Thank you very much. We will now begin the question-and-answer session. The first question is from the line of Ishank Gupta from Choice Institutional Equities. Please proceed.

Yes. Good afternoon. Congratulations for a good set of numbers.

Ishank, can you please speak a little loudly?

Yes. Am I audible? Is it better?

Yes.

Yes So, my first question is, can you kindly share the demand that you are observing in the used CV business? Moreover, how has been the collection efficiency as we have witnessed a sharper uptick in the gross NPA vis-a-vis other segments?

See, if we talk about the demand, the demand has been quite robust. But when we talk about eligible demand and on tightening the credit screen given the current crisis and especially on the energy side of it, that is the fuel in used commercial vehicle, the eli gible demand was slightly less. And as I shared earlier that we are in the process of calibrating our distribution and product processes as far as commercial vehicle is concerned. And we see to that within next 1 or 2 quarters; we'll be in a position to do the volumes along with the desired quality. And in terms of the collection efficiencies, this fluctuation is normal as far as commercial vehicle is concerned, and we see no undue risk on the quality of the portfolio and the losses that can happen because of this fluctuation.

So, by then we can see some stronger growth in the used CV business for the year?

At least, safely, I will say 2 quarters away because customary to our style, we would not like to jump on the -- into any products in a very aggressive manner and especially given the current situation, which is so fluid. So, we would like to wait and watch for 1 or 2 quarters before we really see that growing faster.

Sir, my second question would be, given the monsoon has been weaker this year, do we foresee any weakness in credit discussions for the two-wheeler segment as we witnessed a degrowth on quarter-on-quarter basis?

Not really because degrowth on quarter -to-quarter basis is that usually Q3 and Q4 are strong quarters for two-wheeler given the seasonality and the festivals being there in Q3 and Q4 in

different parts of the country. So, Q1 is usually muted. So, this is in lines of the normal muted Q1 that we have been seeing mostly over the years. And as far as the rains are concerned, many part has recouped in terms of the deficiencies in the rain. Now, at many places, we are facing another problem that they were overflooded. And so, now we need to see that how it really spans out. So, depending upon the geographies we operate and depending upon the centers we operate , the ground level information that we gather from our sales collection and the credit team, we design our credit screen and tighten our credit screens accordingly. So , let us see how that really spans out. It will take some time before we can really comment on that.

Understood. Also, we have witnessed a back -to-back increase in yields and advances for the second quarter. So, how sustainable are these yields? And what was the primary driver for this increase?

As far as our NIMs are concerned, as I always maintain that we would like to work on a spread of anywhere between 7% to 7.5% and then translating into NIMs of anywhere between 8% to 8.5%. We see that we structure our asset creation in such a manner that the spreads of around 7% to 7.5% are maintained more or less and that should sustain the yield anywhere between 8% to 8.5%.

Got it. And my last question would be , are we going to witness any further reduction in our cost of funding given we have already reached our target of 9.2%, more or less around target of 9.2%?

Difficult to comment right now because the cost of borrowing is dependent on the macro situation. So, depending upon the RBI policies from time-to-time and the liquidity available in the market from time -to-time. But it will be our efforts to see to that we stabilize or reduce. But as Ankit shared with you that this should remain in this horizon of between 9.2% to 9.3%.

Got it. All the best for the coming quarter.

Thank you.

Thank you. The next question is from the line of Devam Modi from Ardeko Asset. Please proceed.

Yes. Congratulations on a good set of numbers, sir. So , firstly just wanted to understand that, we understand that your on -book AUM as a percentage of total AUM has risen this quarter. Now, what implications would that have for provisions? And would that mean that, let's say, you would need a more higher level of standard asset provisioning or something like that because your on -book AUM has gone up? And what will be the impact of the same in numbers?

So, whenever the on -book asset increases, obviously, the corresponding provisions also increase. So, if you see that against our 5 .5% QoQ growth, on-book assets have increased by

8.25%. So, that has caused an increase in provision also. If you see our provisioning in Stage 1 and Stage 2 has increased from 0.65% to 0.7%. So, that is the impact which translates to roughly around between INR5 crores to INR7 crores in provisioning. But the fluctuation in on-book and off-book is constant because it depends upon the opportunity and the rates at what we can assign our portfolio from time-to-time. So, given our capabilities to have a lot of alternate means of funding, we don't compromise on rate of interest and other terms just to keep the portfolio off-book and even our capital , very strong capital adequacy. So, off-book is desirable, but not a compulsion on us.

