CSL Finance Limited (530067) Earnings Call Transcript & Summary

Good evening, everyone. I would like to welcome you to the Q4 FY '21 Earnings Conference Call of CSL Finance hosted by Antique Stockbroking. [Operator Instructions] I would like to welcome the entire management team of CSL Finance, led by Mr. Rohit Gupta. Without further ado, I would now like to hand over the call to Mr. Gaurav, who will take across the numbers, and then further we can ask Mr. Rohit Gupta to take us through the financials and start the call.

Thanks, Vidhi. Welcome, everyone, and thanks for joining us for the Q4 FY '21 con call for CSL Finance Limited. To take us through this update and answer your questions, we have today with us Mr. Rohit Gupta, Managing Director; Mr. Chandan Verma (sic) [ Mr. Chandan Kumar ], Wholesale Credit Head; Mr. Naresh Varshney, our CFO; and other senior management team. We will be starting the call with a brief overview of the last year and then follow it up with a Q&A session. I would like to remind you all that everything said on this call that reflects any outlook for the future can be construed as a forward-looking statement and must be viewed in conjunction with uncertainties and risks that they face. These uncertainties and risks are included but not limited to what we have mentioned in the prospectus filed with SEBI and subsequent annual report that you will find on our website. With that said, I will now hand over the call to Mr. Rohit Gupta. Over to you, Rohit.

