Spandana Sphoorty Financial Limited (SPANDANA.NS) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Spandana Sphoorty Financial Limited Q1 FY '22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Ms. Padmaja Gangireddy, Managing Director of Spandana Sphoorty Financial Limited. Thank you, and over to you, ma'am.

Thank you. Good evening, and welcome you all to Q1 of FY '22 financial and business update call of Spandana. By the end of Q4 last year, the business was almost a near normal, with collection efficiency hitting 101% in March 2021 and quarterly disbursements touching north of INR 2,000 crores. While we were expecting FY '22 to be a normal year, unfortunately, COVID 2 came back with much more intensity, causing more damage than COVID 1. However, the experience of managing COVID 1 was very much visible in the actions of both central government and also Reserve Bank of India. This really helped us in recovering much faster than COVID 1, while it was very disappointing to how the collection efficiency once again falling significantly in the month of May and the business de-growing and all this impacting profitability. In the hindsight, we believe that everything happens for a reason. And in the long run, we will have great lessons to learn. Microfinance, as a sector has evolved much stronger after every crisis, and this is not an exception. We had almost 99.9% to 100% collection efficiency till 2010. We mean like the whole industry, and it sustained almost for a decade while the credit cost was negligible during this time, there was always a fear that how long this can be sustained. We could not imagine credit cost to be at 2% or like 4% as it was believed that microfinance will have either 100% or 0% collection efficiency. By then, it was not tested against a political interference, natural calamities and pandemic that could last for a longer time. Back then borrowers serviced every single installment as the business model did not gave scope to escape even one installment. From 2010 onwards, the industry experienced several massive crisis' such as AP crisis, demon, COVID 1 and now COVID 2. While nobody thought that this industry could survive after these crises as the business is perceived to be very fragile contrary to the expert opinion, the industry withstood to all the crises and it evolved much stronger. In fact, it got recognized as an industry of its own and scaled up subsequent to 2010 only. RBI and Ministry of Finance, today acknowledged microfinance as a key component of financial inclusion. There was always this question if a borrower does not pay 1 or 2 installments owing to her financial constraints, would she come back and start repaying installment when her cash flows improved, or she would be turn to be a defaulter. This is answered beyond anybody's doubt that borrowers are not repaying with an understanding that they cannot escape from it rather with a high conviction that microfinance is the most credible source that they can depend upon for their credit requirements. Every crisis helped all the stakeholders to learn many lessons, only after AP crisis, comprehensive regulation was formulated by Reserve Bank of India for microfinance, which has mitigated the social and political risk. Only those players who can evolve constantly with changing needs and demands of borrowers under dynamic [indiscernible] and have agile risk management practices invited in their processes will be able to survive and be in the business. There has been enough talk for that. The learnings from COVID 1 are immense which helped all of us to manage COVID 2 much better and the impact of which can be seen in much faster recovery. This time, central government did not implement nationwide lockdown. And the [indiscernible] has been left to state government, which was great. While few states had over 2 months lockdown, a few states had less than 1 month. COVID, second wave had varied impact on various states, and the period it impacted was also very different from state to state. Each state government, depending upon the severity in this state, lockdown conditions were enforced. Unlike COVID 1, we did not close even a single branch this time. Borrowers whose cash flows were not impacted, could continue to repay all their installments throughout the quarter. Few branches due to unavailability of staff, particularly in the month of May, so the branch -- few branches could not operate for a maximum period of 1 or 2 weeks. But otherwise, like all branches were operational throughout the quarter. During the quarter, wellbeing of the staff and borrowers was the