Good day, and welcome to the Q3 FY24 Earnings Conference Call of Home First Finance Company India Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Kayal from Home First Finance. Thank you, and over to you, Mr. Manish. Thank you, Rico. Good afternoon, everyone. I hope that all of you and your families are safe and healthy. I extend a very warm welcome to all participants on our Q3 FY24 conference call. I hope everybody had an opportunity to go through our investor deck press release uploaded on stock exchanges yesterday. We have also uploaded the Excel fact sheet on our website. Please go through it. On today's call, Home First is represented by our MD and CEO, Mr. Manoj Viswanathan, and CFO, Mr. Nutan Gaba Patwari. As usual, we'll start this call with an opening remark by Manoj and Nutan, and then we will have a Q&A session. With this introduction, I will now hand over the call to Manoj. Over to you, Manoj. Thank you, Manish. Good afternoon, everyone. I'm pleased to share with you the highlights of our quarter 3 FY 2024 performance. Growth momentum for Home First continues in quarter 3 with stable asset quality. Performance has been strong across all operating and financial parameters. During a high inflationary environment, we have delivered an ROE of 15.8%. We continue to build distribution by simultaneously entering new markets and deepening our presence in our existing markets. The states of Uttar Pradesh and Madhya Pradesh are emerging as large affordable housing markets, and we have taken steps to strengthen our existing presence and deepen distribution in these growing states. Overall, we have added three branches in quarter 3, and now we have 123 physical branches. Including potential and digital branches, we now do business across 305 touchpoints across tier 1 to tier 5 markets in 13 states and one union territory of India. Disbursement in quarter three at INR 1,007 crore grew by 29.1% on a year-over-year basis, leading to an AUM growth of 33.5% on a year-over-year basis to INR 9,014 crore. Spreads remain healthy at 5.3%. The PAT at INR 79 crore and ROE is maintained at 3.7%. Our asset quality continues to be strong, with a focus on early delinquencies. 1+ DPD is at 4.5%, which is +10 basis points on a year-over-year basis and flat on a quarter-over-quarter basis. 30 DPD is at 3%, which is flat on a year-on-year basis, and there is an increase of 10 basis points on a quarter-on-quarter basis. Gross stage three, that is GNPA, is at 1.7%, which is a decline of 10 basis points on a year-on-year basis and flat on QOQ basis. Prior to the RBI classification circular of November 2021, it stands at 1.1%, which is flat on year-on-year and QOQ basis. Our credit cost at 30 basis points, declined by 10 basis points on a year-on-year and QOQ basis. Technology continues to be at the core of our strategy. Account aggregator adoption has now become mainstream, with close to 40% adoption rate. We have set in motion several account aggregator-led initiatives that will further strengthen our speed and accuracy in underwriting. With this, I would now like to hand over the call to Nutan to take you through the financials. Nutan, over to you. Thank you. Good afternoon, all. Coming to financial performance, starting with spread. Our spread is at 5.3% and is within our guidance range of 5%-5.25%. Our quarter three NIM at 5.7%, is due to projected increase in cost of borrowing and higher cash balances during the quarter. As discussed earlier, the increase in cost of borrowing is from NCD reset that has continued to happen on the historical borrowing book. Cost of borrowing is expected to go by another 10 basis points, and I would like to reiterate our spread guidance of 5%-5.25% for the medium term. Net interest and income has gone up by 20% on a YOY basis. Moving to operating cost. Operating cost to asset at 2.9% is stable. We expect this ratio to remain in the range of 3%-3.2% going ahead as we focus on expansion and getting deeper into newer markets. Cost to income at 35.9 is an increase of 60 basis points on a YOY basis. Moving to balance sheet, it remains strong and ready to take on the growth ambitions of the company. Starting with borrowing, the company continues to have a diversified and cost-effective long-term financing sources. This remains diversified across banks as well as NHB. Our borrowing mix is 56% from banks. NHB refinance share is stable at 22%. We have drawn INR 200 crore in quarter three, and we have another INR 250 crore to be drawn in quarter four. 14% is from direct assignment and 3% from co-lending. 3% is from IFC NCD. We continue to have 0 borrowing through commercial papers. Our cost of borrowing is competitive at 8.2%, an increase of 10 basis points on an exclusive basis. We expect further increase of around 10 basis points in quarter four. Coming to capital, our total capital adequacy is at 40.9%, and Tier 1 is at 40.5%. The impact of our capital adequacy is 2% on account of organic growth and 3% on account of higher liquid fund balances at the end of the quarter. Our debt to equity is now 3.4x. Our December 2023 net worth stands at INR 2,032 crore. Book value per share ₹3. Moving to provisions, we continue to have remained conservative and continue to carry provision over and above the ECL requirements. Our total provision coverage ratio stands at 52%, prior to NPA reclassification of IRAC circular, provision coverage ratio stands at 79%. On strategic transactions, we did direct assignment of INR 135 crore during the quarter of the liquidity strategy. We continue to have a robust demand for our portfolio of assets. We also executed a co-lending transaction of INR 61 crore in Q3. Co-lending business is growing and is expected to contribute to around 10% of disbursements in the near future. With this, I open the floor for question and answers. Thank you. 