Cholamandalam Investment and Finance Company Limited (511243) Earnings Call Transcript & Summary

I now hand the conference over to Mr. Nischint from Kotak Securities Limited. Thank you, and over to you, sir.

Good morning, everyone. Welcome to the earnings conference call of Cholamandalam Investment and Finance Company Limited. To discuss the 1Q FY '22 performance of Chola and share industry and business updates, we have with us today Mr. Vellayan Subbiah, Chairman and non-Executive Director; Mr. Ravindra Kundu, Executive Director; Mr. Shaji Varghese, President, Housing Finance; Mr. Suresh Kumar S., Senior Vice President and Business Head, LAP and SME; and Mr. Arul Selvan, Executive Vice President and CFO. I would now like to hand over the call to Vellayan for his opening comments.

Thank you, Nischint. Good morning, everybody. Let's just go through quickly the key financial results for the company for the quarter. Disbursements were at INR 3,635 crores, which is marginally higher than Q1 FY '21. Total AUM was at INR 75,763 crores. NIM was at INR 1,363 crores, that's up 39% for Q1 FY '22. And pre-provision operating profit was at INR 993 crores, which is a growth of 56%. Our PAT was at INR 327 crores in Q1 FY '22 as against INR 431 crores in Q1 FY '21. And in terms of -- so broadly, because of the second COVID pandemic, between localized lockdowns and other factors starting mid-April 2021, which had extended in most states up to mid-June, and in some states, we still have partial lockdowns in force. So basically, many of the borrowers and staff of CIFCL were impacted by the pandemic in the second wave. And we, as a company, basically shifted our priority from business to protecting the well-being of affected persons. In a lot of the rural areas, it was -- I mean there was a lot of challenge in terms of infrastructure, health infrastructure. So getting everything there became a priority for the company, including the team is spending a lot of the effort getting -- looking at everything from oxygen to drugs to kind of getting anything that they could do to support both our employees and kind of key people during this whole effort. As a result, collection kind of -- disbursement, so this basically can result in a setback in performance in Q1 on both disbursements and collections. Disbursements were up 1% compared to Q1 FY '21, but collections suffered and resulting in an increase in Stage 3 assets from 3.96% to 6.79%. The restructuring option with asset classification benefit extended by RBI and the restructuring 2.0 was used to the extent of 3.86% of the book as of June '21. So total restructuring stood at 5.44% of the book. And these loans have been classified as Stage 2 assets by us currently. CIFCL held management overlay provisions of INR 750 crores as on December '20. And then we created an additional overlay in March to the tune of INR 350 crores. So we had a total of INR 1,100 crores. Of this, basically, we have reversed INR 400 crores during the quarter. And this release was made towards additional provisions, which were in Stage 1 in March '21 and where the customer continues to be in Stage 1 in June '21, without downgrade to a subsequent stage. And additional provisions held in March '21, which were in Stage 1 and 2 in March '21 and moved into Stage 3 in June '21, on which higher provisions as per regular Stage 3 norm had been created. Post this reversal, we have a management overlay of INR 700 crores in Stage 2 and 3 to manage any future contingency. We've also witnessed a recovery in disbursements and collections during the latter part of June and in July post relaxation of state-wise lockdowns. And we expect a gradual revival in subsequent quarters in FY '22 with normalization and rollback of accounts, which have moved to higher buckets. In terms of -- so in terms of individual businesses, vehicle finance disbursed INR 2,846 crores in the quarter as against INR 3,231 crores, which is a decline of 12%. LAP dispersed INR 386 crores as against INR 119 crores, which is a good great -- good growth because of the challenges during first lockdown. HL dispersed INR 199 crores as against INR 190 crores, a growth of 5%. And AUM was at INR 75,763 crores compared to INR 70,826 crores. And PAT was at INR 327 crores like I discussed. PBT-ROA was at 2.5% as against 3.5% the previous year, and ROE obviously dropped as a result to 13.5%. We still have a strong liquidity position with about almost INR 8,000 crores as cash balances at the end of June, which includes INR 1,700 crores which we invested in GSEC, which we show under investments, and a total liquidity position of INR 16,400 crores (sic) [ INR 16,417 crores ], which includes undrawn line. ALM is comfortable. We have no negative mismatches. In terms of asset quality, I think we just talked about it goes -- Stage 3 stood at 6.79% and that had a provision coverage of 35.5% as against 3.34% of Stage 3 during June 2020, which had a provision of 41.6% (sic) [ 41.62% ]. Total provisions carried against the overall book was at 4.37% as against normal provision levels of 1.75% prior to pandemic. And we obviously are going to talk about the impact of the Supreme Court order in the past and that still remains in force. The capital adequacy of the company was at 19.08% as against regulatory requirement of 15% and tier 1 was at 16.6%. So Nischint, I will stop there, and we'll be happy to take questions.

