Ladies and gentlemen, good morning and welcome to the Shriram Finance Limited Conference Call. As a reminder, all participants will remain 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 the operator by pressing star, then zero on your touch-tone telephone. Please note that this conference is being recorded. I will now hand the conference over to Mr. Umesh Revankar, Executive Vice Chairman, for opening remarks. Thank you, and over to you, sir.
Yeah, thank you. I'm Umesh Revankar here. Mr. Parag Sharma, MD CEO, and S. Sunder, Director and CFO, along with Sanjay, are with me. We can now go after the initial remarks. Good morning to everyone, and I would like to share a few of my thoughts here. As you know, Shriram had a merger of two listed entities in 2022. Shriram Transport Finance Company, which was mostly focused on vehicle and equipment financing. Shriram City Union Finance, who were into SME, two-wheeler, and gold financing. We merged with the purpose that we will have a larger branch network, better reach, and multi-product. The multi-product was a strategy which we adopted, and thereafter, post COVID, you would have witnessed that we have been growing at around 17%, 16%-17%, even some quarter reaching 18%-19%.
The growth rate has been quite good, satisfactory, and we were able to really use the multi-product strategy in all the branches. We have 3,225 branches, and we have been able to activate many of the branches, most of the branches, I can say, for multi-product. With this kind of growth, we have been looking for a strategic partner to raise capital, and in this process, we have been talking to many of the interested investors who also are keen to participate in India's growth story.
What is very important for us is India's growth story and the investor having the comfort of coming for a long-term haul. In this process, we interacted with the MUFG. As you know, MUFG is one of the top bankers in the world. They are the 10th largest in asset size with $2.8 trillion in assets.
The proposed partnership with the MUFG will be with a 20% stake in the sense the provisional allotment given to them. So fresh capital would be coming in with approximately $4.4 billion. That is the proposal, and both the MUFG board and SFL board have approved the proposal, and we have already sent the notice for the EGM, and that is with you. Some of the things which you would like to highlight here is we believe with the large capital coming into SFL, we will have a long-term growth strategy, and we would be able to grow significantly higher than what we have been growing. We have been growing around 16%-17%. We would like to grow another 3%-4% more. That is anywhere between 18%-20%. It all depends upon the economic activity.
last two quarters, the GDP growth in India, if you have witnessed, it is growing around 8%+ , which is a very positive sign, and we believe this is going to be a long-term happening in India the way things are moving. The GST reforms also have given some kind of a positive consumer consumption push, and we believe greater demand will follow. We also believe that growth rate, credit demand in India will grow around 2.5x of the GDP. There's approximately 20%. We should be able to grow on par with the credit demand, and maybe in certain quarters and certain segments, certain geography, we would be able to grow much faster. There are a few things which we have in plan.
We have been all these years financing to small vehicle operators and machinery owners, agricultural household for tractors, mechanization of agricultural activity through mechanization, SMEs. We have been either doing small ticket lending. We believe with our knowledge and experience in this field, we can upgrade to little newer vehicle and bigger ticket. We don't have to really go into unrelated businesses with the addition of new capital. The additional growth, what we can provide by having additional capital, that itself will be sufficient for our growth.
From where we are getting this confidence is basically when a large strategic partner comes into, we believe our balance sheet being very strong, the borrowing rates will come down. Additionally, with rating upgrade, further the rates will come down, and overall, we believe the 100 basis points advantage will get over the next two years on our borrowing cost.
Our liability side will get rerated on the borrowing, and some of this will get passed on to the customers, especially the customers who are moving away from us for better rate to either bank or other peer NBFCs. So retention and attracting few new customers would be sufficient for us to keep up the growth momentum and grow at around 20%. The immediate impact of the capital infusion will be our gearing increase around 4.3. That is leveraging will come down to 2.6x, and we expect that as we keep using capital, that will keep increasing.
