IIFL Finance Limited (IIFL.NS) Q1 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to IIFL Finance Q1 FY '26 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to the management. Thank you, and over to you.

Thank you very much. I welcome everybody on the first quarter results earnings call for fiscal 2026. On this call, I'm joined by Mr. Nirmal Jain, our Founder and Managing Director; along with Mr. R. Venkatraman, the Joint Managing Director of the company. We also have the CEOs of 2 of our subsidiary companies, Mr. Monu Ratra, CEO of the IIFL Housing Finance; and Mr. Venkatesh, who is the CEO for IIFL Samasta. Myself, Kapish Jain, I'm the CFO. And as we take it forward, I would like to now request Nirmal to just take over and give an update on the broader macroeconomic situation, industry update and company strategy for this quarter and going forward.

Thank you, Kapish. Good afternoon, everyone, and thank you for joining us. So the macroeconomic backdrop remains broadly constructive. India continues to demonstrate strong growth fundamentals with stable inflation, improving rural sentiment, increasing digitization and formalization of credit. And for the NBFC sector, the growth runway remains wide, supported by retail -- by rising retail credit demand, digital inclusion, financial inclusion and the robust regulatory framework. However, the operating environment is not without its challenges. So asset quality in MSME lending has come under pressure across the industry, especially in the unsecured and micro LAP segment, reflecting regional volatility as well. Even in our portfolio, NPAs have edged up sequentially, but we have acted swiftly by covering exposure to high-risk segments, recalibrating our policies and deploying dedicated collection teams and embedding AI-led early log-in systems. On the global front, rising trade friction, especially the return of tariff rhetoric from the U.S. is something we are watching. While near-term impact on our customer segment is likely limited, we remain vigilant given the second quarter effect on inflation, currency and exposure in MSME. Yet on the whole Q1 FY '26 has been a quarter of revival and reassurance. Our gold loan business has fully bounced back from last year's embargo reaching an all-time high in AUM. MSME secured lending continues to be one of our core growth engines, and we are exiting the riskier segment. We also strengthened our governance and risk architecture. We have bolstered our leadership team and doubled down on tech-led execution and innovation. We remain focused on building a high-quality compliant retail loan franchise, generating targeted return on equity and fulfilling the mission of financial inclusion. With this, now I hand it over to our CFO, Kapish Jain, again to walk you through the detailed financials.

