Repco Home Finance Limited (NSE: REPCOHOME) Q4 2025 Earnings Call dated May. 19, 2025
Corporate Participants:
Unidentified Speaker
Rajeev Mehta
T. Karunakaran — Managing Director and Chief Executive Officer
Abe Palpandi — Chief Operating Officer
Shanti Srikant — Chief Financial Officer
M. Raja — Chief Business Officer
Ankush Tiwari — Co. Secretary & Compl. Officer
A Palpandi — Chief Operating Officer
Analysts:
Unidentified Participant
Vikas Kasturi — Analyst
Ankit Gupta — Analyst
Kiran B — Analyst
Shubhranshu Mishra — Analyst
Sonal Minhas — Analyst
Anand Mundra — Analyst
Presentation:
operator
Ladies and gentlemen, Good day and welcome to the Repco Home Finance Q4FY25 Earnings Conference Call hosted by S. Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing then zero on a touchstone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajeev Mehta from yes Securities. Thank you. And over to you sir.
Rajeev Mehta
Good evening everyone. Welcome to the Q4FY25 earnings call of Repco Home Finance. We thank the management for giving us the opportunity to host them. From the company we are joined by Mr. T. Karnakaran, Managing Director and CEO. He began the MD and CEO from this April. So sir, congratulations for that. He is joined by Mr. Abe Palpandi, Chief Operating Officer. Mr. P.K. Vaidyanathan, Chief Development Officer. Mr. M. Raja, Chief Business Officer. Ms. Shanti Srikant, Chief Financial Officer and Mr. Ankush Tiwari Kamil, Secretary and Compliance Officer. I would request Mr. Karnakaran to give. Us an overview on company’s performance post which will open for Q and A. Over to you Sir.
T. Karunakaran — Managing Director and Chief Executive Officer
Thank you Mr. Rajiv. Good evening everyone. I am T. Karnakaran MD, CEO of this company. Just introduce my just small introduction about me. I started my career with this company during 2004. Prior to that I worked in in bank housing in various capacities and various places basis. This is my just introduction. We would like to welcome you all to the earning call of PrepCo Home Finance Limited for the quarter and year ended 31st March 2025. We would like to thank you all for joining us in this call today entire senior management team along with me in this call.
This is my first time interacting with you all in my new role as MD so CEO of this company. We are pleased to announce that this year our company is celebrating silver Dupli in the industry marking 25 years of excellence. As we celebrate this achievement, we anticipate continued growth, greater achievement and sustained market relevance as we move forward into the future. Coming to the company’s performance, we have been able to maintain the growth trend seen in the last few quarters in Q4 2025 as well, the company is steadily progressing on its business parameters. The structural changes that have been made are getting strengthened across the organization and are yielding results.
This will be an ongoing process and we shall adapt to changes as and when the business demands. We have also been able to initiate the introduction of new systems and business process and wish to take advantage of the same in the current year. Some of the major steps taken by us in FY 2425 are number one target oriented approach in sanctions disbursements NPAs while strengthening vertical sanctions number two localized by processing by creating regional level operations technical legal resources for improving turnaround time of our loan sanctioning Number three various recovery efforts including conducting four auction mela during the year and implementing special OTS schemes.
Number four Improving the employee model. Now I give updates on business. In the current financial year we were able to achieve disbursements of 975 crores in Q4FY25 as against rupees 895 crores in Q4FY24 and rupees 761 crores in Q3FY24. Our Q4 disbursements are up by 28% compared with Q3 of the financial year 2425. Our sanctions stood at 1059 crores in Q4FY25, as compared to rupees 975 crores in Q4 of FY24 and rupees 806 crores in Q3 of FY25. Overall we have achieved 3519 crores of sanctions and 3284 crores of disbursement in the financial year 2429 as against 3340 crores of sanctions and 3135 crores of disbursement in the financial year 2324.
This is the highest disbursement we have made in the recent our AUM stands at Rupees 14,492 crores at the end of the financial year 25 as against Rupees 14,155 crores in Q3FY25 and Rupees 13,513 crores at the end of the previous financial year. The ratio exposure between self employed and salaried segment stood at 52 and 48% respectively. The share of non housing loan I.e. home equity stood above 27% of the loan book and housing loan contributed to about 73% of the loan loan book. The new loan book has shown strong performance with the total disbursement of about 9,338 crores from financial year 23 to financial year 25.
The NPA from new book remains low and accounting about 0.7% of the total AUM of during the 23 and 25. During the period dispersed loan dispersed from FY23 to 25. Due to our continuous recovery efforts like conducting Action mela and also implementing special OTS has given a good result. The GNP has been reduced from 552 crores in FY24 to 475 crores in FY25. Our GNPA stood at 3.26% of the AUM as of March 2025. The net NPA stands at 191 crore representing 1.32% as end of March 2025. The total provisions for NPA amounts to 282 crores and provision coverage ratio stood at 59.60% as end of March 2025.
