29, 2020, 10:59:46 PM »

The entire gross loan portfolio of the Credit Card Company is not interest earning portfolio. The gross loans (credit card receivables) portfolio is divided into three parts depending upon the interest earning capability:

Transactor receivables: Dues which are paid within the due date of payment and thus company does not earn any interest. Credit Card company earns by way of MDR charged to the Retailer (~ 1% to 2%). Most Corporate Cards are in this Category as they don't believe in paying exorbitant Annual Percentage Rate - APR 24%-36% on Revolving Credit or High Interest on EMI Loans about 15%.

Term loan receivables: Dues are converted in equal monthly payments (EMI) by the customers and thus earn interest income for the company. Term loan usually carries lower interest rate as compared to the Revolver receivables. As per SBI Cards website, the interest on EMI loans is in the range of 14-15%. As per company filings, ~30% of the portfolio is term loan portfolio in 1HFY20 and has been at similar levels in past.

Revolver receivables: Dues which are revolved from current month to next month, earn interest income for the company.

In our study we have found that the Credit Card company's Loan Book is equally split between the above 3 categories.

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India Credit Cards / Personal & Business Loans / How SBI makes Money on Corporate Card ?

« Last post by komal on June 29, 2020, 07:44:55 PM »

The corporate card business model is characterised by:

Lower loans-to-spend ratio as it is unlikely that corporates would incur 20-40% interest costs on term / revolver loans on cards. The entire loan book would largely comprise only transactor loans, which earn no yields. As the yield on transactor loans is 0% and would have to be funded at the cost of funds, i.e. card issuers do not earn interest from corporate cards.

Revenues driven largely by fee income, within which spend-based MDR would be a large component. Since the spend per card on corporate cards would be significantly higher, the lack of interest income is made up for by fees.

Theoretically, corporate cards are a high RoE business, given large operating leverage and lower capital consumption (lower loans).
However, there are a lot of operational challenges that act as bottlenecks. Low bargaining power against corporate clients also means a meaningful part of the MDR must be passed back to the corporate clients as kickbacks or rewards or interest-free credit periods. Profitability depends on ability to underwrite credit limits and select the right kind of corporate customers.

For SBI Cards, corporate cards account for ~29% of spend, though they account for <1% of cards in- use.

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Equity Investments, Fundamental Research and Sectors Review / COVID-19 Hits Consumer Buying

« Last post by komal on June 17, 2020, 08:21:29 PM »

Credit Suisse in a Report said that COVID’s uncontained spread extends hit to consumption

COVID continues to spread with a rising number of new reported cases and no flattening of the curve. The worst impacted are the large cities and media reports. They consumers to avoid non-essential out-of-home visits which would extend the impact on consumption.

Pattern of strong foods and weak personal care consumption to extend - (1) strong growth in home categories such as biscuits, noodles, branded tea/coffee, home insecticides; (2) a pick-up in healthcare and hygiene products; and (3) a decline in personal care/out-of-home products such as shampoo, hair oils, skin creams and ice cream.

Consumer discretionary
CS sees highest headwinds for discretionary companies which have a high salience of sales from top 10 cities such as Avenue, Jubilant, Page Industries and Titan.

They Downgrade Avenue Supermart to UNDERPERFORM (from Neutral) and Jubilant to NEUTRAL (from Outperform)

Company -

Stock Target

HUL - 2400
Emami - 240
United Spirits - 575
DMART - 2000
Jubilant 1625
Page Industries - 14100
Asian Paints - 1850
Pidlite - 1100

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Sensex and Nifty Company Analysis / Morgan Stanley Target on NBFC

« Last post by resh on April 28, 2020, 02:04:42 PM »

After the Debt Market Chaos. Morgan Stanley has done a Stree Test on the Top NBFCs in India and in a report titled India NBFCs: All about Debt Mutual Funds and Interplay with NBFCs has released the Stock / Share Target Prices of the Top NBFCs as under.

HDFC - Rs2,270: sum of the parts, probability-weighted (bull 5%, base 75%, bear 20% - skew reflects challenging conditions for macro economy and NBFCs / HFCs and remote possibility of sharp recovery, in MS' view). Core business: base case target P/B of 2.5x on core Mar-2022 BVPS. Derived from Gordon Growth Formula (cost of equity 12.5%, ROE ~16%, growth ~10%).

