Ladies and gentlemen, good day, and welcome to the Arman Financial Services Limited Q4 FY23 earnings conference call, hosted by Monarch Networth Capital 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. Aalok Shah from Monarch Networth Capital Limited. Thank you. Over to you, sir. Thanks, Suzanne. Good afternoon to all. I would like to thank the management of Arman Financial Services for giving us an opportunity to host them. We have the entire senior management team of Arman Financial Services, represented by Mr. Jayendra Patel, Vice Chairman and Managing Director, Mr. Aalok Patel, Managing Director, and Mr. Vivek Modi, Group Chief Financial Officer. Without much ado, I would now like to hand over the call to Mr. Jayendra Patel for his opening remarks, post which we can open the floor for Q&A. Thank you. Over to you, sir. Thank you, Aalok. On behalf of Arman Financial Services, I extend a warm welcome to all our Q4 and FY 2023 earning conference call. With me, I have Aalok Patel, Joint Managing Director, Vivek Modi, Group CFO, and representative from SGA Investor Relations team. I hope everyone has an opportunity to go through the results, press release, and the presentations for the quarter and full year ended 31st March 2023, uploaded on the stock exchanges and on the company website. You must have had a chance to go through it. The tightening of the financial conditions on account of aggressive monetary policies, the slowdown in global economy, the turmoil within the global banking system, and the rising inflation have dampened the global macroeconomics. Despite such challenges and uncertainties, the Indian economy has shown remarkable resilience and signs of growth. As Reserve Bank of India taking proactive steps to tame inflation, monetary, and credit conditions, a rebounding credit environment has been witnessed in the economy. This bounce back is accompanied with a notable upswing in momentum in the rural economy, which has led to an emergence of a robust credit demand. The microfinance sector has encountered several challenges in the past. A significant inflection point occurred with the implementation of revised guidelines by Reserve Bank of India for NBFC-MFIs. These new guidelines have played a pivotal role in restoring the growth trajectory, the impact of these guidelines have installed a renewal sense of confidence and optimism in the microeconomic lenders as well as borrowers. Overall, the revised RBI guidelines have ushered in a new era of growth and sustainability for microfinance companies. They have addressed the sector's challenges, provided a conducive regulatory environment and have paved the way of continued expansion. As a result, microfinance companies are better equipped to fulfill their mission of extending financial services to the underserved and marginalized sections of the society, contributing to last-mile financial inclusion. The improved environment of credit has helped the economy record a robust growth in assets under management. AUM for the year ended 31st March 2023, stood at INR 1,943 crore, recording a robust growth of 58% year-on-year. Of this, rupees 1,943 crore AUM, around 84% is from microfinance business, 13% is from MSME business, and 3% is from two-wheeler business. On a new technology and systems are now in place, and this has helped the company better its efficiencies, lower the operational risk, and enhance customer experiences. With this resurgent demand and greater emphasis on sourcing, underwriting, and technology, the company has demonstrated robust growth across all its businesses. The Q4 FY23, we recorded the highest ever quarterly disbursement of INR 631 crore, with a growth of 87% year-on-year, and 32.1% sequentially for FY23. The disbursement grew by 73% to INR 1,767 crore from INR 1,023 crore. The growth was also supported by our newer states of Bihar and Haryana. Much of our delight, Bihar is doing amazingly well. We are banking on it to continue doing well in the future, too. We are exploring opportunities to expand its operations to new geographies, and tap into new customer segments, and diversify the revenue streams. During the year, we opened 44 new branches, taking our total branch count to 336. With this, we have a presence in eight states and 120 districts. We remain focused on contiguous expansion in existing states, with a potential to take our footprint to another two or three states in the medium term. At Arman, it is our constant endeavor to serve the low-income, underserved people of the nation, who have little to no access to the formal banking or financial services system. In accordance with this, we have started a pilot of individual business loans, which accounts for 2.1% of the total AUM. As rural customers graduate from being long-time MFI customers, there is a strong demand from some of more advanced customers to break away from the group-based JLG model and move towards individual loans. Our micro-enterprise and IBL segments are well-placed to take advantage of this market demand in the long run, and offers a long-term potential to scale up our business in other rural loan products. While we are taking a cautious and calibrated approach so that we understand the customers better, the credit cost so far appears to be similar to microfinance products, despite not having group guarantees. There is a higher operating cost involved with individual loans, but the higher margins more than offsets it. In the long run, the goal is to reduce operating costs by