Ladies and gentlemen, good day, and welcome to the Shriram Transport Finance Q3 FY 2024 earnings conference call. 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 zero on your touchtone phone. I now hand the conference over to Mr. Umesh Revankar, Executive Vice Chairman. Thank you, and over to you, sir.
Yeah, thanks, Sahil. Good evening, friends from India and Asia. Warm welcome to all of you. Greetings and good morning to those who are joining from the western part of the world. To present Q3 call today, I have with me Mr. Chakravarti, Managing Director and CEO, Mr. Parag Sharma, the Managing Director and CFO, Mr. Sunder, the Managing Director, Head of Accounts. We also have with you Mr. Agarwal from Shriram Housing. We also have Sanjay Kumar Mundra from our investor relations head. It has been a encouraging third quarter for the Shriram Finance. We are seeing fruitful dividend in our operation post-merger on the back of multi-products being offered across our branch network. To first quick look at the Indian economy.
The Indian economy expanded by 7.6% growth in the second quarter, considerably higher than the consensus estimate. The surge was largely led by manufacturing sector, which jumped 13.9 year-on-year in the second quarter, helped by few favorable base and improved volume growth. With the latest number, GDP added 7.7 during the first half of the year, as compared to 9.5% a year ago. India's real GDP growth in 2024 is estimated at 7.3, compared to 7.2 year ago. As per the first Advance estimate released by MoSPI, which reckoned the economy will outperform 7%, even endorsed by the RBI recently. On the inflation, retail inflation December increased to four-month high at 5.69.
Slightly better than expectation, but still, rose mainly from 5.55 in the month of November. The wholesale inflation also rose to nine-month high, to 0.73% for the month of December, from 0.23 recorded in the month of November. RBI, in its MPC meeting on December 8, has kept the key policy repo rate unchanged at 6.5 by unanimous decision. This is the fifth meeting on that, on track, that MPC decided to maintain the status quo on repo rate. However, RBI raised GDP growth projection for FY 2024 to 7% from 6.5 earlier, on buoyant domestic demand and higher capacity utilization in manufacturing sector. CPI inflation projected at 5.4 for FY 2024, with Q3 at 5.6. We expect steady liquidity in the system with stable interest rate environment.
The rural economy and monsoon. As per the Union Farm Ministry data, Rabi crop sown in the country was 4.4% higher to 620.62 lakh hectares, as compared to 96.2 lakh hectares, sown from the previous cropping season. Year-on-year increase is higher in all crops, with wheat being highest, indicating healthy rural economy going forward. The Cabinet Committee has increased the minimum support price for the Rabi crops in between 2%-7% for the financial year 2024-2025, which includes wheat, pulses and oilseeds. India's GST collection for the month of December 2023 increased by 10.28% to INR 160,000 crore as against INR 150,000 crore in December 2022.
The December 2023 collection, however, was lower than 1.68 collected in November and even down from 1.72 from October. It is seventh time the gross GST collection has increased have crossed 1.6 lakh crore mark in FY 2023-24. The gross GST collection for the first nine months of FY 2024 increased by 12% to INR 14.97 lakh crore, is higher- is 12% higher than the GST collection in the year FY 2022-23. The government spend on infrastructure continued to remain strong, with the strong GST collection. Government recently announced that textile ministry has mapped eight sanction sanctioned PM MITRA Parks on PM GatiShakti National Master Plan portal, while pharmaceutical department has reported successful completion of 129 pharma clusters and 23 medical device cluster project.
This in addition to ongoing road and railway project, helping better logistics to succeed the agenda of Make in India happen. Coming to the auto industry, the total CV sales in Q3 2024 was 2.35 lakh units against 2.27 lakh units in Q3 2023. For the, and for nine months, it was 6.99 against 6.83. Within CV, M&HCV sales recorded 991,370 units against 85,678 for the Q3 2023, and for nine months it registered 9% growth with sales number 2.60 lakh unit against 2.41 units sold.
LCV sales in 2023, Q3 2023, was 1.44 lakh units against 1.41 lakh units, and for nine months it was 4.36 lakh against 4.42. Passenger vehicle has registered a growth of 8.3% with 10.1 lakh units being sold against 10.35 lakh units in Q3 2023. For the nine months, it registered 7.3% with 30.83 lakh units sold as against 28.72 lakh units sold in the same period last year. Two-wheeler recorded robust 22.6% with the sales of 47.31 lakh units in Q3 2024, against 38.59 lakh units sold in Q3 FY 2023.
For the nine months, it recorded a growth of 9.9% with sales of 134.71 lakh units against 122.58 lakh units sold in the same period last year, indicating strong rural and urban demand. Three-wheelers, the Q3 FY 2024 registered strong growth of 62.6% with 1.87 lakh units sold versus 1.39 lakh units sold in Q3 2023. For the nine months, it recorded 57.2% increase, with sales of 5.27 lakh units as against 3.35 lakh units sold in the same period last year, which implies e-commerce and last mile delivery is growing very fast.
