Ladies and gentlemen, good day and welcome to the IIFL Finance Limited Q1 FY23 earnings conference call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to the management. Thank you and over to you, sir. Good afternoon, everyone. On behalf of team IIFL Finance, I thank all of you for joining us on this call. I am Rajesh Rajak, Chief Financial Officer, accompanied by Mr. Nirmal Jain, our Managing Director, Mr. Monu Ratra, CEO at IIFL Home Finance, and Mr. N. Venkatesh, CEO at IIFL Samasta Finance. I'll now hand over to our Managing Director, Mr. Nirmal Jain, to comment on the economy and the group's overall strategy and plan. Over to you, sir. Thank you, Rajesh. Good afternoon and welcome to the analyst call. Macro environment, as we all know, the global environment is turbulent. Yesterday, Fed hiked the rate by 75 basis points, which was a little aggressive, but maybe most people say that was much required or called for. Market rallied maybe for a variety of reasons, but the fact which very few people doubt is that there is an imminent slowdown or recession in the developed world and particularly USA and Europe. The global backdrop is worrisome. In that backdrop, if you see India, then the underlying momentum in the economy is very strong. If you look at all the headline numbers of GST collections or the consumption demand or auto sector monsoon, at the same time there are recovery signs in the rural economy as well. This is corroborated by earnings, particularly of banking, financial sector, IT sector, as well as capital goods, that the momentum has been very strong. India seems to be a sweet spot in this global economy. Coming to NBFC sector in our company, I think NBFC sector also has come out of a long crisis, which began with IL&FS and then a few more other corporate defaults and COVID. The sector seems to have consolidated and now the liquidity as well as credit demand is improving. The environment is becoming a lot more positive. Coming to IIFL, I think we had a good quarter. Our loan growth of the core product. Now, I would like to emphasize more because these are the products where we are focusing for growth, and now they account for almost 95% of our portfolio. Growth was 26%, in terms of loan A UM, and the pre-operating profit, pre-provision operating profit was up 33%. We had higher provision this time again, and the post-provision pre, profit before tax and profit after tax were up by about, 24%. The provision requirement was higher, as we have, microfinance pool and, in fact close to INR 400 crore which are restructured, that came out of restructuring, in last quarter. I mean, it would have come, the payment would have become due last quarter, maybe some in this quarter. Where we are seeing some stress, and we've been conservative, we've provided for it aggressively. We've taken about INR 100 crore additional provision in microfinance. But I think what is noteworthy this quarter is that NPAs have started falling and, GNPA is at number which was 3.2% at March end. Even following RBI's stricter norms, which, you know, although RBI has given some discretion, but we continue to follow the norms, that will come in force very soon, maybe by September. With that, our GNPA number was 2.6% for the entire book. NNPA or the net non-performing assets after provision for stage three was 1.5%, down from 1.8%, and provision coverage ratio has improved and is now 137% as against 123% in the previous quarter. Our net gearing, which, you know, if you net off the cash, liquid, and cash equivalent and beam debt, where contractually legally is not debt, is around 4.4 x, significantly better than what it has been in last few years. Our capital adequacy for IIFL Finance Limited is 22.8%, a shade lower than 23.9% last quarter. IIFL Home Finance capital adequacy is at 30.7%, which is significantly better. Almost half of our business now is done by our housing finance company. Operating cost, again, has gone up quite significantly last quarter. 200 new branches were commissioned and more than 2,000 people got further added to our manpower strength. Our total manpower now has crossed the 30,000 mark. We continue to invest in technology and marketing as well. Along with this, also the annual salary hikes, and in an environment like this, they have been pretty good. That impact also is visible in the first quarter operating cost. The outlook seems positive because, as I said, that credit demand is showing strength. The collection and the general credit quality is also improving. Interest rate hike is always a worry for any lending institution. As far as we are concerned, given our retail small ticket granular book and even in the home loan we operate in affordable housing. Relative to the rest of the financial sector, I think we'll have better capacity or better, superior ability to pass on the interest rate hike. I mean, as long as in a reasonable band. If it goes up significantly, it can impact demand, but at this point in time, the economic momentum is so strong that it looks like that will be taken in its stride. With this now I'll hand it over back to Rajesh to take you through, details of our profit and loss, and some developments during the quarter, and then we'll open it for Q&A. Thank you. Thank you, Mr. Jain. In line with the momentum of the previous quarters, our profit continued to grow. The profit after tax for the quarter was highest ever at INR 300 crores, which is up 24% on a year-on-year basis and 3% sequentially. The major drivers being the volume growth of 22% in AUM and the higher non-fund-based income. The PPOP was at INR 674 crores, again, up 22% on a year-on-year basis and 1% sequentially. Our loan book structure is such that 95% of our loans are retail in nature and 67% of our retail loans are PSL compliant, with the exclusion of gold loans which are not classified as PSL loans, but they have other benefits for banks in terms of capital charges. This is in line with our capital optimization strategy that 39% of our