Ladies and gentlemen, good evening and welcome to the earnings call of Equitas Small Finance Bank Limited's financial performance for Q3 FY2025. 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. 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 touch-tone 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 evening to all of you, and thank you for dialing into this call. I would like to talk about two items. First, which Dheeraj, our Investor Relations and Strategy Head, will talk about the rest of the business. I would like to talk about the stress in the MFI sector, which is an immediate focus to start with, and after that, I would like to touch upon the fundamental strategic platform that we have been building for the bank from a medium- to long-term perspective. Microfinance portfolio was behaving normally till March 2024. During Q1 of this year, for the first time in Equitas, we saw the X bucket collection efficiency slip marginally from the normal levels of about 99.4% to about 98.9%. However, it was believed that this was due to the combined effects of heat wave and the General Elections in April, May of 2024. And so the industry, and us included, were quite caught by surprise when the collection efficiency dipped further in Q2 for no apparent external reasons. In our case, it dropped from 98.9% of Q1 down to 98.2% in Q2. And when this happened across geographies, it was clear that an important reason for the stress was as much internal as external. Around 10%-15% of customers availing loans from more than three lenders, and even going up to five, six lenders, were common earlier also. While this caused some level of stress, it was still very much within tolerable limits, as there was an income norm that all lenders put together the loan cannot exceed INR 1.25 lakh. However, this cap was removed effective January 2023 for reasons that we all know, and it was not replaced by a norm, but a general amorphous cap of something in the range of around INR 2.25 lakh, kind of backwards from the prior norms. Somewhere during the calendar year 2023, because of this change, the actual amounts borrowed by the customers had gone up probably at a pace which was too rapid, and this was also reflected in the strong growth in the industry during that point in time. B ut while we know all of this and we have an idea of the players and the amounts involved, I believe that what is not really understood or clear is also there's some kind of a parallel lending happening to the same set of borrowers by so-called app loan companies. When I visited some of the customers to understand the level of leverage, I often saw that they had taken many small loans from app-based lenders. These loans were typically small in the range of INR 5,000-INR 25,000, yet with short repayment terms, the monthly EMI does work out to some decent size. And probably this is adding further to the kind of stress that the customers are facing in terms of over-leveraging. So we may have to see how at the industry level we get all lenders to the segment to somehow fall in line with the MFIN guardrails 2.0 that's been rolled out effective January of this year. In our portfolio, we have seen that X bucket efficiency stabilized in Q3, but this is not really enough. We have put in many initiatives and hope to see an improvement in the same over this and next quarter. Because of a six-month lag between X bucket slippage and eventual credit cost, we should see elevated credit cost in MFI for this and next quarter also, arising out of slippages in the second and third quarter of this year. Depending on improvements in the X bucket efficiency, we might see in Q4. Based on that, we should be able to predict some level of moderation in credit cost, hopefully from Q2 or Q3 of the next financial year. Of course, as we speak, we are also aware of certain recent developments in Karnataka, so the outcome of that anyway needs to be assessed as the picture unfolds there. In terms of diversification in Equitas, we started the journey of diversifying from 100% Microfinance both to other forms of lending, basically secure forms of lending, way back in 2011. Presently, we have over 14% of our portfolio in Microfinance, with the rest being secured. We would continue on this path and expect to see the share of Microfinance going down into single digits shortly. Micro Loan Against Property, or MLAP, is a product which we had introduced again way back in 2012-2013. This is basically for funding small businesses from INR 2 lakh to INR 7.5 lakh secured against house property. We have completed two cycles of this product, which is typically a five-year loan product. Out of about 2.3 lakh customers we have financed MLAP over the years, we have had to take legal recourse to repossess the property only in about 690 cases, and out of this, we actually had to sell the house only in 23 cases, while the rest have either settled by the customer themselves or it's work in progress. This shows our ability to underwrite properly and also determine the right amount of loan that these customers would be able to borrow and repay. The MLAP product addresses typically the 15% of the top end of the MFI customer segment. We have rolled out special emphasis on this product during this year, resulting in the disbursement in MLAP doubling during the year. Further emphasis is being given with an objective of trying to replace as much as possible the rundown in the MFI books by the MLAP book. Now I come to the second part of what I wanted to cover, which is a medium to long-term strategic positioning of the bank. Our objective has been to build a stable, sustainable, and scalable business model over the years. As per this on the lending side, we have now built a secure book of about 86% of the portfolio, comprising of Small Business Loans, Affordable Housing, used vehicles, and MSE finance for working capital. All these businesses have large unmet credit demand and address the requirements from the informal sector borrowers. Banks, by and large, have been absent from this market for all these