Tractor sales as at 2.03 lakh units as against 2.16 lakh units in Q3 2023, and for the nine months, it recorded a growth of 6.8% with sales of 6.48 lakh units as against 6.0306 lakh units sold in the same period last year. We believe both agri activity and income continue to grow further, and that will create, increased demand for mechanized farming and better selling demand. On construction equipment, the Q3, FY 2024 registered a strong growth of 29.6% with 33,121 units sold versus 25,565 units sold in Q3 FY 2023.
For the nine months, it recorded a growth of 26.8% with sales of 101,798 units, as against 80,302 units sold in the same period last year, indicating continued strong infra-related spend and real estate activity. Now, I shall ask my colleague, Mr. Chakravarti, to take through operational performance.
Thank you. Thank you. Hello, all. This is Chakravarti here. I welcome all of you to our Q3 FY 2024 earnings call, and I trust you have had the opportunity to pursue, peruse, our results that are posted on the website of the stock exchange. We have registered a disbursement growth of 29.21%, year-on-year, and 9.2% quarter-on-quarter.
Our disbursements in Q3 FY 2024 this year aggregated to INR 37,787.84 crore, versus INR 29,245.26 crore in Q3 FY 2023, and versus 34,605.60 crore in Q2 FY 2024. Our AUM as on thirty-first December 2023 registered a growth of 20.70% over Q3 FY 2023, and of 5.7% sequentially. Our AUM stood at INR 214,233.47 crore, as against INR 177,498.02 crore a year ago, and rupees INR 202,640.96 crore in Q2 FY 2024.
Our net interest income in Q3 FY 2024 registered a growth of 15.04% year-on-year and of 5.72% quarter-on-quarter. We earned a net interest income of INR 5,093.93 crore in Q3 FY 2024 this year, as compared to INR 4,447.88 crore in Q3 FY 2023, and rupees 4,481.18 crore in Q2 FY 2024. Our net interest margin was 8.99% as against 8.52% in Q3 FY 2023, and 8.93% in Q2 FY 2024. Our profit after tax grew by 2.33% in Q3 FY 2024 over Q3 FY 2023, and by 3.86% over Q2 FY 2024.
We registered a PAT of INR 1,818.34 crore for Q3 FY 2024 as compared to INR 1,776.97 crore in Q3 FY 2023, and INR 1,750.84 crore in Q2 FY 2024. Our earnings per share for the quarter stood at INR 48.42, as against INR 47.46 in Q3 FY 2023, and INR 46.67 in Q2 FY 2024. On our asset quality, our Gross Stage 3 in Q3 FY 2024 stood at 5.66% and Net Stage 3 at 2.72%.
These numbers does show an improvement over the corresponding numbers of, corresponding numbers of 6.29% gross and 3.2% net in Q3 FY 2023, and 5.79% gross and 2.8% in Q2 FY 2024. Our credit cost for Q3 FY 2024 stood at 2.15% as against 1.75% for Q3 FY 2023, and 2.02% for Q2 FY 2024. Our cost income ratio was 25.14% in Q3 FY 2024, as against 22.23% recorded in Q3 FY 2023. Our cost income ratio for Q2 FY 2024 was 25.68%. Regarding our subsidiary, Shriram Housing Finance Limited, they have registered a disbursement growth of 69.64% over the same quarter last year.
Disbursement in Q3 this year were 1,698.16 crore, as against 1,001.05 crores in Q3 FY 2023. Shriram Housing AUM, as on thirty-first December 2023, exhibited a growth of 67.53% year-on-year, and 11.18% sequentially. AUM stood at INR 12,025.24 crore at the end of Q3 FY 2024, as against INR 7,178.16 crore in Q3 FY 2023, and INR 10,816.03 crore in Q2 FY 2024. Their net interest income registered a growth of 33.44% in Q3 FY 2024 over Q3 FY 2023, and 6.3% over Q2 FY 2024.
Net interest income for Q3 FY 2024 was INR 103.57 crores, as compared to INR 77.62 crores in Q3 FY 2023, and INR 97.43 crores in Q2 FY 2024. Shriram Housing Finance has also registered a profit after tax growth of 69.08% in Q3 FY 2024 over Q3 FY 2023, and of 27.57% over Q2 FY 2023. PAT for the third quarter this year was INR 61.52 crores, as compared to INR 36.38 crores for Q3 FY 2023, and INR 48.22 crores for Q2 FY 2024. The EPS stood at INR 1.88, as against 1.12 in Q3 FY 2023, and against INR 1.48 in Q2 FY 2024.
Shriram Housing's Gross Stage 3 for Q3 FY 2024 stood at 1.01%, and their Net Stage 3 came in at 0.075%. In comparison, these numbers were 1.15% on gross and 0.87% on net in Q3 FY 2023, and at 1.08% gross and 0.82% net in Q2 FY 2024. I shall now request our full-time director and CFO, Mr. Parag Sharma, to talk to you about our resource raising activities, after which our JMD, Mr. Sunder, will brief you about accounting and regulatory aspects. One thing I would also like to, I'm very happy to tell you is that the board has declared a dividend of interim dividend of 100% in the just concluded board meeting. Thank you.
