Repco Home Finance Limited (REPCOHOME) Earnings Call Transcript

Welcome to the Earnings Call of Repco Home Finance Limited, [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajiv Mehta from YES Securities. Thank you, and over to you.

Yes. Hi, good afternoon. Thank you, everyone, for joining us, and thank you to the management for giving us this opportunity to host the second quarter earnings call. We have with us Mr. T. Karunakaran, MD and CEO; Mr. B. Kannan, Whole-time Director and Chief Development Officer; Mr. Raja, Chief Business Officer; Mr. A. Palpandi, Chief Operating Officer; Mr. Ankush Tiwari, Company Secretary and Compliance Officer; and Mr. Shanthi Srikanth, Chief Financial Officer. Mr. Karunakaran sir will start with his opening remarks and post which we'll open the floor for questions. So over to you, Mr. Karunakaran.

Yes. Thank you, Mr. Ajiv. Good afternoon to everyone, and I'm extending warm welcome to this call to discuss our September 2026 performance and way forward. Thank you for joining. The detailed results are in the investor presentation on our website. So I'm not going to read every number -- before discussing the current quarter -- I mean, September 2026 performance, I would like to go back, I would like to recollect the efforts taken by the company to improve the business in terms of increased their disbursement to increase the AUM to reduce in PA and other stage assets. Technology side, we have revamped our technology side digitalizations we have carried out. We have also implemented a entire digitalization program Actually, we have carried out the digitalization program in 2 phases. Phase 1 consists of implementation of core application and the Phase II consists of supporting applications core -- I mean, core applications, we have implemented and mobile applications, we have implemented. We have also integrated our software with like other software and other civil, et cetera, to improve the turnaround of time. Second thing, we have done a verticalization in our company earlier branch that is responsible for all the activities, which is having its own limitations. We want to take this company to next level articulation is -- or verticalization or specialization is required. We have done verticalization in our company, we gave introduced separate vertical for sales recovery, collections, operations, credit and given sarcastic management. Third, last 2, 3 years, we have opened almost approximately 50 branches across the country to reach out people. This year, we want to open another 12 to 13 branches across the country majority of our branches will be in non -- these are the initiatives -- a few initiatives we have taken in the last 2 to 3 years. The results are now the -- I mean, almost building a the strong base of repo is completed. And now we are -- our focus is growth and aggressive growth, which is savings from the disbursement number -- if you look at our disbursement number since September '25, we crossed INR 1,000 crores disbursement per quarter in June '26 last quarter. Last quarter, we had a lot of -- I mean, transfers and promotion exercise we carried out, which has likely affected over June '26 disbursements. Now all the transfers, what are the transfers we got put in first quarter. All the people are settled down their places. They started to beating the business disbursements are increasing. We have seen substantial improvement in asset quality in terms of production in PA and stage 2 assets. At end of September 2026, our AGM stood at INR 16,425 crores, which is almost up by 9.2% year-on-year basis. Our sanctions as end of the September or the off-year ended. I mean for the quarter in debt would at INR 1,359 crores as against INR 1,205 crores the corresponding year of previous year. Again, our disbursements, we have crossed INR 1,000 crores mark. We have done a disbursement of INR 1,205 crores in September 2027 as against disbursement of INR 1,069 crores in last financial year. Now this is on business side. We have seen substantial improvement in the asset quality. Our gross NPA has end up September 2026 stood at INR 396 million crore as against INR 47 -- INR 475 crores in last September. Our gross NPA stood at 2.4%. We have seen substantial improvement in stage 2 assets also as end of the September, our Stage 2 assets stood at INR 1,054 crores in as against INR 1,334 crores in the corresponding period of the previous year. Our provision coverage ratio stood at 66% -- it's on the -- our performance in NPA side as on asset quality side on last -- I mean, September '26 -- our book remains well diversified. We have not seen any change in the salary -- significant change in the salary and HL versus non-HL. Our book is well diversified. As end of the September out of total book, Saldi class accounted for almost 53.6% nonsalaried -- sorry, onset it account for 53.6% and salaries accounted for 46.4%. The mix of home loan as a home equity remain confident. So out of total AUM, 71% of our book is housing rooms remaining is a non-HL. -- of course, 29% is a noner. The entire AM is retained. Right now, we don't have any exposure to builder. The average ticket size is incrementally, it's about INR 23 to INR 25 lakhs. And about our overall book, it is about INR 14 lakhs almost 57 percentage of the book is coming from TN remaining is from non-delegated steps to initiatives to improve the non-TM book. Going forward, I'm expecting books from other states will increase. Coming to the borrowing side. Last year, we started diversification in liability sites. We have done in NCDs, CP and PCs. Our borrowing cost as end up the September that overall borrowing cost stood at 8.5 out of total borrowings almost 86% of the funding is coming from banking system. It's, of course, not depends on 1 or 2 banks. It's spread across almost 19 to 20 banks. 7.2% of the funding is coming from National Housing Bank by way of refinance. For current financial year, National Housing Bank has sanctioned INR 600 crores refinance facility to us. Out of INR 700 crores. Q1, we have taken INR 106 crores. And Q2, we have taken INR 125 crores. The remaining amount will be utilized based on the deal NCDs and PTC is accounted for almost 0.7% of our total borrowings and Repco Bank funding is about 1%. During the Q2, we have raised 70 mega funds through a way of issuing commercial people at the rate of 7.6%. We then passed through certificate also in September. It's a pass-through certificates with about INR 74 crores. The cost of funding of cost through certificate is about 7.9 percentage. These are the from borrowing side. Coming to the profitability. Cost of end and told you stood at 8.5 million Return on assets, it's about 11.83%. So we are maintaining a spread of 3.4%. Our benchmark rate or the used to palm lending rate. Our minimum lending rate is about 9.9% depending upon the [ Boros ] risk profile on the interest rate very -- the average yield what we are getting from Saudi plus customer is about 11.25%. And from non-class customer is about 12.7%. The return what we are getting from housing loan portfolio is about -- average this is about 11.7 in -- we are getting -- you talk about 13.32% from nonhousing loans. This all -- our performance in spreads and NIM. Our NIM stood at about 5.4% -- 5.44% as of the November. Coming to profit. Our net profit for the quarter is about INR 116 crores as against INR 114 crores in the previous quarter. Last September, our profit stood at about close to INR 106 crores. ROA at end of September was about 2.9%. It's almost stable. Even June quarter also, it's about 2.9%. ROE is about 12.5%. We are having a strong capital adequacy ratio. Our capital adequacy ratio is about -- close to about 37%. We are having adequate capital to grow. Also, we have accelerated the disbursement. We have taken a lot of initiative steps to improve the disbursement. Our sourcing -- we have increased our sourcing channel. We have recruited a substantial amount of -- and we have introduced a connector model DSA channel also we have increased. So going forward, our disbursement will go up -- we are also some controlled our BT out last con call, as I said, we are going to sacrifice some portion on spread to retain the good customer. We control the BT out -- these are the from profitability on the other side. Our credit cost stood at 0.1% as compared to negative in the previous year. Coming to the branch network, right now, we are having 242 branches across the country, including Sat center. This year, we want to open another in to put in branches, majority of the branches will be in non-T -- these are the about performance in Sure. I'm very happy to say that our Board has approved an interim dividend of INR 5 per share, the base value of INR 10. Going forward, lost my con call, I had given you guidance of for disbursement of 1,200 crores for September. And I said we want to bring down our NPA to below, I mean, March level. Yes, we have done. September, our disbursement, we have crossed a disbursement of INR 1,200 crore mark -- and we also brought it down our NPA to INR 398 crores from INR 426 crores as end of June 20 okay. Six -- going forward, our priorities will be acceleration in disbursement. At the same time, we want to maintain quality in the asset for the growth, we will not dilute the it.

