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

Ladies and gentlemen, good day, and welcome to Home First Finance Company India Limited Q4 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Manish Kayal, Head, Investor Relations, at Home First Finance. Thank you and over to you, sir.

Thank you, Ria. Good morning, everyone. I hope that all of you and your families are safe and healthy. I extend a very warm welcome to all participants on our Q4 and FY '24 conference call. I hope everybody had an opportunity to go through our investor deck and press release uploaded on stock exchanges yesterday. We have also uploaded the Excel spreadsheet with historical numbers on our website. So please have a look. On today's call, we have our MD and CEO, Mr. Manoj Viswanathan and CFO, Mr. Nutan Gaba Patwari. We will start this call with an opening remarks, by Manoj and Nutan and then we will have Q&A session. With this introduction, I hand over the call now to Manoj. Over to you, Manoj.

Thank you, Manish. Good morning, everyone. I'm pleased to share with you the highlights of the quarter 4 and the full year FY '24 performance. We concluded FY '24 on a strong note. Disbursements at INR 3,963 crores grew by 31.5%, and AUM grew by 34.7%. The spreads remained healthy at 5.4%. The PAT at INR 306 crores grew by 33.9% on a year-on-year basis, leading to the ROA of 3.8%. Delighted to deliver ROE of 15.5% for the full year FY '24. And quarter 4 FY '24 saw it higher at 16.1%, even in a high interest rate environment. We continue to build the distribution by simultaneously entering new markets and deepening our presence in existing markets. The states of Uttar Pradesh, Madhya Pradesh and Rajasthan are emerging as a large affordable housing markets and we have taken steps to strengthen our presence and expand distribution in these states. Overall, we have added 22 branches in FY '24 and now we have 133 physical branches. Including potential and digital branches, we now do the business across 321 touchpoints. Across Tier 1 to Tier 5 markets in 13 states. We have added 7 branches in UP, MP and Rajasthan in FY '24, serving 16 additional touchpoints in these states. Our asset quality continues to be strong with a focus on early delinquencies. 1+ DPD is at 4.2% and it has declined 30 basis points from previous quarter. 30+ DPD is at 2.8%. It's a decline of 20 basis points from the previous quarter. Gross Stage 3, GNPA is at 1.7%, flat quarter-on-quarter. And prior to RBI classification circular, the figure stands at 1.1%. Our credit cost is at -- was at 10 basis points that is a decline of 20 basis points on a quarter-on-quarter basis. Overall, collections remain strong and even in quarter 4, we have had considerable recovery from previous written-off accounts, contributing to these low credit cost levels. We continue to maintain our credit cost guidance of about 30 to 40 basis points. Digital adoption continues to be strong and a key area of our focus as we grow. 95% of our customers are registered on our app. Unique user logins was 53% in quarter 4. Service requests raised on app was at 89%. In quarter 4, we have processed 47% of our loan sanctions with data coming from the Account Aggregator. Another important point to communicate is that our Chairman, Mr. Deepak Satwalekar's tenure has been extended for the second term of 5 years, subject to shareholders' approval at the upcoming AGM. With this, I would now like to hand over the call to Nutan to take you through the financials. Nutan, over to you.

Thank you, and good morning, everyone. Starting with the spreads in NIM, our overall spread is at 5.2% and our spread ex co-Lending is at 5.4%. Our overall Q4 net interest margin stands at 5.3%. The NIM compression is an outcome of continued growth, and increase in financial leverage, increased cost of borrowing and higher cash and cash equivalent holding in Q4. The breakup of this NIM compression is around 20 basis points coming from cost of borrowing increase, net of repricing, 20 basis points on part of financial leverage, and 20 basis points on higher cash. Moving ahead, our ex co-lending spread guidance of 5.0 to 5.25% stands for the medium term. Co-lending is building well in line with plan and remains a return accretive product in markets we operate. Our first milestone is to take it to 10% of AUM . Today we're only at 3%. As you all must also be watching, the deposit rates are holding. MCLR of all banks are trending up on the back of tight liquidity situation. Despite all of this, our marginal cost of borrowing remains range bound for the last 5 to 6 quarters with continued diversification. Our ability to engage with banks for improved pricing comes from continued focus on transparency of sharing information with lenders and our scalable business model that allows us to expand while managing risks. We also got an outlook upgrade from India Ratings, one of our 3 rating agencies. This kicks off a very important journey for us to move to the next rating category. Moving to operating cost. Operating cost to assets at 2.5% for Q4 is due to cleanup of some old provisions as part of closing the financials for the year. We continue to maintain the guidance of 3% going ahead as we focus on expansion and get deeper into new markets. Our balance sheet is strong and ready to take on the growth ambitions of company. Starting with borrowing, the company continues to have diversified and cost-effective long-term financing sources. This remained diversified across banks and industry. Our borrowing mix as we already seen continues to be 60% from banks. NHB is at 18%, and we've also taken a further drawdown of INR 250 crores in April '24. 14% from direct assignment and 3% from co-lending, 3% is from IFC, NCD, and we have no borrowings from commercial papers. Our cost of borrowing is competitive at 8.25%, an increase of only 3 basis points quarter-on-quarter. Coming to capital. Our capital adequacy is at 39.5%, with Tier 1 at 39.1%. Our debt-to-equity is now at 3.4x. Our March '24 net worth is INR 2,122 crores, and book value per share is INR 240. Moving to provisions. We have remained conservative and continue to carry provision over and above the ECL requirements. The total provision coverage ratio stands at 50.9%. Prior to NPA reclassification as per RBI circular, our PCR stand at 75.7%. On specific transactions, we did direct assignment of INR 103 crores during the quarter as a liquidity strategy. We continue to have a very robust demand for our portfolio of assets. Our total co-lending volume in Q4 was INR 68 crores for quarter 4 and INR 214 crores for full year. Co-lending business is growing, and we expect to contribute 10% of AUM in the near future. With this, I open the floor for questions and answers.

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

Congratulations, Manoj and Nutan. Let me congratulate on another good quarter for you and the team. I had just three questions. First one for Nutan, how should we look at cost of borrowings trending? I think you've guided that in 1, 2 quarters, it is going to stabilize. Where are we now in terms of the outlook on cost of borrowings. If you can answer that, then maybe I can get to second question.

Sure Abhijit. Abhijit, like I was mentioning everyone is watching the overall liquidity situation and the deposit rates and MCLRs. So what we're experiencing is that the private banks able to continue to maintain the pricing. Public sector banks, there is a little bit of better -- higher pushback. Nonetheless, our pricing is maintained at the same level for the last 5 to 6 quarters as we've been disclosing the numbers as well. So net-net, coming to cost of borrowing, another 10, 20 basis points at best is what we're looking at. We are not expecting any further increase, unless, of course, the policy rate changes or G-sec pricing changes. With this environment, another 10, 20 basis points, not more than that.

