TRUNSEFebruary 19, 2024

TruCap Finance Limited

5,565words

69turns

8analyst exchanges

0executives

Key numbers — 40 extracted

30%

Thank you. Welcome to our Earnings Call today. In the 3rd Quarter of Fiscal 2024, we reported a 30% quarter-on-quarter growth in pre-tax profits to Rs. 35 million, driven by robust disbursements of

Rs. 35 million

the 3rd Quarter of Fiscal 2024, we reported a 30% quarter-on-quarter growth in pre-tax profits to Rs. 35 million, driven by robust disbursements of Rs. 3 billion, up from Rs. 2.95 billion in the previous quarte

Rs. 3 billion

quarter-on-quarter growth in pre-tax profits to Rs. 35 million, driven by robust disbursements of Rs. 3 billion, up from Rs. 2.95 billion in the previous quarter and Rs. 1.75 billion a year ago. For the first

Rs. 2.95 billion

th in pre-tax profits to Rs. 35 million, driven by robust disbursements of Rs. 3 billion, up from Rs. 2.95 billion in the previous quarter and Rs. 1.75 billion a year ago. For the first nine months of the year, d

Rs. 1.75 billion

en by robust disbursements of Rs. 3 billion, up from Rs. 2.95 billion in the previous quarter and Rs. 1.75 billion a year ago. For the first nine months of the year, disbursements have been Rs. 8.62 billion, up f

Rs. 8.62 billion

r and Rs. 1.75 billion a year ago. For the first nine months of the year, disbursements have been Rs. 8.62 billion, up from Rs. 4.9 billion a year ago, representing increasing scale and volume, driven by expansio

Rs. 4.9 billion

ear ago. For the first nine months of the year, disbursements have been Rs. 8.62 billion, up from Rs. 4.9 billion a year ago, representing increasing scale and volume, driven by expansion of our distribution net

Rs. 8.62 billion

ank, Central Bank of India and UGRO Capital. This addition of partners has enabled us to disburse Rs. 8.62 billion in the first nine months of the year, of which these partners have contributed Rs. 3.75 billion.

Rs. 3.75 billion

e Rs. 8.62 billion in the first nine months of the year, of which these partners have contributed Rs. 3.75 billion. This means that Rs. 4.87 billion of disbursements has happened through our own resources, for

Rs. 4.87 billion

ne months of the year, of which these partners have contributed Rs. 3.75 billion. This means that Rs. 4.87 billion of disbursements has happened through our own resources, for which we have raised debt of Rs. 2.9

Rs. 2.98 billion

billion of disbursements has happened through our own resources, for which we have raised debt of Rs. 2.98 billion, while having repaid Rs. 2.2 billion of debt in the first nine months of the year. Net debt growt

Rs. 2.2 billion

through our own resources, for which we have raised debt of Rs. 2.98 billion, while having repaid Rs. 2.2 billion of debt in the first nine months of the year. Net debt growth of Rs. 0.77 billion in the first ni

Guidance — 20 items

Rohan Juneja

opening

“Almost 47% of our branches are profit making on a cumulative basis as of December 2023, and we expect this number to go up to 65% in the next few months.”

Nikhil Arora

“So, can we expect a similar range of growth in the coming quarter?”

Rohan Juneja

“We would all like to give guidance on profit growth going forward.”

Rohan Juneja

“I think there is good enough muscle in the distribution model that we have built today, and hopefully we will be able to keep up the performance.”

Rohan Juneja

“But we would not like to give any formal guidance on percentage numbers for profit growth or revenue growth.”

Neha Jain

“This is regarding the plan to introduce fee income, so what is the target for that?”

Rohan Juneja

“Fee income as a percentage of total income will be in the 20% to 25% as a percentage of total income.”

Rohan Juneja

“So, going forward as well you should expect a consistent run rate, like you’re seeing right now.”

Rohan Juneja

“So, both of them should do well going forward and I think, you know, proof lies in eating the pudding, so we should see that in the next few quarters.”

Neha Jain

“So, since we see that co-lending has been increasing, so how do we expect that, like where are we comfortable, what is our comfortable debt level over there?”

Risks & concerns — 4 flagged

So, believe it or not, to tie up with bank for a potential co- lending partnership is a very long process, because not just you have to agree on policy, product and process, you have to agree on risk mitigation, collection, reconciliation, integration.

— Rohan Juneja

There has to be a lot of comfort on the side of the bank, their risk management process, their underwriting process with the NBFC.

— Rohan Juneja

Sir, just to touch upon our lending against property, since that is on the decline, have we completely exited?

— Rohan Mehta

So, what happens in the industry often times, there is a significant drop off from lead to login, either because the customer journey is not that easy or either the kind of documentation that is required by the lender is too difficult for the customer to give you, because of which the customer becomes not interested.

— Rohan Juneja

Q&A — 8 exchanges

Hello. Good morning, sir and congratulations on a good set of numbers. Sir, I just want to understand if you know the banks are moving more into the gold loan space, so I mean will this affect the market share of NBFCs? I just want to have an idea.

