Ladies and gentlemen, good day and welcome to Repco Home Finance Q3 FY24 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 your touchtone 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.
Thank you, Seema. Hi, good evening all. Welcome to Repco Home Finance's Q3 FY24 earnings call. We thank the management for giving us this opportunity to host this call. From the company, we have Mr. K. Swaminathan, MD and CEO, Mr. T. Karunakaran, Chief Operating Officer, Mr. P.K. Vaidyanathan, Chief Development Officer, Ms. K. Lakshmi, Chief Financial Officer. With that, I hand over the call to Mr. K. Swaminathan, MD and CEO, for his opening remarks. After that, we will open the call for Q&A. Over to you, sir.
Thank you. Thanks, Mr. Rajiv of YES Securities. Good evening, everybody. We once again welcome you all to the earnings call of Repco Home Finance for the quarter that ended December 31, 2023.
Thank you all for joining us on this call. Before we present the current quarter performance, we would like to inform you that our board, in yesterday's meeting, has approved a three-year growth roadmap of reaching an AUM of at least INR 20,000 crores by 2027, with an addition of 40 branches per year.
The GNPA is expected to go below 2% by then. This timing is on a normal growth model. If the company benefits from some external factors like government schemes on affordable housing, the growth could be on a different plane, with the AUM reaching nearly INR 25,000 crores in three years.
Now, coming to the December 2023 quarter results, we are happy to announce that we have been able to maintain the growth trend seen in the last few quarters, continuing in Q3 FY24 as well.
The company is progressing on its business parameters. The structural changes that have been in process across the organization, which we also mentioned in our previous earnings call, like delegation of powers, implementation of new software, verticalization, et cetera, are beginning to yield results, and we are confident that we would be able to see the combined effect of all these changes in the forthcoming quarters.
Business updates. We were able to achieve a disbursement of INR 759 crores, adding INR 696 crores in Q3 FY23, registering a growth of 9% YOY. Our sanctions stood at INR 777 crores as compared to INR 745 crores in Q3 of last year, registering a growth of 4% YOY.
Our AUM stands at INR 13,185 crores, an increase of 8% YOY. While we admit that the disbursement numbers could have been better, we notice that the YOY disbursement numbers have actually gone up. The ratio of exposures between the non-salaried and salaried segment stood at 51.3% and 48.7% respectively.
The share of non-housing loans, that is home equity, as they call, stood at 24.4% of loan book, and housing loans contributed to about 75.6% of the book. Book quality. We were able to reduce the GNPA from INR 637 crores to INR 618 crores, which is 4.7% of the AUM, and the NPAs stood at INR 247 crores at 1.9%. GNPA numbers have come down by INR 137 crores YOY organically. Reduction in NPA would have been still better, but for the heavy rains in parts of Tamil Nadu during December 2023.
We have a total provision of INR 528 crores, with a provision coverage ratio of 60.1% for Stage 3 assets. Our systematic and relentless action on NPA accounts is proving fruitful and would continue. As of December 31, 2023, we hold INR 547 crores of restructured portfolio outstanding, of which approximately INR 170 crores are in Stage 3, and the remaining are in Stage 1 and Stage 2.
Overall, under Stage 2, that is dues between 31- 90 days, the exposure is around INR 1,500 crores, which is 12% of our AUM. Our aim is to bring down to less than 10% by March 2024. Profitability. Our NIM for Q3 FY24 was at 5.3%, up from 4.8% in Q3 FY23. The company has been able to maintain a spread of 3.41% by raising yields to 11.76%, despite facing stiff competition at our pricing levels.
The net profit grew 1.4% QOQ and 23% YOY at an amount of INR 99 crores for Q3 FY24 as against INR 98 crores for Q2 FY24 and INR 81 crores for Q3 FY23 respectively. Our ROA and ROE stood at 3.1% and 15.8% respectively for Q3 FY24 as against respective figures of 3.1% and 15.1% last quarter.
Cost to income ratio for the quarter decreased marginally to 22.03%, against 23.2% of the previous quarter. New software. Phase one of the project, comprising LMS, LOS, and eKYC, are completely integrated across branches and stabilized.
A few related applications will be completed before 3/31/2024. The company has started work in implementation of phase two applications covering HR, audit, and other related works. Implementation of sell applications under phase two, specifically for our internal departments, will be completed in two stages by September 2024.
A total of approximately INR 22 crores have been spent so far in this software implementation. Branch network. As of December 31, 2023, we have 200 touchpoints across 12 states and one union territory, comprising of 156 branches and 34 satellite centers with additional two asset recovery branches. We will be touching 210 outlets by March 2024.
I will summarize the key financial highlights for the quarter before opening the floor. The loan book stood at INR 13,185 crores, registering 8% year-over-year growth. PAT for the quarter was INR 99 crores, with a 23% increase year-over-year. ROA and ROE stood at 3.1% and 15.8% respectively.
The core profitability has remained strong with a solid spread and margin of 3.4% and 5.3% respectively. The gross NPA has shrunk to 4.7% with a stage 3 coverage of 60.1%, and net NPA is at 1.9%.
