Ladies and gentlemen, and welcome to IIFL Finance Q3 FY 2023 Earnings Conference Call. As a reminder, all participant lines will be in listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please use the operator zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to management. Thank you and over to you. Hi, good afternoon, everybody. On behalf of IIFL Finance, I thank all of you for joining us on this call. I am Kapish Jain, the Chief Financial Officer. On this call today, I am accompanied by Mr. Nirmal Jain, our Managing Director, Mr. Monu Ratra, CEO of IIFL Home Finance, Mr. Narayanaswamy Venkatesh, CEO of IIFL Small Business Finance. I hand over now the proceedings to Mr. Nirmal Jain to comment on the economy and the group's overall strategy, including performance for this quarter. Over to you, sir. Thank you, Kapish. A warm welcome to everybody. In terms of economy and macro environment, I think we know that the environment is turbulent. As far as the Indian economy is concerned, our underlying factors still are positive. While all of us have noted that the consumer demand had a slowdown last quarter, maybe a quarter before, there was a bit of a corrective effect of post-COVID demand. As far as demand for credit is concerned, it remains robust. Most of the segments of credit basically continue to see strong growth, double-digit growth for the whole economy or nation as a whole. Interest rates have increased significantly. In fact, RBI's Repo has gone up by 425 basis points, but most of it has not been transmitted because, the longer tenure loans, what we already had are at a contractual rate. Even at the incremental borrowing, we are able to negotiate better given our track record and the way we have handled the crisis in the last five years. The cost of credit has gone up marginally, and what we also passed on to our customer is a marginal impact and not the, of the Repo would reflect in a, you know, a tenure loan of 3-5 years. Having said this, you know, I think let's keep... I don't want to comment on the geopolitical or the market volatility, but underlying economy remains strong, whether it grows by 6.5% or 7.5%, that may be better off debate, but the demand for credit is growing. Unless interest rates go up significantly from here, we see that the outlook will remain positive and very optimistic on that front. Whatever interest rate hikes have happened till now, I think that at least our customer segments have been able to absorb to that manner, to that effect. I'll just briefly comment on our core businesses and then hand it over to Kapish for more detail, a detailed deep dive into the financial numbers, and then we'll take Q&A. You know, we have four core businesses, as you're aware of. In gold loan, there has been intense competition due to the number of new NBFC players who just jumped in and also many banks, and particularly the smaller banks have become very aggressive. What they do is a kind of undercutting of the price where, they try and set up branches near or they try and take our paper and offer, to the same customers at a lower rate. Sometimes these rates are below the cost of funds, in the hope that, you know, probably they'll be able to raise the rate increase later. What we are doing and what we've been doing in last two quarter is that rather than react to this short-term strategy or approach, we track our customers and we make sure that, you know, even if they go for our rates which are, you know, not affordable by us, we track them. Whenever the competition, they try to, you know, take interest rate hikes in a manner which is not straightforward, we try and approach those customers again. What we have seen is that October, November months were not good for our gold loan, the de-growth, but in December we were rebounded strongly. The quarter we ended with, I think 3% growth, a quarter-on-quarter. YOY growth remains fairly positive, about 20% for most of core products. Then, in fact, many competition now they are understanding and some new friendships were not able to raise capital, that undercutting price is not a long-term strategy. And also, our brand is positioned on what we say, "See the value." We share, we transparent even if we lose business in short term, we don't resort to the knee-jerk reaction or approaches where you have a teaser rate and then later it turns out to be something else. Home loan, again, we are moving more granular. Our ticket size is falling. In fact, there was subsidy received. That's what probably would have depressed the growth a little bit because subsidy gets adjusted in the loan amount of the customer and to that effect, to that extent, customer loan. Here again, probably we would like to see faster growth. The impact is, the growth has not been as strong as we would have liked it to be in quarter-over-quarter, primarily because we are moving to a smaller loan. The number of loans that we are processing is going up more significantly and the ticket size is falling and our more and more business is coming from what we call spoke locations or smaller places, compared to hub locations where competition is intensifying more. I think, as our network has in the home loan also, in fact our branches have gone up significantly in last nine months. As we get into smaller towns and we get market share there, I think the growth will become stronger. Microfinance has seen very strong growth, in fact 55% YOY. In industry, many good players have grown at good pace and demand is strong. The environment has become far more positive with the very pragmatic reforms by RBI. Where a number of reforms, including the remove the price cap and income-based assessment where the loan amount can be higher. And even our interest rate has gone up. We should note that we are taking the interest rate increase only on the new loans and not reset the old loan interest rate and therefore the portfolio rate will grow at a slower pace, but over a period of time it'll catch up. In microfinance, I think the industry has done around very well. We are very well diversified geographically from a strategy point of view. In business loans, we have a loan against property segment that has grown. Again is intensely competitive with NBFC and banks. What we are trying to do is focus on small ticket first property loans, which is like, you know, the ticket size typically less than INR 10 lakh incrementally. There's the sweet spot that we are trying to target. These are the home loan customers or the same segment where they already have a loan. The loan has been repaid, they take a new loan, which is classified as a loan against property. Primarily against self-occupied residential property or smaller premises. You know, the digital loans now we have separated this time because digital loan is a loan where we kind of do it untouched by hand, where Entire end-to-end processing is digital. Our strategy is to partner with big players who have got digital footprint. In digital loan, if you look at most of the fintech, then they don't make profit despite very high NIM, primarily because customer acquisition cost is very high. What we want to do is that we don't want to incur customer acquisition costs ourselves by aggressive digital marketing. We have tied up with number of players and many bigger relationships are also in pipeline where the testing is going on and the, you know, the launch will happen very soon. We get the leads from these players and where we share the NIM or the fee in a pre-agreed manner. The digital loan can be personal loan and business loan both. In India, many a times sole proprietor, mom-and-pop shops are, like it's difficult to classify whether it's a business or personal because many of these self-employed people also use their personal account for business purposes as well. The digital loan is loan where