India Shelter Finance Corporation Limited (INDIASHLTR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the India Shelter Q1 FY '27 Earnings Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Renish Bhuva from ICICI Securities. Thank you, and over to you, sir.

Thank you. Yes. Hi, good morning, everyone, and welcome to India Shelter Finance Q1 FY '27 earnings call. On behalf of ICICI Securities, I would like to thank India Shelter management team for giving us the opportunity to host this call. Today, we have with us the entire top management team of India Shelter, represented by Mr. Rupinder Singh, MD and CEO; Mr. Ashish Gupta, CFO; Mr. Rahul Rajagopalan, Head of Investor Relations. I will now hand over the call to Rupinderji for his opening remarks, and then we'll open the floor for Q&A. Over to you, sir.

Thank you, Renishji. A very good morning, everyone. On behalf of the company, I extend a warm welcome to all of you. Thank you for joining us on the call today. Before we discuss our quarterly and annual performance, let me briefly touch upon the broader macroeconomic environment, the operating landscape, and some of the strategic priorities shaping our business. The Indian economy continues to remain one of the fastest-growing major economies globally, supported by strong domestic demand, healthy government capital expenditures and improving private sector investments. Overall, on the macro front, things are looking encouraging on account of reduced impact of West Asia crisis, monsoon deficit has narrowed, rainfall deficit has been less severe than previous years of deficient rainfall, RBI maintaining a neutral stance during the recent weeks. The long-term outlook for the housing finance industry continues to remain compelling. India's mortgage penetration remains at approximately 11% to 12% of GDP, significantly lower than most of developed and several emerging economies, highlighting the long runway for structural growth. Whereas technology and artificial intelligence are becoming increasingly important differentiators across financial services, AI is being institutionalized and embedded across business, credit, collections, operations, compliance, and marketing. Today, our AI initiative includes AI-enabled work assistance, AI-assisted collection voice calls, voice and chatbots in vernacular language particularly. Simultaneously, we are working on multiple different use cases to increase our AI adoption. These initiatives are aimed at improving productivity, enhancing customer experience, strengthening risk management, and enabling scalable growth while maintaining operational efficiency. Coming to our performance for the quarter. During the quarter, the company consciously transitioned to recognizing disbursements on check realization rather than check handover. This transition is aligned with strong operational controls and the impact of same is onetime in nature. This onetime accounting change has shifted a portion of disbursement that we mentioned across reporting periods and temporarily impacted reported quarter 1 financial year '27 disbursements. Reported disbursement for the quarter stood at INR 641 crores, whereas DAB guidance was around INR 1,040 crores, which is at par with quarter 4 financial year '26 and almost 36%, 37% higher than quarter 1 '26. This activity has no P&L impact, as benefit of interest was already being provided to the customers. Excluding this timing impact, business trend remains as per plan with strong log-ins and financial pipeline. Against this backdrop, gross AUM grew at 24% year-on-year to INR 11,284 crores. All the said [indiscernible], we witnessed an increase in Stage 3 to 1.5% and early selling with these buckets during the quarter. We remain watchful of the operating environment and our collection teams continues to focus on early intimations, recoveries and maintaining portfolio quality. We expect asset quality to stabilize around similar level at the end of quarter 2 and expect recovery from quarter 3 onward in this financial year itself. As stated earlier, the disbursement recognition methodology has no P&L impact. PAT for the quarter came in at INR 143 crores, registering a growth of 23% year-on-year and 4% quarter-on-quarter. Return on equity for the quarter stood at 17.5%. Net worth now stands at INR 3,353 crores. Despite the near-term moderation, our long-term strategy remains unchanged. We continue to invest in expanding our distribution, strengthening technology capabilities, deepening customer relationships, and building organization capabilities that position us well to capture the significant opportunities in the affordable housing finance market. On that note, let me reiterate the guidance for financial year '27. Branch addition of around 40, 45 for the year, maintain spreads of more than 6% in the medium term, credit cost of around 40 to 50 bps, loan growth of around 25% to 30%. This is the guidance of this financial year. Now I would like to hand over the call to Ashish ji, our CFO, to take you through the financial metrics. Ashishji, over to you.

