SRG Housing Finance Limited ($534680)

Ladies and gentlemen, good day, and welcome to the Q4 FY '26 Earnings Conference Call of SRG Housing Finances Limited. [Operator Instructions] Please note that this conference is being recorded. At this time, I would like to hand the conference over to Ms. Purvangi Jain from Valorem Advisors. Thank you, and over to you, ma'am.

Good afternoon, everyone, and a warm welcome to you all. My name is Purvangi Jain from Valorem Advisors. We represent the Investor Relations of SRG Housing Finance Limited. On behalf of the company and Valorem Advisors, I would like to thank you all for participating in the company's earnings conference call for the fourth quarter and full year ended of the financial year 2026. Before we begin, let me mention a short cautionary statement. Some of the statements made in today's earnings call may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's belief as well as assumptions made by and information currently available to the management. Audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decision. The purpose of today's earnings call is purely to educate and bring awareness about the company's fundamental business and financial quarter under review. Let me now introduce you to the management participating with us in today's earnings call and hand it over to them for their opening remarks. We have with us Mr. Vinod Kumar Jain, Managing Director; and Mr. Archis Jain, Chief Executive Officer. Mr. Archis has been with the company for over 8 years since 2018. He has played a key role in driving on-ground business expansion across sales and operations. Appointed as CEO in 2023, he brings deep market understanding, execution-focused leadership and hands-on experience in scaling business operations across regions. Without any delay, I request Mr. Vinod Kumar Jain to start with his opening remarks. Thank you, and over to you, sir.

Good afternoon, [Foreign Language]. SRG Housing Finance Rajasthan [Foreign Language].

Good afternoon, everyone, and thank you for joining us today. It is a privilege for me to address the investor community for the first time as the CEO of SRG Housing Finance Limited. I sincerely appreciate your continued trust, support and confidence in our institution. Over the years, our company has built a strong foundation driven by prudent underwriting, customer-centric growth, disciplined risk management and a deep commitment to affordable and inclusive housing finance. As we move into the next phase of growth, our focus remains clear: strengthening asset quality, improving operational efficiency, expanding responsibly across markets and creating long-term value for all stakeholders. As I take on this responsibility, my commitment is to lead the organization with transparency, accountability and a long-term perspective. We will continue balancing growth with governance while remaining focused on profitability, portfolio quality and customer trust. I would also like to thank our employees, customers, lending partners, regulators and shareholders for being an integral part of our journey. With that, let me now take you through the company's performance and key business updates for the quarter and the year. For the fourth quarter under review, net interest income stood at around INR 28 crores, registering a healthy growth of 33% year-on-year, while NIMs remained healthy at 11.28%. Profit after tax for the quarter came in at INR 9 crores, reflecting a strong growth of 50% year-on-year. For the financial year 2026, the company reported net interest income of INR 98.26 crores, reflecting a growth of 31% year-on-year. Supported by a steady AUM expansion and improving funding efficiencies, NIMs for the year stood at 10.91%. Profit after tax for the period stood at around INR 32.49 crores, marking a healthy growth of 33% year-on-year. As of financial year '26, our asset under management stands at INR 1,042 crores, reflecting a strong growth of 37% year-on-year. Disbursements for the year grew by 45% year-on-year to INR 443.54 crores, reflecting healthy demand momentum across our operating geographies. On the operational front, we continue to witness improvement in productivity metrics across the organization. AUM per branch increased to INR 10.86 crores in quarter 4 financial year '26 from INR 8.44 crores in quarter 4 financial year '25, while AUM per employee improved to INR 1.54 crores from INR 0.88 crores over the same period, reflecting improving operational efficiency and strong scale-led productivity gains. We also witnessed a 41% year-on-year increase in average ticket size to INR 15.44 lakhs during the quarter, primarily driven by expansion into newer markets and higher construction costs. Importantly, despite the increase in ticket sizes, our underwriting discipline remains strong with average LTV maintained at a comfortable level of around 50.7%. Asset quality continued to remain stable and healthy. GNPA improved to 1.77% compared to 1.84% last year, while NNPA stood at 0.65%, reflecting prudent underwriting standards and strong collection efficiency. Our capital position also remains comfortable with capital adequacy at 38.62%, providing sufficient headroom to support future growth. Cost of borrowing improved to 10.88% in quarter 4 financial year '26 from 11.07% in quarter 4 financial year '25, reflecting continued strengthening of our liability profile. Operational efficiency also improved steadily with the cost-to-income ratio declining to 63.14% from 67.49% over the same period, supported by improving scale efficiencies and operating leverage. Overall, we believe SRG Housing Finance remains well positioned to continue delivering sustainable growth supported by deep rural penetration, disciplined underwriting, strong collection infrastructure and a scalable operation model focused on underserved customer segments. With that, we would now be happy to take your questions. Thank you.

