Concall AI

India Shelter Finance Corporation Limited — Q4 FY25 earnings call

Call held 12 May 2025

Management summary

India Shelter Finance reported strong Q4 FY25 results, with AUM growing 35% YoY to Rs. 8,189 crores and PAT increasing 39% YoY to Rs. 108 crores. The company demonstrated improved asset quality, with DPD 30 and Stage 3 declining, and maintained credit costs within guidance. Management highlighted strategic branch expansion and a focus on affordable housing, while acknowledging challenges like regional portfolio dips and attrition.

Highlights

AUM growth of 35% year-on-year, reaching an AUM of Rs. 8,189 crores.
PAT for the quarter came in at Rs. 108 crores, registering a growth of 39% year-on-year.
Return on equity further improved to 16.3%.
DPD 30 is at 3.1%, down by 60 basis points quarter-on-quarter. Stage 3 is at 1%, down by 20 bps quarter-on-quarter.
Credit cost for the quarter is 20 basis points and for the year, it is at 40 basis points, which is in line with our guidance.

Concerns

Karnataka portfolio has seen a slight dip of some 20 bps, 30 bps.
Attrition is still a challenge on that side.

Key financials

3 periods

Headline

AUM
₹8,189 Cr
YoY +35% QoQ +7%
Lending Margins
6.2%
DPD 30
3.1%
QoQ -0.6%
Stage 3
1%
QoQ -0.2%
PCR for Stage 3
25%
Net Worth
₹2,709 Cr
Portfolio Yield
14.9%
Fixed Rate Portfolio Funded by Variable Rate Liabilities
18%
Housing Loan Portfolio (Overall)
57%
Housing Loan Portfolio (On-book)
67%

Q4 FY25

PAT
₹108 Cr
YoY +39% QoQ +12%
RoA
5.8%
RoE
16.3%
Credit Cost
20 bps
Bucket Cost of Fund
8.7%
Marginal Cost of Fund
8.6%

FY25

PAT
₹378 Cr
YoY +53%
Credit Cost
40 bps
Disbursement Yield
15%

What they filed

Q1 FY27: revenue up 19.7%, net profit up 20.2% against the same quarter last year.

₹ Cr · quarterly

Line item	Q2 FY25	Q3 FY25	Q4 FY25	Q1 FY26	Q2 FY26	Q3 FY26	Q4 FY26	Q1 FY27
Revenue	282	304	327	361	369 +31%	390 +28%	411 +26%	432 +20%
Expenses	79	85	83	97	98	113	110	123
Other income	1	0	0	0	0	0	0	0
Interest	85	92	102	106	110	114	115	121
Depreciation	3	3	3	3	3	3	3	3
Profit before tax	117	124	139	155	158 +35%	160 +29%	182 +31%	185 +19%
Tax rate	23%	23%	23%	23%	23%	22%	23%	23%
Net profit	90	96	108	119	122 +36%	124 +29%	140 +30%	143 +20%
EPS	8.37	8.91	10.00	11.05	11.24	11.41	12.88	13.14

How to read this

₹ crore, as filed. The percentage beside a figure is the change against the same quarter a year earlier — never the quarter before, which would make every seasonal business look like it collapses and booms each year.

Capital allocation

high confidence

Liquidity Undrawn ₹900 Cr Comfortably placed with liquidity of Rs. 1,480 crores, including undrawn sanction of about Rs. 900 crores. Our ALM is positive across all the buckets.

On liquidity side, we are comfortably placed with liquidity of Rs. 1,480 crores, including undrawn sanction of about Rs. 900 crores. Our ALM is positive across all the buckets.

Guidance & targets

Branch Expansion

Branch additions Branch Expansion · for the year · High confidence 40 to 45

Branch addition of 40 to 45 for the year

— Rupinder Singh

Profitability

Margins Profitability · medium term · High confidence around 6%

Margins of around 6%

— Rupinder Singh
RoA Profitability · in 2 years · Medium confidence close to 4.5%

So as the leverage will increase from here, our ROA will moderate from there. So we expect that down the line, 2 years from here, we will be touching close to 4x kind of leverage. At that point of time, you will see some moderation in ROA close to 4.5% that you could expect.

