Ladies and gentlemen, good day, and welcome to the Arman Financial Services Limited Q3 FY24 earnings conference call, hosted by JM Financial. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this 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 Mr. Mayank Mistry from JM Financial. Thank you, and over to you, sir. Thank you, Darwin. Good afternoon, everyone, and welcome to the Q3 FY 2024 earnings conference call of Arman Financial Services. First of all, I would like to thank the management team of Arman Financial Services for giving us the opportunity to host this call. From the management team, we have Mr. Aalok Patel, Joint Managing Director, Mr. Vivek Modi, Group CFO. I would like to hand over the call to Mr. Patel for his opening remarks, post which we will open the floor for Q&A. Thank you, and over to you, sir. Thank you so much, sir, and on behalf of Arman Financial Services, I extend a warm welcome to our Q3 and nine-month FY 2024 earnings conference call. So joining me, of course, we have Vivek Modi, Group CFO. Mr. Jayendra Patel also will join shortly. And we also have SGA, which is part of the investor relations team. I hope you reviewed the Q3 and nine-month results and press release and presentations available on the stock exchanges and also our website. Before I brief you the updates on the financial and operational numbers, I would like to share with great pride that during the quarter, the company has successfully closed the qualified institutional placement or a QIP of INR 230 crore. The completion of the QIP is another milestone in our company's journey, and we are thankful to the incoming investors for the trust that they have reposed on us. These funds will further solidify our presence in the market by expanding our footprint and strengthening positions in key verticals, including microfinance, MSME, and other loan segments. Furthermore, the equity capital will be used in meeting our growth plans of achieving INR 5,000 crore of assets under management, with a healthy capital adequacy and debt equity ratio. It is also with great pleasure that we announce the launch of our Micro LAP pilot during the last quarter. We'll be assessing the feasibility of providing secured business loans in rural areas of India, with a ticket size ranging from INR 3 lakh to INR 10 lakh, a tenure of two to six years. For now, these products will be offered to both new and old customers through selected MSME branches during the pilot phase. So far, which is the last one and a half months, we have originated 22 loans with a disbursement of approximately INR 1.7 crore. While we have a long assessment process after the launch of any pilot, we are bullish that Micro LAP, if feasible, is the next logical product for the company to introduce in the rural strongholds. Now, turning to Q3 and nine-month FY 2024 results update. The company's consolidated assets under management stood at INR 2,437 crore. I repeat, INR 2,437 crore, registering a growth of 48% year-on-year and 6% sequentially. This growth was largely fueled by the rural demand as well as supported by favorable regulatory measures implemented by RBI, which opened new avenues of growth for the MFI industry. Arman's standalone assets under management within, which include lending to two-wheeler and MSME businesses, increased by 42% to INR 391 crore in the nine-month FY 2024, as compared to INR 275 crore in nine-month FY 2023. Assets under management of our microfinance subsidiary, Namra, has now crossed INR 2,000 crore, registering a growth of 50% to reach INR 2,046 crore in the nine-month FY 2024. At Arman, we have put stringent credit filters in place, resulting in a very high rejection rate and a high-quality book. Consolidated disbursements for nine months stood at INR 1,628 crore, registering a strong growth of 43% year-on-year, while disbursements for Q3 FY 2024 stood at INR 561 crore, registering a 17% year-on-year and 4% sequential growth. Of the total disbursements for nine months FY 2024, INR 267 crore were lent to two-wheelers and MSME businesses, while for microfinance, we disbursed INR 1,362 crore. Our emphasis on sourcing, underwriting, and geographical expansion led to strong growth in the business. Furthermore, our expansion into newer states of Bihar, Haryana, Jharkhand and Telangana is gaining traction. The company is currently operational in 10 states with a total branch network of 394, of which 73 branches have been added in the last 12 months… which too are yielding positive outcomes. In addition to this, we have also inaugurated a zonal division with a new zonal office in Uttar Pradesh. The company is committed to its core strategy of prioritizing asset quality and collections over business volumes. The gross non-performing assets stood at 2.83%, while the net non-performing assets for the period stood at 0.33%. Overall collection efficiency for the first nine months of FY 2024 is north of 98%. Collection efficiency for the month of December 2023 in our microfinance book stood at 97.9%. MSME business stood at 98.6%, and two-wheeler business stood at 96%. Total borrowings amounted to INR 2,240 crore, comprising a diverse mix of financial instruments. We maintain substantial liquidity of INR 355 crores in cash, bank balances, liquid investments, undrawn CC limits, and with a comfortable debt-to-equity ratio now of about 2.1x, post the QIP. Cumulative provisions stood at INR 81.5 crores, which is 3.35% of the consolidated