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

Ladies and gentlemen, good day, and welcome to the AU Small Finance Bank Q2 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Aseem Pant, Vice President, Investor Relations, AU Small Finance Bank. Thank you, and over to you, sir.

Thank you, Rutuja. Good day to everyone, and welcome to AU Bank's earnings call for the second quarter of FY '22. We thank you all for joining the call today, and we hope you and your dear ones are safe and well. For approximately the first 25 to 30 minutes of the call, we will have few brief remarks by few members of our senior management, followed by 30 to 45 minutes of Q&A. Firstly, we will have our MD and CEO, Mr. Sanjay Agarwal, share his thoughts on the performance and overall outlook for the bank. He will be followed by our ED, Mr. Uttam Tibrewal, who will share his narrative on the business outlook and asset strategy. Mr. Vivek Tripathi, Head of Commercial Banking, will discuss asset quality for the bank and finally, Mr. Rishi Dhariwal, Group Head of Branch Banking, will discuss liabilities and Branch Banking. Besides them and the IR team, we also have a few other members of our senior management to answer any other questions you might have. For the benefit of everyone, we would humbly request that a number of questions per participant be restricted to a maximum of 2, and to join back in the queue or mail us in case you have any further questions. With that, I'll request our MD and CEO, Mr. Sanjay Agarwal to share his thoughts on the bank's performance and outlook.

Yes. Thank you, Aseem. Good morning, everyone. Namaskar. Thank you for joining. We hope that you and your dear ones are doing well and keeping safe. Let me start on an encouraging note that last quarter was one of the most healthy, happy and hopeful quarters in the series of last 6 around the pandemic. It was promising and action-oriented. The economy, both micro and macro, capital markets, liquidity, vaccination drive, drop in the active COVID cases, business continuity, confidence, hopefulness, entrepreneurship, everything kept the whole environment very, very upbeat. This time, the energy was vibrant and the feel was very high, which we haven't seen in the last 2, 3 years. People are now coming out and looking forward to rebuilding themselves and their businesses. We could see a lot of progressive approach in every aspect. Demand across businesses looks strong, especially in the wheels and home loans. Businesses have also started looking for capacity expansion and a good festive season should further boost sentiments. Government expenditure and infrastructure contracts will also boost downstream demand as local level contractors and subcontractors start looking for bank guarantees and funding facilities. Similarly, the green shoots are visible in metals and mining, pharma and biotech as well as agri processing projects, which is expected to boost demand for smaller MSME suppliers and retailers. Barring any severe lockdowns, we hope to have a better demand visibility in the next couple of quarters. We, as a bank, have capitalized on the opportunities offered in last quarter. It begins from improving the asset quality significantly by achieving NPA reduction from 4.3% to 3.2% that too without any write-offs. The collection efficiency trends seen in June '21 continued in Q2 as well, leading to a higher-than-expected asset quality performance. To further strengthen the balance sheet, we have used the provision released due to reduction in GNPA to buffer up the contingency provisions amounting to INR 110 crores. We stood beside our customer with a solution-focused approach and provided necessary support after understanding each customer's business situation. We appreciate the customers' intention to pay us as the normalcy returned. And would also like to acknowledge the phenomenal dedication and commitment displayed by our team as well. Other data point also demonstrates similar trends. During quarter 2, we grew deposits by 40% -- 45% year-on-year, reduced our cost of funds by 89 bps year-on-year. CASA ratio touched 30%. The disbursement increased by 57% and AUM by 24% on a year-on basis, and the yield on AUM was 13.7% (sic) [ 13.9% ]. The growth in every asset vertical has achieved our desired expectations. Our balance sheet size grew by 21% and net worth grew by 38% year-on-year. And our capital adequacy is at around 22%, very comfortable. Our liquidity position continues to be quite strong with an LCR ratio of 151% during the quarter. HR hiring, distribution and franchise building all remain in line. Close to 3,000 employees joined us in this quarter. We have launched 53 new branches in this quarter. We are now serving 21 lakh plus customers as the largest small finance bank and are offering over 30-plus products at 800-plus banking touch points across 15 states and 2 union territories with a team of 23,000-plus employees. We continue to believe that India is at the cusp of digital revolution in banking and to be relevant in the coming years, the bank is investing in building advance tech capabilities. Our digital outlook remained progressive, whether it's our Super App 0101, video banking, our payment channels through UPI, credit card cost, QR codes. With more than 6 lakh preapproved offers already extended, we are using advanced analytics to deepen our relationship with the customers based on hyper personalization of offers. All cylinders are firing. And I personally believe that if Indian economy remains north of 7% for the next few years, then all these properties will give us a lot of support for building the largest retail franchise of this country. Further in this quarter, we launched our first mega campaign, Badlaav Humse Hai, and we are witnessing amazing results at such higher brand recall leading to increased footfall in the branches, increased engagement of digital properties, whether it's website or app registration. The energy of our team has accelerated the momentum. We remain very excited on how we are progressing on our journey to be a tech-led bank. Even as we continue to invest in people, new products, digital ecosystem and brand building to become a strong and sustainable bank of the future, Our ROA and ROE for the half year stood at 1.8% and 14.5%, respectively, which is a reflection of our strong and differentiated business models. As we all know that we are building a unique formal Robinhood model by garnering deposits from urban markets and disbursing in core markets. 74% of our liability comes from urban markets and 65% of our lending happens in core market. Our purpose of being an SMB guide us and drive us every day. Continuing our legacy, we have exceeded the requirement of key licensing guidelines with 86% loans to priority sector, 63% loans with ticket size less than INR 25 lakh and 30% of touch point present at [indiscernible] center. The inclusion of the trader segment under MSME classification ensures continuous flow of credit to them at competitive price by retaining their PSL status with the bank. I'm really thankful to the government for this. Our commitment to financial and digital inclusion remains unwavering. As we move forward, I also welcome Deloitte and G. M. Kapadia as our new statutory auditor after 8 years of distinguished service by S.R. Batliboi. We are very thankful to their team. I would also like to conclude by saying that our strategy is well defined and well executed, and it has been developed over the last 2 decades. As of now, we are focusing on 4 projects: Wheels, SBL, Home Loan and Commercial Banking. The entire team is well stitched and has good vintage. In terms of our liability strategy, we are focusing on to raise low-cost stable money. For that, we are developing all the means in terms of product, processes, people, payments, digital, brand, distribution, and building trust since the start of the bank. We are working on all those things with lot of focus and it continues to remain our prime job. We are very hopeful that our inputs will get us to the desired results. As we speak today, we are gearing up for the festive season. Last quarter was better than the previous one. And we hope that coming ones will be better both in terms of lives and livelihood. We still remain -- we still choose to remain optimistic, but with lot of cautious approach. It has been wonderful 4.5 years. However, we are still new in this journey of building the bank and may take some more time to understand every dimension of the banking platform. As promised last time, we continue working towards our communication. And I just want to assure everyone that we are adhering to a gold standard [ with the ] government and the compliance, and we'll keep improving there. So thank you so much. I wish you all a very happy Diwali and festive season. And also really want to thank the regulators and the government to handle this whole situation so well that there is more hope for the coming years. Thank you so much. Handing over to Uttam for business outlook and assets.

