Shriram Finance Limited (511218) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to the Shriram Finance Limited Earnings Conference Call for the fourth quarter and full year ending 31st March 2023. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Umesh Revankar, Executive Vice Chairman for his initial remarks. Thank you, and over to you, sir.

Yes. Thank you. Good evening, friends from India and Asia, and a warm welcome to all of you who joined this call. Greetings to those who have joined the call from the Western part of the world. Today with me, we have Mr. Chakravarti, Managing Director and CEO; Joint Managing Director, Mr. Parag Sharma, Mr. Sunder, Mr. Sudarshan Holla; Nilesh; Jilani, and Srinivas. We also have Ravi Subramanian, MD and CEO of Shriram Housing Finance; and Sanjay Mundra, our IR Head. Let me first give an update on the merger. At the conclusion of financial year 2023, the merger of both Shriram Transport Finance and Shriram City Union Finance stands completed. On the operation front, majority of the branches of Shriram Finance now offer at least one product more than they were handling before -- before the merger. The IT and HR functions have fully integrated. Let me come to the growth in Indian economy. Shriram Finance, our activities are closely linked to economic activities. And I shall start to brief commentary on the latest economic scenario. The Indian economy grew at 4.4% in the quarter ended December '22. Recent reports by ADB among others, indicate that economy would have grown 6.4% for full year '23. Now while pace of growth may have somewhat moderated on the account of easing of demand post-COVID, but still, India would continue to grow and likely to be the fastest-growing major economy with expectation of GDP growth around 6.5% in coming years. On the Union budget, which was presented in the 1st of February, the government has termed it as Saptarishi, the 7 sages, in the name of 7 sages. The 7 major announcements are inclusive development reaching the last mile, infrastructure and investments, unleashing the potential of the country, green growth, youth power and development of financial sector. These are the 7 areas on which government is focusing in the budget. And the budget also reiterated the importance of infrastructure with the investment plan of INR 75,000 crores on the major, including INR 15,000 crores on private sector. On the major transport infrastructure project for last mile connectivity for gold, coal, steel, fertilizer and food grain sectors. That others good for our segments. Government also revamped the credit guarantee scheme for MSME to take effect from 1st April '23 with an inclusion of INR 9,000 crores in the corpus. This scheme would enable additional collateral-fee guaranteed credit of around INR 2 lakh crore and reduce the cost of credit to MSME by around 1%. The government also announced in the budget, the entity, DigiLocker that is set up for exclusive use of MSME and the charitable trusts to store and share documents online for ensuring ease of credit flow. On inflation, the CPI in India has dropped to 15 months low of 5.66% in the month of March as compared to 6.95% a year ago. In the March, rural inflation stood at 5.51% while urban inflation stood at 5.89%. RBI Monetary Policy Committee, MPC in its meeting on April 6th kept the repo rate unchanged. Repo rate thus continues to be at 6.5%. On agriculture and rural economy, agriculture for long has been one of the pillars of Indian economy and the Union Budget for the financial year '24 has been cognizant of this in announcing the measures to bolster the agri sector. Some of the measures mentioned and taken in the budget are setting up of agriculture accelerator fund to enter a agri setup by young entrepreneurs