Can Fin Homes Limited (511196) Earnings Call Transcript & Summary

Shreepal, we have Amitabh towards my right. Towards my left, I have Shamila, who is the Business head. Amitabh is Deputy Managing Director; and we have Prashanth Joishy, he's not in the frame because the frame is frozen, he's our CFO; and we have Prashant Shenoy, who is our Strategy Head.

Got it, Sir. So without taking much just the time, I will begin the call. A very good morning to everyone. We welcome you all to the Equirus Securities Virtual Annual Conference for the calendar year 2022. Today, we have the management team of Can Fin Homes. The management team is represented by Mr. Girish Kousgi and the other participants as he just highlighted. We'll begin the meeting with initial comments from the management team, followed by question-and-answer round. Without taking much of the time, I request Girish sir just to give us the opening remarks and also comment on the recent developments. Over to you, sir.

So I would request, we can just keep it Q&A because quarter 2 results are not announced. And therefore, I won't be able to talk anything about quarter 2. So I would request if we can have a Q&A session that will be more appropriate. For us, from day [indiscernible] period starts.

Got it. Got it. so sir, in that case, we are open for the Q&A. [Operator Instructions] We'll just wait for the question sort of assemble.

While, Shreepal, in the interim, if you have 1 or 2 general questions which have been asked by the clients, you can get that addressed right now. Thank you.

Sure. So sir, in that case, like, as I said, if you could just highlight or give your comments on the recent developments with respect to the management transition or changes that would help the broader audience to sort of understand this development.

I think everything is in public domain now. So there is no update beyond that. I think everything is in public domain. Any specific question, I'll be able to address.

So we have the first question lined up. So that is from Mr. Dhaval Gada. Please go ahead with your question.

So sir, for a benefit of all, if you could -- one of the concerns that sort of market has is relating to excess credit cost coming from the fraud cases and any other sort of kitchen sinking fear that the market has. So if you could just address -- I mean, given in the next couple of quarters, is there any risk on that front? That would be useful.

Thanks for asking this question. See, actually, our credit cost is 0.11 to 0.12. And this is absolutely -- I think the guidance is the same. I'm sure Amitabh will agree with me. The guidance is same for next few -- next many quarters. So there is absolutely no challenge on the credit cost. It will be in the range of 0.12 plus or minus 1. With respect to fraud, we are very clearly told quarter 4 of last year and quarter 1 of this year, both the quarters put together across the country, across all 200 branches, the fraud amount is INR 6 crores. And today, the outstanding is less than INR 3 crores, which means most of the customers actually have indeed repaid the loan completely. So this is on a base of INR 28,000-odd crores. It's actually very, very negligible, and there is absolutely no concern on the credit cost. It will be in the range of 0.12 going forward as well. You want to add anything, Amitabh?

No, that is true. Any credit cost increase, it will be due to the bucket movement of NPAs.

And the guidance is it will be -- because we have been ranging between 0.12 to 0.14 and you will not see any change in the credit cost for next few days -- for the next few quarters. We can't hear you. Shreepal, I think you're on mute.

[Operator Instructions] We have the next question from Ms. Sukriti.

This is Sukriti from Laburnum Capital. I had a question more of a broad question on retail LGDs in mortgage finance. So this has come up a lot of times in various housing finance con calls. And the answer has sort of deferred from probably people doing more INR 30 lakh, INR 35 lakh sort of home loans in LIC Housing, for example, saying this is a single-digit retail LGD. And then you have more affordable housing players, let's say, Home First, who once in the con call said, it's about 25%, 30% for us. So what is -- it's a wide range for home loans. And where are we in this spectrum? And has this changed post COVID.

Okay. Good question. Actually, LGD for different company would depend on what is the profile mix, what is the ticket size mix and what is the product mix, right? Now the most safest I'm saying would be probably our company because we are completely into affordable, almost 100% retail, right? And home is 95, nonhome is 5. So we have the profile advantage because we are more skewed towards salaried 72, where the default is less comparatively to SEP and SENP. We also have a skewness towards product favorably because our home is 95%, including the 5% of top-up because the characteristics of top-up is similar to home loan, right? And if you also look at geography mix, we are more skewed towards south. So whether it is geography, whether it is product, whether it is profile, whether it is ticket size, we are more on the affordable low ticket size. So on all the 4 parameters, we are on the positive side. And therefore, our LGD -- look, we can't compare LGD of one company with another because unless these parameters are in sync, we can't have the same LGD between companies. And therefore, there would be a difference between one company and the other company because all the mix would change from company to company, and therefore, we are the lowest. In our case, it is 7%.

