AU Small Finance Bank Limited (AUBANK) Earnings Call Transcript & Summary

Good morning, ladies and gentlemen. Welcome to AU Small Finance Bank Q3 FY '20 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sunil Parnami. Thank you. And over to you, sir.

Thank you, Lizan. Good morning, everyone, and welcome to our quarter 3 and 9 months earnings call. Today on the call, we have all members of our senior management team, including our MD and CEO, Mr. Sanjay Agarwal; our ED, Mr. Uttam Tibrewal; our CFO, Mr. Deepak Jain, and respective business and vertical heads. On the call, I also have with me my colleagues, [indiscernible] and Ayush Rungta, from the IR and M&A team of the bank. Before we begin, a standard disclaimer that certain statements that we are making in today's discussions could be forward-looking in nature. We had given a note to that effect in the earnings call invite. Also, we hope that you have seen our results already. And now we can start the call. So like always, we'll start with the opening remarks. Followed by that, we can take your questions. Starting first, first with our take on the environment. Well, as all of us are already aware and seeing that at a broader level, the environment continues to be challenging. This is partly on account of moderation in consumption demand and a prolonged credit squeeze for NBFCs the last few months. However, in the meanwhile, banking system liquidity continues to be surplus, now in excess of more than INR 3 lakh crore. Moreover, there has been some moderation in deposit rates. In terms of overall systemic asset quality, corporate loan exposure, particularly in real estate and the NBFC sector, continues to be under the scanner, while retail segment asset delinquencies remain largely stable. So moving over to AU's performance. We feel that last quarter, our performance was quite satisfactory, especially given the backdrop and our journey of just 11 quarters as a bank. We feel that being a twin NBFC and bank engine, we are quite uniquely placed and in some sort of a sweet spot. Our double advantage has enabled us to navigate and consistently grow minus the slowdown, liquidity and asset quality issues. The bank platform pull is and continues to be a big multiplier for us. [indiscernible] We achieved steady business growth across all our key product segments with overall balance sheet growth coming at 38% year-on-year. Our total assets now stands at more than INR 38,000 crores. Retail continues to be at the forefront of our growth. Share of retail loans in the disbursements increased by 11% to 82% for the year-to-date disbursement numbers. Realigning ourselves with the external environment, we further shrunk our NBFC exposure by 17% over second quarter of the same financial year, and the same is now reduced to 7% of our loans. In the previous quarter, we funded more than 13,000 smaller businesses, nearly 1,400 homes and more than 76,000 vehicles. Overall, we added nearly 1.4 lakh new customers last quarters at the bank. During the quarter, we took a new leap and launched our first ever digital brand campaign #BharosaApnoJaisa on Hotstar, which generated more than 3.3 crore impressions and more than 1.4 crore video views. Moreover, we deepened our customer engagement through more than 300 SMS and e-mail campaigns. We strengthened our product proposition by launching our premier contactless debit card offering named AU Royale. We all know that deposit building is tougher and initiatives like these will help us foster deeper relationship, engagement and transactions with our customers and also allow us time to build a sustainable retail deposit franchise in the long run. At 31st December, our total deposit book was INR 23,865 crores, which is up 75% year-on-year, with CASA ratio excluding CD hovering around 17%, and CASA and retail TD hovering around 43%. Coming to risk and governance. Firstly, on asset quality, as you might have already seen, we further improved our asset quality with absolute NPAs remaining at INR 504 crore level, the same which was at the start of the December quarter. In terms of absolute -- in terms of gross NPA, net NPA, improved to 1.9% and 1%, respectively, in the third quarter. Improving portfolio quality amidst slowdown and daily tagging is a strong testament of our NBFC DNA of strong underwriting and collections. Now governance. Our Board has approved the appointment of Mr. V. G. Kannan as an additional independent director. Mr. Kannan has earlier served as MD State Bank of India Associates and Subsidiaries, and he brings with him more than 38 years of experience in banking, credit, risk management, insurance, capital markets, treasury and fund management. With his addition, we have expanded our board to 10 members, with majority directors being independent and subject matter experts in their respective domains. Let me share our select financial numbers with you. For the 9 months FY '20, our disbursement growth was 23%, which was led by retail asset growth, which grew 42% year-on-year. Talking about the growth in geographies. Compared to 9 months of FY '19, non-Rajasthan retail disbursements grew 45% in the 9 months of FY '20. Our portfolio IRR remained stable in the third quarter at 14.7%. There was a reduction in the cost of fund, which drove the spread to expand to 7.1% from 6.9% in the second quarter. We remain focused on reducing our overall cost of fund. During the 9 months, we availed refinance lines of INR 2,315 crores at 7.25% and also securitized portfolio worth INR 3,000 crores at a cost of close to 7%. NIMs sequentially improved to 5.8% for third quarter from 5.5% in the second quarter. NIMs for 9 months were at 5.4%. However, as we had communicated earlier, we should see the further positive impact of increase in spreads getting more reflected in the next few quarters. Our cost-to-income ratio declined further with improving operational efficiency of our bank branches. It was at 55.3% in 9 months of FY '20 versus 60.7% in 9 months of FY '19. We were able to maintain healthy ROA and ROE numbers. The ROA, excluding gains of Aavas came in at 1.8% for 9 months and 2.1% for the third quarter, and our ROE came in at 17.4% for 9 months and 19.6% for the third quarter. In line with the market environment, we continue to maintain a very healthy capital adequacy and liquidity at the bank platform, which was aided by the equity infusion of INR 525 crores on the exercise of convertible warrants by Temasek during the quarter. Our capital adequacy as of 31st December '19 was 19.3% and at 21.8% if we include the profits of the last 3 quarters. Net worth saw an accretion of 40% year-on-year and has now crossed INR 4,200 crore mark. So that concludes our opening remarks. On behalf of the management team, we'd like to convey our best wishes for the new year, and we could take your questions now.

