The results only confirm what many have been suspecting that there is a stress in the system, especially in microfinance (SME and retail) segments where default rates may have started picking up. We have seen that with Indusin, Poona and now IDFC first bank, all taking heavy provisioning as a risk management measure. This was the segment that was being chased by most of NBFCs seeking to grow their loan book forgetting that this is also the riskiest segment especially during high interest rates.

Not sure what’s going to happen to other NBFCs who have got heavy exposure to microfinance and I trust as part of good corporate governance and risk management practice they will also take similar steps.

Thanks to RBI’s proactive action of tightening liquidity taking steps to control credit bubble in the system otherwise we could be witnessing something worse.

The challenge with Poona is their smaller balance sheet as opposed to the bigger players, so 600 crores worth of provisioning will have a bigger hit for them.

I only hope that this is the end of provisioning and management doesn’t come up with additional one. Best case scenario, they don’t have to use this provisioning.

But in general I can’t find anything else wrong with Poona. They have got strong management, a committed promoter and deep pockets. With interest rates expected to be cut they will eventually come out of this rut sooner than later.

Some highlights from Earnings Call Q2FY25

• Volumes grew +11% YoY

  • Revenue grew +6% as realisation declined -5% YoY due to reduction in end prices
  • Monsoon in South India were exceptionally disruptive this season and hence the demand was weak in the past few months – slower construction, infra build out

• EBITDA grew +18% YoY

  • Better metric to track company is EBITDA growth and EBITDA/ton since realisations/revenue can fluctuate based on steel price; however Hariom can capture adequate EBITDA/tonn regardless of commodity price volatility

• WC down to 58 days in H1FY25

• OCF for H2 was +50 crores and 35 crores of debt was paid down

• Capital Raise

  • Enabling resolution of QIP; Focus will be on specialized steel products + Geography expansion

• Distribution

  • Have direct connect with 800 dealers in south india; don’t work with distributors
  • Work with fabricators but not directly, instead connect with local dealers

• Guidance

  • Co has ~270kt sales target for FY25
  • In H1, 114kt volume done, so ~156kt remaining for H2
  • FY25 revenue target = 1,600 cr
  • FY26 revenue target = 2,500 cr reaffirmed; this hasn’t been changed despite weaker than expected Q2

AARON_28102024155416_InvestorPresentation_28102024-compressed.pdf (2.4 MB)

Decent Q2 results posted by Aaron, stable topline around 18 crores with margins at 17.5%.

Good thing – First ever PPT shared by the management.

The Capex to yield additional revenue of 150 crores going forward.

Q2 FY25 Summary for All e Technologies Ltd. (Alletec)

• Financial Performance:

  • Total revenue of INR 359.1 million, an 8.4% quarter-over-quarter (QoQ) growth and a 24.5% year-over-year (YoY) increase.
  • EBITDA of INR 91.3 million, with a 24.0% margin, reflecting a 38.3% YoY growth.
  • Net profit reached INR 66.8 million, achieving a net profit margin of 17.6%, up 39.4% YoY.

• Operational Highlights:

  • Added 12 new customers in Q2 FY25, emphasizing growth in both domestic and international markets.
  • 93.6% of revenue was from repeat and recurring business, indicating a stable client base.

• Strategic Initiatives:

  • Focused on Microsoft Cloud, Dynamics 365, and Power Platform for digital transformation services, with conversations trending toward RPA, data, and AI solutions.
  • Expanding into international markets with a targeted focus on Africa and the Americas.

This quarter, Alletec showcased solid growth in revenue and profitability, underpinned by a consistent client base and an increasing focus on global expansion and Microsoft-based digital transformation solutions.
ALLETEC PPT.pdf (5.6 MB)

Home First Finance Company Q2 FY25 Summary

• Financial Growth:

  • Achieved record Assets Under Management (AUM) of ₹11,229 crore, marking a 34.2% year-over-year (YoY) growth.
  • Disbursements rose by 22.7% YoY, reaching an all-time high of ₹1,177 crore.
  • Profit After Tax (PAT) increased by 24.1% YoY to ₹92 crore, resulting in a Return on Assets (ROA) of 3.4% and a Return on Equity (ROE) of 16.5%.

• Operational Highlights:

  • Expanded branch network by adding nine branches and eight touchpoints in Q2 FY25, totaling 142 branches and 351 touchpoints across 138 districts.
  • Employee strength grew to 1,642 from 1,249 in March 2024.

• Funding and Financial Health:

  • Enhanced funding with two new banking partnerships and a first drawdown from the sanctioned $75 million from the U.S. Development Finance Corporation (DFC).
  • Maintained an improved spread of 5.3% by raising the Prime Lending Rate (PLR) in August.

• Asset Quality:

  • Stable asset quality with Gross Non-Performing Assets (GNPA) at 1.7% and 30+ Days Past Due (DPD) reduced by 10 basis points to 2.8%.
  • Credit cost remained low at 20 basis points.

• Digital Adoption and ESG Initiatives:

  • Strong digital engagement with 95% customer registration on the HomeFirst app.
  • Focused on sustainable finance, securing funding to promote affordable housing, especially for women borrowers.

homefirst ppt.pdf (4.3 MB)