SBFC Finance Limited (SBFC) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to SBFC Finance Limited Q3 FY '25 Earnings Conference Call, hosted by ICICI Securities Limited. [Operator Instructions] I now hand the conference over to Mr. Renish Bhuva from ICICI Securities Limited. Thank you, and over to you, sir.

Yes. Thank you, Steve. Good morning, everyone. Welcome to SBFC Q3 FY '25 Earnings Call. On behalf of ICICI Securities, I would like to thank the SBFC management team for giving us the opportunity to host this call. Today, we have with us the entire top management team of SBFC, represented by Mr. Aseem Dhru, Managing Director and CEO; Mr. Mahesh Dayani, Chief Business Officer; Mr. Narayan Barasia, Chief Financial Officer; Mr. Pankaj, Chief Risk Officer; and Mr. Sanket Agarwal, Chief Strategy Officer and Head IR. I will now hand over the call to Mr. Aseem for opening remarks, and then we'll open the call for Q&A. Over to you, sir.

Good morning, and thank you. Thank you for your time this early morning. Since our road shows and in every quarterly call thereafter, our guidance has been growth at 5% to 7% quarter-on-quarter, cost reduction of 50 basis points year-on-year and credit cost in the region of 80 to 100 basis points. If you compare our December '24 to that of December '23, because the longish period to give you a full idea and then I will talk of the quarter, December '24 to that of December '23 our AUM has grown by 30% year-on-year, while core operating profit has grown much faster by 38% year-on-year. This was aided by increased operating efficiency because we have reduced our cost-to-income ratio from 45% to 40%. So overall, against an indicated 50 basis point reduction for the year in 9 months, we have delivered about 68 basis points. As we continue to invest in growth, our costs will be stable this quarter, and we will aim for a further reduction of 50 basis points in the coming year. In a rising interest rate environment, our cost of funds has reduced by 3 basis points year-on-year, keeping our NIM steady at 10.26%. The ROA has expanded from 4.31% to 4.49% despite increase in leverage from 1.5x debt to equity to 1.84x debt to equity. Credit costs have inched up from 83 basis points to 97 basis points during the year. ROEs have expanded by a full 200 basis points from 10.77% to 12.77%. In terms of quarter-on-quarter, we have grown with our -- within our guided range at 6%, with core operating profit also growing at 6%. Quarter-on-quarter yields have further expanded by 12 basis points to 17.81%. And with stable cost of funds, we have increased our spread to 8.43%. Credit cost marginally down quarter-on-quarter to 97 basis points and a flat cost-to-income ratio quarter-on-quarter. Bank finance is about 60% of our total liabilities, and as the year goes by, over the next financial year, this number will come to under 50%. In April '24 call, we had called out that we would see the tides of the economy ebb, tightening liquidity and rising consumer leverage, and that the year is going to be a challenge on 3 fronts: growth, NIMs and credit quality. The same was restated in the July and October calls, too. When we called it out, we were the canary in the coal mine, a lone voice. Now, slowing consumption and elevated consumer leverage is common commentary and coffee table discussions. We are still a small company, and to that extent, the size of the economy and growth does not matter. We stay focused on execution and navigating the currents we find ourselves in. A year back, I said that the industry is too optimistic. Today, I say it has become too pessimistic. The truth is always somewhere in the middle. We continue with our guidance of 5% to 7% quarter-on-quarter growth, annual reduction of operating cost by 50 basis points and credit costs at the higher end of our guided range of 80 to 100 basis points. As always, we remain cautiously optimistic. With that, I hand it over to Narayan.

