Fedbank Financial Services (NSE:FEDFINA) Q1 2027 Earnings Call

0:00 Ladies and gentlemen, good day, and welcome to the q one f y twenty seven earnings call of Fedbank Financial Services hosted by Equity Securities. As a reminder, all participant lines 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 0 on your touch tone phone. I now hand the conference over to mister from Equira Securities. Thank you, and over to you, mister. Good afternoon, everyone. We welcome you all to the earnings conference call of Fedbank Financial Services to discuss the Q1 FY 'twenty seven performance of the company.

0:47 Today, we have the management of the company represented by Mr. Parvish Moola, MD and CEO Mr. C. V. Ganesh, CFO and along with them, we have other senior members of the management as well. I would now like to hand over the call to Mr. Lokeesh Parikh, Head IR at Fedbank Financial Services. Over to you, Lokeesh. Thank you, Shripal. Good afternoon, everyone. I would like to welcome all of you for joining our Q1 FY twenty twenty seven results earnings call. Before we start, I would like to highlight that some of the statements made on this call may be forward looking in nature, including those related to our financial performance, business strategy and growth plans.

1:34 These statements reflect our views as of today and may evolve with changing business and market dynamics. With this note, I now hand the conference over to our MD, Mr. Parvish Moola for his opening remarks. Thank you, and over to you, sir. Thank you, Lakesh. Good afternoon, everyone. I would like to extend a warm welcome to all of you for joining the Q1 FY twenty twenty seven post results earning call. I'm accompanied by Mr. C. V. Ganesh, Mr. Sharadur Gadam, Mr. Jagdish Shah, Mr. Suresh Kumar, Mr. Vikram Rathi and Mr. Lukesh Parekh. For the last five quarters, we have articulated the same set of priorities and they remain unchanged. We continue to allocate capital to businesses that earn a strong and consistent return to grow our fully secured book, to scale our twin engines of gold loans and lab, to grow our core income even as we consciously reduce our reliance on direct assignment, to transition to an efficient cost structure and to hold credit costs below 1%.

2:34 This consistency is the foundation on which we have built rebuilt this business over the past one year. Against these priorities, our disbursements in this quarter increased 14% Y o Y to INR6760 crores and our AUM grew 35% Y o Y to INR21136 crores. Our gold loan business continued to lead this growth with disbursement rising 15% Y o Y to INR 6,087 crores and AUM increasing 77% Y o Y to INR 11,191 crores. Our doorstep gold loan offering maintained strong momentum with AUM growing 96.5% Y o Y to INR $17.87 crores and our AUM per branch stood at INR 17.7 crores.

3:20 While gold tonnage remained stable, we continue to maintain a prudent risk profile with the LTV on AUM at 67.9%. Our mortgage business continued to demonstrate steady growth with disbursement increasing 4% Y o Y to INR673 crores and AUM rising 14% Y o Y to INR9777 $9.77 crores crores. Our focus remains firmly on prudent portfolio expansion and disciplined underwriting. This quarter, there has been a regulatory transition for the gold loan industry, which I expect will be a common theme across the sector in this season. Effective April 1, the RBI revised the LTV framework requiring onboarding LTV on bullet loans to be calculated on the total amount due at maturity, that is principal and interest together rather than on the principal alone.

4:08 In response and to support our customers while maintaining prudent risk standards, we have adopted the periodic interest due structure and we continue to operate at LTVs below the regulatory limits. As customer repayment behavior is unlikely to change immediately, Reported overdue levels are expected to remain elevated in the near term. We view it as a customer behavior in transition rather than an asset quality concern. On the shareholding front, True North Fund LLP, a strong long standing shareholder in the company has exited its entire holding of approximately 25,700,000 equity shares, representing 6.86% of the company's paid up equity share capital through a block deal executed on the stock exchange. The shares have been acquired by Nomura India Equity Fund managed by Nomura Asset Management in its capacity as a foreign portfolio investor. We remain deeply appreciative of True North's support and partnership over the years, and we warmly welcome Nomura India Equity Fund as a shareholder as we look forward to their participation in the company's growth journey.

5:11 There have been a few leadership developments during this quarter. We are joined by Mr. George Mr. George Ohman has joined us as a business head for gold loans, bringing over thirty years of experience. He has held leadership roles across leading banks and financial institutions with extensive experience in building lending and gold businesses. He will report into Mr. Jagdish Rao, who is our CBO for gold loans and leads the gold loan business. Mr. Sharadul Gadam, who has steered our small ticket lab business through a challenging period and played a pivotal role in stabilizing it, he will move into a new role of Chief Transformation Officer. Shardul will be responsible for driving end to end business transformation by identifying opportunities for collaborative growth and driving efficiency across products. Mr. Jagdish Rao, who serves as our Chief Business Officer for Gold Loans and he is our CMO, will assume additional responsibility of CBO small ticket and home loans.

6:05 Jagdish comes with a rich successful experience of incubating and scaling businesses. He will be heavily invested in enhancing resource utilization across our distribution infrastructure. These two businesses share a complementary fit and near similar target market customer and under Jagdish's unified leadership, we are confident of unlocking greater synergies, scaling operations and driving growth to newer heights. Both these businesses are strong growth businesses and we wish to invest equally in these businesses. Turning to profitability and asset quality. Despite a negative direct assignment income of INR 13 crores during the quarter, a direct consequence of a deliberate choice we made to reduce our reliance on direct assignment, the company continued to expand its core earning delivering a 33% increase in net income. Credit costs have remained stable at 0.8%, well within our guided range of below 1%.

