Our first question comes from the line of Abhijit Tibrewal from Motilal Oswal.

Congratulations on a good quarter. So , first question is around retail finance. I'm just referring to Slide number 41. Within that, I see that retail finance as a proportion of the GLP mix has become 3x; on an absolute basis, it's 3.5x, obviously on a small base. But very, very clearly, other than those other products, we are seeing individual loans growing much faster. So just trying to understand is the future of MFI moving towards individual loans, which could obviously be given as part of a group for operational efficiencies on sourcing and collections, but without JLG safety net.

While we've discussed this subject earlier too, our thought process is that individual finance to graduated microfinance customers is a clear way to progress. And the growth in individual loans will look larger because of the base, like you said, and its in itial time period. As we start penetrating into a certain proportion of customers, which we believe roughly around 6 -8% of our customer base, we should be able to target, convert to retail finance customers every year. And as the base increases, it will slow down, but we are of the firm belief that microfinance will continue to be as an entry point and a better strategy is to pick up the good ones, the ones which has established credit history . Are they able to demonstrate better cash flow to move into individual loans, right? So it will be calibrated growth while microfinance continues to grow.

Got it, sir. And sir, the second question I had was around the guidance that you have put out. Just trying to understand this time around why such a wide band in terms of the credit cost guidance 3.0-4.0%. And within this, as per your estimates, what proportion of this could be because of the higher ECL provision?

We have implemented a new ECL model in this current business, and you may have seen our Stage 1 ECL has gone up to 1.63%. And the current model is more of a forward-looking, wherein we have also taken into account probable impact because of the ongoing global issues. From that perspective, obviously, certain element of that has already been baked in the current ECL. Nevertheless, it's an evolving model, and every quarter fac ing the external factors, business factors as well as the macro factors, we will be revisiting the ECL. The broader range, what we have picked from 3.0-4.0%, it is primarily to take into account all these evolving externalities, because we need to see how, what is going to be the actual fallout of the global issues. While we also are aware of the fact that our customer segment will be relatively much more resilient in the current environment, but at the same time, we need to keep certain room to kind of factor in certain macroeconomic effects, etcetera. So that is the reason why we have kept a broader range. But largely we believe that we should be within this range because the current PAR accretion rate is very much stable. Now we have seen full month of April, and we are in the first week of May. Relatively, the trend what we have seen in fourth quarter, it is holding. So we need to see, I mean, as we set into the next year, we'll be in a better position to take a view whether we are at the lower end of the guidance or at the higher end of the guidance. Largely, we have kept that band around.

Thanks Nilesh. And just a follow-up on that. Sir, I mean, when you say, just trying to understand April month, like Nilesh mentioned, has been in line with what we've been seeing in the fourth quarter. So in times like this, especially in the context of the current West A sia conflict, I remember seeing a chart that you've given or maybe a slide that you have given in the presentation where we have shown that in this cycle. We have done better than COVID. So at times like this, if there is an economic impact, do we also see our segment of customers coming across as vulnerable, or like Nilesh mentioned, they will come across as more resilient given the more rural exposure and t he kind of various work that they are in?

Typically, we have seen our customers segment specifically rural to be more resilient. But we'll have to see what happens in case of prolonged disruptions with respect to the ongoing global scenario. Any temporary issues, I think, we should be able to manage very strongly. But say, for example, if there is no supply of fuel or gas for months, then what happens? So those are things that we have to be really prepared for, and we budgeted a little more around that. And I think at this point of time, while we don't anticipate something like that since the evolution of the model is such that we have to take into account certain risk weightage for external events. We've built a cushion around it. So now what happens subsequently, whether this ends or it has a larger impact on the country, we'll have to wait and watch. But just that we are a little more prepared in case something, that's what it means.

Our next question comes from the line of Aravind Ravichandran from Sundaram Alternates.

Congratulations on the very good set of numbers. I just like to understand, like, the overall guidance given on growth, margins and everything. Does it include even, like, for example, bond market borrowing rates have moved up and down? We have seen much volatility there? Like, have we considered all those things in our guidance? That is one question. And similar question, from the first participant also, our PAR accretion rates are much lower than what we've seen in the past in the last few quarters. And you know, it's under 10 bps; we are 13 plus. But still, we have given like 3 -4% kind of a guidance in credit cost. Like, are we on the conservative side here just to be on the safer side? Even with the geopolitical crisis, I know, the credit cost could be under 3%?

