UGRO Capital Limited (511742) Earnings Call Transcript & Summary

And welcome to Ugro Capital 3Q FY '21 Earnings Call. We have with us the senior management from Ugro Capital, including Mr. Shachindra Nath, Chairman and Managing Director; Mr. Abhijit Ghosh, Chief Executive Officer and Whole-time Director; Mr. Sandeepkumar Zanvar, Chief Financial Officer; and Mr. Nirav Shah, Head of Strategy and Investor Relations. Without further ado, I will hand over the call to Chairman, sir, for his opening remarks and key highlights for the quarter, post which we can open the floor for questions. Over to you, sir.

Thanks, Prabal. Good morning, everyone, and many thanks from all of us at Ugro for joining us for our quarter 3 FY '21 earnings call. As vaccines arrive and the nation moves to rebuild after these trying times, it is vital for the nation's financial institutions to come together and ensure that hard-hit MSME sector has sufficient liquidity to not only achieve full business recovery, but to persevere onwards towards the growth in the post-COVID world. The sector has largely absorbed the majority of the damage to the portfolios of lenders till date. And it's our belief that the worst is now behind us. Our desire to build Ugro as India's largest small business financing platform, got reinforced during the pandemic. And given resilience of our portfolio, we were able to utilize the downtime to expand our reach, accelerate the buildup of our full technology architecture and set the foundation for a sustainable liability franchise. Our 5-year goals remains to take 1% market share of a small business financing in India. And to further that objective, we launched our micro enterprises lending vertical in Q3. We will be catching to these micro enterprises primarily through our new Saathi program and the launch of GRO micro branches. These GRO micro branches will cater primarily to the bottom of the pyramid small businesses, providing livelihood and employment to millions across the country and thus present a real pathway for improvise to beat the poverty threat. We have commenced our direct distribution channel across five states, Karnataka, Tamil Nadu, Gujarat, Telangana, and Rajasthan with 5 branches opening each of this state through mid-January 2021. This has been a highly successful rollout of our direct distribution channel with all 25 branches in our pilot program inaugurated and operationalized as per schedule. This has been a very large undertaking for us. As these 25 branches have come with a large growth in overall headcount but we feel that this is the perfect time for us to target calibrated but aggressive growth and really demonstrate our long-term commitment to micro-enterprises and financial inclusion in general. These branches are spread across Tier 2 and 3 locations and will allow us to greatly expand both the breadth and the depth of our distribution without cannibalizing any existing business lines. Aside from commencing the new business lines, we have also been targeting growth across our existing business lines. Our GRO partner network continues to grow with 603 onboarded as of the end of Q3 which is a 16.4% increase on the Q2 figure. On the partnership side, we continue to expand on both the number of partnerships we have signed as well as the partnership operationalized across both ecosystem and partnership and alliance channels. While we are seeing some of the fruits of such expansion already, we will surely see much more in FY2022. Our overall monthly disbursals have now surpassed pre-COVID levels with INR 140 crores disbursed in December 2020, we have disbursed approximately INR 368 Crores in total in Q3. We fully expect this positive trend to continue as our GRO micro branches start disbursing loans. We have reached a total of INR 2,065 crores of disbursal as of the end of Q3 and our asset under management stood at INR 1127 crores with a blended yield of 14.8%. Our AUM is spread across 8,429 live customers for a highly granular average ticket size of INR 15 lakhs. Our portfolio remains well diversified by sector and geography and our book is 70% secure. Our portfolio is holding up well from the stress that is to be expected from a black swan event like COVID-19. Our collection efficiency remains high at 96% for secured loans and 92% for the unsecured loan which are the monthly