Release Date: July 19, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Net interest income grew by 24.8% year-over-year to INR 595.3 crore, in line with loan portfolio growth.
- Collection efficiency excluding arrears stood at 95.8% for Q1 FY 25.
- Net profit grew by 30.4% to INR 827.9 crore.
- Cost-to-income ratio improved to 29.2%, reflecting positive operating leverage.
- Added nine new branches during the quarter, expanding the reach and customer base.
Negative Points
- Transitory increase in delinquencies due to low base impact and operational limitations during elections.
- Gross NPA increased to 1.46%, indicating asset quality challenges.
- Higher provisioning rate at 2.29%, reflecting conservative approach but impacting profitability.
- Cost of borrowing remained stable at 9.8%, but liquidity tightening in the banking system poses a risk.
- Incremental credit cost guidance increased due to ongoing delinquencies and higher provisioning.
Q & A Highlights
Q: Can you elaborate on the provisioning policy and its impact on the financials?
A: Balakrishna Kamath, Chief Financial Officer: The provisioning policy has been adjusted to reflect district-specific risks, which has led to a conservative approach in provisioning. This change is expected to help navigate potential asset sales and capitalize on growth opportunities.
Q: What are the key factors contributing to the increase in delinquencies?
A: Balakrishna Kamath, Chief Financial Officer: The increase in delinquencies is due to a combination of factors including low rainfall, operational limitations during elections, and temporary customer behavior changes. However, we anticipate a gradual improvement in the coming quarters.
Q: How is the company managing the cost of borrowing in the current liquidity scenario?
A: Balakrishna Kamath, Chief Financial Officer: Despite the tightening liquidity scenario, the cost of borrowing has remained stable at 9.8%. We expect it to stay within the range of 9.8-9.9% for FY25.
Q: What is the outlook for portfolio growth and asset quality?
A: Ganesh Narayanan, Chief Executive Officer: We expect portfolio growth to stabilize and asset quality to improve. The collection efficiency excluding arrears is at 95.8%, and we anticipate a reduction in delinquencies as temporary factors subside.
Q: How are you addressing the challenges in non-core markets?
A: Ganesh Narayanan, Chief Executive Officer: We have seen an increase in credit costs in non-core markets, but we believe this is transitory. We are implementing measures to mitigate risks and expect credit costs to stabilize in the coming quarters.
Q: What is the impact of the new regulatory guidelines on customer acquisition?
A: Udaya Kumar Hebbar, Managing Director: The new guidelines, which limit the number of lenders and borrowing amounts, are expected to have a minimal impact on our customer acquisition strategy. We have always adhered to conservative lending practices.
Q: Can you provide insights into the disbursement trends and future projections?
A: Ganesh Narayanan, Chief Executive Officer: Disbursements were lower in the first quarter due to operational restrictions, but we expect them to normalize in the coming months. We are confident in achieving our annual growth targets.
Q: How is the company planning to leverage technology for better risk management?
A: Balakrishna Kamath, Chief Financial Officer: We plan to implement a business rule engine to align loan provisioning rates with district-specific risks. This will help optimize revenue generation and mitigate potential risks.
Q: What are the expectations for the cost-to-income ratio moving forward?
A: Balakrishna Kamath, Chief Financial Officer: The cost-to-income ratio stood at 29.2% for the quarter, benefiting from positive operating leverage and controlled costs. We expect this trend to continue, contributing to sustainable profitability.
Q: How is the company addressing the impact of adverse weather conditions on asset quality?
A: Ganesh Narayanan, Chief Executive Officer: While adverse weather conditions have impacted asset quality, we have implemented additional measures such as deploying experienced field teams and extending support to affected customers. We expect these measures to mitigate the impact in the coming quarters.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
