Aptus Value Housing Finance India Limited (APTUS) Earnings Call Transcript & Summary

Thank you, Bilal. Ladies and gentlemen, good afternoon to all of you. I am Anandan, CMD of the company. I welcome you all to the conference call to discuss the financial performance for Q2 FY '22. I have with me Mr. P. Balaji, ED and CFO; and Mr. S. Subramaniam, our ED and Head of Business. The results and the investor presentations are available on the stock exchanges as well as our company website. I hope everyone had a chance to look at it. With the unlocking of the economy and ease of restrictions, I'm confident of the fact that the economy will grow faster hence forth. Just prior to that, while business activity was impacted in Q1, due to second wave of corona, things returned back to normalcy towards the end of Q1, and more so, more in pronounced manner, in Q2. This is reflected in our overall performance, be it in disbursements and collections, which as you are aware, are the crucial -- which are very crucial for any HFC. In Q2, we were almost at pre-COVID level, both in terms of disbursements and collection efficiencies. For Q2, we have disbursed about INR 421 crores, representing a growth of 70% over Q1, mainly because Q1, the larger impact of COVID was there. Our NIMs for the quarter improved, net interest margin has improved by 6 basis points to 9.09%. Our gross NPA reduced -- compared with the June, 1st quarter, reduced by 26 basis points to 0.81%. Profit after tax for the quarter was about INR 85 crores, representing an increase of 16% Q-on-Q. We continue to grow consistently and have closed September 2021 with an AUM of INR 4,480 crores, representing a growth rate of 27% year-on-year. Key highlights of the half year performance being disbursements for the half year is about INR 668 crores, a growth of 37%, our AUM as I mentioned earlier, growth of 27%. Our PAT for the half year is about INR 159 crores, growth of about 30%. Our GNPA, gross nonperforming assets, were at 0.81%. It's a -- there's a marginal raise of 14 point -- sorry, 14 basis points as on March '21, though it has come down when compared with the June 1st quarter. Our ROA is at 7.43%, which is 1 of the best in the industry. And our ROE is late rate lower 14% -- 14.09%. The sufficient cash or cash equivalent on balance liquidity will maintain at about INR 736 crores. Our net worth is very strong at about INR 2,700 crores, implying we have a very strong capital adequacy to take care of the future growth. I now hand over the line to Mr. P. Balaji, CFO, to discuss various business parameters. Thank you.

Thank you, sir. Good afternoon all. As on 30th September 2021, we had a total [ LIG ] customer base of over 72,000, [ which caters a growth ] of 31% on a year-on-year basis. Total number of branches were 198. We had added 8 branches in the first half of FY '22. Employee count was at 1,998. Disbursements increased by 37% year-on-year to INR 668 crores in first half, AUM grew by 27% year-on-year to INR 4,482 crores. As on 30th September 2021, our average yield on the portfolio was at 16.95%, and average cost of funds were at 7.86%, resulting in a NIM of 9.09%. Our OpEx to assets were at 2.74%, resulting in a healthy ROA of 7.43%, and ROE of 14.09%. We have a well-diversified borrowing profile and almost 51% of our borrowings were from NHB and DFIs like IFC, and large financial institutions, balance 49% of our borrowings were from banks. We had sufficient on balance sheet liquidity of INR 736 crores as on September 2021. And hence, we are going slow on additional borrowings and high-cost loans are either being prepaid or renegotiated. As of now, we enjoy a rating of A+ from both ICRA and CARE, and we are taking up with the rating agencies for a possible rating upgrade. Collection efficiencies has improved to pre-COVID levels and stood at 99.7% in September 2021, vis-a-vis 95% in June 2021. The backlog that has got created due to the COVID 2 impact in Q1 FY '22 is being collected in a phased manner. This has actually led to a marginal increase in 30-plus DPD. However, we are confident of collecting the backlog in the ensuing quarters. Gross Stage 3 assets declined to 0.81% in September as compared with 1.07% in June 2021. It marginally inched up by 0.14% as compared to September 2020. We have restructured 1.56% of our AUM. More than 85% of our customers who have restructured are paying on time and have cleared all the dues. Further, we have strengthened our provision coverage ratio from 0.41% in March '21, to 0.72% in September 2021. The provision coverage ratio for Stage 3 assets stood at 25.16%, and for Stage 1 and 2 assets stood at 0.51%. Our PAT for the first half stood at INR 159 crores, representing a growth of 30% year-on-year. Our Q2 PAT was at INR 85 crores, representing a growth of 16% quarter-on-quarter. As on 30th September, our net worth was over INR 2,700 crores. Thanks for the hearing. Now with these remarks, I open the floor for the question-and-answer session.

