Ladies and gentlemen, thank you for patiently holding. The conference will begin shortly. Please stay connected. Please do not disconnect. Thank you. Ladies and gentlemen, thank you for patiently holding. The conference will begin shortly. Please stay connected. Please do not disconnect. Thank you. Ladies and gentlemen, good day and welcome to the Ujjivan Small Finance Bank Q1 FY26 Conference Call hosted by Equirus Securities. 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 the star then zero on your touchtone phone. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company around the date of this call. These statements are not a guarantee of future performance and involve risks and uncertainties that are difficult to predict. I now hand the conference over to Mr. Shreepal Doshi from Equirus Securities. Thank you and over to you, Mrs. Shreepal. Thank you, Viren. Good evening, everyone. I welcome you all to the Q1 FY26 Earnings Call of Ujjivan Small Finance Bank. Today, we have the Senior Management Team of Ujjivan Small Finance Bank represented by Mr. Sanjeev Nautiyal, MD and CEO, Ms. Carol Furtado, Executive Director, Mr. Sadananda Kamath, CFO, Mr. Ashish Goel, Chief Credit Officer, Mr. Martin, Chief Operating Officer, Mr. Vibhas Chandra, Head of Micro Finance Business, Mr. Hitendra Jha, Head of Retail Liabilities, and Mr. Gaurav Sah, Lead for Investor Relations. I would now like to hand over the call to Mr. Sanjeev for his opening remarks, from which we can open the forum for questions and answers. Over to you, sir. Is the management line not clear? Sir, may I request you to start speaking, sir? Okay, am I audible now? Yes, yes. You're audible, sir. Good evening, everyone. I welcome you all to the Q1 FY26 Earnings Call of Ujjivan Small Finance Bank. Today, we have the Senior Management Team of Ujjivan Small Finance Bank represented by Mr. Sanjeev Nautiyal, MD and CEO, Ms. Carol Furtado, Executive Director, Mr. Sadananda Kamath, CFO, Mr. Ashish Goel, Chief Credit Officer, Mr. Martin, Chief Operating Officer, Mr. Vibhas Chandra, Head of Micro Banking, Mr. Hitendra Jha, Head of Retail Liabilities, and Mr. Gaurav Sah, Lead for Investor Relations. I would now like to hand over the call to Mr. Sanjeev Nautiyal for his opening remarks, from which we can open the forum for questions and answers. Over to you, sir. Thank you, Shreepal. Good evening and welcome to our Q1 FY2026 Earnings Call. I will walk you through the business and financial outcomes for the first quarter of financial year 2026. Please be informed that references made during this address to Q4 pertain to financial year 2024-2025 and Q1 and H2 relate to financial year 2025-2026. About overall business, in Q1, our gross loans have delivered a growth of 11% YoY and 4% QoQ, reaching INR 33,287 crore. The disbursements in the quarter grew to INR 6,539 crore, registering a strong growth of 24% YoY. The rising share of our secured portfolio from 31% to 46% YoY underscores the calibrated strategy to diversify our product suites and enhance portfolio quality. The MFIN guardrails, too, have been fully adopted by the bank effective April 1, 2025. While we had anticipated a slower disbursement, we observed that the demand scenario improved, and Q1 disbursement in group loan was 2% higher than Q4. We stay aligned to this new operating framework and are focusing on deeper existing customer engagement and opportunities to acquire new customers. Our focus on graduation of good customers to Individual loans is also gaining momentum as per our existing strategy. We added approximately 1.1 lakh new customers in microbanking during Q1 while ensuring healthy borrower profiles. Reinforcing our focus on customer lifecycle management, we also graduated approximately 34,000 group loan customers to individual lending and also migrated a large number of customers to secured products in gold loans, vehicle finance, and micromortgages. A testament to our efforts in nurturing creditworthy borrowers and driving sustainable growth. Recent regulatory changes were introduced, reducing the priority sector lending requirements for small finance banks from 75% to 60%. This move marks a significant positive shift and gives the bank enhanced flexibility to calibrate its portfolio mix. We believe this will aid in better capital allocation and improve the cost and risk profiles of the bank's portfolio. About macros and liquidity, the Reserve Bank of India took various steps starting February 2025, including the reduction of policy repo rates and continuous liquidity inclusion. We believe these measures will bring down the cost of funds and drive higher credit demand in rate-sensitive segments like affordable housing, MSME, and vehicle finance. As part of our strategy to diversify the loan book towards more secured products, we expect the NIM to moderate for the bank. The impact of repricing of deposits undertaken by the bank in the last few months is expected to benefit the cost of funds in the coming quarter. Additionally, we carried a higher liquidity buffer to meet the large liability maturities in Q2, which is getting absorbed in this quarter, leading to liquidity stabilization. Assets update. In Q1, Group loans stood at INR 12,961 crore, reflecting an 18% YoY degrowth. However, disbursements in Q1 were up 2% QoQ to INR 2,834 crore. Our focus during the quarter remains firmly on revising disbursements, strengthening collections, and improving portfolio quality. Individual loans grew 7% YoY to INR 5,332 crore, backed by a strong 16% YoY growth in disbursements. This reflects the quality and credit behavior of customers graduating from our group loan portfolio and remains