Shriram Finance Limited (511218) Earnings Call Transcript & Summary

So good afternoon, ladies and gentlemen, and welcome to the Shriram Transport Finance Company group interaction at ICICI Securities Financials eConference. We have with us from the management, Mr. Sanjay Mundra, Senior Vice President. Please note that this meeting is being recorded. Just one more request, please note that the management will not entertain any questions relating to the group's corporate restructuring. So thank you and over to you, sir, for your opening comments, post which we can have the question-and-answer session.

Well, good afternoon. Thanks. And I hope in this COVID times, all of you are safe and your loved ones. Just as you know, just 15 days, 16 days back, we've been out with the quarterly numbers. Though we had a very, very decent quarter as you look at from the loan book growth from the asset quality perspective with the collections, restructuring and et cetera, and I can only tell you we -- whatever last 50 days has passed, it remains like the business from collections are almost at the same level. We feel that as the time passes by, the festive seasons happens because of the Diwali 3, 4 days is actually off. We hope certainly now the disbursements and et cetera, is going to pick up. I think if you recollect from the stress segment, there were 3 brought on the stress segment which we had. One definitely was the aggregator model taxes. The second was to buses and the third one was soft transfer. I think aggregator and taxi model, they are virtually at the normal for last 2 months or so. Entire repayments and everything et cetera is coming on time. We feel that even the school buses and basically the staff transfer, I think a lot of face masks where 2 times -- 2 days in a week or something like started opening. So some activity level has also started in those -- both the activity. But we feel that as the time passes by, those things will also -- will get back to the normal income. That's what we hope, so. So we -- so our -- whatever we have announced during the conference call regarding the double-digit kind of loan book growth and over the time, we're getting the Stage 3 at around 7%, net NPA below 4% and probably, we also said that the paid cost will be lower than the last year, though because of the second wave of the COVID things got postponed by 1 or 2 quarter. So we expect -- but we -- earlier we -- if you look at last year when we came out with the result, we said that probably it will be 2%. But now because of the second wave of COVID, it might be a little bit higher. But it will -- definitely, it will be lower than the last year, what we feel. As far as the different fintech things coming in, a lot of people had the apprehension, how Shriram is coping up with this. It's not that people have not replicated the used vehicle model of Shriram. Even if you look at some larger bank used to do in 2005, 2007, and suddenly, they need to go out in 2008. Thereafter, a lot of other people has also tried. Then there are some of the NBFCs, which got converted into the small finance banks started doing. But these are basically the regional-based. And still we find that there is no much threat of doing that. Because once you become a bank, you have the other thing like salaried people in personal loan or rec sector gold loan. So CV really, as a thing from the national point of view, yes, some pocket, some people is there. But on the nation-wise, I don't think so there is any challenge what we have faced. Then a little bit on the CV growth. If you look at from 1 million vehicle which was sold in 2018, we came down to roughly around 640,000, 650,000. And the things looks it will move up definitely this year. But I think for the goods vehicle -- in the heavy vehicles, there are 2 part: one is the construction equipment-related vehicle, and one is the goods vehicle, what we take. Still, the goods vehicle, I won't say that demand is up to the mark. Probably it might take 1 more quarter. It seems to be that, for the goods vehicle to come up. But I think if I look at the entire growth trajectory segments, which generally we have divided into 4 parts, I think the infrastructure activity continues to do very well. And I feel the recovery post both first and second wave of COVID, the smart recovery in the country, what we need is, I think the full credit goes to the infrastructure activity. The second part which we have since seen in the past for almost now 10 years where we feel that the real estate activities has really picked up, which was the missing case, I think, post 2011-'12, that's what we feel that. So that activity started doing very well. And yes, if you look at the export number, I think export numbers are very, very encouraging. But I think there's one segment which we feel still is lagging behind. It could come up -- cover up in the coming days is the consumption-related growth. When I say consumption, I'm talking more on the FMCGs and this kind of things. I think this is what I feel that something is missing, which I think will get rectified in -- probably in next 2, 3 months' time. Otherwise, from the growth side, looks very, very strong. Only there is one disclaimer: we doesn't get impacted by -- further by the COVID 3. Then the last point of my opening remarks, I think people want to hear what has come during in the -- probably in -- on Friday regarding the -- some NBFCs, some changes in the way RBI proposed to recognize or upgrading of NPAs from Stage 3 and et cetera. Though we have -- officially, we haven't clarified yet, but most of the analysts called us, and they have said that we are the company. We are -- we only upgrade the Stage 3 asset only when the entire amount which is overdue is paid by the customer. That is why if you look at the asset which stays on Stage 3 come directly to the Stage 1. It doesn't go to Stage 2, which means the customer has to clear the entire amount, both principal and interest, to upgrade that. And we calculate the NPA every month rather than on the quarter itself. Though there could be slight disconnect because I feel what the RBI has proposed is the daily calculations of the NPA. But -- and though we are -- we will represent to the RBI tomorrow itself or within this week, from our customer segment, it's become slightly harsh because unlike vehicle, he is also mobile. Sometime he comes to the native places after 2 days. So his EMI remains at 50 comes and repay 70 or 80. So if you do like this, it will be harsh. And the moment you tell to the customer comes and says I'm paying you every month now. So as you know -- so these are some of the things, though, there could be impact but not meaningful, but there could be some impact. And hope so, RBI will listen to us because probably RBI has come out with the direct guidelines rather than having a discussion paper. So this is one thing. Then another part which I just want to highlight, there were some people who have asked these questions on decades and then yesterday and today also. If they go towards the annual report, they find that a lot when we discuss the movement of NPA. They have seen that from Stage 3, it goes to Stage 2 also. But this is the yearly movement what we have disclosed from 1st April to 31st March. But for NPA like, for example, suppose a guy on 31st May is at 90 days dpd. Then in the month of June, he repays the entire money. He goes to Stage 1. Then suddenly, 6 months after he again delays the 2 EMI. So what happens is that if I transfer that first Stage 3 to Stage 1 and then Stage 1 to Stage 2, it will be too much movement. So probably you will find that 50% of the portfolio is moving around. So what we do is that what was the portfolio -- same-person portfolio as on 31st March to 31st March of next year? There he remains. Based on that, we give the movement analysis. So don't get that from Stage 3, we transfer to Stage 2. It's always been -- and this is not the case. We have been following since Ind AS. We have always followed that. From Stage 3, it always goes to Stage 1. So I think, Kunal, this is what some of the opening remarks. And I'll keep on adding the points once the Q&A starts.

