Aye Finance Ltd — Q3 FY26

Aye Finance Ltd Q3 FY2025-26 Earnings Conference Call https://www.youtube.com/watch?v=6T3ZIxDIhHA Published: 2 months ago

0:01 1 second Ladies and gentlemen, good day and welcome to the I Finance Limited Q3 FI26 conference call. As a reminder, all 0:09 9 seconds participant lines will be in the listen mode and there will be an opportunity for you to ask questions after the presentation concludes. 0:17 17 seconds Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchstone phone. Please note that this conference is being recorded. 0:29 29 seconds I now hand the conference over to Mr. 0:31 31 seconds WBO Sharma from Noama Wealth Management Limited. Thank you and over to you sir. 0:37 37 seconds Thank you Steve and good uh good good evening to everyone. On behalf of Noama Wealth Management, I welcome you all to 0:44 44 seconds I finance Q3 FI26 earnings conference call. We have along with us Mr. Sanjay Sharma, managing director, Mr. Nir 0:52 52 seconds Koshit, deputy CFO, Mr. Senate Praash, interim CFO and Mr. Gorov Street head 0:59 59 seconds investor relations. We are thankful to the management for allowing us this opportunity and I would now like to hand it over to Mr. Sanjay uh sir for his 1:08 1 minute, 8 seconds opening remarks. Over to you sir microphone connected. 1:18 1 minute, 18 seconds Thanks and good evening to everyone. Uh I hope you can hear me clearly. 1:25 1 minute, 25 seconds Is that fine? Yes sir. 1:30 1 minute, 30 seconds Okay. Sure. So uh 1:43 1 minute, 43 seconds okay. So welcome to our maiden earning call for quarter 3 of uh financial year 1:49 1 minute, 49 seconds 26. And uh let me just uh mention that I finance is a lender to the unorganized 1:57 1 minute, 57 seconds microscale businesses and these could be businesses in manufacturing into trading dairy or service sectors. 2:05 2 minutes, 5 seconds Our performance in quarter three and the numbers have been shared with you. It clearly demonstrates the robustness of our business model and indeed the 2:14 2 minutes, 14 seconds robustness of our customer segment. We provide loans for business needs as opposed to consumption lending and this 2:21 2 minutes, 21 seconds segment has performed with a better credit resilience than the typical consumption lending segments. 2:28 2 minutes, 28 seconds As this is the first running call, please allow me to share some context to our business model before I touch upon the financial and key operational 2:36 2 minutes, 36 seconds metrics. It's a different uh or differentiated uh lending model and uh I think it's important to understand some of the nuances around the model. 2:49 2 minutes, 49 seconds The borrowing need of over 67 million unorganized microscale enterprises across India are primarily unaddressed 2:58 2 minutes, 58 seconds by the banks or NBFCs and uh primarily the reason is that it's difficult to underrite the segment and their need is a very small uh business loan. I finance 3:07 3 minutes, 7 seconds has targeted exactly this customer segment and it is transforming these businesses at the micro scale by 3:15 3 minutes, 15 seconds building a scale lending model for itself. 3:19 3 minutes, 19 seconds This segment of microscale businesses is the real employment generating engine in our economy and it contributes uh as much as 90% of the non-aggri employment. 3:31 3 minutes, 31 seconds Hence addressing their business needs is important and I has taken up exactly this challenge. So clearly this is a 3:40 3 minutes, 40 seconds need of the country and of the businesses in Bharat and uh this is what we address. 3:48 3 minutes, 48 seconds As you can see in slide 15 you can get a sense of where does a customer lie. 3:56 3 minutes, 56 seconds I think the primary thing to learn is that if you look at our customers, they come from a segment number three which is the unorganized micro businesses 4:04 4 minutes, 4 seconds which are into trading into into manufacturing dairy and uh service. 4:10 4 minutes, 10 seconds Whereas when you look at microlab or MSI they have customers coming in from marginal day also from marginal 4:17 4 minutes, 17 seconds self-employed people like plumbers, carpenters etc. So I think this is where our targeting of customer is different. 4:25 4 minutes, 25 seconds We look at our customers the value from a lens of whether they run a business and they generate employment. 4:33 4 minutes, 33 seconds The so in a way you could say that our customer is someone who owns a business. 4:39 4 minutes, 39 seconds It could be manufacturing, trading or service enterprise or TV. 4:43 4 minutes, 43 seconds He is not a self-employed worker like a plumber, carpenter or not a salary employee. This is an organ unorganized 4:52 4 minutes, 52 seconds space which mean that they typically don't have the financial records like GST returns or uh indeed income tax 4:59 4 minutes, 59 seconds returns or uh bank statements that show business transactions and hence is usually new to formal business laws. The 5:07 5 minutes, 7 seconds third thing about our segment is that our customer is not linked to the organized industry supply chain and 5:14 5 minutes, 14 seconds hence uh effects like oil price change or tariff etc do not affect this segment 5:20 5 minutes, 20 seconds and therefore this uh asset class is quite insulated from many of the effects of the organized industry. So this is 5:29 5 minutes, 29 seconds what makes it a very interesting asset class to look at because it behaves very differently from what our normal uh 5:37 5 minutes, 37 seconds asset classes in the organized industry are. 5:42 5 minutes, 42 seconds On the next slide, slide 16, you will see that we have a comprehensive product offering to the microscale MSA. What we 5:51 5 minutes, 51 seconds mean here is that if the requirement is small, we can give them a small hypertification loan and if the requirement is larger, we can give them 5:58 5 minutes, 58 seconds a property based loan. 22% of the portfolio secured by property based loans of which 20 21% comes from 6:06 6 minutes, 6 seconds mortgage loans which are the typical uh laplike loans given against cell phone uh residential property or cell phone 6:14 6 minutes, 14 seconds commercial property. The remaining small percent of 1.6% 6% are federal loans given against loss and part of uh 6:21 6 minutes, 21 seconds titles. Uh the remaining 79.5% of our portfolio is secured by business assets 6:29 6 minutes, 29 seconds like machine, inventory, finished goods etc. which are the hypotheication uh to us and within this hypertheation loan 6:38 6 minutes, 38 seconds 40% of loans have hypotheication of assets where the values of these assets have been assessed by us to be more than 6:44 6 minutes, 44 seconds 120% of our loan value. These we call as secured hypothication loans and the balance 37.5% of the portfolio is again 6:54 6 minutes, 54 seconds hypertheication of working assets but where the value of the hypertheication assets can only provide part cover for the loan amount. These we classify as 7:03 7 minutes, 3 seconds unsecured hypertheication loans. The important thing is that all these loans are uh business loans. they're not of 7:12 7 minutes, 12 seconds consumption uh in nature and uh even the hypertation unsecured loans that we classify are actually partly secured against business offense. 