assets under management, including an overlay. Of this, provisions for Arman's standalone business stood at INR 16.28 crores, and for Namra's stood at INR 65.29 crores. Now, let's run through the key consolidated financial numbers for the quarter and nine months, ended 31 December 2023. For FY, Q3 FY 2024, the gross total income stood at INR 169 crores, registering a 64% year-on-year growth. Net total income amounted to INR 98 crores, representing a 65% year-on-year growth. Pre-Provisioning Operating Profit, or PPOP, grew by 85% year-on-year to INR 72 crore. Profit after tax stood at INR 42 crore, reflecting a year-on-year growth of 91%. Yields stood at 25.1%. Net interest margins stood at 13.1%. Cost to income stood at 25.7%. Return on Average AUM stood at 7.1%. Return on Average Equity stood at 26.4%. Please note, this calculation includes QIP proceeds of INR 250 crore raised in the last week of December, which is yet to be deployed, but increases the denominator of the ROE calculations. For nine months ended of fiscal year 2024, the Gross Total Income stood at INR 479 crore, registering a growth of 74% year-on-year. Net total income amounted to INR 276 crore, representing a 66% year-on-year growth. Pre-Provisioning Operating Profit, or PPOP, grew by 92% year-on-year to INR 205 crore. Profit after taxes stood at INR 123 crore, reflecting a year-on-year growth of 113%. Now, lastly, to address the elephant in the room, we are aware of minor concerns that have emerged following our recent quarterly results, particularly regarding the slight uptick in the provisions and impairment cost compared to the second quarter. It is important to contextualize these figures within our broader financial performance. Other parameters, such as return on assets, return on equity, overall profitability, operating costs, et cetera, have consistently exceeded expectations over the past several quarters. While it is true that we've observed a marginal increase in loan slippages recently, our GNPA stands at 2.83%, and NNPA stands at about 30 bps, and remains firmly under control and accurately mirrors the prevailing market conditions. It is worth noting that various macroeconomic indicators, as well as observations from RBI, have pointed to mounting pressures on asset quality across the unsecured retail space. While historically, Arman can, on average, boast of superior asset quality in the long run, we are, of course, not immune to the overall market scenarios. We have taken aggressive provisioning this quarter, refraining from utilizing any available overlays, which amounted to a balance of INR 27 crore. Moreover, we are intensifying our efforts to monitor and enhance quality and collections, including recruitment of 300 additional staff members dedicated to our collection efforts and elevating our underwriting standards beginning from the fourth quarter. With this, I thank you, and I would request the operator to open the floor for any questions and answer sessions. Thank you so much. 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 touch-tone telephone. If you withdraw yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Arpit Shah from Stallion Asset. Please go ahead. ... Hello. Yeah, hi. Yeah, hi. Congratulations on the capital raise. The market shown really immense trust on the franchise and the competency that the way you run the show. Just wanted to understand, let's say, for the next year, for FY 2025, given the capital raise of INR 2,230 crores and INR 100 crores in the previous year, a lot of incremental lending is gonna happen with your own money, right? And I do believe that in FY 2025, you're gonna see a lot of NIM expansion, probably a big jump in your absolute PAT number for FY 2025. And will be probably a tad bit lower than INR 4,000 crores of new AUM, but we'll be talking about INR 250 crores of PAT, given the high equity that you have raised this year. You think this is possible? Well, I mean, you've done a lot of analysis. Of course, anything is possible. I don't think that we have issued any guidance, but the math seems sound to me overall. Let us see how the other parameters emerge, as far as, you know, operating cost and the NIMs and the asset quality and everything. But yes, you are correct. As far as absolute values are concerned, definitely in the coming few quarters, the equity raise will help increase ROAs and absolute profits and, of course, maybe decrease because of the denominator effect the ROEs, until we sweat the equity a little more. Got it. Got it. That, that was my question. Thank you so much. Great. Thank you. Thank you. The next question is from the line of Suraj Das from Sundaram Asset Management. Please go ahead. Suraj Das, your line has been unmuted. You may proceed with your question. Am I audible now? Yes, you are audible, sir. Yeah. Okay. Yes. Hi, Suraj. Hi, hi, sir. Thanks for the opportunity. A couple of questions. If I look at your segmental yield, so that has declined as well as the overall yield on a quarter-over-quarter basis. And if I look at the segmental yield, microfinance, I can understand maybe some part of the yield compression has come from the incremental slippages. However, MSME and two-wheeler loans also the yields has declined. So just wanted to know, I mean, what is the rationale behind that? And probably where- Sir, as you know, there has been some commentary by the RBI about overall rates which are being charged by MFIs. And therefore, I think