Repco Home Finance Limited (REPCOHOME) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Repco Home Finance Q4 FY '25 Earnings Conference Call hosted by YES Securities. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Rajiv Mehta from YES Securities. Thank you, and over to you, sir.

Good evening, everyone. Welcome to the Q4 FY '25 earnings call of Repco Home Finance. We thank the management for giving us the opportunity to host them. From the company, we are joined by Mr. T. Karunakaran, Managing Director and CEO. He became the MD and CEO from this April. So sir, congratulations for that. He is joined by Mr. A. Palpandi, Chief Operating Officer; Mr. P.K. Vaidyanathan, Chief Development Officer; Mr. M. Raja, Chief Business Officer; Ms. Shanthi Srikanth, Chief Financial Officer; and Mr. Ankush Tiwari, Company Secretary and Compliance Officer. I would request Mr. Karunakaran to give us an overview on the company's performance, post which we'll open for Q&A. Over to you, sir.

Thank you, Mr. Rajiv. Good evening, everyone. I'm T. Karunakaran, MD, CEO of this company. Just to introduce my -- just small introduction about me. I started my career with this company during 2004. Prior to that, I worked in Ind Bank Housing in various capacities and various places. This is my just introduction. We would like to welcome you all to the earnings call of Repco Home Finance Limited for the quarter and the year ended 31st March 2025. We would like to thank you all for joining us in this call today. Entire senior management team, along with me in this call. This is my first time interacting with you all in my new role as MD and CEO of this company. We are pleased to announce that this year, our company is celebrating silver Jubilee in the industry, marking 25 years of excellence. As we celebrate this achievement, we anticipate continued growth, greater achievement and sustained market relevance as we move forward into the future. Coming to the company's performance, we have been able to maintain the growth trend seen in the last few quarters in Q4 2025 as well. The company is steadily progressing on its business parameters. The structural changes that are being made are getting strengthened across the organization and are yielding results. This will be an ongoing process and we shall adapt to changes as and when the business demands. We have also been able to initiate the introduction of new systems and business process and wish to take advantage of the same in the current year. Some of the major steps taken by us in FY '24, '25 were number one, target-oriented approach in sanctions, disbursements, NPAs while strengthening verticalizations. Number two, localized file processing by creating regional level operations, technical, legal resources for improving turnaround time of our loan sanctioning. Number three, various recovery efforts, including conducting our auction mela during the year and implementing special OTS schemes. And number four, improving the employee morale. Now I give updates on business in the current financial year. We were able to achieve disbursements of INR 975 crores in Q4 FY '25 as against INR 895 crores in Q4 FY '24 and INR 761 crores in Q3 FY '24. Our Q4 disbursements are up by 28% compared with Q3 of the financial year '24-'25. Our sanctions stood at INR 1,059 crores in Q4 of FY '25 as compared to INR 975 crore in Q4 of FY'24 and INR 806 crores in Q3 of FY'25. Overall we have achieved INR 3,519 crores of sanctions and INR 3,284 crores of disbursement in the financial year 2024-2025 against INR 3,340 crores sanctions and INR 3,135 crores of disbursement in the financial y year '23-'24. This is the highest disbursement we have made in the recent past. Our AUM stands at INR 14,492 crore at the end of financial year '25 as against INR 14,155 crores in Q3 FY '25 and INR 13,513 crores at the end of the previous financial year. The ratio exposure between self-employed and salaried segment stood at 52% and 48%, respectively. The share of non-housing loan that is Home Equity stood about 27% of the loan book and housing loan contributed to about 73% of the loan book. The new loan book has shown strong performance with a total disbursement of about INR 9,338 crores from financial year '23 to financial year '25. The NPA from new book remains low and accounting about 0.7% of the total AUM during the '23 and '25 -- during the period loan disbursed from FY '23 to '25. Due to our continuous recovery efforts like conducting Auction Mela and also implementing special OTS has given a good result. The GNPA has been reduced from INR 552 crores in FY '24 to INR 475 crores in FY '25. Our GNPA stood at 3.26% of the AUM as of March 2025. The net NPA stands at INR 191 crores representing 1.32% as end of March 2025. The total provisions for NPA amounts to INR 282 crores and provision coverage ratio stood at 59.60% as end of March 2025. Additionally, the Stage 2 outstanding has decreased significantly by INR 151 crores. That means our