Additionally, the stage 2 outstanding has decreased significantly by 151 crores. That means our March 2025 stage 2 assets stood at crores as against 1561 crores at end of March 2024. Thereby we have seen reduction of 151 crores in stage 2 assets. Look at borrowings. Our borrowings stood at 11,148 crores at end of March 2025. If you look at borrowing mix, NHP contribution is about 7.85%. In absolute terms it comes to close to about 876 crores. Bank borrowing outstanding stood at 9,247 crores. Almost out of total borrowings, 83% of the borrowings are coming from banks and our promoter bank Repco Bank.
Outstanding is term loan, term loan as well as credit. Specifically outstanding is 1026 crores which accounted 9.20% as of 3-31-2025. I’m happy to inform that we got a sanction from National Housing bank in financial year 2025 after a gap of 3 years. The sanction amount is some rupees 150 crores. We would like to avail this 150 crores in coming days. Profitability Our NIM for The financial year 25 was at 5.15%. The company has been able to maintain a spread of 3.3% for the financial year 2025. Our yield on loans stood at 12.07%. The net profit grew by 8% quarter on quarter and 6% off Y and out to 150 crores for the Q4FY25 as against 107 crore in Q3FY25 and rupees 108 crores for Q4 of FY24 respectively.
For the whole year we have earned a net profit of 439 crores as against 395 crores in last year which is a 11% increase. Our ROA and ROE stood at 3.15% and 15.23% respectively for the financial year 2025 as against 3.05 and 15.79 in financial year 2024. Cost to income ratio as end of March stood at 37.52 of course and for entire old year the credit cost is negative for the financial year 2425 software the new IT revamping is in advanced stage and is expected to completed by September 2025. Core systems including the loan origination system, loan management system and loan collection systems are fully operational with initial issues successfully resolved.
Additionally, mobile applications for sales, collections and field investigations have been rolled out. Coming to Branch Network as of March 31st, 2025 we have added in other words, during the financial year 2025 we have added 21 new branches bringing the total branch count to 233 across 12 states and one Union Territory. This includes 189 branches and 44 satellite center with additional two asset recovery branches. We are expanding our branch presence in regions outside Tamil Nadu. During the current financial year we would like to open new 14 branches various locations across the country and majority of the branches will be in ap, Telangana and the west part of our country.
I will summarize the key financial highlights for the financial year 2425 before opening the floor for P and A session. The loan book stood at 14,492 crores registering 7% y on y. Growth span for the year was 439 crores with 11% increase y on Y basis. ROE and ROE for the year stood at 3.15% and 15.23% respectively. The core profitability has remained strong with solid spread and margin of 3.33% and 5.15% respectively. The gross NPA reduced to 3.26% with the stage 3 provision coverage ratio of 59.60% and the net NPA stood at 1.32% as end of 31st March 2025.
Our stage 2 assets stood at 1410 crores in March 2025 as against 1561 crores in March 2024. I’m happy to announce that our board has declared a dividend of 4 rupees per share subject to the approval of our shareholders. Pay forward we would like to present the roadmap of the company. The company targets 16,200 crores of AUM by FY26. That means 12% growth. Right now our book size is approached about 14,491. We want to take this 14,491 crores to 16,200 crore by this year end with a spread of 3.2% and around 3.2%. And maintaining ROI of 3.1% in recovery plant.
We want. Right now our NPA gross NPA is about 473 crores. We want to reduce this NPA by at least by another 75 to 80 crores. And we want to bring it down to our gross NPA from present level of 3.26 to below 2.5%. Our net NPA right now stood at 1.32%. We want to bring it to this NNPA to below 1% by March 2026. We will be adding 14 new branches in FY26. And 12 SAT centers will be upgraded to the branches. Increasing the shorter number of branches to 247. The focus for the current year includes growth, acceleration and overdue reductions.
With the momentum gained in the just concluded year and the learnings the company is confident of reaching a disbursement of rupees 4000 crore. Repeating rupees 4000 crore and AUM of rupees 16,200 crores. And we set a target of reducing stage 3 number between 7 to 8%. Looking ahead, the company has failed to reach 25,000 crores AUM by FY28. With accelerated disbursements and growth with quality and profitability. I take this opportunity to thank all our investor analysts, credit rating agencies, our bankers, borrowers, vendors, regulators and all the stakeholders for evincing the interest in company’s growth story and for continued support.
Now we open the session for Unda.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on the Touchstone telephone. If you wish to remove yourself from the question queue, you may press star and. Two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Vikas Kasturi from Focus Capital. Please go ahead.
Vikas Kasturi
Am I audible? Sir? Am I audible?
operator
Yes, sir. Please go ahead.
T. Karunakaran
Yeah.
Vikas Kasturi
Okay.
