Ujjivan Financial Services Ltd Q2 FY2024-25 Earnings Conference Call

Ladies and gentlemen good day and welcome to ujen small Finance Bank Q2 fy2 earnings conference call hosted by IFL Securities limited as a reminder all participants 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 tach phone please note that this conference is being recorded I now hand the conference over to Mr Rin sha from IFL Securities limited thank you and over to you sir

um thank you Nia uh good evening and a very warm welcome tojan small Finance Bank uh 2 qfi 25 results call to discuss the business strategy and outlook for the results um we have the entire management team of fujan small Finance Bank the management team is represented by Mr Sanjie noal MD and CEO Miss Carol Fado executive director Mr Martin PS Chief Operating Officer Mr Ashish goel Chief credit officer Mr vibas Chandra head micro Banking and Mr Barun Agarwal deput CFO uh with that uh over to you Mr naal for your opening remarks thank you

so much uh good evening and Welcome to our Q2 fy2 earnings call uh total disbursements during the quarter were at rupees 5,376 crores slightly better than q1 fy2 up 2% QQ but lower with respect to Q2 FY 24 that is down 6% Yi this resulted into loan book growth of 14% Yi and marginal 1% QQ at rupes 30344 CR as of September 24 Q2 FY 25 has been a relatively slow quarter compared to previous ones this was an outcome of expected reduction in business volumes due to implementation of MN guard rails and our heightened caution

around the micr finance Segment while growth might be visibly slow on the overall book performance remained robust in the secured portfolio affordable housing business our second largest asset vertical dispers rupees 758 CR during the quarter higher by 40% Yi and 70% QQ this made the affordable housing and micro mortgages book grow to rupees 5,784 CR as of September 24 adding a book of rupees 585 CR versus June 24 and registering a book growth of 43% Yi systematic group marketing activities across regions penetrating deeper in select markets with better per capita income stronger ground team better

connect with customers and diligent customer retention plan have added to improve business micro mortgages portfolio a part of housing portfolio continues to grow stronger with each quarter this is approximately rupees 400 CR book now as we speak from rupees 76 crores in September 23 customer branch And staff referrals added an edge to the business growth around 60% plus of the overall disbursements in micro mortgages happened via referrals M msme business has now stabilized with all its products policies and systems in place disbursements have picked up and will continue to see an uptrend QQ during Q2

fy2 msme vertical disburse 216 CR versus 130 CR in q1 fy2 this resulted in achievement of a Book of rupes 1,514 CR up 5% yuy 7% QQ adding rupees 100 CR of incremental book in H1 FY 25 to further strengthen the product Suite we have introduced Elite lab product in addition to the base lap offering and this is helping in increased business volumes in Q2 we also launched Bank guarantees and the working capital Term Loan variant making our working capital offerings comprehensive and full stack apart from growing the Book our focus is also in managing

asset quality of this portfolio our revised msme strategy has resulted in a better quality growth mix and health of the portfolio our fig book as on September 24 was rupees 242 CR contributing 7% to the total asset book this book grew by 57% YY and 13% QQ and continues to scale as per the strategy of increasing the secured book of the bank vehicle Finance streamlined its business process and strengthened infrastructure in the last Quarter and made full use of the upgraded capabilities during Q2 fy2 dispersing rupes 82 crores leading to a book of rupees 262

CR up 105% yui and 20% QQ the team is poised well to drive higher business in the upcoming festive months by capitalizing on upgraded technological enablement dealer tys Partnerships offering competitive rates and better utilizing cross sell revenues similarly gold loan business has Expanded well currently being offered from 162 branches across the country and targeting to cover over 200 branches by end of next quarter disbursements have been rising incrementally month- on-month and over 40% of the monthly businesses coming from referrals this has led to a book of 62 CR growing over 100% QQ going ahead special

Focus will be on process enhancements and introducing products and features to better serve our customers Our secured portfolio as at September 24 is 34.9% of the total book The strong growth in the secured book has led to a faster progression towards 6040 unsecured secured book mix we anticipate that secured book will reach around 40% by end of this financial year bank has always followed a risk calibrated approach in order to risk the portfolio we had Diversified our product suite and contined to to make steady Progress by offering relevant products to our customer segment in the

last 18 months we have introduced products like microd gages gold loans two-wheeler loans agre and working Capital Loans and it's good to see that these five products products alone now contribute 6% of the quarterly disbursements in Q2 fy2 versus 4% in q1 fi25 with this portfolio growing 29% QQ and X Y let me now come to micr finance as mentioned in our q and earnings call the micr finance Segment has seen some challenges and the situation continues to evolve for the financial year 25 basis our current understanding we believe that business Revival on a reasonable

estimate will only be visible from Q4 fy2 onwards at the earliest to steer through this we have devised a prudent approach and restricted business diss to new to credit NTC and stop new customer acquisition in problematic clusters of some States we have cautiously acquired only 1.5 lakh new group loans and individual loan customers during the quarter who had demonstrated Better Credit Behavior our approach during this quarter was serving good quality repeat customers additionally we have also introduced stringent norms for new to bank customers with three existing mfi lenders 1. 5 lakhs mfi exposure for all

