Yes, sir. Thank you. We will now begin the question -and-answer session. T he first question comes from the line of Akshay Jain with Autonomous LLP. Please go ahead.

Thank you, sir. Thank you for the opportunity and congratulations on a good quarter. My first question is on margins. So like, if I look at cost of funds, that is still improving with additional tailwinds from SA rate cuts if and when it comes. So that leaves us with the asset mix shift. So is asset mix shift is expected to be so severe that your clean margins of 5.9% this quarter will turn into 5.75% for full year. So that's my first question.

Yes, thanks Akshay for the question. Yes, maybe I should respond to this or should you want to continue with all your other set of questions?

So maybe I will respond to the margin question first. So yes, I do agree in the previous earnings call, we had guided for a 5.75% margin, and we have come at 5.9% if we adjust for income tax refund. But now for the year, our expectation is that we could hit margin closer to 5.8%. So in that sense, we now feel that margin could improve from 5.75% to 5.8%. If we see for this quarter, as I said, the margin was 5.9%, we still got some benefits because we ran a lower investment book. So from here on, into the year, we see the margins could still slightly get impacted because of the asset mix change, which we have articulated in the previous call as well, because we have been growing some segments of business, which could be NIM dilutive, but still make sense in the ROA sense, but still it could be a margin impacting factor. Second, we feel the cost of funds could stabilize, could stay very range bound around the 6% mark. So that's the second factor and some normalization of the investment book, which may happen during the course of the year. So, we feel that margins could broadly stay around the 5.8% handle now for the full year.

Okay, sir. And any sensitivity have you done for how your margins will move in case of rate hikes? Any numbers you have done?

So, I have not factored in any rate hike when we are giving these projections, we'll see as it comes by.

Okay. The second question is on credit cost. So, again, for 1Q, your credit costs have been around 153 basis points and 1Q is typically the weakest quarter for the year. And if you are beating your guidance of 180 basis points, 190 basis points in 1Q itself. So, is there any scope for bringing down the credit cost guidance? And number two is on the prudential provisions. So, are you seeing any signs, early warning indicators turning negative because of the Middle East war or weaker monsoon?

So, on the credit cost, yes, to our surprise, Q1 has fared quite well. In fact, we spoke in the previous quarter, Q4 typically ends to be the much better quarter. Collection momentum is quite strong there. But from an asset quality front, we have seen all of this sort of flowing into Q1 as well. And we have said that all the asset indicators which we have put on the presentation, SMA, GNPA, NNPA, all sort of product -wise is t rending well. We have of course created a contingency provision which I would say is more on a prudent basis. We all know the uncertainties which we are currently dealing with in terms of the geopolitical factors which would play out. Monsoon, of course, rains have been improving, but still we felt that it would be prudent on our part to take into account some of these risks which could emerge over the later part of the year. So, I would say it's purely a prudent provision. Taking all of this into account, I would say, of course, as I said, there could be still some bit of uncertainty here and there. But on the credit cost guidance also , while we said 170 to 180 basis points in the previous earnings call, we feel now we could land up more with 150 to 160 basis points on credit cost.

So, that is coming on the back of a much improved Q1 and how we see at least the current quarter and some of these things could play out.

Thank you, sir. And on ECL, any numbers on one-time transition and steady-state credit cost?

So, on this again, I think we have discussed this question also quite a number of times in the previous calls, but the position continues to be the same. Of course, the final guidelines have come in, we are fine-tuning some of the numbers. But our preliminary sense is that from a capital point of view on transition, there will be two impacts. Of course, we will be required to keep more capital aside for ECL, but there would be also benefits which would come from a reduced RWA application both on credit risk and operational risk. So, in a combination of both, we feel that the impact on capital could be quite neutral at the time of transition. So, that is our current sense as far as ECL is concerned.

Understood, sir. And last question if I may, on FCNR(B). So, if you can share some targets or, you know, what is the current mobilization and how are FCNR costs compared to normal TD costs?