Vikas Kasturi
Thank you. Yeah. First of all, congratulations sir on becoming the MD of the company. And we wish you all the Best in your new role, Sir, I had about three questions. So the first one is sir, in last year, May of 2024 we had said that we will be adding 40 branches and we have actually added somewhere around 2022 branches. And in the coming year also we are going to add only 14 branches. So if our branch addition is not increasing sir, would it not affect our future growth? So that is number one. Number two is Sir.
So congratulations to you and the entire team of Repco for improving the asset quality drastically in the last three years. And you have also given further guidance on bringing it down. So what are the interventions that you are planning to bring this GNPA down? Will you continue the auctions and ots or are they. Are you going to introduce some more interventions to bring this down? And the third one is that this is more like an observation. I am also a shareholder of the company, sir. As a concerned shareholder, sir, I. You know I’ve been seeing the frequent changes at the board level as well as at the CXO level.
Sir, this is not inspiring much confidence among investors. So could you please convey to the board that we would like to see stability at the top level so that there is stability in the strategy as well as in the execution of the company. That is all I have to say.
T. Karunakaran
Yes, thank you for your greetings and wishes. I would like to answer the first question, I mean third question first. Yes, I have taken note of your thing on frequent changes on the board. Definitely I will escalate this thing to our board in second question, recovery. Yes, we set a target of achieving below 3 GNP percentage. Bring it down to GNP percent to below 3%. 2.5% by year end. Yes, we have taken a lot of initiatives. Of course last two years we have started verticalizations in our company almost we employed close to 170 people in recovery department for collection zone collections as well as to take care of NPA things.
Of course we conducted four Sarpassi action mela in Laska P mentioned we want to extend the same in coming year. Also special OTS schemes we have introduced. Of course Board has permitted to extend this special OTS schemes by up to June 2026. I mean 2025. With these initiatives we are confident that we’ll be in a position to reduce our NPA from present level to 2.5% by year end.
Shanti Srikant
In addition to this for this year we are going to introduce a recovery vertical exclusively for the NPA reductions are they will be supported by the legal manager from the region. Well for taking action under Sarpasi Act. And also we are planning to conduct mega auctions on monthly basis.
T. Karunakaran
In addition to that earlier one GM is responsible for entire recovery operations in our company. Now we posted one more additional GM for looking after recoveries of non Taiwan non TN and one specific general manager for Tamil Nadu. These initiatives definitely will bring results in the coming year.
M. Raja
On the first question, I would like to take this question Raja here on me. Adding only 24 branches. Yes, we have consciously not gone into increasing our footprint across remote regions. We are more now looking at channel wise teams getting built up. Now we are looking at an urban oriented channel, a builder channel, a DSA channel. So we are going now a bit branch agnostic. It is only a starting stages. It will start delivering results in the near future. Yes, branches will. As you all know, physical branches has its own pros and cons. We are also now getting into channel voice sourcing.
T. Karunakaran
In addition to recoveries, we have also paneled a few recovery agencies which will also help us to improve our GNP percentage in coming year.
Vikas Kasturi
Thank you sir. Thank you for answering my questions. Hello moderator. Yes sir.
operator
Thank you. Our next question comes from the line. Of Ankit Gupta from Bamboo Capital. Please go ahead.
T. Karunakaran
Yes sir.
operator
Mr. Ankit, may I request you to unmute your mic? The question please.
Ankit Gupta
Hello.
Unidentified Speaker
Yes sir. Please go ahead.
Ankit Gupta
Hello. Hello. Am I audible?
Unidentified Speaker
Yes sir. Please go ahead.
Ankit Gupta
Sure. You know, congratulations for, you know significantly on being appointed as MD. And you know our efforts to bring down NPAs over the past two to three years now we have seen a significant decline in those. So one of the challenges that we as a as an nbsp have been facing is, you know, the significant amount of BTE out which has happened, which has been happening in in the company for the past many years now. You know a lot of our good customers, you know after a year or two switched to other banks or NBFCs which offer them lower rate of interest.
So anything you would like to specify where we can improve this issue or we can work on this thing so that you know our BTOUT ratio becomes lower and you know this also helps us in increasing our aum. So sometimes what happens is our disbursements are pretty good but our AUM doesn’t increase much because of this BTout issue. So if you can talk about this update.
T. Karunakaran
Yes sir. Thank you. We have taken a lot of initiative to retain the good customers. We articulated customer retention policy. As per the policy we are permitted to reduce the rate of interest up to 2% and also give Additional top up loans to retain good customer. Yes. The initiatives taken by us, even the good results. We have seen improvement in VT out compared with the last 2, 3, 4 years. See the 2524. I mean the financial year 2025. I’m having the statistics on VT in and VT out which will indicate there is a improvement in BT out.
See, in the financial year 2425. Total BT in this about four hundred and fifty crores. And BTO because of that our various initiatives taken by the company, our BT out is reduced to 300 crores.