[Operator Instructions] We have a first question from the line of Ashutosh Mishra from Ashika Stock Broking.

A very good set of numbers to come out with. I want to basically know first on the competitive scenario in the market which you operate? What sort of [indiscernible]

1 second, Ashutosh. We are not able to hear you clearly.

Are you able to hear me now, sir?

Slightly better. Just go ahead with the question.

Yes. Yes. Nice to know. Yes. So what sort of competitive scenario we are seeing in a market which we operate, basically the southern market? And know if the prepayment rate has increased or it has remained at the same level which compared to our historical average?

We operate in 2 segments of the market, namely the home loans, and the business loans. The competitive market is fairly good. This is -- this part of the country, the southern part of the country where GDP is higher, most of the financials are [ present ] in this market. The question of second, you asked about the pre-closure transfer of loans, that is the question you asked, correct?

Yes. So what is our trend on the pre-closure of the loan?

We see, generally, as we explained in our slides also, the pre-closure ranges between about 7% to 7.5% rate. But even in that 83% of the pre-closure comes from the own source of funds of the customers. Our customers are being self-employed customers, they are able to not like [indiscernible] customers. They are able to take the money from their business or from the hereditary or they are able to get money. So they are able to close the loan from 83% from own source. Only 17% of our pre-closures are transferred to other [indiscernible] families. So if you convert that, our precursor [ BT ] out rate will be about 1.2 percentage.

Okay. And do you see the way whole housing finance space is setting up. A lot of new players are coming or even existing players has increased competition. Do you see this changing in the future? Or you are confident of maintaining this repayment or transfer to the other [indiscernible] Will remain at the same level?

We have seen this for the last about 3, 4 years, we are seeing the same grade of percentage, and same kind of own source from the customers. So we are not envisaging a big change in the percentage in the near future actually.

Competition?

About the competition. Basically, we are present in the -- we are present in most of the towns, Tier 1, Tier 2, and most of the places in the market where we operate, namely Tamil Nadu, Andhra, Telangana and Karnataka. So the coverage -- [indiscernible] coverage is very high. The number of branches and the staff is very high. And also we are there in the market for quite long and being able to satisfy the customer, they are able to refer new customers to us. So the brand name is very high in this market. So for a competitor to replicate all this, it will take slightly a longer time for this.

Okay. Got it, sir. Second part of my question is basically on the cost of funds. So you just mentioned that, now you expect some rating upgrades and more, you're renegotiating with the existing borrowers out there. So if you can put light on how much decline in the cost of funds, how well you see our cost of fund now or 6 months down the line?

Thanks, Ashutosh. So we figure the cost of funds, the cost of funds, which was at 8.4% as of 31st March, has reduced to 7.86% as of now. It is basically because of the incremental cost of other than the NHB, which was reached at around 7% to 7.2%. And the NHB funds were raised at an average rate of around 5% to 5.5%. So it is basically , which is -- which has brought the cost of funds down as of September. But going forward, as you know, the interest rate differential between a A rated company, or A+ rated company, and a AA rated company, is anywhere between 1% to 1.5%. So if you are going to get the upgrade, this cost of funds reduction is likely to happen on the incremental borrowing.

So any ballpark number, this 7.86% number, if I asked at the end of by this year, or by March, where you see or it will remain at the same level?

If you look at our funding profile as of to date, I mean, I have a cash balance of almost INR 736 crores plus the incremental funds that is going to come from the surplus from businesses. I think this is going to be -- this funding lease require is enough for us to go up to March 2022. If at all, if I'm going to borrow more or additional funds, it will be at obviously less than at least 0.5% to 1%. The additional funds will be borrowed at less than 0.5% to 1%.

Also Aptus have bank borrowings from the bank, how much is linked to the NPLR? And how much is to that bank number [indiscernible] ?

