Robust Profitability and Asset Quality Improvements Highlight Repco Home Finance’s Q1 FY25

Repco Home Finance’s Q1 FY25 performance shows robust growth and improved financial metrics across various segments.

The company’s credit book grew by 8.3% year-over-year to Rs. 13,701 crores, with AUM reaching Rs. 13,513 crores as of March 31, 2024. Credit sanctions increased slightly by 0.2% to Rs. 727 crores, while disbursements slightly decreased to Rs. 680 crores.

Total income surged by 13.6% to Rs. 416 crores, with NII growing by 8% to Rs. 175 crores. Net profits showed significant advancement, rising by 18% to Rs. 105 crores. The company maintained a solid loan spread of 3.4%.

KEY INDICATORS FOR Q1 FY25: (Figures in Rs. million)

RELATIVE PERFORMANCE – Q O Q:

Profitability metrics improved, with return on assets increasing to 3.1% from 2.8% and return on equity rising to 16.3% from 15.8%. The credit portfolio remained diversified, with non-salaried segments accounting for 51.6% and salaried segments for 48.4%. Housing loans comprised 74.3% of the outstanding loan book, while home equity products made up 25.7%.

Income & Earning Growth QoQ: (Amt in Rs. Mn)

Asset quality showed improvement, with GNPA decreasing to Rs. 583 crores from Rs. 695 crores year-over-year, although slightly up from Rs. 552 crores in the previous quarter. The GNPA ratio improved to 4.25% from 5.5% year-over-year, while the NNPA ratio decreased to 1.7% from 2.8%. The company maintained strong provision coverage, with expected credit loss provisions at Rs. 519 crores or 3.8% of total loan assets.

Asset Book: (Amt in Rs. Mn)

ECL PROVISION (Amt in Rs Mn):

Repco Finance maintained a robust capital position with a capital adequacy ratio of 34%, well above the regulatory requirement of 15%. The company’s distribution network expanded to 181 branches and 42 satellite centers across 13 states and union territories.

Profitability Ratios: (Amt in Rs. Mn)

This comprehensive improvement in growth, asset quality, and profitability metrics positions Repco Home Finance well for sustained performance in FY25, despite potential market challenges such as elections and heatwaves. The company’s focus on retail lending in both housing and home equity segments, coupled with a strong capital base, provides a solid foundation for navigating the evolving financial landscape.

Quarterly Performance Analysis:

Repco demonstrated strong execution in Q1 FY25. The company’s credit book grew by 8.3% year over year to Rs. 13,701 crores, while total income surged by 13.6% to Rs. 416 crores. Net interest income increased by 8% to Rs. 175 crores, and net profit showed significant improvement, rising by 18% to Rs. 105 crores. The company maintained a solid loan spread of 3.4%. Asset quality improved, with the GNPA ratio decreasing to 4.25% from 5.5% year over year, despite a slight increase in the GNPA amount due to factors like elections and heatwaves. Profitability metrics also improved, with return on assets increasing to 3.1% and return on equity rising to 16.3%. The loan portfolio remained diversified between non-salaried (51.6%) and salaried (48.4%) segments, with housing loans comprising 74.3% of the outstanding loan book. Repco Home Finance maintained a strong capital position with a capital adequacy ratio of 34%, well above the regulatory requirement. These results indicate robust growth and improved financial metrics across various segments, positioning the company well for the financial year despite potential market challenges.

In the transition from Q4 FY24 to Q1 FY25, Repco Home Finance experienced some changes in its financial metrics. Loan sanctions decreased from Rs. 9,777 million to Rs. 7,272 million, while disbursements also declined from Rs. 8,946 million to Rs. 6,804 million. However, the company’s Net Interest Income slightly increased from Rs. 1,723 million to Rs. 1,749 million. Profit After Tax (PAT) saw a notable decline from Rs. 1,081 million to Rs. 1,054 million. The Net Interest Margin (NIM) remained stable at 5.1%. The Yield on Assets improved from 11.7% to 12.0%, while the Cost of Funds increased from 8.3% to 8.6%. Despite these changes, the company maintained its spread at 3.4%. Profitability measures showed a slight decrease, with Return on Assets dipping from 3.2% to 3.1% and Return on Equity declining from 16.5% to 16.3%. These figures suggest that while Repco Home Finance faced some challenges in loan growth, it managed to maintain relatively stable performance in terms of interest income and overall profitability.

