Thank you very much. We will now begin with the question -and-answer session. The first question is from line of Kunal Shah from Citigroup. Please go ahead. Kunal Shah, can I request to unmute your line and proceed with your question?

Yes. So the first question was on net NPA. It is still at 1.04% and slippages also appear to be sticky across the segment s. So when we look at it like say MFI, ye s, it has been at still more than Rs. 1,000 odd crores, but vehicles still continuing at 690. When we look at the consumer banking still closer to like Rs. 470 odd crores. So there, there is not much of an improvement on this slippage. And eventually when we look at it on the net NPA side, we indicated that we would endeavor to bring it down to 0.4%-0.5% odd. But it doesn't seem like there has been the increase in the provisioning coverage. So if you can share in terms of what would be the plans with respect to net NPA?

Let me just share some perspective on what i s really happening here. So, what we have shared in the previous quarter is that we want to make sure that we are consistent in our provisioning and write -off policies across our business segments. What you saw in the last quarter was the appropriate provisioning and write -off on the microfinance business. But as you rightly pointed out, gross slippages have been pretty much sustained even in this quarter as well. It is pretty much same elevated levels as the previous quarter. And as we keep writing -off, what happens is the portion we are writing-off is largely 100% provided. So that kind of brings down the provisioning because you write off that portion and then you are providing on the incremental slippages at the appropriate level of provisioning. So, what you will see is the PCR being stable and as slippages start dropping in subsequent quarters, you will see that improve. But PCR is an outcome. It is not like we are maintaining provisions to be at a number, but it is simply the impact of large write -offs that we are doing in a more prudent manner, which really brings down the PCR and then you build it back up with normal provisioning. So that is kind of what is really happening there.

Sir, any target for net NPA?

See, Kunal, what the aim is to bring down the stress book through write-offs, etc., but I think we need to keep the interest of all our stakeholders in mind. Our intent is to bring down Net NPA well below 1%, in the 60-70 basis points vicinity over a period of time.

Got it. And in terms of this entire right -sizing of the balance sheet, both on assets as well as the liability side, where are we in that journey? How much time would it actually take in terms of maybe running down the bulk and maybe the low -yielding corporate book as well? And when should we start seeing the acceleration in the overall loan growth? No doubt on the retail side and some of the focus segments, the growth has still been there. But when do we start seeing the overall growth picking up?

Like I mentioned in the last quarter as well, Kunal, our intent is to grow in line with market in the financial year 2026-2027 and be in the vicinity of 1% ROA as we get to the back end of that year.

That is correct.

Thanks. That is helpful. Thanks and all the best.

Thank you. Next question is from the line of Jay Mundhra from ICICI Securities. Please go ahead.

Yes. Hi. Good evening, Rajiv. Thanks for the improved disclosure, sir. Sir, on presentation and in your opening remarks, you also mentioned that there is some improving trends on MFI in terms of new delinquency or new stress formation. If you can provide SMA -1, 2 number for MFI that will ideally give more picture. You have given some certain disclosures, but somehow the absolute number of SMA-1, 2 would be really helpful?

We have mentioned in the opening remark, the SMA-1 and 2 or 30 to 90 DPD is 2.4% against 3.2% last quarter.

Sure. Thanks, Indrajit. And on the PACE strategy, right? So you mentioned that PACE would mean, the protection as well as the acceleration of some businesses , where would MFI fall into this framework? Would it be like acceleration or would it be like protection?

I believe, and I mentioned this in the last quarter as well that the microfinance business is a very critical business for this Bank and for multiple reasons. It is a business that if run well is a very profitable one. Two and more as important perhaps is as the industry continues to g row, I do believe that meeting P SL and particularly Agri and within that the small and marginal farmer is going to become increasingly difficult. And here is an engine that meets that requirement for us. And so therefore, both from a profitability perspective, the fact that we are able to now start to grow other products within this space, which is our Bharat Super store busine ss, which I spoke about as well a nd the fact that this is going to meet our critical PSL requirements makes this a very important business for us. We also recognize the fact that it is cyclical in nature. And therefore, as I said in my opening remarks as well, we are using the credit guarantee schemes and based on 31st December disbursals, we will have coverage of approximately about 38% of standard loan book . The intent is to take that to 100% and thereby eliminating the tail risk on the microf inance business. So, if you are able to do that and manage the proportionality of the business somewhere between 7%-8% of the asset side, I do believe that we can build a more predictable and profitable microfinance business going forward.