If you look at our total borrowings, the ones which I mentioned as 51% were from, both 29% from NHB and 22% from securitization, and DFIs and IFCs. All these are fixed for the entire channel. NHB, as you know, give the funding up to 10 to 15 years, and IFC funding or the securitization funding for the channel, IFC funding is for the 7-year tenure. So all these are fixed rate loans. The 49% which is representing the bank borrowings are linked to the MCLR. And this is -- most of them are linked to 6-months or a 1-year MCLR basis.

[Operator Instructions] The next question is from the line of Aalok Shah from MNCL Group.

Congratulations on great set of numbers, sir. I have 2 questions. 1 was more of the margin side. Clearly, what we've been saying here is that, there is a lot of cost benefit, which is pushing the margin higher, optically the best ever in the last 4 years or so. What, according to you, is the more sustainable margin for the kind of business model we are into? That is 1 that I would like to understand from you there. The second part, if I could, could I put up my questions to you first?

Yes. Yes, please.

Sure, sir. The second 1 is more on the securitization. That is just a 5% of your borrowing profile or borrowings. Is there something that we look at in terms of taking securitization as a number closer to [ 10% ] or higher as a percentage of overall borrowing also? And the third question will be more on OpEx as to -- we currently are, fairly well spread, and have a very good expansion plan in our markets of presence historically, where we have been there, the [indiscernible]. But if you also talk about [ porting into new speed take ]. So what according to you could be the near-term OpEx to asset ratio? I'm not asking about cost to income ratio, but more as an OpEx to asset ratio, that you would look at.

Sure. If you look at the margins to explain how sustainable it is, we have 2 companies. First of all, 1 is the Housing Finance Company, the other 1 is the NBFC, which is a wholly owned subsidiary of the Housing Finance Company. And in the HFC, we do all loans relating to housing loans. There are 4 products which gets booked under this. 1 is the housing finance, which is the direct housing loans given for the purpose of either construction purchase, repairs, or innovation. The other 1 is what we call as quality home loans. Quality home loans are loans, we are in the business of funding self-employed customers. These kind of customers during the course of running their businesses have their own cash flows as surplus cash flow, and they use that fund for building their warehouse, and also complete the house. But after completing the house, maybe 3 to 6 months down the line, they find themselves cash out for running the business. So what they do, is they come to us for a loan, which we give also, but thing is like, as per the NHB direction, this cannot be classified as a housing loan. So this is classified as quasi home loan. The other product which gets booked under this company is the insurance product, which we give to the customers for covering the credit -- covering their life under the and credit chain arrangement with an insurance company. The other 1 is the top of loan. If you look at the housing loan, rate on the total AUM, it's constitutes around 54%. And if you look at the quality home loans, it's constitutes around 16%. The insurance, and top of loan constitutes around 4%. The other 1 -- the other loan, which we give is the small business loans. This gets booked under the NBFC. These are loans which are given to the customers for enhancing their businesses. We don't give these loans for consumption purposes like marriage, education, et cetera. So what happens here is, I mean, -- we give this loan for a period of 7 years, and we charge interest rate of [ 21% ]. And the housing loan, we charge anywhere between 14% to 14.5%. And nonhousing loan, the quality home loans, which are in 17% to 17.5%. The blended yield of this -- all these products comes to around 17%. And with the lower OpEx, and also the reduction in the cost offer, our ROA is at 7.43%, which is clearly 3% to 4% more than our peers. Now coming to the sustainability, the quasi-home loans and the non-home loan, the small business loans, we are charging what the market is charging. Suppose if you are considering the small business loan, there are players in the southern markets, southern part of India like [ 3-star, 5-star ] et cetera, who are charging anywhere between 24% to 25% or 21%. So we are charging slightly lesser than that. So we don't have any intention to reduce the interest rate there. Similarly, the quasi home loans also, quite a few market players, have in the range of 16% to 17% to 17.5%. So there also, the sustainability of charging the interest rate is there. As regards housing loans, we are at a 0.5% to 0.75% more as compared to the peers, so which we were planning to reduce over the period of time. But without addressing the NIMs, we'll be doing this because if you go for an upgrade, there's going to be a cost of funds reduction.

[indiscernible]

Yes. So this is the basis on which the sustainability will happen.

Sure. Sorry, sir, could I ask a question...

OpEx, also will continue to be at around 2.74%, so this...

Yes. [ securitization ].