[Operator Instructions]

Meanwhile, Kunal, you can go through it.

We'll just wait for a minute. And meanwhile, just...

That's why I told you, you can ask the question if you have.

Yes. Yes, yes, sure. So again, particularly in terms of this entire RBI, so you have touched upon this aspect very well. But in terms of the provisioning, when we look at as per the IRAC and as per Ind AS, is IRAC just sufficient to cover the Ind AS provisioning? Or maybe it's the IRAC provisions are much over and above the buffer, which is getting created under the Ind AS? And in fact, even though the upgradations and which as we follow, say, the entire upgradation, but maybe if the provisioning, requirement has to go up, will that result in any kind of knock in the P&L?

No. See, Kunal, if you look at, this is not today's matter. If you look at even -- I don't recollect when, but the RBI came out with some circular that the -- if there is a deficiency in the -- basically, the Ind AS provision, if you compare with the IRAC provisions, you have to provide extra right? And then I think for the last 2 years, we are disclosing in the annual report also that. So if you recollect, though this is a COVID time where the provisioning level has gone up, but if you look at, say, for example, in December 2019, where we had a coverage of roughly 32%, 33% in terms of LGD. In terms of LGD, we had a coverage of 32%, 33%. At that time, when you calculate the provision as per IRAC, it used to come at 26%, 27%. So we were roughly around 5% to 7% higher than what it was during the IRAC...

Now we can include it in the price also because what I'll do is basically...

Sorry, Rushad, if you can mute...

[ Ashish Kumar ] is where the...

Yes. Yes, I have muted him.

Okay. So -- and now with the COVID provisioning, most of the people have done the COVID provisioning. I don't think that the provisioning is going to get impact right now. But I don't think so this is going to -- this is not going to change the entire provisioning norm or the credit cost of the company. Only thing is that then it could impact, though it does not impact, but this is just my opinion. The recovery will get delayed. Though sometimes I got surprised because if you look at the Shriram movements of NPA, for last -- even if you look at 5, 7 years, it has always been in the range of 30 to 50 basis point between a quarter. Though some of the people have disclosed 100, 200, 300 basis point, which seems to be that they were just calculating the NPA at the quarter end or the gain time line.

