Repco Home Finance Limited (REPCOHOME) Q3 FY2026 Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Repco Home Finance Q3 FY '26 Earnings Call hosted by YES Securities Limited. [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.

Good evening. Thank you all for joining this Q3 FY '26 conference call of Repco Home Finance. From the management side, we have Mr. T. Karunakaran, MD and CEO; 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. With this, I hand over the call to Mr. Karunakaran for the opening remarks. Over to you, sir.

Yes. Thank you, Mr. Rajiv. Good evening to you all. I'm extending a warm welcome to this earnings call of our company to discuss about Q3 results and way forward. The numbers already available in our website and I'm sure you had a chance to go through the numbers. Before going to Q&A, just I want to walk through our performance in the Q3. Last con call, I said, if you look at our growth history, our disbursements or particularly disbursements, Q1 and Q3 will be always, we will have a lesser disbursement. Last con call, I said we want to break this trend. Yes, we have changed the trend. During the quarter ended December, we disbursed close to INR 1,069 crores, which is almost in line with our disbursement of September 2025. Again, this current financial year, our disbursement has crossed second time INR 1,000 crore mark. If you compare our disbursement of December 2025 versus December 2024, we have seen 40% year-on-year growth in the disbursements. If you look at state-wise disbursements, what is the states are contributing for our disbursements, almost -- we have seen improvement in disbursement of Maharashtra, Madhya Pradesh and Rajasthan, we have seen disbursements improvement in these three states. In these three states, disbursements, say, in December quarter is better than our September quarter disbursements. Tamil Nadu -- in other states, our disbursements are almost flat. In Karnataka, in last minute, we expect the numbers, our disbursements numbers were not up to mark. Actually, we set a target of disposing close to about INR 1,092 crores, INR 1,100 crores. Because of slowdown in disbursements in Karnataka state, we could not achieve these numbers. Finally, we ended with INR 1,064 crores disbursements. Now coming to the AUM. Our AUM at end of the December 2025 stood at INR 15,394 crores as against last year December of INR 14,155 crores, as we have seen growth rate of 8.8%. During the quarter, I said INR 1,064 crores we have disbursed of which around INR 360 crores added to the my loan book. Remaining thing is gone for principal written off. The BT out is almost similar with -- the similar trend is continuing. We have not seen any increase in BT out. Of course, prepayments rate is also in line with what we experienced in the previous quarter. Coming to the recovery side. Our gross NPA at the end of the December stood at INR 449.53 crores as against INR 545 crores in the last year at the same period. During the quarter ended December 2025, we have recovered NPA the extent of INR 25 crores. At end of September 2025, our gross NPA in absolute term, it was INR 475 crores. We brought it down to, in the last con call I had given you a commitment that we are giving -- we are -- our NPA will come down around INR 440 crores. Of course, yes, we have done. We brought it down our NPA from INR 475 crores to INR 450 crores in December -- in the end of the December 2025. Even if you look at our Stage 2 numbers, which is also we have done a tremendous reduction in Stage 2 assets also. Stage 2 assets as end of December 2025 stood at INR 1,235 crores. Q2, it was INR 1,323 crores, almost INR 100 crores reductions we have seen in this current quarter alone. If you compare our Stage 2 number year-on-year, December Stage 2, our number was close to about INR 1,500 crores, that means INR 1,494 crores. Now it was INR 1,235 crores, almost roughly INR 250 crores kind of reduction we have seen in Stage 2 assets also. Delinquencies in other buckets also we have seen lot of improvement. Coming to the borrowing side, our borrowings stood at INR 11,769 crores as end of the December 2025. Out of total borrowings, around INR 829 crores is coming from National Housing Bank by way of refinance. Banking system borrowings stood at close to about INR 9,893 crores. And we are having a facility with Repco Bank, our parent bank, to the extent of INR 810 crores. As part of diversification, we done one CP at the year beginning, which stood at INR 145 crores. Again, this quarter, we have diversified our liability side. We have raised about INR 93 crores by way of PTC. Our diversifications will continue. In NCDs, yes, this is also form part of our diversifications. We're already having discussions with a few investors and bankers. The discussions are in advanced stage. Most probably in a couple of weeks times we will roll out the NCD of about another -- I mean, INR 100 crores to INR 125 crores. This is about liabilities, coming to the cost of fund. Our cost of fund at the year beginning, it was close to about 8.75% at the year beginning. At end of the December, it was close to about 8.45%. We have experienced 30 basis points reduction in cost of fund in the 9 months. Out of 30 basis points reduction in cost of fund, we have passed on 20 basis points to our borrowers in the manner of 10 basis points on -- with effective from 1st July 2025, and another 10 basis points with effective from 1st February 2025. Our spread as end of December stood at 3.3%. Our yield on assets almost flat compared with September. As end of the December 2025, our yield on assets is about 12% and September, it was 12%, and December also, it's also 12%. We are maintaining a spread of 3.3%, and our NIM was close to about 5.41% as end of the December. Our net owned funds stood at INR 3,574 crores as end of December. Our return on assets stood at 2.89% and return on equity stood at 13.17%. These are the broad numbers. During the current, I mean December quarter ended, we have opened two more new branches. Our branch count at the end of the December 2025 stood at 236, which is inclusive of about 31 satellite center across country. Now these are the broad numbers. Now as -- I mean, coming to dividend, last quarter, we have paid an interim dividend of about 25%. This quarter, I'm happy to say that -- happy to share and say that our Board has declared an interim dividend of 20% again. Totally, this current financial year so far, we declared a dividend of totally 45% as against 40% in the last financial year. These are the broad numbers from my side. So I'm very happy to take Q&A. You can open the floor for Q&A.

