Ladies and gentlemen, good day and welcome to the Repco Home Finance Q4 FY 2025 Earnings Conference Call hosted by YES Securities. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajiv Mehta from YES Securities. Thank you, and over to you, sir.
Good evening, everyone. Welcome to the Q4 FY 2025 Earnings Call of Repco Home Finance. We thank the management for giving us the opportunity to host them. From the company, we are joined by Mr. Thangappan Karunakaran, Managing Director and CEO. He became the MD and CEO from this April. Sir, congratulations for that. He is joined by Mr. A. Palpandi, Chief Operating Officer, Mr. P.K. Vaidyanathan, Chief Development Officer, Mr. M. Raja, Chief Business Officer, Ms. Shanthi Srikanth, Chief Financial Officer, and Mr. Ankush Tiwari, Company Secretary and Compliance Officer. I would request Mr. Karunakaran to give us an overview on company's performance, post which we will open for Q&A. Over to you, sir.
Thank you, Mr. Rajiv. Good evening, everyone. I am Thangappan Karunakaran, MD/CEO of this company. Just a small introduction about me. I started my career with this company during 2004. Prior to that, I worked in Repco Bank in various capacities and various places. These are my just introduction. We would like to welcome you all to the earning call of Repco Home Finance Limited for the quarter and the year ended March 31st, 2025. We would like to thank you all for joining us in this call today. Entire senior management team along with me in this call. This is my first time interacting with you all in my new role as MD CEO of this company. We are pleased to announce that this year our company is celebrating silver jubilee in the industry, marking 25 years of excellence.
As we celebrate this achievement, we anticipate continued growth, greater achievement, and a sustained market relevance as we move forward into the future. Coming to the company's performance, we have been able to maintain the growth trend seen in the last few quarters in Q4 2025 as well. The company is steadily progressing on its business parameters. The structural changes that are being made are getting strengthened across the organization and are yielding results. This will be an ongoing process, and we shall adapt to changes as and when the business demands. We have also been able to initiate the introduction of new systems and business process and wish to take advantage of the same in the current year. Some of the major steps taken by us in FY 2024, 2025 were, number one, target-oriented approach in sanctions, disbursements, NPAs while strengthening verticalizations.
Number two, localized file processing by creating regional level operations, technical legal resources for improving turnaround time of our loan sanctioning. Number three, various recovery efforts, including conducting four auction mela during the year and implementing special OTS schemes. Number four, improving the employee model. Now, I'll give updates on business in the current financial year. We were able to achieve disbursements of INR 975 crores in Q4 FY 2025 as against INR 895 crores in Q4 FY 2024 and INR 761 crores in Q3 FY 2024. Our Q4 disbursements are up by 28% compared with Q3 of the financial year 2024-2025. Our sanctions stood at INR 1,059 crores in Q4 FY 2025 as compared to INR 975 crores in Q4 of FY 2024 and INR 806 crores in Q3 of FY 2025.
Overall, we have achieved INR 3,519 crores of sanctions and INR 3,284 crores of disbursement in the financial year 2024-2025, as against INR 3,340 crores of sanctions and INR 3,135 crores of disbursement in the financial year 2023-2024. This is the highest disbursement we have made in the recent past. Our AUM stands at INR 14,492 crores at the end of the financial year 2025, as against INR 14,155 crores in Q3 FY 2025 and INR 13,513 crores at the end of the previous financial year. The ratio exposure between self-employed and salary segment stood at 52% and 48%, respectively. The share of non-housing loan, that is home equity, stood about 27% of the loan book, and housing loan contributed to about 73% of the loan book.
The new loan book has shown strong performance with a total disbursement of about INR 9,338 crores from financial year 2023 to financial year 2025. The NPA from new book remains low and accounting about 0.7% of the total AUM during the period loan dispersed from FY 2023 to 2025. Due to our continuous recovery efforts like conducting auction mela and also implementing special OTS has given a good result. The GNPA has been reduced from INR 552 crores in FY 2024 to INR 475 crores in FY 2025. Our GNPA stood at 3.26% of the AUM as of March 2025. The net NPA stands at INR 191 crores, representing 1.32% as end of March 2025. The total provisions for NPA amounts to INR 282 crores, and provision coverage ratio stood at 59.60% as end of March 2025. Additionally, the Stage 2 outstanding has decreased significantly by INR 151 crores.