7:24 7 minutes, 24 seconds In the slide 17 you can see that we have a very well diversified book which is spread across 7:33 7 minutes, 33 seconds 18 states and three union territories and the number of branches you can see whether it is north, south, west or east 7:41 7 minutes, 41 seconds they are almost well balanced. We have a granular book of 5.23 two three lakh loans as of December 2025 7:49 7 minutes, 49 seconds and uh even the zones when you look at north southeast west the area is well spread this has a huge advantage because 7:56 7 minutes, 56 seconds in times of difficulty our portfolio does not see very acute challenges also 8:04 8 minutes, 4 seconds when we want to grow we don't have to rely on anyone one uh area one uh one 8:10 8 minutes, 10 seconds state or one zone to grow and that opens up Firstly uh huge opportunity for growth 8:19 8 minutes, 19 seconds and second a very uh strong opportunity for diversifying as similarly on the industry also we continue to have a 8:28 8 minutes, 28 seconds balance look at industry and diversify industry you can see that between manufacturing uh daily service and trading we are well 8:36 8 minutes, 36 seconds balanced and no segment overpower trading is a very large segment because it contains grocery stores it contains 8:43 8 minutes, 43 seconds different types type of trading uh cluster. So I think that's the reason that is at 50%. 8:52 8 minutes, 52 seconds The business that we uh have has been built from ground up because there's no 8:59 8 minutes, 59 seconds prior model to work with and that has given us an opportunity to design the businesses the teams to the way that 9:08 9 minutes, 8 seconds they can be optimized to the target segment and this helps us address this business opportunity very effectively. 9:15 9 minutes, 15 seconds Our base for the business is is built around three uh simple things. First is to make sure that the face origination is of good quality. 9:26 9 minutes, 26 seconds Second is to make that make our underwriting effective and the third is to have a strong ability to collect. Now 9:34 9 minutes, 34 seconds you may say that these are there's nothing new in that and often in life things nothing things are nothing new 9:41 9 minutes, 41 seconds and it is how you execute and how you plan it which is the differentiator which is what we believe in picking up 9:48 9 minutes, 48 seconds on origination quality we have a total inhouse sales team for all our agent as well as mortgage uh mortgage loans this 9:57 9 minutes, 57 seconds is important because we do not want to use a DSA or a third party uh sourcer to uh source for us since we have the 10:06 10 minutes, 6 seconds strong capability to source inhouse and this ensures that the quality of what we source is of very good standard. 10:15 10 minutes, 15 seconds Also beyond this we have maker and checker at multiple steps of the sales funnel. Our diversifi diversified 10:22 10 minutes, 22 seconds presence in 18 states and three union territories also further adds to the diversification of what we source and we 10:29 10 minutes, 29 seconds are not dependent on few states. As I mentioned it is also not concentrated in any industrial sector. On the underwriting we use a cluster based 10:37 10 minutes, 37 seconds underwriting which uh I think is partly covered in slide 33. 10:42 10 minutes, 42 seconds Uh this is a innovation that we have uh uh done in the segment where we use a 10:51 10 minutes, 51 seconds deep understanding of the various categories of business like let's say our understanding of the shoe manufacturing industry or the grocery industry or the cloth trading industry. 11:01 11 minutes, 1 second And our insight from these industries helps us estimate sales and and and the net income of the business owner using 11:08 11 minutes, 8 seconds some observed alternate data points like the number of workers they employ, the level of inventory that we can see or the capacity of machinery that they use 11:17 11 minutes, 17 seconds etc. This cluster based and writing is fully automated. All the roots are uh there in our uh co system and this has 11:26 11 minutes, 26 seconds enabled us to underwrite well and see our portfolio go across multiple challenges like co demonetization or 11:35 11 minutes, 35 seconds lending and not show too much of a volatility in credit cost. 11:41 11 minutes, 41 seconds The third piece that I mentioned which is collection here again in slide 34 we have shown some indicative uh aspects of 11:48 11 minutes, 48 seconds collection. Our collection is based on the philosophy that we need to be present on the field to collect and 11:55 11 minutes, 55 seconds hence a physical model with over 500 branches is what we use. 12:01 12 minutes, 1 second So netnmet in our target segment of unorganized microscale businesses. We are the leading pan India provider. 12:12 12 minutes, 12 seconds Our competitors as they arise in future will always face a challenge 12:19 12 minutes, 19 seconds or on or challenge or a mode that we have built around the business. One is the underwriting method because 12:27 12 minutes, 27 seconds underwriting this customer uh cannot be done through traditional means of reasoning documents. The second is that 12:36 12 minutes, 36 seconds it needs a branch presence because this segment of customer needs to see someone face to face. And third is that the unit 12:46 12 minutes, 46 seconds cost since the loan size is typically 1 to two lakhs. The low unit size makes it difficult for people to uh generate 12:55 12 minutes, 55 seconds profits without adequate amount of technology deployed on the uh in various processes. 