Shriram Finance (NSE:SHRIRAMFIN) Q2 2026 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the Shriram Finance Limited Q2 FY 'twenty seven Earnings Conference Call. As a reminder, all participant lines will be in a 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. Yes. Thank you. Good evening, friends from India and Asia, and a warm welcome to all of you.

0:47 Greetings to also to those who have joined the call from the Western part of the world. To present our Q2 FY twenty twenty seven call today, I have with me Managing Director and CEO, Mr. Parag Sharma Joint Managing Director and CFO, S. Sundar and Sanjay Kumar Mundra, Executive Director, Investor Relations. It has been a good second quarter of the year for Shinar Finance under current circumstances. Let us first look at the broad economic indicators that has a direct impact or indirect impact on our business. First on the GDP growth, India's Q1 GDP growth of 7.8% in FY twenty six, FY twenty seven has highlighted the resilience of country's economy with the data pointing towards strong consumption, rising investment and sustained government capital expenditure as a key drivers of the expansion.

1:56 The stronger than expected performance has reinforced expectation of broad based economic momentum across multiple sectors. The IMF has raised India's GDP growth forecast to 7% for 26%, 27%, up from 6.4% in July. The revision in the estimate comes on the back of stronger than expected momentum, supported by a resilient domestic demand and robust services activity. India's headline retail inflation rose to 5.54% in September from 4.8% in August, adding pressure on the country's central bank to further tighten monetary policy.

2:46 Inflation has been on the rise for eleven straight months in the world's fastest growing economy and has touched twenty two months high in September. This increase is mainly due to higher fuel and food prices, which rose amid West Asia war driven supply disruption and delay in seasonal rains. India's food inflation climbed to 7.74% in September from 5.97% month prior, with prices rising faster in rural areas than cities. India's wholesale price based inflation climbed to 11.39% in September from 9.92% in August.

3:38 Among key drivers of wholesale inflation were mineral oils, food articles, and natural gas, coal and lignite, basic metal, chemicals, textile, rubber, plastic products and electric equipments. Now coming to the RBA policy key takeaway of RBA policy. Vapor rate increased by 25 basis points to 5.5. Policy stands shifted from neutral to calibrated tightening. GDP forecast revised upward to 7.1% from for FY 2027. CPI inflation forecast 2027 raised marginally to 5.2 Coming to the rural economy, which has a major impact on our business.

4:34 The 2026 South West Monsoon concluded at 87% of long period average with sharper shortfalls hitting regions like South Peninsula, Northeast Asia. India received its lowest rainfall in the more than decade moving through El Nino effect. The below normal and Atlantic rainfall has triggered moisture stress, hurting major curry crop like rice, soybean, corn, cotton and pulses, coupled with fertilizer shortage due to war. That will lead to some food issues in coming months.

5:22 India's drought monitor said in September 23 that 51.2% of India's agricultural area was abnormally dry and or was. India's weak monsoon is beginning to weigh on rural consumption ahead of crucial festive season, with companies seeing pressure on demand for entry level two wheeler and cars, discretionary FMCG products and also consumer appliances. However, India's rural economy is becoming more resilient to weak monsoon as growing share of non crop activities, diversification into allied sectors, rising irrigation coverage and reduced dependence on the rains.

6:21 The RBA report said empirical findings suggest that while rainfall shortfall remains important for agricultural output, Their association with allied activities and other rural activity has moderated over time. Other significant indicator is the GST collection. India's gross GST collection rose by 14.7 lakhs year on year to INR 2.04 lakhs in September compared to INR 1.77 lakh crore. On a cumulative basis, gross GST revenue for April to September reached INR 12.46 lakh crore compared with INR 11.17 lakh crore during corresponding period of INR 20 five-twenty 6, increase of 11.6%.

7:13 The increased government spent on infrastructure is one positive indication and GST collection has really helped the infra spend. And the OEM sales side, there has been a positive impact throughout the last one year post the GST rate cut. The commercial vehicle sales has increased by 28.7% in Q2 FY twenty twenty seven and stands at 3.09 lakh unit against 2.4 lakh units sold in the Q2 FY twenty twenty six. Within commercial vehicle, medium and heavy commercial vehicle sales recorded growth of 57% in Q2 FY twenty twenty seven and stands at 121,171 units against 88,431 units sold in Q2 FY 'twenty six.

