Earnings Call Transcript - XNSE:REPCOHOME 2026-11-06

Operator

Thank you. Ladies and gentlemen, good day and welcome to Repco Home Finance Ltd. Q2 FY27 Earnings Call, hosted by Yes Securities Ltd. Please note all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions following the conclusion of the management's opening remarks. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajiv Mehta from Yes Securities. Thank you and over to you.

Rajiv Mehta, Head of Investor Relations

Yeah, hi, good afternoon. Thank you, everyone, for joining us, and thank you to the management for giving us this opportunity to host the second quarter earnings call. We have with us Mr. T. Karuna Karan, MD and CEO, Mr. B. Kanan, full-time director and chief development officer. Mr. M. Raja, Chief Business Officer. Mr. A. Palapandi, Chief Operating Officer. Mr. Ankush Tiwari, Company Secretary and Compliance Officer. And Ms. Shanti Shrikant, Chief Financial Officer. Mr. Karunakaran, sir, we'll start with his opening remarks and post which we'll open the floor for questions. So open to you, Mr. Karunakaran.

T. Karunakaran, CEO

Yeah, thank you, Mr. Rajiv. Good afternoon to everyone. And I'm extending warm welcome to this call to discuss our September 2026 performance and way forward. Thank you for joining. The detailed results are in the investor presentation on our website. So I'm not going to read every number. Before discussing the current quarter, I mean September 2026 performance, I would like to go back. I would like to recollect the efforts taken by the company to improve the business in terms of increase the disbursement, to increase the AVM, to reduce the NPA and other state assets. Technology side, we have revamped our technology side. Digitalizations, we have carried out. We have also implemented an entire digitalization program. Actually, we have carried out the digitalization program in two phases. Phase one consists of implementation of core application, and phase two consists of supporting applications. I mean, core applications we have implemented and mobile applications we have implemented. We have also integrated our software with other software like CSI and other civil etc to improve the turnaround time. Second thing, we have done a verticalization in our company. Earlier, Branched is responsible for all the activities, which is having its own limitations. We want to take this company to the next level, verticalization or specialization is required. We have done verticalization in our company. We have introduced separate vertical for sales, recovery, collections, operations, credit, and even surface management. Third, last two to three years, we opened almost approximately 50 branches across the country to reach out to people. This year, we want to open another 12 to 13 branches across the country. Majority of our branches will be in non-TN. These are the initiatives, a few initiatives we have taken in the last two to three years. The results are now, I mean, almost building a... A strong base of repo is completed. Now, our focus is growth and aggressive growth, which is savings from the disbursement number. If you look at our disbursement number since September 25, we crossed 1,000 crores disbursement per quarter, barring June 26 last quarter. Last quarter, we had a lot of, I mean, transfers and promotion exercise we carried out, which is likely affected our June 26 disbursements. And now all the transfers, what are the transfers we have put in first quarter, all the people are settled down in their places. They started to leaving the business. Disbursements are increasing. We have seen substantial improvement in asset quality in terms of production in NPA and stage two assets. As the end of September 2026, our AEM stood at 16,425 crores, which is almost up by 9.2% year-on-year basis. Our sanctions as the end of September for the off-year ended. I mean, for the quarter index, we did 1,359 crores, as against 1,205 crores, the corresponding year of previous year. Again, our disbursements, we have crossed a 1,000 crore mark. We have done a disbursement of 1,205 crores in September. This is on the business side. We have seen substantial improvement in the asset quality. Our gross NPA, as end of September 2026, stood at 396 crores as against 475 crores in last September. Our gross NPL stood at 2.4%. We have seen substantial improvement in stage 2 assets also. As end of the September, our stage 2 assets stood at 1,154 crores. As against 1,324 crores in the corresponding period of the previous year, our provision coverage ratio stood at 66 percent, our performance in NPA side on asset quality side on last, I It came in September, 2026. Our book remains well diversified. We have not seen any change in the salary, significant change in the salary and HL versus non-HL. Our book is well diversified. As end of the September, out of