Ladies and gentlemen, good day and welcome to Mahindra & Mahindra Financial Services Limited conference call. Please stay connected. The call will begin shortly. Ladies and gentlemen, good day and welcome to Mahindra & Mahindra Financial Services Limited conference call. Please stay connected. The call will begin shortly. Participants, you have been connected to Mahindra & Mahindra Financial Services Limited conference call. Please stay connected. The call will begin in two minutes. Thank you. Good day and welcome to The Mahindra & Mahindra Financial Services Limited Q3 FY2023 Earnings Conference Call. This call is not for media representatives or Bank of America investment bankers or commercial bankers, including corporate and commercial FX. All such individuals are instructed to disconnect now. A replay will be available for Bank of America investment bankers and commercial bankers, including corporate and commercial FX. The replay is not available to the media. This call will be recorded and the recording will be made public by the company pursuant to its regulatory obligations. Certain personal information such as your name and organization may be asked during the call. If you do not wish for it to be disclosed, please immediately discontinue this 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 signal an operator by pressing star then zero on your touchtone phone. I'd now like to turn the call over to Mr. Anuj Singla. Thank you, over to you, sir. Yeah. Thank you, Neeraj. Good evening, everyone. This is Anuj Singla from Bank of America Securities. Thank you very much for joining us for the Mahindra Finance call to discuss quarter three and nine months FY 2023 earnings. To discuss the earnings, I'm pleased to welcome Dr. Anish Shah, MD of M&M and Chairman of the Board of Mahindra Finance. Mr. Ramesh Iyer, Vice Chairman and Managing Director. Mr. Vivek Karve, CFO. Mr. Raul Rebello, Chief Operating Officer, Core Business. Mr. Dinesh Prajapati, Head Accounts, Treasury and Corporate Affairs. Thank you very much, sir, for giving us the opportunity to host you. I now invite Dr. Anish Shah for his opening remarks, post which we will open the floor for Q&A. With that, over to you, Mr. Shah. Thank you, Anuj, good evening, good afternoon, good morning to everyone. Our apologies for the delay today. We just concluded a board meeting and have an exciting announcement that we had to upload to the stock exchange site before we could get on this call. I will plan to stay on the call for the first 10 minutes or so, to cover the announcement as well as address any questions and then hand it over to Ramesh, Raul and the management team to take it forward. Over the last 12 months - 18 months, we have been very clear about the path that Mahindra Finance is headed in, and that has been around improvement in asset quality, ensuring that we significantly reduce the volatility in asset quality, in driving growth, in bringing in a much stronger management team as the business moves into the future, and to look at data and digital in a way that can really help Mahindra Finance be a leader in technology in financial services. These are the four areas of focus that we've had over the last 12 months - 18 months. You will see the results and many of you may have seen it already with regard to asset quality, I won't spend much time on that. The management team will take you through that in detail. What I would like to talk about is our succession plan. We've announced earlier that the MD and CEO, Ramesh Iyer, will retire on April 29, 2024. I would give a lot of credit to Ramesh and the team for building a very strong business. As we see the business, the core is truly extremely strong. It's been the volatility in asset quality that sometimes has caused angst for all of us, and that's something that, as I mentioned earlier, we will reduce. The team has built a fantastic business. It's a great franchise. It's one that, even today with banks and other NBFCs in this space, continues to be a very strong leader in rural and semi-urban markets. Therefore, the strength of the franchise is one that can be leveraged to do a lot more as we go into the future. That's the reason why I would give a lot of credit to Ramesh and the team who built it. As is our norm at the Mahindra Group, we also want to ensure a very structured and a thoughtful succession process. That is something that you had seen when I got into my role, where the announcement was made literally about 18 months or 15 months prior to that happened. Exactly in that same vein, we are making an announcement 15 months prior to ensure a very smooth succession at the leadership level. We have gone through a very detailed process. The Mahindra Finance board was collectively very deeply involved in it. There were a number of candidates that we looked at from across the industry, and I must say that it was very gratifying to see many of the top bankers in the country also very keen to talk to us about this role at Mahindra Finance. Having done a very detailed assessment of all potential candidates, we are pleased to announce that Raul Rebello, who's currently our Chief Operating Officer, will assume the post of MD and CEO designate for now, and then will assume the post of MD and CEO when Ramesh retires on April 29, 2024. Rahul comes with a very strong background with Axis Bank, having spent 19 years there, has built a very strong business at Axis Bank. Over the last 17 months at Mahindra Finance has really led, along with Ramesh, the turnaround that you've seen and the improvement in asset quality, the growth, the focus on technology and data, all of those things. We feel that Rahul is an ideal candidate to take this business forward. The details that we've gone through with him on the vision for the future on how to leverage technology, how to be a tech leader were also, I would say, inspiring for the board and something that you will see in the months and years to come. We're very excited to have Raul Rebello as the next MD and CEO for Mahindra Finance. At this point therefore, let me open it up for questions. I would caution in a sense or request that please do not ask questions on M&M because we are in a silent period right now till we announce the results next week. I'm here in my role as Chairman of Mahindra Finance and would be happy to address any questions on the succession plan. The details on the quarter, I would again request, please wait for the management presentation and then go through the questions after that. Specifically on succession, if there are any questions, happy to address that. 