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

Ladies and gentlemen, good day, and welcome to the Repco Home Finance Q2 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.

Thank you, Swapnil. Hi. Good evening, everyone. Thank you for joining Repco Home Finance Second Quarter FY '26 Earnings Call. From the management side, we have 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. Shanthi Srikanth, Chief Financial Officer; and Mr. Ankush Tiwari, Company Secretary and Compliance Officer. Now I request Mr. Karunakaran sir to start the call with his opening remarks, post which we can open the floor for Q&A. Over to you, Karunakaran sir.

Thank you, Mr. Rajiv. Good evening to everyone, and warm welcome to the earnings call of Repco Home Finance Limited for the quarter ended September 2. We appreciate your participation and thank you for joining us today. Before we move into Q&A session, I would like to provide a summary of the company's performance for Q2 FY '26. While the detailed financial results and operational highlights have already been shared in the investor presentation of this [ real ] year, for the benefit of all participants who have not had an opportunity to review the financials, I will present a brief update on performance of our company during the quarter before taking Q&A. We are happy to announce that growth momentum seen in the last few quarters has continued in this quarter as well. The company is progressing on its business parameters and is positive of meeting its guideline numbers. The structural changes that have been processed across the organizations are yielding results. Coming to the business, yes, we have dispersed INR 1,069 crores in the Q2 of current financial year as against INR 867 crores in Q2 of FY '25 and INR 829 crores in the previous quarter. I'm happy to say that this is the highest ever disbursement in a quarter we have achieved in the history of our company. In fact, in the first quarter, in this current financial year, we achieved highest disbursement compared to the first quarter of any other year. On an average, we are able to maintain a stable growth of 22% in disbursements in month-on-month. Our sanctions stood at INR 1,206 crores in Q2 FY '26 as compared to INR 926 crores in Q2 of FY '25 and INR 907 crores in the previous quarter of the current financial year. During the current quarter, we have witnessed a marginal reduction in cost of funds. In line with our policies, practices, strategy, we have reduced our benchmark lending rate, it's called marginal lending rate, to 10% from 10.10%, effective from 1st July 2025. Since our assets are repriced on a quarterly basis, benefit of MLR cut passed on to all the customers as end of June 2025. This reflects our commitment to ensuring that our borrowers benefits from rate cuts. The overall loan book stood at INR 15,033 crores at end of the September 2025, as against INR 13,964 crores a year back, registering a growth of 8%. Loan disbursement in the second quarters reflect a strong regional engagement, with Tamil Nadu contributing to 62% to overall disbursements, Karnataka accounted for 11%, followed by Maharashtra at 7%, Telangana at 6% and Andhra at 5%, while the remaining 9% was disbursed across the state with notable improvement in Rajasthan, Gujarat, Madhya Pradesh. Our September 2025 disbursements across all the states where we are present are all time high disbursements. The ratio of exposure between the non-salaried and salaried segment stood at 53% and 47% respectively. The share of non-housing loan, that is home equity, stood at about 29% of the