CreditAccess Grameen Limited (CREDITACC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to conference call to discuss CreditAccess Grameen's Q2 FY '24 earnings. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Shweta Daptardar from Elara Securities Private Limited. Thank you, and over to you, ma'am.

Thank you, Sagar. Good evening, everyone. On behalf of Elara Capital, we welcome you all to the earnings conference call of CreditAccess Grameen to discuss the Q2 FY '24 earnings performance. From the esteemed management today, we have with us Mr. Udaya Kumar Hebbar, Managing Director; Mr. Ganesh Narayanan, Chief Executive Officer; Mr. Balakrishna Kamath, Chief Financial Officer; Mr. Nilesh Dalvi, SVP and Head Investor Relations. Without much further ado, I now hand over the call to Mr. Hebbar for his opening comments, post which we can open the floor for Q&A. Thank you, and over to you, sir.

Thank you. Thank you, Shweta. Dear all, a warm welcome to everyone, and a very happy Navratri to you and your family. We thank you all for joining the conference call to discuss our second quarter and first half FY '24 financial performance. We have witnessed another healthy quarter reflecting strong growth momentum. We are confident of maintaining the business traction in Q2 FY '24 with all key foundation lots in place. The rural demand continues to remain strong supported by high entrepreneurship spirit. Despite Q2 being historically weaker quarter due to seasonality, we continued to witness robust growth in our borrower base in Q2 FY '24. We added 3.36 lakh new customers, of which 40% came from outside the top 3 states. Overall, in H1 FY '24, we added a healthy 6.64 lakh new customers with an average monthly addition of over 1.1 lakh, demonstrating customer-led growth across our operating markets. The customer base grew by 21.2% Y-o-Y and 4.1% Q-o-Q to 46 lakh, while the AUM grew by 36% Y-o-Y and 3.1% Q-o-Q to INR 22,488 crores. Disbursements grew by 13.5% Y-o-Y in Q2 FY '24 to INR 4,966 crores. We forayed into Andhra Pradesh and Telangana in line with our contiguous district-based approach. With this expansion, our presence is across 16 states and 1 Union Territory. Our branch infrastructure stood at [ 1,877 ] spread across 364 districts with 51 new branches opened in this quarter. Our interest income grew by 53.9% Y-o-Y and 7.4% Q-o-Q to INR 1,187 crores. Our average and margin cost of borrowing for Q2 FY '24 stood at 9.8% and 9.6%, respectively. The increase in average cost of borrowing was primarily on account of USD 100 million drawdown of social loan in June '23, followed by INR 990 crore public NCD in September '23. We believe that our cost of borrowing would largely peak out at 9.8% to 9.9% as the incremental drawdown planned for the next 2 quarters are predominantly from domestic sources as we have, by and large, achieved our foreign borrowing requirements. Our NIM stood at 13.1% for the second quarter as the increase in borrowing costs was offset by the increase in our portfolio yield. Further, NIM primarily benefited due to 3 factors: one, superior asset quality leading to minimal interest reversal; strong control on cost of borrowings; higher share of portfolio growth funded through internal accruals. It's important to note that we have delivered healthy NIMs while still remaining one of the low-cost lenders for our customers. We successfully raised INR 990 crores in September '23 through the second tranche of our public NCD. These funds came at an average coupon rate of 9.3%, which is 3% -- 30 bps lower compared to our first tranche last year with an average tenure of 3 years. The share of public NCD now stands at 7.9%, the share of foreign borrowing stands at 18.4% and share of long-term borrowing is around 70%. This has further strengthened our ALM position with an average maturity of assets at 19 months and average maturity of liabilities at 25.2 months, resulting in a positive mismatch of over 6 months. The robust liability strategy embarked by us has helped us to address liquidity, positive ALM, long-term funding and adequate diversification along with lower price to our customers. While our pricing is one of the lowest in the market, we have been further able to retain our pricing, which was last changed in February and we shall be maintaining our price during Q2. Our operating profitability continued to follow an upward trajectory with the net interest income growing by 49.6% Y-o-Y to INR 772 crores. Cost-to-income ratio was 31.7% on the back of improved income profile. PPOP grew at a healthy pace of 68.3% Y-o-Y to INR 563 crores. The credit cost stood at INR 96 stores, which was partially offset by INR 11.7 crore of bad-debt recovery, resulting in a net credit cost of 0.4% non-annualized in Q2 FY '24. By H1 FY '24, net credit cost stood at 0.7% non-annualized; and our collection efficiency, excluding arrears, was steady at 98.7%. GNPA, measured at 60 plus dpd, further reduced to 0.77% compared to 0.89% in the last quarter, whereas net NPA stood at only 0.24%. Our PAR 90 is at 0.6%. We continue our effort to maintain the best-in-class asset quality underpinned by various quality controls in place. PAT grew 98.1% Y-o-Y to INR 347 crores, resulting in ROA of 5.6% and ROE of 24.7%. Our H1 FY '24 ROA stood at 5.7% and ROE at 25.5%. Capital adequacy remained comfortable at 25% at the end of Q2 FY '24. On the back of our operating performance during H1 FY '24, we are happy to provide you with revised guidance for FY '24. The key factors which have resulted in the upward revision are: more balanced growth across all parameters; two, improved total income profile and profitability; three, robust capital adequacy, leading to a higher share of growth getting funded through internal accruals; and four, strong control on cost of operations. We maintained our portfolio growth at 24% to 25%. We expect the improvement of NIM in the range of -- to the range of 12.7% to 12.8%. Cost-to-income ratio, which will be in the range of 31% to 33%, while we maintain credit cost at 1.6% to 1.8%. We expect improved ROA and ROE in the range of 5.4% to 5.6% and 24% to 25%, respectively. Thank you for your patient hearing. We look forward to answering your all queries during this question-and-answer session. Thank you.

