L&T Finance Limited (LTF) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the L&T Finance Holdings Q3 FY '22 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. We have with us today Mr. Dinanath Dubhashi, Managing Director and CEO and other members of the senior management team. Before we proceed, as a standard disclaimer, some of the statements made in today's call may be forward-looking in detail, and a note to that effect is provided in the Q3 results presentation sent out to all of you earlier. I would now like to invite Mr. Dinanath Dubhashi to share his thoughts on company's performance and the strategy of the company going forward. Thank you, and over to you, sir.

Thank you. Wish you all a very good morning. Thank you for joining the results call and wish you all a very happy New Year. We do continue to learn from the ebbs and flows of the pandemic. With the current hopeful be milder than the previous 2 and hopefully, we are nearing the end of the pine. I look forward to the future with great deal of hope and optimism. For this call, I will divide the commentary into 2 parts. As usual, I will speak about the first one, focusing on the performance of the quarter. But given that we are coming out on the other side of pandemic and hopefully, we see it becoming more like epidemic now than the pandemic, it may be important and relevant to talk about our growth plans and profitability plans for the next 4 to 5 years. And I would like to give you some glimpses or more than glimpses of what the company hopes to stand for and what it hopes to deliver over the next 4 to 5 years. Moving on to the highlights of this quarter. I would think this quarter was -- the main aspect of the quarter was extremely strong business momentum with focus on rapid and sustainable retailization. Our retail portfolio mix is down 50%. For the first time ever, we just crossed 50%, up from 40% in the same period last year. Rural business now is, for the first time, the largest lending We always had infra as our largest lending segment. Now rural is the largest lending segment at 38%, showcasing almost 12% Y-o-Y growth. Now this has happened faster than what we had anticipated also, one, yes, I have anticipated, the rural business is doing extremely well. But yes, against what we had expected and against our wishes, we are seeing some prepayments in infra portfolio also. So that is of course that component of it. But definitely rural business. The headline is that it is now the largest segment. We could also see the highest ever quarterly disbursement in rural as well as overall retail, highest ever, which is 29% Y-o-Y up. So rural was close to INR 7,000 crores. And total retail was INR 7,600 crores in the quarter. Both these numbers highest ever. Whereas it comes from in addition to growth in our existing products, launch of new retail products with aim to accelerate and has really worked. The new product that we launched about a couple of years back, consumer loans have now got the momentum of, of course, INR 650 crores a quarter and increase. We have also just launched a pilot now finally offer small business -- small and medium business loans and hopefully, over the next year this will start paying dividends as well. Second highlight other than business momentum was NIMs. Now NIMs plus fees, you would have noticed for the first time, has been higher than 8%, at 8.1%, mainly achieved on the back of increased retailization and increasing disbursement volumes of retail, which also leads to higher fee income. And also second one, what it has helped is much increased proportion of long-term funds. It is that extremely good cost, which one reduces our and I will talk a little bit more about it later, but also protects us using phase, which may come in the future of tightening liquidity and slowly increasing interest rates. The total aspect of the normalization of condition across businesses have now either stabilized or actually crossed pre-COVID levels. And what I would like to highlight is in our real estate portfolio, and I will talk specific numbers, it has been given in the presentation, we are going to increase in the resolution, actual repayments and prepayments coming from the escrow mechanism have gone up and have been built robust over the last 10 year, reducing the around this portfolio substantially. Coming to asset quality. GS3 is at 5.91% [indiscernible] 3.03% with PCR almost at around 60%. There is a margin that increased Q-on-Q in the GS3 number. But it's small and it has to be taken in the context of one particular asset, which we talked about last time, slipping into GS3. And last quarter, Q2 only, we had said that in Q3, there will be further INR 300 crores, INR 350 crores which will slip. A total of INR 1,300 crores of single asset And despite that, GS3 remaining quite steady. In rural business, there is a significant improvement in asset quality with GS3 at around 4%. And most importantly, now that we have created macro protection provision. And our calculation showed that we may start utilizing them in rural from Q3 audits. But the collections have been so good in Q3 that we have actually been able to get through Q3 and show these results with total credit cost just about INR 700 crores, which is 31% down from last year, without utilizing any substantial macro potential provisions, there's still stand at INR 1,700 crores. We believe that, however, minimum impact of third wave, et cetera, we are well protected. Our OTR portfolio stands fairly moderate. And even that is well protected based on collections and based on the provisions that we are carrying. Headline numbers, of course, PBT up 29% Y-o-Y, PAT up 12% because of change in tax and tax loss. Balance sheet quite strong. Capital adequacy 24% and debt equity ratio at 4.2%, making sure that as we move now towards future growth, capital availability is definitely not going to be a constraint as we go ahead. So clearly, since the beginning of the pandemic or even before that, I have mentioned that our focus on first principle will hold us in good state and that is coming to play in this quarter, which are proven business strengths basically are right to win and using that strong collection framework, which our digital capabilities and helps us stay ahead of the curve, strong liability franchise, improved asset quality and strong balance sheet. So these are the 5 which have worked quite well. I will deep dive a little bit into number, which will hopefully answer many of your questions upfront only. Let me dive into disbursements. 35% Q-on-Q growth with a strong performance in retail business. Retail book grew at around 4% Q-on-Q on the back of highest-ever Q3 disbursements supported by strong growth in Two-Wheeler finance, micro and consumer loan business. Total disbursements in retail, as I have said, is 29% up at INR 7,600 crores. Rural is now the largest segment in LTFH compared to 38% infra book for the first time. The business achieved in Q3 comes from funds farms that is tractors, a relatively strong performance despite the market falling. By working on our deferred dealer stroke OEM strategy helped by analytics, which has helped us maintain our market share and Two-Wheeler also working on our business strategy to building around dominating counter shares of our preferred partners as both these industries, as you know, are down, and we have maintained our disbursement and quite well and it has actually come from a preferred dealer OEM strategy. That is what I always call precision bundling using deep analytics. We a take minute here to provide the perspective tractor sales in the country during Q3 were down by around 13% and Two-Wheelers were down by around 19%. Uneven rainfall and in fact, almost 120 events of heavy rainfall at the end delayed harvesting of kharif crops, losses to standing crops due to unseasonable and extreme rainfall events had adverse impact of fertilizer shortage on rabi sowing also and lower than MSP Mandi pricing across markets and across majority kharif crops, increased unemployment and slowly spreading COVID in the rural beds has actually caused this slowdown in the rural market. And we have been talking about it for the last 9 months. We also believe that this slowdown might continue for the next 2 to 3 quarters. However, the fundamentals of the rural economy remains strong. And while this dip is expected for the short term, our faith in the rural economy continues strongly. But the important part is with this -- in this context, we have managed to buck the trend as our disbursement in both tractors and Two-Wheeler have been more or less around same as