Thank you, Aseem. Hi. Good morning, everyone. Thank you, Aseem. Our AUM for December '24 is INR 8,148 crores, with a growth of 30% on a Y-o-Y basis and 6% on a Q-o-Q basis, with 99% of book being secured by properties and gold. This growth is in line with our guidance given earlier. We added about 5 brands during this quarter, and the total brand count now stands at 197 as of 31 December 2024. Our borrowing cost has remained stable at 9.31%. Given the stress in the liquidity in the market, this is a good achievement. The yields and the spreads continue to remain stable at 17.81% and 8.5%, respectively, for the quarter. Our OpEx continues to reduce and is at 4.62% for the quarter due to improved operating leverage, which is again in line with our guidance of reducing OpEx as a percentage of AUM. Our return on average AUM for the quarter is 4.49%, with the return on average equity further improving to 12.75%. In terms of asset quality, our GNPA remained stable on a Q-o-Q basis at 2.74%. Our 1+ DPD portfolio for secured MSME increased marginally to 6.52%. Our credit cost is at 0.97% for the quarter, again in line with the guidance. We remain healthy at a PCR of 40.2% as of December 2024. In terms of capital return ratio, our capital adequacy ratio is at 28.4%. Tangible net worth is INR 2,820 crores as of December '24. We made profit of INR 88 crores for the quarter, whereby reporting a profit growth of 38% on a Y-o-Y basis and 5% on a Q-o-Q basis. Our 9-month profit for the year exceeded the 12-month profit of FY '24. With this, we open the floor for questions.

[Operator Instructions] The first question is from the line of Nischint Chawathe from Kotak Institutional Equities.

Two, three questions from my side. One is, you kind of said that your yield on loans has gone up marginally, maybe around 12 basis points quarter-on-quarter. So just curious what is driving it, whether there is a change in the lending rates or the mix or what is it? And the second one is on gold loans. Your book is sort of flattish or probably gone down a little bit this quarter despite the fact that there are a fair amount of tailwinds for gold loan companies.

Mahesh here. So responding to your first question on the yield. So in the mix, the ME yields have largely been stable. So the bump up that you see in the yield is largely on account of gold, which has come in. So the yields on the gold portfolio have moved up. So, at a consolidated level, the 12, 13 basis points increase that you see is largely contributed from [ gold ]. That's one. Second, I guess, Quarter 3, the growth in gold was relatively lower. Obviously, it was coming off from a higher base in Q2 and Q1. But the run rate that's been there in Q3, we expect that the same momentum of that run rate is going to continue in Quarter 4 without compromising on the yields.

Sure. Just extending the first question, what is your view on the pricing environment at this point of time? Do you see -- with whatever is happening around, do you really see the rates going up? Or, given the fact that we are kind of probably looking at a rate cut in the near future, you kind of expect the rates to go down? You're seeing competition tightening rates a little bit, sir.

So I don't think the rates specifically on the gold are going to go up from where they are. The range is anything between 18% to 21%. So I guess that's going to be extremely range-bound. So there's very limited room that's going to be available to increase the pricing there. Maybe on the lower end, where probably the yields are in the range of 11%, 12% or 13-odd percent, maybe there's going to be some movement there. But the ones which are already priced in and fully priced in, I guess there's going to be very little headroom available.

So on the MSME side?

On the MSME side, I guess, we'll be largely stable. I don't think that there's opportunity to increase or inch it up beyond from what we are already charging.

Sure. And just one last one, if I can squeeze in. I believe you have been sort of tightening your screens. And so do we see the process further continuing, or do you think we are now done and in that sense, maybe on a sequential or probably maybe on an annual basis, we start seeing disbursements growth kind of [ leaping ] up from here on?

Sure. I would say that -- so you're right, we have further tightened the screens. And as we reiterated in the last call that, obviously, the log-in to disbursal numbers have been impacted because of it. But that's what we see on the ground, where on account of higher leverage, probably we're not able to underwrite as much as we could. We expect this to continue and probably we will be watchful for at least a quarter more before we slightly open the gate.

Sure. And sorry, just last one, since you mentioned this. When you say higher leverage, how do you look at it, if you could kind of give some data point or a portfolio cut on how you have looked at high leverage and where you really cut [ the space ]?