transitioning to a tech-driven organization. We have made significant progress in our digital improvisation efforts, focusing on enhancing our operations and providing an exceptional customer experience. Key initiatives include digitized customer onboarding at their doorstep, automated underwriting with robust rule engine, enhanced online security measures to protect customer data and safeguard against cyber threats, advanced data analytics, and process automations like facial recognition, OCR verifications, and automatic data entry through barcode and QR code scanning. We have implemented a complete paperless journey from onboarding to dispersal and collection. These efforts demonstrate our commitment to technological advancement and innovate solutions for our customers. We appreciate the dedication of our team, and will continue to embrace digital transformation and strive for excellence. Coming to the consolidated financial performance. The gross total income for FY 2023 stood at INR 424 crore, registering a growth of 80% year-on-year, on the back of improvement in yields across all segments. During the year, net total income registered a growth of 73% to INR 251 crore, as compared to INR 146 crore in FY 2022, representing a cheaper availability of funds. Our NIM, our net interest margins for FY 2023 stood at 15.9%, as compared to 14.2% in FY 2022. In this financial year, the company has recorded a highest ever profit after tax of INR 94 crore, with a growth of 196% year-on-year. This was mainly on account of improved interest income, optimization of operational costs, lower provisioning requirements, and improved asset quality. Our continuous emphasis on collections and underwriting process helped us improve our asset quality. asset quality as of 31st March 2023, our GNPA stood at 2.7%, representing a year-over-year improvement of 170 basis points from 4.4%, and a sequential improvement of 60 basis points from 3.4%. For FY23, the company has conservative provisioning policy, with a provision for the year standing at INR 45 crore. This takes the cumulative provisions to INR 67 crore, which is 3.4% of the AUM. Our collection efficiency improved to 98.3% for FY23, as compared to 91% in FY22. Collection efficiency for the month of April 2023, the various segments stood at: microfinance segment, we have 98.4% collection efficiency, for MSME, we have 98.5%, and at two-wheeler segment, we have 96.9%. Coming to the borrowing profile. As on 31st March 2023, company has total borrowing worth INR 1,937 crore. This includes the debt component split of OCRPS and CCDs as per Ind AS of INR 49 crore. Of the total borrowing, 35.3% is through banks, 31.3% is through NBFCs, 14.7% is through debt and NCDs, 16.6% is through direct assignment of the off-balance sheet liabilities, and the rest is borrowing through DFIs like NABARD, MUDRA, and SIDBI. As on 31st March 2023, the company has healthy liquidity position, with INR 185 crore in cash, bank balance, liquidity investment, and undrawn CC limits. Additionally, company has INR 218 crore undrawn sanctions from existing lenders. The company is well capitalized with capital adequacy ratio for the stand-alone business at 32.61%, and Namra is 25.62%. Lastly, in the fiscal year 2023, our company accomplished several noteworthy milestones that have propelled our growth trajectory. Latest one being on, in January 2023, when Namra Finance Limited was assigned the MFI 1 grading by CARE Ratings Limited. Let me also tell you, MFI 1, there is nothing above MFI 1, we are proud of that. Another such achievement was the successful fundraising of INR 115 crore via allotment of CCDs and OCRPS on a preferential basis. The infusion of this fund has played a pivotal role in facilitating our target growth objectives. We believe that favorable regulatory environment, coupled with sustained growth momentum witnessed in recent quarters, will continue to support our organization's pursuit of achieving the target assets under management. The supportive measures taken by the RBI have bolstered our confidence and reinforced our belief in the long-term growth potential of the microfinance industry. With this, I will request the operator to open the floor for any questions and answer session, and I thank you all for giving me your time. Thank you. Thank you very much. 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 required to unmute their handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Reminder to the participants, anyone who wishes to ask a question may press star and one at this time. The first question is from the line of Kunal Kothari from Fortune Securities. Please go ahead. Hello, sir. Thank you for the opportunity, and congratulations on the good set of numbers. I had a couple of questions relating to our branches. We have opened around 45 branches this year. Are we seeing that same kind of trend next year? Another relating to the branches is that how much time does it take for us to break even and a branch? Can you give us some branch-specific metrics on that same matter? Thank you. As far as our plan this year, we'll probably open somewhere in between 50-70 branches, for microfinance and MSME, for which we already have already on the way to open about 32 of them. The balance of which will probably get opened in the next quarter. As far as break even goes, typically, we reach break even when the number of customers gets to about 600-800 customers, in any particular branch. That depends, it ranges from anywhere between