Hello. Good evening, everybody. I'm Rohit Gupta from CSL Finance. CSL Finance welcomes you to the quarter 4 for the financial year 2021 investor con call. Thank you for taking out the time to attend this call. We hope you and your loved ones are safe and healthy in this stressful period of COVID-19 pandemic. Now taking you with the financial performance for the year and the quarter. The company has performed very well in this quarter 4 for the financial year 2021, given the current challenging environment. Our total income has increased by 14.31% from INR 14.06 crores in quarter 4 in financial year 2021 as compared to INR 12.3 crores in quarter 4 last year. Our pre-provisioning profits have improved by 36.95% to INR 12.75 crores in this quarter as compared to INR 9.31 crores as compared to the last quarter of the last financial year. And PAT has also significantly increased to INR 8.75 crores as compared to INR 1.82 crores in quarter 4 financial year 2020, a growth of 381%. For the year ended '21, our net interest income grew by 8.14% from INR 48.25 crores in financial year 2020 to INR 52.17 crores in financial year 2021. Our PAT has shown a decent growth of 22.46% from INR 22.48 crores in financial year 2020 to INR 27.53 crores in financial year 2021. Our AUM has increased by 3.78% from INR 318 crores in financial year 2020 to INR 330 crores in financial year 2021. The AUM growth has been lower due to cautious approach followed for fresh disbursement, where first 5 months of 2021, April to July, were affected by lockdown and disbursements to fresh customers was tactically 0. And we have also had an early [indiscernible]. We have also had foreclosures of about 170 accounts in the SME, amounting to INR 8.29 crores, which has impacted the AUM in the SME segment. In the wholesale segment, in spite of large disbursements of INR 433 crores, the collections were also very high, amounting to INR 419 crores, and so our AUM has remained constant during the year. Operational update. Our performance in the wholesale segment has been good in spite of negative sentiment in the real estate sector. Our wholesale book has performed exceedingly well. We have received repayments of INR 419 crores during the year against total scheduled repayments of INR 107.97 crores as of 31st March 2021. We have always been prudent in our underwriting and have maintained an average LTV of about 42% in the wholesale loan book. We have been able to maintain a high-quality book even in this challenging environment in the real estate sector for the past few years. This is largely due to our good domain knowledge and geographical focus in the NCR region. Also with continuous monitoring of projects, regular site visits and constant -- consistent review of project financials, the quality of our book was -- has remained high. Our strategy, while funding the wholesale loan segment, has been to fund developers in the small and midsized category and small developers in the builder flow segment and structure loans to companies coming out of stress. Given that peak stress for this segment is behind us, we do not foresee any big challenge in this loan portfolio. Furthermore, most of the funded projects are either complete or near completion. So the execution risk is no longer [Technical Difficulty] sizable committed receivables from the sold but undelivered inventory. We are currently operational in Delhi NCR, but going forward, we will increase our geographical spread to drive the growth of our area. The only limiting factor right now for us is the ability to raise debt at reasonable rates. Our wholesale lending AUM stands at INR 268 crores as on 31st March 2021 as compared to INR 246 crores as on 31st March 2020. Our SME segment AUM decreased by 15% to INR 62 crores as on 31st March 2021 as compared to INR 73 crores as on 31st March 2020. We were relatively a new entrant in this segment, and the period from 2017 till 2019 has largely been a learning curve for us. The decline in AUM is largely on account of higher collections, which consists of foreclosures of around 170 accounts amounting to INR 8.29 crores and cautious approach towards new sanctions and disbursals due to the impact of this COVID-19 pandemic. We stopped the disbursals in school segment and plan to continue with this policy until schools reopen and normalcy is achieved. The disbursement in first half of 2021 was negligible due to the uncertainty due to COVID pandemic impact. But from quarter 3 financial year of 2021 onwards, the disbursement had started picking up. The second wave hit us in April 2021 and impact on the business was observed. Our school portfolio was doing exceedingly well until March 2020, and it got severely affected due to COVID-19 lockdown. As the schools we fund are based out of semi-urban and rural areas, there is lack of online education infrastructure, schools are not operational in these areas, so cannot charge any fees. In spite of all these challenges, we have been able to maintain a good collection efficiency of 89% in the SME segment. Our SME portfolio consists of both secured and unsecured loans with over 92% loans being secured, which we consider [Technical Difficulty] We give unsecured loans only to K-12 schools where we have capped the ticket size to INR 5 lakhs per loan. And the total portfolio of unsecured loans is only INR 5 crores as on 31st March 2021. The COVID-19 pandemic has impacted the business across the segments and our SME loan growth had already been impacted earlier due to certain external factors, such as demonetization, slowing economy. As a future strategy, we are now gearing up our SME sales team to focus on retail segment, especially essential services category like kirana shops, dairy outlets, small retailing outlets for essential commodities, et cetera. Now coming to our provisioning. We have a gross NPA of 2.11% as on 31st March 2021. which has been significantly provided by the ECL provisioning of INR 7.84 crore, and our net NPA as on 31st March 2021 is 1.19%. As a prudent risk management practice, we have already provided the total ECL provision of INR 7.84 crore, out of which INR 4.84 crore pertains to stage 1 and stage 2, with an ECL coverage ratio of 1.5% and INR 3 crore for stage 3 with an ECL coverage ratio of 43.27%. Regarding our treasury update, the NBFC sector has been facing challenges post lockdown [Technical Difficulty]. The company raised INR 53 crore of debt in financial year 2021, maintaining our weighted average cost of borrowings at 9.4% as compared to 10.5% in financial year '20. And we raised NCDs for the very first time in this financial year. We were actively looking to raise more debt to drive the growth in our AUM. We have a comfortable level of liquidity and have maintained cash and cash equivalents, and we've unutilized credit limits of INR 47.82 crores as on 31st March 2021. We have repaid about INR 40 crore debt, including prepayment of INR 10.5 crore of high-cost loans in financial year 2021. Our net debt has reduced from INR 96 crores as on 31st March to INR 83 crores as on 31st March 2021. Our CRR stands at 79% as on 31st March 2021 as compared to 73% as on 31st March 2020, which is one of the highest among NBFCs of our size. That concludes my opening remarks. Then I'll put the floor open for questions. I have Chandan and Naresh Varshney along with me to answer your questions.

[Operator Instructions] Dhwanil, you can go ahead with your question.

Can you guys hear me? Hello?

Yes, yes.

