REPCO - RR - 14022024 14 February 2024 1923849091

Q3FY24 Result Review
TP Rs.535 Key Stock Data

Repco Home Finance BUY CMP Rs.455 REPCO IN / RHFL.BO
Asset quality improved; valuations comfortable Potential upside/downside 18% Sector Housing Finance
Previous Rating BUY Shares o/s (mn) 63
Summary Market cap. (Rs mn) 28,481
Price Performance (%)
Repco Home Finance’s AUM growth remained steady at 7.8% YoY (up 2% QoQ)
-1m -3m -12m 3-m daily avg Trd value (Rs mn) 8.8
led by 9% YoY growth in disbursements. Management retained guidance at 12%
Absolute 5.5 4.2 96.6 52-week high / low Rs491 / 169
AUM growth for FY24. NIMs declined slightly by 10bps QoQ to 5.3% led by
Rel to Sensex 6.9 (6.0) 78.2 Sensex / Nifty 71,555 / 21,743
increase in cost of funds. Management guided NIMs at 5.1% for FY25. Asset
quality continued to witness improvement during the quarter with GNPA at V/s Consensus Shareholding Pattern (%)
4.7% vs 4.9 % QoQ and PCR (on stage 3) improving from 51% (Q1FY24) to 60% in EPS (Rs) FY24E FY25E FY26E Promoters 37.1
(Q3FY24). NII grew by 18% YoY led by improvement in NIMs. PAT grew by 23% IDBI Capital 61.6 65.6 69.6 FII 13.8
YoY led by lower operating expenses (up 3% YoY) which supported RoA at 3.1% Consensus 59.5 64.4 71.9 DII 17.6
(highest in last 3 years). We have moved to FY26E estimates and maintain our % difference 3.5 1.9 (3.2) Public 31.5
“BUY” rating with revised TP of 535 (earlier 515), valuing it at 1.0x P/ABV FY26E. Financial snapshot (Rs mn)
Key Highlights and Investment Rationale Year FY2022 FY2023 FY2024E FY2025E FY2026E
 Loan book growth improved: Loan book growth improved to 7.8% YoY vs NII 6,003 5,827 6,797 7,437 8,431
Change (yoy, %) 6% -3% 17% 9% 13%
7.1% YoY (Q2FY24) led by decline in repayments. However, disbursements
Net Profit 1,915 2,961 3,853 4,107 4,353
grew by 9% YoY (down 5%QoQ). Strong growth was led by salaried segment Change (yoy, %) -33% 55% 30% 7% 6%
(up 8% YoY; 2% QOQ) as well as Non-Salaried segment (up 8% YoY; 2% QoQ). EPS (Rs) 30.6 47.3 61.6 65.6 69.6
We expect 13% CAGR (FY23-26) AUM growth. Change (yoy, %) -33% 55% 30% 7% 6%
BV (Rs) 357.4 402.2 461.1 524.0 590.9
 Asset quality improved: Asset quality improved with GNPA at 4.7% vs 4.9% QoQ as
PER (x) 14.8 9.6 7.4 6.9 6.5
per new RBI norms. Recoveries for 9MFY24 from GNPA stood at Rs.1.01bn vs P/BV (x) 1.3 1.1 1.0 0.9 0.8
management guidance of Rs.1bn for FY24 (reduction of Rs2.13bn GNPA for 9MFY24). ROE (%) 8.9 12.5 14.3 13.3 12.5
 NIMs declined QoQ: NIMs declined by 10bps QoQ to 5.3% led by increase in ROA (%) 1.6 2.4 2.9 2.8 2.6
GNPA (%) 7.2 6.2 4.5 4.0 4.0
cost of funds. Management guided NIMs should stable at current levels (5.3%)
NNPA (%) 5.5 3.7 1.8 2.0 2.0
in Q4FY24 and 5.1% for FY25. CAR (%) 33.3 35.8 34.7 35.2 34.9
 Outlook: Management believes that the worst of Covid’19 related challenges Source: IDBI Capital Research
are over and guided for an AUM growth of 12% (on conservative basis)
Bunty Chawla Rishit Savla
supported by disbursement growth of around 20% in FY24. Valuations remain [email protected] [email protected]
comfortable at 0.9X FY26E ABV. +91-22-2217 1843 +91-22-2217 1843
February 14, 2024
Repco Home Finance | Q3FY24 Result Review
Conference Call Highlights