as an industry, we have taken some steps to reduce our overall margins by a small amount. So that's... That is one part and of course, I mean, the slippages is not going to add too much to it, but yes, that will add some basis points to the overall margin decrease as well. Okay. And also on the MSME and two-wheeler, sir, I mean, they are also yield has declined. So just wanted to know, is this also because of, let us say, as you grow, probably, in terms of interest yield coming down or, I mean, where we are heading? So let us say now, if I- We were running some schemes in those segments, you know, so that has resulted in a slight decrease in yields. So that is kind of it consistently happens during seasons where the yields kind of go up and down a little bit. So that is not permanent. That should come up in the next quarter or so. Okay, understood. The second question would be on the MFI. I mean, as you highlighted, that probably some, you know, incremental, some, slippages, has happened. Just want to know, is this pertains to any specific geography, like, you know, in the western region or northern region, or, I mean, this is probably pan-India, I mean, wherever you are, six, seven states, so that, that is where you are witnessing, or is this pertains to only one geography or two geography or probably few districts? No, that's a great question. The answer is, while there are some slippages across the board in every state, largely speaking, a lot of the increased slippages are happening in the states of Maharashtra and Madhya Pradesh. So those two states are much higher than any other state, but minor decline has happened across the board. Okay, understood. You are not facing any as such, issues in Rajasthan, right? No, not really. I mean, Rajasthan is performing fine for us. Okay. Okay, understood, sir. And, the third question would be, sir, on the DA income, this DA income and probably, in terms of, let us say, securitization, do you have anything in mind? Probably, this percentage of the book would be, you know, securitized on a, on a steady state basis, and hence probably DA income could be a bit fluctuating quarterly. Because if I see your reported yield, which you have published, that is probably excluding the DA income, and hence probably there is sharp decline. However, including that, probably, the overall yield would be kind of, steady on a QOQ basis. So just want to understand your philosophy on the securitization side. So, Vivek, I think earlier we were reporting yields including DAs, and now we have removed it, right? Right. Probably your math is right on that one, but the first question in terms of what is the kind of sweet spot on amount of DAs, I believe we will probably try to maintain about 15% to 20% of the book on a DA. Thankfully, right now, the interest for the pool purchases by the larger lending community seems to be high for microfinance. So that seems to be fine enough. We've been doing regular DAs for the last four quarters, so hopefully, you know, the interest keeps alive for the next coming quarters. And, yeah, we are right now reporting in terms of yield, deducting the DA upfront income. If you include that, we probably normalize. Okay, sure. Understood, sir. Yeah. So thanks, thanks. That's all from my side. Thank you. The next question is from the line of Ankit Gupta from Bamboo Capital. Please go ahead. Thanks for the opportunity. So, you talked about, you know, some stress on the, you know, overall, you know, microfinance sector. So if you can, you know, please address, you know, how, what are the reasons for the stress that you are saying, you know, we have been hearing about some stress on rural income. So is it because of that? And, you know, how and what, what according to you, like, is it expected to continue for the next few quarters as well? Well, Ankit, that is really the million-dollar question. I don't think it can attribute to one factor. I don't think it's as a result of rural incomes, personally speaking. I think largely speaking, if you talk about it, you know, culturally, India is probably moving more towards borrowing kind of a culture than a saving. And I think that as people borrow more and more money, that is reflecting slightly higher slippages, and that is true in the small ticket size loans in, you know, the rural segment and all segments. So I think if you look at the total household debt that a person is carrying today versus what they were carrying three years, five years ago, or pre-COVID, you'll find a sort of a larger increase there, and that is what is probably one of the reasons what is causing it. And second is, you know, again to do with the culture again, people are probably more used to availability of credit now. I mean, the penetration in microfinance and everything has been very good. And so, post-COVID, we saw one of the best credit cycles that we can possibly imagine. You know, everything that we dispersed post-COVID, for the longest time, for at least two years, that was behaving fantastically beyond my own expectations. But, you know, honeymoon cannot last forever, and there is obviously some very negligible but minor uptick in the slippages. We'll just have to make sure we monitor it and take it in stride. Got you. So how is, you know, how is your expectation on our credit cost for the next two years because of the, you know, the cycle going through some or a little bit of stress or some early signs of stress? So how