Good afternoon, ladies and gentlemen. Thanks for joining in for today's call. We'll wait for about another couple of minutes before we start this call. Thank you for your patience. Hi, sir. Is it good to go? Can we start? We have about 95-odd people on the call.
Sure, I mean, I am fine. We can start. I think.
All right.
Yeah, it is 3:00 P.M. already. We can start.
Sure. Thank you. Thank you very much. Ladies and gentlemen, good day and welcome to the Can Fin Homes Q1 FY 2027 conference call hosted by Investec Capital. 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 any assistance during the conference call, please signal to me, Swapna, by raising your virtual hand. Please note, this call is being recorded. I now hand over the conference to my colleague, Nidhesh Jain from Investec. Thank you, and over to you, Nidhesh.
Thank you, Swapna. Good afternoon, everyone. Welcome to the quarter one FY 2027 earnings conference call of Can Fin Homes , hosted by Investec Capital. We will start with management commentary followed by a Q&A session. To discuss the financial performance of Can Fin Homes and to address your queries, we have with us Mr. Suresh Iyer, MD and CEO; Mr. Shailesh Kumar Singh, Deputy MD; Mr. Prakash Shanbhogue, President; Mr. Uday Kumar, President and CRO; and Mr. Abhishek Mishra, CFO of Can Fin Homes . Please note that this call is being recorded. I would not now like to hand over the call to Mr. Suresh Iyer for his opening comments. Over to you, sir.
Yeah. Good afternoon, everyone. Thank you, Nidhesh, and welcome to this earnings call for Q1 FY 2027 performance of Can Fin. I'll just start by giving a brief of the performance as few highlights. Obviously, all these things are covered in the investor presentation. However, I'll just give you some brief and some commentary on these aspects also, then we can open it up for question and answers. First of all, I'll start with disbursements. In terms of disbursements, we had given a guidance or a projection that in Q1 we'll be doing INR 2,500 crores, Q2 INR 3,000, and INR 3,500 and INR 4,000 in the third and fourth quarters and so on. Against INR 2,500 crores, which was what was planned and what was projected, we have achieved INR 2,609 crores. We have been able to do more than what we had originally projected.
This has been possible because of positive growth across all our geographies. That is, we have six zones, all the six zones, including Karnataka and Telangana, we've had a positive growth. Karnataka actually with the 18% growth over Q1 of last year is actually the lowest in terms of the zone-wise growth. We've had a growth across all the geographies. Plus we've also had a positive contribution coming from the sales team as well as from the new branches that were opened post-March 2023, which has helped us in achieving this disbursement. That is a positive thing, which is one of the drivers for this growth. In terms of breakup of this growth, if you see, we've had salaried and self-employed both have grown compared to last year corresponding period. Salaried in absolute terms has grown by at 21%.
The overall growth for the quarter has been 29%, that is against INR 2,015 crores. The current quarter we have done INR 2,609 crores, that is a 29% growth. Within that, the salaried segment has grown at 21% and the S&P has grown at 44%. Similarly, if you break up between the housing and the non-housing. The housing in Q1 FY 2027 has grown at 28% compared to the Q1 of housing figure of last year. Whereas the non-housing, that is NHL, has grown at 32%, and combined there is a 29% growth. Basically, across all the four 2x2 matrix, if we see, there has been a growth across all the four things. The next, if we look at what is the challenge, however, has been that the prepayments or the rundown has been a little higher compared to even Q4 of last year.
We had this challenge and one of the expectation or one of our planning was that post this conversion from annual to quarterly reset, we may probably see a reduction in our BT Outs. However, this has not happened. In fact, as against INR 1,730 crores rundown in Q4 of last year, this thing we are having a rundown of INR 1,857 crores. Basically there is almost INR 127 crores increase in the rundown. If you break up the same rundown, what comes out is BT Outs, which was INR 400 crores in Q4 of last year, has increased to INR 408. There is no major increase or higher BT Outs, which has resulted in this rundown. It is just a marginal INR 8 crores increase compared to Q4 of last year.
Same way, if you look at loan closures other than BT Outs, that is cases where customers have closed their loans from their own funds or because they are selling their property or where we have initiated the sale under SARFAESI. That amount last year, Q4, was INR 360 crores. As against that, it has increased to INR 377 crores. Both these things have not actually increased in a major manner. What has actually increased, resulting in a higher rundown, is that part prepayments from the customers and amortization particularly have increased. Basically, when the amortization or the reset happened from annual to quarterly, most of the customers were under a change in tenure option. The EMI was constant and the tenure was changing.
In all these cases, when the reset changed from annual to quarterly, and the rate of interest was passed on half a percentage, the tenure has actually crashed, and the EMI has remained the same, because of which higher amount of proportion has gone towards the principal. As against INR 976 crores in Q4 of last year, which was part prepayment amortization, the number has gone up to INR 1,072 crores. Basically, this is the main reason why the rundown has been higher, and we will have to now work on this particular aspect. Coming to the AUM growth. Last year, we had a overall AUM growth of 10.4%, and this year, in Q1, it has inched up to 10.8% or 11% as we have reported, but 10.8% in real.
