Ladies and gentlemen, good day and welcome to the Shriram Transport Finance Company Limited Q2 FY 2022 earnings conference call. As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during 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. Umesh Revankar, Vice Chairman and Managing Director. Thank you, and over to you, sir. Thank you. Good morning, friends. Good evening to those who have joined from the western part of the world. A warm welcome to all of you who have joined this call. I hope all of you are healthy and safe. Today we have our JMDs, Joint Managing Directors, Mr. Sudarshan, Sridharan, Nilesh, Sundar, and Parag, along with me, and Mr. Sanjay, who is our IR head. Friends, let me first go through economic updates, then let me come to the results. Most of the states started unlocking almost fully. The second quarter on the back of aggressive vaccination. As stated in the previous quarter, goods transportation continues to have a good run and not hindered by any kind of lockdowns. With good freight rates, they were able to run their business quite comfortably. There is also a pickup in passenger transportation, which helped taxi and bus operators to repay their installments regularly. All this has helped in improved collections overall. The government has announced several policies to support the Indian economy in regaining the momentum. Most important is the MSP on various crops, which have increased by 2%-8%, and that really helped the rural economy. RBI is continuing to come with a lot of positive statements and initiatives. RBI issued a securitization of standard asset direction, 2021, which will enable greater risk distribution and greater liquidity to the originating lenders. Bank lending to NBFC for providing on-lending to MSME, which was permitted to be classified as a priority sector, was extended till March 31st, 2022. As a result of all the above factors, we continue to expect Indian GDP growth to clock 9.5% for FY 2022, in line with RBI's estimates. In line with the same, several economic indicators were positive in the past quarters. Manufacturing PMI rose from contraction in Q1 FY 2022 to expansion level to 55.3 in July 2021, and remained above crucial 50 mark being 52.3 and 53.7 in August and September respectively, reflecting pent-up demand. Reflecting this index, IIP rose 11.5%, 11.9% in July and August 2021 respectively. The GST collections which were low in June rose above INR 1 lakh crore mark, being at INR 1.16, INR 1.1.12, and INR 1.17 lakh crore respectively in the month of July, August, and September. Now coming to the auto industry. Commercial vehicle sales was 166,251 units in Q2 2022 against 133,524 units in Q2 2021, an increase of 24% and almost close to the 167,173 in Q2 FY 2020. The medium and heavy grew much faster with 51,740 units against 23,921 units in Q2 FY 2021, and 41,158 units in Q2 FY 2020. The higher fleet utilization level were visible. The greater amount of infrastructure, road construction, and adding to that, cement, steel consumption, they were all positive indicators. In the new vehicle sales, one particular differentiating item, what we have witnessed this time is the demand for CNG vehicles. The CNG vehicle sales, which were 25,729, 26,250, and 23,269 for the last three years, almost constant for around 25,000, which rose to 31,529 in six months in this year. That means significantly, new vehicle sale is moving towards CNG, and especially in the corridor where CNG is available. That is in and around Delhi, and now Mumbai Delhi corridor, where CNG availability is reasonably good. Majority of our staff has been vaccinated, and we continue to operate with full strength across India. Now, coming to quarter performance, we draw a disbursement of INR 14,869 crore, including INR 493 crore towards new vehicles and INR 14,317 crore towards used vehicles, compared to the total disbursement of INR 6,463 crore in the previous year. AUM was INR 121,647 crore compared to INR 113,346 crore in the previous year. Net interest income was INR 2,193 crore in Q2 against INR 2,025 crore in Q2 last year. The net interest margin was 6.44% against 6.38% in the previous quarter and 6.66% in the previous year. The profit after tax was INR 771 crore in Q2 compared to INR 685 crore in the Q2 previous year and INR 170 crore in the Q1 FY 2022. The earnings per share stood at 28.71% against 27.79% in the previous year. The collections were consistently good in the month of July, August, September. It was 98.05%, 99.56%, and 99.49% against the demand respectively. The gross stage three NPAs stood at 7.82% compared to 6.5% in the previous year and 8.18% in the Q1 FY 2022. Previous year, we had the advantages of a moratorium, therefore the comparable would be previous quarter where we have improved. The net stage NPAs stood at 4.18% compared to the 3.61% of previous year and 4.74% in the Q1 2022. The board has decided on the dividend of eight per share. Our liquidity position now stands at INR 17,228 crores against INR 17,051 crores in the previous quarter, and board has suggested to continue with higher liquidity. On growth outlook, we still are confident of double-digit growth for the full year. The cost to income ratio was 20.73% in this quarter, and we are likely to maintain our long-term average of 22%-23% for the full year. The asset quality, we have been very selective in restructuring and have done INR 239.62 crores restructuring in this quarter, and INR 369.05 crores were done in the previous quarter. We added four branches, which now stands at 1,825. Employee strength, we continue to add more number of employees through business associate method so that we can onboard the new employees by giving them fresh