Star Housing Finance Limited (539017) Earnings Call Transcript

Ladies and gentlemen, good evening, and warm welcome to all participants to the quarterly and full year update call of Star Housing Finance Limited. Star Housing Finance Limited had organized this conference call with an intent to share updates and discuss operational as well as financial highlights of the company for the period ending March 31, 2025. On the call, we have the senior management comprising Mr. Kalpesh Dave, Director and CEO of the company; Mr. Natesh Narayanan, CFO; and Mr. Anoop Saxena, Chief Operating Officer. Before we proceed with this call, I would like to take this opportunity to remind everyone about the disclaimer related to this conference call. Today's discussion may be forward-looking in nature based on the management's current beliefs and expectations. It must be viewed in conjunction with the risks and -- risks that our business faces that could cause our future results, performance or achievement to differ significantly from what may be expected or implied by such forward-looking statements. [Operator Instructions]. Without further ado, I would request Mr. Anoop Saxena to address the participants. Thank you, and over to you, sir.

Thank you, operator. Welcome, everyone, to the earnings call by Star Housing Finance Limited for the fourth quarter and full year ending March 31, 2025. We are happy to have you join us today as we review the operational and financial performance for the year ended 31st March 2025 of Star Housing Finance Limited, providing insights for the year. Following the management remarks, we will be eager to address any questions from our participants. Star Housing Finance Limited is dedicated to extending home finance to first-time homebuyers in semi-urban and rural areas, focusing on economically weaker and low income families. Headquartered in Mumbai and listed on the Mumbai Stock Exchange, we serve six states and National Capital Region, which is NCR through 35-plus locations and a team of 250-plus housing finance professionals specialized in low ticket housing finance space. Coming to the performance for the period -- year ending March 31, 2025. I wish to state the following points. Throughout the period, Star Housing Finance Limited extended housing finance assistance to a number of families from the economically weaker section/low-income housing group. Our assets under management have reached INR 520 crores plus marking 22% year-on-year growth. Our asset portfolio is predominantly retail and well diversified across the regions where we operate. The average incremental loan size stands at INR 12 lakhs in semi-urban areas and INR 8 lakhs in rural regions. We have cumulatively served more than 6,500 individual homebuyers in our operational geographies since inception. As our portfolio expands, we maintain our focus on asset quality. Our gross NPA and net NPA ratio as at 31st March 2025 stands at 1.84% and 1.40%, respectively. We are committed to enhance our operational capabilities through investment in human resources, branch infrastructure and technology. Our focus remains on scaling up our asset management -- asset under management through both on-book and co-lending, participations through our strategic collaborations. We executed first direct assignment transaction, which is a testament to our sourcing processing, underwriting and receivable management capabilities. Under the leadership of our Chief Financial Officer, Mr. Natesh Narayanan, Star Housing Finance Limited, has successfully secured credit lines totaling approximately INR 170 crores from various banks and financial institutions during the period. Our core focus continues to remain on providing retail credit access to first time and new-to-credit homebuyers, empowering them to realize their dream of homeownership. With this, I'll now call upon our Chief Operating -- Chief Financial Officer, Mr. Natesh Narayanan to speak on the balance sheet and profit and loss and financial ratios for the period ending 31st March 2025. Thank you, and over to you, Natesh.

Thank you, Anoop. On behalf of Star, I extend you all a warm welcome, and thank you for joining us on this analyst call. For the financial year '24-'25, we secured a total incremental sanction of INR 210 crores from various banks, NHB and financial institutions, of which the INR 40 crores sanction from NHB still has not been disbursed and it's available for use in the current financial year. With this, I also share the full year's performance for the year ending March 31, 2025. The asset under management stood at INR 520.7 crores as of March 2025 as against INR 426.86 crores in March 2024, thus registering a year-on-year growth of 21.98%. Disbursement for the year FY '24-'25 stands at INR 148.6 crores. The total income for the financial year '25 is INR 94.96 crores as against INR 61.64 crores last year in FY '24, a year-on-year growth of 54%. The net interest income in FY '25 stands at INR 32.94 crores as against INR 26.13 crores in FY '24. GNPA as of March -- as on March 31, 2025, is at 1.84% and NNPA at 1.5%. For the period ending 31st March 2025, PAT increased by 25% year-on-year to INR 11.11 crores. During the period, the company received a total sanction of INR 210 crores from banks, NHBs and our various other lending partners. The total borrowings as on 31st March 2025 stand at INR 403.81 crores, giving us a leverage of 2.81x. The liability profile -- the liability plan and the pipeline is robust and strong to support the growth initiative in the financial -- coming -- in the ensuing financial year. This -- I'm also happy to state that this -- in the last financial year, that is FY '24-'25, we successfully closed the direct assignment transaction to the tune of INR 55.83 crores. With this, we thank you all for all the support that you have extended during the day, and I hand over this call to Mr. Kalpesh Dave, our CEO. Thank you.

