City Union Bank (NSE:CUB) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to City Union Bank Limited Q1 FY 'twenty seven Earnings Conference Call hosted by Ambit Capital Private Limited. As a reminder, all participant lines will be in a listen only mode, and there'll be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Jignesh Shyad from Ambit Capital. Thank you, and over to you, sir. Yes. Thank you, Neera, and good evening, everyone. On behalf of Ambit Capital, I would like to welcome you all to Q1 FY 'twenty seven earnings call of City Union Bank.

0:50 We have along with us Mr. R. Vijayanan, MD and CEO Mr. Veera Mish, Executive Director and Mr. Jay Sadhgopan, CFO. I'll now hand over the call to Mr. R. Vijayanan, MD and CEO, for his opening remarks. Over to you, sir. Thanks, Jitesh. Good evening, everyone. I've been joined by my Head, Sri Ramesh and CFO, Jay Sattakopan and the other senior colleagues in this room. Hathi, welcome to all of you for this conference call to discuss the unaudited financial results of City Union Bank for the first quarter of FY twenty twenty seven. The Board approved the results today, and I hope you all have received the copies of results on the presentation. Before we get into the results, it's truly a great honor and privilege to lead the 122 year old franchisee.

1:43 I thank the Board, regulator and shareholders for approving my candidature. My sincere gratitude to my predecessor, Doctor. Ian Kamakoti, for his mentorship and steadfastly supporting the smooth transition of leadership. At this juncture, I want to congratulate our Director, Professor. V. Kamakoti, who was conferred with prestigious Padmasree Award in recognition to his contribution to the nation. I hope you all have received the notice of the Annual General Meeting to be held on August 14, which will happen face to face at Kumakonam and also through the virtual mode. On behalf of the Board, I invite you all to participate in the AGM. During Q4 FY 'twenty six con call, we have stated our expectations for FY 'twenty seven.

2:37 With respect to advances, we should be 2%, 3% over and above the credit growth of the industry. Our focus on MSME will remain same. Cool loans and Secured Retail will be an additional enhancer, but the MSME proportion will continue to dominate. Our business through the third party, which is DSAs, on our overall bank book, we envisaged only 1% to 2%. Our focus on Secoo products will continue for the year. Our long term average numbers with respect to PAT, ROE and NIM will hold good, and we hope the positive moments will continue. So these were the discussions we had at the end of Q4. Largely, we are in line with the expectations conveyed in the last quarter call.

3:24 During last financial during the last financial year, we have achieved double digit credit growth in all the four quarters. For Q1 FY 'twenty seven as well, we have achieved 25% credit growth quarter on quarter, the highest credit growth rate in June to June, and our advances had increased to INR 67,645 crores from INR 54,020 crores in Q1 FY 'twenty six. As stated in our earlier calls, with improved efficiency level, aided by gold loan growth, coupled with digital lending process, we have achieved consistent credit growth, and we hope that current trend will continue. Deposits. Our deposits stood at INR 79,342 crores for Q1 FY 'twenty seven as compared to INR 65,734 crores in Q1 FY 'twenty six, registering a growth of 21.

4:19 As you all know, we always measure by average CASA and nor by terminal deposits. The average CASA grew by 22% in Q1 FY 'twenty seven to INR 20,062 crores compared to INR 16,478 crores in the corresponding period last year. Sequentially also, it has improved since Q1 FY 'twenty six, that is for five quarters consecutively. Our CV ratio for this quarter is at 85%, which is the level we indicated in our last call as well. With respect to the benefit given by RBI on FC and R deposits till now, the bank has mobilized a fresh deposit of 150 crores. Asset quality. On asset quality front, for the current quarter, the total slippages is around INR 195 crores, while the total recovery is INR $20.06 crores, consisting of INR 182 crores from live NPA and INR 24 crores from technically written off accounts.

5:18 So the trend of recovery more than slippages continues, and we are confident of maintaining recovery more than slippages for the next quarter as well, which is the current quarter. Our gross NPA have reduced from reduced to 1.73% in Q1 FY 'twenty seven. Both gross NPA and net NPA in both percentage and absolute terms is reducing quarter by quarter for the past twelve quarters continuously. When compared to Q1 FY 'twenty six, the GNPA has reduced from 2.99% to 1.73%, which is almost 126 bps reduction. Similarly, in our net NPA, we have reduced to INR $40.05 crores and the net NPA percentage is to 0.61 in Q1 FY 'twenty seven, while the net NPA was at 1.2% in Q1 FY 'twenty six, which is a reduction of 59 bps on Y o Y basis.