four months to eight months to get there. On average, you can say, maybe, usually break even between six and eight months. ... I had another question, that, what kind of demand are we seeing from the two-wheeler and the MSME segment in general? Are there any specific regions that we are seeing a greater demand from? Thank you. Yeah. I think, as far as MSME goes, I think there is a consistent demand. It's just a matter of... It's a different product than microfinance, so it requires a lot of work to find the right kind of customer, to assess him in the correct way, to figure out his cash flows in the correct way, and to disperse the loan. Typically speaking, our rejection rates are average around 70% in the MSME segment. Demand has been quite strong, at least until March to April. In the last couple of months, it has gone down a little bit, as far as the demand goes, otherwise last year it was quite strong. In the two-wheeler, the demand unfortunately has not picked up to pre-COVID levels or even, you know, 2019 levels. I think the latest statistics that I have, you know, overall, if you compare 2018 or 2019 two-wheeler sales versus what it was last year, it has gone down significantly, almost 40% or so, and it has not recovered. Overall, two-wheeler demand is not as strong, unfortunately, in the market, although it has been improving slowly, quarter-over-quarter. What was your other question? What was the other part of your question? Are we seeing any specific demand from any region for the MSME and two-wheelers, the greater demand? See, so for two-wheeler, we are operational only in Gujarat, so I could not comment on that. For the MSME side, we do see, I mean, you know, if I had to rank it, I would say Gujarat is probably having a higher demand than Maharashtra or MP. It's not a huge difference, you know. Overall, there is a strong demand in multiple states in the MSME. In MSME also, we started operations into Telangana. We have opened up our first branch, I think, just a couple of weeks back, and that was for numerous strategic reasons, which I can get to later on, if you like. Okay, sir. Sure, sir. Thank you for your time. Thanks. Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Srinath V from Bellwether Capital. Please go ahead. Hi, Aalok. Congratulations on the fantastic set of numbers. you know, first, wanted to understand this gain on assignment of financial assets of INR 12 crore. How should we look at this particular line item from a... Is it to be seen as a slightly more, you know, one-time in nature, or is this a more recurring line item? want to find out that in, like, calculation of yield, that's 36.9% in our MFI, would this INR 12 crore kind of be factored into that calculation? What would be the yields at which we are giving incremental disbursements in microfinance? Broadly, if you could help me out on all of this. I mean, I think the accounting side of the DA, I think Vivek can explain a little better than I can. But that being said, as for Ind AS if you're doing a direct assignment transaction, which means it's not a PTC type of transaction, or it does not have DA transaction, which has no kind of recourse. By accounting standards, we have to upfront recognize the profits, because essentially, you have sold the assets, right? You have maintained the servicing rights, but you have sold the assets completely without any recourse. Okay. It's like selling any other assets. You have to recognize the profit of it upfront because you have sold it. Now, whether that act is a challenge in terms of, you know, looking at this as a one-time thing, or whether it will create a future impact in the PNL in terms of apples to apples comparison, yes and no. The thing is, as you grow larger, the DA transactions happen more in a consistent basis. You might be doing more or less every quarter, but you'll be doing something or another every quarter, is what our expectation is. By that way, this is something that you should be seeing, more regular of. Also, you know, more DA transactions will happen in the fourth quarter versus the first quarter. That's just the nature of the business. Overall, it's a very, lucrative thing for us, because not only do we get, added margins for it, but also we offload some of the assets from the balance sheet, it allows us to, you know, improve our capital adequacy ratio. I don't know, Vivek, if you want to add anything? Srinath, just to kind of connect the dots, in Q3, we saw about INR 100 crores of DA transactions. In quarter four, we had about, we almost doubled up. There is a good possibility, and overall, the market is kind of seeing a lot of DA transactions for the crop sector, so hopefully, things should be fine. Yes, this is, this can have the quarter-over-quarter oppression. ... Good, sir. Yeah, I mean, to your second question that you had regarding yield, the upfront profits have been taken into account for the quarter four yield calculations. In terms of our general yield, or the lending rates to MFI borrowers, they are anywhere between 24% to 27% is our usual product price. Got it. On these yields, how will the yields kind of play out? Now with the, you know, deregulated pricing, and of course, there's a back book which should still be in the previous regime. You know, where do you see yields kind of moving, you know? Let's assume that RBI is a status quo for the next 12 months, and so on. How do you see yields trending? Do you see yields at book level trending towards 27%-28% over the next, say, six