Utkarsh Small Finance Bank Limited (UTKARSHBNK) Q1 2027 Earnings Call Transcript

Ladies and gentlemen, good day and welcome to the Utskash SFB Ltd. Q1-FI27 Ordings Conference Call, hosted by ICICS Securities Ltd. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions at the end of today's presentation. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-down phone. Please note that this conference is being recorded. I would now like to hand the conference over to Mr. Lainish Bhuvah from ICICI Securities Limited. Thank you, and over to you, sir.

Yeah, thank you, Manu. Hi, good evening, everyone, and welcome to Uttar's Small Finance Bank P1F-27 on this call. On behalf of ICAC Securities, I would like to thank Uttar's SHB management team for giving us the opportunity to host this call. Today, we have with us the entire top management team of Uttar's SHB, represented by Mr. Dovin Singh, Managing Director and CEO, I will now hand over the call to Govindji for his opening remarks and then we will open the floor for Q&A. Over to you, sir.

Thank you. Thank you, Renish. Thanks a lot. Good evening, everyone, and thank you for joining us for our quarter one FY27 earnings call. The first quarter of FY27 marks an important point in our journey. Over the last several quarters, our bank has navigated one of the most challenging operating environments faced by the microfinance industry in recent years. Throughout this period, our focus remained firmly on protecting franchise quality. Preserving balance sheet strength, improving collections, and ensuring that every strategic decision was aligned with the long-term interests of our customers, shareholders, and other stakeholders. We are encouraged by the progress achieved across multiple dimensions of our business during the quarter. The actions undertaken over recent quarters are beginning to translate into measurable improvements in business momentum, asset quality indicators, portfolio composition, funding costs, and operating performance. While profitability has not yet fully normalized, the significant reduction in losses and the strengthening of underlying business drivers reinforce our confidence that a bank is moving in the right direction. Over the last year, our objective has been to build a stronger and more balanced institution by improving the quality of new businesses, strengthening risk management practices, diversifying revenue streams, expanding secured lending, enhancing collection infrastructure, deepening customer engagement, and improving the credibility and quality of our liability franchise. These efforts are now providing the foundation for a more sustainable growth cycle. One of the most encouraging developments during the quarter has been the tensing of business across both our JLG and non-JLG segments. Disbursement trends have improved significantly, reflecting both increased customer demand and our confidence in the calibrated growth. During quarter 1 FY27, total disbursement grew by 49% year-on-year, supported by JLG disbursement, which grew by 5% year-on-year, and non-JLG disbursement, which started a robust growth of 96% year-on-year. Importantly, this growth has been built on strengthened underwriting framework and improved portfolio monitoring mechanisms. Our objective remains to grow assets of the right quality and risk profile rather than pursuing growth for its own sake. Consequently, equally encouraging are the trends visible in portfolio performance. The improvement in business momentum has been accompanied by continuous strengthening in asset quality. During the quarter, X-bucket collection efficiency in the JLG segment remains strong at 99.7%, up from 98.6% in quarter 1 of 9.26. SMA pools within the microbank segment contracted to 1.2% from 1.3% in March 26 and 5.1% in June 25, reflecting strong field execution enhanced collection processes. As a result, the GNPA ratio as percentage of gross loan portfolio stood at 5.9% as of June 2026, representing an improvement of 550 basis points year-on-year and 160 basis points quarter-on-quarter. These trends demonstrate the measures implemented over the recent quarters are producing tangible outcomes. As we assess the future shape of the bank, diversification continues to remain a central strategic priority. Over the years, we have consciously worked towards reducing concentration risk and building multiple growth avenues. Our GSD portfolio now represents 26% of the gross loan book. and 26% including BC-JLG exposure compared to 88% in March 2020 and 90% including BC-JLG exposure. Simultaneously, secured lending has increased to 51% of the gross loan book from 45% a year ago. This structural transformation is changing the nature of our balance sheet, reducing margins, volatility, and supporting a more resilient risk profile. Within micro-banking, the growth of our micro-banking business loan product continues to validate our customer life-scale strategy. MBBL serves customers who have demonstrated repayment discipline and are ready to graduate beyond traditional group lending structures. Further, we have expanded the product to cater to new-to-bank customers as well. MBBL portfolio grew by 147% year-on-year and 11% sequentially during the quarter and now constitutes more than 30% of the micro-banking portfolio. With penetration still below 20% of our customer base, there remains substantial room for further expansion. We believe this segment represents an attractive opportunity to deepen customer relationship while supporting business growth among our borrowers. Beyond micro-banking, growth of momentum across secure and diversified asset classes remain healthy. Our MSME portfolio expanded by 12% year-on-year to 4,482 crore, also supported by the micro-life segment, which is delivering disbursement yield of around 18%. Housing loan grew by 8% year-on-year to 1,005 crore, while our BBD, the business banking portfolio, recorded strong growth of 40% year-on-year. In commercial vehicles and construction equipment segment, we have continued refining portfolio composition with greater focus on asset demonstrating stronger risk profile. The share of used vehicle in disbursement is around 30%, reflecting our emphasis on balancing growth with prudent risk management. Golden penetration is also expanding through a digital LOS aimed at improving turn-down time, controls, and operational efficiency. Collectively, these trends highlight the emergence of a broader and more diversified lending franchise capable of contributing to long-term profitability and stability. Over the last several quarters, we have remained focused on strengthening our liability franchise, increasing granularity, enhancing customer engagement, and reducing dependence on bulk deposits. Total deposits grew by 3% year-on-year, supported by CASA deposits, which grew by 15% year-on-year, while retail