DCB Bank Limited (DCBBANK) Q2 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to DCB Bank Ltd Q2 NFI 27 Earning Conference Call. Today we have with us Mr. Praveen Kuti, Managing Director and Chief Executive Officer, Mr. Sridhar Shahshadri, Old Time Director, and Mr. Ajit Kumar Singh, Chief Irministerial Relations Officer. As a reminder, all participant line will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touchtone phone. I now hand the conference over to Mr. Praveen Kuti from DCB Bank Limited. Thank you, and over to you, sir.

Thank you, and good evening, everybody. Welcome to the Q2 results call. The bank continues its growth momentum with advances growing by 21% YUI and deposits growing by 19%. In keeping with the guidance, both advances and deposits have doubled over September 2022, over the last four years. Our net interest income grew by 17% YOY. Over the last one year, the yield and advances dropped by 38 basis points, while during the same period, we reduced the cost of fund by 34 basis points. If you look at the last quarter, our yield and advances dropped by two basis points, while cost of funds dropped by eight basis points. If you look at revenue, it grew by 21% YOY, core fee income continuing to be strong, and also the focus we have on our productivity and on technology adoption is helping us in keeping our cost to average assets under control. It continues to be below 2.5%, to be precise, at 2.47%, and our cost to income is at 59.64% at a 18 quarter low. In the last two years, we have grown our employee strength by 1%, our balance sheet by 34%, and our revenue by 33%. The fact that the revenue grew by 21% and cost grew by 18% YOY meant that operating profit grew by 26% YOY. The portfolio quality continues to improve with our credit cost at 0.28%. Our GNPA is at 2.29% and NNPA is at 0.73%, both of which are at a 23 quarter low. Our PCR is at 81.38%, a 7.23% improvement over the last year, and PCR excluding technical write-off is at 68.75%, a 9.6% improvement over the last year. As a consequence of all this, our net profit has risen by 29% over the year to 236 crores, which is the highest ever in a quarter. This is the fifth consecutive quarter where the bank is clocking a highest ever quarterly net profit. As a result, our ROE is at 1.03% for the quarter and 1% for the half year. Also, the ROE is 14.6% for the quarter and 14.12% for the half year. I just want to take you back one year into a Q2 2025 when we gave guidance of an 18-20% growth, of cost to average assets being less than 2.5%, of GNPA also being less than 2.5%, net NPA being less than 1%, and lastly, on ROE of 13.5% for this year, 26-27. One year later, in each of these four quarters, each of these numbers speak the story of consistency and predictability. Finally, I'd like to share with you the trendline of ROE for the last four quarters. It is 12.73%, 13.53%, 13.61%, and now 14.6%. Thank you Thank you for listening in. And operator, could you please open the lines for any questions from the audience?

Thank you, Swamaster. Ladies and gentlemen, we will now begin with the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question comes from the line of Akshat Agarwal with Nirmal Bank, Institutional Equities. Please go ahead.

Good evening, sir. Thanks for the opportunity and congrats on a good set of numbers. So, on the first question is on cost. While the cost-to-income ratio and cost-to-everage assets are tracking guidance, OPEX growth, QOQ, and YOR looks a bit elevated. So, is it mostly on the staff addition, branches, and a bit on technology? Is that contributing to increase, or are we, I mean, is there some one-offs there? And are we on track to reach 13,000 employees by year-end, and adding 20 branches overall during this year? Thanks.

So, on the operating cost, the increase has been on the people, 12,002 people. So, people cost is coming in. Otherwise, it's a normal cybersecurity cost. There is nothing exceptional on the OPEX side. And we should expect similar kind of trend lines to continue on the OPEX cost and also on the cost to average assets. So I don't see us doing any change on that. I ask you a question whether we will be 13,000 people by the end of the year. We want to be, but I don't think we will be. So, we'll be higher than 12,000, which we are currently, but I don't think we'll reach 13,000 by the end of the year. Probably we'll be around 12,800, 12,900. That's what we're seeing currently.