Okay. Sure, sir. And sir, we do note that you have been a little cautious on the environment. However, as you mentioned that there is a sheer resilience of the model and probably the overall borrowers ’ profile and all those things. You have managed to overshoot the ROA towards like, let's say, greater than 3% for the last 2 quarters. Given that the environment going ahead, you are probably stepping into a relatively more benign environment than the last 6 to 8 quarters, which had other headwinds. What is the kind of ROA range that we should comfortably consider first part? And the second thing that how should we see the new branches that we have opened post March 2024, how should we see that sweating playout in '27 and '28?

So, starting with the second question, the branches by 2027-2028 will definitely sweat or even earlier than that. And on question of ROA, I think we always maintain the 2.75% to 3.25% as a range between which we will maintain our ROAs. And depending on the environment improvement or deterioration, that is where our credit screen works as a cushion. The only difference is that we get more opportunities to do the business if the environment is good, because we can take a calculated risk as far as our credit screens are concerned , which are tightened in a challenging environment. But at the end of the day , when the dictum of extending credit due is maintained , we are not allowing that to hamper our profitability. So, in the same way, it cannot increase our profitability substantially, because that is already been factored in. The difference will be how the ease of doing the business at the ground level in terms of logins to disbursement and in terms of the ticket sizes that we can extend that might potentially translate into better efficiencies.

Okay. Sure, sir. Just if you can clarify when you say branch sweating should happen before 2027 and 2028, what are the key numbers to watch out for? And what would it mean in terms of -one is you mentioned efficiency as a thing, what would be the metric to track there? And what would it mean in terms of cost to income?

So, obviously, the cost to income should stabilize or reduce marginally over a period of time. And as I told you, being a diversified product company, taking only cost to income or yield in isolation will not give us the right picture. But taking the complete yield metrics in terms of what are the ROAs that we generate , because if I have a product which is high yielding but

high operating cost, but at the end of the day, the ROA is maintained. So, once again, the focus will be to maintain ROAs between 2.75% to 3.25%. The sweating of branches will signify that we are at the higher end of the spectrum.

Perfect. Thanks, sir.

Thank you. The next question is from the line of Aditya from Securities Investment Management. Please proceed.

Hi, sir. Thanks for the opportunity. Sir, first question was on credit cost. So , now credit costs are around 1.6% of our AUM. And if I look back 1 year before, they were around 1.2%, 1.3% of AUM. And sir, if I look at your share of direct distribution that broadly remained , in the range of 66% -67% for the last 2 years. So, what explains this higher credit cost?

See, the borrowers worked with credit cost will always be range bound, so it will be difficult to maintain a particular number. So, we have always maintained that we'll be anywhere between 1.25% to 1.75% on credit cost. And once again, credit cost has to be looked in a perspective of what are the net ROAs we generate. So, for example, 2 quarters down the line, we grow more on commercial vehicle. The very nature of commercial vehicle business is high yield, high losses. So, at the end of the day, it all depends upon what is the asset configuration. But here, increase from 1.2% to 1.5% and from 1.5% to 1.6%, does not reflect on the quality of the assets we generate. And that is well within our tolerance of what yields we generate from those assets. So , at the end of the day, these credit costs are well within our tolerance limit and it will be range bound between 1.25% to 1.75%.

Understood. But sir, just a follow -up here. I understand there is a mix change. But last year, you know, there was an impact of microfinance because of which our credit cost increased last year. In Q4 also, which has taken aggressive write-offs because we were expecting good profit growth. So, ideally, the credit cost as a percentage of AUM should have come down or should be coming down this year, but that doesn't seem to be playing out. So, some understanding if you could give us?

If I requote the number, there are two which I shared earlier that our standard asset provisioning because of our on-book assets being increased higher than what it was last time or before that had entailed an extra provisioning of anywhere between INR6 crores to INR7 crores. So, if you take out that INR6 crores to INR7 crores of extra provisioning, that will normalize our credit cost to a far extent. So, that was one of the reasons. Plus , we also had a prudent write -off this year. So , a combination of everything that, higher on-book portfolio, a marginally higher provisioning in our Stage 1 and Stage 2 portfolio, which is in a sort of a sense of buffer. So , combination of everything has resulted to whatever numbers we have reached here. But those numbers have not affected our ROAs or profitability.