Right. So for your first question, the model itself takes care of any changes in pricing, if that's what you're talking about. Cost of borrowing is what you're talking about?

Yes, sir.

Cost of borrowing, yes. So the model takes care of it predominantly. But what we see is that, so far, we've had a very strong cost of borrowing reduction. And I think now we've reached kind of the bottom. We don't see ample opportunity to reduce any furth er. It could probably remain range-bound or slightly move up. And any movement, it will get automatically priced into our pricing model. And the second question on PAR accretion rate, yes, we have kept a wider range. We also have to keep in mind that we went through an elevated credit cost period. And then we've corrected very sharply in the last quarter. Normally, our last quarter would be much lower than any other quarter. Now we will start moving towards a normative range, right? So that also needs to be kept in mind. And hence, what we've given also takes care of what is the normative range of one month accretion that we anticipate as well as probable external events, including the global crisis, probably some amount of heatwave that's going to build in, and any effects due to that, etc.

Our next question comes from the line of Shreepal Doshi from Equirus.

Congrats on a good quarter. My first question, sir, was on the microfinance side. So have you taken any rate hike during the quarter or in the last 3-4 months' time period?

No, we have not taken any rate hike in the last quarter.

Okay. And do we have any such or do we plan to take any rate increase in that segment?

At this point of time, no, unless we see significant movement in cost of borrowing, that also comes in two quarters lag. That's how it will pan out.

Okay. Got it. Sir, my second question was on the retail side. So within the IBL portfolio, I see that the ticket size has changed materially. So from INR 142,000 to down to almost INR 93,000 in the last one year. So have we changed any strategy for that particular product?

It's gone down because individual loans are practiced in two models. One is called Unnati & the other is Unnati Lite. So the first model is where we actually have a larger ticket size. Average ticket size is around INR 1.7 Lakh there, where we look at visible, how do you say, credit points that are required for underwriting a customer, right? So customers who exhibit better credit profile, better cash flow demonstration, we give them a slightly larger ticket size loan. However, customers who have moved up the income cycle, but they are not able to or we are not able to reasonably validate while we move them to individual loans, we maintain a lower ticket size. And probably in the next cycle, we will look at graduating them to the normal individual loans. So that is why you are seeing that since both these books are growing, you're seeing a taper down of the unsecured business loan ticket size.

Okay. Okay. So sir, in the Unnati product, you said the average ticket size would broadly be INR 1.7 Lakh, and Unnati Li te, wherein we are not having complete grip of the cash flows of the customer or growth. There, the ticket size would be what?

Can be in the range of INR 75,000 to INR 1 Lakh.

Okay. So there, we are broadly trying to match with the group loan ticket size thought process.

It could be around INR 1 Lakh, but then if they have other borrowings, it gets minimized. But when they come for next cycle, it will go up.

Okay. Got it, sir. The last question was pertaining to the retail portfolio growth strategy. So in terms of launching this product or, let's say, having it implemented, so how are we doing it? We are doing it in some specific states initially, and then, or let's say, specific districts initially, and then expanding it because I know that this is done through a separate branch network. So in terms of selection of those, let's say, geographies, how are we sort of planning that out? I just wanted to understand that because the growth has been pretty healthy.

Sure. So you know that this is not new at this point of time. Our retail products are today at least 3 years vintage, except for 2-wheeler loans. And when we launched the individual products, we did go to our core markets, specific districts. We got them piloted. And once the assumptions were proven, we scaled up. So today, our individual products are predominantly offered across all our core markets. And a significant portion of our branches are already covered. So we have specific branches for mortgage loans, you know that roughly around 120 branches. And the rest of the group loan branches manage this portion of the individual business loan, which has also scaled up significantly over the last 3 years. So today, it's widespread.

Got it. So core markets, when we say it will be broadly be Karnataka, Tamil Nadu and the Southern belt, right, sir?

Karnataka, Tamil Nadu, Maharashtra, Madhya Pradesh.

So that would be the broader belt where we are sort of launching this retail product so far. Got it, sir. Got it. And sir, so incrementally FY27 or FY27 end, where do we see the share of retail products, let's say, reaching?

It should hit somewhere around 24-25%.

Our next question comes from the line of Rajiv Mehta from Yes Securities.