8:18 LCD sales recorded a growth of 23.8% in Q2 and stands at 1.88 lakh unit versus 1.52 lakh unit sold in the Q2 previous year. Passenger vehicle has recorded highest growth of 30.7% and stands at 13.61 lakh unit against 10.41 lakh unit in Q2 twenty twenty six. Two wheeler again seen a record growth of 15.2% with sales of INR 64.33 lakh unit in Q2 against INR 55.86 lakh unit. Three wheelers also have recorded a very good healthy growth of 23.6% in Q2 with sales of 2.85 lakh units sold versus 2.31 lakh units sold in Q2 twenty twenty six.

9:16 Tractor again has recorded a good growth of 18.26% with 2.91 lakh units sold as against 2.4 lakh units sold in Q2 twenty twenty six. Construction equipment has started the growth after decline in growth in the previous year with a 23% growth with 29,289 units sold against the 20,758 units sold in Q2 twenty twenty six. Coming to the EV, we are seeing robust growth in EV throughout all the segments. In the passenger vehicle, it grew by 106% to 99,732 units against forty eight thousand two fifty units.

10:09 In three wheeler, it recorded 30.61% to 2.53 lakh unit against 1.94 lakh unit. Two wheeler, it increased by 90.93% to 5.95 lakh unit against 3.11 lakh unit in the previous year. Now I shall ask my colleague, Parag, to take us through the operational performance for the quarter. Thank you. Good evening to everyone and welcome to our Q2 FY twenty twenty seven earnings call. And I trust you had the opportunity to produce our results and the related investor presentation, which has been posted on the website of the stock exchanges.

10:59 We registered disbursement growth of 25.71% year on year. Our disbursement in Q2 FY twenty seven this year aggregated to INR5479.02 crores versus INR4319.17 crores in Q2 FY 'twenty six. Our AUM as on 09/30/2026 registered a growth of 16.96% over Q2 FY twenty twenty six and a 4.85% sequentially. Our AUM stood at INR 329,021.72 crores as against INR 281,309.46 crores a year ago and INR 313,008 crores in seven Q1 FY 'twenty seven.

12:05 Our net interest margin in Q2 FY 'twenty seven registered a growth of 38.2 year on year. We earned a net interest income of 8,661.04 crores in Q2 FY 'twenty seven this year as compared to INR 6,266.84 crore in Q2 FY 'twenty six. Our profit after tax grew at 59.37% and stands at INR3677.03 crore in Q2 FY 'twenty seven as against INR2307.18 crore in Q2 FY 'twenty six.

12:55 The profit after tax was INR3444.56 crore in Q1 FY 'twenty seven. Our net interest margin in Q2 FY 'twenty seven was 9.52% as against 8.19% in Q2 FY 'twenty six and nine point zero four percent in Q1 FY 'twenty seven. Our earnings per share for the quarter stood at INR 15.63 as against Rs. 12.27 in Q2 FY twenty twenty six and Rs. 14.83 in Q1 FY twenty twenty seven. On our asset quality, gross Stage three in Q2 FY twenty seven stood at 4.65% and net Stage three at 2.31% at against 4.57% gross and 2.49% net in Q2 FY 'twenty six and was 4.64% gross and 2.33% net in Q1 FY 'twenty seven.

14:07 Our credit cost on total assets for Q2 FY twenty seven stood at 2.03% as against 1.68% in Q2 FY twenty six and one point six six percent for Q1 FY twenty twenty seven. Our cost to income ratio was 22.52% in Q2 FY twenty twenty seven as against 27.76% recorded in Q2 FY twenty twenty six. Our cost to income ratio in Q1 FY twenty twenty seven was 25.48%. The Board also declared an interim dividend of INR 6.5 per share, that is $3.25 percent. The record date for the entitlement thereof has been fixed at 10/29/2026.

15:07 On the liability side, the total liability stands at 236,271, broken up into public deposits, which is 31%, non convertible debentures at capital market borrowing at 15.71%, ECB loan and bond at 16.5%, domestic bank borrowing and institutional borrowing is at 21% and securitization at 14%. The cost of liabilities on balance sheet is 8.41% versus 8.56 in the previous quarter, a reduction of 15 basis points.

15:55 And from March, it is down by 18 basis point. The incremental cost of fund for the quarter was 7.3 versus 7.7 in the previous quarter. The liquidity coverage ratio was three zero three versus two sixty two in the previous quarter. The liquidity buffer continues to be strong to repay our next quarter's liability. And leverage ratio was 2.16 times versus 2.14 times in the previous quarter, and March was 3.82. The capital adequacy ratio is at 33.24% versus 34% in the previous quarter.

