Bank of Maharashtra (MAHABANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Bank of Maharashtra Q4 and FY 2025 Earnings Conference Call. We have with us from the management, Shri Nidhu Saxena, Managing Director and Chief Executive Officer; Shri Asheesh Pandey, Executive Director; Shri Rohit Rishi, Executive Director; and all general managers of the bank. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Shri Nidhu Saxena. Thank you, and over to you, sir.

Thank you, and good afternoon. Thank you for joining this con call. And I'm very happy to share that we have ended yet another financial year very successfully where we've been able to showcase and maintain a consistent growth across all parameters, whether it is business growth parameters, asset quality, profitability, capital adequacy, efficiency ratios and so on. I will quickly share with you the highlights of it. The total business has grown by 15.30% year-on-year and has reached INR 547,000 crores. Total deposits increased by 13.44% to INR 307,000 crores. Advances increased at 17.76% to INR 240,000 crores. NPA has declined in the bank to 1.74%. Net NPA also reduced to 0.18%. PCR is maintained at 98.3%. Our operating profit has grown by 14% to INR 2,520 crores for this quarter, and for the full year, it is 16% year-on-year growth. Net profit has increased by 36% and it has reached for full year at INR 5,520 crores. NIM, against this challenging environment where some lenders have been experiencing or at least claiming that they would be seeing some NIM contraction immediately, but we have been able to maintain and rather NIMs year-on-year were improved 8 bps and full year NIM stands at 4% now. And Q-on-Q, we have improved our NIM by 4 bps and we are maintaining that high NIM of 4.01% for Q4 as well. The ROA stands at a healthy 1.75%, which is a 25 bps increase over the last year. The CET1 capital adequacy healthy 16% around. CRAR is healthy 20.53%, LCR at 127%. Our Government of India holding has been reduced during the last financial year where we have done a successful capital raise and the same has been brought down to 79.6%. My other cost to income has come down again, 22 bps year-on-year and stands at 38.5%. Yield on advances has improved year-on-year 16 basis points, stands at 9.3%. Recovery, it has been a good year for the bank in terms of recovery, and we have achieved what the number of recoveries that we had planned for the bank. Our write-off recovery performance also has been fairly good. As regards to the segment-wise growth, the RAM segment has seen healthy growth. Within the RAM, retail grew by 25% year-on-year. Segment-wise, home loan also grew 30%. Our other focus products, car loan grew by 47%. Gold year-on-year grew by 56%. Corporate advances to wherever we are getting good income earning opportunities, we are present there, we are maintaining a RAM corporate ratio of 62.38% for March '25. And corporate book also grew year-on-year by 15%. Stress in the loan book has been managed well. We have seen improvement here as well. 129 bps reduction in the overall stress number of the bank from 4.71 to 3.42 for March '25. Stress in accounts above INR 5 crores have been standing at 0.11. SMA-1 plus 2 is a mere 2%. Lot of strategies were put in place in the beginning of the year, which have actually helped this sustainable growth of business in the bank. We have also seen that the core business coming from the branches, the retail sustainable portion of business have also grown up in the bank. We have seen that the dependence on pool buyouts and direct assignment transactions also have been kept under control and wherever. For strategic reasons only, we have gone ahead in entering into these transactions. So despite a degrowth in pool transactions, we have seen our advances overall has grown at 18%, and the satisfactory part of this growth is that the sustainable -- the core portion of the business has grown in the bank. Branch opening, we have been -- one distinct bank who have been opening branches over the last 3 years. Some 500-plus branches has helped the bank to have its presence across the major districts of the country. Going forward, we have approval from the Board to open 1,000 branches in 5 years at the rate of 200 to 220 in the next 12 months. We are also taking help of an external expert to formulate revised strategy if so felt in terms of branch expansion that is going to happen in the bank going forward. We have also been approved of a GIFT City license for opening a IBU and GIFT City, Gandhinagar, and the project is being taken at a fast pace, and this one enabler will open new opportunities for the bank, which will be only helping us give more benefits to the bank and also our clients for who, for some of their existing needs, were actually going to some other banks to fulfill those. So this GIFT City IBU will also ensure our global presence, and this will happen a reality within this financial year. All the IT, HR and other segment requirements have been assessed. There have been -- steps have been taken to see that these are getting available so that the project is seen on track as soon as possible. While we are growing our business, we have also been very mindful of the assurance function, the governance, the risk, managing risk of different natures, including technology risk. And lately, we have been onboarding talents. Wherever the internal skill sets were not available, we have gone for these domain experts recruitments to strengthen the technology structure, to strengthen the risk in the governance structure in the bank. So there is a strong understanding that if the bank is to grow in a sustainable manner, the risk governance and assurance functions need to be strengthened and which have been very consciously done. And we have onboarded a lot of senior level skill sets in the bank to help support the bank in growth and sustain this growth in times to come. I think I will take a pause here and take your questions. Maybe some other critical numbers you may like to further ask us or any other questions, they are most welcome. Thank you.

