Release Date: April 29, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Retail loan book grew by 14% YoY, the highest growth in the last five years.
- Affordable housing segment saw significant growth, with the book increasing from INR 138 crore to INR 1,790 crore YoY.
- Gross NPA reduced by 57%, from 3.83% in FY23 to 1.5% in FY24.
- PAT for FY24 grew by 44% YoY, with a 57% increase in Q4 alone.
- Company received a rating upgrade from AA to AA+ from three rating agencies.
Negative Points
- Incremental cost of borrowing increased to 7.93% in Q4 FY24.
- Yield on loans dropped from 10.19% in Q3 FY24 to 10.08% in Q4 FY24.
- Operating expenses grew by 23% YoY in Q4 FY24 due to investments in new verticals and IT transformation.
- Corporate loan book reduced by 46% YoY, impacting overall yields.
- Guidance indicates a potential compression in margins to around 3.5% for FY25.
Q & A Highlights
Q: What is the outstanding AUM for the new emerging market vertical as of March 2024?
A: This is a new vertical, and we have just started this year. The existing branches have an AUM of around INR12,000 crore. - Girish Kousgi, CEO
Q: Can you provide more details on the customer profile for the affordable housing finance segment?
A: In the affordable segment, about one-third of the customers are either new to bank or new to credit, and around 45% to 50% have a credit score of about 70%. - Girish Kousgi, CEO
Q: What caused the decline in yields from 10.29% to 10.08% in Q4?
A: The decline is due to the transition from super-prime to prime and the introduction of affordable and emerging segments. There is also pressure on margins due to competition and our cost structure. - Girish Kousgi, CEO
Q: Do you expect pressure on yields as you move into FY25?
A: The yield contraction is largely due to the reduction in the corporate book. With the new segment strategy and the plan to restart corporate lending, we expect to maintain margins around 3.5%. - Girish Kousgi, CEO
Q: What is the guidance for credit costs in FY25, and how do you see recoveries from the write-off pool?
A: The credit cost guidance is around 30 bps, excluding write-backs. Recoveries have started and will continue quarter on quarter. - Girish Kousgi, CEO
Q: How do you expect operating expenses to trend with the expansion of affordable and emerging verticals?
A: OpEx will increase slightly due to investments in new branches, but we expect it to stabilize at around 95 bps to 100 bps. - Girish Kousgi, CEO
Q: What is driving the strong growth in Q4, and how sustainable is it?
A: The growth is driven by increased disbursements and improved asset quality. Fee income is also up due to higher volumes. - Girish Kousgi, CEO
Q: What is the benefit of the recent rating upgrade on your margins?
A: The rating upgrade will help reduce the cost of borrowing, and we are negotiating with bankers to realize these benefits. - Girish Kousgi, CEO
Q: How do you plan to manage the different business processes for prime and affordable segments?
A: We have dedicated teams for sales, credit, operations, and collections for each segment. The processes and risk controls are tailored to the specific needs of each segment. - Girish Kousgi, CEO
Q: What is your growth guidance for FY25, and what are the key drivers?
A: We are targeting a 17% growth in the retail segment, driven by the expansion of affordable and emerging markets. Corporate lending will also contribute to overall growth. - Girish Kousgi, CEO
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
