Thank you, Steven, and good evening, all of you. This is Kunal Shah from ICICI Securities. We have with us today Mr. V. Vaidyanathan, Managing Director and the CEO, Mr. Sudhanshu Jain, CFO and the Head Corporate Center, and Mr. Saptarshi Bapari, Head, Investor Relations from IDFC FIRST Bank to discuss their Q2 and H1 FY 2023 earnings. Sir, at the onset, congratulations. Good set of numbers and wish the entire management team as well as the participants on the call a very happy Diwali. Over to you, sir. Hello to all of you, tuning in today to talk to us. Thank you very much. Wish you all a very, very happy Diwali to every one of you. Now, we have, I got some five or six quick comments to keep it brief, and then Sudhanshu will take you through the details. And then we'll hopefully have more time for Q&A. Now, from our point of view, basically, we are seeing that the credit growth is quite strong. I'd say stable and strong because we are now at 25% loan growth. If you remember, for three years at a stretch, we held the discipline of not growing the loan book because we were not strong on the liability side. Now, with a 51% or 50% CASA, we are feeling very strong from the inside on the deposit side, so therefore, now we are in a position to start growing the loan book. The important thing is that we are growing the loan book along with growth of deposits. For example, last quarter, we grew our loan book YoY growth on deposits. The loan book was 25%, but we also grew the deposits by 37%. Now we know we are entirely funded through deposits, through incremental deposits on a strong basis, and therefore it provides us with solidity and also gives us the confidence that we will be able to sustain the CASA of a 51% or 50%. That's very important because we need CASA for two reasons. One is we need CASA for normal growth, which we feel that about 20%-25% of loan book growth should go on from for a while. We need deposits for that. In our particular case, we also need deposits to pay off that legacy bonds and borrowings, et cetera, which we need to pay. That's about, like, INR 5,000-6,000 crores a year. We need for that also. The good news is that we are able to raise enough deposits to pay off both the past liabilities and also fund our growth. That's coming comfortably. Now, the second part of the point is to notice that the credit quality. Now, on the credit quality front, I'm actually happy to tell you that all the input parameters, you know, we call input parameters as underwriting. Underwriting quality is an input parameter. Underwriting quality, frankly, we were always good for, you know, for like, for 10 years now. Our gross NPA is 2% and net NPA is 1%. 10 years is a long time to establish a model. The underwriting method, meaning the score, it's not just the output of two and one. It is the score that is of credit score of customers at onboarding continues to be 84 or 85% of the customer base of credit score above 700. That tells you that our customer profile is good and stable for a long time now. Now, you know, this time we have also given some additional data in our presentations about underwriting method or LTV, our average ticket size, location, et cetera. A little more extra data there. Now, the other input criteria that we see is how much are new to credit customers. That number is also trending downward. We don't want it to trend too much downward because after all it's our specialty and we've grown that business for, you know, 10 years now. Still, it's still very much low, I would say. We think that about the number of checks that return on presentation, that is really at an all-time low. What we track is the number of checks that return after presentation. Sorry, in the first month after booking. Supposing we booked a loan in January, you know, the checks are due for presentation. First EMI is due for presentation in February. Then we just see in February how many checks are returning. That number is really at an all-time low. If it's low means that the quality of incremental underwriting is very good, in fact better than before. These are our input parameters. Frankly, all these input parameters with no exception are all behaving, are all showing that we're doing well, which means that if you ask us to take a guess at the credit quality one year from now, two years from now, I would say it'll only be better from today. Because of the reason I told you of input parameters. The third thing is also the SMA. The SMA is to the uninitiated, I could say that, think of a loan book. A loan book would have some defaults or delays and 0-30 customers who are in, you know, 0-30 means 0-30 days outstanding, they're called SMA- 0. You know, 31-60 is called SMA- 1, and 60-90 is called SMA- 2. Our SMA- 1 and 2, which is the most, which you can call it 31-90 DPD, these are the 0.6%. In this bucket, our SMA same year last year used to be 3%, which means that 3% of the portfolio could go to NPA. The amazing thing is that this SMA one and two has now come down to 1% in retail. Just think, 3% down to 1%. Which means that if there's not much portfolio left in that bucket only, we're not expecting much NPA formation going forward. This also represents or talks to the quality that we are building. Now, all in all, if you ask me, I'm feeling very comfortable or very happy with the quality we're building the book. We can boldly guide to low NPA and low SMA and all that in the future. Last thing is about our this one. This year, this quarter, we had, you know, if many of you recollect, we had a lot of security receipts that we had from the bank because these were infrastructure loans sold to ARCs prior to the merger. Now, the good news is that this quarter we sold some SR and we got a happy outcome, I should say. Many of you would fear that we'll take a hit and all that stuff, and happy outcome meaning we actually got, you know, we had taken a provision of INR 200 crore for those SRs. Now INR 200 crore got released because they actually sold well at a good price. That 200 crore suddenly you think of it like a bit of unexpected money or found money. Now, what do we do with that money? We thought that we will use that to improve the provisioning coverage ratio of the bank. We used it largely towards our retail PCR has now gone to 77.6% gross of technical write-off. The reason we take it as a good benchmark in gross of technical write-off is that even the write-off customer base we are collecting from. When you calculate provision coverage ratio as a percentage of gross of technical write-off, it'll be appropriate because it's provisions divided by the gross NPA, including write-off bucket, because you are going to collect from them as well. That number is now tacked to 77.6%, which is an all-time