Ladies and gentlemen, good day and welcome to Arman Financial Services Q2 FY2025 conference call hosted by JM Financial. 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 press star, then zero on your touch tone phone. Please note that this conference call 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, Sidharth. Good afternoon, everyone, and welcome to the Q2 FY2025 earnings conference call of Arman Financial Services. First of all, I would like to thank the management of Arman Financial Services for giving us the opportunity to host this call. From the management team, we have Mr. Jayendra Patel, Vice Chairman and MD, Mr. Aalok Patel, Joint MD, and Mr. Vivek Modi, Group CFO. I would now like to hand over the call to Mr. Patel for his opening remarks, post which we can open the floor for Q&A. Thank you, and over to you, sir. Thank you, Mayank, and to JM for hosting this call. Hopefully, I'm audible to everybody. And on behalf of Arman Financial Services Limited, I extend a warm welcome to our Q2 FY2025 earnings conference call. Joining me today is, of course, Mr. Vivek Modi, who is the Group CFO and also the investor relations team. I hope you've had the opportunity to review the Q2 and H1 FY2025 results, the press release, and the presentation available on the stock exchanges and our website as well. I apologize; those were uploaded with a slight delay this time, so my apologies for that. Today, I wish to start by addressing the key developments in the industry and discuss our performance in the context of the significant challenges currently facing the microfinance industry. As you may know, the industry is experiencing a substantial rise in impairment cost, which increases largely due to over leveraging in the rural retail unsecured lending space, impacting both microfinance institutions and non-MFIs alike. Over leveraging has strained borrower repayment capacities, leading to a rise in delinquencies and higher default rates. Additionally, high attrition rates among the field staff across the industry have affected collection efficiency, as turnover disrupts the consistency and effectiveness of borrower interactions, which is a crucial component for timely repayments in microfinance. In our past interactions with capital market participants, we have briefly discussed and anticipated as well an increase in the credit cost from over leveraging, and I think this discussion was since early last year. However, the severity of these challenges has been much greater than expected, at least for me personally, and compounded by an evolving macroeconomic and regulatory environment. Given these conditions, we have opted for a cautious growth strategy, emphasizing collections and portfolio health over expansion. This conservative approach is crucial to preserving the quality of our assets and maintaining a stable financial position, and has also worked well for us in the past credit cycles. For H1 FY2025, total disbursements were INR 832 crore, down from INR 1,068 crore in H1 FY2024. This reduction reflects our decision to prioritize asset quality and to focus on collections rather than growth. Our assets under management as of 30th September stood at INR 2,465 crore, while gross non-performing assets or GNPA stood at 3.74% and net non-performing assets or NNPA stood at 0.64%. At least today, that level remains manageable in the broader industry context for us. Our pre-provisioning operating profit for the period was INR 163 crore, an increase from INR 133 crore in the first half of FY2024. This improvement in PPoP highlights our commitment to operational efficiency and disciplined cost management despite the challenging macroeconomic environment. The impairment costs were at INR 99 crore for the first half of FY2025, reflecting the current risk environment's impact on our finances. We recognize that these impairment costs are a natural consequence of the increased risk, and we are taking, or at least trying to take, all necessary measures to manage and mitigate them. Both the industry and Arman are actively implementing strategies, both big and small, to address these issues. The MFIN guardrails have been introduced to manage over leveraging, and we are currently in the process of also establishing independent credit teams across all branches by the end of this fiscal year. These teams will strengthen our credit assessment processes, enhance oversight, and quality control at the branch level. This initiative is designed to improve our risk management capabilities and better equip us to assess and respond effectively to borrower needs. Once again, our focus remains on quality over quantity as we navigate the current challenges in the rural environment and await the end of this downside. We believe that by prioritizing quality, we'll be in a stronger position once the industry environment stabilizes. Now, let me run through the key financial and operational numbers for the quarter and half-year ended 30th September 2024. Consolidated for Arman, the gross total income for the quarter stood at INR 182 crore, registering a growth of 13% year-on-year, while gross total income for first half stood at INR 366 crore, registering a growth of 18% year-on-year. The net total income for the quarter stood at INR 116 crore, registering