SURYODAY - Suryoday Small Finance Bank Limited Share Price

Management's outlook indicates a positive trend for Suryoday Small Finance Bank moving forward into FY27. The Bank expects stability and consolidation in the upcoming quarters, supporting healthier and more balanced growth, particularly following a strategic focus on asset quality and repayment behaviors. Key figures show that gross advances grew to Rs. 11,885 crores, a 24.3% year-on-year increase, while deposit base increased by 32.5% to Rs. 12,865 crores. They anticipate a significant reduction in slippages to below Rs. 100 crores in Q4, expecting to achieve collection efficiencies close to 99.5%.

Management highlighted specific areas of growth: Vikas loan disbursements reached Rs. 2,729 crores for the 9-month period, reinforcing portfolio quality. The commercial vehicle portfolio grew by 35% year-on-year, reaching Rs. 1,609 crores, with improvement in collection trends being noted. The mortgage book expanded to Rs. 2,778 crores, reflecting a 39% increase, driven by select market focus and cash flow-based underwriting.

The cost-to-income ratio is targeted to fall below 65% in the next fiscal year as non-paying assets are cleared. The bank maintains a strong capital adequacy ratio of 21.9%, providing ample headroom for growth. Moving to performance metrics, net profit before tax decreased to Rs. 102.2 crores from Rs. 148.7 crores year-on-year, but management remains optimistic about improving profitability with guidance for ROA at around 1.1% and ROE at 10% by Q4.

Overall, management expresses confidence that credit on UPI, among other digital initiatives, will strengthen the institutional framework of the bank, setting a solid foundation for sustainable growth.

Here are the major questions and their detailed answers from the Q&A section of the earnings transcript:

1. Deepak Poddar: "What led to the increase in gross NPA and how do we see gross NPA going forward?" Kanishka Chaudhary: "Our MFI book is covered under the credit guarantee scheme. Thus, we expect that write-offs will be aligned with claims made. After a major write-off of around Rs.340 crores in Q2, the gross NPA did increase, but it's expected that we'll see continued stabilization as we approach our normal collection efficiencies."

2. Deepak Poddar: "What was your PSLC income this quarter and how do you see Q4?" Kanishka Chaudhary: "We reported PSLC income of Rs.6 crores in Q3, down from Rs.10 crores in Q2. The market for PSLCs has varied, and while predicting Q4 demand is challenging, historical trends suggest an uptick towards the end of the quarter."

3. Deepak Poddar: "Do you have a cost-to-income ratio benchmark?" Kanishka Chaudhary: "We aim to drop our cost-to-income ratio below 65% by the start of the next financial year. Currently, we are at around 75%, but with an improved paying book, we feel achieving this target is feasible."

4. Deepak Poddar: "What is your guidance for growth and ROAs for FY27?" Kanishka Chaudhary: "It's premature to provide specific guidance, but we expect our collection efficiencies to return to 99.5%, serving as a foundation for FY27's results."

5. Shailesh: "When should we expect a similar earnings trajectory for Suryoday?" Kanishka Chaudhary: "We expect Q1 of next year to mark a significant uplift in earnings due to reductions in the non-paying book and overall improvement in the paying book."

6. Shailesh: "What do you expect for slippages in Q4?" Kanishka Chaudhary: "We anticipate slippages around Rs.100 crores in Q4, with a particular shift towards individual loans improving performance."

7. Rahul Kumar: "Can you split the slippages between MFI and non-MFI?" Kanishka Chaudhary: "For Q3, it was Rs.116 crores in MFI slippages and Rs.39 crores in non-MFI. We are seeing a trend to reduce these numbers towards less than Rs.20 crores for Q4."

8. Arvind: "When do you plan to make the CGFMU claims?" Baskar Babu Ramachandran: "We expect to make a substantial claim of around Rs.200-300 crores in Q1 FY27."

9. Vatsal: "Why is the fund raise planned at this moment?" Baskar Babu Ramachandran: "We don't require capital immediately; this is purely for enabling future growth. The intent is to maintain a capital adequacy above 21% without affecting current shareholder value."

10. Swaraj Dev: "How confident are you about achieving ROA of 1.1% and ROE of 10% by Q4?"

Baskar Babu Ramachandran: "We are optimistic about achieving these targets, particularly as we see stability returning across the industry and our operational improvements materializing."

This captures the main questions and responses from the earnings call Q&A while including critical figures and guidance.