Ladies and gentlemen, good day, and welcome to AU Small Finance Bank Q1 FY 2024 earnings conference call. 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 this 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. Prince Tiwari, Head of Investor Relations and FIG. Thank you, over to you, sir. Thank you, Nirav, good evening, everyone, and welcome to AU Small Finance Bank's earnings call for the first quarter of FY 2024. We sincerely thank you all for joining on the weekend. The format for today's call will be very similar to what we have been doing for the last few quarters, where we will start with an opening remarks from the senior management of the bank for about first 20-25 minutes, followed by a Q&A session of about 30-35 minutes for everyone who's present on the call. To start the call, I'll now request our MD and CEO, Mr. Sanjay Agarwal, to share his thoughts on the overall performance of the bank and his outlook for the bank. He'll be followed by ED, Mr. Uttam Tibrewal, who will share his thoughts on the operating highlights for the quarter. Besides them, we also have senior members of the management to answer any questions that you may have. For the benefit of everyone, as is customary, I would request to keep your questions to two, and if needed, join back in the queue so that everyone can have a chance to ask the questions. With that, I'll now request Sanjay Ji, to start the today's call and share his thoughts for the bank's performance. Over to you, sir. Thank you, Prince. Good evening, namaskar. I extend my heartfelt appreciation for each of your presence today, given it's weekend and a holiday. I'm delighted to address you all today and provide an update on the bank's first quarter performance and our vision for the future. Before going into the details, I want to express my gratitude for your unwavering support and confidence in our bank, which continuously drives us to surpass boundaries. On the macro front, the global economy continued to face heightened uncertainty in the first quarter amidst banking system fragility in certain countries, persisting geopolitical tensions, and moderating but elevated inflations. Despite these global headwinds, the Indian economy and the domestic financial systems remain resilient. Most high-frequency indicators show that India continues to be on the path of sustained growth. Inflation is moderating, current account deficit is narrowing, foreign exchange reserves are on rise. The Indian financial system is robust. Rural economy has continued to recover, government spendings and infrastructure CapEx programs. The monsoon is likely to support the credit demand in rural and semi-urban areas. In whole, India is shining and poised for a sustained period of growth. In this backdrop, let me share my thoughts on the first quarter performance. The quarter gone by was the 25th quarter of our banking journey. Our performance remained consistent with the expected outcomes, driven by our team's unwavering commitment. Our deposits grew by 27% on a yearly basis, which is now around INR 63,315 crores. We started the financial year with excess liquidity. Our LCR as on 31st March was 151%. On an average, we had 39% additional liquidity during the quarter than regulatory required. Our focus was to take advantage of this excess liquidity that we carried from last quarter, and we consciously chose to keep away from high-cost deposits and instead focus on retail and granular deposits. Our retail term deposits increased by 8%, even though our overall deposits remained similar to last quarter. During the quarter, we have reduced our peak deposit rates by 25 basis points across savings and retail term deposits and continued to place strong emphasis on CASA retail deposits, particularly by enhancing our current account offerings. Going forward, we want to pivot our liability strategy more towards our products and services and our brand pull rather than interest rates alone. Our cost of funds has increased by 29 basis points, reaching to 6.58%, as deposits continue to reprice. On a year-on-year basis, our overall deposit cost has increased by 86 basis points since June 2022. This is compared to 250 basis points increase in system-wide interest rates during the same period. As we had previously communicated during our last year fundraise, the impact of interest rate changes typically takes about 12- 18 months to fully manifest, and we are now in that cycle. We're expecting the pace of increase to be gradual from here on, as bulk of the repricing is behind us. This increase in deposit costs and drag from higher liquidity impacted our margins by 38 basis points this quarter, but it remains within the guided range. We might experience a spill of additional 10 basis points for the full year compared to our earlier projection. We have increased our disbursement yields by 29 basis points during this quarter, which help us our margins in the coming year. 66% of our loan book is fixed rate, and 34% is floating rate. Our fixed-rate retail book will be advantageous once interest rate reversal start, as we have seen in past cycles. We will be likely the beneficiaries on the margin front in the coming years. We will look to maintain mix of fixed to floating rate around similar levels now. During the quarter, our asset growth was strong, growing at 76% on quarter-to-quarter basis. This was supported by surplus liquidity buffers and strong credit demand. As we have maintained in the past, our asset growth will be deposit-led, and we will calibrate further to the extent we raise cost-effective retail deposits. Our focus on as-assets is to prioritize yields and the underwriting filters. You will hear more in this from Uttam. Our asset quality trends continuity within the range, with gross NPA increasing by 10 basis points quarter-over-quarter to reach 1.76%. Quarter 1 generally is a sluggish period due to seasonality, which is the case this quarter as well, and we expect that asset quality to remain within the range without any surprises. Cost-to-income ratio for quarter 1 was 65%, and our endeavor is to keep the full year cost of to income around the range of FY 2023. Cost-to-income ratio will remain under pressure as we continue to invest in credit cards and digital initiatives. Also invest in building our transaction banking capability this year. The quarter saw us of increasing our net profit at INR 387 crore, an increase of 44% year-on-year. The resulting ROA and ROA stood at 1.7 and 13.8% respectively. The bank remains well capitalized, with our CRAR at 21.5%. We continue to increase our distribution and have added 11 new touchpoints this quarter. In all, we plan to add 60+ new branches and touchpoints in the current financial year. We are continuously enhancing our tech ecosystem and digital properties. A lot of work is going on internally towards automation and digitization. We are working with global tech giants like Visa, Salesforce, NPCI, Oracle, Accenture, hope to build operational excellence and efficiency through tech in the coming years. One particular project which I am excited about is the end-to-end digital journey for our vehicle business, with the help of front-end solution from Salesforce and integrated with back-end BRE from FICO. Once implemented successfully, in the first