is that expected to impact our credit cost for us as well as for the industry, if you can give your view? So, I mean, I don't know about the industry, to be honest. For us, I think on a regularized basis, I have said this for a while, publicly and then, privately as well, that microfinance is now about a 2.5% credit cost business in the long run. Right? So that is, and that is really my expectation, in the long run. It's a 2.5% credit cost business. Okay. Okay. You know, that's absorbable. I mean, the balance sheet allows you to absorb that cost, so I don't foresee that to be any problem. Okay. And, my second question was on, you know, the yields in the MSME loans, you know? You did talk about some pressure from RBI for, you know, unsecured lenders to reduce their yields. And, you know, we in the MSME segment, we have a yield of around 35.9%. So, you know, over the long term, you know, where do you see this yield trending, settling for us? No, I mean, MSME is a different business. The operating costs are... Structure is different. And, you know, mostly the comments that were made were more related to the microfinance side than MSME, which is not to say that they cannot come. Mm-hmm. But right now we are not looking at MSME separately. Okay, because microfinance is almost 10% or more than, more than 10% lower yield than MSME. Microfinance is not 10%. Microfinance is about 80% of our business. No, that I know. What I was saying is, like, the differential between the yields of the product is almost more than 20-10%. Let's say microfinance is around- ... These are different products. They're serviced in a different way by different branches, different people. Mm-hmm. Really apples to apples comparable. I mean, they are- Okay. Fruits, but, different fruits. Okay. Okay, okay. So, just one last question on the growth side. Given, you know, some bit of caution that we are seeing across, the sector, do you think, you know, we can maintain the growth rate that we did from the past two years in next 25 as well? No, I mean, see, again, the guidance that we have always provided is that we have been growing at about 40% CAGR for the last decade or more. Mm-hmm. The plan is to continue that growth trajectory. Okay. In the short term, I think people who have followed us know that we will never really be pressured by growth trajectory and sacrifice asset quality. Mm. So, I'm not saying that I don't think I myself know, to be honest. It's not that I'm resistant to provide guidance. I'm not sure at this point. Again, it's only one quarter, but you know, we have increased our underwriting that will have some marginal impact also in the disbursements on the fourth quarter, probably. And by minor, I mean very minor. So, but I'm not in a position to sort of revise our growth projections, at least at this point. We'll see in a couple of months or a quarter or so. Okay. Thank you, thank you, and wish you all the best. Thank you. Thank you. The next question is from the line of Balkrushna Vaghasia from Axanoun Investment Management. Please go ahead. Hello. Good afternoon. Hi. My first question is, like, how is the competitive intensity shaping up, particularly in microfinance, in the regions that you are operating? Well, to be honest, competition has been there for couple of years, and there is some... I don't think that we are facing... I mean, in the short term, if you look at the last one or two quarters, it has been stable, so there has not been very aggressive targets by other peer groups or anything like that. But yeah, it's a competitive landscape. Of course, and I would say that in about 20% to 30%, 20% of the areas that we operate, it's probably very low competition. 20 to 30% will be medium, and 50% will be high competition. So it just depends on geography to geography. So if you look at, like, let's say, Kachchh area of Gujarat, there is very little competition, maybe three to four players that operate in that area. But just, you know, a few hundred kilometers away in Ahmedabad, you have 20 to 25 different players who are, that includes SFBs and MFIs and, and DSAs and BCs and all kinds of people. So it just depends largely from geography to geography. Another question related to this, like, you have been able to grow at the rate, I think, double that of the industry. So what things or what, you know, what are the aspects that you attribute to, you know, this achievement? Well, you know, I don't know, but probably if I had to venture a guess, I would say that we typically grow quickly and do well post a down cycle such as DeMo or COVID. And because we tend to recover faster than a lot of our peers, we are there to, you know, take over sort of a disbursement vacuum which has been created temporarily. So during good credit cycles, we are probably, we grow average. Right after a down cycle, we usually historically have grown quickly. Plus our asset base is, was historically lower also. So geographically, we could spread, and get some extra mileage out in that as well. Okay. And, your, ROE is 7% to 7.5% range. So what do you think? What is the, you know, cross-cycle ROE, sustainable ROE for you? Again, I mean, our projections are typically we target at least 4.5%, with a 25%+ ROEs, so that is what we try and do. Anything more, and of course, for the past several quarters, we have been fortunate that we have been able to report numbers significantly north of that. But you know, something has to... something usually