Apollo Finvest (India) Limited (512437) Q3 FY2026 Earnings Call Transcript & Summary

Good morning, everyone. Thank you for joining us today. I'm Pooja Gohel, Company Secretary and Compliance Officer of Apollo Finest India Limited. On behalf of the company, I warmly welcome you to our quarter 3 financial year '25-'26 earnings call. Joining me today are Mr. Mikhil Innani, Managing Director and CEO; and Ms. Diksha Nangia, Whole-time Director and CFO of the company. They will take you through the company's performance and key highlights for Q3 FY '25-'26. [Operator Instructions] With that I request Mr. Mikhil Innani to take these proceedings ahead.

Perfect. Thanks a lot, Pooja. Just allow me a minute. I'll share my screen and then we'll get going.

Sure.

is my screen visible?

Yes, it is.

Perfect. All right. So firstly, thank you, everybody, for taking out the time this morning to spend the time with us and allowing us to kind of take you through the progress that we've made in the last quarter as well. So without any further ado, let's get started. So here's a quick snapshot of the financials over the last quarter or so, right? As we can see, basically, there's been sustainable profit growth like we kind of try to deliver every single quarter. There's been an uptick as well in terms of ROE. So things moving along in the right direction. And we can also see some of the numbers ahead, which support that the underlying metrics are also positive. So with that, I want to talk about the portfolio quality because ultimately, what's a lending business without great portfolio quality, right? And we've always kind of stressed on the fact that we try to always have the top tier or the top 5% portfolio quality as compared to the rest of the industry. And our numbers kind of really double down on that, right? Some of the numbers that we are really kind of happy about is obviously, the GNPA number, which is almost half of the industry and also the 30 PAR numbers, right, which are almost 7x to 8x substantially smaller than the rest of the industry. Actually, it was almost 15x to 18x lesser than the rest of the industry, right? So that's a significant kind of differentiator in terms of our portfolio quality versus the rest of the people, which are present in the digital lending space in India. The way we've kind of gone about this is something that we've spoken about in the past as well. But I think some of the things which are now coming to fruit is all of the partnerships that we've been doing over the last 1 year. As you've kind of stressed, our philosophy has been really kind of understanding the space by doing a few term loan or warehousing financing loans with some of the best players in the industry. With our -- where our focus is primarily ticket sizes, which are less than INR 2 lakh or so in terms of the amount. The main reason for that is fundamentally, we feel like those are the kind of loans, where doing digital underwriting kind of makes sense. I think anything above INR 2 lakhs does go into the physical territory in terms of the trade-off between doing it digitally versus doing it physically. So I think our focus has again been in trying to partner with the best the retail name players in the fintech universe. And because of that, I think a lot of our partners have graduated from us basically giving them term loans or warehousing financing loans to now us doing BC or co-lending partnerships with them. Because of this, obviously, our retail exposure has also quarter-on-quarter gone up almost 2x in terms of size, right? And we're expecting this momentum to kind of continue. And hopefully, over the next few months or quarters, our retail book should be largely significantly in the 70%, 80% category of our entire AUM. With this, obviously, one of the surprises that we kind of want to talk to you about today is the new adventure that we've kind of embarked on over the last 2, 3 months, I would say, specifically, right? So this is something we've been asked about really over the course of almost the last 8, 9 years that we've been on this adventure -- that when will you guys go direct and why aren't you guys going direct, right? So I want to take some time out about -- to talk about exactly what we're doing and why we're doing what we're doing and how we are doing all of these things, right? So I think our strategy overall in terms of digital lending has been the following, right? I think when digital lending kind of got started in India about 8, 9 years back, right, I think there was a big question mark about whether digital lending itself would work in India, right? Would it be that the old-school ways of underwriting are the only way to underwrite? Or is there any -- or was there any credence to basically underwriting people purely digitally and also at the same point time, take -- make money out of this, right? I think the industry itself took about 5, 6 years to figure out this business model. And during that time period, I think our philosophy was largely to be a platform, right, where we essentially worked with many, many players out there, where our -- again, our focus has been retail side of digital lending, again, ticket size of less than INR 2 lakh or so, where we basically worked with the many, many fintechs, right? I think at this point in time, we must have worked with more than 80-plus fintechs really over the last 9 years that we've been doing. And it's really been like observing and learning exercise for us to firstly understand what are the kind of loans, which kind of work, what are the kind of business models, which work and most importantly, what are the kind of loans, which don't work and what are the kind of business models, which don't work. I think one trend that we observed over the last 2 to 3 years is especially the digital lending guidelines of RBI, right? What pretty much happened after that is in conjunction with to, obviously, the interest rates essentially increasing across the world pretty much was that equity became at a premium. And obviously, RBI became very, very strict about not allowing too much FLDG, first loss guarantee in these businesses, right, which really meant that the risk had to be controlled. And with the tightening of equity, it mean that -- it meant that the business models have to be kind of sensible. So one of the good things that we observed over the last basically a couple of years is that not only has the industry contracted in terms of number of players, but I think it's expanded in terms of overall AUM. At the same point in time, now we see at least 4, 5 players out there, which are actually having double-digit ROEs. And at the same point in time, obviously, by that matter of