Got it. And the second question I had is for Manoj. Manoj, I mean, if I look at the BT Out rates, until last year, the number which used to be in the ballpark of 6%, right, suddenly seems to have moved in this year to 7.5% to 8%. So I mean is there anything you are seeing there? Because that you've seen in the past, right, as organizations grow, as organizations mature and other lenders, right, have more comfort on your originations, the appetite to take the balance transfers of other institutions go up. So anything that you're seeing there on balance transfers?

No, I think the balance transfers slightly elevated only because of the repricing that has happened. I mean we don't see any kind of long-term trend or anything like that. Largely as the reaction to this sharp increase in rates that has happened in the last 2 years. It's largely result of that. And we are also putting in place a lot of new measures to address the balance transfers. We don't see that as a major concern. I mean it is a concern, but it's not a major concern because you can see overall erosion, erosion levels are still at the same level. So it seems to kind of what do you call it, balance out between balance transfers and own prepayments, et cetera. The total erosion still stands at about 18% -- 16% to 18%, including the balance transfers. So it's not like the increase in balance transfers have increased erosion rate of the portfolio.

Got it. And one last question that I had was more of the sectoral level. I mean you'll recall, there was the circular from RBI, which spoke about HFCs now kind of asked to start charging interest on loans only when the check was handed over to the customer. So I mean what I'm kind of trying to understand is at the sectoral level, what you're seeing is it can even take up to 30 days, 40 days in a lot of cases from the time that check is printed to the time the check is actually handed over to the customer. So I mean, two things I wanted to understand from you in terms of our practices, what is our practice, in terms of how -- when is it that we start charging interest to customers? And if at all, you see this having any impact on the interest income?

So in our case, we don't issue checks at all. So as a practice, we have been doing electronic transfers from day 1. There are, of course, a certain proportion of transactions, especially on the resale transactions, where the customers themselves require demand draft because they have to show the demand draft to the seller so that the seller will transfer the property in their name. So that is a kind of assurance. So those are the only transactions that we -- where we issue a demand draft. But in the case of a demand draft, we are also incurring the cost from day 1 because the money goes out of our account. So we charge the interest to the customer. However, the clearance happens fairly quickly. So I mean, we don't have a practice of actually issuing a check and then completing the transaction later, et cetera. So the turnaround time between issuing the demand draft and clearing happens fairly quickly. So within 30 days, almost 90% -- 95% of the issued demands get cleared. So on average, it could be maybe a 15-day turnaround before it's cleared. And we don't have a very large -- I mean basically, it largely happens in the case of resale transactions where the seller requires the assurance. So those are the only cases where we issued a demand draft otherwise largely it is done electronically.

Got it. So in essence, I mean, for us, it is not going to be much of an impact because anyway recent transactions should be a much lower proportion of our disbursements. And there also -- like you are saying, there was a 15-day on an average kind of a lag between the demand draft getting printed and handed over to the customer.

Correct.

So now if at all, this is the only impact which will be there. But now on printing of demand draft, you can start charging the customer. Only when the demand draft gets handed over to the customer, we can start charging interest.

Exactly. The RBI circular does not mention demand draft. So we will have to get a clarification on that in due course.

Next question is from the line of Rajiv Mehta from Yes Securities.

Congrats on good results. So firstly, on the origination yield ex of co-lending. That has declined by 30 basis points on Q-on-Q basis. And second is on the accelerated AUM shift towards more than 1.5 million loan ticket in this quarter. And this is also ex co-lending, that shift is pretty significant in the quarter. So what are reasons behind both?

Okay, I...

Your question was not clear, Rajiv. Can you repeat?

Can you hear me properly now?

Yes.

Yes. First question is on the origination yield ex of co-lending. That has come down by 30 basis points quarter-on-quarter. And the second is the AUM shift in this quarter towards more than 1.5 million loan ticket has been pretty accelerated. And this is also ex of co-lending. If you remove the impact of co-lending, the shift is pretty significant. So what is also driving this?

Sure.

So origination yield is as you have mentioned will be range bound. Our target is to hit it with 13.5% kind of an origination yield, but there will be some quarter-to-quarter fluctuations on that. Nothing more to read into that. And the second question was on...

Average ticket size going...

Average ticket size, as we have mentioned before, there is -- there will be a secular increase in ticket size as we go forward because in certain states in the country, the ticket sizes have gone up because of higher incomes and aspirations of people to build larger houses or purchase larger houses. So there will be a gradual uptick in ticket sizes, but it's not very -- I mean, we are not addressing -- we're not going after a different segment. It is just a normal increase that we will likely to see as the country progresses.

And the second question is on Gujarat, which is a key market. Incrementally, there has been a growth slowdown in Gujarat. So when I calculate the growth Q-on-Q has been around 4.5%, 5% this quarter versus 6%, 7%, 8% in the previous quarter. So the slowdown which we have seen in this quarter in Gujarat, is it linked to what competition we have? Is it that the higher amounts of BT Out are happening in Gujarat because it's more -- slightly more mature market for us. And -- or whether if there is this market slowdown happening in Gujarat.

So Gujarat, you're referring to the AUM decline in Gujarat, that is something that we've...

Incremental AUM growth.

Yes, incremental AUM growth. Yes. So because we are diversifying ourselves to other markets, it's kind of intended number. Our aim is that over time, share of Gujarat will come down in the overall mix. And -- but no, in Gujarat also see, our share is about 4% to 5%. So there is still a lot of headroom to grow. So it's not that we are looking at a slower growth in Gujarat. We aim to grow by between 20% to 30% in Gujarat as well.

Okay. And just lastly, Nutan can you explain the decline in OpEx in the quarter, both the employee cost as well the nonemployee cost because I see that branches have been added but the OpEx has come down. Have I missed out something in terms of explanation in the press release?

Nothing to miss, Rajiv, essentially because March will be financial year close. We took this as an opportunity to clean up some excess provisions that were there that kind of got built up essentially that. And that's why when I was talking about my opening remarks, I mentioned that the right number to look at moving ahead is 3%. We should not get anchored to the 2.5%.

Next question is from the line of Shreepal Doshi from Equirus Securities.

My question was pertaining to the cost of funds side, so incrementally what is the rate of interest rate getting on sanctioning by NHB?

NHB, again, has multiple schemes. It varies from scheme to scheme. So the range that we get from NHB is anywhere from 5.5% to 8.5%. So that's the range that NHB lends on. It depends on the funds available with them, the pool that we can tag and refinance their mix and how they want to share it with different HFCs with the combination of various factors, but that remains to be the range.

Okay. Have -- so we must have seen a change or an increase in that range as well, right, in the last 6 months' time period?

Yes.

So technically, we would have passed on that change to our customers as well, right?

So if it is the floating book, yes. If it is fixed book, then it does not change, but it is fixed from NHB as well. The age of scheme for example remains fixed. The other scheme is floating as we pass on. But the pass-on is not 1:1. We do pass on at specific periods, we plan for it. So we will not specifically go and then pass on for customers which are tagged to NHB. We will not do that.

