Ladies and gentlemen, good day, and welcome to IndusInd Bank Limited Q1 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kathpalia, Managing Director and CEO, IndusInd Bank. Thank you and over to you, sir. Good evening, and thank you for joining the call. Let me start with some macro commentary and then go into bank specific details. During the quarter one financial year 2023, we saw economic activity momentum picking up sharply as well as headwinds to growth rising as well. The services PMI index signaled a very strong improvement in private services activity while manufacturing sector activity levels were stable. Prospects of the farm sector also looked better with the timely onset of monsoon and output last year touching another record. Bank credit offtake too picked up over the quarter in line with an improvement in the underlying economic activity. However, rising inflation levels led to the monetary policy tightening by major global central banks, including India, which is likely to continue in the near term. Relatively strong economic growth prospects, a deleveraged corporate sector, much improved health of the banking sector along with some external forex reserve buffer and measures taken by the government and the RBI to curb inflation would help India negotiate these headwinds. Global supply chain pressures have begun to ease and non-energy commodity prices are now easing. While the real GDP growth is expected to slow down in financial year 2023, India still will remain among the fastest growing global economies. Coming to the quarter-specific developments. Our focus areas for the quarter were continued loan growth and acceleration. We maintained a healthy loan growth of 4% quarter-on-quarter, driven by strong disbursements in vehicle, corporate and other retail assets. Microfinance disbursements too returned to normalcy after a brief hiatus to adapt to the new regulatory guidelines. We're thus seeing loan growth momentum in all the business units. This has also resulted in a year-on-year loan book growth improving to 18% from 12% previous quarter. Maintaining deposit momentum. We achieved 3% quarter-on-quarter growth in deposit mobilization in spite of the liquidity tightening and increased competitive intensity. Our growth was driven by 16% growth in CASA, and CASA ratio improved from 42.7% to 43.1%. The retail deposits as per LCR also grew by 17% year on year. We also achieved the highest new customer acquisition of 425,000 customers during the quarter through consumer bank. Ensuring healthy asset quality. We all have provided gross slippages segregated for standard and restructured book in the investor presentation. Our standard book slippages have reduced to 0.57% from 0.75% quarter on quarter. Our restructured book has reduced by INR 1,013 crore from 2.6% to 2.1% quarter-on-quarter. Our net NPA is at 0.67% with a provision coverage at 72%. Our contingent provisions are at INR 3,003 crore with total loan-related provisions at 141% of gross NPAs. Our credit cost has reduced to 50 basis points from 61 basis points quarter-on-quarter. Sustaining profitability of the franchise. We saw a healthy net interest margin of 4.21% with both loans and deposits witnessing repricing during the quarter. Client fee income grew by 9% quarter-on-quarter, driven by continued retail momentum. Our trading income too was positive during the quarter. Our PPOP margin to loans for the quarter was at 5.7% versus 5.8%, marginally lower due to lower trading income. Steady improvement in return ratios. Our profit after tax grew by 16% quarter-on-quarter and 61% year-on-year to INR 1,631 crore. Our return on assets improved to 1.73% and return on equity was at 13.4% for Q1. With improvement in profitability metrics and lower risk density, our capital adequacy ratio improved during the quarter with CET1 at 15.96%-16.05% with overall CRAR at 18.14%. Now coming to individual businesses. Vehicle finance. The vehicle finance loan business accelerated during the quarter to 4% quarter-on-quarter. The year-on-year growth too improved from 1% to 8% over the quarter. Historically, first quarter has been a seasonally weak quarter, whereas quarter four has been a strong quarter seasonally. However, we have seen disbursements of INR 10,078 crores in quarter one, which are higher than the March quarter. This is the first time in last several years we have seen quarter-on-quarter growth in disbursements in quarter one of financial year. The disbursements are also the highest in a quarter we've ever achieved. The segments showing strong disbursements are commercial vehicles, utility vehicles, cars and tractors. Disbursements are muted in the three-wheeler and two-wheeler segments. The disbursement traction also validates efficient capacity utilization of existing vehicles. Vehicle customers are also able to pass on increased cost of fuel to the end user. The recent oil price movement and also the tax rate cut by various state governments has provided further support to the freight economics. The collection efficiency of standard customers remains stable at pre-COVID levels. The slippages from the standard book were stable at INR 4.5 billion quarter-over-quarter. The restructured book in the vehicle finance has reduced from INR 3,298 crores to INR 3,131 crores quarter-over-quarter. The collection efficiency of these customers remain comfortable in the 80s as per our expectations. While the vehicle portfolio pricing is fixed term in nature, the fresh disbursements are at higher rates, broadly in line with the benchmark movements. We have thus seen an overall yield on the vehicle portfolio improve during the quarter and expect the trend to continue in the coming quarters. The vehicle portfolio has now shown strong disbursements for four quarters in a row. The industry volume, however, are yet to achieve or reach their peak levels. We do thus see further scope of disbursement growth in the year, participating in the overall industry growth. Microfinance. During the quarter, microfinance industry adopted RBI Master Direction on the MFI issued on 14 March 2022. Though the time available was short, necessary changes were made, and we could commence the disbursements from May. We were able to recoup some lost sales and achieve disbursements of INR 7,531 crores during quarter one. These are the highest quarter one disbursements in Bharat Financial history. Our MFI book at the end of quarter one was at INR 229,403 crores, was up 11% YoY. Our MFI standard book collection efficiency for quarter one was at 99.1%, and same as for quarter four financial year 2022. The collection efficiency for new clients sourced post-COVID too has also remained healthy at 99.2%, which is close to pre-COVID levels. Our 30-90 DPD book, including restructured