[Operator Instructions] The first question is from the line of Haresh Kapoor from IIFL.

Congrats on a strong quarter. So just a couple of things from my end. One is on your Slide 18, where you give your disbursement yields, just wanted to understand that part better. On the wheels portfolio, on a Q-on-Q basis, we are seeing the disbursement yields just kind of gone down a bit even on the new and the used vehicle front. And also on your Small and Mid-Corporate assets, even that kind of gone down by 20 basis points. Just want to understand what is the -- how do you look at this, what is your thought there. And also, if you could -- I understand the cost of funds are coming down. But broadly, if you could [ connect ] the disbursement yield [indiscernible] disbursement yield and also on the NIMs moving forward, how do you look at that?

Yes. So Haresh, so far as your first question is concerned, the second part of your question that our disbursement yields for Small and Mid-Corporates have gone down, actually what you have taken is the overall portfolio yield, which is around 15.5% and 15.3%. So we'll talk about that, but I just wanted to clarify that first. In terms of the drop in the disbursement yield for vehicle, as you see, the primary reason is that the third quarter was where you had festive seasons and December discounts. So there was slight change in the product mix, which was more in the favor of new as against used. Typically -- directionally, in the first 2 quarters, we have done more of used vehicles. But in the third quarter, there was an impact of the change in the product mix to a certain extent. So that's essentially the reason for a momentary decline that you see in the disbursement yield for the vehicle assets, and that has essentially also reflected in your yields for the retail assets in general as well because the other segment of retail assets, which is Small and Mid-Corp -- which is your secured business loan for MSME, this continues to be priced at 15.7%, housing continues to be priced at 13%. So largely, it is on account of the change in product mix on the vehicle side.

And Haresh, to be precise, that -- October was the Diwali month. And especially in October month, we did around 60% of new vehicles and 40% of used and CoW. And as such, our share is 50:50. In November-December also, we came to the same ratio, but then because of Diwali October, we did that new business, and that is the main reason for this low IRR.

[indiscernible] comments on the NIMs, how you're looking at NIMs going forward?

So if you see the NIMs, we have seen that sequentially in the last 3 quarters, our NIMs have been on the uptrend. Of course, as the new book is getting built at the higher yields, as the cost of fund incrementally has been coming down, you are seeing NIMs are kind of in step to the level of, just give me a sec, around 5.4%. So for the 9 months and for the quarter, the NIMs are around 5 -- for 9 months, it's around 5.8%. And for the quarter, the same number is, one second -- it's 5.8% for both. So we expect that our NIM should remain in the same zone where we are right now. However, there are 2 disclaimers here that when you take NIMs, you also take into account the investment book and the leverage. We might like to basically bring our leverage down gradually over a period of time. So to that extent, NIMs may see some contraction, but other than that it should hold up.

Okay. And just some comments on the [ growth front ]. You've seen pretty strong growth on the advances side. Mostly, the environment is very different right now. So if you could just comment, how do you see the growth, let's say, for a couple of years now? And what is the thought process there?

Sorry. Could you repeat which segment you wanted to speak particularly about?

For the company, in particular. And if you could just split it broadly between retail and the other Mid-Corporate piece, then that should be fine.