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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rajiv Mehta from YES Securities. Please go ahead. Yeah. Hi, everyone. Thank you for taking my question. So, Manoj, how should we read the persistence of BT pressure, which is reflecting in both BT out remaining higher than trend and the pressure on the back book yield because of repricing of BT requests? And also when I look at your incremental lending rate, the origination yield, it has been pretty stable over the past few quarters, and we haven't been able to fully pass on the increase in the incremental cost of borrowings. So can you comment on both these things in the context of the competitive intensity? On BT outs, the BT out has moderated slightly because, compared to last quarter. So that is the result of some of the actions that we have taken to retain customers, et cetera. And so it's kind of moderating and trending, trending back towards, you know, our earlier levels. Repricing of back book, we have not done a lot. I mean, that is not really the reason for the compression and the spreads. The spreads have compressed because the cost of borrowing has gone up. So back book repricing is only very, very minimal. I mean, there are few customers who come to us with some requests are only getting repriced. There is no, you know, systematic repricing of the back book at this point. And, as far as origination is concerned, we are, you know, we have always been maintaining that we are operating at a certain yield point, and we continue to operate there. And, the yield is, I mean, the spreads are moving up and down, depending upon the cost of borrowing. So we don't want to operate at very high yields because then we tend to tend to tread into a different customer segment altogether. So we have kept that balance. And we have always maintained that the spreads are likely to hover around or, you know, settle down around 5.25%. 5%-5.25% is what we have always maintained. So that is just coming to play right now. I'd just like to add to your question, Rajiv. The 13.6%-13.5% yield that you see is an outcome of three aspects. One, the new business that we have done at 13.7%. The NHP-led repricing, like I was mentioning earlier, we've taken INR 200 crore off NHP this quarter, which entails repricing of that pool of customers down to 10.7% back. And thirdly, this line that you see of yields is growth of co-lending. But what you are seeing on the origination yield line is net of co-lending, so that difference contributes there as well. So, overall, we have not passed on any systematic repricing downwards to customers apart from NHB repricing. No, so Nutan, just to clarify, the origination yield which you put out in the presentation, that is excluding the co-lending yield, right? Yes. That's what you're saying. Yes. That is, that is a blended number for both home loan as well as LAP? Yes. But the yield line does not exclude co-lending. Okay. Okay. And the second question is on the employee base. So, I mean, this quarter we have seen some decline in employee base. So any comments on, you know, whether the challenges persist in terms of employee attrition, you are backfilling the employees who have, you know, attrited, and whether this can impact our growth execution? No, it is just a cycle, you know, it's a cycle of, you know, when people are hired, when they join, et cetera. So generally, our hiring cycle, you know, is from campuses. Largely we hire from campuses. So the hiring actually happens in the October to December period, a lot of the hiring. So, and then they join between January to June. So, you know, I think, this month itself, probably more than 100 people would have joined us. So, it's just that, the way the cycle is. So I, and, portfolio... I mean, sorry, the employee attrition is at similar levels. It's about 30-35%, in that range. Still not, you know, gone to the highs that we saw last year, still fairly moderate and what we have, what we have had historically. So the employee numbers should come back again this quarter. Mm-hmm. Just the last thing on the bounce rate in January, you know, remaining slightly higher than usual. So technically, in Q4 the bounce rate subsides, but in January it has been slightly higher. Just understanding whether the increase in bounce rate has any repercussion for our RMs productivity. ... The increases are fairly marginal, so, does not really impact the productivity much. So, like, if you see as on date, you know, hardly 4% out of that is left. So, you know, today we are sitting on 19th and, you know, each RM would have probably 3-4 loans left to collect, you know, with 10-12 days left. So it doesn't really, it doesn't really... I mean, these marginal changes don't really impact the productivity. Got it. Thank you so much. Best of luck. Thank you. Thank you. Our next question is from the line of Renish from ICICI. Please go ahead. Yeah, hi, Manoj. Congrats on a good set of numbers. Again, two questions on spread and bounce rate. So, on spread, if you look at the incremental spread at 5.3, which is, you know, broadly at par with our Q3 blended spread, and also it is very close to our guided range as well. But now if you look at the pricing trends, right, I mean, we have not hiked our rates since April 2023, and if you look at the competition, I'm assuming it will be difficult to hike rates further. So in that scenario, let's say, where do you see a spread settling? If one is to assume, you know, the rate cycle reversing over next 2-3 quarters, and, given, you know, we have a fairly high share of floating net book, directionally, how should spread behave? I mean, considering the rate cycle as well as the competition and, a limited room for, further rate hike? We intend to continue or maintain the origination yields, you know, that we have. You know unless there is a reduction in rate. If there's a reduction in rates, then we obviously intend to pass that on to the customer, as we mentioned earlier. So if we do that, then both the spread will remain where it is and, you know, yield will go down. So overall, we are looking to maintain this 5-5.25 kind of spreads. So if there is any advantage that we are getting out of reduction in cost of borrowing, then we intend to pass at least most of it to the customer so that we remain competitive and we are still earning a healthy 5-5.25 kind of a spread. Got it. Got it. So if I to assume that over the next 2 to 3 quarters, we will maintain the spread guidance of 5-5.25? That's right. Got it. And, sorry, again, circling back to the check bounce rate. You know, so, of course, our 1+ DPD, 30+ DPD, has been fairly stable, like, sequentially. But, you know, let's say generally, your Q4 is the strongest quarter in terms of asset for digital growth. But in January 2024, you know, the cheque bounce rate, going up, though it's marginal. But is there... I mean, how should one read this data? Is there a change in customer behavior because of the, let's say, last, couple of, quarter, let's say 3-4 quarters rate hike, so that their EMI might have gone up, et cetera. So how one should look at this data? You know, increase in the bounce rate in January month. I would say, you know, these, you know, minor fluctuations keep on happening. I mean, if you see the overall bounce rate curve, you know, it's kind of an up and down, up and down curve. You know, sometimes it's 5.15, 6, sometimes it's, you know, gone down to up to 14 and comes back up. So, you know, within that, 150 basis points, there is always some movement. So, you know, as