we're going to get I mean, they're actually branches we refer. Primarily that happens through our app and through website, the leads come from partners. These are, I think, unsecured loans, predominantly unsecured loans. We want to keep it separate so that loans against property, which is like a mortgage, can be tracked separately. With this, I'll hand it over to Kapish to take you through the financial numbers, and then he'll come back for Q&A. Thanks. Thanks a lot, Nirmal. Just to tell you about the financial numbers and the performance. IIFL Finance profit after tax, without considering... Before considering the non-controlling interest part for the quarter, was its highest ever at INR 423 crore, which is up by 37% on a year-on-year basis and up by 12% on a quarter-on-quarter basis same time last year. This, ladies and gentlemen, is largely driven by the AUM growth and also some bit of expansion that happened on our NIM part as well. We recorded pre-provision operating profit of around INR 772.7 crore during this quarter, which was up by 26% on a YOY basis and 12% on quarter-on-quarter same time last year. As what Nirmal mentioned, our loan AUM has grown by around 24% YOY and 5% sequential quarters to INR 57,941 crores. If I further dissect this and focus on our core products, which are the retail products that we hold, that segment grew by 26%, 2% higher on a YOY basis and 5% quarter-on-quarter to INR 64,689. The core product segment now comprises of 95% of our total AUM. The non-core AUM primarily consists of the constructions and the real estate financing, which further shrank by 7% on a YOY basis, in line with the strategy that we have shared with the market earlier. As I mentioned, 95% of our loans are retail in nature, 67% of our retail loans are PSL compliant, which excludes Gold Loan products. Having said that, Gold Loan products still qualifies for a zero risk weight for the bank. Therefore, banks, even though they are non-PSLs, are keen to buy these assets from us. Lastly, the retail and the PSL compliant loans are of significant value in the current environment where we can sell down with the kind of pristine asset performance that we have shown to this market. Banks are always in keen to buy this from us, we ensure that we have a proper management and oversee these assets from a collection, recovery and risk management perspective. In line with the capital optimization strategy, 99% of our AUM is either assigned, securitized or under co-lending, bulk of it is now under assignment and co-lending. Going forward, we'll see a larger share of co-lending emerging in this number. Our signed loan book currently stands at INR 15,939, up by around 67% from last year. Besides this, there are securitized assets of INR 1,049, which is going down. The co-lending book is the key highlight here, which I should mention is from zero almost gone to around INR 5,700 crore in this particular quarter end. It's been made possible by new relationships that we added on the co-lending piece. We added UCO Bank and Punjab & Sind Bank for co-lending of our gold and home loan products, including the MSME LAP products. During the last nine months, to support our growth, we have added 669 branches and 4,318 employees in all across all our businesses. Which on the results shows a higher cost to income. With the monetization happening of the newer branches and the resources and people, we strongly believe that we should be able to bring this number down. This is actually has always also helped in our overall disbursement going up by around 44% from 9 months- 10 months. Our annualized return on equity for the quarter is around 17.9% on a lower gearing because we had the IDIA infusion of INR 10,200 crore, which came in the previous quarter. Which is bringing our therefore has some impact on the, on the overall ROE, the division on the, on the capital position. ROA stays strong and stable at around 3.4%. Capital adequacy for the standalone entity stands at around 21.5%, which is well, well above the minimum threshold of around 15%, which is really suggesting that we are able to grow ourselves without impacting hugely on our capital position through the on-book, off-book system model that we hold. Our average cost of borrowing marginally increased by around 10 basis points, and around 16 basis points Q on Q to around 8.79 basis points. This is despite what Nirmal mentioned, two very 5 basis hike in Repo rates and close to 100 basis points hike in the MCLRs or maybe 110 basis points. The gross NPA is touching closer to our endeavor or the guidance that we have given of around 2%. It currently stands at 2.08%, and the net NPA similarly stands at around 1.06%. Significantly down from our 2.42% and 1.22% respectively, which we gave and which we reported in the previous quarter. With the implementation of the ECL model and the act, the provision coverage ratio on the NPAs today stands at 184%. Earning per share for the quarter and not annualized stands at around INR 10 per share, which is up 22% year-on-year. The book value of the share per share now stands at INR 225.6, which is up by 41% year-on-year. Brief update on our liquidity position. During this quarter, we raised around INR 2,340 crore of term loans, bonds and refinance. All long-term money, which helps in my ALM very strongly. Additionally, we did around INR 3,700 crore of risk assignments of retail loans to banks. The cash and cash equivalent and committed trade lines from banks and institutions, of around INR 8,462 were available at the end of the quarter, adequate to meet not only for the near-term liabilities but also to fund the growth momentum. I must mention that this liability and liquidity position is also helping us in negotiating our borrowing, not showing any destination when we go and fetch some new liabilities from our bankers. We have a positive ALM thereby, and inflows over and above the exceeding outflows across all buckets, as you could see through the presentation that we have. The net to debt equity, the netting of the liquidity position thus is down to 3.2 compared to 4.2. The total liquidity for the group, as I mentioned earlier, is around INR 8,562. Loans classified as digital loans are part of the unsecured business loans with an active customer count of around 3 lakh. As what Nirmal mentioned on the digital front, we continue to focus on digitization and analytics to improve customer experience and enable a convenient one-stop shop for purchase and user experience. Our Gold Loan at Home initiative, established approximately two years ago, also saw significant traction with disbursement year over increasing by around 90% to INR 260 crore for this quarter. With this I come to an end, and we are open to Q&A. Thank you very much. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the questions are assembled. Participants, you may press star and one to ask a question. First question is from Manoj Kumar Mishra from PhillipCapital. Hi, sir. Good afternoon. Thank you for the opportunity. Just wanted to understand the gold finance business a bit in detail. What kind of tonnage do we have here, and what kind of LTVs are we running, averages LTVs on the portfolio? Also speak on the competitive intensities between some of the other players also stepping into bank. If you can speak to that. Thank you, sir. In terms of tonnage that we have, I'm really... I don't know. I think our average loan to value is around 60%-30%. What is the tonnage we have? That number, do you maybe? Maybe we'll get that number. I don't have it right now with me. In terms of industry, you know, since last year, it became very competitive. What we are seeing is that more... I mean, there are a few new players, and they try to do balance transfer. In terms of... That's a practice that happens in this industry. What we have to do is that from, as far as we are concerned, we make sure that money is coming from customer's account because you don't want to violate even for a smaller amount of money laundering and KYC process what it is. If you get a full money, obviously customer has a right to take his gold back. You know, the competitor that is trying to do balance transfer has to put money in customer's account without the gold and to that extent, you know. Normally what they do is that the people will accompany the customer, get the money transferred to customer's account. customer will transfer it to our account and, you know, then basically release the gold. This is as far as outward, outbound, balance transfer is concerned. Inward we don't encourage normally. If customer is very old and known, but other than that, you know, I think, customer have to come on their own. Understood, sir. Tonnage, sir, if you could just repeat. 