[Operator Instructions] The first question is from the line of Renish from ICICI.

Sir, congrats on a good set of numbers. Sir, just 2 questions from my side. First is on the liability side. Now given our balance sheet size, which is now almost touching INR 25,000 crores and we've been in a complete unsecured product business, so how we are going to manage the liability side, especially considering the size and the product nature?

Yes, you said 2 questions.

Yes. Yes, so secondly, from the borrower attrition side, so just wanted to understand that in last 1 year, we have lost almost 0.5 million customer base. Despite we being the leader in the sector, our lending rate is still far lower than the competition. So to whom we are losing this customer? And if you can also share what are the primary reason for this attrition?

Okay. Okay. So thank you, Renish. So the liability side is one of the things we kept on working to strengthen, that's the strategy since last many years. So we have been witnessing this is going to be one of the primary requirement to expand our liabilities beyond domestic, beyond banks because the requirements keep increasing at least 25% every year and then many banks will not be able to give that much of money every year in this funding. Therefore -- and also, we wanted to build up a very, very positive ALM so that we should not be vulnerable for any liquidity, I mean, tight kind of situation. So therefore, we have been planning to expand our liability beyond banks, then beyond domestic territory to go to international also. So in this process, we did a couple of things. One is going to nonbank side, which are DFIs, and then the international borrowings and the what we call non -- what you call conventional public NCD route. So asset process, as of now, our way -- our view was over a period of time, our dependency on the bank should be within 50%. And the 50% of the funding should be outside the bank and as much as possible outside the geography so that we have a continuous supply of funds with a longer maturity and the possibility to return to higher ALM -- positive ALM as well as very strong diversification. So we are in that process. Probably we are largely in that process today. Almost only 53% of our funding is from banks today; almost close to 20%, it's from the international side, which is minimum 3 years all the way up to 7 years; another 7% to 8% from public NCD; and then the balance, about 11% is from a nonbank DFIs; and then about 7% from normal short-term DRP, this kind of thing. This is very strong, what you call liability side, what we do it. It is most important -- I think this strategy is important for us to grow in the future. That's why we have made our strategy and working on it. I think this should be helping us continuously while we are diversifying our assets also, so which will match and then we'll have continuous positive liability mismatches. Maybe second part of question, I'll request Ganesh to respond in terms of our attrition and how we are managing it.