years, and given our strength built over the years, we do have a very strong competitive edge in this space. These products have been credit tested over the past decade through multiple headwinds such as GDP slowdown, demonetization, Corona, etc. Through all those headwinds, the credit costs for all the rest of the products have remained within a very acceptable narrow range. Affordable Housing Finance, which is also having a comfortable GNPA and credit cost, has yet to break even, being a new product, but contributes 12% to the portfolio. This is expected to turn black next year, which should hopefully help improve the overall profitability of the bank. We have launched, as I mentioned earlier, liability strategy 2.0 during the current year. The objective is to improve stickiness of depositors, which will in turn enable us to reduce the interest rates that we offer and reduce the differential between us and the large banks in terms of interest rates over a period of three to five years. On the liability side, most of the standard offerings are already in place, such as investment options, trading, ASBA, and bill payments. On the asset side, Affordable Housing, Used Cars were the only ones that we could offer till now. This quarter, we have rolled out personal loans for deposit customers, and credit cards for deposit customers will go live by March. Based on the level of product consumption by depositors, we will take calls on reducing our interest rates on deposits. During this year, we have changed twice the interest rates on certain fixed or savings accounts, yielding a reduction of about 13 basis points in savings account interest cost. We also reduced our peak TD interest rate during Q3 by 25 basis points. For the next three to five years, as we reduce our cost of funds, we should be able to further improve the quality of our borrowers. And given the large unmet credit demand from these customer segments, we should be able to sustain healthy growth with quality. To sum up, the bank is going through the short-term impact of the stress in its Microfinance portfolio. However, the platform on which the bank has been built remains robust and strong, and we should be able to sustainably and profitably grow this over the next few years. I'll now hand over to Dheeraj for taking us through other business numbers. Thank you, Vasu. Good evening to all of you. As you all know, Equitas operates at the grassroots of the economy and predominantly deals with the informal workforce on the lending side while seeking deposits from the mass and mass affluent segments. In our limited perspective, we are seeing a marginal uptick in economic activity, continued tightness in liquidity, limited growth in household incomes, robust credit inquiries across segments, and overall tightening of credit norms. At Equitas, we operate across eight lines of business, which are our liability franchise, the treasury business, which we set up in 2016, Small Business Loans, Vehicle Financing, Microfinance and micro loans, Affordable Housing, MSE finance, and NBFC finance. Our deposit franchise currently stands just north of INR 40,000 crores and registered a healthy growth of 26%, backed by strong growth in retail term deposits of 31% in a challenging environment. Our CASA remains stable at 29%, and we saw some uptick in current account balances. However, growing SA, or savings account balances, continues to be a challenge as depositors prefer parking money in term deposits given the uncertainty of when the interest rate cycle may turn. Our total retail deposits, that is retail TD and CASA, stand very healthy at 73% to the overall deposits. Our LCR stands at 184.8% and CD ratio comfortably at 88.6% as of December 2024. The NRI business continues to attract depositors and is laying the foundation for the soon-to-be-launched AD-I business. The wealth and third-party distribution business is also moving along well. Today, we process around 33,000 SIPs and have handled a volume of close to INR 20,000 crore in ASBA during this year. Three quarters back, and this is also what Vasu had mentioned in his opening commentary, we had spoken about liability 2.0 strategy. The strategy focused on two aspects to give Equitas a strong competitive edge in the long term. Firstly, we aim to bring our cost of mobilizing deposits down through operational efficiency and improved productivity, and secondly, to narrow the cost of funds gap between Equitas and large universal banks and also get it a notch lower than the AAA- rated NBFCs. To achieve this, it was critical that the bank develop a wide range of products and services to cross-sell and create stickiness among depositors, as well as leverage technology to improve customer experience and service. Over the past few quarters, we have focused on putting this in place. With the launch of credit card personal loan and soon-to-be-launching AD-I services, along with products like car loans, housing finance, services like digital focus, wealth management, ASBA, etc., for savings account holders, we now have a strong proposition to build a loyal and sticky customer base. We are hoping all of this will help us in our liability 2.0 strategy mentioned earlier. These initiatives have also given us room to revise our SA rates and drop our peak FD rates by 25 basis points. However, we are being very watchful and cautious given the current liquidity scenario. The rate revision has translated into a drop in the cost of SA by 13 basis points, and our FD cost should see some moderation in the coming quarters. This has helped keep our cost of funds stable at 7.49% despite raising INR 500 crores in Tier 2 bonds during the quarter. As the deposit franchise matures and we acquire good quality depositors, the focus is now on leveraging our customer base for cross-sell opportunities. Work is going on to strengthen this with data analytics through propensity models, digital marketing, and active customer engagement. On the technology front, we have had a few important rollouts. Our new scalable state-of-the-art CRM has gone live