This has obviously been because of INR 755- odd crores, which has been added to the book from the disbursements net of the rundown. If you actually see, the disbursement was projected at INR 2,500 crores, and for the full year, we had projected that against INR 13,000 crores disbursement for the full year, INR 7,000 crores would be the rundown, which means approximately INR 1,750 crores every quarter. Against which this quarter, the rundown has been INR 1,857 crores, so almost INR 100 crores more than what we had anticipated. Actually, this has also been offset by the disbursement, which has been higher by INR 109 crores. Against INR 2,500 crores, we have done INR 2,609 crores.
Basically, whatever was the expected increase in our AUM, which we had projected for the full year, the Q1, whatever we had projected, actually the numbers net-net have been the same, just that on the disbursement also has been higher and has been offset by an equivalent amount of higher rundowns as well. We are still in line with what we had projected at 14% AUM growth, just that we will have to now consistently do a little more disbursements every quarter to see that we offset whatever is the higher prepayment or rundown that is there. That we will be planning. As of now, we are projecting for INR 3,000 crores only, but we will be pushing for seeing that we cover up for the higher rundown.
The projection for the entire year, we continue to have as a 14% AUM growth is what we will be targeting. Next, we talk about the spread and the NIM. We had in the end of Q4 of last year, we had indicated that there was a high amount of portfolio which has moved from annual reset to quarterly reset and have benefited from the reduction in rate of interest. Plus, there was a January 2026 rate cut also of 15 basis points. Net of that, our yield would come down to 9.81%, which in fact, we have been able to sustain throughout the quarter. For the full quarter also, our yield is 9.81%. This is something which was already envisaged and was already highlighted in the previous quarter earnings call.
Against that, we had indicated that our cost of borrowing would be 6.99%, which in fact has ended at 6.98%. Basically, on the cost of borrowing side, we have further been able to bring down from what we were as on 1st April. This has mainly happened because we also had some high cost NCDs which have been repaid, and we also were able to time our commercial CP fundraise at a very appropriate time. This has helped in ensuring that our cost remains low. We do have a couple of term loans, or rather one term loan which we have raised at 7.25% during the quarter. None of the older borrowings have had any rate revision because there is no repo revision. All our term loans are either linked to T-bill or are linked to repo.
There is nothing which is linked to MCLR, we have not seen any increase in that. Our spread is 2.83% as against 2.81%, as we had indicated in the beginning of the year. Consequently, our NIM is 3.81%, which also we had given a guidance for 3.75%. Going forward, we have a good amount of sanctions on hand from banks, and of course, NCDs and CPs are also there. I think the banks are currently the cheapest option we are having, of course, other than the short-term CPs. We have also got an application with NHB. At least as of now, even considering that NHB, we don't consider in Q2, we don't raise any NCD.
Based on the bank borrowings also, there will be a very marginal increase only in cost of borrowing, and that also because of the incremental loans, not on the existing loans. Keeping that in mind, we are confident we should be able to maintain the spread and the NIM, because on the yield side also, we have a couple of opportunities available because of our change in product mix and segment mix. We are confident that the NIM will be maintained at +3.8% , and we should not have a problem in that. Regards delinquency and NPA, the Stage 2 and Stage 3 delinquency has actually come down compared to March 2026, in absolute value. While there is a little increase of about close to INR 17 crores-INR 18 crores in NPA, it is more than that compensated in the reduction in our SMA-2 and SMA-1.
Consequently, our provision or credit cost is marginal. It is much less than what it was in last year. We are confident, in fact, the trends also indicate that the last six quarters continuously, our NACH bounce ratios have been coming down. Even right now, we don't see any increase in the number of delinquent accounts. Basically, we are confident that we should be able to maintain our credit cost guidance of 10 basis points. That's in a nutshell the brief highlights of the performance. There are any queries, we can now open it up for queries. Thank you.
Thank you, sir. We open up session for question and answer session. Participants, please raise your virtual hand. I will unmute you. Please introduce yourself and ask your question. First question is from [Shreepal Doshi]. Shreepal, I have unmuted you. Please ask your question.
Hi, sir. Thank you for giving me the opportunity. My first question, sir, was on the macros, which have been tough and still remain uncertain, while our asset quality indicators have remained resilient. How do you see that playing out in the next three, six months now? Have you taken any underwriting norms or process changes in the last two, three months? In terms of customer profile, any filtrations or any do's and don'ts that we have tweaked there? Any particular trend in terms of salaried, self-employed segment in terms of rejection rates, and aspects on the same. How do you see the same, let's say, the asset quality trend shaping up in the next three, six months overall, and keeping in mind the points that I've highlighted?
Sure. Thank you, Shreepal. First is, in terms of macros, I think, as I indicated, across geographies, we are at least not seeing any slowdown in the demand. We are not seeing any major issues either in the project launches also. In fact, in this quarter, that is Q1, we have added another 60 APF projects also. The projects are also there. We are also increasing. From 271 approved projects, we now have 331 approved projects as at the end of the quarter. We don't see any major thing on the demand side. On the interest rate side, of course, and liquidity side, liquidity also, as I mentioned, we are having a good response. Almost all our partner banks have come forward and have shown a willingness to sanction. In fact, we've got a couple of large sanctions also.