topmost priority. Unlike last year, many of our field staff were affected by the virus. We provided COVID insurance for all of our employees and their spouses with a cover of INR 3 lakhs. Those who did not require hospitalization, were given INR 5,000 as onetime help to meet the immediate needs, including the cost of testing and oximeter, et cetera. All affected families were given -- all affected employees were given 14 days paid leave. We also distributed 50 kgs of rice or atta to each and every borrower, whoever is impacted by COVID and they could not attend their work for 14 days, and it was really difficult for them to meet their daily basic necessities. So this quarter, we have taken a conscious call of not doing disbursements, except in a few cases where borrowers needed emergency loan. Once again, the situation turned very precarious and we had no clue on how long the situation was going to continue like that. Our credit assistants were to spend disproportionate time to reach out to borrowers individually at their doorstep as center meetings were once again canceled. Even after spending 9 hours in a day, they could not meet all the borrowers. As against, INR 1,311 crore collections in the quarter, only INR 216 crores was disbursed. It has broken another big myth in microfinance that borrowers would pay as long as the loan disbursements are on collection efficiency was maintained despite the disbursement being a fraction of collections while AUM grew by 8% from INR 6,835 crores to INR 7,390 crores Y-o-Y, it degrew by 9% Q-o-Q. By June end, we have 76% of the total AUM, which is created post-COVID, and all these loans have monthly repayment frequency. We transitioned from biweekly to monthly as borrowers do not want to commit higher time for attending center meetings in order to repay installments. This has helped us a lot in the last 1.5 years to contain the cost. And also loan officers were not required to pay 4 to 5 visits in a month. Monthly loans have been performing significantly better than weekly and biweekly loans with the collection cycle starting from second of every month and ending by 10th, there is ample time left to follow up with borrowers who have not paid their installments. Monthly loans have 95% -- 94% collection efficiency by June end as against weekly and biweekly loans having only 54% collection efficiency. Collection efficiency dropped by 3% in April from 101% in March and -- to 98%. May collection efficiency was very bad with just 72% and it further improved to 80% in June. Collection efficiency for the full quarter was 83%. By June end, almost all states ease in lockdown conditions. And this time, borrowers could effectively resume their book and the collection efficiency improved significantly in July to 93%. So we expect 96% to 97% collection efficiency in August. Going by last year's experience, we did not give moratorium to our borrowers, and so far, we have not restructured even a single loan having seen substantial improvement in July collection efficiency. Further, the collection efficiency calculation, we consider the demand of each and every borrower irrespective of whether they paid or not. So INR 765 crores portfolio has been impacted by COVID 2 due to most of the borrowers not paying 1 installment in May and very few borrowers not paying 2 installments. However, we made 20% provision on this INR 765 crore portfolio, which is impacted by COVID 2. By June end, the GNPA was 4.6% and NNPA was 2.3%. By July, the GNPA and NNPA were reduced to 3.5% and 1.8%, respectively. We have a carry-on provision of INR 577 crores by June end, which accounts for 7.8% of the total AUM. In addition to this, we also wrote off INR 362 crore portfolio in Q3 and Q4 of FY '21. So we also recovered INR 8.3 crores in this quarter from the portfolio that was written off in Q3 and Q4 of FY '21. So Criss Financial, which is a subsidiary of Spandana and this is an NBFC and that offers secure loans such as LAP loan against property, business loans and gold loans and group launched 2 households whose income is about the threshold of microfinance borrowers. Performance of CFL has been outstanding in the last 1.5 years. CFL has operations only in AP and Telangana. And these states -- these 2 states performance has been significantly better than any other state. CFL's collection efficiency for the quarter was 101%. CFL's AUM grew by 170% Y-o-Y and [ 4% ] Q-o-Q. Revenue of CFL grew by 125% Y-o-Y and 27% Q-o-Q. Portfolio parity has been robust with the GNPA at 1.9%. So we opened 15 new branches in the quarter, of which 9 are gold loan branches opened