training. During the quarter, company has not considered any additional credit cost for the COVID, and so far, we have done INR 2,852 crores of whole provisioning. The long-term strategic initiative like digital roadmap, green financing, and creating deeper reach mentioned in the previous quarter by the JMD, it is in good progress, and any specific question would be answered by them. Now, I request our CFO, Parag Sharma, to take the call. Subsequently, Sundar also would be joining the call with the numbers. Thank you. Hello, everyone. On the liabilities front, we have focused more on bank borrowing and securitization during the quarter. Compared to last quarter, the bank loans have gone up substantially, which is INR 5,400 for the quarter versus INR 1,300 for the previous quarter. Securitization, which was hampered last year around because of moratorium concerns and all, has picked up. This quarter, we did INR 4,200 versus INR 2,600 in the previous quarter. The volumes, we feel it will continue to be at around INR 4,000-INR 5,000 every quarter for next part of the year. When it comes to the cost of fund, it has come down by around 25 basis points for the quarter. That is on the overall liabilities, the cost is down. We do have scope to reduce it further by around 15-20 basis points in next quarter. Liquidity, as mentioned, is high, which is good enough for six months of liability repayment. We had a policy of three months liabilities to be in liquid cash, but it was enhanced last year around. We will look at diluting it by around December to March quarter. We'll continue with slightly more liquidity for maybe one or two months and then gradually reduce it. The incremental cost of funds is at around 7%, so that also should have further improvement we should be able to see in next quarter. On the ALM front, we continue to have all buckets positive. Cumulative also is positive, and that has been the case in the past. I think retail is still doing well, and we should see further increase in our retail portion of the liabilities. Broad break-up of liabilities, the bank loans is close to around INR 400,419.37. The offshore borrowing, including Masala and ECB loans, is around INR 22,900 crores. Domestic capital market is INR 23,000 crores and deposit is close to around INR 20,000. That is a broad mix of liabilities. I think that is it from my side. We pass on to Mr. S Sundar. Hello, everyone. The cost-to-income ratio for the quarter was 20.73 as against 19.11 in June quarter. Currently, the increase has been on account of royalty in the current quarter, which was minimal at the previous quarter on account of the lower profit in the previous quarter. The employee count has been stable in the current quarter, and we have vaccinated more than 92% of the employees, at least with 1 dose of COVID-19 vaccination. We have done OTR two totaling to INR 608 crore. In the OTR one, we had done INR 551 crore. The total OTR stands at INR 1,049 crore as on 30th September, which is less than 1% of the total AUM. We are holding adequate provisioning in respect of these assets. The stage three was at 7.82% and the net stage three was 4.18% as on 30th September as against the gross stage three of 8.18% in June and net stage three of 4.74% in June. The coverage ratio has been increased to 48.57% as against 44.16% in the previous quarter. The stage one in the current quarter was 79.39% as against 77.29% in the previous quarter. There has been an improvement in the stage two also, which is now at 12.79% as against 14.53% in the previous quarter. We are maintaining our coverage ratio of 3.28% in stage one assets and 9.66% in the stage two assets. The PD for stage one was at 7.34% as against previous quarter of 7.33%. For stage two, the PD was 22.06% as against 22.17% in the previous quarter. The LGD remained at 45.10% as against 45.26% in the previous quarter. The COVID related provisioning was maintained at INR 2,853 crores, and no addition was there in the current quarter. We are holding more than the RBI required provisioning, which as per the Ind AS, we are holding INR 9,258 crore as against an Ind AS norm of INR 3,008, which translates into INR 6,249 crore of excess provisioning that we are carrying on the books. The capital adequacy has been healthy, thanks to the QIP and the potential offer to the promoters. Now it stands at 21.06% in the Tier one and 2.15% in the Tier two, totaling to 23.21%. With this, we hand it over to- Over to you, Andy. Thank you, yeah. Thank you very much. Ladies and gentlemen, we can now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Anyone who wishes to ask a question may please press star and one at this time. Our first question is from the line of Rikin Shah from Credit Suisse. Please go ahead. Good morning, sir. Thank you for the opportunity. I have four questions. First Your line is muted. We request you to please go ahead. Hi. Am I audible now? Yes, you are. Please go ahead. Hi, thank you. Thanks for the opportunity. I have four questions. First, I just wanted to get a sense of how the vehicle capacity utilization of trucks for our customers is moving, say, in this quarter versus last and versus the March quarter. The reason why I ask is that the new AUM is still down 8% sequentially and has been declining quarter after quarter. Just want to get a sense on when do we expect the new truck sales. To kind of start picking up on our AUM. Second question was on the freight rates and the fuel cost. Of course, the gap has been narrowing between the two. We do hear that the freight rates are, despite the increase since the COVID second wave, has not kept pace with the fuel. Wanted to get a sense of what kind of freight rate movements you are seeing