Thank you very much. We will now begin the question -and-answer session. The first question is from the line of Gaurav Purohit from Systematix.

Thank you. I think we are going to remain on course for the 30% growth, and that we believe that is quite healthy growth. We don't think we are going to exceed that this year.

And also, sir, on growth, what is giving you comfort on growing so aggressively? I understand that you are primarily into secured businesses. And what do you think can go wrong given the current environment because some of your peers have started reporting some stress in MSME segment. So, do you think that could later on result into some delinquencies or are you seeing that in your portfolio right now?

So, I think our confidence of 30% growth comes that we are -- as you rightly said, we are in a collateralized portfolio. So, we have ability to recover by various means, including disposing of the property, which is mortgaged to us. Out of about 35% portfolio is gold, which is the asset quality remains in complete control where we can auction the gold and recover our money. As regards to the other segment, we agree that MSME, we have seen some slippage, more particularly from a state of Madhya Pradesh, where we are already turning down our disbursements and we are progressing cautiously on that. However, other segments of housing finance remain very stable, where we are not seeing much challenge in asset quality. And now Pradhan Mantri Awas Yojana credit subsidy coming in the play, where the loan -to- value further goes down, giving us a higher security margin. I think we are going to see the good growth in that segment. So, while this quarter, some more delinquency have come because of various reasons, including that first quarter is always, we have seen the rise in the delinquency because of seasonality. Also, Q4 we run a lot of campaigns and incentive programs. And one of the reasons is also that quarter is less than 90 days because of February is 28 -day month. So, some of the slippage of the 60 and 90 cases in the month of April because of those 2 days less in the last quarter. So, a combination of this. However, if you see the overall delinquency that is still our GNPA in the range of about 1.7%, net NPA is about 1%. It is very, very healthy, robust.

And sir, like the trend we've seen in the last year, do you see the slippages coming down significantly in the coming quarters?

I will say that slippages will not be as much as what we have seen. We will see that overall asset quality remains in the range we have projected. So as a company, we have given the guidance that our gross NPA will never cross 2% . Net NPA will never cross 1.2% . I think we intend to maintain within that range, specifically to project about quarter will not be possible. It can always vary 10 basis points here and there. But overall range will remain the way I said.

About what?

Credit rating. You had mentioned in one of your media interviews?

That exercise is on. Exercise is on. We should see the results by mid of September.

Okay. And then there is a possibility of a reduction in your costs from third quarter onwards?

Yes. I think because as far as the reduction of cost is concerned, I think for the next 12 months, we'll be having a higher issuance on NCD, commercial paper, and a lot of borrowings with MCLR is going to get reset. The MCLR reduction already announced by various banks. And we see the inflation has also come down. So overall interest rate scenario should look like the interest rate is going to remain softened. That effect will be seen over a period of time, next 6 months, whenever the individual banks, MCLR gets reset, we'll get the advantage plus our incremental bo rrowing are going to be at a lower level by at least 30 to 40 basis points. So, we'll see quarter-on-quarter, our cost of funds will come down. And by the end of the year, I think our overall cost of the fund should at least come down by 40 to 50 basis points.

That was a sizable reduction. Just one specific question on your Micro LAP because you said that is helping you scale up your MSME. One of your peers has discontinued the disbursement in that business, specifically in the South India market. So, any comments on that? I understand it is a very recent venture, and the book is not yet seasoned, but any signs of stress that you're seeing there?

So, I think we are also growing that book very cautiously depending on the various feedback and observation that delinquency has risen in Micro LAP segment. However, we are creating a differentiation by using the technology and data science capability, where various risk triggers are being built. And we have gone a little slow till our full stack of technology get s rolled out, which should happen by end of September. So, we are cautiously trading there, and we are confident that given our experience in the collateralized lending, we'll be quite cautious the way we do the collateral evaluation, legal title search, any case going bad, your ability to recover comes from the confidence, the right valuation and the right title. So , we are quite confident that we'll be doing better than the competition in that business, backed by our technology and data science capabilities.

And sir, one last relating question?

Okay. I'll come back later.

The next question is from the line of Sweta Padhi from SBI Securities.

Congrats on a great set of numbers. So , in this quarter, we have seen a slight increase in the GNPA and the Construction Finance segment. Can you throw some light on that? And second question is on the cost -to-income ratio. The performance has been very good on the cost -to- income front. So where do we expect this cost to income to settle by FY '26?