in rural India, creating digital infrastructure for agri, developing massive decentralized storage capacity to help farmers store their produce and realize remunerative price through the sale at appropriate time. Promoting cultivation of high nutrition cereal such as millets among others. The government announced that total food grain production in the country is estimated for this crop year at 328 million, which is 4% more than the record food grain last crop year. That's '21/'22. This is significant because the dependence of rural economy on agri and with increased MSP that addressed well for rural economy. And it also helps in controlling the inflation for overall country. Monsoon prediction, the Indian Meteorological Department has forecasted normal southwest monsoon this year. This, again, despite some doubts on [indiscernible] impact, this announcement really gives relief. On GST collection, it continues to be good for the financial '23. And in the March, INR 1.6 lakh crore was collected, being second highest GST collection ever. The total GST collection in the financial year '23 were to the extent of INR 18.1 lakh crore, a growth of 22% over previous year. Coming to the auto industry, the Jan to March quarter '23, the total CV sales grew by 11.6% compared to Q4. The quarter saw 2,78,878 units being sold against 2,49,080 units corresponding in the last year. For the full year, the overall growth was 34.3% over the financial year '22. The sale stood at 9,62,468 units against the 7,16,560 units in the financial year '22. Sale of medium -- MSME unit in Q4 grew by 25.3% with 1,17,710 units being sold against 93,974 units. For full year, it grew by 49.2% over the previous year, with the sale of 3,59,003 units against 2,40,577 units. Sale of light commercial vehicles grew by 3.4% over the previous quarter at 1,51,168 units compared to 1,55,870. For the full year, LCV grew by 26.8% over FY '22 with 6,03,465 units against 4,75,989 units. Two wheeler sales grew by 6.3% in Q4 versus previous quarter. Sales amounted to 36,04,593 units against 33,89,792 units. For the full financial year, the two wheeler sales grew by 16.9% for FY '22 with 1,58,62,000 units against 1,35,70,008 units. The domestic tractor sales grew by 8.1% in Q4 over Q4 '22. Quarterly sales aggregating 2,22,910 units against 2,06,263 units in the same quarter last year. For the full financial year, tractor sales recorded 9,45,318 units compared to 8,32,266 units in FY '22, a growth of 12.2%. The construction equipment sales in FY '23 grew by 25% over the last year. Again, because of the infrastructure spend and the road building activities. The MSME sector comprises NBFC of nearly 63 million enterprises, which contributes 30% of GDP, Indian GDP and 45% of manufacturing and 40% of export, which provides the employment for 113 million people as per the government data. And also, as per the IFC, International Finance Corporation, [indiscernible] sector that credit gap is INR 32.5 lakh crore despite the huge demand. Less than 5 million MSME have access to formal credit. I'm very happy to say that all the segments, which Shriram Finance represents an industry leader and has significant presence have seen healthy growth. And we expect with the resale price of vehicle, equipment and property being robust, which will -- that will create better credit demand plus, which will also help in credit costs significantly. This year, we also have gone through the -- we have done this stress test, and the results will -- since we have integrated the 2 companies, and we have multiproduct, we also have gone through -- done the stress test, and the results will also have that in factor. Now I hand over to Mr. Chakravarti to go through the operational performance. Thank you, everyone.

