The first question is from the line of Mr. Bunty Chawla from IDBI Cap ital. Please go ahead, Sir.

In the opening comment s, you said there has been a pressure on the spreads or on the yields d ue to the competiti on. Can you elaborate which segment we are seeing more pressure? Is it MSME? Is it Gold? Or is it Hous ing? And going forward what will be the sustainable yields for these segments ? And similarly, what will be the cost of funds?

If we see on an overall basis, our yield on advances was 15.7% in Q1 FY24, which has come down to 15.6% and thereby resulting in a spread compression of 40bps from 7 .0% to 6.6%, primarily because a lot of Construction Finance portfolio has been pre -paid and the new loans are happening at lower rate of interest. We have seen because of faster sale of inventory in those accounts, there's a faster pre -payment and repayment and thereby, the new portfolio, because of competition, is happening at a lower rate of interest. And there, we have seen that our spreads come down. But in H2 FY24, we believe that Gold Loan share will go up in overall por tfolio. That will improve the overall yield on advances. And we also feel that our cost of funds, which is another factor which ha s gone up by 21 bps, we should be able to pass on in incremental lending better. So that should improve our overall spreads.

So can we say the 6.6% spread, which you have reported in Q2, should be sustainable for second half of the year?

6.6% is definitely sustainable. We still expect this to slightly better bec ause our current AU M of ₹20 bn Gold Loan will increase to ₹30 bn. Gold Loan AUM should increase the yield in the mix because that is the highest -yielding product in our overall portfolio. That will also improve the overall yield on advances.

So it's purely on the Construction Finance we have got the impact on the yields and no more in Gold Loan or Housing, we don't have any competitive pressu re, right?

Suppose we remove the Construction Finance portfolio from this calculation, then our yield would have become better by 3bps1.

Okay. So similarly, can you share your thought s on the cost of funds going forward?

I think cost of fund is largely market driven. Unless there is a change in the c redit rating of the company, we will continue to be in the same bracket of the cost of fund. But certain MCLRs on old loans are going to reset. So there we will see cost of funds go up but that will not be more than 10 bps. However, we will be able to pass on this increased cost of funds to our incremental lending.

Secondly, Sir, ther e has been a higher credit cost. You rightly said that was because we have taken a proactive step in increasing the provisioning. But if you see the prov isioning, still it's kind of a 32%. How much are we targeting to increase this PCR level? Because what we have observed in other medium or large-sized NBFCs, they have a PCR on Stage -3 of 40%+. Some have 45%, some have 40%, some are at 50%. So where are we targeting to reach our PCR and how will this impact the credit cost going forward for us?

We will increase this PCR in a gradual manner, in-line with what I think the market expects and in -line with the best practices. But if you look at it , our portfolio is a little d ifferentiated from many others who have a higher PCR because our portfolio is completely collateralized either by gold or by self-occupied house or by self-occupied business premises. However, with a conservative approach, if you see the PCR last quarter, it was 27.8%, now it has gone to 32.2 %, already 448bps, PCR has been increased and gradually will increase. We don't want to give a level at the moment, but we will keep increasing it QoQ and stabilize somewhere around 37% to 40%. _________________________ 1. This should be read a s follo ws: 'Had the yield on our Construction Finan ce portfolio stayed unchanged, our weighted average yield on advances would have Increased 3bps QoQ'

Okay, Sir. And lastly on Gold Loans, as you have shared that we have touched almost 750 branches . So no more increase in your branches in a shorter period of time. So how one should see the Gold Loan growth going forward? Because until now, the branch increase was supporting high er Gold Loan growth. So how we should see the Gold Loan growth going forward?

Gold Loan business, as I said, from current AUM of about ₹20 bn in Sep'23, we expect it to close about ₹30 bn by Mar'24 . And by then, all our branches, which were contributing losses because they were in the investment phase, will achieve break-even. They will start contributing to profitability in the last quarter. So next year, again, we will draw a plan to add some more branches. That plan is not yet firmed up - how many branches , where they will be opening etc. We will deliberate that somewhat in the next quarter and then we will implement in th e first quarter of the new financial year.

