Ladies and gentlemen, good day and welcome to Home First Finance Company India Limited Q4 and FY 2023 earnings conference call. 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. If you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Kayal, Head, Investor Relations at Home First Finance. Thank you. Now to you, Mr. Manish Kayal. Thank you, Renu. Good afternoon, everyone. I hope that all of you and your families are safe and healthy. I'm Manish Kayal, and I look after the investor relations of Home First Finance. I extend a very warm welcome to all participants on our Q4 and full year FY 2023 financial results con call. As usual, Home First management is represented by MD and CEO, Mr. Manoj Viswanathan and CFO, Ms. Nutan Gaba Patwari. I hope everybody had an opportunity to go through our investor deck and press release, which was uploaded on stock exchanges and on our website yesterday. We'll start this call with an opening remark by Manoj and then Nutan, and then we will have a Q&A session. With this introduction, I hand over the call to Manoj. Over to you, Manoj. Thank you, Manish. Good afternoon, everyone. I'm pleased to share that Home First has reached several notable milestones in FY 2023. We now take pride in having served 1 lakh customers since inception with total housing loans disbursed in excess of INR 10,000 crores. Our physical branch office distribution has crossed 100 branches. It stands at 111 branches as of 31st March 2023. We have disbursed more than INR 3,000 crores in this financial year, demonstrating a growth of 48.4% over the previous year. This year saw the entry of International Finance Corporation, a member of the World Bank Group, as a lending partner to the company with the issue of NCDs aggregating to INR 280 crores. We also received our first ESG rating score in the low risk category from Morningstar Sustainalytics. Declaring our maiden annual dividend of INR 2.6 per share, which is a 10% dividend payout. Moving on to FY2023 financial performance. The profit after tax at INR 228 crores was a growth of 31.1% on a year-on-year basis over INR 174 crores in the previous year. This translates to a return on assets of 3.9%, an increase of 30 basis points compared to the last year. As a result, ROE improved sharply from, by 170 basis points to 13.5% in FY 2023 over 11.8% in FY 2022. In Q4 FY 2023, the company delivered an ROE of 14.4% versus 12.5% in Q4 of FY 2022. Strong financial results were achieved on the back of good disbursement momentum, AUM growth, portfolio quality, improved management of cash and operating costs. AUM is at INR 7,198 crores. It grew by 33.8% on a year-on-year basis. Disbursement momentum continued into Q4 2023, with a disbursement of INR 869 crores, which is a growth of 35.6% over Q4 FY2022. The portfolio health remains strong with further improvement. All rates have improved to 13.6% in Q4 from 14.9% in Q3. The 1+ DPD improved to 4% from 2.4% in quarter three. It has dropped below the March 2020 or pre-COVID levels. 30-plus DPD improved to 2.7% from 3% in quarter three. Gross stage three GN3, as per the latest RBI guidelines, improved by 20 basis points to 1.6% in quarter four from 1.8% in quarter three. This includes INR 421 million, which is currently in buckets less than 90 DPD, but they are still included in NPAs due to the asset classification norm as per RBI notification dated 12 November, 2021. Prior to such classification, it is 0.9% and it stands below March 20 levels. We will now focus on some of the key drivers and metrics of the business and outlook for the current year. Starting with technology, during quarter four FY 2023, digital adoption has further improved. Usage of the customer app for various activities has increased. 93% of our customers are registered on the app as of March 2023, compared to 91% in December 2022. Unique user logins have increased to 57% in quarter four from 55% in quarter three. 91% of our service requests were raised on the app compared to 89% in quarter three. We continue to invest in technology, we have a number of projects lined up for the year that will enable us to widen our moats in origination, underwriting, and collections. Coming to distribution, we added nine branches in quarter four and a total of 31 branches in the entire year. We now have 111 physical branches. 65 touchpoints were added this year, taking the total touchpoints to 265. Our FY23 disbursements in our core segment of INR 5 lakh-INR 25 lakh ticket size are diversified with top 50 districts of the country of the industry contributing to 72% of our business. The next 50 districts of the industry contribute to 15% of our disbursements, and the balance 13% comes from districts which are beyond the top 100 districts of the industry. For reference, the top 100 districts of the industry contribute to 62% of the disbursements in the INR 5 lakh-INR 25 lakh ticket size segment for the overall industry. We continue to focus our expansion in the states of Gujarat, Maharashtra, A.P., Telangana, Karnataka, and Tamil Nadu, supplemented by gradual and contiguous expansion in other states where we are present. Expansion will span tier one, two, and three levels of towns. We are targeting to reach 400 touchpoints by March 2025. We are targeting an AUM growth 30%+ for FY 2024 to enable us to cross the INR 10,000 crore mark, AUM mark in the next 12 to 18 months. We have a three-pronged approach to growth centered on expanding distribution, increasing market share, and expanding the addressable market through Fintech. Talking about margins, FY 2023 full year spread stood at 5.7%. This is an improvement from 5.6 of last year. Q4 FY 2023 spreads were at 5.5%. It declined by 10 basis points on a year-on-year basis. We have increased our rates now by 50 basis points from April 1st onwards, and an overall increase of 125 basis has been given to customers since July 2022. This will stabilize the spreads going forward. We are confident of maintaining spreads of 5.25% on our loan book in the medium term. Coming to asset quality, it is at pre-COVID levels. We maintain to maintain this with a bias towards gradual improvement. Our strategy is to achieve this by strengthening our data-driven risk models and filters. The stability in input parameters post-COVID will enable us to accomplish this. Coming to people, we are always focused on building a high quality team that is capable of high productivity. We have invested in creating a campus recruitment program with a connect across 200+ engineering colleges and business schools across the country. Freshers are equipped with the right knowledge and skills through a one-year continuous training and testing process that will make them productive entry-level employees. The majority of our branch managers and cluster managers are selected from amongst existing employees. They are trained on specific skills for the next role. This year we have planned some new initiatives to further strengthen our hiring and training programs. With this, I would now like to hand over the call to Nutan to take you through the financials. Nutan, over to you. Good afternoon all. I will take you through our performance in Q4 FY 2023. I would like to start by mentioning that now we have crossed 14% ROE and reported Q4 ROE of 14.4%. Our Q4 net interest margin is robust at 6.1%. For full year, it stands at 6.4%, increased from 5.4% last year on better utilization of balance sheet and PLR increase of 75 basis points we have taken till March 2023. I will also like to convey that we have taken another round of hike of 50 basis points from 1st April 2023. Net interest income has gone up by 44.6% in FY 2023 on a year-over-year basis. For the quarter, it increased by 30.6% on a year-over-year basis to INR 101 crores. We did direct assignment of INR 81 crores during the quarter as a liquidity strategy. Approximately INR 289 crores for FY 2023. We continue to have a robust demand for our portfolio. We executed co-lending transaction of INR 35 crores in Q4 and INR 89 crores in FY 2023. Co-lending business is growing and expect this to contribute around 10% of business in the near future. OpEx to assets stands at 2.9% for the quarter and 3% for FY 2023. As guided earlier, we expect this ratio to remain in the range of 3%-3.2% going ahead as we focus on expansion. Cost to income at 34.4% in Q4, decline of 130 basis points on a YOY basis. For FY 2023, it stands at 35.7% versus 34% in FY 2022. Q4 FY 2023 profit before provisions stands at INR 91 crores, growth of 11.3% on QoQ basis and 38% on YoY basis. For full year, this is INR 317 crores, growth of 26% from INR 251 crores in FY22. Credit cost in Q4 is at 0.4% or 40 basis points and is well within our guided range of 30-50 basis points. Our retail provision stands at 1% of the total principal outstanding. We continue to be conservative with the provisions. Total provision coverage ratio stands at 59.5%. Prior to NPA reclassification as per RBI circular, provision coverage ratio stands at 104.8%. Our adjusted PAT for Q4 is INR 64 crores, a growth of 9% on a QoQ basis and 32.9% on a YoY basis. For full year FY 2023, adjusted PAT is INR 228 crores, increase of 31% over FY 2022 PAT of INR 174 crores. Moving to liquidity and borrowings, we continue to have diversified and cost-effective long-term financing sources. During the quarter, we added South Korea's Shinhan Bank and Indian Bank as a new lending partner, and we continue to work towards further diversification. We continue to have a healthy borrowing mix with 58% from borrowings from banks, 15% from NHB refinance, and 19% from direct assignments. We continue to have zero borrowings through commercial paper. Our cost of borrowing is competitive at 7.9%, despite not drawing NHB's INR 800 crores in FY 2023, which we have drawn in April 2023. 