Release Date: May 16, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- CSL Finance Ltd (BOM:530067, Financial) achieved a robust growth in AUM, increasing by 9% quarter-on-quarter and 38% year-on-year, reaching INR1,030 crores.
- The company successfully met its AUM target of INR1,000 crores for FY '24, driven significantly by the SME retail vertical.
- Asset quality improved with GNPA and NNPA lower by 17% and 10% respectively, and a provision coverage ratio maintained at 70%.
- Net profitability saw a significant increase, with a 67% year-on-year growth in net profit for FY '24, reaching INR63 crores.
- The Board recommended a dividend of INR2.5 per equity share, continuing the company's dividend-paying policy.
Negative Points
- Net interest income decreased by 4% in Q4 due to higher liquidity and negative interest carry on the fees.
- The rollout of the new suvidha loan product faced delays due to on-ground challenges and complexities in developing the platform.
- Employee costs increased significantly due to the addition of new team members and branches, impacting overall expenses.
- The unsecured loan segment, particularly the suvidha loan product, faced challenges in disbursement and collections, leading to a cautious approach.
- Despite the rating upgrade to A-minus stable, the immediate impact on borrowing costs is expected to be limited to an initial reduction of 50-75 basis points.
Q & A Highlights
CSL Finance Ltd (BOM:530067) Q4 and FY '24 Earnings Call Highlights
Q: Congratulations on the rating upgrade. How will the A-minus rating impact your borrowing profile and costs?
A: Rohit Gupta, Managing Director, explained that the A-minus rating will allow CSL Finance to access more funds from PSU banks, potentially reducing borrowing costs by 50-75 basis points initially. This will also enable larger loan sizes from PSU banks.
Q: What led to the significant increase in team members despite opening only three branches last year?
A: Rohit Gupta noted that the focus was on making existing branches more productive and expanding their geographical reach. This required adding more salespeople and strengthening the middle and senior management teams.
Q: Can you provide an update on the Suvidha loan product and its potential growth?
A: Rohit Gupta mentioned that the Suvidha loan product faced challenges but is being reengineered. The product will be relaunched in July with a new digital platform. The potential market size is significant, with an estimated 15,000-20,000 customers and a loan book of INR150-200 crores over the next two to three years.
Q: What is driving the significant increase in fee income, and can this trend continue?
A: Sayam Pokharna explained that the increase in fee income is due to higher spreads in retail and wholesale segments and co-lending activities. The trend is expected to continue as the company focuses on fee-based income.
Q: How is CSL Finance leveraging technology to scale its business?
A: Rachita Gupta highlighted that CSL Finance has developed a robust digital platform for SME loans, with 100% digital processes from loan origination to disbursement and collections. The company is also working on machine learning and automated deviations to improve efficiency.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