So, FCNR we also feel this is a very good opportunity and we want to capitalize to the extent possible. Like if you would have noted, we have given our NRI deposit book, right, which is about INR25,000 crores. If you go and check, the system is about INR1.65 trillion, which means that our share is about 1.7% currently in the NRI deposit market. Of course, this is a book which we have started growing more so in last two to three years and growing at a much healthy space. With respect to FCNR, we feel that through a combination of leverage and the SBLC structure, we are hopeful of garnering a share of about 2.5% or so. So, that is how we are looking at it. You would have noted that on FCNR deposits, we have announced a rate of 6.75%, which is quite competitive and we feel that is a very good opportunity which we want to capitalize.

Understood, sir. Thank you. Those are my questions.

Thank you.

Thank you. The next question comes from the line of Param Subramanian with Investec. Please go ahead.

Hi, good evening. Thanks for taking my question and congrats on the quarter. It's really a strong bounce back from the issues we had in February, so and it's happened so quickly. So, congrats to the entire team on that. My first question is on the opex. So , our guidance is 13% to 14% for the full year. I understand business is coming back strongly. So, are we still sticking to that sort of guidance, 13% to 14% opex growth through the year?

Param, thanks for the question. So, I would want to state here that the business momentum continues to be very strong as we see now. Of course, we are cautious of the macro factors which could play out. And our endeavor would be to maintain that opex leverage, right, which is that 500 basis points delta which we were able to achieve in Q1.

So, it all depends on the business momentum what we see from here, but we're quite hopeful of maintaining this jaw even into the rest of the quarters. That's how we are seeing it. So, there could be, I would say a change in both the income side as well as the opex side, but we would want to still maintain this 500 basis points at the minimum.

Okay, fair enough, Sudhanshu. Okay. So, the main drivers of our say ROA improved guidance is the 20 basis point upgrade you gave on credit cost guidance and on NIM you said 5 basis point higher. So, those are the main positive deltas you're talking about.

Yes, broadly.

Okay, okay. And going into FY28, I know it's very early days, but and Vaidya sir mentioned, you know, 1% is not where we stop. So, how to think about say how the, you know, ROA trajectory progresses going into next year?

Should increase naturally, no? Should increase naturally because next year will be more see this thing what Sudhanshu pointed out, see if you remember we had talked about 13 % to 14% increase in opex with a 18% to 18.5% increase in income. Right, Param?

Yes, yes.

Yes, that's it. If you see our transcript of the last call also, you'll see that. So, now if this 18 .5 is not 18.5 it's 20 or 20.5%, you know, correspondingly you could have some increase in opex also because see the market opportunities are growing and we don't want to be missing out on them, you know, and just stick to one line item. The point is that this 450 to 500 basis point difference jaw opening. If you cut-paste it into next year also, which we believe it will happen in next year meaning FY28 also, then straightaway it is a cost-income reduction of about 350 basis points straight, just from these numbers. So, and that when you do the maths of it, you'll find it's quite meaningful to the P&L.

Sir, one last question if I may, the fraud incident, are we beginning to see any recoveries from that and if so, you know, going ahead where will we be booking that in the P&L if and when it happens?

Param, there continues to be I would say progress on this front. If you go by the public news and so on, a few more arrests have been made, ED has been actively looking into the case, they've filed a charge sheet and so on, indicated some amount which could be a potential recovery. But all of this takes a long time, right? So, I'm saying there is a proper process which needs to be followed like for example going to the PMLA court, filing our claim, then these claims will be assessed for whether it's due to us in the right sense and so on. I mean, lot of work will have to be done. This is a totally I would say a legal process, court process. Difficult to sort of put out a timeline for this, but at least we are seeing movement on the ground, right? So, it will be difficult for us to sort of commit to a timeline in terms of what recovery could finally emerge from here, but we continue to be quite engaged on this front.

Fair enough, Sudhanshu. Yes, very clear. Is there anything at all in the P&L in this quarter as a recovery of anything?

No, nothing as of now.

Okay, perfectly clear. Thank you so much and congrats once again on the quarter to the entire team.

