IndusInd Bank Limited (INDUSINDBK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to IndusInd Bank Limited Q3 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Sumant Kathpalia, Managing Director and CEO, IndusInd Bank. Thank you, and over to you, sir.

Good evening, and thank you for joining this call on a Saturday evening. I will start with some macro commentary and then go into the bank's specific details. We will upload this commentary on our website for ease of reference. Economic activities continues to gain strength, helped by a release of pent-up consumer demand during the festival season, pick up in general government spending, strong public investments and record exports. This recovery was reflected in the highest quarterly GST collections and improved bank credit growth. The recovery may see some impact due to COVID-19 pandemic resurgence. However, increasing coverage of fully vaccinated population and low hospitalization risk so far have ensured limited restrictions. On the global front, major global central banks have forced guidance of faster-than-anticipated monetary tightening over 2022. While this can disrupt the easy financial condition exert upward pressure on rates, we expect that the domestic monetary policy to remain supportive to strengthen the nascent recovery of pursuing a gradual normalization. The budget for the next fiscal too would be to look to enforce a structural push for the economy by canalizing a greater share of public resources towards investments and growth further incentivizing our private CapEx cycle. Coming to quarter 3. This quarter, our focus was on addressing the concerns on micro finance. We ensured Bharat Financial operations remain smooth and without any impact on customer servicing our collections. We have completed the internal review. In addition, the bank appointed external consulting firm to undertake an independent review, which is underway. The updates of both the reviews, including financial implications are broadly in line with management expectations. I will share further details subsequently. Maintaining disbursement tractions on non-MFI portfolio. The overall loan group grew 4% quarter-on-quarter. Our vehicle finance disbursements are up 5% quarter-on-quarter. The strong disbursement ensured the vehicle book grew up by 2% quarter-on-quarter, reversing decline in the previous 2 quarters. The consumer loan book other than the vehicle MFI 2 grew by 2% quarter-on-quarter. The corporate loan book has maintained its growth trajectory after the last year's consolidation with a quarter-on-quarter growth of 6% driven by SME and small corporate. We were cautious on micro finance disbursements pending reviews during the last quarter, and they have already picked up for this quarter. Continued deposit momentum. Our deposit growth was strongly at 19% year-on-year and 3% quarter-on-quarter. We let go of some expensive deposits given abundant liquidity. This helps us further reduce the cost of deposits to 4.66% from 4.85% last quarter. Asset quality. Slippages during the quarter net of upgrade and recoveries were at 0.9%. As expected, bulk of the slippages were from the micro finance at 4.4% of MFI book. Whereas slippages from the balance 8% of the loan book was contained at 0.3%. Our GNPAs have reduced to 2.48% from 2.77%. And the restructured book too reduced to 3.3% from 3.6% quarter-on-quarter. We have maintained our PCR at 72% and increased our contingent provisioning to INR 3,328 crores or 1.5% of loans. Maintaining profitability of the franchise. Our net interest margin improved to 4.1%, helped by falling deposit rates -- helped by falling deposit costs, sorry. The noninterest income continued to remain healthy, growing at 14% year-on-year. Our cost to income increased marginally to 41.6%. This resulted in maintaining a healthy PPOP margins at 5.90% of loans. Digital launches. We launched IndusEasy deals during the quarter, a portal for used vehicle ecosystem. We scaled up our quarter 2 launches of Indus Merchant Solutions at IndusEasyCredit stack for business and debit card EMI on IndusInd Bank debit card in quarter 2. We went live with updated version of Indus Mobile app and enhanced security features and improvements. The mobile app has seen good response with the user base increased by 36% year-on-year. Overall, we remained on track on digital along with new initiatives on individual and vehicle finance segment planned for launch in the coming quarter. Now coming to individual business, micro finance. I will start with an update on the reviews followed by business performance during the quarter. As informed earlier, the Board of the bank conducted internal review on the anonymous allegations received in quarter 3 financial year '22. We have completed the internal review. In addition, the bank appointed external consulting firm to undertake an independent review, which is underway. Based on the findings of the internal review and the preliminary status update provided by the external consulting firm, key findings and actions initiated by the bank are as follows: Our micro finance product was offered to provide liquidity support for customers impacted by the COVID second wave after they cleared existing views. However, it was observed cash disbursements and repayments of arrears took place on the same day, which is a procedural lapse. The product was discontinued in September '21 and prior to the receipt of the anonymous complaint. The standard loans outstanding under this product were INR 179 crores as of December 2021. The bank has on a prudent basis fully provided for this exposure during the quarter. All micro finance products required disbursement of loans with a biometric or an OTP