This is on the sustainability. Now coming to the securitization. Securitization what we do is -- what the 5% of the total [indiscernible], which is represented as securitization is pure securitizations through [ pass-through certificates ], it is not a direct [indiscernible] first. And we -- as a tool for borrowing, we are not against securitization. But we will do securitization with the normal opportunity for raising funds is not available, because we don't have a capital constraint or a capital adequacy constraint. So this is the plan with which we'll do on the securitization. As we get direct [indiscernible], they might not be in favor of doing that due to our internal policy.

Sure. so is it safe to say that at least on securitization path, that number is here to stay at probably low teens, unless there is need for cap -- unless there's need for liquidity or liquidity and...

Yes, yes. Yes.

On the first part, sir, on the NIM, I really appreciate the effort that you've taken in explaining each of the segments and the ROIs therein. And where you also highlighted that at least on the housing loan, which is 54% of your AUM, there is a need to a kind of look at reducing it by 0.5% or 0.75%. So clearly, at least on the lending side, there is a reason to believe that this could be a kind of move -- may remain here or more gradually lower, but it's more a cost benefit that could come through. Is that the right understanding?

Yes.

Yes.

Okay. And 1 other, putting a number -- not really putting a...

Just 1 second. Just to add a point here, Anandan. So, basically, as Balaji has explained, product-wise yield, the sustainability is absolutely and is there. On the pricing of HL is concerned, we've made -- actually, we did reduce by about 50 basis points, a couple of months back, and we want to stay with that. And this reduction will entirely come from our, either in, started coming already through the form of a lawyer borrowing the cost of funds or through better productivity at the branch level and the staff level. So in other words, this optimization of our lending rate of 50 basis points reduction for the HL, is not really have any impact as far as our NIM is concerned, our ROA is concerned.

This is very helpful. It gives a picture on how NIMs could move in a more sustainable manner. So on the OpEx side, as it -- I hope I can ask you a question on the OpEx unless there is any queue here. Can I go ahead, sir, on the OpEx line, please?

[Operator Instructions] The next question is from the line of Arjun Bagga from Nirmal Bang.

So I had a question regarding this -- [indiscernible] restructuring book. So I could say that we have around 1.5%, 1.56% of restructured assets. So in that, sir, can you please provide a segment-wise detail? Like how much is it from the -- for the NBFC and how much of it is for the HFC?

On the HFC side, it will be around INR 50 crores. The balance will be -- only INR 20 crores will be.

[indiscernible]

Almost 70% will be from the HFC book, and 30% is from the NBFC book.

Perfect. And sir, in terms of the slippages from this book, so what would be our expectation of the slippages from this book over the next 2 years?

We have given this restructuring in the month of June. Out of that, 85% of customers have paid all the 3 -- there are 3 months, that is July, August and September. Only the 15%, even they are hardly 3%, 4% has gone into all the 3 months, and rest have paid in [ 2 buckets and 3 buckets ]. So 75 -- 83% has paid close to about all the 3 months after the restructurings. So we feel that after the restructuring, the performance will be really big at least going by the recent 3 months of performance.

Sure, sir. I had another question. And sir, so I could see that in terms of branch expansion, so we are looking at expanding in Maharashtra, Odisha, and Chhattisgarh. So this question is related to the competitive intensity. So like how do we look at the competitive intensity in the South, in the North, and in the West Region?

Our policy is to go deeper into the market -- in the states where we operate. That is the first policy. So we will be opening more branches in the states like Andhra, Telangana and Karnataka. But having said that your questions on the Odisha, Maharashtra and Chhattisgarh, we will be opening branches there. In fact, just to give you an update, we are starting about 1 or 2 branches in the Odisha. So we will test that, then we will expand more into the Odisha market. Then we will see about the Maharashtra and the Chhattisgarh. So whenever we open new branches, we see 2, 3 things. 1 is the what is the overall market; second, what is the operational culture of debt, and the repayment of the delinquencies; and more important, how we fix our product, that is -- we are very strong in the self-construction product, rather than purchase or other products like other competitors. So if it fits our model of self-construction, and then we open in the particular branches. So we will open this Maharashtra, as I told, we are going ahead in Odisha, but Maharashtra and Chhattisgarh, we will go in the phased manner.

Got your point, sir. Got your point. And just on this competitive intensity thing, I'm sorry to harp on this. So like can we assume that it is highest in the South, and then in the West, and then in the North? Would that be an appropriate assumption?

