SBFC Finance conducted a conference call on 29 April 2024 to discuss its financial results for the quarter ended March 2024. Aseem Dhru, MD&CEO of the company addressed the call:

Highlights:

The company continues to maintain the guidance of quarterly AUM growth of 5 to 7% per quarter till FY 2026. The company aims to reduce cost income ratio by 50 bps in next 2 years. The credit cost is expected to be in the range of 80-100 bps with 80 bps for FY24.

The company expects to exit FY2026 with RoE of 15%. The company posted RoE of 11% after IPO and exited FY 2024 with RoE of 12%.

The challenge for the industry was to maintain cost of funds after various regulatory changes and tight liquidity conditions. The company has well maintained its cost of borrowings.

During the year, the bank received a rating upgrade to AA- and the company also moved to the NCD market. The share of NCDs in borrowings of the company has increased to 8% from 1% last year.

The bank has substantially reduced its share of bank borrowing from 70% to 57%. The share of co-origination has increased to 18% from 11.6% last year.

The company has converted 17% of borrowings into fully hedged FCNR loans bringing down the cost borrowings.

The company would further add DII to its borrowings further diversifying source of borrowings.

The cost of borrowing for the company has increased by 37 bps in FY24, while declined by 8 bps in Q4FY2024.

The company has exhibited substantial 112 bps increase in yield on loans in Q4FY2024 helping the spreads to improve by 76 bps in FY2024.

With respect to accounting change, the co origination fee income recognized under other income is now recognized as interest income from the current quarter. This recognition has led to 45 bps increase in the yield and consequent reduction in the other income in Q4FY2024.

The company has recognized Rs 6.34 crore of income as interest income through co-origination of loans in Q4FY2024. Excluding this income, the yield stands at 17.2% which is a sustainable level.

There is a strong momentum in the co origination loans, which contribute 18 to 20% of the disbursements.

The company has added 31 branches in FY2024 as against 17 branches added last year.

The company has added 220 employees and 6 branches in Q4FY2024. As per the company, it operates a new branch with 14 to 15 employees.

PCR of the company has increased to 45% from 39% last year.

The asset under management increased by 38% yoy and 9% on poq basis to Rs 6800 crore. MSME AUM has increased by 46% and 9% qoq to Rs 5704 crore end March 2024.

The company is awaiting approval for housing finance subsidiary to start the business.

The company expects stage 2 assets to be at the comfortable level of 3.2%.