[Operator Instructions] We'll take our first question from the line of Shubhranshu Mishra of PhillipCapital.

Shubhranshu here. So quickly on the sanctions, sir, they have come off very sharply on a Q-o-Q basis, but the disbursement remained largely similar. So is it because of the unsanctioned disbursements last quarter that we have been able to bridge the gap? That's first. Second, how do we look at the competitive intensity in Tamil Nadu now that we've Aavas also opening up branches there. So what do we think of the growth that will accrue from Tamil Nadu itself? And how do we think about growth in terms of disbursement going forward for us in '27 and '28? Third, sir, we have given roughly around 45% of dividend. Would it not be more prudent if we would have deployed this into our business expansion and paying off employees for their motivation and getting more disbursement? I'm not certain why are we paying so much of dividends, sir. These are my questions.

This is Raja here. I'll take that question. Yes, the competitive environment in Tamil Nadu has gone up. We being a player for more than 23 years now in Tamil Nadu, we have our roots deep and we have a very, very large footprint in Tamil Nadu. So yes, we do have competition, but not to the extent of it impacting my disbursement or my disbursement plans. And of course, we are also consolidating on our growth in non-TN states like my -- most of the branches that we are planning to open in the next financial year is going to be in the eastern and western section of our country. So that is what we are planning. And going forward, we want to reduce the contribution percentage of Tamil Nadu by increasing the disbursement in other states. So that is how we are going to hand the competition there.

Coming to the disbursement for the current quarter, in first con call, I said INR 4,000 crores of disbursement in the current financial year. Numbers are in line with our expectations. We are targeting INR 1,200 crores to INR 1,400 crores kind of disbursement in the current quarter, and we are targeting INR 16,200 crore AUM. Coming to the disbursement in next financial year, yes, we are setting a target of close to about INR 5,000 crores disbursement in the next financial vis-a-vis from disbursements things. Dividend. Our dividend, it's a conscious call taken by the Board to -- I mean, what is the impact of this dividend is not that much. What we have given so far is about 20%, 25% -- 20% and 25%, 45% of the capital, INR 62 crores. It's nothing. It will not have any impact on our financials. Of course, other, salary -- salary cost and other things, that sort of issues we are going. It will not have -- the payouts of dividends, 45% on INR 62 crores, in the entire capital of INR 62 crores, will not have much impact.

One last question, sir. Any guidance on credit cost and cost of funds for '27?

Credit cost, right now, see this, for the September -- I mean, December quarter, December 9 months ended, so actual credit cost is about negative. It's about INR 19.72 crores, it's negative. I'm expecting INR 25 crores reduction in the NPA going forward, INR 20 crores to INR 25 crores of kind of reduction in NPA -- NPA reduction I'm expecting. And I'm also expecting -- we are targeting to reduce our Stage 2 assets also going forward. Right now, I wanted to bring it down to Stage 2 assets to close to 7.5% by year-end. Having said all those things, I'm not expecting my credit cost will not go up. It remain negative. I hope I answered that.

Cost of funds, sir? Cost of funds?

Cost of fund, see, so far, we have seen in this current 9 months, we have seen -- we have experienced 30 basis points reduction in cost of fund. During September to December quarter, yes, we have seen around 10 basis points reductions. Out of total borrowings about another INR 4,600 crores bank borrowings are subject to repricing in current quarter, that means January to March. We have done one PTC at the rate of 7.75%. Keeping all those things in mind, I'm expecting that my cost of fund -- overall cost of fund may reduce another 10 basis points. You can see reduction in cost of fund to the extent of 10 basis points in the current quarter. That's what I want to say.