under CFL. So we raised INR 751 crore in Q1. And we wanted to reduce our dependency on borrowings from banks and raised a significant amount of borrowings from capital markets. We raised INR 337 crores in a single MLD issuance, and this is the highest ever that any MFI has raised so far from capital markets. While the situation was highly precarious, we maintained high liquidity in the last 6 months. This has increased the financial cost ratio from 7.7% in Q4 FY '21 to 8.1% in Q1 FY '22. Though the marginal cost of borrowing reduced from 11.3% to 10.8%. Our on-balance sheet debt reduced from INR 5,373 crores to INR 5,200 crores. So the total cash and bank balances maintained were INR 1,694 crores, which was almost 20% of our total assets. We deliberately reduced loan officer productivity levels from 600 to 400 to ensure that each and every borrower is met on the demand date. To maintain sufficient bank strength, we hired 600 staff in the quarter, of which 572 are loan officers. There was a slight increase in the cost-to-income ratio which increased from 21.9% to 22.5%, and this is majorly due to high liquidity we maintained in the last 4 months. Further, interest income was also reduced slightly due to portfolio degrowth. Number of borrowers remained same at 24.5 lakhs and we added just 16,000 new borrowers in the quarter. Average loan outstanding per borrower is now INR 30,000, which reduced from INR 33,000 in the previous quarter. NIM reduced slightly from 15.4% in Q4 to 14.1% in Q1 '22. And this is due to increase in the financial cost ratio and reduction in the lending cost by almost 7 basis points. Operating costs continue to be lowest across the industry at 3.38%. Abhiram, which is our group company, contributed just INR 40 lakhs towards rent for the quarter. Had Abhiram not contributed this amount, operating costs would have been 3.39% instead of 3.38%. And the difference is just 1 basis point. Pre-provision operating profit for the quarter was INR 226 crores. PBT was INR 71 crores recording 6% growth Q-o-Q and PAT was INR 55 crores, recording 11% growth Q-o-Q -- quarter-on-quarter. Pre-provision ROE was intact at 11.7% and post provision and tax, it was 2.8%. ROE was 7.9% while the normalized ROE was 24%, not consolidating the provision and tax. CFL made INR 7 crore profit after tax on an average book of INR 411 crores and CFL share of portfolio being 6%, its share in profit was 13%. So net worth increased 5x in the last 4 years from INR 537 crores in 2017 to INR 2,743 crores. Capital adequacy ratio was healthy at 42.4%. And the state level and district level diversification is very much intact. Three largest states, MP, Orissa and Karnataka now constitute 47% of the total portfolio and it got reduced from 48%. Only 10 districts have more than 1% of the total AUM and no district has more than 2.3% of the total portfolio. We continue to maintain 95% rural and 5% urban in terms of AUM and our agile risk management helped us avoid states with very high microfinance penetration. As such, we don't have operations in Assam and our portfolio in West Bengal is now less than INR 40 crores. Happy to share that in July, we were rated by CRISIL and they awarded us A Stable, which is one notch higher than the ratings we had from ICRA, which was A minus. While we had only one rating for a long time, we got fitter rating done by India Ratings in November 2020, and they awarded us A Stable and now the third rating by CRISIL in July '21. While Spandana continue to be the microfinance institution, we are making efforts to diversify the portfolio across segments and products through our subsidiary Criss Financial and moving in the direction of having 40% of the total portfolio towards secured loans by 2025. Our gold loan portfolio grew from INR 20 crores in February to INR 60 crores in August, and we are very bullish about it. We found a niche market to build gold loan portfolio, and we have been opening branches in Tier 3 and Tier 4 towns in Andhra Pradesh, where each branch can build INR 8 crore portfolio in less than 2 years' time. Gold loan branches increased from 6 in Feb to 28 as on date. With no COVID third wave, we are very much in line with our business plan by which the AUM can grow to INR 10,000 crores by March '22, as we already resumed loan disbursements in August. And on a priority basis, we have been disbursing loans with existing borrowers whose loans were closed in the last 4 months and all branches having more than 90% collection efficiency started acquiring new clients. So with this overview, now I'm opening the floor to questions and answers.