— Ashish Gupta

Credit Quality

Credit cost Credit Quality · High confidence around 40 to 50 bps

Credit cost of around 40 to 50 bps

— Rupinder Singh

Loan Growth

Loan growth Loan Growth · High confidence around 30% to 35%

Loan growth of around 30% to 35% to reach AUM of Rs. 30,000 crores by March 2030

— Rupinder Singh

AUM

AUM AUM · by March 2030 · High confidence Rs. 30,000 crores

Loan growth of around 30% to 35% to reach AUM of Rs. 30,000 crores by March 2030

— Rupinder Singh

Capital Structure

Leverage Capital Structure · in 2 years · Medium confidence close to 4x

So as the leverage will increase from here, our ROA will moderate from there. So we expect that down the line, 2 years from here, we will be touching close to 4x kind of leverage.

— Ashish Gupta

Interest Rate Risk

Fixed rate portfolio funded by variable rate liabilities Interest Rate Risk · 12 to 18 month's time · High confidence further reduce

From 18% today

We are committed to further reduce this in coming 12 to 18 month's time.

— Ashish Gupta

Portfolio Mix

Housing Loan portfolio proportion Portfolio Mix · Medium confidence 60%, 61%

From 57% today

Instead of slowing down LAP portfolio, we'd always insist of taking up our HL portfolio. So this 57% eventually would tweak to respected level of some 60%, 61%.

— Rupinder Singh

What to watch in Q1 FY26

Branch expansion strategy effectiveness

next quarter

Current New experimentation in branch opening strategy

Target Improved efficiency/AUM per branch from new strategy

Why it matters

New strategy could impact growth efficiency and AUM per branch.

I think since it hasn't been executed yet I won't say better strategy or not. I simply said that there will be new experimentation, and we'll come back to you once done.

Risks & concerns

Attrition
medium

Attrition is still a challenge, though improved YoY, and a new ESOP tranche has been approved to address it.

Management acknowledged
Regional portfolio dips (Karnataka)
low

Karnataka portfolio saw a slight dip of 20-30 bps, but overall impact is minimal due to diversified portfolio.

Analyst acknowledged
Competitive intensity in affordable housing
low

Company operates in Tier 2, Tier 3 markets with direct sourcing, differentiating it from larger players.

Analyst acknowledged

Q&A highlights

6 direct

Karnataka portfolio performance and issues Partial

About Karnataka, we have portfolio of around 6.3%, there is a slight dip of some 20 bps, 30 bps. Obviously, these are the reasons which you know very well in the market. Thankfully, India Shelter distribution portfolio has been spread across country since the very formative years, so that there is no impact in any case.

Addresses a specific regional portfolio performance concern, indicating a slight dip but manageable impact due to diversified portfolio.

Asked by Varun from Kotak Securities

LAP portfolio aggression and RBI compliance Direct

So if you look at our overall AUM, yes you are right that our housing loan portfolio is at 57%. But if you look at the on-book balance sheet portfolio, so as you have rightly said that for direct assignment, we do it for LAP portfolio. So at the on-book balance sheet level, the proportion of housing loan is at about 67%. So we are well compliant with the RBI regulation on this particular PBC criteria.

Clarifies the company's compliance with RBI regulations regarding housing loan proportion, addressing concerns about aggressive LAP growth.

Asked by Aman from PhillipCapital

GS3 coverage and credit cost comfort Direct

So you need to differentiate between us and any other prime housing finance company. So while we underwrite the loan, we underwrite the loan only against the self-occupied residential property and average LTV of the portfolio is close to 52%. So if you go over the historical numbers, which are available for more than 12 years now, so the LGD that we have seen on our portfolio is close to 11%, 12%, including principal and interest. So the PCR of 25% that you are seeing on Stage 3 assets is actually 2x of what the actual provision is required.

Explains why the company's PCR of 25% is considered adequate despite being lower than peers, citing low LGD due to underwriting practices.

Asked by Shreepal Doshi from Equirus Capital

Scalability of direct sourcing model for Rs. 30,000 crores AUM target Direct

That will be our prime model. In case if you have to come with the new models, then definitely, we'll not be able to disturb the current one basically. We're not going to overload our current set of teams, who will be shifting from a direct sourcing model to some new models because of the expertise which this team has developed to with time.

Reaffirms commitment to the direct sourcing model even with ambitious AUM targets, indicating confidence in its scalability and effectiveness.

Asked by Miten Lathia from Fractal Capital Investments

ROA/ROE trajectory with increasing leverage Direct

So as the leverage will increase from here, our ROA will moderate from there. So we expect that down the line, 2 years from here, we will be touching close to 4x kind of leverage. At that point of time, you will see some moderation in ROA close to 4.5% that you could expect.