consent from the customer. It has confirmed that the disbursement of loans without client consents getting recorded was as a result of a system issue. The standard loans outstanding for such customers were INR 7 crores as of December '21. Prior to the seat of the anonymous complaint, the bank has changed the disbursement process, wherein loans are disbursed only for biometric consent except for 1 state which is Assam. Few areas of scope for improvement in governance and oversight of the banking correspondent activities of the subsidiary are highlighted. Steps have already been undertaken, including strengthening of process controls, integration of control functions and formation of an oversight committee, et cetera. The management has evaluated the matter of possible impact on the asset classification, revenue recognition and provisioning. Further evaluation also included factors which could lead to regulatory issues, and they have been also addressed adequately. The bank will constitute a committee to assess staff accountability, if any, arising of the findings of the review. Now coming to the business of micro finance during the quarter. The increasingly broad-based recovery in economy was also reflected in the micro finance business during quarter 3. The COVID third wave too did not affect rural India as much as urban location. Bharat Financial added 564,000 customers during the quarter. The member acquisition has picked up this month and business activities are improving across India. The positive momentum in business activity was also a result -- was also reflected in improvement in collections. Collections efficiency in December '21 was at 93% on overall book and 98% on standard book, excluding NPAs and restructured book. West Bengal and Kerala continue to pull the overall collections down with collection efficiency of 95% and 91%, respectively, on standard book. With quarter 2 incremental NPA customers -- within quarter 3 incremental NPA customers, 70% of the customers paid some installment during quarter 3, indicating potential for recoveries even though we have made conservative provisioning. And overall NPA base, 40% customers pay some amount during quarter 3. The restructure book was at INR 1,003 crores against INR 907 crores quarter-on-quarter. Overall, for Bharat Financial, 86% of customers paid all weeks in December, 8% are intermittent payers in December and 6% are nonpaying. Among standard portfolio, only 2% of clients are not nonpaying. This also reflects in terms of quality of portfolio outstanding wherein portfolio current on all installment has improved quarter-on-quarter from 83% to 92% of standard portfolio. Our 0 to 90 DPD book has reduced quarter-on-quarter from INR 4,446 crores to INR 2,153 crores, of which 60 DPD booked in INR 643 crores. The net slippage during the quarter was INR 1,239 crores. The net slippages Cumulatively, for the 9 months financial year '22 was INR 1,851 crores or 6.7% of the book. Looking at the performance of the overdue book as of now and assuming coverage of 80% or 90% of the delinquent book, we remain confident of the credit cost from MFI book for the year to be broadly around 6% to 8%, as stated earlier. We continue to scale up our non-micro finance activities. The merchant acquisition business grew to 437,000 merchants from 320,000 merchants quarter-on-quarter. The loan book from these customers was at INR 1,463 crores from borrowing customer base of 261,000 merchants with 98.2% collection efficiency. We have also further scaled Bharat Money stores from 91,000 to 94,000 during the quarter. Overall, we remain committed to the micro finance business. The Bharat Financial business model has delivered outperformance versus the industry, not just in COVID, but also in disruptions premerger. Bharat Financial prides in being a process-driven organization. The focus for this quarter will continue to be on improving field discipline, process tightening and quality control without impacting customer acquisitions and collections. Vehicle finance. Our vehicle finance disbursements for the quarter were at INR 8,800 crores, reflecting 5% quarter-on-quarter and 14% year-on-year growth. Similar to the quarter 2, the disbursements are also higher than the pre-COVID level. Within vehicle categories, disbursements are now ahead of the pre-COVID levels for commercial vehicles, cars, utility vehicles and tractors. The 3-wheeler and 2-wheeler volumes will take a few quarters more for the COVID impact to pass. Strong disbursements in the last 2 quarters has resulted in the vehicle book growing by 2% sequentially after being stagnant or declining for the past few quarters. We have maintained or gained market share in most of the vehicle categories, except 2 wheelers. The vehicle finance restructured book remained stable at INR 3,769 crores quarter-on-quarter with marginal fresh additions during the quarter. The collection from the restructured book too improve to 87%. Collection efficiency from the rest of the book is back to normalcy. We see continued improvement in trade availability for existing vehicles along with stability in fuel price. This has supported the portfolio quality and will also result in new vehicle demand for the coming year. This is also evident in the quarter 4 so far with disbursements improving further. We aim to maintain the growth trajectory, distribution reach and work towards improving to pre-pandemic levels in the last quarter as well. On the Vehicle Finance Management Leadership Trust, Mr. Parthasarathy has identified A.G. Sriram as a successor. A.G. Sriram has been with the bank for over 3 decades running large portfolios, including commercial vehicles and construction equipment. A.G. Sriram