Thank you, Udaya. So Renish, attrition for us is range-bound, currently around 13%. So we've been around 13%, 15%. Attrition happens because of a combination of a few reasons, as we have stated earlier, too. There are a certain amount of customers who are moving up. There are a certain amount of customers whom we don't want to lend, and there are certain amount of customers who don't want any further borrowing. So it's generally a combination of these 3 that comprises our attrition, and I think it's in the right track.

Got it. Got it. So I was just trying to get a sense that given a leader like us losing customers, does it signal the, let's say, aggressive lending in the segment? Or is it the normal attrition rate?

So far, we have seen it's quite normal. And then I think it's in the range of what we have been observing over the last 5, 6 years. We have not seen any new difference. But when we started addressing -- when we started the product lines, which are addressing by following our customers to combine some of the pilots that we have been doing last year, which we are scaling it now, which are going to address this one set of customers moving up to the next level of intuition or requirement of the larger value that we are addressing through our pilots now. And then those who don't want to borrow or whom we don't want to lend anyway, we don't want to get into. But those who are going into NBFCs kind of thing, so probably, we have already started addressing that through our diversified different non-micro-finance product range.

Got it. And sir, sorry, just the last question from my side on the revised guidance. Now I think we will be the first MFI company in the industry to say that we'll be delivering 24%, 25% ROE. So is it fair to assume that this will be the, let's say, a new steady-state ROE? Or this is, let's say, this ROE is because of we might be getting some margin benefit as of now and which might not be there maybe earlier down the line? So how one should look at this revised guidance, sir?

I think it should be, at least in the medium term to long term, it should be a steady case because our capital adequacy also will be within the same range-bound between 20% to 25%. We should be able to maintain such kind of a, I mean, steady-state ROE going forward.

[Operator Instructions] The next question will be from the line of Ajit Kumar from Nomura.

So congratulations for a great set of numbers. So first question is on disbursement yield, which has increased by another 10 basis points sequentially. So is there any plan or scope of increasing this further from here on?

Not really. I think we remarked already that our growth rate is quite comfortable, and we are maintaining the same price to customers. We may not be increasing the price to customers. By and large, over 90% of our lending [ as payment ], portfolio has been already repriced. So there is not too much scope for increasing the yield.

Okay. Okay. And sir, second question is on the number of employees, which has increased substantially in this quarter. The increase is by roughly 1,800, which is quite higher than the normal run rate. And this is despite the fact that your number of branches has increased by roughly 50 branches every quarter. So what is the reason for that? And in which function this hiring has happened?

No, no. Actually, no, last quarter, it was low because a lot of transfers, and we have not hired too much. We are in the -- most of the time, we are spending on completing the transition from Madura to [ CreditAccess Grameen ]. Now that everything is settled, we started hiring back and it's a normal growth. That is why we said last time our result and its cost of operations, those are not the benchmark. It will increase a bit in one of the branch opening, hiring, tax expenditure, all those we actually told last time also. These are not -- you have to see combined first half year rather than 1 quarter. Moderator, there's some echo in our call. Can you look at it?

I'll definitely check that out. The next question is from the line of Abhijit Tibrewal from Motilal Oswal.

Sir, just 2, 3 questions. First thing first, if you could just explain insurance distribution income which has come in higher in this quarter...

Abhijit, if you are using a cordless, can you speak through the phone or something? Because your voice is not clear.

Is it better now? Is it better now?

Okay. Carry on. I think you are using speaker.

Sir, I've come to the handset now. I'm not using the speaker anymore, but let me try.

Okay. Carry on, carry on. I think we can make it, please.

So sir, first thing first. I mean, this insurance distribution income that we've reported and is much higher than in the past 2 quarters, just wanted to understand, are there any things which have got bumped up and kind of there in this quarter, some income which were there for earlier quarters and I imagine booked in this quarter? Or is this now going to be a steady-state run rate in insurance distribution income? And if that is the case, what has kind of led to this sharp amount of insurance distribution income?

