Aavas Financiers Limited (AAVAS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Aavas Financiers Limited Q4 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sushil Agarwal, MD and CEO. Thank you, and over to you, sir.

Thank you. Thank you for participating on the earning call to discuss the performance of our company for Q4 and FY '22. With me, I have Mr. Ghanshyam Rawat, CFO; Himanshu Agrawal, Investor Relations team; and other senior member of the management team; and SGA, our IR advisers. The results and the presentations are available on the stock exchanges as well as our company website, and I hope everyone has had a chance to look at it. For Q4 FY '22, we disbursed INR 1,287.2 crores, registering a 27% year-on-year growth, which is the highest quarterly disbursement in our history. Excluding the impact on business due to lockdown imposed during Q1, FY '22 due to second wave of COVID-19, our average monthly disbursement were close to INR 350 crores during the period from July '21 to March '22. Having said that, we continue to adopt a cautious approach on growth and give a higher thrust to maintaining sustainable quality and sustainable operating metrics. During the year, the average portfolio is reduced by 51 basis points from 13.16% as of March '21 to 12.65% as of March 2022. The average borrowing cost also reduced by 52 basis points from 7.4% as of March '21 to 6.88% as of March '22. As a result, the spread as of March '22 was maintained at 5.7%, roughly same level as the end of March 2021. Further, with our robust collection efforts, we have improved 1 plus DPD from 6.45% in December 2021 to 4.47% in March 2022. Similarly, our exposure to 90-plus DPD assets have come down from 0.83% in December 2021, 2.68% in March 2022, but we have also categorized 0.31% of up to 90 DPD assets as the NPA following RBI notification dated 12 November 2021 to harmonize IRACP norms across all lending institutions. As a result, total Gross Stage 3 stood at 0.99% in March 22. We will continue our strategy of controlling the RBI delinquencies and strive to maintain 1-pluse with 5%. I would now hand over the line to Ghanshyam ji, CFO, to discuss various business parameters in detail.

Thank you, Sushil ji. Good afternoon, everyone, and a warm welcome to our earning call. During the year, company borrowed an incremental borrowing amounting to INR 43,884 million at 6.04%. As of March '22, our average cost of borrowing stood at 6.88%, on an outstanding amount of INR 102,607 million. Our long-term credit rating continued to maintain a AA minus with a positive outlook from both rating agencies ICRA and CARE. Despite the highest short-term rating of A1 plus, we continue to maintain 0 exposure to commercial paper as a prudent borrowing sector. IGAAP to Ind-AS reconciliation has been explained in detail for profit after tax and as well net worth on Slide #32 and 34 of our presentation. Key parameters. As on 31st March 2022, total number of live accounts stood at 150,837, year-on-year growth 20%. Total number of branches was 314, 34 new branches added in last 12 months. Employee count is 5,222, 20% growth year-on-year. Assets under management grew by 20% year-on-year to INR 113,502 million as of 31st March 2022. Product wise breakup, home loans 72.1%, other mortgage 27.9%. Occupation wise breakup, salaried 40%, self-employed 60%. During the year, disbursement has increased by 27% year-on-year -- disbursement increased by 27% year-on-year to INR 12,872 million for the quarter 4 and FY '22, and by 36% year-on-year to INR 36,022 million for the FY '22 for full year. As of 31st March 2022, average borrowing cost at 6.88% against the average portfolio yield of 12.65%, resulting in a spread of 5.77%, borrowing side. Access to diversified and cost-effective long-term financing, very strong relationship with the development financial institutions. Overall borrowing mix in 31st March 2022 is 37.9% from term loans, 22.9% from assignment and securitization, 21.5% from National Housing Bank, and 17.7% is from debt capital markets. Assets quality and provisioning. 1-day past due stood at 4.47%. Gross stage 3 stood at 0.99%. Net stage 3 stood at 0.77% as of March 31, 2022. Gross stage 3 of 0.99% include 0.31% up to 90 days DPD, assets which has been categorized as GNPA following RBI notification dated 12th November 2021. During the financial year, resolution plan was implemented for certain borrowers account as per the RBI resolution framework 2.0 dated 5th May 2021. Some of such accounts with an outstanding amount of INR 1,361 million as on 31st March 2022 have been classified in Stage 2 and provided for as per the regulatory guidelines. Total ECL provision includes that of COVID-19 impact also as well as resolution framework 2.0 stood at INR 643.2 million as on 31st March 2022. Liquidity of INR 32,052 million as on 31st March 2022. Cash and cash equivalent of INR 15,690 million, unavailed cash credit limit from bank, INR 1,150 million, documented unavailed sanction from National Housing Bank, INR 4,060 million, documented unavailed sanction from other bank, INR 1,150 million. Profitability, during the year -- during FY '21, there was a tax benefit -- a tax benefit on account of share-based payment of INR 126.8 million adjusted in profit and loss account, whereas for FY '22, such tax benefit of INR 214.1 million was directly transferred to retained earning equity. Consequently, on a like-to-like comparison, PAT of FY '22 increased by 29% year-on-year to INR 3,575 million. ROA 3.6%; ROE 13.7% for FY '22. As on 31st March 2022, we are well capitalized with a net worth of INR 28,086 million, and our book value per share stood at INR 355.8. With this, I open the floor for Q&A session. Thank you.

