Repco Home Finance Limited (REPCOHOME.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Repco Home Finance Q1 FY '26 Earnings Call hosted by YES Securities 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, sir.

Yes Hi, good evening. Thank you all for joining on this earnings call of Repco Home Finance First Quarter FY '26 results. We have with us from the management side, Mr. T. Karunakaran, MD and CEO; Mr. A. Palpandi, Chief Operating Officer; Mr. P.K. Vaidyanathan, Chief Development Officer; Mr. M. Raja, Chief Business Officer; Ms. Shanti Srikanth, Chief Financial Officer; and Mr. Ankush Tiwari, who is the Company Secretary and Compliance Officer. Sir with this, I would want to hand over the call to Mr. Karunakaran for his opening remarks, post which we will start with the Q&A session. Over to you, sir.

Good evening to everyone. We would like to welcome you all to this earnings call of our company for the quarter ended June 30, 2025, to discuss performance of the company. We would like to thank you all for joining us in this call today. We are proud to announce the declaration of 25% interim dividend for the financial year '25-'26. This milestone dividend is tribute to the company's 25 years journey of empowering homeownership across the nation. This interim dividend is not just a financial reward. It is a celebration of our journey, our values, and the trust our stakeholders have placed in us -- on us. As we mark 25 years of service, we remain committed to expanding access to institutional credit for the purpose of housing finance to unserved society and delivering long-term value to our shareholders. Coming to the company's performance. We have been able to maintain growth trend seen in the last few quarters in Q1 2026 as well. The company is steadily progressing on its business parameters. The structural changes that we have been made are getting strengthened across the organization and are started to yielding results. This will be an ongoing process, and we shall adapt to changes as and when the business demands. We have initiated the introduction of new loan schemes and business process in current year. Some of the major changes taken by us where I am highlighting. Number one, target-oriented approach in sanction disbursements, NPA while strengthening verticalizations; number two, localized file processing by creating regional level operations like technical, legal resources, improvement of turnaround time; number three, recovery efforts and special OTS schemes we have introduced. We are also taking steps to improve employee morale. We were able to achieve a disbursement of INR 829 crores in Q1 of this current financial year as against INR 680 crores in Q1 FY '25. Our sanctions stood at INR 907 crores in Q1 FY '26 as compared to INR 727 crores in Q1 of last financial year. These are highest ever disbursements and sanctions achieved in the first quarter by us. Our AUM stands at INR 14,690 crores at end of Q1 FY '26 as against INR 13,701 crores in FY '25. Loan disbursements in the first quarter reflects strong regional engagement with Tamilnadu contributing to 60% to our overall disbursements. Karnataka accounted for 12%, followed by Maharashtra at 8%, Andhra Pradesh and Telengana at 5% each, while remaining 10% was dispersed by other branches and across other states. We have seen improvement in disbursement of Rajasthan, Gujarat and Madhya Pradesh in this current quarter. The ratio between the self-employed and salaried segment stood at 52% and 48%, respectively. The share to non-housing loan that is home equity stood at about 28% of the loan book and housing loan contributed to about 72% of the loan book. The new loan book has shown strong performance with the NPA accounting just 1% of the total AUM with improvements in Stage 1 and Stage 2 numbers. This is in the new loan book I'm talking about. Book quality. Our GNPA stood at 3.3% of the AUM as end of Q1 FY '26 and significantly improved as against 4.3% as end of June '25. The Net NPA stands at INR 171 crores, representing 1.19%. The total provision for NPA amounts to INR 314 crores with a Stage 3 provision coverage ratio of close to about 65%. Additionally, the Stage 2 outstanding stood at INR 1,420 crores as end of June '25 at 9.7% as against INR 1,596 crores in corresponding period of the previous financial year, which at 11.70%. On year-on-year basis, we have seen reduction in Stage 2 assets aggregating to INR 175 crores. The cost of funds for our company stood at 8.7% as end of June 2025. We are happy to share that we have started diversification of our borrowings -- after a very long time -- very long time gap, we entered into the capital market. As an initial