last year despite this big drop in volumes in the market. One major reason for this is the way we approach our business with clear outcomes. And more importantly, have remaining. Yes, tickets have gone because the prices have gone up naturally, but LTVs have remained same or, in fact, just marginally lower than last year. One major reason for this is the way we approach business with clear outcomes from analytics, which states to operate and which dealers to work with, how many resources to allocate to e-counter, all this come from deep analytics and that really helps us getting -- we don't fight for market share. We go for counter shares where we need, and that moves to market share. If we talk about micro loans, our disbursements are always collection based. Healthy disbursements driven by normalization of collections and better than industry asset quality has marked our disbursement for this quarter to be almost INR 3,200 crores, which is aligned with pre-COVID level. We have now very clearly, once again, crossed the INR 1,000 crores I may say so, of disbursements. And this, we believe bodes well for future profitability and asset growth. And most importantly, this has happened very clearly based on analytics as efficiencies have gone up. So we believe that this increase in disbursements will, of course, contribute to profitability but will also make sure and we are making sure while increasing the disbursement, that portfolio quality remains strong. Talking about consumer loans, we look at it with great hope. It is our first digital-native product. Right from beginning, it is end-to-end digital. It's even now relatively small, but now disbursements have gone to almost INR 650 crores in this quarter, and this is a big change if you see that over the entire FY '21, the disbursements of the product was about INR 400 crores. It is building up very well. I will take a moment to explain what we are doing in this product. It's an entirely digital proposition, entirely more touch sourcing and instant decision. In fact, total disbursement takes less than 30 minutes. And we believe it is really our USP in the market. This is including documentation, everything and the whole thing is digital. Right now, we are churning this as a cross-sell engine to existing customers and will be very shortly when in open market, this product, the product now as we go to open market, will be dedicated to responsible to end-use especially in the health care and education sectors as we go ahead and is going to be a game changer for us. Moving to housing. Housing over the last 2 to 3 years. We have not scaled up much, but last year, we undertook steady business in retail home loans where salaried home loan book was up 12% Y-o-Y and 6% Q-o-Q. focus was very clearly on fine-tuning our approach towards business and getting our market offering right. During the waves of pandemic, asset quality was given clear clarity compared to growth, profitability, et cetera, and as a result, a large proportion of our recent disbursements are very focused on salaried segment. In Q3, this is now turning. Models are ready. Market is ready. Early warning signals are ready. First, to now start again growing our segment and lab offerings, sourcing through select market channels, which were quite limited during the preceding quarters. We were making sure that all the disbursement happens through our internal channels, et cetera, with some control in place and now more business coming through these additional segments, we are quite confident on growing disbursements in this product to go ahead. And frankly, we don't need much, right -- and yes, I understand it is a very competitive product, but given our volumes even doubling the volumes is increasing from INR 650 crores to INR 1,300 crores, INR 1,500 crores a quarter is -- it's not that much dependent on competition. It is not doing a few things right. And we are quite confident of doing them as we go ahead. In the wholesale segment of housing, that is in real estate, we have continued now to stay away from looking at any new projects for financing with current focus clearly aimed at completing existing projects, and that has worked very clearly, as I will talk about in the collection when I come to collections. Infra. Infra in Q3 FY '22 disbursements were at INR 1,758 crores, which were up quarter-on-quarter, no doubt. But they were well below the run rate that we are capable of because we believe that currently, despite the lower cost of capital, et cetera. But some of the pricing that we see in terms of is not pricing the risk properly suitably. And we believe that this will turn soon. We continue with our refinancing opportunity for operational projects, working on the roads, renewables, greenfield projects. And with our expertise and turnaround time in this, we are sure that disbursements here will definitely pick up. Here, the important part is we will continue with our capital-light model. As disbursement pickup, our sell-down will also pick up. We will make sure that the ROE fees in this business is very good as we go ahead. Collections. Our continued focus on analytics and data-driven resource allocation technique over the years has helped us make it better than industry collection performance throughout, especially in our retail product. Same holds true for this quarter as well. Total collections of the focus book stands at INR 13,000 crores compared to INR 10,700 crores in the last quarter and INR 11,000 crores same quarter last year, clearly demonstrating that collection efficiencies have returned and in fact, better than pre-COVID level. Portfolio focus continues towards boosting 0 DPD collections and managing early bucket delinquencies, just to give you farm collection efficiency, I will not spend too much time these are all numbers given the industry investor presentation. Farm collection efficiency, 91.3%, clearly well above industry performance. Two-Wheeler -- and these are on-time collection efficiencies. Two-Wheeler at 98.3%. And micro loans, once again going beyond 99%, at 99.3%. Consumer collection efficiency continues to be at 99.6%. This is, of course, a relatively small portfolio of about INR 1,700 crores, but this bodes as well as we go ahead in the future. Home loans and lab collection efficiency is now at 99.3% on-time collection efficiency. This bodes extremely well. The story really collection is in real estate. Real estate principal repayments and prepayments Here when prepayments, it is very different than infra prepayments. I will talk about infra prepayments as we go ahead. But real estate prepayment is a mechanism. It's a mechanism of escrow where our collections come in -- as flats are sold, collections come in. We sweep in collections repay the loan early. So this is up 153%, vis-a-vis the quarterly average for FY '21. And in fact, principal repayments In the last 12 months, has been precisely INR 3,148 crores. So our overall portfolio, as you would have noticed, it has fallen from around [ INR 16,000 crores to around INR 11,000 crores ]. Yes, couple of assets into that, we would have sold to ARC, et cetera. This number, I'm telling you, it's actually cash received, INR 3,148 crores cash received from accounts which have been resolved and closed, accounts which are some regular prepayment and prepayments. This has been because of our continued focus on project monitoring and project completion, and we are quite happy with the way it is going. On the infrastructure finance. While the portfolio continued to see extremely good operating performance and strong collections. The prepayments is something, which has definitely hurt the portfolio size. So you would have seen that asset size here is rapidly reduced. Yes, it is our strategy to limit capital given to this business, but it has reduced even faster than what we would have liked certainly because it affects the overall growth, certainly, even though retail is growing. While regular repayments are good, we have faced some heavy prepayments, which we believe are due to mispricing of risk at the industry level. We are now employing certain measures to arrest this -- we also have a good portfolio pipeline over the next 2 quarters. Hopefully, we will do higher disbursements and arrest this trend of portfolio dropping in a while growth will come from retail. The third aspect, liabilities, our quarterly Y axis at 7.47, is lowest ever. But important part is, yes, we also maintained strong liquid effects, but important part is we have raised substantial long-term funds in this time, registered the impulse of using very strong CP or very high CP proportion