The company is on track on profitability and GNPA figures. In the last quarter, that is the March quarter, our focus will be on taking the growth numbers to the next level, and we are quite positive on this. We had planned a reduction of INR 100 crores of GNPA for the entire financial year, against which we have already achieved INR 101 crores in a span of nine months.
Our profit guidance was INR 350 crores for the whole year, and we have so far achieved INR 287 crores in the nine months. We are confident of surpassing the target for the year. On the disbursement front, we are likely to reach INR 3,200 crores organically and the AUM of approximately INR 13,500 crores by March 2024. We thank each and every one of you for investing interest in our company's growth story. We now open the session for Q&A.
Thank you very much, sir. We will now begin with the question and answer session. Anyone who wishes to ask a question may press star and one on their 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. We take the first question from the line of Sanket Chheda from DAM Capital. Please go ahead, sir.
Yeah. Hi, sir. Good evening. My question was primarily on growth. In all likelihood, you will miss our guidance for this year of about INR 3,600 crores of disbursement and thereby doing 12% AUM growth. What gives you comfort to now guide for three years, doubling the AUM in three years, which would entail 26%, 27% CAGR?
Hello? Yes, Sanket. Hello. Hello, is that only one question?
Yeah, sir. Yeah. That's on growth.
Yeah. As far as growth is concerned, yes, you are right. This year, against the INR 3,600 crores we had promised, we will be nearing around INR 3,200 crores organically. That, of course, excludes any DA transactions that we may enter into during the course of this quarter. That said, for the future, we are having a plan of growing in the normal way that we are now growing.
That will be at a 12% for the next year, 14% for the second year, and 17% for the third year. Of course, if we are supported by other measures, I mean, if we are seeing some growth improvements like it happened, like government supports and all that, naturally, we will be accelerating. That time our growth will be more than 20%. That is our expectation. So it will be around INR 15,000 odd crores if it is in a normal phase.
If we are supported by external factors, we will be reaching something like INR 24,000 crores.
What could be that external factor, sir?
What could be?
What could be those external factors?
Like government support. See, for example, the budget has given a thing for middle class households. For new housing, they are going to give some schemes. Likewise, let's say the new government is also planning some measures for affordable segment.
If the company is able to take advantage of all these measures, definitely we will be having a different path depending on how we are growing during the course of next year. Maybe we will be recruiting more people on sales front. We will be improving even our delivery plans and all that. So those are all plan B. Even in the normal ways, we are having a growth plan of reaching INR 20,000 crores by 2027.
Because out of this, the middle class thing or the PMAY thing, I was just skimming through the annual reports. I couldn't find our data in terms of, say, how much subsidy we have received till FY 2023 in case of earlier PMAY. If you can help with that number, it would be useful to understand how much of tailwind we should expect out of that.
See, I do not have the exact number, but we have received all the subsidies that were received for the previous schemes. For the scheme that has been announced, I think the counters are yet to be revealed by the government. We will come to know. But for those which are released earlier, the company has already received all the subsidies that are to be received from the government.
Okay. Although we reiterated, you are saying 12% maybe this year, then 15%, then 17%, then 20%, like that, you are expecting the growth path to be.
Yes. Yes, and this is on AUM.
Okay. The other question was in recent quarters, most of our growth has been from home equity or the LAP. Per se, the growth in pure HL has been just 2% YOY. How do we see that? And in this growth aspiration that you have, how would the share of LAPs and HL would look like? Because we are growing the pace wherein the pain has been higher since history, and hence a reason to worry, maybe.
See, as far as regulation is concerned, we can go even up to 40%. Non-home loan free segment can even go up to 40%. But as of now, we are at around 75%. Still we are very much below the regulatory requirement.
As well as even our internal thing, we are now approved, got the approval from both for about 30% of non-home loan segment. We are still below. The home loan portion has come down only from around 76.9%- 75.6%. I think that is only a marginal decline as far as home loan is concerned. That too, in the current quarter, it was a mere 0.6% decline.
Sure, sir. I think those were my questions, issues that to reach close to your aspiration. Thanks a lot, sir.
Hello? Yeah, thank you.
Yeah, sir, those were my questions.
Yeah. Thank you.
Thank you, sir. We take the next question from the line of Akash Jain from Moneycurves Analytics. Please go ahead, sir.
Hi. Good evening to you and your team. Sir, I think my first question is quite similar on the lines of what the earlier participant asked, because I think everything looks very good as far as numbers are concerned.
The only thing that is slightly disappointing is growth, because we had initially guided for INR 14,000 crore AUM for the end of the year. Clearly not going to get there. You have also revised it downwards to INR 13,500. And now we have obviously a good plan for the next few years, which again is aspiring for a growth which we have not done over the last few years.
I think what we want to understand is probably a little more detail in terms of what processes, et cetera, you implemented, where results are not yet completely visible, and what are the steps or what are the things you will do so that we can get more comfort that growth will come in the years to come.
I think some concrete points that you can elaborate will be very useful, sir. So that is the first question. Maybe a little more depth in terms of how are we going to change the whole trajectory. I think that will be very comforting for investors. The second question is, sir, on recoveries, even though, like you rightly said, we had guided for INR 100 crore GNPA decline, and it is going to be much better than that for this year. But where do you see recoveries?