March 2025 Stage 2 assets stood at INR 1,410 crores as against INR 1,561 crores end of March 2024, Thereby, we have seen reduction of INR 151 crores in Stage 2 assets. Look at borrowings. Our borrowings stood at INR 11,148 crores at end of March 2025. If you look at borrowing mix, is NHB contribution is about 7.85%, in the absolute terms it comes to close to about INR 876 crores. Bank borrowing outstanding stood at INR 9,247 crores. Almost out of total borrowings, 83% of the borrowings are coming from banks. And our promoter bank, Repco Bank outstanding is -- term loan as well as credit facility outstanding is INR 1,026 crores, which accounted 9.20% of total borrowings as of March 31, 2025. I'm happy to inform that we got a sanction from National Housing Bank in financial year 2025 after a gap of 3 years. The sanction amount is INR 150 crores, we would like to avail this INR 150 crores in coming days. Profitability. Our NIM for the financial year '25 was at 5.15%. The company has been able to maintain a spread of 3.3% for the financial year 2025. Our yield on loans stood at 12.07%. The net profit grew by 8% quarter-on-quarter and 6% on y-on-y and INR 150 crores for Q4 FY '25 as against INR 107 crores in Q3 FY '25 and INR 108 crores for Q4 of FY '24 respectively. For the whole year we have earned net profit of INR 439 crores as against INR 395 crores in last year which is 11% increase. Our ROA and ROE stood at 3.15% and 15.23% respectively for the financial year 2025 as against 3.04% and 15.79% in financial year 2024. Cost to income ratio as end of March stood at 27.5% for entire whole year. The credit cost is negative for the financial year '24-'25. Software. The new IT revamping is in advanced stage and is expected to complete by September 2025. Four systems, including the loan origination system, loan management system and loan collection systems are fully operational with initial issues successfully resolved. Additionally, mobile applications for sales, collections and field investigations have been rolled out. Coming to branch network. As of March 31, 2025, we have added -- in other words, during the financial year 2025, we have added 21 new branches, bringing the total branch count to 233 across 12 states and 1 union territory. This includes 189 branches and 44 satellite centers with additional 2 asset recovery branches. We are expanding our branch presence in regions outside Tamil Nadu. During the current financial year, we would like to open new 14 branches, various locations across the country and majority of the branches will be in AP, Telangana and West part of our country. I will summarize the key financial highlights for the financial year '24-'25 before opening the floor for Q&A session. The loan book stood at INR 14,492 crore registering 7% y-o-y growth. PAT for the year was INR 439 crores with 11% increase y-o-y basic. ROA and ROE for the year stood at 3.15% and 15.23% respectively. The core profitability has remained strong with solid spread and margin of 3.33% and 5.15% respectively. The gross NPA reduced to 3.26% with Stage 2 provision coverage ratio of 59.60%. And net NPA stood at 1.32% at end of 31 March, 2025. Our Stage 2 assets INR 1,410 crores in March 2025 as against INR 1,561 crores in March 2024. I'm happy to announce that our Board has declared a dividend of INR 4 per share subject to the approval of our shareholders. Therefore we would like to present a roadmap of the company. The company targets INR 16,200 crores of AUM by FY '26. That means 12% growth. Right now our book size is close to about INR 14,491 crores. We want to take this INR 14,491 crores to INR 16,200 crores by this year end with a spread of 3.2% and -- around 3.2% and maintaining a ROA of 3.1%. In recovery part we want right now our NPA -- gross NPAs about INR 473 crores. We want to reduce this NPA by at least -- by another INR 75 crores to INR 80 crores and we want to bring down our gross NPA from present level of 3.26% to below 2.5%. Our net NPA right now stood at 1.32%. We want to bring it to this NNPA to below 1% March 2026. We will be adding 14 new branches in FY '26 and 12 sat centers will be upgraded to the branches, increasing the total number of branches to 247. The focus for the current year includes growth acceleration and overdue reductions. With the momentum gained in the just concluded year and the learnings, the company is confident of reaching a disbursement of INR 4,000 crores, I'm repeating INR 4,000 crores and AUM of INR 16,200 crores. And we set a target of reducing Stage 3 number between 7% to 8%. Looking ahead, the company aspires to reach INR 25,000 crores AUM by FY '28 with accelerated disbursements and growth with quality and profitability. I take this opportunity to thank all our investors, analysts, credit rating agencies, our bankers, borrowers, vendors, regulators and all the stakeholders for evincing the interest in company's growth story and for continued support. Now we open the session for Q&A.

