Ladies and gentlemen, good day, and welcome to Earnings Conference Call of Equitas Small Finance Bank Limited Financial Performance for Q3 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 participants' lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone telephone. 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 evening to all of you, and thank you for dialing in today. The Indian economy is doing well compared to the other global economies. However, inflation remains a sticky issue and still away from the target of 2%-4%. India's GDP growth this year is expected to end robustly, while next year, even though moderation is definitely expected, it might still remain at an attractive level. At Equitas, as you know, we lend to customers at the bottom and the base of the pyramid, and we continue to see a healthy credit demand, normalizing of asset quality cycles, and ample opportunities from this segment to enable us to continue to build a stable, sustainable, and scalable bank. Our business model of lending to the informal and formalizing segments through a wide range of products, fueled by deposits from the mass and the mass affluent households, catered through a differentiated branch network, has helped us weather and stay profitable during black swan events like demonetization and COVID. As the impact of such events wane off, the bank has been able to deliver consistency in advances in deposit growth and return ratios. In the current year, we are going through an unfavorable interest rate cycle against the backdrop of the bank having nearly 85% of its loan book at fixed rate loans. During the first quarter earnings call, I had highlighted the impact we may see on the cost of funds and margin during the year. Also, we had discussed our focus on improving the CD ratio and how we see that moving over the next two years. On both these fronts, Equitas is moving as per what we had mentioned. Our NIM at 8.37% for Q3 reflects the increased liquidity on account of improved CD ratio and also the rising cost of funds. During the past 12 months, we have improved our portfolio yield by 60 basis points and yield on fresh disbursement by over 100 basis points, and this has helped us mitigate some of the impact of rising interest rates. It's generally expected that interest rates may remain stable over the next one year, with marginal drop coming towards the end of next year. If that plays out, we should see a reverse of the effect of this year in terms of NIM expansion, given our large fixed rate loan book. On CD ratio, as guided during the first quarter, we expect to bring it down to about 85% by end of March 2025. I repeat March 2025. With a CD ratio at about 91.5% as of December 2023, we have completed most of the heavy lifting, and the impact of further reduction in CD ratio on NIM over the next five quarters may be muted. When we include refinance, the CD ratio, even as of December 2023, is about 85%. On the business front, across product and customer segments, we are fairly well settled, reflected in steady advances growth. We expect to continue this and expect to end the year with around 25%-28% gross advances growth. Overall, portfolio quality remains comfortable. Our deposits also continue to grow well with a focus on retail TDs. We would like to highlight that out of the incremental deposit mobilized during the third quarter, about 80% of them came from retail term deposits. The franchise is coming up well, and over the next few years, our strategy is to move to a customer segment approach from a product segment approach, which should help us deepen our offerings for families, NRIs, and digital-savvy customer segments. Before handing over, it gives me pleasure to inform you that our trust, Equitas Healthcare Foundation, jointly with Sringeri Sharada Math, Karnataka, have launched the Sringeri Sharada Equitas Hospital, a cancer care hospital with 100-bed capacity. Since the entire CapEx for the land, building, and equipment are born out of the donations from Sringeri, as well as our CSR contribution, we need to charge patients only for the operating cost. Thus, our charges are about 40% of the charges of other private hospitals, and this hospital is really targeted at the middle and low-income families to provide affordable, high-quality cancer care. And for those who come from very low income or poor families, we would be further discounting, even giving free for some of the low-income BPL. With that, I now hand over the call to Sridharan, our CFO. Good evening to everyone. Our net interest income for the quarter came at INR 785 crore as compared to INR 647 crore during the same quarter last year, registering a growth of 21% year-over-year. Other income for the quarter came in at INR 185 crore as compared to INR 127 crore during the same quarter last year, registering a growth of 46%, resulting in a net income growth of 25% year-over-year. The total operating expenditure came at INR 610 crore and remained stable with an increase of 2% sequentially. Cost to income has come down to 62.8%, which is comparatively better than Q2 of FY 2024 at 64.3%. This improvement was attributed to treasury performance during Q3, FY 2024 of INR 30 crore, as compared to INR 18 crore during Q2 FY 2024, a growth of 70% QoQ. Pre-provisioning operating profit, PPOP, grew 29% year-on-year to INR 360 crore, and PPOP to asset remains stable at 3.53% for the quarter. Tax for the quarter came at INR 202 crore, as against INR 170 crore during the same period last year, registering a growth of 19% year-on-year. ROA and ROE for Q3 FY 2024 stands at 1.98% and 14.44%, respectively. During Q3 FY 2024, the bank has securitized and assigned advances worth INR 1,390 crore pertaining to advances in SBL, HF and VF. Based on the current advances, the bank is maintaining a healthy PCR of 55.97%, and it continues to follow stringent provisioning norms across all asset segments. The total provision for Q3 FY 2024 was INR 84 crore. GNPA improved by 108 basis points year-on-year to 2.38% in Q3 FY 