[Operator Instructions] The first question is from the line of Prashanth Sridhar from SBI Mutual Fund.

I hope I'm audible.

Yes.

Sir, just 2 questions from my side. On the vehicle finance book, if you could give us some color on how your customer segment would be dealing with issues like capacity utilization, freight rates, increasing diesel prices, et cetera. And if you could give us some numbers like Stage 2, Stage 3 and restructuring in the LAP SME and home loan segment, sir? That's it from my side.

Yes. Vehicle finance, last time also I mentioned that we are actually into SRTO categories, which is actually [ 0 to 10 vehicle or 1 to 10 ] vehicle customer. So in that category, utilization level or managing the vehicles during this time when diesel prices have gone up is better. But we [ sized ] the fleet operator who are actually having to operate a little higher than the SRTO customers. They are [ stable ] where the exposure is lower in our case. And second is that in the case of heavy commercial vehicle, we have concentrated in a few markets only, not across the country. And during the last 2 years, we have been reducing our exposure in heavy commercial vehicle after noting that the [ PTE ] has gone up in 2018, '19. And since then we have [ defused ] -- also, we got benefited on the [ PTE ] as at overall level. So utilization level has been impacted in 1 segment of the customer, large fleet operators and SRTOs are better off. But things are improving. This was there in Q1, but in the month of July, things have improved significantly. We have seen that the industry has sold 10,000 units of heavy commercial vehicle. So TIV has gone up. And if in case this continued, I mean there's no COVID impact Wave 3. Then obviously, heavy commercial vehicle is also expecting a replacement demand, which is due for last few months. And we will see that heavy commercial vehicle customers will benefit it in time to come. As far as the stage, Stage 3 and Stage 2 of LAP, Stage 2 are restructuring about 2.95% of the portfolio and our Stage 3 stands at about 8.86% for LAP.

Mr. Sridhar, your question is answered, sir?

Yes. Sure. Yes.

The next question is from the line of Dhaval Gada from DSP Mutual Fund.

I had 2 questions. First is on the stress increase that we've seen both in Stage 3 as well as higher share of restructured loans. I mean, I just wanted to understand, if you look at the movement, given that there was no moratorium this time, you would have expected both Stage 3 and restructured to increase. Just curious to know, is the extent lower than what you initially estimated? And by when do you see normalization of this trajectory? And related to that is the second question on credit costs. So you have excess provisioning of about INR 700 crores. How much -- would that be adequate enough with the normalized credit cost for FY '22? Yes, those are the 2 questions.

So just tell you the vehicle finance data so that -- and our LAP and HL have done also similar way. In the month of April, we saw 93% of our billing collection efficiency, which went down to 84%. And in June, it was 101%. And in July, it is 114%. So the stress came in the month of April and May. Then after that, it has actually started improving -- in fact, in the month of July, Stage 2, Stage 3 has gone down as against the June closing. The overall step is due to -- in the month of June, when entire country was not operational. Southern part of the country was under lockdown and part of east was also under lockdown like Northeast, Orissa and West Bengal, it got impacted. In fact, in the month of July also, we saw lockdown in partially applicable in Orissa and WB and stringent overall lockdown is there in Northeast. So in spite of that, we have seen our collection efficiency has gone up to the level of March in the month of July, and that is -- that is an indication that things have started improving in terms of Stage 2, Stage 3. As far as the provision is concerned, provision, we have taken 4.37% at the overall book, and our normal provision used to be 1.75%. So at this point in time, at an overall group level, we have 3x of provision. So it is adequate -- more than adequate.

And the overall stress you would expect -- yes, sorry.

Yes, go ahead. Go ahead.

Yes. The overall stress, do you expect -- by second quarter, we should start seeing normalization or it would be in the second half of the year? I mean, just directionally, I mean, given that the collection trends are quite buoyant, yes...

