Home First Finance Company India Limited (HOMEFIRST.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good evening, and welcome to the Home First Finance Company India Limited Q3 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sunil Anjana, Head of Treasury and Investor Relations of Home First Finance Company India Limited. Thank you, and over to you, sir.

Thank you, Sapnali. Good evening, ladies and gentlemen. Welcome to Home First Finance Company's earnings conference call to discuss the financial results for the quarter ended December 31, 2025. We hope you have had the chance to review our investor presentation and press release, both of which are available on our website and stock exchanges. As per our practice, we have also uploaded an Excel fact sheet containing historical data on our website for your easy reference. From the management, we have with us today Mr. Manoj Viswanathan, MD and CEO; Mr. Nutan Gaba Patwari, CFO. With that, I now invite Mr. Manoj Viswanathan to share his insights on overall performance. Over to you, sir.

Thank you, Sunil. Good evening, everyone, and thank you for joining us today. We are pleased to present the performance for quarter 3 FY '26, which reflects the strong business momentum, robust profitability along with a stable asset quality and with improving early delinquencies. Let me share the quarter 3 FY '26 highlights. AUM growth remained strong, growing at 24.9% year-on-year and 5.3% quarter-on-quarter to reach INR 14,925 crores. In this quarter, we added 2 branches with the latest additions comprising 1 in Karnataka and 1 in Madhya Pradesh. We have 6 to 8 branches in the pipeline and at least 6 branches will be added in quarter 4. Disbursements for the quarter stood at an all-time high of INR 1,318 crores, up 10.5% year-on-year and 2.2% quarter-on-quarter. Monthly disbursements crossed INR 500 crores for the first time in December 2025. Our origination yield continues to be healthy at 13.1% with an 83% share of individual housing loans. Asset quality metrics remained healthy and range bound. We continue to focus on early buckets and resilience. 1+ DPD is at 5.3%, an improvement of 20 basis points on a quarter-on-quarter basis. 30-plus DPD remained flat at 3.7% with Stage 2 reducing by 10 basis points. Gross Stage 3 is at 2%. This has increased by 10 basis points quarter-on-quarter, and we are confident that this will improve going forward as the early delinquencies have shown improvement and overall collection efficiency has also improved. Moving to state-specific updates, starting with our largest state of Gujarat. In quarter 1, we had flagged off an anticipated impact of tariffs. However, we are pleased to report that Gujarat has successfully overcome this on account of the overall economic vibrancy of the state. We continue to witness strong growth and stable asset quality in Gujarat. In Maharashtra, we have successfully reestablished a strong growth trajectory, especially in the larger and more competitive markets of Mumbai and Pune. This impact can be seen in the strong AUM growth in this state. In Tamil Nadu, we faced both tariffs-related delinquency issues as well as chrun in the team. We have made good progress in stabilizing the team, and we expect a strong turnaround in the state in FY '27. Regarding UP, we have adopted a calibrated approach. We are in the process of setting up a strong team in order to capitalize on the large potential in the state in the coming years. We can expect the state to be a large contributor for us from FY '28 onwards. With respect to the other key states, Karnataka is emerging out of the [ Qatar ] overhang and has clocked a strong growth this quarter. Rajasthan, MP, AP and Telangana continue to deliver growth as planned. Technology remains the backbone of our company, complemented by a focus on developing in-house solutions that drive innovations and operational efficiency. To enhance operational efficiency and reduce costs, we have developed an enterprise-grade document management system that enables secure, structured and scalable document management. This system handles high volumes with robust security, tracking and safe archival for optimal storage and performance. Digital adoption continues to be strong and a key area of our focus as we grow. 81% of our approvals in quarter 3 were facilitated via the Account Aggregator framework. More than 80% of our loans are digitally fulfilled through e-agreements and E-NACH mandates. 96% of our customers are registered on our mobile app with 85% of the requests now raised digitally. In addition, several AI pilots are in progress, and we expect these to deliver results in the coming years. During quarter 3, we received certification for 70 additional green homes, taking the total to 310. The Pradhan Mantri Awas Yojana 2 schemes saw further traction. As on date, we have received around 4,500 customer applications. Of these, 103 customers have already received the first tranche of the subsidy with an additional 15 cases approved, where subsidy will get credited shortly. We expect the scheme to pick up traction with increase in customer awareness and streamlining of the process. As we move towards FY '27, we are positioned to achieve 25% AUM growth driven by enhanced distribution, technology adoption supported by diversified funding and robust risk management. Lastly, I also wanted to address the topic of my continuity at Home First. There could be some rumors and speculation on this topic, which I want to state are completely baseless. I would like to strongly reiterate that I do not have any plans or intent to move out of Home First. With that, I now hand it over to Nutan to take you through the financials in more detail. Over to you, Nutan.