despite very, very low cost of -- it will help us in 2 ways. First of all, I must mention that in NCDs, we have raised 2 to 3-year money and very strong amount. In fact, close to INR 25,000 crores in the last 7 quarters at a marginal cost of between 5.25% to 6.25%. So a lot of money has been raised at this rate. And what this has done for us is locked in the balance sheet for the next 2 to 3 years at good cost. And as growth comes now, we can actually increase the CP proportion from currently between 7% to 8%, even if it has increased to 12%, 13%, the cost of funds can reduce, have a good trend as we go ahead. Asset quality, I've already talked about the numbers and about 1 specific real estate. There is one explanation that I must give. During the quarter, the regulator has issued clarification. There is a circular, which is much talked about circular. This circular says that the aim of the circular ensuring uniformity in the implementation of IRAC norms and harmonize the treatment of accounts under NPS across banks and NBFCs. It has 2 pipes: one that moving from month-end reporting to exact DPT reporting: second, which will perhaps affect in the short term NBFCs more is the rollback norm that one something goes to beyond 90 days, then the entire interest in principle has to be collected unless it's rolled back and very clearly, many NBFCs, including us, had an accounting of -- even if 1 installment is received and the account remains between 30 to 90, 0 to 90, et cetera, it was rolled back. There was nothing illegal in it. There was no specific circular for NBFC. Now it has been clarified that NBFCs have to follow this for IRAC norms for GNPA, and we will certainly follow this. There is also clear clarification that we have got, FIDC has also got that this has nothing to do with Ind AS accounting. There is no financial impact. So I will give you some numbers that if you actually take our GNPA by the -- new definition, it will be higher by about INR 845 crores than our GS3. The important part is our GS3 is so well provided that even if you calculate the IRAC provisions according to the new IRAC norms, our GS3 provisions are really increase of that. And hence, under the spirit of Ind AS, very clearly, not only spirit, the later, the guidelines of Ind AS, there is no financial impact on the P&L as we continue to carry additional provisions and the current provisions under Ind AS are well in excess of the IRAC norms. So in the short to medium term, there is this protect is complete. We will continue like we have done. We will continue to report to the market both the numbers. As a medium-term strategy, obviously, collection intensity will now shift from the 61 to 90 bucket because 61 to 90 when you concentrate some accounts move forward. And given this -- the type of customers that we have or some people in CV industry, commercial vehicle industry, some people in construction equipment industry have, a person will pay 1 installment, 2 installment remain current. It is normal. And hence, it is important now to concentrate on the 31 to 60 bucket. We are moving our entire analytics and collection force now to this bucket. I will draw your attention to a couple of -- 3 or 4 years back. When the industry continuously and successfully moved from 180 DPD to 290 DPD over a 3-year period very seamless. Any disturbance caused at this point of time is because no time has been given. It is with immediate effect. But we are very happy that our strategy of providing substantially higher than IRAC is working well. And hence, in the short term, there is no impact. And in the medium term, over the next 2 to 4 quarters, we are sure that as we concentrate on the 31 to 60 bucket, both these numbers, GNPA and GS3 will converge So that's the period that normally any retail NBFC requires. And we are very clear and in the highest order of governance, we thought that I will explain this and also give both the numbers so that there is no confusion. Our OTR book, and I'm taking some time to explain some of these aspects. Our OTR book stands at around INR 3,000 crores, about INR 1,200 crores from OTR 1 and about INR 1,800 crores from OTR2, which corresponds to close to 3.6% of the overall book. Advanced collections have been quite strong, owing to consulted efforts on this and data analytics, which has resulted in this portfolio performing even better than estimates. I will take a minute now to do a little bit deep dive. For our retail book entire for the OTR, we have continued to actively engage with our customers while they have been under OTR-related moratorium to explain to them the benefits of timely repayments, if they have the money, because finally, they have to bear the cost of interest. For this dedicated on-ground resources have been allocated with specific deliverables are to ensure that the book remains moving even though it is under moratorium under OTR. I will give you a specific illustration on how this is performing. Our total customers under OTR micro loans and given the amounts in the investor presentation. At the end of June '21 quarter, we're close to about 1.9 lakhs. As of 31st December, the contractual repayments of all these accounts had not started. They have started in January because they were June end. However, over 53% of these customers, 53% of 19 lakhs, even though their contractual repayments have not started, have paid at least 1 EMI and there are some who have paid actually 5 EMIs as already. And this also includes almost 6% of the total number, which have actually foreclosed the accounts. This actually attests the repayment capacity of our OTR portfolio and how we have worked concentrated on making sure that when the OTR portfolio CD suddenly opens up, it is not a number which becomes unmanaged. We have stayed well in tune with the customers and not only just stay in touch, but actually, there are metrics which are good showing that hotel customers are paying. It was a decision that required to have a choice in this period between OpEx and credit costs. And while these initiatives on specific initiative on OTR book, for specific initiatives COVID-related would have led to a marginal increase in OpEx. Continuous engagement with customers have helped us save considerably on credit costs present and future. Overall, over and above ECL and provisions on GS3 assets, we continued to carry INR 1,700 crores to counter, which is about 2.2% of standard book to counter any OTR-related complications, if any, going ahead. One more aspect for this quarter. During the course of the quarter, the company entered into a definitive agreement with HSBC Asset Management on December 23, 2021, to sell 100% of equity shares of our mutual fund. Now there is some confusion, though -- and I think our press release perhaps was not extremely clear as to the total value that we have sold it for -- and there are some interpretations that we are solidly cheap, et cetera. I would like to clarify that. The consideration is the aggregate of around $425 million, subject to regulatory approval, subject to certain performances, et cetera. We expect this to be closed sometime fourth quarter of calendar '22. In addition to this $425 million, which converts to around INR 3,200 crores, we are also entitled to surplus cash balance in the company in excess of the regulatory and investment capital -- now this regulatory capital is in double-digit grow. Against that, cash, cash equivalents and liquid investments in the book of LTM today, that is December 31, 2021, stands at INR 730 crores. And this is accruing at an average rate of INR 50 crores per quarter, right? So you do your calculations as to what will be the total consideration, even at the end of third quarter of calendar year '22 that where we will reach as the total consideration. And you will see that it is very substantially in excess of the $425 million headline number. So that's the clarification on the mutual fund transaction. To wind up this section, which talks about, and I think have taken a lot of time, and I should move out to the future. But just to quickly recap, our fee income has gone up almost 12% Y-o-Y, 28% Q-on-Q. WAC is continuously reducing. NIMs plus fees now is well above 8%. And we believe around this level now, increasing retailization around this level, plus/minus a little bit, is quite sustainable. Reduction of credit cost to INR 700 crores now and reducing continuously and PBT growth of 29%, PAT growth of 12%, which is largely due to tax rules change over last year to this year. This brings us to the second part now, which talks about what do we want to stand for as we go ahead. Very