Okay. So maybe recovery is an unwinding of stress that could get slightly delayed?

Yes. Absolutely.

Okay. Sure. So we have a few questions in the queue. Rushad, if you can take that up. And again, to reiterate, maybe we should refrain from any -- asking any questions related to the group corporate restructuring, yes. Thank you.

So we have the next question from the line of [ Saurabh ].

Hello. Am I audible?

Yes.

Yes. Thanks for your perspective and the opening remarks. Just a couple of things. One, I just -- I wanted to understand, like what is the average life of a borrower in your case?

Life of a borrower or life of a contract or just let me...

The borrowers, like the truck operator or someone who borrows, average loan tenure?

Average loan tenure is around 3 years.

Okay. And do you have only single product for the consumer or you have multiple lines of products?

No. We do every kind of commercial vehicle, but the vehicle has to be used for commercial purpose.

And for borrow -- borrower, like based only a single line of credit? Or you also want to upsell, cross-sell new products?

Yes. Definitely, we do. But most of the cross-sell, what we do is the insurance thing is the biggest because you require vehicle to be insured. And that's regulated. Without insurance, we don't lend against the asset. So some of these we do, and we do earn a fee-based income based on that.

Okay. Sorry, just a basic question, like what is the average fee you earn from a customer?

Fee?

Yes.

No. We don't earn fees from the customer. Customer always gives you the direct interest. We don't earn fee-based income from the customer. Yes, if we do the insurance, insurance companies pays as the commission rather than customers giving us.

Oh, okay. Okay, okay, okay. Yes, it's more like an agency model?

Yes.

Okay. And one more holistic question. Like how does a company like Shriram Transport, they go into a single product -- like they specialize in a single product like used commercial vehicle rather than having multiple products?

Well, I said we do tractor. We do construction equipment. We do school buses. We do Ola, Uber. We do -- but it's a transport -- it's basically the earning asset, what we do. Okay. That is the consumer finance are done by Shriram City, and they have been for so many years.

Yes. And did you also do home lending, right, from a group company?

No. That's a subsidiary in -- subsidiary of Shriram City, and that does housing loan.

Yes. Okay. So is it like you use data from the other company and try to extract more value from the customer or the consumer segment is completely different?

No. It's completely different right now.

We have the next question from the line of [ Megha Shah ].

I just had a question regarding the movement of NPAs. So as you've just mentioned that typically, you upgrade an account only when all the dues are paid. That's your interest and the principal repayment, okay?

Okay.

So in this aspect, how does the movement happen? So assuming an account is in Stage 3, does it go directly to Stage 1 then? Because all the so how will the moment happen in...

It has to be directly going to Stage 1 only. And then after it can further go up to Stage 2 or Stage 3, but upgrading the accounts only happens when the customer repays the entire area.

So there's no moment that happens from Stage 3 to Stage 2 is what you're saying?

No. No, no, no. It's never happened. That is why if you look at for last 5 years, 7 years, that's what I explained that for us the Stage 3 or the GNPA movements has always been restricted to 30, 40 basis point maximum.

[Operator Instructions]

Yes. Again, so just to equity in terms of the financial metrics, if you look at over last 4 quarters, in fact, it has really stood out. And the way the Stage 3 assets have been managed plus the trajectory of the credit cost, that has improved a lot. So maybe is it like what -- maybe the initiatives have been taken over the last 2, 3 years. Now maybe when we transition from, say, 180-day to 90-day and the collection infrastructure, that is really helping us. And is the trajectory maybe in COVID if we have managed it at this level, then do we really see the steady state to be much lower, okay, both in terms of a Stage 3 as well as the overall credit cost?