Yeah. Good evening, everyone. I'm Parag here. In the liabilities front, our total liabilities stands at INR 177,000 crore, which is up by INR 5,000 crore from the previous quarter. We continue to maintain diversity in our liability with 24% coming from retail deposits. The capital market is 21% of the overall liability. Supervision continues at 14%. The external commercial borrowing is at 13%, and the term borrowing from banks and institution is around 28%. The total cost of debt is 8.96% as of December, which has gone up by around nine basis points from the September 2023 period.
We continue to maintain three months of liability repayment into liquid assets, which was INR 17,400 crore, which is good enough to meet the liabilities for January, February, March. However, we have raised a substantial portion of external commercial borrowings in January, which is INR 1,050 million. at 6.625 coupon, and this will enhance our liquidity to the four months of liability repayment. So that money has come in last week. The liquidity coverage ratio stands at 256.25%, and the overall borrowing for the quarter, September to December, was INR 24,000 crore, only INR 4,337 crore. The ALM surplus up to one year, all buckets being positive and surplus up to one year is INR 29,636 crore. The incremental cost of borrowing is, has slightly gone up to 8.95% now, which was around 8.7% in the previous quarter.
The leverage ratio stands at 3.77 times versus 3.59 in the previous period, end of September. With this, I hand over to Sunder for his comments.
Thank you, Parag. The employee count, as on 31st December, was 73,485, as against 71,373 as on September 2023, an increase of net increase of 2,121 employees. The Stage 3, as on December, was 5.66, as against 5.79 in September. The Stage 1 PD was 7.89% as against, again, 7.89% in the previous quarter. The Stage 2 PD was at 18.25% , as against 18.21% in the previous quarter, and the LGD was at 41.45% in December, as against 41.39% in the previous quarter.
With this, I would like to hand it over to the moderator for opening the forum for question and answers.
Thank you. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone phone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use only handsets while asking a question. An operator will take your name and announce your turn in the question queue. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahrukh Adajania from Nuvama. Please go ahead.
Good evening, and congratulations. So my first question is on margins. It has already surpassed your guidance, and it has stood steady for the last two, I mean, very strong for the last two quarters, and the growth in interest expenses is also on the lower side. So how do we take margins, look at margins from here on? Now, I know that an increase in the liquidity cover was mentioned earlier, but just in terms of margins, what range of margins do we now look at? That's my first question.
So I think the margins, we are actually hoping that we will be able to hold the margins at around 8.9% going forward.
Okay. So you can hold it here with changing mix, even though costs will rise, or?
We believe and we feel that the costs, interest costs, we don't believe that they will rise any further. As of now, I mean, we are hoping that it will not rise, but even then, as you put it, since the mix is also slightly altering, we are actually very confident that we will be able to hold it at 8.9. And both mix and our ability to pass on the increased cost, that will give us the confidence of making and keeping this margin now.
Okay. Okay, sir. So my next question is on AUM. I mean, especially, outlook for CV growth, how it gets, I mean, for you, especially for your CV financing, not so much for the sector, on how it could or if it at all would be impacted in elections, and how do we look at it from, like, say, a one-year perspective? Because the share of CV has been coming down.
Yeah. Now, if you look at the guidance, we gave the guidance of 12%-15% growth in CV, right in the beginning, even during the merger, and we are maintaining that. If you look at the AUM growth, CV is growing at 13%. So that is something we are maintaining, and we know that in economic ups and downs, CV can go up and down. Therefore, we are very steady in our CV. Whereas high margin, high-yielding businesses, we are increasing, which has shorter tenure and better visibility, because shorter tenure, visibility is better, margins are better. So our gold loan, two-wheeler and passenger vehicles, we are focusing on. And these are the products which can be done from all the branches, all across all the 3,000 branches we can do.
So that's how we have been able to manage. And it will not have a big impact because CV demand mostly depends on the infrastructure activity and overall economic activity. Both are being good, and we expect there is a very steady growth for CV. And plus, since the CV cycle has just started two years back, and the used CV demand will come at a lag. So we expect the CV demand to continue to remain good for next couple of years. And as I was telling you, we will maintain a 12%-15% growth in CV, which is very steady.
Even in FY 25, and what would be the overall AUM growth you would look at in FY 25?
We will give guidance as 15% only, because in the beginning, we had given 15% guidance for three years, and this year, economic activity being quite good, we grew at 20%. But in the long run, or maybe even in the next financial year, we would like to give a guidance of 15%.
Okay, sir. Thank you.
Thank you. The next question is from the line of Vikram Raghavan from Moon Capital. Please go ahead.
Thank you for giving me the opportunity, and congratulations on the results. Sorry, I joined late, so I might have missed it. I just have two questions. One is, what is the disbursements for the quarter? And second, the guidance on credit costs.
The disbursement for the quarter was INR 37,787 crore, as against INR 34,605 crore in the previous quarter.
The credit cost guidance will be 2% for the full year. For the quarter, it was 2.15%, but the full year will be 2%.
Thank you so much.
Thank you. The next question is from the line of Avinash Singh from Emkay Global. Please go ahead.
Yeah, good evening. Thanks for the opportunity. My question is on credit cost. I recall you explained some changes into the PD and LGD. So I mean, this quarter has seen increased, I mean, overall, your credit cost, and you are still maintaining 2% guidance. So which product segment particularly has sort of led to or rather you are seeing this, your PD and LGD changing more? And I mean, despite this increase, you are still guiding for 2%. So I mean, where do you sort of see that, okay, credit cost will moderate?