2024, as compared to 3.46% in Q3 FY 2023. Including the securitization book, GNPA would stand at 2.29%. NNPA improved by 67 basis points year-on-year to 1.06% in Q3 FY 2024, as compared to 1.73% in Q3 FY 2023. The provision coverage ratio remains at 55.97%. As of December 31, 2023, the total CRAR at 20.24%, consisting of Tier 1, 19.69% and Tier 2 at 0.55%. With this, I would like to hand over to Mr. Rohit. Thank you, Sridhar, and good evening, everybody. Advances have grown by 31% year on year and 5% quarter on quarter. GNPA has been stable at 2.29%. In SBL, advances have grown by 32% year on year and 7% quarter on quarter. In SBL, there's growth in Non-TN disbursements. As of December 2022, the composition of disbursements of TN and Non-TN was 65% and 35%. Whereas as of last month, December end, TN disbursements had come down to 54% and Non-TN disbursements had gone up by 46%. X bucket collection efficiency continues to be at 99.5%. The business has seen steady growth in the states of APTG, Karnataka and Maharashtra in the Non-TN region. The new LOS has been rolled out and is now active in 182 branches across the country. Another 200 branches will go live this quarter. In microfinance, advances have grown by 32% year-on-year and 7% quarter-on-quarter. 100% of all new customers acquired last quarter were onboarded using eKYC. 95% of all new customers acquired last quarter signed the agreement, eliminating the need for use of physical agreements. In the vehicle finance business, the used car book has now grown to 14% of the total VF advances, and it has crossed INR 1,000 crore. The focus here 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 focus in new CV and new CV portfolios continues to be primarily on small commercial vehicles, light commercial vehicles, and pickups. The affordable housing home loan business is scaling up well in 34 branches and 34 branches in five states. The new LOS for this business has been rolled out in all the branches. Rural demand and macro indicators are quite positive. Things do augur well for the coming quarter. I'm quite hopeful that the coming quarter will always be good. Thank you. I'm handing it over to Murali. Good evening. Thank you. Once again, I take this opportunity to thank you all. Our overall focus on retail-centric approach with a differentiated approach of mass and mass affluent is continuing, and it is continuing to yield good results on three reasons. One is, if you see our mobilization, not only last quarter, for last three quarters, we are able to maintain anything between 77% and 80% of the incremental amount, what we mobilize is through absolutely retail tickets, which is through individuals, which is through affluent individuals and also through the NRs segment. I think that is one important thing that is happening. So our continued focus on retail is helping us to penetrate us into investor segment as well as trader segment. So our AUM, the coupled fact, if you see mutual fund AUM, is showing a trajectory growth of 36%. Our coupled with our broking account, which we have a 3-in-1 tie-ups, is showing very good traction of, again, a growth of 25-26%. And most importantly, ASBA is helping us to actually retain our balances. So, expansion from a saver to an investor to trader is significantly helping us. As a channel, our focus on NR is now we are present in close to 120 countries through customers across and giving us a reference mode. And NR shifting into RTD is one new development, but that is helping us to grow the relationship across the spectrum. So what we are seeing is relationship backed by an attractive pricing at this point of time. Consumer, as a retail, would like to transact more and want to hold more products. And increasingly, we are seeing product holding at a customer level and product holding at a individual level is increasing the traction. VRM as well as normal RM channel books are growing. So overall, the trajectory looks positive. Yes, the pressure on CASA will continue to be there, and this is the first quarter. After last two, three quarters, I think we have shown growth in CASA also. And with the increased focus on ASBA as well as trading account, I think we should develop that module. A differentiated solution and current account, for example, virtual account numbers and solution-centric approach, along with TB suite, is helping us to grow the CA account too, that is, current accounts. Overall, our efforts are continuing to sustain this growth path. I hand it over to Mr. Natarajan, who heads up the show. Thank you, Murali. Good evening, everyone. Q3 FY 2024 has been a relatively steady quarter on the market front. On a quarter-on-quarter basis, India ten-year yields remain mostly unchanged despite some volatility. Bond prices remain steady as market participants continue to believe that the worst of inflation and rate hike cycle is behind, while continuing to await corroboration through data prints. The U.S. Fed continues to be hawkish despite expectations of softening view, largely due to the ongoing fight to bring inflation below the targeted level of 2%, while trying to avoid recession in an attempt at safe landing. It is a good quarter for equities globally. Dow Jones gained 12%. Nearer home, Indian equities continue to see a run-up, too, in Q3 FY 2024, with gains of almost 11% for the frontline Nifty 50 Index, which scaled 20,000 on good buying from across investor classes like FIIs, DIIs, HNI and retail. Multiple state election results seem to aid market sentiment ahead of national elections. Short-term volatility is not ruled out as we approach budget and national elections. Geopolitics continues to be a point of concern, and supply lines can be an issue, especially for oil. If situation in Israel and Gaza worsens, it can result in higher inflation numbers. Despite India's economy continuing to stabilize, consolidate and grow, considering the global nature of trade and supply chain, we can expect some volatility going ahead. Hence, we view the market as cautiously optimistic. Coming