Thank you, Sanjay. Namaskar. Good morning, everyone. I hope all of you are safe and healthy. Last quarter was one of detailing, hard work ,activity and excitement. The team had to do a fine balance between managing customers, reassuring collections and asset quality while also focusing on growth and competition. I'm happy to report that with our on-ground connect and support from our customers, our disbursements for the quarter was at INR 5,135 crores, up by 57% year-on-year. While our GNPA reduced by 115 basis points over last quarter, to 3.16% as on 30 September '21. The improvement in customer cash flows, availability of [ legal imposes ] and empowerment to take decisions on the ground allowed us to see resolution of more than 37% of the gross NPA pool in 1 single quarter. Despite rapid falling COVID cases across India, some customer were indecisive on this possible third wave on horizon. However, businesses are now more positive about future outlook with customer footfall reaching pre-COVID levels. With ongoing festive season, we expect even stronger loan demand in the coming months. In the most impacted segment during COVID pandemic like commercial passengers, tourism and travel, education, hospitality, et cetera, are starting to open up and showing signs of revival. Domestic tourism has almost normalized while schools and colleges are opening in a phased manner. I remain enthused around the opportunity of our all asset businesses in the post pandemic role, and I'm happy to share some key insights that are based on each of our 5 key priority businesses. First of all our Wheels business. In the quarter gone by, Wheels used their collective experience to produce a fantastic results on the collection front leading to 160 basis point reductions in GNPA within 1 quarter, taking our GNPA to this book to 4.3%. Second quarter also saw a strong revival in the demand in both new and used vehicle segments, leading to our disbursement rising by 86% year-on-year to INR 1,906 crores during Q2 FY '22, supported by low base effect and strong rebound in demand post second wave. Our Wheels volume has reached INR 14,280 crores across 6.5 flag retails with 52% growth being under personal segment and average LTV of 80%. While auto industry continues to witness pressure led by supply type constraints, semiconductor shortage, low inventory levels at dealerships, we believe the near-term outlook for personal and commercial vehicles will remain strong driven by the same factors. The formalization of used vehicle industry is a big opportunity. I would like to highlight 2 industry search points to substantiate. In the next 4 or 5 years, the ratio of sales of used cars to new cars is expected to reach 2:1 from current 1.5:1. Similarly, the share of organized players in used vehicles is expected to increase from current 25% to 45% in the next coming years. AU Bank is well positioned to capitalize on this opportunity by actively engaging with both online and offline used car businesses. We have increased our focus on this segment, forming separate sales team and building a robust channel distribution network of over 3,000 used car dealers and their associates. Our new vehicles to used vehicles ratio has now reached 62% to 38% and over time we see this ration nearing to 50-50. We continue to watch the opportunity in electric vehicle space as well. Moving on to our SBL business. SBL has now become our largest business with AUM of INR 14,378 crores, crossed INR 1.5 lakh MSME businesses and has remained one of our most stable and resilient businesses. In the current quarter, we saw the NPAs reducing to 3.14%, a reversal of 106 basis points in 1 quarter. It remains a highly granular book with average ticket size of INR 10 lakhs and average LTV of 50% across well diversified businesses with no dominant segment or profile. On the demand side, we saw some good demand in certain categories like FMCG, retail traders, et cetera, while green shoots were visible in other impacted cities. The total disbursement for the quarter was at INR 978 crores, down by 7% on a year-on-year basis as we continued to see customers very cautious. Simultaneously, we did see growth in states like MP, Punjab, Himachal and Haryana, signifying a better Q3 outlook. During the quarter, we also remained cautious in our underwriting assessment and kept the [Indiscernible] at high levels with very limited balance transfer cases. With resumption in activity levels, opening up of education sector, the upcoming marriage season in North India, and the destocking during ongoing festive season, we expect demand to pick up in the second half for the financial year. Our SBL team is all charged up and remains well geared up [Indiscernible]. With our digital onboarding solutions well tested and our capacities well buildout, and the absence of any significant lockdown, we are quite hopeful of a strong SBL disbursements in H2 FY '22. Moving on to our housing finance business. With around 3 years of building the housing verticals at the banking platform, the total AUM in housing vertical has reached to INR 1,690 crores across 18,000 dwelling units. The portfolio comprises 80% home loan and 20% nonhousing loans like LAP and top up loans. Our disbursements in Q2 FY '22 were at INR 276 crores against disbursement of INR 58 crores in Q1 FY '22 and total disbursement of INR 177 crores in H1 of FY '21. Timely changes in underwriting criteria, [ likely capture of ] good set of customers, thereby creating a quality portfolio with only 84 cases in NPA amounting to 0.6% of GNPA in the HL business. The average ticket size in this group is INR 11 lakhs whereas the average LTV remained at 53% as on 30 September '21. The reverse migration caused by the rise of the remote working culture has led to the heightened demand for homes in Tier 2 and Tier 3 cities. Decade low housing finance rates, stagnant property prices and government focus on housing for all, the affordable housing market is expected to continue and attract serious home buyers. With our reducing cost of funds, we have also launched an elite scheme targeting better credit profile customers and remain well placed to leverage new locations and markets going ahead. Moving on to our commercial banking business. Our 2 main businesses on commercial banking platform are business banking and agri banking, which are balance sheet based lending, where we compete with mainstream banks and have gradually built a gross advanced book of about INR 3,269 crores. In these 2 businesses, across 6,000-plus SME and MSME businesses performing resiliently during the pandemic with GNPA at 0.6%. Both these businesses provide strong fee opportunity in the form of non fund-based lending and transaction banking. During the quarter, the disbursement in these businesses was at INR 728 crores, growing by 130% on year-on-year basis. We will continue to grow this segment by focusing on providing best book banking solutions to MSME, combining working capital, current accounts, promoter accounts and transaction banking solutions. We were the first SMB and probably among the few banks to launch our own credit card in the first 4 years of this journey and have started seeing some traction with our insurance of reaching 50,000 plus credit cards till date. The entire layout and foundation of the product right for conceptualization to launching was undertaken during COVID-19 period, and we expect to see these businesses grow rapidly over near to medium term. Our merchant acquisition and engagement strategy is also shaping up well for deployment of 2 lakh plus UPI QR codes with associated transaction based lending. To conclude, we have been sailing against the wind for last 18 months. The bank has used this time to focus on building our capabilities and capacities, expanding our leadership team, granulizing our liability franchise, launching products like credit cards and UPI QR, integrating technology in our product journey and focusing on launching digital properties like AU 0101 and video banking. We believe we have the right technology and platforms with segmental leadership positions across [ selections, ] disbursements, branches and team alignment. And as Indian economy is gearing up for a speedy recovery, given our vintage product alignment, exhibition capabilities and out digital outlook, AU Bank is fully equipped and ready to be in the top quartile is to take advantage of that recovery. I'm personally very excited to lead this business and look forward to sharing more with you in coming quarters. With this outlook, I now invite my colleague, Vivek Tripathi, to share our view on the asset quality of these businesses. Thank you.