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Yes. Good afternoon, Sushil ji and Ghanshyam ji, hope both of you are doing well. Firstly, congratulations to you and your team for demonstrating such a strong improvement in asset quality. I had 3 questions. Let me first try to solicit your views on AUM growth. Sir, while everyone keeps saying that the mortgage penetration in India is low and that there is an unlimited opportunity in the affordable housing finance segment. In your view, how big is the opportunity today in the low ticket housing finance space? And sir, I ask this because we hear very divergent views from players, and some of them even acknowledge that it is easier to build an AUM of, let's say INR 10,000 crores or beyond that, the client becomes very, very steep. So we like to hear what your views are.

So Abhijit, good afternoon. Some status as per our knowledge and the data we collected, India has 140 crore population, around 60 top cities have 35 core population and around 8 core families, and around INR 1.6 crore housing loan exist in that market, so around 20% penetration in that market. The rest of the India, 105 crore population, around 28 crore families and around 65 to 70 lakh home loans exist, so around 3% or less penetration. So I think the market in which we operate, even after 75 years of independence, the penetration is somewhere around 2% to 7%, 8% in different towns. So we think another 20, 25 years, we can sustainably grow in that market. Marketing, but that market is, you can say difficult in terms of, so you need to have patience, you need to learn to grow slowly, and you can create n number of time market -- opportunity in that market.

Sir, the second question that I had was on the higher PPVs that we have seen during this financial year. Can you give us some color on the competitive intensity in which segment or geography and to which lenders are these customers taking when it transfers to? And what is the alternative loan yields which are being offered by the competition that you deem it wise not to retain such customers? And lastly, can the BT outs further intensify as the interest rates now rise?

So Abhijit, normally the prepayment rate how it works with, around 6% to 7% comes into principal debridement with the installment, around 5% to 6% comes as a part payment -- prepayment from the customers from their own fund, and around 6% to 7% comes from a BT out portfolio. So traditionally, if you will see the first 2 components there is not much of the thing, it's a normal phenomena for large HFC also, for a small HFC also. On BT out, yes, pre-COVID level, we were able to contain it and we need to improve. We are working on that. So another 2% to 3% savings we can do with improved term in the next 12 to 18 months' time. And that's the kind of, so but not much of BT out impact, 2% to 3% higher from the normal level, which anyway in the very low interest rate regime you can assume. But we plan our distribution business numbers growth keeping that in mind. And the guidance which we have given that we can grow 20%, 22%, we are still matching. So I don't think so. But yes, competitive landscape will always remain there, because nobody recognizes it when it gets growth above the table hikes, everybody started recognizing and the competitor intensity will be there. But with the kind of distribution technology and niche created in the last 12 years of journey, we will continue to sustain our growth level, which we tell 20% to 25% growth.