an important growth engine. The portfolio quality in IL continues to be better than GL. Ex-pocket collection efficiency of the microbanking book remains strong at 99.34% for June 2025, reflecting repayment discipline. We are witnessing improvements in collections environments and expect to touch normalized levels of 99.5% plus by Q3 financial year 2026. Coming to the secured book, disbursement growth of 86% YoY in Q1 was primarily led by a strong 100% YoY increase in our affordable housing and micromortgages segment, alongside a 212% YoY growth in the MSME segment. Additionally, our FIG book continued to contribute meaningfully to overall disbursement momentum. Others, including vehicle, gold, and agri loans, contributed about 11% of disbursements in Q1 and continue to grow at an accelerated pace. Our housing portfolio, comprising affordable housing and micromortgage loans, has delivered impressive growth of 53% YoY in loan books, reaching approximately INR 8,000 crore. Micromortgages, a higher-yielding, lower-ticket product, contributes roughly INR 900 crore to the portfolio, registering a strong growth of 227% YoY and 24% QoQ. As part of our strategy, micromortgages have augmented the housing portfolio, effectively addressing the top INR 10 lakh ticket-sized segments and complementing our current product offerings. MSME business witnessed an impressive loan book growth of 59% YoY, reaching INR 2,253 crore. Working capital and supply chain finance now account for over 24% of our MSME book, reflecting the growing traction in our business banking segment. In the other portfolio, vehicle finance continued its strong momentum with loan book growing to INR 560 crore for a robust 156% increase YoY and 20% increase QoQ. Agri banking loan book reached INR 403 crore, growing 288% YoY and 25% QoQ. Gold loans also gained traction during the quarter, with disbursements rising around 550% YoY, taking the loan book to INR 293 crore with presence in 280 branches. Our focus decades in newer product offerings, comprising micromortgages, gold, vehicle, and agri banking loans, has started showing noticeable contribution towards the portfolio. Our Q1 disbursements were INR 628 crore against Q1 financial year 2025 disbursement of INR 190 crore. These are our higher-yielding offerings in the secured lending portfolio. Liabilities update. The bank's total deposits grew YoY at 19% to INR 38,619 crore. Our CASA deposits grew by 13% YoY to INR 9,381 crore. Retail TD plus CASA deposits stood at INR 27,884 crore, registering a 16% growth YoY and contributing 72% to total deposits. Notably, retail deposits have remained consistently above 70%, emphasizing the steadiness and stickiness of customers towards our franchise. Our cost of funds remained at 7.6% in Q1 and shall reduce in the upcoming quarters, since we have lowered the peak FD rates by 65 basis points. NSA rates have been recalibrated up to 100 basis points in some buckets. In terms of asset quality, the green shoots are visible with spot attrition in microbanking showing a consistent decline over the last two quarters. Our slippages in microbanking have peaked in 9 out of 10 states in Q4 and we foresee Karnataka peaking in Q1. Slippages are expected to show an improving trend going forward, as was the case in Q4 and Q3 of financial year 2024-2025. This improved scenario did not necessitate the sale of NCS to ART in Q1. Bank continued the prudent approach of taking accelerated provisions of approximately INR 23 crore in Q1 and additionally sold unutilized floating provisions of INR 21 crore as of June 2025. Our financial performance. Interest income for the quarter went up by 3% QoQ as the asset book continues on an upward trajectory. Other income increased 26% YoY. It was down by 8% QoQ due to USLC income, retail insurance, bad debt recovery, and disbursements being lower. This was offset by higher treasury income due to OMO switch buyback transactions carried out by the regulator during the quarter. Additionally, collections in the ART pool have contributed approximately INR 7 crore by means of provision release towards discounted cash cards. OpEx for the quarter reduced by 3% due to lower variable pay compared to the previous quarter and tight control over costs. Major savings came from IT. The cost to income for the quarter stood at 67%. Travel costs improved QoQ to INR 225 crore from INR 265 crore, including accelerated provisions of INR 23 crore. Profit after tax for the quarter stood at INR 103 crore. The return on assets and return on equity were at 0.8% and 6.7% respectively. We would now like to place before you the guidance for the year. Advances growth around 20% with secured growth around 35%. Liabilities growth in line with advances to maintain CD ratio around 88%. The growth should be around 18%. CASA percentage targeted to close at around 27%. Cost to income percentages to remain around 67%. Gross costs to be in the range of 2.3% to 2.4% of average gross loan book. ROE to be 10% to 12% and ROA to be around 1.2% to 1.4%. Lastly, coming to the universal bank license application, post-submission in February 2025, our application is under consideration of RBI. Before I conclude, I would like to introduce Mr. Umesh Arora, who has joined as our Head of Emerging Businesses. He holds a rich experience of over 25 years and has held senior leadership roles in retail lending, credits, and asset businesses across reputed banks like Axis Bank, IDBI Bank, Standard Chartered Bank, and of course, Ujjivan Small Finance Bank. He would be overseeing the departments of housing, MSME, and agri banking. Thank you. Now I hand over to Viren. 