Ladies and gentlemen, good day and welcome to the Ujjivan SFB Q1 FY 2025 earnings conference call, hosted by IIFL Securities Limited. As a reminder, all participants' 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 touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rikin Shah from IIFL Securities Limited. Thank you, and over to you, sir. Thank you, Sejal. Good evening and welcome everyone to Ujjivan Small Finance Bank Q1 earnings call. We have with us today the entire senior management team of Ujjivan Small Finance Bank to discuss 1Q FY 2025 earnings and the business performance. The management team is represented by Mr. Sanjeev Nautiyal, MD and CEO; Ms. Carol Furtado, Executive Director; Ashish Goel, Chief Credit Officer; M. D. Ramesh Murthy, Chief Financial Officer; Martin P. S., Chief Operating Officer; and Vibhas Chandra, Head of Microbanking. I'll pass on the call to Sanjeev, sir, for you to kind of discuss the Q1 earnings. Over to you, sir. Thank you, Rikin. Good evening and welcome to our Q1 FY 2025 earnings call. I'm happy to present to you an update on our Q1 FY 2025 business and financial performance. On business, our Q1 disbursements have grown to INR 5,286 crore as far as Q1 last year. This resulted in gross loan book of INR 30,069 crore, as on June 24, 2024, up 19% year-over-year and 1% quarter-over-quarter. This is despite our cautious approach in acquiring new-to-credit customers and amidst slowdown in business inquiries in microfinance over the last few months. We acquired around INR 2.08 lakh group loan and individual loan customers during the quarter, ensuring onboarding of good-quality customers with healthy credit behavior. With an endeavor to serve good-quality repeat customers, we have also graduated 32,623 customers from group loans to individual lending during the quarter... While qualifying such customers, we have ensured that these customers have good repayment track record with us, their loan utilization checks were successful, and their income and FOIR criteria are duly met. With the introduction of the new guardrails by MFIN, we foresee slight reduction in business generation due to rising bureau rejection and lower ticket sizes. We aim to overcome this by serving our repeat customers, managing customer attrition, and lending areas which are demonstrating good credit behavior. We believe our diversified presence of 752 branches spanning across 326 districts in 26 states will help achieve this objective. We do believe normalcy will be restored by the end of H1 FY 2025, and higher volume generation will be achievable from Q3 onwards. The microfinance business environment has been evolving over the last few months. We have seen some positive developments from microfinance institutions' networks, and we appreciate their proactiveness in addressing the issue with the newly introduced guardrails for the microfinance sector. These will be beneficial to the industry as a whole in terms of incorporating healthy credit behavior and discipline. We are also closely tracking our secured and unsecured book mix, which improved to 31.3% as on June 2024 from 30.2% as on March 2024. Affordable housing, including micro-mortgages, which contribute over 50% to the secured book for the bank, continues to do well, disbursing INR 445 crore in Q1 FY 2025, achieving a book size of INR 5,199 crore, registering a growth of 42% year-over-year and 6% quarter-over-quarter. We currently have three product lines under micro-mortgages, with the introduction of micro-home improvement loan and micro-business loan, along with previously introduced micro-LAP. Pre-qualified top-up loan launched for the affordable housing segment in March 2024 has seen a healthy traction with INR 6.5 crore business till end of June 2024. In Q1 FY 2025, the MSME vertical has scaled up on its renewed business strategy. We disbursed INR 130 crore during the quarter. Our LAP business scaled up with the newly launched formal segment LAP variant in addition to the semi-formal segment LAP offering. As mentioned, when we last met during our analyst meet, our future-ready loan origination system was launched in Q1 FY 2025. This will boost the working capital business scale-up and have a positive impact on various critical metrics like productivity, turnaround time, and first-time right. Our increased focus in enhancing product offering and investments in new-age LOS and LMS will be augmented by key API integrations, ensuring improved business volumes. As of June 24, our secured business was INR 1,800 crore book, growing by 48% year-over-year and 4% quarter-over-quarter. This secured business forms 6% of the overall asset book. Disbursements have been healthy at INR 400 crore during the quarter, lower than Q4 FY 2024 but 25% higher than Q1 FY 2024. Gold loan and vehicle finance business continues its traction, rising business volumes month-on-month. As we speak, gold loan is being offered in 100+ branches. Similarly, vehicle finance loans are being offered to customers on risk-based pricing and scorecard-based decisioning. These processes have made us market competitive and brought efficiencies to business processes. Utilizing our captive-based vehicle finance products, we cross-sold to our customers to meet their vehicle acquisition needs at attractive interest rates. During Q1 FY 2025, 1,779 loans amounting to INR 15.20 crore have been disbursed. We have also enhanced our product offering in addition to the commuter segment and plan to cater to mid-premium and green funding segment. Our deposits acquisition has grown at a similar pace. To better manage liquidity and to reduce the negative carry, we have