high. You can think that INR 200 crore has broadly been used up for that purpose, so it's not come to the P&L in a way, but at least it strengthened the balance sheet to that extent. On the wholesale side, of course, the PCR is now very, very good. We don't worry much about it anymore. It's like upward of 95% onwards or 97%. The infra is the only one that we had a bit of an issue, but frankly, it's a rundown book. Today or tomorrow, it'll go away. The last thing is on profitability, I'd say that we are very, very strong on profitability. You know, a very simple way to understand our profitability is that last year our loan book has grown by 25%. You know, the growth in our operating profit, core operating profit, pure NII plus fees minus OpEx, core, that is up by some 84%. If book grows 24% but operating profit grows 80%, I'd say it's a bit of a higher side. I would not expect that every quarter we'll get such kind of a high number. Certainly we feel that overall this year our operating profit should be upward of at a year-to-year level, we should expect at least a 50% increase in operating profit over last year. Quarter-on-quarter, it is even healthier than that. You get the drift there. That's on profitability. Basically, in all, I'd say that all our indicators are moving very well. We're very happy about how the numbers are going, and hopefully you'll also be more comfortable with us now, because for the first two or three years, we gave you this bad news or that bad news, so you know, this wholesale or that or, you know, early profitability, whatever. Now I feel that most of those clouds are behind us, and we're feeling pretty okay, pretty good about the future. Now, you know, in a sense, I'd say that, you know, as I sign off, I'd say that we're building a really high quality bank. Our products are very customer-friendly products, and anybody experiencing us is usually very happy. I personally just happen to, you know, meet or bump into many customers whom we know are customers of the bank, and most people have really happy things to say about our service and all that. We are a very customer-oriented bank. Our corporate governance standards are really very good. Balance sheet is very strong. ROE is catching up. Overall, I'd say that things are looking good. With that, over to Sudhanshu, he has some specific numbers to share. Thank you, V. Vaidyanathan. Good evening, everyone. I will call out few key numbers for the quarter. I will start with the balance sheet side, which is now at INR 210,000 crore and has grown by 23% on a YoY basis. The growth was largely driven on the asset side by the retail portfolio. The overall funded assets grew by 25% and 6% sequentially to reach INR 145,000 crore. In the retail class, the home loan segment grew by 59% on a YoY basis. Rural loans increased by 34% on a YoY basis, and consumer loans increased by 36%. These are certain asset classes which I've called out, but we have given a detailed breakup on slide 41 of the presentation. Moving on the wholesale side, the non-infra corporate book, that also grew by 20% YoY and by 4% on a QOQ basis. The infrastructure book de-grew further and is reduced by about 41% on a YoY basis and by 11% on a QOQ basis and is now sub 6,000 crores. It now merely forms 4.1% of the total funded assets as compared to 22% at the time of merger. There has been a significant downward move here. Moving to the liabilities front very quickly, the customer deposits has grown by 36% on a YoY basis. The CASA deposit growth was very healthy. It grew by 37% on a YoY basis to INR 63,305 crores. The CASA ratio was again very strong at 51.28% as on September 30th. Average CASA deposits also grew by 13% on a QOQ basis and 32% on a YoY basis. Even on the term deposit front, the growth was strong at 35%. Overall, the customer deposit growth came in very strong during the current quarter. The bank continues to maintain excess liquidity. Of course, we would want to calibrate some in due course, but for the quarter it stood at about 131%. This is well above the regulatory requirement. The branch count now stands at 670 branches. The bank added 19 branches in the current quarter. The bank has also substantially granularized the liabilities and which is reflected by CASA and TD less than INR 5 crores, which is standing at 84% of the customer deposits. We have further repaid about INR 2,000 crores of high cost legacy borrowings during the quarter. This residual borrowings now stands at INR 20,444 crore, which is still at a high cost of 8.8%. We would sort of bring it down further. We have given statistics in the presentation in terms of what would be the rundown on this portfolio. Moving quickly to the asset quality. The gross and the net NPA of the bank was at 3.18% and 1.09% respectively. It is reflecting a sequential improvement of 18 basis points and 21 basis points. PCR, including technical write-off, has been enhanced to 76.5%. This was 70.3% at the start of the year. Further, if we strip out the run-down infra book, the PCR coverage is 83.3%, including technical write-off and net NPA instead of the reported 1.09% would be down to 63 basis points. In the retail and commercial segment, the GNPA and NPA came down sequentially by 8 basis points and 20 basis points respectively to reach 2.03% and 0.70%. The PCR on this book stood at a healthy 77.6%. We have increased PCR by about 545 basis points here during the quarter by further tightening the provisioning policy. On the corporate book ex infra, we continue to have a strong PCR coverage of 98%. Another data point to note, the restructured book as a percentage of total funded assets has reduced to 1% now as compared to 1.3% last quarter. The gross and net slippages for the quarter were at similar levels as to last quarter despite the increase in the overall book. V. Vaidyanathan mentioned about that SMA on the retail has been coming down. It came down from 3% in September 2021 to 1.8% in March 2022, and now it was 1% at September. Even in the corporate book, the ratio of SMA one and two is sub 0.2%. Moving quickly to profitability. The profit after tax was highest ever for the quarter. It was INR 556 crore, up 266% on a YoY basis and 17% on a QOQ basis. I'm happy to share that on a quarterly annualized basis, the ROE did cross 1% and is now at 1.07%, and the ROE has reached double digits and was 10.12%. The strong growth numbers was largely driven by steady growth in operating income and lower credit cost compared to last quarter in the previous year. The net interest income grew strongly by 32% to INR 3,002 crores. The net margin expanded by 9 basis points on a QOQ and 15 basis points on a YoY basis to reach 5.98%. The increase was also due to a transmission which happened