Okay. My name is Dhwanil Desai. I'm from Turtle Capital. So Rohit, 3 questions. The first one is, one thing that we have observed is that there is a lot of consolidation which is happening on the wholesale side, and we are pretty strong in terms of our understanding and the risk management, et cetera. So how do you see that segment growing in the next 2, 3 years? How do you guys look at it?

Okay. And the other part?

Okay. You want me to put all the questions together?

Yes, yes, yes. We'll be able to answer all.

Sure. Okay. So second question is on the retail book. So I think we have been trying to grow this book, and even I think last couple of quarters we have shown -- we have kind of indicated that we want to grow this segment aggressively. But somehow, even on the disbursement numbers, if you look at it, it's not any meaningful scale-up that has happened. So going forward, are we going to change our strategy? Or what are the bottlenecks? And how do we want to grow our retail book? So that is the second question. And last question, I'm not able to understand the rationale for giving this bonus because, for us, capital -- for a company like us, which is -- where capital is raw material, why do we want to kind of cede away capital by giving bonus? Can you please throw light on the rationale behind that?

Yes. So now coming to all the 3 questions. Regarding the wholesale growth, you have seen that during the last 5, 6 years, we have seen so many challenges, especially in our part of the wholesale side, starting from demonetization, going through RERA, GST, then COVID phase 1, COVID phase 2. And though our size is not so big, but we have been able to prove that we withstand our quality. And you have seen even the last year, our collections were very high even though we were not able to operate for 4, 5 months in the initial -- for the half -- first half year. So growth, all those -- the bigger events, which we have seen in the last 4, 5 years, have -- now we have a lot of confidence in ourselves that we can grow. And the only, as I told earlier, the limiting factor will be our ability to raise debt at reasonable rates and which we always very focused on if we want to raise debt at reasonable rates. And now we will be venturing out of from our sweet spot NCR, which we think that we have a good domain knowledge. And we have already had some small exposures in the Chandigarh suburban area and now we would like to expand further into further geographies. And now coming to the second part, on the SME, yes, SME has been a trouble spot for us for the last 4, 5 years. As we started in 2017, '18, it was a little learning curve and we faced some challenges both on hiring the people and then we started a little earlier and we were framing policies along with that. So the initial 1 or 2 years have been a little -- we were trying to explore ourselves and grow within that. Our school segment has picked a lot of strength and where our collection efficiency was more than 98% as late as March 2020. And we were very bullish on that segment, but all of a sudden because of the school closure for the last 15, 16 months, that segment has dried up. And we faced few challenges internally and a few externally due to COVID and a little bit of when we started the demonetization. And now what -- I would not like to say again because we have been telling for the last 2 years -- for the last 1.5 years, practically, that kind of segment we are in, COVID has played a bigger role, and we made a little small mistake by bottling our SME marketing team resources [indiscernible] down in the last year April. And when we started hiring, we wasted practically 3, 4 months in hiring and those people coming onboard and training them and putting them on the field. And the moment they were becoming productive in the month of January and February, then again the COVID struck in the month of April, even which we postponed our sanctioned March disbursals -- sanctioned -- March sanctions. So now we have -- but during this phase 2 we hired more people. We didn't retrench a single person. We hired more people, and we have even hired senior people also. And there's 1 or 2 new state heads have joined, and our business head will be joining next week. So -- and we are working on some other digitalization part also. So hopefully, we think that this year as against all 3, 4 years, will be good, but we'll be a little cautious due to COVID, especially the segment we are in. And opening of the schools will also increase our growth in this segment. And Chandan will like to add something on the wholesale after I conclude. Coming to the third part, bonus. Bonus does not entail any cash outgo. It is only to capitalize your reserves. The purpose of the bonus, first, was to increase the liquidity of our shares, which they had a lot of demand from the investors through our -- the people who manage our Investor Relations and one was that and one was to reward our investors because we've had a very strong reserves. On an equity of INR 6 crores, we are having a reserves of more than INR 260 crores. We thought this is one way of rewarding the investors. But it doesn't entail any kind of cash outgo. So I think -- so that is all. And Chandan will like to add a little bit more on the wholesale growth side.

