Arman Financial Services Limited — Q3 FY26

Arman Financial Services Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=G7DQnXosBOE Published: 2 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to the Aman Financial Services Limited Q3FI26 earnings conference call. This 0:10 10 seconds conference call may contain forward-looking statements about the company which are based on the beliefs, opinions and expectations of the company 0:18 18 seconds as on date of this call. These statements are not the guarantees of future performance and involve risks and opportunities that are difficult to 0:26 26 seconds predict. 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 0:35 35 seconds concludes. Should you need assistant during the conference call, please signal an operator by pressing star then 0:42 42 seconds zero on attached phone. Please note that this conference is being recorded. I would now hand the conference over to 0:49 49 seconds Mr. Aluk Patil, joint managing director from Arman Financial Services Limited. Thank you and over to you sir. 0:57 57 seconds Thank you so much Muskan and uh uh have a a very good afternoon to everybody. 1:05 1 minute, 5 seconds Uh thank you for joining us today on behalf of Arman Financial Services Limited. I extend a very warm welcome to 1:13 1 minute, 13 seconds all of you to our Q3 and 9 month ended FI26 earning call. I'm joined by our new US executive director and group CFO Mr. 1:24 1 minute, 24 seconds Vive Modi and the investor relations team from SGAA. 1:29 1 minute, 29 seconds I trust all of you had the opportunity to review our results, the investor presentation 1:37 1 minute, 37 seconds and the press release which are all available on the stock exchanges and our company website. 1:43 1 minute, 43 seconds Hopefully also I'm audible to everybody because we are working on some new hardware here. So Muskan please interrupt me if there's any problem with uh hearing me. 1:54 1 minute, 54 seconds Yes sir. 1:56 1 minute, 56 seconds Before I move on to the business performance I would like to highlight important leadership transition at Arman. 2:03 2 minutes, 3 seconds Mr. Jendra Patel the founder of Arman has transitioned from the role of vice chairman and managing director and now 2:11 2 minutes, 11 seconds will continue as the whole time director. 2:14 2 minutes, 14 seconds He wrote a letter explaining his decision to the shareholders which is definitely a good read. 2:21 2 minutes, 21 seconds In this new capacity, he will remain closely associated with the company and actively engaged with the board and 2:28 2 minutes, 28 seconds senior management in providing strategic guidance, mentoring the leadership team and ensuring a smooth transition with continuity and stability. 2:38 2 minutes, 38 seconds For better or for worst, now I step into the role of vice chairman and managing director, of course, spending shareholder approval. 2:48 2 minutes, 48 seconds I've had the privilege of being with the company for over 16 years now, tried my best to learn everything from the bottom up. I deeply value the trust placed in 2:57 2 minutes, 57 seconds me by the board and remain committed to carrying forward our legacy while steering Arman into the next phase of 3:05 3 minutes, 5 seconds long-term valuedriven growth. I'm also pleased to share that Mr. Vive Modi has been appointed as executive director 3:14 3 minutes, 14 seconds again pending shareholder approval in addition to continuing as the group CFO. 3:20 3 minutes, 20 seconds Vive has been with the company for the past 8 years and in his new role he will help execute the strategic goals of the company. His financial discipline and 3:29 3 minutes, 29 seconds structured approach will continue to strengthen our institutional framework as we enter the next phase of growth. We 3:36 3 minutes, 36 seconds congratulate Vive on his new role and wish him best of luck on his added responsibilities. For sure he will need it. 3:45 3 minutes, 45 seconds Moving on to the business performance. 3:47 3 minutes, 47 seconds The past one and a half years has had its own share of challenges which I have discussed in excruciating details over 3:55 3 minutes, 55 seconds the past four to five calls. The industry had to navigate a series of events including overleveraging, 4:03 4 minutes, 3 seconds low growth in real incomes in the rural household, changing JLG culture, regulatory uncertainty, regional 4:11 4 minutes, 11 seconds political developments, and broader macroeconomic pressures. 4:16 4 minutes, 16 seconds While these factors created short-term uncertainty and affected industry sentiment, it also pushed the MFI 4:24 4 minutes, 24 seconds companies to become more disciplined, risk focused, and structurally stronger. 4:29 4 minutes, 29 seconds During this period, MFI tightened underwriting standards, strengthened monitoring mechanisms and recovery processes. In many ways, this 4:38 4 minutes, 38 seconds period helped the sector build a stronger systems and operate with better prudence. 4:45 4 minutes, 45 seconds I'm happy to say that the industry continues to learn from every crisis and pushes forward. 4:51 4 minutes, 51 seconds Notably, much of that uncertainty has now eased. Now we are seeing clean broad-based recovery taking shape. 4:59 4 minutes, 59 seconds Repayment behavior has improved across key geographies. Collection efficiencies are much stronger and fresh 5:06 5 minutes, 6 seconds delinquencies are moderated to a great extent. 5:10 5 minutes, 10 seconds Borrower cash flows on the ground remain subdued, but our systems have evolved to better assess household cash flows and demand 5:19 5 minutes, 19 seconds across our business segment is showing healthy sustainable traction. 5:24 5 minutes, 24 seconds At Arman 2, we took a step back, assessed the situation carefully and focused on getting the fundamentals 5:31 5 minutes, 31 seconds right again. Over the past few quarters, we tightened our underwriting, strengthened our recovery processes, and enhanced monitoring across verticals. 5:42 5 minutes, 42 seconds One important step we took was clearly separating the underwriting and recovery teams. This has brought better 5:49 5 minutes, 49 seconds accountability, sharper credit decisions at the time of dispersement, and more focus flow upon collections. 5:57 5 minutes, 57 seconds This structure is now in place across a majority of our branches and we've already seeing the benefits in terms of more stable portfolio behavior and stronger execution on the ground. 6:09 6 minutes, 9 seconds As a result, our business performance has strengthened. Our consolidated AUM stood at 2274 KRES 6:18 6 minutes, 18 seconds registering a sequential growth of almost 7% reflecting improving demand and 6:24 6 minutes, 24 seconds calibrated dispersements. Dispersement momentum gathered pace across segments with consolidated dispersements reaching 6:33 6 minutes, 33 seconds 612 crores during the quarter compared to 475 KES in Q2 FI26 6:40 6 minutes, 40 seconds marking a strong 30% sequential growth in dispersements. 6:45 6 minutes, 45 seconds This growth has supported by sharper credits screening at the loan officer level and improved confidence on collections. 6:55 6 minutes, 55 seconds Q4 seems to be shaping up even better on the financial front. Gross total 7:01 7 minutes, 1 second income for the quarter stood at 160 KS remaining largely stable on a sequential basis. 7:08 7 minutes, 8 seconds Gross total income for 9 month FY26 to that 470 Kors 7:15 7 minutes, 15 seconds pre-provisioning operating profit PPOP stood at 55 cr in Q3 FI26 and 166 crores 7:24 7 minutes, 24 seconds for 9 month ended FI26 reflecting steady operating performance even as we continue to invest in people 7:32 7 minutes, 32 seconds and technology strengthen our systems and building long-term capabilities. 7:39 7 minutes, 39 seconds We are improving on ground conditions and stronger repayment discipline. 7:43 7 minutes, 43 seconds Impairment costs have moderated consistently over the past few quarters, declining from 76 crores in Q3 FI25 to 26 KES in Q3 FI26. 7:55 7 minutes, 55 seconds This reduction reflects the benefits of tighter underwriting standards, better early stage controls and sustained focus on collections. 8:05 8 minutes, 5 seconds As a result, profitability has improved. 8:08 8 minutes, 8 seconds While sequential growth may not always be the most appropriate metric to assess profitability, 8:14 8 minutes, 14 seconds profit after tax for Q3 FI26 22 crores, registering a sequential increase of 177%. 8:24 8 minutes, 24 seconds For 9 month FI26 profit after taxes stood at 16 crores. 8:30 8 minutes, 30 seconds This improvement in our view is a strong indicator of the broader normalizations largely by our MFI business and other operating trends. 8:42 8 minutes, 42 seconds Asset quality trends have also strengthened. G&PA as of December 2025 stood at 3.4% 4% improving for from 8:51 8 minutes, 51 seconds 4.13% in Q3 FI25 and 3.69% in Q2 FI26 while NNP is to 77%. 9:03 9 minutes, 3 seconds Early delinquency indicators are also moving in the right direction with par 1390 bucket showing sequential 9:11 9 minutes, 11 seconds improvement particularly in the micro finance segment. 