Ladies and gentlemen, good day, and welcome to Mahindra & Mahindra Financial Services Limited Q3 Earnings Conference Call, hosted by Kotak Institutional Equities. As a reminder, all participants in line will be in a listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nischint Chawathe from Kotak Institutional Equities. Thank you, and over to you, sir. Good evening, everyone. Welcome to the interaction with management of Mahindra & Mahindra Financial Services. We will discuss Q3 FY 2026 earnings today. Let me welcome the Senior Management of Mahindra Finance, represented by Mr. Raul Rebello, Managing Director and Chief Executive Officer, Mr. Pradeep Agrawal, Chief Financial Officer, and Mr. Sandeep Mandrekar, Chief Business Officer of wheels. I would now like to hand over the call to Raul for his opening comments, after which we'll take the Q&As. Yeah. Thank you, Nischint, for hosting us and the Kotak team. Good evening, everybody, and thank you for joining us on our Q3 earnings call. Apologies for a slightly delayed upload of the deck on the exchanges. I hope you've got access to it. As usual, I would request you to keep the deck handy, because I'll be referring to certain page numbers as we progress for updates on Q3. Starting up on Page 4, I have broadly four key messages before I get into the details of financials. Number one, we are happy to convey that a lot of the capability building that the management has been driving for the last couple of years through our business transformation project called Udaan. I'm happy to say that we have completed this, and this is now starting to bear very strong outcomes, whether it's on the customer front, on the dealer front and, you know, just from pure efficiencies from our executives. The second message is, we are seeing and what is, what we would think is a description of this quarter, is a visible step up in our profitability for Q3 and nine months of the financial year. We are also seeing, further stabilization in asset quality. Evidence that our Gross Stage 3 has been sub-4% now for the last eight quarters. As we had also mentioned, we were keen to keep GS2 + GS3 below 10%, and that's also playing out now for the last eight quarters. Finally, considering that, we think and observe that with the capabilities built and with the operating metrics progressing in the right direction, it is the right time for us to pivot to growth. We have been making investments, largely on products, channels, systems, and earlier in the year, we had a rights issue. So this is the right time for us to pivot to growth, and I will, during the course of my presentation, share with you our plans on amplifying growth as we go ahead. Moving on to Page 5. As I mentioned, we believe that the business transformation now is complete. It is evidenced clearly that 95% of our channels have adopted the new stack. This is resulting in both acquisition and collections now at a very strong pace on the new stack. We have sunset all our old LOS, LMS, tech infrastructure, which means our associates are now onboarding clients completely paperless. Our branches have now been kind of re-equipped to do multi-product and omni-channel journeys. Our two back offices, the CBCs, have also got AI-fied in a way, to look to use the best tools for improving on efficiency. Moving to quarter three, visible step up that we have seen in profitability. If you look at the quarter three ROA, we have climbed to 2.5. Now, there have been a one-time benefits in this quarter. If you look at nine months of FY 2026, our ROA is moved up to 1.9%. You would all recollect that as of, from the business model, you know, kind of, metrics that we were keen to get the, movement. We said we are keen to hit a 2% ROA and then sequentially climb up from there. I do think we are moving in that direction, quarter-on-quarter. The PAT numbers for Q3, if you look at a sequential growth, it has come in at a 59% growth. Nine months for FY 2026, PAT is up 76%. This is, of course, adjusting for what you are all aware, we do the model refresh in Q3 of every year. Last year we saw a, you know, a kind of PCR cover fall from 60-odd to 50, 50% coverage ratio. So it's not a comparable YOY, and hence we have done a Q-on-Q comparison, and PAT is up 59%. The story on NIMs is also quite encouraging. If we look at quarter-on-quarter NIM expansion, we have seen a 50 basis points expansion in NIM. 7.5 does have some one-time benefits. I would request you to read the 9-month financial year 2026 NIM, which is come up to 7.1%. All of you would be aware that this is one of the metrics we've been talking about, that the NIMs, which had bottomed out at 6.5%, we clearly said that we are looking at getting back to seven, and then from there on, you know, inching up. So it's, it's good to see NIMs for nine months climb to 7.1%, which is comparable to 6.6%, nine months of last fiscal year. Overall, what is structurally also improving is our fee income. Fee and other income has expanded quarter-on-quarter by 10 basis points, and nine months for the financial year to 1.4% versus 1.1% for nine months of last fiscal. Moving to page number 7, which talks about our further stabilization on asset quality. GS3 numbers for quarter three are at 3.8%. This is sequentially down 14 basis points and year-over-year down 13 basis points. As I mentioned in the opening comments, GS3 plus GS2 together is 101 basis points lower than last year, same time at 9.2%. And credit cost for the quarter is 1.3%. Nine months credit cost is at 1.8%. You would all recollect that for the business model that we said, which requires us to get back to a 2% ROA, credit cost should be in the range of 1.5%-1.7%. YTD, we are at 1.8. We do see capability for us to live up to that, you know, commitment of being within that ZIP code of 1.5%-1.7%. Finally, as every year in Q3, we do the ECL refresh. We did an ECL refresh this year itself, this year too, and we have largely now in-housed the model. While there has been, you know, LGD resets and which kind of caused us to have a slightly lower PCR. But we are not taking any PCR benefits from the ECL model into the P&L. We are keeping an overlay. The overlay details I will spell out later. It's about INR 635 crore. On a high level, the PCR cover, which was in the zip of 53% in Q2, has been maintained at 53% for Q3 also. I request you to move now to page number 8. So what does pivoting to growth mean for us? While investments are in place for a rural player like us and with the GST benefits, we did in our quarter call of Q2 talk about certain momentum that is building up with the GST cuts. From a disbursement standpoint, Q3 has been the highest. What we delivered in Q3 of this fiscal has been a higher, higher sale of Q3. So we did catch momentum of the GST benefits. Of course, most of these benefits for us has been, I would say, enjoyed with the tractor disbursement growth, which is up 65%. We have had unit growth in PV, CV, but as you know, the ticket sizes had to get readjusted because of the price of the vehicles, so we couldn't see that translate to, equal benefits in the disbursement numbers. While we saw, you know, reasonable growth in PV and CV, the real standout growth for the quarter was in tractors. I don't know whether you guys got the update that, in our diversification plan, we have been sharing this for a while now. Our subsidiary, our 100% sub, MRHFL, for the last year now, we have been focusing on, on streamlining the asset quality in that business. I'm happy to share that for last two quarters, that business is now shaping up well. We are, holding the asset quality