Laxmi India Finance Limited (LAXMIINDIA) Q4 2026 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Lakshmi India Finance Limited Q4FI26 Earnings Conference Call hosted by Co-India Advisors. As a reminder, all participant lines will be in the lesson-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should we need assistance during the conference call, please signal an operator by pressing star then zero on your touch-tone phone. I now hand the conference over to Mr. Deepak Bhets from Lakshmi India Finance Limited.

Thank you, and over to you, sir.

Yeah. Good afternoon, everyone, and

thank you for joining us, Lakshmi India Finance Limited Q4 and FY26 earning call. On behalf of entire management team, I extend a warm welcome to our investors, analysts, lending partners, and stakeholders. Today, in this quorum, here we have myself, Deepak Veth, MD, CEO, Lakshmi India Finance Ltd., CFO, Mr. Gopal, Treasury Head, Mr. Piyush, Somami, CBO, Mr. Kuldeep Singh, and Collection Head, Mr. Sanjay Oja is here with me in this call. FA26 has been an important and transformation year in the journey of Lakshmi India Finance. During this year, we strengthened our scale, improved our operating metrics, enhanced our capital position, diversified our liability franchisee, and continued building a stronger institutional foundation for long-term sustainable growth. Most importantly, FY26 was also our first year as a listed company following as the successful competition of our IPO in August 2025. We believe this transition is not merely a capital market event, but an important milestone in building a stronger, more transparent, and institutional-governed organization. As we enter this next phase of our journey, our focus remains firmly centered on creating a scalable, resistant, and sustainable franchisee that can compound constantly over the long term. The broader environment of secured MSME and retail lending in India continues to remain structurally favorable. Increasing formalization of small businesses, improving rural and semi-arbal economy activity, government focus on financial inclusion, rising infrastructure development, and growth credit penetration across Tier 2 and Tier 3 market continues to create significant long-term opportunity for organizations like us. From the beginning, our objective has never been growth at any cost. Our focus always remains on building a high-quality lending institute with strong governance, standards, discipline, risk management, sustainable profitability, and long-term customer relationship. We believe this philosophy becomes even more important as we continue scaling the business. Today, our franchisee has stronger presence across Rajasthan, Gujarat, Madhya Pradesh, Chhattisgarh, Uttar Pradesh, and recently we started with Maharashtra also. With a deep penetration across semi-urban and rural market, we continue focusing on underserved borrower segments, including small businesses owners. Traders, transport operators, self-employed borrowers, and first-time credit customers who often remain outside the formal lending ecosystem. FI26 also marks another important phase in strengthening our institutional capability. Along with expanding the businesses, we continue investing in technology, infrastructure, operating processes, collection architecture, risk controls, and management bandwidth in building a strong and more scalable operating platform for future. As we move into FI25 and beyond, our strategy... Prioritize remains very clear. First, we will continue focus on calibrated and profitable growth across our secured MSME and retail lending portfolio. Second, we will continue our geographical expansion strengthening in measured manner with increasing focus on strengthening density with existing market while selectively entity adjacent geographies. Third, we remain focused on future improving operating leverage and branch productivity as our distributed network measures. Fourth, we will continue strengthening and diversifying our liability franchisee while improving our overall cost of fund over time. And finally, we remain fully committed toward maintaining strong governance standards, prudent underwriting practice, and disciplined risk management as we continue scaling the organization. Looking ahead with our strengthening capital base, expanding distribution network, improving funding profile, and scalable operating platform, we expect a compound growth of AUM at around 30 to 35% annually over the medium terms. As operating leverage improves and branch productivity matures, we believe profitability growth can remain stronger, with that expected growth at around 40 to 45% in coming years. In current year, FY26 will be continuous to be an important year in this long-term growth journey as we focus on scaling the franchisee in a calibrated, profitable, and sustainable manner. Now, I request Mr. Gopal, Mr. CFO, to take through the financial and balance sheet performance in a greater detail.

Gopal, over to you. Thank you, sir, and good afternoon, everyone.