is being groomed over the last several quarters to take on the leadership growth. Mr. Parthasarathy has been instrumental in building the vehicle finance domain for the bank and continue to be associated with the bank post transition as a mentor to A.G. Sriram. Other retail assets. This segment contributes 15% of the overall book and includes non-vehicle non-MFI products. The loan book grew up 2% quarter-on-quarter, driven by growth in both secured and unsecured products. Credit card spends continue to reach new heights every quarter with quarterly trends at INR 14,256 crores, growing 28% quarter-on-quarter. The secured asset disbursements were among the best in the last several years. The segment, however, is witnessing intense competition, and we have to let go of customers the risk reward was not favorable. The collection from this customer segment are back to pre-COVID level with the net slippages well under 1%. Corporate Bank. The corporate bank book maintains its growth trajectory with quarter-on-quarter growth of 6%, Y-o-Y growth was strong at 19%, albeit on a weaker basis. We continue to focus on well rated corporates with average rating profile of the corporate book improved to 2.67 from 2.76 Y-o-Y. That is equivalent to AA rating. The growth was driven by demand from NBFC, small corporate and SME. The slippages from the corporate book remained well contained in quarter 3 slippages at INR 56 crores. This would be one of the lowest quarterly slippages in the last several years. A part of the corporate book under restructuring will complete 1 year of satisfactory performance and expected to be upgraded this quarter. We are however watchful of our developments in 1 of the restructured accounts under litigation. Our exposure to stressed telco was at INR 30 billion as of December '21, of which funded is INR 10 billion and balance nonfunded. The consortium is evaluating the business plan, and we will update you at an appropriate time. During the quarter, we sold down 1 of the IL&FS exposure to an ARC for INR 240 crores cash recovery with an upside participation on final recovery. The exposures have already been written off and recovery is used to augment the contingent provisions. The gems and jewelry book reduced quarter-on-quarter due to repayments and is maintaining its asset quality with 0 NPA. Overall, the corporate franchise has seen a comfortable turnaround with focus on growth compliant with the underwriting framework. Now coming to deposits. Deposits grew 19% year-on-year driven by 24% year-on-year growth in current and savings accounts and retail deposits as per LCR grew by 32% year-on-year. The growth is achieved along with reduction in cost of deposits. Our cost of deposits reduced to 4.66% from in 4.85%, showing a decline of 19 basis points during the quarter and 139 basis points cumulatively in 7 quarters. We continue to remain surplus on liquidity and let go some of the expensive deposits during the quarter. The certificates of deposits reduced in absolute as well as proportion of deposits during the quarter. The CDs now formed 2.2% of the overall deposits. Approval segment, total AUM stood at INR 60,000 crores, showing a Y-o-Y growth of 25%. In the same period, total deposits in the segment grew by 21% and stood at INR 35,000 crores. The growth in deposits is driven by CASA, which grew 37% year-on-year and 4% quarter-on-quarter. Deposits from the NR segment has been holding off well at INR 27,000 crores. The NR market has seen a sharp fall in the fresh inflows of the deposit this year. We have, however, gained market share this year till date and aim to maintain the trajectory. We have maintained our overall LCR at 137% and we're running surplus cash balances and excess investment of over INR 60,000 crores. Digital traction. We have been executing a business strategy focused on, a, improving efficiency of existing business; b, creating new digital business models; c, building digital propositions with a wider ecosystem. Over the last 9 months, we have built a comprehensive stack of digital platform to serve the needs of retail, individuals and SME clients. These include IndusSmart for investments, IndusForex for reach -- and recently launched IndusEasyCredit for personal loans and credit cards as well as purchase financing on debit card spend. In the MSME sales during the year, we launched EasyCredit for business and Indus Merchant Solution to meet banking, payments and lending needs for small entrepreneurs. Consequently, our digital sourcing mix continued to increase during the quarter. Overall, 92% of the transactions happened digitally and 71% of overall service requests are now processed via digital channels, up from 68% a year ago. New developments during the quarter include we opened up IndusEasyCredit stack for credit cards to various channel partners and employees and it is gaining transactions in more than 120 offline channel partners. We also integrated 2 digital partners and several more in the pipeline. That platform is generating over 300,000 inquiries every month. With the platform launch, our cost of processing for application has come down by 80% as printing, dispatch, scanning, data entries are eliminated. We launched an enhanced version of IndusMobile app with better user experience and security features. The mobile app continues to be rated 4.3 on play store and IBM mobile and UPI transaction growth almost doubled Y-o-Y. We enhanced features on WhatsApp banking, including PDF statements, card balances and bill payment. We saw good engagement on WhatsApp with 3.6 million user registered base and over 1 million conversations every month. WhatsApp banking user base had increased by 82% year-on-year and