Can Fin Homes Limited (CANFINHOME.NS) Earnings Call Transcript & Summary

All right. Good afternoon, everybody. Welcome to this call. I'm [ Swapna ] from Investec. Handing over to give a brief introduction about the call and the management to my colleague, Nidhesh Jain, who is the analyst BFSI. Thank you, everyone.

Thank you, Swapna. Good afternoon, everyone. Welcome to the Quarter 3 FY '26 Earnings Conference Call of Can Fin Homes Limited hosted by Investec Capital. We will start the call with management commentary, followed by a Q&A session. To discuss the financial performance of Can Fin Homes and to address your queries, we have with us Mr. Suresh Iyer, MD and CEO; Mr. Vikram Saha, Deputy MD; Mr. Prakash, President; and Mr. Abhishek Mishra, CFO of Can Fin Homes Limited. I would now like to hand over the call to Mr. Suresh Iyer for his opening comments. Over to you, sir.

Yes. Good afternoon, and thank you, Swapna and Nidhesh for the introduction. Welcome all of you to this earnings call for Q3 results of Can Fin Homes Limited. And first of all, a very happy New Year to all of you. So just to give a brief about the performance of the company, the disbursements for -- I'll start with the disbursements. So the disbursements for the -- in the third quarter have been INR 2,700-plus crores, which is the highest ever for any quarter in the history of the company. Therefore, in this particular year in the first quarter also, the INR 2,000-plus figure was the highest for the first quarter in any of the years. Same way for Q2, we crossed INR 2,500 crores, which again was a record for any of the quarters. And this -- the third quarter also in a similar manner, we have been able to have a disbursement of INR 2,727 crores. So that is a 45% increase over corresponding quarter of last year. Basically, it's a base effect because in the last year in the third quarter, we had an impact of the e-khata, which was announced around 27th, 28th of September '24. Therefore, the Q3, there was a major dip. So to a large extent, it is also a base effect. However, compared to the Q2 also, we have had a sequential growth of about 7% in disbursements. As a result of this, the AUM growth has inched up from 8.4% to 9.5% plus. So effectively, about 10% kind of AUM growth is there for the year. And however, AUM growth has been slightly impacted because of the higher prepayments. In the Q2 also, we had witnessed a slightly higher prepayments of INR 1,661 crore as against INR 1,459 crores in Q1. In Q3 also, this trend has slightly continued and the prepayments and loan closures have been at a slightly elevated level at INR 1,691 crores. Therefore, this has slightly impacted about INR 400-odd crores in the second and third quarter, we have lost because of prepayments, which has impacted our AUM growth. In terms of the delinquency, for the fourth quarter in a row, we have had an improvement in our delinquency numbers, where in absolute value, the SMA numbers have come down. So last quarter, when we had reported our Q2 earnings numbers, we had -- our total delinquency was INR 3,860-odd crores. We had said we would like to make it to -- bring it down to below INR 3,750 crores, which also has happened. We've had more than that. In fact, it is -- our delinquency numbers have come below that, mainly in the SMA-0, but we've also started seeing some benefits coming in our -- because of our lower SMA-0 numbers, we have also been able to focus more on SMA-1 and 2. And there also, the numbers have started coming down. And though the delinquency has come down and NPA has been almost the same as Q2, but our provision has been about INR 10 crores for this quarter, mainly because of the increase in our book size. So otherwise, there is no other concern. The highlight here that I want to mention about the recovery is that the last couple of quarters, we have been talking about a little bit of stress in the Telangana portfolio, where because of our actions on the DSAs, all some past issues and also because of the hydra and all, the delinquencies have been affected. But in Q3, we have seen an improvement in our delinquency in Telangana as well. And there also, for the first time, almost after about 6 to 7 quarters, we have seen that the delinquencies have started coming down. So that's a positive number. That's a positive thing that across our geographies in all our zones, we are seeing some improvement in our delinquency numbers. In fact, going back to the disbursement number, in fact, our Karnataka disbursements last quarter was negative 10% YTD, which this quarter, we have done a run rate of about INR 250 crores per month in Karnataka, which has -- so now we are back to kind of a INR 250 crores plus kind of a number. So for the third quarter, we have done INR 740 crores disbursements, INR 740-plus crores has happened from Karnataka because of which now YTD, Karnataka has also moved into the positive zone. It is 3% positive YTD. As far as the other zone, which was in negative, which is Telangana, there also, in fact, across the third quarter in all the 3 months, we've had a positive number of INR 100 crores plus. So Telangana compared to Q3 of last year, there has been almost 30% plus growth in Q3 this year because of which we have been able to considerably bring down the negative figure of Telangana. And at this rate, we are quite positive by end of the year, even Telangana will end in a positive zone in terms of YTD disbursements. Third, as regards to the spread, we have had a further