Target: ₹560
CMP: ₹423.80
We interacted with Repco Home Finance’s management to understand the drivers of loan growth acceleration, factors which will influence portfolio spread/NIM and actions taken to consistently reduce the overdue portfolio and NPLs.
The management was quite confident about achieving the guided disbursements of ₹40,000 crore in the current year and reaching 12 per cent loan book growth, managing spread decline within 15-20 bps, and improving GNPL ratio to 2.5 per cent by the year-end. Repco trades at an undemanding valuation of 6x P/E and 0.7x P/BV on FY27 estimates, and acceleration of loan growth and further improvement in asset quality should re-rate the stock. We have a BUY rating with a target price of ₹560.
Foundational levers for growth have been put in place by the management over the past 18-20 months. Business productivity has started yielding results — in strong disbursements numbers of Q4 FY25 (grew 28 per cent q-o-q). In the coming quarters, the execution run-rate should materially improve (on y-o-y basis).
The company’s focus has also increased on higher-ticket home loans but with traditionally targeted customer segment/credit profile. Repco’s board and the management is aligned on delivering an improved growth with strong credit quality. Repco has demonstrated a substantial improvement in GNPL level over the past three years without any meaningful write-offs. The overall Stage-2 portfolio of Repco has also seen a reduction from 13.6 per cent as of FY23 to 9.7 per cent as of FY25, and it targeted to decline to 7.5 per cent by FY26-end.
Published on June 13, 2025