Q1 21/22

Aug 2, 2021

Ladies and gentlemen, good day and welcome to the Cholamandalam Investment and Finance Company Limited Q1 FY 2022 earnings conference call hosted by Kotak Securities Limited. 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 * then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Nischint from Kotak Securities Limited. Thank you, and over to you, sir. Good morning, everyone. Welcome to the earnings conference call of Cholamandalam Investment and Finance Company Limited to discuss the 1Q FY 2022 performance of Chola and share industry and business updates. We have with us today Mr. Vellayan Subbiah, Chairman and Non-Executive Director. Mr. Ravindra Kundu, Executive Director. Mr. Shaji Varghese, President, Housing Finance. Mr. Suresh Kumar S, Senior Vice President and Business Head, LAP and SME, and Mr. Arul Selvan, Executive Vice President and CFO. I would now like to hand over the call to Vellayan for his opening comments. Thank you, Nischint. Good morning, everybody. We'll just go through quickly the key financial results for the company for the quarter. Disbursement were at INR 3,635 crores, which was marginally higher than Q1 FY21. Total AUM was at INR 75,763 crores. NIM was at INR 1,363 crores. That's up 39% of Q1 FY22. Pre-provision operating profit was at INR 993 crores, which is a growth of 56%. Our PAT was at INR 327 crores in Q1 FY22, as against INR 431 crores in Q1 FY21. Broadly, because of the second wave of the COVID pandemic, between localized lockdowns and other factors starting mid-April 2021, which had extended in most states up to mid-June, and in some states we still have partial lockdowns in force. Basically, many of the borrowers and staff of CIFCL were impacted by the pandemic and the second wave. We as a company basically shifted our priority from business to protecting the well-being of affected persons. In a lot of the rural areas, there was a lot of challenge in terms of infrastructure, health infrastructure. Getting everything there became a priority for the company, including the teams spending a lot of the effort in getting and looking at everything from oxygen to drugs, kind of getting anything that they could do to support both our employees and key people during this whole effort. This basically kind of results in a setback in performance in Q1 on both disbursements and collections. Disbursements were up 1% compared to Q1 FY 2021. Collections suffered and resulting in an increase in Stage 3 assets from 3.96% to 6.79%. The restructuring option with asset classification benefit extended by RBI under Restructuring 2.0 was used to the extent of 3.86% of the book as of June 2021. Total restructurings were at 5.44% of the book, and these loans have been classified as Stage 2 assets by us currently. CIFCL held management overlay provisions of INR 750 crore as on December 20, and then we created an additional overlay in March to the tune of INR 350 crore. We had a total of INR 1,100 crore. Of this, basically, we've reversed INR 400 crore during the quarter, and this release was made towards additional provisions, which were in Stage 1 in March 2021, and where the customer continued to be in Stage 1 in June 2021 without downgrade to a subsequent stage. Additional provisions were held in March 2021, which were in Stage 1 and 2 in March 2021, and moved into Stage 3 in June 2021, on which higher provisions as per regular Stage 3 norms have been created. Post this reversal, we have our management overlay of INR 700 crore in Stage 2 and 3 to manage any future contingencies. We've also witnessed a recovery in disbursement and collections during the latter part of June and in July, post relaxation of statewide lockdowns. We expect a gradual revival in subsequent quarters in FY 2022 with normalization and rollback of accounts which have moved to higher brackets. In terms of individual businesses, vehicle finance disbursed INR 2,846 in the quarter as against INR 3,231, which is a decline of 4%. LAP disbursed INR 386 as against INR 119, which is a good growth because of the challenges during first lockdown. HLS disbursed INR 199 as against INR 190, a growth of 5%. AUM was at INR 75,763 compared to INR 78,206. PAT was at INR 327, like I just discussed. PBT ROTA was at 2.5 as against 3.5 the previous year, and ROE obviously dropped as a result to 13.5%. We still have a strong liquidity position with about almost INR 8,000 crores of cash balances at the end of June, which includes the INR 1,500 crores which we invested in G-Sec, which we show under investment, and a total liquidity position of INR 16,400 crores, which includes undrawn line. ALM is comfortable. We have no negative mismatches. In terms of asset quality, I think we just talked about it, gross stage 3 stood at 6.79, and our other provision coverage of 35.5%, as against 3.34 of stage 3 during June 2020, which had a provision of 41.6%. Total provisions carried against the overall book was at 4.37% as against normal provision levels of 1.75% prior to pandemic. We've obviously talked about the impact of the Supreme Court order in the past, and that still remains in force. The