We don't see any problem in the liquidity either. In terms of the rate of interest, yes, the rates have slightly gone up. As against 6.95%, at which we were raising in last year from the banks, the spread, they have increased, and while they can't increase on the existing loans, it's only for the new loans where the banks have been quoting anywhere between 7.25%-7.5%. That is one change.
Hello?
Yeah.
Yeah. On the asset quality side.
No, some noise anyway. What we have done is in terms of to offset this increase in the incremental borrowing cost, we have also tweaked some of our internal guidelines also. Now, whatever special rates that we are offering, which we are offering for more than INR 20 lakhs, we have increased it to more than INR 25 lakhs. That is one thing which will slightly, in the 20-25 bucket, we will slightly get a little better yield. We've also, in terms of customers re-rating, basically every year, we have to do a customer appraisal once again and classify the customer's risk profile. There also, we have relooked at it.
One is we have added additional parameters that we are doing a little more EWS signals have been added, a little more monitoring in terms of OTM reports and all those things have been added. That if anything is there, we get an early warning and we are able to take corrective action. As I said, one, INR 20 lakhs- INR 25 lakhs we have increased. Now we have also, in terms of CIBIL score. As against about 75% to odd percentage, today 82% of our loans are now having a CIBIL score of more than 700. I think, it's more of customer selection also, which has slightly improved. That is coming from the customers at this point of view.
Consequently, there will be some indirect increase in the rejection ratios, but as we know, 80% of our customers are coming through the DSA channel, their login and everything happens only when it is basically cleared or fitting into our norm. We don't have a very great data, this thing that we can share about how whether the rejection rates have gone up. Basically, these are the things that we have done in terms of this. As I mentioned, for the last six quarters, we have been monitoring, we have our NACH bounce rates have actually come down. We have also, during the last couple of quarters, run some exercises to see that older cases where NACH was not there, we have tried to convert those cases also into NACH.
These are basically some more of hygiene improvement that we have tried to do. This is what we have done.
Got it, sir. Thank you, sir, for that detailed answer. My second question was on the IT side. In the quarter, we were supposed to do a complete implementation on the LOS, LMS, and report generation. I think we have completed the pilot already. When do we see complete implementation? If it is in 2Q or in 3Q, do you see any impact on the business or on the disbursement targets that we have highlighted?
Sure. See, we have done a pilot of five branches and, of course, there have been some teething problems, but nothing which has impacted our business. All these, actually, we implemented all of them on 8th of July. Today it is just 12 days, but all the five branches have put through all transactions including sanctions, disbursements, customer creation, NACH processing, EMI collection through BBPS, non-NACH transactions, loan closures, all these transactions have been put through. While there have been some small issues which have come up and have been immediately attended to, but we have not had any kind of a problem, touch wood, where we feel that it will impact our business. We plan to, in fact, implement it across our remaining 245 branches in this current quarter only. The only thing is we do not have a weekly upgradation or a weekly implementation process possible.
It has to be only at the month end because only then we can take the data and compare it and be able to go ahead. We have done it based on the 30th June data on 8th of July. Same way, we will be doing it based on the 31st July data in August, and the August data in September. Definitely before the next quarter's earnings call, we will be done with all the 250 branches. Going by the experience of the five branches, I think we do not envisage any problems or any issues in the business. Because these branches also are likely to end the month of July with almost the same or better business than June.
Because already they are all logging files, their disbursements are happening, all integrations with all other applications including internal as well as external APIs, all of them have been functioning quite well. We do not envisage any problem.
Got it, sir. Got it. Thank you so much, sir, for answering my question. I'll come in the queue for more questions. Good luck for the next quarter.
Sure.
In case you are joining via dial-in facility, please press star and five on your phone to raise your hand. The next question is from [Sonal Mehas]. Sonal, I'm unmuting you. Please unmute yourself at your end and ask your question. Sonal, you can unmute yourself from your end and ask your question. Since there's no response from Sonal, I move to [Rajiv Mehta]. Rajiv, unmute yourself and ask your question.
Yeah, I'm audible?
Yeah.
Thank you.
Yes, Rajeev. Please go ahead.
Thanks, Nidhesh, and thank you for giving the opportunity. Just few questions from my side. In terms of this IT implementation, what was the experience in coming back to normal business volume for the five branches that we implemented in June? Are we already back to normal business volume or productivity in those branches? That we get to understand that when you implement it in the residual number of branches, what will be the business impact and for what length of time?
This IT implementation I just mentioned, it is based on the June data we've implemented in July. We are almost 12 days since we implemented. We are already kind of, I would say, on track in terms of the business for the month. All the branches we have been talking to them. There are small issues, but nothing major which is a showstopper. All the processes as I mentioned, disbursement, sanction, closures, repayment, NACH, everything has been processed. They are very much on track to, I think in this month itself, they will probably be on track for the business. Already, disbursements have also started in all the five branches. There is no problem in terms of that. Going by that experience, I think we are confident we'll not have major issues. The only thing is, we had five branches.
