Company Update : Repco Home Finance Ltd by Motilal Oswal Financial Services Ltd
Disbursement momentum picks up; NIM expands QoQ
Earnings in line; asset quality improved
* Repco’s 2QFY26 PAT declined 5% YoY to INR1.07b (in line). NII in 2QFY26 grew ~14% YoY to ~INR1.9b (in line). Other income declined ~46% YoY to INR123m (vs. est. of INR200m). Opex rose ~17% YoY to INR603m (in line).
* PPOP grew ~3% YoY to INR1.4b (in line). Provisions write-backs stood at INR15m, translating into annualized credit costs of -4bp (PY: -46bp and PQ: -7bp).
* Repco reported an RoA/RoE of 2.9%/14% in 2QFY26.
Disbursements rise ~23% YoY; loan growth remains subdued
* Disbursements grew ~23% YoY to INR10.7b in 2QFY26. Loan book grew ~8% YoY to ~INR150b. Run-offs were stable, with repayment rates declining ~20bp YoY to ~17.4% (PY: ~17.6%).
* As of Sep’25, loans to the non-salaried customers accounted for 53%, while non-Home Loans accounted for 29% of the loan book.
Yields improve ~10bp QoQ; NIM expands sequentially
* Reported yields improved ~10bp QoQ to ~12.1%, whereas CoB declined 10bp QoQ to ~8.6%. This led to spreads improving ~10bp QoQ to ~3.4%. Reported NIM improved ~10bp QoQ to 5.5%
* The cost-to-income ratio rose ~3pp QoQ to ~30.0%. (PY: ~27.4% and PQ: ~26.9%).
Asset quality improves; S2 assets dip ~90bp QoQ
* GS3 declined ~15bp QoQ to ~3.15%, while NS3 rose ~35bp QoQ to ~1.55%. Repco reduced the PCR on S3 loans by ~12pp QoQ to ~53%.
* For the book that originated from Apr’22 onwards, GS2 stood at 5% (vs. 8.8% for the overall book), and GS3 was 1.1% (vs. 3.3% for the overall book).
* Stage 2 assets declined ~90bp QoQ to 8.8% (PQ: 9.7% and PY: 11.0%)
* The capital adequacy ratio (CRAR) stood at ~36.9%.
Valuation and view
* It will be interesting to hear from the management regarding its expectations on loan growth and credit costs for FY26.
* Repco trades at 0.7x FY27E P/BV. We will look forward to the management’s commentary on the demand environment, its view on sustenance of disbursement momentum, and steps taken to stem balance transfers to Banks/HFCs in the current declining interest rate environment. The trade-off between loan growth and NIM will be an important monitorable for the company. We may review our estimates after the earnings conference call on 13th Nov’25.
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