The next question comes from the line of Ankit Bihani with Nomura. Please go ahead.

Yes, hi, good evening, everyone and congrats on the quarter. So, most of my questions have been answered, so I have a question on our tech investment priorities over the next two to three years. So, basically how is the bank leveraging AI and GenAI capabiliti es across functions and how do you see technology investments increasing from here? If we look at IT expense as a percentage of overall opex, it has come down a bit from 11% odd to 9% odd now. Even the large banks are operating, you know, at these levels. Could you please elaborate on this? Thank you.

It's not actually like I said before, you know, it's not about how much you invest; it's about where you invest them. So, I agree we are like 9% there. The thing is that we've built a really good architecture and a good stack and modern stack and cloud and API -first integration and cloud- native principles and event-driven platforms and microservices architecture and we're hollowing out the core as much as possible. We have real -time data streaming, you know, it's all being built. I can only tell you that, you know, for example, what people can't see, I think, generally speaking, is that people can see ROA, ROE, they can measure us today, but they don't know the quality that's been built what your eyes can't see, that's, you know, that's below the ground. On that front, I am giving making my comment to you that it is truly really fantastic modern architecture is coming about in the bank. So in terms of this , it is a big enabler of many of our businesses that we're doing, many of the services we're providing to our customers and naturally there's a payback in terms of revenue and robustness with which the bank will be able to grow. Which means that, you know, I don't think this bank will stop, you know, will even say three years or four years from now even we're INR6 lakh crores so to say in deposits, INR5 lakh crores in loans, you know, we can continue to grow on this platform. Once platform is strong, foundation is strong, you can grow 20% or more. Who knows? I mean, of course we'll put out our numbers at that point of time, but as far as I can see the platform strong means the bank can grow for a long time.

Okay, sure. And just on the FCNR front, did we highlight we'll be able to capture we'll potentially capture 2.5% of the overall market share, right?

Okay, and till now if you would like to, you know, give out any number how much we have mobilized?

It has just started, I'm saying gaining steam. So, yes, so maybe we can give an update next time.

Okay, great. Yes, congrats on the quarter again.

Thanks.

Thank you. Thank you.

The next question comes from the line of Jai Mundhra with ICICI Securities. Please go ahead.

Yes, hi, good evening and congratulations on a strong quarter, sir. Sir, first question on MFI slippages, right? So, I believe I mean we've not given separately, but if you can quantify how much was the MFI slippages and how much was the MFI disbursement in this quarter?

MFI slippages was quite low in this quarter and same was actually the case in the previous quarter as well. And hence as I said all the SMA or all these numbers are indicating that sort of back to normalcy when collection efficiency continues to be around that 99.5% which we are seeing in the overall portfolio as well. So, so that's on MFI. Sorry, Jai , what was the second question?

The disbursement, MFI disbursement.

So, disbursement if you see if I sort of see the numbers from last year Q1, then then we have seen almost doubling of disbursement as far as MFI is concerned. So, we are hopeful while the book has not grown that very much in last one or two quarters, at leas t the decline has been arrested. But through the course of the year, we feel that now since disbursements are picking up and we're hopeful of a quarter-on-quarter increase here, we feel that we could end up or target a book increase of 15% on a Y-o-Y basis.

Sure, this is helpful. Secondly, Sudhanshu, I see that 6 basis points of IT refund, this would translate to roughly around 60 crores. Where do you book it? Because does it go to income interest on advances or does it come on interest on balance with RBI and others? Sorry.

It would be the other line item; it certainly doesn't come in advances, but it and it would be the NII line item.

Okay, okay. Sure, because the other is only INR76 crores or something, right, within which there is INR60 crores of IT refund.

Yes, number is slightly lower than, but round about that number.

Okay, sure. Sure. Secondly on, you know, customer deposit or CASA, right? So, if I can get the number separately for CA and separately for SA, the reason I'm trying to I mean overall deposits have bounced back and within which CASA has also rebounded by li ke 7%, 8% Q-o-Q. But if

you can qualify if you can give more colour as to, how we have got the traction in SA especially maybe granular and maybe the high-ticket SA post that incident. Just wanted to trying to understand, we have done reasonably well ahead of your guidance of 5% Q-o-Q deposit growth, but within which if you can, sort of highlight the granularity and maybe the high-ticket this thing.

