Ladies and gentlemen, good day and welcome to the CreditAccess Grameen Q1 FY2025 earnings conference call. As a reminder, all participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Abhijit Tibrewal from Motilal Oswal Financial Services Limited. Thank you, and over to you, sir. Yeah, thank you, Sujan. Welcome everyone to the CreditAccess Grameen Q1 FY 2025 earnings conference call. We have with us today from senior management, Mr. Udaya Kumar Hebbar, Managing Director, Mr. Ganesh Narayanan, Chief Executive Officer, Mr. Balakrishna Kamath, Chief Financial Officer, and Mr. Nilesh Dalvi, SVP and Head of Investor Relations. With this brief introduction, let me hand over the call to the management for their opening remarks, post which we will open up the floor for Q&A. Thank you, and over to you, sir. Thank you. Good evening to all, and a warm welcome for joining the conference call to discuss our first quarter FY 2025 business performance. Before we begin, I would encourage everyone to read our FY 2024 integrated annual report, themed "Being Sustainable and Responsible," which is available on our website. This report highlights our initiatives aimed at sustaining robust cross-cycle business performance, promoting strong governance and best practices, conscious efforts to reduce our environmental footprint, and safeguarding the stakeholders' interests. As we reflect on the last quarter, it is evident that we navigated well through a seasonally moderate period for microfinance, coupled with the general election process during a large part of the quarter. Despite facing challenges such as extreme heat waves across regions and operational limitations during general elections, we maintained consistent performance in our net interest margins, operating efficiency, and return ratios. Overall, AUM grew by 20.6% YOY to INR 26,000 crore overall. The GL book grew by 18.2% to INR 25,542 crores as against our annual guidance of 20%, while the RF book delivered a healthy growth to INR 762 crores. The overall portfolio declined on a sequential basis, in line with our internal estimates given the seasonally weaker business momentum in the first quarter, coupled with the general elections. We have factored this in our annual guidance of 23%-24% portfolio growth in FY 2025, estimating a lower growth of 20% in Group Loan business as against 24.7% growth in FY 2024. Therefore, we reiterate our annual growth guidance for FY 2025, and we do not see any downside risk towards growth guidance. The disbursements stood modest at INR 4,476 crores. We added 1.9 lakh new customers in Q1, leading to 12.7% YOY and 1.3% QOQ growth in the customer base to 49.84 lakhs. For branch infrastructure, we had 1,976 branches across 30 districts at the end of June 2024, as we added 9 new branches during the quarter. The net interest income grew by 24.8% YOY to INR 953 crores, in line with the loan portfolio growth. Our portfolio yield at 21% continued to remain the lowest in the microfinance industry, resonating with our belief in serving customers with responsible pricing. On the other hand, the cost of borrowing was also stable at 9.8% despite the tightening liquidity scenario in the banking system. We expect our cost of borrowing will be within the range of 9.8%-9.9% for FY 2025, guided by a healthy mix of domestic and foreign borrowing, along with maintaining a robust ALM position. While we operate with an interest spread of 11.2%, our NIM for the quarter stood at 13%, benefiting from our strong capital position and our balance sheet. The positive operating leverage generated due to the scale of our business, coupled with improved income profile and controlled cost, resulted in a cost-to-income ratio of 29.2%. PPOP grew by 30.4% YOY to INR 709 crores. Coming to the asset quality, we saw a transitory increase in delinquency trend during the first quarter due to one low base impact on account of 1.5% QOQ reduction in our loan portfolio, two extended impact of low rainfall during last year, followed by a few-week heat wave across several regions throughout the quarter, coupled with operational limitations during general elections, which impacted regular corrections and follow-ups in the delinquent buckets, contributing to election sensitivity in the borrower's profile. We have been anticipating a gradual increase in business as to delinquencies over the past 3 quarters due to ongoing issues like temporary customer migration, rising customer leverage trends, third-party loan utilization issues, and higher steady-state delinquencies outside Karnataka. Accordingly, we had budgeted higher credit costs for FY 2025 compared to the previous year. We, however, expect the delinquency trend to stabilize in the coming quarter and credit costs within the guided range of 2.2%-2.4% for the year. As you can see on slide 6, we continue to witness sustained partial repayments in the past 6 buckets, with an improving repayment trend as we move forward. Additionally, we have taken adequate measures like tightening credit filters while onboarding new customers, while extending new loans to existing customers, limiting overall leverage while disbursing, etc., and deploying senior and experienced field staff and business support teams to control the poor trend in some buckets. Despite the increase in delinquency during the quarter, our asset quality continued to remain strong with the collection efficiency exceeding 97.8% for Q1 FY 2025, PAR 90+ at 1.13%, GNPA of 1.46% measured at 60 DPD, and net NPA of 0.45%. The credit cost of INR 175 crore during the first quarter compared to INR 153 crore during Q4 FY 2024 reflects our early risk recognition and conservative provisioning policy. Our initial provisioning stood at 2.29%, which is 116 basis points higher than our PAR 90+ and 130 basis points