Can you share the ballpark Gold Loan AUM growth for next two to three years, how it should shape out? Ballpark number, roughly.

Ballpark number, you can imagine from ₹30 bn, we should be able to reach almost 30%, 35% growth for the next two years, even if we don't open new branches. But we a re going to add branches. I said we are not -- but definitely 30% to 35% growth we are going to achieve.

Next question is from the line of Mr. Priyesh Jain from HSBC. Please go ahead, Sir.

Sir, we are noticing that there is a steady increase in the co -lending share. I have some questions regarding that. I want to under stand how different is the customer profile under the co -lending book versus the on -book loans? If you could throw some light on that.

Under co-lending, we are doing MSME, home loan, and gold loans. When we do the loan, we do the loan as if we are going to keep it in our book. Thereafter, we run the data - our data teams have made a program where we say (check), which bank qualif ies for which pool. And accordingl y, we give those pools to tho se banks. But there's no specific program we carry out under co -lending. It is our product policy and the same is adopted by the bank also. So , there is no specific origination or underwriting done targeting that this should go in co -lending. In routine course, our portfolio, whatever gets qualified, we place under the co - lending.

Fair enough, Sir. I'm just trying to understand, like I'm trying to get a flavor of the co-lending book versus the regular book. So maybe if y ou could like -- what I understand is there are not any specific products being made or co -created specifically for such co -lending partners. But there might be some filters and, ultimately, the book that they get is different. Like wha t is the differences between that book and our book? Maybe there could be any differences in the loan characteristic or something in terms of interest rates or ticket size or tenure or things like that.

No, no, no. It is like this -- when we sign the co-lending partnership, our product is aligned first. And within that, they keep a criterion. Suppose sometimes, say, I (i.e. the bank) will take (accept) a CIBIL score of 750, somebody will say 700, somebody will say loan to value, I will give 75%, somebody will sa y I will give 80%. These are the variations every bank has. But we have our own policy. Our portfolio meet s their criteria. Whatever the pool and the specific loan account meet s the criteria, those are placed under co -lending. But w hen we onboard the customer, we onboard the customer as if we have to underwrite and we have to collect it back. So th e underwriter and branch doesn't know whom to originate, whether for co -lending or not. It happens after the customer is onboarded and then we put the filter and, accordingly, we show it to our partner banks.

Thank you. The next question is from the line of Mr. Jai from IIFL Securities. Please go ahead, Sir.

Our co -lending contribution has incre ased consistently over the past few quarters. And Sir, what could be the sustainable level here in each business segment of SME, housing finance and gold finance? And what is their incremental focus in this -- amongst these business segments for co-lending?

Sir, could you speak a little bit louder and request you to please repeat your question?

We have co-lending partnership s across MSME, home loan s, and gold loan s. And we feel that co-lending under the gold loan will increase as compared to the two other prod ucts. The gro wth is happening in the gold loan. So there, substantial co -lending is expected to happen. We expect that out of ₹30bn, at least 20% book will go under the co-lending. That is the target we are chasing. Of course, it depends also on the banks to grant the facilities and all, but we are hopeful to achieve that. MSME and the home loan put together are happening month-on-month on a regular basis. And I think that is happening at the pace of ₹400mn to ₹500mn a month. And with that pace, that will continue. How ever, sometimes even we also -- these are based on our pricing, our overall contribution basis. So sometimes you slow it down, sometimes we increase it based on what pricing criteria we are getting from the partner banks.

Thank you. The next que stion is from the line of Mr. Anuj Mohata from Equirus Securities Private Limited. Please go ahead, Sir.

Congratulations for a good set of numbers. I just wanted to ask like you have highlighted in your opening remarks that H2 will be better i n terms of disbursement. But given that our share -- that our portfolio mix is more focused towards rural and semi -urban area, and there, we are seeing some challenges due to rising inflation , how do you see the demand trend ending up in the H 2? And how will it affect our disbursement going forward?

