The Karnataka Bank Limited (KTKBANK) Earnings Call Transcript & Summary

Ladies and gentlemen, good day, and welcome to Karnataka Bank's Q4 FY 2023 Audited Earnings Conference Call hosted by Karnataka Bank. [Operator Instructions] Please note that this conference is being recorded. On behalf of Karnataka Bank, today's call is attended by Mr. Sekhar Rao, Managing Director and Chief Executive Officer Interim; Mr. Balachandra Y V, Chief Operating Officer; Mr. Gokuldas Pai, Chief Business Officer; and Mr. Abhishek S. Bagchi, Chief Financial Officer. I now hand the conference over to Mr. Sekhar Rao, MD and CEO Interim, from Karnataka Bank to give his opening remarks before the Q&A session. Thank you, and over to you, sir.

Thank you, Melissa. Hi, everyone. Thank you for sparing time for this call. I'll start with my introductory remarks. A very good evening, and welcome you all to this conference call of the results for Karnataka Bank for the quarter and year ended 31st March, 2023. I am right now The Interim MD and CEO, and my other colleagues have joined this call, whom Melissa just introduced. I assumed charge as the ED of the bank on 1st February, and since mid-April, have been functioning as the Interim CEO. As you know, the bank has identified the new MD and CEO. It is Mr. Srikrishnan Harihara Sarma. He comes with -- the same has been approved by RBI. Prior to his selection for Karnataka Bank, he was with Jio Payments Bank, he was an entrepreneur, and he was part of the founding team at HDFC. And he comes with impeccable credentials. So we are delighted to welcome him on board. This is an important change for the bank in the sense that for the first time, we will have a lateral with industry experience joining the bank as the Managing Director and CEO. Moving on to the financials of the year that went by. As you all are aware, the year that went by witnessed one of the economic history's sharpest monetary tightening and steepest inflation. Central banks across the world responded with aggressive rate hikes. India was no different. U.S. was leading the way with around 475 basis points. The Indian central bank, RBI, raised repo by 250 basis points. This benefited and tightened operations for banks, so there was a plus and minus. Apart from that, the focus for many banks, including our bank, has been digitization. And going forward, we expect that to accelerate. The concerns largely on the economic front are probably some job displacement due to automation, digitization, et cetera, risks associated with climate change, rise of the gig economy and remote work. So these are some emerging trends, but too early to call on it right now. We have made significant strides on our financial performance. And for the first time, our bank has declared a net profit which is in 4 figures. It is INR 1,180 crores, which is almost INR 100 crores per month. Coincidently, we are celebrating the centenary year this year and this is our -- this, I believe, is the greatest gratitude we can offer to our founding fathers. And we are very happy to announce this result. On various business strategies, some of them that will pan out and that is -- we've already laid the foundation is our sharper focus to retail lending, portfolio optimization, digital origination. These are areas that we've laid the foundation and we'll build on it going forward. The Q4 net profit was around INR 353.75 crores and year-on-year growth of 171.39%. Last year in the same quarter it was 130.34%. Important point to note is other income, excluding depreciation and trading profit was also at INR 1,150 crores. This also had a healthy 15%, what you call, increase over the last year. Operating profit during the quarter has shown a growth rate of 80.41%. Net interest income during the quarter went up 31%, and for the full year 27.86%. NIM, as you are aware, we have story going there. It's improved to 3.87%, which was -- as against 3.25% for the quarter ended March '22. For the full year, it went up from 3.18% to 3.70%, a healthy increase of 52 bps. ROA during the quarter went up from 0.56% to a record high of 1.4%. For the full year, it stood at 1.21%. ROE went up from 7.4% to 17.61%. Gross NPA is at 2,292.91 crores, whereas it was INR 2,250.82 crores. This was primarily account of some accelerated provisioning and accelerated recognizing of NPAs that we did in Q4 since we had -- we relied on the strength of our balance sheet, which was looking very healthy in Q4, to make this accelerated provisioning. In percentage terms, it's down to 3.74% from 3.90%. But this accelerated provisioning is a onetime exercise and it will add to the health of the bank. As far as net NPA, it has come down to INR 1,021 crores from INR 1,376.97 crores, a healthy reduction of 25.83 basis points. Coming to slippage ratio. Last year March, it was 3.11%. This year, it's 3.31%. The reason which I mentioned is as before, because of the accelerated calls that we took. Provision coverage ratio is a healthy 81% as against 73.47% last year. Cost-to-income has moderated to 47.14% vis-a-vis 52.57%. The interesting point to note on the accelerated provisions is out of the INR 328.82 crores of provisioning that we did during the quarter, almost 249.14 crores is the accelerated provision, and the balance is as per IRAC norms. Overall business turnover reached a new high of 1,47,319.63 crores, just short of INR 1,50,000 crores at a growth rate of 7.40%. The other point here is while deposits grew at 8.68%, we did not see significant loss or movement of deposits from CASA to term deposits, which was observed in the market. So we were able to protect our CASA franchise. In fact, our SB account franchise the cost of deposit is the most competitive in the industry at around 2.94%. CD ratio has marginally decreased to 69% from 71%. But this was a conscious call that we had taken. In the increasing interest rate scenario, we were able to, like I said, retain the CASA market share. Yield on advances during the full year has improved by 57 bps, up from 8.84% to 9.41%. The cost of deposit for the last year is 4.66% to 4.62%. The other good news is our Board has proposed a dividend of 50%. This is subject to shareholder approval. And I have every reason to believe that the stage is set for an impressive take off from here so as to ensure business excellence during FY '23, '24, especially in the area of growth in advances, which could be ahead of industry growth rates. We would also see significant improvement in asset quality. Technology initiatives are being strengthened further. We've seen our technology budget for the upcoming year go up by almost 80%. Clearly, while there have been a lot of positive outcomes, there are some learnings as well. The important points we have to recognize -- the important point here is to recognize the same and start working on these and clearly start demonstrating our intent. In this regard, I thought of sharing some of the major initiatives already rolled out. Our org structure, which I mentioned in our -- in the media interview, today morning as well, is realigned. We have made it more linear with heightened focus on retail, branch banking and product management. The product management will, of course, support the sales verticals. We have benchmarked our gold loan and housing loan products to make it more competitive in terms of features and pricing as well. We are already seeing green shoots of that. We are improving our underwriting capabilities, both in terms of efficiency and capacity. We are increasing the number of retail hubs from 3 to 5 and which will eventually go up to 8. With this, beginning -- the other promise that I want to make to all of you is instead of keeping these interactions as an event base once in a year, we will increase our interaction and reach out to all of you, and we will seek feedback from you on a continuous basis. With this, I kind of open the floor. Over to you, Melissa.