The second one, again, related, would be now on your personal loan segment, your overall GS3 PCR is 53% odd, whereas, I mean, in the personal loan, that's largely unsecured, and of course, in the new book, you are still kind of keeping it around 50 odd percent. So what is sort of leading to, you know, that having a personal loan for PCR being lower than your overall PCR? Thanks.
The quarter on quarter PCR movement has not been significant. If you see, the Stage One PD was stable at 7.89, which was similar to what was there in the previous quarter. And the Stage Two PD was 18.25, a marginal increase of 4 basis points compared to the previous quarter. And LGD also, if you see, it is 6 basis point increase compared to the previous quarter. Again, there is a combination of various factors of the mix and all those things which drives this number. And, coming to your other question-
Of personal.
Of personal loans, the LGD, the coverage which we maintain is based on the ECL norms, which is based on the historical track record. So as of now, the personal loan has been behaving pretty stable. And as we have also indicated in the previous calls, that we extend these personal loans to customers who have already demonstrated by paying off the full two-wheeler loans, and hence the default is comparatively lesser compared to the certain other segments.
Okay, thanks. One follow-up, if I may have, on Shriram Housing, your subsidiary. Also, the growth is pretty strong, and particularly on the co-lending DA side. So if you can help us understand, I mean, what kind of, like, who are your, kind of a key partner among the banks? And also, I mean, there have been sort of a report around this, your plan to divest this. So, I mean, what's going on there?
Yeah. Yeah, this is G.S. Agarwal here. In terms of co-lending, we are basically doing co-lending with one PSU bank and one private bank. DA we are doing mostly with all the private banks and PSU banks. Our total DA and co-lending volume is close to 20-21% of our total AUM.
Yeah.
In terms of divestment, we are looking at capital infusion for the Shriram Housing because it is growing. We are looking at various options, and any one of the option that suits, we will take a call. It is basically to give growth capital, we are looking at the various options.
Okay. Thank you.
Thank you. The next question is from the line of Shweta Datar from Elara Capital. Please go ahead.
Thank you, sir, for the opportunity, and congratulations on good earnings day... So I have two questions. If you could throw light on the write-off trend this quarter vis-a-vis previous quarter, and also a bit on asset quality. I think, you partially answered this in previous questions. So what has changed, besides asset mix in terms of, you know, across products or asset classes, wherein certain products would have put up benign asset quality trends and others would have been slightly, you know, some strength there, which has led to such market improvement in GNPA and credit costs? Thank you.
The break-up of the credit cost for the current quarter is a write-off of INR 725 crore and provisions are INR 525 crore, totaling to INR 1,250 crore. This compared with the previous quarter, write-off being INR 839 crore and provisions being INR 289 crore, totaling to INR 1,128 crore. The other question as regards the asset quality, it has been fairly holding up, and then there have been a marginal reduction in the Stage Three assets, and Stage Two assets also are more or less holding up compared to the previous quarter.
The economic environment has been quite positive for all the businesses which we are in, whether it is infrastructure, whether it's the logistics, whether it is a demand for a two-wheeler that is the rural economy or the urban economy. So we are quite confident and that our asset quality will hold good in the coming quarters. Even though the elections are likely to be there in the next financial year, typically the election what you call election time we have a diversion of mind of the business activity for 15, 20 days. It will not have a bigger impact for the full year or maybe for a full quarter.
Okay, so I'll squeeze in one more question. Does anything change on the goalpost on growth outlook now that you are 20%+? Thank you.
No. See, we will be looking at, this year we definitely will be looking at 20% AUM growth. But for the longer period, we have given a 15% guidance in this, around, during the merger announcement and post that, so that will continue to remain.
Sure. Thank you, sir.
Thank you. The next question is from the line of Piran Engineer from CLSA. Please go ahead.
Yeah, hi. Congrats on the quarter. Thanks for taking my question. Just one clarification. Did I hear the incremental borrowing cost?
No, we did not get you.
Sorry to interrupt. Sir, your line has broken. Could you please repeat your question once again?
Yeah. Am I audible now, operator?
Yes, sir.
So, from-
Sir, again, there is a breakage from your line, sir.
Okay. Now you hear me?
It's a bit better, sir. In case if you are using the speakerphone, may I request you to use the-
No, no, I'm on a handset.
Perfect. Yeah, it is, it is better now, sir.
Yeah. Yeah. Okay. So now the-
If your question is, if your question is regarding the incremental cost of borrowing?
Yeah.
8.95.
Up 25 basis points QOQ, is it?
Correct.
This is because of the risk weight guidelines or what has caused this jump?
In fact, there will be factors regarding mix of liabilities we have borrowed. We have also increased our retail deposit rate. We have higher duration of capital market borrowing. With a longer duration, the cost is generally up. And also the other term borrowing from the bank, there has been a slight increase in cost.
Okay. And so this ECB we raised, what would be the fully hedged cost?
Okay. So, on fully hedged, what we have raised will be around 9.5, but there are the withholding taxes that has to be grossed up, so it'll be closer to around 10%.