across branches. This is helping us service customers digitally, leverage biometrics for instant paperless servicing, and track customer journeys from lead to conversion to servicing. A proprietary cloud-based loan origination platform for personal loans and credit cards is live and will aid in cross-selling initiatives too. The much-awaited revamped mobile banking application is being rolled out to customers as we speak, and initial feedback has been very encouraging. We hope all of you who have accounts with us give it a try and share feedback with us. We will now embark on creating a super app platform that will significantly enhance the experience depositors will have with the bank. On the treasury business, we made INR 39 crores from profit on sale of investment, and the team now manages a book of INR 9,500 crores. Our SLR book stands at INR 8,300 crores as of end of December. Moving to other lines of business on the asset side, our advances growth has been soft with a growth of 14% year- on- year as Microfinance continues to regrow. Our secured book or non-MFI book grew 20% year- on- year, led by robust growth of 27% in Small Business Loans. The bank continues its strategy to focus on higher-yielding products like Micro LAP, Used Commercial Vehicle loans, and car loans. As a result, gross yields on advances increased six basis points quarter- on- quarter, despite a slowdown in Microfinance. I will take a few minutes to give you a quick update of some of the major segments. Small Business Loans, the bank's flagship product, which started over 12 years back, continues to grow well, clocking a 27% growth in advances year- on- year. With an average ticket size of about INR 7 lakh and a semi-urban focus, it is the most profitable book of the bank. The GNPA continues to hold well at 2.34%, and we see no signs of contagion from Microfinance spilling over. The business operates from over 200 branches across 12 states, and the bank plans to expand its network in Andhra, Telangana, and Karnataka in the coming year. We have provided more granular deposits in our PPT too. Coming to Vehicle Finance, the overall growth has been slow at 14% as we continue to defocus on new commercial vehicle loans. As we anticipated a negative market cycle to play out in the SCV segment. However, our UCV book has grown steadily at 19%, and Used Car loans clocked a strong, healthy growth of 55%. Our overall loan book is now INR 1,700 crores for cars. Our VF business operates out of 260-odd branches and continues to enjoy a long runway for growth given the level of under-penetration. The book is largely small and light commercial vehicle focused and targeting FTU and FTB segments. We are now seeing growth to come in the used heavy commercial vehicle segment in the coming quarters. Our Affordable Housing book now is INR 4,500 crores, and we continue to invest in broadening its network by leveraging our existing branches. With an average ticket size of INR 12 lakh and an NPA of 1.36%, this book remains healthy and has also seen improvements in yield during the year. We are now focusing on improving profitability of this book as the business matures. Other products like MSE and NBFC finance continue to remain small, and the business growth is determined by how the interest rate cycle plays out in the coming months. On overall asset quality parameters, we have seen a good improvement in net slippage as a trend downward from Q2. Net slippage for Q3 is 3.15% compared to 3.31% in the previous quarter. Improvement came in as net slippage in the Microfinance book improved considerably from 2.28% in Q2 to 1.11% in Q3. However, MFI continued to deteriorate as net slippage climbed sharply from 8.31% to 14.16% in Q3. The 1- 90 DPD at the bank level also improved 47 basis points as additional initiatives were taken to improve collections in MFI. We also added close to about 1,000 employees largely in MFI during the quarter. Coming to the overall financial performance of the bank in Q3, the balance sheet has grown 22% year- on- year and is now above the INR 50,000 crore mark. Margins remain under pressure at 7.39%, a decline of 33 basis points, mainly due to the drop in the MFI business mix and drop in treasury yields. Credit cost came in at 2.65% as we utilized INR 38 crores from the INR 100 crores stressful provision created in the previous quarter. GNPA closed at 2.97% and NNPA at 0.96% as we focused on getting the bank in line with the universal banking guidelines for SMEs. Lastly, the bank registered a PAT of INR 66 crores with an ROA of 0.53% and an ROE of 4.44%. I thank you all for patiently listening to me. Now the operator can open the call for questions. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone phone. 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. Our first question comes from Rajiv Mehta from YES Securities. Please go ahead. Yeah, hi. Good evening. Just a question on the X bucket collection efficiency. You can share the latest numbers across products in Vehicle Finance, SBL, and MFI, and whether have you seen further improvement in January versus December? The X bucket, as I mentioned in the opening remarks, was 98.2% for the third quarter, and it was at a similar level in the second quarter, while it was 98.8% or 98.9% in the first quarter. Yeah, sir, but this is MFI loan, right? That's right. It's for the MFI. Correct. And other products? Other products, X bucket, I mean, and that's. I don't know if that's relevant because I don't even have the data immediately. Got it. Got it. Got it. Got it. Yeah, but typically, the MFI is very critical to measure X bucket because the percentage of collections that we do out of X bucket flow in Microfinance is much lower. In other products, generally, the collection efficiencies are much higher in the OD bucket, and so the eventual flow into NPA is not that much. So X bucket is an important parameter that's measured internally, but we don't share it within ourselves. Sorry, we have given that. Oh, that's there. What is this? This is X bucket. Product-wise, we say what it