Yes, everything cannot be done in the quarter. Every month, the resolutions are happening. So normalization has started happening in the month of June. It will take 6 months to get into -- 6 to 9 months to get into the exactly the similar level. We are expecting that we will try to deliver better numbers than last year closing as on 31st March in this financial year, closing.

The next question is from the line of Chetan Gindodia from AlfAccurate Advisors. [Operator Instructions]

Hello? Hello?

Yes, sir, you may go ahead, sir.

So only 2 things. One is in - in terms of competition intensity with the banks also moving aggressively in this space, how do you see that from a competition perspective? And second, considering that the environment still is still looking very challenging, particularly on retail financing side. How do you see the trends over the next 2, 3, 4 quarters? Any change in strategy from the long-term perspective? If you can highlight on that, that will be useful.

Look, we have mentioned that in the past that the cycle -- our auto cycle as far as the heavy commercial vehicle -- is something which is going to pick up. So we're going to start any time and replacement demand is going to start. So heavy commercial vehicle, we'll see better number in time to come. And in this month, it's July, if you see the data, the heavy commercial vehicle segment has registered a very good number. Other than that, entry-level car, entry-level 2-wheeler, tractor, used vehicle, all of them is going to do better. So -- and we are present over 1,100 branches, 80% branches in Tier 2, Tier 3 town, and these are the places where the intensity is there, but we are able to do the job because of our people and our relationship with the manufacturer and the customer. So we did not change the strategy very, I mean, dramatically, but we will definitely come back to some of the products which we have not done so far. And overall disbursement in the month of July, we have seen that we have delivered more than July '19 disbursement as the organization put with the vehicle finance, LAP and HL. So this trajectory is actually going to continue, and we will deliver better than last year, if in case COVID wave 3 doesn't come.

I see. Sir, no major change in strategy, right? Because you might have seen some more delinquency in few pockets. So are you trying to become more conservative by making any change in the risk management, any gain from the systems perspective?

We are actually following the product level at a make model variant level and the customer and geography level and watching that where the probability of default and injuries are lower. And that actually varies, is not static -- as and when we see that some product [ NMDs ] is actually not giving return, we change, reduce the disbursement. So that is the ongoing process. We have a system business decision model working. Every quarter, we'll look it and then accordingly, we give the direction to the team to change their focus from market to market, product to product and [ MMB to MMB ] and customer category to category. That has been working very well.

Would be your guidance for the full year credit cost?

It's very difficult to say at this moment in time. Internally, we are trying to do better than last year. That is what we can say.

Sir, your question is answered?

Yes, sir.

The next question is from the line of Manan Tijoriwala from ICICI Prudential Asset Management Company.

I wanted to get your view on ECLGS versus the restructuring as options for working with the borrowers as we have done around 4% ECLGS of the portfolio last year. So at minimum, I think we were able to help the cash flows for around 20% of the portfolio. So were these flows largely into the auto segment? I'm not sure if you could confirm that? And also, if you could throw some light on ECLGS this time and why it has been [ abnormally moved ]? And lastly, would you say borrowers to avail ECLGS last time around were as stressed as anyone who availed restructuring or more?

See, yes, last year, we did a good amount of ECLGS because obviously, it is guaranteed by government, et cetera. And so we wanted to capitalize on it. Now there is a cap on what you can do under the ECLGS. And so since we have done quite a bit last year, this year, we have kept it to the minimum. This year, we have done around INR 6 crores only in the quarter, Q1. So we have not scaled it up much in the current year. The ECLGS actually, we have done INR 2,000 crores last year. Out of that INR 1,200 crores was vehicle finance, INR 800 crores was LAP. In this year, we have done only INR 7 crores here.

Sir, your question is answered?

Sir, lastly, if you could shed some light around how stressed you would imagine the ECLGS borrower would be versus a guy who availed restructuring?

ECLGS customers are performing better than [ restructuring ] overall.

And we don't encourage the restructuring for such customers.

Yes. There's no restructuring.

There is no restructuring available for [indiscernible].

The next question is from the line of Anand Bhavnani from White Oak Capital.

Sir, my first question is how you see relative assessments of various segments that you operate in now? We have seen that in the tier 2, tier 3 towns that we operate in, affordable housing has done very well. So -- and the -- they withstood the test of the pandemic better than, let's say, vehicle finance or LAP. So is the experience similar for us? And do you think the opportunity in affordable housing is something that we would explore more rigorously going forward from here on?