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. Ladies and gentlemen, you may press star and one to ask a question. Yeah, just checking with, so Dr. Anisha mentioned that the management would like to make some comments on the results as well. If the management is okay, we can go ahead with the comments, and after that we can proceed with Q&A. Yes, that sounds good. I think we can do that. Are there any other questions on succession? Sir, we have one, but I think we can combine it along with the other questions, if that's okay with you. We will have many more towards the end. I think... Why don't we cover the one question because I will step out after that and leave it to the management to go forward. Sure. Sure, sir. Sure. Dilip, can you open the please? Sure. Thank you. The first question is from Jignesh Shah from InCred Capital. Please go ahead. Yeah. Hi. Am I audible? Yes, sir. Yes. Please go ahead. Yeah. Yeah, yeah. Thanks. Congratulations to Rahul and even you guys for, you know, such a advanced announcement and all. I just sort of one question that with Rahul moving towards, you know, gradually moving towards to top role, are you know, seeing any further additions into the top management level, you know, immediately? How any changes in the structure has been thought about? It will be more or less just, you know, succession plan that has been talked about. Any further changes that we are seeing in the top management side? That is what I wanted to know. Thank you. Jignesh Shah, over the last two years, there have been a number of senior leaders who joined Mahindra Finance, many from very reputed banks in the country. That has really helped to build a very strong team here. This was sort of one additional step that was a critical one, which we've taken now. It will leave the post of the Chief Operating Officer open, which is Raul's current position, we will review that. The two options are that either we will fill that post as is and bring in a new Chief Operating Officer or there may be some small changes. I wouldn't expect something significant or dramatic because we've got a very strong team in place now. This was a plan laid out 18 months ago and executed in a very structured manner. I would not expect any significant changes. Sure. Sure. Thanks. Thanks. Thanks for the answer, sir. I'll be back with a question and answer on the results. Thank you so much. With that, I will leave it to the management team to then take it forward. Thank you all again for joining the call today, and we will continue to be in dialogue with you. If there are any further questions you have after the call as well, please feel free to reach out to us and we will respond to that. Thank you. Ramesh, over to you. Hi. Good evening, everyone. Can you hear me? Yes, Ramesh, we can. I'll very quickly give an overview, then we can get into the Q&A. you know, I'll take you back to a few quarters back when our GNPA had gone to the highest level, then we had made a commitment that how we see things changing. Then on every quarter we've seen things going in the right direction as envisaged by us. It's not by chance it's going in that direction. We clearly put in place various initiatives that were required to bring things to control. We also have said repeatedly how the rural market buoyancy helps this get corrected. We continue to see the rural market continuing to be strong. The demand is high. Cash flows definitely are showing very, very positive trends. Good news is the monsoons have been good, yields have been good, support price announced is good, therefore, the farm cash flow definitely is holding up. We are also seeing opening up of the infrastructure in different states and this will only further enhance going forward and the contracting cash flow is doing pretty well. I think every activity levels which had subdued in the past, which we had listed out, whether it is the tourism, people movement, we see no pressure on any of those front, and that's clearly indicative of how the cash flow for the rural market is performing. We've also always stated in the past that demand for vehicles, tractors, pre-owned vehicles is a direct indication of the improved cash flow, and that results also into collections being always good because that speaks of the overall cash flow strength of that market. Demand is holding up very clearly through falls at the dealership continues to be high. Supply positions have improved. Vehicle availability is increasing. There are some vehicles non-availability, some partner locations non-availability. Pre-owned vehicle was a short supply product. All in all, we see availability has improved and that has resulted also into good retails. You can see from our disbursements, we've clocked the highest disbursements in an MMFSL this quarter as compared to any of the past. The NPA levels are continuously declining. Also important to read it with, we had no repossessions during the quarter. In spite of that, we've seen quality correction, which is again a reflection of the cash flow holding up. When there was this order of repossessions imposed on us, we had said that it's come in a quarter where normally the repossessions would be low. With the improved cash flows, we may not necessarily resort to high repossessions. That's come out pretty true that we have done well in spite of no repossessions. We have overall improved market share in most of the product lines that we work with, and we are very happy to report that we continue to maintain our leadership position in most of this product in this market. We are very efficiently using the data and the various proxy data that's available for even underwriting. If we kind of analyze our last 12 months- 18 months of lending, extremely happy to note that the delinquency from that portfolio is pretty negligible. Therefore, as we progress in that direction, and we start cleaning up our past, both by recovery, repossession, settlements and all of that, we would be a very healthy balance sheet in terms of our asset quality is concerned and coupled with the growth that we are already witnessing. We have talked about our strategy up to 2025. We are very much on course for achieving most of those parameters, and we are progressing extremely well on those fronts. We