Financial Aid 26 has been a healthy year for the company from both growth as well as profitability perspectives. Our assets under management increased to Rs. 1,626 crore as of March 26, reflecting a strong year-on-year growth of over 27%. Our own book all expanded to approximately 1,519 crore, demonstrating healthy organic growth across our core operating markets. Dispatchment during the year across Rs.821 crore while our customer base expended to more than 42,800 customers. At the same time, our branch network increased to 176 branches across six states, reflecting our continued investment towards strengthening distribution, reach and improving customer access across semi-urban and rural markets. From a profitability standpoint, our net interest income for financial aid 26 increased by nearly 39% year-on-year to Rs.161 growth. The improvement was supported by healthy portfolio growth, improving branch productivity, better portfolio mix, and stronger operating traction across mature lunches. Profit after tax for financial 26 increased by over 38% to Rs.49.7 crore, despite continued investment toward branch expansion, technology infrastructure, manpower, and operating capabilities. Our profitability metrics also demand healthy during the year with return on assets at 3.08% and return on net worth at approximately 13.7%. One of the encouraging development during the year was the continuing spending or borrowing profile or average cost of borrowing reduced to 10.8% from 11.48% in Farnation 25. At the same time, NIME expanded 12.26%, reflecting improving lender confidence, better pricing discipline, and gradual improvement in our funding profile. During the year, we continued diversifying our borrowing mix across banks, small financial banks, NBFC, and financial institutions. Incrementally, bank borrowers contribute a large share of the sanctions and disbursements, which was believed is an important indicator of improving institutional confidence in our organization. Another important milestone during Financial 26 was upgraded in our external rating. Extend credit rating by acute rating from acute A- positive outlook to A- stable outlook. We believe these reflect our strong capitalization, profile cost IPO, healthy operating performance, and prudential risk management tracking. Today, we maintain relationship with more than 40 lenders across public sector banks, private banks, small financial banks, NBFC, and financial institutions. This positioning us will further directification of liabilities and gradual reduction in borrowing costs over the medium term. Our capital composition also improved significantly during the year. Net worth increased sharply to approximately 465%. Following the IPO and internal network, while our capital adequacy ratio improved to over 26%, providing us with adequate headroom to support future growth. From an asset quality perspective, while the broader industry environment witnessed some moderation in collection, efficiency across certain borrow segments, or portfolio performance continue to remain reasonably stable and controlled, considering the scale of achievement during the year. Gross NPS2 rate 2.13% and net NPS2 rate 1.09% as well as 26. We continue maintaining the potential provisioning buffer and remain focused on early warning identification, discipline, underwriting and collection efficiency improvement. Our balance sheet continues to remain adequately capitalized with comfortable liquidity and has a well-matched LM profile, which we believe positioned as Well for future growth opportunity. With this, I would now request for our business head to discuss operational education, customer segment, and business initiative in greater detail.

Thank you. Thank you, Gopal, and good afternoon, everyone. Our operating model continues to remain

deeply focused on localized execution, customer relationship, and discipline sourcing across semi-urban and rural markets. Unlike standardized lending models, our approach combines technology-enabled process with deep local market understanding. And a branching maintains close. Engagement with borrowers, enabling stronger sourcing quality, better collections, improved customer retention, and more effective underwriting outcomes. Today, our franchisee operates through 176 branches across six states with strong presence in Tier 2 and Tier 3 markets. We continue following a cluster-based expansion strategy that helps us building local market understanding, operating efficiency, and stronger customer connectivity. Our branch-led model remains one of the key strengths of the organization. Branches functions not only as a sourcing center. But also, as a local underwriting, servicing, collection hubs, these create stronger accountability and improves borrower engagement throughout the loan life cycle. Our customer focus continues to remain centric around underserved and underpenetrated borrowers, including MSME, small traders. Transporters, self-employed customers, first-time borrowers, with nearly 37% of our borrowers continues to be first-time borrowers, reflecting our positioning within financially underserved customers. At the same time, we continue maintaining a secured and conservative portfolio profile supported by collateral-backed lending and prudent loan-to-value ratios. Over the last few years, We have also invested significantly toward strengthening our technology, operating infrastructure. Today, our sourcing, underwriting, servicing, and collection ecosystem increasingly digitalized through integrated with LOS and LMS platforms, CQIC integration, automated workflows, DRM systems, digital collections, infrastructure, and real-time monitoring capabilities. These investments are helping us improving turnaround time, strengthen risk monitoring, enhance customer experience, bending long-term operating scalability, and our underwriting framework continues to remain conservative and highly process-driven. We combine centralized credit assessment with local market intelligence and field-level verification processes. This hybrid approach helps us evaluating borrowers' cash flows more effectively, particularly with informal and semi-formal customer segments. From a collection perspective, our model continues to remain field-intensive and relationship-driven. We maintain frequent borrower engagement through branch-level monitoring, field follow-ups, and early warning systems. We please this operating model remains and Important differentiator in managing portfolio quality across semi-urban and rural borrower segments. During financial year 26, we also continued selected expansion into newer markets, including Maharashtra, while continuously strengthening density within our existing operating geographies. Going forward, our focus will remain on improving productivity across Mature branches, maintaining, underwriting, discipline, enhancing operating efficiency, and scaling the franchising in the calibrated and sustainable manner. With this, I would now request moderator to open the floor for questions and answers. Thank you. Thank you, everyone.

