Good evening ladies and gentlemen. Please note, this call is not for media representatives, investment bankers, or commercial bankers, including corporates and commercial FX. All such individuals are instructed to disconnect now. A replay will be available for investment bankers and commercial bankers, including corporates and commercial assets. This replay is not available to the media. Good day and welcome to the Mahindra & Mahindra Financial Services Limited Q1FY26 earnings conference call. 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 to disclose, 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 the conference call, please signal an operator by pressing star then zero on your telephone keypad. Please note that this content is maintained. I now hand the conference over to Mr. Abhijit Tibrewal from Motilal Oswal. Please go ahead, sir. Thank you, Muskan. Good evening everyone. I am Abhijit Tibrewal from Motilal Oswal and it is our pleasure to welcome y ou all to this earnings call. Thank you very much for joining us. For the Mahindra Finance call to discuss the Q1 FY2026 earnings, to discuss the company's earnings, I'm pleased. To welcome Mr. Raul Rebello, Managing Director and CEO, Mr. Pradeep Agrawal, Chief Financial Officer, and Mr. Sandeep Mandrekar, Chief Business Officer o n behalf of Motilal Oswal, we thank the Senior Management and the Investor Relations team of Mahindra Finance for giving us. This opportunity to host you today. I now invite Mr. Raul Rebello for his opening remarks w ith that, over to you, sir. Thank you. Good evening everyone and thank you for joining us. Thank you, Abhijit and Team Motilal Oswal for hosting us. As usual, as I walk you through the Q1 performance, I'd request you to keep the pages of our earnings document handy. I'll be referring to some specific pages as we go along. At the outset, as a lender who has largely dominance in the wheels business, the lending environment in Q1 has been a bit of a mixed bag. There's been momentum in some categories, especially the ones which have benefited from strong rural cash flows. They've also been, and we have witnessed softening in some segments like the entry level passenger vehicles and some of the CV segments. Bearing that in mind, if you recollect in the last earnings call we had put out our key priorities, request you to move to page four and I'll give you an update on each of our key priorities for Q1. Moving number one on our defending the wheels business, the key highlight for the quarter was a standout growth in the tractor lending business. We saw 21% disbursement growth. By virtue of that disbursement growth we have been able to gain market share and we plan this as a big theme for the year to increase our market share and increase growth because we think the tailwinds are very favorable. Other segments have largely been subdued, a combination of inherent sluggishness that we saw in certain categories as well as proactively. We've had to take some prudent underwriting calls to be flattish in certain segments. Second, on margins we managed to keep our pricing within the yields, it was reducing and it is an intense competition with the reducing interest environment. We've managed to keep our yield steady and our margins also have seen some positive moment in the quarter. Too early to comment on the borrowing side on stock, what I can say is on the incremental cost we are seeing some, I would say, positives on that front. Third, on asset quality, our collection performance was quite steady. If you recollect, we have always said that our GS2 plus GS3 is we target to be within the 10% range. Q1 came in at 9.7%. You would recollect this is the same number as Q1 last year. On credit cost there's been a slight, there's been a marginal increase and I have a detailed page on credit cost where I'll give you the workings and what we've seen as reasons which has led to that uptick. Moving to diversification, our SME business did see a decline in disbursements. Nevertheless, the book grew at 28%. I'll give you commentary on the SME book a little later. The positive story for us is the fee-based income. We continue to build on our insurance corporate agency license, and we have seen healthy fee income coming. Update on MRHFL, our mortgage subsidiary, which is on a turnaround path. Q1 they did come in at a positive. We continue to make edits to the business model, and we do see an uptick in terms of fees, the momentum of that subsidiary going forward. Overall, on the operating model, we did say that we want to build in more resiliency in the operating model. One of the key updates that I'd like to share is that we have completely migrated from our in-house tech stack, which is the loan management system. We did a complete cutover in the month of June, so nearly all of June disbursements happened on the new cloud-based element stack. The objective was to have a much more stable backend while allowing a great deal of versatility at the front end for our digital applications. We are very happy to have crossed this major milestone. We also have a significant amount of investments being made on the data side, and while our AI use cases are in the initial stages, we will at a later stage, when the business and control functions use cases of data and specifically AI start becoming material, provide detailed commentary. Overall, our post-tax ROA for the quarter was at 1.6. Moving to page five quickly, which is titled as Highlights Disbursement AUM. All these numbers which you see on the screen is what we've achieved. Our disbursement is 1% growth. A little flattish for the quarter, book at 15 and income at 18. PAT growth was at 3%. I just want to make out some call outs on the PAT at INR 530 crore. There is a point out that I want to include here. This PAT includes a INR 46 crore dividend payout from MIBL. This is not a one-off. We plan to have this as a recurring item going forward given the current and future cash flows of MIBL. Just as a quick background, you know MIBL is 100% sub. It has a very consistent income generation, distinctive business model from the corporate agency license. Considering it's a capital-light business and there will be a regular cash flow in that entity, we see this dividend as a regular flow into Mahindra Finance on a regular basis. There is a INR 540 crore cash surplus sitting in MIBL even after this INR 46 crore dividend payout. Moving on to asset quality, as I mentioned, GS2 plus GS3 is at 9.7. We did raise. We had a rights issue by which our debt equity ratios have come down significantly. The INR 3,000 crores means that our capital Tier-1 is at 17.9 and we are very well capitalized for growth. Moving to page seven on disbursements, various segments I did highlight, Raptor was a standout at 21%. Most of the other categories, whether it's passenger vehicles and used passenger vehicles, our disbursements