to Equitas Treasury performance for Q3, it has been another steady quarter. Profit on sale of investments stood at INR 27 crore. Our funding profile has been stable, with opportunities available to raise funds both in the form of refinance or IBPC and securitization. Thank you. With this, I hand it over to the operator. Thank you very much. We will now begin the question and answer session. Anyone who wish to ask question may press star and one on the touchtone telephone. If you wish to remove yourself from question queue, you can press star and two. Participants are requested to use handset while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shreepal Doshi from Equirus Securities. Please go ahead. Hello, sir. Good afternoon, and thank you for giving me the opportunity. So my first question was pertaining to the increase in slippages, which has also led to increase in GNPA. So, could you please explain, you know, the reason you understand? Our slippages have increased slightly for the reason that, you know, there have been heavy floods in Tamil Nadu, and primarily slippages have gone up by, gone up in vehicle finance and microfinance. But if you look at our slippages, they have always been range bound between 3%-4%. I think this is. We, we feel that this is normal, and 3%-4% is a range bound for our practices. Okay. Okay, so as you analyzed, because the floods. So how are we seeing the situation now in terms of recovery? Usually, fourth quarter, collection efficiencies are good. But we see that, you know, in particular in case of, vehicle finance in the market, delinquencies have normalized. And coupled with that, you know, the fourth quarter, generally, collection efficiencies are higher, so we feel that the collection efficiencies will be much better in the fourth quarter. But we think that we have reached, a normalization in the credit cycle, because, for the first two quarters, the credit cycle was very benign, and now now we feel that the market coming back, the credit cycles are being normalized. . The increase in credit cost during the quarter was also pertaining to this event only. Is that a fair understanding? Yeah. Yes, yes, you're right. Got it. The second question was again on the vehicle finance side itself. So last quarter, we had rolled out the new LOS for this particular segment. And, and I, I was just listening to our, our earlier commentary, wherein we are aspirational about growing this segment. So, so but if you look at the GNPA and one of the disbursements during the quarter was soft, so what is it that we have in pipeline in terms of ramping up this segment incrementally? So, the new LOS for vehicle finance has been rolled out in all the branches, and it's very active. As far as growth is concerned, advances have grown at 30%, so which is quite good. We will continue this pace of growth in vehicle finance. Right. In vehicle finance, we have only the disbursements are slightly lower because the same period last year, we had funded some low-yield strategic customers. Low-yield product is what we have not done in vehicle finance. That is why probably you see some of the disbursements lower. But otherwise, you know, we see a healthy growth in the market also in terms of vehicle finance, and we also feel that vehicle finance, particularly in UCV and used car, will grow. Got it. The last question, just a bit on credit cost front. So because of floods and also, while you said that the recoveries will be held in 4Q, will there be any spillover effect on credit cost front in 4Q? So, see, if last year we had guided on a credit cost of 1.5%, and we landed at about 1.56%. This year, we feel that our credit cost will be at around 1.25%. Okay, so we will not breach irrespective of this event at all? Yes, yes. Got it. We believe that we'll be there. Sorry? We believe that we will be at 1.25%, that we will not exceed 1.25%. Got it. Got Got it. Thank you so much, sir. I'll come in the queue for more questions, and good luck for the next quarter. Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit your question to two questions per participant. Should you have a follow-up question, we request you to rejoin the queue. The second. The next question is from the line of Renish Bhuva from ICICI Securities. Please go ahead. Yeah. Hi, sir. So two questions again, circling back to the credit cost one. So over 9-month credit cost run rate is, you know, 90 basis points odd, and when we are saying our full year guidance is 1.25%, does it mean that Q4 will be higher in terms of credit cost or will be significantly below the guidance range? If you remember, in the beginning of the year, we had guided for a credit cost of 1.25% for this year. Okay. So, we are kind of sitting with that guidance that we gave in the beginning of the year, and we believe that the credit score should be around that level or less than that. It cannot, it will not be more than that. The question whether you're, what you're asking is whether it will actually be 1.25 or will it be lower than that? We believe it will be lower, but we are still sticking with the guidance that we gave at the beginning of the year. Got it. Just, you know, from a medium-term perspective, you know, as you already highlighted that our normal slippage run rate will be anywhere between 3%-4%, and even if we take 30%-40% LGDs, so let's say going ahead in medium term, the credit cost range should be 1.2%-1.5%, or how you internally build the credit cost? See, historically, our credit cost has always remained. I mean, if you remove some of the black swan years, otherwise historically our credit costs have always remained in the 1.1%-1.2%. That's where it has always traditionally been. And we believe that, the, given our product mix and the customer segment that we lend to, on an ongoing basis, our credit cost should be typically within that range of around 1%-1.25%. Got it. Got it. Got it. And And so just a last question from my side. So if you look at the disbursement deal, you know, which has gone up by almost 