The ROA part of it, because the capital and lower cost, the ROA will expand from current 2.8% to around 3.6% over the period, and the ROE, which will come down next year because of the additional capital to around 13.5%, will start growing year after, and we would be able to go back to the current ROE by 2031.
That's around five years from now. So we should be able to have a growth momentum, better ROA, better ROE, and we also expect the credit cost to come down. Even though we don't want to give, we have been always a conservative. We don't want to give a very high positive picture on this, but around 10- 20 basis point improvement in credit cost is a possibility because we would be able to retain our top customers, our best paying customers for a longer term.
These are all the positives of the investment, and I think this is the base. Of course, the other advantages which I would like to highlight, MUFG has an investment in Morgan Stanley with 23.7%, and apart from that, they have investment into four Asian countries. That is Philippines, Vietnam, Thailand, and Indonesia, and their experience in these countries has been good. They have a very strong digital play that we should be able to take certain advantage of the platform what they have built in these countries, and since they have the experience of investing in Asian countries, it will be very comfortable management for us. As per the understanding, they will have two board seats, and we also expect certain advantage in funding support, capital market support, treasury solution.
These are the broad understanding we have, but as we move together, we should be able to work out on a lot of mutually beneficial advantages. These are the broad numbers, and I think the rest of it, the rest of the information you already had. We are happy to go in for a Q&A. Thank you very much.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use their handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We take the first question from the line of Mahrukh Adajania from Nuvama Wealth Management Limited. Please go ahead.
Yeah, hello. Congratulations, sir. So I had a couple of questions. Firstly, what was the ROA indication that you gave? I could not catch that properly.
See, right now our ROA is around 2.8%. We expected to improve to 3.6%.
Okay. So my questions were that just in terms of growth, where do you see the share of new CVs settling? What do you think would be an ideal mix for your new CV? And if you could guide to a margin trajectory, say over the next one year and maybe even longer term, would we see it crossing nine? How does it work?
See, basically what happens is the interest rate, the borrowing cost reduction will be much deeper and for the entire book, and we will be onboarding few customers for new vehicles. That means maybe around 5% of my customers would be new vehicle customers. Since my borrowing cost comes down by nearly 100 basis points, a few of the customers, if I am able to retain by reducing my lending rate, it will not have any impact on the net interest margin. In fact, my net interest margin is likely to expand from here. Exact numbers I will not be able to give you immediately.
Sanjay will be able to help you out of that, but you can imagine 100 basis points coming down for the entire book over the two years, and very few customers I'll be able to offer new vehicle lending rate. Even there, since we would be giving to a select few, that will not have any impact on the margins or spreads.
Sure, but so what will be the ideal proportion? I mean, how much do you want to increase the proportion of new vehicles to?
Yeah. So basically, our new vehicle market share is very low. It's around 3%, including the passenger vehicle among the new vehicle overall new vehicle sales, which we would like to double it in the next three years.
Got it. And the ROA target, not target, but the indicative ROA is for two to three years, is it?
Yeah, yeah. See, it will start improving from the next year, and it will have over the four years.
Over four years. Okay.
Yeah.
Okay, sir. Sir, thank you so much and all the best. Thank you.
Thank you. We take the next question from the line of Piran Engineer from CLSA. Please go ahead.
Yeah. Hi, team. Congratulations on this landmark deal for the Shriram Group and the Indian financial sector. So my first question is, some of the management changes we did two months ago, was this in lieu of this deal, and should we expect any more changes over the course of the next few quarters?
Oh, see, the management changes were the normal management changes. There is nothing surprising here. So as the term came to an end of the earlier managing director, the new Managing Director and CEO has come, Mr. Parag Sharma, and he will continue for a longer time. There is nothing in anticipation of this deal we have done.
Okay. Understood. And sir, also, like you mentioned that in the vehicle segment, you will go into the higher ticket, lower risk segment. Should we expect something similar in MSME where you get into higher ticket LAP? Right now, you all are operating in the INR 10-12 lakh rupee segment, but that's still a more niche market, the INR 50 lakh-INR 1 crore segment. Should we expect you all to enter into that also?