[Operator Instructions] The first question comes from the line of from Ashok Ajmera from Ajcon Global. Mr. Ajmera, if you have muted, please unmute your line, and go ahead. There is no reply from the line of Mr. Ajmera. [Operator Instructions] The next question comes from the line of Jai Mundhra with ICICI Securities. Please go ahead.

Chair, congratulations on a steady and strong set of numbers. I have 2 questions, sir. First, in the growth that you mentioned, you also talked about that you have strengthened the assurance function. I wanted to check, sir, of this growth, is this 100% delivered by branches? Or you have some tie-up with the DSA or loan originator or this growth is entirely done by the branches itself?

So I did mention about it. Let me further elaborate. We have, as I said, 500-plus branches and the new business that is coming into the bank, it is mostly from my existing set of branches and these new branches, which have been identified to be opened in potential growth centers. They are contributing in a significant manner to the bank's business. And the focus in the last full year, in fact, for the last 3 quarters, the way we are reviewing our zones, the field functionaries, it was amply clear that the bulk components of business are handled by the head office, corporate office centrally, but the zones in the field are ensuring that each of their branches are functioning at their optimum level and getting both the assets and the liability business that is available in the periphery or in the geography of the new branch or the existing branch that is opened. So with that clear focus given to our feel functionaries in the review, the impact, I will share a small data with you, which will indicate that how the business that has been growing in the bank has been more from the branches, which is the core and the sustainable one. So taking, for example, our NBFC relationships and the pool buyout and direct assignment transactions. So in the previous years, we have been experiencing some year-on-year growth in this contribution coming from the tie-ups with the NBFC, whether through pool or direct assignment transactions. But FY '25 whole year has been the first year where there has been a degrowth in pool buyer transaction by minus 7%. And despite this, the advance, the credit has grown by almost 18% in the bank. So that strategy has worked and the branches have been given a lot of enablers from head office to help them source new business. And as regards to your question on DSA, we are very, very conscious and considering that what loan book that is going to get created about the quality of it. So we are mindful of the quality and the underwriting benchmark standards. We have, in fact, in the last year, strengthened our underwriting standards and have said that below a point of, say, credit score for an individual segmented borrower, there is no underwriting permitted in the entire bank. So while that was a tough call, but we had seen that the right enablers gone from head office, the growth has not gone down. We are growing and maintained the growth and this growth rate is already -- is only improved. But the satisfactory part of it is that the growth and the quality of loan growth has been insured with the stricter underwriting standard. So to answer in one line, there are no aggressive DSAs and acquisition strategies. It is my own core branches where we have complete control and asset quality is of supreme importance. I don't mind achieving a level of business in, say, 1 or 2 more quarters, if I take. But definitely, there is no compromise on the asset quality at any point of time.

Right. Sir, what is the outstanding of this pool buyout, which has declined just to get a sense? Out of your INR 2.36 lakh crore loan book, how much is the outstanding pool buyout?

Yes. Amit, you would have those numbers ready with you. Can you share the numbers?

Sir, as of 31st March, pool outstanding is INR 12,998 crores as against INR 14,045 crores, March '24.