Ankit Gupta
So in FY25 it is reduced to 300 crore from 400 crore in FY24 is what you are saying, right?
T. Karunakaran
No. FY25, my BT N is 450. 50 crores. In general, our BT out will be more than BT in because of.
T. Karunakaran
Okay. Various initiatives taken by us. Our BT in for the financial year 2425 is 455 crores. And BT out is 300 crores in. Generally it will be the same. Or our BT in BT in will be lesser than BT out.
Ankit Gupta
Sure, sure, sure. Because that has been the training. Yeah, that has been the training. FY23. FY24 also. Yeah. And which is exactly. That is a reverse reversed in FY25. Yeah.
T. Karunakaran
Yes, exactly.
Ankit Gupta
Okay. Okay. You know, on the credit cost for FY26, you know, last year we saw because of the recoveries, we had a. We had a positive credit cost in FY25. And since you are also targeting recoveries in FY26 as well, where do you see a great cost in FY26 and even for FY27 and onwards? Like what should be the normalized credit cost for us going forward? First for FY26 and then for FY27 onwards.
T. Karunakaran
If we. For the current financial year we set a target of reducing our NPA in observed terms around 75 to 80 crores. Yes. There will be a reversal of existing provisions. We want one thing. We want to also improve our provisional coverage ratio. Right now my idea is to make some additional provision. To the extent of 10 to 15 crores. Bring the credit cost below 0.5 below 2.25 basis points or 30 basis points in the current financial year 26. Really, we need to work out.
Ankit Gupta
On a steady state basis. Can we assume, you know, less than 0.5% rate first or it will be higher.
T. Karunakaran
It will be. It will be. I’m talking about absolute terms. It may be around 10 to 15 crores to the charge. To the P and L for the current financial year. Financial year 27. Right now I am not having the data. I may be in the position to tell in my next con call. This year I would like to charge around 10 to 15 crores to my P and L.
operator
Thank you.
T. Karunakaran
Of course my state, my stage one assets also will go up to the extent I have to make a provisions. There will be a movement from stage one to stage three keeping all those things. I’m. I’m expecting around 10 to 12 crores. Provision in provision charge to current year profit and loss account.
operator
Thank you. Mr. Gupta, may we request that you return to the question queue for follow up questions as there are several participants waiting. Thank you. Our next question comes from the line of Kiran B from Dawil Tree Capital. Please go ahead.
T. Karunakaran
Hi.
Kiran B
Thank you so much for the opportunity Sir. Many congratulations on the results and turnaround in the company. Broader strategic question first. What has changed at Repco or in the states that you’re expanding in Especially ap, Telangana, Maharashtra, Karnataka that you are now confident of disbursing almost thousand crore a quarter. Like we’re talking about 4,000 crore disbursements. So I’m just averaging it out. Thousand crores a quarter. When we have. I mean our track record over the past two years has been around 600 to 750. This quarter we delivered over 875. So what are the broader things that are happening in these 34 states? Is it the economy that’s doing well? Is it our channels clicking? Are we gaining market share or is it the opportunity expanding?
M. Raja
I would like to take that. Take that question Raja here. So basically as you are aware last year we have been building up our sales vertical. That is now we were engaging BSMs in all the branches. Now I have almost 163 branches. And we have also got into tie ups with a few of our corporate DSEs. So. And there has been a clear focus shift to the western region wherein now we are brought in cluster. It’s under status like I have a stated now for Gujarat specific and Rajasthan specifically and for Mumbai again we have a cluster specific guy for Mumbai.
So we are confident that our sourcing is improving and we are seeing the numbers. So it is time that we increase our numbers on a quarterly basis. As you rightly said, thousand crores is what we are looking at. Disbursement per month. We should be able to achieve it. That that’s how confident we are.
Kiran B
Got it sir. So second question then sir is from a funding perspective right now we are about 875 crore from National Housing bank and we are got a sanction for about 150 crore additional. Is there a possibility to double NHBS allocation? Are there certain criteria that we need to fulfill for this book for this funding source to go to 2000 crore. That is one part of the funding question. The second part of the funding question is you’re asking for a NCD raise of 1500 crore and commercial paper of. I mean our leverage is fairly at comfortable levels and NCDS and commercial papers are usually a little more expensive than Repco bank or commercial bank interest rate.
So just wanted to understand your funding structure. One on the NHB perspective two on the commercial paper and NCDS that you want to raise if it is cheaper than what are current funding sources?
T. Karunakaran
Yeah, Highline. So the current financial year NHP assumption 11050 crores very short. They communicated the sanction. We are also send our accept acceptance to them very shortly. We are going to execute the documents and going to avail before end of this current quarter. Yes we are. Once the results are now the over after uploading the. I mean after on uploading the results in stock exchange by after AGM we are going to seek additional facility of about 500 to 700 crores. We fulfill the the LGBT criteria of availing refinance from National Housing Bank. So I’m. I’m confident of getting about 500 to 700 crores of refinance for the current financial year.
