Many congratulations for a good set of numbers. Sir, just wanted to understand, first up, now on this credit cost outlook that you have given 2% credit cost by FY27 end, right? And currently, including the management overlay, it was close to 4.2%. But if you exclude the INR65 crores, it would be around 3%, right? So, you expect this additional provisioning, because given the PCR is already at 85%, so coming quarters, you wouldn't need to provide this additional provisioning?

Yes. Our stock of net NPA is only INR 184 crores as of now. And last quarter, the slippage number was very meagre at the gross level, now it is INR 74 crores. And at net level, it is only INR 40 crores. So going forward also, we don't see any drastic increase in the NPA number. So, this gives us the confidence that the credit cost will come down in the coming quarter.

Okay. 2% by FY27. And what does it mean for ROA? I mean, for this FY27, what sort of ROA, then we are looking at given credit cost will decline to 2% by FY27?

ROA, we expect that it will be 2% by year-end.

Okay. So, 2% of an ROA by FY27 end, right?

Yes.

Okay. And now coming to your other income. I noticed that this first quarter, you had INR 69 crores of PSLC income. So just wanted to understand, I mean, how is it distributed between the quarters? I mean do you expect this trajectory to continue in coming quarters as well or PSLC income will decline?

It will continue because we are in the growing space in the priority sector. But normally, the rate of the PSLC in the coming quarters will be on the lower side. So, this kind of magnitude may not be there in the coming quarters. But definitely, there will be some contribution from that side.

Okay. So, for the entire year, what sort of PSLC income we are expecting to generate?

Maybe around INR 20 crores to INR 25 crores in this quarter alone.

Okay. And just one last thing on FY28 now. I mean, earlier, we were alluding to FY28 being a 2% ROA for the entire year. Now we are targeting to achieve by fourth quarter itself this year. So, for FY28, then how should one look at FY28 in terms of your ROA?

It is too early to precisely give a number because the liability side, how it is sha ping out, what are the challenges going forward, what will be the RBI policy on the rate front. All those things will be dependent. But as it stands today, it will be more than that we are seeing in FY27 as per the revised estimate.

Higher than your exit FY fourth quarter ROA?

This is Paul Thomas, the MD. So, we are on a growth phase. So, if some totally unprecedented and unexpected things don’t happen, we will stay on the growing phase. We are not just giving you a specific number, but the direction is very clear about this.

The next question comes from the line of Amit Mehendale with RoboCapital.

My first question is on the effective tax rate for FY27 and '28. I mean considering that we have had losses in the past, what do you expect the effective tax rate to be?

Effective tax rate will always be around 25.5.

So, we will have some DTA to offset, right?

Yes, DTA will be there.

Do you still expect 25% of tax rate?

Yes, because the DTA impact will come only on the cash outflow on the taxes, etcetera. But we have recognized the tax gain or loss during the last year itself.

Right. And sir, in terms of capital, do you plan to raise any Tier 1 capital in FY27?

Our CRAR is very comfortable now. We have close to 24% CRAR . But as per our long -term strategy, we also have to bring down the promoter holding to 26% by 203 2. So as the market conditions improves, we are exploring.

Right, sir. I mean is it fair to say that you are exploring in like next 2, 3 quarters? Or will it be in FY28?

As per the capital plan, we are growing around 25 % minimum growth. And with the RO E coming around 17% to 20%, definitely growth capital requirement is there. And during the last 2 years, we were infusing Tier 2 capital because the price levels were not conducive enough for raising Tier 1 capital. And as MD was expressing, the promoter stake also has to come down by 2032. So, keeping all these in mind, if the price level comes at appropriate level, we may hope for raising Tier 1 capital by the end of this year.

Right, sir. And what type of price -to-book multiple are you comfortable when you dilute the stake? Is there any broad guidance like 1.5x or 2x, any price-to-book ballpark number?

We have not started those discussions.

Right, sir. And my last question is on ROA. Like 3, 4 years out, what do you see as a steady - state ROA for the business? Because our secured book has now expanded significantly. And how do you see it as a business on a steady-state basis?

See, on the ROA, I have already given that even for FY28, it is too early to predict. But on a steady-state ROA, I think 2% to 2.5% will be a good guess given the growth rate as well as the expense, which is additionally required for the investment in IT, technology, spread, etc. All those things we will have to keep it into account and so 2% to 2.5% will be a comfortable level of ROA going forward.