9:15 9 minutes, 15 seconds Collection continues to show steady improvements supported by tighter monitoring mechanisms and disciplined field execution. 9:23 9 minutes, 23 seconds Collection efficiencies improved to 96.3% in December compared to 96% 9:29 9 minutes, 29 seconds in September 2025, reflecting strengthening borrower behavior and sustained recovery momentum. 9:38 9 minutes, 38 seconds Operationally, we added 15 new branches this quarter, taking our total branch count to 524 9:46 9 minutes, 46 seconds while remaining focused on strengthening our presence in core geographies. 9:50 9 minutes, 50 seconds On the liquidity and capital front, the board has approved raising up to 500 kodes through NCDS on a private placement basis, providing us with 9:59 9 minutes, 59 seconds additional financial flexibility to support future growth. During the quarter we also raised 522 cr of debt further strengthening our balance sheet. 10:10 10 minutes, 10 seconds We remain very well capitalized with capital adequacy ratio of 38.3% for the 10:17 10 minutes, 17 seconds standalone entity Arman and 52.3% for the subsidiary number of finance. 10:25 10 minutes, 25 seconds Both very comfortable and well above regulatory requirements. 10:30 10 minutes, 30 seconds In addition, our liquidity position remains healthy with 247 crores in cash and bank balances, liquid investments, 10:38 10 minutes, 38 seconds undrawn CC limits which ensures adequate headroom to support business expansion. 10:46 10 minutes, 46 seconds Now moving on to the subsidiary number of finance which is where the MFI portfolio is kept. 10:56 10 minutes, 56 seconds Our MFI portfolio grew by 7.3% sequentially to 1618 KES supported by strong 11:04 11 minutes, 4 seconds dispersments of 455 K during Q3 FY26. 11:11 11 minutes, 11 seconds We are seeing strong traction in the new individual loan portfolio which now stands at 285 Ks. 11:20 11 minutes, 20 seconds While growth has resumed, we have remained measured in our approach, ensuring that expansion is supported by disciplined underwriting and strong risk 11:28 11 minutes, 28 seconds controls, especially in the current operating environment. 11:32 11 minutes, 32 seconds Gross total income for FY or Q3 FI26 stood at 107 KS 11:40 11 minutes, 40 seconds while for 9 month FI26 it stood at 316 kores. Pre-provisioning 11:47 11 minutes, 47 seconds operating profit was for the quarter was 35 crores reflecting a sequential decline of 2.2%. 11:54 11 minutes, 54 seconds For 9 month FI26 POP stood at rupees 102 crores. 12:01 12 minutes, 1 second PP OP should also start improving once AUM starts increase and generating more interest income. Importantly, 12:10 12 minutes, 10 seconds we returned to profitability for number this quarter after four consecutive quarters of loss losses with profit 12:18 12 minutes, 18 seconds after tax standing at 13 kores for the 9month period. We continue to report a loss of 16 kores as we steadily 12:26 12 minutes, 26 seconds work through the stress seen in the earlier year earlier in the year sorry. Our net interest margins have also began to 12:35 12 minutes, 35 seconds improve with Q3 FI26 margins at 14.77%. 12:41 12 minutes, 41 seconds This is driven by two factors. Our ability to raise borrowing at competitive rates and new portfolio being built at healthier yield levels. 12:51 12 minutes, 51 seconds Asset quality trends continue to move in the right direction. G&PA stood at 3.4% 4% and NNPA at 66% 13:01 13 minutes, 1 second reflecting improving portfolio stability. 13:04 13 minutes, 4 seconds Collections have strengthened on month-to-month basis with December collection efficiency at 96.4% 13:11 13 minutes, 11 seconds and Xbucket collections of 99.3% in the MFI book. Early trends for January and February also indicate continued improvements. 13:23 13 minutes, 23 seconds As of December 2025, 82% of our MF MFI portfolio is covered under the CGFMU 13:30 13 minutes, 30 seconds scheme, providing an additional layer of risk protection and balance sheet comfort. 13:37 13 minutes, 37 seconds Overall, we believe we are past the most challenging phase and now on a steady path of recovery with improving fundamentals, stronger 13:45 13 minutes, 45 seconds controls and renewed confidence across the portfolio. 13:50 13 minutes, 50 seconds Now moving on to the standalone Arman business. During the quarter, we have piloted a new product offering solar loans. 13:58 13 minutes, 58 seconds This initiative started in November is aimed at supporting households and small businesses in adopting clean and sustainable energy solutions. 14:08 14 minutes, 8 seconds The product carries an average ticket size of about two lakhs and has been rolled out across sorry has been rolled out in selected areas across Gujarat. 14:19 14 minutes, 19 seconds The initial response has been encouraging. As of December 2025, we have dispersed approximately 56 lakhs under this portfolio in two months. The 14:28 14 minutes, 28 seconds product has a loan tenure ranging from 12 to 16 months with an average tenure of approximately 30 months offering a 14:36 14 minutes, 36 seconds balanced mix of profitability and manageable repayment structure. 14:41 14 minutes, 41 seconds Beyond this, our non-MFI portfolio continues to witness strong traction. 14:46 14 minutes, 46 seconds Dispersements during the quarter stood at 163 kores comprising of 115 kores in the MSME book, 32 kores in the two-heer book and 16 kores in the microlap book. 14:59 14 minutes, 59 seconds Our EUM stood at 657 kodes registering a year-on-year growth of 28% with 74% of 15:08 15 minutes, 8 seconds this portfolio in the MSN book. uh we continue to see healthy demand across these segments supported by disciplined 15:16 15 minutes, 16 seconds underwriting and improving on ground confidence for Q3 FI26 growth total income stood at 15:24 15 minutes, 24 seconds 54 kores registering a growth of 20.2% quarteron quarter and 3.6% yearonear 15:33 15 minutes, 33 seconds for the 9 month ended FI26 gross total income grew by 20.2% 2% yearonear 257 15:40 15 minutes, 40 seconds crores pre-provisioning operating profit or PPOP for Q3 FI26 stood at 19 KES for the 15:50 15 minutes, 50 seconds 9 month FI26 POP stood at 40 KES reflecting largely stable performance on a 15:57 15 minutes, 57 seconds year-on-year basis despite significant headwinds profit after tax for the quarter stood 16:05 16 minutes, 5 seconds at 9.4 4 KS marking a sequential growth of 5.4%. 16:11 16 minutes, 11 seconds For the 9month FI26 to net 31 kores registering a modest growth of 1% yearonear 16:20 16 minutes, 20 seconds asset quality improved sequentially across our stand alone portfolio. As of December 25, GNTA for MSN stood at 3.74% 16:29 16 minutes, 29 seconds for the lap book at 31% and for the two-wheeler segment at 4.28%. 28%. 16:37 16 minutes, 37 seconds Collections have also strengthened across these segments. In December 2025, collection efficiency of the MSME 16:44 16 minutes, 44 seconds portfolio stood at about 96% while the two-heer portfolio reported collection efficiency of 95.6%. 16:52 16 minutes, 52 seconds Reflecting stable repayment behavior and disciplined followup. 16:56 16 minutes, 56 seconds Largely as the environment continues to improve, we remain focused on building a stronger and more resilient company with 17:04 17 minutes, 4 seconds disciplined growth, prudent risk management and committed team on the ground. We are confident of delivering sustainable performance in the quarters 17:12 17 minutes, 12 seconds ahead. With that, I believe we can now open the floor for questions. Thank you very much. 17:20 17 minutes, 20 seconds Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press 17:27 17 minutes, 27 seconds star and one on the touchstone telephone. If you wish to remove yourself from question Q, you may press 17:34 17 minutes, 34 seconds star and two. Participants are requested to use handsets while asking a question. 17:41 17 minutes, 41 seconds Ladies and gentlemen will wait for a moment while the question cue assembles. 17:55 17 minutes, 55 seconds The first question is from the line of Kartik Shinas from Unifi Mutual Fund. Please go ahead. 18:02 18 minutes, 2 seconds Uh thank you so much. Uh congratulations team for the good set of numbers and the organizational change. So I had uh two 18:10 18 minutes, 10 seconds or three questions. First one uh being what will be the percentage of uh the 18:16 18 minutes, 16 seconds loan book that uh that would represent the loans raised in FI26. Uh now sir what will be the percentage of the loan 18:25 18 minutes, 25 seconds book that that is that represents FI26 the loans that have been raised in FI26. 18:33 18 minutes, 33 seconds The loans that we have given out, how much of the AUM will contribute to loans that were dispersed in 26? Is that is that the question? Did I get that right? 18:44 18 minutes, 44 seconds Yeah. FI26. Yeah. Right. 18:47 18 minutes, 47 seconds Do you have that number? So not be readily available, Karthik. But uh generally if I give a good guesstimate, it will be sometimes about 70%. 