FEDFINA - Fedbank Financial Services Limited Share Price

The management outlined a strategic shift towards secured lending (Gold Loans and LAP) while reducing unsecured business loans (targeting <5% of AUM). Key initiatives include tightening underwriting policies, enhancing collections, and leveraging technology (e.g., Salesforce) for risk management. Elevated delinquencies in Small Mortgages (3.3% Stage 3) prompted one-time provisions (Rs.75.5 crore) and management overlays to strengthen the balance sheet (PCR improved to 45.2%).

Growth Focus: Gold Loans (35% of AUM, +53% YoY) and Medium Ticket LAP (+45% YoY) remain core drivers. Small Mortgages will prioritize quality over growth, with operational restructuring (new leadership, dedicated collections).

Financial Outlook: Targeting sub-1% credit costs in Q4 FY25 and normalized metrics ahead, supported by secured portfolio dominance. AUM reached Rs.14,922 crore (+39% YoY), with ROA/ROE recovery expected as unsecured loans phase out. Regulatory engagement (RBI's NBFC guidelines) is ongoing, with confidence in compliance. Branch expansion (693 total) and synergies between Gold/Mortgage branches aim to improve cost efficiency.

Question 1 (Renish, ICICI Securities):
"Sir, my first question is on the strategy side. So you did highlight about re-looking at some of the process in the way business is structured currently. So just wanted to know what is your sort of initial assessment in what areas we have to sort of restructure the process, etcetera? And does that require additional investment? And if yes, where do you see cost ratios settling down in near term?"
Answer: The strategy focuses on prioritizing secured loans (Gold, Medium/Small Ticket LAP) over unsecured business loans. Investments will target strengthening collections, tech integration, and branch synergies. Cost ratios will improve via frugal operations and reduced unsecured lending.

Question 2 (Vivek, DSP Mutual Fund):
"Is there a regulatory pressure to change Gold Loans from a bullet repayment product to an EMI product, which could be yield mitigating?"
Answer: No regulatory pressure exists to shift Gold Loans to EMI. Compliance with RBI guidelines (e.g., LTV limits) is confirmed, and product design remains flexible.

Question 3 (Shubhranshu, PhillipCapital):
"Regarding the change in business mix, could you clarify the regulatory stance on Gold Loans and potential yield impacts?"
Answer: Business mix shifts involve reducing unsecured loans (from 12% to 5% of AUM) and reallocating to secured products. Gold Loans remain compliant with RBI norms, with no yield impact from regulatory changes.

Question 4 (Aditya, Bandhan Mutual Fund):
"What caused stress in the Small Ticket LAP book, and when will it normalize?"
Answer: Stress stemmed from under-invested collection infrastructure in select regions. Normalization is expected by Q1 FY26 via dedicated collection teams and process improvements.

Question 5 (Pranav, Aionios Alpha Investment Manager):
"Can you clarify the credit cost breakdown and opex synergies from branch integration?"
Answer: Credit cost included INR75.5 crore one-time provisions (NPA coverage + management overlay). Opex synergies will arise from merging Gold and Small Mortgage branches, tech-driven efficiencies, and cost rationalization.

Question 6 (Chirag, Fast Water):
"What is the long-term ROA/ROE target post-restructuring?"
Answer: Specific targets deferred to Q4 guidance. Focus is on improving profitability via secured lending, lower credit costs, and operational efficiency.

Question 7 (Renish, ICICI Securities follow-up):
"What is the target PCR and credit cost guidance?"
Answer: PCR will stabilize above historical levels but below current 45%. Credit cost aims to normalize to sub-1% by Q4 FY25, aided by reduced unsecured exposure.

Question 8 (Vivek, DSP Mutual Fund follow-up):
"How does the RBI's bank-owned NBFC guideline impact FedFina?"
Answer: FedFINA has sought regulatory exceptions as a listed entity. Compliance with most stipulations (e.g., upper-layer norms) is already achieved, and constructive dialogue with RBI continues.