6:57 Asset quality, our GNPA moved to 1.6% from 1.9%. In Q4, our provision coverage increased to 38%, net NPA stood at 1%. The quarter concluded with a PAT of INR114.4 crores of Y o Y growth of 52.5% and ROA of 2.6% and an ROE of 15.4%. Taken together, the quarter reflects a business that is growing well with improving asset quality and resilient core earnings. The foundation we have built over the past year, a fully secured book, a scaled gold franchise, a stabilized small ticket lap and a strengthened collection organization is now in place. We believe it positions us well for the quarters ahead. I will now hand over to our CFO, Mr. C. V. Ganesh to take you through the numbers in more detail.

7:45 Yes. Thank you, Parviz. Thanks everyone for your participation on the call. We have started the year on a strong operational beat in spite of Q1 being episodically sluggish for us. Detailing on what has been covered so far. First, on the AUM growth. We had a modest AUM growth in Q1. AUM grew almost 5% sequentially quarter on quarter and 34.7% year on year. Gold loans remained the largest contributor to business growth, supported by branch expansion, customer acquisition initiatives and a strong demand across our various markets. Our gold loan AUM increased to INR 11,191 crore, up nearly 77% year on year.

8:38 The mortgage AUM also remained on a healthy trajectory and closed at crores, growing approximately 15% year on year. Consequently, our total AUM crossed the INR21000 crores milestone during the quarter, coming in at INR 21,136 crores. Q1 twenty twenty seven has been a very different quarter for us from the four quarters of last year, especially for our lead product, which is gold loans, with headwinds of declining domestic prices of 15 between January 31 to June 30. Additionally, there were disruptions in the business model due to a change in gold loan related regulations with effect from April 1.

9:29 In spite of these two headwinds of adverse price movement and regulatory changes, we have delivered an 8.1 quarter on quarter sequential growth in our gold loan a year. We have also been able to marginally grow gold tonnage in the quarter by 1% sequentially over Q4. Now on the operating income and profits. Our operating performance in Q1 has been strong. Our core net interest income grew 12.3% sequentially quarter on quarter and 40.6% year on year. We consciously degrew our DA income. NII, net of DA income, increased 6.6% sequentially quarter on quarter and 38.7% year on year.

10:23 So while our NII grew about 40%, operating expenses declined sequentially by 2.4%, resulting in a strong EPOP growth of about 50% year on year, which I will cover separately. Now on the yields and cost of borrowing. The yields, excluding DA, grew quarter on quarter sequentially by 10 bps to 15.7% on the average loan book and 15% on the average total assets. We had advised in our last earnings call that we had conservatively tanked up on liquidity in the quarter to counter volatility caused by the geopolitical situation in The Gulf.

11:11 Now this tank up has stood us in good stead. And while incremental borrowing costs in Q1 remained heightened by 2,030 bps over Q4, we were able to actually bring in our weighted average cost of borrowing marginally lower by three bps quarter on quarter at 7.80. That being said, we remain cautious in terms of outlook but optimistic in terms of rates turning benign with the FCNRB flows coming in Q2 into the banking system. On the co lending, due to transition related issues with the new regulatory guidelines across partners. A large part of what would otherwise have been CLM business was booked into our own balance sheet in Q1, resulting in leverage going up from 4,600,000,000 to 4.89 This has also resulted in the interest expense showing a rise of 10 bps in the ROA tree.

12:09 We are hopeful that most of these issues will get streamlined over the next few months, and our co lending business will get normalized, helping us deleverage in the next few quarters. Now on the asset quality. The new guidelines have made bullet loans less attractive for customers. While this has necessitated us to move to a periodic interest due structure from the optional interest servicing structure earlier, customer repayment behavior will take some time to readjust, resulting in reported overdue levels being elevated in the near term. Our increase in Stage two from 2.2% to 2.7% is entirely due to this readjustment. We do not see any asset quality concerns due to this rise with the gold collateral remaining highly realizable.

12:59 However, we see the new rules as setting a new normal in terms of the reported delinquencies due to the new construct, with the entire loan amount now getting reported as overdue even if the customer misses a single interest servicing. On the asset quality, our GNPAs reduced 30 bps to 1.6% in Q1 from 1.9% in Q4. And net NPA also reduced 30 bps, falling marginally below 1% for the first time. While flows have remained at similar levels to Q4, the reduction is due to write offs we have taken on the deeper bucket and higher provision NPAs. As per our Board approved policy, which has resulted in this 30 bps drop in GNPA.

13:48 Without the write off, the GNPAs would have stood at 1.87%, which is the same level as March 26. Our provision coverage increased to 38.36% in Q1. This is because of the mortgage skew in the GNPA book. Any gold loan flows would require a much lower provisioning, optically reducing the PCR going forward. Our credit costs are marginally up six bps quarter on quarter due to the combined effect of the above. However, it remains contained at the 0.8% level. Now on the ATVs. The increase in gold loan ATVs by about 7% is attributable primarily to the decline in gold prices.

14:35 Our on boarding ATVs remain at levels similar to last quarter. We have not increased the same. Now on the profit and return metrics. The strong core income growth and controlled BAU OpEx resulted in our pre provisioning operating profit at INR 187.5 crores, growing 15.2% sequentially quarter on quarter and 50% year on year. Our PAT also grew 52.5% year on year. In the last quarter, we reported that we had crossed the psychological milestone of a quarterly profit of 100 crores. We have returned a PAT of INR 114.4 crores in Q1.

15:20 Our quarterly EPS on a non annualized basis also crossed INR 3 for the first time ever, up from INR 2 in quarter one of last year. We remain optimistic on the sustainability of this number. Three months ago, we announced our ROE breaking into the teens from the 12% range. In Q1 twenty twenty seven, our ROE has also crossed the psychological milestone of 15, coming in at 15.4 This represents an expansion of three eighty bps year on year in our ROE from 11.6% in Q1 twenty twenty six. We remain deeply grateful to the support of all our investors and their faith in us, including a lot of the new investors who have entered the capital table and are on the call today.

