Fino Payments Bank Limited ($FINOPB)

Ladies and gentlemen, good day, and welcome to Fino Payments Bank Limited Q4 FY '26 conference call [indiscernible] [Operator Instructions]. Please not that this conference call is being recorded. I now hand the conference over to Ms. Sheetal Khanduja [indiscernible]

[indiscernible] Good afternoon, everyone, and welcome to the Q4 FY '26 Earnings Call of Fino Payments Bank hosted by Go India Advisors. We have on the call Mr. Ketan Merchant, Interim Chief Executive Officer; Mr. Anup Agarwal, Interim Chief Financial Officer; Mr. Shailesh Pandey, Chief Business Officer; and Mr. Tejas Maniar, Chief Digital and Liabilities Officer. . We must remind you that the discussion on today's call may include certain forward-looking statements and must be, therefore, viewed in conjunction with the risks that the company faces. May I now request the management to take us through the financials and the business outlook subsequent to which we will open the floor for Q&A. Thank you, and over to you, Ketan.

Thank you, Sheetal. A warm welcome to all of you joining us today for our bank's quarter 4 FY '26 and Full Year FY '26 Earnings Call. Well, FY '26 has been in many ways the most defining year in Fino's journey since inception. We came into the year on the back of a landmark FY '25 with a clear focus on risk-calibrated growth in what we knew would be a challenging operating environment. What followed was a year that tested franchise on multiple fronts, and I'm pleased to share that it has emerged stronger on every parameter that matters to long-term value creation and our focus on differentiated SFP. That is small finance bank. Let me set the context briefly. Through FY '26, the broader ecosystem witnessed heightened regulatory scrutiny, industry-wide efforts to tackle digital fraud, the rise of new accounts in banking system and a tightening of operating environment. In addition to these industry-wide factors, the bank also navigated an unprecedented event in quarter 4, 2026. As a part of our tech cast commitment to timely disclosure and transparency, we have provided detailed disclosure on these matters through our regulatory filings across the month of March and April. And if I'm not mistaken, we put around 40 disclosures in the month of March and April, a testimony of our transparency towards our stakeholders. I want to take a moment to thank each of you, our Board, investors, analysts, customers, merchants, regulator and the entire team at Fino for the trust and patience, you have extended to the institution through this period. Through all of this, our approach has remained very clear and simple. We have consciously chosen sustainable and compliance growth over short-term term acceleration. We've taken measured path and prioritize building a stronger and a more resilient institution for the long term. And the results, I believe, speak for themselves. On the governance front, I want to be second, but absolutely clear. Throughout the second half of the quarter 4 of FY '26, the bank had active institution first at every step, coupled with keeping in mind mid- and long-term objective impact. The Board simply can mean within 20 for us to ensure continuity to interim leadership arrangements approved by the Reserve Bank of India. Now the lifespan of an organization, specifically a bank, the most important aspect is robustness of its business continue to plan that is BCP. For us, March 26 turned out to be a testimony of our execution of -- on BCP. And amidst all this, what came out is resilient business model of ownership reflected in accounts being opened an increase in deposit balance in March 2026. In addition to these business parameters, what to successfully tested was the stability and levelheadedness of the leadership team in keeping mind focused amidst the chaos and thereby not battering from mid- to long-term vision of the organization. Let me come to what I believe is the single most important development on FY '26 on the business front. Yes, this is the strength of our deposit franchise. Our customer base stood at INR 1.75 crores by the end of March 26, growing 22% on a year-on-year basis. We've added approximately INR 6.9 lakh new CASA accounts in quarter 4 quarter '26 alone, increased by this event in end February '26. Focus for the month of March was on CASA and liability generation. In this context, in the month of March '26 we opened INR 3.2 lakh new accounts. Yes, this is INR 3.2 lakh new accounts, highest in last 3 years. Our total deposit balance increased all-time high of INR 2,957 crores, a post event and the sustaining of that has been consistent across after achieving the highest possible peak. I want to emphasize this point because it speaks directly to the quality of the franchise we've built and in compliance-driven culture being implemented for long-term value creation. Our renewal income in quarter 4 '26 reached INR 62.2 crores, the highest single quarter renewal in the bank's history. For the full year, renewal income grew by more than 25% year-on-year this is not transactional revenue, but customer owned ownership revenue. The most authentic measure of the trust of our 1.75 customers have placed in this institution and also corroborates our plans for journey toward small finance bank. Coming to our digital and transaction business. Through the second half of FY '26, we further heightened our deliberate risk calibrated approach. We tightened merchant onboarding and strengthened transaction monitoring. We exited certain partnership on sou moto bases and certain merchant categories where the risk return profile was no longer aligned with where Pino wants to be as an institution. The result in short term was moderation in our digital throughput and our transaction-led business as well. Throughput from D2B digital payments were down approximately 17% sequentially in quarter 4 '26. It is exactly the kind of decision a prudent bank should make when its business associate risk remote, niche and overhaul. And we made it on our old accord being aware of the short-term impact on our profitability. Let me come to technology. As committed in earlier calls, our core banking system migration to Finacle has been completed in this quarter. This was an investment of around INR 200 crores for the bank and one of the most consequential technology project we've undertaken and it has gone live within our anticipated time line. Alongside Pinnacle, we've also developed all of the core modular architecture, which recoupled high-frequency transaction handling from the core. This significantly reduces the failure rate, enhances traceability and crucially provides us with technology backbone that is ready to cover scale and complexity of small finance bank. We expect significant improvement in ease of doing business, faster product launches and better customer experience over the coming quarters as new platform stabilizes. Now moving on to another important aspect of FY '27, that's a small finance bank. As you are aware, on December 5, the Reserve Bank of India granted us in principle approval to convert to payment from payment bank to SFB. We are the first payment bank in India to receive such approval, and we are deeply grateful to Reserve Bank of India for the trust they have posed on us in the institution. Further, RBI framework, we have defined window to satisfy stipulated condition for final SFB license, including the threshold of network, capital adequacy, promoter shareholding brands roll out that overall, a differentiated business plan. I want to assure you that execution is on track on every front. On lending side, we mix steady progress on our referral book, which is a proof of concept for our lending franchise. We will eventually -- which we will eventually own as an SFB. FY '26 Referral business would at approximately INR 1,300 crores with Q4 alone contributing around INR 592 crores, a 97% sequential increase. The referral mix is heavily aligned to the kind of secured priority sector aligned lending that an SFB model is designed for and that is the model which we are also looking at. housing loan, affordable housing gold loan -- a loan against property and MS are the key products which we are looking at. Our intent, as I stated in earlier call, is to build a differentiated SFB focus on secured asset and an asset-light model that can deliver superior return on equity. To reiterate. Our business model for SSB revolves around 3 primary moats. First one is our cost of fund advantage over traditional bank wherein we are looking at around 300 basis point advantage on our cost of funds. The asset-light model, which will be predominantly through our merchant network plus merchant which we already have currently, and a strategic edge on our technology and digital platform which we built. To summarize, FY '26 has been a year that has [indiscernible] franchise to demonstrate 2 things. deposit base is durable through a difficult environment and that the institution can execute on SFB transition on every condition that the regulator has set on would count the answer in numbers record deposit record customer base, record renewal income, CBS migration delivered compliant leadership strengthen. As I have repeated in my earlier calls as well, our priority continues to be steadily sustainable and predictable bottom line growth rather than pursuing exponential top line expansion, along with a sound base going towards a small finance bank transition. With this, I will now hand over to Anup, who will take us through the financial performance for the quarter and full year in detail. Over to you, Anup.