Because a lot of our restructured book, as well as GNPA, is sitting as a large block there. Recoveries is going to be very important for us over the next two years. The SARFAESI situations and the initiation shipped under SARFAESI. Can you give us some broad guidance in terms of where do you see trajectory of this recovery is going over the next few years?
Because there is a large sum sitting down in restructured book. Not restructured book, mostly I think GNPA recovery will be from GNPA, not from restructured book. There may be some effects from restructured interest and things. These two things, if you can please elaborate in more detail. Thank you.
Okay. Thanks, Akash. See, as far as growth is concerned, let us be very clear. The company's growth was not all that good in the last few years, even before COVID. See, the growth number was only around 10%, 12%, 7%, and all pre-COVID. Of course, during COVID it was 2% and a minus 2%.
From that level, the company is slowly but steadily going up. See, 2023 was around 5%, 2024 it will be around 9%. So what we are predicting is more on a conservative level, more on a realistic level.
That is why when we say 12% in the normal growth path, I think it is quite reasonable. We plan to disperse around INR 4,000 crores. That is from the existing year, we will be doing something like INR 3,200 crores by end of this year.
What we are predicting for the next year is in addition to the normal growth from our existing lenders, we also plan to open some 40 new centers. So we are expecting a contribution from these 40 new centers also adding to our disbursement numbers.
With all these only, we are now projecting a normal growth of 12%, which we feel that quite reasonable. Especially what we plan to do is let us promise less so that we try to perform more. We are also planning to add more and more sales people in our vertical. There is a likelihood of a person exclusively at a senior level, an exclusive person to follow from business parameters. He is also likely to join.
With a new set up of sales, with a different way of approaching our customers, I think what we are predicting next year as well as in the next further two years, I think it is more a reasonable level.
So the way we are going to reach around INR 20,000 crores in 2027, and by the trajectory by which the company has been performing in the last two years, I think it is not unreasonable to achieve a number of INR 20,000 crores. We are quite confident by the momentum that the company has gained in the last two years, it should be in a position to reach INR 20,000 crores by 2027.
And if we are supported, as I was telling the previous caller, if we are supported by the government measures or by our own impetus inside the organization, I think the acceleration also will take place, and we will be even surpassing our own estimates. The new branches, as well as the additional sales staff, all these are going to contribute to our improved numbers as far as growth is concerned.
And we as a company, as a management, we are quite positive and confident that we will be able to reach these numbers. Now coming to NPA. The NPA numbers have now reached a stage where almost all the 4,000 accounts we have now, I think it is slightly less than 4,000 accounts. It has almost reached a level where it is going to be on the auction level. Now, for that also, we have already strategized.
We have now started a separate vertical exclusively for following up from the legal angle. Our own recovery department, we have split it to two, recovery collection, recovery legal. We have engaged some three or four exclusive legal people, mainly to follow on SARFAESI related measures, because all these accounts have reached the SARFAESI auction stage.
What we are projecting in the next two or three years is a similar performance of what we have done in 2023, 2024. A reduction of INR 100 crores per year in each of 2025, 2026, and as well as 2027. This is excluding any of the technical write-offs that the company may engage if things are favorable. The expected GNPA number by 2027, GNPA I am talking, will be 2%. It is around 4% now. We will be reaching around 2% by 2027.
That is our expectation, and we are quite confident by the way the trajectory is moving. We are quite confident that we will be able to do. In addition to attacking the existing NPAs, we are also following up on the presently present overdue accounts.
That is what I was saying, the second vertical within the recovery department is called as the collection vertical. Around 800 people are there in the field, which number also will increase over a period.
These people are to handle only our 1+ DPDs. And if the trends which we saw in January 2024 is to go by, we are quite confident that over a period of two or three years, we will be on par with the others in the industry as far as overdues are concerned.
That said, the flow from stage 2 to stage 3 also will get minimized, and our GNPA numbers, as we are seeing, is likely to reach a number of 2%. This I am repeatedly saying, this is also purely organic, excluding any ARCs yet that we may enter into in a few years or any significant write-off that the company may incur. Without all these incidents, we are quite certain the company will be in a position to reach a GNPA number of 2%. I think I answered that, right?
Yeah. Sir, can I just ask a quick follow-up question on this part only? I think earlier you had mentioned that one is, once we are now at a stage where auctions are happening. Are we also seeing some people? Hello?
Yeah. Please speak.
Yeah. Now that we are at a stage which is very close to auction, are we seeing the customers or the homeowners coming to the table for settlement with the company? What are you observing on that end? Earlier you had mentioned that auction obviously is not the best option ever, both for us as well as the customer, right?
Because there is under-recoveries and the customer also to certain extent loses a part of his equity in the business. How are we viewing, because there is a large NPA to be auctioned. What is your view in terms of under-recoveries and how aggressive will you be in terms of recovering both either with a one-time settlement auctions or go ahead with auctions. Just a little more thought on that part, sir. Thank you.
You are perfectly right as far as auction thing. Only thing is this auction, in our view, should be used more as a threat than as a pure recovery measure, and that is the strategy we are completely following. Each and every account or NPA account, the legal team is expected to follow so that it gives a pressure on the borrower so that he comes to us for a discussion.