term deposits also increased by 15% year-on-year. Consequently, CASA plus retail term deposit ratio improved to 83% compared to 74% a year ago, and the CASA ratio strengthened to 22% as on June 2026. The benefits of the improving deposit mix are also reflecting in funding costs. Following RBI repo rate cuts, we have phased reduction in interest rates on savings and thumb deposits to remain competitive while optimizing cost of funds. As a result, cost of funds declined by around 40 basis points year-on-year and around 50 basis points quarter-on-quarter to 7.7% in quarter-on-FY27. We expect the full impact of repricing action. to the unfold progressively over the coming quarters, providing further support to margin stability. From an earnings perspective, quarter 1 FY27 reflects a business that is steadily approaching normalization. We reported a net loss of 34 growth. This represents a reduction in more than 80% both on year-on-year basis as well as sequential basis. As I said earlier, also to further de-risk incremental flows, we registered under CGFMU Credit Guarantee Scheme for eligible JLG and MBBL disbursements with effect from January 17, 2025. 60% of our microfinance book relating to disbursement up to quarter 4 of FY26 is already covered under CGFMU, increasing to around 80% upon including quarter 1 FY27 disbursement. This coverage materially reduces the risks associated with new disbursements and supports portfolio stability as we continue to scale higher quality, secured lending products. During the quarter, the CGFMU scheme provided mitigation of around 75% in terms of P&L impact, contributing to a reduction in the credit costs to 2.3% compared with 5.3% in quarter 4, FY26, and 8.5% in quarter 1, FY26. Importantly, the key drivers of future profitability, asset quality, credit cost, business growth, cost of fund, and portfolio mix have all moved in a favorable direction. While pursuing growth opportunity, we have remained committed to maintaining a strong liquidity and capital position. As of June 2026, the bank maintained surplus liquidity of around 3200 crore and NCR of 227%. The CD ratio stood at 83.8% and our capital adequacy remained at 17.4% well above the regulatory threshold, providing sufficient capacity to support growth plans and absorb potential uncertainties in the operating environment. The bank is planning to raise around 500 crore through NCDs in the current year to accelerate growth initiative and reinforce its capital adequacy. Also, we have taken a strategic decision aimed at accelerating balance sheet cleanup through the ARC sale of stress, JLG, and wheels portfolio, and ensuring that we remain focused on future growth opportunities rather than legacy stress. We believe such actions improve transparencies, tension the franchise, and create a clearer platform for long-term value creation. On the proposed scheme of amalgamation of holding company, UCL, with and into the bank, the NCLD, at its hearing on July 23, 2026, took note of the responses received from the relevant authorities, and wherever the replies were pending, granted another 10 days to file the same, and hence, fixed the matter of next hearing on August 6, 2026. The reverse merger is expected to complete in the next few months, subject to NCLD proceedings. The excellence continues to remain a core area of focus. We have strengthened our collections infrastructure, operationalized a specialized call center for overdue accounts, enhanced monitoring processes, and training program for new frontline staff emphasized core processes such as center meetings and customer onboarding, ensuring consistent execution across the field. Our collection workforce supporting JLG and MBBL businesses exceeds 1,200 personnel. We have also improved branch level oversight and strengthened customer engagement mechanisms. These operational enhancements have contributed meaningfully to the improvements seen across collections, SMA trends, recoveries, and overall portfolio quality. Technology continues to play an increasingly important critical role in our transformation journey. Through the Utkash 2.0 technology transformation project, we are embedding greater automation, data-driven decision-making, monitoring capabilities, and process efficiency across the organization. Enhanced digital underwriting tools are helping us identify and avoid over-leveraged borrowers while 360 degree control parameter mapping, strengthening monitoring frameworks, and improving visibility across the credit cycle. The bank is also about to launch new CBS. These investments are expected to improve customer experience, strengthen risk controls, and support scaling of the business over the coming years. We have also taken steps to improve the quality of new Thank you. Asset products through our liability focus general banking branches, thereby increasing product penetration per customer and improving wallet share. These actions taken together are designed to reduce the probability of future stress and to create a more diversified resident earning space. The bank's strategy is centered on improving productivity and operating efficiency rather than branch expansion. Employee headcount has been rationalized by around 1,700 while growth is being driven through enhanced productivity of the existing branch network, digital and technology investments. The bank is also undertaking various product and process simplification initiatives, including workflow automation, digitization of customer journeys, reduction of manual interventions, and streamlining of operating processes to improve turnaround time, service quality, and cost efficiency. Look ahead, our priority remains clear. We intend to build on the positive momentum achieved during the last few quarters by sustaining collection performance, further improving asset quality, expanding secured lending, accelerating growth in diversified asset classes, and deepening our liability franchise. At the same time, we will maintain disciplined underwriting standards and appropriate approach to risk management. We are aiming for a loan book growth of around 25-30% with the secured lending compromising 55% of the portfolio, maintaining the name of around 8% and delivering an ROE of 15% by FY28. While sectoral headwinds and regulatory transitions may continue to influence near-term performance, we remain confident that the strategy direction we have charted will deliver a stronger, more sustainable franchise over the medium term. FY27, in our view, is a year of rebuilding earning strength and translating operational improvements into sustainable financial outcomes. The progress achieved during quarter one is encouraging because it demonstrates that the recovery process is firmly underway. We are seeing stronger disbursement, improving portfolio quality, lower stress formation. Thank you very much, sir.