16:49 I think with this, we'll open the forum for question and answer. Thank you. Thank you very much. We will now begin with the question and answer session. 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. Your first question comes from the line of Chintan with Autonomous.

17:35 Please go ahead. Hi, good evening. Thank you for taking my question. Could we start with asset quality? There is a step up in stage two, stage three loans across construction sorry, across construction equipment, gold, MSME. Could you help us understand some of what is kind of creating this increase in Stage two, Stage three loans? And how do you see provisioning costs play out for the full year? Your guidance from the previous quarter was around 200 basis points. What is your expectation given that we've seen some deterioration this quarter?

18:23 That's my first question. See, it's basically the seasonal and also from certain geography where there is less rainfalls. So but we don't expect this to be a widespread thing. It should contain itself in the festive period if the demand overall demand remains good. So we do not really see any kind of alarming situation in increase in the Stage two or Stage one. And we have sufficient provisioning to manage this.

19:10 And our guidance will remain at 2% credit cost. And in the beginning itself, we said that in case of deficient rainfall, it can go up by around 30 basis points for a short period of time. It will be temporary. I don't really think it is across. It is mostly in the area where it has seasonal impact. So, sorry, just to be clear on the credit cost, is the guidance still 2% for the full year because you're already 2.5% this quarter, It must be higher than two percent for the current year, correct?

19:59 It is 2.03%. Yes. The loan book, it's 2.3%. It is not 2.5%. So I think it will remain at this level for next one or two quarters. But our overall guidance, we said that it's 2%, but in select areas and select products, it can go up to 30 basis point more. Okay. Okay. Okay. Fine. And then, I mean, in the big scheme of things, with your where your margins are, these are not the biggest moves, but still thank you for the color. On the NIM and NII, I mean, there's been good development there.

20:44 How should we think about kind of NIMs going forward? So what is your take on evolution of cost of funds over the next year? How should we think about your loan yields? If you could give some color there as well. The net interest margin is because of the capital infusion, there is a temporary increase in the NIM. It is likely to remain at this level maybe for another one quarter or two, then slowly coming down. So in the medium term, it should come to around 9%, then maybe in the long term, it will come to around 8.5%. Could you explain the drivers of that as well? Like how so what drives that moment?

21:35 See, basically, what happens is as the fresh capital is there, the capital cost being less, no cost, the NIM expansion happens. And as the interest rate environment also will play some role here as the cost of borrowing, fresh borrowing goes up, then NIM can come down to some extent. But we'll be able to increase the lending rate from the fresh loans, not on the existing borrowing existing loan. Okay. So it's the typical ALM that is causing moderation.

22:22 Could you give some color on where your incremental cost of borrowing is likely to be over the coming quarters? Like we've already had one rate hike. I'm sure that's being passed on to you with perhaps more rate hikes on the way. So should we like what is the starting point of cost of funds and then we can adjust it for incremental rate hikes? So cost of liabilities on book is 8.4 and I don't expect the incremental cost to be more than eight as of now. It is be it our bank borrowing or the retail borrowing and other instruments like securitization and all. But if the rate hike happens and capital market rates move up, I think that can slightly go up, which is as of now close to around 15% of our liabilities.

23:19 Incremental costs can slightly go up by from 8% to around 83035% level. But still that overall liability is being at 8.4%. I don't expect the overall liability cost to go for us for the entire liability book. Okay. And one final question on NSME, if you can give some more color on what is causing the increase in Stage two, Stage three loans, like what is happening in that product area? I know that you're trying to get into mid ticket items product. So could you give some color in that MSME area? MSME is a huge opportunity, and we are getting into more geography. Initially, our MSME was mostly focused in the Southern market.

24:15 And as post the merger, because MSME lending was done through earlier Shriram's Sittinen book, then we are now expanding it to all India. So we expect the MSME book to grow much faster than other segment because of the bigger geographical reach. So it is only bigger geography will give us higher growth and that's how MSME book will be growing faster. Okay. So it's more geographical or you're also increasing your ticket sizes? Ticket sizes... It's a combination. No, it's a combination of both, but wherever we have a comfort, then ticket size will go up.

25:10 The next question comes from the line of Shishwan Tao with Johnson. Hello. Am I audible? Yeah. Yeah. Thanks for the opportunity. Just on growth strategy in the current situation given the uncertainty of lower income in the second half, are we still going aggressive to push through? So are we thinking about maybe increasing some tightening some filters? How should we think about the growth for the full year? Growth, sir, we have been cautious even though our initial guidance was 18% growth.