well. We did, of course, bring the GS3 below 3%. We have taken to both the boards today, a plan to look at, what's the best way to do mortgages going ahead, which includes an evaluation of merging, merging the two entities. We are going to do a full evaluation and take the final, you know, suggestion to the boards in due course of time. So mortgages is going to be an important asset category for us to double-click on, and doing it in a manner which makes sense from a cost-efficient manner is also equally important for us to get to the ROA outcomes. In line with our diversification, the MSME business now is also touching close to INR 8,000-odd crores. We are seeing an AUM growth year-over-year, of course, because it is a small base. We have much, much more prolific plans for the SME business growth, and it's early days yet for us to see true potential of that playing out. As I mentioned in past calls, it's still capability building and channel investments that we're doing for the business right now. To grow, of course, capital is important, and we are extremely well capitalized. Our Tier 1 still is at 17.4. So all the growth plans that we have are supported by a very strong capital adequacy. I'll now get into details about disbursement, spreads and risks. So, moving to page 10. You might be interested to know where we got our disbursement growth from. On a YOY basis, tractor has been stand out. We have, we have mentioned this in the past. While a lot of our peers claim to be a number one in tractor finance, I request you to look at all everyone's book numbers and disbursement numbers. We have, by far, increased our leadership position. We are the number one tractor financer in the country by a fair margin now. With this increase we have got in Q3, I think the gap has even widened between us and the second best or the second, you know, financer on the leaderboard. Used vehicle also grew, but we have been cautious in this growth considering the new vehicle numbers. Passenger vehicle growth, while quarter-on-quarter is higher, 33%, YOY is just 1%. As I mentioned, there's been a ticket size decrease here. We have got unit growth, but not equally high disbursement growth because we have kept the LTVs at the previous level. CV growth, while unit has growth, but you know, a lot of our movement has been towards the ticket sizes, where we were again conservative on LTV, so we haven't got disbursement growth. But unit growth has happened in the quarter. Three-wheelers, we continue to move towards more the EV three-wheeler business, because we think that's the future in the three-wheeler business. So we are a little more conservative on the other combustion engines and focusing on the electric three-wheelers. And SME, while we had a YOY growth of 4%, overall, you know, YOY growth in AUM is much stronger. So highlight message on page number 10 is, we have grown disbursement 7%. I would say the YOY growth in unit is much higher than 7%. Quarter-on-quarter, you were saying that because, of course, Q2 was a big week, it's a 30% growth quarter-on-quarter. Many of you have asked us this, in the past, why is the quarter-on-quarter growth in book been only 1% if the disbursement growth has been high? I would like to clarify. In quarter two, we have a very decent size of what we call a trade advance, which is to facilitate the season disbursement. That is not interest-bearing, that also has a benefit as we go into the NIMs of Q3. But since that is not counted in disbursement, it's counted in book. So because that gets translated into, you know, adjusted into book growth, you see that 37 in the last column, you see a degrowth in the QOQ book growth. Otherwise, adjusted for that, it's a 5% book growth quarter-on-quarter. Now, coming to the overall ROA tree, this, in a sense, gives us what's moving, what are the levers that the management has been invested in to move the ROA tree. If you look right on top on the total income by average assets, on the nine months for FY 2026, there's been a 20 basis points growth. Fair to say, in a declining interest environment, we are going to see intensified competition, which will mean as we, as cost of funds go down, we'll have to pass on some benefits. You know, the competition intensity is quite acute, so we will have to be competitive. And what we have seen so far is a 20 basis points decline in the loan income. However, with our investments in augmenting fee-based income, we have been more than able to offset this loan income decrease of 20 basis points by a 30 basis points increase in fee, investment income, which has grown from 1.1 to 1.4. As we also mentioned that, some of our subs, especially MIBL, and many of you asked whether it's a one-time, dividend payout that comes into this fee income. We said, "No, this is structural." That business is a cash-generating entity. We will continue to enjoy, regular dividend payout from that entity, which will keep augmenting our fee-based income. Our interest cost, yes, not comparable to last year exactly, because the rights issue was done this year. So we do have some of the debt equity play at work here, but we are seeing incremental COF coming in at a good level, at a good interest level. So, COF is also a metric, and hence, if you look at... I request you not to look at Q-on-Q, but nine months of this year versus last year, we have still seen a NIM expansion of 50 basis points. OpEx has been largely range-bound. We are investing, as I said, in new businesses and growth, so, we do believe our business franchise can absorb between 2 to 2.5, 2.8% OpEx to average assets. I'd like to spend some time on credit cost here, but, move to page number... I kind of cover my commentary on asset quality through Page 12 and 13 together. The highlight on page number 12, as you would see, is our collection teams have done a phenomenal job. The GS3 numbers have reduced quarter-on-quarter by 14 basis points. You know, same time last year, we actually increased by 10 basis points. But there is a qualification here. We also have enjoyed. We have basically written off, you know, from our earlier fully provided portfolio of the Aizawl incident that happened. We had 100% provided for that. As you know, it's in litigation and whatever recoveries are going into a court account. So we have decided to completely what we have provided for, write that off. That's another 10 basis points. So net-net, we have still seen a 4 bps reduction in GS3. The real positive story is in GS2, which has seen a 38 bps reduction Q-on-Q. Which means that, you know, GS2 plus GS3 has reduced by 52 bps, sequentially, quarter on quarter. Go to the next page. I'm going to explain credit cost here, but, you know, I do acknowledge that the credit cost could be a little confusing because of the amount of PCR that happens. So maybe the better explanation is on Page 14. If you look at credit cost for the quarter, you know, credit cost is a combination of provisions and end losses. Provisions, because we wrote off the amount of INR 146 crore, that's moved out from provisions, but yes, that gets added back into the write-off. We have circled that, the 146 that you see, you know, interplay between A3 and B1. The real credit cost for the quarter would be the last row, which is reading as INR 482 crores. Because that adjusts for all the movement in the PCR cover for the that happened in between the quarters, as well as the offset between write-off and the, one-time write-off and the, you know, subsequent provision. So in our mind, we have, adjusting for this provision movement, the real credit cost, which one would