targeted maintaining our CD ratio at 85% inclusive of IBPC securitization. Total deposits grew to INR 32,514 crore, up 22% year-over-year and 3% quarter-over-quarter. Our focus from a retail liability perspective is to be the primary bank catering and fulfilling the banking needs of the aspiring middle-class segment by offering quality banking services and, at the same time, attract and retain individual customers by maintaining and building a long-term relationship with them. The objective is to achieve granular retail deposits at a lower cost. With this objective, retail deposits improved to 74% as on June 2024 versus 70% as on March 2024. This also includes an upward impact of 200 basis points due to the change in definition of retail deposits recently issued by RBI. Our CASA ratio at INR 8,334 crore saw a healthy growth of 27% on an annual basis while remaining same sequentially, contributing to 25.6% of total deposits for June 2024. Our priority is acquisition and retention of low-cost CASA deposits for the bank through segment-focused approach, customer-centric products, partnerships and alliances, relationship management, and customer service excellence. Our value-add product offerings are also showing green shoots of success. Our Maxima CASA product, which was launched in the second half of last financial year, has crossed over 1,000 crores in the month of June 2024. Additionally, through our digital initiatives to enhance the banking services for our customers, we have been able to mobilize over INR 100 crore of business through digital term deposits and savings accounts. We are also in the process of launching digital current accounts beneficial for the MSME segment and other enhancements in digital platforms, which helps the customers in receiving seamless experience and ease of doing business with us. These digital measures are not just about keeping pace with the industry but also for setting new standards in our objective of building a scalable and granular liability base. During the quarter, INR 10,000 crore of fixed deposits were rated AA minus stable by CARE. This will be beneficial for us to empanel or engage with PSU, mid, and large corporate businesses for our future funding needs. Continually improving our customer experience and enlarging the scope of customer interaction, our multiple-channel offering is now playing a pivotal role in building business and serving our customers. Hello Ujjivan, India's first voice, visual, vernacular app launched for microfinance customers is available in 11 languages, including English, with chatbot facility. Few notable achievements for the app are the downloads for the app have crossed over INR 10 lakh+ downloads in the month of June 2024. 26% repeat and top-up group loans are getting acknowledged through Hello Ujjivan. 17% of loans acknowledging customers have opted HospiCare by Hello Ujjivan. Other channels like internet, mobile banking are now loaded with 125+ features serving various financial and non-financial transactions. Additionally, our payment systems are equipped with UPI Lite for low-value UPI transactions below INR 500. Our payment systems are also enabled with AePS facility promoting financial inclusion. Asset quality, due to few isolated pockets of stress visible in some states, our PAR has increased to 4.2% in June 2024 versus 3.5% in March 2024. Rising credit cost, which we have been indicating from last few quarters, came in at INR 110 crore for Q1 FY 2025 versus INR 79 crore in Q4 financial year 2024. However, we are confident of meeting our FY 2025 credit cost guidance. Portfolio quality remains healthy with GNPA at 2.3% and NNPA at 0.4%. Slippages for Q1 FY 2025 were at INR 192 crore versus INR 175 crore in Q4 financial year 2024. We have written off INR 59 crore during the quarter. With our enhanced focus on maintaining healthy collections, currently at 98% for June 2024, we have strengthened our collection team this quarter and will continue to add headcount as necessary. Target recovery remains strong at INR 27 crore in Q1 FY 2025. Our target is to collect over INR 100 crore this year. On financials and margins, NIMS for the quarter is 9.3%. COF, cost of funds for Q1 financial year 2025, is at 7.5%, marginally elevated from last quarter, as Q4 FY 2024 had a one-time benefit of reversal of interest expense. But when compared to Q3 FY 2024, cost of funds for the bank remained at par. The stability in our cost of funds was due to our focus on growing retail deposits. To benefit the margins, some repricing of microfinance book is pending to be factored in as the new disbursements take place. This, along with our risk-based pricing, will help sustain NIMS at healthy levels despite our secured books' accelerated growth. Operating cost for the bank is a key monitorable cost-to-income ratio for the quarter ended at 55%. Our objective is to keep this in control in the upcoming quarters. PAT for the quarter was INR 301 crore, resulting in a healthy ROA and ROE of 2.9% and 20.9%. Our focus is towards maintaining the guidance given on our previous communication of 20% asset book growth and the full-year ROE at 20%. Lastly, on Universal Bank License, we are considering making an application for Universal Bank License. The board shall decide the timing of the application in this financial year. I will end here and hand over to the moderator, Ms. Sejal. Thank you. Over to you, Sejal, please. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rajiv Mehta from YES Securities. Please go ahead. Yeah, hi, good evening. Thank you for the opportunity. So my first question is on the asset quality of microbanking. Is the fresh PAR addition stabilizing in July? And what will be your outlook on rolling back the PAR, which is already sitting in the early buckets of 1-30 and 31-60 DPD in the coming months? And what is the assessment on slippages in the current quarter? Hi, Rajiv. So on your first question on whether the PAR is stabilizing for the month of July, we are looking at a 99.5% collection efficiency in our non-delinquent NDA pool. So that would mean a marginal increase in PAR. But what we have also done is we have strengthened our collections in the 1-90 bucket. A lot of our collection team has moved towards the 1-90 bucket. We have also identified our branches where we need to reduce our PAR. We are on that path. We'll continue to do that throughout quarter two. In terms of reducing the PAR, which you were talking about in 1-90 bucket, as I said, we have strengthened our collections team. Our efficiencies have gone above 40% in the last quarter, in the last two months of the last quarter. We expect that these kinds of efficiencies can be maintained in Q2. Therefore, we will hopefully see steady slippages during this quarter. I would also like to add that our slippages in the last four quarters have been steady between 0.6%-0.7%. Therefore, that gives us confidence that in Q2 also, we will maintain the same rate of slippages. Yeah, this is clear. Thank you. On affordable housing, I see the disbursement declining by 40% quarter-over-quarter. Were there any specific reasons? One more question is on the OpEx decline. So it is basically the non-employee OpEx, which has come off pretty significantly. So is there anything one-off here? Why it has come off so significantly? On the housing, hi. On the housing, the disbursements have been quite steady. It is just that since the introduction of the circular, wherein we have to look at the DD disbursements a little differently, the bookings have taken place, but we will be disbursing the loans to the customers once the DD has been handed over to the customer. That is the only reason why we have seen a dip in the disbursements, which over a month will get corrected. So the amount, I think, is around INR 80 crore. Sorry, ma'am, what is this INR 80 crore? So the difference between the bookings and the disbursements for the quarter is not INR 80 crore, it's INR 111 crore. Okay, understood. But does it disturb our higher run rate of disbursement now in July, August, or can we revert back to our pre-March or maybe last year's run rate of growth back? Of course. Of course, it will come back to normalcy. This is a new thing that has happened across the industry. So this will get corrected. Our disbursements, otherwise, our bookings are always steady growth. Got it. And on the OpEx side, the non-employee OpEx being lower in this quarter? Our OpEx is related to our business and the volume. So depending on that, the OpEx will vary. That's number one. Number two, because we've been strict focused on OpEx, we've seen our costs increase to around 56%, 57%. So there is a very tight control being exercised on the OpEx. Got it. Thank you and best of luck. Thank you. Thank you. The next question is from the line of Deepak Poddar from Sapphire Capital. Please go ahead. Yeah, I'm audible, sir? Yes. Okay. Thank you very much, sir, for this opportunity. So just wanted to understand, I think you mentioned about the credit cost to be normalized for FY 2025, right, in spite of this issue that you are facing in terms of whatever you have guided. So can you just reiterate what is our guidance term of credit cost? One moment, sir. So last year, we had spoken about the second half credit cost starting to normalize. And the second half of last year was in the range of 0.9%-1%. In the beginning of the year, we had guided that our credit cost would be in the range of 1.7%. In Q1, the annualized cost is about 1.42%. It is in line with our full-year plan. Okay. Okay. In the full year, we are still kind of giving an outlook of 1.7% or 1.4% credit cost, or in that range? Yes. See, there was a little bit of disturbance in the market, which started in Q3, Q4 of last year. And that credit cost will continue for about till those accounts are fully provided. And therefore, there will be marginal increase. But we still believe that our credit cost will remain as we have guided. Okay. There is a marginal increase. For example, this quarter, we had about 1.4%. Marginal increase, we can say 1.4%-1.7% range. That is the range one can see, I mean, in the second quarter or third quarter or fourth quarter? Yes. We should be able to see that range. And we will continue to guide you for the second half. The first half, we are seeing the same range as 1.4%-1.6%. First half, we are looking at that same range. And for the full year, as we have guided, we will stay within 1.7%. Oh, yeah, yeah. So for the entire year as well as for the first half, right? And what about the credit cost for FY 2026 next year? We will come back to you on that as the year progresses. Okay. Understood. And what sort of ROA we are looking at for this year, FY 2025? So we currently have an ROA of 2.9, which is significantly better than appears. ROA is a function of how much secured, unsecured book we have. Correct. Yeah. So considering the ROE is what we have guided for, that should remain in the range of 20%. 