Thank you, Manoj. Thank you for that. Let us start with the key financial metrics. Total interest income for the quarter stood at INR 429 crores, up by 20.5% Y-o-Y and 4.8% Q-o-Q. Portfolio yields held constant at 13.4%. Disbursement yield for the quarter was at 13.1%. With proactive management, we were able to contract our cost of borrowing ex co-lending by 10 basis points at 8%, supporting our ex co-lending lending spread of 5.4%. Net interest margin for the quarter was at 6%, up from 5.4% in the previous quarter, supported by gearing, optimized liquidity position and lower cost of borrowing. Provisions arising from the implementation of new labor code have been recorded and these onetime expenses of INR 3.3 crores on account of gratuity provisions have impacted OpEx and earnings of quarter 3 FY '26. Reported cost to income was 32%, up by 10 basis points on a Q-o-Q basis. Ex the gratuity provision impact, it would have been 31%. Reported operating cost to asset was at 2.7% for the quarter. Ex gratuity provision impact, this ratio stands at 2.6% for the quarter. We expect this ratio to remain range bound within 2.6% to 2.7% as we focus on growth and expansion. Our profit after tax increased to INR 140 crores, up by 44% Y-o-Y and 6.3% Q-o-Q with return of assets of 4% and return on equity of 13.7%. Ex gratuity provision impact, the earnings growth in Q3 FY '26 has improved by 46.6% Y-o-Y and 8.3% Q-o-Q with return on assets of 4.1% and return on equity of 13.9%. We also had a QIP of INR 1,250 crores earlier in April. Pre-money adjusted ROE for Q3 stands at 17.1%. Moving to provisions and asset quality. Credit cost for Q3 stood at 40 basis points. Provision on Stage 3 has increased to 22% as on December from 21% in the previous quarter. We continue to adopt a conservative approach to provisioning, maintaining a provision overlay above ECL requirements. As of December '25, our total provision coverage is 40.4%. Moving to balance sheet and capital position. Our funding profile continues to be well diversified and cost effective, reflecting our potential prudent financial management. 57% of the funding comes from public and private sector banks, 16% from NHB, 20% from assignment and co-lending and balance from NCDs, ECB and NBFCs. During Q3, we executed direct assignment transactions of INR 215 crores. Our disbursement under co-lending business increased to INR 101 crores for Q3, taking co-lending book to INR 585 crores or 3.9% of the total AUM. Co-lending would continue to be an important part of our strategy to strengthen our ability to cater to higher ticket size segments. We aim to take co-lending contribution to 10% of AUM as we scale. Coming to capital adequacy and liquidity. Our capital adequacy ratio as of December '25 stands at 49% as compared to 48.4% in Q2. This increase in capital adequacy is due to lower cash held in mutual funds. Our net worth stands at INR 4,180 crores, up 73.6% Y-o-Y and 4.1% Q-o-Q. Book value per share as of December is INR 402. With that, we conclude our opening remarks and are now happy to take your questions.

[Operator Instructions] The first question is from the line of Abhijit Tibrewal from Motilal Oswal Financial Services.

