Suryoday Small Finance Bank Limited (SURYODAY) Earnings Call Transcript & Summary

Mr. Baskar Babu Ramachandran, MD and CEO; Mr. Narayan Rao, Chief Services Officer; Mr. Sarveish Kharangate, Head, Inclusive Finance; Mr. Kanishka Chaudhary, CFO; Mr. Gaurav Pawra, Head mortgage; Mr. Senthil Kumar, Head, Commercial Finance; Mr. Sasidhar Vavilala, Head Analytics; Mr. Himanshu Mishra, Head, Branch Banking; and Mr. Himadri Das, Head, Investor Relations. We will first start with the corporate [ AV ], after which we will take you through the presentation to discuss the business model, key strategic initiatives and growth drivers. I now request the team to start the corporate [ AV ]. [Presentation]

I now request Baskar Babu to address the audience.

Good evening. This is our first analyst meet and such a pleasure to have all of you, investors, analyst, fund managers. We did our IPO during the most challenging of times, which was March 2021, hardly knowing that we will be facing [ COVID-2 ] in the month of April, May, June. So it didn't really give us much of an opportunity to interact with the investor fraternity or analyst at that point of time. We did have our share of challenges and we had our share of challenges for multi times. As we started in 2008. We are faced with [indiscernible] crisis in 2010. Before we became a bank, we had a [ demon ] crisis. And then [ post becoming ] a bank, we had the COVID crisis. The good thing about all of that is that there has been tremendous learnings, mistakes done. And hopefully, mistakes at the early stage of becoming a bank. However, backed by solid capital and liquidate all points of time will enable us to become what we think is a simple and superb bank in our financial inclusion segment. Thank you again. We just take you through our milestones in terms of our journey. We started in the year 2008 from a small 500 square feet office in Pune. The dream then was still however, small does not really enable us to become world class. So we had our own practices. We did some of those things, which is first in class in the industry, continue to do so. We received our RBI license in the month of May 2009. And as I said, we commenced operations from 5 branches in Pune. Just as we started it, the intent was to make sure that all our customers have a very operative savings account. This was yet 2009. We did quite a bit of pilots, including wanting to become a BC and NBFCs are not allowed to become BCs. So we kind of enable them open accounts in public sector banks. Hardly did we obviously dream that there will be a possibility of us becoming a bank ourselves one day. But that became a possibility when the differentiated banking license were announced. But still too small. We had INR 130 crores of net worth. We didn't have a clue that whether we'll have a chance to get a one. And if we get one, how to really navigate to the entire piece. Just at the time of becoming a bank, we have INR 1,000 crores of AUM, [ 7.5 lakh ] customers, and we had 200 branches, predominantly in the states of Maharashtra in the West, in the South, Tamil Nadu and in the East, Orissa. The reason why we were in [indiscernible] states was to do with the crisis in 2010, an epidemic happened in Pune localized. We realized that it's better for us to spread. So we said on the right it will be Orissa and the South, it will be Tamil Nadu, and here it will be Maharashtra. We continue to have a strong presence in all these states with an experience of closer to around 12 years in each of the state that we present. We had to list as per the regulations. When the small financing bank guidelines came, probably the regulator thought all of us will also be small banks. But many of us had a net worth of more than INR 500 crores just about -- we are about to start, so which meant that we had to list within 3 years of our net worth crossing INR 500 crores. Being a regulatory requirement, we wanted to do our IP at earliest not to be seen of breaching the regulations of the license terms and conditions constitutional as the regulator calls it. So we did our listing in the month of March 2021. At that point of time, our size was around closer to INR 2,500 crores in terms of AUM and we kind of have hit upon -- just before we started, we had the [ demon ] crisis. [ Demon ] did really have a impact on the overall sector, specifically on the low-income households. We did manage to navigate that and we had AUM of INR 5,000 crores at the end of FY 2022. We serve approximately 0.6% of the Indian household statistics in terms of a size may not really tell the story in terms of the depth of the number of customers that we handle. We manage the volatility pretty well. And we had the COVID during the period. COVID had really imparted very, very significant learnings. One never take anything for granted in terms of extrapolation, However, great it may be. The impact of any unknown event can be dramatic. And the way to manage is first to really recognize that there is a problem. And once we know there's a problem, then we find ways in terms of solving the problem. That, I think, was our key takeaway, and we will take you through in terms of how did we really incorporate those learnings. And this year of 2023 FY is what we'll call it as a reset. We cleared up our heads. We said we are going to acknowledge that there's a problem. We're going to clean up the problem and we're going to come back pretty strongly as a very respectable bank. What we did not lose in all of these 14 years and [ god willing ] will continue is our transparency, integrity and more importantly, what we call as a culture code. That culture code is not something -- not a great performance in 1 year can be made good in the subsequent next year or the 2 years. What cannot be done in a very short span of time is a change of culture. If it is good, you'll have to keep maintaining it, and slippage can always be faster. But we are proud that we have maintained that. And I kind of, in a lighter way, tell that if you have to know the strength of us and financially, you have to go through only the P&L account and balance sheet. The notes to accounts is not going to be giving any significantly different picture. We would believe that we'll keep that as we progress. We are reimagining Suryoday. The JLG model, our micro finance model typically has been trust customers as a group without even knowing customers individually. So we were moving from group loans to graduating individuals from various groups and single customer to the serving the entire household and to specifically in terms of rather a generic product, 1 size fits all, 2 specific products for segment of customers, not necessarily personalized on individual basis, but at a kind of segment level. So digitalization and digitization is across well it is cliche, but the fact is that how meaningfully use it to make things simpler for our employees, very, very simple for our customers is what we have embarked on and reasonably proud that we have been able to make an impact, and we will talk about it during our various products, including our flagship product at this point of time, which is Vikas Loan. The key learning for us as we hit upon the COVID, we invested heavily in terms of analytics, including investing INR 10 crores [indiscernible] system the reason being, while it is counterintuitive is that we look at customers all together as 1 million customers, 10 lakhs, 2 million customers, 20 lakhs. But within the customer segment, there has been a huge demographic shift from being homogeneous in terms of the income being 15,000 to 20,000, all of them plus/minus 20. The breakout has been far, far impactful, which means that there is a household of 50,000 part of the JLG with somebody 30,000, how do 30% of them already have a retail asset footprint. So we mine that and which is where the second one, as you really call it, is that MFI customers are the foot in the door, acquire the customers, either they already have a track record outside or you create a track record buyer lending. But once they have done that, understand the customer a little more deeply and take them to meaningful, which is the first step we have taken reasonably well, a year to go before I say that it's fairly successful as individual Vikas Loan. And the next step would be that all these customers are consumers of 2-wheelers, small ticket micro lab, the micro home loan easy to understand at a knowledge level, difficult in terms of execution. So our focus in FY '24 is execution, execution and execution. And alongside to bring balance to that, we also have the non-MFI customer base, predominantly driven by mortgages, which varies between INR 5 lakh of micro home loan or micro lab to approach of around closer to INR 100 lakhs depending on but purely move forward. Business purposes, [indiscernible]. We don't do any nonbusiness secured business loan at this point of time. Analytics have been our core strength. We have been doing it in [ XL ], we started moved to clicks during a period, and now we are at [ Tipco ], but the fact is that today, we have a far better insights into who our customers are, then playing it blind as a group. These are our strategic enablers. So one, obviously, as any MFI converting it to a small finance bank has a huge branch network across states and we have experience in terms of mini-state present for 10 years, some in a place like Uttar Pradesh, we have been there for 7 years, but not a significant presence, but does really help us. And 1 of the things we understood out of this transformation to the small finance bank is that we cannot really grow in new products by just hiring a better team from outside, putting your systems and process. There is an organizational learning, which is -- which will certainly take time. It takes a time of around 2, 3, 4 years. We are investing in that. So there's a product proposition and distribution is what we [ dovetail ] on our branch network. We have done a significant credit guarantee for our unsecured portfolio through what we call as -- what it is as a CGF [indiscernible]. The question is that whether you look at it as an investment or whether you look at it as a cost because in a good year like this, which is what it looks like for next year, the credit loss in microfinance portfolio is likely to be 30 basis points, 40 basis. But we pay closer to around 1% on the CGM if you cover. It's counterintuitive, why you pay 1%, and you're not going to utilize it and your credit loss is not going to be 30 bps. These are things which helps us fortify -- if -- repeat even god-forbid to happen like a COVID, we believe that the impact of that on our balance sheet and portfolio, more importantly, the way which address the problem will be significantly lesser and we'll cover that as we go along. Simplification, simplification. It's not a cliche where we use it. In everything we do, we kind of ask us whether it is simple enough for us, simple enough for the customers. And we have fairly made a good progress. Intent is to really take it can we really deliver a loan in 5 minutes. Can we really recover -- collect that money back also through digital means. Entire sector has moved to digital in terms of dispersing the loan, but we hardly have a success in terms of more than 5% of collecting back to the bank mode. However, we have closer to 99% of our customers in a particular product, repaying also through the bank mode, which is our own savings account. It's not easy. It took 1 or 2 years for us to come to this size, but we believe that is the first step in terms of rolling out multi-products, probably reducing our cost of operations over a period of time, and more importantly, connect with the customer one-to-one. I deal with the customer, not by a customer number, but I'll start dealing with the customer by the name, by the household profile which is what we capture through our app called [ Sarathi ] app. Partnership is a way to go. SFBs are not allowed at this point of time, explicitly to co-lend. There is a tremendous opportunity of that we have been representing to the regulator. And hopefully, it will come at some point. It's not a co-lending by somebody else sourcing for us. We have a large engine, we can also co-lend with a larger bank. That these 2 possibilities of us being originator in co-lending, us partnering with NBFCs for co-lending is probably the opportunity which SFBs make tremendous use for the years to come. Then we have the advanced analytics as I mentioned. But as we all did it, SFBs have really done liabilities customers are different. Asset customers are different. The day any SFB is able to meaningfully merge these 2 is the day that there will be a breakout of that particular SFB, I wish that we are one of them. And starting point of that is our social security schemes, we don't need to -- you'll never be getting into [ miss-sell ] on a wrong side, but these are schemes that many of our customers at a statistical basis do not have even the basic term insurance cover. And [indiscernible] starting point. However, unfortunately, in any MFI segment, 1% of the existing household closer to that or little more, little here a couple of basis points encounter the death either of the customer or in the scale of usually 4:1 of their spouse. But when they do, they hardly have any cover. And the test of that is to go back and check with anybody around your ecosystem, is a driver made a vendor, you will get to know that probably they just don't have cover or they don't know that they've taken a cover. If this is not going to give us any income, but what will certainly give us that clearing ecosystem where the stickiness is going to be far more stronger. This I would call it would be a dream where we at least can start with a basic term insurance, customer believes that if I deal with Suryoday, I'm better off. Can I answer that question? The answer today is no. Will it happen in the future? Yes. What are we known for? We can many times we say, what's your vision? In 5 years, I want to be INR 50,000 crores, I want to be INR 30,000 crores. That's how, I think, usually the strategy or a vision gets documented in form of asset base, in terms of profitability. We do believe that the banking is all about a long [ haul ] game. It's not a game to be judged in 5 years, too short -- the story goes that Mr. [ Deepak Parekh ] said that writing a book on HDFC is too early because many we have to have 25 years to really call yourself a financial institution has made a mark. So if that is true for a large institution, it is true for many of us. But we tend to get compared in the short run in terms of what did we achieve in 3 years and 5 years. Banking is not yet another financial services. It is a long haul business. How we really build your foundation is significantly important in terms of scale. So we did -- the way in which we are looking at is that we currently have 20 lakh customers, which is around probably less than 0.7% of the Indian household. The intent is that we want to have 35 lakh customers, which is 1% of the Indian household, 2% of our target Indian households. And that is the largest opportunity we see. And once we have that, what you do around in the ecosystem is going to be differentiating, whether we are a world-class small finance bank or we are just a bank which grows at 25% every year. Sustainable liability offering across all products. While in assets, we can target a specific segment. In terms of liabilities, we had to cut across is almost like the simplest analogy would be in terms of like a telecom company, you serve from INR 100 to [indiscernible]. But we accept that you'll have to kind of cut the products in various things. So liability will be cutting across while we'll be focusing mainly in terms of what is in the middle, which is around 3 lakhs to 15 lakhs. So we'll span across all of that. We'll talk about more in terms of technology and analytics. When we started where we wanted to become a bank. We have kind of asked one of the CA who was of a large private sector bank. How much should we really invest in technology to start. They said anywhere upwards of INR 100 crores, under [ net worth ] of INR 130 crores. So it was very difficult, but as the entire technology became democratized and that's a key differentiator for a minimum to do. We have transitioned last year to the best-in-class technology system. There were [ petty ] issues, and we are kind of overcome it. But what will help us is in terms of speed to market. Net worth is the largest 1 in terms of the competitive string for any SMB, but how meaningful do we really use it to market various products and ability to serve the customer as trust points is exercise that we have taken in FY '24. This is the scope that we see that inclusive finance is a foot in the door, acquiring customers by lakhs, probably acquire around 50,000 customers a month, add these new customers. But once you have gotten into it, how do really profile the customer and the segmentation would be that each of our inclusive finance customers, specifically 50% is a 2-wheeler [indiscernible] the small vehicle customer, is a micro home or [ micro lab ] customer and a small business loan customer. There is a good amount of intersection in the scope in terms of cross overlay, but how we really effectively use it is going to be determine the success. India, as you know that probably is changing from a pyramid structure where it's tapering towards the top to kind of becoming almost a diamond. The middle is bulging. I would say that it becomes this 1.24 lakhs to 5 lakhs. By the time the top 30% of the transition is to 5 lakhs to 30 lakhs, I would say that's more in the 5 lakhs to 10 lakh is very, very much faster than we really understand. Because we do a Vikas Loan product, if we just randomly qualify customers and ask them what the profile is. So the latest is why I kind of recollect from what it did in the last 4 days. I said, why is it that is so different. So we called up a customer in Rajasthan and he said he's got [Foreign Language], 12 acres, per day income is INR 2,000, and he wants a INR 1.5 of lakhs of Vikas loan. The other customer is in Nagpur. She has taken a home loan, husband works in a factory. She has got a grocery shop. The house -- the articles inside is valued at INR 5 lakhs. I didn't ask her income, but husband was earning 40,000 and she wants 1.5 Lakhs. She has taken home loan of INR 15 lakhs from SBI, principal outstanding is INR 12 Lakhs. This is also a JLG profile. But the moment we start recognizing it, if the customer wants 1 lakh, and I'm really looking at INR 75,000. I can say I'm giving a limit of INR 2 lakhs, INR 1 lakh now and 1 lakh whenever you want. So that's our focus for now. Over to you [ KC ] for taking through the numbers.