AUM is either assigned, securitized or under the co-lending model. The same number for the previous year for the same period was 34%. Since April 2021 till June 2022, that is a period of 15 months, we have added almost 11,000 employees and over 1,000 branches. This has obviously affected our cost to income, which has increased to 43% in Q1 FY23. Last year same quarter was 38%. The expansion has paved the way for accelerated growth in the future. The annualized ROE continues to remain above 20% at 20.5% and largely driven by annualized return on asset of 2.9%. Our capital adequacy, as mentioned at 22.8%, is significantly higher than the regulatory amounts. Our average cost of funds for the quarter at 8.5% is 48% down on a year-on-year basis and in fact 9% down or 9 basis points down even on a sequential basis. At the quarter end, we had liquidity of INR 5,520 crores, which was adequate to meet not only all near-term liabilities, but also to fund the growth momentum. Two important events took place during the quarter. One is, we enter into a joint venture with Open Financial Technologies Private Limited, which is Asia's largest SME-focused neo-banking platform. With this, we aim to strengthen our offering, our entire product range available to MSME customers. The second update was that the board of directors of IIFL Home Finance Limited approved a transaction involving investment by a wholly owned subsidiary of ADIA, Abu Dhabi Investment Authority, of INR 2,200 crore for a 20% stake in IIFL Home Finance Limited. A brief update of our digital properties that we have. We largely do our DIY sales, loan sales through WhatsApp and MyMoney, the apps. More than 45,000 customers have been onboarded till date under the above initiatives. The DIY disbursement in the quarter one was at INR 260 crore. We also have another initiative of gold loan at home, which continues to see significant traction, and it has increased fourfold to INR 206 crore during the quarter. Also in terms of servicing transactions for customers, they can do it through IIFL Loans app and the MyMoney app. They continue to increase in usage. We had about 350,000 active users during the quarter, which is in line with the overall digitization strategy of the company. These are the brief updates. We can now open the floor for further questions. Thank you. Thank you. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on your 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 Sukriti Jiwarajka from Laburnum Capital. Please go ahead. Hi. Just on the first point you mentioned, the stress that you are seeing in the restructured book is only the MFI restructured loans or the overall INR 400 crore restructured that you had reported last quarter? I think MFI was the large part of it. The other restructuring actually came out in relatively lesser. The stress that we are seeing is predominantly in MFI. Okay. No, because last quarter, as of 31st March, I think the MFI restructured book was zero, right? Yeah, Sukriti. What happened that came out, supposing the getting out of restructuring is over on 31st March, then your payment will become due sometime in the next quarter, and once you have defaulted for 90 days, then only it becomes GNPA or a stressed asset, or as you start defaulting on payments whenever it's due, then it becomes stressful. All of this has slipped into NPA, right? Not necessarily, because as they come out of restructuring, some customers do pay and some of them don't pay, or some of them are not able to pay the full amount that is required as per RBI's new policy, then they get into this thing. Many of them, you know, there is a recovery process and there's a collection. It is not that, you know, if somebody has not paid, you know, for one or two installment, it will definitely go into losses. Some of that, you know, is recovered and some of them come after a lag, so there's a recovery from pool that is identified as NPA also. Can we quantify this? Because you have INR 400 crores of about INR 375 crores of restructured MFI loans, maybe a quarter, two quarters back. How much has slipped? How much is in stage two? Because what I'm seeing is also that your stage three provisions for MFI is still at 67% and MFI customers don't usually come back. I'm just trying to understand what has gone where. These are COVID-related restructuring because all these, many of these customers, had their income and livelihood, suspended for some time. You know, I think that out of INR 375 crore, we should be able to recover at least half of it. The process is there, so whatever recovery is happening is not that it's zero or whatever, it's not that. See, what happens is the customer under normal circumstances is not paying for, say, 90 or 180 days, then you are right, that will become very difficult to collect. When you give a holiday for a time period and then you come back and it takes some time, that is a different situation. Okay. The half that you expect to recover, the other half. Now the entire thing has come out of restructuring. In last quarter and this quarter, I think we'll know exactly the total stressed assets. Sure. No, just for the half that we don't expect to come back, are we 100% provided there? We have, I think, INR 271 crore provision in total for MFI. INR 270 crore, including the INR 100 crore this year, this quarter. Yeah. I think that's the provision that we have, total provision carried for MFI. We may need some more in the next quarter, I guess. Yeah. Yeah. Got it. INR 275 crore you said, right? Total provision in MFI? INR 271 crore, but that includes for all assets, not only the stressed assets but even the normal book. Got it. On these assets, we have provided about 66%. Two-thirds of it. Yeah. Got it. My next question is on, so you have given across product segments, it does look like, the customer, your customer is being able to absorb the higher rates. Like you said, you know, you probably have a better ability to pass it on. I just want to get a sense