fact, kind of delivering positive portfolios, which are actually good quality and at the same point in time, managing the risk really well, while growing their book as well, right? So for us, I think it's been an exercise in kind of working with these people. And at the same point in time, figuring out what really works with these platforms, what's the best way to go about interacting with them. And while we've kind of done partnerships with them, work with them very closely, done on-site kind of interactions with them, we've had a lot of learnings. And I think with Apollo Cash, the goal is really to execute on those learnings. And the way we'll be going about doing that is, first is hiring really people from players that we've been impressed with, number one. And number two, at the same point in time, finding people in the industry, who have done this for easily like 5-plus years and getting them on board at Apollo, specifically to do pretty much the same thing that they've done in other industries or specifically in this digital lending industry, but the same role really to kind of help us scale up exponentially, right? So while we are very, very early when it comes to Apollo Cash, I think some of the things that I'm expecting right now is probably the contribution of Apollo Cash in the next 12 months towards our AUM should be sub maybe 5%, 10%, right? But I do expect this to be a very, very large part of our story in the next 2, 3 years to come, essentially. And a lot of our hiring plans are being influenced by investing in the future of Apollo Cash. And I do expect our employee expenses to go up as a result. But it's all an investment towards the future, which we are pretty confident that we will be able to crack. And this will be a real -- this will be a really a big star for us to be able to grow this exponentially over the next few coming years, right? That being said, I think a lot of the things that we are doubling down on, obviously, is fraud and risk specifically, right? And how do you go about and do that? I think one of the big evolutions, which is happening in the fintech industry is really getting access to, I would say, authentic banking information, right? And that's largely due to account aggregator. I think before the industry was relying upon PDF statements, which unfortunately -- or you could say, fortunately now with AI, you can come up with really big fraudulent ones. But I think thanks to a lot of initiatives from the government and the banking industry, I think account aggregator has now become a good avenue for us to get authenticated data. So that's very, very useful. And in fact, we've already done INR 30-plus crores of disbursements using AI-driven underwriting, right? So it's very much in full flow at Apollo. I think other things that we're also deploying not only in Apollo Cash, but across our partnerships is a lot of learnings are, I would say, cross-pollinating between the 2 businesses, right? Because what we learn in partnerships, we deploy in Apollo Cash and vice versa as well, right? So I think not only are we learning about lot of interesting signals that we are getting, right, things like device data, SMS data, people's app usage, right, indicators about how old SIM cards are as an example, right? And one of the big learnings has been for us that especially when we're giving out retail loans, just primarily using things like bureau and A, as an example, are just not enough. You need access to device and SMS and telco information because that really provides you real-time information about what is happening in the customer's life. If you think about basically bureau data, right, one of the big problems with bureau data today is that the data, no matter which bureau you pull from is at least 60 days old, right? And in a credit-hungry economy like India and especially when we are focusing on the kind of borrowers that we are focusing on, right, which tend to be somewhat well versed in using, I would say, digital lending apps, right, which are pretty fast and furious in nature. I think a 60-day lag is largely unacceptable to be very honest, right? So we want to get access to the very last second of what's happening in a customer's life. And thanks to getting the device data and SMS data, we're able to pass through a lot of that using AI as well to figure out what's the best way to segregate this data and turn that unstructured information into structured signals as well, right? So this has been absolutely super-duper powerful for us, right, to be able to differentiate between, firstly, fraudulent versus non-fraudulent. And I think that's a big part of the game, which not a lot of people talk about, but I think that's actually key, right? Because fraud is not really risk, right? Because when it comes to fraud, it's either 1 or 0, right? Either the customer pays or he doesn't pay. With risk comes after fraud because there, you're trying to figure out is this customer in a capable position to borrow? If he can borrow, how much can he borrow without being overleveraged and being able to pay that sustainably as well, right? So there are multiple layers to kind of figuring this piece out as well. Finally, a lot of our investments, like I said earlier, have gone towards building a very, very capable team. Obviously, I think over the last few years, we are privileged to have some team members, who've been around in the company for a while, right? So I think the compounding of knowledge essentially from being in the same space in the same industry really, really helps because I really feel not only in this industry, right, but I think pretty much in any industry, having people who've been doing the same thing for multiple years, it does help significantly. And especially, I think in a space which is relatively new in the grand scheme of things, which is like digital lending, I think this is a really, really niche skill set. So we've been obviously nurturing our existing talent, but at the same point in time, hiring people from, I would say, companies that we are familiar with and who have a solid exposure in digital lending because when we add those kind of people into the system, it not only gives us added knowledge, but also helps us move forward quicker. So we expect this to continue happening. And we expect a few more hires to come in from companies within the industry, companies that we really like and respect to add on to our knowledge layer, which will kind of help us really dramatically scale up over the next 24 months or so, especially with Apollo Cash. So with that, I want to kind of pause and obviously allow questions to come in. Thank you so much again, and we'll open it up now for questions.

