Release Date: October 23, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Can Fin Homes Ltd (BOM:511196, Financial) reported a 28% growth in disbursements compared to Q1 and an 18% growth compared to Q2 of the previous year.
- The company achieved a stable quarter in terms of spreads and net interest margins (NIMs), with a slight improvement in cost of borrowing.
- AUM growth improved from 9% in Q1 to 10% in Q2, with expectations to reach 11-12% by the end of Q3 and 13-14% by the end of Q4.
- The company received a refinance sanction from NHB at a lower cost than current borrowings, which is expected to benefit future quarters.
- Efforts to expand geographically and diversify the customer base, including increasing the self-employed segment and marketing initiatives, are underway to sustain growth beyond FY25.
Negative Points
- There was an increase in SMA 0 and 1 accounts, indicating some collection challenges, particularly linked to regulatory changes affecting advance payments.
- Operational expenses increased due to promotions, increments, actuarial evaluations, and legal expenses related to surface actions.
- The company is facing challenges in Telangana due to issues with property registrations and demolitions, affecting growth in that region.
- The cost-to-income ratio is expected to rise slightly due to ongoing IT upgrades and operational expenses.
- The company is still in the early stages of implementing builder tie-ups, with limited success so far, which could impact growth in that segment.
Q & A Highlights
Q: Can you explain the increase in SMA 0 and 1 in Q2 and its implications?
A: The increase in SMA 0 is due to a regulatory change requiring excess payments to be credited to the principal, affecting flexibility. SMA 1 saw a slight increase, but there's no significant concern. The focus will be on reducing this in Q3. (Suresh Iyer, CEO)
Q: What are the incremental lending rates for different loan categories, and how are portfolio yields being maintained?
A: There has been no change in product-wise pricing from Q1 to Q2. The yield is maintained due to an increase in the self-employed non-professional (SENP) segment, which carries a higher rate than the salaried segment. (Suresh Iyer, CEO)
Q: How do you view the industry trend of growth in affordable housing versus higher ticket loans?
A: Growth is primarily seen in the 20 lakh-plus segment, reflecting higher property values even in smaller towns. The company is experiencing growth across geographies, except for Telangana. (Suresh Iyer, CEO)
Q: What is the impact of potential Repo rate cuts on your liabilities and margins?
A: With 45% of bank term loans linked to Repo, a 25bps cut would benefit about 25% of the liability book. This could allow passing on a 10bps reduction to customers. The reset cycle is quarterly, ensuring timely adjustments. (Suresh Iyer, CEO)
Q: What are the plans for branch expansion and sales force development?
A: The company plans to open 15 new branches this year, focusing on the north and west regions. A small sales team is being piloted, with a goal to source 20% of business through this channel, reducing reliance on direct selling agents. (Suresh Iyer, CEO)
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