55 tons, I think. 55 tons, and this has grown on a YOY basis on a QOQ by how much, sir? I'll get you that number. Must be 8%, 10%, but I think it will grow. I'll get you those numbers, and maybe we'll try and put those numbers also. Sure, sir. Before the end of the call, I'll get you those numbers, yeah. Sure. If I can just ask one last question. Can the AUM then go less than INR 1 lakh, INR 1 lakh-INR 3 lakhs, and more than INR 3 lakhs as a proportion of AUM,ir, it will be very helpful. Yeah. I think we'll get you these numbers by the end of the call hopefully. Thank you so much, sir. That's what ma'am. Thank you. Thank you. Next question is from the line of Saptarshee Chatterjee from Centrum PMS. Please go ahead. Yeah. good morning, sir. Thank you for the opportunity. my first question is on the digital loans. Now, if I see a digital loans, the GNPA percentage has reduced year-on-year or quarter-on-quarter, but there has been growth in loan dispersal as well as AUM. Can you explain what is happening in this side? You... So you're saying that the... Sorry, what has reduced the- Asset quality. Asset quality is improved, that's what you're saying, right? Asset quality has been better, but AUM as well as dispersal both have reduced. You should have been more aggressive on this front, right? Yeah, it's a very valid point. In digital loans, what has happened is that there was RBI circular in September, which basically laid down certain guidelines for partner sourcing. Particularly, I think from KreditBee and Buddy, the incremental loans have been insignificant and the RBR books are typically short tenor, so they run down very quickly. You know, organic growth is there in that loan book and is very strong. Maybe what you are seeing is a quarter-on-quarter number. I mean, that's where the September RBI circular had an impact. In terms of asset quality and all those things, there was, okay, some old book which has been, you know, which has been written off or which has been closed. That could be one reason. A year ago the book was quite small. You know the growth, although you don't see growth in this quarter, but in the previous two quarters there has been good growth. This quarter again, the continuing partners or where we have a direct, where we are fully compliant with RBI's new guidelines, that business is growing. There are two large partnerships that actually has shrunk in this quarter. Understood, sir. Very helpful. I can see as a data point, like in nine months, if I can see, I see that around INR 1,658 crore kind of a provisions that you have created with P&L. Can you please give a breakdown of how much is coming from, like a write-off, how much is from standard provisions there too? No. Sorry, can you repeat the question? Can you please give the breakdown of nine-month provision number to the PNL? Provision number. Okay. I think it's there in the slide, but I'll get you. Well, Okay. I'll get these numbers because I think that these are numbers are quarterly. For nine months, we'll just get you these numbers before the end of the call. I mean, the previous question was about, the gold loan manage has grown by 20% YOY. Okay. Sir, lastly, if you can give, like if I see your investment book, investment book has grown by around INR 1,000 crore quarter-on-quarter also. What are the general breakup of the investment book and how much investment, like how much investment we are doing on the 360 ONE side on their funds? This data is not correct actually. I don't think we have grown by quarter-on-quarter by INR 1,000 crore. Unless they're including mutual funds or the liquid assets in this. Where have you gotten this INR 1,000 crore number from? If I see your balance sheet from quarter 2 to quarter 3, and both including like cash and as well as short and long-term investments. No. Okay. The short-term investment means liquid mutual fund, whatever liquid we have. That will keep varying based on sometimes we put in liquid mutual fund, sometimes we put in FD. Other than that, we are happy. There's no change in the investment. Okay. As on date, like we have around INR 2,000 crores kind of an investment. What is our, like, exposure towards 360 ONE funds or real estate funds? IIFL Wealth... No, the IIFL Wealth Fund is nothing much, but the real estate fund of SSG, there is about INR 1,000 crores. INR 900,000 crores is there in that fund in total. Understood, sir. Thank you. Thank you so much. Thank you. Next question is from the line of Sharaj from [Laburnum Security]. Please go ahead. Hello, sir. Thank you for the opportunity. My question was again on the write-offs part. MFI has around INR 100 crores of provisions this quarter. Again, there is a continuation of write-offs here because the PCR has gone up. Can you quantify this amount? There's INR 123 crore write-off in the MFI book. Primarily because there are some of the old loans. Although we continue our effort to recover, but above 180 days or the older loans have been written off. There was provision last time also. There is a provision which is there last time and also additional provision has been created on the book, which is growing faster. Sir, if I see the provision, it has actually come down quarter-on-quarter, the overall provisions of the MFI. The old provision relief is taking care of that, the new loans. I think the total hit to the profit and loss account in MFI is how much? I think the provision was created then in last few quarters, and against that we have written off the loan book. Some of the older loans, they get fully provided for, given the provision policy that we have in MFI. Out of that, some of these things have got written off. Can you quantify the amount again of the write-off? Yeah, I'll just give the amount. One second. Which is the, have you seen incremental shipages because again, it's come down very, by INR 235 crores only, whereas the provision we've adjusted is around INR 100 crores? INR 105 crore release. Do we continue to see some slippages here? This is how it is. Hello? Hello. Yeah. Hello. Can you hear me? Yeah. I want to answer. Hello, sir. Okay. Yeah. I'm saying in MFI we have taken 105 crore INR of total net provision. I hit the P&L including the write-offs. Yes. The write-off plus new provision minus old provision is INR 105 crores. I wanted a write-off figure actually, sir. Just the write-off figure. The write-off figure is INR 123 crores. INR 123 crores. Sir, do you see any slippage in terms of slippages here or, it is broadly now, growing? No, incremental business after November 21 is doing very well. The older one where we had a moratorium and restructuring cases, that is what we've been trying to sort out. That I think is becoming I think the problem is just getting sorted out. Older loans, whatever we can recover, and there's a good recovery also or wherever we can close by one-time settlement, so we are doing that. What we have done is that we have divided