Right, sir. Thanks for that. And on the NIMS, what was the reason for the decline QOQ? Cost of funds seems to be declining. Yield on advances declined too best. So, if we can elaborate on the key drivers of the compression and outlook for the NIM in coming quarters, ideally with the rate hikes, we should see expansion going forward. Is that correct or is there some other component that could affect margins?

So, if you look at Q4 and Q1, our advances growth was in the region of 18.5 to 18.7%. Whereas, deposit growth was between 20% and 21%. So, we were stockpiling liquidity post-February 26th Israel-Iran War, and it was a conscious strategy to have enough liquidity within. And what happened is in August, there was a window to garner NRI deposit, which comes at a much lower cost than our normal term deposits. So we got $194 million through the ACNRB window. So this really increased the liquidity significantly. And that has a liquidity cost attached to it. Why you don't see a similar growth on deposit in Q2 is because usually most of the maturities come towards the last week of Q2, or last week of every quarter. So we really went aggressively, and on maturity of the high cost bulk deposits, we gave up those deposits, which is why deposit growth is at 18.6%. But you have to carry the excess liquidity for the whole, practically the whole 88-87 days of this quarter. So that's the cost which you have to pay and that's the reason why there has been a reduction in the NIM in Q2. Going forward, you've already seen the lead indicator where the deposit growth was less. So we're starting Q3 with less surplus liquidity. And obviously, in November, we will be passing on the increase in repo rate to a significant chunk of our asset customers who are on floating rate. So that will have an impact on them. We are confident of holding our credit cost to well below the guidance level, which will also have a positive impact on that. So on a go-forward basis, we would see the LIMM improving in Q3 and in Q4 as well, assuming even if it's no further. Right, sir.

And if you could provide some quantitative guidance like 5 to 7 BIPs or something like that, can we expect going forward per quarter? And is there a component for, a continued component from home loans to lap shift as well, which was incrementally 70% to 30% last quarter?

So, we are at 70-30, slightly 71-29. I'm not comfortable with it. We'll be continuing with that. But that's on the incremental, right? So, over a period of time, the stock also changes its color. So, you get the benefit of it. But the real story is not this. The real story is about the cost of deposit. The way the cost of deposit is coming down, and it's not because of CASA. It is because of the conscious strategy of not being the highest rate provider, and we managed to make 3,000 people in branch banking aware of it, and still grow 18.6%, still keep the top 20 less than 7%, and that is really helping in this run. And some will also have helped in our long-term deposit repricing, which is coming in. So it's a combination of this. So it's more a cost of deposit improvement that is helping the NIM in the longer term, not necessarily the yield growth. Of course, a repo rate increase will have an immediate impact on the widening of the NIM.

Thank you. Ladies and gentlemen, in order to ensure that the management will be able to address all the questions From the participant, we request you to currently limit your question to two questions per participant. If you have a follow-up question, please rejoin the queue. Our next question comes from the line of Suraj Das with Sundaram Mutual Fund. Please go ahead.

Suraj, we can hear you.

I have more than actually two questions. But first of all, I think congrats on the board approval on your tenure sale. And secondly, I think on a good quarter, after long, I think you have given 1% ROA, 1% plus ROA on a quarterly basis. But before coming to ROA, sir, on the gold loan, I think growth has been strong, but I don't know, the slides where you give your disbursement and the loan, it looks like that the loan increases more than the disbursements. Is this because of the co-lending fees that you don't give the co-lending fees?

Yeah, so let's go one by one. You can ask me multiple questions, but in a serial order. So on gold loan combinations, we have, we increased our DA, because it provides you better compliance and gives you better pricing. So about 30% of our entire gold loan book is organic and 70% is inorganic, which is basically a mix of whole lending and DA. So, currently gold as a percentage of the total asset is 23%. The bank is comfortable taking it up all the way to 25%. I don't think we'll ever go beyond 25% for this particular category, but currently we're at 23%, and there's no anomaly between disbursal and growth because the disbursal that you see is for organic gold loan only and not for inorganic. It neither has co-lending, which is actually flat, and nor does it have DA, which is growing.

And sir, overall, yield would be also, let us say, better on a quarter-on-quarter basis because of maybe this mix between co-lending to DA?

