Release Date: November 07, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- AAVAS Financiers Ltd (BOM:541988, Financial) reported a 20% year-over-year growth in Assets Under Management (AUM), reaching INR 184 billion.
- The company achieved a net profit of INR 1.48 billion for Q2 FY25, marking a 22% year-over-year increase.
- Disbursements for Q2 FY25 amounted to INR 12.94 billion, contributing to an 8% year-over-year growth in H1 FY25.
- The company successfully raised INR 6.3 billion through Non-Convertible Debentures (NCD) from IFC, the largest debt fund raised by the company to date.
- AAVAS Financiers Ltd (BOM:541988) maintained strong asset quality with 1+DPD below 4% and Gross Non-Performing Assets (GNPA) at 1.08%.
Negative Points
- The company experienced a sequential drop in spread by 11 basis points due to increased cost of funds and yield compression.
- Disbursement growth was affected by an extended monsoon and regulatory changes, leading to lower fresh disbursements.
- Operating expenses remain a concern, although there was a slight improvement in the OpEx to asset ratio.
- The company's spread fell below 5% for the first time, attributed to rising borrowing costs and yield compression.
- There was a 30 basis point increase in 1+DPD, attributed to seasonal factors like extended monsoon and festive season.
Q & A Highlights
Q: For the first time, the spread fell below 5%. What is happening on the asset yield side, and how do you plan to address this?
A: Sachinderpalsingh Bhinder, MD & CEO, explained that the cost of funds has increased, and there is a lag in adjusting disbursement yields. The company is focusing on increasing disbursement yields by 25 basis points and expects spreads to stabilize between 4.8% to 5% for FY25.
Q: Given the muted first half, what is the growth outlook for FY25 and FY26?
A: Sachinderpalsingh Bhinder stated that despite challenges, the company achieved a 22% Y-o-Y growth in disbursements for September and October. They maintain a guidance of over 20% AUM growth for FY25.
Q: Can you elaborate on the improvement in operating costs and how sustainable it is?
A: Sachinderpalsingh Bhinder noted that operating leverage is improving due to stable employee strength and technology investments. The company aims to reduce the OpEx to asset ratio below 3% in the coming quarters.
Q: What is driving the lower credit costs, and is this sustainable?
A: Ghanshyam Rawat, CFO, explained that the company maintains strong asset quality with a focus on risk-adjusted returns. The credit cost is expected to remain below 25 basis points, supported by sound underwriting practices and digital initiatives.
Q: How is Aavas positioning itself in the competitive Tamil Nadu market?
A: Sachinderpalsingh Bhinder mentioned that the company is focusing on self-employed and micro MSME segments backed by residential properties. They aim to leverage their experience in similar markets like Karnataka to navigate the competitive landscape in Tamil Nadu.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