Hi. Good morning, everyone. I'll be sharing a brief perspective on the asset quality. We saw weaning effect of COVID, and most of the businesses saw increased activity during the quarter, which resulted into a better cash flow. We saw collection efficiencies sustaining to the June and July level in the entire quarter. The collection efficiency and customer activation numbers of Q2 are in line with pre-COVID levels. The average collection efficiency in Q2 is at 109% compared to 101% in Q1. Customer activation also remained stable at 91% in September compared to 92% in June. Our gross NPA reduced 115 bps from 4.31% to 3.16% in Q1 -- sorry, from 4.31% in Q2 to 3.16% in Q1 -- in Q2. And NPA number of -- the net NPA number also reduced from 2.26% in Q1 to 1.65% in Q2. The improvement seen sequentially in terms of economic activity, borrower connect, business continuity, the overall confidence in the operating environment and there's more visibility of the cash flows of customer. Therefore, customers are forthcoming for resolution. However, we continue to remain cautiously optimistic as there is still little uncertainty on the third wave. We have witnessed around 61% activation in the NPA book, which was there on 30th June during the Q2, where customers have either done repayment or have surrendered the security. A result -- as a result of this, we saw 37% resolution in the opening NPA book. Here, it is important to note that more than 80% resolution happened due to repayment while residual 18% -- almost about 18% of resolution happened on account of security disposal. Further, we have security in hand for almost 10% of our NPA book. It may be noted that so far bank has not done any write-off. However, we shall start cleaning the book going forward, which is the recoverability on account-to-account basis. On restructuring part, bank has done INR 80 crores of incremental restructuring in people, which is 0.2% of our gross advances. And as on 30th September, the bank had total of INR 1,302 crores of standard restructured assets, which represents 3.6% of our gross advantage. Out of this pool, billing has started for 48% of restructured book, wherein 14% of the book is NPA as on 30th September. As we anticipated, this represents around 30% in the Q1. As of now, it remains within the comfortable limit of that. During the quarter, INR 57 crores of NPA was added and INR 48 crores were resolved in the restructured book with net increase of only INR 9 crores and closing NPA of restructured books stands at INR 99 crores. Our overall book, if you look at the composition on -- as of 30th September, 50% of book now originated before March and 50% of book was originated before March -- after March '20. So further March '20 book is 92% current, and it contributes only 5% of NPA and 2% of restructured assets. The overall resilience of our entire book has validated the approach of underwriting and customer segment [indiscernible]. On moratorium book, as on 30th September, we had outstanding [ 4 -- 4 plus 1 ] moratorium book of INR 4,500 crores, which is contributing to 76% of NPA and 70% of restructured assets. However 43% of this book is current and another 27% in the first and second bucket. Therefore, we expect minimal slippages -- further slippages [indiscernible] On ECLGS, bank has done cumulative ECLGS disbursement of INR 958 crores, out of which INR 87 crores was done in Q2. As on 30th September, bank had a total of INR 887 crores of ECLGS book, which is 78% current and 1.1% of NPA. We do not see any significant difference in the asset performance of ECLGS book [indiscernible] nominal book. During the quarter, INR 4 crores of NPA was added, while -- INR 5 crores were resolved in the ECLGS book with net reduction of INR 1 crore. The closing NPA of ECLGS book was INR 10 crore. On the provision coverage, bank is carrying a provision of INR 560 crores against GNPA of INR 1,151 crores with PCR of 49% and provision of INR 213 crores against restructured assets of INR 1,302 crores. The bank has utilized the entire provision reversal net of [indiscernible] losses of INR 110 crores to increase the contingency provision to INR 300 crores. The contingency provision now stands at 84 bps of loan -- loan book which further strengthens the balance sheet and makes us better prepared for any unforeseen events. As you would be aware, our loans are [indiscernible] secured, primarily for income generation, coupled with our strong on-ground connect and agility helps in faster recovery. Also, in house loan sourcing and collection helps in underwriting and providing flexibility in aligning resources basis the situation. Keeping opposite factors in mind as well as NPA resolution movement of Q1, with 80% resolution being driven by repayments and repo loss rate remains broadly stable versus historical level. We feel confident that PCR of 49% is quite likely to be more than sufficient to cover any credit loss arising from this portfolio. With regards to restructured books, as mentioned earlier, the slippages trend so far are within the anticipated level and the 16% coverage against the pool look sufficient. Further, over and above this, the bank also carrying contingency provision of INR 300 crores for any unforeseen risks in the future. Now I would like to request Mr. Rishi Dhariwal to give update on our performance of branch banking.