have mimicked the underlying commerce. You would have seen other vehicle finances where there is pretty much the growth are in line because the underlying commerce isn't trending in that line. The CV business did have a degrowth. We are calibrating some of the CV businesses specifically keeping in mind the margins that we get in that business and participating in segments which we think from an NBFC standpoint are attractive and where our cost of funds can help us get a reasonable amount of margin. The SME business you've seen kind of a degrowth. I did mention that in the SME business we are in quarter one. We did look at some of the choices on the distribution. We have rehashed our geography strategy. We have created four divisions. We were doing our org rejig with two NSNs and some want of recalibralization. We look at this as a temporary, temporary disbursement kind of regrowth. We look forward to the SME business being a very very solid contributor going forward. Let's move to slide eight. If you look at our pricing which has come in between Q4 and Q1, clearly the fee-based income has seen some further improvements from even sequentially and year-on-year also sequentially 1.3 to 1.4 and year-on-year 1 to 1.4. I did mention the MIBL dividend added 14 basis points but even though we have seen a good increase in the fee-based income, the loan income also has moved up by 10 basis points overall from a NIM standpoint. I did comment last time that we do believe our NIMs have bottomed out at 6.5. We do look at abilities to level up on whether they are pricing capabilities or they are cost of fund. On stock of cost of fund is not right now playing out. It will play out eventually but we see positive trends there. Let's move to slide nine. This is GS2 and GS3. If you look at compared to last year I think I request you to look at the bottom part of the slide. You would see typically in Q1 there are very large challenges in terms of slippages from the GS2, GS2, GS3 proportion increases with some amount of disruption of monsoons etc. On a combined basis, GS2 plus GS3 had gone up, had kind of hiked to 123 basis points last year. Between Q4 and Q1, that equivalent hike was 57 basis points. Largely, the GS2 number has seen a moderation. We do look at having, going forward, also less intra-quarter volatility. However, you would understand our businesses have a decent amount of rural, semi-urban, agriculture customers who have volatile cash flows within that. We're still trying to build a less inter-quarter volatility. I think part of that has been addressed in Q1. The underlying GS2 numbers haven't spiked as much. We think it's been reasonably stable in GS2, and GS2 has been an improvement over last year. Moving to slide number 10, I'd like to spend some time on this slide. On credit cost, if you recollect, in Q3 last year we did see a kind of PCR coverage coming down. We'll explain details of that based on the COVID period. This year, if you look at one of the controllable variables on credit cost as a GS3 stock, that has not moved up. What has really moved between last Q1 and this Q1 is the coverage ratio. Between Q4 and Q1 last year, we had close to a 340 basis points reduction in PCR cover, which would have given a release in provision. This year, between Q4 of 2025 and Q1 this year, this is a 20 basis points kind of coverage increase. Of course, I've kind of given you a guidance of where we see the PCR settling at. I would say the underlying credit cost variables, whether it is end losses, we have not seen a big hike there as a percentage of portfolio. It is largely the PCR cover which has led to some amount of hike in credit cost. We do understand Q2 also has some rainfall disruptions, etc. We will optimize between the quarters also to, from a management standpoint, try to reduce the volatility between quarters. Moving to next slide. There is a kind of routine slides. I'll conclude here and quickly go into coming into question answers. If I were to reflect on the quarter gone by, in conclusion, I would characterize this quarter performance as a reasonably stable one. We've had some key metrics which we've managed to keep at a stable level. Clearly, there have been concerns on growth, which is not difficult, only us, but you know, underlying businesses. I would still say that we, for the remainder of the year, will be watching out for opportunities for growth. We do think there are some very profound tailwinds that are attractive as of now. Number one being the rural businesses specifically because of the distributed monsoons, the good sowing. All of you know the tariff sowing has been at a record level and NSP is also quite encouraging. We think overall rural cash flows will hold up well for some of the businesses that we are deeply invested in. We do see positive sentiments rising, positive sentiment because of favorable policy, and finally there is a low inflation environment. All of this is hopefully coupled with the upcoming festival season. This year we see the festival seasons are all in one month and that's a big part of our business. While the first quarter has been a little bit of a lull, it's too early in the year for us to kind of call the rest of the year. We do think that there will be opportunities for growth and we are primed to catch those opportunities for growth. I pause for now and I'll come back during the Q&A. Thank you. Abhijit, over to you. We can open up. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask questions may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use caution while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. The first question is from the line of Avinash Singh from Emkay Global. Please go ahead. Good evening. Thanks for the opportunity. A few questions on your venture into housing, or rather universal housing approach. What are the updates? I mean, of course we heard you explain the turnaround in your housing subsidiary, but the kind of universal housing business that you announced last year that you were doing in that parent entity. What sort of update there? That's one. Second, if we were to look in terms of the approach, distribution approach, followed by your peers and all, your branch, of course, you are driven, trying to diversify. If you look at your branch count, nearly five years, it is kind of like stagnant. Now if you plan to diversify away more from, you know, wheel, what sort of your strategy going ahead in terms of the distribution? Is it going to be branch led or you are happy with the branch where it is, then you can focus on the. Yes, thank you. On the MRHFL and the overall housing aspirations, we stay committed to or we find the housing segment, especially the affordable housing, extremely attractive. As I mentioned earlier, we need to have conviction that when we unlock the playbook, whatever is the existing housing playbook needs to