gives. And so that's what we typically project out, I guess, 4.5% to 25% in the long run. ... And, with the capital raise that you had in December, how far you can, you know, grow with this, with this capital? Like, how far you can grow your loan? It depends on the internal accruals, but we are estimating about INR 5,000 crore. Okay. Okay. Thank you. That's it from my side. Thank you so much. Yeah, thanks. Thank you. The next question is from the line of Parth, an individual investor. Please go ahead. Hi, hi, am I audible? Hi. Yeah, congratulations on the great set of numbers. You've also addressed provisioning and uptick, in relation to that. I have a couple of questions. We have opened as many branches in the last two quarters as we have in previous, let's say, five, six quarters. So can you throw some light on this? Any opportunities that you see on geography or line of business? I mean, I don't think, and what numbers are you seeing? I don't know, because last two quarters we have not opened that much. March 2022 to June 2023, as per your presentation, it's 292 to 343, which is existing on branches. And in the last six months, June to December, I see 343 to 384. Starting maybe due to, you know, a larger base, but yeah, it's still quite high. With our expansion in Bihar and Jharkhand and Telangana and a lot of state branches as well. I'm sorry, you are right. I guess you said last two quarters, but a lot of these branches would have been opened in Q1 and then obviously been reported in- I mean, they started. Started operations. So I mean, that's very normal. I mean, we open a lot of branches in the first quarter of the year, last to first quarter sometimes. This year, this past year was slightly delayed in terms of opening branches. So, the first half of the year, we typically open the branches, and then we spread them out in the last two quarters, and rinse and repeat. So that's how we typically do it. Right. Okay. So, another question was, what's our impact after the RBI guidelines on the capital norms? And what's our overall view on this for the industry? And- I'm sorry, ask that, what's our guidance? What, what did you say? Sorry. Sorry. What's our impact on the business after the RBI guideline that has come on the capital norms? Yeah. And then NBFCs credit cost might have increased. Cost of capital might have increased. So I just wanted to- Vivek, are you trying to refer to the risk weightages that have been increased? Yes, correct. Yeah, yeah, yeah. Capital risk weightages. Yeah. Yeah, right. So on, on that one, I think we're not seeing much impact as far as Arman Group is concerned, because 80% or 84% of our book anyway is microfinance, which are PSL qualifying assets, and which have been ruled out of that circle of RBI. So there is no direct impact from the lender community to Arman borrowing profile to that extent. Otherwise, our borrowing quality—Yeah, Parth. Yeah, yeah. I wanted to understand the borrowing quality, like the capital that you get from banks with the loans. So borrowing profile, Parth, if I got your question right, has kept on improving with new lenders getting added, or overall with the capital infusion that has come in, there are enough reasons for us to kind of look forward to a better pricing, if that is the kind question that you're trying to kind of- Yeah, yeah. Yeah. To recap with this, improved capital adequacy on the balance sheet for the group and, the overall leverage having come down, we should, we are definitely aiming at having our, cost of funds coming down a bit as we move the couple of quarters ahead from here. Okay. Okay, thank you. Just one last question on the individual business loans side, on how is it going and- Please rejoin the queue for follow-up questions, sir. Sure, sure. No worries. Yeah. The next question is from the line of Srinath V from Bellwether Capital. Please go ahead. Yeah, just, Hi, Alok. Just taking on to the last question, I want to understand on the liabilities piece, does the DA kind of give a better profile of some PSL advantage for the bank or, so what is the current PSL standing for Namra? Any loan that the bank gives in any form gets PSL. And so I wanted to also understand the liabilities for, Arman and Namra. Are you facing any difficulties for Arman? Because, you know, I don't think that will come under PSL. Just wanted to, get that clarification. So I, Vivek, stepping in directionally here, if I'm mistaken, but as far as banks goes, any loans given to the subsidiary, Namra, is considered as a PSL on the books of the bank. However, there are different categories of PSL... there is, I guess, wholesale, there'll be retail. So if they are missing the retail PSL asset, then they can do a DA, if that makes sense. Got it. Got it. Perfect. Perfect. Yeah, that is. So basically, Srinath, if they are missing on the agri-aligned or agriculture portfolio, that's what is the highest interest for any banks when they come to organization like us. Right. So, I think, now as far as, what was your other... Did you have other question? So in Arman, are we, because the risk weights have actually gone up for the NBFC side, so or is the fact that we have got capital kind of, you know, solve that problem for the next two to three quarters? No, so, Srinath, by God's grace, due to our vintage and sort of, I don't know, strong kind of conservative risk practices, usually we have historically not faced much problem for raising funds. If I were