higher compared to other provisioning norms. We have strengthened our initial provisioning policy further by aligning the provisioning rates based on district-specific risk compared to state-specific risk earlier, along with customer interest. Our conservative approach of granular risk recognition and higher provisioning has historically positioned us to quickly navigate any potential asset quality cycle and capitalize on growth opportunities. We plan to implement district-based loan pricing in Q2 FY 2025, leveraging the business rule engine that would help align the loan provisioning rates on a granular basis. Thus, by tailoring loan pricing strategies based on district-specific factors, we not only aim to mitigate the potential risk but also optimize revenue generation, safeguarding our overall return. Our gross credit cost stood at 2.7% for Q1 FY 2025, while net credit cost stood at 2.6%, which is slightly higher due to transitory nature and base effect of Q1, as explained earlier. Coming to the return profile, Q1 FY 2025 PAT stood at INR 398 crore, resulting in ROA of 5.4% and ROE of 23.5%, in line with our annual guidance. This is the sixth consecutive quarter where we have delivered ROA over 5% and ROE over 20%, resulting in sustainable profitability, mirroring our strong cross-cycle performance. Looking ahead, we would like to reiterate our confidence in achieving our annual growth and profitability targets. Our strategic initiatives, coupled with the resilient business model and dedicated team, position us well to mitigate the known risk effectively. Lastly, before opening the forum for question-and-answer session, I would like to highlight the guidelines implemented by the industry body, MFIN, earlier this month, imposing a cap on microfinance businesses to INR 2 lakh number of lenders to four. The industry collectively has come forward to move towards a sustainable growth path, given large and untapped credit advancing opportunities available through microfinance channels. We look forward to your insights and questions as we delve deep into our Q1 FY 2025 result and strategic outlook. Thank you. Thank you. 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 a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rajiv Mehta from Yes Securities. Please go ahead. Yeah, hi, good evening. Thank you for the opportunity. I have a couple of questions. Sir, the first question is, as we are defining this increase in delinquencies as temporary, have we already seen improvement in fresh PAR accretion in June and July? Or conversely, if you can share whether there has been improvement in the collection efficiency of June and July so far? June and July is still remaining stable at the little higher frequency only, but we believe that overall by Q2, this should improve. So what I'm trying to explain here is the 60 days was the general election time. We had difficulty in managing the collection, particularly going to field, going to do a follow-up of delinquent customers. That bucket would have moved further, whereas new PAR, we are able to collect back or collect partially or move backward. So therefore, overall, delinquent trend may remain same, but the new PAR, actually, ability to collect is much higher than the first 60 days. Okay. Okay. And sir, you have mentioned about strengthening of the ECL provisioning policy in first quarter, and you have aligned your provisioning rates on districts versus states earlier, and also along with the customer vintage. But when I look at the ECL coverage on standard loans with the stage one loans, it remains the same. So incrementally, as the growth picks up in the remaining quarters, would this ECL coverage percentage increase, right? Because more and more growth will come from the newer geographies. Correct. It is right. When we realigned the in all three buckets, you could see variation. For example, you have seen the standard asset, it has come down by two basis points, whereas stage two, it's gone up by 2%, and stage three, it's come by 1%. Correct? It's more of when we moved from a state level to district level, we moved to granularity. So some of the state, the actual numbers would have changed, but the coverage. For example, take an example of Maharashtra. We decided a high-risk state earlier. So now we moved to district-wise, some districts moved to medium districts, some districts moved to low districts. The customers also moved the same coverage buckets. So therefore, there is a one-time aberration or a change based on moving from a state level to granular level. Going forward, this would actually remain the same or follow the past 36 months' trend, actually, which gets reevaluated every quarter. It's a one-time change because of the move from state to district and move to granular level. And just lastly, we don't see any structural issues in any of the large markets like Bihar, Tamil Nadu, Karnataka, and Maharashtra in terms of rejection rates increasing or in terms of unique borrower acquisition challenges in these markets. Are we seeing any issues at all? Because your guidance seems to suggest that things will come back normally in the coming quarters. There could be some stabilization because of the new guardrails which are implemented. Because the overall, if the total borrowing of one sector is more than INR 2 lakh, you may not be able to acquire the customer after new guardrails, which is going to be common for the whole industry, not just for CA Grameen. But our view is that we should not impact too much because we always have this policy with us. Therefore, we don't see any challenge because of this. But yes, there is a little increase in the rejection rates, but I think it will help us to acquire new customers to compensate that kind of rejections. Got it. Thank you and