Repco Home Finance Q2 Review - PAT Beat Aided By Lower Credit Costs; Asset Quality Stable: Motilal Oswal

Motilal Oswal Report

Repco Home Finance Ltd.’s profit after tax fell 17% YoY, but grew ~15% QoQ to Rs 712 million (19% beat), led by lower annualised credit costs of ~60 basis points (previous quarter: 0.8%/previous year: 0.6%) in Q2 FY23.

Net interest income grew 3% QoQ to Rs 1.4 billion (inline). Provisions, at Rs 188 million, were below our estimate of Rs 300 million. Pre-provision operating profit improved ~6% QoQ to Rs 1.1 billion (inline).

Gross non-performing asset (including the Reserve Bank of India NPA circular) was largely stable QoQ at 6.5% (previous quarter: 6.4%).

Repco raised the provision coverage ratio on stage-III loans by ~6% QoQ to ~43%. Expected credit loss/exposure at default increased ~30 bps QoQ to 4.3%.

The new management team, led by Mr. Swaminathan as the Managing Director/Chief Executive Officer, offers a different strategy and a new ray of hope, and we are indeed seeing signs of execution and turnaround.

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