As Rohit has rightly mentioned that we are very much bullish on the wholesale part. And in future, we are seeing a lot of opportunity into the coming market as well. We have opened a little on -- being more flexible on the IRR part also that we have [indiscernible] opening our target segment geographies as well as we are now exploring some new markets also so that we can tap the existing market [indiscernible] and grow our wholesale book. So considering the last year book also and by comparing the last year's book also, you can see that our aim to grow the wholesale book is there. And in coming 2, 3 years, we are seeing that we have good growth into the wholesale book part also. One part in SME book also we want to add that Rohit was adding -- in addition to Rohit point, that being the SARFAESI provisions being enabled for NBFC segment for financial year -- in financial year 2021 the budget for the loans above INR 20 lakhs. Now -- and this is adding a new target segment for us to grow our SME book. So we are now -- earlier we are focusing on a smaller ticket size loan into the SME part. So now we have opened a new target segment, and we are very much bullish on the SME part also, that opening the segment -- that customer base of the clientele which we were losing due to the higher ticket size and a good credit line till date we were losing, now we would be able to tap those customers into coming [Technical Difficulty]. So there would be a lot of opportunity in both the SME as well as the wholesale part.

[Operator Instructions] Dhwanil, I think you can further go ahead with your questions, if any.

Yes. So Rohit, taking forward this conversation, so -- I mean currently we are at anywhere between INR 330 crores, INR 340 crores kind of a loan book. I mean do we see us reaching INR 500 crores in a couple of years or do you think that is too ambitious? Or how do you guys think about that?

As we told you, growing our book is not a problem. The only limiting factor has been to raise debt at reasonable rates. And because of COVID, all the banks are a little more cautious. I think [indiscernible] opening up and we are in discussions. And if we are able to raise debt, definitely growing to that size is not a challenge even in this current year itself.

Okay. Okay. And how do you -- I mean -- so -- I mean as the loan book texture changes from wholesale to retail, how do you guys look at margins, IRR? I mean is it that NIMs will compress, but our portfolio will become more granular? I mean where is the trade-off between risk-reward in that wholesale/retail mix?

Yes, definitely, the operating cost is much higher in the retail side as compared to the wholesale. But as you yourself said, the whole portfolio becomes more granular and that is the added advantage and it gives a diversification to us also. And we will always like to have a right mix between both the segments. So -- yes, the IRRs are practically same in both the segments. We are working between [Technical Difficulty] average IRR of between 16% to 19%, in the wholesale 15% to 19% and in the retail side we are working between 17% to 19%. So IRRs, both gross IRRs are same, it's only the operating cost is higher in the SME. Once our branches become more productive, we will be able to absorb that also. And we'll give a granularity to whole loan book with the small retail coming along with the wholesale side. And we are focusing on the wholesale, not on the real estate, but those companies which are coming out of small -- companies which are coming out of the stress also, who are coming out of settling the OTS and all those. We had a very good experience, and we did a lot -- we had funded a few of those portfolios and [Technical Difficulty].

Yes. So last question. So I think you mentioned about our wholesale book, you guys venturing out of NCR, and NCR has been, you know that market very well, and you're in comfort zone. So what kind of risk you think you would need to tackle? Or you kind of preempt when you venture out on the wholesale side? Because a lot of people have burnt their fingers funding some of the wholesale loan book, especially on the real estate side. So what are the things that you would want to kind of preempt in terms of risk mitigation?