a growth of 25% year-on-year, while the net total income for the first half of FY2025 stood at INR 235 crore, registering a growth of 32% year-on-year. Profit after tax for the quarter stood at INR 15 crore, registering a steep growth of 63% year-on-year, while profit after tax for the first half stood at INR 47 crore, registering a degrowth of 42% year-on-year. The lower PAT was obviously on account of higher impairment cost. Consolidated yields for the quarter stood at 25.4%. Cost-to-income for the quarter stood at 33.3%. Collection efficiency for the month of September 2024 stood at 24.9%. Total borrowing stood at INR 2,019 crore, which includes off-balance sheet transactions such as direct assignment, DAs, and other off-balance sheet debt. As of 30 September 2024, the company has a healthy liquidity position with INR 281 crore in cash and bank balances, liquid investments, and undrawn CC limits. In addition, the company has INR 157 crore of underwriting sanctions from existing lenders. Now, moving on to Arman's standalone business, which includes our MSME two-wheeler and the newly formed LAP business. Assets under management stood at INR 483 crore, registering a growth of 35% year-on-year. Total disbursements stood at INR 206 crore in the first half, registering a growth of 35% year-on-year, while disbursements for the quarter stood at INR 104 crore. The gross total income for the quarter stood at INR 43 crore, registering a growth of 24% year-on-year, while the gross total income for the first half stood at INR 86 crore, registering a 32% growth year-on-year. Net total income for the quarter stood at INR 31 crore, registering a growth of 35% year-on-year, while the net total income of the first half stood at INR 64 crore, registering a 52% growth year-on-year. Profit after tax for the quarter stood at INR 8 crore, registering an 11% degrowth year-on-year, while profit after tax for the first half stood at INR 21 crore, registering a growth of 21% year-on-year. Segment-wise, collection efficiency for the first half stood at MSME, which was 96.8%, and two-wheeler at 96%. Gross non-performing assets for the MSME business stood at 2.54%, while the NNPA stood at 0.57%. GNPA for two-wheeler business stood at 4.79%, while the NNPA stood at 0.87%. On the microfinance side, which is managed by Namra Finance, the wholly-owned subsidiary of Arman, assets under management stood at INR 1,981 crore. Total disbursements stood at INR 625 crore in the first half, while the disbursements for the quarter stood at INR 269 crore. Gross total income for the quarter stood at INR 138 crore, registering a growth of 9% year-on-year, while gross total income for the first half stood at INR 281 crore, registering a 14% growth year-on-year. Net total income for the quarter stood at INR 84 crore, registering a growth of 19% year-on-year, while the net total income for the first half stood at INR 170 crore, registering a 23% growth year-on-year. Profit after tax stood at INR 6 crore, registering a degrowth of 81% year-on-year, while profit after tax for the first half stood at INR 25 crore, registering a degrowth of 61% year-on-year. Collection efficiency for the first half stood at 95%. GNPA stood at 4.03%, while NNPA stood at 0.65%. Now, to conclude, we do acknowledge that the challenges encountered in the first half of FY2025 have impacted our performance. However, these issues are industry-wide and not unique to Arman. The rural sector, in particular, has faced significant pressures from various factors, including unpredictable weather, election-related uncertainties and disruptions, and broader economic headwinds, all of which have contributed and affected borrower repayment capacities. Despite these near-term challenges, we are confident in our long-term strategy, which we believe will support future growth. With a 32-year legacy, Arman is no stranger to credit cycles. We have navigated similar situations in the past and emerged stronger each time and also more resilient. Our experience and proven management practices give us the confidence to continue our long-term path. We remain steadfast, well-capitalized, and prepared to manage these headwinds effectively. Supported by a dedicated team and a clear focus on risk mitigation, we are well-equipped to overcome current challenges and drive sustainable growth for our stakeholders. Thank you very much, and we will now open the call for any questions. Thank you very much, sir. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchscreen telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question is from line of Ashlesh Sonje from Kotak Securities. Please go ahead. Hi team, good afternoon. Sir, firstly, if I look at— Sorry to interrupt, Ms. Ashlesh, can you please be a bit louder? Your voice is not audible. Can you hear me better now? Yeah, yeah. Please go ahead. Firstly, if I look at slide number 31, where you have presented the PAR 31- 90 book, there is a sharp increase across the MSME and two-wheeler segments as well. So can you talk about what is causing this increase? And if you can also share the overlap between your customers across these segments with MFI. What slide did you say? Slide number 31. The PAR 31- 90 book which you have shared. Yes. Yes. Yes. The MSME also has seen some