It's a, we're talking about basis points, right? So it's better in that sense, but overall, it really wouldn't matter. It's not like as massively different as business loan and home loan, like LAP and home loan. It's not that different. It is marginal, but look, we are in a marginal business. We don't let anything lie. We are constantly on the lookout for improving yield and reduction of cost of deposit.

Related question to that, your gold slippages is also increasing for last two quarters. While I understand that LGD would be hardly anything, that I fully agree. But is this because of your DA and co-lending? I mean, is the slippages coming from DA and co-lending or organic book? Because also asking the context for asking this question is this quarter few people on the NBFC side, they are highlighting that there is some stress in the gold book, especially for the sort of 10-year product. So, I don't know what is your DA composition, DA or co-lending in terms of, let us say, bullet loans or maybe EMI sort of 10-year. So, that is the context for asking this question.

It's a relevant question to ask. If you look at non-gold, our slippage ratio is 1.55%. It was 1.52% last quarter. Now it has gone up to 1.55%. Is it 3 bits increase? Are you worried about it? Honestly not. Your early bounce, your early month on board, vintage performance, one doesn't lose sleep over it. On Goal Loom, what I said is right. Some of the co-lending or DA partners, you find The mindset is to collect before NPA happens, rather than at a 1DPD level. So we are dealing with multiple co-lending partners and DA partners, so it's not exactly, you know, the rigor of 1DPD doesn't apply to many partners. To some it does, but by and large it really doesn't Which is the reason why this is happening. From a bold loan, is there a worry perspective, I want you to look at our investor presentation page number 22. Our NPA was 27 crore. One year later, it is 26 crore. And in the last five quarters, the highest our NPA has ever been to is 29 crores. And our book has been growing. We are talking about a 14,000 crore book with 26 crore MPA. Look at the perspective.

Thank you. Our next question comes from the line of Varun with Bandhan Life Insurance. Please go ahead.

Sorry, thanks for the opportunity and congrats for the setup number. First is, basically, I observed a sequential increase of 460 employees while the branch network has expanded by just about three branches. So, could you help us understand the areas or functions that is driving this increase?

Yeah. So, we are putting more people in existing branches both for assets and liabilities. The belief is that we can really sweat more from existing branches without having to increase a footprint significantly. And that is being borne out. You know, the space is already there. It's a sunk cost. It's already invested. The network is already there. You don't have to reinvest in it. But we still are a people-dependent business. We still are digital. Customers expect some sort of assistance to happen. So what we do is where our portfolio is getting bigger, both in assets and liabilities, we put more people in those branches. And that's why it's not a location game. I mean, the big eight cities contribute to practically everything of deposits. So it's still driven by not top eight branches, but all branches in top eight to ten cities contribute a lion's share of deposits and advances. So, we continue to invest in those areas where our returns are much better. I still think that we can extract more juice from the existing branches, but does it mean that we will not do incremental branches? Probably maybe about 20 branches in a year, one doesn't see more of that happening and one doesn't see the need for more of that to happen. And even These are the 20 branches we would like to put in locations where we already have our branches.

And with respect to the cross-sell for the bankational business, we have said that volumes will cover up for the last that could come in form of dropping commissions. So, just wanted to understand how well prepared are we to capture the volume growth opportunity and also can you talk about some of the factors that are helping us drive higher bankational business at the moment?

So, on Crossell, I wish I could tell you some good news. We're putting in a lot of effort. We're putting in a lot of work. We're not seeing too much of results happening, but are we going to give up? Absolutely not. This is a slow-burning fuse. The graph remains very close to the x-axis for a long period of time, and then suddenly, harmonically, we'll increase. We know that. We're going to be patient about this, like many other things in retail. So, there's a lot of effort on both from people skilling, from technology, from business intelligence, but there's really no great input to tell you right now. So, that doesn't mean that it will not happen in the future. So, there is effort happening, there is work happening. Maybe we'll see the results over the next 12 to 18 months.

Okay. And this last question from my side, do we look to source mortgage business through balance transfers for NBSPs, given that our ability to probably offer more competitive rates to the same customers? Is that integral part of our mortgage group strategy? And any update on capital risk?

