Third quarter was good for the company. Second quarter was subdued and first quarter was hugely impacted due to the Second wave of the pandemic.
Real estate market would be robust for the next few years. Buying demand would be good for the next 4-5 years.
The company is getting business across all geographies. Robust demand is from metro as well as non metro cities. Borrowers Profile wise, demand is more from salaried group. Salaried group demand has not come back fully, but it is growing gradually and will recover in the next year as per the management expectation.
18-20% growth can be expected in terms of Disbursements in the upcoming years.
Loan Book growth was 19.5% in the quarter.
Q3 Disbursements were at all-time high. Up by 123% Y-o-Y. Year on Year comparison cannot be made as base was low in the last year. From April company has raised interest rate twice and helped the company to raise its overall portfolio yield.
74% salaried and 26% non-salaried customer base. No issues are currently seen in both salaried and self-employed customer base in terms of repayment.
Out of the total salaried customer base, 50% private and 50% government salaried customer base.
More demand is from Salaried customer base. When company decreased rates last year, demand increased from salaried customer base and average -ticket size also increased.
Average ticket size of the loans to be maintained at 18-21 lakhs in the upcoming quarters.
65-35 mix ratio is what is ideal for incremental borrowings between salaried and self-employed customer base.
Top 20 and 30 branches contribute 65-70% of the total incremental disbursements.
Average income of the customer base is approx. 40,000 Rs.
Cost of Funds are stable across the years. Incremental Cost of Funds was 4.98% in the Q3 of FY22.
Margins are improving, disbursements are improving, approvals are improving quarter on quarter helping the company to grow across all the business parameters.
The benefit of rate hike would be seen from quarter 1 of next fiscal due to the time lag.
Last year rates were dropped to compete with big banks entering housing finance business and other HFC’s. This strategy helped the business to gain traction.
This helped the business to: Gain new business and secondly to protect the existing book.
In the previous quarter rates were increased a bit. Still, this led to all time high disbursements and increase in overall loan book.
Margins will increase and yields will increase in upcoming quarters leading to increase in revenue and PAT as well.
Asset quality wise, NPA’s are improving. Company was able to write back certain amount from the NPA pool.
Collection efficiency are improving quarter on quarter. Further room for improvement in collection efficiency is still there.
Whenever disbursements are up, company has to make additional provisions as increased disbursements there lies a risk of non payments, so there is additional provisions in the quarter.
No specific reason to increase the coverage ratio. 40% coverage ratio provides good comfort and the same can be expected in the upcoming quarters.
Pricing strategies are been keenly focused when it comes to disbursements in tier 2 and tier 3 cities.
Restructured Pool has come down since customers are paying down their loans. Management think its too early to comment on restructured pool.
Costs are coming down on overall basis. Average cost of borrowings from banks is at 5-5.25%. Credit costs to be remain compressed in the remaining quarters.
Average lending rates are at 7.75%.
Commercial papers are only for cost leverage purpose and not for core fundings. Commercial Papers are riskier and are more for short term.
In terms of borrowings, NHB rates are to be expected to be in the range of 3.95%.
Because of such conservatism, it helps the company to negotiate well when it comes to borrowing funds.
Networks and branches:
Networks and branches were not able to be opened in the last year. Planning to open 12-15 branches every Financial Year. No significant branches were opened in the current year due to Covid, but the guidance of branch openings stays intact.
Collaborations and Tie-ups:
No tie-ups and collaborations are currently in the pipeline but views are open if there are any such opportunities.
Strong Team Buildup:
Teams have been kept for the respective categories to focus on.
Couple of teams have been built to focus on customers who want to switch out. This helps the company to increase the customer retention ratio.
Better support from the government is received till now and the same is expected to be received in the affordable housing segment in the upcoming years.
Better prospects are expected in the affordable housing segment owing to better budgetary allocations from the government in the future.
No challenges are been seen for this segment in the future 3-5 years.