step, the company has successfully issued commercial paper amounting to INR 150 crores. This will help us improve our funding sources and manage costs better. The total outstanding of borrowings stood at INR 11,074 crores as end of June 2025. The current borrowing mix remains at 82% from banks, 8% from NHB and 8% from Repco Bank and 1% from Commercial Paper. During the Q1 of FY '26, we have also availed refinance facility to the extent of INR 58 crores after gap of 3 years. Our NIM for Q1 FY '26 was at 5.23%. The company has been able to maintain spread of 3.27% for Q1 FY '26. Our yield on loans stood at 12.02%. The net profit stood at INR 180 crores as end of current quarter as against INR 105 crores in the corresponding period of the previous financial year. Our ROA and ROE stood at 2.9% and 14%, respectively, for Q1 FY '26. Cost-to-income ratio for Q1 FY '26 is 24.26%. We have seen a notable improvement in our cost-to-income ratio compared to the financial year ended March 2025. The credit cost as end of June 2025 is negative. In respect of software, I mean, upgradation of our software core system, including the loan origination system, loan management system, and loan collection system are fully operational with the initial issues successfully resolved. Additional mobile applications for sales, collections, and field investigation offices have been rolled out. The company continues to drive various technology initiatives with ongoing developments in areas, including the customer mobile application portal, custody system, asset and liability management system, which we rolled out during FY '26. Following the recent revamp of our IT infrastructure, we have observed measurable improvement in overall productivity. Coming to the branch network. As of June 30, 2025, we had a total of 234 touch points across the 12 states and 1 union territory we present. This includes 233 branches and 31 satellite centers with additional 2 asset recovery branches. We are expanding our branches presence in region outside Tamil Nadu going forward. Now I will summarize the key financial highlights for the quarter ended June 2025 before opening the floor for Q&A session. The loan book stood at INR 14,690 crores, registering 7% Y-on-Y growth. Profit for the quarter ended was INR 108 crores. ROA and ROE for the quarter stood at 2.9% and 14%, respectively. The core profitability has remained strong with solid spread margin of 3.27% and 5.3%, respectively. The gross NPA remains at 3.3% with Stage 3 provision coverage ratio of close to 65% and net NPA is at 1.19% as end of June 2025. With the momentum gained in the first quarter, the company is confident of reaching a disbursement of INR 4,000 crores and AUM of INR 16,200 crores by this current financial year. We are setting a target of achieving GNPA percent of 2.5% and maintaining Stage 2 numbers between 7% to 8% by year-end. We will be adding 14 new branches in the current financial years and existing 12 SAT centers will be upgraded to the branch. And year-end, our branch count, including SAT centers, may touch 247. The focus for the current year includes growth, acceleration, and overdue reductions. We thank investors, analysts, credit rating agencies, borrowers, vendors and all the stakeholders for showing interest in our company's growth history. In this last Board meeting, our -- I'm happy to announce that our Board of Directors approved to induct Mr. P.K. Vaidyanathan, our CDO, into our Board. I'm extending a warm welcome to him. Looking forward his continued contribution to the growth of this company. Also, I would like to inform that our Board has appointed Dr. G. Venkataiah as Independent Director in the last Board meeting. With that, I'm concluding my opening remarks. And now I'm opening the floor for questions and answers. I'm very happy to answer your questions.

[Operator Instructions]. We have a question from Shubhranshu Mishra from Phillip Capital.

The first part is just an observation. If we can have the quarterly call on the same days that we declare our results. Second, if you can keep your opening remarks limited to possibly the guidance because we have already gone through the presentation. My question is just if you can repeat the target for your AUM and disbursement. And the gross NPA target that you mentioned, how are we going to manage it? What are the various measures that we are taking?

Yes, sir, we have taken note of conducting -- I mean, limiting my initial address as well as conducting this con call. The question on my target for this current financial year is I'm planned to disburse INR 4,000 crores and achieving AUM of INR 16,000 crores. We set a target to achieve GNPA of 2.5%.