the book in two parts. The older book where during the COVID period all the restructuring of moratorium was given, we are handling that book separately and wherever cases are getting closed, we just write it off primarily against provision and just get over with it. On the credit cost, overall we track for 100- 200 with, for the year. How should we look at it now and going forward, sir? I think, yeah, it will remain in that range. If the book grows probably more. If you see our book is around INR 40,000 crores, rough give and take. You know, if you see that INR 150 crore, INR 20 billion crores, then every quarter you see around INR 200 crores. We should stay in that range for the whole year, I think. Yeah, we'll stay in that range. It is slightly on the higher side of that range, primarily because still microfinance, things are getting sorted out. I think in terms of, you know, guidance or expectation, I think we'll be in that range. Okay. On the gold loans that you mentioned on the growth, we're looking at, you mentioned that the growth is coming from the expansion. How should we look at it going ahead? I mean given the competition which has come in, just on gold and home loans, how should we look at the growth here? Okay. Just your question that investment, what we are seeing is the investment done by HFC in CP instruments, which is just short-term instruments, because we have received money from ADR last quarter, so that money is not fully deployed, so that money is invested in short-term instruments. Coming back to your question on gold loan and home loan. You know, gold loan in last 10 years we have seen these kind of things happening in spurts where some new players come and they think that they can take the market by attacking. After some time they also realize that this is mud game in which, you know, nobody wins. What I think about gold loan that what we are seeing this quarter is gold prices have been firm, and gold loans should do well now. Whatever we have seen is the worst is over, at least in terms of the cutthroat competition and the impact of that on such price. If you don't want to compromise or you don't want to be that game, then obviously you lose the growth. I think that is over and we should see a much better time for gold loan. Coming to home loan again, the segment that we cater to, which is a mid segment, which is aroud INR 10 lakh, INR 50 lakh. Maybe, you know, Monu is there on call. Monu? Yeah. Yeah. maybe I can take this question, his question you would have heard that how do you see. Yeah. Our gold loan competition or the environment? Yeah. Absolutely. Yes, we have seen that, with interest rates going up and some competition also beefing up. If you would see that, in the last two years, we've been expanding ourselves pretty deep in the geographies, in the tier 2 and tier 3 towns. We see that, as our distribution also increases, if at all there is any slight slackening in the hub areas, hub or metro areas, we should be able to offset it by our distribution, which we have in tier 2, tier 3 towns. Our ability to price competitively with co-lending also in place, I think we are good to see the growth in home loan book this year. one last- I think what is the competition is intensifying mostly larger cities. Okay. Maybe say top 20 cities or top 30 cities. Our strategy is to expand beyond that, where still competition has not reached or is expensive, maybe because the business is not so much as the to cover up for many new players and we can ride on the golden brand network as well. Am I right, Monu? That's what you're trying to say. Yes, absolutely. The distribution and reaching out to tier three, two and four markets is there. This is reflective in our current quarter's performance as well. Here the problem as you mentioned is the ticket size is much smaller. The overall, delta on the book will be lower, right? For like even the smaller ticket size will be able to generate enough volume to give the 20% growth. What do you think? Absolutely. I think to answer this, if you will see that, if you look at the HFC numbers, there has been a increase in distribution cost also there. At the same time we are able to have a very consistent growth plan. For example, whatever we grew in the last complete year, we've already done that in the first nine months itself. We're pretty confident of continuing this growth because of the efficiency of such technology which we use as well. Obviously they come up with a better spread than what we get in the urban areas. We should be pretty consistent for growing as well, along with the profitability as well. Our ticket size already come down quite a lot in last few quarters. Now this is a level at which You know, this is the ticket size which is a sweet spot for us to operate. Okay. The damage to growth or the impact on growth has already been taken, I think more or less. Yeah. We are now at INR 40 lakhs-INR 50 lakhs as a ticket size. We already gone into these smaller places. Okay. One last question on the co-lending piece. A lot of our growth has been coming here. With the growth of the system slowing down, would we see a slowdown here as in the banks not wanting to extend the balance sheet for the co-lending business and trying to, you know, keep up their own customers? I mean, how would you look at that? Co-lending we accept it if the overall growth slows down for the system. No, I think it's very unlikely because today if you ask me, the demand for co-lending is maybe 10 times what we can offer. you know what is happening today is that banks still need... You know, in last so many years, if you see PSU banks and many other banks, PSU banks in particular, they haven't really expanded the network while the economy and credit demand has grown much faster. They've expanded much slower. the demand is much, much stronger and the credit deposit ratio is quite low. You know, if you see the PSU bank balances and they still have to catch up. keep that aside for a moment, say that the deposit environment really becomes very difficult. what is happening is that capital is moving to fixed deposit. It's not that the, you know, the money is not there in the system. And secondly, I know if you look at as a company, even if we have to take the loans on our own books, it will not be very difficult for us. Supposing, you know, for theoretically, although I don't think that there's a possibility at least in the foreseeable future, that we don't have to do co-lending. We can very well keep the loans on our book and grow like any other NBFC for that matter. Will we have the, you know, bandwidth for that? I mean. Bandwidth we have. I mean, we are managing the loans as of our own. You're talking about equity maybe. Yeah, liability side probably, yeah. That's not a problem today, actually. In terms of liability and equity, like our capital efficiency in housing finance is almost 29% and our gearing is 3x. We have enough room to grow on our own should, you know, should there be a need for that. At this point in time, you know, we see that there's a tremendous latent demand and, you know, in fact, we are not able to. Of course it takes time to build up your systems, people, trained people and network, but the demand is very, very strong. More than for both, what is happening today. Mm-hmm. banks also for 9%, 8%, 9%, their cost of funding 3%-4%. They get retail credit where the, you know, the losses are minimal, and they need this for their PSL and for their balance sheet. You know, it's a win-win relationship. It's a mutual... In fact many banks that we are talking to, we are talking about long-term arrangement where they also want to have a commitment that every quarter you deliver so much of co-lending or direct assignments. You know, we, the negotiations are on that front, actually. Okay. Okay. Thanks for