[Operator Instructions] First question comes from the line of Vikas from Focus Capital.

First of all, congratulations, sir, on becoming the MD of the company, and we wish you all the best in your new role. Sir, I had about three questions. So the first one is, sir, in last year, May of 2024, we had said that we will be adding 40 branches, and we have actually added somewhere around 20, 22 branches, right? And in the coming year also, we are going to add only 14 branches. So If our branch addition is not increasing, sir, would it not affect our future growth? So that is number one. Number two is, sir, so congratulations to you and the entire team of Repco for improving the asset quality drastically in the last 3 years. And you have also given further guidance on bringing it down. So what are the interventions that you are planning to bring this GNPA down? Will you continue the auctions and OTS? Or are you going to introduce some more interventions to bring this down? And the third one is, sir, this is more like an observation. I am also a shareholder of the company. Sir, as a concerned shareholder, sir, I've been seeing the frequent changes at the Board level as well as at the CXO level. Sir, this is not inspiring much confidence among investors. So could you please convey to the Board that we would like to see stability at the top level so that there is stability in the strategy as well as in the execution of the company, sir? That is all I have.

Yes. Thank you for your greetings and wishes. I would like to answer your first question -- I mean third question first. Yes, I have taken note of your thing on frequent changes on the Board. Definitely, I will restate this thing to our Board. And second question, recovery. Yes, we set a target of achieving below 3 -- GNPA percent bring it down to -- GNPA percent to below 3%, 2.5% by year-end. Yes, we have taken a lot of initiatives. Of course, last 2 years, we have started verticalizations in our company. Almost we employed close to 170 people in recovery department for collections as well as to take care of NPA things. Of course, we conducted 4 SARFAESI auction mela in last financial. We want to extend the same in coming year also. Special OTS schemes we have introduced. Of course, Board has permitted to extend this special OTS schemes by up to June 2026 -- I mean, 2025. With these initiatives we are confident that we will be in a position to reduce our NPA from present level to 2.5% by year-end.

In addition to this for this year, we are going to introduce a recovery vertical exclusively for the NPA reduction. They will be supported by the legal manager from region wise for taking action under SARFAESI act. And also we are planning to conduct mega auctions on monthly basis.

In addition to that, earlier, one GM is responsible for entire recovery operations in our company. Now we posted one more additional GM for looking after recoveries of non-TL and one specific general manager for Tamil Nadu. These initiatives definitely will bring results in the coming year.

On the first question, I would like to take this question, Raja here. On me adding only 24 branches, yes, we have consciously not gone into increasing our footprint across remote regions. We are more now looking at channel-wise teams getting built up. Now we are looking at an urban oriented channel -- builder channel, DSA channel. So we are going now a bit branch agnostic. It is only starting stages. It will start delivering results in the near future. Yes, branches as you all know, physical branches have its own pros and cons. We also now are getting into channel wise sourcing.

In addition to recoveries, we have also impaneled recovery agencies, which will also help us to improve our GNPA percentage in coming year.

Our next question comes from the line of Ankit Gupta from Bamboo Capital.

Sir, congratulations for significantly on being appointed as MD and our efforts to bring down the NPAs over the past 2 to 3 years, we have seen a significant decline in those. Sir, one of the challenges that we as an NBFC have been facing is the significant amount of BT-out, which has happened -- which has been happening in the company for the past many years now. A lot of our good customers after a year or 2 switched to other banks or NBFCs which offer them lower rate of interest. So anything you would like to specify where we can improve this issue or we can work on this thing so that our BT-out ratio becomes lower. And this also helps us in increasing our AUM. So sometimes what happens is our disbursements are pretty good, but our AUM doesn't increase much because of this BT-out issue. So if you can talk about this a bit.

Yes, sir. Thank you. We have taken a lot of initiative to retain the good customers. We articulated customer retention policy. As per the policy we are permitted to reduce the rate of interest upto 2% and also give additional top up loans to retain good customers. Yes, the initiatives taken by us given the good results. We have seen improvement in BT-out compared with the last 2, 3, 4 years. See, the '24 -- I mean the financial year 2025, I'm having the statistics on BT-in and BT-out, which will indicate there is improvement in BT-out. In the financial year '25, total BT-in is about INR 450 crores and because of various initiatives taken by the company our BT-out reduced to INR 300 crores.

So in FY '25, it is reduced to INR 300 crores from INR 400 crores in FY '24 is what you're saying, right?