Good evening, everyone. Thank you, Ketan. As mentioned, FY '26 has been the year of challenges, but let me assure you Fino has emerged stronger and more resilient with single focus on building prudent franchise with governance first approach. Let me take through our Q4 and FY '26 financial performance. . The total revenue for the quarter dropped by 31% year-on-year and full year by 14%. The causes are discrete and largely external. The regulatory-driven contradiction in digital [indiscernible] from Q2 onwards the industry-wide collapse of bank-led DMT remittances following the November 24 RBI circular has caused the decline. And further, on our B2B business because of the [indiscernible] in the NBFC MFI sector, the revenues have declined for the quarter and for the year. None of these reflect customer attrition or a loss of market position. Our margins expanded by 250 bps for quarter-on-quarter and 500 bps on year -- full year basis. This itself demonstrates the shift from a low margin to high-margin and ownership business. Our CASA base reached INR 1.75 crores accounts as of 31st March '26, up 22% year-on-year. We added nearly 7 lakh accounts during Q4 alone, despite tightening our onboarding framework and overall difficulty in the ecosystem conditions. The headline metric I draw your attention to is the renewal income. Q4 FY '26 renewal income reached INR 62.2 crores, the highest in the quarter and in the history. Full year renewal income grew 25% to INR 237 crores from INR 190 crores in FY '25. Reneal income is the cleanest measure of our customer ownership. It reflects customers actively choosing to stay with Fino. 25% increase in a year of an industry disruption tells you something durable about this franchise. Our cost of funds. Remained structurally low below 2% on the core CASA book, entering our SSB phase with approximately INR 2,800 crores of low-cost liabilities. It gives us a cost of funds advantage of approximately 300 basis points related to our typical small finance bank. That is the foundation of our lending business. Coming to digital. The revenue decline from INR 63 crores in Q3 to INR 41 crores in Q4 reflects a deliberate derisking of high-margin program manager flows in response to the regulatory environment, not a loss of platform capacity. . We have intentionally trimmed down on this segment as we recalibrate our approach, reflecting in our active client base declining from 347 in December 25 to 29 in March '26. Operating cost discipline has remained tight throughout the year. FY '26 operating expenses, including depreciation, grew only by 9% year-on-year, absorbing the final migration investment, which is a proof of concept for the lending franchise, we will eventually own as an SFB. FY '26 referral disbursal stood at approximately INR 1,300 crores with Q4 alone contributing around INR 592 crores and 97% sequential increase. The referral mix is heavily aligned to kind of secure priority sector lending SMB model is designed for housing gold lab MSME. Our intent, as I've stated in earlier calls, is to build a differentiated SMB focus on secured assets and an asset-light model that can deliver superior return on equity. To reiterate, our business model for SAP revolves around. It revolves around 3 modes, which is the cost of funds advantage asset-light model and cutting edge of our technology. In summary, FY '26 has been a year of lot of challenges. We have navigated through those challenges coming through the difficult times in Q4 and FY '27, we look forward building a prudent franchise of liability and preparing ourselves for the SMB. With this, I open the floor for questions.