Operational Performance:
 For Q3FY24, the company witnessed a disbursements, sanctions and AUM growth of 9%, 4% and 8% YoY
respectively.
 The company has now split its recovery department into 2 verticals out of which one vertical is dedicated
to recoveries using legal measures under SARFAESI.
 The company follows a strategy of using the auction of property as more of a threat in order to bring
borrowers to the table for discussion.
 ROA remained stable at 3.1% and ROE stood at 15.8% for Q3FY24.
Advances:
 The company has been able to sustain yields at ~3.7% on the back of improved yield on advances despite
elevated cost of funds.
 Ratio of exposure to Salaried to non salaried stood at 51.3% and 48.7% at the end of Q3FY24.
 Home loan contributed to 75.6% of the total loan book.
 Cost to income decreased marginally QoQ.
 BT outs and BT ins stood at a run rate of ~Rs.0.30bn per month.
 Slippages stood at Rs.0.57bnr and recoveries stood at ~0.76bn for Q3FY24.
 One of the factors for relatively slower AUM growth in FY24 is the reduction in GNPA.
Asset Quality:
 The company was able to reduce the GNPA from Rs.6.37bn to Rs.6.18bn while NNPA stood at Rs.2.47bn at
the end of Q3FY24. Further, GNPA has come down by Rs.1.37bn YoY organically and the management
stated that GNPA numbers would have been better but for the floods in Tamil Nadu.
 The company had planned a reduction of Rs.1bn of GNPA for FY24 against which it as achieved a reduction
of Rs.1.01bn in 9MFY24.
2
 The company has an outstanding restructured portfolio of ~Rs.5.47bn out which ~Rs1.78bn is in stage 3
and balance in stage 1 and 2.
 The slippage in the new book is at only ~Rs.0.18bn since Jan-22.
 Stage 2 assets stood at 12% in Q3FY24. The management estimates the same to decrease below 10% of
the AUM which is expected to be at ~Rs.135bn at the end of FY24.
Future Guidance
 BOD has approved a roadmap for reaching an AUM of ~Rs.250bn by within 3 years, an addition of 40
branches per year while GNPA is expected to go below 2%.
 Aim is to being down the stage 2 assets to less than 10% of the AUM by Mar24.
 The management is positive regarding growth momentum in AUM to continue going forward.
 PAT for 9MFY24 at Rs.287cr vs Rs.350 cr target for FY24. Hence, the management is confident about
achieving the guided profitability numbers.
 AUM growth target set at 12% for the FY25,14% for FY26 and 17% for FY27 assuming a normal business
environment scenario. However, if the company is able to take advantage of the government’s focus on
affordable housing, the growth trajectory guidance might be positively revised.
 The management may allow certain relaxations in the company’s recovery policies in order to reduce the
NPA numbers going forward.
 The company expects to have an advantage of releasing the excess provisions (Rs.0.40bn-0.50bn) it is
currently holding in its books thus, it will support the ROA and ROE starting from FY25 onwards.
 The company will prioritize organic growth first and later focus on inorganic ways like co-lending and
partnerships.
 The NIMs are expected to remain at par with the current rate of ~5.1% for Q4FY24 and FY25. The current
spreads stand at 3.4% levels, however, the management is open to reducing the spreads to 3.1% levels in
exchange for better quality of customers.
 50% of the new branch openings for FY25 will be in Tamil Nadu as the company aims to deepen its
presence in the state.
3
Exhibit 1: Quarterly Snapshot (Rs mn)
Year-end: March Q3FY24 Q3FY23 Q2FY24 YoY (%) QoQ (%)