And sir, the last question that I had was on the asset quality. And sir, excuse me, perhaps I'm asking you for the secret sauce on an earnings call. But I wanted to understand what aided the sharp improvement in your Stage 3A, which is your less than 90 DPD book. So out of the total reduction that we have seen in Stage 3 on a Q-o-Q basis, 5% of the reduction has come from Stage 3A. What really made me curious here is that you could not have initiated SARFAESI on this loan pool. And these customers who had 3 installments sometime in November and December when they slipped into NPA, suddenly they have so much money that they're able to pay 3 EMIs and get upgraded to standard. So were these resolutions more in the nature of settlements and closer rather than upgrades to Stage 1?

No. So Abhijit, as a process, any accounts which get marked and be in the system, the SARFAESI process got initiated. And after 12th November circular, immediately next day whichever accounts were under new regime counted as 90-plus or stage 3, we initiated SARFAESI. And you know in SARFAESI, there are 83 days, but within 60 days you will have first [ symbolic representation and swing ]. And customers who were already living in the house, the properties, the customer is there, then either customer takes any loan or he pre pays the loans. And these customers are almost those customers which were because of some event in life, they missed 1 or 2 installment and they keep on paying 1 installment every month. After proceedings, either they have closed or they have prepaid the outstanding. So there is no secret sauce, a process driven. And since the underwriting and process is good and in each case customer or properties existing, and so recovery anyway needs to happen.

Thank you. The next question is from the line of Karthik Chellappa from Buena Vista Fund Management. Please to ahead.

Congrats on another good quarter, Sushil ji and Ghanshyam ji. I have 3 questions. The first one is, if we were to look at your other OpEx line this year, almost every quarter that has been growing very strongly, almost 40% plus. While I understand that the branch expansion has also resumed, it looks like there are a few other expenses that are also growing fast. So on the other OpEx side, could you please help us understand what are these expense items that are growing? And how much of this is related to investments for which we will see the benefit probably 1 or 2 years down the line?

Karthik, good afternoon, and -- on the OpEx question, so last year, OpEx has almost 3 components. One is 2021 because of COVID there was salary deduction, less bonuses or no bonuses or incentives. In the current year as you see, there was a large attrition across the industry and to sustain that, the salary increase, incentive bonus as it was normal as well. So when you compare from 2021 when because of COVID no increments, no bonus, salary reduction. So this percentage looks high. Second, as you know, we are continuously investing in distribution, so every year 30, 35 branches, that is also there. But this year, we are also embarking on another transformation journey on digital side where we are scaling up our digital and technology infra for to cater to a $15 billion to $20 billion kind of size of assets. And in that journey, yes, last year also the other OpEx and depreciation is included and this year also will be a little bit high. We hopefully complete all this transformation journey next 12 to 15 months. So this will help us becoming a scalable infra to the side which I have told you. At the same time, it will help us in transforming the customer journey and the employee journey and experience, and also significant impact on reducing the tax, operating cost, operating leverage. So these 3 or 2 or 3 components are there because of which this year's numbers looks like this. But we continue doing investment. The hike is because I've told you to in '21 there was no investments in technology, no investments in manpower more, and reductions in salaries, incentives and bonus. So when you compare from a low base to the normal base, it looks like that high.

Got it. Okay. My second question, Sushil ji, if I were to -- just look at your AUM growth of 20%. And if I were to dissect it further, the AUM per branch has actually been growing at high single digit, at least for the last 3 or 4 quarters. Now given that some of your new branches in new geographies probably will grow faster on a lower base. This would mean that in some of your existing geographies, let's say, if it is Rajasthan or Maharashtra or so, the AUM per branch growth is probably even like mid-single-digit CAGR. Why do you think this is the case?

So Karthik, I think we need to see a cut of the number. But the philosophy with which we work, I've told you also that all investors when you open a branch, take it inner view. So like some branches in 4 lakh, 3 lakh or say 4 lakh population town, so divided by 5, so around 8,000 families. In the next 15 years we need 2.5% of the customers, so around 4,000 customers divided by 180, so almost 30, 40 case per month. So we go that way and then AUM growth will be in tandem. We don't say that this year will do 3, next year we'll do 4, next year we'll do 5, next year we'll do 6. Some efficiencies will always be led. But all of that is almost 90% of our branches are ROE positive in the first 12 months. We open in second half. So it will remove that part and because of COVID also last year also the branches we opened the branches. The growth is a little bit low. We expect them to do normal business function from this year. In fact last 3 months, the normal business numbers were there. So I think like a 20% year-on-year growth from all the branches. It will always be, some branch will be at 100% efficiency levels, some 80%, some 65% level. And normally 3-year lag is there to achieve the 100% efficiency.