Okay, okay. And the second question and also circle on -- bridging here. So the second question was on the credit cost front, so if you look at structurally, we have had a credit cost ranging between 30 to 50 basis points. So this quarter, it has been a little lower. So while if you look at peers in the landscape, they have been in the range of 15 to 20 basis points. So with portfolio seasoned now and having seen two big cycles, is it fair that incrementally, we can also stabilize at relatively lower levels.

So let me give you the context and how we also look at from a ECL provisioning perspective because that impacts credit cost. So firstly, as you would have seen, our delinquencies have improved and stabilized across buckets, right? So therefore, the ECL movement is only for new growth that we build on the book. But we also try to carry a larger provision than what the ECL model throws up, and we have a significant overlay more from risk management perspective. So specifically for this quarter, what has happened is that we've had some write-backs from loans that were originally written off during the COVID period and data because we've been taking prudent calls to do technical write-offs, but we've had recoveries of almost close to INR 2.5 crores. That is essentially why this quarter, the number is looking low. Moving ahead because of the provisions that we've continued to carry, which is higher, we continue to carry slightly higher provisions from growth as well. The right number for us probably is around 30 basis points, not 15, not 20. So around 30 basis points is what we think we should be projecting for us.

Okay. Got it. And the last question was on the branch expansion side. So incrementally, which states would drive our branch expansion?

So we are looking at some of the emerging affordable markets like UP, MP and Rajasthan to drive further expansion. So as we mentioned, 7 out of the 22 branches that we have put up last year are in these states. And in the coming years also, we intend to further expand into these states.

Next question is from the line of Sameer Bhise from JM Financial.

Congrats on good quarter. So if I look at the marginal cost of borrowing, that's still like 40 bps away from the on-book cost that we see on Slide 29. So by when do you think the both converge, like given the environment remains the way it is right now?

So Sameer, hopefully never is the answer because we also have NHB borrowing. So as you would have seen on the liquidity slide, we have a INR 250 crores sanctioned line from NHB, which we have drawn down in April, which allowed us to kind of maintain the cost of borrowing. And of course, in this FY '25 is also hope to get a significant line which will again help us manage the cost of borrowing. So from a projection perspective, the 8.30% can look more like 8.50% in 2 quarters to 3 quarters and was fully flatlined there. Again, the assumption is that there is no policy rate change or no significant changes in the overall capital -- the capital markets.

So then is there a case for a bit of a pricing increase on the asset side?

Let's Manoj address that.

So pricing increase, as we mentioned earlier, the -- up to small increases like 10, 20 basis points, we are looking to absorb it, and we are not looking to pass it on to the customer. because we want to give the customers a stable period where we don't keep changing the rates. We will watch the trends. If there is a substantial increase, then, of course, we will have to pass it on. But if there are the increase, the difference remains in the 20 basis points range, we will not pass it on.

Fair enough. So I think like until 20 basis points, you are okay to hold on to current spreads levels that you have NHB access also? Secondly, if I just look at the quarterly ROA profile. So for the full year, I think we have been able to hold on well at around 3.8%. But say, if I look at a 5- to 6-quarter trend, steadily there has been like a 30 bps kind of a drop. Is it the right way to look at it on a quarterly basis? And would it be fair to comment that probably the ROA kind of bottomed out at current levels?

Yes. ROA will keep declining slightly every quarter because that's the financial leverage that is playing out. That much of movement you will see. I mean there may be some fluctuations in some quarters because of higher cash being kept, et cetera. But otherwise, on a secular trend, you will see that there is a small decline every quarter, which is largely due to the financial leverage.

Yes. So in terms of our threshold on the downside, we would be towards the trough now?

Yes. So the way to look at it -- so let me share how we're looking at next year's ROA tree, for example. So we've always been talking about the spread of 5% to 5.25% right? When you look at that, our NIM for full year is 5.8%. So let's say, 5.5% NIM more or less, and 2.2% to 2.5% of other income. So that lands somewhere between 7.8%, 8% of total net total income. And an OpEx of 3% and a credit cost of 30 basis points, you will land at a ROA of around 3.5%. So that range can be 3.4% to 3.6%. But let's say you anchor around 3.5% plus/minus which essentially leaves you with a 16% plus ROA because the financial leverage will continue to go up. We are already at 4.5%. Let's say we exit close to 5% with an average of 4.7% to 4.8%. So the idea is that we maintain a 16% plus ROE with a significant contribution from the core business itself.

Next question from the line of Raghav Garg from AMBIT Capital.

So my first question on this thing where RBI pointed out charging of interest before the date of disbursal. But if I understand correctly, you gave in principle approval but the actual disbursement happens later, right after further due diligence. Just wanted to clarify if you are charging any interest before the date of disbursal but after giving the in principle approvals, just one clarification on that and then I will ask my other question.

Not at all, not at all. Yes, disbursal, the interest starts only once the actual payment goes out of the system as in once the -- once our account gets debited for the amount, only then the interest starts.

My second question is on incremental spreads. So I think you are guiding for 5%, 5.25% in that range but if I look at your incremental spreads, it's around 4.7%, right? So how is it that you will be able to bridge that gap from 4.7% to say 5%, 5.25%?

So Raghav there are quarters where the spread will be lower. Essentially, those quarters really do not take the NHB funding. But the quarters where we've taken NHB funding, the spreads will also expand. So the overall spread for the year, therefore, will kind of compensate that and land in that 5% to 5.25% range. That is one of the key drivers. The other driver, of course, we talked about more expansion. We've talked about the product mix slightly increased in the last slide. So all of those things will contribute to spread as well.

Right. Nutan, if I look at your spreads since 1Q FY '23, they've been coming down, right, and that's because of the higher cost of borrowing. There hasn't been a quarter where -- or there hasn't been a series of quarters where these spreads have fluctuated up and down. So why should that be the case going forward?

So the reason that is coming down is because the cost of borrowing has increased sharply. There has been a significant catch-up. Now that catch-up is complete. So therefore, it will kind of stabilize. But the yield line, I'm talking about ex co-lending numbers, we should start seeing some expansion in that from new products as well.

Understood. And last question, why was your OpEx ratio lower or absolute OpEx flat despite branch and employee addition?

There's some cleanup in the financials, Raghav. I mean this is March. So we kind of do a deep clean-up of the financials. We had some old provisions which we said is kind of better to kind of knock them off.

Okay. Understood. And sorry, just one more last question. So what is the outstanding pool of written-off loans, which -- from which you could potentially see some recoveries going ahead?

The potential target pool, I mean, the number would be close to INR 20 crores, but we do not expect the INR 20 crores to come and hit us as write-backs anytime in the future. What we see is usually a [indiscernible] of around INR 50 lakhs, INR 70 lakhs every quarter. This quarter, it was around INR 2.5 crores. Of course, we did some focused activity as well on that. So I would not expect more than INR 50 lakhs, INR 70 lakhs going ahead every quarter.

Next question the line of Pavan Kumar from RatnaTraya Investments.

I just wanted to check if there has been any change in terms of NHB lending pool that has been -- that is available to all the HFCs? And do we -- how do we see our NHB or NHB pool as a proportion of our entire borrowing pool going forward? Is there going to be any kind of significant increase in proportion, and how will that affect the overall [ buckets ]?