Thank you, Umesh. Welcome all to our Q4 and financial year '23 earnings call. We have declared our results for the quarter and year earlier today. And as such, you had an opportunity to look at the related investor presentation. It gives us a pleasure to report that the merger process has been concluded successfully. And as Mr. Revankar has already mentioned in his opening remarks, the process, IT and workforce integration stands completed. The rolling out of additional products across integrated branches have commenced, and we are on track with regard to the introduction in phases of these products. Before I start my commentary on key performance areas, I would request you to note that the corresponding previous year figures are not comparable as the effective date for the merger is 1st April 2022. On the performance metrics, in Q4 FY '23, we have registered disbursement growth of 6.19% over Q3 FY '23. Our disbursement in Q4 FY '23 was INR 31,054.10 crores as against INR 29,245.26 crores in Q3 FY '23. Our disbursements in Q4 FY '22 were INR 25,54.08 crores. For the full year '23, our disbursements were INR 1,11,848.44 crore while in FY '22, we had disbursed INR 87,948.67 crores worth of loans. Our AUM as on 31 March 2023 grew by 4.61% over Q3 FY '23, and it now stands at INR 1,85,682.9 crores as against INR 1,27,040.8 crores at the end of FY '22. Net interest income in Q4 FY '23 grew by 0.41% over Q3 FY '23. Our net interest income for the fourth quarter stands at INR 4,445.89 crores as against INR 4,427.88 crores in Q3 FY '23. For Q4 FY '22, we have registered a net interest income of INR 2,627.82 crores. For the full financial year '23, our net interest income was INR 16,963.07 crores. Our net interest margin was 8.55%, against 8.52% in Q3 and 6.96% in Q4 FY '22. Profit after tax for the fourth quarter grew by -- actually, we grew a little over Q3 FY '23. Our PAT for Q4 FY '23 stands at INR 1,308.31 crores compared to INR 1,776.97 crores in Q3 FY '23. PAT for the full financial year was INR 5,979.34 crores while in FY '22, it was INR 2,707.93 crores. Our earnings per share stood at INR 34.94 as against INR 47.46 in Q3 FY '23 and INR 40.15 in Q4 FY '22. As regards to asset quality, Gross stage-3 in Q4 FY '23 declined by 8 basis points, and Net stage-3 decreased by 1 basis point over Q3 FY '23. Accordingly, Gross stage-3 stood at 6.21% compared to 6.29% in Q3 and Net stage-3 stood at 3.19% compared to 3.20% in Q3. Our Gross and Net stage-3 figures as of Q4 FY '22 were 7.07% and 3.67% respectively. The credit cost for the current quarter stood at 2.24% as against 1.75% for Q3 FY '23. Our credit cost at the end of Q4 FY '22 stood at 2.03%. Our cost-to-income ratio was 28.29% in this quarter as against 22.23% recorded in Q3. The cost-to-income ratio at the end of Q4 FY '22 was 20%. Regarding our subsidiary of Shriram Housing Finance, our subsidiary registered disbursement growth of 16.43% year-on-year and 29.98% over Q3. Disbursements in Q4 FY '23 were INR 1,301.1 crores as against INR 1,117.6 crores in Q4 FY '22 and INR 1,001 crore in Q3 FY '23. For the full financial year '23, disbursement growth was 51.36% over FY '22. FY '23 disbursements aggregated to INR 4,145.96 crores versus INR 2,739.2 crores in FY '22. Shriram Housing's asset under management as of 31st March 2023 grew by 50.26% year-on-year and by 12.1% sequentially. AUM at the end of FY '23 stood at INR 8,046.6 crores as against INR 5,355 crores, at the end of FY '22 and INR 7,178.2 crores as of Q3 FY '23. Their net interest income in Q4 FY '23 showed a growth of 3.84% year-on-year and 44.62% quarter-on-quarter. Net interest income for Q4 FY '23 was INR 105.3 crores as against INR 72.8 crores in Q4 FY '22 and INR 101.4 crores in Q3 FY '23. Their net interest income for the full financial year of 2023 grew by 54.9% over FY '22, having come in at INR 387.7 crores in FY '23 versus INR 250.1 crores in FY '22. They have registered a profit after tax growth of 68.19% year-on-year and 2.1% quarter-on-quarter. PAT for Q4 FY '23 came in at INR 37.1 crore versus INR 22.1 crore in Q4 FY '22 and INR 36.3 crores in Q3 FY '23. As for the full financial year 2023 was higher by 71.45% over FY '22. The figures being INR 137.7 crores and INR 80.3 crores respectively. Their earnings per share stood at INR 1.14 against INR 0.78 in Q4 FY '22 and against INR 1.12 in Q3 FY '23. Shriram Housing Gross stage-3 for Q4 FY '23 stood at 0.39% and their Net stage-3 was at 0.69%. These were 1.72% on a gross basis and 1.32% on net basis in Q4 FY '22 and at 1.15% on a gross basis and 0.87% on net basis in Q3 FY '23. The company is investing. The Shriram Housing Finance is investing in the expansion of its distribution through the addition of -- across identified key focus states. The company has added 19 branches to its network in the second half of FY '23, taking the total branch strength to 131 as on March '23. Shriram Housing Finance is now a dominant player across Southern states and Gujarat and plans to expand distribution in selected, focused geography. I shall now request our Whole-Time Director and CFO, Mr. Parag Sharma to brief you on our fundraising activities and other liability-related matters as they have evolved in the quarter. After that, our Joint Managing Director, Mr. Sunder, will give his commentary on accounting and regulatory aspects. Over to you, Parag.

