Release Date: October 21, 2024
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
Positive Points
- Indostar Capital Finance Ltd (NSE:INDOSTAR, Financial) announced the sale of its wholly owned subsidiary, IndoStar Home Finance Private Limited, for INR1,750 crore, which is expected to strengthen its core business focus.
- The company received a rating upgrade from CRISIL to stable, reflecting improved financial stability and creditworthiness.
- Indostar successfully raised INR266 crores through its maiden public issue of secured, redeemable, nonconvertible debentures, enhancing its liquidity position.
- The commercial vehicle disbursement for Q2 FY25 reached INR1,499 crores, showing a growth of 53% over the previous year.
- The company has made significant investments in technology, enhancing its end-to-end loan origination system to be digitally driven, which is expected to improve operational efficiency.
Negative Points
- The annual retail inflation rose to 5.49% in September, driven by food inflation, which could impact consumer spending and borrowing costs.
- The RBI's unchanged repo rate and tightening regulatory norms for bank funding to the NBFC sector could limit Indostar's access to funds.
- The company's gross non-performing assets (GNPA) stood at 4.97% for FY25 Q2, indicating challenges in asset quality.
- Collection efficiency was impacted by adverse weather conditions, such as extended monsoons, affecting vehicle movement and revenue.
- The company's operating expenses increased by 16% over the previous quarter, driven by workforce expansion and branch costs, which could pressure profitability.
Q & A Highlights
Q: Does the increase in commercial vehicle (CV) prices mean that freight rates have also increased, or will it result in longer-term tenors for customers? What is the financial health of your target segment, and do you see overleveraging as a problem due to fintechs?
A: The increase in CV prices ideally requires longer-term tenors, but NBFCs in India typically offer shorter terms due to asset-liability management constraints. Freight rates have not increased, and the financial health of our target segment remains stable. We haven't observed significant overleveraging issues from fintechs impacting our operators. - Karthikeyan Srinivasan, CEO
Q: Can you explain the write-offs and provisions seen this quarter?
A: We have a policy to write off loans outstanding for over 730 days. This quarter, we wrote off such loans, which were primarily from the CV business. The provisions were adjusted accordingly, but there were no reversals. - VinodKumar Panicker, CFO
Q: Are there any plans to make reserves for climatic changes impacting performance?
A: Our Expected Credit Loss (ECL) model already factors in macroeconomic conditions, including monsoon variability. We do not see a need for additional provisions specifically for climatic changes. - Karthikeyan Srinivasan, CEO
Q: What is the strategy for the inflows from the sale of the housing finance subsidiary?
A: The inflow will be used for our core business operations, including CV and small business loans, disbursement, loan repayment, and regular operating expenses. Specific plans will be finalized closer to the transaction completion. - Randhir Singh, Executive Vice Chairman
Q: What is the target mix for CV and small business loans by FY26, and are there any expected challenges in the housing finance business sale?
A: The CV business will remain our main focus, with Micro LAP expected to be less than 5% in the near term. We anticipate a smooth sale of the housing finance business, with no expected challenges in obtaining necessary approvals. - Randhir Singh, Executive Vice Chairman
For the complete transcript of the earnings call, please refer to the full earnings call transcript.
