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.