A few numbers on the liability side. Total liability stand at INR 1,57,906 crores broken up 23% through retail deposit, which is close to INR 26,140 crores, capital market borrowing of INR 34,768 crores which is close to 22% of liability. Bank loans and institution loan of INR 41,000 crores which is close to 26% of liability and securitization of INR 22,106 crores, which is 14% of liability. Rest is offshore borrowing in the form of loan and bonds, which is close to around 14% of liability. The cost of funds have gone up from 8.77 in the previous quarter to 8.82 now. So the RBI policy increase -- rate increase on 8th of February by 25 basis points, which has led to increased borrowing costs. Borrowing for the quarter was INR 20,000-odd crores, and this is being borrowed at close to around 9% through different sources. Liquidity on balance sheet is close to around INR 17,659 crores, which is good enough to take care of more than 3 months of our liability repayment, which is INR 16,000 crores. And LCR is at around 209 against security requirement of 70% from there. And debt equity was at 3.65% versus previous quarter of 3.61%. ALM buckets have been positive and cumulative up to a year, will be positive by INR 20,000 crores. With this, I will hand it over to Sunder for his comments.

Good evening gentleman. The employee count as on or 31st March was 64,052 as against 60,918. The cost of income was higher at 28.29 primarily because of we taking a hit of INR 302.58 crores on account of amortization of the intangible, which we have created on account of the merger. And the PD of Stage 1 was 8.04%, PD of stage 2 was 18% and LGD was 42.27% for the quarter ended. As Mr. Revankar had mentioned in his opening remarks, we performed a stress testing on the entire portfolio post-merger. The stress testing was done by Big Four and the impact of the same was INR 295 crores in the current quarter. It is a onetime hit which we have taken into book. And hence, the grade cost for the year has gone up about 2%, 2.01% [indiscernible]. And there has been -- there will be some fair valuation differences when we -- the standalone number of Shriram Finance and the standalone numbers of Shriram Housing, if you add 1 plus 1, will not be equal to 2. It will be slightly different. There's a difference of INR 23 crores on the PAT number for the quarter 4 that is primarily on account of the fair valuation that we have done. And for the entire -- for the full year, it is higher by INR 32 crores, again, on account of fair valuation. It is more of an accounting comment and nothing else, yes. With this, we open the floor for questions.

[Operator Instructions] The first question is from the line of Avinash Singh from Emkay Global.

A few questions. First one will be a data keeping, if you can just provide segment and disbursement number for the quarter and for the year. And the second question on your intangible amortization that you have taken for around INR 295 crores for the quarter as it relates to mostly the branch asset and [indiscernible], so now roughly around INR 1,500 crores you have taken close to INR 300 crores. So is it like going to be a per quarter around it or it's like kind of INR 300 crores kind of amortize on an annual basis? And lastly, if you can explain that elevated credit cost, I mean, particularly considering that you have close to 500 that you manage it overly, and it's still that credit cost is on the higher side. So if you can explain. So these are my few questions.

On the disbursement side, on this quarter, commercial vehicle was at INR 12,182.3 crores. Passenger vehicles at INR 5,592.1 crores. Construction equipment at INR 1,945.7 crores. Farm equipment at INR 623.3 crores. MSME, INR 3,572.8 crores. 2-wheeler at INR 2,339.50 crores. Gold, INR 2,523.3 crores. Personal loans, INR 2,250.1 crore and INR 25 crore revolving loans.

And on the intangible, we have created an intangible of INR 1,513 crores on account -- during the merger on account of the network, which we had acquired of SCUF. And we are amortizing it over a period of 5 years. And the hit for the current year has come to INR 302.58 crores. Going forward in the next 2 years -- 4 years, it will be INR 75 crores per quarter, meaning INR 300 crores per annum. And coming to the credit cost, as we mentioned, we had performed a stress testing on the entire portfolio -- loan portfolio and the additional hit on account of it comes to INR 295 crores consequently, due to this, the credit cost goes at 2.01%. Despite the fact that, okay -- we have reduced our COVID-related provisioning to INR 1,100 crores from the earlier INR 1,650 crores. And this -- as we have been guiding you earlier, that -- this is being utilized for giving waivers to the customers, who were impacted during COVID times.

The next question is from the line of Abhiram Iyer from Deutsche Bank.

Congratulations on a good set of results. I wanted to talk regarding your cost of funds. You mentioned that it was currently around 8.8% with potential 20 bps increase coming through. Given that cost of funds all in would be somewhere around 9% right now, what are your fundraising plans going to be moving forward? You've done a recent private placement of USD bond, is the gap between INR funding and onshore, offshore funding now sufficient enough for you to test the waters in the USD market again?

Yes. So incremental cost of fund has been slightly higher, so I don't expect the full 25 basis point RBI policy increase to be there for us for next quarter. There will be at least 10 basis point increase in the cost of fund for sure from the current level. When it comes to the dollar bond, what we have done is loans as of now and one private placement of bond. As of now, we are not envisaging issuing a dollar bond in the immediate future. That is maybe not -- for sure in next month or so because the rates still continue to be -- the landed cost still continue to be higher than what we have done through the loan format. So we'll continue to look at opportunities at loan rather than looking at bond market which, until the market has sufficiently increase -- the rates come down, we will not be able to tap it. Onshore liquidity continues to be good, and that is what we will focus upon both in the form of retail deposits and the domestic capital market.