[Operator Instructions] The first question is from the line of Ankit Kanodia from Zen [indiscernible].

So my first question is related to the SAB transition. If I understand the business correctly, we are currently doing acute services or products, which will probably be in a conflict of interest when we start lending as an SFB. So for example, when we look at our cash management business or our business corresponding business. I think lender basically takes this business -- basically will be business to us. Now how do we make sure that there is no conflict of interest. That is number one. Number two, we are also doing a lot of [indiscernible] -- some of lending with other lending. But when we start our own lending book, will there be a conflict of interest on that part as well. That is my first question, sir. [Technical Difficulty]

Sorry, there was a technical snag instead of unmuting we just touched some other button. But coming back to your question, and I'll take the second question first about your coal lending. I think we put some statistics on -- actually, it's not co-lending. It is about lending referral the amount which we've done for the last quarter of INR 597 crores of dispersal. There is no intent of co-lending SFP are also not allowed coal lending. Before we migrate and before the launch of operation starts, this is our way to establish a proof of concept or a pilot that how our differentiated model, which we are doing through merchant, what kind of demand it can raise. So it is actually showing a very good traction it is helping us to prepare the guardrails. Once this essentially, it is not a revenue accretive business currently, but it is a business which is being prepared for getting the railroads establishing the potential of our differentiated channel, and that seems to be going in the right direction. So that's where our lending referral will translate itself into our SFB loan book through our differentiated channel. Coming to your first point, conflict of interest. In the past also, we have actually said it many times, we're not going to go into a brick-and-mortar small finance bank with multiple branches and traditional cost of funds and traditional business models. We intend to continue our payment business, which are regulatorily allowed. You had used the example of cash management services. Yes, we do have some of the financial institution where we act as cash management services. But in addition to financial institutions, the industry is far and wide. It's logistics, it's operations, it's quick commerce. So there might not be an impact. If your question alludes towards that, is it either in or the answer is no. From a regulatory standpoint and from a business plan perspective as well, our CMS will essentially continue. Coming to the second example, which you said business correspondence, yes, that business approximately has a revenue number of around INR 140-odd crores in FY '26. That is a business which we are not allowed to do in small finance bank, and we've made our business model after factoring that. So once we transit into a small finance bank, the business model as envisaged all the business which will continue barring this business correspondence, which will be separately dealt with. I trust this clarifies your point.

That was very helpful, sir. And I read a news article that you are planning to sell this business corresponding. So do we have any progress on that front? Anything which we want to share in this call regarding

I do not answer on any media articles, but we are looking at strategic options, which we can look at for this business, and we will keep -- we'll keep and we'll provide an update on this as things progress out.