That we are seeing a momentum. If things are what we are seeing in this current month is to go by, we are seeing some momentum. Hopefully, by the pressures that we bring in, we will be in a position to have more and more people on discussion table, and we will be in a position to reduce the NPA number. Maybe we will also have to have some relaxation on our settlement mechanism.
Maybe we may have to sacrifice some more interest because there may be some NPA accounts which are more than 1,500 days old or more than 2,000 days old account. Maybe some relaxation in our recovery policies also will happen. With all this, we are quite confident that going forward, the GNPA numbers will be coming down.
Thank you, sir. Thank you so much.
Thank you, sir.
Hello.
The next question is from the line of Vikas Kasturi from-
Sir, first of all, a big congratulations to you on achieving that INR 100 crore recovery in this year. Sir, my Hello, can you hear me, sir? Hello, can you hear me? Hello?
Hello, sir. Can you hear me?
I can hear you, ma'am. Can you hear me?
Yeah. Just one moment, sir. Hold on for a moment. Management sir, can you hear me? Just give me one moment, sir. Ladies and gentlemen, we have the line for the management reconnected. Sir, please go ahead. Mr. Vikas, you may go ahead with your question, please.
Yeah. Ma'am I audible?
Yeah. Hello.
Yeah. Hello, sir. Sir, first of all, a big congratulations on reaching your target of INR 100 crore recovery, sir. I had two questions. The first is some data keeping. I would want to know the numbers for BT out recoveries and slippages for this quarter, sir. Should I go ahead with the second question, sir?
Yeah, please.
Yeah. The second question is, sir, is there any plan to reduce the concentration of Tamil Nadu in your overall business, sir? Because I think right now at 55% plus. Any thoughts on that, sir? Just these two questions.
Thanks, Mr. Vikas. You are Mr. Vikas, right?
Yes, sir.
Yeah. Thanks, Mr. Vikas. As far as BT out is concerned, it is around INR 30 crores per month. Okay. BT ins are also at the same level. Coming to recovery and slippages. Slippages are INR 57 crores during the quarter, and we were able to recover INR 76 crores during the quarter. That is for Q3 2024.
Yeah.
Your other question was reducing concentration. Tamil Nadu is around 57%, but Tamil Nadu is our core market, Mr. Vikas. We do not want to lose our hold in this particular market. While we want to grow in other areas, definitely we do not want to lose our grip in our core market. In our growth strategies also, we would like to maintain at least the same percentage that we are having.
Next year also, for example, when we are planning around 40 new branches, we will be having around 50% in Tamil Nadu, and the remaining 50% will be on non-Tamil Nadu regions. Maybe in Tamil Nadu, we will be reaching something like tier 3 or tier 4 centers.
The second year onwards, maybe you are right, Tamil Nadu would have got some saturation. We may be moving to other centers, and the ratio of Tamil Nadu to non-Tamil Nadu will be less in the second year onwards.
All right, sir. Thank you, sir. Thank you for your answers. I will come back in the queue.
Thanks, sir.
Thank you, sir. The next question is from the line of Kaustav Bubna from BM SPL Capital. Please go ahead, sir.
Hello, sir. Thank you for taking my question. I just wanted to understand, we are speaking about slowly gaining back growth momentum. Just wanted to understand how on the speed of growth-
Can you please move a little. You are not audible.
You cannot hear me? Can you hear me?
Now it is okay.
Yeah. I just wanted to understand on the speed of growth. See, right now we are at 15.5%-16% ROEs.
Hello?
Yeah. Can you hear me? Hello?
Now it is okay, sir.
Yeah. So right now we're 15.5%-16% ROEs, but NIMs could be topping. So just wanted to understand if NIMs come down, what are the steady state NIMs we should see in the current rate environment if rates stay stagnant?
Also wanted to understand what type of You're saying 12.5% growth in FY 2025. So will this growth rate be enough to maintain these ROE levels given that NIMs could be topping over here?
Okay. Sir, you were not fully audible, but I could understand the context. See, for the next year, we will also have an advantage. In addition to our growth and growth-related net interest income, we will also have an advantage of provision, excess provision that we are already holding in our books.
So the more and more recovery measures that we are going to have, that will help us in increasing the release of provision. So going forward, that will definitely help us in improving our ROA and ROE levels. That is one material advantage that we'll have in the coming years.
So you're saying your credit costs could come down?
Definitely.
Which will improve your-
Going forward, that could be even a reversal of provision. So far we have been holding back and whatever is the release of provisions we are holding back, we are increasing our provision coverage ratio.
But going forward, as more and more provisions are also happening and our provision coverage ratio keeps increasing, maybe time will come when we will start releasing our provisions, which will help us in improving PAT as well as our ROAs.
Is this a possibility for FY 2025, and could you give some kind of quantum on what range could that be? Like how many hundred crores, 50 crores? What is the range you are expecting of
Sir, internally, we are estimating something like INR 40 crores to INR 50 crores of provision relief in 2024-2025.
FY20.
It could be more. But hopefully by the trend of the NPA movement, I think it should be possible for us.