So, no significant change as far as we are familiar with. NHB does have this process of inspection and quality of reporting and everything else, which determines the size of the borrowing. One of the new criteria that we also understand has gotten added is the incremental housing loans. And essentially a percentage of that is what NHB will be funding. So we are the best place from that perspective. So coming to the second part of your question, NHB refinance as a percentage of the overall book. My sense it'll be 20% on an average basis. I mean we believe plus/minus 2%, depending on whether we've taken disbursal or not, taken disbursal but ballpark around 20%, and the number -- the percentage of cost of borrowing 8.3% is where we are right now. Like I was mentioning earlier, 8.50% -- assumes that we will continue to maintain a 20% in NHB finance and able to deliver 8.5%, let's say, for the rest of this year.

And currently also, you're at around [indiscernible].

Yes.

Okay. But I just wanted to have your comments on one of the larger NBFC, HFC. I mean, you can call it HFC [indiscernible] exited the market. And I thought that pool would be available to all of you guys, so with -- and I just wanted your comments on why there has not been a significant increase in availability.

So your question is why some other HFC does not have 20%? Is that what you're asking?

No, no. I'm asking about all the HFCs -- for all the HFCs that are there in the market, the pool should have significantly increased since the biggest player has now emerging with [indiscernible]. So that's what my question.

We tend to agree with you. But going back, NHB runs a treasury function. It's not the money that they have from the government or subsidies. They essentially raise from the market because they have a significant advantage in rating. They add a small margin to that and then they lend to us. So the overall, what they have been raising has reduced to account for the largest HFC move becoming a bank.

Okay. Now one last question from my side. What would be the difference in the borrowing rate NHB versus marginal borrowing rate at the present moment?

Almost 50 basis points.

Next question is from the line of Nischint Chawathe from Kotak Institutional Equities.

Three small questions. One is, where do you account for recovery from written-off loans?

In the credit cost line.

So this is adjusted with the credit cost?

Yes.

Okay. How do you account for co-lending income? Where does it get reflected?

The co-lending income gets reflected on the spread basis. So essentially, only the delta gets represented in the interest income line.

Okay. It is not like fee income or something.

No, no, no. The fee income is sitting in the fee line, but there's no up-fronting, that's your question.

I got it. And this comes -- sorry, just to clarify, this comes on interest on loans or does it come on other interest income?

Interest on loans.

Okay. Got it. Can you quantify the number for this quarter or the year or it's too insignificant?

I'll have to come back to you.

Okay. Okay. Maybe you can do it from next year when it will start getting a little more relevant.

Yes, we view that once we get to this milestone of 10% on co-lending, it merits a separate disclosure on the product. Otherwise, it's too small.

No, no, fair point. The reason why I'm saying is that you can just book a spread and the IGAAP yield calculation that you do sort of tends to get a little distorted and obviously kind of get into that discussion mode. The other one was that, why did the repayment rate go up for the quarter? And ideally, I would have expected the repayment rate to be lower this year versus the previous year.

You're talking about the balance transfer rate?

No, the repayment rate. So the simple math is you have the loan book number, you have the disbursements for the period. So you could mathematically calculate the repayment. And we obviously don't know the breakup of repayment between prepayments and BT Outs or scheduled repayment. So just some color on that.

The number is 18%, right? That you're looking at the same number.

18.5%. That's right. So 18.5% for the quarter. For the full year, it remains flat at 20.5%, which we would have ideally expected to go down. So, just some color on that. Is it something that BT Outs have gone up?

No. If you see the total erosion rate quarter-on-quarter largely in the 18% range only. It ranges between, say, about 17% to 20%. Some quarters of 17%; some quarters 19%, 18.5%, et cetera. So that's the range it is in. So this quarter has not been very different. So the total erosion rate that is what you're referring to -- is only -- is 18.5% for the quarter. That includes the balance transfer, which is about 8-odd percent. And the balance comes from loan prepayments and the EMI portion, et cetera.

Last year, the BT Out was lower than 8%, right?

Yes. Last year, the BT Out was lower than 8%. But if you see the erosion rate that again was in the same 18% to 20% range only. Total erosion was in that range only.

So last year, I think there was something because of the CLSS scheme and the repayment rates were higher, and this year, despite the fact that there's no CLSS scheme, the repayment rate is still at around 20.5%, which probably means that the difference is BT Outs. I think that's what my question was.

Last year, including CLSS, rate was higher actually. It was higher by about 2%, 3%. This year, it's come down to about 2%, 3%. Last year, average was about 20%. This year, average is about 18%.

Sir mathematically both, I can take it offline, but mathematically repayment rate for '23 and '24, both years is 20.5%. And we would have expected that ex of CLSS, probably this goes down to maybe 200 basis points or so. So maybe that is the increase in BT Outs. I think that's what I was -- that's what I wanted to check.

Reduction in CLSS probably has been compensated by a slight increase in BT Out.

And is this because of competition? Or what is it that you are seeing the big high BT Outs.

BT Out rates are higher largely because of rates being higher because we have repriced the large part of our book and that is creating some tension with customers. That's primarily the reason. So we have analyzed our BT Out also. So largely the BT Outs are in cases where there has been a -- I mean, the 3 rate increases that we did over last year have been passed down to those customers. So those are the customers who are more prone to BT Out.

And the last rate hike you would have done in which month?

Last hike, we did in April of the last year.

'23.

April '23.

That's a long time back, right? I mean there's -- some of your peers have done it as late as January of this year -- Jan of '24. So it's not like nobody else is price rates. Are you seeing new players in the market? Are you kind of maybe sort of are -- any of your borrowers getting migrated to the larger bank? Whom are you like moving with.

Migration is largely to the larger banks. So I mean, new players in any case, will not target BT Out as their starting point or as their core business because they'll have a challenge on cost of borrowing, et cetera. So it will be largely the bigger banks and bigger financial -- bigger housing finance companies that target BT Out.

Nischint, just a couple of points from my side on in BT Out. One is if you compare us as with the peers because you brought up that point. Home loan to home loan, we're operating at a much higher pricing in the market -- in competitive markets. So that makes us more prone to BT Out per se, but we've kind of maintained that and we've delivered the growth despite that. The second issue in comparison is that most peers run with a mix of fixed and floating book. So -- and BT Out numbers are not fairly disclosed on the floating and the fixed book. So the comparison is not very fair. What we can compare is the total runoff. And if you compare that, us versus anyone else in the market, it's broadly aligned. So it's not isolated issue for us in the sense that our BT rate is higher compared to anyone else. If you compare runoff, it's identical. Pricing in the market is higher so that makes us more prone to BT Out by design.

Got it. But is it something that you may want to review going forward given the fact that competitive intensity seems to be heating up?

Yes. So we will -- we have a thoughtful mind that we will want to look at customers and cohorts and see where we need some pool of customers to reprice upwards and downwards also take risk into consideration. So that is something that we will do probably this quarter.