16:13 Your support makes us stronger. Now on the operating leverage. We have admittedly had a history of stubborn OpEx. In our journey over the last six quarters to create a different organization from the past, we had in the last earnings call advised that our operating leverage is playing out slowly but surely and advised of green shoots. As a percentage of average total assets, our OpEx had reduced in Q4 to 5.5% from 5.9% a year ago. For Q1, we have come in with an OpEx to average total assets of 4.8%, an improvement of 70 bps sequentially quarter on quarter.

17:05 This creates space for us to invest in new branches in the current year and still give headroom for some investment OpEx increase, while at the same time attempting to sustain the ROE. Our cost to income has also shown an improvement of over 400 bps sequentially quarter on quarter, coming in at 52.8% from the annualized number of 57.2% in FY 'twenty six. While we keep a very keen eye on costs, I want to emphasize that the primary driver of these reductions remains the core income expansion. The improvement in costs seen during the quarter should also be viewed in the context of the seasonal nature of our business.

17:51 Q1 is typically a relatively softer disbursement quarter compared to Q4, which results in a lower sourcing and business acquisition expense for us. As originations pick up meaningfully in the next few quarters, we would expect sourcing related expenses and operating costs to also increase, but corresponding to the business growth. We are building the business for the long term. And while we continue to measure continue to monitor and measure the cost metric, we only see this as a reaffirmation in terms of the investments we will seek to continue on our new growth drivers for the future. Lastly, on capital adequacy, our CRAR came in at 20.71% compared to 22.4% in quarter four.

18:42 Some part of this reduction was attributable to the shrinkage in the core lending book, which came on balance sheet. We are working on enhancing the number of partners and much of the incremental AUM growth during the year would be done on a collaboration basis with CLMDA partners to help us conserve capital and give us headroom for growth. We believe that Q1 FY 'twenty seven has set a strong foundation for the current fiscal. As the numbers over the last four quarters show, we have attempted to build resilience and consistency in terms of asset quality, credit cost and return metrics.

19:28 We are deeply grateful for your support in this exercise. With that, we now hand it over to the floor for Q and A. Thank you very much. We'll now begin the question and answer Anyone who wishes to ask a question may press star and 1 on the 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'll wait for a moment while the question queue assembles. The first question is from the line of Digant Haria from GreenEdge Wealth. Please go ahead.

20:14 Yeah. Hi. Thank you for the opportunity, and congratulations to Parvez,, and and the entire team, including. It was it was, you know, great to see the... You know, whatever you have been talking for the last five quarters, play out quarter after quarter. Congratulations on that. I have three questions this time. First, you know, first is, you know, with this new guidelines setting in from April, you know, where we have to ensure that LTVs are maintained across the life of the loan. Like, you know, how have we positioned ourselves and, you know, how is, you know, this whole NBFC versus the bank's equation playing out? Because I believe banks can now give those income generating loans, so they can give slightly higher LTV.

21:00 So just any color on this particular thing of how FEDFINA is positioning itself? Srinag, thank you so much for the question, and thank you so much for being with us consistently. See, you understand this gold business. This regulation change is earlier the industry was doing bullet loans. The regulator has permitted that you can go up to 85% on certain ticket sizes in certain categories. But if you go 85% on bullet loans, then you have to subtract the interest rate upfront. That means you'll have to subtract 15% interest if you're charging, then the LTV sourcing LTV comes down. So what has happened is because of that across the industry, most of the players will be looking at offering the customers quarterly products, which means that the quarterly dues will get created.

22:02 So that is the change which has happened. As far as the IGL product is concerned and comparing with banks is concerned, we also have IGL, which is income generating loan. We also do income generating loans. So NBFCs are well positioned to do those similar loans. So as far as competition between banks and NBFCs are concerned, it remains same. New guidelines is only affecting in terms of how the quarterly dues are reflecting into the one plus and 30 plus, which will optically show. But as you are aware, this is an auction related product. It does not increase the asset risk. It is only an optical piece that this will happen, and it is well managed by most of the gold companies as well as people who are doing gold as a primary business.

22:57 It's and customer behavior also, if you see earlier also customers who are paying monthly or quarterly interest. Now because of the dues getting created, there will be a little bit more push. So there the behaviors will also change. So NBFCs will also come out with innovative products, which could be quarterly, half yearly and other products. And I think it's a game for innovation. We just have to be optically okay with this change. Right, right, right. Okay, okay, okay. Got it. So thanks for this. My second question is around this entire gold price correction which happened. So, see, it was a... It seems like a large collection from the top, but I know that you guys lend on thirty day average rate. So so, you know, at the top, you know, nobody would have lend anything significant at the top of the gold price.

23:46 But just in terms of, you know, let's say the gold price stays where it is in this particular year, you know, what what kind of growth outlook do we see for, you know, ourselves and and, you know, especially this combination of, income generating product plus our regular gold loan product in the NBFC format. So just any thoughts there? Yes. So, Digant, our guidance remains the same, which we have been giving for the past quarter also that if there is no price drop and if the price remains flat also over the year, that means, let's say, let's look at March to next March, the price would have remained flat. Even then, we would have given a gold AUM growth of about 25% to 30%.