clearly, yes, headline obviously, we will stand for strong growth and strong returns to shareholders. But obviously, within that, a big picture, I will talk about something specific. Over the last couple of years, as we faced wave after wave of the pandemic, we are focused on delivering 2 objectives: preserving our business strengths and maintaining the health of balance sheet. The main purpose was to emerge safely on the other side of the pandemic, safe and strong. Believe we have done that. Simultaneously, we were, of course, planning and working on a robust plan to ensure future growth and profitability. I would now like to lay out glimpses on how we see growth and profitability panning out over the next 4 to 5 years. If I have to summarize this over the next 4 to 5 years, what we intend to become, I can cover it under 3 major heads. First, really clearly being a retail-oriented NBFC, providing strong sustainable growth and profitability to our shareholders. Second, using deep tech across the value chain covering the entire spectrum of customer insights, including customer need prediction and analysis and this is where growth can come from, prospection, enhancing operational efficiency, credit analysis, collection efficiency and last but not the least, direct-to-customer apps covering the relevant ecosystems that we operate in. So you would see that digital and data analytics now is forming a core part of the strategy as we go ahead. And then last but not the least, making this entire journey sustainable through strong ESG-oriented measures. I will specifically now like to talk today, and as we go ahead, we will put more details on this in the public space. But today, what I would like to talk about is where we think growth will come from and how we see profitability trending over the next 3, 4 years. Growth will come from 3 major sources, 3 major metrics. One, strengthening our product expertise on our existing products, making sure that when markets are down in an existing product, we lose less than the market. When markets are up, our growth is way faster than the market, and this is without affecting our concentration on good sourcing quality and good portfolio. The second metric will be launch of new products to capture adjacencies of where we are and also capturing new markets. And third, most importantly, is now moving more and more towards customer insights and having the customer-oriented approach, selling even more and more to the customer rather than being product oriented. I must point out here that already the number of products that we sell to each customer on average is in excess of 4, to be accurate about 4.1%. But the large part of it actually is insurance products that we cross-sell to our customers. Now having done very well here, we are now concentrating on selling loan products to our customers more making sure that it is need based. It is responsible. And it doesn't spoil the credit health of the customer by giving more loans. As we look at the macro factors for growth, as I have said, the short-term rural demand, and we are largely a rural company, we are conscious that the short-term rural demand points towards a decline in the consumption over the next couple of quarters. But this being said, this country has been driven for quite some time and will continue to do so by rural growth. Underlying drivers for rural growth remain in place and our belief in the medium- to long-term fundamentals in rural India continue to be strong. And hence, we will continue to strengthen our rural offerings. In farm is at this point of time, tractor finance, I would like to point out that our market leadership has been based on deep analytics capacities -- capabilities. The outputs have not only been limited to credit decisioning, but also OEM and dealer partnerships and geographies that we should concentrate double downward. In recent times, we have taken it a notch up to churn our existing customer base and use it for upsell, which is now consistently contributing to additional volumes. In fact, I would think that in Q3, almost 20% of disbursement in tractors and farm came from existing customers. So as soon as the rural economy bounces back, we will not only gain volumes due to ability to maintain gain our market share, but also by delivering a strong punch due to our refinance and existing customers. Moreover, plant expansion into new geographies and market share consolidation in a few states, where we are not -- the states where we are not among the top 3, we'll deliver additional growth. And lastly, this is the most exciting part. We will be leveraging the rural customer data, pharma customer data and channel partnership to launch new business channels to address additional financing needs of farmers which currently our offerings are largely limited to tractors. So we will -- we are now in maybe the final phases of finalizing this offering to farms. In Two-Wheeler, our growth will be based on, again, a two-pronged strategy. First is, of course, it remains -- our main strategy remains once again analytics-based concentrated, strong targeting of specific counters, increasing -- maximizing counter share on those. In addition, we are concentrating and launching specific products while increasing finance penetration. And that has worked extremely well. You know that 2-wheeler finance penetration was less than 30%, just about 2, 3 years back or maybe 3, 4 years back. And today, it is ready in excess of 50%. I would like to say that -- I mean, I can't claim that everything is due to our efforts, but LTFS has contributed majorly by launching specific products for people who are not borrowing before. Our credit decisioning time, which is less than a minute, provides us a superior customer proposition, the next wave of increasing finance penetration now is based more and more on converting of cash customers to credit customers by offering customized offerings. The proportion of these customers are continuously increasing quarter-on-quarter. The second offer the segment remains very small today, but we are first one of the primes around our offerings for the electric vehicle segment. Two-wheeler emerging where EVs are clearly an emerging trend. This year, it will contribute to less than 2% of the total vehicle sales, but our estimates and market estimates are also that over the next 5 years, it is likely to reach close to 20% as battery costs come down, as fuel prices generally increase, we are working very closely with multiple OEM partners, which is for a seamless financing experience, to make EVs more attractive to the customer and I'm confident of carrying our success in Two-Wheeler to EVs as well. Talking about micro finance. I have mentioned time and again, that micro loans disbursement growth is a well oil metric based on collection efficiency, market delinquencies, asset quality, et cetera. The business now has been smoothly able to talk up monthly disbursements of about INR 1,000 crores. And we are quite confident that with improving macro environment and our collections being strong, over the medium term itself, we will cross a run rate of almost INR 1,500 crores per month. This volume will come from diversification, whose first phase is already under execution. And also, again, having specialized offers for existing customers who are with us for a long time who have behaved well. This will go a long way in adding NIMs -- growth, NIMs and increasing overall profitability. When we come to retail housing. Over the course of the last few quarters, we have worked in steadying our disbursement and portfolio quality. Close to 90% of the INR 650 crores that we have disbursed this quarter is now salaried. This is a stable number. As we go ahead, of course, the salaried numbers will also inch up. but new business volumes will be added through disbursements from and lab segment, and we are quite confident that in maybe a year or 2 years' time, we will double this quarterly rate as we go ahead. Our consumer book till now, this is another exciting part, is entirely based on our cross-sell and how the business metrics, business fundamentals, customer propositions have been clearly established. The offering from this product now will not only be limited to our -- the database of our 1.3 crores active customers, but now we are getting into open market customers targeted mainly towards responsible end-use ecosystem. So potential is very high. The first couple of offerings will be towards education and health care ecosystems, and we are already working on them and will slowly launch 5 lakhs. We have to look at all these in the context that I'm talking