be put in order. There's no point running one shop which is not yet set in order and start something else. I am very pleased with the way in which MRHFL is moving right now. The business model over there has gotten a professional, the CEO, he has been seconded as the CEO of that entity. I am seeing some encouraging early signs of that turnaround. The ticket size of that business has moved in the right corridor. The pricing has moved well. We've been able to create the right amount of provisions and now right sizing of the organization from 9,000 people to close to 5,500 people. We are just on the corner of once we have full conviction that we have got a good handle on the mortgage playbook is when we will turn on the amplification on that. I will share with you later what's done there versus what's done in Mahindra Finance. The objective was to get the playbook in order and get the operating model as convinced that we have set that in the right direction. Coming to your second question on the branches being stagnant, when we look at the auto lending business, as you would recognize, the underlying commerce for the vehicle lending business is largely the action points at the dealer. While you would see that our branch number has been a little bit, we've in fact closed some branches which were not profitable. Our branch covered about 1,370 odd. Maybe if you see the number of dealers that we operate in, I mean we have shared that number. We have now crossed 6,000 dealers that we work with. The objective is being a dominant wheels player. We need to cover the underlying action points of the commerce, whether they are new vehicle dealers or used vehicle dealers. We have ensured that our coverage at that point where the rubber meets the road, hits the road, is where the customers finally select the vehicle and then we can quickly finance it. We are increasing our points of connect at the dealerships. We are also working with, as we say, some of the rural partnership points where we are able to find customers a branch. We will continue. We have branches now across the country. They are one of the most well developed, distributed across north, south, east, west. We have pretty much 20% coverage across. Unlike some NBFCs who are skewed towards a certain geography, we think our branch count today is adequate, but we will now, as we plan to be multi product. Many of our SME businesses are done through some of our vehicle branches. We have created infrastructure for that, and our branches also have been reorganized with a Branch Head and a cross-sell desk head branches to make sure that the branches are active service and service and sales points also. A quick sort of one more if I may, loud on CE side o f course there is a s harp decline in disbursal. Of course the market is tough, but can you share your assessment, kind of qualitative or quantitative assessment, how the market has, you know, in the new CV financing, how the market has grown or shrunk, and if at all, you have applied certain strategies in certain geography where you have kind of seeded market share for whatever underlying concerns. Also, if you can just provide some more color on the CV financing market. Just to get it right, you're talking about CV or PV? CV. CV, okay. We were never a very large player in the used CV business. Our CV business is largely in the LCV category and some amount of business that we were doing for the fleet operators. Where we have ceded ground is where we think, as you know, and I'm sure you would have heard bank commentary, many banks are chasing the fleet operators and the pricing for that is really not attractive from an NBFC's balance sheet standpoint. We have actively stayed out of some of the fleet operators in the MNHCV segment. What we continue to grow is in the SCV, LCV, and some of the ICV in the buses segment where the pricing capability is decent as well, as we've been able to wrap our heads around the margin and risk participation choices that we have. I don't think the underlying, you know, the kind of tailwinds have been too exciting for the CV business. You would have seen it struggle for quite some time now. There are certain challenges maybe in the mining segment, in the overall price discovery for new fleet addition or new purchases that are happening. If I were to be encouraged by some segments, wherever we feel that the LCVs or the SCVs are being used for, let's say, agri, commodity trade, or rural movement, goods movement, etc., that uptake, we will be in a good advantageous situation to capture some of that momentum. On the earlier question on your branch, I just want to go last minute. One of our biggest branches is the mobile app. Now we are able to do a lot of acquisition and transactions on the app itself, and we see that also as, going forward, a good acquisition tool. T hanks. Thank you. The next question is from the line of Nischint Chawathe from Kotak. Please go ahead. Thanks for taking my question. I was just wondering, looking at the momentum in first quarter, what kind of growth do we really pen down for the year and maybe over the medium term as well? In that backdrop, post the recent rights issue, how do we sort of expect to scale up to a mid term kind of an ROE? Thanks, Nischint. I think it's a little early in the year to give a full year guidance on growth. Fair to say that the first quarter was quite muted for us, and you would have seen it for other folks also. Do we think the Q1 is the same texture, color for the rest of the year? Definitely not. As I said, there are good enough tailwinds to believe that we can turn around, and we remain optimistic with some of the inherent attractiveness of the sector. We would, you know, I'm not talking about FY2026, you would have heard us say earlier. That's why the rights issue, because we do believe we need to equip the organization with gunpowder for growth. It is important for us to at least target a mid-teen growth, whether it's a disbursement growth, which will then lead to a book growth, which will lead into earnings growth, etc. I think we are very keen that the organization has the ability to participate in underlying segments that can mimic that kind of growth. Yes, the wheels business will continue. Some of the segments in the wheels business are seeing prolonged stress, like the entry-level car segment is seeing some stress for quite some period of time because of the buying of the middle-income households are seriously not, either the prices of the vehicles are too high or there is an earning pressure. There are challenges there. I don't want to discount that pressure, but we at least have identified certain segments which we think will give us the capability to participate in growth so that we get back to that mid-teen disbursement growth and hopefully a book growth which will also keep up with pace. Would you look at the inorganic. Route