have invested sufficiently and adequately, appropriately in the technology space. We have a project, Udaan, which is a transformation project in hand, where all of us are very actively engaged with our best people put in that project. That will really bring much higher degree of stability to what we are focusing. We do believe that until 2025, it is definitely a great opportunity in the rural market, and we are absolutely ready for capitalizing on that opportunity given our deeper penetration, given our investment in technology, given our vast relationship with OEMs and dealerships, and very clear indications of getting into new product lines. More specifically, I'll call out the SME as a segment where we had set out clearly that what would we want to do in the next couple of years. Currently, we run a book close to about INR 4,000 crore in the SME segment. They largely come around the auto engineering agri space that we well understand. It comes around the small trader community that we well engage with, and we believe that that's a great growth opportunity. The other two growth engines, which is the leasing business that we got into, again, very happy to report that we have underwritten more than 200 clients-250 clients. They're all good corporates who offer the CTC vehicle to their employees. We believe that we are getting ready for the future, and we are rather one of the NBFCs who got into it much earlier than anyone else, and we definitely see advantage and the growth coming from there. On the digital finance front, which we have launched a year plus back, I think all processes well tested, technology well tested, and we've kind of built relationship across. While the numbers are too small to report at this stage, but you will see numbers punching in. If you look at the next one year, we should very categorically be able to talk about that being another vertical of growth for us. All in all, we think that, having done things with lot of patience and partnership approach with the consumer, we've been able to turn it around, and we are at a juncture now where we are able to clearly see growth for us. Some of the areas of clear focus for us going forward, we are conscious of the fact that the borrowing cost has gone up. What we have done is we have also passed on to the consumers, more importantly, in the quarter just gone by the then effects of which could be seen in future. Around 80 basis point has been passed on to the consumer. While there is still a gap, but we don't believe that that needs to be bridged in urgency. Our expectation is in the next couple of quarters, we may probably start seeing the interest rates come off. If not, we can always take a decision to what more and how much more to really pass on. We don't see any specific pricing power being withdrawn from that market. While there is sufficient competition across the country, but given our presence for a long period of time, and as I said about our relationship, large customer base, deeper penetration, all of that put together, we are able to counter that pretty well. Any compression that you see in our NIMS would also come from a product mix change because different products come at different rate levels or yield levels. Therefore, when certain products which are low-yield products are high in volume, like especially the personal segment, cars, et cetera, you would see some compression on NIMS, but they more than get offset by lower operating costs and lower credit costs for those product. The other area of focus for us very clearly is going to be on the OpEx. It looks a little elevated at some point of time, but you now start seeing the productivity kick in with the disbursements growing and the AUM growing. At the same time, we have little overinvested into future, especially with our transformation project, and we would continue to invest in that direction even in the coming year. While the absolute operating cost would remain under control and the productivity would kick in, but additional invested cost into these projects will keep the cost little elevated. We do see a 20 basis points, 30 basis points improvement that we are very cautiously working on and the benefits of could be seen over a period of time. Putting all of this together, I think our real clear way forward is to keep controlling the asset quality and maintain continuous improvement. As you all must be aware that RBI has already lifted the ban on the repossessions. Therefore, we will resort to repossessions from delinquent account which are long outstanding, and that should release further provisions from the book as we repossess and transact on them. We therefore strongly think with the growth returning, with asset quality under control, margins being maintained, and with little additional focus on the OpEx, as we consume capital, our returns should also start to improve. While our first attempt is to keep continuously focusing on the ROA improvement and parallelly as we consume capital, you'll also see the ROE improvement. All in all, we think we are taking advantage of what's happening in the rural market and we are being benefited from what's happening out there. Our confidence is that in the times to come, rural market is a place to watch and it will have the continuity of the positive buoyancy and the sentiments that we see there. I would stop here and open it up for Q&A. Thank you very much. Operators, you may press star and one to ask a question. Ladies and gentlemen, you may press star and one to ask a question. The first question is from the line of Abhijit Deb from Motilal Oswal. Please go ahead. Yes, thank you for taking my questions and congratulations on a good quarter and congratulations to Mr. Raul Rebello as well. Two questions. First on margins. I'm just trying to understand, I mean, there were wide-ranging expectations that we will see a, you know, compression in margins, but looks like you've been able to maintain steady margins. I mean, should we read it as, I mean, given that, I mean, interest rates have now peaked out going forward, we can maintain steady margins or, I mean, how should we look at margins going forward, is the first thing that I'm trying to understand. As I said, I think you should look at margins from two or three angle. One, you are right. We also believe that the interest rates must have peaked out but start rolling back only in the next couple of quarters. It's not going to