transactions are up 2.9x year-on-year. Indus Merchant Solutions, the one-stop solution app for small merchants saw a good response in the initial months of launch and garnered an installed base of 10,000 plus organically with 60% of the new to bank users indicating wider acceptance of solutions offered by the app. As we start the media campaign from this quarter, we expect the momentum to build in the come quarters. The bank has launched IndusEasy Deal, the websites, host, ancillary services like roadside assistance, mechanic services, insurance, which is the first of its kind in the market. The portal also host the repossessed vehicles of the bank for auction and provides a smooth user experience for anyone looking for pre-owned vehicles. This is the first step in the journey of vehicle discovery and the future road map will include bringing in more inventory from aggregators, dealers, provide customer value-added services on such customer touch points. The vision is to create a wholesome customer journey to complete vehicle ownership cycle and give enhanced user experience, transparency and value. The channel is expected to bring in niche digital footprint and market recall of vehicle finance. We also continue to build our open banking platform, open banking, platform banking strategy, leveraging the bank API live with 260 partners so that we can extend banking services and by embedding ourselves on to partner platform. Now coming to the financial performance for the quarter. Net interest income grew for quarter 3 at INR 3,794 crores, grew 11% year-on-year and operating profit at INR 3,312 crores was up by 12% year earlier. Our operating profit margin remained healthy at 5.90% of loans. Net interest margin improved during the quarter from 4.07% to 4.10%. The improvement was driven by continued reduction in the cost of deposits from 4.85% to 4.66%. The yield on advances came up from 11.66% to 11.36% due to higher share of corporate loan and with better rating profile and slower MFI disbursement. Other income grew 14% year-on-year. Retail fees contributed 58% of the total fee income. On the cost side, we resumed investments in our branch network, adding 88 branches during the quarter, taking our branch count to 2,103. We continue to invest on the digital initiatives as well. Our cost-to-income ratio was at 41.6% for the quarter. On the asset quality and the provisioning front, our provisions for the quarter were at INR 1,652 crores. Net slippages for the quarter were at 0.9% of loans. As expected, bulk of this came from micro finance at 4.4% of loan, whereas net slippages from the rest of 88% of the book were contained at 0.3% of loans. Our coverage of micro finance NPAs at 95%. We also have standard provisions of INR 368 crores towards full coverage on products with procedural laps and 10% provisions on all 30 to 90 DPD loans. We also carry additional -- we also additionally carry significant contingent provisions for restructured loans. We are thus well provided on the existing as well as potential NPAs in micro finance. Overall, the GNP of the bank has moved down to 2.48% from 2.77% quarter-on-quarter. And net NPAs were down to 0.7% from 0.8% quarter-on-quarter with PCR of 72%. The restructured book reduced from 3.6% to 3.3% quarter-on-quarter. We have used recovery from IL&FS exposure to improve our contingent provision to INR 3,328 crores, amounting to 1.5% of loans. Total loan related provisions are at 3.7% of loans or 144% of gross NPAs. Our SMA-1 and SMA-2 book was at 25 basis points and 59 basis points respectively. Net security receipts were at 85 basis points versus 71 basis points quarter-on-quarter. Profits for the quarter were at INR 1,242 crores, growing at an 8% quarter-on-quarter and 15% year-on-year. Our CRAR, including profits improved to 19.07% from 18.06% with CET1 ratio at 16.14%. The CRAR was also boosted by the Tier 2 issuance of INR 2,800 crores during the quarter. Overall, I think quarter 3 was one of the toughest quarters since the first COVID wave and outcomes have been what we have been communicating. We are all thus well poised and pivoting to growth as reflected in disbursements as well as collection in the 88% of the non-financed micro finance book has been stable. The book grew 4.3% quarter-on-quarter and with 30 basis points of net slippage. We expect these portfolios to maintain this strategy. The micro finance portfolio has seen slippages broaden in line with our expectations. The update from internal as well as external review also corroborates our views. The disbursements are now back on track, and we expect loan book to grow here on. We have conservatively chosen to take the micro finance credit cost through the P&L along with augmenting contingent provisioning. The contingent provisioning position us well to mitigate future credit cost cycle. The liability franchise continue to scale up with reduction in cost of deposits. We are well positioned for the upward risk cycle as well. We are well on our track on executing our digital strategy. We have so far launched 3 out of the planned 5 initiatives, IndusEasyCredit, Merchant Acquiring and Vehicle Finance portal the these are being scaled up. The other 2, Millennial and SME offerings, are planned for the launch in the couple of quarters. The profitability of the franchise remains healthy at 5.90 PPOP margin. ROA and ROE continues the journey towards normalization and should see further improvement as micro finance costs have peaked. While the COVID remains a risk to watch out for, the implication of the recent wave on our business have been limited. We are thus committed to executing our strategy quarter-on-quarter. With this, we can open for question and answers.