7.9% represents increase of 70 basis points on a year-on-year basis. We pushed forward drawing the NHB funds in April 2023 as we have sufficient liquidity through our lenders. NHB funds in April 2023 will help us manage our cost of borrowing better in FY 2024. Moving to capital, our total capital adequacy is 49.4%. Tier one is 48.9%. Our March 2023 net worth is at INR 1,817 crores versus INR 1,574 as of March 2022. Our quarter four ROE is at 3.9%. Our annualized ROE stands at 13.5%. Quarter four is at 14.4%. Our book value per share is INR 206.5 per share. We have declared our first ever dividend of 2.6%, sorry, INR 2.6 per share. With this, I open the floor for questions and answers. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question comes from the line of Mona Khetan from please go ahead. Hi, good evening, and thanks for taking up my question. Firstly, what% of AUM has there been an increase in EMI after exhausting the tenure increase? sorry, what% of AUM has? For what percentage of AUM have you seen an increase in EMI so far after having exhausted the tenure increase, yeah? Okay. Yeah. We have looked at it in terms of number of customers. About 2% of our customers have undergone an increase of more than INR 1,000. Another 3% is between INR 500-INR 1,000. The balance would rather, you know, lower than earlier or lesser than INR 500. Sorry, Mona. The line is not clear. Okay. see, I get some kind of the answer. I'll repeat. 5% of the customers have a EMI increase of more than 500 INR, of which, 2% have an increase of more than 1,000 INR. Okay. roughly 5% EMI, right? It's not clear. Not able to hear you clearly. Okay. I'll try again. What I'm saying still only 5% of customers are seeing this EMI increase. Yes, yes. Yeah, a significant number. I mean, there are about another 20% who have an increase between INR 0- INR 500. A significant increase is only 5% of the customers. Okay. The loan Mona, we cannot hear you. Not able to hear. Okay. Thank you. Next question comes from the line of Rahul Maheshwari from Ambit Asset Management. Yeah, Nutan and Manoj, good evening and excellent set of numbers. First of all, also the disclosures regarding the ESG and all, very fantastic. My two questions in the previous commentary last quarter you had said that in southern markets the ATS is looking stable in at least in the tier two and tier three cities. In northern markets, the ATS has witnessed reduction. Can you give some brief color that what has happened in quarter four and what are the insights you're getting in at the start of this financial year? Well, I think what I was referring to was that in northern markets the ticket sizes are lower than southern markets. In southern markets, the house, the size of the houses and also the material used, et cetera, is more, you know, more expensive. The ticket sizes tend to be a little higher. The same trend continues. We are seeing the same trend, even in this year or this quarter as well. The ticket sizes in the southern markets are slightly marginally higher than what we see in northern markets. On your slide, if we go in where you have given some detailed information on the tech interventions which you have raised on cases, you have developed a lead management system. Can you give some more numerical quantitative details that how it will be helping and in terms of the throughput, how the trajectory you would be seeing going by it? Second thing, how much leads you are getting on a monthly basis and what is the rejection rate? A lead management system is just to streamline the, you know, processing of leads. I mean, we are already using Salesforce platform, you know, to track our loans. We just thought the lead management system will act as a central database for all leads which are coming through, and we don't have to, you know, run all those leads through our Salesforce system. That is the reason for building this lead management system. Plus it also has integrations, you know, with things like SMS, WhatsApp, et cetera. It kind of makes it easier to interact with the customers, in case, you know, we have to provide certain or answer their queries, et cetera. There are multiple features in it. It helps to route the cases to the right person, right callers, acts as a central repository. You know, you can pull various details like bureau, et cetera, directly from that. There are many features which helps us to improve the productivity as far as the lead management system is concerned. As far as number of leads are concerned, it depends on the channels. Overall, our conversion rate is about 50%, 40%-50%. If you're booking about 3,000-4,000 loans in a month and the number of leads will be about double of that. In certain channels there are very large number of leads coming through, like in digital channels. I'm not considering that, as far as this ratio is concerned. Just related to this, when you are suppose those 6,000 or to 8,000 leads which you are getting, and of that only 50% is converted, how much fees you are charging at the beginning, for those cases also in cases they are not converted? For the leads which get declined straight away based on initial initial parameters, we don't really charge any fees. We don't charge any fees. If the loan looks feasible, I mean, if the relationship manager on the ground feels that the loan is feasible to go through, which satisfies some of the basic criteria, then we charge a login fee, which is about INR 3,000. Okay. I'll come back. Thank you. Thank you so much. Thank you. Next question comes from the line of Renish from ICICI. Please go ahead. Hello. Hi, Renish. Yeah. Hi. Hi. Congrats on the pick-up numbers. Just one question is on spread. Okay. In PPT we have mentioned that our incremental spread is sort of pretty low at 4.7%. Just one thing is that after considering this 50 basis points rate hike? No, that is for the prior quarter origination. Okay. Okay. Secondly, which is, you know, sort of linked to this only. In the opening remarks, you know, we did mention about some maintaining spread at around 5.25%. When we look at the incremental spread at 4.7%, how confident we are that we'll be able to sort of, you know, meet this 5.25% spread in coming quarters? Let me just start on this. 13.4% is our yield for Q4, and we have taken a 50 basis point yield increase in April 2023. We expect that with this increase in yield the Q1 yield will close around 13.7-13.8. That is almost 30-40 basis points higher than we reported quarter, which is Q4. On the cost of borrowing line, because we have brought down NHB in Q1, and also we are able to maintain a similar marginal cost of borrowing. We expect that the cost of borrowing will be around the same range or at least not more than 10 basis points higher. Essentially 5.57% spread could practically expand for a very short period in Q1 and Q2 when the cost of borrowing moves up to 8.20%. 8.20% is a cost of borrowing that we are projecting. It can go back again to 55%-60% levels. That is how we are projecting this. We are very comfortable with the watermark that we have set out for ourselves, which is 5.25%. That's the next two-quarter projection on the spread that we have internally. Now we also have to monitor how the RBI repo rate progresses in June and August and then decide if we want to do any further changes. Just a clarification, Nutan. When we do the rate hike, what percentage of our AUM gets repriced, let's say, in a month or quarter? Essentially, for example, for April 1, 2023 rate hike, all customers who were in the AUM on January 31 will get repriced with the exception of NHB funds. Got it. Basically it's a three-month reset period kind of a thing. Two months you can say. Two months reset. Okay. Okay. Secondly, on the disbursement run rate. This quarter of course, you know, we have seen a good improvement. What kind of a sequential growth are we expecting, you know, given we have added people and capital this quarter? Maybe first half, what sort of disbursement run rate we assume? We have always maintained about a 5%-10% kind of a growth on previous quarter. We intend to maintain that kind of number. Got it. Okay. That's it from my side. Thanks a lot. Thank you. Next question comes from the line of Mayank Agarwal from InCred Capital. Please go ahead. Hi. Thanks for taking the question. The first question is on OpEx. We have witnessed a 7% QoQ growth in OpEx, while there was no branch addition this quarter. Is it mainly because of the increased disbursement or we might see an increased number of branches next quarter, so that OpEx was up front end? My second question is on margins again. Basically, your current forecast is factoring the rate pause or you are still factoring the rate hike or a rate reduction in this fiscal quarter, you know, what you guided for a 5.25% spread. On the first operating cost, we've actually added eight branches in Q4. Sorry, nine branches in Q4. That is also mentioned in our presentation. That is where the operating cost increase is coming from. The second question on margins, it assumes that there is no rate change by RBI either upwards or downwards. We will have to watch how it progresses in June, then take further action. Secondly, are you witnessing any kind of increasing competition from small regional players or anything, which is higher than what you've seen, let's say, a year ago? Any color on that? No, nothing, significant, or no significant change. I mean. Competition has always been there in this segment, so, no significant change as such. The last question is on your D&A income this quarter. I was just looking if you have done more assignments or anything is going there. No, just the volume. We've also given the volume trend. Lastly, we have mentioned that we will stick around this INR 100 crores ±INR 20 crores, and that's where we have landed. Presenting the volume only. Cool. Thanks. That's very useful. Thanks. Thank you. Thank you. Next question comes from the line of Chandra from Fidelity. Please go ahead. Hi. good afternoon. I had a few questions. Manoj, maybe can you help, maybe tell us roughly sort of why you've given the number. What is the percentage increase in the EMI for these customers? One. Second is, you know, what does this mean for the FYR at this point in time versus origination? What's the change in FYR if you've done some Percentage increase, when you pick up INR 500, we have basically looked at two buckets, INR 500-INR 1,000 and INR 1,000+. INR 500 increase would be like a 5% increase in the EMI generally, because EMI, average EMI is about INR 10,000. INR 1,000 would be about 10%. 