SRG Housing Finance LtdQ1 FY23Finance

SRG Housing Finance Ltd

Q1 FY23 Earnings Call Analysis

Management growth scorecard

Revenue

Category 1

Margin

Category 3

Fundraise

Yes

Order

Yes

Capex

Yes

4 of 5 growth signals are positive — a strong management growth story.

Full analysis

Revenue guidance

Category 1

→SRG Housing Finance plans 100% growth by expanding into 3-4 new states.
→Target AUM (Assets Under Management) of Rs. 1000 crores in 3-4 years.
→Business model to remain the same to achieve this growth.
→Disbursement expected around Rs. 250-300 crores annually, maintaining Q4 run rates.
→New branches (15 planned for FY24) will contribute to growth, with ongoing expansion into new geographies.
→Existing and new branches collectively show strong disbursement growth.
→Liquidity and funding are well-managed with 22-23 lenders and Rs. 300 crores readily available.
→Credit rating expected to improve with AUM growth, potentially lowering borrowing costs slightly.
→Confident growth outlook driven by post-pandemic rural demand revival and strong, experienced management team.

Margin guidance

Category 3

- SRG Housing Finance plans to achieve an AUM of Rs. 1000 crores in 3-4 years, indicating strong future growth. - The company expects 100% growth if they expand into 3-4 new states. - The business model will remain the same to achieve this growth. - Confidence is high due to the company's strong capital position, experienced team, and recovery from past difficult times. - Margin improvements and cost efficiencies are expected with increased scale and productivity in new and old branches. - Credit rating upgrades could reduce borrowing costs by 0.25–0.50 basis points, positively impacting profits. - Earnings growth is expected to follow disbursement and AUM growth, supported by stable net interest margins (~11%). - No immediate plans for equity raise before reaching Rs. 1000 crores AUM; liquidity management is being optimized. Overall, SRG Housing Finance projects solid expansion in earnings and profitability aligned with substantial asset growth over the next 3-4 years.

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Fundraise plans

Yes

→The company currently has no immediate plans for raising equity in the current year.
→Equity raise may be considered if a long-term investor offers good terms, but only beyond a loan book size of Rs. 600 crores.
→For FY24, fund raising via debt is not an issue, with 22-23 existing lenders including banks and financial institutions.
→The company can easily raise Rs. 300 crores in funds through debt.
→Liquidity is maintained at around Rs. 100 crores on the balance sheet, with undrawn sanctioned limits available to support disbursements.
→No equity plans are currently scheduled until the loan book crosses Rs. 600-650 crores.
→Expansion to new states and branches will likely be supported mainly through debt funding.

Order book

Yes

- The company did not explicitly mention a current or expected orderbook or pending orders during the call. - Focus is on housing finance business expansion with increased branches (62 branches in FY23 up from 37 last year). - Disbursement in FY23 was Rs. 190.73 crore with a growth of 124%, and Q4 disbursement grew by 136%. - Expected disbursement guidance for FY24 is around Rs. 250 to 300 crore. - Emphasis is on organic growth via new branches, targeting an AUM of Rs. 1000 crore in 3-4 years. - No mention of any orderbook as such since the company operates in the housing finance sector, focusing on loan disbursement and AUM growth rather than order-based contracts. In summary, the company’s growth trajectory is based on expanding loan book and branches rather than orders or pending contracts.

Capex plans

Yes

→Currently, SRG Housing Finance Limited does not have immediate equity raising plans, as per Vinod Jain's comments on maintaining liquidity and funding growth through existing resources.
→The company plans business expansion by opening 10 to 15 new branches annually, especially in new states like Karnataka, Telangana, Tamil Nadu, and Maharashtra, indicating capital deployment in branch infrastructure.
→Vinod Jain mentioned that if a suitable long-term equity investor appears, they may consider raising good equity at a favorable rate, but there is no urgency until the loan book reaches around ₹600 crores.
→The company has invested in technology upgrades, including a new headquarters in Udaipur and implementing SAP systems for underwriting and collections.
→Overall, capital investment is focused on branch expansion, technology enhancement, and maintaining liquidity with ₹100 crore on the balance sheet.
→There are no explicit large-scale future capital expenditure announcements beyond branch growth and operational scaling.

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