Well, there are various aspect to it. And to be very, very honest, whenever we had discussions during the pre-quarter or the post quarter because we keep on interacting so much probably. I think a lot of people -- there are 2, 3 points I just want to make. A lot of people, when I hear the media part or the analyst part or the investor part or the corporate part or the government functional, people say pre-COVID. No, my opinion, I have always said that the pre-COVID was the worse than the 2-days period. I'm talking about 1.5, 2 years down the line. The economy was slowing down, what I mean was. And GDP also, we know we came down to 4%, 4.5% kind of GDP levels. So that's one aspect. So what I mean -- what I'm trying to tell you that is post-IL&FS crisis or post-NBFC crisis, liabilities were the issues. Yes, for us, like a stand-alone. I'm not talking about the promoter-driven NBFCs. And on the other side, the -- even the economy was slowing down and then the 6 month of election period. Okay? So -- and 2, 3 months after the elections also, nothing has happened. So what I' m -- so there was a problem in the consumer side. There was a problem with the customers. The earnings was not up to the mark and et cetera. Somehow people were able to managing. And I think probably in 2019 or somewhere, you've seen that some of the uptick movement has happened to the Stage 3 we've gone up to 9%, 9.1%. I don't recollect which was the quarter, but post this also. So growth also slowed down. We reduced the LTVs by 4% to 6% that we have told in various conference calls also. So I think the customer required that healing period which fortunately or unfortunately, moratorium has given that. So suppose that during the 6 months' time, even if we have done 50%, 60% of average collections -- say, for example, customer had a 60 days overdue or 90 days overdue, he -- instead of -- he came and paid 2 EMI or 1.5 EMI. So his overdue got clear. So that lean period has really helped the customer and to the company also in managing that. The only thing is that the 3-year contract has become 3.5 years. I'm not talking about -- but even 10%, 15% of the customer got that benefit. So that's really helped the customer in getting. And thereafter, the individual truck operator has enjoyed the parent. You know how the freight movement, how there was a scarcity of the drivers and et cetera. So I think all these things have helped really us in maintaining the asset quality.

And the way that we had articulated even on the conference call, so is it like the particular product segment as well as the customer profile given that it's not much dependent on the driver's availability? And that's where maybe the performance has been much better. But if we have to end maybe our presence into the multipurpose vehicle financing rather than being more focused in one particular segment, that has really helped in terms of the capacity utilization. So if you can just highlight as to how are we seeing fleet utilization levels, the cash flows of the operators. And definitely, in the Stage 3 numbers, the stress is not so much reflected. But if you can highlight with this rise in diesel prices, now how is the economics of the operating cash flow of the operator has changed here?

No. Definitely. And every week, you'll find one report on the freight rates in various print media. And I think the -- it's been the human nature in the last 3, 4 years. People has not gone beyond a month on month or fortnightly or fortnightly. But we are a company, do the business, there will be ups and downs, which we all agree. And there will be 1-month period where your margin can get impacted. There will be one month where your margin will be very good. But in general, if you look at since COVID broke out in the month of March or when the lockdown came, I think freight rate till today, I think it's up by more than 30%, near about 30%. Yes. Fuel cost has also gone up by roughly around 18%, 20% or could be 22%, depending on the various state governments. It's very, very difficult to quantify or 25%. So let's assume 25% increase in the fuel cost. That means ideally the freight rate should have moved by around 15% to 20%, but it has gone up 30%. That means definitely, the earnings of the entire customer has gone up. The second part, you can carry 15%, 20% more where the -- where you don't have much increase in your fixed cost, drivers salaries. So your revenue also goes up. So it's -- there was a profitable to run the asset, but only thing was that -- then the COVID was there. And as the things got eased out or unlocking happening, more vehicle comes. The only thing is that the supply chain get disrupted. When I say supply chain, I'm talking about the retail or getting the retail load as early as possible. So sometime if you need to wait for -- generally, you need to wait for 6 to 10 hours, but if you need to wait for 24 hours or 36 or 48 hours, that much of loss of business happens to you. So I think that supply chain which got impacted in the first wave of the COVID and even in the second wave of COVID till July or probably 15th of August because generally, August seasonally is the weakest quarter in the year because of the monsoon and et cetera. So I think all these things are getting rectified. Like supply chain, I think, is more than 90% of things got better, only some 5% or 7% here and there. So things are getting better as far as operator margin. Now today, fuel hike is [ inevitable ] because I think INR 10 minimum 10% as reduced by the central government in terms of excise duty, and various state government has also reduced. So hope shortly on an average 12% to 15% reduction in the -- basically, the fuel cost is there. Now freight cost, really, we need to accept and how much it comes down. But even if it comes down by, say, 50 -- roughly around 15% or so, I don't think that the margin and the things are very much there. I think utilization rates, I think, should be in between 22 to 24 days. Still, I think 5 to -- there should be some improvement by 5% to 10% in the utilization levels.