Thank you, t. Am I audible, operator?

Yes, sir, I can hear you.

Yes. Okay. Thank you. On behalf of the Star HFL team, I extend a warm welcome to all our participants. At Star HFL, we see ourselves as part of the broader low-ticket retail housing finance ecosystem that enables the credit access towards home purchase that is end-use driven for deserving borrowers in economically weaker section and low-income group customer segment who reside in extended metros, semi-urban and rural locations. Alongside banks, HFCs, credit societies and other lenders with whom we coexist, we aim to widen credit access and contribute to the housing for all vision, targeting housing shortage, 95% of which emanates in the segment that we operate. Over the year, we continue to search for new avenues of growth based on demand and remain committed to asset quality and disciplined operations. Our commitment remains steadfast in cultivating a quality AUM book. Star HFL has navigated a challenging year for mid and small institutions across the retail lending space. The year saw a tightening on the liquidity front and also muted activity on the capital market space for such players. However, we have continued to register incremental growth on the AUM front thanks to our strong liability machinery led by our CFO, Mr. Natesh Narayanan and the resultant disbursements. We have also been able to successfully execute our very first direct assignment, which shows our ability to create value from portfolios to create till date. We have stayed good and focused on maintaining asset quality, invested in strengthening the network by addition of quality manpower and continue to search fertile micro market throughout the year. We look ahead to FY '25-'26 with optimism and build the bearings across the balance sheet that would enable scale up as envisaged. In conclusion, we extend our heartfelt thanks to all stakeholders, including the RBI, the NHD, the Ministry of Corporate Affairs, our banking partners, rating agencies, business associates, valued customers, dedicated employees and their families. Each has played a crucial role in the development of Star HFL franchise. As a committed and responsible lending organization, we are dedicated to creating value for all of our stakeholders. Thank you, and over to you, operator.

[Operator Instructions] We have our first question from the line of Ashish Kumar.

I wanted to ask which are your major operational geographies? New geographies, you are planning to expand in this current financial year? And could you throw some light on the direct assignment that we have done in financial year 2025?

Anoop, you want to answer on the new geographies, the geographies that we operate, and Natesh will answer on the direct assignment.

Yes. So aside, I will take the first question, followed by the second answer will be provided by our CFO, Mr. Natesh Narayanan. So in terms of the major operational geographies, majorly, we are as of now, if you look at our data cuts, majorly, we are present in the geographies of Maharashtra. In Maharashtra, we are operating through three centers which are based out of Mumbai, Pune and Bidar, which is a majorly -- regional headquarter is based out of Akola. In an around Akola, in an around Pune and in an around Mumbai, these are our major operation geographies, followed by Rajasthan, further followed by Madhya Pradesh, Gujarat, National Capital Region, which is called as NCR, in and around Delhi and Ghaziabad and Tamil Nadu. These are major geographies wherein we are present as of now. In term of future expanding in terms of geographies, we are planning to go deeper in the geographies of National Capital Region, again, which is a Uttar Pradesh, Tamil Nadu and of course Maharashtra. So these are our new geographies where we are planning up on to go more deeper in terms of geographical presence. Natesh, if you can take the second one.

Sure. So as far as the direct assignment goes, this is our first direct assignment transaction, which is a very normal kind of transaction for large HFCs. But for this specific transaction, this is our first. This gives us a lot of benefits in the terms that, one, it improves our ALM in a very big way. Two, it validates our credit underwriting processes because the counterparty to the direct assignment has validated our credit underwriting standards before the -- doing the transaction. Three, this gives us enough firepower to do disbursements for the coming quarter, that is the Q1 of this financial year. Fourth, of course, it improves our balance sheet in a reasonable -- in a very significant way. So all in all, these are milestones from a perspective. So first, we started with NHBs and we added new lenders. We then did NCD. Direct assignment is one of significant milestones, which will improve the growth prospects going forward as times roll out for this setup. I hope that should be enough. Anything more, I'll be more than happy to clarify.

[Operator Instructions] We have our next question from the line of Ketan Kataria from Ketan Kataria & Associates.

First of all, congratulations, Star Housing team on the strong FY '25 performance. Regarding the announcement plan to list on NSE, could you provide more details on the expected time line and the strategic objective behind this move? Additionally, what steps are being taken to ensure a smooth process?

Kalpesh Dave here. I will answer this question. So yes, we have been telling in our earlier conference calls as well that we intend to transition to the NSE subject to all qualifying criteria is being met. While I'm not the authority to definitely tell you that we do qualify, but we do feel that one of the impending criteria, which is INR 75 crores net worth for 3 financial years. That is something which we were looking to attain, which we have attained given our results that got announced yesterday. And we do feel that at the right time would be definitely this current financial year, which is FY '25-'26, where we should aim for transition. To that effect, we have got approval from the Board as well to explore whether we can see the transition happening subject to obviously all approvals and necessary regulations in place. So just to give you a sense of it, definitely during the current financial year, somewhere maybe in the latter half of the year, we would explore, we would see if we indeed do qualify to get transition to the NSE. And to that effect, we will look forward to appoint a merchant banker and put up a formal application to that, sir.