Hi. Good afternoon, everybody. A quick look at the journey in terms of the financial ratios and key numbers. So we have always been a bank which has tried to be prudent in its growth. We believe in the long-term story. If you look at our disbursements, it's around 16% CAGR. But what has also happened is slightly we have changed our mix. We have moved towards the longer tenor secured retail assets and which is the reason why the growth in the assets have been more than the disbursements. The other key aspect is in terms of deposits have historically grown at a faster clip as compared to the assets. But just to give you a bit of an insight into how we look at the balance sheet, right? What we say is that if there is a INR 5 asset that I have to fund I would put INR 1 of equity. I will take about INR 1.5 of refinancing from development institutions just to create the stability in my entire funding base and INR 2.5 will come from my deposits. And this is crucial for us because we are at the end of the day, just about a 5-year bank. And we would want to learn and adopt this journey of being a deposit collector gradually, carefully and in a granular fashion as possible. If you look at our entire deposit profile, more than 80% of our depositors are depositors who will fall in the 0 to 50 lakh and more of them will be more towards the 5 lakh rather than the 50%. And that's what we would want to do. One of -- this is possibly 1 of the reasons why our CASA today is a little low at 17%. But if you compare us with our peers, you will notice that the differential in terms of cost of fund is not really much. Possibly, we are 10 to 15 basis points here and there right? The other thing, obviously, linking up to the story that Baskar talks about of us being able to serve 1% of the Indian household over a period of time, crucial is the customer base and the growth in it. Historically, we've been an MFI bank, and that has provided the bulk of the customers that we have come. The important thing is how do we convert these customers from being uni-product consumers to multiproduct consumers, customers who are taking credit products from us will also have a need for saving products and are we able to provide those to them in the most convenient fashion. The core to the entire story is obviously, how are you making that money and what kind of money you are making. And which is what is reflected in the core income, the operative income in terms of the [indiscernible]. Our focus will continue to be a bank which is able to generate higher returns in terms of the mix of the portfolio that we have, so that even though our share of retail assets will continue to increase over time. At the end of the day, we would still like to be known as a bank which can manage a judicious mixture of unsecured and secured credit products and give the return to our investors. And how do we do that? How do we execute that is what's going to get to mind. What kind of a success story we are able to build. Our book has continued to change when we started. We had a very small proportion of book that was secured. We are now about 40%. What we see ourselves being is about a 50-50 bank. 50% of it will be unsecured, which will largely be coming from the inclusive finance customer segment and 50% will be secured, which will also come from a larger and a wider variation -- variant of customer base. So what does it really mean in terms of numbers from where we are today? And how does it look going forward? As I said, our NIMs today are double digit they're going to improve a little bit because we have been able to sort of take care of the bad book and take it out. But over time, what you will see is that there's a bit of a compression because of increase in the proportion of secured assets, which have lower yield as compared to the unsecured book. But at the same time, what is also happening in the community is that joint lending group borrowers are becoming aspirational they would want to be seen as individual borrowers and people who are also willing to pay a higher price for the convenience. And that will mean that while there can be margin compression because of the secured book going up, there will also be an uptick because of the individual credit products that we are able to offer to our aspirational customers coming out of a joint lending group. Cost of income. This is clearly an area of challenge and improvement for us. Pre-COVID, we have been a bank who have been more closer to a 50% rather than a 60%. Our immediate aspiration is that in the next 18 to 24 months, with most of the investments behind us, we are able to achieve a 55% number. That would be crucial. Today, we have been able -- for the last 2 years or so, we have largely been investing. There will be 1 more year of investing, especially in businesses like commercial vehicles, our deposit franchise. But then at the same time, we would want the operating leverage to kick in. Like I said, in terms of cost of deposits, there isn't too much of a differential between us and the peers. If you look at the small finance banks, given that we need to be able to attract money, we offer fairly attractive rates, which basically means that our CASA product is essentially a proxy for an FD without a premature penalty. What we would want as part of our journey and by engaging with the customers is that we are able to generate flow in our bank accounts that we have provided to them today. And that flow will help us to generate float. And that's what's going to make a differential between the CASA as a whole cohort and the FD rates that we provide. Clearly, what will be important for us, like I said, is that given that we are going to be having a 50-50 mix of secured and unsecured, how do we manage the overall risk of the portfolio, and that's going to determine the kind of profitability we are able to deliver. In the medium-term, what -- or rather in the short-term, what we see is that for this year, we would want to have a return on asset somewhere around 2 quarter to 2 half, but in a steady state, we would want to be seen as a 4% return on asset business. Return on equity, that's a variable depending on the kind of capital structure that we built. We have historically been a very conservative bank, having a leverage of not more than 4x equity. But gradually, as the book builds, as the book matures and the proportion of retail asset increases, we will certainly look to improving our leverage. So then what does all of this really mean and especially the story that Baskar talked about in terms of numbers, right? Given where we stand today, we see ourselves having a growth rate of around 30% in assets. And clearly, we will need to bolster our deposit game, and that was the reason why we see ourselves growing our deposits by around 35%. We would want to see ourselves as a bank that has a healthy mix of CASA, a bank that has a CD ratio of around 100% in about 18 to 24 months' time and then have that kind of balance sheet mix, whilst we are growing. In terms of assets, like I said, clearly, we would want to have a judicious mix of secured and unsecured. Unsecured is the 1 that's going to give you the higher yield and the exponential earning. That is a segment that we have been in for the last 14 years versus an NBFC and now as a bank. It's a segment that we understand very well. It's very proximate to what we have been doing all this file. And we would -- we believe that that's the segment that we can address very well and in a very safe manner. And so far as deposits are concerned, and Himanshu, my colleague, [indiscernible] will speak in a little bit more detail about it. But I think the thumb rules are very well defined. We would want to -- it to be granular. We would want to have a judicious mix of CASA and FD I think in the long-term, and this is 1 number which can only grow gradually. So our first port of call is that we reach about 25% CASA. Hopefully, in the next 12 to 18 months, we'll be there. Possibly Himanshu will be able to tell you how to do it quicker. But that's where our challenges are. So given that our asset story is going to be almost equal mix of secured and unsecured, how do we really navigate this credit space, right, to be able to give the kind of returns that we are talking about. This is a mix of learnings and opportunities that are there in the market today. And clearly, from a point of view of learning, I think Credit underwriting is something that you will have to constantly review given the client segment and the customer segment you are in and the kind of products that we would want to offer. And technology clearly helps because what technology helps to do is to be able to get to know about the client as part of its customer experience journey. So we need not be obtrusive, but we can get to have as much of information as we would want to have about the customer. I think this will be very crucial, right? Depending how we are able to underwrite customers how we are able to -- do the fulfillment of the various products that we are going to get into the market. But I think as a bank, given that our core customer base is going to be that inclusive finance customer base, which is aspirational and always trying to move on to the next level of its economic journey, we would focus on products that are based on cash flows. We would want to focus on products that are short cycle, and we would want to focus on products that give you that yield. The other is an opportunity which is available today in the market and not just to us, but to every other player. And this is basically the government of the country trying to push credit more for enterprise. And that is the [indiscernible] program, which is run by an agency of the government. We believe given the kind of mix that we have in our business or we intend to have in the business. This is a very attractive proposition. It does come at a price of about 1%, like Baskar said. But given the kind of history that we have seen in the inclusive finance segment, where there is an event every 4 to 5 years, which you cannot imagine today, this is something that works. It will provide us with the guardrails to be able to grow our unsecured business cash flow-focused credit products. But at the end of the day, all of it will have to be supported by a judicious approach to underwriting and the risk that we have inherent in a business such as ours. And for that, it's a very basic simple rule. Save when the going is good, so that you can save enough for the rainy day. As a bank, what we have seen and what we would ideally want to do starting this year, given it's really the good times for us is that we are able to set aside enough money every year so that in 4 to 5 years' time, when you possibly have a probable event, you have saved enough money. The basic idea being that we are able to always provide very even earnings and returns on the investments that is being made. So as a policy, what we would want to do is that every year, we would want to keep aside a certain proportion of the money that we make for that rainy day, which can come anyway in 4, 5 years' time or hopefully not. And with that, I will hand it over to my colleague, Himanshu, who joined us about 3 months back to build our liability story. Thank you, Himanshu.