Yes. So Nischint, our customers largely borrow against their property. So these are largely driven by institutions who lend to them against the property. But there are only one-odd loans or probably, at best, two. What we meant is that the amount that they've already borrowed with, in addition to the secured, is a little too high, which impacts their [indiscernible] or their repayment capacity. So [ if ] we're not very comfortable on the amount that an individual is seeking, that then we try and stay away, because we feel that he is not going to be in a position to probably service the loans in the near future. So that's a cautious call. That's a pretty guarded call that we've taken. And this is something that probably we initiated almost 3, 4 quarters back, and that probably also explains why the disbursals have been slowly inching up despite the opportunity still existing. So we feel that we will probably wait for at least a quarter more before we actually go back and revisit the underwriting norm.

So quantitatively, it means that you've brought down your [indiscernible] or something?

Yes.

[Operator Instructions] The next question is from the line of Renish Bhuva from ICICI Securities.

Sir, my question is on the, let's say, the current scenario in the small ticket LAP segment. So of course you will be the first one to highlight that there are some sort of stress building up or maybe customers are going through some sort of seasonal cash flow mismatch. So sir, where do we stand in terms of that cycle? Do you feel that things have started improving, or it's too early to call that we are, let's say, peak of the cycle?

See, this is not -- I mean these are economic winds. They move the way they move. It is not about that all customers are in trouble or that there is a major crisis. It is just that a certain segment of customers have got overfunded by the industry, and those are a problems that are coming on the road. So at the very lower end of the spectrum, we are seeing the problem the highest. So when you're going at the lowest end of lending, that's when we are seeing the problem highest, which is why we have not gone below those ticket sizes of lending yet. And at the middle segment, you will be watchful. There is nothing dramatically that is changing. We are financing bread and butter businesses. We are not financing manufacturing, we're not financing any exotic businesses. These are trades and services, basic B2C businesses. So you have to go it borrower by borrower. And also there are an equal number of good borrowers, but there are also some borrowers where -- so it's a marginal increase that is actually what can cause a concern. So I mean, in 100, if you make 2 mistakes, it's okay. If you make 5 mistakes, then that becomes a lot. So those additional 3 is where the problem is. So you just have to be watchful. Nothing is dramatically different. These cycles keep coming where one has seen many cycles come and go. You just have to do the right thing and watch the winds and the play accordingly.

Got it. Got it. So nothing alarming as of now, at least in terms of cycle?

You see the problem is this only, that we get either too enthusiastic or we get too pessimistic. This is our problem as a nation. We are emotional people. And also, 3 quarters back I had a problem telling anybody that there is a problem, nobody wanted to hear it. And now everybody has gone the other extreme, saying the whole world is coming to an end. [Foreign Language] You have to keep playing your game, and some damage will come, you will take the damage and move on. And as long as you are delivering a profitable outcome, it's par for course.

Got it, sir. Got it. And maybe just a bookkeeping question. So credit cost assumption, et cetera, will remain intact, right, sir?

We are not giving any guidance.

[Operator Instructions] The next question is from the line of Mayank Mistry from JM Financial.

Sir, I wanted to know what would be our floating rate mix in the borrowing side? And secondly, I would like to know, I mean, since you have highlighted there are some of the stress building up in the small ticket SME segment. So I would like to know whether this is specific to a few regions, a few geographies or this is like a pan-India situation that we are seeing?

So let me answer your first question. So we don't take interest rate risk. On the asset side, we have all the assets which are variable floating rate. So on the liability side also, 99% of our loans are on the floating rate basis.

Okay. And related to the geographical, I mean the spread, whether it is concentrated to a few geographies? Or how is it -- I mean, how are you seeing the trends?

So there is no geographical concentration. Some geographies here and there keep happening, but it's a general credit cycle, we would say, which we are watching and we'll manage it accordingly.

Does that answer your question, Mr. Mayank?

Yes, yes.

The next question is from the line of Hrishikesh Thakker from Valuequest Investment Advisors.

Hrishikesh here from Valuequest. My first question was on the moderation in OpEx. So obviously, you've been achieving the OpEx moderation target that you called out earlier. But does that at some point have a correlation with growth? And do you believe that in the interim, with the challenges that we're seeing, [ that ] this moderation in OpEx growth could slow down in the medium term? Obviously, next quarter we retain our guidance. But the medium-term growth is this an implication of the OpEx [indiscernible]?