Thanks, Rupinderji. Good morning, friends. Let me take you through key financial numbers. During the quarter, we have disbursed INR 1,046 crores of funds to customer account, which is higher by 3% as compared to quarter 4 of last financial year. However, the transition of booking from handover to clearance had a onetime impact on our reported disbursement this quarter. Our gross AUM as of June '26 is INR 11,284 crores. Year-on-year growth in AUM is 24%. The growth was impacted by change in accounting of disbursement. However, we are confident of catching up the growth in remaining 9 months and retaining our AUM growth guidance at 25% to 30% this year. Our portfolio yield is 14.8%, stable quarter-on-quarter basis. Our quarter 1 disbursement yield was at 14.9%. Finance cost is stable at 8.2% on quarter-on-quarter basis. Our marginal cost of fund is also stable at 7.9% quarter-on-quarter basis. We have draw down INR 172 crores from National Housing Bank in June '26 at 7.3%. Since our incremental spreads are higher than the portfolio spreads, we are confident that we will be able to maintain our portfolio spreads even there is some impact on the margin cost of fund due to ongoing macros. Our borrowing profile continue to be diversified with more than 30 counterparties. Share of NHB funding is at 15%, up by 230 basis points year-on-year basis. Average borrowing tenure is more than 8 years, which is coterminous with the [indiscernible] tenure of our loan assets. On liquidity side, we are comfortably placed with liquidity of more than INR 800 crores and undrawn sanction of more than INR 1,500 crores. Our ALM is positive across all the buckets. Net interest income for the quarter is up by 30% on the back of growth in our AUM and 20 bps improvement in our spread year-on-year basis. Coming to OpEx, our OpEx for the quarter is 4% and down by 10 basis points year-on-year. Cost to income is for the quarter 36%. On asset quality side, Stage 3 is at 1.5%, up by 30 bps due to seasonal factors. We expect resolution to start coming from Q3 onwards. Our credit cost is stable at 0.5% year-on- year basis. PCR for Stage 3 asset is stable at 26%. Our total ECL is INR 93 crores against the regulatory threshold of INR 52 crores. BT-out rate for the quarter is down to about 4%, down by 50 bps year-on-year basis. Our focused data-driven approach of customer retention is helping us to contain our BT-out. PAT for the quarter is INR 143 crores, year-on-year up by 20%. If we exclude the impact of direct assignment transactions accounting, PAT growth for the year is 30%, driven by higher volume and margins. ROA for the quarter is well above 5%. ROE for the quarter is 17.5%, up by 30 bps year-on-year basis. With this, I conclude, and now we can open the floor for Q&A.

[Operator Instructions] The first question comes from the line of Aman Soni with Seven Alpha Investors.

Sir, could we please leverage on the compared H&O, you mentioned AI across key financial lines, loan disbursement, collection and recoveries, in customer service, and customer engagements. If you can share measurable gains and benefits and just could you also share the technology partner or vendor for this calendar please [Technical Difficulty]...

Aman, we are unable to hear you. Can you please use the handset?

Sir, could you please leverage on the company adoption of conversational AI across key functions like loan disbursement, collection recovery, customer servicing and customer engagement? And conversational AI has been implemented. Could you also share the technology partner and also vendors supporting of these technologic advancements and measurable value as and when in terms of operator level can see customer experience or collection in performance.

Yes. Thank you, Aman. Though I could not get entire question from you because of the muffling in voice, but, yes, as I try to address as much as possible what I could hear. Regarding with the partnerships, we have definitely partnership of the AI companies, but leveraging name at this juncture is I think not feasible for us. I would not appreciate that way basically unless until I have a context for that, number one. Number two, when we talk about per case where the use case is definitely we have now a large call center where most of these phones are being used there to connect customer for inbound and outbound query and engagement with the customer. On the collection side, now that is the purview of collections. There are 3 AI tools are being used and vernacular language, because we expect across the peer set from north and south. So language becomes an important tenet where certain tools are [indiscernible]. Whilst in setting when you have to serve a customer in Tamil Nadu, here you don't get the resources typically on the call center side, these issues are quite special in [indiscernible] basically. So that's a particular detail. Plus we've got a lot of query calls on let's say [indiscernible]. There again you have to immediately go back to customer incentives without keeping in mind the time gaps what we have in the call center. There again, we internally starting around that side. So we started adopting it. Additionally, when we see on the process side, there are many operational things which AI has taken up in terms of reducing turnaround times, improving the efficiency of operational processing department particularly, and now we started adopting into this. And more we go deeper inside, we'll be more in position to keep giving you exactly where it is happening in quarters coming signs as this is how we go about it. Thank you.