That would be great, sir. And sir, 1 last question, if I may. Again, I think we have mentioned in the past that as per the condition to SFB, we'll be doing the front rain. So any time line, any valuation or any kind of dilution numbers, which we have internally chopped out and we want to share with the investor community [indiscernible]

Okay. No, I think you mentioned the top of that as we currently speak, our capital adequacy ratio is 83%, if Anup can validate that for me, we serviced a 15% regulatory requirement. We have made our business plans until FY '30, which will be a fee-based business plan coupled by the secured lending book as well. So as things stand now, from a business projection perspective, we are technically not requiring to have capital. So our SFB launch is not dependent on any capital based on the business plan, which we have drawn up for us. How do we take it forward? If at all, whatever happens, we'll keep an update on that?

And RBI doesn't mandate us to reduce our premier holding because our product holding 25% today in the company. So is there any mandate by RBI to reduce it once we transition into SFB.

So Ankit, as mentioned in the speech, what were the conditions we have laid down from implementation point of view or a promoter shareholding point of view or like exiting certain business or whatever the requirements, we are in process of progressing on the same and as when things progress, it will be updated to the relevant stakeholders in during [indiscernible]

Right -- that was very helpful, sir. One last question. Sir, one of the payment bank license has been canceled by -- actually it was cancelled [indiscernible], it has been just exhibited recently. Any particular -- I mean, I know you would not want to comment on any --

I'm sorry to interrupt, but could you please return to the question queue?

Sure.

[Operator Instructions] We have the next question from the line of [indiscernible] from Anand Dama from Emkay Global.

Ketan, what explains the drop in the CASA opening in Q4. I understand the internal business, but CASA was a [indiscernible] business, where we had a strong finance and the non-GMP customers. So what explains it all in the CASA account opening in fourth quarter?

So the answer to your question regarding the CASA slowdown in Q4 other than the digital business. during the Q4, we had initially in the first month in January, we had a core banking system migration. So for around 4 to 5 days, there was a disruption in terms of the technology switch over. that 1 of the causes that? Second, at an overall level, as mentioned in [indiscernible] also comments that we are now focusing on a high-quality customer with higher balances and which will enable us to sell them lay the foundation for our SFB [indiscernible]. So these are the 2 factors. which led to the Q4 that during -- sorry, the CASA account opened up in Q4.

Anand, Ketan here ,just 1 thing to add. If you're looking at it from a representative way forward, I think our focus is fully on retail and CASA as we have seen across in the month of March as well. So that momentum is expected to continue in FY '27 in a manner which Anup just explained.

Should we expect that FY '27 or particularly affected first quarter FY '27 should be a normal quarter where we don't have any technical issues and so the CASA momentum should have been pickup .

Yes. Yes, Anand. As I said, the technology change, et cetera, was already completed in Jan and Feb, March was a testimony of that, and our focus remains back to going back into the CASA and retail momentum, and that is our high focus.

And in the [indiscernible] segment, the customer cleanup that we have done in the fourth quarter -- and you thought in the fourth quarter. Most of these customers were largely related to real money gaming business or the other customers that we have done an up in terms of either profitability or regulated so what are the case? .

Yes, I'll ask Shailesh to just take this one. .

So if you recall, the real money game was actually stopped in August 2025 as per the regulation issued by the government of India. So the cleanup at that point, immediately the next day, we had blocked all the merchants who were doing real main gaming after the curricular. And the current quarter 4 changes which we have done is belonging to merchant, which are paid up predominantly within the program manager and it .

So in that case, and I think Ketan mentioned about that we're looking at better profitability and better profitable customers. Does that mean that the margins of the DMT business now that we have done the cleanup or should we better implementing in March.

So I think Anand, you are, I think maybe there are 2 products which we are talking about. One is what is the digital payment, which is a UPI P2M product, which is where the real money gaming was there. where is now in your question, I think you mentioned about DMT.

Sorry my mistake, it was about digital payments.

So -- sorry then, can you just repeat your question, sorry?

So we think that we have done a team up in the near tenant business now. And then I think you said that you're looking at now more profitable customers. So does that mean that incrementally the margin of the real payment business should be better? .

Sorry, this confusion because of digital payment and DMT, you're saying that should going forward our digital payment margin be different from what we've seen in the FY '26. correct? That is your question?

Yes.

To answer to that, I think what we've essentially done based on March is we've taken a pause. We are looking at our processes, recalibrating our risk and so on and so forth. On the digital payment as and when we progress after the reviews, which we are doing internally and otherwise as well, we'll just keep an updated on the entire business model in later part of the quarter or towards the end of the quarter.

Sir, and how should we model FY '21 in terms of our varialbusiness lines? Where should we expect improvement and where we should see declaration in terms of the business, except for BT business as we know that would undergo change, but other business and how should we model it in terms of throughput revenue and margins? .

