Can Fin Homes Limited (CANFINHOME) Q1 2027 Earnings Call Transcript

Hi, sir. Is it good to go? Can we start? We have about 95 odd people on the call.

Well, I mean, I'm fine. We can start. I think it's 3 o'clock already. We can start.

Sure, sure. Thank you. Thank you very much. So, ladies and gentlemen, good day and welcome to the Canton Homes Q1 FY27 conference call hosted by Investec Capital. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need any assistance during the conference call, please signal to me, Sapna, by raising your virtual hand. Please note, this call is being recorded. I now hand over the conference to my colleague Nidesh Jain from Investec. Thank you, and over to you, Nidesh.

Thank you, Safna. Good afternoon, everyone. Welcome to the quarter 1 FY2027 earnings conference call of Canfin Homes Limited hosted by Investec Capital. We will start with management commentary followed by a Q&A session. To discuss the financial performance of Canfin Homes and to address your queries, we have with us Mr. Suresh Iyer, MD and CEO, Mr. Shailesh Kumar Singh, Deputy MD, Mr. Prakash, President, Mr. Uthaya Kumar, President and CRO, and Mr. Abhishek Mishra, CFO of Canfin Homes Limited. Please note that this call is being recorded. I would not now like to hand over the call to Mr. Suresh again for his opening comments. Over to you, sir.

Yeah. Good afternoon, everyone. Thank you, Nadesh, and welcome to this earnings call for Q1 FY27 performance of Canfin. I'll just start by giving a brief of the performance, a few highlights. Obviously, all these things are covered in the investor presentation. However, I'll just give you some brief and some commentary on these aspects also, and then we can open it up for question answers. First of all, I'll start with disbursements. In terms of disbursements, we had given a guidance or a projection that in Q1, we'll be doing 2,500 crores, Q2, 3,000, and 3,500 and 4,000 in the third and fourth quarters and so on. So, 2,500 crores, which was, you know, what was planned and what was projected, we have achieved 2,609 crores. So, we have been able to do more than what we had originally projected. And this has been possible because of, you know, positive growth across all our geographies. That is, we have six zones, and all the six zones, including Karnataka and Telangana, we've had a positive growth. And Karnataka actually with the 18% growth over Q1 of last year is actually the lowest in terms of the growth, zone-wise growth. So, we've had a growth across all the geographies. Plus, we've also had a positive contribution coming from the sales team as well as from the… New branches that were opened post-March 2023, which has helped us in achieving this disbursement. And that is a positive thing, which is one of the drivers for this growth. In terms of a breakup of this growth, if you see, you know, we've had a. So, salaried and self-employed both have grown compared to last year's corresponding period. So, salaried in absolute terms has grown at 21%. The overall growth for the quarter has been 29%, that is, against 2015 crores. The current quarter, we have done 2609 crores, so that is a 29% growth. But within that, the salary segment has grown at 21% and the SENP has grown at 44%. Similarly, if you break up between the housing and the non-housing, the housing in Q1 FY27 has grown at 28% compared to the Q1 of housing figure of last year. And whereas the non-housing, that is NHL, has grown at 32% and combined there is a 29% growth. So, basically, you know, across all the four 2x2 matrix CPC, there has been a growth across all the four things. The next, if we look at, you know, what is the challenge, however, has been that the prepayments or the rundown has been a little higher compared to even 2-4 of last year. So, we had this challenge and one of the expectations or one of our, you know, planning was that post this conversion from annual to quarterly reset, we may probably see a reduction in our, you know, BT outs. However, you know, this has not happened. In fact, as against 1730 crore rundown in In Q1, Q4 of last year, this, you know, this thing, we are having a rundown of 1,857 crore. So, basically, there is almost a 127 crore increase in the rundown. However, if you break up this same, you know, rundown, there's a, what, what this comes out is, you know, BT out, which were I. This was 400 crore in Q4 of last year, has increased to 408. So, there is no major increase or higher VT outs which has resulted in this rundown. It is just a marginal 8 crore increase compared to Q4 of last year. Same way, you know, if you look at loan closures other than BTO, that is cases where customers have closed their loans from their own funds or because they are selling their property or where we have initiated the sale under Surface E, that amount last year, last Q4 was 360 crore. As against that, it has increased to 377 crore. So, both these things have not actually increased in a major manner. However, what has actually increased resulting in a higher rundown is that part print payments from the customers and amortization particularly have resulted have increased. So, basically, when The amortization of the, sorry, reset happened from annual to quarterly. Most of the customers were under a, you know, change in EMI, sorry, change in a tenure option. So, the EMI was constant and the tenure was changing. So, in all these cases, when the reset changed from annual to quarterly, and the rate of interest was passed on half a percentage, the tenure has actually, you know, crashed, and the EMI has remained a change because of which higher amount of proportion has gone towards the principal. So, as it is 976 crore in Q4 of last year, which was part payment amortization, the number has gone up to 1072 crore. So, basically, this is the main reason why the rundown has been higher and we will have to now work on this particular aspect. Now, coming to the AUM growth. So, last year, we had an overall AUM growth of 10.4%. And this year, in Q1, it has inched up to 10.8% or 11% as we have reported, but 10.8% in real. The call has obviously been because of 755-odd crore, which has been added to the book from the disbursements net of the rundown. And if you actually see, the disbursement was projected at 2,500 crore. And for the full year, we had projected that against 13,000 crore disbursement for the full year, 7,000 crore would be the rundown, which means approximately 1,750 crore every quarter. Against which this quarter, the rundown has been 1857, so almost 100 crores more than what we had anticipated. But actually, this has also been offset by the disbursement, which has been higher by 109 crores. Against 2,500, we have done 2,609. So basically, you know, whatever, you know, was the expected increase in our AUM, which we had projected for the full year, The Q1, whatever we had projected, actually has the numbers net-net have been the same, just that on the disbursement also has been higher and has been offset by an equivalent amount of higher rundowns as well. So, we are still in line with what we had projected at 14% AUM growth, just that we will have to now consistently do a little more disbursements every quarter to see that we offset whatever is the higher prepayment or rundown that is there. So, that we will be planning. As of now, we are projecting for 3000 crore only, but you know, we will be pushing for seeing that, you know, we cover up for the higher rundown. So, the projection for the entire year, we continue to have as 14% AUM growth is what we will be targeting. Huh? Next, we will talk about the spread and the NIM. So, we had in the end of last quarter, Q4 of last year, we had indicated that there was a high amount of portfolio which has moved from annual reset to quarterly reset and have benefited from the reduction in rate of interest. Plus, you know, there was a January 2026 rate cut also of 15 basis points. So net of that, our yield would come down to 9.81%, which, in fact, we have been able to sustain throughout the quarter. And for the full quarter also, our yield is 9.81%. So this is something which was already, you know, envisaged and was already highlighted in the previous quarter earnings call. As against that, he had indicated that our cost of borrowing would be 6.99%, which in fact has ended at 6.98%. So basically, you know, on the cost of borrowing side, we have further been able to bring down from what we were as on 1st April. And this has mainly happened because we also had some high cost NCDs which have been repaid. And we also were able to time our commodity fund raise at a very appropriate time. So this has helped in ensuring that our cost remains low. We do have a couple of term loans which we have, or rather one term loan which we have raised at 7.25% during the quarter. But none of the older borrowings have had any rate revision because there is no repo revision. And all our term loans are either linked to T-bill or are linked to repo. There is nothing which is linked to MCLR, so we have not seen any increase in that. So, our spread is 2.83 as against 2.81 as we had indicated in the beginning of the year. And consequently, NIM is 3.81, which also is, we have given our guidance for 3.75. Going forward, as we know, we have a good amount of sanctions on hand from banks, and of course, NCDs and TPs are also there. But I think the banks are currently the cheapest option we are having, of course, other than the short-term CP. And we have also got an application with NHB. So, at least as of now, even considering that NHB, we don't consider in Q2, we don't raise any NCD. Based on the bank borrowings also, you know, there will be a very, very marginal increase only in cost of borrowing. And that also because of the incremental loans, not on the existing loans. So, keeping that in mind, we are confident we should be able to maintain the spread and the NIM because on the yield side also, we have a couple of opportunities available because of our change in mix, product mix, and segment mix. So, we are confident that the NIM will be maintained at 3.8% plus, and we should not have a problem in that. As regards to delinquency and NPA, the stage 2 and stage 3 delinquency has actually come down compared to March 26 in absolute value. So while there is a little increase about close 17-18 crores in NPA, it is more than that compensated in the reduction in our SMA 2 and SMA 1. And consequently, our, you know, The provision of credit cost is marginal. It is much less than what it was in last year. And we are confident, in fact, the trends also indicate that our last six quarters continuously, our NAS bond ratios have been coming down. And even right now, we don't see any increase in the number of delinquent accounts. So, basically, we are confident that, you know, we should be able to maintain our credit cost guidance of 10 basis points. So that's, in a nutshell, the brief highlights of the performance. If there are any queries, we can now open it up for queries. Thank you.

