Ladies and gentlemen, good day, and welcome to the Cholamandalam Investment and Finance Company Limited Q2 FY twenty-five earnings conference call hosted by Kotak 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 after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nischint from Kotak Securities. Thank you, and over to you, sir. Thank you. Good morning, everyone. Welcome to the earnings conference call of Cholamandalam Investment and Finance Company Limited. To discuss the Q2 FY twenty-five performance of Chola and share industry and business updates, we have with us the management of the company, represented by Mr. Vellayan Subbiah, Chairman and Non-Executive Director, Mr. Ravindra Kundu, Managing Director, and Mr. Arulselvan, President and Chief Financial Officer. I would now like to hand over the call to Vellayan for his opening comments, after which we'll take the Q&As. Thank you, Nischint, and good morning, everybody. We'll go through financial results and performance for the quarter and the first half of the year. For disbursements were at INR 24,314 crores for the quarter, which is up by 13%, and INR 48,646 crores for the half, that's up by 17%. The total AUM stands at INR 1,77,426 crores, which is up by 33% year-on-year. The net income for the quarter is at INR 3,238 crores, which is up 37% year-on-year, and INR 6,271 crores for the half, which is up by 40% year-on-year. PAT is at INR 963 crores for the quarter, which is up 26% year-on-year, and INR 1,905 crores for the half, which is up 28% year-on-year. The board met and approved the unaudited results for the quarter and half year ended 30th September 2024. Vehicle finance disbursements were at INR 12,336 crores in the quarter, as against INR 11,731 crores, which is a growth of 5%, and disbursements in H1 FY25 were at INR 25,102 crores, as against 23,032 crores, which is a growth of 9%. LAP disbursed, the loan against property business disbursed INR 4,295 crores in Q2, as against INR 3,192, which is a growth of 35%. For the half, they were at INR 8,170 crores as against INR 5,872, which is a growth of 39%. Home loans disbursed INR 1,823 crores in the quarter, as against INR 1,575, which is a growth of 16%. For the half, disbursements were at INR 3,601 crores, as against INR 3,029 crores in the previous years, which is a growth of 19% year-on-year. The SME business disbursed INR 1,959 crores in the quarter, as against INR 1,945, which is a growth of 1%. And disbursements for the half were at INR 4,119 crores, which is a growth of 3%. The CSEL consumer and small enterprise loans dispersed INR 3,588 crores for the quarter, as against INR 2,853, which is a growth of 26%. And for the half, they were at INR 7,075 crores, which is a growth of 36%. Secured business and personal loans dispersed INR 312 crores in the quarter, as against INR 246 in the same quarter last year, which is a growth of 27%. And the disbursements for the half were at INR 580 crores, which is a growth of 36% over the first half last year. AUM stood at one lakh seventy-seven thousand four hundred and twenty-six crores as compared to one lakh thirty-three thousand seven hundred seventy-five crores, which is a growth of 33%. PBT growth in Q2 was at 27%, and for the half, it was at 29%. PBT ROA in Q2 was at 3%, and for the half year, it was at 3.1%. ROE for the quarter was at 18.24, and for the half was at 18.55. The company continues to hold a strong liquidity position, with thirteen thousand eight hundred and sixty-four crores as the cash balance as at the end of September, including two thousand five hundred and sixty-three crores invested in G-Secs, and two thousand one hundred and six crores invested in T-Bills, and six hundred and twenty-four crores invested in STRIPS shown under investments, with a total equity position of fourteen thousand four and four crores, including undrawn sanction line. The ALM is comfortable with no negative accumulated mismatches across all time buckets as per regulatory norm. Consolidated PBT for the quarter was at thirty-one three zero four crores, as against one zero six five crores in Q2 FY 2024, which is a growth of 22%. And for the half, it was at INR 2,579 crore as against INR 2,021 crore, which is a growth of 28%. In terms of asset quality, Stage 3 levels increased to 2.83% as of September 2024, from 2.62% as of the end of June 2024. GNPA as per RBI norms increased to 3.78% as of September 2024, as against 3.62% as of June 2024. NNPA, as per RBI norms, also increased to 2.48% as of September 2024, as against 2.37% on June 2024. NNPA is below the threshold of 6% described by RBI as the threshold for NPA. The capital adequacy of the company as of September thirtieth, two thousand and twenty-four, was at 19.5% as against the regulatory requirement of 15%. Tier 1 capital was at 15%, common equity Tier 1 at 14.2%, as against the regulatory minimum of 9%, and Tier 2 was at 4.46%. So with that, I'll stop with the commentary, and we'll be happy to turn it over to you for the Q&A. Thank you. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants, please limit yourself to two questions per participant and come back in the queue for follow-up questions. We will wait for a moment till the question queue assembles. The first question is from the line of Dhaval from DSP. Please go ahead. Yeah, thanks for the opportunity. Just a couple of questions. First is on the asset quality for VF and CSEL. Could you talk a little bit around both these segments, you know, where the stage three and, you know, in CSEL, especially the NCL is also relatively higher in the first half compared to last year. Just how things are progressing in line or better than what you think? The second question relates to the growth, you know, just with the RBI sort of cautioning, you know, companies on growth, how is the company looking at just, you know, where we are and our growth trajectory? If you could give some perspective around, you know, regulatory interactions around this aspect, that would be useful. Yeah. Thanks. Yeah. So Dhaval, thanks. So I'll answer the growth bit, and then kind of Ravi, talk a bit about asset quality. As you can see, we've moderated disbursements a fair bit, right? And kind of, so you've seen disbursement growth is up by only 13% for the quarter. And so you can see that growth moderation that basically we've been talking. We obviously kind of, this is a matter that we discussed as a board as well. And so you can basically see that, disbursement growth is moderated to 13%. Why you see a slightly