Thank you very much, Nirmal. To take this forward and give you a more detailed update on the quarterly numbers for the quarter at a consolidated level, IIFL Finance reported profit after tax before controlling interest of INR 274 crores. This is running in a 9% up quarter-on-quarter and 19% down on a Y-o-Y basis. We recorded a pre-provision operating profit of INR 836 crores, again up 28% quarter-on-quarter and 31% is down Y-o-Y. As you all are aware of, last year, we also hit by the gold embargo, which is causing this negative trend. However, the momentum is on the upward side when you compare things on a quarterly basis. For the quarter, the consolidated loan AUM grew by 21% and was up 7% quarter-on-quarter, edging to around INR 83,889 crores. As Nirmal mentioned, this is led by gold, which has already surpassed the past embargo limit. And we were up around 30% quarter-on-quarter in the gold AUM and 85% up Y-o-Y to INR 27,274 crores. If I further dissect the AUM, the retail segment comprises of 98% of the overall AUM, which is like home loan, gold, MSME and microfinance. They all aggregate an upward movement of 21% Y-o-Y and 7% quarter-on-quarter. Our gross NPA is in line with our guidance and stands at around 2.3%. In a large balance sheet, there could be marginal shift a few basis points, but it's largely in line with our guidance of 2.3%. And our net NPA stands at around 1.1%. And when compared to same time last year, it's a marginal up around 10 basis points. The company maintains a very cautious stance on the MSME and MFI segment, and we'll continue to keep our focus on the recovery collection. And as things get better, we'll like to see how we can further build up the portfolio. We have been implementing and we build our credit on the ECL model. And under the [indiscernible] provision, the coverage on this overall portfolio stands at around 91%. The assigned loan book currently stands at around INR 15,061 crores, which is up 3% Y-o-Y and more importantly, up 18% quarter-on-quarter. Besides this, the co-lending book assets has also moved up to INR 11,565 crores, up 21% Y-o-Y and 9% quarter-on-quarter. Our quarterly average cost of borrowing increased by 34 basis points on a Y-o-Y basis and very marginally of around 4 basis points to 9.45% on a quarter-on-quarter basis. We've been maintaining good and healthy liquidity. If I give you an update during the quarter, we raised around INR 14,008 crores of borrowing through term loans, bonds and commercial papers. And we -- with the gradually seasoning of the portfolio, we could also enhance our direct assignment transactions like we have done historically across banks and including the gold loan portfolio to around INR 4,489 crores this particular quarter compared to INR 2,400 crores last quarter. Our cash and cash equivalent stands at around INR 7,367 crores, adequate to not just meet our short-term liabilities, but also support our growth momentum as we envisage them for these particular asset classes. We are positive of our AUM across buckets and the net gearing stands at around 3.4x. On an annualized basis, the ROE stands at around 7.6% ROA at around 1.6%. Our basic earnings per share for the quarter stands around INR 5.5. We are adequately capitalized with the consolidated capital adequacy standing at around 28.4%, much higher than the minimum threshold of 15%. And individual companies capital adequacy stand at around 18.3% for the NBFC, 47.4% for HFC and 28.4% for Samasta Microfinance. In line with our endeavor to enhance our standing on the Board, both from a governance and supervision perspective, we had -- we are pleasure to have Mr. B. P. Kanungo as one of our Board members in the IIFL Finance. As you would all know, he was a former RBI Deputy Governor. We also have Mrs. M. V. Bhanumathi, who was the former Income Tax DG on the Board of our housing finance company, IIFL Housing. There have also been meaningful changes on the management side to kick start off the critical initiatives like AI innovation. With this, I come to the end of the entire presentation, and we'll open the floor for Q&A. Over to you.

[Operator Instructions] The first question is from the line of Chetan Gindodia from Mahindra Manulife Mutual Funds.

Just wanted to understand the changes that have happened on the asset quality side in this quarter. So we've seen that across all segments other than gold and capital markets. So most of the segments, both Stage 1, Stage 2, Stage 3, we have all seen deterioration. So can you explain segment by segment what are the key changes that have happened on the asset quality? And commensurately what has been the impact for credit cost in this quarter? And how do you see the credit cost going up ahead?

Chetan, gold loan, there is no -- I mean, asset quality has improved. I don't think there is any stress in gold loan. And in the core home loan also is a marginal difference. So the primary problem is microfinance and then MSME -- they are also unsecured in the micro LAP, the small ticket LAP. So these are the issues that we have. And in home loan, we had exposure to the Andhra Pradesh state government scheme where the project is halted, but with a small exposure. But other than that, it's not okay. So if you really look at gold loan, which is like almost 1/3 of our business and will grow even faster and then the home loan, the core home loan product comes from this is more or less -- I mean, it's not -- it's a very small marginal difference, but not much. It's 1.14% 1.31%. And what we are seeing now is that even the other segments, particularly the MSME and microfinance also things are -- I mean, the industry-wide they're getting better.

But still on the unsecured MSME for us is still largely INR 4,000 crores book and even though secured MSME is the substantial portion of the book, so over here, how do we see that trend like going ahead or what sort of provisioning can come from this segment?

So if you look at the overall portfolio, let me give you the brief -- let's look at the product by product or segment by segment. So

The management line is not clearly.

Hello? Can you hear me?

Yes. Better now.