18:57 18 minutes, 57 seconds Yeah. 65 70% would be a good guess also from me. We can pull that number out and uh give it out to you. 19:06 19 minutes, 6 seconds Sure. Uh sir uh when uh when you just uh mentioned about the collection efficiency 96.4% 4% for MFI. 19:15 19 minutes, 15 seconds Uh so while the peers have reported uh collection efficiencies of 90% and above 19:23 19 minutes, 23 seconds what would be the uh difference in the calculations or how do we compute visa we collection efficiency how how do we uh 19:31 19 minutes, 31 seconds you know understand the collection efficiency in right metric or how do we compare it so that's so so so that's a good question. So 19:41 19 minutes, 41 seconds there are two kinds of collection efficiencies which are reported. So one is typically called a zero bucket uh 19:49 19 minutes, 49 seconds collection efficiency or other is the overall total uh across all buckets. So 19:57 19 minutes, 57 seconds the number that you are most likely seeing is the X bucket or the zero bucket collection efficiency for which ours is about 99.3%. 20:11 20 minutes, 11 seconds Got it sir. Sure. Understood sir. Now and uh sir if I may ask one question uh 20:18 20 minutes, 18 seconds what are the key uh changes to your um 20:25 20 minutes, 25 seconds overaging episode uh versus visav as it is now and see this going forward. So as 20:33 20 minutes, 33 seconds our EVL model strengthen how have we strengthened our EL model to accommodate such kind of shocks. So what will be the 20:40 20 minutes, 40 seconds key parameters that have changed in the ECL model? 20:44 20 minutes, 44 seconds In the ECL model you are saying yeah right in your assumptions 20:51 20 minutes, 51 seconds the all we can do is provide more management overlay. 20:57 20 minutes, 57 seconds uh our ECL model is evaluated semianually right semianually semiannually and whatever 21:05 21 minutes, 5 seconds uh needs to change in that that is the pro I mean you know once a once a account goes into one plus DPD that's 21:14 21 minutes, 14 seconds when the ECL model kicks in and then obviously there is some bit of uh provisioning which is there on the zero 21:21 21 minutes, 21 seconds bucket as well uh in addition uh look uh if I can add yeah So in 2425 21:29 21 minutes, 29 seconds uh when you really saw the effect quality duration ECL is one way of ensuring 21:36 21 minutes, 36 seconds covering yourself up for a probable future losses. But as a strategy it was also important for us to ensure that at 21:45 21 minutes, 45 seconds a sector level if the stress continues then how do we safeguard ourselves and that's wherein you probably one of the 21:53 21 minutes, 53 seconds few who uh took the uh leap forward and started subscribing to the CDFI new 22:00 22 minutes coverage and as Aluk during his opening remarks commented that we already have 22:06 22 minutes, 6 seconds 82% of our micro finance book in Nambra uh been covered under the CGN cover uh 22:15 22 minutes, 15 seconds which kind of came into existence since uh October 2024. Right. 22:19 22 minutes, 19 seconds Right. So I think that's a that's an excellent point. So you know provisioning I I know a lot of people 22:26 22 minutes, 26 seconds put a lot of emphasis on uh the provisioning figure but I mean you know 22:34 22 minutes, 34 seconds from a non-accounting standpoint aside only thing the provisioning helps is to income it's just a balance sheet figure so I 22:43 22 minutes, 43 seconds mean yeah I I guess that provides comfort to some people but you know like having adequate liquidity 22:52 22 minutes, 52 seconds uh sufficient capital available you know and other factors play a lot bigger part 22:58 22 minutes, 58 seconds for companies to get out of uh any jam that they find in themselves in during a 23:06 23 minutes, 6 seconds down cycle. So CGFMU was definitely one of those calls where if there was a way 23:13 23 minutes, 13 seconds to you know sort of hedge away the risk by paying some premium I think it was a no-brainer and that's what we jumped into and that is 23:22 23 minutes, 22 seconds basically the uh the the insurance policy available to us today in case something drastically goes wrong again in a short period of time. 23:34 23 minutes, 34 seconds So just a follow-up question. So in that case will your uh provision PCRs come down now that your 82% of your books a book is now covered by the scheme? 23:48 23 minutes, 48 seconds Yes, you're right because uh you know you paying for the default guarantee cover and you're covered for every 100 23:56 23 minutes, 56 seconds rupee that you kind of take a coverage for. The default guarantee cover applies to about 75% of it. Right. Right. 24:03 24 minutes, 3 seconds So the provisioning requirement to that extent would come down. Right. So in in some ways the opex would increase 24:10 24 minutes, 10 seconds because you're paying for the cover and subsequently your provisioning might decrease to the percentage that that 24:18 24 minutes, 18 seconds cover is guaranteed for those particular assets which are in default. 24:23 24 minutes, 23 seconds Got it sir. And last question is on the growth rate. So now that the entire uh sector is on a steady state like coming 24:33 24 minutes, 33 seconds out of the woods. So uh just talking about growth rate uh how would you see sir now that the number of lenders is 24:40 24 minutes, 40 seconds capped and then you have a high rejection ratio. So going forward what will be the strategy to grow then? So would you go would you have to seek more 24:49 24 minutes, 49 seconds and more uh penetration or would you have to give uh how do you grow then? So in terms of your strategy 24:58 24 minutes, 58 seconds also the growth see there are couple of things here. So first of all, let me say that hopefully 25:07 25 minutes, 7 seconds people like myself and the industry has learned enough lessons where uh just because the market is improving, 25:14 25 minutes, 14 seconds we don't really go into not just unreasonable growth. You can grow fine but you know not just put growth ahead 25:23 25 minutes, 23 seconds of uh whatever the lessons that were learned during these crisis, right? 25:29 25 minutes, 29 seconds uh people have a tendency to sort of forgive and forget and move on after a 25:36 25 minutes, 36 seconds couple of years and uh so my my fear is that is exactly what's going to happen again and hopefully that does not 25:44 25 minutes, 44 seconds happen. Uh so whatever growth comes in has to be calibrated. It has to be well thought out. 25:52 25 minutes, 52 seconds uh but to answer your specific question you are right uh as far as JLG and things are concerned uh you know I mean 26:01 26 minutes, 1 second the culture is diluted you are restricted with underwriting and every or you are restricted in terms of number of mfi and total leveraging and other 26:10 26 minutes, 10 seconds factors and so honestly as a company we have already started to redefine of what is 26:19 26 minutes, 19 seconds micro finance right because it's not discuss the JLG model that might be a model that is there and is become is 26:27 26 minutes, 27 seconds still is a substantial part of your books. Uh but I personally feel that the future is in product innovation and better underwriting. 26:36 26 minutes, 36 seconds If we are able to assess the customer better and that's what we are trying to do with the BCM model that's what we are trying to do with technology 26:45 26 minutes, 45 seconds uh with new algorithms and stuff that we are starting soon that if we can assess the customer better we don't need them in a group we can service them 26:53 26 minutes, 53 seconds individually and we have been doing that in the MSME book as well for many many years successfully perhaps even more 27:00 27 minutes successfully than the JMG model so I believe that the next phase of growth is 27:06 27 minutes, 6 seconds going to come with uh innovating the product structure itself. So we are not saying reinvent 27:14 27 minutes, 14 seconds the wheel and find new customers but the segment that you are servicing can you evaluate them better and service them 27:22 27 minutes, 22 seconds with uh different products basically. 27:28 27 minutes, 28 seconds Sure. Uh thanks that's it. All the very best. Thank you. 27:36 27 minutes, 36 seconds The next question is from the line of RDRA Kraija from I thought Financial Consulting. Please go ahead. 27:46 27 minutes, 46 seconds Yeah. Thank you for the opportunity. So can you speak little louder please? 27:53 27 minutes, 53 seconds Yeah. 27:57 27 minutes, 57 seconds Little more sir. We can't hear you properly. Yeah. 28:05 28 minutes, 5 seconds I wanted to check sir what uh kind of growth rates would be we would we be comfortable uh now the industry books 28:13 28 minutes, 13 seconds has all been cleaned up and all of that um 28:21 28 minutes, 21 seconds that's an interesting question and that's probably one that I also struggle with is there a growth rate that we can 28:30 28 minutes, 30 seconds target or should the growth naturally as a function of all the things that all 28:37 28 minutes, 37 seconds the changes and all that you are trying to do. So 28:43 28 minutes, 43 seconds I mean I would say in FI27 roughly speaking I would be comfortable growing maybe 25% just throwing a figure 28:52 28 minutes, 52 seconds in the air. Uh but I think we are going to stop doing those kinds of things that 28:59 28 minutes, 59 seconds okay we want to grow at 40% and what do we need to get there? I think it needs to be a function of many many different 29:06 29 minutes, 6 seconds things and the growth figure has to be reverse engineered in that perspective. 