IndoStar Capital Finance Limited (INDOSTAR) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Q3 and 9 Months FY '24 Earnings Conference Call of IndoStar Capital Finance Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nikunj Jain from Orient Capital. Thank you, and over to you, sir.

Thank you, Baraja. Good afternoon, ladies and gentlemen. I welcome you to the Q3 and 9-Month FY '24 Earnings Conference call of IndoStar Capital Finance Limited. To discuss this quarter's business performance, we have from the management, Mr. Karthikeyan Srinivasan, Chief Executive Officer; Mr. VinodKumar Panicker, Chief Financial Officer; Mr. Shreejit Menon, CEO, IndoStar Home Finance Private Limited; Mr. Pushkar Joshi, CFO, IndoStar Home Finance Private Limited. Before we proceed with this call, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. For more details, kindly refer to the investor presentation and other filings that can be found on the company's website. Without further ado, I would like to hand over the call to management for their opening comments, and then we can open the floor for Q&A. Thank you, and over to you, sir.

Good afternoon, ladies and gentlemen. I, Karthikeyan Srinivasan, would like to extend a warm welcome to all of you for attending our Q3 and 9 months FY '24 earnings conference call to discuss the financial performance of IndoStar Capital. I hope all of you have got an opportunity to go through our financial results and investor presentation, which have been uploaded on the stock exchanges as well as the company's website. I wish to express a heartfelt gratitude to all those who dedicated their time to join the call and have consistently been part of our journey. Joining me today are Mr. Vinod Panicker, our Chief Financial Officer; Mr. Shreejit Menon, our Chief Executive Officer of IndoStar Home Finance; and Mr. Pushkar Joshi, the Chief Financial Officer of IndoStar Home Finance. Before going ahead with the business update, let me give you a brief on the macroeconomic factors that prevailed in the preceding quarter. The Indian economy saw a positive trend on account of increased government spending, improvement in the domestic manufacturing and services segment. GST collections increased by 13% as compared to the previous year, and both manufacturing and services PMI have stayed in the positive growth zone. On the consumer side, better demand from shoppers due to increased spending in different areas led to a strong growth in the various sectors. The RBI maintained its interest rate at 6.5% and kept its stance unchanged, focusing on withdrawing support while slightly lowering its inflation forecast for the second half of this year. Looking forward, the economic outlook appears positive, with India's estimated year-on-year GDP growth for FY '24 at approximately 7%. Additionally for FY '25, the GDP growth rate is anticipated to be around 6.5%, solidifying its position as one of the world's fastest-growing major economy. On the CV side of things, the new CV has a muted year where the growth has been only at 1% over last year. Turning our attention to the used commercial vehicle segment, as the demand and significance of used commercial vehicle in the market continues to rise, particularly within the retail and FTU segment, it was evident that the affordability and practicality of these vehicles will play a pivotal role. In this landscape, where the price of the BS-VI heavy-hauled vehicle have been reaching higher and higher, the used vehicle has been the only leeway for the financially challenging profiles to get into the CV business. These segments continue to buy the used commercial vehicle segments, even at a price which is much higher than what has been in the market probably 1 year back. This is predominantly because there has been a lot of change of the BS-III vehicles with BS-IV vehicles. At IndoStar, our mantra has been to make the life of customers better, focusing on giving a world-class