We'll take our next question from [ Vikas Kasturi ] of Focus Capital.

So first of all, congratulations on another fantastic quarter, sir, and you almost came close to breaking your previous quarter disbursement record. And also, secondly, I want to thank you for taking all the inputs that we have provided in the past. So for example, we asked you for a split of the pre-March '22 and post March '22. So you have done that. You have also started providing the numbers in rupees, crores. So thank you for taking these suggestions, sir. So I had a couple of questions. So first is on -- so you had given some guidance at the start of the financial year. So how likely are we to meet that -- those targets, sir, with respect to GNPA as well as with respect to the AUM? So that is the first question. And my second question is, sir, more on a strategy point of view. So it seems that, let's say, we are giving out loans at a yield of about 12% to 13%, right? And so if you increase the growth rate of the company, we have only about 1.5% of our -- our OpEx is about 1.5%, right? So does our OpEx increase if you start to increase the growth? That is number one. And the second thing -- second question is like would our credit cost increase if we start growing faster. So I think there is some sort of a trade-off that you as a management would do, right? So for example, if you try to grow faster, then OpEx and credit cost will also go up. But if you don't grow, then -- but if you try to keep these costs under control, then the growth will be slower. So how do you think about these trade-offs, sir? So these were broadly my two questions.

Yes. Coming to the guidance. In first con call of this financial year, we have guidance of -- we have given you a guidance of about disbursing INR 4,000 crores our disbursement, and we have given a guidance update into our AUM to INR 16,200 crores. And we said we want to bring it down our NPA to 2.5% and Stage 2 assets to 7.5%. Our numbers are in line with up to December our performance, I mean, in line with our guidance. I'm confident of achieving INR 4,000 crores disbursements and touching of INR 16,000 crores -- INR 16,200 crores AUM and the NPA of -- bringing down to NPA of 2.5% and bringing down Stage 2 assets to about 7.5%. And I'm pretty confident that whatever guidance I've given during my first con call at the beginning of the year, I'm confident of achieving all the guidances. Coming to your other questions, yes, growth -- yes, costs will increase. We have taken a lot of efforts to reduce our cost of funds. Recently, we have done one -- we diversified our liability side. We have done one Pass Through Certificate, we got accounts at 7.75%. We are taking all our efforts and we are exploring the possibilities to reduce our administrative and other costs. It's a balance between the growth and other things. Our objective is to maintain ROA of about -- close to about 2.9%. And we would like -- we will maintain a spread of around 3.2 to 3.3 kind of spread. We will balance other things according to this.

Sir, if I may ask a follow-up question. Sir, Q-on-Q in quarter 3, you gave out about INR 1,060 crores of loans. But our AUM went up by only about INR 350 crores. So which means that nearly INR 600 crores to INR 650 crores went down because of, say, BT out or repayment, prepayment, et cetera, right? So if you give out INR 1,200 crores of disbursement in quarter 4, we will -- our AUM might go up by only about INR 400 crores, INR 500 crores, sir. Even then we will fall short of our guidance. How do you think about this, sir?

I will take this. See, monthly, our rundown is somewhere between INR 170 crores to INR 200 crores, which is the average run rate that we have been seeing so far. So in that perspective, for Q2, of course, the guidance is 4,000 crores for the year. But for Q4, we are planning at doing somewhere around INR 1,200 crores to INR 1,400 crores so that we equip ourselves to achieve INR 16,200 crores. So from the perspective of me taking INR 200 crores as a rundown, if I'm going to do INR 1,400 crore, then yes, I am very much there at INR 16,200 crores. But that is something we are striving to achieve. Yes, you are right. We are striving to achieve that. Hope we do that.

If we look at our BT outs as well as principal rundown, we have not seen any significant change or principal rundown rate is high or something like that. It's almost similar. If you look at December 2025, our principal rundown rate, including borrowers own prepayment and balance takeover, it is almost similar to previous quarter. That comfort we are having. So we are -- though we have said, rightly Raja said, INR 1,200 crores, if we do INR 1,200 crores kind of -- INR 1,300 crore to INR 1,400 crores of disbursement, INR 16,200 crores AUM we can easily -- we can achieve easily. Second thing, if you look at our performance, almost around 35% to 36% of the growth will come from last quarter. Always last quarter will be the best compared with other quarters. With that, we are confident of achieving INR 16,200 crores loan book size.