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 the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handshakes while asking a question. Ladies and gentlemen, in order to ensure that the management is able to address questions from all the participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. We have our first question from the line of Renish from ICICI Securities. Please go ahead. Yeah, hi, sir. Comments on the setup numbers. Just two key things from my side. One on the asset quality previously, so during Q1, we saw most asset quality metrics deteriorating sort of across segments, whether it is uncertainty, spot growth, spot equity, etc. Just wanted to get a sense, is it largely due to seasonality or is there any specific key reason to do this? Hi, Renish. This is Ashish here. Yes, in terms of PAR, we had a higher PAR in Q1 as compared to Q4. Right. The first, you know, in terms of addition, the PAR addition has started to decline for the last two quarters, as Mr. Nautiyal said. However, in Q4, we had done an ARC deal of INR 300 crore. That had reduced our PAR significantly, and we have not had the need to do any ARC deal in Q1, and therefore, the PAR and GNP would show a slightly higher number. Similarly, the only thing that we have done in terms of intervention is about INR 150 crore of FICO, which was eligible as per policy. With no intervention, the PAR and GNP numbers have gone up a little. Got it. Let's say, adjusted for ARC sale in Q4, the stress par acquisition pace has deteriorated and has improved in Q1? Yes, Renish, that is right. The PAR acquisition has improved in Q1 because our Bucket X collection shows a much better trend in Q1 as compared to Q4. In Q4, we also saw some deterioration because of Karnataka as well. That factor played out till April. In May and June, that was not a factor. Our Bucket X collection efficiency also showed an improved trend. We are now at about 99.4% for the last two months. Mr. Renish, does that answer the question? There's a drop from the question. We can take the next question. The next question is from the line of Pritesh Bumb from DAM Capital. Please go ahead. Hey, sir. Hi. Just a couple of questions. One is, on micromortgages. The GNPA is now touched at 1%. Those are numbers smaller, but any color that is there is some stew over from the main, you know, GNPA or any other microfinance towards micromortgages? Hi, Pritesh. In micromortgages, this book is almost now 15 MOB. Sorry, this book is now 24 MOB. 15 MOB is where we have built most of our book. Almost 80% of the book is in 15 MOB. There will be a slight increase in PAR as we go forward as the book stabilizes, as it matures. If you see quarter on quarter, the NPA was negligible when we look at Q4 and Q3 of last year. It will see a slightly higher PAR and GNPA as we go forward as the book matures. As Mr. Nautiyal also said, this is a high-yielding book for us and complements the gap in housing of below INR 1 million. It is budgeted accordingly. Got it. Second, on individual lending as well, we've seen some PAR moving up. You alluded to PAR moving up in the GNPA book due to, you know, they had sold some ARC, but then individual lenders may or may not have sold the ARC. What has the reason been in the individual lending that the PAR has moved up? As I said, you know, Q4, we had done some interventions in terms of ARC sale. The par had come down, and similarly, the NPA had also come down. In terms of delinquencies, IL continues to do better than GL. That is point number one. Point number two, most of the deterioration that we see in the IL metrics has come from Karnataka. I would take it as a one-off, and we would see stability in this quarter onwards. Just to follow up on that, any impact in Tamil Nadu as well? There was some momentum that has been there as well in collections. No. In Tamil Nadu, GL has not been doing as well as we've seen IL. GL, as we all know, has been an industry-wide phenomenon because of higher leverage of customers. Overborrowing has been the highest in Tamil Nadu. Therefore, GL continues to show slightly elevated PAR and NPA. In terms of IL, it continues to be below 2% GNPA and the PAR has been below 3.5%. Sorry, 4%. It has been in the range of 4%. GL is doing quite well in terms of IL. Got it. Actually, the securities and the microbanking yields are not much different than the securities. I'm seeing that microbanking is down by 26%. The overall yield has done quite good. This is basically only from the mix change, right? Nothing else to do from that. Yes, it is largely due to the mix change, Pritesh. Yeah. Okay. Thank you. Got it. Thanks. Thank you. Thank you. The next question is from the line of Rajiv Mehta from YES SECURITIES. Please go ahead. Yeah, hi. Good evening. Good numbers. Just numbers. Just a couple of things from my side. Just talking of this salient decline of, you know, 60-odd basis points and two potential basis, how much was the impact of this buffer liquidity which you carried through the quarter and also due to interest reversals? How do you see our NIMs moving forward in the remaining Q3 quarter, you know, considering how our liabilities would increase, basically the actions that you have taken? The average tenure of Pulse and of the liabilities will increase. Also, considering the fact that, you know, we had reinstated lending rates, you know, cuts from per person in microbanking. There are multiple factors, so if you can just, you know, kind of clarify how the NIMs will increase in the next Q3 quarter and what was the impact of buffer liquidity and interest reversals in Q1. Rajiv, there are three aspects to the change in the NIM. One is because of change in asset mix, which is