Thank you so much, Mikhil, for sharing valuable insights of the company's performance. We will now open the floor for questions. [Operator Instructions] So I can see [indiscernible].

Hello. Am I audible?

Yes.

Yes, you are.

I have 2 questions. Firstly, as you mentioned and I also have been following, right, for the past 3 quarters, on your website, you've been ramping up partners and term loans as well. But term loans, as I recall correctly, are from 6 to 12 months. So like what time frame do you expect when our disbursals, AUMs and revenues actually show some growth considering the liquidity easing that's been done by the RBI as well? Secondly, as a partner, besides funds, what additional features, benefits or tech does Apollo Finvest provide to the partners because funds can be provided by any other NBFC too, right? So what other features does Apollo Finvest bring to the table? These are my 2 queries.

Perfect. Thank you so much, Nitul. So I'll answer the questions. I think the first thing is, as you rightly pointed out, I think for the last couple of quarters, we have been mentioning that we are kind of ramping up on our retail partnerships, starting with either getting into a term loan with them or doing a warehouse financing structure with them, all for a period of around 6 to 9 months preferably, right? So for us, essentially, the last couple of quarters has been to try and examine a lot of these companies very, very closely. And that's something, which we can do only by doing a structure like warehouse or kind of doing term loans because that's what allows us access to a lot of data about those companies and really kind of getting under the belly and understanding whether these companies are something that we want to double down on or not by doing BC or co-lending partnerships, right? Like that's how we think about term loans. And because of that, I think one of the things you must have noticed, as we pointed out in today's earnings call that our retail book overall has almost grown 200%, right? I think that's all a function of a lot of the partnerships that we ended up doing, which were starting wise, maybe warehouse or co-lending -- sorry, warehouse or term loans in structure, right? So I think in terms of the second question that you kind of mentioned, which was on the lines of revenue, right? I think for us, basically, the focus isn't revenue because I think we always kind of think first in terms of profitability because revenue is purely a function of kind of business model, right? Because as an example, if we do more BC or just lead gen partnerships, right, our revenue will ramp up. But if we do co-lending partnerships, your revenue won't ramp up, right, because there's a difference in the way commissions are given out structurally, which RBI has kind of directed, right? So I think revenue is not really the right way, I would say, to examine at least a business like ours. I think profit is the right way. So we kind of think about it internally that revenue -- I mean, it's very easy to inflate revenue in such businesses, to be honest, because you can just basically end up doing BC partnership instead of a co-lending partnership and then your revenue kind of jumps up, right? I think what we try to do is focus a lot on the bottom line. So that's how I would think about that. And I think bottom line is for us a function of purely ramping up AUM right now. And we've been kind of focused first on first finding the right partner, and we always kind of go slow with every partner, right, because we don't want to go in and directly deploy a lot of money in the first shot, right? We kind of observe people's books, and we want to be really, really sure about -- risk isn't something that we are very worried about, but other things -- other softer things about the partner, right? How do they to deal with or how do they to work with, right? I think those are things that we have to kind of examine over a couple of quarters. And once we have that comfort, then we start slowly kind of deploying more and more capital. I think that being said, right, I think 2 things, which will definitely happen in the coming quarters is, one is we are obviously looking to take on debt as well to obviously scale up. And at the same point in time, we are looking to obviously make some key hires as well, which will, like I said, right, will increase our expenses, but it is all investments I see towards the future of Apollo Cash, especially, right? I think that to me is something, which we feel can have a huge multiplier effect in terms of where this company kind of goes over the next few years. Did I miss any point?

Hello?

Yes.

I'm sorry, I couldn't understand just one small thing that you said as Apollo Finvest as a business model, you can't directly look at revenue. Could you please, if you don't mind, explain me that small point? Like how does -- why is profitability a bigger chunk of focus and not revenue?

Yes, because, I mean, I explained to you, right? Like if you think about term loans, right, and you compare it to something like a BC partnership, in a term loan, we basically just make interest, right? But in a BC partnership, what happens is the entire repayment of the customer comes to us. We then split it by taking our share of the interest and then passing on commission to the fintech partner that we are working with, right? So basically, we become a pass-through mechanism in that case, right? So net-net, basically, the amount of profit that you end up making in both situations as long as obviously, the commercials are agreed the same is the exact same thing, right? So similarly, in a co-lending scenario, right, usually, the way it is structured is the fintech basically ends up or the NBFC that we're working with ends up directly splitting their share from the repayments, which come in, right? And we don't have to pass through a lot of -- or very miniscule amount of commission to them in certain cases, right? So I think -- it's just because of different business models that we can deploy when we are partnering with the fintech, I think top line can differ largely with that, right? If we -- as an example, if you look at Apollo, maybe a few years back, right, our revenue was quite significant. And the reason for that because we had not started doing any form of term loans or co-lending at that point in time, right? It was largely only doing BC partnerships. So there, our revenue looked really, really significant, right? But at the same point in time, if you look at our fee and commission expenses, they were pretty high. So I think those are the 2 things you have to kind of look at very closely.

Yes. Actually, my second question was also that you've been a very tech-heavy NBFC, right? So I wanted to ask that besides funds because funds can be provided by absolutely any other NBFC in a co-lending partnership. So what benefits or tech is Apollo Finvest bringing to the table so that the other NBFC size that we're going to partner with Apollo Finvest and like not anybody else, just we like to focus with partnership with Apollo.

