SRG Housing Finance Ltd Q2 FY2026 Concall Summary

Key Takeaways

• Expansion costs easing, but NIM and yield under pressure: Cost-to-income ratio is set to fall 2–5% over 2–3 quarters as the branch build-out matures, while blended yield dropped to 9.7% due to a regulatory shift toward lower-rate housing loans.
• AUM guidance cut, with a structural reason: The FY26 AUM target was revised down from ~₹1,000 crores to ₹970 crores because NHB reduced the permissible LAP mix, and housing loan disbursements are inherently piecemeal.
• Rating upgrade unlocks the next leg: A move to triple B plus positive and a clear path to an A rating once AUM crosses ₹1,000 crores should lower banks' risk weightage and widen mutual fund access, reducing cost of funds.
• Asset quality is drifting, not alarming: 0–30 DPD rose from 3.26% to 4.65% YoY; management calls it normal fluctuation and expects GNPA/NNPA to stay around current levels.
• What to watch next quarter: Whether the promised ₹150 crore quarterly disbursement run-rate materializes, the pace of cost-to-income reduction, and any further DPD movement in the new states.

The NHB-Mandated Portfolio Reshuffle

• The 70:30 rule is reshaping the loan book: NHB requires a 70% housing loan and 30% LAP mix, forcing a deliberate shift away from higher-yielding LAP.
• Blended yield fell as a direct consequence: Yield declined from 11% to 9.7% because housing loans carry lower rates (16–18%) than LAP; management expects yield to settle around 9–9.5% and considers this acceptable because branch AUM and portfolio scale will drive absolute profit.
• Disbursement mechanics compound the AUM drag: Housing loan sanctions are not disbursed in a lump sum: a ₹50 crore loan may see only ₹15–20 crore actually flow out in pieces, which is why the AUM guidance was trimmed even beyond the LAP mix effect.

Vinod Kumar Jain: "In housing loan, the rate is less, LAP rate is more. If we reduce the portion, the housing loan will increase. So the rate difference comes. But it is okay. We have a branch setup. The Branch's AUM will increase, branch portfolio will increase. Things will increase. So even with the lesser rate the profit will be good and the costing also will be less."

Branch Network: Consolidation After the Sprint

• Expansion phase is ending: The company added branches aggressively over two years and will reach 100 by year-end, then pause new branch openings for 2–3 years to focus on deepening AUM per branch.
• AUM per branch target is ambitious: Management aims for ~₹25 crore per branch, which would take the total book to ₹2,000–2,500 crore from the current base, implying a multi-year compounding exercise.
• New states are performing, with Karnataka leading: Maharashtra, Karnataka, and Andhra Pradesh show good results; Karnataka benefits from higher ticket sizes (₹20–25 lakh) and a more educated customer base that requires less hand-holding.
• Rajasthan's share has halved by design: Rajasthan fell from 60–70% of business historically to 40% this quarter as other states ramped up, and management will not add Rajasthan branches until the A rating is secured because rating agencies expect a multi-state footprint.
• Cost-to-income relief is coming, but not committed: The ratio will fall 2–5% over 2–3 quarters as the higher team manpower settles; management explicitly declined to commit to a specific target like 55% or below 60%, noting that manpower cost rises with the book.

Funding & the Rating Catalyst

• Rating trajectory is the central unlock: The company was upgraded to triple B plus positive and is in active discussions to move to an A rating once AUM crosses ₹1,000 crores.
• An A rating changes the liability-side math: Banks' risk weightage would drop from 150% to 75% or 50%, making bank lending easier and cheaper; mutual fund interest would also broaden materially.
• NCD access is already improving: The company raised a ₹50 crore NCD from a mutual fund in Q2 and another ₹26 crore this quarter, with 3–5 year tenures now available, a good fit for a housing finance company.
• No equity dilution until AUM reaches ₹1,500–2,000 crore: Management will raise equity only when needed, not opportunistically based on share price, citing discipline as the governing principle.

Vinod Kumar Jain: "If we dilute equity before time, then it becomes difficult to run the company. Our focus is not on the rate of the share market. When do we need to dilute equity and when do we need funds we will do it according to that."

Asset Quality: Drift Without Alarm

• Early-stage stress is ticking up: 0–30 DPD rose from 3.26% in Q2 FY25 to 4.65% this quarter; management attributes this to normal 0.5% fluctuation and says there is no specific stress driver.
• New states are not the problem: DPD in Maharashtra, Karnataka, and Andhra Pradesh is limited to 5–10 cases, not a systemic issue.
• GNPA and NNPA expected to stay range-bound: Management sees no big improvement or deterioration ahead, citing the rural sector's historical stability where 1% up or down is normal.
• Balance transfers are a two-way street: The company transfers out 10–12% of its book while receiving 20% inflows from other companies, framing it as a continuous industry practice rather than a risk signal.

Vinod Kumar Jain: "If I put everything, then who will ask? Okay. It is right to take one or two things."

Digital & Operational Levers

• Srajan platform is the operational backbone: The company runs 100% on its digital platform for agreements and operations; credit underwriting now includes an auto system with geotagging and video calls for faster decisions, though the underlying credit team visit process remains unchanged.
• No metrics were shared on digital adoption: When asked for the percentage of new enquiries from the app versus offline, management reiterated that everything runs on Srajan but provided no specific insights or funnel data.

Guidance & Commitments

Key Metrics