collection efficiency as of December 2020 and we are in close contact with our partners or customers whose business may be seeing stress at this time. We have also accepted, selectively, the restructuring request of our portfolio in order to work with our customers with fundamentally sound businesses who are facing short term cash flow challenges. Our portfolio has a GNP of 2.3% and MMP of 1.4%, both of which are reasonable figures as our book has started showing some vintage. We have also maintained our conservative course when it comes to provisioning and we have increased it to INR 21.43 crores in total provisioning and this has led to our having a -- had a large provisioning expense of INR 5.86 crores in Q3 FY '21. This quarter we had made great progress on two technology initiatives we had announced in Q2, we have completed integration on our side with GeM Sahay making one of the first lenders to do so and we are fully prepared for the expected launch in February 2021 by the government. In addition, our highly wanted upcoming digital supply chain financing platform growth chain has completed its first two phases of development and we will go live in February 2021. On the liability side of things, we have continued to take great strides. The elevation of the long-term liquidity crunch that was triggered by ILFS continues, but fundamentally stronger NBFCs like U GRO are gaining increasing access to relatively less cost of liabilities. For well-run and governed NBFCs, this has been a huge boom as it has allowed us to secure our liquidity position for the foreseeable future while borrowing costs have come down significantly, solidifying margin across the industry. This is excellent timing for us, and we'll be able to leverage the large volume of liquidity that are now available to achieve our growth aspirations. We have now built distribution footprint with services ticket size ranging from INR 5 lakhs to INR 2.5 crores, underpinned by our four-prong distribution channels and continue to remain focused on building businesses across our 8-sector pillars with the addition of micro-enterprises loans below INR 25 lakhs being sector agnostic. As of the end of January 2021, we had a total of INR 756 crores of sanctioned liabilities, INR 194 crores of which we have yet to draw out. Our liability book continues to become yet more diverse and we now have 22 active lenders including PSU banks, private sector banks, foreign banks, and other financial institutions. As of the end of January, we have added 8 additional lenders to our book. We maintain an extremely healthy liquidity position at present with nearly INR 300 crores of immediate liquidity on the balance sheet, not including our undrawn sanctions. This has meant that we have a CRAR of 78%, far higher than industry averages. Our liability pipeline is also very strong for the foreseeable future and we are confident in significantly expanding our borrowing book as per the asset side needs through the end of FY '21 and going forward. Our financial performance continues to be strong. We have notably recorded profits throughout this Coronavirus period. Despite our highly conservative approach to provisioning, we have declared profit after tax of INR 6.27 crores in Q3 with a total income of INR 39.08 crores. Our net worth as of December 31, 2020, stood at INR 950.5 crores with our book value per share being roughly around IN 135. In closing, the commencement of mass vaccination shall hopefully signal the curtain for this dark period for humanity. As the small businesses across the nation reopen, there is a strong sense of hunger for growth to make up for the time lost during COVID. We have been hard at work throughout this year to expand our distribution and underwriting capabilities to match the ambition of the nation's best and brightest entrepreneurs. With the commencement of our GRO micro branches as well as continued technology innovation, we feel ideally equipped to grow alongside them in the coming months and years. It is often said that the night is darkest just before the dawn and I believe the end of the COVID-19 era will usher in a period of great prosperity for the MSME space. We are working hard to be part of that growth and we hope that you will maintain faith with us on our journey. Thank you, all of you. Over to you, [ LC ] team.