So yes. Just a minute please, [indiscernible] in my pocket. Yes. So as Baskar was saying, liability happens to be only business, which I think could be slightly not restrictive for us, and we can cut across the customer segments, customer profile, geographies, et cetera. So the way I look at it, I think liability has been a pretty simple business, but difficult to execute across the bank, right? That's why the [ riddle ]. It's a very, very non-glamorous kind of a business but which I'm sure it's on a very, very boring pillar, [indiscernible] product, people and initiatives and distribution. So the way we look at now, if your product could be one, which you can address the segment of [ societies ] basis the profiles, basis the pro forma -- sorry, persona, basis the needs of the customer, right from the mass retail to emerging section of society or the middle class or the affluent segment and then the top most segment of society, I think you are taken care of because everybody has a need. So similarly, the way we talked about it, the [ HY ]accounts, the senior citizens, professionals, self-employed, each and every person sitting in this room and outside the room is my customer. So I don't have that worry that whether can I lend in this segment, can I borrow at this cost? No. So that's what my segment. But why should they come with me? I think apart from your pricing, apart from the solution you offer. The single most thing which comes to my mind is called something called trust. Easy to spell out, difficult to define. When I talk about trust, it could mean different things for different people. But in the simplistic form, when I talk to various customers when I travel across. It means ease of doing business, being available when your customer wants you, do it in a most simplistic fashion, and do it at a time of his choice and without more you want to operate the bank with. Otherwise, I remember a time when I was a kid, my dad used to be a government servant. So when I went to open an account in 1 of the old PSU banks, I remember the gate of a PSU bank, shut like this, there was a chain around the door and the guard standing with the gun half side in and inside in. So when we went inside, he said, why do you want to go in, said, [Foreign Language]. Now imagine just today now 25 years down the line, now bankers are coming to you. So I think the situational times have changed. So is the banking. So if you look at it, apart from the physical process of the bank, Corona has also been a boon for a lot of businesses, right? For example, who would have imagined that a [Foreign Language] accept a [Foreign Language] payment on a QR code. Who would imagine your driver would have accepted a salary on a Google Pay or your [Foreign Language] would have accepted a payment on the Google Pay. But it happened, none of us could imagine that today. So as Baskar was talking about digitalization and digitization of the economy, I think it has made us all think that what innovation can be brought to the table where it can actually be a step closer to customers' convenience. For example, in time of Corona, we have all seen what's [indiscernible] family banking calls going up, right? We have also seen office meetings happens on MS Teams nowadays, people working from work from home, and obviously, now that's changed. But that has given a birth of something called video banking or VKYC, you're opening accounts there. You're doing transactions there, right? At the time and place of customers choosing. So if we can bring in such kind of products which is aligned by the customers need. I'm sure we have a winner in the game. So that is 1 part of life. So we are going to create -- sorry, [ curate ] products like that, which are as per customers choice, profile and the convenience, and I'm sure we're in the game. Secondly, when we talked about people, I think the most important thing is your people. While all of us are sitting here, but the people who are actually on the ground are our brand ambassadors, right? The person who deal with a customer is my brand ambassador. So we need to be very, very specific skill set. It cannot be a generalist anymore. And 1 other days, then you can have a journalist and you don't have a specific skill set. So today, a trader would have a different need rather than a senior citizen or a women banking customer or a student or an NRI or HNI customer. So you need to have a very specific focus on each segment, if you want to really curate offerings for them and really drive the focus home. So similarly, we want to create a very, very clear, separate focused, dedicated team, 1 for acquiring these segments, which is our dedicated acquisition team down the line strong relationship management team, which are fully equipped with the kind of product and services we require in the market and ably supported by the superior customer experience team, whether it's physical, based in our branches or through our video banking center or through a call center. So we should be available both in physical and digital mode. So we'll call it now the [ phygital ] is the strategy. Down the line, if you look at it, which I just spoke about it, the employee as brand ambassador through the heightened employee engagements, cross-skilling, upskilling and obviously a well-defined carrier progression program so that our employees remain for us lifelong brand ambassadors because I think it is 1 thing which has proven in any banking institution is that vintage employees are truly the pillar and [ cornerstone ] of getting more loyal customers. So I think that's what we're all looking for. Coming back to now the initiative, I think I just covered about [ phygital ]. Now I think very important perspective, what Baskar spoke about our investments in data and analytics. Gone other days when you just can go and create anything else and people will be buying from you. Now everybody has a different need. Somebody wants to order from a Swiggy, somebody wants to order from Dineout, Somebody wants to do [ Ola ] or somebody wants to go out and eat out in a particular restaurant, and you need a particular kind of offering. So data, which we have, thankfully, over the last 6 years and even before that, when we became a bank, that has given a lot of insights. We're able to now understand what kind of customer behavior we are talking about and hence, what kind of a nudging is required to each customer. And what kind of product or service can be offered, so that customers understand it means to him or her. Similarly, as we said, as I said, products can come, products can go down the line and everything can be copied overnight, right? It's a commoditized market. But what can't be copied is your customer experience. Hence, we are very clear. The customer experience has to be the hero of the organization. And hence, we are launching soon enough Net Promoter Score and obviously branch-level service score cards, where we will measure service at each customer touch point and see how can we better each and every day. Last, obviously, we spoke about distribution. We have thankfully large enough distribution. While, yes, we have about bank branches about 100-odd locations, but we also have a large distribution branches on our typical asset centers, our inclusive finance centers. So we will leverage that as Baskar was saying, if you can find out a meaningful way to serve both. So to my mind, that's a wonderful way to look at liability strategy into 2 pieces. One strategy would be for Bharat, 1 for India. So you raise deposit from top 100 city centers, which is your India and you figure out then for Bharat, you may need simpler products, less complicated products and the touch points, which are easier to understand and operate. So something like SMS banking, something like door step service, something like pensioner camps in those areas, education awareness initiatives in those areas. And for say metro and urban center, you talk about mobile banking, corporate banking, net banking and the likes. So I think -- this, I think, put together makes a compelling proposition. If you make it simple, based on these 4 products -- sorry, 4 pillars, product, people initiative and distribution and you are there. Moving on, I just spoke about same thing. Now we are talking about segmenting our offering. And these are just to name a few, right, from senior citizen, if you look at for a senior citizen what typically would you like to have? These people have typically 1 source of income, right, in the kind of segment we want to offer. They're looking for a high rate of interest, low-cost or no-cost banking services, banking service at their door step or branches, and they should need to be serve on priority. Similarly, in our customers our HNI customers look at limited efficiencies, digital banking experiences, similarly exclusive lifestyle and benefits and similarly for task in government banking segment, what they look at correction solutions, payment solutions and so on and so forth. So we are trying to create offerings in every segment, so that they can match it up, and that's what the next line tells you. Digital solutions on the payment and collection side, which is CMS, collection links, e-mandates, EPOS, QR payment solutions, soundbox or the likes, down the line financing solution, if you have a tie-up with digital systems and partners, whether in-house or with a collaboration, you can do a lot of meaningful digital lending down the line there. Similarly, corporate and banking we spoke about, if you can add tax payment, if we can offer you comprehensive salary propositions, down the lane API banking, MST lending services, I think we have a winner in the picture. Moving on to third side. These are a few offerings in pipeline for next over 100 days. They're going to be launching senior citizen account, [ HNI ] savings account. We are working on our super app, hopefully, down the line 6 to 8 months. We're revamping our internet banking platform completely, and we are looking to launch a trader specific accounts and also account or professional current account side. So these are the few steps we are doing hopefully, to put us in the right path. Last, as we spoke about, the Suryoday trade, now whenever we open our branches in top 100 centers, there will be strategic branches. As in, we will have enough data and understanding of competition from RBI and other surrogates that where should we open a branch, should it be in this area, should it be that area where it's going to be more visible, more closer to my client and more likelihood to get depositing, success there. Similarly, each branch should have a dedicated acquisition team, a relationship management team and a service team in the metro areas. And obviously, in India, this is the model and for the Bharat model will be slightly different. Down the line, as I said, liabilities through inclusive finance branches. So there we will leverage our teams which are already existing and operating in the markets, and we will ride on their success to get us introduction to those people, and we'll start building their accounts. Similarly, I just spoke about from VKYC, we have a capability of video KYC. We want to convert it idly speaking to a full video banking experience, which means except taking cash and giving cash, I can complete your all transaction through video banking, right, from opening an account, doing the FD, doing the check transfer and all lot, what you speak about. Last, we spoke about nowadays, you see -- it is not necessarily that we manufacture everything yourself. You can also collaborate, right? It's buy versus build. So if you find there are synergies and the advantages in partnering with some digital teams, some fintech, we will go ahead and do that. And we've seen that, that's more efficient for your client, for the bank and for the partner itself. So we'll figure out if there are synergies with the partnership, we'll go ahead and start doing that. And for the customer, as I said, what a customer wants. Basically, we thought customer wants very simple thing bespoke products go out the days when you can say, [Foreign Language]. Now everybody wants tell me what I need. Don't tell me what is available to you. Sell me something which I want. Don't tell me what you have. So we'll try to create those products, offer value proposition. Then digital experience today, less and less people are likely to visit your store. Specifically in this today's event of COVID or maybe people just became too much comfortable. We don't know that yet, but that's experience, right? Then simplicity, nobody wants go there, do this, this form that form, they want fewer clicks clear complications in life, right? Last persona [indiscernible] we spoke about and most importantly, I think security because this is something we also know that while digitalization is going up, other things are going up too are the frauds. You want to be very sure that where you're dealing your money is secure, you are safe and there are enough protocols available to safeguard your interest against any unfortunate event. So these are the few things I think which covers the entire liability plan. While it's the youngest business, I will say, and I'm the newest member of the team, but I'm sure with the kind of experience this vintage team has, I'm sure we will take it to the next level. So I will now welcome my friend, Sarveish, for talk about inclusive finance.

Yes. Good evening, everybody. As I talk about inclusive finance, that's been the oldest business for the bank. So for the institution, it's the oldest business. On the JLG front, the group loans which we do. Today, we have got a book of INR 2,500 crores, and that book is performing at greater than 98% of efficiency. Besides this, we have got another flagship product, which is our Vikas Loan product, which is individual loan products. And that product is completely the collection is happening through digital channels and that book is performing at around 99% plus of collection efficiency. So what we have seen post-pandemic is, the digital penetration has gone up even in this particular segment where like earlier Baskar or Himanshu both said, the QR code has been widely accepted now. And even this particular segment are more comfortable now dealing into digital economy rather than a cash economy. If you look at the quality control side on this, we have got a strong underwriting team and we have put -- we are doing a video PD for each and every customer. So that's how the quality has been measured while we are onboarding a customer or while we are giving any [ repeat ] cycle loans to the customer. Besides this, the entire book has been guaranteed by the government schemes, which are there which Baskar has already spoken about. So that is also we do. Just keeping in mind saying that further going 5 years down the line or 10 years down the line, whenever there's a turbulence in the industry, we will be taking care of the book. So on the operation model, we have got a strong L&D team, which takes care of the carrier progression plan for the entire team. And this business is a people-intense business where we need more and more efforts, the staff to be on field. So that's why we take care of their learning and development needs along with the carrier progression plan for them. And we also got a direct collection team, which we have set up, which takes care of the deeper bucket collections, which I have. So that is also there in place for us. And we -- there was another team which we have formed, which is we -- in terminology we termed them as URMs, there is a unique relationship model program, where 1 particular [ FOS ] is mentoring another [ FOS ] and both of them put together as a unit they operate and they collect -- they have been allocated certain customers where the entire household data of that particular customer is collected and they are managing the portfolio. So this is a recent concept which we have started just 4 months back and a lot of training has gone into this and the team is on field as of now as I talk to you. On the distribution side, we've got a large network in terms of IFOs, the inclusive finance outlets and then the composite launch outlets where the branch banking and the retail teams are working in 1 particular umbrella. And besides this, the unbanked rural segment -- rural places which are there, so we get up to those particular cases. And on the -- if I talk about the platform, we are completely digital in terms of onboarding the customers at whatever stage. So we can say we are completely paperless and entire thing happens on the digital apps, which are available with the field team. Along with the strong data analytics team, which uses a list of the preapproved cases which are there -- if you look at the table down below, predominantly, we operate into semi-urban segments, both on the group loan front, which is the JLG and the individual loan front. And the ticket size for JLG is typically around 30,000. And when we talk about individual loan, the ticket size goes up to around 70,000 type of individual loan. And with a robust underwriting process and the portfolio getting covered under [indiscernible]. So we are scaling up this particular business as well. Okay. I'll just move on to the next one.