comments. Okay. Thank you. Next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Hello. Yes, Deepak. Yeah. Thank you very much for the opportunity and many congratulations for the good set of numbers. Sir, I just wanted to understand now the credit cost you meant. You mentioned that it will remain in that range. I mean, I just wanted to clarify, what is that range we're talking about? Is it on percentage basis or on absolute basis we are talking about? Oh, no, percentage basis. You know, on book loan around 200 basis points in a year. That is what we should try and look at. Yeah. That, that's what we have been maintaining, right? Right. I think currently it is around 350 basis points, right? As on Second and Third Quarter. Not really. Because if you see second and third quarter, we have the range of INR 200 crore per quarter, right? Yeah. fourth quarter is about INR 350 crores, right? No. This quarter. This quarter is. INR 230 crores. INR 230 crores and last quarter was INR 195 crores. INR 213 crores. INR 213 crores. INR 213 crores is this quarter. INR 213 crores and last is INR 195 crores. Okay. You look to maintain this 200 basis point, kind of a credit cost, right? Even in fiscal 2024, if we talk about. Yeah. There'll be some benefit from old things getting sorted out. We want to be conservative because we have a digital loan which are unsecured and, you know, probably I mean, there are still small pieces that's growing, so we need to keep. I think that is what probably will be, you know, I think, one way factor and that is the expected cost. Mm-hmm. Mm-hmm. Mm-hmm. Yeah. Understood. fair enough. In terms of, I mean, growth, how do we see the growth going forward? I mean, I think currently we're at about 25%, right? I think 25% is the growth that we can, you know, we should be able to maintain next few years. Okay. 25% CAGR for next 2-3 years is a likely scenario. That's what we are targeting. Yes. Okay. Okay. Understood. Lastly, on the cost to income ratio, I mean, the current, is there any improvement or efficiency we are looking at in cost to income? There was slight improvement from 43%-42% in last quarter. Mm-hmm. We will see some, I mean, we'll see improvement over next few quarters. Maybe, you know, you can say that, you know, actually our target in general is to bring it down to 35, which will take a few quarters or one or two percentage points every quarter. If we can bring it down, then we'll be there in next 5-6 quarters. Okay. ROE 3.5% is what we have been maintaining. That is, yeah, ROE will be. Okay. ROA is around 3.5%. ROE has come down a little bit in this quarter because ADIA Money, the ADIA equity infusion has added to the net worth. So that defices ROE a little bit. Over medium term, I think our ROE should be 20+%. Understood. Fair enough. Yeah. That's it from my side, sir. Thank you. I'll do that. Thank you. The next question is from the line of Arun from Unifi Capital. Please go ahead. Hello, sir. Congratulations on the good set of numbers. I just wanted to check on the capital adequacy part. Currently, the capital adequacy is at 21.5% standalone entity. What would be the capital adequacy that you'd be comfortable working with, sir? With what level you would, you look to raise fresh equity to support both the standalone business and also to support the capital requirements of the subsidiary? You're saying at what level we raise equity, you're saying? Yeah. I think equity, okay, the way we have structured our business that we should not need, we should not be desperate or we should not need equity for a very long time. Having said that, you know, when we raise equity also depend on the market valuation, but it's unlikely in the near future. I think our business model is little different. One, market and investors have understood it very well. When we believe that they are giving us a fair valuation, that's the time we can look at it. If there's an acquisition opportunity or something, we can look at it. At this point in time, we don't see any need to do these things. Okay. Is there any covenant with the lenders that? Sorry? Is there any covenant with the lenders that the capital adequacy shouldn't be less than 20% or 18%? Yeah. I think that they're in the microfinance, with, you know, microfinance has been one notch below in terms of credit rating. We will negotiate because we don't need that kind of covenant given our track record. Yeah, some lenders in more microfinance have a covenant of 18% capital adequacy. Okay. Coming to one question about nine months and our profit and loss account hit is INR 657 crores for loan losses and provisions. In terms of total write-downs, we have done is INR 736 crores. On the net basis, additional provision, the provision release is INR 39 crores. Also, ADIA has invested INR 2,000 crores in HSF. Similarly, are we looking for external investors in the MFI subsidiary also, sir? At some point in time, yes. Right now we are putting INR 200 crore from the parent in that company as it's growing, and we want to keep capital adequacy properly. We have, you know, INR 200 crore of equity investment has happened from the parent in microfinance. At some point in time, we'll look at a strategic or a financial investor in microfinance, you know. You know what has happened in microfinance is industry has passed through turbulent and rollercoaster kind of a time period. After RBI reforms and the recovery in the economy, the industry is doing well. Some of the leading microfinance companies, you have seen that their valuations have started to improve. At appropriate time, you know, what we can do is, over next five years, I mean, that's not immediate future, is that HSF and microfinance, when they become large enough, then they can be separately listed. Just like we did with our parent company. We had three businesses, wealth, finance, and securities. All of them became large enough, we split them. The way we do demerger, there's no equity dilution required because the holding company shareholders get shares of subsidiary companies and the holding company ceases to exist. That is something which is, you know, not in the immediate future, but at some time, you know, later this can happen. Got it, sir. That's it from my side. Thanks. Thank you. Next question is from the line of Jyoti from Adani Capital. Please go ahead. Yeah. Congratulations on a good set of numbers. Couple of things. I think last quarter you had mentioned that there was some high court borrowing amounting to, $200 million, you know, that was actually raised. Has that happened in this quarter? $270 million is outstanding. The order volume. $270 million. Okay. One second. Out of... Right. It's $270 million number. Let us reconfirm the number. Give me half a minute. Okay. That is I think due for payment in April 2023. Which we are fully prepared because our cash is much more than that. We're talking about roughly INR 2,000 crores or thereabout. There also, if we get an opportunity, we can prepay some or buy the bonds in the market and close it faster. At this point in time, what is the outstanding amount? INR 2,000 crore. Two s- $270 million. $270, $200 million plus $75 million. That we are fully prepared to repay. Nothing has come in this quarter, right? No. Okay. I think most likely next quarter. Now I think the residual term is so short, so it will be difficult to prepay because people... just two, three months. You know, so everybody will wait and just close it. Broadly on the margin. It's just about 2.5 months left. Okay. Broadly, you know, how do you sense margins, you know, will shape up in next fiscal given the fact that, you know, the current levels, you know, do you feel like you can sustain the, you know, this current high level of margin going forward? Yeah, I think our strategy is to go granular and that is how we can maintain the