capital adequacy of the company was at 19.08% as against regulatory requirement of 15%, and Tier 1 was at 16.6%. Ms. Sandra, I will stop there, and we'll be happy to take questions. Thank you very much. We'll begin the Q&A. The first question is from the line of Prashanth Sridhar from SBI Mutual Fund. Yeah. Thanks for my questions. I hope I'm audible. Yeah. Sir, just two questions from my side. On the vehicle finance book, if you could give us some color on how your customer segment would be dealing with issues like capacity utilization, freight rates, increasing diesel prices, et cetera. If you could give us some numbers like Stage 2, Stage 3, and restructuring in the LAP, SME and home loan segment. That's it from my side. Thank you so much. Vehicle finance, last time also I mentioned that we are actually into SRTO category, which is actually 0 to 10 vehicle or 1 to 10 vehicle customer. In that category, utilization level or managing the vehicle during this time when diesel prices have gone up is better. Midsize fleet operator who are actually having OPEX little higher than the SRTO customer, they are struggling where the exposure is lower in our case. Second is that, in the case of heavy commercial vehicle, we have subject in few market only, not across the country. During last 2 years, we have been reducing our exposure in heavy commercial vehicle. After noting that, the PT has gone up in 2018, 2019, since then we have reduced it, we got benefited on the PT also at the overall level. Utilization level has been impacted in one segment of the customer. Large fleet operator and SRTOs are better off. Things are improving. This was there in Q1, but in the month of July, things have improved significantly. We have seen that industry has sold 10,000 unit of heavy commercial vehicle, so TIV has gone up. If in case this continued, there's no COVID impact wave 3, then obviously heavy commercial vehicle is also expecting a replacement demand, which is due for last few months. We will see that heavy commercial vehicle customers will be benefited in time to come. As far as the Stage 3 and Stage 2 of LAP, the restructuring, we have done about 2.95% of the portfolio, and our Stage 3 stands at about 8.86% for LAP. Mr. Sridhar, your question is answered, sir? Yeah. Sure. Yeah. Thank you. The next question is from the line of Dhaval Gada from DSP Mutual Fund. Please go ahead. Yeah. Thanks for the opportunity. Had two questions. First is on the stress increase that we've seen both in Stage 3 as well as higher share of restructured loans. I just wanted to understand, if you look at the moment, given that there was no moratorium this time, you would've expected both Stage 3 and restructured to increase. Just curious to know, is the extent lower than what you initially estimated? By when do you see normalization of this trajectory? Related to that is the second question on credit cost. You have excess provisioning of about INR 700 crore. How much would that be adequate enough with the normalized credit cost for FY 2022? Yeah, those are the two questions. Thanks. Hi, Dhaval. Good morning. As I said, you have the vehicle finance data and LAP and HL have done also similar way. In the month of April, we saw 93% of our billing collection efficiency, which went down to 84%, in June it was 101%, in July it is 114%. The stress came in the month of April and May. After that, it has actually started improving. In fact, in the month of July, stage 2, stage 3 has gone down as against the June closing. The overall stress is due to in the month of June when the entire country was not operational. Southern part of the country was under lockdown, part of east was also under lockdown, like Northeast Odisha and West Bengal, it got impacted. In fact, in the month of July also, we saw lockdown partially applicable in Odisha and West Bengal and stringent overall lockdown is there in Northeast. In spite of that, we have seen our collection efficiency has gone up to the level of March in the month of July, and that is an indication that things have started improving in terms of stage 2, stage 3. As far as the provision is concerned, provision, we have taken 4.37 at overall book, and our normal provision used to be 1.75. At this point in time, at the overall book level, we have 3 times of provision. It is adequate. More than adequate. The overall stress you would expect, yeah, sorry. Yeah, go ahead. Yeah. The overall stress, do you expect by second quarter we should start seeing normalization or it would be in the second half of the year? I mean, just directionally, given that the collection trends are quite buoyant. Yeah. Yeah, everything cannot be done in the quarter. Every month these resolutions are happening. Normalization has started happening in the month of June. It will take 6-9 months to get into exactly the similar level. What we are expecting that we will try to deliver better numbers than last year closing as on 31st March in this financial year closing. Perfect, sir. Thank you and all the best. Yeah. Thank you. The next question is from the line of Chetan Ginodia from AlfAccurate Advisors. Please