It is not like that we see every market is competitive, but all that you need to have a clear product, clear process, and clear heart. More main important thing is the underwriting process, and the reach of the customer marketing. So you can always do that business. So competition, our feeling is most of the market will be almost same.

Just to add a point in that, actually, at a philosophical level, we would really want to follow a [ geographic ] driven policy of looking for leadership in wherever we operate. So being headquartered in Chennai, we started Tamil Nadu, and we have expanded progressively over the last 10 years in Southern states, which provides significant economic growth rates, GDP growth rates, and demand for loans, a reasonable credit culture, low delinquency, low OpEx, and things like that. So we would -- and as we go along, we will look for expansion geographically on a continuous basis. And not really in the order of Southwest to North business. But in the order of contiguous states, that's where Odisha, Maharashtra, and Chhattisgarh, was chosen. We currently have about 198 branches and more branches will come in this contiguous adjacent states, really. The philosophy, again, as I mentioned, is that we don't believe that we should really look at an all-India presence, being operating in all 4 zones, the directions of the country. And there are some companies even with, let's say, 75 branches, operating out of 14 states and all. It is their philosophy. And our philosophy is really operate deeper than wider. But then with again, clear aim of having or getting -- being a leader, and at a leadership position. And that's all will be the dynamic factor, and we'll continue to grow in Southern states. At the same time, we will continue to keep expanding on the adjacent states.

The next question is from the line of Avinash Tanawade from Dalal & Broacha.

I just have 2 questions. What is our growth in state wise growth in disbursement?

Okay. See, we are -- as told by to Mr. Anandan, we have -- in Tamil Nadu, we have about 50% of our books come from Tamil Nadu; 29% comes from Andhra; 11% comes from Telangana; and 10% comes from -- in Karnataka. These are the 4 breakup for our AUM. And in list of branches, 79 branches come from Tamil Nadu; 69 comes from Andhra Pradesh; Telangana is 29; and Karnataka is 21.

Okay. Sir, about NHB borrowing, around 29% of our borrowing comes from NHB. Most of the time when NHB lends the money, they have some easing cap. Do we have any kind of easing cap on an NHB warrant?

See, in terms of NHB borrowing, there are 3 or 4 schemes where NHB gives finance to the HFCs. 1 is the regular refinance scheme, there is something called -- there is a scheme which is being given at 3% to 3.5%, with a cap of 3% or 4%. So those -- there are teams, but we have borrowed only under the regular refinance scheme, and there is no interest rate cap on those kind of things.

What is the average borrowing cost for us from NHB borrowing?

NHB borrowing should be around 5.5% to 6%.

And bank borrowing cost? Cost of borrowing?

Bank borrowing cost should be around 7.2%.

Okay. And what is your balance rate in the month of August and September?

Balance rate pre-COVID, that is before the COVID, it used to be around 20% range. Now it is ranging between 25% to 26% range.

Okay, Sir.

Sorry. 1 more point I missed out in the balances, even within the balance, there is about 35% we are able to collect digitally. Only the remaining part we are collecting in cash from the customers.

The next question is from the line of [ Ferran Ingenio from CLSA ].

Congrats on the result. Just wanted a few -- I had a few questions. So firstly, what percentage of our customers are new to credit?

New to credit, is 40% of customers are new to credit. Typically, these kind of customers normally borrow gold loans, and small things like two-wheelers, and things like that. And as you are aware, many of these customers in the South part of country, chit funds are there. But chit funds together doesn't come in the -- in your credit bureau report. So just to answer the question, it is about 40% new to credit customers.

Okay. And sir, secondly, can you just talk a bit more about the collection strategy? Because your 30 DPD is around 10%, and 90 DPD at 1% or so. So a lot of the collections in the 30 to 90 bucket is quite strong. So can you just talk a bit more in detail about that?