That means our March 2025 Stage 2 assets stood at INR 1,410 crores as against INR 1,561 crores at end of March 2024. Thereby, we have seen reduction of INR 151 crores in Stage 2 assets. Look at borrowings. Borrowings stood at INR 11,148 crores at end of March 2025. If you look at borrowing mix, NHB contribution is about 7.85%. In the absolute terms, it comes to close to about INR 876 crores. Bank borrowing outstanding stood at INR 9,247 crores. Most out of total borrowings, 83% of the borrowings are coming from banks. Our promoter bank, Repco Bank, term loan as well as credit specific outstanding is INR 1,026 crores, which accounts at 9.20% of total borrowings as of March 31, 2025. I'm happy to inform that we got a sanction from National Housing Bank in financial year 2025 after a gap of three years. The sanction amount is INR 150 crores.
We would like to avail this INR 150 crores in coming days. Profitability. Our NIM for the financial year 2025 was at 5.15%. The company has been able to maintain a spread of 3.3% for the financial year 2025. Our yield on loans stood at 12.07%. The net profit grew by 8% quarter-on-quarter and 6% year-on-year and up to INR 150 crores for the Q4 FY 2025 as against INR 107 crore in Q3 FY 2025 and INR 108 crores for Q4 of FY 2024, respectively. For the whole year, we have earned a net profit of INR 439 crores as against INR 395 crores in last year, which is an 11% increase. Our ROA and ROE stood at 3.15% and 15.23%, respectively, for the financial year 2025, as against 3.04 and 15.79 in financial year 2024. Cost-to-income ratio at the end of March stood at 37.52.
Of course, this is for entire whole year. The credit cost is negative for the financial year 2024-2025. The new IT revamping is in advanced stage and is expected to be completed by September 2025. Four systems, including the loan origination system, loan management system, and loan collection systems are fully operational with initial issues successfully resolved. Additionally, mobile applications for sales, collections, and field investigations have been rolled out. Coming to branch network, as of March 31, 2025, we have added, in other words, during the financial year 2025, we have added 31 new branches, bringing the total branch count to 233 across 12 states and one union territory. This includes 189 branches and 44 satellite centers with additional two asset recovery branches. We are expanding our branch presence in regions outside Tamil Nadu.
During the current financial year, we would like to open 14 new branches, various locations across the country, and majority of the branches will be in AP, Telangana, and the west part of our country. I will summarize the key financial highlights for the financial year 2024-2025 before opening the floor for Q&A session. The loan book stood at INR 14,492 crores, registering 7% year-on-year growth. Staff for the year was INR 439 crores with 11% increase year-on-year basis. ROA and ROE for the year stood at 3.15% and 15.23%, respectively. The core profitability has remained strong with solid spread and margin of 3.33% and 5.15%, respectively. The gross NPA reduced to 3.26% with the Stage 3 provision coverage ratio of 59.60%. The net NPA stood at 1.32% at end of February March 2025.
Our Stage 2 assets stood at INR 1,410 crores in March 2025, as against INR 1,561 crores in March 2024. I am happy to announce that our board has declared a dividend of INR 4 per share, subject to the approval of our shareholders. Way forward. We would like to present the road map of the company. The company targets INR 16,200 crores of AUM by FY 2026. That means 12% growth. Right now, our book size is across about INR 14,491.
We want to take this INR 14,491 crores to INR 16,200 crore by this year end. With a spread of 3.2% and around 3.2%, and maintaining ROE of 3.1%. In recovery front, right now our gross NPA is about INR 473 crores. We want to reduce this NPA by at least another INR 75 to INR 80 crores, and we want to bring it down to our gross NPA from present level of 3.26 to below 2.5%.
Our net NPA right now stood at 1.32%. We want to bring this NNPA to below 1% by March 2026. We will be adding 14 new branches in FY 2026, and 12 satellite centers will be upgraded to the branches, increasing the total number of branches to 247. The focus for the current year includes growth acceleration and overdue reductions. With the momentum gained in the just concluded year and the learnings, the company is confident of reaching a disbursement of INR 4,000 crores. I am repeating INR 4,000 crores and AUM of INR 16,200 crores. We set a target of reducing Stage 3 number between 7% to 8%. Looking ahead, the company aspires to reach INR 25,000 crores AUM by FY 2028 with accelerated disbursements and growth with quality and profitability.
I take this opportunity to thank all our investors, analysts, credit rating agencies, our bankers, borrowers, vendors, regulators, and all the stakeholders for evincing the interest in company's group story and for continued support. Now, we open the session for Q&A.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Vikas Kasturi from Focus Capital. Please go ahead.
Am I audible? Sir, am I audible?
Yes, sir. Please go ahead.