phase, it will help us in straight-through processing of our personal cars and two-wheeler loan disbursements. Notably, our digital products continue to scale. The credit card business has now reached INR 6 lakh-plus live credit cards, with monthly spend across, crossing around INR 1,250 crores in June 2023. We opened 49,000-plus savings accounts via Video Banking and AU0101 in quarter one. Our outlook for the future is to move to our long-term vision, right? I sincerely hope that you had a chance to go through our recently released annual report for FY 2022, 2023, themed on building a sustainable bank which can last forever. As India prepares steps to become a $10 trillion economy by 2035, we strongly believe that AU has an incredible opportunity to play a crucial role in this journey. We firmly believe that our first year, first 10 years are very important in this forever journey, out of which we have already completed first six years seamlessly. We have navigated the challenges with a positive mindset, focusing primarily on strengthening our core and growing with a purpose. A significant emphasis has been placed on building a robust foundation and driving content. A lot of leadership depth has been created. Implementation of our SBU framework has helped us strengthen our organizational structure and efficiency. Over the next four years, that is by 2027, when we complete 10 years as a bank, we are preparing ourselves by focusing on platform development, customer centricity, financial inclusion, innovation, and adopting a forward-looking approach. By this time, we hope to attain a significant size and scale, and grow our distribution, onboard a large customer base, establish our brand, and strengthen trust of our all stakeholders. Beyond 2027, we can leverage our size and scale, benefiting from strong brand presence, nationwide distribution, advanced digital properties, tech-driven initiatives, and robust balance sheet. This combination will enhance the bank relevance and create opportunities for sustained growth at a larger scale. Each and every aspect of this readiness is being looked into detail, and we are preparing ourselves ready for the next phase. For me, personally, the focus is to continue strengthening our governance and compliance with a long-term outlook on productivity and efficiency. To prepare ourselves for the next phase of growth and to complete our platform build-out, you will see our initiative around three key functions. First, consolidating our entire digital franchise and products under one umbrella. Second, build out our transaction banking business. Third, which is the most important, is about rural impact and inclusive banking. We remain committed to our core purpose of financial inclusion and refining our products, policy, and processes to strengthen our focus on priority sector lending. As of June 2023, we continue to exceed the requirement of key SFB guidelines, as mentioned in our presentation. However, as we grow, our priority sector requirement also increases. While we have a buffer in other categories, we are now concentrating on a small and marginal farmer lending and creating a rural banking team to fund such farmers directly and through partnership with Farmer Producer Organisation and banking correspondents. This quarter, we had to buy PSLC amounting to INR 860 crore in small and marginal farmer to meet the requirement of in this subcategory and create buffers. I firmly believe that we don't have to buy anything more from our PSL requirement in this financial, rather, we might have a surplus in other category. HR and brand build out remain other key focus area. We are already working on many initiative around becoming an employer of choice, not only for our employees, but for the market at large. I firmly believe that compelling story will unfold once we complete 10 year as a bank. By 2027, we envision a larger and stronger balance sheet with stable leadership and well-tested, mature platform. Our increased brand pull and accelerated customer acquisition can provide us a large base for cross-sell and monetization, thereby bringing economic efficiencies. We're optimistic and seek your continued support as we track record speaks volume about delivering our promises. To conclude, for FY 2024, efforts are underway to improve efficiency and productivity, as evidenced by the stable employee headcount in last 18 months despite business growth. Asset quality is well managed within the range, and we do not anticipate any surprises in credit cost. Our endeavors to align our profitability and return ratios within the range of FY 2023. Our various investment surplus investment avenues, including Video Banking, QR codes, wealth, credit card, etc., shall start yielding profitably from 2025 and will help us unlocking operating leverage. Our size will give us advantage beyond 2027, and we are strategically preparing ourselves for that phase. In closing, I stand before you today, not only as a CEO, but as a custodian of your trust. I assure you that we will continue to push the boundaries of what is possible to create sustainable value and to deliver on our promises. Our path may be challenging, but I am confident that with your unwavering support, we will triumph. Thank you once again for joining us. Over to Uttam for operational highlights for this quarter. Thank you. Thank you, Sanjay. Namaskar, good evening, everyone. Wish you an abundance of health and happiness. I will now share an update on all our businesses for the first quarter of financial year 2023, 2024. Despite the caution on global economic activity, our economic continues to exhibit resilience and has emerged as a beacon of growth, with moderating inflation and strong momentum observed in various high-frequency indicators. The rural economy is also experiencing a positive trend, higher government spending and uptick in kharif sowing will provide momentum. Last quarter also saw worries around delayed monsoon and El Niño effect. The recent coverage and intensity of monsoon augurs well. We continue to remain watchful and agile moving forward. The bank has demonstrated resilience while effectively navigating the higher interest rate and year-on-year liquidity challenges. Reinforcing our legacy of 28 years, we continue to focus on India's Bharat, the semi-urban and rural demographics of India, and continue towards socio-economic development of these geographies via impactful lending. The bank continues to strengthen lending to small and marginal farmers, FPOs, small businesses, and social entrepreneurs in Bharat. The deposit book has largely got repriced, leading to some contraction in our net interest margins. However, this was well expected, and during the quarter, the bank was also able to increase its disbursements yield by 29 bps on a quarter-on-quarter basis. This may help us in the coming years to better manage our NIMs. First, to start with an update on digital banking. Happy to share that this quarter, we launched one-of-a-kind digital journeys to acquire current account and corporate salary accounts via Video Banking. That hold great promise for our future growth and scalability. We continue to leverage technology to enhance our customer experience and expand our reach in the digital banking space. Our presence in digital