new to bank sourcing pin code oblique Center wise decisioning for repeat loan And topup loan is in place we continue focusing on the graduation of good customers from group loans to individual loans around 90% of the overall individual loan book is from this migration due to these factors we will continue to see a degrowth in our group loan portfolio for this year which will weigh down our overall portfolio group growth we have enhanced our focus on building the individual loan portfolio which continues to show much better Health and Prospects we will strive to achieve the

loss ground to some extent from our individual loan segment and other businesses coming to liability business total deposits grew on a strong retail footing to 3470 crores up 177% Yi and 5% QQ retail deposits at 24746 CR now constitutes 73% of the total deposits having grown 32% over September 23 our deposit strategy emphasizes on Increasing the wallet share of existing customers along with quality acquisition of new customers through a mix of physical and digital reach focus on providing solution-based approach continues and accordingly we have created the product and features which are relevant for the segment

like introducing non-resident Max maima in Q2 fy2 a variant of Maxima account launched last year we also introduced navaratna family program focused towards hni Customers and their families we are targeting relationship management to ensure that at least three to four products oblique services are added to each customer this has also added to Improvement in ticket sizes and stickiness of the customers kasab at 8832 CR now forms 25.9% of total deposit book is up 26% Yi and 6% QQ value at products are showing healthy traction Maxima SB book stands at rupes 1,323 CR with 21,000 Plus

accounts as on September 24 with average ticket size of rupees 6.17 lakhs our strategy is to keep enhancing our offerings in line with this we had applied for 81 license and I'm happy to share that we received the RBI approv roval and secured the license earlier during the month this will enable us to offer full-fledged bouet of products and services like engaging in retail foreign currency deposits remittances currency exchange we shall also engage in foreign currency Transactions borrowings and in trade Finance offerings this will lead to an incremental Avenue of other income aiding our pnl

and also widening of our msme product offerings on asset quality as mentioned earlier we are observing stress in the micr finance segment due to which our par has increased to 5.1% in September 24 versus 4.2% in June 24 par zero for our group loan portfolio has increased to 5.5% in September 24 versus 4.1% in June 24 in Q2 fy2 we have seen credit cost of rupes 151 CR versus 110 CR in q1 FY 25 due to this we anticipate folar credit cost may now be around 2.3% to 2.5% we are strongly monitoring our portfolio quality

gnpa oblique nnpa as on September 24 stands at 2.5% oblique 0.6 percentages slippages for Q2 fy2 were at rupes 243 CR versus 192 CR in q1 FY 25 during Q2 slippages in micr finance book Are at 0 .99 percentages while in secured book The slippages remain steady at 0.44 percentages for the quarter same as in q1 fy2 we have written off rupees 140 CR during the quarter we continue to focus on Collections and have ramped up the collection team by adding over 300 Personnel during the quarter taking the count to 2,200 plus b debt recovery

continues rupes 25 CR was recovered in Q2 fy2 our Target is to collect over rupes 100 CR this year on financials and margins the Nim for the quarter is 9.2 percentages yields on the overall portfolio have declined marginally due to the growing mix of secured portfolio we are likely to see further compression as secured book will continue to grow at a faster Pace cost of funds for Q2 FY 25 at 7.5 percentages remains at similar levels versus last water o to focused approach On growing retail deposits operating operating cost for the bank is a key

monitorable cost to income ratio for the quarter ended at 60% our objective is to keep this in control in the upcoming quarters Pat for the quarter was rupees 233 crores and subsequently Roa and Roe for Q2 fy2 is 2.2 percentages and 15.7 percentages respectively similar softness and return ratios will be visible for the full year Financial year 25 however we are very confident that Once the micr finance business Springs back into a growth trajectory Roe of 18 to 20% is achievable for next year Financial year 25 26 last but not the least I will want

to highlight my key areas of focus for the coming quarters micr Finance is the largest portfolio for the bank we shall continue to do well in this segment one situation normalizes profitably expand the non microf Finance secured portfolio a we are giving heightened Focus to Growing the msme book green shoots are visible in our portfolio and we are confident that msme book will do very well B scale up vehicle Finance gold loan and agre businesses C continue to expand our housing loan and micro mortgages portfolio three are of objective is to make the bank a

retail deposit franchise with continued focus on growing Kasa W1 will see stronger growth in this business ahead four lastly on the other Income we will Garner Avenues to enhance our other income special Focus will be on product Services just as we added ad1 license we also will be adding mutual fund distribution and asba facility during this financial year in addition to other insurance product offerings I end here and hand over to the moderator Mr sha thank you over to you 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 touchdown telephone if you wish to remove yourself from the question Q you may press star and two participants are requested to youth handset while asking a question before we begin a gentle reminder in order to ensure that the management is able to address the questions from all the participants please limit your questions to two per participant I repeat please limit your questions to two per participant thank You the first question is from the line of Raju mea from he Securities please go ahead yeah hi