The next question comes from the line of Kunal Shah with Citigroup.

So you are again confidently reiterating the AUM growth guidance of 25% to 30-odd percent. So just wanted to gauge in terms of the disbursements, last time you had indicated that maybe if it's like, say, 20% plus disbursement growth, then that should help deliver like 27%, 28% AUM growth. So now looking at on a check realization basis, how is the disbursement growth that you are expecting? And maybe if you can just highlight in terms of the recent months disbursement trend, that would also be helpful. Yes.

Thank you, Kunalji for the question. I think when we talk about the current month, we just saw the July getting over. That has been good in terms of disbursement pickup. In fact, July had a better number than the March number itself also around 400-ish number what we were able to disburse in fact, check realized, I would say, in month of July. And if we continue to maintain this trend, which we are quite confident about, I think we should be in position to cross 20% mark in disbursement growth. And obviously, 25%, 30% is the AUM target that we have taken for this year, which we will be working towards that.

Okay. So 20% plus we are still retaining that despite the PAT realization?

Yes, yes, because check realization is just a quarter can be here and there, but not beyond that. And easily it will get absorbed as we pass on the year. And that is the reason strategically we took a first quarter to implement that piece.

Got it. Yes. And secondly, with respect to collection efficiency, maybe it has never been so low as 97-odd percent. And even on base of almost 4%, 30 plus, we still saw it moving towards 5.2-odd percent. So if you can highlight maybe there is definitely a seasonality. But again, on a very high base seasonality has continued and collection efficiency got disrupted to an extent maybe getting towards 97%. So if you can highlight anything specific.

So frankly, there are certain months where things looks a little hayward in terms of first numbers on that piece. But largely we see the 1+ number remains intact for us particularly. There is a spike in this number. And it is the same happens in quarter 3 last year where we were confidently maintaining it. So I think earlier the better. So we have now a couple of quarters to work and turnaround this piece. This quarter may remain same what it has been last quarter. Though we -- our intent is to improve on that, right? But definitely quarter 3 is going to help into all. There's a certain cooling we'll definitely report on that piece. Because the smaller set of customers has been in little pain for some time, that we keep expressing even in a last 2, 3 quarter calls. So I think that is a set of customers which we focus on and there's a better delivery for us on that piece. It's a matter of time we'll be come back to the same level what is expected and that is we are on. And that's the reason we wanted to do -- have a guidance of this 40, 50 bps credit cost basically.

Okay. Okay. So this might continue even at 97% even in the second quarter, similar level of collection efficiency?

I won't say collection efficiency. Definitely the improvement in this 97% that is going to give a delivery. But when you talk about GNPA number or say 30-plus number, 30 plus at least that will be lower than what it has been in quarter 1. But EIC may be around the same number for quarter 2 particularly.

Yes. So that's why you mentioned maybe the resolutions would start from 3Q on?

Yes. Yes. Yes.

Okay. And lastly, in terms of the employees, so this is on the expectations of adding 40, 50-odd branches through the year wherein you have added the employees as well during the quarter or this was like maybe strengthening the connection infrastructure as well, almost like 160-odd employees added during the quarter with no branch addition at all over the past 2 quarter -- maybe it's now over the past quarter?

So we have a -- the set of employees that we had, the few have gone into the collections obviously, because we feel that is the major source. And even the current branches where they in fact is required because today we are operating in more than 300 branches. Even in out of that, say 30, 35 branches, you add up 1 resource, you're going to add some 30, 35 resource on that piece. So that is there. So these are the pro rating piece into it. And few employees we added into the head office when we are building the new initiatives, whether it's on AI or tech side. So this has been a normal set of -- on a base of 4,700, 4,800, these are just addition of a couple of breaking on the positive side basically. On a branch basis, yes, we have a plan to open and most of these branches will start coming in quarter 2, quarter 3, and beyond basically.