[Operator Instructions] The first question is from the line of Abhishek Murarka from HSBC.

2,3 questions. The first is this audit report. By when can we expect it? And has any of the slippage or write-off been precipitated as a result of any finding of the report?

So the internal audit report has been presented to the board already, and the committee of the Board Directors who were reviewing and overviewing the -- overseeing the audit, we have presented it to the board. I think the external consulting firms preliminary findings have also been reviewed. A status update has been given to the Committee of Directors and it has -- so I think the external consulting firm board report should be available very soon. I think they are internally validating the report as well as presenting the report to the management for their comments before they presented to the Committee of Directors. So I think it should take a couple of weeks, 2 to 3 weeks before it is out. So that's what. I think what we have done, it's not precipitated it. I think we were always in my first call itself, I said that we had the provision and we have taken the full provision of this portfolio, which was INR 179 crores on a particular product.

Okay. And the INR 368 crores, I think you mentioned that you're carrying separately for MFI. This is outside of any provisions for MFI?

No, no. These are core MFI. What I've done is I've taken -- we've taken 10% on 30 plus as an extra provision. And we have taken the current book, which was on current of INR 179 crores, which was current on this particular product has been taken as 100% growth. So INR 179 crores plus INR 120 crores or INR 130 crores on the 30-plus bucket is what we've taken as provision.

Okay. Okay. Understood. The second question really is on growth. Now at the current rate of growth, we may undershoot our guidance of 16%, 17% growth this year. What is your view for the following year? You're seeing disbursements are kicking back up. So what is your view for '23?

If you look at this quarter 2, I think if you would have just seen our growth, outside the microfinance was 4.6%. So we are back to 18% to 20% growth year-on-year. It's not that. If we get our micro finance growth back, which will be 5% quarter-on-quarter, 6% quarter-on-quarter. At any cost, we will be delivering 5.5% quarter. In my view, our growth is in the early '20s and we'll continue to believe we have to make up for the lost time, which we have done. I think our growth will be in the range of 12% to 13% this year, and we'll go to early 20s in the next year to make up to 16% to 18% [ CAGR ] in the planning cycle 5 on the 2-year period.

Okay. And finally, on MFI, just a few questions. So you're seeing disbursements are back up. But what was the disbursement last quarter? And what have you done in January so far? Just to get a sense of...

Can't give you the January number, I think it's incorrect if we do. The December result was INR 7,300 crores approximately. We do an average of INR 8,500 crore to INR 9,500 crores of disburse.

And we should be back up to those levels in this quarter, let's say?

Yes. And I'm talking only about the -- yes, I'm talking about the member business. There will be another INR 300 crores to INR 400 crores of disbursement, which will happen in the merchant acquiring business.

Okay, sure, sure. Yes, yes. And this average ticket size that you have shared, this is on AUM, right? What would it be on disbursement?

Disbursement will be slightly higher, I think, 30,000, 32,000.

32,000. Not much of a difference.

It's a 1-year book. It runs down and...

Okay. Okay. Just you're giving away quite a bit of data on MFI on paying, nonpaying disbursement, et cetera. Just a request, if you can put it in a slide, it just helps us compare because a lot of others give that data. And would it be useful to have at least the basic data about MFI separately. So just a request there.

The next question is from the line of Sameer Bhise from JM Financial Services.

Just 1 question on how does one tie up the number of sale to ARC, it says INR 740 crores in the presentation and around INR 2,480 crores in the BSE release.

So if you look at it ...

Sameer, INR 7,487 is the gross amount, which is sold to the ARC during the quarter. Within that INR 750 crores is the CNTL IL&FS exposure, which was already written off. And the balance is the loans which are sold during the quarter, which are the retail and other assets. The INR 750 crores, as you know, is a fully provided and return of exposure. Of the balance, INR 1,737 crores, there were already provisions sitting on the book. So the net amount is INR 1,213 crores as disclosed in the SEBI disclosure. And again of that INR 1,213 crores, we received a consideration of INR 740 crores so that INR 740 crores is in the investor presentation. And then INR 740 crores is further the usual, whatever the cash and SR book cost split that you receive in that. So that's how the INR 2,487 crores flows into the SR book and investor presentation notes.

Okay. Okay. I probably just run it down once again offline. Secondly, just wanted to get a sense on the corporate book. How is the growth shaping up and from what kind of sectors.

So our corporate book grew by 6%. I think on the large corporates, we are seeing growth in the NBFC segment, which has done very well for us. And we continue to believe that, that we are about 4.5% of our book there. And we believe that that's a very good business, which we are in. I think we've also added to the real estate sector, 2 deals were done, and we did that smaller amounts, but very good deals, which we did. On the mid-corporates and in the smaller corporate, we saw growth, and we saw the growth in the -- specifically in the smaller corporate at about 10% to 12%.

Okay. You expect the ...

RE loan disbursements were for existing projects, which were for existing projects. So they were not new entrance into the new customers which are acquired, they are disbursed over a period of time.

Okay. And do you expect kind of [ high teens ] number to sustain on the corporate side?

I believe so. I think the budget will prove us very good opportunities in the corporate. I think the CapEx cycle is revising. And I believe that we will continue to grow on the corporate side. Like I said, our mix will be 45-55 and I think we are in that range on the corporate and retail side. I think we will also see the details side shaping up. On the retail side, the vehicle is coming from a very low cyclical downturn. And I think the vehicle side of the business will do very well. Micro finance, there's always a demand and you will see us growing that micro finance. And on non-vehicle asset business, you will see the growth momentum picking up. And I think all the 3 businesses are well positioned for growth now.

The next question is from the line of Kunal Shah from ICICI Securities.

Yes. So firstly, with respect to the OpEx, so overall, the OpEx has been quite contained, but we have seen an increase across the board. So do we see maybe investing further and we catch up on the OpEx? Or we still feel like cost income being [ wallet ] at this level quite comfortably?