because of the repo rate increase on the existing floating rate portfolio. Fee and other income witnessed a strong increase by 44% to INR 945 crores. Another point to note is that the retail fees contributed about 92% to the overall fee and other income and hence it's quite granular. The bank had a trading gain of INR 116 crores in Q2 FY 2023 as compared to a trading gain of INR 122 crores in Q2 FY 2022 and a trading loss of INR 44 crores in Q1 FY 2023. Core operating income excluding trading gains increased by 35% YoY to INR 3,947 crores, aided by strong NIM income growth which I mentioned before. Operating expenses grew by 23% on a YoY basis to INR 2,895 crores. The increase in OpEx was relatively higher on account of higher business volumes witnessed in Q2. The cost to income ratio improved to 73.34% in Q2 FY 2023 from 80.53% in Q2 FY 2022 last year. Core operating profit grew by 84% YoY and 7% on a QOQ basis to INR 1,052 crore. Provisions were also lower by 11% YoY at INR 424 crore in Q2. The credit cost on a quarterly annualized basis as a percentage of average funded assets for Q2 was 1.2% and for H1 it was at 1.1%, which is still much lower than the earlier guidance of 1.5%. We had some release of provisions on security receipts which we used to beef up the overall PCR during the quarter. The last bit on the capital adequacy. The bank has maintained strong capital adequacy and the CAR including profits for H1 was 15.35% with a CET ratio at 13.67%. Even at 15.35%, the bank is well above the regulatory threshold and looks forward to continue the growth in a profitable manner. With that, we can move to the Q&A. That's 15 minutes or maybe 17, 18 between the two of us, so thankfully, this was a bit shorter, so over to you, people. Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone 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 Bhavin Gala from Marine Capital. Please go ahead. Thank you for the opportunity. Could you please confirm if I'm audible? Yes, sir, you're audible. Please proceed. Good evening and festive wishes to the entire team of IDFC FIRST Bank. I have only one question to the MD and CEO. Could you, sir, please help us understand the performance in the recent quarter with respect to the retail and corporate banking operations? Because what we are seeing is this segment turned profitable a few quarters back, and there wasn't consistency as far as the PBT is concerned. This quarter what we could see is there was a drastic decline in the PBT from this segment. If you could help us understand the reason behind this. Thank you No, thanks. I think it's a very important question. If you recollect my opening comments when I told you we had suddenly discovered, not discovered, let me say we sold SR, and then we got about INR 200 crores of provision release. That provision release, we took it to retail and therefore it is showing up there on the retail line. For example, had we not got the INR 200 crores, we would not have needed to really take this provision of retail to put it simply. Therefore, if you add back the INR 200 crores, then you know that your numbers are back to the trend line. Okay. Noted, sir. I mean, was it complicated or was it easy? Was it okay? If so, I should explain again. No, no. That, that's explained. Thank you. Okay. Thanks. Bye. Thank you. The next question is from the line of Ishan Agarwal from Erevna Capital. Please go ahead. Hi. Thank you for the opportunity. First of all, wish everyone on the call a very happy Diwali. You can take the phone off speaker, please. Your audio is a bit muffled. Yeah. Hello. Yes, yes. We can hear. Yeah. First of all, wish everyone a very happy Diwali on the call. I have multiple questions here. First question being, in your last concall with us, you had advanced the guidance of a double-digit ROE, which was originally given for Q4 of FY 2023. However, if I look at the core numbers for this quarter, excluding treasury gains and do a like-to-like comparison with Q1, the PBT excluding trading income is lower in Q2 at INR 644 crores versus INR 678 crores in Q1. Hence, ROE and ROA excluding trading gains is lower in Q2. Are you confident that the bank can touch core annualized ROE of 10% ex treasury by Q3? Yes. Secondly, the annualized credit loss for this quarter was 1.2%. That is blended for retail and wholesale. What will be the annualized credit loss for this quarter for retail plus commercial book? We have not called that number out separately, but as I said, overall is 1.2%, and for H1 it's 1.1%. We would not want to call out a separate number for a retail credit loss. Actually, yeah. Why I'm asking that is, incrementally our book is, No, no. I'll answer that. No. Don't worry. I think we can explain a little more. No, there's no issue. Basically, see the retail side. If you take the retail credit loss is about if you add back that INR 400 crores, the INR 200 crores, which I said is an extra provision, if you don't have that as a one-time item. If you like about INR 400 crore. Yeah. INR 400 crore into 4 annualized is INR 1,600 crore. Oh, INR 1,600 crore. You divide that by about a INR 1 lakh crore book, about 1.5%-1.6%. This should get better as we concentrate more on home loans going ahead, or we expect it to be at 1.5%-1.6% and going ahead for FY 2024-25 too. We like to be conservative on this front and just say this number as we said it right now. If it gets better, you know, just maybe, you know, we'll take it as a positive. But you factor in, if you are thinking of the bank, think of it that retail will have. See, after all, this, it's a pretty good yielding book. Our credit controls are working obviously very well, collections are working very well. Otherwise, you know, for such a low credit loss of that we're talking about in retail, it's already pretty good, so I don't want to give any more aggressive guidances beyond this. Okay. Third question is, OpEx for this quarter is around 8.7% higher, as compared to Q1, which is actually higher than the loan growth, QOQ. Is it because we have invested more on the technology front or, what is the reason for this large jump? Because this is also yielding to a cost-to-income plateauing, from Q1 - Q2 at 72.9%. Really, quarter-on-quarter, it's very hard to explain this quarter, INR 20 crore. No, in general, the jump has been higher, at 8.7%. No, no. They're collectively. Therefore, I was saying that it's hard to really pin down a particular quarter or prior quarter. You know, there are a lot of moving parts, a large bank, it's a lot of moving parts. Broadly speaking, you should expect the cost income ratio of the bank to trend downwards from here. If you take a YoY, all these inter-quarter movements, a little bit up and down, gets evened out. If you take a