We could give our individual attention to five. When we do the next 50 or 100 in the next month, it'll take a little longer to do the hand-holding. Beyond that, we don't see any problem. System-wise, in terms of the product that has been delivered and the processing that is happening, there is no issue. In fact, even the people, they have been three to four days is all that they are taking to get the hang of the system.
Sir, are we targeting a certain number of business in this quarter since it's going to be a very testing quarter from our bandwidth point of view? If we did a certain run rate, say, in June, would we be able to maintain that run rate in July, August, September, despite this implementation? Can you share the numbers?
No, I think we are confident that INR 3,000 crores we don't want to change. I think we will be able to meet that number. However, we do plan to come back somewhere in September and maybe either we will reissue a press release or we will maybe come back and have a conference like this. We can update, we'll give a proper update on how the remaining two tranches of implementation have happened in August and September also. We are confident the way five branches have been able to quickly, within 10 days, come back to normal and do all the processes. I think, other branches also, we should be able to do it in the same month. INR 3,000 crores that we are targeting for Q2, stays. That number stays.
One last thing on pricing. When I look at the shift in the ticket size mix to more than INR 30 lakh loans, the proportion is going up in disbursement and INR 50 lakh-INR 100 lakh category, ticket size loans have also gone up in AUM. If they're contributing higher to our growth with every passing quarter, what is the pricing here, versus the overall pricing that we get in the quarter?
Actually, there's multiple combination. It's, I would say, a 2x2 or a 3x3 or whatever kind of a matrix with some additional
Blended number is okay, yeah.
As I said, blended cost is 9.81%, last year also we had 9.82% is there. By and large, overall blended cost is coming to 9.48%. For a salaried customer who is having a CIBIL score of more than 725 and who is probably looking for a loan of +25 lakh , because we moved it from 20- 25, I think the best rate would be around 8.4%. It goes up to around 11% also, depending on the customer profile. If it is an individual customer rating is S2 or S2 + or S3, obviously the rate will be higher. Same way if the customer is vis-a-vis a salaried is a self-employed, it'll be a little higher. Against the housing, the highest rate would be for a non-salaried, non-housing customer who is having a S3 rating.
That would be probably the highest rating. Anywhere between 8.4% to around 12.5% would be the range. Blended comes to 9.8%.
Okay. Thank you. Best of luck. Yeah.
Yeah. Thank you, Rajiv.
The next question is from [Shubhranshu Mishra]. Shubhranshu, I'm unmuting you. Please unmute yourself and ask your question.
Yeah. Thanks, Nidhesh. Hi, Suresh. Thanks for giving me this opportunity. Two or three questions. The first one is, a couple of NBFCs who have reported before you have spoken about some amount of disruptions in the IT sector hirings, especially at the entry level, mid management level. Given the fact that we have larger exposure to Bangalore and the outskirts of Bangalore. Are we seeing any kind of changes in the offtake, especially in the IT sector, for home loans? If so, have we changed any policies around it? Second is, can we spell out the number of home loans and the number of LAP loans, non-home loans that we have done in this particular quarter, and what is the expected quarterly run rate for the rest of the year?
The third question is around any kind of surprises that we might expect in the OpEx, going forward in 2027? Thanks.
Sure. See, in terms of the IT sector impact on the loans and everything, we have not seen any major thing. Maybe, Karnataka, as we said, is also growing at 18%, and Telangana has grown at a little higher than that only. Of course, to some extent it is also because of the base effect, but having said that, it is still growing compared to last year, and it is also contributing. We've not seeing any major change because of this IT. In fact, there are job losses, that's a fact, but there are also people who are in the mid this thing and all, who are able to re-equip them in new things. They are also able to get different jobs in different these things. It's not that there are no jobs and people are absolutely having to sit at home.
So far there has been no impact. Having said that, if you look at our Karnataka delinquency, our NPA as on 31st March 2026 was lower than in absolute value as compared to 31st March 2025. In June also, it's a very marginal one or two, three cases, but nothing major which is there. Which also is anyway a first quarter sequential impact. We have not seen any major impact of that. Second, in terms of number of loans, I wouldn't be able to give you the number of loan accounts, but I can definitely share the amount. As in out of INR 2,015 crores, which we have done in Q1 FY 2026, INR 1,291 was a whole HL, INR 724 was NHL. As against that Q1 FY 2027, you've done INR 2,609 crores, of which INR 1,650 crores is HL and INR 958 crores is NHL.
Basically, in HL we have had a 28% growth Q1- to- Q1, in NHL we have had a 32% growth. This is in terms of the amount I can say. Number of accounts I don't have right now.
The third question was around OpEx, and if I can just squeeze in one last question.
Yeah, sorry.
Which is around the APFs. The total number of APFs you spelt out is around 331?
Yes.
Per project, what is the maximum number of apartments that we can do? When does this become a major contributor? When I say major, upwards of at least 15% in our disbursement number?