read, which was INR 623 crores for quarter two of FY 2026, has reduced to INR 482 crores for quarter three. The same number was INR 592 crores for quarter three of 2025. I'm happy to take more questions of this during the Q&A session. Quarter three usually gets a bit because we do the ECL refresh. You have moments in PCR, but just stock movement. There is, of course, stock movement, and then there is coverage movement. The good news is for credit costs on stock movement, we have reduced the stock on GS2 and GS3, and hence there's a benefit. But we have not taken any benefit of the PCR, which ideally with the ECL refresh, has caused a reduction in PCR. We have created an overlay, as I mentioned earlier, which we can talk about in more details. Finally, my last page on page number 17. What is a constant for the management team that keeps us, you know, focused on to deliver very strong operating and financial metrics? These are the top five priorities that the company is chasing for now. We do understand our business moat is our Wheels business. There is a leadership position that we enjoy in various categories in the Wheels business, and that being our crown jewel, we are defending and growing our moat in this business. And we do understand that as competition intensity increases, we have to keep working on making sure our market shares hold. As a growing franchise, clearly, the objective is not to be monoline, to make sure that we are meaningfully diversifying. We are growing our adjacent businesses, which we call as SME and the housing finance business. We do believe the turnaround in MRHFL is complete now, and now it's time for us to look at unified approach in growing the mortgage business. That will also be, you know, a continued focus for the company. The growth in margins as we, our NIMs did come under some challenge. We knew we had to balance between growth and margins. We have taken certain calls, even in the Wheels business, on how we participate. With the kind of mix now and tractor becoming a larger part of the portfolio mix, and also us balancing our play in the passenger vehicle business, we are not just growing, you know, just to catch tailwinds of growth in the prime segment. We are making sure that any growth that we do in the Wheels business balances for our margins and growth objectives. That's seeing a visible improvement in our NIMs. We do take courage from the way in which our GS3 numbers, GS2 numbers have been playing out, as I said, for the last eight quarters. Our credit cost as well as asset quality in terms of GS2, GS3 is trending well, and our fee-based income continues to be a focus. All of this, with the continued focus from a operating kind of playbook, which is today reset in a lot of our investments in tech and digital, is going to help us have sustainable, and resilient growth in the future. And this is very much part of the management focus for every quarter as we go forward. So I will pause here now and open up the questions for the call. Thank you very much. Thank you so much, sir. Ladies and gentlemen, we'll begin with the question and answer session. Anyone who wishes to ask a question, may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. Our first question come from the line of Mahrukh Adajania from Nuvama Wealth Management. Please go ahead. Yeah, hello. Congratulations. I had a couple of questions. Firstly, after the ECL model annual reset, now do you expect credit costs to hold on at current levels, given the environment at 1.3% over the next few or over the foreseeable quarters? And my next question is, what were the changes or could you highlight if there were any big or main changes in the ECL model that we should know about? So that's my first question. And my second question is on interest income, if you could spell out the exceptionals. Yeah, thanks, thanks a lot, Mahrukh, for the questions. The first one on, you know, what—whether you think the sustainability of the credit cost. I just want to remind that, you know, the kind of zip codes that we, we have conveyed that our business model can absorb is between 1.5%-1.7%. And we are happy that nine months of this year, we have come down to 1.8%, and we see, we see a lot of confidence in operating within that zip code. Now, you know, there will be quarters when things move up and down. Broadly, we realize the handle on credit cost is to keep the stock of GS2 and GS3 range-bound, and that's what we have seen in the last few quarters, our GS3 and GS2 have been range-bound. So if that remains in line and what we've done in the ECL model refresh also is to make sure that our LGDs are very reflective. The model rightly reflects what should be our PCR cover. So these are the two variables that go into credit cost. Management has to ensure that the stock of GS2 and GS3 are on the same level, and the ECL model, we believe, is reflective of the PCR cover. Hence, you know, the overall credit cost should be in that zone. Now, on your second question on, you know, on, on the, you know, what kind of interest income is exception items? There is no exception items, you know, in our interest income. The real expansion that you're seeing, we called out the two, three levers. One lever is it's been a year now since we got the corporate agency license for insurance. Earlier on, there were some ways in getting insurance back, but it was a little bit of convoluted through the MIBL structure. But right now, the corporate agency is an in-house insurance corporate agency, so we're able to, you know, get fee income directly through the agency license, which we enjoy in the NBFC. Second big source of income is clearly, as we said, we have now, MIBL is a 100% sub. Earlier, it was a-- it was held between us and AXA. After becoming a 100% sub, there is, you know, it's, it's one of the top 5, insurance broking companies in the country. They're not dependent on only M&M. They have very, very prolific businesses. That business throws up good revenue. It's a very profitable enterprise. It is not capital intensive, so we are able to, you know, enjoy dividend payout. It's not a one time, and by now, I'm sure you'll be able to bake it in, into your modeling. This is regular income coming in, into our fee-based income. There are other smaller incomes, which is in the form of, you know, prepayment, penalties, and late fees and all of that, but that's really small. The two big items in fee-based income is that. Now, one more, you know, there would be a kind of impact of, let's say, that is in overall income, right? I mean, not in fee-based income. I think the loan interest income. Loan income. Okay, loan income, I hope I've explained to you the fee-based income. In the loan income, arrow, the difference between Q3 and Q2, what we see is the other variables at play. As I said, in Q2, we have an X amount of trade advance, which is given to augment disbursements in the season. That X amount falls to half in the next quarter, right? So that, let's say, X amount is not interest bearing, it converts to interest bearing in the next quarter, half of that. And hence, that shows an augmentation in the overall loan income, not fee-based. Loan income for Q3. And whatever, because if we have a GS3 improvement, there is a, you know, there's a write back of income reversal that happens whenever they have a positive movement of GS3, GS2. Okay, thank you very much. But anything on ECL? I mean, any major changes in ECL? No, we have the ECL model basically has been... As I said, the objective is to make it as representative of the underlying business. So what we do in the refresh is, we