customers, was at 2.2% on June 2022, compared to 2.6% at the end of March 2022. High emphasis was placed on recovery during the quarter as we felt that the economic condition had sufficiently improved for our customers to start repaying their overdue loans. Through focused efforts, we were able to recover INR 57 crore during quarter one against written-off loans sold to ARC, and expect to realize higher recoveries in the following quarters. The gross slippages during the quarter moderated to INR 560 crores as compared to INR 815 crores during the previous quarter. The slippages from the standard customers reduced considerably to INR 278 crores from INR 779 crores quarter-on-quarter. The outstanding restructured books has also reduced to INR 644 crores from INR 995 crores quarter-on-quarter. The restructured books saw slippages of INR 283 crores. We have utilized the contingent provision created last year towards these customers. Our merchant acquiring business under the banner of Bharat Superstore continued the growth momentum. Portfolios sourced under the business, under this business has grown 15% over quarter four financial year 2022 to INR 2,237 crores with 3.8 lakh active borrowers. The total disbursements during the quarter was INR 942 crore, with continued demand from the missing middle segment. We see large opportunity in deepening relationship with these customers. The book has been performing relatively well with the standard book collection efficiency of 99.1% for quarter one financial year 2023, and net collection efficiency of 97.8%. Our endeavors to take banking to the doorstep of the underserved customers in remote locations continue. At the end of quarter one financial year 2023, the total liability book sourced from the customers and serviced through BFIL increased by 134% year-on-year to reach INR 1,450 crore through 1.14 crore accounts with us. Our focus remains to be the banker of choice of customer segment in Bharat. Global diamond and jewelry business. The global diamond trade slowed down during the quarter due to Russia-Ukraine conflict and lockdowns in China/Hong Kong. Our diamond group book grew 1% quarter-on-quarter and 28% year-on-year and forms 4.2% of the overall loan book. The disruption, however, did not have any impact on asset quality, with no clients getting into SMA category. The industry is working closely with policymakers, makers for normalizing the supply chain. The recent steps by the government and the regulators to facilitate trade between India and Russia to improve the flow of rough diamonds. Overall, we remain comfortable on the diamond portfolio for the growth to continue as the supply chain normalizes and markets in the PRC open up. Corporate book. Our corporate book remained healthy, maintained healthy growth trajectory of 4% quarter-on-quarter growth. We saw growth across segments with large corporates growing by 3%, mid corporates by 5%, and small corporates by 11% quarter-on-quarter. Loan book growth was broadly driven by the large corporate segments like strategic client group and financial services, and in the mid and small corporates like SME and healthcare. Majority of the corporate loan book is floating rate in nature, and we were able to pass on increased rates for customers due for reset. Our yield in the corporate book thus improved by 7 basis points quarter-on-quarter, reversing the past trend of falling yield. The portion of A and above rated customers has improved from 70.6% to 73.5% year-over-year, and weighted average rating improving from 2.68% to 2.63% YoY. The net slippages in the corporate book were INR 4.1 billion for the quarter. This includes, as mentioned in the previous call, some group companies of a retail corporate amounting to INR 2.5 billion, which turned NPA during the quarter. Our corporate restructure book has now reduced from INR 9.6 billion to INR 5.6 billion quarter-over-quarter. Exposure to stressed telco, which was at INR 18.5 billion, including fund-based exposure of INR 10 billion and balance non-funded exposure. We do see continued interest from corporate towards CapEx plans. Impact of interest rate hike is not felt strongly as budgeting was done with the assumption of interest rate hikes. We see interest in CapEx plans, particularly in segments which have deferred CapEx due to COVID, such as auto components, steel, renewable, et cetera. CapEx is also seen under PLI schemes in electronics, mobile, distilleries for capacities being put up. Business momentum also remains strong in small corporates and SME segments, with focus on new acquisitions, supply chain financing, et cetera, albeit on a small base. We are watchful of segments impacted by higher inflation. There are however segments witnessing tailwinds, example export-oriented units, infra, textiles, et cetera, which provide opportunities for growth. Overall, we do see corporate book to maintain a steady growth driven by mid and small corporate with active repricing benchmark to the market rates. Other retail assets. We saw another quarter of growth momentum in other retail loan book growing by 7% quarter-on-quarter and 23% year-on-year. Within secured assets business banking and loan against property, which has seen intense competition over the last few quarters, both in terms of pricing and collateral relaxation. With rising rates environment and inflation, we are seeing underwriting improving. Our acquisition run rates continue to accelerate. Credit card spends have remained strong for us as well as industry spends of INR 16,900 crore for June. We also saw the highest ever card acquisition of 75,700 in June with credit card base crossing two million mark. We expect growth momentum in retail businesses to continue in the current financial year. We do, however, remain watchful of inflationary economic conditions, particularly on the unsecured consumption spend. Now coming to liabilities. Our deposit grew 13% year-on-year, driven by 16% year-on-year growth in current and savings accounts and retail deposit as per LCR also grew by 17% year-on-year. The quarter was also marked by interest rate hikes and heightened competition for deposits. We also saw larger peer banks raising their term deposit rates, in some cases savings deposit rates too. We have been selective in our rate action and seen the rate gap with larger peer narrowing during the quarter. We have ramped up our deposit acquisition with new client acquisition from consumer banks, touching a new height of 4.25 lakh for the quarter. Our term deposit monthly run rates have moved from INR 78,000 to INR 1,15,000 quarter-on-quarter. Our CASA ratio has improved to 43.1% quarter-on-quarter, driven by 19% growth in savings accounts. Contribution of certificate of deposit remains low at 3% of deposits. Our affluent segment