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

Ladies and gentlemen, good day, and welcome to Repco Home Finance Limited Q1 FY '27 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.

Yes. Thanks, Swapnil. Good evening, everyone. Thank you for joining this Q1 FY '27 conference call of Repco Home Finance. From the management team, we have Mr. T. Karunakaran, MD and CEO; Mr. P.K. Vaidyanathan, Whole-Time Director and Chief Development Officer; Mr. M. Raja, Chief Business Officer; Mr. A. Palpandi, Chief Operating Officer; Mr. Ankush Tiwari, Company Secretary and Compliance Officer; and Ms. Shanthi Srikanth, Chief Financial Officer. With this, I hand over the call to Mr. Karunakaran for his opening remarks, post which we can open the floor for Q&A.

Yes. Thanks, Mr. Rajiv. Good evening to everyone. I would like to welcome to the earnings call of our company for the quarter ended 30 June 2026. First of all, I thank you all for joining in this call. The detailed financial results and operational highlights have already been shared in the investor presentation and published earlier and also available in our website. For the benefit of attendees who have not had the opportunity to review the financials, I will brief the performance of our company before we move into Q&A sessions. Our sanctions stood at INR 938 crores as against INR 907 crores in FY '26 and disbursements at INR 843 crores as compared to INR 829 crores in Q1 FY '26. In the month of April, we have -- as a routine thing -- we have transferred a few branch heads and second line officers. And in the month of May, we have promoted an eligible candidate to next cadre. This is the process every year we used to conduct. This year, which is -- this process affected our disbursement in June quarter. Now our people are settled in the new places of posting. Disbursements are happening as per our expectations. July disbursement and disbursement from 1 August, to till date are in line with our expectations. And AUM stands at INR 15,990 crores as end of 30 June 2026. We have seen 8.9% year-on-year growth in the AUM. What I mentioned, the INR 15,990 crores is excluding disbursed checks, but not realized. Almost 57% of our book is coming from Tamil Nadu. Our book is well diversified. We have not seen significant shift or changes in salaried and non-salaried class profile of the borrowers. The ratio of exposure between non-salaried and salaried segment stood at 53.5% and 46.5%, respectively. The share of non-HL, that is a home equity loan is stood at 29% and home loans stood at 71% as end of June 2026. In respect of book quality, we continue to maintain a strong focus on asset quality. As end of the June, our GNPA stood at -- in absolute terms stood at INR 427 crores with the GNPA ratio of 2.7% compared to INR 405 crores and 2.6% in the previous quarter of the same period. On year-on-year basis, we have seen significant improvement in asset quality. In absolute terms, NPAs declined at INR 485 crores as end of the June -- our gross NPA was INR 485 crores as end of the June '26. June '25, and our gross NPA stood at INR 425 crores. We have seen substantial reduction in NPA on year-on-year basis. In terms of percentage also, we have seen improvement on a year-on-year basis. Our systematic and regular follow-up would result reduction in NPA in going forward. Our NPAs and overdues in new loan book is under control. Coming to the provisions, the ECL provision, the cumulative ECL provision, as on 30 June 2026, stood at INR 352 crores. Our PCR, that means Stage 3 provision to Stage 3 gross assets is about 54%. Coming to Stage 2, our Stage 2 numbers are at 7.2%, broadly stable compared with 7% in the previous quarter and showing a significant improvement from 9.7% a year ago. In Stage 2 and as well as NPA accounts, we are recovering, but the recoveries are not sufficient to upgrade to accounts -- to account as a standard. We are making a substantial recovery in both stages, Stage 2 as well as Stage 3, along with the penal interest, other charges, we are recovering, but recoveries are not sufficient to upgrade to assets to next -- I mean, higher category. Coming to the borrowing side, the cost of funds of the company stood at 8.3%. The borrowing mix remains at 86% from banking system and 6.2% from NHB and 4.8% from Repco Bank. And out of total borrowings, NCD contribution is about 1% and about 0.5% from CPs and PTC. During the current financial year, we have received a refinance support from National Housing Bank to the extent of INR 600 crores. Out of INR 600 crores, we already availed INR 106 crores during the first week of August. Remaining amount will be utilized shortly as and when we need funds. Coming to the profitability. Our net interest income increased to INR 216 crores as against INR 207 crores in last June. Our NIM for current quarter stood at 5.4%. We are able to maintain a 3.4% spread for quarter ended June 2026. Our net profit stood at INR 114 crores as against INR 108 crores in the previous year. Our ROE and ROA stood at 12.7% and 2.9%, respectively. We have taken various steps to reduce our cost. If you see the numbers, we have seen a reduction in cost year-on-year basis as well as sequentially. Our cost-to-income ratio stood at about 26%. As end of June, our credit cost stood at 0.2%. During the current quarter, we have not opened any new branches. Our branch count stood at 242 branches. Out of 242 branches, about 32 satellite centers we are having. For current financial year, we want to open another 12 to 13 branches and majority of the branches will be in places like A.P., Telangana, and Karnataka and West side of our country. This is our performance of June quarter. Going forward, our priorities will be accelerate the disbursements. Our transfers and promotion exercise slightly affected our disbursements. Now our people are settled. So we will accelerate our disbursement while growing, we want to maintain the quality in the asset. We don't want dilution or compromise in the quality of asset for the sake of growth. We will improve our operating efficiency. We want to diversify our liability side. We got INR 600 crores refinance and we are negotiating with our bankers for reducing our rate of interest. This is our plan for this current quarter. Guidance, in respect of guidance, I stick on a guidance of what I have given in my last con call. That is INR 5,000 crores disbursements and 13% to 14% growth in the AUM and reducing NPA by INR 40 crores. This is the guidance what I have given in last con call. We are sticking on the guidance all -- whole year. For current quarter, we are targeting INR 1,200 crores to INR 1,250 crores disbursements. And we set a target of bring it down June NPA to last March NPA level. That means our June NPA was about close to INR 427 crores. This number, we want to brought it down to around INR 405 crores. This is what we want to do it in current quarter. We thank each one of you for showing interest in our company. It is now I open the floor for Q&A. Over to Mr. Rajiv.