Got it. Got it. And okay, then clearly, I guess you've not seen any material deterioration?

Okay. You asked one more question, actually after COVID, I'll tell you what. In fact, our morat was the highest, 28% vis-a-vis compared to market, which was 11.5%. Our restructured book was highest, it was about 2.4% vis-a-vis compared to market, which was 1.25%. When I say market, I'm talking about only housing finance industry, not the banks, whether it is PLC or public, right? So we actually double both in terms of moratorium and restructuring. I think that is what we thought we should try and support our customers. But if you look at the delinquency post that actually it has come down. During COVID, the deemed NPA had peaked to 0.99%. Again, it is back to about 0.65%, right? So post COVID, our asset quality has bettered and this is a vintage moratorium book. And with respect to restructuring, I think wherever the cases are due. Today, we don't have even a single case even in one DPD, a; b, about 18% of the customers are paying in advance of the restructured pool. Number three, about INR 50 crores of the restructured pool, these loans are close to the customers.

Got it. So specifically, I think you mentioned right now that the affordable housing part of your sort of book skewness would help in default rates and recovery. Why is that compared to somebody who's doing closer to bank loans at, let's say, INR 30 lakh, INR 35 lakh ticket size, why will your LGD as maybe sub-20 ticket size be better?

No. I think cosmetically, if you see, I think affordable housing should have a higher delinquency, especially on the salaried side. So what I mean to say is that I was talking more in terms of the profile mix more in terms of ticket size, which means I was talking about more than INR 1 crores. So I'm not talking about 35, 45, 50. If you ask me whether INR 50 lakh, INR 60 lakh, INR 70 lakh, 80 lakh of salaried, is it safe, definitely, it is much better, far better than INR 20 lakh salary in terms of behavior, on the repayment pattern. So I was basically talking about high ticket versus low ticket and a mid-sized ticket.

We have the next question from [ Mr. Amit ].

I just had a question on the events for the last, say, 2 quarters. It seems that there was some disconnect between the Canara Bank management and what you have saying during the audit period, although the audit number came at less than INR 10 crores fraud within the 1 quarter of audit getting over you have designed. How as investors, who are not part of this, look at this, as well as what impression it will create in the market in terms of attracting talent for the next CEO.

See, I think these 2 are separate things. So I think as far as parties are concerned, I think both Can Fin Homes and Canara Bank have come and very clearly disclosed to public at large during the course of audit and post audit. I think that is now over and out. As far as the second part is concerned, it is more personal. So that is the current resignation that is -- these 2 are totally delinked. And company has a very long legacy and it's a vintage company with very good equity and name in the market and company is capable of attracting talent.

What percentage of the company workforce gets market-linked salaries?

See, we are different. So today, if you look at various HFCs, the salary levels would be at different, different levels. So we're more aligned closer towards the PSU.

We have the next question from Mr. Ashwini.

Sir, you're experiencing the Can Fin Homes for the last 3 years. What's your take on Can Fin? Is it an individual-driven organization or more a process-driven organization?

I think that we should tell because I think system is -- no one is indispensable. I think company has a very strong legacy, very strong balance sheet, and we have good talent at the management level, at middle level and across all the branches. So at any given point in time, no individual is indispensable and the company is much beyond anyone.

So it means that post whosoever comes, we can see the loan growth in the range of 17%, 18%, similar margins and everything.

See, our endeavor will be to carry forward the growth momentum. And during his tenure, Mr. Girish Kousgi has developed a very good deed and premium is still there, and we will carry forward the momentum.

So where I'm coming from is, I'll tell you. I am following the company for last 10, 12 years. Before Mr. Girish and before the gentleman earlier, this company used to languish at subpar growth rate and subpar profitability. It's in the last -- only the last 2 CEOs, including Mr. Girish, where we saw superlative growth, superlative margins and better asset quality. So my biggest concern or the biggest concern for the investor community is that how do we see this growth, asset quality and return ratios going forward? Mr. Girish may not be able to answer it because he won't be there 2 months down the line. But since you said it's a process-driven organization, what's your take?

Our endeavor will be to carry forward the momentum and the team and they are the team, the same team which Girish was here, the same team will continue. And so I think we will have a good future ahead.