Yes, right from the day when we started the company, we have not outsourced any of the collections operations, be it a soft collection, or be it bucket collections, or be it a legal recovery. Everything is internal. All our collection staff are internal staff on the roles of the company. And all of the legal managers, are also on the roles of the company, and they does not outsourced. So what we do is we collect match from all the customers. 100% of the customers [ with match is ] collected. We -- all of our operations are centralized. So we deposit everything from head office. And once the balance details comes, these details are passed on to the field, and they do the field collection. As I told you, they do two things. 1 is the digital collection and also the cash collections. These people in the field, they have got a mobile device. There, they can pass on the receipts immediately. It comes to the customer's account online basis. There is no manual intervention, and also that once you do that, these mobiles also will help you to find out who is the nearest customer, and it also gives a receipt and sms to the customer. And a lot of controls -- digital controls we have established on the field collection. Because of these operations and also our trained staff, our attrition in this particular segment is also very less. So we are able to do good soft collections. And of course, some of the customers, despite our collections, goes to the recovery. So we include [indiscernible] or we include the arbitration, and also the negotiable instrument at cheque bounce to make the customer come to the table and make the payment. So this is how the whole collection process is set. And more, we have got a very strong daily [ MIS ], which tells you about how many customers bonds, how many customers visit has been done, what is the collections done on a daily basis. What is the productivity of each [ town ] in the field, and a lot of things like that. And also, we have worked maker and checker so that the money that is collected in the field, directly come to our office. So this is what's helping us for quite some time. During the period of corona, where the restrictions in travel was there, we have used all of our staff from all other departments to do the collections on the field. So this is probably 1 of the factors which is helping us in the soft collections.

And do you have like different teams for soft bucket and hard bucket collection?

No. What we do is that because we have got branch level staff, we have got the persons, depending on the balances, and depending on the backups of the customers. I suppose there is only hardly few accounts, then we'll have 1 person. And based on the requirement, we'll have second person, and based on the requirements, we'll have the third person. But we have not separated buckets between the, our collection staff.

And maybe hard bucket may be to legal team.

Legal only when it goes to an NPA, then it goes to a different -- our legal managers, internal legal managers, who will definitely follow this on the legal actions.

Understood. And sir, you mentioned you'll also invoked [indiscernible] and arbitration proceeding. So typically, your -- how many properties would you all be repossessing in a normal year, may not be seen in last COVID year, but in a normal year.

Generally, right from the beginning, our policy is to settle with the customer rather than repossession and selling, because it is not that we are not able to repossess bucket but then once you repossess, the value falls and things like that. So we always try to settle the properties with the customer right from say, -- and all this year, we don't have any principal write-up. We are able to -- because 2 things: our credit underwriting is good and also our LTV on the product is close to about [ 14% ]. So there is always the intention of the customer to restructure the loan with us rather than losing the property. Okay. Talking about this as on today, as on today, we have got about 14 stocks, only about INR 84 lakhs, which is another seized asset out of the INR 4,500 crores loan book. And so that repossessed assets. So that explains us that our repossession is very less, but we are able to settle the loans to the customer.

[Operator Instructions] The next question is from the line of Shailesh Kanani, an individual investor.

Congratulations on good set of numbers. Sir, I have just 1 question. Is there any part of business that would worry you, or any change in dynamics, which would worry you, or on business terms, or which investors should be concerned about with respect to our business model?

Basically, if you look at our -- we don't do any concentrated business. For example, we don't find any builder, corporate, wholesale, it's all zero. Our entire loan book is for annual retail, and the maximum loan would have given to any customer should be about INR 25 lakhs. That is -- even that is not more than 2%, 3%. So in other words, our average loan size only about INR 8 lakhs, INR 9 lakhs. And our average EMI is only about INR 12,500. And it is, for example, we have currently about 72,000 customers. And multiplied by the [ a plan ], that's what will add up to loan book of outstanding loans of about INR 4,460 crores. And these customers come from, 80% self-employed, 20% salaried. The 80% self-employed, they come in different professions and locations, something around 55, 60 different types of businesses, largely service businesses, and retail provision stores, farm servicing, fruits and vegetable selling, small hotels. That way, it is really very dispersed across customers, across geography, and small home loans, and the smart business loans. So there is no concentration of any kind, from our loan book point of view to give us any particular sector later [ sharp cause ] changes.

Okay. Got that. That will be from the customer point of view. And if you, on the macro front, that would kind of worry you anything?

That thing, we are not able to see. Again, if you really go back in the last 10 years, as you know, we came across several headwinds like others. 1 is, for example, the [ IL&FS ] or demonetization, our [ DSGR ], COVID 1, COVID 2. Even COVID 1, we had maintained a good growth rate in our AUM, and in our profit. We have been able to maintain over 30% growth rates. And the year of FY '21, which got impacted by the COVID 1. So see, the question is that when you start funding the small loans, to people, to construct house, where they live in themselves, where the land is owned by them, we only fund a part of the construction cost, that's why our loan-to-value is low, and invariably may live with that house. And to other extent, they also save on the rent and things like that. And there are other community pressures to really pay for their homes and things like that. So resulting in that, even if we have the -- we are not able to really -- not only -- I mean, we are not able to see anything, because we have seen surprises in the past 10 years. But these surprises, we are able to really -- the impact on us is minimal. And as an organization, we are able to handle it well.