have used the old consultant to do it for us, and we have taken in new inputs. We have gone much more granular, so each product is, let's say, in Wheels, there were seven products. Now, we have gone much more granular in the number of products that are consumed. LGD PD is again much, much more reflective of the business. Yeah, that's what we've done. Pradeep, if you have anything more to add on the ECL methodology you want to add? Yeah. So, one of the major change which we have kind of done this quarter is, with the ECL refresh, that we have moved away from the 42 months rolling LGD calculation to a much larger, we can say, period, stable calculation, which is aligned with industry practice. That's one change we have reflected this quarter. Yeah, earlier it was a 42-month model for every business. Right now, we are looking at actually the... There's something called as a lookout period, wherein a recovery period that we do. So, we believe the ECL model now will be much more reflective of the underlying LGDs. Okay, perfect. Thank you. Thanks a lot, and all the best. Thank you. Thank you. Next question comes from the line of Abhijit Tibrewal from Motilal Oswal Financial Services Limited. Please go ahead. Yeah, good evening, and thank you for taking my question. First of all, congratulations on a good quarter. Also, just two questions. First, on the demand side, while giving the opening remarks, you suggested that tractors is the product which is seeing the most benefit from the GST cut. Just trying to understand, while we were seeing 3Q numbers and 4Q is supposedly the best quarter in terms of business. So how are you looking at demand, and is the momentum that we saw after the GST rate cut still sustained? Because when we speak to other vehicle financials, most of them admit that they still see that sustaining, especially in passenger vehicles and tractors. So if you could just help us understand that, and more importantly, how do you view at this momentum sustaining when we get to the leaner first quarter after a couple of months from here? If you could just help us answer that question, then maybe I'll take the second. Thanks, Abhijit. So, you know, these were at least was a reasonable amount of demand augmentation during Q3, thanks to the GST 2.0 enabler. What was clearly encouraging was, let's say, in passenger vehicle, we all know that there was only one story, right? The premiumization story was playing out. And while if you just check most of the OEM data, we've seen at least a bounce back of the entry-level vehicles has showed good promise. And being a rural financer, financing also, you know, kind of self-employed customers, we were able to catch a decent amount of that demand, which came in thanks to GST. Now, has that continued unabated through, let's say, first month of the quarter? Clearly, post-festive season and post-GST, there's been a little bit of waning of that. It's not continued at the same clip, right? And I'm sure you would have heard the similar commentary from some of the OEMs and other financers. Tractor, I mean, the rural economy is clearly chugging along, much more promising than, than other segments. And, and I don't want to just repeat, but the big highlights for us is the, you know, the favorable monsoon, as well as, price, discovery from agri, agri commodities through MSPs, et cetera, has played reasonably well in getting a player like us who serve rural, semi-urban, not just in tractor, but other vehicle categories, to see some rural demand, to ride that rural demand wave. Now, too early for me to comment on what will happen in, in Q1. Our, our job is to make sure that incremental market share... See, our business teams track incremental market shares for every vehicle product. We are keen that whatever commerce is happening and where our business model is highly indexed on, whether it is TV, CV, tractor, three-wheeler in the rural, semi-urban, self-employed segments, we look at getting a higher clip of the incremental market share. And I just invite if he wants to add anything on that. No, I think, just to, just to add to what Raul said, I think Q3, the growth of the industry was a combination of two things. One, of course, the pent-up demand of September getting into Q3, because the availability of vehicles were not fulfilled in the month of September, and part of it got fulfilled in quarter three. Which also means that quarter four may not show the same, same levels of growth as far as Q3 is concerned. But given the fact that, you know, we still have some amount of traction happening in the smaller vehicle segment, plus the rural geographies, I think we are quite optimistic of how we, how it will go in Q4 also. Got it. Thank you for that. The other question I had was around the provisioning bit, while you explained a fair bit of that, during your opening remarks. So you also spoke about building some management overlay, which you've also given out in the notes for financial statements. So is my understanding correct, that after this ECL model refresh, at least in this quarter, we have not taken any benefits in terms of PCR and provisions, and whatever release we saw from this ECL model refresh has actually been parked as a management overlay? Yes. Yeah, that's right. Your understanding is right. You know, we have quantified the management overlay also. You know, I just also want to draw a comparison. If you recollect, in our earlier model also, there was you know, an 18-month plus, we used to keep a certain cover, which is there in the notes of the, you know, in the presentation. So, if we just went purely by the ECL model, there would have been clearly a relief in provision, but we thought it prudent also to make sure that there is, you know, a management overlay that is created, which of course, for a business model like ours, I'm sure the ECL tool is reflective enough. But there could be occasions when the management would need to look at outside the ECL, whether you know there would be circumstances to to you know not really dip into it, but instances to basically look at touching the management overlay. Got it. And just to follow up on what you just answered, basically, what I'm trying to understand is, I mean, if you remember last Q3, when we had done the ECL model refresh post that, we saw a lot of volatility in our Stage 3 cover. It actually declined, and then we increased the cover. After this, ECL model deflation, which I am understanding, is much more exhaustive, where you said you've gone more granular. So we're not expecting further volatility in provision covers from here? That's one. And I just wanted to squeeze in one last question. Also, I mean, today, I mean, when we look at NBFCs, right, at least for a long time, RBI has been saying that they don't want to give out one more HFC license to an NBFC or one more NBFC license to HFC. In our case, we already had one. So, so what was the rationale behind taking this proposal to the boards of going for a scheme of amalgamation or merger between the parent and the subsidiary, MRHFL? It might be a little early to give you full details, because as you would see from what we have taken to board, we ourselves are going to do a full evaluation of the merits to do you know mortgages in one entity versus two. As you know, you know, there is today a duplication, sometimes in geographies, et cetera. There has also been a lot of harmonizing of regulation amongst banks, NBFCs, HFCs. So we are going to completely evaluate whether incrementally, is it more efficient to do mortgages along with some of the capital risk weights, etc, etc? We