And in that backdrop, what kind of margin guidance would you give? Would you say that we are willing to sort of drop down the spreads a little bit in the...

No. So the idea is that the increase in reduction compensate each other.

Sorry, what is the increase?

So there could be some pool of customers where the risk has gone up, so we can reprice them. And some pool of customers where we think they are prone to BT Out and hence need to reprice them downwards so we can go cohort by cohort rather than looking at the entire book.

Next question is from the line of Nidhesh from Investec.

So first is on insurance income. We have got corporate insurance license. So any update on that? And what could be the quantum of fee income that can be related from that vertical?

So we got the agency license in February this -- February '24. We are in the process of discussions with the multiple insurance agencies -- sorry, companies. We are in advanced stages. We hope that we should be able to sign one agreement in this quarter. Once we sign at least let's say 2 to 3 and cover the entire book that we actually onboard today, my expectation is that should add close to INR 5 crores to INR 6 crores of additional income into the P&L, on a quarterly basis. So let's say Q4 -- Q3 onwards is when you should be able to see the full income of INR 5 crores to INR 6 crores in the P&L. And how fast can we get there, maybe mid of Q2 or early Q3, something that we'll have to see. But INR 5 crores to INR 6 crores quarterly is what we have in mind.

Sure. Secondly, what will be the branch expansion target for this year and next year?

Branch expansion, we are targeting 20 to 25 branches every year. And along with that, say, about 60 to 70 touchpoints per year. So that's our expansion plan.

Sorry, I missed the number, branch addition this year.

20 to 25 branches a year.

And in the new geographies, specifically UP, Rajasthan and MP where we are expanding our branches, what is the sourcing strategy and how -- what is the profile of connectors that we are acquiring here? Do you see any change in the financial profile? Are these connectors new to market or they are already sourcing business for someone in those markets?

Sourcing strategies are going to be the same what we have followed in other markets. And it's not that we are new to these states. We have been doing business in these states for a while now. It's just that we are scaling up. So largely, the profile of connectors, et cetera, remains the same. I mean, they would in -- it's a mix of both new connectors as well as people who might be sourcing for others. So that's generally the case in all the markets and true for these markets as well.

And what is the active connector number for the quarter and number of RMs at the end of March '24 and March '23?

Active connectors, we had about 3,000 connectors for the quarter. And RMs was in the range of about 700 -- about 700 RMs.

Next question is from the line of Rahul Maheshwary from Ambit Asset Management.

Good set of numbers, Manoj. Congrats Manoj and Nutan. Just two questions. First, can you give some highlight on the borrowers across pan-India? What is the income? How the income is shaping up, specifically in the India hinterland? Are you witnessing the growth or some kind of pressure? We have witnessed that there is some recovery, rural recovery taking place. So can you give some highlight that how the income-ish thing? And second, as you mentioned that UP and MP are the 2 states where you are getting more and more -- becoming more and more growth drivers. Can you highlight that each state has its own credit cost as a regional specific? Are you finding some case specifically towards those states? I mean you're entering or it's a pan-India basis, same kind of credit policy which you are now opting up?

On the first question, as far as the income et cetera is concerned, we are not seeing any stress with our customers. It's overall looking strong. And there was -- whatever stress was there, post -- immediately post COVID, et cetera, has also kind of tapered off now. People are, I mean, livelihoods are there, jobs are available, so overall, it's a more positive picture across the country. Rural was nowhere as large part of our business. I mean, if at all, customers would have a very small impact or small advantage from rural incomes. So largely, our customers are from a service background or from manufacturing sector or they have their own businesses, et cetera. So they are not highly dependent on rural incomes or agricultural incomes. As far as the credit cost by state is concerned, there is no such trend as such. It's largely location-led and depending upon the supervision in that location, et cetera. So credit quality of that particular portfolio because consumer behavior across states, we have seen is fairly similar. I mean it is more related to the occupation the customer comes from, their own income streams, et cetera. So not connected to the state as such. So we are not seeing any such trends. And the variations are not really state-led. It's more customer-led or customer profile-led, or customer occupation-led is how we are seeing it.

Manoj, just one thing on the first question, how much -- if a set of borrowers, how much income growth you have witnessed in the last 1 year for them? Whatever the self-employed people, which are with you and who are regularly paying the EMI, any such number or some color you can quantify?

Income growth is not something that we track as a specific number, but we can just extrapolate based on ticket size growth because it comes or flows from income growth. So ticket size growth as you can see annually, we are seeing about a 10% kind of ticket size growth. So I would say incomes are also broadly moving in the same -- moving up in the same, I don't know, maybe 10% to 15% income growth is what we can kind of extrapolate.

Next question is from the line of Aravind R from Sundaram.

It was mentioned that leverage would reach 5x by fourth quarter 2025. What would be the maximum leverage you would be comfortable with?

So at our planned expansion, debt-to-equity of 5x or asset-to-equity 6x is what we have in mind. We also look at capital adequacy ratios and what is the comfort level with banks and rating agencies. So all of that, we've taken into consideration and asset to equity of 6x, which gives us another 2, 2.5 years of runway is what is on our mind.

And like a provision coverage ratio is like despite -- like actually ours is one of the highest among the peers. And considering they are also doing loans to the better set of customers, like can we expect credit cost to come down like -- I mean like I can also see like your PCR, our PCR also like come down in last 1 year consecutively, are we getting more and more comfortable with the -- like a lower credit cost than what we have done in the past?

So there are two ways we look at it. One, you are absolutely right, the PCR overall coming down. We've not reduced absolute provisions. What has happened is that the new growth that we're adding that is the reason why the PCL looks low. What we track internally is the overall ECL provision as part of the principal outstanding, which is around 0.9. That is the approximate 0.8, 0.9 is what gives us comfort. Our ECL throws up around 0.5 number. So we want to kind of keep a 50% -- 40%, 50% higher than that. So that's the broad thought process at our end. So when we look at that and we project credit cost comes around 30 basis points going ahead.

And just one question, like on the yields. I mean excluding co-lending also that come down, I'm just trying to understand how it will like move? This is despite increasing the mix of LAP loans and it's like high-yielding segments, like yields we are not able to hold up that cushion I have. Yes.

I mean, firstly, quarter-on-quarter a few quarters, it's largely stable, I would say. It has not been reducing ex co-lending. The other angle to keep in mind is that compared to the peers, we're actually on the higher side with an 85% housing book. A 13.6% yield is something that we feel is really competitive from a market perspective. That's how we are looking at it right now.

And just one last question on the competition like every -- BT Out rates increasing, in case of the rate cut scenario, like can this competition even become aggressive? What is your view on that?

So, it is largely relative. So does the rate cut, then we'll also pass something on to the customer, et cetera. So it becomes relative. So that's increasing or decreasing does not really matter that much. I think BT Out is largely a result of sharp increases over the last 12 to 18 months, which has been passed on to the customer. And if there is a period of stable interest rates and the BT Out rates should moderate a little bit.

But if there is any -- just one question, sorry to add, like our borrowings, especially the bank borrowings, is it only predominantly linked to MCLR or is it linked to our other external benchmarks?

