Ladies and gentlemen, good morning, and welcome to earnings conference call of Equitas Small Finance Bank Limited financial performance for Q1 FY2023. We have with us today Mr. P. N. Vasudevan, MD and CEO, Mr. Murali Vaidyanathan, Senior President and Country Head, Branch Banking, Liabilities, Product, and Wealth, Mr. Rohit Phadke, Senior President and Head, Assets, Mr. Natarajan M, President and Head, Treasury, Mr. Dheeraj M, SVP and Head, Strategy, IR, BI, and Customer Experience, Mr. Rahul Rajagopalan, DVP, Strategy and IR, and Ms. Srimathy Raghunathan, CFO, Equitas Holdings Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. P. N. Vasudevan. Thank you, and over to you, sir. Good morning to all of you, and thank you for taking time out to be with us today. The financial year has started off well for the industry as a whole, with pickup of credit growth, increased economic activity, and the declining worry of any residual shocks from COVID. In the segment Equitas operates, we are seeing very positive sentiments across small fleet owners, small business owners, and an update in the housing finance, housing sentiments also. Inflationary worries have not yet crept into this segment, and the impact of inflation on household consumption, investment, et cetera, remains unclear at this point in time. We largely believe that the segment that we serve will generally remain reasonably resilient to inflation because they deal with the daily use products and services, and their ability to, you know, adjust their selling price or service charges based on certain increase in their own input cost is very high, given the fact that, you know, they are dealing with daily use products and services. Coming to the first quarter performance, it's been largely in line as disbursements remain strong despite the seasonally first quarter's sluggishness. Our fee income has been robust. We had a very strong growth in our liabilities, and our asset quality has been consistently improving. Our advances, excluding the restructured loans, are behaving normally and in most and almost all the parameters of performance, the non-restructured book, which is approximately around 95% of the total book, that's come back to the pre-COVID levels, practically in all parameters, in terms of performance metrics. The annualized gross slippage for the non-restructured book in the first quarter was 2.7%, which is back to almost the old levels, and that book also exhibits a very strong expected collection, which means that the buildup of stress into the future quarters is also very, very comfortable. Our provisions, however, made during the quarter is elevated, since we increased our provisions of those restructured accounts in the last year, which has slipped into NPA in the first quarter. We increased the provisions on these assets, specifically with respect to vehicle finance, where it is moved to 100% and a small business loan, which moved to 25%. If you remember, last year itself, last quarter itself, for microfinance, we had done a similar action, that all restructured books in microfinance, which slipped into NPA, we moved into a 100% provision in the last quarter itself. This quarter, we have added the vehicle finance into that category of moving it to D1, which in our case, for D1, it is a 100% provision, and for small business loan, again, D1 really means 25% provision. So because of this, for the quarter, we had about an additional provision of INR 76 crore, which we did in the first quarter. But this is, this we believe is a one-off because, as you know, our restructured book itself is coming down consistently quarter after quarter, and, most of the pain of, restructured book, has, is behind us, and we expect that, the credit cost should start to normalize going forward. The bank continues to invest in technology to ensure we are future ready. Just a minute. The bank continues to invest in technology to ensure we are future ready. We have now revamped our loan origination system for vehicle finance, and that's now rolled out all India, and work is underway to introduce a similar, you know, state-of-the-art loan origination system for the rest of the products. This, we believe, will help us further improve our sales productivity and reduce our disbursement turnaround times. On the digital transformation, we are actively engaging with partners to draw out a plan that will help us leverage cloud, data, and customers, and you shall be hearing shortly from us on these initiatives as they progress. Lastly, we have progressed well on our reverse merger. We have filed a scheme with NCLT, and we have received the orders of NCLT for convening the meetings of creditors and shareholders. These are fixed on the sixth and seventh of September. So the progress on the merger scheme is going actually slightly ahead of our estimate itself. We had guided that by March 2023, we should be able to complete the merger, but we believe that we will probably do that a few months ahead of that schedule. Thank you so much. Now, I hand it over to Rohit to talk about the asset side of the bank. Good morning, everybody. This is Rohit here. The last quarter has been good. Advances by 22% year-on-year and 5% quarter-on-quarter. We have seen stable growth across all the segments. Our disbursements of INR 3,238 crore was the highest ever in the beginning quarter of the year. In small business loans, we continue to witness strong growth and good logins. Here we cater to the informal segment, and we are- we also now plan to cover the formal segment in loan against property going forward. In