long as it's range bound, frankly, it does not impact our operations that much. I mean, sometimes it is just the date on which it is presented. If it is a Sunday, the bounce rate is a little higher, things like that. So, can't read much into it, as we have mentioned before. So as long as it is in this 13-15, 15.5 kind of a range, can't really read much into it because, the collection results are fairly similar, whether it is, 13% or 15%. You know, by 20th of the month, we have, we would have collected about 11% out of that 15. So, you know, you'd be left with hardly 4%, as on date, which is a very, you know, what do you call it? reasonable number for, for the organization or for even an individual RM to, kind of focus on in the remaining 10 days of the month. So, yeah, you can't really read much into it. Got it. Got it. So just, you know, follow up on that. So, I mean, let's say on ground, we, we don't foresee any early warning signal in any of the geographies as of now, right? Not at all. Not at all. As far as the elections is concerned, you know- Yeah. We're not really seeing any headwinds or anything which is worse than what we have seen in the past. Got it. Got it. This is very helpful. Thank you, and best of luck. Thank you. Our next question is from the line of Mayank Agarwal from InCred Research. Please go ahead. Hi, sir. Thanks for the opportunity, and congrats for the good set of numbers. Sorry to interrupt, sir. May I request you to use your handset, please? Your audio is not clear. Hello, is it better now? Yes, sir. Please go ahead. Yeah. Thanks for the opportunity and congratulations for the good set of numbers. So my first question is on bounce rate. So is there any specific geography like Tamil Nadu or any, I think, any place which has witnessed an increased bounce rate and because of any particular region, or it was broad-based? No, it is broad-based. Generally, the fluctuations happen only branch to branch and not region to region. I mean, we have never seen any, you know, major increase in any particular region. Major increase or decrease in any particular region as a whole. But of course, there are fluctuations within the region, in specific branches, et cetera, which is all business as usual. ... Okay, okay, okay. My second question is on the use of account aggregation. So in terms of customer underwriting, understanding of the customer, its speed, have you witnessed any kind of benefits from the use of account aggregation, or how it works for you? Yeah. So to start with, you know, the major benefit is that the bank statements of the customers come to us directly. So, it helps us in two ways. One is that we get a more detailed understanding of the customer, plus, it's an authentic, you know, we are guaranteed that it is an authentic document. So we don't need any further verification of the bank statement, or any cross-check to ensure that it is an authentic document. So helps us to, you know, start the credit evaluation process quickly, by, you know, getting this, getting the bank statement electronically. I mean, that is like, that is the basic, you know, the most elementary advantages that we gain out of Account Aggregator. Of course, there will be other benefits like, like I mentioned in the, in the, in the call, that we have set in motion a couple of initiatives, which is based on Account Aggregator, which will allow us to, improve our underwriting further. Because analysis of the bank statements and, you know, models built on the base of bank statements, et cetera, help us to underwrite better, but those are, those are being set in motion. After looking at the initial success of almost 40% adoption, within a few months of launching, we are, we are encouraged to kind of, you know, create models based on the bank statements. So, we have put that in motion. Any change in the rejection rates or change in the, suppose, CIBIL Score category-wise rejection rates, like you can now give loan to certain lower CIBIL Score per customer as well, or any interesting thing to highlight in that? Based on credit score, it's more of an elimination. So if you look at, you know, credit scores which are less than 700, we have only about 10% of our business, coming from that segment, you know, where the credit score is less than 700. So within that, you know, it is more of a case-by-case decision that we take. If the customer has, good credentials and, you know, some justification for earlier defaults, et cetera. And beyond 700, you know, it's more of a selection criteria. If it's 700, yes, he can be looked at for a loan, but then the credit score itself, will not be the sole criteria. I mean, we will have to look at multiple other criteria. So approval rates are, yes, definitely, if the credit score is more than 700, the approval rate will be, definitely higher. In less than 700, it is more of a selection, like I said. So, you know, the more, more likely that the customer will get declined rather than approved, if the score is less than 700. Okay, okay. And in terms of sanity of the industry, so any, any especially, sectoral trends you are witnessing that the customer are rejected by you are still getting the loan at a similar rate from the competitors? Anything, any trend you want to highlight? Because what we are seeing is that competition is getting aggressive day by day, and they have the ability to... because of easy capital access, they have ability to offer riskier customer at lower rates also. So anything you are witnessing on that front? Can't say it is, you know, anything new, but this kind of trend usually happens because we are a, we are a fairly large player now in affordable housing. So, yes, there may be declines on credit score, et cetera, which are picked up by smaller players. That has been a general industry trend. You know, when a new player comes in the market, they'll, they'll, they like to or they have to take a little higher risk. So, they tend to be more liberal or more lenient with, you know, poorer scores, et cetera. That's a normal market trend. We are not seeing anything which is new or, you know, something which is very significant. Okay, okay. Thanks. Thanks, that was really useful. Thanks. Then best of luck. Thank you. Thank you. Before we take the next question, a reminder to all participants that you may press star and one to ask a question. Our next question is from the line of Raghav Garg from Ambit Capital. Please go ahead. Yeah, hi. Thanks for the opportunity. One of my questions is that you give this breakup by ticket size, right? 