experience, best-in-class experience of customer service and lasting sustainable value to our customers and stakeholders. Continuing this thought, we took various new initiatives to strengthen our deliverables and increase our presence. We are working on various aspects of business, which will help us scale to newer heights. We continue to build these aspects so that quarter-on-quarter, we will be able to improve our performance. Technology has played a very crucial role in this last 1, 1.5 years of our growth. Our company continued to invest in various technology initiatives to remain competitive. Our focus is on making our technology infrastructure agile and flexible. We are focusing on the customer life cycle. And in this quarter, we plan to add more products so that the end-to-end life cycle of the customer can get addressed so that he can get funding at reasonable rates and not depend on unorganized players who are available in the market. We have leveraged the technology to drive this and will be reaching phenomenal results going forward. We continue to focus on building our analytics to ensure that our model is agile and scalable. Our model is physical, which ensures that there is a digital touch as well as the physical touch with the customers because the profiles I'm dealing with are still adapting to the technology that are available in the world. In the quarter gone by, the company's consolidated disbursements stood at INR 1,345 crores, growing 6% sequentially. Our stated position in the beginning of the year has been that we will reduce our GNPA. We have been taking steps to reduce this. The last quarter, we resolved our corporate book. This quarter, we took one step further by ensuring that our SME book -- portfolio also goes away from the overall portfolio of the company. We did a deal with one of the ARCs, which are part-cash and part-SR transaction, so that our overall GNPA starts coming down, which will get elaborated going forward by our CFO. We have been reinforcing the financial stability and improving the balance sheet quarter-on-quarter, and we will continue to do this going forward also. We are expanding into our retail operations with a special focus on the used commercial vehicle segment. Our focus has been on the Tier 3 and Tier 4 segments only. Looking ahead, we are committed to maintain our consistent capability to raise resources from diverse funding sources at competitive rates. Our focus remains on expanding the scale of operations so that we can increase our numbers quarter-on-quarter while holding on to the asset quality. Additionally, we aim for a sustained progress in profitability, consistently increasing the targeted return on total assets. We expect steady growth in the used commercial vehicle segment, as I explained, because the BS-VI prices have shot up significantly. The enduring demand for the used commercial vehicle segment ensures -- will be due to their efficiency in giving more cost-effective per ton rate while minimizing the downtime. Moreover, ability to collect payments has been exceptionally strong, underscoring the resilience of our business model and trust our customers have in us. Our previous guidance remains unaltered and we have confidence in our capacity to meet our objectives. We are actively exploring fresh products and strategies to generate additional income and enhance returns. Diversifying our product range will enable us to maintain a competitive edge in the market and provide consistent value to our stakeholders. In conclusion, I'd like to express my appreciation for your ongoing support. We are committed to sustaining our focus on growth, the quality of our portfolio and operational efficiency. With a strong financial foundation, a healthy liquidity position and strategic initiatives, we are already positioned for a prosperous and a profitable future. With that, I now pass the call on to Mr. Vinod Panicker to present the financial performance.