Yes. While you said that, we have relatively done [ INR 199 ] crores business. We understand it is 5 percentage higher than last year, but it's a very small volume. But when it comes to the opportunity, so the LMI, lower middle-income families who we target and who we wish to serve, Tier 2, 3, 4 are the obvious opportunities. If you [ ask me this ] is INR 4,500 crores, we have just started the opportunity. We have only just reached out [ to 177 ] branches and just 9 states last year, and we will look at 2 more as this year. The opportunity, of course, is much, much bigger, and we will continue to focus there. And this is an [ interesting ] opportunity for us. And we have also internally strategized and focused accordingly in segments which can scale over a period of time. The transaction types, which can scale over a period of time, like self-construction, [ resi resale ]. These are the large opportunities in 2, 3, 4 cities. We are focused on that. We hope to get in the numbers in the plan, which we have internally planned. It's quite a big opportunity, really I should say. And it also comes very handy to Chola because Chola over the last 2 or 3 -- whatever years -- has been kind of focusing on the LMI, lower middle income. It's a good understanding of risk and an orientation of segment, too. So we hope to do what we are focusing.

Sure, sir. My question was more of do you see for us to divert more resources there or do more business there than historically we have done and kind of have more focus on this given that pandemic has created a template that this business does better than others in rural areas, affordable housing. The question is, is our focus more? And can we expect much higher growth than in the past?

And let me reframe the question the way I have understood. What you were asking is, for affordable housing, should there be a higher priority and increase the volume than currently planned and budgeted? Is that the question you're asking because it's not...

Yes.

Look, look, housing is a generic demand. There's always an opportunity. So we have a reasonably good business plan we have made all the way up to FY '25. We are on course of that and execution. So we will always focus to execute the plan we have already kind of formed up. That plan to be executed with precision is what we will focus. Anyway, it was always an opportunity. It's not that today, affordable housing has grown a new opportunity for a company like us where we do a very small volume. The first priority is to establish to -- [ let's say we're ending up in a ] country -- in a part of the country, establish process and procedures. As you know that [ the word land matters ], as does state function, it needs to have a lot of local nuances. We just don't want to do that. And this is not a business which is rushed in. It has to go -- because 15 years is the average lending tenor. So we would like to go with the way we have built other businesses -- carefully -- and do in a way it is sustainable. So we're not going to rush in beyond the business plan. So that's where we look at it. There is no intent to change an extra focus plan or a higher volume plan than what is currently planned and approved by the board.

Sure. And sir, just double checking, if I heard it correct. We did ECLGS of INR 700 crores in Q1. Is it?

Only INR 7 crores.

INR 7 crores. Sorry. Thank you.

The next question is from the line of Bhavik Dave from Nippon India Mutual Fund.

Just a couple of questions. One is on the [indiscernible] increase in Stage 2 and Stage 3 because the lockdown during April and May. So I just wanted to understand if you could give us some color on how -- what proportion of these customers are paying? I understand that they will not be able to clear the previous dues. Hands have rolled forward. But what proportion of the Stage 3 assets are active and paying 1 or more than 1 EMI? Is that a data point that you can give? And then the same for the Stage 2 because I had seen a significant increase, but I would assume that in June and July when things normalize, customers will start repaying at least 1 EMI. So if you could just give us some sense on what that is.

I mentioned that Stage 0 to Stage 1 roll forward is only 1.45%, which is the lowest in the last 10 months. And when it comes to Stage 2, almost 80%, 85% customers are paying their current month due. So they are stabilized in the same bucket. And the Stage 3, which is nothing but 3 and above. There, also almost 80% customers are paying in the current month due. And also, there is very little repossession happening, although repossession and sale is very negligible in terms of the stages. But some customers who have not paid, they have actually committed to pay subsequent month. That is the situation in Stage 1, Stage 2, Stage 3.

Okay. That's very helpful. And...

It is better than the trend which we have seen in the month of January, February, March and July. I'm just telling you the July trend versus the March trend.

Understood. That's helpful. And secondly is on the INR 3,600-odd crores restructuring that we have. If you could just break it down between vehicle and LAP, how is that breakup looking?

1 second.

Yes, sure, sir. And meanwhile, one last question from my end. On the annuity investments that we have done, and the Vishwakarma consortium, if you can highlight what is the road map? Or what is the thought there? What are we -- what are you planning to do there? If at all anything that you can add...