We have the next question from Mr. Pranav Gupta.

Just to continue on from the previous question actually. So like the previous participant indicated that before -- prior to you and earlier CEO, growth rate, it used to be much lower compared to either the industry or what we deliver today. So the question is, I'm trying to understand within your tenure, what kind of changes on an organizational level have you tried to implement which have sort of led to this increased growth? Obviously, barring the fact that we have seen an increase in growth across the industry post the initial phase in COVID. So if you can talk about some organizational level changes, branch level changes that you have implemented, which has led to the increased growth trajectory that Can Fin has delivered over the last couple of years.

We have done a lot of changes. We have done changes in the sales structure. We have revamped the entire sales infrastructure. Earlier, we used to have 3 verticals that now we have 14 verticals and that will continue, right? So we have done a lot of work on the sales piece, on credit risk team, then IT infrastructure, then monitoring. And -- so I think across, you name it, I think every single space, we have done a lot of changes and all those changes are here to see and it will continue.

So if you were to highlight the top 2 or 3 changes that has primarily driven this growth that we have delivered as an organization, what would those be? And if you can go in a little more detail, that will be a little more helpful to understand as to how things have been institutionalized and how it will continue even post your exit or probably in the future?

So I will talk about what all we have done in the last 3 years and which is even there in the current environment. So on the sales thing, we had basically 3 people managing the entire country. So we have now that increased to 13 people, 14 clusters. So now we have gone deeper into the market in terms of understanding so that there is enough business development and sourcing, which happens from the field. Now we have strengthened on the credit side. Now we have a very, very focused central credit, which is the CPC centrally so that we can turn around the files faster. So we have a delegation which starts at the branch for the branch manager and in the next level at the cluster head and then it comes to the CPC. This is for more standardization and better at TATs. So on the IT, we have tied up with various FinTechs to try and fasten our processing capabilities. And we have worked both on network, on software, on front end to customers and stuff like that. Then with respect to central product and strategy, we had a focused team, especially for customer retention, so that the book depletion could be the lowest, and we have seen that post COVID. During COVID, we had a high book depletion, more to do with the external conditions, market conditions, but I think immediately after that. And you can see that our book depletion has come down to a very, very minimum level, and it got normalized many quarters back. So we have a very strong retention team. We have a very strong product and strategy team, which works on trying to generate alternate income. We significantly increased our third-party income, which is basically insurance cover on life and property. We saw our NIM going up drastically in the last few quarters. We also have a very strong investment policy. We don't have a treasury team. It's a small company, but our CFO Joishy takes care of it. We also try to have some additional buffer in terms of income from the LCR investment. So we have done a lot of work in every single team. So it's a continuous process. And the team is -- we have very low attrition. So we have a lot of people now who are vintaged in Can Fin, who are there for more than 2 decades, 3 decades in the company, right? I think all these things have ensured. We have not done anything drastic in the last 3 years. We've only worked on basics and we only got our house in order. I think that should help even to continue this journey in the future. Do you have anything else to add?

No.

Just one more question before I step back if that's okay?

Yes, yes. Sure. Please go ahead.

Just one more question on the attrition side, you mentioned that at the top level, attrition has been very low, but...

Not top level, across the company, our attrition would be less than half of what you generally see in the market.

Yes. So that's where the question was coming from actually. So when we talk to any of the other affordable housing players, in fact, across the BFSI system, attrition at the lower levels, say, credit officers or field officers has been very, very high across the industry. And this has been a phenomenon that has accelerated during the COVID period. How has our experience been? And if you can compare qualitatively, if not quantitatively, how we are placed within the industry. That will be all.

See, in terms of attrition, I think from top level across the country across all levels, our attrition is quite low. But that is -- I don't know what is the reason, but I think our strategy is very clear. We hire right talent for the right place to do business. So we have better retention ability, which we have displayed over a period of time. And even though in last few years, probably 5, 6 years, attrition has increased, it is far, far lower when compared to the industry.

We have the next question from Mr. Sunil Asnani.

I will represent First Principles Fund. We are a small fund, but we've been investing in India for a long time. So I really respect the work you have been doing. I just wanted to understand, what advice would you give to the Board on changing the incentive structure for the next CEO or an MD? So that is one question. And second question is, how would -- what would you recommend to improve the relationship between MD and the promoters, right? That is the second question. And the third question is, I remember when we first invested, there was about 2 years ago, there was this idea of Can Fin Homes becoming a part of some other strategic or a financial buyer and not part of -- not part of Canara Bank. So what is the progress on that front? And do you think that unless we do that, the incentive structure of the MD cannot become market linked, right? So I think it's kind of that situation, right. Unless you have the right person at the top, you can't sell it to the right buyer. And unless you sell it to the right buyer, you cannot pay the right salary to the right person. So I know I'm asking a lot of questions. So feel free to start with that you can.