6:13 Again, overall SMA two to total advance for the second quarter, it is less than 1% sorry, it is there for the past three quarters, which is less than 1%. Based on our discussions with cross section of our borrowers from various industries, we learned and observed that the domestic consumption remained largely insulated from the impact of West Asia crisis. For the Q1 FY 'twenty seven, PCR provision coverage ratio with technical write offs stood at 85%, which has improved from 79% during the corresponding period last year. For the current quarter, PCR without a technical write off has improved to 65% compared to 61 during the corresponding period last financial year. For the past eight quarters or so, we are steadily and continuously improving our TCR.

7:02 Our interest income had grown by 24% in Q1 FY 'twenty seven and increased to INR $19.85 crores from INR $160.05 crores in Q1 FY 'twenty six. Our yield on advances stood at 9.79% for the current quarter, which is equal to our Q4 FY 'twenty six level, which was almost 9.8. On the cost side, our cost of deposits stood at 5.56, which is marginally lower than 5.6% in the previous quarter, that is Q4 FY 'twenty six, which is due to repricing benefit. Our NIM for Q1 FY 'twenty seven stood at 3.78%. With the term deposit rates on the verge of rise due to high demand, we expect the cost of deposits may slightly increase in the next few quarters, which will impact the NIM levels around five bps. But once the situation eases, it will come back to normal.

7:55 Hence, we expect largely the NIM to be in the range of 3.65% to 3.7% in the next few quarters. During Q1 FY 'twenty seven, the bank invested around INR700 crores in mutual funds. We generated an income of INR12 crores. This income has been classified under other income. Consequently, the yield on investments have declined to INR6.42 in Q1 FY 'twenty seven from 6.61 in Q4 FY 'twenty six. Had the mutual fund income been recognized under interest income instead of other income, the yield of investments would have been 6.67 rather than the reported CAGR of 6.2 crores for the current quarter. Our operating profit had grown by 29% and stood at INR $5.81 crores compared to $4.51 crores in the corresponding period last year.

8:45 By the way, this is the highest operating profit achieved by us. We had achieved a PAT growth of 25%, and our PAT stood at INR $3.83 crores in Q1 FY 'twenty seven, which is again the highest in our bank history as against INR $30.06 crores in Q1 FY 'twenty six. Our cost to income ratio for Q1 FY 'twenty seven have reduced to 45.42% from 46.15% in Q4 FY 'twenty six. As we have discussed earlier, our cost to income ratio will be in the range of 47% to 48% for a few quarters. The ROA is in tune with our long term average, and it is at 1.57% in Q1 FY 'twenty seven compared to 1.55% in the corresponding period last year.

9:33 To sum up, with our best efforts, we have achieved consistent double digit growth for the past two years. We will continue to explore various avenues of advances growth in addition to our core strength of MSME. We are very conscious in improving our credit growth through only secured lending while venturing into other avenues to achieve credit growth at least 2%, 3% over and above that of the industry. Our deposit growth is aligning with our credit growth, which is helping us to maintain the desired CD ratio. We expect the NIM to hover around 3.65% to 3.7%. ROA is expected to be in our current level of 1.55 plus. Our PAT growth will continue with business growth and better asset quality. Our cost to income ratio will remain in the range of 47% to 48% for FY 'twenty seven.

10:23 Thanks a lot. Open to questions, sir. Thank you very much. We'll now begin with the question and answer session. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and 1 to ask the question. First question is from the line of Park Utka from three sixty one Capital. Please go ahead.

11:14 Yes. Thank you for the opportunity. So my first question is, you know, slightly longer term if I look at it by seven Right? What will be the levers for Sorry to interrupt you. We are losing audio in between. Can I request to come in a better reception area, please? Yeah. Hi, sir. Can you hear me now? Yeah. I'm better. Go ahead. Yeah. Hi, sir. So so my my question... My first question was on margins. Of course, you gave the guidance that, you know, cost of funds is expected to increase in the next couple of quarters. But if I look at slightly longer term, FY '27, FY '28, what will be the levers for margin improvement? Because what I'm seeing is, you know, the leads on the lending side are are sort of stagnant or or, you know, sort of, you know... Or or improving not so materially.

12:08 So is it right is it fair to say that the only lever for margin expansion is the cost of funds? Or how are you looking at it? I think broadly, we focus on MSME gold loans, as you would be aware. I think we are maintaining a decent rate on gold loans, which will continue to give the returns as expected. And retail is also picking up nicely for us in secured lending. So broadly to explain, in gold loan space, we are around 10% to 10.5% for agree and 11% to 11.5% for nonagree. Broadly, we are at 9.6, 9.7% in our lab book in retail, and we are around 9.390.4% in MSME.