in your customer segment, and should we expect more freight rate increase in the coming months? The third question is on the asset quality part. The provision coverage has been consistently increasing on the stage three. Just wanted to get a sense that given our stage three ratio has not really moved much, is there a particular kind of target coverage level that you intend to kind of operate at and subsequently bring down? Lastly, just a clarification question for Parag, sir. Did I hear correctly that the incremental cost of fund was 7.25%? That's it. Thank you. Incremental cost is right, seven quarter. On the utilization level, the vehicle utilizations have improved from the previous quarter. If you are comparing with the January to March quarter, the utilization level came down in the month of April and May because of the sudden increase in COVID. This time the COVID traveled to the rural area. There were challenges because many of the drivers hail from the rural belt and some backward area. Because of that, driver availability was a challenge for large fleet operators. For individual operators, there was no challenge at all. The utilization level for individual operator was quite good, so therefore we had a consistently good collection. As far as the sales, vehicle sales, are concerned, we believe the vehicle demand will go up significantly in the next couple of quarters. Our estimation is that the overall vehicle sales would be around 20% more than the previous year. It may reach the FY 2020 level, but may not go beyond FY 2020 level. There is a scope for that kind of a growth. As I was telling you that many of the customers are shifting to CNG. Not only new CNG, they are also fitting the CNG kit for their existing vehicle. CNG cost is INR 50. That is around 50% of diesel cost. Thereby, they bring down the cost, operational cost by nearly 50%. It all depends upon the CNG availability. Right now, the CNG availability is good in the corridor of Ahmedabad to Delhi. Now, last couple of months, there has been new CNG availability in Vadodara to Mumbai. Therefore, Mumbai to Delhi corridor is almost CNG available at a shorter distance. Similarly, it is now available till Kanpur in UP, and likely that they are completing the Delhi-Kolkata corridor. From Mumbai, they're extending towards Bangalore. Now up to Pune and beyond Pune, the CNG is available. It's only the availability that will create the demand for the CNG vehicle. I feel ultimately people would move towards CNG or even the LNG because the LNG is more efficient than CNG as far as the carrying is concerned. Because LNG they can carry double the quantity in the same tank. LNG availability is a challenge in India, especially LNG stations. I think maybe next two to three years, many vehicles would move towards CNG and LNG. Even the existing vehicle, people would try to replace. You will have a solution apart from 20% ethanol mix, which the government is trying. Now already they have 10% mix has been tried. Environment-friendly fuel would be used for the vehicles, and also it will be cheaper. The diesel cost going up is also another way of moving people towards the alternative fuels. I feel the overall demand for the vehicle would go up as infrastructure projects are going on stream very fast. The other most important thing is the coal. Last three years you would have noticed that coal production in India was almost stalled. With government taking new initiative and allowing privatization of coal, lot of coal producing area are getting what you call demand. This time because of the extended monsoon, most of the coal producing areas were inundated with the water. They could not really produce. Now there is a urgency, especially in the Chhattisgarh, Jharkhand, Odisha, there is a big push for coal production. I expect that will lead to more utilization or more demand for vehicles. Overall, I see the vehicles demand will go up significantly in the next one year. As far as the asset quality is concerned, the board and the management we have decided to bring it down, the stage three, to below 7% by March. Stage three. Not net. Not Not gross. Gross. Net we want to bring it below 4%. Yeah. Excellent. Okay, sir. Thank you. Thank you. Our next question is from the line of Shubhranshu Mishra from Systematix. Please go ahead. Hi, sir. Good morning. Thank you for the opportunity. I just want to understand how many vehicles have been financed in this particular quarter, and new vehicles and used vehicles. If I look at the disbursements run rate, we are pretty much at 2018 run rate right now, which was a stellar year for us. Is that the normalized run rate that we should model for the balance of FY 2022 as well as FY 2023? Also the approximate number of vehicle contracts you're going to put up every quarter, if you can throw some light on this one. See, the quantum of disbursement we have given you. Numbers we don't have immediately. You can reach to Sanjay for the number of contracts. You can take an average used vehicle ticket size is around INR 4-INR 5 lakhs, and a new vehicle is around INR 7-INR 8 lakhs. That is the rough estimation I can give you. Right. Run rate you said that's going to be similar, as to some- Disbursement run rate will be almost similar for next two. Normally, second quarter, second half is 60%, 40/60. In that ratio, the second half should be higher disbursement. FY 2023, sir? FY 2023, we expect a much bigger disbursement, mainly because all the economic indicators project that the FY 2023 is going to be large. Based on a 9.5% growth this year, if we are able to grow at around 8%-9% next year, then the demand for the vehicles will be good. See, here I would like to mention the PM GatiShakti