Understood, sir. And any extra write-offs which you'll taken this quarter as well?

So, that's a regular feature. So, anything for any of the assets where we are not very sure of the recovery, that happens. So, that write-offs will be there.

Understood. Okay. And sir, any impact of recent floods , which we have witness in Gujarat , either on asset quality or disbursement growth going forward?

So, many part of Gujarat are still in floods. So, it will be difficult for me to assess it right now. But those are all temporary major things which over the years we have seen. This is not the first time we are seeing our territories under flood. It has happened very regularly in the past also. So, temporarily the operations might be affected maybe for a day or 2. Once again, they are back to normal. So, I don't foresee much of the stress on the quality of the assets, but let us see how it evolves.

Got it, sir. Understood. And now, sir, in the opening remarks, you mentioned that we have been able to bring down the number of employees. So, if you could just help us understand in what areas has tech helped us and going forward as well, do you see this a recurring future?

Hi. So, yes. So, there I think this is a culmination of last, I think, a year or 1.5 years hard work in terms of various tech initiatives that we took across the board. So, what you see in terms of reduction is two ways. One is tech automizing a few things and that leading to requirement of lower manpower. So , we are hopeful that further improvements, further enhancements will help. Difficult to put a number to it right now because there will also be some periods where we will keep the staff strength but also test the tech and then implement it once we are very sure about it. So, we see this improvement coming in during the year. So , difficult to put a number. But yes, I think tech leading to better efficiency, lesser requirement of incremental manpower as the business increases are two areas that we are looking at actively.

But sir, is it more helping us in collections or underwriting

So, operations and underwriting majorly and soft bucket collections, yes. So , introduction of bots, introduction of auto -allocation, various other things. So , even origination wherein some of our partnerships are helping us out there. So , I would say it is getting contribution from everywhere, origination, underwriting and operations and collection, all three of them.

Got it. Understood. And sir, in the opening remarks, you mentioned that we'd like to take our borrowing cost to 9%, which was pre-COVID levels. So, just wanted to understand what will help us drive that. So, is it a credit rating upgrade which we are looking at or anything else?

So, that was more from the sense that we have borrowed at sub -9, and that's the wish ideally, but we also have to look at the market conditions and what is going on in the market. So , currently, sub-9 immediately within next 1 or 2 quarters looks like a far -fetched assumption. On the contrary, even if we are able to maintain this at the current level, considering the

overall macro situation where inflation numbers are, on the fence, RBI is also on the fence in terms of rate hike and all. So, I think the first target for us is to maintain this at 9.25% to 9.3%. Then, we can maybe 1 or 2 quarters down the line once overall macro stabilizes, we can again go back to the drawing board and see what avenues we have for reduction in rate. But credit rating upgrade, yes, is something that we are pursuing actively. We can't say when, but that's one thing that can have an impact on the borrowing cost.

Thank you. The next question is from the line of Madhuchanda from MC Pro. Please proceed.

Hello. Good afternoon.

Good afternoon.

Yes. So, my question is, on this West Asia crisis, which started when we were in Q4 and it has kind of lingered on through Q1 and now we are in Q2. So, have you seen any change in terms of demand or stress in any particular pocket because of the crisis lingering on for so long?

As soon as this crisis came into existence, we could pre-empt that which were the areas that could be likely affected. And we tightened our credit screens on all those areas that is more precisely on the energy -dependent businesses. So , we were very cautious on the energy - dependent businesses on how we will extend the credit to them. So, fortunately, that played out well for us that we did not face much stress. But having said that, as I shared earlier, even the units which were energy dependent had somehow managed to remain standard for other lenders also. That is what our take is that there have not been massive defaults because citing this crisis and they are facing the problem. They might have faced a problem in the business, but somehow, they managed to stay afloat. In our case, it was a combination of both the borrowers being very resilient and we're being very cautious. And in terms of the sector, it was all energy -dependent sectors such as restaurants.

Some manufacturing units where their dependency on gas and natural gas was there. So , we had already started looking at it cautiously on the export-oriented businesses.

