Taageer Finance Company SAOG ($TFCI)

[Foreign Language] Everybody. Am I audible? Can you hear clearly?

Yes, sir, we can hear you.

Thank you very much. Good morning. Thank you for attending the investor discussion for Taageer Finance. On behalf of the Board of Directors and the management team and all staff of Taageer, I would like to thank all the investor community for their trust and confidence. I would like to extend our sincere gratitude also for Central Bank of Oman FSA for their continued support along with our investors and our clients. With this, I would like to start our presentation. Probably you might have seen a big word there called [Foreign Language] in English translates to impact, and that's what Taageer Finance aspires to do to its own community of borrowers and whether it's retail or non-retail. Probably we'll move to the next slide. Krishna, next slide please. Yes. Probably most of you are familiar with this time line. It was the Taageer has celebrated 25 years of Silver Jubilee in 2025. So now moving forward, we would like to think about ourself as 25 years old start-up if we may. So you would have seen all of these time lines. Probably the additional add-on would be in 2025 the company has revised its strategy entirely and looked at it from a different angle to refresh it and update it in order to cope with the recent updates of the market and looking forward. If you look at the branch network, we have 8 current branch networks. We are also expanding, planning an expansion, a healthy expansion into what we believe are profitable segments and from service point will be quite useful for our retail and SMEs. On the other side, you will see the market share in terms of operating profit [Foreign Language] it has been one of the significant landmarks over the past 5 years where it has achieved 30.1%. In terms of absolute market share by gross loan book, it has achieved 22.8% out of the entire FMC market. The Board, there are 3 subcommittees of the Board. First Board of Directors is -- has been recently elected in the recent AGM, whereby Mr. Issa Al Balushi representing [indiscernible] has been elected as the Chairman. Mr. Said Safrar Executive Chairman. Mr. Abdullah Bakhrebah has been confirmed as a member. Along with that, we have the other gentleman, Mr. Seyed Mohammad [indiscernible]. It is worth noting that over 70% of the investors in Taageer are institutional investors. There are 3 subcommittees -- 4 subcommittees ARC, Audit and Risk Committee; Executive and Nomination; Remuneration Committee. And then also the last Board, the Board has elected to form a Strategy Committee to ensure design and deployment of robust strategic plans and the execution throughout. Some key appointments happened recently, the appointment of the new Chairman of the Board, Mr. Issa Janjan Abu Bakar Al Balushi, with a lot of experience within the sector from being the largest shareholder, appointment of a new CEO [indiscernible] in order to reinforce our Governance Risk framework, Head of Internal Audit, a very seasoned person has been appointed. Head of Compliance has been also appointed, Head of Strategy to ensure that we are all aligned to the same objective has been done. And since we have a sizable size of employees bordering around 200 and human being the most important asset any company can have. And so does we have appointed a Head of Human Resources. So to highlight some of the key developments along which has happened recently in 2025. From strategy point, the Board has approved a 5-year strategy point looking forward of what are the market dynamics, where are the opportunities, where are the challenges and how does Taageer Finance want to position itself for moving ahead? Subsequently, the vision, mission and core values were revised. There were strategic objectives, which we have defined on a high level and mid-level to identify -- to keep us on track of keeping up with the market. Naturally, there were updates to the organization structure, which was approved by the Board. All of this focuses on being digital-first approach because we believe that being in the digital space is not elective anymore. It's a necessity for us from service point, from a control point from market accessibility, et cetera. As you may know, the market is evolving dramatically to the digital first. So revamp of systems processes and people is one of the key priorities which we are looking for ahead. On the risk management side, a comprehensive ERM, enterprise risk management, review is taking place. We are making sure that it is fit for purpose and aligned with the best practices along with the guidance of Central Bank of Oman. We are also reviewing the economic sector portfolio, as you know, in terms of amounts, Taageer today is one of the largest lenders to SMEs in the market. And they cut across multiple sectors, and then we are also reviewing past movement, the current and the futuristic outlook. And we do try to align ourselves to the Vision 2040 and the 5 key sectors or pillars we're trying to address and so are we. We are recalibrating our portfolio risk rating on ongoing basis since we are taking a full view of the entire portfolio. Along with that, internal process enhancements are taking place, whether it's from people perspective or system perspective or technology. So we are taking a full stop of that taking this opportunity. On the portfolio quality, we are taking a comprehensive review on the credit framework to improve the asset quality. As you know, the company has been building up quite a good positioning in the book side of it in terms of I think it's very healthy to revive that or take a deep look into the portfolio and reflect that into our credit assessment and become more qualitative in terms of choosing the risk we opt for. We are taking proactive measures to ensure focused recovery. Recovery is a key element for any financial institutions moreover for finance sector. As you know, finance sector try to cater for people who are seeking for financial inclusion, trying to SMEs who are trying to enter the banking segment. And usually, this is the starting platform for all of them. And therefore, we are trying to make sure that the portfolio does not slip behind too far, and we are trying to take further measures across all retail and nonretail segments. We are taking segment-wise review to improve the portfolio quality while making sure that we are having a sustainable growth. I think this is important given the prevailing situation, geopolitical situation where there are some challenges in terms of import. There might be imported inflationary pressures in there. Many of us have started to see some increases in prices, and we are hopeful that this situation in the region will go away soon and things come back to normality. Meanwhile, we are taking this opportunity also to take a full stock and make sure that we are focusing into what really matters in terms of quality of portfolio while bearing in mind the inclusion part of it. So to make it simple, we are focusing on this year and moving forward 3 aspects: one, strengthening our credit risk; two is enhancing our recovery position. And three is sustaining a healthy and sustainable growth moving ahead. I'll hand over to Moosa Al Lawati, our Head of Finance, probably to take you through some of the numbers. And as usual, I'm happy to take questions by the end of the presentation. Thank you.

