Please note that this conference is being recorded. I now hand the conference over to Mr. Prince Tiwari, Head of Investor Relations at AU Small Finance Bank. Thank you, and over to you, Sir. Thank you, Dayo. Hi everyone. Good evening and a warm welcome to AU Small Finance Bank's earnings calls for the fourth quarter and the annual results for the financial year FY2024. We thank you all for joining the call and hope you have had a good chance to go through the presentation that we have uploaded on our website as well as this stock exchange. The format for today's call will be very similar to last few calls, where we will have opening remarks from the management for the first 10-15 minutes, followed by 40-45 minutes of question and answers from the participating analysts and investors. To start the call, we will have our Founder and CEO, Mr. Sanjay Agarwal, share his thoughts on the overall performance and strategy of the bank. Beside him, we have our two deputy CEOs, Mr. Uttam Tibrewal and Mr. Rajeev Yadav, along with other senior members of our management team, on the call today to answer any questions that you may have. For the benefit of everyone, and so that we can take questions from everyone, we would humbly request everyone to keep the number of questions for participants restricted to two and join back in the queue in case you have further questions. With that, I will now request our Founder and CEO, Mr. Sanjay Agarwal, to start today's call by sharing his thoughts on the overall bank's performance as well as the outlook. Thanks, Prince. Good evening and namaskar to everyone. It's my pleasure to welcome you all today. Before I dive into bank performance and future plans, I want to take a moment to express my sincere gratitude to everyone, including the Government of India, regulators, customers, our employees, analysts, investors, and all other stakeholders for your unwavering support and confidence in our bank, which truly motivate us every single day. As many of you know, building a successful bank is a complex process, and your trust fuels our commitment to excellence. Further, we presented our 3-year roadmap to you last month in Mumbai, and I always look forward to your constructive feedback and incorporate the same for the continued success of our bank. You will see reflections of this in our execution over the next 1-3 years. On the macro front, India's inflation trend remains range-bound with strong GDP growth last quarter. However, the global geopolitics, developing situation in the Middle East, and the global macro indicators remain key factors for policymakers to consider in the near future. India's economic landscape is surging forward, with GDP growth projected to be among the highest globally. We are likely to be a $5 trillion economy by 2027 and a $30 trillion economy when we complete 100 years of independence in 1947. This robust growth fuels optimism for business and entrepreneurs like me. Regulations are streamlining, making it easier to do business in India. Initiatives like GST are simplifying taxation, reducing reactive culture, and boosting economic activity. While navigating the regulatory landscape might require some initial effort, the nation's commitment to transparency and digitization is making compliance smoother. Additionally, efforts to harmonize regulation to ensure a level playing field across platforms will further simplify compliance for businesses. We are in the midst of the celebration of democracy in the first quarter of this year, with the entire nation going into general elections. I'm very excited about this election in the largest electorate of the world and the opportunity it presents to all the citizens to exercise their basic right to vote. There could be some break in business continuity during quarter one due to multi-phase elections, but we don't see the impact too materially in our annual FY25 performance. I continue to be very excited about this period of growth, and it coincides with our own philosophy of building AU forever. The first phase of our forever journey, that is AU Act 2027, is the foundational period of the first 10 years of our banking journey. I'm equally excited about the confluence of powerful forces driving our bank forward. India's economic rise and its demographic dividend of 1.4 billion population create a vast canvas of opportunity. We are well positioned to capitalize on this with our expansive national presence around 2,383 physical touchpoints, complemented by our robust digital channels. Furthermore, we offer a comprehensive suite of products and a proven track record of over two decades of consistent growth while maintaining pristine asset quality. Our unwavering commitment to being a customer-centricity, coupled with our deep understanding of risk management and seasoned leadership teams, positions us for continued success. At the moment, the only factor outside our direct control is the elevated interest rate, and we don't anticipate a significant near-term reduction given the global headwinds. The NIMs are likely to continue to remain under pressure due to this and also due to the heightened competition for low-cost deposits. We continue to monitor the same and take all necessary measures to minimize the impact. Further, our asset quality remains intact, and we don't see any asset quality challenge in the near term. We are currently focusing on calibrating our new investment and leveraging the existing investments. Cost-to-income ratio will remain range-bound in the near future and should start tapering off in two to three years. There are ongoing discussions that regulators may come with some roadmap for universal bank license application for small finance banks. As I had highlighted during our investor day last month, with an AD1 license and given our size and scale, the brand recognition that AU has received, many advantages of being a universal bank are already in place for us. However, we are keen to be a complete universal bank, strictly following the regulatory guidance around the same. Before I get into the business and operation head of the bank, let me first talk about our merger with Fincare and reiterate my key strategy priorities for the next three years. I'm thrilled to announce the successful completion of our merger with Fincare Small Finance Bank. This strategic move positions the newly expanded AU for remarkable growth and leadership in the pan-India retail banking