are going to do a complete evaluation and on balance, finally take a call whether mortgages is more efficiently done in one entity versus two, right? As you know, today it's a 100% sub, really. We have 1,400 branches in the NBFC. We have about 500 branches in the HFC. There could be duplication. At the same time, there might be merits. So at this point of time, we are going to really make sure that we have a 100% evaluation of the merits. And then once that is established, we will at the right time, come back to both the boards and take a decision. But, objective. I think the underlying objective is to play mortgages at scale. To be a scaled player in mortgages, what is the best playbook for participation, is what we will evaluate, and, and the boards will take a call post that evaluation. Got it. This is useful. Thank you so much for answering my questions, and I wish you and your team the very best. Bye. Thanks. Thank you. Our next question come from the line of Suraj Das from Sundaram Mutual Fund. Please go ahead. Suraj, you may please proceed with the question. Yeah. Am I audible now? Yes, Suraj, you are. Okay. Yeah. Hi, guys. Thanks for the opportunity. Just one question, I think on the tractors again. In terms of growth, probably if you can talk a bit more, because if you can discuss the volume growth for the industry on a nine-month to ninth-month basis, I think that the- Suraj, we lost you. Can we... Moderator, can you hear him? No, sir, we can't hear him. Okay, maybe we can take the next one, but let me just answer. I think he was questioning on the tractor growth. I just want to, for the benefit of everyone, I know it's a, it's a very strong growth, but I just want to give you what, what has gone behind that. We created two different organization structures for, you know, the-- within the M&M Group, as you would know, that there is a Mahindra tractor and a Swaraj tractor. In fact, most of our additional manpower and distribution for the year has gone to really equip us to, further our mode in tractor finance, and this has played out well, whether it's on distribution, product, as well as incremental penetration in the rural geographies. This has not just happened overnight. We have been in the works of creating distribution for the last 12 months now, which we are now getting some benefits in the last couple of quarters. Moderator, you can maybe move to the next person in the queue. Sure, sir. Our next question come from the line of Avinash Singh from Emkay Global Financial Services. Please go ahead. Yeah. Hi. Good evening. Thanks for the opportunity. Great set of numbers. Just harping a bit more on the NIM part, and as you rightly kind of peel the layers of it. So if you were to see from here and where the direction of business moving and also the competitive environment, there could be, I mean, as you incrementally go to some of the probably a low-yielding segment or even in the digital segment, competition increases, so the yields will come under pressure a bit. Can you also help here that if the fee, that entire interplay of different factors, including your loan-related fee and insurance fee, this 1.5%, is it kind of at the kind of level that where it is going to max out, and you see as still this to improve? And then, of course, on the cost of borrowing side, of course, you will continue to get some benefits from, you know, the rate decline, but then again, increasing yield will kind of have its kind of own impact. So this 7.5% of basically NIM that is currently, is it a sustainable level you are seeing, or do you see that, okay, as scope for it to further expand, or is it kind of a peaking out? So that's my question one. Thanks. Yeah. Hi, Avinash. So, straight answer to 7.5, no, this is a one-time... I mean, there are certain structural benefits that we are seeing in the NIM expansion, but 7.5 has to be read in context of that, because we've got a loan income delta from Q3 over Q2, as I explained earlier, with the, you know, trade advance, which was earlier not interest-bearing, but that has run off, as well as, you know, some of the write-backs because of GS2- GS3. I would look at 7.1 being a little more reflective. The nine months, 7.1 being a number that can be, you know, when you look at when we gather at Q4 next quarter, we should see how are we on the 7.1. I would like to remind, you know, everyone that, you know, we've, we've at an overall ROE level said, we think the company has to first get to a 2% ROA and then climb up. Now, there are various, elements in the ROE tree to get to that 2%, right? I mean, clearly, loan income is one, fee income is another, COF is another, OpEx is another, credit cost. So, we have multiple agendas and levers that we as management and are working on making sure that the, the levers are as controllable as possible, and there might be an interplay between them for us to get to that 2%. Now, are we happy with the way we are incrementally moving towards that with, the levers that we've been working? Answer is clearly yes. We believe we have worked on levers on the income side, we have worked on levers on the fee side, levers on the OpEx side, on the credit cost side, and the cost of fund side. So these are calls we'll keep taking, but these are not tactical. These are in the longer objective of hitting the 2% ROA and then climbing up from there. ... Okay. Okay, Pradeep. On now slightly again on OpEx part, I mean, given that, you know, that you are looking to slightly move away also from wholesale, you know, productivity gain will be on the wholesale side, but this new initiative might require some kind of expenses. This OpEx, you know, do you see a scope for improvement in OpEx over the medium term, or this is where it would be, I mean, over the foreseeable future? If you look at both OpEx to average income and, cost to income, and, as I mentioned earlier, with the business model and the overall ROA, we can operate, you know, within the ranges of 2.5-2.8. I mean, 2.5, clearly not beyond us now, but we are in investment zone right now. So I do see with the new businesses, et cetera, we have to invest. We have a concept called as operating jaws, wherein we are looking at revenue growth actually exceeding, you know, OpEx growth. So, sometimes expenses are required upfront, which will deliver long-term, medium-term, benefits, and hence, I'll be focused only on over-managing OpEx. For, for the time right now, for the new businesses, you know, especially, it might be investment time. Some of it will be, you know, we might be able to capitalize those expenses. Some of them will pass through the PNL. So, really, not looking at being penny-wise pound foolish in the overall process. Got it. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address the question from all the participants, we request you to kindly limit your question to one question per participant. If you have a follow-up question, please do join again. Our next question comes from the line of Shreya Shivani from Nomura Holdings. Please go ahead. Thank you for the opportunity. Congratulations on a good set of numbers. I have two questions. My first question is on the CV/CE book. While I understand your reasoning for the volume growth of auto industry in the passenger vehicle book and the disbursal growth that we've had, I understand that their entry-level cars were sold, but what exactly happened with the CV/CE book? Why is there such a large gap between the kind of volume growth the industry is reporting and our disbursal growth in the quarter? My second question is on the credit cost or rather on the provision coverage. The slide that you showed on slide 14, that you know, the reduction in provisions release coming from the Stage 2 PCR, right? That's at about 8% now. That has been on a continuous declining trend. With history, you've maintained a 53% range. So what is the thought process going on over there, and what kind of improvement can further continue in that book? Thank you. Thanks. I'll take the two questions. First, on CV/CE. See, I think we've basically, you know, earlier articulated that in our balancing between growth margins and risk for the CV/CE business, we saw some structural changes happening in terms of the borrower segment. There is clearly, you know, an aggregation happening in that segment for the fleet operators. It is becoming from a unit economic standpoint, not very viable for small operators. And the cost of funds that the larger players enjoy, maybe the NBFC balance sheets versus banks may not be as formidable, right? So we have decided to participate in the CV business in a certain customer segment, as well as our new versus used CV choice framework to support our overall ROA aspiration. Now, for the new PVs, the new CV segment, I think there has been a reasonable rationalization post GST in the ticket sizes, and that's played out. As I said, we don't kind of display that, but maybe in the future we will show the unit increase also. While we have seen a unit increase, because of the ticket sizes, we have seen a sequential decline in the disbursement value. We are again participating in certain segments, as I said, where not, not the extreme fleet segment, where we can't really price it well, nor are we participating in the new to, you know, new to borrow... new borrower segment. We are generally in the retail play, in the retail base. And, while I'm sure you would have seen some of the commentary of the other segments, parts of the participants in the CV business are also going through asset quality stress right now. So we do, we are not in a very aggressive buildup zone in the, in this segment. Some of the state, payments, et cetera, have also seen delays, and we have to be cognizant of the fact and play in balance over there. Before I go to the, the kind of credit cost question, I'll just invite my colleague, Sandeep, if he has anything to add on. No, that's, that's all right. Please go ahead. Okay. On the credit cost, you know, I, I didn't fully appreciate your question. You were asking whether, you know, the stock decrease in the GS2 would have, would have created a release in, in provisioning. Is that your question? Yeah. So if you see the Stage 2 ECL divided by Gross Stage 3, that percentage is declining for you all, right? So your Gross Stage 3 PCR, you've maintained at 53 by doing all the overlays that you've spoken about, but there is an improvement in your like your providing less in the Stage 2 book. I'll invite Pradeep to come in. So if you look at our Stage 2 book, the overall quantum itself has kind of come down, so that, of course, will give some release. That's point number one. ...Point number two is that generally, your PCR coverage is a function of your PDs and LGDs. If your Stage 2 book gives you a trend which are better in PDs and both LGDs, then of course, your overall PCR on the Stage 2 itself will keep on coming down. So that's a reflective of the ECL model, which is working and giving us that benefit. But largely the benefit is if you look at the provision cover difference, is hardly like, you know, a percentage point and all. So I think that's the kind of outcome of the ECL model. And if you look at the Stage 3, anyways, if you look at the overall provisioning, at a company level, last quarter if my provision was total provision was 4,034 crore INR, which has come down to 3,867.6 crore INR. If you adjust it for the one-time write-off, then I think we have maintained the overall provision and there's no benefit taking it to the PNL. Got it. So fair to say that in the Stage 2 book, your PCR, you can keep taking benefit of the PD LGD trends throughout certain numbers, right? While you will maintain your Stage 3 PCR at a certain level, 53 or whatever range you want to maintain. In the Stage 2 book, you will keep taking the improvement. So even in Stage 3, if you ask me, the PCR has to be a result of the PDs, like always Stage 1, I think LGDs, and accordingly, Stage 2 also moves with the PD and LGDs. I think the provisions are generally by these two factors. That's why we have created an overlay. So overlay becomes a constant factor and balance amount is kind of derived by the model. So whatever way you can look at this model. Okay. Okay, sure. That was useful. Thank you, and all the best. Thank you. Thank you so much. Our next question comes from the line of Umang Shah from Kotak Mutual Fund. Please go ahead. Yeah, hi. Thanks for the opportunity, and congratulations on the quarter. Just one question to the proposal which Raul mentioned about merging the housing finance subsidiary with the parent company, given that both the entities are engaged into similar line of businesses of mortgages. I mean, just an extension to that thought, I mean, is the management also contemplating merging the MIBL subsidiary with the parent, right? Again, we are now doing insurance broking in the parent, excess capital sitting in the subsidiaries, getting upstreamed as dividend income anyways. If not immediately, in future, will that also be a possibility? Yeah, hi, Umang. You know, for the first question, I'd repeat that, on MRHFL, it is a proposal to evaluate the benefits. The objectives of us going down this path is, one, we do believe that we want to be a diversified financial player, and we want to play in multiple asset categories which are promising and adjacent. So mortgage, how do we kind of grow mortgages in a scalable manner? That's the proposal on hand. Coming to your second question on MIBL. Clearly not. Let me just reinstate that we have an insurance broking license, which has been maintained, and the corporate agency license. These are not to fish in the same ocean. We do realize that the field of, and the revenue pool for insurance distribution is very wide, and we didn't want to create a limiting factor of just exploiting the opportunity in the M&M ecosystem or the Mahindra Finance ecosystem. We did believe the corporate agency license gives us a good ability to maximize revenue, which is there in the here, in the low-hanging fruit, in the M&M ecosystem and the Mahindra Finance ecosystem. MIBL is looking at insurance distribution across opportunities: general, health, life, not in the M&M ecosystem. Think about all the opportunities of insurance distribution, which is, which is available, not limited to the M&M ecosystem, is basically being harnessed by MIBL. And hence, there is no thought process. We do believe it's an independent, you know, it's, it's governed by an independent board. It has its own management team. Yes, we do derive benefits for it because it is a subsidiary, and right now, that entity, at the scale it's operating, doesn't need capital and, you know, for us to retain too much of its, of the profits, it's going up. And hence, we felt that there is a clear ability for us to plowback dividend income from there. But we are definitely not having any, you know, inclination. Clearly, it's an insurance distribution business, and it will remain that way in the broking. Okay. Okay, perfect. Perfect, that helps. Thank you so much, and wish you all the best. Thank you. Thank you. Our next question comes from the line of Mayur Parkeria from Wealth Managers (India) Private