banking has yielded promising outcomes, with around 50,000 saving account customers acquired through AU 0101 digital platform and Video Banking in Q1 FY 2024. Currently, the collective deposit balance of Video Banking portfolio exceeds INR 1,300 crore, with a year-on-year growth of 82%. We are excited by the growing digital adoption of AU 0101 platform. We now have nearly 21 lakh customers registered on AU 0101 app, a growth of 90% on a year-on-year basis. Seventy-four percent of these registered customers were active on AU 0101 in Q1 FY 2024, a healthy indicator for engaged customers with the bank. Our digital acquisition efforts were complemented by several high engagement, brand-led campaigns on digital and social media platforms, helping to drive 82% higher traffic on our website year on year, demonstrating greater customer affinity and consideration towards the brand. To further strengthen our digital product portfolio, we introduced four key solutions. First, bill payments through Video Banking, allowing our customers, especially senior citizens, to pay utility bills at their convenience. Second, we have enabled UPI Lite on saving accounts, enabling seamless single-click transactions for small purchases. Third, we have launched reward programs, AU Rewardz, for our liability customers, offering loyalty points for every banking transaction, thus strengthening customer engagement. Fourth, we have introduced digital agreements for lockers, making us a truly digital bank. We sincerely urge you to experience digital products and these solutions and share your valuable feedbacks. Moving towards our liability franchise. As Sanjay mentioned, our overall deposits grew by 27% year-on-year to INR 69,315 crores. This was similar to our deposit base in March 2023. The bank chose to consume surplus liquidity buffers, however, on a quarter-on-quarter basis, our retail term deposits saw a growth of 8%. During the quarter, we also reduced our peak deposit rates by 25 basis points across savings accounts and term deposits. In Q1 FY24, our CASA deposits witnessed a year-on-year growth of 14%, reaching INR 24,286 crores compared to INR 21,216 crores in Q1 FY23. The CASA ratio of Q1 FY24 stands at 35%, compared to 38% as of March 2023, as the CASA deposits saw outflow from our large transacting government saving accounts, which was a normal course of business. Our CASA plus retail TD mix remains steady, contributing 68% of our total deposits in this quarter. Our Q1 customer acquisition for AU IV, Royale, and Platinum constituted 36% of our total new savings accounts customers, including DSBD, onboarded during Q1. Our higher variant current account acquisition was 49% of total current accounts sourced in Q1 FY 2024. This reflects our key strategic focus on acquisition of good quality and engaged customers to build a sustainable and granular liabilities franchise. We have been focused on improving the product mix of our liabilities franchise with a comprehensive suite of value-added products spanning payments, investments, and insurance to become primary banker to every customer. Cross-sell of asset products to branch banking customers grew by 29% year-on-year, with dispersals of INR 635 crores in Q1. Our PPC stands at 1.61 for savings account customers, including dormant and DSBD accounts, and two for current accounts, excluding dormant. Similarly, around 57% of savings and 68% of current accounts customers have actively transacted with us in Q1 FY 2024. The recent launch of our rewards program should enhance early activation engagement with our savings customers. One key initiative started last year was to build out our wealth proposition, helping us to engage more with our retail and urban customers and provide them complete bouquet of investment solutions. We have started to see some initial progress. Besides SIPs, mutual funds, and three-in-one trading accounts, we are also onboarding customers on PMS and AIF offerings. Our mutual fund AUM grew by 48% quarter-on-quarter to INR 247 crores in Q1. Moving to credit card business. Our credit card proposition continues to scale with 1.25 lakh cards issued in Q1, a 54% growth year-on-year. We have geared up acquisition through Video Banking, and are pleased to share that we have issued more than 70,000 of these cards via video KYC in Q1. Overall, we have over 6 lakh live credit cards with monthly spends crossing INR 1,250 crore in June 2023. 69% of these sourced credit card customers are new to bank, with 26% comprising of new to credit card itself. A quick update on personal loan business, which is completely driven through digital acquisition. We have disbursed INR 940 crore till date through AU 0101 app and our website. On the UPI QR front, our over 10 lakh UPI QRs witnessed 17% quarterly growth in value of transactions. Our QR-based lending solution for merchants has also seen a good start with close to INR 250 crores disbursed till Q1 FY 2024, all of which has been disbursed fully digitally on the AU 0101 platform. Moving on to our asset franchise. During the quarter, credit demand remained strong, with disbursements sustaining across product segments. Our total gross advance grew by 29% year-on-year and 8% quarter-on-quarter to reach INR 63,635 crores. Our GNPA saw an increase of 10 bps during the quarter, reaching 1.76%. This is quite a seasonal and a normalized phenomena for the first half of a financial year. The long-term asset quality should remain range-bound. Starting with wheels now. This quarter, the vehicle industry sold 53.61 lakh units, showing 4% growth year-on-year and 12% growth quarter-on-quarter. Strong quarterly growth was visible in the tractor and commercial vehicle segment, with 33% and 22% respectively. Keeping with industry trends, we disbursed INR 4,091 crores in Q1, a 10% growth quarter-on-quarter, at an IRR of 14.66% and an increase of 22 bps sequentially. Our average ticket size remained around INR 5 lakhs on disbursements and INR 3.1 lakhs at total asset level, excluding two-wheelers. As of 30 June, 2023, the total loan portfolio gross of securitization of these stood at INR 24,441 crores through 8.82 lakh live loans, comprising of 60% new vehicles and 40% used. While the personal segment contributed 43%, the commercial vehicle segment and tractor segment contributed to 47% and 10% respectively. Gross NPA stands at 2.2%, improved 13 bps on year-on-year basis. Coming on to our housing finance business, we maintained our steady pace in this quarter. Our home loan business saw disbursement growth by 32% year-on-year to INR 572 crores, and the total portfolio has now reached to INR 4,698 crores, comprising over 44,000 loans with an average ticket size of INR 11.71 lakhs, and a portfolio yield of 11.7% with GNP of 0.4%. At present, home loans are offered at 240+ branches of the bank through a plug-and-play model, and we may scale this distribution gradually as required. Notably, being an affordable housing book, much of our book is also eligible for long-term re-refinance from NHB. Moving on to our Secured Business Loans. Our distinctive SBL business model focuses on providing loans for productive business purposes while adopting a relationship-based approach. SBL Business continues to see positive traction with disbursements at INR 1,407 crores in