happen in a hurry. Nevertheless, we have passed on some rate increase, we would continuously watch that space. If the interest rates were to further go up, for sure we will further discuss on how do we pass it on. Also it's important to understand that, and you must have seen it, that now we also enjoy a AAA rating. We've been upgraded to AAA. That should bring in some benefit on our borrowing cost as well as ability to borrow from more vendors, more providers of funds and could be an advantage from a cost perspective. The fourth is, clearly, as the borrowing cost starts to correct downward, we should be benefited out of that. Maintaining the current margin levels, therefore, for sure is not an immediate challenge. Will it start improving from here? Will definitely depend on the two or three parameters that I talked of. Please be conscious of the fact that product mix will keep moving the NIMs up and down. That depends on the yield of the product. On the end result of the ROA, it should benefit us if it comes from certain products which require low OpEx and low credit cost. Okay, this is useful. The next question that I had is on the asset quality. Obviously from unique, Stage 3 levels of about up to 3% plus, I think we have come a long way and congratulations to your team for that. Just trying to understand, in over the last or next, let's say one year, where can this gross Stage 3 head to and how much scope do we have now for releases of issue provisions? Because I think, in your previous remarks also you talked about given that this RBI ban is lifted, we will now be in a position to repossess some of those old delinquent accounts which will lead to further issue in provisions. I mean, one of the other numbers that you kind of report is this bad debt and new settlement process. Given where they are and given the fact that we've not done any repossessions, I mean, were they more in the nature of customer settlements which led to that write-off number in the P&L? You know, in one of the earlier calls we had said that even though repossessions are not being entertained, we were definitely in touch with the customers and you're right, we have reached out to them for a settlement. There are definitely settlements come at a little lower loss than probably repossessing and selling some of the high delinquent account vehicles. You're right that to the extent you see that number, it comes from— Some comes from whatever stocks that you must have had in the books which would have got sold and some comes from the settlement that will happen with the consumers. Your specific question on where do you see the Stage 3 going forward? You know, this is a business which will have a little volatility when it comes to quarter one, quarter two versus quarter three and quarter four. That is more by nature of the cash flows of that market. With repossessions opened up, et cetera, we would definitely concentrate on high aging buckets like, you know, 12% +, 18% + kind of a bucket. To the extent there we settle or we repossess and settle, et cetera, should give us a scope for at least another 100 basis point improvement on the gross NPA over a period of time. On a normal regular basis, if everything going well in the market, we do believe that 3%, 4% gross NPA in this market always will be on that range given that we are in tractors, we are in three-wheelers, we are in pickup vehicles and all range of vehicles. This is good, sir. Sir, just squeezing in one last question. To get to those guided ROA levels by FY 2025 to 25%. I think one of the biggest drivers of improvement in ROAs are going to be your OpEx and credit costs. I think the opening remarks you talked about and you talked about that we are working very hard towards reducing the OpEx by about 20-30 basis points, and that the improvements will come over the course of time. Are we talking about a sustainable 20-30 basis point kind of an improvement every year from here on? Secondly, I mean, in terms of credit costs, in terms of the franchise that you've built, you've in the past talked about, I mean, reducing the longer tail of the more vulnerable customer base and targeting a slightly more risky customer segment, risky affluent customer segment. I mean, against that, I mean, what are those sustainable credit costs that this franchise that you've built can work on? One is on the ROA that you said, and you referred to my initial remark as well. We did say that we will work at least on a immediate basis in the next couple of quarters, how do we get to 30 basis point saving arising from there. It's a hard work because it is a variable model. As volumes increase, as collections improve, it comes with a parallel variable cost. Definitely with the sentiments of the market being pretty good, there will be some productivity that would kick in for sure. Far as the credit cost is concerned, I mean, it's important to look at our coverage already, right? We are at about 59% coverage. As we speak, and as I said, the future delinquency improvement will come from IH bucket, which already carries a higher provision. Our view is that we may not have to necessarily over worry on the credit cost front going forward. What we really have to focus on is the OpEx coming down and the NIMs being protected by better borrowing, by better lending rates and better product mix management. That will collectively lead to an improved ROA that we are seeing. Got it, sir. This is useful, sir. Thank you so much, and wish you and the team the very best. Thank you. Ladies and gentlemen, you may press star and one to ask a question. Next question is from the line of Kaitav Shah from Anand Rathi. Please go ahead. Hello. Go ahead, sir. You're audible. Hello. Yes, Kavitav, we can hear you. Please go ahead with your question. Yes. Good evening. I believe congratulations are in order for Mr. Ramesh Iyer. First of all, a good set of numbers. My question is more on, the subsidies, if there is any visibility or plan around improving the numbers on both the subsidies. On the subsidy, let me first take the MIBL, which is a smaller one. You know, very clearly we are awaiting certain regulatory changes that we've been given to understand are on the way, and you would see a good turnaround in this business. If you see the top line of this business in terms of our ability to kind of mobilize business and the premium numbers, they are pretty healthy, right? What has caused a little