Got it, sir. So one last thing, sir. I had a couple of suggestions. So one is, sir, if you could please provide your asset liability mismatch across the time buckets in the presentation? And the second thing is, sir, one of the very important aspects about Repco is that you are actually growing your AUM at a pretty fast rate. But because of these rundowns, it is not showing up. So I mean, this is -- only if somebody does this analysis, it is evident to them. So if you could -- in your communications, could you please highlight this that actually the company is growing pretty fast, but because of these rundowns, the overall numbers are looking at, what, 7% growth in AUM? These are my suggestions, sir.

Yes, sir, we have taken note of your points. First thing to ALM, our ALM position was very, very comfortable. We are not having a gap in many ALM buckets. I want to confirm you. Off the balance sheet, on the balance sheet, we are having adequate liquidity. Off the balance sheet, we are having close to about INR 1,000 crores unutilized sanctions from at least 6 or 7 banks which will fuel my growth and funding requirement for at least another 6 or 7 months in the off balance sheet side. On balance sheet side, we are having close to about INR 152 crores -- INR 150 crores kind of investment. So our ALM position in all the buckets, we are comfortable. Anyway, we have taken a note of your thing. So we will -- next investor presentations, we will incorporate these details. Yes, rundown, you rightly point out, yes, rundown rate is a little bit -- but alarming -- it's not alarming kind of thing. If you look at -- if you compare our September rundown date and December rundown date, it's almost similar, it is not going up. Yes, we have taken a lot of efforts. We have articulated customer retention policy. Wherever it is possible, we are reducing interest rate of existing borrowers and retaining them, wherever it is possible we are giving the top-up loans and retaining. We have done an analysis. Yes, going forward, there's almost -- the old book, we're a 25-year-old company, the rundown rate, you know well that the rundown rate in the old accounts will be as -- any housing loan appropriation towards interest and principal, in the beginning of the loan, interest will be high, principal will be low. Going later date, principal will be high, interest will be low. Yes, we have done a detailed analysis. Yes, we have taken adequate steps to reduce the rundown rate. Yes, I'm confident going forward, we can see improvement in loan book also like our disbursements.

We'll take our next question from [ Badhri Narayanan Ravi ] of FPS Assets.

Sir, my first question regarding in our P&L year-on-year, so our other expense has been priced 38% so -- which is affecting our profit. So what is the reason, sir?

Yes, the other expenditure has gone up. Last quarter, I've -- so this is silver jubilee year for us. One-off expenditure to recognize our long servicing employees, we have given rewards and awards incentive to all our employees. We have incurred expenditure to celebrate silver jubilee year, which is amounting to roughly about INR 3 crores. Number two, if you look at performance, month-on-month, quarter-on-quarter, our log-ins are improving, sanctions are improving, disbursements are improving to the extent we have to incur expenditure. Our cost of sourcing will go up. To getting a legal opinion, I have to pay fees to lawyer. To get valuation report, I have to pay fees to engineer. To check the credentials of the borrower, I need to take various kind of reports. All those things, we need to incur expenditure. Because of that, our other operating expenditure is going up, which is in line with our increase in the disbursements. Of course, last 24 years -- 24 months, if you look at branch expansion, last 2 years, we opened around close to about 32 or -- 32 branches for which we need to incur some initial cost. All those things, we will spend expenditure like this, the utilization of expenditures will not accrue immediately. It will take some more time to give results.

Got it, sir. Sir, next question regarding revenue from operations. So top line growth, what is your guidance on this...

Top line, yes, if you look at yield on asset advances, it's about 12%. We will maintain same and we got a dividend of about INR 3 crores from our subsidiary company, which is already we have taken. The similar trend will be maintained.

[Operator Instructions] We'll take our next question from Sanket Chheda of DAM Capital.

Congrats on steady set of numbers. What I wanted to know is that after, say, now 5 to 6 years, maybe this will be the first year when we're able to do 10% on AUM growth and we'll be able to meet the disbursement guidance also for the first time. We have clocked 100 plus disbursement in last couple of quarters. I wanted to know that what are we targeting for Q4 and also for FY '27. And henceforth, do we aspire to grow 12% plus in the next couple of years? On that, some outlook, please? Apologies if it is a repetition, but yes, just wanted to know that.

Yes. I'd say for Q4, we are planning to disburse somewhere around INR 1,200 crore to INR 1,400 crores. That is what is our plan, and we are working on the same. And of course, yes, as you rightly said, we would like to maintain the same kind of growth going forward. For '27, we are setting a target of around about INR 5,000 crores, which is yet to be finalized, but this is what we are working on. So that is how we want to proceed, march forward.

Okay. And on the credit cost question earlier, do you say that you expect the credit costs to still remain in negative going ahead also?