So I'm not going to we're not putting currently any guidance. But however, I can just provide a direction in what we were looking at. Perhaps in the previous question also, this came up. Our focus for FY '20 is driven into 3 parts: One is the CASA accounts, which we have seen a historic high in the month of March, after a relative slumber in Jan because of reasons which we explained. So that is 1 of the growth factors which will come across An earlier mentioned, we are looking at a corresponding liability balances, which is essentially there as well. So that is an important part and our focus essentially is going out there. Digital. Payment I have earlier mentioned it to. We are also looking at our transaction business typically has been a challenge on account of what Anup said in his note, but we are looking at an upside coming across in our other enabled payment system. And that is also we are looking at our CMS business, which will bounce back from the lumber which you see. So if you're asking about the growth levers and all of these 4 growth levers along with I'm not repeating the lending referral, which is not from a modeling perspective, but from a business model perspective, all of this taken together is our priority for FY '27.

And -- and to add on to that, since the product mix is moving towards more CASA driven focus and liability-driven focus. The margins are also will be dependent and moving in that line as well .

So typically, high product margins will lead to an improvement in the margin is what we're seeing in a nutshell.

And is it possible for you to tell me like what kind of commission that you make on this business and data business that we do for this.

No. So again, typically, the epro business, as I said, is not driven by not driven essentially by the P&L, but we around make 100 basis points on the lending referral business, which we are currently doing. .

The next question is from the line of [indiscernible] from [indiscernible].

Just curious extending the conversation for [indiscernible] referring to your April 30 press release about Mr. [indiscernible] be unavailable for more than 45 days. And then you explicitly mentioned that you or The board as well as the RBI, you take a call on hesitant proper status. Just trying to understand what is the procedure reach as an organization have applied to get this what I can say, this assessment to be done. If you can just help us with the time line for [indiscernible]

Ketan here, as you rightly highlighted to stock exchange disclosures. In addition, to the stock exchange disclosure, which we said, you mentioned the pork. I think there was an earlier stock exchange disclosure of 7 March as well, if I'm not mistaken, where the [indiscernible] had approved the Indian management structure, and help us in terms of directional way forward to a fit and proper and their review. So as we speak, the way things have progressed across as well, the bank and the Board is evaluating the guidance and the prescription which the Reserve Bank of India has given. And we will be working towards debt. At the current stage, this is under work in progress and is being evaluated by the bank board. That's where I should stop at.

[indiscernible] the section in the [indiscernible] whether the bank and gold had done any special audit upon [indiscernible] and is there any findings regarding the same, of course, subject to the subsidies and as well as the regulatory team. But of course, if you can comment anything with the bank particularly had done to address this issue.

Yes, it's a fair point. I should have covered it in my listing as well. We are doing a special review of the product and processing contention that review as we speak, is currently on. And as you rightly said, the bank and the Board are evaluating various options, including the outcome of the special review, and we'll take the step forward.

And one last question from my side, Ketan, is that this event has happened late in the quarter. Just curious if you can -- also you mentioned that in the last quarter, the account openings was very large, if you can just try to break the quarter between the even and post this event, have you [indiscernible] slowed down in the equal openings or the business, if you can just comment on.

I think I mentioned it in one of my notes as well. The account opening for the full year was around -- a full quarter was around INR 6.9 lakh [indiscernible] earlier explained the January and February month -- in the month of March, which as you say as post event, [indiscernible] around 3.2 lakh account, which is a historic high of last 3 years. And our deposit balance has also reached a page [indiscernible], I think total deposits of INR 297 crores, which was again historic high, which we've seen. So the customer confidence the business model resilience. And perhaps on account of all of this business pattern heaters, retail business parameters, the business for the month of March and thereafter, has been going as business as usual on account of retail factor. .

Our next question is from the line of Siddharth Gupta from Voyager Capital.

Congratulations Ketan, and I hope [indiscernible] on this result. I just have a few specific questions. Firstly, over the past few months, and this is directly in line with the problems that we have facing on the management. And have the lost merchants or noted a slowdown in merchants being onboarded with us. And just to clarify, on Page 31 of the presentation, in context of Soundbox, the merchant numbers mentioned as INR 2,951. Is that an absolute figure or a scale figure. I just wanted to understand the difference because according to Slide 10, we have about 2,084,000 merchants. And just wanted to understand difference. If you could answer this, and then I can take up the other couple of questions that I will ask.

Anup here. So to answer your question on that same box thing, so the 20 lakh merchants are the physical merchant network, which we have across India, 98% inputs. The soundbox are we started as a strategy for our SMB foundation saying that we want to provide a soundbox and capture more data points from our existing merchants who are having a better transactions. That's where we implemented Soundbox. And these are absolute numbers and not in any scaling. So out of that universe of 20 lakhs, we have deployed on box in these -- for these merchants. Hope that answers your question.