I'm sorry, I didn't understand correctly. So our insurance distribution -- we have been the corporate agent since many years. By regulation, we used to get only 5% commission until Q1. And now that IRDA has revised the pricing, which allowed the insurers to give a higher commission, which actually increased between 12% to 13% -- 12% to 15% now. So therefore, this will be a steady-state revenue going forward. So there is no bumping, I think about only about INR 8 crores in this, which is insignificant part of the Q1 accrual. Otherwise, this should be the steady-state income going forward, at least the medium range until -- unless regulator changes any fee -- what do you call, fee cap or something. As of now, we should be assuming that we should get this kind of income on a very steady-state basis. I don't have anything -- second part to your question, which we could not hear.

So I mean this is exactly what I was kind of trying to understand. So out of this INR 50 crores that you have reported insurance distribution income, you suggested 8 quarters was accrual from the first quarter.

No, no. Actually, in that, only INR 30 crores is the insurance rather than the normal other income like FD interest or mutual fund interest, all those things. So INR 30 crores is the insurance additional income, which is a growing forward steady-state income for the quarter.

Yes, got it. Got it. So the second question was, I mean, around margins. So if I look at the first half performance in margins, you're at around 13.1%, while we guide for 12.7% to 12.8% as the revised guidance for the full year. So is it fair to assume that given that you said to the prior participant that not much scope for any further increase in yields, given the cost of borrowings will increase from here, what we've reported in this quarter as peak margins and from here, we should see some moderation in margins? Is that the right way to look at it?

First quarter income is actually a kind of based on the base effect and then the growth also more -- the growth is lesser than the internal accrual, so we use more capital. So -- and when you use the entire year, you use the capital, then when we use more borrowings also. So that average NIM will come down. So therefore -- however, the NIM has come down. Therefore, we said in the first quarter, our ROE is 25%, the growth -- annualized growth is only about 16%, right? So obviously, there is a -- there will be a gap. When you complete the whole year, you will use the borrowings than the capital. So automatically NIM will change. So therefore, we guided a steady-state NIM for the potential.

Got it, sir. So just one last question. Did this quarter have any impact from floods in the last quarter? I mean in some parts of the country that reported floods, did this quarter had any impact from floods in the last quarter? And the related question, going forward, I mean, given then that we are heading into some state elections, are there any noise or impact that you are seeing on collections from the upcoming elections?

Not really. I think we have not seen any such impacts. I mean even if there is an impact, if it is 15% plus, then ultimately we would have provided more than 50%, our PAR would have increased. So there's no such impact so far we observed. And we strongly believe that what we guided is sufficient on the credit cost point of view as we see for the second half -- including second half.

[Operator Instructions] The next question is from the line of Shreepal Doshi from Equirus Securities.

Congrats on good set of numbers. Sir, my first question was on the -- I mean, when we are entering a new state, in fact, in the last couple of years, you've entered newer states like Bihar, UP, even Rajasthan and Gujarat. So what is the kind of new-to-credit ratio that we are seeing? Because these are not our vintage states per se. So I wanted to understand what is the kind of new-to-credit ratio that we are seeing in these states? And also, what is your thought process on ramping up our operations in AP and Tamil -- and Telangana, sorry?

I think we've said already, we already entered to AP and Telangana through a contiguous district, which has borders into Tamil Nadu or Karnataka or Maharashtra or Odisha. We opened 8 branches in Andhra Pradesh and 4 branches in Telangana in the bordering districts. So for that, we continue to do the same approach of contiguous district approach here also. So we have done that. The first part of your question is we -- when we go to new geography, there is less new to credit because probably we are entering to a place where already some people are operating. So -- but still, it will be in the range of 20%, 25% kind of new to credit. Whereas in the existing states, like Maharashtra, Karnataka or Chhattisgarh or MP, our new to credit is close to 40% to 45%.

Okay. Okay. Sir, my -- the second question was like, what is the thought process in the sense that like currently, we've added 8 branches in AP and probably 4 branches in Telangana, so from here on, like how many more branches do we plan to add in these states, say, over the next 12 to 18 months' time period? Is there a thought process to sort of scale it up further?

As a policy, we don't look at the state-wise numbers, instead we look at our district actually, how many of our districts around us where we have to operate, we evaluate. But yes, Telangana and Andhra are new. But still we would go, again, the contiguous only, probably we will enter. We opened a few branches. We will open a few more branches during this year or first quarter of next year and then penetrate and move to next districts. So that is what we observed. That is the way we operate. Maybe over a period of time, we will penetrate the entire state. It will take a couple of years for us. So same like we're still expanding in Bihar, expanding in UP, expanding in Rajasthan, expanding in Gujarat. Similarly we are operating here also. So we look at districts rather than state when we are expanding.