Q1, a growth of 10% year-on-year. As on 30th June 2023, our loan portfolio gross of securitization stands at INR 19,994 crores, with portfolio AUM of 15% across 1.86 lakh live customers. Our average ticket size stands at INR 10.4 lakhs across 2.31 lakh loan accounts, and our GNPA increased by 20 bps quarter-on-quarter to 2.7%. Coming now to commercial banking. Commercial banking plays a vital role in building retail franchise for the bank and provides liability cross-sell opportunity along with general CASA book. The commercial banking portfolio grew by 57% year-over-year to reach portfolio of INR 13,461 crores as of June 2023. In Q1 FY24, commercial banking disbursed a volume of INR 2,419 crores, with two main businesses of business banking and agri banking accounting for 75% of the total disbursements. GNPA for commercial banking stands at 0.2%. Gross advances for business banking stands at INR 5,510 crores, with total fund-based disbursement growing by 4% sequentially at INR 1,047 crores. The growth in portfolios was driven by leveraging our branch network, leads from existing customers, and cross-sell to existing current account customers. Business banking GNPA stands at 0.2%. This quarter, Agri banking saw disbursement of INR 755 crores, with total book crossing INR 4,335 crores portfolio mark. As on 30th June, 2023, Agri banking has reached more than 81,000 small and marginal farmers via funding 191 FPOs, with total disbursements of INR 24.75 crores. Agri banking GNPA stands at 0.4%. To conclude, our efforts across branch expansion, product innovation, customer engagement, people capabilities, and continued digital innovations have positioned us to scale our business well. This year, our core resolve is to strengthen efficiencies across productivity, cost optimization, and distribution through technology investments, while building a low-cost and sustainable deposit franchise. We are actively working towards sustainably expanding the current account deposit book, leveraging our comprehensive merchant solutions and the strong foundation of our SBL and business banking customer base. We have started the project to operationalize our AD-I license and have received our SWIFT membership. We intend to build a tech-led comprehensive product suite for SME and individual customers in this space. In the coming quarters, we are committed to providing accessible and inclusive financial services to reach the unreachables, foster financial literacy, promote entrepreneurship, and facilitate sustainable development. We continue to align our business objectives with the broader goal of driving positive impact and making a meaningful difference with purpose-driven banking for a stronger Bharat. We are optimistic about the opportunities that lie in our area of strength, that is the value of India. I'm eager to share more positive updates with you in the upcoming quarters. Till then, stay safe, stay healthy. Thank you. Over to Prince for Q&A. Thank you, Uttamji, and thank you, Sanjayji. Nirav, we can now open for question and answers. Thank you very much. We will now begin the question and answer session. Participants who wish to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. If you're using a speakerphone, please pick up your handset while asking a question. This is required to ensure optimum audio quality on the call. Should your line have any disturbance, you may be asked to return to the question queue if you do not have a clear connection. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Participants, you may press star and one to ask a question. The first question is from the line of Renish from ICICI Securities. Please go ahead. Yeah. Hi, sir. Just one question on the deposit side. In Q1 FY 2024, it seems that, you know, we have entirely exhausted the excess liquidity, and incremental growth in Q1 was funded by this excess liquidity. At the same time, we have also cut our deposit rate. Going ahead, in absence of excess liquidity plus the deposit rate cut, sir, what gives you the confidence that we'll be able to accelerate deposit mobilization in coming quarters? I think, Rishi would give you more color on this, but our sense is just that, you know, we have come a long way. You know, our last four years CAGR on deposit growth is around 35%, north of 35%, right? We have built more or less on everything, whether it's about offering better rates, it's offering better product services. I think, you know, as we already commented that, you know, that we want to have a deposit-led asset growth strategy more on table than anything else. We can't have only our interest rate as our only attraction toward depositors, right? We need to build around other things also. We have built lot, many things, right? From credit card, our wealth management practice, cross-selling options from insurance team, and all those things, right? Idea is to be really try out to build deposit. I know it's will remain tough for us. It's a high interest regime scenario. Everybody is putting their best effort to build deposit. I think as a team, we are trying our best, you know, so that let's play on other things also, and want to give it our best try for maybe a quarter and two, and then see how we really want to play a long inning. We are putting, you know, lot much into this, and our key focus area is to really build- ... very granular, very sticky, low-cost money, right? That's the first objective as a bank, right? I think it's an effort from our side, but let's see how we play our inning in the long run. Rishi, you want to really comment more on this? Hi, Renish, Rishi Dhariwal here. Basically, it's like this, that, you know, our journey has been to granularize our savings book, and, in any case, the overall share of the retail deposits in the overall liabilities of the bank. To tell you some numbers, we have close to 120,000 Platinum family savings account, which is essentially the emerging affluent, kind of, customers that we've acquired over the last 27 months. Incrementally, for the last 12 months, two-thirds of the new acquisitions are Royal and Platinum, savings account, you know, and we continue to ramp up, more, you know, these, now also, right? For example, you know, in the 1 quarter, 72% of all the accounts acquired by the branch banking team are Royale Platinum accounts. Which are INR 25,000 and INR 1 lakh average balance family savings accounts. These are really emerging affluent kind of customers where the ultimate rate offered by us is much lower on the savings side. We've grown our distribution to 551 across branches over the last two years. Our deposits are more diversified because we've built our channels on current account, enterprise salary, NR, TASC, and the IV channel. You know, our expansion of geographical footprint from Mumbai to Guwahati and Jammu to Kochi actually gives us the capability and confidence to acquire customers across various segments from salaried, self-employed, small business owners, non-resident, TASC, HNI. Like what Sanjay said, you know, it is a calibrated decision to reduce the premium on our deposits compared to mid-sized universal banks. We have traveled the journey of gradually reducing the spread to other banks over the last six years. I would believe that the current reduction is part of that