No, so both have been growing quite well. Like if you see the average CA deposits, that has grown by about 30% on a Y-o-Y basis and SA has grown about 25% or so. Of course, SA is the major component in the CASA, right? And the CASA deposits itself has grown about 8% on a sequential basis. So, you can assume that bulk of the growth has come in SA, which has given this kind of a lift.

Correct. And safe to say that it would have been broadly similar to granular and maybe high - ticket, right? The entire episode is now clearly past this, right? And you have had increase in balance in both these buckets?

Yes, our deposits on the SA front also quite granular in that sense. So, it's granular deposits which have sort of come in even during the current quarter.

Right. Sure. And last question, sir, just on this ROA. So, just to reconfirm, we are now saying that, you know, what we were earlier saying we have now accelerated that full year we should be able to achieve around 1% ROA, right? That is the correct, if I hear it correctly?

Yes, that's what we're gunning for.

Right, right. And the reason why it is higher because of, experience in credit cost, which is much lower and ideally it should stay that way, and then the NIM should incrementally be also be stable, right? These are and the opex thing anyway continues. So, this is the right understanding, right?

That's right, that's right. Mainly is the credit cost because on the NII front, you know, I know all of you as analysts track that like closely by the basis points. But, you know, it's roughly we'll be in zone. Roughly we'll be in zone.

Yes. Thank you and all the very best, sir.

Thank you.

The next question comes from the line of Jayant Kharote with Axis Capital. Please go ahead.

Thank you for the opportunity and congrats on a great set of results. First question, sir, is on ECL. Maybe I missed this, so sorry about this. Have you quantified the impact of steady -state credit cost after the ECL transition?

So, thanks Jayant for the question. So, of course, to the previous participant we did talk about the impact which could come on transition as far as ECL impact is concerned, where we said we would require to maintain more amount for ECL, but at the same ti me we may get some RWA

benefits through the operational risk RWA reduction and credit risk and hence the in combination of both of this, the impact on capital on transition could be broadly neutral. With respect to the run rate impact, there would definitely be some more requirement for provision, but at the same time we could get benefit because of the EIR implementation because both the sourcing opex and the processing fees will be amortized when the ECL is implemented. So, we feel net of these two, which is your slightly higher provision requirement minus the EIR benefits which could come in, the impact could be quite manageable. Since the guidelines have come in, we are just we are still fine-tuning the numbers. I don't want to put out a specific number here currently, but this is the broad sense.

So, you don't think the ROA expansion journey should be sort of prolonged because of this transition?

Yes, not as such.

Great. And finally, sorry to harp on the margin question again. Given that our corporate book is growing very healthily and again at this size it makes sense, it's also bringing a lot of discipline to the credit cost band. But then again looking out next two, three years, how does this play into our NIMs and our ROA ambitions?

Actually the NIM of the corporate banking is a little lower than retail. So, the more we book corporate, it will have its share of impact on the on the overall NIM. That's why, you know, Sudhanshu said that as a bank it'll have some impact. But really you should see it in totality the asset quality of the franchise and the credit cost should come down over the years when you wake up in FY28 or FY29 or FY30 or FY31. Frankly we don't put it like a guidance but we don’t think of a bank as wanting to be running at 1.5% credit cost at that point of time. That's not our vision statement because becoming a larger and larger bank, we cannot be sitting at 2% credit cost even if it's very attractive a nd NIM attractive and all that. So, we are planning to move in a direction where the bank's ROA, again don't take it like a guidance like for a specific date or something, but we think that our bank is structurally built for a ROA of more like 1.7 %, 1.8% as it builds out. So, yes, and that kind of a number can be achieved even at a lower credit cost, even if we book more of corporate loans. But I can tell you that it’s been seven years now, there's, you know, there's been no mishap in the corporate loan. Seven years is a long time to prove out our governance and our underwriting capabilities and the amount of diligence we do on corporate loans and our ability to get the business and the kind of proposals. So, we're quite, you know, happy with that the way it's coming.