5%-10%, maximum 15%, would be the kind of EMI increase, which is therefore that 5% of the customers. FYR again, we can calculate because average FYR is about 40%. On 40%, the, I mean, if you were to look at it, say, you know, say INR 25,000. On INR 25,000, that would be a 2.5%, 2.5%-5% change in the FYR. Right. Right. Secondly, I mean, you also said that, you know, you know, if it's, once you cross 14%, that you start, you actually start moving, you know, to a different target segment of customers, I mean, those which you may not necessarily want to do business. Given that sort of, you know, your incremental lending yields are at 14% and you want to be, you will be sort of dispersing at these rates. Would the customer profile be start changing, you know, in any material way? This is why we have kept the incremental, you know, lending rate at about 13.5%. If you see, even for the current quarter, origination rate is 13.5%. We are always trying to keep it below the 14% because 14% we feel just a psychological threshold where you move into a different segment. We originate between 13% and 14%. If we have to reprice it, we reprice it after a quarter or so. Because then it just get passed on as a tenure increase and not as a EMI increase. Right. Could you just tell me maybe what's been the origination yield at, on HL and LAP at this time? I mean, after the rate hike, if you check it. HL would be about, I think the blended rate is about 13.5 and LAP would be giving us about 30 basis points. 13.2% for HL. Even after the April increase, you're originating at 13.2%? No. This is before the increase. This is at the origination, time of origination. Right. Right. Okay. Even at origination for your new customers, you'll be originating a slightly lower rate increase. Exactly. Right. Right. At the time of origination, we are keeping it below 14%. Then we increase it after maybe a couple of quarters, if required. Right. Right. Right. you know, this quarter the beginning create was a little higher. Is it just the CLSS subsidy or is there anything else to be released? Yeah. There was a big CLSS subsidy grant which came in this quarter. Which is almost, I think, contributed 8% of the erosion. Yeah. Portfolio erosion. Right. Right. Then just lastly, I don't know, Nutan, when do we come up for our next rating review? I mean, obviously you just had an upgrade to wide latitude. Trying to see that is it like a year or a couple of years? How do we just keep up with that? Just given the context right now, Nutan, could you just help us with how can we leverage cash if you had to be, which sort of income that you're working with? Chandra, on the rating improvement, essentially it's now an outcome of scale, subject to, you know, we maintaining good asset quality like we have been, diversification in terms of market. You know, improvement in profitability. Everything else remaining the same. It is a function of scale. Let's say once we cross INR 10,000 crore, let's say in the next 15 months, 12-15 months and, let's say three to six months from then. Give or take about 18 months broad timeline is what we think it should take for the next rating upgrade. Coming to your second question on leverage. We are actually at current 3.6% as we speak. Now this is really, if you look at from a net to equity, it's aroun%d 2.6. Not a significant leverage, and capital adequacy is also high, and we get a 35% risk weight benefit. In our conversations with rating agencies, they are comfortable with a net to equity of almost 5 times. Now, you know, we've also been talking about INR 100 crore of assignment every quarter. We've also been talking about co-lending of 10% disbursement. This really allows us to look at a very different AUM, from let's say five years before where some of these products couldn't be scaled the way they can today. The AUM context will be very different. You know, your asset to equity could still operate at let's say of 5.5x, 6x in the next rating cycle. Some of these questions haven't bothered us, and we are remaining focused on growth per se. We think that coverage will happen in the next 15, 18 months once we cross INR 10,000 crores AUM. Thank you. Thank you. Next question comes from the line of Kunal Shah from Citigroup. Please go ahead. Yeah. Hi, Manoj and Nutan. Firstly, sorry, taking up on the, taking forward with Chandra's question. In terms of this, CLSS subsidy, I didn't get the number. It was 8% of AUM?. Can you highlight? INR 138 crores is the absolute amount of CLSS subsidy that we received in Q4. In FY 2023, we received INR 66 crores. With this, the good news is that we've received everything, so no more dues on this particular line. If you look at it in percentage terms, our total asset run off was 25%. 8% out of this was pertaining to CLSS. This is annualized erosion rate we have calculated. Yeah. Out of INR 422 odd crores, INR 138 crores is. There is BT out of 1.5 non-annualized. Yeah. Yeah. Yes. Okay. When we look at this entire BT out, given that there is another further, 50 odd kind of an increase which we have done from April. Any risk out there in terms of elevated BT out, or this is more kind of a Q4 phenomena? Yeah, it is basically a Q4 phenomena. If you see last Q4 also was high. Actually it was higher than this Q4. This is Q4 2022. It's just a Q4 phenomena. Okay. Rate hike would also not have too much of impact to this. Again, we should see it normalizing in the coming- Yeah, it doesn't seem to be, because at last Q4, I mean, rates were low and EPT outs were also, again high. It's more of a quarter end phenomena looks like. Sure. In terms of the branches, again, full year, you did almost we added more than 50 odd branches. You have been highlighting that, maybe for another couple of years, should we see similar kind of a run rate or maybe we have done some part of it and now it should slow? No, I wouldn't say slow. Maybe similar kind of pace, about 20-30 branches. 20 odd branches we can say. Okay. Overall in terms of the disbursements, again, after 18, 24 months or maybe two years down the line, because when we look at it, say from 2019 to 2022, there have hardly been 20 odd branches which were added and still there is a strong run rate of disbursement. Once these branches mature, almost say, 30 on 80 odd branches, which is again more than 30%-35% odd, then the disbursements should see a strong uptick once the maturity is there and maybe at least this growth momentum can sustain. Yes, yes. I mean, we get disbursements from all categories of branches. You know, I mean, we will continue to put some new branches and the growth momentum is coming in from the larger branches as well. Okay. Yeah. In terms of the OpEx, overall, when we look at the OpEx to expense ratio, it should stabilize. We are not seeing any maybe 3% odd levels which are there. Obviously, from 2.7% it has gone up to 3% for the full fiscal, with the 30 odd branches expansion. I think broadly should be able to sustain this kind of. Around this level. We had said when it was at 2.5%, 2.7%, we said it'll go up to 3.2%. That is what we are maintaining. Maybe for some more time it'll stay at these sort of levels, and then the growth starts coming down. Sure. Lastly, in terms of the ROA trajectory, it's commendable that, maybe, 30, 50 bps kind of addition every quarter accretion which is happening. Now incrementally, what could be levers available, both in terms of the ROA and ROE? Uh, so, you know, some of the levers, uh, is, uh, you know, we have to really, uh, utilize the co-lending and DA to full potential. Uh, so that is, uh, you know, one of the aspects. Uh, we are looking closely at credit costs as well. Uh, so some of those things are there. Uh, we can further optimize, uh, you know, some of our, uh, cash utilization. So let's say even if we are able to hold on the ROA at around 3.7%, 3.8% levels, with the increased leverage, uh, we are hopeful that, you know, we should be able to, uh, move towards 15% ROE, uh, trajectory in the next, uh, two to three quarters. Okay. co-origination, securitization, and secondly, you mentioned credit cost also, any levers available? Credit cost, so now if you see, we are still carrying 1% of provision of ECL as a percentage of our principal outstanding. When the 30 DPD is 2.7%, you know sometime we'll have to relook at it. You know, some of those areas we will take a closer look and see if there is an opportunity. The fourth area that I also mentioned was cash utilization. Sure. Okay. Got it. Got it. Thanks and all the best. Yeah. Thank you. Next question comes from the line of Ravi Naredi from Naredi Investments. Please go ahead. Thank you for giving me this opportunity. Manoj, really a wonderful result. My question is in quarter four, interest income rises 47%, while net profit rise only 7%. Finance cost rise 76%. The question is, why. Quarter four interest income rise by 47%, net profit rise by 7% and finance cost rise by 76%. What are the reasons? 