24:37 And that we are saying first is will come through tonnage growth. As we have shown in the past five years, our tonnage growth has been consistently about 10% to 12%. Last year also, we gave a tonnage growth of 12%. First quarter and second quarter are usually sluggish on tonnage growth because there are festivities in the second quarter. There are withdrawals which happen, but Q3 and Q4, we pick up the tonnage growth. So there will be tonnage growth which will come in. And if the price remains flat, there will be a little bit of LTV expansion and LTV expansion will happen on the quarterly or the half yearly products. As you are aware, the half yearly and quarterly product is a less risky product in terms of so if you're giving a bullet loan, you will give a lower LTV. But if the loan is getting serviced quarterly or half yearly, you will give a little bit of a higher LTV. That is how the industry is operating.

25:37 So what you might see is that companies will have a different LTV this year, even if the price remains flat. And if you've taken our guidance last year, when the price was going up, we kept the LTV lower. Only when the price has been flat, there could be a little bit of LTV, which could move up. Also, if you notice last quarter since January, the price has dropped considerably and the gold loan industry has absorbed that. Lastly, just to give a clarification, we lent on the last thirty day average or the spot price, whichever is lower. So we do a conservative lending. So if this last thirty day average price is 134 and the spot price is 129, then I will take 129 into my calculation and I will lend at a lower price.

26:35 All right. All right. That is very detailed. Thank you, Parviz. Last question is I just heard that Mr. Jagdish will look at small loans and home housing loans as well. So will these be like new products or are you referring to the mortgage piece that we have? That was one question. Yes. No, thank you. See, Mr. Debish already has earlier also along with Shardul, he is a veteran employee into FEDFINA. He was driving the lab business. He has done lab business. He has done gold business. So he will continue to spearhead our gold business. He successfully scaled it up. He successfully must from the scratch scaled our gold business.

27:22 He will take additional charge of our ST Lab business. That means our existing ST Lab branches, which were distributing the 200 branches, which were distributing the ST Lab product, Chikdish will take charge of that. He will have George Uman under him to drive the gold business. Similarly, there we have Ashish Rajput, who is our NSM. He drives our small ticket lab business. And I think the unification of command will lead to a proposition, which we believe is a unique proposition, where our gold branches, we have almost 400,500 gold branches where we don't do ST lab. So that is a resource utilization, which we believe will be very strong. Plus the target market for both these products is same.

28:10 Thirdly, our penetration into either of the products has been less. We believe that penetration can increase. And fourth, we believe that the distribution for both these products is very similar and geographies we are operating. So there can be a huge optimization plus a scaling which can be done there. And Jagdish, we felt was a person who comes in. See, Shardul came in when we had a difficult situation. He batted on a tough pitch and he corrected most of the things. Now we want the combined element of gold as well as the steel have to give us a different strike rate. And that is where we believe strategically it makes sense. And it also falls in line with the thought process that we have in the future of say three to four years down the line making the branch the epicenter of everything. So it falls in well with what we are thinking.

29:07 Got it. Got it. Thank you. Thank you for this. Lastly, just a data point, did we have any auctions this quarter? What is the quantum of auctions if we would be done in? No, it's very less. Less than INR crore. Okay. That's great to know. Thank you, everyone, and all the best. Thank you, Dikhan. Thank you. The next question is from the line of Chetan Gendodia from Mahindra Manulife Mutual Fund. Please go ahead. Yes. Hi, sir. Many congratulations for a very good quarter. I just had a few questions. Firstly, on the gold loan side, you've given how business has stand out.

29:53 Similarly, on the medium ticket lap and the small lap, if the disbursements have been slightly weaker and also you have made a lot of business side changes also. Any outlook if you can share how you are looking at maybe disbursement growth or overall growth for this year? What would be your aspiration over, say, one to two years of how you want to grow this entire lap, please? Yes. Chetan, thank you so much. The medium ticket lap and the small ticket LAP are part of our twin strategy. LAP and gold will be our segments, which are focus segments for us. And I have consistently said that we will continue to invest into these two segments and grow these two segments. The guidance that we have given for this year is that we will grow the entity at about 20% to 25%.

30:47 So if gold without the price increase grows at 25 to 30%, the lab segment will also grow at 20%. Within that, the medium ticket lab or the small ticket lab might one might grow faster than the other. And we are heavily invested in both these products. And as you are aware, both these products operate in different target segment. The medium ticket lab is a higher ticket size and operates and competes with different organizations and it is a more Tier one, Tier two product, whereas the small ticket lab is a Tier two, Tier three, Tier four product and a lower ticket size. The medium ticket lab has been facing competitive intensity on the yield side. There is a huge pressure on the yield. So companies are playing with approval rates, yields and dispersal. We are maximizing on the yield so far, and that is how we've been operating in the first quarter, but it will be quarter on quarter play.

31:42 There has been a substantial drop in yield by competition. We have not joined there yet. So and for us, the dispersal or the AUM growth is an outcome. We want to get good quality business there. On the small ticket lab side, we've had a drop in approval rates, and we have not let go of the yield. These are the two elements which have led to the dispersals showing what it is. We have come on the back of a rebuilt business. We are watching. We are sure to pick it up. As I said, it's a combination of approval rates and yield. And there have been enough there is enough expertise in the organization for us to know when we want to pick it up, looking at how the market is playing and which vernacular market is playing. So we will play it accordingly, but we will give your company the growth that we are expecting for the year in the lab segment and the gold segment.

32:45 But we are watchful in terms of what we are getting. There is a play of partners, there is a play of payout, there is a play of yield, all these combinations. So each company will maximize one or two. We have chosen to get this vessel as an output. The others we have held very, very closely. That's the outcome. And I think that the new change is more a strategic change, more a scale change and that will benefit us in the longer term. And we've been taking decisions from a longer term perspective. Understood. That's it. Sir, one more thing is this credit cost margin you had in stock on sequential basis. Is this a function of the write offs that think you were alluding, is that the function of the write offs you have taken? And what what could will be be the quantum of that?