[Operator Instructions] We have the first question from the line of Sushil Choksey from Indus Equity Advisors.

Congratulations to Karnataka Bank on centenary celebration and the performance which you achieved in FY '23 Sekhar, referring to the comments which you made in media and right now of your joining the bank in this year and the new MD coming in, what is the broader vision of Karnataka Bank in terms of perspective which you would like to see over a period of 1 decade or 2 decades, because it's one bank which has never lost money in any of the financial years of last 100?

See, we're not looking up for a decade, but very clearly, we have a very robust network. We are a recognized brand in Karnataka. We are a recognized brand in markets that we operate in. We have significant presence in places like -- apart from Karnataka places like Mumbai, Delhi, Hyderabad, Chennai. And so there's a lot of customer goodwill. And riding on this, we would like to increase our retail focus. Here, we have taken a lot of steps already. One is the org structure, to make it more retail-centric, the classical structure of having a retail advances vertical, a branch banking vertical so that we leverage our network of 900-plus branches. We are also improving our credit underwriting flow so that the turnaround times improve. Already 85% of the loans that we originate are digitally underwritten. We would further deeper this process to ensure that the customer experience improves. We also are improving capacity by adding 2 more credit hubs immediately, retail credit hubs, which will process loans up to value of INR 2.5 crores. This will go up to 8 crores. Given all this capacity enhancement and the investments that we are making in technology, we see a significant -- we hope to see a significant uptick in our retail market share. Also another important initiative that we have taken is with the help of E&Y, we are setting up an analytics center of excellence. So we have a large customer base of 1.3 million customers. In fact, if you consider a bankable population of 458 million, 1 out of 40 customers actually bank with Karnataka Bank. So this analytics center, we are looking at using data analytics to increase our understanding of our customers, propensity modeling for preapproved loans, cross-selling. So our current product penetration is somewhere between 1.5 to 2. We plan to improve it further. So these are some of the thoughts that -- and strategies that we are rolling out for the next 3 years.