49 basis points sequentially. So if you can throw some light on which product is sort of driving this, you know, higher rate. I mean, across the product we have increased rates or there are a couple of products wherein we have increased the rate. And secondly, when we look at the disbursement run rate for this quarter, you know, it's a flat-ish. So is there some correlation between, let's say, higher interest rate and the lower disbursement? Or how one should read this two data points? So, one is you, you asked on which product we grow. So the No, no, which product you have high rates? High rates? Which product have increased the yield? SBL, vehicle finance, microfinance, so all these three products have increased rates. Rates have also gone up marginally in the affordable home loans business. But that is marginal because there, you know, you don't get very high rates. But rates have significantly gone in small business loans, vehicle finance, and microfinance. This is your first question. The second question is whether, you know, we have slowed down disbursement because of some low-yield products. Yes. See, we don't want to sacrifice NIMs for the sake of only top-line growth. So some of the low-yield products, we have stopped focusing, and we have focused only on high-yield products. That is a yes. So, the last year, we had the opportunity to do a lot of NBFC funding, and we did get our rates. This year, there is a lot of demand for NBFC funding, but the rates, they are able to get very low rates in the market, and we don't feel that that's a great opportunity in sacrificing rate for the sake of doing top line growth, so we have de-focused on those products. Got it. Got it. Got it. And, so is it just the last thing, so on the deposit side, you know, how the market is, and, you know, what we understand from outside is that, competitive density has gone up significantly, during past 6-8 months. So in such scenario, you know, how confident we are to sort of sustain this, current, deposit growth rate? And let's say, if, now, if that don't happen, how we will protect our CD ratio? I mean, naturally, we have to tackle our growth assumption. So, you know, how one should, look at the, deposit growth run rate, in conjunction with the CD ratio expectation? Yeah, I see, deposit, if you see the mobilization part, at a retail level, between CASA and RTD, while the mix has changed, more skewed towards RTD, our ability to raise retail deposits has been in line and steadily growing up month on month, quarter on quarter. The relationship team, which works there. So our key strengths are the product we have, program we have, relationship we have, and most importantly, the price points at which we attract the customer. So in terms of product suite, program suite, and engagement suite, I think we are there. So we are fairly confident. And second thing is, since it's a retail and spread across mass and mass affluent and NR, all contributing, we are fairly confident that in terms of retail, you know, growth, we will sustain there. Bulk is based on requirement, okay? The bulk is based on absolute requirement. Despite the requirement being there, as we, Mr. Vasu also said in the initial discussion, to be very precise, last quarter, 77% of the deposit mobilization came from only retail. A quarter before that, if you go back, it will be anything between 76%-77%. So we'll continue to focus on retail. We'll continue to go granularly, and that will help the CD ratio also, as charted out till March, we able to achieve it. Got it. Got it. Okay, that's it from my side, sir. Thank you, and best of luck, sir. Thank you. Thank you. The next question is from the line of Aravind R from Sundaram Alternates. Please go ahead. Hello, sir. Thank you so much for the opportunity. I'd just like to understand if you can give any color on what kind of book has been securitized, and with that, that is my first question, and second question? Is it clear? Yeah. Is it, is it clear? Yeah, the first question is clear, no? What, what are the book, books, or advances have been securitized at night? Yeah, what kind of books it has been securitized? I mean, like, if you can give me some color on that. And, second question is on, like, how it impacts the interest income. For example, if it is securitized, do we recognize it as a, you know, direct assignment gain or, like, a differential is booked as an interest income? Like, if it is booked as an interest income, like, where, you know, where it could be easily reported in the financial statement? Yeah. Yeah. The first question is that, whatever we have done, the securitization attainment is SBL and, HF and VF loans, actually. And the second question is that, how they are. See, vehicle finance is INR 897 crore, housing finance, INR 271 crore, and small business loan is INR 422 crore. Put all together, INR 1,390 crore. And your second question is, you know, how the recognition of income, no, with regard to this one, actually. See, whenever we securitize the portfolio, whatever the investor gets paid is shown as a interest expenditure, actually, as a cost. With regard to our portion of the income which we receive, over and above what is paid to the investor, is shown as other income, as a securitization income, not as interest income. It will be part of the other income, I mean, like, basically part of the fee and other income, you're saying? Yes, yes, yes. There's no upfront. Hmm? There's no upfront. Hmm? There's no upfront. There's no upfront. Sorry, sir. There is no? There is no upfront income is recognized, actually. Okay, okay. Only the difference is booked as part of the income. Exactly. Over because this is based on the cash flow waterfall mechanism. Okay. As per that, it is recognized over a period of time based on the cash flow. Okay, sir. Okay. Thank you so much. Thank you. The next question is from the line of Harish Swaminathan, an individual investor. Please go ahead. Thank you. I have just one question on the employee stock option scheme, if I may. Have