Concall AI

JM Financial Limited — Q3 FY25 earnings call

Call held 29 Jan 2025

Management summary

JM Financial reported a steady Q3 FY25 with revenue of INR 1,121 crores and PAT of INR 209 crores. The company continued its strategic pivot in wholesale credit, significantly reducing its on-balance sheet loan book by 45% and proactively increasing real estate loan book PCR to 93%. Strong growth was observed in wealth management (AUM up 17% YoY) and affordable home loans (AUM up 33% YoY), while the investment banking pipeline remains robust. Management expressed confidence in asset resolution and future growth across its diversified businesses.

Highlights

Revenue for Q3 FY25 stood at INR 1,121 crores.
Profit after tax (PAT) for Q3 FY25 was INR 209 crores.
Wholesale credit loan book declined by ~45% from INR 7,529 crores (Mar 31, 2024) to INR 4,207 crores (Dec 31, 2024).
Provision coverage ratio on the real estate loan book increased from 54% (Mar 31, 2024) to 93% (Dec 31, 2024).
Wealth business AUM grew 17% Y-o-Y to ~INR 1,10,000 crores.
Affordable home loans AUM increased 33% Y-o-Y to ~INR 2,600 crores.
Cash and cash equivalents rose to INR 5,840 crores (Dec 31, 2024) from INR 4,769 crores (Mar 31, 2024).
Group borrowing reduced from INR 16,145 crores (Mar 31, 2024) to INR 12,143 crores (Dec 31, 2024).

Key financials

2 periods

Headline

Revenue
₹1,121 Cr
PAT
₹209 Cr
Wholesale Loan Book
₹4,207 Cr
YoY -44.1%
Wholesale Loan Book Provision
₹800 Cr
Real Estate Loan Book PCR
93%
Overall Loan Book Gross NPA
₹838 Cr
QoQ +0.36%
Overall Gross NPA PCR
84%
Wealth Business AUM
₹1.10L Cr
YoY +17%
SEBI Margin Finance Book
₹2,100 Cr
YoY +38%
Mutual Fund AUM
₹13,800 Cr
YoY +200%
Affordable Home Loans AUM
₹2,600 Cr
YoY +33%
Cash and Cash Equivalents
₹5,840 Cr
YoY +22.4%
Group Borrowing
₹12,143 Cr
YoY -24.8%
Consolidated Net Worth
₹8,874 Cr
Book Value per Share
₹92.8
Gross Debt to Equity
1.1×

9M FY25

Revenue
₹3,426 Cr
PAT
₹612 Cr

What they filed

Q1 FY27: revenue up 8.1%, net profit down 19.6% 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	1,191	1,106	1,004	1,111	1,031 −13%	999 −10%	949 −5%	1,201 +8%
Expenses	700	500	426	261	426	436	458	500
EBITDA	491	607	578	850	605 +23%	563 −7%	491 −15%	700 −18%
Margin	41%	55%	58%	76%	59%	56%	52%	58%
Other income	21	14	23	10	13	105	20	24
Interest	343	318	274	251	254	248	246	247
Depreciation	15	16	16	17	19	20	22	22
Profit before tax	154	287	311	593	344 +123%	400 +39%	243 −22%	456 −23%
Tax rate	6%	28%	25%	23%	26%	24%	34%	19%
Net profit	144	207	235	459	262 +82%	318 +54%	162 −31%	369 −20%
EPS	2.43	2.19	2.19	4.75	2.82	3.27	1.73	3.05

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.

Guidance & targets

Asset Quality

Real Estate Loan Book Provision Coverage Ratio Asset Quality · March (FY25) · High confidence 100%

And if required in the real estate book, we'll take it to 100% in March. So, it's completely cleaned up.

— Vishal Kampani

Asset Resolution

Resolution of 50% of distressed assets Asset Resolution · CY25 · High confidence This calendar year

I think in almost 50% of the portfolio, we are pretty much in advanced stage. So, when I say advanced stages, we should see resolution this calendar year.

— Vishal Kampani
Resolution of balance 50% of distressed assets Asset Resolution · CY26 · High confidence Following calendar year

And in the balance, 50%, we should see it in the following calendar year.

— Vishal Kampani

Asset Recovery

Recovery of provided amount from distressed assets Asset Recovery · Next 2 years · High confidence 80-90%

But we are fairly confident that this provided amount, I mean most of it, I would imagine between 80% and 90% of it, should be back within the next 2 years because there are some cases where we tried to do a resolution with the developer with the best effort.

— Vishal Kampani

Ownership

Ownership in Credit Solutions Ownership · This quarter (Q4 FY25) · High confidence 90%

And we are hoping that this quarter, RBI will give us the approvals to take control of Credit Solutions and have 90% ownership.

