Shriram Finance (NSE:SHRIRAMFIN) Q1 2026 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Shriram Finance Limited Q1 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Umesh Srivankar, Executive Vice Chairman, Shriram Finance Limited. Thank you and over to you, sir. Thank you. Good evening, friends from India and Asia, and a warm welcome to everyone joining us from Western part of the world.

0:50 I'm excited to share our Q1 FY twenty twenty seven earnings call with you today. And I'm joined by our Managing Director and CEO, Parag Shriram, Joint Managing Director and CFO, Sundar and Mr. Sanjay Kumar Punjab, our Executive Director and Investor Relations Head. Looking back, the first quarter of the year has been positive one for Shriram Finance, especially given the current situation. Let us start by examining some broad economic indicators that affect our business directly or indirectly. India's economy wrapped up FY twenty twenty six on a strong note with the GDP growth picking up to 7.8% in the fourth quarter, which was a comfortable beat to the market expectation of 7.3% or the growth trajectory and revised full year real GDP growth rate of 7.7% with updated base year.

2:03 However, RB has lowered its economic growth forecast for FY '27 to 6.6%. This adjustment comes as they are concerned about global conflicts, energy prices and weather condition. India's retail inflation has increased to 4.38% in June, up from 3.93% in May. This rise is mainly due to higher fuel and food prices, which have increased because of supply disruption driven by war in Middle East and delaying seasonal rates. India's wholesale price based inflation jumped to record 9.87% in June, up from 9.68% in May.

2:55 Fuel and power prices went up a lot, which really pushed this number higher. Food inflation also hit an eighteen month high, which affected overall index. Amidst the recent RBF policy, there are main points From June 26 RBL monetary policy, repo rate stays at 5.25, policy stance remains neutral, GDP forecast has been adjusted to 6.6 from earlier 6.9. CPI inflation forecast has been raised to 5.1%, up from 4.6%. Coming to the rural economy, the biggest challenge for India's economy right now are geopolitical tension in West Asia and uneven rainfall from Southwest monsoon.

3:52 A big monsoon deficit, a changing monsoon path, inconsistent rainfall could cause problems for expenditure, inflation and overall spending. The IMT recently lowered its forecast for 2026 Southwest Monsoon predicting only 90% of usual rainfall. This is happening as El Nino gets stronger, which might lead to even more rainfall problems during important planting season. The latest meteorological department data shows India's Southwest Monsoon in a long dry spell with the total seasonal rainfall now 24% below normal between June 4 to July 16.

4:45 But the good news is that country has made some changes like more irrigation, different ways for people to earn money in the countryside, which makes the whole economy stronger when it rains unpredictably compared to the past. Coming to the GST collection. India's GST collection went up by 13.9 year on year to INR 1.95 lakh crore in June 26 compared to INR 1.71 lakh in same month last year. This increase was mainly because of more money coming in for both domestic and imported goods. If you look at the whole April June period of FY 'twenty seven, gross GST collection were INR 6.32 lakh crore, which is 8.4% increase from INR 5.83 lakh crore collected in the same period last year.

5:46 Coming to the auto industry. On OEM sales side, this quarter has been very good for automobile sector following GST rate cut. It had a positive impact leading to significant surge in sales. Commercial vehicle sales increased by 14.1% in Q1 FY twenty twenty seven and stands at 2.65 lakh unit as against 2.24 lakh unit in the Q1 twenty twenty six. Within CV, M and HCV grew at 18.3% and stands at 95,910 units against 84,040 units sold in the Q1 twenty twenty six.

6:37 LCV sales recorded growth of 20.8% in Q1 FY twenty twenty seven and stands at 1.69 lakh unit versus 1.4 lakh unit sold in the Q1 twenty twenty six. Passenger vehicle sales in Q1 twenty twenty seven recorded a growth of 25.9 and stands at 12.74 lakh unit as against 10.12 lakh units in Q1 twenty twenty six. Two wheeler recorded growth of 20.3 with sales of INR56.29 lakh unit in Q1 as against INR46.78 lakh unit. Three wheelers sales recorded growth of INR29.7 lakh in Q1 FY twenty twenty seven with sales of 2.14 lakh units sold versus 1.65 lakh units sold in Q1 twenty twenty six.

