# 1. Financial Performance ## A. Key Figures * **Disbursements:** **₹2,000+ Cr** Q1 FY'26 (+9%) * **Approvals:** **2,060** (+6%) · **Approval-to-Disbursement Ratio:** **98%** * **Cost-to-Income Ratio:** **~18%** projected FY'26 · **19%** projected FY'27 * **Dividend Payout Ratio:** **18–20%** targeted (vs. ~18% prior year) ## B. Revenue & Disbursements * **Record Start to FY'26:** Disbursements achieved a quarterly milestone with strong double-digit growth, supported by robust approval growth and near-perfect conversion efficiency. * **Regional Divergence:** East zone delivered strong rebound with **over 40% growth**, while Telangana remained in decline and Karnataka showed mixed trends—flattish volumes despite **30% disbursement growth**, constrained by e-khata delays until mid-2025. * **Volume Stability:** Annual home loan contract onboarding remains stable at **~50,000**, reflecting consistent origination capacity despite regional headwinds. * **Seasonal Recovery Confirmed:** April disbursements were below trend but **recovery in May–June** aligns with historical seasonality, supporting full-quarter strength. ## C. Profitability & Margins * **Margin Expansion Ahead of Guidance:** Net interest margin surged to **64%**, significantly above prior guidance, driven by yield optimization and cost discipline. * **Cost Outlook Moderates:** Cost-to-income ratio expected to stabilize this year but will rise slightly next year due to **1% salary hike impact**, with recurring employee costs fixed at **₹36–37 Cr/quarter**. ## D. Cash Flow & Funding * **Disciplined Capital Return:** Dividend payout ratio maintained in line with prior year, signaling stable shareholder returns amid growth reinvestment. --- # 2. Loan Book & Asset Quality ## A. Key Figures * **Delinquency Reduction:** **₹280 Cr** reduction QoQ (vs. +₹360 Cr increase YoY) * **Credit Cost Guidance:** **15 bps** (prior year: 13 bps; ~₹75 Cr total) * **AUM Growth Outlook:** **12%–13%** growth expected, with **₹5,000 Cr** AUM addition from ₹10,500 Cr disbursements * **LTV Ratio:** **80%** of project cost, **60%** against market value ## B. Delinquency Trends * **Broad-Based Credit Improvement:** Delinquency fell sharply QoQ—fastest decline in five quarters—driven by stabilization in Telangana and improved customer sentiment post-demolition cessation. * **Telangana Recovery on Hold:** Despite structural improvements, no meaningful turnaround observed in Q1; recovery remains gradual with **over 80% of customers having CIBIL >700**, supporting long-term resilience. * **Rundown Dynamics:** Annualized loan rundown of **15% to 5%** is primarily due to part-payments (**~8%**) and amortization (**<4%**), with only **~4%** from full closures, indicating sticky book retention. ## C. NPA Levels & Provisioning * **Intentional NPA Reclassification:** Sequential NPA increase includes **₹90 Cr** from 96 sticky accounts moved to Stage 3 for active recovery—proactively managed under ECL model with **no further provisioning expected**. * **Path to NPA Reduction:** NPAs expected to decline to **~₹340 Cr** by year-end (**~₹38 Cr** reduction), enabling potential **provision release in H2**, mirroring last year’s **₹10 Cr** reversal in Q4. * **Cost Impact Transitory:** One-time **₹5 Cr** actuarial cost from salary revision inflated cost-to-income in Q1; non-recurring and expected to normalize. ## D. AUM Growth Drivers * **Disbursement-Led Expansion:** AUM growth outlook of **12%–13%** underpinned by **₹10,500 Cr** disbursement pipeline, signaling strong demand and execution capacity. --- # 3. Funding & Cost of Capital ## A. Key Figures * **Funding Mix:** **17%** from NHB · **80%** of bank loans linked to repo rate * **Rate Pass-Through:** **25 bps** reduction passed to customers (10 bps in May, 15 bps in July) * 67% of loans on annual reset · 3% on quarterly · 1.3% fixed-rate ## B. Borrowing Cost Trends * **Significant Cost Relief Ahead:** Borrowing costs set to decline further as **INR 3,000 