you done any sort of analysis as to the cost versus benefit of this scheme with respect to. You know, the benefit is, of course, if you can retain employees, but the cost is that it dilutes the equity. And so instead of that, if you pay out the market salaries, then if they are interested, they can buy the shares. So and is there any sort of threshold which we don't want to breach with respect to comparable banks? Because it dilutes the equity on the one hand, but yes, we hope to. The employee has a vesting period of, let's say, four years. But instead of that, if you pay him market salaries, then he decides whether he wants to buy or not. So I just wanted your thoughts on that. Thank you very much. Yeah, hello. So we had an ESOP scheme which was formulated very long time back, and when we did that, I'm talking of really 2007 or 2008, when we formulated the ESOP scheme when we are an NBFC. So we had set aside certain options under the pool, ESOP pool, and that was about 15% of the capital at that point in time. So the, subsequently, I think once we added to that pool, maybe about 6 or 7 years back, today, the number of options available in the pool to be granted will work out to maybe about approximately, I mean, off memory, I'm not very sure, but off memory, it should work out to maybe about 4% of the, no, maybe 3, 3.5, 4% of the equity of the bank. In terms of dilution, of course, yes, as we all know, equity, ESOP schemes do dilute the rest of the shareholders, but then it benefits the employee to whom it is offered. It's part of the compensation package and compensation structuring. So it's something that we expect should help, you know, improve retention in the system of P&L who are good performers. ESOP, there are many ways of offering ESOP to the employees. In Equitas, what we are adopting currently is that ESOPs are offered to employees at the end of each year of business performance. Based on their performance and based on their appraisal rating, ESOPs are granted based on their position or level in the system. And once the ESOPs are granted, they vest after a period of 12 months, and once they vest, they can be exercised within 3 years from there on. And all options are granted at the time of grant. They are always granted at the price of the previous closing price of the previous day. That's how the ESOPs are the grant price is taken as of the closing price of the previous day to the date of grant. That's how it is done. We do believe that this is something which is a very highly motivating instrument from an employee retention perspective. And I'm sure you would have seen in other organizations, and in Equitas we have definitely seen many instances where people have seriously and significantly benefited from the value of value accrued under the ESOP scheme. And that's something that overall helps build you know a further level of loyalty or commitment to the system. Thank you. Thank you. Thank you very much. Thank you. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead. Yeah, hi. Hi, Vasu. Thanks for taking my question. So my first question is on disbursement yields. I think can you share the disbursement yield for SBL, VF, and MFI for the quarter? One second. Abhishek, just a minute. I'll share the... See, overall, our yield has gone up from? 3, 3 products. 3, 3 products. SBL, VF, and MFI. MFI is 25%. MFI is constant at 25%. We've increased it from 24%-25%. In vehicle finance, I don't have the overall, One second. One second. One second. Okay, I'll, I'll give you, I'll give you the sub-segment, right? In UCV, we have grown from 18.28% in March to 19.56% in December. In new CV, we've grown from 12.32% in March to 13.69% in December. In SBL. In SBL, we have grown from 16.33% in March to 17.16% in December. Is that okay, Abhishek? Sure. Thank you. Thank you. Yeah, that's, that's very useful. And these are the disbursement yields, so Yes, yes, these are the disbursement yields. These are not the portfolio yields. Understood. And, passing on these yields is easy or, I mean, you're finding it incrementally difficult to take further yield hike. So in your customer segment, how is the competition playing out, if you can talk a little bit about that? Yeah, as we keep saying, you know, that we lend to the underbanked or the bottom of the pyramid. So, we don't find much difficulty in increasing the rate, but we also have to keep in mind that, you know, there has to be a threshold that we have to be able to bear the rate of affordability has to be borne in mind. That is one thing that we have to keep in mind while increasing the rates. Sure. So the disbursement, if I were to tie it back, basically the slowdown in disbursements this quarter on a sequential basis, that was more to do with just trying to align with the CD ratio goals. And now, incrementally, should we see a sort of pickup, you know, again in the following quarters? No, no, no. The disbursement and CD ratios, they are really not connected, because we have been able to mobilize extra deposits in to ensure that we meet our CD ratio requirements on an ongoing basis. So that's really not a reason in terms of you know, disbursement at all. So I think the disbursements moving you know, quarter to quarter, if you see the Q2 was higher and Q3 was lower in disbursement, that will be only because of certain specific reasons such as you know, maybe a lot of holidays, maybe a lot of rain disruptions in different parts of the country in the third quarter, et cetera. But these are very normal, and I think they are, they are, so long as they are within certain range. I think they are generally comfortable. Right. But incrementally, Vasu, the disruptions are over, and now it is business as usual, and we should resume growing in, you know, each of these segments. Is that a fair, you know, fair way to look at the I mean, see, even with all those disruptions, we have done a 32% advance of growth grown across business over the nine months, which is, which is very comfortable. I don't think that's something that, you