Ladies and gentlemen, good day and welcome to the Aavas Financiers Limited Q1 FY 2022/2023 Earnings Conference Call. Standard disclaimer. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. As a reminder, all participants' lines will be in the listen-only mode, and there'll 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 and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Sushil Agarwal, MD and CEO. Thank you, and over to you, sir. Thank you. Good afternoon. You are participating on the earnings call to discuss the performance of our company for Q1 FY 2023. With me, I have Mr. Ghanshyam Rawat, CFO, Himanshu Agrawal, Investor Relations team, and other senior member of the management team, and SGA, our investor relationship advisor. The results and presentations are available on the stock exchange as well as our company website, and I hope everyone has had a chance to look at it. I am happy to inform you that during the quarter, the company's long-term credit rating was upgraded from AA- positive outlook to AA stable by ICRA. I take this opportunity to thank you all, stakeholders for their continued trust and support. During the quarter, RBI raised the repo rate by 40 basis points in an off-cycle meet on 4th May 2022, followed by another 50 basis point hike in the scheduled meet on 8th June 2022. Consequently, all the financial institutions started hiking their lending rates with varying amount. We have also increased our prime lending rate by 25 basis points with effect from 5th June 2022, and further announced hike of 50 basis points with effect from 5th of August 2022. For Q1 FY 2023, we disbursed INR 10,936 million, registering a 136% year-on-year growth and achieving 85% of the disbursement done in the seasonally strong Q4 last year. We continued to grow in a calibrated manner and registered an AUM growth of 24% year-on-year as of June 2022, while maintaining our operating metrics and delivered a PAT growth of 14% year-on-year for Q1 FY 2023. With our continued focus on collection, 1+ DPD stood at 4.67% and 90-day past due stood at 0.82% in June 2022, but we have categorized 0.26% of 90-day past due asset as DNPA following RBI's notification dated 12 November 2021 to harmonize IRAC norms across all lending institutions. As a result, the total gross NPAs stood at 1.08% in June 2022. We will continue our strategy of controlling the early delinquencies and strive to maintain one day past due below 5% and 90-day past due below 1%. I would now hand over the line to Ghanshyam to discuss various business parameters in detail. Thank you, Sushil Agarwal. Good afternoon, everyone, and a warm welcome to our earnings call. During the year, company borrowed an incremental amount of INR 8,984 million at 5.65%. As of June 22, our average cost of borrowing stood at 6.86% on an outstanding amount of INR 104.76 billion. During the quarter, our long-term credit rating was upgraded by ICRA from AA- positive outlook to AA stable outlook. CARE continued to maintain long-term credit rating of AA- with positive outlook. Despite the highest short-term rating of A1+, we continue to maintain zero exposure to commercial paper as a prudent borrowing practice. Ind AS reconciliation has been explained in detail for profit after tax and net worth on slide number 31 and 33 of the presentation. Other key parameters. As on 30th June 2022, total number of live accounts stood at 158,979. That is 23% year-on-year growth. Total number of branches was 318. 34 new branches added in last twelve months. Employee count 5,389. Year-on-year growth is 22%. Total assets under management grew 24% year-on-year basis to INR 118.94 billion. Product-wise breakup, home loan 71.1%, other mortgage loan 28.9%. Occupation-wise breakup, salaried 39.9%, self-employed 60.1%. Disbursements has increased by 136% year-on-year to INR 10,936 million for Q1 FY 2023. As on 30 June 2022, average borrowing cost of 6.86% against an average portfolio yield of 12.67% resulted in a spread at 5.81%. Borrowings. Access to diversified and cost-effective long-term financing. A strong relationship with the development financial institutions. Overall borrowing mix as on 30 June 2022 is 38.8% from term loan, 22.5% from assignments and securitization, 22.9% from National Housing Bank, and 15.8% other debt capital market instruments. Assets quality and provisioning. One-day past due stood at 4.67%. Gross Stage three stood at 1.08%, and net Stage three stood at 0.84% as on 30th June. Gross Stage three of 1.08% include 0.26% up to 90-day DPD assets, which have been categorized as a GNPA following RBI notification dated 12th November 2021. During FY 2022, resolution plan was implemented for certain borrower accounts as per RBI Resolution Framework 2.0 dated 5th May 2021. Some of such accounts with an outstanding amount of INR 1,111.5 million as on 30th June 2022 have been classified as a Stage two and provided as per the regulatory guideline. Total ECL provision includes that for COVID-19 impact as well as Resolution Framework 2.0 stood at INR 646.8 million as on 30th June 2022. Liquidity of INR 22,910 million as on 30th June 2022. Cash and cash equivalents of INR 14,600 million. Unavailed CC limit of INR 1,100 million. Documented unavailed sanction from other banks of INR 7,210 million. Profitability. PAT increased by 49% year-on-year to INR 892 million for three-month FY 2023. ROE was 3.2%, and ROE was 12.5% for Q1 FY 2023. As on 30th June 2022, we are well capitalized with a net worth of INR 29,050 million. Our book value per share stood at INR 367.9. Now by this, I open the floor for Q&A session. 