20% ROE. And now, given that we are focusing more on secured book, right, and we have a target to reach 40% by year-end as well. So now, what would be the normalized ROA once you reach at 40% secured book? I mean, what is the, I mean, sustainable ROA for higher, I mean, secured book for us? So what would be the aspirational range that we might look at? I mean, this, as Rajiv said, is a factor of our secured and unsecured percentages. The unsecured percentage is gradually coming down, and we are able to increase our secured book percentage. Over the year, we will be meeting the guidance that we have given over the next two years, which is 60-40-40 in the secured percentage. This year, we should touch 35% of secured asset portfolio. So I mean, we will have to just back-calculate that, I guess. Okay. Understood. Fair enough. Okay. I got it. I think that's it from my side. All the very best to you. Thank you. Thank you. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants, please limit your question to two per participant. The next question is from the line of Abhishek Murarka from HSBC. Please go ahead. Yeah. Hi, good evening. So am I audible? Yes, sir, you're audible. Yeah. Okay. Thanks. So my first question is regarding the micro-individual loan book. The question is, what is giving you confidence to grow this book? Overall, the commentary about low-pay and secured personal loans remains that that segment is showing a lot of stress. How is your book behaving, and can you share some trends in terms of bounce rates or asset quality or delinquency? What is giving you confidence to grow this book going forward? The individual loans, they are given to our group loan customers after, typically, they have crossed about 3.5 cycles of repayment with us in the group loan with the group loan product. Customers already have a significant tenor with the bank before they are offered an individual loan product. That's point number one. Number two, each loan is assessed through a PD and through a credit process by credit officers who go to the field and do every loan's due diligence. So for us, the behavior of individual loan portfolio has been better than the group loan portfolio since we started this business. And this is a very tightly controlled business. The customer base is met month-on-month. So that gives us confidence that this portfolio will continue to be good with us. So the collection efficiency, number that you— Sorry, we are 16 years into this business. So our processes have matured. Our people have understood this business well. No, I don't doubt that. At the point of underwriting, the loan would be pretty good. That's why you've given the loan. But currently, what are the trends? So because if you look at the collection efficiency that you report, NGL plus IL, that's 98%. So what you're saying is IL is actually higher than 98%. Is that how you read this? Yes. And when you look at the non-delinquent portfolio, where we say that our collection efficiency is in the range of 99.5%, the individual loan collection efficiency for the non-delinquent bucket is higher than group loan as well. Understood. So at the moment, you're not seeing any kind of increase in stress here? Got it. Second question is on the ability to increase disbursement yield. Now, Peer banks just reported that they saw an increase in disbursement yield in housing, business loans, yields, of course, you don't have yields, but in housing or business loans, are you seeing any opportunity to increase disbursement yields, or do you think the market is too competitive and for you, it is not possible? We are in the tier-three kind of markets. So our yields today are comparable to the yields that the companies who are disbursing in tier-three markets are offering. We are very competitive there. But any change in yield could only happen if we change our market or our customer segment. We don't see that happening in the immediate term. Also, in the Micro Mortgages section that we have, the segment that we have introduced recently, that has a higher yield. So that sort of compensates for the higher yield overall. Understood. Understood. Understood. Got it. Thank you so much. Thank you and all the best. Thank you. The next question is from the line of Somil Shah from Paras Investments. Please go ahead. Hi, sir. Thanks for the opportunity. The last three, four quarters, the NPL numbers are gradually increasing. So I do understand these numbers are lowest among the industry. But still, since it is increasing, can we know what would be our normalized NPL numbers going forward or maybe by the end of this financial year? See, we have seen you look at it this way. We have almost 60% of the portfolio in markets which are mature, which is West Bengal, Tamil Nadu, Karnataka, Bihar, and Uttar Pradesh. And the sixth being Maharashtra. And this contributes to almost 60%. These markets are mature. We don't see an increase in NPA in these markets. The increase in NPA has happened from Punjab, Haryana, Gujarat, Kerala, Odisha, and Rajasthan. We also see some five districts of TN, five to six districts of TN, where the southern districts where there has been an increase in NPA. So when you look at it from the overall portfolio perspective, we are currently at about 2.3%-2.4%. We expect that this will peak out to about 2.7%-2.8% by the end of this financial year and then start showing a reducing trend. Okay. So I mean, at the max, it can go to 2.7%-2.8% by the end of this year. Okay. And sir, my second question is on the guidance of 20% ROE for this year. So does that mean that it will be a flat year in terms of profit, or do we expect some improvement in numbers? So towards the latter half of the year, we will see some improvements in the numbers. And that's how we have also pegged our growth guidance. Okay. Because last year, if I'm not wrong, we were on 27% ROE. And this year, we have guided for 20%. Yes. 27% was because we had come out of COVID, and there was a lot