Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Repco Home Finance Ltd (BOM:535322, Financial) reported an 18.33% increase in net profit for Q1 FY25, amounting to 105.4 crores.
- The company maintained a strong core profitability with a solid split on margin.
- The cost-to-income ratio decreased to 23.6% from 26.3% in the previous quarter.
- Repco Home Finance Ltd (BOM:535322) has started recruiting experienced personnel in sales and collection verticals to drive growth.
- The company plans to expand its footprint by adding 30-40 new branches, aiming to reach 250 outlets by March 2025.
Negative Points
- Disbursements for Q1 FY25 were flat compared to the same period last year, affected by internal staff relocations, general elections, and a heatwave.
- Gross NPA increased to 4.225% as of June 30, 2024, compared to 3.95% in the previous quarter.
- The company's loan book growth was only 8.3%, which is lower than the 26% growth registered in the year-ago period.
- Stage two numbers remained high at 11.6%, the same as the last quarter.
- The company faces stiff competition in the home loan space from microfinance and small finance banks, which could impact future growth.
Q & A Highlights
Q: Why are the company's disbursements flat despite high capital adequacy and low leverage? What is stopping growth, and how do you plan to grow from here?
A: (Kuppuswamy Swaminathan, CEO) We are quality-conscious and selective in our loan applicants to avoid past asset quality issues. We have clear plans to grow to 15,000 crores this year, targeting 11-12% growth. We are recruiting experienced sales personnel to drive this growth systematically.
Q: What is your disbursement growth target for the year, given the flat first quarter?
A: (Kuppuswamy Swaminathan, CEO) Traditionally, Q1 is flat for us. We plan to disburse between 3,600 to 3,800 crores by the end of the year. Despite challenges like elections and heatwaves, we are confident in achieving these numbers.
Q: Do you plan to return money to investors in the form of dividends, given the high capital adequacy?
A: (Kuppuswamy Swaminathan, CEO) The Board will decide on further increases in dividends. We have already increased the dividend by 33% this year. The conserved capital is necessary for our growth plans, targeting 15,000 crores by March 2025.
Q: Are the promoters planning to dilute their stake in the company? How do you plan to compete with microfinance and small finance banks entering the home loan space?
A: (Kuppuswamy Swaminathan, CEO) We have no information on promoter stake dilution. We have faced competition before and have a strong brand, especially in South India. Our interest rates and market penetration strategies will help us compete effectively.
Q: What is your AUM and credit cost guidance for FY25? What forms the other income this quarter?
A: (Kuppuswamy Swaminathan, CEO) We aim to maintain negligible credit costs, with around 1.4 crores impact this quarter. Other income increased mainly due to interest income from investments and securities.
Q: How do you plan to achieve the disbursement target of 3,600 to 3,800 crores for FY25?
A: (Kuppuswamy Swaminathan, CEO) We are improving sourcing channels, adding DSDs, and recruiting experienced sales personnel. Each branch has been given targets based on detailed analysis. We are also increasing our footprint with new branches.
Q: What is your guidance on GNPA for this year? Have there been any policy changes to increase disbursements?
A: (Kuppuswamy Swaminathan, CEO) We aim to bring GNPA down to 400 crores by year-end. We have made policy changes specific to each state to liberalize certain aspects, which should help increase disbursements.
Q: How do you plan to achieve the AUM target of 20,000 crores? What is the incremental loan growth outside Tamil Nadu?
A: (Kuppuswamy Swaminathan, CEO) We expect Tamil Nadu's share to reduce to around 50%. We anticipate 7,000 to 9,000 crores of disbursements over the next two years. The intent is to grow consistently, targeting 13% growth this year and 15% subsequently.
Q: How are you attracting experienced personnel to augment your sales and collection teams?
A: (Kuppuswamy Swaminathan, CEO) We match their salary expectations and offer growth opportunities within the company. We have recruited 30 new sales personnel and plan to add more.
Q: What is your outlook on margins given the competitive environment and rising costs?
A: (Kuppuswamy Swaminathan, CEO) Maintaining the same spread may be difficult due to rising costs. We plan to offer competitive pricing to salaried segments and compensate for any margin dip through provision reversals.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