Yes, sure. So I think if you take the cues from our disbursement numbers, for the first 9 months, the growth has been around 23%. However, the retail growth in that has been around 42%. So of course, the shrink has been more on the Small and Mid-Corporate side and particularly within the NBFCs, which is in line with the market -- where the markets [ are perceived ] in the segment is. Having said that, we've been guiding the market that at a smaller base that we have and the untapped opportunities in the market we work. I think a growth to the tune of about 28% to 30% is [indiscernible] over the next 2 years before we take the next leap as a universal bank. Having said that, like we have said earlier as well, retail should be the major driver of that growth, in the Small and Mid-Corporate we'll continue to remain cautious. We have detailed workings with us that we have shared earlier in our one-on-one conversations about the market sizing, our market share and how do we plan to tap into that. And that's broadly, I think, our take on the growth. And the last piece is that we're not really, fully sacrosanct on these numbers. If the market were to change either in favor of little more opportunities [indiscernible] we'll accordingly alter our path.

[Operator Instructions] The next question is from the line of Rohan Mandora from Equirus Securities.

Congrats on the good set of numbers. Sir, wanted to understand that in the current environment, when there's stress in the vehicle finance portfolio for most of the financiers, you are seeing pretty healthier trends. So some comments on what ensured that? And any specific measure that we have taken in 3Q to ensure [ healthy ] collections? And if you can share the GNPAs in new vehicle, used wheels and cash on wheels segment in 3Q as well as in [indiscernible]?

This is Mayank. I'm the Chief Risk Officer for the bank. So if you see the current shift in the business, which we have done from last year from new to used, yes, the -- the new car dealers, if you see the new car sales have dipped down, and that is why the reason you can see the market is talking about a lot of stress in this segment. But as far as used market is concerned, this is getting more and more organized these days, and we could see more and more -- the market is -- the used car market is increasing. The customers are willing -- good segment of customers are also willing to buy new cars. So as for [Audio Gap] customer, it is the same as we could see in the new and used, both the segments. So we are not seeing any challenge as such in collections or our asset quality towards the used segment.

Yes. I'm Sanjay this side. So vehicle book is a 25-year-old book. So it's well-oiled book in terms of the sales, credit, operation and collection. And it's very well-diversified book in new, used, CoW in terms of commercial, personal, captive. We also do tractors. We also do 2 wheelers. So it's an amazing combination of -- across wheel portfolio. And we also have seen in past also -- you have seen in the past also, whenever the market has become bad, our book has not gone for any kind of disturbance there, right? So we are continuing our path. We are tightly monitoring our credit selection. We are tightly monitoring our selection efforts. We are not seeing much stress on the ground, honestly because the stress maybe in the SUV and LCV range, which is not so big for us. So we just want to continue our effort and our -- the way we are working over the years in next -- maybe next 2, 3 quarters more, and then we'll comment on a long-term story around wheel business for us.

Sure, sir. And sir, absolute GNPAs at [indiscernible] new wheels, used and cash on wheels?

So Rohan, I can give you the numbers off-line as well. But overall, the gross NPA number movement between the September quarter and December quarter for the vehicle portfolio, let me just give you an indication that the cumulative amount of GNPA that we had in September quarter and what we had in December quarter is broadly the same. In fact, it's gone down by INR 50 lakhs to INR 60 lakhs in total.

Sure, sir. And lastly, sir, in terms of eligibility for a customer for Cash on Wheels, like, what kind of vintage or -- what kind of vintage is there in -- whenever you collect the loan, what kind of an -- is there a percentage cap on the existing loan amount? Because in case there's some [indiscernible], up to what DPD do we allow a Cash on Wheel customer? Some color on that.

Largely both is the top-up to our existing customers, and it's also we buyout from other financiers' book. Largely, we don't encourage any loan on the default accounts. On a very selective basis, it is allowed up to 60 days.

60 days. Okay. Sure, sir.

As a policy, right? But we don't encourage that.

The next question is from the line of Renish Bhuva from ICICI Securities.

Congrats on great set of numbers. Sir, one question is on our personal loan side. So our average ticket size is roughly INR 1.5 lakh, and I'm sure that this is pretty much unsecured in nature. So what sort of underwriting and sourcing we do to make sure that we will maintain the same asset quality as we have in the [indiscernible] secured products?

Renish, just one second. Let me just first recheck the number because I don't think so that the personal loan average ticket size would be like INR 1,69,000 [ it is ]? Fair enough, fair enough.