of recovery happening. There was a lot of disbursement happening. There was a filling up of the gap happening during that time. And therefore, increased disbursements and increased collections had given us a very high ROE of 27%. But 27% is obviously not a sustainable number. So therefore, we are talking about a normalized number in the range of. Okay. Okay. That's it from my side. Thank you and all the best. Thank you. Thank you. The next question is from the line of Shreepal Doshi from Equirus Securities. Please go ahead. Hi team. Good evening, and thank you for giving me the opportunity. My question was pertaining to PAR increase in the MSME segment. So if you look at it in the last couple of years, we've done a lot of homework in terms of getting things right in terms of product processes, policies. Yet, the PAR continues to be elevated for this segment. So which states or which districts are creating issues here? Just if you could throw some light on that front. So our LAP portfolio, our MSME portfolio is largely the LAP portfolio. It's about INR 1,400 crore, of which INR 700 crore is the old portfolio, and INR 700 crore is something that we have built over the last two years. Our old portfolio has regrown from INR 1,000 crore to INR 700 crore in the last two years. And the new portfolio is showing an NPA of less than 1%. The PAR number, which you're referring to, was a slight increase for the month of April only. But in the month of May and June, we have been able to normalize those cases from bucket one and two. So increase in NPA is not happening for the old portfolio. It's stabilized now. The new portfolio is showing a much better asset quality. So the portfolio, we can say, is stable with no increase in NPA over the last two quarters, I would say.`` Okay. Okay. The other bit was on micro-individual loans. I think one of the earlier participants also touched upon that. So my question is, again, what is it that is giving us comfort? I understand that your underwriting process and so forth. But the majority of these customers are transitioned from group loan to micro-individual, right? And even when you acquire it from the other market, these customers typically fall in the same category from the income perspective. So in that case, since the GL itself is showing such high level of PAR across industry, is the thought process clear to be a little aggressive on this front, or would we be a little prudent and cautious incrementally for this segment as well? So yeah, we covered this, but I would again reiterate that you are right that this is the way we used to think when we started IL a long back, about 15 years back. That is a high-ticket size product, and it should be more risky compared to typical group loan, where there is a group dynamic as well. But what we have seen in our experience in the last five-six years, especially during demonetization and after that and during the pandemic, that IL behaved much better than GL. And the reason being, you have a base of INR 40 lakh-INR 50 lakh customer base in GL, and you filter out a cream of microfinance customers from there and give them IL loan. The chances of these customers behaving better is something which you also expect. Second, you see in the group loan, the average number of loans per customer at industry level is close to 2.1 at this point of time. That means a customer takes two loans. And we have seen through our data that the customers who take IL loan, the affinity toward taking further loans from somewhere else goes down. And that also helps you in collecting, you have a better portfolio quality. These customers, as I earlier mentioned, that our IL process is just not an extension from GL to IL from the same team, but we have this independent business team and independent credit team who assesses these loans. In these loans, even family members are involved. We also take overall, the husbands also get involved. These all together ensure that our IL portfolio is robust and actually behaves a little better than GL. We have a strong plan for IL to grow as we see a lot of upsell opportunity from GL customers to IL customers, and this is something which we will continue to do. We have been able to grow over 40% for the last two, three, financial years, and this trend we will see will continue in the coming years as well. Got it. Got it. Just last question on the strategy front. So if you look at it, we had coined this idea to get into the secure business three-four years back, wherein at that time, we had thought that we'd have 50%-50% secured and unsecured. But then during that time, there was a very strong momentum in the microfinance segment. Therefore, we didn't really aggressively bring up the share of secure products. However, lately, we are seeing the microfinance segment seeing issues, and therefore, the tilt towards secure product has seen decent traction. So will we continue to stick to that strategy of 40/60 now, or if the microfinance landscape sees revival, then we will sort of moderate our aspiration to have the 60/40 ratio getting achieved in the set timeline? We had initially set ourselves up for 60/40, 40 being the secured asset portfolio, and we continue to do it because we are seeing a good momentum happening even in the secured asset side. Our new business lines, like the vehicle finance, the gold loans, micro-mortgages, are all seeing good growth potential, and it is growing. This is also including the affordable housing, the MSME now, which has gotten to a lot more segments, LAP, working capital, fintech partnerships, various things. So we will continue to grow this and also grow our microfinance