best of luck. Thank you. Thank you. The next question is from the line of Renish from ICICI Securities. Please go ahead. Yeah, hi, sir. Thank you for the opportunity. Hi, Rinesh. Hi, hi, sir. Sir, just two questions from my side. So one, on the PAR 0 trend, right? I mean, if we exclude the Karnataka and Maharashtra, which has been the best-performing state for us as well as I'm assuming for the industry, wherein we have 50% of our book. Now, if I exclude these two states, then the rest of the states, PAR 0 is actually hitting 4%. So it clearly suggests that there are some challenges across these states. Now, of course, this could be because of transitory in nature because of election-related, etc. But how one should sort of read this data? I mean, is this due to the over-leveraging? Even the industry has been growing at an accelerated pace post-COVID. Or is there any structural change in the customer behavior? Because we have been hearing a lot from the industry players that the center attendance is not sort of back to the pre-COVID level, which of course tells us that the customer behavior has changed structurally. So sir, where do you see PAR zero settling down in near term for us as well as for the industry? So PAR zero, other than the core markets, it was a little higher earlier also. That is why in our earlier call also, we said that we have to increase our trade guidance because we continue to grow outside Karnataka. So therefore, it actually moved up by about 60 basis point-70 basis points compared to earlier at the first quarter. We have to see the next, actually, maybe Q2, we feel it should stabilize from here. But on a continuous sequential basis, in the last 3 quarter-4 quarter, we have seen an increase in the credit cost in the non-core markets. So therefore, we anticipated an increase of credit cost guidance last year for the year itself. So currently, we are seeing a little higher than what we anticipated in these cases. But we believe it is a transitory nature in the first quarter, and it should come down to a normal stable cost, what we anticipate about 3.5% outside these core markets. Okay. So let me put it this way, sir. So do you think this 3.5% in other markets is a steady state PAR 0-1 one should think of going ahead? Even when your PAR 90 will be, yeah, PAR 90 may be much lower. 4.1% is higher considering the aberration, the difference Q1, right? So it should be down. Maybe PAR 90, we should look at maybe 1%-1.24%, maybe a stable PAR 90 for a non-core market. That is what reflects in our credit cost, what we built up for the FY2024-25. Got it. So in a nutshell, I mean, is it fair to conclude that whatever we have been hearing in the newspaper or media articles about the building of stress in the sector, on the ground, maybe as per your assessment, things will come back in Q2? Should be stable in Q2, and you still have to complete a journey what you had in Q1, right? Actually, the fresh accrual should come down on top of what you had already in the Q1. So does June and July doesn't indicate those improvement? Actually, June and July are still stable. Still stable. Their ability to collect back is better, actually. So delinquent trend is remaining stable, but ability to collect is better. Whereas May and June, sorry, April and May, delinquent was there, but your ability to recover was back. The difference is that. Basically, net flow forwards in June and July should be lower than April and May? No. Absolutely. Okay. Okay. Fair enough, sir. And just the last question from my side on the detailed lower line. Look at, just look at our page 6, where we said that the 0-60 PAR collection is much higher, almost close to 40%-45%. Whereas 60+, it is actually PAR collection is much lower because it was part of the, I mean, April. Correct. Correct. Okay. Okay. Got it. And sir, just last thing on the retail loan side, of course, now that book is at around INR 750-odd crore. So which product is driving this growth? Is it the individual loans which are driving this growth, or? Yeah. Individual is a larger portion because we started that as a first product, already as a retail product more than 2 years now. The other part, we started recently. So currently, 70%-75% is more of an individual business loan. Let's say the PAR trend or asset quality is similar to that of JLG, or it is slightly worse than that? It is much better than the JLG at this point of time. These are all cherry-picked, seasoned retail customers. Got it. It's quite low at the moment across all RF products. Nothing significant to mention about. Sir, do we have any internal, let's say, cap in terms of to which or to what percentage we will scale up this book? We already said earlier, by 2028, we said that we will reach up to 15% of our book. The Individual Loan, I think that was for the total retail asset. It was the RF. Correct. See, it will all go by a different product starting from different point of time. For example, individual loan started 2 years back. Then we started the what's called LAP product and two-wheeler product. Then we went to housing loan. Eventually, by 5 years' time, we are looking at about 40%-45% is secured book in terms of LAP and HL and two-wheeler. LAP and HL is a long-term product, whereas individual is always 3 years' product. Let's say that it will churn out. So when you have a season of the seasoning of the retail, you will see 45%-55% kind of asset, I mean, secured and unsecured book. Got it. Got it. So maybe if I were to just split it, 7.5% will be secured and 7.5% will be individual books. Yeah. Yeah. Yeah. It will be seven, eight kind of thing. Correct. Correct. Because the GL book will not run down, right? It will only keep accruing, whereas other book will actually start running down over a period of time. Got it. Got