Yes, absolutely. That's a fantastic question. I think you're absolutely right, right? There are 10,000 NBFCs in the country today, right? And realistically, at least 500 of them would have a decent amount of AUM and capital to deploy, right? So I think why do fintechs not partner with all of those guys? And why do they come to us, where we probably are one of the smaller ones out there. I think the answer is truly tech, right? Because tech and experience because the thing is what sometimes people feel is that tech is just a onetime effort, right? You just integrate and then everything just happens magically. Well, the reality is actually kind of different because not only do you have to integrate, which with Apollo usually takes 1 week with any other NBFC out there, it will take like 6 to 8 months, right? Let's say you get over that, right? You partner with somebody and say that, okay, maybe they'll give me cheaper form of capital. And let me take the effort of doing 6 to 8 months of integration. But the problem doesn't end there, right? Because usually, whenever we use -- like just to give you an example, right, when you use your phone or your laptop, right, just because the software has been made once, it doesn't mean it doesn't have bugs or doesn't go wrong, right? So you usually want somebody whose tech is really, really stable, right? So as an example, a lot of people may prefer a MacBook versus, I don't know, a Windows laptop, right, sometimes because they feel like maybe a windows may not be as stable, right? It's not about both have software, right? And that's what I mean. So fundamentally, when it comes to Apollo, not only do you end up going live much faster, right? It's almost multifold faster, right? Like 1 week versus 8 months is it's a night and day difference. But I think in the end of the day, also the experience of the software itself is much better, right? There is little to no downtime as an example. In case there are some queries and your tech team needs to talk to somebody, they can just get on the phone, make sure that at the same point in time, the software is always smooth essentially, right? In case there is any regulatory change happening from RBI, we are pretty much first-in-class to kind of deploy those things, whereas for other people, again, any kind of change, right, is basically, again, 2 quarters gone in kind of executing it and implementing it, right? So it's a continuous partnership, right? Anything to do with tech, right, I think is something, which has to be not only built once, but maintained to ensure that it is bug free and highly efficient, right? So that's the reason why people were always happy and want to partner with us. And usually, the feedback that we always observe is that people want to do their high-quality customers with us because one of the things about retail lending, especially in the digital space, which a lot of people don't realize, but is absolutely true, right, is this is a space, which is truly looking after the people who are unbanked in the first place, right? Like they aren't getting access to loans from banks. Now amongst that base as well, right, it's divided into multiple layers. There are people who are somewhat on the brink and who, let's say, would get a loan from many, many fintechs, right? And there are people, who are on the absolute brink, right, who maybe only 10% of even fintechs are serving as an example, right? So if you're targeting the people who are the cream that this industry can cater to, right, you want to deliver the best user experience to them because if you don't, they will actually just take a loan from your competitor, right? So there, you don't have the luxury of taking time, API is failing. It has to be a red carpet user experience. The more friction you give the user, the more likely a good user is to bounce and a bad user is to continue, right? Because psychologically, if you think about it, if you're a good user and the minute you see a lot of friction, you won't proceed, right? Because you'll be like, I can just take a loan from anybody, like I don't have to deal with this. A bad user will probably persist through all the bugs and issues and actually end up taking the loan no matter what because nobody else is lending to him, right? So it has ramifications across the board, not only for your own engineers and your own speed and your own scalability and your own stability, but also the quality of book is directly impacted. So a lot of fintechs when they work with us, they primarily want to work with us for their best portfolio and which obviously ties back to the kind of portfolio numbers that we also show, right In our slide, as an example, our 38 DPD numbers are 15x better than the industry, right? Why is that the case? Is our underwriting world-class? Or is it that we are doing the best that the book our partners have to offer? It's a combination of both actually. So that's how I would think about this.

Now we'll take our next question from [indiscernible].

I'm a shareholder from around 3 years plus. I have consistently seen Apollo having this policy, right, that we won't directly compete with our clients, right? Now with Apollo Cash, we are changing that policy, right? Why is the logic of this pivot and will it be harmful in the longer term? And second is that -- second question is that like the -- we have been doing multiple initiatives, right? But the sales growth, right, I mean, revenue growth is not coming from 2, 3 years, like it has moved up after many quarters, right? And then again, it has started coming down. So at least on a longer period, we would want some growth in revenue as well, right? That's the only way in which company can also grow, right, if it has to grow to a certain size, right?

You are absolutely correct, right? I think -- so basically, to talk about Apollo Cash, and I tried to explain that in the presentation as well, but I'll kind of double down on it, right? Why are we doing Apollo Cash? And what has changed in our stance, right? So fundamentally, I think over the last multiple years, right, we've always got a lot of -- not only inside our own company, right, but obviously, from outside investors as well, we've got a lot of requests, let's put it this way, to go direct. And we've always kind of said no because we didn't feel that was the best time. We didn't feel that was the best strategy, right, despite obviously my own personal background in building multiple kind of consumer-facing consumer-first businesses, right, with obviously Hotstar, PharmEasy, things like that, right? But I think we didn't do that because the rationale always was at least for the first 6, 7 years of the industry, and I think roughly, it's been about 8, 9 years of the industry, right? So I would say for the first 6 to 7 years in the industry, right, if I have to be very honest, I saw probably close to 0 companies in the first 6, 7 years of the industry making any kind of profit or certainly more than 5% ROE, right? So if I had to give a general blanket statement, one thing was for certain, I didn't see any kind of business model in the digital lending space showing consistent levels of performing -- performance other than, frankly, Apollo's, right? And if you look at the kind of ROE that we delivered, I personally believe that it was best-in-class when it comes to fintech in India, especially because largely other companies were doing a lot of experiments, which weren't working out essentially, right? So that gives us a very strong signal that there are no learnings right now in the industry, which can be distilled into basically going direct and basically creating a direct retail book, which actually makes money, right? I think over the last couple of years, specifically what we saw, and I think 2 big things happened: one was obviously RBI coming in and curbing in first loss guarantee; and secondly, I think equity in the world at a certain point in time became difficult to come by because interest rates across the world kind of increased, right, especially with what happened in the U.S., right? Because a lot of the equity stuff, which happens at least in the start-up universe in India is reflective of the interest rates in the U.S., right? So because of these 2 things converging, I think a lot of players in the industry has actually just disappeared, right? So if today, I was to see the number of players who are active in the industry in the digital lending space, I would say it's almost close to 80% to 85% reduction, right? So that's a significant cleanup in the industry. But at the same point in time, there's a very big silver lining that over the last couple of years, we observed that there are almost 4, 5 companies, which over the last 2 to 3 years have shown consistent levels of profitability and creating sensible portfolios, which I think can be sustainable, right? And we know this because we examine these companies deeply, where we work with them through term loans, we did warehousing structures with them, maybe BC partnerships, co-lending partnerships, different ways in which we kind of collaborated. And what we saw in their financials, we kind of doubled down by actually partnering with them and observing those loans on our own books to make sure that this was not a mirage and this was a reality, right? And after doing that for a couple of years, we kind of understood that now there is a very clear direction in which you can kind of end up going to essentially end up creating not only a large business, but most importantly, creating a very ROE positive business, which is having good margins as well, right? So that is the rationale as to why we are going with Apollo Cash today, right? And to make sure that we end up getting to this point much sooner than the rest of the industry, right, which is many players have taken 6, 7, 8, 9 years to get there, right? Now how do we accelerate ourselves to be where somebody else took 8 years, how do I make sure that I reach there in 2 years, right? It's an ambitious target, right? But I think 2 things which help us over here, right? One is we have a database of 20 lakh plus retail loans that we have done over the last 8, 9 years for us to learn from, right? At the same point in time, we are hiring talent from the industry. of people who themselves either at their company or in their personal capacity have demonstrated that they are experts in their field, specifically in digital lending. So what learnings we would have over -- by doing this, maybe by hiring people with maybe a couple of years' experience, if we hire people with maybe 3, 4 years or I would say, 5, 6 years' experience, right, essentially, we can reach there much, much faster. So now that's where I would say that right now for us is a time of heavy investments into our team. In fact, we've already hired a bunch of people in this quarter as well, and we're expecting that to continue as well in the coming months. So again, do I expect the number of employees of the company to go up significantly? Answer is no. I just expect our quality levels to rise up significantly, as we double down on getting people from the industry, while keeping the count of employees more or less, I would say, similar to what we are today. But with all the learnings that we have and the right talent that we bring on board to accelerate our journey into where we want to go, specifically with Apollo Cash, I think now is the time for us to do it. Basically, our philosophy as a company, right, is we don't think of -- very honestly speaking, we don't like doing experiments, where we believe the chances of failure are significantly higher. We only head in directions, where we know that it's not a question of if we will succeed, it will be a question of when we will succeed, right? And for us, the sample sizes, once we see closely a few companies doing this and we understand deeply how they have done these things by examining them very, very closely and working with them very closely, that's when we kind of double down and decide that we want to head in this direction. So just giving you some picture as to how the thought process was to head in this direction.