Net Sales increased by 11.89% from Rs. 364.48 crore in June 2023 to Rs. 407.83 crore in June 2024. Quarterly Net Profit increased by 17.91% from Rs. 95.44 crore in June 2023 to Rs. 112.53 crore in June 2024. EBITDA increased by 14.38% from Rs. 326.38 crore in June 2023 to Rs. 373.32 crore in June 2024. Repco Home’s EPS grew from Rs. 15.26 in June 2023 to Rs. 17.99 in June 2024.

Industry Overview:

The global economy remains strong, with steady growth and inflation gradually returning to targeted levels. Although risks persist, such as potential price surges due to geopolitical tensions in regions like Ukraine and Gaza, and ongoing core inflation driven by tight labor markets, the overall global outlook remains relatively balanced. Global GDP is projected to grow by 3.1% in FY24 and 3.2% in FY25, while global headline inflation is expected to decrease from 6.9% in FY23 to 5% in FY24, and further to 3.4% in FY25. However, differences in disinflation rates across major economies may lead to currency fluctuations, affecting financial sectors. Additionally, high interest rates may have a more pronounced cooling effect than anticipated, potentially leading to financial stress as fixed-rate mortgages reset and households struggle with high debt levels.

India continues to be one of the fastest-growing economies globally, with an estimated GDP growth of 8.2% for FY24, up from 7% in the previous year. The IMF projects a growth rate of 6.8% for FY25, driven by public investment and strong domestic demand. Contributing factors include high capacity utilization in manufacturing, government capital expenditure, FDI inflows, and strong financial and corporate sector balance sheets, which are expected to support a positive economic cycle. Digitalization initiatives are expected to enhance formalization, financial inclusion, and economic opportunities, contributing to India’s sustained rapid growth. India’s large and young population offers opportunities for growth, employment, and consumption-driven expansion, with investments in education and skill development being crucial for inclusive progress. However, challenges persist, such as geopolitical tensions, volatility in global financial markets, geo-economic fragmentation, and extreme weather events, all of which pose risks to the economic outlook. To mitigate these risks, ensuring resilience through the diversification of trade partners and strengthening domestic capabilities will be critical. Contributing factors include a decline in rural consumption due to an uneven monsoon and crop yield in FY24, as well as a potential slowdown in government capital expenditure early in FY25 ahead of the general elections. Geopolitical tensions and financial market volatility continue to pose risks to the inflation outlook, with the Reserve Bank of India projecting CPI inflation at 4.5% for FY25.

Asset Quality:

The asset quality of Repco Home Finance has shown a mixed trend over the past year, as reflected in both the graph and the provided data. The Gross Non-Performing Assets (GNPA) ratio has generally improved, decreasing from 5.5% in June 2023 to 4.3% in June 2024, despite a slight uptick from the March 2024 low of 4.1%. In absolute terms, GNPA amounted to Rs. 583 crores as of June 30, 2024, down from Rs. 695 crores a year earlier, but up from Rs. 552 crores at the end of March 2024. This marginal increase was attributed to the impact of national elections and prevailing heatwaves during the quarter.

ECL PROVISION (Amt in Rs Mn):

SECTOR WISE MOVEMENT (Amt in Rs. Mn):

Similarly, the Net Non-Performing Assets (NNPA) ratio has shown improvement, declining from 2.8% in June 2023 to 1.7% in June 2024, with a slight increase from the 1.5% recorded in March 2024. In monetary terms, NNPA stood at Rs. 223 crores as of June 30, 2024, a significant reduction from Rs. 338 crores a year ago, though up from Rs. 192 crores at the end of the previous quarter.

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