I think, see, in terms of OpEx, I don't think there is any major surprise other than what we have been saying, that INR 40 crores is yet to happen. As I said, since we have just implemented in July of this year, we still have some of the things we had signed off with Madhav. We have to still capitalize some of the things we'll capitalize in this July also. That will come into by way of depreciation and all those things. By and large, I think quite a few of the items which are there, where the AMCs have also kicked in. Some of the cases where payments and all have been made. Those things have already started. I think even this quarter, there is a little bit impact.
In fact, if you recollect Q4 of last year also, about INR 5-6 crores of expenses had already kicked in terms of the project, because some of the project items for which we had taken in the last quarter of last year, first year AMC was also started. Basically, in terms of OpEx, I don't think any major new things are going to come. Salary cost for rent and taxes and all those, everything else other than IT cost is also well under control. There is no major surprise there. Everything is in line with last year's thing only. In terms of APF, actually, we are looking at as such about up to 100- 150 units per project also we can consider for APF. We do have some good marquee projects also which have been approved by us of some very Category A builders also.
Although most of their projects are of Category B builders, we do have some good marquee projects of Category A builders also. As of now, in fact, the contribution is more of they are also testing us. We are also going through the whole thing. Learning is happening. It's a very small number. I think 15% I think will be a while away. At least we have started getting a good regular trickle from these projects, which is a positive thing.
Sorry, this 100 number is what percentage of their total apartment throughput?
No, no. This is the total number of apartments in the project. What we are expecting is to start with maybe one, two, because we will basically see all the projects that we have tied up with mostly are already having two or three tie-ups. Okay? Right. No builder goes with a single tie-up. Since we are not doing developer finance, obviously the first right of refusal goes to the lender who has also given the project finance. Okay?
What I'm trying to get at, Suresh, is from a risk management perspective, what is the maximum number of apartments we can do per project?
We have a dual thing. We have a 10%, and there is a number-wise also that, if it is a project with 20 units, then you can go up to, I think five or six or something. We have a matrix for that also.
Sure.
We don't go by that. From the risk point of view, we will never go with more than 10% in a single project.
Understood. Thank you so much. I have one more question.
That was the point. I misunderstood your question, sorry.
Done.
Thanks.
Nidhesh, I'm done. I'll come back in the queue. Thanks.
Thank you. The next question is from [Abhijit Tibrewal]. Abhijit, unmute yourself and ask your question.
Nidhesh, am I audible?
Yes, you are.
Yeah. Thank you. Sir, just two things. One is, given the fact that we are going for higher ticket sizes now, where we are seeing that large part of the book coming from higher ticket sizes, I think I also got you on the call that given that the incremental cost of borrowings are moving up, we are also trying to do some tweaks on the asset side. Basically, where you said that maybe the yields that we used to charge to up to INR 20 lakh is the same yield we will charge to up to INR 25 lakh now. I hope that understanding was correct.
Correct. That is correct.
Don't you think that as we keep moving up, sir, we are facing higher competition? Basically, all I'm trying to understand is, sir, until now, the competition always used to be with banks or PSU banks. A lot of these large HFCs also talk about doing, I don't want to call it affordable, but small ticket housing, that INR 25 lakhs, INR 30 lakhs, INR 35 lakhs, where we are building our sweet spot. Are we not seeing higher competition from banks there? From these large HFCs there?
See, actually, in fact, it is not the banks who are the prime players who take away our portfolio. Our main BT happens with LIC and Bajaj only. It's always been the private sector and players who are doing it in the NBFCs or larger HFC space. The banks, of course, are there, but so far, we are still not in that ticket size segment. We are directly competing with them. If I ask 50 branches, probably 30 branches would say LIC is the main competitor. Maybe another 10, 12 will say Bajaj is my main competitor, and maybe a few of them will say PNB in one or two pockets, smaller geographies. Rarely, you will have the number one competition or the number one entity as a bank. We don't have that.
So far, at least these other players, they have not majorly been able to make a dent in our thing. As I also mentioned, our prepayment or loan BT Outs has been almost stable in Q1 compared to Q4 of last year. Q4 last year, we had INR 400 crores of BT Outs. This time it is INR 408 crores.
Got it. Sir, then you remember you touched upon this when someone asked you if you're seeing any higher bounce rates, higher delinquencies from salaried customers in the IT sector, given that we have a very good presence in Bangalore and southern India, Telangana. Sir, just trying to understand, have you had a chance to look at what proportion of our salaried customers are employed in the IT sector? That is one part of the question. The other part is that, if these are our customers, what ticket sizes, what is their annual income like? Because what I'm trying to understand is what kind of IT customers will typically end up going to banks, and what kind of IT salaried customers will come to us.
Sure. See, our IT sector exposure is only about 6% in terms of the number of customers who are associated with the IT sector and have taken a loan from us. Okay. We have done so a study, at least the top companies which are in IT, the customers from those companies are not, like if you say, whether an Infosys customer, whether a Wipro customer, whether a Cognizant customer or somebody is taking a loan from us, it's almost not there. Okay. We have small IT-related entities with whom we are there. Obviously, yes, those entities will be the first ones facing the challenge whenever competition comes or whenever any new change happens. Still, so far, we have not seen any major impact of this. At least, our check bounce ratios, as I mentioned, for the last six quarters, actually, our bounce ratios have been coming down.