On my other question of revenue growth of over 3 years, roughly right? I mean --

Yes.

So on a long term, we would expect some sort of revenue growth, right, in the company.

Yes. I think our hope is basically that's the reason why we're investing in things like Apollo Cash, right? It is our bet over the next 4 to 5 years, that is our bet that, that is going to be one of the big drivers of the business, right? Because revenue growth now will be largely driven essentially by AUM growth. And for AUM growth to happen, we will need larger and larger margins to be able to obviously take on larger and larger amounts of debt. Today, obviously, the debt to equity of the company is almost close to 0, right? So I think there is a huge headway in front of us, right? Conservatively in the industry, I think I've seen people go up to 2.5x, 3x, right? So I think there is a lot of headroom for us. I think like I said earlier as well, I think we are looking at where, obviously, our partners are doing a good job to deploy more capital in that direction and allow us to obviously scale up in those partnerships as well. At the same point in time, we feel in probably 12 to 15 months' time, Apollo Cash will be in a place for us to even deploy more capital, right? So I think we will start seeing that now.

Yes. Got it. So with this model, we would be -- what will be our distinction from other NBFCs? Is it just the tech that will distinguish us from other NBFCs? Like we are now -- like our business model is now similar to any other NBFC, right, except that we have a better tech. Like earlier, we are a distinction from other NBFCs, right?

I would say I don't think of it that way. I think of it as it's not one or the other. So as an example, our platform business continues to be our bread and butter, right? So I'm not expecting -- if I had to give you a general statement, over the next 12 months, I would expect our platform business to be anywhere between 90%, 95% of our AUM. So that kind of continues. Apollo Cash is more towards the future that we see as an addition and another vertical for us to kind of help us scale up even more, right? So I think of this as an addition of a business line rather than something which is competing between the 2 things.

We'll take our next question from [ Mr. Paras ].

Congratulations on the application launch. Just wanted to check on how significant will this app be in terms of a contributor to your overall book in the coming years?

Yes. Thanks for that question. I think as I mentioned, basically, our thought process is that this is more towards, where we think the company should be over the next, say, 2 to 5 years, right, really. Like I think over the next 1 year, I would expect it to be less than 5% to 10% of our AUM, where the partnership business does continue contributing about 90%, 95% of the AUM for us. I think like I said to [ Mr. Matthew ] as well, our thought process really is that we don't see of the 2 businesses as one or the other. We think of the 2 businesses as 2 separate business verticals where one, the partnership business is obviously 8, 9 years baked in. So there's a lot of comfort, maturity, knowledge and execution chops, which we've already built over there. So long will that continue, right? And I do expect that business to keep growing at the same pace it has been growing. I think for us, Apollo Cash is a whole separate vertical that we kind of have, where we expect that growth to also come in, but I expect that to happen over the next 12 to 15 months of building a lot of things inside the platform, obviously, getting the right team together for it essentially. And that will be an additional business line for us. That's how we think about both these 2 businesses.

We'll take our next question from [ Mr. Mahavir ].

Mikhil , see historically, we have said that we are going to be very -- we are very obsessed with CAC, customer acquisition cost for Jio. But now since you are lending Apollo and you are saying that we are going to bring in new hires, it is going to shoot up our expenses a lot, which we've insinuated right now and our profits have been very stagnant in the last 3, 4 years. So how are you going to address expenses in relation to profits going forward?