vehicle finance, vehicle sales continue to show an upward trend. TV sales were higher by 4% from the pre-COVID levels in June 2019. If we compare the sales in June 2021 with June 2019, sales were higher at 89%. We have disbursed INR 889 crore, which is a phenomenal growth because the first quarter of last year was, we had very low disbursements. We also saw the highest ever disbursements in the used car segment, which we started catering to last year. Freight rates have stabilized, and the free cash flow for operators has also stabilized because fuel prices have been rationalized across. So vehicle replacement demand has come back. Prices of used vehicles have also seen a slight increase. The most comforting part is the two-wheeler sales have grown by 20%, which does indicate that the stress in the rural segment has come down and the rural segment has begun to grow. So two-wheeler sales grew by 20% year-on-year, though they are yet to reach the pre-COVID levels. In microfinance, our bucket efficiency remains stable at about 99%. We have seen improvements across. However, some pockets in the south, namely Kumbakonam, Puducherry, and Mayiladuthurai, continue to show less improvement over the other regions. Affordable housing continues to show strong growth. We are in 35 branches now, and we are... Other than West, we are now live in the southern states of Tamil Nadu, Andhra Pradesh, and Telangana and Karnataka. We see good growth momentum across segments, and as Vasu sir explained, that, you know, the impact of commodity prices and inflation is unclear. We see strong growth, and I'm quite optimistic that this, the quarter ahead, which is full of the festive season coming ahead, will show good growth. Thank you. Thank you so much. Hello, good morning. Murali here. I would like to give you a perspective of liability, branch banking, TPP, digital, and marketing, what went right. As we are aware, we are continuing the journey, what we laid out for last 2-3 quarters on focusing on key segments. So I would like to give you some highlight, which actually gives us the confidence that we are traveling in the right direction. Our program, Elite, which is meant for middle class plus and HNI, is now close to 40% of the book. That is close to INR 8,800-INR 8,900 crore. And increasingly, it is because of a primary reason, the proposition and the relationship management structure, which we knitted behind it, is actually showing us the good trajectory. So that is one good perspective, which is contributing towards buildup of granularity, most importantly, savings-centric approach. Third important parameter, which is happening, is do it yourself. We are seeing more from this segment. So Elite is one prime driver. Second key highlight for this quarter is NR book crossing INR 1,000 crore as a key measurement index. I'm sure that all of us are aware, all of, all most of the SFBs doesn't have a presence, nor can we have a representation in, outside India. Despite the fact, the percentage of goodwill beyond banking initiatives through marketing, and most importantly, the virtual RM based on time zone, is actually helping us to grow the book. It's not few customers. We are adding granular customers month on month, and most importantly, the active customers and the primary customers of NR has now got up to 80%. Now, third important perspective, which is giving us most comfort in terms of two things. One is people's aspiration towards saving and spending. That's, we call it as a demographic, that's an entry-level customers, which you get through digital mode. So we are now having a Selfe Savings. That book has crossed INR 500 crore, and we have a tie-up with Niyo and which has also crossed INR 500 crore, which means INR 1,000 crore of book, which is now close to 8%-9% of our entire liability base, is started coming from digital source account. Our ambition is to double it, and we are on towards the trajectory. But the most important part here is the demographic excellence is actually helping the branches to get cash management-centric. So now the relationship management structure, which we have put in, is actually helping us. And now we have a full stack of full KYC conversion and virtual management through CLCM. So the entire, vKYC to full KYC to business correspondent, all these three things are actually helping us to get digitally savvy, demographic-centric customers. So now all these three things backed by, we have a strong propensity-based, you know, data lead management system, which we run here, that is helping us for cross-sell also. So if we look into it, whether it's AUM growth, whether it is the overall protection penetration inside the book, the actual activation of debit card, where to go and how to get the unique card. So the only saver as an ecosystem, which we started two years back, now is expanded into spender, now it is expanded into investor. Now we have a tie-up, which has happened, which has helped us to get into three-in-one accounts. Also, those Demat, we have now recently tied up with HDFC Securities also. So the extension of saver to investor is actually propelling the balances. And last but not the least, these are backed by predominantly marketing campaign, high visibility, high penetration, high impact, which we do it through predominantly on social media platform and sticking to our core theme of beyond banking as an initiative. So all coupled, this put together and on one slide, which we will touch when we have the question and answer session, the absolute transaction, active path and primary path, is actually