Thank you very much. So, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on the 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.

The first question is from the line of Dipesh Ruchethi from Mania Finance.

Please go ahead.

Hi, I'm audible.

Yes, sir, you are. Please go ahead.

You're guiding towards sustained 30 to 35% AUM growth. Given the current operating environment and increasing competition in MSME lending, what gives you the confidence of maintaining this growth trajectory without diluting any underwriting standards?

So, actually, if you want to see our footprint in Lakshmi, India, we have presence in only five states in Bharat. So, we believe that we can grow, we can have more branches in other states where the requirement or where the business requirement is there. So, business loans requirement, security automation loans requirements are there. So, we can open more branches over there and we can maintain this disbursement pace and maintain the growth in Asian size. Seeing, of course, this market scenario, that war and all, that is a little bit challengeable, but yes, we believe that this should get over very fast, and we should be in a clear stage to do our business as regular as we were doing as before.

So, we already have predominantly in Rajasthan and somewhere also have a presence in Gujarat and Madhya Pradesh, which are the other states which where you are trying to expand and won't that carry a risk of, you know, getting into a new state because in the same state you have, you know, you know how the demographic is.

So, actually, we have presence in six states right now. So, that is Rajasthan is the mother state, of course, having a bigger portfolio. Besides that, Gujarat MP, MP is the second and third will be the Gujarat. But we have a presence in Uttar Pradesh also, Satyagrath also, and recently with Maharashtra. So two of the major states we have recently opened, recently we have come up, and before going into any states, we do a lot of R&Ds, cross-check, comparison, peer comparison and all. So we are comfortable, we have seen the comfortable disbursement page, we have seen the comfortable connection in this state Uttar Pradesh and Maharashtra. So that is why we have entered and we have opened a few branches in Maharashtra and Uttar Pradesh. And moving ahead, we will be adding more branches in these states only.

Hunter, I want to add here.

Yeah, please.

So, our expansion model is very robust, actually. We are not just like opening a branch anywhere, wherever the competition is. So, we first evaluate in terms of the collection, in terms of the risk, in terms of the negative areas, negative customers. So, all these reports are being submitted by everyone, and then after there is a collective decision on the branch opening. So, first, we are not just opening the branches, we are opening with process approach.

Right. So, what is the break-even of each branch? If you can let us know that, you know, we are opening a new branch, what AUM it breaks even?

So, there are categories of branches. So, we have differentiated into three categories, Tier 1, Tier 2, and Tier 3. So, some resource and some premise area and everything is defined as per the prospect at that particular place. However, there is around seven to eight months is the time to take the break-even where the expenses in the branch and the income at the branch level set off each other.

But what is the loan, how much loan does the branch have to disperse to actually break even?

You might be having a bigger benefit. So around 1.5 to 2 CR is the range where we come up with the break even point. Okay.

So, once the branch reaches around 2CR, the break-even happens quicker, right?

Okay.

So, a large part of your customer base consists of semi-urban and underbanked borrowers. How vulnerable is the portfolio to local economic disruption, rural slowdown, or political events at the regional level? Also, now with El Nino coming in, how much of your portfolio is actually dependent on the agricultural sector, if you can also mention that?

See, these natural calamities, natural problems actually impact all the sectors. But, everywhere, there is a pros and cons. So, the broader market scenario, the broader prospect doesn't impact the smaller customers immediately. So, that is the benefit where we are serving to the rural and semi-rural, semi-urban areas customers and small ticket-sized customers, small MSME customers like traders, like manufacturers, like service providers. So these are those borrowers who are not directly impacted through the bigger calamities like a war is happening and all these things. But yes, vulnerable, these customers are, these segment is vulnerable. So that's why the rate of interest is there and we have the robust mechanism for the underwriting. So, every customer is being visited by the credit manager. He talks with the customer as well as the neighbors, as well as the two references in the nearby area, and he visits to the business providers, visits to the customers, where the property he's giving us as a collateral. So, by visiting a mandatory visit, with the RCU process, with the audit process, technical, legal, everything is happening as per the industry norms. So, by this, we are mitigating this risk which you are talking about.