13:05 13 minutes, 5 seconds Let's move on to the key financial and operational metrics that are given in the earnings call presentation. 13:12 13 minutes, 12 seconds I would like to draw your attention to the following. First item is growth. 13:17 13 minutes, 17 seconds The company operates in a market where there is very limited or almost no supply of business loans to the segment 13:25 13 minutes, 25 seconds of customers that we target which is the unorganized microscale businesses. 13:29 13 minutes, 29 seconds Hence, it's not surprising that we've always found our dispersements to stay in a healthy growth range. Even in this 13:37 13 minutes, 37 seconds year, in the quarter three, our disersment grew by 35% yearonear and 13:43 13 minutes, 43 seconds stood at 1,310 crores in quarter 3 with an addition of 41,5 new borrowers. 13:52 13 minutes, 52 seconds In a business, the last quarter has always produced significant higher displacements and this is something that we witnessed 14:00 14 minutes already starting to witness this momentum in January and February months that have gone by. Our AM which grew by 14:08 14 minutes, 8 seconds 23.5% year on year and 5.5% quarteron quarter. With this expected increased reimbursement in the coming quarter, we 14:17 14 minutes, 17 seconds are on the trajectory to achieve a guidance of 29 to 30% growth in area for the full financial year 26. 14:26 14 minutes, 26 seconds Our net worth of 1,773 crores as of December 25 has been further augmented as you know uh through our primary raise of 710 crores in the IPO. 14:39 14 minutes, 39 seconds this network will be the catalyst and will enable us to continue with this uh robust growth trajectory. 14:50 14 minutes, 50 seconds The second area that I want to draw attention to is the improvement in credit quality. This has become 14:58 14 minutes, 58 seconds extremely important in the backdrop of how the business have done in the last year. collection efficiencies we believe 15:06 15 minutes, 6 seconds are a leading indicator for the health of the lending portfolio because what we collect today is ultimately going to see how our gross NPA will look like in 15:13 15 minutes, 13 seconds future. The collection efficiency therefore is what I want to start with. 15:18 15 minutes, 18 seconds The collection efficiency for our nonOD bucket was 99.3% in December and has further improved to 15:26 15 minutes, 26 seconds 99.4% in February. These are very healthy numbers which typically are a signal of a good year ahead. 15:37 15 minutes, 37 seconds Similarly, the bucket one collection efficiency also has been improving and during the year this collection 15:46 15 minutes, 46 seconds efficiency for OnePlus bucket went up from 42.8% 8% in April to 58% in 15:53 15 minutes, 53 seconds December 25 and in February 26 it is actually at 60%. 15:59 15 minutes, 59 seconds So the trade cost of a business obviously looks like because of the good collection efficiency will be down but 16:07 16 minutes, 7 seconds actually historically also the trade cost for a business has been reducing for the last four quarters consistently 16:15 16 minutes, 15 seconds and in quarter 3 it was down to only 83 crores or 4.69% of the agency. 16:26 16 minutes, 26 seconds This lowering or the trend of lowering of trade costs is expected to continue into quarter 4 16:33 16 minutes, 33 seconds and this is visible to us even in the numbers that we have seen in January and February months already. 16:41 16 minutes, 41 seconds So from a great quality we are targeting to start the new financial year at a normal level level of great cost for a 16:50 16 minutes, 50 seconds business segment. So we'll exit this financial year with a fairly normalized book from a credit perspective also. And the third area is profitability. 17:02 17 minutes, 2 seconds Although the profits in this financial year have been weighed down by two things. One is that we set up the mortgage loans scheme and in the last 17:11 17 minutes, 11 seconds one and a half year we have added almost more than 1,400 people to the mortgage team. So this is the additional cost 17:19 17 minutes, 19 seconds that is uh bringing down or bringing up the operating expense ratio but this team will ultimately uh see thems of 17:29 17 minutes, 29 seconds mortgage business build up and the cost will automatically come down. This is a simple business math that will play out. 17:37 17 minutes, 37 seconds The second reason for profit being default is the higher credit cost. It's no denying that the credit costs which 17:45 17 minutes, 45 seconds we would have liked to see in the 3.5 to 3.75 range have been higher than that in this year and that has also brought the 17:52 17 minutes, 52 seconds profitability down but going forward we should see a robust improvement in profits from the coming 17:59 17 minutes, 59 seconds quarter as the effect of both these factors are lower. First of all the mortgage area has been growing at a good 18:07 18 minutes, 7 seconds clips. We are already at 22% of the 22.5% of the portfolio is uh with property. So that will help in deferring 18:16 18 minutes, 16 seconds the cost of the new mortgage teams. And second is that our credit costs have been dropping consistently and now we will see the effect in the profits. 18:28 18 minutes, 28 seconds The total income for the quarter 3 was 449 crores which is 21.3% 18:35 18 minutes, 35 seconds growth over year on year and 5% growth quarter on quarter. 18:40 18 minutes, 40 seconds The ns have remained at 14.21% in quarter 3 despite the increase increasing mix of mortgage loans. 18:50 18 minutes, 50 seconds cost of borrowing has reduced to 10.96 and the incrementary cost for borrowing in quarter 3 was 10.31%. 18:58 18 minutes, 58 seconds This trend will continue to help us improving the NIS and even though with the increasing mix of mod the NIS tend 19:06 19 minutes, 6 seconds to become lower. This is a effect that will help us stabilize the names at a good level. The profit after tax for 19:15 19 minutes, 15 seconds quarter 3 was 43 crores which has grown 87% over year on year and primarily it is because the quarter 19:24 19 minutes, 24 seconds three of last year was a uh depressed quarter but quarter on quarter from last quarter we have grown almost 23.4%. 19:33 19 minutes, 33 seconds So this shows how rapidly the profit after tax is beginning to grow and this uh acceleration is going to going to 19:42 19 minutes, 42 seconds further speed up this profit that I mentioned of 43 crores actually has also absorbed a 19:50 19 minutes, 50 seconds one-time impact of 1.7 crores which came about because of change in the labor law regulations. 