7:36 Tractor sales recorded growth of 21.6% with 2.65 lakh units sold against 2.18 lakh units sold in Q1 twenty twenty six. Construction Equipment recorded a growth of 8.8% with 25,176 units being sold against 23.147 units and showing a growth after long or negative growth in the last financial year. Here, one highlight is the EV sales have gone up significantly, maybe due to the uncertainty about the fuel price, but very positive.

8:24 The PV sales, passenger vehicle sales increased by 94.8% to 84,665 units against 43,464 units sold in Q1 twenty twenty six. Three wheeler sales for Q1 increased by 13.2 to 2.15 lakh unit against 1.9 lakh unit sold same period last year. Two wheeler sales for Q1 twenty twenty seven increased by 69.3% to 5.22 lakh unit against 3.08 lakh units sold in Q1 twenty twenty six. Now I shall ask my colleague Farag Sharma to take through the operational performance.

9:15 Thank you. Welcome everyone to our Q1 FY twenty twenty seven earnings call and I trust you had the opportunity to produce our results and the related investor presentation, which have been posted on the website of stock exchanges. We registered a disbursement growth of 19.51% Y o Y. Our disbursement in Q1 FY twenty seven this year aggregated to INR49974.49 crores versus INR4816.75 crores in Q1 FY 'twenty six. Our asset under management as on 06/30/2026 registered a growth of 15.26% over Q1 FY twenty twenty six and of 3.81% sequentially.

10:16 Our asset under management stood at INR31378.39 crores as against INR 272,249.01 crores a year ago and INR 302,273.75 crores in Q4 FY 'twenty six. Our net interest income in Q1 FY 'twenty seven registered a growth of 33.67% Y o Y. We earned a net interest income of INR 8,055.70 crores in Q1 FY 'twenty seven this year as compared to INR 6,026.43 crores in Q1 FY 'twenty six.

11:09 Our profit after tax grew by 59.79% and stands at INR 3,444.56 crores in Q1 FY 'twenty seven as against INR 2,155.73 crores in Q1 FY 'twenty six. The profit after tax was INR 3,013.57 crores in Q4 FY 'twenty six. Our net interest margin in Q1 FY twenty twenty seven was 9.04% as against 8.11% in Q1 FY twenty twenty six and eight point six one percent in Q4 FY twenty twenty six.

11:55 Our earnings per share for the quarter stood at Rs. 14.83 as against Rs. 11.46 in Q1 FY twenty twenty six. On asset quality, gross Stage three in Q1 FY twenty twenty seven stood at 4.64% and net Stage three at 2.33% as against 4.53% gross and 2.57% net in Q1 FY twenty twenty six and was 4.58% gross and 2.33% net in Q4 FY twenty twenty six. Our credit cost to total asset for Q1 FY twenty twenty seven stood at 1.66% as against 1.64% for Q1 FY twenty twenty six and one point six eight percent for Q4 FY 'twenty six.

12:54 Our cost to income ratio was 25.48% in Q1 FY 'twenty seven and as against 29.29% recorded in Q1 FY twenty six. The same was 25.32% in Q4 FY twenty six. On the liability side, this quarter we didn't borrow much and overall liabilities have come down from INR 250,690 crores as of March to INR 232,639 crores because of use of capital in the current quarter, which was infused in April 2026. Overall liabilities have come down. The cost of liability has also come down from 8.59 to 8.56, three basis point reduction. The incremental cost is at 7.77%.

13:52 The liquidity coverage ratio for the company was at 262.54% and liquidity is well maintained for six months of liability repayment. The leverage ratio came down because of this large capital infusion is at 2.14 times versus 3.82 as of March. The capital adequacy ratio for the company was healthy at 34.17%. And I think with this, we can open the forum for question and answer. Thank you very much. We will now begin with the question and answer session. If you wish to remove yourself from the question queue, you may press star and then 2.

14:46 Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Your first question comes from the line of Ramesh Harishbhai Bhuva with ICICI. Go ahead. Hi, sir. Congrats on a good set of numbers.