Understood. Understood. And so secondly, on Shriram Housing Finance, I just wanted to understand, our distribution is from all our 1,800-odd branches, or what is the distribution for the HFC subsidiary?
No. So the HFC is focusing only on eight states, so it's-
Okay.
They are not present across the country. Their focus area is eight states, and probably we'll be adding one more state this fiscal. But only here, and their offices are exclusive.
149 branches.
149 offices, and all of them are exclusive to the SFL network.
Okay, okay. So because, sir, at, at this scale, we are at INR 12,000 crore, and when we've looked at other affordable housing financiers, we don't see players of this size growing at 60%-70%. So I just wanted to understand, you know, what's giving us this edge on growth versus some of the other players that are actually listed of the same size?
One is basically, as I said, no strategy of focusing and going deep into territories. So we have identified those eight, nine states where we felt that, about 70% of the business, is there. And with a conscious strategy of going deep in those territories. For example, Tamil Nadu, Karnataka, the southern states of Tamil Nadu, Karnataka, Andhra Pradesh, Telangana, Maharashtra, Gujarat. We actually are very, have gone into it very deep. So that actually is one. The other point is, of course, the team makes a difference. Then third, they are coming off a small base. So 66%, don't read that 66% growth, that's because that comes from a small base. Probably going forward, they may not grow at that 60, 70% growth. Probably they'll grow at 20%-30% growth.
Okay. How many employees do we have, sir, if you could just help me with that? In the HFC subsidiary.
Yeah, in-
Or fees on-
3,500 employees.
Got it. Well, okay, this is useful, sir. Thank you, and wish you all the best.
Thank you.
Thank you. The next question is from the line of Kunal Shah from Citigroup. Please go ahead.
Yeah, hi. So the question was maybe, when you look at a few of these segments like two-wheeler, MSME as well as PL, no doubt that there is a substantial increase on a quarter-on-quarter basis in the AUM, which is showing the relatively lower Stage 3. But otherwise, there is an absolute increase which is there in the GNPA. And in fact, the Stage 1 provisions out there, they have also increased. Okay, I think so we have raised it across from most of this product segment. So looking at this too, how comfortable we would be in terms of sustaining such a strong growth in these three products? Yeah.
So see, on this two-wheeler, I think this is like a bread and butter product, like a bread and butter product for the team. They've been doing it for the last 20, 23, 24 years. So I, I don't see, I mean, we don't see any big risk there. And we are pretty confident that we'll be able to hold the both GNPA and the net at what, at these rates.
Replying to your other query on the provision, we have taken a hit of INR 525 crore as provision, incremental provision in the current quarter. That has mainly come out of the Stage 1 assets, which has gone up, which has increased by INR 331 crore, which is primarily again driven by the growth. There's close to 11,200 crore of increase in Stage 1 assets. And the Stage 2 assets, we had taken a hit of INR 30 crore, and the balance, INR 143 crore-
In this, stage one, if I have to look at it in terms of the, percentage as well, going up from 3.06% to 3.11%. If I broadly look at the split in terms of the segments wherein the stage one provision has gone up, it is largely MSME, two-wheeler and PL. Okay, wherein again, in each of these segments, the stage one provisions have gone up by almost like, 40, 50 on this point.
Yes, sir.
In terms of government-
As I was referring into the previous quarter also, that the provision requirement depends on the LGD and the PD, PD rates, and hence, it is difficult to offhand comment on that. So I would request that you contact Mr. Mundra, who will be able to give those final details.
Sure, sure. And two-wheeler, no doubt, it's a mix there, but if you look at the sequential momentum, again, like, 16% quarter-on-quarter growth in AUM. So that's, again, quite strong. Okay. So obviously, there would have been some increase in the market share and the positioning. But how much is coming on account of any synergies? So if you look at the growth in some of these segments, if you can highlight what is coming out of really the synergies towards the merger.
See, Two-wheeler is largely has been mapped earlier, also by the erstwhile SCUF team.
Yeah, MSME.
All the dealers are already mapped, so where it is the. But one portion of the country where this growth is coming from in two-wheeler new growth is say Odisha, West Bengal and the Northeast, where and portions of UP and MP, where the SCUF did not have a strong network. The other point is also basically your quarter-on-quarter growth bound to be there, because any quarter that has Diwali and you know Dussehra, Dhantera, Dhanteras coming in, the growth will be strong. The numbers would normally be about two, more than two times of what we do normally in any given month, particularly in November. So that also is a reason for your quarter-on-quarter growth. But yes, because of the synergy, as I said, these states actually are giving us extra numbers.
Sure. And lastly, slightly revising the guidance earlier, on the credit cost, we were at, somewhere around 1.5-2%. Now, maybe this quarter also, credit cost continues to be 2.4%, not coming down. And we are now seeing that it will be like around about 2%. So any worries in any of the segment that we are seeing with this kind of a growth?
To be honest with you, no, because each of these segments we operate as a individual. You know, the business teams, actually, they are pretty, how do I put this? Each of the business teams have responsibility for the product, and they operate within their known environment. So we don't find- we don't... There's no worries on any specific segment as of today.
Oh, okay. Yeah. Thanks, and all the best.
Thank you. Thank you. The next question is from the line of Viral Shah from IIFL Securities. Please go ahead.