total book, Salary class accounted for almost 53.6%, and non-salaried account for 53.6%, and salaried accounted for 46.4%. The mix of home loan, possess home equity remain consistent. So, out of total AUM, 71% of our AUM is... Housing loans. Remaining is a non-HL. Of course, 29% is a non-HL. The entire EUM is retained. Right now, we don't have any exposure to builder loan. The average ticket size is incrementally, it's about 23 to 25 lakhs. And about overall book, it is about 14 lakhs. Almost 57% of the book is coming from TN. Remaining is from non-TN. We have taken steps to initiatives to improve the non-TN book. Going forward, I'm expecting books from other states will increase. This is coming to the foreign side. Last year, we started diversification in liability sites. We have done NCDs, CPs, and PTCs. Our borrowing cost, as end of September stood at, overall borrowing cost stood at 8.35. Out of total borrowings, almost 86% of the funding is Coming from banking system, it's, of course, not depends on one or two banks. It's spread across almost 19 to 20 banks. 7.2% of the funding is coming from National Housing Bank by way of refinance. For the current financial year, the National Housing Bank has sanctioned. 600 crores refinance. Out of 600 crores, Q1, we have taken 106 crores, and Q2, we have taken 125 crores. Remaining amount will be utilized based on our need. NCDs and PTCs accounted for almost 0.7% of total borrowings. Repco Bank funding is about 1%. During the Q2, we have raised 75 crore's funds through way of issuing commercial papers at the rate of 7.6%. We done a pass-through certificate also in September. It's a pass-through certificate. It's worth about 74 crores. The cost of funding of pass-through certificate is about 7.9 percentage. These are from the borrowing side. Coming to the profitability. Our cost of end, I already told you, RIM, stood at 8.35. Return on asset is about 11.83%. So we are maintaining a spread of 3.4%. Our benchmark rate, or otherwise we used to call the minimum lending rate, our minimum lending rate is about 9.9%. Depending upon the borrower's risk profile, the interest rate vary. The average yield, what we are getting from salary class customer, is about 11.25, and from non-salary class customer, is about 12.07%. The return, what we are getting from housing loan portfolio is about, average is about 11.07. We are getting a yield of about 13.32% from non-housing loans. These are the, our performance in spreads and Our NIM stood at about 5.44% as the end of September. Coming to the profit, our net profit for the quarter is about 116 crores, as against 114 crores in the previous quarter. Last September, our profit stood at close to 106%. ROE as end of September was about 2.9%. It's almost stable. Even June quarter also, it's about 2.9%. ROE is about 12.5%. We are having a strong capital adequacy ratio. Our capital adequacy ratio is about close to about 37 percent. We are having adequate capital to grow. We have accelerated the disbursement. We have taken a lot of initiative steps to improve the disbursement. Our sourcing, they have increased our sourcing channel. We have recruited a substantial amount of DST, and we have introduced a connector model, DSA channel also we have increased. So going forward, our disbursement will go up. We have also controlled our BT out, lost phone call. I said we are going to sacrifice some portion on spread to retain the good customer. We controlled BT out. These are from profitability on the other side. Our credit cost stood at 0.1% as compared to negative in the previous year. Coming to the branch network. Right now, we are having 242 branches across the country, including SAT center. This year, we want to open another 18 to 14 branches. Majority of the branches will be in non-TN. These are about our performance in short. I'm very happy to say that Our board has approved an interim dividend of 5 rupees per share, the face value of 10 rupees. Going forward, last May, I have given a guidance of about disbursement of 1,200 crores for September, and I said, we want To bring down our NPA to below, I mean, March level. Yes, we have done. September, our disbursement, we have crossed a disbursement of 1,200 crore mark, and we also brought it down, brought it down our NPA to 398 crores from 426 crores as end of the June 20th. 6. Going forward, our priorities will be acceleration and disbursement, at the same time we want to maintain quality in the asset. For the growth, we will not dilute the quality, and we want to diversify our liability side more. We want to avail more refinance from National Housing Bank to reduce the cost of fund. And our another top priority will be improve the operating efficiency. These are our priorities. I thank each one of you for joining this call. Now I am opening session for Q&A. I am happy to answer the questions. Over to Mr. Raj.