29:14 29 minutes, 14 seconds Uh so usually there are right after a crisis there are short-term opportunities 29:22 29 minutes, 22 seconds available typically we have advantage of. So you might see a sort of strong growth in the 29:30 29 minutes, 30 seconds last quarter of this year for example when lot of the MFIs are still kind of coming out of crisis working through 29:39 29 minutes, 39 seconds liquidity issues leadership issues and other things. So that creates sort of a temporary vacuum where we can 29:48 29 minutes, 48 seconds sort of take over market share and then typically that slows down right so uh I 29:55 29 minutes, 55 seconds don't have an exact growth percent to give you certainly I don't think we can expect growth out 30:03 30 minutes, 3 seconds of the industry that we have uh the market has been uh historically been 30:10 30 minutes, 10 seconds used to very honestly uh but that said I think FI27 you can 30:17 30 minutes, 17 seconds expect at least a 25% growth understood sir understood and sir would 30:27 30 minutes, 27 seconds it be fair to assume that nonfi book would grow at a much higher rate than mfi book going forward 30:35 30 minutes, 35 seconds I would say that nonjg will grow much much faster whether that is in the subsidiary Namra or in the standalone 30:45 30 minutes, 45 seconds Arman through MSME LAP and two wheeler loans. So uh yes I would say JLG will be 30:52 30 minutes, 52 seconds a lot slower to or even I dare say grow and while these other products will uh continue to grow faster. 31:05 31 minutes, 5 seconds Understood. And sir for uh business going forward what level of debt to equity would we be comfortable before 31:13 31 minutes, 13 seconds getting into the market and raising more uh equity and diluting? 31:18 31 minutes, 18 seconds So what is the peak debt to equity that we foresee? 31:23 31 minutes, 23 seconds We are usually comfortable at about 4 and a2x which we are very quite a distance quite a distance from right now we our 31:30 31 minutes, 30 seconds debt equity is less than two in fact less than one and a half for that matter. Yeah. 31:36 31 minutes, 36 seconds But uh having said that uh I mean with the new normal in the first first milestone would be to reach a debt 31:44 31 minutes, 44 seconds equity of at least three three and a half and looking at the overall how market behaves we might have to go 31:51 31 minutes, 51 seconds forward and largely we can say that at a at an organizational level group level 31:59 31 minutes, 59 seconds uh till aum size of about 5,000 I think we should be comfortable with a capital liqu of upward would look at 25%. So now 32:07 32 minutes, 7 seconds we not really seeing that as a challenge in in our 32:19 32 minutes, 19 seconds understood sir. And uh last question sir from my side uh would we be like uh uh stepping up dispersements a lot on the 32:28 32 minutes, 28 seconds MSME book now or will be we will be focusing more on more new products like one you mentioned uh this quarter we 32:36 32 minutes, 36 seconds have done a pilot on solar goods etc. So what is going to be focus on non MFI side? 32:44 32 minutes, 44 seconds No, I mean I mean 32:51 32 minutes, 51 seconds there are no here. Uh for sure if I can grow the MSME book a lot 32:58 32 minutes, 58 seconds faster. Sure I'll take the opportunity to do that. But uh that product has 33:04 33 minutes, 4 seconds always been uh sort of slow and steady kind of a growth for us and that has worked very well for us during both 33:12 33 minutes, 12 seconds COVID and whatever you call this new crisis. Uh so you know I would rather not take my chances. I've been lucky 33:21 33 minutes, 21 seconds with that product uh for for the past many many years. So I think the growth rate in the MSME book should be similar 33:29 33 minutes, 29 seconds to whatever you have seen in the past 3 four years. Understood sir. Thanks a lot. 33:40 33 minutes, 40 seconds Thank you. 33:42 33 minutes, 42 seconds The next question is from the line of Ron Cha from Orga Capital Advisor LLP. Please go ahead. 33:50 33 minutes, 50 seconds Yeah. Hi. Am I audible? Yes. Yes. 33:55 33 minutes, 55 seconds Uh hi all congratulations on the dispersement growth. Um I have two questions. Uh one is on the pilots which 34:02 34 minutes, 2 seconds we were running uh especially on say lab products etc. Uh just wanted to check on the progress. Have we met internal 34:09 34 minutes, 9 seconds benchmarks for you know to uh kind of now see a significant scale up on these products. Uh in your past answers you 34:16 34 minutes, 16 seconds really mentioned about adding more products. Um so so uh what is the status 34:23 34 minutes, 23 seconds there and uh will we use Namra's distribution kind of you know to go ahead and ramp up this product significantly. 34:35 34 minutes, 35 seconds Yeah. So um so definitely the the lab is doing reasonably well. 34:43 34 minutes, 43 seconds uh little bit of uh sort of fear which is a bull fear in the you know the micro lap in the 34:51 34 minutes, 51 seconds affordable housing space. Obviously there are murmurss of uh something uh of 34:58 34 minutes, 58 seconds quality related issues that might may or may not happen uh in the short term. 35:06 35 minutes, 6 seconds uh but you know we are steadily growing I think Vive what are we now about 6 and a half K dispersement uh on on the lab 35:15 35 minutes, 15 seconds and growing about you know probably 5 to 10% every every one month um and so yeah as far as we are 35:24 35 minutes, 24 seconds concerned we are on schedule for whatever we had envir uh but uh you know I'm very cautious 35:32 35 minutes, 32 seconds about blowing anything up so we'll We'll continue with that slow and steady approach and we'll see as far as 35:40 35 minutes, 40 seconds performance goes. We are facing no significant so far in the lap book lap portfolio it's about uh close to 90 k now 35:49 35 minutes, 49 seconds close to 90 k is largely I think we are out of that project phase because today we kind of doing it across at least 35:56 35 minutes, 56 seconds three states and as we move into UP I mean north in terms of up even uh I mean 36:05 36 minutes, 5 seconds that way we can clearly say that it's definitely not a project phase and we looking at scaling it up in in all these geographies where we're comfortable with 36:14 36 minutes, 14 seconds right and so as far as some of the other pilots I think we had mentioned we started in November uh the rooftop solar 36:22 36 minutes, 22 seconds financing and uh again that's just probably an experiment and also a limited opportunity in the market because there 36:31 36 minutes, 31 seconds are you know government subsidies available directly to the customers. So it has become a very popular option. But 36:38 36 minutes, 38 seconds what we found is that most of the marketing is being done in the urban 36:45 36 minutes, 45 seconds you know metropolitan cities and tier one cities. 36:50 36 minutes, 50 seconds I don't think that reach has developed in the rural yet for uh these rural uh these uh you know these rooftop solars 36:57 36 minutes, 57 seconds and arguably they probably needed more than uh the urban people you know. So uh 37:04 37 minutes, 4 seconds you know we have started this pilot let's see where it goes. I mean uh we have done very small volume so far about 37:11 37 minutes, 11 seconds only about 56 lakhs. Uh the goal is in this quarter to reach about 1 K of uh dispersement monthly by March hopefully. 37:22 37 minutes, 22 seconds So uh we'll keep you posted on that. 37:26 37 minutes, 26 seconds Uh my question was more on math uh given that it's an uh at a critical size can this go to like 500 kores where we are 37:33 37 minutes, 33 seconds MSME bookish uh over next two three years given that if the internal benchmarks are met you just roll it out across your uh different geographies where you already are doing unsecured. 37:45 37 minutes, 45 seconds So the question was more on the lab side. 37:49 37 minutes, 49 seconds It's it's poss it's definitely possible even going past that because you know the lab ticket sizes are larger and the 37:58 37 minutes, 58 seconds stickiness is higher as well because the uh portfol because the tenure is higher. 