J&K Bank: Where Are Deposits & Advances Headed In FY25? | NDTV Profit
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00:00Hello and welcome. You're watching the small and mid-cap show here on NDTV Profit. I'm
00:09Harsh Saita. With me is Mahima Vajrajani. Now, first off on the show today, we have
00:16Mr. Kuldeep Singh Rathi, who is the Chairman and Managing Director at Ask Automotive. The
00:20stock on a tear, up 9.5% over the last five trading sessions, and very strong growth on
00:26the top line, but margins are a work in progress. First off, good morning, Mr. Rathi. The expectation
00:33is margins will go 12.5-13% odd. One, how quickly do they get there? Two, what are the levers,
00:41cost controls, or any other levers that you have up your sleeve which will help you get there?
00:48Yes, good morning, Harsh, and good morning everyone else, and thank you so much for
00:53giving me this opportunity. Well, I think we gave a guidance for 11.5% EBITDA margins,
01:01and we have done much better than that. I hope you will appreciate it. The good part is that
01:09we made a very heavy investment of 400 crores in our Karoli plant in Rajasthan by 31st March,
01:18and in this quarter, the capacity utilization has been 40%, and that has given the economies
01:25of scale, and so you can see the margin improvement. Mr. Rathi, good morning, sir, and thank you so
01:34much for joining us today. Really good set of numbers. My second question was talking about the
01:40OEM electric vehicle revenue for the company. Now, we've seen as a percentage has gone down
01:46compared to the same time last year. It's coming at around 3.6%. If you could just talk us through
01:52what are you seeing in this particular segment, what is the competition like, and we've seen
01:58the ending of the fame to subsidy in March has led to volumes de-growth for a lot of
02:04electric vehicle, two-wheeler makers specifically. That might be one of the regions that you are also
02:09addressing. So, if you could just talk us through that part of the business, and specifically,
02:14if you have any kind of number. Last year, we had around 120-odd crores of revenue and it's
02:18grown substantially over the last two years. How are you seeing this in this particular year, sir?
02:22No, the uncertainties because of the withdrawal of the fame to subsidies has led to some downfall
02:30in this sector. In any case, this segment was only 5% of the total revenues, you know,
02:37so, but I am very confident that since the new policy is around the corner and
02:45the EV sector will take a lead, but it will grow further, you know, as soon as the policy
02:51gets stabilized, you know. And since we are supplying to 80% of the organized EV market,
03:00so we will grow as per the growth of the market. Right. Mr. Rattay, you know, I want to understand
03:06that you're entering into a lot of strategic agreements for two-wheeler alloy wheels, you know,
03:11your recent joint venture, which is a technical collaboration with LIOHO and, you know, passenger
03:17vehicle aftermarket types also you're making. How are things shaping up here? And are there
03:22any recent developments in this particular space? See, the alloy wheel project is going
03:29at a very good speed. We are in the process of taking out the samples by,
03:38hope to take it out by October. Then there'll be testing on the roads and testing at various
03:44levels with the customers, which may take about six months. So from next financial year,
03:50if all goes well, we can see quite a good boost in revenues because of this segment.
03:56Now, Mr. Rattay, I just wanted to address another piece of business, which is on exports. Now,
04:02I think the last time we spoke after the quarter four and he didn't mention that exports is a big
04:06focus over the next two to three years now. Currently, we have seen some degrowth here
04:12coming at roughly 3.8% versus 5.8% last year. You have given a longer term target now. How
04:20are you seeing the export market going forward? And essentially, I wanted to understand which
04:27kind of segments are you targeting for exports? You have aluminium precision as one of the major
04:32ones. ABS is another one. Alloy wheels is also another division that is a key focus. I just
04:36wanted to understand on that, sir. No, as I'll maintain what I had said, that we have continuous
04:43focus on our export segment. And, you know, export is a little bit cyclical. Kindly don't
04:50see it quarter on quarter because one of our major customers, they are in the process of reducing
04:56their inventories in the pipeline. So that's why this quarter has gone a little low. But we are
05:03very, very confident that in the whole financial year, we'll be having a very good growth in this
05:10sector. Any kind of segment that specifically that you are very positive on for exports? And
05:16you mentioned a customer of, I think that's in the US that you mentioned is correcting on
05:22inventory. Anything apart from US, any kind of geography that you're looking at? And specifically
05:28any comments on Europe? Because we've seen other auto component makers also suffer a lot because
05:33of slow growth in Europe as well. Do you have any kind of exposure there as well? Yes, yes,
05:38we have exposure in Europe as well as in the US. And I think Europe is quite a little slow. And
05:44then there have been in the end, there were some concerns because of the containers and
05:50because of the disturbance in the Red Sea. So that has also contributed a little bit.
