Satin Creditcare Network Limited (SATIN.NS) Earnings Call Transcript & Summary

All right. Let's begin. Management, if I could request you to switch on your audio and video. Great. Thank you, and good afternoon, everyone, and a very warm welcome to you all. My name is Anuj Sonpal, the CEO of Valorem Advisors. We represent the Investor Relations of Satin Creditcare Network Limited. Firstly, on behalf of the company, let me thank you all for participating in today's CXO meet. And I'd also like to take this opportunity to thank the management for giving us this opportunity to host them for the CXO meet. So thank you, everyone, and welcome. As you all know, the Valorem CXO Meet is the first of its kind analyst meet event series, and our intention with these virtual CXO meets is to take advantage of technology platforms like this by reaching out to a wider audience, and to creating a better understanding and bringing awareness about our client company's fundamental business, provide insights into their business specific industries, financials and future growth strategies. The format of this meeting will primarily be in a Q&A format, where I'll start off by asking the management some high-level questions, and then we'll move on to taking questions from the participants. [Operator Instructions] Now before we begin, let me mention a short cautionary statement. Some of the statements made in today's meeting may be forward-looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management's beliefs as well as assumptions made by, and information currently available to management. The audiences are cautioned not to place any undue reliance on these forward-looking statements in making any investment decisions. Now let me introduce you to the management participating with us in today's meeting. First off, we have with us Dr. HP Singh. He's the Promoter, Chairman and Managing Director. Dr. Singh is a law graduate and a fellow of the Institute of Chartered Accountants of India since 1984. He brings with him over 4 decades of rich experience in the financial services sector. He's a pioneer in financial inclusion and innovation. He has been pivotal in driving organizational growth and positioning Satin Creditcare as one of the -- as 1 one of India's foremost NBFC microfinance institutions. His recognitions include Social Innovator in 2017; the Golden Globe Tiger Award in 2018; Exemplary Leader in 2020; CEO of the Year in 2021; Pillar of the BFSI Industry in 2022; and twice been named India's Most Trusted Leader by GPTW. Next, we have with us -- Welcome, sir. So next, we have with us, Mr. Jugal Kataria. He's the Group Controller. Mr. Kataria is a graduate from [ Shriram ] College of Commerce and is a cost accountant, chartered accountant and company secondary with approximately 35 years of relevant experience. We have with us next, Ms. Aditi Singh, Chief Strategy Officer. Ms. Singh has over 16 years of experience in the financial services industry across several functions. She possesses extensive knowledge in various areas such as investment banking, private equity, fundraising, mergers and acquisitions, deal structuring negotiations and alliances. We also have with us Mr. Anil Kwatra. He's the Chief Business Officer. Mr. Kwatra holds a postgraduate degree in Marketing Management. He's an accomplished financial services profession with over 17 years of experience in sales and operations. Lastly, we have with us Mr. Sunil Yadav. He is the Chief Information Officer. Mr. Yadav holds a master's degree in computer science and boosts over 15 years of extensive experience in the banking and financial industry across various domains.

Now without any further delay, let's begin. Dr. Singh, my first question is for you. So you founded Satin Creditcare in 1990, and that's 30-plus years, making it one of the very early entrants in the micro finance segment. Could you please start by giving a brief history and take us through your journey so far and the key learnings also?

Thank you, Anuj -- and thank you Anuj, for arranging this. And thank you, everyone, for joining this virtual meet of ours. So as you rightly said, I think it's a 35-year-old legacy. We started in 1990. For us, our first milestone technically was 1996 when we came with our IPO during that point of time. So if you look at the debt and breadth of time, I think we've probably done about 29 years of listing arrangements, and we've been under the SEBI guideline since 29 years as such. Having said that, we have been bootstrapped from 1990 until about 2008. 2008 is when we got our first investor, which was the first microfinance fund in India called [ Low Capital ]. That was our first foray into the capital market in terms of private equity, which came in during that point of time. 2008 is also the time when we actually graduated from doing in our earlier start of doing individual lending, retail tiny businesses. When I say retail tiny businesses, mean practically the retail shopkeepers across the segment in Northern India, that is what we were on with and that is what we have done 18 of our life before we finally transformed ourselves into the [ microcap ] model, which is the current year model of the JLG system, the group system, which came in 2008, which coincided with the advent of our first equity investment into our company. In 2008, I think the journey has been with -- with the prices led a journey which we have seen across these years. And so if I would probably say that seem probably the earlier journey of crisis it used to hit when the [indiscernible] and the CRB scans was there, and that was the earlier part of my life. But post that, when we came into microfinance per se, I think we saw the advent of 2010, the crisis of [indiscernible]. We saw 2008 [indiscernible]. We saw COVID. We've seen demonetization. We have seen the current crisis, which is there. So if you really ask us, I think we probably would be -- there would not be any [indiscernible] in saying that I think we are also [ crisis child ] in terms of looking at ourselves. But having said that, I think -- not to actually get into that negative thought process. But for us, we've always believed and have always done it that we have been -- technically been able to understand crisis better. And we've always had and looked at the opportunity, which emanates from crisis. And that is exactly what we've done in the last 35 years of our life. And that is how our journey has been going in from that point of time when we were -- when we were bootstrapped from 1990 until the time we've entered this era of 2025 and micro finance per se on a larger [indiscernible] has completely transformed into what it is right now. Having said that, I think the only thing which I would place on record before I finally I am able to say whatever we have to say in our various questions and answers. But I would say that I think what we carry as an institution, it's probably a long legacy, a long experience, a very, very well-thought of well bred management team and crisis handling mechanism as well as a penchant for diversification if we really want to do it. If I am going to sum it all, I think we've survived all onslaughts, whichever might have hit us. We've always turned that into an opportunity for us. And this is where we are right now in terms of how we stand and how we look at it. That's my -- that's my brief of what we've done.