Thank you sir. So, we open up a session for question and answer session. Participants, please raise your virtual hand. I will unmute you. Please introduce yourself and ask your question. So, first question is from Shripal Doshi. Shripal, I have unmuted you.

Please ask your question.

Hi, sir. Thank you for giving me the opportunity. My first question, sir, was on the macros, which have been tough and still remain uncertain, while our asset quality indicators have remained resilient. But how do you see that playing out in the next three, six months now? And have you taken any underwriting norms or process changes in the last two, three months? And also, in terms of customer profile, any filterations or any do's and don'ts that we have tweaked there? And any particular trend in terms of salary, self-employed segment, in terms of rejection rates, and then, you know, aspects on the same. So, how do you see the same, like I said, quality trends shaping up in the next three, six months overall, and keeping in mind the points that I've highlighted?

Sure. So, thank you, Sripal. First is, you know, in terms of macros, I think, as I indicated, across geographies, we are at least not seeing any slowdown in the demand. And we are not seeing any major issues either in the project launches also. In fact, in this quarter, that is Q1, we have added another 60 APS projects also. So, the projects are also there, you know, we are also in business from 271 approved projects, we now have 331 approved projects at the end of the quarter. So, we don't see any major thing on the demand side. On the interest rate side, of course, and liquidity side, liquidity also, as I mentioned, we are having a good response. Banks are, you know, almost all our partner banks have come forward and have shown a willingness to sanction. In fact, we've got a couple of, you know, large sanctions also. So, you know, we don't see any problem in the liquidity either. In terms of the rate of interest, yes, you know, the rates have slightly gone up. As again, 6.95%, which we were raising in last year from the banks, we are now, you know, the spread, they have increased. And while they can't increase on the existing loans, it's only for the new loans where the, you know, the banks have been quoting anywhere between 7.25 to 7.5. So, that is only, that is one case.