Sure. Yes, Rushad, we can take the questions.

[Operator Instructions]

Yes. I had another question, if I may ask.

Yes. Go ahead.

Yes. Yes, [ Saurabhv ], go ahead.

Can you tell us some of the initiatives like how you are improving NPA recognition or understanding the NPA trends of the customer and improving delinquencies because so many initiatives from the government and improvement in technology has happened?

Okay. Sir, I don't know how the improvement in the NPA can be done by us. Only thing is that we keep on talking to the customer that now is the time. It's not 180 days, it's 90 days and et cetera. But I think if you look at the last 3 to 5 years' time, I think there was a continuous talk with the customer. That is why we always used to work 90 days with 10% to 11%. Now we are sub-8%. So I think 300, 350 basis point improvement has already happened in the Stage 3 in last 3 to 5 years. And we have also indicated that probably we are looking at sub-7% or near about 7% kind of Stage 3 going forward would be next 1, 2 or 3 quarters. That what we have always -- we have also indicated that in the in the conference call. Now coming on the technology side, yes, technology really is helping in understanding the entire thing. When I say understanding, I mean doing the analysis on the entire portfolio in terms of geographical, in terms of make and model, in terms of some of these asset on resale losses, EV channel model, which are resale losses or the -- all the datas which are getting in terms of collections or disbursements are happening online. So updation in the system happens very, very fast. And that really helps us in doing the analysis. Say, particularly kind of vehicle, where we're finding a slightly more delinquency suppose in 2, 3 states. Then immediately, you get -- it get rectified back. whether we should rework on the LTVs of those kind of asset or this should stop. So these are the things. It's a continuous effort, and that has been happening since 2010, '11, I think. But -- and technology is the one thing. It's a continuous upgradation. It's not that once you do, and then you sit. It's a continuous thing. So that really is helping us in the big, big way.

And on the customer acquisition side?

No. Customer acquisition, so we don't have a DSA/DMS. So the entire customer acquisitions are happening at the branches. And we have always been that, when customers over next -- when the customer comes, it remains in our fold for minimum 5 to 10 or 20 years. If his requirement is always continue to have a used vehicle, he will remain. There are the cases of example where the generation father and sons has always stayed with me. And this customer segment has always been the community-based model. So we always feel that one customer brings roughly around 10 to 15 customers in the next 10 to 15 years to us. So that's how the entire sourcing of the customer happens through the branch.

Okay. And are you seeing any changes in how you acquire customers over last 5 to 10 years? Or it is more or less similar?

See, used commercial vehicle or the auto sector is they're there where we feel that the first transactions are looking at the vehicle, particularly in the used when it happens fiscally only. Because how rich you are, what is your social stature, you go to the showroom, look at the vehicle even if you are very rich, you to go to BMW showroom, do their test drive, check the colors, which you want to buy them, only you take a call. And that to used commercial vehicle people want to look at the body, the engine, the tires, they want to run the asset before they take a decision to buy. So once that has happened, thereafter, everything is digital for us, whether you -- in terms of process, in terms of getting all the regulatory approvals. When I say regulatory approvals, I mean the transfer of vehicles from seller to a buyer, hypothication the company name, change in the insurance certificate, the changes in the tax and et cetera. There are various things. So those things has become very, very digital. That is why if you look at last probably 10 to 12 years, we have been able to reduce the cost-to-income ratio.

Okay. And does it remain the same for other segments, like passenger vehicles or tractors?

Yes. Yes, yes, yes. Because, see -- because ultimately, all the vehicles, all these vehicles have the numbers. The moment you have the vehicle number, the process and everything are seen. Only thing is that if the lower ticket size, the higher the interest yield because your cost of operations are also slightly higher.

Sorry. Can you repeat the last statement, please? The cost...

What happened, lower the ticket size, higher will be the interest rates.

Okay. Okay. And how do you think about this cost of operation or cost of customer acquisition?

We don't have any cost of customer -- as I told you, the entire customer acquisitions happens at the branches.