I think our cost -to-income ratio on the increased scale of operation; it should come down. However, we are going to add another 200 branches this year. So, we expect this cost-to-income ratio should remain in the range of about 50% for the year. If we remove the impact of addition of the branches, the cost-to-income ratio in real terms will be in the range about 46% to 47%. But we assume that because of those branches, some impact will be there. But still, it will be much lower than the last year, and if we are able to maintain the cost-to-income ratio even in the range of 50%, we are on the track to deliver ROAA in the range about 3.5%.

Yes, sir. And on the construction finance part, the slight increase in the GNPA?

So, there's one account which has slipped into the NPA. And on account of that, the value of that account was INR16 crores, INR8 crores provisions have been provided for. But already for that account, if you see the last quarter, the recovery has also happened on account of one of the NPA about INR7 crores. This is a constant phenomenon. Further, there are a lot of developers who are coming forward to take over that account. So, this remains on a consistent basis that whenever NPA happens through the SARFAESI, other means we are able to attract other developer to take over the account and recover amount.

Our next question is from the line of Chintan Shah from ICICI Securities.

Congratulations on great set of numbers. So just firstly, on basically the asset quality sir, as you mentioned the GNPA is likely to be below 2%, and NPA below 1.2%. So, like given that some lenders have already flagged some risk on the MSME portfolio, so what gives us the confidence? And if you could just throw some light on the collections part as well? How are the collections panning out? Yes, that's the first question, please.

So yes, as regards the collection is concerned, I think we have about 520 people, very strong team, and we have very good analytics on the collection, the processes automation is in place, where we are able to track actively our collection agent performance and drive them. They are attractive incentive plan to push them higher. Having said that, yes, we have seen some of the slippages happening in MSME. We are more cautious for our incremental underwriting and taking the right measures. Currently, our collection efficiency in the range of about 97% upward in the segment. So, we are quite confident that our focus will be to resolve the old NPA faster by doing a lot of settlement and other things. And we see that while our MSME is 100% collateralized, not like many other where they are giving unsecured business loan, they are collateralized, where we have LTV cushion about 55% LTV there. So, with that cushion in place, even though whe n accounts slip into NPA, we are quite confident to auction those properties or recover back of that property by mutual negotiation and recover those amounts. Focus during the next 9 months will be that old NPA pool, we are able to resolve faster by settling those accounts by selling those properties faster. And I think with that pace coming back our NPA overall will remain in range bound. As I said, our GNPA will not cross more than 2%. Our net NPA will not cross more than 1.2%. Within that framework, we will work.

Sure. This is quite helpful. And also, sir, secondly, on the AUM growth. So we have guided for around 30% in AUM growth for FY '26. But on a steady -state basis, probably over the next 2, 3 years, could we assume a similar t rend here or are we looking to moderate the growth post '26? On the growth front, how should we look at it?

So, I would like to say that if you observe that we are a well-diversified company in the secured segment, we have currently five products. So, we have ability to change the levers and increase one product, which is doing better and reduce the other product, which is doing not that well given the macro environment in some of the segments or some of the geography. With that capability in place, I think we are quite confident to achieve the 30% growth for the next 3 years by targeting the AUM to be INR50,000 crores by FY 2028 and maintaining our ROAA at 3.5% upward. So, with those two metrics in place, we are quite confident to continue that path. And I think gold loan, we have done well, where the yield is very good. Similarly, our retail construction finance segment is also doing quite well, given the housing demand on rise and a lot of traction we are seeing, RERA in place, security structures are good. Again, the housing loan growth remains a very high -- a very good growth driver. So , with combination of this, I think we are well placed to achieve a 30% growth for the next 3 years.

Sure. And sir, just lastly, on the opex front. So I think our opex is relatively elevated, like around 6% odd, so do we see this moderating like if the ROA is set to improve from here on, so what could be the key driver, other interest income, opex or margins or credit cost? Some thoughts on that, please. That's the last question?

If you see our cost -to-income ratio, if you look at last quarter, Q1 FY '25, it was about 65%. Constantly, by our gold loan branches delivering higher margins, and overall our scale also going up with AUM going up, the cost-to-income ratio have this quarter come below 50%. And as I said earlier, if overall basis, we intend to maintain our cost -to-income ratio in the range about 50%. Given that, we are going to add another 200 to 250 branches this year. Had not been that done, our cost-to-income ratio would have been the range of about 47%.

Sure, sir. This is very helpful. Yes. And that's it from my side, and all the best for the future quarters.

Next question is from the line of Sagar Shah from Spark Capital.