Sure, that helps, Rajiv. And last question, sir, you mentioned that you have intention to grow in line with the system by FY '27. But would it be fair to say that on a Q-o-Q basis, the Bank should now be on a growth track or it could be by maybe beginning from FY '27, how would you put in the overall loan growth?

I do not want to guide Q-on-Q. But I think, I stand by what I said last quarter, that our intent is to grow in line with the industry in FY 26-27.

Thank you. Next question is from the line of Rikin Shah from IIFL Capital. Please go ahead.

Hi, good evening, everyone. I had three questions. So the first one is going back to the net NPA point. So just some back of the envelope calculations suggest that if we have to bring down our net NPA to 0.5 %-0.6%, and given the net slippages that we have, it looks like for next 3 quarters, whatever PPOP we make will largely be used to just provide and bring down that net NPA. So is it a fair assessment to say that for next few more quarters, the operating profitability will just be used to kind of bring down the net NPA? Or how wo uld you think about it? Otherwise, it looks tough to achieve 0.5%-0.6% net NPA. So that is number one. Second, Rajiv, it is on your earlier point on the PACE strategy, while you briefly alluded to what are the segments that you want to focus on, etc., but any broad level detailed strategy or the financial targets you would want to put it down as yet, or maybe that will happen at some point later. So that is the second one. And the third one is on the capital, right? So I know that you mentioned in the past the capital levels are sufficient. But first, if you could quantify what is the potential impact from the ECL whenever the transition happens from 1st April on the net worth, on pro forma basis, and the fact that while the ROEs are depressed, and once you start growing again, you will be capital. So what looks like as sufficient, I am not pretty sure whethe r we have enough growth capital? So what would be your thoughts on capital raise? And if and when that happens? So those are my three questions. Thanks.

So let me take question 2 and question 3 first. So on the PACE strategy, we have done some work. And the intent this time is to see k the idea that there is a long -term strategy that is being built out. We will obviously share more details with you in the months to come, that I assure you. I think as far as capital is concerned , the issue there is, that why do I need capital at this stage? And I would first stay focused on getting growth impulses back particularly on the liability side, because I think we have enough engines of growth on the asset side, including some of the new engines that I spoke about, like SME, for example. And that, like I said, will take us deep into FY26- 27. And so therefore, to that extent, growth capital is not something that we require. And even if we do consume at a relatively lower RO A, I think we have more than sufficient, at least for the next 12 -18 months. I will let Viral answer the net NPA question.

So let me answer the first question and break it into two parts. The first is your point about saying our entire or large chunk of PPOP go towards servicing credit provisioning. Now, that is an outcome of the level of slippages that come out, right . Now, it is true that for past 2 quarters, they have been elevated. But we are seeing clear signs of that coming down in the next quarter. So as that starts dropping, you will obviously see a much lower level of credit provisioning. So that kind of answers your first question about are we going to continue eating up all our PPOP. Now, your second question about net NPA, right , ag ain, we are going to be following very consistent provisioning policies. And that is something we ha ve done from the last quarter itself. And we will continue to do that. So as the NPA start dropping, the absolutes also start dropping, right. So that is really how that net NPA number starts coming down. So that kind of answers the first question. On ECL impact, we need to wait for the final guidelines on ECL. But our initial assessment suggests a pre-tax impact between 1.5%-1.7% of the loan book.

Sir, on the Net NPA point, in your own assessment, when do you really think that we should be able to reach our target range? Is it like FY '27? Or you would want to do it a lot more gradually or maybe over until even FY '28 as well?