Dhwanil, it's 2, 3 things. When we fund, we don't fund a project at the greenfield level apart from the whole -- this affordable one. So affordable housing, we're funding at the greenfield level, where we see the location and the history of the developers and all of our wholesale affordable funding of projects are doing extremely good. So in others, we only enter when the project is at the middle level and that too in the mid-segment. And so as compared to others, our ticket size is smaller, and we come at -- when the project has been launched and they have committed receivables and sales and the execution risk has been taken -- to some extent has been taken care of. So the small builder loans is a fantastic product where we have not seen till stage project not being getting finished between 12 months to 24 months, and salability is very, very good. And we are -- it's a very strong market asset we are sitting on. So we -- according to us, we find that the real estate funding is much more risk taking -- receives much more -- less riskier or we are more comfortable in that segment. It is only how you do it. It requires a lot of monitoring. You have to do a lot of monitoring both in terms of site research, meeting with the promoters, getting their financials every month, understanding them. And you have to have a good domain knowledge in the area you are working in around the authorities, local laws and informal knowledge which you get. So when we move out, we will move out as we have just funded few projects in our Chandigarh suburban area. So we will first like to build our domain knowledge in that particular area and then start -- slowly start funding it. So that will be the way we'll be looking at.

Okay. So the kind of segment that we will focus on will be very similar to what we have been dealing in NCR, like I mean small builder loans, affordable housing?

We strongly believe, as a small NBFC, we can only outperform when we are present in 2 segments and we have a little edge by building a domain knowledge, by building a core strength in the 2 segments which we focus on. And that is the only way we'll be able to build our presence among our customers only. If we spread to too many segments without size, we will end up going nowhere. Neither our team will be able to build any kind of expertise neither our presence will be felt. So that is why we have chosen 2 segments which require a little specialized knowledge, and we want to build that knowledge. And if you see our SME, that is also an unorganized where the data is not there, assessment-based lending. So we want to build the domain knowledge in that segment only. Neither it can be touched by the fintech part also because the data is -- too much data is not there. Apart from the bureau data, banking and all those things are not there in that segment. So if I go into those segments where the bigger NBFCs or larger banks are present with -- so we will find it difficult to have any kind of market presence. And secondly, we may not be competitive as compared to those people. So as we grow, we may enter into other segments. But as of now, till INR 1,000 crores, we don't see that we have any reason to move into any other segment.

[ Ananth ], you can unmute yourself and introduce yourself and ask a question.

My name is [ Ananth Jain ]. I'm an individual investor. I have just one question as to, if you can elaborate on our school loan portfolio book, how do you see it? What is the current status of the book in terms of value? And how much of it has turned NPA? How much of it can turn NPA in the next quarter or so? And what kind of write-offs we have taken in this portfolio?

Our school portfolio as on March '20 -- April '20 was around INR 22 crores out of -- in terms of number, around 290 schools. As on March, only 2 schools were in DPD and not a single account was in NPA. But during these last 15 months, our 88 accounts are in DPD. And roughly our total DPD segment out of INR 22 crores is around this -- this is around between INR 8 crores and INR 9 crores as on March 2021. And we are quite hopeful because even in these -- the schools which were in DPD, we started getting EMIs in the month of October till March 2021 -- from October '20 to '21 because they were already in DPD and they were paying only 1 EMI. They couldn't come out of that. So we have made additional provision our -- against -- we have already made in the stage 3, where we have already provided 44%. And the other schools are performing, and we don't see much provisioning going ahead because most of that has been taken care of by aggressive provisioning.

So any of these accounts -- any kind of restructuring, which we have done in any of our book...

We have not done any kind of restructuring. The schools were not ready to -- neither they do understand to that extent, what is restructuring and all those. And so they -- we have not restructured any of the schools. We did provide ECGLS (sic) [ ECLGS ] benefit to -- in the last phase to around 20, 22 schools and -- but we have not restructured any of the schools. The scheme is still valid till, I think, July and August, September. And so -- but till date, we have not restructured any accounts.

And since most of these are schools, they'll probably come back as soon as wave 2 is over. Do we expect -- what kind of -- do we expect write-backs happening also from this portfolio?

Yes, definitely. I have told you in the last -- from October till March, we started getting EMI. But the only issue is that where the 7, 8 EMIs are pending, they were paying 1 only. So they were not getting out of that DPD. So -- but going forward, yes, definitely, those 2 which we have made more provisions, the write-back should start coming up when the schools reopen and may not be done this year. Because even if they start repaying, they may be repaying the EMI due which is for the current month. And I think then the coming year we can see reasonable write-backs.