[Operator Instructions] Your first question comes from the line of Ronak Chheda from Awriga Capital.

Congratulations on the results. Sir, I had 2 questions. One is if you could share qualitatively on your new branches, how is the scale up happening in terms of AUM and the leads which we are generating? How do you see that panning out over the next 12 months in terms of scale up of the new branches, especially in the geographies where we have launched in the last couple of years? And the second is on your disbursement growth. Earlier, you have actually guided about INR 500 crores of disbursement growth. Just wanted to check, is that still holds? And how does one should think of the AUM growth for the next 12 months?

Right, sir. Thank you for your question. So one is that on the expansion program and how we are planning to do it. Currently, in last 1.5 years, we have expanded in the states of Maharashtra, Andhra Pradesh and Karnataka. And we are keen on increasing our branches in those particular locations. But we are also planning our expansion in the states of Tamil Nadu and Andhra Pradesh -- Telangana with that, but it will take time for us to do our research. And by the end of this year, we will be present in the states of Tamil Nadu and Telangana, but we are planning for approximately 10 to 15 new branches in these particular states. We are not going to expand in our existing states such as Gujarat, Maharashtra and MP, but we are focusing on the southern region. With the question on the disbursement number, we are targeting of approximately INR 600 crores of disbursement for this year. So this is our target.

And that would lead to an AUM growth of around -- you'll reach AUM of INR 1,500 crores by then...

It will be around INR 1,300 crores to INR 1,400 crores. But definitely, of course, we are very optimistic on the conditions right now. So we will definitely target for INR 1,500 crores of achievement. But the INR 1,400 crores of AUM is something which we are very optimistic on.

And just last thing is on your cost of borrowing. Now that we've got a rating upgrade, how should one think of your cost of borrowing as a trajectory over the next 2 years?

Sir, definitely, it is going to come down. But the thing is we are in an expansion mode right now. We are expanding in newer states. We have -- now we are focusing on a better top management team as well. We are doing a lot of recruitment as well and expansion also. So I can't guarantee you on the numbers, but definitely, it is going to come down, let's say, for next 1 to 2 years, it will come down from 63% to 61%.

The next question comes from the line of Ankur Kumar from Alpha Capital.

Congrats for a good set of numbers. Sir, I wanted to understand given our [indiscernible] geographical expansion plan and AUM target, what kind of ROE levels are we looking for in coming 1 or 2 years?

Sir, currently, what we are managing right now, we are trying to manage the same ROI level. But the thing is with the market of housing, how it is going forward, I think it will be around 18%.

Sorry, but currently, are we making at like 12%, 13%, right?

ROE you were asking, right?

Yes, ROE, return on equity.

Right. So -- so it is going to be same parallelly, but we are definitely optimistic on that. So we'll go around 12% to 13%.

Got it, sir. And sir, given this war situation and monsoon also less this year, so are we seeing any concerns on book quality or everything is going fine on that front?

No, sir. That is not impacting us a lot because we have a diversified book profile, and we have very different, different credit profiles also, customer profiles also. So that is not directly impacting us. So we don't see any challenges on that.

[Operator Instructions] The next question comes from the line of Rohitash Arora, an individual investor.

Sir, any particular reason for high GNPA in Rajasthan region?

Sir, nothing in particular, if I say so, that there's no reason to it. Maybe I don't see any challenge in terms of Rajasthan state, but the portfolio is quite big in Rajasthan when you compare it to other states which we operate in. So that's the reason it might show that there is an increase of GNPA. Otherwise, there is no concerning factor which is impacting the portfolio.

And sir, as our average ticket size is increasing, so these customers can get lower interest rates than ours. So is high competition affecting us?