No, no, no. I think what you will see is we will continue to invest in OpEx. So I think OpEx is a very important component, specifically on technology and people we are investing. Our branches, we are growing the distribution. We are investing in technology, and we will invest in people. So I think OpEx will continue, but please understand the revenues will also grow. The nature of our business is such that we will continue to grow the revenue. I've always said our OpEx will be in the range of 41% to 43%, and it is contained within that percentage. So to say that the OpEx will not grow, absolute numbers of OpEx will grow. But I think the revenue will also grow to take care of the OpEx.

Sure. Okay. So maybe the way there has been surprised all across that we are not seeing particularly for IndusInd, maybe I think credit card could be 1 component of it. But apart from that, I don't think that there ...

We have a very small card base of 1.6 million clients. So people have invested a lot during the festival season because of the large base. I think our investment will be INR 8 crores to INR 10 crores. It doesn't move the needle.

Sure. And sorry, I don't know if you covered it earlier, but the write-offs primarily were pertaining to the MFIs almost like [ INR 1,470 ] crores.

Let me give you the number. I think we did a write-off of INR 1,662 crores. INR 281 crores was from vehicle finance. Secured retail was INR 41 crores, unsecured retail was INR 217 crores. MFI was INR 928 crores, corporate was INR 194 crores.

So MFI was 9?

INR 928 crores.

INR 928 crores. So almost like 4% of the book is something which would have been written off?

Yes.

Okay. So overall what was the paying, if we have to look at it we in terms of the entire restructuring plus slippages over the past several quarters and the write-offs which have happened. Finally, on that book, what is the kind of paying which we had seen over the last 4 to 5 odd quarters?

On the MFI?

On the MFI in particular?

INR 1,850 crores is the overall slippages for the -- over the year on the book. And if you look at it, I think we are at the -- I think we touched the peak. And I think you will only see improvements. And I think by quarter 1, we will be on [ BAU ] -- there may be an elevated provisioning in this quarter of about INR 400 crores to INR 500 crores. But I see that going down to about INR 250 crores to INR 300 crores. And that is the normal course of the business, which will happen in that business. So it has actually gone down dramatically and that is reflected in the ex-plus book or the -- that's what I've given you the data and if you read my commentary, I've disclosed it's almost 50% down.

Yes. So next quarter, we'll see INR 400 crores, then they're after getting settled at INR 250-odd crores normal.

I just -- I'm saying that you will have to see the numbers. I'm just giving you, I think, it's on its way down. And I think the normalization should happen from next. I think it may be elevated than the BAU next quarter. But overall, from quarter 1, it will be BAU. And we have -- and this is because I'm not taking any hit to the P&L or to the contingent provisioning and I'm taking it to the P&L. I could have reduced the cost by reducing it through the contingent provision, and I could have reduced my P&L costs imply all the. So I'm not using my contingent provisioning right now. And even the excess which I received from the sale of an asset on a recovery, I made a contingent provisioning. So I'm not using that provisioning at all.

The next question is from the line of Shagun Verma from Goldman Sachs.

This is Rahul here. Just a couple of questions. Just on -- just wanted to understand the behavior on the portfolio. So we understand and correct you if my numbers are wrong, about INR 4,500 crores was actually just about -- how has the behavior been? And we have a micro finance sitting in there that we have [indiscernible].

So let me tell you what is our GECL portfolio. So I think our total overall portfolio is INR 5,878 crores as of now. And how has the portfolio performed, Ramu?

We are very marginal, very small slippages and loan against property and other claims have been made. It's not been anything material as of late. The repayments have started because the 12-month moratorium has ended for some of the early loans that we had given in 2020, in the second half of the year. So we continue to monitor it, nothing material or any flags which have come up on this portfolio. And we haven't seen much traction on disbursements at recent time.

And on the MFI portfolio, which you asked on the product in which we have booked the GECL, there is an 88% to 89% collection efficiency.

Sorry, the 89% collection efficiency is on the MFI book?

On the GECL portfolio.

Yes, we have a GECL program for MFI clients. So I think about -- it's about 89%.

Yes. 89% was the collections.

And the full repayment of this book will happen in which quarter, the fourth quarter?

It goes on for 3 years and 4 years, right? The term of the proposal is 1 year moratorium.

Yes, I meant moratorium. When does the moratorium for the entire book ends?

Some of it will end by early next year because we disbursed up to last December, right? because of GECL 3 also came.

MFI ends in March and the other may end up by another 3 months or 6 months later.

The bulk of our disbursements happened last year. So many of them have already ended, that's what.

We can give you the data. We don't have that real data with us. So I will send you that data into the investor present.

The other question was on the 2-wheeler and large portfolio. Over the last 2, 3 quarters, the book is running down. So when do we see that run down sort of to start stopping or discuss to start picking up in those portfolios or conscious decision.