higher number for AUM is because of kind of, you know, the base, right, from last year. But that will moderate kind of, you know, as we go into the rest of the year as well. You know, I mean, I think- Sorry to interrupt. Ladies and gentlemen, the management line has been disconnected. Please stay connected. The management line has been reconnected. Over to you, sir. Yeah. So, sorry, I don't know where we dropped off, but- So, Milan, you were just highlighting that you had discussed at the board and the disbursement growth is around 13%, and that's when we lost you. Yeah, yeah. So basically, you know, that was just to give you an indication that we have moderated, right? Kind of we have moderated. And as kind of some of the base effect wears off, I think we'll kind of drop the numbers that are slightly lower than the numbers that you're seeing in terms of AUM growth right now, right? You are... Ravi? Yeah. Go ahead, asset quality. Asset quality in vehicle finance, we've seen that due to the heat wave in the first quarter and the second quarter was actually the, you know, extended rains and all, slightly it had gone up by thirty basis points in the Stage 2 and then thirty basis points in Stage 3. I mean, I think this quarter it will be at the same level, and then next quarter it will come down. As usual, the fourth quarter is always better for the, you know, vehicle finance as well as the company. As far as the CSEL is concerned, they are also range bound, like, you know, hovering between 4.25% to 5%. We have also started Samsung partnership for mobile funding. So there are three businesses. One is traditional, the second is the partnership for the digital lending and digital lending in-house, and then the Samsung. So CSEL is continuously expanding their product line, so you will see that this will be, yeah, hovering between 4.25%-5%. ... Got it. And just, sorry, one follow-up on the growth bit. So, you know, the book is sort of shifting towards a longer duration product, so which is why there is a gap between AUM and disbursement. So what we should monitor is disbursement growth, or, at the board level, the focus is on disbursement growth or AUM growth? Because just trying to link the medium-term guidance of 25% plus AUM growth. That's the reason I'm asking. Yeah. So our sense is that we. Yeah, so basically, I mean, what you saw was a 33% number, right? That number will come a bit off, right? So that's why I'm saying that the guidance of 25% is kind of a useful guidance to use on the AUM side. Got it. Got it. Very, very clear. Thanks. Thanks, all the best. Thanks, Dhaval. Thank you. The next question is from the line of Raghav Garg from Ambit Capital. Please go ahead. Hey, hi. Thanks for the opportunity. My first question is on the asset quality again. Your slippages this quarter were around 930 crores. How much of these would have come from the vehicle finance and the C cell product, specifically, if you can give these two numbers separately? And how much would these numbers be up on a YOY basis? Yeah. Good. Yeah, it's given in page twenty-nine of the investor presentation. Even, you know, individual product sub-product wise details are given on the page three numbers. So there's a slippage of around INR 600 crores, less than INR 600 crores, it's around, of which around INR 300 odd crores would come from vehicle finance. And the rest are marginally increased. Sir, I think your write-offs have also been elevated, right? So, I am assuming here that some of the flows that you would have seen in either last quarter or even in this quarter would have been written off. You know, in that backdrop, the absolute amount on gross slippages, which seems to be about INR 900 crores, would... You know, a breakup of that would be useful. It is at the same level as in our scope. Okay. Write-offs are the same level. Same level, yeah. Write-offs, there's no difference in the comparable quarters. Understood. Fair enough. Second thing is that in the last call, you had mentioned about 1.2, 1.3, 3% credit cost for vehicle finance this year, right? We are already averaging about 1.8, 1.9 in the first half. I think that in the first quarter call, you had mentioned it would come down. I just wanted to understand what has changed between then and now, that the credit cost has not come down, it's still elevated, and what gives you the confidence that it will come down, you know, into the second half? No, for company level, we said that 1.2-1.3. So 1.2-1.3, and if you take a little conservative approach, it will be at 1.4 for our company level. Vehicle finance is actually at one point, Both at the company level and even at vehicle finance level, if you see compared to Q1, it is coming down, and this is the same similar trend you saw, you will see even in last year, that what used to be like a larger number, ends in the year with a smaller number, because the second half will always be better, especially more so in vehicle finance, because they are more skewed towards collection, festival period and post onwards. No, sir, I completely understand. Q4 is generally very good in terms of recoveries and collection, but it's just that whatever guidance you had, the ask on second half just goes way too high. So wanted to get some confidence on that. But, yeah, you partly... It will be at 1.3%, NCL is what we are seeing now. Understood. And sir, in vehicle finance, can you, you know, apart from the numbers that are already there in the presentation, you know, whatever is there in the quarterly numbers, what is actually happening on the ground in vehicle finance in terms of truck utilization, in terms of the freight rates? If you can give some ground up trends, you know, are operators getting enough load to carry, you know, all that sort of stuff, just to help us gauge how the trends could be going forward? Yeah. So, Ravi here. See, trucks, we are actually having a lower mix in terms of our commercial vehicle business, but, small commercial vehicle business, we do more. So we saw that, you know, the rural economy is slightly not doing that better. And, demand side also, we have seen that small commercial vehicle has come down. So delinquency related to the last mile transportation is there. So among all products within vehicle finance, if you, you know, segregate CVC and, you know, passenger vehicle, tractor, two-wheeler, three-wheeler, I see that, you know, small commercial vehicles, especially sub-one ton, last mile transportation got impacted, both from the demand side as well as the delinquency