Manoj, first of all, thank you so much for kind of reiterating towards the end of your opening remarks that you don't have any plans to move out of Home First. I think that is very, very reassuring. And like you said, I mean, we also kind of used to get questions around the continuity and your plans. So first things first, thank you so much for that. Now kind of moving to business. Very, very clearly, I think disbursements are starting to pick up. But I have 2 questions here. First thing is, I mean, disbursements, while they have improved sequentially, maybe they're still a share lower than what we were expecting or penciling in. So what is it that is leading to this? Is it a higher competitive intensity? Or was it in the nature of, I would say, some weakness in asset quality that we were seeing until last quarter, which was making us go a little conservative on new businesses and disbursements. If you could explain that. And the other thing is now that, I mean, asset quality looks like stabilizing, your 1+ has actually improved sequentially. 30+ is now stable. And so to that end, are we getting higher confidence to start accelerating the business from here? And you have already put out in the press release that next year, we will look to grow at 25% year-over-year. For the fourth quarter, at least what are the internal targets that you're working with?

So the target is to end the year at 25% AUM growth. And again, for the next year, we have given the guidance of 25% AUM growth on AUM. And as you rightly mentioned, yes, last -- the first half of this year, there were certain issues that we were grappling with because of the environment. And as I've mentioned in my detailed state-wise discussion, there are certain states where we were going through certain issues, et cetera, which are now gradually stabilizing and which is the reason for the, you can say, renewed confidence in disbursal numbers. And some of the overhang, which was there because of the MFI delinquency, et cetera, is also now coming to an end. It's kind of tapering off, as you can see in the overall market environment. So these are all the reasons why we are feeling more confident. And we are also seeing that uptick in numbers internally in origination numbers, et cetera, so which will eventually translate into disbursal. So that is the reason we are feeling more confident about the disbursement numbers for quarter 4 as well as for next year.

The spillover of MFI stress, like you mentioned, at least in affordable is coming to an end. So just trying to understand in your detailed comments, you spoke about maybe 3, 4 states where we are seeing things improve. Gujarat, you mentioned, the impact of tariffs, which was earlier anticipated. I think Gujarat has successfully managed with Gujarat being one of our top states. So just trying to understand, I mean, at least this increase in bounce rates, that doesn't bother us, right? I mean I think that is a little bit more of a behavioral problem, right, rather than of an asset quality issue?

Correct. Yes. So we are gradually seeing that divergence between bounce rates and actual collections. If you see last quarter, also the bounce rates were elevated, but then the collection was far better than the previous quarter. So to some extent, it is becoming more of a behavioral issue where customers have multiple accounts, so they end up missing the payment in one account, then they immediately transfer the payment from some other accounts. So we have been talking about this over the last couple of years. But I think now that it's very -- it's coming out very clearly. And -- so collection efficiency is kind of getting disconnected from the bounce rate itself.

Got it. And lastly, Manoj, I mean, on asset quality, again, given that we've seen some stability in this quarter, you think 4Q, again, a seasonally strong quarter? And given where we are, do you think we can look -- start looking at an improvement in asset quality even in Stage 3 from this quarter onwards?

Yes, we should see that in this quarter. Generally, quarter 4 is in any case good. But what gives us more confidence is that we managed to bring down our early-stage delinquency also quite substantially this quarter. So that is giving -- whereas if you see the same quarter last year, it actually had got elevated. So better collection efficiencies in Q3 is giving us the confidence that this thing -- the Stage 3 also should start moving down.

Got it. And have you made any PLR changes in the last quarter or effective January?

Yes. Effective from 1st Jan, we have reduced our PLR by 10 basis points, and we have passed on that benefit to customers from 1st of January.

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

My question was on the PLR front. So we've already taken 10 basis points. But given the competition in the market, and I think even in the last quarter, the BT out rate had increased. So are we planning or is there any plan to further take a rate cut in the quarter? Or how is that aspect likely to shape up in the next, let's say, 3 to 4 months' time period?

