Can Fin Homes conducted a conference call 23 January 2024 to discuss its financial results for the quarter ended December 2023. Suresh Iyer, MD and CEO of the company addressed the call:

Highlights:

The company had undertaken process changes and tightening relating to centralization of disbursements and reconciliation, which has impacted the disbursements of the company in Q3FY2024

The disbursements were particularly impacted in the month of October, while they have returned to normalcy with the monthly run rate of Rs 700 crore in December 2023.

So the company expects to clock disbursements of over Rs 2500 crore in Q4FY2024. The overall asset under management growth is expected at 13-14% by end March 2024.

The company is targeting disbursements of Rs 12000 crore for FY2025.

AUM growth is expected to accelerate to 15-17% in FY2025 and further higher to 18 to 20% in FY26

The company had a restructured loan book of Rs 670 crore of which Rs 450 crore come out of moratorium by end June 2023 with Rs 64 crore slippages to NPA category by September 2023. Another Rs 200 crore of restructured loan book exited moratorium in Q2 and contributed NPAs of Rs 30 crore in Q3FY2024.

The company has fully recognized the pain in the restructured loan book. The overall slippage in the restructured loan book has been inline with the estimated level of 15% or Rs 98 crore.

The company had created management overlay provisions of Rs 34 crore, which they have continue to hold. So, the provisions were higher in Q3FY2024.

The company expects normal credit cost from FY2025.

The NPA in the non restructured loan book are in line with the normal trend and the company expects them to reduce in line with seasonality by March 2024

The company is expecting Rs 20 to 30 crore of decline in its NPA book in Q4FY2024, helping to reduce the gross NPA ratio to 0.75-0.80%.

The company has received AAA rating from ICRA in Q3FY2024, which has helped to maintain the cost of borrowing steady.

The repricing of loan book as helped the company to improve margins.

The company is not expecting any further increase in cost of borrowings, while it expects to maintain spreads of 2.6% and margins of 3.7-3.8% by March 2024.

The company also expecting to receive NHB refinancing in Q4FY2024, which is the cheapest source of borrowings.

The sourcing mix from DSA channel has declined to 79% end December 2023 from 85% a year ago. The company aims to reduce it further down to 60% in the next 2 to 3 years.

The company has added 5 new branches in Q3FY2024, which are mostly added in the north and the western part of the country.

The share of southern region in the disbursement has declined to 72%. The company has also exhibited increasing the ticket size in the Rs 20 lakh plus category.

The company had guided at 18% cost to income ratio, but due to delay in the digital expense the cost in ratio is expected to be at 16% for FY2024. For FY2025, the cost to Income ratio is expected to the at 18-18.5%.

The opex is expected to be at Rs 52-53 crore per quarter going forward. The new customer addition stands at 4200 to 4500 every quarter.

The company is planning to move to the quarterly reset of interest rates which is expected to help in controlling balance transfer out.