advantage, which we had last -- in the last earnings call indicated regarding a particular large value loan where the rate benefit of 50 bps was yet to be passed on. We have -- we received that. As a result of which we decided to pass on a 10 bps benefit to our existing and new customers, housing loan customers in December -- from 1st of December. But subsequently, 5th of December, again, there was another repo rate cut. So we further analyzed. And from 1st of January, we have decided to pass on a further 15 basis points rate benefit to our existing and new housing loan customers. So with this January impact, our total rate benefit that we have passed on to our customers would be 50 basis points, 10 basis points in May, 15 -- another 15 in July, then 10 from 1st of December and 15 from 1st of January. So totally, against the 125 basis points rate -- repo rate cut that the RBI has announced, the transmission in our books has been about 50 basis points and entirely, we are passing on to our customers. However, there is a benefit that still continues to accrue to us because we still have about 54% of our loans, which are on annual reset. So while we have announced the rate benefit, the actual pass on will happen to those customers as and when the reset dates come. So as indicated last quarter, where our annual reset was 59%, this time, it has come down to 54%. But we have made some aggressive actions and given time for them to -- of 60 days to give the -- submit the documents and are aggressively following up. So hopefully, by end of the -- this quarter, Q4, we might end with somewhere around 80%, 85% of our loans should move to quarterly reset. So this will help us in case of a rate reversal if the rates -- interest rate starts moving up, then we will -- the transmission on the asset side will also match with the transmission on the -- increase on the liability side. So that's the plan. We plan to aggressively move it to our quarterly reset. But as I mentioned, because of this slight lag that we have still experienced a slight increase in our NIMs and spreads. So for the quarter, the NIMs have moved to 4.14% from 4.02% last quarter. Obviously, it is a timing difference because while we got the rate benefit in mid of -- end of October, but we decided to give that 10 basis points from 1st of December. So that was a slight benefit that we got. But going forward, now that with the additional 15 basis points, we expect that the rates would -- the spreads will kind of stabilize around this number of about 3.75% to 3.80% in terms of NIM and spread around 2.75% to 2.80%. That would be where it will stabilize because on the liability side, while we have passed on 15 basis on the asset side, on the liability side, we still have to receive some benefit on the NHB portfolio. And we still have an additional INR 1,000 crores of NHB refinance, which we are holding. So this is in terms of the spread and the NIMs. Going forward, in terms of disbursement, we are -- we anticipate or we are hopeful that we should be able to do about INR 3,200 crores to INR 3,300 crores of disbursements in Q4 in line with our H2 numbers, 45% in H1 and 55% in H2. So that should take us to our guidance number of INR 10,500 crore disbursement for the entire year, which we are positive we should be able to maintain -- we will be able to do. In terms of our delinquency, we further expect a little improvement in our SMA-1, SMA-2 numbers. And obviously, Q4, usually, there is a reduction in our NPA also. Last year, it was a little less. But normally, in Q4, we do see some good amount of reduction in our NPA. So therefore, in credit cost-wise, we don't expect any further NPA provision in Q4. There is a very likely reversal which might happen because of the reduction in NPA, but definitely no increase in NPA because we don't see that kind of a stress in any of the geographies or in any of the segments. So that's as regard this. The last point is as regards our IT transformation, that is also a major impact. You would have seen from the presentation that during this Q3, we have also added some more elements, which we have completed and implemented and which have gone live, mainly the HRMS, the DMS and the Aadhar Data Vault. Deposit, which is almost on the verge of completion, the testing is almost -- UAT testing is almost done. It is expected at month -- end of this month, it will also go live. So that leaves only the LOS, LMS, where the deadline was January, and 19th of January was what has been given by our partner, but there are some delays in the deadline. So I expect that it might end up around February end or something. In which case, we are inclined to actually push it into Q4 -- sorry, Q1 of next year. So Q4, there will be no impact of the IT transformation, which is why we feel that INR 3,200 crore, INR 3,300 crore is a very much achievable number in terms of disbursement. So in a nutshell, I think in the -- for the quarter, in terms of disbursement, in terms of delinquency and also spread and this thing, it has been a very satisfying, I would say, quarter. Going forward also, we are positive that we should be able to achieve the guided number of INR 10,500 crore for disbursement. And Q4, we may expect or we can expect some more improvement in our delinquency. So with the spreads and NIM has been maintained, I think Q4 also would be a positive quarter for us. So that's in a nutshell, the brief of the performance. We can open to the -- to all of you for questions. Thank you.