Okay, sir. Thank you very much. That's it from my side.

Thank you. The next question comes from Rishabh, who is an Individual Investor. Please go ahead.

My question is as per your investor presentation, 71% of total deposits are from Kerala. So how you plan to diversify this pool?

We already have a very good build up over the last couple of years. We built a branch network across 26 states. So that's why we said that during the last 2 years because of the asset quality issues and all, we couldn't leverage on that branch network we built. So, we have good branch network spread across the country, and we will be now leveraging that network.

And sir, secondly, what is your take on further branch expansion? I mean any guidance for next 3 to 5 years?

For this year, we have planned 50 branches out of that 17 is already opened and operationalized. And in a phased manner, we'll be opening the rest. Most of these new branches will be opened in the newer geographies where we have started last couple of years.

And sir, which kind of locations you'll be focusing? Is it metro, semi-urban or urban?

Mostly semi-urban and rural because as you all know that 25% of our branches has to be in unbanked rural locations. So, we have a regulatory requirement to meet that. So rural, semi - urban, and a few branches in metro.

Okay, sir. That's all from my side. Thank you and all the best for upcoming quarters and years.

Thank you. Thank you very much.

Thank you. The next question comes from the line of Sebin Joy, an Individual Investor. Please go ahead.

First of all, congratulations on the results. It looks great coming back from our times when we had losses in the previous quarters. My question was mostly on the gold loan portfolio. When I look at it overall, it's 42% of our loan portfolio. Are we planning to keep this at this range?

And the follow-up question on that is like what is the approximate LTV value on these loans? Are we lending out to the ma ximum regulatory possible limit or are we keeping an internal buffer on those?

Thank you, Sebin, and we'll be continuing at almost this level, 40% to 45% we will be continuing. And our overall book level LTV is at 72%. We are not going for the upper limit.

That sound prudent. Yes, I just had that question. Thank you and congrats on the results.

Thank you very much.

Thank you. Your next question comes from the line of Ankur, an Individual Investor. Please go ahead.

Hello. My question is on the Credit Guarantee Scheme. Few of the competitors I've noticed have got INR 500 crores plus recovery from such scheme, if I can name them, it's IDFC Bank and Suryoday Bank. So, wanted to know if our microfinance book was covered in this scheme, and if not, what was the business rationale for that? And if it's covered, how much recovery are we expecting?

On the CGFMU, we have not covered our micro banking portfolio because traditionally, the delinquencies are very low on that book. And as a conscious call, we have not taken it so far. So going forward, having experienced this kind of delinquencies in the past, we will be taking a call going forward.

Okay. And my second question is on the disbursement front, the disbursement for the quarter was INR 8,500 plus, which is significantly lower Q-on-Q basis. So just wanted a color on this.

So, we'll be keeping that same pace when compared to Y -o-Y. This quarter, we have a much better disbursement happening considering the industry as a whole has improved in all segments. So, we expect that to be keeping in same line.

Sir, I was asking Q -on-Q. So basically, if you look at from March quarter versus June quar ter, disbursement has come down?

Last year, the gold loans, the prices were going up in a unidirectional way. So that is not the case now. So, people are pledging the gold loan, which is typically for a 1 -year loan, which we are giving them. But most of the people , because of the additional funding requirements, the same amount of gold, they will be repledging the gold for getting a higher amount or getting a partial release of the loan by way of closing and booking a fresh loan. So that intensity has come down during the year because of the price correction, which has happened in the recent past. So that is one of the reasons why the disbursement is on the lower side.

See, book growth, we have given the guidance only to the extent of 22% to 25% on the asset growth. So, with the current level of disbursements, we are confident of achieving those kind of numbers.

Okay. Thanks a lot.

Thank you. As there are no further questions from the participants, I now hand the conference call over to the management for closing comments.

So, thank you very much all for participating in this call. So, we believe we have taken the right strategic steps and the improved performance validates the same. We will continue with the same dedication and hopefully supported by a positive macro environment we can expect to see continued growth in the coming quarters. So, thank you all, all the participants, investors, and analysts for taking the time out for this conference call today. In case you have any follow -up questions or inquiries, you can always reach out to our Investor Relations team. Thank you very much.

Thank you, all the members of the management. On behalf of ESAF Small Finance Bank, that concludes this conference. Thank you, everyone, for joining us, and you may now disconnect your lines. Thank you.