Thank you, Vivek, and good morning, everyone. The launch of our Badlaav Humse Hai campaign, with Aamir and Kiara has done wonders for the retail branch banking business. It has helped announce our brand acceptability and recall in people's mind, thereby boosting customer acquisitions. Our digital banking platform, AU 0101 Super App has made significant strides since its launch in the last quarter, enabling a seamless banking experience for our customers. Over the last 4 years, the branch banking business and liabilities have matured substantially, making continual improvement to build predictable, stable and scalable franchise. To begin with, I'll provide the overall business highlights. Our overall savings deposit book has grown by approximately 26% quarter-on-quarter from INR 8,102 crores in Q1 to INR 10,228 crores in Q2 FY '22, and by 138% year-on-year from INR 4,296 crores in Q2 FY '21 to INR 10,228 crores in Q2 FY '22. About 5.8 lakh customers are digitally active, and going forward, we aim to ramp up this further. The current account book grew 13% in the quarter from INR 1,387 crores in Q1 to INR 1,600 crores in Q2 FY '22 and by 54% year-on-year from INR 1,041 crores in Q2 FY '21 to INR 1,600 crores in Q2 FY '22. More than 200,000 customers have been equipped with QR and over 8,000 with POS, allowing the bank to get better balances in their accounts with us. Monitor transactions and payments suitable products and services to our customers based on the same. We have been able to improve our CASA ratio consistently over the last few quarters. As of September 2021, our CASA ratio is 30% compared to 26% in June '21, 23% in March '21 and 20% in September '20. Improving our CASA balances and optimum pricing on our savings and deposits will help us to reduce the overall cost of our deposits over a period of time. We activated almost 77,000 debit cards in the quarter. 10 lakh transactions amounting to INR 267 crores in value were done by customers during the quarter using our debit cards. Our newly launched credit cards have been a game changer. We issued 30,000 credit cards during the quarter, 300,000 transactions were done amounting to INR 120 crores in value. Also, about 84% of our credit card customers are ETB with 70-30 mix of liabilities and asset customers. Our partnership with ICICI Prudential and Future Generali for life insurance and Aditya Birla and Care Health insurance have enabled us to sell more than 10,300 policies in the quarter with increasing ticket size, which is indicative of better customer profile. We have around 23,700 customers who invest in SIPs through us. Because of our well-integrated mutual fund and broking services on the AU 0101 app, and our focus to grow our investment segment, we expect engagement with customers through these products to improve as we grow. We also have more than 43,800, 3 in 1 broking accounts through our partnership with Motilal Oswal Financial Services. I will now talk about our medium-term priorities. Our focus on acquisitions and activation in the past has resulted in acquisition of 15 lakh -- of over 15 lakh savings accounts and 1.3 lakh current accounts. As we had shared last quarter also, we are taking measures to boost engagement and deepen relationships to establish sticky, long-term customer base. To this end, we are equipped with various attachment products and services, namely debit card, e-com and POS activation, UPI, bill payments and FASTags, royale and platinum products for savings and AU Power current account for current account customers, SIP, 3 in 1, asset products life and health insurance products, et cetera, to build customer engagement. These initiatives have resulted in 49.1% of the customers regularly transacting with us with 20 transactions on average per transacting customer. Furthermore, more than 60% of liabilities customers use 2 or more of our products. We continue to invest in building relationship management to cater to the needs of customers and focus on the customer lifetime value. With our attention on family banking, we continue to organically drive new acquisitions through referrals of friends and family. We have equipped our sales team with digital tools and gamified performance tracking for better sales experience and we continually utilize analytics to understand our customers better. In terms of physical distribution, we have a well-oiled system in semi urban regions, which we will continue to operate. Our growth in liabilities will be driven by metros and urban markets. We have launched 26 new liability branches in the quarter, 25 in urban markets and 1 in rural -- in the core markets, bolstering our focus to grow the customer base in urban markets. We are optimizing the size of our branches to maximize productivity per square foot of a branch, taking into consideration the shift towards digital banking. In terms of our digital initiatives, we had over 5.8 lakh registered users on our AU 0101 Super App as of September '21, and it's growing. We opened more than 28,000 accounts via digital route using AU 0101 app and video banking during the quarter. The number of transactions on the app have been steadily increasing with 28 lakh plus transactions recorded during the quarter. In August, we launched the digital savings account and no minimum balance account designed to provide instant banking facility to digital customers. During the Badlaav Humse Hai campaign, the bank rolled out a series of offers on platforms such as Big Basket, JioMart, Domino's, MakeMyTrip and many more. These offers nudged the customers to increase their balances with their accounts with AU Bank and is an important initiative to get the customers to engage with us. In conclusion, our targeted efforts on customer engagement, optimizing physical distribution and developing people capabilities along with the Badlaav Humse Hai campaign have provided the bank with the much-needed momentum to still -- retail liabilities on the platform created over the next 4 years -- over the last 4 years. Thank you.

Rutuja, we can maybe start the questions now.

[Operator Instructions] The first question is from the line of Antariksha Banerjee from ICICI Prudential Asset Management.

Yes, can you hear me?

Yes, yes.

Yes, sir. So I have 2 sets of questions. First is of the 3,000 employees that you have added this quarter that you mentioned, can you tell us a rough split between how much was in collections and how much was in business or maybe in digital? And on the total stock of employees also, what could be the rough split between collections and business, and how that has changed over the last 1 year because [ unfair collections ] would have been much more important over the last 1 year. That's the first. And the second is on your core customer segment, right, given the level of fuel price maybe that we are seeing, how do you think the cash flows are impacted because at least ground checks suggest that the tariff highs are -- have not kept pace with the rate at which the fuel prices are growing. So is that an impairment of cash flows? Or do you think that as recovery happens, the cash flows are still growing? And if so, why?

So the first data, which is around HR, I can give you the -- a little bit of overall composition of team. We are having around 20,000 -- 23,000-plus people in which we have around maybe 30% sales force, around 10% collection force, and other than that, people are in different, maybe around another 20% are in the front-end job like credit, operation and all those things, right? And specifically, if you want to ask [Technical Difficulty] we haven't hired specific people for collections because we have built our capacity for every function way back. We were actually building our team from last maybe now 12- to 15-month period. So this all hiring done this quarter was a normal kind of hiring where we'd have hired people on front jobs, back-end jobs, across verticals, sales, credit, risk and so on. So it remains a very normal hiring pattern, right? And I'm not able to figure out your second question.

The second question is on the Wheels, sir. The end customer or the borrower, how has their income profile or cash flow been impacted because of the recent fuel price hike? Or has the tariff or revenues kept pace with that? Are the take homes reducing? Or is that not an impact?

Yes. Hi, Antariksha, this is Bhaskar here from Wheels. While the fuel price increase in the profile that we lend to, which is a very, very retailized single vehicle owner, where -- there the freight rate gets adjusted as a function of the fuel price as well. What -- the one that you are referring to is more impactful to the contractual fleet owners, the large fleet owners. So for the retailized business like the ones that we do, which is more intracity, it is more short distances, here the freight gets adjusted as a matter of fuel in the business lines that we operate.

Sir, if it's possible, can you give us a rough breakup of what the Wheels book looks like? I mean you used to share it earlier. But as of today, what would the stuff -- breakup be roughly across category?

I mean we have a personal segment of around 50%. We have commercial loading of about 22%. We have commercial passenger of about 18%. We have tractor of about 8%. We have construction equipment of about 3%. So that's how it all gets spread out, and all of them are pretty much retailized.

The next question is from the line of Sonal Gandhi from Nirmal Bang.

I have just got one question. So if I'm looking at your loan losses for the last quarter 1Q, I see that has been revised upwards to INR 206 crores. And similarly, you've also increased your other income by INR 30 crores. So that has been the kind -- can you please tell me what exactly is happening there?

Sonal, can you repeat the question? Your voice is not clear.

Is it better now?