Thank you, Karthikeyan, and good afternoon to all of you. I sincerely appreciate your presence on this conference call today. Allow me to provide you with an overview of our financial performance for Q3 and also the 9 months FY '24 that has gone by. Let's start with the net interest income. It has stood at about INR 133.8 crores in the current quarter as compared with INR 145.9 crores in the immediate -- in the same quarter last year. Our interest margin is broadly the same that it was at the -- last year as well. That was 5.6%. Turning to the operating expenses. It has stood at about INR 119 crores in the current quarter versus about INR 120.9 crores in the same quarter last year. Our profit after tax at about INR 16.9 crores was lower versus the same time last year when we reported about INR 36.7 crores in profitability. We have achieved our collection of about INR 997 crores in the current quarter versus the INR 963 crores in the immediately preceding quarter which shows the amount of collection efficiency that the company as a whole has. And basis this the collection efficiency, the overall collection efficiency stood at about 135% in the current quarter, showcasing our commitment to maintaining of high credit standards and also operational efficiency. Our focus on portfolio quality has led to a decrease in the Stage 3 assets, which has gone down to about 5.3% at the end of the quarter. Further, our consolidated net Stage 3 is at about 2.4%, demonstrating the efficiency of our credit risk management strategy, an improvement from about 3.3% that we had at the end of the immediately preceding quarter. In terms of funding, we have very steady progress, and we continue to improve our liquidity position to ensure that we meet our committed targets of disbursements in the fourth quarter. We raised an incremental funding of roughly [ INR 1,422 crores ] to be precise in the third quarter -- in the quarter that went by. As of the end of the year -- end of the quarter, we had a cash and cash equivalent of about INR 1,312 crores. And we had a capital adequacy of 30.4%, and the debt equity of about 2.1x, which gives us ample headroom for both future growth and would give comfort to the lenders of the kind of cover that they have on the lending that they took. We are confident of using this and driving the profitable growth in the coming months and -- quarters and years. Our AUM for the -- at the end of the third quarter stood at about INR 8,037 crores as compared to INR 7,726 crores in the immediately preceding quarter. The increased disbursement of INR 1,345 crores in the current quarter is slightly higher than the immediately preceding quarter where we did about INR 1,269 crores. And that can be attributed to the strong focus that we have on the retail segment. Retailization efforts continue to yield favorable results, and we are confident in sustaining profitable growth in the coming quarters. In the stand-alone entity, that is, IndoStar Capital Finance, where our focus has been on CV, we have a total disbursement of INR 1,074 crores during the quarter for the CV business versus the INR 1,000 crores that we did in the immediately preceding quarter and INR 334 crores that we did in the same quarter last year. We have come a long way since then. We have been like a -- it has been like a restart for us. And hence, the issues of the start-up keeps coming up. And with our past experience, we have been able to tackle them. While the overall book of the stand-alone has seen some increase, it does not reflect the INR 1,074 crores disbursements that we have done in the CV business. It's largely on account of the INR 292 crores portfolio that's to be sold of SME, which Karthik mentioned about in one of the first steps towards reducing delinquency and adding a solid balance sheet. The book was one of the -- it was a stress to us, and we believe that it was appropriate to sell it off. That has made us bring down our GNPA to about [ 6.45% ] at the stand-alone level, which has always been a stumbling block when we used to speak to lenders for funds. While it reduced our revenue by about INR 7 crores in the quarter, we believe that this will yield positive results in the coming quarters. The sale of the corporate loan book in the previous quarter of about INR 915 crores had impacted our revenues by about INR 30 crores, and it continues to on a quarter-on-quarter basis. But that would be temporary. And in the long term, we'll ensure that there are no hits from this. In the vehicle finance business, our AUM at the end of the quarter stood at about INR 4,850 crores, marking an increase of 11% over the immediately preceding quarter. As previously mentioned, our emphasis continues to be on growing the used CV segment, and we are experiencing significant growth in the AUM. Karthik did mention about the economy and the benefits that we are getting from that, which is also driving the CV segment apart from the efforts that our team is putting. We realized that our ROA is not justified for the book that we are carrying, and we believe that the SRs that we are carrying is one of the reasons for this same. We're finding ways to have the same redeemed and converted to cash at the earliest. We had in the past said that we would look at ensuring that there is no discount the -- on account of the corporate loan book and due to SME delinquency. We have worked on it and achieved it. Now our effort is only getting profitability. Last but not the least, I would want to point out that the quarter has seen an upgrade from CARE from A+ to AA- stable. This is a testimony to the changes that we have brought about to the company, the strong promoters that we have and the overall profitability that this would bring to us going forward. We are confident of a bright future, and we are confident that we would achieve whatever disbursement targets that we have committed in the past over the last 4 quarters. Now I invite my colleague, Shreejit Menon, to provide further insights into the housing finance business, which is another key focus area for us. Over to you, Shreejit.