And I would like to add one thing in this, that in the area where we are operating, still there is a joint family system. So in a family, let's say five, six people are staying together, father, mother, father, two sons, and their wife. So everybody is contributing and everybody is contributing towards the EMI. Like in rural areas, you will find housewives also working either at home or cattle or at farm or whatever. So everybody is contributing, everybody is aware of the loan. So that is the best part that there's a number of hands are more to pay the EMI.

Right. So how do you balance your growth versus asset quality in the market where competitive intensity is increasing and the pricing discipline is weakening? Also, when you said that, you know, you're in the same family, a lot of people are contributing to the EMIs. How do you avoid loan evergreening in that case?

So, by taking all into the deal, so, we are passing the bureau reports also for all the family members. So, we are taking the income as well as the liability of all the family members. So, by this, we can avoid the liability part. After the deduction of liability, we can come for the loan eligibility.

I am talking about loan evergreening as well as, you know, how are you maintaining your asset quality where you are, you know, trying to grow?

So, generally, what customers do, customers do have a billing by taking other loan, actually, from where they have not taken the loan currently. So, for that, I explained that we are taking all the family members, we are fetching all the serviles of all the borrowers, and finding out how much is the current liability, so that the customer cannot be over-leveraged. Second thing, why? By doing the credit underwriting with such a robust mechanism, we are maintaining very healthy asset quality.

Right. Thank you so much.

Yeah. Yeah, please. And yes, in this retail segment, if you are targeting a small ticket size customers, so there is no asset quality kind of risk.

Thank you. The next question is from the line of Nazareth Ahmed from Pinpoint X Capital. Please go ahead.

Amma, what is it, sir?

Yes.

Thank you for the opportunity. Sir, my first question is, as larger banks and fintechs aggressively target MSME customers,

where exactly do you believe your competitive mode lies today?

See, competition is definitely there, but competition is healthy. So, we are also learning from the market, how the market is doing, how the underwriting is doing. There's a difference in five years back and now. So, five years back, there was no process, there was no underwriting standard, even in the industry also. So, this competition is healthy, and everyone is learning because of that and improving themselves. So, that's why I can say that the competition never actually hampers you. This motivates you to do the business because MSME is anyways growing. So, everyone is having their particular target segment and the space in that segment. So, as and when the MSME is growing, definitely everyone will participate in this growth.

I would like to add that, as you said, bank or fintech. So, banks, generally, these customers, we call them the NIP customers, so non-income proof customers. So, generally, banks or fintech companies, you can say, don't take calls on such customers because they need proper documentation, like proper income proof and all. So basically here, what we are different from others is like we evaluate, we go to their shops, cross-check with their businesses, and then we evaluate their income. So this is a total, you can say, a lot of technology we are using here to evaluation for their income. So that can be done in BFC like us. If you compare with FinTech, so FinTech generally are taking more into unsecured side. So we are 100%, 98% book of hour is secure. So, we are doing that, and the banks, if you say, so they read the documents and also where these customers are not able to provide documents which is required. So, being such a deal, you can say that we have a more better cover towards these customers.

So, do you have your own personnel in your company or in the branches who go and do the physical visits, or how did you make sure that before you give loan to such customers?

Yes, physical visit is compulsory to everyone, every customer, and we are considering for the underwriting, as well as we are doing the FIs also and RCOs also.

We have a separate Cray team who is underwriting this each and every case. So, each and every case is visited, cross-checks, and everything is done.

Okay, sir.

Got it, sir.

And now, as you expand geographically, how are you ensuring underwriting consistency across branches and avoiding local-level credit dilution? So, what's the question? Go ahead, sir.

So, actually, if you talk about the state level, every state is having a difference in terms of the customer segment as well as the asset also. So, we used to formalize a local level policy like we have entered into Maharashtra recently. So, Maharashtra is having a different property paper which is coming. So, Rajasthan is different, Guzat is different, MP is different, UP is different, and Maharashtra is also different as of now. So, we used to make a localized policy with the competition feedbacks, competition interviews. So, by this, we are actually entering into the new market, and we are operating as per the local expertise. So, when we are entering into Maharashtra, we are adding local people. We are building a local-level policy there, local-level acceptance of the property papers. Legal also, we are localized there, and technical also, we are localized. So everything is as per that state.

Sir, what proportion of your portfolio today would consist of cash flow assisted borrowers versus fully documented income borrowers?