1-1.5, and then all the way up to 2.5 and above. Is there any yield differential between you know, these cuts in terms of the ticket sizes that you disclosed? And if yes, can you please give us the data in terms of which ticket size would be commanding how much yield? Yeah, that's my first question. Generally, the yields tend to follow the ticket size trend. So the higher the ticket size, the yields tend to be a little lower. See, our interest rate offers in the market are, you know, based on an algorithm which takes into account multiple factors, including ticket size, bureau scores, customers' income, you know, whether it's salary, self-employed, et cetera. So multiple factors are taken into account before we offer the rate. But generally in the market, if you look at it, the higher ticket sizes command, you know, lower yield because the customers generally tends to be more affluent, you know, having more stable income, et cetera. So they have more choice in the market and they are, you know, it becomes more competitive. So broadly, that is the trend, but, you know, because we are operating in a fairly tight, tight band, you know, up to INR 25 lakh, we don't deviate that much on the... you know, and we have a fairly, you can say, strict policy as far as rates are concerned. We have to maintain a certain yield. So we don't fluctuate that much on the yields between ticket sizes. But yes, there would be a some trend of, you know, lower pricing as the ticket sizing increases. ... So the reason why I ask this question is that if you look at your trends for last several quarters, the AUM cut, which is or where the ticket size is more than INR 2 million, that's been growing at some 50%-60% for last many quarters. Now, is that something that's weighing on your yields, which have come off by about 12 basis points versus last quarter? It's a more gradual trend, but if you see the AUM cuts, you know, the segment that is more than INR 25 lakh is still in the 12% odd range. I mean, I think maybe six, say 6-8 quarters ago it might have been 10% and 9%. It has gone up about 2-3%. So that is a more secular trend, which is following the inflation and, you know, overall price increases, et cetera. We are not going after that segment specifically. Just to add, the co-lending products that we do is in the INR 20 lakh plus segment, where the spreads are protected, given the nature of the agreements with the bank and the regulatory interface. And you see that increase. Now, like I was mentioning earlier to a previous question, the yield 9 that you see is does not exclude the co-lending yield, but the origination yield that is given does. So that probably is the issue. And the second part, the 12 basis point decline that you're seeing, is also contributed by the NHB led refinancing. Sure. Understood. The second question is, would you have seen any impact of elections in Rajasthan and Madhya Pradesh on collections or there was nothing like that? No, in our portfolio, these are, you know, you can say, states which are doing extremely well on collections. Sure. That's all from my side. Thanks. Ripo, you can take the next question. Yes, sir. Mr. Nidesh Jain from Investec, please go ahead. Hi. Thanks for the opportunity. First question is on the growth. So as we prepare for the next 3 years, reaching INR 20,000 crore book, how do we prepare ourselves in terms of distribution, in terms of products, customer segment? Do we see that the current segments that we are operating can take us to that level of loan book over the next 3-4 years? And how we plan to scale our distribution to achieve that? Yeah, so if you see the quarterly disbursement in this segment, I mean, even if you take it, take the ticket size only up to INR 25 lakh, the quarterly disbursement is around INR 45,000-50,000 crore. We, you know, the... I mean, if you exclude the states where we are not present, you know, say about 20% of the volume will go away. So let us say ballpark around INR 40,000 crore is the potential or addressable market that we have in the states that we are present in. So the plan for the next three years is to ensure that we are able to get to, you know, all the pockets, all the pin codes of the existing states, so that we have a complete access to that entire INR 40,000 crore potential market, you know, which is there in this segment. So very, very granular distribution in all the states where we are present. So, as we have been saying in the past, there were two or three states which are central nor- central and northern states, where we had only skeletal presence, so Rajasthan, UP, MP. So these are states which we are focusing on now. They are emerging as large states. You know, the per capita incomes are increasing in these states. The industrialization is increasing, and, you know, they are getting more urbanized. So we are seeing those green shoots, so we are looking at building distribution in these states. So that will be one of our key focus areas to ensure that we have access to that INR 40,000 crore. So, currently, as you can see, we are, we have done INR 1,000 crore out of that INR 40,000 crore. So it's kind of a 2.5% share that we have in that, in that market, in that segment. And, so the idea is to take that, 1,000 to, you know, a INR 2,000 crore kind of a level over the next 3-4 years. Parallelly, we are also, you know, to expand the addressable market, we are also doing co-lending. So that will give us access to probably another INR 10,000-15,000 crore, which is in the, let us say, INR 25-35 lakh segment, which can be addressed through co-lending. So that is a parallel effort that is going on. On loan against property, we have been conservative in the past. We have maintained it at about 15% of disbursal and about 12%-13% of the AUM. So that is also something which we can explore in terms of, you know, taking it up a little bit more, because our credit performance so far has been good in that, in that. We still have a lot of headroom there, from a regulatory sense. So these are the ways, these are three ways in which we are looking at the next three years. So the aim is to get from INR 10,000 crore to INR 20,000 crore in the next three years. FY 2027, try to close it at about, you know, INR 20,000 crore. And at the same time, you know, deliver similar productivity, similar, you know, and keep improving on the other metrics, which is cost as well as, you know, profitability metrics. So to try and deliver a 17%+ kind of an ROE in that, in that time frame. Sure. And, what will the branch network, what is the branch network expansion strategy in terms of number of branches, number of employees?... what are the numbers that we should- The branch expansion strategy, you know, when we listed the company, we were at about 100 touchpoints, and we said we are going to take that to about 400 touchpoints in the next, you know, 