The next question comes from the line of Darshan Deora with Indvest Group.

First of all, congrats on a decent set of results. You maintained the 17.5% ROE, ROA spreads. So good showing on that front. So my question was really just wanted to get some clarification on this policy change regarding the recognition of disbursement. It seems that about INR 405 crores of disbursement was impacted due to this change in policy, which is from check handover to check realization. So just assuming if the policy has been kept the same, is it fair to say that our AUM would have been higher by about INR 405 crores and then AUM growth would have been on a Y-o-Y basis about 28% instead of the 24% which we reported?

I think there was a policy chain where you have to recognize income from the time of check handover that came around 1.5 years back. And that time itself, we implemented check handover policy where we start -- we'll as in relatively -- we will start that realization -- that interest fees for us basically. But we would like, in many of the cases, there's always through and through from our side and customer side the check is not being -- in fact has been handed over, but realization takes time. And this is something which you want to cover the gap. And that's why we just need where we start recognizing from the day the check is clearing from the customer form instead of the handover. And since we understand in a modeling when you give the check to the customer for registration and multiple recent mortgage and all that is sometimes. So quite a big number in something which cannot be realized for net after disbursement. So we put this mechanism to become a more transparent pair, not only in terms of the customer but in terms of reporting also. That was the intake around that piece. And because of this, we made this tweak around that side. So these realization is going to come to back to actually part of this piece and that has been continuous process going forward also. And this is the reason there's a no change when we see the reported PAT around that side. So that's going to impact first particularly because from beginning only we're giving a interest, what is said impact to the customer from day 1 once the handover has been given to it basically. So if this could have not yet, then definitely there was I think increase of the numbers what we are taking from. So I would say this 41 should definitely have gone much bigger in that number. Exact calculation I don't have that if it was 350 or 375 or whatever number been there basically. But yes, that's what any much better around that. But that's definitely ID and going forward what we have to see that this financial year, our disbursement growth, what we project earlier for 20%, that's going to remain same. So year growth is again going to be maintained between 25% to 30%. So for us that is not a macro thing. Our point is the operation has to be more predictive, both the size and customer should get the best of finance advisory doing that piece. That has not just entire there. And if that disbursement as one of the question has come up, that itself shows that the disbursement has recently enough to gain that. Thank you.

The next question comes from the line of Umang Shah with Kotak Mutual Fund.

Rupinderji, I'm just trying to -- I'm just taking a step back from the quarter, right? And what I'm trying to understand is how should one look at the credit quality of the business? And where I'm coming from is that since listing, every 1Q on a year-on-year basis, our 30-plus Stage 2, Stage 3 has steadily just gone up. So from sub-3%, we are at about 5.2%, 30-plus at this point of time. Our Stage 2 plus 3 also has steadily risen over the last 3 to 4 years. What looks like a steady state? And this is -- more importantly this is something which has happened at a time when our book has compounded at 35% CAGR. We are now talking about much lower growth rates now. What exactly is the issue? I mean, is there any specific geography, any specific customer cohort, which is playing up? Is there some deficiency in the collection mechanism? What exactly is the cause of this issue?