Interest Income 3,873 3,270 3,802 18.4 1.9
Interest Expenses 2,153 1,810 2,075 18.9 3.8
Net Interest Income 1,720 1,460 1,727 17.8 (0.4)
NIM (%) 5.3 4.7 5.4 60 bps -10 bps
Non-Interest Income 59 39 38 52.8 57.3
Operating Income 1,779 1,499 1,765 18.7 0.8
Staff Cost 242 228 255 6.2 (4.8)
Other Op Exp 167 170 172 (1.6) (2.6)
Total Operating Expenses 410 398 426 2.9 (3.9)
Cost to Income (%) 23.0 26.6 24.2 -354 bps -115 bps
Cost to AUM (%) 1.3 1.3 1.4 -6 bps -8 bps
Operating Profit 1,370 1,101 1,338 24.5 2.4
Provisions 29 12 16 153.0 81.9
Credit Cost (%) 0.1 0.0 0.1 5 bps 4 bps
PBT 1,341 1,089 1,322 23.1 1.4
Tax 346 282 341 23.1 1.5
-effective tax rate 25.8 25.8 25.8 -1 bps 3 bps
PAT 994 808 981 23.1 1.4
EPS (Rs) 15.9 12.9 15.7 23.1 1.4
BV (Rs) 410.8 358.2 396.0 14.7 3.7
AUM 1,31,855 1,21,963 1,29,215 8.1 2.0
Source: Company; IDBI Capital Research
4
Exhibit 2: ROE Decomposition

(%) FY22 FY23 FY24E FY25E FY26E
NII 4.9 4.8 5.1 5.0 5.1
Fees 0.0 0.0 0.0 0.0 0.0
Other Income 0.1 0.1 0.1 0.1 0.1
Net Revenue 5.1 4.9 5.3 5.2 5.2
Op.Exp 1.0 1.2 1.3 1.3 1.3
Op.Profit 4.0 3.7 4.0 3.9 3.9
Provisions 1.9 0.4 0.1 0.2 0.4
PBT 2.1 3.3 3.9 3.7 3.5
Tax 0.6 0.9 1.0 0.9 0.9
PAT 1.6 2.4 2.9 2.8 2.6
Leverage (x) 5.7 5.2 4.9 4.8 4.8
ROE 8.9 12.5 14.3 13.3 12.5
5
Exhibit 3: Figure: One-year forward P/BV (FY14-19)

6.0
5.0
4.0
3.0
2.0
1.0
-
Oct-14
May-15
Apr-16
Apr-18
Mar-14
Jul-14
Jul-16
Mar-19
Jun-17
Jan-18
Aug-18
Dec-15
Feb-15
Sep-15
Nov-16
Feb-17
Sep-17
Nov-18
1Yr Fwd Pbv(x) -SD 2.6x Avg 3.5x +SD 4.4x
Exhibit 4: Figure: One-year forward P/BV (FY15-24)

5.0
4.0
3.0
2.0
1.0
-
Feb-16
Sep-16
Feb-18
Sep-18
Feb-20
Jun-20
Sep-20
Feb-22
Jun-22
Sep-22
Feb-24
Mar-15
Oct-15
Apr-17
Oct-17
Apr-19
Nov-19
Apr-21
Nov-21
Apr-23
Nov-23
Jan-23
Jul-15
Jul-17
Jul-19
Jul-21
Dec-16
Aug-23
May-16
May-18
Dec-18
Dec-20
1Yr Fwd Pbv(x) -SD 0.4x Avg 1.8x +SD 3.2x
6
Exhibit 5: Loan book growth continued to improve YoY

1,50,000 10.0%
1.5% 5.9% 6.7% 7.1% 8.1%
3.5%
8.0%
1,00,000
6.0%
4.0%
1,20,677
1,21,963
1,24,492
1,26,554
1,29,215
1,31,855
50,000
2.0%
- 0.0%
Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24
AUM (in mn) YoY Growth
Exhibit 6: Disbursals growth declined during the Quarter

10,000 80.0%
38.9% 9.0%
8,000 54.1% 56.8% 6.9%
6.6% 60.0%
6,000
40.0%
4,000
20.0%
7,455
6,962
8,352
6,843
7,971
7,589
2,000
- 0.0%
Disbursals (Rs.mn.) YoY Growth
7
Exhibit 7: Loan Book Composition by Borrower Type

70,000
65,000
60,000
59,762
59,018
62,201
57,897
61,725
61,252
65,302
63,315
65,900
64,609
67,246
55,000
56,704
50,000
Salaried Non-salaried
Exhibit 8: Net Interest margins moderated sequentially