We will now begin the question and answer session. Anyone who wishes to ask a question may press star and 1 on their touch-tone 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. We have a first question from the line of Shreya Chatterjee from H-List Capital Finance. Please go ahead.

Hello, sir. Thank you for taking my question. If you could just give some color on to what would be the portfolio rundown of your JLG portfolio, like going ahead in the year, like what percent of your portfolio did it be and the overall MFI portfolio also, and how much do you plan to run down the book as well?

So, just to mention, you know, we have been talking past also. I mean, we have a strong, you know, belief that the JLG and overall micro banking has a, you know, good potential for growth also. So, our idea is to remain almost in the same range around 25% or so overall, you know, if you look at JLG part over a period of next two to three months also. Sorry, not two to three years also. So, around 25% is what we expect our JLG portfolio will be.

Okay, so if you're not planning to run down much of the JLG portfolio from here on, so what would be the total overall portfolio growth for this year and the next year?

So, as you mentioned, in case of JLG, and I also add, you know, we have micro banking business roles also. Our range is around 15 to 20% growth as far as the JLG and the micro banking is concerned. And we have mentioned that, you know, overall we expect that 25 to 30% growth will be there. But JLG growth will be, you know, below 20% overall.

Okay.

Sorry, ma'am, just to add, I guess, you know, maybe if you are referring to the stress that has been seen in the past in the JLG, and, you know, the fact that how are we looking at that growth in this book. Two things. One, that environment, you know, as we speak, all the dispersements are happening under the new guardrail, which is to say that the behavior of the new guardrail, the sleepages are normalized. So, you know, to that extent, the past guardrail legacy can be called as past. And second, in any case, you have covered this portfolio under the CGMFU guarantee scheme for any abnormality that can in future come. So one way is that we have already, as far as mix is concerned, and this was the planned trajectory of our, you know, couple of quarters, eight quarters that will, you know, move from unsecured to secure, and we will bring the JLG or microbanking to one-third of the portfolio. We have already almost on track on that trajectory, and while we grow the portfolio on total portfolio basis, I think we will continue to keep the cap around 25, as Govindy mentioned, but still grow this book and not thinking about running down the book as you started the question.