33:41 Yes. See, our regular credit cost has been around 0.7. So a little bit 10 basis points, it could be from there. Okay. Understood. Great. Thank you. All the best. Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to one per participant. Should you have a follow-up question, we would request you to rejoin the queue. The next question is from the line of Rajiv Mehta from your securities. Please go ahead. Yeah. Hi. Good afternoon. You know, thank you for giving me the opportunity, and congrats on good numbers.

34:29 I do not understand this gold loan disbursement impact because of new regulations. I think there seems to be a very substantial impact at the operational level or at the volume level itself. Because when I look at our disbursements, we have grown by 15%, 20% Y o Y, but the gold price itself is up 3540% Y o Y, and then the 20% capacity growth also from our standpoint. So just wanted to understand where this hit has been more. Is it more on the more than 2.5 lakh loan segment where the repayment assessment was also an additional friction or an eligibility filter, which RBI asked every entity to do. So if you can just tell us how quickly can we normalize from a volume standpoint in terms of operations from where we are and whether that it was more on the than 2.5%?

35:25 So Rajiv, two ways to look at it. See, dispersals on the gold translates to a growth in the gold loan book. If you look at our gold loan AUM growth is about 8%. If I have to break that 8% for you, 1% has come from the tonnage side. And there has been a price drop. If you look at comparing between the quarters, there is a price drop, so of almost 4% to 5%. And the so if you will have a plus 1%, minus 5% and about my LTV has moved up from 61 to 68. So that is a seven, that is a 10%.

36:10 So that's the math. No. Actually, sir, I was actually asking from a flow data point of view from the new business activity, which is this was my number. And that number in this quarter versus the same number in the last year quarter is up 15%, 20%, but we had about 20% capacity growth and the gold price are higher by 30%, 40%. So there seems to be a significant amount of volume hit in terms of operational hurdles because of the new regulation. Would that be the right interpretation? No. No. See, because if you if I just give you one number and I'll ask Jagdish to add there. If you look at my gold disbursement last whichever quarter you are comparing, if you're comparing that with the quarter one of last year, you see quarter one of last year, whatever disbursement I did and look at the growth in the AUM. So if I did about INR 6,000 crores, 5,000 crores of disbursement, I got a INR 400 crores of growth last quarter last year first quarter. And this time, with the INR 6,000 crore, I got a INR 800 crore growth in AVN.

37:16 So the growth is a correct number. I'll ask Jyabdish to add to your listing. But if you do the math with growth, you will get it correct. So Rajiv, it's the reverse which has happened. So if you compare last year's Q1, we have actually degrown in our tonnage. And what was growth that we have seen and the dispersal that we have seen is purely the impact of the price movement, which happened in Q1. And to answer you about the ticket sizes, the trend for after the new this quarter, Q1, so we are completely aligned to the new regime. Our systems are aligned. The assessment methodologies, the purpose based lending consumption loan and income generating loan. So everything is aligned. And even the industry, I believe, is completely aligned in terms of the structure.

38:12 But unlikely, what we are seeing is there is a skew towards loans getting disposed at a ticket size more than 2.5 lakhs. So that is happening. So even though you have tightened your norms for lending plus bringing in LTV controls at 2.5 lakhs, anything about 2 or 2.5 lakhs, you can't give that 85% range or so that has played a lot. It has not impacted, in fact. Okay. Okay. I'll just come back because I've got more questions maybe. I'll just come back with you here. Thank you, Rajiv. Thank you. The next question is from the line of Dheesh from ICICI Securities. Please go ahead.

38:58 Yeah. Hi, sir. Congrats on a good set of numbers. Sir, just to one thing on this credit cost part. Right? So we we see are now settling at, you know, historical high level of 38, 40%, and especially, you know, significant part of our AUM is now gold. So I think PCR looks pretty decent at this scale. So now considering the marginal uptick in commit cost in q one, you know, despite 600 basis point increase in PCR. So for the remainder of FY twenty twenty seven quarters, logically, credit cost should trend downwards, right, assuming there is no further increase in PCR. So what's your thought on that, sir? Ramesh, thank you for that question. So you're right. I think on the mortgage side, we do not perceive or expect any increase in credit cost, right? It is just that we remain watchful of this new structure. See, we have stopped doing bullet loans, okay? Our entire loan book, which was predominantly bullet loans, is now almost entirely on an interest due structure.

40:03 Now effectively, it is a large book. And depending on the if the customer misses the interest servicing, the overdue creation, while the provisioning on that is lesser. But there is a provisioning, nevertheless, right? So that is an unknown. It's as I said, we are into a new normal, okay? Are also calibrating and understanding how this works. Now clearly, the collateral is very liquid. There is no reason for any stress, we believe, in the asset book because of just because we met this as an interest payment, right? And so we remain watchful. So the only thing that can your hypothesis is correct. The only thing which may sort of affect it a little is how the gold delinquencies trend over the next next few quarters.

40:55 But whatever happens to us, we believe will be on a relative basis similar to what happens to the rest of the peer group. So we will watch it. Got it. Got it. So just to follow-up on that, so when we look at your Stage two numbers, right, from last quarter to this quarter, there is an increase of 50 basis points. And I'm sure, as you also mentioned on the call that it is entirely because of the regulatory change in gold business, right? So in that sense, the impact is already there, right, in the numbers. Okay. So you can answer that. So, Vanish, in the first quarter, the regime, we were all aligning to avoid the mean, the bullet repayment structure, what we brought in is the monthly repayment structure, monthly interest due structure.