it, sir. This is very well said, sir. Thank you very much and best of luck. Thank you. Thank you. Thank you very much. Thank you. The next question is from the line of Kunal Shah from Citibank. Please go ahead. Yeah. So firstly, in terms of the incremental delta of 70-odd basis points, which states so maybe earlier you said there is an increase, but any specific state which is leading to a higher delta, like Karnataka and Maharashtra? Yeah. So any particular state wherein that increase of 1.7-2.5, is it spread across all of them, or maybe we are seeing one or two states having relatively higher? So we saw largely, other than Karnataka, we saw largely very steady. But Karnataka, Maharashtra, it's stagnant growth. In Madhya Pradesh, stagnant growth is less than 2.2%, whereas others have a little higher, which actually forms only 15% of our business. Particularly, what we saw a little higher is Rajasthan, Kerala, Bihar and Jharkhand and some pockets of Tamil Nadu. Okay. Rajasthan, Kerala, Jharkhand, and some pockets of TN. Correct. Okay. And secondly, with respect to disbursement, so if you can just suggest in terms of the monthly run rate, okay, because maybe it's less than INR 1,500 crore a month. So how would that have been maybe like April and May was slower, and getting into June, July, we are seeing the traction better because on year-on-year basis also, there is a decline. So just want to look at how it should actually pan out in the coming quarters. Year-on-year, depending physically, first 2 months, it's an election process. Normally, you have a lot of restriction on due to code of conduct, cash handling, and number of customers joining. Only such an issue about the administration. Therefore, we anticipated lower disbursement in any case for this first quarter. But we would retain our annual guidance of growth, and we believe our disbursement continues to become normal maybe after one or two months because we still believe June, July, or July, August, maybe more of a calibrated growth because we have to see how this whole industry across the player is playing. So one or two months or three months, we will be calibrated. But Q3, Q4, we should be able to grow. We are normally microfinance Q3 and Q4 is the higher business. Therefore, we still believe there is no risk of what we call non-compliance with the guidance. Yeah. So maybe July, August also, we could see INR 1,500 crore a month kind of disbursement when it's not much. It may be between INR 1,500- INR 2,500. Yeah. Okay. Okay. It will be calibrated. Yeah. Okay. Okay. Yeah. Thank you. Thank you, Kunal. Thank you. The next question is from the line of Shweta from Elara Capital. Please go ahead. Thank you, sir, for the opportunity. So two questions. One, so while we have maintained portfolio yields over the past three to four quarters, now, given the fact that we are going to implement district-based loan pricing in Q2, so do we see any changes out there in the trends going forward on the yield front? Should not be. Even if it is there, it will be very small because when you move to granular, there will be small variation like ECL, what I explained earlier, very small variation. So this may have a small variation, but we are not anticipating any significant variation here. Noted, sir. So second, on the borrower addition front, so obviously, seasonally, Q1 tends to be a weaker quarter. Also, there have been transitory challenges, as you explained. But this consistent decline in borrower addition since past 3 quarter-4 quarter, so now that we are at a number of 1,200-odd kind of a number, so how much of this would you attribute to these transitory challenges, and how much would be on the grounds of prudency wherein we are sort of trying to curb the challenges because of the industry headwinds? I think there is a correction. Our customer retail not reduced except last quarter. While over, we have borrowers gone up by almost close to 13%. So it's a quite healthy customer addition. It's only Q1 we had a transitory challenge. Now, we're already back to normalcy about 100,000 per customer per month, which will start going back. If you go back last two months, other than the first quarter, we would have added almost 100,000 new customers every month. So there is no reduction in earlier quarters. But it's already come back to normalcy in terms of acquisition. We would be able to acquire almost 100,000 clients from this month onwards. Noted, sir. Thank you, and all the best. Thank you. Thank you. The next question is from the line of Abhishek M. from HSBC. Please go ahead. Yeah. Hi, sir. Good evening. Hi. Hi, Abhishek. Good evening. Hi, sir. Yeah. So my first question is just on this rain, which has been fairly disruptive. There have been flood conditions in several parts. Any kind of impact due to that in this quarter, in the second quarter so far? We don't see. Normally, Abhishek, when the rain impact, it is very short-term. Nothing should happen, actually. When rain impact on the ground is more than 1 week, 2 weeks, then there is a difficulty in the earning capacity of the customer or a displacement, then it will impact. But we are not anticipating that so far. So far, that situation not happened. So we don't see any impact because there will be short impact, but very, very few. But we don't see any significant impact because of that. So like sort of, let's say, 2019, there were 15 days there was rain across the flooding. People have to displace. Then there's an impact, temporary impact. But this, we are not anticipating anything. So far, we have not seen that in any major disruption. No, sir. No, no, no. Sir, the other thing is your credit cost guidance. If you're at 2.4 also for the full year, the implied credit cost for the rest of the year is only 2.1%-2.2%. Do you think there's