No. FY '25 my BT-in is INR 450 crores. Generally, our BT-out will be more than BT-in. Because of various initiatives taken by us our BT-in for the financial year '24-'25 is INR 455 crores. And BT-out is INR 300 crores. Generally, it will be the same or our BT-in will be lesser than BT-out. Got the point?

Sure. Yes. That has been the trend in FY '23 and FY '24 also, which has actually reversed in FY '25.

Yes, exactly.

Okay. And sir, on the credit cost for FY '26, last year, we saw because of the recoveries, we had a positive credit cost in FY '25. And since you are also targeting recoveries in FY '26 as well, where do you see our credit cost in FY '26? And even for FY '27 onwards, like what should be the normalized credit cost for us going forward, first for FY '26 and then for FY '27 onwards?

For the current financial year, we set a target of reducing our NPA in absolute terms around INR 75 crores to INR 80 crores. Yes, there will be a reversal of existing provisions. We want -- one thing we want to also improve our provisional coverage ratio. Right now, my idea is to make some additional provision to the extent of INR 10 crores to INR 15 crores, bring the credit cost below -- below 25 basis points or 30 basis points in the current financial year. '26 on really we need to work out.

On a steady-state basis, can we assume less than 0.5% rate cost or it will be higher?

It will be -- I'm talking about absolute terms, it may be around INR 10 crores to INR 15 crores charge to the P&L for the current financial year. Financial year '27, right now, I'm not having the data. I may be in a position to tell in my next con call. This year, I would like to charge around INR 10 crores to INR 15 crores to my P&L. Of course, my Stage 1 assets also will go up to the extent I have to make a provision. There will be a movement from Stage 1 to Stage 3. Keeping all those things, I'm expecting around INR 10 crores to INR 12 crores provision in -- provision charge to current year profit and loss account.

Mr. Gupta, may we request that you return to the question queue for follow-up questions as there are several participants waiting. Our next question comes from the line of [ Kiran B. ] from [indiscernible] Tree Capital.

Sir, many congratulations on the results and turnaround in the company. Sir, a broader strategic question first. What has changed at Repco or in the states that you're expanding in, especially AP, Telangana, Maharashtra, Karnataka, that you are now confident of disbursing almost INR 1,000 crores a quarter, like we're talking about INR 4,000 crores disbursement, so I'm just averaging it out, INR 1,000 crores a quarter when we have -- I mean, our track record over the past 2 years has been around INR 600 crores to INR 700 crores. And this quarter, we delivered over INR 875 crores. So what are the broader things that are happening in these 3, 4 states? Is it the economy that's doing well? Is it our channels clicking? Are we gaining market share? Or is it the opportunity expanding?

Kiran, I would like to take that question, Raja here. So basically, as you are aware, last year, we have been building up our sales verticals. That is now we were engaging BSMs in all the branches. Now I have almost 163 branches, and we have also got into tie-ups with a few of our corporate DSCs. So -- and there has been a clear focus shift to the Western region where in now we have brought in cluster heads and state heads like I have a state head now for Gujarat specific and Rajasthan specific. And for Mumbai, again, we have a cluster-specific guy for Mumbai. So we are confident that our sourcing is improving, and we are seeing the numbers. So it is time that we increase our numbers on a quarterly basis. As you rightly said, INR 1,000 crores is what we are looking at disbursement per month. We should be able to achieve it. That's how confident we are.

Got it. Got it, sir. So second question then, sir, is from a funding perspective, right now, we have about INR 875 crores from National Housing Bank, and we got a sanction for about INR 150 crores additional. A, is there a possibility to double NHB's allocation? Is there -- are there certain criteria that we need to fulfill for this book, for this funding source to go to INR 2,000 crores? That is one part of the funding question. The second part of the funding question is you're asking for an NCD raise of INR 1,000 crores, INR 1,500 crores and commercial paper of INR 1,000 crores. I mean our leverage is fairly at comfortable levels and NCDs and commercial papers are usually a little more expensive than Repco bank or a commercial bank interest rate. So just wanted to understand your funding structure, one on the NHB perspective; two, on the commercial paper and NCDs that you want to raise, if it is cheaper than what our current funding sources?

