Can Fin Homes conducted a conference call 18 October 2023 to discuss its financial results for the quarter ended September 2023. Suresh Iyer. MD and CEO of the company addressed the call:

Highlights:

The disbursements of the company have declined on a year on year basis due to change in the processes, checks and controls. However, the company has exhibited growth in disbursements on sequential basis.

The company is looking at raising the ticket size as well as focusing on builder finance and its witnessing good results on this front.

The company expects the disbursements to pick up going forward and expect to recover some of the losses of H1FY2024 during better performance in H2FY2024.

The GNPA ratio for the non-restructured loan book is steady at 0.57% end September 2023 compared with 0.55% end March 2023.

However, the slippages in the restructured loan book have been higher at 14% against earlier estimate of 10% causing overall increase GNPA ratio in Q2FY2024.

Thus, the company has created additional management overlay provisions of Rs 17.28 crore on the restructured loan book in Q2FY2024 in addition to Rs 17 crore in Q4FY2023.

Out of the restructured loan book of Rs 685 crore, about 450 crore has come out of the moratorium at end June 2023 and 14% of that at Rs 64 crore has slipped to the NPA category in Q2FY2024.

Further Rs 216 crore of restructured loan book has come out of moratorium in Q2, which may contribute to rise in NPAs in Q3FY2024. The balance restructured book is expected to come of moratorium in October 2023 and November 2023.

The company has overall Rs 85 crore provisions on the restructured loan book and which would be more than sufficient to take care of the book.

The provision coverage ratio of the company has increased to 57% end September 2023.

With regard to the fraud at Ambala branch, the company has a scanned all the branches and the event was found to be one off at Ambala branch. The fraud amount was at Rs 39.67 crore against earlier reported level of Rs 38.5 crore. The company has also created full provisions for this fraud in Q2FY2024.

The company has witnessed healthy improvement in the margins as well as spread in Q2 as Rs 5700 crore of loan book has witnessed repricing. The company still has Rs 6000 crore of loan book to witness repricing in Q3FY2024.

The bank is targeting it achieve disbursements of Rs 10000 crore for FY2024.

The long growth has slightly moderated to 16%, while the company expects growth to pick up in the second half of FY2024.

The company is maintaining the guidance of spread at 2.5% and the margins at 3.5%.

The cost of funds was steady on sequential basis as the commercial papers borrowings was a done at lower rates, compensating for slight increase in MCLR rate.

The NHB borrowing sanctions comes in October and it will be utilized by the end of the year which is the cheapest source of borrowing and help in reducing cost of funds.

The company has started scheme for good customer offering lower rates which would help to contain the pre-payments and transfers.

The company is targeting AUM growth of 20% for FY2025.

The competitive rate and increase in ticket size would boost the growth

The company wants to maintain its gearing ratio below 8 times. Any growth pick-up and gearing goes beyond 8 times would require capital raising.

The company has added 3 branches in Q2 and another 9 branches are in the various stages of addition.

The credit cost is expected at 10 bps for FY2024.

The cost to income ratio is expected to rise 18-18.5% by end FY2024 and for FY2025 on account of investments for technology transformation.

The company is aims to maintain RoA above 2%.