This is with respect to nhp. Now if you coming to NCD and CP issuance if you look at our borrowings we are our bank. I mean the entire borrowings are concentrated on NHP bank, NHP funding and funding from banking and Repco bank loans which is highly concentrated over the period of time. Our regulators also saying we should diversify our liability site. We have also added two or three rounds of discussions with potential investor and arrangers. The objective of going for NCDS and commercial papers is to diversify our libraries and not depend on bank borrowings. Yes, you rightly said initial issues may be a little bit expensive than the bank borrowings but once we establish our credentials our presence in the debt market we will be in a position to mobilize that competitive I mean lesser and competitive interest rate from debt instruments like NCE and CP’s the period of time.
Kiran B
Got it sir, got it. Last question sir. The GNPA we are targeting about two and a half percent. Is it a safe thing to think that you know we will go below 2% by FY27. Mid FY27 itself will be below 2%. Is that a fair estimate given the quality of book that you are raising?
T. Karunakaran
Yeah. If you look at our new books are really performing good. Old NPAs we started to recoveries are happening in the old NPAs. If you look at our new loan book this last three years we dispersed about 9000 odd crores. The NPA in the 9000 odd crores is 0.70%. Which is clearly indicates that there will not be any additions. There will not be major additions from new loan book hold NPA book. We have taken a lot of initiatives to initiatives to recover. I am sure and confident of achieving this. Whatever the number target in FY27.
Kiran B
Got it sir. Thank you so much. I’ll join back in the queue. Many congratulations.
operator
Thank you. Our next question comes from the line of Subranshu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Hi sir. Good afternoon. Thanks for this opportunity. The first question is around the what proportion of the recoveries came from.
operator
Sorry to interrupt you, sir. Before you go ahead with your question may I request you to use your handset. Sir, there’s a lot of disturbance on the.
operator
Yeah, yeah, yeah.
Shubhranshu Mishra
Is this better?
operator
Yes, sir. Thank you. Please.
Unidentified Speaker
Right.
Shubhranshu Mishra
So first question is what proportion of the recoveries came from Tamil Nadu versus X Tamil Nadu. Second is that we are speaking about. Branch expansion and builder strategy. This is a fairly competitive segment. So have our. What kind of payouts are we giving to the DSAs and the builders On a per file basis? Are we paying more than our closest competitor? And if we can spell out the. Disbursement split from Tamil Nadu and non Tamil Nadu in the future of this 4,000 crores. Thanks.
T. Karunakaran
Yeah.
M. Raja
On the DC payout we are. We are in line with the market. Of course we do have corporate essays and individual DSS. As such the market is paying somewhere around 1 to 1.2 percentage per file basis. And there is no retainership phase. And we are. We are tagging the market so there is nothing extra that we are paying. So that is how we are with our DSS on builder. We are just entering into the builder market. So it is too early for me to talk about the cost. But in builder market traditionally the costing will be cheaper or the sourcing cost will be cheaper. We are looking at that. Recovery site right now. I am not having the data. I will come back to you offline. Building. Disposal. We are already at 53 to 56% from Tamil Nadu. Balances from rest of TN and we are trying to improve that percentage by increasing our disbursement in non TN states this year. You will see the ambus.
Shubhranshu Mishra
Got it, sir. Thank you. Thank you. I’ll come back.
operator
Thank you. Our next question comes from the line of Sonal Minas from Prescient Capital. Please go ahead.
Sonal Minhas
Hi sir, this is Sonal Minas. Am I audible?
Unidentified Speaker
Yes sir. Please go ahead.
Sonal Minhas
Sir. Wanted to understand the quality of sourcing from a corporate DSA or a third party dsa. How has that improved over the last two to three years? What are our checks and balances? To make sure that the input funnel, what we are approving is as per what we want the book to grow. So that’s the first question.
M. Raja
Yeah. When I am talking about quality of file it is. It is not dependent on the DSA because DSA only refers the files or gives the file to us. Then we from our team, the credit team gets engaged with the customer. We do our fy, we do our RCU with our M panel vendors. And yes, the credit decision is with the organization or with us. We are with Repco housing finance. So DLCs role in quality of book may not be there or it’s very, very negligible. We do have a have our controls and checks. It is same as any other sourcing channel.
Any file that gets sourced through any channel it goes through the same process of rigorous checking, testing and then only we do sanction the loans.
Sonal Minhas
Okay, so. So in decision making as a follow up, has anything changed in the last three years? Have you changed the decision making? Have we changed the decision making to be centralized? We’re using more technology, more software. Anything in terms of physical validation of let’s say any loan documentation. If you could just share some details around that, that will be answered.