So I think as a company, we started with a significantly higher OpEx to begin with. And I think now is the time where probably you'll see it sliding down. But I think a couple of quarters back, the questions were as to why the OpEx was high. But thankfully now, the distribution is beginning to [ sweat ] and that's how you see the OpEx moving down. What we've always guided is we will grow, we will consolidate, and we will grow again. Our guidance on adding 25-odd branches in the year continues intact irrespective of the market, irrespective of the cycles. And that we feel is going to give you a good risk-adjusted return on an overall front. So if our guidance is anywhere between 5% to 7% growth on an AUM. And to deliver the required ROE, I feel a lot of those investments have already done it, and incrementally these investments will continue to trickle in. The reason that you won't see the significant uptick in OpEx is largely because most of the heavy lifting on the high costs have already been done. And they were done in upfront because you were laying distribution across the country in each of those states, which is extremely expensive. Now the incremental investments are more to do in scope in smaller cities and in variable costs with respect to employees at the front end. So you won't see a significant OpEx getting added. So on a marginal costing basis, I feel that it's going to be a lot more accretive. And that's the reason we said that we are more than confident of meeting our OpEx outcome without compromising on any of our AUM growth or credit cost outcome.

Got it. My second question related to this was the new client addition in this quarter in particular seems to be slightly muted. Anything to read into that number?

No. Let me just put some probably numbers in perspective. As we had mentioned earlier that we did tighten up our underwriting screens at the beginning of the year. So just to give you a sense that earlier, if I was originating close to around 100-odd customers, 50-odd customers would pass through the door. Now that number has dropped to roughly around, say, 45 or below. And that's roughly a 5%, 6% impact. We originate close to around 20,000-odd customers, and out of which probably currently 7,500 pass through the door, which is less than 40%. So if you just put your numbers and say that if we were to go back to our original number of efficiency of going back to 5% or 6%, that's 1,000-odd customers, and average ticket size of INR 10 lakh is almost INR 100 crores delta that you would otherwise get in a quarter. This, we feel, is a result of what is consciously by design being implemented at SBFC. As and when we feel a little confident that the market is beginning to open up or probably the credit risk is beginning to get a lot better, we will accelerate. So I think the good part for us is that we have all our ammunition ready. We have the distribution, we have the people on the ground. It's on us to decide how much do we want to accelerate without compromising on any of our other credit parameters.

Got it. Final question was on this other income line item. So other income slowdown is on account of the slowdown in disbursement rate? Or is there anything else?

So there was a -- so we have a business when we do a servicing to institutions, there has been a slight slowdown in that income. So that is what we call our LMS fee income, a slight slowdown there. Other than that, as a percentage of disbursement, percentage of AUM, all other numbers remain the same.

The next question is from the line of Nischint Chawathe from Kotak Institutional Equities.

This actually -- sorry, this actually pertains to the liability side. What you can see is that there is a little bit of an inch up on liquid investments on balance sheet over the last 1 quarter. Apart from that, what we can see is that the share of bank borrowings will actually be going up. Is it kind of some reading that probably will be a little bit more -- we'll probably be a little bit more cautious on liquidity at this point of time?

Yes. So I'll take this question. So Nischint, liquidity is certainly tight in the market. But the good thing is -- and the NCL is also going up. The good thing is we have been able to contain the cost of borrowing, right? We generally keep our liquidity buffer in a range. And so in September it was slightly lower, in December slightly higher, but it is still the same range where we maintain the liquidity. So liquidity is actually not very high. But yes, we continue to maintain a high liquidity given the tightness in the market. To your next question, whether the bank borrowing is going up? Actually, no. So we are diversifying a lot. For instance, in this financial year, we added -- so if you compare the data versus March, you will actually realize the journey we are into in terms of diversification. We added a lot of money from NCD investors. We are now moving towards [ DFI ], and you will very quickly hear that. So there's a diversification happening. As we go along, more and more diversification is happening. But as of now, if you have to look at all the bank borrowings we have, it is almost about some 60-odd percent, including the FCNBs, et cetera, we borrow from the banking system.