38:05 38 minutes, 5 seconds uh but uh you know these are not honestly speaking uh from my perspective you have to take 38:14 38 minutes, 14 seconds a balanced approach because lap does not uh well the opex is low in lap as well so let's not compare it to msme but the 38:22 38 minutes, 22 seconds margins are also lower in the secured book so uh it's it's just not a matter of being 38:31 38 minutes, 31 seconds secured or unsecured I think you have to take a calibrated approach uh and uh yeah over 2 three years I 38:39 38 minutes, 39 seconds think it's definitely possible for it to even surpass the MSME portfolio for the reasons which I said but uh I I I I I 38:47 38 minutes, 47 seconds won't really feel comfortable making long-term predictions at this point and second question is on uh MFI uh so 38:56 38 minutes, 56 seconds given that the guards are in place now um lot of the borrowers who may have defaulted in the last cycle are already 39:04 39 minutes, 4 seconds out of the system. Uh so just check wanted to check on the on ground credit growth demand and is that uh aggressive 39:13 39 minutes, 13 seconds enough for us to step up on dispersement is there enough growth. Uh and the second part is uh are the fintex etc 39:20 39 minutes, 20 seconds which were active in the last cycle still relevant as competition or you seeing some of the competition with 39:28 39 minutes, 28 seconds various startups you know exiting the market and uh there are handful of players now catering to this demand. So just wanted to take on uh this front. 39:38 39 minutes, 38 seconds Yeah. So to answer your second question first definitely there are lot fewer players 39:45 39 minutes, 45 seconds uh serving the same customers as we were today uh than they were let's say about 2 years ago or something. So yeah I 39:53 39 minutes, 53 seconds would say again I don't have any numbers to back it up. This is just the feedback which I receive from operations team 40:01 40 minutes, 1 second that definitely their uh overall presence in the markets that we are servicing is significantly lower. Uh 40:09 40 minutes, 9 seconds number one uh your first question was remind me again what was your first question? uh about the growth and 40:19 40 minutes, 19 seconds yeah so that is a I mean again we struggle with these kinds of questions uh very often as well that you know 40:28 40 minutes, 28 seconds during covid you had a significant uh serviceable population drop out 40:35 40 minutes, 35 seconds because of defaults during this cycle you have another significant portion so 40:42 40 minutes, 42 seconds uh the market is becoming from a client perspective is becoming smaller and smaller because for most mfi 40:50 40 minutes, 50 seconds being a pass defaulter is is an autoreject right I mean no no human eye has to even look at it the system will 40:58 40 minutes, 58 seconds automatically reject the customer and so over the long run what do we do with these customers you know I mean I 41:07 41 minutes, 7 seconds don't know you know it's it's it's really a it's a valid question that the industry needs to get together and try 41:15 41 minutes, 15 seconds to figure out that if we keep removing customers who have ever defaulted 41:22 41 minutes, 22 seconds uh from the uh from the overall pool of potential customers you have that in it of itself is a problem. uh but on the 41:30 41 minutes, 30 seconds other hand nobody's going to really risk giving loans to customers who had prior defaults right so so that is one aspect 41:39 41 minutes, 39 seconds of it and that is something that we face on a day-to-day basis that is what pushes up our rejection rate significantly 41:47 41 minutes, 47 seconds as well uh so you were asking about inquiries so the inquiries have increased the 41:55 41 minutes, 55 seconds rejection rate has improved slightly by 2 50% where it was let's say about 80% earlier now it is closer to 77 75 77%. 42:07 42 minutes, 7 seconds Uh so it's it's improved slightly and the inquiries have also increased over the last 2 to 3 months. Uh you know I I 42:17 42 minutes, 17 seconds think our staff is now uh better trained or have better experience that which customers will 42:26 42 minutes, 26 seconds have a higher chance of getting approved. And so that is what the pipeline gets pushed uh into the system 42:33 42 minutes, 33 seconds as well. Uh but there are a lot of contributing factors uh that would you know determine how much we can and 42:41 42 minutes, 41 seconds cannot disperse. Uh obviously past default is a huge uh is a huge issue that the industry would have to solve in the next year or two. 42:54 42 minutes, 54 seconds Uh and my last question is on your recoveries. Uh given that now the disersment can I request you to rejoin the queue for the question. 43:01 43 minutes, 1 second Sure. I'll come back in. Thank you so much for answering my questions. Thank you. 43:06 43 minutes, 6 seconds Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit your 43:14 43 minutes, 14 seconds question to two question per participant. Do you have follow-up question? We request you to rejoin the queue. 43:20 43 minutes, 20 seconds The next question is from the line of Tinme Neymar from Preston Capital Investments. Please go ahead. 43:28 43 minutes, 28 seconds Hi sir, hope I'm audible. 43:30 43 minutes, 30 seconds Uh yes, a little louder if you can please. 43:34 43 minutes, 34 seconds Sure sir. Uh sir, just wanted a little better understanding of the uh trend in 43:41 43 minutes, 41 seconds power on the micro finance side. uh so one if you could explain what has led to such a sharp decline in the 30 to 90 43:49 43 minutes, 49 seconds book in the last two quarters. So have the collections been better or have the fresh inflows have been significantly 43:56 43 minutes, 56 seconds lower and uh secondly the similar the same trend uh is not visible on the 90 44:03 44 minutes, 3 seconds plus book uh which I believe is a book on which you would have had uh all the write offs. So uh if you could explain that as well. 44:13 44 minutes, 13 seconds Yeah. So you know it's the reduction in PAR figures is a 44:23 44 minutes, 23 seconds you know at the expense of overusing this a function of many different things. So first of all you know 44:31 44 minutes, 31 seconds whatever pain points we saw were essentially dispersements made prior to March 2024. 44:39 44 minutes, 39 seconds So, and typically when you work with a 24 month cycle in the MFI pool, 44:46 44 minutes, 46 seconds uh long story short, you know, either those customers have mostly repaid you back or they have defaulted and we have 44:54 44 minutes, 54 seconds written them off or are provided for and are already at 90 plus. Whatever new pool was created post September or 45:02 45 minutes, 2 seconds November that we are tracking closely with new underwriting standards with guard rails in place with uh you know 45:10 45 minutes, 10 seconds very very calibrated kind of dispersements. We were looking at their performance and following up on their 45:19 45 minutes, 19 seconds performance in terms of quality basis very very closely. So the reduction is largely replacing bad customers with 45:27 45 minutes, 27 seconds good customers. That's number one. Uh that's probably 80% of the reason. The 45:34 45 minutes, 34 seconds 20% is probably slightly better macroeconomics and better collection team on the ground level. 45:42 45 minutes, 42 seconds Vive anything to add I don't know. Wow. 45:44 45 minutes, 44 seconds No. Uh so again just from uh a more statistical point of view because you would have seen that the X bucket 45:52 45 minutes, 52 seconds collection efficiency or the zero bucket collection efficiencies have been constantly improving in the sector and also for a number which automatically 46:01 46 minutes, 1 second means the slippage ratios into the 90 to 30 will you know in a phase manner come down 46:08 46 minutes, 8 seconds because uh when the when the trouble was at the peak in let's say quarter two of the last biscuit Then the collection the the zero bucket 46:17 46 minutes, 17 seconds collection efficiencies have come down to as low as 95 uh 97.5 or something and 46:24 46 minutes, 24 seconds so they they're upwards of 99 that clearly means that you're adding so many less defaulters every month. 46:31 46 minutes, 31 seconds Correct. Correct. Yeah. So that's also a very interesting point. So right the the zero DPDs is something that in the NFI pool you follow very closely. 46:43 46 minutes, 43 seconds Usually speaking, again this is a very rough statistic, but a customer who goes 46:50 46 minutes, 50 seconds into one plus bucket depending on what crisis it is, whether it's COVID or demon or others, there's 46:59 46 minutes, 59 seconds about a 30 to 50% chance or 30 to 40% chance that they will eventually write them off, right? So they'll keep going 47:07 47 minutes, 7 seconds into different buck into 30 60 90. So the idea is that you don't want things to slip into even on one plus bucket 47:15 47 minutes, 15 seconds because then the probabilities are very high that eventually you'll have to uh provide for them and write write them 47:22 47 minutes, 22 seconds off completely. Uh so yeah that has come down significantly as well but for reasons which I just explained to you. 47:32 47 minutes, 32 seconds Oh sure sir understood. Thank you. Thank you. 47:39 47 minutes, 39 seconds The next question is from the line of Serves Gupta from Maximal Company. Please go ahead. 47:47 47 minutes, 47 seconds Yeah. Hi sir. Uh good afternoon and thank you for giving the opportunity. So sir, first question is on your OPEX. Uh 47:55 47 minutes, 55 seconds so for 9 months we can see that the OPEX in absolute terms has increased by around 40 odd crores and around 17 18 cr 48:04 48 minutes, 4 seconds is being contributed by the MFI business. So I'm guessing some part of it is related to the premiums that you 48:10 48 minutes, 10 seconds might have paid. Uh but if you can explain you know what has led to this sort of an increase in the OPEX and how 48:18 48 minutes, 18 seconds we should look at OPEX ratios going forward. Yeah. So OPEX has definitely increased. 