Can Fin Homes conducted a conference call 27 April 2023 to discuss its financial results for the quarter ended March 2023. Suresh Iyer. MD and CEO of the company addressed the call:

Highlights:

The company has recorded healthy 8% growth in the disbursements in FY2023. The loan book has jumped by 18% end March 2023 over March 2023.

With the strong collection efforts, the company has registered decline in the gross NPA ratio to 0.55% and net NPA ratio to 0.16% end March 2023.

The company has increased provisions on conservative basis to raise provision coverage ratio in Q4FY2023. The company has created standard asset provisions of Rs 25 crore raising the overall provisions on the balance sheet to Rs 312 crore from Rs 290 crore a quarter ago.

The rising interest rate has led to increase in cost of borrowings, while the rate hike has been gradual on the asset side and the full impact of lending rate hike is yet to be experienced. Thus, the company expected improvement in the spreads and margins going forward.

The cost to Income ratio has been reduced to 16.93% in FY2023 from 18.32% in FY2022. The company expects to maintain cost income ratio in the range of 16- 17%.

The company has undrawn bank lines of Rs 4600 crore.

The company has a monthly collection rate of Rs 500 crore and quarterly Rs 1500 crore.

The company is comfortable with the current gearing ratio of 8 times and it does not see the immediate need to raise capital.

The company has witnessed jump in the yield on advances to 9.8% in Q4FY2023 as the pricing on Rs 10000 crore out of a Rs 30000 crore of loan book was reset during the quarter.

The company expects further repricing of Rs 18000 crore of loans in next two quarters. The company is already charging higher rate of interest on new disbursals. Thus, the company expects the net interest margin to improve from existing 3.4% to 3.5%.

The entire liabilities have been already repriced and the cost of borrowing stands at 7.5%. If there is no negative, the cost of funds can remain stable ahead.

The recent policy rate hikes have slightly impacted the demand with the increase in EMI on housing loans. However, the company expects the demand to recover in the second half of FY2024 with stabilizing interest rates.

The company is comfortable to deliver 18-20% loan growth in FY2024.

The company would be refocusing on branch expansion after covid pause. It aims to add 10-15 branches every year.

The current loam mix of 70% for salaried segment will be maintained. The DSA will continue to be as a major sourcing channel for the company.

The southern states contribute 65% of the business of the company and the company aims to reduce the share of southern states to 60% in the loan mix ahead.

The company expects to maintain credit cost of 5-7 bps.

The restructured loan book of the company stands at Rs 695 crore. The payments have started from February 2023 and the entire book would be out of restructured category by November 2023.

The company is targeting to recover NPAs of Rs 74 crore in FY2023.

The company would maintain the provision coverage ratio at current level and it would like to raise it upward if the opportunity arises.

The company is focused on maintaining spreads of 2.5% and the margins of 3.5%.