Fedbank Financial Services posts 25.12% growth in profit during Q2FY24

Fedbank Financial Services, the recently listed Non-Banking Financial Company (NBFC), posted a 25.12 per cent growth in net profit during the second quarter of FY 2024 to Rs 57.76 crore from Rs 46.16 crore recorded in Q2 FY 2023, aided by healthy growth in income and quarterly disbursements.

The Net Interest Income (NII) of the company rose by 29 per cent to Rs 207.30 crore from Rs 160.40 crore in the second quarter of the financial year 2023.

The quarterly disbursements of the company rose by nearly 28 per cent to Rs 2932.90 crore from Rs 2294 crore in the year-ago period. The gold loan business of the company accounted for nearly 68 per cent of the total disbursements at Rs 2007.3 crore, and the non-gold loan business was Rs 925.6 crore.

The Assets Under Management (AUM) increased by 37.54 per cent to Rs 10030.40 crore from Rs 7292.20 crore in the second quarter of FY 2023. AUM remained diversified across gold loan and non-gold loan business.

Speaking on the future growth of AUM, the management said that increasing branches, particularly for the gold lending business, and a rise in gold prices will fuel the growth of the business.

Speaking at the post-earnings call, Anil Kothuri, MD & CEO of Fedbank Financial Services, said, “As far as the non-gold loan business is concerned, we have the capacity that's already there. And our disbursements will keep increasing, and the AUM will keep increasing as a consequence.”

“Our endeavour is to ensure AUM growth between 25% - 30% by FY 2025,” Kothuri added.

The asset quality of the company continued to improve, with Gross Non-Performing Assets (GNPA) and Net Non-Performing Assets (NNPA) slipping to their lowest levels.

The GNPA was flat at 2.30 per cent compared to Q1 FY 2024, and NNPA also stayed flat at 1.80 per cent in the same time period.

The Net Interest Margin (NIM) was at 9.50 per cent from the year-ago period.

Speaking on the impact of the Reserve Bank of India’s decision to increase the risk weights on lending to NBFCs, the company is seeing a 20 basis points (bps) impact on the capital adequacy of the company,” said Kothuri.

The capital adequacy ratio in the quarter under review stood at 19.7 per cent.

Also, the management added that the company is in talks with a few banks who approached the company to increase the lending rate. The company estimates an impact of 25-50 bps on the entire loan book.

Meanwhile, the company has also started off with co-lending options, with the firm already partnering and operating with a large private bank and a foreign bank in the space.

The company was listed on the bourses on 30 November 2023, with a total IPO size of nearly Rs 1092 crore.