48:26 48 minutes, 26 seconds There is no denying it. 48:28 48 minutes, 28 seconds uh I mean I I've covered this in previous calls as well but uh uh you 48:36 48 minutes, 36 seconds know largely we added the whole BCM structure which is expensive we separated 48:43 48 minutes, 43 seconds uh you know operations completely from credit uh and so that adds to the opex uh we 48:51 48 minutes, 51 seconds have a big recovery team which is in place which is you know collecting a good bit 48:58 48 minutes, 58 seconds of money that otherwise would have gone into NPAs and grouping and write offs. 49:05 49 minutes, 5 seconds Uh so definitely we are getting more value from them than what we are spending at this point for sure. uh but 49:12 49 minutes, 12 seconds that has also increased the overall uh opex related to employee cost and as you 49:19 49 minutes, 19 seconds mentioned the CGFMU we have paid 7 this year CG 49:28 49 minutes, 28 seconds uh so that has also that is honestly the only way to I I don't think it going to be possible. 49:44 49 minutes, 44 seconds All we can do is that at the existing level you increase the portfolio and therefore the interest income that you 49:52 49 minutes, 52 seconds are earning a portfolio and that will increase the PPO fee. I don't think it 49:58 49 minutes, 58 seconds is a good strategy today to about reducing that absolute number of 50:05 50 minutes, 5 seconds opex but certainly from a percentage standpoint it will slowly start coming down. 50:11 50 minutes, 11 seconds uh but even in the standalone piece I think the OPEX has increased by almost 50%. 50:18 50 minutes, 18 seconds So MFI we understand collection teams and credit structure and uh premiums but in standalone 50:26 50 minutes, 26 seconds uh what has contributed to this highex standalone you're talking of Arman. 50:34 50 minutes, 34 seconds Yes. 50:36 50 minutes, 36 seconds Okay. So uh standalone Arman um we've kind of added team on the lap and there 50:44 50 minutes, 44 seconds has been expansion of the Arman team itself into states like UPRA and yeah originally just expansion basically 50:52 50 minutes, 52 seconds so basically expansion and then we've added this entire uh uh you know uh solar energy or green energy team. So 51:01 51 minutes, 1 second it's not a very very large thing but still uh that's something that has come up uh in the quarter three itself. 51:07 51 minutes, 7 seconds No I think if you look at it we have opened new branches we have opened new divisions you know 51:14 51 minutes, 14 seconds employee costs are going up just like many other companies in all over India. 51:20 51 minutes, 20 seconds So I don't have any better explanation than that. And additionally also to address uh while this number in absolute 51:29 51 minutes, 29 seconds terms may not be very high because two wheeler itself is not a very big uh portfolio. It's just about less than 10% 51:37 51 minutes, 37 seconds or around 10% for for the standalone but quarter 3 is uh the highest performance 51:45 51 minutes, 45 seconds quarter for the two wheeler and that's where the expense uh also kind of peaks for the second. Yeah, I think he's 51:52 51 minutes, 52 seconds talking about the 9 months. Yeah. So, so kind of both 9 months and where should it settle sir? Where 52:01 52 minutes, 1 second are your opex ratios going to settle? If you can give some guidance on that. 52:07 52 minutes, 7 seconds No, I would love for them to at about four and a well for micro console level. 52:14 52 minutes, 14 seconds Let's say about probably four and a half to five about 5% or typically I think the good new target. 52:28 52 minutes, 28 seconds Okay. And sir this quarter um I think last quarter we felt that you know you are slowing down a little bit on the 52:35 52 minutes, 35 seconds MSME piece and increasing other u product segments uh more than MSME but 52:42 52 minutes, 42 seconds this quarter I think again we have seen a sharp increase in the MSME dispersements reserves other bucket 52:50 52 minutes, 50 seconds other products I MSME please that what you are 52:58 52 minutes, 58 seconds No. So last quarter I think going by the commentary it looked like you know you are relatively preferring other products 53:05 53 minutes, 5 seconds uh which are lower ticket lower yielding uh products within your standalone business but this quarter I think again 53:12 53 minutes, 12 seconds MSME has grown the most in the dispersements. So so has there been any change there? 53:20 53 minutes, 20 seconds Let's let's first kind of uh the first quarter misunderstood 53:28 53 minutes, 28 seconds uh we we never kind of wanting to slow down our unsecured 53:36 53 minutes, 36 seconds last in fact we started or ramped up our branch network in newer states as well. 53:43 53 minutes, 43 seconds So maybe uh you know uh I say a lot of things sometimes I don't 53:49 53 minutes, 49 seconds remember it. So it wasn't probably 53:56 53 minutes, 56 seconds said it in a prop that I don't remember but no my intent was never to slow down 54:02 54 minutes, 2 seconds MS. So let me very very okay sir thank you and all the best. 54:11 54 minutes, 11 seconds Thank you. 54:13 54 minutes, 13 seconds The next question is from the line of Shinas V from Bell Weather. Please go ahead. 54:19 54 minutes, 19 seconds Hi Adok um just wanted to uh take forward from Ronuk's question on loan 54:26 54 minutes, 26 seconds against property. So what we're kind of looking for is a slightly more nuanced and detailed understanding of how do you 54:33 54 minutes, 33 seconds plan to roll out this product you know and what kind of uh you know customer occupancies have you know seen you seen 54:41 54 minutes, 41 seconds join join in or cohorts where uh you know it's worked out well and if you can share uh you know between the three 54:47 54 minutes, 47 seconds markets how has been behavioral pattern and one of the issues in this particular product has been that there's been some 54:55 54 minutes, 55 seconds level of overleveraging at the end client And you know what are your thoughts on that and how have you built a credit 55:02 55 minutes, 2 seconds process to kind of keep a check because if the uh customer has not been that overleveraged the the collections in 55:09 55 minutes, 9 seconds these products are phenomenal. So generally you want to get a perspective of how you're seeing this product and its nuances over like a 3ear window. 55:19 55 minutes, 19 seconds So let me tell you that the NDAs in this segment are pretty much uh very very low 55:26 55 minutes, 26 seconds at this point. I I think it's only 30 bits. Uh so I don't have enough data to develop that nuance. Is one occupation 55:36 55 minutes, 36 seconds better than other? Is one region better than other? I have not noticed anything that you can uh from at least from the 55:43 55 minutes, 43 seconds BI perspective we don't we track all of these things but nothing really has emerged as more or less risky uh in 55:51 55 minutes, 51 seconds terms of lab uh now we are rolling them out in our MSME branches which are located in 56:00 56 minutes Gujarat MP uh Rajasthan Telangana and Maharashtra we are not rolling out but 56:07 56 minutes, 7 seconds obviously we have in Maharashtra as well. So, so far we have ruled them out in MP Telangana and Gujarat. 56:16 56 minutes, 16 seconds I we have not ruled them out in Rajasthan yet. Not even in Rajasthan that way. 56:22 56 minutes, 22 seconds maybe few cases he might have tried there to just to get the flavor of the place but right but the major uh pie for the uh lab 56:31 56 minutes, 31 seconds portfolio as we talked today stands in Gujarat which is more than 60% of the entire 56:39 56 minutes, 39 seconds and then MC and uh as we scale up may maybe UP might be also one of the larger 56:48 56 minutes, 48 seconds yeah right so in the MSM we are uh pushing our branches towards 56:56 56 minutes, 56 seconds and so that can be another place that we can start microlap uh in the up market. 