Okay, sure. Secondly, sir, on your benchmark, what would be the share of loan linked to EBLR, MCLR, fixed rate and other benchmarks?

So from my loan book, 37% portfolio is linked to EBLR and 57-odd is what is linked to MCLR. You would see a distinctive factor that there has been 2 rate cuts. I'm not operating out of the system. I also would be affected going forward. I'm sure impact is going to be felt by us. But the way we have managed our business mix, and there has not been the full quarter impact for the large rate cut that we have seen. But if you see that NIM, in our case, actually, for the last 3 quarters, the number was 3.97%, 3.98%, 3.99%, and we have crossed to 4.01% for the Q4. So we have always been mindful of the not only quality but also the pricing aspect of it. So top line growth has been driven in the bank very consciously to see that how it is impacting my bottom line. Some of the businesses where we were seeing that there is no contribution to the bottom line, even sometimes due to competition where we are giving some -- we are required to give some concessions, are we able to keep that relationship profitable by taking some ancillary business from the same set of borrowers. If those were not happening, some segments we have not taken exposure or exited. Like, for example, we have a Board-approved product where a T-bill rate we could have built some portfolio. But we decided that whatever exposure we had, that T-bill rate product today as of March '25, the exposure is not there. It is zero. So that's how we have been driving business consciously that not only top line but bottom line also how each and every ratio quarter-on-quarter is maintained in the bank.

Mr. Mundhra, please rejoin the queue for more questions. Next question comes from the line of Ashok Ajmera with Ajcon Global.

Compliments to you, Nidhu sir, Asheesh ji, and Rohit ji and, of course, Amit ji, the GM, in advance for the fantastic results quarter after quarter and year after year now for last 2, 3 years, 4 years. And if you look at the -- I mean, on all the parameters you have performed well. I mean, the CASA which went down to 49.28% in December, which used to be always above 50%, has again been brought up to 53.28%. In this scenario, having this kind of CASA is -- I think you are the only bank maybe who is having this. Even on the credit front, and I mean, on all the parameters, sir, the result is fantastic. Compliments to you for that. Having said that sir, I have got a couple of observations and some questions. Since we have noticed that the growth at the end of the year is good, whether it is a deposit or advances, but the major growth has come in this quarter. That is the January, March quarter. If you look at the advances, of course, it was like very small in the first 9 months, I think. Even in the deposit also, only 3.5% in 9 months and 10% down this quarter only, similarly in the credit also. And if you look at further breakdown, sir, the savings deposit have gone up only in this quarter itself by 14.78% and the current account has also gone up 31%. So whether this kind of growth which has come only in this January-March quarter finally is sustainable? Number one. Number two, is it going to be the pattern for the next year also that you are a little bit down in first and second quarter and then you pick up in the third and fourth quarter? So what is the -- your comments on that? Because it is something, which is very, very unusual that in 1 quarter only, you have grown so fast and whether it is going to be sustained. So this is my first question, sir.

So Ajmera ji, thank you for your noting the performance in the bank and the consistency in the performance. As regards our feeling regarding the growth happening only or mostly or majorly in the last quarter is not something very unusual in terms that you will see that Q1, Q2, Q3, Q4, in the entire industry, if you would have -- look at the data at the industry level or even at the individual bank level, you will see that the Q4 is the highest performing quarter for any bank for any matter. Now there have been some macro events we all have known about. So some -- maybe if it's the Maharashtra general elections -- Maharashtra state elections or elections in some states, and as we have robust kind of relationships at the government and the institutional business that we are commanding in Maharashtra, in outside Maharashtra and many states. So with these kind of macro events beyond the control, you would have also read that wherever we have relationships, it was a news item that the state had released 500 GRs in the last 3 days of the financial year. And out of that 500 GRs, 300 GRs happened on the last day only because that's how the election activity had delayed the disbursement of funds. So these kind of events do impact that you will see sometimes more than unusual. This is something more than unusual. Every year, you will not find elections happening, so this is one-off kind of an event. But let me tell you, when we are reviewing our branches and zones, as I mentioned earlier, the focus is entirely on the core business that the zone and its set of 60, 65 branches are going to generate for the bank. As regards to the institutional business, my vertical heads in corporate office, in central office sit and plan for that kind of business. So our focus is 100% on the core and which is a sustainable business, number one. And our focus is also on the average business because when we are reviewing the second part, critical in our review mechanism, review format of our field is that what is the average business. It is not the terminal business basis which we are only reviewing and ending. It is the average business. If it is the average -- it is advances, the average advances in that quarter, 90 days because concept given to the field is very clear, if you are doing business for the last 1 week or the last terminal date does not advance -- will not need to have the bottom line contribution. If we are 90 days earning advance only interest only for 7 days, for 3 days, that doesn't add to my bottom line. But if you see that even the bottom line parameters have been correspondingly maintained. So I think it is not true to us that it is majorly only in the last quarter that things are there. If I quote the numbers, my average advance has been growing at the rate of 18%. My average deposit in the bank has been growing at the rate of 14%. If you see the terminal number, the terminal number and the average number is the same. So average advances, we are always excluding the quarter end numbers and when we are calculating this figure. So I think, Ajmera ji, that answers your question.

