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

Ladies and gentlemen, good day, and welcome to Repco Home Finance Q1 FY '22 Earnings Conference 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 Limited. Thank you, and over to you.

Yes. Thank you, Ahman. So welcome, everyone. We thank the management of Repco Home Finance for giving us this opportunity to host their earnings call. We have with us Mr. Yashpal Gupta, MD and CEO; and other members of the top management team. Gupta, sir, may I request you to start the call with your opening remarks on Repco's performance. Post which, we'll open the floor for questions. So over to you, sir.

Yes. Good afternoon to everyone, and a very warm welcome to this earning call. As we all know, this quarter 1 was historically, in many ways, for all of us. We had a second wave of the pandemic, COVID-19, which was only first wave. We also lost in the company [ some of the employees and their relatives ]. As you know, collection was very poor in this. And also, [indiscernible] any new business. Last year, if you remember, we had done 75% of [indiscernible] in Q1. But this year, since our [indiscernible] did not allow moratorium, we, too, despite the [indiscernible], we increased by [indiscernible], we had to [indiscernible]. And because we're [indiscernible] still were 90%. That is why you find it [indiscernible] still high. But we had quite [indiscernible] last year also, as you saw. While Q1 and Q2, if you look at until February to May [indiscernible] was about 35%. But the margin could bring down the [indiscernible]. So this year, we have done the [indiscernible] of some accounts and [indiscernible] good recovery. The [indiscernible] last year was also not good in terms of [indiscernible]. This year, we record [indiscernible], but it goes [indiscernible] results [indiscernible] to be high, and the [indiscernible] with negative. But the important thing is you look at the parameters, that is the NIM and the spread. They are better than last year. While profit is lower because of [indiscernible], but we are [indiscernible] upfront. The entire loss book fund still be imported [indiscernible] outcome, which [indiscernible] visible, then we should do well in winning most of the year. [indiscernible] of our employees and a lot of you investors also. Now with this [indiscernible] numbers that I'll shared with you. So I would not [indiscernible] numbers. If you have anything, any questions, I'll be happy to answer and my colleagues also will be happy to answer.

[Operator Instructions] The first question is from the line of Viraj Mehta from Equirus PMS.

Sir, as far the provisioning that you have done, are you saying that almost all the pain that you think can come, you've taken upfront and there'll be no more provisioning, which will come -- elevated provisioning that we are seeing that will come from Q2 onwards? And do we see what kind of recovery will you see from some of the write-offs that you have taken?

See, yes, [indiscernible]. There are 2 parts to your question. What is the [indiscernible] Q2, Q3 and Q4? Now here, of course, [indiscernible] become, how long it was there. [indiscernible] we're working parameters [indiscernible] then yes, you are right, we don't see any additional value, maybe [ INR 10 crores, INR 30 crores ], not much in the remaining period of the year. That is your first part. But again, [indiscernible] because most of our customers are not [indiscernible]. So collections can be a problem. But we are hoping that with the vaccination, the [indiscernible] will be controlled. Now second, you asked about write-offs. We are not -- if you see, we have not done [indiscernible], but we are [indiscernible] you can only [indiscernible] after [ 50% ] will only recover. So while the [indiscernible] will take time, but the [indiscernible] under COVID.

I understand. I understand. And what were the bank transfers this quarter? And when do you see growth normalizing for you? Will it be this quarter, next quarter? If you can throw some light on that.

Sorry. Can you repeat the first part of [indiscernible] again?

What were the bank transfers this quarter?

[indiscernible] bank transfer.

Bank takeover.

Thank you. Yes. See, it is very difficult for us to move that [indiscernible] and we have seen [indiscernible] sometimes the customers have faced from [indiscernible]. But I can tell you the -- equally is about [indiscernible]. First quarter, we saw about [ INR 2 50 crores ] [indiscernible]. It is difficult [indiscernible] how much was by bank, how much was by investor [indiscernible]. Total about [ INR 2 50 crores ] was [indiscernible]. And [indiscernible] we have -- because [indiscernible]. So Q2 [indiscernible], and we are looking at growth on Q3 onwards. We feel we may guide that continued outcome.

Sir, can you repeat that, sir? Last thing, what did you say?

I think Q3 impact is minimal. [indiscernible]

Okay. And so, sir, we have been between this INR 11,000 and INR 12,000 crore book for almost 1.5 years, 2 years. And because we don't seem to grow, when do you think the environment will be prudent for us to again start growing because, essentially, we are losing market share not only to banks, but even to other housing finance companies who are growing at this point? What do you have to say about that?