15:31 Just two things, sir. First, on this AU mix, right? So from a two to three year perspective, how do you see the share of new vehicle financing shaping up in overall vehicle financing portfolio? And what is the current risk adjusted yield in this segment? I mean it is better than the book, we can just schedule or a par or maybe slightly lower. And also if you can share how internally you estimate the return metrics for new vehicle? I just wanted to get a sense like product level, the new vehicle finance book ROE in a finishing basis will be upwards of 15% or it will be slightly lower? Yes.

16:20 See, we are slowly increasing our new vehicle disbursement, focusing on existing customer upgrading. And our existing customers keep upgrading to new vehicle and that's the common. Everyone has aspiration to upgrade to new vehicle and we have been financing them. Plus, we are also maybe reaching out to the our earlier customer. Shriram has been in this business for nearly fifty years. Many of our customers would have gone to the other players because we were not matching the interest rate in the past. Today, since we have capital and since our cost of borrowing is coming down, we are able to match the rates. So not only the match rate, we are also able to service the customer much better. So we are increasing our new vehicle portfolio.

17:22 Right now, on the disbursement basis, it's around 16% of the disbursement is new vehicle. And increasingly, it will go up next two to three years as we reach out to more number of our earlier customers. And sir, any comment on the profitability in The profitability since we are passing on the reduced cost of borrowing to the customer, overall margins will not come down. So our long term margins of 8.5%, we will be able to manage. Okay. Okay. Okay. Okay. And just second on the growth side, right? So while we were really cautious during our Q4 earnings call because of the attrition war, and hence we were not maybe guiding for higher numbers. But as you know, you did mention in your opening remarks that Q1 and this quarter, you know, the volumes are better. So are we aspiring for 18% to 20% growth in this year itself or Or we may want to see wait for another quarter and then the SSE guidance?

18:41 We would like to wait for another quarter because the net impact of the deficiency in monsoon is a little So less we would like to wait for that. But we are confident that we'll be able to grow more than 15% at least for next quarter. Then onwards, if things are much better, we feel that we'll be able to catch up and grow faster. Got it. Got it. So can you just share the full year guidance on growth for this year at this point? Our earlier guidance of 18% will hold good unless after second quarter we revise it. Got it. Okay. Okay. That's it sir. Thank you.

19:30 Thank you. Your next question comes from the line of Chintan with Autonomous. Please go ahead. Hi. Thank you for taking my question. The first one is on asset quality. What kind of impacts are you currently seeing from the Vetisher war? Are you seeing capacity utilization come down? Are you seeing signs of demand destruction? Like what signs are you currently seeing on the ground? See, basically, we were expecting that fuel price to go up steeply. But since the fuel price has not gone up steeply, the operating margin for the operators have not changed much. They're able to pass on the increase in cost to either shipper or the end customer.

20:22 So that has not changed much. And the demand for the vehicle remains good because we have not seen any stress or vehicle idling anywhere, and there has been good demand for the vehicle. And that is reflected in the way the sales have gone up. If the utilization levels were a little lower, then sales would not have gone up by 20% year on year, which is actually a positive surprise to us. Okay. So it's holding up well just now. Okay. The second question is on margins. So your NIMs were 9% this quarter. How should we think about your NIMs over the next three, four quarters? And how what how should we think about the excess liquidity that you have on your balance sheet? So I'm kind of thinking about the next few quarters here rather than long term with the new vehicle finance, like let's leave that aside, just kind of trying to think about how your balance sheet develops over the next three, four quarters?

21:26 See, immediate two quarters, I think the current NIM will hold good because we are still utilizing the capital. But over the medium term, definitely, it will come down a little because our new vehicle mix will go up. And right now, whatever the benefit we are getting because of the lower cost of borrowing, to some extent, we are passing on to the new vehicle purchases. So I believe the as new vehicle portfolio keep increasing within the hours one, we will be able to manage the NIM at around 8.5% in the medium term. I mean, this is where I have a problem with your guidance. Like I don't understand this 8.5% number. You're currently at 9%.

22:14 You've got excess liquidity on balance sheet. So that will probably go a little bit higher. And the mix shift, the way you're guiding on new vehicle loans, the mix is moving very slowly. So how does the NIM then drop from, say, 9.1%, 9.2% back to 8.5%? That just seems very conservative. Is it fair that you're just being conservative in this guidance? Yes, I'm talking about a medium term. Medium term is two to three years. In the short term, said, currently, you will be able... Unless the no, fair enough. But unless the new vehicle book grows very fast, it's hard to see that much mix shift come through and then see 8.5 NIM again. So I think your growth will really go fast, which you are not guiding to, you're guiding to more balanced growth, then the mix shift would be more like five years rather than two to three years. Or am I but I can understand if you're being conservative.