to eight months or one year? Broadly, to understand the mix change between the old book and the new book. No, I think, I mean, largely speaking, there is not a lot of old book because we have grown, and these are very short-term kind of loans. We increased our rates in April of 2022, and from that, the book size has also increased. I would say that overall, weighted will be probably less than 30%. Yeah, 70-30 is the new to old, kind of, new-to-old ratio. Okay. It will not have a very, very large impact. While you might see a marginal increase in the yields, it will not be very large unless we decide to increase the rates to the customers, which we have no plans to do so now, as of this moment. Got it. Got it. Quick one. In this, you know INR 1,943 crores of assets under management, what would be under the direct assignment? What part of the AUM would be... That's not part of this number itself, since we sold it off our book? How does it work? It's part of the AUM. It is part of this. Part of the AUM, the amount would be INR 311 crores. That's the book, which is. In this, in Q1, the INR 311 crore will not accrue any interest income in our book, right? Fair understanding? Yeah, fair understanding. Okay, perfect. One last question, Aalok. Just wanted to find out on our new product innovation, you know, where are we? You know, couple of products that I vaguely remember would be, one would be on durable financing, for the slightly, you know, slightly more premium customers within your, you know, deep rural circles. The other product would be, rural to wheeler, and the third one would be, you know, secured, I'm using "secured" more loosely, meaning I'm not saying hypothetically, but you're taking a property document and probably looking at an INR 3-5 lakh kind of ticket size product. If I missed any product, if you could broadly, you know, help us understand from the product side, where how will things look, you know, about, 12-18 or two years later? Yeah. I think, we have made some strong headway into the IBL product. That is the Individual Business Loan product, which is basically an individual microfinance loan, that is striving to be cashless. Which means that we are dispersing obviously, all loans we disperse cashless, but the collection also is cashless. We are trying to target the more, I don't want to say affluent, but you know, people who have graduated, from microfinance and are somewhere in between mainstream and micro, so to speak. So that is about, I think, 2% to 3% of the portfolio now, and that is doing quite okay. Realistically speaking, that is the future really. I mean, if you look down the next two to five years, I think overall microfinance will start... I mean, my prediction, our prediction is that microfinance will continue to move away from the group-based lending and kind of evolve into a more individual lending. that is basically making sure that we are ready for that. in terms of consumer durables and other kind of products, I mean, we were doing LAP loans and other kinds of products, insurance products and stuff. not a lot of headway in the consumer durable side. because initially speaking, you know, when the rate, the rates were restricted by RBI and the margins were capped, it made a lot of sense to do these kinds of products. Today, in a situation where there is, you know, it's a matter of supply and demand and competition that sets the rates, you know, the consumer durables are kind of a little hard to sell to the customers. In terms of the LAP loan, we have something on paper. We are working on the pilot. We still have to make headway into it. It's kind of a difficult segment to break into, especially if you are trying to do in the rural areas, which we kind of learned the hard way, that the documentation is quite shabby and, you know, we have not, unfortunately, not been very successful to break into that in the rural areas. From what I feel to understand when talking to these guys is nobody actually, you know, ever triggers a collateral, right? It almost seems like a threat that I have your paper with me. You know, given that as a broader context, don't you feel that extremely robust legal system may not be the most, you know, important part of this particular product? Nobody seems to be, you know, a, you know, repossessing any of these collaterals in the industry. No, you are correct. You are correct. I guess this is, that is a debate of a different forum. You know, our conservative nature is kind of sometimes gets the best of us. We'll, but I think that's probably a debate at another time, that how, you know, how eager do you rather would you want to be about the documentation? Where do you draw the line, right? I mean, that is the question, and I think that is an excellent question. Something we'll have to ponder, more seriously down the road. Thank you, Mr. Srinath V. We request that you return to the question queue for follow-up questions. Participants, to ask a question, you may press star and one. The next question is from the line of Savi Jain from 2Point2 Capital Advisors. Please go ahead. Hi, Aalok. Hi. -on the numbers. you mentioned you are not seeing a lot of traction in the individual business loans, the, you know, secured loans. Is that what you mentioned? No, the individual business loan is different. That is non-secured. Okay. traction there. Okay. I think what Srinath was asking was the kind of pilot that we are trying to start on the Micro-LAP side. Okay. That's what I was saying, that it's not