Yes sir, yes sir, very-well answered. Sir, one question is a little observation is on the restructuring of the standard advance, which has gone up by, I think, INR 439 crores only in the corporate book. So can you throw -- would you like to throw some light on this, that INR 439 crores in the corporate book, which has gone to the restructuring of the standard advance. What is the nature of this? Is it 1 or 2 accounts or it's a multiple number of accounts?

Sankpal and Srivastava, would you like to respond to that?

Ashok ji, it is only DCCO extension so nothing alarming there. Only because of DCCO extension in 2 accounts, that number has gone out.

Both are, sir...

In 2 accounts?

Yes, yes, only 2 accounts.

Another is state government.

Yes, one is a PSU and the other one is state government account. So...

And both are infra projects. Due to land issues, the DCCO got extended.

Okay. Sir, on the capital raise, you have got the approval of INR 7,500 crores for the QIP and INR 10,000 crores for the long-term bonds. So what is the plan, sir, there, as this rate of the stock, which in spite of the good result today has also not yet responded, which I feel would do? Would you be comfortable to immediately coming in this quarter, this April, June quarter for the QIP or a part of it?

So Mr. Ajmera, when we begin our financial year, we make our assessment of the capital requirements for the full financial year. So this is a process being the beginning year of Board meeting, the first of the Board meeting, along with results, we have moved this paper. But there is a process that will follow after this. We have to go to shareholders' AGM and then government and get the approval. Once the approval is done, our process is complete. We will then be taking a call what mode will be used and at what time opportune. That call will be taken during the course of the year. And one of the motivation with us is that since we have -- we are currently at 79.6% of Government of India holding, the SEBI requirement of 75% is not a difficult milestone to be achieved. So definitely, we will be looking at the right time, right mode and taking our decision during the year.

Mr. Ajmera, please rejoin the queue for more questions. Next question comes from the line of Pinaki Banerjee with AUM Capital Private Limited.

Congrats on the good set of numbers. Sir, just a couple of questions. Regarding your loan portfolio, the maximum exposure is towards the infrastructure sector. So actually, can you segregate what type of companies this exposure is regarding infrastructure, what is the types of companies the loan book is?

So see, our -- overall, if you see my business mix and the guidance that we had kept for ourselves was to maintain RAM corporate share of 60-40 and plus/minus 2%. And along with all other parameters, we have actually achieved or surpassed our guidance that we kept for the full year last year, including this when we closed our year at 62-38. So the important part is wherever we are seeing the opportunities emerging, we will definitely participate and opportunities which are profitable for the bank, so adding to my top end and also my bottom line. So in the sectors where we are seeing traction, whether it is road HAM model, whether it is renewable energy, whether it is LRD, so these kind of areas, we have been bullish on and we have been taking our considered calls in participating in new opportunities that are coming. Amit or Rishi ji, you would like to add if anything in this?

To be very specific, our additional exposure has come mainly in renewables or in HAM...