Thank you for that, Dr. Singh. So I think you're talked about a very interesting point about how you've navigated these crises over the last 3 decades. So continuing with this, can we deep dive a little bit more into the microfinance industry? So the segment saw, in recent times, a lot of pain during the whole COVID period. And then after that, we saw some decent recovery. But again, in the last year, we saw some issues in the sector rising again. So can you talk a little bit about this -- and let's focus a little bit in the last few, 4, 5 years for our audience today. So what were the reasons for this? How do you see the situation evolving over the coming years? What has the regulatory body has done to improve situations? And also, if you can explain a little bit more specifically in terms of our strategies that the company has undertaken in these periods to overcome because you did mention how we have survived this, but if you can specify a little bit about how we've grown and evolved as a company?

Sure. So I think, Anuj, I would say the crisis started typically from demonetization, that is 2016. And so it goes beyond COVID and various other factors. So if I pan that out in that era from 2016 until I think 2025, is what we are currently living in. 2016, '17, '18 was typically the demonetization prices. For us, our learning from that -- before I get into the negative part. We've always created positive impact out of us for ourselves from a crisis. We saw the opportunity that should we move away from typically monoline product of microfinance and unsecured lending. People talk about unsecured lending right now. We've thought about this in 2016. So that is how we are probably [ nimble footed ] enough to understand and take cognizance of the crisis and we find a way out, how we are able to mitigate so that we're not able -- not being able to hit other crisis again and again. As they say, don't make the same mistake twice, and that is exactly what we do. So 2016, '17 is the advent of our subsidiaries of MSME lending as well as housing finance. It is at that point of time when we started from there. Demonetization was back. We were on a very negative [indiscernible]. But for us, the resilience, the way we've been able to handle that was probably an understatement where we actually look forward towards, how we were able to address it. We actually looked at our -- the number of human resources we had. We cut down on that. We actually cut down on our branches. We made our muted growth. But the biggest fact what we've always done in terms of crisis is we always brought in capital at every point of time. Be it COVID, be it demonetization and be it any time under -- I think the only thing which we have been able to actually do, which has been evident to a lot of people across this, that we've been able to attract capital even during times and things were not working out for the sector or for any one of us. So that is probably one of the key factors, which we've been able to do it. Besides the fact that I think for us, we've also made -- besides diversification, I think we've put out a lot of strength in terms of our internal guardrails that we've been able to do. For us, guardrails in terms is not only related to just a pure mathematical number of how do we do it, but it's a whole gamut of how we do underwriting for our portfolio. And that has probably been the best out of the entire industry, and that is done by numbers. If we do a comparison of 6 years, and this is probably evidence on record, it's probably not the best comes to all our peers, which have been there. Now that's point number one. And secondly, I think we put us on technology, for us, it's a homegrown internal technology efforts, which we started from 2017 when we actually took that call whether we want to build a [indiscernible]. And actually, we took that hard ball for a fledgling institution at that point of time. And even though we were going through a crisis of demonetization, and we started to build our own technology. But today, when I look at it, I think we have been able to take decisions. We are able to mine our data. We are able to take reports. We are able to do anything which is probably -- has to be escalated or taken due fall-off, faster, much faster than anybody can possibly think of. Because for us, data is probably the only answer where you will be able to take a call on that. And that is what we've done. So our underwriting capability, the strength of our team and wherever we've been able to work on data, I think that has probably held us in a differentiated manner amongst all of them. And I can give you examples of this, how we acquire our customers through means of technology. Today, if I can safely say that today, if you go to my branch, which is in the rural space, you will not find a piece of paper. My loan agreements, my cash flow, my everything is all digitized. And that is the kind of technology advancement, which we do. Today, if you really want to look at it, [indiscernible] an acquisition of a customer, just as an example, is not through biometric, KYC or [indiscernible] anything. It is through [indiscernible] multiplied by an iris verification where nothing can go wrong. That's the team rooted technology, which we work upon. Today, for me, a center meeting, which happens in microfinance, is based on facial recognition. For me, our borrower is not marked by her physical presence, but it's marked by a facial recognition, which is actually the source of attendance for my center meeting. So that is the way we look at technology, and that is the depth of making us probably different from everybody else in terms of how we are able to attract our output in terms of -- through our technology and the experience.