propelling our customers to get more and more engaged through do-it-yourself mode. I think we continue to hold our retail focus. We are now close to 80% of our book is retail. And very important part is, individuals are close to 65% of the total book composition. Increasingly, that will try to expand it also. So overall, we are looking ahead with a lot of optimism, a lot of planning, and most importantly, integrating multiple departments towards giving a customer first as an objective. Thank you. I'll hand it over to Dheeraj. Can you hear us? Okay. Good morning, all of you. Dheeraj here. So this time I'll walk you through the performance, because Sridharan has taken leave. He's not feeling too well, so please bear with me this quarter. On the net interest income, it came in at INR 581 crore as compared to INR 461 crore during the same quarter last year. This registered a 26% year-on-year growth. Other income came in strong at INR 100 crore as compared to INR 59 crore the same quarter last year, registering a 69% year-on-year growth. Net income, income grew at 31%, and came in at INR 681 crore for the quarter, as compared to 520 during the previous quarters, last year. On treasury, the profit on sale of investments for the quarter is about INR 6.52 crores, and MTM loss on investments was limited to less than a crore, INR 0.83 to be precise. From next quarter onwards, we'll invite Natarajan to talk to us more about the bank's treasury operations. Coming to OpEx, the total operating expenditure came at INR 412 crores as compared to INR 356 crores during the same quarter last year. Employee expenses for the quarter takes into account reversal of employee provisions of INR 31 crores. This is related to the COVID policy and some performance incentives, which we have provided for. Adjusting for this, our OpEx would have been about INR 445 crores instead of INR 411, as we've reported. On a daily average basis, our cost of funds has improved by 73 basis points and now is at 6.2%. In terms of PPOP, we've registered INR 269 crore as compared to INR 164 crore during the same quarter last year, registering a 63% year-on-year growth. Our PPOP, in terms of percentage to assets, expanded and now it is at 3.87% compared to 2.65%. Our PAT has registered at INR 97 crore is against INR 12 crore. I'm now talking on the asset quality provisions and the restructuring pool. The total restructuring pool now stands at INR 1,190 crore. We have given segment-wise breakup and, some other parameters in the presentation. The bank now carries total provisions of INR 603 crore. To give you a breakup, NPA provisions is about INR 415 crore, provisions on restructured standard assets is about INR 114 crore, provision on standard assets is INR 61 crore, and we made an additional provision on standard assets or what we would call management overlay of about INR 13 crore. GNPA comes in at 3.95% in Q1, compared to 4.06% in the sequential quarter, previous to this. NNPA comes at 2.07% compared to 2.37% in Q4. Our provision coverage ratio has improved, because we've made some additional provisions. I think that's also mentioned in the presentation. So it's improved to 48%. Credit cost came at 2.68%. Provisions on Q1 is INR 142 crore, comprises INR 95 crore from restructured loans and INR 47 crore from the non-restructured book. During the quarter, the bank also saw gross slippages at 296 crore, and 53% of this 296 crore is actually moved in from the restructured pool. Write-off during the quarter was about INR 130 crore. Lastly, we remain well-capitalized, and in June, our capital adequacy was 24.62%. LCR also has improved sharply to 211%, as we've been focusing on better quality deposits. With this, I'd like to hand it over to the operators, and we can start questions. Thank you very much. We now begin the question and answer session. ... Anyone who wishes to ask a question, may press star and one on their touchtone 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. Participants, you may press star and one to ask the question. The first question is from the line of Shripal Doshi from Equirus. Please go ahead. Sir, may I request you to unmute your line from your side and go with the question, please? Hello, can you hear me? Yes, we can hear you now. Yeah. So, just wanted to check that of the INR 1,764 crore of restructured pool that we had as on 3Q, what has slipped to NPA, and what is the write-off from the same, like, INR 1,764 crore of the pool? And how much have we collected from this pool? Wanted to get these numbers. 25. Yeah, just give us one second. Sure. Yeah. So last quarter we were at 2.86% in terms of NPA. In this quarter, we are showing 2.71%, but this takes into account we have written off microfinance loans of INR 95 crore. So roughly you can say about 80-odd crore would have added. Okay. So mainly the write-off, the NPA is INR 271 crore outstanding, and the write-off is INR 95 crore from that INR 1,764 crore pool, and the remaining would have got recovered, and that's how the outstanding restructured book is INR 1,190 crore? Correct, correct. The normal rundown is also there. Yeah, okay. I was, like, on... In your presentation on slide 19, the MSME, wherein we show segment-wide details. So there, the average ticket size disbursement for MSME has gone up significantly high on a sequential basis. So is there a change in thought process there or strategy there? Yeah, so- Last quarter it was 4.6 million, this quarter it is 8.6 million. No, there is no change in strategy. As far as MSME is concerned, we'll continue to focus on the mid-segment. We don't