Right now, that's a wait and see, right? Because basically, the RBI has to kind of declare who they're going to -- which of the consortiums they're going to give a license to. And that they have said that they will do in September. So till they do that, there's nothing for us to do. But obviously, if they do announce that in September, then we will kind of come out with a more detailed strategy in terms of what Vishwakarma's approach is going to be. And there's some sense that it's -- I don't know, it may be delayed, but we have to see. We can't dictate when this comes on.

So on Stage 2, VF is INR 2,250 crores. Balance is [indiscernible].

Other restructuring, INR 3,600 crores, INR 2,003 crores, vehicles.

[indiscernible]

The next question is from the line of Shubhranshu Mishra from Systematix.

I just wanted to understand what kind of disbursement numbers are we looking at for the full year? What kind of run rates can we look at going forward? It was very healthy to understand that we are pretty much at June -- July '19 targets. But how can we model that going forward? That's the first question. Second question is we had tightened our credit filters during COVID. Have they been eased out in this particular quarter? And what kind of rejection ratios are we looking at right now versus FY '21 versus FY '20 in each segment, vehicle finance as well as LAP and in home loans. And if you could give out the LGD, PD assumptions for the LAP segments, which is LAP Delhi, LAP Tamil Nadu.

See, disbursement numbers, we don't give any forward-looking statements. What you will -- can assume, whatever is the assumption on the industry growth, you can assume that we will be 5%, 10% better than the industry. That's how it has been our past trend and that we will maintain it in the current trend also. Regarding credit filters, I will request Ravi to answer before that -- the LGD, PD, we don't give individual subproduct and you were asking even geography level. We don't share it in the public domain.

Yes. So as I mentioned that in the vehicle finance, we had the contract of using the business decision model, which is that we have got 4 variables on [ safe ] products and make model variants and customer category and for the [ DV ], what is going to be the probability of default. We have tightened that in the last year by launching the Gen4 model of underwriting tools. And that's the reason our rollforward rate, even in the bad times, like in July 2021, we have seen that our expected rollforward for Stage 1 to Stage 2 rollforward is 1.45%. [ Our default ] and nonstarters are actually started showing up a downward time. So from the portfolio behavior point of view, we have done better. Our PD as you heard, although we don't share the PD at a product level and geographic level. But just to give you the whole PD, LGD and purely off the ECL. The PD of the Stage 1 of the pre-COVID level has come down in the COVID year. So last year PD has come down as compared to the previous year. And Stage 2 has slightly gone up, but LGD has improved. So in spite of bad times, our PD in Stage 1 has improved, slightly Stage 2 has gone up, but LGDs actually -- so that is the outcome of the underwriting mechanism, which we are using it on all 3 businesses. I hope I answered.

[indiscernible] Yes, sir. Yes, sir, you did. If you could give some amount of a regional perspective into the LAP portfolio: which portfolio is behaving better and maybe where we are lagging? Especially in the Tamil Nadu market and the NCR market and in the MMR market, if you could give out these 3 particular geographies.

Yes. So our NCR book is the biggest in the country and be followed by actually Tamil Nadu. And you know it, we had challenges in April and May month, especially the lockdowns were severe in these states. The good part is that June, we recovered in terms of our collection recovery and our efficiency started improving. In fact, we have done significantly better in the month of July in both these locations. And both locations started showing collection efficiency improvement in the last 2 months, and we continue to focus on that, and we will improve.

That's for NCR, sir. In Tamil Nadu?

That's what I'm saying. So both the locations is a top priority because these are the 2 biggest books for us in the book -- and the 2 good biggest regions in the book. So as you know, April was better because the lockdowns were not there, but in May, the lockdown started, but then quickly we recovered as a state itself. So we are seeing significant traction, especially in the month of July, we saw a significant traction in Tamil Nadu region as well.

Right, sir. And if I am allowed to just squeeze in 1 more question, sir. If you could just speak about the repossessions because repossession of vehicles is pretty much the end of road with that customer because he is in an earn-and-pay segment. So what kind of repossessions are we looking at in this particular year? And if you can guide there as well. That's my last question.