Okay, fine. So, on NBFCs, it's a target segment for us. Balance transfer from NBFCs is very much a centripy activity for a mortgage business, but not from a reduction of rate perspective. We want to give them a higher rate overdraft facility so that our yields are higher, but the customer has a flexibility of paying a lower rate of interest, lower interest cost despite a higher rate of interest. So, we want to give OD facilities to these customers and take them both. We want them to transact with us. They want to engage with us, converse with us, which will provide us an opportunity to cross in. And that is working reasonably well. Customers understand the concept of interest paid versus interest rate. But are we looking at dilution of yield? I mean, unless it's a very, very high arbitrage opportunity, we would like to keep the interest rate safe.

I'm sorry to interrupt you, sir, but you can please rejoin the queue.

Yeah, quick one on Capital Race. We should be hearing some good news before the next investor call.

Thank you. Next question comes from the line of Nithi Nagarwal with Motila Loswell Financial Services. Please go ahead.

Yeah, hi. Good evening, everyone. Am I audible?

Yeah, very audible indeed.

Great. So, a couple of questions. One is around the cost of point. Like this quarter, we have seen a good decline. So, deposits have also shown some traction. So, but the margins have declined. So, can you share the lending yield and the margin X of S&R deposits? So, how much were the two numbers this quarter?

See, that will require a bit of calculation. What I know is that about $194 million is coming with leveraged deals, Thank you very much. When asset yield dropped by 38 bps, we managed to drop the cost of deposit by 34. So that's a longer double, one full year trendline movement. Last quarter, I will take it with a pinch of salt, Nathan, because there are some NR customers have foreclosed their previous deposits to take advantage of the CNRB. So, we got more than what we deserve in terms of, you know, foreclose, what do you call it, prepayment penalty, etc., and lesser interest rate. So, it is giving us more credit than we deserve, but even otherwise, it would have been on the downward trend.

Because the yield declined very marginally low, but the asset mix is getting better. So, fair to say that X of X in our yield should have also moved up.

Are you talking about the future?

No, this quarter, the lending is this quarter.

Lending is, is there a drop at two basis points?

Two basis points, yeah. So, X of FCNR, would this have gone up because next quarter with the same trend in cost of funds and with yields moving up, supported by the rate hikes, the expansion could be, like, fairly decent. Right, right, got that. And second, on the PCR, now we have been making quite a stride on the PCR. We have covered up almost 10 percentage point over the last one year. So, any number we are looking at, and any color around the ECL transitioning impact and the steady state impact on credit cost?

Yeah. I mean, look, we are a, you know, we are a secured lender. We don't lend unless the collateral is much more than our exposure. And secondly, you've seen the recent trend lines happening across metrics. So, except for SMA 1 and 2, I see that every other parameter is pointing to a positive direction as far as ECL is concerned. Having said that, we have appointed a big four. Our team is working very closely with them on ensuring that we get our assumptions right, we get our ECL model Right. So, work is underway on that. I'll be confident by March we should be able to go up and running. But right now, what I can tell you is that all lead indicators and the profile of the banks seem to indicate that we are in a good frame as far as credit quality is concerned. And that should reflect in the ECL also.

Right, got that. And lastly, on the ROA and ROE guidance now, we have already reached what we indicated for FY28 also. So, will you like to revisit those guidances?

Yes. I mean, at the bank, we have no intention of sitting on a lower end. One person is also only a milestone. That's not a destination. We are hungry, we are ambitious, we determine. No two ways about it. It's just one more milestone in our journey. The reason why I don't want to put up another guidance is because there is a very high possibility that before the next investor meeting happens, we would have either a firm offer or we would have incremental capital coming in, which would change the ROE guidance going forward. But otherwise, look at the trend line. 13.5 is what we committed. It will definitely be higher than 13.5. And possibly, with the capital coming in also, we'll be better than 13.5. That's what I can tell you right now. Assume the capital comes in on January 1, we still will be on a diluted base, we'll be better than 13.5.

Thank you. Next question comes from the line of Jai Prakash Mundra with ICIC Securities. Please go ahead.