[Operator Instructions] Our first question is from the line of Shreepal Doshi from Equirus.

Thank you for such a detailed information that you just gave us. Ma'am the question was with respect to the collection efficiency numbers that you've disclosed. So are these -- so I suppose these are not against billing for that month. I think this also includes the arrears. So what would be the number without the arrears for April, May, June, July? And what would be the collection efficiency number for some of the key states like Karnataka, Madhya Pradesh, Orissa and Maharashtra against the billing for that particular month?

So basically -- so you know, like it was very difficult period like the ones in the first quarter was. So we hardly got ED amount like in the form of arrears. So that is why like if you look at like the PAR numbers, so there is no significant change in terms of buckets. So our PAR 0-plus like, [indiscernible] is 24%, 1 to 30, 14.7% and 31 to 60, 3.6%. But however, the collection efficiency, like only in July, it has touched 93%. But again, in May, it was as low as 70%, which means like almost like 30% of the borrowers, so they did not pay at least 1 installment. So that is the reason. And in terms of state-wise collection efficiency -- yes. So state-wise collection efficiency, of course, like Tamil Nadu, we have only lab branch. So as such, like I'm just looking at June numbers, Tamil Nadu 106% and -- sorry. Yes. Tamil Nadu is 123%; Maharashtra, 87%; and Pondichéry [ 98% ], Haryana, 99%, Telangana, 105% and [ AP ] 96% and then Goa it is 88%, and the lowest performing states are Kerala, Kerala, it was just 42%. And again, Karnataka in June, like it was very bad. Our collection efficiency was 55% while it increased to 82% in July.

Okay. Okay. So ma'am the least performing state is Kerala basically. And which are the other states, like the least collection efficiency top 3 states?

So if I look at July numbers, even Kerala has improved to 57%. Then the least performing state is like Karnataka. Karnataka 82%, Rajasthan 85%, and again, Chhattisgarh also 84%. All other states like that above 90%, 91%. So for example, MP was 91%. And Gujarat 98%, Goa 97%. And then of course, Tamil Nadu, Maharashtra, Haryana, like they're all about 92%, 93%.

Okay. So ma'am in the state of Kerala and Karnataka so what -- so was it just because of the delayed lockdowns or you were -- or you saw something else also, which was different?

So it was like a proportionate to the kind of time like it was -- the state was in lockdown. So Kerala, like even now like some of the districts are still under lockdown. So -- and again, Kerala compared to all other states like it had extended lockdown. And somewhere across the state like borrowers they have taken a stand that we do not know like how long this lockdown would continue. So we do not know like how much savings that we have to maintain for ourselves. So -- but in May, like the recovery was very, very bad in Karnataka. And every borrower said this, we will start from June. And again, as they stated, as they promised like most of them, like they started paying in June and again July, like there is a big huge jump from 50% like it went up to 82%. And we are hopeful that like Karnataka will hit 90% in August.

Got it. So we have not given any installment holidays...

And Kerala for us, like it's only 3% of the total portfolio. So -- because like what we have seen, particularly in the last 15 months, so the work culture of staff is very, very different from other states. So while like the long-term conditions were very serious, but still like employees were not willing to travel to villages to meet the borrowers in the past quarter, while across the country, so every branch was operational, every employee was traveling, they were meeting the borrowers. They were collecting borrowers -- they were collecting installments from the borrowers. But the picture like that we saw in Kerala in the last 1.5 years was very, very, very different. So the work culture is a little different, like from the rest of the country. And we are not getting sufficient comfort. As such, like in the last 15 months, we did not disburse in Kerala. And as such, today, the portfolio of Kerala is 3% of the total. And even now, like in July and August, also, we do not resume disbursement in Kerala because most of the time, almost 99% of the time of loan officers is spent in terms of going and meeting the borrowers.

Got it. Got it. Ma'am, so since you've not given any install holidays -- like installment holidays or restructuring of the loan. So -- and even then like our 30-plus, 60-plus dpd buckets are probably finest in the industry currently. So what is the strategy or what did we try to do different that helped us in sailing through this difficult time without availing something like installment holiday or restructuring?