know, we need to be, we are at least concerned or worried about. And, so these kind of disturbances will be there, you know. Holidays and, rains are something which is part of life, so they will keep coming at various points in time. So if you see Q2, there are certain parts of the country which, faces rains. In Q3, some other parts of the country face rain. So these are things which will happen, and to that extent, there will be some level of, range within which disbursements will move or get impacted. But on an ongoing basis, these are normal things, and business doesn't really get affected too much because of that. So you may have a small dip here or a small increase in some other period, but these are within normal ranges, and so they don't really account for a factor which should raise it as a cause of concern. As we have mentioned earlier, we have been guiding that we should, on a sustainable basis, look for about 25%+ level of growth on an ongoing basis, and that's something we believe should be possible, you know, over the medium term. Got it. Got it. Just the second question is on cost. So we've seen now a bit of improvement in cost for a few quarters. Should this secular trend continue or, you know, again, we could see some or is there any impending, you know, spend, let's say, on technology or, you know, big branch expansion plans or something in the pipeline? So on cost of operations, you know, we have been saying, and I think that's something that we have been saying fairly for a long time, that we are still a fairly evolving bank, so we are, we are going to be seeing a cost of funds at very similar levels to where we are. Yes, there has been a drop in the last two quarters, but again, you must remember that in the first quarter, our cost of operation always jumps higher because there's a increase given to the staff, the yearly increment given in the month of April, and that always takes the first quarter cost to a higher level, and subsequently, that gets levered over the rest of the year, and that's what is playing out in the second, third, and second and third quarter. So if you look at the further investments required in the bank going forward, technology is one area where some amount of investments will keep going in. Second thing is, we have mentioned this earlier, there are two big products coming along the way. One is our AD-I project, and the other one is the credit card launch. The AD-I project is underway, and there's going to be some amount of investments we need to make, both on tech and on people to get us, you know, enabled and ready to commence our business. And credit cards, again, there's going to be an investment both on tech and on people before the product will go live. So these are the two products where some investments will come shortly in the future. But otherwise, if you see branch expansion, as we have mentioned in the past also, we have set up a very large number of branches quite early on, and so thankfully, the cost of you know increasing our network of branches is behind us. So that is not something you should see for the next at least 2-3 years. You won't see too much of increase in cost because of branch expansion. That's one thing. Second thing is that other than these two new products of credit card and AD-I, we don't really see any particular new other new product coming into the system. So there is most of the products we have already invested, and many of the products have become profitable. They have crossed their loss-making cycles and become profitable. The Affordable Housing is still at the early stage, but this year they should break even. In the next two years, they should be pulling their full weight in the system. So minus Credit Card and AD-I, we are all really not looking at any other major product investment. So product investment, outside of these two, and branch network investment are something we have done in the past, and we are getting the benefit of that today. Going forward, tech investments in these two products are the ones where we should be investing, besides, of course, our branding. To some extent, you can say our cost will be at these levels, you know, give or take, 1% or 2% on a quarterly basis, moving up and down, but as it is, by and large, I think we should remain at this level. Understood. Thank you. Thank you, Vasu, for the detailed explanation, and all the best. Thank you so much. Thank you. Thank you. Before we take the next question, a reminder to all participants, you may press star and one for questions. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead. Sir, just to follow up on the previous question. So, I mean, we are having a very strong growth in our overall top line. So given that, I mean, why would you expect, let's say, in the medium term, two to three years, for the cost to income to remain at the same level? Is it just because of the newer products which will have, losses which will be large enough to be, to keep the cost at a elevated level? Yeah, absolutely. Absolutely. I think there is going to be a fairly large amount of money which has to be put behind those two products and the related technology, you know, platforms that need to be created. You know, we don't have any of that. We don't have, you know, the treasury system for managing forex. We don't have the, you know, foreign transaction settlement systems, and we don't have the FRM tools for monitoring fraud risk management of foreign transactions. We don't have any of that today. So the technology behind all of that needs to be put in place on the credit card. Again, the entire thing has to be put in place. I mean, the LMS or the loan management system for credit card is the first, and then that has to be integrated with so many other, you know, systems. So there is a large amount of investment required on both. And, you know, probably we'll spend most of the money before we even start the product, and then the product is going to take time to get going and then turn breakeven and then become profitable. So