Okay. My follow-up question is a couple of points which you've highlighted. So what is your expectation on NIM, cost of funds, ROE for coming years? And where do you -- what kind of provisions have you taken -- or you have taken some provisions for slippages. And what was the provision for mark-to-market and treasury?

So yes. So you will see some moderation in NIMs, which will reflect in NII. However, we are also positive that this will get compensated by a change of product mix and business growth and other income as well. ROAs and ROEs will be marginally higher than current levels. As you see, our provisioning already has reached 80% plus. Our NPA provisioning is also fairly healthy. But we'll continue to provide as and when required, and we would take it up to -- it would be somewhere between 81% to 85% as we progress through the year. We also have seen a significant reduction in our restructured book, which has helped us as well. And as a combination of restructured and related accounts, close to 90% of the restructured accounts are repaying their loans, which is, again, a source of comfort. So overall -- also last year due to the interest rate -- rising interest rate scenario, there was not much of opportunity for trading profits. But already we are seeing green shoots of that in Q1 itself. As we speak, our -- we have a depreciation benefit, and that would be one of the stories that will pan out during the current year. But that will not be unique to us. In fact, most banks would benefit on that.

Okay. But if you can highlight as what you said, some accelerated provision was made in the quarter. And what was mark-to-market loss in the...

Say, for example, the mark-to-market last year was around INR 180-plus crores. So that is already captured in the balance sheet. And this year, we'll see an improvement there and write back there. Accelerated provision, again, the number that I have handy is for Q4. We did -- out of the INR 328.82 crores, INR 249.14 crores was the accelerated provisions that we did. So clearly, we've used the health of balance sheet to take the right calls in terms of provisioning. And...

What was the reason for this accelerated provision?

So there are multiple. Wherever we identified some stressed accounts, also some places where the FSV changes, for sale value changed happened. So a combination of a couple of factors, we took the call and took these additional provisions -- made these additional provisions.

My last question. What would -- what kind of credit growth aspirations -- the industry is talking about 12% to 14% across private or public sector banks. What would be an aspirational number at Karnataka Bank for the year?

So touchwood, we would beat the industry growth rate this year.

[Operator Instructions] We have the next question from the line of Sarvesh Gupta from Maximal Capital.

So on accelerated provisions as a follow-up. So basically, you are saying that out of the INR 330-odd crores provisions, INR 250 crores was sort of more than what we were required to take, and we took it because we had a healthy profitability for the year and the quarter?

Yes, yes. That would be a right assessment of that. So close to INR 75 crores as per IRAC and balance on account of accelerated provisions on...

So ideally, these will not recur in the coming years, this INR 250 crores?

Yes, yes, very clearly these will not recur in the coming years. And these are one-offs. So whenever you see an opportunity, you take these measures as a measure of -- a prudential measure basically -- a prudent measure.

And on our restructured book, so that came down from, let's say, INR 41 crores, INR 42 crores of standard restructured which was there last year. Now we have around, I think, INR 2,500 crores odd. And this reduction also contributed to, let's say, INR 800 crores of gross NPA out of the INR 1,800 crores of the slippage. So further, how much can we expect this year against this INR 800 crores which has come from this book?

So this book -- like I said, almost 90% of this restructured book has been -- are repaying and only 10%. Actually, 8% is where we see stress. So I would peg that number somewhere around, say, INR 200 crores where we will see enhanced measures. But the good thing is most of our portfolio are backed by very bankable securities. So we are confident of a recovery in that piece as well. Also, the thing is why -- as you know, this INR 2,570 crores is based on the RBI classification, which includes related accounts as well. So the core restructured book is actually lower than this.

Okay. So basically, what you are saying is that out -- so in FY '22, we had an opening balance of, let's say, INR 4,000 crores and 20% of that slipped into NPA, right, INR 800 crores. Now out of the remaining INR 2,500 crores, you are saying 10% can slip?

See, actually, we've seen 630 -- INR 630 crores is the number that has slipped into NPA out of this and -- INR 630.51 crores to be exact. And this was on the back of the COVID based, what you call, fallout. And we clearly see an improvement in this portfolio. And what we are predicting, we are fairly confident to -- that the outcome will be very close to what we are saying right now.