25:56 Looking at the impact of the war situation in West Asia and the weak monsoon, we have been growing a little less than that. In the first quarter, our growth was around 15%. In the second quarter, it was 17%. We'll be anywhere growing anywhere between these two, 15% to 17%. So we are very cautious in our growth. Okay. And sorry, just to double confirm, your credit cost guidance for the current year is 200 basis points plus 30 basis points temporary. So two thirty basis points, right? And then we expect to come down after maybe a couple of quarters?

26:45 The grade cost, we had given a long term guidance of 2%. But temporary, maybe certain geographies, it may go up by 30 basis 40 basis points is what we indicated. And in the being a seasonal and monsoon being weak, we have seen a little increase in Stage two and Stage one in certain geography. I believe that it will be seasonal and it should get normalized to overall expectation of 2%. Thank you so much. Thank you. Your next question comes from the line of Piranjanjani with Citi International.

27:35 Please go ahead. Yeah. Hi, team. Thanks for taking my questions, and congrats on the quarter. Just one or two clarifications. Firstly, sir, this investment lending growth, which has just suddenly picked up this quarter, is there an ECLGS portion of it also? No. We are not availed any ECLGS. Okay. So then this quarter, we've disbursed almost INR 10,000 crores. In the peak, it has been INR 7,500 crores. And last few quarters, we are doing around INR 6,000 crores. So just a sudden 50% jump, like what drove that? See, we have been... It's in disbursement. I know, I know. So we have been informing in the previous quarter call also that we are focusing on MSME, and we are reaching out to larger geography.

28:30 Earlier, our focus was mostly in the Southern market and to some extent, the Western market. Now we are growing across India. So MSME growth is mainly because of larger geography we are reaching out. Okay. Okay, fair. And sir, just on your other comment that you made that near term for one or two quarters NIM will be at these levels and then in the medium term, it will decline to 9% because the equity capital gets utilized. But on the other hand, our borrowing cost will also keep going down, right? So net net NIM should not decline. No. We are talking about the increasing interest cost.

29:20 That's one thing. And also as we lend to more new vehicles, where the yields are a little lower, definitely, there will be some NIM compression. Okay. Okay. And just last one for Parag, sir. What proportion of our banks or our bank borrowings have been migrated to EDLR? Or we are still on MCLR with some banks? We'll get that with the numbers through Sanjay. Okay. Sure. Sure. Yes. Thanks and wish you all the best. Thank you.

30:08 Your next question comes from the line of Raghav Garg with Ambit Capital. Please go ahead. Hi, good evening and thanks for the opportunity. I just have two questions. One, in your total disbursement and your AUM, what is the contribution from new vehicles and if you can split that between commercial vehicles and passenger vehicles? The breakup of new and used will be provided through Sanjay. So you can reach out to Sanjay post the call. He will help you out. Sure. And then what would be the yield differential between the new and used vehicle financing? It is normally, it depends upon segment to segment, it will be between 200 to 400 basis points.

30:57 Understood. And one more question, if I can ask, please. Okay. Yes. Okay. So see, I see I hear you out on the asset quality bit. You know, so I look at the slippages, which has gone up some 50% Y o Y. You would attribute that entirely to the to the geographical disturbances because of, I think, you're seeing weak rainfall or less rainfall. In fact, the only reason or there is something else also to it? It's largely due to that, and we can't have a pinpoint reason everywhere. It is India is such a large country. There'll be fluctuations in the income on various but drop prone areas, we see it little higher.

31:50 Understood. Any data that you can give of how much of your splitages would have come from, say, broad prone states or areas, if you would have worked that out? I don't have it right across. I will ask Sanjay to provide. Sure. That's all from my side. Thank you. Thank you. Your next question comes from the line of Dheeraj Mali with Wealthy five. Please go ahead. Good evening, sir. Thank you for the opportunity. My question relates to the reports of alleged unauthorized loan account in Kerala. Could management clarify the current status of investigation and the root cause of this incident?

32:36 Given the company branch expansion plan, what measure are being taken to ensure that expansion does not compromise KYC verification and employee oversight? This question, we'll take it offline. So you may reach out to Sanjay, and then he will assist you in this. Okay. And my second question is what progress have you seen in the Construction Equipment segment? Since your previous guidance said that loan book would start growing from Q2 FY twenty twenty seven, is the recovery demand progressing as expected? The Construction Equipment sales have grown up and the demand is picking up now. Last year, our overall construction equipment book came down because of the government spent on infrastructure came down and demand came down. Now in the last quarter, we are seeing the government spend is going up and slowly the demand for construction equipment is coming back.