No, we will not go into large ticket SME lending. We will never get into LAP lending. We will do only the SME business lending. We are very clear. However, yes, we will have additional security of property, either commercial property or residential property. That will continue, but we will not get into large ticket and will not get into LAP.
Sir, but if I may ask, why will you not do that now that your cost of funds is likely to be competitive with the good players?
See, we have been repeatedly saying that we are a conservative company. We do not wish to play for a long-term lending. LAP, moment you call it as a LAP, it goes into 12-15 years longer lending, which we would like to restrict to five-seven years only and only for a term loan and for the business purpose and based on the cash flow.
Understood. Understood. And even this vehicle, new vehicle segment that we are talking about, doubling market share, that will come primarily from new vehicle loans to existing customers. We will not go into the open market to source new vehicle loans aggressively. Is my understanding correct?
Yeah, yeah. You are exactly right.
Got it. Got it. And just my last question, now that we're sitting on INR 40,000 crores of cash, any potential M&A that we could be thinking of?
No. So we will not be looking into any kind of inorganic growth.
Got it. Got it. Okay. That was it from my end. Thank you and wish you all the best and a happy New Year.
Thank you.
Thank you. We take the next question from the line of Avinash Singh from Emkay Global Financial Services Limited. Please go ahead.
Yeah. Good morning. Congrats on this deal. First question, again, repeating on that, of course, you have provided some color, but I mean, now with the higher capital, in terms of accelerating growth, I mean, in terms of product, customer, and geography, I mean, on the product side, adjacencies, you explained where you would like to go. Now, in terms of your geographic footprints, you have been relatively more into the rural semi-urban. I mean, does now your cost of funding becoming very, very competitive? Would you like to kind of venture more aggressively into urban or metro as well as, I mean, going after the prime customers also where some of the, I mean, typically the NBFCs or banks have been operating? So I mean, do you have certain plans around this customer and geographic adjacencies?
Secondly, on MUFG, I mean, of course, the filing and everything says for now they are kind of a public investor, but now given the kind of direction of this investment and the strategic importance, is there a plan from their side to, I mean, kind of being turning into the co-promoters and like that? Thanks.
See, basically, we would like to remain in our geographies where we are. We don't want to get into metros at all. We would prefer to be in the suburban rural market, and as I was telling, that we would prefer to retain my existing customer, and definitely, I'll create more reach in the north, central, and east where our footprints are a little less. We would be expanding. We have rural centers there. We would be converting those into branches, so naturally, my reach in these geographies is going to be better. Even if you see the way each states are growing in India, south seems to be growing much faster, and the GDP per person also is much higher, and also to some extent west, but there is a scope in the east and north and central to grow.
Especially, we believe that central and north are likely to grow much faster, and there is enough indication for us that they are catching up with south maybe in the next 5 to 10 years, and that is where we believe the sweet spot and the maximum growth we should be able to get. The second question.
On MUFG, there is no discussion whatsoever for any further stake. They will be classified as non-promoter and have 20% stake. There is no discussion whatsoever for any further increase as of now, and this is huge capital, which is going to take some time for us to deploy. There is no need for any further capital or discussion for their stake increase.
Thank you. Thanks.
Thank you. We take the next question from the line of Pratik Kothari from Unique PMS. Please go ahead.
Yes, hi. Good morning. Sir, one question irrespective of this large capital, we had the wherewithal, the products, the customer segments, etc., to kind of accelerate growth. But like you mentioned, for the last three, four, five years, we have been growing at this 15%, 16%, 17%. So is it just this incremental capital which kind of now makes us more aggressive and we want to do 20%? Because the reverse would have been what we would expect where you are growing at 20% and you need capital, and hence you went out and got capital. It seems the reverse where you got capital, and hence now we want to grow faster.
