- Revenue: INR4,832 crore for the year ended March 31, 2024, up 45% YoY.
- Adjusted Pre-Provision Operating Profit: INR1,915 crore, up 48% YoY.
- Profit After Tax (Adjusted): INR984 crore, up 40% YoY.
- Quarterly Revenue: INR1,276 crore for Q4 2024, up 46% YoY.
- Quarterly Adjusted Pre-Provisioning Profit: INR669 crore for Q4 2024, up 129% YoY.
- Quarterly Profit After Tax (Adjusted): INR345 crore for Q4 2024, up 110% YoY.
- Consolidated Net Worth: INR8,438 crore as of March 31, 2024.
- Book Value Per Share: INR88.3 per share.
- Consolidated Loan Book: INR12,917 crore, down 17% YoY.
- Gross NPA Ratio: 4.7% as of March 31, 2024.
- Net NPA Ratio: 2.2% as of March 31, 2024.
- Cash and Cash Equivalents: INR4,769 crore as of March 31, 2024.
- Long-Term Borrowings Raised: INR3,585 crore during FY24.
- Investment Banking Segment Revenue: INR2,000 crore for FY24, up 52% YoY.
- Investment Banking Segment Profit Before Tax: INR911 crore for FY24, up 87% YoY.
- Investment Banking Segment Profit After Tax: INR706 crore for FY24, up 90% YoY.
- Mortgage Lending Segment Net Revenue: INR842 crore for FY24.
- Mortgage Lending Segment Pre-Provisioning Profit: INR657 crore for FY24.
- Distressed Credit Business AUM: INR14,500 crore as of March 31, 2024.
- Platform AWS Segment Revenue: INR978 crore for FY24, up 75% YoY.
- Platform AWS Segment Profit Before Tax: INR117 crore for FY24, up 4 times YoY.
- Platform AWS Segment Profit After Tax: INR90 crore for FY24, up 2.5 times YoY.
- Mutual Fund AUM: INR6,189 crore as of March 31, 2024, up 2 times YoY.
- Equity Schemes AUM: INR3,857 crore as of March 31, 2024, up 4 times YoY.
Release Date: May 27, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- JM Financial Ltd (BOM:523405, Financial) reported its highest-ever operating revenue for the year ended March 2024, driven by strong performance in investment banking, AWS platform, and retail mortgage businesses.
- The company achieved the number one franchise position in IPO and QIP for FY24, with the highest-ever profitability in its integrated Investment Banking segment.
- The mutual fund AUM crossed INR8,000 crore, with equity assets reaching over INR5,000 crore in May.
- The brokerage business saw significant growth, with average daily turnovers exceeding INR55,000 crore, up 70% year-on-year.
- The retail mortgage loan book increased by 69% year-on-year, reaching INR3,239 crore, with the highest-ever quarterly disbursement of INR449 crore in Q4 FY24.
Negative Points
- The company recognized a loss of INR985 crore due to fair valuation of investments and loans in its distressed credit business, primarily related to one large account.
- The wholesale mortgage business faced a total impairment loss of INR562 crore for the year.
- The consolidated loan book declined by 17% year-on-year, with the wholesale markets loan book seeing a 42% decline.
- The gross NPA ratio of the lending businesses stood at 4.7%, with net NPA at 2.2% and SMA-2 at 1.6% as of March 31, 2024.
- The company is pivoting its wholesale credit business from an on-balance sheet model to a distribution-led syndication-driven model, indicating a strategic shift due to competitive intensity and regulatory changes.
Q & A Highlights
Highlights of JM Financial Ltd (BOM:523405) Earnings Call
Q: Congratulations on the record operating revenues and profits. Can you comment on the factors leading to the strategic shift and how investors can track progress? Also, will this shift lead to a change in the valuation framework for the company?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: The strategic shift is driven by increased competitive intensity, regulatory changes, and the need for higher provisioning in real estate and infrastructure sectors. Investors can track progress through metrics like fee-based income growth and reduced leverage. The shift should lead to a valuation framework based more on fee-based multiples rather than price-to-book multiples.
Q: After the recent write-off, is the majority of the write-off done, or does the INR5 write-off remain? Will partners also be putting capital into JM ARC?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: The majority of the write-off is concluded. We do not expect any exceptional provisions like the recent one. Our partners have the option to participate in the rights issue, but we do not expect them to. If they do not participate, our stake in ARC will significantly increase.
Q: What is your strategy for the asset management business, and what are your expectations for breakeven levels?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: Our private equity alternative business is already profitable. We expect the mutual fund business to break even once we achieve close to INR15,000 crore in equity AUM. The PMS business has significantly narrowed its losses and is expected to be profitable soon.
Q: Given the significant cash pile on the balance sheet, how do you propose to deploy this capital?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: The capital will be used for higher payouts and reinvestment into AIFs, digital, asset management, and wealth management. We will also invest more in our brokerage business. Surplus capital will be distributed back to shareholders.
Q: Considering the strategic shift, will the focus be more on AWS and investment banking, with less focus on wholesale mortgage and ARC?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: Yes, the focus will be more on investment banking, asset management, wealth management, and retail HFC. However, we will still focus on building a larger private credit distribution and AIF business.
Q: Can you elaborate on the provisions taken in JM Financial Credit Solutions Limited and the levels of SMA2?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: The SMA2 ratio stands at 1.6%, which is positive given the declining book size. We have taken some technical write-offs to avoid higher NPAs, but we expect to recover from these write-offs.
Q: What are the expected provisions and ROEs for the lending and ARC business for FY25 and FY26?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: It is difficult to quantify provisions as we expect some write-backs. The ROEs will be capped due to cash generation and reduced leverage, but the ROAs will remain healthy due to fee-based revenue.
Q: What is the roadmap for the investment banking business over the next three to five years?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: The investment banking business should multiply in the high teens annually. The market cap of India is expected to double in the next five to seven years, providing significant opportunities for capital markets and advisory businesses.
Q: Are you open to a buyback if valuations do not improve?
A: Vishal Kampani, Non-Executive Vice Chairman of the Board: We are open to considering a buyback at the right time. As we generate more profit and reduce leverage, the distribution of profit to shareholders will increase.
Q: What is your right to win or grow in the retail mortgage business, given its competitive nature?
A: Manish Sheth, Managing Director, Chief Executive Officer - Home Loans: The market size is large, and our focus is on people, product, processes, and policies. We aim to be granular and diversified, with a strong presence in multiple states and cities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