That was helpful. And if you could just guide about what's your guidance for the NPA and the credit cost for the rest of the year, and how much provision do you expect to build up because of that? And ultimately, apart from the NCD fundraise that you are doing, any additional fundraisers that are planned in the medium term?

On the credit course, I know you would be around, you know, on an upper side, being conservative, not more than 3% or 3.5% as we go along. And on your second question, you know, we are raising 500 crore, but we are also repaying it one of the trenches that we have of 200 crore, which is, you know, at a well-and-a-half-person coupon. We are prematuring, repaying that about a year earlier. That should happen in mid of August. We have already put this formal announcement across. That should save the bank, you know, around 20 crores as we go along. The primary idea was not to carry 200 plus 500, 700 crore N3 debt, and that 200 crore which we are repaying or prematurely or making an ugly redemption, you know, had no delta on the CR benefit. What we are going to do now is raise N3D under tier 2 classification. That helps us to boost our CRR, and on the back of the envelope, this 500 crores should inch up the CRR by around 250 basis points.

Got it. So that was helpful. And any indications on the early signs of stress or portfolio at risk for your new lending book that you're giving away? So the new lending book, any power numbers that you'd like to share?

Yeah, I'll miss this thing. So if you see the... So, we do track the pre-guardrail and post-guardrail portfolio, which we have built up in the microbanking and GLG space. So, if you will see post-guardrail, that is 1st April 2025, if you will see our total gross NPA and majority of our outstanding book now belongs to that particular period in GLG in particular, and our gross NPA are below 2%. To be precise, it hovers around 1.85 to 1.9% only. And just to add, this book now, starting January, mid of January 25, our JLG or our MBBL portfolio is covered under CGMFU. So whatever NPA is coming post April 25 is also covered under CGMFU.

And probably just a point, Ed, that as we speak, you know, as of March, my CGMFU coverage on the portfolio was 60%. And if I take June, it is 80% of the portfolio is covered. And this portfolio is JLG, MBBL, MBBL, including the CGMFU. So, all 80% of the portfolio as it stands, as on June, is covered under the CGMFU guarantee scheme.

Thank you.

Yeah, thank you.

Thank you. We have our next question from the line of Sagar Shah from Spires PWM. Please go ahead.

Yeah, thank you for the opportunity. My first question, sir, was actually related to your MBBL portfolio. We are seeing a sharp jump, especially in the MBBL disbursement side, actually more than 100% growth. So, is this portfolio completely to the existing customers who have demonstrated good behavior in the JLG portfolio, or is it something like, are we sourcing some new-to-banking customers also for these kind of loans?

So, currently, I think it's a 99.9% portfolio of our existing customers only. We have just piloted to, you can say, the open market or the new-to-banked customers. I mean, the number may not be even 100 or 200. Thank you. What we say, you know, cycle heavy.

Okay. So, basically, on the underwriting front, how is it different from the normal JLG front? What sort of different underwriting measures have we taken for this portfolio?

So, there is a, so this portfolio is primarily, hi, this is Varendra, sorry. So, primarily this portfolio is built up on the previous pieces only to the people who are having an established business activity, and the credit is run by the separate underwriting team, which does the complete underwriting as is the norm in all other unsecured loan business. So, we have built up this business over a period of last four years. The incremental business has jumped in the last one year after learning experience of last three years, which is helping us growth in this side, and our focus after the study of last four years, three years on the portfolio. Additional to that, we also cover its portfolio under the CGFMU scheme. So, So, with a very stable collection team and as well as the frequency being closely monitored in that space.

Now, just to add, Virendra, I guess when we are doing MBIL, we are having a dedicated collection team for MBIL business as well. So, if the headcount that we have spoken earlier for JLG stays with JLG, and as we grow, we do look at the necessity in terms of the support for the collection, and we have given collection headcount to teams to ensure that MBIL has a, you know, net-net, the contribution and the business remains, and the NPA remains checked.

And hi, Amit, just to add again, post-April 2025, we will see the outstanding out of this portfolio, which is close to 1250 crore, 1042 crore is post-April 2025. And out of that particular pool, we have only 0.4% as INP. So we do track whatever interventions in terms of process, underwriting, standards we have done, what kind of outcome we are getting in terms of asset quality.