depression on the bottom line clearly is the way the commissions are structured, and that's definitely undergoing some change and you will see change in this business for sure. More importantly, the larger business, which is our rural housing business. We have taken a very conscious call on how much should we do the rural housing lending and how much should we get into the affordable lending. While we started off initially with a 15%-20% as affordable lending, we do believe that we need to get to a much higher percentage in the affordable lending space. The months gone by, we have seen a mix of at least about 50/50, 45/55 kind of a number. You will see that first very clearly arresting the volatility of the NP. As all of us know that the business that we got into the rural housing to an extent initially was a little experimentation. We were the first to get to the business and it has given us lot of learnings from different markets at different points of time. Therefore, we've taken this conscious call on also getting into affordable housing a little more larger than we are today. That changes the overall ticket size of the loan as well as therefore the mix of the business changes. On the rural front, again, it's a great business to be in, except that we've very quickly aligned and realized that we need to cut certain segments while there is enough high-end segments available even for the rural lending. Therefore, the segmentation has helped us to move up the ladder in going to different segment of customers. You will see in rural housing, at least in the next one year, you'll see dramatic change, not just to the asset quality of the book that we are building, also correction too because we're putting a very strong legal practice in place to be able to negotiate with the customer, settle with the customer, use our fee where required, et cetera, et cetera. One side we will do the past book cleaning up and on the other side we'll build a very strong future book. These two together should help grow the book as well as return back to high profitability level. Right. Right. Wonderful. One data keeping question on the customer count that you have, and what you've added in terms of digital for this quarter and what it would look like, say, in the next one year? Sorry. When you ask this question, you mean how many customers are we acquiring digitally? Is that the question? Yes, sir. Yes. Overall customer set and the number of customers acquired digitally. What is it that we are targeting. The customer base live today is close to about 22 lakh customers we have live. You must be seeing our monthly updates where we say. Correct. On an average we are upward of 60,000 + customer every month we add. Good months we have added 70,000-75,000 + customer. Right? Right. In terms of digital acquisition is concerned, it may not be a very high number buy vehicles and tractors still digitally. Right. We have started seeing traction there. More importantly, in our personal loan segment, if you recall quite some time back, we had discussed and launched a product called Manthan, which is to our existing customer, existing extremely good customer who have repaid 12 months, 15 months, 18 months without a default. We are giving them certain personal loans which will mature much before maybe the equal loan matures, and therefore the vehicle acts as a collateral. That loan largely is digitally handled. That is close to about INR 40 odd crores a month is what we do there. In number terms, there will be about 4,000-5,000 customers or maybe even 6,000 customers. That we see will grow faster as compared to digital growth in vehicle tractor business. Many of the processes, including recovery process, including KYC process, are all very well digitally handled. One additional data point I now want to give you, a company which used to be 90%+ cash collecting company over a period of time, has now come to about 40% is what get cash collected, and 60% is coming through various digital means. That's an interesting phenomena for us because then that helps us in terms of even improving our cost going forward. Right. Got it. Got it. Thank you. One last question, if I may be allowed to ask. In terms of the operational changes, this is more to Mr. Raul Rebello. Are there any other low-hanging fruits? I mean, you have already, we've already seen some ground-level changes, but are there any other low-hanging fruits to improve the efficiency from here on that you could talk about from a strategic perspective? I think, you know, you would have seen our Vision 2025 document wherein we've put out our growth plans, asset quality plans, as well as our OpEx plans. But more from a growth standpoint, while we have our organic channels of growth, which is a dealer channel, we are also investing a lot in as Mr. Iyer have said, in other channels of acquisition. The non-dealer channel as well as the platforms for origination. We've also, you would have heard from our last update, we've tied up with India Post Payments Bank. We're unlocking as many partnerships to acquire customers as well as service customers in a, in a manner which is, you know, for customers there should be a, an ease of of having a financial relationship with us. Okay. Okay. Awesome. Thank you so much, sir. Thank you. Thank you. The next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead. Thank you, sir, for the opportunity and congratulations on good set of numbers. A couple of questions from my side. You made a comment in the opening remarks mentioning that you have maintained your leadership positioning and also market share across products. If I'm looking at your breakdown of business assets as well as disbursements composition, then your three key products, so auto and utility vehicles, tractors and cars, all have been reporting slight sluggishness, I mean, sorry, nine months year-on-year as well as if I compare with March quarter. Would you like to throw light upon then what will be the key growth businesses going forward? That's question number one. Question number two. you know, Terry addressed this, but, still, you know, in absolute terms, if I have to look at credit charge to P&L in terms of provisioning, so that number has been little volatile. If we have to sort of model in that particular number, so, you know, how shall we look at provisions on P&L going forward? Thank you. Let me take the first one. You know, within our mix you may see