good evening uh sir your credit cost guidance of 2.3 to 2.5% implies uh maybe further versing of Trends uh in Q3 uh and uh then even provisioning uh elevated provisioning continuing in Q4 so uh have we seen uh absolutely no improvement in October in terms of collection efficiencies in the uh IND account and if you can also give more Color on the micr finance portfolio in terms of uh you know what percentage uh of portfolio would be borrowers uh having you know four plus loans and indebtedness of more than 2 lakh and then what percentage

of this pool is already an SMA and NPA sure sure so uh uh our you know in Q2 our uh non- delinquent portfolio which is the regular portfolio saw a collection efficiency of 9.23 and in October were you know the First few days there were holidays but we are seeing a much better in elction efficiency in the month of October compared to the month of September of course there are about 7 Days uh for the month to end but the initial trends of the first three weeks are much better than the month of September so

we are seeing you know improving collection efficiency and we hope that in this quarter our collection efficiency in the non- delinquent portfolio will reach Back the q1 levels your second question was on sorry yeah I'll just repeat five five yes so we have about 7% of our uh borrowers uh in four plus lenders and the slippages on that was higher than the you know and the borrowers with one two or three lenders the overall slippages from there is about 4 or 5% higher than the regular ones I'll just give you the right Numbers on that

okay and uh the second question is on has there been any change in the right of policy which led to our writeoffs and uh what is the reason behind reduction in tier one Capital uh in this quarter there has been no change in the uh right of policy however we have written off about 50 crores of our Assam portfolio which was NPA since 2019 that is about 50 odd crores and That has you know we were carrying that as a NPA portfolio not written off that is one additional write off that we have done during

this quarter we have TR divid during the quarter of 290 that has resulted into a uh deep into C ratio Capital sorry sorry sir it was not very clear can we just repeat again on the tier one Capital reduction we have paid dividend during the quarter that has resulted into a in Cap 290 crores 290 cres oh that was a large number okay thank you I'll come back in the queue uh so the the question on slippages about 10% of our slippages comes from uh 4 plus lenders so the contribution is 7% and the slippages

are about 10% got it thank you the next question is from the line of Rish from ICA security limited please go Ahead yeah hi sir uh just two questions from my side uh so uh let's say on the individual loan side you know we have been growing this book quite aggressively uh since past many quarters and as you rightly said 90% of these customers are actually migrated customer from the uh JG book uh so what are the current trends in that book and uh do you foresee asset quality sort of worsening in that book also

in second course I mean second Half so you know when we were taking uh you know precautionary measures during the first and second quarters of this financial year we also slowed down the growth of our individual loan portfolio the group loan individual loan migration is about 90% as as rightly mentioned so the you know the slippages and the NPA of individual loan is much better than the group loan portfolio so the impact has been largely on the group Loan portfolio if we look at the September numbers uh IL gnpa is below 2% uh and that

gives us a lot of comfort that you know uh the iel portfolio can be grown much more profitably and therefore we continue to uh focus on that portfolio uh okay and uh would it be possible to share similar data point uh similar data point for IG lbook customer as well like uh customers with more than three four Language in I these customers have uh uh you know mostly uh relationships with ujan however we can come back to you whether our customers also have loans outside okay is if that is what you're referring to yeah yeah

yeah okay so that come back to you sure and so secondly on this credit cost guidance right I mean uh so we have been uh saying that for the full year credit cost will 2.3 to 2.5 and when we look at first half Trend it Is broadly 1.7 1.8 types so uh which naturally means that second half will be you know more elevated maybe around 2.7 2.8 Ty and when we look at the collection numbers or even in your opening remarks you are highlighting that October collections are better uh so actually I'm not able to

connect the dots at the at one end we are seeing uh things are improving and on the the other hand uh we are increasing the credit cost Guidance so uh you know credit cost typically comes uh with a 90 to 180 day lag from the date when the when a customer has gone into delinquency so what we were referring to is an improved collection in the non- delinquent portfolio however we have seen you know 99.23% of uh non- delinquent collection efficiency in q two when these customers get into 60 90 180 dpd that is where

the uh you know credit cost will start to pick up for this set of customers so for Q2 whatever has moved into delinquency the cred cost would be a outcome of uh that number no sir then then it is uh let's say then this collection efficiency has no meaning right because uh it's X bucket collection so why can't we start uh giving X AER collection as well xer collection is 99 sorry xer collection is 106% X plus aers no no I'm saying collection excluding I think what oh that is 9 okay you're talking about non