journey. We will, I mean, make our best efforts and make sure that this is something that we are able to deliver. Right. Rishi, just to follow up on that. Let's say the 25 basis points, you know, deposit rate cut in this quarter, and flattish growth sequentially on deposits. Ideally, you are saying there is no strong correlation between rate cut and the, let's say, muted deposit on sequential basis. I mean, we will be able to make up in coming quarters with the product proposition? Yes, that is the effort that we are making. Got it. Got it. Thank you, Rishi. My second question is on the FBL. You know, unlike other products, our, lending rate in FBL is static at around 15%. Despite that, you know, our, let's say, sequential growth in this segment has been muted, since last, six months. In Q4, it was 2%, this quarter it is also 2.5%. This quarter, we have seen the offent fee moving up in FBL. If you can just quantitatively tell us, you know, what is going on this segment? Is there any, stress building up or, you know, let's say, customers are not ready to, take any extra, pain on the EMI side? Vivek here. You've asked a couple of questions. Yeah, hi, Renish, Vivek here. We've asked a couple of questions. One, on the asset quality, it's more of a cyclic thing, you know, we always have this uptick in the Q1 on the GNPA number, and that's nothing unusual about it. Historically, you know, this has been the case, right? Second, on the, you know, on the demand side, in the last quarter also, we've given some of the colors that, you know, this segment which caters to the, you know, the marginal customer base, you know, the end user of those customers, and which had a sort of a K-shaped recovery, post-COVID. It's coming up well, and the, you know, disbursement would grow, though we had a muted this thing, but the ground situation has pretty changed in terms of the demand. Incrementally, we might we would see the numbers coming back to the normal. On the rate front, obviously, since we are operating on a bank platform now, customer also has expectation on the rate front. plus Got it. sort of a competitive pressure also from the smaller NBFCs, though we don't have a pan-India sort of a competition, but there is a competitive pressure in the pockets, you know, around the franchisee. Got it. Got it. Renesh, Prince here. Just to add, you know, I mean, the overall NPA on the SBL segment, as Vivek said, obviously, it's more seasonal. I mean, in any case, you'd note that it has only gone up by about 20 basis points, right? Yeah, yeah. Obviously, we came out of a period where the, after COVID, the NPLs were very elevated, and it has since been considerably coming down and has now kind of settled, you know. From here onwards, it's gonna be like what we have commented in the presentation as well, that's gonna be range bound from here. You typically start seeing, you know, first quarter, second quarter, probably some amount of slippages, and then a lot of recovery around the third and the fourth quarter when the cash flows improve at the ground level, right? on the overall growth front, I think on a year-over-year basis, we have grown by about 18% in SBL. you know, I think, we, adjusted for the first quarter, we are saying we, in any case, have guided that some of these matured businesses, which are, you know, around INR 20,000+ crore, which have historically we have got an advantage, we will grow somewhere between 20-25% only, not necessarily, look at a very, extraordinary growth here. Got it. Thank you, everyone. It's very helpful. Thank you. Next question is from the line of Nitin Aggarwal from Motilal Oswal Financial Services. Please go ahead. Hi, good evening, everyone. We appreciate the tough decisions the bank is taking in building a strong and resilient bank which can stand tall over the long term. Maybe a few questions. Like, first, in the past, we mentioned about the competitive pressures which may be difficult to pass on higher rates in terms of the disbursement yield. This quarter we have seen a good 29 basis point increase in disbursement yield. How do you see the trend going forward, which signals that now we are seeing, like, a better ability to pass on these rates? Yeah, again, you know, my friend, I would only say that, you know, this is the tough environment, you know, because, you know, rising rate and then too intense competition for asset build up, you know, every financial institution is making themselves countable on the ground, right? It's not easy to really pass on everything, but, you know, but team has done a very good job in last 1 quarter that, you know, they are able to pass on around 30 bips, you know. I think incrementally, we will do better here, that's my sense. Overall, our 64% book is around fixed, you know? in this kind of scenario, it's looks very ugly. In the longer run, when the interest rate cycles will again start reversing, then this book will start yielding you again, right? We need to be little patient here, right? Because it's just a matter of about 25 bps here and there. We are trying our best. We need to grow ourselves, you know. We have to raise deposits, and it has to be deposit-led growth strategy, you know. Again, as I narrated in my commentary that, you know, we are in our seventh year of banking, right? It will take around whole 10 year to really understand every part of the banking, right? Every minute thing about banking, right? This is another of that phase where when interest rates are high, there is intense competition on the ground for both deposits and assets, you know, how we team, how we as a team, you know, perform on the ground, right? It has to be more on the basis of hope. You know, and we believe that the way we have built ourselves in last 28 years, you know, that should help us, you know, in terms of our product offering, tad around it, the customer affection towards us, you know. I think that's the overall thing, you know. Vivek or Bhaskar, do you want to add on something, the whole interest rate on your assets and whatever? Nitin, Bhaskar here. On the wheels front, what we have done by design itself, when the cost of fund went, started going up, we have this ability to fortunately have a product mix in store with us, between new, used, tractor, two-wheeler. We have this entire product range, which helps us kind of moderate our offerings accordingly, so that we are able to give that balance and build a rate direction, and that is something which has helped us. Fortunately, all the vehicle models also are doing decently well in the market, and we've having a vertical and having a position which is one where we have put ourselves correctly placed, we have been able to take advantage of that, and that product mix is where we have been able to manage the yields on the wheels part. Yeah, Vivek, go ahead, Vivek. Yeah, Nitin, on the commercial, asset side, you know, we've already increased yields, because obviously this was book, which was a floating rate book. We already have seen that uptick, by 100 bps, from if you see Q1 last year and this, Q1 FY24. Also incrementally, we are able to, you know, pass on the higher cost of fund, to our, you know, borrower. Obviously, you know, that, since this is asset is, sort of a floating rate asset, right, linked to a floating