Ladies and gentlemen, good day and welcome to the Shriram Transport Finance Q1 FY 2023 earnings conference call. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Umesh Revankar, Vice Chairman and Managing Director. Thank you and over to you, sir. Thank you. Good evening, friends, and a warm welcome to all of you who have joined this call. Good morning to those who joined from USA. Today, we have our joint managing directors, Mr. Sudarshan, Sridharan, Nilesh, Sundar, and Parag, along with me and Mr. Sanjay, who is our IR head. Firstly, on behalf of company and Shriram Group, I would like to thank all the shareholders, investors in approving the arrangement embodied in the proposed composite scheme of arrangement and amalgamation between various Shriram Group companies at the holding company level and the merger of two operating company that is Shriram Transport Finance and Shriram City Union Finance Limited. The scheme was approved by 97.13% votes by Shriram Transport shareholders and 99.56% by Shriram City Union Finance shareholders. Coming to the economy, India's gross domestic product growth slowed to a four-quarter low of 4.1% during the January to March period, from 5.4% in the preceding quarter. As a result, full year growth came in at 8.7%, a tad lower than 8.9% projected earlier in February. Coming to the inflation, India's headline retail inflation rates, as measured by CPI, stood at 7.01% in June 2022 from 7.04% in May 2022 and 7.79% in April, showing slight decline. This is sixth consecutive month that India data has beat RBI's upper margin of 6%. The stubborn inflation is definitely having some adverse effect on consumption, and there are some indications on economy slowing down. The annual Wholesale Price Index inflation rate in India fell to 15.18% in June from 15.88% in the prior month, less than the market estimates of 15.5%. Coming to the RBI monetary policy, RBI in its monetary policy on June 8, 2022, has increased the policy repo rate under Liquidity Adjustment Facility by 50 basis points to 4.9% with immediate effect. Prior to this, RBI increased repo rate to 4.4 in May 2022. Inflation is projected at 6.7 for financial year 2022-2023, and MPC has retained GDP growth forecast of India at 7.2. The GST, the positive side is the GST revenue collection in the month of June is INR 1,44,616 crore and is second-highest collection after April, which was INR 1,07,540 crore. The GST collection crosses INR 1,40,000 crore mark for sixth time since inception of GST and fourth month at a stretch since March 2022. The monsoon trends seems to be positive and good. The latest data states that farmers have planted total area of 592.11 lakh hectare so far in this Kharif season. This is more than 591.30 covered during the corresponding period last year. Now, coming to the commercial vehicle sales. In spite of chip shortage challenges, the commercial vehicle sales increased by 112% to 2,24,512 units in Q1 FY 2023, as against 1,05,800 units in the Q1 FY 2022. It is decreased marginally from the Q4 which was at 2,49,806 units. The heavy and medium commercial vehicle showed positive growth of 160% with 85,685 units against 29,158 units during the corresponding period previous year. The LCV numbers also showed growth of 94% to 1,48,827 units as compared to 76,642 units sold in the corresponding previous year. The tractor sales have improved by 47.5% to 158,169 units in the Q1 compared to 107,257 units in the previous year. The earthmoving and construction equipment showed 59% improvement in sales by registering 21,299 unit sales compared to 13,153 in the same quarter previous year. All the indications being very positive and good, coming to the first quarter performance, the collections were consistently good. Average collection of June quarter was 101.45 of the demand against 91.04 of the corresponding quarter in the previous year, and against 104.28% in Q4 FY 2022. We clocked the disbursement growth of 30.92% to INR 16,670 crores against INR 12,733 crores in the same period of previous year. The used vehicle disbursement increased by 26.40% to INR 15,754.52 crores against INR 12,462 in the same period previous year. The new vehicle disbursement also showed improvement by 56.7% to INR 784.90 crores against INR 220 crores in the same period previous year. Overall, the AUM grew by 9.55% to INR 1,30,688 crores as compared to INR 1,90,301 crores in the previous year. The net interest income increased by 25.35% to INR 2,641.74 crores against INR 2,107.45 crores in the same period previous year. The net interest margin was 6.91% against 6.38% in the same period previous year, and 6.96% in the Q4 FY 2022. The profit after tax increased to INR 965.27 crores in Q1 FY 2023 compared to INR 169.94 crores in the previous year, which is 468% increase. The EPS stood at 35.68 compared to 6.64 in the previous year. Gross stage three declined by 7 basis points, and net stage