Got it. Very clear. My last question, Sushil ji is, currently what is the difference in the yield between our fixed versus floating rate product? And are we seeing any shift from customers towards more fixed rate loans given that interest rates are starting to trend up?

Normally, we give all the options to customers while they apply. Between fixed and floating, they are difference of 275 basis points as the yield in the portfolio. And we normally try to match our lending with the borrowing kind of pattern. The money which we can raise or we raise on fixed rate, we try to on that fixed red lending and money which we have borrowed on a floating rate basis, we try to tell. And I think balance sheet is perfectly matched on fixed and floating rate if interest rate. But it is the customers choice. And we are not seeing any significant difference, if you will see quarter-on-quarter basis, it's hardly 1% difference.

Thank you. The next question is from the line of Mayank from InCred. Please go ahead.

Hi, am I audible?

Yes.

Hi, sir. So basically my question is on the increasing prices of construction material and other inflation. What kind of challenges are you seeing on housing demand or on the under construction property of our customers? And what kind of change in our cash flows are we seeing on the household due to inflation?

Mayank, on the construction cost side, so I will give you one data point. So even 10 to 15 years back the construction cost for a normal home used to be around INR 1,000 to INR 1,100 per square feet. But during that time, construction material costs was 35%, 40% and labor costs used to come 60%. Now over a period of time the metal cost has increased from 35%, 40% to 60%. But there is a significant cost in labor, reduction in labor cost because of machinery, new method of development. So we will see basically a sectoral rate on which government used to give the tender for constructing the home, while around INR 1,100. And even in March government has issued the tender on INR 980, INR 995 cost. So basically it depends so not much of that difference, but yes, maybe 5% to 10% further beyond that. But over a period of time customer affordability has also increased. Even if you take inflation rate growth in income. During last 2 years because of COVID, some of the cash flow of the MSME was hampered, but I think last 9 months the recovery is better and faster. And I am seeing at least in our portfolio when we discuss with all the customers and even we process some more than 4,000 customers last quarter. Now cash flow levels are almost matching the pre-COVID level at the ground level, the kind of profile which you find for a customer.

And what is the employee base for us as on 31st March 2022.

Employee base, 5,222.

Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.

Yes, congratulations for a good set of numbers. So firstly, the question is with respect to the OpEx again. So when we look at it, maybe you highlighted that maybe on a long-term average we would want to be somewhere around 200 to 250-odd bps, and we are still at 3.9-odd percent. So how should we see the overall trajectory, maybe the investments still are going to continue and even for 20%, 25% kind of a run rate on the AUM, should we really see the higher OpEx trajectory? Or maybe as the effect goes away and it should normalize and there should be some operating leverage that we'll play in now.

So Kunal, good afternoon. During pre-COVID if you see, in pre COVID last 3 years we were able to reduce our OpEx by 30 basis point year-on-year basis. Due to COVID in the last 2 years, that operating leverage was not able to visible. One is because of 4.5 months in the last 2 years went into COVID and the fixed cost option which is already there. But with the use of normal business, we able last 9 months number after COVID, significant recovery has impacted and hence you see network has grown 17% from a year-to-year basis. So that is there. But we continue to grow even in COVID Phase 1 came, both year we opened 30 to 35 branches. And as I told you now we are embarking on another digital transformation journey for the side which I have told you. So that will be there. But yes, with that also this year will be -- we hope so there will be no COVID impact. But that will be there. Yes, 30, 35-point cost efficiency we can expect.

30, 35 basis points of cost efficiency, this fiscal itself?

Yes.

Okay, and this digital -- any estimate in terms of the cost because on the overall base that might not add significantly. So any cost in mind, maybe in terms of this entire digital business.