So basically, last year, what we have seen is, so last year, particularly, March to May, it was a harvest period for agriculture. And agriculture was exempted from lockdown. And most of the borrowers like they were getting very good wages during that point in time. But however, as soon as like RBI announced a moratorium. So borrowers like irrespective of having money, not having money, so they were saying that like there is a moratorium, there is a moratorium. We are given an understanding that like we don't have to pay now. And like there was a kind of anticipation that after 6 months, like there could be a waiver or whatever, whatever. So it's most of the borrowers like irrespective of having money in their hands because 95%, 96% of our borrowers are from rural. And out of that, almost like 80%, 90% of them like they work as agriculture wage laborers and agriculture was very much intact. In fact, like there were controls in terms of migrant laborer coming to a few areas. The wages went up big time during last year lockdown. Despite that, like we did not get 90% recovery because the borrowers were in rural. So they just wanted to make use of like whatever -- whatever the moratorium that was given by RBI. So we felt that like the messaging was wrong. So borrowers did not really get it right. And hence, at this time, we have taken a call that even if like the PAR is increasing, so even if we have to make a higher provision, let us do that. But again, let us not give a message that like there is a moratorium. So that is why we have taken a conscious call in terms of not giving moratorium. And again, we were able to go back and tell the borrowers last year, you did not pay, as such, like your overall loan tenure got extended by 3 months, 4 months or some in case of a few borrowers, it was 6 months, and your overall cost on the loan has increased and to make sure that like such a thing doesn't happen this time, it is better like you pay your installments. And that is how like since there is no moratorium, we got 93% in July because borrowers did not really think of availing moratorium this time. And then again, whatever the portfolio that got impacted because of COVID 2, which I said like INR 756 crores, on which like we made the 20% flat provision though we are very sure that like this portfolio will not have like higher credit losses than whatever, 1% or 2%, the standard losses.

And ma'am this INR 756 crore portfolio is very much part of the -- I mean either 30-plus, 60-plus, right?

No. No. So like we made a standard 20% provision and like that is excluded from these buckets.

Okay. Okay. So this is not part of the 0-plus, 30-plus, 60-plus, 90-plus.

No. No. No. But out of that INR 756 crore, like almost 75% of the borrowers like they skipped only one installment, as such like that is in 0 to 1 bucket. So like -- and it will be -- it should be classified as Stage 1 on which like we were making only 0.8% provision. But again, like since it was a difficult situation, and we are yet to get clarity. We made 20% provision on that.

Okay. So what ma'am -- what is this portfolio? Like what is -- if you can just give some color where would this be coming from, which stage, geography, some color?

[indiscernible] across all states. However, as I mentioned, like AP, Telangana, Gujarat, so Haryana, Pondicherry, like some of the states like they had 98%, 99% collection efficiency. And so this is coming mostly, once again, like from Kerala, Maharashtra, MP, Rajasthan, and Karnataka. Because Karnataka picked up very well in July. But like until June, the collection efficiency was not that great. And Orissa?

Next question is from the line of Sarvesh Gupta from Maximal Capital.

So this INR 760-odd crores, which is almost like 10% of your AUM. So you have it -- have not classified it under any bucket. So the bucket classification is for the remaining 90% of the portfolio. Is that the right understanding?

Yes, exactly. But out of INR 765 crores, almost like INR 495 crores is in 1 to 30. So had we put them in the normal bucket, the provision requirement was as low as 0.8%. But however, we made a 20% provision on this portfolio.

Understood. And I mean, so the way you are looking at it is that, again, the rest of the portfolio you feel is -- but in the remaining portfolio, you have 3.5% sort of 90-plus, as on July. So what is the provisioning requirement that you foresee on the remaining 90% of the portfolio?