If you could just a couple of follow-up on this. So if -- are we pursuing sound book as a revenue strategy that will form part of like rental income from these sound boxes, are we charging anything or anything along those lines? And the other bit that I wanted to understand, are we response of the UK incentive from the government given that there's a lot of UPI [indiscernible] that goes through [indiscernible] Or yes, if you could quantify the amount received in the last financial year or provision to be received last financial year?

Let me just take the first one. Soundbox strategy is not a revenue-accretive strategy. This is to something the way I explained the lending referrals where we are building our card rail so that it essentially, we can leverage all of this at the time of small finance banks launch. On the second point on perhaps you're looking at UPI incentive, Anup, is a better person to answer.

So although -- so the incentive from the government of India only came until FY '25. FY '26, although they announced something in January, but till date, we don't have any line of sight unless any further communication is there from the government and Government of India on this, I don't think we will be able to comment on that.

So that, I think if your question is towards UPI incentive, I think increasingly, it's going towards the nature of the merchant, the small merchant and the mid or the large merchant as well. as we are understanding most of the banks which are operating may not be coming under the umbrella of the small merchants. So as Anup explained, it is not currently factored into our model or neither it is there in FY '26, neither factor in FY '27.

[Operator Instructions] The next question is from the line of Ashish Kumar from Infinity Alternatives. .

Just quickly wanted to understand in terms of the account openings. How has been the month of April? Has it been similar to March? Or is it similar to Jan-Feb, if you can kind of -- because we have also 1 month additional which has passed. If you can give some [indiscernible]

Ashish, Ketan here, I think I'm not commenting or giving -- divulging the numbers of April currently. However, the earlier someone had asked the question of whether the momentum which is being picked up, is that a momentum which we intend to continue for the coming quarter and coming year? The answer is, yes, CASA account opening is our -- the fulcrum of all our strategy coming across, and we expect the momentum to continue. .

Okay. Secondly, in terms of the merchant partners that we have, we see that there is a big drop in from December to March in terms of total number of merchants, is it fair to say that a lot of that is already behind that we have discontinued the whole merchant program and now it's only direct merchants? Or there's still some more cleaning up need?

Ashish, are you -- presumably you're referring to our...

[indiscernible]

Yes, I can get Shailesh to answer that, please.

We have been following a risk-calibrated growth strategy for our PI [indiscernible] business. And we've highlighted that in earlier calls also. What we've been doing as we move in FY '25, the management team in its internal discussion has decided on a some basis that we will do a comprehensive review of the digital payment business. As we empower on this journey, I think we have decided to cast the UPI P2M business, which means the existing merchants will not be able to transact as well as we'll not be onboarding any new partner as well as merchant. The objective actually is to not just strengthen the overall monitoring systems and develop a long-term sustainable business model in alignment with our overall strategy of the bank. So currently, we are pausing the business, and we will come back as we do the entire complete entirety. .

Shailesh, when we say pausing, does it mean that the revenues are near 0 in the month of April?

April, there will be some revenue which will happen, but would it be 0?

Ashish, yes,. So just to give a context to everyone and we clarify as Shailesh said, and I earlier alluded to this as well, it is like a pause, look at he hole, look at the ecosystem, get reviews done. And then we will announce a separate plan as I earlier said, maybe towards the end of the quarter or thereabouts in terms of our digital plan. Until then, the focus very persistently remains on the 4 items which I had earlier alluded towards. .

Sure. The second question was in terms of depreciation and interest. We see a large jump quarter-on-quarter on that. Is that because of the new IT system being capitalized? How much would that be the impact because of that?

So Ashish, Anup, here. So to answer your question, first, depreciation is completely primarily the impact on account of the core banking system [indiscernible] and capitalization of the -- that is one. Second, in terms of the interest cost increase, it's primarily on account of the leveraging our -- in terms of the license, which we have in terms of participating in reverse report.

I understand, none that -- so how much is the increment on depreciation?

So depreciation -- the complete increase is on account of that.

Okay. And that would be going -- continuing, I guess.

No. The next year will be a larger impact because here, this quarter -- this year only, you had around 2.5 month impact, whereas...

So, [indiscernible], this quarter, what is the depreciation for this quarter?

Sorry, the depreciation for this quarter is INR 23 crores. .

So that's going to be your run rate going forward broadly?

Probably a little bit.