Two Ops.

Hello.

Yeah, yeah, I didn't know what somebody was saying.

No, no, I have some noise anyway. So, now on, so what we have done is in terms of to offset this increase in the incremental borrowing cost, we have also tweaked some of our internal guidelines also. So, like, you know, now, you know, whatever special rates that we are offering, which we are offering for more than 20 lakhs, we have increased it to more than 25 lakhs. So, that is one thing which is slightly, you know, the 20 to 25 bucket, we will slightly get a little better yield. We've also... You know, in terms of... Customers re-rating. Basically, every year we have to do a customer appraisal once again and classify the customer's risk profile. So, there also we have re-looked at it. One is we have added additional parameters so that we are doing a little more, you know, EWS signals have been added, a little more monitoring in terms of, you know, OTMS reports and all those things have been added so that we are, you know, if anything is there, we get an early warning and we are able to take corrective action. And as I said, 120 to 25 lakhs has increased. And now we have also, you know, in terms of civil score. As against about 75 to odd percentage today, we are 82% of our loans are now having a civil score of more than 700. So, I think, you know, it's more of customer selection also, which is slightly improved, you know, that is coming from the customers at this point of view. So, consequently, you know, there will be, you know, some indirect increase in the rejection ratios. But as we know, 80% of our customers are coming through the DSA channel. So, the login and everything happens only when it is basically cleared or fitting into our norm. So, we don't have a very great, you know, data that we can share about how whether the rejection rates have gone up. But basically, these are the things that we have done in terms of this. And as I mentioned, you know, for the last six quarters, we have been monitoring, we have our, you know, NAS bounce rates have actually come down. And we have also, during the last couple of quarters, you know, run some exercises to, you know, see that older cases where NAS was not there, we have tried to convert those cases also into NAS. So these are basically some more of, you know, hygiene improvement that we have tried to do. This is what we have done.

Got it, sir. Thank you, sir, for that detailed answer. My second question was on the IT side. So, in the quarter, we were supposed to do a complete implementation on the LOS, LMS, and report generation. And I think we've completed the pilot already. So, when we see complete implementation, and if it is in 2Q or in 3Q, do you see any impact on the business or on the disbursement targets that we have highlighted?

Sure. See, we have done a pilot of five branches, and of course, there have been some dealing problems, but nothing which has impacted our, you know, Business, all these, actually, we implemented all of them on 8th of July. Today, it is just 12 days, but all the five branches have put through all transactions, including sanctions, disbursements, customer creation, you know, Natch processing, collection of the EMI collection through, you know, BVP, non-Natch transactions. The loan closures, all these transactions have been put through, and we, I mean, while there have been some small, small issues which have come up and have been immediately attended to, but, I mean, we have not had any kind of problem touch wood where we have had to kind of, where we feel that, you know, it will impact our business. We plan to implement it across our remaining 245 branches in this current quarter only. The only thing is we don't have a weekly, you know, upgradation or weekly implementation process possible. It has to be only at the month end because only then we can take the data and, you know, compare it and be able to go ahead. So, we have done it based on the 30th June data on 8th of July. Same year, we will be doing it based on the 31st July data in August and August data in September. And so, definitely before the next, you know, quarter's earnings call, we will be done with all the 250 branches. And going by the experience of the five branches, I think we don't envisage any problems or any issues in the business because these branches also are likely to end the month of July with almost the same or better business than Zoom. So, we don't, because, you know, already they are all login files, their disbursements are happening, all integrations with all other applications including, you know, internal as well as external APIs, all of them have been functioning quite well. So, we don't envisage any problems.

Got it, sir. Got it. Thank you so much, sir, for answering my question. I'll come in with you for more questions. Good luck for the next quarter. Thank you, sir.

So, in case you are joining via dial-in facility, please press star and swipe on your phone to raise your hand. The next question is from Sonal Mayas. Sonal, I am unmuting you.

Please unmute yourself at your hand and ask your question. As soon as you can unmute yourself from your end and ask your question. Since it moves, I move to Rajiv Mehta. Rajiv, unmute yourself and ask your question. Yeah, I'm an audible?

Yes, Rajeev, please go ahead. Thanks, thanks. Thanks, Indesh, and thank you for giving me the opportunity. Sir, just a few questions from my side. In terms of the IT implementation, what was the experience in, you know, coming back to normal business volume for the five branches that we implemented in June, are we already back to normal business volume or productivity in those branches so that we get to understand that when you implement it in the residual number of branches, what will be the business impact and for what length of time?