Got it. And how is the October quarter? What was the disbursement that we did in October.

Yes, the disbursements are in line with our expectations. I said for this current quarter, we want to do a disbursement of INR 1,030 crores INR 350 crores. It's October. October disbursement as well as disbursement till day give me confidence that we'll be in a position to achieve the number what right now, I'm just not committed. this year, what are we expecting in terms of credit cost? And what do you think See, our June NPA was about INR 427 crores, which we brought it down to INR 97 crores, we got, of course, a reversal in the provision. But as a matter of prudent, we have not done any reversal. We have appropriated to other NPE accounts. Going forward, current quarter as well as next quarter, I'm expecting charging to the provision to the extent of INR 5 crores to INR 6 crores in P&L and this is on our provision side. However, profit for the current of year, our profits stood at almost INR 230 crores. I'm expecting a profit for current financial year in and around close to about 490 to -- INR 480 crores to INR 490 crores.

Very helpful and good luck for the remaining quarters and very heartening to see that you've achieved your guidance, which you had given out of INR 1,200 crores of disbursements. So congratulations to the entire Repco team and wish you were happy to win happy that dates and good luck for the balance quarters of the year.

We'll take our next question. We have Mr. Abhijit Tibrewal of Motilal Oswal. Abhijit, you can work with your question?