I think one of the things as you mentioned, right, like our profits have been pretty stable in terms of the last few years, right? And this is -- if I had to just put it out there, right, this is the shot that we are taking with Apollo Cash to really jump on to the next level, right? So if I to just tell you, right, like fundamentally, the way I think about it is we always have 2 different parts, which Apollo could have taken this year, right? One was status quo, which is continue the partnership business the way it is, and we really had absolutely no requirement at this point in time to delve into any other business. And it would have been like a stable double-digit ROE kind of business, right, which, again, I would say, is not too bad, and I think a lot of our competitors would love to be in our position over there, right? But I think what we wanted to do right now is build from a place of stability and strength, right? So we didn't want to be in a position, where we have to think of a new idea as an example, right? So for us, it was a very organic kind of direction to move into, right, where we felt we had the knowledge, the insights to do this very, very organically. And I felt also the right time for the industry itself with the number of competitors significantly dropping -- now there are actually people I can hire in the industry, who I can put my hat on and be like this guy knows what he's doing, right? Because there are companies out there, which are actually doing a good job. If somebody -- if we had thought about like one of the things if you notice about their company, right, with us, we've historically always hired people pretty much having less than 2, 3 years' experience, right? And always, we were asked this question like why don't you hire, why don't you invest, et cetera? And the real answer was always that we didn't feel like there's any point to hire people, who don't know what they're doing, and that was not a slide on them. It was the reality of the entire industry, right, because nobody know what is -- you don't know what you don't know, right? You only -- the only way I can know for sure that the opposite person knows what they're talking about is through numbers and results, right? If you tell me you're very good at risk, then show me the numbers for it. So -- that's just one example, right? Like when I talk about marketing, I'll ask you like as a marketeer, what's the CAC you can get to, right? What's the CAC for cost per disbursement as an example. So there are various metrics in which if we had to evaluate somebody, we just couldn't get the right person in because their numbers are all over the place, where the unit economics didn't make sense, and that was representative of the entire industry other than probably a business like ours, which was a platform business, right? I think like I mentioned over the last few years, we did see that there are now viable business models that we can execute with people who have done this in the past to be able to get to a much higher level of AUM, much higher level of revenue and we can, over a course of the next 3 to 5 years, not only have this one very solid mature partnership business, but maybe in 4, 5 years' time, have 2 really mature businesses, right, which is one is great for partnerships, where we keep learning from the rest of the industry. And at the same point in time, it's almost like a bread and butter. At the same point in time, Apollo Cash can give us something exponentially scalable, right? If we get this right, obviously, the fruits are -- the risk is worth the effort. And like I said earlier as well, right, like our fundamental thinking when it comes to lending or financial services is it's not a game of -- if I had to put it bluntly, right, it's not a game of innovation. It's a game of efficiency, right? So for us, when we thought about this decision, it wasn't about let's do this, we may be successful. The idea was, let's do this, we will be successful. We don't know in what time frame. Hopefully, in the next 2 to 3 years, there will be significant data backing these words. But how can we make that 3-year time period into, say, 2 years and we get the right people on board right now, it's okay, we make the investments, right? We take the expenses on, right? But at the same point in time, if this pays off, it will be, again, us going towards significantly higher double-digit ROEs, right? That's what we want to get to finally as a business, right? We want to get to a position, where we have debt to equities of 3x and we are giving consistent 20-plus percent ROE, right? That's my personal vision. That's where I want to see the business go. And the only way it will get to those places, right, is if we are able to have these multiple businesses that we build over a period of time. And the next business that we want to build, which we feel we'll be able to deliver success with is Apollo Cash.

And the other thing, you just said that initially, Apollo Cash is going to be a 90-10 business, wherein only it is going to contribute around 10% of the AUM. Let's say it goes to 50% in the next 2 years. So looking at our past or historical business model, which was we having partnerships, how do you think that would erode the trust between Apollo and its partners? Or how do you think it will pivot us to the next level as in getting more clients from their side and we are going through the data and checking it out for further lending purposes?

I think the good news is that one of the things that we kind of did when we obviously went direct is we did it well and truly by getting our partners on board, right? It wasn't like a surprise to them. We did very openly, honestly, have conversations with them. And we've been very thankful. Actually, a lot of them were very, very helpful as well by giving us tips as to these are some of the things you need to watch out for, right? And some of them also just said that finally, you guys are doing these things. So I think for us, we were pleasantly surprised as to how our partners have also taken this -- taken us going. And I think -- just simply put, I think the lesson for us, which I think why this reaction was positive is, I think, just honest communication. I think that's really how partnerships always have to work, right? If we are doing something, and this is something, which we've internally taken a call of, we have to be very candid and open with our partnerships. And I think the reason they didn't feel threatened is because we were very open about it and spoke about how we are planning to do these things and without compromising any of the, I would say, promises, which both of us have made to each other in this partnership, right? And I think given that Apollo has been doing this for 8, 9 years, and there is a bit of legacy and trust, which has been built in, I think that level of transparency and active communication probably helps smooth this over, right? And to all of our delight, honestly, the number of partners that we lost in this transition is 0. So that itself goes to kind of add testament to what basically I'm saying. What was your other question?

I guess you have already answered that in some ways. Also, we are seeing this Anthropic thing. I don't know exactly how it works. But let's say, I would -- the simple question I would frame out here is how we are a non-immutable business and how can or cannot Anthropic disturb -- disrupt us in some ways. I mean, because we are big companies like Jio and others, which can easily take us out of I don't know. Of course, we are very positive and like how would that affect us going forward?