in terms of gold or housing. Any of these entities. Gold? Not for now. It's a heavy operational business and takes time. Small ticket. Now gold seems very attractive, but yeah, there is an operational intensity to it. As I said, our participation continues our asset categories. Just to remind everyone, while we are dominant in wheels, we have created some attractive positioning in the SME lab business, supply chain finance, bill discounting, machinery loans. We are increasing our personal loans in the existing 11 million customers we have serviced to date as well as the M&M customer segment. We are cockpit in the leasing business. We are really, really looking at over-indexing on fee-based income through distribution and mortgages. I did mention earlier the playbook will get refined. These are the categories which we think have inherent capabilities to give us that mid-teen growth in the midterm, mid to long term. I know you mentioned in the. Opening comments, the reason for slowdown in this segment, but I'm not sure if I really kind of caught it on the SME side I'm referring to. I would just ask you as in Q1 we had a rejig in the org structure. We went into a four zone structure to an SM structure. Some of the choices to make lap over index on LAP and you know takes time in these geographies, so we had to move some of the geographies. It's like choices on the breadth and depth. Look at it as a temporary August rejig which has led to this, not a posturing on our growth ambitions. Have just two tiny questions. One is do we see the fee run rate sustaining, and any specific reason why you are kind of ramping up on fixed deposits at this point of time. Thank you. Fee and fixed record. I discriminate between the two. Fee-based income definitely is. We think we are over-indexed even now and there are avenues for us to get up. There's headroom enough for us to get more deeper on fee-based income. On FD, I don't think you will see us muscling ahead with, in terms of a liability mix, FDs. They will pretty much, there are more attractive instruments. We just wanted to kind of diversify the liability mix. I think we have reached a decent point and we will only look at FDs going forward if we do believe that there is a cross-sell, upsell on the FD book. Also, let's say in Q1, of course, the rates are going down. We passed on the rates, but we managed to get some momentum in the early parts of Q1. Otherwise, the FD as a composition will be looked at also as a cost of fund instrument and a diversification of liability instruments. Got it. Perfect. Thank you very much. Those are all my questions. All the best. Thanks Nischint. Thank you. The next question is from the line of Mahrukh from Nuvama Wealth. Please go ahead. Hi, good evening. My first question. Sorry. In terms of Nishin's question on disbursement growth, 15% is the medium-term target, but by the end of the year what is the vision? Visibility, because it's slowdown for the entire sector as such, it's not necessarily a MF specific thing. Yeah, thanks. I would be more keen to not give very immediate guidance. The midterm guidance, yes, the aspiration is to be at a mid-teen growth. We do take into stride temporary hiccups, and of course the wheels business is going through a certain amount of challenges on the entry-level CV for, I would say, a prolonged period. Thankfully, we do have in our arsenal the used business as well as tractor, which is seeing some uptick. We will have to navigate within these constraints. We still have a dominant wheels player. I would say early in the year to give a full-year guidance, and I would refrain from doing that. Our company, definitely from medium term, and therefore the rights issue also, to make sure that we are able to catch any kind of opportunities for growth, we would like to quickly have the opportunity to attach ourselves where those wins are going. Got it. In terms of cost of funds, you did comment about it, but it appears that the on-book cost of funds seems to be rising, right? As in, the marginal may have come down at least from the balance sheet numbers. That's how it looks marginally. Your yield also is increasing. You've grown tractors. When other segments start growing and the yield comes up a bit, how will margins behave in the next 4- 5 quarters? When will we start seeing a correction in actual average cost of funds? A couple of variables that we can kind of influence overall NIMs. I did mention that I don't think being in the skin of an NBFC and especially us we can go below 6.5, it will be extremely challenging on our ROA aspirations. Quarter one is good, I think at least we think that we have moved in the right direction. The variables that we are influencing right now are on the participation of. I did mention we did a lot of the prime segment, which I think we have reached at the optimum level. I don't think our incremental sourcing will create any stress on our pricing IRR for the future. We have managed to have very strong underwriting now, playbooks to make sure that even in the near prime customers, we are able to onboard that with the right risk-based pricing to protect our overall pricing. We are seeing some early good trends on the incremental cost on a quarter-on-quarter basis. Our treasury teams have managed to leverage the priority sector book very well, and we continue because of our increased tractor business. We will still have a lot of PSL underlying good PSL assets to offload either through on-lending or through securitization to keep the cost of funds at a decent level and fee-based income. I did mention there is headroom for improvement. There are variables in the overall NIM to move it to a higher corridor as we get back on growth. Yes, you're right. What is going to play out is the competition intensity. Banks are being extremely competitive, vehicle as a category is getting intimidated by mainstream banks. We do have our moats in terms of. I did mention we participate at 6,000 dealerships. We are very relevant to that community. We have a very strong engagement built in the micro markets we operate at. I do think we have reasonable capabilities to protect NIMs from where they are and in fact have aspirations to go from here. Hi. I have two other questions. One is that now this is it on capital, right? There are no plans to raise anything more, right? That's one. The next is that you had, you know, people have been talking about a slowdown and deterioration since the fourth quarter. I know that the first quarter is seasonal, but in terms of the structural variables that you would be monitoring, do you think that slowdown has accelerated or it's stable? I think I see us slowly moving up from now. You would also see the high frequency data points which come in our mind and we get a very good pulse check from the. In fact, the senior management was on the road for the last month meeting, covered about 450 dealers. We do see a shift in the momentum. I think if you've seen the underlying tractor growth has been 8% + in Q1 this year. I do see us at the bottom of the, you know, of the kind of level that we have reached. There should be positives from here on at least. We do see those trends and we would hope to capitalize from an uptick from here on and capital rate. We are, I think, very, very well capitalized. It wouldn't be prudent for us, especially now, and you know, we are 95% plus secured business. We did want to keep enough of, you know, equip ourselves well enough to equip ourselves for high growth. I think we are very well capitalized at a debt equity of 4.75 to 1. It's a very, very, very decent level. Perfect. Thank you so much. Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead. Thanks for taking the question. Firstly, maybe sorry, coming back on margin part and yields in particular, can understand that incremental disbursements towards Spectre is leading to increase in yields. If you can indicate in terms of the rate actions which you would have taken across the product categories with this 100 basis points of reformatory just to gauge in terms of whether there could be pressure on yields because I think cost of borrowing benefit is flowing in only gradually for us. See Kunal, at least some of the segments that we operate in are not extremely price sensitive. The near to prime customer segments, etc. I think as an NBFC you don't win on rates, you win on time to predict, being quick to decisions and being at the heart of where the action is. An NBFC usually has to ace that game. Thankfully, with our very high distribution in these markets and some of the toolkits that we have employed, we have moved to a Salesforce LOS and a Fin1 LMS. The ability for us to use the BREs, etc., get quick decisions out, and do some risk-based pricing, etc. I don't see us hazarding there should be a hazard to our pricing going forward. Yes, the intensity and competition will be there. The PV business, I did mention some of the very, very super prime customers. We have taken an evaluation of how much do we swap that. In the last two, three years, we have seen a phenomenal growth in the premiumization of SUVs. We did want to participate there. That has had some amount of downsides in the NIMs and the pricing, but we have reached at a level where we have recalibrated how much of that comes in right now to protect for overall NIMs. That's the kind of guidance on how we plan to participate and not let pricing inefficiencies creep in. We do believe we'll be able to largely hold pricing in a range which is favorable for our NIMs and ROAs. Okay. Okay. With respect to credit cost, I think that vector has been relatively well with respect to the volatility in 1Q and given the tough operating conditions still managed well. Generally, like say 2Q, last year we saw a sharp rise in GS2 plus GS3 and despite maintaining the coverage we saw a much higher credit cost in Q2 compared to that of the first quarter. Any early indicators with respect to delinquency trends? Given the tough macro, are you expecting that maybe there could be further catch up on GS2 plus GS3 in 2Q or maybe we are confident of still managing it at less than 10% and any credit cost guidance that you would want to give given where we are in the first quarter so punish. A little early in Q2. Yes, Q2 if you look at it traditionally, it's always been the last three years. Also, we have spiked already. We are looking at over managing it this quarter, but you know there are some inherent challenges which sometimes pop up. It's finally, you know, the collection teams have to be on the job day in and day out, and that's what we are on the job for. I don't want to give a Q2 guidance exactly on credit cost. I think what we have provided is from a full year basis we would like to operate in the 1.3% - 1.7%. Last year, more than 1.3% - 1.5%. Think of it like we would want the credit cost not to go more than 1.7%. Yes, GS3 plus GS2, one of the management actions is to keep that below 10%. There could be some quarters where this goes marginally above. Like last quarter in Q2, we saw it going, breaching a bit more than 10%. We have, from a management standpoint, reorchestrated our collection offices. We have much sharper vertical-wise collection teams because Q2 used to see tractors go out crazily. Now we have segment-wise collection teams, so we have a tractor collection team, etc. We are trying to optimize within the constraints that are there. It's not an extremely benign cycle. There are challenges. There are sectors in pockets which have disruptions, and we know the levers that we can implement on the collections. Finally, an NBFC has to over index on collection rigor, and that's what capabilities we have been building for some time, which should start bearing some fruit now. Okay, got it. Lastly, if I may ask, maybe. With respect to declining the number of employees, we are still seeing a higher employee cost both on a sequential as well as on a quarter-on-quarter basis. What led to almost 1,700 employees declined during the quarter and anything on the cost side? Yeah, I think if you look at it on a YoY basis it's 11%. There will always be some. I mean on a Q on Q I think there's a reduction. On a YoY it's 11% employee costs. Finally, if you be extremely cute on employee cost etc. it might have a bearing on final collections, needs to be maintained, account has been largely stable. There's been in fact reductions over the last couple of years. There is an interplay between off roll and on roll. I'll invite Pradeep here to kind of offer some commentary. Pradeep, any overall commentary? Yeah, so actually in Q1 we have kind of moved a certain amount of certain kind of count of people from the on roll to off roll and that's why I think employee count is looking lower in Q1. Otherwise, our overall employee count is flat quarter on quarter basis. Okay, got it. That helps. Yeah, thank you. Now Sandeep is adding some comments. To add to your first couple of questions. One, in terms of how do we look at the pricing given the fact that there are some changes which are happening, I think product mix is something which is also going to help to this. If you look at the push that we are working on currently, it is going to be also on our refinance book where we are looking at increasing the contribution of the refinance book in our total scheme of disbursements, which will add to the NIMS and the margins that we look at on the fresh disbursement. Secondly, in terms of the collections, surely with a good monsoon which is well distributed, the expectation of a cash flow seems to be on the higher side and we would like to over index and see how we can capitalize on what comes out of it, on the positivity of the market. Sure. Okay. Thanks. Thanks. Thank you. Ladies and gentlemen, in