Al Omaniya Financial Services SAOG (AOFS) Earnings Call Transcript
August 13, 2026
Earnings Call Speaker Segments
So we have a very experienced team of management. Gentlemen, I'm Aftab Patel, the CEO of this company. I have a very eminent team here with me. Let me just briefly introduce Mr. Chandrasekar. He is our Chief Financial Officer, been with the company for over 2 decades. He also looks after the compliance. Mr. Ram Kumar is the Chief Manager, Retail.
Good afternoon. [Indiscernible].
Mr. Viju, Head of our Corporate Finance.
Good afternoon.
And then we have Mr. Manish, Head of our IT, also each one of them have more than 20 years of experience with Al Omaniya. And then, of course, we have Mr. Douglaus Chandrasekhar, the Board Secretary. Yes. Go to the next slide. All right. This is our team here, maybe the combined experience of more than 100 years. All right. Then getting into a little more details, gentlemen. The Al Omaniya offers a very wide and gamut of products and services, which entire range of corporate, retail financial services. We are both into corporates, large corporates, medium, small corporates. We do retail loan car financing. We also do hire purchase consumer loans. And most of our assets are -- we are almost about 60%, 65% into corporate. The balance is the retail segment, which is, again, the car loans as well as the hire purchase consumer durable loans. Now what do we bring to the market? What do we bring to this market? What is the unique selling proposition of Al Omaniya? We have been in this market for a good 3 decades. Every year has been a very eventful and successful year for all our stakeholders. We bring to you strong fundamentals, which is very apparent from our financials. Our clientele base is now in excess of 100,000 clients. And we also have the unique distinction of having paid the dividend in every single year of our existence. We have extremely more than required provision coverage, lowest NPLs in the segment, including the banks. So our capital adequacy is very high, about 35%, robust capital structure, very sufficient amount of liquidity, almost OMR 85 million, OMR 90 million we have in liquid assets, which allows us to capitalize on the opportunities as may arise as well as leverage our borrowing cost. This slide, gentlemen, you see starting with 1998, our first year of operations, till 2025 for a lot number of -- for every single year, if you see, we paid -- we were successful and we were privileged to have paid a dividend and not only a dividend, a cash dividend every single year. So a majority of the years, we have paid 25%, 20% dividend. And currently, our total dividend payout since inception is 521.868%, which probably is a record for our sector in the country. We will take you briefly now to the overall fiscal situation to give you a broad idea of the environment under which we operate, the broad macro fiscal situation. As you see, we have fared much better at the end of Q1 in 2026. Our deficit has come down to just about OMR 25 million. Our revenue has been almost OMR 3 billion. Spending is a little over OMR 3 billion. First quarter, the oil prices ranged about 64. And then thereafter, you know the total geopolitical situation. In the last quarter now for which figures are yet to be released, I think the average oil prices have been much higher. So overall, we see a very strong fiscal position of the country. Hopefully, we'll have a surplus budget this year again. The social and the infrastructure spending is on line. Our inflation is under control. Our financial institution as well as the country's rating has been enhanced. There has been tremendous appetite for Omani debt, both at the corporate level as well as the sovereign level. We have seen tremendous responses for the issues that have been made. The borrowing costs probably are in line or lowest with what you see in the region. So I think on the -- excepting for the a little bit of uncertainty that you all know, I foresee that Oman should relatively perform very well. They remain very stable, and provide a reasonable amount of growth in spite of the geopolitical situation that we see in the region. Gentlemen, now we will take you briefly through our performance for the last 5 years, 2021 to 2025. If you see our income has been reasonably consistent. We have -- this is for the whole year, right? Okay. So our net income has been in the range of about $10 million, about $25 million. Operating expenses have slightly moved up in the last 2 years. We have done a lot of, I mean, training and upskilling. We have added a lot of new talent in various fields. And as a result of that, if you see that we have remained consistent in delivering the results, yes, our hallmark has been a very consistent growth and maintainable and sustainable growth. That's what we have demonstrated in the last 30 years, and we'll continue to follow that policy of sustained growth, and sustainability will be one of our very prime objectives. Our total assets have hovered around OMR 200 million, approximately about $500 million and net worth is around OMR 70 million. If you see the earnings per share hovering around 2025, 12.5% debt equity, yes, very low. And you can see the provision nonperforming loan as a percentage of our total assets is just under 3%, 2.5%, probably, as you know, that this will be probably one of the lowest in the country here as well as in the region we estimate. Now our provisions have been very robust. We believe that lending business is fraught with risks and uncertainty. We continue to maintain our robust provision for -- including for unforeseeable credit losses that could emerge, uncertainties that could come in. We remain -- any lending business remains invested into the clients' business for several decades. It's not that you lend today and story ends tomorrow, it doesn't. And as a result of which we have been served very well with keeping a large provision. Last year, our dividend was 16%. 