[Operator Instructions] The first question is from the line of Mehul Soni, an individual investor.

Firstly, congratulations on the decent performance even during the time of COVID, and good to see that you're coming back to the pre-COVID levels. Sir, just a couple of questions from my end. One is you know that now the business is back to pre-COVID levels and we're going aggressive in expansion mode. Just wanted to understand what are the number of branches that you are looking to add in FY '22? And how do you look at the dispersals coming across?

Yes. So both are very forward-looking questions, still we don't give forward-looking numbers. But we can -- directionally, we can tell you that our aspiration is to create Ugro as a platform which has to achieve 1% of the market share of the outstanding credit of MSME in the next 5 years. In order to build that kind of scale, we believe that MSMEs, which are dispersed set of customers and whose need has to be serviced from a multipronged channel rather than 1 channel, and we have now built our footprint across that. So for our -- in our 4 distribution channels, which is our branch-led distribution channel, we have now capability to service loans starting from INR 5 lakh to INR 2.5 crores, and that are divided into the branches, which we are building for our sub-INR 15 lakh loan, which are direct distribution branches. And our core branches continue through intermediatory or GRO partners, which services what we call prime lending market and the mid-prime lending market. On the supply -- what we call ecosystem financing which is supply-side financing,1we have built both digital technology and distribution platform and we have made great strides in creating integration to a large platform like GeM Sahay so that we can be one of the forefront leaders in cash flow based financing. Third, we have this distribution channel which we call GRO-Xstream which is a core lending platform, wherein during the quarter we have operationalized 6 partnerships with smaller NBFCs and fintech partners and we are seeing an average disbursement of around INR 15 crores a month. And fourth is digital which will start -- starting next financial year. In terms of the -- as you would have seen that for the whole year of -- which was our first operational year for FY '19/'20, we had a total disbursement of around INR 850-odd crores. For FY '20/'21 we disbursed around INR 850 crores while we were operational, technically, only for 6 months. But if you do on a run-rate basis, we've doubled our disbursement from year 1 to year 2 and we think that we will continue to do that trend or even surpass that, so that would give you directionally where we are headed to.

Sir, second thing was on the NPA level, right? I understand now that the book has started doing vintage. So are these NPA levels mainly due to COVID? And could we see them coming down in the coming quarters?

I think that this is -- with current NPA levels, which are there, it obviously takes into account the impact of the COVID and the heightened stress. And also it is because out of our 8 sectors, there are some sectors, especially the hospitality, which is a small portion of our overall outstanding book, has seen much more cash flow issues than any other sector. I won't be able to comment whether it would come down or not, but I think we are now running at a vintage level wherein these are very tolerable NPA number, and this is what we had always expected. Had the COVID not been there, probably this would have been little lower. But I think the current range is a completely tolerable range for us.

Right. And sir, one more thing. I just wondered, on your presentation on the restructuring of the portfolio, right in the opening statement when you mentioned. And we also see that even the bounce rate for December had been close to about 14% for secured and 20% for unsecured, so could we see some more restructuring happening in the coming quarter?

Yes. So at the beginning of the pandemic itself, given our sharp data analytics capability, digital technology, how we look at the bureau and playing in the prime market, we had a full view of what would be the total stress. And our book and the requirement of -- or the request of the restructuring has actually come near to roughly around 60% of what we have expected. We continue to evaluate each of the restructuring requests. The underlying costumer go through their complete re-credit exercise. And we accept those restructuring stress, wherein we feel that the customer needs cash flow release for a temporary period of time. I believe that most of our restructuring stress, which is -- which was there -- or the requirement which was there has already been undertaken with roughly around 15%, 20% more to happen and not beyond that.

Okay. I think that was very helpful. And then just one last question if I can squeeze in over here on the liability side. Now that we have started taking liability as we have a decent size of liability on the books. So how do we look at leveraging our book from here onwards? And what is the current rate of borrowing that you're looking at? I mean, is it coming down with the book getting older?

Yes. So we -- if you look at our presentation, we have already given that our cost of borrowing from its peak in Q3 FY '20 of 12% has already come down to 10.12%. But some of this is because the liquidity push, which government has given through PCG and TLTRO scheme. So our liability cost would be the range bound in -- within this small retail. Our strategy on the liability side have been to increase the funnel and create more and more partnership as a lending partnership with different kind of financial institutions. So today, if you look at on Slide 21, we have almost 7 out of 12, 7 of the public sector banks, we have 5 private sector banks, we have SIDBI, we have DFIs, we have small and big NBFCs. Every lending type of institution which you can think of is already there. So it's in a -- it's a sheer achievement within last six months, we have been able to expand our lender universe from 3 to 22. So we don't think -- so specific to your question, I think our liability cost would remain where they are, I think, for next 2, 3 quarters because we don't see that to dramatically go down. But our yields on the book are also increasing because we are going more micro in terms of our asset profile. So our NIM would expand from where they are. Number 2, in terms of your leverage, fundamentally we believe that going forward, the facet -- the conventional business models of NBFC, which was run primarily on leverage and asset-liability mismatch is not coming back at all. So our longer tenor, we would like our leverage to remain between 3.5x to 4x and not go beyond that. And that's why we are very focused on both co-lending and asset securitization and constantly working on some of those aspects.