23:11 See, we always I have been conservative in our guidance. But new vehicle, if you look at the mix, from 10% to our new vehicle volume, we have increased to around 16%, 17% now. It will keep increasing to around 20% to 25% over the period. So definitely, new vehicle book will be around 30% of our book, 30 plus in our book, maybe in the medium term. Understood. Okay. And then finally, on the non vehicle portfolios and asset quality, could you give us some sense what's happening in MSME, gold, PL, these areas we are seeing GSC inch up a little bit. Can you provide some color on what's happening there?

23:58 Yes, our gold portfolio is definitely growing very fast, and we expect it to grow very large because we have started using many of our existing branches for gold loan. Currently around 2,200 branches are made ready for gold loan activity. So we expect the portfolio to grow or double in the next three years from around 2.5% of the overall book to around 5% because we feel that there's a very big opportunity for us to grow in the gold. And MSME book also, we are being traditionally lending in the Southern market. Other markets, they were not really explored much.

24:47 And since we have now branch network across the country, we will be able to grow our MSME book. And last year, we were little cautious because of The U. S. Tariff and were little inconsistency in the policy, which many of the MSME were dependent on exports. Now since there is the MSME, by and large, they're able to find new market and expand the market within India. We are confident of the growth in the MSME book. So from around 15% of the portfolio, the MSME will become around 20% of the book. Personal loan also, we would like to extend to other customers. These are two, we were focusing only on two wheeler customers.

25:35 Now we will be offering this to other customers like gold, MSME customers also. So the personal loan book also will keep growing, but we try to as much as possible keep it within our known customer. And we do not wish to make the outsourcing as a big way to move forward in a personal loan. And there's no worry about asset quality in gold and MSME at the moment, right? The GST... Gold absolutely not. MSME, we have been cautious in the last one year. We are now pretty confident about the MSME quality, as is quality.

26:24 Thank you. And a final quick one, any guidance on OpEx? Because the revenues are now growing stronger because of the excess capital, should we think about a stable cost income ratio or should we think about an improving cost income ratio? Stable, I should say. Okay. Thank you. Thank you. The next question comes from the line of Kunal Shah with Citigroup. Please go ahead. Thanks. So firstly, again, coming on to this entire deployment of liquidity question. So if you look at it, money was utilized in terms of repaying the borrowings, borrowings are down, and then there is some liquidity, which is parked in the cash bank balances and the investments.

27:13 So here on, do we assume that maybe now the repayment of the borrowing is largely done? We will not utilize the funds or cash liquidity to repay the borrowings, and it will be more utilized towards the growth? And how long would it take to utilize this entire excess liquidity out there, which is currently Yes, I think whatever liability repayment we targeted we have achieved. So, we'll be looking at business growth only, utilization towards more of growth only. And we previously also used to maintain slightly higher liquidity, which will be close to around three months of our future liability repayment, which works out to close to around INR700000 to INR18000 crores.

28:09 The balance what we have surplus of that will definitely come down because of higher disbursement. And we don't look at any utilization towards liability repayment. In fact, we'll be looking at mobilization towards the end of the quarter of fund mobilization also. Yes, what we are saying is right, no more liability repayment, more of growth and look at some mobilization towards the end of the quarter. Got it. So as this liquidity gets utilized into the growth, in fact, that should support the margins in the near term, and that's the reason we are confident that it will remain in this trajectory for few quarters.

29:00 Correct. Okay. Got it. And secondly, in terms of the credit cost, given that it's holding on quite well, and you indicated that there is no stress reflected in any of the segment, do we stay with the credit cost guidance? Or would there be any risk to whatever we are indicating, we are still hitting below our guidance of 200%. So any changes out there on the credit cost front? Yeah. I think it will hold good, but our see, our guidance has been around 2%. So it will remain around that in the near term or even in the medium term.