Okay. Thank you. First of all, congratulations, sir, on becoming the MD of the company, and we wish you all the best in your new role. Sir, I had about three questions. The first one is, sir, in last year, May of 2024, we had said that we will be adding 40 branches, and we have actually added somewhere around 20, 22 branches, right? In the coming year also, we are going to add only 14 branches. If our branch addition is not increasing, sir, would it not affect our future growth? That is number one. Number two is, sir, so congratulations to you and the entire team of Repco Home Finance for improving the asset quality drastically in the last three years. You have also given further guidance on bringing it down.
Sir, what are the interventions that you are planning to bring this GNPA down? Will you continue the auctions and OTS, or are you going to introduce some more interventions to bring this down? The third one is, sir, this is more like an observation. I am also a shareholder of the company. Sir, as a concerned shareholder, sir, I've been seeing the frequent changes at the board level as well as at the CXO level. Sir, this is not inspiring much confidence among investors. Could you please convey to the board that we would like to see stability at the top level so that there is stability in the strategy as well as in the execution of the company, sir. That is all I have, sir.
Yes. Thank you for your greetings and wishes. I would like to answer the third question first. Yes, I have taken note of your thing on frequent changes on the board. Definitely, I will raise this thing to our board. In second question, recovery form. Yes, we set a target of achieving below 3% GNPA, to bring it down to GNPA to below 3%, 2.5% by year-end. Yes, we have taken lot of initiatives. Of course, last two years, we have started verticalizations in our company. We employed close to 170 people in recovery department for collections as well as to take care of NPA things. Of course, we conducted four SARFAESI auction mela in last financial. We want to extend the same in coming year also. Special OTS schemes we have introduced.
Of course, board has permitted to extend this special OTS schemes up to June 2025. With these initiatives, we are confident that we will be in a position to reduce our NPA from present level to 2.5% by year-end. In addition to this, for this year, we are going to introduce a recovery vertical exclusively for the NPA reduction, sir. They will be supported by the legal manager from the region wise for taking action under SARFAESI Act. Also, we are planning to conduct mega auction on monthly basis. In addition to that, earlier, one GM is responsible for entire recovery operations in our company. Now we posted one more additional GM for looking after recoveries of non-TN and one specific general manager for Tamil Nadu. These initiatives definitely will bring results in the coming year.
On the first question, I would like to take this question, Raja here. On me adding only 24 branches, yes, we have consciously not gone into increasing our footprint across remote regions. We are more now looking at channel-wise teams getting built up. Now we are looking at an urban-oriented channel, a builder channel, a DSA channel. We are going now a bit branch agnostic. It is only at starting stages. It will start delivering results in the near future. Yes, branches may, as you all know, physical branches has its own pros and cons. We are also now getting into channel-wise sourcing.
In addition to recoveries, we have also expanded a few recovery agencies, which will also help us to improve our GNPA percentage in coming year.
Thank you, sir. Thank you for answering my questions. Hello, moderator.
Yes, sir. Thank you. Our next question comes from the line of Ankit Gupta from Bamboo Capital. Please go ahead. Yes, sir. Mr. Ankit, may I request you to unmute your mic and go ahead with your question, please.
Hello?
Yes, sir. Please go ahead.
Hello? Hello. Am I audible?
Yes, sir. Please go ahead.
Sir, you are audible.
Yeah.
You are audible.
Sure. Sir, congratulations for significantly on being appointed as MD and our efforts to bring down NPAs over the past two to three years. We have seen a significant decline in those. Sir, one of the challenges that we as an NBFC have been facing is the significant amount of BT out which has been happening in the company for the past many years now. A lot of our good customers after a year or two switched to other banks or NBFCs which offer them lower rate of interest. Anything you would like to specify where we can improve this issue or we can work on this thing so that our BT out ratio becomes lower and this also helps us in increasing our AUM. Sometimes what happens is our disbursements are pretty good, but our AUM doesn't increase much because of this BT out issue.
If you can talk about this a bit.
Yes, sir. Thank you. We have taken a lot of initiative to retain the good customers. We articulated the customer retention policy. As per the policy, we are permitted to reduce the rate of interest up to 2% and also give additional top-up loans to retain good customer. Yes, the initiatives taken by us given the good results. We have seen improvement in BT out compared with the last two, three, four years. See the financial year 2025, I'm having the statistics on BT in and BT out which will indicate there is improvement in BT out. See in the financial year 2024 or 2025, total BT in is about INR 450 crores and because of our various initiatives taken by the company, our BT out is reduced to INR 300 crores.
Sure. In FY 2025 it is reduced to INR 300 crores from INR 400 crores in FY 2024 is what you're saying, right?
