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You are here : IndiaNotes >> Research & Analysis >> Companies >> Bharat Financial Inclusion Ltd. >> Research

Dynamic Levels recommend short-term and long-term targets on Bharat Financial Inclusion

Dynamic Equities Pvt Ltd | 17 Mar, 2017  | Follow Author | Add to my Favourites 
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Microfinance has become an effective tool that can help bringing economic equilibrium and reduce poverty. Bharat Financial ltd is one company that spread economic opportunity by giving poor people access to financial services, such as credit and insurance.

Bharat Financial Inclusion is the largest microfinance company in India in terms of gross loan portfolio. The company’s core business is providing small value loans and other basic financial services to its customers, who are predominantly located in rural areas. The company provides loans mainly for use in small businesses or for other income generating activities and not for personal consumption. BHARAT FINANCE has an AUM of over INR8500. CRS, with active customer base of over 5 MILLION and over 1,000 branches.



Bharat Financial Ltd distributes small loans range between Rs. 2,000 to Rs. 12,000 (about $44-$260) to poor women so they can start and expand simple businesses and increase their incomes. Their micro-enterprises include:

  • Raising cows and goats in order to sell their milk
  • Opening a village tea stall.


Unique tools to check credit worthiness of Borrower


  • Bharat Financial Ltd uses the group lending mechanism where poor women guarantee each other’s loans. Borrowers are also provided financial literacy training and they have to pass a test before they are allowed to take out loans.
  • Weekly meetings with borrowers follow a highly disciplined approach. Re-payment rates on their collateral-free loans are more than 99% because of this systematic process. The company also offers micro-insurance to the poor as well as financing for other goods and services that can help them combat poverty.

Major finding from analyst Meet


  • BORROWING COST: Banks have materially cut their MCLR which will lead to reduction in micro finance company cost of borrowing anywhere between 35 to 50 basis points and in next one to two quarters. Bharat finance ltd provide loans at 19.75% interest rate which is the lowest amongst the Pvt sector MFIs and the company is operating at a spread of 8.7% vis-à-vis 10% stipulated by the RBI.
  • Demonetization : The collection of the Company was temporarily effected due to demonitisation except in States where there were political interferences, but in many states like Bihar, Chhattisgarh, Jharkhand and Orissa it got restored to normalcy at 99% plus.

The collection efficiency got impacted in places like UP, Maharashtra districts bordering Maharashtra and Karnataka, and parts of Madhya Pradesh more due to local politicians encouraging poor women to not pay loans in order to provide waiver so as to secure votes rather than demonetization. Despite this, we see collection rates to the north of 80% in these states.



  • Profit for the period of Rs. 143 Crs. in Q3FY17 (growth of 80% YoY) and Rs. 428 Crs for 9MFY17 (growth of 96% YoY)
  • EPS has increased from 6.2 to 10.3 (YOY) i.e. a roubust growth of 66%.
  • The Company made Loan disbursement of Rs. 2,981 Crs. in Q3FY17 and Rs. 10,765 Crs. in 9MFY17 (Rs. 8,022 Crs in 9MFY16).
  • A 35% growth (YOY) in Income from Operations has been delivered by the Company.
  • Non-AP Portfolio grew by 38% YoY to Rs.8,531 Crs. as of Dec 31, 2016.
  • Weighted avg. cost of borrowing reduced to 10.8% in Q3FY17 from 11.0% in Q2FY17
  • Incremental drawdowns of Rs.1,048 Crs. (Rs. 947 Crs. post demonetization) in Q3FY17 and Rs. 4,324 Crs. in 9MFY17 (Rs. 4,093 in 9MFY16) excluding origination under managed loans. BFIL also originated Rs.226 Crs. and Rs. 835 Crs. loans under managed portfolio in Q3FY17 and 9MFY17 respectively.



The Microfinance industry continues to be one of the sectors in India that has a huge potential for sustainable growth, based on industry reports. The MFI industry GLP grew by 84% YoY while the disbursements during the year grew by 65% in FY16. The industry grew by 69% in FY15 and 47% in FY14. As on March 2016, the MFI industry served 3.25 crore clients.


World Bank and EDA Rural Systems’ reports indicate that 150 million households in India require microcredit with an average credit requirement per household at ` 20,000. This translates into an annual aggregate demand of ` 2,40,000 crore for microcredit in India. Hence there is a huge demand-supply gap.



  • Huge demand-supple gap
  • Entry barriers and supervisory standards are significantly enhanced thwarting future competition



  • BHARAT FINANCIAL LTD is the most efficient and lowest cost MFI lender
  • Impeccable track record of meeting financial obligations in a timely manner even during the black swan event of AP-MFI Crisis.
  • Diversified earnings stream with cross-sell / Non-Loan revenue contributing 4% to PAT for Q3FY17.
  • Pan-India presence with no unbalanced geographic sectoral exposure.
  • Strong solvency (Capital Adequacy of 36.2% as on 31st Dec 2016) and sufficient liquidity.
  • Steady state RoA of 4% is the highest among financial services play

Short term Technical Recommendation: Buy Bharat Financial Inclusion at Rs. 830 with target of Rs. 907.

Long Term Fundamental Recommendation: Industry PE of the Micro Finance Sector is around 30 while the Company is trading at a PE multiple of 20 so we can set a long term target of Rs. 1300 (Rs.830 *30/20).


To know more about our Large Caps, attend our webinar on "Get the new list of Multibaggers - Post Dec Quarter Results – Part 2" on 22 Mar, 2017 by Mr. Shailesh Saraf. Register Now -

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Dynamic Equities Pvt. Ltd. is a a SEBI Registered Investment Advisor and Stock Broker, a leading financial services provider, and one of the major players in the Equity markets in India. With an experience of over 15+ years in Stock Markets and Equity Research, they provide daily updated Support & Resistance of 4200 instruments across 93 exchanges and 56 countries globally. They have an in-house team of over 25 analysts. Under the guidance and mentorship of Mr. Shailesh Saraf, MD of Dynamic Equities Pvt. Ltd., these analysts are dedicately involved in guiding their clients and users of the website for trading in the market. Mr. Shailesh Saraf has an experience of over 24 years in the financial market, especially in capital & derivatives market operations, trading, research and management related areas. Dynamic Levels is a website owned by Dynamic Equities Pvt. Ltd. The website can be reached at

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Disclaimer: The author has taken due care and caution to compile and analyse the data. The opinions expressed above are only the views of the author, and not a recommendation to buy or sell. Neither the author nor accept any liability whatsoever arising from the use of any of the above contents.

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