3-4 years. So currently, we are at 300 touchpoints. So now our, you know, strategy is to take the 300 to 500 touchpoints in the next three years. And branches will keep expanding as a kind of a, you know, by-product of that at about 25 branches a year. So currently we are at 123, so probably in the next three years expand to over 200 branches. You know, and servicing about 500 touchpoints. This is our, you know, overall strategy in terms of distribution. Sure, sure. And in terms of the market share in some of the states like Gujarat, Maharashtra, in the segment where we operate, what would be the market share and in disbursement in these states? So Gujarat, for example, the market share is, you know, so on an overall average, our market share is about 2.5%, 2.5%, but in Gujarat it would be higher, it would be 3%-4%, market share. Maharashtra, we still have, have some way to go. We are still at about 1%, 1.5% market share. And, so that, that is a journey that we will be, undertaking in the next, three years. So wherever we are at 1%, 1.5%, the idea is to take it to about 3%, and where we are already at about 3%-4%, it, take it beyond 5%. So that's, the aim. Sure. And as the co-lending scales up, so first of all, what is the timeline co-lending? And as the co-lending scales up, how it will change the PNL construct? We are at about 6% of our disbursal. If you see last quarter, we disbursed INR 60 crore in co-lending out of INR 1,000 crore overall. So, we are maybe two, a couple of quarters away from hitting a 10% share of co-lending as a percentage of disbursal. So our aim is to do that first and then, you know, take that to 10% of the AUM, the co-lending 10% of the AUM. Co-lending should not, would not change the, you know, profitability structure very, very much because, you know, at the current rates at which we are lending, we are making a 5% plus spread on the co-lending portfolio. And our aim is to keep doing that. If the rates start trending down, then the spread should improve, so making it more ROE accretive. Okay. Lastly, what is the number of active connectors this quarter, and the number of sales manager or RMs as of December 2023? So we have, you know, scaled up the connectors to about 2,900 active connectors this quarter. And relationship managers are at about 800 relationship managers now. Sure. Thank you. That's it from my side. Thank you. Thank you. Next question is from the line of Arjun Bagga from Baroda BNP Paribas Mutual Fund. Please go ahead. Yeah. Hi, sir, good evening, and thanks for the opportunity. I had just one question regarding the yields. So I understand the last repricing that we took. I think that was in the month of April, and we did take some 50 basis points. At that time, I think Q4 was we were at some 13.4% yield. Then Q1, we improved to some 13.7%, but since then we have been coming down. So how should I understand, because I think my understanding would be that yield should actually increase for the remainder of the loans when, as and when they are repriced. But is it the BT out pressure that which is keeping the yield under pressure, or how exactly is it, sir? So what has been happening, every quarter we have been taking the NHB drawdown. And, when we take the NHB drawdown, there is a portion of that drawdown which we allocate to specific customers, which happens at 10.7% yield to customer and approximately 5.5% cost of borrowing to us. So when we reprice, the overall yield show the drop, and that's what you see in that number. So we've been taking about INR 200 crore every quarter. Okay. So this decline is entirely due to that. Yes. that spread maintenance. Okay. Yes. Okay. Sure, ma'am. Thanks. Thanks, this is it. Thank you. Next question is from the line of Mohit Surana from HDFC AMC. Please go ahead. Yeah. Hi, sir. If you can throw some light around, in terms of the BT out customer, how they eventually, you know, how their eventual asset quality has behaved versus if you have tracked this versus your own book. And secondly, what is the percentage of BT out customers that go to a bank lending institution versus a NBFC? Majority of the BT outs go to banks. I mean, if we now consider HDFC, HDFC used to be one of the large entities doing the BT out, but if you now consider that as banks, a large part of the BT outs go to banks only. There could be a small residual portion that goes to other housing finance companies. And as far as the quality is concerned, I did not get the question properly. So- I was asking, like, if you have monitored the quality of BT out book versus your own book, if there is any differential to highlight? ... like DA or DA as in DA team, what we are doing, where we are doing DAs? In, No, no, the book which has gone out, if you have tracked the asset quality of that book versus the customer. Keep track of the- Okay. Okay, okay. Understood. Understood. That, that's it from my side. Thank you. Our next question is from the line of Gaurav Sharma from HSBC. Please go ahead. Hello. Yeah, am I audible? Yes, sir. May we request you to use your handset, sir? We can't hear you, Mr. Gaurav Sharma. Yeah. Audible now? Yes, sir. Please go ahead. Yeah. So, sir, just a small question on that. Yesterday, one of the HFC mentioned that they have slowed down their disbursement through co-lending, as they received some criteria from NHB that minimum certain threshold of their loan has to be maintained at their own book. So just wanted to understand whether you have also received some instruction based on this, and if yes, can you please elaborate on that? No, we have not received any intimation, and we are maintaining the minimum percentage as per the RBI guidelines, which is 20%. The co-lending guidelines are fairly well articulated, and there is a transfer of loans circular also, which companies need to follow. We are following both of them. Okay. So no intimation from NHB as of now to you? No issues at all. No issues whatsoever. Okay. Thank you, sir. That was my only question. Thanks a lot. Thank you. Our next question is from the line of Bhaskar Basu from Jefferies. Please go ahead. Yeah, thanks, good morning, good afternoon, everyone. I just had one question. This is on your guidance for spreads. I mean, if I get it right, you are now guiding to 5-5.3. I think earlier you used to kind of guide to about 5.3. So is there a downward revision in the spread guidance? And what is this being driven by? Bhaskar, the guidance always was 5-5.25. I think, we chose the higher number, so Okay. So, I think, what's been happening is that, we've seen this cost of borrowing projection, for a long time. Right. And then, of course, we've been managing above 5.5 levels. So we've slightly gotten used to that