[Operator Instructions] Just a reminder, this call is being recorded. [Operator Instructions] Nidhesh, would you like to go ahead with any questions on your side?

Sure. Sure. So Swapna, we can start with the Q&A. I think I'm seeing questions there. So Shreepal, you can go ahead with your question.

Shreepal this side from Equirus. So my question was pertaining to the lending rate. So we've taken another 15 basis point in Jan. So cumulatively, we are at 50 basis points. So are we seeing other peers also in the landscape following a similar trajectory on the lending rate side? Or are we early in this because we are seeing some prepayment-related issues?

Sure. Thanks, Shreepal. See, basically, we have passed on because we have experienced that kind of a benefit. I'm not sure how much of a benefit the others have passed -- have experienced on their liability side. As you know, we have moved all our bank borrowings to repo-linked borrowing. So therefore, in our case, all the loans, we have experienced a benefit or a pass on of the 125 basis points, except for that one which is linked to T-Bill. So there also, effectively, we have seen. So in our case, of course, there is a bit of a prepayment pressure. But more than that, it is just that even after passing on 50 basis points, I think our spread, which was around 2.55% at the beginning of the year has already moved to 2.89% for the 9 months ended December. So in spite of passing on, we have actually had some benefit in the rates, mainly the timing impact, but it's also because we already have experienced it. So we have passed on to our customers.

Right. Sir, so I mean -- I think in 3Q also, you had highlighted that we might play this pricing strategy-related tweak because -- so that we can gain momentum in the market in terms of, let's say, growth being better than what we saw in the earlier quarters. So is it in the same direction that we are sort of moving in, right?

Yes. So in Q2, in the earnings call, we had said that there is one large INR 2,500 crore, INR 3,000 crore of term loan where we are yet to receive that 50 bps rate benefit. And once it comes, there is definitely a scope to pass on 10 basis points to the customers. So that happened at the end of October or thereabout. So basically, we were in a position to take it in the November ALCO and pass it on from 1st of December. So that's what we did. And same -- so -- and this time, we've not had that problem. We had the benefit of the 25 basis points coming through quickly. So from 1st of January, we have done that. Of course, there is a bit of a pressure, which is quite evident in the loan closures and BT out and everything. So obviously, this would help. Obviously, as stated last quarter, we would still want to at least maintain our spread, and we will not compromise on the spread and NIMs beyond -- below this. So that's the strategy at least.