76%. This is, INR 204 is the interest income, against INR 139. Uh- Sir, you are looking at, quarter four versus quarter four last year or quarter three? Yeah. Yeah. Yeah. Quarter four last year. Quarter four, the total income is INR 139 38.7 crores for this this year quarter four versus INR 102 crores for the last year quarter four. That's a 35.3% increase in total income. This finance cost rises don't reflect. That is because, sir, if I may answer this question. The finance cost has gone up because there has been a lag in the increase in cost of borrowing. If you look at our last four quarters of cost of borrowing, though the repo rate has increased by 250 basis points, our data has increased only by approximately 70 basis points. There has been a very high degree of lag. We were able to maintain almost flat levels of cost of borrowing in Q1 and Q2 because they're linked to internal borrowing, there has been a lot of lag. The cost of borrowing increased only in Q3 and substantially in Q4. That is the reason why you are seeing a sharper increase in interest expense versus interest income. When you look at it, sir, at a full year level, the interest income has gone up by 43% and the interest expense has gone up by 41%. We've performed better, sir. This other expenses are also high, very high. INR 175 million against INR 115 million. Sir, as we expand the businesses, to more branches and more people. Right. Okay. That is the reason. Sir, if you see the overall quality of returns, that has improved sharply on a quarter-on-quarter basis consistently. Okay. Mr. Manoj, can we assume the 30% CAGR growth is possible in next two, three years? Yes, sir. We are targeting a young growth of about 30% over the next two, three years. Okay. Thank you. Thank you, and all the best, sir. Thank you, sir. Thank you. Next question comes from the line of Sanket Chheda from DAM Capital. Please go ahead. Yeah. Hi, sir. Congrats on good set of numbers and setting new standards as far as disclosures are concerned. quite good disclosures. primarily my question was on OpEx. last year we had guided that we'll carry on, with some investments in this year, wherein the OpEx should be around 3% -3.2%. We have closed it at about 3%, last couple of quarters, the OpEx has been lower at about 2.8%-2.9%. how do we see the business now over the FY 2024, 2025? Sanket, we still want to expand, let's say from 255 touchpoints to 400 odd in the next two years, which will essentially mean more branch locations, physical branch locations, more people, more travel and all of that. As you know that, you know, there is a vintage by when by which the branch really starts to perform and the productivity picks up. Basis all of that, we've done a bottom-up analysis and we are projecting a 3% to 3.2% operating cost. We have calibrated it to say that if we want to do 30%+ growth, this level of operating cost is essential today to be able to maintain this. Operating cost will be directly variable on a growth perspective. This is something we have in mind. Okay. Okay. Now that the stress is also normalizing in terms of the credit cost, what run rate do we see in 2024, 2025? 30 to 40 basis points. We don't need more than that. Okay. The same. Yeah. same maintenance. Sure. I think those were the two questions from me. Thank you, sir. Thank you. Next question comes on the line of Raghav Garg from Ambit Capital. Please go ahead. Yeah, hi. Thanks for the opportunity. Just a couple of questions. First one on the treasury side. I see that you reported about INR 95 million of treasury income this quarter. The run rate usually has been about INR 20 million-INR 22 million in last a few quarters. When I look at that as a percentage of average assets, that's about 1.6% versus a run rate of about 1.16% in last several quarters. Can you explain what is the reason behind this jump up and whether this is sustainable or not? Right. Raghav, when you look at the overall treasury investment management, it essentially falls into three buckets. We look at liquid funds, essentially overnight funds or the very short-term liquid funds which carries no underlying risk. The second category is deposits with our consortium banks, and the thirrd category is T-bills. Depending on the underlying dispersal and operating cost plan, we choose between these three products, essentially depending on where we think we can maximize the returns even if it is 10 or 20 basis points. In this quarter, it so happens that we placed more deposits and lesser liquid funds, which is why you've seen a reduction in mutual fund income and an increase in the bank deposit income in our fact sheet. Coming to your second part of the question on sustainability, at a very high level, this represents almost a 6.5%-6.6% of yields on the funds placed across these three categories. It will depend on two things. One, the rate, operating rate in the market and secondly, volume. As far as volume is concerned, we don't expect to increase it by any meaningful number. We want to keep approximately two months of dispersals with us in cash and cash equivalents on the balance sheet to optimize our cash holdings. That we will continue to do. We don't expect the overall treasury income to be changing meaningfully. It can change between the three categories. Right. Is this understanding correct that, you know, the ramp rate will not be as high or whether if we look at this, the yield that you just mentioned around 5%-6% versus around 1%-1.5% that we've seen previously, is not sustainable. Is that, would that be fair to assume? No. It will really depend on where the repo rate is. As long as the repo rate is 3.5%, there is no reason why this should change. We have not seen 1.5% earlier. Earlier we used to see more in the range of 4%-4.5%, which is similar to the repo rate then. It is really a function of the repo rate at that point of time. Understood. My second question is on your PLR hike. If I do the math, July you had taken about 25 basis points. December again, another 50 basis points. Cumulatively that's about 75 basis points taken in FY 2023. On your reported yields, the increases on is only about 60 basis points. Can you explain, you know, whether, you know, to what extent have you been able to pass on the effect that you've taken in FY 2023? In light of that, how confident are you that this 50 basis points PLR hike that you've taken in April 2023, to what extent will you be able to pass that on in order to mitigate any margin compression? Let me break down this for you. When we take any rate hike, we look at various pools of AUM, and there is one significant chunk, which is your NHB AHS pool, which is a fixed rate pool on asset side as well as liability side, where we do not increase the rate. Now, please also remember that this particular pool has similar or better spreads to us in itself. You know, there is no need to worry from a spread compression on that particular part of the pool. That pool has been about INR 700 crores. More recently, it's increased to INR 900 crores. When we take any rate hike, we have to exclude INR 900 crores out of our total rate hike pool. When you look at the blended increase, in the yield line, the drop from 75% to 60% represents the fact that you've not taken any increase on the pool at a. This is how it's visible that it does not impact the spread because it is fixed in nature on both sides. Sure, understand. This INR 700 crores that you're mentioning, this is as of March 2023, is it? Yes. This is as of March, INR 900 at the peak. This is coming under, Affordable Housing Fund? Yes. Yes. Right. Do you have any visibility or, you know, any sense whether the at NHB level, whether this AHS fund will be rolled over or whether it will get any renewed deposit in FY 2024 or not? Out of the INR 600 crores that we have drawn down in FY 2024 in the month of April, we already have received INR 300 crores under this fund. The next application will happen in July because the NHB refinance year is July to June. We will have to engage with the officials at that point of time, and we will only have a better understanding perhaps in Q2 of this year. Sure. You know, if at a system level, the AHS fund doesn't get rolled over in FY 2024, would that mean that, you know, typically if a company is lending under the AHS, then without it there would be some kind of pressure on margins for a typical housing finance company? Would that be correct to assume? No, simply because, you know, it's a very small set of our book today. If you see, like I mentioned, 700 crores as of March out of 7,200 crores, and we are able to manage the margins and the spreads in the rest of the book. Nothing to nothing, you know, mention that, you know, there will be impact or anything of that sort. Sure. thank you a lot, Nutan. That's all from my side. Thanks. Okay, thank you. Thank you. Next question comes on the line of Amit Ganatra from Invesco AMC. Please go ahead. Yeah. Couple of questions. One is that, you know, I think at the beginning of the last year, during first part of conf call, you had mentioned that, you know, rates from 5.8% can come down to 5.25%. Now if you see, rates have come down to 5.5%, but when they have touched 5.5%, your guidance is that the spread should remain stable. Any specific reason as to why the change in thought process when it comes to spread? That's my first question, and I'll ask the second question later. Amit, maybe I can get started. Our guidance still remains at 5.25% on the lower end. What we are trying to say that the visibility for the next quarter seems to be stable on spreads. Yeah. I guess, now, I mean, one year after that, in where we are today, the overall outlook on interest rates seems to be more that it will, I mean, there may be a minor increase, but it will flatten out. Which is the reason for our slight change in stance. Okay. You're on the borrowing side, I mean, your reported cost of borrowing is 7.9%, right? Yes. Yes. What is it till, right now, cost of borrowing? Around 870, 880, excluding NHB. Okay. That was my other question, that in terms of your borrowing mix, why is it that NHB as a percentage is continuously coming down? If you see March 2022, we were at around 27%. In the last four quarters, we did not draw down any inventory which we drawn down in April 2023. When you look at Q1, that number will go back to 20+ levels. It's just a function of when we have drawn down the funds. During the course of the year, you did not draw down anything- Yes. It kept on coming down. Now once again, you know, if you start, if you said if we have pre-drawn down so automatically- Yes. In the first quarter it should go up. Yes. If that happens, then that also helps in terms of overall cost of funds, right? Absolutely. That's why we are saying that, you know, our quarter one cost of funds will not go up. If you remember, Amit, we've always said that, you know, there's a lot of lag in MCLR. The increase actually started to happen in Q3. Q3, Q4, Q1 should be the maximum increase, given the lag. We see