So 90% is well taken care of because there is an element of SMA-2 also in the current standard restructured also, right? So you feel that only 10% will slip from here?

The SMA-2 -- so there are 2 categories in that. One is account -- 3 categories actually: accounted overflow; second, account paying regularly; and third, accounts paying with a little delay. So the combination of all 3 is close to 90%, and the rest is around 8%. So...

Okay. And the other thing, sir, is the growth on the overall credit side. So I think this year, we did only 5%, 6%. And even if I just look at the retail, which is where we were supposed to grow, that also is at 11%, 12%. So both are lower than the industry growth rates significantly, overall as well as the retail piece. So what gives us the confidence that we will be able to match to the industry growth on an overall number because we have not been able to match even the retail growth number for this year compared to the industry and most of the players?

Yes, 2, 3 points to note here. First, we were tracking along around 12% growth till about Q3. We deliberately took a call in Q4 to slow down, basically retire advances which had yields lower than G-Sec yields. So there was an opportunity because of the health of the balance sheet to take that call, and we did take that call. Yes, it did reflect negatively on the growth rate, but it helped us improve the bottom line because this money actually got redeployed in instruments which were leading higher. Point 2 is we clearly understand now as to what are the engines of retail growth. Our pricing and the product construct was, what you call, slightly out of tune with current market trends. Gold loan, for example, we have completely re-turned the product. It is simplified. We didn't have a bullet loan product. We have introduced the bullet loan product. Our home loan prices was out of sync with market rate. Now we have a headline home loan pricing of 8.75% with somebody with a CIBIL score of greater than 800. We have SPP processing through our digital journey. We are increasing our capacity in terms of ability to underwrite and TAT. We have significant presence in most of our markets in the mid-corporate lending to the builder and promoter segment. But we have never leveraged this for, what you call, builder tie-ups on the retail side. We are going through a, what you call, very calibrated action in this, where we are -- in fact, over the quarter itself, we have more than 300 properties in Bangalore being assessed and valued preapproved by our bank. So all these measures, the structured approach -- we also are putting close to 200 feet on street for home loans. In gold loans, we are also tying up with an agency called SahiBandhu, which currently distributes around INR 500 crores, for that additional reach. So a variety of measures give us this confidence that clearly we would be able to accelerate on the retail front. And we have demonstrated this in earlier years. In fact, when we had a fairly competitive pricing, our home loan and retail portfolios have grown ahead of market rates.

Okay. Sir, on your ROA. So your pretax ROA might have increased by, let's say, 90 basis points or something like that for this year. And the NIM alone contributed to more than half of it. So NIM expanded by, let's say, 52 basis points. So how much of a mean reversion is possible in your NIM going forward, especially as we see that your cost of deposits have actually gone down this year by 4 basis points even in a year when interest rates are moving up. And now that same benefit you will not get when the interest rates move down, if they were to move down. But you are also guiding for increase of ROA instead of any decrease. But most of the increase of ROA has actually come from your NIM. So what is that conservative -- or how should we take your ROA guidance and including the NIM guidance?

So like I said, ROI guidance we'll -- I said we would be trending around current levels and maybe a marginal increase, but largely trending around current levels. That's what I mentioned. On NIMs, I said we won't reach the current year levels. It will be range-bound between 3.5% to 3.7%. Our compression NIMs will be compensated by increase in -- by our growth and also change in product mix. We also would see some -- in fact, the treasury part of it will start kicking in this year, and you already are seeing signs of it. Both trading profit would improve. And that would keep our ROA protected to a large extent. Maybe factors contributing to ROA would slightly alter, but the output will remain around these levels.

And NIM should trend in a similar range as where we are right now at 3.87%?

Yes. I mention, no? I said it will range -- it will be range-bound between -- on the optimistic side to around 3.7%, on the pessimistic side 3.5%.

Okay. And what is your estimated number on cost-to-income and the OpEx side, sir?

Cost-to-income, we would see one very slight marginal increase. There will be some provisions on account of wage revision. And there will be some technology spends, large -- most of which is budgeted for and accounted for. Some of the CapEx have already been incurred. So you will see 1% to 1.5% range on either side of current OpEx levels. It could be in that range, plus 1 to minus 1, I would say.

We have the next question from the line of Manish Dhariwal from Fiducia Capital.