rate benchmark, we are able to pass on the incremental costs so far. Yeah. All right. Thank you. The second question is on the AD-1 license. How do you see this contributing to the revenue and business growth over FY 25, once everything is in place? What are the plans to apply for the universal banking license also? Nitin, again, work in progress. You know, the capacity of AD-1 license creating a large pool is there, right? We are, you know, want to build in that way only, but it will take some time. I strongly believe that next year will be too early to comment that, you know, it will have a large income pool for us or revenue pool for us. I think, I think in three-year term, you will see it on a size and scale, because we will service 360 degree around it, you know, whether it's retail, whether wholesale, whether it's remittance, whether it's about credit and all those things. Difficult to comment as of now that, you know, what it will have an impact on our P&L next year, but it will have the positive one only, right? It can't have negative one, right? It will add on to our overall revenue pool for on our balance sheet, right? But the quantum is to be, you know, maybe we will only can comment once we complete our whole overall build-up time and then overall. What's your other question? Okay. Again, I would say, we are on the process, right? Because we got that AD-1 license in April only, and we need to implement that first. You know, again, we have to showcase to the regulator that we can build it up to their expectations and can service the customer as a whole. In my opinion, after AD-1 license, you know, we have now everything to offer for a customer in comparison to universal banks offering, right? It is well-rounded now. Whatever we are not doing is our own choice. You know, it's not being stopped by any regulation. For a customer, we are now, to be very honest, full-fledged bank in next one year. Internally, of course, there are certain things which everybody expect us to become universal. I think we are not in hurry, you know. Let's take things one by one, and let's see how we want to progress for next couple of years and then see, you know, how we want to go to the next level. Just lastly, one data point on the incremental cost of funds, while we have not raised much deposits this quarter, but as compared to, say, the cost of fund of 6.6 that you reported for the quarter, where will you approximate the incremental cost of fund is right now? Okay. Nitin Aggarwal, I think incremental disbursement yields and cost of funds, actually, we have kind of stopped giving for last couple of quarters, as you know. Yes, you'll have to understand that or probably intuitively, you know, we have a CASA mix, our CASA ratio or cost of SA has been around 5.6, that we, you already know. You know, the savings accounts, because we have been focusing more on retail, and retail typically ends up coming in the highest slab, right? Which we have kept for two years-three years, which is around 7.75%. You make a educated guess around the blended rate, and that's where we would be. Okay, sure. Thank you, Benson. Thanks so much. Wish you all the best. Thank you. Participants, you may press star 1 to ask a question. Next question is from the line of Madhuchanda Dey from Moneycontrol Pro. Please go ahead. Hi, am I audible? Yes, ma'am. Yes, ma'am, you are. I have a slightly long-term question. As you alluded to your completion of 10-year journey in 2027. Question is, in that journey, we are at 1.7% kind of ROA now. Where do you see the ROA? Especially my question comes from, you know, the cost-to-income ratio trajectory. Where do we see ourselves in that journey by that time? Very, very long term expectation around these things. If you ask me, you know, because it is not only a combination of cost to income and all those things, because interest rate cycles will also play a very important role in estimating all those things. I strongly believe that AU has remained in some of their last period in the last six years, also around north of 2% ROA and ROA around 16%. I strongly believe by building up the entire revenue pool from credit card, QR codes, personal loan space, TBG, AD-1 license, you know, everything will become profitable in the next four years, right? We'll get a scale, right? Maybe we double our balance sheet in the next four years, right? I think everything will be very different, right? In that sense that, you know, cost-to-income ratio can be around 55, 56, you know, our ROA can be north of 2% again. I think this is a journey, but, you know, don't hold me for these numbers, right? I'm saying because the entire other data point, whether it's about size of the balance sheet, whether it's about the overall distribution, the kind of investment we made over the years, you know, like, you know, credit card will become profitable from FY 2024, 2025, right? Or may become breakeven in that year. You know, our TBG will get evolved, you know, that will have extra revenue pool. We'll have maybe around 10 million customers, we'll have more options around cross-sell, around of insurance, wealth and everything. What we have done in last six years is this, that we have put everything in place now, and that has given us more cost-to-income ratio. I think everything will get mature in next two to three years. I think that's. You know, the most important thing for us is that let's not be only one-sided kind of bank, which only focus on ROA and ROA for next four years. Let's see holistically that AU is, will be really coming up as a very formidable franchise for a customer, right? Which serves them, you know, entire product range, you know. That's my sense, right? That's what I'm saying you. I think the quality and content will be very high in next four years, and it eventually will lead us to a better ROA and ROA, and for a sustainable future. Yeah, thanks a lot. I'm just repeating the question which has not been asked live over here. Ma'am. Ma'am, sorry, but your voice is breaking. May I request you to come in a better reception area, please? Hi, my question. We lost the participant. The next question is from the line of Shailesh Kanani from Centrum Broking. Please go ahead. Thanks for the opportunity. Good evening, everyone. I wanted to know, what is the size of ECLGS in our book, and how is it classified as of now? Is it standard, or what is the amount of it? ECLGS? Exposure, if any, in the book. No. Yeah, it is about INR 560 crores. INR 160 crores. How is it classified in the book? It's typically, I mean, the behavior is very similar to the overall book. Bulk of it is standard, and there is some amount of, I think, NPA. On the underlying contract, obviously, you know that ECLGS is guaranteed by the government. On the underlying contract, it's very similar to the overall book behavior. Okay. We classify them as NPA? Yes, we do classify them as NPA the moment it turns NPA. Despite of it that, it is guaranteed by government? Yes. Yes. Okay, thanks a lot. Thank you. Next question is from the line of Kunal Shah from Citigroup. Please go ahead. Yeah. Sorry, I joined in late and the questions are repeated. Firstly, when we look at it in terms of, like, the choice between margins and growth, and given that you highlighted that you have reduced