Ladies and gentlemen, good morning, and welcome to the earnings conference call of Equitas Small Finance Bank Limited's financial performance for Q1 FY 2024. We have with us today Mr. P.N. Vasudevan, MD and CEO, Mr. Sridharan N., CFO, 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 Mohan, Head Strategy and IR. 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 would now like to hand the conference over to Mr. P.N. Vasudevan. Thank you, and over to you, sir. Thank you. Good morning, and thank you all for dialing in this morning. The year has started off well, both at the macro level and at the local economy, where Equitas operates. The credit momentum continues to be robust, and with the early signs of inflation softening, the momentum may continue for the rest of the year. Tractor, three-wheeler sales, vehicle sales, and other indicators all point to the right direction, and hopefully, monsoon ends well, giving rural and semi-urban economies a boost. Coming on to Equitas, the bank delivered strong growth across its diversified loan book. We are seeing growth across states. Newer products like commercial vehicles, affordable housing, are maturing well and will start contributing meaningfully to the bottom line soon. We are also working on products like personal loans, car loans, credit cards, Forex cards, et cetera, that can be offered to our depositors, which can help us improve our overall engagement and stickiness with the depositors. Over the next 12-15 months, we hope to see these products rolling out. On asset quality, things are back to normal, with the gross slippage calculated on daily basis, I repeat, calculated on daily basis, hovering around the 3% level and a stable GNPA. Our restructured book is now only about INR 213 crore, and we have a 97% provision for NPAs arising out of this book. With that, I guess, the entire restructured issue is completely behind the bank. Rohit would talk in further details about advances. On the deposit side, the environment is getting tough, with most banks increasing their deposit rates. Over the last 15 months, we have narrowed the difference between our peak deposit rate to those of the large banks by about 50 basis points. We were one of the earliest SFBs to focus on CASA, and at one point, we had exceeded 50% CASA ratio. Though this has come down sharply over the last few quarters, yet it remains very good in the banking industry. We continue to back up our attractive interest rate on savings accounts through high-velocity engagement with depositors through our various channels. We have also upped our new CASA acquisitions. The story of the quarter for Equitas clearly is our retail TD. We have been able to mobilize almost INR 500 crore per month of net accretion to our TD, and channels like NRIs and the virtual RMs are doing quite well to help us deepen our relationships. Murali will take you through more details on this. While deposit mobilization has been good, our cost of funds has seen an uptick, largely in line with the industry. As you know, more than 80% of our loan book is fixed-rate loans, and this had a corresponding impact on NIM. During the past year, we also increased our lending rates, and our yield on disbursement for the quarter is about 8.4%, which is up 35 basis points compared to last year's first quarter. However, we feel the changing portfolio mix will continue to put pressure on the NIM, but should be offset to some extent by an improvement in OpEx and credit costs. Last quarter, I mentioned that we delivered a 2%+ ROA for the second consecutive quarter. Today, I'm happy to make that the third. I can never keep my philosophies or my governance standards out of any dialogue, and please indulge me for a couple of more minutes as I ramble along on this. Equitas and ESG. I now want to talk about our approach to customers. As you all know, our borrowers are typically from the informal economy, comprising of the base of the pyramid segment. I repeat, base, and not the bottom, but the base of the pyramid segment. Moratorium, where RBI announced a moratorium during wave one of COVID, we offered it liberally to our customers, and 90% by value and 97% by number of customers availed the moratorium, which might probably be the highest, amongst many banks. After that, in post two, RBI offered a special restructuring window. At a time when investors were giving brownie points to those banks who showed the lowest percentage of restructuring, we again offered it liberally to our customers. Outside of microfinance, we restructured about 31,000 customers, of which about 27,000 customers did not move into NPA. This means that if we had not been very empathetic and considerate to our borrowing segment, out of these 27,000 customers, most of them might have slipped to reach NPA if we had not offered that restructuring, and we would have ended up repossessing their only house property in their life, and then brought them to peril. As I have mentioned before, in Equitas, we are not just running a bank, we are running an organization impacting the most vulnerable segments of society, and we have to be extra supportive in their times of need, and return, they always stand up for us. I believe that these actions of the bank propel us to the highest standards of ESG, benefiting real people in an immediate and direct manner. For all stakeholders associated with Equitas, we not only offer a bank run on high standards of governance, professionalism, and financially attractive, but also a bank which positively impacts large segments of base of pyramid population. At Equitas, we believe in circle of life. The good you do comes back to you. I repeat, the good you do comes back to you. And so I end this with a big thanks to all of you who have supported us, and hope that the circle of life touches your life, too, and enlivens it up. Thank you, and I now hand it over to Rohit. Thank you, Vasu sir, and, good morning, everybody. Advances have grown by 36%, and disbursements are 46% year-on-year. Collection efficiencies have been stable, and GNP has been maintained at the same level as the previous quarter. In small business loans, there is growth in the non-Tamil Nadu disbursements. In June 2022, the composition of disbursements was 65% in Tamil Nadu and 35% in non-Tamil Nadu. At the end of June 2023, the composition of disbursements has now changed to 61% in Tamil Nadu and 39% in non-Tamil Nadu. The business has seen growth in the states of Andhra Pradesh, Telangana, Karnataka and Maharashtra. The new loan origination system has been rolled out and is active in 100 branches across the country. Another 100 branches will go live this quarter. The microfinance business has recovered from the COVID impact, and ex-bucket collection efficiencies are stable at 99.51%. 