33:41 Okay, fair enough. Yes, that's it from my Thank you. Your next question comes from the line of Kunal Shah with Citi. Please go ahead. Yes. Hi, sir. So firstly, as you indicated in terms of the credit cost, it might be elevated for a couple of quarters and we are seeing higher steepages in few of the geographies. What are the maybe the tightness in the credit filters if we had done in any of this And should it actually impact the growth momentum? Because this quarter, when you look at it with the credit cost, still the growth is much higher. It's almost like five odd percent quarter on quarter.

34:28 So now would this lead to some kind of a moderation in the overall growth momentum as well with the tightness in the credit filters? See, the seasonal impact has nothing to do with the credit filters. Credit filters will have normally a proper credit filters done at every geography has a separate credit filter. But certain we felt I had done some loan at two years back, and there is unseasonal negative impact because of certain reason, that will have some impact on the performance of the loan. So definitely, whenever the environment are little against, like economic activity is slowing down, only then we decrease our LTVs and tighten the lending.

35:26 Otherwise, we don't really change the LTV norms Our credit filters, for example, will remain almost same for the full year, unless there are certain reasons to believe that the economy is slowing down. Our particular segment is not doing well. So we don't see any of that. And all the economic indicators say that India is growing well. Is quite good. We are also witnessing the demand in fact, the demand from rural was much higher in the last two quarters. Only now, in the last one month, we have been a little cautious on certain broad pronged areas.

36:17 Okay. And so overall, in terms of growth, you still indicated you would be growing at 15% to 17% odd, maybe this quarter, quarter on quarter run rate was five odd percent. And generally, half is better than that of first half. And we are already more than eight odd percent or so. So what is making us guide slightly slower? Maybe even if you assume, like, say, this is 5% this quarter and it picks up in q three and then maybe similar level, then also it takes it to a slightly higher percentage. So I was just trying to gauge whether maybe credit cost is likely making you more conservative on the growth side or this 15 to 17 is, like, a relatively conservative growth guidance? See, basically, because of the impact of the monsoon, we are little cautious in certain geographies.

37:10 That's the main reason to give a conservative numbers. Okay. And how much would this broad prone area be as a proportion of AUM if you have to look at it? I don't have the number, but generally, the Maharashtra, Karnataka, Telangana are the largest hit now. And we have a reasonably large size there. But exact numbers, I can give through Sanjay. Sure. And then in terms of the utilization of liquidity, to what extent are we done? So when I look at cash plus investments, maybe it's down to like 31, 32 or 1,000 crores from 38,000 crores.

37:58 And so how much of utilization and what level we would be comfortable in this kind of a macro environment? And in terms of borrowings, is it like now we should start to see the increase in the borrowings also coming through or maybe there is still the room to repay the borrowings going forward and manage the maybe overall at least on the borrowings and then not have too much of impact on the funding cost, yes? Yes, I think in this quarter we have started our borrowing program, be it bonds, bank borrowing, it is back to the pre March level. So we have borrowed around INR27000 crores in the last quarter. Liquidity wise, we have brought down the liquidity and it is now at our three months of future liability level.

38:51 So nothing of excess liquidity now and our borrowing program will continue the way it was in the previous quarters. Okay. So now it will be almost equivalent to the AUM growth, whatever AUM maybe now we will have to borrow and there is no excess liquidity which will be utilized towards that towards the growth? Correct. That is right. Okay. Got it. Perfect. Yes. Thanks. Thanks, and all the best. Yes. Thank you. Your next question comes from the line of Shriram Doshi with Equivious. Please go ahead. Hi, sir. Thank you for giving me the opportunity. My question was on, again, on the increase in GS two and GS three.

39:36 So is it purely because of the drought situation in the states highlighted by you? Or is it also because of the heavy monsoon or flood like situation in the northern part of the country? So if you have to attribute weight, what like how would it be, the impact? See, flooding is something very normal in the monsoon season. It will not have any negative impact. So it is temporary, some two, three days impact will be there. That will not impact the overall progress or economic activity. And the drop from areas only will have a lower income in the due to the aggregate output being lower.