The next question is from the line of Aalok Shah from MNCL Group.

My question was more around trying to understand how do you see the OpEx to asset ratio play out? You talked about moving into Odisha and Maharashtra, so what's a typical breakeven point or that either in terms of time or AUM? Or if you could throw in more better clarity on such line.

Yes. See, basically, the -- our -- as has been mentioned earlier, our OpEx is 1 of the lowest, the best in the industry, basically because our cash structure, we are very frugal in incurring the cost, be it revenue cost or capital cost. At our warehousing expenses and our branch wise expenses. And our productivity is the best, highest, and our credit cost is the lowest. So in other words, if you really look at the total OpEx, that's why it's 1 of the best at 2.7% of AUM. And so given that the scope for further reduction may not be much. But having said that, we don't expect it to go up either on account of the new branches, as we have mentioned that we already got about 198 branches. And in the year, we may add about -- at least maybe about -- around 20 branches also in the year. In fact, so far in the current year, we have added 10 branches, which has starting without really impacting our OpEx. Basically because while there will be an additional cost coming on account of these new branches, we will also have the productivity of the -- those branches, which have started 6 months back, 1 year back, 2 years back, where -- when we look at -- when you look at our profile of the branch network of the 198, there are some about 100-odd branches we really see, they're finished -- yes, 118 branches they finished over 3 year, where the average loan book is over INR 30 crores. Whereas there are about 58 branches with 1 to 3 years, where the loan book is around INR 11 crores or so, and 22 branches where the loans -- it's less than 1 year, where the loan book is around up to INR 2 crores. So we will start getting the benefit out of these branches. That will really pay for our new branches, to that extent, we don't really -- we have not seen any significant change in our OpEx. 1 thing -- second thing is we really have a reasonably low-cost branch operations. And until such time we crossed our threshold level, our breakeven will be -- normally it will be between 4 to 6 months. That's about it.

Sure. Okay. This is helpful, sir. And just a quick question, when you talk about this client base of 72,000 customers, would there be any customer where there is an overlap of the loan product, and you would have given a housing loan, and then you give a quasi-loan, or maybe a loan from an NBFC?

See, this -- as we explained, we have got 3 products. 1 is the home loan, the quasi-home loan, and the small business loan. Between these customers, there is criss-cross, there's no criss-crossing, each loan is an individual customer, and the individual property. But some of the customers are home loan or a small business loan, we would have given a top up after a good seasoning, and after seeing the repayment, that is close to about 4.5% of our AUM. So to that extent of 4.5%, there is like a criss-crossing. But other than that, every loan is an individual account given to a single customer, it's a single property. And almost close to about 99% of the customers, we don't have second loan to the same customer other than this 4.5% top up loan.

That helps. And sir, final question, home loan would be write to -- at the [indiscernible] or CFO's office for a detailed interaction. I'm sorry to -- after this question.

You You can contact me.

Yes.

You can contact concierge as well. They will guide you to me, and we can have an interaction.

The next question is from the line of [ Franklin Morris from Mendes Wealth Advisory ]

So I've seen that a large part of our growth has come by funding from -- via equity sources. So is this a conscious decision to fund via equity?

No. It's actually, it is not a conscious decision to fund -- to do business out of 100% equity, because you know the -- then the company and the shareholders will lose the benefit of leverage, and consequential tax-related, half tax returns. And in fact, I'm sure you know pretty well, much more than us in the [ selling side ], cost of equity is the highest cost. The equity cost is the highest when compared to any other form of debt, there are no given various issues. So in other words, clearly, our intent is not to fund the business out of equity alone. But having said that, being a stand-alone company, not being part of a large industrial house, or large NBFC, we wanted to have a strong threshold capital, that will enable us to get a good credit rating, and good funding, long-term funding, which is required for this business, from banks and, the other financial institutions. And towards that only, we've been sort of strengthening. We have strengthened our equity through -- to a reasonable threshold level as seen by us. And going forward, given the strong network that we have now, and the margins that we are making, that this should help us in terms of we're able to leverage the company better going forward.

