CANFINHOME - Can Fin Homes Ltd. Share Price

Management's outlook for Can Fin Homes Limited remains positive for FY26, driven by strong disbursement growth and strategic initiatives. Key highlights include:

1. Disbursement Growth: The company achieved disbursements of INR 2,000 crores in Q1 FY26, marking a 9% increase year-over-year. They expect disbursements to reach around INR 2,500 crores to INR 2,600 crores in Q2, projecting total disbursements of INR 10,500 crores for FY26.

2. Geographical Performance: North zone disbursements increased by over 40%, Tamil Nadu grew by 35%, and the East zone saw more than 40% growth. However, Telangana recorded negative growth, while Karnataka's performance was relatively flat, affected by e-khata issues. The management anticipates improvement in Karnataka due to recent governmental announcements facilitating approvals.

3. Delinquency and NPA Trends: For the first time, total delinquency declined by INR 280 crores compared to the previous year. Despite a sequential increase in NPAs (up INR 45 crores), the overall delinquency percentage is the lowest in five quarters. Management maintains a credit cost guidance of 15 basis points, with expectations of a continued decrease in delinquency.

4. Branch Expansion and Sales Team Growth: The company plans to open 15 new branches (up from 234) by September 30, FY26, and has increased its sales staff from 39 to 100 members, which is expected to significantly boost sales contributions.

5. Cost of Borrowing: Following recent rate cuts, the incremental cost of borrowing is projected to decrease to around 7.3%. Additionally, management has passed on 25 basis points in rate cuts to customers, enhancing their competitive position.

6. Expected Ratios: The management expects net interest margins (NIM) to stabilize around 3.5% and return on assets (ROA) at 2.2%, with returns on equity (ROE) projected at 17%.

7. Future Strategy: The company aims to shift focus towards enhancing their customer base in segments less dependent on Direct Sales Agents (DSA) and improve their asset quality through proactive measures.

Overall, Can Fin is optimistic about leveraging its operational improvements and market conditions to achieve robust financial performances in the upcoming quarters.

Q&A Section: Can Fin Homes Limited Q1 FY26 Earnings Conference Call

1. Question: What is the progress on the planned 15 new branch openings, and what is the target number of branches by financial year '28?
   Answer: We are looking to open 15 branches this year, primarily in the West and North geographies, which will increase our total to 249 branches by the end of FY '26. For FY '28, we are aiming for 300 branches.

2. Question: Are we seeing increased competition from PSU banks or asking for EBLR?
   Answer: PSU banks have reduced rates, but they focus on higher-ticket loans. We mainly cater to loans below INR 25 lakhs and have not seen intense competition affecting that segment. Customers are not frequently asking for EBLR but are looking for rate cuts, which we have provided.

3. Question: What are the reasons for Telangana's flat performance, and how does it impact collections?
   Answer: Telangana faced negative growth mainly due to past demolition threats, which have now stabilized, boosting confidence among customers. We are hopeful for improved disbursement as inquiries are growing alongside reduced delinquency.

4. Question: Regarding growth drivers, what are we targeting for disbursement volumes in Q2?
   Answer: We expect disbursements of approximately INR 2,500 to INR 2,600 crores in Q2, boosted by branch expansions and additional sales staff contributing to the increase in business activity.

5. Question: What is the proportion of fixed versus floating-rate loans in the portfolio?
   Answer: Currently, approximately 1.3% of our portfolio consists of fixed-rate loans. The majority is tied to an annual reset, with most customers benefiting from floating-rate structures.

6. Question: Can you provide insights on your credit cost guidance of 15 basis points?
   Answer: We are guiding for a credit cost ratio of 15 basis points, anticipating a reduction in overall NPA as we have seen a significant decline in gross delinquency. The expected exit NPA for FY '26 should be around INR 340 crores.

7. Question: How do you see asset growth and disbursement trends evolving?
   Answer: We aim for 12%-13% growth in assets, targeting approximately INR 10,500 crores in total disbursements for FY '26. The expectation is that growth will accelerate further once technology upgrades are fully implemented.

8. Question: What will be the cost-to-income ratio for the current and next fiscal years?
   Answer: We expect the cost-to-income ratio to stabilize at around 18% for FY '26, while for FY '27, we anticipate it to rise to approximately 19%, mainly due to IT transformation costs.

9. Question: How has your loan book changed in response to market conditions?
   Answer: Our overall loan book has seen a minor shift in ticket size, increasing the share of loans above INR 30 lakhs. We aim to refocus attention on the INR 20 to 30 lakh segment due to its historical performance and yield potential.

10. Question: Are there plans to differentiate products or strategies for branch expansion?
    Answer: There is no specific product differentiation planned for the new branches. Our strategy is to open branches across existing states, focusing on maintaining competitive products without introducing new offerings.