M&M Financial Services - Rs285: sum of the parts, probability-weighted (bull 5%, base 55%, bear 40% - skew reflects challenges in macro climate and for NBFCs/HFCs, remote possibility of sharp recovery, in our view). Core auto finance & housing: three-phase RI model (five-year high-growth period, 10- year maturity period, terminal period. Cost of equity 12.5%, terminal growth rate 6%.

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Experian-Equifax / Multiple Cards + High Utilization Impact

« Last post by cardbhai on April 23, 2020, 09:59:08 PM »

One of the factors your Experian Credit Score depends on is the current balance on your credit cards in comon to the credit limit.

In other words if you have multiple credit cards with a balance that is close to the credit limit / high credit, it is likely that your Credit Score will be impacted. Ensure you do not accumulate huge balances on your card and if you do, always try and pay off the balances on your card to avoid reaching the credit limit.

One of the factors your Experian Score depends on is the number of active loan / credit card accounts reported in the last 24 months that carry a current balance. A high balance on such active accounts will impact your Credit Score. Paying off the balances on the loan and credit card accounts as well as not having too many open lines of credit with current balances will help maintain your Credit Score.

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CIBIL Credit Report Score / How Monthly Payments affect Score ?

« Last post by cardbhai on April 23, 2020, 09:55:10 PM »

Your CIBIL Score is not only dependent on your timely payments towards loans/credit cards that have been availed but also the amount that has been paid.

E.g. If you have a high credit utilization on a credit card and are making monthly minimum payments by the due date, this will not affect your payment history. However, this will impact your CIBIL Score as the minimum payments made is low in comon to the actual amount payable.

You can maintain your CIBIL Score by making timely payments every time, as well as ensuring you are paying off the balances on the loans/credit cards. Paying more than the minimum due will help bring down the total outstanding on the accounts.

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CIBIL Credit Report Score / Total SBI Cards Outstanding

« Last post by resh on April 23, 2020, 03:42:03 PM »

SBI Cards & Payments Services is a payment solutions provider in India and is a subsidiary of the SBI - India's Largest PSU Bank.

SBI Cards & Payments Services has reported outstanding borrowings by retail Indian customers worth Rs 17,362.86 crore as on March 31, 2020. The company had the highest credit rating during the previous fiscal year ended March 2020 with AAA/ Stable rating by Crisil and ICRA.

RBI has issued a Moratorium on Credit Card Payments for Consumers who are in distress due to COVID-19 Issue. However, interest will continue to accrue on the Credit Card Account until the balance is Paid off. However, NO Negative CIBIL Reporting can be Done for the period ending till June-30.

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India Credit Cards / Personal & Business Loans / NeoGrowth Credit for Discplined Businesses

« Last post by resh on April 13, 2020, 08:21:08 AM »

Mumbai-based Neogrowth was founded in 2013 by Dhruv Khaitan and Piyush Khaitan to offer short-term collateral free business loans to vendors/channel partners (supply chain finance) of large corporates (turnover of more than INR 2.5bn) by underwriting these loans based on their digital payments data.

The company also offers unsecured loans to online/offline merchants (retail finance) that accept digital payments from retail customers. Neogrowth has a customer base of more than 13,000 spread across 21 cities in India. The average ticket size of the loans underwritten by the company is INR 1.8mn and they have a renewal rate of 70%.

Overall, the company had disbursed more than 25,000 loans worth INR 43bn till 31 Mar’19 and presently has above INR 11bn worth of assets under management.

This company is funded by Khosla Impact, Accion, Aspada Investments, Omidyar Network, IIFL Asset Management, Accion, Quona Capital

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India Credit Cards / Personal & Business Loans / COVID-19 Impact on Loans

« Last post by resh on April 13, 2020, 08:15:58 AM »

In our view, the most vulnerable segments are two-wheeler, new-to-credit and self-employed customers. Salaried borrowers with good CIBIL scores may also default given the uncertainty around job losses or salary cuts. BAF’s collection infrastructure will have to be ramped up significantly to address the surge in bounce rates. Our channel checks suggest that while it is possible to scale up collection infrastructure at the field agency level, this will come at a cost and may not be as efficient because the agents will have to cater to other financiers too.

CIBIL score 750+ 65%
New to credit 35%