Attended my first AGM this friday- Repco Home Finance.
Key takeaways-
Key takeaways-
- Dependence on Repco bank is coming down & will decrease going forward.
- Cost of funds may go up soon, but company has the ability to pass it on to the customers. It would have been problem if only Repco had to pass it on. All HFC including LIC & Gruh have increased their rates a week or two back. Repco may do that, if needed.
- Rating upgrade won't help much as it is still getting loans at Base rates from Banks. Cost can't go below base rate.
- They plan to increase provisions going forward. Will take PCR to 70-80% in the long run.
- Repco rate is lesser than Gruh. So that may benefit Repco in areas where Gruh is stronger.
- For credit appraisal, they sit with the customers & work out the customer's P&L and balance sheet. Loan to Asset Value is 65% & EMI to income is 50%.
- NHB has come up with a lot of regulations so the component of NHB funding has gone down. They want to maintain that and NHB regulations will not let them do that. They evaluate the situation and then decide on what funding source to use. NHB funding may even go down to 25% if they decide so.
- Real-estate slowdown isn't affecting them (in the 5 months this yr till now) due to customer profile & focus on Tier-II,III cities.
- The response to new branches has been good. In Tamil Nadu, they don't have to worry about getting new customers as the company's brand is quite strong. They open the new branches at locations that are not too far away from an existing branch. That's the reason they have not ventured into UP and Bihar for instance. They opened a branch in Pune and Pimpri where the NPAs are zero. They will slowly expand in Maharashtra.
- They took approval for max loan limit of 10,000 crs.. planning to reach that level in 3-4 years.
- Their target is to have a 3% spread and 4% NIM
- Planning to maintain historical rates of growth.
Overall, I feel they should be able to grow at 25% for next few years due to limited competition & customer profile & low housing loan penetration. The most important RISK remains Possibility of Bad Debts & losses on account of that.