Okay. So everything is fixed here, no marginal cost?

Yes.

We'll now move to the next question. The next question is from the line of Krishnendu Saha.

Sir, just to understand, any flavor you can give us as to what kind of -- in the sense, how much is mining? How much is what you call last time connectivity? How much is -- any other thoughts like that you can give us of the portfolio?

Yes. Roughly I can tell you. Roughly around 10% is the vehicle, which are used for mainly the infrastructure activity or could be real estate. It's very, very difficult because some are not these. But these are all vehicles which applies, not nonmobile. It is all mobile, the APL loader, backhoe loader and et cetera. And then we have roughly around -- close to around 3% is the tractor and in this are used tractor. Then if we look at -- and then the LCV and the heavy commercial vehicle, we definitely give you the breakup. I just like to tell you the 10%, what I said, was the construction equipment that you know [ Jumpa ], which has been classified in the heavy commercial vehicle. Then you have the passenger. And the passenger commercial vehicle, if you look at everything put together, is around 3 dealers, both passenger and the goods movement. Then you have the MUV, SUVs, you have the city taxi, you have the aggregator model, you have the school buses, you have the route buses. Then you have MUVs and et cetera. So it's a mixture of entire thing. And out -- if you look at the entire passenger segment, I would put it in this way, like school buses, and then you have a staff transfer. And aggregator model will be less than 4% of the -- around -- near about 4% of the total book. And within that 10% is actually the cars. And when I say car, it's like people using for the movements, hill stations, like go -- you require the local sightseeing and et cetera. Generally, what happens these people don't put the yellow tag so that the registration cost gets higher. These are all used van. Some of them are taken up by our customer who -- a customer also like used car for the family movements and et cetera. But I would say, even though they are not exactly the yellow plate, but that's used for the business purpose. So generally, these are the portfolios for us.

But that means basically real estate is 10% and the rest will be mostly...

I haven't said real estate. I said infrastructure which is composed...

Infrastructure, basically.

I'd just like to mention dumpers, deepers, [ PO ] loader, backhoe loader, these are almost 3 to 5 construction equipment. When we had a company, it was 25 equipments. Now we have 5 to 6 constitutes for more than 95% of the entire portfolio.

Sure. Sir, and I remember we had spoken about increasing our partnership with the local lenders. So we had 500, and we were supposed to increase it to -- I thought -- I forgot the figures. But what was the movement out there to get customers in our fold?

See, I think -- see, because of the COVID, everything get delayed. So I think 18 months -- we never wanted to be very, very aggressive in terms of lending. If you have seen the vol in terms of getting new customer on the board. If you look at last almost 3 years, we remains around the existing customer rather than doing new customers. So I think we probably -- because of the COVID, that things got delayed. This much I can tell you at this juncture.

And last question is -- just a little bit I couldn't understand, I asked before. There -- we are mostly lending to the -- we're increasingly lending to LCVs, but the number of customers has gone down. There is a spend that the ticket size has increased. So I could not get 2 and 2 together the last time. So if you could explain that, please.

It's very, very -- if you look at number of customers for last almost, I think, 2 years has been seen. There could be 5,000 here and there, not beyond that. Okay? So what happened was -- and then the question was asked, your AUM has grown from there. So how that? That is what we have said, that the ticket size has gone up. That is why in spite of same number of the customer, the AUMs are slightly higher.

But we increasingly went towards LCVs, so our incremental is preferably LCVs...

No. Pardon? Pardon? Pardon?

If you are mostly focusing on LCVs, the ticket size would be lower. That's what I was trying to understand compared to the rest of it.

No. No, no, no. If you look at heavy also, we always give you quarterly portfolio, heavy hasn't come off.

Okay. I forget that.

Even with the LCV, with the BS-III, BS-IV and BS-VI, the prices has gone up everywhere, no?

[Operator Instructions]

I think there's one hands up.

[ Megha ], do you have a follow-up question? Your hand is still raised.

No. I'm done, yes.

Yes, [ Krishna ]?

Just on the order portion of the book, which have gone down during COVID, the working capital loan, the insurance and the forum. So do we see an uptick in that as a proportion of the total book in the next 36 months onwards?

There could be some increase because last 2 years, it has come off. And that could see -- but overall, we have made it very, very clear, both working capital business, loan book together, won't be more than 7%, 8% of our total portfolio.