The next question is from the line of Shanay, an individual investor.

There were some rumors about U GRO acquiring Religare Finvest, so I am sure you cannot comment on the particulars. But are we looking at inorganic opportunities arising because of COVID?

So COVID, no COVID, our business is dedicated upon building our entire franchise organically. When I said our 5-year goal is to take 1% of the market share of outstanding credit of MSME, that does not entail any inorganic opportunity. But given -- with the size -- with the size of our balance sheet, kind of our investor base and the change of our government and Board, we generally believe that as being -- as a listed company, we believe that there's always a market opportunity for consolidation. But those -- we are very focused that our consolidation effort would be only for the segment of the market which is purely MSME and for the product line which we do not do today. Once you try finding inorganic opportunities on those filters, they are going to be very few, but I am quite confident that given that large number of small business financing NBFCs, which are invested by private equity and others there would be eventually opportunity of consolidation. So to answer your question, we are open for that but that is not something actively we pursue.

And just one more thing. So we did a capital raise before 2 years of around INR 900 crores, and we are doing a quarterly run rate of around INR 38 crores revenue. So when can we see -- like I'm sure there is huge growth hike. So when can we see the numbers scaling up?

Yes. So you're absolutely right. So Ugro's capital raise was completed in July of 2018. We took the time to set up the platform. We became operational in April of 2019. We actually piloted in January 2019, but we became fully operational in April 2019. We completed our first full 11.5 months of operation in March of 2020, and pandemic hit afterwards. And obviously, we have come back. We had to take a pause of almost 6 months, and we have come back. And as you are seeing that lending businesses would normally scale up in this gradual fashion. Because lending as a business has 3 spectrum, the liability side spectrum, the platform in between and the asset side spectrum. And you have to make sure that you are aligned to all of it. So we are -- at our base, we are growing exponentially. As I've answered in the last question, that we have doubled our AUM growth, disbursement of our asset side from first year to second year on a run rate basis, while asset price has -- disbursement is, like-to-like, INR 800 crores to INR 800-odd crores. But if we would have been operational full year, then it would have been INR 1,600 crores and we intend to double it again because the underlying -- we have the advantage of liability side, we have the advantage of fully built out distribution, we have advantage one of building one the best technology platforms in the country. So all of that has played out well. And in the next few years, you should continue seeing us as a growing platform.

The next question is from the line of Mithun Aswath from Kivah Advisors.

I'm looking at this company maybe for the first time, so pardon me if I ask some basic questions. I just wanted to understand what is the space that you're working on? And who would your relevant competition be? And how do you see yourself differentiating in a crowded market like the one we have currently, especially you having a higher cost of funds? I just wanted to understand, are you seeing even some of the traditional banks also entering spaces where you are? And how are you seeing that? And number two was, despite your portfolio being relatively new, you are already seeing some sorts of concerns on the collection front. So I just wanted to understand how technology is helping you or is it more than technology that what you will require to build this as a durable business?