Yes. So 38% is home loan, where -- I mean, there is a small INR 500 crore portfolio out of which 65% is being, but that's where there's a stress. But other than that, they could be doing okay. Gold loan 13% is not a problem. MSME secured, what we are seeing has come down because that micro LAP, which was through microfinance customers and the cross-sell or a very small segment of customers that we discontinue. The new disbursements are not taking place. But there the other -- the rest of the portfolio is okay. And microfinance, which is about 10%, 11% now. I mean that's also stabilizing across the industry. So these are the -- so I think going forward, I mean, this quarter, we had a total loan-loss provisions of a little over INR 500 crores on a consolidated basis, which is a little higher than what our guidance or expectations were last quarter. So we were talking about the guidance, I think 2.5% to 2.7%, but we might end up -- if you see the first quarter trend, hopefully, even if it be a conservative around 3.5% as well.

The next question is from the line of Shubhranshu Mishra from PhillipCapital.

So 3 questions. The first one is around the gold loan. What is the onboarding LTV that we have on the gold loan right now? Second is in terms of housing finance, is the CLSS 2 acting as a demand driver or it is too tedious in terms of operational challenges? Third is around securitization in IIFL Samasta. It's been coming off. So are we facing issues in securitization or people asking for more cash collaterals? Any changes in covenants, especially in IIFL Samasta from our raw material providers?

So basically LTV in gold loan is varies from product to product. So we incentivize our customers to take a lower LTV and get benefit of lower rate of interest also. The yield has slightly improved in this quarter. If you see the first slide, which is Slide, I think, 2, the yield is at 17.6% when we restarted was 17.8% and is now 18.2%. And our LTV on a portfolio level is 66%. But at the time of giving loan is around 70%, 75%. Then there are customers who can come and revise or can do the top-up loans also they want to do. But on the portfolio level, we are around 66% right now. And securitization from the start, because, see, the differences are slow, so the new loans are also -- fortunately are building up at this pace. But in [indiscernible], we did a direct assignment of INR 700 crores and -- sorry, INR 1,100 crores in total of our DA -- sorry, compared to 178 -- actually quarter, but Samasta, we did -- finding good amount of sell down the cool assets by way of direct assignment.

Any cash collaterals being...

No, in the DA, there is no cash collateral. DA happens without cash collateral. Only PTCs happen with cash collateral, we will be not doing that. Now maybe probably Monu can address the CLSS 2 issue.

As far as CLSS 2 is concerned, you're absolutely right, it's operationally cumbersome. But as last time also, we did pretty well on that. We've already given subsidy to 1,600 people, which we have done. So I think we've got the hand of it. It took us a while, but we're pretty confident that this will act as a very good demand engine for us going forward. So we've understood the nuances of it, and we've already got a subsidy for 1,600 people. And this time, the government is pretty swift once you upload everything, the subsidy is coming pretty promptly.

Right. And the salaried formula that we do in home loans, these are from Cat A companies, Cat B companies, Cat C companies. What kind of salary levels, income levels are we speaking about?

Yes, yes. So typically, this former salary for home loans is typically in very decent companies, I will not say super Cat A companies, but B or C companies where people are in the boundary order in the reality of the occupation they are in. But these are absolutely in the B or C category employees companies.

And average incomes of those customers?

Now if you talk about the metros and other places, the average household income will be upwards of INR 50,000.

About INR 6 lakh per annum.

It will be in the range of about...

INR 6 lakh to INR 8 lakh.

Yes. Understood. And for [indiscernible], at the point of origination?

The DBR at the point of origination is below 50%.

The next question is from the line of Anusha Raheja from Dalal & Broacha.

Actually you said that for the full fiscal, you're anticipating credit cost 3.5%. So do we anticipate that going ahead for the next 2 quarters, the asset quality or the NPAs will continue to be on a higher side?

Anusha, your voice was not completely there. We had 3.5% something that you mentioned. Can you repeat your question?

The thing that we are anticipating credit cost of closer to around 3.5% for the current fiscal. So how -- do we anticipate for the next 2 quarters on the MSME and on the microfinance, the NPAs will remain and the slippage will remain on a higher side?