See, I'll tell you on the first point, I don't think so since I'm in notice period, I'll not be able to comment on that. right? I think as far as the relation between Can Fin and Canara Bank is concerned, parent is concerned, I think we have a very cordial and formal relationship. Canara Bank has many subsidiaries and associates. And I think since many, many years, since many years, they've been supporting all the associates and subsidiaries, and which is where we also have Amitabh from Canara Bank, representing management, he's the Deputy Managing Director. There is a lot of synergy between both. The rest of the questions, I don't think, sir, I'll be able to comment. Sorry for that.

I'd just like to add. Now we have already -- we have -- Board has decided to hire from the market only MD and CEO. So that process is on. So I think salary should be also market-determined.

Okay. And will -- sorry, maybe one follow-up question. In your incentive structure, was there any linkage to Can Fin Homes being sold. I mean, the stake of Canara Home being sold to a buyer? Was there any incentive linked to that? Or was there no incentive?

No, I think that was totally out of the discussion in terms of appointment.

We have the next question from [ Mr. Sumit Aggarwal ].

Can you just guide us on the probable time line of the new MD because there's Deputy MD said that is probably from the market only that is the Board has decided. But we would like to know some certain at least timelines, 3 months, 6 months or...

No, I think it's too premature. I think Board has taken and we have made it public also saying that we'll be hiring next CEO from the market. So at this point in time, it will be premature to talk anything there on the topic.

But sir, any visibility on the time line, at least, maybe if we were not in a position to comment, maybe Deputy MD can comment on this. We have some visibility at least ...

We have initiated the process. And I think I cannot specify what time exact time, but that process has already been initiated. At this point of time, I can say that only.

We have the next question from Mr. Bhavik Dave.

2 questions. One is on Can Fin. Just want to understand if you would have stayed back couple of things that you would want to improve in the company, like you said you made enough changes and teams have been looking up. But if there are certain things that you would want to maybe improve if you were around for the next -- like the next CEO for the company themselves, any areas of improvement that you think that you all were working on and still are work in progress?

No comments on this question, please. I don't think so, no one will answer this.

Because you were already around to...

I'll tell you, I'll tell you whatever needs to be done, whatever had to be done, I think most of it is done. And that is why you've seen a phenomenal journey in 3 years despite of COVID, despite of morat, in spite of restructuring, I think our team held on together, and they've put up, I think, one of the best performance in the entire industry, which is there for everyone to see. At the same time, keeping our risk fabric impact, you can -- I think you can see a GNPA and net NPA, I think that's a testimony to what we've been talking about in last almost 11, 12 quarters. I think we have walked the talk. Even if you go back 10, 11 quarters back, and if you ask what is the guidance on margins, I've always maintained 2.4 and 3. And if you see last 12 quarters, not even 1 that margin has breached, right? And we always talked about 18% growth on disbursement and book, and I told you it will take some time to catch up because we were literally flat or negative from that stage we had to. I think whatever had to be done, we have done. Of course, having said that, it's a continuous process. So whatever deems with respect to changes required in future, I'm sure it will be done.

I just asked because there are always 1 or 2 areas of improvement for everyone. So that was the primary reason, nothing to point out at all. Second is a broader question on the market, right? With increasing interest rates and we've been dealing with the salaried customer segment with now rates like almost touching pre-COVID levels, where 8%, 8.5% kind of home loan rates and like arranging towards 9 with the hikes. In your assessment, how do you look at the market, right? Because other demand -- is the footfall demand still reasonably high? Or do you think that -- and when do you think that can start getting impacted with the rising interest rates that you see in the market, not necessarily for Can Fin, but generally a very industry-specific question if you can like give us your wisdom.