is. Okay, sorry. It's there in page. This is internal number. Okay, okay. Yeah, that's right. So we do have this data from our internal review purposes, but it's not that relevant, so we don't share it with the market. Microfinance, we told you because it's very relevant. Can you also share the quantum of this work that now you're doing on a monthly basis in MLAP? Sorry? It's about INR 150 crores right now. Monthly in MLAP, right? That's right, monthly, and that's what I mentioned. That's the focus. Now the target is to try and see how that can be taken to the next level because the MLAP was introduced by us about 12 years back for the top end of the Microfinance borrowers. We had done a study long back. About 15% of the Microfinance borrowers, we determined were people who were entrepreneurs by choice, people who got into business by choice, and they were able to scale up and manage their business better and required funds to grow their business more. So basically, MLAP was introduced to address the top end of the MFI customers a long, long time back. So now what we are doing is we are getting the same MFI team to work with our current set of customer base of MFI and try and penetrate MLAP to the top end of the MFI borrowers. And as the MFI loan book keeps coming down, the objective is to try and see how much of that can be filled by MLAP. Currently, the disbursement is about INR 150 crores a month, and going forward, we should see how to scale that up further. Okay. And, sir, this net slippage is being lower in the non-MFI products. So what would have driven this much higher levels of upgrades and recoveries, say, in Vehicle Finance or SBL portfolios in this quarter? Because the macro backdrop was not very conducive. So what do you attribute this higher recovery and upgrades in these portfolios to? On the page, is it? See on the page. See, basically, the third quarter generally is better than the second quarter normally. And so even our retail, our SBL businesses and all that, they really did quite well in the third quarter. Now, if you see upgrades and recoveries, in Q3, it was about INR 300 crores compared to INR 216 crores in the second quarter on more or less similar level of, no, t he additional INR 505 crores in the second quarter on which we were able to this is for Microfinance or non-Microfinance? Bank. This is for the bank. No, we are talking of non-Microfinance. We're talking of non-Microfinance. Show me that. Yeah. So, here you see page number. Slide 23. Slide 23, we have put certain data. If you can go through slide 23 later on, you will find out what's been the growth slippage and also the upgrades and the net slippage in the non-Microfinance portfolio. And so the non-Microfinance portfolio, the growth slippage, the net slippage was at similar levels to. 200. Yeah. 200. Which is non-Microfinance. 84. Net Slippage in non-MFI was INR 84 crores for the quarter, and for the previous quarter, it was INR 150 crores. So there's been a significant improvement in terms of the upgrades. Right. And net slippage really reduced. See, basically, the third quarter is always a good quarter, and fourth quarter should be generally even better normally. So we should really hope for something even better in the fourth quarter. Can I just ask one last question, please? Okay, go ahead. Yeah. And on this credit cost, sir, so now that the SMA-2 bucket is still elevated at the bank level, SMA- 0 and 1 is improving, so we will have follow-through slippages. In MFI in particular, do you plan to continue providing at 75%-80% on the incremental slippage? Because your current PCR is 77%, and whether you would further utilize the remaining 62 crores of that stress sector provision that you have created on the standard loan? So, that usage of that balance, a buffer provision on standard assets in Microfinance, will depend on how the bucket, that SMA buckets, move in the fourth quarter. I mean, so internally, we had some norms to arrive at that 100 crores in the second quarter. Based on that norm, there was a release of 30 crores, 30-odd crores in the third quarter. But, so it depends. I'm not going to be in a position to say whether we'll use it in the fourth quarter or not. It depends on how the OD bucket portfolio comes out in the fourth quarter. As far as the first question that you asked, do you want to take that? No, no. It was related to whether we keep continuing to provide 75%, 80% in these or the other side? Because what happens is our NPA norms provision, we changed it during the year for Microfinance, right? We kind of increased the provision norms, and that will continue. I mean, that's something that we are not actually, we are not even allowed to change it frequently. Once you change your provision norms, it will have to be on a consistent basis. So that will continue. Except the 91-150, it is still 100%. Yeah. 91 to 150, we are providing 50%, and 150 plus, we are providing 100%, and that will continue. Okay. Thank you so much, investors. Thank you. Thank you. Thank you. The next question comes from Kamal Mulchandani from Investec Capital Services. Please go ahead. Hello. Thank you for the opportunity. Firstly, sir, I was seeing in the PPT that PPOP to assets is decreasing from last five odd quarters. So when do we see an improvement in the PPOP to average assets rate going forward? Yeah. So see, the factors impacting it is largely the proportion of Microfinance we have on the book. So as Microfinance is a high-yielding book and in good times, it's very, very profitable, you're seeing that impact play out. And additionally, we have also mentioned that we want to bring down Microfinance in the long term to some single-digit number. And to counter this movement is why we are growing Micro LAP and focusing on products which have similar, let's say, internal ROA or internal profitability. So the whole challenge we have, and we started this two quarters back, I think, is when we mentioned this that we are growing the Micro LAP book. So the whole challenge we have is to bring back PPOP despite readjusting the bank for a