SRG Housing Finance Q4 FY24 earnings call

What moved the numbers, as management explained it

• Disbursement jumped 49% to ₹284 cr and income 35% to ₹127 cr, driven by 25 new branches added in FY23 that matured from Q3 FY23 onward.
• Average borrowing cost rose to 11.13% (from 10.82%) due to repo rate hikes, partly compressing NIM though spread held at 11%.
• Branch network expanded to 67 from 62, enabling quarterly disbursement volumes now matching prior annual levels.
• Net NPA rose to 0.69% from 0.51% even as gross NPA improved, suggesting a base/lag effect in provisioning. (accounting)
• FY24 results benefited from full-year contribution of FY23 branch expansion; this annualisation effect will not repeat in FY25. (one-off)

The numbers management led with

• FY24 disbursement: ₹284 crores (+49% YoY from ₹191 crores)
• FY24 loan book / AUM: ₹601 crores (+37% YoY from ₹438 crores)
• FY25 AUM target: ₹700-780 crores
• FY26 AUM target: ₹1,000 crores+
• FY25 equity raise plan: ₹50-100 crores, targeted close in 1-2 months
• Branch count trajectory: 67 (current) → 90 (FY25) → 100+ (FY26)

Guidance on this call

Balance sheet, capex and funding

• Total outstanding borrowing ₹491 cr (vs ₹357 cr), mix 49% banks, 39% FIs, 12% NHB; average cost 11.13%.
• Liquid funds ₹82 cr including ₹17 cr undrawn; ALM described as comfortable.
• FY24 funds raised ₹227.80 cr, of which 40% from PSU banks.
• Net worth ₹159 cr (vs ₹133 cr); current debt-to-equity 3x, SBI-approved leverage up to 10x.
• Equity raise of ₹50-100 cr planned in FY25; no further equity needed up to AUM ₹1,500-2,000 cr per management.
• Capex not separately quantified; new-branch cost treated as operating expense with break-even in 6 months.

The industry, as management sees it

Management views rural India as a long-duration structural growth story — favourably positioned due to lower housing finance competition outside metros, the unsuitability of fintech models for collateralised housing loans, and rising property values. Monsoons are a positive but uncertain factor, with no rigid ceiling or floor on rate dynamics across states.

Risks management named

• Higher borrowing cost at 11.13% vs 10.82% due to repo rate increases
• Net NPA rose to 0.69% from 0.51% in prior year
• New branches in unfamiliar regions elevate execution and credit risk

Not answered directly

• Credit cost outlook — qualitative reassurance only, no quantitative guidance

Asked for a number, answered without one

• Credit cost guidance: Management cited 22 years of rural experience, physical verification and meticulous credit procedures but gave no numeric credit cost guidance.
• Borrowing rate / spread in new regions: Said there is no rigid ceiling or floor; rates vary by state and development pace; no figure provided.
• Opex growth vs top-line growth: Said fixed-cost leverage will help; once 25-30 branches added, only 10-20% team increase needed for AUM doubling; no ratio given.
• Monsoon-linked demand uplift: Said there is no certainty with the monsoon; no quantitative impact factored into FY25 AUM guidance.

Every question, with its answer

1. 1. Disbursement acceleration and branch expansion

   Moderator (relayed chat question from Arvind Kumar), Unknown

   Question. You said monthly disbursement is now what you used to do in a quarter and quarterly disbursement is what you used to do in a year. How was this achieved and how can the ratio improve further?

   Answer, Vinod Jain, Managing Director. In FY23, we opened 25 new branches as part of an expansion initiative; the impact came through from Q3 onwards, making quarterly targets achievable monthly and yearly targets quarterly. New branches in Q2 and Q3 of FY25 give us Q4 to develop them — including two six-branch clusters in Maharashtra, six in Karnataka, five in Tamil Nadu, three in Telangana, three to four in Andhra Pradesh. Teams and 10-12 branch managers are already recruited. Break-even typically takes 4-6 months.

2. 2. FY25 AUM and disbursement guidance

   Moderator (relayed chat question from Arvind Kumar), Unknown

   Question. What is your AUM and disbursement target for FY25?

   Answer, Vinod Jain, Managing Director. Last year's average monthly disbursement was ₹25 crores; this year, factoring ~25% branch growth, monthly target is ₹30-35 crores. Disbursement ~₹400 crores, loan book rising ~₹200 crores, AUM between ₹700-780 crores.

3. 3. Branch profitability

   Agastya Dave, Unknown

   Question. How many of your branches are not yet at break-even?

   Answer, Vinod Jain, Managing Director. All branches inaugurated have achieved break-even. Even a branch doing ₹20-25 lakhs in business volumes begins the break-even process.

   Follow-up. So all branches are at break-even? And what business does your most profitable branch do?

   Answer. Confirmed all 67 branches are at break-even. Branches are tiered: Category A doing ₹25 lakhs/month (breakeven + profitable), Category B targeting ₹50 lakhs/month, and largest city branches targeting ₹1 crore/month turnover.