Rohan Juneja

So, what we have seen, Nikhil, is that banks are very willing to collaborate with NBFCs like us and for us that’s a win-win. The reason being that the customer segment that we cater to is very different from what the banks cater towards. So, it has been a collaboration model and that’s evident with the co-lending partnerships that we have struck, be it with an HDFC Bank, DCB bank or with Central Bank with India, and also with Shivalik Small Finance Bank. So, the customer segmentation is slightly different for sure, the services offered are different, and obviously the rates and other charges a

Congratulations on the good set of numbers. I just had two questions. This is regarding the plan to introduce fee income, so what is the target for that? And what is the total amount of AUM that it will constitute?

Rohan Juneja

So, fee income, Neha, does not contribute to AUM. Fee income as a percentage of total income will be in the 20% to 25% as a percentage of total income. We have several components that go into fee income, but the idea is a good amount of fee income should pay for the Opex. That’s the way we like to try and that’s the way we’re looking to build the model. But it doesn’t go into AUM. And how soon we see that in action? I think we’re getting good traction there. So, going forward as well you should expect a consistent run rate, like you’re seeing right now. The other change, I mean not the other c

A very good morning, sir.

Rohan Juneja

Good morning. Yeah. Sir, I just want to understand, as we have tied up with this UGRO Capital, so what is the contribution for the combined OU? So, UGRO has given us a co-lending line for the business loan product. The contribution to the AUM over there is just under Rs. 40 crores. Okay. Any guidance for the revenue, revenue guidance for next two years? So, I think we will be in a better position to give some form of formal guidance with the end of fiscal year 2024 results, and we can potentially do that for fiscal 2025 and 2026, but not now, at the end of fiscal 2024 we will look to try and d

So, what we’re doing on product is, you know, if you just break down our portfolio, 65% of the AUM comprises of the gold loan product. In the gold loan product, we are not looking to do anything new. The idea over here is to continue to enhance scale, which will bring in more profitability and that will come in now through, obviously, additional disbursements with co- learning partners and also enhancing productivity of the branches. So, that’s on the gold. On the business owned product, which is about 34% of AUM, there we have introduced certain other nuances within business loans. So, for in

Aniket Redko

Okay. Thanks. That’s it from my side please. Thank you.

Hi, sir. Good morning. I have two questions. So, recently I’ve noticed over the last two quarters, portion of the portfolio which were allocated to LAAS, there has been a significant rise from 24% to 34%. So, do you anticipate it becoming the primary segment of the portfolio in the near future?

Rohan Juneja

So, LAAS, which is Lending-as-a-Service as we call it, is the business that we do with these co- lending partners. We started this business in August 2021 with one partner and then the next partner we added was only in December 2022, which was Shivalik Small Finance Bank after Central Bank of India and since then, we have added three other partners which are UGRO Capital, HDFC Bank and DCB bank. So, as these partners have gotten added or co-lending relationships, what we call Lending-as-a-Service, obviously, the portfolio will expand because there’s a certain volume commitment that we have giv

Yeah. Thank you. Good morning, sir. Congrats on a good quarter. Sir, I wanted to ask if you would look to increase the focus on unsecured loans since the yields are relatively higher in that section.

Rohan Juneja

So, there continues to remain a focus on both the products, the secure and the unsecured product. As a percentage of disbursement, today the secured product is between 80% to 85% of quarterly disbursements, while the unsecured product is between 15% to 20%. In terms of AUM buildup, the secured product takes longer for us. The reason being, it’s a gold-backed product, and gold the run-off is faster. So, going forward, I think we will continue to see the relatively same proportions for both the products because the AUM build up for the secured product for us takes longer, given the fact that it’

Hello. Hi sir, I just wanted to ask, what is the Opex of each branch and do we see any improvement in the quarters coming ahead?

Rohan Juneja

The Opex without any Capex on per branch basis is roughly about Rs. 1.5 lakh a month. You have to remember this is not a traditional business loan branch. This is a traditional gold loan branch where you can now cross sell BL as well. So, for a traditional gold loan branch, our branch structure has four people per branch and then obviously the salaries, the petty cash, all the other expenses, that’s about Rs. 1.5 lakh a month and then if you’re going to cross sell the BL product, there’s an additional cost to that, because the sales people for both the products are different. You cannot have a

Thank you very much. We look forward to talking with everyone on the next quarter’s earnings call. Thank you. Have a good day.

Management

Speaking time

Rohan Juneja

Moderator

Rohan Mehta

Nikhil Arora

Neha Jain

Aniket Redko

Nihar Mehta

Harsh Sharma

Opening remarks

Rohan Juneja

Thank you. Welcome to our Earnings Call today. In the 3rd Quarter of Fiscal 2024, we reported a 30% quarter-on-quarter growth in pre-tax profits to Rs. 35 million, driven by robust disbursements of Rs. 3 billion, up from Rs. 2.95 billion in the previous quarter and Rs. 1.75 billion a year ago. For the first nine months of the year, disbursements have been Rs. 8.62 billion, up from Rs. 4.9 billion a year ago, representing increasing scale and volume, driven by expansion of our distribution network, coupled with addition of co-lending partners. To illustrate on both these important points further, number one, on capital allocation. We have expanded our suite of Lending-as-a-Service partners from one lender a year ago to five lenders today, which include HDFC Bank, DCB Bank, Shivalik Small Finance Bank, Central Bank of India and UGRO Capital. This addition of partners has enabled us to disburse Rs. 8.62 billion in the first nine months of the year, of which these partners have contributed

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