I'll answer current financial year, NHB has sanctioned INR 150 crores. Very short they communicated the sanction. We have also sent our acceptance to them. Very shortly, we are going to execute the documents and going to avail before end of this current quarter. Yes, we are -- once the results are now over after uploading the -- I mean, after uploading the results in stock exchange by -- after AGM, we are going to seek additional facility of about INR 500 crores to INR 700 crores. We fulfill all the eligibility criteria of availing refinance from National Housing Bank. So I'm confident of getting about INR 500 crores to INR 700 crores of refinance for the current financial year. This is with respect to NHB. Now coming to NCD and CPs insurance, if you look at our borrowings, we are -- our bank -- I mean the entire borrowings are concentrated on NHB Bank -- NHB funding and the funding from banking and RepCo Bank loans, which is highly concentrated over the period of time, our regulators also saying we should diversify our liability side. We have also had 2 or 3 rounds of discussions with potential investors and arrangers. The objective of going for NCDs and commercial papers is to diversify our liabilities and not depend on bank borrowings. Yes, you rightly said, initial issues may be a little bit expensive than the bank borrowings. But once we establish our credentials, our presence in the debt market, we will be in a position to mobilize at competitive -- I mean, lesser and competitive interest rate from debt instruments like NCDs and CPs over the period of time.

Got it, sir. Got it. Last question, sir. The GNPA, we are targeting about 2.5%. Is it a safe thing to think that we'll go below 2% by FY '27, mid-FY '27 itself, we'll be below 2%. Is that a fair estimate given the quality of book that you are raising?

Yes. If you look at -- our new books are really performing good. Old NPAs started to -- recoveries are happening in the old NPAs. If you look at our new loan book, this last 3 years, we disbursed about INR 9,000-odd crores. The NPA in the INR 9,000-odd crores is 0.70% which clearly indicates that there will not be any additions -- there will not be major additions from new loan book. Old NPA book, we have taken a lot of initiatives to recover. I'm sure and confident of achieving whatever the number target in FY '27.

Our next question comes from the line of Shubhranshu Mishra from PhillipCapital.

Sir, first question is what proportion of the recoveries came from Tamil Nadu versus ex Tamil Nadu? Second is that we are speaking about branch expansion and builder strategy. This is a fairly competitive segment. So what kind of payouts are we giving to the DSAs and the builders on a per file basis? Are we paying more than our closest competitor? And if we can fill out the disbursement split from Tamil Nadu and non-Tamil Nadu in the future of this INR 4,000 crores.

On the DSA payout initiative, we are in line with the market. Of course, we do have corporate DSAs and individual DSA. Corporate DSA assets, the market is paying somewhere around 1 to 1.2 percentage per file basis and there is no retainership pay and we are tagging the market. So there is nothing extra that we are paying. So that is how we are with our DSAs. On builder, we are just entering into the builder market. So it is too early for me to talk about the cost. But in builder market traditionally the costing will be cheaper or the sourcing cost will be cheaper. We are looking at that. Right now, I'm not having the data I'll come back to you, offline we will do. On disbursement split, we are already at 53% to 56% from Tamil Nadu, balance is from rest of TN, and we are trying to improve that percentage by increasing our disbursement in non-TN states. This year, you will see the numbers.

Our next question comes from the line of Sonal Minhas from Prescient Capital.

This is Sonal Minhas. Sir, wanted to understand the quality of sourcing from a corporate DSA or a third-party DSA. How has that improved over the last 2 to 3 years? What are our checks and balances to make sure that the input funnel, what we are approving is as per what we want the book to grow. So that's the first question.

When I'm talking about quality of file, it is not dependent on the DSA because DSA only refers the files or gives the file to us. Then we -- from our team, the credit team gets engaged with the customer. We do our FI, we do our RCU with our internal vendors. And yes, the credit decision is with the organization or with Repco Housing Finance. So DSA's role in quality of book may not be there or it's very, very negligible. We do our -- have our controls and checks. It is same as any other sourcing channel. Any file that gets sourced through any channel, it goes through the same process of rigorous checking, testing and then only we do sanction the loans.

Okay, sir. So in decision-making as a follow-up, has anything changed in the last 3 years? Have we changed the decision-making? Have we changed the decision-making to be centralized? We're using more technology, more software anything in terms of physical validation of, let's say, any loan documentation. If you could just share some details around that, that would be helpful.

As of now, we are already running with a regional level delegation of powers for sanction for loans up to certain limit of loan quantum. Beyond that, it comes to the corporate office. It happens the same. It has been so for the past 2 years. And we have not done any major change in the credit process. But on the technology side, yes, we are exploring different options like we are looking at incorporating a BRE into our system so that decisioning happens faster and the turnaround time is better for us. We are investing in technology, but on credit processing, nothing has changed, sir. It is the same for at least for the past 2 years, which I can say.