there's a maybe a three-year kind of a timeframe by which they will probably fully pull their weight in the system, and that is the time when the investments will have to be supporting those products. Is it possible, like the two projects you mentioned, AD-I and CC, is it possible to quantify or give a range of the investments that we are contemplating in these two areas? Yes, we will do that. So it's a nice point. I think we'll note that down. Next quarter when we come back, we will give you the data. Yes, we will give you a good amount of idea of the kind of money that we are going to invest in these two, and also give you some maybe a ballpark idea in terms of the launch date and also the likely, you know, breakeven time frame. So we'll give all of that in the next call. And just finally, you know, next year, you would expect broadly NIM to be in the same range or increase little bit in case the interest rates go down? Or do you expect any pressure because of the mix change, any further pressure on the NIM? Actually, if you see, you know, our model, we had a 85% of fixed rate loan book model, and so we have had the worst of the time during the current financial year, right? We have really gone through the worst of the time when the interest rates have really sharply gone up. And, our yield on advances remain sticky because they are all fixed rate loans. We are not going to be able to reprice for our existing borrowers. And, we did increase our lending rate. We have mentioned that our disbursement yield went up by 1% over the last 1 year, whereas our portfolio yield has gone up by about 0.6% over the same period of 1 year. The NIM has contracted by nearly about 75 basis points or 0.75% over the same period. So in, because of that, the NIM has contracted. But I... In spite of all of that, and in spite of continuing to invest in technology and in the new products, we are able to deliver ROA and ROE, which is at fairly reasonable levels of around 2% and 15%, you know, respectively. So that shows basically the underlying fundamental profitable model of the bank. Now, going forward, that's going to be interesting. The next year is going to be really interesting because there are three scenarios. Interest rates can go further up, interest rates may flatten out and remain at this level, and interest rates in the next maybe three quarters or four quarters may start coming down. Now, as the interest rates go up, we are going to see a repeat of what we have seen in the current year. Our NIMs should go down. But however, if that does not happen, if interest rate remains even flat, forget going down, even if it remains flat, we should see our NIMs starting to improve because our advances yield has been going up, as we have mentioned, right? And our interest cost will start flattening out. The, the rise in the interest cost will stop. You know, we have taken most of the hits, I believe. In the fourth quarter, there will be further increase in the interest cost to some extent. And in the first quarter of next financial year, there will be again a marginal increase in the interest cost because we still have some old deposits, you know, coming up for maturity. But from the second quarter of next year onwards, the interest cost may not really go up at all, assuming the rates remain flat. But our yield, the portfolio yield will continue to rise because of the current year disbursement being at higher rates, you know, as a percentage, contributing more to the portfolio, as the old book runs down. So we should see an improvement probably in the next financial year, even if the interest rate remains flat. That is where things are going to be really interesting for Equitas. Thank you, sir, and all the best. Thank you. Thank you. The next question is from Ashlesh Sonje from Kotak Securities. Please go ahead. Hi, team. Good afternoon. Just a couple of questions. Firstly, on the slippages front, specifically in, in the MFI book, the GNPA ratio has gone up by 55 basis points QOQ. Any specific geography which has seen a higher deterioration in asset quality that you would want to call out? Yeah. So, we have said, you know, the floods have affected the southern districts of Tamil Nadu, which is Tirunelveli, Tenkasi, Tuticorin. Basically, for us, it's a division called as the Madurai division. So, there, that is where we have seen slightly higher. Okay, perfect. Secondly, on the yield front, would you take a look at the product mix within SBL, the sub-segmental mix across a micro LAP, business loans and general LAP to proper yields? Because that mix has been fairly steady over the past few quarters. Yes, we do look at the yields as such, because our when we increase the yields on advances, it is done on a per product. It is not being done overall for the business. No, see, I'm coming to that. So you see, so what happens is, so when you have to, you know, attain a certain yield, so you do it based on the potential of that product and the potential to increase the yield. In SBL, we don't see any reason why any product should, you know, decrease in terms of disbursements, because there is ample market for each of those products. So we have not decreased anything. We have increased yields for every sub-segment of SBL. Perfect, sir. Thank you. Thank you. The next question is from the line of Pallavi Deshpande from Sameeksha Capital. Please go ahead. Yeah. So on the SBL portfolio, what would be the slippage for that portfolio on quarter on quarter? We haven't given product level slippages, so we, yeah, so we'll leave it at that. We don't disclose that. Okay. Right. No, I was just trying to wonder if, you know, this, like, Yeah, we've given you an indication that it is microfinance and microfinance led. Right. Yes. Hmm. And also just, okay, just to put it another way, is there any, like you said, the increase in rates, you know, how does that affect, you know, for asset quality for SBL? Is there any deterioration there because of that, and hence we don't. How much capacity do we have to