So the PLR is a function of our own borrowing cost. So that will work in sequence. So as our borrowing cost comes off, we should be able to pass on the reduction to customers. So as of now, because this decision was actually taken in middle of last quarter. So hence, the Board decided that 10 basis points -- because based on the reduction that we have experienced, we have passed on 10 basis points to the customer. If there's further reduction, yes, the Board will decide how much to pass on in the coming quarter. So the reduction in PLR is more to be basically fair with the customer. It is not directly intended to reduce the BT out. BT outs generally happen when there is a huge difference in the rate which the customer is getting compared to what they're experiencing with us. So a minor reduction in PLR is not going to really materially impact the BT out rates.

Okay. So then in that case, to Nutan, ma'am, what is the overall cost benefit that we've already seen from the 125 basis point rate cut that we have seen at systemic level? And what is that is remaining.

So Shreepal, I'll take you back to the overall benchmark-led rates that we have. So repo-linked rates are about 15%, external benchmark is about 30% in total. So to that extent, we've got the benefit. Out of the 125 basis points in total, we would have now gotten the benefit about 40 to 50 basis points. As we all know that the credit deposit ratio of banks are what they are and the MCLR of banks are just about starting to come off. So moving forward, we should expect a little bit of a reduction of maybe 5 to 10 basis points every quarter for the next 2, 3 quarters is what we expect. And basis that, we will have to go back to see how the rates are looking like, what we are getting and eventually look at the PLR. I would not -- I would think that we will not do any more PLR in this quarter, which is quarter 4 of this year. Anything from here on will be next year only.

Got it. Got it. The other question, ma'am, again, was on the liability side only. So on the NHB borrowing, what is the sanctioned pool that we have there? And what is the borrowing rates that you're seeing from that avenue?

So we got an approval this year of about INR 900 crores. We've actually put that liquidity position slide last quarter and this quarter also. In terms of pricing, pricing remains pretty comparable to the banks. So we are now in that broad region of 7.5. And I mean it's a good pool of liquidity for us, and we want to expand on that as well as the banks, both.

So has there been a PLR cut at the NHB level as well or not yet?

There has been. Yes, there has been.

The next question is from the line of Rajiv Mehta from Yes Securities.

Congrats on good performance. So my first question is on Tamil Nadu. I think you spoke in the initial remarks that the team is in place now. So when do you expect the productivity from the team to come through? And can you also comment about the competitive intensity impacting the volume recovery out there? And are you also budgeting that in FY '27, disbursement in Tamil Nadu would outgrow that of the company?

I think the recovery should -- it will -- recovery will take probably another 2 quarters, Rajiv. So probably from quarter 2 of this year, we should expect a turnaround in Tamil Nadu, I mean, in the coming years.

Okay. And Manoj, were there any underwriting changes done across markets because of the difficult macro that we saw? And can such changes be released, giving you better approval rates or helping you in recovering your disbursement volumes in FY '27?

Not really. So underwriting changes since it's a home loan product, generally, the impact of your underwriting is visible after maybe 18 to 24 months. So when the -- and generally, these things become more visible when there is some stress in the economy, like what we saw over the last 12 to 18 months. So when we realized that this is likely to happen to a specific cohort of customers, then generally, you do not reverse those changes. I mean, to give you an example, if, let us say, customers with, let's say, a certain type of bureau score are going to default in a certain situation. So then you would not reverse that going forward. I mean, unless there's something really, really changes in the environment. So -- and these are ongoing changes. And as we keep discovering, let's say, new cohorts, which may be defaulting, it can happen on both sides, positive as well as negative. So when we realize there are certain cohorts which are behaving well, we kind of doubled down on those. Certain cohorts which are not doing well, we kind of restrict those profiles. So this is an ongoing process. And there is no immediate knee-jerk reversal that we are going to carry on.

