Utkarsh Small Finance Bank (NSE:UTKARSHBNK) Q1 2027 Earnings Call

0:01 Ladies and gentlemen, good day, and welcome to the Utkarsh S. F. B. Limited Q1 FY 'twenty seven Earnings Conference Call hosted by ICICS Securities Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Utkarsh Thank you, and over to you, sir. Yes. Thank you, Manu. Hi. Good evening, everyone, and welcome to Utkarsh Small Small Finance Finance Bank Bank q one FY twenty seven earnings call. On behalf of IT and T Securities, I would like to thank Utkarsh's management team for giving us the opportunity to host this call. Today, we have with us the entire top management team of HSBC represented by Mr. Bhuvan Singh, Managing Director and CEO Mr. Sanjay Kumar, Executive Director Mr.

1:02 Amit Acharya, Chief's Officer Mr. Vrinder Sharma, Head of Microbanking Saurab Ghosh, Head of Consumer Banking and Mr. Abhi Kataria, Head of Accounting. I will now hand over the call to Govindi for his opening remarks, and then we'll open the floor for Q and A. Over to you, sir. Yes. Thank you. Thank you, Ernest. Thanks a lot. Good evening, everyone, and thank you for joining us for our quarter one FY 'twenty seven earnings call. The first quarter of FY 'twenty seven marks an important point in our journey. Over the last several quarters, our bank has navigated one of the most challenging operating environment faced by the microfinance industry in recent years. Throughout this period, our focus remained firmly on protecting franchise quality, preserving balance sheet strength, improving collections and ensuring that every strategic decision was aligned with the long term interest of our customers, shareholders and other stakeholders.

1:56 We are encouraged by the progress achieved across multiple dimensions of our business during the quarter. The actions undertaken over recent quarter are beginning to translate into measurable improvements in business momentum, asset quality indicators, portfolio composition, funding costs and operating performance. While profitably has not yet fully normalized, the significant reduction in losses and the strengthening of underlying business drivers reinforce our confidence that the bank is moving in the right direction. Over the last year, our objective has been clear to build a stronger and more balanced institution by improving the quality of new businesses, strengthening risk management practices, diversifying revenue streams, expanding secured lending, enhancing collection infrastructure, deepening customer engagement and improving the granularity and quality of our library franchise.

2:47 These efforts are now providing the foundation for a more sustainable growth cycle. One of the most encouraging development during the quarter has been dispensing our business across both our JLG and non JLG segments. Disbursement trends have been have improved significantly, reflecting both increased customer demand and our confidence in the calibrated growth. During quarter one FY 'twenty seven, total disbursement grew by 49 year on year, supported by JLG disbursement, which grew by 5% year on year and non JLG disbursement, which registered a robust growth of 93% year on year. Importantly, this growth has been built on strengthened underwriting framework and improved portfolio monitoring mechanisms. Our objective remains to grow, assess to the of the right quality and risk profile rather than forcing growth for its own sake.

3:37 Consequently, equally encouraging are the trends visible in portfolio performance. The improvement in business momentum has been accompanied by continued strengthening in asset quality. During the quarter, ex bucket collection efficiency in the JLG segment remained strong at 99.7%, up from 98.6% in quarter one of 5.26%. SME pools within the Microbank segment contracted to 1.2% from 1.3% in March 26 and 5.1% in June 25, reflecting strong field execution, enhanced collection processes. Along this, the total fresh NPAs slippages, net of recoveries and upgradation, reduced materially to INR 125 crore compared with INR 117 crore in the previous quarter and INR 400 crore in the corresponding quarter of the previous year. As a result, the GNP ratio as percentage of gross loan portfolio stood at 5.9% as of June 2026, representing an improvement of five fifty basis points year on year and 160 basis points quarter on quarter.

4:41 These trends demonstrate the measures implemented over the recent quarter are producing tangible outcomes. As we assess the future shape of the bank, diversification continues to remain a central strategic priority. Over the years, we have consciously worked towards reducing concentration risk and building multiple growth avenues. Our JLT portfolio now represents 26% of the gross loan book and 26% including BC JLT exposure compared to 88% in March 2020 and ninety percent including BCJLG exposure. Simultaneously secured lending has increased to 51% of the gross loan book from 45% a year ago. This structural transformation is changing the nature of our balance sheet, reducing margins, volatility and supporting a more resilient risk profile.