Operator

Thank you, sir. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may click on the raise and icon from the participants tab on your screen. We request participants to restrict to two questions each and then return to the queue for more questions. To rejoin the queue, you may click on the raise and icon again. We'll wait for a few minutes until the question queue assembles. Requesting participants. If you wish to ask a question, you can click on the raise and icon from the participants tab on your screen. We'll wait until the question queue assembles. Yes, we will take our first question now. We have Darshan Devra. Darshan, please go ahead with your question.

Darshan Devra, Analyst

Yeah, thank you for the opportunity. So, just wanted to know, what is the guidance for disbursement for Q3 and Q4?

T. Karunakaran, CEO

Uh, guidance for... See, for current time in Q3 disbursements is about 1,300 to 1,350 crores. For Q4, it's about 1,650 to 1,700 crores. For this current year, we want to achieve a disbursement number of approximately 3,000 to 3,050 crores. This is on disbursement side. Coming to NPA side, our guidance is, I'll stick on my guidance of what I have given post March 20, 25, six results. Guidance for NPA is to bring it down below 2% by year end.

Darshan Devra, Analyst

Got it. And how was the October quarter? What was the disbursement that we did in October?

T. Karunakaran, CEO

Yeah, the disbursements are in line with our expectations. I said for this current quarter, we want to do a disbursement of 1,300 to 1,350. It's October disbursement as well as disbursement till date. We are confident that we are in a position to achieve. The number what right now, I'm just not committed.

Darshan Devra, Analyst

Got it. Got it. Got it. Great. I mean, I appreciate that. One last question on the credit costs. So, you know, last year, I think we had negative credit costs, right? For the last part of the year. And this year, what are we expecting in terms of credit costs? And what do you think, you know, like in terms of pad growth, what sort of pad growth can we end up with this year?

T. Karunakaran, CEO

Coming to this, to date cost, see, actually, we have, see, our June NPA was about 427 crores, which we brought it down to 397 crores. We got, of course, a reversal in the provision. As a matter of prudent, we have not done any reversal. We have appropriated to other NPA accounts. Going forward, Current quarter, as well as next quarter, I'm expecting charging to the provision to the extent of 5 to 6 crores in P&L, and this is on our provision side. Profitability side, for the current off-year, our profit is at almost 230 crores. I'm expecting... Profit for current financial year in and around close to about 490 to 480 to 490 cross.

Darshan Devra, Analyst

Got it. Thanks. That's very helpful. And good luck for the remaining quarters. And very heartening to see that, you know, you've achieved your guidance, which you had given out, you know, for 1200 draws of disbursement. So congratulations to the entire Repco team and wish you a happy Diwali, happy Danderas, and good luck for the balance quarters of the year. Thank you.

Operator

Thank you. Thank you so much. We'll take our next question. We have Mr. Abhijit Dibrewal of Mothi Laloswal. Abhijit, you can go ahead with your question.

Abhijit Dibrewal, Analyst — Motilal Oswal

Yeah, am I audible?

Operator

Yes, Abhijit.