41:54 What happens is and now we have dispersed the set of numbers in Q1, and there is a skew towards monthly disbursements because of the LTV related benefits that customer gets. So what we have changed is, we have changed it to a quarterly disbursement structure and even the industry is innovating this. So moving from a bullet repayment to quarterly, moving from only bullet repayment to monthly. So monthly has given us K2. Yes. Overall, Arunish, the credit cost guidance remains same. See, at the start of the year itself, we said the credit cost guidance will be sub-one percent. And as far as the mortgage GNPAs are concerned, they are tracking well. We have not seen anything on the West Asia crisis hitting us as of now. I don't know how it will in Q2, monsoon effect in Q2, Q3.

42:48 So we are well sub the guidance. And this gold thing also, I think we managed it well in the first quarter with the regulator change happening. It's only an optical thing that it is showing in the Stage one and Stage two. The flow into the NPA also is going to be very less compared to the way you see it in other products. And even if it does flow there, we have an effective auction mechanism. So I'm not so I'm not concerned about I'm not at all concerned about the asset quality risk on the gold loan side. And as far as mortgage is concerned, it is tracking well. So the guidance remains. All our guidances, which we had given at the start of the year, continue to remain on the growth side, on the tonnage side, on the credit cost side and on the ROA side. Everything is same intact.

43:48 So just a last clarification. So now since we are moving from higher tenure loan to a shorter tenure loan, a monthly repayment loan, so does this will have any impact on blended yields or broadly will maintain spreads? See, the yields, if remember last year also, we had said the yields will be not because of the mix. As I said, the yield pressure is coming more in the respective products, which is a lap is facing a yield pressure. I'm operating at a particular yield of about 12%, 12.5%. That is coming under pressure.

44:35 And gold, I think we will try and see how the competition operates with a combination of LTV and yield. So individual products will have to behave particularly in those geographies. So I don't see a mix issue coming in, more of a product related play, which will happen in Q1 and Q2. Q1, we have held it as we had promised in Q4 that we will hold the yields. Q2, it will be the operating dynamics which will play and we'll have to see how each product behaves. But as a mix wise, there won't be any challenges, what we feel. Got it. Got it. So just a shift from, let's say, three months, six months loan to one month loan will not have a material impact on FX is what you're Okay. Trying to write, sir, Okay. Thank you so much, sir, and best of luck. Thank you, Ramesh.

45:33 Thank you. The next question is from the line of Rahul Kumar from Bank Area Fund. Please go ahead. Yes. Hi. Sir, just on the ST Lab segment or the mortgage actually, can you just help us understand the flow through stress for this quarter versus the previous quarter? See, after the slippages in this quarter also have been quite similar to the earlier quarter as a percentage of the old book. So we have an old book, which is behaving in a particular manner, and that old book keeps shrinking on a quarter on quarter basis, and we monitor that percentage. And that percentage is similar or it is going in the expected trend. So we are not seeing any adverse movement in terms of the slippages quarter on quarter. Whenever there has been any adverse movement, we have been the first to call it out and tell you that there have been extra slippages on the small ticket lab, but we have not observed it. The old book is behaving in a particular manner, which we have guided you. And the new book is behaving much, much better and better delinquencies.

46:48 And as the composition of the new book improves, we should benefit from it. So answering your question straight away, there is no adverse movement on as far as the ST Lab flows are concerned. Okay. Okay. Okay. If you can help us understand the guidance on the OpEx to assets or OpEx to income, which are ratio which you guide for this FY 2027? Yes. See, again, what we have guided, Rahul, for the year FY 2026 start, I had guided that we will expand the ROA by about 20 to 30 bps over the average ROA that we had given last year.

47:34 Last year, FY 'twenty six, we had given an average ROA of about 2.4. So we had guided that we will do average ROA much better, that is the 20 to 30 bps expansion. And that 20 to 30 bps expansion will happen with a combination of credit cost and cost to average assets. These are the two levers which will play out. They might not play out quarter to quarter. There might be aberrations within the quarter, but on a yearly basis, that's how you will see it play out. So it could be a combination of 10 bps here and 20 bps into the other element, and that is where we are seeing, and that is how our ROE tree has been moving. Rahul Kumar, sir, I would request you to rejoin the queue.

48:22 The next question is from the line of Yash Dantivadia from Danti. Please go ahead. Yeah. Hi. Congratulations on a great set of numbers. So I brought this question up last time also, right, on the expansion in terms of segment. So for this this financial year, for the next three quarters, where are we seeing our gold AUM versus the rest of the AUM? Like where are we seeing ourselves grow and where are we seeing the AUM reach? So that if the price doesn't move, then we are expecting the gold AUM on a base of March 26, the gold AUM should grow by about 25% expecting to grow about 20 to 22%.

49:15 And the mortgage AUM will grow between 15 to 20%. No. I meant AUM... Gold AUM as a percentage of your total book. That's what I meant. Okay. Yes. So that mix will be arithmetic. Yes. It will be slightly higher as a mix. You see, because if gold is growing higher, that mix will be higher. No, if it stays stagnant then? No, the mix of gold percentage will be higher. Right. Can you quantify higher? Just assume gold does not move from here? See, we track it as a percentage of our right now, I think on AUM, it is about 51.4%.

50:10 Right. Right. Yes. So if I will just have to do the arithmetic, but if gold is growing at 2%, 3% higher than the other one, and that is 50% of the book, so maybe it will add another 2%, three percentage point there. Right. And there is some stress on small ticket side lap, right, in this quarter. Could you tell me where our focus is in terms of mortgage loans or lab loans, and what kind of loans are we focusing on, and what are the reasons there exactly? And when you said 18% growth in lab loans, I'm assuming we are focusing on particular segments within lab.