That was useful. Going ahead...

The schools are performing. It's a cash flow base. They have the cash flow they were paying us. The only problem with our schools is that they are mostly semi-rural and in small towns and where the online infra with the school, neither the teachers are equipped to that level neither the students have that kind of equipment or the internet bandwidth with them. So -- and once they stop paying the fees, they will say we will pay when the schools will open. And definitely, schools will charge fees also. When they promote to the next class, their cumulated fees will come to them, and we are quite hopeful and a few of them do take the benefit of this [Foreign Language], we will pay when the school start functioning. So a few of them can say maybe intentionally doing it, but we are following very hard. And it has been a good segment till March '20, and we never thought that schools can be -- will be closed for extended period of 15, 18 months. So -- and hopefully, they will definitely come back. And we -- for borrower safety, as the schools open, we'll start paying. And all of our schools are having a good infra. If you see the schools we have funded, they are on reasonably very good infrastructure they are at and with a good piece of land and everything. And then the LTVs, though maybe schools are -- so in the name of trust sometimes or societies or samithis or maybe individual name, our LTVs are quite low. And those borrowers are wary of them, and they feel that we have worked within only 10% to 25% kind of LTV in the school cases. And they still feel that the property of the school is with them. And definitely, those write-back should happen, but I don't think so it will happen this year, maybe in the next year, we'll start seeing that.

That was helpful, Rohit. One more question that I have is like to earlier question which Dhwanil had, you said that we might be reaching INR 500 crore book this year as well. So...

No. I've just told him [indiscernible] we've been able to raise debt at a reasonable rate we will definitely -- we have the market. We have the ability and we have the confidence. And last 1.5 years, we were a little cautious, too. We didn't go -- we don't want to be a little too aggressive. It has been our strategy that we want to survive and maintain our quality of book and maintain healthy cash reserves with us. And with so much fear around COVID and we even faced 1 death of our employee and so many employees got COVID and all those, so the things were a little fearful. And we were not aggressive. And from April to July, practically, there was no disbursement because in both of our segments, unless until you meet the borrowers, you can't do disbursement digitally just on the base of Zoom interviews and all those. So we also wanted to see how things play out after the COVID wave. So we have been a little conservative. So growing our size -- this size is not a problem for us. We are working under co-lending arrangement also where a co-lender was funded around INR 150 crores to INR 200 crores. If we had the funds, we could have been in our book also. So that is not the problem, but we were a little conservative and a little -- wanted to see the passing of this COVID. And there was a lot of fear when the first phase of the COVID came in April till -- on the real estate also. And we were also internally fearful because we have not seen what the COVID will play out. But it played -- but we were very surprised what happened after July, August. The sales and collection improved dramatically. It was one of the best years for the last 5 years, we have seen.

On the SME side, Rohit, we are -- AUM has been constantly coming down. Do you think that now we'll also have a renewed focus on the SME segment? And how do you see SME versus wholesale shaping up maybe 1 year, 2 year down the line?

We gave those numbers, but we would not like to give you any kind of numbers for that mix in this year. But I can just add one thing. In last -- when phase 1 throughout the COVID, we retrenched a few of our salespeople. Maybe a little mistake on our side. We became a little too fearful that the business is not going to happen for the next 6 to 9 months. And -- but this time, we added people. We retained our existing staff. It is only that they became a little more fearful going into the field, and it was a very difficult period. You can't force your team to just move out. So those -- and practically last, out of 15 months, we barely had 3, 4 working months only. That was from September till March. And we lost 2, 3 months because we retrenched the people and taking onboard new -- fresh people, took a little time and training them. So partially, it was lost to that. And we saw huge foreclosures also. Out of a total 1,200, 1,300 accounts, we saw a foreclosure of 170 accounts in this COVID period. So that added all those things. And, yes, as I told, the first 2 years has been a little learning curve and then we are facing a little external factors. And in terms of any mix and all those, I would -- I think the end of the year will be a little better year. We are putting a lot of effort on our side, but we were not able to perform for last 3, 4 years. We would not like to give any kind of numbers. So this time, we want to just perform and then we like to speak.