M. Raja
As of now we are already running with a regional level delegation of powers for sanction for. For loans up to certain limit of loan quantum. Beyond that it comes to the corporate office. It happens the same. It has been so for the past two years and we have not done any major change in the trading process. But on the technology side, yes, we are exploring different options. Like we are looking at incorporating a BI into our system so that decisioning happens faster and the turnaround time is better for us. We are investing in technology but on credit processing nothing has changed, sir.
It is the same for at least for the past two years which I can say.
Sonal Minhas
Got it. As a follow up.
T. Karunakaran
If you look at asset quality which is savings from. We are following a robust credit appraisal system in our company. See, last nine three years we have dispersed 9300 crores of which NP is 0.70%. Even stage one state, I mean stage two also very negligible which indicate that we are having a strong credit appraisal system in our company.
Sonal Minhas
Got it. So this book typically matured between three to five years. So do we expect the stage three for this book to inch higher? Because your mix is roughly 5050 for salaried and self employed. Do we expect this book to maybe inch little higher to one point stage three of being 1.2 1.3% as we. Let’s say two years out, three years out.
T. Karunakaran
No sir, I’m not expecting any this kind of numbers in new loan book. The new loan book we are closely monitoring all the new loan books are performing good. I’m not expecting any changes in this number. I mean NPA numbers in the new loan book in a position to meet in the existing level or we can even reduce up.
Sonal Minhas
Sir, my second question is regard to the guidance for the loan book that you’ve given. We plan to grow by around 11 12% in FY26. Whereas we’ve grown less than single digits more the lower end of the single digit numbers in the in the past. And you’ve given a guidance of 25,000 crore of loan book growth. Is the system given the software, given the technology, given the people, the training ready to grow. See a growth of this order without rattling too much on the asset quality. That’s a question.
M. Raja
See as you are our last. Over the last year and the year before that we have been implementing the system. Now the system is fully up and operational and it is performing good. So we don’t have any issues from the technology side and on employee training. There is a continuous training happening for all our employees at different levels. Last year alone we have almost had more than 14 to 15 training sessions for all our employees across regions. So we are continuously improving training and matching with the market. So I don’t see any strengths in that sir.
T. Karunakaran
Addition to that last two years we opened 41 branches. This year again we are going to open roughly another 14 branches. What are the branches opened in last two years? We started to giving the business. All the branches are stabilized. Breakevens happened. So achieving this 4000 crores will not be big strain for us. Of course the average tickets, average ticket size also quarter on quarter improving two years before average ticket size of our company is close to about 14 to 15 lakhs. Now we touched about 2131 lakhs I’m expecting further increase in average ticket size.
All those things will give confidence achieving a disbursement target of 4,000 crore by year end.
Sonal Minhas
Got it, sir. So you’ve seen fairly confident of growing your book by 20% year on year for the next few years. That’s what.
T. Karunakaran
Yes, yes. Yes. That’s what. That is the message of us.
Sonal Minhas
Thanks a lot, sir. Thanks a lot for explaining. Thank you. I’ll fall back.
Unidentified Speaker
Thank you.
operator
Thank you. Our next question comes from the line of Anand Mundra from Sorewell. Please go ahead.
Anand Mundra
Yeah. Good evening, sir. So wanted to check about E. Kada problem of Karnataka. Is that problem behind us.
M. Raja
Sir? Good evening. Raja here. Ikada problem is still there but it’s kind of muted now. There are. We are able to do business but not into the full flow of it. But yes, business is not getting stopped. We are able to do business, sir.
T. Karunakaran
Yes. Yes. We have seen improvement in disbursements of Karnataka states in March compared with December quarter.
Anand Mundra
Yeah. Sir, with respect to slide 30 on the presentation where you have given the disbursement state. State wise in Gujarat and Kerala the growth is not there, sir. Gujarat 0% and Kerala 2%. Any specific reasons for both the location?
M. Raja
Sir, specifically on Kerala. Yes. We are. We are yet to bring about growth in Kerala. But for Gujarat now we have appointed a specific state level resource. And Gujarat is speaking. My March and April in Gujarat has been very good. So Gujarat will pick up. But Kerala we will have to wait for some more time. Sir. We are waiting for the proper resource to be in place post that Kerala will pick up. But as of now Gujarat and Rajasthan will start posting stupendous numbers. Sir,
T. Karunakaran
Even Kerala if you look at disbursement in the current financial year 24, 25 financial year. It is better than a previous financial year. Numbers are coming up. It may take now the manpower issues until it’s solved. You can see improvement in disbursement in coming quarters in both states.
Anand Mundra
Another question. Our guidance for FY26 with respect to disbursement is 4,000 crore.
T. Karunakaran
Yes, absolutely, sir.
Anand Mundra
And. And the loan book would be 16,200, correct?
T. Karunakaran
Yeah. From the present. Yes. From. From the present level of 14,492 crores.