If you look at asset quality, which is savings from, we are following a robust credit appraisal system in our company. See last 3 years, we have disbursed INR 9,300 crores, of which NPA is 0.70% even Stage 1 -- I mean, Stage 2 also very negligible, which indicates that we are having a strong credit appraisal system in our company.

Got it, sir. Sir, this book typically matures between 3 to 5 years. So do we expect the Stage 3 for this book to inch higher because your mix is roughly 50-50 for salaried and self-employed. Do we expect this book to maybe inch a little higher to Stage 3 of being 1.2%, 1.3% as we, let's say, look 2 years out, 3 years out?

No, sir, I'm not expecting any -- this kind of numbers in new loan book. The new loan book, we are closely monitoring. All the new loan books are performing good. I'm not expecting any changes in this number, I mean NPA numbers in the new loan book. We'll be in a position to meet the existing level or we can even reduce also.

Got it, sir. Sir, my second question is regard to the guidance for the loan book that you've given. We plan to grow by around 11%, 12% in FY '26, whereas we've grown less than single digits -- the lower end of the single-digit numbers in the past. And you've given a guidance of INR 25,000 crores of loan book growth. Is the system given the software, given the technology, given the people, the training ready to grow, see a growth of this order without rattling too much on the asset quality? That's the question.

Yes. See, as you are aware, last -- over the last year and the year before that, we have been implementing the system. Now the system is fully up and operational, and it is performing good. So we don't have any issues on the technology side. And on employee training, there is a continuous training happening for all our employees at different levels. Last year alone, we have almost had more than 14 to 15 training sessions for all our employees across regions. So we are continuously improving training and matching with the market. So I don't see any strains in that, sir. In addition to that last 2 years, we opened 41 branches. This year, again, we are going to open roughly another 14 branches. What are the branches opened in the last 2 years, we started giving the business. All the branches are stabilized, breakeven has happened. So this -- achieving this INR 4,000 crores will not be a big strain for us. Of course, the average ticket size also quarter-on-quarter improving. Two years before, average ticket size of our company is close to about INR 14 lakhs to INR 15 lakhs. Now we touched about INR 31 lakhs. I'm expecting further increase in average ticket size. All those things will give the confidence of achieving the disbursement target of INR 4,000 crores by year-end.

Got it, sir. So you seem fairly confident of growing your book by 20% year-on-year for the next 3 years. That's what...

Yes. Yes. That's what, that is the message of us.

Our next question comes from the line of Anand Mundra from Soar Wealth.

Sir, I wanted to check about E Khata problem of Karnataka. Is that problem behind us?

Sir, Raja here. It kind of problem is still there, but it's kind of muted now. There are -- we are able to do business, but not to the full flow of it. But yes, business is not getting stopped. We are able to do business, sir.

Yes, we have seen improvement in disbursements of Karnataka states in March compared with December quarter.

Sir, with respect to Slide 30 on the presentation where you have given the disbursement state-wise, in Gujarat and Kerala, the growth is not there, sir. Gujarat 0% and Kerala 2%. Any specific reason, sir, for both the location?

Sir, specifically on Kerala, yes, we are yet to bring about growth in Kerala. But for Gujarat, now we have appointed a specific state level resource and Gujarat is picking up, sir. My March and April in Gujarat has been very good. So Gujarat will pick up. But Kerala, we will have to wait for some more time, sir. We are waiting for the proper resource to be in place. Post that, Kerala will pick up. But as of now, Gujarat and Rajasthan will start posting stupendous numbers, sir.

Even Kerala, if you look at disbursement in the current financial year, '24, '25 financial year, it is better than previous financial year. Numbers are coming up. It may take now the manpower issues resolved, you can see improvement in disbursement in coming quarters in both states.

Okay. Sir, another question. Our guidance for FY '26 with respect to disbursement is INR 4,000 crores?

Yes, absolutely, sir.

And the loan book would be INR 16,200 crores, correct, sir?

From the present level of INR 14,492 crores.

So sir, if I calculate the rundown, if I assume the rundown, then it's -- then we need at least INR 4,500 crores of disbursement to reach INR 16,200 crores because I'm assuming rundown would be around INR 2,500 crores, INR 2,600 crores.