want to focus on the large ticket sizes. So we are clear, and there's no change in strategy there. But you have to explain the difference. So there is one. In MSME, there are two types of loans. So one is the working capital loan, which we give, and the other one, which is called TReDS, which is on the- is a screen-based lending. So there, the ticket sizes would have improved, which is resulted in this. Okay. Okay, so there the ticket size is, like, materially high? Or, like, what would be the ticket size range there? Very, very less. Yes. Yeah. Yeah, so there, the TReDS ticket size is generally INR 1-5 crores, compared to the working capital loans, which are INR 25-50 lakhs. Okay, okay. Got it. Okay, sir. Thank you so much. Thank you so much for, for answering my questions. Yeah. Thank you. Next question is from the line of Savi Jain from 2Point2 Capital. Please go ahead. Hello, can you hear me? Yes. Yeah, hi. So one is, I just wanted to know the guidance for credit costs for the full financial year, FY 2023. I mean, we have had very high credit costs this quarter, so what is the expectation for the full year? So, see, we will be below 2%, is what... We'll be below 2% for the year, because improving collection efficiencies also in the restructured books. In most of the restructured book was in the vehicle finance, vehicle finance segment. And there, you know, even while recovery, we, we realized that, loss on sale of vehicles is decreasing. The price of used vehicles is going up. So, we will see lesser credit cost going ahead. Yeah. So just to be a little sharper, what we've said in the past is 1.5% credit cost. This takes into account, a couple of factors. One, it takes into account the guidance we have given in terms of loan growth of about 30%, and it also takes into account some level of beefing up of PCR and the provisions we need to make in regard to the restructured loans. So far, we seem to be on track of that, on those targets. So we are quite hopeful that we will contain it at 1.5% for the year. I think Rohit was just trying to give you a slightly broader range, but at this point in time, that's what we have seen. Yeah, 1.5- Is this- -possible. Yeah. So is this, I mean, so most of the provisioning has been done this quarter, or, and the rest of the year will be at, normalized levels, or you expect another round of elevated provisioning and then a sharp, decline thereafter? ... Yeah, so, it may not be uniformly distributed in the remaining three quarters, so you may see some elevation in Q2, but definitely not in the lines you saw in Q1. And again, Q1, INR 76 crore, is because we've made some additional provisions, which is reflecting in the improvement in PCR. But we don't foresee that this level of provisions or credit costs will hit in Q2. But Q3 and Q4 definitely will normalize, to almost business as usual credit cost. Okay. And second was on the OpEx. You know, the OpEx is, I mean, does not seem to still stabilize. It's still, you know, increasing every quarter. So when do we see, you know, a stabilization in the OpEx? Hello? Yeah. Yeah, so just from a OpEx stabilization in terms of percentage, we can understand in absolute terms. So Q1 also has wage inflation, which is reflected, so you will not see that level of growth, and this typically happens for most organizations in Q1. So you should not see the same rate of growth every quarter, clearly. But in terms of cost to income, income comes in and obviously the operating expense will not grow at the same pace. Yeah, so I understand the employee expenses, but the other expenses, you know, for example, in Q4 was INR 148 crore. It has gone up to INR 169 crore in Q1 alone. So is this a trajectory this is going to follow? Because, in that case, there will still be substantial increase. Yeah, so there are, as I think Vasu's commentary also had mentioned, we are making some investments in technology to help increase business. So these are largely in the digital transformation space. We've already gone live with the loan origination system for vehicle loans. So some of those will reflect in the technology expense, in which comes under the other expense. These are technology not from, you know, fintech technology, but technology as the foundation to the bank, and we're now five years old, so there are some upgrades which are happening. But we don't think it will derail any of the cost to income or OpEx to assets numbers. It will be calibrated. So, ROE for the full year should be above 2% in that case? Yeah, at this point in time, we are silent to it. I think what is more important is to see ROE hit 2% for a quarter, then we'll discuss of you know how more it can go to. So at this point in time, please, please pardon us for not answering that. Okay. Yeah, that's all from my side. Thank you. Next question is from the line of Renish, from ICICI Securities. Please go ahead. Yeah, hi, sir. Congratulations on the set of numbers. So just two questions again, sort of on the restructuring side. As of total liquidity this quarter, how much of this has flown from restructured book? 53% of 296 has flown from the restructured book. About INR 156 crore. Okay, is from the restructured book? Yes. Okay, got it. And secondly, sort of on the PCR point, okay. So, you know, we have been always mentioning that, the LGDs in retail finance, you know, will be lower, and not of course at the 100% level. So, what is the thought process behind sort of improving the coverage in retail finance NPA to 100%? And why- So, so last quarter, so Renish, last quarter we had given our coverage policy. So