No, in FY 2025, my BT in is INR 450 crores. In general,
Sure
Our BT out will be more than BT in.
Sure.
Because of
Okay
various initiatives taken by us, our BT in for the financial year 2024-2025 is INR 455 crore.
Sure.
BT out is INR 300 crore. Generally, it will be the same, or our BT in will be lesser than BT out.
Sure.
Because-
That has been the trend in FY 2023 and FY 2024 also. Which has actually
Yes, exactly.
reversed in FY 2025. Yeah.
Yes. Exactly.
Okay. Then, on the credit cost for FY 2026, last year we saw because of the recoveries we had a positive credit cost in FY 2025 and since you are also targeting recoveries in FY 2026 as well, where do you see a credit cost in FY 2026 and even for FY 2027 onwards? What should be the normalized credit cost for us going forward? First for FY 2026 and then for FY 2027 onwards.
For the current financial year, we set a target of reducing our NPA in absolute terms around INR 75 crores to INR 80 crores. Yes, there will be a reversal of existing provisions. One thing we want to also improve our provisional coverage ratio. Right now, my idea is to make some additional provision to the extent of INR 10 crores to INR 15 crores, bring the credit cost below 25 basis points or 30 basis points in the current financial year. 2026 really we need to work out.
On a steady state basis, can we assume less than 0.5% rate cost or it will be higher?
I am talking about absolute terms. It may be around INR 10 crores to INR 15 crores charged to the P&L for the current financial year. Financial year 2027, right now I am not having the data. I may be in a position to tell in my next con call. This year, I would like to charge around INR 10 crores to INR 15 crores to my P&L.
Thank you.
Of course, my Stage 1 assets also will go up to the extent I have to make provisions. There will be a movement from Stage 1 to Stage 3. Keeping all those things, I am expecting around INR 10 crore to INR 12 crore provision charge to current year profit and loss account.
Thank you. Mr. Gupta, may we request that you return to the question queue for follow-up questions, as there are several participants waiting. Thank you. Our next question comes from the line of Kiran Dhanwada from TableTree Capital . Please go ahead.
Hi. Thank you so much for the opportunity. Sir, many congratulations on the results and turnaround in the company. Sir, broader strategic question first. What has changed at Repco or in the states that you are expanding in, especially AP, Telangana, Maharashtra, Karnataka, that you are now confident of disbursing almost INR 1,000 crore a quarter. We are talking about INR 4,000 crore disbursements, so I am just averaging it out. INR 1,000 crore a quarter when our track record over the past two years has been around INR 600 crore to INR 700 crore and this quarter we delivered over INR 875 crore. So what are those broader things that are happening in these three, four states? Is it the economy that is doing well? Is it our channels clicking? Are we gaining market share or is it the opportunity expanding?
Kiran, I would like to take that question. Raja here. Basically, as you are aware, last year we have been building up our sales verticals. That is, now we were engaging BSMs in all the branches. Now I have almost 163 branches, and we have also got into tie-ups with a few of our corporate DSAs. There has been a clear focus shift to the western region, wherein now we have brought in cluster heads and the state heads. I have a state head now for Gujarat specific and Rajasthan specific. And for Mumbai, again, we have a cluster specific guy for Mumbai. We are confident that our sourcing is improving and we are seeing the numbers. It is time that we increase our numbers on a quarterly basis. As you rightly said, INR 1,000 crore is what we are looking at disbursement per month.
We should be able to achieve it. That's how confident we are.
Got it, sir. Second question then, sir, is from a funding perspective. Right now we have about INR 875 crore from National Housing Bank and we've got a sanction for about INR 150 crore additional. A, is there a possibility to double NHB's allocation? Are there certain criteria that we need to fulfill for this book, for this funding source to go to INR 2,000 crore? That is one part of the funding question. The second part of the funding question is, you're asking for a NCD raise of INR 1,000-INR 1,500 crore and commercial paper of INR 1,000 crore. Our leverage is fairly at comfortable levels, and NCDs and commercial papers are usually a little more expensive than Repco Bank or a commercial bank interest rate.
Just wanted to understand your funding structure, one on the NHB perspective, two on the commercial paper and NCDs that you want to raise, if it is cheaper than what are current funding sources.
Yes, I'll answer. The current financial year, NHB has sanctioned INR 150 crores. Very shortly they communicated the sanction. We also send our acceptance to them. Very shortly, we are going to execute the documents and going to avail before end of this current quarter. Yes, once the results are over, after uploading the results in stock exchange after AGM, we are going to seek additional facility of about INR 500 crores to INR 700 crores. We fulfill the eligibility criteria of availing refinance from National Housing Bank. So I'm confident of getting about INR 500 crores to INR 700 crores for refinance for the current financial year. This is with respect to NHB. Now, if you coming to NCD and CP issuance. If you look at our borrowings, our entire borrowings are concentrated on NHB funding and funding from banking and Repco Bank loans, which is highly concentrated.