a question of traction, it's a question of the paperwork that we are getting from the customers, especially in the rural areas. Again, I don't want to spend too much time on discussing that on this forum. You know, I think a lot of our competitors also are facing issues in the rural. There has been headway that people have made in the urban, semi-urban kind of places. In the rural, the documentation for the properties remain kind of shabby, and that is, again, where do you draw the line, you know? If you are just going to accept the, the documents at face value, then you might as well do an unsecured loan. On the flip side of the coin, it is just a scare tactic, right? That you are never going to actually try and repossess, which of course, even in the best of documentation, that is not the intention, is to, you know, repossess the collateral or repossess the property. And that is the challenges, but I think this is quite a long discussion, and I don't think this is the right forum to discuss it. Yeah. Maybe in the south, southern states, where there are a lot of skill players in this space, is it, that the properties there have much better paperwork as compared to, say, some of, you know, state like Gujarat? That could be another reason why. Possibly. Possibly. Mm. As far as my knowledge is concerned, in Gujarat specifically, there are no players in a large way that are operating in the rural segment, in the, you know, INR 3 lakh-INR 5 lakh kind of ticket sizes in the LAP side. Mm-hmm. People are facing similar challenges to us. It's just a matter of cracking those challenges. In terms of asset quality, what are you seeing? You know, I have read somewhere that Maharashtra is facing a lot of issue. You know, if I look at your credit cost also, it has been, you know, higher than what it has been through COVID. What is the credit cost that you are looking at from a business as usual, you know, point of view next year, FY24? Is it going to be around 3%? What is the early, you know, signs, any stress that you are seeing in any geography? Your first question was about Maharashtra. Mm. Maharashtra has been badly impacted during COVID, and throughout COVID, it was probably one of the worst impacted states that we operate in. You know, in a pan-India level also, it was one of the worst states. If not the top one, then at least in the top three. That has been gradually improving. I mean, there was a lot of room to improve. Even in today's scenario, I think if you look at overall stress levels, they'll be highest in Maharashtra, but we are still a lot better than we were a year ago or even two years before that. It has been improving consistently. If you do a comparison state to state level, obviously, Maharashtra is probably one of. Still has the lowest in terms of asset quality goes. In terms of credit cost, see, I think I've been very open in sharing in all of these one calls and, you know, other kinds of discussions, that, you know, we are not going to see the pre-COVID level loan losses. That is, that industry is over. That is not going to come back. If you are going to compare, even on the best years, compare loan losses that we had, you know, in 2017 or 2018 versus in 2023 or 2024, it's not going to be comparable. The days of 1% loan losses are behind us, I think we'll just have to accept that. That is fine. That is not. I mean, you know, I think as an industry, we can absorb higher losses than that, especially in today's scenario with the RBI, new circulars and everything coming out. It will be difficult for me to say what to expect really, but... you know, 2.5% ballpark figure would be something that you would have to be prepared for in the long run. Do you have any business plan drawn up for FY 24 in terms of AUM target? What are you looking at? Typically, we don't give that. You know, I think I'll say what we always say is that our CAGR has been about 35%-40% since the last 10, 12 years. That is the growth that we try to achieve on a year-on-year basis. Somewhere in that neighborhood, 35%, 40%. Okay. Thank you. Does that answer your question? Yeah, yeah. Thank you. Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Riya Soni, from Soni Investments. Please go ahead. Hi, sir. Thank you for the opportunity. I would like to ask two questions. Firstly, Gujarat still accounts for 30% of the total AUM. Do we have any plans to de-risk this portfolio going ahead? I'm sorry, what is the question? What is 30%? Gujarat. Gujarat. Gujarat still accounts for 30% of the total AUM. Do we have any plans to de-risk the portfolio? No, I mean, it has significantly been de-risked. I think if you look at the Gujarat portfolio in, let's say, FY17 or in 2017, it was almost 80% of the book, you know, right after demonetization. We had already looked to de-risk it, and we are continuing it to de-risk it. Overall, concentration risk on a state-to-state level has been falling consistently. That is part of our plan overall. I think if you look at branch openings also, Gujarat has seen Much lesser in terms of branch openings than we are doing in the other states. It would be difficult for me to give you a percentage of what the targets are, but overall, geographical-based de-risking is a consistent endeavor for us. Okay. Secondly, the, you mentioned that the states of Bihar and Haryana are doing well. What will be the comfortable AUM levels for the, for the states, and how much will they contribute going forward? What is the AUM of Bihar right now? Is that what you are