50:57 But could you just elaborate more on that and elaborate on the yields too? Yes. Yes. We are not seeing any stress on the lab segment. We have not mentioned any stress on the lab segment. I'm seeing as a sector as a sector in small l... On on small lab loans, there is some stress this quarter. See, you will have to look at the ticket size, particular ticket size is being called small. We operate in a ticket size between INR 7 lakhs to 35 lakhs, a small ticket lab. There could have been stress at below INR 7 lakhs. Segment that we operate between INR 7 lakhs to 35 lakhs has not seen stress in this quarter. There is another segment, which is medium ticket lab, we operate between INR 35 lakhs to INR 3 crores.

51:44 That has also not The seen small ticket lab business, we operate at a yield of about 16% and the medium ticket lab, we operate at a yield of about 12% to 12.5%. Right. So on the 18% growth, where is this going to come from? What's going to drive this growth? And are we looking to enter new segments? No. The AUM growth, which I said at an entity level will be 50% of my gold book will grow at about 25% to 30%. And my lap book, which comprises of my medium ticket lap and small ticket lap, will grow by 15 to 20%. Yeah. And so in the lap lap segment, what's going to drive your growth, whether it's small or medium, and audio same both are going to be equally contributing?

52:37 And within lab, are we looking to enter prime prime... You know, the luxury and ultra luxury segment is obviously outperforming. I'm pretty sure you're aware. The the segment above 5 crores is going exceedingly well. So are we looking to enter that segment too? Right now, no, because it operates at a different yield. And we are operating the segments, and we are decently positioned to grow the segments that we are operating in. And the medium ticket lap and the small ticket lap, we will look at the quarter two and quarter three. Alternatively, we could grow either segment. I mean, it could depend on the market. And as I have always said, growth is an outcome for us. We will look at the quality that is coming in and decide the growth where we want to push which particular distribution.

53:30 So it could be medium ticket lap or small ticket lap and depending on the yield combination and the overall portfolio yield that we want to maintain. So it could be a combination and it could be also in the vernacular markets that we operate. The small ticket lab business operates in Tier three and Tier four locations and the medium ticket lab operates between the Tier one locations. So we'll also have to look at how these two locations are playing out when we look at distribution of these products. So it will play out. But overall level, I'm giving you a guidance that will grow this both these together segments at an NTT level, these two segments will grow at about 15 to 20%. Mister, I would request you to please rejoin the queue.

54:17 The next question is from the line of Devanshu from Equintas. Please go ahead. Hey, sir. Thanks for the opportunity, and congratulations on a great set of numbers. My question was regarding our branch expansion strategy. So I think we have guided for opening around 200 odd branches for the full year. And I think we haven't added any branch this quarter. So are we still sticking to our guidance? Or... And what would be the reason why we haven't expanded our branches in q one? So, Divansh, thank you so much. That's a good question. Last year, we added about 150 branches. This year, we plan to add 200 branches. Our guidance remains.

55:03 We have not changed our guidance. We will continue to add 200 branches. Q1, we identified the premises. We did all the work, but we've not opened them. So there are unfinished branches, which are across the country. There were new territories we were getting into, And those openings could not be done. That is why we couldn't disclose the number. So you will hear us disclosing the number in Q2. But that has happened in Q1. We have not done the opening of those branches as much as we had. So the opening has not happened. Investment and identification and work and the premise is everything has happened. Okay.

55:48 But so so previously, historically, we have, on a maximum basis open around 50, 60 branches. So at seven... Around the 70 branch, can we do that? And the branches that you are that you are saying that haven't been opened but have been identified. And so how many that would be? So will will that spillover effect be in Q2 or later on? Yes. It should be you should see the spillover effect in Q2. Yes. Okay. So our guidance remains for 200 tranches, right? Yes, yes, sir. Okay. Okay. And my second question would be, what are our one plus CPD, 30 plus CPD and 60 plus CPD numbers for the quarter? See, the one plus numbers right now are looking different because of the gold loan listing. The one plus and 30 plus for the mortgages is same as we had given last year last quarter.

56:49 The OnePlus is right now for a because of the gold piece is looking slightly higher. And it could be about 200 bps to 300 bps higher on the NTT level. So yes, I'll just maybe add to that. See, I think in the new construct, the delinquency numbers from a one plus 30 plus may not be comparable because of the new structure in which gold loans will operate, which is why we would urge not to read too much into that number. Mister, I would request you to please rejoin the queue for a follow-up question.

57:35 Participants, I request you to stick to one question per participant. The next question is from the line of Mohit M from Manglani Investments Private Limited. Please go ahead. Firstly, many congratulations on this earnings. I just wanted some guidance broadly that... Are there any pockets of stress emerging due to macroeconomic conditions? Mohit, right now, we are not seeing anything. Maybe it will come in Q2 or Q3, maybe after the monsoon plays out. But as of now, we are not seeing anything and we have not declared any stress on because of the macroeconomic environment. All right. Thank you so much. Thank you. The next question is from the line of Dinesh Loni from SHPL.

58:25 Please go ahead. Thank you for the opportunity, and many congratulations to the team. I just want to ask to mister. So where are we planning to do expansion in India, the new territories? And what are the growth plans for, let's say, three to four years? Thank you. See, as far as expansion is concerned, we are present in about 18 states. And so our penetration our expansion is decent enough. We will continue with our extra penetration. That means if we have entered one particular territory with one or two branches, we might add more branches there. There is the territories of Orissa, which is a wide space for us. So we might expand there this year. But there are other territories in the North where we could expand within the territory where we've already been there.