We will evaluate every quarter, depending on how the revenues are pacing out, how the asset quality pans out in some of the large businesses. So, we don't want to guide a s pecific target or anything. Let us see how each quarter goes a nd then we will update you.

Got it. Thanks, Indrajit. Thank you, everyone.

Thank you. Next question is from the line of Abhishek Murarka from HSBC. Please go ahead.

Yes, hi. So, Rajiv, one question on growth. Now, I know you have guided for FY27. But if we look at 2-3 years, on a more steady state basis, what kind of growth are you aspiring to?

The way I am thinking about this is basically year one, which is FY26-27, grow in line with market; FY27-28, start to gain market share and FY28-29, start to dominate in some of the focus areas that we have built out.

But when you say gain market share, would you have a certain, let us say, spread to industry or something in mind? Or a number, maybe given the size and the re - acceleration in growth?

See, I don't have a number offhand. So, for some of our large businesses, for example, our vehicle finance business we have about 7.5% market share. Our intent is to take that back to 9% as we go forward. Similarly, we will continue to gain market share on our microfinance business. As we accelerate our SME businesses in the short to medium term, I am fairly certain that we will be able to gain market share. But I think the key to all this is to be able to improve both the quality and quantity on the liability side. And as we all know, there is a mad scramble for deposits in the banking system. And so, therefore, I am actually not very concerned about being able to gain market share on the asset side. I think the challenge for us will certainly be to be able to improve the quality and quantity of liabilities as we go forward.

Right. And just in terms of the microfinance slippage, I know the SMA 1 and 2 number looks actually quite g ood. But does it indicate that from 4Q onwards, the slippage should come down materially? Because if you look at the rest of the industry, they are already in that phase. And I guess for you, you may be like one quarter off, but shouldn't be more than that. Is that a fair assumption?

It is.

Perfect. Yes. And finally it will help jus t to get some sense on a medium -term ROA aspiration. It may be 3 years, 4 years down the line, but just from a steady state perspective, where do you think you can get to and some sort of bridge to it or what will be the key levers at least going forward, something like that would be really useful so that you can get a sort of view beyond 27?

I think it is a fair ask which is why we decided to seed the idea of PACE with all of you. And we will share more details, which will give you color, the possibility of execution, the execution rigor that is going into all of that in due course.

Got it. Thank you and all the best.

Thank you. Next question is from the line of Chintan from Autonomous . Please go ahead.

Hi, thank you for taking my question. I also have three questions. Can I follow up on your last answer regarding the ROA bridge? Over the next 2-3 months you are bound to talk to investors, they are bound to ask you this question, you will give some color, we will hear that feedback. It would be helpful if you will give us some idea about what that bridge looks like ? What are the kind of main levers that you have on cost of risk, we can obviously assume some amount of normalization, but where are your cost of funds going? What is your asset mix kind of going to add to that ROA bridge? Some color there, if you could see that now as well, that would be helpful. My second question is on your slippages. You hinted to a policy change on slippages. Could you help us quantify that if you were on your old policy, what would that slippage number be so we can understand the policy change , how much of that slippage is driven by that? And then my final question is, why are vehicle finance slippage s running at a higher pace or it has been high for a while, what is driving that and what is the road to improvement?

So, on the ROA question, what I have been saying is that this is a 3-year journey, year 1 is really to start to grow in line with market with 1% quarterly ROA. And I think you can do some numbers on your own, given some of the commentary that you have heard from us. The vehicle finance and microfinance business will continue to be a critical component for us, i.e., higher yielding assets. We will add the SME business and to some degree, defocus on the very large corporate business that we have. There is space for us to be able to grow our entire Agri franchise, including gold loans, which will help us meet some of our PSL requirements as well. Given where we are on cost of funds and retailization, including a renewed focus on current accounts should benefit us from improved cost of funds in the medium term. We are already working on a fairly elaborate cost takeout. If you look at cost to assets currently, there is a bit of a denominator effect because of the fact that assets are not growing, but there is the cost to assets continue to be elevated as well. So as I look across the ROA tree, I think there is opportunities for us to improve pretty much on each of these lines. On the NIMs through some benefits on cost of funds, fee incomes both on retail and corporate, som e cost takeouts and be able to reduce credit costs as we go forward. So, in that sense, you can clearly see that there are opportunities. I think the question really is how long will it take for us to execute all this. To my mind, it is a 3- year journey at least.