5:31 Within micro banking, the growth of our micro banking business loan product continues to validate our customer life scale strategy. MBPL serves customers who have demonstrated repayment discipline and are ready to graduate beyond traditional group lending structures. Further, we have expanded the product to new to bank customers as well. MBBS portfolio grew by 147% year on year and 11% sequentially during the quarter and now constitutes more than 30% of the micro banking portfolio. With penetration still below 20% of our customer base, these there remains substantial room for further expansion. We believe this segment represents an attractive opportunity of deepen customer relationship while supporting business growth among our borrowers. Beyond micro banking, growth momentum across secured and diversified asset classes remain healthy. Our MSME portfolio expanded by 12% year on year to 4,482 crore, supported also supported by the micro less segment, which is delivering disbursement yield of around 18%.

6:34 Housing loan grew by 8% year on year to 1,005 crore, while our BBG, the Business Banking portfolio recorded strong growth of 40% year on year. In Commercial Vehicles and Construction Equipment segment, we have continued refining portfolio composition with greater focus on asset demonstrating stronger risk profile. The share of used vehicle in disbursement is around 30%, reflecting our emphasis on balancing growth with prudent risk management. Goldwood penetration is also expanding through our digital LOS aimed at improving turnaround time, controls and operational efficiency. Collectively, these trends highlight the emergence of a broader and more diversified lending franchise capable of contributing to long term profitability and stability.

7:21 Over the last several quarters, we have remained focused on strengthening our liabilities franchise, increasing granularity, enhancing customers' engagement and reducing dependence on borrowed deposits. Total deposits grew by 3% year on year, supported by CASA deposits, which grew by 15% year on year, while retail term deposits also increased by 15% year on year. Consequently, CASA plus retail term deposit ratio improved to 83% compared to 74% a year ago, and the CASA ratio strengthened to 22 as on June 2026. The benefits of the improving deposit mix are also reflecting in funding costs following RBI reported cuts, we have faced reduction in the interest rates on savings and some deposits to remain competitive while optimizing cost of funds. As a result, cost of funds declined by around 40 basis points year on year and around 50 basis points quarter on quarter to 7.7% in quarter one FY 'twenty seven.

8:18 We expect the full impact of repricing actions to unfold progressively over the coming quarters, providing further support to margin stability. From an earnings perspective, quarter one FY 'twenty seven reflects a business that is steadily approaching normalization. We reported a net loss of INR 34 crore. This represents a reduction in more than 80%, both on year on year basis as well as sequential basis. As stated earlier also to further derisk incremental flows, we registered under CGFMU credit guarantee scheme for eligible JLG and MBBN disbursement with effect from 01/17/2025. 60% of our microfinance book relating to disbursement up to quarter four of FY twenty twenty six is already covered under CGFFE, increasing to around 80% upon including quarter one FY 'twenty seven disbursement.

9:12 This coverage materially reduces the risk associated with new disbursement and supports portfolio stability as we continue to scale higher quality secured lending products. During the quarter, the CGF MU scheme provided mitigation of around 75 in terms of P and L impact contributing to a reduction in the credit cost to 2.3% compared with 5.3% in quarter four FY 'twenty six and eight point five percent in quarter one FY 'twenty six. Importantly, the key drivers of future profitability, asset quality, credit costs, business growth, cost of fund and portfolio mix have all moved in a favorable direction. While pursuing growth opportunity, we have remained committed to maintaining a strong liquidity and capital position. As of June 2026, the bank maintained surplus liquidity of around INR 3,200 crore and NCR of 227%.

10:02 The CD ratio stood at 83.8% and our capital adequacy remained at 17.4%, well above the regulatory threshold, providing sufficient capacity to support growth plans and absorb potential uncertainties in the operating environment. The bank is planning to raise around INR 500 crore through N Series in the current year to accelerate growth initiatives and reinforce its capital adequacy. Also, we have taken a strategy decision aimed at accelerating balance sheet cleanup through the ARC sale of Stress, JLG and Wheels portfolio and ensuring that we remain focused on future growth opportunities rather than legacy stress. We believe suggestions, improve transparency, strengthen the franchise and create a leader and platform for long term value creation.