loan book and housing loan contributed to about 71% of the loan book. GNPA amounted to INR 475 crores as end of September 2025, at 3.16%, as against INR 552 crores as of September 2024 and INR 485 as of June 2025. The net NPAs stood at INR 225 crores at 1.50%. We have a total provision of INR 375 crores with a provision coverage ratio of 52.54% for stage 3 assets. Our systematic and continuous action on delinquent accounts yielding results. It is savings from protection in stage 2 assets. As end of the September 2025, our stage 2 assets stood at INR 1,323 crores as against INR 1,422 crores in previous quarter end. During the COVID period, we restructured loans close to about INR 790 crores, of which INR 121 crores already slipped in the NPA, remaining INR 408 crores are various stages of asset [indiscernible]. Our NIM for quarter, Q2 FY '26 was at 5.5%. The company has been able to maintain a spread of 3.4% by raising yield to 12.1% despite [indiscernible] competition at our financing levels. The net profit amounted to INR 107 crores for Q2 FY '26. Our ROA stood at 2.9% and ROE at 13.5% for Q2 FY '26. Cost-to-income ratio for the quarter stood at 28.4%. We have initiated diversification of our [ boring ] profile. In June, we successfully issued INR 150 crores of commercial paper. Following the entry into the capital market after a long time, we received a positive response from banks, mutual funds and other institutional investors for both commercial papers and NCDs. Parallelly, we continue to engage with our banking partners and are actively negotiating for reduction in rate of interest. Approximately INR 6,000 crores of bank borrowings are scheduled for repricing over the next 3 months. And as a result, we anticipate further reduction in overall cost of funds. With respect to refinance facility from National Housing Bank, we have secured a sanction of INR 150 crores and we utilized the entire INR 150 crores. Additionally, we are in the process of submitting a fresh proposal to NHB in the range of INR 500 crores to INR 750 crores. We will provide an update on the progress of this proposal in the next con call. Coming to the branch network. As end of September 2025, we have 234 touchpoints across the state and 1 union territory, comprising of 203 branches and 31 satellite centers with additional 2 asset recovery branches. We are planning to open a few more branches before end of this current financial year. Looking ahead of Q3 FY '26, we are targeting disbursement of approximately INR 1,100 crores from INR 1,069 crores of Q2 of FY '26. And we are having a plan to reduce our GNPA from INR 475 crores to INR 450 crores in current quarter. And we are expecting reduction in Stage 2 assets from to INR 1,275 crores from INR 1,325 crores as of September 2025. We intend to maintain your provision coverage ratios, spreads and NIMs at level what we reported in the current quarter. Our current provision coverage ratio for Stage 3 asset is 52.50%. We remain comfortable with existing provision coverage ratio and confident in the adequacy of the provision frameworks. We have recruited people with experience in sales, recovery and collections verticals. With this additional strength, our focus will be on taking the growth numbers to the next level and reducing our overdue accounts. And we are quite positive on this. The company is geared up to achieve the targets set for FY '26 in terms of profitability, GNPA reduction, disbursement and AUM growth. We thank each every one of you for showing interest in our company growth story. Now I open the session for Q&A. Thank you.