So we keep measuring all the parameters, what is impacting and what is the overall impact of everything particularly. We are dealing with self-employed customers. Last 1.5, 2 years, there's a lot of news which we keep discussing, hearing and talking about it. And we have taken the cognizant of that piece also. Today, we have more than 80% of customers which are self-employed and that's something which is a bread and butter for our entire business and working very well for us. So one side when we see the -- when you stop particularly in the cohort side, the smaller pieces has definitely having effect, but that has a both of impact, you have to see both of the sides. One side when we see selection case the bucket size of up to 7 lakhs as we keep discussing on at least. There definitely the number has been very different from what it used to be 50 years back, 30 years back. So earlier used to have around 1.4, 1.45, whatever the number, which is above 2% today on this specialty cohort. But good part is on this cohort you necessarily maintain best of the ROAs also, this is on -- you get us some 15% of the deals and that was much, much better on that piece. For this cohort we also get that there's a lot of seasonal impact that's there, but again times they are the -- or the seasonal times they are the one which got impacted. But they have the tenacity to cope up and revert that very cost, we've seen it in the past particularly. So this is the reason that we feel so confident. Our set of collection is of course we updated. And they may be in a bucket, but you'll never find that someone which had gone out of the gondola box on that piece basically. So one just almost remains same what it was a year back or what it has been a quarter back or so particularly. This is like junk which has come up. And I don't think that we have to read much on that piece. As we progress through the quarter, you'll definitely find the licensing coming off of this set of customers also particularly. So I think you asked for these cohort around 15%, 20% of customers for us is around that bucket in the 7 lakhs, 8 lakhs and these are the customers this is lost -- on that piece since you talk of particular data point. But, yes, you have to be confident because these have been same customers from last 10, 12 years and we know when the recovery compares that these are very first giving all the important things including this charges, effects, charges and everything on that piece.

I'm sorry to harp a little more on this, right? See, unfortunately we don't see the ones those data, right? So whatever data we have seen, we are trying to analyze that. And that data is clearly showing the deteriorating trend. Also the comment that you are making about the lower ticket size segment, I mean, somehow I mean, the proportion of 10 lakhs AUM continues to remain the same, right? I mean, it has been about 45% to 50% for last 3, 4 years. So I am still unable to understand that if the share of that book has not increased or rather in this quarter, it has gone down to 46%. We were at about 50-odd percent last year. But still on an overall book basis, the stress appears to be inching up, right? So then there has to be something more than just the lower ticket size cohort. That is what I'm trying to understand.

So I think when we talk about certain cohorts, first of all, we don't want to limit this, that is a very clear. It is not something, there maybe gap of 2%, 3% maybe because of the inflation what you're talking about, 50%, 46% or something that way. But it is a cohort which us gives us delta also for us particularly. And we know that eventually we get a result from that piece. So quarter 3 last year was that, but quarter 4, you'll see that as if it gets mature, things starts coming back, we were able to get the numbers, or whatever we planned on at least. So the same way when we -- someone asks like how it's going to be this for this quarter, I said it's a pudding here. This quarter you will find the number being same around that side and next quarter our [indiscernible] start if it's on that piece. So I think this has been there. We talk about cohort, we talk about CapEx size, we talk about what lead we get there, we talk about what are the numbers what is there, and we talk about all the progress what's that happening we see particularly.

So then a related question out here is then how confident are we to hold on to our credit cost at about 50 basis points, right? So see, I mean, our Stage 2 plus Stage 3 numbers are now by far the highest that we have seen in the last 4 years. And our overall ECL provision on the balance sheet still remains sub 1%. Technically, then this number has to inch up, right? Because I mean, if as a business, we take a call to stick to this particular cohort, which is relatively largely volatile and vulnerable as well, which means then higher cushions have to be built into the balance sheet, right? I mean, in the fourth quarter, we did see a strong pullback in 30 plus, and that has completely gotten reversed in the first quarter. So do we intend to build any buffers on the balance sheet or we'll just hold on to this credit cost? And I'm not too sure whether we would be able to hold on to this 50 basis points credit cost or not.

I think we are confident of the interest yields offsetting the cost, number one. And it is on -- in this category very, very low if you talk about, and that is the reason we always take a management overlay for building on that side. But yes, I think that it's not a point of confirm that we can go across that piece, because the mechanism has also instead to be with the set of customer. So with the 1,000 collection employed set across 300 plus branches, this is a mechanism that is being built on this. And on seasonality factor, even as quarter is going on, it's our intent to win this and we keep doing that regularly.

The other point which I wanted to talk about is on the growth part, right? I mean, I'm glad that we have reiterated our guidance of 25% to 30% sort of growth rates. But just to the point what Kunal was mentioning, the ask rate in terms of growth for the rest of the year, even at 25% AUM growth looks relatively higher. I'm not too sure whether the management is even aspiring for higher than 25%. But if the management is doing that, then in that case, clearly, the ask rate for the rest of the year will be even higher, especially under the new mechanism of calculating disbursements. So how confident are we that we would be able to deliver a 25% plus sort of AUM growth this year?