about, one after the other products coming over the next 5 years, which will continuously put the new injection of growth in the future as well. In this quarter, we actually launched a pilot of our small and medium business loans, which is aimed at addressing financing needs of one of the largest segments in the country's GDP. We take -- there are a number of players, especially 2, 3 good players who are very good success in this. We have learned from them. We have studied this market in detail and are very clear about what is our offering, what should be our offering. This business draw strength from our data analytics and digital ability to offer a differentiated customer proposition. Idea is to target growth through simple digital offerings and very simple product offering, which make credit flow easier to the customer makes documentation easier taking the loan easier. And hence, have a differentiated product offering from us and the differentiated credit cost also through choosing good customers and data analytics-based early warning signals, which is very, very important. The market is quite big, and we are just beginning, yes. And practically size the limit for us. Currently, we have products are aiming at addressing the financing needs of professionals, mainly doctors and chattered accountants and specific industries, which have shown reliance during successive waves of COVID. Now this talks about retail and SME. Speaking specifically of infrastructure finance, we have been always concentrating and we'll continue to concentrate on enhancing profitability of this business by maintaining a capital-light approach while having our expertise in this. This being said, we have lost more assets than what we would have liked in the recent past through the prepayments that I have talked about. Specific plants are being operationalized to reverse this trend over the next couple of quarters. This includes a strong pipeline of disbursements over the next 2 quarters. Let us hope that it works out. Well, we look at this portfolio more or a profitability contributor than a contributor just to build up growth. We have done that in the past. We are not going to do it again. But just putting on assets to big growth. Clearly, the profitability either through NIMs or through fees have to be there, and that's where we will be pushing in our infrastructure business. In summary, business growth will be led by established strength in our retail segment which based on the 3 things that I've said, increasing expertise in our current product, going more and more to sell to our existing customers and launch of new products. We expect a CAGR of close to 25% over the next 4 to 5 years. Still now on very, very specific products and just concentration on our existing products, we have shown from FY '16 a CAGR of 20%, which includes COVID-impacted quarters. And with these additional engines coming for growth, we are quite confident of being able to achieve a 25% CAGR in our retail book as we go ahead. Something that is just a statement of purpose at this point of time, no specific plan is that our capital adequacy is 24.1% already. And the proceeds from the HSBC transaction whenever they come, maybe in a year's time or 9 to 10 months' time, we'll add to this war chest. And hence, clearly, apart from the organic growth as we have discussed earlier, we will be obviously looking for opportunities for inorganic growth in the market. Obviously, if they come at the right valuation compared to our valuation. So we hope that our valuation will be better and that will help us look at these opportunities. Obviously, this will not be a part of -- this is not a part of any specific plan, but very clearly, we are not to make this statement that we are there in the market. As far as profitability is concerned, Page 43 of the investor deck, we have shared with you, talks about the next 4 to 5 years milestones with clear goals of retailization, retail growth, ROA and asset quality. We believe that as retailization continues the NIMs plus fees of around 8%, 8% plus will become increasingly sustainable as we go ahead. An increase in retail book will normally mean rise in OpEx. But very clearly by using -- continue to use data analytics and making sure and our retail credit costs have shown extremely good trends over the last 5 years other than the additional NIMs -- additional credit cost that we have provided during the pandemic. But if you take out, we are quite sure that even with so much retail percentage, we will be able to maintain the OpEx plus credit cost, this particular bucket at a level, where with the NIMs of 8% plus, or 2.6% to 3%, or 2.7% to 3% pretax ROA, which will lead in to a 2.25% plus post-tax ROA is definitely what we will aim for, hopefully reaching 2.5% at the end of the 5-year period. So that's the trajectory of ROA and growth that I would like to clearly lay out and commit at this point of time. It goes without saying that our last 5-year retailization strategy, our digital channels and data analytics, I would like to talk a little bit about them, were primarily focused towards product leadership, better portfolio quality and also towards productivity and efficiency enhancement. We've worked also a lot internally to get it done, tremendous use of robotics in operations, lots of things have changed internally. And we believe now the engine is strong enough for digital to go to the next line. With the critical mass having been achieved in each of the retail product level, we are now already -- we are also restructuring the organization. In fact, already restructured to gear for the next level of growth, which will now be more customer centric rather than product centric. Our retail, we are now concentrating under strong leadership of micro loans, farm that is rural and urban. So we already have some urban products like housing, consumer loans, Two-Wheeler, the large part of. And now these customers will be allocated to specific business leaders to now grow faster and more strongly in each of these 3 segments. With this structural change, the objectives for digital and data analytics will also undergo a change. The focus will now pretend towards assessing customer needs early and being available to the customers 24/7. Not only would it require product flows to be rebuilt and they are being rebuilt across -- around digital architecture, but it will also need to allow customers to undertake end-to-end journeys on their own. And our experiments with CL, et cetera, are doing extremely well there. The offering would largely involve synchronous real-time credit assessment based on submission of basic customer details, thus allowing us to enhance efficiencies and limiting the need of our employees to be initiating the journey. As I said, the launch of our customer loans has actually been a step towards this direction, and it is giving us extremely good confidence. In addition to the finance needs, it will be also be imperative to provide for a customer with an ecosystem where associated queries and needs are addressed and hence, ecosystem D2C apps will be the next big bank of digital and data analytics as we go ahead. Now all this is I'm laying down the road map for the next 5 years, okay? And the specific launch timetables will obviously we put in front of you. As I said, last but not the least, offerings will continue to ensure sustainable growth. As a part of our ESG initiative, we have taken carbon neutrality targets to be achieved by FY '35, and there is a specific year-to-year plan for that. And water neutrality, thanks to our CSR projects on Jal and Vaibhav and water conservation, we are already water neutral in FY '22 itself. Our ESG score as a part of S&P Corporate Sustainability Assessment currently stands at 55%, which is up 20 points from FY '20 and is far ahead of the industry's core average, which stands at 27%. So these are the 3 things. I believe that I have spoken not only about this quarter, but given a good -- there was some feedback coming as to where the company is going in the future. I think I have given a good insight into this, and I must now apologize for -- not slightly, but a long commentary. In fact, last time, you had given a feedback that my comments are quite long. And I'm returning that by actually making it longer. But I must plead that it was only because I wanted to give a very deep insight into what we are going to stand for in the future, what we aim to do in the future. I hope I've already answered a lot of questions, but always a pleasure to speak to you. Hope to see you physically sometime soon. I now open for questions.