Yes. This quarter, I'm expecting INR 25 crores, I already briefed -- INR 25 crores reduction in NPA, around INR 20 crores to INR 25 crores kind of NPA reduction I'm expecting in current quarter. Of course, my Stage 2 assets also will come down. My target is to bring it down to 7.5% from present level of 8.02%. Yes, I will get a reversal, but overall, my credit cost, my guidance for credit cost for the current quarter will be negative. I mean, for entire financial year, is negative. I'm not expecting any credit cost for the current financial year. The credit cost will be negative.

Okay. Sure, sir. And while we have done a wonderful job in terms of bringing down the stress, Stage 2 plus Stage 3, quarter after quarter, but if I look at Stage 2 for a housing finance company in affordable space, the 7.5% still looks very high. Can there be some accelerated work or focused work here wherein we could just solve the underlying asset and say resolve this asset as soon as possible? I fail to understand why it is so sticky, around 7%, 8%. So these kind of levels are not there even in case of vehicle financials now as far as the Stage 2 is concerned. We being a housing finance company, it should be much easier for us to get these assets resolved. And this is low-hanging fruit in my view wherein the stress improvement can continue maybe for the next 5, 6 quarters also. So is that the plan you are working on? How -- where do you see that the Stage 2 should say stabilize? And what should be the ideal Stage 2 in your business?

This is Vaidyanathan. See, if you see the Stage 2 accounts as to 2 to 3 years back, it was around 14%. So we have started to take so many strategies and that we have introduced verticalization exclusively to take care of the Stage 2 accounts, Stage 1 accounts. So because of this strategy, it has come down from 14% to now it is 8%, and we have targeted for 7.5% before the end of this financial year. This is what is [ discussed ]. As far as Stage 2 accounts, we are planning to reduce month-on-month basis, the opening figures. That is what we have given the target to the collection vertical as well as to the branches. So it is working well. So going forward, every year, we are planning to reduce at least 2% to 2.5% in Stage 2 accounts. In another 1 or 2 years, we will bring down to less than 2% or 1.5%.

See, right now, in addition to that, right now, we employed close to about 225 people to see that recoveries, most specifically Stage 2 assets. We have taken a lot of steps. We are also discussing with the recovery agencies to how we can bring down these Stage 2 numbers further. I'm sure that going forward it will come. Over the period of time you can see our Stage 2 numbers also in line with the industry. Of course, other side, we have strengthened our credit appraisal system, which is ranging from the performance of the new book. Yes, these are the steps we have taken to reduce our Stage 2 numbers. Yes, you can see reductions going forward. Very soon, our Stage 2 numbers will be in line with the industry.

And one more thing. If you see last 10 quarters, whether the Stage 2 or the Stage 3, it is consistent and it is continuously going in the downward trend, both Stage 2 and Stage 3 accounts. Because we are concentrating on Stage 2 accounts also, not only NPA, we have taken so many strategies as we already told in initial, the first quarter call. We have posted a separate General Manager for Tamil Nadu and another GM for non-Tamil Nadu. So we are giving more concentration on this, and we hope that we will reduce these figures before the end of March 2026, expected level of 7.5%.

[Operator Instructions] We'll take our next question from Saurabh Dhole of FYERS Assets.

So 2 questions. One is, obviously, your target for this quarter ended March '26 of INR 16,200 crores approximately of AUM, that is well noted. If that happens, you will obviously enter into the double-digit growth trajectory for the first time in many, many years. But what I want to understand is that compared to the last couple of years what exactly has changed, which is kind of changing the growth trajectory of the company. Obviously, in the last few quarters, you've added personnel, you've added branches. Is it all of these efforts or these investments kind of paying off? Or have you also relooked at your credit policies?

Sorry. Can you repeat that? We lost your connection. Can you repeat again?

So I wanted to know what exactly is the source of this growth because you will be -- if you are at INR 16,200 crores by March '26, you will end up doing about double-digit growth rate, which we have not seen in the company for a very long time. So what exactly is kind of contributing to this changed growth trajectory at the company? And I think for FY '27, also you expect something similar, right?

Yes. I would say the growth in disbursement is happening because of the investments that we have made last year in the sales vertical. So we had -- though the sales vertical was there, we had created a very, very clear cut sourcing channel, say, my Branch Sales Manager, my direct sales team, and our empanelment of corporate DSAs and all sourcing channels. So those sourcing channels are now delivering the numbers for me. And that is the backbone of our growth what is being witnessed by you. And yes, we are looking at going in the same lines. And we have introduced a lot of new programs and schemes in line with the market so that my sourcing team gets the comfort going down to the market and pitching -- having a sales pitch against my competition. So that's how we will be progressing this.