19:58 19 minutes, 58 seconds Now let me go a step deeper by highlighting a few efficiency drivers in our business. I would like to draw your 20:06 20 minutes, 6 seconds attention to slide number 18. The first efficiency driver is technology and all 20:15 20 minutes, 15 seconds our processes be they origination, underwriting, repayments, collection are optimally automated by use of technology 20:23 20 minutes, 23 seconds as well as use of data science models and visualization dashboards. These are important tools to help optimize the 20:31 20 minutes, 31 seconds business and maintain strong monitoring day in day out. 100% of our loan origination is paperless. 20:41 20 minutes, 41 seconds 32% of our hand underwriting at present is done using AI ML model has been in play for the last more than six years. 20:49 20 minutes, 49 seconds 68% of our underwriting still happens through the cluster based underwriting method that we had innovated in 2014. 21:00 21 minutes Repayments are generally non-cash. You can see that 96.8% of our customers are registered on AC 21:07 21 minutes, 7 seconds and 84.1% of our collection happens through various digital modes. So clearly a business which is not based on 21:15 21 minutes, 15 seconds cash collection. Tech technology also plays an important role in our collection capability by providing 21:22 21 minutes, 22 seconds uh machine learning models like the bounce forecasting model, the selection likelihood score model and we have a 21:30 21 minutes, 30 seconds in-house data science team mentored by uh our principles uh our investors movie 21:36 21 minutes, 36 seconds capital uh which develop various machine learning and data science models for us in house. 21:45 21 minutes, 45 seconds The second hero for efficiency is the use of branch network. There's a often a false feeling 21:55 21 minutes, 55 seconds that growth in branchled businesses are linearly related to branch growth and 22:03 22 minutes, 3 seconds some data which shows that it need not be. So if you look at the December year-on-year growth, 22:11 22 minutes, 11 seconds the pie chart that is shown here, 60% of our growth was contributed by enlarging the fresh area per branch itself. 22:21 22 minutes, 21 seconds 39% of the growth came from repeat loss and only 1% came from the new branches that had been added that had been added 22:30 22 minutes, 30 seconds in the last one year. So clearly it shows that we can derive a lot of growth through a branch set of pictures and I 22:38 22 minutes, 38 seconds think there's a graph a bar graph on the slide which tells you that 24 256 you see that the branch new branches 22:45 22 minutes, 45 seconds contribute typically between 1 to 7% of the growth. 22:51 22 minutes, 51 seconds This can also be uh supported by the fact that you see that branches which are up to 2 years old typically have a 23:01 23 minutes, 1 second of 4.8 crores. Branches from 2 to 4 years uh acrew 23:07 23 minutes, 7 seconds AM of 8.8 age growth and four plus year branches that we have has 14.5 growth of the year. So this is a natural growth 23:16 23 minutes, 16 seconds and therefore we believe that we don't have to add too many new branches. Uh this financial year FI26 we opened 44 23:25 23 minutes, 25 seconds new centers which added to a 527 branches. So it's less than 9% of more branches will open at the start of the 23:33 23 minutes, 33 seconds year and which will help us in the growth. 23:37 23 minutes, 37 seconds The third area is the on repeat and this without any doubts is a very important aspect of our business because we have a 23:44 23 minutes, 44 seconds customer segment that is has a need that we address comprehensively and it's very useful to retain him and to improve the 23:54 23 minutes, 54 seconds uh lifetime customer value. We use data find models to filter the customers for offering repeat loans so that we pick up 24:00 24 minutes the best customers. You can a better pricing and moreover the repeat loans use the teleing channel instead of the 24:09 24 minutes, 9 seconds free team to drive the repeat business and typically a teleoler can generate almost 1.8 crores of repeat loans 24:18 24 minutes, 18 seconds dispersement in a single month. So it's a very efficient way of getting repeat loans and extending the customer's 24:26 24 minutes, 26 seconds payback. Repeat loan uh portrayal also enables that our customer foreclosure rate remains low. 24:34 24 minutes, 34 seconds We have a very low foreclosure of 3.33%. 24:38 24 minutes, 38 seconds If you look at our first 9 months of FI26. 24:42 24 minutes, 42 seconds So clearly this is one engine that adds to the efficiency and also helps us improve the quality of our portfolio. 24:53 24 minutes, 53 seconds On slide 21 is the mortgage business and about three slightly over 3 years we decided that we needed to have a better 25:02 25 minutes, 2 seconds credit for mortgage business. uh and we started focusing on mortgage businesses mortgage loans after the covid pandemic 25:10 25 minutes, 10 seconds with the aim of increasing our loan tenner and to reduce the very fast runoff rate that we see in hyperational 25:18 25 minutes, 18 seconds our primary ML team is there in 180 branches and besides that the normal branches 25:26 25 minutes, 26 seconds also generate ML loans in addition to their hypertention loan targets 25:32 25 minutes, 32 seconds our ML loan has been very robust and the ML portfolio as on December 2025 was 25:40 25 minutes, 40 seconds about 1,350 crores constituting 21% of our overall portfolio. 25:48 25 minutes, 48 seconds In conclusion, I would say that I finance is in a unique position to address a large 25:54 25 minutes, 54 seconds target segment of underserved microsememes. 25:59 25 minutes, 59 seconds Our technology and data science backbone coupled with the branch based uh sourcing and servicing is optimally suited to address this customer segment. 