some sluggishness in growth of the first three products that you've talked about. That has no relationship to the market share and leadership position that we have, because they are already a very large base number, and what we do in that business will depend on the underlying volumes of the market. If tractor industry grows by 2% or 3%, since we already have a 30%-35% market share, and therefore we will also get only that kind of a growth coming from there. I think you have to deal in these two verifications. On the market share front, on the leadership front is very independent of the growth rate this product offers internally. Therefore, if you kind of look at our growth engines, we always have said that pre-owned vehicle will be a growth engine for the year because the demand for that is pretty high. I think it's also important to look at as the vehicle price, tractor price starts to go up, for the same volume, the disbursement will go up. For that benefit is not still coming in because the OEMs are also cautious in terms of when and how much they want to increase. When the price increases on the vehicles, tractors, et cetera, begin to happen, which we believe in the next 12 months, you will see few increases should happen. That will also bring in a higher disbursement for the same volume. Therefore, one should look at retention of market share and the volume that we clock on a monthly basis on this product to be very independent of each other. The growth that is projected by all the OEMs going forward also seems to be looking attractive, and which is why we are confident that we'll maintain our growth rate. In as far as the provision number that we should consider for the P&L purpose, may Vivek will take this question. Yeah. Hi, Shweta, you can hear me, right? Yes, sir. Okay. what I would suggest is instead of looking at only the provision number, you should probably look at the overall credit cost number because there is an interplay, between the provisions and the other write-offs, that we do. Because to the extent our bad debt is written off, you would know that we write off bad debts on a quarterly basis. There are termination losses or settlement losses that are also accounted for as and when they are, they are incurred. In most of the cases, these come out of the Stage 3, gross Stage 3 assets that we hold. Therefore, my suggestion would be not to look at the provision number per se, but look at the overall credit cost, as a number. Fair point, sir. One question, if I may squeeze in, which again you have already addressed partially. Did you guide for, incremental 100 basis points decline in Stage 3 GNPA going ahead? I think the question was, how should we look at the trajectory of, gross Stage 3 over the next 12 months. I think that was the question that was asked. That's where Mr. Iyer said that, potentially we could look at a sequential downward movement in the gross Stage 3 from where we are today. Okay. sir, are we giving a break up of Stage 1 and Stage 2? Yeah. You're talking about the guidance or you're talking about the break up? No, break up separately of Stage 2. Oh, yeah. We do that. It is already available on slide 25 of the investor presentation. Now that you're asking this question, as of 31st of December, we had close to INR 6,500 crores of Stage 2 assets, which comprises 8.4% of our asset book. Sorry, sir. Yes, it's there. Thank you. Okay, thank you. Thank you. Next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead. Hi. Thanks for the opportunity. Congrats on a good set of numbers and, congratulations to Mr. Raul Rebello. My question is again with respect to credit cost guidance for FY 2024 and ahead, given that it's very important for your ROE predictions. Given the business mix and risk profile is undergoing a change and we have also seen the impact on loan yields, would you guide to a much lower structural P&L provision charge than what you used to guide in the past of about 180 basis point -200 basis points in normal times? I think, you know, if you're talking of a little long term, definitely as the asset quality, the segment of customers starts changing, mix of business starts changing with little more of SME coming in, I think the answer would look to be an yes for sure. Sure. Maybe we have already taken the bulk of the provisioning in this year, right? We are seeing good recovery. Why not for FY 2024? If you look at, we still have 5.9% NPA, right? While we have made provisions for. If you look at the Stage 3 at 5.9%, our focus is to collect from what we have provided, and you may get some benefit. As I just said in the opening remarks as well, the repossessions have been allowed and we will focus on high delinquent accounts. To forecast that as a number is a challenge. Maybe when we put out our monthly number, like we put out our monthly number for January, and you would have seen that the NPA levels are maintained at a December level, which is not normally the outcome any time. You always see as a quarter ends, the first month of the next quarter, you see something going up. The very fact you see in January that's been curtailed, we are reasonably confident to believe that our efforts on the delinquent account resolution is working. We will put it out on a month-to-month basis. To make a commitment, what would it look like in February, March would get little challenging for us. Thank you. My second question is, if you could highlight where do you expect your exit cost of funds, versus the current, calculated levels of about 7.2%? We have already seen a sharp compression in 2Q. Do we expect that going forward, the yields should stabilize or maybe even move higher? yeah. Yeah. The high interest rate scenario even continues. It's not that the interest rate curve has started sliding. You would have also seen Fed recently taking up the rates by another 25 basis points. It is to be seen what action does RBI take. We at least believe that the high interest rate scenario is here to continue at least for the first half of the next fiscal. That's the view that we have today. You also know that during the current year, we have had to borrow at a rate higher than what we have done in the past. As the older book, which probably could have been a lower cost book, exists, some pressure on the overall weighted average interest rates will continue and slowly, maybe towards Q3 or Q4 of next year, there could be some signs of the rate stabilizing