So yes, so this personal loan which we have discussed in this 9 months around INR 129 crores, [ INR 130 crores ], this is 100% to our ETB customers, existing-to-bank customers. All these customers are my assets and liabilities customers. And we have not started new-to-bank customers. We are adjusting the behavior of our existing customers towards repayment, towards their earnings. We do our own scrub analytics towards their earnings, towards their existing credit lines and bureaus. And we do our analytics, and we come out with the preapproved kind of loans, and we offer them on the phone. And this is how we have started these personal loans. We are testing trial this product. And going forward -- and we will leverage our -- keep leveraging our bank customers because as you know that we have started this franchise of liabilities customers, which are [ huge ], 15 lakh customers. So that's how we are building this PL. And going forward, we'll [indiscernible] product. And as of now, it's gearing very well.

Yes. So just to add what Uttam has said, that for us it's a learning curve. We haven't done PL in past. But as a bank, there's lot of liability customer comes and look for book around personal loans from banks, right? And so based on our analytics, based on their data transaction, we have started on a pilot basis, and we'll see for next year, maybe 6 quarters, 8 quarters, to really figure out that how big we want to make it. But early trends are very satisfactory.

Right. So sir, just a follow-up on that. So basically, it is fair to assume that most of these ETBs are on the liabilities side?

Yes, because generally, we don't want to hold leverage at asset customers, and our asset customers are generally self-employed. But on the liability, we work with salaried people also. So this 80% book is around existing to liability.

Right. And in metros, I mean, primarily?

No. Largely, you can say that metro, semi-urban, these kind of customers. Yes.

Okay. Okay. Fair enough, sir. And sir, just on the used vehicle side. So I know we have a long 24 years of vintage in handling the vehicle portfolio. But just to make sure that in the current cycle we kind of sort of [indiscernible] ourselves from the slowdown. What sort of, let's say, credit criteria we have tightened up maybe on the overall indebtedness of the customers or the sort of segments in which he operates or the geography? What sort of filters we have to make sure that we don't underwrite the bad credit in a tough environment, sir?

So largely, this book is so old for us. We already know how to lend in these markets, right? And it's about very small ticket, commercial and personal used vehicles, right? This is largely driven by product. So we have increased our LTVs. We have increased our, actually, margin money requirement from customers. We are doing products, which are -- have a good resale value. We are actually building lot of comfort from existing database of customers so that we can ask them to bring guarantee from that base only. So I think we have done a lot of things from last, maybe -- not in last 6 or 12 months, we are doing it from last 10 years. And we are pretty sure that markets are not too bad, and people are also risk averse nowadays, right? People are not buying vehicles because the finance is available. So customer is also well aware that if he defaults, he will have different treatment from lenders nowadays. So I would say that the credit [indiscernible] in the country has gone up, and that has also -- has helped us a lot to maintain our asset quality.

Right. So sir, so in used vehicle, what will be customer breakup? I mean how much would be the existing customers? And how much would be, let's say, market share gain from others?

No, no, no. I think used -- we are actually doing 80% new to buying and 20% in ETB. But in ETB -- new-to-bank also, we -- actually push them to bring some existing customer as a guarantor.

The next question is from the line of Amit Nanavati from Nomura Securities.

Congrats on extremely good set of results. Just had one question on your branch expansion strategy. I see branch -- you've been soft on branch additions in the last 6-odd quarters now. How should one look at your branch additions over the next 2 years and the consequent OpEx driver, cost-to-income ratios to that extent?

No. Yes, yes, of course, we have taken very cautious call on our branch expansion in the last 10 quarters and because branch banking and as such branch is a new subject to this franchise, and we need -- we thought let's understand first this from the real market condition and environment. But I think now, we have got some good feel and understanding from last 10 quarters, and we will expand in near future. But I think I would answer this question more elaborately in next quarter call because we are in -- work in progress around our expansions. But I think on a high numbers, I can tell you that by March '22, we should open up around another 200 branches, but it will be largely driven by semi-urban, rural areas. And so I don't think that we'll have a high cost to income because of these expansions because it will be very calibrated around our requirement and around our cost. But yes, bank needs branches, and I'm a huge advocate of that, if there's a branch on the ground, it creates a lot of awareness, it creates a lot of buzz around the banking, the whole system get awake. So in my opinion, we will have more detailed discussion maybe in quarter 4 of this year, and we'll have the detailed plan out by that time.

Sure, sir. Just one clarification. So you -- in your presentation, you kind of highlight your drag on -- because of branch banking, right, a 30 basis point drag on ROA basis. So will there be some focus on containing that despite you moving to a branch addition mode [ back ] or for the temporary phase where you add branches, this can increase? Or you'll want to contain it at 30 bps or lower?