5.6 5.4
5.4 5.3
5.2 5.1
5.0
5.0 4.8
4.8 4.7
4.6
4.4
4.2
NIMs (%)
8
Exhibit 9: Asset quality witnessed improvement QoQ

8.0 65.0
60.1
43.1 46.2 57.4 60.0
6.0 49.6 51.4 55.0
50.0
4.0 45.0
40.0
2.0 35.0
30.0
6.5
3.9
6.2
3.3
5.8
3.0
5.5
2.7
4.9
2.2
4.7
1.9
0.0 25.0
Gross NPA Net NPA (%)
Exhibit 10: Borrowings notched up on a sequential basis

1,05,000 7.9% 10.0%
8.0%
6.0%
4.2% 6.0%
1,00,000 2.4%
4.0%
-2.5% -0.2% 2.0%
1,00,493
1,03,582
95,000
0.0%
96,453
99,241
98,702
-2.0%
95,955
90,000 -4.0%
Borrowings (in mn) YoY Growth
9
Exhibit 11: Return on Assets remained stable Exhibit 12: Cost to Income Ratio remained at
sequentially comfortable levels
3.5 3.1 3.1 27.0 26.6
3.0 2.7 2.7 2.8
26.0
2.4
2.5
25.0
2.0 23.9 23.9 24.2
24.0
1.5 23.1 23.0
23.0
1.0
0.5 22.0
0.0 21.0
Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24
Source: Company; IDBI Capital Research Source: Company; IDBI Capital Research
Exhibit 13: Spreads remained range bound Exhibit 14: Cost of fund remained stable QoQ
3.5 8.5 8.4 8.4
3.4 8.2
3.4 3.4 8.1
3.4 3.3
3.3 8.0
3.3
7.5
3.2 7.5
7.1
3.1
3.0 7.0
3.0
2.9 6.5
2.8
6.0
Q2FY23Q3FY23Q4FY23Q1FY24Q2FY24Q3FY24
10
Exhibit 15: Return on Equity moderated during the Exhibit 16: Credit Cost remained stable sequentially
quarter
20.0 0.7 0.6
15.8 16.1 15.8 0.6
14.7 14.4
15.0 13.3 0.5
0.4
10.0 0.3
0.3
0.2 0.2
5.0 0.1
0.1 0.0 0.1
0.0 0.0
Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24 Q2FY23 Q3FY23 Q4FY23 Q1FY24 Q2FY24 Q3FY24
Exhibit 17: Average Ticket Size (In Mn) remained Exhibit 18: Tier-1 Capital Ratio remains comfortable
stable QoQ
1.7 37.0 36.7
1.5 35.8 36.1
1.5 35.8
1.2 1.2 36.0
1.2 34.7
1.3 1.2 1.2
35.0
1.1 34.1
34.0
0.9
0.7 33.0
0.5 32.0
Q2FY23Q3FY23Q4FY23Q1FY24Q2FY24Q3FY24 Q2FY23Q3FY23Q4FY23Q1FY24Q2FY24Q3FY24
11
Exhibit 19: Yield on Advances witnessed uptick Exhibit 20: Costs to AUM declined sequentially
sequentially
12.5 1.6
11.8 11.9
12.0 11.6 1.5
11.5 10.5 10.8 11.1 1.4 1.3 1.4
1.3 1.3
11.0 1.3 1.3
1.2
10.5 1.2
10.0 1.1
9.5 1.0
Q2FY23Q3FY23Q4FY23Q1FY24Q2FY24Q3FY24 Q2FY23Q3FY23Q4FY23Q1FY24Q2FY24Q3FY24
12
Financial Summary
Profit & Loss Account (Rs mn)
Year-end: March FY21 FY22 FY23 FY24E FY25E FY26E