So just to add a couple of points on the earlier one. So if you have to cover 20-kilometer radius from a branch, you just need 2,600 branches to cover entire India. India got 3.8 million square kilometers area. And if you take a 20-kilometer coverage from 1 branch, you actually don't need more than 2,600 branches. And we are already operating in 430 branches in JLG and we covered 2,400 pin codes out of 21,000 pin codes in India. We're already covering 2,400 pin codes. And there are markets like Maharashtra, we hold 19 percentage market share in JLG. So we are a significant dominant #1 player in these markets. Like if you go to places like Solapur, 1 out of 3 households will be having Suryoday relationship. So that's the kind of strength we have built over the past decade plus in this. And it's no more a customer who's having the first cycle, you'll get 30,000, second cycle will get 40,000, third cycle you get 50,000. It's driven basis, what is their expected imputed income and what is the current relationship, not just on JLG, but also on the retail assets. And also, what are the loan leverages they got in the market, even the co-applicant and guarantor. So combination of that, we identify -- we let go of nearly [ 1/6 ] of our customers who otherwise could have given in the past. So that's a kind of intelligence and that's the kind of distribution we currently have.

Thanks, Sasi. So if you look at [ IFO ] strategy and the enablers, we follow AAA approach completely where the first A stands for [ AOCTV ] that is where we do the customer point verification while onboarding a customer and complete household level data has been captured. The 1 word which you see Sarathi. Sarathi is a name of app, which internally we have developed and it's there with the team. They have entire household data along with the photographs of their house and the customers, everything has been captured into that. If you look at the second 1 in the analytics, as Sasi was already mentioning, we have got a strong analytics team which helps us into customer acquisition and cross-sell risk management. So all this is taken care into that, an augmentation where since we are capturing the entire household level data of each and every customer, it helps us to serve the customer better by using artificial intelligence and data analytics for scaling up for the new products of the bank. So the focus products for inclusive finance customers, typically, the first one, I would say, is a micro lab type of a product where they require funds. And every household is having a 2-wheeler here, and that's the need for this particular segment. So moment the son or the daughter she turns 18, they want a 2-wheeler into their hands. And the demand is very high there. So we want to focus on 2-wheeler along with the small business loans for them. So typically, smaller ticket loans for their businesses. Besides this, we have got another line of business which we do to the partnership channels. So the BC partner channels, and we have got 3 to 4 business currently who are operational, and we are looking at expanding in that particular space as well. So I just appraised on the unique relationship model that's a unique model, which we have come across, and we have started practicing it, where it's a micro unit within a branch where 1 RO is going to mentor the second guy. So it's a train the trainer type of a concept, where both put together where they work as a unit and they do the business, both put together as a unit. So the part way for the customers is, firstly, my onboarding happens in the first cycle through JLG model, that's the group model where we create a track record for the customer. There are 2 types of customers getting onboarded. One is completely new to credit, one who's new to bank, but not new to credit. So they get onboarded as a first cycle customers and moment, they have a track record with us we go for a second cycle loans with them. Post second cycles, this customer gets a choice to either continue in JLG format or the individual loan format and through data analytics and artificial intelligence, which Sasi was just talking about we give a preapproved loans to them, which we are booking it under the Vikas Loan book. And in -- where we do Vikas Loan, the household level complete data has been collected. So we've got the household income along with the household liabilities, whatever are there, and what would be needs further going. So all this is captured, which helps us -- which will help us for into augmentation and providing the right product at the right stage for this set of customers. Besides this, we also want to -- we are focusing on the savings for this set of customers where we are incorporating the habit with for them after opening bank accounts to do smaller savings for them. And as I talked to you, we've got quite a few customers who have opened fixed deposits where a small ticket fixed deposits with us for longer tenure. So that is also there. And on the social security schemes, we cover since these customers belong to mid-level of the pyramid, so we cover them under the social security schemes given by government of India also. So in case of any calamities, these customers are taken care in that particular stage. Over to you, Sasi, if you want to add anything?

Just to add on the Vikas Loan. This is a fundamental graduation or a transition product for a JLG customer. JLG customer typically takes a load in a group there is a group behavior. However, in Vikas Loan, it's an individual customer, individual product. So if you look at the largest NBFC in the country or 1 of the recently acquired bank license bank. So 1/3 to nearly 40% of their profits come from this particular product of cross-sell STPLs, small ticket personal loan. The average kit sales is about INR 1 lakh, and our current average ticket is INR 70,000 and it largely boils down to how you curate the data and how -- who you can choose. That's a fundamental starting point. But the bigger story is in execution. So our team is able to -- over the last 18 months, almost 20 months, our team is able to build this product from strength to strength, and we are able to see 99.7 percentage collection efficiency in this. 99.7 percentage are 30-plus is 0.5 percentage. So if I take static pool, if I take 12 months, so the maximum part, I get is 1.2 percentage right now. So it may change. The point is, right now, we're in a building phase. Over a period of time, it may be a little higher product, but we operate this product at 28% IRR. The JLG is at 25%. This product is at higher IRR and also about 3.5% fee income. So this takes care of a much larger part and the cost of collections is significantly going to be different as it scales because it doesn't require the whole month collections. The entire collections get over indeed 91% of our SA gets cleared by the due date. So what happens is -- typically, this product, if you look at the market, if somebody goes for [indiscernible], it's anywhere between 18 percentage to 25%, depending on how they are targeting. So primarily because we have a savings product, we have the advantage of the bank license we can see whether the -- our money is there in our account or not. 100% of the customer got a bank account, it is through SA. It is not any other mode. So we know whether there is money in the bank account and then we make sure the money is put in the bank account before the clearance. So that's the fundamental difference we bring into this. And this is a primary transition product, and it should be graduating into further products.

Thanks, Sasi. Lastly, on the success mantra, if you see we already spoke about analytics being used for customers onboarding and the repeat cycle loans. Besides, there is the strong credit underwriting, which we already spoke about, digital journey, entirely digital, where we are onboarding the customers. And on the collections, it is digitally collected to the SI mode and UPI channels, which are there. And on the analytics for risk management, it is already covered. And lastly, if I talk about it -- the portfolio is covered CGFMU. So this is -- this product and the customer base becomes a gateway for us to enter the household with different bouquet of products for the bank. With this, I end it here. Thank you, and over to you, Gaurav.

Hi. Good evening, everyone. So my name is Gaurav, I take care of the mortgage business, and I take you through the mortgage slides. So I think the mortgage market is clearly very large. It's super important for any lender to really look at the space he wants to operate in. You have customers starting from 9% going up to 24%. You can look at people like you and me, typically going to a bank, looking at a [ catecollateral ], high-ticket size low rate of interest to somebody who's in an informal segment. So while there is no real definition, which is there in the market with regards to affordable or semiformal. But the way we see it is the biggest chunk today is with the large banks looking at home loans and loan against property in the 8% to 9% kind of a range in ticket size, which are really large, which is also linked to the collateral, also linked to the income and also linked to the profile of the customers. However, 1 notch below that is the MSME segment, the large India we kind of come across, which is slightly informal, have good repayment capacities but do not really have the formal documentation with regards to taking a loan, do not really fit into the bank policies for getting a formal loan against property or a home loan. Going on to maybe affordable segment, which is slightly lower in ticket size, maybe about INR 10 lakh, looking at collateral, which will be maybe a nonstandard looking at a [indiscernible] of Bangalore or regularize colony or maybe a society part in Rajasthan. Ticket size typically in the range of about INR 10 lakh to maybe an informal EWA segment. So while we see the market is highly polarized, it becomes important for a player like us or anybody to really look at the segment we want to go and accordingly plan the strategy around it. So we, as a bank today, we feel that this second and third segment is wherein we can really add value, which goes with our really complements to what we do as a bank to the customer base we have. So the base prime, which is near prime segment, semiformal segment, typically the MSMEs and the affordable segment is wherein we intend to operate and we have been kind of focusing. Moving on. I think the journey so far in the last -- we started Mortgages about 4 to 5 years back, looking at the affordable segment, added products, added geographies, really learned across these products. So basically, I think today, we see the volumes are small, but I think the platform we have been able to create is phenomenal. A full platform, which is ready for high-level growth with a superior quality of portfolio, any -- which ways, I think the mortgage portfolio brings in that stability, the rundowns are slow, the portfolio is stable. So it really gives you that kind of a cushion for overall portfolio performance of the bank. In the last 4 to 5 years, we have been focusing on largely the MSME segment, looking at a productive end use for home loan customers who are looking to buy properties for self-use instead of looking for funding home loans for investments, or loan against property, we call it secured business loans for customers who are looking for working capital, for developing, for productive end use. So that has been the focus for us clearly, and looking at both the products because it also goes -- the first slide, which we kind of discussed, it becomes important that we have a strategy, which is distribution, our policies, our collection strategy, which is in line with the customer segments we are catering to. So on basis that look at a distribution model, which is lean, which is not really manpower intensive, which is not something which is highly, highly fixed in nature. So looking at that, we have been able to really pivot assets to create a portfolio, a healthy mix, both in terms of home loan and loan against property. I'll talk about the variance, but largely into how a healthy mix, which gives us good profitability and stability as far as the program is concerned. I think today, we have a pool of -- a portfolio of about INR 1,000 crores for our semiformal segment and about INR 100 crores, close to about INR 90 crores of our micro mortgages, which we started just about 2 years back. [ Briju ] talking about both the products, micro mortgages, typically the affordable, which we discussed in the last slide, ticket size, we started slow, we started in a conservative manner to test the market, to take this segment. Looking at a self-construction loan in the range of about INR 6 to INR 7 lakh, a tenure which is about 8 to 10 years and our conservative LTVs in the Tier 2, Tier 3 market. The product has been working phenomenally great for us. My colleague, Vishwanath, who manages this business. Today, we've created a book which is fast growing and hitting a run rate of now INR 15 crores with absolutely no stress on the book. The crucial loan is more on the semiformal side, which is the -- your semiformal home loan, typically, a sweet spot of between INR 25 lakh to INR 75 lakh for customer aspiring to buy their first property or MSME is looking for a working capital loan. A range of about INR 25 lakh operating in Tier 1, Tier 2 cities. Here, we look at a variable model instead of getting into a fixed model wherein the productivities are high and costs of controls. We -- in both the first segment, it is completely managed by the team. The sourcing team manages the entire collection starting from -- in fact, we don't have any stress, as I mentioned, but the entire piece is managed completely in-house. While for the other part, we have exclusive collection team while the first 12 months is managed by resourcing team, which is linked to their KRIs. So that there is a sourcing discipline followed by a full collection team, which supports in collecting of this particular portfolio. I think the -- as I said, the journey so far has been -- the numbers are small, but I think we've been able to choose, select the customers and really look at a sustainable growth as far as the business is concerned. The market is large. I think it's about for us to decide as to how much we want to do. But however, it's super important. It's a competitive market. We kind of look at the right products and policies to make it productive for the sourcing team, for the customers so that it really becomes -- the conversion becomes really good. To do that, sorry -- yes -- so to do that, as far as segment strategy is concerned, we have been focusing, as I mentioned, wanted to look at end-user segment, MSMEs who are looking for productive end use. As far as geographies are concerned, we have been focusing instead of spreading ourselves thin going all over the world, we have been looking at going deep in the existing geographies wherein we started wherein we have bank presence. So currently, we are operating out of 7 states in about 26 locations as far as the bank is concerned. Portfolio, as I mentioned, it's a highly diversified portfolio. Instead of having a concentrated risk in 1 particular segment, in 1 particular geography, we're looking at having a portfolio which is spread across geographies and customer segments. And to do that, we -- as I mentioned, we have created a very -- spread a hybrid distribution model, which is supported by our in-house team, referral partner, which has connectors, which basically are chartered accountants, property bookers and the developer -- small developers, followed by our channel partners who work on a variable payout with us. While -- as I mentioned, this opportunity is large, but I don't -- we don't really believe in creating a model wherein you have to really hire from 2,000 people for doing, let's say, 2,000 accounts. So while mortgages doesn't really have an end-to-end digital journey as a product because of the collateral, which is legally technical of the collateral. But it becomes important that we have a phygital model, which really brings in efficiency as far as the entire process is concerned, which is starting from onboarding to underwriting and to a large part of collections being done. While we are working on them, we have currently our [ LOs, ] but we are moving to a more robust platform in next quarter wherein we see that we'll be all to digitize a large part of this entire underwriting and onboarding process. I think on the micro mortgage strategy, this is one piece wherein I mentioned a high-yield business, a business which gives us -- comes at about 17% to 18%. We are also pivoting slightly to urban sector. Currently, we are in the range, as I mentioned, about INR 6 lakh. We intend to move slightly 1 notch up, the urban segment, looking at average ticket size of about INR 10 lakh to do that. We launched products, which will be in the near buying segment in the microlab segment and in geographies touching Tier 2, Tier 3. To do that, we are also the same on the hot food [ LOs, ] which we are introducing, which is there for this product because this is the 1 manpower intensive product, which is retail granular and talks about retail customers coming in. So expansion is something. This is -- as I mentioned, this is currently in Tier 2, Tier 3, SSB locations, wherein we have presence for our [indiscernible] branches and have existing ecosystem of the bank. I think digitization is something which goes with it and collection, story is something which has been really working great for us. And we see that in the years to come, this will become one of the crucial products for us, not only from a profitability point of view, but also a progression for our JLG customers because a large part of this business we see that would be coming from our JLG base, which is large. Like 2-wheeler loan, Baskar has mentioned, there's going to be a progression of a customer. In fact, today, also, we see a lot of our JLG customers are having prime mortgages running with PSU banks. But definitely, as far as micro mortgage is concerned, is it going to be a big, big opportunity. That's it from my side. Thank you very much. I'll request my colleague, Senthil, to take you through the wheels strategy.