Great, sir. That's very reassuring. And again congrats for a great set of quarter. Thanks.

Thank you. Thank you very much.

Hey hi guys, congratulations for a great set of results.

Hi Anand.

Yes hi. One, is it possible for you to share like how has our institutional deposits moved past the episode that we had? Were there any more withdrawals from any other government or basically it is holding up well and it is growing? Some of that stuff we would lik e to know about that because that will give a better comfort.

Yes, deposits coming very strong. Just I mean, frankly the way deposits came back into the bank, not just came back I'd say frankly we didn't lose deposits in the first place in any material way. I mean, frankly we had a flat quarter. We didn't lose money. And the way it's come back, come back very strong. So, let me just directly at my level let me assure you, there is absolutely no problem on deposits; in fact we are flying actually.

Yes, institutional deposits are also quite stable.

That's very comforting. Secondly.

Though our intent, frankly in due course will be to continue to do more of the retail deposits than the institutional deposits. I mean, that's been a strategy anyway, it's not a new strategy as you know it's been like seven years of practice as a strategy. So, I mean in the sense that will be our intent. And we will get there. I can tell you everyone hearing this call that money is coming thick and fast into IDFC, it's coming very strong and the relationships are strong and the way customers responded to us for so much of bad news all over Twitter and YouTube and all over the place, even then money just stayed. It's like really, we're happy about the way customers believed us during the crisis. Of course, we came out in the open, we took our interviews, we spoke publicly about it and public thankfully supported us on that.

Sure. Secondly, I think during the call you said margins around 5.8% or 5.9% I couldn't hear that clearly. Because this quarter if you look at a core margins are somewhere about 5.9% if we take out the interest on IT refund. So, it should remain stable aro und these levels or like where should it settle maybe by over next two, three quarters?

Yes, so in margin as you rightly said if you strip out that interest on income it was more around 5.9%. I also alluded to that we also continue to get some benefit from a lower investment book during the current quarter. Some of it could normalize as we sort of move into the ensu ing quarters. And we feel that margins which we had earlier guided for 5.75% for the full year now could more look like 5.8%. So, this change I would say from say 5.9% adjusted for the investment book, the asset mix changes which continue to happen, we need to see how this FCNR plays out as far as the margin is concerned. So, all of this in combination we feel the margins could s till be around 5.8% for the year.

Yes, yes.

Okay. And then I think you talked about the operating jaw opening up. So, what kind of cost to income ratio should we look at in FY27 given that, you know, this quarter we have got some benefit on the other opex front, but I think that was sequentially primaril y because of the IPL expenses being not there, right, in this quarter?

Which expenses would not be there?

So, quarter-on-quarter if you look at the other opex actually has come down. Is it more to do with the business seasonality or were there some lumpy expenses in fourth quarter which were not there in this quarter?

No, in fourth quarter we had this incident of fraud, right, where we had taken it to the opex line item, right? If you take out that, then the opex increase about 2.3% sequentially. In terms of cost to income translation, even on a sequential basis C to I has improved by about 166 basis points and on a Y-o-Y that's more around 310 basis points. So, we feel that Q1 cost to income which has come at 70.7%, our endeavour would be to take into below 70 during the course of the year. So, that is what it could look like.

Okay, okay. And then what kind of ROA that we're looking at for the full year in FY27? Should we get closer to 1%?

That's what we sort of answered on the previous call, that we are gunning for reaching an ROA of about 1% for the year.

Looks like it for now, you know, last time of course like I said we used to say fourth quarter we used to say kissing distance but looks like full year will get there.

That's great to hear. And any more CGFMU recovery should we expect during the year, any more claims that we have put out or this is for all?

No, procedurally it comes only once in a year. So, for the year it's done actually . We could get some similarly into the next year.

Next year we will get it, right? That's very helpful. Thanks a lot.