And sir, in terms of credit policies, underwriting policies, has there been any change in the last, say, 7, 8 quarters?

Definitely, sir. See, in -- 2 years, 3 years back, we have followed unaudited profit and loss account. Nowadays, we introduced so many schemes based on gross discount method, gross profit method, banking balance method, average income method, introduced so many methods. So we have improved our credit policies in coming days also.

We have done a lot of -- I mean, we have reviewed our entire credit policy in line with present requirement, we have -- present need we have done. Of course, it's a market where that market 2 ways it's going on. One is interest-rate war, another 1 is credit policy and SOP war. Our policy is robust for the sake of -- I mean, improve the disbursement or improve the business, improve the AUM, we will not compromise on quality of the asset that I want to confirm.

Sure. And sir, the second question is with respect to the dividends...

Dhole, sorry to interrupt. So we're taking only 2 questions per participant. We'll take our next question from the line of Darshan Deora of Indvest Group.

Firstly, congratulations to the team for a great performance, especially with disbursement as well as controlling the credit cost. My first question was regarding the disbursements. What percentage of our disbursements would have come from DSAs versus sourced internally by our own team?

We are balancing anywhere between -- 50%-50% between both. Chances, a month it may be 45%-55%, the other month it should be 55%-45%, but on average we are 50%-50% as of now.

So just to understand, like, say, if I had to compare this with the same quarter last year, like Q3 FY '25, what would that split been? Like I want to understand that, say...

You know, last year, it was 35%-65%. Now, we are at 50%-50%.

So 35% in the favor of DSAs last year?

Correct. You're right.

Got it. So essentially a lot of our disbursement growth is coming with the empanelment of DSAs that we have done this year, basically.

Also from them, yes.

Sorry?

They have also contributed to the growth. It is not that they have only done the growth. They have also contributed to the growth, yes.

Any growth rate you can give us for the internally sourced disbursement, like what would that be versus...

See, out of my growth, as we said, it is 50%-50%. 50% growth has come from my own internal sourcing. That is, I have now -- I have my BSMs and DSAs and 50% assets come from my DSA sourcing channels.

Got it. And my second question is, assuming we hit the INR 16,200 crores and we are able to do this INR 5,000 crores disbursement next year. So essentially, we could be looking at something like INR 18,000 crores for FY '27, right, give or take in terms of our exit AUM in FY '27.

Approximately.

Okay. And last is 1 suggestion. So obviously, I think the real fruit of all the efforts that management is putting in will really start coming when the AUM growth starts exceeding the ROE. We start consuming capital in our business versus accreting capital. So again, congratulations on a great disbursement figure. I hope you are able to keep it up, and hope you're able to cross a disbursement figure, which exceeds the ROE. So then we can actually start growing our ROE, start levering up the business again.

Sure, sure.

We'll take the next question from the line of Varun Dubey of Share India Securities.

Congratulations on the good set of numbers. Sir, just wanted to understand 1 thing. I mean, your company has got an approval to acquire assets. And I remember last quarter the company saying that it would acquire some assets going forward in Q4, which would actually add to a little gearing in [ FY '27 ] as well. So any update on the same? And this INR 5,000 crores of disbursement that you're eying for '27, does it include that acquired asset as well? Can you throw some light on that?

Yes, that transaction, yes, we are discussing with few companies, banks and NBFCs. Now the matter is asset mix, what kind of assets we can take: 80%, 20%. 80% is the home loan, 20% is the home equity loan, at what price and all. For the sake of growth, for the sake of disbursement growth, for the sake of being -- growth, we will not land into trouble in the form of taking bad loan from other companies. We will be very cautious. Yes, we are discussing with few -- leading companies, if there -- I mean, they have loans matched with our credit policies, their rates match with our expectations. Yes, we will acquire. Some of the discussions are in advanced stage. Most probably, I will give further updates in next quarter. Coming to the second question, INR 5,000 crores disbursement, yes, which is inclusive of some portion of DA transactions also.

So even without acquiring the assets in Q4, you will reach the INR 16,200 crores AUM target, right?

Yes, that is how we have planned. But if at all it comes in, it adds to our efforts.

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

Congratulations on good results. Sir, I have 2 questions. What was our BT out this quarter, sir?

BT out has been at the same rate. It has been at INR 30 crores this quarter also. And our BT ins have improved. So we are almost at the same stage. It is in similar with the last quarter. We have not experienced any kind of change in the principal rundown, including BT-outs. So almost similar...

Any number which you can give...