That was very helpful. The other two questions?

Sorry. Your other two questions were, why is vehicle finance slippage is high? Let me just ask Sriram who heads that business to take this, please.

Yes, good evening. Slippage will be better than the last year. The slippage will be like both on absolute terms and on percentage terms lower than last year. We are expecting 20 basis point lowering of slippage during this current year. Having said that, like the vehicle and the entire industry, like particularly MHCV has been going through bit of a strain because of the GST norm changes. People have been takin g 28% and discounting the rates to customer, which has caught them out a bit. But having said that, it is a good thing for the industry on the long run. The entire industry will be benefited by such move. And the rest of the products like we are doing better than the last year.

Thank you. And then finally, on that slippage question, the policy changes impact on the slippages?

Yes, let me answer that. So, slippages are not policy-driven, right? That basically IRAC norms and normal identification of NPA. So that is not policy -driven. What is driven by policy is at what point do you write off and what is the quantum of provisioning that you need to do? Now, that change again, that is not something we have done this quarter. You saw that last quarter where we changed or upped our provisioning maintenance on the microfinance business and also at what point do we write off. So both those changes were made in the last quarter itself, and it is not this quarter event. But nothing to do with slippages, that is more on write-off and provisioning.

Thank you.

Thank you. Next question is from the line of Piran Engineer from CLSA India. Please go ahead.

Yes, hi. Thanks for the enhanced disclosures. Just firstly, quick data or quarterly questions. Other OPEX has declined quite meaningfully quarter-on-quarter from about Rs. 2,700 crores to Rs. 2,400. Anything to add to this?

If you look at quarter-on-quarter comparison, first point to make is we have already absorbed Rs. 228 crores impact simply from the labor law change where the gratuity provisioning need to be upped. So that is already built into Quarter 3 expenses. And you are right that if you adjust for that, expenses have actually come down roughly to Rs. 240 crores for the quarter-on-quarter. Now, there is some amount of impact from higher expenses that we booked in Quarter 2, like one-off GST provisioning. And also, we changed some of the expenses rela ted to business activity. So sum of that, Rs. 150 crores odd from there and remaining Rs. 90 crores is a real save that we have achieved through operational excellence and all the initiatives that we are trying to do. So yes, we are calibrating expenses tightly and tracking that to bring in the OPEX efficiency. So as Raj iv said, we are going to be focusing on bringing down the OPEX percentage because we believe there is opportunity there.

Got it. Thanks for that. Secondly, moving on to more mid -term questions. With the MFI share shrinking, I know you touched upon how it is important from a PSL perspective, but it is already down from like 9% to 6% of book in the last 2 quarters. And probably a year later, it might be even lower. So how are you thinking about bridging the gap? And you also mentioned your Bharat Super Shop, which is the merchant loan business. Does that also qualify for PSL?

MSME, not Agri.

So it won't be SMF, but it will still be general category?

Under MSME category.

Whereas the MFI business was under MSME or under SMF or Agri?

Largely SMF under Agri.

So we are losing the SMF contribution from the MFI business, but we are gaining it in the MSME, but net-net, I think, SMF?

It is not an either or.

We have seen degrowth on the MFI book over the last 2 quarters, including this quarter. Having said that, there has been a significant increase in disbursals in this quarter, really from the middle of October. And so, therefore, to that extent, the full benefit of disbursals will come through in Quarter 4, when monthly disbursals will be higher than the repayments that we receive and the book will start to grow after Q4 onwards. So the degrowth that you have seen, we should be able to recoup as we get into 26-27, helping us in fixing one, the proportionality that you spoke about, and two is meeting a significant component of our PSL requirements for Agri and SMF.