Got it. Got it. Sir, the second question was on the non-micro-finance segment that we want to -- we aspire to sort of scale it up. So how is the management bandwidth that we are planning to create over the next 12 months so that we are able to scale up that segment as well?

So -- this is Ganesh here. So from a management bandwidth perspective, I think we are adequately staffed. So we have adequate resources to take care of the newer businesses. In fact, the newer businesses, most of them are run through a separate vertical. And we have a business where we have an NCM. So we will have all the manpower already in place, right? So apart from expansion in field staff, we don't see a requirement coming in for management for the new business.

Got it. Got it. And sir, one last question was with respect to recovery. So we have -- like we have taken the hit of the COVID and we have written off portfolios -- we've written off some accounts. So are we seeing any healthy recoveries lined up in the third quarter or in the fourth quarter, like we have seen during this quarter as well, but do you expect that there could be some healthy recoveries coming up in the second half?

The stronger recovery from COVID portfolio has almost been completed now. And for the last few quarters, we've seen a similar trend. So it will be in the range of around INR 4 crores, INR 5 crores a month, and that keeps coming. But as a broad guidance, we can always see around 10% to 15% of recovery coming from it every year.

The next question is from the line of Nidhesh from Investec.

So firstly, on the new initiatives, new business that we are scaling up, if you can share some progress, how has the traction been in this quarter?

Okay. So new initiatives, as I said earlier also -- what happened? Sorry, as I said earlier, the more of our time we spent last year on pilots. And this year, we started scaling up the 2 products, which is particularly higher individual loans unsecured, which is not more than INR 2 lakhs per client, which is actually going very well. I think we should be -- start presenting the numbers from the next quarter. And also the what we call LAP, which is also progressing very well already. The 2-wheeler are still in the nascent stage. And home loan, we are planning to pilot from this year. And the last one, gold loan, we are not very sure still. So we are still in INR 2 crores, INR 3 crores of portfolio, which we are continuing our pilot to evaluate and see whether it's the right product we should continue or not. So other products are getting scaled up. Probably from next quarter on, we start presenting the non-micro-finance initiatives also.

Sure, sir. And secondly, from an ROE point of view, reporting 24%, 25% ROE. How do you think about creating buffers for future specialized passing on benefit to the customer? Or we are okay with 24%, 25% ROE, are we expanding beyond that also with operating leverage?

No, no. There are 2 things -- 2, 3 things on that. The passing on can happen through the operating efficiency, the cost of borrowing. So for many of the areas are there, there may -- I think, as we said, we are seeing the cost of borrowing keep getting into peak mode, in fact, we start moving down or stable and then moving down. OpEx, again, the today's 4.7% is actually basically including the investment what we are working with the retail and all these new initiatives also. So that also there will be some leverage. This all will get passed on to customer actually going forward, so that we'll be trying to keep the return intact as far as possible. And as the capital consumption is becoming more and more, then we'll be able to maintain this easily without any difficulty.

Sure. But this sort of internal accrual, we should not require capital in future because our growth is also around 25%, book value growth will be higher than 25%. So ideally, we should not quite require capital...

Ideally, yes. At least for near future, we are not looking for any capital.

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

Udaya and team, congratulations for the quarter. So my question was again on the new products. Can you share what was the disbursement in those products in the last quarter? And let's say, in a year's time, what percentage of AUM are you targeting to get to in terms of the mix?

Yes. So currently, it's about 1.5% of portfolio approximately, and the disbursement last quarter is close to INR 170 crores.

Sorry?

So last quarter, disbursal is close INR 160 crores to INR 170 crores. And then the portfolio is around 1.5% of the total portfolio. And then it's behaving quite well.

Yes. So let's say, by the end of next year, what percentage do you think will be contributed by this portfolio? Do you have any target in mind or any threshold?