See, as of now, we have mostly customers with the assessment income only. Recently, we have started with a prime product of Amhasami, where we are taking these documents for the, at least for the applicant or applicant, 1% documented income must be there. But other person can be added on the basis of assessment. So, I can say the major portion is of Assessed Income Program only.

Sir, finally, like, in case if some of the loan payers are unable to pay or something, and it gets into NPA, how do you recover those loans? How do you manage that in case?

See, we have a different collection team, and litigation team also reports to the collection. So, once the case moves to the hard bucket, there is a separate team who moves to collect the amount. And then after, if it is harder, then it goes to the litigation team, and we start the legal process immediately. So, we have a complete framework for the legal initiation process. So, when and how this legal can be initiated. And what level, at what NPA stage, this legal can be initiated. There is a complete framework for that.

Okay, so got it.

Also, we used to take a lady or a guarantor mandator as a NMD, and we take the SPDC either of the lady or external guarantor. So, we also utilize that tool to recover the amount.

Okay, so good. Thank you, sir. All the very best. Thank you. Thank you.

Thank you. The next question is from the line of Vinit Sharma from Param Capital. Please go ahead.

Thank you for the apportionment.

I had questions principally around the OPEX and the borrowing cost. Firstly, on the borrowing cost, I understand our current cost has improved over the year and presently stands close to 10.8% on a blended basis. But what would be the incremental borrowing cost? And how do we see the overall blended cost moving over the course of F527?

So basically, hi, this is Piyush Samani. I'm heading the treasury vertical. So basically, our cost of borrowing for the last year was 11.48. That has been came down to 10.80. But the incremental cost is true to around 10.25 to 10.30. So, ideally, we are more focusing towards the bank borrowing. So, the last year, that is the last closed financial year, we have borrowed majorly from the banks, PSU banks, private banks, and small finance banks, at least from the NBFCs. So, the major focus area is to build up the borrowings from the larger PSU and private banks.

Got it. Understood. Secondly, on the operating expenses, and this ties in with the growth strategy which was mentioned, we presently would be having a cost-to-income ratio, say around 50% or so. And the growth that we are targeting going forward, we had mentioned earlier that it is going to come from adding new branches. But given the expansion that we have done in the course of last year, there would be a lot of headroom in the existing branches also. I just wanted to understand that what kind of growth potential in the overall AUM can we see from the existing branches, and how much of that, like, also if you could layer your response with what is the current mix of AUM from top three states, and how do we see that evolving going forward?

Yeah. So, actually, we have 176 branches in which 18 we have added last year only. And we have started operation in Uttar Pradesh last year and Maharashtra also. So, we are having now these branches which we have opened in Uttar Pradesh is now getting a match out. And, of course, we have done expansion in an existing Gujarat, MP, and Chhattisgarh also. So, there also we have done expansion. So, we believe that these branches are now ready to earn now in position. Like, they are having a good manpower, good now strength. Local people are aware of the company. Now, they have good logins and all. So, we believe that this 30-35% growth, what I have told, we will be able to achieve from the existing and, yes, the branches which are getting mature. And plus, as we have added to major state Maharashtra also, so we will be adding some more branches over there also in the same urban and semi-urban areas. And from there also, they will be also contributing towards the growth and to touching this target. So, this is a plan, what we have set. So for the coming years. And what was next? Another question? Top three states, if you want to say. So, Rajasthan is, of course, having a maximum branches. So, Rajasthan has a maximum AUM percentage. Then, second will be Madhya Pradesh, and then third will be Gujarat.

And broadly, what would be the composition, if you don't mind sharing?

Composition for?

I mean, what would be the percentage of AUM in these states?

Percentage of AUM.

And how would it evolve going forward?

One thing.

Percentage of AUM is from Rajasthan.

How much? 82% is from Rajasthan. Around 11% is from MP and 7% is from Gujarat. And rest is from other states.

Understood.

Thank you so much.

Thank you. The next question is from the line of Aryan

Ajmera from Holani Venture Capital Fund. Please go ahead.

Good afternoon, sir.

First of all, congratulations for your amazing financial results. So, first my question is, your NIM has expanded meaningfully despite portfolio seasoning and competitive intensity. How sustainable are current spreads over the medium-term spreads? Sir, your NIM has expanded meaningfully despite portfolio seasoning and competitive intensity. How sustainable are current spreads over the medium-term spreads?

So basically, I decide to use.