Delinquent plus the delinquency the delinquent tool that is that is 97% but that includes uh overdue collection as well right that includes overdue collection that is right yeah so I'm saying excluding over collection so so you know uh the way we measure our collection efficiency and this is what we have been putting up on our uh on our deck as well is uh we have non- delinquent portfolio collection Effici which we mentioned is 99.23% the the additional collection which is which could be prepayments or others that's a separate number including that the number goes up

to 106 okay okay okay thank you best of Lu thank you the next question is from the line of asales sonj from kotak Securities Limited please go ahead hi team good evening um firstly on The mfi book just wanted to get a sense What proportion of the overall mfi portfolio of 193 billion which you have What proportion would be outside the scope of the infin Gils so we have about 7% of borrowers who have four plus relationships so that is so this translates to 93% which have three and Below but you would would you need

to abide by those guard rails for the for the full 100% of your portfolio uh Because some of these borrowers might have incomes let's say about 3 lakh rupes so technically they won't qualify as uh micro Finance from a technical definition perspective right and you you might not have to abide by the infin guard rails for that set of customers so yeah so yeah we have customers with the income family level income is more than 30,000 and yes you are right technically we don't need to abide by uh The mempin guard RDS but we have

we decided that we'll go ahead with that earlier also we were using it and after implementation of guard rail and our own guard rail is actually stricter than M guard rail which is implemented implemented for both customers having less than 25,000 income and more than 25,000 income as well understood sir um perfect and secondly uh the you mentioned the slippage number for the quarter at Roughly I think 190 crores if I back calculate based on the number you given firstly is that correct and also can you give a corresponding number for the previous quarter the

mfi cation number so it was two 193 for the previous quarter and 240 for this quarter okay understood s just one clarification you mentioned the number of 7% borrowers who are uh 4 plus so that is five or above right five or more lenders right four and Above that includes four as well yes yes yes includ includes four okay but the infin card still allows four lenders right yes yes would you would you have a number for borrowers yeah yeah yeah 7% around 7% number that saying it is four and above this includes four also

okay now you have a have a proportion of borrowers who are Associated with five or more lenders because that actually would be the ineligible set of borrowers right uh we are a little we are a little aggressive on that and that's the reason why we count four and above so we don't have five and above as of now we've been only working with four and above because that is something that is the reason for us to worry five and above is anyway out of the consideration set understood perfect thanks a lot Sir thank you the

next question is from the lineer shaes Kalani from Centrum broking limited please go ahead uh thanks for for the opportunity uh so just one uh one question on the Mis income side uh there seems to be a q onq sharp jump and uh so wanted to understand and get some color uh what kind of uh this is there what is the reason for this jump up and because in the comments say in the pp it's foreclosure late payment and other Charges so how sustainable it is just wanted to understand that yeah we have introduced uh

new uh me charges for customers in quarter one that has uh resulted into the spike by 12 crores in the miscellaneous income there's a quarter on quarter spike is 12 so I didn't understood which charges you m minimum account balance charges MB okay okay maintenance non-maintenance of M maab charges okay okay so that that has Resulted so it is quite sustainable in uh that is what you saying yes we will continue charging customers who do not maintain their minimum balance in the account obviously because this maintenance charges were not there and we introduced some some

time in last year and we gave some time and after that we introduced it and the charges came in but with time obviously it will little go down because customers start maintaining balance so numbers Will slowly decline but it will still be there in every quarter okay uh so second question would be on micro mortgages uh we have a decent exposure over there and that book is also ramping up uh do we uh so any any overlap between two products mfi and micro mortgages what we have in our portfolio and any any any issues in

terms of asset quality over there we've built a book of 300 crores over the last 18 months uh about 50% of This book uh comes from Individual loan customers who graduate to micro mortgages uh in this book we have not allowed new to Credit in fact new to credit is only 1% everybody else has a uh history uh Bureau history and the bureau you know cut offs are quite high as of today we see a you know ontime repayment of 99.5% and a full month repayment of uh Almost 100% in fact only nine or 10

customers out of 8,000 customers are in Delinquency so we you know we maintaining this a very tight monitoring on this portfolio Okay so just last question from my side uh sir can you just uh reiterate the revised guidance if you can because last time we uh we have guidance of growth of around 20% similar growth for deposits and we have already revised the credit good guidance how about Roe if you can just share those three Numbers so actually uh on the business side uh we are saying that you know uh our secured portfolio will grow

by 40 plus percentages our individual Loan in the micr finance book will go by 177% for the full year uh we are not uh penciling on the uh micro Finance group loan growth or degrowth because we feel that it is still you know a little ambiguous not Clarity is still not there so we refrain from you know giving you a Guidance on that and uh therefore uh the the return on Equity is going to soften as you would have seen in the results that we've shown for the half year and again this will be subject

to how uh bounce back we see in the group loan business that will actually decide where we actually you know uh zero in so on the business side uh this is what we say credit cost we've already said 2.3 to 2.5% uh secured book would be around 40 to 4 Percentages hope it answers your query yes yes sir thanks a lot and best of luck thank you the next question is from the line of somil sha from Paras Investments please go ahead hi thanks for the opportunity uh could you is there any update on the