side, and therefore, the overall delinquencies at a higher side. But it is also related to, you know, seasonality. Quarter one and quarter two have been always, you know, higher. And this time, it was election in the first quarter, and then, you know, heat wave. Second quarter, we have extended rain as well as, you know, the post-election transition also not completed fully on ground, and therefore, there is some utilization related problem is there. And the election. Then the festival also moved to October, both the festival. So pre-festival activity also has not been good in the quarter two. So all put together, you know, last mile transportation, capacity utilization during the quarter two for the commercial vehicle has been down. So among all products, we have seen that CV, delinquencies were higher. Thank you, sir. It is likely to go down in the quarter three, and then quarter four, it will again improve further. Right. Thank you. Do I have room for another question? Go ahead. Sure. Okay, sir, just on the employee side, right? So there's been a pretty substantial jump quarter on quarter. We've almost added about seven thousand employees this time. You know, which all products have you added and, you know, in which functions have you added these individuals? That's my last question. All the businesses is actually, if you see that the LAP is working on Micro LAP, and, you know, SME business is working on equipment finance, you know, vehicle equipment finance, industrial equipment finance, and micro term loans. We HLL is expanding into Non-South market. Vehicle finance is also adding small branches as well as, you know, manpower for collection. LAP is also expanding, so manpower increase is there across the business. Mr. Garg, does that answer your question? Yeah, yeah. I'm good. My questions have been answered. Thanks. Thank you. Ladies and gentlemen, in order to ensure the management is able to address questions from all the participants, please limit yourselves to one question per participant. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead. Yeah. Hi, good morning. So questions, I mean, related to this employee addition, I mean, that has also led to sort of the expansion in, you know, OpEx in sales. Now, so if you can help, I mean, in here, that how has been this breakup of employee addition towards, you know, the sales and collections? And also, if, I mean, this were to sort of this led to kind of a jump in OpEx. Now, how do you see the ROA trajectory improving? Because, I mean, in terms of credit cost, yes, I mean, we are expecting some bit of improvement in the second half, but, in, I mean, for the full year, it is somewhere towards the upper end of guidance. Now, OpEx going towards slightly higher, and also, I mean, your borrowing, just because a function of your growth, will be higher. So how do you see that ROA playing out? Thanks. So the operating expenses are actually flat. If you see the quarter one and quarter two, it is at 3% level, and it is going to be in that same level for this financial year. Because we are adding manpower for expansion of the product line as well as the geography. The productivity is down because the market was down. So with quarter three onwards, the individual productivity by sales executive doing more number of loans will go up from October month. We have seen that in this month, the disbursements are higher than last month. So the productivity increase is going to be same, but OpEx will remain as it is. Yeah, and if you can just help that, okay, how much of this kind of a seven thousand employee addition you have done towards collection side? More or less balanced, actually. We are adding manpower equally in sales and collection. Not only sales and collection, we are also adding for supporting. Yeah. It is in vehicle finance little bit more on collection, but in the LAP and other businesses, it is more on the sales. I think this breakups will be more getting into more data, which is not available in public domain at the category level. But this is the whole range. General bias is that, like Arun said. Okay, thank you. Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. Yeah. Good morning, everyone, and thank you for taking my question. Sir, I had two, two questions. First thing is, I mean, if you could comment a little bit on our view on the auto cycle. Sir, if you look at the last four quarters, vehicle finance disbursements have been in a tight range, 12,500 close to 13,000 crores. And given that we are already talking about some slowdown that is being seen in T&Vs, how should we look at the auto cycle going ahead? This is something I want Ravi, sir to comment on. And the other thing is, maybe a related question here is, I mean, while you said October disbursements are looking better than September, if you could also comment a little bit on the festive season demand, because from what we are able to gather, I mean, festive season is not very good this time around. Also, the second question that I had is, Ravi, sir, said that, in the last quarter, we saw that CV delinquencies were higher. Small CVs, last mile transportation has got impacted, both on the demand side as well as the delinquency side. So just wanted to understand, I mean, if you can throw some nuance around new and used CVs. Is there a significant difference in behavior that you are seeing between new and used CVs? Those are the two questions I have. Thank you. Yeah. So maybe, the demand is, you know, determined by the wholesale number of the manufacturer. I'm not sure how much wholesale number will come in the quarter three. As of now, in the quarter two, CV numbers are down by 11%, and TV is down by 2%. But retail is going to go up because whatever supply they have made it to the dealership, dealers were going to sell, and to that extent, the disbursement will go up. As you mentioned that we have been doing 12,000 crore of disbursement in a quarter, so obviously from there, from Q3 onwards, it will go up. And that's how we have also budgeted in internally. What Mr. Vellayan was talking about that even after doing the disbursement, say, you know, say 12, 10-12% or 14% within the vehicle finance, the asset growth, which is at, say, 22%, will come down to 18-20%. And at the overall level, it's similar story. We are at 17% growth in terms of H1, and if you do the disbursement growth of also, the asset growth will come down to 25-48%. Now, coming to delinquency, which you want, segregation between used and new, in the case of small commercial