I think we spelled out clearly in our analyst meeting, we said that in the 4, 5 years, we should be actually achieving about 12% to 15% in this work, which means around INR 6,000 crores to INR 7,000 crores is our target to reach by the next 4, 5 years' time.

The next question is from the line of Aravind R. from Sundaram Alternates.

I have a few questions on my mind, like this might have been answered, but -- so the average disbursement rate is like 1% higher than the portfolio yield and like cost of borrowing was also like lower than like 20 bps higher -- or lower than the -- the marginal cost of borrowing is 20 bps lower than the book cost of borrowing. Does it mean that like yields -- sorry, the NIMs can improve further from here over the next several quarters? That is my first question.

So NIM may not go up further because most of the portfolio is rebased already, and the marginal cost is not a reflection. You have to look at the average -- weighted average cost, which is the real cost, which is getting into the overall financial metrics. Marginal cost is only for the cost on the borrowing for that quarter. So for the next quarter, we got to borrow at a little higher cost, it's like the marginal cost has suddenly gone up. So therefore, the marginal cost does not have a bearing. Weighted average cost is the one we have to look at. So we believe it will go up by another 10, 20 bps maximum, and the what we call portfolio yield may not change too much because average portfolio not yield too much. So therefore -- and then actually use more capital -- sorry, more borrowings in the next 2 quarters because normally, our disbursement -- or our growth, almost 60%, 65% will come from second half, which means we start using the borrowed money in the next 2 quarters, whereas we used more capital these 2 quarters. Therefore, with these 2, 3 combinations, we believe that the NIM will come down, hence we guided the lesser NIM than the current.

Understood, sir. So my other question would be like number of branches, if I could see like Tamil Nadu -- sorry, Maharashtra, like similar branches to Karnataka or like even slightly higher, but the portfolio is like almost only just half of the portfolio in size in Karnataka. Like when can -- I mean like is it -- is there any target like reaching the current levels of Karnataka book in Tamil Nadu, Maharashtra like in the next 3 years, something like that?

So Karnataka book, which is quite old branches, quite mature branches, and then we continue to grow the same branch that is quite higher. Whereas as we go more and more to the newer geography, that is Maharashtra or Maharashtra was next and then the Madhya Pradesh, we keep on doing all this just like that. It's always based on the vintage branches will grow. So eventually, most of them will beat that level. Tamil Nadu specifically because many Madura branches has become a part of the Grameen in this financial year, where those outstandings are quite lower, the average book is a bit lower. So our whole idea of Madura acquisition needs to grow there. Obviously, we'll grow there. So eventually, all this will come into a similar range of productivity.

The next question is from the line of Kashyap Javeri from Emkay Investment Managers.

Congratulations for a good set of numbers. I have only one question, which is on the disbursement side. Quarter-on-quarter, our disbursements have grown by about 4% and Y-o-Y about 18%, which then looks like a slower growth. As you said, for these new initiatives of about INR 150 crores, this number would have been down by about another 3%. So for the full year, what's our view on the disbursement growth as well as why it would be a slow number this quarter?

So these aren't lower. Actually, if you see first half growth, I mean in any year, probably we have done better than any other year, actually. So you have to look at what is the normal natural first half growth and second half growth. And we also said that we are retaining the guidance. We said that we are -- our guidance is 24%, 25% annualized growth, which we are retaining this guidance. And probably, I think that guidance is intact. And normally, third quarter and fourth quarter, the higher disbursals will happen. Therefore, I don't see any reason to worry about the potential growth guidance what we have made.

The next question is from the line of Manuj Oberoi from Yes Securities.

This is Rajiv. Congratulations on a very good set of numbers. My question is on credit cost guidance. So when I look at -- you have maintained your credit cost guidance. But when I look at the collection efficiency, excluding arrears, it is at 98.7% on the whole portfolio. Your PAR 30 number is also small. Your buckets are even smaller, and you are carrying good provisions on Stage 2 and Stage 3 assets. So can we then not undershoot the -- I mean, could we have not lowered the credit cost guidance? Or are you expecting that collection efficiency may not hold up?