Right. Sir, the second question was on the NHB funding side. So that, of course, had been falling because I think the rates there were not so lucrative. So incrementally, are you -- what is the kind of rate that you are seeing being offered by the NHB borrowing?

You're talking about NHB borrowing. So NHB, our blended rate that we are getting at which we are getting the refinance is 6.3%. It is very comfortable. But why we did not pick up the entire INR 1,500 crores is because we -- first of all, of course, there was -- we don't maintain any treasury book where we can keep the surplus funds. So whatever funds we are raising, we are utilizing it for either prepayment of borrowings or lending for loans. In this case, the other thing was that first of all, we required less amount of funds. Second thing is that we had other committed lines of disbursement from banks. We still hold close to INR 4,000 crores of undisbursed, unutilized bank sanction limits. So that is still there. But other thing is that in Q4, normally, the rates are at an elevated level. So basically, other thing, our thought process was that if we can take INR 1,000 crore and keep it for Q4, then it will help us in meeting our entire requirement, and we will not be compelled to go to the market and raise at a higher cost. So as a pricing strategy also, we decided to keep or postpone or take that INR 1,000 crore in Q4. And this quarter, we'll definitely be awaiting the full INR 1,000 crore of the sanction. So that should also help us.

The next question is from Sonal.

Sir, this is Sonal Minhas from Prescient Capital. I hope I'm audible. I was just trying to extrapolate the numbers for the year-end, and it looks like I think the year-end book growth would be close to 10, 11-ish thereabouts as we close the year. I understand, I think you've given a guidance around 15% a little while back. Looking for the next year, basically, given that the software stack will be done by Q4 and the tech platform would be ready, so would be the other systems. Are we equipped to actually have a see a higher growth or closer to your longer-term average growth for FY '27-'28? That's my first question.

Yes, sure. See, you are right, we may not be 10%. It will definitely be higher than that. As I mentioned earlier, we are looking at around INR 3,200 crore to INR 3,300 crore of disbursement in this quarter. Frankly speaking, we had in the beginning of the year, our -- if you see our data in the previous year, our normal prepayments every quarter, closures and everything put together, amortization and everything was around INR 1,380 crores -- INR 1,350 crores to INR 1,380 crores every quarter. So we had actually planned keeping in mind INR 1,400 crores to INR 1,450 crores in quarter-wise, we had planned it. But the last 2 quarters, our prepayments have been higher. So about INR 400 crore worth of AUM growth has been impacted. Had this been at the rate at which we had anticipated, we would probably have been around INR 41,100 crores to INR 41,200 crores kind of a range in terms of our AUM by the end of this quarter. But yes, about INR 400 crores has been impacted because of the higher prepayments. And in Q4 also, with INR 3,200 crore disbursements, assuming the same level of INR 1,700 crores, we expect about INR 1,500 crores is the net addition to the book. So we should end somewhere around INR 42,000 crores plus kind of a thing for our -- so that will be around 11% to -- between 11% and 12% is what we anticipate in terms of our AUM growth, which is, yes, lower. We had indicated that 12% to 13% or somewhere in that range, between 12% and 13% is where we will end up for this year. Next year onwards, we had projected for 15%, not this year. So we will be probably around anywhere up to -- because INR 400 crores we have lost, that is about 1 percentage point in terms of -- because we were INR 38,200 crores at the beginning of the year. So INR 400 crores is 1% we have lost because of the higher prepayments in terms of our AUM growth. So that is correct. But next year, we are looking at about INR 13,500 crores. And considering INR 1,700 crores every quarter as the prepayments or thereabouts, so INR 13,500 crore and INR 7,000 crore prepayment amortization BT outs should give us around INR 6,500 crore of addition to the book. That is what is the plan for next financial year, which should be around close to 15%, assuming we end at INR 42,000 crore this year.