10:49 On the proposed scheme of amalgamation of holding company, UCL with and into the bank, the NCLG at its hearing on 07/23/2026, took note of the responses received from the relevant authorities. And wherever the replies were pending, granted another ten days to file the same and hence, fixed the matter of next hearing on 08/06/2026. The reverse merger expected to complete in next few months, subject to NCLD proceedings. Operational excellence continues to remain a core area of focus. We have strengthened our collections infrastructure, operationalize a specialized call center for overdue accounts, enhanced monitoring processes and training program for new frontline staff emphasized core processes such as center meetings and customer onboarding, ensuring consistent execution across the field. Our collection workforce supporting JLG and MBPL businesses exceeds 1,200 personnel.

11:45 We have also improved branch level oversight and strengthen customer engagement mechanisms. These operational enhancements have contributed meaningfully to the improvements seen across collections, SMEs trends, recoveries and overall portfolio quality. Technology continue to play an increasingly important critical role in our transformation journey through the Utkarsh 2.0 technology transformation project, we are embedding greater automation, data driven decision making, monitoring capabilities and process efficiency across the organization. Enhanced digital underwriting tools are helping us identify and avoid over leveraged borrowers while three sixty degree control parameter mapping, strengthening monitoring frameworks and improving visibility across the trade cycle. The bank is also about to launch new CBS.

12:37 These investments are expected to improve customer experience, strengthen risk controls and support scaling of the business over the coming years. We have also taken steps to improve the quality of new account sourcing and to cross sell assets products through our liability focused general banking branches, thereby increasing product penetration per customer and improving wallet share. These actions taken together are designed to reduce the probability of future set and to create a more diversified resident earnings base. The bank strategy is centered on improving productivity and operating efficiency rather than branch expansion. Employee headcount has been rationalized by around 1,700, while growth is being driven through enhanced productivity of the existing branch network, digital and technology investment. The bank is also on tracking various product and process simplification initiatives, including workflow automation, digitization of customer journeys, reduction of manual interventions and streamlining of operating processes to improve turnaround time, service quality and cost efficiency.

13:46 As we look ahead, our priority remains clear. We intend to build on the positive momentum achieved during the last few quarters by sustaining collection performance, further improving asset quality, expanding secured lending, accelerating growth in diversified asset classes and deepening our liability franchise. At the same time, we'll maintain disciplined underwriting standards and appropriate approach to risk management. We are aiming for a loan book growth of around 25% to 30% with the secured lending comprising 55% of the portfolio, maintaining NIM of around 8% and delivering an ROE of 15% by FY 'twenty eight. While sectoral headwinds and regulatory transitions may continue to influence near term performance, we remain confident that the strategy direction we have chartered will deliver a stronger, more sustainable franchise over the medium term.

14:40 FY 'twenty seven, in our view, is a clear is a year of rebuilding earnings strength and translating operational improvements into sustainable financial outcomes. The progress achieved during quarter one is encouraging because it demonstrated that the recovery process is firmly underway. We are seeing stronger disbursement, improving portfolio quality, lower stress formation, better recoveries, a healthier funding mix, declining cost of funds and increasing transaction costs across diversified businesses. Together, these indicators point toward a franchise that is emerging stronger, more balanced and better positioned for the future. With this, let me hand over the call for the question and answer session. Thank you very much. Thank you very much, sir. We will now begin the question and answer session.

15:54 We have a first question from the line of Shreya Chatterjee from Eight West Capital Finance. Please go ahead. Hello, sir. Thank you for taking my question. If you could just give some color on to what would be the portfolio rundown of your J and D portfolio like going ahead in the year, like what percent of your portfolio did it be and the overall MFI portfolio also? And how much do you plan to run down the book as well? So just to mention, we have been talking past also. I mean we have a strong belief that the JLG and overall microbanking has a good potential for growth also. So our idea is to remain almost in the same range, around 25% or so. Overall, if you look at the JLG part over a period of next two to three months also sorry, not two to three years also. So around 25% is what we expect our JLG portfolio will be.

16:47 Okay. So if you're not planning to run down much of the JLG portfolio from here on, so what would be the total overall portfolio growth for this year and the next year? So as you mentioned, in case of JLG, and I also had we have micro banking business growth also. Our range is around 15% to 20% growth as far as the JLG and the micro banking is concerned. And we have mentioned that overall, we expect that 25% to 30% growth will be there. But JLG growth will be below 20% overall. And sir, regard yes. Sorry, ma'am, just to add, I guess, maybe if you are referring to the stress that has been seen in the past in the J and G and the fact that how are we looking at that growth in this book.