Not really, sir, because the customer profile remains the same. The source of income remains the same, although there is a change in the cost of construction also and an aspiration of how a house should look like. That is also changing in the sector of rural and semi-urban. So with that sentiment, the reason of why we have an increase in the ticket size.

Your next question comes from Danish Shah, an individual investor.

I have a couple of questions to ask. So first is, I have observed Rajasthan and Gujarat together contribute nearly 77% of the AUM. So how does the management is planning to diversify the portfolio geographically over time?

Yes, sir. So basically, because we started off with Rajasthan and then Gujarat, then there is -- of course, there's a dominance in both the states. But if I see the fastest-growing states has been our southern part. In the last 1.5 years, I think they have been our fastest growth, which I have seen in our journey of SRG. I think they have grown faster than Gujarat and Rajasthan itself. So now I'm very much optimistic in the states of Maharashtra, Tamil Nadu, Andhra Pradesh, Karnataka and Telangana. That's the reason we have an expansion plan in these particular states only. And with that, I think in next 2 to 3 years, of course, right now, we see the dominance in Rajasthan and Gujarat, but eventually, it will have, by and large, the same percentage of share in the AUM.

Also, sir, I wanted to understand from you like what will be like some key challenges in scaling deeper into rural geographies while maintaining the company's asset quality and operational efficiencies.

Sir, only the key challenges is on the customer front. I don't see any key challenges in terms of macro-wise, but the thing is how we are improving our services, how we are giving the right need what is required from the customer part in terms of the amount, in terms of how faster we are giving that and a better customer service. So that is the key challenge for each and every company. So for that, we are having a lot of change in our platforms as well in our -- into our ERP system also. And we are transforming completely digital also. So I think these are the key things which we are focusing on for the upcoming year.

Okay. One last question. So as another participant has said, our average ticket size has increased significantly. So I wanted to understand how much of this increase was driven by high property prices versus a strategic shift in the customer profile?

Sir, I think it is more of the purchase has increased. The construction cost has increased and the customer profile remains the same for us. And I don't see any difference in that we are getting very new or different profile in comparison to the urban profile, but the profile remains the same. Only just that definitely, the property prices have increased also. There's a lot of development which government is doing into semi-urban and rural areas. A lot of industries are also coming up into different, different areas. So that is also leading to the price raise also in terms of properties. But now everybody aspire to have their home in a manner which was not been thought before. They want a proper house. They want small amenities also, which is also -- that is an aspiration, which is now seen in the semi-urban and rural areas also. So in that case, the ticket size has improved drastically.

Your next question comes from the line of Parag from PH Financials.

Sir, first of all, congratulations for a very amazing set of numbers. You guys have kept your word and given outstanding results as compared to other housing finance companies, what they have guided and what they have achieved. So sir, I have a couple of questions. One question would be on the guidance part of the AUM in the next 2 to 3 years that I would like to understand from you. And for that, the capitalization, are we well capitalized to achieve that kind of an AUM growth? Number one would be that. And number two, I would also like to understand the credit collection mechanism because in one of your presentation on Page #20, we see that the gross assets is close to INR 1,042 crores, but Stage 1 is close to 93%, and which reduces to 5% and subsequently at Stage 3 reduces to 1.77%. So why the Stage 1 collection is at such a high level as in the delinquency is at a high level? And I want to understand the collection mechanism, if you could help me with that, sir.

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[Foreign Language] which goes up to, say 93% [Foreign Language] and then subsequently [Foreign Language] and 14% to 15% bounce rate [Foreign Language].

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[Foreign Language] penal interest [Foreign Language] for that matter?

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[Operator Instructions] Your next question comes from the line of an [ Tushar ], an individual investor.

Sir, my question is more on the macro front. I just wanted to know, sir, how is this ongoing macro level uncertainty, especially the ongoing West Asia crisis and other things are impacting us? Considering our 75% loan book is contributed by self-employed borrower segment. So how is this uncertainty impacting us? How is the repayment trends remained within this segment? That's the first question, sir I have.