portfolio. This is a year where we have taken a cautious approach because of the industry situation. But this will also continue to grow at a healthy pace. And even earlier, we had said that FY 2026, we would have a 60/40 composition, and we will continue to stick to that. Got it. Thank you, ma'am. Thank you so much for answering all my questions, and good luck for the next quarter. Thank you. The next question is from the line of Pritesh Bumb from DAM Capital. Please go ahead. Hi team. Good evening. Just a couple of questions. First is on upgrades. So this quarter, the upgrades have been slightly better. Just wanted to check, do we first do slippages and then upgrade, or the slippages will have upgrades during the quarter? We do slippages and upgrades separately. So any account which has slipped during the quarter is counted as slippages, and subsequently, if it gets upgraded, it is counted as upgrade. Sure. So this upgrade, which is slightly better, does this have anything to do from this quarter, or these upgrades are a bit older ones which have come in? So most of it is slippages from the previous quarters. If I were to take a breakup, it's almost 85%-90% is from previous quarter slippages. Got it. Second question was on the FIG lending. We have been a little bit gung-ho on there. We've been growing that book quite decent. Given that the situation in the MFI book is slightly cautious, how is the lending there happening? Is it to NBFC, which are in MFI, or is it—and how is the book performing there? We have 95% of our book in A-minus and above-rated corporates. And we see that this trend will probably continue for some time. And we had set ourselves 5%-7% of B and Triple B and below. So we've seen that growth happening in A-minus and above-rated corporates, and that gives us confidence that since there is demand on that side, this growth will continue. Most of our growth is coming from vehicle finance and MSME, NBFCs. Some of it has also come from gold loans. In microfinance, I think our exposure is about 12%-13%. It's 12. 12%. 12%. So 12%. So we have various segments, and we continue to do well in that portfolio. Got it. Thank you. Last question was on the ticket sizes of the microfinance and individual loans. Generally, they fall when you have a slightly higher new customer acquisition. And from the graph of new customer acquisition, it's generally down. So what has led to the ticket size being lower from a quarterly perspective? So yeah, you are right that if you do more NCI and inverse cycle, your ticket size is lower, so your average ticket size will go down. At this point of time, as you know, that for the last three, say, from December onwards, we have been cautious in locations where we are seeing some stress, not necessarily within Ujjivan microfinance customer segment, but at industry level. We have fine-tuned our trade policies so that our portfolio is protected. For that reason, we have also ensured that ticket size, wherever it requires to be trimmed down, we have trimmed down also, which has resulted in slightly lower ticket size at this point of time. Just to clarify, the existing customers have been given a lower ticket size than the earlier cycle. That's how you'll have to look at it? No, no. If you see, though, when you give repeat cycle loans, you give repeat cycle loans to customers from previous cycle, you'll be giving higher ticket size loans also at the same level as well. But there are a lot of customers who go from first cycle to second cycle also. So these customers, if you start giving in certain locations slightly lower ticket size, you are moving from first to second, your average will go down. So that will result in a little lower average ticket size, which is showing here. Got it. Thank you. Thank you. If you're giving lower or higher ticket size in the first cycle, the ticket size is based on customer family level income and therefore. So it can go up, go low, or can remain constant based on customer family level income. Sure. Got it. That was good enough. Thank you. Thank you so much. All the best. Thank you. The next question is from the line of Ayush Vimal from Clearview Capital. Please go ahead. Mr. Ayush, may I request you to please unmute your line and speak? Mr. Ayush? You do not respond from the current participant. We will move on to the next participant. The next question is from the line of Shreyansh Jain from Electrum PMS. Please go ahead. Good evening, team. I just have a quick question. Are you seeing any growth slowdown in Bihar and UP after the RBI comments? What is the impact of that? Have you received any communication from them, or is it just broad observations, and what are we doing about it? So in Bihar, we have a growth of 0.5% over March 2024. We have about INR 1,800 crore of portfolio and 9% concentration in the state. Our portfolio is doing quite well there. PAR has remained in the range of 1.5%-2%. Non-delinquent collection efficiency has been in the range of 99.7%. This state has tremendous potential. It has now become the largest state for microfinance for all lenders put together. We continue to grow at a healthy pace, not at a very fast pace. And we expect that this year, we will end up in the range of about a 10% kind of a growth. The second you mentioned was UP. UP? UP, UP, we've had a flat 7% kind of concentration of our portfolio in that state. In UP, as we had told earlier, there are a couple of areas in which we found delinquencies going up. We have Agra, Firozabad, Aligarh belts, and other places. So there are some four or five districts where we have slowed down. In other districts, we have not seen an increase