Okay. So, now my next question was related to the asset quality. We are seeing that your recovery slash upgradations are getting slower, actually. We expected this quarter to be strong in terms of recoveries, but it hasn't happened. So, the NPS that have been shown in the past, actually, why is the recovery being so slow or it's non-recoverable? Is it like that way?

I guess, you know, in particular, you would see that, and I can say that as far as MB or JLG, almost all things are sorted, but when it comes to retail book, you know, we have certain accumulated recoveries from... It's a matter of pushing that to come back. So as we go along, when you see this legal litigation bucket where some amount is lying yet to be recovered, you will see that unfolding in coming quarters. So that is one of the reasons where it's taking time, at least on the retail side to, you know, the secured book side to get this encashed.

So, on the secured book, if it is getting time for, what about the unsecured? Because every small finance bank, almost 8 on 10 small finance banks are getting stronger on recoveries, at least what the last two years that every bank had based on the. Microfinance side. So on the microfinance side, out of the 69 crores that you reported in this quarter, how much was it on the unsecured microfinance book? Out of 69, 49 was that. 42, okay. Okay, okay, got it. So, at least you expect the recoveries to pick up in the coming quarters at what your iPad is.

Quarter one was normally slow in that recoveries, but if you see the quarter four one. Back in the quarter 2 and quarter 3, so that will be done.

I just want to add one more thing and correlate it and hope, I guess, you buy. This is one that we had, you know, aged up our headcount about a year and a half back to improve our collection efficiency, which last five, six months has been above 99.5. And the headcount, as we added up, stands at about, say, 1,100 headcount only on collection, and I'm talking of JLG. I just mentioned MBBI as its own source of collection headcounts that we have allocated to them. But once 1,100 headcount that is lying in JLG, and as we see normalization is happening in the credit cost, we would obviously shift some of this headcount for recovery of the NPA and write-offs. So you would see some traction there in the coming quarters because at the normalized rate of credit costs in GLG, probably $1,100 is a bigger ask in terms of headcount being there. But we will continue to hold them and deploy them for recoveries of the past NPAs and write-offs, and I guess you should see some traction there in coming quarters.

Okay. Okay. So, now just one suggestion from my side. As you highlighted on the asset quality, the recoveries were taking time. So, the asset quality, if you can, on the investor presentation, on every segment-wise asset quality, if you can mention from next quarter onwards, what was the GNP for every segment? So, because I wanted to know what was the GNP for MSME for Arizona this quarter.

We will do that. We will do that.

So what is the JNP as on 30th June for MSA?

It was around 169 crores.

169 crores out of your 444482.

Yeah, percentage-wise, you will see the 3.8%. Okay. When Sajju said, I just wanted to add, when Sajju said that it's taking time means, you know, there are certain cases which are legacy cases, which has come into NBA in the last quarter itself. So now if you have to go for Sartesi and auction the properties and take into possession, normally it's a process of six to seven months. And that is where Sarju said. But normally in Secure, we have seen that when we initiate the initial notices regarding this Sacheti, majority of the cases and the customers comes and pays the overdue amount. So that is where, you know, because these cases have come into NP in the last quarter itself, so probably in the next two months, majority of them should get, you know, resolved without going for actual options. So just wanted to add that point also.

Okay, fine. And just last one from my side, in FI28, you were saying 25 to 30% portfolio growth that you just highlighted on the guidance. So, 25 to 30% is growth from FI26, right?

No, no, we are talking year-on-year growth of around 25 to 30%.

So, from FI27 also, you are eyeing 30% growth.

Yeah, 25 to 30%, that's giving a range, you know, because market is also that way.

Because in this quarter, in this quarter, we hardly have seen any growth, right? That is why.

Because of, you know, some of the, you know, we have done write-off also, because of write-off, the portfolio goes down, which will not, you know, reflect. So, that's why I'm saying 25 to 30 percent is raised for this year, and our base is small right now. When I say small means because we have not grown during last two years, so base is also small. So 25 to 30 percent growth for this year, and very similar type of growth we expect for next year also.

Sorry, I just want to add that if you really look at Q4, which is the beginning of, you know, green shoots and the momentum continuing in Q1, so Q4, the disbursements across was 30%, which is Q4, our previous Q4, and, you know, Q4 is the loaded volume business in the financial service sector. Generally, Q1 is lower.

