National Finance Company SAOG (NFCI) Earnings Call Transcript & Summary

Good afternoon and Ramadan greeting to everyone. I'll start by introducing myself. I am Wisam Al Said, the Head of Marketing, Communications and Sustainability. I also oversee quality assurance and Investor Relations here at National Finance Company. We are delighted to have you join us today for this reported session. It provides an excellent opportunity to engage with our stakeholders and discuss the audited financial results for the year ended 2024. These results have been disclosed on MSX platforms as well as other communication platforms. This session will be conducted entirely in English. However, we are happy to [Technical Difficulty] Before we proceed, let me please introduce esteemed members of the National Finance team who are present with us today. I'll start with Mr. Tariq Al Farsi, our Chief Executive Officer; as well as Mr. Rakesh Makkar, our Deputy Chief Executive Officer; Mr. Saam Al Habsi, Chief Operating Officer; Mr. Bikram, General Manager, Risk Control & Strategy. We have also Mr. Ramkumar from Finance [indiscernible] our Deputy Head of IR. I'll quickly go through the agenda overview [Technical Difficulty] We'll start with the content of this session. We will start with our company overview, our industry overview and company track record and then move on to the financial update. We would like to emphasize that the main purpose of this session is to highlight the company's performance for the year 2024 and we do not intend to promote the company's products and our investments in this platform. I will now leave the floor to our CEO, Mr. Tariq Al Farsi to begin the session and provide it.

Thank you so much, Wisam Al Said for the introduction. Hello, everyone, and I'm sure that you can see the slides now 3. So in slide -- we go to the Slide 4. [Audio Gap]. I'm pleased to announce that National Finance Company continued its dominance as a largest financial leasing company in the country and further strengthen its position to increase its market share to over 49%. And during 2024, our growth story was supported by record increase in new lease creations, and we continue on this path in 2025. We operate with 23 branches and now over -- and also we have over 62,000 active customers. We managed to increase our gross loan for approximately OMR 100 million during 2024 to reach to OMR 640 million at the end of the year. As visible in our financial statements, our NPL ratio and provision coverage have consistently improved post COVID. We reached at the profit after tax about OMR 12.1 million in 2024 which was a 9% increase compared with the previous year. In this slide, our portfolio diversification strategy has helped us immensely during the last 3 years, especially where in which we have taken a concentrated effort to limit single borrower concentrations. The improvements in our NPL ratio stand proof to the positive impact of this diversification. Importantly, we have also diversified our funding sources during 2024 with multiple lines opening up from international lenders [indiscernible], the product portfolio too has consistent grown in 2024 reflecting our investors' confidence in National Finance. In this slide, our Board has remained unchanged with Mr. Hani Zubair functioning as the Chairman and Mr. AbdulAziz Balushi as Deputy Chairman of National Finance. I'm directly supported by a management committee which consists of the Deputy CEO, Mr. Rakesh [Technical Difficulty] and also Chief Operating Officer, Mr. Saam Al Habsi; and General Manager Risk, Control & Strategy, Mr. Bikram Monga. We continued our growth, both digitally and physically during 2024 and added 2 branches during the year to take our branch count to 23. As the largest [indiscernible] Oman, we continued to be recognized both locally and regionally during 2024 -- '24 yes. Thank you so much, I'll pass the floor to Rakesh, our Deputy CEO.

Yes. So this slide give you industry overview and company track record. We are aware that we have a 37-year legacy in the country, and we have been growing continuously. Like Tariq mentioned, our market share has grown to almost 50%, 49% to be precise in terms of the network book. And in terms of profitability, we have almost 50% market share on top. That tells you that we are growing. And last year, we have taken additional market share of close to 1.5%, 1.6%. If you look at the chart, we know that tells you about our remarkable track record. And this has been achieved by our continued investment in growth. There has been a digital growth for us, where we invest in branches like Tariq mentioned we added 2 more branches last year. And on the technology side, we have done a whole lot of investment. Just to give you an update, key changes that we did in terms of technology was we moved to applications scorecard for underwriting our loans. We moved to digital printing of agreements. We strengthened our kiosks with more features for customers. We launched NF Customer Care and application for customer complaint and monitoring and the best part is, today, we have 24/7 IVR, which is a call center for customer to handle the queries. Over and above that, we continue to invest in terms of our technology platform on information security and upgrade our infrastructure. All these initiatives gets reflected in our increased market share and in terms of the continuous momentum that we've seen post COVID from 2021 onwards. In fact, if you look at last 2 years, we have grown by almost 15% to 16%. And other big achievement for us for 2024 was that we had a perpetual bond, which was oversubscribed and we have issuance of OMR 35 million perpetual bond. That tells you the strength of the company, how we have grown and what we are doing to continuously grow. Moving on to the next slide. I'll just give you an overview in terms of what happened to -- sorry, we have with our technical snag here. So I'll ask Ram to take over in terms of the overall financial. The key message here is that we continue to grow. Last year, we disbursed OMR 250 million as disbursal for the full year, which moved up from OMR 203 million in 2023. And as Tariq mentioned, we added almost OMR 62 million in terms of our loan growth book as compared to 2023. And on an overall basis, our revenue grew by -- operating income grew by 25% and that helped us to strengthen our provisioning further and it actually translated into additional provision of OMR 2.6 million on our NPA portfolio, which also helped us to bring down our net NPAs to 6.2% on an overall basis. I'll let Ram take you through all the financial details. Over to you, Ram. Thank you.