2024 was 14%. So in the last 5 years, 12%, 12.25%, 13.25%, 14% and 16%. Hopefully, our performance will be marginally better in 2026. So I'm sure barring unforeseen circumstances, we should be able to look at some steady earnings and performances. Income statement, this is for the comparison for the first half year of 2026 against the similar results for 2025 first half. And here, 2026 and '25, we have seen a marginal growth here. Profit has -- income has moved up. Our interest expense is marginally down as a result of which the net finance income is up by about 5%. As per the IFRS -- conservative IFRS model that we follow, we were required to reverse this provision. It was a limit to how much we can have as a result of which we achieved OMR 2,072,000 as profit for the first half after making a tax provision, our profit is OMR 1.76 million, which will give us an EPS of -- which gives an annualized EPS of about OMR 11.2. If you look at the balance sheet for the first half year, we have had a marginal growth in our assets from OMR 134 million in June last year to OMR 139.3 million in the June of this year. Provisions have remained steady at OMR 13 million. That's because of the reversal of the interest suspense that was not required. Net receivables are grown by about 6%. We continue to focus on Prime and Prime plus business. Quality is something that we draw a line and say this is what we want. The deposits with commercial banks are steady at around OMR 85 million. Rest of the numbers are not similar. So our total assets are OMR 213,670,000 against OMR 206 million of year -- first quarter -- first half of the year 2025. Now as we see, it has been our endeavor to maintain a very balanced asset liability mismatch. We do not believe in spite of the deposits that we have, we have very minimal mismatch. And therefore, we do not see any significant impact on account of any changes that might arise as a result of any mismatch that may be there. So our deposits are about OMR 4 million. Bank borrowings are steady, reflecting -- the change reflects the increase in the asset size. Trade and other liabilities are around a similar figure. Unsecured compulsory bonds of OMR 4.2 million. This is the -- including the bond that was issued as dividend in the year for 2025, as a result of which this bond is OMR 4.2 million, represents bonus bonds, free bonus bonds issued to the shareholders. Similarly, this unsecured nonconvertible bonds, redeemable bonus bonds of OMR 4.5 million. This also were issued in the previous 2 years as dividend to the shareholders. So this combined, this comes to about OMR 8.7 million, about OMR 9 million. One of these bonds will be converted into shares in the year 2027 and one unsecured convertible bond will be up for maturity in 2027, which will be redeemed as per the terms on the due date. So this is the -- our liability side here. Equity has remained constant. Our paid-up capital is about OMR 31.5 million. The minimum paid-up capital required is about OMR 25 million over the years that we have -- the bonus shares that we have issued. Our capital is now OMR 31.5 million. We have reached the maximum requirement for legal reserve, which is 1/3 of the capital at OMR 10.5 million. There's a small share premium account. Cash flow hedge represents our cover for the foreign currency borrowing of -- from $50 million -- $55 million. Yes. And special reserve, we have created about OMR 5 million as a matter of abundant, abundant precaution so that in any unforeseen very unique circumstances also, we should be in a position to manage those things. Retained earnings are OMR 15.5 million, giving us a total equity without taking the convertible bonds at OMR 63.7 million. For regulatory purposes, if you add for about OMR 4.5 million of convertible bonds, the capital comes to about OMR 68.03 million. Here are some ratios for you to have a look at. Our yield on the assets. Average yield is pretty steady at around 7.7%. Our interest cost has come down this year from 5% to 4.4%. So we have a healthy margin of about 3.5%. Our NPLs are about OMR 4.4 million. This includes one of the corporate, which went into liquidation, which will be resolved this year. And NPLs as a percentage of assets have come down from 3.55% to 3.22%. NPL coverage stands currently at 404%. And this is the Stage 1 classification. Stage 1 normally means that there is nothing overdue, performing very well, Stage 2 and Stage 3 where amounts to OMR 19 million. So we'll take you briefly to what we believe, how the year will probably pan out for us, the year 2026. We are reasonably satisfied under the current circumstances with what we have achieved in the first 6 months of the year 2026. Our results were satisfactory for the month of July, and we believe the third quarter results will also be in line with what we have projected. We don't anticipate any significant impact on the Omani fiscal budget. We expect there will be a budget surplus this year. And our ratings are -- will probably improve further. We are already investment-grade, and we believe that the ratings will further. So we don't anticipate any issues with the sovereign raising of capital as well as the corporate raising of capital. I think there is -- we believe there's a tremendous appetite from what we have seen in the previous few issues by the banks. So the banking liquidity is more than adequate. We haven't seen any distress anywhere. Banks have been very, very willing, partners willing to lend if we need. So the liquidity position for the company and the system remains extremely well -- we have -- we are on a good wicket here. Our capital structure is good. Our provisions are more than adequate. We have a reasonably large cash reserves. So if we believe or if we can foresee any opportunity, we have the immediate ability, both financial and other resources to capitalize on that. So our only issue is that we will continue to look for Prime and Prime Plus credit. Now gentlemen, I think we have finished a bit early. And if I suggest that -- we're happy to take your questions, kindly identify yourself, your name and your organization, and then you can state your question. Thank you very much. Is everybody able to hear me? Yes. Go ahead.
