MFI Income Analysis - Non-Core Revenue Contribution To RoAUM Stood Between 1-2% In FY23: ICICI Securities

ICICI Securities Report

Micro finance players witnessed sharp recovery in profitability during FY23 as reflected in average return on asset at 3% versus less than 1% in FY22 for most players.

Profitability was driven mainly by credit cost moderation and improved core business performance, while higher direct-assignment income and fees and commission also boosted earnings.

In this context, we deep-dive into the FY23 return on assets management waterfall to assess the sustainability of current RoA by segregating contribution of core income (interest income on balance sheet loans, investment and deposits) and non-core income (assignment / securitisation income, third-party sales, recovery from w-off accounts and other income) to earnings.

Overall, contribution of non-core revenue to RoAUM stood at 1-2% except for Satin (7%) and, specifically, recovery from written-offs accounts contributed 20-50 basis points to RoAUM in FY23.

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