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 your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use the handset while asking a question. We have the first question from the line of Karthik Chellappa from Buena Vista Fund Management. Please go ahead. Yeah. Thank you very much for the opportunity, sir, and congrats on the quarter. I have three questions. The first is if we look at our NIMs for the first quarter compared to the exit in FY 2022, it's actually come off quite a bit despite the spread being stable. How do we reconcile that? Yeah. Karthik, you can ask all the three questions. We will reply. Yeah. Okay, great. The second question then, sir, is the one on slide 29. If I look at the reversal income on earlier assigned loans, that is up almost 38% year-on-year in the first quarter of this year. Could you clarify what that relates to and why is the growth so strong in that reversal income? My last question, sir, is again on slide 25, where you have given your liquidity position. I noticed that the principal collections and surplus from operation estimate that you have in first quarter FY 2024 is actually lower than the second quarter of this year and meaningfully lower than the fourth quarter of FY 2023. I'm just wondering why that is the case. These are my three questions, sir. Thank you. Yeah. Yeah. Thanks, Karthik. I think NIM is generally, if you see in the trend of last few quarters, few years also, first quarter generally NIM remain little low. Then it will start to mop up in the quarter two and quarter three as disbursements improve, as AUM also start to improve in that category. Apart from that, I think there is nothing much difference on account of anything in the NIM because the spread is very much stable. Secondly, obviously, capital utilization is also increasing gradually, which will also have a some basis point impact on the NIM. Overall, I think NIM is on the right trajectory. Reversal. Reversal, basically, as I explained in earlier few calls also, as we are doing assignment every year around INR 700 crore to INR 800 crore to INR 900 crore, depending upon the business, depending on the demand in the market. If we do one assignment, overall assignment book get increased. Reversal is also getting it will increase every year, every quarter as we progress, as AUM increase, as O book quantum is also increased basically. Because when we do assignment, income get booked, then it gets reversed in the coming years basically. That the steady state reversal will happen in that as the volume will increase, it will also increase basically. Slide 25. Karthik, in this principal collection surplus from operation, profit is also included. Q1 profit is normally less and Q4 profit will be high. That's the reason. I see. Okay. Sir, as far as this reversal is concerned, this reversal of assignment income, this has nothing to do with, let's say some of your loans either became BT out after being assigned and hence you have to reverse it. That, it's nothing to do with that. This is just a normal process of reversal, is it? Yes. Normal process. Once the income gets recognized when we do assignment, average life of contract, the income gets reversed, because we adopt the behavioral life. We give the loan, let's say contractual life is 14-15 years, income get recognized for 6-7 years. It gets reversed between 6-7 years also. Got it. Can you just share the BT outs for the quarter, sir? That's all from my side. Payout is again, I think, steady-state basis. I think we are observing in last few quarters also and in- One point five eight percent. Uh. 0.5%. 0.5% of opening AUM per month basis. That's good. Karthik, for the quarter it is 1.58%. Sorry, 1.5% of opening AUM, right? Yeah. Yeah. Which is basically 6% annualized. Yes. Okay. Got it. That's all from my side, sir. Wish you and the team all the very best for the remaining quarters. Thank you. Bye. Thank you. We have the next question from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. Yes, sir. Thank you for taking my questions and congratulations on a good quarter. Sir, I just wanted to understand, I mean, how should we kind of think about our operating expenses? They continue to remain elevated. So if you could just give some more granular color on, I mean, what is leading to this kind of higher operating expenses. Understandably, you have suggested in the past that, I mean, you have on-boarded employees, you have given out increments. I'm sure for FY 2023, again, you would have effective increments from April or May onwards. Are there also components of investments in technology, infrastructure that you are doing which are more in terms of capital investments and one-off in nature and which can kind of might not repeat in the kind of coming