lower MFI book. So today, it's a little distorted given that Microfinance is dropping much faster and disbursements are fairly muted. So you'll have to give us some time till the storm passes, and we think that it will take another one or two quarters for us to get that clarity. So have patience till then, but these are the factors which are impacting the PPOP, which is largely that single product which is disturbing it. Got it, sir. Also, sir, if you could just help us, what would be the blended ROA for the secured book? See, this is how internal products are looked at is there's a transfer pricing which happens to each of these products. So when we tell you an ROA, for example, we say that the ROA of SBL, let's say, for example, is 4% or 5%. It has a transfer pricing element of what we charge each business on their borrowings. So it's really not easy for you to understand. All we can say is SBL is extremely profitable, and there are standalone NBFCs which do similar businesses, and the numbers are very, very comparable. So you should actually do a sum of parts. So what similar Vehicle Finance companies do or similar small LAP or NBFCs do. We are not way off any of them. We are extremely comparable. And then the denominator is between assets of a bank and assets of an NBFC. So if you just adjust for that, you will actually get a better picture. But our internal ROA numbers actually will make no sense. We've given you years of these products largely. You know the cost of funds to the bank. The cost of liability, I think we mentioned it somewhere, is about 2.5% is the cost of raising deposits. So you have to adjust for all of that. So it's not a very straightforward answer, but the easiest way is to look at standalone NBFCs and do a sum of parts of Equitas. Okay. Okay. No, so what we are trying to do is that trying to understand how the bank would again go back to more than 2% ROA in the near future, taking into consideration that we are not increasing the share of our MFI book or even we'll try to reduce our MFI share further. So just wanted to understand that if we'll sacrifice one of our MFI book, will it affect the ROAs of the entire bank as the secured segments are still not contributing much to the profitability? Yeah. As I mentioned, as Dheeraj mentioned, some of our secured loan products are quite old products, and so they contribute well to the profitability of the bank. Typically, your small business loan, which is about 42% of the book, and the used vehicles were the used commercial vehicle and the used cars, which together contribute about 17%-18% of the book, and the 2-3% of the loan to NBFCs. All of these are profitable at normal levels because they have been around for enough time, and so they are profitable at very comparable levels. What is still not broken even is our new product like Affordable Housing and the MFI that we are doing. These two have about 12% and about 4%. About 16% of the book is still to break even. And the new commercial vehicle, the new small commercial vehicle, which is about 5% or 6%, that's just at the borderline. So you are talking of really this 20%, which is either just at the borderline or yet to break even. So these are products which will probably start breaking even and contributing to the profitability maybe in the subsequent years. And that is when the overall profitability of the bank can go up as these new products start contributing to the bottom line. So Microfinance, as I said, will go down, and to that extent, its contribution to the profitability will obviously go down. But some of these products like Affordable Housing and MFC, which have been around for the last three, four years, as they break even and they start contributing, hopefully, some of that burden should be taken by that. Okay. Thank you so much, sir. That's it from my side. Thank you. Yeah. Thank you. Thank you. The next question comes from the line of Palak from ICICI Securities. Please go ahead. Yeah, sir. Thank you for giving me this opportunity. So I wanted to know that [audio distortion] It's not clear. Palak ma'am, you're sounding muffled. Yeah. Am I audible now? Yeah. That's better, better. Yeah. So the question was that for the SMA-0 and SMA-1, for the MFI book, I've seen some improvement in Q3 as compared to Q2. So do you think that this is sustainable, or do we think that further improvement is still expected for the coming quarters? Yeah. So you're right. The SMA-0 was 2.17%. It has improved to 2.03%, and SMA-1, which was 1.7%, has improved to 1.5%. However, if you see SMA-2, which was 2%, has actually shot up to 2.73% in the third quarter. Right. I think this is slide number, I don't know. Yeah. 25. 25. Slide number 25. See, basically, the SMA-2 has shot up because that's an effect of what happened in the second quarter, right? The X bucket flow in the second quarter will lead to an increase in NPA towards the end of third quarter, which is where we see the SMA going up, and eventually, part of that will move into NPA in this quarter. But SMA-0 and SMA-1, the improvement that we see is because, as I mentioned, between Q2 and Q3, the X bucket stabilized. Even though it's not at a comfortable level, 98.2 is where it stabilized, but 98.2 is nowhere near comfortable. At anywhere around 98.6, around that, the MFI will actually break even, meaning the credit costs that we lose and the income that it generates will kind of match each other, and the product will break even. But if you're at any X bucket less than 98.5% or 98.6% or somewhere in that range, it means that the credit costs will be higher than the income generator. So net, the product will be a negative contributor. So this first sign of improvement in SMA- 0 and SMA-1 is nice, but it's really not enough. And this quarter, we have to see where is our X bucket going to be, and that will determine what will be the potential cost that we may incur over the next two quarters. Okay. Understood. And if you could even touch upon that, what kind of X bucket efficiency have you seen for the month of January for the MFI book? For