vehicle, we are not doing any- Sorry to interrupt, sir. The management line has been disconnected. Ladies and gentlemen, the management line has been connected. Over to you, sir. Yeah, we're here. So, what I was saying is that within the CV used, we don't do small commercial vehicle used. We do lights and then heavies. So as far as the small commercial vehicle, which is related to last mile transportation, it is pertaining to new small commercial vehicles, especially sub-one ton. But if you club all CV new versus all CV used, the delinquency levels are in the same level. So increase in the delinquency are the same, irrespective of new or used. Got it. Got it, sir. And sir, just, just, one more question that I wanted to squeeze in here. In addition to, I mean, this festive season demand, how is the festive period panning out? So I think, I mean, somewhere you said, that manpower increases there across businesses and will continue in the foreseeable future. I just wanted to understand, for how long do you expect this to continue, and at what point you will start focusing on, improvements in productivity? Yeah. So, CV has not picked up in this festival. For the month of October, we are seeing other than CV, all the other products are doing well in terms of relatively. And this will still get continued maybe post-harvesting when the crop will come to the market and people, farmer will start getting money and then construction activity will pick up, then CV will start picking up. Till such time, I don't think CV is going to be pick up the way we want it. As far as the productivity is concerned in vehicle finance, we mentioned that we have recruited more collection than sales. So obviously, we are focusing on the productivity on front side, which is in manpower and increasing the collection intensity to manage the collection. Other product line, they are adding manpower. Obviously, they are working on the productivity. Now, you take the example of home loan. Home loan is like, you know, they are 50% focused in South, and Non-South is like 50%. Obviously, they have a lot of room to basically expand in, you know, rest of the markets. So obviously, they will continue to hire manpower, continue to open branches, and similarly, LAP retail SBPL, those are, you know, operating from one third of the one half of the vehicle finance branches. So obviously, if they open up more branches, they have to recruit more manpower for sales and collection. Initially, every business will open up, recruit more manpower in sales, and then they recruit collection. Got it. This is useful now. Thank you so much, and wish you and your team the very best. Thank you so much. Thank you. Thank you. A reminder to all participants, please limit yourself to one question per participant. The next question is from the line of Ishan Shrimali from Tara Capital. Please go ahead. Hello, sir. Thank you for taking my question. I just wanted a little clarification on the credit cost. Was it 1.3 on the NCL, or what was it? Is it 1.4 or 1.3? 1.3, 1.4. NCL. 1.4 for the quarter and 1.5 for the half, right? For losses. NCL. NCL. Yeah, NCL. I was talking about the NCL. It was one point three, it's one point four for this quarter, and, for the next of the year, it was? 1.4 for this quarter. It has come. Okay. What we said that it will be one point three for the full year. Okay. One point three for the full year. Okay. Thank you, sir. Thank you. That's it. Thank you. The next question is from the line of Piran Engineer from CLSA. Please go ahead. Yeah, hi. Thanks for taking my question, and congrats on a good quarter. My question is really on the home loan business. Firstly, can you just talk a bit about competition there? And secondly, when repo rates are cut, what happens to our yields? What percentage of our home loan book is linked with the repo rate? So as far as home loan is concerned, right now we are expanding GEOs, and our major focus is the rural construction business. So as of now, we are maintaining the yields. I will not allow the yields to drop because we are going towards the new geographies, where the delinquencies will turn up over a period of time. So as far as the yields are concerned, we are trying to maintain that. Of course, going forward, if the rate of interest goes down, there will be a stiff competition. And as we all are aware, in the affordable segment, there are many new entrants. But over a period of time, it will be those guys who can maintain the delinquency levels at the expected, and who can have the team for additional credit. Hello? Yeah, are you there? Yeah, I'm there. Now, sir. Okay, fine. No, but my question is really like, are our internal benchmarks indirectly pegged to the repo rate or not? Like, if the repo rate is cut fifty basis points, will our yield on the back book also decline by fifty basis points? How should we think about that? That was my question. Yeah. Going forward, definitely the pass on will be to the customer, but it will be there are three aspects to that. Of course, there are cost of fund is one of the variant. There is also the cost of operations and the profitability part. So we'll see over a period of time how it pans down in terms of the rate reversals to the customer. Understood. Understood. And just one clarification on what Kundu sir mentioned, lower capacity utilization, is that only for LCV or across, LCV and HCV both? Yeah. Across all product line, we see that including the first quarter and second quarter, because of the election or heat wave, extended rain, and also transition has not been completed. The capacity utilization of the commercial vehicle is down, as well as last mile transportation also got impacted because of the poor demand in economy, as well as, you know, you know, consumption in the rural market is down. Understood. Understood. Okay, that's it from my end. Thank you and wish you all the best. Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead. Yeah. Thanks for taking my question. So first is on the borrowing side. So when we look at it, still the skew is more towards the bank borrowing compared to that of the debt market. But the rate cuts would be following relatively later compared to the benefit which we are seeing on the debt market side. Would we be tweaking the proportion, looking at the opportunities which are available, or we obviously expect the overall mix to continue? And within bank borrowings, how much is linked to MCLR and how much is linked to EBLR within that, in terms of just to get the repricing benefit? Yeah. I think we will continue with the skew more towards bank borrowings, primarily because of two reasons. You are right, like, more than 50-60% of borrowings are connected to EBLR, and we are already seeing some amount of benefit coming into that, and the other point is, because of the bank borrowings, in bank borrowings, we take advantage of the PSL numbers. Yeah -to get the rates lower than the, market rate. So it continues to be better to be skewed towards bank borrowing. Okay. And within bank borrowing, you said 50% is linked to EBLR? Yes. Yes. Okay, got it. And, 50% is EBLR, around 10% is fixed, and the rest are MCLR. 10% fixed rate and balance MCLR. Okay, got it. And, when we look at it, in terms of the commentary, normally Q3, sequential uptake in the disbursements, particularly on the vehicle, is quite good. So but does it suggest that maybe at least in terms of the momentum this quarter, Q3 could be relatively low, maybe at least in terms of the increase from where Q2, was? Would it be relatively lower compared to what we have been seeing in past two, three years? Because you are highlighting maybe, things are still not on track and it might take some time. So Q2 to Q3, disbursement is going to go up. That is for sure. There is no problem. No, the only thing is in terms of like the quantum, which generally happens, that's quite huge, but, the commentary still suggests that it's gonna take some time. So would it be fair to assume- Are you talking about disbursements or you're talking about collections? Yeah, disbursements. Disbursements are about the same range only. I don't think there was a very huge jump from Q2 to Q3. Disbursements, we don't see kind of... I think your question that Ravi's commentary was more on the collections and the portfolio normalization. Yeah, and collections also, Q3, you said, like at least in terms of the Stage 1 to Stage 3, it would be at a similar level to Q2, and the improvement would be from Q4 onwards. Yeah. So that's the writer. Okay, got it. Yeah. Thank you. Thanks. Yeah. Thank you. Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead. Hi, good morning. Three questions. The first one is around the fee income, which chunky piece is now coming from our insurance payments. How do we model for the insurance payments going forward in the fee income? The second question is around the assignment that we used to do in vehicle finance. It's come up drastically versus, say, six, seven quarters ago. How do we look at that in terms of assignments going forward in vehicle finance business? And third, if you can split the collections team or collection employees into various businesses. Thanks. ... in insurance? Yeah, insurance, we were regularly getting from the subsidiaries and which we're taking through dividends, which is now coming. We are already at a fairly decent phase on the insurance. I don't see too much of an upswing from here. It will go in more, you know, in line with the disbursement trends. On the assignment, actually, we're not doing assignments, we're doing more of only securitization so far. So- I think his question was, we were doing a lot of assignments. Long time, yeah. That was a long time ago. Very long time, like more than five years back. Actually, most of the assignments we have booked has already ramped down. We have a few thousand, two hundred crores or so on the LAP and HLL book, which we have done long time back, which is still as some residuals and follow scheme. Manpower of same will not indicate a guidance. We have not given separately guidance on our collections. But majority are. But, uh, It's more or less in line with kind of the size of each of the businesses. How many people do we deploy in collections? Oh, the question is overall in collections. It depends again, product to product. Vehicle Finance is the largest, almost like, 20,000 people will be in- So I think quarter of our total workforce in collections. Yeah. Say that number again. It'll be between 25% and 30% of our total workforce is collections. What portion would be in vehicle finance and LAP? That's what we just told you. No, we won't give that. We're not giving specific guidance. You can just kind of, you can just assume that it's in ratio of the size of the business. Got it. Got it. Sure. Thank you. Happy Diwali! Thank you. Thank you. The next question is from the line of Raj Shah from IIFL Securities. Please go ahead. Hi. Thank you for the opportunity to ask, let me ask the question. So I wanted to check on the new businesses. So, last three quarters now, we are seeing broadly flattish, kind of disbursements. So, what is the outlook over there, or is it more of a conscious call? And also, you can... if you can share the percentage of the CSEL book now being sourced through fintech partnerships? CSEL book is like 1% is the partnership. Out of the overall CSEL book is INR 14,000 crores. Out of that, the fintech partnership is only INR 2,000 crores. The rate has actually come down. About 12% through Fintech Partnerships of the book. Exactly. To your question, kind of, you know, I think what we've always indicated is that, you know, that the total unsecured book will cap out at a percentage of our overall portfolio. So that's the C cell business is about 8%, 8-9% of the overall portfolio right now. So we don't see it kind of growing into double digits, right? So I think we cap out at 10% maximum. Yes, thank you. So to your question on whether that's conscious, obviously, it's moderated, yes, by the size of the overall business. So the answer is, yes. Okay. And, when you say you'll cap it at, say, at max 10%, is it like, say, more a six-month, 12-month kind of thing, or more from, say, a medium-term perspective to three years out? Also it is maximum? Yeah, yeah, medium term also, three years out also it will be capped. Got it. And, secondly, wanted to check if there would be, say, any impact of the RBI's directive on doing away with the foreclosure charges on the floating rate MSME book, which would be a LAP book in our case. Do you foresee any impact, not just from, say, the fees perspective, or, I would say more from a competitive perspective as well, as the exit barrier kind of goes away? Sorry to interrupt, sir. The management line has been disconnected. The management line has been reconnected. Over to you, sir. Yeah. See, the directive is more for foreclosures out of own funds and for personal purposes taken. What we do is all business loans, and where it is from own funds, we don't charge, but where it is a