4. 4. Branch ramp-up timeline

   Agastya Dave, Unknown

   Question. How long does it take for a new branch to reach its full potential — two to three years, or less?

   Answer, Vinod Jain, Managing Director. It takes about six to seven months.

5. 5. Monsoon and rural demand

   Agastya Dave, Unknown

   Question. Predictions of a good monsoon — would rural housing demand get a benefit from this?

   Answer, Vinod Jain, Managing Director. A favorable monsoon stimulates the wider economy. Higher agricultural productivity lifts incomes, prompting investment in housing and business expansion, raising demand across sectors. However, an excess of rainfall can damage crops — there's no certainty.

   Follow-up. So this ₹200 cr AUM addition is your base — that should come through?

   Answer. Absolutely.

6. 6. Equity raise timing

   Agastya Dave, Unknown

   Question. On the two-year AUM guidance — when you reach ₹1,000 cr will you raise capital, or only after ₹1,000 cr?

   Answer, Vinod Jain, Managing Director. Board approval already obtained for equity raise. Plan is to secure ₹50-100 cr equity in this fiscal, closing it within one or two months as quickly as possible.

7. 7. Competition and fintech

   Moderator (relayed chat question from Arvind Kumar), Unknown

   Question. How about competition from other companies and online fintech companies?

   Answer, Vinod Jain, Managing Director. Competition and fintech are two separate things. Rural areas have relatively fewer housing finance players due to intensive fieldwork. Fintech operates in unsecured loans where property documents, valuation, legal and technical checks are not required. In housing finance, which requires detailed credit assessment, the fintech model is not suitable.

8. 8. New branch geography and team

   Kamlesh, Unknown

   Question. Which regions are you planning for new branches and what kind of team are you building?

   Answer, Vinod Jain, Managing Director. Maharashtra, Karnataka, Tamil Nadu, Telangana, Andhra Pradesh. Clusters: Pune-region (Pune, PCMC, Ahmednagar, Solapur, Satara, Kolhapur); Nashik-region (Nashik, Dhule, Jalgaon, Aurangabad, Nagpur, Amravati); Karnataka (Bangalore, Mysore, Mandya, Hassan, Chitradurga, Kolar); Tamil Nadu (Coimbatore, Erode, Salem, Tirupur, Madurai); Telangana (Hyderabad, Rangareddy, Nalgonda); Andhra Pradesh (Nellore, Chittoor, Kurnool). The south region is monitored from the Mumbai corporate office. PAN-India training team in place.

   Follow-up. The new branches you are opening — in terms of profitability and disbursement size, how is it?

   Answer. Branches are yet to open. Plan is to start in Q2 and Q3; 10-12 branches finalized with possession expected next month.

9. 9. Mumbai corporate office role

   Kamlesh, Unknown

   Question. What kind of team sits at the Mumbai corporate office and what is the goal of opening it?

   Answer, Vinod Jain, Managing Director. As we move to PAN-India coverage spanning 4-5 new states, team expertise is advantageous. The MD himself has shifted to Mumbai — easier access to industry experts and centralized control. Strategy department is headquartered in Mumbai.

10. 10. FY24 branch economics

    Kamlesh, Unknown

    Question. Contribution of the ~30 older branches to FY24 AUM and disbursement?

    Answer, Vinod Jain, Managing Director. FY24 disbursement ₹283 crores and AUM ₹601 crores (he clarified FY22 disbursement was ₹189 crores and AUM ₹438 crores).

    Follow-up. What will be the contribution of these existing branches to AUM going forward?

    Answer. ₹400 crores disbursement target for the year is set from existing branches alone — new branches not factored in. Anticipates AUM of ~₹700-800 crores from existing branch strategy alone.

11. 11. Future equity raise cadence

    Moderator (relayed chat question from Arvind Kumar), Unknown

    Question. After this equity raise, when do you plan the next one?

    Answer, Vinod Jain, Managing Director. Equity is not abundant; raised as needed factoring market cap, AUM and business needs. Current range ₹50-100 crores. No immediate need for additional equity up to ₹1,000-1,500 crores of AUM. As a listed company, avenues are available when needed; will consider another round as AUM expands.

12. 12. New-region credit appraisal and ramp

    Moderator, Strategy & Investor Relations Consulting

    Question. As you expand new branches, how fast can disbursement ramp up and how strong will credit appraisal be in unfamiliar regions?

    Answer, Vinod Jain, Managing Director. Credit personnel are employed in each new state; credit operations are centralized with the Mumbai head overseeing decisions across the five states. Once established, disbursement typically commences within 2-3 months. Branch managers and teams are hired already well-versed in the industry, minimising training. Vendor management ensures legal/technical aspects are handled swiftly. New-area expansion involves surveys and business plans informed by collection experts before opening.

