Release Date: April 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AAVAS Financiers Ltd (BOM:541988, Financial) reported a robust growth of 22% year-over-year in Assets Under Management (AUM), reaching INR 173 billion.
- The company achieved an all-time low one-plus DPD (Days Past Due) at 3.12% and a Gross Non-Performing Assets (GNPA) ratio of 0.94%, indicating strong asset quality.
- Net profit for FY24 grew by 15% year-over-year, amounting to INR 4.91 billion.
- The company saw a significant increase in disbursements, with a 39% quarter-over-quarter and 20% year-over-year growth in Q4 FY24, reaching INR 18.93 billion.
- AAVAS Financiers Ltd opened 21 new branches during FY24, expanding its reach and enhancing its distribution network.
Negative Points
- The overall cost of borrowing increased by 12 basis points quarter-over-quarter to 8.07%, which could impact future profitability.
- Despite the robust growth, the company faces competitive pricing pressures, which may affect its spreads and margins.
- The incremental cost of borrowing for Q4 FY24 stood at 8.14%, indicating rising funding costs.
- The company has a high concentration of its loan book in Rajasthan, accounting for 35% of the total AUM, which could pose geographic risk.
- The employee costs saw a sharp increase during the quarter, partly due to long-term incentive plans, which could affect operating expenses.
Q & A Highlights
Q: How confident are you in sustaining the strong disbursement momentum in the first half of FY25?
A: We are confident about a strong H1 due to the green shoots seen in logins and our tech transformation. Sequential improvement quarter-on-quarter gives us trust in our teams and the sanctions we see coming.
Q: What is the current mix of disbursements between in-house branches and other channels?
A: Currently, around 13% of disbursements come from digital, e-Mitra, and Mitra channels, which are OpEx light models. The rest is a hybrid of direct and connector terminals.
Q: Have spreads bottomed out at 5.06%, and should we expect improvement in spreads from Q1 onwards?
A: We expect spreads to remain around 5%. Our focus on less than 10 lakh customers will help improve spreads, but we commit to maintaining spreads at around 5%.
Q: Can you provide insights into the BT (balance transfer) scenario and competitive intensity?
A: Our BT rate is around 6% of the opening AUM. We focus on retaining the right customers and let go of those getting over-leveraged. The ones we let out have higher one-plus DPDs and GNPA.
Q: What are the pending elements of the tech transformation for this fiscal year?
A: We have gone live on Salesforce for our alert system. The lead management system in Salesforce and the loan management system on Oracle Flex are in the pipeline and should be live soon.
Q: How are you thinking about assignment volumes for the next fiscal year?
A: Assignment is a tool to fund our long-term growth. We plan to grow assignment volumes by 15-20% this year, maintaining strong ties with public and private sector banks.
Q: What is the branch addition plan for FY25, and which markets will be targeted?
A: We plan to add around 10% more branches, focusing on Karnataka and UP. We will also look at opportunities within existing markets.
Q: Have you seen any increase in BT requests after the recent PLR hike?
A: Our BT rate remains at 0.5% per month, totaling 6% for the year. We focus on retaining the right customers and do not see any alarming increase in BT requests.
Q: What are the yields for home loans, LAP, and MSME loans?
A: Home loans yield around 12.5%, while non-home loans, including LAP and MSME, yield around 15%.
Q: How do you see the impact of the recent PLR hike on yields in Q1 FY25?
A: The 25 basis point PLR hike will have a full impact on the 60% floating rate book in Q1 FY25, providing a positive impact on yields.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