increase. That's what I mean. So I mean, our MSME book is, relatively speaking, in the same area and are essentially one step or two steps above microfinance customers. So it won't be fair to say that this is a completely [crosstalk] Can you please come a bit closer to the speaker? [audio distortion] [crosstalk] So it is not fair to say that the MSME is completely different than microfinance. These customers will be one or two steps above microfinance customers, but that said, of course, MSME does have a little pressure, but it is much better than. Now, as far as overlap is concerned, obviously, as far as our books are concerned, there is very little overlap or no overlap. Some microfinance customers do graduate to MSME, but there is no cross-sell. So essentially, it would be one loan, one customer. So we do not do multiple loans to the same customer. But if your question is more asking how much overlap would there be between the MSME that we service and the microfinance industry, obviously, there would be some level of overlap. Understood, sir. And secondly, when it comes to implementing the MFIN guardrails, do you see all the lenders now implementing this in letter and spirit? It's hard to say. All I can say, disbursements have been down sharply for all industry players. And my guess is that, like us, people have increased underwriting, and self-preservation is an inhuman instinct. And so I would say everybody is following guardrails and, to be honest, going beyond the guardrails, right? So the guardrails is one thing, but I would say that you need something more than guardrails as well. I mean, guardrails will not get you all the way where you need to go. Understood. Sir, and at least in the recent underwriting, can you infer that the quality of at least the recently originated book has now improved, or is it too early to say that? Too early. It's too early. There is very little non-starters in microfinance. So we do get it will be less than 1%. But instinctually, I would say that, yes, it has created an impact, but probably not as much as I would have liked. But again, it's too early to tell as far as data is concerned. Thank you, sir. Very useful. Those were all the questions I had. Thanks again. Thank you. Our next question is from line of Karthik from Unifi Capital. Please go ahead. Hello. So good afternoon, sir. Mr. Karthik, can you please be a bit louder? Is it better? Yes. So So your voice is not audible. If you can switch to handset mode. Yeah, that's good. Is Is it better? Is it better now? Yeah, yeah. Please go ahead. Yeah. So I have just two questions. So on the regulatory front, what are we seeing as a headwind? Because I've heard this circular from RBI directing a few NBFCs to stop disbursements. How are we taking it? Is the directive in terms of the interest rates, or is it in terms of NIMS? Or what's the RBI's call for all the MFIs? That's my first question. So I only heard part of your question. The quality of the audio was not very clear, but I got the gist of your question. I think you are asking about basically the RBI circular regarding interest rates and other factors and stuff like that. See, it will be very difficult for me to comment on such matters. All I have to say is that RBI is the regulator. So if they ask us to jump, all we can say is how high, and to an extent, RBI had been issuing a lot of notices. I mean, they have both publicly and privately had been discussing with many MFIs and other institutions about many things such as transparency and interest rates and NIMS and other factors. I was surprised, to be honest. Again, I don't know the internal matters. If it was just about interest, then I was a little bit surprised this was what the outcome was, considering that to a certain extent, the punishment has to fit the crime, and in certain of the NBFCs, I know the rates were, again, it's not fair for me to comment on this. I'm not exactly sure what is appropriate, but the rates were clearly on the higher side. Whether you call that usurious or not, I don't know. At least on the MFI side, I'm just not sure whether it's 2025 usurious and 2024 not, or it's 2026 usurious and 2024 not. It's very difficult to judge what is going on. In today's stage, in today's context, obviously, we are discussing the matter at great length internally with our board, with RBI as well. We are engaged with them as well. Whatever steps are required to protect Arman particularly and Namra particularly to end this risk, we are taking all measures which we feel are prudent. So again, I really want to specifically comment more than this. Sure. Thank you so much, sir. That was helpful. And last question. So what would be the proportion of Namra plus four in our current portfolio, sir? Namra plus four, the customers who have— I know people have been reporting this number, and I've been seeing it as well. I'll give you that number because I figured somebody would ask that, and we do have those numbers ready. But before we give you that number, I want to specifically give a disclaimer here that there is no standard way to report these numbers. And whether this was the status of a particular customer at origination, or did you do a scrub analysis from the credit bureau? Did you do it at the customer level, or did you do it at the