if you see that, at doubtful one, it becomes 100%, and this is an accelerated provision I think we did two years back. So, I think you should draw comfort from the policy which we have, and that is... So every incremental NPA is getting a higher PCR than it was couple of years back. So that is one. Rohit? To add to what Dheeraj has said, see, the vehicle is an earn and pay asset, and its value is there till you use the vehicle. If the vehicle is stationary for some reason, its value starts depreciating, because, you know, to make it start, you again need investment in that. So to just give you a perspective, you will understand, you know. So if I compare the loss on sale, you know, in quarter four and quarter one, and I'm not going back into the COVID area, COVID period. So if you just take the Q4 and take the comparison between restructured and non- and the normal regular book. So if you take the restructured book, the loss on sale on the restructured book on vehicles, where we had done restructuring in the COVID period, it was 47% in Q4. The same loss has come down to 39% in Q1. Sorry, yeah, 39% in Q1. And if you take, the non-restructured book, the regular book, the regular book in Q4, the loss on sale was 37%, which has come down to 28%. So overall, you know, we had, 45% loss in Q4, it's come down to 36% in Q1. So- ... to be conservative, we have decided to provide 100%, but in actual, as we go ahead, the loss will keep decreasing because the prices of used vehicle will keep increasing. Another perspective which I want to give you is, see, the cost of a BS6 vehicle has gone up phenomenally. So a BS6 vehicle, you know, who can afford a BS6 vehicle? A fleet operator who's got many vehicles, who's got contracts, where the turnaround time of the vehicle is-- I mean, the utilization is 100%, he can really go and buy a BS6 vehicle. A BS4 vehicle is still in demand, and that is why the prices of BS4 vehicles have gone up. So that is another perspective to this, just to give you a full perspective on. Dinesh, the PCR on the vehicle finance restructured NPA pool is 77%. Okay. Total NPA pool. Yes. Yeah, for vehicle finance. Got it. it. Got it. Just last question, on the growth side, I mean, just a clarification, we are continuing with the same guidance of percent- Dinesh, sorry to interrupt you, but your voice is breaking. Can I request you to come in a better reception area? Is it better now? Slightly. Yeah. So I was just confirming that we are maintaining the 30% growth guidance for FY 2023, right? Yes, yes, Dinesh, yes, we will grow. And, see, growth will be better because, see, we traditionally in India, now the festive season starts in August. With the end of August, festive season starts. So August till, October, November is a full festive season, so we see growth. We are all poised for growth, yeah. Got it, sir. It's very helpful, sir. Thank you. Thank you, everyone. Thank you. Operator, do you have press star and one to ask a question? The next question is from the line of Nidhesh Jain from Investec. Please go ahead. Hello, sir. So firstly on restructured book, how are we saying that we will not see most slippages from this book or incremental slippages from this book, given that 60-90 DPD in the restructured book is INR 169 crore, plus, 1-60 DPD number that you have shared, among that 340 crore of pool. On 40 crore of pool, in last three months, only one EMI has been received. So this, 210 crore pool will have high probability of slippage. Even if we assume, let's say, 50% of that getting slippage, NPA, that will still lead to maybe high grade costs in coming quarters? Yeah, Nidhesh, before Rohit comes in, just want to put that credit cost to this number. Let's stick with your number, let's say INR 200 crore. About 80% is vehicle finance and secured. There, the LGDs are about 40%, and the remaining twenty percent or thereabout is microfinance. So if you look at it from that perspective, impact on credit costs on a terminal basis may be only about 0.5% of advances. Not saying that it will come next month, next quarter, but if I go with your numbers and put the loss on repo numbers to that pool, this is what it works out to. But anyway, I'll give it to Rohit to talk more on what trends we are seeing. No, so, Nidhesh, you know, even if you, if you break this down, 169, 54--64 is from CV and 54 from SBL. In SBL, there's no loss because it's fully backed by property, and we see good recoveries in SBL. In 64 CV, I'll just give you the breakup. You know, the loss on sale when we repossess a vehicle, the, the loss has come down from 45% to 36% on an overall basis. And particularly, if you talk about the restructured basis, it has come down from 47% to 39%. So as I explained, you know, as prices of vehicles keep going, as growth picks up, so I think this number will keep going down. So it is not, like Dheeraj explained, it is not, you know, with the total INR 169 + 40, which will go back. Okay, sure. Nidhesh, just to reclarify, the restructured book has come back into billing now about 6-7 months back, little more than that. So in a 7 or 8 month period, if you have paid 2 EMIs and you are in that 60-90, that, you know, essentially means you have only missed 2 out of those 7 EMIs. So we'll have to look at it from that perspective also. So, can you share this number, the disclosure that you have shared from 1-60? How is the 60-90 DPD book behaving in terms of customers who have paid only 1 EMI, 2 EMI, 3 EMI in last 3 months? Yeah, we'll try to put that. Sure, because that will give some clarity that how much slippage may