Congratulations on good numbers. One clarification first. This INR 38 Crore of additional provision taken for the West Asia crisis. This will be sitting in Stage 1, right? So 1.63% will have some element of this. But would this become a usual provisioning rate or then this coverage will actually come down next quarter because you may not take this additional provision if it is not required?

So what we've done is based on the guidance of the Board, we formed an ECL committee with Board members and a part of it along with the management team. And this committee reviews various variables that need to be considered and what weightages have to be given based on the developments. So every quarter this committee will convene, and whatever has happened in the previous quarter, or we foresee for the next quarter will be taken into account before making any adjustment.

So in your guidance of 3-4% credit costs, have you kind of -- your base assumption is that you will continue with this 1.63% broad based ECL provision rate.

Broadly, you should expect that it will be range-bound. It will remain there.

Yes, yes. Got. I think just coming back to...

Unless there is significant data points to look at the reduction, but that takes a longer period to move back.

Okay. Understood. And just coming back to growth, because we have exponential growth in retail, and as you were discussing that there's a lot of penetration to happen of individual loans in the group loan customer base. So this may continue. Then the residual growth has to come from your core group loan IGL. Then that will be what, 12-15% in the current year. That's what the expectation is?

So our assumption is around 10-12%.

As the portfolio level?

Yes.

And on NIMs, when I look at your guided NIM, the midpoint is 13%, you are exiting at 14.2%. I know there will be a leveraging effect because of growth. But still, I mean, the kind of NIM decline that we are trying to indicate in the guidance, is it because of the cha nge in mix, which I don't believe is so diluted, but is it because of cost of fund changes that you are indicating? Or are you planning to pass on incremental hand strength and efficiencies by reducing pricing?

Okay. I'll ask Nilesh to take this one.

The NIM range what we have given , compared to the fourth quarter NIM, it is at a low range. There are a couple of things here. The NIMs what we generate, there are always the factor of our pricing what we charge to the customer. And the pricing currently is aligned with our borrowing cost, operating cost and credit cost. So obviously, on a YoY basis, we do see the credit cost will be trending downwards. And to that extent, there will be certain pricing which needs to be passed on to the customer on a YoY basis. So from that perspective, if we are able to do a better credit cost this year, compared to FY26, obviously, some of it will flow as a benefit to the customer. So that is where slightly we are budgeting lower NIMs because at the same time, the credit cost will also be lower, and we'll be still doing ROA in our guided range. And on the borrowing front, as we said earlier, we believe that the borrowing cost seems to have stabilized now. We don't see it further dropping. Depending upon the rate environment, we are keeping certain buffer on the borrowing cost as well because even, the domestic rate environment seems to have been reversing now in the coming 3 to 4 quarters. And even internationally, given the way global situation is panning out, the hedging rates have also gone up. So factoring all these aspects, we are keeping this NIM range. And largely at any point in time, you will see that the NIMs will have to be commensurate to absorb our opex and credit cost and give a guided ROA range. So that will be the corridor within which we will always maintain our NIMs to achieve our intended ROAs.

Nilesh, just a similar question for cost -to-income ratio bands as well. I mean, the midpoint is 34%. I mean, I'll not take the agreed number of 30%, but even the whole year number is about 33%, while we grow income in this year very nicely. So would the opex grow more than commensurately, and that is what the guidance seems to be factoring. And we were thinking that when the growth will come back, you will also have some operating efficiencies, which you're trying to pass through pricing. But when I look at cost -to-income guidance, it seems to suggest that your cost will grow higher than income?

We need to see. Currently, things are a little volatile. So we have built certain inflationary elements because of the global issues. So if the global issues do not prolong, I mean, if they do not prolong and if there are no cascading effects on the input factors, then we may not see cost- to-income rise. But as of now, we have built certain increase considering the anticipated inflationary elements.

Our next question comes from the line of Shreya Shivani from Nomura.

I have a question on your long-term guidance that you have shared, which is Project Shakti. So the Slide number 21, I think fair to say that you're targeting for 20 -25% CAGR over next 10 years. Is that understanding correct, interpretation, correct?

Yes. Right now, we've assumed a growth rate of at least 20% plus.

Right. So now that makes me question that, see, you've always said that in the near term, your MFI will grow slower and your retail finance will grow faster, and that's how you will achieve the FY27 guidance. But over 10 years, if you're going to target this, then your MFI also has to grow at the same pace because you cannot breach the 60-40 mix. So what is our thought process around it? And when our entire presentation today has been about moving beyond MFI, then doesn't the NBFC MFI format somewhere restrict us on the longer - term period? I'm not talking about immediate 1 year.