go ahead. Mr. Chetan Ginodia, your line is unmuted, sir. Please go ahead with your question. Hello. Yes, sir. You may go ahead, sir. The two things. One is in terms of the competition intensity with banks also moving aggressively in this space, how do you see that from competition perspective? Second, considering that the environment still looking very challenging, particularly on vehicle financing side, how do you see the trends over the next two, three, four quarters? Any change in strategy from the long-term perspective, if you can highlight on that will be useful. Thank you. Look, we have mentioned that in the past that the auto cycle as far as heavy commercial vehicle is something which is going to pick up, going to start anytime and replacement demand is going to start. Heavy commercial vehicle will see better number in time to come. This month itself, July, if you see the data, the heavy commercial vehicle segment has registered very good number. Other than that, entry-level car, entry-level two-wheeler, your tractor, used vehicle, all of them is going to do better. We are present over 1,100 branches, 80% branches in tier 2, tier 3 town. These are the places where the intensity is there, but we are able to do the job because of our people and our relationship with the manufacturer and the customer. We need not change the strategy dramatically, but we will definitely come back to some of the product which we have not done so far. Overall disbursement in the month of July, we have seen that we have delivered more than July 2019 disbursement as an organization put together vehicle finance, LAP and HL. This trajectory is actually going to continue, and we will deliver better than last year if in case COVID wave 3 doesn't come. I see. No major change in strategy, right? You might have seen some more delinquency in few pockets. Are you trying to become more conservative by making any change in the risk management, any change from the systems perspective? We are actually following the product level at a make, model, variant level and the customer and geography level and watching that where the probability of default and NGTs are lower. That actually varies. It's not a static. As and when we see that some product MMV is actually not giving return, we change, we reduce the disbursement. That is the ongoing process. We have a system business decision model working. Every quarter we look it, and then accordingly, we give the direction to the team to change their focus from market to market, product to product, and MMV to MMV and customer category to category. That has been working very well. What will be your guidance for the full year credit cost? No, it is very difficult to say at this moment in time. Internally, we are trying to do better than last year. That is what we can say. Sir, your question is answered? Yes, ma'am. Thank you. The next question is from the line of Manan Tijoriwala from ICICI Prudential Asset Management Company. Please go ahead. Hi, sir. I wanted to get your view on ECLGS versus restructuring as option for working with your borrowers. We have done around 4% ECLGs of the portfolio last year, so at minimum, I think you were able to help cash flows for around 20% of the portfolio. Was this first largely into the auto segment? I'm not sure if you could confirm that. Also if you could throw some light on ECLG this time and why it has been or not been used. Lastly, would you say borrowers who availed ECLGs last time around were as stressed as anyone who availed restructuring or more? See, yes, last year we did a good amount of ECLGs because obviously it is guaranteed by government, et cetera, we wanted to capitalize on it. Now, there is a cap on what you can do under the ECLGs, since we have done quite a bit last year, this year we have kept it to the minimum. This year we have done around INR 6 crore only in Q1. We have not scaled it up much in the current year. The ECLG, actually, we have done INR 2,000 crore last year. Out of that INR 1,200 crore was vehicle finance, INR 800 crore was LAP. In this year we have done only INR 700 crore. Sir, your question is answered. Sir, lastly, if you could shed some light around how stressed you would imagine a ECLGS borrower would be versus a guy who avails restructuring? ECLGS customers are performing better than our overall customers. We don't encourage restructuring for such customers. Yeah. There is no restructuring. There is no restructuring available for that. You can extend it. Okay. Sure, sir. Thank you. Thank you. The next question is from the line of Anand Bhavnani from White Oak Capital. Please go ahead. Thank you for the opportunity. Sir, my first question is, how you see relative attractiveness of various segments that you operate in now. We have seen that in the tier 2, tier 3 towns that we operate in, affordable housing has done very well. They have withstood the test of the pandemic better than, let's say, vehicle finance or LAP. Is the experience similar for us, and do you think the opportunity in affordable housing is something which we would explore more vigorously going forth from here