We've not seen any major impact because of this yet.
Got it. Sir, just the last thing and the clarification to what you have said and here. What you're saying is that this year you're still targeting that INR 13,000 crores in disbursements. Just that, given that what you explained, the EMIs remain the same, the tenure comes down, so the principal amortization is faster. To that end, this year, you're expecting the rundown in the book to be higher, but still targeting that 14% growth that you spoke of.
If required, we may have to push the business. I think we should be able to do that. Already in Q1, we have overshot whatever we had targeted for. Q2 also, we are targeting INR 3,000 crores. I think, the way our IT transformation has gone, we may be able to push a little earlier than what we had anticipated. I think we will be able to do that, INR 6,000 crores accretion to the book by the end of the year. If that means we'll have to push a little more in terms of disbursement, INR 13,000 crores will become INR 13,200 crores, INR 13,400 crores, or whatever, we will try to push for that.
Got it, sir. That answers my question. I wish you and your team all the very best. .
Thank you, Abhijit.
The next question is from Kunal. [Kunal Dhokas], please unmute yourself and ask your question.
Hello, sir, am I audible?
Yes.
Okay. Am I clear?
Yes, go ahead.
Hello. Okay. Just two questions from my side, both long-term. First is it correct that since 2001, Can Fin Homes has written off just about INR 20 crores in total loans? Is that information correct?
Sorry, INR 20,000?
INR 20 crores.
INR 20 crores?
Since 2001. Since the year 2001.
Sorry, I mean.
Written off.
Written off, you are talking about. Yes, that is correct. That is correct.
How, sir? We have companies who write off thousands of crores in a year. Can you please talk about the culture or the process of Can Fin that make it so very different?
No. I'll tell you. One thing is, in terms of technical write-offs, there are two things over here. I will just clarify. We are talking about credit frauds or credit write-offs that we are talking about.
Yes.
Of course, this doesn't include that INR 40 crores of Ambala, which we are talking about. That is a non-credit issue. In terms of credit thing, which affect the thing, there are two things. One. There are frauds. There are issues where some frauds might happen, and we are still continuing those frauds with 100% provision, and they continue to reflect as NPAs in our books of accounts. Our INR 380 or INR 375 crores of NPA that we are showing, this could include some accounts which we have been flagged as fraud. We may be providing 100% provision for it, but we would not have written off those accounts.
There is 100% provision, there is a fraud, it continues to show as an NPA, it is there in our books of account, and we attempt to recover from that, either through SARFAESI, wherever property is available, or through other legal processes, is continuing. That is one part of it. The second is in terms of actual write-off. This happens where, one, we know that there is no property, some fraud wherein nothing is possible. That is a case where we would have written off. Or alternatively, second would be where we have sold the property, there is a difference amount. For example, there is an INR 22 lakh outstanding, we have sold for INR 21 lakhs through SARFAESI e-sale, and we don't envisage a possibility of recovering the remaining INR one lakh, we would have written off that INR 1 lakh also.
When we add up those write-offs also, that is up to INR 20 crores only from the last 20-25 years. That is correct. There are additionally some frauds which are shown as frauds, reported to the regulatory authorities. We have taken police action. They continue to show as NPA. They continue to show with 100% provisioning. If we actually remove those kind of frauds and would have either written off, then probably we would have had another INR 60- odd crores which pertain to the fraud, which pertain into all the other things. Maybe about INR 50-60 crores could have additionally been written off. Had this been some other entity where there is a write-off policy, then in that case, if we would have had a similar policy, then another INR 50-60 crores would have probably been also written off.
In which case our NPA, which is INR 375 crores, would have come down to INR 310 crores-INR 320 crores only.
That's still a very exceptional number, especially if it is cumulative, given how much total loans have dispersed over the 20, 25 years and written off just INR 100 crores cumulatively. That was my question. Even with reliance on DSA sourcing, how have you been able to maintain such a pristine credit underwriting practice and policy over such an extended period of time We all know that financial institutions are subject to very great external pressures, human pressures, and organizational pressures to grow when they make mistakes. Can Fin has been able to maintain that discipline over the last 2.5 decades?
No, I guess, yes. Per customer selection and per tight policies, conservative policies is yes. It has impacted our growth. Sometimes we've not grown in line with what market expects, yes. Yeah, it has been a very safe lending, conservative policies, conservative lending has been followed. That's all.
That's fantastic. The second question on the cost-to-income ratio. With the technology transformation and the movement towards more in-house sourcing, how do you see that playing out over the next few years?
Current year, we will envisage that it will be hovering around 19.5% cost-to-income ratio. Some of it, as we said, has already started kicking in in this quarter itself. Therefore, from the 18%- odd numbers, we have now moved to the +19% cost-to-income ratio. For the year, we expect it will be around 19.5%. Since our project is already implemented and we've already worked out the cost, now going forward, the AMCs and this depreciation part and all will kind of remain stable. As the book grows, these percentages, again, start to come down a little bit. I guess, in another three years down the line, we would again want to bring it to 18% or thereabouts.
Okay. That would be the long-term average. Okay.
Yes. Correct. That's right.
Okay. Thank you very much, and have a great day.