order to ensure that management is able to address questions from all the participants in the conference, please limit a question to two questions per participant. If you have a follow up question, we request you to rejoin the queue. The next question is from the line of [Parnuch] from JP Morgan. Please go ahead. Hi, thanks for taking my question. First one, coming again back to your market share loss in the CV, you have seen a 12% decline in disbursements and CV registrations have been flat year-over-year for the industry. What is leading to you calibrating that growth over here? Are you seeing any risks build up in the segment which is driving that caution? That's the first question. Second is your write-off levels have risen 30% year-over-year. How do you see this number moving for the rest of FY2026 versus the INR 1,500 crore number you had for FY2025? Thank you. Yeah. On the CV business, as I mentioned, if I look at the market share in SCV LCV business, largely we are holding our market share there. Especially considering we do have some synergy with the Mahindra & Mahindra dominance that they have in the SCV business there. We are not seeing any loss of market share there. As I mentioned in the MNS CV business, the construction equipment business, which is largely moving now to fleet operators, there are some margin pressures over there. It doesn't make sense for us to compete with mainstream banks with the pricing competitiveness that we have against them. Also, some of the Mahindra Finance series segments, which are typically the single option, there is a risk. There is, of course, ability for us to do that business, but the risk is possibly now not in our appetite. We have consciously stayed away from some of that. In a market where the CV business is anyway flattish, considering we are making certain participation choices, there will be degrowth. It is to make sure that we finally have a segment-wise ROA aspiration in each of the segments that we operate in. That's from the CV business. Your second question. Just one thing on that. Is it more of a margin call than a risk call? Yeah, I would say more of a margin than a risk on the writers. On the write-offs. The write offs I would request you to look at. I mean if you look at absolute values, they kind of get misleading because you are a growing portfolio. INR 1 lakh AUM versus INR 1.2 lakh. If you look at the write off as a percentage of opening assets or the average asset, you will see that is largely in the stable zone. Of course, we don't want that to keep that pace; we would look at the write off numbers being lower. Right now, I would just urge absolute maybe a little misleading compared to the slippage numbers, which are a little more reflective. Okay, understood sir. The reason for the question is I think you had seen a steady decline in write down for the last three years. I understand the base was quite high. That's why I want to get a sense for FY2026. Yeah. I think since all of this forms part of the credit costs, one should look at the aspiration of being within that 1.7% headroom. We will optimize within them. Perfect. Thank you. Thanks a lot. Thank you. The next question is from the line of [Shubranshu Mishra] from Phillip Capital. Please go ahead. Hi Rahul. Good evening. Two or three questions. First one is how do we get. Deeper into the wallet share of existing customers that we have through our own products, or through co-lending, or through non-credit products like insurance, mutual funds, any other distribution product. What is the roadmap for that in the next two weeks? The second is that you did a. Due to volatility or intimidation due to agri customers. How do we. Understand this volatility. How do we attack this in terms? Of catering more non-angry? Even if we cater to angry, how do we cater to help get our credit cost more predictable from the same pool of customers? Thanks, [Subranshu]. If I heard your questions, one was on existing customers, higher cross sell, and volatility. Right. Let me take the first question on existing customers. We have a very targeted what we call a number called as a product per customer, which we track, and thankfully we are well endowed as an NBFC. We have a fixed deposit license, we have a corporate agency license, we have a mutual fund company, and of course we'd like to kind of do some distribution there. There is capability for us to be more relatable to our existing customers because of the products that we have. I have not put this out, and at some point in time we'll put it out. Our product per customer, what we track, is progressing in a very healthy trend. Now that we have a branch structure with a branch head and a cross sell desk at every branch, the product per customer numbers are only seeing an increased clip. You're right. From an NBFC standpoint, once you acquire a customer, we need to clearly monetize better, and that is a key metric that we all track. Secondly, on volatility, and you alluded to agri customers' volatility, being a semi-urban rural player, I think what the company has done well is immerse itself in the micro markets. We operate out of more than 12,500 pin codes in the country. Country. Thankfully now we've been able to use some of the toolkits to ingest a lot of the micro market data into our underwriting scorecards to take calls. There is an inherent volatility because customers have not, like you and me, salaried incomes. There are a bunch of our customers, most of them are self-employed agriculturists. For a player like us, it's important, one, to understand the cash flows and schedule our loans. Let's say for a tractor customer, when there is underlying cash flows to pay those EMI. Whether it's an EMI or it's a quarterly installment or a half-yearly installment, we have a, I wouldn't say we have optimized on that, but we are moving in the right direction. I think what you can gain and gauge from that is the inter-quarter volatility that we have started to reduce, and there is scope further to reduce that. Managing volatility from a collection standpoint, from a scheduling of EMI standpoint, from a deep immersion into the rural micro markets to understand the customers and make sure that our loans, our loan sizes, are mimicking the EMI capability, repayment, FOIA, etc. That's all something which we have improved vastly with the underwriting team coming in, with the risk team doing the risk scorecarding, etc. Etc. Right. Can I ask one last question? Are we looking at any co-lending? Arrangements in products where we do not have capability right now with large PSP banks or private banks or any housing finance companies are in who see. On the vehicle lending business, largely we are a junior partner. You know, we have a co-lending partnership with a bank. We are streamlining that. There is no paranoia to grow rapidly. We have to put the systems and processes in