Yes. No, that is not right assumption actually. Because repossession, if you know that, it is actually lowest. Every year, we do repossession of only 0.1% of overall assets, which is basically sold and -- see, there are 2 types of repossession, repossession and release. That is -- there is no point in discussing because there are some customers who are repossessed and get back in that category. What is important is that we reposs and [indiscernible] which is 0.1%. And if you see the Stage 3 book. On the Stage 3 book, the repossession is hardly 2%. So on the overall book, the repossession is 0.1%. On the Stage 3 book, which is hardly 2%. The rest of the customers, we are collecting on either by way of normalization or by way of basically waiting for some time and then collecting [ on accounts ].

So we are going to look at similar levels in FY '22 as well? Correct assumption?

It is going to be [ same only ]. It will be there in -- for quite some time. In fact, that is what is the underwriting tool is working on.

The next question is from the line of Kunal Shah from ICICI Securities.

So firstly, on restructuring, if you can just let us know in terms of what is the texture of this restructuring? And how would it deployed through into the buckets, either the standard or the stress bucket going forward? In terms of the time line, in particular, so is it like a 3 months, 6 months? What is the kind of a moratorium or something that we would have [ offered you ].

Restructuring [indiscernible] we have only given 1 to 2 months in very few cases where an underlying business is related to industry where it is having a long-term hit like where -- like school bus in the case of travel tourism or something related to a hotel industry [ cases ]. In those cases, how long we have given? Around 3 to 6 months. And in none of the cases we have exceeded 6 months. So this is on the of the restructuring investments. Of course, the rest of the positions of the EMI is not exceeding 24 months beyond, et cetera, as well as the [ amendments ] and the internal board policies are being fully adhered to. So as we have already discussed, we have done around 3% -- 3.6% of the total booking restructuring to and overall put together, it is around [ 4% ] on the restructuring. Some more of the first restructured book is also run down. So to that extent, you will see some differences. So those arithmetically, they add up [indiscernible].

60% customers are at 30 days, and that means they are paying from the next month, then 20% are succeeded paying after next to next month and...

Over 80% is within 2 months.

Sorry, I didn't get that. 60%...

1 month. And 20%, 2 months.

Yes. Okay. 60%, 1 month; and 20%, 2 -- not 2 months. So almost 80% are less than 2 months, they can be in restructured pool?

Correct.

Okay. Perfect. And in terms of the disbursement, so the industry-wide data, which we have shared and along with that Chola's growth -- so overall, when we look at it, you said that maybe because of the safety and cautious approach, we have been slow. But maybe how should we look at it? You said that we will be broadly following the industry trajectory. But does it suggest that in some of the product segments, we have been giving away the market share? And would that be more in terms of competitiveness or that's our internal strategy? How should we look at that? Because in most of the industry data, we are seeing much higher volumes compared to where Chola was okay in the first quarter.

Yes. It's a good question. Actually, this year, now inventory is getting [ by half ] -- the manufacturers last year, they could not produce BS-VI in the time in the first quarter. And they were starting to produce in, say, second quarter also. So -- now the industry is actually increasing the inventory and our numbers are on the retail sale. So there is a difference between the wholesale number and retail sale. What we showed -- the manufacturing industry number -- is a wholesale number, which is published by the SIAM, and our numbers are at scale. So when we see the retail to retail, our market share is definitely maintained at the same level and some of the product segments we have also increased. So it's not a real apple-to-apple comparison. Last year, we were showing the market -- I mean when we are comparing it, the wholesale numbers were not much. So it was looking like our market share is going up. So this program is always going to be there. So retail numbers are not -- we are getting it from any particular authentic resources. So we have only 1 data which is published by SIAM, and our number is based on the disbursement. So obviously, you will see that there is a gap between the wholesale number and Chola number because our market share are depending on the retail number.

[Operator Instructions] The next question is from the line of Sunil Kothari from Unique PMS.

Mr. Vellayan, my question is to basically your view, basically, whenever there is a challenging time you -- last decade back also, you've taken a control on the company and strived really back well Chola and then we created a team, which is also managing well. And again, you are here with -- during this COVID time. So really, as an investor would love to -- your presence will be very highly appreciated. Sir, my point or my question is, what is the learning and listens and area of improvement you feel Chola should do during last year this recent 10-year and your last 10, 12 years experience with Chola -- what is a major area of improvement you would like to see? What internal change you would like to make?

