Aavas Financiers conducted a conference call 25 April 2024 to discuss the financial results for the quarter ended March 2024. Sachinder Bhinder, MD&CEO of the company addressed the call:

Highlights:

The company strongly believes that it can continue our momentum in serving the unserved, underserved, and underbanked customers in Tier 2 to Tier 5 markets, with relentless focus on risk-adjusted returns.

The company has undergone the technology transformation in FY2024 coupled with management transition. Still the company has delivered on its stated guidance of AUM growth as well as on profitability.

The company delivered the highest-ever quarterly disbursements of Rs 1893 crore in Q4FY2024 with growth of 39% QoQ & 20% YoY.

Green Shoots in technology transformation are already visible with turnaround time improvement and in turn resulting in better customer service. The company expects tech transformation would benefit in improving productivity and efficiency across organization.

The company does business across 367 branches in 13 States. It has added 21 new branches in FY24 to deepen its presence. The company would continue to deepen footprint in the states where it is already present in a contiguous manner.

The prudent management of cash and strong liability profile enabled the company to contain the cost of borrowing and maintain spreads in line with guidance of around 5%.

The company is well capitalized with CRAR of 44% end March 2024 and sufficient balance sheet liquidity of Rs 3030 crore.

The Company’s focused granular underwriting risk practices & collections efforts backed by technology, led to an improvement in 1+ days past due to 3.12% in March 2024 from 3.30% in March 2023.

Portfolio health remains strong with Gross Stage 3 at 0.94% in Mar-2024.

The AUM of the company has surged 22% to Rs 17300 crore end March 2023. The company aims to maintain steady and sustainable growth in AUM in FY2025. The company is targeting AUM growth of 22-25% for FY2025.

The number of logins, sanctions and tech initiatives indicates at strong H1FY2025.

The company aims to maintain the healthy growth in the disbursements across states.

Efforts on cost optimization have helped to reduce cost to asset ratio to 3.58% in FY2024 from 3.68% in FY2023. The company aims to reduce cost to asset ratio below 3% in the near to medium term

The company has improved gross NPA by 15 bps to 0.94% in Q4FY2024. The credit cost continued to be low at below 25 bps.

The company has well diversified sources of borrowing and it is always focused on diversifying sources of borrowing.

The company has received funding from the MSME cluster building institution for the first time for its MSME business

The cost of funds on incremental basis was 8.14% in FY2024 as compared the outstanding cost of funds at 8.07%, indicating at peaking out of the cost of funds.

The cost of borrowings on incremental basis student 8.1% and the book basis student 8.07%

The company as raised its prime lending rate by 25 bps effective from 1 March 2024. About 60% of the loan book of the company is on floating rate basis.

The credit cost has declined to 11 bps in Q4 from 21 bps in the previous quarter and 16 bps in the corresponding quarter last year.

The company had implemented resolution plan for some accounts in line with the RBI guidelines in FY2022. On account of the existing stress, the company has classified accounts amounting to Rs 71.23 crore of these advances as stage 2 and created provisions. About 80% of this at Rs 56.72 crore is already into 0 to 30 days bucket.

The overall ECL provision stands at Rs 84.82 crore.

On the branch expansions side, the company is targeting Karnataka and adjacent States.

The company expects balance transfer out at 0.5% per month and 6% per annum of the opening a AUM.

The assignment book is expected to grow at 15 to 16%.