12:57 So we are slightly confident of maintaining this. And traditionally, you would be aware that we are not the highest payers in deposits, so we will maintain the same cost of funds in terms of deposits as well. And hence, this trend should continue. And more or less, we should be there with 3.7%, 3.75% range on a long term. Okay. Okay, sir. And my second question was what led to the increase in cost of funds for this quarter? We have come down on cost of funds, right? Repricing. We have done better repricing and costs has come down. Increase INR 72,000,000 to INR 94,000,000 has increased.

13:47 Okay. Yes, yes, yes. So that's largely because of the borrowing cost, right? Right. Okay, sir. Thanks a lot. You. Next question is from the line of Subramanian K. From Itus Capital. Go ahead. Congrats for a good set of numbers, sir. My first question is on the gold loan. So as everyone is expanding in taking market share of the gold loan, how do you see the competition going forward? And what would be the strategy to continue growth in this segment? Yes. Thank you, sir. Broadly, the competition is there in all the spaces, not necessarily on gold loans, but every type of firm, whether it is banks or NBFC, typically, they have their own customer base and the kind of customers. I think we are predominantly branch driven customer base, and we get the customers who walk into the branch and pledges and do the transactions.

14:53 I think we are at 30%, 31 as we speak today, and we expect it to be in the same range of 31%, 32%. We don't expect it to go up. And hence, we don't see much threat to gold loans from the competition at this juncture, sir. Okay. Got it. So the second is on the MSME. So currently, the system MSME is growing pretty strong, but they are growing at 15% range. So what are the reasons for this growth, this 15% growth rate? Is it going to continue this range? Or is there any specific reason for the MSME growth? The market is good. The consumption is good. So we and the funding is also a function of asset quality.

15:39 The asset quality has been given benefit to us. And if you even if you see MSME bank like us have INR 900 crores of repayment per month. So every quarter, we almost come down by INR 2,700 crores. So in spite of that, we could move this engine quite faster, basis the consumption and the market and asset quality. And we envisage this to grow 23% more than the system growth. That's our expectations on this. Okay. But I'm asking specifically, I think the system level MSME is growing faster, I think more than 20%. But book is growing at 15%. So is it some reason like you are maintaining asset quality?

16:27 Or is it like you are a bit cautious in terms of lending? So that was actually... We were always cautious on lending, so it's not. So if you see, one of the major reasons there are a couple of reasons, I would say, okay. One is INR 900 crores of repayment per month. And most importantly, only in this quarter we have seen this, the unutilized portion, which our utilization used to be 73% on an average, this has come down to 70%. So the utilization level has dropped from 73% to 70%. And we are also slightly cautious on pricing now. I think combination of these three factors, you would have seen some drop. But actually, I would say that it is not a drop because with INR 900 crores of repayment and utilization coming down by 3%, I think we are very fairly poised for a good growth. And pricing, we are conscious of what we have taken a call.

17:31 Thanks. Thank you. Participants, you may press star and one to ask the question. Next question is from the line of Sonal Manas from Frenzon Capital. Please go ahead. Hi, sir. This is. I hope I'm audible. Yeah. Hi. Yeah. You are audible. Great set of numbers, sir. Congratulations. My first question was with regard to the credit cost and the slippage numbers. I'm able to understand the industry is actually going through a global patch, especially the industry, and there are not too many write offs on the side. So from a one or two year perspective, what should be a number that we should be comfortable with in terms of our slippage and also our credit card guidance?

18:26 You see credit cost at a steady state, we should be around 0.4. That's a number we see once it stabilizes. We don't envisage to go up much for sure with respect to credit cost. The other question was on write off, is it? The continues to be more than the recovery continues to be more than slippages. We have been doing this for the last ten quarters almost, and we expect this continue for this quarter as well. So we don't see much change to this. And our slippages, whatever we have committed in the last year that what we will achieve this year, I think we are on track, INR 700 crores to INR $7.50 crores was a number which we discussed. I think the slippages would be in the same range.

19:19 Okay. So from a one year, two year guidance also, this is a separate number we should be around on a percentage basis as well, like around 1%, 2.25%? Yes, 0.4% credit cost and 1.2%, 1.3% should be the number. Yes, you are broadly right, yes. Got it, sir. Thanks for explaining. Thank you, sir. I'll call back in queue. Thank you. Thank you. Next question is from the line of Jain Karate from Axis Capital. Please go ahead. Thank you for the opportunity and congrats on a good set of numbers. So my question is again on the growth. If I'm correct, you have guided for the Bao System growth by a couple of 200,300 basis points.

