SRG Housing Finance Ltd - May 2025 Earnings Call Transcript Analysis May 9, 2025
·
4 min read
Earnings Call Transcript Analysis Report
# Key Financial Metrics:
# Earnings Per Share (EPS): INR 17 for FY25, up from INR 15 in FY24.Return on Assets (ROA): Current ROA is 3.17%, down from 3.56% in March of the previous year. Management attributes this to an increase in equity.Loan Book Composition (FY25): Housing Loan: 73% Loan Against Property (LAP): 27% Salaried Loan: 26% Self-employed Loan: 74% Average Ticket Size (Housing Loan): INR 8 lakhs.Average Loan-to-Value (LTV): 44%.Borrowings: Outstanding borrowing at INR 584 crores (up from INR 491 crores last year).Bank: 46% Financial Institutions (FIs): 48% National Housing Bank (NHB): 6% Liquidity: INR 55 crores in liquid funds.Credit Cost: Management states current credit cost is 1.82% (down from 2.24% in March of the previous year), though an analyst question referred to a recent increase to 60 bps.Stage 2 Assets: 0.46% of the book.Comparison & Trends:
# EPS has shown year-over-year growth. ROA has decreased, primarily explained by equity infusion. Management expects this to improve. Borrowings have increased to support loan book growth. Revised Guidance or Forecasts:
# ROA Outlook: Expected to cross 3.5% in the next year (FY26) and potentially 4% thereafter.AUM Guidance: FY25 (ending): Aiming for around INR 750 crores. FY26: Targeting INR 1,000 - 1,100 crores. FY27: Targeting around INR 1,500 crores. Disbursement Guidance: FY26: Around INR 400 crores. FY27: Around INR 500 crores. Areas of Growth or Decline:
# Growth: Loan book, EPS, geographical presence, branch network.Decline (Temporary/Explained): ROA (due to equity), OpEx as a percentage of AUM is expected to decline going forward after recent increases due to expansion.Strategic Initiatives & Business Updates
# Major Strategic Announcements:
# Completion of significant branch expansion, reaching 90 branches. Recent equity fundraising of INR 80 crores, including a 9.17% stake acquisition by M3 Investment Pvt. Ltd. Hiring of experienced management personnel to support Pan-India operations. New Products, Services, or Markets Discussed:
# Expansion into new states: Maharashtra, Karnataka, Andhra Pradesh. Future expansion planned for Tamil Nadu and Telangana within the next 10 branches post achieving INR 1,000 crore AUM. Continued focus on affordable housing in semi-urban and rural areas. Significant Operational Changes:
# Establishment of a Bombay corporate office. Stabilization of OpEx expected after the current phase of expansion. Branch network to be capped at 100 branches for the next 2-3 years after reaching that number. Ongoing or Completed Projects:
# Geographical diversification is well underway. Improvement of credit rating to BBB+; targeting A- upon reaching INR 1,000 crore AUM. Market & Competitive Landscape
# Industry Trends:
# Competition is higher in urban areas for housing finance. The rural and semi-urban affordable housing segment is perceived as less penetrated and offers growth opportunities. NHB guidelines mandating 70% portfolio in Housing Loans (HL) impacts product mix flexibility (reducing scope for higher-yield LAP). Competitive Positioning Statements:
# SRG Housing Finance focuses on rural and semi-urban areas where larger players have less presence. The company differentiates by its deep understanding and focus on this niche segment. Market Challenges or Opportunities Mentioned:
# Opportunity: Under-penetrated rural and semi-urban markets.Challenge: General economic slowdowns can impact the finance industry, though management feels their segment is relatively insulated.The company does not aim for a very large market share but focuses on profitable growth within its chosen segment and geographies. They are comfortable with their current loan booking capacity. Risk Factors & Challenges
# Concerns or Challenges Acknowledged by Management:
# Past impact of rising interest rates on fixed-rate loan book NIM (now expected to reverse with falling rates). Increased OpEx due to recent rapid expansion, though this is expected to normalize and reduce as a percentage of AUM. Analyst concern about increased credit cost (60bps), though management stated their overall credit cost has reduced (1.82% from 2.24%). Regulatory Issues Mentioned:
# NHB guideline to maintain 70% of portfolio as Housing Loans, limiting LAP business (which offered higher yields). NHB and banks tightening lending norms in general. Supply Chain or Operational Constraints:
# Initial operational costs associated with setting up new branches and hiring in new geographies. Past delays in getting administrative support for SARFAESI actions, which is now improving. Market Uncertainties:
# General economic volatility is a perennial factor in the finance industry. Forward-Looking Statements
# Outlook and Future Projections:
# ROA: To cross 3.5% in FY26, aiming for 4% eventually.AUM: INR 1,000-1,100 crores in FY26, INR 1,500 crores in FY27.NIM: Expected to improve due to falling interest rates, increased ticket sizes in new states, and operational leverage.PAT: Expected to grow faster than AUM due to improving NIM and stabilizing OpEx.Please enable JavaScript to view the comments powered by Disqus.