fixed deposit rates and maybe the focus is on retail rather than the wholesale. If that leads to some kind of a compromise on growth, would you do that just to sustain the margins somewhere around 5.5%- 5.7% odd? Maybe would allow it to dilute more given the competition? Kunal, hi, Prince here. Obviously, I think, what we have as a philosophy or a strategy as a bank, what we had adopted, is we want to have a deposit-led asset growth, right. And within that deposit also, we are very clear that we are focusing more around, retail deposits, right. Our preference for current accounts, CASA plus retail and general deposits remains very, very high. To that extent, obviously, like, first quarter, we had a lot of liquidity. We consumed that, and we grew very well. You saw that. Even going forward also, I think when we have said that we'll be able to maintain margins of, you know, the range that you talked about, we have considered, you know, what kind of deposit growth we can do at this point of, at this pricing. As Sanjay said again, some time back, is that what we are trying to do here is we are trying to see if we can compete on products and services instead of competing on interest rate alone on the deposit side. We'll see how it goes for the next couple of quarters, and then we'll take a call. All in all, we are very confident that we'll be able to deliver the growth that we have talked about with this kind of margins. Even though, like, LCR is now down to almost, like, 119, if you look at the period, and if deposits doesn't come in, then still, like, we are confident in terms of at least sustaining, like, 25%+ growth? Yeah, I mean, at 119 also, it's about 20%, higher than what the regulatory is. Typically, I mean, we have our internal policies of keeping it around 110 plus. We will definitely have enough and more room. Yogesh jain, you want to add anything? Additionally, we have non-SLR book, liquid book, which comes for liquidity. We have around INR 3,500 crore book, which is non-SLR investment, more than its cost of funds. That is also there other than this LCR. Sure. Secondly, in terms of credit costs. Now here also we have utilized the COVID buffer, and what is left out, is say, relatively lower. Given the uptick in the slippages, how should one assume in terms of the credit cost, trajectory? Because I think maybe this quarter had the advantage of utilization to the extent of almost like, say, INR 60 odd crores and INR 15 odd crores on restructured. Maybe if that gets over, then should we ideally see the credit cost also increasing up? Kunal, again, there, what we just talked about earlier, that typically, Q1 is a seasonally weak quarter, and to that extent, slippages obviously are slightly higher than. We don't really see that playing out for the full year. For the full year, our credit cost guidance doesn't change very dramatically from where we were in FY23, right? Overall, whatever cash flows we are seeing on the ground, whatever customer feedbacks we are getting, I think, continues to be quite positive. Adjusting for the seasonality for the full year, our credit costs, we don't really see a material change in our credit cost. Okay. Okay, yeah. Thank you. Thank you. Next question is from the line of Prakhar Agarwal from Elara Capital. Please go ahead. Thanks for this opportunity. Just a couple of questions. One is in follow-up to last question of Kunal, which he asked about INR 62 crore that we utilized this quarter. What could be a thought process of using this buffer that we build up over a period of time and then utilizing essentially in 1 quarter? What was the thought process of that? Prakhar, contingency, if you remember, we had created during a period when obviously a lot of uncertainty was there around the COVID period. Given that specific contingent event has gone through, I think our the advice that we have received, we have been utilizing that. We don't really envisage, given that we do a secured lending and our historical credit cost hasn't been, especially loss given defaults, hasn't been very strong, very high. We have definitely, I think we are already at CRAR 70+, if you see, whereas historically, we used to keep it about 30%-40%. Enough buffer is already there in the balance sheet in terms of provisioning. At this stage, we don't really think that, you know, a contingency, additional contingency provision is required. Of course, we have about INR 40 crore of floating provisioning that we have created. Also the fact that the overall structure of the book itself, right? What we talked about last quarter as well, that incrementally, the home loan and the commercial banking book, which are more, you know, better credit book, that has gone up to almost 30% in the overall advances. That obviously is, you know, expected to have further reduction in our slippages as well as the credit cost requirements. Okay, what would be your normalized level of credit cost? Not for 2024, but from a business model perspective, what should ideally be a normalized level of credit cost for the business that you run? Prakhar, this is Sanjay Desai. Oh, sorry. Hi, Prakhar, this is Sanjay Desai. You know, we run around seven, eight businesses now. You know, we run vehicle business, which is more in retail, more in semi-urban areas. Then we run SBL again, which is more of a semi-urban, rural area, you know. Then, of course, house loan too is like this. We also run business banking, agri banking, NBFC, REC book, which is more about urban customers. It's a more of a balance sheet-driven approach, you know. Then we are also want to build our PL and credit card business. I think it's a mix of everything. My sense is that FY 23 was one of the best year for the overall asset quality perspective. From here on, you know, there would be some normalization happening in next three-five years, you know. You know, in next three-five years, our book composition will get under changed dramatically, because, you know, as of now, commercial banking is only around 25%, right? It may go up to 30%-35% in times to come, right? I think in the longer run, I still strongly believe that AU GNPA should remain in the range of 1.5%-1.75%, and our net NPA should remain around 0.5%-0.6%. We need to build all your calculation around this, right? Ultimate credit cost, you know, an entire book should not exceed 0.5%. That's my overall sense. Got it. Sorry, if I can just add, Prakhar, we continue to have additionally INR 100 crores on the restructured book as well, right? That provision also continues to stay, which is over and above the provisioning PCR. The basis of asking this was, Prince, the fact that most of the other banks, if you ask them, though, they are in wake of the fact that they probably have to transition to India over a period of time, and given the profitability that we as a system are seeing through, most of the other banks have started to add in bits and pieces, or at least maintain that. In that context, if we have to transition to India in FY 25, and we are using this buffer up, that probably creates a corridor of uncertainty at that point in time. Prakhar, you know, because, you know, we, we make our ECL every quarter, you know, the ECL calculation every quarter, and need to submit to the regulator also. If you go by that whole