of the competitive landscape in the sense that is competition being rational and has everyone raised rates in, you know, the core products in home, in gold, in business loans also? No, you're saying competition, competitive pressures on the yield, on the interest, rate? Has everyone been rational enough to raise rates to the same extent, or are people- Yeah, I think it's a good question. In gold loan, in the last financial year, almost from September to March, people were actually quite irrational in terms of the interest rate that they're quoting, like 49 basis points per month means 6%. Many of these players have cost of funds more than that. They thought that they'll get the customer and they'll be able to raise the, you know, price by some default or whatever. But then it doesn't happen to that extent. So I think the industry and this cutthroat competition in gold loan is easing now because most of the players are now raising money and becoming rational. One is that rationally increasing the price, say 90 basis point bank rate has gone up, the interest cost might have gone up by a certain basis point. That is one part of it. The second was that teaser rates and trying to, and that was like spoiling the market. That tendency has reduced significantly. Got it. See, 50-100 basis points, the price, you know, pass on in this industry is never difficult. What was challenge in the last, you know, one year was that many players were coming with the teaser rates, which are completely irrational below their cost. Obviously, customers actually see this over six months, nine months, that, you know, the rates that what was promised to them when they took the loan and actually is very different. I think that tendency is getting away and this is a good sign for the industry. In home and business, are people raising rates like we have? In home loans, I think one rate hike has been done. In home loan, typically what happens that maybe Monu is there, Monu can answer this. Yeah. The first it goes into tenor, but if it gets into EMI, then Monu, why don't you explain the home loan? Yeah. Home loans. Yeah. Hi, Sukriti. I think your question was that has the industry also moved in tandem with the interest rate increase, right? Correct. Yeah. It has moved in tandem and it's right through, whether it is the public sector banks or the private HFCs or private banks, everybody has moved in tandem. The difference, everything has moved in tandem, so there is no widening of the gap created by us increasing the rates. Clear. Monu, while you're here, the business loan strategy is not entirely clear to me. I think a few quarters back, you all had said that it's, you know, you're going to start focus on this. Is it part of the growth portfolio? Because I do see that it does seem to lag the other core growth segments. What do you want to grow here? I think do you want to run down the unsecured book? Can you just re-explain the strategy? I think I'm repeating. Maybe you've covered it before. No, one second. You are asking about strategy for housing finance company or for the group? No, the business loans. Okay. Business loan, if you see, 73% is secured. In business loans there are two parts of business loans. One is which we do through HFC, which is, you know, led by Monu, where it is mortgage against property. The other is we do digitally, which is unsecured, which is done through parent company, where also a significant part of it we try and get it insured, but there the ticket size is small and loans are unsecured. I think, what we are trying to do digitally is more focused on unsecured, but what we are doing through our network and particularly the housing finance is mortgages. The split is around 70-30, 70% is secured and 30% is unsecured. Both the businesses, both the segments will grow. Okay. The Open will come into your digital unsecured mortgage? Open will come into unsecured to start with, but over a period of time we can get leads from there for secured home loan also. Okay. Can I squeeze in one more? Please go ahead. At 15% Tier 1, do you think, I mean, I know the regulatory limit is much lower, but you never want to go there. Is a fundraise likely in the parent in this year? I think, given the co-lending model and the co-lending assignments, probably they gather momentum in the second half. We won't need capital. Actually the capital that we have raised in HFC, we will make sure that, you know, that is also utilized productively and is leveraged adequately so that we generate enough ROE. At this point in time, there are no plans to dilute equity in the parent. Got it. Thank you so much. Thank you. Next question is from the line of Amit Mantri from 2Point2 Capital. Please go ahead. Hi, Nirmal Jain. First of all, congratulations on a very good quarter. My question is on the provisions front. This quarter, you know, we have done almost 2.9% of the book on an annualized basis, as provisions, and large part of that is microfinance. What is the credit cost guidance for the full year that we have now? Because I think last quarter you had given a credit cost guidance of 1.5% for this year. As of now, what is the guidance for the full year? You know, actually what you're saying is right, that the provision is higher than expected and almost like it's INR 100 crore of additional provision in MFI. I think you should, Now it should be between 1.5%-2% for the whole year. See, if you see now, the provision is around INR 250 crore in a INR 52,000 crore book. The year, so full year I think it'll be, it, we should be anywhere between 1.5%-2%. Okay. This provision is on the own book, right? Which is almost around INR 33,000 crore- INR 34,000 crore. Because the rest of the book is anyway, we don't take the risk on that too. Yeah. I think I should, you know, I said correctly. What you're saying is right, that the provision is on own book, which is INR 34,000 crore-INR 35,000 crore. Even the percentages are calculated on that basis. Now in the presentation you have