at a lower end. If your question is have you already started seeing a lower cost of borrowing? The answer is no. Having said that, We'll always use a very prudential approach of our borrowing mix and we'll try and optimize the cost to the extent we can. Yeah. Thanks. Assuming, obviously that you will have some MCLR based borrowing repricing as well, I mean, where do you see possibly the cost of funds exiting in the next 3 quarters -4 quarters? See right now, as of 31st of December, if we are at a certain rate, I believe over the next 3 quarters -4 quarters, we believe on a weighted average basis, another 15 basis points -20 basis points increase in that particular borrowing mix. Thank you and wish you all the best. Thank you, Subramanian. Thank you. Next question is from the line of Nishant from Kotak Institutional Equities. Please go ahead. Nishant, may I request you to unmute your line from your side and go ahead with the question, please. Yeah. Am I audible now? Yes, you are. Thank you. Sure. Thanks. Mr. Patel, my question just continues from Subbu's question. You know, the rate hikes that you have done, are you seeing the full benefit already flowing in the P&L or do we, do we kind of, expect to see the, the benefit going forward? No, no. We've just increased the rates in this quarter. November? November onwards we increase, so you will start seeing it over a period of time. Nishant, see, as you know, this is a very large book that we are carrying. The rate benefit is on disbursements that we do on a month-on-month basis. You will see the benefit over a period of time. It's not a magic wand that it will reflect in the weighted average yields overnight. Won't happen. Nishant, as you know, this will benefit only the new book, right? I mean, the new lending- Yeah, of course. ...that we did in November, December. The past book is still a fixed rate. You will start seeing at least the new businesses come at this new yield and therefore the full benefit you won't see at the NIMS level until the past book is matured and the new book builds up. Sure. The hike that you've done last month was how much? I mean, I heard you mentioned 82% aggregate, but how much was last month? Nishant, my request is, let's not get so. Sure. Fair point. Just one broad question. You know, we calculate this ratio called repayment rate for the quarter. Basically just an interplay of your, you know, quarter on quarter loan book growth and disbursement. I think the sense that we got was that the repayment rate was very high last quarter. Was there any specific trend out here that's, or business trend out here that you would want to highlight? No, actually, if you see our asset book, there are two components in the asset book. One component is of the loans that we grant to our customers. The other asset book is comprising the trade advances. The trade advance is also a function of the incoming festive season. We have witnessed a much higher level of advance as we close the second quarter. Much of that trade advance has got utilized because the months that followed both October as well as November, they were festive months. These advances have now got converted into retail and therefore that trade advance level has now seen a much more normalized level by end of this quarter. That's how probably you should see, you should look at it. If you can look at, say, June to December, maybe that could be a better way to look at it, instead of looking at it from September or June to September and then September to December. Sure. fair to say that a part of the Jam business would also have fair amount of trade advances. It's a normalized level of— Sorry. No. What we publish as disbursements, if you're talking about our monthly. Today's, yeah. Today's business level, yeah. No, those are the loans that we disperse to our customers. Got it. Got it. These are pure disbursement. That does not have trade advance. It doesn't have trade advance. Okay. Got it. Got it. Thanks and all the best. Thank you, Nishant. Thank you. Next question is from the line of Sanket Chheda from DAM Capital Advisors. Please go ahead. Yeah. Hi, sir. Congrats on a very good set of numbers. My question was on the PCR that we have. Even if we include the impact of the new classification and also, the PCR is currently at about 45%, 46%. Versus pre-COVID level that we used to have of about 30%, 35%. Moving ahead, as you are highlighting that cash flows are improving, and as far as the new NPA formation would is concerned, you know, you don't see it any meaningful in the coming times. Whether we will move back to the 35% level over the course of say, next 5 quarters, 6 quarters, or how do you see that particularly on the PCR cover that we have? This is a formula-driven approach, right? I mean, it is not about us doing a 60% provision or bringing down to 35%. It is a historic 4-year data which is formula driven. You will see as each year pass away and a better year comes into play, you'll start seeing this getting corrected. Just to add to what Mr. Iyer mentioned, you would recollect that we carried during the COVID period, an overlay. Today the overlay is zero. Everything is completely driven by the ECL model that we have adopted. Okay. Okay. The formula driven thing adds the subjectivity of good times and bad times, like that? No. If you look at the ECL model is in our case at least is completely a function of the historical trend of the collection behavior of our customers. So far as the Stage 1 and Stage 2 provisions are concerned, yes, it is also based on a projection of the future, but which also is also completely based on external indicators. The management judgment, I would say, is very, very minimal. Just to— One more correction, I don't know where you picked up this number of 45%, 46%, but our Stage 3 PCR is 59%. Stage 3 PCR is 59%, but if you add the INR 77 crore which under RBI's amendment will get added to the Stage 3, then the Stage 3 moves to 7.6%. Then corresponding whatever is net NPA we have, basis that the number was coming to 44%, 45%. I don't know, but maybe in that case, you will also have to add to the provision, the provisions that you're already carrying in Stage 1 and Stage 2 for this, for the, for this IRAC/ NPA which is otherwise, not getting classified as Stage 3. If you have done that, it is fine, but, if you need any more clarification- Yeah, a small addition would be there. Yeah. Yeah. No problem. Okay. Sanket, do