on? Yeah. Okay. While you said that we have just done INR 199 crore of business. We understand it's 5% higher than last year, it's a very small volume. When it comes to the opportunity, the LMI, lower middle income families whom we target and whom we wish to serve, tier 2, 3, 4 are the obvious opportunities. If you ask me, with INR 4,500 crore, we have just scratched the opportunity. We have only just reached out to 177 branches and just 9 states last year, we will look at 2 more states this year. The opportunity, of course, is much, much bigger, we will continue to focus there, this is an identified opportunity for us. We have also internally strategized and focused accordingly in a segment which can scale over a period of time. The transaction types which can scale over a period of time, like self-construction, ready retail. These are the large opportunities in 2, 3, 4 cities. We are focused on that. We hope to get the numbers and the plan which we have internally planned. It's quite a good opportunity, needless to say. It also comes very handy to Chola because Chola over the last 22-plus, whatever years, been kind of focusing on the LMI, lower middle income. There's a good understanding of risk and an orientation to the segment too. We hope to do good. We are focusing on that. Sure, sir. My question was more of, do you see for us to divert more resources there or do more business there than historically we have done, and kind of have more focus on this, given that pandemic has created a template that this business does better than others in rural areas, the affordable housing space? The question is our focus more and can we expect much higher growth than in the past? Yes. Let me reframe the question the way I have understood. What you are asking is, for affordable housing, should there be a higher priority and increase the volume than currently planned and budgeted? Is that the question you are asking because it is an opportunity? Yes. Look, housing is a generic demand. There's always an opportunity. We have a reasonably good business plan we have made all the way up to FY 2025. We are on course of that in execution. We will always focus to execute the plan we have already kind of firmed up. That plan to be executed with precision is what we will focus. Anyway, it was always an opportunity. It's not that today affordable housing has grown a new opportunity for a company like us where we do a very small volume. First priority is to establish to Western and the Northern part of the country, establish process and procedures. As you know that the whole land matters are a state function, it needs to have a lot of local nuances. We just don't want to rush in, and this is not a business to be just rushed in. It has to grow because 15 years is the average lending tenure. We would like to go with the way we have built other businesses, carefully and do in a way it is sustainable. We are not going to rush in beyond the business plan. You know. That's where we look at. There is no intent to change an extra focused plan or a higher volume plan than what is currently planned and approved by the board. Sure. Sir, just double-checking if I heard it correct, we did ECLGS of INR 700 crore in Q1, is it? INR 7 crore. Only INR 7 crore. INR 7 crore. Sorry, my bad. Thank you. I'll come back in the queue. Thank you. The next question is from the line of Bhavik Dave from Nippon India Mutual Fund. Please go ahead. Hi. Good morning, everyone. Just a couple of questions. 1 is on the, we understand the increase in Stage 2 and Stage 3 because of the lockdown during April and May. I just wanted to understand, if you could give us some color on what proportion of these customers are paying. I understand that they would not be able to clear their previous dues and hence have rolled forward, what proportion of the Stage 3 assets are active and paying 1 or more than 1 EMIs, if that data point you can give, and even the same for the Stage 2, because that has seen a significant increase. I would assume that in June and July, when things normalized, customers would have start repaying at least 1 EMI. If you could just give us some sense on what that is. I mentioned that stage 0 to stage 1 roll forward is only 1.45%, which is the lowest in the last 10 months. When it comes to stage 2, almost 80%, 85% customers are paying their current month due. They are stabilized in the same bucket. The stage 3, which is nothing but 3 and above, there is also almost 80% customers are paying the current month due. Also there is a little bit repossession happening, although repossession and sale is very negligible in terms of the stages. Some customers who have not paid, they have actually committed to pay in subsequent month. That is the situation of stage 1, stage 2, stage 3. Okay. That's very helpful. Thank you. Which is better than the trend which we have seen in the month of January, February, March and July. I am just telling you the July trend versus the March trend. Understood. That helps. Secondly is on the 3,600 odd growth restructuring that we have. If you could just break it down between vehicle and LAP. How is that