Abhijit Dibrewal, Analyst — Motilal Oswal

Yeah, thanks. Good afternoon, sir. So just two things. One is, you just gave out, you just spelt out the guidance on the investments for 3Q and 4Q. I think that's a very heartening thing to hear the numbers that we are targeting in terms of newer business in the coming quarters. But I just want to pick your brains on one thing. I remember asking this to you same time last year as well, that in the past, we typically used to have 3Q disbursements, which were lower than 2Q. Then last year, I remember we marginally inched up from where we were in 2Q. 3Q disbursements were marginally higher than 2Q last financial year. However, this year, I think we are talking about a very good increase from 2Q levels. So that is the first point that what used to be there in the past, which didn't allow us to do a lot of business in 3Q and what has changed now, which is giving us that confidence. And then again, on the fourth quarter disbursement guidance that you've given out, I think, I mean, again, very heartening to hear very strong business aspirations and targets that you put out. So in addition to what you spelled out in your opening remarks, which is this additional DST hiring, connector channel. So what exactly is giving you confidence that we'll be able to deliver the numbers that you just spelled out? And so lastly, if I look at the OPEX this quarter, it was, I think, slightly elevated. So unless you've covered something in your opening remarks, which I missed, because I joined a little late, for the benefit of all of us, if you could let us know what led to OPEX being slightly higher than what was expected.

T. Karunakaran, CEO

Yeah, I'll answer second question. First question, my colleague Mr. Raja will answer. Yes, slightly, our apex is slightly elevated compared with June. You know, with that, our June, our disbursement number was, we have not achieved our target. We said we set a target of internal target of close to about 1000 crores displacement for June quarter, but we have done about 843 crores. So we have not paid incentive for the first quarter. So I told my people that you increase the displacement, you increase the business, you recover more. So we'll pay for the incentive for the June quarter along with September. Yeah, our people have done a good job in terms of both. Disbursement, new bookings, as well as reduction in NPA, reduction in stage two. So, I paid an incentive. That is one of the reasons for increasing the salaried cost. Number two is... Last quarter, we have done ad hoc provision for retirement benefits, funds like a graduate leave and cashment. We have done ad hoc basis based on our experience. This quarter, we collected actual evaluation for both graduate as well as leave and cashment. We have provided more. Of course, we have invested in staff, recruited branch sales manager, I mean, recovery people for to improve their performance, which resulted in increase in salary cost. Number three, we have given annual increment. We have given to all the stock, which is based on purely performance, which will vary from 5% to 10%. These are the reasons for increase in salary cost coming to the administrative cost. Marketing expenses like DSA payout. Because disbursement number is gone from 800 crores to 843 crores to 1205 crores. Disbursement we have 10. Our disbursement numbers is increased. So sourcing cost also slightly increased. This cost to income ratio will stable at this level.

M. Raja, Other

So I will take the first part of the question. What is the difference that we have done between Q3 and Q3? Why the trend is broken now or breached now? It was through organic development wherein we had invested quite a amount of... We have efforts on building the channels. So now we have an independent sales channel, independent credit channel. So now there is no overlap of responsibilities and hence the concentration and focus on business is good. So that is the change that has happened and that is the confidence that we have in saying that, yes, I will be doing more than my Q2.

Abhijit Dibrewal, Analyst — Motilal Oswal

Got it, sir. Got it. How do we answer our questions? Yes, sir, that answers my question. Just one more thing I wanted to understand is now that we are in a rising rate environment, already seen a 25 bps repo rate hike. And there are potentially more which might come in the subsequent months. What is the sensitivity of our cost of borrowings to, let's say, a 25 or 50 basis points rise in the repo rates? So basically what I'm trying to understand, what is the mix like between fixed and floating in our liabilities? And likewise, on the asset side, have you taken any PLR actions or are you contemplating anything? So subsequently, what impact we could see in the margins in the coming quarters?