13. 13. Credit cost outlook and physical verification

    Agastya Dave, Unknown

    Question. On credit costs and NPA — given expansion into new areas, should we expect the same clean balance sheet or is there incremental risk?

    Answer, Vinod Jain, Managing Director. 22 years in rural housing finance gives deep credit expertise. Procedures are designed to minimise errors; unlike documentation-only businesses, rural operations prioritise physical verification, significantly reducing the likelihood of errors.

    Partly answered.

14. 14. LTV policy and property price cycle

    Agastya Dave, Unknown

    Question. Will LTV increase in the ₹1,000 cr AUM target, given rising rural property prices?

    Answer, Vinod Jain, Managing Director. Maximum LTV is 50%. In rural areas with populations below 10,000, strictly 50% LTV; in larger populations, slight variation of 5-10% permitted subject to conditions. Conservative LTV is crucial for collection efficiency — exceeding 80-85% poses risk of borrowers abandoning properties if values depreciate.

    Follow-up. Will you keep 50% LTV the same in the future?

    Answer. For populations below 10,000, will maintain 50% threshold; for areas above 10,000, may allow 5-10% deviation.

15. 15. Monsoon and prepayments

    Agastya Dave, Unknown

    Question. If monsoons are good, do prepayments increase?

    Answer, Vinod Jain, Managing Director. Good monsoons don't directly increase prepayments. Instead, business activity surges; individuals may need additional financing. For housing, once a person has funds, they tend to invest in furniture and upgrades rather than downsizing.

16. 16. CEO Archis Jain role

    Kamlesh, Unknown

    Question. You have designated Archis Jain as CEO — what role does he play?

    Answer, Vinod Jain, Managing Director. Archis Jain has six years of field experience, spends 20-22 days/month at branches or in the field. He oversees branch operations, develops business plans, manages teams, provides motivation, and ensures target achievement.

17. 17. Borrowing mix and rate outlook

    Kamlesh, Unknown

    Question. Going to ₹750-1,000 cr AUM, what will be the borrowing mix and expected borrowing rate? How will spread hold in new regions?

    Answer, Vinod Jain, Managing Director. Borrowing mix: 49% banks, 12% NHB, 39.16% FIs — composition remains consistent, with one bank accounting for roughly half. In new states, rates will generally align with rural norms, with minor adjustments for larger population centres. There is no rigid ceiling or floor — depends on each state's pace of development.

    Partly answered.

18. 18. Balance transfer rate

    Kamlesh, Unknown

    Question. What is the balance transfer rate in your loan book?

    Answer, Vinod Jain, Managing Director. BT typically ranges 8-10%. The amount transferred out is generally reciprocated by an equivalent sum from the recipient finance company — there is a balanced flow.

19. 19. Collateral and co-applicant policy

    Kamlesh, Unknown

    Question. In LTV, how much collateral do you consider?

    Answer, Vinod Jain, Managing Director. Portfolio is entirely collateralised based on LTV — exclusively secured products, no unsecured lending. Each loan is backed by property collateral, a co-applicant (typically wife), and a guarantor — both mandatory per policy.

20. 20. Fixed-rate book and rate cycle sensitivity

    Kush Tandon, Unknown

    Question. Your loans are on fixed rate; the repo rate rise cost ~1% at the NIM level. Are new loans also fixed rate? Will a future rate cut help?

    Answer, Vinod Jain, Managing Director. Client base primarily opts for fixed-rate loans — rural customers have limited understanding of floating rates and even minor instalment changes (e.g. ₹50) cause disputes. If repo rises, slight profit decline; if repo falls, profits will rise — a possibility anticipated in the foreseeable future.

    Follow-up. Opex has increased with new branches and hires — going forward, will Opex growth be lower than top-line growth?

    Answer. Scaling to 25-30 new branches will eventually lower costs because fixed elements at head office remain unchanged — even with AUM doubling, only 10-20% increase in team size may be needed.

21. 21. Customer profile

    Moderator (relayed chat question from Arvind Kumar), Unknown

    Question. What type of customers are you giving loans to?

    Answer, Vinod Jain, Managing Director. Loan portfolio is 94% rural and 6% urban. Within rural, ~74% self-employed and ~25% salaried. Customer base spans grocery stores, vegetable markets, general stores, barbershops, utensil sellers, jewellers, tailoring shops and hardware stores.

22. 22. Leverage and debt-to-equity ceiling

    Moderator (relayed chat question from Arvind Kumar), Unknown

    Question. To what extent are you willing to expand the debt-to-equity ratio?

    Answer, Vinod Jain, Managing Director. As a housing finance company, RBI permits leverage up to 12x. SBI, the lead banker, has sanctioned up to 10x. Typical NBFCs operate at 5-7x. NHB allows up to 12x. Private banks usually prefer 5-6x. Current D/E is 3x. With current equity raise, ₹1,000 cr to ₹1,200-1,500 cr AUM would be supported without further equity up to ₹1,500-2,000 cr.

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