upside risk to that? Should not be. Actually, no. As you said, it's a kind of stabilizing now. We will review by Q2, but the strong sense that it should be normal. We anticipated that because in May, it's only Q1 a little higher, actually. We still believe that our overall credit cost should be within for the year. Right. It has low basic income. First-quarter low basic effect as well as the low growth effect. There's a different impact. Overall, it should not change. Got it. Okay, sir. Thank you. Those were my questions. All the best. Thank you. Thank you. Thank you. The next question is from the line of Ashlesh Sonje from Kotak Securities. Please go ahead. Hi, team. Good afternoon. Good evening. Sorry. Just a couple of questions. Firstly, on the MFIN rules, would you have a sense of what is the proportion of your borrowers who would either be in breach of either of those two rules, either they have more than four lenders or the exposure is more than INR 200,000? Okay. So our current analysis says there could be an impact of roughly around 8% of our borrowers. But I think with new customer acquisition, we should be able to manage that. Okay. What is the typical plan of action for these borrowers in your case? These borrowers are normally, if they are high-vintage, good business, there's always a position for them to move to retail also, some of them. Because if it's a fine business, right culture and opportunity, we will actually have a ready product, they can always move to them. Others, we may have to decline. But yeah, we have to compensate through a higher customer acquisition in such case. To a certain extent, the INR 2 lakh limit was an internal guideline already. Already, we have followed. So it would have certain impact with four lenders. But I think that we should be able to compensate through a better run rate. Got it. The retail, Ashlesh, INR 2 lakh already our internal guideline. Even otherwise, obviously, we would not have run. Understood, sir. Sir, you mentioned that you have tightened some credit filters. Can you please elaborate on what changes you have done exactly? So one is whatever MFIN is asking, largely we are already doing it in our work. On top of that, we have certain geographical credit filters using rule engine. For example, if we feel a state is high risk, we would not even do four lenders. We may do a three-lender, or a two-lender. So it depends on loan size variation based on the geography and risk, pricing based on geography and risk. All these are filters which we are using to rule engine. So it depends on each risk variant. We can actually play with the rules. That is what we are using. These tighter credit filters would be largely temporary, or these are more permanent in nature? Depends on. If the risk continues, we have to continue the filter, right? So if the filter we will keep evaluating every quarter or two quarters and see if there is a variation, whether we have to tighten or we will loosen, we can do that. So good part is we have a right software, Rule Engine to manage the things. Perfect. Perfect, sir. Thank you, Ganesh sir. Thank you. The next question is from the line of Sebastian from DWS Investment GmbH. Please go ahead. Hi. Good afternoon. Thanks for the time and the opportunity. I just have a general question about the regulatory environment. I mean, it's like basically not a week goes by without RBI, the regulators, making any statements about loans, deposits for the banks, for the NBFCs. I mean, how do you expect the regulatory environment for the rest of the year to shape up? What kind of measures do you think the financial sector needs to put on itself in order to appease the regulator a bit more? I think there is nothing any further regulatory actions or indications, except for pricing, that the regulator is closely monitoring. However, the self-regulation that the industry has put in through the SRO is also in the right direction, right? So you are reacting much proactively to the market conditions. And that, I think, will go in the right way towards the regulatory governments. On loans to NBFCs, I think it's more of to NBFCs, whereas the exempted such kind of risk weight for real sector lending. So by default, any lending by banks to NBFC MFIs, so the rules are exempted for that. All right. Thank you. Thank you. Thank you. The next question is from the line of Hardik Shah from Goldman Sachs. Please go ahead. Good evening, sir. Thank you for the opportunity. I have two questions. First one is on the borrower addition. Incrementally, what would be the proportion of NTC borrowers that we are onboarding? And on a stock basis, what would be the customers which would be unique to CredAcc? If you observe for last four quarters, we saw about 30%-32%, 35% sometimes the new-to-credit we observed. We feel that will remain at that same trend, about 30%-35%. Unique customer is in a little declining way because as we keep acquiring customers from other MFIs, so unique will come down. Currently, we are at about 29%, 29% currently. It's a small marginal change will happen as we add more and more customers with other customers belonging to other MFIs or other lenders. Understood. And sir, my second question is on the over-leveraging. Your slides also mentioned that you're seeing some kind of over-leveraging on ground. And also, bureau data suggests that there is a high level of retail loan exposure to the MFI borrowers, especially in the states of Karnataka and Tamil Nadu. So can you share some color on your portfolio, how much of your borrowers would have retail overlap in terms of number of customers as well as value, if you have that? I think the percentage what I think you are referring to CRIF High Mark report. Correct. So largely, it resonates in the whatever they talk to other