asking? Yeah. Going ahead, what would be the comfortable AUM level that we target? If I get your question right, if we look at the states that we operate in, I think we look at some of the states as the larger states, which could be Gujarat, and MP or UP, and Bihar probably comes into that line. Over a period of time, Bihar's AUM will consistently keep on increasing. Right now, Bihar probably is bundled up in the 9% say, other, which is like, right now, less than 5% of the total AUM. Overall, in terms of the branches that we've already started in, Bihar is about 27 branches. We're expecting it to be to keep on growing steadily. Kind of giving a specific figure as to what percentage it would eventually have is a very dynamic situation, because all other states also are important. Yeah, all other states are also increasing to that extent. You know, I think Bihar right now will be somewhere in the neighborhood of 7%, of the 6%-7% of the portfolio. This year, maybe we can expect it to reach somewhere around in the 12%-13% neighborhood, roughly speaking. What about Haryana? Haryana is a lot slower. We don't have that many branches there. Haryana will be only about 3 odd%, at this moment. We are only, it's only about, 15 branches that we have right now. The scope of opening further branches in Haryana is limited, being a slightly smaller state and also being slightly more wealthier state, where the target market is lot smaller. It's picking up fairly well, given the fact that we have, 15 branches, but I don't think that it's going to be a very meaningful, part of the portfolio. Definitely not 10% plus in the coming, few years. Few quarters. Few quarters Few quarters like this. Okay, sir. Thank you. That answers my question. Thank you. Participants, to ask a question, you may press star and one. The next question is from the line of Karan Mehra, from Mehta Investments. Please go ahead. Yeah, hi. Thank you for the opportunity. Just a couple of questions from my end. First is, like, we have been investing in technology recently. I wanted to understand that, what was the quantum for the same, and what kind of cost efficiencies will kick in, and, where do we see our Opex to AUM come down? Mostly in terms of technology, most of our technology, we are working on a SaaS model, software as a service. There is not a lot of upfront investment. Might be INR 50 lakhs-INR 60 lakhs in total. Largely we pay on a either a per customer level or a per disbursement level or on a portfolio level. That amounts to, I don't know, somewhere in the neighborhood of INR 2.5 crores-INR 3 crores a year, is what we are paying for our LOS/LMS system. Probably more this year. It's kind of linked to the overall portfolio and the number of branches and the users. Yeah. In the larger scheme of things, yes, it kind of, gives the optimization. It kind of starts reaching the optimization as we kind of keep on growing the portfolio. Right. Okay. So do we see more room to increase our ticket prices, or will our growth come from the client addition? We have no plans currently to increase the ticket sizes. If it does happen, it might be in the third or fourth quarter. Largely for most of this year, the plan is to add more customers and add more branches. There might be some marginal increases in ticket size, but nothing too crazy, you know, maybe 7%-10% here or there, but nothing that meaningful. understood. Thank you. That answers my question. Thanks, and all the very well. Thank you. Thank you. The next question is from the line of Himanshu Dhingra, an individual investor. Please go ahead. Yes, sir. We just wanted to know that, in microfinancing, the people who are borrowing this money? Sorry to interrupt you, Mr. Dhingra. The audio is unclear from your line. Please use the handset phone. Okay. Yeah, can you hear me? Yes, sir, go ahead. Yeah. In the microfinancing, when you are giving these small ticket size loans, what are the people using it for? What is the money used for, the capital? Well, I mean, in the microfinance space, the overall goal is to increase household income. You are giving the loan for some kind of income-generating activity. Now, what that income-generating activity is, there's a vast variety. For example, the largest use of our fund goes towards cattle. They get a loan, buy a cattle from it, generate milk, sell the milk, generate cash flows, and in two years their loan is done and their cattle is theirs. That is the largest one. Otherwise, it's a very diverse set, including stuff like, you know, there are the kirana stores or street side vendors or, you know, small ticket type garment makers or, you know... I mean, there's a very variety of different, there'll be hundreds, if not thousands, of different kinds of activities that the rural people are engaged in. Agriculture product, food processing and then smaller cottage industries for that. Largely about, 60%-70% of the portfolio is covered through the animal husbandry kind of. Yeah, for, I would say 40% is covered to. To that. In the allied agriculture. Allied agriculture. 