margin. The smaller ticket we do, I mean, there's impact on operating costs and the network required, but that basically allows you to have higher margin. Okay. On the gold loans, you know, you did describe, you know, but could you just, you know, give more updates about how do you see, you know, growth happening on that side? Because if you see for other NBFCs, you know, we have the billion NBFCs, their AUM growth is not happening. What makes you say that, you know, probably, you know, you know, here to come to them, you know, on that side. Actually in 2020 and 2021 we expanded our gold loan brand network very aggressively. You know, as you would have seen if you've been tracking our company for a few years, that has resulted in significant increase in operating costs because the brand network has almost gone up by 40%, 50%. That is what is helping us to maintain some growth. Logically, I mean, I think if the industry-wise then, you know, we should grow faster than what we've been growing, given the expansion that we did. I think other players that you're talking about, if they've not grown their network maybe as aggressively then obviously their same-store sales, you know, what you can talk or call them, have been under pressure in last few quarters. Like it's true up in this quarter. I think probably you'll see some recovery in this quarter. Okay. And the, and on the home loans, do you see the competition is relatively less in, you know, smaller ticket size loans like less than INR 20 lakh? Whereas, just, you know, for higher ticket size we have seen the competition and just there has been slowdown in the growth, I think across the players with the banks and some NBFCs as well. How do you think so? No. In home loans they are smaller. You're right. In a smaller ticket size the competitive intensity is slightly lesser. Although there are some new NBFCs, but they're very small and regional. When you look at the whole country then, relatively speaking, you know, the small ticket size, which is less than INR 20 lakh, INR 50 lakh, INR 60 lakh or even INR 10 lakh, INR 12 lakh, you know, the segment that we are now catering to, has lesser intensity of competition. Again, we should understand it's not easy for anybody to become a competitor in this segment because it requires network of branches and people who can do, say, the title verification and valuation in smaller places and which is operating cost. When you have small tickets only, it takes longer to break even. Our competition is lesser and that is where banks are also very comfortable doing co-lending and even long-term co-lending partnerships with us. Okay. What these business loans are nothing but the personal loans, right? Business or the personal loan. As I explained in the beginning of this call that, you know, many times when there's a mom-and-pop shop or a one-man professional or self-employed and, you know, even his business is done from his personal account, that is one. Secondly, we are tied up with ZestMoney also, so that also we are getting certain personal loans from that relationship as well. These are personal and business loans both. Mostly, you know, the salaried employees will not come to us because they'll get it much cheaper rate from. Salaried employee is a formal sector. They'll get it a much cheaper rate from public banks like SBI or HDFC. The people who come to us are self-employed or some of them may be salaried but in informal sector where the document for, you know, their payslip, PF are not foolproof that way. Okay. Lastly on the branch expansion side, you know, what, you know, what can we expect from it this year? Sorry. How much. On the branch expansion side, you know. Yeah. Branch expansion side. We have slowed down the branch expansion, but expansion will continue. Okay. We have a team that does the data analysis and keeps tracking the opportunity areas and we set up branches. I think branch expansion at normal pace will continue forever. The aggressive spurt, you know, where we did like 40%, 50% expansion in 18 months, that kind of thing will not happen. 15%, 20% or 10%, 15% expansion every year will continue. Okay. Okay. Thank you, sir. Thanks. Thank you. Next question is from the line of Sharaj from Laburnum Security. Thank you for the opportunity again, sir. On the NIMs, I wanted to know is there any one-offs here on account of assignment income? On the NIMs, is there any assign one-offs we are seeing on people assignment income or something? Or these are normalized NIMs? No. These are normal NIMs. Normal NIMs? Yeah. Okay. Okay. Sir, on the home loan side, if you could just give some light on the customer segment. Is it more self-employed, salary? I understand we're going more to tier three towns probably now. What is the segment of customer we're dealing with? What is our edge here? Monu. Yeah. Yeah. Nirmal, can I take this thing? Yeah, please. Yeah. Yeah. Typically our customer, about 60% of our customers are salaried people and, 40%, belong to the self-employed segment. The, maybe the target group which we are looking at is people with a household income of, below, 50,000, in the urban areas and in the smaller towns it could be, household income of less than 35,000. Usually if you see these people would be in the blue collar jobs and, usually, these people, could be working in, private limited companies or even sometimes as contract workers as well. This is the kind of a target group which is there. As Nirmal mentioned earlier also, the edge or the moat for us is, the distribution which we have set up for the past, so many years. Along with the NBFC network available of gold loan branches for us to reach and I think even is much faster. The opportunity has always been there for everybody else. To make it a profitable business, if you would look at our cost income ratios also would be fairly better off than the industry affordable housing players. The reason for that is how we use technology to enable this and have a faster growth path as well. I think the distribution, understanding of the local policies process and the technology edge puts together gives us a good moat to scale up this business further. I thought the yields here would be around, what was the yields we'd be talking around 11%, 10% or higher. Yeah. Nearly, 11%. As you can see it's 10.9%. It has gone up in last one year. Yeah. Yeah. Okay. Yeah. Okay. Thank you so much. That was my question. Thank you. Yeah, go ahead. Thank you. Next question is from the line of [Ishwar] from Investor Capital. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. My question is on gold loans. Just want to know what would be the count of gold loan branches today and what is our target for branch expansion and overall AUM growth in gold loan for FY 2024? Out of 3,965 branches, around 2,800 will be gold loan branches. 2,500-2,800. I'll get the exact number. Sorry. Gold loan is 2,589. 