landscape. I wish to express my deep gratitude to all stakeholders for this merger, and more specifically to the regulatory bodies for one of the fastest merger approvals in the Indian banking sector, received in just 4.5 months. This swift approval is a testament to the well-planned approach and strong synergies between our institutions. Our institutions have highly complementary strengths. Fincare brings a robust geographic footprint, particularly in South India, while AU offers a comprehensive product suite backed by cutting-edge digital capabilities. This strategic combination allows us to leverage the strength for significant market expansion and deeper customer penetration. With a combined customer base of nearly 1.1 crore and an employee strength of over 46,000 dedicated employees, the merger positions us as a formidable financial entity. Our physical presence expands to 2,383 touchpoints across 21 states and four union territories, giving us a pan-India footprint. Apart from a brick-and-mortar presence, we have a body and soul present in all these locations, giving us an extensive network which ensures we are closer to our customers than ever before and fast-forwards our distribution build-out by many years. Our immediate focus is on ensuring a smooth and seamless integration within the next 9-12 months. We have meticulously crafted an integration blueprint that prioritizes minimal disruption for all stakeholders, employees, and customers. We have provided more details on this same in our quarter four investor presentation. From 1st April, our interest rates have been aligned across savings and fixed deposits. As a next step, we are working for Fincare customers to gain access to AU flagship products, both on deposits and asset side. Deposit products, including our digital offerings, will be available to all new customers in Fincare branches within quarter one this year only. Asset products like deals will follow in the coming quarters. Following up on our investor discussion last month, I would like to reiterate our top strategic priorities for the next three years. These priorities have been designed with the objective of returning to a level of ROA with which this business model comes out. The first priority is around increasing the disbursement share of high ROA, high-yielding assets like vehicle loans, microbusiness loans, microfinance, among others. With expanded distribution and deeper geographies, we are confident to grow this segment to approximately 70%-75% of our portfolio, up from current 70% by 2027. We're also calibrating our low and medium ROA businesses. On the housing loan business, we have asked the team to originate more MBL businesses given they operate in similar geographies and similar markets. On the business banking and agribanking business, teams are working together to drive more synergies. These are a few examples. The second priority is around driving branch profitability. We aim to achieve a healthy current account book, targeting at least 7.5% of deposits from approximately 5% currently. Additionally, we have asked all asset verticals as well as businesses like credit cards, wealth, commercial banking to focus more on leveraging the branch presence to originate their business to improve individual branch-level profitability. We will endeavor to reach around 65% of branches, which are live as of December 2023, to be profitable by 2027. Another priority is around calibrating our investments. With our core digital platform now established, future investment will be focused on maximizing potential. For the credit card business, we will moderate issuance to around FY24 levels to control upfront acquisition costs. Moreover, we'll focus on increasing the proportion of cards short-term branches. Video banking and QR codes will act as channels for liabilities and customer acquisition and support branch banking. To give you I think I want to give you some highlights around our operational fourth quarter. So we delivered an ROA of 1.6% as well as FY24 gross of exceptional items related to merger expenses. We put in ROAs around 1.5%. Our asset quality improved by 26 basis points with strong collection efforts in the last quarter, with a gross NPA of 1.47% of gross loan portfolio, which is 1.83% in quarter three. We expect our asset quality to remain stronger over the years. Our deposits registered 26% year-on-year growth, in my opinion, phenomenal performance, crossing the INR 87,000 crore mark. Our GLP, gross loan portfolio, also grew sustainably as it grew by 28% year-on-year, and now it's around INR 82,000 crore, and net of securitization is around INR 74,000 crore. We will continue to grow our balance sheet by maybe around 25% annually over the next three years. I think this is achievable in the way we have grown ourselves in the last maybe 7 years. I think the growth of 25% is there for us in the next two to three years. While witnessing a healthy 9% growth in our overall deposits compared to the preceding quarter, our CASA also has increased by 10% quarter-on-quarter. The combination of CASA plus retail-term deposits now accounts for 64% of our deposits, with CASA contributing 33%. As I highlighted in my last quarter's commentary, our current account franchise build-out has not been to the extent we would have liked, partly because of limitations of the platform, partly because of excessive competition in this zone. We are in the midst of reworking our current account strategy and are aspiring to increase our cut to at least 7.5% of deposits by 2027. Operationalization of AD1 business, which includes state forex and revised current account led QR code business strategy, are likely to enhance our current account proposition. The major risk nowadays is coming from the AML side and has attained prominence with increased cybercrime and identity theft. We remain vigilant and have implemented robust systems and processes to effectively mitigate the risks associated, including our AD1 business. To conclude, I'm deeply committed to building one of the most trusted and respected financial institutions in India. We, as a team, strive to be a full-service bank meeting the diverse needs of our customers. This dedication to multiple stakeholders can be complex, but it's essential for our long-term success. As your CEO and custody of your trust, I stand before you today with a sincere commitment. We will continue to push boundaries, seeking innovative ways to create sustainable value and deliver our promises. The path ahead may be challenging, but I am confident that with your unwavering support, we will overcome them together. Thank you once again. Now I would like to hand over to Prince again. For your Q&A, please? Yes. Thank you so much. Thank you. Thank you, Sanjay Ji. Ray, with that, we can now open the call for Q&A. Sure. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from the line of Renish from ICICI. Please go ahead. Yeah. Hi, sir. Congrats on our good setup number. So just two questions from my side. So one on the credit cost side. So in PPT, we have mentioned about the MFI portfolio on a steady check basis will have 2.5%-3% kind of a credit cost. And when we look at the MFI portfolio of Fincare, which is currently INR 8,000 crore, on which Fincare has already provided 1.5%, so the incremental 1.5% works out to be INR 100 crore. So that we will provide in FY2025, right, sir? Yeah. Yeah. Yeah, Renish. Okay. Sorry. Good evening. Yeah, sir. Okay. After factoring that one-time impact, what should be the steady state credit cost for a merge entity, sir, given our standalone credit cost has already been normalized to 70 basis point, including credit card cost of INR 45 crore? So what should be the steady state credit cost for the merge entity? Sir, Renish, I think if you go back to March 18th presentation on the strategy that we had done, and we had laid out what each individual product group-wise credit cost on advances. We also said that it will depend on the mix that we go forward because the mix is also changing compared to where it was historically. So as you rightly said, I think the normalized book without MFI has now reached about 70 basis points on average advances. And of course, to that extent, MFI will come up, and we have already articulated that it will be about 10% of the book. So I think anything about 1%-1.1% on overall advances and anything around about 70-75 basis points on total assets is where we should work with. Got it. Got it. So to summarize, 100-110 basis points should be the steady state credit cost, X, this INR 100 crore of what we have to provide to take this 1.5%-3%, correct? Yes. In FY25? Yes, sir. Yes, sir, yes, sir. So again, for the clarification, around 0.75 on total assets and 1.10 around on the advances. Got it. Got it. And sir, next question is on the NIM. Okay. So considering that we still believe that there could be a cost of funds increase by 40-45 basis points in FY25, so does that lead to further NIM contraction from Q4 exit level, or let's say we have some leeway to sustain the NIM in FY25? Yes, Renish. So again, Prince here. So basically, you're right. On a standalone basis, as we have articulated, we do expect some more costs built up because there's still a gap between the cost of funds on the book and the incremental cost of funds, and which we had articulated. And as well as in the presentation, also, we have said that another 40-45 basis points cost of funds can go up from here on an average basis for the next financial year because this financial year, while the cost was 680, the exit cost for us has been 698 in Q4, right? Having said that, definitely, there is a merger on the cards, and we have already committed and started working at one entity with 1st April. So Fincare obviously comes with a slightly higher margin. On a merger basis, our endeavor would be to protect the margins on the overall level for next financial year, at least. Yeah. So Renish, yeah, yeah. So just to supplement Prince. So we want to defend 1.6 ROA next year too. So I think there would be some cost coming maybe around 30 basis points because of the increased cost of fund. But we acquired Fincare, so we'll have the high yield book from there. And also, we also want to put our incrementally, we are passing on some cost to the borrower in our yield book or SBL book. And one is really see the mix changing up, right? So we want to do more book from disbursement from high yield book, which has microfinance, yield, MBL, gold loan, all these things, right? So as of now, the whole endeavor is to defend 1.6 ROA for next year. And I strongly believe that I don't see first rate cut maybe first six months. If at all rate cut comes, the only impact will be visible next year. Got it. Got it. So I don't think that there would be any help from interest rate kind of scenario this financial year. So we are building up in that way that can we defend 1.6%. Got it. Just a clarification. So when we say 1.6% ROA, this is including that INR 100 crore of cost? Yes, yes, yes. So everything. Everything. Everything we have incorporated maybe around 0.75 on total assets, the NPAs, and all those things. So yeah. So Renish, Vimal decides you are taking INR 100 crore only. So 3% total credit cost on MFI portfolio. So it includes our credit cost also, historical credit cost also. So the additional credit cost will be 1.5% over the year, which will create a buffer. Yeah. So let's say in PPT, we have disclosed that our existing credit cost on MFI is 1.5%. So incrementally, we have to provide 1%-1.5% in FY2025 to take that credit cost to 3%, right? Yeah, right. Absolutely right. Absolutely right. On INR 8,000 crore of portfolio. Okay. Got it. I have a few more, but maybe I will take it offline. Thank you and best of luck, Sanjay. Thanks, Renish. Thanks for your questions. Maybe you can join back the queue in case. Sure. Sure, sure. Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from Kunal Shah from Citi. Please go ahead. Yeah. Congratulations. So firstly, when we look at it in terms of the integration expenses, what we have highlighted of INR 300-odd crore, so out of that, we mentioned INR 77 crore is stamp duty, another 50-60, which will be a BAU. And balance has been already taken care of by Fincare. And when we look at it, the net worth which is being given at 2,421 on the merged basis, that is after taking into account those merger-related expenses? Yes. Yes, yes, Kunal. Yes. Okay. So it's already been factored in by Fincare. Incrementally, what we will see by way of the integration will be only INR 50-60 odd crores in BAU expenses. That's it. Yes. Yes, yes, yes, yes. The rest all is accounted for now. Yes, yes. So deal is maybe now in other words, you can calculate deal is around it's not about INR 2,400 crore net worth. It is around INR 2,550, INR 570 kind of net worth deal. Okay. No, sir. I was just seeing in terms of what we expected as additional transactional expenses, INR 300 crore. So that is. Yeah. Fincare has a super, super I would say quarter three, quarter four. So they built up more buffers, and we are able to put more expenses in that year itself so that there is no one-off in coming years. 