29:45 Okay. So no risk out there? No. Okay. And SME, we have started to see the inflection, maybe it has started to grow quarter on quarter. So as you are indicating the MSME proportion will also in chops. Should we see the accelerated pace in SME growth and getting towards the double digit kind of a number on a year on year basis now? Or would it still take some time before we get the comfort on the overall environment? No, I think it will start growing now. We are pretty comfortable and confident and we would like to expand the market. So sequential momentum on MSME will pick up? Yes, yes. Okay. Got it. And just last question in terms of the data point breakup of disbursements, yes.

30:36 PV for the current quarter was INR 19,556 crore passenger vehicle INR 11,018 crore construction equipment INR $7.92 crores, farm equipment INR $9.47 crore, MSME INR 6,184 crores, two wheelers INR 3,548 crores, gold INR $5,001.53 crores, personal loans INR 2,773 crores, total INR 49,974 crores. Thank you. Thanks a lot. Yes. Thank you. The next question comes from the line of with PP Capital. Please go ahead. Good evening, sir.

31:21 Am I audible? Yeah. Yeah. So I want to ask a question regarding the gold. As you know that the... Our prime minister has requested our citizens to buy less gold. So how this is going to affect the businesses for Shriram? And overall, I want to understand in the like in the Middle East Crisis and all, how this is going to affect the business of Shriram Finance? See, basically, gold finance against the existing jewelry, it is not against the buying of the gold. So and gold traditionally is not used for raising resources or borrowing.

32:08 People have been hesitant to part away with the gold. And thanks to some of the NBFPs who specialize in gold, they have highlighted the advantages of raising resource against gold at a lower cost. So people who were otherwise would have raised personal loan or hand loan, now they are raising against gold for all their requirements. So I believe the gold holding in India is pretty large, so it will keep increasing. And also, there is a large number of bond brokers who are still in the business and they're doing pretty good. So I think some of this business will flow into NBFCs.

32:58 So in that way, I think it will turn out to be a good volume for everyone who is there in this business. West Asia crisis, even though there were certain challenges, especially in certain industry, which was dependent on the petroleum product as their raw material, like plastic and all. So there the cost went up and there were some challenges for the manufacturers to pass it on to the end customers. But I think that phase is over now. So onetime increase in cost is already passed on. And people have started living with it. And therefore, I think there may not be further surprise unless the retail fuel price goes up further.

33:51 And the government also have taken a lot of measures in managing this by the higher ethanol mix. The E20 is going to be a norm now and that is going to have, to some extent, less dependent on the import. So I think overall, I feel the situation is quite comfortable and the economy is doing quite well and growing at the indicated level of what RBI has indicated or forecasted at 6.6%. And I believe that the economy is growing steady.

34:39 Thank you very much and congratulations for the good set of numbers. Thank you. Your next question comes from the line of Raghav Garg with Ambit Capital. Please go ahead. Sir, good evening, and thanks for the opportunity. I just have two questions. Most of my questions have been answered. One, I know you said that your incremental cost of funds is 7.77. I just wanted to know what is the incremental cost of bank funds, if you can share that please? Yes. So we have not borrowed from banks in the current quarter, but when we start borrowing, I think it would be in the range of around 8%. Around 8%. Okay. Superb. And the second question is on your MS and E portfolio.

35:28 Think at the time of the merger, the thought process was to expand this portfolio across the recipe branches in the Non South states and regions. As of today, where are you has the product been rolled out across all those branches that you were targeting? Or there's still some more penetration to go there? That's the second question. No. I think it's a long way to go. There are a lot of scope and opportunity. From the were initially, we're mostly in the South. Now in the West, we have rolled it out. We need to grow more in the North and East, which we are looking at scaling up. So we are also trying to have more specialized people in these areas.

36:20 So as we are able to get more specialized and experienced people, we should be able to grow that business across India. Can you share some numbers maybe in terms of your percentage of branches covered? What would be right now in the West? And then as you go into North, that will help us get some idea on what is the opportunity out there? Not all branches we were doing, even in the South, we were not using all branches for sourcing the MSME. We were focusing on the certain pockets where the MSME segment is pretty large. And other branches is mostly lending to small shopkeepers, our trading activity.