the month of January, we are almost at the end of the month, of course. So we will not be able to tell you clearly because there's still a few hours left for the business to wind down. But it's very similar to the last quarter. Very similar. So it's not shown an uptick. That's clear. It might end up very close to the last quarter. But then there was a lot of holidays this month. Hopefully, February and March, less holidays. All this has become such a big issue today that a set of holidays can tweak your performance. But that's the way it is. So January was more or less in line with Q3, and February and March is something that we'll have to watch out for. So as you had mentioned in your opening commentary that maybe Q2 or Q3 of the next financial year, you would see some improvement. So 98.6% X bucket collection efficiency is expected by Q2 or Q3 of the next financial year, right? No. Sorry. That's not what I mentioned. What I mentioned was that if the X bucket goes up in this quarter, that's the fourth quarter, and if X bucket also improves in the first quarter of next financial year, then what happens is the credit costs see, basically, credit costs is a six-month lag impact. Okay. From X bucket efficiency to credit costs is a six-month lag impact. So if my fourth quarter of this year X bucket improves, then in the second quarter of the next financial year, we might see credit costs moderating. Okay. That's what I mentioned. Now, what I also mentioned is that since the second and third quarter collection efficiencies have been low at 98.2%, it means that I will have an elevated credit cost in the fourth and first quarters. That's a given because the X bucket has already happened. So the elevated credit costs for this quarter and next quarter is a given. Now, whether Q2 and Q3 of next year will be better is based on this quarter and next quarter's X bucket, which is where the full focus is, and that's what I had referred to. Thanks. Thanks. Okay. Thanks, sir. Thank you. Thank you. The next question comes from Shailesh Kanani from Centrum Broking. Please go ahead. Good evening, everyone, and thanks for the opportunity. Sir, my first question is with respect to disbursements. So in MFI segment, we have seen around 17%-18% decline year- on- year. When do we expect this to pick up? And if you can throw some light in terms of our guidance as well because we had withdrawn the guidance of the year. Are we giving any guidance with respect to FY26 as of now? So Microfinance disbursement will continue to be a little bit moderated only because the comfort to go all out is really not coming yet. So the disbursement will continue to remain subdued. In terms of overall growth, advanced growth, we have done about 14% for the nine-month period. The non-Microfinance has grown by around 20%. The Microfinance has degrown by 11%. So overall, it's about 14% for nine months. But if you ask me for a guidance, it's not going to be easy because the disbursement in Microfinance is still something that I'm not in a position to predict because if the comfort improves, obviously, the more money will go out. If the comfort remains low, then the disbursement will also remain low. So for the moment, we are really not giving a guidance on that. Okay. The second question is on the UCV front. Even including Affordable Housing, though it's a small base for us, but are there any early signs of increasing delinquencies or collection efficiency going down because that is getting reported in certain parts of the country? See, the collection efficiencies of commercial vehicle has actually improved in the third quarter compared to the second quarter, and typically, the fourth quarter is generally a very good quarter, both in disbursement and collections, so we expect that to continue, that trend to continue as far as commercial vehicle is concerned. As far as Affordable Housing is concerned, again, our collections have been very good. Our NPA continues to remain very much under control, and the credit cost is very at a comfortable level, and it's not small. You just mentioned that it's a small part of the book. Actually, it has become 12% of the book, so it's not small any longer, and so there's no concern as far as credit quality is concerned in Affordable Housing either. Only thing I can mention is that it's not yet broken even. And this year, it might come very close, but next year, it should actually be positive. It should be black. And that is where it should start contributing to the ROE of the bank next year. Okay. That's useful. So just last question from my side. Is there any improvement in soft bucket resolutions? And we have kind of increased our collection team, I assume, with 1,000 people coming in. So has there been any improvement, and how is the trend? Yeah. So basically, we have increased the feet on street on Microfinance. I think nearly about 800 of the 1,000 are deployed in Microfinance. And this deployment has happened in the third quarter. And so I'm also waiting to see the impact of the benefit coming in the fourth quarter and first quarter of next year. The soft bucket resolution, which is at SMA- 0 and SMA-1, and SMA- 2 resolution, in the third quarter, it was not very different from second quarter, but most of the people have been joining towards the end of the third quarter. So it was too early. Even now, as we speak, people are still joining, and they are just getting trained. They are getting certified, and then they are being put on the field. So the real benefit we should see only going forward. Okay, sir. Thanks a lot. Thank you. Thank you. The next question comes from Ashlesh Sonje from Kotak Securities. Please go ahead. Hi, sir. Good afternoon. Sir, firstly, can you just share a breakup of the net slippages in the non-Microfinance book, especially across Vehicle Finance and SBL, both for this quarter and the previous quarter, if you can, please? Product-wise? Yeah. Vehicles and SBL. Do we have product-wise? Okay. Okay. We'll try to see how do we incorporate it in the next quarter's presentation. Okay. So we don't