See, this IT implementation I just mentioned, it is based on the June data we've implemented in July. We are almost 12 days since we implemented. We are already kind of, I would say, on track in terms of the business for the month. All the branches I have, we have been talking to them. There are, you know, small, small issues, you know, but nothing major, which is a showstopper. All the processes, as I mentioned, disbursements, sanctions, closures, repayment, NACs, everything has been processed, and they are very much on track to, I think, in this month itself, they will probably be, you know, on track for the business. Already, disbursements have also started in all the five branches. So, there is no problem in terms of that. So, going by that, you know, experience, I think we are confident we will not have major issues. The only thing is, you know, we had five branches. We could, you know, give a individual attention to five. When we do the next 50 or 100 in the next month, we may not see. It will take a little longer to, you know, do the hand-holding. But beyond that, we don't see any problem because the system perhaps, system-wise in terms of the product that has been delivered and the…

So, are we targeting a certain number of business in this quarter since it's going to be a very testing quarter from our binary point of view? I mean, so, if we did a certain run rate, say, in June, would we be able to maintain that run rate in July or September despite this implementation? Then can you share another one?

No, I think we are confident that 3,000, we don't want to change. I think we will be able to meet that number. However, we do plan to come back somewhere in September, and maybe either we will issue a press release or we will maybe come back and have a conference like this. But we can, you know, update, we'll give a proper update on how the remaining two branches of implementation have happened in August and September also. But we are confident the way five branches have been able to quickly, within 10 days, come back to normal and do all the processes. I think, you know, other branches also, we should be able to do it in the same month. And so, 3,000 crore that we have targeting for Q2 stays, that number stays.

This is one last thing on pricing. When I look at the shift in the, you know, ticket size mix to more than 30 lakh loans, the proportion is going up in disbursement, and 50 to 100 lakh category, you know, ticket size loans are also going up in UN. So, you know, if they're contributing higher to our growth with every passing quarter, what is the pricing here versus the overall, you know, pricing that we get in the quarter?

So, actually, there's a, you know, multiple combination. It's, I would say, a two-by-two or a three-by-three or whatever kind of a matrix with some very similar. So, as I said, you know, blended cost is 9.81, and last year also we had 9.82 is there. And so, by and large, you know, overall blended cost is coming to 9.8. For a salaried customer who is having a Sibyl score of more than 7.25 and who is probably, you know, looking for a loan of 25 lakh plus because we have moved it from 20 to 25, I think the best trade would be around 8.4. But then, you know, it goes up to around 11% also depending on the customer profile. So, if it is an individual customer rating is S2 or S2 plus or S3, then obviously the rate will be higher. Same way if the customer is, yeah, vis-a-vis a salary is a self-employed, then it will be a little higher. Against the housing, if it is a little, you know, so the highest rate would be, you know, for a non-salary, non-housing customer who is having a S3 rating. That would be probably the highest rating. So, anywhere between 8.4 to around 12.5 would be the range. When blended comes to 9.8. Thank you. Yeah, thank you. Thank you, Rajiv.

The next question is from Subranshu Mishra.

Subranshu, I am unmuting your, please unmute yourself and ask your question.

Yeah, thanks. Hi, Suresh. Thanks for giving me this opportunity. Two or three questions. The first one is a couple of NBSTs who have reported before you have spoken about some amount of disruptions in the IT sector hiring, especially at the entry level, mid-management level. Given the fact that we have a larger exposure to Bangalore and the outskirts of Bangalore, are we seeing any kind of changes in the off-take, especially in the LT sector for home loans? If so, have we changed any policies around it? Second is, can we spell out the number of home loans and the number of LAP loans, non-home loans, that we have done in this particular quarter? And what's the expected run rate for the quarterly run rate for the rest of the year? And the third question is around any kind of surprises that we might expect in the OPEX going forward in 27th.

Sure. See, in terms of the IT sector impact on the, you know, loans and everything, we have not seen any major thing. Maybe, you know, Karnataka, as we said, is still also growing at 18% and Telegram has grown at a little higher than that only. So, you know, of course, to some extent, it is also because of the Bayes' effect, but having said that, it is still growing compared to last year, and it is also contributing. We are not seeing any major change because of this IT. In fact, there are job losses, that's a fact, but there are also people who are, you know, in the mid-dressing and all, who are able to, you know, re-equip them with new things. You know, they are also able to get different jobs in different things. So, there are, you know, it's not that there are no jobs and people are absolutely having to sit at home. So, so far, there has been no impact. I will say that if you look at our Karnataka delinquency, our NPA as on 31st March 26 was lower than in absolute value as compared to 31st March 25. And in June also, it's a very, very marginal one or two, three cases, but nothing, nothing major which is there, which also is anyway a first quarter sequential impact. So, we are not seeing any major impact of that. Second, in terms of number of loans, I wouldn't be able to give you the number of loan accounts, but I can definitely share the number, the amount. So, as in out of 2015 crores, which we have done in Q1 FY26, 1291 was HL, 724 was NHL. As against that, Q1 FY27, we have done 2609 crores, of which 1650 is HL and 958 is NHL. So basically, in HL, we have had a 28% growth, Q1 to Q1, and in NHL, we have had a 32% growth. This is in terms of the amount I can say, number of accounts I don't have right now.

The third question was around OPEX, and if I can just squeeze in one last question, which is around the APF. So the total number of APFs you spelt out is around 331. Per project, what is the maximum number of apartments that we can do? And when does this become a major contributor, when I say major, upwards of at least 15% in our disbursement?