number. But if you look at the business model, the business model works best, from a growth perspective as well, at a 5%-5.25%. I mean, from a perspective of the recent RBI tightening and general increase in funding cost, what is the incremental impact you're seeing? I mean, I see that marginal cost of borrowing is kind of similar. So, do you see some increase because of this? Because of the RBI tightening, because of the- The RBI framework on this aspect, either capital adequacy or the bank credit to NBFC, actually is favorable for housing finance companies that you would have read. So what we are actually seeing on the liquidity and the funding side, we are getting more preference over NBFCs. So in no case, for example, has our bank term loan pricing gone up. We're able to retain the exact same marginal cost of borrowing for, like, four quarters now, despite increase in MCLR, despite, you know, the RBI regulations. Coming to the capital adequacy risk, housing part is clearly excluded. There remains a confusion on the non-housing part, specifically LAP portfolio for us. We have also, you know, looked at the details. We've also engaged with some experts. The clarity is still not there on the secured asset side, specifically Loan Against Property. Our understanding is that there is likely to be some clarification, so we await that clarification. However, we've also done simulation at our end to see that if LAP gets considered at 125% risk weight, what will be the impact for us? So that is about 2% for us on the capital adequacy. So what we see is 40.9, will perhaps come down to 39%. So that is how it will look like. From a capital perspective, fairly well covered. Even leverage is at 4.3. It's a long way to go on the capital side as well. Okay. So just following up on the, on the spread on the cost of funding issue, with this 10 basis high, increase, which you're kind of guiding for the next quarter, would you say that the whole MCLR repricing is largely done, or we continue to see some more increase in the coming quarters...? So largely done, Bhaskar. However, you know, if you see, for example, HDFC Bank, I'm just taking as an example, in the last six months- Right. The MCLR for 1 year has gone up by 20 basis points. Right. SBI in the last six months has gone up by 10 basis points. So, we should assume a formula of, let's say a public sector bank, so let's say SBI is a good representative. So whatever MCLR increase is happening, so SBI, 60% of that, comes and resides on our book over a one-year period, right? So if SBI is taken up by 10 basis points, we will get another 5 basis points in the next 12 months. That's really the impact, hence we've kind of, you know, chosen to call it minimal. Eight thirty levels is what we will definitely likely see in the next quarter, but I think this, after that, we are largely done. Whenever kind of rate cycle turns, given that MCLR, your borrowing is largely MCLR-... and you intend to pass on some of the rate cuts to the borrower. Do you see some kind of a timing difference between the way you kind of pass on, or would you kind of time it similarly? Because your cost of fund will also fall with a lag, I guess. Similar is the best approach. However, you know, a few weeks here and there can always be there. Okay, okay. Thanks. That's all from my side. Thank you. Thank you. Our next question is from the line of Arvind R. from Sundaram Alternates. Please go ahead. Hi. Hi, team. Thank you so much for the opportunity. I'd just like to understand, like, if BT out rate is it increasing or anything? Are we comfortable with the, you know, current BT out rate? That is my first question. And my question on borrowing cost has been, like, answered now. But what about yields, you know, continuously declining? Like, is it just because of the higher ticket sizes will, you know, disburse anything, higher ticket continues to grow more faster than the overall loan book? BT, BT trend is moderated compared to last quarter. So still, maybe about one percentage point higher than, you know, what we used to see earlier, but, it's moderated, from the high of last quarter. The second question, I did not hear it clearly. The question is on why yields are dropping, right? Yields, okay. Yes, yes. So yields are not dropping. The yields are only getting adjusted for the NHP drawdown that we are taking every quarter. Oh, okay. I'm looking at... Okay, what is the cap on spreads, on NHP, NHP plans? Close to 5.5%. Close to 5.5%, okay. And, do you have anything like, you know, leverage, you know, total, like we are comfortable with? Like maximum leverage you are comfortable with. Is 3 on asset to equity. Yeah. We are very comfortable to at least go up to 5.5-6 levels. Sure. Sure. Thank you. Thank you so much. Thank you. Our next question is from the line of Omkar Kamtekar from Bonanza Portfolio. Please go ahead. Thank you very much. I hope I'm audible. So, one of the questions was with regards to the leverage. So you said, you are comfortable to go up to? 5.5-6 levels, asset to equity. May I request you to use your handset, please? Is this better? Yes, sir. Please go ahead. Yeah. So you said it, you are comfortable to go up to 5.5-6 times leverage. Yes. So, it could be assumed that, say, by FY 2026, if we hit a leverage of, say, 5.5 times, and the ROE remains same, so our ROE would be much higher, so we could be closer into the in the 20s to the 20s. Would that be a fair assumption, then? No. I think, what we are looking at is more in the range of 17% ROE. As we grow the book, and the debt portion of the balance sheet becomes larger, there will be compression in the NIMs. We are looking at an ROE close to 3.5, 3.6, let's say in about 24 months' time. Then, of course, leverage of, let's say, 5x. I mean, approximately 17, 18% is the math that we are working at. We are not looking at a 20% ROE. Okay, so if we take it at five times, then it makes sense. And also, will there be any equity raise be required by the firm? Or do you see a need for an equity raise to happen in the near future? In the future, yes. Maybe not in the next two years. Okay, okay. With respect to the run rate, so now we've hit the INR 1,000 crore disbursement per quarter. Will this become sustainable from the next quarter itself, or will it take some time to, you know, steady state itself at this level, and then run at INR 1,000 crore per quarter? Is the question. 