Sir, we have taken lot of initiatives to avoid prepayment and BT-out we drafted customer retention policies and all. This initiatives will help us to avoid pre-closures. With that, I'm confident of achieving INR 4,000 crores disbursement target as well as taking the book level book to INR 16,200 crores.

Noted. Last thing, sir, what about -- since our GNPA has reduced, any initiative we are taking to improve the credit rating?

Yes, sir. We are going to have discussions next week. I'm confident and hope of getting a nudge above. We are -- in my point of view, we are the deserving candidate for upgradation.

Absolutely, sir. Sir, one last question, sir, if I just -- sir, earlier also, I requested the ex-MD sir to -- for higher dividend payout ratio because our EPS is much higher, but our dividend payout is very less. We don't need so much capital also, sir. So that is only INR 4 or INR 10, but we are running -- but our EPS is much higher, sir. So it can be much higher than INR 4, sir. So I would request you to request the Board to consider a higher dividend payout ratio for the shareholders, sir. As there is no appreciation in the share price, at least we should get a higher dividend.

Mr. Anand, Ankush, here. Your advice has been noted, we'll pass on to our Board. And this year, they have increased from 30% to 40%. And based on your advice and other investor sentiment, we'll take a suitable decision at board.

[Operator Instructions] Our next question comes from the line of [ Saikiran Pulavarthi ], who is an investor.

Sir, just extending the earlier participant's question on the credit rating and probably you were also in discussion with rising up NCDs. So sir, is there a scope for what I can say, upgrade of the credit rating? And if so, what are the apprehensions at this point of time? Or what are the things which a credit rating agency is looking for an upgrade? And the second thing, sir, follow-up on the NCDs, what should be the pricing you are getting an indication from your intermediaries with which discussions are happening? That's my question, sir.

Credit rating side, actually the credit -- I am Shanthi this side. The credit rating side, we are taking all our efforts we are putting to improve the rating. But the rating agencies are of the view this midsized SMEs they are always keeping the level which like Chennai based and Tamil Nadu geography concentrated HFC. And of course, on asset quality side, now we have improved in all the parameters to a maximum extent. We expect a good improvement in the rating side also. In respect of the NCD issuance, we are taking up our initiative to contact various [indiscernible] insurance companies to evince interest in our company and invest and we are in the advanced stages of closing some deals. We will expect some good improve and we will definitely have some good diversification in the coming quarters.

The objective of going for NCDs and CPs is diversify our liability side. Pricing will not be I mean, cheaper compared with bank borrowings immediately. But over the period of time, we will get a benefit. Right now, I'm not in a position to comment on at what rate I can mobilize. I'll be in a position...

So directionally the commercial bank's borrowing cost is the highest among your sources of financing. Do you believe that NCDs will be higher than that or will be lower than that?

Initially, 1 or 2 issues, commercial paper will be slightly higher than present bank borrowing rates. Once we establish our presence in the market, I'll be in a position to mobilize NCDs and commercial papers at a better rate of bank borrowings. That is our whole idea.

Got it, sir. And in terms of the diversification objective which you are trying to achieve, at what level do you foresee the commercial papers/NCDs to be as a percentage of overall funding profile, sir?

This Board has given approval for mobilizing INR 1,000 crores and INR 1,500 crores CPs and NCD, respectively. Initially, I want to start with INR 100 crores commercial paper and around INR 100 crores to INR 150 crores NCD before end of this quarter. We want to test the water, based on that thing, we will proceed further. For this quarter, my target is INR 100 crores commercial paper and about INR 100 crores to INR 150 crores of NCDs.

Sir. One last question from my side, sir. With the disbursements target you have given and the spreads also you have guided for FY '26 to be more or less flattish year-on-year. So is it safe to assume that the disbursements mix will be similar to what is earlier like between home loan and home equity and overall?

Yes sir, that is what we are trying to maintain so that we don't have an impact on our margin. More or less, this will be -- we will be maintaining the same ratio, sir, you are right. As per the Board, I can go up to 30% in non-housing loan portfolio, but we would like to maintain the existing loan book mix as well as salaried and non-salaried component. There may be 1 or 2 basis points in 1 or 2 quarters. But overall, we want to maintain 74% and 26% and 58% and remaining thing is non-salaried. I'm not expecting a significant change in the loan book mix and borrower mix in the near future.