2,589 branches. Okay. What is our target for FY 2024 in terms of branch expansion and AUM for gold loan? I think we set up another 300 branches. Maybe we'll reach 3,000 by FY 2024 for sure. Okay, sir. Our average cost is about 8%. We would like to take it higher, 9%, 10%. I think 20%-25% growth is what, you know, we target in most of all our core products. All right, sir. Okay. Yeah. Thank you. Yes. Thank you. Next from the line of Nischint Chawathe from Kotak Securities. Please go ahead. No. Two questions from my side. you know. I'm sorry to interrupt you. Your voice is not clear. May I request you to speak through the headset, please? Is this better now? Yes, sir. Thank you. You know, the question is, the first is on the gold loan branch on gold loan branches. Just to clarify, you don't need to take any regulatory permission for adding branches, right? No. Okay. Now there's a bit of ambiguity on this, but to be safe side, we take regulatory approval. We took approval. We got approval for 1,000 branches in 2020. We got another approval for 700 branches, out of which we would have set up maybe another 200. We got approval for 500, 400-500 more branches in the scene. We are taking approval. We will debate whether we need approval or not. Okay, I'll give you background that earlier there was a circular that the gold loan industry came under press in 2013, 2014 saying that the gold loan companies, if they expand their branch network beyond 1,000, they should take approval. Whether we are a gold loan company or not is again a difficult question, but on the overall portfolio we are less than 50%. If you take a look at standalone NBFC, we may be more than 50%. To err on the side of caution, we go to RBI and take their approval, and we actually present an entire data of how we want to under-penetrated market and what has been the track record of earlier approval and what have we done. We have the approval now. I think so, you know, we have adequate approval for next one year. Sure. you know, just to, you know, just for my understanding, your branches are not exclusively gold loan branches, right? I mean, what you have essentially is, IIFL, branches, and you probably do gold or, you know, I mean, you know, you can do multiple products from the branch, so it's not exclusive gold loan branch. Practically speaking, if you look at our gold loan branch count is 2,589. Our housing finance home loan is about 370. What will happen is that many of the gold loan branches will develop as home loan also. Many a times what happens that the home loan works in a hub-and-spoke model. Like say in Bombay, we have 100 gold loan branches, but there'll be only 10 home loan branches. What will happen, those 90 gold loan branches will feed the leads of home loan to those 10. Suddenly we have a branch in Borivali. Ankara and Delhi to Basant India will give those home loan leads to Borivali branch. We leverage the branches to get the leads. Out of these 2,589 branches, almost 2,200 will be exclusively only gold. Got it. Got it. Just one small clarification on numbers. Your cost of funding is going up by around, I think sequentially around 10 basis points and consequently 15 basis points and annually around 10 basis points. Just trying to understand, you know, what is the secret sauce? What is this? What is the secret sauce? Yeah. I think it's a good question. One is that, you know, we have a longer tenure loan. I think if you see the loans before 2018 were even more, the interest rates were higher than what it is today. What is happening is that sometimes when these get repaid, what we are getting now is even after this MCLR increase is still not too bad. The dollar loans which are at a very high rate, I think we've been able to bring that down by 130. Third thing is that in NBFC refinance, what we get because we are affordable and really catering to the low income group, we get from NHB different schemes, 5%, 6%, 8%, depending on what kind of loans you're doing. The refinancing is also at a competitive rate. Also, given our track record, we are able to negotiate with banks better. With the premium or what we are paying to MCLR now, we can, you know, now we are able to negotiate at MCLR or sometimes even better than that. It's a combination of everything. Sure. Just to understand, in IIFL Finance standalone as against your weighted average cost of borrowing of 9%, what would be your incremental cost last quarter? The incremental cost last quarter was. One second. I'll give you. The incremental cost, the new loans. New one. Similar. Similar, is around 9%. Okay. Perfect. Thank you. Those were my questions. Thank you. Thank you. Next question is from the line of Navneet Bhaiya, [Vision Investment]. Please go ahead. Hi, sir. Congrats for the good results. I have two questions. First, your leverage profile, of course, has improved quite significantly after the ADIA Money raise. So is there a timeline by which you're looking to revert back to the earlier leverage profile, if you are looking to it? That's the first question. Second is your standalone results. You know across your total total income, PPOP, there's been a dip sequentially as well as YOY. So while you've mentioned some reasons on the Gold Loan completion, et cetera, if you can throw some more insight on that? Okay, there's one also component is a markdown in the value of investment, which, you know, the valuations happen every quarter, and that's why you see that the fair value gain is negative. The standalone book basically comprises the old business loans, construction finance and gold loan. Gold loan has been under competitive pressure, and there is a bit of a markdown on the investment that we made. Those valuations happen every quarter, so you know that come, it's like a quarterly movement. Understand. on the leverage bit, sir, your, let's say the ADIA Money raise is a lot more conservative. Last part, here I think we had a covered bond again. What was it? Kapish, you just said. You know, last year we had the, some of the off-book assets which were sitting into a trust, which when they get closed, there was a one-off profit which, you know, was around INR 202 crore in the entire. Beautiful. In the standalone financials or IIFL Finance. It didn't affect the consolidated numbers, but in the standalone numbers, this accretion of INR 202 crore of additional interest income came in. That gets locked off. Which is why in the standalone numbers looking lower compared to last year. That's one-off impact. Other is the increment impact that he talked about mark-to-market. Yeah. On the investment. Yeah. Sorry. Go ahead. The second question was on the leverage. Are you looking? Leverage, I think we don't want to go back to the 5, 6 or whatever. From 3.2, I think we'll be comfortable, at least whatever we discuss in the boards to go up to 4. You know, we, I think we'll try and contain, you know, I mean, that should be the level, that we should try and not cross. Okay. By when would you look to, sort of reach that level? That obviously means your ROE also perhaps would improve to that extent. I think, you know, given that incrementally we can do co-lending, I mean, we can achieve that level in 12-18 months and stay there and increment as the business mix stabilizes, you know, at whatever level we want. It could be 12-18 months, time by when, you know, we get the leverage back to that level. Understood, sir. Thank you so much. Thank you very much. The next question is from the line of Nikhil Agarwal from Tusk Investments. Please go ahead. My question is on the mix of the co-lending strategies and on-balance sheet book. Right now we are at 37.9% on-book, off-book balance sheet lending. Can you talk on the breakup of the off-book balance sheet lending and the on-book balance sheet lending, from different businesses that we have? Primarily gold loan, home loan and LAP are off-book. The construction finance is obviously completely whatever we have is on-book. Business loan, also the digital loans are new. I mean, that's also is probably more or less on-book. In terms of if you really want to have the exact numbers, then you can work out the numbers from the loan AUM and the assets from balancing difference, which is there in the presentation. The total assigned assets are INR 15,939, and total co-lending is INR 5,700. On-book is around INR 36,300, and off-book is around INR 21,600. Okay, got it. Incrementally in the microfinance book, are we doing more co-lending or any assignment is happening or? In microfinance also, probably now we'll do more co-lending and assignment going forward. It requires some seasoning, and I think going forward, that's also a great product to be, you know, part of a bank. Just to give you a perspective in the microfinance capital