household level? For example, including both the customer and the spouse. Did you do it for MFI loans, MFI plus retail, or all loans? Again, there is little clarity on this. So the disclaimer here is that the numbers that Vivek will just tell you right now are numbers that we had during origination at the family level for all loans. So what that means is the customer, their spouse, whatever loans they had, and whatever the outstanding of those loans added up to before the disbursements that we made, that is the status available to us. As far as scrub analysis goes, we have done it on a limited basis on a state-to-state level, but we have not done it at the household level. So I don't think it would be very prudent for me to share those numbers with you. But anyway, sorry. So that's. I was able to answer your question more specifically. The lenders at the time of origination at household level, I mean, about 22.8%, which is Namra plus four or more, and Namra plus three, we're talking about 18%. And basically, if you look at the outstanding, practically none of the customers at the household level for us had an outstanding of more than INR 2 lakhs. So that was the underwriting that we used. I think it was less than 2% of customers who had more than INR 2 lakh rupees of outstanding. So again, when you are looking at household numbers, that 22% might seem quite high. But you have to remember that at the spouse level also, there is a lot of these KCC-type loans and other loans that are sometimes not very, very large. So many customers may have multiple lines. But what we were largely concentrating on was total outstanding and total EMI burden over and above the number of loans that a customer had. But Vivek, you want to just read out what it was for Namra plus 1, Namra plus 2, 3, or whatever. Namra alone was 21.8%. Namra plus 1 is about 16.9%. Namra plus 2 turns out to be 19.9%. Namra plus 3, 18.6%. And Namra plus 4 or more was 22.8%. And along with that, with the outstanding, when we gave the loan, excluding our loan, the outstanding at the time of giving the loan being less than INR 50,000, being 47%. Yeah. INR 50,000 to INR 1 lakh was 25%. INR 1 lakh -INR 1.5 lakh was 18%. INR 1 lakh -INR 2 lakh was 8%. And customers with more than INR 2 lakh of outstanding when we gave out the loan was 2%. Okay, sir. Got it. Thanks a lot for this. This was very helpful. Thank you so much. Thank you. Our next question is from the line of Amit Jeswani from Stallion Asset. Please go ahead. Hi, Aalokji. Aalokji, how are things looking in October and November now that we finished 45 days in the quarter? I wish I could say it was good news and things are looking up, but unfortunately, that is not the case. November has been fairly disruptive due to the Diwali festival. As far as availability of customers and everything is concerned, that became an issue. Right now, obviously, it's covering up and covering up very quickly. That is good news at least. Yeah, I don't think this down cycle has ended. Neither can you expect it to end so quick as well to be perfectly frank with you. I would say, I guess if you want to count the silver lining, the rate of descent is slowing down significantly. At least that is a win. We'll take that win, I guess, if nothing else. Got it. And I was just seeing that COVID, we peaked around 6% GNPA. What do you think would be our GNPA this time? Sorry, sorry, sorry, sorry. We peaked at 7.9% GNPA in March 2022. What do you think this GNPA will end this time? Because you're best. You're seeing data. So Amit, I understood your question. I understood your question. The problem is that COVID and this is not very, very comparable because during COVID, you had a lot of different schemes available by RBI and Finance Ministry and a lot of different. First was the moratorium, so you could kind of delay recognition of GNPAs until the moratorium got over. After that, there was restructuring available and a lot of other things were available. I'm not saying that that was done maliciously or anything like that, but there were a lot of different things available during COVID. Now, if you look at the credit cost today, we are nowhere close to what COVID cost us, for example. You can take that as a silver lining to an extent. But what is different this time is that COVID was like a heart attack and then like a quick recovery period, right? The problem this time is that it's like an extended edition. It's a headache, not a heart attack. But it's a bad migraine. Sorry, maybe not a very good analogy. Your NPAs, as long as you keep writing off assets and taking them as impairment in your P&L, it's possible that the GNPA may never rise to more than what it is today also. As long as you stay on top of it and keep either providing for it or writing it off. I don't know, Vivek, you have anything to add to that? I mean, just adding to Aalok's comments. One, the differentiator between COVID and today is obviously the environment. During COVID, there were a lot of supports that came in. In this, I think we will have to kind of internally ring-fence as much as we can do in terms of improving the collection efficiencies and the monitoring and so on and so forth for whatever has already been disbursed and put into place a much superior underwriting processes