05:54But I remain confident, I think we'll cover it up.
05:59Sure. Mr. Rathi, if I were to just zoom out, last three years, you've doubled your revenue,
06:04you've taken margins from around just about the double digit to around 12% or so now.
06:13What's in store for the next three years? Can you continue this kind of growth clip?
06:20What are the levers for that? And how will numbers really shape up?
06:26We are very, very confident that what we have achieved this quarter, we'll be maintaining it.
06:32And we'll work continuously to gradually improve it.
06:37Understood. But, sir, just in terms of the numbers, how will they really shape up?
06:43Some flavor on that? See, the sector is doing very well. I can only say that because our sector had
06:50not grown for the last four to five years. We have still not reached the volumes of 18, 19,
06:56which was the peak of the two-wheeler segment. So I think we are heading for a very good growth
07:03this financial year, the next financial year, especially because so much money is going into
07:08the infrastructure, and it is going to help in the rural segment from where the two-wheeler
07:14growth will come. So my estimation is that we'll be doing pretty well in the coming years.
07:21Okay. And last off, sir, on the CAPEX side of things, how are things shaping up for you?
07:27How quickly do new capacities come on stream? And when do they start reflecting on your numbers?
07:32See, we are investing about 200-250 crores in our third plant in Karnataka. And this,
07:42we started construction in the month of March, and we'll be commissioning it in the Q4.
07:48And next year, it is going to deliver very good capacities to the tune of 500 crores,
07:56revenue. So we are sorted for the next one, one and a half years,
08:02completely having invested so much in advance.
08:06Understood. Thank you so much, Mr. Rathi. It's been a pleasure speaking with you. Longer chat,
08:10definitely warranted. Thank you so much. Yeah, I would also love that. Thank you so much.
08:18We're now joined by Mr. Baldev Prakash, Chairman and MD at J&K Bank to talk to us about how the
08:23quarter has gone by. Welcome to the show, sir. My first question to you would be that, you know,
08:29give us some guidance as to how the loan growth has been for the quarter and how it will be for
08:34the entire FY25. Yes, good morning. So on the loan growth has been as per our guidance,
08:42though first quarter generally remains subdued as historically also. And this year, some additional
08:48factor was because of the elections first quarter. So our growth has come around in the two digit.
08:55So, but our guidance is 15%. We will definitely pick up in the coming quarters and will reach
09:01and surpass our guidance. Understood, sir. Sir, Harsh also joining in. Good chatting with you. I
09:07want to try and understand the margin trajectory. It's gone up. Talk us through what levers you've
09:13used for actually increasing margins this quarter when other banks have really struggled to even
09:20retain their Q4 margins. Good morning, Harsh. So traditionally, the bank is having a strength
09:28in the franchise, particularly in Jammu and Kashmir and Ladakh. And we are maintaining a
09:34good healthy CASA ratio. And because of that, we are able to protect and not only protect,
09:41but improve our names. And our guidance has been within 3.75 to 3.85. And we have closed this
09:50quarter above 3.85. We are confident that with the type of connect and the customer service
09:57and the loyalty of the customers of the bank, we will be definitely protecting it going forward
10:02also. Understood. Sir, 15% you've suggested on loan growth. Deposit growth also round about
10:11double digit or maybe early teens? It is early days to say, but this quarter it is just under 10%.
10:19Yes. Traditionally, this quarter generally it is subdued. But going forward, if you see today also,
10:29if I'm talking, we have a quite healthy deposit growth. And this quarter you will find the
10:34difference. Right. Mr. Prakash, your net interest income is up around 8% YY and 5% QOQ. And operating
10:42profit, however, is down 10% QOQ, despite of, you know, 13% increase YY. So I just want to
10:48understand that what is causing these trends overall? So there's no cause of worry, Mamta.