82% of all customers acquired last quarter were onboarded using eKYC. 46% of all customers e-signed the agreement, eliminating the use of physical agreements for this set of customers. The vehicle finance business, the used car book, has grown and is now 11% of the total vehicle finance advances. The focus is on funding to customers for personal use. The used car market in the country is huge, and we aspire to grow this product. The UCV and New CV portfolio comprise primarily of small commercial vehicles, LCVs and pickups. In the new small commercial vehicle segment, we have a market share of 10% in Tata Ace in the geographies that we operate. The market share in Ashok Leyland Dost has reached 4.5%. We also aspire to increase our market share in Mahindra Pik-Up, where we have a market share of 2.3%. The affordable home loan business is scaling up and now operates out of 34 branches in five states. The new LOS for the business will also go live in the coming quarter. Rural demand is looking up, as indicated by various macro, macroeconomic indicators like rural car and two-wheeler sales. Even FMCG companies have reported improved rural demand. In short, things do augur well for the coming quarter. I'm quite hopeful that the coming quarter will also be good. Thank you so much. Handing it over to Murali. Good morning. Bank is actually taking a very sustainable and very scalable effort towards building a very stable and retail-oriented franchise, as we know, through differentiated segmental approach and, very importantly, creating a differentiated channel. So I would like to, you know, stay put on this for two more minutes. Our retail deposits, that is our CASA plus RTD, remains at healthy 78%, and that is actually a very healthy sign for two reasons: One, our product holding at a house level and also penetration at the market level for NTB is getting enhanced. Our relationship management structure, where we have put VRM, which is data, voice over data, and then physical RM structure, is helping us to grow the RV by 8%-10% across the spectrum of customers whom we offer. Please note, we also have a VRM based on time zones for the NRI segment. Now what we are doing through this is, we are actually focusing on family banking as an opportunity. This has helped us, our premier program, Elite, to cross INR 12,500 crore. Very important point today is close to 77,000 families are totally banking with us through this proposition. Glad to see our Wings proposition, which we have revamped, focused predominantly towards salaried as a segment, is seeing an encouraging, not only encouraging, seeing a higher penetration of salaried segments coming in to us. Close to 40%-42% of the book today of savings account is through salaried as a proposition. RTD. RTD was a very, very good story. It continues to be. There are two things: One is mobilizing INR 1,500 crore-INR 1,600 crore net, which means at a gross level, it should be INR 2,200 crore-INR 2,300 crore, but the reality is we could spread it across to 120,000 customers across the spectrum, both NTB and existing book. So 60% of the existing customers opting for TD inside this enhances our product holding as well as foot on door syndrome, and this will give us an enhanced opportunity. Our channels, which we have dedicated, have started giving most productive results. For example, NR, now we are present across 100 countries, and the book has crossed INR 1,500 crore of RV. So has our institution business, which has crossed INR 7,000 crore of RV with 30% of CASA in NRI. So the important segment here, what I want to push on, MSME business is, close to 92% of the book is on non-callable deposits. So all these things put together has helped us to maintain a healthy SLR and LCR ratio. And most importantly, we have onboarded 130,000 customers during the first quarter, which means our acquisition rates have gone up. And second important part is leveraging on phygital and digital, our full KYC conversion of digital basic account has gone up. And our engagement based on propensity and analytics model has helped us on debit card activation, and importantly, primary and active accounts reaching closer to 60% mark, and our product penetration across TPP is getting enhanced. Our retail and trade focus on current account is helping us to be in top 17 in terms of acquirers, and we will continue to monitor our current account and progress there. And overall digital side, I think it's been a very encouraging quarter, from prepaid to micro ATM to full conversion, and we will sustain our journey there. Thank you. Let me hand it over to Gopi, on treasury views. Good morning, everyone. Q1 has been largely steady quarter in the market front. Bond prices improved as yields cooled off with inflation edging down, even as the growth outlook consolidated. First quarter saw RBI pausing the interest rate hike cycle in April and maintained status quo in June. Despite comments from the RBI governor emphasizing that the back-to-back pauses by RBI MPC should not be construed as a definitive change in policy direction, there was a cause for optimism that interest rates are nearing their peak on the back of CPI numbers pulling within RBI tolerance band. First quarter of the new fiscal witnessed largely positive developments in Indian economy. Stable rupee and macro conditions helped attract strong foreign fund flows into domestic financial markets. Rally in equity markets is primarily driven by steady FPI flows, resilient domestic economy, and lower crude oil prices. A few areas of concern continue to hover, mainly, uneven monsoon and El Niño, which may have some impact in inflation. We have seen that bond yields are slightly firming up in July as well, reflecting these developments. Now, coming to Equitas Treasury performance for this quarter, this has been another stable performance from Equitas Treasury. Our profit on sale of investments stood at INR 26 crore. Our funding profile has been stable, with opportunities available to raise funds, both in the form of refinance as well as IBPC. Thank you. Now, I hand it over to Mr. Sridharan. Good morning to everyone. Our net interest income for the quarter came at INR 743 crore, as compared to INR 581 crore during the same quarter last year, registering a growth of 28% Y on Y. Other income for the quarter came in at INR 150 crore, as compared to INR 100 crore during the same quarter last year, registering a growth of 50%, resulting in a net income growth of 31% year on year. The total operating expenditure came at INR 581 crores, as compared to INR 412 crores during the same quarter previous year. The increases on account of annual increments for employees, payout of performance bonus, and new recruitment. The bank also invested in the brand by advertisements in IPL. The cost was accounted for in Q1. Lastly, investments in technology increased as we spent on various IT projects relating to loan systems, customer