Okay, great. Thank you. But again, on that question, do you think apart from the write back that we could be getting, what about growth rates? Is that 12.5% enough to maintain these ROEs? Or we should be growing faster? Hello?
Hello.
Hello.
Sir, can you hear us?
Yeah, I can. Can you hear me?
I can hear you, sir. I think there is some issue with the management line. Sir, just allow me a moment, I will connect them back. Ladies and gentlemen, we have the line for the management reconnect. Sir, please go ahead.
I'll just frame my question in another way. Yeah, can you hear me?
Yeah, no problem.
Yeah. Given the scenarios we see going into FY 2025 on interest rates, et cetera, what type of ROE should we expect for FY 2025?
FY 2025. Can you give me some time, sir? I give you the exact number, okay? Whatever we have planned.
Okay, fine. Okay, that's fine. Thank you.
Kaustav, sir, are you done with your questions?
Yeah, I am.
Thank you. We take the next question from the line of Tejas Shah from Laser Securities. Please go ahead, sir.
Sir, can you throw some light on the new RBI directions for the processing charges? Are we included in that or only the banks are included?
I don't think there is an issue as regards to processing charges. It's not on processing charges, but I think it is related to penal income, right?
Yeah.
Yeah. Penal income is, as far as we are concerned, we have been not accounting for penalty income, even otherwise. Okay? So only as we earn, we host the penal income. So that way, the company is not affected by the new RBI guidelines on penal income.
Okay. Is there anything on the processing charge? Because I think they have specifically said if or when we take a loan, where they are charging a processing charging or any documentation charges, now that needs to be included in your rate of interest what you are charging. So are we affected on that or no?
To my knowledge, I think there is no issue. Anyway, we will check up, sir. To my knowledge, there is no issue as regards to processing charges. Still, I will check up. If there is anything, we will definitely inform you.
Okay, fine. Any growth rate, looking at the housing demand, we can definitely do better than what we have. Are we planning any co-lending also if that helps in terms of the growth?
Yeah, you are right, sir. That is also in our horizon. See, it all depends on if we are able to grow on our own. Definitely this co-lending will help us in improving the numbers. That is for sure. That's what I'm saying. Whatever we have given number, it is purely organic, it is purely in-house, what we are doing. Anything extra like a book buying or a co-lending or any other thing will be all additions.
Okay. I think if you can look at sectors which are out of your domain for a co-lending, I think then that can help as a big growth lever.
We will take a view, sir. See, in fact, we have got one or two queries from some of the institutions. We will take a view. If it is profitable, we will definitely take a view.
Thank you. Thanks so much.
Thank you, sir. The next question is from the line of Bunty Chawla from IDBI. Please go ahead, sir.
Thank you, sir. Thank you for giving me the opportunity. Sorry, I joined late if I am repetitive. Can you share the exact number you have guided earlier for recovery of more than INR 100 crores in FY 2024? So what is the absolute number for 9 months FY 2024?
See, check out. FY 2024, that is nine months, GNPA has now come down to INR 618 crores.
No, you have guided for the recovery of more than INR 100 crores in FY 2024. Last quarter, you said in H1, we have recovered around INR 82 crores. What is that number for nine months?
Sir, see, nine months is INR 230 crores reduction and INR 112 crores repayments.
Okay. Sir, if we see during this FY 2024, we have this much of recovery in hands. That is why our credit cost is almost low in last few years, which is coming around 9, 10 bps only. How is the next year FY 2025 we should see with respect to credit cost, if our similar kind of a recovery we have so that our credit cost. Any guidance on the credit cost for the next year as such?
Actually, I am unable to give you any specific credit cost, but we are quite confident that the credit cost will not be much. In fact, as I was telling a previous caller, there will be a provision reversal. So net-to-net, there will not be any impact. That is our expectation, by the way we are going.
This confidence is coming only because our new book so far is holding very well. We have not seen much of a deterioration in the new book in the last two years, whatever disbursements that have happened.
Based on that, it is only the existing NPA books which will have an impact on our NPAs as well as on credit cost. There we are confident by the way we are performing. We are quite clear that the numbers will keep coming down and there will not be much requirement of increasing the provision or increasing the credit cost.
Okay. And sir, lastly, on the margin front, though there has been a slight dip in the margin, but still we are well above 5% for this year. What will be the margins? How the margins should shape out in Q4 and then FY 2025?
Sir, Q4 definitely it will be on par or there may be a slight dip. But FY 2025, what we are saying is we do not mind. Internally, we have now talked that we do not mind forgoing some spread if we will be able to retain our customers and improve the quality of the customers.
But we will be supported as far as yield is concerned, NIM is concerned, we will be supported as I was telling by the reversal in provisions. So net-to-net, there will be an increase in the NIM numbers. That is our expectation. Today, we are at around 5.1. We will definitely be maintaining at least this number.
Okay. 5.1% for FY 2025 you are saying, correct?
Yeah.
Okay. That was very helpful, sir. Thank you. Thank you very much and best of luck.
Thank you. Thank you.
Thank you, sir. The next question is from the line of Anand Mundra from Soar Wealth. Please go ahead.