So what the strategic objective behind this move, you might have -- earlier you might have what -- how it will help the growth of the company?

See, strategic objective, I would say that it's a very natural progression for a listed company on the main board of BSE to get transitioned on to the NSE platform. I think that comes very naturally. And once you move transition, there is definitely more revenues that get available to you. This is what we do feel in terms of capital market activity. And currently, the net worth and the liability position is good enough. Leverage levels are also pretty much modest. But our vision, if you ask me is to have a INR 2,500 crores of loan book, and I'm not giving any guidance over here, but that's what we have resolved in our earlier calls also that in next 3 to 4 years, we should look forward to become a midsized housing finance company with a reasonable presence across major centers in India. So for that raw material is money and to have a good leverage, we need to have a good capital base. So definitely going towards NSE, one may explore raising, having a good capital levels from the current levels. And obviously, that again, all depends on all the requisite approvals from the Board, from the shareholders and from the necessary authorities. But that gives us a good avenue to ramp up the way we have envisaged in our overall interaction with all the stakeholders that we have said. So we are looking forward to it, sir.

We have our next question from the line of Vishal Jaiswal, an individual investor.

I wanted to ask at portfolio level, what is the average LTV on the organization? Second thing, what efforts you have taken for digitalization of the process?

Anoop Saxena, I will answer both the questions. So Vishal, at portfolio level, so as an organization we offer at the time of origination, we offer maximum LTV, 80%, whatever product it is. So in layman terms, against INR 100 value of the property, we offer up to 80%, wherein as per statutory, as per regulatory guidelines, we can go up to 90%. But looking at the kind of segment we are operating in the kind of geographies we are operating at the policy level, we chose to keep loan-to-value ratio at 80%, which is maximum at the time of origination. Whereas, if I'm talking about loan-to-value ratio at portfolio level, then at company level at portfolio level, we are operating at 55% LTV, which typically means that against INR 550 crores AUM, entire AUM of INR 550 crores is secured by way of approximately INR 1,000 crores of asset under -- assets covered as a security. So that is to answer your first question. In terms of -- to answer your second question, in terms of digitization, Star Housing Finance Limited was keen to improve in terms of digitization. During last financial year, we invested approximately 1% of our gross revenue for enhancement of our software and enhancement of our core loan origination system and core loan management system. As of now, Star Housing Finance Limited is 100% at digital mode. That means my customer journey starts at digital footprint without any manual intervention, followed by every sort of verification, every sort of checks and balances, every kind of maker and checker processes. and ends at digitally without any manual intervention. So right now, no company -- if you are invested in the company is able to operate 100% digitally without any manual intervention. And furthermore subject to approval from Board and other stakeholders, we are further keen to invest more in the technology platform. So that is to answer your second question. I think able to answer you.

[Operator Instructions] We have our next question from the line of [ Vikas Kasturi ] from Focus Capital.

Anoop sir, I had quite a few questions. So one is I noticed that the disbursement for this financial year was much lower than what we disbursed last year and the year before that. So one is please throw some light on that? Then the second question is our GNPA numbers have actually gone up again over the last 2 years, and it has also gone up significantly over quarter 3. So again, please throw some light on that. And the next one is, it's sort of an observation and a request that, see, we have been having investor calls every quarter, and we did not have one last quarter. And -- so my request to you is that please for continuity sake, you please have this call on a quarterly basis because it also signals that the company is continuously engaging with us. Normally, what we see is that companies go into a shell when the bad times start, right? So that is when we stop having all investors related to conferences and so on. So to signal that there is nothing happening in the company and everything is status quo and we are improving and growing as a company. So I request you to have this kind of outreach every quarter. And along with it, the presentation that you have put out, you didn't put it out this quarter, but last quarter. Again, I request for some more granular information like, for example, are -- so for example, the previous participant asked the loan-to-value ratio. So you could provide information like that, what is the loan-to-value ratio, what is the ratio of new to credit customers versus customers who come with some sort of CIBIL score and the more granular kind of information. So it just gives somebody who wants to know more about the company more details about it. So this is what I wanted to convey, sir.

Sure. Thanks, Vikas. So I'll take this question. Disbursement lower, yes, definitely, the disbursement has been lower in the current financial year. And that comes on the heels of liquidity tightening that basically was observed. And in my speech also, I have said that there has been a tightening of liquidity that happened in the -- it started in Q2 of the last financial year and well into Q3, Q4 as well. And that tightening was observed not just at Star Housing Finance, but across those players.