Cr** of term loans absorb delayed **50 bps cut**, with full benefit expected by September–December. * **Incremental Funding Cheaper:** New borrowings secured at sharply lower rates—**sub-6% on CPs** and **≤2.5% on bank loans**—driving down overall cost of funds. * **NHB Rate Uncertainty Persists:** Despite **15–17% of funding** sourced from NHB, no PLR cut has been implemented; future reductions remain contingent on regulator action. ## C. Funding Mix & Sources * **NCD Market Reopening Soon:** Company expects to resume **NCD issuances post-August** under new shareholder-approved limit, targeting lower-cost funding than current bank alternatives. * **Co-Lending Not Viable with Banks:** Structural misalignment prevents bank partnerships; exploration limited to smaller originators willing to cede 80% exposure. * **Self-Reliant Funding Model:** No policy yet on DA or portfolio buying; focus remains on organic funding while resolving IT and operational constraints. ## D. Rate Pass-Through * **Proactive Customer Pass-Through:** Among select HFCs, company has fully passed on **25 bps benefit** to all customers, enhancing credibility and competitive positioning. * **Margin Tailwinds from Reset Lag:** Despite passing on cuts, **67% annual reset base** creates temporary spread expansion as liability-side benefits flow faster than asset-side resets. * **Limited Customer Migration to Shorter Resets:** Only **5 percentage point decline** in annual reset users despite 100 bps repo cut, indicating inertia; management expects gradual shift ahead. --- # 4. Branch & Team Expansion ## A. Key Figures * **Branch Openings:** **29** net new in past two years · **15** planned by September 30 * **Total Branch Count:** **234** as of March 31 → targeting **300 by FY '28** * **Sales Team Size:** Expanded from **~39 to 100 members** (+63 hires) effective July 1 * **APF Proposals:** **80 added last year**, with continued additions in current year ## B. Branch Network Growth * **Expansion Driving Costs:** Rising rent and taxes reflect recent network build-out, including 25 branches, six zonal offices, and corporate office expansion. * **Front-Loaded Growth Strategy:** Aggressive branch rollout front-loaded to September 30 to accelerate revenue ramp-up in current fiscal. * **Revenue Contribution Lag:** New FY '25 branches contributed minimally due to late launch but expected to add meaningfully in FY '26. * **Regional Focus with Scalability:** Expansion concentrated in **West and North geographies**, targeting high-potential states without exclusive product or state bias. ## C. Sales Team Scaling * **Direct Hiring for Stability:** Company avoids high-attrition DSP/DME model by employing sales staff directly at **entry-level salaries of ₹35,000–₹38,000**, ensuring lower turnover. * **Capacity Build Precedes Volume:** Sales team tripled to **100 members**, with early signs of traction as direct team contribution rose to **5% this quarter** from 4% YoY. * **Growth Supported by Structured Initiatives:** Expansion backed by APF pipeline growth and upcoming CRM integration to improve tracking of DSA-originated leads. --- # 5. Product & Segment Mix ## A. Key Figures * **Disbursement Growth:** **>40%** North zone · **>35%** Tamil Nadu · **15%** West zone (YoY, Q1) * **Loan Portfolio Mix:** **74%** housing-related (ex-CRE) * **Non-Housing Target:** Increase from **11%** (FY23) to **20%** by FY28 * **Average Ticket Size:** **₹24 L** housing loans · **₹14 L** non-housing loans * **DSA Contribution:** Declined to **79%** (from 85% in Q4 FY23) * **Sales Team Contribution:** **5%** of incremental business this quarter ## B. Housing vs Non-Housing * **Regional Momentum:** Strong double-digit disbursement growth in North and Tamil Nadu zones reflects robust regional demand and execution strength. * **Strategic Portfolio Shift:** Deliberate pivot from sub-₹15L affordable housing to the ₹20–30L segment amid supply constraints, with expectations of recovery in coming