Thank you, Dr. Singh. Let me move my question to some of the other panelists here in our management team. Aditi, let me ask you the next question. So we've diversified our services over the years from a pure-play microfinance company to now offering housing loans, SME loans and other areas as well. Can you talk to us a little bit and educate our audience as to how we have diversified what -- and also what is our long-term strategic outlook on these verticals down the line?

Sure. So thank you, and good afternoon, everyone. So on the diversification play, like Dr. Singh briefly touched upon that during [indiscernible], we did identify that being a monoline product totally dependent on unsecured book may not be a great idea going forward as they're going bigger. So at that time, the seeds were actually sort for housing and MSME business. And today, where we are, 13% of our consolidated AUM is contributed by housing and MSME. And we have also shared our vision that by 2030, we will be having 35% of AUM contribution to these subsidiaries. Now this is the diversification within the NBFC space in financial services. And it's a very natural progression where the kind of people who we are targeting on microfinance plus-plus borrowers. But he has done a 2, 3 cycle in microfinance. Now their requirements are larger. They can offer some collateral. So we will derisk -- and they are good customers because otherwise, we're going to be losing them out as they grow bigger, their demands grew bigger. So now we are having a high [indiscernible], a high [ line ] business, which is secured, so less risky. And the advantage is that in rural India, there aren't people who are offering such services. And besides, institutions like us, people don't understand that market also. So we understand the customer segment, their requirement, the risk appetite, et cetera. We know it better than other urban NBFCs. Then comes the technology business. So last year, we also found [indiscernible] technology limited. Now as we were discussing earlier, that technology remains our stronghold. It's our forte. So now what we are doing is we are expanding that to offer added services to other institutions. It can be in BFC, that can be cooperating banks. So the products we are having like loan management system or an HR [indiscernible], which is [indiscernible] agnostic. Everyone needs to offer their people something for their -- for servicing them or attracting them, monitoring, you call it whatever. Then we are also taking more futuristic bets in those businesses, which we feel are great investments and will reap good results in future. The latest addition is the AIF fund with a debt trend point now. Now again, how we are differentiated from the market which is cluttered with many IFS. Our team is again beyond the metros, beyond the big boys club, it is the MSME where we are going to -- and it's the [indiscernible]. So first of its kind of, yes. Then we are targeting the MSMEs, green, women-led enterprises. And there also, we can just deepen the impact. And here, it will be [ semi-owned land ] and the small towns of India where we will be expanding to. So again, an area where there's a dearth of capital, there's a dearth of credit. So we are just expanding it in this way. And also, of course, when we are making all of these investments, they are on 100% subsidiary. So what we bring to the table is that whenever these businesses hit critical mass, there will be an upside to the existing shareholders because the equity we are investing is found out of the capital network of Satin [indiscernible] itself. So that is also in the larger picture, the vision that we have that whoever is part of the story, they can also gain from the upside that comes through the subsidiaries in future.

Thank you, Aditi. That was quite helpful. Let me move on to -- for my next question to our Group Controller on the financial side, maybe. So Jugal, we have experienced, obviously, a good growth in AUM even in the last couple of years, while the sector was undergoing stress and while many of our peers were probably de-growing or probably were stable. And amid the period, we have been profitable since consistently over the last 16 quarters. We've maintained our NIMs and also kept the credit costs under control. So can you explain to us what strategies are working in our favor, supporting the balance between growth and asset quality?

So yes. Thank you. Good afternoon, everyone. So historic question of it does not happen by chance. We have worked really hard for the last 6, 7 years strengthening our system processes, technology. It's a combination of what we have done over a period of time. In microfinance, nothing will happen overnight because the portfolio will improve overnight nor it will go bad overnight. We have worked really hard on our technology. So we are very confident that no [ fake ] customer can come into the system because we are identifying them through IDs, et cetera. Then we have a very strong data-based credit underwriting process. Our rejection rate is 67%. So in case we source 100 customers, we reject 67 out of that and only defers to balance, 33. So there is surely focus on quality over quantity. Of course, as a listed entity, we want to achieve some numbers. But quality is our target, we do not compromise there, which is resulting into the overall credit cost spread over a period of 6 years. We have reported on an average 3.3% credit cost, which is the lowest in the industry. Average ROA of 2.1%, average ROE of 9.6%. Lastly, the team that we have built over a period of time is a fairly stable team. The average vintage of the senior management in his tenure in the system. And it is going down the line up to regional manager and in some cases, to the branch manager. So a combination of all these factors has helped us report the kind of numbers we have reported.