increase in Q3, Q4, but because of NHB, we are saying we should be able to hold it in Q1 and then see another 20-30 basis points in Q2, and then that's a flat line after that. Okay. After that, okay, you're saying then that then there should be a flat line. Yes. cost, you are saying that you still will be in investment mode. Yes, we have to be, right. Okay. Okay. More or less, from a ROA perspective, this year, the fact that you managed to protect ROA, itself is decent, right? Overall there was this possibility that ROA is going to decline. I mean, at the beginning of the year, considering interest rates going up, there was this possibility. Yes. -but that- Yes. that did not happen. Now the important thing is that, more or less we should be able to maintain ROAs at these levels. Absolutely. leverage should go up. Absolutely. To drive ROAs, right? That should be the purpose. Absolutely. That is the purpose. Yes. Okay. Understood. Thank you. Thank you. Next question comes from the line of Nidhesh Jain from Investec. Please go ahead. Thank you for the opportunity. Firstly on the disbursement, can you share the disbursement to branch on three years vintage branches, the branches which you opened three years back. What is the disbursement to branch on an annual basis for FY 2023 from these branches? Three years plus vintage generally will be about INR 3+ crores. I mean, we don't have the figure off the cuff, right? Just roughly it's about INR 3 +crores per branch. INR 3+ crores, per month? Per month, yes. Sure. Secondly, in the distribution, in the origination, the share of connectors still continues to go up. The origination mix is becoming much more concentrated towards connectors. Does it worry you or is it a strategic decision that connectors is the best segment to originate loans? No, the connector, the group itself is a very diversified group, and it's the distribution of loans is also very diversified. You know, most of the connectors are only providing us one or two loans in a month. You know, the connectors are also from different categories. You know, these are not large, you know, large entities which are giving us any concentrated business. We are pretty comfortable with this channel. If you look at, you know, the asset quality also, the connector group's asset quality is good or better than the overall average. We are pretty comfortable with this channel. What do you count as active connectors for the quarter? Active connectors for the quarter is about INR2,200. INR 2,382. INR 2,3383 Okay. There is significant decrease in the quarter-on-quarter in active connectors in this quarter. Yeah. I think last quarter was only 2,100 active. Yes. Right. Right. About 200+. Lastly on the operating cost. When should we expect operating leverage or through asset ratio to start improving? FY 2024, you are saying that we will be in investment mode. Should we expect operating leverage to play out from FY 2025 or that will also, will we need to extend that? I think from FY 20 25 some, you know, operating leverage should play out. I mean, the objective is to bring the cost to income, at least marginally lower in FY 2025. Nidhesh, having said that, you know, if you compare us with, you know, the larger, you know, A-players in the affordable housing industry or even the prime industry, we are actually quite competitive when it comes to operating cost. Whether you look at it in OpEx to AUM per loan, or per, you know, lack of disbursement, whichever way you slice it. From that perspective, the focus right now is growth and of course maintaining the right optimal levels, not over-stressing about the operating cost and compromising growth. It's really a choice that we are making to focus on growth, maintain right asset quality, and then also, you know, and not not go overboard on operating cost. we've been maintaining this 3%, approximately, which is actually quite good. Sure. Just last question on the LAP segment, which is originally really strong growth, and the share of LAP has now increased to almost 13%. We have guided that long term, we want to keep the share of LAP around 15%. If you can share what is the split size in LAP and is that 15% still holds true for us? Yeah. We are currently disclosing at about 15% rate. I guess, you know, maybe in a couple of quarters, the AUM will also catch up to that to that level. At the moment we, you know, our standard that we'll stay with 15%. We'll keep the portfolio quality for maybe a few more quarters before we start taking a decision to take it further up. The ticket sales are generally in the same, you know, same range as our regular housing loans. No major difference. Sure. Sure. That's it from my side. Thank you. Thank you. Next question comes from the line of Karthik Chellappa from Indus Capital Advisors. David, please go ahead. Hi. Thank you for the opportunity. Hi, Manoj and Nutan. Congrats on the quarter. I have three questions. The first, if you were to look at your 70,000 odd borrowers, how many of them, either anecdotally or so, would you think have either experienced a drop in their income or possibly faced a job loss? Because of? Various other things. I mean, it could be economic, it could be macro, et cetera. I'm just trying to see whether what portion of your customers, based on the interactions that your field officer had with them, would have experienced a drop in income, whether it is inflationary or macro or fall in demand or any. Generally, I mean, I would say on a, you know, if you look at it on a state-by-state basis, I mean, we keep reviewing our collection cases which go into collection. Typically about 15%-20% of the cases, the reason comes as job loss. I'm talking about a collection, the ones which slip into collections. In most of the cases, the resolution is also that the customer has got another job. Now he will catch up on his installments. In job loss cases, we don't normally see a permanent delinquency. This is also my collection experience. The 15%-20%, before this pre-COVID, has gone up, in any significant manner or is this more in line with the trends? Our ratios have actually come down to pre-COVID levels. I mean, if you see our 1-day past due, it's at 4%. You know, since the numbers have come back to pre-COVID levels, we are not seeing any different, anything different from our pre-COVID times. 30 DPD has also come down to 2.7%. Generally the reasons are similar. I mean, job loss, temporary job loss, and, you know, the customer will get back another job or so he's getting another job. The reasons are more... I mean, the problem is more permanent in cases of medical problems, where, you know, there is a serious medical issue in the family, et cetera. Those are also, I mean, the ratios are generally the same. I mean, we're not seeing any particular reason going up as such. Got it. If we were to just look at our AUM mix by credit history, the new credit is now almost 20%. If I'm right, it's probably one of the lowest among our previous, let's say two-three years or so. Typically, what is the difference in the lead between credit and customers with a credit score? At what point of time do you think you'll be comfortable to increase this ratio? This ratio is actually coming down because it's, I mean, it's more of a market phenomenon, where more and more customers are getting some form of credit, and they end up getting a score. We are seeing true to our segment, which is, you know, people who are building their first home, between INR 20,000-INR 50,000 income levels, coming with some form of informal income, et cetera. In that segment, more and more customers are getting credit, you know, either a small personal loan or a consumer loan, et cetera. As a result of which they're getting a score. This number according to us is actually reducing secularly every quarter. Every quarter, you're seeing a 1%, 2% kind of a drop in this number. I mean, it's just a question of time and, you know, maybe in the next six to eight quarters it'll vanish completely. I mean, you may not find customers in our segment who don't have a credit bureau score. That, that is really the way we are looking at it. Oh, okay. Okay. Interesting. My last question is basically on channels. Now, in the past we've had this channel which we were trying to develop called strategic alliance, and I think we have an officer heading that. First this channel, it's totally a connector. Even branches can actually now have these strategic alliances other than across borders. What constraints are you actually facing in scaling up this channel, if any? It is a, I mean, it's a, it's a channel which, you know, has multiple problems that need to be solved. The partners are also working towards it. They're also working towards it. The challenge is not getting leads. I think I've mentioned this in the past also that we get a very large number of leads through these channels. The intervention that a connector provides, you know, the connector is actually filtering the leads to understand which customer is serious, which customer is eligible, et cetera. There is some validation being provided by the connector, which is absent in the other channels, in the strategic alliance channels. There the leads come through without much filtration. As a result of it, the conversion rates are low. We are, you know, we are working with the partners to see how to address this challenge. At some point, there will be a, you know, a good enough solution to it, and then the channel will start scaling up. Okay. What exactly is the difference between a connector and micro connector? Pardon. A connector and a? Connector. Sorry, Karthik. Connector and a...? A micro connector. You also have another bifurcation called micro connector. Micro connector. How is it different? Yeah, yeah. Just a slight classification difference. Micro connectors are located, you know, near the branches. I mean, they're like neighborhood shops. Whereas, these connectors are, you know, more of people who are in the real estate segment or in the financial services segment. They are in touch with our kind of customers. The neighborhood shops, the arrangement or relationship with neighborhood shops, we call it as micro connectors. Okay, got it. Very clear. Thank you very much for the insights. Wish you and the team all the very best going forward. Thank you. Thanks, Karthik. Thank you. Next question comes from the line of Abhijit Tibrewal from Motilal Oswal. Hi, Manoj and Nutan c ongrats on a good quarter. I joined around 20 minutes late, so please let me know in case some of the questions that I ask is a repetition. I kind of listen to the recording after the call. No worries. No worries. First things first. I mean, have you already addressed why we chose to increase the provisioning cover in this quarter? We've kept it at the similar levels, compared to what we've been doing last, five or six quarters. 