place before we get growth up. We do a little bit of senior balance sheet partner play for some of the MSME business. Very small right now, but nothing material to talk about. Right. Thanks, that's a plus. Thank you. Thank you. The next question is from the line of Shweta from Elara Capital. Please go ahead. Thank you sir for the opportunity. My question is on how do we perceive the growth levers now that the wheels business continues to remain slightly under persistent stress. If I look at SME, which is 5% of your mix and pretty sizable enough to make sort of a difference ahead, what do you consider as your business moat in SME business? You know, whether it is, I mean, what is your niche customer profile like or do you have a moat on price discovery or ticket size? I understand you mentioned that you have been recalibrating the offset. Could you just throw light on the overall contours of SME business? Earlier in the commentary you mentioned that refinance business could be probably a good growth driver. I understand that even the underlying commercials there have not been supportive enough. Right. I mean, how do you perceive this? Thank you. Thanks. See, the MSME business, there is a bank playbook and there is an NBFC playbook. We are in the M of the MSME. That's the micro enterprises. We started largely in that segment, the micro and the small, you know, in the corridors of the, let's say, the auto ancillary business. More a manufacturing playbook, which is a concentrated playbook of participating wherever there is a concentration of these enterprises. As we increased our participation in MSME, we did go into the service and the trading participants in the MSME, and our hero product there was LAP. For us, the benefit or the early mover advantage or the kind of ability to move faster was the branch presence that we had, and we populated a lot of our branches with the MSME skill set staff, had the underwriting teams in place, etc. Happy to say that the LAP business from a very two-year standpoint is now 50% nearly of our MSME business, of our SME business. We also came off from participating in, let's say, bulky businesses long back. We don't have any bulky SME sitting in our portfolio. We do have machinery loans. We do have supply chain finance, which is including bill discounting, etc. Machinery loans sitting there. Our ability to grow forward would be, I do think that this is a segment where there is still headroom for participation. One might think that there is too much participation from existing banks and NBFCs, etc. Though we have come late to the game, we do believe we have a relevance in the segments that we operate to start growing in a more meaningful manner. There is no, I would say, challenge in the ability for us to kind of originate from our shop and buy incremental business versus where the competitors are. That's on the SME side. You had many other questions on refinance. I'll invite Sandeep to come in. On the used car and the refinances, yes. On the used car and the refinance business, yes, that is an area of growth which we have factored for ourselves. If you really look at the current. Year with the new vehicle business being down, the used vehicle market has not grown and we have kind of posted a marginal growth of around 3%. Going forward, I think the rates are quite considerable enough for us to continue to participate into that segment. We are looking at growing in both, that is existing customer refinance plus buying and selling. What we have stayed away from consciously is not going overboard in terms of the BT product as far as the used is concerned. We do believe that's the right way for us to approach it going forward. Between quarter two, quarter three with the festival season coming in, I think we should be able to capitalize more on this. Okay, sure. Thank you. Thank you. The next question is from the line of Viral Shah from IIFL Capital. Please go ahead. Yeah. Hi. Thanks for the opportunity. Raj, two fundamental questions. You mentioned that we have now much more products in our arsenal to kind of drive the diversification fee. Where do you see this now happening? Of course, in the past we had set certain targets, but for various reasons we could not accomplish that. Why do you see this, number one? Number two is how does this then flow into your profitability? I think Nischint did ask you about the guidance about when do we see emitting kind of an ROE, if you can help us work through the ROE 3 from a medium term perspective. Lastly, just some bit of clarificatory question. You mentioned that sats of the SME is lakh. Can you mention what are the yields and the ticket sizes over here? Thanks, Viral. There are some details which are not out publicly, so I won't be able to give you the granular details. Whenever we put it out there, I'll spell it out. Your question on the underlying asset categories, I mean there's nothing new I can offer in commentary. In the wheels business, of course, we have dominance in some segments. I mean tractor is one of that which is at least attractive for now. You would have heard my colleague Sandeep talk about the used vehicle business, which can see some turnaround potential in this fiscal itself. Overall, it's an attractive space for us, from our NBFC playbook PV business. We do have very, very strong synergies with various OEMs, including the leading OEM in the country. We have run into some kind of challenges with the entry-level passenger vehicles, and if there are some tailwinds which can augment that growth, we'll be able to ride that wave. Overall, the wheels business is where our fortunes are. We are over-indexed on that, and there's no downplaying that. If there is a bit of lullness, we will be impacted. The other segments I spent time in the call talking about, I won't repeat myself on the ROA and ROE. I mean on the ROE getting into. Raul, before you get to the second question, my question was more about how do we see this mix on the non-vehicle business progressing. We are currently still anywhere between 5% - 10% depending on some pieces of the other businesses that we classify. Some of them were legacy businesses, but just from a directional perspective, say two years out, how could this be? Can this be more like 15% or 20%? Yeah, I'll just be consistent with what I said earlier. By FY, it's a little long way out. By FY2030, we look at the non-vehicle business to be 25% of the mix by FY2030. It is going to be a gradual climb up. There's no point in buying a diversification inorganically and not doing it in a profitable manner. That's what I would stay with, a 25% non-vehicle book by then. Can I move to the next question? Sure. On the ROE front, clearly I think we've hit close to 12, 12.5 last year. I think this year, of course, they have come down because of the Tier-1 going up. Our first stop will get to 15, and to get to 15 we need