Sir, just 2 things. One is, you just gave out -- you just spelled out the guidance on disbursements for 3Q and 4Q I think that's a very heartening thing to hear the numbers that we are targeting in terms of newer business in the coming quarters. But I just want to pick your brains on 1 thing. I remember asking this to you same time last year as well that -- in the past, we typically used to have 3Q disbursements, which were lower than 2Q than last year, I remember, we marginally in stock from where we were disbursements were marginally higher than 2Q last financial year.

This year, I think we are talking about a very good increase from 2Q levels. So that is the first point that what used to be there in the past, which didn't allow us to do a lot of business in -- and what has changed now, which is giving us that confidence. And then again, on the fourth quarter disbursement guidance that you've given out, I think, I mean, again, very heartening to hear very strong business aspirations and targets that you put out.

So in addition to what you spelled out in your opening remarks, which is this additional DST hiring connector channel -- so what exactly is giving you confidence that we'll be able to deliver the numbers that you just spelled out? And lastly, -- if I look at the OpEx this quarter, it was, I think, slightly elevated. So unless you've covered something in your opening remarks, which I missed because I joined all late for the benefit of all of us, if you could let us know what led to OpEx being slightly higher than what was expected.

Yes, I'll answer second question. First, Pass in, my colleague, Mr. Raja will answer.

Yes, slightly our OpEx is slightly limited compared with June. With that June, our disbursement number was we have not achieved the target. We set a target of -- internal target of close to about INR 1,000 crores disbursement for June quarter, but we have done about. 43 crores. So we have not paid an incentive for the first quarter. So I told my people that you increased the disbursement you increase the business, you will recover more -- so we'll pay for the incentive for the June quarter along with September. Yes, our people have done a good job in terms of both in terms of disbursement new bookings as well as reduction in NPA reduction in Stage 2. So I paid an incentive. That is 1 of the reason for increase in the salary cost -- number 2 is last quarter, we have done a top provision for retirement benefits funds like graduate and catchment bival basis. based on our experience. This quarter, we collected actual valuation for both gravity as well as a legend catchment. We have provided more -- of course, we have invested in staff recruited brand sales manager, I mean, recovery people for to improve their performance. which resulted in increase in salary cost. Number three, we have given annual increment we have given to all the stock, which is based on purely performance. Which will vary from 5% to 10%. These are the reasons for increase in salary costs coming to the administrative cost marketing expense. DSA payout because disbursement number is gone from INR 800 crores to INR 43 crores to INR 1,205 crores disbursement became -- our disbursement numbers has increased. So sourcing costs also slightly increased. This cost-to-income ratio is stable at this level. Coming to.

Yes. So I will take the first part of the question. On what is the difference that we have done in Q3 and Q3 why the trend is broken now or bridge now. It was through organic development value we had invested quite amount of efforts on building their channels. So now we have an independent sales channel independent credit channel. So now there is no overlap of responsibilities. And hence, the concentration and focus on business is good. So that is the change that has happened and that is the confidence that we have been saying that. Yes, I'll be doing more than by Q2.

Yes, that answers my question. Just 1 more thing I wanted to understand is now that we are in a rising rate environment already seen a 25 bps report hike. And there are potentially more which might come in the subsequent ones. What is the sensitivity of our cost of borrowings to, let's say, 25 or 50 basis points rise in the reports. So basically, what I'm trying to understand how -- what is the mix like between fixed and floating in our liable. And likewise, on the asset side, have you taken any PLR actions? Or are you contemplating anything? So subsequently, what impact we could see in the margins in the coming quarters?

Yes. Coming to the mix liability side, our entire liability is floating, except. Some few amount of what we have taken from National Losan, which is a special scheme, it's a special rate. Barring that, our entire liabilities on floating side -- floating rate. Coming to the asset side, our entire asset is fixed or floating. We don't have any fixed kind of loans in our asset side. And the entire asset is subject to repricing of once in year 3 months the time lag of 3 months, I can pass on to any decrease or increase to my moreover. At the end of the September, cost of fund is rooted. -- overall, I'm talking about overall cost of fund. It's stood about 8.35%. Yes, post or rate hike we have seen increase in our borrowing costs. Going forward, I'm expecting cost of fund may Gobby, at least 10 to 15 basis points. I will pass on this increase in cost of funds to my borrowers with the time lag of about, say, 1 quarter 1 quarter? On the side, the refinance, the agent INR 600 crores refinanced to us. I have already taken about 106 in first quarter and 225 in second quarter remaining more based on the funding requirement, I'm going to avail.