If you comfortable, sir, one last question from my side. There has been some significant asset quality challenges in the past and then I understand that you have changed your underwriting standards and the incremental book, which is now behaving very well. Just trying to understand if you have to look back and see what has caused the asset quality challenges? And what are the changes you have made post that experience because of which you are confident that going forward, the asset quality is better?

Sir, in the earlier stage, we have assessed based on profit and loss account. The last 3 years, we have introduced many models like cross profit method, cross sales method, bank analysis method. We introduced SARFAESI through analyzing bank statement for income calculation, so we improved our cash flow method. So this is the improvement we have done in our credit assessment. So in other words, we have introduced a lot of income assessment model 4 years before, 5 years before, we used to rely on the profit and loss account given by the borrowers. If you look at our loan book mix, majority of our borrowers are non-salaried, non-document income. We relied upon their papers, IT returns and whatever the papers given by them. Now we changed our approach. We have introduced a lot of income assessment model. Now we are assessing the income based on our inspections of their business unit, and we have introduced a lot of checks and balances in our credit policy, which has really helped us to maintain the good quality assets.

Understood sir, and because of which also your cost income would have increased. Is it a fair assumption to make?

It is slightly because 3 to 4 years before, 6 years before, there is no verification by external agency or something like that. We have introduced the RCU and bank statement verification, we are having a separate software. This is not there before 4 years, 5 years before. And likewise, I mean, valuation reports also, we have introduced the technology to verify the value of the property. We have made a lot of changes in credit appraisal and income appraisal in the last 4, 5 years, which is really -- last 3, 4 years, which is really helping us to build a quality loan book.

So in conclusion, what you are suggesting is that in the last 5 years, you have changed a lot of underwriting methods. And at the same time, you have introduced a lot of technology and made significant investments. And now with funding profile also being diversified and asset quality most of the peers are behind, is it fair to assume that going forward, you are far more better equipped to grow faster?

Yes, sir, that is the entire idea. We are right now standing on a jump board. We are just waiting to take the leap. Yes, this year, we should be doing it. That is what we are working towards sir.

Our next question comes from the line of [ Katherine Gomes ] from Nirmal Bang Institutional Equities.

Congratulations on a great set of numbers. So I just wanted to understand with all the initiatives that are in -- I mean, that you are planning to take ahead, what would be the cost-to-income ratio that we are looking going forward? Any particular guidance on that? Secondly, I just wanted to understand that the customers that you are catering to in the regions like Gujarat and all other states, are these new to credit customers as well? So that is my second question. Third, I just wanted to understand what kind of NIMs are we targeting? And how do you pass on your -- like if you get any benefit on your borrowing side, how are you looking to -- do we have a differentiated strategy that like we look at if we are getting any benefits on our borrowing only then we will pass it on to the customers? Or how does it work? So like all these -- I would really appreciate if you could elaborate on the same, sir.

Right now, yield on asset is 12.07% and cost of fund is 8.73%. We are maintaining a spread of 3.34%. Our aim is to maintain the spread is around 3.2%. And yes, we have seen rate cuts however our bankers are yet to pass on rate cuts to us. If any rate cut happen in our borrowings, we will pass on to our borrowers by resetting their interest rate. As per our policy, interest rates are reset once in 3 months, once in 3 months timing difference. What are the benefits we are getting on the funding side, we will pass on to our borrower with a gap of 3 months, number one. On Gujarat, we are targeting our customers both on the salaried and self-employed segment. As you said, on whether it's going to be a new to credit or an experienced customer, we don't differentiate between the two. Other than the CIBIL score, yes, we do have a credit scoring model wherein the CIBIL score plays a role. We have a holistic approach wherein any customer comes in, we'll go through the same process, and that is how we handle it. We don't have any specific leverage or a green channel for an existing customer and new to credit customer. Spread side, we want to maintain a spread of around -- our guidance for this current financial year is we would like to -- we want to maintain a spread around 3.2%.

Given that all the initiatives are in place, so what kind of cost to income or FX to AUM are we looking at in FY '26?

Yes, cost-to-income ratios -- to improve the cost-to-income ratios, we have taken a lot of initiatives. I'm expecting -- right now, I'm not in a position to commit on firm numbers. Most probably I will be -- give a guidance in next my con call. Right now, our cost-to-income ratio is 27.52%. Yes, I'm expecting a reduction in the current financial year. It may be around 60 to 70 basis points.

Ladies and gentlemen, that was the last question for the day. I now hand the conference over to the management for closing comments.

Yes. Thank you for joining with us. Thank you.

Thank you. On behalf of YES Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.