50-60 odd crore INR in next two years will be treated as business-as-usual kind of expense. Sure. And secondly, in terms of the segment-wise ROA, okay, so it's quite an interesting one in terms of 1.6% ROA and we had given the retail and the commercial, no doubt Fincare will get added into this, which will be relatively ROA accretive. But besides this, where could we see the levers in terms of what we are seeing, say, credit card? Let's say a drag of almost 27 odd basis points. And I think regulatory drag would also continue. So would there be any other levers besides Fincare out there and the OPEX out there, or if we just look at this particular slide, which is there, yeah, on 37? So no, no. I believe that retail asset ROA will go up. It may not be in immediate terms, but in a 12-18 period, one period, you will see ROA of retail asset will go up because we are focusing more on yield and MBL, maybe microfinance business. Of course, microfinance business has a cap of 10% of total advances. So that will go up. The second lever, which I strongly believe, is this that the branch banking has to be more efficient and profitable by building CAR because our CAR is around 5%, right? And even if we increase it by 1%, right, it saves us a lot of money. So we want to really focus more on branch banking as an overall franchise. And we have invested a lot in terms of a lot, maybe product, in the sense that credit card, wealth, insurance, AD1, so many products are there. So the branch banking need to leverage those products so that they become more profitable. So second lever will be coming from there. So I think if you add up these two things, I can save at least maybe 10-20 bps in coming year, right? So that's our whole strategy that and of course, the treasury and all those things won't come profitable unless and then there is a cut in interest rate. So these are two levers. And I think commercial banking also, we just want to be more rational around our whole franchise there. So I think that the approach they are giving us 2.75%-3% kind of ROA, but I think they can also move up a little bit up. So I think I'll be focusing more on high-yield businesses in those assets also. So I think these are three, four levers which will help us to defend 1.6% at least this year. And we'll look for a better ROA next year onwards. Operator request has been initiated. If you'd like to cancel this request, please press star zero again. But, credit card will also we are moderating in terms of our issuance. So, we'll be issuing same level of last year. And I think we have taken a lot many measures to really see the early delinquencies or early challenges in our asset quality. So that already been arrested in last quarter. And we really want to watch another two quarters. This is Operator Ram. Help you? I think these are certain measures we have taken, and it will start coming up in next two quarters itself. Okay. Okay. Thank you. All the best here. Yeah. Thanks, Kunal. Thank you. Thank you. Participants who wish to ask a question, please press star and one on a touch-tone telephone. Ladies and gentlemen, to ask questions, you may press star and one. The next question is from the line of Nitish from Investec. Please go ahead. Thanks for the conversation and congratulations for a good set of performance in Q4. Firstly, on credit card business, if you can spell out the drag on P&L that the credit card business has had in this quarter, which you have shared in the analyst feed for nine months, that would be useful. How should we think about the profitability of credit card portfolio over next year and subsequent years? Mayank will speak more on this, but I'll just give you some high numbers there that we have gone back to our drawing board in last quarter and have really want to calibrate the entire credit card business to really learn more deep about every aspect. So we'll not be issuing more than 600,000 credit cards this year too. And we really want to watch the space out in the sense that what the real sense of credit cost there, right? Again, the initial feedback is around 6 or 6.5 on an average basis for the entire year. We are also expecting some more circulars, more direction from regulators to deregulate this industry or this vertical more in the sense that they want to put more stringent norms so that this industry becomes more stronger or in terms of there's no risk to the system. So difficult to assess when it will become profitable or when we'll achieve the break-even. But I think one thing is sure that for next two years, it's not getting profitable. And beyond two years, the visibility is not there because it has a lot many variables like the cost of interest, any norms which will come from the RBI about the expense side. We are hearing so many things in the newspaper. And of course, how our credit cost can get stabilized, right? So there are certain variables which we really want to comment maybe next year that how we really want to make it profitable. But we want to we want to play we want to build this vertical because this vertical remains an important vertical for any bank. And we have done a lot many good things in terms of issuance, in terms of card spend per card, the acceptability of people. Generally, people have accepted our credit card to a very high level, right? And the acceptance has gone up every month. So we are really interested in this business, but we really want to take one pause, learn more, go more deep, and then take the final view in next 2-3 years that how will we want to become profitable, right? Mayank, you want to add on something? Yeah. Yeah. Hi, Jitish. Just to add upon what Sanjay said, we have been reviewing and doing a lot of calibrations in the business. You will see a continuous improvement in our operating matrices also quarter-over-quarter. Apart from this, on the credit side, a lot of calibrations we have taken in last 9-12 months as we told in the last on the 18th March presentation also. So good part is that we are seeing a positive impact of the calibrations we have undertaken, and the early trends are quite visible. This quarter, we have seen similar