apps, data warehouse, and other enhancements. This led to a marginal increase in our cost to income to 65.05% for the quarter. Pre-provisioning of profit, PPOP, grew 16% year on year to INR 312 crore, and PPOP to assets remains healthy at 3.42% for the quarter. PAT for the quarter came at INR 191 crore, as against INR 97 crore during the same period last year, registering growth of 97% Y on Y. ROA and ROE for Q1 FY2024 stood at 2.10% and 14.54% respectively. As on 30 June 2023, the bank's restructured loan book stood at INR 213 crore, which is equivalent to 0.72% of the gross advances book. NPA on the restructured book was INR 160 crore, and provision made against this book was book stood at INR 156 crore. Now, moving on to asset quality and provisions. The bank carries a total provision of INR 574 crore, NPA provision of INR 445 crore, provision on standard assets at INR 129 crore. In order to strengthen the PCR, the management made additional provision of INR 14 crore, and total provision for the quarter is INR 60 crore. GNPA remained flat at 2.6% in Q1 FY 2024, as compared to Q4 FY 2023, and improved by 135 basis points as compared to Q1 FY 2023. NNPA came at 1.12% in Q1 FY 2024, as compared to 1.14% in Q4 FY 2023, and 2.07% in Q1 FY 2023. Provision coverage ratio improved to 57.79%. If ECL is implemented by the bank, the ECL provision will be lower than the IRAC provisioning requirement. To meet the minimum IRAC provisioning requirement, additional provisions will be made as management overlay. As of June 30, 2023, total CRAR stood at 22.06%, with the Tier 1 at 21.36% and Tier 2 at 0.70%. Lastly, the bank has made investment in setting up its own corporate office building at the heart of the city, and we hope to complete the work by early FY 2026. With this, I would like to hand over to operator, and we'll be happy to take questions from your end. Thank you. Thank you very much. ... Ladies and gentlemen, we will now begin the question answer session. Anyone who wishes to ask a question may press star, then one on the 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. The first question is from the line of Deepan Narayanan from Trustline PMS. Please go ahead. Good morning, everyone, and thanks a lot for the opportunity, and congratulations for good set of numbers. So firstly, we wanted to understand, so if RBI holds rate at these levels for a couple of quarters, do we foresee pressure in NIMs continuing or we can pass the rates pressure to our customers fully without affecting growth profile? This is Dheeraj here, Deepan. So as you know, 80% of our book or 80%-85% of our book is largely fixed. So the place where we can actually pass on rates is on incremental disbursements. Incremental disbursements over the years, just for some numbers, have actually gone up about 40 basis points. But as you see, our portfolio yields are around 17%-18%, so that's also there's limited room for us to expand it equivalent to how we see rates going up. But still, adjusted for that, to see what impact it will have in the bank from a yields at a portfolio level, we should be able to hold yields where it is. And also keep in mind that there is a slight mix change with housing, new commercial vehicles, disbursements as a share improving, but we still should hold yields. So one, yes, we have passed on rates to certain segments of the customer. Two, the portfolio mix is playing out well from a long-term cost to assets and credit costs. So we will have that yield passing out being compensated or negated with the portfolio mix. Thirdly, the cost of funds, yes, is moving up. You've seen it spike in Q1. From our estimate from a cost of funds, is that we may end the year at about 7.5%. This is taking into account where we feel inflation, rates, competition in this, deposits, all of that play out. It will have an impact on NIM, adjusted for all of that. Hopefully, for the full year, NIMs should not deteriorate below 8.5%. But if you look at quarter-on-quarter, you may see it go below, especially in the later half of the year. But we still should maintain a NIM for the full year at about 8.5. This is about a 0.5% drop from last year. Okay. Okay. Our NIM profile should be substantially improved if the rate cycle goes starts going down, right? Yeah. If rates reverses, like we get the, we have the bad side when it increases, our portfolio yields will not drop because we don't have floating rate loans, so we should start seeing that benefit play out. But the question is, when it will play out, I think it's- Yeah. To everybody's imagination of the interest rate cycle. Secondly, so now our growth profile has increased substantially. So what kind of cost to income are we expecting for FY 2024? So like what we've been saying, this is actually an investment phase we are going through. We are investing largely in products like credit card, personal loans. The AD-I license also will result in a few products being launched. And also in technology, largely on the digital side, Rohit had talked about, you know, the loan origination systems which we are putting in place, which all eventually should help us improve productivity and scale up faster. And largely on the brand, and lastly, on the brand, some investments were made on IPL, like Sridharan had mentioned. So we are still in investment phase, and like we said earlier, the cost to income, this, where it is right now, marginally may improve. We've been saying 63 odd, so let's see how it goes. Usually, income builds up for us in the second half of the year, so all of that should compensate to where cost to income should remain at, let's say, 63%-65%. Okay. Thanks a lot, I'll join back in. Thank you. The next question is from the line of Renish from ICICI Securities. Please go ahead. Yeah, hi. Congratulations on a good set of numbers. So just two question, one again on the deposit rates. So this quarter, we have seen almost 30 basis point increase in the cost of deposit. So is it fair to assume that on the blended or let's say, a portfolio basis, we are near to peak on the deposit rate side? Renish, Dheeraj here. No, we are not at the peak, like we said. Are you asking on, are we going to introduce any more products with higher rates of interest? No, I'm saying, let's say our cost of deposit is at 6.94, and within that, if you look at the AD cost- Yeah. So, Renish, that will go to 7.5, like I just explained, because there will be some deposits getting renewed at a higher interest rate, plus our retail term deposit momentum is very strong. Hmm. We see that going up to about 7.5%. Okay. Okay. Uh, That will have a considerable impact on NIM as well, right, for this year? Yes, it will. So I don't know if you heard my previous... Yes, yes, I would say. Yeah, so it should be somewhere around that. For the NIM, like I said, full year, 8.5%, but I think you will