I'm saying that if you look at the first quarter trend, which to our mind is a highly elevated cost, then also it goes to 3%, 3.5%. But we believe that things will get better, much better in the second quarter, but mostly in the second half of the year. And we should be able to end the year at a lower, not 3.5%. So sorry, I just want to correct it. I'm saying going by first quarter trend, if you just work out those numbers, then it goes up there. But hopefully, things will not be at best throughout the year. So first quarter, because there was a sudden unexpected hit of the microfinance and on MSME because the trend suddenly, particularly in Karnataka and some other states has worsened. But if you really look at it then in the last few weeks, RBI has got more authority stand, the security has eased and there's an impetus to growth and the impact will be felt by the industry and MSME maybe a little bit after a lag. So I believe that things will get much better from here in the second half. But as things stand probably -- the first quarter has been a little much worse than what we expected in terms of credit cost and primarily for MSME and microfinance.

Okay. And sir, on the AUM growth side, if you can just give some color on the gold loans, we are seeing a strong growth coming in there. On the home loans, I think the growth is slightly sanguine. But on each of the segments, if you can just give some color how do we anticipate AUM growth for the full year and some color on each of the segments as well?

You're right, gold loan growth has been much stronger than -- so that we have every one positive news is that segment has been better than probably what we would have anticipated or guided. Home loan, first quarter, was flat. And first quarter is [indiscernible] exploited and flat and also we were recalibrating our underwriting policies, exiting and consolidating some of the segments of the business, so it grew only about 11%, but only increased by more.

Annualized basis, we can see so 15% is what we should see at the...

Yes, otherwise, I think maybe 15% to 18% growth is what should be very good.

And lastly, I think on Q-on-Q basis, we have been seeing a dip on the margins on the spread side. So was it purely because of the fact that there could have been interest rate reversals on the NPA accounts? Or was it something additional related to margin wise?

Yes. Surprisingly, interest rate reversal on -- whenever you see the higher elevated NPAs and provisions, obviously there's impact and there's redressals.

And what is the broader call that we expect margins for the full year, how do you anticipate that number moving?

There were interest -- frankly the MSME and micro LAPs and microfinance. But I think that all the sectors, all the segments of the business are getting better and interest reversals should also reduce in next -- in the second half will be much better, but things will start getting better from now.

The next question is from the line of Deepak Poddar from Sapphire Capital.

So first of all, I just wanted to understand given your credit cost outlook is now 3.5%. So what sort of ROA we are looking at for this year? I think we were targeting closer to 3% as per our previous call. Now given higher credit cost, what sort of revised outlook we should look at?

So we were looking at I think 3.5% ROA...

3%. Close to 3% ROA, that's what we mentioned in the last call.

So the credit cost might -- somewhere from 2.5%, 2.7% level if it goes up to 3%, partly we should be able to meet -- now we know the interest rates from this quarter probably will see a reduction in the borrowing cost and maybe more so in the second half as a lot more loans come for renewal and new loans come at a lower rate. And as the volumes grow, particularly in gold loan business, we should see some benefit in cost-to-income ratio also. So I mean, at this point in time, it's too early to change the guidance or expectation on ROA, but we have to watch how things progress from here.

Okay. So we still maintain 3% kind of ROA. I mean, you want to maintain that?

Yes, we should maintain that.

Okay. Understood. And in terms of overall growth, I think you mentioned 15% to 18% on the AUM growth we are looking at on a consol level, right?

Yes. No, 15% to 18%, Nirmal and I talked about home loans. Consol level should be higher, maybe 20% -- between 20% to 25%. Around 20% actually, in microfinance and [indiscernible], but around 20% you can -- and we expect gold momentum to continue. So on a consol level, 20% would be a good estimate.

And 15% to 18% was for home loan.

Yes.

And the 3 problem areas that you mentioned about MFI, MSME and small ticket LAPs, so what percentage of our book currently form?

So if you look at the businesses that we have actually on Slide 5 we've given, so MSME that we discontinued is unsecured business, 2.4% and LAP, it's 3.1% of total book. So together, they are about 5%. Microfinance is 10%, 11%, but for microfinance I think because with the -- I think the policy support, RBI support, credit guarantee or whatever, the growth -- I mean we are not discontinuing that business. The business degrew in the first quarter. But I think in the next 3 quarters, we will have some growth just around 10% or so for the full year.

