Release Date: October 24, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- MAS Financial Services Ltd (BOM:540749, Financial) reported a strong growth in assets under management (AUM) of 22.35% on a consolidated basis.
- The company achieved a profitability growth of over 25% on a consolidated basis.
- The housing finance segment showed robust performance with a 33% rise in AUM and a 25% increase in profitability.
- The company maintained a stable asset quality with net stage 3 assets at 1.57% and 0.698% for the parent and housing segments respectively.
- MAS Financial Services Ltd (BOM:540749) has a well-diversified liability profile and has been able to raise funds at competitive rates, with plans to increase capital market exposure to 20% over the next three years.
Negative Points
- There is a slight increase in gross stage 3 assets, indicating some stress across product categories including MEL, two-wheeler, and commercial vehicle loans.
- The company is seeing signs of over-leverage in some SME segments, leading to increased rejection rates.
- The microfinance segment, although a small part of the portfolio, is experiencing industry-wide stress.
- The company anticipates a potential slowdown in growth, prioritizing asset quality and profitability over aggressive expansion.
- There is a challenge in recruiting desired manpower for new product launches, delaying the rollout of the used vehicle financing segment.
Q & A Highlights
Q: Are you seeing any signs of stress across your product categories, particularly in SMEs, two-wheelers, and micro-enterprises?
A: Kamlesh Gandhi, Executive Chairman and Managing Director, noted a slight increase in gross stage 3 assets, indicating some stress across product categories, including MEL, two-wheeler, and commercial vehicle loans. However, SMEs have been relatively stable. The company expects the stress to remain within a range of 2.25% to 2.5% for gross stage 3 assets.
Q: How are your microfinance company partners performing, given the stress in the microfinance sector?
A: Kamlesh Gandhi explained that MAS Financial has been reducing its exposure to microfinance companies, which now form less than 5% of their total AUM. The company is selective in lending to MFIs, ensuring they pass rigorous liquidity and solvency tests.
Q: Have you changed any credit loss arrangements with your NBFC partners, and how do you see the proportion of sourcing from NBFC partners evolving?
A: Kamlesh Gandhi stated that there has been no substantial increase in defaults or losses with NBFC partners. The company plans to shift towards a 70-30 distribution model in favor of retail distribution over the next three to four years.
Q: How does the current asset quality environment compare to past cycles, especially with the shift towards more direct retail distribution?
A: Kamlesh Gandhi mentioned that while direct distribution may show higher numbers, the anticipated losses are within the risk-adjusted return metrics. The company remains confident in managing credit costs effectively, similar to past cycles.
Q: What is the outlook for loan book growth, considering the current environment?
A: Kamlesh Gandhi reiterated the medium to long-term growth guidance of 20% to 25%. However, he emphasized that the company prioritizes asset quality and profitability over growth and may accept slightly lower growth in the short term if necessary.
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