So I would say that let's wait for one more quarter to have a very detailed plan around it. But I would only assure you that any expansion will not have any overhead on our earnings. It will be very calibrated and very thoughtful around our strategy. So give us some time to come out in detail to explain the markets.

The next question is from the line of Nitin Aggarwal from Motilal Oswal Securities.

Congratulations on very strong results. Good to see that we are gaining on geographical diversification and our disbursement growth outside Rajasthan has now exceeded what it is in Rajasthan. So how do you see this geographical mix changing? And if you can talk about our market share and the key product segments of vehicle, MSME in some of these key states?

Yes. So Nitin, I think that's a, let's say, a question that we are often asked that what is your market share and how we're growing in states outside of Rajasthan? And I think what we have started to report for the last 2 quarters is that how the overall Rajasthan and non-Rajasthan proportion is looking like and how the growth in that is looking like? And particularly, I think, if you talk about each of the segments, for example, wheels that -- if you talk about states, state of MP, state of Gujarat, state of Maharashtra, of course, the market share number for, say, a vehicle finance penetration would be far lower than what you would find in Rajasthan, of course. And secondly, I think at this stage, these numbers are so small that reporting them and then tracking a change on them is more meaningful internally rather than we communicating it externally. But maybe we can do that once in every 6 months or maybe once a year once we see some meaningful traction. We could come back and share those numbers with you.

Right. At least on the incremental business, outstanding, I understand that it will be very small. So on an incremental basis because most of the other banks are not growing as such.

So Nitin, I think on the incremental basis, if you see, there's one slide that we have included in our presentation, which I mentioned to you all, which is on Slide 21. And on the incremental basis, our disbursements outside of Rajasthan has grown at 45% for the 9 months of this financial year as against 36% growth in Rajasthan over the same period. So it does give you some color. I think breaking it down further, we could do it maybe off-line because it will lead to minute details to bring out at this stage.

Sure. And secondly, like, in the past we have been talking to increase the mix of retail deposits, although deposit growth continues to remain very healthy for us. So any color on how the mix has been during the quarter between bulk and retail? And what is the cost difference between this? Because our funding cost also has come down by 20 basis points, a pretty sharp drop in the quarter.

Rishi, can you answer this retail deposit versus FD? Or...

So Rishi Dhariwal here. I look after branch banking nowadays. See, the way we are moving towards retail, we have split our deposit franchise into 2 basic parts, one is B2B and the other is B2C. So B2B typically has the government and the cooperative banks and the wholesale kind of deposits. And the B2C is the branch banking where we go and source individual retail customers. And what we are basically doing is that we want to -- we believe that there is scope to replicate what we do in assets in terms of retail granular loans. In the liabilities side also because when you track small ticket deposits, then those become again disaggregated large number of customer acquisition, and you are able to really build yourself in terms of having a retail -- granular retail franchise -- deposit franchise. So what we are doing is that we are focusing more and more on value acquisition in the SA book where we are basically taking the learning from whatever other banks have so far figured out over the last 25 years of the private sector banks in the country, where you realize that value comes only from a limited number of customers, there is no use in going for carpet bombing of the market. So we have a sniper strategy rather than a carpet-bombing strategy. And what we are doing is we are chasing values with customers. So in most of our urban and metro markets, we are opening customers only with minimum INR 25,000 IP, initial payment, and we've sort of come up with our Royale offering also where the minimum AMB is INR 1 lakh. Those are the kind of customers that we are targeting in the major markets. And we are also building up granular small deposits on these customers. That's the strategy that we'll continue to follow.

Is it fine, Nitin?

Yes, this is fine. But one last question -- one clarification on the employee expenses. And our employee expenses has been broadly the same for 3 quarters now. So what explains that? Because we have been adding like 1,000 employees a quarter. So why is it so? And what's the outlook on the cost-to-income ratio?

No. So I think we already talked about our guiding numbers, guiding projections on cost to income, which is around 55%. Around -- ideally, it will be around 52% to 55% in the next maybe 4 quarters also because we'll have our own expansion plan also. And so that's the broader number of around OpEx. But I think the employee cost is largely now stable because the entire senior team is in place, and so I don't think that we'll have very extraordinary expense around employee cost, and it will remain in this range only, right? Any specific?

Nitin, we can discuss it off-line, I mean, if there's anything further level of detailing that is needed.

So there is no surprise around this, neither employee cost, neither OpEx.