Thank you. To start off with a positive note, the company has been consistent in increasing its revenue, registering a 16.2% in the current period. Despite the significant increase in revenue, the company has been able to increase its interest expense only by 5%. This shows management efforts in maintaining the borrowing and funding mix. This is also reflected in operating expenses, where operating expenses have also increased only by 5%, showing management efforts and budget control and cost control. Now moving into provisions. The company has booked provisions higher than the previous period by around 90%. This is in line with the company's prudent provisioning strategy where the company has decided to take additional provisions because of certain legacy accounts and certain restructured cases. As a result, we have booked a lower profits than previous period by around 25%. The company has also been consistent in increasing its portfolio levels, registering a 10% increase as compared to the prior period. Moving to the -- our borrowings and liabilities. I think I want to take a moment here to thank our banking partners, our corporate depositors, bondholders and the confidence in this company because the levels are positive here. Our borrowings have increased by around 5%, showing the bank confidence. I think 30% increase in corporate deposits is a significant increase in our books, showing the depositor confidence as well. Moving to retained earnings. Retained earnings have decreased by around 7%. This is due to lower profitability in the current year. As you can see, there is a constant -- there's a consistent growth in our portfolio. The company -- over a period of 5 years, the company jumped from OMR 185 million to OMR 340 million, showing a CAGR of 16.4%. The same revenues are in line, 20.5% CAGR from OMR 18 million to OMR 40 million increase over a period of 5 years. Again, operating profits are in line with the steady growth. Net profits have decreased in the current period, as indicated before, is because of the lower -- higher provisions taken by the company. The company has been able to maintain and increase their market share to 22.8%. EPS is in line with profitability. Cost-to-income ratio, despite the increase in revenues, a 16% increase in revenues, the company has been able to reduce its cost-to-income ratio from 45% to 30%, showing a very healthy level. Next slide. Provision Coverage. Again, provision coverage has decreased from 66% to 59%. This is mainly due to certain write-offs that the company has taken over the previous period. This is again pertaining to our legacy accounts in an effort to maintain a healthy book. Now borrowing mix over a period of 5 years. You can see that the borrowing mix, the company has put a great effort in diversifying its borrowings, jumping from 7% to 31% of deposits. Gearing ratio is maintained at a healthy level, 2.9%. ROE, ROA are in line with profitability. Now in terms of market price, you can see that the company has jumped from OMR 0.072 to OMR 0.130 over a period of 5 years, showing improved in capitalization -- market capitalization.

Okay. I think we are happy to take any questions at this point.

Thank you for the detailed presentation. This is Ranjith -- I am Ranjith. [indiscernible] at Ubhar Capital. I have a question regarding the cost-to-income ratio. As you mentioned in the slide the cost-to-income ratio has declined from 29.8% to 25.1% previous year. If you see during the last 5 years cost-to-income ratio was 42%. Is this ratio sustainable going forward at this level?

See, in terms of cost-to-income ratio, primarily the biggest components are people and the infrastructure. So what we plan to do is that, as you know, that overall going forward, because of this new digital strategy, so we will be investing significantly in the digital infrastructure. So this cost-to-income ratio slightly is supposed to go up in the future. But we plan to control this within the limits.

And if you look at it, try to reflect it on what is the typical return on investment that you deploy on digitization. I think we all, first of all, agree that it's not elective anymore to become digital first. It's now becoming a survival point. But if you look at it from efficiency point, turnaround time, effectiveness, while it might like Kashif rightly mentioned, might go slightly up. But the expectation is on the other side on the profitability, revenue generation, optimization of processes, turnaround times, it should...

Maybe we appreciate if you can introduce yourself asking the question.

My name is Ranjit. I'm in Ubhar Capital Asset Management team. Sir, I have a couple of questions. One regarding the growth side. So you basically highlighted about your 5-year strategy getting approved by the Board. Can you give some color on what your targets are, how the portfolio mix will look like? And basically looking at the growth trends in the economy, I mean, what is your outlook on the medium-term target on growth trends for your company?

Okay. Is that the only question?

