![Sudipta Roy](https://img.etimg.com/thumb/msid-111829143,width-210,height-158,imgsize-96216,resizemode-75/sudipta-roy.jpg)
Given that the company has put out a good set of numbers, your retail disbursements as well have grown on year. Do you think that this momentum is going to continue for the upcoming quarters?
Sudipta Roy: This quarter has been a satisfactory quarter for us. We recorded 686 crores of PAT, which is the highest ever quarterly PAT declared by L&T Finance. Our disbursement momentum also has been strong, especially with retail disbursement growing at 33% year-on-year. In terms of the forward growth trajectory, obviously being a rural business, a large amount of the momentum of our business is dependent on the trajectory and the projection of the monsoon.
Till July right now, the trajectory of the monsoon has been reasonably satisfactory, though there are certain parts of the country, especially the eastern part of the country which is yet to receive its fair share of rainfall.
So, given the progress of the monsoon and given the trajectory of the monsoon, we expect that our disbursements might remain buoyant and we might be able to maintain the trajectory of our disbursements.
And if the disbursement trajectory maintains, as well as the credit costs that we see in the market right now also holds, then we know we can look at the earnings trajectory to sustain going forward. Though it is very difficult to put exact and precise numbers on our go-forward trajectory, we are hopeful that given on the back of good monsoons and stable credit quality remaining a constant in the environment, we can look at better performances going forward.
The other thing I wanted to talk about was also retail disbursements. While healthy year-on-year, we have seen a nominal fall on a sequential basis. What were the headwinds in Q1 and was that a one-off?
Sudipta Roy: See, if you look at our overall last three-quarters disbursement trajectory, our quarter four FY24 disbursements were actually higher than our quarter three FY24 disbursements, which typically is a festive quarter.
So, actually when we went into Q1 FY25, we were actually riding on the back of already a very strong quarter in Q4 FY24. Now, in the month of April, May, and June, in the month of April, we had elections that led to certain disturbances in some of our businesses, especially some of our rural businesses, where the elections sort of trajectory created some distribution challenges.
And in the month of May, especially in the latter part of April, as well as in the month of May because of the tremendous heat situation that was there, especially in many parts of India, distribution became a little sluggish in that month.
So, between the election month and between the heatwave that we saw in the month of May affected our quarter-on-quarter or sequential disbursement trajectory a bit, especially in the rural business finance sort of vertical.
But if you see some of our lines of businesses, we have maintained a good strong growth trajectory on a quarter-on-quarter basis, especially in two-wheeler. Two-wheeler actually was very good in April primarily on the back of the marriage season in April. So, overall, though the quarter-on-quarter sequential growth rate was about minus 1% in terms of retail disbursement, on a year-on-year basis it was 33%. So, from that point of view, it has been a reasonably satisfactory quarter and we are hopeful that on the back of good monsoons this growth trajectory can be maintained.
Could you share the retail book and NIMs and target for FY25? You have earlier guided for a growth of 25% CAGR for next three years, are you on track to beat that?
Sudipta Roy: See, we will still continue the guidance at 25% CAGR, though in terms of our asset growth rate we have been holding above 30%. However, especially in the rural business finance segment, there have been certain initiatives towards self-regulation as well as moving towards risk-calibrated growth and the self-regulatory organisation MFIN has rolled out certain guardrails.
So, we are also party to those guardrails, though we maintained all those association norms and there is very little breaking impact or very little adverse impact on our credit policies or our eligibility criteria basis those new guardrails that have come into force.
But we would like to maintain risk-calibrated growth in the rural business finance vertical as well. Urban finance verticals have been also growing very well. Our home loans has been growing very well, especially on the back of our complete home loans campaign. Our personal loans business, though on a year-on-year basis in terms of disbursement it has been a flattish growth, but if you look on a quarter-on-quarter basis, the disbursements has grown and we are also intent on growing this business in a risk-calibrated fashion with especially some of the digital partners that we are going to add in the next couple of quarters and our two-wheeler finance business, the trajectory has been reasonably satisfactory both in terms of top-line growth as well as in terms of book.
So, overall, our businesses are all on a positive trajectory and we hope that the trajectory continues. Though our guidance will remain at a 25% CAGR, we as an organisation hope to do better.