you have any follow-up question? No, no, that's it. Thank you. The next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead. Yeah. Hi, sir. Thank you for the opportunity. Two, three questions from my side. Firstly, on leasing business, just want to know what kind of ROA and ROE we are targeting from this business. Yeah, this is Raul here. Our leasing business, as you know, we mentioned that we are doing a B2B business, which is largely lending under the employee lease program. Our average pricing that we get over here, I mean, we aim for a 12%+. We have to play it as per corporate. I don't think we disclose product-wise ROAs are different from that, we compete with a couple of players in the market and, you know, basis every deal we evaluate and we price it accordingly. It's a growing business and for us, it's a strategic business in terms of how we're diversifying also from the core. Got it, sir. My second question is on your other OpEx. We've seen sharp decline in your other OpEx QOQ. Just want to know what was the reason for this? Yeah. Yeah. There are two reasons for it. You would recollect that we have taken on board or taken on payroll some of the resources that were earlier part of our outsourced payroll. Therefore, I would say it's a contra between the employee cost line item and other OpEx line item. The other key reason is that because during the third quarter, we were not doing any repositions using third party reposition agencies, those related costs were also not incurred during Q3. That's primarily the reason why you would see the YOY increase in the other OpEx at a very lower number of 1.1%. Got it, sir. Thirdly, on your yield. If I look at your yield, it seems to be up by 50 bps -60 bps QOQ. Just want to understand what drove that increase, given that you mentioned that a 30 bps hike that you took in November, and then also you are moving towards higher risk appetite and more quality customers where your yield would have been lower. Just want to understand that what drove this 50 bps -60 bps QOQ increase in yield. We presume that you are referring to slide 22, wherein you are saying, the total loan income to average business asset has moved up from 13.4% to 13.7%. It would definitely reflect the yield increases that we have taken in the third quarter. That is one of the primary reasons why it is so, and the product mix also. To the extent we are able to do more business from high-yielding products, to that extent the yields will be better. Mm-hmm. Got it, sir. Yes. That is from my side. Thank you and to all the best. Thank you. Thank you. Next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead. Good day, sir. Thanks for the opportunity and, hardest congratulations to Raul on this appointment. First 1 is if you can specify the rollback rates in Stage 1 and Stage 2 this quarter versus the last quarter. That's it first. Second is if we can speak on housing finance, maybe I know, there was a previous participant who spoke on this. However, it seems like a capital misallocation for the longest period of time. We, we've seen a sticky gross NPA of almost 16%. In the last 10 years, barely around total cumulative PAT of INR 1,000 crores. Why, why are we running this business at all, sir? Do you think that it's a misallocation of capital? Would it be feasible if we can just write this off at a point in time? Thanks. Maybe we'll take your input and review, but, you should, look at it as definitely as last five year out of the 10 year has been most challenging and you know what rural went through right from demand to the COVID situation. We've chosen to work with a customer segment who are taking these loans of INR 1 lakh and INR 1.5 lakh for house improvement, room addition, and they were doing pretty well in the first five years. It's just that this disruption caused them enormous pain and we have realized that this is not the segment that we should go after. Having built that franchise, and which is what I was explaining, that there is enough opportunity to move this a little up in the segment and go up to a INR 2 lakh, INR 5 lakh kind of a segment in rural which is more affluent in nature. We don't want to miss that opportunity having invested so much of time and money there. We do see a turnaround clearly possible. The other thing you should look at is this. I said we are changing the mix and about 40%, 50% of the future book will come from affordable housing space, which again is an INR 8 lakh, INR 10 lakh, INR 12 lakh kind of a product we are looking at, maybe up to INR 15 lakh. That would come at a very different quality and at e-level. The two together is the real change in strategy that we are looking for the housing business. You are right that for a little longer period of time, that we've not been able to generate sufficient profit, but we do see that the next three years you will see a dramatic change in this business. Thank you very much. Coming to your first question, I think you wanted to know about the rollback rates. Right. As I said, it's a dynamic situation because there could be rollback and roll forward. If I were to give you a rough indication, if you look at, again, slide number 25 of our investor deck, you would see that, what was 83.5% as of September 30th has now improved to 85.5%, 85.7%, in fact, for Stage 1 as of 31st December. This is the direction upwards, so on Stage 1, which is a good news for us. At the same time, Stage 2 has come down from 9.7% to 8.4%, and Stage 3 has come down from 6.7% to 5.9%. That should give you a fair bit of an indication on the rollbacks or roll forwards. Sure, sir. Thank you so much. Yes, that's all. Thank you. Thank you so much. Thank you very much. As there are no further questions, I will now hand the conference over to Anuj Singla for closing comments. Yeah, thanks, Neeraj. Ramesh, any closing comments before we conclude? Not really, but except that we feel extremely happy and energetic with what we see in the rural market. I think now all the pieces are in place for us to really capitalize on that emerging opportunity. As we've demonstrated in the last few quarters, we do believe that run up to 2025, the strategy that we have committed, we are on course for that. Thank you everyone for participating. Thank you very much. Thank you, sir. Neeraj, back to you. Thank you very much. We conclude this conference. Thank you for joining us. You may now disconnect your lines. Thank you.