And how do we do that 2.5% from the present levels? What are the various measures we are taking?

Yes, I'm Vaidyanathan speaking. Sir, last year, we have reduced our NPA from 545 to 472. This year, we are planning to reduce below 2.5% cap, for which till last year, we have introduced a collection vertical to concentrate on the collection of overdues that is B1, B2, B3. This year, we have created a separate layer that is recovery vertical managers exclusively to monitor the NPA accounts. As of now, we have posted at least 3 recovery managers in each region to concentrate at least 100 to 150 NPA accounts. Apart from that, we have introduced a special OTS, which was approved by the Board of the bank, Board of the company yesterday. So with that, we hope that we will reduce considerably the NPA portion. Apart from that, we are conducting mega auctions on a monthly basis. See, we are also having the recovery agencies, and we are planning to give more number of accounts to the recovery agencies. And also with the collection vertical, we are giving various strategies to control the flow from B3 to NPA. See, with these strategies, we hope that we will reduce considerably the NPA portion before the financial year ends.

If you can just quantitatively answer one last question. What is the total amount of OTS, we have done YTD sir, in this fiscal year?

Right now, we don't have data in hand, we will discuss in this offline.

[Operator Instructions]. We take the next question from Sameer A. H. of Vidura Capital.

My questions are twofold. First is the Stage 2 assets. We are at around 9.7%. Sir, when we compare it with other affordable HFC players like Aadhar, Aavas, HFC, India Shelter, Aptus, PNB and LIC Housing, they are in the range of 1.3% to 4.7%, sir, as compared to our number of 9.7% -- so if we can work in getting this number to that range, it will have -- it will be a great confidence booster for the shareholders. So I would like to hear your views on how you are planning to go about doing that. That's question number one, sir. Question number two, in your earlier analyst call, you mentioned about having a builder channel. So you are going through builders and originating the files, et cetera. So some of the other housing finance companies have had actually a very difficult situation when they have sourced from builders, especially in the western part of the country, which has led to a lot of NPAs, sir. Given that we have recently forayed into this channel and these geographies, I just want to seek your views on what studies we have done. For example, have we decided that we will finance apartments of -- sold through builders only after a certain stage of construction or something like that. I want to get more color about this, sir.

Sir, in respect of Stage 2, yes, if you look at, I mean, old book performance versus new book performance, our new book, that means a loan given after COVID is doing good, even NPA in our new loan book is below 1% even and Stage 1, Stage 2 assets in the new loan books are very, very minimum. We are having the issues with the older book that we have given in prior to -- I mean, before COVID, we are taking a lot of efforts to reduce. I'm sure and confident going forward, these numbers will come down. If you look at analysis of Stage 2 in last 2 quarters, it started to coming down. If you look at my current -- I mean, June 2025 Stage 2 assets with the June 2024 assets, we have seen a reduction of close to about INR 175 crores. So we have taken efforts to reduce Stage 2 and -- I mean, Stage 2 and Stage 1 assets. Going forward, we can see substantial improvement in both categories.

Supplement to that, I wish to say if you see the second as percentage of Stage 2 accounts 2 or 3 years back, it was around 14%. Last year, we have reduced to 11.7% and this year, again, 9.7%. So gradually, we are reducing. The only thing is 3 years or 4 years back, we have not concentrated more on the B1, B2 accounts. Stage 1, Stage 2 accounts. Only you have concentrated [indiscernible]. But now we have changed the strategy and we are now concentrating from B0 onwards. So because of that reason, we have reduced Stage 2 accounts from 14% to 9%, and we are planning to reduce below 7.5% before the end of this year.

In connection with the builder product, we are very conservative. We are having well-defined policy. We always exercised more caution. We have taken note of everything. We always exercise more caution on this kind of product. So far, we have not experienced any kind of a bad thing on this builder product.

[Operator Instructions]. Next question is from Kaustav Bubna from BMSPL Capital.

Yes. So you had mentioned in your opening comments that management is going to take certain steps to boost employee morale. I found that pretty interesting. Could you dwelve deep into that and explain exactly what you are going to do?