Hi, good evening, sir, and thanks for the opportunity. And congratulations on your board renewal. Sir, most of the questions have been answered, but I just wanted to check. Again, on ETL, you know, you would have done the dry run, right? And, I mean, while everything looks okay in terms of LGD and the last few years, actually, of decent performance on LGD and etc., but the slippages are slightly higher, right, including gold and everything. Does that mean that you may have to provide more on a standard basis, standard assets, because your SMA may be slightly higher? The LGD may not change, but could that mean that you have to provide slightly higher on standard assets basis?

So, Jay, we are sitting on close to 218 crore of floating provisions, which we started making in somewhere around 2015, Never touched it, despite whatever headwinds we had, including pandemic. In an ECL kind of environment, that will really help the cause. Secondly, look at PCR. At 81%, and it's a secured book. Forget about 81%. Look at the 9.5% increase over the year.

Right?

Okay, forget that also. Look at our cushion available. Look at our provision as a percentage of, you know, as a percentage of our operating profit, or the other way around. You know, we have a 5.93 cover, times cover, of operating profit on our provisions. So, there is so much cushion available, which, and our credit cost is 0.28%. Just look at the, triangulate these three numbers. Credit cost of 0.28, provision coverage of 81%, a 10% increase in provision coverage over the last, not 10 maybe, 9.5% over the last one year, 218 crores of floating provision.

So it is there.

And what I can tell you and the rest of the audience on ECL is, when it kicks in, what we have very much focused on is to reduce the SMA 1 and 2, which will help us gain benefit over the period of ECL before the next calibration of ECL model. Is it going to be difficult? Look, if we can get 97% of upgrade and recovery from fresh slippage, right, and we can bring down the NPA. Our NPA grew by 7 crores in the last quarter without any technical write-off. So if we can bring down the NPA, why can't we bring down the SMA 1 and 2? It's an execution challenge, but I think people are capable of doing that. So, that's the next big gain in credit cost, ECL will come, after the ECL is implemented, will come from the production of SMA 1 and 2.

Right. Okay. And secondly, sir, on overall ROA, right, so we have around 20-25 basis point ROA contribution from bank fee, And that is going to be materially impaired. Other banks are saying 60% decline in the fee. That is possible, assuming the draft guidelines come through. That would mean 10-12 basis point of an ROA hit. And do you have any, you know, within fee line item or any other line item that can actually offset that kind of hit? It would be really helpful if you can provide some color.

So, see, the answers to the future actually remain in the past. So, if you were to look back, let's look back two years. We had a 120 crore plus hit on MFI. Okay? And nothing came. NPA equals loss. Right? We took that in our stride and then we had a 100 crore plus one time benefit we got from treasury. We disappeared this year. Are you seeing any impact of that? 100 crore plus in H1 of 2025 has disappeared in H1 of 2026. Will it impact? Will bank assurance impact? Certainly it will. But will we be passive observers waiting to take a punch and curl up and die? Obviously not. So, there will be multiple areas where we will put together. Let's wait for the draft guidelines to come in. Maybe the draft guidelines is the final guidelines. And you look at us one quarter after the implementation of the bank assurance norms and see what the results are looking like. And then you will see the resilience of the bank.

Right. That is very clear. And last question, sir, on gold loan. There are a lot of bureau reports suggesting that, you know, the last part of the disbursement is going to people who have already been delinquented to other banks or other lenders or in other products. So, when we divorce a gold loan either organically or through partners or DA, I mean, is civil score being a standard, is that a prerequisite or because it is a gold loan, the product itself is secured? So, let us say, so what is the current practice and maybe could that change the growth trajectory?

So, our philosophy is absolutely clear. Gold loan is usually loans taken by people who really desperately need the money. Somebody could be in a hospital, they would need it for farming requirement. There are people who may not have access to formal source of credit, and some of them could be delinquent customers. We are okay with that.

Okay?