So basically, the yield is any which way is in the same lines. You can see in the last three, four years, we are not reducing majorly into the yield portion. Secondly, there is a decline in respect to the inward cost of borrowing. So this is one of the catch that the NIM will be on, I can say, the same level or it may be increasing going forward as well. So other fees income, we are more also focusing on getting the things into that, top lines to be added into that way. So apart from them, so we are more focused toward other income as well.

Moving forward. Okay, sir.

So, sir, does that mean your loan's volume is increasing? Yeah, loan volume is increasing. Okay, sir. So, sir, my second question is, while comparing this quarter with corresponding previous period of this year only, nine months, The company's part has increased from 29.10 crores to 49.68 crores, and revenue has grown from 256 crores to roughly 350 crores. But, sir, your customer base has increased only by 4.8% during the same period, compared to quarter three to quarter four. Could the management explain the key factor driving such strong growth in revenue and profitability, despite relatively modest customer growth?

Sorry to interrupt, we are unable to hear you, sir.

If we compare quarter-quarter increase in name, that is the one impact. In quarter-fourth, we have done DSO around Rs.41 crore. So, on the account of 8 crore, 66 lakhs are included in name. That is why our name is increased in quarter-quarter basis, quarter-three to quarter-fourth,

despite of an increase of customer base.

Sir, can you repeat, sir, because do you receive any new orders or what, sir, I didn't get it exactly?

In quarter four, we have done a DA transaction. We have sold around 41 crore pool under DA transaction, and on account of this, we... Recognize upfront profits on account of 8.66 lakh rupees. This is included in our revenue name. That is why our name is high in compared to customer base.

So, sir, but my question is, sir, how is your PAT has increased above 40% roughly, only compared to this quarter?

This is PAT, including the impact of also upfront profit on the arrangement. That is why PAT is showing 38% growth.

Okay, sir. Thank you, sir.

Thank you. Participants who wishes to ask a question, please press star and 1.

The next question is from the line of Rachna Mehta from SK Advisor. Please go. Hi, good afternoon. Am I audible?

Yes, please.

Yes, you are. Please go ahead. Hi, hi. Thank you for giving me this opportunity. Also, many congratulations on a great set of number. I joined the call a bit late, so apologies if my questions are a bit repetitive. So, my first question is, which specific borrower segments or geographies are witnessing higher stress currently? And how much of the stage 2 portfolio do you expect could potentially migrate into stage 3 over the next 12 months?

See, ma'am, our major portfolio is in Rajasthan. So, that is almost 80%. So, if you're going to see number-wise, of course, Rajasthan number will be higher as compared to. But if you're going to see the security which we are having, the LTV, which we are maintaining on NPA cases, is around almost 35% to 38%. So, we are very much in a good position to recover it. And as this all asset, what we are having as a security is an appreciable asset because we take property which is self-consumed, either a residential or a commercial property we are taking from the customers as a security. So, these customers doesn't leave this property any cost. So, they take this property back and all. So, we believe that we have a handsome recovery on our budgets also. So, we have a strong LTV and we have a strong collateral with us. So, we believe that our cost loss will not be there at any time in past also and in future also.

Okay. And sir, your PCR on stage 3 assets appears relatively moderate at about, I guess, 49%. How comfortable are you with the current provisioning buffers given the pace of the portfolio growth?

As I told, we are having a secured portfolio, and with LTV, as I told, overall LTV on the book stands for around 45%, and on NPA, 35% to 38%. So we have very strong feelings that we will be able to receive, get the money back. And if you want to see the compare with the companies also, the 49% is a very healthy PCR what we are maintaining. On this secured asset, because our 98% book is almost secured. So, that is why, if you want to see with other compared PA companies also, we are healthy in PCR.

Okay, okay. Thank you. And also, you mentioned about increasing participation from banks in incremental borrowings. Could you discuss how lender conversations and sanctioned terms have evolved post-IPO and rating upgrade? Also, how much further room do you see for reduction in cost of borrowing over the next two to three years, sir?

