Concall Summary: JM Financial Ltd Q4FY20

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Business Overview

  • Consolidated Revenue for FY20 at Rs 3,453.55 crores, down 1.3% YoY
  • FY20 PAT at Rs 545 crores, down 5% YoY
  • Net worth at Rs 5,586 crores; Book value per share at Rs 66.41
  • Consolidated loan book stands at Rs 11,531 crores, down 18.3% YoY. Breakup: Wholesale mortgages- 70% (approx Rs 8000 crores, down 20.5% YoY); Capital market book- 4% (Rs 465 crores, down 56.8% YoY); Corporate lending loan book- 20% (Rs 2270 crores, remain flat YoY); Retail mortgages- 6% (Rs 750 crore, grew 28% YoY)
  • The retail business mainly comprises of housing finance and education institution lending business and also cross-sell of low budget property
  • GNPA 1.65% ; NNPA at 1.13%; SMA II stands at 2.64%
  • Consolidated gross debt to equity stands at 1.47 times and on a net basis 1.04 times
  • Raised Rs 640 crore through public issue of NCD during FY20
  • Borrowing mix: 91% from long term sources vs 84% in Q3FY20 and 9% from short term sources vs 16% in Q3FY20

Participants

  • BOB Capital
  • Elara Capital
  • HSBC
  • HDFC Mutual Fund
  • ICICI Mutual Fund
  • Prospero Tree
  • Rare Enterprise
  • Sundaram Mutual Fund

Segment

  • IWS FY20: Revenue Rs 1,611 crores; PBT Rs 444.6 crores; PAT Rs 311.26 crores vs Rs 239.6 crores YoY; Asset under advise for wealth management business currently stands at Rs 44,883 crores (excluding custody assets); equity component declined 17.7% YoY to Rs 10,159 crores
  • Mortgage lending business FY20: Revenue at Rs 1,350 crores; PBT at Rs 533 crores; PAT at Rs 178.6 crores; Loan book at Rs 7,651 crores, down 8.1% YoY
  • Distress credit business FY20: AUM declined 18.2% YoY to Rs 11,489 crores; Revenue Rs 413 crores; PBT Rs 85.58 crores; PAT at 29.85 crores
  • Asset management business (mutual fund) FY20: Revenue at Rs 63 crores; PBT at Rs  22.5 crores; average quarterly AUM for the mutual fund stood at Rs 6,109 crores (equity Rs 3,285 crores and debt Rs 2,824 crores)
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Concall Highlights

  • JM Financial has made an additional provision of Rs 175 crores in Q4FY20 across the group due to the Covid-19 outbreak. Break up of additional provisions: Wholesale mortgage Rs 87 crores, ARC Rs 67 crores, structured finance, and promoter lending book Rs 16 crores, capital market book Rs 3.7 crores and home loan Rs 1.6 crores
  • Company has doubled the size of the team of wealth management business
  • Mr. Satish Ramanatha has recently joined as Chief Investment Officer of mutual fund business; earlier he was with Sundaram Mutual Fund
  • JM Financial is targeting over Rs 3,000 crores home loan book by FY22
  • Home loan: Average ticket size is around Rs 10 lakh and yield is 12.75%
  • 2/3rd of wholesale mortgage book under the moratorium, zero moratorium on capital market and promoter lending book, 50% moratorium in home loan book and 1/3rd of structured finance book under moratorium
  • Capital market book and promoter lending book is totally dependent on market finance (CP, NCDs)
  • Cost of fund for the lending business stands at 10% vs 9.2% YoY
  • JM Financial has not sought a moratorium from any bank or any financial institution and has no plan for that in the near future
  • In the next 12-15 months, will see the completion of down cycle of real estate that India has seen over the past 7-8 years. The home prices will come down by 15-20% and the interest rate will also come down significantly to around 6-7% for the home loan. We will witness 7-8 years of upcycling post that
  • Commercial real estate will go through long-term pain. Retail will see some short term pain but will revive post corona
  • If credit transmission doesn’t happen, bankruptcy will go up in India from September onwards
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Image source: Company website

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Karan Sharma

Karan Sharma

The Concall Summary Guy | CFA | Investor
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