guided that even another two, three quarters, you will continue to see a high rate of provisioning, and after that it starts tapering. Possibly Yeah. What you're saying is right, that that's why I'm saying that it we may end the year with 1.5%-2% because we. There are two things. One is the provision amount that we take. The MFI thing may come, it may taper off for a period of time, but it can continue in the next quarter. One quarter we've already seen. Probably we'll see some impact next quarter. You know, I think, unless there's something unexpected happens, it should. The unusual impact of COVID restructuring moratorium should start easing now from the next quarter. If we continue to have the current run rate, then the provisioning will obviously be much higher than 2%. Currently INR 250 crore run rate, if we have for even two, three quarters, then the full year provisions will be probably more than INR 800 crore. The, on a 35, even if that group becomes INR 40,000 crore, it's still higher than 2%. No, no. Yeah. What you're saying is right, but then obviously our expectation is that the provision will fall. Hello? Hello, can you hear me? Yes. Sorry, I lost you in between. Hello? Mr. Amit Mantri, please go ahead and speak. Okay, great. Okay. Okay. Mr. Amit Mantri, your line is. Your voice is cracking. Please go ahead and speak. Now? Clearly? Yeah. I think in between your voice is cracking. Yeah, tell me. In the microfinance book, when you look at the stage two plus stage three assets, that is around INR 600 crore as of now. Corresponding to that, we have say INR 270 crore and even if we take out some standard asset provisioning, we still have INR 200+ crore of provisions that are corresponding to that. That's right. From the other place that we are hearing on the 30- to 90-day book, most of them seem to have 90% plus correction efficiency. How much of this, you know, stage two book is expected to slip into NPA? Stage two book. Now when you say stage two, up to 60 days if you look at it, there'll be, I think, 90% collection should happen. 60-90 days it goes into little lower, and then 90 days and above becomes even more difficult. I think, see this restructuring thing is new because one is that people on a regular basis don't pay one, two, three installments and that people were allowed to take some time and then they're asked to come back as things become normal. We should be in line with the industry. I think, you know, at least in terms of what we have done in last quarter is that we have increased our collection force. We have also, you know, in terms of teams, we have separated the sales and collections. Some of the people who are there in sales, we identified them for collection, put out a proper incentive scheme for them. We want to handle this on a war footing so that this gets resolved, properly in next one or two quarters. Okay. Thank you very much. I'll come back in the queue. Thanks. Thank you. Thank you. Next question is from the line of Harsh Shah from L&T Mutual Fund. Please go ahead. Yeah. Thank you. Congratulations, Nirmal Jain and team for the good set of results. Just couple of questions. Firstly, on few of your business segments, like for example, gold finance, how has been the competition intensity now, and what has led to increase in yields on QoQ quarter on quarter basis? Competition intensity is easing and the cutthroat, you know, I spoke about it, some absurd kind of prices, they are now going out of the market. You know, what happened is that, these easier schemes, you know, we also sort of tried to follow the industry, but very quickly we withdrew them, in the last quarter itself. We realized that, even the volume growth is slower sometimes and we have to sacrifice something, but we'd rather be. You know, as our tagline is a easy path, that we'll be more transparent and straightforward to the customer that is interested rather than say something else and charge something else. Last quarter we suffered. This quarter we are a little bit back and hopefully yields should improve little bit from here also. Correct. I was asking about competition from the perspective that there are other NBFCs, like for example, yesterday Bajaj also very aggressively commented that they are now starting to open standalone gold loan branches aggressively and also will offer gold loan in its existing branches. At the same time, customer base is different, but branch intensity continues to remain same. You know, earlier there was this hypothesis that once such kind of competition is seen, you come down the yield curve, and overall NIMS and ROA in this business segment will get depressed. Does this philosophy still remain the same, or you think that your overall business dynamics can improve and we can generate superior returns versus last one or two years? Our yields actually compared to the larger gold loan players has been lower actually historically. Secondly, what we have learned in the last, one years, you know, this gold loan, competition drama and the cutthroat pricing, that the market is so vast and the customers are looking for many other things. It may not be the right thing to fight on low price and if somebody is reducing the price and you just, you know, panic and do something. You know, there'll be some pockets where you may have some volume sacrifice, but there are some other pockets where you still have your strength in terms of brand, service and customer connect. I think we would be, you know, continue with the fair pricing and, you know, actually, see in gold loan what happens, people think that 17%-18% price is very high and a lot of margin. But what people don't realize is that the operating cost to loan is also 6%-7%, or it can be anywhere between 5%-8% depending on the scale. Like Muthoot kind of large players might have 5% or, you know, close to that. And the smaller players, sort of, volumes are lower, then can be 7%-8% also. It's not that 17%-18% is straightaway going into margin. If you do pricing