So there was an entry of employee -- cost of ESOP expenses. This was in last year, but not in this year. So this is the main reason, which has increased the cost...

Sorry, I was talking more on the like these 3 quarters for FY '20, the number is by and large the same despite us adding 1,000 employees every quarter. So on a Q-o-Q basis, if you look at these numbers...

Yes. So 1,000 employee on the ground doesn't make much of a difference on the balance sheet side, right? The average cost of the ground employee would be around INR 15,000, right? So it does not make that big sense around it.

The next question is from the line of Aditya Jain from Citigroup.

On the disbursement yield on Slide 18, so if we look at the disbursement yield separately in new wheels and in used, individually also there was a movement downwards in the quarter. So for new, for example, 13.3% to 12.8%, similarly some decline in used. So what is driving this decline, generally, given the macro, I guess, NBFCs are not really flushed with funds. So this seems slightly surprising.

So Aditya, I had covered this earlier, but just for your benefit, what we have shared that the third quarter is usually the quarter of festive seasons and December discounts that you typically see. And in that, particularly, we focused more on new vehicle disbursements, which was directly not the case in the first 2 quarters. These are tactical calls that the business teams keep taking on the ground depending upon the market swings, the competition behavior, the mix that you'd like to attain and so on and so forth. I think you all understand that. So the reason that you see some drop in the pricing on the yield is because of these...

Very cyclic.

Very, very cyclical. It's business as usual, Aditya. There's nothing incremental for us to decipher from this.

Okay. I'll follow up later, I guess. And then the decline in Q-o-Q in NBFCs is great to see. So just to understand, so have you done some active sell-downs? Or is it normal repayments? Or [indiscernible]

So you're saying that the drop in the NBFC book between the second quarter and the third quarter.

Yes.

It's normal, Aditya. [indiscernible]

We haven't sold a single account in NBFC.

The next question is from the line of Aakash Dattani from HDFC Securities.

Once again, before we take the question, I think somebody has to go on mute. So Vivek or Bhaskar, I think if you've unmuted, can you please mute your line? Thank you. Lizan, I think we can take the next question.

The next question is from the line of Aakash Dattani from HDFC Securities.

Congrats on the quarter, and thank you for taking my questions. So most of my questions have been answered. I just have one question on what is -- what would you consider -- where would you want to take the PCR we're seeing in the quarters to come?

You mean PCR, provision coverage ratio?

Yes.

So what's your question, sorry? What's your question?

Where do you want to take this in the next few quarters?

No. So there is no target around our PCR coverage ratio because, as you know, our credit cost is somewhere 0.3%, 0.4% over the years. And we are already covering our -- that losses through our PCR provision. So it will be outcome of our provision policy. So we are not working on any targeted number, honestly.

The next question is from the line of Hiral Desai from Anived Portfolio Managers Private Limited.

Sanjay, congratulations on the quarter. I actually had 2 or 3 questions. One was, if I look at the MSME disbursement, it's been extremely strong for last 7, 8 quarters now. If you could throw some sense in terms of, one is in terms of branches now, do we do MSME loans across all the branches? And what was the number a year back? So is there some benefit because of distribution coming in? And within MSME disbursement, what is the percentage of new to bank?

No, sir. I think, of course, now entire -- this is our one of the most important book for us after wheel, and we really want to make it very big. We find it very, very amazingly in terms of market, customer, the competition landscape. The way we are building our franchise around this product is very, very amazingly. So I think we want to make it very big in next -- maybe in 5 years. And for that, the entire system is now in place in terms of our operation, credit, sales. So the distribution is entire now -- across bank, right? And I feel that NTB, our customers are main acquisition done in this business, right? So across 90% book is NTB because these customers are very small, these customer are roadside businesses and these customers are not over leveraged. So we don't give a second or third loan so quickly to the customers, and it is always a acquisition model where our team has to go and figure out the new businesses, new businessmen who really want to take loan from us. And being a bank, now it's a huge pull towards us. Customers really want to take loan from us, right? Because being a bank, you feel that we can give even more value around it. So I feel that as we move forward, I think this will -- eventually this will book -- this book will become our biggest book in the organization.

Okay. Okay. And the other is really on the asset quality. So if I look at last 2 or 3 quarters, when you compare yourself with some of the smaller banks, I'm not comparing with larger banks, and NBFCs which operate in a similar profile, the asset quality has clearly deteriorated for most of them. But in our case, actually if I look at the number, let's say, at end of FY '19 and right now, the GNPA ratios are much better versus what they were at the end of the year. So anything specific that we are doing, which is very different from rest of the industry because clearly there is stress in the economy?

