Release Date: August 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated revenues increased by 1% year-on-year, reaching INR1,094 crore.
- Profit after tax increased by 3% year-on-year, from INR166 crore to INR171 crore.
- Retail mortgage loan book saw a significant increase of 61% year-on-year, from INR2,033 crore to INR3,267 crore.
- Assets under management in the wealth management and distribution business crossed INR1 lakh crore.
- The mutual fund business achieved a milestone of INR10,000 crore in AUM, with INR7,500 crore in equity.
Negative Points
- The rest of the loan book declined by 37% year-on-year, from INR13,858 crore to INR8,666 crore.
- Disbursals in the home finance business were down by 30% year-on-year and 75% quarter-on-quarter.
- Incremental cost of funds for JM Financial Home Loans increased to 9%.
- Net NPA in JM Financial Credit Solutions stood at 3.4%, with unresolved projects still undergoing resolution.
- Significant investments in AMC and digital businesses, around INR50 crore per quarter, may impact short-term profitability.
Q & A Highlights
Q: Vishal, with the pivot in your wholesale credit business, how do you plan to utilize the surplus capital generated?
A: We will generate surplus capital but still have debt to repay. Our net debt will come down quickly, and payouts will increase over the next 3-4 years. We are also investing in Credit Solutions, which will cost us INR1,400 crore. We see long-term value in this business and plan to build a global distribution for India credit products.
Q: Are all your customers aligned with the rundown of the wholesale lending business?
A: Yes, we have done due diligence on the entire book of JM Financial Credit Solutions. The book is solid, and we have liquid assets in JM Financial Products. We expect to generate significant cash flow from resolutions over the next four to six quarters.
Q: Why was there a significant fall in home finance disbursals?
A: April and May are typically slow months, especially in Tier 2 and Tier 3 cities. Additionally, we sold INR100 crore during the quarter, which affected the overall AUM. Regulatory changes also impacted the disbursement booking process.
Q: Have you started syndicating transactions in the wholesale business?
A: Yes, we have an active syndication business in corporate finance and are extending it to real estate, distressed credit, and promoter finance. We will continue lending but will hold a smaller portion of the syndicated loans on our balance sheet.
Q: How do you plan to manage the talent crunch in capital market businesses?
A: We are aligning ourselves with industry standards by offering stock options in the businesses employees drive. This helps us attract and retain the right talent. We are also expanding our sector and client coverage to capitalize on market opportunities.
Q: What is the plan for the cost-to-income ratio in the AWS business?
A: We are still in heavy investment mode in asset management, PMS, and digital. The cost-to-income ratio will stabilize around FY26-FY27. We are front-ending costs by hiring people, and as revenues kick in, the numbers will improve.
Q: What is the status of the regulatory audits and investigations?
A: The special audit by RBI is complete, and we have submitted our response. We are fully cooperating with SEBI in their investigation and providing the necessary information.
Q: How do you plan to grow like other financial firms such as Motilal Oswal?
A: We aim to grow rapidly in our core businesses. In home loans, we target 35% growth, in corporate advisory and capital markets, high-teens growth, and in wealth management, 25%-30% growth.
Q: What are the investment levels in AMC and digital, and how do you see it going forward?
A: We expect to invest around INR50 crore per quarter in digital, asset management, and AIF businesses over the next eight quarters, totaling INR300 crore to INR400 crore.
Q: What is the cost of funds for JM Financial Home Loans, and how has it moved in the past year?
A: The on-book cost of funds is around 8.56%, and the incremental cost is around 9%. This includes funding from National Housing Bank Refinance schemes and long-term liabilities.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