Over the period of time, our regulators are also saying we should diversify our liability side. We have also had two or three rounds of discussions with potential investor and arrangers. The objective of going for NCDs and commercial papers is to diversify our liabilities and not depend on bank borrowings. Yes, you rightly said initial issues may be a little bit expensive than the bank borrowings. But once we establish our credentials, our presence in the debt market, we will be in a position to mobilize at lesser and competitive interest rate from debt instrument like NCDs and CPs over the period of time.
Got it, sir. Last question, sir. The GNPA we are targeting about 2.5%. Is it a safe thing to think that we'll go below 2% by FY 2027, mid FY 2027 itself will be below 2%? Is that a fair estimate given the quality of book that you are raising?
Yeah. If you look at our new books are really performing good. Old NPAs, recoveries are happening in the old NPAs. If you look at our new loan book, these last three years, we disbursed about 9,000 odd crores. The NPA in the 9,000 odd crores is 0.70%, which clearly indicates that there will not be major additions from new loan book. Old NPA book, we have taken lot of initiatives to recover. I am sure and confident of achieving this, what was the number target in FY 2027.
Got it, sir. Thank you so much. I will join back in the queue. Many congratulations.
Thank you.
Thank you. Our next question comes from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Hi, sir. Good afternoon. Thanks for this opportunity. The first question is around the having. What proportion of the recovery came from-
Sir, sorry to interrupt you, sir. Before you go with your question, I request you to use your handset, sir. There is a lot of disturbance on the line.
Yeah. Is this better?
Yes, sir. Thank you. Please go ahead.
Right. So first question is, what proportion of the recoveries came from Tamil Nadu versus ex-Tamil Nadu? Second is that we are speaking about branch expansion and builder strategy. This is a fairly competitive segment, so what kind of payouts are we giving to the DSAs and the builders on a per file basis? Are we paying more than our closest competitor? If we can spell out the disbursement split from Tamil Nadu and non-Tamil Nadu in the future of this INR 4,000 crores. Thanks.
Yeah. On the DSA payout, we are in line with the market. Of course, we do have corporate DSAs and individual DSAs. Corporate DSA as such, the market is paying somewhere around 1%-1.2% per file basis, and there is no retention fee, and we are tagging the market. There is nothing extra that we are paying. That is how we are with our DSAs. On builder, we are just entering into the builder market, so it is too early for me to talk about the cost. But in builder market, traditionally, the costing will be cheaper or the sourcing cost will be cheaper. We are looking at that. Recovery side, right now I am not having the data. I will come back to you in the offline build data. On disbursement split, we are already at 53%-56% from Tamil Nadu.
Balance is from rest of TN. We are trying to improve that percentage by increasing our disbursement in non-TN states. This year you will see the numbers.
Got it, sir. Thank you. I will come back.
Thank you. Our next question comes from the line of Sonal Minhas from Prescient Capital. Please go ahead.
Hi, sir. This is Sonal Minhas. Am I audible?
Yes, sir. Please go ahead.
Sir, wanted to understand the quality of sourcing from a corporate DSA or a third-party DSA. How has that improved over the last two to three years? What are our checks and balances to make sure that the input funnel from what we are approving is as per what we want the book to go? That's the first question.
Yeah. When I am talking about quality of file, it is not dependent on the DSA because DSA only refers the files or gives the file to us. Then we from our team, the credit team gets engaged with the customer. We do our FI; we do our RC with our empaneled vendors. And yes, the credit decision is with the organization or with Repco Home Finance. So DSA's role in quality of book may not be there or is very negligible. We have our controls and checks. It is same as any other sourcing channel. Any file that gets sourced through any channel, it goes through the same process of rigorous checking, testing, and then only we do sanction the loans.
Okay, sir. So in decision making as a follow-up, has anything changed in the last three years? Have you changed the decision making? Have you changed the decision making to be centralized? We are using more technology, more software. Anything in terms of physical validation of, let's say, any loan documentation. If you could just share some details around that will be helpful.
See, as of now, we are already running with a regional level delegation of powers for sanction for loans up to certain limit of loan quantum. Beyond that, it comes to the corporate office. It happens the same. It has been so for the past two years, and we have not done any major change in the credit process. But on the technology side, yes, we are exploring different options. Like we are looking at incorporating a BRE into our system so that the decisioning happens faster and the turnaround time is better for us. We are investing in technology, but on credit processing, nothing has changed, sir. It is the same at least for the past two years, which I can say.