20:07 If that is to be kept with the mix intact between gold and non gold, SME needs to grow much higher, sir. Right? Closer to 2020... Around 20% or 18, 19%. It is not happening right now. So how do you plan to catch up during the rest of the year? And not just SMEs, you could also talk about other products outside gold. How do you ensure the mix doesn't change as you achieve your growth target for the full year? If you can add some numbers on SME guidance. So I will broadly categorize into three. We have three major sets of products. One is MSME, one is gold loans, one is retail. As we said in the previous calls as well, we would be on the gold loan between 31%, 32.

20:56 MSME would be around 55%, 60%, and the remaining would be 10% of the book should be retail secured. That's what broadly the plan is. We aren't changing the goalpost much. Probably, if I would have got the utilization of the same level, what was happening for the last at least ten, twelve quarters, we would have been another 2% more, I think, 2%, 3% more in MSME. That would have happened because traditionally, we used to be 73%, 74% on our utilization. As I said before, this has come down to 70 So we had a drop of 34%. So it's again, the utilization is a function of the business utilized, how much they are utilizing and how is the business growing. So that's going to continue.

21:47 In terms of MSME growth, as I said before, will not hesitate to grow. Probably, the asset quality is fantastic. I think the growth on MSME is going to be 2%, 3% more than the credit growth system growth, and we are quite confident of that. Sir, the next question is on the branch rollout. You have up fronted this year's branch rollouts, and you see OpEx growth is coming healthy, 15,500,000. How should we think about the rest of the year on the OpEx? And given where you are on the OpEx, why the ROA guidance to INR 1,550,000 from INR 1,650,000? I mean, is there anything that we are missing in the ROA tree?

22:34 So largely, the branch opening is done, as you rightly said, but our hikes are from July. So as we speak, the stock hike is from day after tomorrow. So we expect the cost to move up. That's basically the reason why we said our CAR would be in the range of 47%, if you see our commentary. So we are quite confident of maintaining the cost to income at 47%. We are currently at 45 as we speak. In terms of ROA, I think we wanted to be realistic in the numbers what we commit. So with 1.6%, 1.65% ROA, I think that's the number which we are looking at in terms of the exit ROA.

23:22 My other income should also comfortably move up. That's around the corner. Considering this, I think if you see Q2, Q3, Q4 of last year, we moved from we were in the range of INR $2.59 crores and in the Q4, we moved to almost close to INR 300 crores, if you see our Q4 other income. We are currently in this quarter at INR $2.43 crores in the other income. So with INR $2.43 crores to INR $3.20 crores, even if we replicate the same last year's performance. And retail just picking up, I think, 1.65 crores ROA is visible. That is the visibility for 1.6 to 1.65% there. Sir, you said that is the exit ROA, right?

24:07 Yes, exit ROA. Okay. And full year, you're expecting in between 1.55 to 1.6? 1.55 to 1.65. 1.6. Understood. Thank you, sir, and congratulations once again for the great quarter. Thank you, sir. Thank you. Thank you. Next question is from the line of Aman from ICICI Securities. Please go ahead. Hi, sir. Thank you for the opportunity. I just wanted to understand our cost of funds has been stopped this quarter despite the moderation in cost of deposits. So can you explain that? Sorry, I could not hear. Cost of funds.

24:52 Sorry, if you can just repeat the question, sorry. The cost of funds has been stopped during the quarter despite moderation in cost of deposits. So can you help us understand that? Sir, that is mainly because of the other borrowing the refinance, whatever we avail. The Q4 cost was INR 72.50 crores, which has increased to INR 94 crores during Q1. That's the main reason. So what was the borrowing cost for the bank? INR 94 crores for the quarter. Okay. Got it. And sir, second question, if you can spell out the treasury gains during the quarter. If you can. Sorry, can I comment? Treasury gains. Sorry.

25:40 Treasury gains. So the total treasury gains, which is around 52 for the current quarter. Last to Q4, it was INR 29 crores. Got it, sir. Thank you. Thank you. Next question is from the line of Pratesh Pamm from DAM Capital Advisors. Congrats on a great set of numbers. Just two questions. One is, you participated in the ECLVS scheme? Have you sanctioned anything? And have you disbursed as well? Yes. We are we have participated as we speak today. Last quarter, it was INR 200 crores. And till today, we are at INR 800 crores.

26:32 And it's pretty decent. Sir, as a in terms of context, how much will be the portfolio eligible in terms of the portfolio? So we expect the CGLS to be in the range of INR 2,000 crores to INR 2,500 crores totally for this under this scheme. 100 crores. INR 2,002 to INR 2,000 We will have sanctioned everything or is it that just the eligibility, we are going to do it as a company. Got it. Based on the merits and the who are eligible, they will be entitled for this case. Right. Sir. Sir, the second question was on the SMS side. I think you mentioned that for multiple quarters, have been less than 1%.