I talk about industry, not about the company. See, if you look at industry, I think in last 2 years, a lot of things have changed. Real estate, other space has -- is in the process of reviving. It started about 18 months back. So real estate is really good. And this boom will last for the next 5 to 6 years. In terms of affordability, even though there has been increase in rates in last 12 months, I think still it is very much affordable because just see the rates 2 years back, 3 years back, we were talking about yields of 11% and 11.5%. Now the yields have come down to as low as about 8.4, 8.5%. Even today, as we -- there'll be one more increase in the credit policy. Still I think we will be affordable. Loans will be affordable to the customers. It's a question of relativity, right? So market is robust. If you look at the construction cost, it has gone up, it is increasing. In spite of construction, the cost increase and also interest rate increase, affordability would be still very high and market is quite robust, well supported by good demand in the real estate space, and therefore, market should look, the entire sector should do well for the next few years.

And sir, on the competitive intensity, have banks like pulled back a little on the home loan front, considering the broad-based demand visible in the market? Has the competition from banks lowered? Or do you think it's -- the business is as usual for Can Fin?

See, I'll tell you -- I'm talking about industry. Banks had a particular level of focus on mortgage. And during pandemic, since the business was not available outside, there was heightened focus on mortgage. And therefore, I think the entire industry is of right of book from NBFCs, HDFCs to banks. Now that got normalized in quarter 4 of -- that's immediately after COVID. So we had -- 2020, '21, we had 2 quarters of COVID. Quarter 3 October, the demand started coming back; and the fourth quarter 2021, I think from that point in time, banks focus on mortgage and activity was back to normal. From then until now, there has been no change.

We have the next question from Mr. Amit.

Sir, this is Preethi from UTI Mutual Fund. So I had one question. Also as you appreciate that the importance of leadership and also how the capital markets are sensitive to change in the leadership. So while you did mention that your resignation comes, it was a completely personal decision, it comes in the context and background of 2 things. One, there was an audit, although it has been addressed; and two, the liquidity in the market has [indiscernible]. So I just wanted to understand what is the reception of our requirement or let's say, if in case, if they have to go to market tomorrow and raise NCDs for commercial focus, what has been the reception since these changes? And also what has been the support from the banking part of the funding as well.

See, I'll tell you, I think the support from the banking has been as it is. Absolutely, there's no change at all. And we are raising funds from banks post that as well. It's hardly a few days, but still, right? Now in terms of raising interest rates that that's something which is true for the entire industry. The only thing is we are seeing that the bank short-term rate is much lower than CP, and therefore, receivable. I have been saying this from the beginning, we are agnostic to the source of funds as long as we get the -- it fits into a structure. So now we see that in the short-term CP, rates are much higher than bank, right? But in terms of liquidity, we still maintain very high liquidity. And in terms of support from banks, I think that is continuing. And recently, is it in public domain?

Yes. In the public domain. In the last fortnight, we got sanctions from 5 banks, Federal Bank has sanctioned, HDFC Bank has sanctioned, then Union Bank of India has sanctioned the loan. And yesterday, we got the sanction of Central Bank of India. Punjab National Bank had some queries, which is clarified. Their sanction is expected in a week's time. And State Bank of India are in the process of giving their final approval. And if refinance, as usual, is in the revaluation stage that will be expected by the October end as usual. So all these banks have sanctioned the loans in the last 10 days. And we've drawn in some -- in 1 or 2 cases, we have drawn the funds also both short term as well long term. The rates what is offered by them are cheaper than the market rate for the matching period. So as sir has told, we are going with the cost of the funds on the primary with liquidity as a backup. We used to go to the market borrowing one is for the purpose of cost leverage with the undrawn bank documented bank limit at our disposal; second, for the purpose of liquidity. Keeping these 2 things constant, when we see the bank borrowing was cheaper, so we have gone to the bank borrowing. Market borrowing, we restricted as of now only to the compliance portion. That is incremental 25% of the borrowing has to come from market from NCD. For the half year end, we are complied with. Regarding the another, I want to clarify. We had a discussion with the rating agency has reaffirmed the rating. Rating was done. And yesterday, they have issued the press release. You can go to their website and check it out, where they reaffirmed the AAA rating for our borrowings. And then in the rationale, they are given the detailed comfort what they enjoy to reaffirm the rate. You can refer to that which is available in their website right now, where they are given what is the strong points, what is the particulars they have explained there. This is published yesterday after the discussion of what they had with us in the last 4 or 5 days.

Understood. So just to reconfirm, we are not tapping the capital market burrowings beyond the compliance requirement. Is that right, sir?

I'm talking about debt market, not capital market.