I think, see, in terms of OPEX, I don't think there is any major surprise other than what we have been saying that, you know, 40 crores is yet to happen. As I said, since we have just implemented in July of this year, we still have some of the, you know, things we have signed off with, we have to still capitalize, some of the things we have capitalized in this July also. So, you know, that will come into by way of depreciation and all those things. But by and large, I think quite a few of the items which are there, where the AMCs have also kicked in, some of the cases where, you know, payments and all have been made, which are, so those things have already started. I think even this quarter, there is a little bit impact. In fact, if you recollect, New four of last year also, about five to six core of expenses are already kicked in in terms of the project, because some of the project items for which we had, you know, taken in the last quarter of last year, one year, the first year AMC was also started. So, basically, you know, in terms of OPEX, I don't think major any major new debt things are going to come. Salary costs or rent and taxes and all those, everything else other than, you know, IT cost is also well under control. There is no major surprise there. Everything is in line with last year's thing only. In terms of APF, actually, we are looking at, as such, about up to 100, 150 units per project also we can consider for APF. So, we do have some good marquee projects also which have been approved by us of some very CAT-A builders also. Although most of the projects are of CAT-B builders, but we do have some good marquee projects of CAT-A builders also. As of now, in fact, the contribution is more of we are there also testing us. We are also, you know, going through the whole thing. So, learning is happening. So, it's a very small number. I think 15% I think would still take a while away. But at least we have started getting a good regular trickle from these projects, which is what is the positive thing.

Sorry, this 100 number is what percentage of their total apartment throughput?

No, no, this is the total number of apartments in the project. What we are expecting is, you know, to start with maybe one, two, because we will, see, all the projects that we have tied up with mostly are already having two or three tires. Okay? And no builder goes with a single tire. And since we are not doing developer finance, obviously the first trice of recusal goes to the lender who has also given the project finance.

No, what I am trying to get at, Suresh, is from a risk management perspective, what is the maximum number of apartments we can do per project?

That actually we have a dual thing. We have a 10% and there is a number wise also that, you know, if it is a, you know, project with 20 units, then, you know, you can go up to 5 or 6 or something. So, we have a matrix for that also. So, from the risk point of view, we will never go with more than 10% in a single project.

Understood. Thank you so much. I have one more question. That was the point. I missed the studio question. Sorry. Done. Done. Thanks. Nidesh, I am done. I will come back in the queue. Thanks.

Thank you. Thank you. The next question is from Abhijit. Abhijit unmute yourself and ask your question.

Am I out of it?

Yes, yes, you are. Yeah, thank you. Just two things. One is, I mean, given the fact that we are going for a higher ticket sizes now, where we are seeing that last part of the group coming from higher ticket sizes, I think I also heard you on the call that given that the incremental cost of boardings are moving up, we are also trying to do some tweaks on the asset side. Basically, when he said that Maybe the yield that we used to charge to up to 20 lakhs is the same yield we will charge to up to 25 lakhs now. I hope that understanding thing was correct. Correct. That is correct. Don't you think that as we keep moving up, sir, we are facing higher competition. Basically, all I'm trying to understand is, sir, until now, the competition always is used to be with banks. Now, a lot of these large HSTs also talk about doing, I don't want to call it affordable, but small ticket housing like 25, 30, 35 lakhs, where we are building our sweet spot. So, are we not seeing higher competition from banks there, from these large HSTs there? Bye-bye.

See, actually, in fact, it is not the banks who are the prime, you know, players who take away our portfolio. Our main VT happens with LIC and Bajaj only. It's always been the private sector and, you know, players who are doing it in the NBFC or larger SFC space. The banks, of course, are there, but so far, you know, we are not still not in that ticket size segment. We are, you know, directly in competing with them. So, it's, you know, if I ask, you know, you know, 50 branches, you know, probably 30 branches would say LIC is the main competitor. Maybe another 10-12 will say Bajaj is main competitor, and maybe a few of them will say, you know, Or PNB in one or two pockets, smaller geographies. So, rarely, you know, you will have the number one competition or the number one entity as a bank. So, we don't have that. So far, you know, these, at least these other players, they have not majorly been able to do a dent, make a dent in our other thing. And as I also mentioned, our, you know, prepayment or loan BT outs has been almost stable in Q1 compared to Q4 of last year. So Q4 last year, we had 400 crores of BT out. This time it is 408 crores.

You got it. And sir, then you remember you touched upon this when someone asked you if you are seeing any higher bounce rate, higher delinquencies from salaried customers in the IT sector, given that we have a very good presence in Bangalore and in India, Telangana. So sir, just trying to understand, have you had a chance to look at? What proportion of our salary customers are employed in the IT sector? That is one part of the question. And the other part is that if these are our customers, what ticket size is, what is their basically annual income like? Because what I'm trying to understand is what kind of IT customers will typically end up going to Vans and what kind of IT salary customers will come to us.

Sure. See, our IT sector exposure is only about, you know, 6% in terms of, you know, the number of customers who are associated with the IT sector and have taken a loan from us. Okay. And, you know, we have done so, at least, you know. The top companies which are in IT are definitely not, the customers from those companies are not, like if you say, whether an Infosys customer, whether a Visro customer, whether a Cognizant customer or somebody is taking a loan from us, it's almost not there. Okay? We are small, small IT-related entities with whom we are there. Obviously, you know, yes, there are, you know, those entities also have to have, will be the first ones facing the challenge whenever competition comes or whenever, Any new change happens. But still, so far, we have not seen any major impact of this. At least, you know, our check bounce ratio, as I mentioned, for the last six quarters, actually, our NAS bounce ratios have been coming down. So we've not seen any major impact because of this, yeah.