Understood. And the last thing is on the origination yield. The origination yield has actually come down by 20 basis points on a Q-on-Q basis. Now is this largely a function of we incrementally doing higher tickets in our own books as well? Or is it also the thought process that whatever decline we are seeing in the marginal cost of funds, we are concurrently passing it on, on the new lending?

Yes. So the -- it is more of the latter. So because the marginal cost of funds has dropped by about 30, 40 basis points. So that is likely to reflect in new originations as well.

So broadly, our book spreads should kind of stabilize I mean, around 5.2, 5.4 and you would want to kind of prioritize growth and push volumes for any incremental benefits.

Yes. We have always maintained that -- see, book spreads will be 5 to 5.20 is what we have always said.

Yes, yes. That's a long-term number. Yes.

Anything more than that, we will basically follow a fair practice of passing that on to the customer.

We have the next question from the line of Raghav from AMBIT Capital.

Congrats on this quarter. I just have 2 questions. One, I wanted to ask what will be your disbursement target for FY '27? I am estimating somewhere around INR 6,400 crores to INR 6,500 crores. Is that a fair estimate? That's about 18% higher versus FY '26.

So Raghav, we're not giving a specific number for disbursal for next year because there are multiple levers by which we can reach our AUM growth target. So we're not giving a specific disbursal number.

But you would have done your budgeting or some sort of numbers, right, for FY '27. So is that a fair estimate of around INR 6,500 crores for next year? Or do you think that...

Yes. Raghav, when you do the budgeting, there are multiple scenarios and multiple scenarios involving a lot of business factors. There could be more than 20 factors contributing to the AUM final growth number. We want to keep those variables flexible and under control. And what we want to guide the market is to an AUM number and then deliver that number. So that's how we are thinking.

Sure. Fair enough. Will reducing the repayment rates be one of -- be under consideration, Say, for example, if you want to deliver a 25% growth on the AUM front, then do you also have some strategies around reducing your repayment rates next year?

Yes. It will be one of those many variables, yes.

Understood. So fair to say that what you're looking at is probably the FY '25 repayment rate, the way that we calculate should be lower compared to FY '26, right? That's a fair assumption to make?

I can separately run the model discussion with you. But like I said, we want to stick to the AUM guidance of 25%.

Understood. And then besides this 10 bps PLR cut, think you've partly answered that. You -- any further PLR cuts will be considered only from next quarter onwards, if at all, right? But do you sense that there will be a requirement for you to cut the PLR given the competitive intensity in the affordable home loan segment, the moderation in volume growth and in this slide, do you think that you'll be required to take a PLR cut further?

So Raghav, the business is now becoming -- you have to react much faster. Therefore, it will be very difficult to say what could be reality on the ground 4, 6, 8 months down the line. So -- and hence, the whole spread guidance of 5 to 5.25, the whole AUM growth guidance as well, we want to stick to that and then let the rest of the interplaying forces be with the internal teams and then deliver on the guidance. So today, it will be very hard to say what could competitive pressure look like in July or in October and how we choose to react to that.

Understood. On another aspect, see, I saw your employee number that's down quarter-on-quarter. Is that because of high attrition that's continuing for the larger industry as well as for you? And what are you doing to control that? That's my last question.

Yes. So attrition has remained in that broad 35% range. What we are seeing, yes, you're right, the overall number quarter-on-quarter is down. We actually have about 250 people who are joining us. It's just got delayed between December and Jan. So we expect that number should increase in March when you see the numbers next time.

Understood. And sorry, one more related question to this. See, generally, out of the INR 1,700 crores -- sorry, 1,700 employees that you have, there would be different cohorts wherein there is going to be a set of people which is highly productive and then there is another set of people, which is not as productive. Is it usually the ones which are less productive getting weeded out or are leaving to join other companies and therefore, you're left with the more productive ones. And that's something that's going to be an input to your AUM growth or disbursement growth next year? Is that the right way to think about this or not really?