27:22 But any particular rise quarter on quarter or any trends in that where we could know that this test is rising as a trend or this West Asia crisis is not a problem for us? I think it is such not West Asia crisis, I think it was not a big issue as of now. Whatever we speak is as of now for us. I think ECGLS is something which was fabulous, which came at the right time because there were not any stress. I've been meeting customers. We have gone and met multiple customers on this space. I think most of the customers have not shown any stress, and it's only the working capital cycle for that ECGLS has helped them to come back to normal. So as such, we have not seen any stretches, and our numbers are also speaking on the same.

28:24 One, the visit, what we did for the customers is comfortable. Second, the backing up for the same is percentage of SMA two advances is less than 1%. And not only SMA two, even SMA zero and SMA one, we are seeing of the lowest win quarter on quarter. I think we have not seen much stress on this space because of West Asia Crisis. Sure, sure, sure. Third question was on utilization levels. You mentioned that it has actually dropped this quarter given that whatever is happening in the economic standpoint of view, it is surprising that the utilization levels have gone down actually. So just because you mentioned that the ECLGS requirement came in at the right time. So why will the utilization level drop?

29:16 Any any analysis on that? Utilization is normally a function of the business, how it goes and what is the requirement And it's good if somebody is very conscious of how they are utilizing, then from a credit perspective, you feel comfortable. Typically, when the market is good, the utilization will be as high as 80%, 75% to 80% and for an industry which is probably not in great and the margins are lesser, it will be around 60%. So on an average, you get 73%, 74 to be on the utilization. And if somebody is conscious of what they are utilizing, I think it's a good sign. We keep monitoring this very closely. And we don't see it as an issue.

30:03 If you are a primary banker and if you're monitoring where the money is going and where the money is coming from and if you can understand them better, I think more or less, the Kundlis is there with you and you feel more comfortable. I think we have not seen much cycles. And lastly, sir, our fee income this quarter looks slightly lower than what we have built in the last one year. As you mentioned that it builds up over the year, but looks like 15% year on year, 19% decline a little bit looks like a little So bit any thoughts on that because that is also an important lever for ROA to borrow? Yes. Hopefully, we'll catch up Q2, Q3, Q3. Hopefully, we'll catch. But that will be driven by disbursement, higher disbursements or will it be driven by any other fee income line item? What will be the driver in your view?

31:00 Broadly, the factors contributing to the income will be proxy and suit recovery and the insurance income. I think if the risk three can deliver, we will be as per the plan. And the proxy is a function of what we disbursed, which is functional to the business. Suit recovery, again, is from what they what we collect from write off recoveries. And insurance income is something which we always keep it at last because we really don't push that much. So it's a function of what is happening in these three heads broadly. Other than the treasury income is something which we so even the last quarter, we last year, we started the same almost with the same number, and we could scale it up till almost INR $3.90, INR 400 crores.

31:48 We expect this to grow as well in the quarters to come. We are quite confident of that, hopefully. It, sir. Sir, last question, I couldn't get the treasury income number, sir. I missed that number. Treasury income, think 52, so Nilani. 5254. 5254 is the number. 5254. Okay. Okay. Got it. Thank you so much and all the best. Thank you. Thank you. Next question is from the line of Puneet Bhaihlani from Dollar Capital. Sir, firstly, on the yield bit, your looks like the yield increase is driven by gold loans because the portfolio yield there is higher. But some peers had highlighted that because of the strong increasing competition in this segment, had to cut down the yields. Have we cut out any yields in our portfolio for the whole loan bit? Or are we still going with the same yield?

32:56 We haven't changed any rate of interest for gold loans. We are at the same rate, and we continue to do the same. We have not seen much to it. Okay. Got it. Also on the utilization levels that you commented that they are dropping down because just extending other participants' question, is could competition be a reason for utilization levels coming down because across other peers, we hear that working capital utilization levels are going up because of the demand, higher treasury yields, everything. So any comment on that? And also, what would be the disbursement, MSME disbursement growth Y o Y or Q o Q, if you could highlight that? So competition cannot be a function for utilization that when you are a primary banker for majority of your book.

33:42 Utilization, again, is a function of a business needs. And it's just not that the utilization keeps on rising because, as I said a couple of minutes before, the type of industry, the demand, the supply and other stuff. And some of the businessmen were also really cautious on what was happening in Q1. And people are really long ago about the future business prospects considering the European agreement, what has been signed, particularly in the textile space. So we are really not much concerned on the utilization level. We are confident that this would slightly go up above the threshold as well, considering the future prospects of the European agreement, what textiles have signed with India with Europe. So that part is we are quite confident.