59:23 The growth plans are definitely there. Last year, we put 150 branches. This year, we are putting 200 branches, and we'll continue to put more branches. We believe our distribution capabilities and our branch expansion is very, very important to our growth strategy, and we will continue to do that, sir. Mr. Dinesh Loni, I would request you to rejoin the queue for a follow-up question. The next question is from the line of Pawan Kumar from Edelweiss. Go ahead. Hi, sir. Thank you for the opportunity. Firstly, around some of the numbers. Like the provisions have gone down by INR 40 crores on GS3 assets, right? And it seems like there was a large write off of INR 75 crores.

1:00:10 That's one part of the question. Second part is there's also fair value loss on loans like INR $5.85 crores, which is mentioned in other comprehensive income. And again, the financials, on the INR $5.89 crore lap assignment that you have done, there is a loss of INR 12 crores to INR 15 crores. Can you please explain these three like what led to this? Like what are the am I looking at the numbers correctly? What is that? Yes. So Pawan, first of all, the number that you quoted on write off is not the correct number. It is much lower than that. The write off is somewhere close to INR 55 crores, and I'll request CVG to reconcile it for you. Yes. Thank you, Parvish.

1:00:57 So Pawan, see the credit cost during the year, right, it has provisioning across all stages. So I think the mathematics cannot be done that way. So as I had explained in my commentary, right, our normative GNPA continued to be same as March, which is INR 1.87. We wrote off a little above INR 50 crores, which is which resulted in a 30 bps reduction in the GNPA. So that's where that is there. Now the FPOCA number you see, okay, is where what we have done is in terms of the change of classification of certain assets from FEOCI to amortized cost basis, when we do fair valuation, there is a derecognition of ECL on that. Now when we have classified it back into amortized cost, there is a re recognition of the ECL provision, so which is what has also resulted in addition to the PCR, and it has also resulted in the number you mentioned in the P and L.

1:02:05 Okay. So it's a very normal thing. Now the last question was on some net DA gain. So just say that again. What was the last question, Pawan? I'm sorry, I missed that. So you have done INR $5.89 crores of lab DA, right? This is all in your book. You mentioned on the... Okay. Got that. No, no. So basically, the DA number there, now we have started doing DAs in gold also. Okay? They have thirty seven months of outstanding maturity. So that means it is likely all lab, right? Just one second. I'm a little unsure. You're looking at the LOD, is this? I'm looking at Page seven of the quarterly numbers.

1:03:00 Just one second. Do you have the date? Not the presentation, sir. I mean the quarterly financial results. Details of transfer through assignment, the $4.89 crores that you have transferred out, they have thirty seven months of outstanding maturity? No. So that would be an average across the gold loan and the lap, right? So the lap would have an average tenure of about ten to fifteen years. And the gold loan would have a month. So it may not be indicative, yes. We had done out of the INR 500 and whatever number you mentioned of DA, we had done about a little over INR 300 crores of gold loan DA, right? And which results doesn't result in too much of an upfront gain, right? So the... But we had a loss on DA this quarter, right? That is correct.

1:03:52 No. So the way the accounting for DA works is that the unwinding effect of the DAs we have done in the past, what is the number the negative number represents is that the income booked on the new DAs is lesser than the unwinding effect of the past DAs. And that is exactly why we are getting off this and decelerating the DAs because this is something which results in a negative income going forward. The next question is from the line of Ghansham Joshi from GGS Technopinol.

1:04:41 Good morning. Yes. For giving the opportunity. Primary fiscal year numbers are very good Good number. My question is, does it related Sorry to interrupt you, sir. Your voice is breaking. The next day is 03:38 o'clock. Mister, voice is breaking. Hello? Hello? Sir, your voice is breaking. Can you please repeat your question? Am I audible now? Yes. It's better. Yeah. So the net percentage...

1:05:27 Net stage three percentage of mortgage that is increasing quarter on quarter and year on year? How we are going to tackle this in future? Thank you. Hello. So yes. So see, basically, I think in the last call, when we did the March call, we had mentioned that we have significantly beefed up the collections team. The intensity on the ground is very high in terms of collection effort, right? Now there are multiple conversations happening with some of our delinquent customers.

1:06:14 And the wherever there is a property involved and where the ability to enforce such phrases are little limited, right? So it's a very lengthened process. So it takes time for resolution. We have a lot of people, legal, technical. We have a lot of collection people on the ground working on that number. Now we are going for the long haul, and the idea is to successfully resolve all of these cases, keeping in mind the RBI regulations around collection and recovery efforts, right? So we will the attempt will be to resolve all of these successfully over a period of Sorry to interrupt you, sir., sir, your voice is breaking.

1:07:17 Why publishing the results? Taking account and then you are publishing that. Can it be possible you do convert the files in video and digital sign at? Thank you. Okay. Your suggestion is we convert it into PDF and do a digital signature. Okay. We'll we'll examine that noted. This was the last question of the day. I now hand the conference over to the management for closing comments. Thank you so much. It was an interesting quarter. I repeat, there is a regulation change and I think the industry will maneuver with this regulation change. There will be a new normal which will come because of this regulation.

1:08:14 We've had a very, very decent AUM growth. The operating profit has grown healthily. The PAT has grown healthily. The mortgage growth has shown about 15% Y o Y and we continue with our old guidances. We have not changed any of our guidances. Our ROA guidance, our credit cost guidance, our growth guidance remains the same. Quarter on quarter, you will see us sticking to the number that we have promised. And these businesses, wherever things have not worked well, we are the first people to come and tell you. So thank you so much for joining us, and thank you so much for supporting us in rebuilding your company. Thank you. On behalf of Macquarie Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your line.