No, no, no. Rahul, the issue is there is a decline in the 2-wheeler industry. We have to accept it, 30% to 40% decline. And that's why while we are maintaining our market share, increasing our market share. The issue is the number of scooters sold is decreasing, and that is why the book is running down. However, we've seen that turn in cycle down. And I think for the first time, we saw a little bit increase. But yes, you're right, the book is running down. And we should start seeing an increase this quarter, but it will be a marginal increase of INR 30 crores to INR 50 crores because the runoff is also very high. On that, we will start seeing a progressively a great disbursement happening. We did INR 260 crores of disbursement last month, but the issue is that the runoff is also we have to touch to INR 350 crores to INR 400 crores, and you will see the growth happening from this quarter onwards.

Got it, got it. And just last question on the employee expenses. The last 2 quarters, the run rate has gone up to INR 850-odd crores from INR 600-odd crores thereabout. So is it how the run rate is going to be now? Or is there is any one-off predicting there?

No, it will be similar. We've added new people in Bharat Financial. I think we are adding resources in the -- the cost of our resources in technology and digital have gone up. We made a bonus provision, which is a little bit higher of the retention of people. We've also given an increment in January to our people at the lower level. So I think all around, we've done that. But I don't think it will -- it's going to be at that level for some time because it's all the cost which has been added up to that level. But we continue to believe we will be between 41% and 43% efficiency of our business.

The next question is from the line of Nitin Aggarwal from Motilal Oswal.

So like when you guide for a loan growth of 20% plus next year to make up for [indiscernible] this year, how confident you are to go the liabilities at a [indiscernible] space because the mix of retail deposits has been sticky around 40. So would you not focus to grow this like a mix of retail deposits in [ collective ] manner?

See, we continue to believe that we can press the accelerator on deposits at any point of time. The issue was in this because of the excess liquidity which we had, we actually run off a little bit of our mature term deposits also. And I think it is only a matter of time that you will see this coming back. We did lose certain deposits because of IR rate getting dropped, not to say that we did not drop the rate, we dropped the rate on savings and all, we dropped the rate of this. I think it will come back. I've always said our liability growth will be higher than our asset growth. And we are ongoing to continue to maintain that. We have given a 48% to 52% SBC plus LCR, and we will continue to stick to that plan.

Okay. And secondly, we have put strong [ intelligence ] during the quarter. So if you can provide some color on it? And how do you see this spring of in tightening rate environment?

No, no. So there are 2 things in that. If you look at the other income, there are 2 things. One is the extent guidelines which have been modified and INR 240 crores of income which came in into the other income. And then there is a treasury income, which come in. So the treasury income is around INR 250 crores. And then the other income is about INR 130 crores, INR 140 crores, which have come in there.

Okay. And lastly, like on the corporate yield, while we have talked about that the improvement in rating has driven the decline, but it's still pretty sharp.

What has happened, see, the MCLR, we've been dropping our MCLR. The MCLR impact has to come in at some point and it has come in. Number two, please understand that a lot of repricing happened because we were losing clients a market rate on corporate banking is anywhere between 5.5% to 6%. So what how do you manage your clients? We had to give a little bit of a reflection on the yield. Otherwise, we would have lost a very good loan book, specifically in the SME side and in the BBG side.

And we have got higher rated plans.

And of course, there is a higher rated paper, which has come in. Most of our disbursements are happening in the higher-rated paper, and we are moving towards working capital also in a large way.

The next question is from the line of Anand Dama from Emkay Global Financial Service. The next question is from the line of Alpesh Mehta from IIFL Securities.

The first question is, again, going back to the route ARC. So what I can see is the gross value is around first and foremost, this is a 9-month number. This is not a third quarter.

This is a third quarter number.

This is the third quarter number? So the gross value of the loan cycle is around INR 2,500, the net value is INR 1,200. So the provisions that you have made on this book is INR 1,275 crores, that is the consideration. So how is this entire provision consideration received and the shortfall is being accounted in the report.

So I repeat the numbers again. So out of the INR 2,487 crores of sale to ARC, INR 1,737 crores is the sale related to retail MFI all the books and INR 750 crores is regarding the IL&FS exposure. Within this INR 750 crores was fully provided, and this -- the provisions include provisions still date, not just in the last quarter. So the net value of [indiscernible] is 0. The net value after provisions of other loans is around INR 1,213 crores. That is the number reflected in the disclosure. Again, this INR 1,213 crores of net exposure that we have sold. The consideration for that was INR 980 crores. Within that INR 980 crores, INR 240 crores is for the IL&FS asset and INR 740 crores is for the rest of the book because the IL&FS exposure was return of already, that INR 740 crores is a recovery, and that does not get reflected in the GNPA movement. The INR 740 crores is the number that is seen in the NPA movement. And that INR 740 crores number then goes into the SR book for which we are carrying provisions.

So this INR 240 crores would be a part of the recovery from written off account?

Yes, it's a recovery from written off accounts.