T. Karunakaran, CEO

Yeah, coming to the mix, liability side, our entire liability is floating, except Some few amount what we have taken from National Housing Bank, which is a special scheme, it's a special rate. Barring that, our entire liability is on floating side, floating rate. Coming to the asset side, our entire asset is fixed, sorry, floating. We don't have any fixed kind of loans in our asset side. And the entire asset is subject to repricing of once in a three months. With the time lag of three months, I can pass on to any decrease or increase to my borrower. As end of the September... Cost of fund stood at, overall, I'm talking about overall cost of fund, it stood about 8.35%. Yes, post RBI rate hike, we have seen increase in our borrowing cost. Going forward, I'm expecting cost of fund may go up by at least 10 to 15 basis points. I will pause on this increase in cost of funds to my borrowers with a time lag of about, say, one quarter. Another side that refinance, there is ancient 600 crore refinance to us. I already taken about 106 in first quarter and 2025 in second quarter. Remaining amount based on the funding requirement I am going to avail. So, whatever increase I am going to experience in cost of funds will be passed on to our borrower with time lag of about Second thing, to control the BT out to attract the good customer. I mean, return and quality will not come together. To retain a good customer, we have to pass some concession to them. Those who are with us for at least two years, having good track record, good civil score, and having a threat of moving out of our company, we need to pass on some great benefit to them. And so keeping all those things in mind in near term. Right now, I'm maintaining a spread of close to about 3.4%, keeping this borrowing cost increase and giving the benefit to the existing customer to arrest the BT out. I may have my spread will stable at in and around 3.25% to 3.3%.

Abhijit Dibrewal, Analyst — Motilal Oswal

Got it, sir. That answers all my questions. Thank you so much, and I wish you and Team Repu the very best.

Operator

Thank you. Thank you. Moving to our next participant, we have Vinod Vyas of Share India. Vinod, you can go ahead now. Hello, good evening sir.

Vinod Vyas, Analyst — Share India Securities

Just one question from my side. Because the measure of our exposure is in South, so are we facing any stress in the housing loan in South, specifically in Karnataka or the other region? In the demand?

Harshit Toshniwal, Analyst — Premji Investment

No. No, we have not. Thank you very much for having me at this moment. Have you ever done five years?

T. Karunakaran, CEO

No, we have not experienced any stress. Of course, we have seen improvement in disbursement in Karnataka. Q1 of a disbursement in Karnataka is slightly below the normal disbursement. For Q2, we have seen improvement disbursement in Karnataka, but we are not seeing any stress in South.

Vinod Vyas, Analyst — Share India Securities

So, in current matter and going forward also, you are seeing no stress, right?

T. Karunakaran, CEO

No stress from South. No, we have not seen any kind of stress in South.

Vinod Vyas, Analyst — Share India Securities

Okay. Okay. Thank you, sir.

Operator

Thank you, Vinod. We'll take our next question. We have Harishit Toshniwal of Premji Investment. Harishit, we have, yes, you can go ahead now.

Harshit Toshniwal, Analyst — Premji Investment

Hi, sir. Sir, thanks for a decent quarter. I had a few questions, sir. One, obviously, if I look at the last 4-5 years for Repco, the challenge has been more on the growth piece itself. I think in probably... How to exactly, if you can help us articulate that, what were the changes, that the growth is now seeming a bit more, that you guys are sounding a bit more confident on that number, that 1,300, 1,600 kind of a number. So if you can double click that, say, have we upgraded some of our technology, the incentivization of sales team. DST as a channel, if you can also help that, how can that be a reasonably stronger growth viewer, just to gain confidence on that piece itself. And the second thing is, sir, more obviously in September, we saw deputation change from RepcoBank. I think PSY, Nathan, sir, went back within a very short period, and comments had come up. Now, just want to understand that, does this also align with now Repco Bank being aware that probably in the last four or five years, because of many reasons, could be lower spending on tech, a bit of bureaucracy, that the growth was, I think the Repco home finance was not Are they not able to grow to its potential? And are they acknowledging? Those things and working towards a much, towards the potential of where Repco finance can grow. Please, please, please. I just want to understand the deputation and the thought process of the Repco bank with respect to their housing finance subsidiary. And obviously, the first question is more, what gives us that confidence of the numbers which you are saying for C2-4-2? Like, I think, more not just as a guidance, but what are the processes that are giving us that confidence?

T. Karunakaran, CEO

Mr. Raja will answer first question on business side, Mr. Raja.