Yes, we have conducted a promotion exercise. We have validated a suitable candidate. That is the #1 steps we have taken. We have -- of course, we have given increment -- annual increment, which is a little bit higher than what I have given in the last financial year. We are conducting a regular training programs to improve their knowledge and other things. These are the few initiatives we have taken to improve the model of the employee.

So none of this is -- none of these initiatives are stock-based compensation for senior employees, right? That's not allowed. That's not [indiscernible].

Right now, we don't -- right now, we don't. We'll explore the possibilities in future. Right now, we don't have.

[Operator Instructions] We'll take the next question from Rajiv Mehta of Yes Securities.

Sir, just in the meantime, as more people are queuing up, I just wanted to check in terms of growth momentum, right, you said INR 4,000-odd crore disbursement you're retaining your guidance. So when you look at the first quarter, and can you give us some idea how the monthly disbursement run rate is playing out, right? So generally, April, May is weak and then you would have had good June. How is July going? And also in terms of where are we in terms of Karnataka, because I'm sure Karnataka is not fully normalized for anyone. So can Karnataka normalization can also help us better volumes going ahead? And yes, I think if you can answer how the incremental volumes will come from and from which geographies you expect higher volumes to come?

Yes, you rightly said Karnataka, yes, now the scenario is better than what we experienced February or March. Day by day, things are improving in Karnataka. I'm expecting more disbursement in coming quarter. If you look at our RHFL history, any other housing brands always -- the first quarter will be always dull. Yes, we have seen improvement in July. Our disbursements are picking up. And if you look at the disbursement numbers, Maharashtra, I mean, Gujarat and Rajasthan, we have seen substantial improvement in disbursement in first quarter. We are expecting increase in disbursement in these states like Rajasthan, Gujarat and Madhya Pradesh.

Yes, Rajiv, to supplement whatever MD was saying, Raja here. our trend has been almost the same as what it was, but only a plane higher. That is whatever number we were doing previously, we are doing the same trend, but the numbers are higher because whatever we have invested on manpower strategy and our positioning in the last year is now giving us dividends. That is what is happening now. And I believe it will continue to happen, and it is happening good also from a business perspective.

In addition, last 2, 3 years, we have opened around 30 to 35 branches, all the branches, infrastructure facilities we provided, manpower issues, branded issues, verticalization issues, all those things are stabilized. All the branches opened last 2, 3 years started to giving the business, which all those things indicate that achieving INR 4,000 crores disbursement will not be any challenge.

We'll take the next question from Damodaran Narayanan from Acuitas Capital.

So just to continue the previous participant's question on growth and on asset quality. So we have heard -- I mean, 2 of your peers call out that asset quality stress in South and particularly, I think one of them highlighted Karnataka. So just wanted to get your thoughts, I mean, on any region-specific stress that you are seeing out or the emerging signs of stress in any of your -- I mean, Karnataka, especially and the other geographies in the South. And as a result, even on growth, I mean, not only Karnataka, we have heard about Telangana and Telangana also having an issue with slowdown in terms of growth. So are you seeing any signs of improvement there? So yes, I just wanted to get your thoughts on those regions and the asset quality front.

Okay. In respect of asset quality, we have not experienced anything in Karnataka or any other specific states. It is similar to what we experienced in the previous quarter. We have not noticed or we have not experienced any significant -- I mean, increase in asset quality or deterioration in our asset quality across the states.

The issue in Karnataka, what we were facing -- what we are facing even today is on the E-Khata, A-Khata and B-Khata. Now the government is coming out with solutions and slowly the situation is improving. And we are also trying to go in line with the market and the government. And we are doing cases where only we get the E-Khata upfront proper. So that is helping us a lot. Though the business has slowed down a tad, we are not impacted by it, and we are managing the same. And Telangana growth story is something we believe is happening, though it is not at the speed that we had expected. But yes, Telangana is growing, and we are getting our numbers better in Telangana, and we wish to continue to do so. So on the growth perspective, we are almost equal across all the states except for a few packets in states like Maharashtra or somewhere else where we are able to put in the proper manpower in place. Everywhere else, my growth is not an issue. On the asset quality, as rightly what my MD was saying, we are not facing any package-specific issues. It is more general for us across the states and across all our branches.