Yes.

So I was talking about loan losses. So for the last quarter, we have revised it upwards to INR 206 crores. And similarly, we have also increased our other income by INR 30 crores, I mean. So what exactly has happened over there?

Sonal, so there is an RBI guideline because of which there were some reclassification. If you refer to Slide 17, there's a footnote that makes the reasoning clear. So the MTM losses have gone into the other income, and that's the main adjustment.

The next question is from the line of Himanshu Taluja from Motilal Oswal.

Yes. Just needed one clarification. If you can give on the moratorium book, what's the total moratorium book? And also like between standard, NPA, restructured and [ SME, what do you see from them, give ] that classification?

No -- so Himanshu, Vivek here. We've been giving detail on 4 and 4-plus months moratorium book. So in Q -- at the end of Q1, it was INR 4,900 crores, now it has reduced to INR 4,500 crores as we speak. And as I've given the [ color back ] that 43% is in current and another 27% in first and second bucket. So as far as the contribution in the NPA and the restructuring book is concerned, almost [ 869 ] which is roughly 76% of the NPA is from this book and almost 70% of the restructured book is from moratorium book.

The next question is from the line of Arav Sangai from VT Capital.

Congrats for the quarter. So I have two questions. My first question will be on the credit cost going ahead. So you mentioned that we'll be looking to take some write-offs in the coming quarter. And I think as a strategy, we might also like to maintain some countercyclical provisions going ahead. So what might be the credit cost one can expect for next quarter?

So to be very honest, we need to go with some more time because the whole recovery process and -- has just started last quarter only, and we need to figure out the whole means available to us to recover our money. And so -- but I can only say you this that we have around now INR 1,150 crores kind of NPA, and we have a provision of around INR 560 plus contingency of INR 300 crores. So I genuinely feel that credit cost will be under the provisions only, right? So we don't have any extra P&L hit. So you need to give us some more time, maybe a quarter or next quarter to really figure out what is the stable credit cost in the P&L.

Fair enough, sir. Sir, my second question is on the OpEx front. So I know you are investing a lot in tech and brand building and specifically employee additions. So by when can we expect some normalized level of employee costs? And also the second part to this question is, when can we expect, sir, more lateral hiring taking place? I know you have mentioned that we have added a lot of people from other -- like veteran bankers and all, but when can we expect some more seasoned person in the top management as well going ahead?

No. So to answer, so first, we have built our capacity from last 2, 3 quarters. So -- and unfortunately, quarter 1 was completely washed out. But we hope that quarter 3 and quarter 4 will give us space to again use that capacity. So HR hiring remains very normal, and we are in line. In terms of key hirings, we are doing as of -- when it's required. We actually got Head of video banking. We got a new digital officer. So that has all been done and to remain confidential around it, we haven't shown you data, but we are getting people from across board, whether large banks, small banks, fintechs, so there, we remain very excited. We remain one of the most exciting companies to people to join us, right? So that has also been seen. So any other -- on the OpEx side, so yes, you rightly said that we are investing in our credit card business, QR codes, we want to build a very new tech-led bank, so it requires a lot of investment in applications, infra, all those things. So that will continue -- we will continue to do that because it's a future requirement, right? And -- but we have that added advantage. We have the high-yield book and low cost money, so that is why we are able to even deliver kind of 1.8 , 1.9 kind of ROAs. So that is quite enough for us to really make ourselves investable in this kind of properties and initiatives.

Just one clarification, sir. All this hiring that we are doing, all this lateral hiring, will it be more towards the Mumbai branch? Or is it a fair mix of both, Jaipur and Mumbai as and when the need arises?

Across. Across. So we are very sorted out ourselves there that the job which requires working at Bombay, people try join there. But if job requires you to be at Jaipur, people need to be at Jaipur. So we are not compromising our stand there. And largely, we have sorted out. So we are good to go there.

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

Congrats on a great quarter. Hopefully, things improve for all. And [Technical Difficulty] was, if I look at the disbursement [Technical Difficulty] similar for Wheels and slightly muted for MSME [Technical Difficulty]

I'm sorry to interrupt you, Mr. Desai. We cannot hear you properly.

Hello?

Mr. Desai, your voice is not audible. May we request you to please rejoin the queue, sir. We move to the next question, which is from the line of Renish Hareshbhai Bhuva from ICICI Securities.

Sir, congrats on a great set of numbers. So Sanjay, sir, first question is on our AU 101 (sic) [ AU 0101 ] app. So if you can share the unit economics and maybe the customer profile of this customer who are active on the AU 101 (sic) [ AU 0101 ] app. The -- broadly, the question here is a sense that since most of your customer are captive customer and hence we would not be incurring any bank processing cost as such. So on a standalone basis whether AU 101 (sic) [ AU 0101 ] is at breakeven as of now excluding the marketing expense?

I'll let Gaurav, who takes care of our digital initiative. So he would answer this question.

Yes. So I'll give you sort of couple of sort of points towards your question. The first one is if you look at the profile of customers that is being acquired, so I think we've given out details on one of the slides. But broadly, Rishi mentioned that we've acquired about sort of 28,000 liability customers, savings account, digital savings account customers through 0101. And what we have seen is these are largely urban and salaried customers. So this is a slightly different profile from what sort of our overall stock of priority customers have, right? So that's the first one towards the profile. Second term -- point in terms of unit economics and breakeven, right? So we are in the investment phase right now. So we are -- there are two things we are doing. One is just building the product, right? So you saw us launching 0101, and we are continuing to add more products and more journeys on that. So we'll continue to invest in those. And the second effort is towards digital adoption, right? So there again, we've given out numbers which is across all metrics, sort of both registration, monthly and daily active users we see very encouraging trends, and we have a dedicated team which are driving increased usage of digital channels for servicing, increased usage of digital channels for acquisition. So we'll continue to sort of scale our digital bank, but it's very early to talk about unit economics there.

Okay. But even on a stand-alone basis, I mean, let's say, on a transaction basis, we would not be breakeven?

So again, we don't sort of -- it's very difficult. If you say, can I break out the digital bank separately to rest of the bank, right? So that's not possible to do, right? What -- maybe one thing that will help you is if you compare cost of acquisition of a liability customer to 0101 that's significantly lower than a cost of acquisition of a branch customer.

Yes, actually, that is what. So let's say we are acquiring customers through 0101 app. At what time we'll be able to recover that cost. Any ballpark guestimate there? Or it's too early to comment?

So I mean, what I can share is our cost of acquisition of a digital savings account customer is sort of roughly, let's say, half of that of the branch customer.