universal banking license so uh this matter is under uh active consideration and uh we would you know uh once we do that uh we would announce it and let you know about It okay so can we Ed in this quarter it's work in progress uh this financial year seems likely okay okay and so we do have a floating provisions of 250 crores so why we are not utilizing it uh to reduce our NPR the floating provision can be utilized only in extraordinary circumstances with prior approval of RBI and therefore you know when we took the

floating provision we have taken it for an event which is Unforeseen you know like something like something like a pandemic or something which disturbs the portfolio quality uh it we don't use it on a normal basis currently we have utilized it only for PCR computation and nnpa computation so therefore uh and we still have 100 crores of unutilized uh you know floating provision but we'll keep it at at this uh you know at at this level and as in when required we'll use it okay okay and the last question from My side so in the

first half our loan book has grown by mere 2% so now what can we expect to uh close this loan book by the end of this year I think uh uh I I just now you know highlighted how the book is going to pan up out secured book overall which is you know gold loan vehicle loan housing loan micro mortgages msme and agriculture that will grow by 40 plus percentages more than 40% for the full year individual Loan in the micro Finance Book will grow by 177% for the full year we are not uh you

know announcing anything on the group loan side in the micr finance book because we find that it is the situation is still very fluid and evolving and therefore you know that number we refrain from uh zeroing in and the other parts is as I just now suggested to you okay okay that's it from my side thank you a gentle reminder in order to ensure That the management is able to address the questions from all the participants please limit your questions to two per participant I repeat please limit your questions to two per participant thank you

the next question is from the line of J prash from lent India please go ahead oh hi sir I have two questions like like you said that you have stopped business in most of the cluster where you where the business has impacted and which strategy you following there for Collection so we have you know some branches which we call you know stressed branches and in those branches we have put restrictions on growth and these restrictions on growth are you know not uh not acquiring new customers acquiring you know new to bank new to credit customers

as in run we find that customers are showing some signs of delinquency not giving them repeat loans no topups Etc so these are the kind of restrictions we have put for branches uh Which are showing higher signs of stress if I heard you right we have not stopped business anywhere repeat we have over borrowers and at this point of time in turbulent time also over 8% customers are paying on time on date and we have a good eligibility in repeat loan so we are serving our existing customer to repeat loan and graduating them to Il

uh which states the major uh major portfolio you have Ved from the uh this type of Customers which states or which type of belts which type of belts or which belts you are uh stop this business means mostly affected the business which belt can you please repeat the question and clarify it um May I know that clusters and basic which locations majorly impacted in among the states okay this is actually done at Branch level so we have branches uh which we find you know as I was saying That these are stressed branches and that is

where we have put restrictions on new acquisitions as well as servicing customers with uh higher uh you know higher loan sizes or uh showing signs of stress so this is across all states there could be some branches in Western up some in Kerala some in Gujarat some in Tamil Nadu and across but just to CL clarify once again we have not stopped business Anywhere uh we have large number of customers in each branches where we are serving customers existing customers with ap and products the Restriction is only for the kind of customers that we do

not want to onboard board otherwise uh the the disbursements for the welcome kind of customers is still going well underst the second question is that you told that you have something done at pin code level to understanding the opportunity Right so whether is there is any kind of calls like scorecard and not pin code level you have been implemented yes yes so uh this is something something with old practice it is not something new that we have developed during this or trying to do during this turbulent time uh this we are doing for years I

think starting from uh demonetization period where we not only during the branch opening we understand the pin p information to Understand the create Behavior but also we do it periodically for all branches we are where we are operating and the PIN codes we we are operating and based on the performance of the PIN code we fine tune our credit policy for each branch oh Fair got it but have you done any hard calls on this hard basis of pin code or stop any pin code sourcing is it like that so yes no in PIN codes

you have you know good number of borrowers but in This pin code become we become C cautious we stop certain products which we feel that will uh is not suitable for the PIN code uh those action we take we don't stop business uh in a location because we are present there and we are serving customer there but we take create decisions there BAS Bas on the performance of the PIN code uh thank you sir all the best thank you thank you the next question is from the line of shal Doshi From Aquarius Capital please go

ahead hi sir uh good evening so my first question was which are the states where we have seen collection efficiency being uh being relatively better and which are the states where we are seeing you know the collection efficiency being lower than your average collection [Music] ne% yeah hi shal so like we had spoken last time also we have the top five states which is Tamil Nadu Karnataka Bihar West Bengal and up of the five states we find that our collection efficiency is not at par in coming whereas in other states we find that the collection

efficiencies are 99.4 and above in fact in Karnataka the the number is 99.7 be Contin to be in the range of 99.4 to 99.5 sir I'm sorry but your voice was not clear so are you saying that in the top five State our collection efficiency Is above 97% I'm sorry but I couldn't hear you properly sir I I was talking about the collection efficiency for the regular customers non- customers there I was talking about Tamil Nadu being not at par but all the other states have 99.4 to 99.7 which is up West Bal and K