quarters? That's the first question then kind of that I wanted to understand. The other thing is, I mean, understandably you are making a lot of investments and which is why perhaps the operating expenses are elevated. When can it kind of start leading to a higher momentum in disbursements? Lastly, I mean, on the asset quality side, I mean, there has been a kind of sequential deterioration, especially in the greater than 90 DPD bucket. While, I mean, if I kind of look at the other HFCs or if I look at the broader narrative today in the HFC space, I mean, everyone's kind of talking about an improvement in asset quality, and this despite the fact that we have grown our AUM by about 5% on a QOQ basis. I mean, is there a way to kind of explain this divergence that we have seen in this quarter? Thank you so much. On this OpEx side, we have already given the statement in last quarter also that we are a growing concern organization. We need to keep on investing on our for future distribution technology and other CapEx. During current 12-18 months time, we are taking a large technology investment infrastructure cost. In the past anyway, we have also, it's been invested in distribution. We clearly told that this year will be our OpEx will be in the same range, but going forward then 20-25 basis points, 30 basis points incremental reduction in OpEx we can assume for next three to five years. On the disbursement side, yes, we have invested in capacity, and that's where you can see we are almost INR 350-400 per month business line. Whatever capacity we have invested, that is giving the results. We always say we can, we will grow our AUM 20%-25%. We are in the right trajectory as per our plan. Third is NPA. Normally we always say that one day possibly will be less than 5%. We will attempt that and NPA around 1%. You will see we are in the trajectory which we have defined. 10 basis points here and there, it will always be there. Normally Q1s are always 10-15 basis points elevated than the Q4. On this side I think we are much more confident on asset quality at this point of time. This quarter from risk sector book around INR 16 crore shifted to Q3. That was anticipated so no issues on that side. Thank you, sir. Sir, if I could just squeeze in one last question here. Even kind of excluding the reversal that we see on the earlier assigned pool, if I just strictly look at the interest income on loans and kind of try to calculate your core lending mix, I mean, interest income that you make on loans. Even there, I mean, we are kind of seeing some kind of a sequential deterioration. Is there a way to explain that, given that last quarter it was about INR 310 crore, this time it is INR 320 crore increasing on an absolute basis. If I kind of calculate the yield, it is declining from 14% to about 13.6%. I'm assuming given that, I mean, borrowing costs have started going up, you would have taken some maybe interest rate increase, maybe in the month of May or June in the last quarter. Despite that, there has been a moderation in the lending rates. Abhijit- Is there a way to explain this? Abhijit, which slide are you referring? Because Q1 and Q4 interest, absolute income is on increasing trend. To the interest income on loans? Yeah. All right, sir. No problem. I think maybe I'll kind of take this online. Thank you so much for patiently answering my questions. Yes. Thank you. We have the next question from the line of Kunal Shah from ICICI. Please go ahead. Hi, Sushilji. Hi, Gangaramji. Firstly on this disbursement run rate, in first quarter itself we are almost INR 350-INR 370 crore. How should we see it? In fact we are investing a lot as well. Incrementally we have seen branch expansion in Rajasthan, Maharashtra and Gujarat, our core market. How should we overall look at the growth and are we confident that instead of 20%-25% now we would be more near to 25% and above, okay, rather than being in 20% over past several quarters there? Kunal, the way we always describe that on the sales side, we always keep around 40%-50% buffer capacity and other department side, 15%-20%. If competition doesn't come, we over perform our number. If in the difficult scenarios also we continue our consistent number, which we have demonstrated even in COVID one, COVID two. Even during that difficult time, we were able to give 21% CAGR growth. Now the COVID is past behind, I hope we will be able to deliver better number on that side. Okay. Overall in terms of the guidance, if you have to look at it, could it be more towards 25% odd now? We have already been more than 23% and I think first quarter itself was pretty good. Yeah, 25% we always say we will, we have capacity to deliver more. This quarter also, some of the subsidy component is there, otherwise it's the growth is 24%-25%. That will be there. We will, like you have already said, INR 370-380 crore rupees per month run rate. Even if you take INR 400 crore rupees per month run rate, disbursement numbers should be around that range. That will translate into I think 23%, 24% or maybe 25% growth for this year. Sure. Secondly, I'm not sure if you have touched upon this, but overall in terms of the rate hikes, earlier I think we have been slow in terms of passing it on, but now what would be the stance in terms of maybe the increase in the rates going forward? Looking at the repricing profile, okay, wherein there is some components which, I mean, when we look at it in terms of the fixed rate, that's also like almost INR 5,500 crore is like the fixed rate on the asset side. How should we look at it in terms of the margin? In fact the floating would only get repriced and fixed would really take time to get repriced. Yeah. Kunal Shah, if you will see our liability profile, slide number 20- Twenty-three. 