It is my pleasure to report the performance of the Company and the progress that we aremaking. At the outset I would like to inform the stakeholders that FY19 has been one ofthe most challenging years in our existence. The industry we operate in passed through animmense financial and trust crisis triggered by issues in few AAA rated NBFCs and HFCs.Following this funding from the banks declined and that from other sources were availablefor lower tenure and higher interest rates. This led to severe liquidity crunch. Playersstarted focusing on improving ALM and liquidity position and thus there was a markedslowdown in new financing.
Your Company was no exception to this. We faced issues in sourcing funds. Furtherstate elections in our operational states followed by central elections brought atemporary slowdown especially in the second half of the year.
In the wake of this tough scenario we took a conscious call to adopt a conservativeapproach in borrowing and lending. Though this impacted growth the move was taken in theinterest of shareholders. Consequently our disbursements for FY19 were lower by 12.55% toRs 124.90 Crores as we considered it safer to not fund longer duration asset with shorterterm liability. This is in line with our long-term strategy of pursuing sustainablegrowth rather than being myopic and targeting aggressive growth. With this we maintainedour long-standing track-record of no significant mismatch across all buckets sinceinception thus remaining in a healthy position to repay debts in the longer-term. Wecontinued to maintain higher spread at 11.45% which ensures higher earnings. This resultedin SRG Housing being amongst the most profitable housing finance companies with a Profitafter Tax (PAT) to Average Loan Book of 5.88%. Our Net Interest Income for FY19 increasedby 72.86% to Rs 31.27 Crores and Profit after Tax increased by 75.37% to Rs 14.17Crores. The health of our portfolio remains strong with net NPAs at a low of 0.46% andaverage LTV at 37.65%.
The year was also important in terms of execution of our strategy. We maintainedsmaller ticket size and tenure of loans by focusing on individual retail loans and notmaking any new loan disbursement to developers. diversifiedour borrowing sources We withnearly 43% of the borrowings in FY19 coming from non-bank sources as compared to 31% inFY18. The Government's relaxation to allow NBFCs to raise finance from TReDS will sourceof funding.
Demand remains intact
Amidst all the crisis the good thing is that the demand for housing credit was in noway impacted and continues to be strong. The stagnancy in property prices rise in wagesand lower effective interest rates led by tax incentives and subsidies available due toPradhan Mantri Awas Yojana has enhanced the overall affordability of homes. This isfurther boosted from the Government's recent move of reducing GST to 5% for underconstruction flats and 1% for affordable housing without input tax credit.
Adding to it the mortgage penetration is low in India with our key operational marketsof Rajasthan and Madhya Pradesh at 6% Gujarat at 8% and Maharashtra at 14%; the housingcredit demand is immense; and the demographic and economic position of the country isfavorable. Overall I feel that the markets are panning out well and we are headed for astronger future. The recent regulation of exempting NBFCs/HFCs from linking retail loan toexternal benchmarks in a bid to protect home loan borrowers from future interest ratevolatility is also a positive move.
Fulfilling home dreams carving out
Over the years we have greatly evolved as an organization never losing sight of ourmotto and the objective that we wanted to achieve. We started this organization to makepossible the dream of home ownership for individuals in the rural areas for whom financingto impossible. In the last two decades we helped over 7000+ families get their homeswhile accomplishing several milestones.
Having said what started as a means to fulfill dreams is today one of the key growthareas in the industry.
Rural housing and credit shortage are a massive opportunity. Our niche and competencyin this segment provide us an edge. Today we have 32 branches across rural and semi-urbanareas of our markets. Our network is well supported by a dynamic team whohave strong relations with customers as well as locals.
Moving towards a better future
Many of you may be aware that your Company has framed its vision for FY22 whereby weintend to grow our loan book to Rs 1000 Crores and branch network to 70 by FY22. I amhappy to say that we are progressing well on it. With the addition of 8-12 brancheseach year and maintaining the current provide us an additional average branchbusiness run rate we will be able to comfortably reach there without stressing businesshealth. To support the expansion we plan to raise funds for which an enablingresolution to raise equity shares has been passed. We are also undertaking a majoroverhaul in technology. While several new applications have been launched we are nowunderway with SRAJAN Program a series of standardization measures to help us streamlineall our operations.
Message to the shareholders
The successful pass-through of your Company in such difficult times exemplifies thesolid foundation that it has built. This includes the strength of our processes andsystems enabling us to maintain asset quality technology infrastructure for efficientbusiness operations and superior customer experience. And most importantly two decades ofrich experience expertise and competitive edge in the rural segment which very few in theindustry have. With immense opportunities coming underway we are focused on capitalizingour competencies to accelerate growth.
I thank all our stakeholders for their support and belief in us and continue to seekthe same for the future. We are at an important juncture and the coming times aregoing to be exciting. Together we can scale niche greater peaks.
Vinod k. Jain