Nischint, the liquidity is the price of a good night sleep.

That's true. But you're not...

Don't [indiscernible], let us sleep in there. Don't object to liquidity.

Fair point. But you're not seeing any tightness by any of the banks?

[Foreign Language] we are sitting on a large pipeline of approved credit. The problem is the rate of interest. So it takes us longer to arrive at an acceptable rate of interest rather than the absolute amount of liquidity.

Sure. And what would be the difference in your average...

You guys keep needling the banks, saying your net interest margin is falling, so then they keep needling us.

Sure. What is the difference in incremental and weighted average cost of funds as we speak?

So we are borrowing at the same average cost of borrowing what is there today. So our cost of borrowing -- incremental cost of borrowing and the limited weighted cost of borrowing remains the same. The idea that -- the challenge is to really hold this at this price. So that's the reason you will see, over the last 3 quarters, even though MCLRs, et cetera, would have gone up, the cost of borrowing remains the same or slightly coming down. So it's almost at the same level, incremental cost of borrowing is the same.

But having said that, it's going to be tough to hold.

Okay. With the MCLRs going up.

Yes. Yes.

Next is from the line of Himanshu Taluja from Aditya Birla Sun Life.

Congrats for the quarter and your elaborative comment, and it at least showed a narrative of cautiously optimistic stance as well. So just a few questions. Firstly, in this environment, what growth do you envisage for FY '26 where you see that FY '26 can head towards from a growth standpoint? Second, for my next one question, any particular sweet spot in ticket size where you are very comfortable to lend in the current environment, and which ticket size where you think that there is an increased delinquency for any customer segment which is showing the vulnerability? Also in this, if you can add what is your thoughts, because although you don't do less than INR 5 lakhs ticket size loans category, but any particular read-through for this ticket size, how that segment is behaving, less than INR 5 lakhs? And last question is around what is your -- when do you expect to reach the path of the 15% ROE, return on tangible equity? By when one... Yes, these are all my questions.

So from a growth perspective, I think -- we don't want to bore you, but nothing changes. We continue to maintain a 5% to 7% even for the coming year as well, irrespective of how the cycles move. And that's a growth that we feel is comfortable both on -- that's something that we feel is comfortable both on our financial capital and human capital and will give us the required outcomes in terms of profitability. I think your second question was related to the sweet spot on the ticket sizes. I think we lend out to customers who -- where the pricing is anything between 12% to 21%, and that's a large range of customers that we cover. In the current context, I think it's more to do between 11% to 17% is what probably we are looking at. The lower end or the extreme low ticket is something that we are extremely watchful for. So we stopped peddling that particular segment. But as and when the market tends to open up, then probably we are going to start expanding there. But we've seen these cycles come in our professional careers over a longer period of time, and nothing lasts forever. So I guess that it's a quarter or a couple of quarters before it seasons in.

Sir, any particular readthrough for less than INR 5 lakh ticket size? How that segment is behaving in the current times?

That, I don't think we'll be able to comment. That's not our domain. So we would have very little commentary to talk about that particular market.

Sure, sure, sure. And lastly on...

Yes. A 15% ROE is what your question was. So what we are looking at is the last quarter of next financial year or the first quarter subsequent to that is where we will land at a 15% ROE or thereabouts.

Sorry, I missed out.

The last quarter of next financial year.

The next question is from the line of Shailesh Kanani from Centrum Broking.

So given the current situation and tightness in liquidity, how do you see evolving competitive landscape in MSME financing? Is it being lower? And since we are at a strong footing vis-a-vis our peers, are we thinking to push our growth more and increase the market share? Anything on that front, sir?

Our strategies don't change as per what the wind changes. So we are doing nothing new. We are doing nothing different. We will keep doing what we are doing, the same ticket size, the same customer segment, and they're growing at the same pace of growth. So there is enough for us to do right there. We have enough challenges. There is also going to be a challenge to both maintain the profitability as well as maintain the credit quality. We have enough challenges. We will try our best to meet those challenges. There is nothing new that we would wish to do at this point of time. We just wish to keep steady, we have to deliver cost efficiencies. We have to deliver -- we still have a long road back to get to where we wish to see the organization. We are still an early-stage organization. We are just not even 7 years old. We have a long path and we have to work hard to get to that part. So nothing -- there is no great change. We will keep doing what we are doing and hopefully keep getting better at it with time.