And you have also entered into augmented sourcing channel for home loans and two-wheeler loans in partnership with PhonePe. Can you tell us more about this partnership? What kind of benefits are you seeing?
Sudipta Roy: So, the home loan and the two-wheeler partnership with PhonePe is primarily right now on a lead-generation basis, that means customers who are using the PhonePe app actually can opt for L&T Finance home loan or a L&T Finance powered two-wheeler loan.
In fact, the response on the two-wheeler loan has been extremely encouraging and we are getting a reasonable amount of lead flow every day and we are doing conversions.
However, right now the focus is on to do a more integrated journey with PhonePe, especially on the two-wheeler business where we can actually approve the loan directly on the PhonePe platform and the customer can actually walk into a nearby dealership and pick up his vehicle, so that is the objective right now and we are working with PhonePe on that and our objective is to make sure that the PhonePe platform becomes much more deeper embedded with a couple of more other products that we might bring in in the next couple of quarters. And our focus is also on bringing a couple of more new partners. And as and when we are ready, we will announce it to the market.
You are also stepping up on home loans disbursements, under this segment were up about almost 39% as well. In housing finance and loans against property segment as well, disbursements did see a healthy uptick to 73%. Give us a sense of the trends that you are seeing being played out here.
Sudipta Roy: The housing segment, both commercial real estate as well as residential real estate has been robust for the last couple of days. The end user demand has been robust and some of the inventories in many of the cities are at probably a couple of quarter lows.
So, you are right, we have been focusing on this business because this business is a business that gives a lot of stability to the risk profile of an organisation and so our focus has been to make sure that we play in the prime and the near prime segment of this market and as we say we are not in the affordable housing segment that much, so we are playing mostly in the prime and the near prime segment.
So, for example, if in the Budget, the home loan interest payments or principal payments exemption limits go up from income tax, it will be a welcome move because that will spur the industry a little more.
But overall, even if that support is not coming, we are looking at a strong growth trajectory in the home loan business going and the loan against property business going forward.
However, I would like to reiterate that the focus is actually on all of our lines of business.
We are intently growing each of our lines of business both granularly and what I call horizontal distribution as well as vertical deepening of distribution.
So, the focus is on growing all lines of business and not only the home loans business. Yes, the growth in the home loans business is visible on the back of our complete home loans campaign. However, over the next couple of quarters, you will see that we are focusing on building granular distribution momentum in all our lines of business.
Your asset quality has also seen marginal improvement for Q1. What would you say is the comfortable level for GNPAs and NNPAs?
Sudipta Roy: See, our objective is to improve asset quality further. In fact, if we look at the Cyclops, new credit engine, the three-dimensional credit engine that we have rolled out in the beta mode in the last half of June is our effort in that particular direction.
But again, the full effect of Cyclops will take a couple of quarters to be visible. So, obviously our effort as an organisation is to make sure that our credit cost tends downwards.
As I said, there was some sluggishness in collections in the month of April as well as in the month of May because of the extreme heat, but that has sort of stabilised in the latter part of May and June and we expect that stability to continue.
So, as of now, we are reasonably satisfied with the trajectory of the credit cost right now. And as you can see, there has been a two basis points sequential improvement in terms of credit cost and we are hoping to maintain it at this particular level.
We are counting down to the Budget. So, what are your expectations according to you from the industry as a whole?
Sudipta Roy: So, obviously we have a lot of expectations from the budget, especially on the rural consumption as a rural income generation side, because a large amount of our portfolio is rural dependent and last year because of bad rains many of our businesses actually became sluggish especially our tractor business, so we expect that on back of a good monsoon if the Budget comes up with policies or budget comes up with schemes that is focused on rural income generation as well as rural consumption, then that will be a net positive for our business.
We hope that the Budget would have certain elements that would boost the residential real estate as well as commercial real estate because our home loans business as well as our loan against property business is a very large component of our businesses right now.
We expect that because we are a large two-wheeler financer and we finance a large number of electric vehicles, if there are certain schemes that pushes the sale of electric vehicles and makes electric vehicles more affordable, then that will be a net positive for our business. And overall, the government has been very fiscally prudent and we hope that that fiscal prudence continues going forward.
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Subscribe to The Economic Times Prime and read the Economic Times ePaper Online.and Sensex Today.
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