credit cost as what we have in actual amount what was there in the last quarter despite of the increase in ENR book. So we are quite positive around it. All our early indicators, be it non-payment on the due dates, 30+ in 3 months, are quite promising. Nevertheless, we are continuously monitoring our portfolio, and you will see the results coming. One more thing, Nitish. Sorry. Nitish. Nitish, we also have changed our strategy around video banking and QR code. Video banking and QR code is no longer a product for us. Actually, we have changed them from product to channel. Video banking had got merged with branch banking team now. There also, the investment will not be there because now the whole leverage will happen through branch banking team. Similarly, in the QR code also, we don't want to put QR code as a separate business. Rather, we want to put a QR code to our current account acquisition kind of strategy, right? I think there also, the QR code will become profitable, right? It's more a value proposition than a product. That two initiative will also help us to cut cost in that two initiatives. Sure, sure. So you shared a number around INR 200 crore of drag because of credit cards for nine months. If you can share that number for full year FY 2024, that would be useful. We have already given that, Vivek. On the SBU-wise profitability, the digital side, I think you can assume 90% is credit cards only. Slide number? 37. You can refer that. I think it's 200 and? 68. 68 crore. So you can assume 90% of that to be coming from credit cards. Okay. Sure, sure. And I see on incremental disbursement yields, we see some improvement in this portfolio. But in housing loan and microbusiness loans, the incremental at least the on-book yields have not changed for last three, four quarters. So any data point on how the incremental yields are behaving in these two portfolios, microbusiness loan and home loans? So two things here, Nitish. One, after acquiring Fincare, so in South market, we have seen that on MBL business, that team do around 18% kind of yield. So we really want to focus more in South market through the Fincare unit because MBL is more competitive in North nowadays, right? So we are not getting space there. But fortunately, Fincare team has done a decent job in terms of yield there. So we really want to capitalize our positioning in those markets. And you will see yield uptake as we move forward, right? And second, we haven't invested a lot in our MBL franchise in last two years, but now focus has come back. And as I commented earlier also, that we really want to build more ROA, high ROA business. So there may be a case where the yield is lesser, but the ROA proposition in overall profit will go up from these businesses, right? And we really don't want to build more affordable housing space because, again, affordable housing space to increase rates are not easy, right? So we want to change our strategy more in favor of MBL than AHL because generally, markets are same. The operational ability is same. The customer is also same. So we really want to capitalize our positioning more in MBL than in AHL. Sure, sure. That's it from my side. Thank you. Thank you. The next question is from Prakhar Agarwal from Elara Capital. Please go ahead. Yeah. Hi, sir. Thanks for the opportunity. Just a couple of questions. First, in terms of yields, if you could just highlight if any of the yield adjustments that you have made in several products that you probably made a mention that you are trying to adjust to reach few yields. So any? Prakhar, sorry to interrupt. You are not very clearly audible. Now is it better? Sorry? Is now is it better? Yes, much better. Yeah. So first is I just wanted to understand on yields, any of the products wherein you have tweaked the yields on the freshest version and how if you could just highlight in terms of which product and what yields adjustment that you have made, which is first. And then probably I go ahead with the second question. Yes. So yeah, I think on the Prakhar, again, as we have said earlier, I think given the competitive intensity, there was a bit of challenge around, we were a bit cautious, let's say, in terms of increasing the price and underwriting the business. But I think beginning of quarter four, sometime mid of quarter four, as we had articulated earlier, there has been a letup or some sort of a room is now available in the market where we are seeing that competition is also starting to increase rates, right? And that has given us some room. Maybe if you look at the whole quarter number, it might not give you a very clear picture. But we can say for sure that in March, we have seen while it has been a record March for us, but we have seen a disbursement yield also increase by at least 10-15 basis points, at least in the retail asset product. But maybe Bhaskar Ji can offer you more clear details. Bhaskar Ji, can you please yeah. Yeah. Hi. Hi, Bhaskar Karkera. Just to give you one data point, just the Q3 of FY and the Q4 of FY, we have an incremental of 27 bps on the rate purely just in the. I'm just talking about a three-month period. And the fact that we have already calibrated and the same goes for MBL where we have also while the rate increase, it takes a little more time in MBL. But all the three businesses, which is when I'm talking about the affordable home loan space, even there also, we have been able to increase it by about between the two quarter itself, Q3 to Q4. In the HL business also, we have been able to increase it by 20 bps. So, it is more the traction that we are putting on the ground in terms of all the incremental businesses have to happen at an incremental rate. So you would see it coming as it comes if you come while it will take time to show on the books though. But incrementally, on all the businesses, we are in the trajectory of taking it upwards. So just to add on, Prakhar, one more clarity is this that vehicle business, MBL business, the microfinance business, the gold loans, maybe NBFC funding, and of course, the REG business gave us north of 3% ROA. So the idea is to build more disbursement from this business from this year onwards. So the proportion of disbursement of affordable housing or commercial banking or maybe low ROA businesses will come down. So I think there is one way to increase the yield on this high-yield ROA business. And the other way is to really build more businesses from these high ROA