which is more, you know, intense or like lower, then you discover that business might become loss-making for you. I, but you know, whatever we are seeing that we have our geographies, our areas, our branches and our brand and connect with the customer, we should be able to maintain. Okay. You had mentioned that you have opened around 200 branches. Any specific breakdown, what kind of businesses these branches will cater to? Out of these, 50 branches are for housing finance. Now housing finance, we have only about 330-odd branches. Relative to what base we have, we are scaling up a little faster in housing finance because as ADIA money comes in, probably, you know, Monu and his team will have more ammunition. Monu, you want to talk about it? Yeah. Thank you, Nirmal. Expansion plan. Yes. Thank you. We are, Harsh, looking at expanding our footprint in HFC business, which earlier was moderate. With this ADIA money on the anvil, we are moving to Tier 2, Tier 3 towns in specific states. We believe that t here's a vast opportunity out there for affordable housing and we should see some serious scale-up of the housing loan business in the coming years. Other than that, therefore, for microfinance and gold loan also. Understood. Just last question from my side. Your cost of fund has come down this quarter on a quarter-on-quarter basis. Was it repricing? Was it smart ALM management? What was it? See, it has come down only by 10 basis points. If you look at people are talking about interest rate increase, but the current interest rate, even after increase, are lower than what it was, say any time before 2018. What happens is, as the older loan gets repaid and we borrow now at a relatively better rate, you know, the interest basically the rate comes down. Our financials have been consistent, you know, our credibility with the bank and banks have their own and the lenders have their own scorecard, so we are able to negotiate little better as the liquidity is improving. What's the outlook for cost of funds when you're entering Q2 and Q3 for next year? If the RBI increases the rate and the liquidity is tightened, you know, the liquidity is very important factor, just not the RBI rate. You know, there can be some impact. I don't think that if the interest rates are taken higher across the system and across the economy, we'll remain aloof. Hopefully we should do better than last year. Understood. Just one last thing that I want to squeeze in, if I can. Since we are very aggressive on co-lending and off-book, and also we have great tie-ups with this bank, does that side of the business help us getting a better pricing on our liability side? Uh- As our relationship with them have significantly got better over the years because of the. Yeah, relationship is good, but yes and no, because even their rates are tied to MCLR. Like in case of home loan, we take a price increase for the customer, so even that goes to banks also or any other person. On the co-lending by itself will not help reducing or increasing cost of funds. But only good thing about co-lending is that it's like it's the loan term or financing is co-terminous with the asset. Supposing you're giving home loan for 15 years. Mm-hmm. It's very difficult to borrow for 15 years in Indian market because the market for long-term borrowing doesn't exist for corporate sector or is very small, very thin. When you are doing a co-lending, then it almost becomes like funding for 15 years, but you don't have to again refinance it. For, you know, it's taken care for the entire tenure of the loan, whatever it be. I mean, if you have prepaid it can get shortened. As a co-lending advantage is that the asset liability matching is automatic and 100%. Understood. Yeah, that's it from my side. Thank you for the team and all the very best. Thank you. Thank you. Next question is from the line of Saptarshee Chatterjee from Centrum PMS. Please go ahead. Yeah. Thank you and congratulations on a good quarter. Construction and real estate business, last quarter I think we had around Stage 2 and Stage 3 together, around close to INR 250 crore exposure. This quarter this has come down drastically. Can you please give us the break-up of write-off and recovery in this? No, it's difficult to give breakup of write-off and recovery, but some assets we've written off and there are some. There's a recovery as well. Also there are new loans also in this. You know, this CRE is one. It's not that we are shutting it down, but the new loans are from HFC for the approved project and of smaller amount. So I think it's a mix of this. Even the DCC of portfolio what we had has come down now. So DCC of portfolio in the last quarter was INR 890 crore, now down to almost INR 440 crore. Something like that, okay. INR 490 crore. INR 490 crore. Okay. Understood. The reduction would be largely like a write-off or it would be more like recovery. Both. Hello? Hello. Yes. It's a combination of both the things. Some of it you have part recovery and part you write off kind of thing. Okay. Sure. Second question is, we have, I think, a high coupon dollar bond of around INR 24,000 crore. Earlier you have talked about buying it back, but can you please talk about how much quantum and maybe timeline for buying this back? 2,000 - INR 24,000 crore. No, no. INR 2,400 crore, I think, right? INR 2,400 crore. Yeah, yeah. I think what is the outstanding now? INR 323 million. INR 323 million. We have done a INR 400 million total issue, out of which we bought back INR 323 million is outstanding and which is due in April next year. What we plan to do is that we'll try and buy back more and so that by the time the maturity comes, the amount outstanding may not be very significant. Okay. Sure. They're fully hedged. Okay. In the annual report you have mentioned that in the investments book you have around INR 2,000 crore exposure in the IIFL One Value Fund Series B and C. Can you please talk about which are the constituents and how the accounting of income from