Hello, sir. Good afternoon. Sir, I wanted to understand when we are saying INR 100 crore of GNPA reduction in this financial year for the first nine months. Have they become standard, or has the loan been reduced?
The loan has been reduced or recovered.
Okay. Next year, sir-
Whether it has been upgraded or recovered, it is a combination of everything.
Yeah.
It is a combination of everything. But mostly they are recoveries.
Okay. Mostly there is a reduction of AUM because of that.
Yeah.
Yeah. Next year also, sir, when you are guiding for 12% growth, we have to factor in 2, 3% contraction in portfolio because of GNPA recovery, because we will be doing auction of so many properties or we will be recovering that.
Yeah, you are right, sir. Even in the current year, one of the reasons why our AUM is not growing is this. See, for example, in the last three quarters, our recovery has been something like INR 200 crores. INR 230 crores. See, this is one of the reasons of our AUM not growing. This is also to be factored.
That translates to around 1.5% of AUM has not grown because of growth has. Next year also there would be 2%, 3% impact. So net of that, our growth may be 10% only.
Yes. No. Whatever we have projected is after factoring this GNPA.
Okay. So gross growth can be 2% or 3% higher than 12%, what you are projecting.
Little better. Yeah.
Yeah. Sir, second question was, what is our NPA split between new book and old book? By new book, I am saying post-COVID you have built. All this GNPA package will be from the previous book.
Yeah. New book, as I was telling, new book is holding really well. Internally, we have found out that the slippage in the last two years' disbursement, we have disbursed around INR 5,600 crores since January 2022. Today, out of this new book, the slippage is only around INR 18 crores.
Okay.
Whatever is the NPA is all the previous book. Usually, it is more than four years or five years old.
From January 2022, sir, if you can cumulatively give the data on a quarterly basis in presentation, that would be helpful to understand how the new book is doing and whether Because historically, Repco always had higher GNPA or Stage 2 loan. There is something which is changing. That is the reason I am saying the new book has lower number of GNPA or Stage 2 loan. I was wondering if you can keep that as a part of the presentation every quarter.
Am I audible?
Yeah, audible, sir.
Okay. See, that is the strategy. We want to see that the new book doesn't increase our NPA. So in our underwriting centers also, we are improving so that the new book is not giving us additional problems. Whatever GNPA that we are handling is only the existing ones which we are tackling.
Okay. Sir, another question was, what about the stage 2 percentage currently?
12%, sir.
Oh. There's no major reduction over there.
See, in the last quarter we have reduced around INR 58 crores. Our estimate is to make it below 10% by March 2024. Of course, the denominator also will increase. We will be ending up around INR 13,500 crores for March 2024. Today, we are around INR 1,500 crores as far as stage 2 is.
Okay.
Hello?
Okay.
Hello?
Yeah. Understood, sir.
AUM is expected to be around INR 13,500 crores by March 2024.
Okay, sir.
The expectation of stage 2 in March 2024 is to be between INR 1,350 to INR 1,400 crores.
Okay. Sir, the last question which I had was, what would our loan from National Housing Bank, what is the status of that approval, sir?
For 2023, 2024, unfortunately, we could not get the sanction, but 2024, 2025, we are confident. Even otherwise, we have got enough sanctions from the bankers. That way we are quite comfortable.
National Housing Bank loan would certainly reduce our cost of capital, sir, or cost of borrowing.
You are right. At least there will be a marginal reduction. That will be additional feature in the next year.
Okay. Thank you, sir. Thanks a lot. All the best, sir.
Thanks, sir. Thank you.
Thank you, sir. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead, sir.
Good evening, sir. Sir, in your NIM calculation, do you include income from the write backs? If we were to adjust that, what would be the adjusted NIM?
See, so far, write backs have not been factored because this company was only providing, it was not writing back. Probably next year, we may start some write backs because there is no point in keeping on adding to our provisions. We have to report.
Whatever this 5.1 we have said is taking into account this write back as well. Write backs, we are fetching around INR 50 crores. This 5.1, we have factored this as well. Let us see. Maybe I can drill down, find out what will be that excluding write back. We are estimating around INR 4 crores to INR 5 crores of profit.
Sorry. What level of profits? Sir, I couldn't hear you.
See this 5.1, Mr. Sarvesh Gupta. Am I audible now?
Yes.
Yeah. See.
Hello, sir. Hello, management, sir. Can you hear me? Participants, please reconnect as while I reconnect the management. Thank you for patiently holding, participants. We have the line for the management reconnected, so please go ahead.
Hello?
Yes, sir. Go ahead.
Sarvesh Gupta, I think you wanted a breakup of NIM excluding this write back, right?
Yes.
Yeah. We will get back to you, sir. But the thing is, so far, this company has not done any write backs. From next year onwards, we may have to have some write back. Okay. We will use the right decision without write backs. Maybe separately.
Okay. Sir, to put this differently, if you just look at the spreads between our current cost of borrowing and the expected loan interest rate. Sir, what would that be in, let us say, next couple of years? Because it is at a higher level. So, for growing fast, we expect to sort of bring it down.
Yes, sir. Am I audible, Mr. Sarvesh?
Yes.
Hello?
