SURYODAY - Suryoday Small Finance Bank Limited Share Price

Management provided a positive outlook for FY27, highlighting that the bank is positioned for healthy growth and consistency. The focus remains on building resilient long-term operations, capitalizing on improved portfolio qualities, and leveraging digital initiatives.

Key forward-looking points include:

1. Growth and Profitability Targets: Management targets a profit after tax (PAT) of around Rs.300 crores for FY27, emphasizing a doubling of profitability from FY26. This aligns with a belief that the credit cycle in the microfinance sector is stabilizing.

2. Asset Quality Improvement: The guidance sets a significant reduction in GNPA to around 3% by the end of FY27, aided by anticipated claims from the CGFMU scheme. The claims are projected to be between Rs.450 crores and Rs.550 crores due to three cohorts qualifying for claims.

3. Slippage Management: Targeting a quarterly slippage rate between Rs.75 crores and Rs.90 crores, with ongoing focus on managing and reducing slippages, particularly within the commercial vehicle (CV) and mortgage segments.

4. Credit Cost Projections: Expected credit costs are set at approximately 70 to 80 basis points for FY27, indicating a conservative approach while navigating potential market pressures.

5. Deposit Growth: The bank's total deposits reached Rs.13,994 crores as of March 2026, maintaining a year-on-year growth of 32.3%. Management anticipates ongoing strengthening of retail deposits and a prolonged focus on digital deposit initiatives.

6. Strategic Expansions and Innovations: The transition towards individual lending models has reached about 75% of the inclusive finance portfolio. With healthy disbursement rates, management expects continuity in lending growth, especially as new digital products gain traction.

7. Digital Ecosystem Development: Continued emphasis on digital initiatives expected to enhance customer engagement and lower acquisition costs, with over 50% of incremental deposits sourced digitally.

These projections profile a solid strategy aimed at sustainable growth, reflecting a cautious yet optimistic management stance as Suryoday Small Finance Bank approaches FY27.

Key Questions and Detailed Answers from the Q&A Section of the Earnings Call:

1. Question: "In your view, how is the bank preparing to capture evolving demand in financial inclusion and retail lending while addressing challenges such as regulatory changes, credit risk, and competitive pressures?"

   Answer: "We've shifted from JLG to Vikas loans for individual borrowing, with 75% of our inclusive finance portfolio as individual loans, growing 40-45% year-on-year. Our goal now is to introduce multiproduct offerings across liabilities, not just on the asset side as before."

2. Question: "How are you prioritizing capital allocation between branch expansion, technology investments, and shareholder returns?"

   Answer: "Currently, our capital adequacy is at 20%. We prioritize banking and expansion within a rationalized framework, focusing our headcount growth on frontline functions while keeping corporate costs low, ensuring operational efficiency."

3. Question: "The slippages in the retail asset book showed minimal decline. How do you consider these numbers going forward?"

   Answer: "There's localized slippage mainly in Odisha's commercial vehicle sector. Excluding that, our commercial vehicle portfolio is performing well. We expect slippages to decrease to around 1.25% for the overall retail asset book in the second half of the year."

4. Question: "What is the expected range for CGFMU claims in FY27?"

   Answer: "We are anticipating claims between Rs.450 to Rs.550 crores, with the first cohort claimed in Q1, depending on our timing decisions around these claims."

5. Question: "We are guiding for a 1.2% ROA for June, increasing to 1.6% by Q4. How confident are we in achieving these targets?"

   Answer: "Given the growth of our paying book and the claims from CGFMU expected to enhance our financials, we are confident in achieving the 1.2% ROA target for June, as Q1 typically sees higher income levels from PSLC sales."

6. Question: "What cost-to-income ratio are you targeting in the upcoming year?"

   Answer: "We aim for a cost-to-income ratio of around 67% to 68% for the coming year, with a goal to be below 70%."

7. Question: "Have you made claims for CGFMU already? What is preventing an immediate claim?"

   Answer: "Claims can only be made after the accounts meet certain conditions, typically after six months of being an NPA. Therefore, optimal timing for claims is crucial, and we have yet to make any recent claims."

8. Question: "What are the expected credit costs for FY27?"

   Answer: "We are targeting credit costs around 70 to 80 bps for FY27, reflecting our strategic approach in managing asset quality."

Feel free to ask more questions if needed!