Yes. Thanks, Sunil. So see, I think broadly, the good thing is that a lot of these basic things, right, -- like Ravi was saying, our belief is that as long as Wave 3 doesn't come back, collections will start improving now. I mean, they've already started in the month of July. And so basic things like that, the team disciplines are very high. And the capability to roll these things out at a field level are very high across the company. So I would say that in itself is a massive strength for the company to have because I would actually kind of argue that by far, from the ability to roll out and kind of execute at the field level, both on the sales front and the collection front, I don't think that there are any companies that will be stronger than Chola at doing that today. And so I think without that, it makes it more dangerous to do anything else. So what are the opportunities? I think we've talked about this in kind of prior calls. I think there are 3 sets of opportunities. So -- and perhaps kind of -- so the first set is basically around looking at what is happening -- if you take what's happened kind of in with a strong field capability, companies -- some companies have gone out and kind of gone out across a whole set of verticals, right? We've traditionally been in just vehicle finance and LAP and housing loans. So that is the first set of opportunities, which is can you broader base the set of verticals that we offer. So that is 1 set of opportunities that we would look at. The second set of opportunities is like a lot of people are now obviously with these fintechs, a lot of people are trying these digital solutions and trying to kind of capture a lot of market share with them. Our sincere belief and hypothesis is that it's very difficult to pull off a fully digital solution in India. Unless you have the front-end collections capability to go out and collect against loans that don't perform in the market. We don't think that a fully digital service will work. So what we're looking at doing is seeing how we can also push out along that kind of dimension of kind of getting more digital, but backing it up with a lot more physical both kind of collections capability and field presence, because I think that, that marriage is going to become very important for India as we go forward. And then the third opportunity is really around as more data becomes available, how do we use both the combination of that data to improve the effectiveness of our field force, right? So how can we use that to basically improve perhaps the productivity of the frontline sales employees -- of the collections team, right? By using kind of a combination of first the digital front, then kind of a centralized front for collections and then appeal kind of. So how do we use that -- whether it's collections or sales, how do we use this combination of 3 things to fundamentally improve the efficiency of our field forces. So I would say these are the 3 main areas.

Very detailed explanation there. Thanks a lot. Last, just 1 point. Sir, looking at this easy availability of capital because of this piece and easy money flowing from outside -- then technology and then fintech, do you feel any structural shift towards lower NIMs, maybe over the next 3, 5 years? Or do you feel there is enough opportunity to maintain this type of 6.5%, 7.5% range of net interest margin which Chola is making since almost 10 years?

Yes. I don't think the digital players are the ones that will cause NIM compression, predominantly because even with these NIMs, most of them are losing money, right? So I think that it will be a while to basically kind of see if they can lower -- because their approach is not to get customers by lowering the NIM. As a matter of fact, I would say half of these guys out there are lending at a higher NIM and higher yields than us. So I don't think that they are going to cause NIM compression because none of them I would -- as far as we can tell, none of them have figured out a way of actually kind of running at a NIM that is similar to us and making money, right? So I don't think that, that's going to happen in the near term. And most of them are at higher yields, most of them with higher NIM and then basically some -- very few, I think there are literally like 2, that are making money in the country today.

The next question is from the line of Anand Bhavnani from White Oak Capital.

Just wanted to understand a bit more from a 2-, 3-year perspective. What is the potential for us to use the existing branches for home loans and [ like on the ] LAP? So out of 1,137, actually, I see in the presentation, you have 365 -- 359 co-branded LAP facilities with vehicle finance. And 144 home loans, co-branded with vehicle finance. So how much of the existing vehicle finance can -- network can be used for these teams and over what time lines?

When it comes to home loans or for that matter vehicle finance, the first priority is to go along with the existing infrastructure when it comes to sharing of infrastructure, because that gives a lot of sense for us to make the existing infrastructure to be more effective. But when it comes to individual businesses, mortgage business sales, we will also look at the opportunity in that market. Now sort of home loans, we have already reached out to 177 branches. So opportunity [ interstate is there ]. Yes, we also need to look at our internal capacity and with the way it is planned. So we will -- the first priority always will be to [ coexist ]. And even for 177 branches, except 30 branches where we don't have typical space and we were forced to [ add a branch ]. Otherwise, we are coexisting in the same infrastructure [indiscernible] operations and teams, that's where we operate. And that will be the approach which will make the business much efficient and smarter. [indiscernible] employee induction and so on and so forth. Yes, opportunity is much larger, as I said, and I think a previous -- somebody else had also asked. We have a plan to expand and capitalize the market to serve larger customers. So we will focus with that plan. We have a reasonably set plan in that direction.

