Release Date: February 02, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AUM grew by 28% year on year to INR8,702 crores.
- Disbursements increased 25% year on year to INR2,159 crores.
- Net worth stands at INR3,500 crores, indicating robust capital adequacy.
- NIM was at 13.37%, showcasing strong profitability.
- Total live customers grew by 25% year on year to 1,25,000.
Negative Points
- Collection efficiency dropped marginally by 7 basis points to 99.65% due to unprecedented rains and floods in Tamil Nadu.
- 30 plus DPD improved only marginally by 23 basis points to 6.04% year on year.
- Net NPA was at 0.89%, which, while low, still indicates some level of non-performing assets.
- Incremental cost of borrowing has increased slightly, impacting overall cost structure.
- Growth in Tamil Nadu was slower due to staffing issues and floods, affecting overall performance.
Q & A Highlights
Q: Your branch network and your employee base have expanded sequentially. Yet, the OpEx to assets ratio has come down versus last quarter. Is it that a lot of this expansion was back-ended during the quarter and hence, we'll probably see some of those costs in Q4?
A: Regarding the cost, it is not that it has been back-ended. The cost has not gone down very substantially, just from 2.71% to 2.67%. The salary cost has gone down by INR1 crore compared to the last quarter, mainly because the employee costs directly related to disbursement segments have slightly come down.
Q: What is your outlook on the yield front, given that your yield is flat quarter-on-quarter, but the cost of borrowing has gone up? How much more of an increase should we expect in the cost of borrowings?
A: The yields have been flat quarter-on-quarter due to the product mix in Q3. We have been consistently raising funds at around 8.25% to 8.5% for housing finance. However, for the NBFC, the cost has slightly gone up by 0.25% due to an RBI circular. We expect another 0.1% to 0.25% increase in borrowing costs this quarter, but drawing INR300 crores from NHB will slightly compensate for this increase.
Q: Why hasn't the average ticket size or average loan exposure increased, unlike other affordable housing finance companies?
A: We have a clear business profile focusing on self-employed individuals in Tier 3 and Tier 4 cities, funding fully constructed houses. We consciously serve this market segment and do not aim to move towards higher ticket size lending, as many players already cater to that segment.
Q: Can you speak about the growth trends in terms of disbursement and loan book in Tamil Nadu for Q3?
A: Tamil Nadu's loan book has been growing at 13%. There was a one-quarter lag in growth due to floods in December, which affected disbursements. However, January disbursements have caught up, and we expect Tamil Nadu's growth to be back on track in Q4.
Q: Given the fixed nature of your portfolio, is there scope for further improvement in yields as we go forward?
A: We don't foresee any particular increase in yield. We have raised our pricing in our quasi home loans and small business loans. The full impact of the last interest increase, effective December, will have a beneficial impact in the ensuing quarters.
Q: How do you see the demand for both home loans and SME loans in your segments and geographies?
A: The on-ground demand is very strong. Except for Tamil Nadu, other regions like Telangana and Karnataka have shown significant growth. We see no dearth of demand and expect to achieve our guided growth of 30%.
Q: What rate are you borrowing from banks for both the HL and NBFC book, and do you believe the cost of funds has peaked?
A: For the housing finance company, we borrow at 8.25% to 8.5%, and for the NBFC, it is around 9% to 9.25%. We feel that the rates will peak in another quarter and may come down next year. We are also moving from fixed-rate borrowing to variable-rate borrowing, which will help reduce costs and expand NIM.
Q: What specific measures have you taken to address employee attrition issues, and how confident are you that these issues won't crop up again?
A: We have taken utmost care at the recruitment stage, training, and handholding new staff. We have introduced recognition and reward schemes to motivate employees, particularly in customer-facing roles. These measures have helped reduce attrition and improve productivity.
Q: Are there any plans to expand into new geographies, such as Delhi or the northern regions?
A: Our growth strategy is contiguous. We have opened branches in Odisha and Maharashtra and will focus on fully utilizing the potential in these states before expanding further north.
Q: What are your plans for IT investments and enhancements in the medium term?
A: We have various technology-enabled operations and are investing in a new loan origination system with lead management, mobile-first technology, and digital agreements. We will continue to invest in relevant technology to support our growth.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