Hi. Thank you for giving me the opportunity, and congrats on good set of results. So I have three or four questions. First is on the PL book. So you mentioned that this the provisioning on that is based on the historical track record. So is this the SCUF track record that you are referring to? And-
Yeah.
And is the incremental book that is being sourced in this segment, the customer profile of it, is it similar to what the SCUF customers were?
It is, it is exactly the same. It is exactly the same, so this is basically 99% of this incremental book is coming from mostly two-wheeler customers or customers who have finished one. Also, customers who have finished one cycle of two-wheeler and a PL and coming back for another PL.
Right. Got it.
There is a short-term tenor, no? A two-wheeler is a short-term tenor, 18 months, 24 months. So it, it will be very easy to offer to them and keep them in our books.
Okay, fair enough. The second is basically, if I look at the slippages trends, so that has been actually inching up. So in last quarter, it increased by 30 basis points, and in this quarter, it has again increased by now 45 basis points. So what is driving this?
Which segment you are saying?
On an overall basis, the net slippages. Adjustments on the-
No, the drop in the... No, you're talking about, okay, you're talking Stage 3. Stage 3 has actually come down from 6.2 to 5.6.
Yeah. So if you add back, the write-off, right, then basically, that slippages number is, inching up.
Yeah, correct. See, if you see the overall Stage 3 number of absolute amount, even the percentage terms it is coming down, absolute amount, there is an increase. There is no denying of the fact. And similarly, the Stage 1 and Stage 2 assets also are going up, because the overall book size itself is going up.
Okay, fair enough. And, basically, in terms of the growth driver, right? So now, primarily we see that the growth for the SCUF segments is coming from the distribution, expanded distribution that they are now enjoying. So how much more juice is left in terms of being able to say scale up these products in the Shriram Transport Finance erstwhile Shriram Transport branches, and how much should we expect growing there? Because these products are growing at 30%-35%.
Yeah, I'll put it this way. If you look at the growth, overall growth of the company itself, there we have guided for about 15% growth at the beginning of the year. I think, the growth is also largely a factor in some of these products to the, as you said, expanded network. For example, gold, we have actually introduced in about 600 of the CV branches. There is still work in progress, and these branches have also started producing results, but they have not yet reached their full potential, number one. Number two, then we also have to introduce the gold in, probably we'll introduce in another 600 branches going forward in the next year. So this is a work in progress. We'll have to keep on introducing this.
Similarly, the SME loans. The SME loans, basically we need the people trained, so it's not that I recruit and deploy people at one go. It's a stage-by-stage process that we're doing, so we do feel that gold and MSME will continue to grow strongly. The reason, again, on the personal loan growing so strongly is also a major factor is the distribution. Because earlier we were, in SCUF, we were struggling to reach these customers because we had about close to 3 million eligible customers and we were struggling to reach them. Now, with that expanded network, we were able to reach them and service them, so that's the growth. That's why you see that 65% growth in personal loans that you see.
Okay. If I have to say, ask you to ascribe a number in terms of, at what potential have these products reached from this, new branches, so as to just get a sense?
Sorry, I didn't get your question properly. Can you-
Yeah. Basically, like for example, the gold branch, gold loan from the branches, the 600 branches where you have already rolled it out. So in those 600 branches, what's the, AUM, the gold loan AUM, and, how do I, like, how is it compared to your, SCUF gold loan, AUM, in those branches?
I don't have the numbers offhand, but I think if you can reach out to Sanjay, he can give you those numbers.
Fair enough. And, lastly, on the status of the FinTech partnerships on the PL and the MSME piece, if you can talk on that. What's the status, the progress?
No, PL, FinTech is a... See, we are only working with one partner. That is only for a sourcing partner. That is, it's been working, we've been working with them for last six-seven years. So we are not pushing that. Basically, it's happening about INR 4-5 crore per month is what we are doing through with them. Now, on the, so MSME side, we have only tied up with Paytm to do only merchant loans. But that is, we are still, you know, finding our way around. So it's not a full-fledged operation as yet. We are actually exploring the area, so probably we will only see how, we'll be able to guide you how much we will do probably down a quarter.
Right. And, sir, lastly, basically in terms of the share of the personal loans, last quarter you had said that we'll probably be capping it at around 4.5%-5%. We have now reached 4.5%. So should we now expect that the growth going ahead will be in line with the overall, loan book growth?
Yeah. Though we have an 8% cap authorized by the board, we would like to keep it below 6%.
Below 6%?
Yeah.
Basically there is room for-
Now.
Yeah. So you, you'll probably take this up to 6%.
See, no, we are not planning of taking it up to 6%. As I told you, we have a 3 million eligible customer database. Eligible customers in the sense, through an algo, I mean, basically depending on, basing on their payment pattern, basing on their income sources, we have a 3 million database. So, it is available there in the market. It is available there, and those customers are our existing customers, they are not market customers. So, whether I, you know, to grow, it's not that I'm consciously pushing it. Since we have the data, we were some of these branches, where CV branches are also involved, it has grown. But, going forward, it should grow at about 20-25%.