40:24 When the slows down, consumption comes down, overall demand and economic activity comes down. So these are the main reason where the businesses slow down and cash flow gets stressed and we get people normally miss out on one or two EMI. That need not be really worry us because most of our lending is against the asset. The asset values have remained very strong throughout. There is real value of every asset has been quite good, so nothing really to worry about as long term prospect or increase in the credit cost.

41:15 Got it. And then the second question was on the Construction Equipment segment. So while we have seen strong bounce back in disbursements, but the GS2, GS3 indicators here also show an increase. So what is it that is giving us comfort on the incremental side that we have got back to high disbursement phase. Repeat again, please. In the Construction Equipment segment, there is a strong bounce back in the disbursements. However, if you look at the GS two and GS three, the asset quality indicators that continue to go up, so what is it that is giving us comfort or or, you know, what... How to read into these two data points?

42:02 If you see the absolute amount, it is still coming down quarter on quarter, even though the disbursement have been better this quarter. The previous quarter's gross sales were $8.74 crores absolute amount, And this quarter, it is INR $8.62 crores. Similarly, gross SAGE II, if you see, it's INR $9.53 crores previous quarter, this quarter is INR $9.63 crores. So not much of a difference as such. So it's more of a denominator effect, which is causing the spike in the percentages. Okay. Okay. Got it. Got it. Got it, sir. Thank you so much for answering my question, sir. Thank you. The next question comes from the line of Vivek Singh with Securities. Please go ahead.

42:51 Hi. Hi, sir. Sir, my question is on the cost of fund. So earlier, we had guided a 100 bps compression in the cost of fund because of the various factors. So does that guidance still stay or there is a provision on that part? So that we also mentioned that in case the rates don't go up, we'll be able to reduce. As of now, this quarter, it has come down by 15 basis points. And if rate further goes up and continue to remain at the even if we are at the current level, we may not be able to reduce our borrowing costs, but we are confident of maintaining it at the current level. And sir, in terms of the asset quality, so if I look at the accretion from the MSME segment in terms of the GS3, so it is coming at incrementally the accretion on GS3 from the MSME is quite higher compared to its share in the disbursement.

43:53 So any color what cohort or any is there any specific geography which is not performing as per our earlier or we had and besides earlier? No, basically, as I was explaining you in certain geographies, the seasonal impact is there. And therefore, there is elevated the, what to call, State two and State one. I believe it is a temporary one, and it gets normalized in the subsequent quarters. And sir, what is the share of unsecured exposure in MSME?

44:41 Unsecured? Yes, MSME. 28% is unsecured and 7028% is unsecured. Okay. Got it. Thank you. Thank you. The next question comes from the line of Abhishek Murarka with HSBC. Please go ahead. Yes, sir. Good evening. Am I audible? Yeah. Yeah. So, sir, my question is on gold similar to what was just asked on MSME. Now the GS2, GS3 growth for the past three quarters, if you look at the Q o Q movement, it's very high. I understand there won't be losses. So obviously, I'm not worried about that.

45:27 But have you looked into reasons why GS2, GS3 are going up? I mean apart from the macro reasons or RAIN related reasons, any micro reasons specific to your book, why No, GS3 are going no, basically because we had introduced EMI and interest servicing gold loans. And people are habituated to servicing only bullet repayment. So we are trying to introduce because they can get a little more loan if they opt for EMI and interest.

46:13 So that's the only thing. So once people get used to it, then I think there may not be a challenge. Since they are used to only bullet payment, so servicing is not on time. That's the main reason. So sir, when a loan gets into delay, so it gets into zero to 30 or 30 to 60, at that time, what is the measure you are taking? Because that is the time when you have to tell the customer that you have to pay on time and not delay. Right? So what do you do at that time? And why is it that can't arrest it even ninety days later? Because GS three means that ninety days have passed at least. I think that's... Abhishek, we can always take action and sell the gold and appropriate it.

47:00 So we don't have any credit cost in the gold loan. Do you understand I understand that, sir. So I'm not worried about slots, Yes, as I said upfront, we have to educate the question what is... It's educating the customer. You have to educate the customer saying that interest has to be serviced every month. So the communication educating takes time. Okay. So by when do you think this stabilizes? No, it will stabilize. So as we are now increasing our communication to the customer, it will stabilize and become normal. People will understand that paying EMI and interest servicing will help them in taking gold loan much or more, what call they also have higher amount of gold loan because LTVs are little higher for that.