Thank you, Gaurav, and good evening all. I handle the commercial vehicle portfolio of the bank. And as of now, we are a small portfolio of around INR 400 crores. We do have a commercial -- I mean we do have a very small 2-wheeler portfolio as of now, which we have recently started. To give you a perspective of the commercial vehicle market, let me run you through this slide. Now this is the market size for commercial vehicles. We have around INR 5.6 lakhs -- INR 5.6 lakh crores of market, which is available to us. We are -- like we are currently focused on the used vehicle market with the vehicle age ranging between 8 to 10 years. But if you really see the market, the market is so huge that in the first 0 to 4 years where we have around INR 3.5 lakh crores, all these vehicles in the next couple of years will be moving into a segment of 5-plus years. So we have a huge opportunity in front of us. Commercial vehicle has got a unique -- it is uniquely divided into 2 sectors. One is organized and unorganized. The organized segment, basically, we have these large operators, heavy commercial vehicle operators who run across the length and breadth of the country. And you do have this unorganized segment, typically this last mile connectivity where you have these smaller commercial vehicles and LCVs, which run between the cities, which come to our door steps to deliver fruits and vegetables and whatnot. So like we are currently present in the organized sector. Our aim for this year is that we will move into both organized and unorganized sector. With this background, let me give you -- yes, let me give you a brief of what we are doing now. As I said earlier, we have INR 400 crore portfolio as of now. We are present across mainly in urban and semi-urban centers as of now. We are yet to make our presence felt in the rural areas. We are present across 8 states. We have around 22 locations which are operational. And we have a hub-and-spoke model where we have around 22 hubs and around some 24 spokes as of now. And as of now, like we have a sourcing team and the collection team, which manages the portfolio. And our average ticket size is around some INR 13 lakhs as of now. And in terms of 2-wheeler, we've just recently started this business around 3, 4 months back. The portfolio is pretty small, around INR 8 crores, INR 10 crores. We have average ticket size of around INR 85,000 and we are present across 2, 3 major cities. And in terms of our -- the team size, et cetera, it's extremely small. Well, coming back to commercial vehicles, the focus for the current year is to make a foray into rural area, like Tier 3, Tier 4 cities, use our existing -- the banking distribution network and also strengthen the sales team. This is a unique product where you need to have people who carry the relationship of the customers. This is a very relationship-based business. So we are looking at people with specific experience of commercial vehicles. In fact, I have around 20-plus years of experience in commercial vehicles, the team, which is coming in is also -- very specifically, we are looking at people who operate in the rural areas. And the strategy now for the current year is to ensure that we go more granular in terms of the risk where even the ticket size of these commercial vehicles, they range from around INR 10 lakh to INR 50 lakhs or INR 200 lakh sometimes. So now currently, we have not been -- though we started this business around 5 years back and as like any other financial institutions, we went through our ups and downs during the pandemic. Now we are -- our focus is going to be more on used vehicle. And that is the reason I showed you in the first place where the humongous opportunity we have in front of us for used business. We will get into Tier 3, Tier 4 cities with a more focus on granular risk where average ticket size will range around INR 10 lakh to 11 lakh with a focus on the small commercial vehicles and light commercial vehicles. In fact, as -- when my colleague, Sarveish, mentioned that there is a huge opportunity for cross-sell, for commercial vehicles, for our JLG customers. And when I look at the bureau report, I think we have around -- almost around INR 8,000 crores to INR 10,000 crores of commercial vehicles, which have been availed by our existing customers. So I think our focus is going to be to tap these existing customer base and work out on the distribution network, which is currently, we have around some 560-plus distribution centers across the country and also ensure that we optimize our cost. The easiest thing is to put across a team of 1,000-odd people and start sourcing. I don't think we are going to look at that model. We will look into building our -- building on our existing strength and also on partnership. Specifically on the 2-wheelers, we are clear that we are not going to go on organic growth model. We'll be -- we, in fact, have tied up with a digital sourcing platform very recently. And our growth in two-wheelers is also going to be inorganic. One is inorganic and other is on cannibalizing our existing customer base. And all these things will be possible by a fourth piece where I think the first piece, I think it's going to be people. I think without people, people with -- without people -- with people with experience in the segments which you're operating, I think we will -- we look at building this business. First piece, people. The second one is product and policy. Product and policies, we have ensured that it is aligned to the market. We have ensured that these -- the policies which we are bringing out now or market-friendly and which will ensure that we have probably a robust portfolio in the coming years. Another is process. Very recently, all these years, we have been more into a traditional way of booking business. Now in the last couple of months, we have been -- we are trying to move into an entire digital way of booking the commercial vehicle business, where the RO or the salesperson, he walks into the customer place. And he gets his KYC documents verified. And immediately, a bureau report is generated. And within -- probably within a span of 15, 20 minutes, where we're able to at least tell the customer as to whether we are going to go ahead with the loan or not. And an in-principle sanction is given. I think probably next 2, 3 months, this platform will stabilize. And in terms of the 2-wheeler, we have already, for the past months, we are on a hot food platform where the entire journey is digitalized where currently, we have a few staff sitting in dealership when the customer walks in. I think we are able to sanction a loan within probably, I would say, within 5 minutes, subject to he having the required documents, basically, the KYC documents. And we also have a process where the customer e-signs the agreement. There is no need for any physical copy of the agreement. And also his NACH mandates are registered immediately with the bank. Yes. And in terms of partnership, as I said earlier, we have recently tied up with a digital sourcing platform for 2-wheelers. And I think this is the way which we would like to grow our 2-wheeler business apart from cannibalizing our existing customer base. And we are clear that we are not going to put in more manpower or build a 1,000, 2,000 strong people force and incur costs and wait for next 4 years to make profit in this business. And also in terms of commercial vehicles, we are looking at tie up -- we were looking to tie up with smaller NBFCs across the country. Now as I said, we are present across 8 states and 24 locations. Probably by year-end, we will try and expand our base to around 52 locations in commercial vehicles, and simultaneously, in these locations, we will tie up with smaller NBFCs where we can have both the sourcing and servicing agreement. And by end of the year, hopefully, we should have around INR 800 crores to INR 900 crores of commercial vehicle portfolio. That is it from my side. Thank you. Himadri? Sir Please.