Credit cost is not just the PAR, no. Our credit cost provision is still a bit higher compared to the -- because we provide a 60 days for NPA, 15 days for Stage 2. So we deploy our credit quality is higher than the comparison to NPA, right? So these are validated. Only in the first quarter, it was a blip, kind of a better blip, which was much better, which -- but that is not the comparison, but Q2 is a comparison. If you see Q2, our cost was about 4% -- 0.4%; annualized is around 1.6%, right? I think we are quite in line with our guidance. And I thought suddenly you changed your name, Rajiv.

No, just from the collection efficiency being reported on the whole portfolio, ex of arrears, being 98.7%, was implying that the flows going into Stage 2 and Stage 3 are also less and which is why the requirement could be low.

No, no, it's because of the policy. Because if you go by the current -- if you go by the iGAAP methodology, our requirement of provision may be half of what we are doing. Correct? But whereas we are doing more, right, so automatically, the cost will go up [indiscernible] GNPA of 0.7%, we are 1.6% of provisions, right?

Correct. Correct. And sir, on the NIM guidance, again, I mean, just a clarification because when I look at the first half NIM, it is 13.1%. You have given a full year NIM guidance of 12.7%, 12.8%. But again, when I look at your incremental disbursement yield, it is 1% higher than the portfolio yield. So that gain will come. And unless the cost of fund goes up significantly, and I understand the leverage part that you will grow much higher in the second half, but is it just a leverage or something else? Also, are you building some cushion for any other reason as well?

No, it's more of it. So look at last quarter, last quarter, we -- I mean everybody was ROE revising. If you look, our yield has gone up, but ROE has come down, right? So NIM has slightly gone up, but the ROA, ROE has come down, correct? It's more linkage between the leverage, the operating cost. There's operating cost increase by 20 bps. So that has an impact, a huge ramification. Even if 10 bps increase, there's a ramification because the growth is -- we are talking about opening many more branches also next 2 quarters. So we have opened 90 branches whereas the plan is to open 180, 190 branches, correct? This is one impact. And then the usage of capital is another impact. So all these 3, 4 things, we have to look at together. So we did that analysis and then come out with a stable potential NIM for the year.

Okay. Okay. And sir, you have maintained your growth guidance between 2 quarters. So do you see some risks or -- of growing faster than 24%, 25% because we have the capacity, we have been expanding in newer markets and the cycle is also good, collections are also good? So is there any harm in growing slightly faster?

Not necessarily, but we also believe that 24%, 25% is good growth at the base of what we are operating. And then second, newer market entry will actually give you expansion, but the growth you will get only next year, not the current year normally. So I think we are preparing for the, what you call, the expansion for next year by entering the new markets. So I think 24%, 25% is a decent growth. We still need to do a lot for that. Annual guidance for the -- so far, annual growth is only 16%. We need to really grow almost about 30%, 40% annualized growth for next second half to achieve this itself because we actually want to retain the same guidance. And maybe one more point I want to add is we are actually strengthening our operations also in this point of time. It's always good to strengthen our operation when the good time is going on, right?

The next question is from the line of Shreepal Doshi from Equirus Securities.

So I wanted to check with like where we differentiate among the peers and the landscape is on the OpEx upon AUM front, where we are probably at 4.5%, 4.6%. So on that front, I wanted to understand -- so with that angle, I wanted to understand what is the attrition rate at loan officer level and at middle management level?

So our attrition rate is around 28%, including loan officer and middle management together. If you ask only loan officer, maybe it's about another 5%, 6% more; and middle management probably are higher, maybe about 5% less. Average about 28%, 29%, which seems to be reasonable for us. Maybe it's lesser than the market, but we don't have an appropriate number for others' figures.

Right, right. And sir, this -- on this...

Similarly, the customer attrition is quite low for us, which is one of the reasons why our operating cost is better because the growth is largely coming from the retained existing customers, which is also an advantage for better operating metrics.

Right, right. You said 13% to 15% is the attrition for the customers, right?

Yes, which I think we observed the industry is around maybe, I mean, north of 25%.

So the customer attrition is north of 25%, you said?

Yes, for the industry.

For the industry, okay. Okay. Got it. Got it, sir. And sir, just one bit. On the OpEx upon AUM front, there won't be any further improvement and we would want to maintain these levels, right?