deposits grew from INR 35,300 crore to INR 36,300 crore during the quarter. Affluent AUM was stable at INR 59,000 crore despite the market correction. Deposits from NR segments have remained stable at INR 26,800 crore. The NRI momentum is expected to pick up with the recent regulatory guidelines. We let go of borrowings during the quarter, reducing by 12% quarter-on-quarter and 15% year-on-year. The borrowings now form only 10% of the liabilities and almost all are long-term in nature. We also repaid our Euro MTN program in April and thus we don't have any foreign currency bonds outstanding. We also exercised a call option on additional tier-one bond at the earliest permitted anniversary of five years. Overall, we continue to remain focused on the retail liability mobilization. Our physical and digital distribution priorities have been aligned towards retail deposit. We are aiming to take the branch distribution to 2,500 by March 2023. We continue to scale up new initiatives like Affluent and NRI. We're confident of maintaining our deposit and cost of deposit profile to fund our loan growth aspirations. Digital traction. Digital sourcing percentage across products continues to increase and what is interesting now is that we have started building and scaling up digital unassisted models which focus on scale with profitability. During the quarter, more than 200,000 clients were onboarded using video KYC. 96% of bank savings accounts and fixed deposits are originated digitally. Of this, 30% of savings accounts are opened in a digitally unassisted manner through marketing or direct to client platforms and 40% of fixed deposits originate in a digitally unassisted manner. Easy credit stack continues to scale, bringing in fresh volumes as well as reduce the cost of acquisition. 90% of cards are originated digitally now on the back of easy credit at a cost of processing which is 60%-70% lower per unit. We recently went live with easy credit for personal loans as well, and 54% of personal loans are originated digitally, which will be scaled up to 90% within the next few months. We continue to focus on increasing digital transaction intensity and increasing the clients digitally. 92% of the branch transactions are digital. Mobile transactions have increased more than 2x YoY and mobile active base has increased 21% YoY. On WhatsApp banking, we scaled up our user base to more than five million. We offer more than 50 services on WhatsApp and our WhatsApp transactions increased 45% YoY. In terms of new launches, Indus Merchant Solutions app has scaled up to a user base of 80,000+ retailers and every second user on the app is a new-to-bank suggesting strong pull of the product in the market. Indus Easy Credit for business stack is also scaling up steadily, wherein we offer small ticket business loans and secured overdraft to clients. As a result, nearly 40% of our MSME lending in less than 2 crore exposure bucket is now digital, and we plan to make it 100% digital with the expansion of working capital product suite over the next couple of quarters. We are progressing on the remaining two launches for Digital 2.0. That is for individuals and for SME. They are expected to be launched in the second half of the year. As we build capabilities in our digital platforms and applications, we also leverage the underlying API to integrate with partners and ecosystem to boost our banking-as-a-service model. Now coming to the financial performance for the quarter. Net interest income grew by 16% year-on-year and 4% quarter-on-quarter, in line with the loan growth. Net interest margin improved sequentially from 4.20% to 4.21% quarter-on-quarter. The net interest margin was supported by repricing on the asset side as well as active management of the liabilities. Our consumer as well as corporate book loan book saw yield improvement during the quarter, with overall yield on loans improving by 10 basis points. While the cost of deposit increased by 19 basis points, the cost of funds increased by only 6 basis points due to reduction in our borrowing expenses. Other income grew by 12% year-on-year and 1% quarter-on-quarter. Core client fees, excluding trading income, grew by 9% quarter-on-quarter and 41.7% year-on-year. Our trading income was down quarter-on-quarter and year-over-year due to rise in interest rates. We have nevertheless saw positive non-core income of INR 146 crore during the quarter. Share of retail fees improved to 70% from 64% of total fees. Our total revenue for the quarter was INR 6,057 crores with 15% year-on-year growth. Operating expenses grew 5% quarter-on-quarter with continued recovery in the business momentum. Our overall cost-to-income ratio increased from 42.6% to 43.4% quarter-on-quarter due to lower trading income. Our core cost-to-income before trading income improved from 45.4% to 44% quarter-on-quarter. The operating profit for the quarter was at INR 3,432 crores, growing 10% year-on-year and 2% quarter-on-quarter. The PPOP margins to loans continue to be healthy at 5.7%. On the asset quality and the provisioning front, our provisions for the quarter have further reduced to INR 12.5 billion. The provision to loans are thus down to 50 basis points now. We saw reduction in slippages from the standard book from INR 17 billion to INR 13 billion. The reduction was driven by lower slippages from microfinance and corporate customers, whereas vehicle and other retails were stable quarter-on-quarter. The restructured book slippages were driven by microfinance customers coming out of eligible moratorium and also retail group in corporate banking. We also made contingent provisions against these last year and have utilized to the extent of slippages. The restructured book has reduced by INR 10 billion during the quarter from 2.6% to 2.1%. We did not have any sale to ARC during the quarter. The net security receipts have reduced from 83 basis points to 72 basis points. Overall, the gross NPA for the bank was at 2.35%, and net NPA was at 0.67%. We have maintained provision coverage ratio of 72%. Our contingent provision, excluding specific provisions, were at INR 3,003 crore. We have utilized INR 325 crore towards slippages during the quarter from the restructured loans, as explained earlier. Total loans related provisions are at 3.4% of loans or 141% of the gross NPAs. Our SMA1 and SMA2 book was at 10 basis points and 39 basis points respectively. Profit after tax for the quarter was at INR 1,631 crore, growing at 16% quarter-over-quarter and 61% year-over-year. Our CRAR, including profits, remained healthy at 18.14%. Return on assets continued upward trajectory from 1.51% to 1.73% quarter-on-quarter, and return on equity improved to 13.4%. I also want to spend a minute on the stock exchange intimation done earlier