Got it, sir. Sir, a follow-up question just to understand the nuance of how the BT out and the prepayment works. And this is a theoretical scenario, just trying to understand that if we would have reduced the rates, let's say, maybe by passed on more rate cuts to the customers, would the BT outs been lower? And whom have we lost these customers to? Are these banks, are these peers who are more aggressive? Just trying to understand the on-the-ground dynamics.

Sure. I think it's a very valid point. Unfortunately, what has happened in our case is we have about 54% still of loans which are on an annual reset basis. While the rates it helps us in terms of getting lag, it helps us in terms of improving our NIMs and spreads. What has happened is the annual customers, annual reset customers are the ones where the prepayments have been very high. So the quarterly reset customers have been very -- although they constitute about 46% of the book, but the prepayments, if you look at it, less than 20% of the prepayments are happening in the quarterly reset book. So basically, it is our failure to communicate to the customers or to convert them or the delay in converting them into -- from annual reset to quarterly reset, which has hurt us, I believe. Because if it was -- because at least when our customers do appreciate that we have passed on 50 basis points and we have regularly -- this is the fourth rate cut that we are passing on to the -- to our customers. But what has happened is the annual customers don't get the entire benefit. They have to wait for that 1-year period. And we have, I believe, not pushed it. We should have done it much faster. So that is, I believe, the main reason why the prepayments are happening. But having said that, prepayments are mainly for 2. One, obviously, is the rate point, which we could have handled this way. But the second point, of course, is that there are also customers who go for takeover plus top-up. And many times, we are not in a position to offer them the same level of top-ups that they are able to get from the market. So those kind of cases, we have to let go. But those are conscious calls. But yes, on the rate side, if we had communicated better, probably we would have been able to save some of the portfolio from moving out.

The next question is from Shreyans.

This is [ Shreyans Gathani from SG Securities ]. So I had a couple of questions. So one was basically looking at a long-term trend in terms of the borrower mix, we've seen a structural increase in the self-employed nonprofessional category. So where do we -- I don't know if this is a function of us moving out of South India or as Northern India, there's just more of that population? Or are we looking to increase that and where do we see this stabilizing as a mix of our book?

It's not a function of the geography change in geography. In fact, if you see one of the slides, we have mentioned the 4 pillars of our Vision 2028 document, where we have said one of the things is we would like to increase our SENP book. We were almost at 73-27, 73% was salaried and 27% was self-employed. So by FY '28, we have indicated that we would like to -- we are okay to take it up to 65-35. So that is the thing where we have now from a 73-27, we have moved to 69-31. And by FY '28, we are okay to move it to 65-35. And -- so it's more of a conscious call. As far as geography is concerned, actually, if you look at it, our salaried percentage is highest in the North. Among all the 6 zones that we have, our North zone has the highest percentage of salaried segment. So it is not that the non-South geographies have a higher self-employed segment. But yes, within geographies also, there are pockets where self-employed is more like if you look at -- say, if you look at Rajasthan or maybe if you look at parts of Tamil Nadu, mainly the Tirupur side and all, yes, there are -- so it has nothing to do with the geography. But consciously, we have taken a call to slightly increase our self-employed so that we can have a slight improvement in our spread, so which is visible also because while the rates have been coming down, we have been passing on the rates. If you see our yield has been somewhat kind of maintained at 10.10% was, I think, there. We have 10.14% or thereabout. It's just come down to 10.07%. So basically, we have -- this strategy has helped us also maintain a little bit of our yield, and it's a conscious call.

Got it. So as we see this book seasoning, will we -- what kind of NPA ratios do we expect in terms of now versus current for this particular year?

See, we have got the last couple of years or whatever, if you see our salaried segment, GNPA has been in the range of about 0.5% to 0.6%, whereas self-employed category, our -- this thing has been range bound around 1.6% to -- 1.5% to 1.7%. This is the range-bound figures. Even in the last 8 quarters, the numbers have kind of remained in this particular range only. So yes, to that extent, there will be a slight increase in our delinquency numbers, if you look at it. But we are confident that we will -- we still have quite a bit of delinquent pool in the existing pool where we can collect and reduce those numbers. So in the medium term, I don't see the numbers. And you know we -- for the last so many years that we have been there, Can Fin has not seen a GNPA more than 1%. So we are confident that, that will not be reached. We are confident of keeping it below 1%.

