- Gross Advances: INR9,037 crores in Q1 FY25, up 41.8% year-on-year from INR6,372 crores in Q1 FY24.
- Vikas Loan Gross Advances: INR2,776 crores in Q1 FY25, up 116.4% year-on-year from INR1,283 crores in Q1 FY24.
- Disbursements: INR1,740 crores in Q1 FY25, up 46.3% year-on-year from INR1,190 crores in Q1 FY24.
- Vikas Loan Disbursements: INR513 crores in Q1 FY25, up 141.2% year-on-year from INR213 crores in Q1 FY24.
- Deposits: INR8,137 crores in Q1 FY25, up 42.2% year-on-year from INR5,722 crores in Q1 FY24.
- CASA Ratio: Increased to 17.7% in June '24 from 14.9% in June '23.
- Retail Deposits: 78.9% of overall deposits in June '24, up from 75.7% in June '23.
- Gross Nonperforming Assets (NPA): Reduced to 2.7% in June '24 from 3% in June '23.
- Net Nonperforming Assets (NNPA): Decreased to 0.4% in June '24 from 1.6% in June '23.
- Provision Coverage Ratio (PCR): Increased to 83.9% in June '24.
- Net Interest Income (NII): INR293.2 crores in Q1 FY25, up 30.5% year-on-year from INR224.7 crores.
- Net Total Income: INR363.4 crores in Q1 FY25, up 31.8% year-on-year from INR275.7 crores.
- Yield on Portfolio: 20.1% for Q1 FY25.
- Net Interest Margin (NIM): 10% in Q1 FY25.
- Cost of Funds: 7.6% in Q1 FY25, up from 7.4% in Q4 FY24.
- Cost-to-Income Ratio: 60.3% as of June '24.
- Capital Adequacy Ratio (CRAR): 27.3% in June '24.
- Branch Network: 701 branches, with 115 liability-focused, 392 asset-focused, and the balance comprising rural centers.
Release Date: August 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Gross advances increased by 41.8% year-on-year, reaching INR9,037 crores in Q1 FY25.
- Vikas loan disbursements grew by 141.2% year-on-year, indicating strong traction in this segment.
- Deposits grew by 42.2% year-on-year, with the CASA ratio improving from 14.9% to 17.7%.
- Net interest income increased by 30.5% year-on-year, reaching INR293.2 crores.
- The bank's capital adequacy ratio remains strong at 27.3%, well above regulatory requirements.
Negative Points
- Sequential increase in asset quality issues, with a 50 bps rise in the 31 to 90 days past due category.
- Cost of funds increased to 7.6% in Q1 FY25 from 7.4% in Q4 FY24.
- Credit costs remain high, with a net credit cost of INR51.5 crores for the quarter.
- Challenges in maintaining CASA ratio, with a focus on improving it to at least 20% over the next three quarters.
- Potential need for capital raising in the next 15 to 18 months despite a strong capital adequacy ratio.
Q & A Highlights
Q: Congratulations sir, for a good set of numbers in a very challenging quarter. Sir I have three questions. So first on asset quality, in the 31 to [90] we have seen a sequential increase of around 50 bps. So how much of that do you think is attributable to seasonal factors? And how do you see -- this forward flow for this? And also, if you can throw some highlight -- some light on the collection efficiency in the month of July, even when the collection efficiency has seen a draw?
A: Yes. So there's a bit of work for us to be done after the first quarter in terms of improving our collection efficiency numbers, and they are reflected in our 30 DPD. Our collection efficiency numbers have improved in July from the first quarter. And we will continue to focus on that. Typically, what we have seen is that about one-third of our 30 DPD flows further into 60 DPD. And another 40% of that will flow into our NPA bucket. And that's what we are focusing on right now in terms of arresting the same. (Kanishka Chaudhary, CFO)
Q: And what would be the reason for this, sir? If you can throw some light on that as well?