The next question is to Bhaskar, sir, again, sort of repeating one. So sir, what Antariksha was highlighting that at the ground level, what kind of feedback we are getting. The fuel price is sort of increasing every day, and of course, since we are in the segment wherein your tariff will get adjusted maybe immediately. But do you see any impact on the growth side, if not on the asset quality?

Renish, if you look at -- I mean, I will want to stay specific to what we do. And if you look at what we do on the commercial side, we are more small commercial vehicle player, technically. And there if you see, courtesy e-commerce, courtesy the kind of demand that is coming up even for agri movement for this small hall movement there, there is a visible traction even going on even at this point in time, in spite of the fuel price increase. While there is also in some places, the fact that CNG option also does keep the market alive. That's another part of the story. But even if you look at on the small commercial vehicle side, we continue to see the same kind of requirement going on because there is a pending demand of all the ways which was also pending. So on the small commercial vehicle, there does not seem to be much of an issue at this point in time, courtesy that adjustment and requirement.

Got it. And sir, just last question, sorry, a follow-up on that, might be stupid as well. But do we have any data on, let's say, entire our vehicle book, how much of this would be running on the CNG [Technical Difficulty] directly linked to the fuel prices?

How much would be running on?

On the CNG and how much would be on the petrol, diesel?

At this point in time, broadly, it will be around 15% -- 10% to 15% is what I would think -- yes, 10% to 15% is what I would think.

Sorry, sir, I didn't get this number.

10% to 15%.

So Renish, we had given this in our annual report this time. So around 10% of car vehicles run on CNG right now.

[Operator Instructions] The next question is from the line of Amit Nanavati from Nomura.

Yes, hello, am I audible?

Yes, you are, sir.

Yes. Just wanted to understand the nature of reversals here, right? We've had very strong reversals in NPA. What part of it, if you can give some color would be wave 1 kind of impacted customers who moved into NPA early on or what was -- what part were more transient which only moved into NPA last quarter and this year it bounced back?

Yes. Vikrant, Head of Collection is there, he wil reply on this.

So just to give you some color on the total INR 555 crores of reversals which have happened in Q2, 20% has happened through security in first wing, 10% have happened through foreclosures completely moving out of the book. And 70% is through cash collection.

Yes. I've got that number. Just wanted to understand those collections, those repayments, which are coming, right? Were these like the ones which slipped into 2Q or even the ones which slip in now, the wave 1 -- or wave 2 versus wave 1 basically if you can give?

Amit, Vivek here. We haven't looked at these numbers the way you wanted to know. So at this moment, we don't have this data in front of us.

Yes. And Amit, you have to also understand that I think the wave 2 didn't really see a lot of slippages to the extent that we saw in wave 1. Like for us, if you look at the gross NPA tagged as of March end was 4.3%, which was INR 1,503 crores. And when you come down to 30th of June when wave 2 impact might have come in, we still had INR 1,496 crores. So for us, the impact was more upfront.

Understood. No because wave 1 we saw a similar trend, right? What slipped in 4Q, immediately bounced back in 1Q, and just wanted to understand it's -- whatever at a gross level slipped in 1Q is bouncing back in Q2. Second question on the cost front, right? At one end, you have heavy investments being made on the digital front. At the other end, if I look at branches, right, versus, say, 4Q '20 or FY '21, we're up by around 50 percentage points in terms of our branch count. And we'll also be having the elevated collection cost. So broadly, which part will normalize sooner, later what contribution of those costs are -- broadly if you can give some sense what would move the whole [ cost to income ratio. ]

So Amit, of course, there might be a smaller elevation around collection cost. But as you know, we are nearing to the pre-COVID level in terms of activities, in terms of collection efficiencies and all those stuff, and we are also growing, right? So again the most stabilizing item would be around the collection cost, which should be stabilized by maybe next 2 quarters. But we will keep on investing in our branches because we are just around 800 touch points. And our digital lookout is not so big as of now, right? So both the properties, whether it's the digital properties, or whether it's our branch properties, need to expand, and we have that whole plan. So that will remain elevated. But I think this quarter, we had an exceptional quarter because of our mega campaign coming in. And we launched the credit card and we launched the QR codes and the digital property. So there is a certain amount of elevation there. But those will also get subsidized in coming quarters. But our investment in all those properties will continue.

And if I may just add, Amit, we've also built excess capacity on the asset side. And because business disbursements are still picking up, as disbursements pick up, that should give us some improvement in operating leverage as well.

Understood. Last thing, any growth aspiration this year that you'd want to point out?

Not as of now. For -- last experience taught us that it is still an unpredictable environment. India looks good, but maybe not internationally. So we just want to take every day as a new day and really want to come and execute our plans, not thinking too much about future, and let this overcast goes away in maybe next 1 or 2 quarters, then we will say how really we want to grow in coming years.

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

Sanjay, am I audible now?

Yes. Yes. Hi, yes.

Congrats on the quarter, and hopefully, us as well as India will sort of come out of this COVID-related issue. So the question I really had was on the disbursement side. If I look at the MSME disbursement, while that's a more broad-based indicator of the economy, the disbursements are slightly weaker as compared to Wheels, if I compare both the business lines. And the MSME disbursement even in Q1 was relatively muted. So just wanted to get your thoughts on that.

So as we are -- these are very small traders, service provider on the road, and -- so they were largely impacted. And we have also had done tightening our credit delivery process, right? And you will appreciate that this quarter 2 has allowed us some kind of hope. And those guys are also settling down. Our team is also settling down, and our focus was more on collections. So -- but I think the coming quarters would be more festive and God forbid if COVID doesn't come, lot of economic activity will help trickle down lot of benefit to those people, then I think we will be able to come back to the similar levels of growth. But that book remains very exciting for us. And the way we -- those customers reacted after the normalcy has come in, that has given us more support and confidence that we need to build this book to the next level. But I think we need to keep patience for some time. And then once everything settles down, we'll [ press our button. ]

And the other question was on the Wheels disbursement that we had of about INR 2,000 crores. What would be the proportion of used cars within that? And if Bhaskar can generally talk about the used car market, given that there is a supply issue at the OE end because of the chip shortage and the supply chain issue. So how is the used car market shaping up and the competitive intensity there?

So on the new and used proportion, we continue to remain 50-50, [ Veeral ] (sic) [ Hiral. ] So that's something which we have been doing for the last couple of quarters. If you see that, there has been a conscious design about going on the used business. So that continues in that same ratio. Your question on the used car business, yes, they are definitely seeing demand because in the event of a new vehicle not being available and the used vehicle options actually getting better with every passing day because the kind of models, which are coming, people are upgrading, if the earlier time line was about 5 to 6 years, it is now coming down to about 3.5 to 4 years. So a, the availability of used car does -- is going up with every passing day. Well, in the interim because of this short term shortage of new, there has been a few lesser exchanges. So not to read much into it, but I would see this continuing and sustainable over a longer period of time. And in terms of the competitive intensity, frankly, the same players are in the field. There are no new finances who have come into the financing side of the used car business as we see in the current situation.