Got it. And just a quick clarification. This is more sort of a technical question. You've given in your presentation that the NIM on AUM has slightly increased to 8.55% despite net interest income on an absolute terms being pretty much flat quarter-on-quarter and your AUM actually growing by about 4%, 5% quarter-on-quarter. Am I understanding this correctly on how the NIM and AUM is calculated because it seems like they should go down with the higher denominator?

So we do an averaging on a daily basis and hence, on an absolute number, it will be difficult for you to conclude. So frankly just opening [indiscernible] will not work out. It will be against averaging. And hence, there will be some different by this -- by what we will be getting.

Got it. So suffice to say there was chunky disbursements. I mean 1 or 2 days where disbursement are much higher towards the end of the month, which...

That should be. Yes, end of the quarter, it will be.

End of the quarter, margins we'll get.

The next question is from the line of Sameer Bhise from JM Financial.

So just wanted to understand more about this onetime hit. What led to this higher PD on the portfolio? And how could one see credit costs for FY '24, especially when we have guided for a potential 3% less kind of an ROE?

The PD have been, again, recalculated based on the current year up to December. And we have removed the fifth year because we're using. And hence, there will be some shift. This is an yearly activity that we do. And because of that, there has been some changes in the PD. And also the mixture of the -- mix of the portfolio also will have an impact on the PD and LGD numbers.

So basically, when we do the stress test, what happens is depending upon the inflation, the interest rate -- interest rate changes, overall average cost changes, the people who prepare it, they also give a weightage to the kind of segment which we are lending to. And definitely, it will be a little conservative in the way we account it. So the PD will be normally a little higher elevated. But we take it in our stride because it is very conservative, and it's good for us to be conservative in this environment. Even though the economic activities are good, the credit cost has actually come down. But to be conservative and having a stress test calculating -- calculated and taking into account helps us for preparing for the worst.

Fair enough. That is helpful. And secondly, on the MSME and personal loans piece. Just wanted to understand given that SCUF historically probably did not grow as fast, but what gives confidence that these 2 segments can meaningfully pick up, when SCUF has historically grown, especially in these 2 segments? That's it from my side.

See, the basic thing is that MSME, we have been growing. It's not that we have not grown, but what gives us confidence that we will be able to grow faster is the availability of number one, network ; number two availability of people with vintage within the group, where we will be -- the idea is that we should be able to leverage on these two. So that means you're -- since we have access to lot more locations and with MSME being a focused product for the organization, we feel confident that we will be able to grow it.

We have the next question from the line of Gaurav Kochar from Mirae Asset.

A few questions. Firstly, if I look at the credit cost for this quarter, while you mentioned you've changed the PD assumptions and all, the write-offs were elevated at INR 629 crores if I just calculate the differential in provisions. So going forward, what is the sort of steady-state credit cost because 2% is what you had always guided for. So taking cues from that and given that you're in a kind of benign environment, does this PD assumptions change that? And the overall guidance, I think Sameer alluded to earlier at 3% ROA, does this have any bearing on that number?

The credit cost, if you look at it is 2% for the year -- year ended March, for the full year. So I'd say our guidance of credit cost at 2% will continue to remain.

Okay. So going ahead also, the guidance is 2% despite the PD.

Yes, that will remain.

Okay. Okay. Sure, sir. And for the margin, sir, if I look at this last quarter, there was a INR 138 crore because of the accounting changes that we had done for acquisition or during merger, that related INR 138 crore was there on the NII line. In this quarter, was there INR 109 crores positive impact on NII in this quarter?

It is INR 145 crores in the current quarter.

Sorry, how much is it?

145.

Okay. 145. So just removing INR 145 crores from current quarter and removing INR 138 crores from previous quarter, on a core NII, if I were to just compare the 2, the NIMs have actually declined, and AUM has grown by around INR 8,000 crores. So net-net, the NIM on AUM -- on average AUM would have declined. So what would explain that, sir?