So basically, like we have INR 1,000 crore in 1 to 30, which means like basically these borrowers, they did not pay in May. Almost 99% of them, like they did not pay in May because like most of the branches, they could not even function for 10 to 15 days because like all the staff in the branches, they were affected by virus because all our branches are residential. They sleep -- like they stay together, they eat together. So in one branch, like one staff was impacted by virus means like the entire branch got impacted. So as such like I'm not really looking at like any kind of losses from 1 to 30 bucket. But if I look at 31 to 60 bucket, we have INR 265 crores. So from this, I'm taking like, which is very aggressive, so I'm assuming that like 50% is the recoverability. So there's like the losses, INR 130 crores. And we have INR 80 crores in 61 to 90 days. So there's like the loss, I'm taking 75%. So hence, the loss in this -- from this bucket is INR 60 crore. And we have PAR 90-plus like, which is INR 338 crores -- sorry, and as on 31st of July, like it is INR 250 crores. So here, I'm taking entire INR 250 crores going into losses. So with this calculation, the overall loss is going to be INR 640 crores. As against this, like we have INR 450 crore provision, excluding standard provision. So I think with these assumptions, like there could -- there will be additional requirement of provision to the tune of INR 190 crores over a period of 1 year.

Okay. So if I understand it correctly, over the next 3 quarters, you are going to provide for around INR 200 more crores, if things were to continuously improve in the same direction as we have been seeing in July?

Exactly, yes.

Okay. And this -- I think you would be done with -- I mean, for the August, while the month is not complete, but how have the numbers trended for -- in terms of building efficiency in August till now or for the month what is the expectation?

So basically, like till 10th like we have not seen much of improvement compared with July. So we are still at like 90% to 93%. But again, like we expect at least like a 3% improvement because from 11th onwards, 11th to 30th, so like because all the branch staff like they will focus only in terms of following up like the borrowers who did not pay like from 2nd to 10th. So in the previous months also, like we have seen at least like 3% to 5% improvement like after 10th. So I'm expecting at least 95% to 96% collection efficiency in August. But for collection efficiency calculation, I have not excluded the demand that was coming from INR 765 crore portfolio. So we consider demand of each and every loan.

Understood. Now coming to this -- your plans of increasing in the direction of secured loan. So any target -- interim target for FY '22?

In FY '22, I think our gold loan portfolio will be INR 250 crores, and our LAP portfolio will be INR 200 crores. And the non-microfinance group loan portfolio will be -- so that is not secured. Basically, like by FY '22, it will be INR 500 crores on a book of INR 10,000 crores, overall book.

Okay. So it's still small. And finally, this new RBI rule on increase where the pricing spread caps have been removed. So by when do you think we can operational?

Hello?

Hello?

Yes, we lost in between.

Yes. I was -- this new RBI draft rule, which has come in, where the spread caps are proposed to be removed. Any idea when -- by when we can operationalize it? And what will be the impact on our spreads because of the rule?

I think -- so till July end, like RBI was selecting feedback from various stakeholders. So we are expecting at least like this to come in force by August end or like at least before 15 September. And this will definitely like because while we were not able to factor the increase of credit losses, like while pricing our loans. And of course, knowing that like 0.5% to 1% increase in the lending cost doesn't really make any impact on borrowers in terms of paying their installments because installment-wise, it will make an impact of INR 5 or INR 10, which doesn't really matter to the borrower. But again, we were not able to factor our credit costs like for several years. And now like freeing up, like it's a great idea. But however, like we should be sensitive to the fact that -- so the regulation has helped in terms of mitigating the political risk, and we should not be inviting that risk once again by charging exorbitant interest rate. But however, we will increase by maybe like 100 to 200 basis points once we are allowed to do that.

[Operator Instructions] The next question is from the line of Sagar from PwC.

Thank you for the detailed outlook and detailed data. I have 2 questions. One is, we've seen back-to-back wave 1, wave 2 and you've seen a lot of uncertainty, as you mentioned at the start of the call, over the last decade. Is there any change in our business strategy in terms of disbursement growth, kind of borrower profile, et cetera?