balance transfer, et cetera, we will charge. Okay, so you are saying only the BT, sorry, the non-BT portion, will be impacted on the LAP book? No, there are two type of co-foreclosure, no. If someone is actually paying from his own pocket, then it is basically we are not even charging now also. Okay. Someone is basically taking loan from the market, then it is being charged. Okay, and that does not change with this kind of directive, to your understanding? But more difference is coming, I think. It will come, so we will. We have assessed it, and we have to, you know, at the portfolio level, we will see and there could be some impact if the full foreclosure is impacted, implemented. ... Okay. Got it. Thank you. And, do I have a chance for one more question? Go ahead, go ahead. Thank you. With respect to the NIMs, if you can see, let us know how it will trend in the second half, and more importantly, also in this quarter, was there any effect of averaging or timing impact? Because we saw a 10 basis points increase in cost of funds. Did it have anything to do with ECBs that we raised? So we did some tap, 2-3 thousand crores. There's a marginal impact, but it is more a case of some of the old loans, old borrowings, which were at lower rates, also running off. The same reverse story of what we had talked about in vehicle finance. But we are able to manage it, there, and we hope to keep it. Got it. Thank you. Thank you so much, and all the best. Thank you. Thank you. Thank you. The next question is from the line of Pranav from J.P. Morgan. Please go ahead. Thank you, sir, for the opportunity. There are two questions. One is on your fee income. It is sustaining at a pretty decent level of INR 400 crores plus. Your insurance income has not increased that much quarter on quarter. So what actually led to the strength over here? And second, is your OpEx should sustain at that 3.31% level, even if you see that disbursement, incremental disbursement growth coming off from this year, next year? Fee income. Yeah. So I think the OpEx, yeah, the OpEx will be at the 3% level. We don't see kind of that OpEx, going up even if disbursement grows. See, Yes, so because like we said, I mean, OpEx is basically measured off of the AUM base, and we see the AUM base, like, we've guided, right? It can be lower than the 33, but for OpEx, we don't see any issue. Mm-hmm. The question was on fee income. Fee income will remain at similar levels. It has improved a bit, but it will remain at similar levels. As a percentage of AUM. Because it is amortized on the books in the in- Understood. So just to clarify, OpEx, you said, three to three point one should sustain going forward also, right? Correct. Three. Okay. Understood. Got it. Thank you. Thank you. The next question is from the line of Hardik Shah from Goldman Sachs. Please go ahead. Thank you for the opportunity. Am I audible, sir? Yeah. Yeah. Yeah, I had two questions. One is, specifically on yields, what will be your incremental yields versus outstanding, and if you've taken any interest rate hikes across portfolios? In which you're doing? You're talking about overall aggregate? Overall. In this scenario, we will not be taking interest rate hikes on the floating rate book, which has already been hiked, which is the LAP, HL and SL. In the rest of the books, where it's a fixed rate, we have progressively been increasing marginal yield. Two components to it. One is the increase as well as the mix. Both these are, you know, giving an impact on the yield. So you'll see that more in vehicle finance and diesel, and diesel you won't see much because it's already a high-rate book, so you may not see that much impact. But in vehicle finance, you will see progressive increase over the next two quarters. So, what would be the broad delta on incremental yield versus- It's hard to discuss those delta because it is a combination of two factors, as I say. One is the increase we are doing, as well as the mix of the portfolio. So mix of the portfolio will be determined by market demands, et cetera, so we cannot really, you know, give you a number, and it's going to nitty-gritty into that. Okay, got it and sir, second question is, broadly on the customer overlap with MFI, if you could share some color, especially for our two-wheeler and affordable housing business. If you're seeing any impact on those portfolios from the stretch that we are seeing in MFI? No, there is no overlap, actually. Zero? Across all business. No, you can't say zero. But it's not very, very minimal. 1% off. Okay. Okay. Thank you, sir. Thank you. Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead. Hello. Thanks for the opportunity. Two questions. Firstly, are there any growth and asset quality divergence between new CV and used CV? And secondly, in the SME book, there is almost 30 basis point sequential increase in GNPA, Stage 3, and the book is also growing at a healthy pace. So that looks a bit high increase on the Stage 3, so any comment or color on that? As we mentioned, always in, we are more and more focused on the CV used, and in the case of CV new, whenever, heavy commercial vehicle is growing faster, our growth is lower than the market. But now, CV new is also growing lower pace. So our growth rates are in the CV and, CV used are both the same. On the asset quality trend, the Stage 3 increase that we have seen, is it uniform across used and new, or there are divergences? Yeah, yeah, it's the same only. I mentioned that in the previous analyst question also. Okay. Sure. Sure. As far as SME book is concerned, quarter on quarter, the book has almost stabilized on the same number, and as far as GNPA is concerned, basically, book is maturing, and we are seeing that some cases will come, but with legal goals and all, things will come down with SARFAESI. It's all covered under SARFAESI, so it is now maturing, and we'll take actions to bring it down, and H1 was anyways a little bit tougher. Market was like that, but in H2, we are confident that it will come down to the same path. Okay, good. Thank you, sir. Thank you. Thank you. The next question is from the line of Ajit Kumar from Nomura. Please go ahead. Thanks for the opportunity, sir. Just one question in your credit cost guidance for FY 2025, are you factoring in further reduction in retail provision Stage 1, 2, 3 assets in second half? This quarter actually, we have seen reduction in retail provision. That is why I wanted to check on trajectory of retail provision going forward. Yeah. So the reduction would be driven by