Got it, sir. As a follow-up, second-
If you look at asset quality, which is savings from, we are following a robust credit appraisal system in our company. Last three years, we have disbursed INR 9,300 crore of which NPA is 0.07%. Even Stage 2 also very negligible, which indicate that we are having a strong credit appraisal system in our company.
Got it, sir. This book typically mature between three to five years. Do we expect the Stage 3 for this book to inch higher because your mix is roughly 50/50 for salaried and self-employed. Do we expect this book to maybe inch a little higher to stay safe of being 1.2%, 1.3% as we, let's say, look two years out, three years out.
No, sir, I am not expecting this kind of numbers in new loan book. The new loan book, we are closely monitoring. All the new loan books are performing good. I am not expecting any changes in this number. I mean, NPA numbers in the new loan book. We have been in a position to maintain the existing level, or we can even reduce.
Got it, sir. Sir, my second question is regard to the guidance for the loan book that you have given. We plan to grow by around 11%, 12% in FY 2026, whereas we have grown less than single digits small, the lower end of the single-digit numbers in the past. And you have given a guidance of INR 25,000 crore of loan book growth. Is the system, given the software, given the technology, given the people, the training ready to see a growth of this order without ratting too much on the asset quality? That is the question.
Yeah. As you are aware, over the last year and the year before that, we have been implementing the system. Now the system is fully up and operational, and it is performing good. We do not have any issues from the technology side. On employee training, there is a continuous training happening for all our employees at different levels. Last year alone, we have almost had more than 14 to 15 training sessions for all our employees across regions. We are continuously improving training and matching with the market. I do not see any strains in that, sir.
In addition to that, last two years, we opened 41 branches. This year, again, we are going to open roughly another 14 branches. What are the branches opened in last two years? We started to giving the business. All the branches are stabilized, breakevens happened.
Achieving this INR 4,000 crores will not be a big strain for us. Of course, the average ticket size also quarter on quarter improving. Two years before, our average ticket size of a company is close to about INR 14 lakhs to INR 15 lakhs. Now we touched about INR 21 lakhs. I am expecting further increase in average ticket size. All those things which will give a confidence of achieving a disbursement target of INR 4,000 crores by year-end.
Got it, sir. You seem fairly confident of growing your book by 20% year on year for the next three years. That is what-
Yes. That is the message of us.
Got it, sir. Thanks a lot, sir. Thanks a lot for explaining. Thank you. I'll fall back in with you.
Thank you.
Thank you. Our next question comes from the line of Anand Mundra from Soar Wealth. Please go ahead.
Yeah. Good evening, sir. Sir, wanted to check about the E-Khata problem of Karnataka. Is that problem behind us?
Sir, good evening. Raja here. E-Khata problem is still there, but it is kind of muted now. We are able to do business, but not to the full flow of it. But yes, business is not getting stopped. We are able to do business, sir. Yes, we have seen improvement in disbursements of Karnataka State in March compared with December quarter.
Sir, with respect to slide 30 on the presentation where you have given the disbursement state-wise. In Gujarat and Kerala, the growth is not there, sir. Gujarat 0% and Kerala 2%. Any specific reason, sir, for both the locations?
Sir, specifically on Kerala, yes, we are yet to bring about growth in Kerala, but for Gujarat now we have appointed a specific state level resource and Gujarat is picking up, sir. My March and April in Gujarat has been very good. So Gujarat will pick up, but Kerala, we will have to wait for some more time, sir. We are waiting for the proper resource to be in place. Post that Kerala will pick up. But as of now, Gujarat and Rajasthan will start posting stupendous numbers, sir.
Even Kerala, if you look at disbursement in the current financial year, 2024-2025 financial year, it is better than previous financial year. Numbers are coming up. It may take now the manpower issues and all resolved. You can see improvement in disbursement in coming quarters in both states.
Okay. Sir, another question. Our guidance for FY 2026 with respect to disbursement is INR 4,000 crores?
Yes, absolutely, sir.
The loan book would be INR 16,200. Correct, sir?
Yeah. From the present level of INR 14,492 crores.
Yeah. If I calculate the rundown, if I assume the rundown, then we need at least INR 4,500 crore of disbursement to reach INR 16,200 crore, because I am assuming rundown would be around INR 2,500-INR 2,600 crores.