23. Yeah. Yeah. Our floating and fixed rate borrowing versus floating and fixed rate lending both are almost in sync. We have 40% fixed rate borrowing, 40% fixed rate lending, and we have 60% floating rate lending and the fund is in tune with that. We have done 25 basis point increase in last quarter. From fifth of August we have also announced 50 basis point increase in our PLR rate. This is ALCO decision. Every quarter we have discussions and ALCO committee meetings. We see the next two to three quarters situation of borrowing rates and how it will impact and accordingly we take the decision. At this point of time it will stay. This quarter also we were able to maintain our spread and I hope so next two quarters with this hike we will be able to maintain our spread. On that fixed and floating rate side, I think we are perfectly matched on ALM. Sure. 50 basis points from August, and that will be having an effect on the floating 50. Yeah, 50 basis points. Yeah. This floating, how does it get reset? Reset means like fifth of August we will reset from 5th of August. It's implemented. This is a one month, three months kind of a period now to reset or? No, no. In this ALCO we have decided, and from 5th of August, which is our installment cycle, we will implement it. Okay. Right from fifth of August on the entire back book, this will get reset. Yeah. Yeah. Yeah. Okay. Overall, maybe our stance in terms of earlier we have been highlighting that at this time the rising interest rate will slightly go slow in terms of hiking the rates and try to pass on some benefit to the customers. I think overall borrowing costs would have also gone up to a similar extent. Broadly then we should be comfortable maintaining these spreads and the margins. Yeah. Yeah. Spreads are stable and the next two to three quarters we are seeing that it will remain stable in that range. Okay. Sure. Yeah. Thank you. Thank you. We have the next question from the line of Shreepal Doshi from Equirus. Please go ahead. Hi, sir. Good afternoon. Mr. Shreepal, we request you to kindly come a little closer to the mic. We are unable to hear you much. Now am I audible? This is much better. Come a little more closer to the mic. Yeah, sure. Sir, wanted to understand how are the approval rates or the login rates, login to approval rates in the newer states that we have entered versus the same in the vintage states that we are present in. From the applications that we receive, what percentage would actually get logged in and what percentage would actually be approved? Just wanted to understand this trend for our vintage states and for our newer states. Normally, at company level, number of cases wise we source 13,000-15,000 cases and 5,000 get approved and disbursed. On amount wise we are sourcing almost around INR 1,600 crore per month, and disbursement are INR 375 crore per month. Normally, in newer states when we go first 30 months we go slow because it takes time to understand the local nuances, cash flow patterns, feasibility things which impact on mortgage and other things. In new states first 30 months we go slow, might be a little bit less sanctioned percentage in those states in the early time because focus is that first 30 months there should not be any 30+. If you see last four and five states where we have entered in last four, five years, we were able to see this getting successful. Once we become comfortable understanding the local businesses, income patterns, feasibility, how judiciary works, how the other market works, and then we go for a normal business kind of stride in the new market. Maybe 5%-6% less than the mature market in the sanction rate or new disbursement rates. Got it. They're basically fair to say that 35% would be the approval rate in the mature states and probably okay. Yeah. Okay. Question was with respect to asset quality. I think somebody else also touched upon this question. If we look at the Stage three bucket, which is actually the more than 90 DPD bucket, there is increase. What explains that increase? If you will say, we have a restructured book of around INR 100 crore, which is in a Stage two. Out of that, around INR 16 crore has slipped to Stage three. That's where. But I think, we always say that this 1% of NPA absolute term, it's 82 basis point. With new guidelines, because we implemented last November itself, it is around 1.1%. In first quarter if you are marking them NPA because so in next three quarters you are able to resolve it within a year's time. That helps us maintaining the asset quality over a period of time. From restructure