17:36 Two things, one that environment as we speak all the disbursements are happening under the new guardrail, which is to say that the behavior of the new guardrail, the steepages are normalized. So to that extent, the past guardrail legacy can be called as past. And second, in any case, you have covered this portfolio under the CGM if you guarantee scheme for any abnormality that can in future come. So one way is that we have already as far as mix is concerned, and this was the planned trajectory of our couple of quarters, eight quarters that we'll move from unsecured to secured and we will bring the JLG or micro banking to one third of the portfolio. We have already almost on track on that trajectory.

18:24 And while we grow the portfolio on total portfolio basis, I think we will continue to keep the cap around 25 as Rohinji mentioned, but still grow this book and not thinking about running down the book as you started the question. That was helpful. And if you could just guide about what's your like guidance for the NPE and the credit cost for the rest of the year? And how much provision do you expect to build up because of that? And ultimately, apart from the in city fund raise that you are doing, any additional fund raises that are planned in the medium term? On the credit cost, I know we would be around on a upper side being conservative, not more than 3% or 3% to 3.5% as we go along.

19:14 And on your second question, we are raising INR500 crores, but we are also repaying it one of the trends that we have of INR200 crores, which is at 12.5% coupon. We are prematurely paying that about a year earlier that should happen in mid of August. We have already put this formal announcement across. That should save the bank around crores as we go along. The primary, the idea was not to carry INR200 crores plus INR500 crores, INR700 crores in fee debt and that INR200 crores which we are repaying or prematurely or making an R and D redemption had no delta on the CR benefit. What we are going to do now is raise NCD under Tier two classification that helps us to boost our CRR and on the back of the envelope, this INR500 crores should inch up the CRR by around two fifty basis point.

20:18 Got it. So that was helpful. And any indications on the early signs of stress of portfolio risk for your new lending book that you're giving away to the new lending book, any par numbers that you like to share? Amit, this is Saig. So if you see the so we do track the pre guardrail and post guardrail portfolio, which we have built up in the micro banking and G and G space. So if you'll see post guardrail that is 04/01/2025, if you'll see our total gross NPA and majority of our outstanding book now belongs to that particular period in JLT in particular and our gross NPA are below 2%. To be precise, it hovers around 1.85% to 1.9% only.

21:06 And just to add, this book now starting January mid of January twenty five, our JLG or our MBBN portfolio is covered under CGMFU. So whatever MBA is coming post April 25 is also covered under CGMFU. And probably just a point to add that as we speak, as of March, my CGM if you coverage on the portfolio was 60%. And if I take June, it is 80% of the portfolio is covered. And this portfolio is JLG, MBBI and NBPL, including BCG and G. So all 80% of the portfolio as it stands as on June is covered under the CGU if you get into scheme. Got it. Thank you.

21:53 Yes. Thank you. Thank you. We have our next question from the line of Sagarsh Small Finance Bank Limited. Please go ahead. My first question, sir, was actually related to your MBBN portfolio. We are seeing a sharp jump, especially in the NBTEL disbursement side, actually, more than 100% growth. Is this portfolio completely to the existing customers who have demonstrated good behavior in the JLT portfolio? Or is it something like are we sourcing some new to banking customers also for these kind of loans? So currently, I think it's 19.9% portfolio of our existing customers only. We have just piloted, you can say, the open market or the new to bank customers. I mean, the number may not be even 100 or 200. So it's primarily almost 100% is our existing customer with the history with us. And two to three, what we say, cycle have been exhausted in these cases. So they're existing customers only.

23:02 Okay. So basically, the under on the underwriting front, how is it different from the normal JLG front? How means what sort of underwriting different underwriting measures have we taken for this portfolio? So there is a so this portfolio is this is Varendra, sorry. So primarily this portfolio is built up on the revised leases only to the people who are having an established business activity and the credit is done by the separate underwriting team, which does the complete underwriting as is the norm in the all other unsecured loan business. So we have built up this business over a period of last four years. The incremental business has jumped in the last one year after learning experience of last three years, which is helping us growth in this side. And our focus after the study of last four years, three years on the portfolio.