[Operator Instructions] We will take a first question from Gurumurthy of HNI. Please unmute your connection and go ahead. Can you hear us? Gurumurthy, can you please go ahead? Would you like to try it one more time? Can you unmute your microphone once?

Audible now?

Yes, please.

Okay. So I just wanted to know, if I check the long-term growth of Repco Home Finance, I find it disappointing because the starting rate of interest of Repco Home Finance is something like 11% for a lender. Am I right or wrong?

Sir, by lender, you mean the rate that we give to our customers or...

Correct, customers.

Sir, we start from 8.75% and our average is at 10.5%, for housing loans.

But what I find out across the home finance companies, some banks are giving like average rate of interest on home loans is something like 8.5% to 8.75%. And with respect to Repco Home Finance, I find it.

It's purely based on cost of funds, sir. It's purely based on cost of funds.

Agreed. No, no, no, no. I'm not connecting the cost of funds at all. I'm just saying that let us say, for example, if I'm a customer, I come to Repco, I end up -- I may end up paying 10.75%, 11% also in certain cases. But if I go to a general home finance company, I will definitely get lower rate of interest.

Sir, the rate of interest fixed based on your income, rating, CIBIL score and everything, so many factors are there. So it depends on the customer.

Sir, first of all, the rate of interest fixed based on what customers depends on the cost of borrowing of each institution. Bank's cost of fund is entirely different. They are having a free -- I mean, they are having a CASA for which they are paying around 3%, 3.5% or something like that. For our company, it is not like that. I'm borrowing from the banking system. I'm borrowing from National Housing Bank and Lending. So the average cost itself, in around 8.35% to -- 8.3% to 8.35%. In this scenario, lending at PSU rate, it's not at all possible for me. It is not at all viable business for the company, number one. Number two, my set of target customer is not like PSU set kind of target customer. PSU set of customers is entirely salaried, pure salaried class customer. My set of target customer is not like that. They are working in unorganized sector. They are working in the business -- doing the business. They will not have a sufficient income proof to show their cash flows and income. That kind of borrowers -- I'm targeting those borrowers, number two. Number three, the pricing of -- the ultimate pricing depends on the profile of the customer on risk basis. I'm ascertaining the risk of the borrower based on 16, 17 parameters. Based on that price will be fixed. This is the system what we are following. Even some of the housing finance companies NBFC are offering at 17%, 18% and people are going.

That is actually -- because I have taught economics degree in post-graduation. I find it amusing to hear this that people are going for this. That is, again, just like an unregistered money lender. So one more thing I wanted to ask, if Repco Home Finance is not able to give returns to its shareholders, why is there any restriction on you to diversify your business? I'll give you an example. If a shareholder has subscribed to IPO of Repco in 2013, and you compare the current market price, he has hardly made any money. Now with respect to myself, I'm one of the top 100 shareholders in the company. I hold a very high quantity of shares in Repco Home Finance because I believe that Repco may also diversify into other lines of business, which I find it could not do so. It is following the same old system of taking from banking system and giving passing it on with a margin of 2% to 3%. So as a customer, I'm the biggest shareholders in -- amongst individual shareholders in Repco because I hold more than 225,000 shares. But I find it amusing that tomorrow, if I have to buy a huge house, I may not be able to take the loan from Repco as a genuine customer, but I will be going to banking system because they are flush with funds and the average rate of return is 8% to 8.5%.

Sir, I will -- as a policy, as a principle, I will not make any comment on our share price in the market.

Agreed, but my question again remains, since your system is fixed, are you going to diversify into other lines of business?

Right now, we don't have any idea. See, we are expert and we are in the field for 25 years. We know only housing finance business right now. We don't have expert and expertise in other business. Let us see. Let us examine. Right now, we don't have a plan to diversify our business. We want aggressive -- though we don't want to diversify our business, we will be very aggressive in business disbursements going forward.

But aggressiveness at a higher rate of interest is difficult.

No, I see, as Mr. Raja said, my initial rate is the beginning rate is 8.75%. Yes. With that rate, yes...