Yes, sir. You are.
Hello.
Sir, we can hear you. Please go ahead.
Mr. Sarvesh, see, presently, our spread is around 3.4, but as you have said correctly, maybe it will be very difficult to sustain for the quality of customers that we are handling. Internally, we are now predicting that we may even go down to 3% as far as spread is concerned, so that we maintain the quality of our customer profile.
Understood. Secondly, on your cost to income now, there would be some one-offs, maybe because of the software implementation, tech upgrade, et cetera. So where do we see it settling down in the coming years?
Sarvesh, I am unable to hear you. I think there is some line problem at your end.
Sir, I am able to hear you. Hello.
Yeah, yeah.
Yeah, sir, I was asking, there might be some one-offs in your cost structure right now because of the software implementation and the changes in hiring and all that we are doing right now. Excluding that, in the coming years, what could be our cost to income?
See, today cost to income ratio is around 22%. The board has also indicated that at no cost you should increase the cost to income ratio. I think the volume increase will help us in maintaining this cost to income ratio.
The additional cost, see, already we have now spent around INR 2,200 crores as far as technology is concerned. Another INR 2,000 crores may be there. But despite all that, I think we should be in a position to bear that additional cost as far as technology, as well as the additional establishment cost because of scale increase.
No, sir. After this year or next year, maybe from FY26, this INR 20 crores will go off, right? Hello?
Hello, management, sir, can you hear us? I am extremely sorry for the inconvenience. I will reconnect the management. Participants are requested to please be reconnected. Ladies and gentlemen, we have the line for the management reconnected. We are extremely sorry for the inconvenience caused. Sir, you may please go ahead. Sarvesh sir, you may go ahead with your question.
Yeah, the question was this 20 odd crores that we are incurring per year in this software implementation. Will that go away from FY 2026?
Yeah, Sarvesh. First of all, my apologies for the break that has happened. Yeah, this INR 20 crores, see, we have already incurred INR 20 crores. Another INR 20 crores may be there in the next year. That's all. With that, it will stop. We have six years to have a depreciation for this entire INR 40 crores. With that, it should not be a big problem for us to absorb this technology expenditure.
So sir, it will continue as it is every year, or will it go away from FY 2026?
See, as far as the software implementation that is now in progress, it should be over. INR 40 maximum, another INR 10 crores. That's all. It should be over. But technology, you know, it's dynamic. So maybe two years since, maybe we may again incur something extra.
Understood.
But the company should be in a position to absorb.
Understood. Sir, finally, on your credit cost, of course it is lower right now because you are also getting the benefits of the write-backs or maybe reduction in the GNPA. But in a steady state, what can be the expectation now in terms of credit cost?
Please. See, every month, our slippages is around INR 20 crores. Okay. So net net, I think going forward too, and even this INR 20 crores is all the old book that is slipping. The new book, as I have been saying, is not all that problematic. If that be the case, I think we should be in a position to absorb whatever is the little credit card that may happen because of these slippages.
Understood.
It may not be much. That confidence is emanating because of the quality of the new accounts.
Sure. Thank you, sir.
Thank you, sir. We'll take the next question from the line of Rajiv Mehta from YES Securities. Please go ahead with your question.
Yeah, sir. Am I audible ?
Yes, sir.
Yeah. Sir, I have a few questions. Firstly, on the asset quality. You said that you disbursed INR 5,600 crore in January 2022, and slippages, which is 90+ DPD, is only INR 18 crore. Can you also tell us how much will be between one to 90 or can you just tell us how much will be in stage 2 out of the new disbursements when you have done?
I do not have from one to 90. I think from 30- 90, it is around 4.5%. 4%.
Oh.
Less than 4%.
Understood. Correct. Even that is significantly lower than the 4%.
Yes.
Yeah.
Yeah.
Yeah. Now just covering that for credit cost, it seems that it is going to be remaining negligible for a long period of time because on a quarterly basis or on an annual basis, you will be reducing NPA 100 crores. You are already carrying a 60% coverage. Plus, you will also be improving stage 2 assets, and even there could be some provision releases, or at least the increment provisions will not be there.
So one is that incremental provision releases will be taken back or will get adjusted. What about the current excess that we are standing with in terms of management overlay? Because I believe you are having a very high coverage. So any plan to take any accelerated actions in terms of doing some technical write-offs, doing some ARC sales, and accelerating your journey to 2% NPA?
See, we have additional overlay of around INR 100 crores as of now. See, this may help us in doing a technical write-off or even an ARC sale. But as of today, we do not have any such immediate plans of inorganic reduction. Maybe we will take a call on March 31.
Depending on the numbers, we may take a call. But ARC sale, immediately, we are not in a position to do any ARC sale today because we have additional provision, we have surplus provisions. I think that will help us. And recovery is also happening, so why incur a cost for this ARC sale? That is our plan today.
Today or maybe this quarter, we may not enter into any ARC sale. But during the course of next 1 or 2 years, maybe we will take a call depending on the availability of provisions and the NPA.
Okay. And sir, in terms of growth, what is stopping us from growing slightly faster than what we are growing with? Because I think we are adding people, sales people in every branch. We are willing to try to compromise even on spreads and margins.