got it got it sir and just one aspect that I wanted to understand on the customer identification side related Document side so uh how are we uh so so on that point what all documents do we take and what is our process so we acquire customer 100% customers on the basis of ekyc and that is something which is you know the most safe safest way to acquire customers and have full we have that license already sorted yes okay and the one last question was on margin side so since the share of secure portfolio is inching

up and the Growth in the segment is in the second half also is actually very very strong where do you see the margins stabilizing for the year so margin compression will happen because the secured business will grow at a faster pace and the softness and return ratios would be visible for the full year uh Financial year 25 uh so the previous guidance uh will be missed and therefore uh uh in the medium term if you say 18 20% Roe from next year onwards is very much under our radar but for this year we would not

like to commit to any specific number because the micr finance book actually is a big book and therefore we want to be more sure on how it is going to pan out got it so okay I mean even on margin front because of the mfi B book being larger book we are not giving a specific number Fair understanding and on the name would like To say on the Nam uh currently I think today we are at 99.2% for the quarter but uh full year we will be a little below 9 hovering around 8.6 to 88.8%

got it got it that was thank you and good luck with the next qu thank you the next question is from the line of Amit mantri from 2.2 Capital please go ahead yeah can you uh talk about the Opex increase that has happened in this quarter uh is this now the sustainable Run rate uh on the OPC side or were there some one-offs in in this quarter on the OPC side yeah so the Opex increase mainly on front of personal expenses and the other Opex the personal expenses f524 versus H1 fi25 has increased by 31%

from 273 to 368 mainly because last year based on industry benchmarking one of the activity which we did is this effective first October 23 salary Corrections was performed for our employees the second there is a volume increase in terms of number of employees we added around from September to September around 2700 uh 2700 people these are mainly towards the uh business which we expect to do well from a secured business and towards the branches which we added around 123 branches we added last year so this was the main reason where people were added our secur

portfolio continue To do well uh on a quarter on quarter basis we have a 12% growth in the secret portfolio which is expected to show good result in the upcoming quarters as well lastly uh we have build up our collection team as well and has been reinforced with the additional Manpower so that was the reason for the personal cost on the other Ops uh the the F cost has increased mainly because of we have added again as I mentioned 123 branches last year our fixed cost in terms of Occupancy expenses towards the r electricity maintenance

and it and depreciation cost because of the capital uh capital investment the cost has increased that's the main reason for the increase we have been closely monitoring the control aspect and that's the uh that the focus area for theing qus as well so as you would see these are all actually Investments uh many initiatives were launched last year at different phases of uh time but the full impact is Being visible from April onwards this year but these are all Investments for growing our book strengthening our collection or reaching out to the people in the nukes

and corners of the country by opening our branches um on a YY basis I understand but even on a QQ basis compared to q1 of this year the Opex has increased by almost 10% quarter on quarter um so what would what would explain that increase sorry if you can repeat the Question so even on a quarter on quarter basis when you compare to q1 fi25 the Opex has increased 10% uh on a quarter on quarter basis so what would explain that increase yeah so as I mentioned see the quarter on quarter increase because we have

opened last year 123 new branches the fish C has increased the branches are opened during the year over the period of at various point in time in last year this year we had a full year Expense or this quarter is a pool year expense that is resulting into the uh increas in opix from a personal cost as well there are addition hirings for the mainly for the secured portfolio which we are doing and the collection team we are beefing up the collection team that is adding up to the cost thank you thank you very much

in fact on the quarter and quarter on the quarter and quarter we have been having a strict control on the cost for the unsecured portfolio Wherever there is attrition we are looking into there is no there is a degrowth in the number of employees okay thank you very much thank you the next question is from the line of goam Jane from gcj Financial please go ahead thanks for the opportunity good evening sir can I get the hello yes pleas please yeah can I get the credit cost separately for micro finance and other business the secure

Business so we have you know we've as a practice not been uh looking at separate credit cost it's been a blended cost for us but if you if you if you if you want it we could send it to you no just for the year we are expecting 2.3 to 2.5 if it is 2.4 so I just want to know how much is coming from secured business is that less than 1% or between 1 to 2% secure business is typically uh it will be less than 1% or in the thereabout region you know uh it

is the Unsecured business where the credit costs would be high for the year but yes you can take a benchmark of about 1% for secure businesses okay and when you say you raise the uh the credit cost guidance from 1.7 to 2.3 to 2.5 uh so that means you still expecting lot of slippage to happen in uh second half is that correct to understand yes so all cases all these you know Borrowers who have been you Know who entered into delinquency in q1 and Q2 the credit cost would only happen with a lag of 90

to 180 days because that is when they get into gnpa and they get into the provisioning buckets so therefore there will be a you know in the second half the impact of that would be fail so yes there will be a higher credit cost because delinquencies and the power numbers have gone up in q1 and Q2 can you give us a bpar number suppose You have 440 CR slipage in first half what could be the slipage in second half around that number or it may be higher so we were maintaining slippages in the range of0