And currently, it is, sir, how much? Currently, sir?

Currently, it should be near about 5%, 5.5% of the book both business unit and working capital put together.

So just to get my understanding right, so the working capital loan will have the highest yield, right?

Yes.

Followed by the MSCV, followed by the LCV?

No. No, no, no. MSCV will have the lowest yield. Ticket size is quite high. And I think the first part definitely will be the working capital, you're right. The second part will be nearly as the tractor and some of the commercial vehicle. Then it comes to the LCV, and the fourth one will be the heavy commercial vehicle.

Okay. Okay. So just -- sorry, on that. Why would MSCV demand a higher future than the LCV when a ticket size is...

Ticket size is large, so you have to be slightly competitive, plus these customers are slightly better off compared to the LCV in terms of financial strength, no?

Okay. Okay. Not from the quantum but if I'm borrowing more, I'm taking all risks, so I want to take in more interest...

No, no, no. But the asset cover also remains pretty good. See, it's not that the entire heavy commercial vehicle we'll be using. Our interest rate or the yield what we charge completely depends on the customer profile. New customer always gives you 100, 150 basis point higher yield compared to existing customer, number one. Number two, the higher the age of the vehicle, higher will be the interest rate. If you look at, for example, if there is a 3- to 5-years old heavy commercial vehicle, probably we'll charge 14% -- near about 13%, 14%. But the moment it becomes 8, 9 years, the yield will go up to 16%, 17%.

Right. That I get. Yes, sure.

[Operator Instructions]

Kunal, just one question.

Yes?

Sanjay, a quick question. From a pure customer behavior perspective, how important do you think is it for them to not be marked as an NPA? I remember that like pre the 90-day dpd move, your customer base didn't even realize that before credit bureaus came through, et cetera, that they were NPA. They paid as and when they had cash, and you were fairly accommodative because you understood the business pretty well. Now if not being marked as an NPA is very important to them, how difficult is it going to be for you to explain to them that, hey, look, 180 days to 90 days and now we are moving from 90 to daily NPA marking, which means that they need to pay overdues more promptly than ever before. How important or difficult do you think this change in behavior is going to be for your customer set?

No. That's what some of the part of your question after in some of the previous questions that it's not -- like if you look at probably when we moved from 180 to 90 days, that I'm talking about 2015-'16 because 2016, we started from 180 to 150 days. So when we started Stage 3, which is 90 days, always been around between 10% to 12%. So just assume on the practical side, I'm putting 11%. And by educating the customers, we came down below 9% and then near about 8% has been holding around. So this has always been the very, very -- it's very important to the customer segment because first of all, if you create one track where you don't move to 90 days, the second time when you come for the replacement or you want the [ younger ] week in the interest rate is the one of the most important point why you want to make. The second part today is not only the NPA, the 90 days. Now you have the Stage 1, Stage 2 also where you need to provide based on the Ind AS. So today, if you look at -- I don't recollect prior to '18 -- prior to 2018, anybody really asked what was 30 days, what was 60 days. But all these things are now getting captured in the systems. So it's a continuous things that keep on repaying the installment every month. Now we have to make a slogans, keep on paying the money every installment day rather than having a monthly, year migraine also. So this was never a focus area, but keep on talking with the customers. But I think for the time being, if I just remove this aspect, it's not that these customers are holding the cash with them and not paying us. I think there are 2 things. One, it's a completely economic activity, how does the economic environment remains. Like today, where the steel prices are up, cement prices are up, infrastructure is doing very well. And then the GST, I think the biggest benefit of the GST, if you ask which we have been talking to the investors, but I don't know how many really has appreciated. I think GST is one thing where you keep on filing the monthly return or doing -- taking the benefit of GST or giving the credit to your person from whom you have taken the goods and et cetera. So what happens is that when these type of things are there on the monthly basis, so what happened, you are clearing the payment also on the monthly basis. Then when the economic environments are not good, what happens is that the credit cycle, which typically runs for 15, 20 days, get extended to 1.5 months. The corporate also to save the working capital or the interest rate going up, there's a 3 months payment period, 2 months payment period. So when this type of things happens, the -- from the corporate also the money going to the contract, subcontractor and then trucker. If this payment cycle does not run very, very smoothly, there will be delay at every corner. So I think the passing of the time with the GSE, without the SSI, you have to report where you have not paid for more than 1 month to the SSI unit, these are some of the changes which has happened in the regulatory environment and I think will keep on making the industry much better. If you recollect, some of the SME dues which were there, probably 6, 7 months when the Finance Minister probably have told that I'm going to clear the INR 10,000 crores, which was due. People said very good, very good. But why that was piled up? Because in any SME segment, if the money blocked by either the government or a big contract, let's say, INR 10,000. That means you are losing INR 20,000 worth of business because 15 days remains the trade cycle for that. So I think as we keep on that there's some -- today, I can't say that only you need to keep on talking and where the customer behavior will change because this is not a small book. For that, he requires some support from the economic environment also.