Right, right.

So, if you have a 30% disbursement growth, as we have shown, and, you know, similarly, it remains 48%, again, in Q1, the trajectory, obviously, is turning, you know, towards our internal, you know, discussions and the management target envelope. Obviously, I guess, you know, endeavor is to really pick up an H2 would be a year where the target comes on a few to get that 25% growth that we are aspiring. And the engine, you know, and the operations, infrastructure, headcount, the new, you know, technology we have switched over to, the new LMS systems and all of that, that improvement. So, all that is now required is higher productivity, which is the same cost to get the high volume, is what is going to be our key focus.

Okay, okay. Thank you. Thank you so much and all the rest.

Thank you. We have our next question from the line of Saurabh Jain from SSJ Finance and Securities. Please go ahead.

Hi, good evening. I'd like to leave my question with a few comments here. The management commentary must be more focused on the liability side of the balance sheet, where you're working on improving your cost of funds, increasing your deposits or so. But as shareholders, our concern seems to be more on your asset side, the quality of your assets, where we don't have enough granular information in terms of the quality of loans that you have. You still seem to be talking about growing your loan book by about 25% to 30% each year, even growing your JLG, NBL book. What gives you this confidence that you can have, grow the book, and with a net interest margin, continuing with a net interest margin of 8%, what gives you this confidence that you can grow the book looking at the history of the industry and even specifically with respect to it, that you can continue to give a healthy asset side of your balance sheet?

No, no, I think if you see the way we have done, and that's why we are using the word, this is a consolation year for us. Whatever products and services we have got, we are not adding anything new. We have been doing these products, you know, for some time, and whatever experience we have gained, I mean, we have utilized those experiences, and that is the basis. In fact, some of the places, you know, we have got around 1100 branches across, in fact. And, I mean, the type of productivity we can get from these branches, we have not reached, I mean, nowhere near optimum, actually. So, if I'm able to do even my 70% to 80% of the capability of my branches, we can do much, much more than this. Because of the experience, we are a little slow. In fact, that's why some people are asking, quarter one, the growth is lower than what maybe people have anticipated. Well, you can see this growth will pick up. JLG, we still have a very, you know, firm belief in JLG. Yes, there have been challenges, but whatever challenges are there, I think because of, I'm not trying to take a shelter of, you know, guarantee scheme, but I think guarantee scheme, whenever there are, you know, when the numbers, I'm talking the stress goes beyond average, I think then we'll get the benefit of guarantee scheme also, which was not there in past. So, that will even out the challenges when there are, because of cycle, there are issues. Otherwise, we see there are humans' potential. Actually, if you really ask me, JLG, the way it has happened during the last four to five years, people have not gone for new customers at all. So, there is a lot of potential there if we are able to do things good. And, again, we are very clear that we are not going to go out of our core geography as far as microfinance is concerned. In case I find a good potential, we will go through partners, not through our own network. So, wherever we have got network, we have got good experience, because people have actually not gone for new customers also, our senses, there is a good potential and there is a good requirement also. Industry also, you know, gone down during this period. If you see, almost 30% degrowth has happened in the industry also. So, there is a potential, which we intend to see that, especially in the core geography of Utkarsh. On the other part, I think we still have a very, very small raise. If I'm talking of any, you know, housing, I'm having only 1,000 crore. I'm talking BBG. We are in the same range, actually. You know, business banking group, which has huge potential. We are talking gold loan. We are around 300 crore right now. I mean, you can imagine the type of potential we are talking of. So, I think each and every segment where we have started, we are small that way. And in percent results, I think, you know, 30 percent is not a very high growth from that perspective. So, these all numbers are, I mean, I will not use our achievals. These are well within, you know, when we talk about our plans for this year, 25 to 30% growth in the top line should not be a problem.

No, my concern has not been with respect to your ability to grow your loan book. It's frankly your focus on growing your loan book is my concern itself, frankly. I mean, my question really is that should you be looking at growing your loan book? Yes, obviously, in linear to the industry for sure. But, you know, the quality of the loan book itself still seems to be following the same pattern as earlier periods. Please correct me on that part. And even now, when we're talking about the secure part of the book, we are talking about, you know, you looking at protection under Sarfasi and recovering money through Sarfasi. And again, which brings in certain questions on your practice of even giving secure loans as such. Can you help me dilute my concern on these jobs?