in the PAR or NPA. So we'll continue to be doing business as usual in other states in five, sorry, in other districts. In five districts, we have slowed down. Okay. Got it. And you mentioned something about 60% in metro markets. Can you just repeat those states in which you are that you have booked? And the other states where there are issues, like Punjab, Haryana, can you just repeat those? So we talk about Tamil Nadu, Karnataka in south, Bihar and UP in north, West Bengal in east, and Maharashtra in west as states which have matured and have shown consistent portfolio quality over many years now. So this is where we said earlier, we have seen very small pockets of stress. And the emerging markets have seen deterioration in asset quality. Okay. Got it. Got it. Thank you so much. All the best. Thank you. The next question is from the line of Yash Dantewadia from Dante Equity. Please go ahead. Hello. Am I audible? Hello. Am I audible? Yes, sir. You're audible. Yes, yes. Yeah. So if we assume that Ujjivan applies for the universal banking license and that does go through, what is the kind of ROE improvement you're kind of factoring in? No, I think this issue is not germane at this point in time because we'll be applying, say, in this financial year, we'll have to take stock of how we design our process. We are in discussions as to what our portfolio mix would be, which segment we would like to give a thrust more. So those are all matters of internal discussion. Therefore, once we decide the proportions of different businesses in different years that we will do, we'll actually, then will be the outcome of ROE and other factors coming into play. So at this point in time, not in a position to communicate this. Could you comment more on Kerala, specifically Kerala and Tamil Nadu? Because these are the most matured microfinance markets in India, I believe. Could you comment on how they are doing right now? You know the first half of quarter two, how have the collections been? So we have about INR 400 crore of portfolio in Kerala. That's about 2% concentration for the state of Kerala in our portfolio. As a strategy, we had started reducing our exposure there. And therefore, quarter-on-quarter, we've seen a degree of different percent. Our PAR is upwards of 5% there. Therefore, we continue to be a little cautious in the state. We are present in about nine districts, and we hope to see improvement in the second half of the year. As of now, the portfolio has not shown much improvement over the last two quarters. Could you give some guidance on the branch? Sorry, sorry. You were saying something. No, we are present in nine districts, 14 branches. That is what I was saying. Yeah. And what about Tamil Nadu? In Tamil Nadu, we have about INR 2,800 crores. That's about 14% of the portfolio in the state of Tamil Nadu. Our collection efficiency in the non-delinquent buckets has been 99.4% consistently in the last three months. And we are present. Our spread is very good. We are present in 33 districts. NPA is in the range of 2%-2.4%. While we have seen some slowdown in disbursements, but this is attributed to about six districts, which is Virudhunagar, Madurai Coimbatore, Tirunelveli, and Tenkasi. Five or six districts, which is the southern part of TN, is where we have seen some slowdown in disbursements. As the market conditions start to improve, we will start to grow our portfolio again. At this point in time, we are a little cautious in the five, six districts. Thank you. The next question is from the line of Ayush Vimal from Clearview Capital. Please go ahead. Hi, good evening. Am I audible now? Yes, sir. You're audible. Yeah. I just have two questions. You alluded to certain disturbances occurring in quarter three and quarter four of last year in the microfinance segment. Can you elaborate a little on the precise reasons for these differences? Was this general overheating of the market or some state-specific issues that arose? So in the states of Punjab and Haryana, there was some Karza Mukti Abhiyan, which was running. And that led to a lot of people believing that they did not pay the loans. And a lot of people have actually enrolled in that Abhiyan. That spoiled the credit culture, and the industry as a whole suffered. We have seen the numbers of the industry also. They seem to be in double-digit PAR. So consequently, we also had similar experience in the states of Punjab and Haryana. In Gujarat, which is the other state that we mentioned, there was an increase in the number of lenders in the last two years. And there, we would say that there was some kind of overlending. So therefore, we became cautious in the third and fourth quarter of last financial year. Our portfolio is now stable. We have about 6% concentration in the state of Gujarat. And PAR is now stable. We don't see the PAR in NPA growing. It's only 20 basis points over March 2024. Got it. Got it. And what about Kerala, UP, Bihar, some of these states? So Kerala, as I was saying, we have about 2% of portfolio. We have degrown about 6% quarter-on-quarter in Kerala because we have been a little cautious in disbursements in the state of Kerala. We are present in about nine districts. Our experience is similar to the industry's experience where NPAs have grown in the last two or three quarters consistently. So we continue to be cautious there with kind of slowed down disbursements. Got it. And just one question. Sorry, you were saying something? In Bihar, just two districts where we have seen higher PAR. And in UP, about five or six districts. But otherwise, it is business as usual in both the districts. In both the states, I'm