to say that, the goal is always to raise cheaper funds, and so that's what we continuously try to do. But historically, we have not faced issues, and even in Arman and Namra both, typically we have more offers than what we can take now. Now, of course, the goal is to get better offers, but yeah, availability is not an issue. Perfect. Moving on to MSME, wanted to understand, you know, how is the, you know, South India portfolio doing? I think we entered somewhere last year to Andhra. So wanted to understand how that's progressing, and any update on larger ticket MSME loans, either in the form of secured or unsecured, any pilots, any feedbacks you've got, you know, from your team, that would be great feedback. Yeah. So Telangana, we have. So it's not in AP. We went into Telangana this year for our MSME branches, and for which we have opened 8 new branches there. I mean, it's a little too early to tell. Right now, we have no overdues at all in Telangana, which is, of course, good news. But again, that is very common when you move into a new place that for the first six months or 12 months, you don't have any quality issues whatsoever. You know, it's going quite well. I think, of course, with the southern states, there's a lot of competition. So growth might be slower than, let's say, what it was in Bihar or some of the other places. But so far so good. Let's put it that way. In fact, let's see, and maybe in a couple of quarters, we can consider moving microfinance there as well. Perfect. Srinath, Srinath, also that, we just started the loan against property kind of. Yeah. So maybe I'll let you. Yeah, no, no, no. So as I announced, so finally, after lot of contemplation and deliberation, we have started the Micro LAP pilot. And of course, it's just a very preliminary pilot at this stage. We have only done about 22 loans in the last month and a half or so, about INR 1.7 crore. But let's see how it goes. So it is, ticket sizes range from INR 3 lakh to INR 10 lakh, and tenure is about from two to six years, is what we are contemplating right now. And, of course, you have all the underwriting and the paperwork necessary to create a mortgage and or to do the search and create the mortgage and everything. So rural areas actually becomes the largest challenge: the paperwork required. Otherwise, I mean, barring that, I can already tell you that it's a fantastic product. A lot of other people in the Micro LAP segment don't typically do rural because of that reason, and so our hope is that we can surmount that. We will still use our traditional cash collection approach to the... Because since it's rural, and second, any behavioral changes you're seeing on repayments versus our, you know, smaller MSME unsecured book or anything you can share on some early behavioral patterns very broadly. So speaking specifically of Micro LAP, this will be using NACH mandate. So it will not be the traditional cash recovery. That being said, we are expecting, of course, like all rural products, that there will be significant bounces, which we will have to go and collect it in cash. And of course, we have created mechanisms to do that. So whatever we can sweep in through cashless, we will do it. Otherwise, of course, our people are available to go and collect it cashless as well. Excuse me, in cash as well. Now, for behaviors, I mean, are you referring to in Micro LAP or in general? Yeah, in micro LAP, meaning customer cohort. You know, anything you can share on, you know, how different this customer is, maybe an occupation, profile, or, you know, any- anything you can broadly give us just to get an understanding of the business a little better? ... No, profile will be similar to our MSME customers, perhaps a step or two higher, but these will be still the enterprises in the rural areas. But people who require a higher ticket loan, you know, for whatever reason, that they're using it for their business. And we are following a similar mechanism of evaluating how much they can afford and what they can take. But largely the hope is to keep EMIs similar by increasing the tenure and securing it, of course, through a mortgage. Now, I think it's fair to say that, you know, while the mortgage is there, repossessing somebody's primary household in rural is of course difficult. But of course, the fear of that and of taking legal action yields excellent results, as I'm sure you are well aware in the entire, you know, Micro LAP and affordable housing segments. Perfect. Thanks. Thanks, Alok, for the detailed answer. I'll get back into questions here. Yeah, thanks. Thank you. Ladies and gentlemen, to ask a question, you may please press star and one. The next question is from the line of Parth, an individual investor. Please go ahead. Hi again. I just wanted to slip in one question on the individual business loan side. How is it doing? Any early comments and guidance on it? Well, I mean, it's doing quite well. You know, the underwriting is quite a bit more stringent, and the turnover time is slightly higher. So I don't know. I think we haven't been doing a good job of pushing that product, to be honest with you, and we have to start doing a better job. But the hope here is that as JLG probably falls out of fashion in the next few years, which is the expectation, these individual products which are available will gain more traction. Really, it's a product for the future, and the hope was that... and the hope is that over the long run, this