37:14 So the manufacturing, MSMS and all are mostly focused in the, what we call, industrialized base. So there, we need to build certain manpower, especially when you go to North and all, so North, central. So that is where we need to build business. But we are covering most of these part now, if not from all branches. We are sourcing from all branches, but processing in the few branches. It's our balance book in as far as MSME goes. I understood. That's all from my side. Thank you. The next question comes from the line of Rajeev Mehta with ES Securities.

38:04 Please go ahead. Congratulations on good numbers. So my first question is on this very resilient CV growth that we are seeing even in Q1. So is it largely reflecting that the demand on the ground has kind of stood up when despite the movement in the June price and not so if the full pass on did not happen out in the quarter, but still the demand for used vehicle was pretty healthy in your cohort on your vintage segments? Or is it also a reflection of some decline in competitive intensity, which benefit us? Or did we use some flexibility in underwriting or pricing because our cost of funds is now moving down? Can you just elaborate on what have been some granular drivers of growth in your CV in this quarter?

38:58 If you look at the broad numbers, it's in line with the increase in sales itself. The CV sales have gone up by nearly 20%, both M and HCV and LCV put together. So naturally, any player in this market will grow by 20% very comfortably because market is growing at 20%. Even in used vehicle, the demand is quite good from the rural market. So I think it's a very comfortable journey. We have not really made extra push for growing the CV. But yes, we have been doing more new vehicle. So naturally, our growth rate will be higher because the ticket size of new vehicles are pretty large.

39:46 So sir, for the remaining part of the year, would it be right to say that you're most comfortable as far as the growth outlook is concerned in CV per se? Because I think this segment grew well in Q4 last year as well as Q1 of this year. And will you expect this momentum of growth to last for the whole year? See, with the current scenario in mind, yes, I feel the growth rate will be comfortable and we'll be able to go as per the guidelines. But I would like to still wait till the second quarter for the actual impact of El Nino because we will see whether agricultural output drops. Right now, the indication is that rice cultivation, there may not be a downtrend.

40:37 It will be flat year on year. There will be some downtrend in the oilseeds and the pulses because the Central India got less rainfall. And the that is the current estimation. But I think if there is a prolonged rain, then there may be a delay in the output. So there can be some kind of new surprises, like positive surprise, like rain continuing hold longer and good output. Then of course, we need to wait for the ruby crop. So ultimately, there is a little uncertainty towards the output and the rural income. So that is the only challenge we would like to wait and see. Otherwise, our guidance hold good.

41:30 And sir, this revival in growth in used TV, right? I mean, last quarter, I think we went slow despite the market was pretty strong. And now in this quarter, think we have accelerated growth, even when look at how the portfolio has grown on Q on Q basis. So what has changed in our approach between two quarters? There's no change. I feel that would as I was telling you, the new vehicle portfolio has gone up, so volume has gone Okay. Okay. And just lastly on the goal loan portfolio, how have we kind of adjusted with the new guidelines, which came into play from first year? Because I think we've seen a good growth in portfolio in this quarter.

42:18 And at the same time, on the asset quality side, we have seen some forward flows. Phase II has gone up and Phase III has also partnered with the Golden portfolio. So anything any connection with the new regulations or any change in the way any use of the business before and now for the regulations? No, no. There's no fresh guidelines that were. The guidance came a year back. I don't see any fresh guidelines recently. But I feel the portfolio is holding very good. There may be some change in the buckets because we are trying to promote more on the one year interest servicing gold loan.

43:06 Normally, they are habituated to pay only bullet payment. We are trying to make the customers more towards interest payment. And that's the only thing, I think, change. Anything else? No, nothing. Okay, sir. Thank you, investors. You. Thank you. The next question comes from the line of with TD Securities. Please go ahead. Hi. Thank you for taking my question. Good evening, sir. Sir, I wanted to understand of your NIMs, which is at 9.04, what percentage of this has come from the part funds? Around INR500 crores of the NII, which is being reflected is out of the fund, that INR37600 crores what we received as Fresh Capital that has contributed to the INR500 crores of additional interest income.

44:11 Okay. And will that so the guidance which you're giving for the shorter term that the NIMs will hold at this level and considering the cautious commentary, right, because of the uncertain situation, like 500 will remain static for next quarter as well, right, this current quarter? It will gradually come down. What we were indicating earlier is that the operational NIMs will hold at around 8.5%, and we continue to guide that. And the benefit of the surplus liquidity with the equity that we had come in will gradually subside over a period of time. Okay. Okay. All right. So my next question then is, sir, with this Iran war again flaring up, right?