It is difficult to compare between the December quarter and the March quarter, primarily because in December quarter, you have 2 additional days, whereas in March quarter, you have 31 days in Jan and March, but 28 days in February and hence, there is an impact of 2 days and -- which is substantive. So that's also need to be factored.

Okay. Okay. Okay. Sure, sir, that would be, but still, I mean, the difference is even if I adjust for that, the difference is large because you've grown. The AUM has grown by around INR 8,000 crores. Unless the bulk of the growth came in the last week of March.

Yes, we have to reconcile. You can contact Sanjay tomorrow, and then he will show it to you.

Gaurav. We also understand that the -- in the last quarter and last few days, normally the booking -- loan booking is very high. So that also needs to be factored.

Okay. Okay. Probably I'll take this offline, and...

And the growth will look very high because of that.

Okay. Sure, sir. I'll take this offline probably. And lastly, on this goodwill or the intangible write-off that you've taken, can you tell me what is the outstanding balance of this intangible of which INR 300 crores -- or INR 295 crores has been marked down. So what is now the balance, which is left?

So we had INR 1,513 crores minus INR 303 crores, it is INR 1,210 crores is outstanding.

So INR 1,513 crores, it could be divided by 5 years.

Okay. So this INR 300-odd crore will come every year?

Yes. Every year.

Correct...

So this will be like a Q4 phenomenon? Or it will be like INR 75 crores this quarter?

It will be spread over each quarter. So every quarter will get INR 75 crores something.

Last quarter, we did not take it into account. Therefore, it had come together on full year.

Full year.

So full year is our market now. So the impact of the full year has come in this quarter. But next year onwards every quarter it is INR 75 crores.

Sure, sure. And on the goodwill front, that impairment is still...

That will be specific for impairment, but it should begun every year-end and it's unlikely to have an impact in the next few years at least. That's what we are continuing to date.

Okay. So what's different between a goodwill impairment versus the intangible impairment that we have done now? Sorry, I joined the call late, so maybe if you would explain.

The intangible primarily has been created to get the benefit of tax. So goodwill, as you're aware, it will be [ driven ] out by the tax department, and there'll be an impact of tax on that. Whereas the intangible, so you get a tax break. So this can be claimed as an expenditure and the income tax allows that.

No, my question was the logic of writing this off and not writing goodwill off given that the entire acquisition was done as a one transaction.

Yes, the intangible has been created for the usage of the network of Shriram City Union Finance branches. And we have taken an independent valuers opinion, wherein we feel that the usage of these branches will be for 5 years, and it needs to be amortized over the life of the useful asset. That is about it. And whereas the goodwill will be tested for impairment. And that the -- again, this year also we tested for impairment, it was not impaired. So next year, again, we will go and test for impairment, and we need to take a call at that point of time. So the accounting treatment for both are different.

So basically, as is explained, goodwill, you don't get a tax break. Impairment on intangible, you'll get a tax break.

Yes, yes. Sure, sure. My question was more on the treatment, not on -- right, I'll take that also offline, I guess. And just final question on growth. This quarter, we saw a strong growth in AUM. So for next, let's say, couple of years, you -- while you have maintained 15% growth guidance, but given that the merger synergies will play through in the next 2 years and slowly and steadily, we'll see more and more branches doing more disbursements of each other's loan, so Shriram City Union branches selling transport loans and Transport branches selling SCUF loan. So taking that cue, do you see any sort of improvement in the loan growth guidance that you have given at Q3?

No. Right now, we are committed to this 15%. The other point is Shriram City Union Finance branches may not be very accretive for the commercial vehicle business because, in fact, if you look at it, Shriram Transport has much, much larger network than Shriram City Union Finance. So it will be actually the retail side, which should grow faster because of the erstwhile Shriram Transport branches.

Gaurav, the focus will be to improve on the net profit's bottom line rather than the top line growth.

The next question is from the line of Shubhranshu Mishra from Phillip Capital.

I just want to stress on the liabilities again. Have you done any kind of prepayment of ECB and that we have -- how the bond market looking at us and what kind of domestic bond issuance are we you looking at in this fiscal '24? Second is on -- again, you mentioned on the growth on the growth guidance. So are we to look at something on the product mix change going forward in '24, '25 if retail is to be more dominant. For the second and third is also data keeping question. If you can just tell me 2-wheeler disbursement again.

