Can Fin Homes reports healthy growth in Q3 earnings: Here are key highlights from conference call

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Housing finance company Can Fin Homes on January 21 has registered a 32.7 percent year-on-year growth in Q3FY20 profit at Rs 106.6 crore, partly driven by lower tax cost.

Net interest income during the quarter increased 23.9 percent to Rs 168.6 crore YoY on the back of strong liquidity position. The company has un-availed liquidity limit of Rs 4,137.84 crore as of December 2019.

Disbursements growth of the company remained strong at Rs 1,476.7 crore in Q3, up 12 percent YoY and 10.7 percent QoQ. Asset under management (AUM) increased 14.9 percent YoY and 3 percent QoQ to Rs 20,194 crore in Q3FY20.

Asset quality remained under control for the quarter ended December 2019, with gross non-performing assets (NPA) rising to 0.8 percent (against 0.79 percent QoQ) and net NPA up at 0.59 percent (against 0.58 percent QoQ).

Here are key highlights from Can Fin Homes' conference call by Narnolia Financial Advisors:

Management Participants - Girish Kousgi - MD & CEO, Shreekant M Bhandiwad - Deputy MD

The company reported high margins at 3.42 percent as against 3.21 percent last quarter due to low incremental cost of funds in Q3FY20 and management expect margins to be maintained going ahead.

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The blended incremental cost of borrowing stood at 7.75 percent. Cost of borrowings from NHB stood at less than 7 percent.

Employee expenses increased in Q3FY20 due to increase in staff and going ahead they are expected to be maintained.

The management guided moderate 20 percent AUM growth for the next 2 years.

Disbursement growth is expected to be at 20 percent in the next 4-5 quarters.

On borrowing mix going ahead, bank borrowings are expected to go down, NHB expected to increase, NCD are expected to be replaced and CPs are expected to go down.

As per management, there is no challenge on Karnataka book growth side. Growth in disbursement in Karnataka in Q3FY20 stood at 10 percent.

The composition mix is expected to remain the same at 70:30 salaried versus non-salaried going ahead.

Asset quality is expected to improve going ahead.

Plan of raising fresh equity up to Rs 1,000 crore through rights issue/QIP / preference share in next 3-6 months.

GNPAs in SEMP segment has been double the GNPAs in Salaries class.

Capital Adequacy Ratio went up to 22 percent from 19 percent last quarter, the reason being as there are three parts to it one is sanctioned but an agreement is not signed, one is sanctioned and an agreement is signed and the last one is sanctioned with an agreement signed and part disbursed. So the company needs to provide for later two not the first one. So there was some rectification in classification done last quarter.

The company expects to raise capital to have its leverage ratio to go down which is at 8.75 currently.

Repayment rates were high in Q3FY20 on the account of subsidy of Rs 145-150 crore in CLSS (Credit Link Subsidy Scheme) credit scheme.

The company has plans to take the branch count to 200 by the end of March 2020.