So all these macro things which are happening around the world and which might be impacting India in a manner that large business houses might get affected. Those who are directly associated with the government policies that might affect. But we are into the segment, which is very small, right? We are into the segment which has -- which are majorly self-employed and with a very basic self-employed profiles like Kirana stores, somebody into contractor, somebody who is into dairy business, somebody who is into spare parts business. So a lot of macro impact is not impacting their profile and their business thing, right, because they have a very small scale operational level. So in terms of that, I don't see any problem that is going to happen in this year and any other upcoming year. And with the rate payment also, I don't see any trouble on that. Along with that, we are very conservative on LTVs also and foils also. So that is helping us also to maintain the risk profile.

Understood. And sir, just continuing with that, so as you rightly mentioned that we are majorly focused on underserved notified customers. So how would be our underwriting approach different from the large affordable housing finance players and the big guys out there?

Sir, there's a difference. So one is that because we have majorly self-employed profiles, so there is a lot of underwriting assessment, which is being made in our organization. From the last 20, 25 years, we have been serving this industry. We have been focusing only on rural and semi-urban. So we have established our expertise in the assessment process. So we have created a lot of different, different profile templates. We have our own understanding, own database to understand the repayment tracks of different, different sectors where we are focusing on. Why we are different? So we don't believe on assessment we, of course, then you have a less documentation, right, because you are definitely targeting to those particular segments. So we have an understanding of assessment of profile. For example, if there is a customer who's into Kirana business, right? So we have made our own metrics and parameters to assess that particular profile. So our credit team goes there and stay with them to understand how the business is there, what are the cash flows, how much expenses they occur during the day, how much purchase and how they purchase it from which vendor to wholesalers. So everything is done then and there only at the customer's location, right? Because they don't have a banking habit, they don't have a GST, they don't have income tax returns, they don't have [ Jamadar ] and all those things. So for that matter, the assessment of the profile and on ground is very important to understand what is the need of the customer, what is the end use of the fund. So for that matter, the way we have trained our team is helping us to assess these profiles.

Understood. And sir, so just last thing, the collections are happening are 100% digital? Or how much would be the split of collections in terms of cash collection and digital collections, sir?

So I think cash collection is not more than 4% to 5% because it is all online now. People now have started the habit of UPIs. So I don't think so. And it is quite prevalent in the semi-urban and rural areas also. So there's -- the cash collection is not more than 4% to 5%.

The next question comes from the line of [indiscernible], an individual investor.

I just have a few questions. So on the first question, so NIMs have remained stable at around 11% despite rapid growth. So what are the sustainable levels that we expect?

Somewhere around 11% only.

Okay. 11% only. And the other question is regarding the average LTV. So it's increased from 46.6% to 50.7% on Y-o-Y. So is this a strategy that the management is using? Or what is the -- like what is the risk profile?

Basically, it is not the strategy and there is no risk profile to it. It is more about the nature of the product that we are into, right? And to be in the market and to understand that it is the nature of the housing finance product is actually driving us from a 46, 47 LTV to 50-point-something something LTV. So that is there. There is no other strategy behind it.

[Operator Instructions] The next question comes from the line of [ Jai Jain ], an individual investor.

I just wanted to understand on your SRG SRAJAN program. So you all have highlighted a lot on the technology-led initiatives that you are taking. I just wanted to understand the business benefits you all have achieved for this and what was the cost for developing this app and maintaining it as well?

So basically, we have our own ERP system and continuously, we have been developing on that particular platform. Right now, we have a dedicated IT team for that. And we have introduced a lot of new changes in terms of AI into the calling. And now it is still under development. We are still -- because it takes the time because a lot of research is required in terms of how we are going to reduce the TAT, how we are going to increase the operational efficiency and all those things. For that matter, it is under process, and we are developing. So there's no [indiscernible] cost is incurred yet. But yes, definitely, we have now increased our teams in IT, and that's how we are doing it.

Okay. Another question I had was basically a bit more on long-term view. So I just wanted to know what AUM scale you all want to achieve in a more long term, like, let's say, 3- to 5-year period as well? And how do you position yourself in the market like with competitors like Aptus, et cetera, which have around INR 20,000 crores AUM currently. So I just wanted to understand how you are positioning yourself in your affordable housing finance segment basically, if you could help me on that.

[Foreign Language].

[Operator Instructions] As there are no further questions, I would now like to hand the conference over to the management for closing comments.

[Foreign Language].

Thank you. On behalf of SRG Housing Finances Limited, that concludes this conference. Thank you, everyone, for joining us, and you may now disconnect your lines.