Carlyle-backed finance firm Repco Home Finance Ltd, which reported a strong earnings performance in the first quarter buoyed by an increase in disbursals, said it expects to sustain the growth momentum and allayed concerns that the high cost of credit is affecting its growth.
The firm reported a 57 per cent year-on-year increase in its net profit to Rs 22.3 crore in the first quarter ended June 30, 2013 over the year-ago period, driven by higher disbursement and stable spreads in a tight monetary environment.
“Though the interest rates are high, there is no reduction in the demand for the housing financing,” R Varadarajan, managing director of Repco Home Finance said in a post-result call.
The firm saw its total disbursement in the quarter increase by 80 per cent year on year to Rs 334 crore, which took its total outstanding loan book to Rs 3,747 crore, up 29.3 per cent. Tamil Nadu alone contributes 63 per cent of its outstanding loans. The firm has seen its loan book increase a compound annual growth rate of 38 per cent over the last four years.
Total income reported a 32.4 per cent increase to Rs 118.6 crore; however, it also saw expenses increase due to one-off expenditure.
It reported a 58.3 per cent y-o-y increase in its net interest income to Rs 42.4 crore in the first quarter, while its non-interest income grew 58.3 per cent to Rs 4.9 crore. Its net interest margin stood at 4.66 per cent, up 3 basis points sequentially.
“We have limited exposure to short-term borrowing; our liquidity position is stable and (we) do not see stress from high cost of money. Since we are borrowing in floating rates, we have the ability to pass on the increase in interest rates to the customers. Hence, we can maintain our spreads as well,” said Varadarajan.
The firm gets 35 per cent of funding requirements from National Housing Bank, a regulatory agency for housing finance institutions, and 57 per cent from banks.
He said the firm will continue to see growth in home loans to customers in tier II and tier III cities and will maintain the overall growth momentum. “Two-thirds of our branches are in these cities and the long-term opportunity is high here,” he said.
The NBFC, which went public in March 2013, has already used its funds and will resort to diversifying its borrowing through other instruments in the current financial year. “We have a bank sanctioned limit of up to Rs 1,000 crore that can be used,” Varadarajan said.
The firm, which counts among its shareholders private equity firms Carlyle and Creador, currently, has capital adequacy ratio of 24.8 per cent.
The firm plans to open 10 to 15 branches in the current financial year. Its gross and net non-performing assets stood at 2.22 per cent and 1.52 per cent, respectively. The provision coverage ratio was at 32 per cent, which is lower than that of most financial institutions; it plans to raise its coverage in the subsequent quarters.
(Edited by Joby Puthuparampil Johnson)