5% for uh many quarters this quarter the slippage is been has been in the range of about 8% so you could expect that the slippages would be in that range for the remaining two quarters okay uh can I ask one more question yes Please hello yes please please go go ahead please yeah yeah so just want to ask whether a secured business uh has break even in terms of profitability or still not making money there there are different uh VAR uh it depends on you know how mature that business has been in the books so

yes uh housing is in profit gold loan and agre and vehicle we have you know just started to do those businesses and Msme is uh likely to break even uh by this year end and the other three are have just taken off and they are a very small portion of the business and therefore the uh therefore I would say they would still need a 12 month period to actually show that profit coming in okay great to hear that and F yeah yeah okay thank you so much and all the best for the future thank you

thank you thank you the Next question is from the line of nides Jin from invest India please go ahead uh uh thanks for the opportunity the first question is on slip ages for first half so in first half of 430 cres of slip ages how much is from secured and how much is from unsecured sorry can you hear me now yes uh sorry are we audible yes there was some disturbance yes sir you are a so about 80% of 80% of the overall slippages are From uh micr micro Finance sure sure and secondly s in

the micro Finance group loan segment your par Z is 5 and a half% uh which is a quite decent number if you compared with some of the other peers how do you see this number trending over Q3 and Q4 and when do you see see that this number will Peak out uh so the way we look at it uh car basically is NDA collection efficiency so yes we did see the NDA collection Efficiency which is the non- delinquent portfolio collection efficiency dip from 9.46 to 9.23 as I said but this time uh you know in

Q3 and onwards we feel more optimistic because the gills have been implemented the changes in policies and other things customers would get adjusted to it and therefore the collection efficiency is likely to improve from here on uh par would be just a derivative of that sure and are you seeing any Trends Because of the guard rails being implemented and uh couple of uh players have been asked to stop disbursment from IM immediate effect uh do you see any spill over of that uh in terms of collection behavior and uh collection behavior from the customers no

we you know uh there is very little overlap in the custom base of the players that you are referring to and our customer base in fact it is in the range of 1 to 1.5% we Just did a rough understanding of that so there is not too much of an overlap there so we don't expect our customers to have uh you know Major Impact due to this slowing down of you know closure of disbursements okay and and lastly on the vehicle Finance segment which segment of vehicles we will be focusing on so we have uh

you know about 8090 good dealership tie-ups where we are getting very good volumes and there are about 300 more where we are Expecting good business to come in as the months progress uh the manufacturers are all the you know the all the large manufacturers it's mainly the two wheeler segment that we are focusing in the the two wheer in two wheer we are we have tie ups with across across manufacturers okay thank you that's it from my side thank you the next question is from the lineup Arin from sundaram Alternatives please go ahead hello sir

Thank you so much for the opportunity uh lots of my questions has been already been addressed but one thing I understand like we are a growing Bank you know we need to invest in the franchise either in deposits or in technology and everything but like like do we see any like a Slowdown in expenses either in terms of Branch addition or in terms of it expenses or like like product related expenses like what I'm trying to get is like you know Do can we expect any moderation in cost income ratio in in any ways for

the next few quarters current year we are not foreseeing any U additional branches uh we are not opening any branches So to that extent uh whatever the expenses are will continue we continue to have investments in technology um that will continue because as we upgrade uh we need to up I mean as we get into newer and newer lines of Business we need to keep upgrading our technology system so that will also continue in on the it side there are uh there are investments or expenses as you may call it will necessarily have to be

done on an annual basis or you know the renewals of the uh service agreements Etc all that will continue so we are not withholding or stopping these investment activities uh cost optimization from a general sense is what every Enterprise would look at and the cost optimization We would certainly look look uh look into but as we said uh we are hiring because we feel collection needs to be strengthened we are not we are hiring for the secured book which we are now trying to grow so all essential expenses and Investments continue to happen and that's

the we we would uh like to uh end the year with sure sir okay okay but like you know we were talking about you know 100 branches more than 100 branches in the Recent time uh I can what I understand is like obviously as you said you know like you need uh you know Personnel for you know secur book and other services I was trying to understand like you know would the employee addition or the branch addition would slow down at least for some time or will it continue at the similar PA but as you

said Branch addition you are not having any plans but was it the same case with the employee Addition so as I would like to clarify is the branches have already been open they have been invested with people process technology and everything that a branch requires okay so those those expenses have started kicking in we what we will have to do is to ensure that business happens and they are all becoming a profitable Venture for us and that we continue to invest in right yeah yeah yeah understood sir and okay okay yeah yeah uh and like

do We uh uh like any uh you for see like I I understand like we are growing bank and we need to like you know consistently you know like show up our deposit franchise especially in retail deposits uh uh would we be open to like you know uh use of like let's say like if there is a rate cut or something like that like to use you know uh wholesale deposits to manage margins or improve margins in a shortterm manner or like will we continue to focus on Like you know retail deposits even if it

comes at a slightly higher cost uh we we will continue our focus on retail deposits uh we are growing our uh you know uh deposit base through granular retail deposits and that will continue and uh our interest I mean the rate of interest out there we will uh we are closely watching the situation wherever required we are reducing our interest rates um but this is something that we'll keep evolving and uh we are Focused on that to keep our cost of funds also constant okay okay and just one last question like uh I see the