Yes, that's how we think about it. And the aim is to retain the more productive salespeople. And so all our efforts in terms of reward recognition, et cetera, work towards that, retaining the more productive people. But some of them also do right because of various other reasons. Some of them want to go to a larger brand or they want to take up a more senior role or some other kind of role, et cetera. So those factors are also at play. So -- but yes, of course, internally, the efforts are on to maintain the -- I mean, retain the more productive employees.

We have the next question from the line of Adityapal from MSA Capital Partners.

Good performance.

Thank you.

Just a couple of questions to you and Manoj. So over the last couple of quarters, we've gone from saying 27% to 30% AUM growth to 26%. And now today, we're saying 25%-odd AUM growth for '26 as well as '27. Now this is the guidance I agree. And the branch additions are also not keeping up the pace to what we had said a couple of quarters back. What are we seeing on the ground? I mean is there any change because now the entire -- the cycle has turned somewhat, the credit cycle? So do you see any green shoots now going forward, maybe say, exiting December?

So let me just straight away take the question on the guidance that you referred to. So the guidance we had given was INR 20,000 crores by March '27. With 25% growth next year, we will hit about INR 19,600 crores to INR 19,700 crores. So essentially, the overall impact in the medium term is about INR 300 crores of AUM. And we all know how the credit cycle has been in the last 12 months. So it would not be very fair to say that we are dropping numbers quarter-on-quarter. I think we need to look at numbers in the medium term and whether the business is geared to take on challenges and do the right things when the cycle is difficult. So that -- I think that's how I would like to address the first part of your question. The second part, you talked about the branch additions. Branch additions, again, take place on a regular basis. Yes, this particular quarter, we had 2 branch additions. But come March, we are expecting 6 to 8 branch additions. So again, it's not a linear number, Aditya, I would request you to consider that.

So to address the last part, I think you were saying about -- last part talking about green shoots, yes, I think the aim is to convey that, yes, we are seeing those green shoots. We have got over some of the challenges that we had in some of the markets. And we are seeing green shoots. We are seeing -- I mean, we are feeling more positive about our origination as well as disbursal numbers for the coming quarters. So definitely want to put it out there and convey that.

Understood. The other part is asset quality. So I definitely understand that last quarter, we tightened our credit filters and even after tightening our credit filters and which would have definitely led to higher rejection rates, we posted this good disbursement growth. Now because of our tightening of credit filter, do you see that this is the peak in terms of 1+ DPD as well as the GNPA?

Yes. So 1+ DPD already has turned around. And the GNPA also should start moving down in the coming quarters.

We have the next question from the line of Prithviraj Patil from Investec.

So I just wanted one clarification on the -- you have given the cost of borrowing ex of co-lending. So I just wanted to know what that metric is and how you calculate.

So we give 2 lines, Prithvi. One is the total cost of borrowings, which includes the total bank borrowings, the assignment transactions, the co-lending transactions. Because the optical spread in a co-lending book is low, we started giving the cost of borrowing, excluding co-lending and the spread, excluding co-lending as well. So what we basically do for that INR 530 crore pool, whatever the cost of borrowing is we take that out and recompute the cost of borrowing and we put it in a separate line for full disclosure.

We have the next question from the line of Divyansh Gupta from Latent PMS.

A couple of data keeping questions. What will be our LAP AUM mix? And what would be the NPA for the 2 respective line of businesses?

Sorry, your question is LAP AUM, is 15%. What is your second question?

The NPA mix between the HL NPA and LAP NPA?

So LAP will be about 1.4. HL will be about 2 -- slightly above 2 just because it's a higher book.

Sorry, higher book as in?

Mix is higher.

Sorry, I didn't get. Can you repeat?

So LAP, basically, to answer your question, LAP NPA will be slightly lower than the HL NPA.

Got it. Understood. And the second question was any early read on the CLM 1? How is it impacting us or the customer experience and any -- from our industry as well as Home First specific?

You are referring to the new co-lending guidelines, if I'm right?

Yes.