this book will come? These are some assets that we have transferred to the fund primarily, and the accounting basically is done based on the fair value. Based on the NAV. Isn't it, Krishan? Or rating agencies, who does it? It's basically there's a fair value NAV does, it's the accounting is based on NAV. Every quarter NAV is computed and based on that, accounting is done. Okay. Every quarter it will come under the non-fund-based income, right? If we're not lending. If there's a change in NII, that will come there. This will be majorly real estate exposure. Yeah. Is it correct? Okay. That's it. One last thing is, in the AUM, can you please quantify how much would be floating and how much would be fixed in terms of interest rate? I think interest rates will be. Home loan and LAP are floating. Home loan and LAP are floating primarily. Okay. Other than that, gold loan will be fixed. There also we have innovated, you know, that way everything will be floating because we'll always have flexibility to increase the price. Practically speaking, home loan and LAP are floating and, the smaller tenure loans are fixed. Understood. In one of the slides where you report the portfolio yields across the segments, does it also include the assignment income, or it is only pure interest income? No, not assignment. No, this is interest income. This is on-book asset. Okay, sure. Thank you so much, and all the best. Thank you. Bye. Thank you. Next question is from the line of Ray Pohanda from BCP Securities. Please go ahead. Hey. Good day, everyone. I believe that some of the persons just raised one question is actually in regard to the 23 notes. Did I hear right that you guys intend to gradually bring it down? No. Sorry. Can you repeat, please? No, it's in regards to that 2023 notes that's maturing later on in April. Yeah. Right? I believe somebody raised that question. I just want to make sure that I've heard that right, that you guys intend to gradually pay it off and Yeah, yeah. Don't plan to extend that notes any further. Is that right? Yeah, that's right. We will be able to pay it off based on RBI guidelines, which allow us basically, I mean, it's a little complicated formula by which it's calculated how much you can buy back. If you can have ECB, which is External Commercial Borrowing denominated in dollars, you can use that money to buy back. At this point in time, we don't have any intention to renew the dollar bond because the cost is significantly higher than our borrowing cost locally. What we intend to do is that we'll pay it off gradually, and whatever the balance is, we'll pay it off on the maturity date. That's what our current plans are. You're right. I understand. It appears that India is pretty close to the other remaining emerging countries in Southeast Asia. It seems that a lot of them either redeem it through sort of local loans, or they just somehow have extra cash, and they will intend to pay off as fast as they can. That's how I interpret or how I see it now. Yeah. Take it. Yeah. Ray, Okay. No problem. If you see our- Thank you. Yeah. If you see the $323 million that is outstanding, and in terms of liquidity that we have as of June end, that's about $700 million. While we plan to buy them back before their maturity, but on the due date also is not, should not be a problem to us to redeem them because of the rupee liquidity that we have on our balance sheet. RBI rules prohibit us from prepaying it using rupee liquidity, but on the due dates, we can always use the rupee liquidity that we have. Understand. Okay. Thank you. Thank you. Thank you. Next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead, sir. Good afternoon. My question was, I have two questions. One is on the capital adequacy ratio calculation itself. It has decreased from 16% to 15.3%, as of 16% as it is in March. If you see your loan book and securities book, I think you have to provide capital for securities book also has barely grown. What explains the dip in capital adequacy? Given the fact that they are doing co-lending, would gearing be a better ratio to look at your company? That's question number one. Question number two is, you know, I heard management talk about the strength of the economy. Do you expect collection efficiency to go over 100% as going into next quarter? Because a lot of the COVID-related problems will be over. With that bring down the NPA numbers. Overall it'll take a little time. I can understand that because there'll still be one, two payments behind. Do you expect the collection efficiency to go beyond 100%? Thank you. Collection efficiency, technically if it goes above 100%, then we'll have to come down because it can't remain over 100% forever because the way they calculate is that the overdue amount and the due amount and what you have collected. It can be over 100% only for a short time period, not for a longer time period. Only if it was lower, then it has to be bounced back to above 100%, to catch up. About your question about capital adequacy, Rajesh Rajak maybe you can explain. Yeah, Vivek, you know, this capital adequacy is obviously for the standalone company. In the standalone company, our loan book primarily comprises of gold loans. Quarter one was a bit subdued just like any other quarter as far as disbursement, though the volumes were high. Compared to, say, March end or the amount that we distributed or the assets that we originated was a little subdued. Our gold loan assets were higher to the extent of INR 1,000 crore on balance sheets. Kind of that extremes it, but then with increased level of assignment in the second quarter, which is the current quarter, this would fall in place back to the earlier levels. Okay, great. Thank you very much. Thank you. Thank you. Next question is from the line of Ayush Vimal from Clearview Capital. Please go ahead, sir. Good afternoon, Mr. Jain. Congratulations on a great set of numbers. I had two questions on the gold loan book. The first question is, what is your outlook on