So the way we are looking at now in terms of scaling is that I sometimes call it unfortunate that we are not very large at this point of time. We are INR 6,000 crores in terms of assets, around 15 lakh productive customers and inclusive finance, with 30% of them ripe and potential either have taken or in the process of taking the other adjourned products. So looking at it in a more simplistic manner, a few of the way in which both liabilities and assets we are seeing is there are 2 models which are merged. One model is that, as you said, highly people-intensive, the other model, the way we would like to look at, including inclusive finance, is the model called unit relationship manager. Split into small units, pay them the highest that they would kind of do it because inclusive finance at the field level operates between 8 in the morning to 8 in the evening, not paid really to a point where they already keep shifting for -- looking for jobs and opportunities, both at the stress level and in the financial. So we had a policy right from day 1, which I would call is a day 1 culture, is that we are probably the highest pay masters at the field level. It tapers on as it goes to the top. So -- but that's the most important. This product, the inclusion business, we are in depends on the people. So we've built it around that. An entire product 1 is in terms of Vikas loan why we keep harping on this Vikas loan is not because of that product being profitable or it's excellent in portfolio, it is a mid-step for the customer to kind of graduate where we endeavor to get our site into their household. And the more and more we see it, it looks like a large opportunity. So whether we can kind of going to do a INR 35,000 loan, do something else. Can you really keep acquiring more customers or drill deeper into the customer. So Vikas Loan, I would call it, as a mid-layer for a customer to graduate where we deal with the customer on an individual basis, migrate them into 2-wheelers, migrate them into [ MDL ]. And the intent is that can we [indiscernible] want to be operating there at the highest price point. So the operational cost becomes so moderated that we are able to be giving them at a competitive price, it make as much profit as it would make if we have to give them at the highest rate. So small business loan will become the focus. The new to bank, Vikas Loan is what will be rolling out in a couple of weeks' time. So the intent of that is that can we really acquire the customer on the go with the digital app where the customer already has an excellent track record with somebody else, but I'm not really looking for a group to come in for them to lend. I will deal with them directly. I'll fund them directly and they'll repay to me directly. And the digital insights, which are available, not just [indiscernible] to anybody today, one, even without the AA model really becoming shape is that the richness of data which is available of the customer of just add this guarantor, which invariably happens to be the spouse or the son or a daughter. Most cases, it's 80% the spouse, 15% will be son, and 5% will be the daughter. Combine that footprint, the way we look at the picture, it looks very, very optimistic, very large. Then it comes to only one thing, which is people. You can't really operate the banking sector, today it probably operates at a 40% attrition. It's almost taken as a benchmark. We would like to really challenge that and see can it be much lower, can we really have employees aided by the tools of various things, including digitalization. We far more productive, earn much higher, work in a meaningful time of around 10 hours in a focused manner. MLAP is a natural extension as we build the Vikas Loan customer. Currently, we have 2 lakh and Sasidhar mentioned it's 99.5%. And if it really stays that way for another year, the key learning out of pandemic is that if I know that the customer is there and if I know that they have got a reasonably manageable economic status of overcoming the cycles, customers come back and pay you and if they are not paid for 400 days. So we want to implement that as far as the MLAP is concerned to move them and used cars and digital current accounts and all that will be products. We're probably without incurring the similar cost of an acquiring customer, which is INR 5,000, can we just put a QR code in a restaurant, you go just download and open an account and you get 20% off, that would really lead us to what we're looking at in a very micro market to start with, which is, I call it as Panvel to Chembur. Can we be the large bank out there, including being a small finance bank, but we are highly visible. On technology, I would probably ask Vishal to kind of quickly take you 2 things. We look at what is not addressed. For instance, while you all can open an account, do all of that in the bank account, if you want to make a customer complaint, can you really kind of figure it out how easy it can be. So we're saying, can you just go and do a mobile app and then press a voice recorder and send the message saying that I'm not happy with the way in which the statement is coming. Please take care. Period. Over. And then we pick it up at the back end. So just addressing those simple things is what will create customer delight. It is not necessarily a proposition where you'll have to spend money to delight the customer. In terms of our investments, we'll continue to do on retail assets and brand building, where we really, really have not done anything is that we started the philosophy that if I need INR 1,000 crores of deposits, why do we need to spend in terms of branding that I need to be known across. So -- but however, as a bank, the more you see, the more the trust you create, the more comfortable you'll become, so -- and in a year like this and that is we kind of get on, we want to reasonably start spending in terms of visibility, branding, not exactly tying up as whether it gives me deposits or customer base, but as you become a little larger from 6,000 to 8,000 to 10,000. The visibility is as important, not just for customers, including for employees. You feel that, kind of, if you say that Suryoday and we say which Suryoday, where is the bank -- cooperative bank, it really -- doesn't really do good. So we are consciously now doing it, though we didn't really believe because of the origin that we're an [ MFI ], word of mouth is the best advertising. Probably, in a bank also it is, but at initial stage, we really require it. And finally, I think it's important as the stakeholder management and for a stakeholder starts with employees, then becomes customers. And the third stakeholders as a natural derivative is the shareholders. If you take care of the first 2, the third is ultimately taken care. We don't nearly need to work on the third one first. So we do really believe that and it goes to 2010, where we said our stakeholders starts with employees, the employees then take care of customers. And if these taken care, customers will take care of stakeholders. And it is really we mean it, and hopefully, we'll demonstrate it. With that, we come to the conclusion of our presentation. Thanks for the attention. But if I have to broadly summarize what we are, we would like to really look at simplicity in terms of INR 6,000 crores of assets, how does it really become in terms of INR 8,000 crores, of which around INR 4,000 crores would be from our inclusive finance segment. Vikas Loan INR 1,200 crores portfolio, 2 lakh customer becoming 4 lakh customers. And kind of from our 2-wheeler penetrate into our existing customer base, drive the digital process, use analytics meaningfully. Take care of your employees at the field level, can they work only for 8 hours, stretch to 10 hours. Can they really make meaningful money and we kind of -- I would say that simplistically put, can they have dinner with their family at the end of the day. As much happy they come to office in the morning, can they go back happy home. It's easy said, but we are not able to do it on a consistent basis. But toward if we are able to do it, I think we would create a super institution, a lot of data available, simplicity of execution, working on a few things. Opportunities are so large. We don't want to be and I don't want personally to be in wealth management. I don't want to be in H&I. Let it all come in after a little of -- a couple of years. Initially, it's a big 3, 4 products, which is inclusive finance, take them to the mid, which is Vikas Loan, Vikas Loan to Micro Lap, home loans, small home loans, create a substantial competitive advantage to people and technology and look at the other products, which will fortify the balance sheet, which is mortgages, which is not necessarily an adjourning segment, commercial vehicle there could be overlap, just 2 or 4 products, very focused, just kind of create the stability. This year, we have guided that we look at a 15% ROE, can we really become a bank that we're 15%, becomes 16%, become 17%, becomes 18% and probably stays there around that. And in that process, kind of can you call out confidently that come what may, as the challenges would be, which keeps happening in our sector for various reasons without knowing what that risk is once in 4, 5 years, fortified by CGM a few. But if it happens, they're still really rock solid with a contingency provision of closely to 5%. Build a bank which is predictable, stable, sensible and above all simplicity in terms of our customer experience. If we are able to do it, which we hope that we'll kind of and as we did last year, we are in the progress, I think take it head on your shoulders, feet on the ground, build a very super respectable institution. Thank you very much.

Thank you, sir, for the presentation. So I would now open the floor for question and answers. [Operator Instructions]

Yes. Good evening, everyone. My question is -- there are 2, 3 questions. The first 1 is about the provisions.

Can you just introduce yourself, please?

Yes. I am [ Ajay Desai ], I'm a retail shareholder and having roughly around 5 lakh shares of the company. Now my question is, one is this incremental provision. When we see that getting addressed and no more hit to the P&L through this provision part. Second is in terms of risk, do you foresee coming election of 2024 or coming state election as one of the risks and how it can impact our future projections -- short-term future projections? And third one is definitely, when do you foresee, like, the valuations, what we -- at a price what we launched or the IPO when it came. So when do you foresee to achieve that kind of a valuation back to ensure investors don't continue to lose money? Yes. These are my questions.

Thank you, Mr. Desai. Too many questions folded into one, but I'll try to attempt and for a far more detailed numbers, probably KC will address. On the provisioning like last year, at the end of 31st March 2023, minus the ECLGS loan, we had around -- closer to around INR 160 crores against which we carry NPA -- of which we carried around closer to INR 100 crores of provision, INR 110 crores, INR 120 crores. So there is INR 40 crores of uncovered as of 31st March in terms of NPA. And the slippages we see, as I said, that the industry goes through good times for a sequential 3, 4 years. So likely that this year is going to be one such across the industry, not just for Suryoday and probably next year we will continue the same. So we are intending, as [ KC ] will mention, we'll make around 1.5% every year of contingency provision for the retail unsecured portfolio, I would say, including finance portfolio, which would mean that then by 2026, we'll have closer to 5% of it. We are covering with a scheme called CGM from you. And to just put it in some numbers, we will be investing, as I call it, investing, would be around INR 45 crores for this year, which -- against which probably the likely claims will not exceed 1/3 of it, if you have to extrapolate but why you really do it is that you cannot cover yourself with such things when actually -- when it really require. You'll have to do it probably when you don't really require. It's very simple, but extremely difficult to implement. So we cleared, we said that, okay, it's based on -- you have to just do the mathematical number of INR 37 crores of [ tipoff ] on March, you have to multiply, you're going to get closer to INR 400 crores. So we are willing to kind of let INR 45 crores be the investment for CGFMU. So that will take care of eventualities, which could be elections, could be anything. Actually, many times, you don't know what really hits an inclusive finance. So -- but if you have to be wiser by your experience, it's better to really create a 5% cumulative plus a CGFMU cover. So I hope that will really give some stability to the volatility in earnings as and whenever god forbidden events were to happen. I can't specifically call out on the election impact because sometimes it happens, sometimes it passes on. When in Karnataka had happened some of the parties we'd really say that we're very good of, but didn't really have an impact. So you can't really second guess of what the impact would be. But if it were to happen, are we safe? I guess that we are attempting to become safe against that volatility. As far as your share price and all of that one, obviously, they said, take care of their employees, employees take care of customers, have good products, they will take care of the stakeholders. Historically, pre-listing, we've always been -- irrespective of what the market was, we always raise capital at around between 2x to 2.2x of our book, even if the valuation was kind of in the market was there, we said this is our zone of comfort, 2x to 2.2x. So -- and obviously, I think the first time we really missed that mark was in terms of when we did our IPO. And equally, we also are very, very conscious about it. But hopefully, I think we'll start delivering the number. We'll create value for the stakeholders. Sometimes, when you do the fundamental things right, I think recognition comes sometimes slowly.

This is Anil Tulsiram from ContrarianValue Edge. I have 2 questions on secured loans. You have guided that we plan to increase our secured loans at 40% CAGR. So 2 questions, sir. First, what's going to be the mix between informal, semiformal and formal customers? And the second is, we have seen in the past whenever any bank or any financial tries to grow at 45%, means very high growth, some accidents do happen. And our focus is granular retail customers, which are not being served well by the other, means the income has been very difficult. So what are we doing so that the chance of accelerate is reduced. So these are the 2 questions. Thank you, sir.

One, I think when you look at the 40% growth, it's not necessarily 40%. There are all long annuity products. So I have INR 1,000 crores. Even if we simply do what we're currently doing without really changing the acceleration, which is, for instance, INR 35 crores to INR 40 crores is what we do in mortgages on a lean month to a good month, sometimes which will be higher, but just take around INR 50 crores. Since they are long annuity products of around minimum between 7 years to 15 years, at the same level, the growth will be around closer to 30%. It's not you're accelerating your business volumes by 40% to get an asset growth of 40%. Exact opposite would be inclusive finance. We have to achieve a 40% growth there [indiscernible] by 40%. And broadly, we are not into the secured loan. We are not into the NTC segment at this point of time, except in micro mortgages, which also is not NTC, they have credit -- at least track record in terms of micro finance, and they will have a track record of only a few MFIs because the customers evolve. When they were taking a secured loan, they will not have a multi small unsecured loans. It's not going to be any different from what we do. We are absolutely conscious that we want to accelerate anything. Sometimes the risk get awarded, but they don't ask even realizing it. So we are not really going to kind of go crazy about it. It's going to be a step by step. We're not going to kind of increase. What we're likely to do is that what works in 1 location. Now they're operating only, say, in 20 locations of for mortgages, we would like to take it to 30 with a similar product, similar thing, add the people. So that is not likely to increase the risk. If I suddenly go into a new geography and do newer products, that may. So currently, it will be mostly people with track record, but 80% of that will be self-employed segment. I will not call it informal segment. Salaries would be very less. And given that salaries would be in terms of somebody working for an MSME. Very, very few will be where somebody has got working in a multinational company and taking a home loan from me. It will not be there at all.

Dhruv Shah from Ambika Fincap. Sir, will it be fair to understand that our bank is not a rural-focused bank, but mainly a Tier 2 or 3 focused bank because nowhere in the presentation, I could see rural being mentioned, but it was more Tier 2 and Tier 3?