to hit a 2.2 at least ROA to level up at least six, six and level up six times. There is a plan to get to that, you know, 2.2 ROA. I'm not giving you like it will be done next quarter, but yeah, there is an aspiration to get there and then ultimately go up from 2.2 to 2.5. First stop is clearly 2.2. There are variables on pricing, there are variables on cost, there are variables on OpEx for us to do that, and I think we have given at points of time what is the split there, and from a DuPont to hit that 2.2 ROE and then user like laboring up to get to that 15 ROE. Got it. Thanks, Raul, and all the very best. Thanks again. Thank you. The last question is from the line of [Priint Enjino] from CLSA. Please go ahead. Yeah. Hi team, thanks for taking my question. Just firstly, going back to this pre-owned vehicle disbursement, it's been at 15%-20% of our total disbursements for a while, and it's not really grown a lot in the last two years. Just wanted to ask, firstly, are we mainly catering to just purchase of used vehicles, or is it also more of refinance of existing customers? Secondly, even when it's purchase of used vehicles, how much is, say, to new-to-Mahindra customers versus existing franchise customers? Hi Bhiran, thanks for the question. This 17% of our disbursement for pre-owned vehicles, you're right, it's been FY25 or 16 and it's come to 17 in Q1 of 26. There are two specific mixes and I'll hand over to Sandeep soon. One is we do hunt at various used vehicle dealerships to get to finance this business. Used PV usually, and there's some kind of very little bit of used CV, but mostly used PV sitting out there. The second segment is from our internal customer base. Once they cross a certain period of time, if they want to take a top-up loan on their existing passenger vehicles, we do have that as the second segment, but it's a mix of both. For the buy-sell which happens in the open market, because it's not an existing customer where we have track record, we do need to look at it through a larger microscope on the underlying risk, and of late we have to take some calibrated calls, right? There are used vehicle dealers, etc. There are aggregators also, you know the kind of aggregators which operate today, the Spinny, Carveco. We also have an in-house car and bike. We participate in the aggregators as well as the retail used vehicle dealers. It's always a calibration of how much of incremental business to buy with the right amount of risk that we have guardrails that we have for ourselves. I'll just hand it over to Sandeep for a piran. Yes. There are three parts to this entire used vehicle business that we work with. The first one is existing customers where after a period of time we give that forms a large portion of what. Second, in terms of the buy and sell, there are three types of channels that we predominantly work with. One is the OEM organized channel where we have a fairly decent market share working with them. Second is with the dealers and the brokers who operate in the market. The third is the aggregators that we work with. We work with all three of them, and of course the broker and the dealer channel is the one where we do the retail business, and with the other two is where we do it through their dealerships and showrooms. What we have consciously refrained ourselves from doing is going overboard when it comes to the external BT business, which also a lot of the market counts into the used vehicle. Because I think that's the area where. We have said that we will be extremely cautious and not go with those overboard scale ups in terms of LTV, so that we are able to manage our delinquencies in the right order. That is why our POCL business has been calibratedly growing, and we do believe that we should be able to grow that further. Just to follow up on this, with existing customers it's always just a top up. In the rural market, will you see that the guy has bought, I don't know, a tractor once and then maybe he's paid well on time, two years later he goes to buy a used car or something like that. It is also very different customers and you can't really cross sell. No, it is two different types. Requirements that come in. If he has an existing asset which is, you know, financed from us and he's coming to the maturity of the asset and he requests to top it up for a particular end use of the loan, that's where we give him the money. That's an existing customer being topped up less, but it does happen that somebody who has purchased a tractor with us wants to go in and buy a car for himself. That's where we do have a program where we look at a pre-approved and pre-qualified offer for that customer and give him that offer so that he gets the loan with lesser documentation and probably some more commercial benefits from the loan. Got it. Just secondly, on the funding side, if I may ask this, what's the incremental cost of fixed rate debt like NCDs, and on the floating rate debt, with how much of a lag will we see the repricing benefit play on? I'll invite Pradeep to offer commentary. We have all witnessed the reduction in repo, and I think whatever loans are linked to the MCLR, there is always a lag between the passing on the benefits of reduction by the banks. I think we are looking at a quarter-on-quarter basis, incremental benefits flowing in. We will not be able to quantify that benefit which will accrue. Yes, every quarter by quarter we will see the incremental benefit coming in the comp side. Okay. is the cost of NCG debt now after this hundred? If you look at it, we kind of have just it should be in the range of 7.10% - 7.20% kind of range, three years NCD. Okay, got it. That's pretty useful. Yeah. Thank you and wish you all the best. Thank you. Thank you, ladies and gentlemen. In the interest of time, we'll take this as the last question. I now hand the conference over to the management for closing comments. Over to you, sir. Thank you everybody for being patient and coming on the call. Just a quick reflection of Q1, as I mentioned earlier, I think it was a steady quarter. Just to remind everyone, considering Q1 collection efficiencies of FY2024 and FY2025, we are about 100 basis points up in Q1 of this year. The collection engines have worked reasonably well in this environment. We do think that there are underlying challenges which we had to navigate in Q1 from a growth standpoint, but we remain optimistic and we see the remainder of the year as the possible tailwinds will be positive. We are primed to capture all avenues of growth as they play out to make sure that the rest of the year is positive, and we continuously look at the year as being an optimistic future. Thank you very much and thank you for hosting us. Motilal Oswal Team, Abhijit, thank you. Thank you, thank you, on behalf of Motilal Oswal Financial Services Limited. That concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.