First of all, congratulations, sir, for excellent set of numbers. I have around three questions. My first question was related to credit cost. So this quarter, we saw the highest almost credit cost as compared to last few quarters, and you had given the clarification that was regarding the one account in construction finance and some stress in MSME. So looking at the picture and will Q2 follow and will see kind of a mirror to Q1, so what kind of credit cost should we be building for the entire year sir, for FY '26 per se? That was my first question?

Thank you. So I think overall basis, if you look at our credit cost has been in the range of about 60 basis. And we don't see that much elevation at the most credit cost will not go beyond 70 basis. It's too early to share because we have seen the seasonal ity that every year, Q1 is a little higher. So this year will be slightly more, higher than the previous average. But Q2 to Q4, between that, we see the remarkable recovery in terms of our old NPA. And by that, we will be able to bring overall credit cost down. Even though on the conservative side, we said this year with the credit cost goes up by 10 basis. It will not cross more than 70 basis for an overall year basis.

My second question was related to our growth. Growth in this quarter was way above the industry average and one of the best quarters for you in terms of AUM growth. So even sequentially, the AUM has grown by almost more than 8%. So , I wanted to understand which geographies are you exactly targeting? Is there any geographies that you are -- particularly that you're targeting, that you're getting such robust growth during the period?

So I think we are going to add second half of the year, Southern India market, which will be Tamil Nadu, Andhra, Karnataka and Odisha also, we are going to add as far as the gold loan is concerned. So these states we are good, Andhra, Telangana, Tamil Nadu, Karnataka and Odisha. These are the five states we are going to add gradually, and we'll roll out the branches in the last quarter of this year.

So basically, is it fair to assume that this growth has been from the non-Southern region, means in the Western as well as the Northern region?

Yes.

My third question, last question was related to co-lending AUM. The co-lending AUM for this quarter was at around 19%. So going ahead for the entire year, what kind of percentage should assume for the co-lending AUM to be on books?

Co-lending AUM, we intend to project in the range of anything between 18% to 20% range. At this range, only we intend to maintain this.

Our next question is from the line of Asutosh from Ashika Stock Broking.

Congratulations for a good set of numbers. So I'd like to understand fee income front. So currently, we are approx 30% of our net revenue is coming from the fee income side of it. So what is our strategy going forward on this front?

Our fee income is mainly coming from co -lending, from car loan, and from insurance distribution. And our fee income, we intend to maintain in the range of about 25% to 27% throughout the year. Quarter -on-quarter can be up and down by 2%. But overall yearly basis, our plan is to maintain it in that range.

And within these three segments which you have discussed, which is a major contributor? And right now, what are strategies....

Our major contributor is co-lending and also income from car loan and insurance.

Second question is on the cost of fund front. Like how much of our borrowing liability fixed versus floating? And how we see things moving forward from here on that front?

So I think next 12 months, we are going to keep a major reliance on raising the commercial paper and NCD to meet some of our requirement, and those will be at a lower cost. Our lending side, given the few regulatory changes, we might shift our -- some of the loan to the fixed basis because we see that interest rates are going to be remained softer going forward, so that would be our policy.

And like MCLR benefit and all those, how much of cost of fund benefit you are expecting in this whole year? I mean from the current rate, do you expect it to come by 30, 40 basis points for this whole year, something like that?

So, there are two elements to it. One is incremental borrowing. Incremental borrowing already started coming down by 20 to 25 basis, hoping that we will get some rating update. That will further go down by another 25 basis. Second point is that all the MCLR rates are getting reset on the due date of their 1 year and 6 month if the negotiation done during the time of drawing that loan. So, in that manner, those banks, MCLR, rate reduction benefit will accrue. So, by every quarter, we'll see some benefits keep coming in. Overall basis, I think we should be able to get the benefit of the MCLR reduction by 30 to 40 basis, this is depending on bank to bank.

And sir, on this cost to income, IT expenditure is also one of the areas which we are focusing on. So, can you give something like what we are doing, what type of expense you continue to incur in that area?

Last quarter, we spent about INR26 crores on various initiatives of the technology, data science and now this year, we are actively enhancing our team on the data science and generative AI side, we already deployed a few tools on the AI transformation, which are going to drive the productivity and impact on reducing our cost to income. So I think the spend on the IT is going to be a permanent feature. This is not going to be something that we'll achieve as a milestone, it will come down. But this is a futuristic investment, which we will continue to do. We have currently about 200 people team in the technology infra and data science.

And last question on the g eographical expansion. So any changes in the opening of the new branches or something like that you want to highlight to investors on that front?