So it's range-bound. If you see, it's always ranging between 4.5% to 5%. Sometimes some quarter -- quarter-on-quarter, we don't see -- and there will be some gaps. But annually, we saw it between 4.5% to 4.75%, not more than that.

The next question is from the line of Omkar Kamtekar from Bonanza Portfolio.

Firstly, on the end, I think it was previously answered, but just to get a proper understanding. So even in the guidance, you have said that NIMs have expanded because we have used internal accruals and own funds for growth. So therefore, in the near term, I think we may not require any external funding. So I think the INR 990 crores that we raised, I think, would be fair enough for the year?

We don't need capital -- sorry, we don't need capital. Funding we need, because our book runs, the 75% is by borrowing only. We don't need capital. That's what we said.

Sure, sure, sure. Next, I see a small -- I need a growth guidance or maybe a color from you. In the GLP product mix segment, the home improvement and the retail segment have shown good growth. So the home improvement has almost doubled, and retail finance has almost increased by 60% on a year-on-year basis. The growth has been more so ramped up since Q4 to Q1 and Q2. So do you see this ramping up? And also the average amount per loan is also increasing for both. So could you give us an understanding of how much this can go up to as a part of the entire portfolio? And will this be margin accretive?

See, Omkar, these are the products we piloted last year, scaling up this year. Last year INR 10 crores; this year, INR 20 crores, 100% growth. That is what the way it was in the initial figures. So these all products were piloted last year, and we are actually growing now and scaling it up. Therefore, it's a number of -- I mean, growth is definitely important, and it will happen. As I said earlier to somebody -- some other question -- I mean, responded to somebody, so I think Abhishek, so we have a plan to grow this at least from the current 1% to 2% portfolio to almost 10% to 15% in the next 4 to 5 years. Therefore, there will be a ramp-up of these products continuously.

Okay. Okay. And it's a small clarification on the -- I would want your view on the micro-finance industry as a whole, a quick overview of what do you feel the next 2 or 3 years would be for the industry -- MFI industry as a whole from your lens.

So our view is quite stable. Actually, post regulation changes, things are definitely good. Post-COVID, also I think the industry has been very, what we call, resilient in terms of coming back to normalcy. Customer segments where we operate also are very resilient. So we believe the industry should actually move well with at least 20%, 25% CAGR growth for next 2, 3 years.

Okay. So 20% to 25% CAGR on the next 2, 3 years.

Yes, that is the potential to grow.

The next question is from the line of Aravind R. from Sundaram Alternates.

So sir, I just had one query. So these non-JLG loans we are looking to grow, is that margin accretive? Like can you give me some guidance, like what would be like the yields in those products?

So these products' yields are actually equal or more than the group loan actually because if you are individual loan, we charge a little higher, whereas group loan, we have a differential rate between high-risk, low-risk and medium-risk branches. Whereas here, it's a common pricing of about 22%, 23%. Therefore, yield is higher for this. So therefore, the margin accrual is also higher because we are giving only for the existing customers who are moving to next level. Therefore, we don't have acquisition cost also. So therefore, this will give additional advantage for us in terms of margin.

Okay. Okay. And like I did see like not for CredAcc, but for other banks, banks and NBFCs, even the sector data like loans, which are like less than INR 50,000 ticket size started to seeing some signs of stress. Is that the cause of worry for you? Or do you see any issues in the ground, not necessarily for CredAcc, but for the industry itself?

It depends on what type of clients. If you want to go and give individual loans to new-to-credit or a new-to-corporate customer, then probably there is a challenge. But our model is clearly to the existing, retained, loyal customers who have been with us for at least 3 years, always they paid well with a good credit history. Therefore, I think there is a very less comparison for this.

Ladies and gentlemen, we would take that as our last question. I now hand the conference over to Ms. Shweta Daptardar for closing comments. Please go ahead.

Thank you. On behalf of Elara Capital, we thank the management of CreditAccess Grameen to give us the opportunity to host the earnings call. Thank you, and thank you all.

Thank you very much, and I think very, very happy festival season for all of you. Thank you so much.

Thank you so much. On behalf of Elara Securities Private Limited, that concludes the conference call. Thank you for joining us, and you may now disconnect your lines.