quarters. * **Retail-Only Focus:** No exposure to developer financing; maintains pure-play retail housing finance model with **zero corporate loans**. * **Diversification Roadmap:** Clear strategic intent to expand non-housing segment to **20% of portfolio by FY28**, reducing concentration risk in housing. ## C. Ticket Size Trends * **Growth Driven by Ticket Size:** AUM expansion primarily fueled by rising average ticket size (now ₹24–25L), not volume growth, indicating premiumization trend. * **Market Positioning Advantage:** Higher ticket sizes insulate the company from direct competition with large PSU banks in mass-market segments. * **Channel Evolution:** Declining DSA reliance reflects successful scaling of **direct sales channel**, not channel withdrawal, supporting better control and margins. * **Shift Toward High-Ticket Loans:** Increasing AUM share in loans above ₹30L suggests growing demand in premium segments and potential saturation in lower-ticket markets. --- # 6. Regulatory & Credit Risks ## A. Key Figures * **E-khata Registration Cost:** **INR 45** via Seva Kendras * **PMAY 0 Subsidy Claims Received:** **7** (from 70 eligible applications) * **CRE Risk Weightage:** **100%** for qualifying residential properties ## B. E-khata & Compliance * **Regulatory Resolution:** Karnataka government’s move to allow **B-khata to A-khata conversion** removes a major operational barrier, enabling resumption of customer onboarding and SARFAESI actions. * **Digital Enablement:** State has launched a **self-help app** and publicized **e-khata registration via Seva Kendras**, signaling strong push for formalization. * **Past Recovery Impact:** E-khata issues previously caused **nearly INR5 crores in lost recoveries**, highlighting material financial impact of regulatory delays. * **PMAY 0 Adoption Weak:** Scheme uptake remains low due to **restrictive eligibility**, **complex data requirements**, and **non-upfront subsidy disbursement**, dampening affordable housing momentum. * **Affordable Housing Slowdown:** Sector-wide deceleration observed, especially in high-supply PMAY states like **Gujarat, Maharashtra, Tamil Nadu, Karnataka, and Madhya Pradesh**. ## C. CRE Risk Weightage * **Target Segment Protection:** Can Fin Homes faces **limited competition from PSU banks**, which focus on higher-ticket loans, insulating its sub-₹25 lakh core market. * **CRE Classification Rules:** Residential properties are classified as CRE—and subject to **100% risk weightage**—if they are a third unit or have **income-generating features** (e.g., rented floors). * **No Developer Finance Exposure:** Company avoids developer lending; **APF project sales treated as housing** unless CRE criteria apply. * **Rate Pressure Rising:** Increasing customer inquiries for **rate reductions and balance transfers** reflect mounting repricing pressure, though actual attrition remains customer-driven, not bank-led. --- # 7. Guidance & Outlook ## A. Key Figures * **Disbursement Target (FY '26):** **₹10,500 Cr** (+12%–13%) * **Q2 Disbursement Guidance:** **₹2,500–2,600 Cr** (conservative to internal target) * NIM & Spread: 3.5% & 2.5% · ROA: 2.2% · ROE: 17% * **AUM Growth Outlook:** **~15%** next fiscal (conditional on disbursement trends and IP transformation) ## B. Disbursement Trajectory * **Accelerating Run Rate:** Disbursements expected to ramp from ~₹2,000 Cr in Q1 to **₹2,500–2,600 Cr** in Q2, signaling strong sequential momentum. * **Regional Strength:** Improving performance in **Karnataka and other zones** underpinning confidence in full-year target. * **Seasonal Headwinds:** April typically sees a significant drop in disbursements due to seasonality, but recovery is on track. ## C. Margin & Return Targets * **Stable Margin Profile:** NIM and spread firmly guided at **5%**, reflecting disciplined pricing and funding management. * **Return Targets Unchanged:** ROA and ROE targets of **2%** and **17%** remain intact, indicating confidence in capital efficiency.