But as the prices continues, have you seen any incremental impact on demand for loans and any particular pocket where there could be possible asset quality stress because this is kind of lingering on for quite some time now?

So, I'll call it eligible demand definitely decreased.

Okay.

Because when we talk about demand, there are so many people who will be opting for credit in such current situation. But once you limit and you tighten the credit screen, the eligible demand decreases, the login to disbursement also decreases that we faced in Q1 and Q2 to a

certain extent. And currently, once it was stabilized in between, that came back to normal. Now, it has to be seen that how it really plays once again in this quarter.

Okay. But that doesn't derail your 20% to 25% kind of growth guidance, right?

No. Hopefully, no , because that has been not that substantial to cause that impact. It results into more field work and more hard work at the ground level to get the borrowers who are eligible for the loans. But somehow , we'll be in a position to maintain this 20% - 25% as demonstrated last quarter and this quarter.

Thank you. And all the best.

Thank you.

The next question is from the line of Meghna Luthra from Incred Equities. Please proceed.

Yes. Hi. So, thank you for the opportunity . And also, for the additional disclosure that was very helpful. One question is, sir. What is the write-off number this quarter and last quarter?

Yes. We will just get you that number.

And sir, I wanted some more colour on how is demand shaping up in terms of segments like , are we still conservative in textile, FMCG and especially our top states? What is driving demand with segments?

Yes. So, yes, I think the cautious segments that we had, we are still a little watchful on those. But other than that, overall, I think across the board, demand has been stable. There has been no outlier in terms of high demand or , you know, high drop-off in terms of any sector. As earlier mentioned, we have had a cautious stand on some of these businesses since the U.S. tariff issue, and that stand still is there. So, overall, MEL, SME across the board, manufacturing and trading businesses, the demand is more or less stable. Due to the input cost going up, working capital demand also has gone up for certain businesses. But at the same time, they get underwritten against a little more stricter policy parameter. So, we are balancing both. We are balancing both the demand as well as the policy parameters to filter out to the best extent possible.

On the write-off, in March, it was 29 Crore. In June, it is 19 Crore, which was offset by higher ECL provisioning. So , if you see more or less our impairment in March or June is same, because as I shared with you that we increased Stage 1 and Stage 2 provisioning by 5 b asis point. So, that entailed around INR6.5 crores to INR7 crores. And that kept the impairment cost almost the same that is March and June.

Got it. So, sir, this would be like credit cost range that we can see throughout the year, right?

This range, we can take it for the full year, we see this range of credit cost, 1.5% and 1.6%?

It will be range bound between 1.25% to 1.75%. I will reiterate , it all depends upon the asset configuration that is pursued during the year. The right way of looking at it will be what are the ROA we are in a position to maintain despite our operation and the credit cost for the very reason that every product has its own characteristics in terms of the operational cost and the credit cost. But the range will be anywhere between 1.25% to 1.75%.

Okay, sir. And lastly, where do we see our direct distribution book in the next 1-1.5 years?

I think it should be in the range of close to 70% from current 66% to 67%, around 70% to 72%.

Got it. Okay. Thank you. Thanks for the insight.

Thank you. The next question is from the line of Deep Vakil from Bandhan AMC. Please proceed.

Congratulation Sir. Thank you for the opportunity. Sir, only one point, I think there is one press release relating to change in management. So , I understand it is broadly to do with designation change. Can you give some clarity here and what the changes are or some colour on that?

It's a designation change. As I shared in the opening remarks that CRO Nishant Jain has been elevated as Director - Operations; and Darshil, Head Credit SME, RAC has been elevated as Chief Risk Officer. So, that is more of an internal change.

Okay. And sir, there is one footnote which says, I mean, MAS has exercised an option of redemption of 3,33,000, I mean option ally convertible preference shares of the subsidiary in cash, which is 25% of the total outstanding convertible preference shares. Sir, what is the amount of exposure here? And can you just give clarity on this transaction?

So, MAS as a parent invest regularly as per the requirement in the subsidiary. So , INR10 crores of OCPS was done, which was to be redeemed over a period of time or converted into equity. If you see the capital adequacy currently at MRHMFL is more than 37%. So , that company not requiring capital, did not keep that OCPS conversion and hence, it was refunded to the parent.