the reduction in Stage 2 and Stage 3 assets. It's not a reduction if you are indicating that it is a... Not a reduction for changing the methodology. That's what I mean. Okay. Okay. Sure. Sure. That is all. Thank you. Thank you. The next question is from the line of Bhaskar Basu from Jefferies. Please go ahead. Thanks for taking my question. I just had one question on the credit cost side. So, you seem to be indicating that Stage 3 asset quality would broadly be stable sequentially, while the ask on the credit cost for the second half to meet your full year guidance is still fairly high. So, do you expect credit cost to go down next quarter onwards, like it we have seen in the past, or it's going to be largely back-ended? Next quarter will be flat, and the fourth quarter will be lower, and that's how we will achieve. As of now, we are at 1.5%, if you see that. Right. And as we have said that, it will come down to, say, one point three. Right. So, the entire improvement is likely to be in the fourth quarter, is what you're indicating? Yeah. That happens actually normally. Last year, quarter three also was good, but since it is, October month, last day is Diwali. So October month will be slightly, you know, not that great, and then November and, December, we need to cover it up. And also, the entire harvesting also got extended. Okay. Okay. And, when you're talking about reduction in GS3, it's going to be across the board or specifically on the vehicle finance side, where you see a correction from where you are? So some of the portfolio, like LAP and HLL, are already at the rock bottom level. Even in vehicle finance, if you see that, we are much lower than the pre-COVID level, and that is also one reason that it is going up. When you have reduced it so, so bottom, it has to go up little bit in four, you know, even a month. But, you know, we are expecting that, you know, vehicle finance, CSEL, SME, they will be reducing their Stage 3. Okay, thanks. That's all from my side. Thank you. The next question is from the line of Ankush Agrawal from Surge Capital. Please go ahead. Yeah. Hi, thank you for taking my question. First, sir, our capital adequacy has increased sequentially. So can you explain why did that happen? CAR has gone up. Yeah, but what- ... I told you, we did the Tier 2, and Tier 1. Perpetual got pulled into Tier 1, so that has happened, and that has improved. Sorry, sorry, can you repeat what went into tier one? Perpetual debt. We did thousand of the perpetual debt, which goes into Tier 1. Okay. Subordinated of 2,000, which went into Tier 2. Both of them improved the CAR. Got it. Got it. The second question was about growth. I mean, in quarter first conf call, we made this comment that, you know, the Q1 growth and disbursement were much higher than what we had expected because of election. And that in Q2 onwards, we expect it to increase further, but obviously we have not seen that happen. So what changed between these two periods that the overall growth outlook is now much lower than what was there in Q1? Q1 growth was 20%, 21%. Now it is 17%. We said that in Q2 because of the rain impact, and then from Q3 onward, it will pick up. We always maintain 25%. Yeah. Broadly, the guidance we've always given, like Arul said, has been 25% AUM growth, right? You know, I mean, there was also the question based on kind of, you know, RBI input and all of that. So broadly, what we're saying is that we were at, I mean, we've shown 33% in the first half, and we will likely kind of drop, you know, to a lower number, but still we maintain the 25% guidance, right? So we're not changing anything on that guide. Full year. We just said, yeah, 25% full year guide. Got it. That was it. Thank you. Thank you. A reminder to all participants, please limit yourselves to one question per participant. The next question is from the line of Renish from ICICI Securities. Please go ahead. Yeah. Hi, sir. Just one question on the credit cost front, once again. So if you can just throw some light, maybe qualitatively that, you know, since we expect visible recovery in Q4, from all our product line, which product you expect will drive this improvement? You know, including, since our exposure to some of the unsecured product is relatively higher, maybe CL, unsecured business loan, et cetera. So which segment you expect to drive this recovery in Q4, and do you foresee any risk to that recovery, as of now? ... So first of all, you have to accept that it is actually from quarter one, which has come down from 1.5% to 1.4%. Okay? And this 1.4%, we are saying that it'll go down to 1.3% at the company level. Now, if you see that our LAP, which was actually doing the reversal till last year, they were reversing 15 basis points. This year, they have given 15 basis points of NCL. So that is a 30 basis point, you know, swing. So for now, they do not have that much reversal capacity. They will be, you know, normally, they will do 15 basis points, and in steady state, they can go up to even 30 basis points, but they're doing better than their, you know, expectation. HL Finance actually, from one point nine, it has come down to one point eight, and it is going to go down further. So the major difference is only 10 basis points, one point four to one point three. So one point four to one point three, everybody will have to contribute, but those who are already lower, like HLL and LAP, they are already lower, they cannot contribute anymore. Yeah. That's why HLL and LAP has had a strong performance, that will continue, and obviously, you know, some of the other segments will now start contributing as well. Okay. And I mean, you don't foresee any risk of unsecured business loan or maybe unsecured portfolio, you know, sort of, resulting in higher credit costs in second half, given the current environment is? Sorry to interrupt, sir. The management line has been disconnected. The management line has been reconnected. Over to you, sir. Yeah, sir. So I think the question is kind of, are we—I mean, are we concerned on further—I mean, existing on unsecured? There's no concern. No concern. There's no concern. Okay. There's not a concern. Sorry. Okay. Okay, that's it from my side. Thank you. Thank you. Thank you. The next question is from the line of Kaitav Shah from Anand Rathi. Please go ahead. Yeah, thank you for taking my question. So just one question was on the improvement in the ROA. So with the growth perhaps slightly slowing down, does that change the ROA trajectory for you? Or, I mean, ROA trajectory in