So what is our current capital ratio, Tier 1?

No. On a balance sheet size of about INR 4,600 crores, we have an equity of INR 2,700 crores. And also the risk-weighted for affordable housing loans are less than [ INR 30 lakh ], it's very, very less. So it is fine. So if we really look at the capital adequacy, and if you see it that way, you can see over 70%, 75%. This won't be a constraint for us. We are well capitalized in other to take care of growth in the near term.

Correct. Correct. So just trying to understand that better, we would not be then kind of looking to raise for the capital equities for the next few years?

No comments. We are well capitalized here. I will take it of the growth -- projected growth in the near term, yes.

The next question is from the line of [ Smriti Gupta from IFS ].

Yes. So when we talk about the [ 4% of interest top-up cases ] in the HFC book, how it is contributing in the incremental disbursement?

We didn't get your question right.

So when we are saying that the total insurance loans contribute to 4% of the AUM, how much does it contribute in the disbursement?

In the loan book-- it would be almost about [ 4% and 4.5% ]. This is the insurance premium paid for the credit shield insurance. And it is actually based on the time of disbursements, you take the credit insurance, 1 time for the tenure of the loans. So in case of a small business loans, it will be around 3.5%. In case of home loan, it will be slightly higher than that. Then the weighted average [indiscernible] 4% is the -- potentially the insurance premium based on the disbursements. That's it.

And overall top up loan, what's the estimate?

What is that?

Sorry?

Are we doing any top-up loans? Are we giving any top-up loans currently to the customer?

Yes. Generally, we give top-up loans for our existing customers, whose repayment is very good and after a particularly [indiscernible] period.

Okay. So the repayment has to be really good [indiscernible] business, plus also with the other financials, reeligible for the top-up. And as we explained before in the previous question, our top-up on the total AUM is close to a good 4%.

And how much it would be in the disbursement?

It will range about 4% to 4.5% estimate.

4% to 4.5%. And the next question is on the productivity level. So you said that your typical branch breakeven in 5 to 6 months. What is the productivity for a salesperson like in the [indiscernible]

[indiscernible]

This particular individual wise sales productivity, I'm not having now, I can share with you later on.

The next question is from the line of Arjun Bagga fro Nirmal Bang.

So this question is a little related to the industry loan. Sir, so what is like the risk in the self-construction segment? Like everyone seems to think like it is safe, and like the [ collateral ] is the land, the LTV ratio is good. But where is that lender generally go wrong when underwriting a self-constructed house?

Self-construction basically means clear to deal with all the retail customers. The 2 main -- 3 main things is, of course, underwriting the credit underwriting, second thing is the valuation of the property. Our valuation is done by internal valuers. We don't have any external valuers, and they are trained in the company for a long time. Third thing is the legal paper. We should have the real capacity to find out whether they are the real owner of the particular piece of land where they are constructing. These are the 3 constraints. These are the 3 constraints of the risk in funding the customer. Of course, the main important thing is that reach of the branches, the trust the brand commands in the market, how customer is referring the other customer, and how he comes to us. And what kind of feet on street do you have, and the productivity. So these -- all of these contributes -- you need to have that much branches, that much sales staff, and that much productivity, trained staff -- to do the self-construction model. It is not like a builder model where you can go to a single place or take 20 or 30 flats on a single place with a single legal, and the single technical. It is an individual property. So it involves a lot of field work and a lot of field staff, training the startup, retaining them, keeping the attrition at the minimum, and motivating them. All this helps us -- all these are the factors which helps us to do more in the self-construction model. But the market is really big in this particular segment.

As there are no further questions, I would now like to hand the conference over to [ management ] for any closing comments.

Yes. Thank you all for attending the call. So we have answered most of your questions and queries. If you still have further queries, you can reach us to our IR agency concept. We would be happy to address them all. Just to summarize, we will continue to -- Aptus, as a company, will continue to focus on serving the low and middle income segment of the population, largely self-employed, and largely living in Tier 2, Tier 3 cities. And we are confident of building productivity-efficient oriented organization, to have efficiency in every aspect, which will help us to deliver value to all stakeholders. Thank you, Bilal, and thank you, Gaurav, for organizing the conference call. Thank you.

Thank you very much. All.