Yes. So broadly, we've picked up certain business lines, and we are anticipating certain growth rate in each of these lines, right? And you also have to remember the regulatory guideline was 15%, till not so long ago, then it became 25% and now it's 40%. Our assumption probably, if there is enough room and potential, that also could move up. Or in the worst case, we can look at managing the 60-40 in various methods, including securitization, sale of portfolio, whatever you deem it. We can also pick up co-lending as we always maintained. For us, growing these independent business lines will be top priority. How we grow it and how we manage the various regulatory aspects is something that we can always work on . And we also indicated that we'll probably look at some kind of diversification over a period of time, including inorganic. We can figure out how to kind of do it, but for us, that is not a limited factor in what we're seeing. So these lines will continue. When it reaches a certain mark, where we need to work on that, we will start wo rking on it. We're already working on some of these aspects. We will build on it, and we should be able to maintain it.

Right, right. Now, that makes sense. Also, there's a very detailed slide on 32, where you've talked about the internal control structure, etc. So this is pertaining to your retail finance, right, because this is completely a branch model that we are talking about, right? The 3 lines of defense, there's a big slide on it.

No, no. That is applicable to all our businesses. So both in GL and retail, we have the same concept, including our internal audit, including our risk, including our quality assurance, all of them are common across the business lines.

Right. But you will have to scale it up in the retail finance, or is it that retail finance you already have the structure, and parallelly you will develop this structure in retail finance, or for retail finance, you have to start from.

No, it is already in place. Whatever size and format we have, right? It is already in place. So any expansion that happens, even the control teams will naturally move towards that.

And just to add in the same slide, we are on the right side, if you see. Retail finance, we have verticals, which are supporting, so which is already in place. So this will be scaled up as the business scale. So all this infrastructure is already built and our controls are in place.

Got it. I think that answers my questions. This was useful.

Our next question comes from the line of Varun Gajaria from Omkara Capital.

Congratulations on a good set. So now that we start our individual loan business and Tamil Nadu being one of the prime blocks that we'll be targeting, what is the competition landscape like, especially in Tamil Nadu because one of your peers also has annou nced something similar. So just would like to understand how the competition set there?

See, I think it is natural for most institutions to take this path, right, both with respect to regulatory route as well as a large customer base. Now I think the biggest strength that we would probably have is in how we execute and how we strategize more, right? So from a potential perspective, I don't see that competition is something that's going to limit us, or we have to look at it differently. But I think our biggest strength is we already made investments on technology, our existing customer base, how we train our employees, how we figure out distribution across all these products, and try and retain as many customers who are graduating from us, not going out of us, right. So just for a broad data point within our existing customers, what we have built as a portfolio is roughly around INR 30,000 Crore. And what we have already outside is roughly around INR 40,000 Crore. So we just have to be sha rper in ensuring we understand our customers' requirements, build products accordingly, and reach them on time to service their needs.

Right. And on the back of the recent tough two years that we've had in the industry, they believe that there are a host of the customers that we will be -- the host of the clients that we'll be now targeting the pool must have gotten smaller over time bec ause a lot of people must have gone out of system due to default, right? So how do you deal with something like this? What is our approach to this?

A lot of customers would have gone because of default, yes, but what is your question?

Yes. So I want to understand is how do we deal with a pool like this, especially when we are trying to ramp up a new portfolio.

How do you deal with the pool, which has been written off is what you're asking?

Yes, yes. Like which has gone out of system or probably is in the default zone.

Okay. So see, typically, once we write off a customer, we don't do much with them, except for helping them come back through OTS as well as a restructuring product that we have, right? So that is the only way to approach, but we will continue to source ne w customers. And that is a very strong possibility because we only have around 7% market share when it comes to the number of customers, we are catering to in the microfinance space. And most of our new geographies is still very new. We don't have sufficient depth there. So, we continue to grow both core and non -core space, but different percentages probably because of penetration. But there will be strong acquisition of customers through microfinance, and we will kind of bring them up the curve for a few years, and then proactively pick of them to move forward. That is the broad strategy. Do you want to add anything?