Okay. And in terms of the relative share of book coming from each of these segments, how do you see this evolving in like 3 years? How -- would the ratio be similar? Or do you see 1 growing faster than the other? Any broad sense you can give us?

Frankly, I did not really grab the question. If you're asking, 3 -- all businesses have a different business plan. Okay? So all these businesses -- we have an internal capacity -- whether are we able to make use of the general capacity to the fullest extent? So it's not about -- [ different ] business [indiscernible]. Auto loans are very mature, large-scale business, okay? And home loan, which is reasonably a new business, it would take longer time to kind of step up there. So for a small -- a new business like home loans, what we look at is, what is the capacity build up [ and does that mean ] that are you able to deliver? That's the way we would look at it and not on a share between the business. I hope I've answered right. And the way we -- we [ couldn't ] really co-originate businesses because customer segment is different. The focus of the lending is different, the nuances are different. So we don't really co-originate by same team. So all businesses got own origination, underwriting, risk management, customer services capabilities, just as we share the physical infrastructure. I hope I understood the question right, and answered it right. This is what you are looking at.

Yes, yes, sure. So I understand. They are planned independently and the growth rates are actually more of -- there's no explicit growth targets you have, if I understood you correct. So they grow at their pace and then eventually they form a percentage of the book. There's no top-down target that we want to have a percentage of book in home loans or LAP or something like that. So is my understanding of your answer correct?

Correct.

Yes. And secondly, sir, in our home loan book, what percentage of the book would have credit in the Pradhan Mantri Awas Yojana. So what percentage of our book or what percentage of customers would be having that subsidy already?

See, around 12 percentage of the base has availed in a PMAY. In Q1, INR 13.74 crores of subsidy we have received. And last year, we had received INR 21.39 crores. So that's the PMAY penetration.

The next question is from the line of Abhijit Tibrewal from Motilal Oswal.

Yes. My first question is to Vellayan. Sir, we touched upon this in one of the previous questions. But because kind of digital taste or flavor of the season, and we've also seen a few of your other peers kind of talk about newer initiatives that they are taking -- some of the newer things that they're trying to do on the digital side. I just wanted to kind of understand, in addition to that, any new license we have kind of tied up in the consortium and applied for one. And then maybe the decision is expected for the next, let's say, 2 months or so. Other than that, are there any other new digital initiatives that we are taking on the origination, on the underwriting side that you would like to share?

Yes. So I think there are 2 or 3 sets of things, right? Kind of one is we will look at what are the opportunities to work with kind of start-ups, right, to basically I say kind of leverage the strengths of each of the entities, right? The start-ups can -- can we leverage the start-up spend -- the digital start-ups spend and kind of we bring to kind of bear the extent that Chola as an NBFC has, right? So that is one kind of start-up initiatives. The second is we're looking to kind of significantly bulk up on kind of what we're doing on the analytics front. I think we've made 1 set of movement towards analytics. Now there's an opportunity for us to kind of get much more, and we're going to start taking some actions on that front as well, which is both in terms of how we start using analytics more on both -- on our origination and our underwriting. And then the third set will be to basically see how we can bring more capabilities to our own tech stack itself, right? Because I think that, that part is something that we're looking at and saying, are there differentiated ways in which Chola can be digitally more enhanced in its tech stack, right? And so that's, I think, fairly different from just the analytics piece. And so these are the 3 sets of initiatives that are going on right now on this front.

Sure, sir. That's helpful. My next question is to Arul. Sir, if you could just help us with 2 data points, one is what was the -- are the write-offs or the reposition losses during the quarter? And if you could just repeat our product price GNPA in vehicle finance, LAP and home loans.

INR 70 crores is the repo losses during the current year -- current quarter. There's not much in the LAP and HL. And it is not fully provided for all [ current going ] additional hit to the [ NPL ].

I would now like to hand the conference over to Mr. Nischint from Kotak Securities Limited for closing comments.

Sorry, we had to wind up the call because of constraints on timing. Thank you very much for joining the call today. We thank the management for providing us an opportunity to host the call. Thank you.

Thank you. Thank you so much, Nischint.

Thanks, Nischint.

Thank you. On behalf of Kotak Securities Limited, that concludes the conference.