And it's a part of other income?

Yes.

Okay. And short fall between the INR 740 crores and INR 1,213 crores, INR 500 crores, so that has been adjusted against the security that you would have got.

No, that's closed through the P&L. Whatever is the loss on the sale to ARC close from the P&L. In the credit cost for the quarter.

Okay. Now the second question is on the -- what is the outstanding quantum of security resets on the balance sheet?

Yes. So net security receipts as covered in the opening remark was 0.85% for the quarter against 0.71% last quarter.

Okay. And last question is on the margin [ interest ] obviously toll systems are seeing that road just picking up and some of the larger corporates especially in the third quarter, and which is likely to be the case at least for the next 1 or 2 quarters. So what's your outlook on margins? Or your view on volume versus the margins? How are you looking at the situation?

Which margins are you talking about?

The overall net interest margin I'm talking about.

So our net interest margin guidance has always been between 4.15 to 4.25. We are not in line right now. We are lower by 5 basis points at 4.10. But I think as the micro finance business picks up, we should be there.

Okay. So even though the -- even though you are planning, you may grow the large corporate group, but your margin should remain intact within that 4.15?

The mix of the book will still also undergo a change at certain point of time. And that is where the mix if it moves towards a little bit towards micro finance and credit card business picks up, you will create more margin.

And the last question. Out of the total slippages, what are the slippages related to the MFI for this...

So our total slippages in the quarter 3 was INR 2,598 crores. INR 1,341 crores is on the MFI book.

And the first 2 quarters would be?

Quarter 2 was about INR 1,070 crores, gross slippages. Net slippages was about INR 1,239 crores in the quarter 3.

And quarter 1, if I remember, it was around INR 150 crores.

Okay. So in case during the call, if you get this number handy, what is the gross number of MFI slippage and the net number of MFI slippage that would be great, in case if you have it handy.

We'll try and collect before the call ends.

The next question is from the line of Prakhar Agarwal from Edelweiss Financial Service.

Just a follow-up on that as well. So this time around, you said INR 980 crores is write-off for MFI. What should be that cumulative number for 9 months? How much have we written off cumulatively for MFI.

We gave you that number, INR 1,800 crores something, not write-off. Write-down would be very less.

We'll get you that number. 9-month number is not handy. I think we've disclosed every quarter what is our write-offs. So we can give you quarter 2 and quarter 3, but we don't have the quarter 1 number.

Sure, sir. During the call, if you could provide that number. Second is in terms of telecom exposure, has there been any change in that telecom exposure? Has something been repaid or something of that...

INR 258 crores of guarantees were repaid. We're expecting another INR 300 crores to go off then we are expecting another INR 300 crores to go off in quarter 1 also. So that's something which we expect. And then we-- I think the ARPU guarantees the decision has to be taken by the government, and we expect that decision to come through. It should be another INR 500 crores to INR 800 crores going off.

But nothing on fund base side that probably get reduced this quarter?

So we've already reduced INR 258 like that crore and we should only get another INR 250 crores to INR 300 crores reversed this quarter.

Perfect. And just last thing on this provision, the continuing buffer that you're carrying, what is the plan to utilize it, how you're thinking about it?

We will see. There was an opportunity to utilized. I was tempted to do it this quarter. But I think -- we think that we should keep it and that's why we added to it also. And I think you should keep it and use it at an appropriate time. We will evaluate it next quarter because we want to come at a credit cost of once today, if you look at it -- my credit guidance was 190 basis of credit cost and 50 to 60 basis points on the Vodafone. We're already at 190 today and 40 basis points on the Vodafone. If I have to maintain the guidance of 190 to 200 basis points, I will see whether I have to use the contingent provision. I may not have to use it much, but I may have to use INR 200 crores, INR 300 crores. So we will see whether we have to use it or we will bust our credit to cost guidance. So we will evaluate it at certain point of time at appropriate time.

And what would you be your credit guidance for FY '23?

Not right now. We will come to it later because -- we've always said that our credit costs should now go down between 125 to 150 basis points. But I'm not giving a guidance. I want to see how COVID plays out.

Ladies and gentlemen, I now hand the conference over to Mr. Sumant Kathpalia for closing comments.

So thank you for being on the call on a Saturday evening. I just want to tell you thank you for being patient with us growing was not easy for people who had confidence in us and lost confidence. I think I want to tell you that the bank continues to remain strong. And we are very, very confident of the recovery phase, and we don't see any issue in what we said. Our micro finance business is strong, and I continue to believe that we will continue to grow the business, and we'll continue to have a growth which we anticipated. We would have achieved our growth target this quarter also except for the micro finance. So we are well on our way to achieving our growth targets. Thank you so much for your -- and me and my [ colleagues ] are available for any clarification, any doubt you have. We've not answered certain questions. We will make sure that that's uploaded in the investor deck. Thank you so much.

Thank you very much. On behalf of IndusInd Bank Ltd. That concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.