Varun, just to add, if you refer to Slide number 11, even in a challenging year this financial year, we added 976,000 customers. And our write -off customers were 491,000. So there is a net addition of 4 Lakh plus customers in FY26. So this write-off is going to come down this year, whereas the customer addition rate will increase. So this is going to be the growth engine where customers will come through trends, and we will keep graduating them.

I think I also want to add one point, what we are seeing because of very strict guardrail implementation is, we have even very old customers coming back for settlement now. As even for the COVID -period customers, we are now getting requests for either res tructuring or settlement of some form of help to make them come back. So that's also playing out quite well, I would say with the guardrail.

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

So again, harping on this guidance part, particularly on the AUM growth, so 20-25% is the AUM growth guidance, of which, what kind of growth are we building from the MFI and non -MFI portfolio, if you could just help on that? And what would be the yield differential between MFI and the non-MFI the retail or other parts of the portfoli o? What would be the yield differential there?

Chintan, as we said earlier, the microfinance growth being in the range of 10 -12% and the rest of the growth will come from the non -MFI. And from a yield perspective today, I think, both microfinance and non -microfinance are very close to each other, not very different in yield. Except for home loans, which is a small book. And like we said earlier, home loan is something we'll actually try and do in partnership with probably a larger bank or figure out some other strategy for that as we scale up.

I'll add one more point here. So when we are saying that microfinance will grow at 10 -12%, that doesn't mean that microfinance is growing at a slower pace. What we need to understand is that we'll continue to see strong customer acquisition. Like last year, we acquired close to 10 Lakh customers. So this year, we should be doing much, much better than what we did last year. The new customer acquisition will continue to happen in MFI. But at the same time, what we'll also see is that 6% to 8% of MFI customers, they will get graduated into retail. So that is why the net growth in MFI will be 12%. It's not that the MFI as a segment will be growing at a slower pace. Overall, we will see that despite 6-8%, customers moving out of MFI into retail, still MFI will grow at 10-12%. And those 6-8% customers who move into retail, we take at least 2 to 3x exposure on them compared to MFI. That gives us the balance 10-12% growth, and that's where the overall, we fit it 20-25% range.

Understood. Fair enough. And this question, again, MFI growth would be around probably other growth or other sectors are expanding. But also, for MFI, what incremental disbursements for FY27 or for FY26, how much of the incremental disbursement was towards the new customers and towards the existing customer? What would be that share?

It may be around this year. I mean last year also, the disbursements were more skewed towards the existing customers because the new customer addition was relatively lesser than what we would have added in a normal year. You may take maybe 20% coming from new customers, 80% coming from existing. So in a steady -state basis, this should be around maybe 30 -40% coming from new customers and balance coming from existing.

So probably steady state means FY27, we should see that inching up to 30 -40% versus 20% in FY26?

At least 30%, 40% and may take time 30%, it may have.

MFI growth rate, you're saying?

Yes, only MFI?

It will be range-bound, like we guided. It should not change much in the near term.

Our next question comes from the line of Shreepal Doshi from Equirus.

Just had one question, which is on the product -wise profitability. So as we've been scaling up these newer products under the retail head, by when do you see these products like all of them, or rather, if you could give product -wise, let's say, some clari ty, becoming profitable at a standalone level?

Shreepal, today, except for the mortgage book, all other products are profitable at the product level because if you see for all retail finance products, we are leveraging our group loan ecosystem. So we have been for the last 3 years, doing mortgage loan s through the standalone retail finance branches and the individual business loans, we have been doing through the group lending branches. So there we get the economies of scale, and we have been able to achieve a faster breakeven in the individual business loan products. For mortgage loan products, the standalone retail finance branches, we should see them achieving breakeven as we near maybe INR 800 Crore to INR 1,000 Crore of mortgage book from the retail finance branches. But at the same time, we have now also started expanding the mortgage loans through select group lending branches, adopting a similar approach for individual business loans. So overall, as these products scale up, we believe that we'll be able to see benefits of operating leverage because we'll be leveraging the GL ecosystem across various states. Obviously, first, we start with the high vintage states . And gradually, we populate into the newer states over a period of time.

Ladies and gentlemen, as there is no question from the participant, I would like to hand the conference over to the management for the closing remarks. Thank you, and over to you, team.

Thank you. Thank you, everybody. Wishing you all the best, and we hope this year will be a very normal year, and we will meet our guidances quite confidently. Thank you so much.

Thank you, sir. Ladies and gentlemen, on behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.