Got it. Sir, last question was on the annual reset portfolio. So assuming that all of that resets to quarterly, what kind of NIM impact do we expect? And what steps are we taking to curtail -- like reduce this prepayment increase that we are having?

Sure. See, actually, we have factored the future conversion from annual to quarterly when we passed on that 15 basis points to our customers. So basically, first of all, there was this December 5 repo rate cut, which we have experienced on 40% of our book. So that, of course, is something which we are going to get, which is -- takes care of this -- some of this 15 bps that we have passed on. The second thing is that, as I had mentioned a little while back, that in our NHB portfolio, which is all at annual reset, we still have some portfolio which is going to see that benefit. And NHB book, approximately 60 to 75 bps is the reduction in the PLR, which they have impacted. So some of that NHB pool, we are likely to experience that also going forward in the next few months and all. So therefore, we have factored those things into it. And currently, we are at 3.89% as the 9 months NIM and 2.83% as the spread for the 9 months. We expect that we should be -- even after all this 15 basis points and factoring in the benefit that we are going to get, it will not go below 2.75% and the NIMs will not go below 3.75%.

Got it. But this is after everything converts to quarterly?

Yes, yes, yes.

The next question is from Raghav Garg. [Operator Instructions]

Can you hear me now?

Yes.

I'm Raghav from AMBIT Capital. I have a few questions. See, one, I wanted to know what is your plan on branch expansion for the next 2 years, which is '27 and '28? And if you can add some geographical color to it, like which states or regions will you expand more? That's my first question. Should I ask all my questions? Or should I wait?

Either way, either way. You can go ahead.

My second question is, can you highlight what is the number of marketing executives that you currently have across all of your branches? Because I think last time when you had indicated this number, it was about 100. That's in July 2025. So has it increased from there? And last question is on your IT implementation, see, I understand that you may end up taking it in next 3 to 6 months. But I just wanted to understand at a very broad level, whenever you do decide to take it, what is the number of days of operations that will be impacted before operations fully normalize? Those are my 3 questions.

Sure. Yes. Thanks, Raghav. See, in terms of the branch expansion, we -- our vision document state, we need to -- we plan to have about 300 branches by FY '28. We are currently at 249. So next 2 years, we plan to open 25, 25 branches. We already have identified some 20-odd locations, which we are very keen to open. So we will be opening about 25 branches in the next year. If you see the branch expansion, so far, most of it has been in the North and the West zones. We have not opened any of the -- any branches in Karnataka and Telangana. Obviously, we've had some slowdown there, which was for various reasons. So basically, we'll continue to look at the other geographies only. Maybe we may open a couple of branches now that Karnataka has come back to its old 250-plus kind of a number. We may look at one -- a few branches in Karnataka. But by and large, it will be North, West, Tamil Nadu and East where particularly Andhra Pradesh, we are quite positive about. So these are the geographies where we'll be looking at branches. In terms of marketing executive, we had 90 as at the end of the last quarter. Currently, also the numbers are the same, 1 or 2 -- given 1 or 2 here and there attrition and new joinings and all those things. So that is the status. The number was about 37 at the beginning of the year in Q1. We increased it to around 90 slowly to -- up to 90 in the second quarter. And in this quarter, we have continued to keep the number as the same at 90. Last quarter, if you see our 90 people in the team, in the first quarter, we had about INR 101 crores of business sourced through the team with 37 people. In the second quarter, this number increased to around INR 185 crores. And in this quarter, we have done more than INR 250 crore business has come. So almost on an average, these 90 people have done close to around INR 80 lakh, INR 90 lakh plus kind of sourcing per month per staff. That's the kind of sourcing that has happened. We have not added anything. But going forward, yes, we plan to at least increase some in the next financial year. And again -- so by FY '28, end of FY March '28, we at least expect to have about 250-odd people in the sales team. The third question on the IT implementation. See, we -- as I had mentioned earlier, we may look at probably taking it to Q1 for the LOS, LMS part of it. Deposits will happen now. But that is more because if it comes closer to the March dates, then probably we may decide to either do a small pilot in this year and most of it next year or entirely in the next year. But -- so the impact in this year may not be there. But what we expect is that the way all our other modules have gone and also in the sense and the way we have seen the customization aspect to it, I think it will be about 3 to 4 days of downtime. Beyond that, I think it will be some 1 or 2 weeks for the teams to get accustomed to it because basically, since customization is less, it's mostly the UI/UX, which is going to change and some process flows will change. So getting used to it will be some effort. Other than that, I think it should not take too long also for the branches and the staff to get accustomed to the new system. So probably if you have to put it into numbers, I would say in the quarter in which we impact probably about INR 300 crores -- INR 250 crores to INR 300 crores of business impact would be there. I would put it in that number, that way.