44:58 And whether being uncertain and based on IND prediction, July and August does not look very... Sorry. August and September might actually lead to lower rainfall or, you impact getting heavier and heavier. Right? So are we confident that the disbursements and everything else, which we are guiding for, right, we won't have any negative surprise on that front? No. Right now, we feel that we're pretty confident of a similar growth as first quarter. Okay. Okay. And last and the final, sir, the new loan portfolio, right? Currently, you said, if I heard you correctly, 16%, right, of the total total numbers or it has increased gradually.

45:50 That ideally comes at a lower NIMs. Right? Lower than the second end purchases. Right? So will that be will that be NIM decorative for us, or do you see still we will be able to manage everything as it stands because of the surplus liquidity, the 500 coming from this? Basically, cost, which is lower borrowing cost is getting passed on to them. So it is not there's not be big change in the NIM because of that. The only reason I'm asking sir is because some of the peers have suggested that the funding is getting a little tighter, right, and funding costs are increasing.

46:36 You don't see any challenge or any negativity coming in from that front because you are saying that our cost will go down and anticipated bank funding it would be around 8%. Yes, in fact previously we used to borrow as a double rated entity and now we are getting the benefit of rating, that itself gives us some benefit of lower cost. For this quarter it was three bps, right? For this quarter it was three bps? Three bps is on the overall liabilities, which has come down. Talking about the incremental, we didn't borrow much in fact. So overall liabilities have come down and that is some high cost paid off and overall liability cost came down.

47:26 When we do the incremental borrowing, which was at seven seventy, seven eighty levels, it should be much lower than the cost of liabilities on balance sheet, which is 8.56. So incremental borrowing costs will be lower, that is why we are confident about overall costs still coming down. Sir, so the only thing I don't understand then is, you have surplus liquidity within your books, Right? But you have again said that between August and October, you will be raising new funds. What is that gonna use for? No. In fact, what we said is the overall liquidity, which was which is more as of June will be utilized for growth.

48:14 We'll be utilizing excess liquidity in one, one point five months and then look at fresh borrowing. Okay. Got it. Got it. Thank you so much, sir. Have a good day. Thank you. The next question comes from the line of Bandhi Chawla with Ask Wealth. Please go ahead. Thank you, sir, for giving me the opportunity, and congratulations on a good set of numbers. My questions have been answered. Just two questions that now we are seeing that their off balance sheet as a percentage of total AUM is coming down consecutively from last few quarters. So what is the thought process on this? Any change in the strategy? Are we not going for the securitization or assignment? Or there is not much of a demand from the banking sector?

49:02 How one should see this? Since our overall borrowing program was subdued for the quarter, we have not done transactions of securitization or direct assignment. Both the transactions were not done. But when we talk about fresh borrowing towards the end of the quarter, it will be in the form of securitization also. So we will look at opportunities. I don't think there is any loss of demand for securitized instruments. It's only that because we were carrying higher liquidity, we didn't borrow in any format and that is why whatever portfolio was there was on a monthly amortizing basis has been paid off and not replaced with fresh transactions, which will happen towards the end of the quarter.

49:55 Okay. Secondly, as you said, the full year guidance still remains at 18% and Q2 might be around 15% to 16%. So it seems to be slightly heavy demand from second half. So on that basis, what we have done in terms of branch expansion, employee base expansion, because still we are guiding for the cost to income ratio as a stable entity. So any thought process or any data point of if you can share? We will be adding some branches and definitely we will increase the manpower, but that will not come at additional cost. It is as volume goes up, that additional cost will be absorbed. So we don't really see a big change in the our operational cost or cost to income ratio.

50:46 So total branches to be added for full year FY 2027, if you can share that number? Tentatively around 150 branches. Okay. Lastly, sir, just one because as we are now moving more towards new CV portfolio, if you can share on a in a presentation out of this at least from the CV portfolio, what is the new and what is the old used vehicle in the CV portfolio? That will be quite helpful. Thank you. Sanjay will provide that information offline. Okay. Thank you. Thank you. The next question comes from Pranuch Shah with 3B Investment Managers. Please go ahead. Just on your MSME book coming back to the growth, I think you had 6,200 crores of disposal this quarter.

