CANFINHOME - Can Fin Homes Ltd. Share Price

In the Q4 FY26 earnings conference call, Can Fin Homes Management, represented by Mr. Suresh Iyer (MD & CEO), shared an optimistic outlook for the upcoming financial year. The company achieved disbursements of INR 10,531 crores, slightly above the guidance of INR 10,500 crores, with Q4 marking an all-time high at INR 3,245 crores. For FY27, Can Fin aims for a 15% growth in disbursements in Karnataka, recovering from earlier challenges. Overall, they are targeting a total disbursement of INR 13,000 crores, with anticipated prepayments and outflows of INR 7,000 crores, leading to a net addition of about INR 6,000 crores to their assets under management (AUM) and a projected AUM growth of 14%.

The management highlighted a robust performance in reducing gross non-performing asset (GNPA) ratios, now at 0.85%, and expects this to remain steady, projecting a conservative credit cost guidance of 15 basis points. The shift from annual to quarterly resets has resulted in approximately 85% of customers now on a quarterly rate, allowing for better management of borrowing costs which were stabilized around 6.99%.

Management underscored that operational efficiencies due to IT upgrades would help mitigate increased costs, which are expected to rise by INR 40 crores in FY27 due to IT implementation. They anticipate maintaining a return on assets (ROA) of 2.4% and a return on equity (ROE) of over 18%. The focus will be on improving profitability through branch expansions and an increased sales team, projected to rise from 80-90 to about 150 members.

In summary, the management is confident in maintaining their growth trajectory, leveraging increased efficiencies, and managing costs effectively to support their ambitious targets for FY27.

Question 1: "How helpful have the IT programs been? And has there been any qualitative insight on how it's helping us right now?"

Answer: The IT implementation has significantly improved our infrastructure and security, enhancing both speed and connectivity. We've seen a notable reduction in issues with MPLS lines. Our security metrics, MTTR and MTdTA, are well within our set guidelines, boosting our confidence in addressing system attacks promptly. We've also made strides in digital solutions, including HRMS and document management improvements. However, the full impact of our Loan Origination System is expected to materialize with its Q1 launch.

Question 2: "After the shift to quarterly resets for most customers, would you assume that the BT out rate has peaked now?"

Answer: I would assume so. Our BT outs in Q4 were slightly elevated but nearly static in percentage terms, remaining around INR400 crores. We've passed on the benefits from the quarterly reset, reducing the likelihood of future spikes in BT out rates. We expect to continue with a disbursement plan of INR13,000 crores and a prepayment assumption of around INR7,000 crores for FY '27, recognizing the potential for reductions in these prepayments.

Question 3: "How satisfied are you with just under 5% growth in our housing loan book this fiscal?"

Answer: We consciously shifted focus towards non-housing loans due to challenges with e-khata in Karnataka during early quarters, which impacted fresh housing sanctions. This prompted an increased focus on LAP, which grew by nearly 2 percentage points this year. Now that e-khata issues are being resolved, we anticipate stronger growth in housing loans moving forward.

Question 4: "Could you throw some light on how you plan to achieve higher disbursement targets given branch growth has been modest?"

Answer: We opened 54 branches previously, leading to notable benefits in the most recent financial year. We are also increasing sales personnel from 80-90 to about 150 and plan to open 28 new branches in H1 FY '27. Factors like improved performance in Karnataka and Telangana will bolster our disbursement growth, targeting INR13,000 crores overall, while prepayment and runoff rates have been carefully projected.

Question 5: "In terms of opex growth, especially regarding employee costs, what are your expectations?"

Answer: We anticipate our employee costs will grow by about 10-12% as we add staff. The total opex is projected to increase from INR311 crores to around INR450 crores. This includes an additional INR40 crores impact related to the IT infrastructure expense, which encompasses both depreciation and operational costs over the year.

Question 6: "Given the geopolitical issues, are you seeing any delinquencies in our LAP book?"

Answer: Currently, we are not witnessing any notable impact on our delinquency rates or bounce rates, even amidst geopolitical issues. The NPA values in Karnataka remain lower than previous year levels, reflecting stability in our loan performance within this segment, predominantly comprising around 6% of our book.

Question 7: "How do you perceive the competitive landscape regarding customer takeovers from Bajaj Finance and LIC Housing?"

Answer: Bajaj and LIC often lure customers mainly through lower rates, especially LIC offering some loans at 7.15%. Bajaj engages in takeovers with additional top-up offers that we find challenging to match, typically due to our more conservative LTV values. While we acknowledge this impacts our competitive positioning, we prefer to maintain our conservative lending approach for long-term stability.

This captures the key questions and detailed responses from the earnings call. Would you like to analyze any specific section further?