And any color on competition? Has it kind of subsided? How is it?

No. Competition is always there. The shape and form keeps changing. Sometimes some players get active, sometimes some players have been a cool-off. So competition in India is always there, and at the segment that we are doing, technically in financial services there is no moat in any aspect. So all players end up doing everything. It is just that the beauty of financial services is that everybody does the same thing, but they don't get the same results. So we have to just focus on our execution. If we execute it right, we'll get the results. If we don't execute it right, we'll not get the results. Competition doesn't matter. We don't [ meet ] competition really in the field as much. It is more a conceptual thinking on Excel sheet. The reality is that we have to work hard to execute well on the ground. That's what our job is, and that's what we'll stay focused on.

Fair enough. I think you answered my second question, but still, any plans to enter into any other segment or increase the ticket size? As of now, it doesn't seem like it, right?

No. No.

Okay. That's all from my side.

There is nothing really exciting that we have to say. We would hope to continue on our boring journey.

[Operator Instructions] The next question is from the line of Kunal Shah from Citigroup.

So I joined the call late, so sorry if I'm being repetitive. But just one thing in terms of any of the segments wherein you would have made the credit filter slightly stronger. No doubt it's evolving based on the macro and the operating environment, but any changes either on the credit side, on the underwriting side, on the collection side that you would have -- maybe you would have done over the past 3 to 6 months looking at the environment, yes?

Yes. So last 2, 3 quarters, actually we have been a little more cautious, some underwriting parameters which we can't specifically say, but some underwriting parameters we have tightened around the eligibility and the onboarding, so that we can take care of some of the emerging aspects, including the leverage aspect. So parameters around that, we have become a bit more cautious.

And should that reflect in terms of the overall approval rates, what we are disbursing and the files which we are evaluating or logging in. So is it like very well reflective of that? And would it mean that maybe either we need to strive more to get a similar disbursement run rate, okay, or maybe we should be satisfied with a slightly lower growth?

Yes, Kunal. So I guess if I were to summarize the last 3 quarters, I think we did 2, 3 things at the beginning of the financial year when we announced that we could probably see the orange lights, or the green turning into orange. One was largely on the credit filter that Pankaj articulated. Then there were certain geographies that we had paused in some of the markets where we saw that the overall delinquencies was moving up independent of the SBFC's portfolio behavior. So that's something that we paused. Third, I guess, we invested upfront a lot -- sorry?

What these geographies would be?

There's one state in the east and one state in North.

And in some of these markets, we've decided to go a little slow. Also, in terms of our collections infrastructure is something what we strengthened during the course of the year. So that was -- these were the conscious investments that we made. What I can tell you is, from an overall log-in perspective, the log-ins, obviously, is a lot higher. As I had reiterated earlier, I'm not too sure whether you were there on the call then, but I was just giving a perspective that obviously what we were logging in earlier and what is going through the door is probably 6% to 7% less. So if we are originating close to around 20,000 applications in a quarter, 6% is roughly around, say, 1,200, around 1,000 to 1,200. So that's a delta of almost INR 100 crores to INR 120 crores in a quarter. That's something that we feel could have been accommodated, we could have done it. But given the market, we're trying to leave that on the table, which is on account of either we feel the leverage is a little too high or the pricing probably is not to the effect that we would want. These are the kind of cycles where we feel that we've seen that in the past come through, but it's just a matter of a couple of quarters here or there before it just comes back to normal. What we remain committed is that we remain committed to investing in the businesses, investing in the distribution. As far as the catch-up to where probably the original metrics were, it's just a matter of time. Having said that, we are not changing any of the guidance. Our guidance for growth continues to be intact, irrespective of the cycle and irrespective of the outcomes that we see.