YoY basis or a YoY meaning when you compare year of 2023 with the year of 2022, year of 2024, if you see it sequentially, things will keep coming down from here on. Okay. I have a few questions related to the bank and not the quarter. The first one being when Capital First was founded, I would say that we were quite ahead of the curve in terms of developing an algorithmic lending model based on multiple parameters, demographics, marital status, gender, geographical location to state a few, and hence we enjoyed a certain niche in that segment. Now that information related to a borrower is more easily available to a larger number of lenders, thanks to aggregators, fintech startups like CRED, payment apps which capture the cash flow data, and also a much larger penetration of credit bureaus, and also given the fact that now 90% of our borrowers have a credit history, has the significance of that lending model reduced for the bank? Actually, it's a very good question. As you know, India is just not served. Simple. I mean, underserved would be an understatement. Whether we play in this game or some 20 other players play in this game, this is a large story. Therefore, this benefit, this advantage we have is not gonna go away, because we'll still grow. After all, we are guiding for growth of only 25%, so it's easy. Number two is that our ability to use the data, our own ability, forget what others do or don't, I'm sure others can also do a good job on these things. Our own ability to use this data is continuously getting better. In a large underserved market, we should bother about how well we do and how well we can control our credit quality and so on. Our ability to use the data is only improving. Every year on year is only improving. For example, our algorithms are getting much more refined. Remember one thing, that our algorithm is a 10-year-old algorithm that is. I mean, not 10-year-old algorithm. It's been continuously refined since 10 years. It's maturing. Yes. Maturing. That's the right word, yeah. It's like, it's getting more and more precise, and the quality of that algorithm is getting better and better with every passing year. Forget year. It's getting better every single quarter. It's getting better and better. Therefore, we feel we are very, very far ahead in this game, because we have gone through R&D ourselves. It's not something that we acquired here and there. Remember we built this company from grassroots of a INR 94 crore loan book 10 years ago. We know every single moving part of this machine. I think we're getting better and we will stay. We'll be pretty good on this front. I would say that now, right now it's helping you on the credit quality front and not as much on the yield front because we are also concentrating on better yield customers. No. It's yes and no, actually. Because if you notice one very definite advantage we have as a bank, we may be new, we may not be as profitable as others, we may have other issues, but the one very unique thing about our bank is that our book itself has been created in an era of when a cost of funds was 9% or 10%, or at least the models are built for that kind of a cost of funds. We were specializing in lending at 14%, 15%, 16% and all that stuff, probably more. At very good credit quality. You know the numbers. I don't repeat them. Now suddenly over the last three years, cost of funds have come down. Our capabilities have not gone. Capabilities are still as strong. We feel that this is a very distinct advantage. If you see the mix of the book, our, you know, mix of the book would probably be better yielding. That doesn't mean we're taking more riskier loans. It just means that we're more specialized. Right. Okay. Understood. Now, you've always been maintaining- Sorry to interrupt, but maybe request you to rejoin the queue, please. Just last question, if I can? Okay, shoot through. Let's try. You have been maintaining that, you know, India is underserved and there's unlimited credit demand at least for the next 10, 20 years. Say, just for FY 2024 because of XYZ reason, the GDP growth stagnates or it's less than 3%, 4%. Even in that scenario, will you envisage that because of our small size, we will still be able to grow our loan book by 20%-25%? Yes, of course. See, it's very important. If you think of very large bank with INR 20-30 lakh crore loan book and all that stuff, of course, they are, they will be proxy to the economy. We are not a proxy to the economy. We are very small yet. Okay. Okay. Coming from a very low base. To give you a small idea. Just to pick a number, supposing a loan against property. Or take any business, okay? We are bookings say X number of X hundred crores a month. Let's call it, say, INR 500 crore a month. If you want to increase it to, say, another number, say INR 600 crore or whatever it is, these are not the exact numbers, but I think it'll probably be close. Now, we don't have to do anything. We don't have to change the credit criteria. We don't have to, you know, relax the criteria. We have to do nothing. We just have to open some five more locations, and lo an and behold, everything will come. On the same location, you need to put up some more branches, you'll get it. That's the benefit of being. That's the point I'm making when you're relatively early in the, let me say, when the book is smaller. We have a base effect, let me say. Yeah. Thank you. Thank you so much. You know, we are nowhere close to the big players. You know, big players are at least 7, 8, 10 times our size. Yeah. If I have to put it that way, HDFC Bank is adding an IDFC FIRST Bank every quarter. Could be, yes. Absolutely. Yeah. Okay. Thank you. Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Hi, V. Vaidyanathan and team. Congratulations on a strong performance. Two questions I have. First is like, we have reported some margin expansion this quarter, though the deposit costs are inching up. If you can talk about how the incremental spreads are moving and how do you see the margins trending in coming quarters? Also, if you can share the proportion of loans that are linked with EBLR. Sudhanshu, the proportion of loans. Yeah. I'll first start with the proportion of loans. Over 38% of the book of the funded assets are roughly linked to benchmarks, which could be MCLR or repo or T-bills. Out of that, about 60% is linked to repo and rest to other benchmarks. With respect to margin expansion, as we've guided earlier also, we feel that we will be comfortably able to maintain margins around a 6% mark. In fact, this quarter we are very close to that. We are 5.98%. We, of course, had the benefit of some reset which sort of benefit which kicked in during this quarter. As the loan came up for a reset, it comes once in every three