BT out is almost on an average, it's about INR 30 crores, right? BT out is INR 30 crores. BT in is about close to INR 150 crores for the entire quarter. So net in net, we are gaining -- we gained.

So BT out is only INR 30 crores...

I think I'm talking about INR 30 crores is a per month. So quarter, it's about INR 90 crores on the BT outside. BT inside is about INR 150 crores from 1st October to 31st December. So net in net, it's a gain of about INR 60 crores.

Sir, what is the reason for higher OpEx expenses on a quarter-on-quarter basis? INR 26 crores has become INR 32 crores.

Sir, as you know well that last 2 years being opened around 30 to 32 branches, all the branches are now stabilized, running cost will be added to OpEx. And last quarter, I said this 25th year for us. We have spent -- honoring our employees. Those who put up long services in company, that have contributed to the growth of the company, they'll be honored by giving a gift and incentives. Quarter-on-quarter, if you look at our numbers quarter-on-quarter, our disbursements are log-ins, sanctions, disbursements are going up for which we have to incur substantial expenditure like taking a legal opinion, taking evaluation fee, taking -- checking his credentials, whether he will fit for loan or those things, which are the things are cost involved. Second thing, if you look at recoveries, this quarter alone we have done INR 25 crores reduction in NPA. We have seen a reduction in Stage 2 assets also. To crack old NPA accounts, we have taken a lot of legal actions, we issued SARFAESI notices, we issued legal notices. All those things will involve cost so that because of that -- all those things, these are multiple items, not a single item. Because of all multiple items, our OpEx -- operating cost has gone up. If you ask me whether you -- we got an entire benefit of the increase in the expenditure, not, yes, going forward, you can see the benefit of the expenditure, our cost-to-income ratio will improve going forward.

So does this include DSA payout also, or that is captured separately?

Yes, that is also -- you rightly said, that is also cost.

And sir, with respect to our geographical mix, Karnataka and AP are not growing as compared to other geographies. Any thoughts on that, sir?

Yes, sir, Karnataka, we wanted to grow faster, but we were not able to do so because E-Khata is yet to be resolved in full. Though we are able to maintain our books there and making our disbursement levels there, growing a bit faster is now becoming a problem there because of E-Khata. So I think by March, the E-Khata issue get sorted out. That is what is the feel that I'm getting from the ground. So maybe post that, may Karnataka should be doing good. Andhra and Telangana, they are going steady. Next year, they should start increasing their percentage of contribution. That is what we are planning, sir.

Sir, any update on credit rating upgrade, because we have started reporting...

Mr. Mundra, sorry to interrupt.

Just one comment, sir. Sir, congratulations on good results and also take you in the note on dividend and declaring quarterly dividend, sir.

We'll take our next question from Akash Jain of MoneyCurves Analytics.

Apologies for being a little late on the call, there were back-to-back calls, and that is why I joined late and maybe the question I'm asking has already been answered. So apologies upfront for this. Sir, I have 2 questions. One is, obviously, we have been -- we have got great disbursement growth in this quarter. But I think because of our rundown on the legacy book, I think it is not translating to good AUM growth. So I just want to understand when you look at your book today, when do you start seeing this disbursement really kicking in on AUM growth? And when do you see the legacy book -- impact of that legacy book run down in the base. So that is the first question, sir. The second question, I think the previous participants anyway asked about the other OpEx. I also wanted to ask about employee cost. So employee cost has also gone up substantially this quarter. And it has been going on for the last 2 quarters now. So any comments on what is the reason for that, please?

Yes. Last question I answer first. Yes, if you look at the employee costs, it's slightly gone up. Our September employee cost was about INR 34 crores. It was -- at the end of December, it was INR 42 crores. You know well that the labor code has enacted with effective November 2025. We have done -- we have taken -- as per the labor code, we have to make adequate provision in -- for leave and care terminal benefits, funds like leave encashment, gratuity, et cetera, et cetera. We have given the data to our actual valuer. They have e-valued and we got numbers. Based on that, we have made provisions for leave encashment and gratuity to the extent of INR 4 crores -- of course, INR 5 crores, close to about INR 5 crores for leave encashment and gratuity on account of labor code implementations. That is INR 4 crores is one-off event. And we now -- in general, we used to take a standard insurance policy for all our employees with minimum benefits. We thought of upgrading to a 1-level above policy for which we paid extra premium, the benefit will be more, which is -- which caused additional cost of about INR 1.6 crores -- to the extent of INR 1.6 crores or INR 1.7 crores premium we paid extra compared with last financial year. And if you see or if you look at our performance, yes, our disbursements are -- month-on-month increasing, log-ins are increasing, sanctions are going up. And if you see the NPAs, we have done a reduction, substantial reduction to the extent of INR 25 crores in the current quarter. All those things happened with the help of our team. We should honor our team members, staff members for which we have paid an incentive in the current quarter, which is also cost -- which is also -- these are the multiple reasons our employee cost has gone up in the current quarter.