Now, certainly, maybe Amit can also talk about this part, but I can, you know, the way we have done during the collection, sometimes, you know, there will be some periodic spurt can happen in some of the portfolio or some of the accounts, actually. But, I mean, there is a proper laydown process. In fact, I mean, secure the challenge, it takes a little longer time to settle. So, it remains an NPS status for some longer period. That's the only difference in case of, but let us accept this fact that in secure case also, the cases will go bad. It's not that the cases will not go bad in case of cases. The process followed a little different in that case. The yield is lower for sure, but I think the stability of portfolio is much better in case of secured. It takes a little longer time to settle the, you know, whatever security you have got in some of the cases.

Thank you. We have our next question from the line of Vatsal Cheda from Philip Capital.

Please go ahead.

What's all I did? Hello, what's up? We'll move on to the next question from line-off. Ashley Stonjee from Kodak Securities, please go ahead.

Hi team, good afternoon. Sir, a few questions on the MFI book. Your total MFI NPAs are today at roughly around 740 crores. Correct me if I'm wrong on that number. Want to know what proportion of these MFI NPAs are now covered under the CGF MU scheme, and what is the NPA provision you are carrying against these MFI NPAs? That's the first question.

One minute, maybe you can go to the next question by the time, we'll just take that figure.

Sir, and secondly, this CGFMU scheme, does it allow you to apply a lower risk rate to the covered set of loans?

Yeah, it does, but there is a cap, Ashresh. You know, you have benefit of, you know, obviously, to the extent of the claim that is eligible, which is 72.75%, and in addition to that, you have a cap of 15% on the total disbursement made, which is obviously under the regulatory terminology called crystallized portfolio. Of that 15%, you know, you can count and apply zero risk weightage on that. I guess the benefit is simply given because on one hand, you have a premium which goes to your cost, and on the other hand, you have the coverage. So the benefits under the RBI norms are twofold. One is provisioning, another is provisioning. A zero risk weightage, but as I said, it is capped. It's not on the total portfolio.

Sir, you said just to simplify it.

Just to add to your question, so under GLG and MBBL product together, if you will see around 170 crores is the gross NPI amount, which is covered under CGMFU. And on this, if you will see, lifetime provisioning we need to require is of 46 crores as per the CGMFU guidelines. Out of that, already 28 crores has been provided. So only 17 crores is something which will come as a bucket movement every quarter.

Okay, sir, just trying to understand the numbers, 170 crores out of that 740 is already covered under CGSMU. Okay, so 570 is not covered. How much provisions, NPA provisions are you carrying against this MFI NPAs which are not under CGSMU right now? I'm just trying to understand what is the provision requirement you have on the existing MFI stress.

So, if you see, let me try to answer this in splitting before April and after April. So, if you see, before 1st of April 2025 portfolio, we had gross NPA is 619 Crore. And out of that already 407 Crore has been provided. So, the PCR comes close to 66%. And post-April 2025, the total NPA is 73 Crores, which is the recent one. Out of that already provided is 14 crore. And between these because we started CJMFU somewhere in mid of January 25. So that is where you know this number comes as 170 because certain NPA is also of the portfolio built up between January 25 to March 25.

Understood, sir. This clarifies. So, just going back to the risk weight question, if I were to simply add 100 rupees of MFI book incrementally going forward, what would be the risk weight assigned to that book?

Out of the 100 rupees, on the 15 rupees, you will assign zero.

Okay, so 85 rupees, you will still assign a risk weight?

Yes, that's right. Simplistically good.

And secondly, can you also split the non-MFI NPS? I think the total number is around 420 crores. If you can give a breakup of non-MFI NPS across segments like CV and MSME. In rupees is also fine for us.

With 38 odd crores, all MB is 425 crores.

Yes, sir, I want to know what's the breakup of that 425 across MSME, wheels, and so on.

Okay, so out of that 425, MSME is, secured MSME is 168 crores, CBC is 62 crores, WSL is 30 crores, and housing loan is another close to 4950 crores.

Understood, sir. So, and lastly, if you can share any update on your capital issuance plans, and also one more, sorry, one more data keeping question, if you can split the, if you can give us the microfinance slippages for this quarter. Thank you. Those are all the questions I had.

The total provision that has gone into my P&L for quarter is 109 crore, out of which micro-banking is 45, and non-micro-banking is 62.