Not of this amount.

Yes, not of this amount, the amounts could be much smaller.

Sure, sir.

The next question comes from the line of Pritesh with DAM Capital Advisors. Please go ahead.

Hi sir, good evening and good set of numbers. Just two questions. One is on channel sourcing. You give the breakup of opex, we see it going down. So, what is the thought on that in the sense are we insourcing more, the outsourcing is slightly lower than wh at it was and that is also one of the elements of opex being getting down, right? So, anything on that?

Channel sourcing expense is about 20 odd percent and it has been quite range-bound if you see the few quarters. Of course, it also depends on I would say the seasonality aspect of it. Q4 typically we see is a much stronger quarter in terms of disbursements and so on. However, Q1 has also remained quite strong. To your question on capability, yes, we continue to work on these capabilities of insourcing on product by product wherever it's applicable. So, we feel that th e benefit also bit by bit is translating somewhere into these ratios. So, but to great extent you can assume this would generally grow in line with the volume growth.

Sir, just a follow -up on that. I think, you know, a year some years back or, you know, a few quarters back we were mentioning that to generate a lot of loans we also incurred a lot of expenses in and around the customer. So, with AI do you see that the exp enses which were required for the customer origination and then of course a lot of customer rejection also happened, is that changed for us in terms of opex?

See, there are two AIs, okay, so people just to clarify. One is the AI that was classical AI, which was happening even before the arrival of generative AI. And that is a big one. For example, all our consumer durables and two -wheelers and small ticket loan s and frankly loans that we give to kiranas and chemists and salons and we have developed scorecards for all of that and these are all machine learning models. And that is also AI. So, that has been going on for like maybe seven or eight years for now. We started this journey of using scorecards like 15 years ago and it's been evolving and newer and newer technologies since then, but we've been using AI in that sense. So, in that way yes, of course it will continue to improve. The in terms of how much the generative AI is going to be used, everybody knows that every part of the bank, every part of every organization will get affected. So, we are also putting our efforts in that front. But end of the day, you know, from your point of view as investors, the reason why it's not figured prominently in any of the notes etcetera, it’s from your investors point of view, whatever we say in terms of AI it has to show in the numbers. So, we are focusing more on the outcomes in that sense. But at the bank level we're putting our efforts for that.

Right, right, right. So, last question from my side is on PSLC. The annual report is not out, but what would have be en done in terms of the agri PSL norms and how much PSLCs we would have bought in for last year and this quarter?

Yes, we bought and we lost some money in the sense that it's st ill a negative drag for us. We're still not a bank which is originating its entire PSL on its own organically. As you know we started from a DFI and we've not yet not yet fully caught up with the requirements. So, because we started from like zero base on building a PSL franchise. So, we are still buying PSL, we are short, and there is a negative like last year was Rs. 250 odd crore, Sudhanshu?

Yes, so I'm saying even the rates had shot up in the market and.

Yes, about 250 odd.

Last year we lost about Rs. 250 odd crore. Probably I mean, it depends on how the rates will be for this year, we'll take the numbers as it comes. But we're going to be short, we're going to buy, but our attempt is to start building more and more of this organically. But we've made good headway. I mean, imagine we have 1 lakh crores of PSL in the bank today, probably a little more, about close to 1 lakh crore s, 1.2 lakh crores of PSL, okay, didn't exist a few years ago. So, we're making good headway, but we're still short. Net -net we are losing money on PSL purchase. Yes.

Sure, sure. Got it. Thank you, sir. All the best.

Thank you.

Thank you.

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

Yes, thank you. Thank you very much. Thanks Sudhanshu and Sapta and everybody and to everybody who took this call. So, we look forward to continuing our work like this and certainly after two or three quarters even those of you who are on the fence will g et confidence in us. Thank you.

Thank you everyone for joining.

Thanks everyone for joining. Have a nice weekend. Thanks.

Thank you. On behalf of IDFC First Bank, that concludes this conference. Thank you for joining us and you may now disconnect your lines. Thank you.