SURYODAY - Suryoday Small Finance Bank Limited Share Price

Management provided an optimistic outlook for Suryoday Small Finance Bank for Q1 FY26, highlighting significant growth in both advances and deposits, attributed to a rebound in inclusive finance disbursement and mortgage financing. Key forward-looking points from management include:

1. Gross Advances: Grew to Rs.10,846 crore, marking a 20% year-on-year increase.
2. Deposit Base: Increased to Rs.11,312 crore, up 39% year-on-year, with retail deposits rising to 82% of total deposits.
3. CASA Ratio: Stable at 17.7%, with a target to reach the 20% range in upcoming quarters.
4. Collection Efficiency: Enhanced to 98.4% by June 2025, improving from 97.5% in April 2025.
5. Asset Quality: Current GNPA at 8.5% (Rs.918 crore) and NNPA at 5.6% (Rs.593 crore), with provisioning that covers nearly 100% of GNPA.
6. Credit Guarantee Mechanism: Rs.584 crore receivable under the CGFMU scheme is expected to substantiate assets, with an anticipated claim amount of around Rs.320 crore expected in Q3 FY26.
7. Non-Interest Income: Management anticipates lower contributions from PSLC, estimating Rs.30 crore this year, and any future claims to be P&L neutral.
8. Credit Cost Guidance: Projected credit cost for the year is approximately 1.2%, normalizing towards 1% under steady conditions.
9. Projected ROA/ROE: Targeting 1.5% to 1.6% ROA and around 12% ROE for FY26, with a longer-term goal of exceeding 2.5% ROA in subsequent years.
10. Strategic Focus: Continued emphasis on secured lending, particularly in the commercial vehicle and mortgage segments, as well as enhancing digital deposit capabilities.

This forward-looking perspective indicates management's commitment to sustainable growth and improving asset quality.

Q&A Section Summary from the Earnings Call Transcript (July 25, 2025)

1. Question from Jay Chauhan: "Can you just break down the customer cohorts driving this inflow and some important metrics like CAC and tenable data points that would convince you to scale marketing beyond the current partnership model?"

Answer: Our digital sourcing is primarily driven by partnerships with payment banks such as Fino, Jio, and Airtel. We are accruing around Rs.3 crore per day, predominantly from retail fixed deposits. The Customer Acquisition Cost (CAC) is approximately 35 to 50 basis points, which is significantly lower than physical modes.

2. Question from Shailesh Kanani: "How is our secured portfolio shaping up, especially given that it now accounts for over 50% of our portfolio?"

Answer: Our secured portfolio has seen robust growth, especially in Commercial Vehicles (CV) and mortgages, which have grown over 50% and 30% year-on-year, respectively. Our portfolio performance, particularly post-pandemic, remains stable, indicating our focus is yielding positive results.

3. Question from Shailesh Kanani: "Is it safe to read that slippages may have peaked during this quarter?"

Answer: The accretion rate of NPA is dwindling, and if this trend continues, we expect the NPA figures to stabilize in Q3. Our current bucket collection efficiency has improved significantly, which supports this optimism.

4. Question from Deepak Poddar: "Is 100% of our Inclusive Finance (IF) portfolio covered under the CGFMU scheme?"

Answer: Yes, more than 98% of our portfolio is now covered under the CGFMU scheme, enhancing our risk management capabilities.

5. Question from Deepak Poddar: "What is our guidance for GNPA and NNPA by year-end?"

Answer: We have guided for a GNPA of 5% and an NNPA of 3% by year-end, considering the timing of CGFMU claims, which will also help reduce our headline GNPA figures.

6. Question from Saumil Shah: "Given the challenges, will we see improvement in our bottom line, leading toward a 12% ROE?"

Answer: Yes, we aim for improvement in quarterly performance, and with a stronger focus on slippages, we believe achieving a 12% ROE is plausible as our loan portfolio stabilizes.

7. Question from Ashlesh Sonje: "Could you share the microfinance slippage number?"

Answer: Out of Rs.280 crore in total slippages reported, Rs.240 crore are attributed to microfinance. We have seen market challenges, but we are focusing on transitioning to individual loans from group lending models to better manage risk.