sorry. Got it. I mean, so besides Punjab and Haryana, where there was this abhiyan that was running, most of the other states are suffering from a normal overlending issue that keeps on happening once in a while, right? Gujarat, I would say yes. And Kerala, yes. But other states have not seen those overlending issues. Kerala, we would say yes. In Gujarat, there were too many players, and therefore, that led to oversupply. So if you divide two issues, one is that the local political level issues in Karza Mukti Abhiyan, and all. But Punjab, Haryana, and some part of Rajasthan were affected. But there also, we are seeing, especially after elections, things are improving. And Punjab, Haryana, both of the states are doing much better than what the previous quarter. At the same time, if you see how one of the things that has helped us during this crisis and previous crisis also is our branching strategy and our customer selection process. If you compare our Ujjivan PAR versus industry PAR as of March number, which is available, our PAR is close to 6.5% versus industry PAR, which is at 20%. And similar story you will see in Gujarat and Kerala as well. So that has helped. The branching strategy has definitely helped us. Kerala, we were aware that this is a state where we don't want to expand three, four years back only, and we have restricted our number of branches in the state. But you're right. There are issues related to not to overlending, but something else, which is temporary in nature. As far as overlending is concerned, it is not something which will get solved in one month. Good news is that MFIN has come up with the guidelines which will help us curb overlending. As 87% of the industry is registered with MFIN, we are hopeful that in coming three-six months, the issues that are pertaining in the state will slowly go away. Also, when we are seeing state, it's not entire state. For example, Gujarat, there are certain locations where we are facing issues, and industry is also facing issues. Similarly, in other states also, there are particular districts where we are facing issues. That will also fade away as we move ahead in the financial year, especially after the advent of new guardrails from MFIN. Got it. Got it. Also, one more thing. You expressed confidence in the fact that your asset quality will be much better than some of your peers. What gives you the source of the—I mean, what is the source of this confidence? I mean, are systems or incentives very different for our loan officers versus other peers? Or what makes you—or what gives you the edge to maintain asset quality better over some of your peers? Actually, the same. And we were having a discussion on the same topic during the analyst call also. Actually, everything starts from branch selection. How do you select your working area? Where do you want to open a branch and work? Because if you see, most of the overheated locations, not only now, but in the previous crisis also, it happened because most of the players went to the same location and started microfinance. As a result, you overcrowd the location. Though there are a lot of white spaces available where you can go have branches there and serve customers who are unserved or underserved. Branching strategy is very important. And that's what I was saying in Punjab, Haryana, Kerala, etc. It has helped us. Second, after that, I think independent credit team is something which is very, very unique with us, which we had from day one when we started microfinance in Ujjivan. And that helps you because your decisioning becomes much more logical because we are an independent team who is also assessing loans. Third, what we have learned, especially after demonetization, is something that how to build a collection team which is specially catered, specially designed for microfinance customer segment, which is very, very sensitive. So these three combined help us so far have helped us, and we have confidence that this will also help us in. Yeah. And at the same time, as we are right now, we are talking about these states, we have also categorized our branching into different categories. For example, as you talked about the customer loan officer case load and their work efficiency, in these three categories, red, orange, and green, we have different productivity expectations so that our team members can unlock their time so that our collection and our book remains intact and then we slowly build on business. So we have a strategy around it. We have tested it during the pandemic and demonetization, and we have been very, very successful. We were one of the first who came out successfully after the crisis. This time also, we are seeing that this thing is working for us. And we have started seeing some green shoots as well. Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the call over to Mr. Sanjeev Nautiyal for closing comments. Thank you, Sejal. Thank you for all the participants on the con call for a very meaningful and quite expressive interaction that we had. I would just like to conclude by saying and reiterating that we are looking for this financial year to grow our outstandings by 20%, to maintain a 20% return on equity, 9% NIM, credit costs within 1.70%, exercising due control on the costs, increasing our secured book to around 35% by the end of this financial year, and looking to actively go for a Universal Bank License within this financial year. In brief, I would say that these are the points that we would be focusing on to build outcomes which are good for the bank and good for all the stakeholders. Thank you so much. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.