months. RBI has also very recently increased another 50 basis points, so that benefit should be slightly higher in Q3. We feel that even though the cost of funds are sort of going up, even for us during this quarter, the cost of funds on a blended basis went up by about 25 basis points. Since this reset kicked in, even for the new loans we have, we have increased the pricing a bit. A combination of this led to a higher sort of, I would say, yield on advances and interest earning assets, and which led to a net increase of 9 basis points. We feel that both these things would sort of work in tandem. In fact, we could be a beneficiary, even in going forward, right, as sort of, the rate cycle plays out. Give or take, like this 5.8, 5.9, 6, in that zone you should expect of us. Right. Right. Sure. The other question from the consumer loan portfolio, while this portfolio has been growing like every quarter and the YoY growth now is 35%, but this quarter the portfolio like held essentially flat. We have seen a stronger growth from other banks in the consumer loans. Any specific reason that has caused this? Let's see the numbers once before I respond. You have the numbers? The loan book. Just 10 seconds. Oh, yeah, the INR 19,500 crore-INR 19,600 crore book that you're talking about. Yes. The QOQ growth like is almost like flat this time. About, I think, INR 300 crore we must have sold this quarter. Yeah. We have sold about INR 336 crore of loans during the quarter, which were essentially out of this segment. Plus Q1 also was a strong quarter, right? Because of the summer, consumer durable sales were also equally strong and so on. Hence these numbers are the way it is. Overall YoY, they're quite strong. Right. Therefore, the retail book, this piece will remain one of the key growth drivers because LAP we have been growing relatively slower, but consumer loan will continue to maintain this sort of traction. No, no, not only consumer, all our lines will grow. I mean, frankly, we don't if you look at home loan, you know, our home loan book is something like INR 15,000 or 16,000 crores. If you think of large banks, they're probably INR 400,000 or 500,000 crores or maybe even INR 600,000 crores. Can you even compare? For us to grow a 16,000 crore by 40%-45%, 50%, whatever, should not be no issue at all. Think of loan against property that can grow. Think of vehicle financing, et cetera. One of the speakers earlier spoke about the base effect. Let me say we are small, a relatively small player, I'd say, when you compare the big 4 or 5 banks in the country. We'll keep growing. Okay. Sure. Got it. Thanks so much, V. Vaidyanathan. I wish you all the best. Thanks a lot. Thanks a lot. Thank you. The next question is from the line of Lalit Deo from Equirus Securities. Please go ahead. Good evening, sir. Thank you for the opportunity. Congratulations on a good set of numbers. Sir, like, I have just two questions. Firstly, on the borrowing side. Sir, like within the borrowings, our refinance portion has increased to about 35%, like if you include the market borrowings. Just wanted to understand, like what is the broad range of interest which we are paying on these refinance borrowings? Also could you tell us about the average tenor of these borrowings? No, we don't do much borrowings anymore in the sense that, I think you might be talking about market borrowings. These are treasury market borrowings. They are not the big item. Sudhanshu, you want to say something? I'll answer that. We keep evaluating various funding options, right, in terms of term deposit, refinance, and other market borrowing, right? We see essentially what is the prevailing rate, what is the average tenure of a funding which could sort of come in. We have done some refinance, additional refinance borrowings during the quarter because one, they were of a longer tenure and the rates which were available were relatively better. This quarter relatively, right? Yeah. If we had to compare with few other funding options which were available. The other, you know, there is an item called other borrowings. See, if you go through the list, there's something called legacy long-term borrowings. Infra bonds. Sorry, legacy long-term bonds. There's infra bonds. These two items are continuously coming down. Of course, refinance Sudhanshu has explained. This item called other borrowings, this could be, you know, general routine stuff. Sure, sir. Sir, again, on the fee income part, like we have been going strong in our credit card business, but on a quarterly basis, the fees from the credit card and the toll business has declined on a quarterly basis. Now with the festive season and we believe that the spends would have been strong, what could be the reasons for the decline in the credit card fees during the quarter? That essentially is a decline which has happened on the toll business. There has been some changes which have been done in the MDR, right? Especially on the issuing side. This is a notification which sort of came in in this quarter and was effective April 1, 2022. Hence that sort of readjustment happened to that line item. On the credit card, the fee has gone up on a sequential basis. This was essentially largely because of the toll business. Broadly, I could say all our businesses are doing very well. You know, whether it's cash management or toll or wealth or credit cards, like every product is turning out to be a big success in the market, so nothing to worry. Sure, sir. Sir, in the home loans portfolio, we have given some extra details on this portfolio. Just wanted to know if you can share the portion of the salaried customers in the home loan portfolio and how has it changed over the last couple of years? I don't have the number upfront, but I'd probably, if I were to ask to take a guess, it'd probably be about 55%-60% would probably be salaried. Maybe next time we'll be better prepared on this question. Sure, sir. Thank you, sir, and happy Diwali to everyone. Thank you. Happy Diwali as well. Thank you. The next question is from the line of Ashutosh Kumar Mishra from Ashika Stock Broking. Please go ahead. Congratulations, sir, for a very good set of numbers. My question is, basically on the cost to income. We are guiding a cost to income ratio of 55% by the end of FY 2025. Can you guide us on what are the levers on this front which will help us to take it from the current, I mean, you know, +70% [audio distortion] Okay. See this, cost to income. I'll give you some very specifics. It'll make it easy for you. Our cost to income for this quarter would probably be like 74%. 