A: No, it's stated as well by the rest of the competitors as well. There has been a little slow down in collections on account of multiple factors, specifically in the northern part of the state and in certain pockets in Tamil Nadu. This is usually seasonal. This can be a little more enhanced, but we're pretty confident in terms of the collection efficiency getting normalized in Q2. (Baskar Ramachandran, CEO)
Q: So our PCR has seen a major improvement in last two quarters. And is, I think above criteria what RBI has kept for universal banking license. So can you let us know how we should build this in our numbers for FY25, '26?
A: So our PCR reaching 83% was along the lines of the road map that we had put in place. From here on, we will like to be above the 80% number. At all points in time, RBI would want us to be above 75% number. But given that we have reached the stage from here on, we would want to sustain the 80% threshold for PCR. (Kanishka Chaudhary, CFO)
Q: And I believe we have aspirations for universal banking license as well for next year?
A: As it comes, we play by three years. So as of now, we really focus in terms of creating a very strong small finance bank platform. As you know, even from a size perspective, we are just closer to around INR9,000 crores in terms of assets. The intent would be to kind of build a very strong (inaudible) around INR25,000 crores and we'll certainly even think very seriously about the universal banking road map at the end of this financial year or earlier than that. (Baskar Ramachandran, CEO)
Q: Sir, just a book-keeping question with respect to CGFMU claim that has been reflected in our numbers means, have we deducted from write-offs? How does that mean kind of in the numbers?
A: Yes. So if you look at the GNPA and asset quality page in our investor deck, you will see that we have shown it there. So our gross credit costs were around INR95 crores, and net of recoveries of INR11 crores and INR32 crores of receipts from the CGFMU. Our net credit cost for the quarter stands at around INR51.5 crores, INR52 crores. (Kanishka Chaudhary, CFO)
Q: So any update on the ECLGS we had or any status of ARC, if you can share some data points on that as well?
A: So now very little around INR45-odd crores is remaining on the books, right, and the process of claiming the same continues. We have received about a little over INR9 crores till date. We have our last tranche of claims to be made, which we will do over the next quarter. (Kanishka Chaudhary, CFO)
Q: Sir, just one broad question on the MFI cycle as such. So probably this is the first time the (inaudible) through with the bureau data being there for at least five, six years and also have seen the COVID kind of an impact. How do you see -- and also the industry volume which is being very proactive as well. How do you see the cycle this time around versus the last cycles, how deep it can go? And what could be the loss given default for the industry?
A: As we stated earlier, we really always kind of planned this business with a credit cost of anywhere between 2% to 3% on an annualized basis over a period of four to five years, and we look at from cycle-to-cycle. However, there could be extraordinary event, the CGFMU cover is not planned kind of look at the premium, what we pay and the claims -- the claims may always be much lower and lower than the overall premium pay. This is for that one-off events and the sharpness can be as much as 7% to 8% higher than what we saw. It could be where between 10% to 17% depending on the geographies that you operate. And as it happens in the industry, in any geography, there is a sharp reduction in the collection efficiency or delinquency. (Baskar Ramachandran, CEO)
Q: What might be the reason for the reduction in the CASA revenues? And what do you expect from this?
A: It has been a very tough market, Mr. Vatsal. So certainly we are fine-tuning our strategy, and also the reason is that while the overall reduction is marginal. As the deposit book grows, we are not really having challenges, including in terms of sourcing digitally fixed deposit absolutely granular. Ticket size is less than INR1 lakh. There has not been similar traction as far as the CASA is concerned. Our focus for the remainder of the year would be in terms of taking it to a meaningful -- minimum at least 20%, while we're targeting a little higher than that, 20% is what we'll try to achieve sequentially over the next three quarters. (Baskar Ramachandran, CEO)
Q: Congratulations on the good overall numbers. A couple of questions from my side. Firstly, on your growth outlook, how do you see growth panning out for FY25? So far, you have reported a good set of
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