34:33 What was the second question? You asked the second question. We also... Disbursement, we don't have the figures. I can share it... Compared to last quarter. Compared to last quarter, we really don't tack this person because we majorly track on utilization and the book. If you want, I'll request Rahul to send this separately to you. It should not be a problem. Rahul, have got by any chance. Otherwise, we can send it to you separately. Disposons, we really don't track because we track on utilization and the book. Sure, sir. No problem. We can take that offline. And yes, that's it. Sorry, last bit on the ECL bits. What are we planning? Like I guess we are giving a guidance of 1.610.55% ROA. Are we planning to make ECL provisions throughout the year? Or what is the plan there basically?

35:25 Predominantly, you would be aware that we are completely a secured player. So we I just got the data from Raghu before I answer this. Our average MSME disposal is around 3,500 crores per month per quarter, sorry. MSME disposal is INR 3,500 crores per quarter. And he wanted the last year comparison, probably you can give it separately. So he should send you the mail separately for that Y o Y comparison. Coming back to ECL, I think largely, we are secured players. So we have more or less to be 0.45 of the loan book to be on an ECL, and we should not disturb as much because we are one of the banks with a very decent capital adequacy ratio. And our consumption should not be more than 0.6%, 0.65% on the car. So with 0.45%, we expect the figure to be there and with 0.65% consumption from the capital adequacy, I think nothing much we need to worry for at this juncture.

36:34 Got it. And anything on the flow basis, if you have done analysis incrementally, that will be negligible, right, because it's a secured book? Yes, yes. Very, very negligible. Materialistically, not a big number. Got it. Got it. Perfect. You so much so far. Thank you. Thank you, sir. Thank you. Thank you. Next question is from the line of Jaya Mundra from ICICI Securities. Please go ahead. Yes. Hi, good evening, sir, and congratulations on the quarter. Sir, I first question, sir, I wanted to know if Doctor. Kamakobi sir is associated with the bank in any form or manner? And did he apply to become a non executive director?

37:27 Did you get any visibility there? Thanks, Jay. Thanks for the question. Yes, Doctor. Kamaborty continues to be a good friend for us. We definitely have a good discussion. And he will be on the CSR. We have a separate CSR foundation as you would be aware and he continues to head the CSR foundation. With respect to non executive director, I think we should ask only him. I haven't asked till now. Probably I will check it up with him and come back to you for sure. Okay. Sure, sir. Secondly, sir, on SME, right, so... Jay, Mundra, sorry to interrupt, we are losing your audio. Can you repeat your question once again, please?

38:16 Sir, if you can quantify the SMA zero, one and two numbers as of June for our bank? Yes. We are at 1.2 on SMA zero, 0.7 on SMA one and zero point nine on SMA two. Right. Total 2.85, yes. Right, right. So this is broadly stable, right? This is broadly stable last from last year. Yes, it's been coming down. If you see, you remember, we used to be around INR 10.78 in September 'twenty four. We've dropped down to INR 7.12 in June 'twenty five. From INR 7.12, we are at 2.8. So that's the kind of asset quality which has been built in over the period of a year.

39:06 Right. But sir, if let us say one year back we were at 7%, then when you do your ECL calculation, right, the slippage is very low. The book is secured. But because we have, let us say, higher percentage of SMA one plus two earlier, the assessment is as of now is only 65 basis points of capital required, right? That is the assessment on this year. Exactly right. We almost there is a drop of INR 50 crores close to the assessment what we have done. Probably, if we would have simulated this ECL a year back, our requirement would have been another INR 150 crores, 180 crores more, probably INR 0.45 crores would have become INR 0.65 crores and our capital would have dropped by 1% or so, 0.9% or so. So that's the benefit which we have got on the better asset quality.

40:05 Right. Sure, sir. And secondly, on the growth mix, we have loans to business enterprises, right? So how is it different from MSME? I mean, what is Business enterprises is a non MSME. Okay. But then there are large industries also. So what is this business enterprise? Is it service non service manufacturing? Since there is no URC, we consider this as a non business, non MSME loan, which is $18,008.26 dollars what has been shown. Large industries and services are predominantly MSME only. And these are quite large corporates kind of stuff. Okay. So if there is no general registration, then it will fall into business enterprises? Correct, correct.

40:53 Which will be a non MSME loan. Right. Sure. And sir, lastly on gold loan. So we have average yield at 10.6%. Have you increased it, let's say, over the last one year? Or this is broadly stable, there's no change in the pricing? Last one year, we have increased around 25 bps, 25 bps, 30 bps. 20 bps, five bps, we have increased in the last one year. So now sir, let us say, global loan growth is still very strong. Why can't you increase it by, let's say, 100 basis points and let the growth fall, it will still be I mean, there seems to be less elasticity here. So if you want to calibrate the whole loan growth, you can actually increase the pricing or that is not really possible?