Got it. So, sir, then the last thing in the clarification to what you said earlier, what you're saying is that this year you're still targeting that 13,000 crores in this performance. Just that, given that what you explained, the EMI is going to remain the same, the tenor comes down, so the principal amortization is faster. So, to that end, this year you're expecting the rundown in the book to be higher, but still targeting that 14% crores that you spoke of.

So, if required, we may have to push business. I think we should be able to do that. And, you know, already in Q1, we have overshot our whatever we are targeted for. Q2 also, we are targeting 3,000 crore. And I think, you know, the way our IT transformation has gone, we may be able to push a little earlier than what we had anticipated. So, I think we will be able to do that, a 6,000 crore operation to the book by the end of the year. If that means we will have to push a little more in terms of disbursement, 13,000 will become 13,200, 13,400 or whatever. We will try to push for that.

That answers my question, and I wish you a little bit better.

Thank you. Thank you, Rajesh.

The next question is from Kunal. Kunal Tokas. Please unmute yourself and ask your question.

Hello, sir. Am I audible?

Yes, yes.

Okay, am I clear? Yes, go ahead. Hello? Okay, okay.

So, just two questions from my side. Both non-term. First is, is it correct that since 2001, Kangsing Homes has written off just about 20 crore rupees in total load? Is that information correct?

Sorry, 20,000?

20 crore. 20 crore? Since 2001, since the year 2001,

written off, written off, written off you're talking about, yes, that is correct. That is correct. How, sir?

I mean, we have, we have companies who write up thousands of crores in a year. Can you please talk about?

So, I'll tell you, so one thing is, you know, in terms of, you know, technical write-offs, so there are two things over here, I will just clarify. This is, we are talking about credit fraud, the credit write-offs that we are talking about. So, of course, this doesn't include that 40 crore of ambala which we are talking about. That is a non-credit issue. In terms of credit thing, which affects the thing, we have, there are two things. One, there is a, there are frauds. So, there are issues where some frauds might happen, and these frauds are, we are still. So continuing those frauds with 100% provision, and they continue to reflect as NPAs in our books of accounts. So our 380 or 375 crore of NPA that we are showing, this could include some accounts which we have been flagged as fraud. We may be providing 100% provision for it, but we would not have written off those accounts. So, there is 100% provision, there is a fraud, it continues to show as an NPA, it is there in our books of account, and it is, we attempt to recover from that either through, you know, surface, wherever properties are available, or through other, you know, legal processes is continuing. So, that is one part of it. The second is in terms of actual write-off, where, you know, this happens where one, We know that there is no property, some fraud wherein nothing is possible. That is a case where we would have written off. Or alternatively, second would be where we have sold the property. There is a different amount. Like, for example, there is a 22 lakh outstanding. We have sold for 21 lakhs through surfacy sales and we don't envisage a possibility of recovering the remaining 1 lakh. We would have written off that 1 lakh also. So, those add up, when we add up those write-offs also, that is up to 20 crores only from the last, you know, 20-25 years. That is correct. But there are additionally some frauds. These are shown as frauds reported to the regulatory authorities. We have taken police action. They continue to show as NTA. They continue to show with 100% provisioning. And so if we actually, okay, if we actually remove those kind of frauds and would have written off, then probably we would have had another 60 odd frauds. We could have probably, you know, which pertained to the fraud, which pertained to all those things. Maybe about 50-60 frauds could have additionally been, would have written off. Had there been some other entity where there is a fraud, that's a write-off policy, then in that case, we would have had a similar policy, then another 50-60 crores would have probably been also written off, in which case our NPA, which is 375, would have come down to 310-320 crores only.

That's still a very exceptional number, especially if it is cumulative, given how much brutal doles have disperged over the 20-25 years, and taken off just 100 crores cumulatively. And that was my question. Even with reliance on DSA sourcing, how have you been able to maintain such a pristine credit underwriting? I will call this over such an extended period of time. The financial institutions are subject to very great external pressures, human pressures and organization pressures, pressures to grow when they make mistakes. But cancer has been able to maintain that discipline over the last two and a half decades.

No, I guess, yes, for customer selection and that and the tight policies, conservative policies, yes, it has, you know, impacted our growth. Sometimes we have not grown in line with what market expects, yes, but, yeah, we have been a, it has been a very safe lending, conservative policies, conservative lending has followed.

Fantastic. The second question on the cost-to-income ratio. With the technology transformation and the movement towards more in-house sourcing, how do you see that playing out over the next few years?

See, current year, we will do envisage that it will be hovering around 19.5% cost-to-income ratio. And some of it, as we said, has already started kicking in in this quarter itself. Therefore, you know, from the 18% odd numbers, we have now moved to the 19% plus cost-to-income ratio. For the year, we expect it will be around 19.5%. And since, you know, our project is already implemented and we have already worked out the cost, now going forward, this, you know, the AMCs and this depreciation part and all will kind of remain stable. But as the book grows, this percentage will again start to come down a little bit. So, I guess, you know, we would, in another three years, down the line, we would, again, would want to bring it to 18% or thereabouts.

Okay. That would be the long-term average. Okay. Yes. Correct. That's it. Okay. Thank you very much for the number.

The next question is from Sonal.