M. Raja, Other

Yeah, I'm there. See, all the points that you mentioned, whether we have done, I would like to say we have done all those points, like we have developed our sourcing team, we have developed our DSA channel, we have developed our DST channel, now the branches are more confident in picking up the cases. Our processing team has helped us through. So there has been a lot of changes in the process, also in the systems. The systems also we have got into, and the LLMS has now stabilized, and we are also having an, we are in the process of giving a mobile app to my sourcing executives. So we have got into the track of getting things done through technology, and also concentrating on the sourcing channels and increasing our penetration. So that is what is giving us the confidence and committing numbers, and that growth is showing in the numbers, whatever you have perceived from your side, thankfully.

T. Karunakaran, CEO

In addition to that, we have also, I mean, revamped our entire incentive structure. We have introduced a special incentive for improve the sourcing channel. With us all, initiatives taken by the management, I'm confident that there will be a portion to achieve the disbursement numbers. Just now I've given as a guidance for current quarter as well as next quarter. Coming to the deputations, Mr. Vaidyanathan, deputation, I mean deputated from Repco Bank for the company for initially three years. Almost is completed about 2.2 and close to two and a half years. Yes, it doesn't really acknowledge its performance, has done a good job in recovery side. Since RepcoBank needs services, so they withdrawn deputation from our companies. They posted Mr. Khan, and he's also an expert. In the recovery, he handled, I mean, important portfolios in Repco Bank and added a few, I mean, big branches in Repco Bank. No specific reason for withdrawing deputation of Mr. Vaidyan. It's administrative. It's a routine in nature. I hope I answered my questions.

Operator

Oh, sir, we don't see his connection in the queue yet. So we will move to our next participants. We have Saikiran Pulavarthi, an individual investor. Saikiran, you can go ahead now.

Saikiran Pulavarthi, Analyst — Individual Investor

Yeah, hi. Thanks, sir, for taking my question. Congratulations on a good set of numbers, sir. Just two questions, sir. What helped a sharp improvement in the asset quality, both on the gross and net NPA, probably on the stage two assets as well? What has helped you to achieve this, point number one? And the second question is, like, thanks a lot again for increasing the dividend payout. How one should think about the dividend payouts going forward? Thank you.

T. Karunakaran, CEO

Yeah, from recovery side, to improve the asset quality, we have taken a lot of steps. Right now, my initial call, I said, we have introduced a verticalization system in our company. We are having a separate vertical for collection of... I mean, word use, even NPAs also, we are segregated into soft NPA, core NPA, we have assigned with responsibility, roles and responsibility, we fixed the target for our team, which has really helped us to improve our performance in recovery side, and we brought it down from NPA2. Below March level from almost 125 crores in June NPL level.

Saikiran Pulavarthi, Analyst — Individual Investor

Coming to this... Do you see further improvement in terms of the asset quality as we move forward?

T. Karunakaran, CEO

Yeah, our target is to bring it down to below 2% by year-end. See, if you look at NPA history, this is almost the present gross NPA level is as close to about 2.4%, which is almost a 16-year low. So, post our, I mean, RBI circular during 2021, November, our NPA levels gone up to... 8% we have taken various initiatives like strengthening a recovery team. And we have taken a lot of initiatives to sell the properties. So, these are the initiatives really helping us to bring it down our NPA. I'm confident that going forward, you can see the improvement in recoveries of NPA. I mean, our guidance, our internal target is to bring it down NPA level from 2.4% to below 2% by year end. Even if you look at stage two numbers, even we have seen substantial improvement in stage two numbers, quarter on quarter as well as year on year, which all those things indicate that the steps taken by the effective steps taken by the management to recover NPA as well as other delinquencies accounts. Dividend payout, yes. Our board has declared interim dividend of five rupees per share. Based on our profitability and other things, the final dividend will be decided during finalization of our year end results.

Saikiran Pulavarthi, Analyst — Individual Investor

Sir, do you consider at least any percentage dividend payout you have in your mind 10%, 15%, or 20%? Something like that?