41:46 It's not that not possible, Neel. A, predominantly in agricultural sector, we are really there for the genuine need for the customers who want to harvest. After harvesting, who wants to take it to the mandi and from that mandi who wants to sell. Genuinely, we are there in the agricultural space, so really, we don't want to burden them. That's one set of thought process. The second set is NADL, I think we are quite comfortable with what we are doing at 10.511%. We really don't want to go overboard and do this for the customers. Probably, we might look at 0.1, 0.2 if necessary and if all the other players increase it. Just for the sake of this, we don't want to do this. Okay. And sir, is there any difference in yield between retail and admin jewel loan or they are probably similar?

42:36 Agri's loan is better, 100 bps lesser, So that's what I said. Agri, genuinely, are there for Agri. So we lend it at least 100 bps lesser than what we do it for others. Right. And sir, why is there the non Agri gold is very strong, right, roughly 40%, 45% versus Agri gold loan. Agri, I believe is linked to your MSM your PSL and Agri requirements. But any reason why the retail gold loan growth is still very strong? Retail gold loan predominantly is always strong because your consumption when it goes up, this is a cheaper source of fund from a player like us because they end up in paying 10.5%, 11% or 11.5% to be precise.

43:25 Then number two is, it is easily I mean, you want the money in the next one, two hours, I think this is the best form of product, which can get them at a very less cost. So NAGL, which is nonaggregation alone is always going to be a demand driven product compared to Agri. Agri is more for a specific use. A nonagri is for consumption, it can be for emergency or it can be for your business needs. So you have various things coming out. Hence, it's always going to be there, Jay, like this. Right, right. Okay. And sir, what is One more thing, sorry, Jay. One more thing, it is also the function of increasing branches. So we used to be at 700, we moved to 800 and now we are at 1,000 as we speak.

44:12 So when it's a branch led product, Agri is a branch led product. So when your distribution goes up, your business also goes up, and it is a function of 700 to 1,000 branches, what you are seeing now in uptick. And in spite of that, we are saying we are at 31 and while we have the capability to grow more even at this current rate, we would be more comfortable with 33%. I think the Slide 24 says it all, rather we build a book, which is quite comfortable rather than getting into overall. Right. And last question there, again, on this, how do you benchmark the, let's say, per gram limit for gold? So let's say, the per gram limit is 14,000 today, you do 71% of that or this you apply some moving average or there is some floor ceiling or this is a daily continuous changing rate?

45:11 Sure. We don't change it daily. We see the price movement at least for a month or so, and then we change the price. So the change of price is not a function of when the price goes up immediately, we go up. So just to give you an overall perspective, the current market price today, our average LTV is at 62%. To be very precise, 62.07%. So when we see this market going up for the next, say, two, three weeks, then we think to increase the rate. In terms of drop, we are quite cautious. We see how steadily the rates are dropping and immediately we come into this. So to answer, while we lend it at 65% LTV today, our price is at 62%. At a 5% drop, we will be at 65% LTV. Under 10% drop, we will be at 69% LTV.

45:58 At a 15% drop, we will be at 73% LTV. Under a 20% drop, we'll be at 78% LTV. So I think broadly, we are comfortable in this crisis. Right. All right, sir. That is very, very helpful. Thank you and all the well. Thanks, Jay. Thanks, sir. Thank you. Next question is from the line of Poshpit Cheyenne from Ambit Capital. Please go ahead. Hi, sir. Congratulations on a great set of numbers. My first question was on the asset mix part. So this large industry that you have been noted, so like it is a small portion of the book, but is it like related to the EC and GS like disbursement?

46:46 No, no, no, no, no. It is a proper funding. It's not an ECG adjustment. When we said that... Classify just to give you a clarity, we classify this as a large industry when the turnover is about INR $7.50 crores and above. That's how we have classified it as a function of that clock or dispersal what we have done for us. Okay. Sure. So like the surge this time is can we like buy that? Sorry, you sorry, we lost you. Sorry. Yes. I was saying like the quarter on quarter surge that is there in this book, like what can be attributable to? We could not hear you, sir. We could not hear you properly, sir. Am I audible now?

47:32 Yes, better. It's better, please. Yes. I was asking, there is a sequential surge in this book. So can you explain like what is the like letting it to? Which one, sir? Large industry. No, we were at 2,002 crores in INR 3,112 crores. We dropped out to INR 15 and we moved it to INR 19 crores. Whenever the pricing issue is one is the pricing we closed because of lower pricing, closed the cases and utilization level. Function of two things. One is utilization level, other one is the rates were not conducive. They wanted to exit. We said fine. So those customers exited us because of the yield pressure. We don't want to reduce the rate. And number two is on utilization level. These are the broad things.