That's helpful. Just one clarification. You said 200 marketing executives by when, March '27, is it?

More than 150 by March '28. So probably this year, we are at 90. We may increase it to about 150-odd next year, and another jump in the FY '28.

The next question is from [ Nipun ].

This is [ Nipun Kinka from CD Research ]. So basically, my question is, why do you think we are underperforming as compared to the NBFC system growth of home loans?

So why we are underperforming? See, in terms of AUM, yes, we are a little lower than the industry level of about 13% to 14%, mainly because it's -- growth this year, if you look at it, current year, disbursements have grown at 19%, which I think is comparable. But -- and by the end of the year with around INR 3,200 crore, INR 3,300 crore, we should end up around 22%, 23% disbursement growth compared to last year. So in terms of disbursement, I don't think that is a major issue. But as I mentioned earlier, our AUM growth is slightly lagging, one, because it, of course, comes with a lag, and it will take -- maybe the next year can be a little better. And two, we have lost about INR 400 crores because of higher prepayments this year. But for that, our growth would have been around 11% plus in this quarter -- end of this quarter. So I think these are the 2 things I would say we are lagging behind.

Okay. Okay. And my second question was regarding the IT implementation that we are doing and we are currently under -- like it's in the field. So what do you think would be the competitive advantage that we might have post implementation of this infrastructure?

See, in terms of our IT -- our existing IT infrastructure or IT thing is quite dated. Our IT -- current IT platform is something which was implemented in the company way back in 2011. So obviously, there are a lot of -- in terms of the elements which are not present. The current IT that we are implementing is a wholesome thing, which is into -- one is application side, second is the security features and third is the infrastructure side. So obviously, in terms of the infrastructure and security, it is going to be very helpful to the company in terms of the present scenario of cybersecurity and cyber threats and all those things. So that's definitely something which we have taken into consideration. Infrastructure, the way we have enhanced the capacity and everything, we should be able to -- definitely, system will be able to match up to the higher growth levels and everything that we are planning in the next few years. As for the applications, earlier, we had, as I said, a dated application, plus at the same time, it was only an LOS, LMS. So now the new application that we are going include document management, a lot of other deposit module also, much enhanced F&A package and also has things like Aadhar Data Vault and a lot of integrations and third-party solutions also integrated. So that way, a lot of benefits will come in the sense that a lot of activities which are presently manually being done will also get automated, plus the API features and everything will enable us to also quickly attach third-party vendor solutions as and when we require it and go-to-market time will be much lower, plus over a period of the last -- from 2011 to 2025, a lot of things have become a little cumbersome, the processes and all. This new system will also have a lot of simpler processes. So definitely, the time of the branches will also reduce considerably. We expect at least 20% productivity improvement in -- although we've not actually -- there's no way to calculate how 20% and all those things. But at least we expect a sizable amount of reduction in a turnaround time for the -- for each of our other key transactions and activities.

