Suryoday Small Finance Bank Ltd (SURYODAY) Q2FY27 Concall Transcript - Sep-2026 Qtr
Moderator (DAM Capital Advisors Limited): Ladies and gentlemen, good day, and welcome to Suryoday Small Finance Bank Limited Q2 and H1 FY '27 earnings call hosted by DAM Capital Advisors Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Prachi Vani. Thank you, and over to you, ma'am.
Prachi Vani (DAM Capital Advisors Limited): Thank you. Hello, and good morning, everyone. On behalf of DAM Capital, I thank you all for joining in to Q2 and H1 FY '27 earnings conference call of Suryoday Small Finance Bank. Today from the management we have Mr. Baskar Babu Ramachandran, MD and CEO; Mr. Hemant Shah, Executive Director; Mr. Kanishk Chaubey, Chief Financial Officer; Mr. Himadri Das, Investor Relationships Head. So, without any further delay, I would hand over the call to Baskar sir for the opening remarks. Over to you, sir.
Baskar Babu Ramachandran (Suryoday Small Finance Bank Ltd): Thank you, Prachi.
Baskar Babu Ramachandran (Suryoday Small Finance Bank Ltd): Good morning, everyone and thank you for joining us today. Let me also take this opportunity to wish you and your family a very happy festive season. I'm pleased to report the progress we have made as a bank in the first half of FY '27. Our focus has been on strengthening the fundamentals of our business while maintaining healthy growth. Over the past few quarters we have made meaningful progress in improving asset quality, expanding our deposit franchise, diversifying our lending portfolio and building a more efficient operating model. This second quarter reflects continued progress on each of these priorities. Before I discuss our performance, let me briefly share our perspective on the broader operating environment and some of the trends we are seeing across our businesses. The banking sector continues to witness strong credit demand. System credit growth has remained healthy supported by retail lending, MSME activity and commercial credit. At the same time deposit mobilization continues to be competitive with credit growth outpacing deposit growth at a systemic level. The recent changes in the interest rate environment reflect a view on inflation and has brought funding cost back to, into focus. For banks, particularly smaller banks, the ability to build stable and granular liabilities will be an important differentiator going forward and for us this reinforces the importance of growing our retail deposit franchise and deepen customer relationships including through our digital channels. The microfinance industry is gradually emerging from a challenging period. Collection trends have improved and are being sustained. Portfolio quality is stabilizing and we see opportunities for calibrated growth. There is now a greater emphasis on borrower quality, overall indebtedness, cash flow assessment and responsible lending practices. We expect the industry-wide transition from group loans to individual loans which is likely to benefit borrowers with established repayment histories. While the drought conditions across Karnataka and Maharashtra have not thus far resulted in any material adverse impact on the portfolio performance or asset quality, our bank continues to maintain a prudent approach and closely monitor the evolving situation. At Suryoday, our transition to Vikas Loan and diversifying into newer products like Vijayashree and micro mortgages to cater to customers and their needs across the spectrum has helped us better engage with the customers. On the retail assets front, our bank continues to grow at a faster clip with respect to secure lending with both mortgages and CV growing at 36% year-on-year. Similarly, affordable housing and loans against property continue to offer attractive long-term opportunities particularly among self-employed and emerging income customers where credit penetration remained relatively low. Overall, we see an environment that offers healthy growth opportunities, but one where underwriting discipline, funding stability and operating efficiency will increasingly differentiate performance. These trends reinforce the strategic direction we have chosen for Suryoday. Coming to our performance, our growth momentum has remained strong. Gross advances, including IBPC, stood at Rs. 14,972 crores, representing a year-on-year growth of 34.6%. Disbursements during the quarter were Rs. 3,096 crores, an increase of 27.4% over the corresponding period last year. We are encouraged by the quality and composition of this growth with both inclusive finance at 41% and retail assets at 59% contributing to the expansion of our franchise. On the liability side, total deposits grew 30% year-on-year to Rs. 16,184 crores. Retail deposits including CASA stood at Rs. 13,676 crores constituting 84.5% of overall deposit base, reflecting continued progress in expanding our customer relationships through granular deposits. While our CASA ratio dipped a bit year-on-year and stood at 19.4%, our CASA balances have grown 26.8% year-on-year in absolute terms. We remain focused on building a granular and sustainable deposit base supported by our branch network, customer acquisition efforts and digital channels. One of the most significant developments during the quarter has been improvement in other reported asset quality in line with the strategy adopted by the bank which played out during the last credit cycle. Gross NPAs declined to 2.9% from 6.5% in June supported by the receipt of Rs. 387 crores of CGFMU claims in July and write-offs and OTS of Rs. 596 crores of legacy stressed assets. At the same time, underlying collection performance has remained stable. Current bucket efficiency for IF in Q2 FY '27 stood at 99.3% versus 99.2% in Q1 FY '27. Our focus continues to be on early identification of stress, close monitoring of borrower behavior and maintaining prudent underwriting standards. Our digital banking business is one of the most important enabler of our growth strategy which creates a clear differentiator for our bank.