Around the buyback of offshore bonds, we have not done anything in the current quarter. We did it in the previous quarter. First previous 2 quarters, we did close to around 230-odd million which was evaluated by the investors. In fact, the secondaries also performed well. Current quarter, we have not done anything. We have maturities in the month of July and August, and that is what we are looking at. When it comes to the other data points, be it 2-wheeler disbursement and growth.

Two-wheeler disbursement, current -- actually, that's one point that I missed out in my statement. We have disbursed nearly close to 1.2 million 2-wheelers in the current financial year. So we expect this to grow by about -- on -- we are actually more focused on the number of 2-wheelers funded rather than on the amount. So the target for the team is also on the number of two-wheelers. So we expect it to grow by -- between 10% to 12%, depending on how the industry is faring. See one thing in this is the South is not -- I would say that the South market -- there is a degrowth in the South market. The growth is coming from Bihar, UP, Madhya Pradesh, Rajasthan. These are the -- plus some of the Northeastern like West Bengal. These are the states that the market is growing at a faster pace. So going forward, we will see the growth there.

And sir, any bond issuances that we're looking at in this particular year, FY '24 and what's the quantum sir?

For domestic or offshore?

Domestic, domestic.

Domestic, we'll -- we do keep doing the regular private placement, which we'll continue.

The next question is from the line of Abhijit Tibrewal from Motilal Oswal Financial Services.

So again, going back to the margin question, sorry to bother -- you need to take again. But I mean if we look at the reported margins, we've really not seen any compression in the reported margins. As a matter of fact, on a sequential basis, it's expanded by 3 basis points. But if you look at the accretion to the interest income, again, I'm just looking at the last 3 quarters from 2Q, 3Q and 4Q. I mean last quarter also, we added close to, I would say, INR 8,100 crores in AUM this quarter also broadly similar number. So while you accreted INR 300 crores in the interest income last quarter, we've not seen the same accretion in interest income this quarter. So are there any one-offs in the interest income in the form of any interest-income reversals?

We'll do one thing. Okay, you contact Mr. Sanjay. He will be able to provide you tomorrow morning. We don't have the number right now. We'll provide it in the morning.

So again, one last question. While you have done that stress testing, and like you said you're scared taking a onetime hit of INR 295 crores. If you could help understand this onetime hit is in the nature of higher provisions driven by higher PDs or these are in the nature of write-offs of about INR 295 crores that you have taken during the quarter? And also related question. In which particular product segments were these more pronounced, the stress testing I mean what was the outcome of that? I mean, are there any particular product segments which are relatively more stressed than the other?

Stress testing, when it was performed, apart from the PD, LGD, what the company has been taking into account based on the historical data. The consultants also looked into macroeconomic factors like GDP, CPA and bank lending rate. And this is that we have performed the stress test. And the number was elevated for -- marginally elevated for almost all the products, whatever we are into. And they had come out with a number. And whatever was the differential provision -- see, let's say, we were holding INR 11,000 crores of provision in our book, and they were seeing INR 11,295 crores. The difference of INR 295 crores was taken as a provision and not a write-off. And in fact, we request the product-wise PD, LGD okay, maybe we'll try to extract that and then try to give it. But as of now, we don't have it right now.

No problem sir. And sir again, squeezing in one last question in the interest of time. I mean the effective tax rate that we see in this quarter was elevated. I mean was it anything to do with this impairment of intangible assets?

No. Not to do with it. It was more to do with the benefit that we had taken over the past few years. So this tax rate will be elevated for the next couple of years. That is what we want to guide. We are resolving the ECL provision, which we have already claimed in the previous year so that we are required to pay and hence the impact is similar on the tax front.

Sir, if I kind of understand you right. You have taken some benefits on ECL provisions in the prior years.

Yes. Earlier, it was -- we used to maintain separate set of books few years back and we used to claim it as an expenditure and the department was allowing it. Once the MBA's came into picture, then we started moving out of maintaining 2 sets of books for income tax and the shareholders. And whatever benefit we got in those years, now we are required to show as timing difference. So it will be -- next couple of years, at least that tax rate will be at around 30%, I would say.

So sir, I mean, essentially for the next few years, the effective tax rate is now going to be at 30%.