optimization stage, we did around INR 15 crore of assignment in Samasta this year compared to INR 250 crore that we did in the same time last year. This year we are awaiting the similar arrangement for doing off-book assignments for this season. Last year we couldn't do much because, you know, the because of the COVID restructuring, the entire business was in bit of a turbulent state. Okay, sir. This time, microfinance growth has been 17% quarter-on-quarter, which has been the major driver for the growth in the book. Last quarter 17%. yeah. I mean, there's a bit of a aberration actually. I don't think that growth will continue. There will be a strong growth for next kind of few more quarters. I mean, whether it's 55% YOY or 70% quarter-on-quarter, it's difficult to say. I mean, if that level won't sustain forever, but 30-35% is quite doable in this year and next year. Thank you. The line for RSB now. For RSB, it's please restrict to two questions per participant. The next question is from the line of Ashwin Kumar Subramaniam from HDFC Asset Management. Please go ahead. Hi. I just want to check in terms of the capital on the standalone, you know, entity. The tier one is 13.8%. What up to what level of tier one would you be comfortable going with? Also, it declined from over 18% last year. Any reason for the decline from 18% to 13.8%? Actually the, you know, the last year in the December quarter, there were more assignments and the book had come down significantly. We have not done that in last quarter, but probably March quarter is a quarter when most of these assignments happen. I think we would like to keep it, you know, around 13.5% is a level that we would like to maintain for tier one at least. Okay. Thank you. Thank you. Next question is from the line of Jyoti Khatri from Arihant Capital. Please go ahead. Sir, any update from the asset quality standpoint of the CRE book? No. I think in terms of CRE book asset quality continues to be what it has been. The CRE environment is improving. If you see the demand for housing in the real estate sector in general, it's seeing good traction. I think most of the projects, things are picking up much faster than historically what they have done. Okay. If you can just tell us, you know, what is the total income that they take from, you know, under the off-book in Q3 versus Q2, sir? I think these numbers are there in the off-book is INR 530 crore. Their income which is there, that is purely, that is purely coming from off-book. The off-book income that you see, INR 530 crores in Q3- Yeah. INR 476.6 crores in Q2, that is off-book income. Okay. Thank you, sir. Yeah. Thank you. The next question is [Manushi Agarwal] from [RBSA Advisors]. Please go ahead. Also just one point, that this time we have given an Excel sheet which is like a data book, which has got a lot of these granular details that you were asking for. You'll find those numbers in those Excel sheets. The numbers are in Excel sheets so that you can, you know, you compare or you can use, you can analyze on your own now. Yeah, go ahead, Jyoti. Yeah. Thank you for giving the opportunity. Just a quick question. One is, Sorry for the interruption. Your voice is not coming very clear. May I request you to speak through the handset please? Just one second. Give me a moment. Yeah. Am I audible and clear now? Yes. Yes. Thank you. Go ahead. Sorry. What I just wanted to understand is that on the co-lending side, co-lending of home loans, I see a quarter-on-quarter decline in the disbursements from about INR 318 crores- INR 653 crores, that's about a 20% decline. I just wanted to understand the reason for the same, which is especially about very big discrepancies in this space and aggressive rate hikes that we've done in this quarter. That is one. Also to estimate like-. As you see with IDFC, we are sitting on a huge cash on which, you know, we just earn 3%, 4%. Although we have a relationship with the banks, otherwise ideally, we shouldn't do any co-lending till we utilize our cash, you know, and have a huge negative carry there. Maybe Monu you have anything to say on this? Yeah. This is one reason which is there, as Nirmal mentioned, and also, we've been seeing that we've also been now adding a bit of our non-HL book loan against property also has got into co-lending as well. If you put both together, they're almost the same as last quarter. As Nirmal said, we have ample liquidity we're sitting on, so we'll better consume that first, rather than having a negative carry. Sure. Would you say that now we are doing the math, along with home loans. Put together the disbursements would be almost similar to- Yeah. That's what... Yes. Yes. Okay. Got it. My second question is that, you know, I just want to understand the reasons for such a sharp increase in operating expenses in the Home Finance subsidiary, that's on a quarter-on-quarter and annual basis. What really has been inside of these expenses? Yes. Yes. This expansion of branches and people have been mostly. Yeah, you're talking about HFC. Monu, you want to talk... You're talking about HFC? Yeah, HFC. Fine. Yeah, I'm talking about HFC. Yeah, yeah. Monu. Yes, yes, yes. If you will see that in the last, almost from the last 1.5 Years, the count of our headcount including the branch network has also increased reasonably. We are in that once again in that investment phase and, we because as we are setting ourselves for a big growth in the coming years, this investment has happened in the last 1 and a half years. However, as you will see, as we are going tier 2, tier 3 towns, there is an increase in the operating cost. Similarly, the spreads have also improved because in those markets you can get earn a better spread. Now the investment phase is evening out. From here on, we should be able to come back to our original operating ratios as we get these branches more productive. how many branches do we have with the invest? 370. Close to about 370 branches. Sorry for interrupting. One last question, which is, in the business loans, what exactly has been the issue on the digital loan side? The digital loan side, RBI came up with a circular which put down certain guidelines about partnering with Fintech in terms of FLDG credit, the money to go to the customer's account directly and not through these partners. There are number of such conditions were put, and you know, this is what has impacted. There was, you know, we have many partners in digital loans and particularly two partners which are fairly significant. That's where the business has come down. I think it's a process change because like money going to customer instead of through the partner and many such things. We are just operational issues we put, you know, we try and sort it out. In terms of underwriting, we always want to do credit underwriting ourselves. Some of these partners in business will also come back. It's just matter of time. I think this circular, if I'm missing not, came sometime in late September, and that is why you see last quarter there's some impact on a couple of partner business. Sure. Thank you. Thank you very much. As there are no further questions, I would now like to hand the conference over to management for closing comments. Thank you very much, ladies, gentlemen, for joining us on this call. I think it was a very detailed conversation, and I hope we'll be able to address all your query. The data book should also help you in fact do further analysis and it's in Excel form for your convenience. If still anything further remains, do come back to us at our investor relations email ID and we'll be happy to address it back to you. Thank you. Thank you so much. Have a good day. Thank you. Thank you very much. On behalf of IIFL Finance Limited, this concludes this conference. Thank you for joining us. You may now disconnect lines. Thank you.