Yes, debt market. Okay. Just the last question then I have is that, so in the last interest rate down cycle, we have actually managed to come out as probably one of the lowest cost of funds of HFC so to compare. So in the rising rate environment, are we confident enough to maintain this profile. We do understand that we did have higher share of CPs through this period. So what would be the strategy going forward?

So if you look at the past many, many years, we have maintained cost addition . So it is not that only in last 2 quarters, we were lowest in cost. If you look at last many, many quarters, we got the lowest. So we have a very efficient system of trying to manage our costs, and that would continue. See it's all relative. If the cost is going up, yield also will go up, right? And if cost goes up, it'll go up for all.

Right, right. Thank you, sir, and wish you good luck for your new endeavour.

Thank you.

We have the next question from [ Mr. Modan ].

Just a couple of questions on the growth plans. So how would we technically approach it from ground up. So which geographies are we specifically targeting? How much is the branch capacity to facilitate growth? And do we have some -- or did we plan some branch expansions which may or may not happen now, given that you would not be around for executing that strategy. So would that continue? Would that not continue?

Basically, we are focusing on South only because South we have got a good number of branches. So a major part of our growth will come from South also. But North also, we are focusing. And going forward, as we'll be opening the branches.

Any -- could you quantify how many branches are you looking at? And what is planned?

We'll be opening up to 10 branches, you can way.

Okay. Okay. And sir, do we think we have some branches where we feel that growth is an issue because it has already saturated in the capacity for AUM?

Actually, if you look at last 3 years yes, the answer is yes. We found that many branches because when we opened those branches 20 years back, 25 years back, 15 years back, it was right for that particular pocket. We realize that the branch has reached the potential, and therefore, it wouldn't really make sense. Or rather, if I relocate the branch, I would reduce the OpEx and double our disbursement or maybe increase our business. So yes, we have been working with and we have done a lot of changes in the last couple of years, and we have relocated our branches. So we moved from within the city to outside the city where the pocket is very potential for our kind of business. So that we have done. In fact, that is one reason why we [indiscernible] to open a lot of branches in the last 3 years in spite of our book growing and disbursement growing. So that definitely would be there because we are into affordable. We say affordable are, our brands probably will be very potential in the particular pocket for 10 to 12 years. And then certainly, it will become -- it will reach saturation point. Again, we have to move those branches. So every year, we will find a set of branches where we may have to relocate.

And what would be that saturation number where you feel as a AUM, it's tougher to grow?

No, it is not on the number. It is basically -- for example, let's say, today open a branch in a particular pocket. So I would have only a couple of bank branches there. Now suddenly, let's say, 5 years later, they would have 20 bank branches there. So then I feel that the entire pie is being shared, and therefore, they would move further to a different pocket where I see that there is less competition.

Okay. Okay. Sir, just one question. I remember your reiteration on the spreads and NIM, so you kept seeing 2.4% spread and 3% NIM would be the lower risk that the company could go. Do you still feel that is the case? Or do you think there could be some change in that direction?

As this is futuristic, I would request Amitabh to address.

Our efforts will be to follow whatever the guidance earlier. So -- but it depends on the market condition and what our peers, how much rate they offer and what rate we get from bank. But certainly, we'll strive for that 3% NIM and 2.4% to 2.5% spread.

We have the next question from [ Mr. Shivraj ].

Sir, just a couple of questions. So FY '22 open staff was, let's say, number of employees were 909, right? What could be, let's say, within that senior people, let's say, the 13 sales manager you highlighted with the senior people there will be in the credit side, right, in the risk parameter. What could be the senior component of that 909 employees.

Shamila, would you just tell them probably -- let say, the Chief Manager [indiscernible].

DGMs, we have around 15%.

No, no CM to DGM, put together, all put together.

All put together, we have around...

50?

More than that, we have.

So we will have about 60-odd people out of 909. So this is Chief Manager, AGM and DGM put together. And which means basically these are -- these will be heading a cluster. Cluster would mean for us half the state or full state or 2 states, depending on the potential and all these people will be vertical heads. So somebody will be heading credit, somebody will be heading product and strategy, somebody will be a CFO, somebody will be a company secretary, somebody will be -- so these are all vertical heads and cluster heads.

Got it, sir. And sir, what would be, let's say, the vintage of this 60 employee broadly?

But for the people who joined from market recently, I think the vintage of most -- it will be average 20-plus years. Actually more.

Yes, definitely more than 20, yes.

Okay. Got it. And sir, a second question on this, let's say, the branch managers power from a disbursement standpoint. So do they have any power, let's say, for a lower ticket size, anything...