businesses, right? So I think that that's a two-way strategy we are working upon. And you will see that in next six months, when we'll give you the data of disbursement, you will see yourself that it is more high ROA-led businesses we are doing more. That's the complete, complete focused and deliberate strategy. Just one follow-up on this. Do you see further room for a hike in rates? We are probably done with one leg, and now it will be more of a disbursement mix change that you have added, or probably some room is still left on yield adjustments that you can make? Prakhar, it's both ways, right? Because beyond a point, if I want to push more high yield, it can be counterproductive. There can be a slowdown in our growth rate, right? The idea is more to have high ROA-led businesses to grow more, right? So for example, our own estimation says that 75% of disbursement this year would be from high-yield assets. And now the respective businesses need to figure out that for that particular disbursement, at what rate they want to really operate, right? But if your 75% business operate at 3%+ ROA business, eventually, we'll get to 2% ROA in next three to four years when the interest rate cuts starts. That's the overall positioning. Yeah. Prakhar, just to add one last data point on that, I think that we have given on slide number 32, the overall disbursement yield for the entire business for the full quarter went up by 8 basis points. So while Bhaskar Ji said that vehicles went up by about 27-28 basis points, for the full business, it was up by 8 basis points. So you'll start seeing this going up because of the mix as well as the yield push in the future quarters. Got it. Just second thing on one clarification. The INR 300 crore that you said on the merger expenses, a large part of that is already done. So INR 50-60 crore per year is left or only one tranche of INR 50-60 crore is left? So overall, INR 50 crore-INR 60 crore in maybe next 2 to maybe 1 to 2 years. I won't say 3 years, but maybe in the range of 80-30 months. Okay. So INR 50-60 crore over the next two years, probably? Yes. Yes, yes. Okay. That is it from my side. Thank you so much. Thank you. The next question is from Nitin Aggarwal from Motilal Oswal. Please go ahead. Yeah. Hi. Am I audible? Yeah. Yeah, Nitin. Good evening. Yeah. Hi, Sanjay Ji. Good evening, everyone. Congrats on the good results. One question is on the other income. If I look at the fee income, traction for us has been very, very strong, and it has been only getting better. So how sustainable, really, this is? Because fee intensity, if I just look at on a quarterly basis, on the total assets, it's already on the higher side. So how sustainable is this, and what further levers do you see going ahead in FY25? So Nitin, this is, I think, on a sustainable basis only nowadays because the whole insurance, as a third-party product, insurance has stabilized in all sense, right? And the team is doing fantastically well. The organic service incomes and all those things is also now stabilized. So I don't think any challenge there. We have added on the wealth product. I believe that wealth product from here onwards should be more firmed up, so that will give you more income. And fourth, we have just started AD1 licensing AD1 products. So that needs to be more stretched. But the initial feedback is so strong that it will only add to the whole kitty. So I believe that there is only the sustainability is already on the table. It will be more firmed up in coming years. Awesome, Vivek. Thank you so much. And the other question is around the security. Another thing, Nitin, another thing is this that because by acquisition of Fincare, we don't have anything to buy now as a private sector requirement. Rather, we may have some surplus, right? But that needs to be seen in this coming year. But there won't be any negative drag because of our private sector requirement. There can be only better off there, right? So let's see. Right. Of course. And the other thing on securitization because you talked about growing 25% on a steady basis over next two, three years. So should we expect lower securitization now going forward as you will be able to mobilize more resources and make Fincare branches also as productive as the AU? So how should we look at that? Optically, yes. Optically, yes. We don't want to securitize because it has its own cost. But in the interest of CD ratio, in the interest of other things, sometimes we might have to do. But on an overall basis, our securitization requirement will come down in coming years. Right. Thanks, Sanjay Ji. I wish you all the best. Yes, sir. Thanks, Nitin. Thank you. Thank you. The next question is from Param Subramanian from Nomura. Please go ahead. Yeah. Hi. Thanks for taking my question. My first question is on the margin. So could you explain the quarter-on-quarter walk for the margin because the funding cost is only up 8 basis points? So we are seeing 5.5 go to 5.1. So if you could break that up for us, yeah. Yeah. Param, so I think margins will have to look at it in two steps. As we had said last quarter, last quarter's margins had one-off impact from the securitization income, which we had taken for an additional month last quarter because of the matching principle that we followed. So it was one-time adjustment. And because of that, the last quarter's margins and we discussed this on last quarter's call as well. The last quarter's margin should ideally be looked at as 5.3 after adjusting that. And from there, if you add the 10 basis points and the fact that it was a shorter quarter. So to that extent, on an average basis, it's about 1. It's actually 5.14, not 5.1. Okay. 5.45. So hope that clarifies. Okay. The total margin last quarter was 5.3. The rest of that was securitization. Comment you made that on a blended basis, post-merger, we will defend this margin. That is, this 5.1 is the one that you're saying will be defended or the average for the year? We want to defend 1.6 ROA. Okay. Fair enough. Okay. On the fee line and so the comment you made on credit card where you are saying that the pace of issuance is going to be flat while going into next year. So we can see that credit card fee is about INR 300 crore in your P&L and OpEx is about INR 600 crore that you've called out. So how do these numbers get affected next year? Is it more a positive delta or a negative? Nitin, the calculation will be sorry. No, the delta will