Release Date: October 25, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Home First Finance Co India Ltd (BOM:543259, Financial) reported a strong year-on-year AUM growth of 34.2%, reaching 11,229 crores.
- The company expanded its distribution network by adding nine new branches, increasing its presence to 142 branches across 13 states and Union territories.
- Profit after tax increased by 24% year-on-year to 92 crores, delivering an ROE of 16.5%.
- The company's credit cost decreased by 20 basis points year-on-year, maintaining a stable credit profile.
- Technology adoption is high, with 95% of customers registered on the app and digital fulfillment reaching over 75%.
Negative Points
- There was a noted increase in the bounce rate to 15.6% in October, the highest in the last eight quarters.
- Employee expenses increased significantly, with a 20% sequential rise, attributed to new ESOP grants and expansion efforts.
- The leverage ratio has been increasing, with debt to equity reaching 3.9, indicating higher borrowing.
- Stage two provisions increased to 10.1% from 7.8% quarter-on-quarter, reflecting a more conservative provisioning approach.
- Net interest cost rose disproportionately by 50.4% compared to AUM growth, due to increased borrowing costs and leverage.
Q & A Highlights
Q: There has been a sharp increase in the bounce rate to 15.6% in October, the highest in the last eight quarters. How should this be interpreted?
A: Mr. Manoj Vishwanathan, MD & CEO, explained that there is nothing significant to read into this as collections typically happen by the 25th of the month. The bounce rate after six days is 10%, which aligns with previous months, indicating no major concern.
Q: Employee expenses have increased significantly. Is there a change in the business model or strategy?
A: Mr. Manoj Vishwanathan clarified that there is no change in the business model. The increase in employee numbers is part of a planned expansion strategy to support future growth, with no shift towards a DSTS model.
Q: With the AUM crossing the 10,000-crore mark, can the company sustain a 30% growth rate over the next 2-3 years?
A: Mr. Manoj Vishwanathan confirmed that the company plans to maintain a 30% growth rate, supported by strategic employee hiring, branch expansion, and new location development.
Q: How does the company view the risk from the current stress in the MFI sector and regulatory concerns?
A: Mr. Manoj Vishwanathan stated that the MFI sector is largely disconnected from their operations, with minimal overlap. The housing sector is supported by regulators, and there are no significant headwinds expected.
Q: What is driving the strong growth in Karnataka and other regions like Rajasthan?
A: Mr. Manoj Vishwanathan attributed the growth to strategic expansion and overcoming past challenges. The company has turned the corner in Karnataka and is seeing expected growth in Rajasthan due to increased distribution efforts.
Q: Is there any one-off element in the increased fee income this quarter?
A: Ms. Nutan Gaba Patwari, CFO, clarified that the increase is not a one-off. It is due to new insurance partnerships, which will contribute approximately 4 crores per month going forward.
Q: How does the company manage pricing in competitive markets?
A: Mr. Manoj Vishwanathan explained that pricing is customized based on customer profiles, location, and risk factors, allowing for competitive pricing where necessary while maintaining profitability.
Q: What is the company's approach to managing leverage and potential capital raises?
A: Ms. Nutan Gaba Patwari stated that the company is comfortable with a leverage ratio closer to five and has 18-24 months before considering a capital raise, depending on growth and market conditions.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