Sonal, unmute yourself and ask me a question. So, this is Sonal. I hope I'm audible.

Yes, yes.

Please go ahead. Yes. Sorry for I think the IT trouble earlier. There was some issue regarding some admin issues. So I have two questions that I am looking at your book rundown numbers and they have been elevated for the last four quarters. Sorry if I was out of the call because of these IT issues. I want to understand like how do you understand these numbers? How do you decipher these numbers? And what is a near term to longer term target of these numbers? Should this be lower than 4% over the course of next one or two years? And this is the new normal. That's the first one.

See, first of all, as I've given in the opening remarks, the breakup of our rundown, we have about 408 crores is coming from BT out. 377 crores is from where the customers are making their own closures from their own funds, either because they're selling the property or because we are pushing them to sell the property or we are generally small amounts and they are just making a payment and closing their loan to reduce their liability. So, the major... You know, challenge or the major portion from where our rundown is happening is actually amortization and more importantly, part prepayment. There are customers are making more payments every month. And, but the loans are still with us. So, it's just a conservative approach from the customer's side where they just get some extra funds and they are parking with us. So, this is something which, you know, from the customer's point of view, obviously, it is good because, you know, we are able to, you know, cut down their tenures and repay earlier, less interest burden for them. So, from that point of view, it is good, but at the same time, it is hurting us. We'll have to see how it is there. What we look at is, You know, this particular quarter, it has been, this has been the number, but going forward, I think we will want to work on, you know, whether we can convert some of these customers into deposit customers for us, or else if we can, you know, look at some other kind of a thing where, you know, they can be retained without having to prepay and move out. So, we will be looking at it because some of the preventments, probably we may be able to offer them a solution and see. So, we have right now analyzing and talking to credit information bureaus to see if we can get an alert even at that time and they make an inquiry elsewhere so that we can contact them and try to retain them. So those efforts are going on. But another thing which is there is today, if you look at it, before the interest rate started going down, our best rate was 8.95, whereas the banks and bigger players, larger players were offering best rate as 8.4%. So the differential was, or delta was 55 basis points. Today with repo rate cut, you know, the banks have moved from 8.4 to 7.25 or 7.15. And some of the larger players also have followed suit. But we have come down from, you know, 8.95 to 8.4. So, basically, now the difference is 7.15 to 8.4 or 7.25 to 8.4. So, this difference, because 55 basis points has now increased to more than one percentage point, which is difficult to convince a customer. 50 to 60 basis points, we can convince the customer. Customers also don't mind because the impact on their EMI is not very large. But over a period of time, a 1% impact is quite large if it is a 25, 20, 30 kind of ticket-sized loan. So, therefore, you know, it is the one issue. If, you know, this rate differential can come down either because PR starts, I mean, sorry, repo rate starts going up or something of that sort, then maybe, you know, this might come down a little bit. Then we may not have so much of a pressure, but having said that, I think, you know, the biggest challenge for us is the part treatment and not BTO, because BTO is just about 408 crores out of 1857.

Got it. Got it, sir. So, my second question is with regard to looking at your numbers and you talked about LIC being a competition. I see LIC not growing, you talking about Bajaj Housing Finance being the other competition. So, just want to understand, like one player is going at 25-30%, which is Balazs housing, and what is it that you see the trade-offs they are making as a competition vis-a-vis you, because of which they are able to demonstrate aggressive growth. So, we have three players. One is 25%, you are at 11-12%, and there is LIC, which is not doing at all. So, from our comp set perspective, if you can just subjectively tell us what's happening, and who's doing what trade-offs, basically, that will just help us set the context.

See, I think Vajaj definitely has had a technology advantage. They have been the first movers and they have adopted technology and that is able to give them a better, you know, edge in terms of tat and all those things. We are catching up and we have all just implemented our transform. Our project has been implemented. So, we also will now be, you know, starting on these journeys and, you know, customer journeys and digital. Roadmaps and all. So, I think that is something which we will be able to, you know, catch up and we will have to obviously, you know, push for consistently 20% plus kind of a disbursement growth over previous years for us to slowly the areas to start picking up and catching up. Second thing is, you know, I think having said that, while technology is also one better, I think, you know, LIC also has an issue of large prepayments, much higher prepayments, because they are directly in competition with on pure home loans with most of the bigger banks, because the ticket sizes are also higher than ours. So, I guess, you know, that they have, you know, a pressure of one is constantly growing, having to grow, at the same time also retain, whereas, you know, had it been a LRD or had it been a developer finance and all, maybe that pressure would have been less for them. So, I guess. But I guess, you know, only they will be in a position to exactly tell you what are the challenges they are facing. I mean, sitting here, I guess these are what I see.

So, sir, like all of the equal with the IT background and I think more agility with regard to the software platform, would that mean that you would have more higher capability of assessing risk at higher yields, apart from obviously aggression in disbursement, but that also means that you're able to launch more products, a little higher yield products, which are not too bad in terms of customer profile, quality of customer, but we are in the 11, 12, 13% kind of yield. Can we see that happening in the near-tals?

Actually, today our system, what we are now implementing, definitely gives us the chance or gives us the opportunity to launch these kind of products faster with proper controls and all those things in place, you know, workflows and decision engines and all those things in place. But, you know, When and how we'll start, I think we'll have to, as of now, in fact, our IT transformation was a bigger, was a first priority. We will look at all these products, you know, going forward. I mean, as of now, I can't comment on that because we, our board has not, we've not actually deliberated and taken a call at our board.