The co-lending guidelines have become effective 1st January 2026. We are in this transition mode as we speak. So some banks are ahead, some banks are taking some time. In my view, we will take another 2 weeks to fully settle the process, but it is a matter of transition, and we will be -- rather be done with it quickly. As we speak today, we are still undergoing conversations with some banks. We do expect that 1 out of the 3 banks, we will do a transaction this month as well.

So does it mean that, let's say, this -- at least the period at least in the first month, our co-lending disbursal is a bit slower, and we expect to ramp it up in the next 2 months?

Yes. But I also have to add that some variations on a month-to-month basis are normal.

Got it. Understood. Understood. This is helpful. And the next question was that if I remember last con call only, we said that UP, there are 4 or 5 big cities and like [Foreign Language], the market is not as big. But in the opening remarks, we mentioned that we expect UP to -- we want -- we expect to make UP a big chunk by -- big business by FY '28. So has there been a change in strategy or products or anything, some light if you can shed on that?

No. So UP, UP was part of our plan. If you see last -- 2 years ago, when we started our expansion into North, UP was part of our plan. But some of our early experience in UP was not so good. and hence, we kind of decided to take a more careful approach. In terms of size of the market, it is large. And yes, as you are mentioning, it is -- right now, there are 3 or 4 large cities, which have a larger amount of business, and then it is more fragmented. But however, that will not deter us from going into UP. It is one of our key markets which we have for future. It's just that by the time we kind of put together the team and create the foundation for expansion to UP, it could take us another few quarters. So which is why we have mentioned in the call that in FY '28, it would start becoming a large contributor.

Got it. And just 2 more questions. So first is, I think in the deck, we mentioned that our CIBIL, average CIBIL is around 750, 747. This is origination at the time of origination or after because once someone takes a home loan then CIBIL score anyways goes up.

Correct, correct. That is at time of origination, at the time of origination.

Got it. Understood. And the last question was that the increase in GNPA, let's say, looking at the Stage 3 absolute growth year-on-year has been faster than the increase in the AUM, which is also, therefore reflecting in the higher NPA percentage. Now given that, let's say, some green shoots and, let's say, overall, let's say, pain being done, how should we expect, let's say, in the next few quarters, this ratio should we expect GNPA to come down with some flowbacks? Or it's just that the growth of the book will more or less make the denominator big and therefore, the percentage will come down?

No, both will happen. So the absolute value should also come down. And because of the denominator going up, there will be some impact on that as well.

Got it. And is it through any specific collection effort or just generally a reduction in stress and therefore, people will -- people are expected to pay back and expecting it to revert or we are doing much more for collections? Or anything specific.

So in some markets where delinquencies are elevated, obviously, there is a greater collection effort. But for us, collection is -- the entire team is tasked on collection. So it's kind of part and parcel of the day-to-day activity for every branch, every employee in the branches. And also to some extent, because of the, you can say, green shoots in the economy and the overhang of all this delinquency going away, some customers also kind of proactively come forward to settle their accounts and repay and come back to normal.

We have the next question from the line of Chintan Shah from ICICI Securities.

So I had a question on the AUM growth. So on the disbursement, we have clocked around INR 500 crores of disbursements per month. So I just wanted to understand, but in terms of the tariff impacted states, which was Tamil Nadu and Gujarat. So had we tightened our underwriting filters? Or had we done any changes to our underwriting policy due to the problem related to tariff? And now have we loosened the filters? Or what is the kind of -- what is actually driving this INR 500 crores and makes us confident that this will be sustainable?

No. So as I mentioned, the tightening of filters is an ongoing process. It's just that when there is an event in the environment, economy not doing well, some of these trends emerge much faster, and it helps us to take those decisions on which segments to tighten and so on, so which we did over the last few quarters. So the growth is not coming from relaxing those norms. The growth is coming from increased distribution and maybe just a bit of better momentum in the environment. So not from relaxing of credit filters.

Sure. So in case -- but are we also planning to relax those filters? And if we do, then could it further accelerate the growth then?