24:00 Additional to that, we also cover its portfolio under the CGFW scheme. So with a very stable, what you call, collection team and as well as delinquencies being closely monitored in that Now just to add, Virendra, I guess, when we are doing MBIL, we are having a dedicated collection team for MBBI business as well. So if the headcount that we had spoken earlier for JLG stays with JLG. And as we grow, we do look at the necessity in terms of the support for the collection, and we have given collection headcount to teams to ensure that MEPL has a net net, the contribution and the buy to the business remains and then NPA remains checked. Amit, is just to add again, post April 2025, we will see the outstanding out of this portfolio, which is close to INR $12.50 crore, INR $10.42 crore is post April 25. And out of that particular pool, we have only 0.4% of the IP. So we do track whatever interventions in terms of process, underwriting standards we have done, what kind of outcome we are getting in terms of asset quality.

25:16 Okay. So now my next question was related to the asset quality. We are seeing that your recoveryupgradations are getting slower actually. We expected this quarter to be strong in terms of recoveries, but it hasn't happened. So means the NPAs that have been shown in the past actually, why is the recovery being so slow or it's non recoverable, is it like that way? I guess, in particular, you would see that and I can say that as far as MB or J and J is kind of almost all things are sorted. But when it comes to retail book, we have certain accumulated recoveries from Surprise E and it is a matter of pushing that to come back. So as we go along, when you see this legal litigation bucket where some amount is lying yet to be recovered, you will see that unfolding in coming quarters.

26:18 So that is one of the reasons where it's taking time, at least on the retail side to the secured book side to get this en cashed. So on the secured book, if it is getting time for what about the unsecured? Because every small finance bank, almost eight on 10 small finance banks are getting stronger on recoveries, at least what the last two years that we every bank had based on the microfinance side. So on the microfinance side, out of the INR 69 crores that you reported in this quarter, how much was it on the unsecured microfinance book? Out of 69, 49 was that? 42. $40.42.

27:25 Okay. Okay. Got it. So at least you expect the recoveries to pick up in the coming quarters. Quarter one was normally slow in that recovery, but if you see quarter four was good. So we expect to see the pickup back in the quarter two and quarter three. So that's I just want to add one more thing and correlate it and hope, I guess, you buy. This is one that we had aged up our headcount about one years point back, obviously, to improve our collection efficiency, which last five, six months has been above 99.5. And the headcount as we added up stands at about say 1,100 headcount only on collection and I'm talking of JLG. I just mentioned MBBR as its own source of collection headcount that we have allocated to them. But once 1,100 headcount that is lying in JLG and as we see normalization is happening in the credit cost, we would obviously shift some of this headcount for recovery of the NPA and write offs. So you would see some traction there in the coming quarters because at the normalized rate of credit cost in JLG probably 1,100 is a bigger ask in terms of headcount being there. But we will continue to hold them and deploy them for recoveries of the past NPAs and write offs. And I guess you should

28:56 see some traction there in coming quarters. Okay. Okay. So now just one suggestion from my side. As you highlighted on the asset quality that recoveries were taking time. So the asset quality, if you can on the investor presentation, on every segment wise asset quality, if you can mention from next quarter onwards, what was the G and P for every segment? So because I wanted to know the what was the G and P for MS, I mean, for as of this quarter? Will do that. We'll So do what was the what is the G and P as on June 30 for MSME? It was around INR 169 crores.

29:44 INR 169 crores out of your INR $4,004.48 crores? Yes. Percentage wise, you will see the 3.8%. And to see when, as you said, I just wanted to add, when Sachu said taking time means there are certain cases, which are legacy cases, which has come into NDA in the last quarter itself. So now if you have to go for Sachu and auction the properties and take into position, normally, it's a process of six to seven months. And that is where Sadhu said. But normally in secured, we have seen when we initiate the initial notices regarding this, majority of the cases and the customers comes and pays the overdue amount. So that is where because these cases have come into NP in the last quarter itself. So probably in the next two months, the majority of them should get resolved without going for actual auction.

30:40 So just wanted to add that point. Okay, fine. And just last one from my side in Utkarsh in FY 2028, you were saying twenty five percent to 30% portfolio growth that you just highlighted on the guidance. So 25% to 30% is growth from FY 2026, right? No, no, we are talking year on year growth of around 25% to 30%. So from 2027... So for FY 2027 also, you are running 30% growth? Yes, 25% to 30%, that's giving a range because market is also that way. But we have Because in this quarter, we hardly have seen any growth, right? That is why? Because of some of the we have done write off also because of write off, the portfolio goes down, which will not reflect.