to ensure that the forward lending or the future lending is far more ring-fenced to that extent. Having said that, I think going down to a specific number may not be a great idea at this point in time. Got it. So my other question is, how does the problem solve itself just by we lending less and people getting deleveraged? Or the only way to come out of a bubble is to create an even bigger bubble and basically lend more so that liquidity improves and everything becomes okay? Well, Amit, you kind of hit the nail on the hammer here. See, one of the bigger problems which why things are continuing to go down is the fact that lending has stopped, right? And whenever you stop credit or at least slow down credit to any economy, that is going to have worse effects. So in effect, to prevent people from getting overleveraged, you are also stopping credit to people who may really need it, right? And if they don't get it, they are also defaulting. So it's a two-edged sword. A lot of people say that, "Oh, it's evergreening," which I don't know. I think evergreening term gets tossed around quite a bit. And I'm not saying I'm not denying its existence. But Arman itself, we borrow every month and repay every month. Is that evergreening? I don't know. I mean, it's just business for us, right? A lot of the borrowed money might be going into repaying also for us, but we are running a valid business. So I don't want to toss around a term like evergreening and other things, fully acknowledging that it does happen. And of course, we are aware of it that it happens as well. But yes, I think one of the bigger problems is that credit has stopped. And until the credit resumes to a meaningful level, it will be even more difficult to get out of it. And so you are stuck in sort of a catch-22 situation. And so ideally speaking, I would want everybody else to start disbursing, and I would be conservative. But unfortunately, that's not how the world works. But I don't know. I'm not exactly sure how to answer your question, except the fact that during both demonetization and COVID, lending did resume slowly, slowly, and it did get up back to what its previous levels were. Does that answer your question? Have you lost the line? Yeah, yeah. The line for the previous parts of the screenshot disconnected. We'll move on to the next question, which is from line of Pranav Gupta from Aionios Alpha Investment Management. Please go ahead. Hello. Yeah, hi. Yeah, hi, Aalok. Just a few questions. A lot of my questions have already been answered. But when we look at collection efficiency and you mentioned collection efficiency hasn't really fallen for us when we compare 2Q or 1Q. But how are we seeing the collections in X- bucket? Because that is what will give a sense to us to understand as to when things are actually going to start improving. That's the first question. So I would say that things will not improve until the zero DPD bucket repayment rate goes up to at least 99%, 98.5%-99%, which is typically what we are used to. But even if it gets back up to 98.5, I'm confident to say, "Okay, the work is behind us and things will progress forward." Now, as far as the other buckets are concerned, 1 to 30, 30 to 60, 60 to 90, and so on and so forth, honestly, I don't have any set formula for that. 1 to 30 bucket ranges anywhere from 40%-70% on a month-to-month basis. And it goes down from there. Obviously, even in write-offs and other cases, there is some level in basis points or in small percentage terms. Collection, obviously, keeps trickling. But maybe a strategy that people follow is to arrest the problem is to concentrate on zero DPD collections and ensure that that remains pristine. The rest of it will take care of itself. No, absolutely. That's the question I was asking. Are we seeing zero DPD collections improve or even though slightly? Or is there still some time to go before we see an improvement? There is time to go. There is time to go. Listen, I think before anybody asked me this question, people have been asking me a lot offline and other times also when I think that this will get over. And so before anybody asks, let me first say that I'm not a guru. I'm not an expert. People have predictions. People in the stock market have predictions. These are wrong all the time. I have no idea. But that said, in my experience, once a credit cycle starts, it takes at least a year for things to start getting back on track. And so if I say that this credit cycle started in April, which is when it really kind of started surfacing very, very quickly, that would mean that by Q4 end, we should start seeing things getting back on track or improving or getting better. Again, I have no basis or evidence to give that prediction except sort of a gut instinct maybe. Right. So just the thing that you mentioned, right, that once the credit cycle sort of kicks off again, that is when we start seeing things getting better. But say if you look at the last 18, 24 months and possibly the last 12 months ending April, that is where we've seen a huge buildup of lenders lending to multiple borrowers and the number of borrowers per lender going up, right? And if you sort of take a lot of anecdotes from multiple companies that trade in the road sector, it doesn't really seem like incomes have