1%. We wanted to keep it 1% of the overall book. We have kept it at that. We see, we'll observe how our delinquencies go over the next four quarters. We'll take a call on whether to, you know, bring that down or not. Got it. Secondly, Nutan, this other income that we are seeing now, it's a fair thing to analyze it, right? Yes. Yes. We can analyze it. Yes. That's good. The other question that I had was on the branches. Some of the mature branches that we have today, in terms of productivity, do you think that they are anywhere close to their peak capabilities in terms of the kind of AUM that they manage? Do you think we still have basically capabilities in even our mature branches to further scale up? We are looking at, say branches reaching at least INR 200 crore before we start thinking about them tapering off. I think at the moment we have only maybe one branch which is approaching that number. We have a lot of branches in the INR 100 crore-INR 200 crore category, or INR 100 crore-INR 150 crore category. They still have maybe at least a couple of years to go before they I mean, we can start thinking about them tapering off. I think every time a branch crosses a certain threshold, we are able to discover, you know, new ways of making them more productive. We are hoping that even under INR 200 crore barrier we'll be able to kind of push it further. Got it. You know, maybe one more question that I had was, again, I mean, I'm not trying to suggest that we should grow faster. As a matter of fact, I feel analysts or investors are happy if you kind of continue to grow at maybe a 30% kind of a CAGR over the next few years. Just trying to understand, when you look at the demand, which is there in the affordable housing segment, when you look at some of your peers in the unlisted affordable housing segment and the rate at which you are growing. Is it that we are consciously kind of trying to maintain these levels of disbursements so that our asset quality is under control, we cherry-pick our customers, we are able to pick and choose which customers we want to lend to? I mean, basically what I'm trying to read into is, given that there is so much demand, given that there is so much of disbursement that's happening even from some of the unlisted affordable players, are we making a conscious decision of keeping disbursements under check? Or how should we kind of read this? Yes, to some extent, I mean, we are focusing on it. It's a question of bandwidth. I mean, if we put all our attention on disbursements, maybe, as you mentioned, we can grow more. We are trying to just balance it because we also have to create an organization that will be able to handle a much larger book. You know, coming back to the question on branches, we have to start thinking what happens when a branch hits INR 150 crores or INR 200 crores. How do we make it more productive? We are also spending time on answering some of these questions and getting the branches ready for that. That's, that's, you know, that occupies some time. Plus we are also... I mean, if you see our rate of interest is also has been extremely vibrant. Even though we are, I mean, we have very little loan against property, our blended yields are very strong, if you see compared to our peers. That is also another area of focus. We are trying to get the right kind of customers, you know, in the segment who are willing to pay that kind of rate. You know, so that also is, you know, is one of the parameters that we look at. Given all this, given that we want to create a strong foundation, for a strong brand structure, get the right kind of customer who will pay us, you know, good yield. We feel comfortable with the 30% kind of, growth rate. Welcome. One last question for Nutan. Nutan, here if you assume basically two scenarios, that going forward there are no more repo rate hikes, and assuming another 25 basis points repo rate hike. Under these scenarios, what is where we are in terms of cost of borrowings? Where should we be if there are no repo rate hikes and if there is a 25 basis point repo rate hike? Where should our cost of borrowing stabilize? Against that, against these two scenarios, in case there is a 25 basis point hike, what is the, I would say, increase in yields that you would have to take to maintain or to meet that guidance of stable spreads from here? Right. Let's go one by one. The first scenario is where there is no more changes in the repo rate. We are seeing that our cost of borrowing will peak out at 8.20 in the next two quarters. That is the peak. Moving to the second scenario, if there is a 25 basis points rate hike in repo in June, we will see this 8.20 getting to 8.40. That takes us to the yield question. If we wanna stick to 5.25%, we frankly don't have to do much. We don't have to do anything. You know, it will be a call at that point of time, how we wanna look at new growth versus old customers, how we wanna look at this whole EMI portfolio, et cetera. At that stage we can decide if we want to pass on or want to absorb. Those decisions will have to come post the June rate hike, if it happens. Sure, Nutan. That's all from my side. Thank you and all the very best to you and the team. Thank you. Thank you. Thank you. Thank you. Next question comes from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead. Thanks for taking my question. Firstly, Nutan, you mentioned that your incremental cost of funds is around 8.7%-8.8%. Right. How do you sort of, you know, expect your, you know, average cost to sort of flatten out as it comes to? I understand that, you know, there is some support coming from NHB, but, you know, if your incremental rate is higher than your weighted average, then, you know, it should kind of, you know, start, you know, affecting your profits. Right. We've discussed this. There is a 50 to 70 basis points, you know, impact that comes because of the NHB presence. We've taken INR 600 crores of NHB drawdown in April, in the middle of April. That will really help us to hold our rates at around 7.9% to 8% in quarter one. Of course. See, because if I look at the rates today, it is below 7.9% because of a sudden increase in NHB in April. Of course, the lag is also being passed on. You know, I will touch closer to 7.98% for the full quarter. Then 8.1% to 8.2% is the peak that we are seeing in Q2. This essentially depends on what is the mix of NHB in the overall borrowing book. As long as I am at 20% levels broadly, I will continue to get that 60, 70 basis points, impact on the blended cost of borrowings. Got it. Basically 8.2%, you're just sort of building in the annual borrowing program that you are having. Yes. Yes. Yes. For the first half of this year, we've already drawn down in April. It's no longer a if or a when, it's already done. Got it. The second question is on collections. You know, Q2 is at around 1.1%. Yes. I think peak was, You know, the best was like 80 or 90 basis points in 2018 or so. Yes. Do you think that we are already there at the, you know, best level where we can be, is there a scope of improvement? You know, do you see that we are already at the best levels where we can be or can we do further? Probably how was April versus April last year? Yeah. We are more or less there in terms of the, you know, pre-COVID levels. Of course, our aim is to keep on improving and I think as we and as our experience also keeps growing, we will be able to improve it. Maybe not substantially, but at least marginally we will keep improving it. Because our experience on, you know, what works, what doesn't work will keep on increasing. We will implement that and we will try to bring some improvements. Yes, I mean, we're more or less there. We will keep trying to improve marginally from here on. How was April versus April last year? April versus April last year was, I mean, let's compare. April was substantially, I mean, like March versus last March has been substantially better. The April is on the, on that base. Generally we don't have that kind of a skew in March. Our first quarter is generally, you know, similar to our last quarter of the previous year. I would say, I mean, there's nothing significant to report as far as April is concerned for this month. I mean, are you talking about collections or are you talking about disbursements? I'm talking about collections. Collections. Sure. The collection efficiency, you know, which I think some of your peers sit out, we probably see that April versus April would not be very different. No, it won't be very different. It'll be very similar. I mean, in fact, April versus March is still very, very similar. I mean, I would say it's just a marginal difference. Sure. Got it. Thank you very much. Thank you. Next question comes from the line of Jatin Sangwan from Burman Capital. Please go ahead. Hi. Thanks for taking my question. I wanted to understand, under the breakup of this other non-interest income, there is section called others. It was more or less zero for the last eight quarters. Now it has increased to INR 4.5 crores. What is this income related to? We started some work on using our website for marketing, et cetera. We are making revenue against that. We expect that this will be consistent on a quarterly basis going forward. Okay, great. Second question is around the AUM growth. You're guiding