No, as I said, we are going to add 200 - 250 branches this year, a combination o f the gold, MSME, home loan, etcetera. And this pace will remain for next year. We are going to add about 700 to 800 branches in 3 years. And that is important because we need to plan 30% growth for the next year, you have to plan at least 6- 9 months in advance.

These new branches will come in any new geography or our existing geography only?

Our next question is from the line of Ninad Jadhav from LKP Securities.

So my question is on yield side. So you have mentioned that the borrowing costs are expected to trend down by 40 to 50 basis points for this year. So how are we looking at yield front? Like are we going to pass on the benefit to our customers as well and if you could quantify how much yield have declined by this year?

So, I think we have to say that overall, if the interest rate goes down for everybody, that at least cost benefit get passed on to the customer because of the intense competition in the retail segment. However, whatever cost benefit and risk spreads going down because of our negotiation and also the rating potential upgrade, that benefit will be able to accrue to our P&L.

So any specific basis points it could go down there?

I think our current spread is in the range of about 7%. We intend to maintain that spread 7%. It can slightly be better because gold loan composition is slightly improving , it will add another 3% to 4% to current composition and which is a high -yield product and for which all the infrastructure cost and operational cost is already in place. So that is going to improve our overall spread. In regards to the interest rate benefit, which comes to because of the potential rating upgrade, that additional benefit will happen. As far as the MCLR reduction is concerned, because of the competition, tha t benefit, as I said, will get passed on to the customers.

So my second question is on the recent announcement that we hav e made. So we have incorporated two new companies. One is financial services and other is wealth management company. So if you can tell us on how we are looking to scale these businesses and what kind of customers we are looking to target? And would the cost for setting up these businesses will affect our cost-to-income guidance for this year or for next year as well?

There are two companies we have incorporated. One is going to carry out the investment banking activities only for the debt capital market. And another company is a securities company, which is going to engage in the sales and distribution of the debt placement at institutional level, online bond platform and exchange trading. Both of these will not consume much capital, and they will be from the year 1 that will be accretive to the profit rather than taking any dent on the cost income side. On a full -scale operation, we expect that this will also enhance our fee income for that- by the end of the year, we will give the exact projection for the coming year. This year, it is in the setup mode. However, whatever the cost, they will be able to make that kind of money. So that will be cost neutral and no impact on the cost income side.

Sir. And any probable customers we are looking to target, any set of customers?

Sorry, can you come again on the question, a probable set of customers for which segment?

For these companies, which we have incorporated?

These companies -- we have a team of about 10 people. We are going to add more people there. The team is specialized in understanding the need of the bond market, see the price trend and we have a large treasury book. Within that, we use those funds to buy the bond and do the buying and selling of the bond, plus we hold them for a short term 15 to 30 days. We help the corporates to come out with the issuance of the bond, merchant banker. So these are the fee-based activities we are going to do. These clients can be corporate, midsize or the larger size. And it is similar to various bond issuance bankers you would have observed that they are associated with such bond issuance. Further, this team will also help us to reduce our cost of fund because of their access to the capital market and their connect and understanding of the bond market.

Our next question is from the line of Darshil Jhaveri from Crown Capital.

So first of all, congratulations for great set of numbers. Most of my questions have already been answered. One question related to your business model. So I mean we have fully secured and have higher lending book, but macroeconomic cycles, I mean can pressure demand collection and risk appetite. So how resilient our model across down cycles, especially in MSME and construction finance, I mean, where borrower cash flows can be volatile?

So construction finance, we are seeing that there are two, three important things have happened. One that after RERA coming in, there is a designated construction account, is a receivable account of the customer where all the money comes in. And we see it is a very, very strong monitoring tool as well as the security structure. So having seen the good demand in the construction finance side, we don't see any such challenges. And even out of the 280 account s, every year, one or two accounts, which slips into NPA for one or other reason, our team have shown the capability to find another developer, take over that account in the SARFAESI and recover the entire amount. So we are quite confident that even the risk -adjusted return with the low opex and secured nature backed by the strong cash flow of the sale of those apartments, we don't see any problem there. So we are quite confident. And this business we are doing since last almost 12 years. We have built a very niche, very good monitoring tools, and we don't see any surprises coming in that segment at all.

And one last question. I mean, post this fundraise of INR2,000 crores, how soon can we expect return ratios to normalize?

So I will say this year, we are confident to deliver RO AE in the range of about 13.5% to 14%. And ROAA will not be less than 3.5%. Next year onwards, our strong fee income and coupled with our cost-income ratio further coming down because now operating leverage with scale will kick-in. So then our ROAA will improve to about 4% and ROAE should be in the range of about 16% to 17%.