see NIM go below that, at least in the third and fourth quarter. But hopefully, interest income will be also compensate. Okay. NIM, yes, about 8.5 is what we should look at. ... Got it. And, you know, just a follow-up on that. So, you know, when we, you know, delivering this 2% plus ROA, as of now, and now, you know, there is a, sort of, some bit of pressure on the NIM, how confident we are that we'll be able to sustain this 2% ROA? Because we also, highlighting that return to investment phase. So there is no lever on the cost side. Our credit cost anyway is, is, you know, at the best of the level. So how, how do we sustain this 2% ROA? Yeah. So, see, the point is that this year, there has to be 3, 4 elements which we expect it to be at play. One is the basic interest income arising out of the growth in the portfolio, which should be one positive support. Second thing is that we saw the highest increase in terms of percentage from the OpEx perspective in the first quarter, because typically we do give out the annual increments effective April. So the staff cost goes up, you know, sharply between March to April, and that obviously will steady up after that. Through the rest of the year, the employee costs to some extent, except for the new addition of people, will remain constant. Whereas the productivity of those people will start coming in from the second and the subsequent quarters onwards. So we should see an OpEx, which is about 32% increase year-on-year in the first quarter. We expect that to come down as a percentage of growth year-on-year for the subsequent quarter. So while the NII should go up because of productivity of the staff improving, as well as new staff coming in and adding to the, you know, business of the bank, the OpEx should come down as a percentage of growth compared to the first quarter. And the third element at play we expect during the current year is, of course, the credit cost. As you know, across the industry, across the banking industry, I think this is one of the best credit cycles that we are seeing. Even in our own case, we have seen, the first quarter was probably the best that we have ever seen in a long time. Though it is supposed to be seasonally weak quarter, but actually it was pretty good from a collection perspective. So the credit cost might again come in a little bit from a support perspective. So while these are all the positive factors at play, the negative factors at play for the current year, as you mentioned, as Dheeraj mentioned, would be the increase in our interest rates. Interest cost from 6.95, it may go all the way up to 7.5, is what we believe, as the old deposits get repriced to the current level of deposit rates. and NIMs, as Dheeraj mentioned, last year we had an average NIM of around nine, and this year we expect it to be averaging around for the full year at around 8.5. So that 0.5% NIM, we should try and make up by the other positive factors at play, which I just mentioned. And so I mean, so obviously, that's a target, 2% ROA is something that we would try and focus on. And some of these factors as they play out, should hopefully help us meet that. Vasu, just, sorry to, you know, just, rounding back to the same question. So, let's say the, productivity or employee cost, you know, will remain same or productivity will improve. But as we continue to invest towards the franchise build up, do you see cost to income ratio coming down? Because, in opening remarks, you know, we did mention that the cost to income will, will remain at around 63%-65%. So how, how will cost to assets will come down? I mean, of course, at one part there will be saving on the employee cost, but at the other part, there will be investment going towards the product, technology, et cetera. Yeah, that's right. So the investments, as we have mentioned, there are a few areas on which we need to keep investing, which is one on our digital and second is on our products. As I mentioned, earlier also, we are introducing new car loans, personal loans, credit cards and Forex cards and AD-I products, which will all happen between 12-18 months from today. But for those products to launch during that time, there's a minimal amount of working that needs to be done in advance, which will, which will add to some level of investment from the bank side. The only silver lining for the bank is that we have, in the past, invested in a very strong network of branches, and so that is one thing that we'll be riding on for the next maybe couple of years. While we invest in products and digital, we may not have to invest much in terms of physical infrastructure, because that's something that we already done in the past. So all put together, yeah, so OpEx growth, as I mentioned, from 32%, year-over-year in the first quarter, should come down over the rest of the three quarters. And cost to income is around 65% in the first quarter. It should marginally come down, maybe 63%-64%. And when that comes, I think that's going to be releasing some level of income to the bottom line. Okay. Very much. Thank you, Vasu. Thank you. Thank you. The next question is from the line of Abhishek M. from HSBC. Please go ahead. Yeah. Hi, Vasu and team. Good morning, and congratulations for the quarter. So, two or three quick questions. One, when you say your cost of funds could reach 7.5, you're talking about a full year average, right? Because... Or, an exit rate for 4Q. We are talking of an exit rate for the fourth quarter, but full year average, interest cost could be in the range of 7.25. ... Got it, got it. In your term deposit, I think your cost of TD has gone up almost 90-100 basis points from the bottom. Is there a lot of repricing that is remaining, or do you think you're pretty much at the end of it? See, we have done two things on TD. One is, if you up to one-year bucket, the rates are in line with what markets are offering. Between 888 days and 444 days, our differential, like Vasu sir said in the call, between our cost of funds and other bank's cost of funds, we bridge it 50 basis points. And we are offering a differentiated rates only in these two buckets for, you know, short to medium-term saving and medium to long-term savers. So in only in these two buckets, which accounts to close to 60% of the book, we are offering more than the peer group by 50 basis points. So I think the rates are more or less stable. We are not seeing any, you know, rate hike to go up unless there is something dramatic happens in the open market. Got it. Can you please repeat the 60% of the book is just those two, triple four- And 888 days. Yeah. Yeah. 444 and 888 days. Correct. So that saves us one long-term book. This is for the one short to medium-term service who is having a goal-based approach. The other one is for slightly longer term, who is actually keeping a destination-based approach in his