— Vishal Kampani

Business Setup

Real Estate AIF application Business Setup · Q4 FY25 · High confidence Next quarter

They've already full-fledged working on the application for the AIF, which should happen hopefully by next quarter.

— Vishal Kampani

Loan Book Rundown

Wholesale Loan Book Rundown Loan Book Rundown · Next 12-15 months · Medium confidence 12-15 months

Previously 4 years → 12-15 months

I think the whole rundown may happen in the next 12 to 15 months, so a lot faster compared to what we had thought.

— Vishal Kampani

Private Credit Syndication

Spread on capital deployed Private Credit Syndication · Steady state · High confidence 400-500 basis points

So, I think it's fairly simple, you should model - as I've maintained before that you should model anywhere between a 400 to 500 basis points spread on the capital that we should be able to deploy, including fees.

— Vishal Kampani
Steady state book Private Credit Syndication · Steady state · High confidence INR 3,000 crores

So, if we are looking at INR3,000 crores of steady state book that we are able to achieve, then that is the kind of spread we will make on it.

— Vishal Kampani
Unlevered earnings Private Credit Syndication · Steady state · High confidence 13-14%

So, in this case, it will be full spread on the book. So, it should be at least 13% to 14%, which will be the earnings and then we try and makes fees over and above that.

— Vishal Kampani

AMC Business

Burn phase duration AMC Business · Next 2-2.5 years · High confidence 2-2.5 years

The way we look at it is this burn phase will continue for the next 2, 2.5 years.

— Amitabh Mohanty
Breakeven equity AUM AMC Business · After burn phase · High confidence INR 20,000-25,000 crores

And once we cross around INR20,000 crores to INR25,000 crores of equity, we should reach breakeven and build out from that.

— Amitabh Mohanty

Capital Allocation

Corporate syndication book Capital Allocation · Steady state · High confidence INR 3,000 crores

I think we'll need approximately INR3,000 crores of book that we will maintain on the corporate syndication side, which is a bespoke finance business.

— Vishal Kampani
Loan against shares book Capital Allocation · Steady state · High confidence INR 3,000 crores

And I think our loan against shares book will scale back to an equal number of around INR3,000 crores.

— Vishal Kampani
Margin trade finance business Capital Allocation · Steady state · High confidence INR 3,000 crores

And I think our margin trade finance business, again, will be approximately INR3,000 crores.

— Vishal Kampani

Investment Banking

Market share Investment Banking · Consistently · High confidence 15-20%

In terms of investment banking, our market share in any given year will be anywhere 15% to 20% on the capital market side.

— Sonia Dasgupta
Growth in capital raising Investment Banking · Next 5 years · High confidence ridiculous amount of growth

So, I think the capital raising environment is looking phenomenal for the next 5 years. So very hard to say to put a number on it, but I can definitely tell you that there will be a ridiculous amount of growth that we will see in capital raising, and we as a leading IB will benefit heavily from it.

— Vishal Kampani

Risks & concerns

Rising inventory levels and slowdown in sales for unlisted midsized real estate players.
medium

Management noted concerns about rising inventory and slower sales for unlisted midsized players, but downplayed severity due to market share shift to larger players and strong underlying demand.

Management acknowledged
Longer resolution time-lines for distressed assets in India.
medium

Management acknowledged that resolution time-lines for distressed assets are longer than estimated, but expressed confidence in recovering 80-90% of provided amount within 2 years.

Management acknowledged
Competition for talent in the Investment Banking industry.
medium

Management acknowledged intense competition for IB talent but stated proactive, aggressive recruitment and strengthening of the bench across IB, wealth, and institutional equity.

Analyst acknowledged
Market volatility and potential slowdown for 3-6 months impacting business.
low

Management acknowledged potential market slowdown but stated continued aggressive investment in digital and talent to capitalize on opportunities.

Analyst acknowledged

Q&A highlights

3 direct

Impact of SEBI regulatory action on Investment Banking revenue and market share. Direct

Regarding the impact of the SEBI order, which came specifically for managing public issue of debt, but there was a lot of misunderstanding among the client, and therefore, you are right, it did impact our equity business and we may have lost out on some large deals. But subsequently, SEBI, in a subsequent clarification made it very clear in writing that this was only applicable to public issue of debt IPOs. And thereafter, having been clarified, now there is no ambiguity about any negativity on our equity capital markets business.

Clarifies the specific nature and temporary impact of the regulatory action, indicating it was largely misunderstood and the equity business is now clear of ambiguity.