Okay. And despite this, I think there are enough levers on the OpEx efficiency side, productivity side, wherein we are not worried even in terms of OpEx. So I think on the earlier questions, you answered that still you seem to be confident in terms of the cost ratios. So when we are seeing these investments being slightly stringent, I would say, like more volumes getting into the log-ins but not getting approved, still not impacting the cost ratios as such?

So on a variable cost structure, part of that is funded. So that's not so much going to have a bearing on the overall structure. As I also covered earlier in the call that most of the heavy fixed costs have already been accounted for, are already penciled in. Incremental costs are very, very marginal, which will literally have no bearing on the overall cost structure.

Okay. And proportion of fixed vis-a-vis variable in the overall cost would be?

Sorry, you are talking about the OpEx?

Yes, OpEx, yes.

So largely everything is fixed, right, because the rentals and the salaries, et cetera, are fixed in nature.

So, volume will...

Also, in a way it is variable, because every front-end team gives us incremental business. So for instance, when we added 5 branches, in a way that -- the cost of 5 branches is variable to the extent that these 5 branches will give us more business, right? So in a way, everything is fixed, but yes, it's variable because it's about productivity at the end of the day.

The next question is from the line of Shweta from Elara.

Sorry, even I joined late, so this might be a repeat question. Sir, you mentioned that the yield range now at least in near to medium term would be around 11% to 17% as against 20% -- plus on the higher side earlier. So do we change our credit cost targets going forward? Like do you -- now do you see the agreeable range to be closer to 1% or higher, one, in the near term, given the gauges currently in the system and, two, across cycles?

So what we have maintained on our credit cost outcome has been 80 to 100 basis points. In the current cycle, we've been guiding that it's going to be towards the higher end, could be probably a 10 basis point here or there. But given the current cycle that we are in, we've adjusted our origination also accordingly. If we were not to adjust the origination accordingly, then probably these credit outcomes were difficult to achieve. When I maintained that our range is -- anything between 11% to 17% is what we are currently focusing on. But your credit cost is on your overall portfolio. So currently what we originate, the color of that portfolio comes in only with a lag. So it's a little difficult for us to justify the credit cost in the next quarter versus what we are originating currently. So -- but what we're currently doing is within -- will help us to be within a guided range of what we've been projecting of 80, 100 basis points.

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

Congratulations on the quarter. So sir, just as you mentioned we have tightened the underwriting, some standards at the beginning of the year, so probably would there be a case of relaxing the same? And how far that would be as of now? So what could be the triggers for relaxing those standards? So any thoughts there, yes?

So I think a little too early for us to say that we are going to be relaxing any of those parameters. The current trend, what we are seeing doesn't seem to suggest that it's time as yet. So what we are going to be doing is going to be watching for another quarter before we revisit any of those filters that we've implemented.

Okay. So the main parameter would be the consumer leverage part. If that probably cools down a little bit, then there could be some relaxation. Is that correct or not?

Yes, I think there are multiple things. You could have a customer where the CIBIL score is upwards of 700, but we feel that the leverage is high, the inquiries are high, the LTV is probably not to the acceptable level that we would want. I mean there are multiple variables that go in before we actually take a call on the customer. So currently, we'd like to hold on to whatever filters that we've done it. Maybe at the end of probably the next quarter call, we can give you an update as to how comfortable we are. But currently, the status quo remains.

Sure, and also secondly, so once the -- as you told, the market opens up, probably we could further accelerate on the growth momentum. So could there be a case also for 8% to 10% Q-o-Q growth for some quarters, or we would restrict ourselves to 5% to 7%?

We will, as of now, commit ourselves to 5% to 7%. We will see how the -- probably the market opens up. Probably at that point of time, we can be in a better position to comment on it. But as of now, as what we see, our guidance remains the same.

Sure, sir. But in case the market opens up, probably 1, 2 quarters down the line, if we relax also underwriting, there could be a case for even higher growth than the guided one, right?

Could be, but I'm not going to fall in for that as of now.

As there are no further questions from the participants, I now hand the conference over to the management for their closing comments.

So thank you. Thank you. That's it from our side.

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