Okay. I got it. And now that RBI has allowed us to open new branches, so any branch expansion plan we have laid out for us?

So as of now, the existing branches still are below their full capacity, so we want to focus on the existing branches in this quarter. And once we see that they are stable and in terms of the profitability they get back to the level we expect them to be at the time we can take up the expenses.

Sure. And just one last final thing. Now that -- I mean we had this quarter some impact of guardrail also. I mean that was got -- that got implemented from April. So now on an absolute basis, one should look at quarter-on-quarter provisioning declining. Is that a trend that one should look at going forward?

Yes. Actually, there are some unexpected things that keep happening, but what we have seen is the ups and downs. So now that things are getting stabilized in microfinance, which is one big problem area, and also in MSME, I think the quarter-on-quarter provisions should decline. I expect second half is much better because seasonally that's where the credit takes off. The interest rate trend seems to be down, the benefit will come after some time, maybe after a few months. So hopefully, second half will be much better. But yes, quarter-on-over, we should see declining trend.

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

I have a few questions on your asset quality. So for your exposure to the beneficiary -- hold on, what you call it, the Andhra BLC, in terms of the NPL, how will you guys manage it? And also, will you guys get any kind of -- any resolution with, say, the government?

Yes. This beneficiary-led construction, first of all, just to give you a perspective, the total AUM is about INR 500 crores. At a loan book level, it's about INR 400 crores. And so it's a very small amount in terms of the total AUM at HFC level also or at the level of the group as well. So it's a very mild exposure. And we are only -- if you will see, we have already been able to like have about 20% of our customers prepaid the loan and already whatever hit we have to take and 65% of the customers are below 30 DPD. So they're anyways paying and 19% have already gone to the NPA. So we've already taken the majority of the hit what we had to. The rest of the people are paying. This was a 7-year product. Over 2 years have already gone by. So I don't see any major impact of this. And now we -- on the ground also, we see things getting back on track in terms of the overall development of these projects. So we should see things better from here.

Okay. Then there are 2 segments that you guys discontinue, right? So there's no disbursement for this quarter. So in terms of the exposure that's existing, do we expect to see this exposure eventually becoming NPL?

No. So our connection, infrastructure [indiscernible] that remain. So I don't think that just because we are discontinuing, so there would be more NPA business, but these are the -- okay, I'll tell you what is the -- because we did a lot of analysis on this. So on the face of it, they have a higher yield, we should take care of the risk, but they also have higher operating costs than when they basically are huge debt par intensive and they are pretty monetizing, these are the bottom of the pyramid where they are vulnerable and not resilient. So the total portfolio of our overall broader loan portfolio is about 5% of what we discontinue. And what we have done is that actually we have increased our force for collection in this. So we have a 300-people team which is focused on collection of the discontinued businesses. So the AUM trend will not change because of discontinuing. But already we are depressed so that we didn't use and you'd recover the hell that we can.

Okay. One more question on my end, if you don't mind. So in terms of the NPR currently at 2.3%, what are we expecting for the next 2 to 3 quarters?

We want to keep GNP at less than 2% on the whole. So our target will be to get there. In the last 2, 3 quarters, we've been out of that. But otherwise, we want to get back to the FY '23 levels and then there have been different regions from like [indiscernible] last year. But our target is to bring it below 2% by the end of the year.

The next question is from the line of Suraj Das from Sundaram Mutual Fund.

Yes. I think most of the questions have been answered. Just one question. In terms of this short-term LAP, I mean, the micro ticket LAP, is the problem any geography specific or you are seeing this pain across the states, I mean, irrespective of the geography? So that's just one question from my side.

Yes. So Suraj, typically, we've seen more stress in Andhra Pradesh as one bigger piece which we saw. And the second was the upcountry in Maharashtra. But we had larger exposure in Andhra Pradesh. So AP has been a bit of a stressful. So I would say top 2 states would be Andhra Pradesh and then Maharashtra.

