Release Date: November 13, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Repco Home Finance Ltd (BOM:535322, Financial) reported a 15% year-on-year increase in net profit for Q2 FY25, amounting to INR 113 crores.
- The company has maintained a spread of 3.4% and a net interest margin (NIM) of 5.1%, despite facing stiff competition.
- The loan book grew by 8.1% year-on-year, reaching INR 13,009 crores by the end of September 2024.
- The company has implemented structural changes, such as new software and delegation of powers, which are yielding positive results.
- Repco Home Finance Ltd (BOM:535322) has recruited experienced sales and collections personnel, which is expected to boost growth in the coming quarters.
Negative Points
- The gross non-performing assets (NPA) ratio remains high at 3.96%, although there is a provision coverage of 61% for stage three assets.
- The company faces challenges in achieving its target of INR 15,000 crores in assets under management (AUM) by FY25, potentially falling short by 100-200 crores.
- There is an increase in repayment rates, with monthly repayments rising to approximately INR 200 crores, partly due to competition from banks.
- The cost-to-income ratio increased to 26.4% from 23.6% in the previous quarter, indicating higher operational expenses.
- Stage two loans remain elevated at 11%, which is higher compared to industry peers, although efforts are being made to reduce this.
Q & A Highlights
Q: Can you provide an update on the performance of the old portfolio versus the new portfolio post-FY22? Also, how are you tracking against your FY25 goals?
A: The new book's NPAs are performing well, with less than 1% NPAs. We maintain our disbursement target of INR 3,600-3,800 crores. However, due to higher repayment rates, we might fall slightly short of the INR 15,000 crore AUM target, possibly reaching around INR 14,800 crores.
Q: Are there plans to diversify funding sources, particularly through securitization?
A: We are exploring options with NHB loans and considering tapping the NCD market. Currently, there are no fixed plans for securitization, but we remain open to PTC transactions if opportunities arise.
Q: What is the strategy to compete with other players in the affordable housing finance sector?
A: Our customer profile is distinct, with over 50% having documented income and an average CIBIL score of 750. Our interest rates are competitive, positioned between prime housing finance companies and other affordable housing lenders.
Q: How are you addressing the increased repayment rates and BT (balance transfer) activity?
A: The repayment rate has increased due to competitive bank rates. We are focusing on increasing disbursements and have strategies to retain customers, including interest rate adjustments and customer engagement through call centers.
Q: Can you provide guidance on asset quality, particularly the restructured book and stage two loans?
A: The NPAs from the restructured book are currently at INR 150 crores, down from INR 168 crores in June. Our focus is on reducing stage two loans, which are currently elevated at 11%. We aim to bring this down significantly in the next one to two years.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