Sorry, so it's lipidious if you can share, and if I slip it, it is.

So for microbanking, slippages for this quarter stood at 68 crores, as compared to 153 crores of quarter-four spots.

Perfect, sir. And last one was on the capital.

Yeah, so, you know, We just mentioned about, you know, raising 500 crore of style to NCD, and I did speak that that should, on the back of the envelope, give us about 250 basis point incremental CRAR. And with the trajectory as we spoke about in terms of profitable years, a clawback of profits, so there would be no otherwise capital equity raise that we anticipate at least till the end of FY27.

Understood, sir. Perfect, sir. Thank you very much for the answers.

Thanks a lot, sir.

Thank you. We have our next question from the line of Henil Sharp and Individual Investor. Please go ahead.

Hello, sir. Hello, sir. Am I available?

Yes, sir. Please go ahead.

Yes, sir. Any guidance on XY27 ROI or TEDICOS?

Since for FY28, which is a 15% ROE, which, you know, it's a path to profitability through FY27, because that has to be the first milestone delivery, we are looking at, you know, more than around two-digit upwards ROE by the exit of FY27, which builds up the case for ROE for the FY28.

Okay, sir. And one more question, sir. Our operating property is not rising. You know, it's very, the growth in operating property is very slow. So can you please throw some light on it?

Yeah, you're right. I guess if you really look at the trend from where and that's what we say, the, you know, consolidation and the bouncing back story beginning, you know, a negative peak up of around 44 in December to a positive of 12. We are at 60 for this quarter, which is fivefold of Q4, signifying that the disbursements, which is the core input that builds up the portfolio, that builds up the income accrual AUM. That trajectory is visible over the last two quarters, and as we go along, disbursements and portfolio will continue to build up with completely normalized credit costs. There will be no reversals. That has been an event last year, so you'll have a steady state AUM to accrue income in a normalized fashion as growth is building up in coming quarters with added cost of fund advantage in terms of almost 60 basis point benefit accrued. And my peak rate of deposits at a point in time on senior citizens was 9.1, which is 8.25 today, and the peak deposit card rate, which was 8.5. It's, you know, eight, seven-point and eight-ish point of view both. 8.1. These two things, as we grow in our deposits and the new maturity gets into at the lower card rate, we continue to see benefits in the cost of funds. The third line, this is relevant because it will come back to the path to profitability. The third line, as I mentioned, the income is also an element of disbursement, loan processing fees, which is up as the disbursement grow up. So correlation, I guess, the income will again be stabilizing, and then at the same cost, which one of our colleagues asked us before you, at the same cost with no expansion plans, it's a matter of getting the higher income and higher productivity, which will lead to a peak of growth incrementally from wherever we are here. And we just mentioned to your previous question that if I am exiting FY27Q4 with a ROE of, say, around, you know, two digits, that, you know, probably would be in a very decent PPO. That's the envelope, you know, in terms of, you know, trajectory we are looking forward.

Okay, sir. Thanks for the details, sir. And may I ask one more question, if you permit?

Yes, please. Go ahead, sir.

Okay, so, sir, how do you mean that is, you are saying that we have already enough interest, sir, so cost-to-income ratio will not rise over the next two years, even if we go every year 30 percentage, right? That is right?

So, I guess, again, little relevance, and thank you for asking this question, because cost to income actually looks elevated because the income, which is a denominator contraction, has happened over last year. Once income comes back, and all that we said is about getting the income, you know, the top-line growth and cost at static, you will see the cost to income ratio reasonably improving as we exit F527.

Okay, okay, sir. And do we intend to grow MFI space or we will stay here, means, on Longwood over the two years?

No, no, I think as I mentioned that, you know, we understand the GSD business. So, I mean, our ratio is very low now. Right now, we're around 25%. But we'll continue with the microfinance, you know, to that exchange, sir.

Okay, thank you, sir. Thank you for the detailed answer.

Thank you.

Thank you. As there are no further questions, I now hand the conference over to the management for closing comments.

Thank you ITEC team for hosting this one, and thanks every investor for your queries, questions, and interest in the company. As you mentioned, I think work is behind us, and we can see next few quarters are going to be really good quarters, and better in all the parameters, all the KPIs that we talk about. So, once again, thank you very much for your support and guidance all these years. Thank you.

Thank you, sir. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your line.