The next question is from [Sonal]. Sonal, unmute yourself and ask your question.
Hi, sir, this is Sonal. I hope I'm audible.
Yes, Sonal. Please go ahead.
Yes. Sorry for, I think, the IT trouble earlier. There was some issue regarding some admin issues. I have two questions. I'm looking at your book rundown numbers, and they have been elevated for the last four quarters. Sorry if I was out of the call because of these IT issues. I want to understand, how do you understand these numbers? How do you decipher these numbers? What is a near-term to longer-term target of these numbers? Should this be lower than 4% over the course of next one or two years, or this is the new normal? That's the first question.
Sure. See, first of all, as I had given in the opening remarks itself, the breakup of our rundown, we have about INR 408 crores is coming from BT Outs, INR 377 crores is from where the customers are making their own closures from their own funds, either because they're selling the property or because we are pushing them to sell the property, or where generally small amounts and they are just making a payment and closing the loan to reduce their liability. The major challenge or the major portion from where our rundown is happening is actually amortization and, more importantly, part prepayments, where customers are making more payments every month, but the loans are still with us. It's just a conservative approach from the customer side, where they just get some extra funds and they are parking with us.
This is something which, from the customer's point of view, obviously, it is good because they are able to cut down their tenures and repay earlier, less interest burden for them. From that point of view, it is good, but at the same time, it is hurting us. We'll have to see how it is there. What we look at is, this particular quarter, this has been the number. Going forward, I think we will want to work on whether we can convert some of these customers into deposit customers for us, or else if we can look at some other kind of a thing where they can be retained without having to prepay and move out. Those, we will be looking at it, because some of the prepayments, probably we may be able to offer them a solution and see.
We are, right now, analyzing and talking to credit information bureaus to see if we can get an alert even at that time when they make an inquiry elsewhere, so that we can contact them and try to retain them. Those efforts are going on. Another thing which is there is, today, if you look at it, before the interest rates started going down, our best rate was 8.95%, whereas the banks and bigger players, larger players were offering best rate as 8.4%. The differential was, or delta was 55 basis points. Today, with the repo rate cut, the banks have moved from 8.4% to 7.25% or 7.15%, and some of the larger players also have followed suit. We have come down from 8.95% to 8.4%. Basically, now the difference is 7.15%- 8.4% or 7.25%- 8.4%.
This difference, which was 55 basis points, has now increased to more than one percentage point, which is difficult to convince a customer. 50- 60 basis points, we can convince a customer. Customers also don't mind because the impact on their EMI is not very large. But over a period of time, a 1% impact is quite large if it is a 25, 20, 30, kind of ticket size loan. Therefore, it is one issue. If this repo rate differential can come down, either because repo rate starts going up or something of that sort, then maybe this might come down a little bit, then we may not have so much of a pressure. But having said that, the bigger challenge for us is the part prepayment and not BT Outs, because BT Outs is just about INR 408 crores out of INR 1,857 crores.
Got it, sir. My second question is with regard to looking at your numbers, and you talked about LIC being a competition. I see LIC not growing, you talking about Bajaj Housing Finance being the other competition. Just want to understand, one player is growing at 25%, 30%, which is Bajaj Housing. And what is it that you see the trade-offs they are making as a competition vis-à-vis you, because of which they are able to demonstrate aggressive growth? We have three players. One is 25%, you at 11%, 12%, and there is LIC, which is not growing at all. From a comp set perspective, if you can just subjectively tell us what's happening, and who's doing what trade-offs, basically, that will just help us set the context for us. Yeah.
Bajaj definitely has had a technology advantage. They have been the first movers, and they have adopted technology, and that is able to give them a better edge in terms of TAT and all those things. We are catching up, and our transform project has been implemented. We also will now be starting on these journeys and customer journeys and digital roadmaps and all. That is something which we will be able to catch up, and we will have to, obviously, push for a consistently +20% disbursement growth over previous years for us to, slowly, the AUMs to start picking up and catching up.
Second thing is, having said that, while technology is also one part, LIC also has an issue of larger prepayments, much higher prepayments, because they are directly in competition on pure home loans with-
with the banks.
most of the bigger banks, because their ticket sizes are also higher than ours. I guess that they have a pressure of one is constantly growing, having to grow, at the same time also retain. Whereas, had it been a LAP book or had it been a LRD or had it been a developer finance and all, maybe that pressure would have been less for them. I guess, only they will be in a position to exactly tell you what are the challenges they are facing. Sitting here, I guess these are what I see.
Sir, all else being equal with the IT background and I think more agility with regard to the software platform, would that mean that you would have more higher capability of assessing risk at higher yields, apart from, obviously, aggression in disbursement? Does that also mean that you're able to launch more products, a little higher yield products, which are not too bad in terms of customer profile, quality of customer, but they are in the 11%, 12%, 13% yield spectrum. Can we see that happening in the near term?
Actually, today our system, what we are now implementing definitely gives us the chance or gives us the opportunity to launch these kind of products faster with proper controls and all those things in place. Workflows and decision engines and all those things in place. When and how we'll start, I think we'll have to, as of now, in fact, our IT transformation was a first priority. We will look at all these products going forward. As of now, I can't comment on that because our board has not, we've not actually deliberated and taken a call at our Board.