Limited. Please go ahead. Good evening, sir. Am I audible? Yes, yes, please go ahead. Yeah. Sir, just to check also, it's already 6:55 P.M. We can go on a little more, but, let's have one question, please, call, if you can. Yeah. So, again, you just mentioned about the time, and pardon me for a slightly, slightly longish question, but, this is mainly in the context of your ROA comment, from a slightly medium to long-term perspective. ... I don't know if in the past, if as management, you all have alluded to anything beyond 2% as a number to, you know, anchor or guide over a medium to long term. So if there is any, please, you know, reiterate that, if any. But the question is more from a slightly longish perspective, historically, when we see, earlier we used to see a swing of ROAs used to be very high, right from 3.5% to sub 1%. The cycles of credit cycles used to swing from 1.5% credit cost to 3.5% on the PNL, 3.5%-4% also, and that is where the swing of ROAs used to happen. Over these longish years, we understand that the interest rate cycle is lower, and hence our yields are now more in the region of 7% against 9%. So that is a structural thing which is not going to undergo a change in next 2 years. Having said that, 1.5%, as you mentioned, the credit cost band, 1.5%-1.7%, is more reflective of a good credit cycle period. So we are sitting at the bottom of the credit cost cycle in terms of the good period. In that light, ability of the management to increase ROA, where does that come from? I'm not talking about 10 basis points here and there, but from a slightly medium to large, what is it that one should look at as a structural business trend from the management side? That is first. And secondly, what if there are external factors where the credit cost band goes out of hand, and that, you know, what are we doing to ensure that, you know, the external risk factors on credit costs do not play to our guidance, to our targeted range of ROA? Yeah, thanks, Mayur. Very long question. I won't have such a long answer, hopefully. See, one thing on the ROA, I'll maintain that our objective is to get to 2%, and then only after we hit that milestone will we share our, you know, plans to go up. But, clearly, is two the gold standard? No. We do understand that any formidable NBFC from the stable of, let's say, the M&M group, should deliver, you know, a 15% ROE, and our goal is to get to that 15% ROE. ROE is the biggest lever, and then since we are largely a secured book, the questions on debt equity, et cetera, we currently are even more capitalized than we're required to. We can sweat the equity a little more. So do we intend to stay at two? I, I would say that our intention is to hit the 15% ROE also. We believe the way to go there is first get to a 2% ROA and then climb up with the levers which are there in the overall ROE tree. Now, your comment on, you know, volatility, I'm sure you answered the question also that the huge swings in volatility, I think, are behind us. I've just opened up my commentary saying last eight quarters, we have kept GS3, GS2 range-bound. Yes, there was because, as Pradeep alluded to the fact that our ECL model had some periods of consideration wherein when the COVID period went out, we saw the PCR moving up and down. But right now we do think our if we, if we keep the, you know, GS2, GS3 range-bound and the ECL model is reflective, we shouldn't see such wide variations. We clearly think a business like ours, with the choices we've made in the last couple of years, should bring in more stability. The other management levers are in making sure that the business is not so monoline, right? As in, if you see, still we are a 90% Wheels business. Part of the diversification plan, which I admit has not played out to the level it has, we do understand with a balance sheet of INR 140,000 crore, loan book of INR 120,000 crore, we need to become much more diversified. And that diversification will lead to less volatility also. Because as long as we are subject to one industry, volatility is that much more. So, part of the mortgage playbook expansion, which will happen out, SME playbook expansion will happen out, is really to meet that long-term goals of not being so monoline and not being a subject to more intense volatility than, a more diversified player is. So that's the, that's largely the, you know, the objective of, of why the management is looking at diversification as well as, this whole fee-based income, et cetera, that we talked about, to, avoid in down cycles, extreme volatility. Thank you. Sir, this is not a new question, just an understanding. Please allow me. I'm, I am really sorry to interrupt you, sir, but we have a lot of- Clarification I am trying to get. May I please? Oh, you know, just in respect, I can see seven more people on the list. I'm happy to engage outside this call also. I can give you full clarification. Thank you. Thank you. Our next question comes from the line of Nidhesh from Investec. Please go ahead. Sir, thank you for the opportunity. So my question is on loan growth, that you alluded that you will diversify the loan book over a period of time. But, so there, I think mortgage is definitely a large opportunity. How should we build a loan growth from a medium-term perspective? This year, I think it's a bit slow, but, let's say from a clear perspective, what is the aspiration in terms of loan growth that we are having? And how the broadly loan mix may look like? Basically, how the share of wheels will move, in your view, over a period of time. Yeah. So, if you've seen... No, thanks for the question, Nidesh. The recent disbursement growth has been really... I would say, if you look at the gap between disbursement, so then book growth, of course, is holding up because of previous good disbursements in FY 2023 and 2024. We will have to make sure that we start seeing a loan book growth, which is in the mid-teens. Now, clearly, this year is subpar. As we, you know, we've seen some tailwinds in tractor, et cetera, but as we start getting more adjacencies from SME and mortgages, we do believe that a franchise like ours should look at CAGR growth in the mid-teens to high teens. Where we get that from will be a combination of wheels, mortgage, and the SME business. How is the growth going to look? I mean, how is the mix of Wheels, non-Wheels going to look like? I'll also kind of repeat what I said maybe in the last call. Over the next four years, by FY 2030, we do believe across, you know, now I'm also talking about mortgages. In the mix, the loan book should reach by FY 2030, and our objective is to get Wheels, which is currently in the combined businesses. Let's say Wheels, MRHFL plus Wheels today. Wheels is at 88%, we want to get that down to 70%. That means the mix from the other asset categories will have to grow, which is 12%-30%. Sure. With the SME and mortgage will be ROE dilutive or ROE accretive, in your view? So in the initial years, as you know, as you build businesses, they won't give you a very strong... But, we have a plan in the mortgage business also, with affordable housing being a big part of that. So we are not just going to mindlessly grow businesses without ROA, without the ROA attractiveness of the underlying, you know, Consol that we are looking at achieving. Initial years could see, as you know, any business which grows in the initial years will take time for the full-blown ROA to play out. Our SME business, in fact, even right now, is giving us encouraging signs on ROAs. Sure. Thank you. That's it from my side. Thank you. Our next question comes from the line of Viral