Release Date: May 09, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Disbursements grew by 31.5% to INR3,963 crores, and AUM increased by 34.7%.
- PAT grew by 33.9% year-on-year to INR306 crores, leading to an ROA of 3.8%.
- ROE for FY24 was 15.5%, with Q4 FY24 seeing an increase to 16.1%.
- Asset quality remains strong with 1+ DPD at 4.2% and 30+ DPD at 2.8%, both showing improvements.
- Digital adoption is high, with 95% of customers registered on the app and 47% of loan sanctions processed with data from account aggregators.
Negative Points
- NIM compression due to increased financial leverage, higher cost of borrowing, and higher cash holdings.
- Balance transfers have increased to 7.5%-8% from the previous 6%, indicating potential customer dissatisfaction with rate hikes.
- Operating cost to assets at 2.5% for Q4 due to cleanup of old provisions, with guidance of 3% going forward.
- Cost of borrowing is competitive at 8.25%, but has increased by three basis points quarter-on-quarter.
- Credit cost guidance remains at 30-40 basis points, with current quarter showing a decline due to recoveries from previously written-off accounts.
Q & A Highlights
Q: How should we look at cost of borrowings trending?
A: Our pricing has been maintained at the same level for the last five to six quarters. We expect another 10-20 basis points increase at best, unless there are significant changes in policy rates or G-Sec pricing. - Nutan Patwari, CFO
Q: What is causing the increase in balance transfers?
A: The increase in balance transfers is largely due to the repricing that has occurred. We are implementing new measures to address this issue, but it is not a major concern as overall erosion levels remain stable. - Manoj Viswanathan, CEO
Q: How does the RBI circular on charging interest only when the check is handed over to the customer impact you?
A: We do not issue cheques; we use electronic transfers. In cases where demand drafts are issued, the turnaround time is quick, and the impact on interest income is minimal. - Manoj Viswanathan, CEO
Q: Can you explain the decline in operating expenses this quarter?
A: The decline is due to the cleanup of old provisions as part of closing the financials for the year. We maintain a guidance of 3% operating cost to assets going forward. - Nutan Patwari, CFO
Q: What is the outlook for credit costs?
A: We expect credit costs to stabilize around 30 basis points. This quarter's lower credit cost was due to recoveries from previously written-off accounts. - Nutan Patwari, CFO
Q: What is the strategy for branch expansion?
A: We are focusing on emerging affordable markets like Uttar Pradesh, Madhya Pradesh, and Rajasthan. We plan to add 20-25 branches and 60-70 touchpoints per year. - Manoj Viswanathan, CEO
Q: How do you account for co-lending income?
A: Co-lending income is reflected in the interest income line, not as fee income. We plan to provide separate disclosure once co-lending reaches 10% of AUM. - Nutan Patwari, CFO
Q: What is the impact of higher balance transfers on your portfolio?
A: Higher balance transfers are primarily due to rate increases passed on to customers. We are implementing measures to address this, but it is not a major concern. - Manoj Viswanathan, CEO
Q: What is the guidance for spreads and NIM?
A: We maintain a spread guidance of 5% to 5.25% ex co-lending. Our NIM should remain in the range of 5.3% to 5.5%. - Nutan Patwari, CFO
Q: What is the strategy for managing cost of borrowing?
A: We aim to maintain a diversified borrowing mix and engage with banks for improved pricing. Our cost of borrowing is competitive at 8.25%. - Nutan Patwari, CFO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