So I think the risk management practices that we are following, like we are -- right now, they are made much more stricter. So in terms of, for example, the average loan outstanding for borrower that we can have has been significantly reduced like in some of the states like Orissa, Chhattisgarh, and Jharkhand and so there are many changes that we have made. And then again, what we have seen in the last 1, 1.5 years is, so the borrowers like who have more than one loan. So somehow like they started saying that like I will service one loan, right now, my cash flows are impacted. So like once this loan is closed, like I will service the second loan. And so if I look at like the collection efficiency of interim loan, particularly the second loan that the borrowers have. So it is significantly higher. So for example, like the interim loans have, of course, like the portfolio remains static, we did not grow that portfolio. In the last 1 year, we did not give any interim loans. The impact -- higher PAR could be because of that. But otherwise, like it is almost like 40%. If I compare the PAR of other loans, for example, like the main loan. The main loan like it is 5%, versus like interim loans having almost like 40%. And again, like I was always thinking that maybe like the first-cycle borrowers, second loan-cycle borrowers, whose loan size is lower. So they might be paying, versus like the senior borrowers who have higher vintage with the company. So their collection efficiency should have been lower. But again, like it's quite contrast about 5-cycle borrower -- about 5th-cycle borrower, so their PAR levels are far, far lower compared to first-cycle borrower. But again like from fifth cycle onwards, like if I look at the average ticket size, it is much higher than INR 40,000. And if I look at like the average ticket size of first-cycle borrowers, it is lower than INR 30,000. So there is a huge difference in terms of average ticket size. But again, some of the senior borrowers who have very good history track record, who have been repaying. So I think like they are doing good. So as such, like we are very cautious in terms of acquiring new clients, not every branch is allowed to acquire a new client. It's only branches like those who've more than 90% borrowers -- collection efficiency are allowed to acquire new clients. And again, we have now decided the maximum loan size, which is very different from 1 state to other state. For example, first cycle when it comes to Chhattisgarh, Jharkhand, Orissa, they're like we are not giving not more than 25,000 because like these borrowers like they don't have a history, they don't have a track record. So we are trying them for the first time. So that is one big change that we have made. First cycle average ticket size has been drastically reduced.

Correct. So looking at the changed landscape, right, what is the kind of disbursement growth that you foresee for the full year?

I think last year, we disbursed about INR 6,000 crores. And so this year, it is like the last year, we could not disburse even in August also. So the disbursements picked up only from October onwards. So it was 6 months. So this year, I think like we'll be disbursing about INR 7,000 to INR 7,500 crores.

And you just mentioned something very interesting on the borrowers' cash flow and the profile, what kind of worst-case scenario do you foresee in terms of further stress from the existing book? It's a ballpark number, ma'am. I'm sure you can just regard a guess going by your experience.

In fact, like I have taken the assumptions very aggressively in terms of 90-plus, like 0 recovery. And given 61 to 90, I said like only 25%.

75%. That's right.

Yes. There is no third wave, like if there is no lockdown, I don't think that like this number will change like this INR 200 crore. It is on a very, very aggressive side. But again, for any reason, if there is a third wave, if there is a strict lockdown. But again -- so I think like everybody, like be it government, be it people, so be it all of us, like we are learning in terms of living with this virus and with this problem. So like while last year, it took its own time to resume everything. But this time like because there is a sudden spurt in terms of collection efficiency, disbursement like starting from July. So unless and until like something goes very drastically down, I don't think that like our provision requirement will be more than INR 200 crores this year.

The next question is from the line of Gaurav from JM Financial.

So ma'am I can see in the presentation that you have raised debt of INR 750-odd crores, and you have cash around INR 1,700 crores. But the disbursement was around INR 260-odd crores. So what is the strategy going forward in terms of disbursement and growth in loan book?

