Release Date: August 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Sammaan Capital Ltd (BOM:535789, Financial) received a fresh certificate of registration as an NBFC ICC from the Reserve Bank of India, enhancing its regulatory standing.
- The company's net interest income increased significantly to INR927 crores this quarter from INR562 crores in Q1 of the previous year.
- Profit after tax for Q1 fiscal '25 was INR327 crores, up from INR296 crores in Q1 fiscal '24.
- Gross NPAs are at the lowest level in 16 quarters at 2.68%, indicating improved asset quality.
- The company has successfully diversified its funding sources, raising close to INR24,000 crores from various channels over the last five quarters.
Negative Points
- The gearing ratio is at 1.9 times, which, while moderate, is close to the upper target range of 2 to 2.5 times.
- There is a noticeable difference in NPA reporting between the financial statement and the earnings presentation, causing some confusion.
- The company faces macroeconomic and geopolitical uncertainties that could impact its business operations.
- The transition to an NBFC ICC and rebranding efforts may incur additional costs and require significant management focus.
- The legacy AUM, which includes loans sourced before fiscal '22, remains a challenge and needs to be reduced to single-digit percentage of AUM by fiscal '27.
Q & A Highlights
Q: Can you clarify the discrepancy in NPA numbers between the financial statement and the presentation?
A: The difference arises because we report NPA as a percentage of AUM in our earnings deck, which is strategically important for us. The statutory filings with stock exchanges follow a different protocol, possibly standalone or consolidated numbers. Our Investor Relations team can provide further clarification if needed. - Gagan Banga, Vice Chairman, MD and CEO
Q: What is your current incremental funding cost, and how does it compare to the last quarter?
A: For the 80% of funding through co-lending, the cost is around 8.5%. For the remaining 20% on our balance sheet, it's about 9.5%. There has been an insignificant change from the last quarter. We expect a material decline in cost of funds in the next 6 to 12 months. - Gagan Banga, Vice Chairman, MD and CEO
Q: Are you confident about receiving the call monies by the end of this month?
A: Yes, we are supremely confident that the call monies will be in the escrow account by August 22. Following procedural steps, the funds should be in our account shortly after. - Gagan Banga, Vice Chairman, MD and CEO
Q: What does the tactical rundown of the legacy book mean, and will it result in any financial hit?
A: Tactical rundown means an organic, well-prepared reduction of the legacy book, leveraging provisions and capital. We aim to reduce the legacy book to a single-digit percentage of AUM by fiscal '27 without any significant financial hit. - Gagan Banga, Vice Chairman, MD and CEO
Q: What is the company's dividend policy?
A: The long-term dividend policy is to distribute 30% to 40% of profits as dividends. We will focus on achieving our eight milestones and, if successful, will declare dividends accordingly. - Gagan Banga, Vice Chairman, MD and CEO
Q: What is the split of the 29% commercial real estate loans between project construction finance and lease rental discounting?
A: Commercial real estate includes construction finance, lease rental discounting, and loan against property loans. We will provide a more detailed breakdown in future reports. - Gagan Banga, Vice Chairman, MD and CEO
Q: Why choose co-lending over lending directly to customers?
A: Co-lending outsources ALM risk and allows us to lend at a lower cost of funds, enabling us to serve higher-quality customers. It also aligns with global best practices in mortgage financing. - Gagan Banga, Vice Chairman, MD and CEO
Q: What are the strategic benefits of the asset-light model?
A: The asset-light model reduces ALM risk and allows us to leverage the lower cost of funds from our co-lending partners, enabling us to focus on prime customers and maintain a high-quality loan book. - Gagan Banga, Vice Chairman, MD and CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