Got it. Got it. Mostly, I believe -- all the stuff that you just talked about, mostly it will improve in our operational side of things rather than the growth side.

Operational and security also. I think security also is something which is not usually this thing about. But in terms of security, we have taken care of a lot of things in terms of the CSIEM, the SOC, NOC, even in terms of the SD-WAN solutions. So these are obviously things which will help in the security aspect also.

The next question is from Yuval.

This is Yuval Aiya from Nuvama. My first question was in this quarter, borrowings from banks have gone up from -- to 62% from 57% in the previous quarter. So could you just share the incremental cost of borrowings in Q3?

See, banks -- all our bank term loans are now at rates below 7%. I think 6.92 or something is our long-term borrowing cost, which is there. Of course, 1 or 2 are there where we have -- they have not yet to pass on small benefits. But other than that, 6.92 is the incremental cost of borrowing, you can say, on the higher side from banks in the Q3. Short-term borrowings obviously are even at lower at 6.4, 6.45. That's the rate at which we are borrowing from banks. So I would say probably around 6.8 or something could be the blended cost of the bank borrowings for us.

Right, sir. Got it. So could you just provide any breakup as to at the moment of the total funding mix, what is the share of floating rate borrowings and fixed rate borrowings? And I understand that NHBs, they have an annual reset. So the other components of the borrowing mix, what is the average time in which you can see the repricing when it comes to floating rate borrowings?

See, in case of our bank borrowing, which you said is 62%, our -- 80% of that is linked to external benchmark rate, which is repo rate. So there, we will immediately see the transmission of the -- whenever there is a reduction or an increase for that matter. The transmission will be immediate. The remaining 20% of the bank borrowings is linked to T-Bills. There also, there will be an immediate transmission, you can say, maybe not to the exact amount. So 125 basis points will not translate into 125 basis points, but somewhat near there will be the impact on the remaining 20% also. Then we have the NHB refinance where 50% of the NHB refinance, which is linked to the affordable housing fund, that is fixed rate. So there will not be any change in that. The remaining 50% of the approximately of the NHB refinance is at floating rates, but at annual reset, so there the transmission will be in a staggered manner. NCDs are fixed rate. Deposits are fixed rate. So -- and CPs, of course, are too short. So whenever they reprice, they will be as good as floating rate only. So considering the 62% bank borrowing and another 6% to 7% of NCDs, I think about 65% to 70% of our borrowings are there where we will get -- within 1 month transmission on the liability side will happen.

Understood, sir. So even after your quarterly reset, I think so...

Yuval, I request you to please go...

Yes, sure.

Next question is from Mohit.

This is Mohit from HDFC AMC. Sir, just wanted to get your guidance on -- for '27, '28 on key parameters like spreads, cost to income and credit cost?

For FY '27, you said, right?

Yes, '27 and '28.

Yes. For FY '27, next financial year, we -- if you look at it, our spread and NIM, as I mentioned earlier, they would be 2.75% and 3.75% is what we would be guiding for. In terms of our credit cost, we have guided for 15 basis points. Of course, this year, it has been lower than that. And next year also, at least as of the moment, we don't see any stress in any of the pools or any of the geographies. So we don't expect it to be any different. But we will say it will be 15 basis points you can consider for the credit cost guidance. In terms of OpEx, there will be an increase because FY '27 onwards, we will have the impact of our IT transformation. So about 1 percentage point is the likely impact on the OpEx. So around 19.5% would be the cost-to-income ratio. And AUM growth, we are projecting for about 15%, considering a disbursement of about INR 13,500 crores. This would be the rough tentative plan that we'll be working on.

The next question is from [ Amit Thawani ]. [Operator Instructions]

Yes. Am I audible?