We will be happy to do a longer conversation for this. But I will try giving you a broad overall summary of how we are building this business. So number one, I think the space of MSME, it's given that the underpenetration of credit for SME -- MSME and SME in India is very significant. On any rough estimate that -- underpenetrated size of the market is roughly around $300-odd billion, right? So the space, while what you see is in a highly competitive segment and depending upon from what spectrum you are looking at it, actually, it is an underpenetrated segment. The outstanding credit for MSME in India is roughly around INR 17,000 crore, and it grows around 10% to 12% on an average basis. And as I said, that we want to take 1% of the market share, which means that by 2025 crores, it should be INR 25,000-odd crores. That would give you the size aspiration. Number two, when we started, and this was India's largest ever capital raise for technically an early-stage startup in 2018. The reason why we could do that with some of the best financial institutions in the world, because of our unique strategy of building a sector-focused orientation. Our view is that there is -- SMEs are not homogeneous as a borrower class. Mainline lenders, when they look at underlying credit, they don't differentiate between one type of customer to other type of customers. To give you an example, a dentist and an IVF clinic are both doctors, but very different to each other in terms of their cash flow profiles and underlying customer they service. And we felt that the only way to create that differentiation is by being focused on certain select sector and we build a unique underwriting capability around that. We did 3 years of research work with CRISIL came out with our all 8 focus sector, which contributes roughly around 40% to 50% of SME market. Then we built what we call our center of the pillar, which is about data analytics and underwriting platform, which is a hybrid model of looking at the conventional underwriting parameters and using both analytics and what kind of data can be utilized, and how can you improve the ease of the origination, ease of collection, ease of doing business, and we invested very significant amount of both human capital as well as financial capital. Third is distribution. That in order to service this market, there are many number of niche players who are there, but niche players have their unique disadvantages. So while we are niche to an extent that we are only dedicated to small business, but in our distribution architecture, we look at customers who can come or who had different and varied needs to our 4 channels, which is our branch-led and intermediary channel, which services our secured and unsecured financing. That's our footprint business wherein we started with 9 locations, we have expanded to now another 25, and we keep expanding that channel. That services anything from INR 5 lakh to INR 2.5 crores of loans, secured and unsecured. Second, our view is that roughly around INR 100 crores of cash -- working capital gap is there around cash flow-led financing, which is called working capital financing, which is linked to supply chain financing. Government has huge focus around that. And that's why most of the innovation, which is whether it's trade, whether it is GeM, whether it's Okane platform, all of that is around cash flow-based financing, and we are at the right at the center of those. Third, we believe that there are roughly around 100-plus market intermediaries, which are small NBFCs and fintech and payment platforms who have access to the smallest micro credit platform. But they need access to the liquidity, and that's why we have built this platform called GRO-Xstream, which partners with them and co-lend. And eventually, fourth is about digital direct, which will start next year, which allows the ability to customers to come to us directly. On the asset side, that's the broad picture. Our different -- unique differentiation is our ability to look at a customer in a templated fashion and correlate with what sector and subsector it belongs and bring a unique credit solution without too much of judgment or intervention from the frontline team, and that is being done by historical knowledge, plus technology, plus analytics. On the liability side, our beliefs have always been that high capital -- high -- the biggest barrier is your size of the capital, and that's why we started with a large capital. Second is the quality of the governance. And third is the way you think about liabilities. Most of the NBFCs in the past era have created their both ROE and ROE return on the back of liability mismatch and high leverage on the balance sheet, which is not -- globally not the model for alternative lenders. Our uniqueness is being able to originate, underwrite and hold a book, which otherwise, for traditional lender or large lender, is not what their main stake is. And that's why we divide our liability side and our asset pools are created, which attracts all form of liabilities. 100% of our book is priority sector, and that's why for all public sector banks, we are attractive. We are attractive to all of the DFIs in the world. And third, we are very focused on co-lending because we believe that the future collaboration between the large liquidity holder, which are the banks, and the NBFC can only succeed when they start partnering with each other. So as you know that we have 4 co-lending partnerships, which is SBI, Bank of Baroda, ICICI and Kotak. And we are hopeful that in next quarter, at least one of them, after the revised guideline, would get -- become operational and actually provide massive liquidity. And that would alleviate the need of leveraging the balance sheet too much. Second is that we have to keeping our assets. And that's why we are very -- our GRO-Xstream platform is a platform which allows lenders to pick and choose the kind of asset, depending upon their need, they can take off from our balance sheet. And third is the leverage of the balance sheet, where we have the ability to go, technically, up to 6x, but we think that we will never go beyond 4x on the balance sheet. If you put all of this together, it's a hard business to build, but you have to remain sharply focused on that. I think we will definitely be able to build India's largest small business financing platform. In terms of your other question in terms of the portfolio quality stress, I think that looks -- the bounce rate which you are seeing, I think between our pre-COVID bounce rate to post-COVID bounce rate, there is not much of a difference. Obviously, at this point in time, the underlying customer cash flow are not that stable. And that's why you'll see a volatile bounce rate, but I think it is very controllable. We are not typical fintech which doesn't have physical infrastructure. So all our physical locations are distribution, underwriting and full-fledged collection. And you have -- this is a collection-intensive business, and we continue to do that. And as a proof, we are a growing business as our portfolio will show more vintage. I think that we are in all-tolerable zone. In terms of our long-term value creation and our targeted ROEs and ROA returns, I think we are in the range, and we have more absorption capacity than anybody else.