[Operator Instructions] We have our first question coming in from [ Akash Jain ] of [ Moneycurves Atlantics ].

First of all, I think huge congratulations on finally doing more than INR 1,000 crore disbursement because I think for the last, I think, 8, 10 quarters, which is what we have been expecting as investors, and finally, we have been able to cross that number. So huge congratulations to the team on that. I have 2 questions, sir. One is regarding AUM growth and disbursement. So, sir, clearly, we have -- we are facing huge rundown on our legacy book, it seems, because of the fact that it is obviously an old book as well as probably we are facing significant [ BT out pressure ] that even after good disbursement growth, we are still not as strong on AUM growth, which is very important from an income perspective. So, I just want to understand what we need to do to really get to this 10% to 12% or 12% to 15% AUM growth number because how much do we really need to crank up on disbursement and control BT out to really get 10% to 12% AUM growth? That is the first part. The second part is on the cost. Like it is quite evident that like you said in your opening remarks as well, that we have increased the cost base by recruiting people across sales and collections. So can you give us a bit of a breakup because there has been a big increase in both employee cost as well as other expenses. So, can you just take us a little bit into detail in terms of what has led to this increase in employee cost as well as in other expenses for this quarter?

I'll answer your first -- second question first. Yes, if you look at employee cost, we have seen increase in current quarter compared with the June quarter. Yes, we have realigned our incentive policy in line with industry practices to motivate employees to do more business, more sales, more recovery, more disbursements, which has resulted in the numbers. This quarter, we disbursed about INR 1,060 crores, which is all-time high disbursements. On account of payment of incentive, our salary cost has gone up, of course, which is in line with the industry. We made a parallel study how do other NBFCs [indiscernible] what are their incentive structures, we collected the information, based on that we realigned our incentive structures which is effective from 1 April 2025, which caused some slight hike in the salary cost, #1. #2, this is a silver jubilee year for our company, we started this company during 2000, this is a silver jubilee year for us. To honor our sincere, long, I mean our employees, we have given [ honorium ] and gifts and all which cost some expenditure to the salary thing. Of course, last 2 years we have opened around 32, 35 branches. All the branches we have provided adequate man powers. Of course, the business is also coming from these branches. Because of increase in manpower count also, our salary cost has gone up. And finally, last 2 to 2.5 years we have not exercised any promotion exercise, we have not given promotion to our employees. During this current financial year, we have conducted the promotion to -- the promotion exercise to motivate our employee and we elevated a suitable candidate to a next higher cadre. Of course, I have been elevated to -- you know well I have been --- earlier I was Chief Operating Officer, I have been elevated to MD. Like that, all the cadre we have done assessment, we have elevated to the suitable candidate to next cadre, which has caused some additional cost. All those things cost us hike in the salary cost. Coming to your first question, AUM growth, yes, the disbursements are going up. The branches what I opened in last 24 months started giving substantial amount of disbursements. I'm expecting around another -- I mean, 30% of increase in quarter-on-quarter disbursements. So going forward, my disbursement number will go up. Simultaneously we can see increase in AUM also. [ BT outs ] are under control. If you ask me, last 3 months, I mean this quarter, September quarter and [ BT outs ] are almost in line with previous quarters. We have not seen any increase in [ BT outs ].

Sir, what is the -- so you covered the employee cost bit. What has also led to the increase in other expenses for this quarter?

Other expenditures it's not a substantial compare with June, the other expenditure increase is about INR 16 lakhs or something, which is in line with the increase in the business we opened 42 branches across the country in last 24 months. All the administrative costs already booked in other expenditure. And another one is silver jubilee year celebration, this is silver jubilee year for -- silver jubilee year for our company. On account of celebrations, we have incurred a certain expenditure. That all which has resulted in increase in administrative. And this are one-time expenditure. On account of this, our administrative cost has slightly gone up compared with our previous quarter end.

Sir, just as an addition, I think I am -- as a shareholder I personally can say I am extremely supportive of all the steps you are doing in terms of salary hikes and promotions because to be honest, I think even earlier we have been pushing the earlier MD on incentivizing the employees enough because you can't grow -- in a highly competitive environment you can't grow without incentivizing your employees. We have been pushing for the earlier MD to also go to the Board for allotment of ESOPs to the employees. I think finally -- I don't know whether anything is happening on the ESOP front, I think unless you pay your employees well and incentivize them well, no way we can grow in a hyper competitive environment like this. So, as a shareholder, I am extremely supportive of whatever you are doing in terms of employee motivation. So that’s a feedback I want to share with you, sir. Thank you so much.

Thank you, [ Akash ] for supporting us. This ESOP matter also preliminary discussion started at Board level. Let's see how it goes. We’ll keep you posted on the update.

We have our next question coming in from Vikas Kasturi of Focus Capital.

First of all, once again from my side, sir, hearty congratulations to you. I was personally very thrilled to see the INR 1,000 crore disbursement number. And so, I had a little bit of an extension to what the previous participant asked. Sir, we saw that you disbursed INR 1,000 crores, but the Stage 1 number went up by only about INR 400 crores. So, my question is, you have guided for INR 16,000 crore AUM by March '26, end of this financial year. So how much more do we need to disburse to get to that number of INR 16,000 crores AUM, sir? So that is my first question. And the second is more an observation, sir, more like a request that in the presentation, could you switch from millions to crores? Because even in the language that we speak, we are only talking about crores and not millions. It kind of makes it more easy to read the numbers, sir. These are my 2 points, 2 questions.

Yes, sir, thank you for your [ observations ]. We have taken note of and we'll note to present our investor presentations in crores. Coming back to [indiscernible] yes, [ BT out ] is under control. We are almost ourselves -- first I answer to first participant line question also, [ BT's ] are under control. This September quarter, we have done a disbursement of INR 1,069 crores. For December quarter, we are targeting a disbursement of close to about INR 1,100 crores to INR 1,150 crores. And March, we are targeting a disbursement of close to INR 1,350 crores to INR 1,400 crores. With that, I'm confident of achieving INR 16,200 crores AUM size by this financial year end.