Thanks, Rakesh. Financial highlights. The highlight like CEO briefly mentioned, we had OMR 100 million growth in '24 in terms of our gross book. And combined with that, we've also seen, as you can see in the top right button, NPA ratio has dropped to 13.2%, combined with an increase in the provision coverage, which you see in the depth -- bottom grid to 83%. So this combination that Rakesh mentioned is what helped us now the extra added revenue that we got through the year into more meaningful provisions to cover more of our Stage 3 portfolio. And this is resulting in a very healthy, consistent performance. The net profit of OMR 12.1 million is what we've shown for the year '24. Moving on to the next slide. Our present capital structure, 2 points coming out of this slide. One is focusing on a diversified funding, again, being covered in the earlier slide, we have a combination of term loans and short-term loans from banks, perpetual bonds, we have corporate deposits, which is becoming a separate player and of course the strong equity. Now the prudent dividend payouts is what the bottom slide talks about that was proposed is 18.6% overall, 12.6% in cash and 6% in share, and this is subject to AGM approval.

So that brings us to the end of the session. We will open the floor for any questions. Anybody has any questions? I guess we'll wait for a few moments and see if anybody decides to have a question.

Borrowing cost. [Technical Difficulty]

Your question was not clear. Can you repeat it, please?

Nova, your voice is breaking. We can't hear you properly. Can you repeat your question, please?

What is the weighted average [Technical Difficulty] borrowing cost.

You are cutting off, Nova. Still you're cutting off. Can you just repeat that question again?

Maybe if you send your question on chat and we'll read it out and respond to it. Weighted average borrowing cost for [Technical Difficulty]

[indiscernible] weighted average borrowing cost, we have different, different terms of structures like control plan, term loan and foreign currency borrowing. So in the year 2024, we have seen that borrowing [indiscernible] because of the -- it has been increased. But we have to manage between around 6.7% to 6.8% level. Our total average borrowing cost is between 6.7% to 6.8% in the year 2024. But in the first quarter, we have seen big reductions in the cost -- in the average borrowing cost area. You can see that at the end of this quarter. In relation to the [indiscernible] and long term 3 to 5 years range what we normally do our borrowing mix is consisting mainly the period from 1 to 3 years for the long term. We have relatively 3 to 5 years' category -- 3 to 5 years' category, most probably the foreign currency borrowing. In that range, we have tried to arrange some [ IRA ] so in that area, our funding cost is slightly lower compared to what I mentioned earlier in the range of 6.7% to 6.8%.

It's a generic statement that those won't stop, and we continue to grow.

So thank you for your compliments, Pankaj. We, as a management don't give any guidance for future. But just to assure you that we will continue to grow at the current rate that we display. And also in terms of NPA, we are looking at further improvement in our NPA. The numbers are getting reflected in our first quarter results itself, which will be shared with the market.

About the dollar borrowings of 6.7% to 6.8% includes...

That's the total borrowing.

So about the dollar borrowing cost, it's mainly the overall borrowing cost is between the 6.7%, 6.8% range. But in the first half of the year 2024, we have seen that due to the debt rate increase, the foreign currency borrowing rate has increased slightly above 7%. But at the end of the year, we have seen that reductions and we have recognized between 6.3% to 6.4% level at the end of the year 2024. But since then if you take and average it out between the year beginning and the year-end, we have seen around 6.6% to 6.7% [indiscernible] dollar borrowing cost.

Nova, can you see maybe you might hear it. Nova, can you hear me? Nova, is it clear? About your borrowing plans for this...

I can hear you, but I think my voice is not clear.

Related to the questions that you have asked relating to the borrowing plans for the year, both Oman rial and USD. We cannot give future details. But in terms of our open unutilized certificates and the recent requests we are receiving from the regional banks, we would be expecting to focus more on the USD borrowing since the rate is coming down. So as a company, we are looking at to reduce our funding costs and bring it down to the manageable level. And so in that sense, we will most probably focus on this year relating to the USD borrowings. And we have open facilities for that one and the cost must be much lower compared to the last year.

Nova, we will always keep our options open when it comes to funding plans. You know that Oman also have limitation of borrowing to leasing company. So like National Finance, we are the largest financial company in the country. And sometimes, yes, we find a bit challenging, but it's easy for us to get funding locally and as well internationally. So we always keep our options open because our plans are basically to grow further. Any questions, Nova? I think you can speak now.

Yes. I think audio is clear now.

Thank you so much, Nova. Thank you. Any further questions?

I guess there are no further questions. With this, we shall close the session. On behalf of National Finance Company, we would like to extend our gratitude to you all for your presence here today and to the Muscat Stock Exchange for facilitating this session and fostering open dialogue with our stakeholders. As you know, this session was recorded, and it will be available on our YouTube channel. Should you have any further inquiries after viewing the video again, please feel free to contact us through our Investor Relations contact details available on the MSX website. Thank you very much, and have a nice day.

Thank you so much.

Thank you.

Thank you.