What other increase I'm going to experience in cost of funds will be passed on to our borrower with a time lag of about 1 quarter. Second thing, control the BT out. Attract the good customer I mean return and quality will not come together to retain a good customer, we got to pause some concession to them. Those who are with us for at least 2 years, having good track, good track record, good SIBIL score and having a thread of moving out of our company, we need to pass on some rate benefit to them. So keeping all those things in mind in near term. Right now, I'm maintaining as reduce closed about 3.4%, keeping this borrowing cost increase and giving the benefit to the existing customer to harness the BT out. many, I was -- my spread is stable at in and around 35.3% Thank you so much, and I wish you and team Repco the best.

Moving to our next participant. We have Vinod Vias of Share India.

Just 1 question from my side. because major for exposure in South. So are we facing any stress in the housing loan out specifically in Karataka Beads. -- the demand -- and no, we have not normal. No, we have not any experienced any stress. Of course.

We have seen improvement in disbursement in Karnataka. Q1, our disbursement in Karnataka is slightly below the normal disbursement -- for Q2, we have seen improvement disbursement in Karnataka, but we are not seeing any stress in South. So in current month, I'm going forward also, you were saying no stress, right? No. We have not seen any kind of stress in so...

Thank you, Vinod. We'll take our next question. We have Harshit Toshniwal of Premji Invest.

I had a few questions first. One, obviously, if I look at the last -- for 5 years for repo. -- challenge has been more on the growth we itself that I think and probably how to exactly if you can help us articulate that what were the changes that the growth is now seeming a bit more that you guys are sounding a bit more confident on that number. at INR 1,300 crores, INR 1,600 kind of a number. So if you can double-click that, say, have we upgraded some of our technology, the incentivization of sales team as a channel, if you can also help how can that be a reasonably stronger growth we were -- so just to gain confidence on that beach itself -- and the second thing is, sir, more we see in September, we saw deputation change from Repcobank. Senate or went back within a very short period and commenced come up -- now just wanted to understand that does this also align with now Repco Bank being aware that in the last 4, 5 years because of many reasons would be lower spending on take a bit of urea the growth was -- I think the reform finance was not able to grow to its potential. And are they acknowledging those things and working towards a much -- to other potential of where content can improve. I just want to understand the depreciation and the process of the repo bank with a respect to their how deepen and subsidiary. And obviously, the first question is more, what gives us that confidence of the numbers which you are saying for focus like I mean more not adjusted guidance, but what are the processes that are giving us that confidence?

Mr. Raja will answer first question, on business side. Mr. Raja?

Yes, I'm that Yes. See, all the points that you mentioned, whether you have done, I would like to say we have done all those points like we have developed our sourcing team. We have developed our DSA channel. We have developed our DST channel. Now the branches are more confident in picking up the cases, our processing team has helped us through -- so there has been a lot of changes in the process, also in the systems. The systems also we have bought into that LMS has now stabilized, and we are also having and we are in the process of giving a mobile app to my sourcing executives. So we have got into the track of getting things done through technology and also consolidating on the sourcing channels and increasing our penetration. So that is what is giving us the confidence and competing numbers. And that number is -- that growth is showing in the numbers, whatever you are pursuing from your side thankfully.

In addition to that, we have also -- I mean, revamped our entire insti structure. We have introduced a special incentive for improve the sourcing channel. With us all initiatives taken by the management, I'm confident that we'll be in a pushing to achieve the disbursement numbers. Just now I have given as a guidance for current quarter as well as next quarter. Coming to the deputations. Mr. Raja reputation, I mean, reputated from ecobankfor the company for insurers. Almost he's completed about 2.2 and close to 2.5 years. I guess it doesn't really acknowledge its performance has done a good job in recovery side. Since Ecobank is need services, -- so they win depreciation from our companies. They posted Mr. Karan also expert in the recovery and. I mean important portfolios in RefcoBank and added a few -- I mean, big branches in RepcoBank. No specific reason for -- with the drawing repetition of Mr. It administrative. It's a rote in nature. I hope I answered the question.

Sir, we don't see his connection in the queue yet. we will move to our next participant. So we have Saikiran Pulavarthi an individual investor.

Congratulations on good set of numbers, sir. Just 2 questions, sir. What helped a sharp improvement in the asset quality, both on the gross probably on the Stage 2 assets as well. What has helped you to achieve this point number one. And the second question is like -- thanks a lot again for increasing the dividend payout, how 1 should think about the dividend payouts going forward?

Yes. From recovery side to improve the asset quality, because we are taken a lot of steps. We right now we have areas my initial -- I mean, initial call, I said, we have introduced a vertical action system in the company. particularly, we are having a separate vertical for collection of, I mean, words, even NPAs also, we are segregated into soft NPA or -- we have signed with responsibility growth and responsibility. We fix the target for our team, which is really us to improve our performance in recovery side. and we brought it on from NPA to below March level from almost INR 425 crores in number -- June level. Coming to this.