So, Rishna, this is Piyush Samani. I head to the vertical for the company. So, basically, previous to, I can say that the IPO, the challenge was that debt-to-equity is one of the factors which was there. Now, it has become easier of taking the borrowings. So, banks and other lenders were adding the risk premium before than that, more risk premium, I can say that. Post-IPO, that has become easier. So, post-IPO, I can say that our cost of borrowing has been in the range of 10 to 10.25 in between of that, that we are raising as of now, and blendedly for the year is to 10.80. Secondly, we are more focusing towards the bank borrowing. So, previously, before rating upgradations, so there are certain limitations, I can say, on the per bank on AEM basis, what they can extend to us. So, with the rating upgradations, so we can get an ample of fund, what we will be requiring for this year. So, I can say that we are decently placed in respect of getting the funds. On a 10 to 10 and 0.25% rate of interest, and going forward, I can see the rating expectations that has happened in the later week of March 26 only. So this year, we will be getting an eventually benefit of around 20 to 25 bps, keeping the visual scenarios in place as well, if there is no rate hikes. That is from my side.

Okay, okay. Thank you so much for detailed answers. I'll join the queue in case of more questions. Thank you and all the best. Thank you.

Thanks. Thanks a lot.

Thank you. Participants who wishes to ask a question, please press star and one. The next question is from the line of Parash Sheda from Purple One Vertex Ventures. Please go ahead.

Yes, sir. Thank you for the opportunity and congratulations for the good set of details, sir. Sir, I joined a little bit late, so sorry for being repetitive, sir. Sir, you clarified this up money issue was a one-off and a secured one. Now, what is the expected timeline and quantum of recovery for FI 27, sir? I mean, and what steady set credit cost should we assume?

So basically, this Apani, there was a balance of 19 crores, and we have made a provision of almost 11 crores. And we are in a healthy talk with the management, and we believe that we will be able to get some good orders from the court also in our favor, as our peer companies have already got an order in their favor. So, we are expecting that within the coming quarters, we should be able to get this money back from UpMoney, and the provision amount what we have created, that is 11 crore, will be directly added to the bank.

And there is no such, you know, DA issue now in our system anymore, beyond this?

No, if you want to see DA all across India, so it's a very normal transaction, and it is like every NBFC bank and everyone is, do this transaction. And if you want to see the default ratio, that is also very minimal in a DA. So, but this is special, you can say that, because DA is very secure, it is a very much secured thing. So, but this is like exceptional, you can say that this event has happened in India, and through which we have also got a hurt.

Sir, what kind of, you know, sort of growth rate now, you know, sort of looking at for FI 27, 28, I mean, in terms of the near-term trend now for advancing?

So, if you want to see the past trend, we have growth, we have shown, we have... Given a growth of 33% CHR year to year from last four to five years. And now, though, after getting an IPO listed, after capital raise also, we are now more stronger, more better position. Now, visibility is good. The rating has got upgrade. The cost of fund has gone down. Now, we have opened our branches in other states also. Now, we have visible footprints and other branches. So we believe that we will be able to maintain a better position than what we are doing at like 30-35%, I believe, that with this growth rate we can expect in the coming years. And we have still so many untouched states are pending, so we can have our footprints over there, and we can make a great business.

So, since it's a branch-led model of lending, I mean, physically, that is still sort of manageable to, I mean, continue this kind of approach, right?

Yes, so we are... You know, the size itself, I guess there is a problem. So, this business, what we are doing is can be done by the team support only and with the branch support because these customers are NIP customers, non-income-proof customers. So, wherever we start this person, so where we open up branches first and then we evaluate their income and then on the process of that, we do it. So, for this, all you do require a manpower. So, basically, this is a little bit of the main effects cost is a manpower cost. But, yes, the per person productivity is good over there and good demand is there and less competition in specifically this product what we are doing. So, we believe that it's a good potential market for us.

All right. I mean, which new states do you now intend to expand to?

So, recently we have added Maharashtra. So, six states we have already in, but we have a lot of opportunity in Maharashtra and UP there. But yes, slowly, gradually, we will be coming up with more states where we can have potential customers for us.

Understood, sir. Sir, the cost of borrowing has come down, you know, quite interestingly to 10.8 now. And so, what do you really think funding was the trajectory you see over the next 12 to 24 months?

Yeah, hi. Hi, Parish, this is Piyush Samani. I head to view vertical. Thank you. So we are trying harder so that the cost of borrowing can be declined by another 20-25 pips going forward as well. But you can see that since from last year, that is 11.48 was the cost of borrowing. That has been reduced to 10.80. And post-IPO, the leverage is one of the factors which has become ease-off for the company, where there is premium that has been inculcated in the rate of interest. That seems to be in favor of the company going forward basis, as well as the rating upgradation was also one of the factors that will be factoring into the rate of interest for this year. So I believe that we will be able to convert and translate into the rate of interest going forward by another, I can say, 20-25 BIPs on a minimum side, and depends upon the global scenario also in place.