48:00 And also their credit score will improve when they pay time. Sure, sir. And so these customers you're lending to, these are existing customers for other products or these are freshly sourced customers? It could be both. But it is we have, what you call, exclusive branches also for gold loan, and we also have gold loan as a product in our existing branch. So it could be both. Predominantly INR 9,000 crores would be I mean, do you have just a broad plate to understand where this is going? Pardon? 9,000 crores. INR 9,000 crores AUM? Yes, AUM, yes. Predominantly it was to fresh customers or what is the proportion of like the existing customers to fresh customers?

48:54 Just a broad ballpark. I don't have number right now, probably Sanjay will help you to get it. Okay, okay. All right, sir. Thank you. Thank you and all the best. Thank you. Thank you. Your next question comes from the line of Renish with ICICI. Please go ahead. Yeah. Hi, sir. Sir, just one thing on the margin trajectory. Right? So, you know, renting expect the excess liquidity to get absorbed. And, you know, when we look at the three deal margin trajectory, which used to be between 8.5% to 9%, you were expecting the structural decline in the cost of one by almost 100 basis points. I can understand that the rate cycle reversal, you know, might be challenged on that.

49:48 So, Shriram, you know, how this 9.5% mean in near term moving? And structurally, where do you see ultimately NIM settling when the equity security gets above? See, I can't have the exact number because the rate repo rate increase, they have done after a long time now. And there is an indication that it may go up further in the next policy rate also. We do not know if the food inflation doesn't go up, may it may not go up. So there is so many ifs and buts. And also there is a view on the war being stopped, crude going down, so many things. How can I exactly tell you the how It it will is not? That's why we are telling you in the medium term, it slows it comes down to around 9%.

50:49 In long term, it will settle down at around 8.5%. But exact timing is not possible to calculate. Okay. Okay. So basically, you're saying in a steady state NIM will be 8% to 8.5%, factoring our entry into large ticket, new vehicle, etcetera. I mean, is that the kind of assumption? The new vehicle will keep growing in our book because we would like to retain our customers. So that will so that is one factor. But the other factors, which is not in our control is the interest rate environment. Correct. But in that case, doesn't our sort of the pricing policy can factor those changes and still sort of give us a closer number to our, let us say, declining etcetera or our asset nature doesn't allow us that activity?

51:54 See pricing, I can do only for the new loan that I'm booking. For existing loan, I can't do it. So I can price it only for as the new loans. So we don't have a floating rate scenario. NBFC is normally as fixed rate lending. Thank you. Your next question comes from the line of Aditya Tiwari with MK Research. Please go ahead. Yeah. Hi. Good evening. My first question is regarding the gold financing that I've seen in this days this quarter. Quarter. In previous quarter, the management has stated that the gold that can grow faster than this. But there are some signs of concerns in the gold and segment. In fact, there has been some rising incentive on the multiple borrowing against Goldman.

52:54 Few of the companies have also stated that there has been on an industry level, the gold loans are emerging as a strategic and the banks have also deliberated deliberately moderated their gold loan growth. In fact, for the state class, state free assets for our company has also increased. So is there any signs of concerns that you are seeing on our industry level in terms of coal financing? No, we don't really see any kind of a challenge as far as proper care is taken in identifying the customer or credit process and also valuing the gold properly. So they both as I was explaining you, the main reason for the increase in the Stage N1, Stage two was the interest and EMI products, customers not understanding the product and waiting for the fullest payment.

53:56 That's the main reason. We don't really see any challenge, and we feel that gold loan industry or opportunity in gold loan is very high. Therefore, don't want to speak on behalf of the industry because we are having a small portfolio, but we feel that very bright opportunity in growing our gold portfolio. Okay. So like in quarter one, the management has stated that the target for gold financing is to grow the book double in next year from around 2.5 to around 5% of the book. So does that guidance remain intact or any kind of changes or revisions are there?

54:43 No change in there is no change. We'll go as per the plan. Okay. And just wanted to confirm regarding the JV and growth guidance for FY 2027, it has been cut to around 15% to 17% from 18% earlier, right? Yes. The credit cost guidance for FY 'twenty seven that you have increased to around 2.3% to a range of around 2.4% from two percent earlier. I said there will be temporary increase of 30 to 40 basis points and not for the full year. So I feel the full year credit cost can be much lower than the 2,300,000,000, temporary maybe for this quarter and next quarter.