Thank you, Vinod. Good afternoon, ladies and gentlemen. Let me start by wishing all of you a very Happy New Year. I have alongside me my CFO, Mr. Pushkar Joshi, on this call. I would like to start by taking you through the key highlights that illustrate our accomplishments during the quarter. Firstly, I'm happy to announce that we've reached a small but important milestone of INR 2,000 crores of assets under management. This achievement is testimony of the trust our customers have placed in us. Furthermore, our active customer base has now crossed 25,000, underlining the expanding reach and granularity of the book. Speaking about the liability side of the business, we have successfully raised INR 535 crores of liabilities during the quarter. This includes the establishment of 2 new banking relationships, reinforcing not only our financial robustness but also our strategic intent to widen the lender base. As I have mentioned, in the past, we've always focused on enhancing operational efficiency and improving our customer experience. With this objective in mind, we have now gone live with the automated loan kit, which was the final leg of our paperless journey. This automated loan kit going live marks a pivotal moment in streamlining our own cycle processes and embracing technology. This also places us amongst the select group of affordable HFCs having developed capability of e-stamping and e-signing of loan agreements, giving end-to-end digital experience to our customers. Now turning your attention to the business matrices. Our customer profile mix remains balanced at 49-51 between salaried and self-employed profiles, which evens out the risk. The home loan to LAP composition at an AUM level stands at 70-30, showcasing the diversification ability to maintain yields. Our strategic vision involves expanding our total addressable market to taluka places with a population upwards of 2.5 lakhs to 3 lakhs with a specific focus on the self-construction segment. This strategic move aligns seamlessly with our commitment of reaching a broader spectrum of customers and fulfilling their unique housing needs. We continue to remain a true-blue affordable housing finance company with average ticket size of INR 9 lakhs at a portfolio level. 85% of our total disbursements are towards ticket size of less than INR 1.5 million. Out of our total disbursement of INR 635 crores for 9-month period ended 31st December '23, around 40% is disbursed in Tier 3, 4 towns and cities. Tamil Nadu, AP, Telangana and Maharashtra remain our core geographies with more than 80% share of our assets under management. So our philosophy of going deep continues on that path. Delving into financial numbers. Our portfolio yield stands strong at 15.1%, reflecting the prudent risk-based pricing policy that we adopted. Maintaining our spreads in the range of 5.25% to 5.5%, we continue to strike a balance between profitability and competitiveness in the marketplace. Moving to the financial performance. We are happy to report a profit after tax of INR 28 crores for the 9 months ended December 31, 2023. Our AUM has exhibited robust growth at 26% on a year-to-date basis, with the loan book expanding by an impressive 24% on the same basis. We are taking concentrated efforts on optimization of our operating expenses and reduction in our cost of borrowing. We firmly believe that these efforts would yield higher return on asset and return on equity in the coming future. Crucially, our asset quality remains strong, with gross nonperforming assets under -- [ on hand ] at 1.24% and net NPA at 0.93%. Additionally, our 1-plus day past due stands at 4.2% and 30-plus DPD at 2.7%, attesting our prudent underwriting policy risk management practices and strong collection capabilities. In conclusion, the future for the company looks promising, underscoring our steadfast commitment to serving the credit underserved population of the country. Leveraging technology, developing a multichannel distribution model and fostering a best-in-class workforce will remain central to our growth strategy. We express our gratitude for your continued support and look forward to navigating this exciting journey together. Thank you for your attention. With this, I hand over the call to moderator for the Q&A.