See, basically, everything falls into your cost of borrowing, and with this new capital, our cost of borrowing will come down, and that will help us to get into a certain segment or certain customers, and therefore the growth rate is higher. It is not that we can grow at 20% at the current borrowing cost and attract capital. It is not there, so therefore, we were looking for a partner for making ground that our total liability cost, borrowing cost, comes down with the peers in the market.
Also, do with the, economic environment, the current GDP growth is good, and possibilities and opportunities are there. We would like to take advantage of that and then grow faster.
Correct. Correct. And, sir, this 100 basis points of cost of fund improvement over two years. If I just highlight the timeline, what happens very quickly, what happens two years out, and the assumptions behind the scenes.
I think two, three things. One is the incremental liabilities and replacement of the current debt takes two to three years. That is why we said it will happen over a period of time and not immediately, so whatever debt gets replaced, maturity will be around two, two and a half, two to three years, so that is why we give this three-year timeline and for growth, whatever liabilities we raise additionally, that will definitely come cheaper, but that will be around 20% growth only for liabilities also, but replacement of debt, which normally takes a longer period for getting the pricing benefit.
Correct. So the thought behind this is two, right? So one is a larger institutional partner backing us and two potential rating upgrades. So two of these, one of two of these fall in place, and we think 100 basis points is what we can get.
Yeah. I think that is the thing. And in fact, other thing also, otherwise also, because of RBI action rate cuts, the benefit is anyways flowing in.
I thought this 100 was over and above that. So this assumes the RBI rate cuts, which is yet to pass through.
Correct. Correct. It assumes that also. But yesterday, also one rating agency has upgraded us to AAA.
Yes. Correct. Yes.
So we do expect other rating agencies' actions also being there. So I think we'll wait and watch, but we factor in all the positives and then say 100 basis point improvement.
Correct. Sir, last on this $200 million non-compete that the employee trust kind of got, if you can just explain what is this, the rationale, something on this.
See, basically, the promoters, part of the SOT, there should not be starting a similar business because you would have seen that normally whenever there is any investment, there is a non-compete clause for maybe a year or two. But this gives. And there is an understanding that we will not start any similar business by the promoter group. That is the SOT. That's why this payment is made.
Correct. But sir, this is unfair to the other minority, right? It's just this one cohort of investors who get something. I mean, I understand the reason behind it, and usually non-compete is part of things, but to get such a large amount just to one cohort, this seems off as a minority investor.
No, it is paid directly by the investor.
There is no price which is reduced because of this investment. As per the SEBI determined pricing, whatever was the preferential issue rate is what is paid, which is not discounted at all. That full money comes into Shriram Finance.
Not fair. But one of the cohort of investors got a larger, I mean, if you do the per share calculation, whatever you got, a different amount than what the others got, right? What Shriram Finance got. So, I mean, agree to what you're saying, but I mean, the promoters did get a different rate.
No, promoters are not selling anything here. It's a fresh capital that is coming in.
Okay. Thank you.
Thank you. We take the next question from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Hi. Thank you for this opportunity. Good morning. And congratulations on this deal. So just this stock exchange notification that was originally put out, there were two other points which you answered earlier, but I'm just reiterating it, that MUFG can second up to three of its personnel as senior management up to six months of the completion date, and there is a non-binding MOU to explore framework to identify beneficial business opportunities, which implies that there could be senior management changes or they can have their own people come in. Second is that there can be acquisition targets. You've answered these two, but if you can just clarify these two points from this stock exchange notification, sir. Thanks.
Yeah. See, basically, the understanding is that none of the secondaries would be either KMPs or senior management. They will be number two or number three level only. So none of the KMPs and senior management changes are discussed at this level.
Areas of synergy.