1,000 crore per quarter is, so we have, you know, if you see last 12 quarters, we have continuously increased the disbursements quarter on quarter. Yeah. We are looking at a similar, similar trend going forward. Okay. So, if that is the case, I think, what is the base target that you are looking at for disbursements for FY 25 and 26, if that could be given? So we are looking at a 30% AUM growth. So the disbursements will you know will follow that follow the trend which will which is required to achieve that. So probably a disbursal growth of 20%-25% should be able to achieve a AUM growth of 30%. Okay, so that is the question. The asset quality has also remained very much stable at 1, 1.5, 1, 1.2, 1, and 1%. This will remain stable, I... 1, 1.2%? So, do you see any points of concern that it might marginally increase? Absolutely not. On asset quality, there is absolutely no concern at all. It is looking very stable, and even from the ground, you know, the feedback that we get, you know, the monitoring that we are doing, it looks absolutely stable. Okay, thank you. And finally, with respect to co-lending, the co-lending, I think we did about INR 60 crore worth of disbursements. You said that we will be targeting 10% of AUM. So, incrementally, there will be a higher share of disbursement in the disbursement through co-lending in the coming quarter. Is that, will that be a fair assumption? ... Yeah, marginally higher, because we are currently at 6, about 6 or 7% of the disbursal. As we kind of inch up towards 10%, yes, the share of co-lending, I can say, is going up. Okay, okay. The spreads on that, what you, what I think, someone had mentioned to you from the management, was +5%, if I did I get it right? That's right. Okay. Thank you very much. That, that's it done. Thank you. Our next question is from the line of Chandrashekhar Sridhar from Fidelity. Please go ahead. Hi, good evening. My question on spread, basically 5-5.25, is that more a function that, you know, beyond a point while your costs are increasing, you know, still, because of some of these MCLR hikes, you don't want to basically underwrite beyond a certain hurdle rate in terms of the customer or yield, because you sort of underwrite a different set of customers. Is that primarily why you're looking to maybe absorb a little bit at this moment? That's right, Chandra. That is correct. That is correct. Okay. That is correct. And also, it is, it's about whether we want to reprice the back book too much. I mean, so we have already passed on 125 basis points. At this point, we are looking at passing that, you know, so but, although actually in practice, you know, we have got a 20 basis points increase over the last quarter, but we are not passing that on to the customer, effectively. Okay. So some of this is a little bit function of where we are. Maybe at some point in time, it go down, some of these things could change also. It's not like, Mm-hmm. Yeah. Okay. Okay, okay, okay, okay. Got it. Got it. Perfect. Thank you. Thank you. Our next question is from the line of Arvind R. from Sundaram Alternates. Please go ahead. Hi, I just had one question, like, do we get any income for, you know, co-lending? Sorry, what is the question? Do we get any fee income for co-lending? Fee income, we get the processing fee on originating the loan. This is the normal processing fee that we charge on our own loans that we originate. The same processing fee will be on co-lending as well. Okay, sir. And just one more thing, like, when we say that we intend to pass, like the benefits of, you know, funding costs as the rate cycle reverses, would we be like looking to pass on everything or like in a part of it? Depends on how sharply it moves. I mean, if it moves very gradually, then we may just pass it on. If it moves sharply, we could probably retain a portion and pass on the balance. Sure, sure. Thank you. Thank you. Our next question is from the line of Amit Jain from Axis Capital. Please go ahead. Yeah, hi. Am I audible? Yes. Yeah. Yeah, thanks for taking my question. So I just had one question. So, as you grow bigger and bigger, so in terms of distribution, will Account Aggregator be the way ahead, or would you like to look at other forms as well, such as DSAs? No. So distribution, our distribution is basically through individual connectors, individual agents, who refer customers to us. We intend to continue that model. That model has worked extremely well for us. We have certain competitive advantages there in the way we manage it, et cetera. So we intend to continue to leverage the connector model. Account Aggregator is more for credit evaluation, you know, so that is for basically collecting information about the customer. So that is, you know, a different purpose altogether. Sure. As far as distribution is concerned, we intend to stick to our connector model. Sure. Thank you, sir. Thank you. Our next question is from the line of Omkar Kamtekar from Bonanza Portfolio. Please go ahead. Hello. Thank you for taking my question again. So first, so another question was on the average ticket sizes of the loan. So is there any specific bucket of loan that is growing faster? And from the previous comment on the co-lending becoming 10% of the AUM, and I think the higher ticket size, that is, INR 25 lakh and above, is where the co-lending higher transactions are there. So would the average ticket size on a whole increase over, say, the next 2-3 years? Yes, average ticket size will increase. The reason being that, you know, what was, let us say INR 5 lakh, you know, 2 years ago is now INR 10 lakhs and so on and so forth. So, if you rewind 5 years ago, our core segment used to be between INR 5-10 lakhs. But now the INR 5-10 lakh segment, you know, because of inflation, that, that segment is more to INR 10-15 lakhs. So now our core segment is INR 10-15 or INR 10-20 lakhs. So it's just the, you know, impact of inflation. The profile of the customer is the same, but, you know, the ticket sizes are gradually moving up. So as a result, yes, every five years you will see some shift in the ticket sizes. Okay. So it is more so from the perspective of a structural change now and not because of the co-lending and et cetera, that you would see a higher, a bigger expansion in the ATS? Yeah, except Co-lending. Yes, Co-lending is definitely contributing to it, or it is contributing more to it. But if you, if you remove Co-lending also, there is a gradual shift in the ticket sizes. So you, you will see that our growth in the INR 10-15 lakh and INR 15-20 lakh is higher than the INR 5-10 lakh segment. That's because of the gradual shift in ticket sizes. Apart from that, you know, there is obviously an extra contribution from the Co-lending aspect as well. ... Got it. Got it. And any specific bucket of the diversification that you have given by ticket size? Any specific segment that is growing, that which is the fastest growing, if you could give which is the fastest growing and maybe anything in that space? Yeah. So like I mentioned, INR 10-20 lakhs. So, you know, 10-15 and 15-20 are growing faster than the other, I mean, the smaller segments. 