calculation, it is more surplus for us than a negative for us, right? In that sense only, as Prince already commented, that our NCLs are very low, right? We are average around 75% is PCR coverage, you know, and we are having contingency provisions for restructure assets. We have one floating contingency reserve. I think overall, we strongly believe that we have covered up, you know, everything, you know, and more than the, more than maybe double the requirement, right? That is why we are not going overly conservative to build more buffers. If time, if in anything, you know, which I strongly believe that next two, three years, you know, there's no point for discussion around asset quality. It will remain in the range. You know, that's the sense we are getting it, right? You know, let's be very fair to everybody there and, you know, let's do whatever is required rather than become more conservatively build more buffers, which we have done in past. Requirement, you know, if anything comes in future, then we'll see. As of now, I'm very strong that we will not require for next two, three years. Got it. Just one more question in terms of ROA. While this quarter, we have taken a large part of hit on margins, which you probably highlighted in last call as well, how do you look at ROA for the full year, what will be the improvement levers in ROA? Again, Prakhar, if you go back to, you know, in our presentation, slide number, this is seven, right? We have, you know, talked about the profitability and ROA and how we as a bank think that despite the challenges around the margins, we will be able to deliver profitability around similar ranges as last year. Again, other income, the fee income under the credit card, the entire, you know, third-party distribution, the wealth management that we are building, and some of these elements of our investments, which we have been doing over the past few years, will start kicking in, and that should. support the other income profile. Hopefully that should well cover up for the kind of margin reduction that we have seen or we are going to see. Also the fact that overall cost to income also, I think we are trying to see if we can keep very similar to last year level, so some amount of cost to asset benefit can come in. Let's see. I think as of yet, we are quite confident that we'll be able to maintain around similar levels. I wouldn't say, you know, what exactly will be the percentage, but very closer to FY 2023 levels is where we are targeting. Got it. That is it from my end. Thanks a lot. Thank you. Next question is from the line of Ashlesh Sonje from Kotak Securities. Please go ahead. Hello. Hi, team. Good evening. Just one question from my side. If I look at the slippage number for the quarter, which came in at around 2.2% on an annualized basis, I appreciate that this was a seasonally weak quarter when it comes to asset quality. If I look at the previous year, we also reported a similar slippage of 2.2%, where about 30% of those slippages came from the restructured book, right? Given that we had a much lower restructured book now, would you say that there were any one-offs in the current quarter in terms of slippages? Even this quarter as well, Ashlesh, around very close to 30% has flown from restructured book. Oh, okay. Okay. Of the forward slippages that has happened, on a net basis. Great. That was the only question I had. Thank you. Thank you. Next question is from the line of Param Subrahmanian from Nomura. Please go ahead. Yeah, hi. Thanks for taking my question. I wanted to ask on the credit card business, what sort of credit cost are we building into the business model going ahead? Generally, if you look at it, for the large players, you know, the credit cost in this business is in the range of 5%-6%. If you have a INR 2,000 crore book here, that looks like, you know, INR 100 crore-INR 120 crore of provisions on an run-rate basis. That can cause a delta to our, you know, credit cost going ahead. Is that something we are building in, or are we looking at lower credit costs in that business? Thank you, Param. This is Mayank. I head the credit card business. Normally, if you have seen, the 5%, 6%, which you are talking about, is 2% remains in the GNPA and rest goes to the credit, where the write-off has been done. Similarly, most of the banks operate or card issuers operate in this trajectory only. Almost we are also as of now, we are quite low than this, but yes, as the business build up, because we'll do more of, NTV business, we are also thinking of keeping it in the same range. Okay. That would mean an uptick from the current book level, because last year you reported INR 150 crore of total credit cost, this year we are looking at similar, you know, credit costs. Going ahead, this is going to pick up, right? Purely from the credit card book itself, it should mathematically just pick up because of that. No, I don't think it will be pick up because, there are a lot of, if you see, lot of, INR 2,000 crores of book has already been built up, and we have got a seasoning of 18 months on the, on a book of around INR 700-800 crores already. I think, Param, I think one important point to highlight there is this INR 2,000 crore is technically out of pocket, right? Not all of it is credit exposure, because credit card, as you know, the revolving, you know, only the revolvers or people who have taken EMI have a credit risk attached. is almost 60%-70% of the book pays on time, right? Sorry, Mayank, if you want to add. Yeah. Param, if you see only 5% of the book remains in 30+ buckets. Rest all is either current or they are just in the next days. Yeah, if I look at it, Mayank, the book is up, like, more than three and a half times YOY. If I look at the lagged NPA, your NPA is 1.6, on a lagged basis, it's more like 5%, right? Is that not the ballpark correct number? No, no, this is not the correct number. The lagged number is much lower than this. Okay, fair enough. When we're talking about the credit card business breaking even, you know, the lending yield here is also 13%. If you look at some of the larger players, on a book basis, at least the lending yield looks higher, at about 16%, 17%, at least. Is that, you know, something that your view needs to pick up when we're talking about this business breaking even in FY25? Yeah, that's it from me. Thanks. This is because our EMI book is yet to build up, and we are in the process to getting it built up. We have seen the large issuers, their EMI books are pretty much in the range of 25%-30% of the ENR. We are still at around 15% odd. Once we build up to that level, you'll see our percentage interest margins going up. Okay. Okay, thanks a lot. All the best. Thank you. Thank you. Thanks, Param. As there are no further questions, I now hand the conference over to Mr. Prince Tiwari for closing comments. Yeah. Thank you, Nirav, and thank you everyone for dialing in today. If you have any residual questions, you can always reach out to the IR team, and we'll be more than happy to provide the answers. Thank you for dialing in. On behalf of AU, have a good night, and see you again next quarter. Thank you very much. Thank you so much. Thank you so much. Thank you. On behalf of AU Small Finance Bank, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.