saving. Got it. So 444/888 should reflect current yields- Yes. whatever you're offering today. Yes, yes. The remaining 40% may have one part, which is at a lower yield, which will get repriced as it matures. Yes. Okay, got it. Okay, that's helpful. Yes. The second thing is... Yeah, sorry, you were saying something? Yeah, go ahead. Go ahead. Yeah. So the second thing is, on slippage rates, now you're at 3.3%. If you look back before COVID, annualized, so if you look back before COVID, you were ballpark at 3.5, plus minus, you know, obviously, good times, bad times, but 2.5, 3.5. So do you think these should sustain here or go down? And, correspondingly, your credit costs, you know, last year, average was about 1.5, 1.6. This year, you started at 0.84. Do you think this should definitely remain below 100 basis points for the year? You know, pre-COVID, yes, our gross slippage used to be around 3.5%, and during peak COVID, it had crossed to 5%. It was, I think, around 5.5% to even 6%. Now, it's come down to 3%, but there is one crucial difference. You know, pre-COVID, you know, we are reporting gross slippage based on month-end figure, which means that during the month, if someone slips into NP and then, you know, pays back in full and stops being an NP within the month, it was not getting, you know, calculated for gross slippage, which we changed. And we had informed this, I think about 4 quarters or so back, we had informed that we've changed it to daily. So that way, the pre-COVID 3.5 is actually not very comparable to the current quarter of 3. And to that extent, I believe that even our portfolio quality are actually further improved compared to even pre-COVID, to that extent. And second thing is from a credit cost perspective is last year, I think we had a credit cost of around 1.55%, and this year we have guided for a 1.25%. And we'll have to keep our fingers crossed, and I believe that we are in for a good credit cycle, as I mentioned earlier. Let's see how the whole you know, collection goes, and hopefully we should be in for some good you know, collection performance for the current year. But parallelly, you know, our PCR is around 58%, and so there is obviously some aspirations from our side on the PCR to also try and increase it over a period of time. So that that might come in for some level of credit cost, if not necessarily from just the normal provisioning, but we might do some extra provisioning only from the perspective of moving the PCR up. Vasu, any target for this PCR? Because, I mean, in case there's, you know, more than expected NIM pressure, can you push it out? Because the PCR is already at a reasonably good level. Yeah. I mean, our destination PCR is the standard, typical 70%, which most banks are. So that's our destination PCR, and we have been looking at it to try and take it to that level over the next few quarters. So we'll have to just take it over the next few quarters to move it to that 70% level. Got it. Got it, Vasu. Thank you so much, and all the best. Thank you. Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Hello? Yeah, go ahead. Thank you very much, sir, for the opportunity. So first up, just a clarification, I mean, PCR to 70%, so that effectively means some INR 90-100 crore of additional provisioning, right? So that we expect to come in remaining three quarters, right? Apart from your standard provisioning that we have been doing. Not necessarily. We are looking to take it to the 70% level over the next two years. So that means the balance may be 7 quarters or so. That's what we are broadly looking at. I mean, I mean, these are not something hard, hard cast or, you know, cast in stone, but broadly, that's what we are looking at. Understood. Sir, in terms of your percentage of portfolio, which has not been repriced as of now, so how much would that percentage be? See, our fixed rate loan book is approximately around 83%, 83-84. The balance is floating rate. So, 83% of portfolio is not yet, I mean... They won't get repriced. No, they are fixed rate loans. ...So they will earn at the same level of interest. Understood. Understood. And what will be the tenure? In our scenario, typically what happens is, in a rising interest rate scenario like currently, so naturally we will have the negative impact of it, and hopefully somewhere down the line when the interest rate cycle changes, that could be the opposite effect, for the bank. I understood. What would be the average tenure of that 80%-83%? Gopi, do you want to- Yeah. The average maturity of assets is around 2.5 years. 2, 2.5 years. Fair, I understood. And, sir, I also wanted to understand in terms of liquidity. I mean, do we hold any kind of surplus liquidity which is having a negative carry on our NIMS or on our spreads? Yeah. But the liquidity per se, we do continue to maintain the liquidity, which is adequate to meet our forecasted funding requirements. And- LCR. Yeah, and it is, LCR is, we also maintain a higher level of LCR, if you have seen from the numbers. So LCR for June stood at around 200 and close to 240%. Correct. Yeah, so, any thought process to reduce that if it is having a negative carry on our P&L? See, LCR is a by-product of quality of deposits. While our SLR stands at, you know, 18%-18.5%, we are able to maintain higher LCR because of the quality of deposits. Mm. So since the quality of deposit is predominantly individual and retail skewed, this is having this impact, and it will have a impact of 30-40 basis. Okay. So it will continue, right? Yeah. It will continue. Understood. Fair enough. Sir, in terms of cost to income, you mentioned about this year, but if I have to see over the next two to three years, how do we see cost to income panning out? Yes. So from a cost to income, we see the next two years as an investment phase, but obviously these return ratios will improve. So cost to income in, at least in our forecast, next year should be a lot more palatable. It should be hopefully somewhere around 60% or below. And from a medium term, we've always been saying that it should be between 55%-60%. And so that's how the model works. Mm. It's definitely modeled for Equitas. So we don't see cost income going below 55, and in investment phase it will be between 60-65. So it should taper next year, and the year after that, it should be at least where the model is. I understood. I understand. That's very clear, sir, and I think that's it from my side, and all the very best. Thank you so much. Thank you. Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Hi, good morning, ma'am. Sounds like a good set of numbers. So one question on the liability franchise. While we have been reporting a very healthy CASA run rate, but the same from the peak has come down by 13 odd%. And so when you now look at the cost of fund going up to 7.5, what sort of further CASA decline are you building in? See, presently, if you see cost of funds, it has three components: CASA, which is at 0 cost; SA, which is at 6.18, which is actually lower than last year. This shows 2 things. One is book that has moved into TD, so it is having a TD cost a year. Second, up to 5 lakh bucket, our average cost is only closer to 4.8, 4.7. That book has expanded also. So which means a spender is building balance, a saver is moving the bucket from savings account to TD, and rightfully so. So we are looking at, you know, RPAL, that is retail pool of liabilities as a strategy. Adding more consumers into retail is very key at this point of time. So we see it temporarily, you know, 1-2% dipping down and then stabilizing and we taking it up. So what this has gained to us at this point of time is we have incrementally added 150,000 more customers whose product holding has gone beyond 2. So that is why we are saying that incremental TD cost will be between, anything between 7.6-7.7. Savings account will be moving it by 7-8 basis points, and overall the cost being coming to 7.5. Right. Okay, and, and CASA is therefore should sustain 35+? Yeah, 35+. Right. Should be our ambition. Right. The other question is on the MSE finance. That has been a segment which we have not been growing. There has been a YoY decline. But if I look at the average ticket size in that segment, that is still higher versus what it was in the last quarter. So with the unwinding that is going on on a YoY basis, why is the ATS going up, and how do you look at this segment as when it comes to the growth going forward? Yeah, the MSE is contributing about 5% of the book now. And, so you know, that's the, that's one product where we are basically keeping it as part of the bank bouquet of offerings to meet the working capital needs of the micro entrepreneurs. We are really not even in the small and medium. We are really in the micro part of the MSME segment. And, you know, if you see the data that we have put out, the NP in that particular segment actually is on a higher side level also. So that is an area where some amount of changes was done sometime about 2-2.5 years back in terms of the credit filters and the LTV norms. So the book that has been being built over the last 2.5 years has a much better quality. So somewhere down the line, we expect that NPA to come back to a more normal level. Then you will see that this portfolio should start growing at a rate which is more or less in line with the rest of the bank products. Right. Okay. Sure, sir. Thank you so much. Thank you. ...Thank you. The next question is from the line of, Ashlesh Sonje from Kotak Securities. Please go ahead. Hello. Hi, team. Good morning. A few questions from my side. Firstly, on the CD ratio, we have indicated that we want to bring it in line with some of the larger banks. So what is the target here? What is the horizon over which we want to meet this? And what does this mean for the deposit growth outlook that we have? So on the CD ratio, you know, there is no hard and fast norm that we have put in place. It's something that is more directional and aspirational that we want to do over the next maybe couple of years or so. So currently, our CD ratio, including the refinance that we get from institutions, is about 95% or so. And so we would like that to come down to maybe about 85% or so over the next couple of years or broadly in that range. Okay. Okay, perfect. And secondly, if I look at the granularity of deposits, that seems to have worsened a little bit. If I look at the proportion of deposits held by individuals, that has declined. Even in the SA and TD deposit breakups, which you have given, there is a clear shift from lower-ticket deposits to higher-ticket deposits. So what, what exactly is happening here, and, when do we expect this, this, shift to stop happening? See, at a portfolio level, 78% is retail and 22% is, we call it bulk. Within the bulk, today, we are having an institution opportunity to build, a stable, non-callable deposit base with a tenure of 1 year. So that is helping us to garner 2 things. One is to get the pool of money in, and second, through that, we are also getting the transaction-centric accounts of them. So this will continue to be in this direction, where 75/25 will happen, very soon. So our direction is we'll continue to build granular accounts, 5%, 10%, LCR-centric account, keeping the focus of, you know, product holding at a retail level. And as and when the insti opportunity comes in, we will start getting it into it. So these are all the institutions which we are taking it in, is which, you know, is the non-callable base and most importantly, the institution which is giving us the duration. So this will continue to grow in this direction. So if you see INR 1 lakh-INR 5 lakh, if you are predominantly what I said, spenders as a segment, is close to 18%, which has gone up compared to last year. Okay, perfect. Just one follow-up on that one. The NiyoX deposit base, which we have, the amount of deposits there seems to be... and the growth there seems to be quite weak. Any plans to ramp that up? Yeah. Yeah, NiyoX... See, total, our book is close to INR 1,200 crore at this point of time, as we speak from a digital segment. NiyoX, now, what we are doing as a conscious activity is no longer calling it Equitas savings account only. We have deputed a dedicated VRM channel and a specific engagement platform through which we'll engage and deepen the customers going forward. So you will see a traction in line with, you know, Selfe as a product. So Equitas is Selfe and Equitas as NiyoX. So both are digital, you know, combo product. One caters to the geographical concentration, that is, where our branches are there, we focus those customers. So Selfe is predominantly geographic-centric. NiyoX is demographic-centric. So Selfe, the biggest advantage is, since it's a geographical-centric, consumers are preferring branch being a closer vicinity. Now that we have engaged a VRM channel to get NiyoX, it will continue to sustain the growth. Okay. Perfect, sir. Thank you. Thank you. The next question is from the line of Nidhesh from Investec. Please go ahead. Thanks for the opportunity, sir. So on the IPL branding, can you quantify the cost that we have incurred in Q1? That is the first question. And secondly, on the productivity after implementing LOS in the vehicle finance, can you quantify what is the improvement in productivity or any other benefit which can be quantified after this rollout? And what can we expect productivity to improve in the other segments where we are rolling out LOS in this current quarter? The first question on the IPL cost, it's INR 7.5 crore. So on the benefits of, you know, LOS implementation, how the productivity will improve is, one, the LOS will create a completely paperless transaction. So from when we implement