Interesting. I understood that. Sir, the ROE has also improved, I mean the return on equity to 13.7 despite the up money issue. Now, so what is the sustainable medium term ROE we should work with, sir, without compromising, let's say, underwriting quality?

So basically, I can say since last four, five years, in the peak ROE that we have reached to 15 plus, that is 15.7273 odd percentage. And in the medium terms, I can say that we believe that it will be above 12%, 12.5% on the minimum side.

So, this sort of 13.7 that we've hit now, I mean, given that this is what we can, on an average basis, expect going forward to continue. And probably, yeah.

Yeah, Parash, so basically, since the equity inflation has recently done, so the translation into the return on equity is not very faster, but you can see the Rota is there, the return on asset is above 3. So, we will be trying and harder to maintain the ratios above 3 in a going forward basis, so that the translation from the return on asset to debt to equity will be translated factoring to debt to return on equity on a maximum node that we see so.

Right, sir. Now, you know, given a little bit of this uncertain situation on, you know, energy and, you know, this entire geopolitical stuff, etc., are you seeing any stress trends in the, you know, core MSME, the self-employed borrower, you know, based on cost geographies that you are operating?

So, precisely, we are in a geography or I can say the customer segment that we are getting to tier 2, tier 3 cities of India, where the customers are not dependent upon majorly on, I can say, the factors that are involved into the scenario, that is oil or other things. Because we are catering to a customer for cash flow driven businesses and businesses are majorly into the rural segment, which is not primarily dependent upon the oil, other things. Or since our vehicle portfolio is 9%, that is very municipal. And so I can see that the going forward basis as well. So this scenario will not impact our kind of business.

So, the loans, book stress also may not drop up, and at the same time, we'll be able to grow as well.

Yeah. If in case the oil prices are high, maybe there may be a slightly slowdown in there, or business segment as well. I mean to say the customer segment that we are catering, but not on a harder note that is there.

Right, sir. And just last query, Mahal. Now, you know, we are trying to scale towards 3,000, 5,000 crore AUM. Now, what operational or underwriting controls are being strengthened to ensure, you know, the growth quality remains intact?

Yeah, over to, over to, sir.

Currently, the indirect is happening on the application where everything is in control and can be monitored. Secondly, we have also introduced the RCU process last to last year. And so, every document, which other than, see, first we are fetching all the details of KYC through the integration and verifying that online. Also, doing the banking verification. Other than that, if any document, like CELI certificate, which cannot be verified online, can be verified through RCU. Then after CQIC is having, then Sarsai is having. So every aspect which has to be covered under the underwriting process with legal, technical. So legal, we are having external vendors. Then again, that diesel is being vetted by the internal legal team. Technical also, the valuation part is also happening through the external vendors. Then there's the internal team of civil engineers who are vetting the valuation, checking the valuation amount also for boundaries. Everything is being as per the industry norms. Everything is on a digital mode. So, customer application is happening on the mobile application. Then after PD is happening, so credit manager is mandatory going to the customer's place for the PD visit. So, then PD is happening on the mobile application. Then the case is moving on the system to the next authority for the decision making. Then the disbursement is also processing through the system. The only part which is left is the e-signing of the agreement, which is happening on a manual basis, physical mode as of now. And very recently, we will be coming up with the agreement signing process. E-mode also, electronic mode also. So the complete infrastructure is already being developed as and when, if there is any requirement as per the industry or as per the new learning, we will also implement it.

Thank you so much.

Thank you. Ladies and gentlemen, due to time constraints, we will take that as the last question for today. With that, I now hand the conference over to management for closing comments. No, sir. I'll hand it over to you for any closing comments, if you have.

Okay. So, what I believe that we have, thank you, first of all, for all the joinies, and thanks for our questions. And we believe that in Lakshmi, we have made a very robust systems, a lot of AIs we are using, a lot of technology we are using. And due to that, we are able to grow, and we will be able to grow in a good pace and fast pace, keeping all the compliances and keeping all the risk ahead and taking care of the portfolio numbers and all. But, yes, this is all because of all the team members, all who are working hard with us, and thanks to our investors also who have made a trust on us. And because of all these factors, we are able to come to this stage. And the future also, we will be, I can say that we will be able to achieve the numbers what we are committing here. And we will work hard and we will be able to make good numbers, good fat, good volume size, and good presence in our community. If anything is left, you can mail us. We'll be happy to reply on it.

Thank you very much, ladies and gentlemen. On behalf of Go Into Advisors, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.