for 30% AUM growth for FY 2024. Is that a conservative guidance? On one hand you are guiding for 5%-10% QoQ growth for disbursement and repayment rate will come down as there will be no impact of CLSS subsidy. Just doing the back-end calculation, you would be growing at 35%-36% growth. Are you being conservative by giving, like, 30% growth guidance for FY 2024? If I say I'm conservative, that means I'm giving away the game, no? Can't I can only say we are aiming for 30%. Okay. Sure. Thank you. Thank you. Next question comes from the line of Amit Ganatra from Invesco AMC. Please go ahead. Just one question I missed. Was this co-lending business, can you explain now, you know, if this business grows then what kind of implication it has on. First of all, where does this come get booked just like, you know, any other, I mean, lending that you do, the entire thing gets reported in interest income, then interest expense in your proportion or how does it get recognized? Yeah. As far as reporting goes, Amit, it gets reported in the respective lines. There is no upfronting in co-lending. No, you know, spiking of income or expense. It's just only tenor-based, for our portion as well as for the portion of the bank. The only portion that we get upfront is the processing fee that we collect from the customer and when we sell down 80%, that part of the processing fee comes to us in the quarter where we actually transfer the loans. Which is not very large number. Coming to the portion of how we are looking at it, from an overall level, see once we do the transfer to the bank, we are able to leverage our book much better. That's one from a financial perspective. Second, we're able to actually address a address a market because we actually can look at a sizable portion of, you know, slightly higher ticket capers, INR 20 lakhs, INR 25 lakhs, INR 30 lakhs, where the borrower expects a lower rate of interest. That then opens up and it also improves productivity for our front-end teams. Those are the broad two or three aspects on how we are looking at it. Maybe I can just request Manoj to share how we looking at expanding this. Yeah. Mainly co-lending will have the impact of helping us expand the addressable market. I mean, that's a key benefit from co-lending. We end up spending time on distribution, getting distribution. In some places what happens is, you know, the same in the same area there are, you know, adjacent ticket sizes. In the same project, same area, there are adjacent ticket sizes that come to us. We generally operate in the INR 5 lakh- INR 25 lakh. When a ticket size comes in the INR 25 lakh-INR 40 lakh range, generally the customers are a little more rate conscious. They are a little more formal in their overall outlook and as a result of which they are more rate conscious. That is a segment that we have to give up. I mean, we will, we may end up even meeting the customer but then the customer does not take the loan from us. That is a customer segment that we can address through co-lending. It helps us overall improve our productivity of our teams, improves our brand presence in the market, improves our clout in the market. That is really how we are looking at co-lending. Of course it is a ROE accretive product because the capital allocation from our side is also very low for this product. Overall it is a win-win. For the bank it is very good because, you know, they get extra distribution, you know, so it's good for them as well. From a customer's perspective, he's taking loan from your company only, right? Or is he aware that there is a bank? Yeah. Customer is taking, I mean, we are the front face for the customer. Customer knows that he's going to interact with us through the life of the loan. He is made aware that, you know, there is it's a co-lending product, so there are two parties involved. you know, that is something that we make the customer aware. For that anyway the customer is getting a benefit of a lower rate. Okay. Okay. Effectively, I mean, if proportion of co-lending goes up then, from a optical perspective it has a deflationary impact on your yield as well as cost, right? Inflation, sorry, what did you say? Inflationary impact on the? Deflationary. If the co-lending goes up as a. Yeah. The yields tend to go down. They put a cost on- Yeah, we are reporting the yields or the origination yields, we are reporting ex co-lending. Yeah. See, if you see the page 27 of the presentation, the 13.5% is excluding co-lending. Okay. From a calculated perspective, when we calculate it will. Yes. It will come down. Right? Yes. Leverage goes up. Leverage goes up. Yeah. Yeah. leverage, why should it go up? I mean, you have the same risk weight, right? why should leverage go up? It will go up when you look at it from an AUM perspective. When they calculate also it should work out now because, the principal on our book is only 20%.. The interest that we're getting will be measured on the 20%, not on the full. The yield also should work out. It's a lower yield loan. That's why. Lower rate to the customer. Lower rate to the customer. The blended will go down. Those are our competitors. It will down, but leverage should not necessarily go up, right? It basically it helps you to improve your leverage further, is what we can understand. Yes. Yes, yes. There was a possibility that this customer would never have been your customer in a. Absolutely. if co-lending was not a product available to you. Absolutely. It helps you to report a higher growth. It actually helps you to improve your TAM to some extent. Yes. To a large extent, I mean, since the risk and everything is shared, so that is then, yeah, it's actually a win-win at this stage if it works. The customer also is marginally better because it's a formal customer. Correct. Exactly. No, understood. Thanks. Thanks a lot. Thank you. Next question comes from the line of Arvind Ramachandran from Sundaram Alternates. Please go ahead. Hi. good set of numbers. I just have one question. Like, on fee income side, I can see like, you know, you know, there was a, you know, like INR 3.6 crores in fourth quarter, and INR 3 crores in third quarter, but it was almost virtually nothing in the previous years. Like, what are the driving factors behind this? Can you understand? Another question is just a clarification. You are mentioning 50 basis point rate hike in 1st April 2023. The overall impact on yields will be 30-40 basis points, and then it could be stabilized around that point? I'll go one by one. On your first question on fee income, this largely represents the processing fee that we get on closures. Every time there is a repayment, or a partial repayment or a BT out or when we do assignment or co-lending or when we receive any CLSS subsidy, we get a small fees from NHB. Every time, like we got INR 137 crores of subsidy, that's why you see this number going up. That is the first part. The second part of 50 basis points, yes, once we, you know, take this rate hike in first April, it will stabilize around that 30-40 basis points plus levels. Okay. Thank you. Thank you. Next question comes on the line of Shreepal Doshi from Equirus. Please go ahead. Hello, sir. Good evening, and thank you for giving me the opportunity. Congrats on yet another strong quarter. My question was pertaining to the branches that we have. What% of our branches would be more than 100 crore? What% of our branches would be less than 50 crore in the AUM? Secondly, in line with the same question, what would be the KRA, like if you could highlight some KRAs of a branch or of an employee who would be operating at a mature? About 22 branches out of 111 are more than 100 crores. Are you able to hear me? Hello? Yes, sir. I think we got disconnected. I think we got disconnected. Mr. Shreepal, please go ahead. Can you hear us? Since there is no reply from the line of Mr. Shreepal, we'll go with the next. Next comes is Mona Khetan from Dolat Capital. Please go ahead. Yeah. Hi. Am I audible? Yes. Yes, you are. Yeah. Firstly on the non-interest income, you know, this component has declined sharply in FY 2023. What is the outlook here? I understand it's partly driven by lower DA, direct assignments. Could this as a% of assets remain same going forward or how do you see this? We've been doing about INR 100 crores of DA approximately. We will continue to maintain that. As a percent, net gain on DA as a percentage, will remain ballpark around 1%. Okay. What was the primary reason for non-interest income coming down so sharply this year? Are you specifically referring to net gain on DA or any specific line? When I see non-interest income, it's actually gone up from 1.1% to 1.3%. Just what I see is that non-interest income for this year stands at about INR 100 crore versus INR 118 crore last year. Okay, fine. I'll take it offline. The other question was on the write-offs. How much of write-offs have you made this year? If you could also share the cumulative write-off the company has made so far. Last year we had a write-up of approximately INR 20 crores -INR 22 crores. I think INR 22 crores to be exact. This year has been less than 50% of that. Approximately INR 10 crores. Also it's important to remember that, you know, the write-off are majorly short recoveries when we close loans. For most part of this write-off, we already have a provision. When we actually close the loans, it appears in the write-off line and not in the net of provision line. There is no financial impact per se because we replace those provisions with new provisions. Your second question was the cumulative write-off. It will be approximately INR 40-45 crores. if it is different, I will have to get back to you. Sure. Thank you. FY 2023 was INR 10 crores? Yes. Write-off. Okay. Okay. Got it. Thank you. Thank you. Next question comes from the line of Manuj Oberoi from YES Securities. Please go ahead. Yeah, hi. you know, congrats on great numbers. This question is on the provision coverage on the stage three asset. That's been consistently taken up. Any specific reason behind this or is this your conservatism or is it also