No, I understand that hesitation on your part. My only question is that do we want to have some kind of balance between retail and wholesale? That was the only...

That effort has been there and that's why we added retail and still our retail team is 2/3 of the total employee strength, still our focus, a lot of time goes into that segment. And we are rebuilding it in terms of making it into a total digitalized platform and hope things work out. And we are able to perform and then we are -- we have to speak a little better -- our effort. And we want to have a reasonable mix among both the segments.

But aspirationally, if wholesale goes up significantly like 90% of the book, you won't be stopping that. I mean if I were to just..

No, no. Given -- I would always say if SME is going, I will choose to go with the SME because we want to have a right mix. But at the same time, if we are getting an opportunity on the wholesale and still we want to grow our SME, we would like to take those opportunity on the wholesale at the same state. But if given the schools, I have limited funds, then my first choice will be to grow SME and bring it to a right mix.

[Operator Instructions] Sir, I would like to ask you a question. So basically, our cost of funds has come down drastically and it's currently at 9.4%. So how much do we expect our cost of funds to go down further? Do we see any scope of that in next year?

It has not come down drastically, just 100 bps has come down. And I don't think so that it will fall further because as we have seen that the inflation, both retail and the wholesale inflations are there. Banks are not ready to go down further. And with those [Technical Difficulty] parameters, I don't think so unless until we are able to improve our rating and [indiscernible] an edge of 25 bps to 50 bps, which we are trying. And so I don't think that we will be seeing further fall in borrowings majorly.

And sir, when you say that you are not growing your wholesale book since you're not comfortable on the liabilities side. So...

No, no. I don't know, that is a wrong interpretation that we are not comfortable on the liability side. I just told in last 12 months for the COVID phase we were little -- as a strategy, we thought we want to be little cautious and we want to focus on our existing -- maintain the quality of our existing book. So -- and for the last 5 years, we have -- our confidence has increased every year. We have faced a lot of external challenges which have come during the 3 last years or 5 years and our confidence has increased. We definitely like to add to our liability. Otherwise, the only limiting factor is that our ability to raise funds. On the liabilities, we would like to add -- on the liability [Foreign Language] there is no second thought about it.

Okay. Anuj, you can introduce yourself and go ahead with your question.

This is Anuj Sharma from M3 Investments. My question is you gave a lot of importance to domain knowledge when entering into an area. So can you just highlight what are these things into the domain knowledge which you look at? And my second question is based on that, which are the areas you are open to looking at in the next 3, 5 years in terms of geography?

Yes, Chandan will give more detail. I will just add 2 lines to it. My experience of the last 9, 10 years into wholesale lending, I say it's a very specialized knowledge when being a little real estate. Every geography has [Technical Difficulty] and it's a very small core team who is able to understand it. And if suppose I'm sitting in Mumbai and want to do a project in NCR, we will take first a lot of time to do it. And so a lot of proactiveness is required in monitoring that every month and understanding those localized markets. So it is a little different from other wholesale segments which we see. That is why some people perceive real estate as a huge risky market. But we see it's a very safe market. We have a very strong security to fall back. And if done properly and with proper diligence, it's a good market to be in. And now a lot of companies are coming back to this segment also. And Chandan will like to add on the geographies and you say if domain knowledge is required why is it required.