Fair enough. And I heard if I heard you correctly, you said that you've always been working on upgrading an NPA only when all overdues are repaid. And to that extent, maybe your customer base is already aware of this fact. Does that mean that you don't need to incrementally spend a lot more time and effort on improving your collection intensity like you had to do when we moved from 180 to 90, right, educating your customer base and then increasing the collection intensity to just kind of systematically bring down the NPA numbers or the overdue numbers took a lot of effort? Do you think that similar effort is not needed now?

See, effort has always been there. But the question always remains what kind of size you were and today, what kind of size you are.

And what I meant was, it doesn't hurt you. It does when you went from 180 to 90.

No. No. See, when you are 10,000 20,000, 30,000, small improvement by your people get reflected in the data. Today, there are 2 types of things out there. One which where you really want to educate and get the customer on the boat on the timely agreement. Then there are one instances where how much you effort to, it won't be there. Like, for example, if they call met with an accident, how is going to repay the money? In India, 2% of the vehicle always remains [ accident-ed ] in the country. Okay. Then the second part you need to understand in our segment, if the -- his brother is getting married, sister is getting married, daughter is getting married. He says, 2 months, sir, I won't be able to pay you. Because you need to understand this owner/driver segment, that is the only earning asset they have. So these are some of the things which will never get rectified. That is why if you look at when we were at 180 days at the bottom, we came to 2.5% kind of stage GNPA. Now we feel that 2.5%, we can look at a 90-day basis around 7%.

Fair enough. Just to summarize. So broadly, you don't think that significantly increased effort and focus on collection will mean lesser focus on growth. Is that something that will not happen? Or do you think there could be a chance that growth might take a backseat as you adjust?

No. No. See, not really. I think growth is the one thing there -- actually, we decide when to grow not to grow. And I think the only way you can control the growth is the adjustment in the LTV. If he wants to grow higher, you have to be slightly lenient towards the LTVs or you can go slightly aggressive. If you don't want to go, like when the NBFC Crisis broke out, we reduced the LTV by 4% to 6%, and we decided not to grow. And even till today that LTV, what has been declined is still we have not increased that.

We have the next question from the line of [ Sanjeev Goswami ]. [ Sanjeev ]? Since there is no response from [ Sanjeev], Krishna, would you like to go ahead with your last question now that we are in...

Yes. Yes. Just, sir, restructuring of the book, what was the -- what kind of restructuring have we done to the book on the interest and the principals front?

No. That we have disclosed in our investor update. I think total around INR 1,100 crores.

No. No, no. So what is the period, 3 months, 6 months? I'm talking about...

Normally between, I would say, 3 to 6 months' time.

Six months' time? Maximum? So basically, our book would be flattish till at least 6 months' time?

Not -- why flattish?

No. No, no, sorry, sorry. Let me rephrase it. If we don't disperse to 3 months or at least the book is there but the morat and the restructuring and the ECLGS has everything. So that will be there for the next 3 months.

That is only 1% of the book so...

I'm just trying to understand how much of the book is still on the restructuring. How much will that affect the whole AUM? I'm looking at it from that point of view.

No. 1% is not going to make a used.

This will be the last question of the day since we are now at the end of the meeting time. Thank you very much Mr. Mundra for patiently answering all the queries. Thank you very much to the participants for making this an interactive session. You may now log out.

Thank you, everyone. Thank you, Sanjay. Take care.

Thank you. Thank you.

Yes. Thank you, sir.

Thank you.