Sir, as such, there is a market segment in this rate also, sir. Sir, what you are talking about is a vanilla product or what we call as a primary housing loan market, where it is at 7.5% and 8%, but there is also a market in our country for our kind of products, and many players are there in that market. We are trying to garner our own market share, increase our disbursement and bring in more profit share. We are working towards that, but we will be more aggressive from now on, sir. That's what we have planned also, and our plan is in place, sir.

So if you look at our disbursement number for last 8, 9 quarters, we are seeing increasing trend now that everything is settled. We have done IT revamping, so many things, structural changes we have done. All the things are stabilized. Now we have shifted to aggressive mode. Going forward, you can see a substantial improvement in the disbursement as well as growth in the AUM.

And also, sir, we have an HFC license, sir. So diversification is not going to be an off the cuff for us because for an HFC license, we are allowed to do only housing loans or mortgage loans, if I can say that.

Of course, we people only know housing finance.

What I meant was if you are flush.

Sorry, Mr. Gurumurthy, would you like to rejoin the queue? We have other participants as well. please. We'll take our next question now from Prithviraj Patil of Investec. Prithviraj, please unmute your microphone and go ahead.

So I just had one question like this quarter or month end disbursement were impacted by the check issue. So ex of that, what is the gross level disbursements that we have done? Because the sanction also seems sort of low? So if you can give that bookkeeping question.

For a monthly basis, my month end disbursement, which will be at around INR 35 crores to INR 40 crores month-on-month would be carried forward. So that is a cyclical for me. So except for that, there will not be much of an aberration, sir, in the numbers, whatever we have reported. That's a business as usual for us. Every month, every year, yes.

Okay. So the first quarter disbursements, but they have been impacted by the cheque?

Yes, sir. My June month number, which is part of the first quarter, my June month number would have that aberration, sir, yes.

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

Sir, just to have the visibility clear about the growth that you are talking that you will do. Can you tell us some business numbers for June and July, whether the momentum is back to the normal levels? What is the monthly disbursement run rate we are exhibiting in August? Because you're talking about INR 1,200 crores and INR 1,250-odd crores from straight away at INR 40 crores. So can you give us more confidence about how June and July has been in terms of numbers?

Yes, Rajiv, on the June month and July month disbursement has been on track as whatever commitment we are given of INR 1,200 crores per month -- per quarter, sorry. We are on track. First quarter, as usual, every month, that is a trend for us, whether we like it or not, that's a trend for us. But this quarter is looking good. My June -- even in the first quarter, my June month numbers has been good. My July is even better. And August, hopefully, I'm looking at clocking more than whatever we have done. So my numbers are in track. And for the year, yes, we are on track for INR 5,000 crores.

So I mean, you're pretty sure that we are sitting?

Yes, yes, yes, I'm pretty sure and confident that we'll be in a position to achieve INR 1,200 crores disbursement. Since this is a price-sensitive information, as per our own policy, I'm not supposed to disclose numbers right now. But the disbursement, what has happened in July and till date from August to till date, in line with our expectations and our -- I'm sure based on that only, we have arrived at INR 1,200 crores of disbursements.

And so between what you did and what you missed in first quarter and now the second quarter, the momentum is pretty much very good? Have you changed any of your policy with regard to pricing, with regard to customer selection? Or it's with the same policy, same pricing that you've been able to get there?

Rajiv, as you are aware, we have not made any major changes either in our policy nor in our organization setup. But in the sourcing, we have brought in more focus on sourcing channels like there's a small alignment change in our sourcing channels from DSA to other ways and all those things. But those are all very, very marginal. And now the focus is more -- the pressure is more, the team has been set in place now. So the clock has started ticking that is all.

In connection with the interest rate, as end of the June, we are maintaining about 3.4% spread. We want to grow, we want to show, I mean, aggressiveness in the disbursements, maintaining this level of spread will be really challenging. Though we have not changed the policy level, changes in the pricing system. Case by case, I may need to sacrifice some portion in the part of fixing a rate of interest. So spread may slightly come down going forward.

Okay. And that is essentially from the fact that you want to be slightly aggressive on disbursement and even the cost of fund will increase?

I'm not foreseeing any increase in the cost of fund because NHB has sanctioned INR 600 crores refinance facility. Of course, I have undertaken INR 100 crores. With that, I will compensate whatever increase in cost of funds. The cost of funds will be stable at the present level.

Sir, I also see this elevation in your runoff of the book, right? Even in 1Q, the runoff of the book is higher than 4Q, meaning that there is a significant indirect competition through BT outs. So is the reading right that the BT out would have been higher in Q1 versus Q4? And if the BT out is going up, what are we doing to ensure that wherever prudent, we can retain good quality customers by offering good rates or offering a top up loan?

Yes, yes, we already decided. We have seen a spike in BT outs in the June quarter compared with March. Yes, we decided to retain the good customer, those who are having a good track record of 24 months and a good source of income and good LTV and having a CIBIL score and all we decided to reduce and offer some good concession to retain the customer to avoid the BT outs.