product will become much and much more significant in terms of the overall portfolio. Right now, it's, I would say it's a couple of%, yeah, three, 3% or so of the total portfolio. So I mean, of the portfolio. It's not significantly different to the- Total portfolio. Total portfolio. Yeah. Right. So, So yeah, I think we probably need to concentrate on that more, frankly. Right. Great. So, can you put a number on that? Sorry, yeah. So, the other is, we started this IBL about almost 30 months back. The average ticket size in the JLG itself, in the entire ecosystem, has increased a fair bit. So, yeah, it's almost like the JLG ticket sizes in the market have caught up to what we envisaged the IBL to be. So, there is not a lot of incentives for... Because see, IBL, we are targeting to be completely cashless, right? So the customers have to be incentivized somehow to accept that product versus like a traditional JLG product. And so the customer thinks that, "Well, here somebody will come and collect the money from my house, and the other way, I have to go through the hassle of actually paying this company by myself." So perhaps that is, I guess, the expectation gap in terms of where we expect it to be versus where we are today. Right. Right. So, can you put a number on the, on the plan of, you know, let's say, expanding the, this business as a, like, let's say, as a share of total, AUM in next five years, let's say? It would be difficult. I would like to say that the individual versus group loans, I would like that to be two-third, one-third. That includes a mix of IBL, MSME, Micro LAP and other products that we have, two-wheeler, of course. So, hopefully in the next three-odd years, we can get it to that level, three to four years. IBL specifically, it will be difficult for me to kind of point there, you know, except to say that at least in the long run, group loans will... My expectation is that group loans will probably fall out of fashion and will be replaced by some kind of individual product, whether you call it IBL or you call it any other product, it doesn't matter. Hmm. Any reason why you say group loans will fall out of fashion? Why do I say it? Yeah. Well, I mean, that's a sort of a longer answer. But as I said, there's a cultural and there's a lot of reasons, you know, number one- customers themselves want to get out of it. They're like, "Well, we've been group customers for the last 10 years, you know, and I have a great credit history, so I don't want to fall into this group setting anymore." Second, because of competition, the group sizes are shrinking. Thirdly, I would say that over the ticket sizes are increasing enough where and the EMI sizes are enough, and couple that with group sizes declining. JLG, the concept of JLG is getting diluted as time goes on. So there are numerous reasons for saying that. Of course, I could be wrong, but, I mean, this is just simply my expectation. But we are prepared both ways. Of course, if JLG continues to do as well as it is doing and has done, no problem, but otherwise, we are future-proofing ourselves by making sure that we have other viable products that we can service our customers with, should the trends change. Right. Thank you so much. Yeah, that's it from my side. All the best. Thank you. Thank you. The next question is from the line of Bharat Sharma, an individual investor. Please go ahead. Hi, Aalok. First, compliments on a great set of numbers, and thanks for giving me the opportunity to talk to you. I just wanted to understand your views on competition coming from small finance banks. How do you see... and because obviously, their liability structure is slightly different and do you see them getting more competition to you over your time, and how do you plan to address that? Honestly speaking, I'm not—I mean, if I was concerned with a group of people in terms of competition, I would say I would be much more concerned about the other NBFC MFIs than the SFBs. So of course, they are part of the market, and of course, they are part of the competition group, so I don't want to just discount them completely. But in terms of their structure goes, you know, I'm not completely convinced whether the ability to raise deposits is advantageous enough to, you know, offset the other factors that they have to deal with, like regulations and operating costs and other factors. So of course, this is my personal opinion, but SFBs do add to the overall competition, but we are more threatened by the other NBFC MFIs than SFBs, at this point at least. Sure. Thank you. Great. Thank you. The next question is from the line of Rohan Mehta from Ficom Advisory. Please go ahead. Hello. Hi, Aalok. How are you? Yeah, great, yeah. Good to see you. Good to tell me. Aalok, I want to ask, so you, you've always kept the MSME and the microfinance segment separate, you know, in terms of branches, employees and, you know, even field agents, right? Yeah. I think we have the view that, you know, it's easier to sell one simple product, rather than, you know, have the field agents cross-sell products. Yes. Just want to understand that these new businesses you'll be seeding, right, like the Micro LAP, would that sort of require fresh infra, or initially we'll be doing it off? I understand. I understand where you're going with this, and that's an excellent question. So initially, we are starting it out through the MSME side with specially trained people at the branches. But if and