There are 2 parts [indiscernible] what you asked. One is the growth in last 1.5 years has been muted [indiscernible], but [indiscernible] with COVID and [indiscernible] companies is suffering [indiscernible]. Unfortunately, because over [indiscernible] is different. And for the last 1.5 years, we unfortunately, externally, we have been affecting the economy and the [indiscernible] that we got. [indiscernible] and what we have tried to do in this period is cover ourself as a group [indiscernible]. We want to take ourselves [indiscernible]. So we have increased the liquidity on balance sheet. We have [indiscernible] [ INR 2,200 crores ] [indiscernible]. So we are considering, I would say, not [indiscernible] as ever. I don't see we are not [indiscernible] ever. But not with [indiscernible] ever to go over [indiscernible] in the last couple of years. But we are forward-looking, we are now going to [indiscernible] from next quarter onwards.

Okay. Okay. And do you think that your interest cost has kind of bottomed out? And do you see any increase in your interest cost going forward?

See, I don't know what you mean by [indiscernible], but [indiscernible] has indicated [indiscernible] that by February, they [indiscernible]. We still have a lot of [indiscernible] while continuing [indiscernible] or there are lenders who are willing [indiscernible]. So we can tell they're not bottoming out. We can [indiscernible], but I don't see it going up in near quarter.

[Operator Instructions] Next question is from the line of Abhijit [indiscernible] from Motilal Oswal.

Hope you are doing well.

[indiscernible] Who is there? [indiscernible]

Sir, is it better now?

Yes, now better.

I have 2 questions here. One question is, how should we read this increase in the GNPA that you have reported? Was it purely because of the COVID second wave? Or is there also an element of the seasonal deterioration in asset quality that you report in Q1 of every financial year?

What is the earlier question?

The first question? I mean how should we read this GNPA deterioration or asset quality deterioration that you have reported? So one element is the second COVID wave and the other is that seasonal deterioration in asset quality that you report in Q1 of every financial year.

Yes. But see, last year, [indiscernible] one as we [indiscernible] moratorium and we [indiscernible] 75% of our customers. 75%. It was temporary [indiscernible] cash flow from them, and they could not pay [indiscernible]. But by March, it was 3 or 4. While I agree with seasonal deterioration, but this year, if [indiscernible] happen, we were hoping [indiscernible] about 4% [indiscernible] by June. It is because of [indiscernible]. We could not move [indiscernible]. They do [indiscernible] all the -- we [indiscernible] so that they could go and we [indiscernible] he will say, how do we add or not -- have no income. So [indiscernible], but [indiscernible]. So I would say, I would [indiscernible] 9%, 10% or 100% [indiscernible].

Okay, sir. And the second question that I had is, sir, can you give some more color on your restructured book? Was it primarily from the self-employed customer segment, any geographical color? Or if you can share, I mean, what proportion of this INR 610 crores that you restructured was in the 0 DPD bucket, also in stage 1 as on March 31?

No. [indiscernible] that we can't give that now. But yes, as far as we have that, they will understand that. And as far your [indiscernible], most of them [indiscernible], they were all [indiscernible]. So most of them [indiscernible] loan book.

Okay. And sir, lastly, on your employee expenses, I think if I remember correctly, you had shared that you had recently seen a wage revision. And despite that -- and I think during the quarter, you saw a net addition of about 15 employees. And despite that, I mean, your employee expenses are down both Q-o-Q and Y-o-Y. And sir, last question, if I may just squeeze in. Can you share the aging of your stage 3 assets now? Because, sir, from what we understand, you keep resolving some of your stage 3 and NPAs. The newer ones keep getting [indiscernible]. So it will be good for us -- rather helpful for us if you can share some of the aging around your stage 3 assets.

Aging for the [indiscernible]. Right now, I don't have that.

Sure, sir. I'll take it [indiscernible].

[indiscernible] we actually [indiscernible]. And I do want to have [indiscernible] turnover rate is quite high. So overall, they could [indiscernible] come down. We have some high value implied our higher cost [indiscernible]. But this is all on track.

Our next question is from the line of [ Akhil Azari ] from Global Capital.

I just wanted to know is there any guidance for credit cost in FY '22 and going forward. If you could just give us any number.

[indiscernible] the first question [indiscernible] first quarter, we have made about INR 70 crores [indiscernible], but we don't expect to go for the entire year. There are [indiscernible], as I told you. And we're hit all so hard. But otherwise, [indiscernible]. So credit costs should be around [ 90 ] this year. First quarter has been high because of the [indiscernible], but they are [indiscernible] So Q2, Q3, Q4 [indiscernible] much.

Okay. And are there any branch additions in FY '22? And going forward, will there be any branch addition?

Going forward, of course, there will be additions. But -- so while in this year, because we may tend to control our losses, losses may not [indiscernible] on the [indiscernible], but it also implies the manpower, and there was our [indiscernible]. So this year, so far, we have not done any branch addition. There will be 1 or 2 additions. We are [indiscernible]. So maybe 2 or 3 will come in the branch, but no new tender as of now. But as you've heard, we had really idea of opening our 15 branches, which is [indiscernible].