Great. Thank you, Jugal. I think I've already taken up a lot of time. Let's take some questions from our participants. [Operator Instructions] First question, comes from [ Siddharth Aruj ]. He's asking, how do you see the capital adequacy position evolving over the next 12, 24 months, given growth plans and potential impairments?

So I think for us, we are comfortable very much right now. We are, I think, close to about [ 26-odd ] percent. Having said that, I think for us, even a growth of 10% to 15% is something which we can fathom and take it through our internal accruals. Even a [indiscernible] of close to about 2%, 2.5% works out, which will definitely be what we have achieved last year also and we'll be able to achieve probably for this year also. We can take off a 10% to 15% growth. Beyond that, if we require more growth to be done, which probably seems kind of -- nothing which we want to do in this kind of a scenario, basically, definitely, yes. But I think having said that, we require capital, we'll be able to take it at a critical point of time. And just to add to it, I think for us, raising capital has not been other [indiscernible]. I think in the last 16 years, we've done 16 [indiscernible] capital. For us, I think we probably feel that capital rate is something which we probably know and understand much better, and we'll be able to do that. So I think that is where we stand in terms of capital adequacy.

Sure. His follow-up question is, how are your PAR 30 and PAR 90 levels trending post-COVID and in FY '26? And are there any particular geographies driving delinquencies?

So I think for us, technically, PAR 30 and PAR 60 would be remaining stable. I think what we are looking at is close to about 3.7, 3.79 GNP, which we work upon. I think for us, that is the stability which we wanted to do it. But the ultimate thought processes for us, credit cost is something which we really monitor to the last 0 [indiscernible] as such. This is what we try and do. We did about 4.6% last year credit cost. For us, our target is to go below that in this year for sure and that we will be able to do that. And that is the major factor which we look at because PAR 30, PAR 90 is synonymous to what I think your credit cost would be and come like to. So that is what we are focusing upon and we definitely will be able to achieve that.

Okay. Next question from him is, do you feel the current provisioning buffers are adequate for stress scenarios, especially in light of rising [ index ]?

I think Jugal can probably answer that.

Yes, I think we're very confident that the provision that we have made is quite sufficient as against 3.7% GNP. Our overall provisioning is about 3.6%. So the book is adequately provided for. The provision that we have made is almost 80%, 85% more than what RBI expects us to make. We are confident and we are booking the losses as they are coming. We are not postponing or keeping it under the [indiscernible]. So we are confident that the provisioning is quite adequate.

Okay. Next question from [ Neil Doshi ] is that are you seeing any kind of stress in southern states or flood affected states right now?

See, southern, we have a smaller portfolio. So I think we are not too much worried on the southern states. But yes, there has been a call of worry technically because of the flood situation, which is probably been severe across India as such. And we've been seeing videos coming in, even as late as yesterday from [indiscernible] and all. So I think it will have some impact for a shorter period of time. Probably this is more denser this year. But I think we are well equipped to take and handle that. And it is only a question of time before the -- I think before the waters recede, before the income levels start coming back and bouncing back. I think we'll be able to do that. There could be a slight blip of uncertainty, which will be there or maybe a slight increase, which would be there. But I think we have it under control, which will be there, and it will be controlled possibly maybe after this month or so 'till the [indiscernible] has been a withdrawal of monsoon, I think, and also this will take care of it from September onwards.

His follow-up question is that...

Sorry, if can add, Anuj. We have also started taking natural calamities insurance, which was not there in our portfolio, I think, and that we've started to do from 1st September once we realize that this is like a deepening which probably will affect year-on-year because of climate changes and everything. So we've started taking our borrowers through the natural calamity insurance, and that will give us another very strong buffer in the years to come for us to mitigate all these kind of natural calamity. Thank you, Anuj.

His follow-up question is, are there any plans to partner with UPI entities and offer products like spend now, pay later kind of options?

I think we use UPI, technically for our repayments, this thing across over there. And I think if I could say that we've been able to address all the tools which are there to have digital collections from there. You name it, we've got ad, you know we've got our website. We've got the thing, I think, Sunil, you can probably tell us how many tools we have in terms of how we can probably take back our money from the -- this thing and they're working hard on industry.

But for consumption -- consumption, we're not operating.

We are not operating on consumption.

Yes. So for U.K. aspect, so all the possible collection methods we have, we have all the omnichannels by covering a UPI, UPI 2.0 mandate based payment. And over and above, we are listed over BBPS channel. So all across the PSP applications like Google Pay, BTM, Amazon, we are available. Client can pay through a QR code and client can directly pay through our customer-facing applications, which is directly downloaded in their phone. So these are mechanisms we have. Over and above, we have EPS and other mechanisms as well. So all such mechanisms we have.

So this question, I think on the tech side, this is more -- the way we've answered is more on the collections. But I think his question is a little bit on that, are we going to offer products which will be like giving a credit card, you spend now and then you pay later. We are not doing that to specifically answer that, yes. Moving on, next question from Deepak Poddar is how do we look at MFI sector currently with industry de-growing in FY '25, how does FY '26 outlook look for the industry and for the company?