this month on media speculation. As disclosed, this pertains to an old investigation. The bank is providing the necessary support to investigating agencies. The matter was also scrutinized by the regulator in the past, and the outcome of the same was intimated to the stock exchange in 2016. The bank is not named as a party in the first information report. Given the investigation is in progress, there will be limited scope for further information beyond what we have already disclosed. Overall, the quarter saw turbulent operating environment with interlinkages of inflation, reversal of accommodative monetary policy and Russia-Ukraine conflict playing out. The first quarter was also a seasonally weak quarter for some of our businesses. The bank has nevertheless focused on delivering our PC-5 ambition. Loan growth has accelerated to 18% from 12% last quarter. Our vehicle and microfinance had their best quarter one disbursement in their history. Consumer and corporate books are delivering steady growth. Asset quality trends from standard book continues to improve. Restructure book carries comfortable contingent provisioning. All key portfolio metrics across NIMS, core PPOP margin, ROA, ROE, have maintained positive trajectory. We continue to invest in new initiatives like Affluent, NRI, tractors, merchant acquiring, and plan to launch the home loan this quarter. We will also launch the remaining two of the planned digital initiatives during the year. We're thus committed to deliver our PC-5 ambitions of achieving 15%-18% loan growth CAGR and maintaining a healthy PPOP margin upwards of 5% and reducing credit costs towards 120-150 basis points. We can now open the floor for questions and answers. 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 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. Participants, you may press star and one to ask a question. The first question is from the line of Maru from Edelweiss Broking Limited. Please go ahead. Hello, sir. Congratulations. My first question is if you could explain fees. There has been strong growth in general banking and third-party distribution fees. If you could give some color on that. That's my first question, sir. I think, when you look at the fees, you have to look at the general banking fees has multiple components. One is the regular deposit processing fee. The second is the payments. The third component is the PSLC. You know the- Yes, sir. The PSLC. I think it's a combination of all the three which has increased. Of course, the PSL increased about INR 50 crores-INR 60 crores in the quarter, and that is what has added to that growth exponentially. On the distribution side, I think the growth is normal, and it's actually the core businesses which are growing, which is the health, the insurance distribution, the card distribution. That's what has grown, and that is what is categorized in this, in the overall fee, and that's what has grown. Okay. That looks sustainable. Yeah. At least for a few quarters, right? Okay. Yes. Yeah. It's about 8% quarter-on-quarter growth. Correct, sir. Yeah. My next question is, in general on outlook on growth, right? Most if you see the banking sector growth or if you listen to the commentary of banks, they remain quite optimistic on growth, whereas investors generally remain concerned on a slowdown. How do we tie in the two? In my opinion, you have to see the growth coming from this segment. That's how you should link it. If you look at our vehicle finance business, and if you talk to the OEMs, all of them are projecting a high growth because they're coming from a cyclical downturn. For two to three years, they've seen a downturn. I think you will see growth coming back in this segment. Of course, also fueled by our entry into the used car markets, our tractor business seeing the scale-up in those segments and the light commercial vehicle which we have entered, and we've now got an 8% market share seeing a scale-up to some extent. I think you will continue to see a 16%-18% growth in this segment for us, and we will continue. In microfinance, I think there's enough demand. I think the demand was affected this last quarter because of the RBI regulations and there was system modifications which was happening. I think the first 45 days were lost. The last 45 days is where we did the disbursements, and I think you should see a 25%-30% growth happening in this segment. It also will be fueled by our new entry into the merchant acquiring segment, where we are seeing a very rampant growth, which is INR 2,300 crores, and we expect to close the year at INR 4,000 crores. That segment is also growing very fine for us. Diamond, of course, once the rupee trade and the regulatory changes happen, you should see the growth coming back. I think that got affected this quarter. Corporate side, I think the SME and the MSME segment, we are seeing good growth. On the large corporate, while there is growth, I think the pricing is still very fine and we continue to be very careful in what we are doing. I think we are getting 3%-4%, and we'll go in line with the market or maybe a percentage point higher because we come from a very small base. Got it, sir. Sir, my last question is on corporate slippage. Where would you see it normalize per quarter, like a broad run rate? Of course, there was slippage from restructured of INR 250 crores, which was pertaining to the group, which you had mentioned last quarter only. Where would the corporate I mean, now most of the restructured corporate loans also would have slipped, right? Correct. I think the corporate will. You see, this, these are one-off specific cases which have come in and which are affecting the corporate. You know which group I'm talking about. I think that's the flow which happened this quarter. There was one more item which happened which actually got upgraded during the quarter itself. You would see an upgrade also in that quarter itself. I think otherwise you should see corporates normalizing. We are not seeing any high, you know, indicators of any such fresh flows which are coming in. I think it will be a BAU. The BAU flow, we've always said corporate will fluctuate between 30 and 50 basis points, and that's where it will be. Got it, sir. Okay, sir. Thank you. Thanks a lot. Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead. Yeah. Hi, sir. Few questions. Firstly, currently now, how much are we carrying in terms of the provisions on the restructured pool? We are carrying INR 3,003 crore as contingency. Contingency. Contingency. We can assume that maybe larger part of it is towards the restructure. As and when maybe, there is a flow through from the restructure, contingency will keep on getting utilized the way it has happened in this quarter. We don't utilize full. Our guidance is 120 to 150 basis points. I also feel, for example, in microfinance, most of the restructured pool, the moratorium is over. They are paying. Whatever had to flow in has flown in. What we'll get is another 50, 100 crores maybe will flow in. In the CFD book, the vehicle finance, we've always said 20% will flow in, and that is what is flowing in. It's not that we are seeing anything else which is flowing in. I think, except for the Future Group, well, the one corporate group which actually is flowing, there have been no surprises for us in the restructured book. Okay. Got it. In terms of this BL, PL and HL, now that component is also quite huge, and there has been a good pickup in this segment. You can highlight maybe amongst these three, which is growing and given that now that scale is also quite high, INR 11,000-odd crores, would we tend to break it down further? Yes. I think PL is growing. I think we have seen INR 300 crore-INR 400 crore quarter-over-quarter growth on the PL side of the book. We are seeing merchant loans, which is about from the Bharat Financial, where I think we have seen a 15% growth in the merchant acquiring, which is growing. I think we are seeing a portfolio of this thing, what you call, smaller businesses like BL, LAP and GL, they have grown quarter-over-quarter by 32%. And KCC, again, a 3%-3.5% growth quarter-over-quarter, which has come in. I think all these businesses have started growing well, and we will see more growth as we go forward in these businesses. We are diversifying our book for secured as well as unsecured. This is the. This is why these businesses have been put and they are doing very fine now. We'll split from the next quarter. If you want the split, we can send you the split over the mail also. Yeah. Yeah, because now that's becoming quite substantial. Yeah. That would be great if that can be shared going forward, yeah. Lastly, in terms of the branch expansion, again, we are looking to add more branches. It was not a substantial one in Q1, but you highlighted 2,500 by the end of this fiscal. We have seen OpEx also growing sequentially now 5% and catching up the pace with the peers. How should we look at cost to income? Would we see that going up with this investments getting into the branches and the employees? I've always said that our income growth will also match our expense growth at some point. I think that's what you will see. Our microfinance, unfortunately, did not grow this quarter, but you will start seeing the growth. I think our cost to income will be range bound between 41%-43%. Of course, in some quarters, you may be 30, 40 basis points here or there, but our objective is to come down. We added our branches. Infrastructure cost came in. I think our resources, if you look at we added 3,200 resources last year, and we've already added 927 resources this year. I think our cost on technology specifically is going up. I think that's about 6%-7% of our overall cost now. It's increasing. I think once our operating leverage of vehicle and MFI starts coming in, I think we should still come back to 41%-43% range, which is what we are headed for, and that's the guidance which we have given. Sure. Okay. Thanks a lot and all the best. Yeah. Thank you. The next question is from the line of Adarsh from CLSA India Private Limited. Please go ahead. Hi, Sumant. The same. Congrats on good numbers. Sorry to interrupt you, sir. Your audio is not very clear. May I request you to speak through the handset? Yeah. Thanks. I'll try that. Sumant, a couple of questions. One on liabilities. This kind of tough period in the sense that a lot of wholesale deposit costs would have moved up sharply. Just wanted to understand, is a lot of that already there or we will see some of that impact come through in the next few quarters? A lot of bulk deposits are smaller duration. They are 90 days to 180 days. I think we will see some part of it also coming in next quarter. Because I think if the cost goes up, if the RBI increases the cost by about 30 to 50 basis points, we will see that impact on the book coming in. I think we have taken that into account while we're preparing our quarter two and quarter three going forward. We've taken that into account, and we still believe that even if the cost of deposits, we have enough assets and our strategy to make sure that our NIMs are within range bound between 4.15% to 4.25%. Perfect, Sumant. My second question related to the restructured book, right? A lot of the reduction was slippages in this quarter. As you said, a lot of it, what had to slip is, has slipped. Like, what, like, how does this 2% of restructured book wind down? Like, they perform for a year, they wind down or like when do we know that what was the outcome from the full book? Quarter on quarter, you will start seeing the winding down. I think, but I think by March of next year, which is the financial year 2022-23, you will see 70% of the book winding down to a large extent because I think the payments would have started. What I had to go down will go down. We've always said that we provided extra, and I don't see our restructured book cost actually crossing more than INR 1,000 crore-INR 1,300 crore. That's what our ask is. Seeing as we've only utilized up till now INR 325 crore. We've always said that we will keep extra buffer and keep INR 2,000 crore safe, and I don't think we need to utilize anything more than that on our restructured book. That is, that if you think of it overall, it's 15%-20% of the restructured book, which is original, which is what the cost will be. Perfect. That was helpful. Just to follow up on margins, Sumant, that we've seen unsecured mix pick up for us. CVs is doing well. MFI will likely come back. From a loan mix perspective, the levers are there for margins to do well, right? See, we have always maintained certain things. We've always balanced our book. Our overall unsecured book to the overall loan book has always been less than 30%. We've always maintained the ratio and the unsecured book, which is credit cards and PL in the consumer bank has been less than 5%. We've not let that bust because we have a microfinance book, which we have always said to the market can go up to 15%. I think those are the levers which we have used. I think we have some headroom there, but I don't think you will see us busting those levers ever. Got it. This is useful. Thanks, and all the best, Sumant. Thank you. The next question is from the line of Nitin Aggarwal from Motilal Oswal. Please go ahead. Yeah, hi. Thanks for the opportunity. Sumant, first question is around the treasury performance for the quarter that looks quite strong in such a challenging time. Any more color as to what has really driven this profit on the treasury line? I think first of all, we