the gold loan book in the light of falling gold prices? The reason I'm asking this is because a lot of the larger gold companies seem to have derived their growth over the last four, five years from you know the change in prices of gold rather than tonnage. I just wanted to check how it's going to impact us in the future if the trend continues. With the gold price, actually in India, the fall has been lesser than the global because the duty has increased. If the gold prices continue to fall, obviously, your ability to loan on the quantum of gold that kind of you or your customers have reduces. That will have a negative impact on the growth, and the growth can slow down for the gold industry as a whole. We should be able to gain market share in the organized sector with our increased network of branches. Of course, with the gold prices, what you're saying is right, that the last two, three years, and particularly in 2021, the significant increase in gold loan assets, you know, of the gold loan companies was primarily because of the gold price increase. What happens is the tonnage growth, what you can also monitor for most of the players is where I think you'll know that the volume grows. That for the industry, the organized sector, I think we have been doing better. We have about 10%-12% gold tonnage growth in our vaults. Hopefully with the expanded network, we should aim a little higher. I think, you know, your point is correct. If the gold prices go down, the industry growth will also slow down. Thank you, sir. One more question that I had on the gold loan book is I see about 20% of the loan book exposure to Gujarat. Just wanted to check on whether we have lumpy loans in the book. If you could tell me what is the proportion of the outstanding loan book whether ticket size has been more than INR 1 lakh. That will be very helpful. No, Gujarat is. What has happened is that we were a little late entrant in the gold loan. Strategically, we saw that the earlier players were very widely entrenched in South. We started with Gujarat and made that as a flagship state. We have more than 350 branches in Gujarat alone. The gold loan book is very granular and distributed, so there's no lumpy exposure at all in this. Any of our gold loan book anywhere in the country is all retail. Got it. I think that's very helpful. Thank you so much. Yeah. Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Yeah. Thank you very much, sir, for the opportunity. Now, sir, I just wanted to understand first up on your credit cost. Now, you mentioned about 2% of credit cost for this year, maybe 1.5%-2%. Even if I take the higher band of that 2%, we are looking at maybe INR 750 crore kind of a credit cost this year, with the 25%- As the book will also grow, yeah. Yeah, yeah. Assuming the 25% growth in book. Now, 250 crores we have already done, so we are left with INR 160 crore kind of a credit cost per quarter, or INR 160 crore-INR 170 crore, for the remaining three quarters in this year. Ideally what we are saying is that from this quarter onwards, our credit cost should normalize. Is that the right interpretation? Yeah. This quarter onward, okay. If you, I mean, what the way logically should happen, but nobody has, you know, precise view on the future. This quarter onward, next quarter, all three quarters, we should see it going down. Provision should go down quarter-on-quarter, right? Yeah. Overall, we are looking at 2%, 1.5%-2% for the entire year, right? Yeah, that's right. Okay, understood. Sir, my second query is regarding, I think we have been guiding about AUM growth of 25%. Now a similar growth on PPOP is what we might be looking at? Sorry, what are you saying? A similar growth in PPOP is what we might be looking at? Yes. Okay. Fair enough. I got it. That's it from my side. All the very best. Thank you. Yes. Some of the impact also came because of deemed NPA, which, you know, came from RBI last quarter. That also has, you know, led to increase in credit cost. Thank you. The next question is from the line of Mudita Nahar from Abakkus AMC. Please go ahead. Hi, sir. Congratulations on the good set of numbers. Just a couple of questions. MFI book in the last quarter, due to the RBI guidelines, the disbursement was quite slow. How is the disbursement picking up from July, sir? Actually last quarter we were focusing a lot more on setting up collection infrastructure and collection apparatus in place. This quarter onward, disbursement should pick up. How much would be the percentage rise, sir? If you see microfinance disbursement last quarter, we did INR 1,374 crore vis-a-vis INR 2,500 crore in the previous quarter. I think we should look at, you know, something like INR 2,000 crore as a normal number in a quarter. Okay, sir. Sir, on the employee expense, quarter-on-quarter, the employee expense has increased drastically by 10%. Is there any involvement of variable expense in this quarter? No, we take our salary increases, make it effective from first April. This year, I think 7%-8% of that would have come because of salary hike alone. On the securitization books, in the last seven to eight quarters, this is the lowest that you have done securitization in a particular quarter. Any color on that, sir? See, because the core lending has grown now, so that obviously is eating into the book that could have been securitized. Yeah. So I think if the core lending and assignment grows, then obviously securitization is not our focus. Okay. Going forward, what is the trend that we can expect out of this, sir? You should look at core lending, securitization and assignment together. These are all three off-book. I think our focus will be more on. See, sometimes what happens that there are like, say, foreign banks, you know, they only take securitization and they don't take assignments or core lending. They're offering a good rate, then you can do a transaction there. You know, I think you should look at the three together as one pool, as off-book. Okay, sir. That is from