48:20 And secondly, like I missed, like the interest paid on borrowings, that was INR 94 crore this quarter, right? Yes, 94. Yes. And how do you see the cost of deposits and cost of funds going from here? Cost of deposit is slightly moderated to INR 5.60 in Q4. Going forward also, probably it may be in the range of INR 5.6 crores to INR 5.7 crores and the borrowing cost of present status of INR 94 crores to continue for the next two quarters. Okay. Sure. That was all from my end. Thank you, sir, for all the answers. Thank you. Thank you. Thank you.

49:06 Next question is from the line of Achilesh from Northrop LLC. Please go ahead. Hi, sir. Thank you for taking my question. So firstly, specifically in the gold loan, agri gold loan book, is the LTV similar to the overall LTV or is it different? Agree LTV will be slightly higher. 5% or higher? I think 5%, it should be higher than the nonagree. Yes. Yes. It will be 5%, 7% more than the non agreeable loans. Understood. Sir, second on the OpEx to assets of the cost to income, considering if you look at over the next couple of years, maybe three to four years time horizon, considering our aspiration to grow ahead of the system, how much potential do you think you have for positive operating leverage from here on?

50:01 Cost to income? Yes, on a cost to income or on a fixed to asset basis. Yes. I think three years is a long vision, at least for me. Cost to income, our aspiration is to be less than 45. That's the number which we are looking at. And all the work are getting for that only. Hopefully, we should be there. We want to be less than 45. Understood. Certainly, MSME and MAP specific segments, any purposes regarding maybe moving higher or lower on the ticket sizes going forward? You would like to maintain this broadly? Our ticket sizes have always been stable.

50:47 Most importantly, we aren't chasing higher ticket sizes. When I say higher ticket sizes, we really are not keen to do about 10 crores from lot of perspective. However, for my existing to bank customer base is a track we are looking at. So our ticket prices are broadly going to be more or less in the same range. We don't expect it to go up. We are more comfortable with granular. Understood. And sir, lastly, Deepa keeping question. What would be the average LCF for the quarter? We are at 150,150. 150, yes. Next question is from the line of Param Subramanian from Investec India. Please go ahead.

51:42 Hi, sir. Congratulations on the quarter. Most of my questions have been answered. So just one broader question. Sir, we are seeing, you know, a lot of the, you know, Tamil Nadu based lenders doing very well on growth, on margins, asset quality, and they are also very positive about the future. Sir, if you... I heard you speak about, say, the textiles opportunity, but if you would call out, say, the MSME, in the industry sort of lending, you know, what are the drivers that, you know, is causing such optimism? If you could just speak a little broadly about that, be it semiconductors, auto parts, what are the opportunities you're saying that will drive the strong MSME growth? Thanks. It's not only Tamil Nadu. Everywhere wherever we are operating, it's pretty decent.

52:31 But particularly, sector space in Tripur has been very positive on the momentum. And if you come to this site, Shri Gurumudu, you have a big auto automobile space, which we have a lot to cover, by the way. Our share can considerably go up there. And we are overall positive on consumption. I mean the business is really taking off in other specs as well. So we expect this momentum to continue, whatever we are talking to the clients. We have been in the paper space. We went to the paper industry. Paper industry has also been doing well in Kangay, M Palladium, corrugated boxes. These are also in a really good shape. So hopefully, the trend continues. I think most of us should definitely do well.

53:20 And you expect this sort of net slippage trend of zero to negative, that sort of continuing for the foreseeable future, is it? We have given it for this quarter. Hopefully, if your words come through, we should continue. Okay, sir. Perfect. Thank you so much and congrats once again to the team on the quarter. Thanks a lot, sir. Thanks a lot. Thanks. Thank you. As there are no further questions, I'll now hand the conference over to Mr. R. Vijayanan, MD and CEO for closing comments. Thanks a lot. I think broadly, we were in line with the expectations of what our deposit growth is getting aligned with our credit growth, I think, which is helping us to maintain the LDR levels at the desired range.

54:11 As we discussed during the call, we expect the NIM to be in the range of 3.65% to 3.7%. Our ROE is also expected to be at the current level. We don't see much issues there. And the better asset quality, we would like to continue better business growth with better asset quality, and we want to maintain the cost to income at the desired level with the automation, with AI in some of the spaces, what we plan to invest, which we have invested and the operational space, we have invested much in AI, I think we should get this cost further coming down. Hopefully, we would like to maintain this momentum and continue for this quarter. Thanks a lot to everyone. That's it.

54:58 Thank you very much. On behalf of Paramed Capital Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you. Thank you.