must, you know, admit that we've done well on treasury and we run a very good treasury book and I think we manage the book well. Arun, who's here, who's our Deputy CEO and who runs this business also. I think, Arun. Yeah, I think, you know, way back in January onwards, we started unwinding all duration portfolio. I think as a conscious decision, we did not do any of these, or we did very insignificant sort of, non-SLR bonds. By March, April, we had already unwound everything. By April, actually, all our positions were unwound when it came to this thing, and we had switched them into, mostly treasury bills. That's why, we did not really take a hit on any of these, positions, but yet tried to, get some revenues with the positions that we carried, and we squared them off in first week April to second week April. Sure. Secondly, Sumant, like, IndusInd Bank has been putting a very resilient performance over the last, several quarters. Every time there'll be all the other concerns, but macro factors has not been great as well. Going into FY 2023, as we look to do better on earnings and growth, what are the top two, three things that will be most watchful? What are the top three things that are most watchful for you for the current year? I think three things which I think we have to be watchful is. I think we've given a guidance on credit cost. We want to remain within the guidance of 120 to 150 basis points. I think that's one thing. Second is, I think, as on the first thing itself, you check out the flows, and I think the standard book flows have normalized. While, you know, our flows have increased because of the restructure, I think people have to understand, and I think the message is our standard book has normalized and is improving every quarter-over-quarter. That is something, a message, and please look out for that. The number two, I think, I'm very watchful is that I think we manage our mix in such a way that we are able to maintain in the NIMs, NIM range, which we have guided. I think cost of deposits, like you've seen this quarter, has seen an increase. We manage the cost of funds very well. I think we have to continue to manage the balance between cost of deposits and cost of funds to make sure that we are within this range and manage the mix of the portfolio. The third thing, and I think which is a lot more important, I think we have to be watchful of our cost. I think while we continue to invest for growth and we never stop our investments, I think technology cost and with the launch of the new initiative on the individual side coming up in the third or the fourth quarter of this financial year, I think you will see some expenses on the marketing side which will build up. I think our data center migration is also in line. We have to see how are we going to manage these costs as we move forward. I think these are some which we are looking forward to. I may necessarily not say the costs are too much. I think the growth in the income has to be much better than try and manage the investment cost. I think I always look at it that we're too small right now to start managing costs, I think in these areas. I think for us, the growth in income is more important than growth managing the cost as of now. Am I right, Nitin? The next question is from the line of Mr. Manish Shukla. Please go ahead. Thank you for the opportunity. First question, Sumant, if you could please break down these slippages and restructure book by segment again, for the current quarter as well as the previous quarter. Yeah. You can take down the gross slippage. I think the gross slippages in quarter four financial year. I'll go by the segment. CFD, which is the vehicle finance book, we had a INR 450 crores of gross slippages in quarter one financial year 2023, against INR 453 crores in the standard book. We had INR 235 crores of slippages in the restructured book in quarter one against INR 100 crores in quarter four. I think, it will be easier if I just upload that table along with the commentary. Yeah, that will be perfect. Thank you. I'll upload that table. That will be much easier. Yes. Second question, Sumant, is that on the granularization of the liabilities, right? The share of retail in total liabilities as per LCR has been hovering around 40%-41%. Now that we are in a rising rate environment and every bank is going to chase deposits, what are your thoughts on increasing the share of retail in overall deposits as reported under LCR? We've said we want to achieve 45%, and that we are committed to achieve 45%. I think there are four or five initiatives which we are backing this up with. I think the NRI. I think unfortunately the NRI flows have been stable over last year or the previous year also because of the moving targets. I think you will start seeing the NRI flows coming in and with the regulations changing or RBI giving the dispensation on the CRR and SLR. I think some more dispensations will come in the forward or the swap rates. I think you should see the growth coming back in that business. We are targeting a good growth out there as a consequence of that. That's number one. The second is the affluent piece. I think the affluent piece also saw some. While the growth in liabilities have been strong, I think they can do much better, and I think we are committed to achieving our numbers on that. That should see a growth. Our acquisition run rates have increased, and I think we are seeing around, in the branch banking side of the book, we are seeing about 125,000-150,000 accounts on savings accounts, which should move to about 200,000. I think the acquisition run rates will itself increase the balance sheet in itself, along with the new branches. The fourth is the Bharat Financials book has started increasing and the accounts getting opened. I think we are already seeing INR 200 crore-INR 250 crore, which is if the disbursement starts happening, I think you should start seeing INR 350 crore-INR 400 crore quarter-on-quarter growth in this business, which is, and along with the merchant acquiring business. The last is the digital piece, which I think will get launched by November, December. I think we will start talking about a scale in a different way. What we are doing with the branch banking today, I think with double of that we will start doing in the digital. We'll start doing 200,000-250,000 accounts a month to up to three million. That I think will set a new benchmark on how our balance sheet. I think we are well prepared to take care of our growth as well as the retailization piece which we are moving towards. Okay. My last question is on the entire MFI whistleblower episode. Whatever actions had to be taken from your end, those are largely done in terms of either making procedural changes or making provisions, or is there