[Operator Instructions] The first question is from the line of Rikin Shah from Credit Suisse.

Thank you, sir, for the opportunity and for sharing some early insights into the next 5-year plan. I had a couple of questions. One was relating to infra. While I understand that the prepayments have been strong, but we used to share the pipeline also was looking strong for the last quarter that went by. While you did mention that the pricing in the market doesn't seem to reflect the rest, it would be helpful if you could elaborate what exactly is happening? And why are you confident that this would correct in the coming quarters? That's number one. Second, is on the asset quality side, especially on the housing real estate -- sorry, overall housing NPA, while you had flagged that the incremental NPA from that 1 account could be around INR 300 crores, INR 350 crores, the addition to the NPA has been around INR 390 crores. So has there been any additional slippage that you would like to flag? And lastly, as a continuation on the asset quality, you did highlight that in the next 3 to 4 quarters you do expect both the GNPA and Stage 3 ratio to kind of align together. If you could share whether -- where does this confidence kind of come from? Would we expect the rollbacks to be meaningful as your customers pay all the remaining 3 EMIs and kind of bring down the GNP as well? This will be very helpful.

Sure. Okay. Yes. I'll try and answer each of the 3. So Infra disbursement. And I'm fully confident and I'm fully conscious of the fact that last time, also, I have spoken that pipeline was strong. After that, yes, we have done about INR 1,700 crores of disbursement. It's not as if the disbursements have been negligible, the problem has been that the prepayments have been even higher. So that -- the INR 1,700 crores was not less, but the prepayments have been even higher. The problem with Infra let's talk about the 2 things. One is disbursements and repayment. Infra disbursements, there are 2 things which happened. One is a lot of disbursements, especially are subject to certain approvals coming from authorities. So if you do a refinance, MHI has to approve that. Or even if for new loans, especially if you're doing it for under construction project, there are various approvals which are needed for -- from the authorities. Sometimes when we believe that these approvals will come in December, they come in January, they come in February. And then the disbursement just gets postponed, right? So the number of disbursements which have got postponed from December to January actually give us hope that our Q4 will be substantially better than Q3. That is number one, okay. Number two is where have the prepayments if I talk about the prepayment. Second, as far as the disbursement is concerned, the number of projects where we have looked at approved, holding the teams, holding approval in hand is actually quite robust. And it is more than it ever was in the last 6 to 7 quarters and which again also gives us the hope that Q4 this year or maybe Q1 next year, there will be good push in disbursements. As far as prepayments are concerned, okay, one thing is competition giving very low rates and the assets moving out. That is one. Second, even international markets for bonds, et cetera, being used and many companies running, what I say, unhedged borrowings and thus believing that the cost of funds is low -- much lower. We believe that as there is unsteadiness in the exchange rate, hopefully, this trend -- it has been seen before also over the last -- I mean I worked for 30 years now. And I have seen various phases where people believe that low dollar -- low-cost dollar funds come for free when converted to rupee and cycles show that it is never true. And when the exchange volatility comes to hit, that truth comes out. So almost -- I would say, almost 40% to 50% of our prepayments were actually to 2 bonds, right? Or maybe 1/3 of the prepayments were to bonds. And this is something we believe will actually hopefully go down as we go ahead. Also, there are good projects with -- if they come up for repricing, we will also. Now that we are getting access to cheaper funds, partially we will also try and retain So as a mix of all this, we believe that the rapid fall in the infra portfolio will be arrested. How much it will increase in 1 quarter, 2 quarter? I won't be able to say. As I told you, the disbursements are quite lumpy there, and it will be highest tender. Your second question -- and I hope your first question is answered. Second question, okay, when I had actually said INR 350 crores, INR 360 crores, it was more of approximation and a few INR 20 crores, INR 30 crores here and there are not any indication of any other big assets going bad or something like that. In fact, I would tell you that the retail home loan portfolio now is completely stabilized. And in fact, seeing the GS3 levels coming down slowly but continuously. So that perhaps would answer your second question. I've forgotten the third question. GNP, okay. Okay. So now how does this happened, right? So first, I hope I'm very clear that immediate impact, why immediate for hopefully, for the next couple of years, the impact on P&L anyway will be 0 because we are carrying tons of additional provisions, right? Now let me take you back to FY '14, FY '15, when RBI said that NPA will start reducing NPA recognition will start reducing from 180 days to 90 days. And it will happen every year. And the big question in everybody's mind, everybody saw see okay with 180 days, 90-plus is so much, right, which was a multiple of what was 180 plus. And it was predicted that NBFC industry is in deep trouble because now NPAs will be so much. What happened? Nothing like that happened. Almost every NBFC adjusted over the next 3 years, slowly to the new way of -- the new number of NPS. So when the collection push was in 150 to 180, it slowly moved to 120 to 150, slowly moved to 90 to 120, and now it was at 60 to 90. So tremendous efforts are done at 60 to 90. So there are always 2 components: one which major attempt to stop something at 60 to 90 big attempts; and if something flows back to 90, collect at least 1 EMI, 2 EMIs, et cetera, to bring it. So these were the 2 components. Now what over the next 6, 9, 12 months around that, what are the 2 things which will happen? First, the big change will happen is from 60 to 90. The entire collection machinery will move to 30 to 60. Whether it is good for the sector -- not sector, meaning not NBFC, good for the final borrowing segment, that will happen, I'm not discussing that at this point of time, but people will get used to it. As you know that the circular also talks about educating customers, et cetera, we have all started all that already. And I'm speaking on behalf of the industry, okay. I'm not saying everybody will adjust at a particular time. But generally speaking, the direction will be moving major collection machinery from 60 to 90 to 30 to 60. It will take time. So things will be highlight that, I mean -- 60 itself. Now what it will do? I mean is NPA coming to 60? No NPA remaining at 90 only. But what it will do to bring to 60 is very clearly, it will give a good 30-day time between 60 and 90 to the collection team to make sure that the asset doesn't flow to 90s any time for the first time. Because very clearly, if it moves even for 1 day to 90, 90 plus, it is going to remain till you collect all 3 installments. And hence, the entire trial is going to be limiting it at 60. Why are we confident? To -- because we have done it before. We have done it before without the benefit of analytics. Now we have a strong analytics engine, a strong collection engine, we are sure we will do it. Once it moves beyond 90, now there is another change that we will have to do. If it actually moves beyond 90, the focus now is not going to be on collection and stabilizing. The focus is going to be on, what you call, resolution, prepayment, settlement and closing the account. So these 2 things will change. It will change. It will take its time. I mean we are represented to the regulator that give the industry a year or so it doesn't seem to be convincing the regulator at this point of time. Maybe we will get, we don't know. But at this point of time, we are assuming that these new norms are already in place, but we have started working on changing the rhythm on the ground. And the good thing is, in the meanwhile, it is not affecting our profitability because we have made substantially higher provisions. Does that answer all your 3 questions, hopefully?