No. Sir, I've answered this question from so many years that we are in the business from last 25 years, and the machinery is well-oiled, right from sales, credit, operation, collections. So this is one team, one dream. So -- and that is helping us to mitigate this challenging time. I don't personally believe that there is huge economic crisis on the ground. People has become a lot of risk averse. They don't want to borrow irrationally. And so I think the team, which is on -- more on ground, team who really understand realities and build solution around it will be the eventual winner. So I think we are not doing anything very special, but the focus is very high. The commitment is very high.

Just one clarification. When you say daily NPA tagging, so if the person does not pay on the day when it was due, then you'll essentially tag him as an NPA. Does that mean daily NPA tagging?

Yes. Yes. Yes. So if the customer does not pay me fourth EMI, so date of fourth EMI default has been tagged as NPA, which is not in case of NBFCs. So we have moved it from April 1. And in spite of that [Audio Gap] [ gross ] NPA has not gone up. So actually, we have reduced it in largely -- internally, we had a very huge discussion around it, that our team has done commendable job around the -- containing this kind of NPA numbers.

Okay. Okay. And Sanjay, just lastly, given that we are growing at a very fast pace, when are we likely to raise capital?

My friend, we have just -- we have grown disbursement by 23% only in last 9- to 9-month basis, so how come you say that we are growing so fast?

No, no, sir. I essentially meant -- I'm just assuming that going forward retail will keep becoming a bigger part of the disbursement till the SME space recovers. So if I just take at ex of the SME book which is actually growing at a relatively lower pace, your retail is still growing at 40% plus, right?

Yes, Hiral, so we have wheel book, we have SBL book, we have a home loan book, we have a branch -- the business banking, the agri banking, right? We are also [indiscernible] some [ digital-led ] funding, right? So I think it's a mix of so many products which launched in the last 10, 11 quarters. That is giving us this kind of growth. It's not about we are just growing a wheel book or SBL book. So I would appreciate that if you really go and figure out detailing in terms of our growth spectrum, you will know that how we want to grow ourselves. So of course, some products has very good liking, the franchise has become [ over ] around it, but largely I believe that if AU even grow by 25% year-on-year, our AUM growth will happen around 35%, and which is what we are looking in next maybe 8 quarters. So based on that, whatever capital we needed, we'll raise it.

No. No. But when are we likely to raise it is the question.

It should be in '21, '22 -- it should be in '20, '21.

'20, '21.

'20, '21, which is next year?

Actually we should comment this on the end of this year, actually.

The next question is from the line of Amit Jain from Axis Capital.

I just had a small question on your PSLCs. So this quarter, the run rate was pretty high as compared to previous quarters. So anything to read here?

PSLC, I think is a normal course of business for us. Our book is around 80% private sector. We have to keep 75% as our minimum buffer for regulatory guidelines. But it is always based on last number, so there is enough scope for us. So every year, we should have this kind of income based on the market requirement.

The next question is from the line of Anand Dama from Emkay Global.

Sir, one in the slide basically in the NBFC exposure, we have said that there is an RE-related exposure and that, I believe, is basically Altico where we have INR 50 crore kind of an exposure and we have INR 36-odd crores kind of in FDs. I believe we had relatively higher FDs when we had reported last time. Is there any repayment which has happened on that?

No, no, no. We -- our exposure was around INR 62 crores against FD of INR 50 crores. So as per court order, we have appropriate our 3 installments from the FD. That is why the overall exposure has come down from INR 62 crores to INR 50 crores, and the FD had come down from INR 50 crores to INR 38 crores or INR 36 crores, whatever you're telling, right? So we haven't paid anything to the company because it's a court order in our favor.

Okay. So in that case, so do you think basically that this account is one which basically could turn NPA? Then in that case, basically, we will recognize this account as an NPA next quarter, and then we will adjust these FDs against that, so net about INR 14-odd crores kind of a hit is what we're going to take?

No. Why? Because there is a resolution happening in the company. So the receivable is around INR 5,000 crores. So I think we are pretty fine with that kind of scenario where we -- the court had just ordered that this INR 50 crores is your money. [ You now ] need to appropriate if company doesn't pay you. So the company is not paying us anything as of now because they are under resolution process. So I think in the next 6 months, they will get some resolution process in place. And I believe that our money is not in any kind of danger.