The next question is from the line of Tushar Sarda from Athena Investments.

My question is on your cost of operation. They seem to be high probably because you are in the initial phase of business. So where do you think this would stabilize around as a percentage of assets deployed?

So sir, you are absolutely right. The way you should look at us is that we are in our -- technically in our first 1.5 years of operation. And unlike -- because we started with a large capital pool, we build all our infrastructure upfront: people infrastructure, distribution, infrastructure and technology infrastructure. So we have taken that load upfront so that when we scale, we don't have the challenge to then match up with the growth. So obviously, our initial cost of operation would be higher than what our vintage lending institution would be. Our belief is that we would generate over a period of 3 to 4 years, which we have -- where we are headed to, our return on equity and return on asset for our segment of the market would be best in class, and we would -- we should be comparable or compete with any other lender in the country. And the reason why we say that, one, we are a mix of both conventional and digital business, which means our cost-to-income ratio should be lower than any other player in the market. Our general productivity per people is already showing at least 50%, 60% improvement than what any other conventional lender would be. So that is the broad guidance I can give you on this.

No, but you are at almost 7%, 8% in terms of your operating cost. So I would like to understand whether it will settle around 1%, 1.5%, 2% or you think it will be higher. Because I think you have opportunity to grow around 4x, 5x with this cost. So if you can throw some light on that, that will be very helpful.

Yes. So you're right. I think -- so that's -- I don't know what is the guidance we would have. And depending upon what time frame you're looking at, sir. Because -- we -- obviously, as management, obviously, our view is to build this business and deliver superior performance over a period of time, right? This thing cannot be done. But if we have to generate in ranges of 16% to 20-odd percent return on equity, then we have to match that kind of cost of operations.

Okay. But you can't give a specific number as to what you are aiming for in terms of the cost by assets?

No, we can take this offline at some point of time, and we can give you -- directionally, we can tell you how we'll build on that.

The next question is from the line of Mangesh Kulkarni from Almondz Global Securities.

Yes, sir, I just wanted some more colors on our asset quality. The reported numbers of 2-point-something percent. This includes sir, some pro forma NPAs and all these things?

Sorry, what do you mean by pro forma NPS, sir?

That means a status quo on the NPA recognition because of the Supreme Court order. Is that...

No, no, no. This is as per 90-day period. So, no.

So if we include that, then what will be the number?

So sir, the numbers shown to you here is as if -- Supreme Court direction is not to report customer as NPA, right? But what the number you are seeing, as if those have become NPA. So this is not -- we are not taking the shelter of Supreme Court restrictions. Obviously, we cannot report those customers as NPAs, but the numbers shown here are not behind those numbers.