So ROAE 13% to 14% this year and 15% to 16% in FY '27?

No, FY '27, ROAA will be about 4%. ROAE will be in the range about 16% to 17%.

16% to 17%.

Our next question is from the line of Saumil Jain from Lucky.

Congratulations on a good set of numbers. On the 30% AUM growth guidance, can you talk a little bit about what the mix will look like between the segments? Do you expect momentum in gold to continue and softness in MSME to continue?

So we see that gold will continue to grow as we are adding more branches in that segment because we are seeing the strong traction and demand. And now our distribution team is all in place. So gold should be in the range of about 37% to 40% kind. MSME will remain in the range of about 20%- 22%. Housing will remain in about 20%-22%. Construction finance will remain in the range of about 17%-18%.

Gold, you mentioned 37% to 40%?

Yes.

And secondly, on the branch addition guidance for this year, I think you mentioned 200 branches, right?

Yes, 200 to 250 branches will add this year.

And this will be -- any mix on gold or non-gold?

So I think gold will be in the range of about 100 branches and rest will be between housing and MSME.

So credit cost on a long term, we have built in about 70 basis. If you look at last few years credit costs barring the COVID year, the credit cost has remained more or less in this range.

And Q1 opex, you mentioned will stabilize for the year because you're going to add more branches. Correct?

I think operating cost, keeping in mind our branch expansion, will be in the range of about 50%, cost-to-income ratio.

Our next question is from the line of Lalit Kumar, an investor.

Good afternoon. Congratulation for a good set of numbers and my question was…

Your voice is not audible.

I am saying that my questions have already been answered.

According to Lalit, sir, his question is already answered. We'll move to the next question. The next question is from the line of Gaurav Purohit from Systematix. It's a follow-up question.

I just have one question on the Micro LAP book, understanding it is a very new business. But in case there is a default in future, what is the legal recourse you have given that the ticket size is around 10 lakh and not eligible for SARFAESI?

So the eligible recourse, ideally, the major effort is by negotiation, we make borrower to agree to come forward and sell his property or find inner ecosystem to give him the money so that we need not to sell the property at much discounted rate. And another option is Section 138 to build the pressure and initiate the arbitration proceedings. And within that, these tools are effective. The combination of bilateral negotiation or using these Section 138 filing to build the pressure as we move to the arbitration to get the order and then sell the property and realize our money.

And what would be the typical timeline for this in your best assessment?

So for bilateral negotiation, you can yield the result a case -to-case basis less than a year. But cases which are not solved by bilateral negotiations, if you go for arbitration, then it takes a period of effective realization of money, anything between 2 to 2.5 years.

Very clear. And last question I have on the competition intensity. So gold loan sector is seeing phenomenal growth. Everyone is focusing on either growth or affordable housing, so what is the kind of intensity you are seeing here, given that we have a stee p target of 30%. So I j ust wanted to know your take on that?

So I think, in all our segments which are collateralized, if you talk about competition, it is a very intense competitive. Your right to win has to be how you use your technology automation and ability to turn around the sanction faster and do a better customer service in terms of how you handle them, how seamless your journey is, how less the paperwork you seek without compromising on the asset quality. So I think amid the intensity, it is the turnaround time. It is the approach you take it, simplified approach to carry out the whole process, makes a difference. The lending doesn't have a quality other than the service.

Fair enough, sir. Thank you so much for patiently answering all the questions.

Thank you. Ladies and gentlemen, that was the last question for today. I now hand the conference over to the management for closing comments. Over to you, sir.

Yes. So I think I would like to say that our Q1 have set a solid tone for FY '26. The addition of INR2,000 crores capital raise give s us the financial strength to accelerate the growth across lending and new verticals. Backed by a secured book, healthy asset quality and solid technology infrastructure, we remain on track to grow 30% annually and deliver sustainable RO AE of between 16% to 18% and ROAA in the medium term to 4% and even going up to 4.5%. There will be constant endeavour to bring our cost of fund down and you will see by the end of the year, the significant reduction in the cost of fund, where we will be quite conscious of bringing our operating cost in control by using technology and various other intervention of artificial intelligence. As regard to asset quality, there are enhanced effort on the collection side and monetizing the NPAs, disposing of those repurchased assets to bring the overall net NPA in the check. So overall basis, we are on a quite good growth trajectory, and we are all thankful for the support shareholders and other stakeholders are offering to us. Thank you.

Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you for joining us and you may now disconnect your lines.