Okay, fair enough. And lastly, I would say a bit of data keeping question. So the cost of funds, you mentioned that it has sequentially gone up, but when I look at the reported, rather, sorry, the calculated funding cost, that is actually showing a 20 basis points decline quarter-on-quarter. Is that the intra-quarter adjustment, the averaging effect?
That has been mainly driven by the liquidity. It's okay. That's representation anyway. Sanjay can help you out offline.
Okay. Fair enough. Thank you. That's it from my end.
Thank you. The next question is from the line of Nilesh Jethani from Bank of India Investment Managers. Please go ahead. Mr. Jethani, your line is unmuted.
Yeah. Am I audible?
Yes.
Yes, sir.
Yes. Thank you. Thanks for the opportunity. My first question was in line with the previous participant only. So this 20% odd AUM growth, so wanted to understand, what you would attribute to branch expansion, cross-selling, et cetera, via the Shriram Transport branches, and what would be the actual growth, which you ascribe to this 20%, A? Second question is on the passenger vehicle growth. So growth seems to be higher for us. So what you would ascribe to pricing and volume, and how do you see this industry or see this phase of high growth to continue over the next 2- to 3-year period? What is your sense on that? And third is on the credit cost.
So directionally, as the share of tough products increases, do we attribute from a 2- to 3-year perspective, the credit cost can actually go up to 2.5, 3, which is a normal for a two-wheeler and a personal loan business.
So, your answer to your last question is no, we don't anticipate the credit cost to go beyond 2%. Basically, we are holding pretty steady there, and, in fact, if you look at the two-wheeler credit cost, it's slightly lower than, you know, the personal loan, which is expected. The other question on the growth ascribed to the expansion or product expansion to branches, as I said, as we said in the beginning of the merger time, we have guided for 15%, and today we are at 20%. I think you can ascribe the growth in gold loan, personal loan, and, to some extent, MSME and passenger vehicles to the merger effect also, expanded network effect also.
Commercial vehicles is not so much from the erstwhile Shriram City branches, but mostly the existing CV branches, because it's difficult to actually evaluate those vehicle source customers for from these branches. Because again, mostly, most of those cities and branches are situated in urban cities, I mean, in the center of the city or a town, whereas this business you need branches in periphery.
... Got it. And the passenger vehicle fleet, volume versus price growth, what you are seeing, if any, you can attribute, and how to look at this growth from 2- to 3-year perspective for us?
We hope the demand will continue to be there. Two things: one is personal mobility vehicle, and the other one is your commercial passenger vehicles. Both are growing, and with the improved infrastructure, I think that will keep growing. There are a lot of upgradation from a two-wheeler customer to used car. Aspirational demand is coming to passenger vehicles, that is really helping us. And the previous track record of a two-wheeler customer who wants to upgrade, that helps us to grow faster in passenger vehicles. So that is really helping us to grow faster in passenger vehicles, where we are growing around 30% year-on-year.
Got it. And then one last question, if I can squeeze in. Our branch count from 2,900 has only increased to 3,100, actually 137. So wanted to understand what is our strategy. So maybe this year or next year, are we focusing on cross-selling and probably start on the branch expansion from a year or two later? What's the thought process of the branch expansion?
Most of these branch expansions are happening where we are having rural centers, we are converting that into branches after reaching a certain growth. So, that is the main addition into the branches. And also there are some locations where we feel the gold loan customer can get, we can offer gold loan in the residential area, there we are putting the branches. So totally, we have added 136 branches in the last one year, if you look at last year same period to now. So our committee also, guidance was that we will be opening around 100-150 branches, which is a combination of conversion of rural center and the new branches.
Okay. Got it. Got it.
Thank you. The next question is from the line of Chandrasekhar from Fidelity. Please go ahead.
Hi, thanks. I had a few questions. One, could you just remind us within this, how large is the used bus segment? That's one. You know, then maybe how large is our fleet operators, you know, within this, segment? And what is the average ticket size right now on the passenger vehicle segment?
We don't have a large bus segment of which is financed, because most of these bus operators, tourist buses, we don't lend much. And the normal transportation buses where the government has the monopoly, we don't lend. So most of our lending is-
No, I meant school buses. I mean, school buses.
Four-wheelers and the local transportation.
Yeah, yeah. Umesh, sorry, I meant school buses.
Ah, school buses, we have a reasonably large portfolio. But, see, the post-COVID, it has not really grown big. During the COVID, it came to a standstill, and after that, it has not really grown big. But that's a very, what you call, least credit cost portfolio. It's one of the good portfolio, which we may consider growing, as the business picks up.
Right. So is the delta coming in from people upgrading their fleets over here, like the fleet operators, Ubers and Olas, upgrading their fleets? Because, I mean, my understanding is that the entire used CV segment is like a INR 100,000 crore market size, and, you know, our book is already INR 35,000 crore over here. So I'm just trying to get some sense around the market sizing and then just how large we are relative to that.
See, normally what happens is you can't just have a strict monitoring of the passenger vehicle. It is some rule is one-third, two-third. One-third is used for what you call commercial use, two-third is for personal use. Even the vehicles registered in a personal use gets used for a commercial vehicle in the commercial activity in the semi-urban and rural area, not in the urban area. Urban area is strictly monitored. So many of the customers would be having a vehicle which is registered as a personal vehicle, but using for commercial purpose in the smaller towns. So the business in the semi-urban, rural area, that is where we are very active, and many of them are SUVs or MUVs or a car, and not much in buses. We don't have large bus portfolio.