I can talk about the company much more because industry is industry what everybody reads a board and [indiscernible]. See, we -- again, I think as an institution, we are different from everybody else. Today, I think what is happening is I think people are looking at more secure when the qualifying asset loan has gone down from 75 to 60 now. So I think people are looking at maybe secured lending much to that. We already have 2 subsidiaries which are taking care of that. And as what Aditi mentioned in the next 3 to 4 years, 5 years, we are looking at about a 25%, 30% portfolio moving in across over there. So that's addressed by us. Now what we are doing is that we are looking at that when people are actually looking at degrowing this space, banks are moving out, SFPs are moving out. The space is open now. What we are doing is now to take part of our growth, we are opening about close to about 400 branches in this year to take care of that growth. I said -- and that is how we are different. When people are talking about secured lending, others, we already have that in our table. But I think what we are also trying to look at, that all the larger players, all the banks, all the small finance banks. And you've heard talks about various times saying that don't get fine, we are cutting down on our micron portfolio. Someone else to serve it. And this is an opportunity for us to look at it. And I think I'll give Anil the mic for about 1 minute, 1.5 minutes to talk about our growth plans, basically because we are very [indiscernible] about it. When people are kind of mutually subdued on this, and that's how we -- our thought process is. Anil, if you can probably just...

While we speak about this with people in the industry, the peers have been wondering as to how have we even thinking of this plan of opening up 400 branches. But I think we've already identified the areas. And just to tell you, this is by December 31, all these 400 branches will be up and running. Already 50 of them have been opened. The disbursements have started. Another 100, the premises being -- have been finalized. Your IT setup is already there. So I think the idea is rather than going [ haywire ] everywhere in the country and just disbursing whoever comes in your way, the right idea would be to pick at right locations, right geographies. I may not be able to speak about our secret formula of doing this business, but yes, we have cherrypicked these locations as to where do we want to do this business. So these are 400 branches being opened in one of our best geographies in the country. And again, we'll not be leveraging only a few states, but this is being done across the country. So they'll be [ Risa ], there'll be [ Rajasthan ], there will be [ PUP, Panjab ] [indiscernible], everywhere. So we have picked up those good locations where the credit culture is good. The customers have been coming in the center meetings. We see there is an opportunity of growth. So rather than spreading across the country in every single pin code, which may show very high delinquency as per the data by [indiscernible] eco fax, et cetera. The idea was to look at geographies which are really doing well for us. So we have opted this strategy. And as I said, by 31st December, since Dr. Singh has already ordered it, my job is to make these 400 branches up and running, yes.

Anil ji. Next question, as a follow-up from Deepak, is that what kind of credit cost is the company looking at for the current year?

I think as we said, we did 4.6% last year. We want to beat that. It can range anywhere basically. But definitely, the only correct answer we have and given a guidance, but the only guidance we've given is that it will be lower than what the last year credit cost [indiscernible].

Sure. Next question from [ Shubhran Mishra ] is that what is the proportion of Satin plus 3 and Satin plus 4 borrowers? And are we fully complied with the regulations such as MTEN recently came out with?

Shortly from the time the [ garden 2 ] to came into being from [ EPR ], no loan has been disbursed, which is not in compliance with the service regulation. But our overall portfolio end of June, 6.1% of the portfolio was where we have 3 microfinance -- more than 3 microfinance lenders. And on the INR 2 lakh cap, there was only 0.1% of the clients who were more than 0.1%.

And just to add, Anuj, I think -- just for the benefit of all the audience, which is there. We've been following our internal guardrails from, I think, 1.5 years earlier than what opportunity came in. So we were -- and that's the reason why our portfolio quality is may be differentiated from others because we already made our own guardrails, we made our own ways of looking at branches, districts and everything, how to curtail wherever I think we could see some signs of stress. We've been able to do that, and that's the reason why I think where the industry talks of maybe a credit cost of about 8%, 7% and onwards still about 20-odd percent. We are still talking of below about 4% as such.

Next question is from [ Anmol Hinge ]. How has the collection efficiency been in the month of July, August, September so far? Any improvement over June? I don't think we would like to answer this question. I restrict you all from this just because the quarter is still ongoing. And this is UPSI, so I don't want to discuss this. Sorry, Anmol. Next question from [ Srinjana Mitel ] is you mentioned that you learn from every crisis. Can you share your learnings from the current crisis? Specifically, when did we start noticing the crisis emerging? What key changes have we implemented in our own guardrails since then? And where do we currently stand regarding the overall market and asset quality?