eKYC to eSign, there will be no paper involved. We can onboard the customer easily onto the app and straightaway go into disbursement. So you will see the productivity in terms of, one, number of files per person that he can onboard. Number two, the number of back-end people we need, you know, lesser number of people to process the files. So once, all the LOS gets into full implementation, we can see this productivity benefits. So, in vehicle finance, I think it has already been implemented, so have you seen any- Vehicle finance, 92% of all disbursements are currently in HETRA, but there is still 8% of functions to be implemented. Where in vehicle finance, you're already seeing the productivity go up because the number of... We have not added many people there, but the volumes in vehicle finance have grown. You see a 39% growth in advances in vehicle finance. Okay, okay. So that, that has happened without addition of employees? Absolutely. Very less people we have added. Okay. Thank you, sir. That's it from me, sir. Thank you. The next question is from the line of Darpin Shah from Haitong Securities. Please go ahead. So most of the questions have been answered. Just one thing on my part is first, on the TV interview, you mentioned that slippages will still be around 3%.... you know, if things are looking better on ground, we are growing at a faster rate, so why then still have a 3% kind of guidance or, you know, for gross slippages? Yeah. So, see, these gross slippages, I don't know which number you have to compare, because what we have seen is, not too many institutions put out gross slippages, which can be comparable. So for which is why we keep saying 3% is the healthy run rate which we have, and it should remain steady at this level. My point was, you know, in first quarter also, you are roughly at around 3%. Yeah, right. This is a seasonally weak—it is a seasonally weak quarter, right? So when things get better, you know, you know, in terms of seasonality for say 2Q, 3Q, 4Q. Q4 is- Then we still- Yeah, sorry. For the seasonality, Q4 actually you will see it improving much better. But like what we said, that we are in a good credit cycle, so assuming a 3% slippage for the, you know, for the full year is not too off. And if Q4 typically plays the way it plays every year, it'll obviously be below 3%. Okay, fine. Thank you. Thanks a lot. Thank you. Thank you. The next question is from the line of Shreepal Doshi from Equirus. Please go ahead. Hi, sir. Thank you for giving me the opportunity. So the question was pertaining to the MSME segment. Therein, if you look at the GNPA have only been going up. So I mean, and whereas if you look at the share is not so significant, but the GNPA in that segment has been going up. So could you please throw some light. What's the reason and what is the outlook for this particular product? So, see, these are basically, you know, overdrafts and, you know, term loans given to MSME customers over a period of time. See, during COVID, a lot of MSME customers got infected, and some of them have still not come up. So, that is why the GNPA are still high here, because they're all collateralized and there is property. So it takes time for us to, you know, proceed legally against them and utilize the property. But you will see some decent reduction in GNPA this year. We are all aspiring for that. Sir, the ticket size here is also, like, INR 48 lakh-INR 50 lakh at the time of disbursement. So are we able to invoke SARFAESI in these cases? Yes, we are able to invoke SARFAESI, as all of these are backed by collateral. Okay, got it. And sir, to Vasu sir, sir, what's the update on the universal banking license? Any timeline for that? As we have mentioned before, you know, that the merger was one licensing condition, and now that is behind us. So technically, we are now completed all our licensing conditions. So now we have to just wait, you know, somewhere down the line, we assume that the regulator will probably come with some kind of a guideline on, you know, who can apply for converting from an SFB to a universal bank. So some kind of a guideline probably will emerge from the regulators. And as and when that comes, then we will have to see whether we comply with those requirements under those guidelines. And if we do comply, then we'll be in a position to apply. So there is no particular timeline that we have in mind. We have to just wait and take it as it comes. Okay, okay. So this question was on the back of our thought process to launch, you know, new car, personal loan, credit cards. So, so then, say, products like credit card would be, would be a tie-up product only, broadly. Is that a fair understanding then? Tie what? Tie-up product? Yeah, like with, with some other bank or... No. See, the new car loans that we will be launching during the current financial year is largely a product that will be targeted for the deposit customers and our own asset customers. So it'll be largely a cross-sell product to the existing customers. So that's not an area where we will be seeking to go to the market and acquire, you know, open market customers through the dealership, where, you know, the kind of commission payable, et cetera, makes it really unviable for someone like us. So that will be largely a product that will be targeted only for cross-sell of to the existing customers, essentially the deposit customers and some of the asset customers. You know, in the deposit side, you know, we already taken out certain data. We have a few large customers whose credit bureau score is over 750. So those, those kind of segments is what we'll really be looking to cross-sell a product like new cars. And minus the dealer commission, because it will be direct to customer, so hopefully it will be a viable product for the bank. As far as credit card is concerned, I think we have mentioned it the last time also, that's something that we are working on, and we'll be launching our own credit card. But that we expect it to happen only around maybe a year plus from today. So there will be some amount of cost we may incur in terms of setting up the system, but over a year's time, we hope to launch it, you know, subsequently. Got it. Got it. Thank you so much, and good luck for the next quarter. Thank you. Thank you. Thank you. The next question is from the line of Harsh from Dimensional Securities. Please go ahead. Hi, sir. Good afternoon. My, my, my first question is on the, OpEx and the digital space. I, I look at last quarter's, our employee costs have almost increased from, INR 90 crore to INR 330 crore, where we are standing today. We have spent, around INR 300 crore in digital spend. Load also increased to the same extent. So how, why are we not yet seeing the impact of productivity that we, that we are speaking of? Because we already spent almost INR 400 crore in technology