No, we are not looking to relax those credit filters because the credit filters, as I mentioned, the impact of the credit filter comes only after 18 to 24 months. So we have already realized -- once we have already realized that a certain cohort will not behave, then there is no -- it doesn't make sense to kind of relax the criteria on that cohort.

Sure. And do we have any limit on a maximum exposure to a single state, any internal ceiling or limit?

No, at the moment, we have not set any limit for a particular state because if you see our market share in each state, it is still in low single digits. So which is why we have not set any cap for any state. So in any state where we are present, there is obviously other players. There are obviously other players who have much larger share, including banks. So which is why we have not, at this point, put any cap on any state.

Sure. And one last question. In future or in the coming years, do we intend to further -- do we intend to reduce ticket size at any point of time to just get into a higher-yielding segment like INR 6 lakh to INR 8 lakh ticket size? Or this is the current ticket size will only continue?

No. So our proposal always has been that as the country grows and incomes grow in most of these states, the availability of housing in the lower ticket sizes is shrinking. So we have always said that every year, the ticket sizes will grow by 3% to 5% as a natural progression. And -- so we will continue on that path. We are not going into lower ticket sizes.

We have the next question from the line of Nidhesh Jain from Investec.

Thanks for the clarification on rumors around management changes. So first question is on management change only that -- to Manoj, that you will be continuing as an executive role as MD and CEO going forward as well, right?

Absolutely.

Second is, how is the approval rate has changed, let's say, last year to this year? Is there a drop in approval rates that we have witnessed?

Not significantly because the way we operate is that if any credit screens which have to be implemented, new credit screens have to be implemented, we convey that to the front-end teams. And a lot of that, you can say elimination happens in the front end itself. So by the time the proposal comes for underwriting, it's already gone through those screens. So at a head office level, there is no significant change in approval levels.

Sure. And what are the plans to add -- for branch addition in FY '27 and which are the states which you are looking to add branches?

So we have about 6 to 8 branches in pipeline. It's kind of spread across several states. So I think there are a couple of branches coming up in the North, Uttarakhand, Delhi. I mean I think they are basically split across the various states. So I think 1 or 2 branches in -- across 4, 5 states.

Yes. I think that is for Q4. Any planned addition for FY '27?

So FY '27, again, we are looking to add about 25 to 30 branches. It will again follow the same path where we are concentrating. So MP will be one of the states, MP, Andhra Pradesh, Madhya Pradesh, Tamil Nadu, Maharashtra, I think these would be front runners next year in terms of branch additions.

Sure. And UP will pick up in FY '28, is the plan?

That's right. That's right.

And lastly, a data keeping question on what is the count of active connectors for the quarter?

Count of active connectors is around 3,600.

[Operator Instructions] We have the next question from the line of Maulik Chaudhari from Monarch Network Capital Limited.

So I just have one broad question. So there was an article in Economic Times 4 days ago stating that sales in affordable housing has declined. So just wanted to know your take on the overall loan demand momentum?

Yes. So see, affordable housing, we'll have to kind of narrow down the definition to understand where it is shrinking and where it is growing. So as we have always said, the lower ticket sizes in affordable housing. So if you look at ticket sizes less than INR 10 lakhs, there are markets where that is shrinking. And the growth has moved to the ticket sizes between INR 10 lakhs to INR 40 lakhs, which is a natural progression of country progressing, incomes increasing and so on. But of course, different states are in different stages of this evolution. There are some states where they are already at an average ticket size of INR 15 lakhs or INR 20 lakh plus. In some states, there are still properties available between INR 10 lakhs to INR 15 lakhs. So that is a state-wise, there are -- state-wise, there are differences. But yes, if you were to -- if you were to look at an overall commentary, the ticket sizes below INR 10 lakhs are shrinking. That's because of the income -- increase in incomes in most of the pockets in the country. So I think we -- in order to keep track of affordable housing, we will have to index the ticket size by about 3% to 5% every year to account for inflation.