The rest of Maharashtra, means other than Mumbai, outside Mumbai.

Smaller cities of Maharashtra.

The next question is from the line of Navneet, who is an individual investor.

My question is, I believe you've surpassed your AUM which was there prior to the RBI embargo. So December '24 is the reference -- December '23 is the reference point I'm taking. However, there are some -- your pre-operating profit -- pre-provision operating profit is much lower. I believe your other income before the embargo used to be in the range of INR 50-odd crores per quarter, which is now in single-digit crores. And your operating expenses have also gone up a bit. So if you can just talk us through this?

Yes, you're right. So there are 2 reasons for this -- 2, 3 reasons for this. As you know the portfolio ending, you can fast-forward 2 quarters, we built at a slightly lower rate of interest. Two, last year also, we gave salary increments as normal to the existing people, so not only we retrieved all the people, we also gave them normal salary increment as I envision increasing all the cost that you're aware of. So every year, for similar kind of property or at least 10% higher volume. Secondly, in the stand-alone business, the significantly higher loans after the pressures are coming from MSME segment of the business, which when [indiscernible], we had grown that at a fairly good pace and that has come under stress across the destiny. So that have contributed significantly to lower profits.

So if you can talk a little bit about your other income. It's in single-digit crores per quarter right now, and it was averaging about INR 50 crores, INR 60 crores, INR 70 crores...

Okay, the other income is INR 37 crores...

I'm referring to your earnings or quarterly -- yes, the consolidated -- yes, so for the quarter you reported -- consolidated, you've reported INR 6.5 crores of other income in this quarter, and it's been ranging in this range -- the line below total revenue from operations, INR 6.5 crores in this quarter, INR 3.1 crores in the March quarter, INR 12 crores in the June quarter last year. This number used to be in the INR 50 crores, INR 60 crores and maybe even INR 90 crores range prior to the embargo. So I was wondering what -- since you've already surpassed the AUM, what is the difference?

No. So one is that these are the insurance companies which we cross-sell used to give us marketing -- just give me a minute.

Yes.

Hello? Can you hear me?

Yes.

Yes, we can hear you.

Yes. So I think kind of the fee structure from the insurance company has been negotiated separately. So there are certain things which they used to support by way of marketing support in terms of other income, but now that comes as part of commission.

Okay. So going forward, this will be the new normal, we will earn lesser other income?

Yes. [indiscernible] remain on its own low. Sometimes when there are certain capital gains or certain IPO gains that comes [indiscernible]. But yes, what you're saying is right that this will be the new normal. But what will happen is that the fee and the commission income, what you see above will grow faster because that is 12.6 even the flat quarter of Q1, and so the part of the income will get reflected there. So you see that the 2, 3 lines above the fee and commission income from -- and also below that fee income, other commission and other, which is 94.9.

That's right.

So some part of this income will get reflected there. That has gone up significant -- I mean that has gone up in the Q1 over Q4 also.

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

Nirmal, can you hear me?

Yes.

So my first question is gold loans. Now we've surpassed the levels we were at when the ban came into effect. From here, would the growth normalize? Or would you still continue to see this kind of Q-o-Q growth? How are you thinking about the business now? And when does it normalize, if not this quarter, maybe next quarter or by year-end?

I think growth should continue. And there actually we are just catching up. So if you really look at our disbursements per month, then they are not significantly higher. So I think at least in next 2, 3 quarters, we should see the growth momentum continuing, I would say.

Okay. Because I think this kind of growth, so disbursement requirement in gold will be much higher than the net book growth, which means that you're borrowing more and it's also pressurizing your cost of funds. So is it -- I mean, why continue to grow so fast because...