Okay. Got it, sir. Sir, a follow-up question. You had also guided for financial year '28 that you will reach, I think, INR 25,000 crores, if I'm not mistaken, sir. So that will be a big jump for you from -- in 2 years, you will have quite a bit of disbursements to do. So, could you just share some initial -- what are your initial plans? Like what are you -- how are you planning to achieve that big number, sir?

Vikas, I'll take this question. Raja here. Yes, we have aggressive growth plans on both disbursement and AUM; that is on the organic side. We are also looking at going ahead with some book purchases, which is in the early stages. So by and large, we should be reaching the guidance of 2028. But for this year, maybe it is safe for me to stick on with my current guidance of INR 16,000 crores. Of course, we are working on that, and we will work towards that very, very aggressively, and we should be able to delight the investors, yes.

Fantastic to hear, sir. And one last question, sir. Our GNPA number for the first half is almost at the same level as where we were at the end of March. And you had also again guided for 2.5% GNPA by end of March, which will -- actually we need to bring it down to INR 400 crores, sir. It just looks like a very big target to me, but I think you have it under control. Could you just mention a few things that you're working on that?

Sir, what you said is correct, we are maintaining the same figure as of March even in September. But we have taken a lot of strategies. We have a lot of steps to reduce the GNPA. See, as we already told in the last quarter, we have posted 1 general manager exclusively for overseeing the Tamil Nadu branches and another GM posted for other than Tamil Nadu branches. And we have also created a separate layer, that is recovery vertical managers during this quarter. So, they are exclusively monitoring the NPA accounts in all regions. They have been allotted at least 100 accounts. So far, we have posted 25 [ RVMs ]. So, in the last quarter, we have also introduced a special [indiscernible] for the financial year '25 - '26. So, because of these strategies, we are able to reduce GNPA of INR 450 crores by the end of this quarter and also, we are able to reach the 2.5% as promised by us before March 2026.

In addition to that, we have also our recovery, I mean recovery review mechanism. On weekly basis we are conducting a review meetings specifically on NPA reductions. So, we are confident of achieving the numbers we have given in the guidance.

We have our next question coming in from the line of Anand Mundra of Soar Wealth.

Sir, congratulations on crossing INR 1,000 crores number and congratulation on completing the silver jubilee also, sir. Sir, [indiscernible] we have INR 3,500 crores of net worth and we are generating INR 400 crores of PAT. Our dividend payout should be much higher than INR 20 crores what we are distributing every year, sir. We don't need so much capital. So why we are holding -- why are we keeping such a high capital and our ROE is suffering, sir? The return on equity ratio, if it crosses 17% to 18%, it will give -- it will be very attractive from an investor perspective. So that's a small request. Your thoughts on this, sir?

Anand, Ankush. For dividend sequentially every year, we are increasing our dividend payout. On this expectation on higher dividend, we'll certainly convey it to the Board, and we'll consider in next Board whatever in future...

Ankush, our payout is only -- how much -- out of INR 400 crores PAT, we are distributing only INR 20 crores. At least we should distribute 25%, 30% of our PAT generation every year.

Certainly we take note of your suggestion.

[Technical Difficulty] adding so much capital.

Yes sir, we have taken note of your suggestions. We will escalate to the board. Coming to the business, yes, you have seen our disbursement in last couple of quarters. Quarter-on-quarter, our disbursements are going up, [ BT outs ] are, prepayments are under control, NPAs are coming down. Our Stage 2 numbers are coming down drastically. So that going forward, our profitability will improve, you can see improvement in return on equity also.

Another question is what is the strategy of buying a portfolio, sir? Because organic growth is much better than buying a portfolio. From that perspective, I wanted to hear from you.

Yes, sir, we are not basing our growth on inorganic purchase. But yes, that is also under consideration, but we will be growing basis the guidance on our organic growth, that is going to go strong. But this will be an add-on to whatever we are trying to do. Let us see how the future takes us through, sir.

A couple of years before we have done 3 tranches of the kind of assignments. So, all these books are doing well. So, we are having experience expertise on selecting loan books from other HFCs, NBFCs.

[Technical Difficulty] one question, sir, which I wouldn't follow, what is our AUM target for this financial year, sir?

INR 16,200 crores, sir.

INR 16,200?

Yes.