Areas of synergy is basically, see, since they have investment in other Asian countries, we would like to see how their investment has progressed. And depending upon that, some sharing of the information would be there. It can be that they will also learn from our experience here in India, and we can also learn from their experience. So it's mutually agreed. And I believe on the digital platform, there will be some advantage because they have a very robust digital platform in the Asian countries. And even though India is one of the leading in the digital network and digital transactions, we believe that the other Asian countries have done much better in certain areas. We would like to really know from that and, if possible, adopt here.
Right. One last question is that they also have a significant stake in DMI Finance, which is into digital lending and consumer durable lending, which could be a complementary business for us as well. In the future, is there a case that we'll see the merger of DMI Finance into Shriram Finance?
No, we don't see that opportunity or the chances because it's a purely fintech company, and we did not discuss. In fact, they have invested in DMI through their fund, one of their funds called Ganesha Fund, and not directly from the bank as planned as they're investing here.
We don't want to explore that complementary business also in the present construct, Consumer Durable Financing, fintech partnerships, so on and so forth.
Nothing was discussed, and I don't see any kind of chance there.
Thank you. Best of luck and happy New Year.
Thank you.
Thank you. We take the next question from the line of Abhijit Tibrewal from Motilal Oswal Financial Services Limited. Please go ahead.
Hello. Good morning, sir. Congratulations on this transaction. So just a couple of questions. So what is the timeline that we're looking for the completion of this transaction? And once the transaction is completed, within what timeframe can we expect this equity distribution to get deployed?
See, basically, 14th is the AGM date, and after that, we need to apply for RBI approval, formal approval from RBI and CCI. We expect it to take two to three months, but it can be faster also. It all depends on how these things move. And we would be happy to get it in this financial year, but at the max, it can be April. So we are happy to receive as early as possible.
Sir, basically, minimum of two to three months is what you're expecting on this transaction to get completed?
There is nothing called minimum. It can be as early as possible. We are just giving you outer time.
Okay. Okay. Got it.
It can be faster. Yeah.
Got it. Sir, the other thing is, I mean, yesterday we reported we already have a AAA credit rating upgrade from CARE, and maybe the others will follow suit in the coming quarters. After that, I mean, with the AAA credit rating from multiple credit rating agencies, what is the steady-state leverage that we can operate at? I understand it will take a few years to get there, but what is the steady-state leverage at which we can operate?
See, as we have an international rating, we have to have it after a requisite of 20. So we always feel the sweet spot for us is anywhere between four to five times, maximum five, and four is ideal. And for reaching that four times leverage, it may take maybe five to six years. But we are happy in this. I think the sweet spot is four to five, and we should, or I should say 4.5 should be the exact.
Got it, sir. So then, I mean, a couple of times earlier in the call, we shared that over the next two years, we are expecting 100 basis points impact or benefit on our lending cost of funds. So if perhaps you can just briefly explain where is it that the bigger benefit will come from? Will it come from the debt capital market? Should it be coming from the bank borrowings? And how much of this benefit will be retained versus passed on to the customers to be in market share?
Yeah. I think two, three fronts where the larger benefit will come. I don't think there is much of differential when it comes to the bank borrowing between AAA and AA. There is definitely a lot of differential between the capital market borrowing, what we have, and also the retail deposit. Retail deposit for us is around 26%-27%. So as and when we reduce the rate there and the capital market, which is close to around 23% of our liabilities, both this will have benefit, and that should happen over a period, as I mentioned, around two and a half to three years.
Got it. And sir, how much of this do you think can be retained versus what could be passed on to the customers so that we gain market share if we grow at a higher rate?
See, basically, if you would like to retain my existing customers who are growing and becoming larger, how many of them? I can tell you around 30% of my customers over a period move out because they grow their business and they want a new vehicle or larger ticket. And if you are able to retain that, itself is significant. We don't have to really look for a new customer to grow my business.
Got it. And sir, lastly, we spoke about now maybe targeting a 20% kind of an AUM CAGR with this equity infusion. And like you said, even if we end up losing some of our existing customers who move out, we can very well get there. Just trying to understand, I mean, we've discussed already a lot in terms of our focus on maybe venturing into newer geographies, maybe a bigger MSME playbook. But in terms of product segments, which are those product segments which will kind of consume most of this growth capital that has come in?