So you are right. We are not exactly a rural, but we are more outskirts of city limits of it. So that's the kind of profile that we have in our portfolio today. And that's the kind of profile we will likely to continue with even in the near future.

So if that's the case, will our ticket size in the inclusive finance be more than the peer sets?

Not necessarily. Yes. Not necessarily, right? Because we have been fairly conservative in the kind of ticket size that we typically start with and where we stand today. Our ticket size typically will start with around INR 30,000 odd, right? Even in the Vikas Loan where our customer is graduating to become an individual borrower, right? On an average, it is somewhere around INR 60,000, which is just a little bit shade above what we would otherwise give to a third cycle JLG customers. So I think the kind of ticket size that we offer is something for us to determine based on the kind of risk that we would want to assume. So we have been fairly circumspect in the kind of ticket sizes that we have and how it has grown over time, and that will continue to be the case.

And sir if you can mention in the inclusive finance, how many borrowers would be the single lender and how many will be odds plus 1 and 2 if that figure you are sharing?

Well, Sasi will share the data broadly. Again, Dhruv, the risk does not depend on how many loans they have taken. The risk is about in terms of how reasonable we are able to capture the economic profile of our customer. The typical microfinance model worked on first cycle 20, third cycle 30 -- second cycle 30, third cycle 40. It is what probably sort of a little bit of a history of experience and learning is that you can't do rearview mirror driving in inclusive finance. One cycle to another cycle, automatic without knowing who the customer is. It's probably at least our learning. It's kind of -- even if we fund INR 2 lakhs to a customer who has got more than 2 strong household income, has got their own property. They won't borrow more than they want. So 30% of inclusive finance in a segment across in the industry do not take the next loan if they're eligible. And who are those customers? You were able to kind of target them. And to give even a higher ticket, it is much more low risk than probably funding without even knowing who the customer is as a pool. The social collateral works very well when the ticket size is small, and the tenure is lesser. But when a group of 10, if only 2 of them don't pay or it still gets managed to an extent. If it is 3, it cracks and that's the time even the good customers don't want to be part of it, and which is what led to this Vikas Loan, and we are seeing more customers saying, if I want to borrow, can you lend me on my credit. I do not want to be standing for a guarantee for 10 people because my husband is saying that why do you want to really borrow INR 40,000 by guaranteeing for so many every month. So it's not, in the larger sense, if you understand the risk, the risk is much lower rather than going by how much ticket size do you do? So our ticket sizes are one of the lowest at this point of time, which is around closer to INR 30,000 per customer. But the fact is that does it mean that you are low risk or high risk, the answer I wouldn't be able to tell. However, if we're able to understand the customer or the footprint, for instance, your customer has got a good track record for COVID 1 and COVID 2, and she wants INR 1 lakh, happy to fund, provided you also have visibility in terms of the household income is more than around INR 25,000, INR 30,000. Microfinance norms currently stated the INR 30,000 as an income cap. But if you really kind of want to get into the household level, it is very likely that 30% of it will be more than INR 30,000, maybe INR 40,000, INR 50,000, then it is where a lot of kind of ensure that they get Udyam Aadhaar. So that it gets classified as [ PSF ], which is what we're going to be doing with new to bank [indiscernible] customers.

Yes. Just to add to the larger question of what you asked. So if you look at the entire industry, about 20% of the customers got a retail track, which was not the case 4 years back, 5 years back. Second thing is COVID has done a lot of good to the industry in one way. It's able -- now we are able to differentiate who is actually a good customer in bad time. But before COVID, everybody was a good customer. You hardly can differentiate between a very good customer and a good customer or a not so great customer. So that differentiation has clearly called off. And thanks to we being more urban focused or semi-urban focused. Our retail penetration is 38% compared to the industry. We are almost 2 extra retail penetration. So a sizable part of our customers already got an experience of handling individual loans in whatever small way. So that's a fundamental advantage. And just because they have serviced 1 cycle -- a second cycle like Baskar said, it doesn't -- necessary means, at least the data doesn't say that they're going to be, again, servicing the same INR 50,000 again. So it has to be backed up with what is the current behavior and what are the current exposures across. And there are more nuances on -- we pick up the...

My question was how many are sole customers and...

So there will be only customers...

Yes.

Okay. People who are only having a relation -- lending relationship with Suryoday, right? So that's about 15%.

And Suryoday Plus One if you have that data?

Suryoday Plus One means?

You and 1 more lender. Suryoday and one more lender?

At least 1 provider? I don't have that data ready.

Hardly I would say that it will be closer to around 60%, either in Andhra crisis or in this crisis, if you look at high indebtedness, it is actually 5% of the customers who are [indiscernible] publishes the data, everybody will get on to broadly that plus 3 is around [indiscernible] 23% of the population. But that 3 is what usually creates a crisis in a particular micro geography, locality and so on because they would be better off when there's a larger delinquency or a default. It is not so much the 95% is a problem, we are -- ability to weed out that 5%. When they substantially borrowed, not necessarily that they're borrowing for themselves. It is a little complicated. Sometimes, people have the limit and somebody else wants they borrow on their behalf, which is what is unpopularly called as ring leader concept. While on paper, it's a little simple to execute. I think it's a little more complicated in terms of simply measuring by plus 1, plus 2. But broadly, I think don't know nothing will be more than 95%, it will be less than plus 2%.

Sir, I have 2 more questions. One that is our concentration mainly caters to Maharashtra and Tamil Nadu. I was -- I attended Equifax seminar where in Tamil Nadu is the second largest state where the lending has happened. And another is Maharashtra. So I just wanted to know if there is a drought like situation, what will happen to our Maharashtra book?

As you can ask, we are not rural, rural at this point of time. We are urban, semi-urban. So more than the impact of drought, what really at least in our experience, which hits pretty badly and temporary though is a flood situation. Whenever there's a flooding, it is when there is disturbance with immediate impact on delinquency, not so much in terms of reduced monsoons. But if it's an extreme drought like has it happened in Marathwada, [indiscernible] a couple of years back, you see a delinquency going up to even 10%, 15%.

And you don't see any issue with Tamil Nadu right now?

Still now no, and hopefully, no.

And my last question is, sir, you mentioned 15% ROE, when is that or the guidance you want to achieve?

So if you start to look at the closing net worth of FY '23 it will be closer to 15% in FY '24.

No. But then your ROA guidance is 2.5% and you don't want to do the leverage of more than 4%. So that calculation doesn't sum up to 15%. That's why my question was, how is 15% achievable this year?

So if you look at the exit of the current financial year and getting on to the year next, that's where you get to see the 15% ROE, right? We do not see ourselves changing our leverage beyond 4% at least for this year itself. This is the first year when we are coming out. But given the kind of growth that we have projected in our book and the core earnings, exit '23, '24, we'll be closer to the 15% ROE.

[Operator Instructions] We have a question from back. Yes, go ahead.

From Centrum Broking. Sir, 2 questions from my side. One is on CV side, we are -- we have not been able to scale up for last 3 years. So what different we are doing going ahead to scale up that business? And second, when we are guiding a 50% secured book, say, 3 years down the line. So can you give some color on that, how mix would be of that 50%? Also, what gives us confidence that we'll be able to do that much of secured lending. That would be my questions.

See, we had our learnings for sure. We've started building it in terms of more of a fleet operator to start with. We said we'll take reduced risk. But COVID impacted the fleet operators much more than small fleet operators. A guy with 2, 3 vehicles was able to manage, somebody with 600 vehicles was hit substantially more. And not that a few customers going bad really had an impact. And hence, we slowed down. We said, hey, let's get a grip of what we are exactly wanting to do rather than getting into CV funding because we want to be in CV funding. So we revamped the whole thing. We slowed down substantially. We built up the leadership, Senthil joined us. So we said we'll let go granular. Let's go meaningful and what we also changed is that I think CV works very well when you have a business team, which is also responsible for the portfolio. It does not work like 1 team sources and the other team collects. So we are now built that go back to the original model of commercial vehicle, which is the ownership of the entire portfolio risk for the business at every level, including at the branch level. So in the last -- post June '21, whatever we have built, which is around close to 80% of the small INR 400 crore portfolio, the 30 plus is less than 3% or less than that, 2%. So the intent is to build it again, 1 learning is that organization learning takes time. You can't simply transplant a good team, put the products and say we can scale. So we will scale meaningfully. So currently, our run rate in commercial vehicles is around close to INR 25 crores. Exit will not be probably more than INR 50 crores. And the INR 50 crores is going to happen by us expanding to geographies digging a little deeper and also focusing on at least increasing the pricing, at least by 1%. Currently, the weighted average is 12%. Intent was at least to go to 13%, 13.5%. As far as the firm, currently our inclusive finance is INR 60 crores, so we're not going to do any acceleration or going to slow down inclusive finance to go to 50-50. If we just repeat the same disbursement that we are doing today, which is around close to INR 300 crores to INR 350 crores in inclusive finance, around INR 45 crores to INR 60 crores in mortgages, around INR 25 crores to INR 35 crores in commercial vehicle and a small 8% of the portfolio in FIG, the portfolio will tilt because of the annuity difference or the tunnel difference between the secured asset and the unsecured, unsecured thumb rule equal -- the disbursement of the year is equal to the portfolio at the end of the year into probably 1.1, 1.2. That's not the case with mortgages. It stays -- actually we can add it. So what is the last year portfolio, minus 10%, plus new disbursement will be the portfolio. So the resizing of that rebalancing would happen by exactly doing what we are doing now, but repeatedly doing it over months. And what gives us confidence? I'm saying we'll have to just do what we are doing, without doing anything, any rocket science and buy that logic and with fortification to the CGFMU, which we should be able to do it. But however, at every step, we'll have to recalculate in terms of whether we are on a strong footing. That's, I think, is a key learning out of COVID as well.

This is Sumit Rathi from Centrum PMS team. First question from my side is this that, as you said, you have seen multiple bad times in the past and 3 you mentioned clearly, what kind of changes you have brought in your underwriting after seeing all these changes to ensure that you would be able to underwrite better quality book or something like that? If you can share some experience on that.

See, on the retail, we didn't have much of a problem. We'll continue to do it a little strong, get more data and do it, not a problem as far as secured is concerned. In unsecured, only 1 simple learning, know your customer, not the group, not by the past track record. So which is what you've put Sarathi App where we'll go deeper into it, at least understand how the house looks from outside. How does their business play, whether within the house or outside looks like. And what are the various track records where the customer as well as the guarantor has. If you combine it and not really make -- and in a group product, it will not be possible for us to differentiate between 1 customer, say, I can fund you INR 30,000 and another customer saying that I can give you INR 60,000. But in the Vikas Loan, we can choose to give what the customer can handle and what she requests. So I think we're at the intensity to do it on a continuous basis. We believe that we have got them into a platform, which can really scale meaningfully provided we are able to do it sensibly. So I think just 1, know your customer at an individual level is a key learning of the pandemic.

Okay. And sir, you mentioned you have a dedicated collection team. So can you share the size of the team?

So today, we have around 700 people who are focused on collections exclusively, right? And the idea is that we are able to build the team to about 1,000-odd people in this particular financial year.

This is [ Pratid Shiraya ] from Guardian Capital. So when you shared that you have an aspirational target of reaching focus and ROA in a longer term. Right now, we are close to around 2.1%, 2.2%. Can you break that down into maybe 3 parts, how much you're likely to see from margins? How much from OpEx and how much from credit costs? I'm asking this question mainly from the backdrop that we are sort of also targeting to grow at 30% CAGR and right now the credit environment is absolutely benign. And reduction of credit costs from here on and from these sort of levels is also sort of looking tough. So could you just break down your ROA target into maybe a slightly more granular level?