Almost 3/4 is MCLR linked while 1/4 is other external benchmarks.

Next question is from the line of Ravi from Naredi Investments.

Congratulations to Manoj and his team to reach INR 9,697 crores of AUM and might probably reach INR 10,000 crores in 40 days. At present you might be INR 10,000 crores, I mean to say. Sir, cost-to-income ratio, what is our target to reach in next 3 years? At present, it is 34.1%.

So cost-to-income ratio, our aim is to keep pushing it down. In the next 1 or 2 years, likely to hover around the same level. Maybe from third year onwards, we can start seeing some decline. Our aim in the medium term is to get that down to around close to 30% levels. So I would say in maybe 3- to 5-year timeframe, we should be able to get it down to 30% levels. Otherwise next 1 to 2 years, we are looking at 34%, 35% level.

Okay. Sir, our 2 promoters, True North and Aether Mauritius, both having 23.56%. What I saw our price share is always down in fear that they will exit from our company. So any information do you have about the exit of their promoter holding?

So as we mentioned in the past, they are likely to exit gradually because they are private equity funds. So currently, only 23% is left. So the aim is to probably exit by about 10% every year. So in the next 2 to 3 years, once a year is what the thought process is that once a year, there will be a 10% sale in the market and -- through a block and exit through that process. So we have tried to give it a bit of predictability in structure. So once a year is what I think we are basically broadly communicated. And since the last time, I think we've also -- I think we have given a 6-month lock-in after previous transaction, which happened in November. Just to give comfort to the market that it will happen only once a year.

Next question is from the line of Sonal Gandhi from Centrum Broking Limited.

Sir, I had a couple of questions. One is for the co-lending book, what is the yield that we are getting?

Close to 10%.

Close to 10%. Okay. Second related question, Nutan, I mean our yields have gone down by 30 basis points. Now I understand I'm talking about origination yield. I understand the rates are competitive, but our BT Out is a little high, our co-lending yield is a little low. So how -- what gives this confidence that we'll be able to maintain between 5% to 5.25% kind of spread? If you could just try and give some clarity over there.

No problem.

Just one more question that I'll add, if you can. What will be the spread of our or what will be the percentage of LAP portfolio in our book in next one or two years, which could kind of cushion up the yields, too?

No problem. See, currently, our spread is 5.4%, right? And we are guiding to 5% to 5.25%. So on the upper side, 5.25% to 5.40%, we already have 15 basis points that we have with us. We are saying that our cost of borrowing can go up to maximum 20 basis points. So we are still within that range. So mathematically, we feel very comfortable. Of course, on the yield side, we have opportunities in LAP, we have opportunities in smaller markets, which will continue to drive. The LAP portion of our current portfolio is 13%. Our 3-year plan is to take it to 20%. So it will be gradual. It will not be very sharp but March '27 is 20%. So we have room there. So those are the things on our mind, which give us the confidence to maintain this 5% to 5.25% ex of co-lending.

And any range that you would like to give for co-lending arena, what would be the spread then?

So the problem of co-lending spread and the reason we kind of split it out this time is that co-lending, we only keep 20% on our balance sheet. So let's say, when I said that the yield is 10%. And let's say, I am having a cost of borrowing of 8.75%. The spread is 1.25% but that's an incorrect way to look at it because you have to multiply that by 5. So therefore, the number becomes 6.50% or 6.75%. That is the right way to look at it. Right now, the number is low because we have a very high interest rate situation. Our aim and our thought process is that by the time we scale this up to 10%, co-lending today remains a return equity product on the balance sheet, primarily because we access the same markets we are presented in an adjacent segment. It uses our capital more effectively and allows us to build a return of equity product. We're at 3% today. We can scale this up to 10%. And by the time the interest rate situation will improve, adding significantly to the overall profitability of the company. So co-lending spread is not a straight answer, unfortunately.

So just other way to ask it would be basically saying because you are taking the spread income on the co-lending book. So the spread should logically be higher than your on-book, probably that's not the case right now, but the spreads would be higher than on your on-book spreads. Is that correct understanding?

If you look at spread on assets, it is actually. So the example, which Nutan gave, 125 basis points is the spread. But if you look at it on the asset, the asset is only INR 20 out of INR 200. So if you take 125 on INR 20, it actually then works out to 6.25%, so it's relatively higher than the spread that we are running on our normal asset, which is 100%. So that's the way to look at it. Here, the asset is only 20% of the loan.

Okay. Okay. Another question was on fee income. So that looks a little low this quarter. So have the rates come down in the market, if you could give some clarity around it?

No, the DA essentially -- we have a lot of liquidity already on the balance sheet. We continue to do DA primarily because we have relationships with banks. And if you see our DA mix on the balance sheet, it's an all-time low of 12%, 13%. So just more from a liquidity perspective, we did not want to load more cash on the balance sheet so we kept it at a lower number. I mean, probably, we should start doing a little bit more, perhaps another INR 1,500 crores, let's see. That is something that we will plan it out as well.

Okay. Let me just take this offline because I think if I just calculate the percentage, that is also looking lower on a Q-o-Q basis. I can take this offline. My next question was on employee addition. So employee addition, I mean, we've added about 10 branches this quarter and anything employee addition is early around 13 employees. So what exactly is happening here?

So I mean I will let Manoj get into the details. But the employee addition does not happen when the branches get added. There is always people come onboard and then branch will be opened. So it's a lead-lag effect. It's not 1:1 matching, but I'll request Manoj to get into the strategy on how we hire.

Yes. So -- because we hire almost 90% of our hiring is from -- as freshers. They are hired from campuses, so there are periods when there are large batches which come in. So for example, as of March, you're seeing the number. But if you see, as of April, there would be a large number of people who would have joined in April. So there is a bit of a -- you can say, a spike in certain months when there are larger number of people joining. So it's more of a step function, not a smooth go.

Understood. And what's your, I mean UP market, MP market then Rajasthan that you're growing really strong. I mean what is the initials sense that you have on the asset quality in this market from the initial trends?

So asset quality, as I mentioned, it is largely consumer-led and consumer profile-led, so we are taking care to ensure that we are onboarding what we are comfortable with because I mean the idea is to keep the credit quality similar to what we have in the rest of the country. So as such, early signals are good. Credit quality in these markets are also very similar to other markets. Plus, as I also mentioned, we have been in this market for a while now, so we are not new to us, just that we are scaling up. So from that perspective, the credit quality is similar to what we had in the past.

Next question is from the line of [ Sanidhya ] from Unicorn Assets.

Am I audible?

No sir, your voice is a little low.

Yes. Now is it clear?

Yes, sir.

Yes. So congratulations on great set of numbers. So my first question is like it's observant that our NIMs have been going slightly down as compared to like quarter-on-quarter also and last year as well like from 6 point -- few basis points to now 5.3% in the latest quarter. So how are we looking at this?