Yojana, which PM has announced, that is going to have a huge impact on the demand for the vehicle. They are trying to bring various transport corridors in various locations nearer to the manufacturing area, so that the manufacturing and the transportation goes seamlessly for export and import. That is one big plan. With that, the impetus for logistic growth in India will be high. The second part is, if you look at last quarter, there was $100 billion export by India, and Indian agricultural exports grew by 21.8%. That is a very big thing. I see it from Indian hinterland, agricultural produce goes to international level through export, that is going to create a larger movement of goods. We feel that FY 2023 can be a good growth momentum for the movement of goods. Sure, sir. If I could just squeeze in one last question, sir. What would be the percentage of repeat customers for our new vehicles and percentage of repeat customers for our old vehicles? See, repeat customers for a new vehicle, most of the new vehicles are our existing used vehicle customers. We normally don't go to any counter or we don't have arrangement with any manufacturing company for a new vehicle financing. You can say that almost 100% of our new vehicle customer, when I say a 100%, near to 100% will be our existing used vehicle customers. Used vehicle customers, the repeat customers would be around 60%. Sure, sir. Those were my questions. Happy to validate with the entire team, sir. Thank you. The next question is from the line of Prashant Jain from HDFC Mutual Fund. Please go ahead. Yeah, thanks, sir. In terms of capacity utilization, how far would you say we are from FY 2018 or FY 2017 levels before the cycle turned? When do you expect the cycle to turn positive again going forward? Okay. The base year, FY 2018 is a good indicator because that's the time when we increased the carrying capacity by 15%. That means all the existing vehicle could carry 15% more weight, and therefore, there was excess carrying capacity built. The economic slowdown also added to the challenge. We are still continuing with some kind of excess capacity in certain pockets, not all pockets, in certain segments. Overall, I think the growth is coming back and places where people need to change to new vehicles because of some of the contracts insist that more than three years old cannot be used for transportation. There people are going for newer vehicles, but the rest everywhere, the carrying capacity is adequate right now. If the economic growth continues to do well, like, the RBI estimation of 9.5%, I believe next year there will be huge demand for new vehicles. At present, I feel the carrying capacity is adequate and utilization levels are good. It is not underutilized now. They are able to use most of the existing capacity. Sure. That's helpful, sir. If you could just give us some idea on the repossession trends in this and last quarter versus what used to be done before. Just one other question on the new RBI securitization guidelines, the profit from direct assignment is not included now in the net worth calculations. Does that affect the capital adequacy for us and to what extent? That's it from my side. As far as the assignment guidelines are concerned, anyway it will not have any material impact on the capital adequacy. Our assigned portfolio is hardly anything compared to the overall securitization that we do. It should not have any impact on the capital adequacy. Yeah. On the repossession, surprisingly, repossession is low. Maybe it's because the utilization level are high. See, repossession happens only when the utilization levels are low. We did not see any increase in repossession. If you recall last year at the same time, there was a anticipation that moment the moratorium is lifted, more, so lot of vehicles would be repossessed and sold by the financial entities, including banks. That was the assumption made. I'm surprised repossession has calmed down in the last four quarters. I don't really see something in repossession anyway from that time. Because we have a Shriram Automall, where they have arrangement for parking of repossessed vehicles. We did not see any increase in repossessed vehicles at all. Sure. That is helpful. Thank you so much, sir. Thank you. Our next question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead. Sir, good morning, sir. The first question was regarding the earlier question in the thing about freight rates and diesel costs and the movement. There was an answer, so if you could answer that, it would be helpful, sir. Yeah. See, freight rates have been moving up on par with diesel price. The very indication of freight rates. What happens in the freight rate is all the perishable goods, vegetables, et cetera, the increasing fuel price gets passed on to the end consumer immediately. That's why you will see the vegetable or fruits price increasing immediately and the fuel price increases. Because even 2% of the vehicles do not ply, the perishable goods remain where it is, and therefore people end up paying. Either a farmer producer end up paying or the consumer end up paying. It has no impact on the transporters per se. On the manufacturing goods, typically the contract will include escalation clause for every increase in the diesel price. It can be weekly or it can be monthly. Nowadays, escalation clause are mostly weekly. Therefore, there will be a temporary challenge for the transporter. Over the period, it gets adjusted. Transporters per se do not take the burden of the increase. It is either consumer or the manufacturer producer who take the burden of the increase in the fuel price. However, there are smart operators who would like to use this opportunity. When