to the extent of 25 basis points. Excess liquidity, which shall be absorbed in Q2 and Q3, led to a 17 basis point inflection. Last payment in microbanking, we had to refund prepaid installments interest to the customers, which led to a 14 basis points hit on the interest income. Total is 36 basis points. If points two and three were not present and only the change in asset groups were to be reckoned, then our NIM would have been around 8%, which is a gradual 8.3% to an 8% kind of a movement. What we have done is CASA deposit rates have been cut by 65 basis points and savings account rate calibration has also been done in a few buckets up to 100 basis points as well. These aspects are going to lead to a reduction in our cost of deposits. It has already reduced by 21 basis points in Q1 over Q4. We see further reduction coming by to the extent of 30 basis points based on our plan. With CD ratio at 86%, we have excess liquidity to the extent of INR 11,000 crore, which is getting unwind now. We expect our NIM to be closer to 7.9%, 7.9% in Q2 and Q3, and stabilizing at 7.8% by the time Q4 comes. Okay, 7.9% by Q2 itself? Sorry, Rajiv. I'm sorry. 7.9%. Yeah, correct. 7.9% Q2 because there are two factors. One is excess liquidity, which has buffered up. Correct. The up payment won't get repeated. You'll see an immediate improvement to 7.9% in this sort of stages. Okay. Also, just carrying forward this point of bulk deposits repricing, what is the average tenure, I mean, average maturity profile of bulk and what is the current cost of bulk deposits versus what is the rate in the market right now? What is the difference that you would capture in the next one to two quarters? Yeah. Hi, Hitendra Jha. If you look at bulk TD, we are now closing at 7.69% and average tenure is around one year. Okay, one year. Our cost, yeah. In retail, we are now closing 8.09% quarter one, which, as Mr. Nautiyal said, going forward, it will come down. Sure. Just one last thing on collections. As I can see, the correct collection manpower has been off-roll, has been ramped up in the last two, three quarters. How does it reflect in our collection efficiency and the rollback and resolution efficiency in the coming quarters? Can you just kind of tell us what kind of a recruitment can, would it lead to significant rollbacks? That is what the plan with this kind of augmentation in collection manpower? Rajiv, this increase in manpowers will help us in two ways. One is in SMA collections and the second is in NPA collections. That also includes write-off. NPA also includes, you know, write-off collections because these are higher TPD. In terms of SMA collections, we have seen that the environment was not so good. We had focused a lot on the early buckets. 31 to 90 is where most of our off-roll team is handling. We have seen the collection efficiency in SMA 1, which is 31 to 60, improve from about 36%, 37% to now 47%, 48%. SMA 2 has gone up from about 42% to 45%. A lot of our team is in the early buckets handling the slippages. That has also shown us lower slippage. The forecast is also going forward much lower. In terms of NPA collections, we have seen an improvement, but you know, in microbanking, it takes time. There are three, four, five meetings over a couple of months it takes for NPA to start getting recovered. Q1 has been better than Q4 in our NPA and write-off collections. Okay, got it. Thanks for that. Yeah. Yes, Rajiv, just to clarify, excess liquidity to the tune of INR 1,100 crore, not INR 11,000 crore. Retail FDs, the page rates have been cut now to 7.6%. Approximately, we'll see a drop. Hiten has mentioned about the quarter one average numbers. We expect a good amount of reduction there going ahead. Thank you. Okay, yeah, thank you. Thank you. The next question is from the line of Sagar Shah from Spark Capital. Please go ahead. Thank you for the opportunity and congratulations to the entire team of Ujjivan Small Finance Bank for a decent set of earnings in such an environment. Sir, actually, my first question was related to the asset quality. In this quarter, we have some loans which are insured against the CGS NUS team. What I wanted to understand is, how can we look, going ahead, that we have around INR 649 crore worth of cover for CGS in the cover. Going ahead, are we looking to increase our cover and just going ahead, what is the strategy over here? Thank you for the question. Yes, we have started doing CGSQ from Q4 and we continued in Q1 as well. We intend to continue this. This gives very good coverage, and we will continue to do a part of the portfolio coverage going forward as well. Okay. At least in the next one year, what% of the portfolio are you targeting to cover? In the next three years also, are you targeting to cover 100% of your portfolio? I would not be able to give you a% at this point of time, but we have it. We have times behind it. We'll be covering some part of our portfolio through the year of Q4. Okay. Got it. Next question was related to, sorry. I would just say that CGFMU is a dynamic activity that we would be doing quarter on quarter based on the situation around. Okay. That will depend on the situation of the kind of the portfolio quality that we'll be taking according depending on that. My next question was related to Ujjivan plus three lenders, which constitutes, as per your data, it constitutes almost 7.4% of your total borrowers. If I see the collection efficiency over the last, obviously, you know what the kind of environment we are going through. The collection efficiency is constantly dropping. When do you see this number stabilize? You already highlighted that you see some recovery going ahead. I