Anuj, the question you have asked about the [indiscernible] market. It is very important to you have a proper understanding about the market which you are going to venture into [indiscernible] You need to do another check like the database, profiling, what are the existing opportunities. And basis your risk profiling, you need to structure the loan of the project. So what we believe that with our lending experience of 8, 10 years into the industry itself and core team, as Rohit has rightly said, it is very important while restructuring any wholesale loan you need to understand the project cash requirements at different phases of project life cycle, whether it is a lean phase or [indiscernible] phase. So what do we believe that with this kind of experience we have developed a kind of knowledge that we are able to structure the loans as per the project requirements. Structuring the capitalization, structuring the project cash flows and inflows, all those are required in building a domain knowledge [indiscernible] Further to that, it is very important to improve your lending method with help of your monitoring technologies. So what we have built in -- we have internally built up a monitoring mechanism, which is very much helpful while successfully delivering a project or executing a project. So what do we believe that this kind of structure or kind of a monitoring which we have built in last 3, 4 years the CSL has helped us to capture or deliver the projects and built up that kind of domain knowledge, which we believe that differentiates us from the other market players.

Anuj to add, [Foreign Language] we have not faced challenge in a few of the accounts. We have faced, but we say had to early detect those accounts where some challenges come and early warning system we keep on. We keep on monitoring every account after every 15 days. And we try to see -- detect that signals early and take early remedial actions. And we have a very strong learning from that account, why that account was going bad and was facing a little problem. So we all -- we incorporated those learnings into our system. And sometimes when we see that we have -- the account has not gone into DPD, everything is fine, we forget, but we try to take learnings from -- small, small learnings from those accounts where we face a little bit of difficulty and add it to our -- those -- the credit diligence line.

Yes, that was very helpful. Just an extension to that. If I see, our major portfolios are concentrated in West and North. So -- that's a function of our domain knowledge. So going forward also, we will see concentration around these areas also? And based on our existing understanding, which other areas can we tap? And does carpet bombing help, I mean moving from adjacent areas to adjacent areas help in our domain knowledge?

Look, Anuj, we are -- and Rohit has already mentioned about that, we are now diversifying our target areas to Chandigarh market also, and we are opening up a little bit. We have landed some few of the projects into that market also. We are now opening up geographies. Now we have the [indiscernible] Look, till the time of opportunities available into the Delhi NCR market itself and we are able to tap that and grow our book. So we would try -- being the core team is based out in Delhi NCR, we would try to maximize these areas in a wholesale lending. We will try to keep focus into these areas itself. But yes, if the opportunity -- earlier, we were disrupting ourselves into the outer geographies as such. But if the opportunities comes, we have now built up a domain knowledge of those areas also like in and around Delhi NCR, like we can go till Chandigarh, we can go till Jaipur. So just as the opportunities come, we would like to tap those markets also. As opportunities would be available, we would like to lend there.

So possible areas which we always have looked upon is near to Jaipur, Lucknow, Dehradun, these can be next possible segments and very good stable markets of Bangalore, Pune also. But we need funds. Without -- unless until we have a size, there's no fun of doing 1 or 2 projects there in which we are not able to monitor it because I told monitoring is very, very important. And whoever -- unless until you have a decent size, you are not able to get the even domain knowledge because the informal knowledge from the developers, from the other borrowers and your understanding of the local laws only comes when you have given few loans in that particular area. So as we build on our size, definitely, we will have no option but to move out, but we'll be doing it cautiously. And I think whenever we want to enter into a new project, I may be entering with lower IRR, better understand their market, then increase my little bit of IRR appetite or risk appetite. So the best way, as I have understood or have done is that go with the safest bet in a new territory and then try to understand and then move ahead.

[Operator Instructions] Since there are no further questions, I would like to conclude the call. Thank you, everyone, for joining this call. On behalf of Antique Stockbroking, this concludes the call, and thank you.

Thanks, everyone, for participating on the con call. Your questions are important for us, and we strive to be transparent in our investor communications. The economic activities have now started picking up post the second wave of COVID-19. While the situation is coming under control, there is still a chance of third wave hitting us and achieving normalcy is highly dependent on how fast we can vaccinate the Indian population. We aim to maintain the high quality of our balance sheet and while striving to grow our business in coming years. Look forward to connecting with you all after the September 2021 quarter results. Thanks all.