be positive. Positive, yes. What will happen is, obviously, because we are going to issue lower and the base has increased. So Mayank, you want to add to that? So, Param, what happens: major fee income is through interchange, which comes through the spends happen from the entire base. So whatever you add to it, also, the previously added 1 million card sort of, it will also contribute to the fee income coming to us. So it will increase from here. That would be less, in my opinion. Yes. That will be less. Okay. Okay. Fair enough. And yeah, so we are looking to so this sort of fee trajectory that we are seeing where you're actually your quarter-over-quarter trajectory as well as year-over-year on fee is very strong. Going into next year also, you actually expect this sort of to be maintained despite the credit card issuance going down. On the fee income side? Yeah. Yeah, on fees. Yes. Yeah. So I think this year has been, obviously, coming together of a couple of things. Obviously, there was insurance, sorry, the insurance and the third-party distribution as well as the credit card. There was lesser drag from treasury. In fact, last year, there was a drag from treasury. This year, there was a positive impact, right? So all put together, this year was exceptionally strong for us where we grew the other income by 70% or 69%. Next year, definitely, it's not going to grow by this percentage point, but trajectory will be positive, and this should grow in line with the balance sheet. Is our expectation at this stage? Fair enough. Fair enough. Thanks a lot. Thank you all. Yeah. Thank you. Yeah, Param. Thank you. Thank you. The next question is from Manish Shukla from Axis Capital. Please go ahead. Yeah. Good evening, and thank you for the opportunity. What is the microfinance yield or the rate at which you are lending today? Hi, Manish. Am I audible? Hi, Manish. Hi, Manish. This is Rajeev Yadav. So our lending rates in microfinance are about 25% at this point of time. Rajeev, if RBI were to put any kind of a spread or yield cap, would you still be keen to take MFI to 10% of the book, or you would want to revisit it in that scenario? So the principles of pricing in a bank for a microfinance portfolio are linked to the input variables, which are typically the cost of fund, the operating expenses, the credit cost, and all those variables. So as a bank, we are expected to have a pricing policy which is well defined on those variables and the profit margins that we need to sort of build on. So the broader expectation is that the regulator is keen to track those variables, and therefore, we are able to align our pricing to the conditions, whether it's a worsening condition or an improvement in the condition. But I think from a policy perspective, banks are typically not governed on a margin or a pricing cap for any portfolio. So Manish, just to add on, I'm Sanjay ji's side. Again, I'm repeating that it is about high ROA business taking more business share in overall disbursement. And microfinance gives us a north of 4% ROA. I don't know what cap you are talking about because I haven't heard anything from regulators or anything in newspapers about this whole capping of interest rate. Rather, they have opened up last year, so there is no cap on it. We can actually price 30% also. No? We can. We can. But it's fine, right? We can do that, right? But we are not doing it not because of cap. We're not doing it because of business sense, right? But it's a high ROA business, and it's an inclusion where I strongly believe that Fincare has given us around 770 touchpoints where they operate as a microfinance unit. And those 770 points, we have a body sold, right? And it's a very detailed franchise available. My sense is that because of this distribution, we can actually leverage those touchpoints by building more real business, more SBL business, maybe more affordable housing business in times to come. And I'm very positive about this whole positioning of AU getting around 2,400 touchpoints in the entire country at one go, right? So I think the idea is to really build more high ROA business than really focusing more on yield, right? Because sometimes, high yield is counterproductive. So you need to balance it out, right? But the idea is to really be around 75% of your disbursement happening in north of 3% ROA businesses. Is there any of these touchpoints where you have that happen or is it? Sorry. Manish, sorry. Can't hear you. There's some disturbance in the line. Hello? This looks to be better. Hello. Okay. Sorry. What I was saying is that the rebranding of the Fincare touchpoints to AU touchpoints, has that already happened, or is it yet to happen? Yeah. That's in progress, Manish. So in our urban branches, which is around 138, nearly 90% branches have been rebranded in a transitioning brand. And the rest will be in due course of time. But necessary compliance, necessary information, necessary communication has already been done with the entire stakeholders. Okay. All right. Those are my questions. Thank you. Thanks, Manish. Thank you. The next question is from the line of Aravind R from Sundaram Alternates. Please go ahead. Hello, sir. Thank you so much for the opportunity, and congratulations on the good set of numbers. Expenses for credit cards continuously increase despite having a similar rate of acquisition in third quarter versus fourth quarter. That is one thing. And also, despite our focus on sourcing mainly through branch banking channel, I'm just trying to understand how this could shape over the years. Why is it not coming down? That is one thing. And I mean, it was also said that video banking would be merged with branch banking, and QR would be part of the current account acquisition. So does that mean that there won't be any additional expenses needed for these two? I understand this is a very small part of that INR 200 crore in fourth quarter, but I'm just trying to understand that, yeah. And also on AD1, we already started making investments in this. Is it already part of the expenses OPEX? So Mayank, can you answer credit card? I'm Vivek, AD1. So Aravind, on your first question related to the cost of third quarter versus the fourth quarter, the cost is yes, there was an increment of just 11,000 cards from quarter three to quarter four. That impacts only the sourcing cost, but the rest of the cost remains same because we have already a base which continues to give us cost in