wanted to exactly have some word about Ujjivan plus three lenders. What is, how is the portfolio doing and how is your collection, how is your overall collection team actually helping out to recover deals from them? One of the reasons for a drop in collection efficiency is also because, you know, Ujjivan plus three and above has also dropped. This number last year was about 14%, and now we are in the range of about 7.4%. As the denominator has gone down, that is one of the factors which contributes to a drop in collection efficiency because the good customers are finishing their loans and the delinquent ones remain. Having said that, it seems to us that it will take another one quarter to maybe four or five months for this portfolio to become insignificant. That is how we are looking at the rundowns. Okay, fine. My next question was related to OpEx. What kind of are we looking at the increase in our branch network this year and any guidance related to that? Are we, how are we looking to increase our branches across, maybe not the year but next year? Any guidance related to that? This year we are planning to open around 25 branches. Over the next four years, we may open around 400 branches. That is the overall. Okay, fine. Once this collection efficiency stabilizes, especially in this search portfolio, do we see that at least the off-road collection team coming back to normal by FY 2027? That will be my last question, sir. Yes, Sagar. You know, post-COVID, this team was in the range of about 1,800 people. Immediately post-COVID, we had ramped up the team. We abrought it down to 1,200 as collections, you know, the stock came down. During this time, we felt we needed to increase it, so we've taken it up. Progressively as the stock comes down, we will bring down the team size. Okay. That will be one of the factors behind the low income ratio, right? I'm sorry to interrupt. May I request you to rejoin the queue, as there are several participants waiting in the queue. Yeah, fine. The next question is from the line of Shailesh Kanani from Centrum Broking. Please go ahead. Yeah. Good evening, everyone, and thanks for the opportunity. Sir, my question is first with respect to our housing segment. There are hookers now at a decent size, and we are seeing a good growth over there on a quarter-on-quarter basis. One small data point over there, the SORP has seen a sequential drop from 96% to 94%. I was wondering, what is that balance 6%? If you can just kind of highlight any key monitorables in this book and key things which are going well for us in this book. Shailesh, we also take commercial property when we do labs. There is some part of residential and commercial. While I can come back to you on specifically what was the 2%, it could possibly be commercial property. We can come back to you on that. In terms of monitorables, in terms of asset quality, we monitor a 99.5% Bucket X collection efficiency. We also monitor our GNPAA and PAR. Our GNPA has been in the range of 1.25% for the past three quarters. It has stabilized in that range. What things have gone right for us means the growth has been quite robust over here? This is largely driven, Shailesh, by our distribution. We are present in almost 550 branches of the 750 branches we have, and the product is widely distributed. We have improved our distribution over the last one or two years. I would say that is the primary reason. The second reason is our price competitiveness. We also are competitively priced compared to the loans available in the market through competition. These are, I would say, the two factors which help us service our customers better. In addition to what Ashish said, we also measure our cash into disbursement ratio, which is close to around 90%, which is much higher than, I guess, in Raksi. That's useful. On my second question, I was just seeing the breakup of GNP A book and the top exposure, where it is about 15%. I remember earlier a commentary has been that it's very realistic, 15.1%, but our commentary has been that we will be keeping it below 15% any state exposure. Is there any change in policy over there or anything to read into it? Yes, we still hold that we want to keep a microfinance portfolio within the 15% range. I think the data that we are looking at is only group loan. If you include IL also, it will come below 15%. Obviously, in the last financial year, we have been facing issue in South. It is really Karnataka and Tamil Nadu. At this point of time, I would say from the last two quarters, we see that East and North has stabilized. It stabilized faster than other regions. We have a larger base there. We have a good number of branches here. At this point of time, we want to grow there. As South also stabilizes, we will also start growing here. You will see the price go again changing. Okay, that's helpful. Thanks a lot. The problem. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one or two per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Nikhil Vaishnav from Emkay Global Financial Services Limited. Please go ahead. Thank you for taking my question. Just one question from my side. You said about being clear in terms of some challenge from one customer regarding the prepayment. Can you give some detail on the thing, like, or keep the customer near this prepayment in loans or any corporate customers? Can you provide some detail on this? Hello. Yeah, it's nothing but, you know, we in microfinance segment, there is a day of prepayment because it is a monthly repayment and it is based on day in the center meeting. Some customers tend to pay, you know, one or two days, three days advance. The kind of accounting that we have in microfinance system, the two or three days advance repayment at interest benefit wants to be transferred to the customer. That exercise we have undertaken and that, you know, small amounts have been transferred to the customer. That is something which is going as an interest reversal before it was realized and then reversed. Okay. Understood. Secondly, sir, can you give some indication on the GNPA? Of course, it will be below 3%. Can you give some guidance or some indication on how it will be going forward in Q2 and in the second half, and also the credit cost? In terms of slippages, these slippages have started to come down post-Q4. In fact, as we said, Q4 was the peak in 9 out of 10 states, and Karnataka has peaked in Q1. We see the SMA book has, if you look at it, been steadily declining from 2.68% to 2.36% and now 2.29%. This means that the slippages going forward will be much lower than what we had in the past two quarters, so you can say that the GNPA would be contained below 2.5% as we go forward. Yes, sir. Thank you. Thank you. The next question is from the line of Abhishek from HSBC. Please go ahead. Hello. Yes, yes. Yes, yes, Abhishek. Yeah, thanks. A few quick questions. One is in the provisions of INR 225 crore. How much was for MFI? The quarterly P&L provision of INR 225 crore, out of that, how much was made for MFI? Abhishek, I'll come back to you, but around 80% should be the figure. Okay. Okay. Okay. I'll come back to you on this. We'll save this. Okay. Sure, sure, sure. In MFI GNPA, typically, what's the PCR you maintain approximately? It's in the range of about 70%. That is the mandate that we have. We have used floating provisions. As you must have seen, we have also used floating provisions at a bank level for completion of PCR. In that unsecured book, the provisions are slightly higher, and on the secured book, the provisions are relatively lower because they happen at an over, you know, the provisions increase at a much lower pace. Unsecured happens much faster. Yeah, yeah. If you are on unsecured, it is about 80%. Sure. On unsecured, 80%. Basically, when you write off, you have to just take the remaining 20%. That's, I just wanted to check that. That is true. In IL, how much is in Karnataka? What would be the par of that book? Sorry, Abhishek. You're asking about? In individual loan, the individual loan book, how much of it would be in Karnataka and what would be the PAR? In Karnataka, the book, our overall book is about INR 5,300 crore, and Karnataka is about 10% of that. The overall PAR is 7.4% in Karnataka. That is the IL par, individual book par. That is the IL par. How would it have been last quarter? While in the investment. Okay, okay, okay. It has increased from 3.8% to 7.4%. Right. Okay. Got it. Sorry. All right. Last quarter, ARC sale would be mostly in GL, right? No, no. It happens for both, a GL as well as IL. What would be the split? Last quarter, would you remember? 78% was GL and 22% was IL. Okay. Perfect. Perfect. All right. Thanks so much. Thank you. The next question is from the line of. Abhishek, one correction. Karnataka, the PAR has gone up from 6.8% to 7.4%. I mentioned erroneously 3.8%. It was 6.8%. Thank you. The next question is from the line of Chinmay Nema from Prescient Capital. Please go ahead. Hi, good evening. A couple of questions from my side. Firstly, please define color on what you're seeing in Karnataka on ground, and when do you see or how soon do you see the PAR number coming down initially or turning around? As Chinnmay, yeah, about Karnataka, you know, we are seeing improvement, definitely. That is very, very clear. The situation which we were in, the industry was in, in the month of January has eased out a lot. We see a lot of improvement in Ujjivan Small Finance Bank portfolio as well. At a broader level, Karnataka has two geographies in microfinance. We have Bangalore Metro and rest of Bangalore. The rest of Karnataka, you can say Bangalore was never affected for us. Bangalore has been doing very well even during the month of January, February, March. We have a large part of our portfolio in Metro. We are better than the industry. It is clearly showing in month-on-month data also in portfolio quality. We have excellent portfolio quality in Bangalore and Arman Market, as you mentioned. We see still some kind of issue in certain districts like Dausa, Ravanagares, Tumakuru, and Ramnagar, which contributes close to 10% of our state portfolio, and which is majorly, majorly, you know, impacted due to ordinance issues. Otherwise, the state portfolio is doing excellent. We also see an increase in demand in other pockets. With the ordinance issue subsiding slowly, new PAR addition has reduced across most of the districts in the state consistently and expect to improve further in the state. We have 24% IL book in the state, and it is performing far better than GL. As the profile and income levels of these customers in the state are much better, we will see continuous improvement in the coming months as well. Thank you, sir, for this. My second question is on PCR. The PCR has been coming down quarter on quarter. Is it trending? Is it driven by change in mix towards the secured book, or is there something else to look into? The PCR has come down because, you know, the increment in GNPA was faster than the increment in provisions. Now that the GNP AA accretion has slowed down, the provision accretion will catch up, and therefore, the PCR will tend to rise going forward. Number two, in terms of secured book, our PCR is low. You know, the GNPA accretion has also been very low there. Therefore, PCR has also shown a slight decline during this