Anand Mundra
Yeah. So sir, if I calculate the rundown. If I assume the rundown then it’s very. Then we need at least 4,500 crore of disbursement to reach 16,200 crore. Because I am assuming rundown will be around 25. 2600 crores.
T. Karunakaran
Sir. We have taken a lot of initiatives to avoid a prepayment and BT out. We adapted the customer retention policies and all these initiatives will help us to avoid pre closures. With that I’m confident of achieving 4000 crores disbursement target as well as taking the book level book to 16,200 crores.
Anand Mundra
Last thing sir. What about since our GNP has reduced any initiative we are taking to improve the credit rating Sir.
T. Karunakaran
Yes sir we are going to have a discussions next week. I am confident in hope of getting on match.
Anand Mundra
Thank you sir. Thanks a lot.
T. Karunakaran
We are deserving. Yes we are. We are. In my. In my point of view we are the deserving candidate for upgradation.
Anand Mundra
Absolutely sir. Seven last question sir if I just. Sir, earlier also I requested the XMD sir to for higher dividend payout ratio because our. Our EPS is much higher but our dividend payout is very less. We don’t need so much capital also sir. So that is only 4 rupees on 10 rupees. But we are running. But our EPS is much higher sir. So it can be much higher than 4 rupees sir. So would request you to request the board to consider higher dividend payout ratio for the shareholder sir as there’s no appreciation in the share price at least we should get higher dividend.
Ankush Tiwari
Your advice has been noted will pass on to our board and this year they have increased from 30 to 40% and based on your advice and other investor sentiment will take a suitable decision at both.
Anand Mundra
Thank you sir. Wish you all the best.
operator
Thank you. Before we take the next question a reminder to all the participants. If you wish to ask a question please press star n1 on your touchstone telephone. Our next question comes from the line of Sai Kiran Pulaworthy who is an investor. Please go ahead.
Unidentified Participant
Hi. Thanks for taking my question sir. Just extending the earlier participants question on the credit rating and probably were also in discussion with rising up NCDs. So sir is there a scope for the. What I can say upgrade of the credit rating and if so what are the apprehensions at this point of time or what are the things which a trade rating agency is looking for an upgrade? And the second thing sir, on the as a follow up on the NCDS what should be the pricing. You are getting an indication from your intermediaries with which discussions are happening? That’s my question sir.
Shanti Srikant
Actually the credit. I am Shanti. This site, the credit rating side we are taking all our efforts we are putting to improve the rating but the rating agencies are of the view this mid sized hrts they are always keeping the level which like the Chennai based and Tamil Nadu geography concentrated SFC and of course on our asset quality site. Now we are improving all the parameters to the maximum extent. We expect a good improvement in the rating side also respect of the NCD issuance. We are taking up our initiative to contact various arrangers and insurance companies to evince interest in our company and invest.
And we are in the advanced stages of closing some deals. We will expect some good improvement and we will definitely have some good diversification in the coming quarters.
T. Karunakaran
The objective of going for NCD and CP is diversified. Our liability side pricing will not be I mean cheaper compared with bank borrowings immediately but over the period of time we will get a benefit. Right now I’m not in a position to comment on at what rate I can mobilize.
Unidentified Speaker
Yeah. So directly the commercial banks borrowing cost is the highest among your sources of financing. Do you believe that NCVS will be higher than that or maybe lower than that.
Unidentified Speaker
Initially? Initially one or two issues commercial paper will be slightly higher than present borrowing bank borrowing rate. Once we established our presence in the market I’ll be in a position to mobilize NCDS and NCDS and commercial paper at better rate of bank borrowings. That is our old idea.
Unidentified Participant
Got it sir. And in terms of the diversification objective which you’re trying to achieve at what level do you foresee the commercial paper stroke and finish to be as a percentage of overall funding profile?
T. Karunakaran
See this board has given approval for mobilizing 1000 crores and,500 crores CPs and NCDs respectively. Initially I want to start with 100 crores commercial paper and around 100 to 150 crores NCD before end of this quarter. You want to test the water based on that thing. We will proceed further. For this quarter my target is 100 crores commercial paper and about 100 to 150 crores of NCTs.
Unidentified Participant
Okay sir, one last question. One last question from my session with the disbursements target you have given and the spreads also you have guided for FY26 to be more or less flattish year on year. So is it safe to assume that the disbursements mix will be similar to what it is earlier like between home loan and home equity? And overall.
M. Raja
That is what we are trying to maintain so that we don’t have an impact on our margin More or less this will be. We will be maintaining the same ratio.
T. Karunakaran
Sir, you are right. As per the Board I can go up to 30% in non housing loan portfolio. But we would like to maintain the existing loan loan book mix as well as salaried and non salaried component. There may be a one or two basis points in one or two quarters but overall we want to maintain 74.
Unidentified Speaker
And. 74 and 26 and 58 and remaining thing is not salary. I’m not expecting a significant change in the loan book mix and borrower mix.
