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00:00Today in focus is Fed Bank Financial Services and to break down the Q4 numbers for Fed Bank

00:07Financial Services, we have with us Mr. Anil Kothori, MD and CEO of Fed Bank Financial

00:12Services who joins us now.

00:13Welcome to the show, sir.

00:16Right.

00:17My first question to you would be, you know, interest expenses, you know, are coming down

00:22sequentially.

00:23What is happening there if you can break that down for us?

00:28So it's quite simple.

00:30The previous quarter we had an IPO, we raised 600 crores of primary capital, that money

00:35has come in.

00:36Right.

00:37So as a consequence, we've had to borrow less this year.

00:40So that's why the interest expense has come down.

00:43We've also had over 500 crore rupees of our gold loan book, which has shifted to co-lending.

00:50So therefore, that has also reduced the amount that we will need to borrow.

00:53So that's why the interest expense has come down in the quarter.

00:57Okay.

00:58And with respect to your margins, what are your margins currently and, you know, going

01:03forward for FY25, where would they be?

01:09We make revenues of upwards of 10% on our assets.

01:15And we are comfortable guiding that we will maintain these kind of margins in the foreseeable

01:21future.

01:22So up 10% of your revenues, right?

01:25That's what your revenues are at present, and you maintain that going forward for FY25?

01:30Yes.

01:31And beyond FY25, if you have some guidance?

01:35Beyond FY25, we will build to, you know, once we get to FY25.

01:39All right.

01:40Okay.

01:41And with respect to your credit cost, going forward in FY25, what is the kind of numbers

01:46you're looking at?

01:49So we're currently at a benign end of the credit cycle.

01:54And we believe that on a through the cycle basis, our credit cost should be something

01:57like 80 basis points.

02:00This year, we've done marginally better than that.

02:02And next year, we should do 80 basis points or better is what it's looking like right

02:07now.

02:08Okay, I take your point.

02:09And in terms of loan growth, you know, what is the kind of loan growth that you will be

02:14achieving by the end of FY25 then?

02:19We are architected to deliver 25% compounded growth every year.

02:25And based on opportunities and tailwinds, we will, you know, try and better that in

02:31some quarters.

02:32Understood.

02:33And, you know, with respect to your CAGR over the last five years, from what we've seen,

02:40it's you know, 40% plus, but going forward, you know, as you grow on a higher base, what

02:47are the kinds of CAGR that you're looking at, let's say, in the next five years then?

02:52So like I said, we are happy to grow at 25%.

02:56We are focused on the quality of the growth, the revenue quality, the credit quality of

03:01the growth, the kind of loans that we originate, and we will not chase growth for its own sake.

03:07However, given the low base that we are starting on, growth rates will be higher in the initial

03:12years.

03:13And, you know, we'll come down with the passage of time.

03:16Understood.

03:17And so with respect to your loan, gold loans, we've seen that, you know, they're growing

03:21at, you know, 32% is what you've witnessed this time.

03:26You know, I just want to understand as to, you know, what is exactly working for you,

03:30which is not working for the others.

03:35There are a few things that we do differently in Fedfina.

03:40First up, we focus on the absolute quantum of gold that we hold in our vaults.

03:47That has registered a sharp increase in the previous year.

03:50We now have over nine and a half tons of gold in our vaults.

03:54There have been other factors which have helped us, such as the increase in price of gold.

03:59The last quarter, the quarter gone by saw prices of gold go up quite substantially.

04:05So that was the second factor that aided our AUM.

04:09The third is the fact that seasonally, this tends to be a busier quarter and people look

04:17to leverage their gold for working capital.

04:20And that's the third thing that we saw.

04:23So all of this is not over yet.

04:26And the initial readings of this quarter are that the price of gold is carrying to this

04:31quarter and, you know, we should continue to see reasonably good growth in this quarter

04:37also.

04:38Understood.

04:39And in terms of your mix between, you know, your mortgage, your gold loan and your business

04:42loan, what is the kind of mix that you're seeing, you know, going forward?

04:50With the passage of time, the proportion of small mortgages in our portfolio will continue

04:54to increase.

04:56We are at 29% of our on-book assets as small mortgage in the quarter ended March 24.

05:03And that number will go up by about, let's say, 4 percentage points every year.

05:09That's because this product has the highest behavioral tenor of about 8 years compared

05:14with all other products.

05:16So that's why it will dominate our balance sheet in the foreseeable future.

05:21Understood.

05:22I take your point.

05:23And in terms of, you know, cost to income, what is the scope for it to come off in the

05:30near future?

05:31You know, two years down the line, what is the kind of trajectory that you're seeing?

05:37Our cost to income is a function of the investment that we made in the platform of our growth.

05:44We keep opening branches.

05:46Now, in future, what will happen is that the revenue that we will realize from our assets

05:52growing in these branches will outpace our investment in branches and outpace the growth

05:59in cost of our existing branches.

06:01So which is why our cost to income should moderate from here on over the next couple

06:07of years.

06:08I take your point.

06:09And in terms of, you know, you scaling significantly, so is there a scope that your ROAs will go

06:16beyond that 2.5% mark then?

06:20I think they should.

06:21And this actually is related to the previous question.

06:25You know, our cost on a per branch basis will stay reasonably constant, but the AUM

06:29per branch will increase.

06:31So this will take up our ROAs from the current level of 2.5%.

06:38Add to this will be the tailwind of declining interest rates as and when that happens and

06:44that should help take up our ROAs.

06:47Understood.

06:48And in terms of your AUM, what is the kind of number that you're targeting by the end

06:52of FY25?

06:53That will be a 25% growth over the FY24 number.

06:59So that's the guidance.

07:01Yeah.

07:02Okay.

07:03Well, Mr. Kathuria, well, thank you so much for taking our time and speaking with us at

07:07NDTV Profit.

07:10Thank you for having me here.

What's Working For Fedbank Financial Services? | NDTV Profit

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