As you just said that we are sitting on high margins and spreads, and we are okay with retaining customers, acquiring high-quality customers, and can become more competitive also in terms of creating the market.
So operationally, and even from a pricing standpoint, we are good levers for growth. When you talk about 12% growth next year, it is sub-industry level growth on even a low base. So is it a minimum number that we are giving out that we will achieve?
Okay. Rajiv, one is, whatever numbers we are projecting for next year, it is purely conservative, as I told you earlier. As far as the trajectory is concerned, please also understand what was the trajectory 2 years back. The company is truly coming out of its negative thing. It was 2%, minus 2% and all that. I do not have a magic wand that suddenly we grow 20%, 30% like others in the industry.
The existing staff members are also reorienting themselves with the new verticalization and all that we are now implementing. I think it is quite natural that it will take some time for the existing staff. Even the sales vertical or the collection vertical that we have now implemented, these are all the staff who were inside the branch, who were doing desk work or doing non-sales related work.
Slowly, they are now being trained to do work like what the others in the industry are doing. It is taking time. It is quite natural that it is taking time for them to adapt to this new situation. I should compliment that people have realized the situation and people are now going out. Things are improving. I think I should be more realistic in giving growth number.
The growth that is happening is more realistic. I think this will be a sustainable level. More importantly, we do not want to just like that improve the numbers, giving a compromise on quality.
Because this is a basic differentiator between our company and other companies, because our NPAs are already on the high side. We do not like to get into future problems on NPA front. That is one of the reasons why we want to grow. We want to grow qualitatively.
Got it. So clear. Just last question. While you are discussing the road map for the next three years in terms of growth and many other things, did the board also decide on the dividend payout because our ROEs are 16 odd percent, we've been sustaining 16% ROEs for the last three quarters. Our growth rates are improving at a gradual pace.
We are sitting on excess provisions, so credit costs will also be low in the coming quarters. It seems that we'll be maintaining good ROE, then the growth will remain slightly lower than ROEs. To utilize and to improve ROE in the future and to utilize capital, are we thinking of giving out better dividends in future?
Rajiv, yesterday's meeting, this particular issue was not discussed. Maybe in the forthcoming board meet-
Sorry to interrupt. The line for the management has got disconnected. I'll reconnect them, please. Participants, we have the line for the management connected. Sir, please go ahead.
Rajiv, see yesterday's meeting, there was no discussion specifically on dividend payouts. Maybe in the next meeting there will be a discussion on dividend payout versus growth percentages. That time, I think the board will also take a call on dividend percentages.
Okay. Thank you so much, and best of luck.
Thank you. Thanks, Rajiv.
Thank you, sir. The next question is from the line of Rishikesh from RoboCapital. Please go ahead.
Yeah. Thank you for the opportunity. Sir, we have our current employee strength of around 1,050. Could you please let us know how much is for the sales trend? Regarding our future targets, you would be adding more sales staff, so how much are you looking to add, and by when?
See, as of now, we are having 200 people on sales. Okay. During the course of next year, if the growth is also around the same level, maybe we will be adding maybe 40, 50 people more. If you are seeing some tailwinds, which will help us in improving the numbers, definitely we will be adding at least another 200 people.
That depends on how the things improve during the course of next year. Otherwise, as of now, from 200, maybe we will be adding another 40, 50 people next year, if things go in the same way that we are now growing. The management will take a call depending on the growth pattern.
Okay. This should add value after you hire maybe around in five, six months. Would it be fair to say?
Yes. It will take some time for the new entrant to understand our company, understand our policies and all. Some two or three months will be some stabilization period. Post that, they will start giving us numbers.
Okay. Would you be starting hiring in future, like next quarter itself, or could you give us broad sense when are you starting to hire staff?
See, the hiring is on an ongoing pace, because you know, in the industry, people are also resigning, so there will be replacements even for the existing staff. The hiring will keep on happening. But for the growth, there will be an increasing number.
Even for the next year, we are planning 40 branches, which means at least around 200 people we will be hiring. For the growth of our existing numbers, as well as for the new branches, we will be hiring at least additional of 150- 200 numbers.
Okay. Secondly, the branches which you said you will be adding 40 per year, where are you looking to add those branches, in the new areas or the existing areas? If you could indicate, please.
See, for 2024, 2025, 50% of our branches will be in Tamil Nadu. That is our plan. Maybe in Tamil Nadu we will deepen our presence. But in non-Tamil Nadu regions, we will be exploring new branches, mostly in the areas where we are already present, like Gujarat, Maharashtra, Telangana, Andhra, and Karnataka. Maybe 2026 we will also be branching out to newer centers like NRA, NCR or U.P. or Bihar.
Got it. Thank you very much.
Thank you.
Thank you. Ladies and gentlemen, that was the last question for the day. I would now like to hand the conference over to the management for closing comments.
I should firstly thank you, and my apologies for all the technical glitches that happened during the course of this conference call. I once again thank YES Securities, as well as all the analysts who are present in the call. I once again thank you for the importance that you have given for this particular company. Thank you. Wish you all the best.
Thank you, sir. On behalf of YES Securities and Repco Home Finance, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.