Yes. This to explain already factors in the migration of our core banking system is what we were essentially saying. So Ashish and maybe for [indiscernible] as well, we can just saw the attention on Slide #12, where if you see until EBITDA level despite a benign business implication and everything that we've discussed earlier. EBITDA has largely been impacted only by around INR 6 crores, INR 7 crores. And this is where when we come down to PBT and PAT, the impact that's larger because of the investment which we've done and which has been something which we've been telling about for rawhide as well. And that is the capitalization, which has happened in the month of January.

Our next question is from the line of [indiscernible] from Advisors.

My first question is, given the management disruption that we saw in the last quarter, do you expect this 2028 launch of our lending business getting impacted, that's one. Second, what regulatory milestones do we need to get cleared over the next 12 months to get to our SMB launch? And third would be, we've broadly given out the 20% ROE target. But if you can, if it's possible if you can take it out into expected yields, annex costs? That would be helpful.

Let me just take the first question is about the challenges in SFP launch, as I had mentioned earlier, and maybe we had referred it in earlier calls as well. RBI has given us in principal approval on [indiscernible] has given us a specific time line. If I'm not mistaken, we have actually articulated did a time line and I'll just give a reference of the slide as well, if there is one.

So If you go to Slide 22, this is exactly the same water you've been asking across the no change in our SFP plan. And as we speak, the work is essentially happening, we are going towards a differentiated SFB. We've given our thoughts in terms of the assets and liabilities as well. liability is being core. So in a nutshell to answer your first point, the SFP functioning or SAP preparation it all has further intensified for FY '27 and the time lines currently as we see are completely intact. Second aspect, which you asked about was a regulatory by [indiscernible], I think this is more different for us. After RBI user intent approval time line, which is given across attempted to capture on Slide #22. As we speak, the major part of our technology upgrade is already done, and we will be adding some more technology levers and the relevant specialized staff as well and that is being progressed. After that, the process I define the process that we'll apply for or we will tell them about the final launch preparation, and that's how it will go through. As regards to your third point on the yields and the kind of products, if I take up on the liability side, if I just take everyone towards Slide 18 and I mentioned it or rather Anutmentioned it in his note as well that 1 of the key aspects which we are essentially looking at is the cost of funds in and around 3.9% based on current. So that will be around 300 basis points. So we are getting skewed towards the cash liability. That is our strength. The point to remember is we are not starting whilst you put an articulation of around 13,300. We already have some INR [ 2,900 crores ] of deposits, which is anywhere there. And with us payment bank license evolving into small finance buying. There are other avenues which we can go into in terms of our low-cost liabilities. As we mentioned it on it is there on the slide, around 2/3 or more business is expected to come on the liability side from our merchant model, which is our current existing model. And then, of course, that will be dovetailed by with some of our brand setting as well. As regards to the yields and I think in the past, either we will just come back, we have listed own products, which we are looking at, largely secured 90% secured portfolio, which we are looking at affordable housing go loans at [indiscernible] loans. We will as we progress towards, we will be providing a much more detailed impact or detailed impact or detailed strategy on how are we essentially building. This is also going to happen through our asset-light model or the merchant-led model. As regards to broadly NIM and I recollect it of NIM we have been putting it across because of our low-cost deposit base, which we have is anywhere in the range of around 8% to 10% is what we are looking at.

We have a follow-up from the line of Ankit Kanodia from [indiscernible].

Sir, one last question which is related to our PPP where we have mentioned about our CASA revenue of INR 629 crores in FY '26. Just a request or is it possible to give a breakup of how much of not income is included in this.

So to answer your question, yes, out of the INR 630 crores of the CASA in revenue, we have INR [indiscernible] crores of float revenue.

The next question is from the line of Siddharth Gupta from Voyager Capital.

Sir, 2 quick questions. One on the reverse merger with the promoter entity, which we had announced back in '23. Any updates that you can share with us? And second, I wanted to know the renewal percentage of our CASA subscribers.

On the reverse merger, yes, we have updated on our earlier call as well. that eventually or rather at the time of the application, our intent was to have a reverse merger as well as small finance tag application. As things stand now and consistent with what we said in the previous calls as well. Currently, we are on the part of our small finance bank, which we proceed, and a reverse merger is something which if it's regulatory allowed, it will be will be explored subsequently as and when the small finance bank comes through. On your second point on the CASA renewal percentage, Anup, you want share?

Yes. So it's the part of the question on the CASA renewal, we are maintaining the renewal run rate of around 60% to 65% for the CASA subscription [indiscernible]

We will take the last question from the line of Nitin, an individual investor.