Am I audible?

Yes. Please go ahead.

Yes. So there are a lot of reasons for celebration at Karnataka Bank. So it's a centenary year. Then a management change. And you have come out with fantastic numbers. So congratulations for all of that. Now my whole concern or the question is surrounding the growth, which is not coming at a high credit loss. So while Karnataka Bank is a good brand surrounding Karnataka and other places, but then I think the other banks also are claiming the same. And the confidence that the management has expressed about growing higher than the industry is something that -- if you could maybe give more color. And what do we understand about the credit costs going ahead? How would one look at that? So growth in sync with the emerging credit cost.

So I believe your question has 2 parts. One is about your growth concerns and second on the credit cost. I think I largely answered what all we are doing on the retail credit growth side, a series of measures, including product rejig, organization structure, capacity building, investing in technology, so on and so forth, which is pretty much a standard playbook. We clearly enjoy considerable goodwill in the markets that we sit in and we will leverage -- we already have 900 strong branch network and a good to tooth-to-tail ratio of greater than 85%, which means a large percentage of our employees operate out of branches -- we leverage this presence both in terms of people and infrastructure for our growth. So the specific initiatives, I already detailed in my earlier question. On the, what you call, credit cost, there was a onetime operation in Q4 on account of accelerated provisioning and the GNPA calls that we took. But otherwise, going forward, it will be around the same levels that we operated in, in the other quarters. So we would see it at an average of around -- anywhere between 0.25 to 0.30.

Okay. See, I was talking also in the line of what recently -- a recent communication has come out from the RBI saying that there has been some smart way of hiding NPAs and all that. So basically, see, the level at which retail is getting credit, ultimately the pain has to come. And there are some institutions who have been like doing retail for a long time. There are some institutions like ours that has recently kind of started focusing on the retail side. So how is it that we are kind of ensuring that it doesn't come to bite us, so maybe [Technical Difficulty] too ahead.

I'm not so sure whether I got the first part of your question. So you alluded to some concealing of NPAs and RBI direction on that. So in fact, we are on the other extreme that we have gone ahead and disclosed. And as a measure of abundant caution, we have also taken some prudent measure of accelerated provisioning, et cetera. On the second part of -- we -- let me just elaborate on the -- what's panning out in Karnataka. With the bank consolidation, et cetera, that happened around a few years back, there are just 2 truly, what you call, Karnataka domicile banks: one is Canara and the other is Karnataka Bank. And so -- and given this 100-year legacy, customer goodwill, we see a fair bit of kind of movement of business and consolidation in our direction. So we also -- one is the pan-India plans that we spoke about, the retail rollout, et cetera. The second is the Karnataka-specific bank of choice. In fact, we are rolling -- we'll be rolling out a campaign which talks about Nam'ma Bank, which says Apna Bank. And where we are -- we'll be riding on the sentiment of being a bank of choice in Karnataka. So these and other things, other measures that we roll out, we hope to kind of -- we have -- actually, we are fairly confident that we would be able to regain our pride of place as the bank of choice in Karnataka.

We have the next question from the line of Chintan Shah from ICICI Securities.

Congratulations on a good set of numbers. One, 2 questions from my end. Sir, firstly, in terms of our loan book, in terms of fixed and floating, how much percentage of our book will be pegged rate and floating, if you could help with those numbers?

So I believe -- so you wanted to understand what is the percentage of floating versus fixed. So almost 79% of our loans are linked to -- are floating. So I can give you the base -- so base rate linked around 1%, MCLR linked 22%, EBLR linked vis-a-vis -- is the majority, around 56%, T-bill rate 1.28% and fixed rate, otherwise, is 21%.

21%, okay. Sure. So got it. And so, sir, in terms of -- as we anticipated that the decline in the interest rate going ahead, there could be some pressure on the NIM. So this is -- so in terms of our borrowing side, so how much hike are expected? Any tentative hikes expected in the borrowing cost from here on? Any chances -- any plans of raising the deposit rate further from here on? Or are we at the peak rates as of now considering the current RBI rate?

I think the interest rates would moderate now. Now we won't see the 7.7%, 7.8% kind of rate that we had earlier. We would see -- we are at 7.3% as our headline rate for a year. You would see a plus or minus of 510 bps, but not major changes apart from that. That will be based on opportunity and need for liquidity. Right now, our liquidity position is comfortable.