See, vehicle being 70% of my book, automatically the larger capital will flow into that. All commercial vehicle, construction vehicle, plus your passenger vehicle is put together 70% of my book. And in the two-wheelers, we are already a number one player in the market, and we'll continue to remain number one there. I don't really see a big change in the two-wheeler market position.
Probably we'll be able to grow on the what you call a bigger bike that is which we were mostly focusing on a transportation kind of a bike. We may get into a little bigger bike. That's all. Otherwise, there may not be a big difference there. But in the SME, I see a huge opportunity, but we'll be very cautious. As I was explaining you, we will not get into LAP. We will do only SME cash flow-based lending.
But definitely, we'll go for a secured lending, at least for some more years. We believe until the SME segment becomes much well understood by us, we will get into secured lending.
Got it. This is very useful. Thank you very much, and I wish you and your team the very best.
Thank you. We take the next question from the line of Viral Shah from IIFL Capital. Please go ahead.
Yeah. Hi. Thank you. First of all, congrats on this landmark investment, sir. So I have three questions. Third one, more of a clarificatory question. So first of all, you have mentioned all throughout 100 basis points reduction in cost of funds.
Now, if I tie in this with the lower leverage that we will have post this money coming in, and also the lower credit cost that you guided, do you think you are being too conservative on the ROA numbers that you are guiding for, sir? Because just mathematically, when I added all these three up, the numbers seem to be much higher the ROA uplift. At least, of course, in the intervening period. I'm not talking of, say, on a steady-state basis like for like leverage, etc., which will still be at least six, seven years down the line.
The 3.6, I said at the end of five years. In the interim year, when the capital comes in, the ROA will go up significantly. It may go up to 3.8, but it will slowly, as we expand our business, it will come down to 3.6. So whatever I'm trying to say is at the end of five years.
Okay. Got it, sir. So secondly, on the growth front, you mentioned the growth acceleration from 15%-16% to, say, 18%-20%. And this seems to be just incrementally on back of lending for new vehicles and that too for retaining customers. Do you think this is the kind of just on back of this, we can achieve this growth, even say in the next one to two years?
Yeah. We are quite confident. See, the GDP growth rate gives us that kind of comfort and scope for growth. Now, 8% GDP growth in the last two quarters is very positive for us. And the credit demand increasing because of the increase. Today's headline also, you would have seen that manufacturing is one of the highest in the month of November. So I think there is enough demand for us to grow. So as I was telling you, by just retaining my customer, I'll be able to grow 20. I don't have to really do acquire a new market or new customer or do something totally different to achieve my growth.
Got it. And sir, lastly, on the leverage, you mentioned the sweet spot of 4.5 times. Just wanted to clarify, are you referring to the debt to equity or the asset to equity?
Debt to equity.
Okay. Got it, sir. Thank you. All the best.
Thank you.
Thank you. We take the next question from the line of Shreya Shivani from Nomura. Please go ahead.
Hi. Good morning, everybody, and congratulations on this historic deal. I have two questions. My first question is just focusing on your product mix. While you've explained very well that your existing customers themselves can support growth, but where would the vehicle-non-vehicle mix be for you? It has been at about, if you include two-wheeler in the vehicle, it has been at about 80/20.
Over five years, will you keep it at 80/20? Does that shift to 50/50 or any other number? If you can help us understand how the diversification within your book takes place. My second question is on the MUFG, the three set of people who will come in, is there any clarity on which business segments would they come in to be a part of? One, you mentioned how you want to deliver their digital capability.
So one can expect something like that can come in there. But is there any other area where you expect these people to, the new set of people to come in and be a part of certain business segments? So those are my two questions. Thank you.
