SRGHFL - SRG Housing Finance Limited Share Price

The management outlined a positive outlook for SRG Housing Finance, targeting AUM growth to Rs.780 crore in FY25 and crossing Rs.1,000 crore in FY26. Key highlights include:

• Expansion: Plan to increase branches from 67 (FY24) to 90 in FY25 and 100+ in FY26, focusing on Maharashtra, Karnataka, Tamil Nadu, Telangana, and Andhra Pradesh.
• Disbursements: Aim for Rs.400 crore disbursement in FY25, driven by existing and new branches. Monthly disbursement targets are Rs.30"“35 crore.
• Fundraising: Target Rs.50"“100 crore equity raise in FY25 to support growth. Borrowing mix (49% banks, 39% FIs, 12% NHB) remains stable.
• Financial Metrics: NIM at 11.29%, gross NPA improved to 2.29% (vs. 2.50% in FY23). Net NPA rose marginally to 0.69% (0.51% in FY23). Average LTV maintained at 40"“50% for rural loans.
• Operational Strategy: Focus on secured loans (100% collateral-backed), rural markets (94% portfolio), and centralized credit appraisal.
• Risk Management: Conservative LTV (50% for villages), physical verification, and guarantor/co-applicant mandates to mitigate defaults.
• Margins: Expect NIM improvement if repo rates decline. Fixed-rate loans shield against rural customer sensitivity to rate fluctuations.
• Regional Growth: New branches in southern states and Maharashtra to leverage untapped markets, with break-even expected in 6"“7 months post-launch.

The management emphasized sustainable growth, robust ALM, and liquidity (Rs.82 crore liquid funds) to support expansion.

1. Question: "You just spoke that what we used to do in a quarter we are now doing it in a month, and what we used to do in a year, we are doing it in a quarter. Regarding this, would you please explain in detail how you achieved this and how this ratio can improve further?"
Answer: Expansion of branches post-COVID (25 new branches in FY22"“23) accelerated disbursement. New branches in Maharashtra, Karnataka, Tamil Nadu, Telangana, and Andhra Pradesh are planned for FY25, with break-even timelines of 4"“6 months, driving future growth.

2. Question: "What is your AUM and disbursement target for FY25?"
Answer: FY25 targets include monthly disbursement of Rs.30"“35 crore (annual Rs.400 crore) and AUM of Rs.700"“780 crore, driven by existing branches.

3. Question: "How many branches are not in breakeven?"
Answer: All 67 branches are breakeven or profitable, with categorization based on monthly revenue (Rs.25 lakh, Rs.50 lakh, or Rs.1 crore). New branches achieve breakeven within 6"“7 months.

4. Question: "How does monsoon impact housing demand?"
Answer: Good monsoon boosts rural income, indirectly increasing housing demand. However, excess rain can harm crops, and monsoon assumptions are not explicitly factored into growth targets.

5. Question: "Which regions are new branches planned, and what team structure is in place?"
Answer: Clusters in Maharashtra (Pune, Nashik), Karnataka, Tamil Nadu, Telangana, and Andhra Pradesh. A centralized Mumbai team oversees credit operations, with local experts and branch managers ensuring rapid scaling.

6. Question: "How do you handle competition from fintechs?"
Answer: Rural housing finance requires physical verification and collateral, making fintech models unsuitable. Limited competition in rural areas due to fieldwork complexity.

7. Question: "After the equity raise, when is the next planned?"
Answer: FY25 equity raise of Rs.50"“100 crore will suffice until AUM reaches Rs.1,500"“2,000 crore. Future raises depend on growth needs and market conditions.

8. Question: "How will credit appraisal adapt to new regions?"
Answer: Centralized credit decisions, pre-recruited experienced teams, and rigorous branch-level business plans ensure robust risk assessment. Physical verification minimizes errors.

9. Question: "What is the NPA guidance amid expansion?"
Answer: Conservative LTV (50% max) and physical verification in rural areas ensure low NPAs. Historical expertise (22 years) and secured lending minimize credit costs.

10. Question: "Will LTV ratios increase with rising property prices?"
Answer: LTV remains capped at 50% for villages (<10,000 population). Slight flexibility (5"“10% higher) allowed in larger towns, ensuring collateral safety and collection efficiency.

11. Question: "How do fixed-rate loans impact margins amid rate hikes?"
Answer: Rural customers prefer fixed rates to avoid payment fluctuations. Margin pressures from repo hikes are temporary; future rate cuts could improve profitability.

12. Question: "What customer segments do you target?"
Answer: 94% rural focus, serving self-employed (74%) and salaried (25%) clients, including small businesses (shops, jewelers, farmers). Loans are secured with co-applicants and guarantors.

13. Question: "What is the debt-to-equity ratio target?"
Answer: RBI permits 12x leverage; SBI sanctions 10x. Current ratio is 3x, with plans to maintain flexibility up to Rs.1,500"“2,000 crore AUM without immediate equity needs.