my side, sir. Thank you. Thank you. Thank you. Next question is from the line of Akhil from Axis Mutual Fund. Please go ahead, sir. Yeah. Thank you, sir, for taking my question. I joined in late, maybe you may have answered this question just. Wanted to understand this decline in stage three book. Last time, I think we also had something which was classified as a deemed NPA. Now, has that subsided until the stage three or we have done away with it? Sorry, just wanted to understand what has happened there. In the stage three, we have taken some write-offs, and we also provided for it. Some resolutions have been done. It's all put together, what we are seeing is the decline, you know, from, you know, up to INR 885 crore from, I think it was about little over INR 1,000 crore last quarter. INR 1,074 crore to INR 885 crore. Okay. No, last time if I combine your normal stage three and stage three, including the deemed NPA, it was closer to INR 1,857 crore, which has now come down. No, no. It was INR 1,074 crore. INR 1,074 crore was combined number. Acha, one thousand- I think it's we adding the two. This is- See if you see the slide. No. This INR 1,074 crore includes INR 783 crore. Okay. Okay. I get your point, sir. Yeah. I mean, that number combines both the things. Maybe it's not presented properly, but INR 1,074 crore is odd. It's not INR 1,800 crore. There's a little bit of decline, maybe 10%-15% this quarter. Get it, sir. Get it. Right. Sir, last piece on the construction book where we have seen a decline in your stage two and stage three. Could you throw some light on what exactly has transpired? Is it a write-off or is it repayment that has actually happened? We are doing certain aggressive settlement and write-offs also, to bring this book, you know, under control. Largely, could we attribute this to, let's say, write-offs from your book. Because the book has actually also declined. I think last time the book was closer to INR 2,800 crore-INR 2,900 crore. Yeah. Which this time has come down, so. It's partly, it's both the thing. It can't be entirely. It's both, it's combination of the two things. Sure, sir. Thanks. That, that's all from my end. Okay. Thank you. Next question is from the line of Anusha Raheja from Dalal & Broacha. Please go ahead. Yeah, thanks for taking my question. I just want to understand, you said that you're looking at AUM growth of around 25% out. I want to understand where the growth will come from because, you know, with the drop in the prices of the gold, AUM growth, you know, will be very difficult to come there. On the AM-MFI portfolio also, you know, the growth will not be that significant. Large part of growth, I mean, if AUM has to grow by 25%, I think home loans will have to, you know, grow at much higher rates. Do you foresee that, you know, that high growth is possible there? What will drive this? Okay. First, gold loan will grow maybe at a slower pace in case gold prices continue to crawl or fall significantly. There are two assumptions here. First of all, that gold prices will fall, but we don't know about it. Even if gold prices fall, then we may grow slower. I mean, our planned growth will be at least 12%-15%, you know. That is one. Secondly, home loan will of course grow, so it should grow stronger. Even microfinance now will start growing because, you know, as I said, the disbursement in the first quarter was lower as we are focusing more on collection. The industry is growing and microfinance also should see good growth. The fourth core product is business loan. There also I think the growth will be there. You know, I don't think that it will remain static. It will also grow. Okay. Over the next two years timeframe, how do you see, I mean, this number panning out? I think home loans should grow faster because that is how we got that company also funded by equity. Gold loan is again a little bit dependent on the gold prices, but given our expanded network, we should grow that also. We find industry looks good for next two years, you know, because I think it passed the difficult phase for last two, three years, so we should grow. In terms of business loan, the base of is not very big, but, you know, I don't see any issue there also in terms of growth. That will all look good, but in terms of, you know, you can probably say that relatively home loans should grow faster and microfinance followed by that and then others. Also, you know, on the cost side, over the next six months to one year, there will be increase in the cost, right? Assume that you pass on to that cost, will it impact growth? On that higher, you know, lending rates, how do you see your book from asset quality standpoint? The cost of borrowing, how much it goes up? It goes up. This is again, my personal view, and, you know, everybody can have a view on this because nobody knows future with certainty. If it goes up by 50 basis points or whatever, I think it'll be taken in stride. Now, if the cost goes up by 150 basis points, it may impact and more, maybe the mortgage of the home loan demand because, that is little rate sensitive, more than others. More than rate, you know, one also has to look at the economy because, the interest rate hike has impact on economic growth as well. That has in turn impact on the demand for credit. Many of these things are linked, but the way things stand today, the economy seems strong and then hopefully everything should be good. Okay. Thanks. Thank you. Thank you. As there are no further questions, we have reached the end of question and answer session. I would now like to hand the conference over to the management for closing comments. Thank you everybody for being in the conference and, in case you have any more queries or any questions, you can always reach out to our investor relations or CFO's department. Thank you and have a good day. I thank you. Thank you. On behalf of IIFL Finance Limited, that concludes this conference. Thank you for joining us and you may now disconnect your line.