quarter overall for the bank. Got it. Out of those INR 775 crore of total provision, would you be able to share what are the provision PCR marks with the NFIB? Hi, this is Gaurav. INR 775 crores is the total provision. INR 130 crores is the floating provision earmarked for this. As we do this breakup of this, we totally have INR 181 crores of floating provision, out of which INR 130 crores is currently earmarked towards the calculation of PCR. We have another INR 30 crores earmarked for Tier 2 capital, and around INR 21 crores is unutilized. I get that. Out of the total provision, if you could share, what are earmarked towards technically the microfinance book? There is no earmarking within the floating provision. That happens as per the provision policy. Are you asking for a breakup of this between microbanking and others? Yeah. Of the overall provisions or for the floating provision? Overall provisions. Overall, we can come back to you. Broadly, about 80% of the micro, 80% is the PCR for microbanking book, and about 55% would be on the secured book. We will come back to you on that. Okay, sure. Thank you. Thank you. The next question is from the line Ashles Sonje from Kotak Securities. Please go ahead. Hi, team. Good evening and congratulations. Firstly, on the MFI book, if. Sorry, we are not audible. Could you be louder, please? This is better. Hello? No. Can you hear me now? Yes. Okay. Firstly, on the MFI book, if I look at the performance of the group loan portfolio, that has seen an improvement in the PAR 1 to 90 bucket over the last two quarters. If I look at the same metrics, the 1 to 90 DPD for the individual loan book, that seems to be steadily increasing both in% as well as in rupees in the individual part. What is the reason for this divergence in performance? Overall, our Individual loans book is doing much better than GL. Overall, the microfinance book is doing much better than the industry. within IL, we have been a little bit impacted in Karnataka. In Karnataka, we were doing very well in IL. the IL book size was also very healthy and large, and that has impacted to an extent. What we have seen in the past also is that in IL, even after delinquency, the recovery is much better than GL. We see that this will come back and our portfolio will improve. That's it. Okay. Can you give a breakup of slippages across group loans, IL, and non-MFI? Just one last question. Microfinance slippages approximately account for 80%. Roughly INR 300 crore slippages are from microbanking put together, group and individual. Housing is the rest, around half of the rest. MSME takes another bucket. Roughly INR 25 crore for housing, around INR 20 crore for MSME, and around INR 5 crore for the vehicle vertical. Got it. Within this INR 300 crore, how would it be split between GL and IL? 220 crore, INR 230 crore of Group loans and around INR 60 crore to INR 70 crore of Individual loans. Got it. Okay. Thank you. Those are all the questions. 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, Mr. Deepak. Please go ahead. Thank you very much, sir, for taking my questions. I just wanted to understand, first of all, I think you mentioned in the opening remarks that by third quarter, we expect normalized level of credit cost or collection efficiency. Is that right? We mentioned about the collection efficiency in microfinance to be normalized by Q3, yes. Okay. We expect 99%+ kind of a normalized collection efficiency by third quarter, right? Yes. Our current aspect is 99, close to 99.4% consistently for the last two months. We expect to go beyond 99.5% plus collection efficiency in expected. Sir, about credit costs, when do we expect credit costs to come to a normalized level and by which quarter? The increase in NPAs over the last two or three quarters is still to be fully provided. We expect that during the next two quarters, there will be provisions on the SOC stock. Since our Bucket X collection efficiency started to improve in Q1, the impact of that will be seen in Q3 and Q4. By fourth quarter, I mean, ideally, you expect a? Yeah, please continue. Yes, I would say so. I would say so that by fourth quarter, it would be normalized. What gets into Bucket X in Q1 starts to show an impact in Q3. In Q3, we will see a reduced number because the efficiency has started to improve in Q1. Got it. The NPA increase in the last two quarters, you have to provide for the next two quarters. Ideally, we will see an improving trend, at least, I mean. Yes, yes. In H2, one can say that the credit cost would be much lower than what we see in H1. Got it. What about second quarter? We can expect similar credit costs as we are seeing in first quarter in this coming quarter? We can say that, you know, Q1 and Q2 would have credit costs. Q3 and Q4 would have much lower credit costs. Okay. I got it. Just one last thing. What's the normalized level of credit costs we are looking at? I mean, once this settles down, in terms of%, what sort of normalized credit costs are we looking at? On unsecured, the credit costs should be in the range of 2% to 2.25%. On secured, we see 0.7% to 0.8% on a steady state basis, minus this disturbance in the environment that we are seeing now. That is a steady state credit cost that we should see. Okay. Since the book is 50/50, we might look at 1.5%, 1.7% kind of an average at a company level. Yeah. Okay. Okay. Okay. That's very helpful, sir. Anyway. Come again, sir? Hello? Maybe lower than that. Maybe lower than that. Okay. Maybe then lower. I got it. Fair enough. I think I would like to wish you all the very best. Thank you so much. Thank you, Deepak. Thank you. The next question is from the line of Vinay Nad