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Can Fin Homes Ltd

| Q3 FY26 Earnings Conference Call

BULLISH SENTIMENT

Report Source

⬤24th Jan 26

Summary : Can Fin Homes achieved record disbursements and improved asset quality, while strategically investing in IT and branch expansion for future growth, despite prepayment challenges.

Management Perspective positive : "Disbursements for the third quarter have been INR2,700 plus crores, which is the highest ever.""For the fourth quarter in a row, we have had an improvement in our delinquency numbers.""We are quite positive by end of the year, even Telangana will end in a positive zone.""We are positive that we should be able to achieve the guided number of INR10,500 crores for disbursement.""Q4 also would be a positive quarter for us."

Concall Report Analysis & Insights

Business Overview

  1. Q3 FY26 disbursements reached INR2,727 crores, the highest ever for any quarter.
  2. AUM growth increased from 8.4% to over 9.5%, targeting 10% for the year.
  3. Delinquency numbers improved for the fourth consecutive quarter, with SMA numbers decreasing.
  4. Karnataka disbursements turned positive YTD (3%) from a negative 10% last quarter.
  5. NIMs improved to 4.14% from 4.02% last quarter, with spreads maintained.

Future Growth Prospects

  1. Anticipates Q4 FY26 disbursements of INR3,200-INR3,300 crores, aiming for INR10,500 crores for the full year.
  2. Projects 15% AUM growth for FY27, with FY26 ending at 11-12% growth.
  3. Expects further improvement in SMA-1, SMA-2, and NPA reduction in Q4.
  4. IT transformation to enhance productivity by 20% and enable digital onboarding.
  5. Plans to open 25 new branches annually, targeting 300 branches by FY28, focusing on existing geographies.

Management Insights

  1. Q3 disbursements were the highest ever, showing strong sequential and year-on-year growth.
  2. Delinquency numbers have consistently improved across all geographies, including Telangana.
  3. We have passed on 50 basis points of rate benefits to our customers.
  4. IT transformation is progressing, with key modules already live and core systems expected soon.
  5. We are confident in achieving our full-year disbursement guidance and improving delinquency further in Q4.

Signs of Skepticism

  1. Management attributes high prepayments to communication and annual reset lag, not fully competitive pricing.
  2. AUM growth is impacted by prepayments, falling short of initial guidance.
  3. Core IT system implementation (LOS/LMS) is delayed to the next fiscal year.
  4. Projected PAT growth for FY27 appears lower than AUM growth, suggesting margin pressure.

Risk Factors

  1. Higher prepayments (INR1,691 crores in Q3) impacted AUM growth by INR400 crores.
  2. Delays in core IT system (LOS/LMS) implementation, now expected in Q1 next year.
  3. Potential business impact of INR250-300 crores during IT system implementation due to downtime.
  4. NIM and spread compression due to rate cuts passed on to customers.
  5. Slightly higher NPAs expected with increased non-housing loan mix.

Good To Know

  1. The company is aggressively moving 80-85% of its loans to a quarterly reset mechanism.
  2. Approximately 80% of bank borrowings are repo-linked, ensuring immediate rate transmission.
  3. The blended rate for NHB refinance is 6.3%, with INR1,000 crores sanction expected in Q4.
  4. Non-salaried segment (SENP) customers have documented income proof, not assessed income.
  5. Branch expansion strategy focuses on deepening presence in existing geographies, not new regions.

Key Drivers

  1. Record disbursements drive strong growth.
  2. Asset quality consistently improving.
  3. IT transformation to boost efficiency.
  4. Strategic branch expansion underway.

Key Analyst Discussions

Competitive Environment

  1. Questions on whether peers are adopting similar lending rate strategies.
  2. Inquiries about the company's underperformance compared to the NBFC home loan growth.
  3. Discussions on the strategy to reduce DSA contribution to 60% and past challenges.

Market Trends & Consumer Behavior

  1. Questions regarding the drivers of delinquency improvement (e.g., gold prices, economy).
  2. Inquiries about the impact of rate cuts on prepayments and BT outs.
  3. Requests for clarification on the profile of non-salaried borrowers.

Financial Highlights

  1. Questions on NIM impact from converting annual to quarterly loan resets.
  2. Inquiries about maintaining spread at 2.75%-2.8% amidst rate cuts and asset repricing.
  3. Concerns raised about potential single-digit PAT growth given lower NIM, higher credit costs, and IT impact.
  4. Requests for FY27-28 guidance on spreads, cost-to-income, and credit costs.

Product Composition

  1. Questions about the long-term trend of increasing the self-employed non-professional category.
  2. Inquiries about the impact of a growing non-housing loan mix on NIMs and NPAs.

Strategic Considerations

  1. Questions on branch expansion plans for FY27-28 and geographical focus.
  2. Inquiries about the number of marketing executives and future hiring plans.
  3. Discussions on the competitive advantages expected post IT implementation.
  4. Questions about the business impact during IT implementation downtime.
  5. Requests for guidance on diversifying the loan sourcing mix beyond DSAs.