So in a normal scenario, like we remain superefficient in terms of maintaining very less cash balance. But in the last 6 months, like we were guided by our Board and also our management committee. So they instructed us that like we should maintain at least like 4 to 5 months repayment obligation. But however, like that did not determine our disbursement duration just to maintain the cash balance, it's not that like we went low on disbursements. Like in the past quarter, while there was so much of uncertainty, so we decided like let us not do disbursements. This is the time to reach out borrowers. And again, like tell them that right now there is no moratorium, better you start repayment, so that like you will get next loan on time, your interest costs will not increase. So disproportionate time of loan officers was spent on collections. They did not have time to do loan disbursements. But that is why, like, of course, the cash balance was very high, and we kept on borrowing because we wanted to maintain like 4- or 5-months kind of -- the cash balance equal into next 4 or 5 months repayment obligation. But now -- so I think with things getting more clear, so we don't have to maintain that high cash balance. And in any case, like it will come down because we are doing disbursements in August.

[Operator Instructions] The next question is from the line of Shreepal Doshi from Equirus.

So ma'am, if I include that INR 765 crores portfolio also, which is not part of any of the PAR buckets. So then our overall stress would be 34.5% sort of a number. Is it a fair understanding?

Yes. But again, like that is -- out of that, INR 490 crores is in 1 to 30 days bucket. Yes, 0-plus.

So INR 490 is 0 to 30 bucket basically?

Yes.

Okay. So what would be the -- like, I mean, the overall coverage, so if you can give Stage 1, 2, 3 ECL coverage, would be helpful, ma'am.

No. Basically, other than INR 765 crore, I will come to INR 765 crore separately. Other than INR 765 crore, 0-plus is INR 1,544 crores in July. So -- but again, that is 0-plus. When it comes to 1 to 30, it is INR 1,080 crores. So I'm thinking that like we will not have any sort of loss because like these borrowers are genuine. They did -- they paid in April, they also paid in June and July. They did not pay only in May. So out of 4 months, like they skipped installment, only one installment. So I'm not thinking that like there will be any loss like from 1 to 30 days bucket, that is INR 1,080 crores. When it comes to 31 to 60, it is INR 265 crore portfolio in that bucket. And I'm assuming 50% unrecoverability. Like we will have INR 130 crore loss from this bucket, which is 50%. And the next bucket is 61 to 90, and we have INR 80 crore in this bucket, and I am taking INR 60 crore loss, which is 75%, from this bucket. And 90-plus, we have INR 338 crores, and I'm taking full amount on this.

INR 250 crore, we will be taking which reduced...

Sorry, sorry, and 90-plus got reduced to INR 250 crore in July, and I'm taking the entire INR 250 crore loss. So if I go back to like 31 to 60, the loss is INR 130 crores and 61 to 90, the loss is INR 60 crores. And the 90-plus, it is INR 250 crore. And again, so on that INR 800 crores, I'm taking a loss of INR 200 crores -- sorry, INR 765 crores. And INR 765 crores, I'm taking INR 200 crore loss. So then it is -- it is INR 640 crores. The total provision requirement with these assumptions. And out of INR 640 crores, now we already have...

INR 500 crores.

INR 500 crores. So -- but INR 500 crores has a standard provision also, right?

Excluding standard.

Excluding standard provision, like we already have INR 500 crores, then the provision requirement is INR 140 crore.

But ma'am since like since you've taken that INR 765 crores separately, then like that we just have -- I mean, we have INR 200 crores of coverage there, but like can that number not get deviated because you are anyway feel this is a very risky asset. So in that case, what is the variability in terms of your loss that can come from that?

No, I'm not thinking that INR 765 crores is a risky asset because out of that, in fact, like I made much higher provision on this because out of INR 765 crores, INR 490 crores is like 1 to 30 bucket. So in fact, like I had to make only 0.8% provision like because it is Stage 1. But again, like now I'm taking more than 20% loss from the INR 765 crores. Because out of INR 700 crores, only INR 165 crores is in 60-plus bucket.

Okay. Okay. And if you can say what are our Stage 1, 2, 3 coverages, like what would be the Stage 1 ECL, Stage 2 and Stage 3?

Yes. Stage 1 is like up to 30 days, and we have 1.25% cover. And 31 to 90 days, we have 21% cover and more than 90 days, it is 50%.

The next question is from the line of Mayank Mistry from Batlivala & Karani Securities.