Got it, sir. Thank you.

Thanks.

Thank you. The next question is from the line of Shreepal Doshi from Equirus. Please proceed.

Hi, sir. Thank you for giving me the opportunity . And congrats on a really good quarter. I joined the call a little late. So, I just had a question on the growth front. So, since MSE as well as SME has seen decent growth this quarter, shall we see the overall growth for the full year closer to on the higher side of the range of 20% to 25% for the full year?

So, very high possibility, yes. We are working on that quite optimistic. Can't predict, but you are thinking on the right lines. Yes, it is like that.

Got it. And second question was on the credit cost side. So , while it has stayed broadly stable versus last quarter's credit cost. So , have we created any macro event related provisions and what will be the normalized levels for the rest of the year and for full year?

I think a sort of buffer, yes, because if you see our standard asset, we have increased from 0.65% to 0.7%, entailing close to INR6 crores to INR7 crores of higher impairment. And one of the reasons for the higher impairment is our higher on -book assets. If you see our on -book assets have increased by 8% whereas our overall AUM has increased by 5%. So, when the asset remains on-book, we have to have a provision on that. Plus, the percentage of provision has also changed. So, we can say that we have a sort of a buffer in that kind. And as far as the trend is concerned, it can be anywhere between 1.25% to 1.75% as I shared earlier. And it is dependent on the product mix that constitutes the AUM from time-to-time because each product has different characteristics. For example, commercial vehicle picking up will give me higher yields, but will have higher operational costs and higher credit costs. So, at the end of the day, what we give the guidance is that our assets will be so created which creates an ROAs anywhere between 2.75% to 3.25%, the aspiration is to reach 3% plus. And we would monitor each and every asset on the yields it generates. So , this is how the quality and the credit costs will be managed and monitored.

The next question from the line of Sanjana Sivaram from DAM Capital. Please proceed.

Hi. Thank you for taking my question. And congrats on a good set of numbers. I wanted to know on our housing subsidiary, what would be some things we are doing that could help us take the growth to the next level? I feel currently, we're still a little bit behind our guidance. So, what is something we’ll do? And at what kind of credit costs are we operating this book?

Correct. So, yes, on the housing side, two things that, we have been working on is in execution is, one is how we can get the efficiencies up in our current distribution that we have and second is expanding the distribution. So, southern part of the country, especially Tamil Nadu, Karnataka are two areas which we are targeting starting from this quarter itself. So, some of the planning has been done, and we are working on recruitment. Hopefully, we will start seeing some results coming from these geographies in Q3 and Q4. So , the adding distribution and also working on rationalization of TAT and improving the processes as well. So, we are working hard that how we can get , better visibility by comparing ourselves to the peers as well that how we can move faster in terms of our overall processing. These are two- three things that are at the top of the priority list in terms of changes to get the AUM growth a little more moving robustly.

Our average yield will be closer to around 14%.

Sorry, I asked what would be the average credit cost on this book?

Credit cost? Okay. Average credit cost is around 0.5%.

Okay. And just one more thing that now our off-book growth was slow this quarter, and we have fallen a bit under what our target mix is. So, was there something to call out this quarter and do we expect the off-book growth to also catch up from going forward this year?

So, off-book is a form of liability for us, and it is dynamic in nature. So, if we get other lines of credit which are maybe better priced or better placed in terms of asset placement, we may choose those during the quarter. So , nothing much to read into the off -book percentage going down. That is for us normal course of business. And as new sanctions come in, new assets get ready, we will look at that also. Ankit also would like to comment on this.

And so, the strategy remains same to keep the off-book at 20% to 25%, nothing changes. It is just that a quarter or year or whereby if there is at a better cost of liabilities available, we can take that first and then off-book later, just that.

Okay. That's all from my side.

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

So, thank you all for joining and spending your valuable time. As always and as shared earlier also that we remain committed to our guidance of growing anywhere between 20% to 25%, hopefully at the higher end of the spectrum, just doubling our AUM and profitability every 3 to 4 years and majority through internal accruals. So , this will be a majority on nondilutive growth and we continue to pursue this. So , team MAS remains committed to its mission of excellence through endeavours. Thank you so much.

Thank you. On behalf of DAM Capital Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.