Housing finance firm Repco Home Finance looks to improve gross non-performing assets (NPA) to 1.5 percent and its provision coverage ratio to 70 percent by the end of this fiscal, says company MD R Varadarajan.
Going ahead, he sees 25-30 percent growth in disbursements for balance of FY15 as well as net interest margins (NIM) to remain stable at 4.5 percent, he says in an interview to CNBC-TV18.
According to him, the company will now focus on home loan business.
Below is the verbatim transcript of the interview:
Q: In the last quarter, the company managed to improve their asset quality a fair bit so the gross NPA stood at 1.65 percent. What is the target, the company’s guidance to lower the GNPA by the end of this fiscal year?
A: We have always been closing around 1.50 percent GNPA over the last few years at the end of the year. So, this year also we will strive our efforts to bring it down to less than 1.50 percent like last year. So, we seek to improve the GNPA position of the company.
Q: In the previous quarter your disbursements were around 26 percent higher if I am not mistaken. Are you managing to continue that trajectory in to this quarter as well?
A: The last six quarters we have seen a growth of about between 25-30 percent on the outstanding loan book. With the corresponding increase in the disbursements also the remaining portion of the current year also should see some where between 25-30 percent growth and the corresponding level in the disbursements.
Q: What about the NIMs? Can we expect an improvement in your NIMs in the coming two quarters?
A: The NIMS should remain stable at around 4.5 percent, which was as at the end of the September. They should remain stable till the end of the year.
Q: What would your possible outlook be going to FY16 considering that there is such a stable asset quality profile, 80 percent of your loan, your ticket size is upto 30 lakhs and it is only to retail home buyers only. So in that sense would this strategy continue? Would there be any sort of diversification that Repco Home Finance could consider at any point?
A: I do not think so; we would like to continue with the business what we understand, we will remain in the home loan business and that will be 100 percent of retail loans. We expect to maintain the same level of growth between 25-30 percent in the next fiscal year also.
Q: What about your provision coverage ratios (PCR)? Despite a good loan growth, asset quality largely under check your PCR is quite low, it currently stands at 51.5. Are you looking to improve your PCR and if yes to how much by when?
A: Definitely we would like to improve the provision coverage ratio. It has already reached about 51 percent as at the end of September 2014. We are trying our level best to take it around 70 percent before the end of this year and may be slowly take it up to 100 percent over the next couple of years. We will work on all this aspects in the remaining portion of the current year. We would definitely like to improve our provision coverage ratio.
Q: What will be the incremental provision that you will require to improve you PCR to 70 percent on your existing book?
A: You can always say if you are going to have a growth of about 25 percent over the asset which we had at the end of the March - take that and take about 70 percent and then you workout the gross NPA level about 1.50 percent and then have 70 percent of that as a coverage. May be we will require may be an additional of another Rs 5-10 crore we will add to take the provision coverage ratio. As I do not have the details numbers, we need to work out on these things.
Q: In the previous quarter, you did have a stronger jump in your net interest income (NII) of over 25 percent but your net profit was up only 12 odd percent because your total operating cost rose 60 percent. What resulted in that and is that the trajectory we can expect in this quarter as well?
A: There was probably a marginal increase in operating cost. The major impact as been through the creation of the deferred tax liability, which we are made to create out of the profits that we are going to make this year onwards by the National Housing Bank our regulator. Now we have a special reserve which we create under Sec 36(1)(viii) of Income Tax Act. So far, we did not have to make any tax liability on that.
However, for the current year National Housing Bank as asked all the Housing Finance Companies to make a provision deferred tax liabilities on these special reserves also. As a result, we have to make some deferred tax liability and because of that the part has come down.
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