No. See -- okay, I'll just a little more correct. First of all, we will be able to do co-lending and direct assignment at a faster pace. And therefore, I don't see that the cost of funds will start easing now hopefully because it's given our [indiscernible] and we can handle these volumes and we should be. Now the industry-wide, if you see there has been a growth in this business, stronger growth in bank last year and NBFCs also, so we are just trying to catch up at least partly. If we grow it faster -- okay, we maintain the growth momentum because in the market the -- even though there is a slightly higher interest cost as we have seen last quarter, I'm hypothetical, I'll come back to the ARP of this, but that is more than made up by operating cost leverage advantage that we'll get, because our operating cost fixed cost will not go up in the same proportion. And from the beginning, you get is 18% is a fairly good hit to take care everything. Then coming back to cost of fund, last year we were -- I'm sorry, last quarter, we've definitely got slightly a higher cost of fund because at the beginning of the quarter, it will leave aside. It's only towards the end of the quarter that we saw that the policy stepping into easy liquidity, bringing down interest rate in CRR and that impact [indiscernible] in this quarter and we're negotiating with banks. But on the cost of fund probably we will see still after a lag of a quarter, but I think definitely as the yields there improve, [indiscernible] big difficulty in maintaining the pace of growth by borrowing or more than borrowing by DA in co-lending.

Okay. The second question is actually to Venkatesh on MFI. So can you give some sense on how much was the disbursement in 1Q? And where do you see disbursements next quarter, quarter after? And similarly, in terms of credit cost, is there any write-back or utilization of some contingency buffer or anything? Or is this like a clean credit cost? And how do you see that for the next 2, 3 quarters? When do we start seeing a sharper improvement in that number?

Venkatesh?

Abhishek, our disbursement in the first quarter would be around INR 1,300 crores. And our provisioning remain the same, what we -- it continues to be the same from what we were provisioning around in the quarter 4.

And going forward, how do you see disbursements from this quarter onwards?

Yes. I mean if you look at most of the collection things are almost settling down in barring -- I mean, again, if it's been raining in some pockets, so slight disturbances are there, but we hopefully that disbursals will pick up post this settlement. Normally, towards this festival season, we have the biggest jump. And predominantly, if you look at microfinance has been the -- it's always been in the second half of the year game actually. Most of the disbursals happen now.

So do you have any estimate of business for this current next half or is it be it in the growing rate?

Yes, we are looking -- we did around that INR 1,300-odd crores in the first quarter. It should hover around at INR 1,800 crores to INR 2,000 crores in the second quarter, and it should pick up from there onwards.

Okay. Great. And what about credit cost? So how do you see that in 2Q and then 3Q? What kind of improvement do you -- so when do you expect it to normalize?

See, I mean, we have always given that post COVID, the credit cost has slightly moved up. So for the cost -- credit cost for the full year will be at around 6% to 7% kind of a thing.

Okay. For the full year?

Yes.

Okay. So I think this quarter, you're at 8% annualized. So then it should normalize pretty quickly from here?

Yes.

Okay. Third question is actually -- sorry.

This book is already included.

Yes. That's clear. The third question is from your Slide 20. So I think what you have given is the MSME secured loan breakup. If I look at micro LAP in home finance and I look at the part in Samasta, both of them have very similar average ticket size and almost similar yields. But if you see the NPA, they are far apart. In Samasta, it's 3.5%, in micro LAP home finance it's 15%. So is there any fundamental difference in those 2 portfolios or customer profile difference? Or what makes the asset quality experience so different? And the book size is also similar, right, roughly 20% each. Yes, that's the question.

I think, Abhishek, in Samasta, it's captive customers and the micro LAP is cross-sell. So actually the micro LAP has been approaching new customers from the customers who have track record in the microfinance business whereas -- so micro LAP is -- I mean Samasta is a cross-sell customer, where the customer already has a portfolio and they get additional loan. And when we look at micro LAP, then these are new customers. These are basically customers who based on their track record, based on their [indiscernible]. So what has happened is that where a customer has already a microfinance loan has a good track record and our collection people, our sales force are already in touch with them, then I mean it's a smaller portfolio, but that's why we run with them.

Okay. But both are secured, right? Both are secured...

Both are secured by -- yes, these are secured, but these are small value properties. So repurchasing them, selling them, it definitely can happen and ultimately can reduce the losses. But if they are impacted by the cash flows, then obviously you recognize with NPA. But they are all secured by residential or commercial property.