[indiscernible] can answer. I think we calculate ROE on the entire balance sheet, right, all the sets.

So there are 2 key things. One is currently, we carry around 500-odd liquidity, which is not an optimum state. So of course, what KC had mentioned earlier that 1 is there would be a NIM compression because of secured asset, but that will be offset by Vikas loan and as well as we will also try to optimize our balance sheet. So our NIM would be in the range of 10.5% to 11% at some point of time when we optimize the balance sheet. So from 2.2% to 4%, there will be 3 parts, one would be NIM. There will be a marginal increase. There would be a CTI reduction, which will give another 0.5 basis points, and there will be a credit cost reduction, which will be another 0.5 basis points. So how we are seeing the thing is 1.5 basis points from all these 3 parts. So 1.5 percentage. Yes.

Also, we mentioned that we are likely to build up a contingency provision of around 5% on the unsecured book, and we are targeting a retail and -- sorry, the secured and unsecured mix of 50-50 that I would assume is 2.5% of the book you'd like to keep it as a contingency provision. How are you dividing it on a per year basis? How much of contingency provision are you likely to create in FY '24 and '25?

So basically, the strategy would be -- see, there are 2 parts. One is CGFMU and another is a contingency provision. How we are seeing the things in case of COVID, which we have faced, maybe 20% is an extreme case of write-off or the credit cost. So CGFMU has a cap of 15% credit cost coverage. So our theory is we will cover the rest 5% through a contingency provision, which will, over next 4 to 5 years, we'll build. So that's the theory. And 1% is all unsecured book. So how broadly -- there was another question of how 2.2% and 15% ROE. So how we are seeing next year is around INR 500-odd crores of PPoP, this year is INR 37.5 crores of PPOP we had in March, which in next year exit PPOP, we should have INR 55-odd crores. So next year, we are aiming exit PPOP. So full year basis, we should have a PPOP of INR 500-odd crores, out of which there will be a CGFMU premium, which will cost us another INR 50 crores, which will leave around INR 450-odd crores of PPOP. After that, we want to build some contingency provision. And apart from that, there will be some lever of the current GNPA. So our current FY '23 GNPA was INR 190-odd crores out of which there is INR 60 crores of ECLGS, which is completely government backed. So we have a net NPA, if you have to technically say, it's INR 130-odd crores, out of which INR 100 crores is already provided, INR 30 crores is the piece that we have to provide next year. So how we are seeing the things INR 30 crores from this old piece and there's a new slippage, which we are estimating around INR 30-odd crores, INR 40-odd crores, which sir also had mentioned, not would be more than 30 or 40 basis points. And INR 100-odd crores, we want to provide for contingency. So we should have a PBT of, let's say, INR 300-odd crores, INR 300-odd crores to INR 310 crores, INR 320-odd crores, which will give us a PAT of around INR 225 crores to INR 250-odd crores, which will translate to 15% ROE. Our average net worth for the next year would be around INR 1650 crores.

Not related to numbers, but regarding the business strategy. Yes. So now last year, you had cleaned your balance sheet and post COVID, now business environment is into buoyant mode. Economy and other businesses are going to do fantastic. And now from the RBI side and government side also, we are pretty safe in inflationary point of view. So seeing this very attractive business environment and economic conditions, why you want to remain very conservative and just going to do ForEx? Why don't you think that next maybe 1 or 2 years down the line, business environment is going to be very, very attractive and to utilize this business environment for generating more profits and develop building simultaneously the organization? Thank you.

I think 1 step at a time, it's very easy to kind of look far, far ahead. I think having come out from a very challenging FY '22, FY '23 is what we kind of decided to build it block by block, played out the way we wanted it. I think it's a lot more stable and consistent to look at sustainability. So 30% of the growth we're able to do it consistently. I think it's far superior to kind of [indiscernible]. However, we will have to extremely be careful that your growth cannot be much slower than what's happening across, then you will miss out on the scale. I think we're able to do 30% for the next 2 years. I think depending on the robustness of the platform that is really built, I think we have to look at every year in terms of what it has to be. But I think broadly, our thematic strategy has been, which has played out pretty well, we would like to keep that. 25% to 30% consistent growth is far, far superior because many times in lending, when we accelerate more, you perceive that the risk is lower because your denominator is substantially higher. The numerator, even if it balloons, it still looks 1% in GNPA, 2%. And when it hits, it becomes extremely difficult. The learning out of COVID, if we'd have to take it, 37,000 customers of delinquent customers, suddenly becoming 370,000, you can't build a variable pipe. I didn't have very super challenging environment. To the question of how many people we have in collections? Now when the Vikas Loan, we said 99.5% collection, the temptation is that why build a collection force. So we're building saying that 10% of the customers are to go and collect, which is 20,000 customers, how many people do you really require? Keep them with the guardrails clearly safe and sometimes you'd have to invest thinking that what happens when the worst happens. And I think our view would resist the temptation of growing higher than that, at least for this year. I think what -- where everybody kind of understands this, I think the industry is about pretty large. The economic status of this class is also growing substantially more. I think we will have to get a grip in terms of execution for a few consistent years and then probably look at it. But I think 30% growth is very nice growth.

Once again, we have a question from the back, over there.

Hello. Good evening, everyone. My name is Neil Chawla. I represent SOIC. So I just want to learn about the organizational structure more. What are the key parameters, top and mid-level management is evaluated, incentivized on?

Organization structure. So what exactly an organizational...

What are the key performance indicators, the top level and midlevel management is evaluated and incentivized on?

Yes. I think RBI came out with regulations that the minimum component for what we call as MRD, 50% has to be variable, 50% has to be fixed. So the last 2 years, we didn't take any variable, obviously, for various reasons. So I think FY '23 [indiscernible] what FY '21 and '22. '23, we're starting with a variable payout. We link around closer to 50% of the performance to the performance of the bank of the top management. And within that 50%, there are certain layers, which will have to clear for us to become eligible irrespective of the financial performance, which is in terms of compliance and governance. So there are the minimum steps that we'll have to grow to cut -- for the bank itself to be evaluated on the bank's performance. So that's around 50%. Remaining 50% is a weightage which is given to individual performance. So we have currently advised in terms of various -- as a bank, you cannot have a few verticals specifically in terms of government. So we will have to have a separate CRO vertical. We'll have to have a separate Chief Audit Officer, and some of them were Chief Compliance Officer. They have a direct relationship reporting to the Board, an administrative reporting and operational reporting to the CEO. So that's a vertical which is irrespective of we're a small bank, midsized banks, large bank, we'll have to have those verticals. They are currently organized on the business side on the business verticals, which is mortgages, micro mortgages, commercial vehicle wheels and distribution together and the largest piece of the business is inclusive finance and liabilities. So that's how we are kind of organized at this point of time. We are kind of putting focus in terms of getting the leadership in place, extremely important that we have a very stable leadership, which can perform consistently, which can -- we are a little fortunate that even went through the crisis, the larger leadership team has been intact. So I think the ability to keep that -- at the same time, it's not that just the longevity, it talks about consistency of performance. You need to have consistent performance and a good, stable leadership team. And more importantly than the leadership team, which is visible to many of you, is that next level? How stable are you and how smart they are, I think dictates the success of any bank. Fairly, we are building it. Are we there? Not yet. Quite a...

What I wanted to know more was, what are the key parameters that leadership team is evaluated on. So it is just the growth of the portfolio or the quality parameters?

You can't really do it for a bank. I said the 50% will be the quality -- I mean the performance of the bank, which has got various parameters. Deposits, within deposits, cost up ratio, how much is the [ CD ratio ], how much is the retail. So it's a huge because I think it's more internal. I don't think I'll be able to kind of spell it out to the dot. But even an individual performance [indiscernible] business, if it's asset business, it will be on quality of the portfolio, not just the GNPA, NNPA, quality of the portfolio across growth of the portfolio, and the segment that we want to do it, you are to achieve the target if you have to present in so many geographies and mitigate. If it is not done, all of that is reverted back. So it's 50% for the bank and 50% individual. And I don't think any bank will have a performance linked only to the numbers being achieved. That probably was pre 2008. Post 2008, it's compressive suit irrespective of whichever bank it is. And broadly, I think most of the parameters will mirror the larger ecosystem.

So we have 1 question from the back, and then you will be next -- sorry. And in the interest of time, we have last 5 minutes for Q&A. So we already have a couple of questions in the queue, and we'll see if we can take any further questions. Thank you. The person from back can ask and then followed by you, sir.

Yes. My name is Amey Kulkarni from Candor Investing. In the inclusive finance portfolio, do you see any over-lending in any of the geographies as of now?

Difficult to say. Again, I said that it depends on customer to customer analysis. The geography which is growing the highest is Bihar and I'm not -- we are not present in Bihar. So it will be very, very wrong for us to comment on where the market is getting overheated. That I think is the largest market as we speak, and hence -- and it was not the largest market or not on the top 3 or 4, 5 years back. So it means that acceleration in that market is higher. Some markets have taken a hit and then got moderated, which is typically Maharashtra and even Orissa. You see them almost a growth rate slower than the industry growth rate in the sector. I think even within the geography, we kind of stay put, except in a much larger ecosystem, disturbance like Assam. I think it's usually the pockets which get impacted than the state as a whole. I won't be able to comment at overall industry level. But at our level, I think we have a risk policy that our portfolio and inclusive finance in any state will not be more than 1 time of our net worth, preferably no more than 0.75x of our net worth on book. So we'd like to kind of...

Maybe just 1 question. Sir, times are good. Everybody is running for a growth. Perfect condition to create an [indiscernible] belief. You might not make a mistake, but somebody -- sorry. But I believe that, I mean, somebody else will. So in that case, at the industry level, are you seeing any early signs of anybody going overboard, either, let's say, in terms of any specific geography, in terms of let's say, average ticket size or either in terms of interest rate?

So one, I think that would be very difficult because each 1 has got various methods of doing it. So the models are different and hence, what perceived to be risky or non-risky is not necessarily true. I think this, I think, probably the best people to answer would be the [indiscernible], which has got a far more deeper research, understanding and also get customer complaints or peer complaints so they kind of process it. And the data is far more detailed nowadays, which is kind of available. So that will give a fairly good idea. But I think having come from a crisis, I think you can expect any industry to behave meaningfully, prudent. And that will -- probably will be the situation. I think we can't really judge by what this year and next year. As we've also been hearing when everything is good, probably is when people do where their risk management had far more strong to each. So I would say what we are trying to do with at least for a CGFMU cover, as Himadri mentioned, 15% of the portfolio covered through that. 15% of god-forbid extreme risky one, through credit NPA or the credit loss, 5% is a contingency, 20%. Can we really do that without getting, I think, distracted by how others are managing their risk.

Thank you. Yes. So in the interest of time, we close this event. I would like Baskar sir to just give a quick closing comment, and then I request everyone to join for the [ hi tea ].

Well, thank you for the attention and that so much of time that you spent with us. This is our first Analyst Investor Meet. And hopefully, we'll become far more nuance, sharper as we really kind of meet you next time around. And hopefully, when we meet next time, we'd have also delivered on what we are thinking that we should commit, I mean what we are kind of committing to deliver. I think that's what we actually look forward to really build a super respectable bank. I think we shall encompass everything. Thank you very much for your attention. Thank you.