Next couple of years. Yes.

The next question is from the line of Bunty Chawla from IDBI Capital.

All my questions are answered. Just a data point, if you can share. Write-offs for the full year and write-off for the Q4 FY '23.

The write-off of the current quarter is INR 805 crores and for the full year is INR 2,615 crores. And the provision including the one-off provision of INR 295 crores, you'll see is INR 79 crores. And for the full year, the provision is INR 1,545 crores. And the credit cost for the quarter amount, which is [ INR 805 crores, and INR 1,184 crores and for the full year INR 2,615 for INR 1,545 crores, INR 4,159 crores ].

The next question is from the line of Piran Engineer from CLSA.

Just a couple on personal loans and gold loans. So in personal loans is, what really gives us the confidence to grow so fast in an unsecured product? Can you give us some more color on this business in terms of, are these cross-sell customers? What is the average ticket size? Is there any bureau list of these customers? And secondly, on gold loans, our plan was to scale it up in the last analyst meet when we met. Gold prices are also up, but if you look at the book, it's been flat in the last 2, 3 quarters. So just your thoughts on that.

Yes. On the personal loan, we are now almost done with that legacy book, which is a market where we were doing personal loans in the market. Today, it's entirely in-house database of our existing customers who have either completed a cycle or who have completed at least 75% plus percentage of their loans, one. Two is average ticket size is around 50,000 -- 55,000 today. This is also because there are also a lot of customers where who have serviced these loans a couple of times 2, 3 times, and they're small businessman where we give them up to we 1 lakh loan. So the average is about INR 55,000 today. And the average tenor is about 20-odd months. So the confidence is that we have mined about close to 5% -- 4.5%, 5% of the eligible database of our customers so far. So the idea is to go ahead and mine it a little more aggressively. Now as I said earlier, now that we have -- we also have the support of the erstwhile STFC team and the branch network. We will be able to service these customers. So that's one. The other point on the gold loan is, yes. We are -- we will scale it. We are in the process of scaling it up. So starting with setting up of a gold loan, one is you need to set up the infrastructure and also train people. See, we do not have appraisals on contract basis. We grow with our own team. We train our people on appraisal, appraising the gold. Second is we need to provide secured room, CCTV camera. So all this infrastructure, so which we are doing on a phase-wise basis. So probably by the end of the year, you will see the impact of all the new branches, adding to the disbursement of gold. Does that answer your question?

Sir, the line for the current participant has disconnected. We will proceed with the next question from the line of Aswin Kumar Balasubramanian from HSBC Asset Management.

I just wanted to understand in terms of the liquidity policy. So prior to merger, Shriram Transport used to carry about INR 17,000 crore, INR 18,000 crores of cash and bank balances and SCUF used to carry about INR 5,000-odd crores. Now the total currently, they're are about INR 16,000 crores. So it's come down a little bit. So just wanted to understand is there any thought process in terms of as a proportion of the balance sheet? What is the liquidity that you would like to maintain?

I think we always had a policy of maintaining 3 months of liability repayment as listed as cash. And that has not been changed. Only during COVID period, we enhanced that liquidity buffer from 3 months to close to around 6 months. So as of now, what we have is INR 17,600-odd crores. I said the debt which is maturing for next 3 months is INR 16,000 crores. So that is good enough to take care of 3 months of liability repayment. And that policy has been there for last, I think, more than 15 years, but we are not going to value, but there has been a constant demand that while we are getting a higher liquidity buffer and not reduce it. So we said we will always maintain 3 months and that continues. So as of now, what we have is for 3 months of repayment, which is close to INR 17,000 crores. And in case liabilities goes up, this will be further increased, but not going to be diluted for 3 months of liability result.

As there are no further questions, I would now like to hand the conference over to Mr. Umesh Revankar for closing comments. Over to you, sir.

Yes. Thank you for participating in this call. As I was telling you, we are in -- our economy is doing well, and our segments which we are in are growing. And we feel that the growth will continue. And as we've given guidance for 3 years, 15% AUM growth will continue -- will be our focus. And also, the underlying -- our focus will be to grow more on the bottom line and improve our profitability. Thank you very much for participating again. Again, we'll meet again in the next call. Thank you.

Thank you. On behalf of Shriram Finance Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.