Can you quantify in terms of year-on-year what Karnataka and Telangana would have grown at in terms of disbursement?

See, Karnataka is anywhere between 10% to 12% growth for me. Telangana has been at 7 to 8 percentage. And we are looking at improving Telangana. Yes, we should be doing it, yes.

Our next question is a follow-up from Sameer A.H. from Vidhura Capital.

Yes. So sir, just a follow-up question to earlier question about the builder channel because in affordable space, there are also a lot of builders who are like first time or they have done only 1 or 2 projects. So how -- what is our criteria? Again, my question is also on at what stage do we finance, right, at the project launch stage or after a certain percentage of the project is completed. What is our whole criteria on choosing builders? And at what stage do we jump in to finance? That is first question, sir. The second question is related to ESOPs because compared to the peer set, we are valued at less than 1x price to book, whereas many other companies are at 3-plus price to book. So if we give ESOPs to management team and others, it can really be a very good -- if part of compensation is given through ESOP, it can be really a very good wealth generation mechanism for the management team also, and they will collectively work for the growth of the company. The AUM growth is anyway coming. ROEs are good. So if NPAs also go down, the stock can really get rerated very well. So this question is about ESOP, sir.

Yes, Sameer, thanks for advocating for us.

Thank you, sir.

On the builder front, as you rightly said, we have revamped our APF norms, wherein we go with only builders who have a proven track record, like we look at his past projects, how many projects he has done. And we go purely with RERA registered projects only. So we have our controls and checks in place. And also, we will be funding only after the borrower investor margin money. Okay. So basically, yes, whatever controls you are talking about is already in place. It is in the form of our APF policy. And hence, we don't see that much of a strain in our funding to projects that are being promoted by builders because we choose on the builders. And that has helped us a lot, and it should go -- it should continue to be so.

Our next question is a follow-up from Rajiv Mehta of YES Securities.

So I have a few questions. And sir, just to understand the impact and the contribution of the sales vertical in the collection vertical that we have set up in the last 12, 15 months. Could you give us specific numbers in terms of, say, for example, the sales verticals contribution in disbursement, how is that growing and playing out in your monthly disbursement, your quarterly disbursement? That's number one. And for the collection verticals performance, can you give us whether are we able to control the bounce rates itself? Or are we able to resolve the bounce better in first bucket, second bucket? So the flow rates are lesser now than what they used to be before? So can you give us more outcome numbers and the impact of the sales vertical in business and the collection vertical in the resolution of bounces and forward flows?

Yes. Rajiv, to talk about the business -- the sales vertical, whatever on the impact, I would say the impact of 22 percentage has been because of our collective efforts on both improving our branches and sales verticals. So there may not be an exact science of splitting it because whatever my BSM or my sales vertical does as a business comes in the branch numbers only. To give you more of a clarity, the productivity of each of my BSM is more than INR 40 lakh plus and my DSC is INR 25 lakh plus. So that is the kind of productivity that we are operating on currently. We are working at increasing both on numbers and also on the productivity. So I think that should be a fair idea of what I'm talking about on a contribution from a sales vertical. So on collection side after implementing vertical system, if you look at analysis, the numbers of Stage 2 and I mean NPA numbers, we have seen substantial improvement. If you look at Stage 2 number as end of June '25 versus, I mean, June '24, we have seen a reduction of close to INR 170 crores, which indicates this is purely based on what the implementation of the vertical system in the -- I mean, the system in the company. Even if you look at numbers of NPA, NPA also started to come down, even bounce rates. Bounce rates also it was close to about 3% -- I mean, 4% to 5%. Now we have -- because of implementing it, after implementing the collection vertical system, the bounce rate has decreased to 1% to 2%.