Sir, we have taken a lot of initiatives to avoid a prepayment and beat out. We had drafted the customer retention policies and all. These initiatives will help us to avoid preclosures. With that, I am confident of achieving INR 4,000 crores disbursement target as well as taking the book level book to INR 16,200 crores.
Noted. Last thing, sir, what about since our GNPA has reduced, any initiative you are taking to improve the credit rating, sir?
Yes, sir. We are going to have discussions next week. I am confident and hope of getting one notch above.
Thank you, sir. Thanks a lot.
Yes, in my point of view, we are the deserving candidate for upgradation.
Absolutely, sir. Sir, one last question, sir. Earlier also I requested the ex MD, sir, for higher dividend payout ratio because our EPS is much higher, but our dividend payout is very less. We don't need so much capital also, sir.
30%.
Sir, that is only INR 4 on INR 10, but our EPS is much higher, sir, so it can be much higher than INR 4, sir. So I would request you to request the board to consider a higher dividend payout ratio for the shareholders, sir. As there's no appreciation in the share price, at least we should get higher dividend.
Sir, Anand Ankush here. Your advice has been noted. We'll pass on to our board. And this year they have increased from 30% to 40%. And based on your advice and other investor sentiment, we'll take a suitable decision at board.
Okay.
Thank you.
Thank you, Ankush. Thank you, sir. Wish you all the best.
Thank you.
Thank you.
Before we take the next question, a reminder to all the participants. If you wish to ask a question, please press star and one on your touchtone telephone. Our next question comes from the line of Saikiran Pulavarthi, who is an investor. Please go ahead.
Hi. Thanks for taking my question. Sir, just extending the earlier participant's question on the credit rating, probably you are also in discussion with rising of NCDs. Sir, is there a scope for, what I can say, upgrade of the credit rating? If so, what are the apprehensions at this point of time, or what are the things which a credit rating agency is looking for an upgrade? The second thing, sir, as a follow-up on the NCDs, what should be the pricing you are getting an indication from your intermediaries with which discussions are happening? That's my question, sir.
Actually, Shanthi here . The credit rating side, we are taking all our necessary efforts we are putting to improve the rating. The rating agencies are of the view this midsize system is they are always keeping at the level which like the Chennai based and the Tamil Nadu geography concentrated HFC. Of course, on our asset quality side. Now we have improved in all the parameters to a maximum extent. We expect a good improvement in the rating side also. With respect of the NCD issuance, we are taking up our initiative to contact various arrangers, research firms and insurance companies who are giving interest in our company and invest and we are in the advanced stages of proposing some deals. We will expect some good improvement, and we will definitely have some good diversification in the coming quarters, sir.
The objective of going for NCD and CP is diversified our liability side. Pricing will not be cheaper compared with bank borrowings immediately, but over the period of time we will get a benefit. Right now, I am not in a position to comment on at what rate I can mobilize. I will be in a position to tell you next month.
Yes, sir. Directionally-
I will be in a position to tell you in my next-
Yeah. Sir, directionally the commercial banks borrowing cost is the highest among your sources of financing. Do you believe that NCDs will be higher than that or will be lower than that?
Initially, one or two issues, commercial paper will be slightly higher than present bank borrowing rates. Once we establish our presence in the market, I will be in a position to mobilize NCDs and commercial paper at a better rate of bank borrowings. That is our whole idea.
Got it, sir. In terms of the diversification objective which you are trying to achieve, at what level do you foresee the commercial paper/NCDs to be as a percentage of overall funding profile, sir?
Usually, see this board has given approval for mobilizing INR 1,000 crores and INR 1,500 crores CPs and NCD respectively. Initially, I want to start with INR 100 crores commercial paper and around INR 100 crores to INR 150 crores NCD before end of this quarter. We want to test the water based on that thing we will proceed further. For this quarter, my target is INR 100 crores commercial paper and about INR 100 crores to INR 150 crores of NCDs.
Okay, sir. One last question. Got it, sir. One last question from my side, sir. With the disbursements of target you have given and the spreads also you have guided for a fiscal year to be more or less flattish year-on-year. Is it safe to assume that the disbursements mix will be similar to what we've earlier, like between home loan and home equity and overall?
Yes, sir. That is what we are trying to maintain so that we don't have an impact on our margins. More or less, we will be maintaining the same ratio, sir. You are right. As per the board, I can go up to 30% in non-housing loan portfolio, but we would like to maintain the existing loan book mix as per the salaried and non-salaried component. That may be one or two basis points high in one or two quarters. But overall, we want to maintain 74% and 36% and 58%, and the remaining thing is not that big. I'm not expecting a significant change in the loan book mix and borrower mix.