states. It It resonates to us also. But it's more of a secured kind of book what we saw, like gold loans or a two-wheeler or a housing loan kind of thing, home loan, which are longer tenure or somebody in the home other than the customers would be paying also. So we are not seeing any such impact because of that on our customers. Gold loan is one common thing across the country, across the southern part of the country, which is normally they would pay only interest and again, keep renewing it. So therefore, it won't impact as a leverage for our customers. However, in the last three quarters, what we observed is the leverage of the customer has increased by about how much? About 18% or something. Overall leverage we saw on a sample basis, not full customers. We saw that. Similarly, the FOIR or repayment load or something also increased by about 12%, which we saw in our sample basis. We keep watching this and taking action, corrective action based on the pockets. As I said, we strengthen the management, strengthen the teams in the pockets where such things happen. We keep watching with the samples. We do not have full data, but we have to go by some samples. And also. Wait a minute. Finish your sentence. Also, our retail finance strategy will also take care of it, right? So the whole logic of building a retail finance strategy in CredAcc is seeing the trend in which customers are availing retail finance loans. And the product that we've chosen also is in that nature. So as the customer's income profile improves, they have better credit history, they will have access to retail finance products from CredAcc itself. So we can move them up as we move forward. Interestingly, the retail finance delinquencies are much higher than the microfinance delinquencies that we see in the industry. Any specific reason for that? How do you read that? So you mentioned that that is more secure kind of a book. But for example, housing loans are showing 30-plus DPD of as high as 10% as of March 2024. So how do you read that data? See, the difference between industry and Grameen is that we are doing retail finance with carefully selected products who are vintage with us, so who've got a credit history and relationship with us. So hence, we will always see better than industry, even in this side of the business. Okay. See, one of the data points probably what Ganesh says is very important. So the unique to Grameen and vintage with Grameen, we are seeing absolutely great credit and credit pattern. So that is what we are actually capitalizing when we do the retail book. Okay. Understood. Thank you, sir. Thank you, sir. Thank you. Thank you. Thank you, Hardik. The next question is from the line of Shreepal Doshi from Equirus Securities. Please go ahead. Hi, sir. Good evening. Thank you for giving me the opportunity. Just one question on the classification of states in terms of low risk, medium risk, and higher risk. Have we seen any deterioration in this in the last 1 quarter, given that the PAR number in states like, as you highlighted, Rajasthan, Kerala, and Jharkhand has increased? Also, in the slide that we have given in presentation, it shows that even states like Bihar have elevated PAR 0 number. Have you seen the risk classification changing for some of the key states for us? So risk sector is now moved to districts. So statewide risk, we stop tracking now. But you can see when you do the statewise, our total 29% portfolio was falling under high risk, whereas when you move to district, 34% fall into high risk, correct? And the medium actually 40-30. 40 moved to 40 medium actually reduced to 30. Whereas low risk, we used to be 31% of our book actually moved up. And 35% book comes under low risk now because of this transition. Hopefully, that answers your question. So okay, there has been some movement, is what you're trying to indicate, but not in state level, but more on district side. Okay. Correct. More district side. Correct. Got it. Just second part, with these new MFIN guidelines, do you expect that even in key states like Bihar and Andhra and the newer states that we were targeting for incremental growth, we would see some moderation in our aspirations given that these are already, especially Bihar, UP, these are decently penetrated states in terms of MFI presence? So overall, our loan growth would also see some moderation in terms of versus our guidance in the presentation? I think it's important to note that the industry body has come up with the self-regulatory assurance to all of us that we will rebuild or we will actually make it more resilient business going forward. I think we should anticipate this better and improved lending process going forward because it is accepted by the whole body. Everybody came together under the banner. So this includes the MFIs, the SFBs, NBFCs, and the banks together. Today, all of us are part of one entity, MFIN. And then the responsibility, what you call, accepted by all of us together. So we believe it should be better going forward for any moderation in growth. So I agree that there could be some moderation in growth for a shorter period, may not be a longer period. Short period, it could be some growth moderation for the whole industry. We too assumed a kind of little lesser growth. If you see, last year, our microfinance growth was 24.7%. What we actually built for FY 2024-25 is only 20%. So though our total growth we anticipated is 23-24%, microfinance growth is only 20%. So it is already enrolled in our budget. So when we started our annual exercise this year, the little higher credit cost, little low growth in microfinance was anticipated. Got it. Last one question. It is on center meeting attendance. So what is the difference that we have when we talk about center meeting attendance in the state of