31:27 So that's why I'm saying 25% to 30% is the range for this year. And our base is small right now. When I say small, I mean because we have not grown during last two years. So base is also small. So 25% to 30% growth for this year and very similar type of growth we expect for next year also. Sorry, I just want to add that if you really look at Q4, which is the beginning of green shoots and the momentum continuing Q1. So Q4, the disbursements across was 30%, which is Q4, our previous Q4 and Q4 is the loaded volume business in the financial service sector, generally Q1 is lower. If you have a 30% of disbursement growth as we have shown and similarly, it remains 48%.

32:16 Again in Q1, the trajectory obviously is turning towards our internal discussions and management target envelope, obviously, I guess, endeavor is to really pick up and H2 will be a year where the target comes on a few to get that 25% growth that we are aspiring. And the engine and the operations, infrastructure headcount, the new technology we have switched over to the new LMS systems and all of that debt improvement. So all that is now required is higher productivity, which is the same cost to get the high volume is what is going to be our key focus.

33:05 Okay. Okay. Fine sir. Thank you. Thank you so much and all the best. Thank you. Thank you. We have our next question from the line of Saurabh Jain from SSJ Finance and Securities. Please go ahead. Hi, good evening. I'd like to leave my question with a few comments here. The management commentary seems be more focused on the liability side of the balance sheet, where you're working on improving your cost of funds, including your deposits or so. But our but as shareholders, our concern seems to be more on your asset side, the quality of your assets, where we don't have enough granular information in terms of the quality of loans that you have.

33:50 You still seem to be talking about growing your loan book by about 25% to 30% each year, even growing your JLGA and BL book at probably the same rates or so rather than running it down. What gives you this confidence that you can have grow the book and with a net interest margin continuing with a net interest margin of 8%? What gives you this confidence that you can grow the book looking at the history of the industry and even specifically with respect to Utkarsh that you can continue to give a healthy asset side of your balance sheet? No. I think if you see the way we have done and that's why we are using the word this is a conversion year for us. Whatever product services we have got, we are not adding anything new. We have been doing these products for some time. And whatever experience we have gained, I mean, we have utilized those experiences.

34:43 And that is the basis. In fact, some of the places, we have got around 100 branches across, in fact. And I mean the type of productivity you can get from these branches, we have not reached I mean nowhere near optimum actually. So if I'm able to do even by 70% to 80% of the capability of our branches, we can do much, much more than this. Because of the experience in that, we have a little slow. In fact, that's why some people are asking quarter one, the growth is lower than what maybe people have anticipated. But you'll see this growth will pick up. JLT, we still have a very firm belief in JLT. Yes, there have been challenges. But whatever challenges are there, I think because of I'm not trying to take a shelter of guarantee scheme. But I think guarantee scheme, whenever there are when the numbers I'm talking the stress goes beyond average, I think then we'll get the benefit of guarantee scheme also, which was not there in the past. So that will even out the challenges when there are because of cycle, there are issues. Otherwise, we see there is human's potential.

35:42 Actually, if you really ask me, JLT, the way it has happened during the last four to five years, people have not gone for new customers at all. So there's a lot of potential there if we are able to do things good. And again, we are very clear that we are not going to go to our out of our core geography as far as microfinance is concerned. In case I find a good potential, we'll go through partners, not through our own network. So wherever we have our network, we have good experience because people have actually not gone for new customers also. Our sense is there is a good potential and there is a good requirement also. Industry also gone down during this period. If you see almost 30% degrowth has happened in the industry also. So there is a potential, which we intend to see that, especially in the core geography of Utkarsh. On the other part, I think we still have a very, very small base. If I'm talking of any 100,000 crores, I'm talking BBG, we are in the same range actually, Business Banking Group, which has huge potential.

36:34 We are talking golden, we are around INR 300 crores right now. I mean you can imagine the type of potential we are talking of. So I think each and every segment where we have started, we are small that bit. And the in percentage of that, I think 30% is not a very high growth from that perspective. So these all numbers are mean, I I'll not use our achievements. These are well within what when we talk about our plans for this year, 25% to 30% growth in the top line should not be a problem. No, my concern is not being with respect to your ability to grow your loan book. It's frankly your focus on growing your loan book is my concern itself, frankly. I mean, my question really is that should you be looking at growing your loan book? Yes, obviously, linear to the industry for sure. But the quality of the loan book itself still seems to be following the same pattern as earlier periods.