So it will be somewhere spend in 3 to 4 years' time, but yes it's a normal technology OpEx or debt pressure or put out maybe INR 20 crore year, this will at least double for next 3, 4 years.

Okay. Okay. And secondly in terms of the overall rising interest rate environment, so on the borrowing side when we look at it, maybe you have and which is highlighted how much is the fixed and how much is the floating on asset as well as on the liability. But as and when our fixed, maybe as and when our borrowing cost goes up, what would be our endeavor? Would we tend to pass it on? How would that be? And across the board given that home loans for many of the players are EBR-linked, the repricing on asset side is also going to be early. So what would be our stance and maybe we would tend to pass it on the benefit to the customers or still retain the spreads?

So Kunal, we discussed these matters in ALCO committee and at the Board level. And there is a proper governed framework where we assess our current lending rate, it's a combination of cost of borrowing, OpEx, risk-based pricing, etc. And accordingly, ALCO and Board advises for this rate. As you know, we have perfectly matched balance sheet both on fixed and floating side where -- so if any quarter, it will see impact that our floating rate of interest has increased, we will pass it on to customer base as per ALCO and Board guidance. Even in fixed side, though we have fixed rate of borrowing for longer period, but our fixed date of lending is 3-year reset allows. So there also that kind of risk is not there on the balance sheet. But we will assess the situation based on the impact -- real impact on our borrowing costs since we have huge liquidity at this point of time as mentioned in the sheet, around INR 3,200 crores after with INR 1,800 crore fixed deposit. So immediately I think there will be no pressure, but we will assess the situation every month and with ALCO and Board guidance, we will take the decision.

Sure, and with respect to the vintage of branches, so in fact, when we look at it, say, in FY '18, FY '19, the number of branches that would have got added. Now maybe we would have not seen that kind of a productivity scale up during COVID, but generally in 3, 4 years of the vintage we see the significant scale-up. So still maybe if I were to look at it in terms of the vintage, in fact, over the next 2 years the productivity improvement can itself bring about a significant growth looking at the additions which have been there 2 years prior to or maybe a couple of years prior to COVID. So then maybe what is still leading to this 20%, 25% growth? Or maybe overall we should see the productivity not getting back to those levels immediately at the branch level?

So Kunal, there are 2 points. If we will see, disbursement is growing 36% year-on-year. Even last year 33%. So branches disbursement pattern is on lighting. Second, we have 5 categories of branches, A, B, C, D, E, and every branch is categorized on different potentials. So when we open the branches, it's not always A category branches with the potential of INR 5 crore or more per month business. They are more C and D category branches with INR 1.5 lakh or INR 75 per money kind of businesses. Because those branches we get a good add, lower ticket size cases and mostly new to customers, which is our kind forte and brand segment of the customers. So as the new branch productivity, I think they are performing as per the defined structure for them, because disbursement growth is intact. Yes, AUM growth outcome of different things, out of pay out, BT-out and once you scale up on that thing, it is now around INR 11,500 crore and prior to this INR 9,500. So all these are factors which determines the AUM growth. But anyway we always project that we will grow 20%. And we are performing on that level. Last year 2% additional prepayment and 2% AUM growth because of 1.5 month of COVID. Otherwise, we were able to perform 20 to 25 kind of percent growth. If situation remains normal this year, I think we will be able to deliver that kind of growth.

Sure, sure. And one last data point question. How much is the asset held for sale as of March? And if you can just give the flow for this quarter in terms of the additions and the resolutions from that.

Net 23.

Net is 23 compared to that of 20 last in December?

Yes.

Thank you. The next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead.

Thank you, sir, for the opportunity and congratulations on great set of numbers. So I apologize in advance, I will be harping on the same question of growth. Sir, I'm looking at your DuPont metric. So look, the ROE of 13.7% and that has been actually constantly going up. And if I just juxtapose to that, your capital adequacy and leverage, so we are at capital adequacy of around 50%, 51-odd percent, right, and you are growing at 20%. So I understand you mentioned the levers of growth in the previous remarks you made. But keeping these 3, 4 metrics in mind, do you think, I mean, Aavas has still huge potential to grow further and even beyond unlike as to what you've been guiding as on today?