Fair enough. Secondly, I think, while I understand you don't want to give the drivers of the improvement in ROA, but even if I assume that slippages in MFI half from where they are, the credit cost might improve 50 bps or so, it is still quite a hard task to get to 1% ROA within the next 5 quarters. And on top of that, we want to grow at 12 %- 13% next year. So just trying to think about what are the risks here really. One thing you have already identified is that ability to raise deposits at scale and at a lower cost. But I don't know, I think it seems like a stretch, or am I reading it wrong?

No, Piran, let us see how each quarter goes. As we have been saying, it is not going to be a given thing that ROA improvement will happen every quarter without doing anything. Bulk of the improvement will come from credit costs. Quarter 3, credit cost is 2.6% of average loans . Bank, as you know, has operated at 130 -140 basis points when microfinance was at around 10 %-11%. So with the microfinance at a lower share, obviously, the bank has potentially to operate at a lower credit cost. So there is a significant scope for improvement plus, the margin that we are delivering today, the fees that we are delivering today, they are lower than what their potential is. So there is scope across the board. But giving exact bridge right now is too early. As you can see, every week things are changing, every quarter things are changing. So let us take one quarter at a time. And that is why we are not giving you quarter specific guidance. Let us reach 1% first. Some of you have actually asked us the other way around, is saying that 1% is too low for a Bank of your loan mix. So let us take one step at a time and then revisit.

But if you had to sacrifice one of the two, what would it be?

What one of the two?

The growth target, which is maintaining market share, which effectively means 12%- 13% growth, or the 1% ROA?

I think, for a banking business, writing growth, particularly on the corporate side, which is not profitable is very easy to do. And so, therefore, the composition of the growth is as important and what part of that growth we are sacrificing is as important as well. Because remember that we are a relatively small player in the banking industry. And so, therefore, I don't think it is an either-or in a very simplistic sense, if push comes to shove, yes, there are opportunities for us to be able t o shed growth without impacting PPOP. So stuff like that we will certainly do, if required, if push comes to shove.

That is it from my end. Thanks and wish you all the best.

Thank you. Next question is from Parth Gutka from 360 one Capital. Please go ahead.

There is a small impact. It is not going to be a big impact because of that.

Thank you. Next question is from the line of Rikin Shah from IIFL Capital. Please go ahead.

Hi, Viral, this is a question for you. You earlier mentioned that the write -off and provisioning policy w ere changed last quarter. Would you be able to just remind us what those changes are and what is the current write-off provisioning policy? Thanks.

That is different across various segments of the business such as vehicle finance, consumer, secured & microfinance. The change for us was clearly in the microfinance business. So the change we made last quarter is the point at which we write -off. We are now writing off at 365 days post NPA. That is one change that we have made. And on provisioning, it staggered depending on the number of months outstanding post - NPA. But broadly, somewhere between 78%-80% kind of PCR on that book. So that is really the key change. On the rest, we have basically just aligned it to where our LGD kind of number where we need to be on provisioning level.

Thank you.

Thank you. Next question is from the line of Ankit Bihani from Nomura . Please go ahead.

Yes, hi. Thank you for the opportunity. I just wanted to ask if the RBI annual supervisory outcome has been done like it has been done for other large banks with respect to Agri PSL. Has there been any impact of that?

The RBI discussions with the Bank are confidential in nature. We won't be in a position to comment on it till the discussions are conclusive. As and when required, we will make the required announcements or disclosures. So difficult to comment on it. We will give any information as and when it is appropriate.

And the second question is, what would be our exposure to Adani Group?

We don't disclose the company level exposure. We had disclosed this specifically in stock exchange 2 years back when there was some market news. Since then, the exposure has come down a little bit.

Thank you.

Thank you very much. Ladies and gentlemen, we wi ll take that as the last question. I will now hand the conference over to Mr. Rajiv Anand for closing comments.

I thank each one of you for your interest in IndusInd Bank and for being on this call. I take this opportunity to wish each one of you a very happy New Year as well. Thank you once again.

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

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