Depending on the grade of the brand. Because we have branch managers starting from a manager level to right up to AGM and some DGM also. Big branches, we have DGM also, right? So the delegation would depend on the A grade and experience, and of course, what that pocket would offer potential. For example, the delegation for a manager would be different from a delegation to an AGM.

Okay. Sir, the question would, let's say, behind this asking was because the fraud, which we have reported, was it, let's say, a branch manager-led or...

Yes. I've told this a number of times. So I think -- let me clarify one last time. It was because of a collusion risk. Because of collusion, yes.

Sure, sir. And sir, final question on this ECL thing. So ECL let's say, exposure at default is at 56 bps for us. And any particular, let's say, guidance which you'd like to give at some point of time to strengthen the balance sheet because the other players are slightly larger ones so they have a 200-plus kind of ECL, overall provision.

I'll tell you what. See, the reason is, again, I told we can't compare one company with another company because there are so many factors which will get into it. Because normally, when we do calculation, we take for last -- so in the last 5 years, we take, right? And it depends on profile mix, product mix and all those things.

The one thing is that they're also when we grant the loan, we'll take into consideration the documented value of the asset, what we are finding and not the market value. In the first stage only the leverage will be less there. Then as the value -- loans period increases, the market value of the property goes up. So when we do the LGD calculation, the security value will be up and loan amount will be less. That's why LGD percentage is going to come down because we are more in retail, virtually full book itself in retail Because of that, the LGD percentage is at the lower level as we told earlier.

And also today, if you look at -- if you see the GNPA for last many years, so we are one of the lowest. And obviously, our [indiscernible] has to be lower and even our assumption in the ECL calculation would be such that it will be in line with what you have seen in the last few years.

Sure, sir. And all the best for your future endeavours.

Thank you.

We have the next question from Mr. [ Prolin ].

I have 2 questions, 1 to Mr. Girish and second one to Amitabh. Mr. Girish, so you have been -- you have worked all your life private sector, right, before joining Can Fin. So how has been your experience, right? I mean, in terms of what have been the challenges to adopt to a very different culture in a way that private organization is run and in a way PSU is run? How long did it take for you to get used to it. And now that the Board has decided that the successor will be from a private sector from the market, how -- I mean, will it be equally easy or difficult for him also to probably hit the ground running?

I can talk about myself because -- see, I'm a very dynamic guy, very adaptable, right? So I think for me, it was right from the month 1, right? So I've seen -- I get good exposure in this company. And the way I've been gaining exposure in my -- all my previous assignments. So a lot of value add I could see in this company. I think any good leader should be able to go forward with the same zeal end effort.

Sure, sure. And the second question would be to Mr. Amitabh, right? I mean in the long history of Can Fin since we have been tracking this name, we have a very successful MDs, which have come from the bank as well, right? Mr. [indiscernible] was somebody who has was instrumental in turning around the bank, Mr. Hota probably saved us from in terms of whatever the NBFC crisis that happened, we were probably relatively unaffected by the whole thing. So again, is there any reason why you have a preference towards market leader when we are looking to replace Mr. Girish? Or I mean, what is the thought process there in terms of looking at the market and not looking inside?

See I think it is a decision of the Board and that may be the good performance put up by Mr. Girish is one of the reasons what I see. So it is a decision taken by Board.

Sure. Mr. Girish, all the best for your future endeavours.

Thank you.

We have the next question from [ Mr. Harshal ].

So just one question again regarding the fraud, which was kind of a one-off incident. So while you indicated that it's because of collusion. But in terms of any structural changes, which you could have done, if you can elaborate so that it should not happen in future. I'm not sure if you explained it already, but any structural changes, if you can elaborate?

So actually, we feel that our system and procedures are adequate enough so that the system -- that do not recur. But what I said is that maybe we have been telling our branch managers to increase the more due diligence on their part. Otherwise, I think -- I don't think we need to put any structural changes as of now. See any change would be warranted only if it is a lapse in system or process. Now this is collusion. And I'm sure all of you would appreciate, Collusion can happen in any company, any institution, anytime, anywhere.

We have the next question from [ Dhruvish ].