T. Karunakaran, CEO

I am very clear. Right now, we don't have any numbers in our mind. So going forward, I'll be in a position to come back to you with what is the number for dividend payout ratio. Right now, really, I'm very frank, I don't have any numbers, specific numbers.

Saikiran Pulavarthi, Analyst — Individual Investor

One last question from my side, sir. As the financials of the co-home finance is improving, do you foresee any benefit on the cost of funds apart from the diversification mix, which you already talked about, like MHB and other things?

T. Karunakaran, CEO

Yeah. NHP, we got 600 crores. Now the NHP also liberalized some of their schemes. I'm expecting more sanction from them. Coming to the rating side, my NPA is right now is 2.4%. I'm expecting it come down to below 2% by year end. I'm positive of the rating upgradation once my NPA level came down to below 2%, which will really help me to reduce our cost of ends going. If I get a better rate, I can go for market borings at a better pricing.

Saikiran Pulavarthi, Analyst — Individual Investor

Thank you so much.

Operator

Team, we have Harshit Toshniwal back in the queue. We will allow him to ask his question again. Harshit, you can go ahead.

Harshit Toshniwal, Analyst — Premji Investment

Yes, sir. Really pardon me, but actually somehow the connection got lost at the second part of the question. So, I think on growth, you answered that BST channel, a lot of incentivization has happened. So, if you can just tell that probably is 2Q the start of that? Timelines, changes, etc. I think which gives us more confidence going forward or was it from the mid of 2Q that it happened? So, which is why that 3Q, 4Q, it can continue at a much larger space. And the second question I completely missed, what you would have commented on the Repco Bank deputation changes and the alignment in terms of them realizing the need for growth, for realizing the potential of home finance business.

T. Karunakaran, CEO

Yeah, initially, Mr. Vaidyanathan deputed to us for the period of three years due to administrative reasons. Since Repco Bank in need of Mr. Vaidyanathan's services, they called back. It is only an administrative decision. In this place, Mr. Kandan has posted is having a vast experience in the banking industry. He handled crucial portfolios in Repco Bank. He handled the large branches in Repco Bank. There is no specific reason for withdrawing Mr. Vaidyan. Got it, got it.

Harshit Toshniwal, Analyst — Premji Investment

And sir, I think the alignment that have we seen some... Directional change from what RepcoBank expects that has helped in the last quarter, last few, I would probably take the last six, seven months, that our disbursements have been scaling up so gradually. But is there any stance or is there any expectation change from RepcoBank from the way they used to operate earlier versus today?

Speaker 3

No, Harshit, there's no change in the operational. We are a professionally managed company, except in board-level decision-making, there's no interference from the promoter. So these are purely internal strategic changes which are yielding results.

T. Karunakaran, CEO

Okay. We used to keep arm's length distance with our promoter and associates company. They will not intervene day-to-day operations of the company, except a small credit facility with Repco Bank and deputation of Mr. Kahn and other things. We don't have any connections with our promoters. We used to keep arm's length distance with our promoters.

Harshit Toshniwal, Analyst — Premji Investment

All right, all right. Sure, sir. And, sir, I think these changes which you mentioned on the DST channel incentivization, if you can also help some timelines to it, that probably from where the effectiveness of these changes have started. And just to understand that probably the, can the delta disbursements be much higher than even what we are guiding? Is it a substantial change in your opinion? Because you have been there in the organization, sir, for the last many years, and you have seen how Repco has operated in probably the best of its days to probably some of the earlier years. But if you can help us to give some qualitative feedback on the extent of change that is happening around.

M. Raja, Other

On the changes timeline, it is an organic thing. Say, like, the day I want to increase my bandwidth or my channel growth is not going to happen on one day. So it was an investment of past two and a half to three years, which we have been doing it gradually. And now the results are visible. So, and yes, we look at growing more on the same lines. So our delta should increase. So, the BSM channel has been built over a period of almost two years now, and now we are dwelling on increasing my feet on street. So, this kind of an exercise is going to continue, and it will be organic. It cannot be sudden, so it will be organic.