Yes. Anand, just to clarify this to you that the exposure to the entity in the form of term loan with the interest servicing on a monthly basis and the EMI on the quarterly basis. So the adjustment that you see of dropping of the FDs will happen every quarter for the next few quarters until the entire INR 36 crores is fully adjusted. And it's only at that point of time, which is like a few quarters away from now, the resolution is still not hit. We will see whether to classify it at that point of time, which we are hopeful that we'll be able to recover most of our dues in this.

So technically it will not turn NPA even if the company doesn't pays up right?

I won't say this. We have to wait and watch. But we are [indiscernible] other lenders.

Okay. Sure. Sir, second, we've been reporting a 90-DPD NPAs. Is it possible to talk about what is basically a 30 DPD-plus kind of a pool, particularly in the wheels portfolio?

So the current is around 80%.

Current is 84%.

And I think -- current means

84%.

You know DPD -- so 1 DPD is around 20%, and the 30 DPD...

And the 30 DPD is around -- it will be around 5% to 6%.

[indiscernible]

Sir, 30-plus [Foreign Language] what is 80%? 80% is current...

So we can share you the data separately with you. But [ whatever ] we are around 20%.

11% you can say. 11% you can say if we count 1-plus

Correct.

Sorry, I didn't [ get ] basically what's...

30-plus is 11%, 1-plus is 20%.

Okay. And how this was...

This data remains in this way from last 10 years.

10 years. Okay. So there is no deterioration that you are seeing even if...

No. We are actually better off.

Okay. Okay. Sure. Sir, other than that, on the liability front, if you can just tell me that, we have an employee base which has been growing now. So what's the branch-based employees that we have at this point of time? And who are basically only and only focusing on the liabilities side of the business as of now? And whether there we have done some addition, whether there have been some attrition out there?

Yes. So Rishi here. See, we -- the way we see the liability, manpower versus branch happening, as I said earlier also, the existing banks over the years had to put out branches because your smartphones are only 8 years old. Smartphone proliferation has happened in the last 7, 8 years. So whatever a large private sector bank would have done with, say, 250 branches in 1 particular city, we may have to do only with 60 branches. I don't know the right number. And as Sanjay said earlier also that our branch strategy is something that we'll talk more about in the quarters to come. But what we are saying is that with the fewer branches, by having more feet on street, because the customer is not really going to come to the branch in any case to do transactions, and we know all that behavior, right, that is very well understood by everyone. So what we are saying is that we will have more acquisition teams on the field, which will acquire customers. The customer in any case is going to transact with us digitally. And therefore, you will see the number of employees per branch sort of higher than maybe what other banks has in the times to come. But the branch number would not really increase in tandem with the manpower if that is the question that you're really trying to understand.

So basically, I was...

Sorry to interrupt, Mr. Dama. Sir, may we request that you return to the question queue. There are participants waiting for their turn.

Sure. So at least we can complete this question, yes?

Yes.

So basically what is the dedicated liability employee base that we have at this point of time? If you can throw some numbers out there.

Anand, it's Sunil here. Can we take that question [indiscernible] have a slightly longer queue and there's just a few minutes left for the call? So why don't we connect off-line and I'll give you the details?

The next question is from the line of Pranav Gupta from Birla Sun Life Insurance.

Yes. All my questions have been answered.

The next question is from the line of Ayaz Motiwala from Nivalis Partners Limited.

My question is focused on the -- just the housing and mortgage side of the business. You had a sort of division which you have split off, and you want to go back into the business in a big way. Can you throw some light on the progress there, sir?

Yes. So of course, housing is another product which we want to build big in bank because the market, the customer, the product, the strategy remains same. And we started 12 months back, and we are now clocking around INR 50 crores a month. And we hope that in the next 2 years, it will come in the same shape and size where we left in 2016, '17. And we are very comfortable. Our yields are around 12.25%, 12.5%. And the franchise power is coming in play. We are pretty fine, and we are hoping that this will -- this book will become big.

All right. And sir, are there any conditions on certain business that you can or cannot do because of that -- because of the past agreements with...

No. Nothing, nothing, nothing, 0. So we have sold it in 2016, '17. We have already become bank. So we are free to do anything around our franchise.

And there is nothing from the regulator also which affects the growth of this business at all?

No, no, no. Nothing. Actually, regulator want us to do more home loans.

Right. Okay. So that was my question, and the other questions have been answered.

Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.

So once again thank you very much for joining us [indiscernible] this call. I hope we've answered your questions. Should you have any questions unanswered, please feel free to reach us. Thank you very much, and look forward to talking to you the next quarter.

Thank you so much. Pleasure talking to you.

Thank you. Ladies and gentlemen, on behalf of AU Small Finance Bank, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.