driven by recovery teams as well? See, we have thought that we want to keep the overall provision at 1% of the principal outstanding. If you have to do that, you have to park it against some exposures. In a situation where the 30 DPD is continuously improving, it becomes difficult to park it in Stage 2 or in Stage 1. You know, probability of default models, etcetera, showing a write back. We said, okay, if you want to still continue with given the conservatism approach we want to follow, the only place where we can practically park is an overlay in Stage 3. That's how it ends up appearing there. As you have seen on the credit indicators, even the stage three, the pre-NPA is, you know, back to March 2020, March 2019 levels. No indicative risk, but it's just parking position from how we are looking at it. Looking a bit at management overlay, if in case, if the stage two increases in the future, would you dip into stage three provision and, you know, shift from provision to stage two? Because I mean, if it's already allocated to stage three, then how will you then keep this provision in the future? See, movement between stages is allowed because it's an overlay. It's not a big issue. I think in a situation where stage two increases, in my mind, that's a bigger issue to be resolved. Frankly, we'd have to go back and see where the concern is and why that would happen. What we are seeing even today, based on daily collection, our cash flows are actually improving. No reason that we think that in the near term we should get to a stage where 30 DPD is concerned from where we are today. Mm-hmm. Got it. It should be pretty much floating in that way. Okay. Just on this Karnataka and, you know, Maharashtra, I mean, they're out of our core focused markets, but they kind of continue to grow at least lower than the overall book. When do we see, you know, a stronger turnaround, you know, in those markets than they started growing in line with you folks? Maharashtra should start turning around this year. As far as Karnataka is concerned, a large part of the business comes basically from Bangalore itself. I think it will continue at similar levels. In Maharashtra, you should start seeing probably increase in AUM. Okay. Thank you so much, Manoj. Thank you. Thank you. Next question comes from the line of Arvind Ramachandran from Sundaram Alternates. Please go ahead. Hi. Sorry just the, like the same questions, on fee income itself. Can we expect the, you know, fee income run rate to be around this level or to do you think it could increase as a percentage of assets or like something like that? I want to remind that, you know, this fee income is not the processing fee income that we recover from customers that we finish onboarding. That goes and gets booked in the interest line itself under the Ind AS norms. This fee income pertains to, you know, early closures or early any additional fee that we recover from CLSS subsidy. CLSS subsidy is no longer there. You know that portion will not come. What I can, you know, confirm is that probably 50% of this should continue because we will not have any more CLSS subsidy going forward. Because of interest rate hike, do you expect the BT rate to, you know, go up, maybe? We are not seeing that happening so far. You see the BT rate, it's more of a, there is a year-end spike, otherwise it just follows a normal trend. Even through the last year, while there were multiple interest rate hikes, we have not seen during the year we have not seen any spikes. The spikes happened only in March, or in the last quarter. We expect the same trend to continue. Last year was a year of aggressive rate hikes. This year, really the, that kind of aggressive rate hike should not happen, I think. It's mostly people are expecting maybe one round, or maybe not even that. Lastly, just one question. I think at the start of the call you were discussing about higher disbursement rates or growth in certain markets, like, some kind of breakdown. Can you repeat that? No. I was just disbursement rate, no, we've been discussing about ticket size. Ticket size is higher in southern markets. Disbursement, if you see the share of disbursement more or less, if you see FY 2023, it's reflects the same disbursement, share of disbursement as FY 2022. We've not seen any major changes geographically, in terms of share of disbursement. Okay. Okay. We have a, by AUM, we have the, you know, like, clearly, in your fact book, but it was not very clear on disbursement size. That's why I want to understand. Yeah. Yeah. We have, you know, so yeah. That, share of disbursement is more or less similar, to what we had last year. Okay. Okay. Yeah. Thank you. Thank you so much. Thank you. Next question comes from the line of Shreepal Doshi from Equirus. Please go ahead. Hello, sir. Thank you. Thank you for taking up my question. My question was pertaining to what% of our branches are mature, that is more than INR 100 crore AUM size and what% of our branches will be below INR 50 crore AUM size? Secondly, in the same line, if you could highlight some KRA differences for a branch which will be mature versus some, versus a branch which is relatively new. We have about 25 branches which are 100+. 100, you know, I mean, there's still a lot of headroom to grow because we are looking at each of these branches reaching at least INR 200 crores. If you look at the branches which are below 50, it would be about 50 branches. 60 branches, actually. 60 branches would be around less than or equal to INR 50 crores of AUM. In terms of KRAs, the larger branches would have slightly more, you can say, focus or bias towards collections because the volume of collections would be higher in the larger branches. In smaller branches, the bias towards collection would be lower. I mean, it's just a function of volume of collections. It's proportional to the portfolio. Sir, in terms of, say, employee targets. like for an RM of a relatively larger branch would probably have a target, monthly target or if you could highlight that? Yeah. Relationship managers have broadly two sets of targets. One target is to achieve a dispersal number for the month. It will be around INR 50 lakhs-INR 70 lakhs of dispersal per month. They also have their collection allocation. Typically a relationship manager would get about between 10-20 loans to be collected. You know, we are talking about 75,000+ loans and with a 13% rate it's about 10,000 loans to be collected every month. Typically an RM would get about 10-20 loans to collect. Broadly, I mean, at a very high level, this is the KRA. There is the dispersal target and there is a collection target. We also do on a quarterly basis, we set some new priorities for them, which is, you know, either it could be a yield target or it could be a channel diversification target. It could be, you know, number of active channels. It could be a product diversification target, things like that. So that depends upon quarter to quarter, we change the priorities. What remains static is basically the dispersal target and the collection target. Got it, sir. Yes. The second quick question was with respect to the LTVs. If I look at it, more than 80% LTV is close to 54% of our overall origination currently. Okay. Now that has been coming down. Is there a strategy to further bring it down? This is actually AUM. That, I mean, this is gives you a share of AUM at the time of origination. If you look at actually our current share of LTV, current share of cases which are greater than 80% LTV, it would be far lower than this. Don't have the figure right now in front of me, but my guess is it would be around maybe 10%, 10%-15%. Got it. Got it, sir. The last question was with respect to the rate. You highlighted early in the call that there has been an increase of 5% to 10% in terms of EMI for a customer. Is that including the 50 basis points last rate hike that we have done? Yes. Yeah. After the recent rate hike also. Got it, sir. Is there any other rate hike on the cards? Not at the moment. I mean, we'll have to see how the policy rates move, and then we can decide if at all we need to increase it. Got it, sir. We've, this quarter we've also, like, come up with dividend payout. What's the strategy there in terms of payout ratio that we would want to sort of maintain? We have done some analysis, and we said for a company of our size and, you know, which is declaring dividend for the first time, this kind of a ratio is a good ratio to have. We'll maintain this for some time. You know, based on our analysis and dividend policy, we have adopted a 10% dividend payout. We are likely to probably keep it at these kind of levels. Got it, sir. Thank you so much and good luck for the next quarter. Thank you. Thank you. Thank you. A reminder to all the participants that you may press star and 1 to ask a question. Next question comes from the line of Arvind Ramachandran from Sundaram Alternates. Please go ahead. Hi. I just have just one last question. You were mentioning about MCLR-based loans as are loans from banks. Like, is that what, like, dominates our, you know, funding from banks, like, excess, or does it also consist of, you know, repo rate or other external benchmark? Bulk of it is actually MCLR-linked. Almost, 75% of our bank loans are MCLR-linked, and the rest is based on some external benchmark, including repo and T-bill. Okay. Thank you. Thank you. Thank you. A reminder to all the participants that you may press star and one to ask a question. Ladies and gentlemen, as there are no further questions, we have reached the end of question and answer session. I would now like to hand the conference over to Mr. Manoj Viswanathan for closing comments. Thank you. Thank you, everyone, for joining us on the call. I hope we have been able to answer all your queries. In case you require any further details, you may get in touch with Manish Kayal, who heads the investor relations function. Thank you so much. Thank you. On behalf of Home First Finance Company India Limited, let me close this conference. Thank you for joining us. You may now disconnect your lines.