We take them on board fully knowing well that their SIBIL score in some cases may not be good enough. Why you do SIBIL is to establish the fact that the customer is of a particular profile that he or she may not be giving us fraud gold. So the profile of the customer is important to that extent. And so it's about, it's from that perspective that you'll be looking at the Sibyl. But a low Sibyl score is not a bar for a gold loan customer, and will continue not being a bar for a customer. For us, we see that as a mechanism to rebuild credit and to get back into the formal world. That's true for us, and it's true for the inorganic partners that we do business with. So what is the big risk in this regard? The big risk in regard is the fall in the gold prices. Currently, 999 gold goes at some 14,560 rupees, and it's fairly stable at that count. If there is a deterioration of credit for those customers, they probably, I can draw in on one analogy, I'll take you back to Q1 of 25 when there has been a massive microphone. We had a microfinance problem. We had gold loan customers who had microfinance exposure elsewhere. From Sybilcheck, we could figure it out. And despite the MFI going completely bust, gold loan did not have an impact. The gold loan was with us, MFI loans with somebody else. We found out that those customers' behavior was very, very different. And I'm telling you this from the perspective that we didn't get the money entirely out of auction. Auction was less than 10%. No customer is going to give up the collateral which he or she has, which is worth much more than the loan that he or she currently has. That's how we see the behavior, right?

Thank you.

If the collateral value comes down, then we will have a problem. Still, we have a buffer, but that's the real risk, not the income earning capability of the gold loan customer.

Thank you, Samasar. A reminder to all the participants, please limit your question to two questions only per participant. Our next question comes from the line of Aditya with Securities. Investment management. Please go ahead.

Yeah, hi, sir. Thanks for the opportunity. Sir, first question was on AgriBook. So, we have a good proportion of AgriBook. So, considering the draw situation prevalent in the country, how are you looking at the disbursement growth in this book and also on the asset quality for our existing book?

So, if you look at the Tractor book, it's about 4%. If you look at the KCC book, it's about 4%. We have 1% individual MFI loans that we provide. And what we have seen is that the Tractor and the KCC book and MFI book also is behaving pretty well. It has given us cover in terms of PSL and subcategories of PSL. So, that is a very important engine of ours which is running pretty well. We are on the lookout for El Niño related pain coming from this particular segment. So far, we haven't seen it. Our book continues to behave very well. The bounce rates are low. It's really benevolent in terms of fresh, vintage bounces and fresh, vintage delinquencies. Also, from a NPA and recovery perspective as well. So, we are on the lookout from an impact of climate risk on this particular segment, but we really haven't seen anything which should keep either us or the industry worried on this card.

Understood, sir. Got it. And, sir, secondly, on NIMS, so, currently we are at 3.3 against a guided range of 3.5 to 3.6. I know we will get the benefit of a repo rate, but that would be on a temporary basis because that would normalize one's deposits, start repricing. But on a structural basis, if you just help us understand what would drive NIMS from the current levels to our guided rates.

Keep the credit cost under control, drive the cost and deposit down, and work on product mix to improve the yield. Do not go into riskier segment within the product to achieve yield to create a problem later on. So we want to play conservative by staying in a safe zone But moving the product mix a bit. We will work on cost and deposit. So the way to look at cost and deposit is, and you rightly said this, when repo rate increases, eventually the cost and deposit will increase. No one is disputing that. It will happen. But what you have to look at is the divergence between the yield on assets and the cost of deposit, and how does that play over the next three, four quarters going in. We want to keep that wide, and we want to keep the provision impact low, as low as what we currently have.

Thank you. Our next question comes from the line of MB Mahesh with Quota Securities. Please go ahead.

Hi, Mahir. If you go back in the last decade, between 2012, 2013, and all the way up to 2016, we did see this instance of very high growth in the period, and we saw how it played out later on. Are we seeing a similar trend coming through again, or do you still think it's too early?

Right now, if you look at any early trends, and across products, I'm not seeing that there is any cause for concern. But in an inflationary economy, the rates going up, it is but natural that there is a sting in the tail. The house view is that it's important to go up the ladder in terms of ticket size. Marginal, it may seem, but even a slight increase in ticket size is going to give a better impact in the future. It is the extension of the K-shape recovery coming through. That's how we see across product segments. The slightly better segment, even if it means a slight compromise on the yield, is good enough in a scenario where rates are going up. That's how we see it. But is there any indication of that? No. Is the demand good? Absolutely. Is the early trends encouraging? Totally benevolent.