have that now, and so we'll try and put it into our next quarter presentation. Sure, sir. No problem. Secondly, sir, on the MFI disbursements, they have gone up sequentially. The question on it is, at what juncture during the quarter did you feel like ramping up disbursements, and what exactly gave you that confidence? Actually, that was a kind of outlier. October was a kind of an outlier in the disbursement in Microfinance. In the second quarter, we were disbursing approximately about 350-odd crores a month in Microfinance. Yeah. It was total worth about 950 crores. Right. So that's about 315-320 crores a month on an average in the second quarter. Third quarter, the October month was a sudden outlier. The disbursement was about 500-plus crores in the month of October alone, but then November, December came back to normal level. That's where you see the blip in third quarter. But that is not something which is going to be repeated. And so we should see I mean, as I said earlier to the previous call also, we are not in a position to predict the disbursement in Microfinance because it depends on the comfort and the performance portfolio behavior, etc., etc. But the October was an aberration, and we don't expect that to happen again. Understood, sir. And any specific reason for the October month being an outlier? Yeah. I think what happened is that at the branch level, they were kind of holding back certain disbursements in the second quarter, and some of them which were being held back were actually released in the month of October. So that is why the aberration was there. Understood, sir. So then just lastly, out of the total Microfinance and micro loans book put together, what proportion of it would be to borrowers who are qualifying as MFI? And what proportion of the MFI book is qualifying technically as Microfinance? Microfinance and micro loans. What's the proportion? Micro loans is about 30% now. Two quarters about 15%. Now it's come to about 30% of that book, and micro loans, 70% is Microfinance. Microfinance, 70%. Micro loans is 30% of the book. Both are JLG products. Their products are exactly. Both are JLG products. Microfinance is about 70% of the micro total book, and the microloan is about the balance, 30%. Micro loans is essentially those borrowers where the household income could be beyond INR 3 lakh? That's right. Absolutely. Understood. Perfect, sir. Those were all the questions I had. Sorry. If you can just repeat again if you have shared the provision policy for the MFI book on a DPD basis? On DPD basis, 91-150. On DPD basis, 91-150 is 50%. Let's all know the substandard. All the doubtful is 100%. Okay. Great. Thank you. Thank you. Thank you. The next question comes from CA Manik Bansal from Master Capital Services Limited. Please go ahead. Hello. Hi, sir. Thank you for this opportunity. So my question is on Small Business Loans and MLAP. So what are the respective yields and average ticket size over there? SBL average yield is about 16%-16.5%. Micro LAP is part of the SBL book. So Micro LAP will be closer to 20%. Okay. So average ticket size is? Yeah. So INR 7 lakh below is what we classify as Micro LAP. If you look at slide 21, it will give you the SBL product mix. So today, Micro LAP is about 13% of SBL. So SBL is actually a collection of products. See, SBL, the average disbursement size is about INR 8 lakh. You can see that on slide number. 21. 21. SBL is about INR 7.9 lakh, which is the average disbursement. The yield on that entire book will be in the range of around 16%- 16.5%. Within that, if you look at MLAP, MLAP, the average ticket size should be in the range of around INR 3 lakh, and the yield on that would be somewhere in the range of 22% because we have MLAP going from 20%- 24% based on different category, different credit filters, etc. It ranges, but the average should be around 22%. Okay. Thank you. And another question is, what percentage of book is linked to MCLR? Because as there is a lot of buzz going on the RBI rate cut, so what are the levels the bank is going to use to keep the NIM stable or increase it? See, we have almost 80-odd percent of the book, which is a fixed-rate book. Only the remaining is floating rate. Our floating rate is typically all our Affordable Housing is all floating rate. A part of the small business loan is also floating rate. The rest is all fixed rate. And all our floating rates are linked to external benchmark, which is a repo rate. So whenever the repo rate moves, it will also move in tandem with that. So last two years, we have actually seen a benefit because the repo rate had moved up. So we saw a benefit. And going forward, in case the rates start coming down, then that portfolio, we should see a reduction in rate. But as for the remaining 80-odd percent of the book is concerned, that's a fixed-rate book. And so actually, on the 80% of the book, we saw a negative impact in the last year and a half because the cost of funds had been going up, but we were not in a position to pass it on to the old borrower. So we were actually having a negative impact on our NIM. Going forward, just in case the interest rate cycle reverses, then 80% of the book, we'll continue to own at the same level, whereas the cost of funds will start coming down over a period of time. So that will be a positive impact on NIM. So we are also eagerly waiting for when the interest rate cycle will reverse. Okay. The last question is, which segments, according to you, are the highest growth contributors for the bank? See, for us, the flagship product is the Small Business Loans because it is sitting on a very high level of unmet credit demand from the market, and it can sustainably grow around the 25%-30% level. We have been doing it for a long time, so we do know how to handle that product. The competition from the mainstream banks is not high because the product is inherently difficult to handle, and we have a lot of competitive strength built up over the years. And that product has seen all kinds of headwinds, starting from GDP cycles going up and down, demonetization