happen from this book. Secondly, in terms of margins, how should we think about the 9% margin, given that we are scaling in formal small business loans, we are scaling in affordable housing? So what could be the margins, how could the margin trajectory will flow? Specifically also, the probably cost of funds may start to inch up from next quarter. See, 77% of our book in small business loans is new to vKYC. And if I get into further segments, it's as high as 85%. So we have the pricing power in the cus- in the segments that we serve. This is number one. Number two, home loans. In the industry itself, despite rising interest rates, home loans have not slowed down. So home loans across the industry, the growth momentum is there, whether it's affordable or whether it's prime. And the inventory of home loans, h- h- home, is also come down. New project launches are also in full vigor. And this being the festive season, I don't see any problems there. ... Thirdly, you know, as we mature into products in the future, you know, going by, we should always, I think we should look at the risk-adjusted return rather than pure yields. So that, that's, as our credit costs keep coming down and as our, you know, credit costs normalizes, we should rather go to a more risk-adjusted return. That's what I feel. Yeah, I also get Natarajan to just talk on the cost of fund. Hi, Akshay. On cost of funds, though the rates are rising, policy rates are expected to go up, I think the market is largely factoring in all this. Even if you see, as we speak today, the rates are rallying, just rallying by 5-10 basis points in the last couple of days. So any hike in interest rates, which is expected, by RBI, is largely factored in, so we do not expect cost of deposits also to go up significantly from here. And also from an equity perspective, we have already built up sufficient reserves, as reflected in our higher than required LCR. We have been sort of front-loading in anticipation of hike in rates, so we are well positioned to meet any, obviously, any sharp hikes in the cost of funds. Sure. So what will be your estimate of cost of fund, let's say, in a current scenario, assuming whatever information we have, it's difficult to call how the interest rate will play out, but how should you see this cost of fund trending in coming quarters? It should not go up. See, you will not see an automatic corresponding concomitant rise in the rates. If the policy rate rises by 50, it doesn't mean that our cost of funds, we do not expect it to go by 50 or 40. It can marginally inch up by 5 or 10 basis points. Okay, sir. Thank you. That's it from my side. Thank you. Next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Yeah, thank you very much, sir, for the opportunity. Sir, I just wanted to understand more on the credit cost front. I know you did mention that 1.5 credit cost you're looking for the entire year. So, I just wanted to understand, do you think that it's a little aggressive, considering our first quarter, the credit cost is already at 2.8%, and you expect second quarter to also be elevated. So balance nine months, I think our credit cost should be 1.1%-1.2%, to make it 1.5% for the entire year average. Any comments that you want to make on that? See, most of the flows, you know, as we said, even in the gross slippages, 53% has flown in from the restructured book. See, what we noticed is that stark difference between the behavior of the normal book and the restructured book. Normal book delinquencies, collection efficiencies are coming back to pre-COVID levels. So what you saw in the first quarter was the effect of, you know, we started restructuring last year in July and ended in about September. So September was the last month where we restructured. So the 12 months of restructuring are getting over this September. But most of it we have, you know, upfronted by provisioning. So, according to me, the pain will last only for one more month, maybe in July, and then things will come back sharply. Secondly, the recoveries from the restructured book are also good, particularly on the SBL and the CV side, the recoveries are pretty good. So that will help us in getting the credit cost down from the current elevated levels of 2.6%-1.5% as the year goes by. Yeah. So by third quarter, fourth quarter, if our credit cost reduces to 1.5%, let's say, so our average would be at least around 2%, right? For the entire year. It might go down below 1.5%. In the fourth quarter, your credit cost will be below 1.5%. Okay. For that quarter. Okay, understood. And what, what would be our PCR target? Is there any kind of targets you have set for ourselves in terms of PCR? Because it's still at 48%, right? Yeah. So we've, like we said earlier, from a... We have a long-term target that should, it should be at 70%, but obviously we can't do it this year because we can't sacrifice ROAs, PAT, et cetera. What we've done is, we have put a, you know, policy to drive that, and that's what we shared last quarter. So hopefully, you know, as the quarters go by, you will start seeing PCR inch forward. But internally, we want it to come to around 70%. 