Net interest income 5,663 6,003 5,827 6,797 7,437 8,431
Change (yoy, %) 9% 6% -3% 17% 9% 13%
Non-Interest Income 188 164 154 178 199 225
Operating Income 5,851 6,166 5,981 6,975 7,636 8,656
Operating expenses 1,145 1,241 1,458 1,653 1,851 2,093
Employee expenses 714 786 879 985 1,103 1,247
Other expenses 431 454 579 668 748 845
Pre-Provision Profit 4,706 4,926 4,523 5,322 5,785 6,564
Change (yoy, %) 12% 5% -8% 18% 9% 13%
Provision 808 2,331 516 128 297 746
PBT 3,898 2,595 4,008 5,194 5,488 5,817
Taxes 1,022 680 1,047 1,341 1,381 1,464
Effective tax rate (%) 26% 26% 26% 26% 25% 25%
Net profit 2,876 1,915 2,961 3,853 4,107 4,353
Change (yoy, %) 3% -33% 55% 30% 7% 6%
EPS 46.0 30.6 47.3 61.6 65.6 69.6
Return on Equity (%) 15.0 8.9 12.5 14.3 13.3 12.5
Return on Assets (%) 2.4 1.6 2.4 2.9 2.8 2.6
13
Balance Sheet (Rs mn)

Capital 626 626 626 626 626 626
Reserves 19,967 21,730 24,536 28,220 32,158 36,342
Networth 20,593 22,356 25,162 28,846 32,784 36,968
Borrowings 1,01,974 96,920 99,241 1,09,289 1,22,151 1,38,957
Other liabilities 1,078 698 832 981 798 1,509
Total Liab. & Equity 1,23,645 1,19,974 1,25,234 1,39,116 1,55,733 1,77,433
Cash 4,550 6,077 4,544 4,019 4,502 5,132

Advances 1,18,342 1,12,918 1,19,622 1,33,976 1,50,053 1,71,061
Investments 220 316 316 316 316 316
Fixed Assets 139 204 233 233 233 233
Other Assets 395 459 520 572 629 692
Total assets 1,23,645 1,19,974 1,25,234 1,39,116 1,55,733 1,77,433
14
Financial Ratios (%)

Growth
Advances 2.1 (4.6) 5.9 12.0 12.0 14.0
NII 8.8 6.0 (2.9) 16.7 9.4 13.4
Pre-Provision Profit 12.2 4.7 (8.2) 17.7 8.7 13.5
Net Profit 2.6 (33.4) 54.6 30.1 6.6 6.0
Spreads
Yield on Assets 11.7 11.2 11.0 12.1 12.0 12.0
Cost of Funds 8.0 6.9 7.1 8.2 8.3 8.3
NIM 4.8 5.2 5.0 5.4 5.2 5.3
Operating Efficiency
Cost-to-Income 19.6 20.1 24.4 23.7 24.2 24.2
Cost-to-Assets 0.9 1.0 1.2 1.3 1.3 1.3
Asset Quality
GNPA 4.0 7.2 6.2 4.5 4.0 4.0
NNPA 2.7 5.5 3.7 1.8 2.0 2.0
Provision Coverage 35.5 29.6 44.7 60.0 50.0 50.0
Credit Cost 0.7 2.0 0.4 0.1 0.2 0.5
Capital Adequacy
CAR 30.7 33.3 35.8 34.7 35.2 34.9
Tier I 30.3 32.8 35.0 34.7 35.2 34.9
Valuation
EPS 46.0 30.6 47.3 61.6 65.6 69.6
BV 329.2 357.4 402.2 461.1 524.0 590.9
P/E 9.9 14.8 9.6 7.4 6.9 6.5
P/BV 1.4 1.3 1.1 1.0 0.9 0.8
ROE 15.0 8.9 12.5 14.3 13.3 12.5
ROA 2.4 1.6 2.4 2.9 2.8 2.6
RORWA 4.2 2.8 4.2 5.0 4.7 4.4
15
Notes
Dealing (91-22) 6836 1111 [email protected]
Key to Ratings Stocks:

BUY: 15%+; HOLD: -5% to 15%; SELL: -5% and below.
IDBI Capital Markets & Securities Ltd.