Good afternoon, Shweta. On ROE side, the number is INR 13.7 crore, but it was including the tax benefit, opening capital versus closing capital there is a growth of 17%. In fact, Q4 ROE is around 17%. But we said in our continued guidance that ROEs will improve by 100 to 150 basis points on a year-on-year basis. And I think they're on the right trajectory and we are delivering that number.

And on the growth front, in light of higher capital adequacy and leverage, if that has taken off higher, don't you think growth can exceed even your current guidance?

So Shweta, we as a management are comfortable delivering 20% to 22% growth year-on-year basis sustainability. Even if you see despite COVID year in 2021 also we were able to deliver 22% year-on-year growth where some of the peers were not able to deliver that. Yes, capital, when you see adequacy-wise, it looks higher, but we work in ecosystem where lenders are there, ratings are there, and RBI notes are there. And everybody sees capital in a different tangent. So when you see from RBI perspective, they see capital adequacy. But when you see some rating agency perspective, it is AUM divided by capital. So already 11,500 divided by around 2,500, around 5.5, 6 leverage. When we go to lender, they see it from that equity perspective. So then we were A rated, we were almost around 510 guidance and AA rated around 5.5, 6 guidance on leveraging them. So we are following that and increasing the leverage and growth, is a continuous journey and target from BBB minus to AA minus. And as we improve ratings in our journey, you can see more better capital efficiency in terms of all the 3 parameters.

Yes, sir, that's well put sir. Sir, my second question and last question perhaps. So you mentioned about BT out cases, although they are on the lower side of 6%, 7%. But just because I'm trying to understand the market and the areas of operations. So who are you losing out to these BP out cases, where are they going to? Who are they going to? And secondly, just an extension to that, you have more than 30-odd percent new to credit customer rate. So because you are present in that nation unique customer profile, so there might be higher possibility today in the age of digital era, you might be having higher financing that might happen going forward because you would create history, the track record and given your high demonstration of asset quality there would be many who would want to sort of take over your portfolio. So just your thoughts on both of these counts. Thank you.

Shweta, as Aavas, we recognize that risk that in our business model that will always exist, that when we acquire a new customer and when they demonstrate better customer credit performance, they are prone to BT out. But as a organization over a period of last 11 years, we have developed our algorithm, understanding, analytics model, where we can work around this parameter and still able to retain customers or use this base pricing as per model approved by ALCO and Board. And I think in the past and even COVID and even current year, those algorithms are working fine. We will try to grow it further better so that we can get 2%, 3% kind of benefit on a yearly basis. And that gives us the confidence even in the difficult times, even in the more intensified competition we will be able to sustain and retain our customers and sustain our AUM growth level going forward.

Thank you. The next question is from the line of Nikhil Kothari from Mantra Capital. Please go ahead.

Yes, so thank you so much for taking my questions. So, sir in the presentation you have given that we have invested INR 15 crore in Aavas Financing. So what's the business we are looking at in the subsidiary?

Nikhil, we have applied for the NBFC license in Aavas Financing. As per regulatory requirement, medium capital into that. In the subsidiary, we intend to do secured MSME products and other customer lifestyle product.

Thank you. [Operator Instructions] The next question is from the line of Siddharth, an Individual Investor. Please go ahead.

And congratulations on numbers. I just wanted to understand on the yield mix for the HL and lap products separately for both Q4 and FY '22? Because I was looking at Slide 20, and we have seen that yields dropped by about 50 basis points year-on-year. So just wanted to understand on HL and lap what is the acquisition yields that we have had for both Q4 and FY '22.

I think -- if you will see our HL and non-HL portfolio was around 73, 27 as of last year and current year it is 72.1 and 27.9. So 90 basis points difference on a year-on-year basis.

Sir I just want to understand the acquisition yield of HL and lap book.

We have -- so you're asking in non-housing, the component of HL or MSME that?

No, not the percentage, I just want to understand the yields at which we are acquiring the book, what is the home loan acquisition yield and the non-home acquisition yield.

So for non-housing -- yes, so for housing 11.7% and for non-housing 13.2%.

Okay, and this is for Q4 or for the full year '22?