Unidentified Participant
If you’re comfortable. Sir. One last question from my side. There has been some significant asset quality challenges in the past and then I understand that you have changed your underwriting standards in the incremental book which is now behaving very well. Just trying to understand that you have to look back and see what has caused the asset quality challenges and what are the changes you have made. Post that experience because of which you are confident that going forward the asset quality is better.
A Palpandi
So in the earlier stage we have assessed based on profit and loss accounting. The last three years we have introduced many models like cross profit method, cross sales method, bank analysis method. We introduced purposes through analyzing bank statement for income calculation. We improved our cash flow methods. So this is the improvement we have done in our credit assessment. So in other words, we have introduced a lot of income assessment model four years before, five years before we used to rely on the profit and loss account given by the borrowers. If you look at loan book mix, majority of our borrowers are non salary, non document income.
We relied upon their papers it returns and whatever the papers given by them. Now we changed our approach. We are introduced a lot of income assessment model. Now we are assessing the income based on our inspections of their business unit. And we have introduced lot of checks and balances in our credit policy which has really helped us to maintain the good quality asset.
Unidentified Participant
And because of which also your cost income would have increased. Is it a fair assumption to make?
T. Karunakaran
It is slightly because. Because three or four years before, six years before, there is a no verification by external agency or something like that. We have introduced the RCU and bank statement verification. We are having a separate software. This is not there before four years, five years before and likewise, I mean valuations reports. Also we have introduced a technology to verify the value of the property. We have made a lot of changes in credit appraisal and income appraisal in last four, five years, which is really last three, four years which is really helping us to build a quality loan book.
Unidentified Participant
So in conclusion, what you are suggesting is that in the last five years we have changed A lot of underwriting methods and at the same time you have introduced a lot of technology and made significant investments. And now with funding profile also being diversified and asset quality worst of the fears are behind. Is it fair to assume that going forward you are far more better equipped to grow faster?
Unidentified Speaker
Yes sir, but that is the entire idea. We are right now standing on the jump board. We are just waiting to take the leap. Yes, this year we should be doing it. That is what we are working towards sir.
operator
Thank you. Mr. Pulavorthy, may we request you to rejoin the queue as there are several participants waiting for their turn. Our next question comes from the line of Catherine Gomes from Nirmalbang Institutional equities. Please go ahead.
Unidentified Participant
Hi sir. Congratulations on a great set of numbers. So I just wanted to understand with all the initiatives that are in play, I mean that you are planning to take ahead what would be the cost to income ratio that we are looking going forward. Any particular guidance on that? Secondly, I just wanted to understand that the customers that you are catering to in the. You know, in the regions like Gujarat and all the other states are these new to credit customers as well? So that is my second question. Third, I just wanted to understand what kind of nims are we targeting and how do you like pass on your.
Like if you get any benefit on your borrowing side how are you looking to. Do we have a differentiated strategy that you know like we look at if we are getting any benefits on our borrowing only then we will pass it on to the customers or how does it work. So like all these, you know I would really appreciate if you could elaborate on the same sir.
T. Karunakaran
Thank you. Right now, Right now yield on assets is 12.007% and cost of fund is 8.73%. We are maintaining a spread of 3.34%. Our aim is to maintain the spread is around 3.2%. And yes we have seen rate cuts above. Our bankers are here to pass on to rate cuts to. If any rate cut is happen in our borrowings we will pass on to our borrowers by resetting their interest rate. As per our policy interest rates are reset once in three months with once in three months timing difference. What are the benefits we are getting on the funding side we will pass on to our borrower with a gap of three months.
M. Raja
Number one on Gujarat we are targeting our customers both on the salaried and self employed segment as you said on whether it’s going to be a new two credit or an experienced customer. We don’t differentiate between the two other than the CIBIL score. Yes we do have a credit scoring model and the CIBL score plays a role. We have a holistic approach wherein any customer comes in will go through the same process and this is how we handle it. We don’t have any specific leverage or a green channel for an existing customer and a new to credit customer.
T. Karunakaran
Spread side we want to maintain the spread of around Our guidance for this current financial year is we would like to we want to maintain spread around 3.02%.
Unidentified Speaker
Given that all the initiatives are in place. So what kind of cost to income or apex to AUM are we looking at in FY26 yes cost to in.
T. Karunakaran
Cost to income ratios. To improve the cost to income ratios we have taken a lot of initiatives. I’m expecting right now I am not in a position to commit and from numbers most probably I will be in a give a guidance in next my con call Right now our cost to income ratio is 27.52% yes I’m expecting reduction in the current financial year it may be around 60 to 70 basis points.
operator
Thank you ladies and gentlemen. That was the last question for today. I now hand the conference over to the management for closing comments.
T. Karunakaran
Yeah. Thank you for joining with us. Thank you.
operator
Thank you on behalf of YES Securities. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.