See, basically, on the overall proportion, I don't see there is any change because, as you rightly said, including two-wheeler and construction equipment and farm equipment, it is 80/20. That is, 15% is SME and another 5% is gold and personal loans. So overall, that proportion will continue to remain. But maybe, yes, we will be a little more aggressive in the gold financing because we have a reach which we need to take an advantage.
There will be a certain push for gold finance. That will increase maybe another 2% more. So gold finance going up by 2% more can bring down our proportion to 78/22. So it will be just 2 to maybe 5% variation could be there within the segment, broader segment, not the small segment. That's how I think it will play out over the five to six years. The second question is on.
Where are the seconds?
See, second, right now, they have not indicated where they would like to put. But there are many things when the MUFG also has regulatory requirements there in Japan. And therefore, they also have to understand our accounting and some kind of reporting would be there because it is a significantly large investment into India. So we believe it will be mostly on this account maintenance and maybe reporting and digital.
These are the areas. On the business front, it may take more time because they need to understand the businesses in India and slowly. But one thing we have made very clear, it is neither a KMP nor a senior management. It will be someone who will be wanting to learn business in India and understand India's environment and help in more of an information flow and the digital play.
Got it. But there is still a possibility that some of them could come into some business segment as secondary also, right? Not just in the three account maintenance and reporting that you are talking. That is still a possibility. There's no restriction on that, right?
See, I can't put any restriction. But yes, definitely, if they want to learn something in India and we use that in Indonesia, definitely welcome. That's how any investment has to be for learning new things. Because Indonesia also has a very active NBFC sector, and there are a large number of financial institutions there beyond the bank. Of course, they have invested in the bank, but the bank also has NBFC, sorry, subsidiary. That's how we understand.
Got it, sir. This is very useful. Thank you and all the best.
Thank you. We take the next question from the line of Umang Shah from Kotak Mutual Fund. Please go ahead.
Yeah. Hi. Good morning, and thanks for taking my question. Congratulations on the deal and the much-anticipated rating upgrade. Sir, just one question and a couple of clarifications. First is on the non-compete. If you could just help us understand this better. So what is the duration of the non-compete? And the non-compete, does it just apply on SOT or even the members or beneficiaries of the SOT, which could be current or past senior management within the group?
No, it is basically for SOT. That is a promoter group. And there is nothing like a timeline. So we have decided that we will not have any other business started by the SOT. That's all. Matters over one time.
Okay. Okay. And any of the members or beneficiaries sort of then technically become part of this agreement, right?
They are all part of the SOT. Anyone who's part of the SOT, they will not be able to start any business. Makes it simple.
Sir, the other two clarifications. One is, once all the regulatory approvals are in place, the $4 billion comes, the money comes into the company in one shot, or are there any milestone-linked investments?
No, it's one shot.
Okay. Perfect, and sir, the last one is, listening to your commentary, it appears that your ROE target for the next five years appears a bit conservative. Even if I build in the cost of fund advantage and maybe a little bit of credit cost benefit, ideally, we should hit our ROE targets much sooner compared to what you're guiding for. I mean, it's fair to be conservative, but is my understanding correct, or am I missing something here?
See, we are a conservative company. We'll be thinking conservatively only. We don't have any other way to think. So you should give us, guide us on other possibilities.
All right. Okay. No problem, sir. I got it. Thank you so much, and we'll show you that.
Thank you.
Thank you. Ladies and gentlemen, we take that as the last question and conclude the question and answer session. I now hand the conference over to Mr. Umesh Revankar for his closing comments.
Thank you, everyone, to come online today. Now, these are all holidays. Many of you, it is the holiday season, and I wish you New Year wishes. Plus, one thing I would like to remind you: we have sent notices, and I request everyone to positively participate in the vote for us, vote for the resolution, and participate. If you have anything to discuss, feel free to talk to Sanjay, and we are open to discuss one-on-one at any point of time on any issues. Thank you very much. Wish you all the best for the New Year 2026.
Thank you. On behalf of Shriram Finance Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your line.