book, shifting to Stage three, that is the reason for this quarter's increase. We are comfortable with around 1% kind of NPA overall on the book side, and one day past due, less than 5%. Okay. Got it. The last question was with respect to the borrowing, on the liability side. The bank borrowing that we have, that would be linked to the MCLR. Would you if you could give some color on what percent, like what percentage would be linked to one-month, three-month sort of MCLR? If you see total bank borrowing is around, we mentioned around less than 40% we have from banking systems and 90% plus book is linked with a one-year MCLR. One year MCLR? Yes. Okay. Okay. Got it. Thank you, sir. Thank you so much, and good luck for the next quarter. Thank you. We have the next question from the line of Nishant Chaturvedi from Kotak Securities. Please go ahead. Hi. Just one question from my side, and this is on your incremental borrowings cost. I believe last quarter it was around 6.04%, and this quarter it has gone down to 5.65%. I wanted to check first of all if this is accurate, and what would be the reason for the same. I think both numbers are accurate. Obviously, in both the quarters we have borrowed good money from National Housing Bank also, and there are certain deals we negotiated earlier period also which got disbursed in this quarter. That's why we see a very, I think, good price around INR 1,000 crore borrowed new at a very good rate during this year also. There is no harm to assume that interest rate is in a rising trend. Banks have increased their MCLR also, capital market rates also increasing. Going forward, our cost of borrowing will also have an impact of rising interest rate scenario. Right. No, just to put the same question differently, if you now go to a bank or when we now get a quote from a bank, you know, for loans versus, you know, what you got around three months back, how much is the difference in rate of interest? The difference is the same. Whatever one year MCLR got increased. Earlier, we also borrowed at one year MCLR. Right now, again, we are borrowing at a one year MCLR. Both the time is the same date. Actually, no difference on the terms, right? In terms of fees or MCLR- No. No. No. No. Sure. Incrementally, what is the plan this year? You'll be probably doing more of NCDs or, you know, borrowing more to, you know, link to repo or how does the borrowing plan for this year differ than compared to last year? As you know, the market is very dynamic in the last one quarter, and we are observing that the market is again dynamic because interest rates are hiked by the Fed and recently again hiked by the RBI. I think there is again a meeting from the RBI on the interest rates. It is difficult to comment on that, where we will focus. It will depend upon how the market reacts. Obviously we have a very huge strength with the banks relationship. We generally borrow very low rates, very large tenders we borrow. All large banks already we got a few sanctions. We, with small tranches, are taking from them and locking our rate for the coming few quarters. Majorly it will depend upon the banks side. We don't see any major change to our mix we are seeing today. Just one more question. When interest rates go up, have you seen in the past typical borrower behavior when we come in and, you know, probably prepay a loan? Nishant, right now there are no signs. In the past also, that was not the sign. We are anyway closely monitor the situation. If anything changes on that side, we will come back to you. At this point of time, there is no sign on that side. Perfect. Thank you very much, and all the best. Thank you. We have the next question from the line of Nidhesh Jain from Investec. Please go ahead. Thanks for the opportunity. Sir, on the fixed rate loans, are they end-to-end fixed rate? For the full tenure they are fixed on the asset side? Nidhesh, they are three years fixed. Though our borrowings are full tenure fixed loans, but on the lending side, we have a clause where we can reset every three years. Sure. Sir, secondly, on the MSME book, which we are building, we are seeing good traction there. Can you share some more details in terms of ticket size? What is the collateral behind these loans? What are the yields on these loans? It's the same. Business owners require the loan for the business purpose. Average ticket size is somewhere around INR 8-10 lakh. Tenure is normally up to seven years, and yields are up to 15%. Secured by, backed by which collateral, sir? Secured by SORP, self-occupied residential property. Okay. It's most like a LAP sort of loan. In the LAP it can be used for personal use also. The tenure is 10-15 years. Here it's the only business use and tenure is almost up to seven years. Understood. Thirdly, sir, do we source any loans from DSAs, or it's completely in-sourcing from our own employees which we do? Of the total business, 98.9% business is through direct team and 1.1% business is through LP connector, DSAs, et cetera. Okay. Thank you. Lastly, sir, can you share the incremental yields on home loan and LAP book? Home loan and non-home loan book. It remains normally the same in the past that we call past Ind AS. Just give me one minute. 