So like I was mentioning in the opening remarks, there are three key contributors. One, we've had more cash on the balance sheet, then there is financial leverage as we grow that picks up. And of course, the cost of borrowing has also gone up, and we've repriced as well, but the net impact is there. So approximately 20 basis points, if you look at year-on-year is the impact. More or less, most of these things have settled. So we are going ahead from here, let's say if you maintain this 5% to 5.25% basis point spread, which we have a significant degree of confidence, our NIM should be in a similar range where we are today like 5.3%, 5.5% is what we have thought. Because I mean the next question you might say, okay, your financial average is going to go up, then how will you maintain the NIM because we have the cash cushion, which we can kind of look to manage better.

Okay. That's fine. So like 5 would be the minimum level, which we are looking 5% to 5.25% would be the ideal?

Yes, yes.

Okay. And like my question was that we have been a major player in Gujarat, Karnataka, Maharashtra kind of states with a good per capita income, right? And now we are entering into much like venturing is not the word -- we are aggressively venturing into MP and UP, Rajasthan and all these states. Whereas I see per capita income in these states are lower. How is the ticket size that we are referring to in these states? Is it the same like in the earlier we had for the states with higher per capita income or is it slightly lower or...

Ticket size is lower. So in these states, the ticket size is lower because these states also -- the product is largely self-construction. So the people are constructing their own homes. And your question on the profile. So when we started the business 10 years ago, the per capita income in places like Gujarat, Tamil Nadu, et cetera, was where it is in UP, MP today. So we are at that starting point when we started the business, so which is why we feel very confident that these states now will be large contributor for affordable housing. And as we develop and show some of the development like the more industrialized states, we will have more affordable housing coming in. And the income -- people's income also will keep going up in the same manner, and we'll have a similar trajectory like what we have had in Gujarat, Tamil Nadu, et cetera.

Okay. That's a good perspective to look at. So just adding on to the same thing. So what -- any number you want to give for the average ticket size compared to states like Gujarat, Karnataka, and Maharashtra versus these newer states? And at the same time, what are the yields, particularly in these states compared to what in the other states?

So Gujarat you can say slightly different from other states because it's largely an apartment-led market. So to that extent, the ticket sizes tend to be a bit higher and the interest rates also tend to be slightly lower. But most of the other markets are very similar because they all serve the self-construction market. Ticket sizes tend to be around, 10 lakhs -- 10 lakhs to 11 lakhs, 12 lakhs in the new states that we are talking about. And rates you can say it would be maybe 10, 20, 20 to 30 basis points higher because self-construction market rates are slightly higher.

Okay. And do we see -- just on the same states bifurcation, just AUM. So I can see that we have been constantly -- like as a percentage of gross loan when compared to states, total AUM vs the particular sate. So these states are continuously losing like from Gujarat from almost 36%,38% to now 31%, same for Maharashtra and same -- I can see for Karnataka whereas for Uttar Pradesh, Rajasthan, we are aggressively trying to increase this. So what is the mix that we are going to see? Like currently, I can see 50% is coming from these 3 states Gujarat, Maharashtra and Karnataka, I would say, more than 50%, so is it going to be much more lower? What are the -- which would be the highlighted state, like 3 years, 4 years down the line? I'm not talking in the short term like from...

Yes, 3 years, 4 years down the line, I think we would be aiming for something like a 10% share across the states. So other state -- I mean, in similar size states. The population is very small, the state is small and the ratio will be likely to be lower but amongst the top 6, 7 states, the ratio is likely to be in the same 10%, 12% range is what we think will happen.

Okay. And just on the branch and number of districts. So we are seeing that we have covered 11 districts in Uttar Pradesh whereas branches are just 6. So how are we managing in that part?

So it's a large state, and we are expanding gradually. And like I mentioned, the single branch caters to nearby areas as well. So it can cater to multiple locations. So the branch is not the only point of distribution point. It can cater to multiple distribution points. A single branch can cater to multiple distribution points across districts also. So that's probably the multiple locations.

So yes, that's okay, but as I could see a trend from all the different states versus branches and compared to just states, every time the branches are higher, of course, than the districts. So we have multiple branches maybe more than 1 name, certain district in other states versus compared to UP and other and I can see that 11 districts are covered under 6 branches. So is it feasible that like -- I'm not sure how are we doing a fact check for those people who we are disbursing. Is it totally technology-driven? Or is it some kind that we are physically -- if the person is site and section is done? So how are we doing in like adjacent districts, whereas our branch is in different district. So are we really able to do the know-how of the place? Or is it just a little bit riskier that we are...

No, no, it's not. It's just -- I think you're just seeing the starting point because we have just started our expansion into UP. So we generally have what we call it protocol which we follow, which is we start with a person going into a new location. So that's the -- we call it a digital branch. And then it becomes a virtual branch or a proposed branch where we start looking out for a new branch premises. So we are in that early stage in UP. And in the coming years, you will see that this number converges, as you have seen in other places. So a number of branches will be either equal to or overtake the number of districts in due course, because right now we are at an early stage because many of the branches are in the digital or digital work virtual stage. So that's where you're seeing the number of branches being smaller than the number of districts.

Next question is from the line of Jigar Jani from B&K Securities.

Congrats on a good set of numbers. Just one question of clarification. Your guidance on yield of 13.5% and cost of borrowing as on IGAAP, or is it ex co-ending IGAAP?

This is essentially on AUM. So it will be on IGAAP.

So essentially, you were saying that this 5.2 will probably end up near 5% on an IGAAP basis all sides.

The numbers that we disclosed were an IGAAP basis.

So on an IGAAP basis, your cost of borrowing is 8.3% because you see in your fact sheet as of Q4, which you are saying probably will end up in the next 2 quarters at 8.5% because there could be a 10 to 20 bps increase whereas you are yields you are guiding towards 13.5%. Is my understanding correct for this number?

That is right. But the number I'm referring to on the spread guidance is ex of co-lending. So the number you need to anchor to is 13.6%.

Okay. And for the cost of borrowing also, I need to anchor to 8.2% business.

Yes, exactly.

Next question is from the line of Gaurav Sharma from HSBC.

Just one question. So on disbursement outlook, I just wanted to understand whether your LAP segment will grow faster or it will be in the similar run rate of overall disbursement for FY '25?

Sorry, can you repeat the question, Gaurav?

Yes. Sir, my question is on the disbursement side for LAP segment. So LAP segment and disbursements will grow at a similar rate of overall disbursement or it will grow faster in FY '25? Can you do some color around AUM growth guidance?

Not substantially different. It will -- I mean, like we said -- we are trying to increase or we will gradually increase the LAP share. So it might have a slightly higher growth rate than housing loans, but not very significantly different.

Okay. And AUM growth will also be in the similar run rate right?

Yes. AUM growth overall, we are targeting a 30% AUM growth. So again, maybe a slight, I mean because LAP is currently, it's only about 13% of our book, 13%, 14% of our book. So I mean the AUM growth in LAP will look a little higher. But overall, we are targeting a 13% growth -- 30% growth.

Next question is from the line of Varun, an individual investor.