Honestly, I think AI is -- I think of AI in 2 ways, right? One is, let's say, when I started out my career 15 years back, right, in building digital companies, right? I think honestly, you needed probably a few things to start a company. One is obviously an idea. Second is capability to build out that idea. And third is relentless execution. I think now pretty much I would say you just need an idea and you need relentless execution because anybody can build anything. I genuinely believe that today, right? Anybody can build anything. I think we are going to be heading in a space of, I would say, something I like to call is PaaS, right, which is personal software-as-a-service, right? I think people are going to build their own software. Like if you have an idea and you need like a software, which primarily just solves your use case, you will just build an app and it will probably take you like 5, 10 minutes. I think that's where we are headed. I think, honestly, it's already here. I think it's not just exposed to pretty much the larger population, but I know that internally in the company, we've seen some of these things. So that's the present. It's just not -- I think I like that phrase, which says that the future is already here. It's just -- some people are living in it and some people are not yet there, right? So I think that's how I think about AI in general. But the other end of AI is, I think it's going to make it more and more difficult for legacy companies to do digital underwriting because I'm expecting -- and we are already seeing this, by the way, the amount of fraud, which is going up is unbelievable, right? Unbelievable is an understatement, right? And this is the kind of fraud, where the reason why I say it's going to be a big problem to solve for is I don't think it's a human problem. Even if you put humans basically doing video KYC or you put humans looking at applications, things like that, I think they're all going to get fooled because it's so authentic that there is no way a human can determine that's an AI image or that's an AI video or anything like that, right? So I think we are headed towards a space, where I feel the advantage for tech companies, not only Apollo, I would say, like any tech company pretty much, because of the DNA of those companies to be able to adapt to these problem statements and be active in finding solutions to these things and being open to experimenting and figuring out how do you battle these things much faster than legacy companies, whose DNA just isn't to think of tech-first solutions first, right? I think we are headed towards a world, where tech companies will become stronger and stronger and stronger, where I would not be surprised if a lot of CEOs of many, many companies by default have to be tech first, right? And I know that's a very big statement to make, but I feel that is the world that we are getting into. And I don't yet feel that people are realizing what AI means for everybody. Just one simple example I'll give you is that imagine a bank giving out a 30-year-old home loan today. I worry for those banks.

Yes. Absolute. Yes.

What's going to happen 30 years from today, who's going to have a job, who's not going to have a job, what's going to get automated, what's not going to be automated? It's troubling to think of that. So I think we are headed towards very uncharted waters, but the only way to navigate these things is be on the bleeding edge, always be learning and surround yourself with people, who are deeply invested in being on the cutting edge of these things. That's what we have to do.

Yes, actually that was expected. And lastly, Mikhil, you see our expenses are going to go up. Our profits -- do you think our profits are going to remain stagnant from here or our profits are going to take care of the upcoming expenses? And also after deducting all those expenses, do you think our profits are going to go -- are going to move up from here? Or are they going to remain the same? I know you don't give guidance, but just where could we land basically.

No, I usually did not give guidance in the past because I used to be quietly optimistic. But this time, I will be very real. I do expect our investments in employee expenses to go up. And I do feel that will have an impact on our profits. But I do strongly believe that this is the right point in the history of the company to make these investments. So we are going to double down on that. And our big bet is that this will all pay off 24 to 36 months from today, where the ramp-up that we'll see will make all of this seem like one of the best ROE or ROI investments that we've made in probably the 40 years of the company. That's the big bet that we are making. And we're pretty confident that we'll be able to land this in the way, which our shareholders will be happy.

Mikhil, I usually follow you on Twitter and that was one -- that was one line that you posted that until death all defeat is psychological.

We'll take our next question from [ Mr. Nitin Sethi ].

Sir, my question is that we are launching Apollo Cash, but how we are going to differentiate it from other [indiscernible] loan app because there are thousands of loan apps on play store [indiscernible] something like Jar App, which provides gold savings so that people are sticky to your app. They take loan again, again from [indiscernible], but because of the plain vanilla app, like Apollo Cash, how we are going to differentiate it from others?

