Release Date: August 01, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Consolidated profit after tax grew by 15% year-on-year to INR745 crores.
- Total consolidated revenue increased by 26% year-on-year to INR10,258 crores.
- NBFC portfolio grew by 25% year-on-year, with a focus on SME segment showing a 39% growth.
- Mutual fund average AUM grew by 19% year-on-year, crossing INR3.5 trillion.
- Health insurance business saw a robust growth of 35% year-on-year in gross written premium.
Negative Points
- Personal loan portfolio saw a decline due to recalibration of sourcing from digital partners.
- Individual first-year premium growth in life insurance was lower than industry growth due to muted growth with one banca partner.
- Net VNB margins in life insurance dropped to 6.5% from 11.8% last year.
- Stage 3 loans in the NBFC portfolio remained stable but high at 2.54%.
- Credit cost in the NBFC business was 1.43%, close to the upper limit of their guidance.
Q & A Highlights
Q: Congratulations on the quarter. So the -- first ma'am, I had a question on the merger. So currently, what all approvals are pending? And how much time do we anticipate -- I think by March 2025, we expect the merger to be over. So are we through with the timeline? And secondly, related to the merger only, we have around 45% stake in AMP and around 46% stake in Health Insurance and 51% in Sun Life Insurance. So any thoughts on whether the regulator -- whether the RBI would be comfortable with our main NBFC lending arm having us almost 50% stake in other subsidiaries. Usually, we have seen in case of some banks wherein RBI restricts the stake in insurance to 20%. So what are our thoughts on that? Yeah.
A: Okay. So first is on the status. As we said, we have already got an in-principle approval from both BSE and NSE, which is the first step. Going forward now, first, we need to get a no objection from RBI. After we get the no objection from RBI, our registered office is in Gujarat, so we will have to file the merger proposal in the NCLT of Gujarat, which is at Ahmedabad. And then, of course, as you know that there is a process, which the NCLT will go through. My expectation is, since this is the merger of our 100% subsidiary into ABC, typically the time required is shorter than the normal merger. The second is, both the companies have their registered office in Gujarat. So that makes it a little more simpler because both of them will be applying to the Ahmedabad NCLT. As you rightly said, our endeavor would be to complete the process by March 31, 2025. And we will keep you informed about the progress in every quarter. So that's the second from the bottom. Talking about the specific approval, I don't want to preempt and really comment on how RBI will look at it. The only thing I would say is that regulation does not prohibit NBFCs to hold the percentages that we are holding today in the companies that you mentioned. In case of banks, typically, there is a banking regulation act which prohibits the banks to hold in any company with more than 30%. It can either be a subsidiary or what you hold in any company has to be less than 30%. So that's the act. And therefore, whatever that you spoke about is applicable to the banks and not necessarily to NBFC. In our case, of course, in case of -- as we had mentioned before, in case of insurance, we are allowed to hold more than 50% with a specific approval from the Reserve Bank of India. There is no prohibition. And in our merger proposal, we have asked for that specific approval. So again, we are very hopeful and we have no reason to believe that they will have any objection to what we have made an application for. But again, we will keep you informed about the progress on that front as well.
Q: Now specific on the NBFC business, if you look at the growth in the NBFC business, it was around 2% QoQ and still we are guiding for around 25% YoY CAGR over the next two, three years? So how do we look at it? What would be the main driver? If we look at the AUM mix, it seems that we are (technical difficulty) focusing or we are going slowly on the (technical difficulty) unsecured seat and that is also high yielding. So given that the margins also have given up quite a bit in the coming quarter. So is that due to the unsecured mix change? And will that continue? Or are we again going to build the unsecured mix? Yeah.
A: So if you look at, we have grown 25% year-on-year. Yes, sequentially, it is 2%, but that's a calibrated growth, which we had taken some time in quarter 3 of last year, that small ticket unsecured loan, where the risk rates have gone up and also RBI had concern on this segment, and that's the reason we had recalibrated growth. And if you see in the last two, three quarters, we have done this segment down. But as we have committed, we continue to be very, very positive in terms of growing 25% plus year-on-year. So with clear focus on SME segment, which we will continue to grow, so if you look at our secured business has grown by 43% year-on-year, and MSME segment, if you look at, that's grown 29% year-on-year. And also with the recalibration, which has already been done in the personnel and consumer, and we have really built our direct sourcing models -- I spoke that in the initial comments that the branches, which we are setting it up -- the direct open market acquisition engines, which we have built the ABCD app, which we have launched, all of this will help us to grow our personal and consumer business. So again, it's a recalibration in the last couple of quarters, but we expect this to grow with the clear direct acquisition models, which I spoke about. Also, on the unsecured business also, we are very, very positive in terms of growth on the unsecured business, and that should help us in terms of mitigating the margin compression, which you mentioned. Yes, the margins have compressed because of the change in the product mix. But as we grow our unsecured business and scale up our direct sourcing channel for personal and consumer, we should be able to manage our margin.
Q: Two questions. But first one is again on NBFC. Now as you have some recalibrated growth, both in unsecured business and unsecured personal and consumer loans, now if you can just provide some color, I mean, (technical difficulty) calibration on your change in strategy more focused on (technical difficulty), how the growth in terms of AUM growth in these two unsecured business and unsecured personal is going to look? And in this calibration or running down some passbooks, how is this delinquency or GSA 3 target to go? I mean, is this number what we are seeing, particularly the GSA numbers in these two segments peak or still, I mean, as until the time the growth comes, like the full throttle, it will inch up further. So that is the first question on NBFC, I will come back with (technical difficulty) question later.
A: First question was on the growth of these two segments, which is the personal and consumer and unsecured business. In terms of -- as I mentioned, we continue to be very bullish on both these segments, personnel and consumer. We have built direct sourcing channels, and our focus will be completely dependent on acquiring customers directly rather than third party. That's the reason why the recalibration you see, we are seeing -- in quarter 1 also, we have seen that our direct sourcing channels have started delivering. Our branches, which we have invested over the last couple of years have started delivering results. And also last quarter, we have launched ABCD app. Initial
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