So we will add INR 1,200 crores of book in the next 6 months, sir?

Yes, we have confidence.

Sir, that's a very high number. That will translate to a disbursement of more than INR 1,300 crores to INR 1,400 crores per quarter, sir.

If you see the disbursements, month-on-month, quarter-on-quarter, this is increasing, this will give confidence that will -- INR 16,200 crores is easily doable.

We'll take our next question from of Prithviraj Patil of Investec.

My first question was what are the incremental yields that we have in [Technical Difficulty]. That was the first question.

Sir, your voice is not audible.

Yes, am I audible now?

Yes, please.

Yes, so my first question was what was the incremental yield in [indiscernible] home loan HL segment? The second question was on the write-off pool. So, we've had negative credit cost, so just wanted to know what is the pool that we have from which we can expect recoveries? The quantum of pool that we have. So, these are the 2 questions that I have.

[indiscernible] housing loan we are getting a yield of about 11.17%. And non-housing loan we are getting a return of 13.55%. What is your second question?

Yes, so my second question was the credit costs are negative since past few quarters. So I just wanted to know if we have a written-off pool from which we can expect recoveries? And if so, what is the quantum of that pool?

See, this year, we have got close to about INR 6 crores written-off accounts and we are more aggressive on recoveries. We have formed a special cell in corporate office to monitor these written-off accounts. So, I'm expecting another, say, INR 8 or INR 9 crores from current [indiscernible] from written-off accounts.

Sure sir. And one last question, if you could just repeat the borrowings that were -- repeat the amount of borrowings that were floating rate borrowings that are coming due which would be replaced?

For us, all the borrowings are floating rate, Prithviraj.

Yes, sir, so [Technical Difficulty]

Question is not clear.

Sir, in the opening comments you had mentioned that certain amounts of borrowings were coming due, which would be -- so if you could just repeat that number?

Yes, it's about INR 6,000 crores, out of total bank borrowings around INR 6,000 crores are due for reset in next 3 months. So it falls due for reset in next 3 months.

We'll take our next question from Abhijit Tibrewal of Motilal Oswal.

Sir, I just wanted to ask one question. I remember hearing earlier in the call, you said that disbursement momentum has been improving and every month, right, we are doing higher disbursements than the previous month. And somewhere, I think you also guided on what we are expecting in terms of disbursements in Q3, Q4. The question here is that historically, right, if I look at the last 4 years, right, and then maybe except COVID period, even before that, Q3 always used to be a relatively lower disbursement quarter for us because as you'll appreciate, right, I mean, we have in phase in end November, early December, right, which are considered inauspicious in Southern India and people don't buy or invest in a property. So, what is giving us confidence today that sequentially also from Q2 to Q3 disbursements can be higher?

Yes, Abhijit, you are right. See, historically, Q3 has been lesser than Q2, but that is exactly what we are working on breaking the trend. Like we have introduced a lot many channels from the market wherein we want to break from the shackles of erstwhile years and go on with a consistent growth. And yes, that is a challenge for us, but we are working on it, and we are confident that we can do it.

To supplement Mr. Raja, see, during the September quarter ended, our sanctions was close to about INR 1,206 crores, whereas we have done only disbursement of about INR 1,070-odd crores. So, there is a gap of about INR 150 crores gap is there, sanctioned but not disbursed in September quarter alone. In June quarter also, we are having sanctioned but construction cases loans, some disbursements are pending. So that -- with those numbers, we are confident that achieving whatever the guidance what we have given.

Got it. And then just a follow-up here, sir. While -- I mean, congratulations to you and your team for, I mean, demonstrating a healthy momentum in disbursements, what really little bit worries me, right, is that in that zeal to get to a certain target in terms of disbursements and growth, hopefully, we are not having to compromise on the underwriting, right, and asset quality. Why I ask this is -- so your yields have actually improved in a declining rate environment. Every other HFC that we speak to, right, acknowledges that, hey, there is a lot of competitive pressure from banks. And despite that in an environment like this, if our yields are going up, and our disbursements are improving, I'm just kind of trying to say that even the underwriting and the asset quality are in place, right, on the incremental book that you are building?

