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Repco Home Fin.: Profitable growth continues amid stable asset quality - Views on News from Equitymaster
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  • Aug 22, 2016 - Repco Home Fin.: Profitable growth continues amid stable asset quality

Repco Home Fin.: Profitable growth continues amid stable asset quality
Aug 22, 2016

Repco Home Finance (RHFL) announced its results for the first quarter (1QFY17) of the financial year 2016-17. The institution grew its income from operations by healthy 23% YoY and the profits by robust 31% YoY during 1QFY17. Here is the detailed analysis of the results.

Performance Summary
  • Interest income grew by 23% YoY in 1QFY17 on the back of 3.4% increase in disbursements. Since 2/3rd of the entity's business comes from Tamil Nadu, loan disbursements were adversely impacted in the first two months of the quarter due to elections in the state with 50% of the overall business taking place in the month of June alone. The loan book grew by 25% YoY during the quarter.
  • RHFL has been able to maintain its NIMs at 4.3% with spreads remaining constant at 2.9% during the quarter. The NBFC passed on the 30 bps fall in the cost of funds to the salaried class by reducing the lending rates by a similar magnitude in order to keep its spread in-tact. Through this strategy, the NBFC wants to keep lending rates competitive so that the non-salaried portion of the loan book remains capped at 60%.
  • Operating expenses fell by 3.5% on a 5% reduction in employee benefit expenses. Even other expenses have grown by a mere 5% during the quarter. The cost-income ratio reduced to 16% in 1QFY17 compared to 21% in the year-ago quarter.
  • Gross NPAs ratio after witnessing a cyclical downtrend in March 2016 quarter has risen again in the June 2016 quarter. However as compared to year-ago levels, both Gross NPA and net NPA ratios have declined by upto 0.2% to 2.2% and 1.2%, respectively. While the asset quality of home loans has improved, that of Loan against Property (LAP) has declined during the quarter.
  • Net profit increased by 31% YoY during the quarter. The provision coverage ratio (PCR) improved slightly to 45.8% in 1QFY17 as compared to 42.4% in 1QFY16. The NBFC is targeting to take the PCR ratio to 70% by the end of FY17.
  • The capital adequacy ratio of the NBFC stood at 20% at the end of 30th June 2016.

    Financial Performance Snapshot
    Rs (m) 1QFY16 1QFY17 Change
    Income from operations 2,000 2,468 23.4%
    Interest Expense 1,271 1,550 21.9%
    Net Interest Income 729 919 26.0%
    Net interest margin (%) 4.3% 4.3%
    Other Income 1 1 57.1%
    Other Expense 154 149 -3.5%
    Provisions and contingencies 113 179 59.0%
    Profit before tax 463 592 27.8%
    Tax 161 196 22.2%
    Profit after tax/ (loss) 302 395 30.8%
    Net profit margin (%) 15.1% 16.0%
    No. of shares (m) 62.6
    Book value per share (Rs) 152.1
    P/BV (x)* 5.5

    * Calculated Book value as on 30th June 2016

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