That does answer all the questions. And if I may, just a feedback...

Sorry, there is one more thing. A large part of it, large part, almost 2/3 of this INR 845 crores is in tractor segment because you understand a 3-monthly or 6-monthly installment, this tendency of just going beyond 90 and then coming back will be much higher. And tractor segment has a 3-monthly and a 6-month installment. So the major push will have to be in 1 product which is tractors because 2/3 of this difference of INR 850 crores is coming from tractors. Sorry to stop you, you were saying something.

No sir, this is helpful, just a feedback or a wish list if I may, while our disclosures are pretty detailed only on the collections, while the regular collection efficiencies help us to understand the potential forward flows, but the absence of quarterly disclosure on the Stage 2 or the overall collection limits the capability to understand the overall or potential stress loan pool. So if we could do that something similar to -- in terms of disclosing Stage 2, that could be helpful. And I look forward, sir, to hear about the detailed study in the next quarter on the other products and the initiatives that you outlined today.

Thank you so much. Thank you so much. I have been getting this feedback. We will work towards it. Very frankly -- I will tell you very frankly, is that given the COVID atmosphere, I didn't want to start a new trend during COVID. As COVID settles down and collection materializes come to a steady level, and they are already coming, we will definitely move towards this. But let me give you the numbers, especially in rural, for example, our Stage 2 book has fallen from 6.9% in September '21 now to 6.1%. And in overall retail, it is down from 6.2% to 5.6% and the provision coverage on the Stage 2 book of retail stands at close to 45%.

The next question is from the line of Nishant Shah from Point72 Asset Management.

Thanks for the very detailed strategy, articulation in the first part. Just 1 quick question from me on the consumer loans that you talked about. So just help me understand what kind of loans these are right now? Like you mentioned you're currently just doing it to internal customers. The average ticket size is at about 150,000. So what is the nature of these customers? Like what kind of risk profiles are these? What are the yields that we're generating on this? And you also talk about like building an urban lending kind of franchise. Would that also be kind of like doesn't with consumer loans with the new external customer-sourcing strategy within this? Like -- because rural customers of your current book would be very different from the urban customers that you want to try to get into. So this something if you could talk about your -- it would be really helpful.

For sure. We will, of course, talk much more about this as we present a detailed strategy, but I will try and be as clear as possible. We launched consumer loans about 2 years back. And we wanted to be very clear that a few things we do carefully. One, is that as we trade into this because consumer loans can mean so many things, right? It can mean consumer durables, it can mean pay now -- or what is the buy now pay later. It can mean STPL. It can mean so many, right? We wanted to go first test waters, go on our strengths and not have any accidents in this. So very clearly, where did we start? We had a very good database, even our urban database of our home loan customers, Two-Wheeler customers as we go ahead. And our asset management company investors. We could actually use this database to try and see -- I mean it was not like just cold calling, using them, et cetera, use this, churn this, put it in saying that we can predict needs. We can predict credit behavior of these people, also concentrated on having the ticket size of our average ticket size is what about 1.5 lakhs? So we are in that category, average ticket size of about 1.5 lakhs. As I said, existing customers come completely to existing customers. We have slowly now started going to external databases also trying to look at localized with our existing customers. So it's not -- again, external database make cold calls. We don't make cold calls, absolutely not. Every call is made -- because first of all, it is useless. It is completely cost noneffective. Every call is being made, so by analysis existing customers. And even if the outside database is there, looking at finding lookalikes from our existing customers with that database and trying and judge in need as well as ability. Now what this has worked for is that now the portfolio is close to 2-year-old and collection efficiencies are at 99.6%. It has worked very well. Clearly, of course, the scale-up of the portfolio has also worked well, but clearly, it will have limitation. By the way, as of now, it is entirely urban, just to answer your question. We have not yet gone to doing this with rural, with farmers. There are other products for that. And I will maybe talk a little bit in details about that. But there are other products where we will go. We are not going to call up farmer and give him a personal loan, but yet, at least, what I will talk about what we are going to do with farmers. But urban, I mean, just marry this with your -- the other question, what are going to be our urban products? Obviously, home loans, and I talked about it. Obviously, this current consumer loans that we are having, obviously, Two-Wheeler -- a large part of Two-Wheeler franchises, urban, semiurban. But more importantly now in urban markets, we are looking at extending this expertise we have got in consumer loans to ecosystems to lending to a customer, but where money is paid to the to the final -- why the money is paid for -- to the final vendor, like we are looking at coaching classes, both physical as well as online coaching classes as building up a model, and there are a few players, there are already, but not too many, there are a few players. So these are not the education loans for basic education. These are education loans for value-added education. It's a great place. A good opportunity exists. We have done a detailed product market analysis, segmentation analysis, and that product will be launched hopefully somewhere early next financial year. The second one is on health care, on hospitalization. It is very clear. I'm sure you guys are all BFSI analysts. You know that the country is extremely underinsured as far as health care is concerned. We are full of people who believe that medical insurance is enough when you reach the -- what do you say, the cap of 80D reduction allowed in income tax. And once you reach that, you believe that you have enough insurance. Everybody by now has seen -- I have myself that is not true. You are, generally speaking, underinsured and hospitalization bills -- and these loans are obviously given to relatives, not to the person being hospitalized or not to the student -- they are not student loan, not to the student, it has given to the parent for -- if you are getting to Akash or Biju's or whatever. And that's -- these are the 2 immediate offerings that we have -- I'm talking about because we have got them fleshed out. There will be more offerings that we will see in the urban market. In the rural market, we are right now looking at refinancing on the existing assets. But as we study our farmers more and more, we will now tie up with ecosystems in rural, the fertilizer ecosystem, the dairy ecosystem, the feeds ecosystem, the post-harvest ecosystem, the warehousing ecosystem. We will tie up with these ecosystems more and more to make sure that our farmer customers and their lookalikes around are -- can be serviced. And that is where the farmer finance as separate from tractor finance is going to grow. So that is what how much I would like to concentrate and elaborate on that at this point of time. I hope it answers your question.

Yes, sir. Just 1 thing got skipped, could you talk about the yields in this...

12% to 16% around -- between 12% to 16%.

12% to 16%. And what would be like the median, say, income for the customers that we've been lending to so far? Just to get an understanding of the...

Can I answer this later? Maybe Anuj can even explain to you more in detail, yes?

Okay. Yes.

We will answer all your questions either during the strategy or if it is a nature of not specific information, but explanations, you can contact Anuj and Anuj can give you any explanations that you want.

The next question is from the line of Aditya Jain from Citi Group.

And sir, I just wanted to ask about the strategy, the 5-year strategy that you spoke about, which was good to get all those details. I don't know if I missed, but if you could talk about real estate within that? And secondly, when we look at the target 25% CAGR in retail and let's say that 80% target 5 years down the line, then the implied growth for the overall book is up 15%. Maybe the 80% is sort of a soft target. But to clarify here, if you could talk about the target for the rest of the loans, non-retail and also specifically on real estate?