three declined by 15 basis points over Q4 2022, and hence the gross stage three stood at 7% compared to 8.18% and 7.07% in the previous quarter. The net stage three stood at 3.52% compared to 4.74% in the previous year quarter and 3.67% in the previous quarter. The credit cost for the current quarter stood at 2.09% against 2.68% for the full year ended 2021-2022. The liquidity position now stands at INR 18,020 crores against INR 17,709 crores in the previous quarter. During this quarter, company raised $250 million from U.S. International Development Finance Corporation. The cost to income ratio was 19.46% in this quarter against 19.11% recorded same period previous year. On the update of merger, we have received approval from both the stock exchanges, NSE and BSE, RBI, and NCLT has convened the shareholder and shareholder has approved, and also from IRDAI. The only pending approval is the CCI, which is expected anytime. We expect the merger process to be completed in the month of October. During June quarter, promoter group Shriram Value Services Limited has acquired 77.10 lakh equity shares representing 2.85% of the share capital from open market and increased its stake to 3.24% from 0.39%. Hence, the total promoter shareholding has increased to 29.30% from 26.45%. On the growth outlook, we maintained the earlier indicated growth of 15% for the combined entity for the financial year. On the pilot project, we had a pilot run for 52 branches, 27 of STFC and 25 of CUF, and around INR 30 crore lead was generated. As the further plan, pilot two will be starting from first of August in 1,183 branches, which is 602 branches from STFC and 581 branches of CUF. That is the plan. Now, I will hand over to Mr. Parag Sharma to give update on the liability side, and Sundar also will join the call on recording number. Parag? Hello, everyone. I'm Parag. On the liabilities, total liabilities stand at around INR 1,19,000 crore. Compared to March of INR 1,14,000 crore, the cost of liabilities have not changed much between March and June. The cost of liability will be around 8.6% on the balance sheet. When it comes to the quarter, we have mobilized four thousand crore, more than four thousand crore through securitization and assignment transaction, which was higher than what the quantum we did in March quarter. Total borrowing was twelve thousand six hundred crore for the June quarter. We are carrying excess liquidity of eighteen thousand crore and the maturities for next three months is around eight thousand crore. This liquidity will be good enough to meet the maturities for next six months. There is a lumpy liability, foreign currency liability of dollar bonds, which is in October, and that is the reason, prime reason of carrying excess liquidity as of now. On the ALM front, all the buckets are positive, and up to one year, the cumulative surplus will be more than INR 21,000 crore, with up to three years being around INR 29,000 crore. Our leverage ratio is maintained. It is around 4.45%, 4.4x compared to March, which was 4.42. Incremental cost of borrowing has gone up for the bonds that we have raised by around 50 basis points. The bank borrowing rates have not gone up significantly. It is more or less same in this quarter compared to March quarter. Securitization, what we have done, larger quantum, there has been a marginal increase in cost. Overall, incremental cost of borrowing is, I think, gone up by around 15 basis points, not very significant. With this, I'll hand it over to Sundar for his comments. Thank you, Parag. Hi, everyone. The employee count as on 30 June was 25,720 as against March number of 24,456, marginal increase of 264 employees. The cost income has been stable at 90.46% as against the March number of more or less up around 20%. As per the one-time restructuring that we had done in the previous year because of COVID, which was permitted by Reserve Bank of India, we had extended the OTR facility to 39,410 borrowers amounting to INR 1,152 crore, out of which the outstanding as on 30th June is INR 763 crore, and the greater than 90-day past due is 1.5%. Coming to the ECL, the PD for stage one was 7.34% as against the previous quarter number of 7.34%. Stage two was 21.75% as against March number of 21.72. The NPL was 43.76% as against 44.65% in March quarter. The company is carrying an excess provision compared to the RBI requirement by around INR 6,730 crore. The capital adequacy is strong at 22.54%, the Tier 1 being 20.62 and the Tier 2 being 1.92. That's it from me now. Thank you, and we will now take the questions. Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. An operator will take your name and announce your turn in the question queue. Participants are requested to only use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhiram Iyengar from Deutsche Bank. Please go ahead. Hi, sir. Congratulations on a very good set of numbers. Mr. Abhiram, may I request you to please speak little louder? Yeah. Am I audible now? Yes. Please go ahead, sir. Yeah. Thank you. First, congrats on a good set of numbers. I have two questions. One was, could the company sort of give sort of general guidance over the upcoming quarters in terms of, you know, repayments and what they're expecting, considering that, you know, inflation is still high and fuel costs are still high. Are they expecting, say, more defaults upcoming, or is the company sort of actively managing that? The second question is a bit more pertinent to proposal that was placed in front of the board for buyback of its debt securities. Could we get a bit more color on this, whether this is gonna be, you know, from the INR market or the USD market, or and what kind of quantum or timing that would be? Yeah. See, as far as the inflation concern on the collections are concerned, or the difficulties in collection, we don't really see that challenge. Because what happens when a person contracts the loan, he knows what the EMI he's paying. If a new customer coming this month and buying a vehicle which is at a higher cost because of inflation price goes up, he exactly knows what EMI he's going to pay. Depending upon The current situation, the EMI gets fixed. He may take a longer duration to reduce his EMI. It doesn't get impacted because ours is all contracted contract rate and also fixed EMI. It doesn't fluctuate. It doesn't go up in between, and nothing. Not like your housing loan. It doesn't go up, the EMI doesn't go up. Therefore, the predictability is clear. The chances of a person having a challenge in repaying doesn't occur. However, the increase in fuel price is normally passed on to the end consumer. Imagine if the fuel price goes up, to that extent, the freight rate goes up, and since freight rate goes up, the inflation goes up. End consumer will end up paying. Truck operators normally don't bear the cost of increased fuel price. We don't expect any challenges due to increase in fuel price or inflation. Challenges on collection because everything is depending upon the business. As far as the buyback is concerned, sir. Yes. Buyback, we are only taking an enabling resolution that is keeping excess liquidity as of now. We have excess liquidity. We'll look at opportunities of closing any of the high-cost debt that we have. Nothing has been firmed up. It is. Things are being evaluated. As I mentioned, we do have a huge dollar bond liability, and one of the reasons for higher liquidity is to meet that particular liability. We will look at opportunities and then we'll communicate accordingly. Got it, sir. And could you also just explain a bit on your debt raising plans for the rest of the year? Because are you finding conditions with the rising interest rates a bit difficult or is it still normalized pipeline for you? No, I don't think there are any concerns when it comes to raising debt. That is the reason why we are looking at even buying back some of the high cost debt. Opportunities are ample and one of the large sources, securitization, which is for priority sector assets, demand is good. The retail deposit mobilization program is also doing well. No challenges there. Increased cost of funds, I think we will have the wherewithal to pass on to the end consumer. Yeah. We have the pricing power. Since we are in the niche segment of lending to used vehicle and in the rural market, we have that pricing power to pass on any increase in borrowing costs. Since it is, as I was telling you, a contracted rate, whatever increase, the rate will remain throughout the period. Got it, sir. Thanks a lot for the answers. Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Shubhranshu Mishra from UBS. Please go ahead. Hi, sir. Good evening. Thank you for this opportunity. Couple of questions. The first one is, I don't think in the initial comments we spoke about the disbursements, if we can just have that shared on this question, sir. The second part is, if we can also you know speak about the number of vehicles that we finance in each category, new and used both. The third is, what proportion of our bank borrowings are on EBLR, external benchmark, and what proportion would be on MCLR? I see a sharp decline in the proportion of securitization. Is that because the cash flow actually being asked for securitization has increased with interest rate hiking or any other specific reason because of that? If we can speak on these few questions as well. Thanks. The disbursement number I did mention, but I would like to repeat it. INR 69,670 crore was the disbursement for the quarter. Out of that, INR 15,754 crore towards used vehicle and INR 784 crores against new vehicles. Yeah. Coming to your other questions regarding the bank loans, most of it will be MCLR linked. Around, I would say, 75% will be MCLR linked, 25% with additional benchmarks. That is on the bank side. When it