anything which is still remaining? Nothing is remaining. In my opinion, the only thing which is remaining, we are doing for a system upgrade, where I think by March 2023 we would have done a system upgrade also. I think that's the only thing which we are doing. We are making it much more robust, and I think we are adding much more features and control secure features into that. That will happen by March 2023. Otherwise, all changes in the organizational structure, processes, as well as what needed to be done have already been done. One last question is, in the MFI book, there is a quarter-on-quarter uptick in ticket size from about INR 27,800-INR 29,700. Is this because of the new RBI norms and should this be the new normal? No, no. I think what has happened, the acquisition of new to bank client, actually, which was 800,000 to 900,000 a month, went down this quarter to 500,000. The cycle one ticket size is actually INR 18,000 to INR 20,000, whereas in cycle two it's INR 30,000, in cycle three it's INR 35,000. What has happened this quarter is that the cycle two and cycle three have been successful. Our new to bank customers have been lower than what they are normally is, and as a consequence the ticket size has moved up. Understood. This is very clear. Thank you very much. Those are my questions. Thank you. Next question is from the line of Rahul Jain from Goldman Sachs. Please go ahead. Yeah, thanks. Hi, Sumant. I think most of the questions have been answered. Just one observation. You know, if I see your slide number 25, the write-offs in the corporate book appears to be on the higher side. Pardon me if I'm sort of repeating this question, but can you sort of explain what sort of triggered such a large write-off number? I'm sure this is an aberration or more. No, not at all. I think you're absolutely right. There are two accounts which have gone into the write-off. One is a media account, which was there, which we had taken a provision long time back, and we had to write off because of the IRAC norms. The second one was a real estate account which was act to be. Okay. Both of them have been written off as a consequence. Got it. Just that I have the floor, maybe, you know, one or two more questions. On the deposit side, again coming back. All right, so you've got the levers on the yield side across portfolios, you know, with pickup in high-yielding portfolios, et cetera. I hear you on the NRI deposits, et cetera. But anything that goes beyond, you know, building the customer base, which is more far more sticky and allows you to diversify in a retail deposit, retail asset mix, at a future point of time, I mean, any strategy or any that you're sort of doing out there to improve that part of the segment so that the business becomes less cyclical? Yeah. I think what I told you, I think while the branch banking is doing, which is, you know, all the levers which are, you know, mobile payments and all of that is happening, I think the digital piece will create a very super engagement strategy. We are coming with a completely different UI/UX and a payment stack, which will redefine the client experience product as well as the business plan strategy on the liability side. It's the client experience does not start from liability. It can start from a very different journey and end up because of the transaction going through the payment, going through the bank. I think as a consequence, we believe while the ticket size may not be equivalent to what our branch gets of about INR 62,000, we have taken a INR 30,000 of about almost 50% decline in the tickets. I think it's the volume which we are planning to do, and I think we will acquire about 2.5 to three million customers per year through this strategy. I think as we go forward, you will see a very differentiated CASA mix as well as the bank going forward in the liability strategy. I think we believe that that's going to be the change agent for the bank going forward in the. In no way am I saying we will stop expansion of branches. No way am I saying that branch distribution is not important. I am saying it's a mix of both the strategies which work together and creates a very differentiated offering. Of course, in the current account side, you would have seen the merchant acquiring business. I think as we scale up this business, 30% of the client flow can go through it. The AUM which is there in the merchant acquiring business, which is about INR 2,300 crores, about 30% of that book lies with us in the current account book. We want to scale this business up to about INR 15,000 crores in three years' time, and you will see that the flows in the current account as a consequence will start coming in. As we grow more deeper into our CV MFI penetration, while the book may not be booked, the cost of that book will be very, very good as we go forward. I believe that we should be able to create a INR 5,000 crore-INR 6,000 crore book in the next two years in this. We are already at INR 1,500 crores. I'm seeing a very good potential which is coming in as a consequence of these efforts which we address. Understood. Appreciate that. Just on the deposit bit again or the deposit pricing rather, you know, over the next few quarters, of course, given that, you know, everybody's sort of, you know, fighting for deposits, how do you see yourself playing in that market? I mean, would you need to offer substantially higher rates or you're comfortable with whatever rate differential you're running with versus the larger banks, and that should be enough to generate enough volumes to support your loan growth? If you look at our loan growth, we are talking about, even if we do everything, even if we do 20%, we are talking about a 50,000 crore loan growth, which means that we have to convert this into a 60,000 crore of liabilities. That's what we need to convert it into. If you look at our growth, we are today at 8,000-10,000 crores or 12,000 crores, 10,000 crores of growth. I think for that we need another 5,000 crores. You will see us maybe solving that, rocking that situation in the next two quarters itself. What the way we are going, I don't see that as a risk if all our strategies play out, and I think, we're not seeing that risk. Having said that, I think we will. I've always said that initially we were 200 basis points ahead of the market during 2020, 2021. We reduced it to 150 basis points, and now I've said we will be 150-75 basis points ahead of the market. That's where we want to be. I think we've been able to attract deposits at that level. I think we should maintain that. If the situation gets worsened, I think we will come and inform. We will also change our mix in such a way that we have changed the mix of the business in such a way that we are able to take care of the deposit