26:10 26 minutes, 10 seconds The use of prudent underwriting using cluster methodology and machine learning models supplemented by a strong prediction capability on the field as 26:19 26 minutes, 19 seconds well as digitally provides an additional stability even in phases like demonetization, covid 26:26 26 minutes, 26 seconds pandemic, over lending etc. Our experienced team of leaders from leading banks, NBFC's and top tier institutes is 26:35 26 minutes, 35 seconds committed to our vision to transform the landscape of microscale businesses. They have been with us uh many years and they 26:42 26 minutes, 42 seconds bring uh leadership and stability to the team. 26:47 26 minutes, 47 seconds Our recent investment in mortgage loans are planned to provide us a lift in growth as well as reduction in operating 26:54 26 minutes, 54 seconds expense ratios. And in the backdrop of the falling trade cost of the last four quarters, we feel confident to provide 27:03 27 minutes, 3 seconds you or share with you a three-year vision where we are targeting to get to 27:09 27 minutes, 9 seconds a consistent growth of about 30%. A credit cost to be kept in the range of 3.25 to 3.75. 27:18 27 minutes, 18 seconds Offers to be maintained between 7 and 7.5 and ROA between 4 and 4.5 with adequate leverage. This is how we would 27:27 27 minutes, 27 seconds target to achieve in a three-year timeline. 27:34 27 minutes, 34 seconds Thank you once again and uh with this I will hand over the call to back to Weber. 27:46 27 minutes, 46 seconds 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 the touchstone. 28:00 28 minutes If you wish to withdraw yourself from the question queue, you may press star and two. 28:06 28 minutes, 6 seconds Participants are requested to use handsfet while asking a question. 28:11 28 minutes, 11 seconds Ladies and gentlemen, we will wait for a moment while the question queue assembles. Smartphone connected. 28:24 28 minutes, 24 seconds The first question comes from the line of Charleen Kapia with IFL Capital. Please go ahead. 28:33 28 minutes, 33 seconds Hello. Hi. Uh uh am I audible? Yes sir. 28:39 28 minutes, 39 seconds Okay. Uh sir I have a couple of question. First of all thank you for the opportunity and uh congratulation on great set of numbers. Uh so sir my first 28:49 28 minutes, 49 seconds question is on AUM and basically it's mix. So with mortgage loans already at 20% of AUM uh what is the target AUM mix 28:58 28 minutes, 58 seconds that we will achieve as we aim 30% kagger over the next 3 years and secondly sir uh 29:08 29 minutes, 8 seconds uh looking at our collection efficiency and credit cost our asset quality is clearly on an improving trend but uh it 29:16 29 minutes, 16 seconds still remains elevated versus our precrisis period. So by when do you expect this to settle down sir and what is your credit cost guidance for FI27? 29:31 29 minutes, 31 seconds Hi this is uh so I'll pick up the first question with respect to growth. Uh so we believe that the mortgage share of 29:38 29 minutes, 38 seconds the overall portfolio should increase to about 30% which is the idle mix. So the overall portfolio over the next three 29:45 29 minutes, 45 seconds years is going to be 30% of mortgage and 70% of uh hypertigation loans to achieve 29:51 29 minutes, 51 seconds the 30% kagger that uh we are talking of as you rightly mentioned the collection efficiencies are improving and uh the 29:59 29 minutes, 59 seconds credit cost has been falling for the last four quarters that has resulted in the parx also falling for the last two quarters and for the month of February 30:08 30 minutes, 8 seconds the par 90 and the MPA have also come down so we believe At quarter four we should be at a quarterly uh annualized 30:17 30 minutes, 17 seconds credit cost of less than uh 4%. Which is a good place to start the next financial year and come down to a level our 30:25 30 minutes, 25 seconds comfort range with respect to credit cost typically is in the 3.5% range with about plus.25% 30:32 30 minutes, 32 seconds to uh minus.25%. So that is the range and we believe with some 4% credit cost that would be a good position to achieve that in the next financial year. 30:45 30 minutes, 45 seconds Uh sir just uh one follow up on the mortgage loan piece. So with ML share increasing in the mix and uh also our 30:53 30 minutes, 53 seconds incremental cost of borrowings has been on a declining trend. So a lot of moving parts in the NISS basically. So where do we expect our names to settle in FI27? 31:04 31 minutes, 4 seconds with respect to guidance exact guidance with respect to FI27 we provide it uh in the next earnings call. However, I can 31:12 31 minutes, 12 seconds give you some picture with respect to the name levels. uh while the overall portfolio yield is coming down because of the increase of mortgage in the 31:22 31 minutes, 22 seconds portfolio. But if you look at this quarter compared to the previous quarter with the increase of mortgage share also the names the yields have improved and 31:30 31 minutes, 30 seconds that is primarily because right now there's a elevated level of reversals because of the higher delinquency and flows into NPA that was happening. Our 31:38 31 minutes, 38 seconds estimate is that roughly around 25 bits to 40 bits higher reversals have been happening over the last couple of quarters which should also improve as 31:47 31 minutes, 47 seconds the relevancy numbers uh normalize. So there is going to be an offset of reduction in uh yields because of 31:56 31 minutes, 56 seconds mortgage. However, some improvement because of the lower reversals. with respect to exact guidance on the name and numbers for FI27. Uh we would like 32:05 32 minutes, 5 seconds to give it in the next warnings call after the year end. 32:10 32 minutes, 10 seconds Uh got it sir. Thank you so much. That was helpful. 32:17 32 minutes, 17 seconds Thank you. The next question comes from the line of Sha with Capital. Please go ahead. 32:25 32 minutes, 25 seconds Yeah. Hi. Uh so Congress and uh thanks for the opportunity. I had uh two questions with regards to Bihar. So I 32:34 32 minutes, 34 seconds can see uh in your PPT uh you have uh 8 and a half% branches in Bihar. Uh but I 32:41 32 minutes, 41 seconds think your AUM concentration is probably in the corridor of 14 15% right? Uh first of all just clarification. 32:50 32 minutes, 50 seconds Yeah. So the AUM concentration for Bihar is 15 and a half odd percentage uh in the total mix. 32:58 32 minutes, 58 seconds Got it. And uh secondly uh now incrementally what is your reading of uh the current uh draft bill which is there 33:07 33 minutes, 7 seconds uh and I understand uh some technicalities of it but what is it you are basically gathering on the ground. 33:16 33 minutes, 16 seconds Is there any uh I would say uh chatter around it and if at all it has to come into and become a law what implications uh do you anticipate? 