Just wanted to check why do we have so much of cash balance on our balance sheet this quarter and even in the last quarter?

So it's close to around 2 to 2.5 months of disbursal that we have been keeping. Now this is something that we started right after IL&FS crisis and then we kind of maintained these sort of balances. What also happens is the number that you look at is the end of the quarter number where we take most drawdowns towards the end of the quarter. So that our overall interest cost is managed, and we also are able to manage banks in terms of periodic drawdown. So the average cash holding will be slightly lower than what you end up seeing. So those 2, I think, would be how I would like to explain this number.

Okay. So should we expect this to remain at a similar level going forward? Or should we expect it to go down in the coming quarters?

Not immediately, I would say, but perhaps 12 months from now, once the liquidity situation in the overall market improves, we are fully covered as far as our next rating upgrade is concerned. Then I think we definitely have a case for improvement here.

Next question is from the line of [ Harshit Porwal ] an individual investor.

So my question is with respect to the percentage of cash salaried customers in the total salary book?

Sorry, we couldn't hear you.

Am I audible now?

Yes.

So my question is with respect to the cash that we presented in the total salary book.

You mean formal salaries?

Cash salary? Cash salaries will be around -- so out of the total, it will be around 20%, 25%. So within the salaries, it will be maybe 30% plus.

Okay. So 30% plus. Any amount of construction finance in our total book?

No, there is residual of about INR 4 crores or so left. I mean just 1 transaction -- 2 loans which are left in the portfolio. The rest are all closed.

Next question is from the line of [ Raj Pather ] an individual investor.

I just wanted to -- what is the vision for next 5 years in terms of new products or new business line?

We want to stay focused on housing because we feel that there's a huge opportunity in housing for a dedicated housing finance company. And so our aim is to stay focused on housing and specialized in housing itself. And of course, the related products like loan against property, et cetera, we will continue to offer. But otherwise, largely remain as a housing finance company and stay focused on housing.

Next question is from the line of Divyansh Gupta from Latent Advisors.

One data keeping question. For this quarter, how much was the write-off in absolute amount?

Around INR 2 crores.

INR 2 crores. Got it. And the collection efficiencies that you have mentioned in the presentation deck is based on the number of EMIs or the customers. What could be your collection efficiency from a POS perspective, given the ticket sizes are now varying, the EMI does not necessarily present the POS collection efficiency?

So the first point is that this is based on number of customers, not value.

Yes, I'm asking from a value perspective, from POS outstanding, right, typical industry collection efficiency.

Slightly better.

It would be slightly better because in higher ticket sizes, the delinquency slightly lower than the lower ticket sizes. So it will be slightly better.

Would it be possible to give a number? Or do you want to keep it right now with you?

It will be -- see, it is not significantly different. So that is why we are not publishing it. It's -- it will be very similar, but maybe marginally better.

Got it. Just one last question around BTs. How much of our origination is coming in from balance transfers?

Less than 1%.

Less than 1%. Got it. And similar to the -- in the similar vein for the balance transfer, you mentioned that, let's say, till 20 bps, you are comfortable in taking hit in your P&L and not pass it on to the customer. Now let's say, the overall increase happens 30 bps. So when you ultimately pass on the interest rate hike, do you pass 10 bps or do you pass 30 bps? I'll tell you, the origination of the question is that certain 30 bps will affect our customers IT much more, which might lead to a higher incidence of balance transfer because others will just sit at 10 basis point hike has happened. But for us -- for Home First customer, it has become 30 bps. So does it play any role in the psyche of customers leading to BT Out?

See, we have -- the last time when there was an increase -- rate increase we passed on 25 basis points and then 50 basis points, 50 basis points. So a total of 125 basis points was passed on. So I guess -- see anywhere between 25 to 50 basis points can be passed on to the customer. So I guess if we see as of now, we are running a deficit of 20 basis points. So I think your question is, let us say that rates grow by another 20 basis points, whether we'll pass on 20 or whether we'll pass on 40, I think this is the question. I think the answer to that will be, we'll probably pass on 25 basis points and leave the 15 for later. So it all depends upon how the rates move and how sharply they move. I mean if they were to move much more sharply, which is unlikely. So let's say, remove by, say, another 30 or 40 basis points, then we may have to pass on 50 basis points at one go. So it all depends upon how the rates move.

Got it. And given this will be last time and we were passing on rate hikes then the whole industry was also doing it. Home First was not the only player who was passing on these hikes. So that as a customer in the industry, you have a big option to go to another lender who might be doing a predatory pricing but now why are the -- the other players are increasing the rate. So why aren't we taking that hike?

So we have had an ideology that we don't want to change the rates too many times for the customer. Frequently changing the rates with the customer not only agitates the customer, but it's also upsets their planning, et cetera, which is why we want to hold on to the rates as much as possible. So which is -- unless there is a serious increase, we don't want to pass it on. We want to stable -- keep it stable for the customer. It's just a good fair practice as far as the customers are concerned.

Got it. And just one last question. So when the rate increase actually happened, do you increase the tenure or do you increase the EMI keeping the tenure constant?

We always increase the tenure so that the budget is not -- customer's budget does not get upset. So the tenure -- our first attempt is always to increase the tenure. Unless the tenure crosses a certain limit in which case, we have to then change the EMI.

EMI. Got it. Understood.

Next question is from the line of Abhishek, an individual investor.

The question pertains to, I think, in the earlier years, management has spoken that there is reversal of provisions for the year and leading to the lower OpEx to AUM ratio. So that would be pertained to the employee expense, I guess, and not the provisions. Am I right?

Yes, we also take certain employee-related provisions around [indiscernible] and related items, so more in that nature.

Sorry voice was breaking. Can you please repeat?

Yes, largely employee-related and expense-related provisions.

Yes. And the provisions, lower provisions for the quarters that those, I think earlier, the CFO has spoken regarding the other write-back or the recovery has been booked in the provisions hence the lower provisions for the quarter.

Credit losses. Write back pertain to the lower credit losses.

Yes. So you do not -- you're not booking the other income part, you book in the provisions part.

Credit part.

Yes.

The lower line item in the P&L. I mean just before the PBT provision for lower. So that is the lower is because of the recovery we have booked.

Yes. Yes. The recoveries have been passed in the credit cost line.

That is lower -- yes. The recoveries from the write-offs is the reason for the lower credit cost. The lower operating expenses because of certain other provisions on the employee side, employee expenses et cetera, which there were some provisions which have been or we have got rid of it. So that is the reason for the reduction in operating expenses. Both are different.

As there are no further questions, I would now like to hand the conference to Mr. Manoj Viswanathan for closing comments. Over to you, sir.

Thank you. We are confident of continuous growth momentum led by a strong economic environment, expanding distribution network and differentiated business model. We continue to stay focused on providing loans for affordable housing led by distribution and use of technology and backed by diversified funding and strong risk management. Thank you, everyone, for joining on the call. I hope we have been able to answer all your queries. In case you require any further details, you may please get in touch with Manish Kayal. Thank you very much.

Thank you. On behalf of Home First Finance Company Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.