[Operator Instructions] The first question is from the line of Vivek Ramakrishnan from DSP Mutual Funds.

My 2 questions are around the profitability and the sell-down books. So the first question on profitability. There is a high liquidity that you're keeping on the balance sheet as well as your cost of funding seems relatively high compared to a AA- company. So is that acting as a drag on ROA? And what are we doing to improve that? And a related question is the cost income also. Is the operating cost stabilized for the future growth? Or would you need to invest in more branches? And would it be just proportional growth? So that's the first question on profitability. I can ask the second question later, if that's okay.

Yes. Thanks, Vivek. Thanks for being on the call. This is Vinod. Let me address your profitability question right away. I'll start by talking about the cost of funds. Definitely, the cost of funds are something which is very high and definitely not something which suits a company with a AA- rating. The reason for that is because we were away from banks till about end of June in the last -- of the current financial year. As for various reasons, we have not approached banks for funds. So we, after June that we started speaking to bank. Banks have been slowly coming to us. And in the interim, to ensure that we kick-start the business, we went into and got a significant amount by way of NCDs, with -- I would say, collected roughly about INR 2,900 crores over the last 4, 5 -- 4 quarters by way of NCDs, so which was at a slightly higher cost. Now that the banks have started coming in and we have got 2 sanctions in the current quarter, we see that there would be a significant amount of reduction as we go forward. In the current quarter, maybe apart from the bank, we have also changed the mix of borrowing, and we have brought in securitization, which we have kept away for almost 5 quarters. And we have got that at a very attractive price. We have got into other forms of CPs and other things to ensure that the cost comes down. Basis this, what we are seeing is in the current quarter, while the -- immediately preceding quarter my borrowing -- incremental borrowing was at about 12%, 12.5%. In the current quarter, it has been -- the incremental borrowing is about 10.5%, which we believe is a very big positive. And the transaction happened towards the fag end of the quarter, and therefore, it has not seen benefit in the current quarter. It will see benefit in the coming quarter and quarters. And now we have decided that no, now that we have opened up, we are going to banks, we are looking at other means of funding, we will ensure that the mix itself -- that the cost remains at this level or go down. That's one part of the -- of course, the point that you mentioned about profitability. You also mentioned about the cost-to-income ratio. See, the cost-to-income ratio has about 3 components, definitely, the revenue. See, the revenue over the last quarter and this quarter has seen a reduction. Well, Karthik had mentioned it. I also mentioned about that. We had sold our corporate book, which was a Stage 2 book because of the delinquencies that it was carrying, which actually reduced the income by roughly INR 30 crores for each of the quarters. Apart from that, the SME book that we sold has actually reduced the income by roughly about INR 7-odd crores. So roughly INR 35 crores, INR 37 crores of income has gone away, but the cost doesn't go away because it is sold partially in cash and partially in -- by way of SR. And therefore, it would be a couple of quarters it will take for us to actually cover up for whatever we have lost. We have been helped. We are locked by the CV disbursement that we are doing at 18%-plus. And therefore, that is something which will ensure that the cost-to-income is taken care of. The other cost-to-income ratio will definitely be taken care of when the interest cost goes down, which is what I said maybe sometime back. So overall, we believe that the cost-to-income ratio will come down, which will lead to profitability.

Sir, the related question was also on the liquidity. I mean you had mentioned that you had kept, I think, INR 1,000 crores of liquidity. So that would also dragging -- be dragging, right?

I thought -- I think I missed answering that. This fund came towards the fag end. It came in the last 3, 4 days -- or last 5 days of the quarter, and there was very little we could do to actually utilize it. Otherwise, we would be always comfortable to ensure that we keep money sufficient for 3 months of loan repayments. That's what our policy talks about. In the interim, we might find a situation like this, where the bank balance looks slightly bloated.

Excellent, sir. Sir, the second question is regarding the sell-down that you have done. So how much of it is holding as security receipts? And you have mentioned in the call that you don't expect any hit. So I mean are they being sufficiently provided for when you sold it down? And there was also -- last quarter, you mentioned about an ICICI book, which was causing delinquencies. So has that also been resolved? That's my only question, sir.

I will take the first part of the question, the ICICI, I request Karthikeyan to speak about. On the SRs, last quarter, we had a transaction there of the corporate loans, and we had a security receipts from that. From that, we have started redeeming some of it. Some negligible portion has come in the month of December. We expect a significant portion of reduction to happen in the Jan to March quarter. On the SME transaction that we did, we expect the redemption of that to happen possibly 3 to 4 quarters from now. That will not happen immediately. So we believe that, that will start generating profits. Now when I meant that it will not take any additional hit, we mentioned -- what we meant was that it will remain as it is. But then for it to start generating cash, it is some -- one of it will start generating in the coming quarter, or it has started generating in the December quarter. And it will -- the generation will only increase as we go forward. And the second SME that we did would start generating possibly in 3 to 4 quarters from now.

And we have also adequately provided for.

Your question on provision, we are adequately provided. We -- while we follow Ind AS and as per Ind AS, as per the clause -- we did not strictly follow the RBI mandate on provision under 75, 76 and 77 clauses. So we have been providing at the same rate that we provided for -- on the book when it was in our book. Our belief is that just because the terminology of the amount changes from a receivable to a security receipt, the realizability doesn't change. That's the reason we continued maintaining the provision.