12.67%. For this quarter. 12.67%. 12.67% overall. For this quarter. Home loan is around 11.6%, and non-home loan is 14%. Sure, thank you, sir. That's it from my side. Thank you. We have the next question from the line of Saket Sheth from B&K. Please go ahead. Yeah, hi sir. Just wanted to ask that in terms of asset resolution. Apart from SARFAESI, which are the other tools that we use or have we done any sale to ARC in recent quarters? In the collection, there are five stages. One is the X bucket, which is first current month bouncing. There we use call center and mostly digital mode of payment collection from the customer. It comes the bucket one to 30+ and one to 30, we do use call center plus field collection team, and mostly mode of payment is digital. From 30 to 90 bucket, we use field collection team along with we use section 138 proceedings. After 90 DPD case, it's a field team and section 13(3C) proceedings. These are the normal steps of our collections. Have we done any sales to ARC maybe apart from this? Sorry. ARC models. No. No. In last 2015 we did. Sir, the second question was on, say, employee per branch and maybe AUM per branch and AUM per employee metric. Now, we have seen that in the last four or five years, AUM per employee and AUM per branch has almost remained stagnant. AUM per employee is around INR 2.5 crore and AUM per branch has been between INR 30 crore-INR 35 crore. That metric has not shown much change in last three or four years. Where do we see it moving going ahead? Do we see the operating efficiency coming in or are these metrics that are looked upon by you? Normally it will see the basic nature of our business. 100% sourcing is through in-house team. Ticket size is INR 8-10 lakh. We are working in tier two to five, basically. Every year we are opening 30-40 new branches, and then branches are also classified into A-E category, depending on the town potential. Since all the metrics remain same, and I hope for next two to three years, this trajectory will remain in that side because we are increasingly increase our distribution network of branches also. Sir, the initial one to two years is okay when we are adding new branches, we have certain set of branches. But over the period of time, maybe five to seven years, that becomes a part of the business as routine wherein the back book or the back branches should at least start displaying higher efficiency, right? You have rightly said, but like our 85% of the branches are C and D category, which are tier three, tier four, tier five. Normally, most of our branches become P&L and ROA positive in 12 months time. In those town we are doing consistent business. Say if a town is doing INR 1 crore business within first 12 months, it continues to doing INR 1 crore, 1.25, but it will not reach INR 2 crore, INR 3 crore and that's not the expectation from our side also. We see the metrics like whether branches are ROA positive in first 12 months or not, whether the branches OpEx are met by the fee income from those branches or not. Those are the critical things we are seeing when the branch operating or unit economics are coming into the picture. Okay. The one percent you said you source it through DSA. Is it incrementally also or it's a similar split between in-house and DSA? No, that includes LP also, Aavas Mitra, DSA, maybe some bit of it. We will mostly remain in-house sourcing model next two to five years. Okay. Lastly, we had a CBO change recently, right? Now Mr. Siddharth Srivastava has come in. Any reasons why Mr. Ram left and any light you can throw on the new CBO? Yeah. As you know, we are an organization which has a very robust employee organization. We have layer one, layer two, layer three, layer four, and we have a very strong management team. Ram has helped us in last seven-year journey, and we have thanked for his contribution. Organization remains the same. Now Siddharth has joined. Siddharth has 22 years of experience out of his 20 years around in ICICI Bank. He has seen most of the other products. Below Siddharth we have almost 40 people leadership team in place which is more or less same. That will be there in all the organizations. Sure. Those were all my questions. Thanks a lot, sir. Thank you. We have the next question from the line of Nitin Kochhar from Antara Capital. Please go ahead. Hello. Sir, thank you so much for taking my call. I have three questions. Currently we are doing ROA of 40%. What are the factors that would lead to ROA expansion and what is the long- to medium-term ROA guidance? Sir, and the second one is, we are doing NIMs of around 8%. Are the NIMs sustainable over longer term, given that opening up of Aavas would lead to higher competitiveness? And can you give us a breakup of other mortgage loan, like how much is LAP and how much is scheme? I will go by the third question. In incremental non-housing loan book, we have almost 40% MSME and 60% non-MSME like LAP and other loans. Coming back to NIMs, normally anything we work on is spread, and we try to maintain 5% spread. When we started our journey, we said that, though in last twelve years we are able to maintain 5% spread, at