the freight rate is fixed at diesel price, a clever person can use CNG vehicles and make more profit. That is the clever businessman. There are people who are fitting the CNG kits. The people who are clever and business people, they make use of this to make higher profits. Okay, sir. I'll ask my questions. They're both interlinked. In terms of, you know, you said that you're going to reduce GNPA significantly, stage three assets. Do you expect cumulative collection efficiency to go over 100% over the next few quarters to enable you to do that? That's question number one. Linked to that is a liquidity policy by any chance tied to the collection efficiency numbers, or, how do you calibrate it? That's it from my side, sir. See, normally collections in the second half is better than the first half. That's mainly because the agri output comes in the festive period. Agri output also will help people to earn more. Even if there are some small outstanding earlier that gets paid in the second half. Last year also if you remember our numbers, January to March our collection was more than 100%. Normally we tend to have more than 100% collection in the second half of the year. We expect the collection to really improve. Is there a second question? Yeah, liquidity. Liquidity. I think more correlation to collection, though that can have some bearing, but more to do with the overall liquidity in the system and any concerns on the sector or, you know, portfolio. Nothing directly linked. It was the tough scenario last year around when we decided to increase the liquidity buffer from three months to six months. Continuing with that, the things have eased out a lot. We will look at evaluating it, as I mentioned in the earlier comment, but maybe towards the Q4. Thank you, Parag, sir, and Happy Diwali to you, Umesh, and Shriram family. Thank you. Thank you. Our next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. Yes, thanks for the opportunity. Hi Umesh, good morning. Just one question I had. You, I think, I mean, if I heard you right during your opening remarks, you suggested that we are looking at a maybe a double-digit kind of a growth in AUM in this year. Let's say if I were to try to juxtapose that with the comment that you just made that collections are indeed better in the second half of the fiscal year, which is to suggest that the runoff that you typically see and which I must admit has been largely very stable for you and would be higher in the second half. To that extent, I mean would it be fair to assume that, disbursements in the second half of the fiscal year will be materially higher? Because I was just looking up, typically our disbursements in the first half and the second half of the fiscal year have in the past been in that range of let's say either 50/50 or 45/50. Can this year be what you suggested sometime back, 40/60 kind of a split between H1 and H2 disbursements? And maybe a related question here, sir. INR 15,000 crore of disbursement is what we've been seeing in Q2 of this fiscal year and probably, I mean, the highest ever level of disbursement that we've been clocking. In the past you have already suggested that, I mean, this growth in disbursement can be achieved through deeper penetration and increase in number of branches. I mean, where is it going to come from? Is it volumes or is it actually price increases that you are looking for which will help sustain better disbursement momentum in the second half of the fiscal year? Yeah. See, mostly what happens is, collections in the second half are better and whatever the small outstanding remains in the first half that gets paid in the second half, therefore the collection goes up. It will not increasingly reduce your AUM because of the collection. There may not be the link between reduction in AUM because of the collection. How you said it, disbursement, as you rightly quoted, the ticket size have gone up. The vehicle prices have increased significantly because of the BS6. The average increase in the price is around 15%. One is BS6 and second, steel price also has increased by around 50% over the previous year and therefore the component price gone up and vehicle prices are going up. We expect the increased vehicle price also will have a bearing on the used vehicle prices. On average used vehicle prices have gone up by around 15%-20% because of this thing. The increase in price has been especially in used vehicles in LCVs. The prices are steeply increased by around 25%-30%. In heavy vehicles, increase has been little less, 10%-15%. That will help us because even though we are being very conservative in our lending up to only 70% of the LTV because of the vehicle price going up the ticket size also will go up to that extent. Additional around 3%-4% AUM will grow because of the ticket size going up. As we have seen in the last year, the fourth quarter our disbursement was almost INR 15,000 crore last year. We should be able to reach to that level in the third quarter itself if the environment is very positive. If the COVID wave 3 doesn't disturb the economic activity. We feel that the disbursement would be. Of course, I can't take first quarter into consideration, but we had a good first quarter. It should be 40/60 is what I believe. As you rightly put it, on a normally it is 45/55 for us. Sure, sir. This is very useful. Sir, maybe a last question. Do we have any updates that you can share on the merger? Sir, the reason I ask is, from time to time, we keep hearing that at least from a thought process, we are clear that we want to do this merger and then maybe we are kind of trying to work on the modalities which will be involved in the merger. If you could maybe share some updates if