55:34 Okay. Got it. And just wanted to confirm one last one. In the MS and A segment, the stress is predominantly because of the drought affected regions, right? There aren't any other reasons for this stress in MS and A? I don't really see any other reasons because other factors like increase in cost of raw material, increase in labor cost, all these things have been already factored. So only in certain geography, there are some challenges because of seasonality. Thank you. The next question comes from the line of Pranuj Shah with 3P Investment Management. Please go ahead. Hi. Thanks for taking my question. First question is on the OpEx growth has been quite benign despite your disbursements picking up pretty sizably.

56:27 So what is there any reversal? What is driving that? No. The previous quarter we had the annual bonuses released for the back office team and hence the staff costs are slightly elevated. The current quarter was normalized. Having said that, the medium to long term guidance will be the cost to income will be around 25%. Sorry, when you say 25%, it is on the current base of your NIMs, right, because the NIMs also you're saying will come off pretty meaningfully in the medium term. So that is you're considering an 8.5% NIM. Right? No. That is for the long term. That's what Mr. Venkat had mentioned.

57:12 In the medium term, it will be hovering around 9% is what he had mentioned. Understood, understood. And like even if I look at your OpEx to AUM that has fallen off pretty meaningfully. So if I were to just look at in terms of OpEx growth related to AUM growth, should that continue to trend downwards or how should we shift It the should be in the same level. Sorry, your 2Q is at 2.5% level, so do you expect that kind of a OpEx to AUM to continue? What will happen is that there'll be additional cost on the technology front and that may have an impact on the overall OpEx. Okay. Okay. And the second question is on your can you disclose what is your disbursements in gold loan this quarter and what is your LTV this quarter and last quarter?

58:05 We have the disbursement number, I'll just tell you. The current quarter gold disposal of INR 5,443 crores. Understood. And what is the LTV on your book, It including the interest should be around 72% to 73%. Seventy two percent seventy three And what would this be last quarter? Should be the same region. There's nothing significant change in that. The disbursement for the previous quarter was INR $5,001.53 crores. Yes. Thank you. I'll take one. Thank you. Thanks a lot. That's it from my end. Okay. Thank you.

58:51 Your next question comes from Harvik Shah with MLP. Please go ahead. Hi. Thank you for the opportunity, sir. My first question is in terms of your assessment of the IRDA circular that has come through, what could be the potential impact for us in terms of insurance income? Number one. And number two, to clarify the understanding on credit cost. You guided for 2.3% for full year. If you can kind of probably confirm terms of how that would trend directionally from 2Q to 3Q, how are you assessing it for the second half? Because your first half credit cost is around 2.1. Full year, 2.3 would imply around two point more than 2.4% credit cost for second half. So how to think about this?

59:45 See, on the second question, I told very clearly that it will be temporarily elevated for this quarter and next quarter. We cannot be giving you at this stage a number 2.3 for the full year. We can't be. So I said it's a temporary 30, 40 basis points for one or two quarters. So we'd like to wait and see how it will impact. And generally, affected period only, it goes up. That's one. And as far as the EBITDA is concerned, it's a draft guidelines, there's a representation from the manufacturers on the distribution income to the distributor because the growth in insurance is dependent on distributors.

1:00:37 So major impact on the distributors' income will impact the growth in the insurance business. So I believe that IRIRAM will look into it and probably come out with revised guidelines or revised rates. So we are waiting for the same. However, given current state of affairs, the income may come down by 50% of what it is now. And but for Shriram Finance is concerned, our the fee income due to distribution is very insignificant, very small portion of our total income.

1:01:25 So we are not majorly impacted. Got it. Can you quantify that? So the previous year, full year, the insurance commission that we received was around INR $3.50 crores. So if the proposed guidance come, there may be around INR 100 odd crores of impact on that. And for the size of our balance sheet, it is not material. Understood. Understood. It's very clear. Perfect. Thank you. Thank you. Ladies and gentlemen, we will take that as our last question for today. I now hand the conference over to Mr. Umeh Shravankar for closing comments.

1:02:17 Thank you, everyone, for joining. As you are aware, there were multiple headwinds for us in last two quarters. One due to West Asia crisis, where the petroleum product prices went up and so many other raw material prices went up. And secondly, now due to El Nino situation, monsoon being a week. In spite of that, the company has performed very well. And we are very confident to do much better in the busy season. Normally, second half of the year is much busier and we are confident of performing, outperforming and coming back to you again. Thank you very much. Thank you. On behalf of Shriram Finance Limited, that concludes this conference.

1:03:10 Thank you everyone for joining us and you may now disconnect your lines. Thank you.