So a very good question, but I can give you a couple of example, which can probably set the tone for it. And because I can't give you the entire spectrum. So how we do it. We've looked at every possible aspect of our capability of ensuring our portfolio quality. Our internal guardrails came in about 1.5 years back when we actually stopped doing NTC clients. This is new to credit lines in 200 of our branches. This was 2.5 years back. OSAT, we've been analyzing data. Basically, we stopped from 224 branches, 2.5 years back, to about 700-some-odd branches in the -- after -- 1 year after that. So that's how we look at data. Similarly, new to Satin basically customers, we start in about close to about 100-odd branches where the bar was higher on new to Satin customers. We stopped that. We've been able to do that. That 100 has probably increased to about 220-odd now as of recently. So this is how we look at data piece by piece. That would probably answer maybe some question on that. There are various other factors how we look at attrition. We've been able -- if I give you probably an example of this, today, my regional managers, the attrition rate is 1%. That's unheard of. So if my 120-odd retailer managers are the same ones which have been [indiscernible] for 5, 7 years, I will have definitely an output, which will be better than that. That's part of how we monitor and look at our attrition. Today, for us, we've got employee schemes for our branch managers for our CSO, who've completed 1.5, 2 years. We work on pension schemes for their parents and everything. Now these are measures which are being taken to ensure portfolio quality -- the end product based portfolio quality. So this is how we learn from that. We have been talking of attrition to a mass extend or people have been talking about in the industry, about 60% of attrition rates. For us, that's half of what it will be of the churn [indiscernible]. On the supervisor level, they are practically as [indiscernible], if I tell you about my circle heads, which is a big team of about 30-odd people, which is looking after all the states, not even a single guy has left. So that's where things come from. Various other factors of how we build on our incentives, how we look at the acquisition of our customers, how we look at scorecards, how we look at profiles in terms of the various geographies where certain work are being done there, whether it's an agricultural labor or maybe somebody who's selling milk or anything, we've got various formats of how to attack. And so that is how we do it. Now I think the other part of the question was that how do we address and look at crisis. That's what we've done from 2016 onwards, be it opening up our branches, be it cutting down our branches. We're looking at 400 more branches being looked at. That's how we look at various forms of crisis or the deviation that happened in the sector. For us, again, when I -- just for the sake of repeating. It's how we evolve as an institution. We had no justification. If you would look at it, we are a financial services company. But for us, we've opened up a subsidiary, which is a technology company. And you won't believe it, we are working on modules of what we have done for about 10 [indiscernible] for ourselves, and we want to give it to the world probably to do [indiscernible]. So we moved away pro financial services also to nonfinancial services. Similarly, I think for us, lending business and lending business. But to set up of EIF fund based on, again, principles of green finance. And in fact, just to tell you, we recently had a CEO basically to do green finance in one of our subsidiary companies or SFL. So that's the way we look at our institution and the group as a whole. I think it's very difficult or different for people to really understand and fathom the various forms of these units and entities, which are probably there in the group as such.

Next question from [ Manish Dhariwal ] is how big a revenue and profit driver is the technology initiatives? And how is the monetization proceeding?

See it's just in a year. The only advantage we can probably say is that we've been able to thankfully been acquired the first set of 3, 4 customers now, which are taking care of our product stable from the system. Also to, I think add, we've got various models. Sunil, if you can probably -- just a couple of these things to that.

Yes. So our technology initiative are designed not just to enhance efficiency, but it's directly contributed to the top line and the bottom line profitability. By developing AI and ML model, which can help us out to customer segmentation, collection optimizations or iteration predictions, such kind of things we are doing around the data. And overall technologies no longer just enabler. It's a revenue engine on the particular side. So a lot of initiatives we are working on around AI and ML as well.

Next question is from [ Vishal Narnolia ]. Can you let us know the proportion of microfinance loans are covered? What proportion of microfinance loans are covered under the guarantee scheme? And what is the outlook on the same and volatility seen in asset quality in recent years?

So we have just applied for the credit guarantee scheme. As of today, it is not there, but we are in the process of getting that done going forward. So on the incremental disbursement, [indiscernible] approval then start covering there.

And it was kind of the [indiscernible] scheme was there in fixed and parts. I think some people could do it. We actually were applying a long time earlier, basically, but somehow, I think the application was not entertained and not been taken through. But I think now finally, it's been settle that in order to go through. So I think there were glitches and hitches, but once it is now streamlined, we've applied now basically and let's see when we get our approval from there.

Next question is for Neil. What is the geographical mix of the 400 new branches that we are setting up?

Anil, some idea on that, some color on that.

Which states are we focusing on?

Yes. So as I already mentioned, it's a mix of branches coming from all together all these states. So majority again being contributed by [ UP and Bihar ] since [ UP and Bihar ] at 1% contributed to more than 50% of our portfolio, which is around 26% today. So I think with the bigger branches and the branch is really doing good. The better revenues in the same districts are high. So UP, Bihar, followed by Panjab, [indiscernible] and some parts of Northeast as well. So these are major geographies where we'll have most of these branches.

Great. A question from [ Varun Gajare ] on this line, while others are descaling with asset quality concerns, how do we ensure that the asset quality is well within the tolerable range. And while we add these 400 branches, wouldn't that elevate the operating cost? What will the cost to income margin look like after that?

