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    India Shelter Finance Corporation Limited

    INDIASHLTR
    Financial Services·7 Feb 2025
    Management Summary

    India Shelter Finance Corporation reported a strong Q3 FY25, with AUM growing 36% YoY to ₹7,619 crores and PAT up 54% YoY to ₹96 crores. The company maintained its operational efficiency with Opex to AUM at 4.3% and kept credit costs and spreads in line with guidance. While a marginal uptick in 30+ DPD was noted, management expressed confidence in Q4 improvements and continued growth in Tier-2/3 geographies.

    Highlights

    5

    • AUM grew 36% YoY to ₹7,619 crores, demonstrating strong demand in affordable housing.

    • PAT increased 54% YoY to ₹96 crores, with RoE improving to 15.1% and RoA stable at 5.5%.

    • Opex to AUM reduced to 4.3% for Q3FY25, reflecting operational efficiency.

    • Credit cost maintained at 50 bps and spreads consistently above 6%, in line with guidance.

    • Branch network expanded to 265 branches, adding five new branches this quarter and 42 in the first nine months of FY25.

    Concerns

    3

    • Marginal uptick in 30+ DPD to 3.7% in Q3FY25, though management expects stabilization in Q4.

    • Sequential growth in home loan portfolio slowed to 5% from 8-9% in prior quarters.

    • BT out rate remains at 5.5%, higher than some peers, indicating competitive pressure.

    What Changed2

    vs Q4 FY25

    Guidance items9 → 6 (-3)Risks discussed3 → 4 (+1)

    Key financials

    Single quarter

    10 metrics
    1. 01AUM₹7,619 Cr+36%YoY
    2. 02PAT₹96 Cr+54%YoY
    3. 03RoA5.5%
    4. 04RoE15.1%+0.4%QoQ
    5. 05Portfolio Yield14.9%+0.1%YoY

    Capital allocation

    2
    high confidence
    CategoryHeadline
    Debt

    Debt disclosed

    Cost 8.8%

    Liquidity

    Undrawn ₹450 crores

    Guidance & targets

    6
    CategoryTargetPriority
    Branch Expansion
    New branch additions
    40-45
    		High
    AUM Growth
    AUM growth rate
    30% to 35%
    		High
    Opex Efficiency
    Opex to AUM ratio
    reduction
    		High
    Credit Cost
    Credit cost
    40 to 50 bps
    		High
    Spreads
    Spreads
    around 6%
    		High
    Asset Mix
    Proportion of fixed rate book
    around 40%
    		Medium

    What to watch in Q4 FY25

    5

    30+ DPD trend

    Next quarter (Q4 FY25)
    Current3.7% (up 10 bps QoQ)
    TargetStabilization/reduction

    Why it matters

    Key indicator of asset quality and effectiveness of collection efforts, especially after the marginal uptick.

    We witnessed a marginal uptick in 30+ to 3.7% in Q3FY25, forward flow stabilized in December and traction looks positive going forward⏳.

    Risks & concerns

    4
    RiskSeverity

    Marginal uptick in 30+ DPD

    30+ DPD increased by 10 bps compared to last quarter, reaching 3.7% in Q3FY25. — Management acknowledged

    medium

    Competitive pressure on BT out rates

    BT out rate remains at 5.5%, higher than some peers, driven by customers moving to larger institutions in competitive Tier-2 markets. — Analyst acknowledged

    medium

    Lag in benefit from repo rate cuts

    Only one-third of borrowings are repo-linked, while the larger part is MCLR-linked with a one-year reset, causing a 6-8 month lag for rate cut benefits. — Management acknowledged

    low

    MP Portfolio Stress

    Previous team exit led to heightened stress in MP, but new sales and collection resources are in place, and the situation is largely under control. — Management acknowledged

    medium

    Q&A highlights

    8

    “So, there's a 10 bps higher when compared to the last quarter. But what we see, things are not beyond control. That is the first thing. This is a tough time for the entire industry largely, but seeing the process that we put on, the collection mechanism that we put on, I think that's working decently well. So, this blip I think not for long days anymore. I think we'll be able to control in the coming quarters.”

    Addresses a key concern about asset quality deterioration, with management acknowledging the uptick but expressing confidence in control and Q4 improvement.

    asked by Vivek Ramakrishnan, DSP Mutual Fund

    2 min read7 chapters

    Detailed Narrative

    01

    Strong AUM and Profitability Growth

    India Shelter Finance Corporation reported a robust Q3 FY25, with Assets Under Management (AUM) growing 36% year-on-year to ₹7,619 crores. This growth was supported by a 29% increase in disbursements, totaling ₹879 crores for the quarter. Profit After Tax (PAT) saw a significant 54% year-on-year increase, reaching ₹96 crores, while Return on Equity (RoE) improved to 15.1% and Return on Assets (RoA) remained stable at 5.5%.

    02

    Operational Efficiency and Stable Margins

    The company demonstrated improved operational efficiency, with the Opex to AUM ratio reducing by 10 basis points quarter-on-quarter to 4.3% in Q3 FY25. Portfolio yield stood at 14.9%, an increase of 10 basis points year-on-year, while the cost of funds remained stable at 8.8%. Consequently, the company consistently maintained its spreads above 6%, in line with its stated guidance.

    03

    Asset Quality Trends and Management Actions

    A marginal uptick in 30+ DPD was observed, reaching 3.7% in Q3 FY25, an increase of 10 basis points from the previous quarter. However, Stage-III assets remained stable at 1.2%, with a Provision Coverage Ratio (PCR) of 25%. Management indicated that forward flow stabilized in December and expressed confidence in controlling the situation, expecting Q4 to show improvement based on historical trends and thorough collection mechanisms.

    04

    Strategic Branch Expansion and Market Focus

    India Shelter continued its horizontal expansion strategy, adding five new branches in Q3 FY25, bringing the total network to 265 branches. For the first nine months of the financial year, 42 new branches were opened, aligning with the annual target of 40-45 new branches. The company's focus remains on deepening its presence in Tier-2 and Tier-3 geographies, which contribute 90% of its AUM, leveraging strong growth potential in these markets.

    05

    Evolving Asset Mix and Funding Profile

    The company's asset book currently comprises 50% fixed-rate loans, with a strategic goal to reduce this to approximately 40% within the next 12 months by increasing variable rate disbursements. On the borrowing side, about 90% of the company's funds are variable rate. While one-third of borrowings are linked to the repo rate, the larger portion is MCLR-linked, implying a 6-8 month lag for any benefits from potential repo rate cuts to reflect in the cost of funds.

    06

    PMAY-2.0 Scheme Update

    The company has started disbursements under the PMAY-2.0 scheme, with 15-20% of its home loan borrowers being eligible. Data entry on the PMAY portal has recently commenced. Management anticipates that a clearer picture of the scheme's success rate and its contribution to overall disbursements will be available in the next quarter, as more data becomes available.

    07

    Employee Engagement and Attrition Management

    India Shelter has expanded its ESOP policy to cover 25% of its employees, including branch managers and above, up from 10% previously. This initiative aims to enhance employee engagement and retention. While overall attrition stands at 37-38%, attrition for employees with over one year of tenure is significantly lower, in the range of 15-17%, indicating the effectiveness of retention strategies for experienced staff.

    This is an AI-generated summary of a publicly available earnings call transcript. It is for informational purposes only and does not constitute investment advice, a recommendation, or an endorsement. inve.money is not a SEBI-registered investment advisor. Please consult a qualified financial advisor before making any investment decisions.