33:29 33 minutes, 29 seconds Yeah, I think uh uh the uh first of all when you look at the Bihar collection 33:36 33 minutes, 36 seconds efficiencies and this problem that you that uh the government has taken note of has been uh running for the last whole 33:44 33 minutes, 44 seconds year. So while the action has come now the effect has been that MFI have been on the ground and there have been 33:51 33 minutes, 51 seconds challenges around that. However we have found that our customer because it's not a consumption loan that is given but it's a loan given to a trader or a 33:59 33 minutes, 59 seconds manufacturing unit there they have maintained very good collection uh or repayment ratios and that's why 34:07 34 minutes, 7 seconds collection in Bihar you can see is uh almost uh for for the months has been between 99.2 and 99.4%. 4% for uh the 34:16 34 minutes, 16 seconds non and even the uh the bucket run is in the 40% sort of range. So one is that despite that environment we haven't seen 34:25 34 minutes, 25 seconds a challenge around our collection. The second is that if the regulation has the similar playout as we saw in Karnataka 34:33 34 minutes, 33 seconds or Tamil Nadu then it will have very minimal effect on non MFI NBFC. So NBFC 34:40 34 minutes, 40 seconds for example when we were in Karnataka and Tamil Nadu while we heard that there was a little bit of uh challenge around 34:47 34 minutes, 47 seconds collection but neither did we face uh problems with the with the regulatory authorities or with the police force 34:55 34 minutes, 55 seconds there. So I think we believe that that could be the way hard also plays out and uh I think uh over the next quarter 35:03 35 minutes, 3 seconds we'll probably get a better picture but my sense is that uh this will play out even the collection efficiency of MFIs 35:10 35 minutes, 10 seconds are improving so that it will uh die out. 35:15 35 minutes, 15 seconds Got it. And uh just one more uh followup over here uh when I look at the bucket one collection efficiency right uh I 35:23 35 minutes, 23 seconds think you have given a great disclosure statewise as well as the overall numbers uh just wanted to get a sense of uh and again I'm not talking about the 35:31 35 minutes, 31 seconds direction of it of course it's improving but compared to most of the other states uh why is it that the bucket on collection efficiency in Bihar uh seems 35:40 35 minutes, 40 seconds to be lower at 40% uh uh when I compare it with others And is this a function of say the inherently uh the customers in that geography? 35:53 35 minutes, 53 seconds Yeah, see I think uh it's a good uh good uh fine. See collect in Bihar we 36:03 36 minutes, 3 seconds first of all didn't have a collection team and I think last year we had we instituted a collection team which does the collection of the first bucket and 36:10 36 minutes, 10 seconds there's a new person who has just taken over I think about four months back so one is that that team is new and that's the reason you will see that while 36:19 36 minutes, 19 seconds bucket one was being collected by the loan officers themselves now the team will come in which is our normal process of collecting so that is one big reason 36:27 36 minutes, 27 seconds the second is when you collect 99.4 or over then the possibility of selecting in bucket one becomes difficult because 36:35 36 minutes, 35 seconds only very few customers who are the tough customers go into bucket one. So I think that's the other reason that uh the collection addition but primarily it 36:44 36 minutes, 44 seconds is the team that has been put in place and I think you'll see uh this number increase. 36:50 36 minutes, 50 seconds Got it. Thank you and all the best. Thank you. 37:00 37 minutes The next question comes from the line of Chinmai Nema with Precision Capital. Please go ahead. Uh hi sir, I'm audible. 37:09 37 minutes, 9 seconds Yes, actually. 37:11 37 minutes, 11 seconds Uh sir, just a couple of bookkeeping questions. Uh could you share the PAR 30 and the PAR 90 number uh for both the 37:21 37 minutes, 21 seconds lab book and the amplification book at the end of the quarter? 37:37 37 minutes, 37 seconds just give us a second. 37:43 37 minutes, 43 seconds Yeah. So, uh with respect to the par 90 of the hyper education loan, uh it was 5.65 37:51 37 minutes, 51 seconds uh%. and the par 30 for the hypertication sorry 5.95% and the par 30 for the hypotification loan which stood at 7.54%. 38:02 38 minutes, 2 seconds With respect to the mortgage portfolio the par 30 was 3.5% and the par 90 was 2.69%. 38:11 38 minutes, 11 seconds Typically our GMPA levels are marginally lower than our par 90 levels. So GNPA would be adjusted accordingly. 38:21 38 minutes, 21 seconds Got it. And uh could you also share the same numbers for the end of the last quarter? 38:35 38 minutes, 35 seconds Hello. 38:37 38 minutes, 37 seconds So that numbers I will not have readily available. I'll connect separately and we I can share the data. 38:44 38 minutes, 44 seconds Sure sir. And uh so secondly just wanted to understand in the 9 months uh the growth has primarily been in the lab 38:53 38 minutes, 53 seconds book uh going forward when can we see uh a higher growth rate in the 38:59 38 minutes, 59 seconds hypertication book or basically when do you see uh stress subsiding in that book? 39:08 39 minutes, 8 seconds So with respect to the hypertheication look obviously because it is 80% of the portfolio the improvement at overall 39:15 39 minutes, 15 seconds portfolio level is being driven by the improvement in the hypertication loan book. So both credit cost and delency 39:22 39 minutes, 22 seconds levels of the hypertication loan has been coming down and that is where the overall portfolio are showing signs of recovery. uh we had tightened the credit 39:30 39 minutes, 30 seconds uh policies uh in the last financial year and continued with the same policies during the course of this financial year also uh which has 39:39 39 minutes, 39 seconds resulted in the approval rates of the hypertheication loan coming down at least by about 10 to 15% during different phases of the last 18 months 39:47 39 minutes, 47 seconds or so. uh as we enter quarter four uh which is typically a higher business quarter across years we are seeing 39:56 39 minutes, 56 seconds momentum build up even in the hypothication loan where productivity levels have started hingching up. Uh so we believe the hypothecation loan kicker 40:04 40 minutes, 4 seconds with respect to growth should be normalized in the next financial year. 40:08 40 minutes, 8 