10:54Actually, this quarter, we could not do much as far as recovery in technical write-off accounts
11:01is concerned. But we have clear visibility going forward this quarter and the next quarter,
11:07we will have a good amount of recovery in technical write-off accounts, which will be
11:11supporting our other income as well as the overall income. Understood. Sir, are you investing
11:18somewhere? What we're trying to get at is, is OPEX elevated because of investments you're making
11:24or is this purely other income as an impact? Yeah, this is only the other income impact.
11:31So understood. And sir, let me come to the OPEX part of it. Where are you investing? What's the
11:38new branch increase that you are anticipating in FY25 or pencilling in? And what's the kind
11:44of OPEX that you're pencilling in for FY25? So normal expansion, Harsh, will continue.
11:51This year also we have opened around 15 to 20 branches in the rest of the country.
11:57And in our home territory, the normal expansion, both for strategic business also as well as for
12:03financing inclusion, that we will do. And this year also the same trend will be visible. And
12:10overall, the OPEX has been under control. Our OPEX has been majorly impacted by the staff costs.
12:16But as I have also indicated in my investor call, our staff costs have now been aligned
12:23with the industry. And we will be improving it further going forward.
12:27Right. Mr. Prakash, Mahima this side, your margins, you've guided for a margin between
12:333.7 to 3.9%, an ROA of 1.5% in two years. You've also guided that annual pad of 4000 crores in the
12:41next four years. So I just, from a long term perspective, I want to understand that how do
12:45you plan to achieve these targets overall? So Mahima, actually our ROA, if you see that 66
12:54crores of the floating provision, then ROA is in line with our guidance. And similarly, the ROE
13:02also. Going forward also, and since we are preparing the bank for the ECL as well as the
13:09various other regulatory requirements. So maybe in the second quarter and third quarter, we will
13:16be achieving the guidance which we have given. And this guidance we have given in the long term also
13:23has well thought of internally. And we are confident we will be achieving all the important
13:29parameters of the guidance as we have done in the past also. Sir, two quick questions. One is with
13:35regard to how recoveries are playing out for you currently, because in terms of provisioning,
13:42you're at negative provisioning currently, which is your recovery seem to be quite strong.
13:47Second is with regard to capital adequacy, would you be looking to raise
13:51more capital because your capital adequacy is now 15.1 odd percent?
13:58So Harsh, both points I'll add separately. One, as far as recoveries are concerned,
14:04it is a fantastic story of the bank. And if you see, we have started our gross NPA
14:10approximately 10 percent, two and a half years before. Today we are below 4 percent and we will
14:17be achieving our guidance rather improving from that level also. And this will continue this year
14:24also. And as far as the equity or the capital raising is concerned, last year, as you might
14:32be aware, the bank had a highly successful QIP raise and that is good enough for us. We have a
14:40good, healthy internal accruals. So this year we are not looking for raising of any equity capital
14:47if at all it is required to satisfy some regulatory guidelines. So maybe we can think of
14:55raising tie to bonds. That decision will be taken later on, perhaps in the quarter three.
15:02Understood. And sir, could you quantify the recovery number FY25, FY26
15:07and what's the kind of runway like?
15:10So I will not be able to tell you the exact amount, but the guidance which we have given,
15:16we will be doing much better than that. Of course, the technical right of recovery,
15:21last year we were under 200 crores, but this year we will be much above 200 crores.
15:27Understood. And sir, scope for further reducing NPA ratios, where should they go by end of FY25?
15:37The good thing is that now the fresh loans which we are booking is of top class and as of now,
15:44we don't have any slippages at all. Hardly any slippages at all. So one side that we have
15:51controlled our slippages, other side a proper SOP is in place to ensure that whatever had slipped
15:57earlier in NPAs is being recovered promptly. And with these both two-pronged strategies,
16:04we are confident that we will be ending this year below three and a half percent and next year we
16:10will be among the best banks in the country. Well, Mr. Prakash, thank you so much for
16:14giving us those insights and taking our time and speaking with us at NTTV Profit. But with that,
16:19it's time to slip into a short break. Stay tuned.