70%, maybe 2 years, would that be a fair timeline? We can't give a timeline right now because, like I said, it is a function of write-offs, slippages, et cetera. But we are working towards that. Okay. Okay, understood. And my final query is on your cost to income. So, how do we see our cost to income going forward, maybe in next one to three years? Okay. So we've got, you know, like we said, from the model to work out, you know, we should be at 55% kind of cost to income. The idea is to start being stable at about 60% and then move to about 55%. Those are the milestones we have and what we also communicated earlier. Okay. And this milestone is over the next three years? Yeah, it should happen before that, but, I would say in the next two years, you will start seeing at least some of these milestones getting hit. Okay. Fair enough. Fair enough. That's it from my side. All the very best, sir. Thank you very much. Thank you. Next question is from the line of Jai Mundra, from B&K Securities. Please go ahead. Sir, thanks for the opportunity. Sorry to interrupt you, sir. You're not audible. Can I request you to speak through the handset? ... Yeah, hi. Thanks for the opportunity, sir. As you said, the restructuring, we had stopped restructuring, and we had given 90 days moratorium. So why is that, that the slippages from restructured has gone up in this quarter? I mean, is there any specific reason versus last quarter? Ideally, it should trend down, right? So was there any particular reason for slippages to go up in this particular quarter? No, no, it has come down sharply. 296 compared to 400-something, compared to 300-something, so it's coming down only. No, only from restructuring, sir, right? No, no. Even the earlier 408 is largely from restructuring. Okay. Okay, understood then. Okay. And, second question, which is slightly different, sir. In your vehicle book, is the... What is the degree of overlap between, customer segment/geography, with AU Small Finance Bank, for example? I mean, just, just wanted to understand, this thing. Is there any significant overlap or there is no material overlap in terms of geography and segment and, products in vehicle? AU operates more in the formal segment. See, 50% of our book is- Don't talk about them. I mean, sorry. So, I don't know, I mean, I can't talk about comparison with AU. But, I don't know, it's not right to, on an investor call, talk about competition. Sure, sure. Understood, sir. Yeah, that is very helpful, sir. Yeah, thanks. Thank you. Next question is from the line of Rohan, a retail investor. Please go ahead. Hi, all. First of all, thanks for the opportunity. Sir, I have three questions. First is, what is our plan to reduce the NPA to pre-COVID levels? Second is regarding credit cards. What are our roadmap to launching new credit cards? And third is, we have recently partnership with HDFC Securities, so how will it benefit Equitas? The credit card, we are already running our white labeled co-branded credit card with HDFC. We have started distribution. Now, we are automating it through to issue through the tab. This is through the distribution mode. Will we have a credit card of our own? The evaluation and the technical feasibility and initial discussions have started. So that will take some time for us to come to the market and declare it. So which means we... Do we have a product to offer to a consumer in form of co-branded, white labeled credit card? Yes, and we'll go full throttle from this month. Second part on HDFC Securities, already we were distributing 3-in-1 of Aditya Birla, and we have crossed 40,000 consumers who are actually using our 3-in-1 active account. Now that we are getting aggressive into digital, we thought that, digital should have a, digital connected, do-it-yourself mode, sort of a technology, through which, we will align. So that's why HDFC Securities comes in place, where the entire alignment through digital happens. So we will have a separate sort of stream for digital and separate sort of stream for physical. So HDFC Securities is on that line. Dheeraj? On the NPA, I, I think I'll... Yeah, sorry. On the NPA, I'd like to draw your attention to what the bank's asset quality was before COVID, and that will give you a sense of how we used to operate and what is the impact of COVID. So the number used to not be at 4%. We used to be in the 2% range. Now, once the COVID impact is over, and our segment is the bottom of the pyramid, it is not the prime segment where they will immediately bounce back. But this segment, as you know, rural and urban, has been impacted fairly badly by the COVID, especially the second wave. So it will go through that, process. What I think you need to look at is the incremental pain, is it there? That is not there, like we said, and I'm sure you're also witnessing it from in terms of COVID lockdown, et cetera. So it's just a matter of time once this moves off the book, and we should then revert back to our, normal levels of credit costs of 1-1.25%, NPAs of 2-2.25%. But it will take some time. I think lastly, what is important is to understand Equitas' book. We are only 18% microfinance, which represents the unsecured portion. The rest is secured. And in secured, I think, Rohit had spoke about vehicle finance. You know, loss on repo is 14%, which is the highest among the other products. So all in all, we are far more stable than what we were five years back when demonetization happened. And we are also fairly stable compared to other SFBs who are in the evolving space. Like I said, the products are also fairly seasoned. These are not products we started last year, but most of these products are now well seasoned, at least in two, three cycles now. So, that's the direction it should move back to. Thank you. Okay. Thank you, sir, for explaining in detail. My last question is regarding Housing finance product. So do you see what do you project the growth strategy for next five years regarding Housing finance products? So clearly, it's a growth area for us, and we will ensure