So I know that you said you won't be giving any guidance. But if you look at the Slide #22 and you have consistently said that you were looking at as part of your SFP plan. Is this 20% something that you're looking by FY '30 or you're planning to achieve that much serene as per your business plan? Also the INR 100 crores of investment that you're going to do, is that also basically on your grant expansion? Or it includes all other expenses like staff, et cetera.

So let me just take the second question first. The investment, which is you quoted about or rather we quoted around INR 100 crores is is primarily around the technology infrastructure enhancement, which we are doing over and above the core banking, which we've done across. So primarily or the larger part of that will be on the digital and technology parts. On the branch, as I have earlier said, it's our business model or a larger part of our asset and liability franchise will be on a [indiscernible] cost model, which is the merchant we will open branches but not in comparison with traditional brick-and-mortar business. So that perhaps answers the second question. .

Which is fine, but that will incur more whatever, even if we open a few branches. So that part is not part of the INR 100 crores. [indiscernible] On top of INR 100 crores.

I essentially said primarily, it was the technology driven. So if you are looking at INR 100 crores, that is the overall CapEx at this stage, which we are looking at. that, but the branches from a business model perspective may not be material is what I'm saying. . Your first question on Slide 22 was about 20% and Anup, jumping on his chair.

I mean the thing is we talked about TAM and we talked about so much in earlier presentations. I've been in investor for a very long time now. But unfortunately, last year's rents of going out new accounts, then what happened with [indiscernible]. And a lot of other things, Investor confidence is certainly down with you all know. What are you really doing? So you get that confidence up and just 20% is definitely something that drills help towards that basically.

Let me just answer your second point now in terms of definitely as within -- I said in my note as well, it has been a redefining year for us, risk calibration, more motor moderation and the event which we are talking about. But 1 thing which has happened and maybe I'm reiterating it off and this also onto maybe answer some of the earlier questions as well, from a management intent and from a management or the stability of the organization, March has been an historic high for us. So there is definitely a retail business, and it is institutionalized. The process is our institutional light and not essentially perfect dependent or a person heaviness as well. So -- and our focus is going towards the which we are looking at. As regards to your specific question of ROE by which time so before Anup answers that, I think we recognize people who have been standing with us and all of this and we are working towards that, and we are making a differentiated SFB. Not many will have a 300 basis point advantage of cost of funds, which I am essentially saying it off. So there is an element to definitely a differentiated model, which is being worked out.

Anup here, but to answer your question on the ROE. The ROE of 20% is what we aim to achieve by FY '30. And there are 3 main factors for aiming that ROE. One is, our asset-light model. So 2/3 of our business, whether be it liability or an asset will be sourced through the merchant network, which we already have, which is already established. .

I think I know all of that, but what I'm trying to really understand is how fast are we working? Because the thing we should have been monetizing everything that we work for the last 3, 4 years. We've been seeing these investors have taken for a very long time now. So what I'm trying to understand is how soon are we looking at -- our profits are down like from INR 100 crores to INR 60 crores. And we know the reason we still need to rarely move ahead and target back where we work, which I understand is asset light and we are differentiated. So we know all of that very well by now. I'm just trying to understand how soon are we going to get some ROE, which will bring back the confidence in the station because that's what investors look at the end of the day.

No. So Ketan mentioned, we are completely the whole entire management and the Board is working towards sale. One thing we can ensure you is we are working on operationalizing at the earliest, what we have given the comp is on what RBI has also given us, we are working towards the same. Second, in terms of getting the higher profitability, we are maintaining the cost discipline. If you see overall the realized cost model has led to this profitability also for us. So we are -- as a management, we have been trying to work on those challenges around the same and we can assure you that we are completely working towards this.

And you're not going to give any guidance for this year at all in terms of what we are planning to achieve [indiscernible]

Due to time constraints, we would need to close the call now. I now hand the conference over to the management for closing remarks.

Thank you. Thank you, everyone. As I have said earlier, it's been quite a task of this quarter, but there will be a lot of positives, which have come across, and I'm not repeating them. But just to give an assurance to everyone, our focus continues to remain on our retail CASA liability is ATS and more importantly, how we are building towards SFP, there has been some amount of events which have happened or event, which has happened, but the management is completely resilient and working towards this. And I'm saying this course it is entire bank is rolling towards the commitment, which we have made towards our stakeholders. So I thank every one of you and as we will -- we are doing our best to increase the momentum and FY '27 would be, again, a redefining year for us in terms of going towards an SSP. Thank you, everyone.

Thank you. On behalf of Go India Advisors, that concludes this conference call. Thank you all for joining us, and you may now disconnect your lines. Thank you.