But when you said demand is good, is it because the cash flows of the borrowers are better, or the income is growing up, or are they simply kind of leveraging much more than before? What's the sense of the book that is building right now?

So, we are fully, I mean, while we say secured, etc., we are a cash flow-based business. Nothing else matters. This whole collateral is just a thing in the mind, right? Honestly, everything is unsecured. So, it's about the cash flow, and what we see from an assessment of cash flow is that there is a requirement people still believe that productive use of the money will cover for the interest rate and give him or her a tidy sum. Some of the labs that we do, like I was telling another person who asked the question earlier. Is it an interest arbitrage or a movement to a better product? So roughly speaking, one third are coming to you for an interest arbitrage. One third is coming in for a better product. Maybe one sixth is coming for a better product, which is term loan to OD. But a significant chunk still is coming for higher exposure. They need more money. It is not for arbitrage at all. Our underwriting team also believes that that money will give customers better returns after paying our interest rate.

All right, last question. When you say bounce rates have not gone up, and when you do look at the bounce rates that are coming right now, however benign it is, it is not like these borrowers are strong signs of being stretched out.

The bounce rates are the same as what it was in January. We haven't seen any changes. In our mortgage book, it is slightly better than what the beginning of the year bounce rates were. And our rejection rates are also similar. That's the more important thing. Are we rejecting more customers than we used to reject in the beginning of the year? No. It's about the same quantity. So, demand is higher, rejection rates are similar, and early trends are looking decent.

Thank you. Our next question comes on the line of Kushagra Goyal with Investec. Please go ahead.

Hi, sir. Thank you for taking my question. Most of my questions are answered, but just a few data-keeping questions. Could you please give us your loan mix on EBLR, MCLR, and fixed rate?

We don't publish that. You can take an educated guess on. I mean, you'll get to know from the next NIM, which we publish three months later, you'll get to know. I mean, you can back calculate how it is. Or the ratios have been same three years back also when the repo rate cut happened. Frankly, it's exactly the similar way. So, we have a hybrid book, we have a fixed rate loan book, and we have a floating rate book. And even the fixed rate loan book, remember this, 23% of our book is gold loan, which is fixed rate. But they reprice practically every month because they're all short enough.

One follow-up on the mortgage piece. So, I know you have not specifically called it out, but could you tell us how right now your mortgage book, how is it split between fixed and floating? So, I know your hybrid keeps on shifting, but if you could give some indication for the number around it.

We don't publish that for, specifically product-wise, we don't publish, neither do we publish for the entire bank. So, we have hybrids fixed and floating.

But, directionally, that's increasing the floating part?

No. Like I said, when the repo rate cuts happened, we had the ratio of these three. On a larger book now, the ratio remains remarkably the same. Maybe a one percentage point, one percentage movement either way. The big change over the last three years has been that the gold loan book has increased significantly, so the fixed rate book has increased, but that's really fixed only in May, because these are typically six to eight month duration gold loans. So, it keeps on getting repriced, as you can imagine. Otherwise, the ratios have remained exactly the same.

Sure, great. That's all for now. Thank you.

Thank you. Make a note. Ladies and gentlemen, anyone who wishes to ask a question, press star and one.

Thank you very much.

We have a question. Our next question comes from the line of Jai Prakash Mundra with ICSA Securities.

Yes, sir. Thanks for the opportunity again. Just to, just to, we have a decent exposure in Maharashtra and we have a, you know, good growing AID book. So, it would be really helpful, sir, if you can share your thoughts, any repercussions, early signs, or what is the bank doing to mitigate the drought-related impact in the AID book. That is the only question.

I would say it is not material enough that it has even come to my attention, and I don't think it is. See, one good thing about the bank is that we don't have a single state where asset exposure is more than 20%. And I'm talking about asset exposure. So if you look at agri exposure, it can be pretty marginal in that sense. But like I said in the beginning, we haven't seen We haven't seen any statewide beginning of an endemic problem or a pandemic problem. We haven't seen that yet. Even in Agree, our collections remain robust. And bounce ratios are standing up to the beginning of the year numbers. Sure.