T. Karunakaran, CEO

Rightly said, it's a changes or not a one-time exercise. Depends on need. We will make the changes. Sir, all the best.

Harshit Toshniwal, Analyst — Premji Investment

We deliver on our expectations. And probably one constant feedback which we have always received, at least as an investor we want to put is that the alignment of Repco Bank towards Repco Finance in a way that the subsidiary can realize its full potential, I think. Whether that means allowing more investments in technology, reducing some of the bureaucracy and everything should contribute towards these numbers. But all the best.

T. Karunakaran, CEO

Thank you. Thank you.

Operator

Thanks, Arshit. We'll take our next question. We have Sanjana Shivram of DAM Capital. Sanjana, you can go ahead now.

Sanjana Shivram, Analyst — Dam Capital

Yeah. Hi, sir. Firstly, congratulations to the team on a very good quarter on disbursements and even a healthy show on, you know, asset quality. I just wanted some clarification around spreads. So this quarter, we seem to have, our spreads seem to have expanded around 30 basis points. And our yields have seemingly gone to around 12. So we were originally expecting that we'd get growth by lowering some yields. Spreads going forward and what would have happened this quarter with the yields?

T. Karunakaran, CEO

No, that yield as for the off year is about, see what the yield I'm getting from my assets on, I mean, off yearly basis is about 11.83. And cost of funds is about 8.35. We are maintaining a spread of 3.47. Yes, post repo, I mean, rate increase. A few of our bankers already increased the interest rate, which is not, so far we have not passed on to our borrowers. Most probably this by month end, we are going to have a HALCO meeting. This HALCO meeting we will decide. So whatever the cost increase is, will be passed on to the borrower with slight time lag, number one. Number two, improve the business, improve the disbursement, to retain, to arrest a BT out, we need to pass on some great benefits to the borrowers. It will impact our spread, overall spread. So maintaining the 3.4 spread, it's really very difficult. But immediately, it will not come down drastically. My spread will stable at the level of around 3.2 to 3.25, one quarter or two quarters down the line.

Sanjana Shivram, Analyst — Dam Capital

Right, right, right. And I just another question, I wanted to understand we've been doing quite well on asset quality. And I wanted to know if the team has done any sort of assessment as to how much of our portfolio would be in drought affected areas in Maharashtra, Karnataka, or just wanted to assess what sort of risk would we be having? In the improvement we're expecting going forward. Is there any sort of assessment done over there?

T. Karunakaran, CEO

Yeah, we have done an assessment. These incidences, see, our majority of the branches, majority of our loans are in urban or peripherals of metro, tier 1, tier 2 cities. So there's doubt this thing will not affect our... Quality of the asset. I've given your guidance of bringing it down to NPA to be below 2% by Maure, March Hain. I stick on my guidance. As of now, we have not seen any kind of stress in our loans in any part of our country. Even our check return ratios, it's almost stable. We have not seen any spike. Our majority of the check written cases can be able to recover by month end or first of next month. So we have not seen, yes, we have done assessment, but we have not seen or we have not experienced any kind of dilutions or thread in the quality of the assets or thread in increase in, I mean, delinquencies levels.

Sanjana Shivram, Analyst — Dam Capital

Right, right, right. That actually is quite encouraging and very helpful. That's all for me, sir. Thank you so much.

Operator

Thank you. Thank you so much. Ladies and gentlemen, we will take this as the last question. I will now hand it over back to the management for their closing remarks. Over to you, team.

T. Karunakaran, CEO

Yeah, thank you for all the participants for actively participating this call. I wish you a happy Diwali and festival season. We'll meet in the next one call. Thank you all. Thank you, Mr. Rajiv, for hosting this call. Thank you, sir. Thank you.

Operator

Thank you so much. On behalf of Repco Home Finance Limited, this concludes today's conference call. Thank you all for joining us, and you can now click on the leave icon to exit the meeting. Thank you all for your participation.