Okay, okay. And my last question is like now in the falling interest rate scenario, sir, actually, you are expecting a fall in your NIMs, net interest margin. So actually on a conservative basis, how much are you expecting to report, like from current 4%?

So if you see that my entire last year, we have been indicating our guidance for NIM. And quarter-on-quarter, we have been performing beyond and against my NIM guidance of around 3.75% to 3.85%. We have closed the full year with 4% and Q4 at 4.01%. But while I have outperformed my guidance, I am mindful that there have been 2 rate cuts. My 37% of loan book is priced to repo interest rate loans and where I have to pass on the benefit immediately. During the year, yes, we had occasions where we had reviewed our MCLR. Around 30 bps of MCLR was increased in various buckets during the year. And repricing in some of those assets is also happening now. Still 1 or 2 more quarters to have that reset date reaching for those accounts. But yes, going forward, the accommodative stance given by RBI, I'm not operating out of the system. So we are again going to keep a conservative guidance for NIM for the next year at 3.75%. And if we see aggressive rate cuts, maybe like other banks, we may be also taking a conscious call to review the guidance. But as of now, after achieving 4% and maintaining this level of 3.95% to 4% for the past 4 quarters, 3.75% around is the guidance I'm keeping for myself for the next year.

Next question comes from the line of Darshil Jhaveri with Crown Capital.

I'm sorry, I was disconnected in the line so some questions of mine might be feeling repetitive, sir. So sir, just when we talked about NIMs right now, so any kind of guidance you want to give on what our advances and deposit growth would be?

Yes, sure. So the guidance for advances, we are keeping at around 17%. For deposits, we are keeping around 14%. And when we talk of deposits, our focus always comes to the low-cost part of it. CASA will be maintained above 50%. So that's the conservative numbers, the conservative guidance I've kept for myself and we will try to keep performing beyond that. Those will be the efforts but this is the guidance for the numbers you asked.

And sir, any sort of guidance on ROA, GNPA, credit cost, that would be really helpful, sir.

Yes, sir. Sure. So ROA, we have achieved 1.75% for the full year. And my guidance for ROA is 1.75%, we would like to maintain for the next year. GNPA has again seen a reduction, has come down to 1.74% but guidance is to maintain it below 2% and the credit cost to maintain below 1%.

Okay, okay. Fair enough, sir. And sir, now I just wanted to know with our expansion in branches that we are planning, so how do we see cost to income going forward? Like are we -- you said we are hiring also a bit more talent. So any sort of like what do we see in the OpEx side for us?

So Mr. Jhaveri, if you see the cost to income that we currently had closed our financial year, it is 38.5%, which is, again, when we compare and look at peers and other banks in the industry, including the private banks, we are the best in the industry in this parameter along with some other 20 parameters that we are every quarter comparing ourselves with. My cost to income has gone down by 22 bps year-on-year. But yes, with the new branch opening, this OpEx is bound to increase. But what I have seen that with the new incremental business revenues that we are generating, we are able to also find some traction in the income-contributing element of it. So cost to income, despite my aggressive branch opening of 500 branches in the last 3 years, we have not allowed it to go up. And the incremental revenue is actually helping us to sustain the cost to income within limits. The guidance, again, for cost to income is to maintain it below 40%. And currently, I'm at 38.5% which is again to maintain below 40% is again among the best in the industry is what I perceive it as.

Fair enough, sir. That's great. Sir, just last question on my end, sir. On the ground, like how are we seeing the demand right now with -- I think people are expecting a good monsoon and there has been tax cut by the government. But are the sentiment like good on the ground? How is it going? What's the reports that you are seeing? Like I know you're guiding for a good growth, but is there like -- how do we see the economy panning out? And is there a possibility of some stress coming or just how do we see in general?