Got it, sir. Thank you. I'll follow back with you. Thank you.

Thank you.

Nidesh, you are on mute.

Yes, sorry. Our next question is from Prashii. Prashii, unmute yourself and ask your question.

Hello, sir. So, I wanted to ask that last quarter, the company has indicated an aspiration to deliver around 2.4% ROE and around 18% of ROE. Given that the relatively softer performance in Q1 and some higher OPEC also we're expecting a little bit, so are we still confident of achieving these return ratios in FY27?

So, I guess this quarter, we have done 2.39 as ROE and, you know, 18% plus in terms of ROE, at least for that quarter. And yes, you are right in terms of our, you know, OPEX, it has slightly inched up. But, you know, because it has inched up a little bit compared to last year is the reason why, in fact, our ROE has dropped from around 2.53 last year to 2.39. But going forward, I think the cost, whatever impact we have envisaged, it started already reflecting. Therefore, this number is something which you will be able to manage. So, one is, you know, we may have to, you know, we will have to obviously ensure that our NIMs and spreads NIM are maintained, which as of now definitely looks possible. In terms of credit cost, also the other variable which is there, where we will have to look at it. As of now, we don't see a problem in the credit cost either. In fact, being the first quarter also, if you look at it, last year, You know, in Q1, we saw a 45 crore increase in NPA. The year before that, again in Q1, we had a 41 crore increase in NPA. So, this, you know, 30-40 crore increase in NPA has been there as a cyclical thing every year. But this year, you know, we have been able to, in fact, you know, restrict it to just about 17, 18 crore. So, basically, you know, what I am trying to say is that, you know, in terms of credit costs, we are in a much better position today. And so, the 10 bids that we have been talking about definitely doesn't look to be a challenge this year. So, I guess, you know, as of the moment, there is no reason to believe or nothing to reflect that we may not be able to achieve it.

Also, one more question was around the FENP segment increase which we are looking at. I wanted to understand the portfolio, how we compare it with salaried segment in terms of the yield spreads, the credit cost, and the returns. So, they are going to be margin-aggressive right over the medium term.

Correct. So, actually, see, when we are talking about SCNP, so our SCNP also is not the assessed income or, you know, surrogate income kind of segment. The SCNP category or the customers whom we serve actually are ones who have documented income. So, they also are having two to three years of IT returns. And we are verifying the IT returns from the portal. And based on that, we are assessing based on our norms. So, even the SD&C segment compared to the rest of the affordable housing finance companies would be a better segment for us, you know, in terms of credit. If I have to look at the credit cost and all, I mean, and the yield, self-employed would be at least half a percentage higher in terms of the ROI as compared to a housing customer. If it's everything else being the same, if it was just a matter of, you know, salary versus self-employed, the differential would be half a percentage point. And if you look at it as to the, you know, risk weightage, sorry, the risk, the GNPA in the salary segment today is roughly around, you know, 0.6 to 0.63. Whereas in case of SENP, our current, you know, NPR ratio is around 1.45, 1.5. So roughly, you know, factored for our credit cost also, I think, you know, 0.5% is accretive only.

One more on the CBS platform, the branch expansion, all we have invested in the incremental operating expenses which are going up. So when do we expect the productivity benefits start to reflect on my cost-income ratio?

Uh, see, today itself, you know, the five branches that we have initiated, those five branches, also the speed and everything is much faster. And I think, you know, in terms of the, you know, stability, I think it'll take about six months for the branches to stabilize, to get fully used to it, and all those kind of things. But having said that, I think this year itself, we should start seeing some benefits in terms of staffing itself, not to mention, you know, the speed and, you know, better quality, more faster tag and all those things. That apart, I think even in terms of manpower, I think this year also itself, we should be beginning to see some benefits whereby, you know, we may not be taking, adding staff for the sales team. We might be able to or we, in fact, intend to take all the sales, traditional salespeople from within the existing team sizes only.

Okay. And lastly, just one point on the tax rate. What do we see the tax rate for S527? Overall, in total, I should expect.

Is it 21% because of some DPA benefits? And this will be stable rate. There are no major surprises from the niche partners.

Thank you so much. Thank you.

Thank you everyone. That concludes today's session. I will hand over the call to Mr. Suresh for his closing comments.

Thank you, Nidesh, and thank you once again to everyone for taking your time out to join this news call of Q1 results for campaign. And I hope you've been able to answer all your queries. And of course, if there are anything more, you can always, you know, feel free to write to us. We have our listening. We are also, in fact, meeting the, and whenever we are having any meeting with any investor or anything, we are uploading our, the transcripts of all our meetings also on our website. So I think that also is something which you can refer to for any updates and all. Second thing is, as we mentioned, that now that we have undertaken this IT transformation thing and we expect to complete it in this quarter, somewhere around mid-September or first week of September, we might put up some update also on how it is progressing and how many brands have gone live, how is the disbursement performance and all in light of this because it is a very important thing. But having said that, we don't envisage any issues as of the moment, looking at the five branches, but we will still be putting up an update somewhere around September. So that's it. So once again, thank you. Thank you very much for joining this call.

Thank you. Thank you, everyone.

Thank you. Thank you, Nidesh.