been hit in a big way. And then to see leverage go up per borrower in such a big way just indicates that most of this incremental credit has gone towards consumption rather than using for working capital or business. That's a fair assessment. In that case, the question arises that does this really need the credit cycle to start going up again for these customers to start lending, or is this just a pure case of most borrowers being purely overleveraged? I mean, lending more to these customers might not really solve the problem. That's the thing I'm trying to understand. No, I understand. And I fully agree with you. And that was along the line with my previous answer that, okay, if we stop lending, will that create an issue? And as I said, it's a two-edged sword. There will be, I mean, we have 7 lakh customers. There will be these customers who are using it for income generating and need more money. And they are not getting it either from me or the industry or whoever else. And there will be others that are purely using it for consumption or evergreening or other things, and they might manage finding it, might not also. So it's very hard to distinguish the genuine needs versus the non-genuine needs. And so people like me sitting where I am, we always err on the side of conservatism and say, "Okay, stop lending." Of course, I know not everybody I reject is going to be a bad customer, but it is what it is, right? When I'm not able to determine whether somebody fits my risk profile or not, it is prudent of me to just simply not give the money, at least at a time like this. So go back to your earlier question about, see, what started this? What started this crisis? And everybody becomes a guru in hindsight. Obviously, nobody, including myself, were predicting this. Of course, I think I've been talking about overleveraging for a while. As I said during my initial comments, I don't think anybody expected things to get to this level as quickly as it did. Really, who else came? First of all, whenever things like this happen, there's never one thing. I mean, there might be one big thing, which is overleveraging, but it's never one thing. It's multiple things that cascade together and kind of the whole Swiss Cheese model. So first of all, as you or somebody else correctly said, that people started more and more trickling, using money for consumption rather than, excuse me. Yeah. People started using it maybe more for consumption, maybe more for aspirations. I think availability of loans just became so easy. Four, five years ago, the people lending to these people were just MFIs. 80% of them were MFIs. We were a close-knit group. We kind of knew. So when things like COVID and stuff happened, obviously, we got into some bit of trouble. But otherwise, it was fine. And it just seems that the world is crazy offering loans. Even the companies who have nothing to do with loans monetize their businesses with giving out loans as a supplementary business. And so I said this before. This is not an MFI business. Everybody who has lent money to this, people are getting their hands dirty. So obviously, I mean, look at, I'm assuming today, when you get cold calls from people, how many people are trying to sell you refrigerators and air conditioners? Very few. Most of the cold calls you'll be getting will be, "You need a car loan or a personal loan or whatever," right? It's a little crazy. I don't want to blame competition or anything like that. But people who had no business going into rural lending went into it very, very quickly. And so that is one aspect, just oversupply. The second part happened, and before I say this, I want you to understand that I am not blaming RBI as the regulator. But when the deregulation happened in April 2022, where they removed pricing caps and also removed overleveraging caps, RBI assumed that the industry was mature enough to manage these things. And that was really the right thing to do. But unfortunately, people thought that they could price away the risk of giving out more loans. And that never works, according to me. So anyway, there are many, many other factors at play. But what I feel is that this is probably the larger issues. Understood. Just one last question. Assuming that—is it fair to assume that given that X- bucket collection— Thank you, Mr. Pranav. We request you to get back to the question queue. Any follow-up? Thank you. Our next question is from line of Sukriti from Laburnum Capital. Please go ahead. Hi, Aalok. I just want to understand a little bit more about the MSME, the INR 400 crore MSME book. Now, I'm looking at this. It's typically the same ticket size or a little less than what I see pure MFIs do in their individual MFI loans. Now, when you run this, I understand as a separate network, different branches, and there's a credit underwriting layer that you have. I'm actually a bit surprised to see the yield here, 35%-36%, when the individual MFI loans that I see are much, much lower. So I have two questions on this. And I think earlier in this call, also, you did mention that this customer is a little MFI plus customer, right? So why is this guy coming to you when he could get a INR 1 lakh individual MFI loan from, let's say, Ujjivan at 22%? And second, on the regulatory aspect, given the