Company Update : Repco Home Finance Ltd By Motilal Oswal Financial Services Ltd
Muted loan growth and disbursements; earnings in line
Reported NIM improves ~40bp QoQ; asset quality continues to improve
* Repco’s 3QFY25 PAT grew 7% YoY to INR1.1b (in line). NII grew ~9% YoY to ~INR1.8b (~5% beat). Other income grew 35% YoY to INR196m. Opex rose ~31% YoY to INR535m (~12% higher than MOFSLe).
* PPOP grew ~2% YoY to INR1.4b (in line). Provisions for the quarter stood at ~INR3m, translating into annualized credit costs of ~1bp (PY: 9bp and PQ: -45bp).
* GNPA declined ~10bp QoQ to ~3.85% while NNPA declined ~10bp QoQ to ~1.5%. The company increased the PCR on S3 loans by ~110bp QoQ to ~62%.
Subdued loan growth; disbursements weak
* Disbursements in 3QFY25 were flat YoY at INR7.6b. Loan book grew ~7% YoY to ~INR142b. Home loans grew 4% YoY. LAP grew 17% YoY. Run-offs were higher with repayment rates increasing ~100bp YoY to ~16.3%.
* The contribution of self-employed customers was largely stable at ~52%.
Reported NIM improves ~40bp QoQ; yields expand ~50bp QoQ
* Reported yields rose ~50bp QoQ to ~12.6%, and reported CoF also increased ~10bp QoQ to ~8.9%, leading to spreads increasing ~30bp QoQ to ~3.7%. Reported NIM rose ~40bp QoQ to 5.5%.
* The cost-to-income ratio (CIR) declined ~40bp QoQ to ~27%. (PY: ~23% and PQ: ~27.4%).
Other details
* Repco reported an RoA/RoE of 3.1%/15% in 3QFY25.
* CRAR was healthy at ~32.5% in 3QFY25.
Valuation and view
* While there was an improvement in asset quality, disbursements, and loan growth remained subdued during the quarter. It will be interesting to hear from the management about expected growth momentum and credit cost expectations in FY26.
* Repco trades at 0.6x FY27E P/BV. We look forward to the management’s commentary on the demand environment, the impact of Karnataka eKhata issues, and its strategies for increasing disbursements. We may review our estimates after the earnings conference call on 13th Feb’25.
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