And some mortgage growth, we should think that it shall, I mean, so far, it's still a little bit muted only. So, it should accelerate, right, towards the overall loan growth basis by over the next two quarters. Is that a fair assessment?

It's a fair assessment for two reasons. One is that we will not allow a gold loan book to be more than 22%. And we are very clear that we will grow overall by, like we kept on I'm saying 18-20%. So, if both these are constants, then what will change is the contribution from mortgages.

All right. Thank you and all the very best. Thank you. Thank you very much, Jay.

Thank you. Next question comes from the line of Karth Gutka with 361 Capital. Please go Yeah, hi.

Thanks a lot for the question.

So, just one question. One question. We have on QOQ basis, you know, the corporate loan Home growth is a bit on a higher side. So, just trying to understand, you know, wasn't there enough opportunity on the retail side where the yields would have been better and, you know, we could have done better on margins?

See, if we look at our corporate exposure, a lion's share of it is from NBFCs. The kind of rate that we're able to command is very good with very low sting in the tail. The ROE that we get from that book is pretty good. And I wouldn't be surprised if we raise it up to 10% of the overall asset book. Currently, it's about 8%, slightly less than 8%. But in this particular segment, we have the expertise. Just look at this. We do co-lending, we do DA. We understand this particular segment, we interact with these particular companies, and therefore we also have the ability to assess We are very comfortable with that particular segment, and the yields are decent, and historical NPAs are very low, and that's reflecting even now. From an ROE perspective, it's a good book to have, and like I said, gold should be 25%, I think corporate, we should be at around 10%. So we should be seeing an increase happening, may not be in Q3, but in an ideal It should go up to 10%. It's a good book to grow.

Thanks a lot, sir.

Thank you.

Our next question comes from the line of Reem Patel, an individual investor.

Hello, sir. I have been an investor from the last three years. I hold around 20 lakhs head, and I am very much

happy with the performance you have delivered.

Just one question. Do you have a back account with us?

No, no. I don't have. You should have a back account, sir. Actually, you should have the experience of having a Defeu Bank account. I will send somebody to your place and on a first-hand basis, see how banking with Defeu Bank is like. So apart from being an investor, we want you to be a customer as well.

Yes, 100%. Sir, I had just one question.

At what price to book valuation are you thinking of value to the equity?

Good question. So, look, we are very near closure on the capital. So, and we've got three components. I'm sorry I'm not able to give a straight answer, but from a timing perspective, before the next investor call, we will have a firm commitment on the capital. Maybe the capital also will come in by the time. The quantum and the rate is getting closed. So, if that is closed, the firm offer will also come in. So, it's a question of a few more weeks or maybe maximum a month before we'll be able to close it out. Look, the bank has not raised capital from 2017 onwards. It's waiting for a right time. And the right time is not based on time. It is based on valuation. That's the reason we haven't raised it so far. So, we are conscious about at what rate would we dilute incrementally. The bank's capital position is strong. Our capital adequacy ratio in September 30th is better than our capital adequacy ratio in March after having grown. So it is not as if we are desperate for capital, so we are holding out, we are ensuring that the capital which we require, and which we definitely do require, comes at a price which is fair to everybody, existing shareholders, as As well as to the new incumbent or new entrant or entrant who would come in for the next.

I had just one concern that I am pretty sure that just now our sales price is very much undervalued.

So, and today just we closed at our book value around 203 or something like that. Okay.

So, below the book value, we will raise the capital or not? Below the book value, we will not raise capital. That much I can tell you. At what price to book will we raise capital, that's under negotiation. But below book value, we will not raise capital.

Okay.

That's it so much. Thank you. Thank you. Thank you very much.

Thank you. As there are no further questions from the participant, I now hand the conference over to Mr. Kuti for a closing remark. Thank you. I know what you're saying.

Thank you very much. Look forward to the meeting three months later. Bye-bye.

Thank you, sir. Ladies and gentlemen, on behalf of BCV Bank Limited, that concludes today's call. Thank you for joining us, and you may now disconnect your line.