msme loans like has started growing reasonably well uh but you know but MSM loan when I look at the collection efficiency is actually uh you know below like you know even like something like mfi like it is close to 90% only like to understand you know you know what are the efforts being taken here to improve that collection Efficiency and and why is that like you know collection efficiency is actually lower there okay in msme we have two books one is uh what we had uh during the pandemic and immediately after that we recalibrated all

our product and policies last year so for the last 18 months uh we have been you know working with the recalibrated product and policy this has worked very well for us in fact this is almost now 40% of the overall Msme book and this continues to have zero delinquency not a single case in uh one dpd and above it is the old book which had got seasoned some of it got uh you know got into delinquency during covid that is what we are now wanting to uh you know it's a de growing portfolio it's now

about $600 OD and this is something that is leading to this delinquency so the new book is completely pristine we we are not worried about what we are the new Product and policy how it's responding uh you know with very very clean portfolio now understood sir the old book shall continue to have lower collection efficiencies because most of it is in the in SMA and inar sure sure thank you so much sir thank you thank you the next question is from the line of bres bum from Dam Capital please go Ahead hi hi good evening

uh og1 Team uh just couple of questions one is uh this guidance of credit cost uh this includes uh uh a desire of PCR to be about 70% right so so that will include our PCR thought process of 70 plus per. uh yes British so our PCR currently is at about 78% and if we look at the you know at the end of Q2 if you look at the unutilized floating provision we are almost fully covered it would you know put together this would be about 97% PCR so even if we see a increase in

the PCR will continue to be above 70 sure no so the whole point was that we are not able to utilize the floating provision until uh we you know ask RBI and RB gives permission but the incremental book is uh the slippages are coming in and that's where I think the PCR is dropping uh but the credit cost which we are guiding at uh just wanted to check that that includes that uh PCR because there will be right off Certainly because of the policy right so uh in in terms of that PCR will remain above

70 yes P will remain above 70 in fact we know when we compare ourselves having 97 98% in PCR for the last 8 quarters you know 90 and above PCR for the last8 quarters 78 looks a little low but 78 by itself as a number is a very decent PCR that we are maintaining got it uh the second question was just uh just wanted to get The thoughts on ticket size perspective uh we've seen this quarter uh ticket size move up and which is natural that uh we are limiting growth in you know uh certain

pockets and new to uh new to credit customers are not being uh roped in but then uh generally thinking that we are one of the highest in terms of ticket size and uh basically we've not seen ticket size coming down for a long long time so what is the thoughts here basically uh how do we see that we get More conservative in terms of ticket size especially in the GLG side so on on the GLG side you know know the reason for the ticket size looking a little high is because a blending of new to

new to bank customers is not happening uh in this quarter we did almost 50% of our loans as repeat loans in on the group loan side and we did not see a you know sizable number of new customer Acquisitions which is why our ticket size looks a little high but if You compare ourselves with q1 the ticket size has more yeah so so my my perspective was that uh we we are at a very high ticket size and where say for example some of our peers will be in a range of 28,000 to you know

you know 40,000 maybe below that but we are at about 58 and uh of course that maths which we are talking about is absolutely right but when we were growing the new or the new uh new to bank customers uh The ticket size had not fallen and now we are seeing a ticket size getting a little bit higher so any thoughts on that how do we you know bring down the ticket size overall so when uh you know this is a this is a repeat of what happened around two years back when we were doing

a lot of uh you know customer retention plans and we were servicing our existing customers and we were very immediately after covid uh that how should we go About doing new customer acquisition we were you know the environment was not certain we saw that at that time the ticket size had gone up but as we opened our new to new to Bank customer acquisition the ticket size came down you know remember it was about 58 and a half 59,000 during that time when we used to be focused on repeat it's the same thing that we

seeing today also as the NCA has come down the ticket size have started to go up a little but once We start opening NCA the blending of new customers would happen and the average ticket size would come down so it's a repeat of what we saw immediately postco it thank you so much thank you so much for this answer yeah yeah thanks thank you ladies and gentlemen we'll take this as a last question I now hand the conference over to the management for closing comments uh thank you uh friends for a Patient hearing and for

your uh uh enterprising questions uh which made us think about our responses hope we adequately uh satisfied your queries as I close this session this very engaging session uh the key highlights that I would like to conclude with is that we would continue to invest growing in our secured book uh we would continue to do the individual micr Finance lending where we see opportunities growing we will sta also grow our group loan micr Finance book on liability side we would focus on Kasa and try reducing the cost of funds and digital and analytics is an

area where we would like to invest more and focus more and and cost to income is another metrics where we would like to focus so with these uh I would like to conclude and thank you for joining us for a very engaging session with our team thank you on behalf of IFL Securities limited that concludes this conference thank you For joining us and you may now disconnect your lines thank you