Release Date: May 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Star Housing Finance Ltd (BOM:539017, Financial) achieved a 74% year-on-year growth in assets under management, reaching INR426 crores.
- The company maintained a low gross non-performing assets (GNPA) ratio of 1.50% and net non-performing assets (NNPA) ratio of 1.02%.
- Successful capital infusion through warrants amounting to INR60 crores has strengthened the company's capitalization levels.
- The company has expanded its presence to the Northern region, particularly in the National Capital Region (NCR), recognizing its growth potential.
- Star Housing Finance Ltd (BOM:539017) received a rating upgrade from CARE, now rated as BBB/stable by both India Ratings and CARE.
Negative Points
- The portfolio at risk stands at 3.22%, indicating some level of overdue accounts.
- The company faces challenges in maintaining asset quality as it expands its portfolio.
- There are concerns about potential regulatory changes affecting co-lending practices, which could impact the company's strategy.
- The average loan size in rural areas is relatively low at INR8 lakhs, which may limit revenue growth.
- The company has a high leverage ratio of 2.41 times, which could pose risks if not managed carefully.
Q & A Highlights
Q: Any new area of geography that we are looking to explore as rural development is going fast?
A: We expanded into the NCR region last financial year. The focus now is to penetrate deeper into existing geographies like Maharashtra, Madhya Pradesh, Gujarat, Rajasthan, Tamil Nadu, and NCR. We will consider expanding into new geographies in the second half of the financial year.
Q: What percentage of our borrowers are new to credit? And what's the average household income of these borrowers?
A: Approximately 50% of our portfolio consists of new-to-credit customers. The typical household income for these borrowers ranges from INR15,000 to INR50,000.
Q: When you speak about portfolio at risk, what does that mean? And how is it different from GNPA?
A: Portfolio at risk includes any account that is even one day past due, which stands at 3.22%. GNPA, which is part of this, is at 1.50%. This approach helps us monitor asset quality effectively.
Q: How do you see diversifying your borrowing profile in terms of lender and instrument?
A: We have diversified our lender profile to include public sector banks, private sector banks, and financial institutions. We have also successfully issued NCDs, which now form about 9% of our overall borrowing. We aim to maintain this at around 10% of our borrowing mix.
Q: What is the maximum ticket size that you offer to the customers and the average ticket size on the book?
A: The maximum ticket size is INR25 lakhs in semi-urban and rural areas, and up to INR35 lakhs in areas close to metros. The average incremental ticket size is INR12 lakhs in semi-urban and INR8 lakhs in rural areas, with an overall portfolio average of around INR10 lakhs.
Q: What is the ALM profile, and what is the ideal leverage level you would want to maintain?
A: We have no mismatches up to three years and maintain a good liquidity position. The ideal leverage level is around 3 to 3.5 times.
Q: How do you see the geographical state of your AUM shaping up, and what are your plans for branch expansion?
A: Maharashtra contributes the bulk of our AUM, followed by MP, Rajasthan, Tamil Nadu, and Gujarat. NCR is expected to contribute double digits in the current financial year. We plan to expand within existing geographies and will consider new territories like Chhattisgarh, UP, Andhra Pradesh, or Telangana in the second half of the financial year.
Q: When do you see the next rating upgrade taking place, and what are the parameters for it?
A: We expect a rating upgrade to BBB+ over the next six to nine months. Typical parameters include an AUM of INR650-700 crores, GNPA under 1.5%, net worth of INR120-130 crores, and profitability.
Q: How much of the book is through co-lending, and how do you see this proportion in the future?
A: Currently, 10% of our book is through co-lending. We aim to increase this to 15-20% while maintaining 80-85% through our own book.
Q: What are your long-term projections for AUM, and can we expect sustainable growth?
A: While we can't provide forward-looking statements, we have grown significantly in the past years. We aim to cater to around 20,000 first-time homebuyers over the next 36 to 48 months, potentially reaching an AUM of INR2,000 crores, subject to capital availability and economic conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
