Liquidity drag has affected Gruh Finance NIM and spread: Sudhin Choksey

We expect the loan asset growth to improve in the third and fourth quarter, says , MD, Gruh Finance. Excerpts from an interview with ETNOW.

It has been a muted quarter for the company, in comparison to the previous quarters and the trajectory that you have delivered. How come your profits have come in flat at Rs 115 crore?
Our NIM was adversely affected because we have been carrying liquidity in terms of the cash in mutual funds. The NIM has come down from 4% to 3.84%. Other than that, our gross operating income has gone up by 18%. That is the major reason. Otherwise credit provisioning, non-interest expense ratios have all remained under our target. Except for the liability, the cost in maintaining liquidity is adversely affected.

What has impacted your loan growth and what exactly is the outlook?
Our loan growth has been around 11% and that has been steady over the last three or four quarters and I expect it to remain in this vicinity. In fact, post third quarter, it should improve once the auspicious season comes in when the demand should accelerate. We expect that in the third and fourth quarter, the loan asset growth should improve.

What has been absolute GNPA figure, asset quality trends also that you see for the coming few quarters what is that looking like?
That should also improve. Our gross NPA level keeps moving every quarter and generally we have witnessed higher level during the first and second quarter and it tapers down during the third and the fourth quarter. The same trend will be observed probably in the current year as well. It has marginally gone up from 0.86% to 0.95% and there has not been much of a concern on recovery front.

Margins have declined sequentially. What is your outlook on margins amid the tight liquidity conditions that we are seeing? Are you expecting the situation to improve?
We have maintained the spreads. It is only because of the liquidity drag that has affected our NIM and the spread. Other than that, there is no issue. The liquidity situation also seems to have improved and it will get further improved. This negative drag should also minimise over the next two quarters.

What is the update on the merger? When can we expect it to be completed?
It has been moving at quite a good pace. We have received all approvals from the shareholders and the creditors on June 4. We are expecting clearance from the NCLT. Hopefully, it will come by August end. Even if there is little delay on the part of the court or something, then by 15th September, the order should come.