60% will be others. Farming that's going to increase in UP, Uttar Pradesh, the northern Delhi. Any plans to- There is, some audio loss from your line. Please repeat your question. What I'm saying is that we've been hearing that there is going to be some growth in the dairy farming, you know, agri farming, on the same lines of, you know, using the loan to buy cattle and then, using the milk and selling it in Uttar Pradesh, UP. Is there any plans to intensify that sector? UP is actually one of the largest states that we operate in terms of microfinance. Gujarat might be on an overall basis, I guess. But from a perspective of only microfinance, about 30% of our book is in UP, I believe. And, Gujarat will be about 24%. So in fact, the plan is to reduce our overall dependence on UP. But, let me tell you that UP has been since COVID, even during COVID and post-COVID, has been one of our best performing states. And perhaps it's because of what the reason that you are thinking, amongst other, multiple other reasons. But, we are extremely happy with UP's performance and, you know, touch wood, hopefully that continues to remain so. Thank you, sir. Thank you. Mr. Dhingra, does that answer your question? Yeah. Thank you so much. Thank you. The next question is from the line of Amit Jeswani from Stallion Asset. Please go ahead. Hello? Yeah, hi, Aalok. Thank you so much for the opportunity. First of all, congratulations on your journey. It's been spectacular for the last seven, eight, nine years. Aalok, my first question is on, how do we recognize when we sell an asset? You sold INR 300 crores of assets. Did I hear it right, this year? INR 300 crores. It's a direct assignment. I mean, we sell assets all the time with PTCs and stuff. Specifically for direct assignments, it was approximately INR 300 crores. Got it. These assets never come to our books? Is that... Like, can you just explain how this entire thing works? Sorry. Yeah, yeah, I can definitely explain to you or maybe, Vivek, you can explain better since you did. So, uh- Ashish, what happens is that you created assets in your regular course business. Especially for the PSL, the priority sector lending requirements, banks and lenders are the typical clients who would want to buy such portfolio, because this portfolio gets kind of de-recognized from my loan book, and it is kind of recognized in their loan assets. It kind of adds to their number of client service and all that kind of stuff. Essentially, you create the book first, handhold it for about at least there is an RBI guidelines, based on which you can sell off these assets. They need to be seasoned for at least a period of three to six months, and so on and so forth. There's a matrix for that. Post that, you're kind of selling it off. You're handholding those customers, and post the sales, you keep on servicing these loans. That means you keep on doing the collection on these loans and, kind of keep on making payouts to the investor or the buyer for this product. Uh, I got- It's not a very simple process because, you know, there'll be a lot of scrubbing that is being done by the bank. You know, I mean, we have to sign a servicer agreement. Customer will not know any difference, to be honest. The customer will not know, that their asset has been sold because we are servicing, we are actually collecting. Whatever we collect, we are sending it to the bank, and in return, the bank is giving us servicer fees for servicing those, money. I think, essentially, the other thing that might come to mind is, these customers, will keep on coming back to us for the next loan. Right. it's not that it has been sold to bank A. The bank A will have access to these customers? No. The access to the customer retains, is retained by. If they did have access to the customers, they wouldn't buy the portfolio. I need to explain to him, Aalok, that whatever is coming in next two years- Yes. It is being collected today. No, I mean, yeah, the recognition of the income from the sale of these assets has to be recognized through NDS based on a certain formula. That's why you see that on the balance sheet. I don't know if that answers your question, you know? I just, I think I got that point. My more important point was, assuming we have INR 300 crores of assets that we have done direct assignments, okay? Assuming the interest rate is 24%. Yes. Okay, I'm just taking it. Yeah. Uh- Right. We in a year, we were expected to make INR 72 crore as net interest income, right? Yes. Yes, 24%, INR 300 crores. If we example, if we sell this asset, at, let's say, do we sell it at, let's say, 27% yield, or how does it work? Like, that entry I'm trying to understand. We'll sell it at, let's say, 12%, right? Instead of having INR 72 crores- Yeah. it would be half of that, right? It'll be INR 36 crores. Got it. That the bank will gain from that. It's off-balance sheet debt, right? The balance 36, in the same example, the balance 36 is the income that you will, over a period of time, be able to collect from the customers, and, it's for you to keep, kind of thing. Got it. If our cost of capital is 12% and we sell the loan at 24%, the 12% in gains- Right. that we make gets recognized upfront and the 12% cost. Got it. Got it. Thank you so much. That's about it. Thank you so much. Oh, I have one more question. Yeah. Sorry to interrupt you, Mr. Jeswani. May we request that you return to the question? No, let him continue. Let him continue. It's no problem. Oh. Please continue. Thank you so much. Just one question on the fundraising part. We are now at four times debt to equity. In the past con call, you've said that five is the cap. Is that the right metric to go forward with? Cap is a little harsh word. There have been times we have gone below, or above five- Above five. ... as well. We have sufficient capital right now to reach about INR 2,500 crores without doing any DAs. Right. If you do direct assignments, obviously a portion of