57:03 57 minutes, 3 seconds Uh now in terms of underwriting you're absolutely right. Uh see in the I don't know so much about the lap but 57:12 57 minutes, 12 seconds at least in the affordable housing you know some players are better than others. Some are just considering 57:18 57 minutes, 18 seconds something as secured and just not doing a lot of underwriting checks and I mean they are they are making sure that all 57:27 57 minutes, 27 seconds of their loan agreements and uh mortgage deeds and everything are absolutely clean but as far as assessing whether 57:36 57 minutes, 36 seconds the customer can actually repay the loan I don't think lot of players in in my limited opinion are doing a very very 57:45 57 minutes, 45 seconds good job just getting comfort from the fact that it's a secure product you know and I believe that 57:53 57 minutes, 53 seconds uh in the Indian context it's very very difficult to uh you know repossess somebody's house 58:02 58 minutes, 2 seconds their primary residence and and and so whether it's secured or unsecured you have to make sure that the underwriting 58:10 58 minutes, 10 seconds is all the underwriting you do is as you know assuming that it's going to be very difficult ult to uh 58:20 58 minutes, 20 seconds get comfort from the the security itself. So we are doing everything that we can. 58:26 58 minutes, 26 seconds I mean obviously we are doing a reasonably well income assessment and uh making sure that uh 58:35 58 minutes, 35 seconds you know on the ground level doing all kinds of checks that we possibly can. uh income proofs are difficult to get in 58:44 58 minutes, 44 seconds some of these segment markets but in the event income proof is not available our BCMs go in and make sure that they get a 58:52 58 minutes, 52 seconds good guesstimate around it by supporting so uh I don't know if that answers your question or not uh 59:00 59 minutes yeah perfect just to so effectively we have 120 MSN branches so over a period of time most of these branches will also 59:09 59 minutes, 9 seconds service micro Would that be a fair understanding? 59:13 59 minutes, 13 seconds I would say most, not all for sure, but most most would. Yeah. 59:18 59 minutes, 18 seconds Got it. And and these these are separate teams completely sitting there, right? 59:22 59 minutes, 22 seconds Because last time I checked the credit appraisal team of the micro lab is completely different. So it's basically one infrastructure housing two different teams. 59:32 59 minutes, 32 seconds It's one infrastructure housing two separate teams. But in many cases we are using uh so there are two levels of DCMS 59:40 59 minutes, 40 seconds that we have. Uh the more senior DCM structure that we have can do the 59:47 59 minutes, 47 seconds evaluation for both MSME and microlab uh and of course there are other branches where it is separated also. So 59:56 59 minutes, 56 seconds it just depends based on branchto branch nuances. 1:00:00 1 hour Got it. Got it. Just one last question is in in in MF5 we've had a credit officer in many of these branches. Just 1:00:08 1 hour, 8 seconds wanted to circle back even last time you had very encouraging feedback on this practice. uh you know how has been your you know assessment of loans that have 1:00:17 1 hour, 17 seconds been dispersed post this particular uh you know addition and in those branches have you particularly seen quality of 1:00:25 1 hour, 25 seconds book being better when there is a person kind of overlooking the specific so on and so forth right so on on and that's a great 1:00:34 1 hour, 34 seconds question so on average uh nonBC nonBCM originated customers post let's say November of 2024. 1:00:47 1 hour, 47 seconds Yeah. Uh compared to BCM originated cases post November 2024 there's almost a 50% difference in the default rates. 1:00:58 1 hour, 58 seconds So but the default rate is low as it is you know. So uh so if one let's say if it 1:01:07 1 hour, 1 minute, 7 seconds was uh non PCM originated where you know 2% this is close to 1%. So there there 1:01:16 1 hour, 1 minute, 16 seconds is a broad difference right now. Whether that carries forward during credit cycles is anybody's guess because 1:01:24 1 hour, 1 minute, 24 seconds uh you know it's easy to say 50% when your default rates are low but whether that same thing carries forward when the 1:01:32 1 hour, 1 minute, 32 seconds default rates are high uh I don't know and there's no way to know until you reach that right. So uh but 1:01:41 1 hour, 1 minute, 41 seconds I'm very bullish on it and having DCMS apart from having uh apart from 1:01:49 1 hour, 1 minute, 49 seconds reduction in overall credit cost also serves another benefit in terms of culture and having the ability to 1:01:57 1 hour, 1 minute, 57 seconds introduce new products right so if you are just doing the same GLG you know one could argue well you know given the cost 1:02:06 1 hour, 2 minutes, 6 seconds and what you are saving it's probably it might not be worthwhile to have BCM but having BCMs every new product that 1:02:14 1 hour, 2 minutes, 14 seconds we introduce is always like okay this requires lot more evaluation it's higher ticket size it's something we haven't done and so it allows us a lot more 1:02:23 1 hour, 2 minutes, 23 seconds flexibility to be agile in terms of offering new products or changing our products 1:02:31 1 hour, 2 minutes, 31 seconds perfect congratulations that sounds good here I'll get back into the question you thanks a lot thank 1:02:40 1 hour, 2 minutes, 40 seconds The next question is from the line of the Prakash from Kan Capital Investment. Please go ahead. 1:02:46 1 hour, 2 minutes, 46 seconds Hi. Hi sir. Uh so my first question is on the uh this poisoning in MNPA. So we've seen some rise in the NNPA 1:02:55 1 hour, 2 minutes, 55 seconds uh from generally I think your last three quarters were about.5 and now this has changed up to8. So does it mean that you have confidence in terms of your GMP 1:03:04 1 hour, 3 minutes, 4 seconds accretion to be lower going forward and that's why maybe not provided for and you're comfortable with that kind of numbers. 1:03:13 1 hour, 3 minutes, 13 seconds Two things that have happened here uh over the last one year is a uh given the overall market scenario we've been 1:03:22 1 hour, 3 minutes, 22 seconds slightly aggressive in our write offs and hence uh the onbalance sheet uh 1:03:28 1 hour, 3 minutes, 28 seconds books uh the uh the average DPDS of the NPS are far lower uh when you compare on 1:03:36 1 hour, 3 minutes, 36 seconds a YI basis right so that means uh something which sits at at an average of 1:03:42 1 hour, 3 minutes, 42 seconds let's say 180 BPD in my NBA book these will be an average that would have been let's say 225 days my NBA provisioning 1:03:52 1 hour, 3 minutes, 52 seconds requirement based on the analysis will slightly come down paper down so to that extent there is an improvement in the uh 1:03:59 1 hour, 3 minutes, 59 seconds the overall uh collection efficiencies and the uh quality of the NPA book 1:04:07 1 hour, 4 minutes, 7 seconds got it got it and uh so just a follow uh just a question on this Uh you said product innovation and new products right? If you can give some more color 1:04:16 1 hour, 4 minutes, 16 seconds on around the site like uh we see that solar uh financing uh as a new product launch and uh can you provide your some 1:04:25 1 hour, 4 minutes, 25 seconds thoughts on new product launches in the foreseeable period. 1:04:30 1 hour, 4 minutes, 30 seconds So, so the individual loan portfolio uh in the micro finance uh number side is one such thing where 1:04:39 1 hour, 4 minutes, 39 seconds uh I think what is the book now of that 28 285 85 kores odd kes yeah uh so that is one 1:04:46 1 hour, 4 minutes, 46 seconds part where we are using the BCS to evaluate customers almost similar to how we evaluate them in the MSME book right and we are 1:04:56 1 hour, 4 minutes, 56 seconds focusing on uh see one of the main purposes of JLG was also the OPEC side 1:05:03 1 hour, 5 minutes, 3 seconds because we were doing doorstep collections and so instead of going to one customer to collect at their doorstep it's a lot easier to go to five and collect at 1:05:12 1 hour, 5 minutes, 12 seconds their doorstep right so there was apart from the risk mitigation part there was a good case in terms of operating cost 1:05:19 1 hour, 5 minutes, 19 seconds as well so with these customers we are targeting cashless and uh I think last month until last month in this entire 1:05:28 1 hour, 5 minutes, 28 seconds portfolio I 75 to 80% of the uh money was coming through cashless mechanisms uh 1:05:36 1 hour, 5 minutes, 36 seconds which is primarily the UPI mandate UPI mandates or N mandates. So that is the pool model. We are not waiting for 1:05:44 1 hour, 5 minutes, 44 seconds the customers to initiate a cashless payment but we are directly pulling it out of their bank accounts. So as long 1:05:51 1 hour, 5 minutes, 51 seconds as it remains that way you know even if it maybe slightly goes slightly lower uh I'm very very comfortable with the individual book in fact more so because 1:06:00 1 hour, 6 minutes we are doing a lot more underwriting. Uh the only problem with individual that I had was you know the opex side. Uh but 1:06:09 1 hour, 6 minutes, 9 seconds as long as it continues to perform well in cashless payments I don't foresee much of an issue there. So that is the 1:06:17 1 hour, 6 minutes, 17 seconds uh individual loan side. Other than that obviously we had started microlap I we have talked in quite a bit of detail in 1:06:25 1 hour, 6 minutes, 25 seconds this call about that I I won't get into that solar is just an experiment I mean I don't want to spend too much time 1:06:34 1 hour, 6 minutes, 34 seconds talking about it uh people who have been following the company knows that we do these occasional pilots and experiments 1:06:42 1 hour, 6 minutes, 42 seconds uh I think let's talk more about it in next quarter let let's it's it's it's really too early to uh kind of get into a lot of details about that. 1:06:54 1 hour, 6 minutes, 54 seconds Got it. Thank you. Thank you. 1:06:59 1 hour, 6 minutes, 59 seconds The next question is from the line of Sham Sat from M Capital Partners. Please go ahead. 