seconds uh mortgage because we have already made a large investment with respect to manpower in the mortgage where across various channels the number of people 40:16 40 minutes, 16 seconds deployed has been about 1,300 to 1400 odd people and the book is only about 1,400 crores. So mortgage is going to 40:24 40 minutes, 24 seconds grow at a fast pace. However, the hyperlocation recovery at least from the quarter four numbers of January and February clearly show picking up of the 40:32 40 minutes, 32 seconds productivity and which should continue in the next financial year also. in the next financial year. We are hopeful that hyper education loan would contribute 40:39 40 minutes, 39 seconds significantly to the growth of the next financial year. Got it sir. Wonderful. Thank you. 40:50 40 minutes, 50 seconds Thank you. Ladies and gentlemen, if you wish to ask a question, you may press star and one. 40:59 40 minutes, 59 seconds The next question comes from the line of Samir Desia. Please go ahead. 41:05 41 minutes, 5 seconds Hi uh thank you for the opportunity and uh congrats on the quarter. Um so I just wanted to understand if you could uh 41:12 41 minutes, 12 seconds elaborate uh how do you monitor the end use of the loans uh and and some thoughts around that uh just uh on how 41:21 41 minutes, 21 seconds the model is built and uh then I have couple of more uh questions after this. 41:28 41 minutes, 28 seconds Sure. Uh so I think that's an excellent uh question. uh the uh basic uh premise 41:36 41 minutes, 36 seconds of our business is built on the fact that we want to lend for business use and that's why any loan that is given 41:43 41 minutes, 43 seconds first of all because we source the loan ourselves the loan officer goes and meets the customer and so does the credit officer on the field who meets 41:51 41 minutes, 51 seconds the customer to see that there is genuinely a business running and it fits into our criteria of whether it's manufacturing trading etc. Second is 41:59 41 minutes, 59 seconds that after the loan is given and the loan also is given is based on the business uh cash flows assessment so it is appropriate to that business and 42:08 42 minutes, 8 seconds that's why our hypert typically stay in the one lakh to two lakh rupee because that is typically what a person who has 42:15 42 minutes, 15 seconds a 30 lakh to a 1 cr turnover annually will make. So when we uh go and validate 42:23 42 minutes, 23 seconds that uh end use within 45 days a vigilance team goes and visits the customer to see whether if uh someone has said that they'll buy uh asset then 42:33 42 minutes, 33 seconds the asset has been purchased or otherwise inventory should look like uh it has been used uh that money has been 42:40 42 minutes, 40 seconds used. That's one. Second is one of the reasons again why we don't want mortgage to become more than 30% or more than uh 42:49 42 minutes, 49 seconds uh or maybe 60 70% of our book is because we believe that a mortgage loan for business requirements is important. 42:59 42 minutes, 59 seconds So we don't want to give a mortgage loan for uh a consumption requirement and often in businesses we don't find enough 43:07 43 minutes, 7 seconds need to give someone a 10 lakh or a 15 lakh rupee loan given the size of their business. So these are the parameters of 43:15 43 minutes, 15 seconds end use that play out in our uh business. 43:22 43 minutes, 22 seconds Okay. and and uh if one were to look at u recent uh uh competition trends if you 43:28 43 minutes, 28 seconds could highlight uh if uh if things have been materially increasing on the on the mortgage side 43:40 43 minutes, 40 seconds can you come again with that question sorry we lost you in between can you can you highlight some trends on how competition has been in in in the 43:47 43 minutes, 47 seconds mortgage loan product on the mortgage loan product. See uh yes yes I think on the on the mortgage loan 43:56 43 minutes, 56 seconds product I think there are many providers in the market and honestly speaking there's a fair amount of supply in the 44:03 44 minutes, 3 seconds market for microlab product uh in our case because we are targeting primarily businesses 44:12 44 minutes, 12 seconds uh we don't see a direct uh face-to-face competition in most of the times but there is competition in the market 44:20 44 minutes, 20 seconds sometimes we do also come across a competitive time to also make an offer. 44:24 44 minutes, 24 seconds So definitely compared to a hypertheation loan where there's almost no alternate supplier of this product in 44:32 44 minutes, 32 seconds mortgage you do have that supply. Uh we want to we already grown to 22% of the property based lending and we saying 44:39 44 minutes, 39 seconds that we want to grow to 30%. So it's not as if we have a very large uh way to go a large growth to uh really achieve. So 44:47 44 minutes, 47 seconds I think uh we are fine. We have uh our interest rates are in line with what the others provide comparable to the market 44:56 44 minutes, 56 seconds and uh I think many of our customers are uh customers who have taken this as a first law for mortgage and uh I believe 45:05 45 minutes, 5 seconds that when we look at their satisfaction with our services that satisfaction rate is high we haven't seen foreclosure which I mentioned that we are at a very low foreclosure rate of 3.3%. 45:17 45 minutes, 17 seconds Uh and sorry uh you mentioned that Q4 uh the first two months have been very strong. U fair to conclude that uh F26 45:26 45 minutes, 26 seconds and 27 you could grow in the range of 30% or or more. Uh is that a fair conclusion? 45:34 45 minutes, 34 seconds I would think that this is what we should target and it is not beyond us uh to grow at that pace. We have shown 45:41 45 minutes, 41 seconds better growth than this in the historic years. 45:45 45 minutes, 45 seconds Okay. Okay. And and uh credit cost uh so one I think highlighted more trajectory in the coming quarter 45:54 45 minutes, 54 seconds onwards potentially then ROA 46:15 46 minutes, 15 seconds we can't hear you. I don't know. 46:17 46 minutes, 17 seconds Uh yes sir, Samuel has been disconnected. Okay. 46:23 46 minutes, 23 seconds Ladies and gentlemen, if you wish to ask a question, please press star and one. 46:43 46 minutes, 43 seconds Participants, if you wish to ask a question to the management, you may press star and one. 47:12 47 minutes, 12 seconds Uh yes, Samir is connected again. Uh Sam, you can go ahead with your question. 