Sir, my question pertains to the size of your loan book. We had seen some increases during the first quarter of this year. And then now during the second quarter, we have again seen a decline in the total loan book. So what is the strategy going forward? Because we have seen some huge increases in the books of even bigger banks with an even bigger base. So if banks are able to expand at that -- at those levels, and other FLCs are also expanding among similar lines. So what's the strategy with your company? And how do you see the future of your loan book growth?
Thank you, [ Jain ]. I mean, that's a question that, I think it gets posed to us a lot of times. It's not right on my part to comment either on the -- my colleague and my -- I mean, the sister companies in the sector, what their strategies are as well as the banks. We have a vision for ourselves. We have the conviction. We believe what we need to do. We are aligned on this with our shareholders as well as the Board. And therefore, our policy is that we don't lack resources. What we are saying is that we will only solicit Prime Plus customers. We will not go for anything below Prime. We have the ability -- our cost of funds is low, and we have the ability to compete. And therefore -- and above all, what really happens is that even we have structured our business model in a manner that even if we do not lend, we really don't lose because we have the ability to leverage our funds. Yes, we have a lot of funds, but the funds really -- there's no negative cost on those funds, right? I would rather sit with my money than lend where you have to provide. Now without taking any names, [ Mr. Saur ], you would have seen -- we didn't want to make that presentation here of a comparison. But if you see what is the average provision cover that you see. I mean, in many of this, we have seen provision cover -- uncovered provisions, uncovered NPLs in excess of OMR 50 million for some of the companies, which means that literally speaking, and I also have noticed that almost 80% of the gross profit now is the provisioning. So you know what, moment you go sub-Prime is it is a never-ending cycle. It's a vicious cycle that you cannot exit. There was a time we are one of the largest, right? Whenever we see the opportunity, we will continue. But above all, what we will do is that we will do -- ensure that we still pay a reasonable -- make a reasonable profit and reward our shareholders with the dividend. We -- in the sector as well as in the banking sector, if you look at the last 5 years, without going back too much, we are one of the high -- large, what you call, dividend payers. 2025, our dividend was second highest in the sector. So I wouldn't be complaining at all, but that's our strategy. And that's how we define what we would like to do.
Yes. Appreciate, obviously, your strategy. And you're right, credit where credit is due, your book is very healthy, and you have a very big cover. If you allow me, I would like to ask a follow-up question on that. So obviously, how is the market looking in your Prime segment? So because -- please correct me if I'm wrong, but the leasing industry deals by definition with the clients that the banks do not or cannot entertain, and that is why they charge a premium on their services on their loans. So how is the market that -- obviously, now in that segment, obviously, there is a Prime market and there is a sub-Prime market in the leasing sector as well. So how is your market? And if you are -- if you follow your strategy, which is perfectly fine, but how do you see growth remaining within your strategy? I mean, how big is the market?