The next question is from the line of Bharat Shah from ASK Investment Managers.

It's been a remarkable kind of a period of departure from many troubles that [ intervened during this time. ] But I have 1 basic question. I wanted your kind of insightive assessment. So if you talk about a great bank, which is future ready and forward looking, I would say there are 6, 7 pillars. The liability management strengths, business model and underwriting capabilities, suite of products so that there is enough to offer, customer engagement and acquisition efforts, technology, people and talent pool and geographies and distribution. Leadership, of course, remains the most important. But on that, I don't need to ask because I surely do know. On these other aspects, what is your own assessment of the way AU thinks today? As I said, hopefully, the shadow of pandemic is kind of being left behind. And it looks like the country is more ready to embrace opportunities rather than keep worrying about the pandemic. So in terms of the liability management, underwriting, product suite, talent pool, customer acquisition, geography and distribution and underwriting strength. On each of these, if you can -- and of course technology, what is your own assessment as to [ where do you stand? ]

Bharat bhai, amazing question. So let me start with the -- because I commented in my opening remarks about the objective of the bank, honestly, is to have the customer in the center stage, right? And we need to...

I could join little late, so I missed your earlier comments...

Okay. Fine, fine, fine. It's fine. It's fine. Perfectly fine. So I just want to say that the objective of the bank is to keep customers at the center stage. And to begin as a banking franchise, you need money, right? So I strongly believe that the purpose of any banking franchise is to raise retail or stable money at a decent cost. I won't say low cost or high cost, but at a cost which that franchise can manage, right? And honestly, last 4.5 years now, I'm very happy the way we have built up -- we have understood first about the importance of this, and then have built up the entire ecosystem internally and externally, right? We begin with high kind of rates. But as we are now moving forward, we have all these things in place, whether it's about people, product, processes, brand, trust, service attitude. And you would have seen that we have grown ourselves now from 0 level in April '17, now at INR 40,000 crores at around 6% rate, right? So -- and being an SMB, it was not easy journey. But just putting ourselves on every day, applying ourselves on every day and building that connect with customers, building that relationship and also building the digital outlook around it, right, because we started with Tab banking, which opened up around 80% of our saving account in 30 minutes, right? We have just launched our Super App. We've launched our credit cards, QR codes. I think all these things have been done just to make customers very comfortable around franchise. And we have done a lot in last 4 years because being an NBFC, we were just lending money right. So there was little bit challenge around our relationship management at that time. But we have understood the importance of relationship and offering the whole patient's outlook towards customer handling and building all those things is required to catch his imagination, right? I'm sure our team will understand more and more as they get maturity. But the focus is immense. And we are able to take lot many leadership from the competition space. And we are just around -- honestly, around 600 branches to have a real distribution for the branch banking, right? And that also 50% is in the core market side. And you'd be surprised to know, Bharat bhai, that in some of our core markets, we are even bigger than the largest bank of this country, right? So that is giving us lot of confidence, and we are building lot of matter there. And I think this is, in my opinion, a 50% or 60% of the franchise, right, as a banking. So if we can sort out our liability franchise, customer relationship, customer engagement, customer trust, we can actually [ let this organization forever type.] So there we are not making any compromise. Anything -- we just remain -- want to focus on that one part more heavily and heavily and doing everything. Honestly, I spend my every day, couple of hours to really see how we are building our branch banking franchise, right? And if you build our branch banking franchise, and you did a liability franchise, low cost, I mean, lending becomes easy. And you will appreciate that AU has built up their asset franchise of last 2 years. And there, we have the ability to lend in core market, right? And that is why AU always remain a profitable banking even in initial years because there we were able to charge a little bit higher rates than to urban market customers. And there I found that AU remain on their -- we remain like a previous avatar of NBFC. We know how to lend, how to collect, whom to lend. So our credit policies, our collection process, our collection strategies, our sourcing strategies remain absolutely same the way we have done in NBFC, even a book profile, which is Wheels, SBL and home loans is now 10 years old, right? So the entire team is well stitched. And you will appreciate that in spite of this whole pandemic for last 6 quarters, it's such a long drive, but our NPLs remain in a bound range. And so -- and I'm very happy the way the customer also reacted towards this. And that has given us more confidence that we should go pan-India, right, in coming years. So the idea remains that we borrow -- we take money from urban markets and lend it to core markets and we retail -- have a private sector book, have income-generating assets. So our principles of assets is very clearly laid down. We're adding commercial banking because in urban markets or even in core markets, certain kind of customers look for bank CCs, bank overdrafts, bank guarantees, trades, international trade. So that is an icing on cake for us. And thing is also -- settled from last 5 years. Vivek is on the call. He is Head of the Commercial Banking. And I think the kind of India would be next 5, 6 years, I mean, that book has the ability to grow, right? So I think there we are -- in my opinion, liability and assets, we have largely sorted out. Of course, every day we have to execute based on the learnings and based on the opportunity we will get. And in the last one, is around digital. It's not an easy subject for a bank. We are highly, highly regulated. And digital is very specialized skill. But I'm very proud of the team, the way they have build on their -- on our limited -- limitation around our people, limitation around our whole as a franchise, we can't experiment everything. So -- but the way we have built our Super App, with the way we are building our video banking, the way we have built our whole UPI system, credit cards, QR codes, and we have very amazing leadership at every level. So -- and they are very passionate to do this. And I hope for me, digital is more an enabler, right? And that we are doing it. But digital is becoming a business for us. It may take some more time, but we are clearly focusing ourselves, and that is why we are doing a lot of investment there. But I think that investment we are keeping ourselves for next 5 to 8, 10-year type of horizon because it requires that kind of runway, right? So that is there. Other than that, I would say whether it's people, which is so important for us, our team remained intact. Last time, we also spoke about the challenges we faced, but I think it was one of the events. And beyond a point we can't control people's choices and people desires, but AU remain one of the most exciting companies for people to join and work. We have our own culture, and we are proud of that because we have come to this level because of that culture and execution. And we really want to be continuing on that path because banking is not -- is a fragile business. We need to keep lot many things in check and control. And because in the end, we are dealing with the public money. So that is also being sorted out. And as we move forward and based on our growth, the whole India is our opportunity, honestly. We are just in 15 states with lesser than 600 towns. So we will grow pan India in times to come, but we are not in hurry. We will take every step based on some requirement, right? And hopefully, you will see AU growing from here and becoming a pan India bank, right, in coming times. So I think this is there and other than that, our compliance standards, our governance standards, our -- whatever the way we operate is not -- we are doing as a bank, we are doing from last 25 years. And we got the support of every investors, big institutions, people like you who have supported us in our thick and thin times. So -- and I believe that we will be continuing on that path. And the team is entirely excited, very young team, 30 plus age kind of team. So I think just you need to have more patience around us and look for the opportunity when it comes, and we execute on that lines. Thank you so much, Bharat bhai. I hope I answered you.