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

Can I clarify on credit cost? I can't hear clearly what is the expectation for full year?

I think we have been discussing the credit cost will moderate from the first quarter level. So I think the full year, we were expecting 2.5% 2.7%, but might end up around 3% at this point. That is what is the best estimate at this point in time.

The next question is from the line of Abhijit Tibrewal from Motilal Oswal.

Just 2 questions. I don't know if they have been covered earlier. I joined a little late. First one is just micro LAP portfolio that we have, housing finance subsidiary, we should be able to leverage surface fee, right for those micro LAP portfolio. Again, I understand...

Yes, Abhijit. Yes, very much.

Yes. I was trying to understand if you can leverage surface fee for this micro LAP portfolio, also I mean, is the quality of collateral and the size of the loan good enough to really leverage surface fee and try for recoveries? That was my first question. The second question is for Nirmal sir, just trying to understand what happens in gold loans in this quarter, very, very strong growth. So complementary for you for that. But what I'm trying to understand is, usually the gold loan growth that one usually targets in a year has come in the first quarter itself. And we are seeing very, very strong growth in gold loans in this quarter across the industry. So in your view, what really happened in this quarter which led to such a high spot in gold loans?

So if you notice, microfinance NBFC microfinance loan portfolio has gone down from something like INR 430,000 crores to INR 350,000 crores. And also the similar stress in the unsecured portfolio. So many of these customers, MSME enterprises probably they would have been earlier reluctant to [indiscernible] gold that they have no source of funding, so they might be taking gold loans. That is one. Two, gold prices have been firm, so the feel it gives and also the loan value has gone up against the gold. So that's the second reason that I believe. And thirdly, the economic momentum has been improving. The growth momentum in the macro-something-environment is [indiscernible]. So there is slight improvement, so I think there is good traction. So I think these are the reasons for the gold loan growth to be strong across the industry.

Abhijit, answering the question of the collateral and the surface fee execution, these are collaterals very much surface fee is executable and which we have started doing it expeditiously now. So in that way, they are pretty secure, and we have given it against the residential houses only. And so every -- because it's a business which we have discontinued. So the AUM is also dropping quarter-on-quarter. So we should be able to handle this in the subsequent quarter.

As there are no further questions from the participants, I now hand the conference over to the management for their closing remarks.

[indiscernible]

Okay. So the next question is from the line of Sudharsan from Prosperity Wealth Management.

So my question is on the unsecured MSME part. So in previous call, you mentioned those come under insurance scheme. So is there any possibility of reversal in coming quarters?

Yes. So in the insurance scheme, hopefully, I think from October 1 has started getting covered. So this would be the prime or this had become that one. Two, yes, there is a recovery possible and some recovery will happen. But the way the scheme works -- on main insurance scheme, you don't get the first 3% of loss and you get 75% -- so still you get 75% minus 3% of the overall portfolio. That is how you get -- as you get from the part reimbursement, but yes, for the loans that are covered that will happen. But as I said that I think our portfolio started getting covered about 6, 9 months ago. So that as -- they might not be under cover.

Okay. Understood. And on your gold portfolio, you mentioned your Q1 growth momentum will continue for upcoming quarters. So how long is this going to continue? Like as you have reached, I think, 47 tonnage, is it going to continue till your peak 60 or is it like...

So as of now, it looks good to continue. I mean, as I said, there are several factors working for it. So maybe it is next 1 or 2 quarters, 3 quarters -- 2 quarters we see momentum continue as a way to give you the forecast.

As there are no further questions from the participants, I now hand the conference over to management for the closing comments.

Yes. Thank you very much, ladies and gentlemen, for your time on the call today. With this, we come to the end of our quarter 1 earnings call. However, for any further questions, you can always reach out to our Investor Relations team, and we'll be happy to assist and provide you any further clarification on our results and numbers. Thank you very much.

Thank you for joining us, and you may now disconnect your lines.