So I think we are -- the way we look at it, basically, I think we are -- as we said, we are opening all these branches, which are in the good geographies where asset quality is not a concern. So that's point number one, which takes care of the asset quality. Yes, there will be a slight increase in terms of our OpEx cost being elevated to a certain extent. But that will be taken away by the growth, which will happen. And I think the percentage will go down. The moment we start getting within the range of doing a breakeven from that end. But typically, for us, a branch breaks even in the first 6 months of its opening up. So it's that intervening period is basically where we will have a slight [indiscernible], but I think that probably will be compensated by maybe a good asset quality as well as probably the revenue coming in from there. So it's just a question of that 3, 4, 5 months before it starts getting breakeven from there.

Sure. Next question is in your discussion by [indiscernible] -- in your discussion with the rating agencies, when do you see a possible upgrade to AA levels for your long-term borrowing? What would it take to reach there and how much time?

Give me an answer, and I can get it today.

That's the million dollar question that everybody is asking.

I know, sir. But I think where I think the struggle would be, I think as an individual entity, I can't go against the market type of when the rating agency looks at the entire sector as such. I think if we get sucked away by that, even though we would be performing the base out of that. I think that is something which probably will have to be borne in mind that we probably will not be able to do much in that as the sector actually stabilizes or maybe there are green shoots somewhere else to be looked at. But definitely, as you know, if any upgrade happens in the sector, I can probably assure you that it has to be asked and nobody else.

His follow-up is consequently, when do you see your borrowing rates reducing as we are currently in the market raising funds at about 12.34% yield to market?

So the cost of fund has started going down with the overall policy rates going up, but some of the lenders are still charging slightly higher this premium. Our overall margin cost of borrowing is sub-11 now. And then we are seeing some more traction coming in from that side. A little bit of industry level shows the moment, they will also get settled, I'm sure the cost to further go down.

Sure. Next follow-up question from Deepak Poddar is with around 10% to 15% growth being seen in our -- can our ROA beat last year's ROA as we are looking at growth in both secured as well as unsecured space?

We will try our best for us. But as we said, I think there will be a slight uptick in terms of our OpEx and everything. But having said that, I think we are currently looking at the credit cost probably being better than last year. We'll try and come for somewhere where we are able to beat that. And that definitely is there in our mind.

Okay. Next question from [ Basel ] is, please correct me if I'm not reading the PAR numbers correctly, our PAR 90, as reported currently is 2.1% ex of 3.7% PAR 90 plus, which is significantly lower than peers. What is it that you are doing differently compared to peers?

I think it's 3.7%. I don't know where from this 2-point-odd number has come.

So we have 3.7, yes.

Is that the...

So 3.7% is what our 90-plus...

[indiscernible] 0 to 90 is 2.1%.

Yes. So the overall is currently 6 points.

So overall was 5.76% [indiscernible]. And out of that, 3.7% was 90-plus [indiscernible].

Correct. So the question is, what are we doing differently? This is obviously lower than our peers.

The [indiscernible]?

All this [indiscernible] about technology acquisition of our customer, the management team, the guardrails she's put for so many years now practically. I think it's a combination of all these factors put together. I can't pinpoint and say, okay, this is the only factor which probably works with. But I think everything put together works and contributes in a significant way. For us, even a small thing like how do we actually look at our incentive structure to motivate our voice, to work much more harder than anybody else, I think it is probably also one of the key factors, which is there. So I think it's a combination of all these factors. The only thing which I can probably answer this question by a general statement is that I think we've understood micro grants for a very long period of time. You've seen a lot of [ pitfalls ] in the [indiscernible]. We understand it much better than anybody else. Plus we have that advantage of technology. I think these are 2 factors which, on a more wider scale, you are able to address it. And rest, I think for us, we understand different, different kind of smaller verticals alone attached [indiscernible] every space. As I told you earlier, we walk even on this space where attrition is a major factor. Now people don't address that. People don't understand that. Take attrition higher and higher. But for us, that's a pause where we want to address it. And we've been able to do that. So that actually gets into the output of numbers and the portfolio quality.

And [indiscernible] in the game also.

Well, I don't know. I forgot the answer.

Sure. Next question is from [ Helisha ]. I just wanted to understand how will our NIMs be impacted going forward? Maybe if we can get some kind of a NIM guidance for FY '26? Also the cost income...

It will be stable. NIM will not go down. That is something which I can probably say. NIMs will not go down, they'll be stable. In terms of our cost to income -- as what has been asked...

The next -- the follow-up is also the cost income ratio has come down...

Yes. It will again be within that range, which has been there. I think there will not be [indiscernible] of an escalation. That will be just a very few percentage points, which will be there because of these new branches getting opened up, but it will be taken care of by the revenue, which we earn from there and it will be there. So I think if you look at probably beyond FY '26 is when we'll have a full blown 400 branches, full blown various other measures, which we have been introducing off and on. I think we'll have a much better understanding of our ROA numbers and our ROE numbers from there on.