increase the ECL if rates go up, like you said, you know? There is no decrease in the quality of SBL. SBL GNPAs are as good as they were the last quarter. Effective collections, collection efficiency in SBL is stable at 99.5%, so the increase in yields for SBL has not led to a deterioration in any quality in terms of SBL. Yes. Thank you, sir. Thank you. Thank you. The next question is from the line of Shailesh from Centrum Broking. Please go ahead. Thanks for the opportunity. So I just wanted to understand, for the nine months, we have done exceedingly well on deposit front, in spite of the heightened competition and that, right? So that has brought down our CDR. So going ahead, could we continue this same pace? Because I see our deposit growth has outstripped the advances growth. So how do we see that? Or will we take a pause in a quarter or two, for protection of NIMs? Yeah. So as I had mentioned in my opening remarks, you know, we had looked at reaching a CD ratio of around 90% by March 2024. So we are at about 91.5 by December, so we'll aim to move to 90 by March 2024. And we are also looking to take it down to around 85% by March 2025, which is the next, you know, financial year end. So as I had mentioned in my opening remarks, most of the heavy lifting on CD ratio has been completed and is behind us now. So from here on, onwards, on a quarterly basis, we will be moving the CD ratio, you know, to on a smaller measure to reach whatever that we are looking at as our outcome. Which really means that the need to mobilize extra deposits over the next few quarters would come down compared to what we did in the second and third quarter. Okay, fair enough. So, apart from asset book repricing, this is one more lever which should help NIMs in next few quarters. Is that understanding right? Sorry, sorry, your voice was not clear. Yeah. So I was saying that apart from asset book, asset book repricing, this would be one more lever at our disposal for a NIMs expansion, scale. Yeah, yeah, that's right. You know, so going forward, we believe that the NIM impact from interest rate scenario will still last maybe to some extent in the fourth quarter and marginally in the first quarter. Hopefully after that, it should plateau out or start even improving. The NIM impact because of CD ratio coming down, you know, that will still be there, but it'll be very marginal going forward. And, you know, if you remember in the beginning of the year, we had also guided on the NIM that the NIM was 9% for the last financial year. In the beginning of the year, we had mentioned that for this current financial year, we should be looking at around 8.5% NIM for the full year as a whole, and also a possible 8.25% exit NIM for the fourth quarter, is what we had mentioned in the beginning of the year, and I think more or less, the numbers are in that level. Got it, that's helpful. Sir, one more question. One is that some of our peers in MFI segment have decreased lending rates, and we have increased, right? In last three quarters, we have increased not only in MFI, other segment as well. So how do you see the competition scenario, and does that affect the growth outlook for FY 2025? I know you have guided that you are maintaining the growth of upwards of 25%, but just wanted to know your view in terms where peers have been reducing rate, especially in MFI segment. Yeah. So we don't see any impact on that. Okay, sir. Thanks a lot, and best of luck. Thank you. Thank you. The last question is from the line of Sameer Bhise from JM Financial. Please go ahead. Yeah, hi. Thanks for the opportunity and congrats on good quarter. Vasu, you highlighted that there could be three scenarios on interest rates, and especially thinking about the scenario of rates coming off probably three to four quarters down the line, how do you think from the point of view of probably a higher margin opportunity, would you like to let that benefit flow to the ROA level, or you have, you would, you would continue to invest with respect to some of the newer initiatives? How should we think about this? Because already we are seeing some amount of improvement on cost to income, credit costs have normalized, margins have come off, and still we are clocking 2% ROA. So some outlook there would be helpful. Thank you, and all the best. Yeah, good question, yeah, very nice question. And, you know, if you remember, I mean, I'm sure, many of you may not remember, but long back, I'm really talking of long back, maybe, let's say two or three years back, we have always been mentioning that, ideally, a bank like ours, given the, kind of, the customer segment that we lend to, you know, a bank like ours should be looking at an ROA of around, 2.25% +. That's what we have been saying, because there is inherent level of risk in the portfolio that we have, because we are lending to a segment of customers, who, while the repayment record, touch wood, has been excellent with us, however, they are fragile to any market events like the black swan event that we have seen in the past. So to offset that risk, the return also has to be compensatory, and so a 2.25%+ kind of an ROA is what we have been always saying should be what we should be looking at from a model like ours. This question of, you know, next year or subsequently, if the rates either remain constant or maybe come off a bit over time, you know, the impact that it should leave on the positive impact of that on the NIMs or on the people should ideally flow down to the ROA level, and hopefully, we should try and reach that 2.25%+, you know, during that kind of a period. Yeah, yeah, this is helpful. Thank you, and all the best. Thank you. Thank you. 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 closing comments. Yeah, thank you, and thanks for all of you for dialing in. I know we have another call now. Let's all hurry into that. See you. Bye-bye. Thank you. On behalf of Equitas Small Finance Bank Limited, we conclude this conference. Thank you for joining us. You may now disconnect your lines.