SRG Housing Finance LtdQ3 FY23Finance

SRG Housing Finance Ltd

Q3 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 2

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

3 of 5 growth signals are positive.

Revenue guidance

Category 2

→SRG Housing Finance Ltd aims to grow its AUM from INR 500 crore to between INR 750 crore and INR 1000 crore within 12 to 18 months.
→The company maintains an average monthly disbursement run rate of around INR 20 crore and expects to exceed the INR 750 crore AUM target based on this.
→Expansion plans include opening 5-6 new branches in FY24, including entry into southern states such as Karnataka, Andhra Pradesh, and Telangana.
→The company has a long-term vision to grow at least 10 times its current size, aiming to be among the top ten housing finance companies in India.
→Focus on quality business growth rather than aggressive scaling, maintaining asset quality with an average LTV of 40%.
→The management plans sustained growth through increased team strength and geographic diversification over 2-3 years.

Category 3

→The company aims to grow its AUM from INR 500 crore to INR 750-1000 crore within 12 to 18 months and expects to achieve this easily given the current disbursement run rate of around INR 20 crore per month.
→Expansion plans include increasing branches from 65 to approximately 70 by end of FY24, including entering southern states like Karnataka, Maharashtra (Vidarbha, Nasik, Pune suburbs), Andhra Pradesh, Telangana.
→Profit margins currently suppressed due to increased interest rates and branch expansion expenses; expected to normalize within 2-3 years as new branches stabilize and cost efficiencies improve.
→Net Interest Margin (NIM) slightly declined from 3% to 2.73% due to rising repo rates but anticipated recovery alongside scaling operations.
→Management envisions at least 10x growth over 5 years, aiming for long-term sustainable growth rather than short-term gains.
→Equity raising of around INR 50 crore planned within the next 1-2 financial years to support growth.
→Operating costs will moderate as branch expansion costs normalize post stabilization period.

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Yes

→SRG Housing Finance Ltd plans to raise around INR 50 crore in equity either in the current financial year or in FY 2025.
→Despite a high capital adequacy ratio of 32%, the company acknowledges that equity addition is needed as the balance sheet size grows.
→The company’s philosophy is to raise equity well in advance rather than at the last moment, understanding that the process takes around 7 years.
→Equity raising will be aligned with growth plans, especially when growth exceeds 20-30%.
→No specific details are given about timing, pricing, or market capitalization for the equity raise.
→On the debt side, the company is managing borrowing costs effectively; average borrowing cost is around 11% - 11.25% after the repo rate increase.
→No explicit future debt fundraising amount or plan was mentioned during the call.

Yes

→As of the call on October 31, 2023, SRG Housing Finance Ltd mentioned having sanctioned loan orders worth INR 60 crore to INR 70 crore, which are pending and being worked on despite some slowdown due to elections.
→The loan sanction in Q2FY24 stood at INR 73.86 crore, showing a 43.50% growth year-on-year.
→Disbursement for Q2FY24 was INR 68.09 crore, up 37.03% compared to the previous year.
→The company is targeting AUM growth to INR 750 crore to INR 1000 crore within 12 to 18 months based on an average disbursement run rate of about INR 20 crore per month.
→Business processing is temporarily slower during elections due to delays in government-related work, but approvals and disbursements are expected to resume normal pace thereafter.

Yes

→SRG Housing Finance Ltd plans to raise equity capital of around INR 50 crore either in the current financial year or in FY25, indicating future capital infusion.
→The company is expanding its branch network, targeting 5-6 new branches by the end of FY24, especially focusing on southern states like Karnataka, Maharashtra (Vidarbha, Nasik, Pune suburbs), Andhra Pradesh, Telangana.
→Creation of new teams for PAN India operations planned, including treasury and business teams to start from Mumbai by April next year, implying investment in human resources and infrastructure.
→Investments in technology and process improvements are ongoing to support business expansion.
→No mention of specific large-scale capital expenditure projects, but focus on branch expansion, manpower, and technology indicates strategic investment for scaling operations.

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