Sure, sure. So this is on the -- and the growth side, sir, it will largely be driven by the retail piece, right, if I'm not wrong?

Yes. Credit growth will be strategically on the retail piece. But we will take tactical calls as and when required on the corporate and mid-corporate piece as well.

Sure. And sir, you mentioned 1 to 1.5 percentage plus/minus on the OpEx. So that was OpEx-to-asset ratio, right, or cost-to-income?

Cost-to-income.

Okay, okay. Cost-to-income. So got it. And also on the recovery in 2, so I think we have seen quite a steep recovery in 2 for us as well as for system during this year. So what is the expectation of this going there -- is this -- any recoverization of accounts expected in the next year? Any ballpark number which you're expecting for that?

So our 2 last year was -- the year before -- the previous fiscal was around 246. Last year, it was 283. We have a 2 book of 3,043. We would see 2 recovery around current year levels -- I mean the previous year levels. This is what we are seeing. So anywhere between 250 to 275 would be a good estimate.

Okay. 250 to 275. Sure, sir.

We have the next question from the line of Jai Mundhra from ICICI Securities.

Sir, I wanted to get your views on the retail strategy, right? So if you can elaborate that? You have said that retail is going to be the key driver for growth, and that is where you want to sort of increase the product per customer as well. You clearly have a retail franchise in terms of customers. But I wanted to check what is your, let's say, key target segment? Is it going to be self-employed segment? Or you have any vision for, let's say, prime salaried customers also? And then the associated question would be that what is it that probably will give us the right to win in this segment? And maybe the last thing is that usually retail comes with a higher OpEx, at least in the initial phase. So are we -- where are we in that investment phase with respect to retail business?

Yes. So in fact, I did elaborate on the retail strategy earlier in the call. That was the first question Mr. Sushil asked. But nevertheless, I'll elaborate or detail it out again. So in fact, I -- in -- so any retail strategy is a combination of pricing, distribution, speed as in TAT. And we would be right now, what we call, customer sub-segment agnostic in the sense if we are able to price our loans attractively, if we are able to underwrite quickly and if the overall features are customer-friendly, we would already see significant low-hanging fruit, because we have something like 13 million customers, 70% of which are active customers. And right now, we have our customers banking with others for -- or going to other banks for some of these products. So clearly, these are the first measures that we will take. Having said which, we are also improving our salary proposition. Earlier, the salary proposition was just a stand-alone savings account. Like most banks, we are coming out with a bundled salary product, which will be a combination of a savings account, locker, fee discounts, special pricing on asset products, et cetera. So clearly, the -- but that -- as you would be well aware, the salary franchise to build will take some time. So initially, we will be pretty much sub-segment agnostic. And we will ride the opportunity created by improvements on the 3 fronts that I earlier mentioned. As regards to products, we are looking at home loans, we are looking at gold loans. We are also looking at agri with tie-ups. For example, we have a couple of large alliances that we have put in place, which we'll see our agri business also scale up. So these are areas where we will see significant action going forward.

Right, sir. And sir, in terms of investment in retail, right? So all the retail is high touch, lower ticket size relative to corporate, SME and more effort involved. So where are we in terms of this investment phase? Or is it more likely that the OpEx growth will be -- at least for the next 6 to 12 months will be much higher than the loan growth as you build the processes, systems, et cetera?

So yes. That's a very good question. In fact, it helps me highlight a point. So we already have underleveraged franchise is my belief. We have 950 branches and we have created those retail hubs, which we are redistributing, the existing 3 hubs will be redistributed to 5 and then we'll go to 8. This will be operating out of our existing regional offices. So we don't see additional costs being incurred there. Around -- we had undertaken, what you call, transformation journey with the help of BCG called KBL VIKAAS, where most of the loan underwriting became digital. So the pipes are in place. The scoring models are in place. The underwriting team is in place. So the thing -- the point is the entire OpEx has already been incurred, and it's a kind of underleveraged franchise. And we'll clearly do those product, process, policy kind of improvements. Also, the standard playbook -- we have created an associate company called KBL Services through which we will be employing feet on street for builder tie-ups and implants there for -- implants at automobile showrooms. We are also tying up with, like I said, a firm called SahiBandhu for gold loan origination. We have onboarded a couple of large VCs like, say, for example, SKDRDP, who has a book of around INR 60,000 crores. We are picking up their -- so that -- we are looking forward to that partnership very eagerly. So we won't see OpEx increase. Yes, there will be some investment in terms of having those feet on street, those run-up boys, et cetera, but they all operate largely on a, what you call, high variable, low fixed kind of model and it will be outcome linked.