you have any. Okay. As you have rightly put it, that we have been debating on the merger. See, both the entities are doing well. They have a good growth opportunity. They have a niche presence. We continue to run business the way we have been running. There are opportunities, like, if one plus one, if it is above two or if it is three or four, then that synergy should help all the stakeholders. That is the argument. We are only looking at what are the synergies we have if we come together, whether we can give a better deal to all the stakeholders, employees, customers. If we have, then we will look for the merger. That's how the discussion is going on. Maybe we will try to come to some conclusion at the earliest on the same. Sure, sir. Thank you. Thank you very much. That's all from my side. Wish you the very best. Thank you. The next question is from the line of Umang Shah from Kotak Mutual Fund. Please go ahead. Good morning, sir, and thanks for taking my question. My first question is related to asset quality. Clearly, performance is probably far superior to what we have seen in the last few years, despite the COVID impact. The outlook also remains fairly benign. In that case, should we see a material drop in our credit costs in the second half? Yeah. The credit cost should only improve. If you observe the number for the quarter, the credit cost was INR 1.91, and for the first quarter, it was around 4%. It is around 3% for a half year. We expect the credit cost to be below last year's level. Last year it was INR 2.48 by the year-end, so we expect it to be below that by the year-end. That's helpful. Sir, second thing was, I just wanted to reconcile the restructured loan numbers. Did I hear correctly when Sundar sir mentioned that OTR two number was INR 608 crores and OTR one was INR 550 crores, so total is about INR 1,000 crores. Is that correct? Correct. Correct, yeah. Okay. Our presentation mentioned the outstanding for total restructured book of INR 608 crores. That is only for the OTR two. We have not mentioned OTR one in the presentation. OTR one is 551. Both together is the 1,000 odd. Okay. Would this be classified under stage two or stage one? It has been categorized as stage two, and the necessary provisions pertaining to stage one has been applied. Okay. Stage two is applied. Sorry. All right. Okay, last housekeeping question. Could you just share the disbursement breakup? Sorry, I missed it in the earnings announcement. Sure. Disbursement. The new vehicle is INR 4,933.9 million. Used vehicle is INR 143,170.6 million, and other is INR 584 million. The total is INR 148,688.5 million. Okay. Thank you so much, and greetings to the whole team. Thank you. Thank you. The next question is from the line of Priyesh from [audio distortion]. Please go ahead. Hi. Thank you for the opportunity. I mean, the credit outcomes over the last 12 months has been really exceptional for Shriram. Just like to understand a little bit as to how this has happened, because ever since the NPA norms went from 180 to 90 days, we had a tough time adjusting. The last 12 months have been truly exceptional. Just wanted some understanding of what actually happened on the ground that these outcomes have been so much better. Let us understand the business model. Our customers are individual operators and owner-operators. They are not dependent on drivers or outside labor. One of the family member drive the vehicle. During the COVID period, they were able to operate without depending on any outside labor or driver. That was the biggest positive for our customer base. Most of them are in a last mile reach or essential transportation. The demand for essentials remained throughout strong, and therefore, their business model did not get hampered, so they were able to operate. The third, we did not allow our staff to remain at home and make the call from home for collection. Immediately after the lockdown was over, we opened all the offices and asked our staff to join for the duty. Even though we maintained the COVID protocol, social distancing, masking, etc, we did try to reach out to the customer depending upon the convenience. We did not try to barge into their home, but we always were in touch with customers. Customers also responded by doing the business in this opportune time, and they were able to earn well, and our executives were able to reach them and collect wherever required. Also, the digital initiative which we have taken four years back, after the demonetization, that also has helped. More than 50% of our customers today, they are comfortable doing a digital transaction. All these factors have really helped us, and we have been very consistent in our collections. Thank you so much, and congratulations. Thank you. The next question is from the line of Anand Bhavnani from White Oak. Please go ahead. First of all, seasonal greetings to the entire team. Secondly, sir, just wanted to understand about securitization quantum in the context of high liquidity that we are maintaining. On one hand, we have very high liquidity, on the other hand, we've done significant securitization this quarter, and then we are projecting it for next two quarters. If you can, you know, reconcile these two contradicting things, and where is the balance? How do you think about the balance? Yeah, I think we're not linking only securitization to liquidity overall, fund mobilization and liquidity. I think we mentioned that we'll bring down liquidity. Securitization is a fast run-off of portfolio also. Though we have done around INR 4,200 crores of securitization, but securitization outstanding per se has not gone up. It's a fast run-off of book, so we should not link that to liquidity. It's bank