the scale or size, there might be chance that we might not be able to maintain 5% spread. Quarter-on-quarter, right now, we are able to maintain because of the support, rating upgrade continuously and the segment which we focus. We always say that even if there will be contraction in spread, we will be able to sustain our ROA more than 2.5%, or if we are leveraged less, we can be more on that side. We can bring those efficiencies in our OpEx cycle. If you see pre-COVID, we were able to reduce our OpEx 20-30 basis points year-on-year. During COVID, it remained stable and increased. Now we are in investment phase in technology, etc. For first 12-18 months, this will look at the same level, but again, next three to five years, we will be in a position to reduce our OpEx by 20-30 basis points year-on-year. That's the trajectory for the spread and ROA. ROA, we see this is a ROA and leverage output. If ROA remains around 2.5%-3% and leverage increase over a period of time, I think, ROA will improve in a sustainable growth manner in next three to five years. Okay. Understood. Are we looking to venture into some other fee-based income products to improve our ROA? No, Nitin. Right now we don't have any aspirations towards that side. We think the market in which we are, there is huge potential for growth in next 10 to 15 years, 20%-25% kind of growth. With that growth rate, anyway, every three and a half years, you are doubling your book. At this point of time, we are not seeing any fee-based product for in the business. Understood. Thank you so much, sir. That was helpful. Thank you. We have the next question. Please go ahead. Mr. Piranlata Jeejeebhoy, can you hear us? Yeah. Hello. Yes. Please go ahead with your question. Yeah. Hi. Sorry. Yes. Thanks for taking my question. Just a couple of clarification. In June, we hiked our yields by 50 basis points and now another 50 basis points in August. Is that correct? No. In June we hiked the PLR by 25 basis point, and from 5th of August, another 50 basis point hike. Understood. The NHB borrowings of INR 1,000 crore, this is over like, over the last one year we've borrowed and these are at floating rates or fixed rates? No. NHB borrowing first is not INR 1,000 crore this quarter or over a period of a year. NHB borrowing is comprising of different kind of instruments. Some of them are fixed, some of them are floating, some of them are at lower interest rates, some of them are de-linked. There's a combination of borrowing depending on your lending pattern and organization's rating and other standards. Nitin, am I right? Mm-hmm. Yeah. Just to confirm, the yield of 12.67% and cost of funds of 6.66%, that is as of July 1st, right? That is how you all report. Yes. Yes. It's a contractual date on the, you can take 1st of July. Yeah. Okay. Got it. That's all from my end. Thank you. Yeah. Thank you. We have the next question from the line of Bhavya Sanghavi from Fortress Group. Please go ahead. Hi, sir. I had two questions. I wanted your view on the competition. We've seen large organizations with you know almost triple A or double A kind of rating profiles entering this business line. Can you you know give us your sense on the competition? Second question was on the credit rating upgrade. Congratulations on that. Can you tell us what is the incremental benefit that you would get because of this rating upgrade? Thank you. Bhavya, on the competition landscape, the areas and geographies where we work, I think housing loan penetration vis-a-vis number of families living there are almost average less than 5%. Some market is 2%-3%, some market is 9%-10%. That market has huge potential. Even if large players will come there, everybody can sustainably grow for next 10 years with 20%-25% kind of growth. We don't see a large threat on that side. Those market requires a specific kind of knowledge for which we have created our niche over a period of last 12 years. With the use of technology and the kind of niche we have created, we are hopeful that we will be able to maintain our stamp on in those markets. With the use of technology, we are improving customer experience. That will also further help us, strengthening our position in those markets vis-a-vis competition. Got it, sir. You know, sometimes the cost differential that the larger organizations would have. Wouldn't that play a part in your sense? Now with the larger player and our cost of borrowing, I think there is not much of difference, more than 25-50 basis point. We are more competitive, in those geographies, I think. All right, sir. Thank you. Thanks for the insights. Thank you. That was the last question. I now hand it over to the management for closing comments. Yeah. Thank you all for attending the call. For any further information, we request you to get in touch with Himanshu, our Investor Relations team, or SGA, our investor relations advisor. They would be happy to help you. Thank you for coming on the call, and giving us opportunity to showcase the company and clarifying the doubts or the questions with our audiences. Thank you very much. Thank you. On behalf of Aavas Financiers Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.