the third quarter also, the same base as given the cost in the fourth quarter also. But yes, with the growing book and this quarter, only a book of around INR 400 crore, there was an incremental book which happened. So quarter on quarter, you'll see this operational cost improvement. But yes, the impact will not be a very large impact from quarter to quarter. It takes around 3-4 quarters till the time the average cost looks better. So that was one. The other is on the branch banking. Yes, we do acquire customers from the branch banking team, but we have a multi-distribution channel also. So we acquire through other channels also, and every channel has a different cost which comes through the sort of customer we bring in. So we are recalibrating all those things, and we have done a lot of review undertaken on this. And we will be continuing doing much better business from the branch banking and acquisition channels which already is there in the bank. Thank you. Vivek, can you give me one? Yeah. Hi. See, in terms of the rolling out AD1, we've already rolled out. So the CapEx part has been already incurred. I believe, if you're part of the AMC, the operational part, which will be there, but that's not a very large expense. In terms of revenue, the business has already been rolled out. And since it is, we have a large base of MSME customers as well as individual customers, so the first attempt is to reach out to those customers and maximize the business from across our distribution points, especially in the urban branches. Last one is video banking and QR codes. So we had a very detailed or heavy setup at Mumbai to build our video banking as a product. But we figured out that video banking customers, we are not able to penetrate more. So we decided to build with our branch banking team so that it's become an acquisition channel for us. It's a very less expensive acquisition channel, and we really want to move out from Mumbai too. The bankers can be at Jaipur or maybe somewhere in South, somewhere in East, somewhere in West. So that is one or two things we want to do in the next 2-3 years. But we don't want to invest more in video banking center in Mumbai and want to really leverage the entire acquisition through the branch banking penetration so that we can create a value out of it. And second, QR code also because QR code generally is very competitive in that sense, right? But we really want to build around the current account customers, right? So the additional expense won't be there. So there will be a separate account or separate pool for investment in these strategies. Rather, it will be clubbed with branch banking, and we really want to monetize it through the current account value or maybe value through more penetration in those accounts, right? So that is why in next maybe this year onwards, you won't see the drag from video banking and QR code in our balance sheet. Sure, sir. Just one question if I can ask. What will be the quantum you have invested in AD1? So we won't need any capital investment going forward? Very rough. Any CapEx what we had done in AD1, maybe not more than 10%? 20%. So we incurred around INR 20 crore. Okay. Sure. Sure. And what about branding? CapEx. CapEx? It's a CapEx. So this INR 20 crore is a CapEx, largely on building up that application and related hardware. Sure. Just one last question. Branding expenses, will it continue through next year also? Yeah. We need to build because the idea is to remain really focused on building the deposit franchise, right? Because the whole purpose of banking is to build deposit franchise. And I'm so happy to see that AU is now able to create their name and visibility across this country, and Fincare acquisition has helped us a lot. So I think the visibility of brand is must to build a brand. But I think the idea is more to really make effective branch banking in overall sense, right? So the branding initiative helps those people to build those things, right? So we won't be doing very high, but it has to be recalibrated, or somehow we have to manage it, right? So we have built that expense in our future projection so that the whole alignment around building up the deposit remains on track. Sure. Sure. Thank you so much. Thank you. Next question is from Pritesh Bumb from DAM Capital. Please go ahead. Hi. Good evening, sir. Sir, just one question on Tier 1. As of April 1, what will be our Tier 1, sir? This is again including the merger I'm asking. 24, no? Okay. Sorry? Just give me a minute. Just give me one minute. Yeah. Sure. Total network will be around 15,000. 15,000? Tier 1 capital. So total capital will be INR 14,981. It will be the Tier 1. And in percentage terms. I see. It will be 18. It will be around 21%. 18 + 21. Around 20%-21%. But we can come back to you with that number. Approximately 21-22 is the Tier 1 we are talking about, right? 20-21, more around that. This is tier one, right? Yes. Yes. We would have taken the benefit of lower risk weights on the MFI book, which comes in through the Fincare side. That will be included in this. Yep. So what has happened, Pritesh, is the merged balance sheet, the opening because we just closed both the balance sheets for both the entities between yesterday and today on the audited side. The opening balance sheet, it still needs to be formed because it can only be done once both the balance sheets had got audited. So we have got both the balance sheets audited today, and then the opening balance sheet will now be formed. So we can come back to you with some of these questions. But yes, if there is a benefit on the table for the MFI, we'll definitely take it. Why not? Got it. Thank you so much. Thank you. Pritesh, broadly, we are getting the benefit of 50 bps in our Tier 1 and Tier 2 capital. So this will be the impact only on must be seen. Got it. Thank you. Thank you. Thank you for this. Thank you very much. That was the last question in queue. I would now like to hand the conference back to Mr. Prince Tiwari for closing comments. Thank you, Rael. Thank you, everyone, for your participation today evening. I know it was a busy evening with multiple banks' results coming through. Thanks for coming on the call. In case you have residual questions, do reach out to the IR team. Thank you so much. Thank you very much. On behalf of AU Small Finance Bank, that concludes this conference. Thank you for joining us, ladies and gentlemen. You may now disconnect your lines.