price. Great. Look, congratulations for a good quarter and thank you so much for the responses. Thank you. Next question is from the line of Sameer Bhise from JM Financial. Please go ahead. Yeah. Hi, thanks for the opportunity. Just one clarification on the vehicle finance book. The sequential accretion in the loan book appears a bit more pronounced versus the fact that disbursements were flat QoQ. Yeah. This is what we have been explaining for last three to four quarters. The way the EMI construct works, if the previous year disbursements are low, the runoffs are so high that even the higher disbursements can't catch up. Once you have delivered three to four quarters of consistent disbursements, then you don't have to keep on growing disbursement. It just keeps on building up. It's purely because of that construct that you have seen the disbursement versus loan book movement over the last three to four quarters. Okay. Sure. Just, secondly, on the corporate side, what sectors are you seeing the incremental opportunity? Sanjeev. I mean, there's you know, on the large and midsize corporates, so it's across the auto sector, the renewable space, the government push on infra, the PLI scheme. Pretty much it's across everything. There are big CapEx kind of plans lined up. Just about the slippages on the microfinance side, could you split it between from the restructured book and even from the standard book? We are uploading the information, but I can tell you that quarter one slippages, INR 278 crore came from the standard book and INR 283 crore came from the restructured book out of the INR 560 crores of slippage. Okay. Thank you and all the best. Thank you. The next question is from the line of Jay from B&K Securities. Please go ahead. Yeah. Hi, sir. Congratulations and thanks for the opportunity. Sir, if you can- Sir, sorry to interrupt you. May I request you to speak little louder, please? Thanks for your call. Please stay on the line. Due to hold music, we move on to the last participant. The next question is from the line of Rakesh Kumar from Systematix. Please go ahead. Yeah. Yeah, thanks for the opportunity. Can you hear me? Yeah. Yeah. Just extension to the previous question, in relation to the, you know, regulatory disclosures that we make on NSFR and LCR. If I see in the NSFR, like, you know, the stable deposit composition is, you know, relatively on the lower side and looking like an outlier, as compared to, you know, the bank of a, you know, similar size. How we are going to, you know, change this, you know, deposit composition profile maybe in times to come? Second thing is that what we have seen in last, you know, eight, 10 years, 12 years performance that, you know, after a rate rise, you know, in the frequent years there is a margin pressure because your deposits are then, you know, priced at the higher rates, and then we see margin pressure in the next year, not in the same year when the rates are rising. These two things, if you can elaborate on, would be quite useful. I think you have to look at it in two ways. I think if you look at it, you're absolutely right. If you look at our retail LCR, it's on the low side, and that's something which we've done it on purpose and we are now increasing it and as we've made it as a part of our PC-5 addition as well as going forward. I think our LCR today, if you look at it from a Basel III, it's 41% and we want to go to 45% and eventually settle at 50% at some point of time. I think that's where we are headed. I think as that happens, I think you will see it. The other thing which you will see is, if you look at our CASA ratio, I think one of the things which you will observe is that our current account percentages are lower to a large extent, whereas anybody else who's there would be around you know 30%-35% of its book in CASA, and this will come out of the current account. I think so that's where I think you will start seeing a focus on the current account business, and that itself will start driving the margin as well as going forward. I think three or four things, I think you will start seeing us focusing on retailization of liability. The second is the current account book, which has almost been stable for last four, five quarters or declining. You will start seeing a growth in that book as we go forward. I think the third thing is you will start seeing that as your CASA percentages move up. I think your cost of deposits will start going down and your margins will come. Fourth, I think we've always said that we have the capability and we may not have had it last time. I think we have the capability of creating a distribution mix through our domain specialization, where we can change the mix very fast to manage our NIMs as we have gone and margins as we move forward. Got it, sir. Just one more question, if I could ask. You know, this is with relation to, you know, the risk weight of the, you know, of the credit and the proportion of the loans which are on the, you know, risk weight of 35% or lower. Proportion of that kind of loans have been coming down. Compared to Q3, in Q4 we have seen, you know, quite lot of drop in that kind of a loan. Q1 NSFR is not yet out. Looking at these two numbers, you know, it is looking that, you know, we are trying to get into the, you know, the, credit, which is higher risk weight, at least from the two quarters numbers that we have. Just to give you, I think if you look at, this is part of the commentary. Our AAA rated, AA rated and above book has actually increased, yeah, by 300 basis points from 70% to 73%. Overall, our risk rated book year-on-year has gone down. Yeah. Our risk rates have gone down. I'm unsure as to where you're coming from. Of course, we have increased our SME and the MSME book also, but as a percentage within our risk, it has not increased. Don't know from where it's coming. Yeah. Maybe you can send us your question and we can investigate and get back to you on that, yeah. For example, RWA growth is 11%, whereas the loan growth is 18% year-on-year. The credit growth is credit RWA growth is 12%. The risk intensity has actually come up over the last 12 months. I can engage with you separately offline and discuss with this. Sure, Indrajit. Sure. Thanks. Many thanks. Thank you very much. Ladies and gentlemen, we'll take that as the last question. I now hand the conference over to Mr. Sumant Kathpalia for closing comments. Thank you for participating in the call. As usual, Indrajit and me are available for any other further clarifications that you may require. We'll upload the one statement which we have to upload by the end of day or tomorrow morning earliest. Thanks a lot for participation. Thank you. Thank you very much. On behalf of IndusInd Bank Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.