So I think India growth story and despite tariff concerns coming lately, and we are seeing that world markets getting impacted in a particular way. Also, we keep listening that maybe in the long run, all these disruptions may benefit India in the long run. So definitely, whether some of the entities have changed the growth estimates for the country, but still, there is no iota doubt that country remains as to be one of the fastest-growing emerging economies. And with the economy in the country growing, we are directly linked. Banks are directly linked. So I don't see any major challenge as such. Yes, there are disruptions that are happening, but there are a lot of data points around how the GST collections have surged in the country year-on-year. It has grown 9.9%. And for the month of March '25, the GST collections is INR 1.96 lakh crores. So all these data points also indicate that the growth is very much there. It is happening -- and we are also continuously engaged in analyzing, which sectors to grow, where the opportunities are coming and how to see that we are present there. And one, as a strategy, we have when we target new sectors, high-quality borrowers, there is a realization that our turnaround time in deciding on the proposals that will come in the corporate credit sector makes some difference and brings some value. So we are very conscious. Being a lean midsized bank, we are able to move on high-quality, high-rated customers. And with our improved TAT, not only are successfully able to onboard but command a better pricing also through our goods and fast service to them.

[Operator Instructions] Next question comes from the line of Ashok Ajmera with Ajcon Global.

Sir, just a few couple of remaining observations and some questions. Sir, one very -- I mean, there is one in the auditor's emphasis note #4. It says that because of the inadequacy of the independent directors, number of the independent directors, some regulation was revoked and the results have been taken directly to the Board. So since when this situation is there, sir, when you don't have the full strength of the independent directors and what is happening on this?

So the independent directors, this is not anything unique to us. Since government is engaged in providing independent directors to all the PSU entities, so whether it is insurance, whether it is entire BFSI space, this is impacted. And since December, we are -- actually 2 of our independent directors, we are awaiting their -- whatever is the outcome, we will not -- I would not like to comment on that part. But this is again, as I said, not unique to the bank. We have definitely not allowed any business in any way to hamper. But this is a transition phase. Nothing of any serious concern or any, I should say, matter of discussion also.

Anyway, things are there in place. They are just to...

And Mr. Ajmera, before you shoot your next question, may I request you, you mentioned that despite the results, stock has not seen any upsurge. So I may request you to write the positive reviews and request you and all others, then the market will get notice. That's what my request will be.

Sir, sure. 100%. And the way -- I mean, you don't have to tell that. I mean your number speaks about that. I mean, I can add that your profit would have been higher by INR 348 crores, had the -- there would not have been any change by RBI in the classification and valuation of the investment. So that is another reserve which is already being built up. It has got to the AFS reserve, INR 348 crores, which otherwise would have come to P&L. So this is all plus point. Another plus point about which I'm talking about and I asked your -- sir, you have continuously you are maintaining a COVID provision of INR 1,200 crores a buffer. How long do you plan to keep it? And especially in this quarter and the year ending when you had to provide a little more for NPA, almost about INR 47 crores, INR 48 crores or INR 50 crores more provision than overall provision is, as compared to the last quarter of INR 840 crores, it is INR 983 crores. So could you not have used at least some portion of that reserve and would have given further decent profit, which directly impacts the stock?

Srivastava ji?

Yes. Ajmera ji, I will give you -- want to answer you that investment AFS gain. Deliberately, we have not reckoned. We were having that gain. But since we are expecting that RBI will come with the cut and it has happened, so we were expecting that there will be good profit, further appreciation, at the time, we can encash that. So you can see though we got the benefit in capital, you know that AFS is again, it will be part of capital. So at the opportune time, we will convert into the trading profit. And however, having said that, it is strengthening our yield also.

Thank you. Ladies and gentlemen, due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to Shri. Nidhu Saxena for closing comments.

Yes, I have nothing more to add. I think broadly, it is all covered. Most of my performance, the highlight would be that it is consistent. For more than 3 years now, quarter-on-quarter, you would not have seen spike in any of the parameters, which should give any kind of discomfort to investors. We have maintained and maintained consistently quarter-on-quarter improvement only. The only one last, given this opportunity, we have also in today's Board recommended a dividend of 15% and which, of course, proposal has to be approved by the AGM. So that's the one more addition I would like to share in this con call. Thank you.

Thank you. On behalf of Bank of Maharashtra, that concludes this conference. Thank you for joining us. You may now disconnect your lines.