those assets go off book and your debt equity ratio improves. If you can, let's say, if you do another INR 300 crores or INR 400 crores, we can push the AUM to about INR 2,800-2,900 crores. Right. That said, we'll probably not wait that long, and at around INR 2,500 crores, we'll likely raise more equity. At least that is the plan. Let's see. You know, the best laid plans are always subject to lot of other factors. Let's see how that works out. Aalok, sir, ROE is already 31%. Even if you grow at 35%, 40%, your debt to equity won't move a lot unless you plan to grow at 60%, 70%. I would be happy with that also. Thank you. Thank you so much, Aalok, for your time today. Thank you. Thank you. Thank you. The next question is from the line of Shubham Ajmera from SOIC Research. Please go ahead. Yeah. Hi, thanks for providing me the opportunity. Sir, our journey over the last few years has been highly successful. Like, with us, we have achieved around INR 2,000 crore of AUM this quarter, which is an outstanding performance. I would like to hear your thoughts on the recent departure of our key personnel. In order to ensure continued growth in the future as well, what kind of highly qualified professionals with a strong background we are taking? As it is also important for us to professionalize the board for the next level growth from here onwards. I think you are talking about the departure. Are you talking about the chief operating officer? Yeah. Chief Risk Officer. Chief Risk Officer has not spent a long time at Arman. He came from a banking background, retired from a bank. You know, many, many NBFCs of my size or even much larger sizes than me, don't actually have a CRO function, you know? For us, having a CRO was something, just a part of our culture, that initially the promoters and the directors only were handling the risk function. We thought it was necessary to formalize it, document everything, and have a permanent CRO function. The current CRO, you know, he has certain obligations in his hometown, with his family members. He has family obligations. Family obligations in Hyderabad. Not Hyderabad, Chennai. Excuse me, Chennai, I forgot. He has to move back to Chennai. Now, that is unfortunate, but, you know, he has been helpful to at least create the risk framework or made a good headway in the risk framework for us. We are interviewing other people for the position. He's still on notice period, has been on notice period for the last few months. You know, we are parting on absolute good terms. There is no problem there. Yes, yes, perfect. He promised me yesterday evening only that if his family matters is settled, he will be happy to come back to Ahmedabad. Yeah, absolutely. In terms of the HR itself, you know, I couldn't agree with you more, that when you are running such a large operation with 6.5 lakh-7 lakh customers, 3,000+ employees, really, this business is more about managing HR than managing loans. Finding the right people, retaining the right people, you know, remains one of our key strategies and also remains one of our, you know, key jobs, rather, if you want to put it that way. We do take measures to do that. Obviously, we don't run a kind of a boiler room kind of a culture. We have a very employee-focused culture that we have created, and we try to do the best that we can. Our employees are very loyal to us, I think. I mean, I'll just give you a few examples, all right? We had a very successful ESOP program. We are going to redo that. I think you'll see that coming out in the next couple of days, of creating a new ESOP pool, the last one being very, very successful. other factors also helped quite a bit for loyalty, such as during COVID, for example, we did not lay off a single employee. We didn't cut a single employee's salary, whether upper management or lower or field executives. You know, all of the companies, all of our peers were doing just that. They were laying off staff. That was not part of our culture, and we knew, you know, once the things improve, we are going to need the people to go and collect the money. That helped us quite a bit. I think if you look at our overall asset quality in comparison to our peers, Not the only reason, of course, but one of the key reasons that we did better than our peers was because of our HR. You know, why don't you give an example, that all the state heads are with us from the inception of the company. They have started as a simple field officers or a credit officers, and now they are state heads. We have a policy of promoting people from within the organization. Right. It just helps us a lot. Right. That's absolutely correct, what you said, that there are many such factors like this, such as internal promotions. Of course, it's a constant endeavor to keep people focused and motivated and retained and everything. Yeah, understood. Understood. Thank you. Thank you so much, sir. That's all from my side. Very good. Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to the management for closing comments. Thank you very much, everybody, for joining us, and hope you have a pleasant day. Any questions, they can call. Yeah, if you have any questions, you can always reach out to our investor relations team at SGA. Hope you all have a pleasant evening. Thank you. Thank you. Thank you. Yeah. Thank you. you. Ladies and gentlemen, on behalf of Monarch Networth Capital Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines. Yeah. Thank you, Arman team. Thank you. Thank you. Thank you. Thank you.