On your first part of the question of what is the disbursement level that we should reach to grow faster. As I already said, my monthly runoff is anywhere between INR 170 crores to INR 200 crores. So anything more and above what I disburse adds to my book. So as soon as I keep disbursing more than INR 400 crores to INR 500 crores around my book should grow faster. But the legacy issue will continue because we being a 25-year-old company, the loan keeps getting matured every year. So we cannot help it. So that legacy book effect will always be there, maybe to a lesser extent when I start doing higher disbursements. I believe I have answered you.

If you look at our principal rundown rate, quarter-on-quarter almost similar. If you look at the principal rundown rate in the December quarter end as well as September quarter end, it's almost similar. It's not going up. That comforts we're having.

We'll take our last question from the line of Sameer A H of Vidura Capital.

Congratulations again for good performance in terms of AUM and NPA trajectory, et cetera, sir. The performance is in line with your guidance. Once again, congratulations. Sir, my question is, while we seem to be doing well from short-term and medium-term perspective in terms of AUM, profitability will follow, I'm sure, because there is a lot of investment happening, which is showing up higher OpEx. Sir, my observation is more regarding the longer term, especially with one deal development that I wanted to bring to your notice, which you may already be aware. There is a company called Easy Home Finance, which raised about $35 million Series C. So we tried to study that company a little bit, sir. It's a tech-driven home loan company, about 8- to 9-year-old company. Their USP is kind of leveraging technology for superior origination of home loans and faster turnaround time. And even on collections, they seem to be using technology, and they call themselves a paperless mortgage company, I mean home loan company paperless. While we have our huge advantages as compared to new age home loan companies because our borrowing costs are lower, we are more established, and we can leverage very well on our equity, et cetera. But just one question, sir, in terms of what work we are doing, both on leveraging technology, both on origination as well as even on collections because there are a lot of interesting fintech companies, which are helping even larger private sector banks with respect to their collections. They are also getting a lot of VC funding, which means they must be doing something right. So can we use some of those fintech collection companies to bring down our Stage 2, et cetera. Just I'm placing a thought, sir, because you are better placed, you may already be exploring and studying what is happening in the market. Because tech is changing so much in every sector. So I thought I will just bring this to your kind attention and seek your inputs and guidance on how we, as shareholders, should evaluate vis-a-vis these developments?

Yes. On the technology side of it, as you rightly said, Easy Home is doing a lot on that area. But due to my customer profile, that is, I don't target a prime customer. For me, the bulk of my customer is either [ cash on hand ], that is a blue collar job or they are a low income group customer. So that, touch and feel of the customer is very, very critical for my risk assessment. So yes, I can use technology, but not to the 100% extent as what the others are doing on a prime housing loan kind of a thing. Because that -- it is a very low profile, salaried customers. So it is very easy to assess. But for me, because of the clients or the customer segment that we have chosen, we may not be -- it may not be feasible for us to go 100% technology on the sourcing side of it. We are trying to incorporate a lot of technology-driven APIs for verifying and checking the customer credentials. But still, yes, personal discussion and the touch and feel of the customer is very, very critical for my risk assessment. That is on the sourcing side of it. On the collection side, yes, we have done a lot on using technology, maybe at the last -- Mr. Vaidyanathan, [ go ahead ] on the technology side for collections.

Yes. As of now, we are having a collection team of our own employees. As of now they are doing well. On top of that, we have -- what we call, we have introduced a mobile app [ enabling ] for activities like, I mean, collections, field investigations and sourcing, all those things. Technology side, a lot of development has happened last 1 to 1.5 years. We have revamped our entire IT system. We are trying for end-to-end solutions. All those things are in place. Yes. Your advice, we have taken a note of it.

Ladies and gentlemen, due to paucity of time, we will take that as the last question for today. I now hand it over to the management team for their closing remarks. Over to you.

Yes. We thank each and every one of you for showing interest in our company growth story. I believe and hope we have answered all your questions with your satisfactory. Anything else you need, further clarifications needed, we are ready to address them offline. Thank you for the participation -- active participation in the con call.

Thank you so much. On behalf of YES Securities Limited, that concludes today's conference call. Thank you for joining us, and you can click on the leave icon now to exit the meeting. Thank you all for your participation.