Right. And sir, any talent gap that you see at the current juncture for all these initiatives to play out? Do you -- have you identified any talent gap in the existing mid-management level?

So very clearly, we did this org structure rejig to make it more linear. So we created those. So you would be familiar coming from the ICICI Bank and that group kind of where you had the structure of having branch banking, retail assets. So our structure is aligned to that product vertical. So the talent gaps that we have clearly are for roles middle and senior in technology, transaction banking, also in product management and a bit in risk as well. So these are areas where we will -- which we will supplement talent through lateral hiring.

Right. And lastly, on commercial/SME, MSME piece, right. So retail you elaborated. Corporate, you had said that the stance will be more opportunistic. On commercial/SME, how are you seeing things panning out because large private banks they are -- they have become very aggressive in this space. So do you -- what kind of a, let's say, priorities or aspirations you have in SME/commercial segment?

We already have a very good presence in the MSME/SME space. In fact, we have -- 30% of our book is there. And see, here -- this is one area where probably the older private sector banks score over modern private sector banks because this product and segment is highly relationship centric. The way new gen private sector banks operate is a large part of these businesses are centralized and branches are agnostic to the MSME customer. They are only points of transactions or service. While as in our model, the MSME customer is owned by the branch apart from just being serviced by the branch. So this gives a great deal of comfort to the MSME. And the other thing is due to our legacy, which is a plus, a large percentage of our branch staff and branch managers are able to understand credit and do that basic underwriting, as well they're comfortable writing CAM sheets, et cetera. So this is clearly one of our core strengths. So -- and we are recognized for that. So we will kind of leverage this for bettering our position in MSME as well. There one clear area of improvement is our pricing structures and the product proposition. So we are creating products for the contractor segment or sector-specific products, which will help us kind of consolidate our position in this MSME space.

Right. No, no, I understand, sir. We have a very good legacy and a very decent, let's say, presence in the SME space. I wanted to check. Like you said, retail is going to be the key driver. Would the same hold true for SME also or -- yes, so that is what I wanted to check.

So I would like to answer it like this. So MSME is already -- it's a kind of cash cow. And while as -- retail would be the star. So that's how I would like to place it. So we will, of course, continue to put our energies in MSME. That's a space that we understand well. But retail is something where given our franchise and presence, we would want to, what you call, scale and build. And hence, the increased intensity there.

We have the next question from the line of [ Hitendra Gupta ] from [ Systematix Shares. ]

Congratulations for the good set of numbers. I have just 2 questions. One is with regard to the appointment of Mr. Sarma. So when he will be assuming the charge?

Yes. He will be assuming charge on 9th of June. In fact, we -- the selection was done almost a couple of months or a little more than that back. And as you know, there's a process of RBI approval, which has been received. And he will be taking charge on 9th of June.

Okay. So his involvement right now is nothing as of now?

As of now, of course -- yes.

Yes. And my other question is with regard to the loan growth -- sorry, the average loan ticket size. So what is the average ticket size for your different segments like retail, mid corporate and large corporates?

So retail, in fact -- so retail, I would say, less than -- so our classification of retail on that, including agri is around INR 10 lakhs, INR 9.67 lakhs. That is including agri. Mid-corporate would be around INR 16.13 crores. Large corporate would be around INR 150 crores to INR 170 crores.

Okay. So no, no, I was referring to your slide. On Slide #21, it was retail was INR 9.96 crores. So I was just wondering whether it's INR 9.96 crores or INR 9.69...

It is INR 0.10 crores. So...

INR 0.10 crores, yes. And what kind of growth can we expect in terms of NII going forward?

So yes. Like NII -- so NIM I have said will be ranged, et cetera. NII would be aligned to the, what you call, top line predictions that we have predicted.

What would be that, sir?

It will be ahead of market rates currently, anywhere between -- a comfortable guess would be around 15% to 18% increase in NIM.

We have the next question from the line of Rakesh Kumar from B&K Securities.