So it means -- that means these 2.3% are actual pro forma NPAs, whatever the slip after the 90 days, we are showing it as NPA, right?

Yes.

Okay. And on all these, we have carried only a very small provision for COVID. What is our total provision for COVID?

No. So we are not -- now we are not carrying small provision. If you go back 2 quarters, we had a large provision with respect to the COVID. So we had roughly around INR 3.8 crores of provisioning towards COVID. And now because some portion of the portfolio which got restructured, so additional provisioning of restructuring has been set off against the COVID provision, because COVID provisioning you have done only for the purpose of stress itself. So that's why the leftover provision of COVID is very small.

Okay. So we said our INR 21 crores of total provisions we are carrying, right?

Yes.

On slide -- some slides, we are cumulative provisions around INR 21 crores, right?

Yes.

So those include COVID-related provisions?

Yes. Those COVID -- it includes all provisions, yes. Nirav, if anywhere, I'm wrong, please correct me.

You are right.

[Operator Instructions] The next question is from the line of Samir Thakkar, an individual investor.

So I have a question. Sir, can you update on the credit rating side? Have you seen any deterioration or stress on it from the agencies? And also, do you expect any further increase in restructuring of loans in the coming quarters?

On the restructuring of loan, I have already answered that question in -- I think the 2 questions back, but just to repeat, at the time of -- beginning of the pandemic, given our data analytical capability, we have assessed stress on the book. Our restructuring has come out -- requests has come out roughly around 60%. So that gives you our ability to assess the predictable future flows is very strong. The restructuring which has been done, we expect in terms of the pending request and what we are seeing, roughly around another 15%, 20% to 25-odd percent which should come in the next quarter and not beyond that.

Okay. Okay. And lastly, if you could share then...

I'm so sorry, your ratings -- our rating has remained stable wherever they are, as you know. But we generally believe that we -- for the size of our company and the kind of -- when we got our rating, we didn't had even INR 100 crores of lending book. We had no liability franchise. We have distribution, which has just started. And we took rating right at the beginning of our initial journey. Unfortunately, as you know, that immediately after that, we have a series of crises in the lending industry, ILFS, YES Bank, so on and so forth. And to that extent, rating agencies, it's difficult for them to revise their reviews upwards. So there is no negative surprise on the rating side. But I don't know, and we have even not tried because we have not felt the need of that as well. Because liability side is coming on the existing [ little ] very easily. But we cannot predict when the review -- upward review for us would happen.

Right. Okay. So lastly, if you could shed any light on the conditions of the sector that you lend to, like how are the sectors performing? And do we see a rise or fall in lending in any of these sectors? Or any plans on changing our strategy to add or stop lending to any sectors from the core 8 ones that we already do?

So as you would have -- so even pre-pandemic, I think, so mid of last financial year, we had stopped auto component as a sector. We are doing now the formal review of that sector in the current quarter. As you know, for us, any sector review goes through a very rigorous process. So we have external agency [ recruited ], which does for us, and goes to our Board and to our Risk Committee. So we are doing auto component. We believe that auto component sector stress is now is at the verge of revival. And we -- once that exercise gets completed, we might just open that again. Second, as I said in my opening remark that for -- we believe the homogeneity around sectors, and that's why we've built a sector-focused platform. But over the last 2 years, what we have experienced, when it comes to sub-15 -- sub-INR 25 lakhs of loan, which is very small micro enterprise businesses, it hardly matters whether the business is pharmacy or a Kirana store. So applying sectoral scorecards and sectoral underwriting parameters becomes unviable and that's why we created what we call micro lending sector as a homogeneous sector. So -- and for that, we don't apply the sectoral approach, we use that. We created a new micro enterprises loan scorecard and based on that we do that. So that's where we remain, continue to be that.

The next question is from the line of Anil Tulsiram, an individual investor.