If you are comfortable, sir, one last question from my side. There have been some significant asset quality challenges in the past, then I understand that you have changed your underwriting standards in that incremental book, which is now behaving very well. Just trying to understand if you have to look back and see what has caused the asset quality challenges, what are the changes you have made post that experience, because of which you are confident that going forward, the asset quality is better.
Sir, in the earlier stage, we have assessed based on profit and loss account. The last three years, we have introduced many models like gross profit method, gross sales method, bank analysis method. We introduced processes through analyzing bank statement for income calculation. We improved our cash flow method. This is the improvement we have done in our credit assessment. In other words, we have introduced a lot of income assessment models. Four years before, five years before, we used to rely on the profit and loss account given by the borrowers. If you look at our loan book mix, majority of our borrowers are non-salaried, non-document income. We relied upon their papers, Income Tax returns, and whatever the papers given by them. Now we changed our approach. We have introduced a lot of income assessment models.
Now we are assessing the income based on our inspections of their business unit, we have introduced lot of checks and balances in our credit policy, which has really helped us to maintain the good quality assets.
Understood, sir. Because of which also your cost-to-income ratio would have increased. Is it a fair assumption to make?
It is slightly, because three to four years before, six years before, there is no verification by external agency or something like that. We have introduced the RCU and bank statement analysis. We are having a separate software. This is not there four years, five years before. Likewise, valuations reports also, we have introduced a technology to verify the value of the property. We have made a lot of changes in credit appraisal and income appraisal in last four, five years, last three, four years, which is really helping us to build a quality loan book.
In conclusion, what you are suggesting is that in the last five years, you have changed a lot of underwriting methods. At the same time, you have introduced a lot of technology and made significant investments. Now with funding profile also being diversified and asset quality worst of the fears are behind, is it fair to assume that going forward, you are far more better equipped to grow faster?
Yes, sir. That is the entire idea. We are right now standing on a jump board. We are just waiting to take the leap. Yes, this year we should be doing it. That is what we are working towards, sir.
Thank you. Mr. Pulavarthi, may we request you to rejoin the queue as there are several participants waiting for their turn. Our next question comes from the line of Catherine Gomes from Nirmal Bang Institutional Equities. Please go ahead.
Hi, sir. Congratulations on a great set of numbers. I just wanted to understand with all the initiatives that you are planning to take ahead, what would be the cost-to-income ratio that we are looking going forward? Any particular guidance on that? Secondly, I just wanted to understand that the customers that you are catering to in the regions like Gujarat and all the other states, are these new-to-credit customers as well? That is my second question. Third, I just wanted to understand what kind of NIMs are we targeting, and how do you pass on your, if you get any benefit on your borrowing side, how are you looking to, do we have a differentiated strategy that we look at if we are getting any benefits on our borrowing, only then we will pass it on to the customers, or how does it work?
All these, I would really appreciate if you could elaborate on the same, sir. Thank you.
Right now, yield on assets is 12.07%, and cost of fund is 8.73%. We are maintaining a spread of 3.34%. Our aim is to maintain the spread is around 3.2%. Yes, we have seen rate cuts. However, our bankers are yet to pass on to rate cuts to us. If any rate cut is happen in our borrowings, we will pass on to our borrowers by resetting their interest rate. As per our policy, our interest rates are reset once in three months timing difference. What are the benefits we are getting on the funding side, we will pass on to our borrower with a gap of three months, number one.
On Gujarat, we are targeting our customers both on the salaried and self-employed segments. As you said, on whether it is going to be a new-to-credit or an experienced customer, we don't differentiate between the two other than the CIBIL score. Yes, we do have a credit scoring model wherein the CIBIL score plays a role. We have a holistic approach wherein any customer comes in will go through the same process, and that is how we handle it. We don't have any specific leverage or a green channel for an existing customer and a new-to-credit customer. Spread side, we want to maintain the spread of around our guidance for this current financial year is we want to maintain a spread around 3.2%.
Given that all the initiatives are in place, what kind of cost-to-income or efforts to AUM are we looking at in FY 2026?
Yes. To improve the cost-to-income ratios, we have taken a lot of initiatives. Right now, I am not in a position to commit on firm numbers. Most probably, I will give a guidance in my next con call. Right now, our cost-to-income ratio is 27.2%. Yes, I am expecting a reduction in the current financial year. It may be around 60 to 70 basis points.
Thank you. Ladies and gentlemen, that was the last question for the day. I now hand the conference over to the management for closing comments.
Yeah. Thank you for joining with us. Thank you.
Thank you. On behalf of YES Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.