So as we see how the check realization process has been paying, it was the first month, and we have seen the output in that case internally. And on basis of that that confidently getting built. If we see the trends of either there's a drag there in terms of log-in tension it is on the case out there particularly. As we see our mechanism in terms of output that we route and the field activity, that is given the alternate on that piece. When we see the AUM growth particularly of this project when we talk about quarter 1 base and to that extent, this 24% is also without even considering what is given the path of that piece basically. If you keep that in hand, you can get the easy quarter number you're talking about. And then next 3 quarters, we're quite confident from that piece because that's the number which is -- what we have seen current day-in day-out. Someone asked about the July number that has been around 400 basically and July is generally rainy season and that time most of the companies, they always not able to reach that number. But it was efficiently is already built and this thing is on that phase. So I don't see any reason that in coming times when seasonality factor will be more positive and giving more output, we'll not be able to do that.

Well, I appreciate that. But as I said, I mean, looking at the trends with your peers and what is generally happening in the industry, clearly, the outcomes in this quarter appear to be a bit more divergent, both on asset quality and growth. I just hope that things tend to improve from second quarter onwards.

The next question comes from the line of [ Nilesh ] with Goldman Sachs. [Operator Instructions] Since there's no response from the participant, we'll move to the next participant that is Akhil Gulecha from Hornbill Capital.

My first question is just to understand the AUM growth. So there's some little confusion here on your Q1 FY '26 number. So the number that you have reported in your current investor presentation is INR 9,120 crores, which shows a 24% growth. But the number reported in your Q1 FY '26 investor presentation was INR 8,700 crores, which shows around 30% AUM growth. So what is the correct number for Q1 FY '26?

So that was the gap between the gross income and the net income. So what we do is that so we have a book of about INR 450-odd crore in terms of pool buyouts that we've done in last 3 years. So that is the gap. So we do -- so earlier we don't used to report that as a part of AUM because we have like formulated that book as a part of pulling the arrangement wherein the 80% share used to remain on the bank balance sheet. But later on as per the industry practice, we, like, realized that, like, everybody is reporting that as a part of AUM. So now we have started from March 2026, we are now reporting it as a gross AUM part.

That's like the different, might be make referring.

Got it. Got it. So it's actually 24% is the right number to look at?

Yes.

Got it. And on your disbursements. So even if I account for the check handover changes, your disbursements have grown 18%, I would say significantly lower than all your peers this quarter who are growing above 30%, 40% on a much higher base. So what happened this quarter? It's also that you have no balance addition this quarter where you're guiding for 40, 50 branch additions for the whole year. So can you just run us through what -- why this happened?

I think every year we make changes in the strategy when it's about the branch opening particularly. So 2 years back, we opened most of the branches in first quarter. Last year, it was spread across 4 quarters. This year on keeping the targets that we internally driving it, we make it keeping the first and starting from the quarter 2 particularly, this has been the plan basically. That piece we keep taking in mind our internal operational expectations from the teams on the line. And it's what we keep even mentioning during our calls that every year will keep changing around that mechanism. But yes, adding 40, 45 branches is always a projection and this year also. That is not the case. When we talk about 18% of growth or something, every company has their own way. Some of the companies in quarter 1 last year had been based on the numbers where we might be stronger. What we see that ultimately this is both on AUM that 25% to 30%, we're able to deliver this year and that's perfectly going on. So that is something which we'll look at on overall.

Got it. Got it. So just to understand, and this is the last question, that we will see accelerated growth in disbursements in Q2 and Q3 going ahead, right, because of the policy there will be a lot of spillover that happens?

So that is obviously, but ultimately when you see the company, disbursement on both on quarter-on-quarter, you'll always try something because of some other reason or something like that. Ultimately, see overall how the book is growing. So if your book is growing 25%, 30% annually, you're reaching the target what you have taken in mind for both long term and short term.