I have 3 questions. First, I thought you mentioned about the Okane and other platforms which are coming up. So we have 2 platforms, which Okane is the account aggregator. Sir, can you elaborate to what extent it will hurt -- it will help the NBFCs and hurt the NBFCs? That is the first question. Second is, over the period of 5 years, you want to reach 1% of the MSME loan book...

Outstanding credit.

Yes, outstanding credit. So to what extent it will be like your on-book loans and what percentage will be co-lending? And the third and the last question is what is the total technology spend till now?

Okay. So one, account aggregation is part of Okane. Okane is a concept. So -- right? As you have seen the UPI change the payment industry, not just in India, but globally. Our view is that we call -- please go to the LinkedIn page of Ugro. Today, we are hosting a worldwide conference on India's track 2.0 which is being done between UGRO, Ispirit and IFC and all the DSIs of the world with -- so it's the panel, which is hosted by Ugro, wherein you have DFC, CDC, ADB, Kotak Bank are as panelists and worldwide domestic financial institutions would be joining. And that we are presenting to all over the world that how India's development of Okane would revolutionize the entire credit as it has done for the payment platform. So one think we think you should remember for this, what we do believe is transformation, which is happening for MSME credit. One, Okane is a layer of the platform would allow -- one of the biggest challenge for lenders have been, and that's why lending to MSME has become only purely collateral-based lending. Because most of the small businesses, their reported cash flows or a balance sheet does not give comfort to lenders to understand whether they can extend credit or not. It's the combination of account aggregation, which means every borrower would be able to give access to 2 things, entire set of the banking and the entire set with the GST with one single OTP, which means that lenders who have data analytical capability to look at these 2 sets of data, bank cash flow and GST and being able to create algorithm around understanding the cash flow would be able to lend on the fly to the customer. I think that is what it would change dramatically. Second, Okane as a platform has a concept where in a lot of people who have customer bases who need credit, but there is no method to provide that, which is kind of loan service provider. So think of a large corporate who has 20,000 distributors or 50,000 distributors, that large corporate would become a loan service provider. It would allow its own transaction data, the GST and banking of the distributor. And the other side of that lender can use all of this data and being able to lend. The first experimentation of that is the GeM Sahay. GeM, which is India's marketplace, government marketplace for procurement by all public sector enterprises, by MSMEs, and they have created the financing platform in which we have integrated ourselves. In fact, entire GeM Sahay is hosted with Ugro. Every lender in the country is now going through Ugro pipe to pilot the GeM Sahay, where you think of this Indian Railway is giving a stationary order to a small shop owner. As soon as that order is placed, based on the MSMEs rating, lenders can lend to the shop owner to buy material and then supply to Indian Railways. As soon as Indian Railways would receive the order, it would pay the money to the GeM Sahay portal and automatically, lenders would get paid back. We have 1 use case of how this can transform the entire credit in the lending industry for MSME.

And sir, that second question, how much will be in the on-book? And how much you want to keep the co-lending part?

Yes, yes. So look, this is very fluid at this point of time. As I said our belief is that NBFC should not go beyond 3.5, 4x leverage. So the conventional models of creating return on assets and return on equity through high leverage and asset side liability mismatch is no longer valid and should not be valid. Aspirationally, we think that our asset book should split 1/3, 1/3, 1/3. 1/3 of its own book, 1/3 is through co-lending and 1/3 through securitization and asset sales, but it is -- that is aspirationally. It depends how the entire liability universe evolves in the next 1 or 2 years. There are 4 sides, which is the regulator, the government and the banking system working towards it. But any transformational change of this nature takes a few years to set in. You saw that the first co-lending circular came 2 years back. We didn't see more than INR 25 crores of total lending on co-lending. The second circular, which has come now, our view is that can really open up the entire co-lending universe, and let's see how does it progress.

Correct. And sir, can you quantify your actual project technology spend till date?

I don't know that -- whether we have publicly disclosed that figure or not.

Okay. I don't know, as well. Sir, my understanding right, your entire technology is on cloud, right, from the day 1?