Yes, suitable underwriting -- yes, of course, we have improved a lot in the underwriting standard, which is [indiscernible] from our performance of new loan book. If you look at delinquencies NPA in the new loan book, it's almost -- its gross NPA in the loan book is close to about 1.2% compared with old book NPA is very, very minimum. So, we have improved a lot in underwriting standard in the last couple of 4 or 5, 7 quarters. In addition to that, we formed a separate in corporate office, it's called credit review. Once sanction is happened, the credit review team review the sanctions and after getting a clearance from the review team, then the disbursement will happen. We are having a proper checks and balance. There will not be any dilution in the quality of the asset. Yes, no doubt, we want to grow. But at the same time, we will ensure that quality in the growth, also profitability in the growth. That is our primary objective, growth with quality and profitability. We will not compromise quality for the sake of growth. That is damn sure.

We have our next question coming in from the line of [ Kiran ] from [ TableTree Capital ].

Sir, many congratulations on a milestone quarter. [indiscernible] enthusiasm in crossing INR 1,000 crores. Sir, a couple of questions, one more strategic and the second more financial. The most [Technical Difficulty] question is around -- we've had a lot of U.S. tariff situation. Tamil Nadu is a massive export to the U.S. kind of state. We are 56% to 60% exposed to Tamil Nadu and most of our customers might be working in one of these textile companies or the engineering companies who are exporting to the U.S. So, in this context, if you could just tell me in H1, we disbursed totally about INR 1,900 crores, of this disbursement of INR 1,900 crores, could you tell us how much was home loan and how much is home equity -- because LAP/home equities when the stress levels are a little higher. So that's the reason why I'm asking that question. And if you could just explain the overall scenario what you are seeing on the ground? Obviously we are reading newspapers but you'll know much more on the ground [Technical Difficulty].

Yes, Kiran, on my housing loan to non-housing loan portfolio, we are maintaining the same ratios of 72 on 28.

Sir, that's for the overall loan book, sir. I'm asking the last H1 we disbursed INR 1,800 crores, how much was home loan and how much was home equity?

So, it is more or less on the same ratios. Anyway, I'll give you the exact numbers, maybe post call I'll ask my team to share it with you. But we have -- I have gone through the numbers, it is more or less the same. A tad here or there but it is on the same ratios. That is one. And second is we don't have any concentrated industry-wise exposure. Because of our branch network in Tamil Nadu and our wide footprint here, we are very, very distributed and so far, touchwood, we have not faced any issues as mentioned by you, because of our concentration of industrial and export markets.

Got it, sir. That is very helpful. Second, sir, I know we have kind of raised cost to income last couple of quarters, but our return on assets fell from 3.2% to 2.9%. Do you see this going back above 3% in this declining interest rate environment? Or we continue to see this trending down to 2.5% over the next year to 18 months?

The return on [indiscernible] major assets which we have procured in the last quarters started earning revenue only in the next quarter only because the majority of the assets had a final month, September. Return will be visible in the month of November and December. So the return on asset we are giving the same guidance which will be 2.9% to 3%.

Okay, for this year ma'am, I mean generally...

For FY '25.

For this year. This quarter we had some one-off expenditure like celebration of silver jubilee and all. Going forward, I'm -- right now the return is 2.92%, you can expect it may go up by another 1 or 2 basis points, not more than that immediately.

Got it, sir. Sir, generally if I may ask, the return on assets is a combination of many, many variables. And given the interest rate continues to decline, GST and all that bonanza coming through, if interest rates continue to decline and given the competitive scenario like this, should we expect the ROA to trend down or how does it work?

See, all my entire loan assets are -- I mean, floating. Whenever I got cost benefits, it will be passed on to borrowers to retain a good customer. To keep our rates in the competitive, we have to reduce the rates and all. Expenditure side, yes, we are exercising more cautious and economy in expenditure. So, keeping all those things we can see slight improvement in ROA in coming quarter -- December quarter end around -- this number may go up from 2.9% to 2.95% or something like that in December.

Congratulations and look forward to the INR 16,000 crore milestone this year.

We have our next question coming in from Varun Dubey of Share India Securities.