Provides specific forward-looking targets for ROA and leverage, outlining the expected trade-off as the company scales.

Asked by Jainis Chheda from Kemfin Family Office

Attrition and retention strategies Direct

So compared to last year, there is an improvement in attrition, but not to our level of satisfaction. That is one thing. Attrition is still a challenge on that side. Particularly for controlling this attrition, I think Board has been kind enough. They have just approved the next tranche of stock options, which is going to cover the large set of people.

Acknowledges attrition as an ongoing challenge and details a specific measure (new ESOP tranche) being implemented to address it.

Asked by Raghav Garg from Ambit Capital

Branch expansion and hiring strategy Partial

I think since it hasn't been executed yet I won't say better strategy or not. I simply said that there will be new experimentation, and we'll come back to you once done. So, we are just in the process. As it completes, we'll definitely showcase ourselves how it works, like as what we did etc. But yes, that's what I can assure is we'll be again opening around 40 to 45 branches.

Indicates a shift in branch opening strategy with new experimentation, suggesting potential changes in execution for future growth.

Asked by Raghav Garg from Ambit Capital

Fixed vs. floating rate structure for loans Direct

So the rate is similar. It's not a teaser loan kind of product where the initial rate is slightly lower and the subsequent rate will be higher. It's a flat rate of product wherein customer rate remains fixed for initial 3 years. And this is the moment after 3 years, the customer rate might change in future.

Clarifies the pricing mechanism for their semi-variable loans, assuring that it's not a teaser rate and providing transparency on rate changes.

Asked by Sonal from Asian Market Securities

2 min read 6 chapters

Detailed narrative

Q4 FY25 Performance Overview

India Shelter Finance reported strong operational performance in Q4 FY25, driven by demand in the affordable housing segment. AUM grew 35% year-on-year to Rs. 8,189 crores, with disbursements reaching Rs. 933 crores, a 25% YoY increase. For the full FY25, disbursements totaled Rs. 3,335 crores, also up 25% YoY. The company's branch network expanded to 266 branches, adding 43 new branches during the year.

Asset Quality and Profitability

The company achieved a PAT of Rs. 108 crores in Q4 FY25, marking a 39% YoY growth and the first time exceeding Rs. 100 crores in a single quarter. Return on assets stood at 5.8%, and return on equity improved to 16.3%. Asset quality showed improvement, with DPD 30 at 3.1% (down 60 bps QoQ) and Stage 3 at 1% (down 20 bps QoQ). Credit cost for the quarter was 20 bps, and 40 bps for the full year, aligning with guidance.

Funding and Liquidity

Portfolio yield remained stable at 14.9%, with disbursement yield for FY25 at 15%. The bucket cost of funds decreased by 10 bps QoQ to 8.7% in Q4, driven by lower marginal cost of funds at 8.6%. Lending margins improved by 10 bps to 6.2%. The company is comfortably placed with Rs. 1,480 crores in liquidity, including Rs. 900 crores in undrawn sanctions, and maintains a positive ALM across all buckets.

Branch Expansion and Sourcing Strategy

The branch network expanded to 266 branches, with 43 new branches added during FY25. Management indicated a continued plan for 40-45 new branches annually, with new experimentation in opening strategies. The company primarily focuses on Tier 2 and Tier 3 markets, maintaining a direct sourcing model for its Rs. 10-11 lakh average ticket size, which is expected to grow to Rs. 14-15 lakh in 4-5 years.

Portfolio Mix and Competitive Landscape

The overall housing loan portfolio stands at 57% of AUM, with the on-book proportion at 67%, ensuring compliance with RBI regulations. The company aims to increase its HL portfolio to 60-61%. While acknowledging competitive intensity, management emphasized its differentiated approach through deep penetration in Tier 2/3 markets and direct sourcing. The percentage of fixed-rate portfolio funded by variable-rate liabilities has been reduced from 45% last year to 18% this year, with further reduction targeted in 12-18 months.

Capital Structure and Leverage Outlook

Net worth reached Rs. 2,709 crores. The company expects its ROA to moderate to approximately 4.5% in the next two years as leverage increases to about 4x, from the current 2.9x. Despite this, ROE is projected to maintain a similar or upward trajectory from the current 16.3%. Management also confirmed that there are no regulatory challenges to increasing leverage up to 5x, with 4x being a comfortable level for credit rating agencies.

This is an AI-generated summary of a publicly available earnings call transcript.

View original transcript