comes to securitization, the quantum of securitization for this quarter has gone up. Your other question was whether the collateral requirement from the rating agencies, whether that is up. That is not the case. We are not seeing any increase there. Though as percentage of the debt outstanding, securitization has come down from 17% to 16%, but the quantum, overall quantum of securitization for the quarter has gone up, and we do see that trend to continue, a higher securitization to continue, and we should go back to around 18%-19% in coming quarters. Yes. One question remains unanswered, sir. The number of vehicles that have been, Number of vehicles. Number of vehicle, I don't have number. Sunder will give it back to you. Sure, sir. Thank you so much. Best of luck, sir. Thank you. Before we take the next question, reminder to the participants. Anyone who wishes to ask a question may press star and one. The next question is from the line of Varun from Nippon Mutual Fund. Please go ahead. Hi, sir. Good evening. I just want to understand a little bit more on the maturing liability of the U.S. dollar bonds. If I recollect correctly, that was about $750 million. Are you guys looking to refinance it? In which case, how are the rates looking like now because of the increase in rates generally? Yeah. The $750 million is maturing, what you are saying is right, in October. Of course, one of the earlier bonds that we did, it was slightly higher cost. Even we as of now have no plans. We have no plans to get any refinance facility for this. It is a very short maturity now. We will repay it out of our current excess liquidity only. Onshore, what we are borrowing right now is much, much cheaper than compared to what we borrowed three years back for this dollar bond. No refinance option is what. We are not evaluating anything. Okay. What is the total landed cost for that? No, it was. Yeah. That point of time it was close to around 10%. Okay. The $250 million that you have just raised, what is the total hedging cost and complete landed cost for that? The coupon is 4%. The overall fully hedged cost will be around 8.8%. Okay. Just one point I wanted to understand in terms of the fixed versus floating nature on an overall basis for your liability side and also how you are able to translate this on the asset side. Is it only on new disbursements or, I would imagine that most of the asset side will be on a fixed basis, right? Yeah. Liability side, other than the bank loans, everything is fixed. Bank loans also, which is linked to MCLR or external benchmarks, the increase doesn't happen significantly. Okay. Asset side is completely fixed. What you are saying is right. Any other liability, be it securitization, be it deposit, be it the external commercial borrowing, all are fixed rate loans. Okay. Got that. That's all from my side. Thank you very much. Thank you. The next question is from the line of Rikin Shah from Credit Suisse. Please go ahead. Hi. Thanks for the opportunity. This question is pertaining to the funding cost and the NIM outlook. Given that you'll be using your existing funds to repay the dollar liability maturing, that would have a positive read through on margins as you bring down the liquidity instead of refinancing it. The second benefit is also from repricing of existing domestic bonds that could be maturing this calendar year. On the offset, the incremental costs have started to go up. If one were to think about the funding cost trajectory on a next 12-month view, what kind of increase one should kind of expect, and also the same for margins? Because of excess liquidity, we are carrying a huge negative carry. There's an acute negative carry on this liquidity. With liquidity coming down, there will definitely be a benefit. What you are saying is right. Incremental cost is up on the bonds what we raise. When it comes to other borrowings based securitization, bank borrowings, the rates have not gone up significantly. Overall blended, if you look at, I think, rates further not going up, the overall cost to us will go up around 20 basis points, between 20 basis points. Okay. Got it. Could you clarify, versus current liquidity buffer of INR 180 billion, what number would be a normalized level that you would be comfortable operating it? We used to have a policy of maintaining three months of liability as liquidity buffer, and three months of liability is close to around INR 8,000 crore. That is what we will continue to have liquidity. We have currently, I think, INR 10,000 excess. Got it. That's it from my end. Thank you. Thank you. Participants who wishes to ask a question may press star and one. The next question is from the line of Abhijeet Kamble from Motilal Oswal. Please go ahead. Yes, thanks for taking my question. Just wanted to understand, what's the demand environment looking like now? I think somewhere during the last month, we were kind of beginning to