And Vivek, just to remind you that last year, we did a deal with one of the ARCs. We got INR 120 crores of SR. We have completely recovered those SRs. So our ability to collect these SRs and get it back is quite high. And we believe that we are adequately provided so that no extra will be left for us. That's the point on SR. On the ICICI portion of it, we still have around INR 150 crores of book. Around 85% of it is in Stage 1. 6%, 7% is in Stage 2. So we end up having around 3 to 4 quarters every month, which come into our book. In our assessment, that will continue to run like this probably for the next 1, 1.5 years by the time that the book will allow. So our best assessment is like around INR 40 crores, INR 45 crores will come to our book. The balance will get paid off automatically.

The next question is from the line of Sumit Bhalotia from MKVentures.

Just as an extension of the earlier question on -- clarification on SME and also the corporate book that we've sold, what is the total quantum of SRs that are sitting on our books as of December end?

Sumit, Vinod here. The -- on the corporate book, the SR, the gross value is at about INR 682 crores, against which we have got a provision of INR 103 crores. On the SME, we have got a SR of INR 160 crores from which there is a provision of INR 30 crores.

Okay. So basically, this INR 325 crores of deal that we did, 50% was in the form of SR, and the balance was in the form of cash?

Correct.

Yes, broadly. Yes.

Okay. And sir, on the overall disbursement guidance, so the sale that we have done, this was completely Stage 3 book? Or what was the categorization of the asset? And going forward, the balance book of SME that we have, what is your view of that? Will we be looking to do more of these deals? Or -- so what is the time frame of rundown of the SME book? Are we looking to do that? Or we'll start growing it? What is the guidance on that?

To answer your second question first, we don't intend to grow the book. That's what has been our stated position from the time we started speaking to all of you 5 quarters back, number one. Number two is on the...

Do we -- are we looking to further sell -- do more of these deals going forward? And also the categorization of the book that we have sold, was it completely Stage 3 or Stage 2 part of it?

Yes, I'm coming to that. Maybe I will just clarify it what we have said, 4, 5 quarters back also was this kind of SME, which is INR 1.5 crore, INR 2 crore ticket is not something that we want to grow. We will come back and do SME in a different avatar. Could be in INR 15 lakh to INR 20 lakh or INR 15 lakh to INR 25 lakh kind of ticket in our Tier 3, Tier 4. And we intend to start that process at the earliest, maybe in the -- this quarter itself or definitely in the coming quarter. As regard the stages of the book that was sold, while the stage continue or can be Stage 3, 2 and 1, see all of them were stressed accounts. I would say roughly 70% of that was in Stage 3, and some of it was in Stage 1 and Stage 2 from the point of view of the DPD. But they were account which were, I would say, stressed and were in Stage 3 for 2 to 3 months in the immediately preceding months. That is the reason this immediately preceding months that is the reason this sell assets of those accounts also.

So the balance SME portfolio is the DA portfolio, so it continue to be remaining in our book.

Yes. Majority of them is DA or PTC, which we cannot sell off unless we get the concurrence from the investor as well. There is a very small portion of Stage 3, which is on our book, which would be roughly -- on our book, which we have not sold, could be about INR 15 crores to INR 20-odd crores. But the Stage 1, which is there on our book is roughly about INR 220-odd crores, which continue to be there, and we'll continue to generate revenues from that, unless we see some delinquencies.

Okay. Secondly, the nonfocus books for us was SME and corporate and both the segments we have degrown our book to the extent that we would have liked to. So SME, from here will not degrow further is what you're saying and -- in a big way in any quarter, and similarly, corporate in any case has come down meaningfully. So from the overall yearly annual target that you mentioned that will not be very different from what you've guided earlier, in terms of disbursement, we had given a target of around INR 5,300 crores, INR 5,400 crores. Are we on track on that? And also closing AUM, I think we were indicating something around INR 9,300 crores, INR 9,400 crores earlier in our previous calls. How are we placed on that?

We had given a target of INR 4,400 crores plus INR 1,100 crores is the ticket size we have given for disbursements, INR 5,500 crores. And we had said that at the consol level, we will be close to INR 10,000-odd crores. That's what we had given. So we are -- both the teams, basis the liquidity that we have, are confident that we'll achieve numbers or be very close to that by the end of the financial year.

So today we are like I mean, INR 8,000 crores. You're saying that closer to INR 10,000 is still possible for us from INR 8,037 crores AUM?