borrowing also which has contributed to larger liquidity. We will look at rationalizing overall liquidity, as I mentioned, from December onwards. Irrespective of INR 4,000-INR 5,000 crores of securitization, this liquidity buffers will not go up because it runs off very fast. Okay. Given that currently system-wide credit growth has been, are you seeing better terms for yourself when you do securitization? Because a lot of banks would be keen to increase, you know, their exposure, loan growth and are you seeing terms being better than, let's say, pre-COVID for you when it comes to securitization? Securitization, what we do is largely for private sector portfolios of banks. The rates will definitely be far better than any other borrowing we do. As long as there is a private sector demand, I think rates will continue to be the cheapest when it comes to this particular source of fund. The banks are- My question- Banks are. My question was slightly different. Usually pre-COVID, are you getting better rates? I think there is a similar rates, not substantially different. Last year around, we were not able to get better rates. It is, I think, back to the pre-COVID levels now. Can you contrast if you were to fund through securitization, how is the cost of funding, approximately how much it is lower as compared to direct bank funding? It'll be around 100 basis points lower. Okay, lastly, overall, when it comes to the merger, the thought process is there, but in terms of timeline, is there a hard timeline, like whether by X year this has to happen? Is there kind of a thought process? If you can give us some color on that. We are yet to draw our plan. We have not finalized any scheme so far. Once we finalize the scheme, then we need to take respective board approval. The process will start. Nothing is in finalization at this stage now. Yeah. There's no such thinking that this has to happen by, let's say, 2023, 2024 or 2025. Is there a thought process around the timeline, that we kind of can use? We need to decide on the advantages and the benefits to all the stakeholders, then only we'll start to draw the scheme. That is still in the process. Sure. Thank you. Thank you. The next question is from the line of Sameer Desai from JM Financial. Please go ahead. Yeah. Hi, good morning, and thanks for the opportunity. Could you just give some details on the vintage of the book on the used side, and if any perceptible change you've seen in the last couple of years or three years? I see. There has been, vintage-wise, it is actually becoming younger and younger. The fleets are becoming young. Our portfolios are becoming young because after the initial NGT recommendation of 10 years, that is, National Green Tribunal in Delhi, we started lending up to only 10 years old vehicle. Earlier we used to lend up to 12 years. The fleet have become younger now. On an average, now the fleet average age should be around six to seven years versus eight to nine years in the previous year. That should be the average vintage. Any material gap between the PV and the CV side? There will be. PV will be much younger because normally the personal vehicle, passenger vehicles will be much younger and also will have more new vehicle component. So on an average, the passenger vehicle will be definitely four to five years. Whereas the kind of goods would be little older. Great. Secondly, any sense on operating costs as we go ahead, given that growth is expected to be strong? That's my last question. Operating costs would remain almost same. In the last two quarters it was actually better than the average. Now our average cost income is 23%, around 20%-23%, and it has been around 20% now. I think we'll be on the long-term average. Okay. Thanks a lot and all the best. Thank you. The next question is from the line of Krishnendu Saha from Quantum AMC. Please go ahead. Hello. Can you hear me? Hello, can you hear me? Yes. Hello. Yeah, thanks for taking my question. Sir, just a couple of understandings. For the first time I see the rural book has more than 50% of the AUM. How does it apply for the ease of the spreads of the business going forward? It should be able to maintain. Sir, how is the UCDs book of INR 7.2 billion which we have given, how is that behaving, sir? These are the first few questions, and I'll have another question later. Rural portfolio has been consistently doing well and increasingly most of our new branches, if you observe in the last three years, most of the branches have come in the rural area, which is. Yes. We had the rural centers that got converted into rural branch. Rural centers got converted into rural branches. Basically, we merged two or three rural centers into one branch and increased our branch network. The portfolio in the rural is consistently going up. Since the agri output has been strong in the last three years, there is a bigger demand because and also because of the road network into rural area, the Pradhan Mantri Road plan, that has made the road reach to most of the villages. That is creating a demand in the deep rural pocket, and we continue to grow there. We feel that growth opportunity is much bigger there and we continue to grow. We have [audio distortion], nine rural branches, rural centers now. That will over the period get converted and we'll have better network in the rural and we will keep adding more rural centers going forward. Sir, how does it compare to the yield of the spreads? The yield would be better in rural. It gives us 1%-2% more yield in the rural, even though ticket size is small and the operating cost could be little higher because of that. On an average, it amounts to almost the same. There is a scope for us to further increase the yield if