Highlights:

The company has witnessed a good quarter on all counts in Q2FY2023.

The disbursement growth was moderate on account of high base, as disbursements shifted to Q2 last year due to covid in Q1. However, the disbursements and sanctions growth has been strong growth for H1FY2023 over H1FY2022.

The NIM is largely stable at 3.55% down 5 bps qoq from 3.60% in Q1FY2023. The company expects NIMs to be maintained at 3.5% and spreads at 2.5% for near terms next few quarters. However, the company is targeting NIM of 3.0% and spreads of 2.4% for long term period.

The company has witnessed increase in cost of funds to 6.04% in Q2FY2023 from 5.8% end Q1FY2023. An incremental cost of funds was at 6.48% and incremental yield on loans stood at 9.02% in Q2FY2023.

The company has migrated from Income Recognition and Asset Classification (IRAC) norms to Expected Credit Loss (ECL) method of provisioning and accounting in Q2FY2023. This has led to some change in NPAs and provisioning.

The net NPA rose 0.35% from 0.30% end June 2022 under ECL, while under IRAC norms net NPA ratio of the company has declined to 0.28%.

The company has also reversed Rs 21 crore of NPA provisions and shifted to standard asset provisioning.

The overall standard assets provisions were higher at Rs 33.5 crore for Q2FY2023 on account of strong disbursements.

The reversals of NPA provisions led to rise in net NPA ratio in Q2FY2023.

The fresh slippages of loans was Rs 12 crore, while the company has recorded recoveries of Rs 13 crore leading to decline of Rs 1 crore in gross NPAs of the company.

The credit cost of marginal at 0.04% for Q2FY2023.

The company expects credit cost at 0.12-0.14% for FY2023 taking into account provisioning under ECL.

The company is witnessing strong demand in all segments and all geographies.

The salaried segment is driving growth, while the self employed segment is showing improvement every quarter and expects to return to normalcy in next two quarters.

The company does not expect any big change in borrowing mix from current level.

The company held NPA provision of Rs 97.85 crore and standard asset provision of Rs 101.17 crore totaling to Rs 199.02 crore end June 2022 under IRAC norms. The provision under ECL norms have increased to Rs 131.33 crore for standard asset and declined to Rs 77.53 crore for NPAs totaling to Rs 208.86 crore end September 2022.

The company is holding Rs 67 crore of restructured assets provisions.

The restructured loan book stands at Rs 704.85 crore and excluding the interest arrears stands at Rs 647 crore end September 2022. The company expects slippage rate of 5% for restructured loan book. The company also expects most of the restructured loan book to come of restructured category by end March 2023.

The company aims for loan growth of 18-20% for next 3-4 years with focus on doubling loan book size. However, the company is not chasing market share. The aim is to grow maintaining profitability and asset quality.

The process for selecting new MD&CEO is on and new MD is expected to be in place by end December 2022.

The process for selection of chief risk officer and chief financial officer from market places is going on.

The company has not hiked lending rates in Q2 as rates were hiked in Q1. The company is planning to raise lending rates in Q3FY2023.

The employee expenses have declined on sequential basis on account of decline in provisions for employee benefit to Rs 0.51 crore from Rs 4.5 crore in the previous quarter with rise in G-sec yields.

The company expects to maintain GNPA ratio in the range of 0.50-.65%.

The company has not conducted any write-off loans in last two years.

Canara Bank do not have plans to exit the stake in the company

The company has started builder finance pilot with small ticket size, but the overall size of the builder finance book will not to cross 0.5% in next two-three years.

The share of Karnataka and Telengana is same in the loan book and stands together at 42-43% end September 2022.

The company aims to add 12-15 branches every year. the new branches take 8-9 months to achieve break even.

The company is ready to raise capital, but there are no plans for capital raising in near terms and it will raise growth capital at appropriate time. The CRAR position of the company is comfortable.

The tax rate of the company was higher in Q2FY2023 on account of reversal of NPA provisions.

The stage 2 assets stands at Rs 1050 crore and provisions at Rs 60 crore. This does not include restructured loans.

The company maintains liquidity of 7-8 months, which was higher earlier.

The unutilized bank lines stands at Rs 3860 crore, while NHB approval for Rs 2500 crore is awaited. Overall Rs 8800 crore of fund raising is in pipeline for next 6-8 months.

The loan sourcing from direct sourcing agents (DSA) stands at 79% of overall disbursements and rest is contributed by own branches.

The loan to value for loan book stands at 65%.

The company is expecting further increase in cost of funds, but it's not expected to be drastic.