Got it, sir. Thank you. I'll follow back with you. Thank you.
Thank you. Nidhesh, you are on mute.
Yeah, sorry. Next question is from [Prachi]. Prachi, unmute yourself and ask your question.
Hello, sir. I wanted to ask that last quarter, the company has indicated an aspiration to deliver around 2.4% ROA and around 18% of ROE. Given that the relatively softer performance in Q1 and some higher OpEx also we're expecting a little bit, are we still confident of achieving these return ratios in FY 2027?
I guess this quarter we have done 2.39% as the ROA and +18% in terms of ROE, at least for that quarter. Yes, you are right in terms of our OpEx, it has slightly inched up. Because it has inched up a little bit compared to last year is the reason why, in fact, our ROA has dropped from around 2.53% last year to 2.39%. Going forward, I think the costs, whatever impact we had envisaged, it started already reflecting. Therefore, this number is something which we will be able to do manage. One is, we will have to obviously ensure that our NIMs and spreads and NIM are maintained, which as of now definitely looks possible. In terms of credit cost also, the other variable which is there where we will have to look at it.
As of now, we don't see a problem in the credit cost either. In fact, being the first quarter also, if you look at it, last year, in Q1, we saw an INR 45 crores increase in NPA. The year before that, again, in Q1, we had an INR 41 crores increase in NPA. This INR 30 crores, INR 41 crores increase in NPA has been there as a cyclical thing every year. This year, we have been able to, in fact, restrict it to just about INR 17 crores, INR 18 crores. Basically, what I'm trying to say is that, in terms of credit costs, we are in a much better position today. The 10 basis points that we have been talking about definitely doesn't look to be a challenge this year.
I guess, as of the moment, there is no reason to believe or nothing to reflect that we may not be able to achieve it.
One more question was around the SENP segment increase, which we are looking at. I wanted to understand the portfolio, how we compare it with salaried segment in terms of the yield spreads, the credit cost, and the returns? They are going to be margin accretive right, over the medium term?
Correct. Actually, you see, when we are talking about SENP, our SENP also is not the assessed income or surrogate income kind of a segment. The SENP category or the customers whom we serve actually are ones who have a documented income. They also are having two to three years of IT returns. We are verifying the IT returns from the portal. Based on that, we are assessing based on our norms. Even the SENP segment, compared to the rest of the affordable housing finance companies, would be a better segment for us in terms of credit. If I have to look at the credit cost and all, and the yields, self-employed would be at least half a percentage higher in terms of the ROI as compared to a housing customer.
If it's everything else being the same, if it was just a matter of salaried versus self-employed, the differential would be half a percentage point. If you look at it as to the risk weightage, sorry, the risk, the GNPA in the salaried segment today is roughly around 0.6%-0.63%. Whereas in case of SENP, our current NPA ratio is around 1.45%, 1.5%. Roughly, factored for our credit cost also, I think, 0.5% is accretive only.
Okay. One more on the CBS platform, the branch expansion, all we have invested, and the incremental operating expenses, which are going up. When do we expect the productivity benefits? It starts reflecting my cost income ratio.
Today itself, the five branches that we have initiated, those five branches also, the speed and everything is much faster. I think, in terms of the stability, it'll take about six months for the branches to stabilize, to get fully used to it and all those kind of things. Having said that, I think this year itself, we should start seeing some benefits in terms of staffing itself. Not to mention the speed and on better quality, more faster TAT and all those things. That apart, I think even in terms of manpower, I think this year also itself, we should beginning to see some benefits whereby, we may not be adding staff for the sales team. We in fact intend to take all the additional salespeople from within the existing team sizes only.
Lastly, just one point on the tax rate. What do we see the tax rate for FY 2027 overall in total, I should expect?
Is it same that you mentioned?
21%.
Yeah, 21% because of some DTA benefits. This will be stable rate. There are no major surprises coming.
Okay.
In the next quarters.
All right. Thank you so much.
Thank you.
Thank you, everyone. That concludes today's session. I will hand over the call to Mr. Suresh Iyer for his closing comments.
Yes. Thank you, Nidhesh, and thank you once again to everyone for taking your time out to join this earnings call of Q1 results for Can Fin. I hope we've been able to answer all your queries. Of course, if there are anything more, you can always feel free to write to us. We have our listening. We are also, in fact, whenever we are having any meeting with any investor or anything, we are uploading the transcripts of all our meetings also on our website. I think, that also is something which you can refer to for any updates and all.
Second thing is, as we mentioned, that now that we have undertaken this IT transformation thing, we expect to complete it in this quarter, somewhere around mid-September or first week of September, we might put up some update also on how it is progressing and how many branches have gone live, how is the disbursement performance and all, in light of this, because it is a very important thing. Having said that, we don't envisage any issues as of the moment looking at the five branches, but we will still be putting up an update somewhere around September. That's it. Once again, thank you. Thank you very much for joining this call.
Thank you. Thank you, everyone.
Thank you. Thank you, Nidhesh.