[Operator Instructions] Our next question is from the line of Viraj Mehta from Equirus PMS.

Most of my questions has been answered.

[Operator Instructions] The next question is from the line of [indiscernible].

Yes, sir. Sorry for the misunderstanding from my end. I just wanted to understand the provisioning you have made. Can you give us a bit of sense of how much of it is on account of GNPA or stage 1, stage 2, stage 3? How much is because of restructuring? Because my understanding is that you need to also create provisions for all restructuring that you need to do some part of the provisioning that to be done for restructured assets. And also give a number on write-offs that you have taken, if any? That is the first question. The second question is, again, on the growth side. So we have obviously been losing almost like INR 200 crores, INR 250 crores of [indiscernible]. But somehow, why are not bidding so aggressive to also do balance transfer in from, for example, other affordable housing companies, which are lending at 17%, 18% where we are extremely competitive in terms of rate? So if we are losing our best customers to bank, why are we not be aggressively trying to also take customers from affordable housing companies, which are lending at almost 3%, 4%, 5% higher than us?

Okay. So first of all, let me answer about [indiscernible] in this quarter is 0 alone. [indiscernible] is about [ INR 61 crores ] are because of the [indiscernible]. That is [indiscernible]

Understood. I just wanted this clarity. [indiscernible]

Okay. Now [indiscernible] remember [indiscernible] in February. The [indiscernible] new colleague [indiscernible]. And we said, yes, [indiscernible]. And we are -- of course, as you know, it requires around 2 months for putting [indiscernible] system to watch it because then you take in other things. So we're thinking we'll cut from them. In April, we [indiscernible]. From April, we [indiscernible]. In fact, we learn from internal competitions also. Unfortunately, as we thought of that, the [indiscernible], and we are not able to [indiscernible]. So the [indiscernible]. Probably [indiscernible] a priority in our banks. But as we see, coming back to normal, probably, we'll start again [indiscernible].

Okay. Just one follow-up question on the restructured part of the book. Like you mentioned earlier, only small part of it is salaried. Can you also give us a sense of how much of it is from LAP and how much of it is from housing finance loans?

[indiscernible]

Total restructured book around 15% is pertaining to LAP book. Remaining is the housing loan.

So basically, it's almost in the same proportion as our loan book where almost [indiscernible].

Yes.

Okay. And both the -- so LAP is largely salaried -- nonsalaried. Then even on the salaried -- I mean on the housing finance loan restructuring, you are saying [indiscernible] from and salaried only?

[indiscernible] salaried. [indiscernible] Right now, we know that [indiscernible], but most of it is nonsalaried.

No problem. I just wanted qualitative understanding.

[Operator Instructions] Our next question is from the line of Amit Ganatra from HDFC Mutual Fund.

Yes. Two questions from my end. So one is that you just mentioned that out of INR 78 crores of total provisions, almost INR 61 crores were towards restructured assets. Is this correct?

Yes, correct.

But sir, then your ECL provisions have also gone up by INR 44-odd crores, whereas the balance provision seems to be only INR 17 crores. So how does this number -- these numbers are not telling, because your ECL provisions on Stage 3 quarter-on-quarter seems to have gone up by INR 44-odd crores.

So there are some write-back from Stage 2 to Stage 3 -- sorry, write-forward to Stage 3 as there is some write-backs. So net increase in Stage 2 was INR 30 crores and increase in Stage 3 was INR 50 crores.

These income provisions were written back from Stage 3. That's why.

Yes, from Stage 2 to 3. Some assets moved from Stage 2 to Stage 3. So we had to provide addition on that. So there's a net addition of INR 50 crores on Stage 3 and net addition of INR 30 crores on Stage 2.

But your P&L, only INR 17 crores was provided. Is it correct? To the P&L?

No. INR 70 crores, 7-0. INR 69 crores -- INR 70 crores -- it was INR 78 crores, sorry. Close to INR 80 crores.

But out of INR 78 crores, INR 61 crores is thoroughly towards restructured assets, right? Is there a better update provision?

No, no. What is [indiscernible] is a gain. There are several reasons looking at it. In premium account, we project it was only INR 8 crores. Now out of the [indiscernible] that INR 78 crores minus INR 61 crores, INR 17 crores. So that one is there. But what I wanted -- when we do this here, the INR 61 crores all in, all [indiscernible] It will go down in that case. What I mean to say is it -- for receiving, we have made INR 61 crores all in, but internally, by [ December ], we want to [ pay it all ].

So is my understanding correct that the INR 61 crores provision has not been made through P&L, I mean, true provision number? It might have been directly been appropriated or something like that? Is the understanding correct?

No, no. We've been providing P&L. But we knew that some things maybe when we were [indiscernible] also. So net provision is already [ INR 80 crores ].