Extremely good question, real estate to be very frank, at this point of time, we are very concentrated on making sure that the portfolio is performing. We are not making any 5-year prediction for real estate. We don't think that either the market, the status of the builder community or mindset at this point of time is in that phase. We would like to prove -- there have been lots of feedback about problems in our real estate portfolio. They were always told that it sort of weighs heavy on our valuation on those things. We would first like to demonstrate that other than 1 or 2 asset which are bad and which has been a mistake to lend to them, our portfolio is good, and we would like to demonstrate that we can deal with this portfolio, actually showed substantial reduction in the real estate portfolio over the next 12 months max, and then rethink about the real estate strategy. I don't think at this point of time, we are actually putting forward with any amount of aggression our real estate will be so much. And very clearly, over the next 12 months, the real estate portfolio will be reducing. And yes, while obviously, arithmetically, both will reduce because of that, but all of us were talking about the overhang in the real estate portfolio and not about growth, not too long back, right? So we will first concentrate on taking away this overall on real estate portfolio and showing that we have a good portfolio. I believe that INR 3,200 crore reduction by actual collections, of course, it has reduced growth overall growth. But it gives great confidence that almost 25% of the portfolio has been collected and reduced in the last 1 year. We will continue that trend for, say, a year or more. Second, you are right in saying that 80% odd is a softer that we don't know. The whole idea is direction that from 50%, retail will increase substantially. Why? Because we are quite clear that Infra disbursements fees we would like to increase. But how much we will give capital, how much we will stay will depend on so many other things, right, which will depend on how retail is growing. So to answer your question because you talked about the overall growth, we are not going to put so much the overall book growth as a hard target. That is why the overall retail growth is a target. Depending on the profitability of each asset, we will see how much Infra we will keep, how much we will sell it out. And that is why very purposely, we have not actually given the overall 5-year -- overall asset growth as a target. I believe that Infra business can be well run if we put underwriting, disbursement and profitability with fees as a metric rather than book as a metric, right? It will depend on so many things, right? It will depend on in the year to come. Are we able to use our equity through inorganic measures? How the retail growth pans up? How the leverage goes up? If all these things go well, we will not be too bothered about not having too much growth in our infrastructure portfolio. If one of these things don't happen, for example, inorganic, there are no opportunities. Then obviously, the equity will be quite high, and I will keep infrastructure assets on book. So I will use that more as a tactic and retail growth as a strategy. Does that answer?

Got it, sir. Yes, it's very...

Too much like...

No, no perfect. Just a second thing, if I may clarify. So just to confirm on the total stock of provisions on the book, is this INR 4,600 crores? So I am adding up INR 480 crores on standard and INR 24 crores on NPA and INR 1,700 crores, which is macro prudential plus restructure?

Yes. Absolutely. In fact, on the page one particular slide, we have given the total provisions and plus GS3, yes. So there is a slide which talks provisions on standard and there is a slide with talks provision on GS3, you have to add the 2.

The next question is from the line of Piran Engineer from CLSA.

I just had a couple of questions. Firstly, when we talk about growing at 20%, 25%, 30%, but in our traditional rural lending segment, the farm and micro finance and Two-Wheeler, we're already among the top 3, maybe in Two-Wheeler fifth or sixth places. And now how do we think of growth in this segments? All these 3 segments are also pretty well penetrated from an industry perspective? You also mentioned that Two-Wheeler financing penetration is well north of 50% now. And at the time of the GFC, it was 70%. So Isn't it fair to say that from a 3-, 4-year perspective, we'll grow largely in line with the underlying industry. And therefore, all the -- it will -- the growth will have to be borne by the new segments rather than the traditional rural lending segment?

I would think, yes, in a way, but I would like to explain this more. In fact, I think it took a lot of time to explain this actually. So let us talk one by one, each, okay? Now first, you are absolutely right in saying our market shares in especially tractor and Two-Wheeler, these products are very different, right, because they depend on the growth of the underlying industry. And our market shares are already strong. And it is while we will always try to be marginally better than the industry, you are absolutely right in saying that especially these 2, we are not going to grow substantially better than the industry. We will do -- always when the industry is down or up, we will do a little better than the industry. That's our confidence, but So you're right. So first of all, let us see the growth potential of these industries by themselves. Currently, they are negative. Maybe they will be negative for the next year or so. But the rural fundamentals are such that we are quite confident that even from existing products, just our existing rural product a growth of mid-teens or maybe high-teens over the next 5 years is possible. So that is as far as existing products are concerned. Now we see what are the other things we are not necessarily only new products, but using those customers to cross-sell and upsell to those customers or this customer database is where the second phase of growth will come. That is one injection. The third injection is of those new products and new markets. So as we go into consumer loans, as we get into SME, as we get into farmer finance, that is where that the calculations are being done. And then obviously, a number like 25% CAGR for 5 years is committed. I have done very, very strong homework for this, and we are quite confident that this will be built, and it will be one on top of each other. So you are right in a way, so one on top of each other existing products growth, slightly better than the industry, new markets for existing products, selling more to the customers of existing products and then new products sell together. This is how -- and I'm including SME also in that in retail, 25% growth just to be clear.

Okay. Okay. Got it. Sir, then just on classification, in consumer loans, do you give it to our tractor and MFI customers also? Is it predominately the home loan and other...

It is to rural at this point of time. So tractor and MFI no, it is rightly -- I mean, you're right, that's simple. So at this point of time, it is a completely urban product.

Okay. So by urban, we mean home loan labs and Two-Wheeler, sir?

Home loan, lab, 2-wheelers...

Okay. Because...

Our databases, which are external databases, used by looking at lookalikes of our data base, but entirely urban.

Okay. Because just a broad backout envelope calculation suggests that we've already given the more than one customer. So I'm just trying to think of the potential because we are also targeting customers and typical in 2-wheelers, most customers will not be client. So the prime customer is anywhere subset of the total base, which we've already given to 1 lakh plus. So I'm just trying to think about potential for scaling of this book from this INR 1,500 crores level saving...

You're right. So potential of scaling up this book is certainly there, but it is not unlimited and hence, launch of new products and looking for new customers, obviously, is the second step. But that's what this is -- this -- what we have done is to be taken as the first step in our consumer loans journey, where we have got the confidence, got the, what do you say, the digital engine right, got the analytics engine right. Finally, our existing customers [Foreign Language]. Obviously, in the first 6 months, we did mistakes. Our digital journey didn't work as efficiently as we wanted. So for many reasons, it is good to concentrate on existing customers, but that is to be taken as first step. Now it is just a starting point.

Okay. Okay. So growth will be more open market driven...

Yes, of course. This also and open market. And open market, the only thing we will stop short in absolute open market is making cold calls and saying you are eligible for 1 lakh, and we will do that, right? It is -- it will be more as we go open market, it will be more end use based.

Got it. Got it. And sir, just 1 clarification on small and medium business loans, they are unsecured, right...

There are unsecured business notes at this point of time. Only simple term loans at this point of time, we will launch OD over the next quarter, et cetera. Here, we are in the same phase as we were in CL 2 years back. We are getting our digital offering right. Obviously, quite a few things go wrong while doing it. Sometimes OTP is going to the right phone. Sometimes the GST data is not read properly, all sorts of things happen. So we are in that phase right now, pilot, making sure that everything goes right.

Okay. But only you mean like flexi loan...

[indiscernible]

Sorry, sir, OD you mean like the flexi loans or some of your competitors...

Sort of, sort of, not flexi loads, but it is a limit given in which somebody can draw repay on an everyday basis. But OD will be a secondary product. The main product will be [indiscernible].

Ladies and gentlemen, this was the last question for today. With that, we conclude today's conference call. On behalf of L&T Finance Holdings Private Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.