the medium-term perspective. I mean, does it postpone the ROA improvement, or it's still on track, you think, over the medium term? No, no, I think that that is still on track. We don't see any challenges. We're still working on the three point five? Yeah, so we've always- Yeah. It's like ten basis points. Yeah, we've always guided that, right? Kind of we've talked about the range and kind of performance that range and, you know, now, I mean... So I don't think there's any change in medium-term guidance. Okay, sure. Thank you so much. That was my question. Thank you. The next question is from the line of Raghav Garg from Ambit Capital. Please go ahead. So thanks, my questions have been answered. So thank you. Thank you. Thank you. The next question is from the line of Sonal from Asian Market Securities. Please go ahead. Yeah, thanks for the opportunity. Just, you know, there was a previous question on PBT ROA. So in one which we are closer to about 3.1%, so how do we reach to 3.5% by the end of the year? Because what I understand there will be ten basis points from credit card. No, I don't think we're saying... so I think the specific guidance we've given is that three point five is the average over the full cycle, right? And we've said that when we are, you know, at weaker points in the cycle, we will drop closer to three. So the range we've given is three to four, and we said we'll average three point five over the cycle. So in years like this, we will definitely be lower than three point five, so we'll be closer to the three end of it. So what we're saying is it'll move up from three, but it'll definitely not move up to three point five. So we're not saying we'll hit three point five this year, to be clear. We are at three point one level at HY, so it'll improve to maybe three point two next. Three point... For the full year. Could be three point three also. Yeah. Between 3.2 and 3.3. Yeah, for the year. Sure. Just another question on CCL. Our provision coverage ratio is at 50.5%. Now, given that the book is unsecured, any thoughts of increasing this provision coverage ratio? Yes. No. So is your question, will we change the CSEL provision coverage ratio? Is that your question? No, no, we are not going to do that. No. CSEL, right now we are adopting a more, you know, aggressive policy, considering that we don't have the history to do an ECL model on it. Hopefully, by end of next year, we will be having the enough data to do the ECL model, but our indications show that the ECL model will throw a lower number than what we are already providing. So broadly, we feel comfortable with the current provision coverage. Okay. So, you know, in pre-COVID levels, when our book was secured book, we were maintaining about 1.75% of PCR. With unsecured book, you know, being closer to about 8%, are we comfortable with that 1.83% PCR, on the total book? You have to look at it from an overall perspective. CSEL is only 8% of the overall book. Okay. Considering that, it, that is not, they're not going to swing that much. On that, you are talking now, 1.25% is the overall company PCR. 1.83 for the entire- 1.83% of total. Earlier it was 1.7. Okay. So we don't see anything will change here over the next two to five quarters? Yeah. Yeah, no. Okay. Sure. Thank you, sir. Thank you. The next question is from the line of Dhaval from DSP. Please go ahead. Yeah. So, thanks for the follow-up. Just, you know, one sort of question relating to the business model. So, you know, like, we added these new businesses to reduce cyclicality, and that's what is playing out with VF being lower relatively lower growth, but the overall business is sustaining. Any part of the business model that you think, as you've added these three or four segments, anything that can become much more bigger in the next, let's say, five, six years from where we are today? Any of the businesses just, any thoughts around that? Thanks. So one is that at a company level, we have diversified, and within the businesses also, every business is trying to diversify. For example, LAP is actually getting into the micro LAP in order to maintain their yield and ROA can be stable. Similarly, HLL is like expanding, and they are also having new product other than the self-construction. CSEL has already got four product in their line. SME also started moving to the equipment finance, medical equipment finance, industrial equipment finance, the generator funding, and also they are also getting into the micro term loan. So I think we are doing both at a company level as well as the division level. Actually, our question, I mean, the thesis still kind of remains intact, right? And so, I mean, you know, like Ravi said, you know, HLL and LAP are showing good indications of kind of the thing. You know, so I think HLL is obviously a much larger base and, you know, but both of those businesses are showing kind of good indications of taking a larger percentage of the overall pool. And so, well, in medium term, should one be thinking that this 50% VF today and maybe eventually 40-50, it directionally, it can be far more diversified, maybe many years down the line, but it can be far more diversified business than what it is today. So that, that should be a broad hypothesis, or you think at some point VF will still flatten at a particular high elevated position? Actually, it will come down. You're seeing that. I mean, like I said, 56 will come down, but if, I mean, if you take the long term, right, I mean, definitely some of the other businesses also have good growth like, so, that's your point is valid. Got it. Thanks, and all the best. Thank you. The next question is from the line of Nischint from Kotak Securities Limited. Please go ahead. Hi. Thanks for taking my question. This is just a clarification. When you mentioned, you know, credit cost of 1.3% versus 1.4% in the second quarter, is 1.3% for the second half, or is 1.3% for the entire year? For the full year. For the full year. So probably second half should be, like, whatever, one point one, one point two or there, or maybe fourth quarter should be like, whatever, one point one or so. Yeah, yeah. Yeah, that's, that was, we were seeing. Got it. Thank you very much. This was the last question for the call. So thank you, everyone, for joining this call. Happy Diwali to all of you, and thank you very much to the management for giving us an opportunity to host the call. Thanks, Nishchint. Thank you. Thank you. Thank you. On behalf of Kotak Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.