In this case, maybe the average ticket size here will be about INR 150,000, approximately?
It should be over INR 2 lakh. No, no, it'll be higher. It should be around INR 300 thousand.
Okay. Okay, INR 300,000.
INR 3 lakh. Yeah, INR 3 lakh. So it's about INR 2.5-3 lakh. The used car prices also have gone up substantially, yes.
Okay, got it. Got it. On the MSME segment, are there any changes in the ticket sizes or tenures which we have done? I mean, you know, we used to have 8-10, it came down to 6-8. Is it going up towards 8-10 again?
... No, it's still the same. It's still about 8-10 only, and there's no change in tenures.
Right. Right. Sorry, and the last question: maybe could you help us? There was 100 basis points of capital consumption in the quarter, Tier 1 down to 20%. So maybe just help me understand where 100 basis points got consumed within one quarter itself?
100% of capital. Risk weight is 100 weight.
No, it is mainly with all the growth.
And, uh-
Yeah. And, some additional point, increase due to the risk weight, attributed to the personal loans.
Right. Okay. Got it. Okay, thanks.
Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah. Good evening, everyone, and sir, congratulations on a good quarter. First things first, I mean, more of a data keeping question, if you can provide the product-wise split of your disbursements.
Product-wise?
Yeah. What? Yeah, yeah.
One second. Yeah.
The CV was 14,449. Passenger vehicle, 6,092. Construction equipment, 2,780. Farm equipment, 464. MSME, 4,328. Two-wheeler, 3,699. Gold, 3,120. Personal loans, 2,853. Totaling to 37,787.
This is useful. Thank you. So the second question I had was on the liabilities. Obviously, I mean, there were multiple questions on where the cost of borrowings have moved up, where the incremental cost of borrowings are. I wanted to understand, I mean, the impacts on this RBI risk weight circular, where it has increased risk weight on bank loans to NBFCs. Is that impact already there in our cost of borrowings, or do you think that large part of our borrowings are PSL, and they will not be impacted by the increase in risk weight circular? Broadly, what I'm trying to understand is, I mean, how are the banks posturing on the liability side?
And the other thing is, from what I understand, given the deficit liquidity in the system, short-term rates have actually spiked up. So, I mean, is it not really having any impact on the cost of borrowings, or will it not have any impact on your cost of borrowing? Because somewhere I remember hearing that you are saying that we don't expect cost of borrowings to go up further.
Yeah, I think two, three things. One, what you said, right, was immediately after RBI notification on the higher risk weight for the lending to NBFCs, some of the banks, two, three banks have actually increased the overall rate for us. Most of the other banks have only said that on incremental lending, they will increase the rate. So as I mentioned, the incremental cost of funds for us for the quarter was 8.95, which was previously the banks were lending at around 8.60-8.75. That is why we don't expect, even at higher lending rates, this to breach at 8- beyond 8.95 is something which is not foreseen.
So that's we don't look at any substantial increase because of the incremental borrowing from the banks, be at a higher cost. That is not foreseen. Any other your liquidity-related concerns, whether there will be a further spike, that, I mean, I think, that liquidity crisis is there for some time. The capital market rates had gone up, and that is all factored in. We are not seeing any further increase in the capital market rates. So beyond this, we don't, as of now, we don't foresee any substantial increase in the liability cost.
Okay, sir. This is, I think, very useful. My last question was again kind of circling back to Shriram Housing. While I understand you have already partly answered that we'll be looking for capital infusion in your housing subsidiary. From what I recall earlier, the discourse used to be that we will maybe look to get an external investor in the housing subsidiary for maybe a primary equity infusion. I mean, what recent media articles are suggesting that, and you also acknowledge that we are looking at various options. Some of the media articles have even gone to the extent of stating that you are even looking at completely selling down the HFC subsidiary rather than, I mean, doing an IPO of the subsidiary at some point in time.
If you could just briefly elaborate on that.
Yeah, at the time being, we are looking at all the options with open mind. We are not either choosing anything right now. So, I will not give you, will not be able to give you a very specific answer because we are still looking at all the options or various options.
Okay, sir. This is useful. Thank you, and all the very best to you and your team.
Thank you. We will take that as our last question for today. I would now like to hand the conference over to Mr. Umesh Revankar for closing comments.
Thank you very much for joining this call. As you are aware, the last quarter will be always the biggest quarter, and we all are looking at the final quarter for this financial year as going to be a very large quarter and also busy quarter. We also have a budget which gives, even though it is interim budget, which gives some indication on government's plan on the infra spend, which is actually giving, in the last couple of years, a big boost for the most of the demand for commercial vehicle and the construction equipment. We all hope that will continue to remain as primary objective of the government of building infrastructure for Make in India, and therefore, we expect a busy quarter and also a good set of numbers.
Thank you very much for calling. We'll meet you again, next call. Thank you.
Thank you. On behalf of Shriram Finance Limited, that concludes the conference call. Thank you for joining us. You may now disconnect your lines.