10-15, 15-20. Okay. Thank you very much. Thank you. Our next question is from the line of Sonal Gandhi from Centrum Broking Limited. Please go ahead. Yeah, thanks for the opportunity and, congrats on good set of numbers. I had few questions. Basically, I needed some clarifications before I move to questions. So if you could just let me know what exactly happened in Tier 1 capital, wherein, you know, it's gone from 45 to 40.5. Because I heard Nutan saying that, you know, if we take that risk weight, impact of circular, this might actually go down to 38.5%. Given that already here. Can you hear me now? Yeah, I can. Yeah. So the 45-40 journey, let's discuss that first. So there are two components to this. If you see our investments in December versus September, they have gone up significantly. Now, when you park funds in liquid funds, liquid funds carry a 100% risk weight under the capital adequacy regulations. However, if you park the same money in fixed deposits, they carry a 0% risk weight. So this 3% increase is contributed by just how we've chosen to invest our liquid our cash and current balances. The other 2%, which is basically coming from organic growth. What I was trying to mention earlier, if we took the impact of the circular, then this 40 will look like 38. Now, if you want to look at it, 3% is just how we choose to allocate funds between fixed deposits and liquid funds. So, you know, March quarter, for example, you can see this going back. But organic growth-related capital consumption will continue to happen. Sure. That's helpful. The other one was on co-lending. So, do we upfront income in co-lending as we do in direct assignments? No. Because the fair value gains... No, we don't do that. Okay, so we had this stated policy, you know, wherein we were planning to do about INR 100 crore of, you know, Direct Assignment every quarter. That number has gone up this quarter. So how, how should we see this upfronting income from, you know, moving from here? There are two ways to look at this. INR 100 crore, you know, plus, minus is the kind of numbers we've discussed in the past. The other way to look at this is the proportion of direct assignments to the overall AUM. If you look at that, that has remained constant at this 13%-14% level. So I think that will be the right number to look at, that the overall composition of the off book, contributed, but assignment is not increasing. But with the growth in the book, the absolute number might shift. Hello? Hello, Sonal, does that answer your question? I think, not sure it should. Sonal, we are unable to hear you. We would request you to unmute your line from your side. So may I request that we move to the next question? Sure, sure. Our next question is from the line of Ravi Naredi from Naredi Industries. Please go ahead. Thank you very much to give me opportunity. First of all, congratulations to cross $ 1 billion market cap of our esteemed company. Sir, our check bounce rate increased and higher side at 3.1%. So many questions asked by so many investor. My point is that if check bounce and his customer bank account charge, bank charge, check bounce charges from the customer, it increases cost of middle class borrowers. So, have you planned to, control this? So we keep educating customers, you know, that they should clear the payment at the first go, et cetera. But there would be a set of customers where probably it is not impacting them because, you know, probably they have not... They're not using those accounts or maybe those accounts are in minimum balance, et cetera. So which is probably the reason they are bouncing those payments. So difficult for us to, I mean, we of course encourage your customers to keep clearing it on the same date and not bounce it. But today, with, you know, so many different options for repayment, you know, through UPI and, you know, through multiple channels, customers, you know, don't take that very seriously. So which is also one reason why there is a, you know, higher bounce rate. Okay. Okay. Understand. Sir, company maintained INR 2,460 crore liquidity against AUM of INR 9,014 crore, all the borrowing is against INR 6,846 crore, means 36%, loan amount of liquidity we are maintaining. So, you think, normally it is higher price? Sir, that number that you are seeing is including the undrawn lines. What we are carrying on the balance sheet is INR 1,200 crore, sir. Okay. Okay. Okay. Understood. Understand. Which is across the- Yes, yes, yes. Understand. Understand, ma'am. Thank you very much, sir. Sir, any equity they don't cause? ... Not for the next 2-3 years, sir. We, we have enough renewals, yeah, which will, which will carry us through for at least 2-3 years. Very nice. Very nice. All the best, and Manojji, you are doing very nice job. Thank you, sir. Thank you. Our next question is from the line of Raghav Garg from Ambit Capital. Please go ahead. Hi. Thanks again for the opportunity. Just one clarification, at what rate would we be getting the NHB borrowing? Would it be somewhere around 6.5%? It depends on schemes, Raghav. So it will be, yes, around that range, if it is the weighted average cost, but it could be different for different schemes. Right. And you also mentioned that our spreads on this particular piece is about 5.5%? That's right. Right. So, Nutan, if I just calculate the impact of NHB borrowings, that comes to about 4 basis points. Right? But your yields have actually compressed by about 12 basis points, so what explains the other 7-8 basis points of compression? Right. So the full delta is actually 8 basis points. I think there could be some rounding of numbers. About 5 basis points is contributed by NHB, and around 2 basis points is contributed by co-lending. And there is also some marginal contribution by the BTL. So that is the full breakup. Sorry, how do you arrive at eight basis points, full? So for full- Because as per your reported numbers, it's about 12 basis points. Where do you see that? Because what we have is 16 point... 13.62 going down to 13.5. No, so there is a rounding off, that we're doing. So we are looking at 13.5-13.52. Understood. Sure, that's helpful. Thank you. Thank you. Ladies and gentlemen, that was the last question of our question and answer session. As there are no further questions from the participants, I now 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 questions. In case you require any further details, you may get in touch with Manish Kayal. Thank you very much. Thank you. On behalf of Home First Finance Company India Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.