It's -- I'm saying it will be closer to it, could be roughly about INR 9,500 crores. That's the way I look at it.

Yes, yes. Obviously, because of the book rundown that we have seen. So on a consol basis, even that is the number.

Maybe one more reason was the 2 sales that we did, INR 915 crores plus close to INR 300, roughly INR 1,200-odd crores was sold by us.

Right. Right. Sir, one question on housing book. The P&L looks a little weaker on a Q-o-Q basis. I might have missed out something. So can you please help us on that? And also, on a sequential basis, disbursements have also not picked up. Any specific reason for that?

Yes. This is Pushkar here. So I would like to take the first part of this question. So on the profitability side, the major dip on the profit is on account of the reduced upfront income book in the quarter 3. So in the quarter 2, we sold our LAP portfolio worth around INR 108 crores. As against that, we sold only INR 25 crores in the quarter 3. So that is the major reason why the profitability is dipped. I would like to request Shreejit to take the second part.

Yes. On disbursements this year, as I mentioned earlier as well, our focus has been to balance out the spreads, the yields and the ticket size. So we continue to play the small ticket game, and we also had to balance off the liability side. So it's been more deliberate to keep it at that number. Now that we have a full line of visibility on the liability side, we have built capacities now to grow the disbursements from hereon.

Okay. Okay. Sir, one last question on profitability. On a consol basis, we are looking at around 2.5% kind of a range for ROA for FY '25. Are we on track to achieve that?

We are on our target to achieve that because that's the number that we gave, and we are working towards achieving that.

The next question is from the line of Harsh Shah from Reliance General Insurance.

Sir, so you said that we'll be able to have an AUM growth of approximately closer to INR 10,000 crores for this year. Sir, with a disbursement, which is closer to INR 600 crores, INR 650 crores, sir how -- so I would like to understand how we'll be able to reach that.

Yes. Harsh, this is Vinod here. See, the disbursement is not INR 600 crores. The disbursement is in the range of about -- both, together, was in the range of INR 1,300 crores, roughly about INR 1,121 crores in the stand-alone and both, together, about -- close to INR 1,300 crores. This is the one number which we intend to ramp up in the -- INR 1,345 crores to be very precise. This is the number that we both are confident -- both the entities are confident of ramping up in the fourth quarter. And we should see the number. Today, we are at about INR 8,000 crores AUM. So both, together, if we do a disbursement of close to INR 2,000 crores, we are confident of being close to that number because even with the rundown, which will happen in the normal course.

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

Am I audible, sir?

You are, Deepak. Kindly go ahead.

So first off, I just wanted to understand in terms of growth, you mentioned about INR 9.5 crores -- INR 9,500 crores this year. So how do we see that over FY '25 and '26 in terms of advances, what sort of target we have?

Deepak, in the previous call, we had said that our aspiration is to do over INR 6,000 crores in the stand-alone and about INR 1,400 crores to INR 1,500 crores in the housing finance. That together should take our number to close to INR 13,000 crores by the end of the next financial year.

FY '25, INR 13,000 crores. And what about FY '26?

I would want to restrict it to '25 right now. I don't want to give too much of forward looking dig into the [ question ].

Fair enough. I got it. And then in terms of your ROA strategy, I wanted to understand, I mean, more 2% ROA -- 2%, 2.5% ROA. I think currently, our ROA is 0.7%. So in next 4, 5 quarters, I think journey from 0.7% to 2%, and that's the average. So ideally, you have to end your year with a much higher ROA. So I just wanted to understand, so what's the strategy that we are likely looking at to bridge this gap of ROA? So where all the improvement is likely to come that will boost your ROA?