Sure. A follow-up is that the cost income ratio has come down significantly. So a little brief on what led to the same? And will it be in the similar levels going forward, which you answered? So what has led to this?

So stable at broadly 48% to 50%. And once this expansion will stabilize, these new branches will be breakeven. As of today, the OpEx is slightly high because of the overall industry headwinds, et cetera, it will settle down at some point in time. The month that will happen, there will be improvement in overall cost-to-income ratio, but probably for the next over 3 quarters, it will broadly remain in this range.

Sure. Next question from [ Pranav Gupta ], is liquidity available in the system for MFIs or lender? Or are the lenders being still a bit skeptical?

To everybody, to themselves, we have [indiscernible] funds. Honestly, [ first ] time ever, this time when I think -- I think lenders are being cautious. I think they are knocking our doors much more than what they used to knock earlier. And we are actually reducing the low hard [indiscernible] above both at because negative carry is also one thing we are very much aware of. But I think we are not facing any kind of a problem. In fact, we are flush with too much of funds. And I think that's a good problem to have, but still it's a problem for us.

Next question is from [ Ashley Sanjay ]. Are you seeing a trend of delinquent borrowers coming back to repay their overdues in order to get access to further credit? And follow-up is, do you believe this phenomena can further augment credit growth for you as well?

No, not much. Is not a segment which we probably get much in this thing. And once a delinquent borrower, if it comes back with money, I think we don't entertain them also. [indiscernible] but beyond that, no further loan from our side.

Okay. Next question is from [ Pratik Tucker ], as we move towards more of the secured business, how should we look at the NIMs from a long-term horizon?

I think one thing which probably we would like to place on the table is that -- for us, our secured business is also currently in the same range as what we do microfinancing. For us, MSME lending as well as housing finance is the same for our micro borrowers as well as the constituency, which both these companies do, are again, within the range of 22% to 25%. That is what we work upon. It's not that typical housing finance, which you see in the urban space of about 8%, 9%, 10%. That's not what we do. So we are currently in that zone where we are only doing much more in terms of the saying there will be a few bids which will be within that space of about 15%, 16%. But the major portfolio happens both in MSME and that at about 22% to 25%. So for us, NIMs will always be the same. Those [indiscernible] company with still has a higher OpEx. Movement is scaled to a critical level where their office will start pushing down pretty fast across over there. I think the NIMs will remain the same range of about 13% -- 11%, 14%.

Next question is from [ Tushar ]. There has been a significant jump in our employee base. Can you talk about what areas are we hiring more people in?

So we've done more people in the DPD buckets of the [indiscernible]. So we've got a team which works on 1 to 90 DPD buckets, a team which works on 90-plus DPD buckets. There has been an increase in that because we want, again, our portfolio quality to probably be the best in the industry. So that has probably elevated that. Plus I think as we said, we started increasing our branch level recruitment across over there, and that is what we've been able to do. And that is probably a slight increase in terms of our OpEx has probably gone up slightly across all that.

Next question from [ Shaba Misha ] is that have we faced any corporate governance issues in the past? And since we've had in the past a few top-level resignations. So any comments on this?

Well, let me answer this question. This is a very, very question which I have wanted to answer for a very long period of time. And I think -- thank you for giving us our platform to. See, we go through rigorous RBI inspection, and it's been there for 20, 25 years. There's not been a single adverse remark in our report ever from our RBI. We are -- we get followed up by SEBI on various forms of committees of directors, independent directors and everything across over there. There's not been a single adverse number. What is corporate governance, just by a few resignations which happened, again, for reasons which are best [indiscernible] to people, if somebody wants to relocate to U.S., one of our guys, somebody wants to open up their own business basically. How is corporate governance and issues [indiscernible]. And that's something which you really want to answer. We've got the best kind of statutory auditors, [ Grant Thornton ] has been our auditor for 4 years. [indiscernible], again, one of the top leading [indiscernible] being there. I think we've got so much of inspections, things to look at, independent directors on the Board, we've got 4 independent directors. Am I right? 5 independent directors, 2 from the promoter side that's it basically. I think we've done enough and this is where we stand. I think -- it's a loosely-worded remark, which probably comes in with any kind of -- I think no validation as such. It's easy to always say. So we've never had any kind of a governance issue up until now in the 35 years of our life. And we want to remain like this forever.

Absolutely. And in our new presentation that we've released as well, we've actually put in words, a lot of measures that the company has taken, which is there in public and have also sent the investor kit linked to everybody. So you please -- you can look at the detailed investor presentation because there are specific slides on the measures and the controls that the company is undertaking on the governance side to a detailed extent. So that was the last question for us and a good way to end it. Thank you so much, everybody, for some really good questions. And once again, thank you, management for a very interesting session and a very educational one. Thank you so much, everybody.

Thank you, everyone. Thank you, Anuj. Thank you.