73 point something. Now, We have always said many times earlier, but we'll repeat it for context. We said there are three lines of businesses which are going to improve our cost to income going forward, and they are very precise, defined items. They will play out. Number one is paying off these legacy liabilities. We have, we'll contract them at 8.8% to 8.9%. We'll replace them at 5.5%. There's a lot of money to be made there. That will give us about INR 150 on a quarterly basis, if you do the differential of 8.8% minus 5.5%, and you multiply that by this INR 23,000 crore, you'll get a number of INR 150 crore. So you think of it'll come to us, nothing to be done. Number two is that credit card business we told you about, INR 70-75 crore. Earlier we used to say INR 75, now we've corrected to a little less than that because scale is coming up. Let's call it a INR 75 crore number round off. Number three, on the retail liability side, because the branches, ATMs, all that stuff, we told you INR 300 crores a quarter. Now, I'm rushing through it because I've said these numbers before, so I'm trying to save time. In this quarter's P&L, you add these three items, INR 150 + INR 75 + INR 300, and then that number works out to something like INR 525 crores. If you take the PAT impact of that number, if you take 75% of that amount of INR 525, it'll come to INR 390 crore. Sorry, let me not go there. Let me just add these three numbers, comes to INR 525 crore. Now, you divide our expenses of this INR 2,895 crore by INR 4,472 crore. That is this reported number that is INR 3,995 crores of income. Then you add this number, what I said we'll get, will come to us in a, by simply playing out the next three years. Then that number, you divide INR 2,895 crore by INR 4,472 crore, you'll come to 65%. In my mind, this is a pretty simple straightforward proof that we will easily head towards a 65% cost income ratio simply by paying off the liabilities and making credit card profitable and making their liability profitable. Okay. We feel that it will happen. I mean, in our mind there's no doubt at all. I hope the numbers and I told you they will. If you do the math, I spoke a bit too fast, but if you go back off record and you do the math, you'll get the same numbers. During this season, because of the rise in the cost of funds, which is expected in the next few months out there, some of these numbers need to be revisited? We couldn't hear you well. Mr. Mishra, your audio is very. Yeah. Is now okay? Yeah. Yeah. Yeah. We have one of the important adjustments which we are taking is the, you know, the benefit which we are going to get on paying off the legacy liability. Because of what is happening on the cost of funds transmission, the last one or two weeks we have seen, you know, larger banks are increasing the term deposit rates in a very aggressive way. Do you see some of these things, you know, getting little bit more instead of at what FY 2025, it will go to a 30%, like that? No. When I did the math for you right now that I added INR 1 50 crore for the legacy, that already factors in the new, slightly higher interest rates. Okay. Second point. I'm sorry, before you go there. I want to just for the other people who probably did not catch up with the conversation. I'd like to explain a little bit more. You see, if you think of large banks, none of them is carrying a borrowing at 8.9%. Yes or no? Yes. When we are borrowing at 8.9%, not that we're borrowing, we have borrowed, let me say. That's the legacy item sitting on the balance sheet. Therefore you cannot really compare our cost-to-income with other banks because we are early stage. You give me 15 years, I'll show you what our cost-to-income will be. You'll rub your eyes. Therefore, you cannot compare a three-year-old bank cost-to-income with a 20-25-year-old bank with cost-to-income. Okay, I agree with you on this. Yeah. Particularly, let me tell you something very important for you to note. You go back and see the numbers, it's there, they're public. The cost income of our bank pre-merger was 92%. 92%. The numbers are there on the website. When 92% has come down to 74% point something, boy, it is a major progress. It just tells you that incrementally you're building the bank at a very good cost income and as and when the story plays on, it'll come down. This is to be very much remembered. Don't worry about the cost income. I mean, I'm not so stressed about it at all. I know I just have to play a normal game, it'll come down. On the issue and deposit liability franchise which we have built over the last few years. How many of them have now been break-even? If you can shed some light on that will further give more clarity on this part, especially on the new branches, how many we have opened and what is the- See, there is no proper benchmark about how to compute this. For example, in the sense that, do you compute this at including allocated costs from the head office or is in a pure variable basis and everything will give you different results. Broadly, I'd say that our close to about maybe 400, 300, about 450 odd branches or like 400 branches on a variable basis would be profitable. Okay. Roughly, what is out of our total OpEx, how much is technology expenses in our rough estimate? No, it's, we haven't specifically gone there. Okay. Thank you. Thank you. The next question is from the line of Sahil Sharma from SS Capital. Please go ahead. Hi, sir. Congratulations on a very good set of numbers. First question I have is, we are building a bank for the next many decades, and, I'm sure we are also, you know, hiring with that in mind. Can you please talk a little bit about the kind of, you know, credit risk team that we have on the retail side? Because I think, in the banking, the most important thing is to get the money back, right? It's not just about giving it out. Absolutely. Absolutely. I agree with you 100%. In terms of people, we are hiring, you know, it's not so much the credit managers anymore. That's a bit of five years ago. As you know, every five years, India is changing so fast. Earlier in credit, we used to hire, and credit managers would really look at a file in great detail and evaluate it and all that stuff. Of course, we still need to do that in products like loan against property or a home loan, et cetera. You still need credit managers who have to physically look at some of the files. Incrementally, a lot of people or, you know, machines are doing all this work. Our focus is of course on developing really good high quality algorithms by using AI and ML, et cetera. The skill levels of people we're looking to hire is a really higher order, not the traditional people who will smell files and all that. I see. Thank you, sir. We're building that kind of people. The other kind of people we are trying to build is the people who can build some really synthetic quality kind of people. You