51:41 For the Q o Q growth to pick up, you would need to sizably move up from 2Q and then hit the INR 7,000 crores run rate plus from 3Q, 4Q onwards. So is that the kind of number that we're looking at? Yes, definitely, yes. Okay. So should your MSME growth for the full year be in line or higher than your overall book growth this particular year, FY 2027? No. Overall book, we have given guidelines now. It's as per the guidelines. Okay. But no guidance as to whether MSME can surpass that 18% target for the overall year? The growth will be definitely higher than this because SWAYAMPAKULA we are projecting CV at around 15%.

52:29 So MSME book and world will be faster. Understood, sir. Perfect. And just second question on the growth itself. Your construction equipment has steadily been coming off and now it's been some 1,000 crore for the last five quarters. What will give you confidence to pull this back up to that INR 2,000 crore run rate you used to have until FY 2025? No. We are seeing that there is some demand slowly coming back because sales of construction equipment in the first quarter has started positive from the negative growth. Last year, if you see all the four quarter, it was growing negative.

53:14 But this quarter, it is positive. And we believe that there can be a demand coming back into Construction Equipment. So we should be start growing that book from next quarter. You don't see any lingering AQ concerns in that space? No, that something you wish to no, we don't. We feel it's robust. Understood. Got it. Perfect. Thanks a lot. Thank you. The next question comes from Mayank Mistry with Antique Stock Broking. Please go ahead. Hi, sir. Thanks for the opportunity, and congratulations on a good quarter. So most of my questions are answered. Just wanted to know, you know, your long term view of this used vehicle demand.

54:02 Since you highlighted that over near time, is it e 20 based, you know, petroleum has kept prices lower, and the demand is right now good. But there is also a theory that e 20 based petroleum is impacting durability of the vehicles. So do you see this as a long term risk in the inventory, especially which can also, you know, impact the borrower's demand later on since borrowers will not be keen on buying these used vehicles if, you know, the vehicles are not so long... Cannot be used for longer ten hours? See, this is basically, I think, challenge with the cars. That's what I understand. But I don't see that as having any impact as of now because maybe people who have older personal car will have some challenges.

54:58 And but the OEMs have said that their cars are capable of running on the A20. So we really don't have a clear picture on the same. Okay, sir. So basically, I was asking for this from maybe from a five to six years point of view. Yes, I agree. But I really don't see any challenge there. See, if the very old cars, we don't normally finance a car, which are more than seven years. Trust, we do. So there's no problem with the trust there. It's basically on the personal cars.

55:44 So there may not be a big challenge is what I feel. Okay, sir. That's all from my side. Thank you. Thank you. Our next follow-up question comes from the line of Aditya Vikram from TD Securities. Sir, just one more thing. So this quarter, our Phase III assets increased 18% Y o Y and 55.5% or approximately... Yeah. 5.5 q on q. Right? It seems some stage three assets have increased on the CV side.

56:29 So what kind of challenges are you seeing? Or because now we have funds, we are trying to clean up our books a little faster? As you see, if you see the numbers, it's a marginal increase only from 4.58 it has gone to 4.63%, the state 3%. So this seasonal impact are there. So I don't really see that's a big change. Okay, okay. I just wanted to clarify that because the number 18% looked higher, so just wanted to see if they're trying to book a little faster than they ideally would. But do you think it's a seasonal impact, mostly nothing to do with the uncertain weather or the crisis as such.

57:16 Yeah. Okay. Okay. Thank you so much, sir. Thank you. Ladies and gentlemen, we will take that as a last question for today. I now hand the conference call over to Mr. Umesh Shriram Banker for closing comments. Thank you. We had a good quarter, I should say. Second quarter is normally a little tricky because depending upon the rainfalls and of course, there is added uncertainty of West Asia crisis. But we are very confident that company will do well and we will come out with a good set of numbers. Thank you for joining. Ladies and gentlemen, on behalf of Shriram Finance Limited, that concludes this conference.

58:04 Thank you everyone for joining us and you may now disconnect your lines. Thank you.