hear that there is some perceptible slowdown in the HGV segment, that is kind of being witnessed by the vehicle financiers. Had that not been the case, I mean, financiers could have done even higher disbursements. Just wanted to understand, I mean, what's the demand outlook looking like? I mean, and is, if at all, I mean, whatever macro outlook or whatever macro uncertainties that we are in, I mean, can it have any bearing on the demand in the coming quarters? That's my first question, sir. Yeah. See, basically, there are multiple factor that is impacting the demand. If you go back to the 2018-2019, the peak sales on commercial vehicle was 1,000,000 units being sold. From 1,000,000 it came down to 550,000 during 2021. Last year it went up to 720,000. Normally, whenever there is a downtrend and the next peak season, it normally crosses the previous highs. I still see, we believe there is a huge opportunity and scope for the number of units to go up. It may take another couple of years to go up to the peak. There are several challenges in between. Challenges faced by the commercial vehicle in between. One is the vehicle price going up because of the BS-VI. Second is because of the steel price going up, the vehicle price going up. Vehicle prices have gone up by 35% over the last three years. That made people acquire, for acquiring a new vehicle, it becomes a little challenge. It is getting a little postponed. The Indian economy looks very robust currently. If you look at the fuel price increase or inflation has not battered or not really brought down the growth. Everywhere I see growth being reasonably good. Even though the stubborn inflation has some negative impact in the urban market. In the rural market, I don't see the same because of the good monsoon and consistently good agricultural output and better price realization in the last three to four months. Because of geopolitical tension, the wheat prices went up, edible oil prices went up. The rural economy did not have a negative impact. In fact, they had a positive impact because they had a better realization. The rural consumption seems to be quite good. Till now, the real estate also is holding reasonably good in the urban market. All the indication is that the momentum is likely to sustain. Maybe the rate of growth can come down a little from 8.7% GDP growth last year, it may come down to around 7.2%. Still India will be the fastest growing economy in the world, and probably it may improve in the next financial year, is what I believe. I, we still believe demand is quite decent and reasonable. As far as our customers are concerned, if the new vehicle prices go up, they normally prefer to buy used vehicles and remain at that level, so that depending upon the application for which they are using the vehicle, they remain at that level. One trend which is very positive is in the construction equipment and the construction related vehicle. The demand for dumpers is very high. There is a waiting period. There is a demand for construction equipment is quite high, and there is a waiting period. Since there is a waiting period and demand still continues to be good, in the heavy vehicle sales, normally this dumper gets included in the commercial vehicle, it doesn't get included in the construction equipment. Whatever the new vehicles are selling in the heavy, it's mostly they are tippers. We feel that the government spend is reasonably good and it is continuing. If that is continuing, I feel the commercial vehicle demand will continue to remain well. E-commerce demand is quite good and therefore there is a large demand for last mile connectivity or last mile distribution. I believe that the commercial vehicle sales or demand and even the resale values will remain good for at least another couple of years or more. Got it, sir. This is useful. Sir, if I were to kind of extrapolate it, I mean, based on your commentary, I mean, we are fairly confident that given all these tailwinds, I mean, the kind of sequential improvement that we've been kind of demonstrating or that we are typically used to seeing corresponds to the fourth quarter in a fiscal year should sustain this year as well. Yes. Correct. Last, on the credit costs, given that things are now, I mean, absolutely normal, and obviously, I mean, none of us are really kind of talking about the pandemic and COVID anymore. I mean, very fair that we have started utilizing our COVID provisions over the last. Two sub-questions here. a) I mean, what is our thought process? Will we kind of keep utilizing these COVID provisions gradually in the subsequent quarters? And if we do that, then is there a case for credit costs for the full year to come below that 2%-2.3% that we kind of keep guiding for in a good year? Yeah. See, we are still carrying around INR 1,800 crores of COVID provisioning. We have used around this quarter around INR 216 crores being utilized. This is