Yes. The second question -- yes, sorry. The second question is on the provisioning side. So obviously, we saw kind of a heightened provisioning this year impacting our profits. And on top of that, the coverage ratio has actually dropped to around 60% as we speak because of the write-offs you rightly highlighted. So what you basically can give you a sense on how we are going to build some buffer on the provision coverage side? And what's the outlook on that front as well?

Okay. That's the end of it somewhat.

Yes, that's it from my side.

Well, on growth, I think we have identified certain sectors based on the company experience along with what is expected from the market trending forward. I'm afraid we cannot reveal much of what is the targeted segments we are trying to aim for. But what I can assure you that the growth will be driven by a sustainable portfolio. It will not be a pure expansion plan. It will be based on calculated segmentation, agility of shifting between portfolios and lines, diversification of different lines between. So for example, within the corporate, we will have -- we are intending to deploy multiple products which are basically catering for the requirement, which are fit for purpose for our clients. We don't intend to remain static in terms of offering the typical product. So there, it becomes more fit for purpose for our clients, and it balances the asset liability element of it for the company. We are also trying to robustly do risk assessment in a more proactive manner and using elements of technology. So the growth as a paint brush, probably if you are to brush it to put a stroke of a brush across will be probably in line of the previous ones. Only thing is that Ranjit and other dear attendants, we have the prevalent situation of geopolitical situation, which is happening. And I think it's only prudent to prioritize quality of portfolio and quality of underwriting moving ahead, not only chase the numbers, if you agree with me. So for that, we have it into place. So on the provisioning part of it, yes, the company has taken a very prudent call. It isn't easy to cut off for any financial institution to take a significant amount of the profitability in order for the ECL. But I think we are in constant dialogue with the Central Bank of Oman. We are very thankful for their proactive and forward-looking supporting sustainable outlook for the sector, knowing that FMCs and -- we support SMEs and people who are seeking for financial inclusion. So for that, I think they have been quite proactive. So was the company in terms of digesting a couple of these provisions, as you may know, post-COVID, there were a couple of accounts which were put in restructure window. We have seen some accounts also because of the overall market dynamic, the expenditure from the government has shifted towards state-owned enterprises. The government was and still is tailing the financials, looking after the order book. Most of the major infrastructures are pretty much done. So we are trying to focus on where it really matters. And then we do have the rest of the market, some legacy accounts, which are still around the book. We are trying to be very proactive in terms of approaching our clients, trying to extend support, trying to understand whether it's a restructuring point or early settlement point or whatever it takes actually to untangle their situation. The positive indicators are when we look at the recent years post-COVID, when we look at our trailing portfolio quality, it is very promising. So we are in the right trajectory for that. But the company and all of us are working on providing adequate provisions. We are trying to be very proactive and prudent about it. It's a bit preemptive to decide on numbers because we are engaging with -- which will be largely corporate. The retail part of it is very much manageable. But usually, the -- if I may say, the bulk of this provisioning is to corporate and SME. And we are trying to work with our partners to find out the solution. And this will naturally shape the provisioning part of it. But on a constant basis internally here, we are proactively reviewing the provisions, making sure that we are prudent about it and sustainable. So we don't bump into unwanted surprises.

Just if you may allow me for 1 more follow-up on the first point related to growth. I think after you've taken over the reins, would you think that this industry can look at more consolidation with the number of players in the industry? And will Taageer Finance be at the forefront of any such consolidation moves? I know it's confidential, but from a color point of view, it will be helpful, sir.

No one will be interested to support in such transactions for sure. As you know, Ranjith, there are 5 players in this market. The market is hovering around OMR 1.4 billion. So that's where the market is sitting. From our point of view, when we review the strategy in the entirety, there was an entire section allocated for M&A. And it's not completely rolled out. But I think when you look at the spectrum of things different lay out. One has to look at organic growth as one of them. Consolidation is another way to it. So is it an overcrowded market? You look at the entire market, you're talking about credit market of over OMR 32 billion as entirely. What the FMCs are covering for are around OMR 1.4 billion, maybe OMR 1.5 billion sometime soon. So I think there's a good runway for all of us to cater for that. But to put it in short, all options are very much on the table. But the company is electing to look at internal part first. Like I mentioned before, we are reviewing our policy process strategy in entirety so that we can decide what is the best course moving forward for us, genuinely before jumping into any particular decision when it comes to consolidation. So we want to consolidate -- let's say, we want to consolidate internally first and then look at the external opportunities.

Wish you all the very best for future.

Any other questions, please? If no more questions, I would like to again thank everybody who have attended this session. We want to thank, again, the Central Bank, all the regulatory authorities, shareholders, investors community and [Foreign Language], we are looking forward for long-term progressive relationship around here and looking forward for your extended support and understanding from such a knowledgeable community in here. We wish everybody the best and [Foreign Language] all of these ongoing situations will hopefully go away sometime soon. And wishing everybody health, luck and prosperity. [Foreign Language] .

Thank you.

Thank you.