1:07:08 1 hour, 7 minutes, 8 seconds Hello sir, good afternoon. Um I want to understand firstly on the MSMA brokerage. uh we had uh spoken about 1:07:15 1 hour, 7 minutes, 15 seconds earlier with another participant how the book grew and it contributes a significant portion of the high yield book. So uh because this is a hightouch 1:07:24 1 hour, 7 minutes, 24 seconds cache collection model I wanted to understand uh do the current uh branches and manpower infrastructure that we have does it support uh further scaling of 1:07:34 1 hour, 7 minutes, 34 seconds this vertical if required without diluting the underwriting standards the current infra so what you are asking 1:07:42 1 hour, 7 minutes, 42 seconds is can I push the portfolio higher without increasing operating cost is that correct correct correct yes Yeah. 1:07:52 1 hour, 7 minutes, 52 seconds Yes. But not by much. Maybe 10 20%. 1:07:59 1 hour, 7 minutes, 59 seconds I I take that back. I mean we have a we have a lot new branches. 1:08:04 1 hour, 8 minutes, 4 seconds Maybe by about 20 25% for sure can we can just you know we can scale up without increasing opex. 1:08:12 1 hour, 8 minutes, 12 seconds Uh will we I don't know. I mean you know it's a continuous process. Uh you got to open branches invest in people. 1:08:20 1 hour, 8 minutes, 20 seconds uh the case load of around 300 or something in the MSME I have to hire another ICO 1:08:29 1 hour, 8 minutes, 29 seconds once the branch reaches a certain portfolio I have to get assistant VM once the branch reaches a certain portfolio 1:08:38 1 hour, 8 minutes, 38 seconds in the credit side instead of one and then there's a whole support team above it so uh 1:08:47 1 hour, 8 minutes, 47 seconds MFI 100% I tell you that we can scale that up quite a bit before u need to hire 1:08:56 1 hour, 8 minutes, 56 seconds new people at least in terms of portfolio and dispersement and besides new branches I'm not too 1:09:03 1 hour, 9 minutes, 3 seconds sure okay sir understood sir and the next question with regards to uh in the 1:09:11 1 hour, 9 minutes, 11 seconds presentation we had mentioned that digital collections are now about 25% and uh you're uh so I want to understand 1:09:18 1 hour, 9 minutes, 18 seconds with that are we analyzing the credit behavior of digital payers versus cash payers and if in case we're doing that 1:09:26 1 hour, 9 minutes, 26 seconds and if digital payers show a lower default rate are we thinking of any differential pricing with lower interest rates to incentivize digital adoption. 1:09:36 1 hour, 9 minutes, 36 seconds Oh that's a good question. So I mean at the origination stage 1:09:42 1 hour, 9 minutes, 42 seconds are that we cash payers and cashless because we encourage all customers to become cash 1:09:52 1 hour, 9 minutes, 52 seconds at origination I I don't I mean that's it's an interesting point because we would have to look into that at that 1:10:00 1 hour, 10 minutes point but uh right now no we are not distinguishing ing cash payers versus 1:10:08 1 hour, 10 minutes, 8 seconds cashless players. Uh it's hard to tell them apart during the origination side. 1:10:16 1 hour, 10 minutes, 16 seconds Uh in terms of offering better rates to people who are paying cashless in further cycles, of course happy to do so 1:10:24 1 hour, 10 minutes, 24 seconds because the operating cost would be much lower. uh uh so yeah I think uh if a 1:10:32 1 hour, 10 minutes, 32 seconds customer is paying a significant uh their EMIs through cashless mechanisms uh definitely we can pass on 1:10:41 1 hour, 10 minutes, 41 seconds some okay sir got it so next I wanted to 1:10:48 1 hour, 10 minutes, 48 seconds understand uh you had mentioned uh there were commentary around like visible signs of normalization and credit 1:10:55 1 hour, 10 minutes, 55 seconds behavior is ensuring right uh like industrywide So given that our MFI GMPP has moderated down to 3.4%. Uh do you 1:11:03 1 hour, 11 minutes, 3 seconds think that this is the bottom of the uh credit cost cycle that we're seeing or in the coming quarters can we expect more writeoffs? 1:11:11 1 hour, 11 minutes, 11 seconds Um I I you know I I'm not sure exactly how to answer that. 1:11:19 1 hour, 11 minutes, 19 seconds Uh would GMT continue to go down uh from the 3 and a half%? 1:11:26 1 hour, 11 minutes, 26 seconds My judgment tells me that yes definitely in M4 it should go down further uh but you are the accounting also. So 1:11:35 1 hour, 11 minutes, 35 seconds primarily if you can look at that uh the uh GNPA plus uh 12 month trading right 1:11:42 1 hour, 11 minutes, 42 seconds if we can put it that way as a figure uh that that definitely has been tapering downwards for the last three quarters 1:11:50 1 hour, 11 minutes, 50 seconds and we feel that this will continue to kind of keep coming down with the overall improvement in uh in the sector 1:11:58 1 hour, 11 minutes, 58 seconds and also you know with the uh kind of checks and balances that we put into face um 1:12:06 1 hour, 12 minutes, 6 seconds through these this this would be probably expecting it to perform better than the market for number 1:12:15 1 hour, 12 minutes, 15 seconds but you know where the industry stands today uh I it would be hard for me to 1:12:22 1 hour, 12 minutes, 22 seconds say okay we will ever go below 3% for example so uh I mean yeah 1:12:32 1 hour, 12 minutes, 32 seconds cycles where you are growing very fast and due to the denominator 1:12:38 1 hour, 12 minutes, 38 seconds might be under 3% but it would be very say that it it in the long run on average it will go below 3%. 1:12:49 1 hour, 12 minutes, 49 seconds Uh but happy to be proven wrong. 1:12:55 1 hour, 12 minutes, 55 seconds Okay sir. Got it. There was a slight disturbance but I think uh I get the gist of what you're saying. Uh sorry. 1:13:02 1 hour, 13 minutes, 2 seconds No no worry sir. No worries. Next I wanted to understand sir uh around the MFI customers we're down to about five lakhs and our dispersements are rising. 1:13:12 1 hour, 13 minutes, 12 seconds So uh is this because we are increasing the ticket size per borrower to d drive growth and do you see this as a risk of increasing delinquencies? Uh next FY. 1:13:24 1 hour, 13 minutes, 24 seconds Um so so yes uh I would say it would be 1:13:31 1 hour, 13 minutes, 31 seconds hypocritical of me to not acknowledge the fact that the average ticket sizes have increased 1:13:38 1 hour, 13 minutes, 38 seconds especially not in the JLG products. I think in the JLG products they have decreased or are in stagnant 1:13:46 1 hour, 13 minutes, 46 seconds uh but in the other products like the individual loans they are obviously much higher. Uh but that said being a 1:13:55 1 hour, 13 minutes, 55 seconds sort of a conservative kind of a guy myself in terms of risk I am not very uncomfortable 1:14:04 1 hour, 14 minutes, 4 seconds uh even despite the higher ticket sizes in the individual products because again we are being very very careful very 1:14:11 1 hour, 14 minutes, 11 seconds selective uh to give you an example in the individual product uh all of our customers have like a credit score of 1:14:20 1 hour, 14 minutes, 20 seconds 300 00 plus you know and they all have credit history so we are not really doing a lot of new to credit borrowers unless you know the the checks and 1:14:29 1 hour, 14 minutes, 29 seconds balances around that are even much stronger so uh it's just a different product you 1:14:36 1 hour, 14 minutes, 36 seconds know uh so I would be a lot more uncomfortable if the JLG ticket sizes are increasing in this product we are 1:14:45 1 hour, 14 minutes, 45 seconds taking ample precautions and uh uh still I I agree it's it's still at an early 1:14:53 1 hour, 14 minutes, 53 seconds stage to say whether it's less or less risky more risky uh but uh it seemed 1:15:00 1 hour, 15 minutes like the right strategic decision and I you know I I still stand by that this was the right uh uh 1:15:08 1 hour, 15 minutes, 8 seconds right direction to go towards okay sir understood sir sir and on the 1:15:21 1 hour, 15 minutes, 21 seconds I heard on the and I must have disconnected. Yes sir. The participant left the queue. 1:15:29 1 hour, 15 minutes, 29 seconds So as that was the last question for the day. I would now hand the conference over to Mr. Alop Patil join managing director for closing comments. Over to you sir. 1:15:37 1 hour, 15 minutes, 37 seconds Okay. Uh nothing much to add. I think uh nice long call. uh like to thank everybody for being a part of this call 1:15:46 1 hour, 15 minutes, 46 seconds and uh hopefully answered all the questions to the best of our abilities and uh you know if you 1:15:53 1 hour, 15 minutes, 53 seconds need more information uh please feel free to contact the investor relations 1:15:59 1 hour, 15 minutes, 59 seconds team uh you know their available in the presentations and I appreciate everybody's time. Thank you very much. 1:16:09 1 hour, 16 minutes, 9 seconds Thank you on behalf of Arman Financial Services Limited. That concludes this conference. Thank you for joining us and you may now disconnect the lines. Thank you. 1:16:19 1 hour, 16 minutes, 19 seconds Thanks.