Asked by Digant Haria

Adequacy of provisioning for wholesale credit NPAs and potential write-offs. Direct

No, I think, Digant, as we have clarified even earlier that whatever write-off we needed to take on these assets has already been taken. Large amount of the write-off has been taken last year... The provision is being done because the loan book is coming down so fast, and therefore, the number, the net NPA numbers look very large... we're almost now at 90%, 95% on the wholesale real estate book. At max, we can do is the balance 7% in March, which is not a big number again. So, I think it's just good to clean it up, have a 100% provision, have a very conservative sort of balance sheet, and we are good to grow on the syndication side very shortly.

Reassures investors that major write-offs are complete, provisioning is proactive to clean up the balance sheet, and PCR is nearing 100% for the real estate book, paving the way for new growth.

Asked by Digant Haria

ARC business recovery, profitability, and future strategy. Direct

Yes. So, ARC, as I told you earlier also, the ARC recoveries are lumpy in nature... what we have said in the past as well is that we are not going to be taking turnaround risk in corporate assets as an ARC... So, the only two businesses we will do in the ARC will be the syndicated business where we will partner with corporates or we will partner with foreign funds who want to take over assets where our commitment will not be more than 15%, and we can go down to as low as 2.5%. So, it will be between 2.5% to around 15%.

Details the strategic shift in the ARC business, moving away from turnaround risk and towards a fee-based syndicated model and retail asset resolution, clarifying its future role and capital commitment.

Asked by Chintan Shah

3 min read 7 chapters

Detailed narrative

Strategic De-risking and Balance Sheet Clean-up

JM Financial has significantly de-risked its wholesale credit business, reducing the loan book across real estate, financial institutions, and MSME by approximately 45% from INR 7,529 crores on March 31, 2024, to INR 4,207 crores by December 31, 2024. This strategic pivot involves moving from an on-balance sheet model to syndicating transactions. The company has proactively increased the provision coverage ratio on its real estate loan book from 54% to 93% over the same period, with a target to reach 100% by March 2025, aiming for a fully cleaned-up balance sheet. Management is confident in recovering 80-90% of the provided amount from distressed assets within the next two years.

Robust Growth in Wealth and Asset Management

The Wealth and Asset Management businesses demonstrated strong performance. The AUM of the wealth business grew 17% year-on-year to approximately INR 1,10,000 crores. The SEBI margin finance book increased by 38% year-on-year to about INR 2,100 crores, and mutual fund AUM tripled to approximately INR 13,800 crores, with equity mutual funds crossing INR 10,000 crores. Management is in an investment phase, hiring quality talent and expanding footprint, expecting quicker asset ramp-up and above industry average growth in the coming years.

Positive Outlook for Investment Banking

Despite some temporary impact from a misunderstood SEBI order in early 2024, the investment banking business maintains a strong pipeline and market share of 15-20% in capital markets. The company reported being #1 in QIP deals in calendar year 2024. Management expressed high confidence in the capital raising environment for the next five years, anticipating a "ridiculous amount of growth" and significant benefits for JM Financial as a leading investment bank, with continued aggressive investment in talent and resources.

Affordable Home Loans Expansion

The affordable home loans business continued its expansion, growing its AUM by 33% year-on-year to approximately INR 2,600 crores. The branch network has expanded to 128 branches, with a net worth of approximately INR 780 crores in this segment. The company noted that 20 out of 29 new branches opened in Tier 2 and Tier 3 cities since April 2022 are already nearing breakeven, indicating efficient scaling and a strong Third-Party Product distribution pipeline.

Evolving ARC and Private Credit Strategy

The Asset Reconstruction Company (ARC) business is shifting its focus away from taking turnaround risk in corporate assets. The future strategy involves a syndicated model, partnering with corporates or foreign funds with a commitment of 2.5-15%, and resolving retail NPAs. For private credit syndication, the company targets a steady-state book of INR 3,000 crores, expecting a spread of 400-500 basis points on deployed capital, translating to unlevered earnings of 13-14%.

Capital Allocation and Liquidity

Cash and cash equivalents increased to INR 5,840 crores by December 31, 2024, from INR 4,769 crores on March 31, 2024, while group borrowing reduced by 25% to INR 12,143 crores. The company plans to deploy its cash surplus into new business lines, targeting approximately INR 3,000 crores each for corporate syndication, loan against shares, and margin trade finance. This strategy aims to generate higher yields compared to current mutual fund holdings and bolster business growth.

Proactive Talent Investment and Digital Focus

JM Financial is aggressively investing in talent and digital capabilities across its businesses, including wealth, investment banking, and institutional equity. This proactive approach, initiated 2-3 years ago, aims to capitalize on market opportunities and strengthen its bench, particularly in areas like derivatives platforms and research. The company expects to see continued growth in team size and coverage breadth over the next 6 months, ensuring readiness for anticipated business expansion.

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

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