Baskar Babu Ramachandran (Suryoday Small Finance Bank Ltd): Our bank intends to grow this digital banking business not only as a means to significantly acquire quality customers, but also for it to be a meaningful contributor to the franchise across assets, deposits and earnings. We are excited about the growth prospects of digital banking and we shall continue to update on our progress with respect to this initiative. Our bank is a clear market leader in the credit line on UPI CLOU offering. CLOU continues to gain traction and helps our bank acquire customers exponentially as well as allowing us to serve customers for convenient, scalable digital credit platforms. Over 14 lakh customers have been targeted under the CLOU program and this said count is expected to increase substantially in the forthcoming quarters. Similarly, deposits mobilized digitally through various platforms is the key engine for acquiring customers and over 2 lakh customers have been onboarded via this channel. Beyond business growth, technology is helping us improve operating productivity, enhance customer engagement and reduce servicing costs. Our approach is to combine the strengths of our physical distribution network with digital capabilities, allowing us to serve a broader customer base more efficiently. We believe this combination will become increasingly important as the bank scales. Our net interest income for the quarter stood at ₹368.8 crores, a growth of 42.8% year-on-year, and NIM improved 28 basis points year-on-year to 7.2%, aided by growth in the share of our paying book. Our net total income grew to ₹495.3 crores in Q2 FY '27 from ₹338.1 crores in Q2 FY '26, an increase of 46.5% year-on-year, aided by the growth in revenue from our digital business. This is despite there being limited PSL income in this quarter. Our pre-pop has grown significantly on year-on-year basis to ₹145.5 crores with our CTI adjusted for digital expenses at 68.7% in H1 FY '27 versus 72.9% in H1 FY '26. Profit after tax for Q2 FY '27 stood at ₹76.5 crores with net profit margins at 15.5%. Looking ahead to the second half of FY '27, we remain alert to the opportunities for the bank while being mindful of the external environment. Our priorities remain clear: we shall continue to grow our franchise footprint, loan book in a disciplined manner, strengthen our retail deposit and CASA franchise, maintain close oversight of asset quality and accelerate the development of our secured lending and digital businesses. We remain focused on the full-year objective of 30% to 35% advances growth and an exit RoA of approximately 1.4% to 1.5% while continuing to assess developments in the operating environment. As we look at the first half of the year, what gives us confidence is not just the growth in our balance sheet, but the progress we have made in strengthening the underlying quality of our franchise. Our ambition is to build Suryoday as an impactful institution, a bank that delivers consistent performance across cycles, earns the trust of our customers, shareholders and other stakeholders and creates long-term value for all stakeholders. With this, I would like to thank our customers, employees, and shareholders and all our stakeholders for their continued support and trust. We will be now happy to take your questions. Thank you.
Moderator (DAM Capital Advisors Limited): Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nishit Shah from Wiseholistic Investment Advisors. Please go ahead.
Nishit Shah (Wiseholistic Investment Advisors): Hello. Am I audible?
Moderator (DAM Capital Advisors Limited): Yes, please.
Nishit Shah (Wiseholistic Investment Advisors): Yes. First of all, congratulations on a good set of numbers. My question is that in presentation, you have said that there is a proposed CGFMU cover, right? So, is the CGFMU cover temporarily disabled or how how is it? Because ex of say CGFMU cover, right, our credit costs in past have been very high. So, could you just tell me if that CGFMU cover is still on or off or how is it?
Baskar Babu Ramachandran (Suryoday Small Finance Bank Ltd): For the current financial year, the CGFMU
Baskar Babu Ramachandran (Suryoday Small Finance Bank Ltd): past, even if the cover were not to be there. But, I think that at the industry level we are all overall fairly confident and that's probably our input. I mean, our expectation that the cover will open up pretty damn soon.
163 more turns of this transcript: log in to Stocksigma to read the full call.