Great question. I think -- so Nitin, I'll tell you one of the things that we've realized very honestly by being in the space pretty much since the start, right? Now let me give you what I expect to happen by looking at the past. So over the last 8, 9 years, like I mentioned, right, we partnered with almost 100 fintechs, right? And out of the 100 fintechs, if I had to say the number of fintechs, which have actually survived for 8 years would be probably less than 5%, right? So let me tell you this that I genuinely believe many people can start lending, right? Lending is something everybody can do, and it's not a big deal, right? Ultimately, you have money, you can figure out some partnership and start lending basically, right? But I think like physical lending, I would say digital lending is even more difficult, right? Because I believe the amount of fraud, manipulation, the amount of algorithms you need to build, it seems very easy, just build an app and start lending and what's the big deal, right? There are 10,000 apps like this. What I really observe is how many of these companies are going to be around in 2 years' time, right? And I feel the number will be 80% lesser, right? So that's how I feel about competition, right? Now number 2 thing is you asked how will we differentiate ourselves, right? I think we will ourselves learn, right? It's been 2 to 3 months right now for us, having just got started on this journey, right? So far, I fundamentally believe that this space is so underserved that it's like offering water in a desert, if you ask me. Now let me give you a simple example. roughly, we are getting about 300 to 400 downloads a day with 0 marketing, right? And why are we doing 0 marketing, by the way? Because we are yet perfecting the app, right? There are a lot of things we are learning, a lot of things we are deploying, a lot of features we want to fix. A lot of small, small changes, which are coming. I think if you see our app updates, I wouldn't be surprised if we are at a run rate of every 3, 4 days, there's an app update, which is coming out, right? So I think at least if you ask me this question today, I feel given the demand that we are seeing, right, I feel very strongly that it's like offering a glass of cold water in a desert. And there is a ramp in demand, right? I think India is a credit-starved country, right? And this goes back to our original thesis of digital lending, right? I think this is not a space, again, for innovation. I don't think this is a space for trying to differentiate for differentiation reason, right? I think this is a space of efficient execution. Who is able to acquire the customer at the least amount of cost, who is able to manage fraud, who is able to manage risk, who is able to manage collections, who is able to manage cost of capital and who is able to manage employee cost. It's actually as simple as that. And inside each of these things that I mentioned, right, it's a whole division doing simple and complex things to get to world-class results, right? That's how I think. So again, I think one of the -- I think one of the misconceptions about digital lending or I think lending in general is that there is some innovation or there is some unique thing you should do. One of the things I always recommend our partners is don't do anything innovative because the risk/reward ratio doesn't make sense, right? You do something innovative, your book becomes terrible, it's over, right? There's no extra 1%, 2% ROI you will end up making if you do something innovative. Just by doing, I would say, the basics, but doing it in a highly intelligent, efficient manner, you can do things better. Like I'll give you one example, right? So when I say let's talk about underwriting, right, which is the key. When we are doing Apollo Cash underwriting, we've seen, by the way, people in this space, who start doing underwriting and they don't use the bureau at all, right? They will directly be like, no, we are building like a magic algorithm, which is purely going to underwrite people looking at SMS data and device data, right? While that's very noble of them. Ultimately, it results in disastrous books, which maybe sounds very interesting that we are trying to do something out of the box and maybe the results in the end will be great because you're saving that money from a bureau perspective, right? The cost of obviously running the bureau, ultimately, the cost is way too high for the result, right? It's almost like you're reinventing the wheel when you don't have to. So when we think about those things, we are under no illusion. We use the bureau. In addition to the bureau and obviously, your income information, we then look at things like device data. We look at alternate data about you on the Internet. We look at telco data. We look at social media data. We look at a variety of factors, right, what apps you're using, where are you spending, all of those things that we will see to augment our underwriting better, right? So the idea is always to augment the traditional ways to become 10x better than that, not reinvent the wheel by just basically destroying the basics, right? That's not the idea. So I hope that gives you a flavor of how we are thinking about this.

But my sense is that because I know you are saying that innovation is not required in this industry because demand is so much high. But sometimes differentiating a factor so that we can get more data about the customer just like giving some mutual fund investment, we can also offer loan against mutual funds, I mean, you have to capture the [ morse of the insight ] of that customer, so that is --

I mean, these are things that we are open to doing in the future, right? Like see, let's put it this way, right? So far, we've not seen any resistance of customers sharing data with us. I think everybody in the digital lending space understands that if they need to give -- provide a loan, they have to share their data, right? They have to share their phone data, and we're very transparent in the app about it, by the way. It's not like some there's underlying APIs, et cetera, to do these things, right? Like if you use our app and download it, in the very first screen, you'll notice we'll be very clear that we need this information in order to proceed with your underwriting. If you don't give us the data, we can't go ahead in your underwriting basically, right? So we haven't -- we've seen like a 98% acceptance of that screen, right, like that's actual data. So if we do see that number drop below an acceptable number, we will obviously think about solving that problem. But today, data tells us that that's not a problem that we have to solve.

Actually, sir, I have been associated with some finance -- most of the finance companies and the loan bracket, which we are offering is low under INR 1 lakh [indiscernible]. The customer who wants this type of loan are not -- you can say the language friendly to invest. They are like more like they need it, but they do not know how to get it. When we are really genuine customers, you can say about any housemaid or any other person, who is now, who is gig workers, they want the loan, but they do not understand the language that what documents that this app is demanding. So are we working on something like this because the loan bracket is so low because -- and mostly, there are gig workers that want this type of loan.

See, the way we are doing this, right, is that because we're in early stages, honestly, we are talking to a lot of our customers, right? We are -- like our operations team is actually calling out a lot of these customers to understand who are these customers? And are they facing any difficulty, especially if they get stuck during a loan application, right? That's like, I would say, when we do things very, very in early stages, we are big fans of doing things that don't scale, right? So in that sense, let's say, building up from 0 is one of our specialties, right? So we are very, very close to understanding exactly what our customers want, okay? So if we -- again, we do get insights that they do want changes in the language of the app, we will solve for it. Right now, from our interaction with the users, the way it works, right, is when you download our app, right? And if your entire phone, as an example, is in Hindi, as an example, the app gets translated to Hindi. So it is getting solved for as long as your entire OS is in that language, which I would expect if a person is not fluent in English, that's what would happen. Like I have seen my own help's phones, some of them who are not fluent in English, they prefer their phones to be in a local language of their choice, and our app also gets translated in that language.

Thank you, sir. Just not to appoint anyone because sometimes we sit in the metro cities and do not understand the real rural or semi-urban India. That's where the loan demand [indiscernible].

No, you're absolutely right, right? Like I think that hits the nail on the head. We definitely have to put ourselves in the shoe of the real customer, then only we can serve them correctly. You can't sit in an office and assume that you know what you -- you know everything about them. You should meet your customers, you should talk to your customers, figure out who your power customers are. You're absolutely right, right? I think I could write an entire blog about how I think about you should be in love with your customers and make them know that, but I think that's for a different conversation.

Well, definitely now that if you put a blog about it because how do you think about it, how do you see your customer, how do you assess your customer is very important. And you want to know about how do you assess your customer.

Absolutely. We'll keep that in mind.

Thank you so much, Mikhil. It appears that we have addressed all the questions for today. If anyone has any further questions, please feel free to write to us on [email protected] and our team will be happy to assist you. So with that, we would like to wind up our Q3 FY '25-'26 earnings call. Thank you so much, everybody, for joining us today and for your continued support and interest in Apollo's journey. Have a great day.