37:27 Please correct me on that part. And even now when we're talking about the secured part of the book, we are talking about you looking at protection under SRPAC and recovering money through SRPAC. And again, which brings in certain questions on your practice of even giving secured loans as such. Can you help me dilute my concern on these fronts? No, certainly, maybe Amit can also talk about this part, but I can the way we have done during the collection, it is sometime there will some mean, spurt can happen in some of the portfolio or some of the accounts actually. But I mean, there's a proper lay down process. In fact, I mean, security challenges, it takes a little longer time to settle. So it remains an NPA status for some longer period. That's the only difference in case of but let us accept this fact that in secured case also, there the cases will go bad. It's not that these cases will not go bad in cases.

38:23 The process followed a little different in that case. The yield is lower for sure, but I think the stability of portfolio is much better in case of secured. It takes a little longer time to settle the whatever security you have got in some of the cases. That's the only thing which what I was talking about. Okay. Thank you. Yes. Thank you. We have our next question from the line of Patul Chedra from PhillipCapital. Please go ahead. Watsal, are you there? Hello, Watsal?

39:13 We'll move on to the next question from the line of Ashleigh Stonejay from Kotak Securities. Sir, a few questions on the MFI book. Your total MFI NPAs are today at roughly around INR $7.40 crores. Correct me if I'm wrong on that number. Want to know what proportion of these MFI NPAs are now covered under the CGF in your scheme? And what is the NPA provision you are carrying against these MFI NPAs? That's the first question. Give us two one minute, maybe you can go to the next question by the time we just take this Sure, step sir. Sir, in secondly, this CGSMU scheme, does it allow you to apply a lower risk rate to the covered set of loans?

40:06 Yes, it does, but there is a gap, Ashlesh. You have the benefit of obviously to the extent of the claim that is eligible, which is 72.75%. And in addition to that, you have a cap of 15% on the total disbursement made, which is obviously under the regulatory terminology called crystallized portfolio. Of that 15%, you can count and apply zero risk weighted on that. I guess the benefit is simply given because on one hand, you have a premium which goes to your cost and on the other hand, you have the coverage. So the benefits under the RBI norms are twofold. One is provisioning and other is a zero risk weighted. But as I said, it is CapEx, not on the total portfolio.

40:59 Sir. Sarju sir, just to clarify Just to add to your question. So under JLG and MBBL product together, if you'll see around the INR 170 crore is the gross NP amount, which is covered under CGMFU. And on this, if you will see lifetime provisioning, we need to require this of 46 crore as per the CGM FQ guidelines. Out of that already INR 28 crore has been provided. So only INR 17 crore is something, which will come as a bucket moment every quarter. Okay, sir. Let me... Just trying to understand the numbers. $1.70 crore is out of that $7.40 is already covered in the CGMU.

41:45 Okay. So $5.70 is not covered. How much provisions... NP provisions are you carrying against this MFNPs which are not in the CGM right now? I'm just trying to understand what is the provision requirement you have on the existing MFIs space. So if you see the... Let me try to answer this in splitting before April and after April. So if you see before 04/01/2025 portfolio, we had gross NPA is INR $6.19 crore. And out of that already INR $40.07 crore has been provided. So the PCR comes close to 66%. And post April 25, the total NPS INR 73 crores, which is the recent one.

42:33 Out of that, already provided is INR 14 crores. And between these, because we started CGMFU somewhere in mid of January twenty five. So that is where this number comes as INR 170 crores because second NPA is also of the portfolio built up between January 25 to March 25. Understood, sir. This clarifies. So just going back to the risk weight question. You were so if you said, if I were to simply add INR 100 of MFI book incrementally going forward, what would be the risk weight assigned to that book? Out of the 100 rupees, on the 15 rupees, you will assign zero.

43:20 Okay. So 85 rupees, you will still assign a risk rate? Yes. That's right. Simplistically. Understood, sir. Sir, and secondly, the... Can you also split the non MFI NPS? I think the total number is around $4.20 crores. If you can give a breakup of non MFI NPS across segments like CV and MSME. In rupees is also fine for us. Yes. So out of this INR $7.38 crores, non MB is INR $4.25 crores. Yes, sir. I want to know what's the breakup of that INR $4.25 crores across MSME, wheels and so on? Okay.

44:10 So out of that INR $4.25 crores, MSME is secured, MSME is INR 168 crores, CVC is INR 62 crores, WSL is INR 30 crores and housing loan is another close to INR 49 crores, 50 crores. Understood, sir. Sir, and lastly, if you can share any update on your capital issuance plans? And also one more, sorry, one more data keeping question, if you can split the if you can give us the microfinance slippages for this quarter. Thank you. Those are all the questions I had. The total provision that has gone into my P and L for quarter is crore out of which micro banking is INR45 crores and non micro banking is INR62 crores.