yields, what is the risk of that? So those are the two questions on MSME. Typically, our interest rates in MSME are between 28%-32%. And as far as this segment goes, this is a little par for the course because the operating costs in MSME are much, much higher than what they are in MSME. As you said, we require a separate credit. The rejection rate is very, very high. And largely, this is what the market has determined that what the cost is giving money to these customers. I'll say it is individual level collection. Yeah. It's individual level doorstep collections. In a JLG group, you have to go down to the group level and collect from maybe five, six, seven customers. Here, it's individual door-to-door collections. That gets expensive very, very quickly. Thank you. I understand from your perspective why this makes sense. This is probably the right yield. The question is from the customer's perspective. Why is he, who is an MFI plus customer, coming to you at 36% for an INR 80,000 loan when he will probably get a INR 1 lakh unsecured loan at 22%-23% without having to go through this credit underwriting? I mean, this is a rabbit hole that really I don't want to get into. I mean, eventually, it will always lead to, okay, why does an MFI customer come to me? Why don't they go to SBI and get a loan at 8% or 9%? I mean, there is no right answer for this except the fact that there are many other things except interest rates. We are providing doorstep customers. The customer doesn't have to find the loan. We find the customer to give him the loan, right? So that is one aspect. Second aspect is that I have a very, very quick turnaround. And I'm very paper-friendly. I don't ask for 30 different documents, tweak 30 knobs to get a result and stuff. So clearly, the customer is seeing some advantage in paying a higher yield with me versus going for maybe a more complicated but a lower yield. I've always said this that a customer who's extremely price-sensitive, I've probably lost that customer. That's not who I'm really servicing. They'll probably wind up going to HDFC Bank or whoever else. When I'm in the market for a car loan, I make 20 calls because I'm in the business, and even two basis points different, I'll go with that person because for me, it's kind of an enjoyable experience of trying to get the lowest possible rate that I can manage. But I'm not a microfinance customer, or I'm not an MSME customer. So yeah, I mean, if you look at it, the market is pretty huge even in that case, and we're talking here about INR 400 crore of AUM with us. I would probably look at your question also on the opportunity, I mean, that we could probably go into those customers as well, but having said that, most of the SFBs technically push customers with e-NACH. Now, that could be a single larger differentiator because even today, when we try to push e-NACH with the customers, it's not as forthcoming as we would all want to believe it. Yeah. I mean, until we stopped it earlier, we used to take for MSME PDC cheques. The number of rejections we would get because people, not that they were unwilling to give it, but they just didn't have cheques. Jan Dhan doesn't issue chequebooks. So they would have to go to the bank, apply for it, get it mailed in. It would take 30 days, blah, blah, blah. And I would lose the customer. So I don't think that these guys really compare interest rates or yields. They are more looking at the EMIs. And the convenience and the convenience. And really, a difference between a 25% and a 30% is maybe INR 80 bucks a month. Some people don't care about that. Got it. Got it. And on the regulatory scrutiny at these yields, I know you partially answered this that you don't think it's entirely yield. But do you think that. Yes. I mean, question properly. I just heard regulatory scrutiny. Can you repeat yourself? No. We've seen a little bit of crackdown on higher yielding loans. I know you partly answered this question. But the 36% book, it's not. It's not 36%. I think that will be probably with processing fee and a lot of other things also put into. So it's not really 36%. But anyway, let's call it X%. Please. Go ahead. I think the question was about regulatory risk. Now, here. No. Line dropped. Line? No, no. I'm here. I can hear you. Yes. That was the question. So on the regulatory risk, just to kind of address that, to a certain extent, since Arman with its entire AUM is still in the base layer. And second, at least the kind of telescopic inspection that we've gone through in the last two or three years, the rates have been similar, and there have been no major changes in that. And I think that has not been specifically being pointed out by the regulator. Given the overall situation that the kind of servicing that it entails in terms of doorstep recovery process and the entire evaluation mechanism and other things, at least at this point in time, we're kind of confident that that doesn't seem to be a major concern from the regulator's point of view, at least at this point in time. Got it. Got it. Can I ask for— Yeah. Honestly, it's getting a bit difficult to kind of predict what is in the regulator's mind at this point, and so there's a lot of guesswork involved about what they want, what the intent is. I think the intent is quite clear. Don't