I have a 2 questions. First is on like trying to understand the reason of not having an ESOP policy unlike most banks and NBFCs. So I mean is we tend to look deeper, the interest in the top management of other NBFCs with ESOP policy would be very different from the interest which the top management of Can Fin would have. So trying to understand that. And secondly, if you look at the remuneration increase, which becomes more important when you don't have an ESOP policy, right? So the MD, CEO and Deputy MD barely saw an increase in FY '22, vis-a-vis the GM, CFO and the Company Secretary sought to the north of 70% to 20% remuneration increase. So why there is a stark difference there? Those are the 2 questions. And third would be, I would say, will not having any ESOP policy make the pool limited for the new interested people to become an MD because since the new guy will be joining in from private sector, so he would be more driven by that ESOP and less about the remuneration. So yes, those are the 3 questions.

See, ESOP policy is to be -- I think this needs to be taken from the top management level. But I think people in Can Fin are more driven by their commitment. As you know earlier, it was told that people here are for more than 20 years, and they are committed. With those people only, we have achieved this level of business. And they are driven more by commitment towards the organization. And as of now, new MD, I think we are not the right person to answer this, that what new MD will think of ESOP or not. Let us leave it to him.

So that no increases for MD versus GM, CFO for '22, what was the reason there? My question is that in FY '22, if we look at the remuneration increase, for MD, CEO and the Deputy CEO, it was like no increase. But whereas for GM, CFO and the Company Secretary, it was to the north of 70% to 20%. So start of...

No, no, I think that from where you pick this. For CFO, everyone...

[indiscernible]

What I feel that it is not about CFO or the Company Secretary, that whatever increase we got, salary increases is there, it is for different, all grades, in fact, right from assistant to up to the level of GM. It was nothing specific for a CFO or CS, it is for the all -- our salary is based on the rank whether it's the AGM, DGM or GM, salary is based on the rank.

So my question was more on the MD, CEO and the Deputy CEO, who saw no increase. So that was broadly, but yes...

No, no. I think to answer your question, Deputy CEO also got an increase. Deputy CEO, Deputy Managing Director is on deputation from Canara Bank, on the rules of Canara Bank, on deputation to Can Fin Homes. For any Managing Director, it all depends on the contract. So without probably looking at contract, I don't think so we should -- so I think let's pass this question.

We have the next question from Mr. Pranav.

Just one question pending. So if we -- if I remember correctly, most of our borrowings -- bank borrowings are linked to 1-month and 3-month and that is the benefit that you got on the cost of fund side. And now with the NCRs going up, how do we look at managing this. And if you can give probably some examples based on what sanctions -- the recent sanctions that you have got. How -- A, how we are able to manage the cost of funds; and B, whether it is possible for us to sort of move to a higher tenure MCLR, say, probably 6 months, 12 months MCLR?

See, the strategy, what you adopted in the past also, when there is increase in cost of funds, right? Now when there is an increase, you can see increase across, whether it is PLR-linked, whether it is [indiscernible] whether it is [ rate ]. Depending on the -- irrespective of the source, I think there will be increase, right? So whenever there is the increase in cost, we are fixated on the margin. And therefore, we try to better the yield. And whenever the rates are going down, yields will come down so that we get the profitability, what we want. This is what we have been doing in the past. So I think the same thing should continue, Amitabh, right? So see, because we have built the capability of building book when the cost of funds were 9%, 9.5%, 10%. And today, we are talking about around 8%. So we have built that capability within Can Fin to build a book at a higher yield and also at a lower yield. And we have built the capability of sourcing business at the lowest possible rate, which was in March at 6.75%, and was the highest possible rates, right? So I'm saying we have built a way with within the organization to work under different scenarios.

I just had one last question, post which since there are no further questions, we can close it. So -- and it is to Amitabh Sir. So are we looking for -- so is the mandate for the new NDCU to find from PSU landscape only or it could also be from the private landscape?

I think it may be from either side. See, it depends on what profile candidates come to us for interview, and I think that the committee which is going to select them, I think they are competent enough to find the right person for Can Fin Homes.

Sure. So broadly, it could be from any sort of branches.

No, it is too early to say. Because on this, we are not at this stage to answer whether it's from PSU or from private. But let us see who all candidates has been shortlisted. So I think appropriate candidate will be a selected for Can Fin to take care all the stakeholders.

Got it, sir, got it. Thank you. Since there are no further questions, sir, we can conclude this conference. I thank the management for giving us the opportunity to host this conference. And I thank all the participants for being part of this call. Thank you so much.

Thank you for participating. Thank you.

Thanks to all the investors.

Thank you, and have a good day.