Yes, yes, yes. Sanjay, always very eloquent. Let me simplify what I was asking, and maybe for some other day. But for the moment, I got a lot of good answers on what I was [ asking. ] So to summarize what I was trying to say was that I believe India is emerging into a very, very large opportunity, and good thing is we have a huge amount of role to play. And if AU is staring at the future and to engage into the opportunity, then I think some of the most important key pillars is to be well founded. And of course, on leadership, entrepreneurial capability, agility, I give AU 10 out of 10 because that is what my personal opinion and belief is. But other areas, whenever you think kind of introspective analysis is done on these in subsequent call of any other call when you think, if we can kind of a do a more detailed discussion on these each of the key pillars, that would be great. It would be good to hear [ overall viewpoint ] on various things.

Yes, yes, Bharat bhai, we will take care of that. And so -- thank you so much for your input.

The next question is from the line of Abhijeet Sakhare from Kotak Securities.

Congrats on the quarter. Sir, first one was that on asset quality. When we look at the first and the second quarter together, we have seen like INR 800-odd crores of recoveries and upgrades. But we still have something like INR 450-odd crores of fresh NPLs. And it looks like the segments where inflow and outflow are happening, it's the same one, right, vehicles and SBL. So where is the disconnect here? Which category or profile of customers are recovering so quickly and which are the ones which are still sort of slipping into NPL?

Abhijeet, to be -- you have a question -- so largely, I would answer this, that the people who are having a commercial passenger vehicle, right, like school buses, and the normal buses, they are not doing well. So in a restructured asset, they got the restructuring done through that. But once that gets maturity, they are slipping in the NPLs because their business has not come back, right? Like for SBL, like the tent house, the schools, some kind of marriage-related event companies and all those things, we restructured them in last year, so they haven't come back. So there are certain kind of profiles, which has not even started or is still struggling, right? So those businesses and those customers are not even able to pay and they are defaulting it, right? And otherwise, lot many business like taxis, salons, the kirana stores and all those things were getting some struggle early, but they have come back strongly because of this opening up. So that is the whole reason of some kind of slippages and more of an upgrade.

Got it. Got it. Sir, second one was we said that we've hired like 3,000 people during the quarter, but the employee base is still marginally lower. So it gives an impression that the attrition levels are still fairly high. Is that a correct observation? And if yes, like which portfolios or segments where we are still seeing very high levels of attrition?

Abhijeet, this remains an issue for every organization and we are not saying that we don't have that. So -- and it remains always on the front end. You will appreciate that people in the core markets, in villages join bank to do something. And when they find that banks are -- banks were through difficult things, and then only the people leave, right? So most of the people who leave is on the front level people, right? So their attrition is close to around 40%, right? So -- and that will continue to be very honest. But if you see the whole attrition at top 100 people of AU is very less. I will appreciate that many companies have published our internal transfers also. But that's our policy right because I don't think that bank is a rocket science, right? And if you're a chartered accountant, if you're a professional, you can be used for many functions internally, right? For me, if you are a Head of a Risk or a Head of Accounts or a Head of Audit or Head of Compliance, it's hardly a difference in the whole job, right? So -- and that's our policy. So we are running this kind of whole practice on the last 25 years, and we have reached to this level because of all those practices. One-off events should not change our course. And I strongly believe that we really take care of our people. And in our AU, 10% people have [ stocks, ] and there are people who are working from last 20 years. So I think we will take the course actions wherever required, but -- and there is an industry phenomenon around attrition. You will appreciate that lot many banks are coming, lot many fintechs are coming, lot many NBFCs are coming, everybody has ambition. And once we became a bank, we also hired from our competitive banks only. So I think this is how the whole circle will happen. But I think we need to be very -- align on our whole objective and keep working on those lines.

The next question is from the line of Abhishek Murarka from HSBC.

Congratulations for the excellent quarter. So my question really is on credit cards. So the acquisition is happening nicely, you've issued about 30,000 cards this quarter. Any plans to tie up with any of the card issuance companies like Slice or Unicards or something like that to accelerate acquisition? And also, can you share how many of your 21-odd lakh customers, how many of them are eligible to get a card? I heard that you said 3 to 4 existing card -- customers are ETB, but how many are really eligible? Have you done some analysis and if you can share that?

Yes. So first one. So yes, of course, we have just launched our credit card and our team, processes, product is just settling down, just 2 quarters. So -- but the discussion is on. And so the team will take the call at the time of the requirement. But I think to being in partnership with some good brand or some kind of sourcing partners or even doing the credit, it's on the card. So as and when it comes, we'll figure out. And the second one, to be very honest, when we figured out that who is eligible, it depends on how and where we really want to give the card, right, at what scores and all those things. So rough back of the envelope calculation is that our 1/3 customer is eligible of credit cards because they already have a credit card, right? So that's one data which support us that we can be -- 1/3 of our customers can get our own AU card. And then, of course, another 17%, 18%, we can actually lend them based on our relationship with them, whether it's branch banking relationship or a loan relationship. So overall, 50% of our customer base in the next 2 to 3 years should get a card from us.

Okay, excellent. And the incremental issuance that is happening, I know the composition might change later on as well, but currently, what is it? Is it more salaried or more self-employed or what kind of customer profile is really being given cards?

In credit card?

Yes.

I think broadly the issuances we had done some really shortly, basically out of 50,000, if you see 55% customers are broadly new to credit cards. So they are not new to credit, but they are using the credit card for the first time. And within that, almost 80% is existing to bank clients, 20% are new to bank clients. And about 40% would be salaried, 40% or -- just...

Around 60% are salaried and around 40% are self-employed.

Okay. You said 80% are existing to bank. But I think earlier you had said 3% to 4% of the card customers are existing to bank. Did I get that wrong?

No, no. I don't think we mentioned that. Most of the customers in the initial phase are existing to bank because we are moving ahead with the preapproved offers [ based on ] the analytics that we have done.

Ladies and gentlemen, this was the last question for today. I would now like to hand the conference over to Mr. Aseem Pant for closing comments.

Thanks, Rutuja. Thank you, everyone, for joining the call. On behalf of the entire AU team, we wish you good health, and Happy Diwali. Please reach out to us in case you have any further questions. Thank you.

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