charge more than you want or than you should, but so when it's like a difference of 5%-10%, obviously, it's easy to determine, but if it's 1% or 2%, I don't know if it becomes that easy, but again, I think if you look at ROAs, ROEs, NIMs, and yields and other factors, and if you look at the complete picture, as long as you are able to justify it in some mechanism given the risk which you are taking and other factors, I think RBI is largely reasonable. The second thing which I just want to say is that, typically speaking, RBI does not do any knee-jerk, and I'm not aware of the specific four companies that they have come out against in the past few weeks, but I know for a fact before they come out with anything public, there are many months of discussions and other things that go on. Even in the case of Paytm and other things, discussions happen not over months but over years, so I would say RBI is largely reasonable, and I would assume that if something like that, this is coming for Arman or Namra, hopefully, I should be able to see it coming and take corrective actions, whatever is necessary. Today, I don't, and again, don't blame me if I turn out to be wrong. Nowadays, I'm also scared to make predictions because it seems like I'm getting more superstitious as time goes on. But we'll see. We'll monitor it very, very closely. No, no. Absolutely. Listen, point well taken. Can I ask one more question? Yeah, please. Go ahead. On the point about credit having stopped in the industry in this cycle, again, how much of this is companies being cautious and saying, "Look, my customer is over-leveraged," and the industry as a whole after SBI guidance and RBI guidance? And how much of that is a definitive regulatory push that no evergreening, no netting off? That's a good question. I'm not sure how to answer that. As far as I'm concerned, I would say that, as I said earlier, that self-preservation will always trump greed, right? And so if there was fear versus greed, most people would err on the side of fear. And that said, I would say that most of the disbursement which is lowering in the industry is in an interest of self-preservation and not wanting to get into something that they don't know yet how it will evolve, rather than something that RBI has been preaching about lowering unsecured lending and other factors. But I'm sure it's some combination of both. But I would probably weigh the former more than the latter. For mer as in the lender being cautious? Lenders being cautious, yes. Even inquiries, you'll be surprised, but even inquiries have gone down from the customers. Even customers are being cautious now, which is a good sign. Yeah. That's very interesting. Thank you. Thank you. We'll take our last question from the line of Amit Mantri from 2Point2 Capital. Please go ahead. Yeah. Hi, Aalok. My question is on the provisions that we have taken and might need to take going forward. So on the GNPA side, we seem to be adequately covered. But given that we have a large PAR book, 30 to 90 days of almost 8% in microfinance, and you mentioned that that number continues to see increase because X- bucket collection, the collection efficiency is still low. So how are we provisioned on this PAR book, which is non-GNPA but will probably flow through in the next few months? I think the simple answer is that we are probably not. I mean, the management overlay has been kept high. The overall provision that you see there is about INR 114 crore for the consolidated, and of which, I mean, largely about 50-odd% would turn out to be the GNPA provision. And the balance kind of stays towards the 31-90-day bucket kind of a period. So at this point of time, with the management overlay, I think we feel fairly confident that that should be our board provisioned number. But again, if need be, there would be sufficient action that can be taken to kind of pad up the provision if situations were to go further down from here. But then that's something in the future that we have to see. Second is, when we're talking of these soft buckets, let's also kind of look at how these soft performance buckets have performed historically also. I mean, every challenging period may not be very similar to the past. But still, in the past, be it COVID, be it demonetization earlier, we've seen customers, especially in the softer bucket, which has meant who are overdue for one to four installments, generally have come back much faster once the kind of cycle starts to improve. But so yeah, I think Amit, if our margins and profits allow, we'll definitely bump up that overlay as much as we can. But that does not seem, I don't see impairment cost coming down in the next quarter or anything like that. So we'll just have to take it in good stride. Sure. Thank you. Thank you very much. Thank you. Ladies and gentlemen, that was our last question for the day. I would now like to hand the conference over to Mr. Mayank Mistry for closing comments. Thank you all for joining the call today. Thank you to the management team of Arman Financial Services for giving us the opportunity to host the call. Thank you, everyone. Thank you, everyone. Thank you. Thank you. On behalf of JM Financial, that concludes this conference. We thank you for joining us, and you may now disconnect your lines.