[Operator Instructions] The next question comes from the line of Mayank Mistry with Antique Stock Broking.

Sir, one data keeping question first. What would be your disbursement number on the year-on-year basis with the new resolution method? Just to compare on a like-for-like basis, because which we -- this disbursement growth has slowed down earlier slightly, which you have also highlighted. So this number I would like to know on a year-on-year basis?

It's around 18%, that we spoke just now. It's around 18% as we mentioned just now.

Okay. Okay. And secondly, sir, currently 99% of your processing is in-house. Any plans to diversify this, and add DSA or connectors maybe to further reduce the impact of increasing risk, which may moderate the gross number gradually that we are observing over last year? So since your guidance have now reduced from 30% to now 25% to 30% and maybe with the increase in the number is expected to further go down when it's clearly anticipated? So -- yes, so that's my question on the projection.

So we feel a affordable model that we have created that is more suited when we do that is a new customer, largely in the field. That's why the branches numbers, which is spread across so many states and so many numbers particularly. And the process is where the customer has to meet multiple times. That percent is something we have specific for many, many years and we are quite confident about this process particularly. So the question keeps getting raised again and again. So I always answer this way, if tomorrow we have to open any of the piece that has the independent preparation, that's currently part of it particularly. So whenever that has to come up, not as a part of your open channel in the same market, through the same things. It has to be independent on that piece. And on a -- keeping in mind the objectives of that product basically, because this is category of products customer may, may not have an idea, they have a very informal income. But for that category it has to open. We feel it has through a different mechanism of underwriting and now through different mechanisms also. So we are not going to indulge that process on that type. But yes, whenever we start it, we'll be the first to give an idea that how the things are building around that type particularly.

Okay, sir. So no plans to invest also in that sense?

So exactly, it started with the first to come basically on that side. So what this is, we're not going to touch anything. We see exploring in the market which is a best-in-class working available for us, whether it's in technology, whether in the other side. But whenever it happen, we'll be the first to count up all, I mentioned that it is a base, something we're trying to build upon for us.

The next question comes from the line of Mohak Batra with Goldman Sachs.

For this quarter, we have seen buildup of stress for us, which is something we have not seen in the industry otherwise. Like MFI is doing well and competition has also done better. So if everyone else is doing well, like, why is the problem for us specifically? So is it something internal that we are only witnessing?

I think there is nothing internal that we should read among the lines. Our -- we have, in fact, increased collection team to a large extent to scattered across geographies around 2, 3 quarters back. And we keep finding that there is a market trend where overall discussion is happening around that piece. MFI was a case, which happened around 1.5, 2 years back, and it spread for around one year particularly. Self-employed is again a set of customers which were having some stress around that piece from last 1.5 years basically. So obviously now along with that this is the first quarter, which is normally seasonal impact. So I think against our book which is 80%, 85% which is into self-employed, and on a smaller ticket size, this stress is which is there around that piece. But we simply said that in a quarter-to-quarter you'll easily find the results coming according to that side basically. So there is no point of reading that there is something internally getting built or something on that side.

Got it. And just a follow-up on that, like, how will collection efficiency behave in Q2 then?

If you talk about GNPA number, it is going to be hovering on the number which we had maintained in quarter 1. Obviously that we should -- you'll find start coming down eventually because this is -- the way you put the controls it starts giving reflection in next quarter. But GNPA takes almost a quarter or 2 quarters to start giving the results because of SARFAESI issues -- SARFAESI points and all particularly. So in quarter 3, you'll also start finding that the SARFAESI activities also start giving the results around that side. This is the way forward particularly. So quarter 2 numbers of the GNPA should remain around the same level which we are working on. Quarter 3 you'll start finding the reduction around that side.

Got it. And how is July behaving specifically?

July if you talk about 1 plus 30 plus that numbers almost remain same. That is a clear idea how the things can shape up in future.

The next question comes from the line of Sonal Gandhi with Asian Market Securities.

My first question was on this recognition of interest income. So just for clarity over there is what you're trying to say is that even post the check handover thing happened about 1.5, 2 years back, we started recognizing interest income on check realization basis only and that is why there is no impact in this quarter. Is that understanding correct?