I think the way we are s eeing, there is no lack or slowing down of demand in Tier 2, Tier 3 towns where our MSME, home loa n, and gold loans are happening. We clearly see that there's adequate demand at a particular level. And we hope to see that Q2 will be -- is traditionally happening for all lending businesses. We say this year also, we expect our H2 to be much higher in ter ms of volume, in terms of better contribution because there' s adequate demand on the ground. So we have not seen any slowing down of the demand of the loan.

Thank you. The next question is from the line of Mr. Satyaprakash from Haitong Securities Private Limited. Please go ahead, Sir.

Sir, congratulations for the good set of numbers. My question is on the new subsidiary that we have incorporated, Capri Loans Car Platform. Would all the car loan business going to be carried from this? A nd are you planning to list this business separately? Any specific reason for that?

Since that business is now getting to a size where we have already done about ₹45bn originations and I think this year, we will do about ₹100 bn number. We will be financing about 80,000-plus cars through our network. And this business requires a separate t hrust on technology side. And we have a couple of other plans in that business. So we believe that the distribution piece of car should be separate. On back of the car loan distribution, we have now also started selling insurance to those customers. So to bring that separate, first, supervisory and a separate profitability, we hav e taken that, formed the new company, where all the empanelments and partnerships with banks will be shifted. While economic interest is consolidated to the level that comes to the company, but there will be a separate Business Head, separate Head of Acquisition, Network, for technology there will be a separ ate CTO and data science team. So I think to bring more focus on that business and to build the distribution around that, a separate SPV has been carved out. And you will see that next year, there will be enhanced effort on building that brand separately.

Okay. Sir, one more question, if I may ask. Even if we adjust for the gold loan business, our cost to income is almost at 50%, as mentioned in the presentation. Also, it is majorly attributed to the increased dig ital spending. Any other reason when can we expect this to normalize? Would we see it going in range of 35% to 40% in the near future?

There's a lot of spending happening on the technology team. We are about 125 - people team in the technology and data science. So that result will also once our new technology platform is launched in the target date in April 2024. And there will be some more addition to that, which we'll complete in the next three to six months. So by September (2024), our technology piece should be, by and large, up, and running in its full force with the revised mortgage tech and property tech. And with that, there will be two impacts. One is the productivity of the team will improve. So the same amount of people will be able to disburse higher, thereby increasing the overall contribution. And two, there will be lesser spending going forward after September 2024 on the technology side. So overall, efficiency will improve and cost will also come down. So that should bring our cost -to-income ratio down. Now whether cost-to- income ratio will come down to 45% or 40% , I won’t able to comment yet. But definitely, next year, you will see a remarkable difference in the cost/income ratio.

As there are no furt her questions, I would now like to hand over the conference to the management for closing comments.

Yes, thank you. So as stated during the call and th e Q&A session, we'll continue to build our distribution through branches. Already 917 branches are up and running. And we have also focused on distributing insurance product and car loan distribution, which will enhance our fee income and support our ROE. Our gold loan branches will start contributing (profit) from the last quarter onwards. An d there will be substantial profitability coming in the next year onwards. So , we are quite hopeful that with the launch of our new technology initiative, new loan origina tion system and Oracle FLEXCUBE core banking system becoming fully operational by Mar ch 2024, all these shall contribute to lowering cost/income ratio and a very high growth. As you have seen, we are growing at the pace of about 50% on AUM basis. That growth, coupled wi th the lower cost/income ratio and better tech initiative, company is on the path to achieve a better profitability. And our asset quality on an overall basis is still very much under control. We are in a collateralized lending portfolio. We clearly see t hat when economy is growing, there's a clear demand that's happening on the ground, and we should reap the benefit of our branch network to build a quality, profitable portfolio along the way. Thank you so much.

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