I thought I answered it when I answered Vivek, but I'll repeat it. First is on the revenue front. We said that we were losing roughly -- in the stand-alone, roughly about INR 35 crores to INR 37 crores on a quarterly basis. And it will take about 3 to 4 quarters for it to start going away, that impact of that to go away because the disbursement in the CV portfolio is significantly high, so -- which is also at 18%. So that will definitely come in. We are also looking at -- starting with the LAP -- I mean, not LAP. I mean the SME in -- definitely in the coming year, which will be an additional benefit to the bottom line and, therefore, the ROA. Cost of funds is something which I mentioned about. We have changed our mix basis, which the cost of funds has reduced -- the incremental borrowing has reduced significantly in the Q3, and we expect that trend to continue. And with the banks also warming up to us, we are fairly confident that the overall cost of funds would go down. So today, in Q3, it has been exorbitantly high at about 11.7%. So we are confident of that coming down to a 10.5% kind of level possibly for the major part of the next year. And revenue is also going up. That's number two. Number three is basis my book going up with the -- not very proportionate kind of increase in my OpEx. I definitely expect the ROA as a percentage to also significantly improve because cost to -- my OpEx currently is at about 4.5% of the total asset. That is something which we see going down to about 3.75% to 4%. It's a combination of all these things, and all that will happen simultaneously. All are currently happening simultaneously. Maybe I would be incomplete if I don't cover the last point. I also mentioned about SR that is our aim is to see how do we monetize and get the SR redeemed at the earliest. So that's one focus area that the company has going forward.

Yes, that's very helpful, sir. But will it be safe to say that, I mean, from current ROA levels we stand on a quarter-on-quarter basis, every quarter, we should see some improvement?

We should see that.

The next question is from the line of Vibha from FairConnect.

My question is, I'm just trying to relate your income from CV balance sheet. If you were to look at your income of INR 666.38 crores, how much of it is from on-balance sheet CV portfolio? And what would be that portfolio? I can see in your presentation, the AUM is INR 4,850 crores. But out of that, some could be your securitized book or assigned book and where income is booked differently. So I'm looking at your on-balance sheet assets in CV and corresponding income.

Vibha, Vinod here. We have negligible amount of DA, which is, I would say, off book. Everything else is one book, in case as you specifically mentioned about CV, I'm responding to the CV part of it. We have a book of about INR 4,850 crores and the entire thing actually generates that kind of revenue. Generates revenue for the organization. It's only -- internally, we have possibly split it up as what is organic, what is inorganic and some part of it, which comes from the ICICI book. But everything is on the book. We have got nothing outside.

Okay. So your total book is INR 5,454 crores. Out of that, CV is INR 4,850 crores. What is balance?

INR 5,454 crores is the on book. The overall is...

Loan book, yes.

Part of -- it's actually INR 5,800 crores AUM. INR 4,850 crores is the AUM, INR 4,850 crores. On book is slightly lower. It is at about close to INR 4,666 crores to be very precise.

Okay. And rest is the securitized book?

Rest is the DA book because securitized are not on to the book.

Okay. Okay. And how much is the interest income out of this INR 4,666 crores?

The entire amount that you mentioned comes out of that, out of that...

No, no that would include your income from bank balances and other things, right? Interest income, part of it will be coming from the CV portfolio, and part would be from other. So I'm looking at purely CV income. What I'm trying to reconcile is what is your yield because your book yield was 18.9%. But if I were to compare this to your earning assets, it's pretty deflated partly because you have a large amount of SRs and other assets. Yes.

Yes. Vibha, the income coming from the vehicle finance -- the interest income is INR 481 crores. You also mentioned about the 18.9%. The 18.9% is the incremental disbursement that we are doing, [ right ]? We are roughly about INR 4,800 crores of book. And over the last 4 to 5 quarters is what we have been disbursing at that rate. The older book where we had a large amount of new portfolio was at significantly lower rate. So the weighted average income for the CV would be in the range of 16%.

Okay. Okay. Okay. Well, actually I were to relate this INR 481 crores to INR 4,666 crores, it's -- and annualize it by way of calculation, it's 13.74%. And your NPAs are not very significant now. So why is there so much of dilution?

Our numbers are that I said at 16.8%. We can definitely, possibly take it off-line. And then we can confirm our numbers with you. We stand by our numbers.

Okay. Fair enough. Just 1 or 2 more questions if I can take. There is this goodwill loss, INR 300-odd crores...