45:07 Sorry sir, slippages if you can share and the five slippages? So for micro banking, slippages for this quarter stood at 68 crores as compared to INR 153 crore of quarter four. Okay, sir. And last one was on the capital. Yes. So we just mentioned about raising INR 500 crore of Tier two LCD. And I did speak that, that should on the back of the envelope give us about two fifty basis point incremental CRAR. And with the trajectory, as we spoke about in terms of profitable years at clawback of profit, so there would be no otherwise a capital equity raise that we anticipate at least till the end of FY 2027.

46:05 Understood, sir. Perfect, sir. Thank you very much for the answers. Those are all Thanks, Harshita. Thanks a lot. Thank you. Thank you. We have our next question from the line of Hanul Shah, an individual investor. Please go ahead. Hello, sir. Hello, sir. Am I audible? Yes, sir. Please go ahead. Yes. Sir, any guidance on FY 2027 ROA or credit cost? We have given the guidance for FY 2028, which is a 15% ROE, which it's a path to profitability through FY 2027 because that has to be the first milestone delivery. We are looking at more than around two digit upwards ROE by the exit of FY 2027, which builds up the case for ROE for the FY 2028.

47:01 Okay, sir. And one more question, sir, our operating profit is not rising. It's very the growth in operating profit is very slow. So can you please throw some light on it? Yes, you're right. I guess if you really look at the trend from what we were and that's what we say the consolidation and the bouncing back story beginning and negative people of around 44 in December to a positive of 12, we are at 60 for this quarter, which is fivefold of Q4, signifying that the disbursements, which is the core input that builds up the portfolio, that builds up the income accrual AUM, that trajectory is visible over the two quarters.

47:52 And as we go along, disbursements and portfolio will continue to build up with completely normalized credit costs. There'll be no reversals that has been event last year. So you'll have a steady state AUM to accrue income in a normalization as growth is building up in coming quarters with added cost of fund advantage in terms of almost 60 basis point benefit accrued and my peak rate of deposits at a point in time on senior citizen was 9.1, which is 8.25 today and the peak deposit card rate which was 8.5 is 7.8 ish point of view both 8.1.

48:50 These two things as we grow in our deposits and the new maturity gets into at the lower rate, we continue to see benefit in the cost of funds. The third line, this is relevant because it will come the profitability. The third line, as I mentioned, other income is also an element of disbursement, loan processing fees, which is up as the disbursement go up. So correlation, I guess, the other income will again be stabilizing and then at the same cost which one of our colleague asked just before you, at the same cost with no expansion plans, it's a matter of getting the higher income and higher productivity, which will lead to a growth incrementally from wherever we are here.

49:35 And if we just mentioned to your previous question that if I'm exiting FY twenty twenty seven Q4 with a ROE of say around two digit that probably would be in a very decent PBOT. That's the envelope in terms of the trajectory we are looking forward. Okay, sir. Thanks for detail. And may I ask one more question, do you permit? Yes, we answered this question. Okay. So sir, how do you mean that there is you are saying that we have already enough infrastructure, so cost to income ratio will not rise over the next two years, even if we go every year 30 percentage, right, that is right?

50:22 So I guess, again, little relevant and thank you for asking this question because cost to income actually looks elevated because the income, which is a denominator contraction has happened over last year. Once income comes back and all that we said is about getting the income, the top line growth and cost at static, you will see the cost to income ratio reasonably improving as we exit FY 2027. Okay, okay, sir. And do we intend to grow MFI space or we will stay here means on one good over the two years? No, no, I think as I mentioned that we understand the GSE business. So I mean, our ratio is very low now, right now we've been on 25%.

51:08 But we'll continue with the microtrans to that extent, sir. Okay. Thank you, sir. Thank you for detailed answer. Thank you. Thank you. You. As there are no further questions, I now hand the conference over to the management for closing comments. Yes. Thank you, ITEC team for this hosting this one. And thanks, every investor, for your queries, questions and interest in the company. As you mentioned, I think what is behind us, and we can see next few quarters are going to be really good quarters and better in all the parameters, all the KPIs where you talk of. So once again, thank you very much for your support and guidance all these years. Thank you. Thank you, sir. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.