Shah from IIFL Capital. Please go ahead. Yeah, hi. Thanks for the opportunity. So Raul, just first, one clarification. You mentioned that now that we have had a ECL refresh and there's some management overlays also now with us, do we kind of see a scenario where, say, to a very large degree and extent, we are done with the first half, second half seasonality in terms of the PNL credit cost? Just one follow-up over here, and then I have one more. Yeah. So, Viral, as you know, management overlays can't be used as per discretion. There are only certain occasions where we can dip into it, and we have, of course, had a very detailed discussion with audit committee board, et cetera. So this is not to even out quarter one, quarter two. Management still has a high bar in making sure that the GS two, GS three is range-bound. We are basically going to, you know, exercise owners on the collection, underwriting, business teams to make sure that we are not evening out in terms of earnings by creating the overlay. We will still be extremely focused on the operating metrics of GS two, GS three being range-bound. Right? So, as you would have seen in the past also, the volatility of quarter one, quarter two also has been largely evened out in the last, you know, in the last in this year and the last year. Yeah, let's go to the second question. Sure. And HFC piece, the reverse merger, I understand that this is under consideration, but the points that need to be considered are not just, say the, risk weight, which is kind of realignment, but also I understand there, there's consideration to be had with respect to access to SARFAESI. You getting, say, the ability to have and operate at an effective lower tax rate. Couple of other benefits are also there, access to NHB funding. So how do you anticipate doing this kind of the exercise? Yeah, Viral, I mean, I won't go into the details, but there are merits, demerits on both sides. There is risk weight, there is. I wouldn't say cost of fund is very different. You know, for somebody like us, there's very little arbitrage even today between cost of funds in, across both entities. SARFAESI is only INR 20 lakh, as you know, affordable housing, et cetera. Today, most affordable housing starts at INR 20 lakh and above. There are other recovery tools. So on balance, in fact, to even bring this to the boards, we felt that there are merits, demerits on both sides. We will cross the bridge when we have 100% conviction that we will go in one direction. Right now, I would say there are both merits on both sides. Our objective is to play mortgages at scale, and we do believe playing it at scale means that there needs to be some amount of evaluation of whether doing it in two outfits will give us that scale benefit. Got it. And one last- I'm sorry to interrupt you. I'm sorry to interrupt you, but please rejoin the queue for the follow-up. Kind regards. Our next question come from the line of Rajamani from Nirmal Bang. Please go ahead. Yeah, thank you for taking my question. I just have one question. So just on this, fee income jump, on insurance, the commission was quite, you know, the growth is quite healthy. So, now that your corporate agency license is now established across, say, seven partners, what kind of run rate should we expect going forward? Is this a, like a structural margin lever? And, how do we think about this, say, going forward? ... Yeah, Vinod, I just want to clarify, whatever you're seeing in that 1.1-1.4 is not only insurance income. There are a couple of things. Yes, insurance is a meaningful part of it. Now, you know, we have a growing franchise, and all the insurance that we do is a combination of whatever is basically good for the customer, right? I mean, we do have customers which come from very deep geographies, and our objective is that they are protected and the family doesn't go into bankruptcy if there is an eventuality. So all the products that we sell are very simple, not complicated, good for customer products. With the corporate agency license that is coming, we have been able to have a very decent amount of penetration into the existing M&M ecosystem. I would also like to remind everyone, ever since we reorganized our branch structure, we now have 1,400 branches, which are also distributing under the corporate agency, life insurance, general insurance, vehicle, you know, open market vehicle, insurance, et cetera. So, have we hit the headroom? There is still, I would believe, headroom for expansion. Are we moving in the right direction in terms of insurance income? Yes. Besides insurance, there are other incomes which as I mentioned, dividend income from the subsidiary and a couple of other avenues. And we do believe that, yes, we came from a position which was suboptimal. We have climbed to a reasonably good. Have we hit the headroom? I would not say yet. We can still augment this. But this will definitely don't read this, 1.4 as a one time. We do believe that this is sustainable, going forward. Understood. Thanks very much for that. Just one follow-up. So, is this, are you doing only individual or are you doing group also in this? Is it only individual premise or you are doing group as well? What do you mean by group, in insurance? Yeah, as in group insurance, like, say, group credit life and so on. Yes, yes, both group, individual. Branches do a lot of retail, so it's a combination. You know, we have set up just for everyone to know, we have a fee and, we have a setup, an organization structure, which basically supports this from a medium to long term. We are not looking at this being one-off, so there's a proper org structure to make sure that this, this fee-based income is a big theme and a priority. Understood. Thanks so much. All the best. Thank you. Thank you. The next question comes from the line of Piran Engineer from CLSA. Please go ahead. Yeah, hi, team. Congrats on the quarter. I'll make this quick. Just getting back to the first question on loan income. Now, you, you explained that it's gone from 11.6 to 12, because the 11.6 had the trade advances in the denominator. But if I go back one quarter, it was 11.7 in the first quarter. So over a two-quarter period where we ignore the trade advances noise, it's still up 13 bits. So I'm just trying to reconcile how to think about this in the context of increasing competition, declining yields, et cetera. Hi, Piran. Thanks for the question. One needs to also look at the inter quarter, what happens between the quarters in terms of GS2 to GS3. So whenever the stock of GS2- GS3 improves, then you have a write back also, right, in terms of interest income. So it's not only the festive, festival period trade advance, it's also the inter quarter. So we wouldn't have had between Q4 and Q1 such a GS2- GS3 improvement, which we saw, as you know, and I pointed out, our GS2- GS3 between Q2 and Q3 has seen a significant improvement, and that, delta has been enjoyed in Q3 in terms of the loan income. Got it. Okay, that's... Yeah, that explains it. Thank you, and wish you all the best. Thank you so much. Ladies and gentlemen, as there are no further questions from the participant, I would like to end the conference. Over to Mr. Nischint Chawathe for closing comments. Thank you, and over to you, sir. Thank you everyone for joining us today. We thank the management of Mahindra Finance for giving us an opportunity to host the call. Thank you very much. Good night. Thank you. Thank you. Thank you. Thanks. Thank you so much. Ladies and gentlemen, on behalf of Kotak Institutional Equities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.