when it does gain traction, the plan is to split it out, because yes, you are right. I have always said that, and I'm still a strong believer that if you're dealing with field officers and people of that, you know, it's much easier to train one field officer to do his job in the best way possible to sell one product, rather than doing it in multiple different products. And so, yes, it's a great question, and the plan would be that eventually it would split out and go its own way, as in have a separate operations. Okay. Got it. Got it. Great. And just another question, on the MSME side, just want to understand, how are we planning to, you know, just grow our book in terms of strategy and even characteristics of people we're lending to, right? Yeah. Is there something like, you know, that maybe changed over the last one to two years, that we've been able to sort of, you know, gather a new group of people or new cohort of people that we can probably start targeting to lend to? No, I mean, the overall strategy has not really changed. I mean, the MSME is growing quite well, if you ask me. I mean, if you are comparing its portfolio to portfolio with microfinance, obviously it looks a lot smaller, but, you know, I think MSME has also been growing at 40% to 50%. And, at least in the last few months, the disbursements have also increased quite a bit. I would say to answer your second question about what I feel has changed. I would say a lot, due to the ticket sizes that some of the peers are giving out, earlier on, let's say when I started doing it, you know, we were targeting, let's say 75,000 to 80,000 customers. Many MFIs have increased their ticket sizes to 75,000 to 80,000 at this point. So there is slightly more competition. That is, while it was supposed to be a segment that targeted people, you know, one or two steps above microfinance, now you have and there's, you know, the line has kind of blended to an extent now. And so we have to kind of target people even higher than what we were originally targeting, which is, which is fine. So my guess is that in MSME, the ticket sizes would increase in the long run. Got it. Great. Great. Thank you so much. Wish you all the best. Thank you. Thank you. The next question is from the line of Nitin Gupta, an individual investor. Please go ahead. Thank you for the opportunity. Am I audible? Yes, thank you. Please go ahead, Nitin. Yeah. So from the investor presentation deck, I was able to calculate the current leverage, how much we are having. I think it's around three.something. So, my question is: are we comfortable with this, or going forward in, let's say, next two, three years, we think that we can further leverage it, I mean, increase it? How did you calculate it at three point, I'm sorry, this is, are you saying leverage? I guess he's talking about debt-to-equity ratio, not three.something, he said. No, I think that is a mistake. So our overall fully diluted capital base on a consolidated level will be about INR 750 to INR 760 crores. And the overall debt will be what? About INR 2,000 crore, last report, INR 2,100 crore. It's shared less than three on a consolidated basis. Okay. Yeah. So basically, the basic point which I wanted to know, like, going ahead, like, we would like to keep it at this level or there is a scope of further increasing the leverage? So, like, you'll have to at least take it up to 4.5x or hopefully not 5x, but I mean at least to 4.5x or 4.75x is, I would say, a fully sweated equity. So you have to, of course, increase it. And that's why we have taken on more equity as well, so we can leverage more and... You know, so the hope is that this year ratio stays within the neighborhood of between 22% to 24%. Sorry, I missed your last statement. The hope is that we can keep the CRAR ratio stable at between 22% to 24%. Okay. Capital adequacy. Yeah, yeah, yeah, I got that. The second question which I had was like, how much AUM growth can we expect going forward? I'm not talking about the next year, but generally. Generally, basically, I have attended the previous conference call, so what I learned in those calls was, like, around 40% odd we can expect. So are we sticking to it? I think one other gentleman also had the similar question. I'm not sure. In the long run, in the next, you know, two, three years or so, yes, the hope is... the target is to grow 35% to 40%. And but there is always going to be short-term peaks and valleys, right? There's always gonna be certain quarters where you grow slower and then... Rarely does growth work out to be predicted consistent and smooth. Yes, I understand that we have to calibrate it so that overall we are able to achieve it. So some quarters it could be low, some quarters it could be high, so that I understand. So that's pretty much it for myself. Thank you. So to answer your question specifically, I am not ready at this point to say whether we are going to revise that or not. So for now, you can assume it is, nothing has changed. Okay. That's it for myself. Thank you. Ladies and gentlemen, that we will take that as our last question. I would now like to hand the conference over to Mayank Mistry for closing comments. Over to you, sir. Thank you for joining the call today, and thank you to the management team of Arman Financial Services for giving us this opportunity to host the call. Thank you, everyone. Thanks. Thank you. On behalf of JM Financial, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.