required. That's the advantage. Right. As far as the MSME is concerned. The portfolio has been stable. Portfolio been stable. Portfolio has been stable. We did not see much adverse challenges there. Sir, one observation also. I'm just trying to understand, sir. At the end of Q4 we had 2.12 million customers. Today we have 2.1 million. Our disbursement has grown, our AUM has grown. Sir, how do I understand this, these numbers? How should I reconcile these numbers? Can you help me please? The ticket size have gone up. We have the numbers of- Right. Number of customers have not gone up, but the ticket size has gone up and recent prices of the vehicles and also new vehicle prices. As I was explaining you around- Yes. 45% increase in the price of the new vehicles because- Sure, sure. BS6 and the steel price, that contributed to the higher ticket. Wouldn't the number of customers as the economy picks up who are there, which will be again in the next presentation, wouldn't that number increase drastically or do you see the same level? No, it will increase now because as we are adding more new branches, automatically number of customers will improve. Maybe next six months you will see we also have other plans to add more number of customers. We are trying to bring out some new products to add more customers. You will see that number of customers will increase in next six months. Sir, last question from my side. The gearing, which you're at 3.4%, 3.4%, how do we look at that going ahead? I think we always want to keep it below five. I don't think there will be substantial increase in gearing. As of now, liquidity will be the place for increased business volume, so gearing may not go up. Okay. Sir, one more thing, just quickly, sorry. Working capital loan, will it come back to the 2.2%, 2.5%? It is low right now. Will that again inch up or we will still be below 1%, below 2% for the coming years ahead? As the economy opens up opportunities there, definitely, the working capital requirement will go up. As of now we are controlling it because of one of the reason is we wanted to see how the COVID impact is panning out. Once we are able to overcome that, we should be able to increase our working capital requirement, fulfill a requirement of working capital can be made. Sure. Thank you. Thank you. That is so much, sir. Thank you. The next question is from the line of Sanket Chheda from B&K. Please go ahead. Sanket Chheda, your line is unmuted. Request you to please unmute your line and proceed. Yeah, hi. My first question was just reconfirming the exit GNPA guidance that you gave. We are currently at 10.8%. You are saying we'll exit at 7%. Is that right? Yeah. We are targeting at below 7% by March. Okay. Sir, the other thing was again on liquidity. Now it's pretty counterintuitive that we had reached 100% plus collections, I believe, in the last month of last quarter. Then this quarter, all three months were relatively closer to 100% only. Going ahead also we are guiding that collections are likely to be above 100%. Then what is making us keep the liquidity buffers so higher? It's alarmingly higher, around 16%-18%. Whereas our peers have already started reducing on it meaningfully, per se, from 10% one quarter back levels. That is second. Third, again, on the merger and related synergies that you said. That one plus one will be equal to two or three. That seems pretty or maybe somewhat not convincing as much. Can you just highlight two, three very good reasons why which can be achieved by way of this merger? Yeah. As far as the liquidity is concerned, if you look at the expectation of the international rating agencies, we have raised money in international markets. In fact, Moody's were expecting to keep the NBFCs around 12 months, what you call, maturity, in hand. That was the expectation in the COVID. Now it has come down. Slowly, the board also wanted us to keep six months of maturity as liquid buffer. That's the reason that we have been keeping liquidity. As Parag rightly put it, by quarter Q4 we'll try to reduce it to some extent and put it into business. That will give us a little more gearing into our activity. As far as the merger is concerned, see, this is something which we are discussing, debating and trying to figure out and give a most advantageous situation to all the stakeholders. That's how we are working out. Customers and employees and all the other investors, shareholders should benefit out of it. When I say that means that what advantages we have now, what further advantages we'll get in the merged entity is something which we are analyzing so that we come out with a concrete plan. Okay, sir. We would await for this. Thanks a lot. Thank you. Ladies and gentlemen, that would be our last question for today. I now hand the conference over to Mr. Umesh Revankar for closing comments. Thank you, and over to you, sir. Yeah, thank you. Thank you for joining the call this time. As I was alluding to you, next two quarters are likely to be much bigger because we see a very good environment. COVID wave three is not being there, and more than 100 crores vaccinated is extremely positive. Government is also proactive to the business. We believe with one large privatization of Air India, there will be more private capital coming into India for investment and further economic activity, which will lead into a bigger scope and opportunity for the growth. We'll be definitely participating in the growth journey, and we are very confident and bullish on our growth. Thank you very much. Thank you very much. Ladies and gentlemen, on behalf of Shriram Transport Finance, that concludes this conference. Thank you all for joining us, and you may now disconnect your lines.