karni from Hathway Investment. Please go ahead. Yeah, just one quick question, sir. That is on the credit costs. This quarter, what is the credit cost that you have suggested for actual credit costs in quarter one as a%? The credit costs are INR 225 crore at a bank level. As a%? As a percentage of gross loan book, mostly around 0.7% non-annualized. Secondly, in your projections, you have projected a cost-to-income ratio of 67%. With an advances growth of 20%, you still expect the cost-to-income ratio to be high? Yeah. See, just highlighting that you would have seen that, you know, our newer verticals have started contributing to the top line. The micromortgage, gold, vehicle, even MSME, agri banking. We still are in the investment phase. Additionally, we are also investing in the liability piece on the tech front, on the manpower front. You know, we want to work on our CASA. The investment phase continues on, and hence we expect the cost-to-income to stabilize. Okay. In terms of your, at which is for clean loan advantage and cost of funds, could you give us some direction for appendix? For cost of fund, we are expecting moderation by 20 bps, around 20 bps in Q2. And advance? See, adding that, we have just done rate cuts in the last 90 days. If you look at the way we have, from April to July, we have taken rate cuts around 65 bps in our PKFT rates and also calibrated the SAR rates. We expect cost of funds to come down. Mostly, it should come down by 20 bps each quarter as per our calculations traditionally. On advantages? Advantages, you're asking about ease? Yeah. We'll continue to come down with the secured mix increasing steadily. Once the microfinance business starts to kick in by maybe Q3 onwards, it will stabilize a bit before again further taking a downward trajectory. Okay, just from the. I'm sorry to interrupt, Vinay. May I request you? Thank you. Thank you. Right. The next question is from the line of Pranuj from J.P. Morgan. Please go ahead. Hi. Thank you for taking my question. In the presentation, you have written that the new infant Gardens are only applicable for Group loans. In the Individual loans, could you give a sense of how is the number of lenders spending on Ujjivan plus two or plus three and above on that particular book? Also, with PA lowering the qualifying criteria for NBS MFIs from 75% to 60%, do you foresee a chance where the competitive intensity in the individual loan meant changes? The last one is if you could give out the yield differential between Group loans and Individual loans. On the Gardens, yes. IL is beyond Gardens 2.0. We don't need to apply that. We have been applying even stricter rules for IL because yield to wild graduation is something which we have been doing for the last 15 years now. Very, very well-established and well-crafted products that we have in the last 15 years which we have developed. Our policies are much stricter in IL. At the same time, the underwriting is very, very different in IL. That also leads to a better assessment of the customers. That is not a problem. Yes, we have applied Gardens 2.0 later in spirit from April 1 and then January 1 and CNRCA. IL is very different for us. IL we underwrite in a very different way. That is even stricter than the Gardens that we have in place. As for the yield is concerned, IL yield is close to 100 basis points higher than GL. Okay. It's higher than GL. Sorry. Sorry. My question on IL was coming out more from the perspective of if you have some criteria where you underwrite the customer at the time of sourcing, it's also likely that because they don't come to the Gardens subsequently after you have given the loans, the indebtedness could rise if they take subsequent loans from someone else. It was more from that criteria and from a competitive intensity criteria also. Two points here. First is that these customers, if they try to take Group loans as such, they will not be eligible because Gardens will apply. As far as IL are concerned, this is our historic data also and historic data thing also stays. That is, proper ticket size loans are given to this customer segment, and underwriting is done well. The propensity of these customers taking further loans is much lower compared to in GL. This is something which we have seen over the period of time, and that also gives a lot of confidence when you are dealing with this customer segment and when you are graduating customers. Second point is that it also shows in data that 79% of our customers are Ujjivan and Ujjivan plus one. Okay. Got it. Thank you. That's helpful. Thank you. We have a last question from Mr. Shailesh Kanani from Centrum Broking. Please go ahead. Thanks a lot for the follow-up. Just one point, you mentioned that PCR will increase going ahead. Any ballpark number, will we be going back to around 80% by the year end? We would be hovering in the range of 75% to 77% during the course of the year. That is what the projections are telling us. We still would have INR 21 crore of unutilized provisions that we are not using for computation of PCR. That's over and above the 75%, 76% range that we are talking about. Okay. Okay, sir. That is very helpful. Thanks a lot, Umesh Arora. Thank you. As there are no further questions from the participants, I now hand the conference over to Mr. Shreepal Doshi for closing comments. Thank you, Vinay. Thank you to the management of Ujjivan Small Finance Bank for giving us the opportunity to host the call. Thank you to all participants for being there on the call. Thank you all and have a good evening. Thank you so much. Thank you. Thank you. On behalf of Equirus Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.