know, you of course need high quality technology people, good high quality engineers. As a bank, we provide really, really good working environment and our employees are very proud about the bank we're building because they can see from within the quality of the bank we're building and the ethics and all that. We're able to hire really high quality people. Any position we look out for, like the hundreds of applications pour in. We're literally spoiled for choice because that comes through. You know, there'll be a higher. We're looking at hiring design people, for example. Say, as we speak, if any of you are in here hearing the program, and if you are probably a very good high quality, high-end design person, please let us know. I'll be very happy to hire you right now. We're looking for a head of design who can cut across our to build really good user interfaces and UX. We're looking for that kind of profile of people. High quality technology coders, you know, DevOps people and all that. Yeah. Thank you so much, sir. The second question I wanted to ask about, just tying back to the other speaker's question. I think what we as investors really appreciate, I've been with the bank for, like, three years now, roughly, is that we have really turned around DFI institution plus NBFC into a retail bank, and that has been a fairly long and strenuous journey. On most fronts, we have made tremendous progress. I think the last remaining thing now, which is at the top of the mind for most investors, according to me, is cost to income, which is why most of the questions are also around that. I think your answer is brilliant on the income side especially, which is that, you know, how the income will expand. But I think one of the things which I think we would really appreciate as investors is if you can also share on the cost side, if there are like is this the correct leverage for the cost. Or, you know, for example, if we double our AUM, we probably shouldn't expect to double the operating expenses, right. For example, probably the branches won't double from here. The lease costs won't double from here and, you know, things like that. I mean, I think one thing which that would really help is if you can give some rough guidance for the cost to income, you know, for FY 2023, FY 2024, based on your best understanding. Okay. Now, first of all, thanks for that. Yes, we are. When we're thinking of the bank, we're really thinking long. We're not doing any shortcut. You may have noticed for three years have gone by, we've not done one item that's a shortcut, okay? We'll not do shortcut things. Now, the second thing is about when you said you're happy about the stuff. Thanks for that. I'll tell you, we are not just building a DFI converting to a retail. That frankly, anybody could do. The thing is that it's hard, but people could do it. What we are very proud is about the culture we're building in the bank. It's very clean, very ethical. People are trained to be ethical. People come from any organization, we tell them this is the way we do work here. Not that other people are bad, they're all good quality ethical people, but we, I think we are building this in the DNA. All that is, you know, that talks from within. That's what it is. Now, coming back to your cost to income, you know, comment. One is of course, I specifically referred you to one of the earlier speakers who talked about, you know, where we added up those three items of legacy, et cetera. You add that, you will find the cost income has significantly come down. I'm telling you, within three years, you will see that you will get there. If you just watch the story play out year after year after year, it will go there. Honestly, I'm not disturbed because I can see it from. I'm an insider, of course, I can see it. You will also see it. As the scale plays out, automatically cost income will sort out. That's how it plays. Initially, there is cost. After that, there is income. That's what it is. Now with regard to, you know, there is one data point which none of you know, I'm going to share some data points with you, and this will help you understand the bank, how the bank has progressed. Okay? Now, if you take the core PPOP of the bank without any other income lines. Now, core PPOP of the bank in FY 2019 was INR 1,100 crores. Okay? INR 1,100 crores, half year. Sorry, annualized for the half year. That is Capital First and IDFC Bank put together for December 2018 quarter and March 2019 quarter. That is the first half year after the merger. That was INR 1,100 crores. Now, even if you assume credit cost at maybe about 1.4% on the whole book, you know, retail being 1.5%, 1.6%, and wholesale being little less than that, blend. If you take 1.4%, which is a very reasonable assumption, that would come to INR 1,300 crores on the book. So actually, on the core, the bank was a loss machine even after merger for the first half. Pre-merger, I can tell you that it was basically the income was INR 743 crore and assumed credit cost was INR 988, so it was actually a loss situation. That's not the point. The point is that this was INR 199 to negative. Now, FY 2020, when you do the same analysis, core PPOP minus core credit loss, it's coming INR 250 crore positive. FY 2021 has gone to INR 400 crores. FY 2022 has become INR 1,079 crores. And FY 2023, you know, you can multiply this quarter's numbers or whatever it is, and analysts have put out some numbers about operating profits, so it's not difficult for you to guess. You know, we already guided about 50% over last year. That means about INR 4,200 odd crores of PPOP. The point I'm trying to say is that if something is rising from INR -200 crore to INR +250 crore in 2020 to INR 400 crore in FY21 to INR 1,000 crore in 2022 to whatever number this year will be, it is substantial increment. You can see how this chart is rising. We as insiders can tell you that the core is delivering very strong, so all items will fall in place as it play out. Thank you so much, sir. Now you watch our 2023, you watch our 2024, you watch our 2025. I don't think the trend is changing. Yes. Thank you so much, sir. My last question is on capital adequacy. I think you're at around 15%. Are you comfortable with this? Would there be any need for a fundraise in the next one or two years to support the kind of 20%-25% loan book growth that we want? Well, we evaluate this from time to time because, you know, internal accrual is also going to be strong now. Growth is also strong. We'll play out with the equation. Okay. Thank you, sir. Thanks. Thank you. The next question is from the line of Sagar Shah from PhillipCapital. Please go ahead. Good evening, sir. First of all, congratulations for excellent set of numbers, I have to say. Now I