47:18 47 minutes, 18 seconds Yeah. Hi. Uh just wanted to kind of uh uh look at say credit cost if they were 47:24 47 minutes, 24 seconds to uh decline below 4% uh as we as we enter into FY27. 47:31 47 minutes, 31 seconds uh is is 4% ROA for next year uh a reasonable expectation. 47:38 47 minutes, 38 seconds Obviously we would not want to comment on the exact numbers but how we look at the current position and the coming year is that trade cost is at elevated level 47:46 47 minutes, 46 seconds at this point of time or normal levels at least 1% higher trade cost is what uh we have at this point of time. Uh 47:53 47 minutes, 53 seconds similarly with respect to opex also we do believe the operating leverage is going to kick in as the application loan productivities again go back uh which we 48:02 48 minutes, 2 seconds are seeing in this quarter. So there are these two big levers with respect to profitability where the credit cost should come down and the operational 48:10 48 minutes, 10 seconds expense also should come down giving us big headroom with respect to our profitability levels. Okay, I would probably say very laggy because if you 48:18 48 minutes, 18 seconds go to slide 28 where we have shown the RA3 for quarter 3 F S F S F S F S F S F S F S F S F S F SI 27 we delivered a R of 2.5%. 48:26 48 minutes, 26 seconds Even with a great cost of 4.69. So if it if the trade cost goes below four then we have at least a 65 basis points 48:34 48 minutes, 34 seconds improvement from there operating expense because it is right now defraing the mortgage team's cost this will gradually 48:43 48 minutes, 43 seconds drop and I I think that you will see almost close to 60 points shaved off from J so that makes it one and a half% 48:51 48 minutes, 51 seconds that it brings you into that range that you're talking of over and above that the cost is dropping because first of all we 48:58 48 minutes, 58 seconds have more equity and second is the cost of uh incremental borrowing is a 10.3%. 49:04 49 minutes, 4 seconds Which I mentioned so clearly there is some room that is being created in the finance cost also. So I think uh next I 49:12 49 minutes, 12 seconds would say yes that's the sort of number we should look at. Great sir thank you and all the best. 49:28 49 minutes, 28 seconds Thank you. 49:30 49 minutes, 30 seconds A reminder to all participants that you may press star and one to ask a question. 49:47 49 minutes, 47 seconds As there are no further questions at this time, I would like to hand the conference over to the management for closing comments. 49:56 49 minutes, 56 seconds Uh so sorry to interrupt uh there's a question it's from the line of Rohitas Aurora an individual investor please go 50:04 50 minutes, 4 seconds ahead sir hello sir am I audible yes you are 50:12 50 minutes, 12 seconds as we are targeting to grow at more than 30% growth rate are we looking to grow at more at a particular region of pan 50:19 50 minutes, 19 seconds India we are trying to grow at 30% plus growth rate 50:26 50 minutes, 26 seconds see on growth it will be across the country so we don't find any particular geography that we would avoid or where 50:35 50 minutes, 35 seconds we find that the uh we have challenges around uh delinquency or uh growth and this is quite apparent if you look at 50:42 50 minutes, 42 seconds our far uh our collection efficiency numbers for nonod buckets you find that when you look at specific states when 50:51 50 minutes, 51 seconds you look at the rest of India Yeah, it is very very similar. So the answer to that is no. There's no specific state we would avoid. Yes, there are certain 50:59 50 minutes, 59 seconds states which show better promise and better productivity which we focus on. 51:04 51 minutes, 4 seconds And uh as soon had mentioned that some of this growth will happen obviously from mortgage uh business but I think a 51:11 51 minutes, 11 seconds lot of it will happen from a organic growth of the hypertication loans and today our approval rates which used to 51:20 51 minutes, 20 seconds be 55% are only 45 42 43%. So clearly as we start opening up and coming back to 51:27 51 minutes, 27 seconds the 55% approval rate automatically the growth of 8 or 9 10% will get hurt. So 51:33 51 minutes, 33 seconds that is what the coming year will see and s are we impacted by new Bihar ordinance regarding micro finance. 51:44 51 minutes, 44 seconds This was a question asked but let me just repeat see first of all historically there has been this press among the MFI customers in Bihar. We've 51:53 51 minutes, 53 seconds been hearing it for the last whole year and yet we have found that the segment of customers since it's a business owner 52:00 52 minutes like a trader or a manufacturing uh owner they have continued to maintain very good repayment rates and you can 52:07 52 minutes, 7 seconds see in our Bihar portfolio that the collection efficiency at the nonod customer is 99.39.4%. 52:16 52 minutes, 16 seconds So clearly we have not seen that strength translate to our customers. 52:20 52 minutes, 20 seconds Second is that we have seen similar things play out in Tamil Nadu and Karnataka which did not really impact 52:27 52 minutes, 27 seconds our customer our customer collection to the to the effect that it could get seriously noticed. So we believe that 52:35 52 minutes, 35 seconds Vihar may also follow a similar trend for us. Okay sir. Thank you. 52:51 52 minutes, 51 seconds Uh, does that answer your question? Yes, it it does. 52:55 52 minutes, 55 seconds Okay. Thank you. Uh, yes sir. There are no further questions. You can go ahead with your closing comments. 53:03 53 minutes, 3 seconds Thank you. And uh, thanks to Thank you everyone for being on this call and listening to our story. We believe that 53:10 53 minutes, 10 seconds uh we are at the start of a important journey and uh we need to build our ability to build trust and build our 53:20 53 minutes, 20 seconds business without any uh surprises and that's what the team is committed to and it's a very transparent organization and 53:29 53 minutes, 29 seconds I think as years go by we'll hopefully demonstrate that in due measure to to the market. Thank you very much for your 53:37 53 minutes, 37 seconds uh support and assurance and have a great great day. 53:45 53 minutes, 45 seconds Thank you sir. On behalf of Moama Wealth Management Limited that concludes this conference. Thank you for joining us and 53:52 53 minutes, 52 seconds you may now disconnect your lines. Thank you.