Full year.

Full year '22, okay. And just one more question on back of questions from Nikhil. So we are setting up the affluent or affluent segment. So is there a shift in strategy from affordable to mid? Or this is going to be a small portion of the entire portfolio?

So, Nikhil, this vertical is there from last 4 years. This vertical contributes around INR 30 crore, INR 35 crore up to INR 400 crore, INR 450 crore we do. And this proportion is same almost last 4 years.

Okay, okay. So we are going to stick with the affordable segment and there is no clear shift in strategy to the mid or affluent seller.

And this department is also from the last 4 years and not this year.

Thank you. The next question is from the line of Abishek Tibrewal from Motilal Oswal. Please go ahead.

The first one is more of a data question. Can you share the geographical split of our disbursements, I mean what was the disbursement mix, this is after we -- in FY '22?.

So Abhijit, we will -- so almost similar to AUM level, 2%, 3% year-on-year headway.

Okay, the mix will be the same as what we have in the year?

Yes, yes.

And typically, have you seen your -- I mean, the AUM mix are typically declining in Rajasthan over the last, let's say 1 or 2 years.

So in the disbursement per month, yes, but AUM, it will take time. I think it's 1% or 2% year-on-year difference.

Okay. Sir, and the next question again, and my last question again is more of a, I would say, a recreating of some of the questions that I mean, participants have asked already. So typically when I look at Slide #20 where you present the spreads that you mix, very clearly, I mean, I would say FY '21, FY '22, we have -- we and including the other HFCs have enjoyed, I mean high spreads given that, I mean, cost of borrowings came down, and we were not maybe required to pass on the reduction in cost of borrowings to that extent to our customers. But now going forward as your, I would say, cost ratio has moderated as you had guided by about, let's say 30 to 35 basis points. You've already addressed a large part of the asset quality pain which was there because of those first and second COVID waves. Is there now a case to maintain the high level of spreads? Or does it make more business sense to start moderating our spreads and the focus will be more on maintaining the, let's say, the ROE?

Abhijit, as I always articulate in our journey when we started 2011, '12, we were able to maintain 5% spread. In pre-COVID level also we were able to maintain 5% plus/minus spread. During COVID, this spread increased, but we have 25 basis points to our customer base in upper end already. And we told that due to some uncertainties which everybody looks in COVID, we retained that spread in our balance sheet. As the situation will normalize and even in current situation now in terms of rate hike, according to ALCO and Board decision, we will do the working on PLR and all those things. But in the long run we want to maintain from 5% spread, and accordingly cost structures and everything will be playing the role in the next journey.

The next question is from the line of Vikas Kasturi from Focus Capital. Please go ahead.

Namaste Sushil ji, Namaste Ghanshyam ji. Congratulations on a fantastic financial year. Sir, my question is more to do with the business. Could you please let us know what are the new digital initiatives that you are taking? And what is the expected benefit out of those? That's it, sir.

Good afternoon, Vikas. As a company at Aavas, we continuously invest in our digital and technology and with a continuous effort from the management and board side. In that journey again when we look ahead 10- to 12-year journey, we thought 5 will be definitive scale. So we're investing into different -- to prepare our self for that large scale and size and similarly RBI regulations are converting more and more NBFC loans towards the banking kind of regulation. So we are making ourselves ready for those kind of adherence and corporate governance. At the same time, looking at the current customer profile and the Internet journey, we see there will be digital conformation which is required. So in the last 10 years journey we came from 23 days debt to 10 days debt. Now in the next digital journey we are trying to reduce it by a significant margin, say 50% to 75% further improvement from here what we are there. And this will help us bringing more efficiencies in the operation. We'll make Aavas ready for new scaled operation going forward. And at the same time will enable us for kind of more control and govern environment which the regulator wants and readiness of data for the future growth.

Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to Mr. Sushil Agarwal for closing comments.

Thank you all for attending the call. For any further information, we request you to get in touch with Himanshu in our Investor Relations team or SGA or IR advisers, and they would be happy to help you. Thank you for patience listening and your continued support and interest in Aavas.

Thank you. On behalf of Aavas Financiers Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.