over the next three to four quarters, the rest of it may be utilized depending upon how each of this portfolio which we disbursed during the COVID or maybe prior to that is behaving. We are adequately provided. Credit cost should remain around 2%. Last quarter, it was around 2.09%, and we expect it to remain at that level throughout this financial year. Probably next year, it may come down further. Thank you, sir. This is very, very useful. Wish you and your team the very best for the merger. Thank you so much. Thank you. Thank you. The next question is from the line of Chandrashekhar from Fidelity. Please go ahead. Hi, thanks, giving me the opportunity. One is, have you stopped this working capital loans, et cetera, completely because I couldn't hear of any disbursement number there. Also obviously on the AUM, it's been just coming off, pretty substantially. There is 2% in those areas. Maybe that's the first question. Second is, you know, the whole NIM expansion. Earlier we constantly used to hear that the board used to say that, you know, we're going to keep excess liquidity. You know, the board has asked to keep excess liquidity for a slightly longer period. That period is passed. Now we have, you know, a bond maturity coming. I mean, these things will keep coming. We're past the point where I think funding was you know a major issue. Are we like fairly certain at least because we've been hearing this for now what two years now that you know the board has recommended that we keep running excess liquidity. At what point in time are we very confident that we can come back to three to four months of liquidity. Second and third is just what are the incremental yields on loans. Have you started taking pricing action at this point in the market. Just the incremental yields on the loans, just what are most of the business. Yeah. To answer your liquidity questions, the Board has been recommending us to keep excess liquidity, but this time around, we've had a discussion in the Board on the liquidity. The Board has suggested us that we can look at some buyback arrangement so that liquidity slowly gets phased out or get reduced from six months to three months level. We'll be still looking at the environment, and depending upon that, we'll be working on that. From this quarter onwards, every quarter we'll be looking at reducing the excess liquidity in the system. Your first question was? Trade loans. Trade loan. Yeah. On the working capital loan, it is not that we have totally stopped lending. There are two factors in that. One is the business loan and another one is the working capital loan. Bunched together it was around 4% of the portfolio. On the business loan, we have reduced the ticket size, and we have made it a smaller ticket. Therefore, the number of disbursements have gone up, but not the volume. On the other working capital loan, we had slowed it down during the COVID because we wanted to restrict the working capital loan. Now that since everything is behind us, we have started increasing the working capital loan. We believe next year probably we'll go back to that 3.5%-4% level. Ultimately, we wanted to keep not more than 5% at any point of time. Temporarily it has come down because of the environment. That will now improve over the next couple of years. What are the incremental yields during the quarter? The yield, we had increased the lending rate by 25 basis points in the month of June. For the quarter, it has not changed much. It has remained almost the same as previous quarter. Should we assume that there will be more pricing action over there? Yes. The lending rate will further go up. Okay. Thanks. Net interest margin will remain almost same. Ideally it should improve, right? As you start withdrawing some of this liquidity, I would presume that, lending. The cost of borrowing is going up, so it may not significantly improve. There could be some three to four basis points, plus or minus. We do not know what is the actual cost going to go up. Also as I was telling you, it may take another two to three quarters for us to reduce the excess liquidity. Thank you. Thank you. Participants who wishes to ask a question may press star and one. Anyone who wishes to ask a question may press star and one. As there are no further questions, I now hand over the conference to Mr. Umesh Revankar, Vice Chairman and Managing Director for closing comments. Friends, thank you. Thank you for joining this call. Maybe this was one of the good quarter for us because normally first quarter is slow and this time we got started quite well off because the quarter results have been quite decent and good. We believe going forward it will become better in this financial year. Meet you again in the next quarter. Thank you very much. Thank you. On behalf of Shriram Transport Finance, that concludes the conference call. Thank you for joining us. As you know, disconnect your lines.