have just two questions, actually. First of all, we have already reached about 10% ROE in this quarter itself actually, instead of the fourth quarter that you were guiding for. We are early in the game, actually. Going ahead, what are the key drivers for further traction in the ROE? If you are expecting anything around traction in ROE for around 13%-15%. What are the drivers, first of all, for the traction in the ROE and the ROA? Second question is, then going ahead, since we are having almost a very good run as far as the economy is concerned. Going ahead, do you see even on your corporate front your corporate growth even for credit will go up as compared to retail? My last question was, have we seen the average cost of the deposits and borrowings that is coming at around 6% if we compare for this quarter? Are we peaking out on the average cost of deposits and borrowings, actually, at least for this quarter and going ahead? Yeah, I'll start with the last one. On the average cost, as I said, average cost for us for Q2 was about 5.5%, which was about 25 basis points higher than the previous quarter. Of course, and many of the repo increases, I think, are factored in the market rate, and that's how it's playing out. We don't see a substantial increase going forward. Offset to this, as I said, even the loans get repriced, in the equation, and hence we see that both should move in tandem. We are not very worried on that front. Sorry, one thing to add to this. From our point of view, we don't take any fixed positions on interest rates in the market. We are right now, frankly, we're paying only 4% up to INR 10 lakhs. We don't intend to touch that, honestly. I've always said that we have enough margin and, if required, we'll always touch something or the other, but we won't let our deposits or machinery slow down. We don't see the need as of now, but we'll watch. Okay. Sure, sir. Now, yeah, for my first question, what are the key drivers for the ROE going ahead, sir? Scale, that's all. Okay. Scale. Is this anything related to maybe your OpEx growth normalizing and your income growth increasing can be related to that extent? That's what scale means, right? Because if supposing the expenses increase by maybe 20%-22%, but income grows by 30%-30-odd%, that straightaway. Remember, income, we expect it to grow by 30% on a larger base, and the expenses will grow by 22% on a smaller base, obviously, even today. So you know how scale plays out. That's exactly scale and operating leverage. Of course, there are so many other product lines like fees and other stuff. You know, so many new lines of business we launched, all that will grow. Because in this quarter- Sir, sorry to interrupt, but for any follow-up, may we request you to rejoin the queue, please. The next question is from the line of Franklin Moraes from Equentis Wealth Advisory. It's 7:30 P.M. I'd love to wish all of you Happy Diwali and wish and close the meeting. If you have any last few questions, push it in. Willing to do that. Just one last question, sir, before. Yeah. Yeah. The next question is from the line of Franklin Moraes from Equentis Wealth Advisory. Please go ahead. Yeah, sir. Thanks for taking my question. I just wanted to understand, you know, from the time of opening a branch to the time the entire costs are loaded, what is that period? How many months does it take? No, no. I told you earlier, it's hard to ever get specific numbers on these things. Because it comes, you know, if you take it on the basis of pure variable cost, you'll get one answer. If you take a fully loaded cost, you'll get another answer. Depending on which way you look at it could even be 18 months, it could be 24 months, it could be somewhere in the zone, depending on how you load the cost and look at it. We shouldn't look at it like that. The way we look at it is that end of the day, cost, you know, we don't want to give explanations to people that this is because of this reason or because I put more branches or credit cards or legacy liabilities, et cetera. These are really details which, you know, people like yourself or anybody who's willing to do some extra work, they understand these things. For most people, end of the day, people will just look at your ROE and say, end of the day, are you improving? Whatever it is, all costs put together, we are committed that our ROE will go up. It'll go up year on year from here on, we have no doubts in our mind. It's already going up, you can see last four quarters. This we feel that this will go on. I will say one last thing because it's very important you know in the context of some of the questions that were asked earlier. Now you take this quarter's PAT of the bank okay. Now I told you that there are three items which are those well-known items. So credit cards legacy liabilities and the setup cost of a branch right of the bank. So you take these three items we told you INR 525 crores. Let us call it INR 500 crores. Now you take the post-tax impact of that number. That'll probably be about INR 375 crores or INR 380 crores. In other words, if this had just been a mature bank, give it three years and, or maybe four years, and then you find that this amount of money will come to, start coming to the P&L hopefully. This quarter's PAT was INR 555 crore. You add INR 555 crore and add that number of INR 375, you'll go to INR 946. You add INR 946 into four, that's INR 3,800 crore. What's the equity base today? INR 22,000 crore. What is INR 3,800 crore you are touching? Nudging 16, 17. Do you have any doubt in your mind that these three items, we can't turn these three items around, you know, those three items? Of course, we will. In my mind, even if you do a simple plain math of just add these numbers and then, you know, do it, you know, bank is heading to a very healthy ROE. For those of you who are willing to wait, give us the time, you will see the numbers for, and we have no doubt. Yeah. Thanks a lot, sir, for the elaborate response, and wish you a very happy Diwali. Yeah. Thanks very much. Thanks. I wish you all a very, very happy Diwali. From our side, let me tell you that we are feeling quite comfortable. Yeah. Thanks, Mr. V. Vaidyanathan and the entire senior management team IDFC FIRST Bank, for answering all the questions. Thanks all the participants for being there on the call. I wish you all a very happy Diwali. Thank you. Thank you, everyone. I wish you a very happy Diwali. From Sudhanshu, Saptarshi, myself, and all of us at IDFC FIRST Bank, we wish every one of you a very happy Diwali to all the people who are listening to the program today. Thanks a lot. Bye. Thank you. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. We thank you all for joining us and you may now disconnect your lines.