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16
Analyst Disclosures
I, Bunty Chawla, hereby certify that the views expressed in this report accurately reflect my personal views about the subject companies and / or securities. I also certify that no part of my compensation was, is or will be directly or indirectly related to the specific
recommendations or views expressed in this report. Principally, I will be responsible for the preparation of this research report and have taken reasonable care to achieve and maintain independence and objectivity in making any recommendations herein.
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analysts cover. Our sales people, traders, and other professionals may provide oral or written market commentary or trading strategies to our clients that reflect opinions that are contrary to the opinions expressed herein, and our proprietary trading and investing businesses
may make investment decisions that are inconsistent with the recommendations expressed herein. In reviewing these materials, you should be aware that any or all of the foregoing, among other things, may give rise to real or potential conflicts of interest. Directors of IDBI
Capital or its associates may have interest in the Companies under recommendation in this report either as Director or shareholder. Additionally, other important information regarding our relationships with the company or companies that are the subject of this material is
provided herein. This material should not be construed as an offer to sell or the solicitation of an offer to buy any security in any jurisdiction where such an offer or solicitation would be illegal. We are not soliciting any action based on this material. It is for the general
information of clients of IDBI Capital. It does not constitute a personal recommendation or take into account the particular investment objectives, financial situations, or needs of individual clients. Before acting on any advice or recommendation in this material, clients should
consider whether it is suitable for their particular circumstances and, if necessary, seek professional advice. The price and value of the investments referred to in this material and the income from them may go down as well as up, and investors may realize losses on any
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Except to the extent to which the report refers to the website of IDBI Capital, IDBI Capital states that it has not reviewed the linked site and takes no responsibility for the content contained in such other websites. Accessing such websites shall be at recipient's own risk. IDBI
Capital encourages the practice of giving independent opinion in research report preparation by the analyst and thus strives to minimize the conflict in preparation of research report. Accordingly, neither IDBI Capital nor Research Analysts have any material conflict of interest at
the time of publication of this report. We offer our research services to primarily institutional investors and their employees, directors, fund managers, advisors who are registered with us. The Research Analyst has not served as an officer, director or employee of Subject
Company. We or our associates may have received compensation from the subject company in the past 12 months. We or our associates may have managed or co-managed public offering of securities for the subject company in the past 12 months. We or our associates may
have received compensation for investment banking or merchant banking or brokerage services from the subject company in the past 12 months. We or our associates may have received any compensation for products or services other than investment banking or merchant
banking or brokerage services from the subject company in the past 12 months. We or our associates may have received any compensation or other benefits from the Subject Company or third party in connection with the research report. Research Analyst or his/her relative’s
may have financial interest in the subject company. IDBI Capital or its associates may have financial interest in the subject company. Research Analyst or his/her relatives does not have actual/beneficial ownership of 1% or more securities of the subject company at the end of
the month immediately preceding the date of publication of Research Report. IDBI Capital or its associates may have actual/beneficial ownership of 1% or more securities of the subject company at the end of the month immediately preceding the date of publication of Research
Report. The Subject Company may have been a client during twelve months preceding the date of distribution of the research report. Price history of the daily closing price of the securities covered in this note is available at www.bseindia.com; www.nseindia.com and
www.economictimes.indiatimes.com/markets/stocks/stock-quotes.
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Q3FY24 Result Review

TP Rs.535 Key Stock Data

Conference Call Highlights

Exhibit 1: Quarterly Snapshot (Rs mn)

Year-end: March Q3FY24 Q3FY23 Q2FY24 YoY (%) QoQ (%)

Exhibit 2: ROE Decomposition

Exhibit 3: Figure: One-year forward P/BV (FY14-19)

Exhibit 4: Figure: One-year forward P/BV (FY15-24)

Source: Company; IDBI Capital Research

Exhibit 5: Loan book growth continued to improve YoY

Exhibit 6: Disbursals growth declined during the Quarter

Exhibit 7: Loan Book Composition by Borrower Type

Exhibit 8: Net Interest margins moderated sequentially

Exhibit 9: Asset quality witnessed improvement QoQ

Exhibit 10: Borrowings notched up on a sequential basis

Profit & Loss Account (Rs mn)

Year-end: March FY21 FY22 FY23 FY24E FY25E FY26E

Balance Sheet (Rs mn)

Year-end: March FY21 FY22 FY23 FY24E FY25E FY26E

Cash 4,550 6,077 4,544 4,019 4,502 5,132

Financial Ratios (%)

Year-end: March FY21 FY22 FY23 FY24E FY25E FY26E

Dealing (91-22) 6836 1111 [email protected]

Key to Ratings Stocks:

IDBI Capital Markets & Securities Ltd.

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