in last 12 quarters itself? Yeah. See, some of these technology costs will take time to actually start showing from a P&L benefit. But just to add on to also what we were asked earlier in terms of productivity benefits, you really look at disbursements per employee last year to this year, from roughly about 18% is actually moved up to about INR 22 lakh, INR 18 lakh is moved up to about INR 22 lakh. This is, and some of these benefits can be directly attributed to, you know, the loan origination system being put out, especially for vehicle loans, where the time for disbursements are much, much faster than it was historically. And again, some of the other investments in technology is really from a scaling up perspective. So two years, three years from now, from a back-end perspective, and those are investments in cloud, investments in APIs or microservices, investments in, you know, platforms like Microsoft Dynamics, etc. All of these will actually give you benefits only after a couple of years, but will help the bank really scale up, which is why we are saying that this year and next year, you may see that not positively adding to the PNL, but after that, you should start seeing some of those investments pay off. Okay. And given that the tenure of our loan is at around two and a half years, then what is the thought process of doing most of the lending at fixed rate and not, two and a half years is fairly long period to have some sort of interest rate risk. So just wanted to understand the thought process there. And incrementally, what is the ratio between fixed and floating? So, we have already, you know, Vasu sir has already said that, you know, fixed rate loans are at about 83%. Secondly, this whole thing about fixed and floating, it also depends on the product. For instance, you know, you can't do vehicle loans at floating. You have to do them at fixed because that's how the industry operates. Whereas home loans, yes, home loans we are doing at floating rates. So it, it depends on which product that, you know, you're lending, so your fixed and floating will depend on that. Okay, okay. Last question, just a bookkeeping one. The fee income, if I look at it, look at it as a percentage of disbursement, has come up from 1.5%-3%. The last time I looked at it, it was around 1.5%. Just come up by 25 bps. So is it just one-off or any, any, Yeah. So about 70% of our fee income is, you know, linked to disbursements, which are processing fee and login fee, et cetera. That has actually remained healthy quarter-over-quarter. If you compare with the last quarter of the year, there were... I think we did some disbursements in NBFC loans, et cetera, which is why the percentage may be looking skewed. But otherwise, the processing fee and or disbursement link fee has remained healthy at about 70%. Okay. Thank you so much. Thank you. We take the next question from the line of Pritesh Bumb from DAM Capital. Please go ahead. Hi, sir. Good afternoon. So, one question was on recoveries. How do we see recoveries going ahead? Is the pool now getting, you know, lower and lower? And is it due to the hard buckets? Is some sense on the recovery and upgrades front. It has been lower this quarter. Yeah, yeah. So recovery has been lower this quarter, just from a- to give you a number, last year, roughly about INR 36 crore was the income which we got from recovery, and that pool actually has come down. So this quarter it is about INR 3 odd crore. Yes. So this line item will start coming down. So actually, I was talking about the GNPA movement recovery, basically, not the written-off recovery. Upgrades. Upgrades and recovery. Yeah, the recovery upgrades, yeah. Yes. Just the pool actually has come down. If you look at it, the opening NPA numbers have come down. From 861, it's come to 723, so correspondingly, you will see- First quarter. the upgrades come down. First quarter. First quarter, usually recovery then. Okay. This is on first quarter. So you mentioned... Yeah, yeah, go ahead. It will also build up as the year goes by. So this is only the first quarter. So the recoveries will, you know, from the pool, will happen. Sure. So why I was making a sentence, because you report on a daily basis, the NPA. So you said that 3% is a normalized slippage which will come in. But, what we've not seen is that, the recovery not coming through this quarter, at least. That's why the question, basically. Oh. Yeah. Okay. The second question was on the PCR. Vasu sir mentioned to it to be moving on a normalized basis to 70. But what will be the triggers to, you know, increase the PCR voluntarily or any triggers? Because asset quality cycle is benign, and your second book does not require that kind of a provisioning. But what will trigger it to move up towards at least 65%? Some sense on that. It's more of general prudence, really. Just going back to your previous question, in terms of the recoveries and upgrades, if you look at it, last year, first quarter, this is on page number- Twenty. Twenty. Last year, first quarter, the recovery and upgrades were 51.75 and 95.64. If you add that and take it as a percentage of the opening GNPA, it's about 18%. And this year, first quarter, similarly, if you take 87.38 and 49.38 and sum it up and divide it by the opening GNPA, which is 723.96, again, it's 18%. So broadly, what happens is the first quarter, whatever be the seasonality that one typically experiences, the first quarter has been quite in line with what was the similar upgrades and recoveries of the first quarter of last year. And hopefully, you know, this year... And it was a higher, I mean, lower level of, you know, growth slippage. I think it's a good combination that, you know, we had a lower level of growth slippage, but an upgrade which is practically in line with the last year's first quarter. Hopefully, as the collection seasonality picks up, which happens typically after the first quarter, we should hope to see an even better upgrade and recovery going forward. Sure. Thank you, sir. Thank you so much. Thank you very much. Well, ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. P.N. Vasudevan for his closing comments. Thank you, and over to you, sir. Yeah, thank you. Thanks, all of you. Thanks for dialing in and giving us a lot of food for thought through your questions. And we shall continue to work to try and create the best retail practice for the bank in the informal economy sector of the country. There is a large unmet demand, as we keep mentioning, and we do hope that we will be a banker of choice for those millions of people in that base of the pyramid segment. And looking forward to all your support on an ongoing basis. Thank you so much. Bye-bye. Thank you. On behalf of Equitas Small Finance Bank Limited, we conclude today's conference. Thank you all for joining. You may now disconnect your lines.