Actually, you know what, the market size has been, if you look at the leasing market, basically the vehicles, it has now got substantially fragmented because -- fragmented because you have the -- some of the dealers who do their own financing, and they probably pick up very much at the bottom of the segment. What everyone has refused, the dealer might still want to sell and do the financing himself. Then with the disruption that has happened in the automobile market, the market is not what it was 10 years ago. 10 years ago, you know you had 4 or 5 identified dealers whom you go to one of them and pick up the car, you precisely knew who was distributor for these vehicles. Today, there are 145 Chinese brands, right? All market is -- if you ask a lot of people, who is the dealer for this car, most of them may not even know, right? And then what has also happened, we have seen that even a substantial part of the cars now sold, and this has been a very, very definite change in the trend that I have seen, we have noticed is that used cars or preowned cars are now form also a very large portion of the total financed cars. Therefore, what is happening now is that the asset backup is not as robust as it used to be just about 5 to 10 years ago. Today, you go in the market, I mean, you can find money for an old car for 10 years, right? So literally, though it looks like a car loan, it is almost an unsecured loan. We do not have that policy. Now what we have really done with our strategy, as I call it, we have flipped it on the head. There is a belief or there is a lot of worldwide that the finance companies or the building societies in the Western world are -- will lend 1 or 2 notches below the banking. And therefore, we normally deal with the sub-Prime or Prime minus. But that's exactly how we are opposite. We have brought a lot of value to our offerings in terms of service, in terms of pricing, in terms of speed and delivery, in terms of what we offer on an analytical front to our corporate customers as a result of which we continue to attract very, what do you call, Prime and Prime Plus customers. Like, in the individual sector, we will normally have customers who would probably be coming with a larger income, higher salaries, low indebtedness, right? These are the kind of customers who still attracted the fact that we still write -- continue to write business. So on the retail segment, we have not really kind of surrendered. And second thing that has really happened in this market is that now lot of this now car financing, et cetera, has become more and more, what you call, determined by incentives that are paid, et cetera, which as a policy also we like to say, yes, our customers are high net worth customers. Our customers are senior personnel in the institutions, and they would like to deal with us directly, and we've been able to maintain that loyalty year-on-year. Now if you look at the corporate side, right, now in the corporate side, we have customers who have been with the company for 20 years, 25 years, 30 years. So our business is a lot of repeat business. People who prefer to deal with this because we bring value to them. We bring transparency to them. We bring to them the pricing advantage. We bring to them this advantage of speed. Now these are the things that customers appreciate. For example, you don't go and buy a cheapest television, right? You don't admit your child to the cheapest school. So it's not -- pricing is not necessarily a big determinant. A lot of determinant is on what kind of value you can provide. You see, our customers on the corporate side are very large family businesses, large listed companies, very large SMEs. And they -- we are, as a finance company, these customers deal with the banks and Al Omaniya. So this is how uniquely structured we are. This is the kind of brand pull that we have, right? We don't really -- the moment you go sub-Prime, the first thing that happens is your cost of borrowing goes up, right? If you do an analysis, Saur, you will see that Al Omaniya cost of funds is the lowest in this industry. Now if you go sub-Prime, sooner or later, your cost of borrowing goes up. Your cost of borrowing goes up, you need higher yields. You need higher yields, you've got to accept low credit. And that's the natural corollary, right? You cannot redefine what it is. You want higher yields, you go lower down on the credit criteria. And then it becomes a vicious cycle. Then you are -- because you're going low down, you have more default. As a result of more default, your cost of borrowing goes up further, and then you need to lend at a higher rate and so on. There's really no exit. In the sector, in Oman, I'm sure you have seen companies who have fallen into this trap and then taken a decade to recover. How many of these companies have skipped dividend in the last one decade, right? So what I'm saying is that we are on a sound. This is a -- we are a boutique finance house, right? And we'll maintain and continue to have that strategy in place, okay?
Yes, perfect. And yes, I agree with you. Obviously, we have analyzed the numbers and Al Omaniya has both the lowest cost of funds. My next question is regarding your payout policy. So during a couple of years back, you had announced redeemable bonds in addition to the normal cash dividend that you -- that Al Omaniya pays. And then for the last 3 to 4 years, we are again seeing convertible bonds. Now as an investor, as an analyst, we would always prefer a redeemable bond because a convertible bond is a stock dividend at the end that doesn't actually pays anything because your number of shares go up, but then your holding also dilutes by the same amount. So it's a zero-sum game, whereas a redeemable bond gets you cash by the maturity period, which obviously, I can be certain and add to the dividend yield. So is the management considering something on that front?
You know what, dividend policy, one thing is what policy you would like to have, and we have a policy in place. But substantially, dividend policy will be determined and payment of determined by what the regulators finally approve, right? If you see we had 3 issues, '22, '24 and '25, where we issued nonconvertible bonds. And like now one bond is going to mature in next year, we actually will be cash payout. But technically, it's like a deferred cash dividend, right? We understand that. We understand our shareholders' preference, investors' preference too. But substantially, we'll have to govern by finally what the regulators approve. So I think -- so we will have -- we will pursue a policy of a cash dividend, and a dividend paid out in bonds or shares, whatever our Board of Directors approve, and finally, whatever is approved by our regulators. But I understand your point from where it comes, yes. I see a lot of attendees here. Gentlemen, please feel free to raise any questions, any queries, any doubts. We are here, and we'd be delighted to provide you with the answers.
It's now 40 minutes. So maybe we'll wait for maybe a few more, and we can wind up then with the end remark and all.
Sure.
Gentlemen, this forum is -- gentlemen, the forum is still open. And please if you have any questions, kindly go ahead. [Audio Gap] So gentlemen, thank you very much for joining in, and for the question-and-answer session, and listening to us patiently. If you do not have any further questions, we will close this session. Thank you very much.
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