that we are present across the country and, you know, the product becomes a significant part of our portfolio going forward. Very, very clear strategy on this. Okay, sir. Yes. Thank you. Thank you, and all the best. Thank you. Next question is from the line of Ashlesh from Kotak Securities. Please go ahead. Hi, everyone. Good morning. First question is on the gross slippages. If you can just give a breakup of- Ashlesh, can I request you to speak a little louder, please? Yeah, sorry. I hope this is better. Can you please give a break-up of the gross slippages for the quarter across segments? Yeah, yeah. So the INR 296 crore we spoke about, like we said, the restructured book is INR 156 crore, the non-restructured book is INR 139 crore. In this, the key segments, I will talk only about the restructured pool. Microfinance is about 36%. Sorry, 36 crore. Vehicle finance is about 75 crore. Small business loans is about 40-odd crore, and the MSME is about 3-odd crore. Okay, thanks. What about overall number, overall slippage number? Two ninety-six. Okay. Can we get a breakup of that, please? So the product-wise, yeah, yeah. So overall, microfinance is about INR 68 crore, vehicle finance is about INR 130 crore, small business loans is about INR 85 crore. These are the large segments. Okay, understood. Thanks for this. And second is on the MSE segment. If I look at the restructured book, that has not changed meaningfully, but the gross NPA level in this book has gone up a bit. Any trends here? So here, you know, see, what happens in restructured is once the account touches NPA, it stays restructured for 12 months, even though the customer is paying regularly. So we have some accounts in MSE where, you know, they are paying regularly, but they form a part of the restructured book because they have touched NPA once. Hello? The flow seems to have increased because, as in, there seems to be significant forward flow. It's a very small book in MSE Mm-hmm. MSME, the book is only about, if you look at the total 61-90 is only INR 4 crore, and 1-60 is only INR 18 crore. Okay, understood. Thank you. Thanks for this. That's all from my side. Thank you. Next question is from the line of Ankit Bihani from JM Financial. Please go ahead. Yeah, hi, sir. So congrats on a good set of numbers. So I just wanted to ask you, what has been the impact of the new MFI regulations on your book? So I believe the growth has been largely driven by ticket size increase this quarter. Has there been any challenges due to the new regulations? Yeah. No, see, we, we have always been conservative on the MFI side. If you look at our ticket size on the book, is just about INR 21 lakh. So, You said INR 21 lakh, sir? Twenty-one- Thousand. Thousand, sorry. 21,000, right? So we have always been very conservative on the MFI side. So now the harmonization norm talks about an income of INR 3 lakh, and if you consider income of INR 3 lakh for the household, the average ticket size will come to about anywhere between INR 1.3 lakh-INR 1.5 lakh. So we are nowhere in that game. I mean, we want to play it secure, and we have always given a guidance that, you know, our, our unsecured book on microfinance will be in the range of 10%-15% of our overall portfolio. So no real impact for us on the harmonization norm, except the fact that we have to make the regulatory changes in our systems as RBI has recommended. So that we are in process. Lead to, you know, aggressive lending brothers and so affect our growth. It will, it will lead to aggressive lending by others because the ticket size is more, but I think the market is pretty big enough. We are, we are very clear where we will operate. So, we, we are aware of the risks that it will cause in the microfinance industry because of some players trying to increase their ticket sizes. So we will not do that. We will, we will not play that game. It will be a very secure game. Okay. Thank you. Thank you. Next question is from the line of Sarthak Shah, individual investor. Please go ahead. Yes, good morning, sir. So my question is regarding MTM loss or, you know, many banks are facing that. So, can we expect any one-off from the treasury department? Yeah, it is true that the most banks have significant MTM losses, but the major shock has happened in the Q1. There's a very sharp and unexpected out-of-cycle policy announcement by RBI. So that was that has taken the market by surprise, and that's why more people who are not well-positioned had to suffer MTM losses. As far as Equitas is concerned, we have consciously run a very clean book by the end of last quarter, that is Q4 of last year. So, we built the book post the hikes by the RBI, so we did not suffer any MTM loss. There, of course, there was a very small MTM loss of around INR 83 lakh. Given the size of the book, very significant. That's part of the trading book. So we do not envisage any. Even for the industry, we do not expect similar shocks in Q2, and talking of the year, so we do not expect any major negative surprises on that front. Okay, that's a good point from you, sir. That's it from my side. Thank you very much. I now hand the conference over to Mr. P. N. Vasudevan for closing comments. Yeah. Thank you. Thank you for attending the conference, and, you know, we hope that the first quarter performance will continue to, you know, reflect in the next three quarters, and we should look for a very good year as we go back. Thank you so much, and thanks for being with us. Bye. Thank you very much. On behalf of Equitas Small Finance Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.