Karnataka, which is probably the best-performing state for us and for industry versus probably the rest of the states? So for us, what would be the difference in terms of center meeting attendance? So largely, Karnataka, Maharashtra, Madhya Pradesh, Chhattisgarh, all are actually quite good in terms of attendance. Little deviation we could see in the other part of the country. So where we are a core market, we are top and first entry. So we are able to maintain that culture's large action. But overall, still we have a good 50%-60% attendance in most part of the country. Yeah. Little higher in Karnataka, definitely. What would be in Karnataka, for example, just to benchmark it? Karnataka maybe about 70%-72%, and then overall market maybe 50%-60%. Approximately. I'm not able to give right now here. But overall, strength and. Got it. Got it. Okay, sir. Thank you so much for answering my questions, and good luck for the next question. Thank you. Thank you. The next question is from the line of Ajit Kumar from Nomura. Please go ahead. Thanks for the opportunity. So my first question is, the regulator has been instructing MFI lenders to lower growth in Bihar and UP as per various news articles. Is there any communication that is currently going on with the regulator on this? And also, your portfolio in Bihar and UP has become three times and four times, respectively, between FY 2022- FY 2024, much higher than the overall AUM growth. Are you going to intentionally tone down growth in these states? So that would be my first question. The first is, I think there is no communication from RBI to any MFIs. Okay? Maybe we have seen only news article. We also see a news article, nothing else. So we have not heard from anybody that RBI wrote to anybody to reduce or made any statement about it. In terms of growth, I think we continue to do the calibrated growth. We continue to watch the industry, watch the risk of each district, and accordingly, we'll go. So I think our growth, what you call, what we estimated is not very high. Therefore, we will still continue to grow with the calibrated manner in those states also. But Bihar, we are not planning any branch openings because we have sufficient branches there. It's only growing in the branch where we already have existing branches. But UP, probably we will expect to add some more branches, but our major growth should come from new branches should come from UP, Telangana, or West Bengal. Okay. Sure. Sure. And sir, in order to achieve this 23%-24% AUM growth target in FY 2025, what is the disbursement growth target in FY 2025? It's similar about 23%-24% disbursement growth. Okay. For the full year, right? Yeah, yeah, yeah. Correct. Okay. So sir, in that context, disbursement growth in remaining FY 2025 has to be around roughly, you can say, 28%-30%. That is a steep task given soft disbursement even in July and August. If we see in last year, disbursement growth during 2Q2024-4Q2024 versus, let's say, 2Q2023-4Q2023 was only 12%. This disbursement growth target seems a little bit on the higher side. No. Annualized growth last year for Q1, Q2 together, it was about 14%. And the balance in the period, we have actually achieved 23%. Sorry, no, less than that. It was 8% growth come in the first two quarters, and we did 23%. So 27%. That means 19% growth we achieved between Q3 and Q4 last year. So we believe microfinance normally 60%-65% growth comes in second half. Sure. Sure. So that is the. I think we are able to manage. Yeah. Correct. You are right. Okay. Okay. Thank you, sir. Thanks a lot. That's it from my side. Thank you. Thank you. The next question is from the line of Raghav Garg from Ambit Capital. Please go ahead. Hi. Thanks for the opportunity, sir. I just have a question. Sorry to interrupt you, sir. May I request you to please use your handset? Sure. Just give me a minute. Audible? Yes, sir. Audible. Okay. Yeah. Sir, just one question from my side. When you look at the food inflation data, that food inflation has been quite persistent. And it matters even more as food expenditure, as part of the overall expenditure, is pretty large for bottom-of-the-pyramid customers given their income levels. And rural wage growth in real terms has been negative for quite a few quarters. On the other hand, you have a typical MFI customer seeing about 10%-11% increase in exposure levels on a YoY basis. So in light of this, how do you expect the repayment capacity to evolve over the next 12 months for your customers or if you can comment on the broader industry? That would be very helpful. Thanks. I think we've seen in history in kinds of inflation, our customers who are largely into similar profiles earn a little more. And sometimes it also gives a negative correlation to collection. Having said that, whatever self-regulation that MFIN is imposed upon, I think this will limit any kind of over-leverage that could build up over the next few quarters. And it should improve from here. I don't see it deteriorate from where it is today over the next few quarters. It should improve from where we are. Understood. That's all from my side. Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead. Mr. Sarvesh, may I request you to please unmute your line and speak? Yeah. Good evening, sir. Thanks a lot for giving me the opportunity. Most of my questions have been answered. Just one question on this overall sort of delinquency that we are seeing. I think you have been alluding to these being majorly caused by the election and the heat waves. But at the same time, there are a lot of concerns in the news reports that we have been reading about over-leveraging and this sort of credit cost being expected to go up along with that. So how do we reconcile both this information? I mean, this is just a Q1 phenomenon which should stabilize by, let's say, Q3 for you, or we are still in a wait-and-watch mode to understand how things will shape up with respect to delinquency, especially in the non-core states? Yeah. See, I think both the delinquency potential in the non-core states, we had anticipated that there will be little higher credit cost compared to the core states. That is a mixture of all these things. It's over-leveraging. It could be customer migration. It could be political or some local intervention. There are many other parts with that. What I explained is the major reason why the credit cost is increased because of the sensitive period of 50, 70 days. Your ability to follow up and convince a customer was less due to the sensitivity. That is why the major reason that for the buckets have moved further. Okay. Now, what I'm telling you is that after that, I think the ability to go back and talk to customer and convince them to repay is higher. Therefore, your ability to control the credit cost is higher. So we can keep listing many other reasons also, but we only give the high-frequency reasons during the quarters. Our strong belief is that this is a one-time and a little higher. We also saw, as I said earlier, we saw three or four quarters, there's a little increase all the time in the non-core states. That's the reason we don't determine credit cost. So I just explained that also earlier. It also appears from your comments as well as what the industry body is trying to do that any such effort to contain the credit cost going forward would be at a significant cost to the industry growth rate in terms of the AUM. Would you agree with that sort of a statement? It depends. If somebody wants to go and lend to the same customer in the industry, then what you say is right. But there's still opportunity because as per the industry estimate also, your potential customer in microfinance is almost 16 crores. And what we address is only about 8 crores so far. So if you spread around your acquisition formula and go to the place where go to deep rural or instead of doing it only in cities, I think still you have good opportunity. Sir, finally. It should be widespread. There should be growth has to come from customer acquisition route, not by what you call an increase in tickets themselves. Understood. Sir, finally, at the same time, we are also seeing normal sort of rainfalls across the country. That is expected to sort of help the rural economy. Do you expect any upsides happening because of this? Because last year was also not so good on that account. In your model projections and what we are seeing on the ground, do you see any upsides coming from a normal rainfall? So it should actually help you stabilize further on the, what you call, credit cost and collection, actually. Automatically, when the rainfall is normal, every product, every job level is improved, every agriculture level improved, I think it will only improve the collection efficiency and the depth of delinquency. Demand will go up. It's always positive. Understood. Thank you, Nomura. Thank you. The next question is from the line of Nidhesh from Investec. Please go ahead. Thanks for the opportunity. Sir, you mentioned in the presentation that you are tightening your filters while onboarding new customers and extending new loans to existing customers. So what exactly we are doing here and what will be the target in terms of new customer acquisition for FY 25? So target for new customer acquisition, I think we already told it's about 13%-14% will be our customer growth what we anticipate for 2024-2025. And the tightening is both sides. One is renewal and one is about the new customer. And even both cases, the tightening will be different in different states, probably different districts. Depends on the risk behavior. We may like, what I said earlier, if the new MFIN said four customers, not more than four lenders, so many states, we have got only two lenders after all. Maybe some districts will go into two, even only two lenders or less. So it's all actually based on the risk needed. We will not have a general rule for everything. We go by the risk and reacting to the risk in each district level. The granular setting given risk, anticipating risk, tightening the rule, placing it appropriately, and provisioning accordingly. All three go with the correlation, actually. All four items go with correlation at a granular level. And if I may add, with us adopting the Rule Engine, we've got a lot more power in hand, actually. So all our attempt is towards making this a lot more finer, making it a little more resilient than what it was when we were doing it at state level. So we could work on many variables, including repayment obligations of customers, like some of you pointed out, their overall leverage, including retail loans. We can even look at many other variables as we move forward, right? So we can work on PIN codes. We can work on certain villages. Whatever we want, we have the power to do it. So we are able to look at things a lot more granular than what we used to do earlier. Sure. And secondly, in the PAR 0, do you think this has picked out here or there is a possibility of further increase in PAR 0 from the current levels? Our belief, it's a bit down. It will be stable for some time and start coming down also. Okay. Thank you, sir. That's it from my side. Thank you. Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference over to the management for closing comments. Thank you, everybody, for joining at the later hours. So look forward for the next quarter and look forward for the support. Thank you so much. Have a nice good evening. Thank you. On behalf of Motilal Oswal Financial Services Limited, that concludes this conference. Thank you for joining us, and you may now disconnect.