happening, Corona happening. It's seen all kinds of headwinds, but the credit cost in that has never gone out of hand, never ever gone out of hand. So that remains our flagship and will continue to be the high-growth product for the bank. The next one will be our Used Commercial and the Used Car, which is also Used Commercial, of course, is a 12 or 13-year-old product in the bank. Used car is about four years or maybe four, four and a half years old. And both of them also will remain a flagship growth product for the bank because they tick all the parameters. Affordable housing will be a third focus product for the bank because it performs very well from a credit quality perspective. Only thing is that it is still not contributing to the bottom line, and hopefully, next year, it should start contributing. But it ticks very strongly on the credit quality. So that will be a third focus product for the bank. Okay. Okay. Thank you. Thank you so much. Thank you. Thank you. The next question comes from Amit Mantri from 2Point2 Capital. Please go ahead. Yeah. Can you let me know if there has been any change in the yield that is being charged on the Microfinance loans? See, earlier, we used to have a flat rate. Now, towards the end of last quarter and this quarter, we have introduced a flat-based rate. So the rate starts from 20% and goes all the way to 25%. So it depends on the profile of the borrower. So people who have been with us for two cycles, three cycles, four cycles, etc., they get a lower rate. People whose past track record has been very good with us, they get a lower rate. People whose attendance at center meetings has been beyond certain minimum level, they also get a lower rate. And so on. So we have defined a few sets of credit parameters. Those who tick all the boxes can get rates as low as around 20%, and those who don't tick any of the boxes will go at the highest slab, which is around 25%. So what will be the impact of this introduction of slab-wise system of rates? Going forward, will the average interest rate on Microfinance loans decrease because of this change? Yes, it should. So we did try to do some simulation on that, and I think it might reduce the yield on Microfinance by anywhere around 1.5%. 100-150 basis points, basically. That's right. Okay. Thank you very much. Thank you. Thank you. The next question comes from Rajiv Mehta from YES Securities. Please go ahead. Yeah, sir. Just a couple of follow-ups. Sir, even affordable housing disbursements, the traction is still lower in terms of run rate versus last year. So there was supposed to be a pickup, but we haven't seen that pickup in Q3. So Q3 number or Q3 figure for disbursement is also lower in Q-on- Q basis. So what is happening here, and when do we see going back to the levels of disbursement which we were doing last year and then even higher subsequently? Yes. So the disbursement in Q3 is lower than every other quarter. It's lower than Q2. It's lower than Q3 of last year also, correct? Yeah. Lower than Q3 of last year. It's lower than Q2 of this year also. It's only better than Q1. Q1 was a very bad quarter. It's only better than Q1. Basically, in Affordable Housing Finance, our disbursement yield, there is a conscious effort by the team to improve the disbursement yield in the Affordable Housing space. We had initially our whole Affordable Housing started from Gujarat and then Maharashtra. Subsequently, we came down to south, and we put up operations in Tamil Nadu, Karnataka, and AP, T. The team's effort, in their effort to try and improve the yield of the disbursement in affordable, they actually took a call to slow down part of the disbursement from west and try and improve the disbursement from south. That's why you see the disbursement coming down. But in return, the yield actually started going up even in the third quarter. And going forward, so the focus will continue to be try and have a blended yield between south and west, between self-construction to flat purchase to builder purchase. So there has to be a proper mix amongst customer profile as well as property profile to ensure that our yield is maintained while growth is also taken care of. So that's a kind of fine balancing that the team is trying to do, and that resulted in this dip in the third quarter. But hopefully, they will be able to come out of it maybe even this quarter. And just on slide number 26, you mentioned about additional provision, and I think you've also mentioned it's mentioned in there that there's a INR 16-odd- crore of additional provision done in Q3. Now, so where is the INR 16-odd- crore of provision? I mean, is it in the PCR of MFI or because you've actually utilized the standard funding provision that you created last year? So what do you mean by this additional provision of INR 16 crore done in Q3? The additional provision is in respect of the provision changes in the buckets of MFI from 151 to 180. Earlier, we were quoting 73%. We started quoting 100% now. That's the incremental provision in Q3, FY 2024. That's a change in policy itself now. Even on a continual basis, 150 plus crore will be 100%. See, this is a change from the bank policy of earlier follow. So it will be consistently followed in the future. Understood. Yeah. Okay. Okay. Thank you, investors. Thank you. Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the conference over to Mr. P. N. Vasudevan for his closing comments. Yeah. So thank you. Thank you all for dialing in and listening to us and asking us questions and helping us to understand our business better. And we look forward to meeting all of you guys again next quarter. And hopefully, the performance also should be much better than what's happening now. Let's hope that the market stabilizes, market settles down, customers come back to more normal levels of behavior, and things do get back to some level of normalcy. Thank you and wish you all the very best. Bye. Thank you. On behalf of Equitas Small Finance Bank Limited, that concludes today's conference. Thank you for joining us. You may now disconnect your lines.