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Soft start but full-year growth guidance maintained

Disbursements stood at Rs6.8bn v/s expectation of Rs7.05bn, and it was lower 24% qoq and flat on yoy basis. There was no DA pool buyout in the quarter. Business operations were least impacted by RBI’s April circular, but were affected by internal transfers/re-locations, heatwaves, and elections. BT OUT monthly run-rate remains moderate, and BT IN continues to be higher than BT Out.

Management expects disbursements between Rs36-38bn in current year. Loan Book is estimated to reach Rs150bn by March’25, representing 11% growth. Co. aspires to achieve an AUM of Rs200bn by March 2027. The drivers of growth acceleration would be augmentation of distribution points (Branch + SO), addition of Sales team at branches, expansion of sourcing channels (DSAs & Connectors) and emphasis on improving productivity. However, the company would not be chasing growth at the cost of asset quality.

Spread could come-off from current level

Portfolio Spread/NIM were stable at 3.4%/5.1% with improvement in Portfolio Yield offsetting the increase in CoF. The co. had raised MLR by 10 bps each in April and May. Increase in CoF was on account of repricing of bank loans and NHB refinance. Portfolio Spread/NIM would moderate from here as CoF is expected to rise further and Repco plans to drive growth through Salaried HL by offering competitive pricing to select profiles. The co. would be applying to NHB for funding, as it now meets all its requirements.

OD buckets and NPLs to improve

GNPLs rose by 6% qoq with level increasing to 4.3% from 4.1% as of March. There was no increase in Stage-2 level (~12% of book) with collection team being strengthened for OD buckets. Credit cost was negligible at Rs14mn as the co. is holding substantial buffer/overlay provisions in Stage-3. ECL coverage on Stage-3 stands much higher than LGD at 62%.

With relentless and systematic recovery actions, the targeted NPL reduction for FY25 is Rs1bn (GNPLs to fall below 3%.). The level of Stage-2 assets is estimated around 10% of loan book by March’25 with further augmentation in collection team. Credit cost for the year is estimated to be positive owing to improvement in overall asset quality and reversal of buffer/excess provisions (~Rs1bn)

Growth uptick required for significant incremental valuation re-rating

Key future monitorable would be a) structural disbursement uptick after recent joining of CBO and planned augmentation of Sales team and b) reduction in soft buckets along with continuing NPL recoveries. To take growth to the next level, Repco has been recruited people with experience. Credit cost even in FY26 is estimated to be negligible with cushion of excess coverage. Visibility for 13-14% loan portfolio growth in FY26 needs to meaningfully improve for significant re-rating of the stock. Repco is trading much below its FY26 BV of Rs590. We maintain BUY and with 12m PT of Rs600.

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