breakup looking? One second. Yeah, sure. 1 last question come mind is on the NUE investments that we have done and the Vishwakarma consortium, if we can highlight what is the roadmap or what is the thought there, what are we planning to do there, if at all, anything which we can add. Thanks. Right now that's a wait and see, right? Basically the RBI has to kind of declare which of the consortium they're going to give a license to. That they have said that they will do in September. Till they do that, there's nothing for us to do. Obviously if they do announce that in September, then we will kind of come out with a more detailed strategy in terms of what Vishwakarma's kind of approach is going to be. Perfect. There's some sense that it, I don't know, may be delayed, but we have to see. We can't dictate when that's going to happen. In the stage 2, there's a VF is INR 2,000 crore-INR 50 crore balances. Of the restructuring INR 3,600, INR 2,000 crore is vehicle. Okay. Thank you. Thank you. Thank you. Thank you. The next question is from the line of Shubhranshu Mishra from Systematix. Please go ahead. Hi, sir. Thank you for the opportunity. I just wanted to understand what kind of disbursement numbers are we looking at for the full year. What kind of run rates can we look at going forward? It was very healthy to understand that we are pretty much at July 2019 targets. How can we model it going forward? That's the first question. Second question is, we had tightened our credit filters during COVID. Have they been eased out in this particular quarter? What kind of rejection ratios are we looking at right now versus FY 2021 versus FY 2020 in each segment, vehicle finance as well as LAP and in home loans? If you could give out the LGD PD assumptions for the LAP segments, which is LAP Delhi, LAP Tamil Nadu, sir. Thank you. Disbursement numbers, we don't give any forward-looking statements. What you can assume is whatever is the assumption on the industry growth, you can assume that we will be 5%-10% better than the industry. That's how we have been our past trends and that we will maintain it in the current trends also. Regarding credit filters, I will request Ravi to answer. Before that, the LGD PDs, we don't give individual sub-product, and you are asking even geography level. We don't share it in the public domain. Yeah. As I mentioned that in the vehicle finance, we have the concept of using the business decision model, which is we have got 4 variables. When you say product, then make model variant, then customer category, and for the ATV, what is going to be the probability of default. We have tightened that in the last year by launching the Gen4 model of underwriting tool. That's the reason our roll forward rates, even in the bad time like in July 2021, we have seen that our bucket roll forward or stage 1 to stage 2 roll forward is 1.45%. Early default and non-starters already started showing up on a downward trend. From the portfolio behavior point of view, we have done better. Our PD, as you asked, although we don't share the PD at a product level and geography level, but just to give you the whole PD, LGD and theory of the ECL. The PD of the stage 1 of the pre-COVID level has come down in the COVID year. Last year, PD has come down as compared to the previous year, and stage 2 is slightly gone up, but LGD has improved. In spite of bad time, our PD in stage 1 has improved, slightly stage 2 has gone up, but LGD has actually improved. That is the outcome of the underwriting mechanism which we are using it on all 3 businesses. No, the PD- Over and out. Yes, sir. Yes, sir, you did. Thank you. If you could give some amount of regional perspective into the LAP portfolio, which portfolio is behaving better and maybe where we are lagging, especially in the Tamil Nadu market and the NCR market and in the MMR market, if you could give out these three particular geographies. Yeah. Our NCR book is the biggest in the country and followed by actually Tamil Nadu. We had challenges in April and May month, especially the lockdowns were severe in these states. The good part is that June, we recovered in terms of our collection recovery and our efficiency started improving. In fact, we have done significantly better in the month of July in both these locations. Both locations started showing collection efficiency improvement in the last two months, and we continue to focus on that and we will improve it. That's for NCR, sir. Tamil Nadu? That's what I'm saying. Both the locations, this is a top priority because these are the two biggest regions in the book. Tamil Nadu, as you know, April was better because lockdowns were not there. May, the lockdowns started, but then quickly we recovered as a state itself. We are seeing significant traction, especially in the month of July. We saw significant traction in Tamil Nadu region as well. Right. If I am allowed to just squeeze in one more question, sir. If you could just speak about the repossessions, because possession of vehicles is pretty much the end of road with that customer because he's in an earn and pay segment. What kind of repossessions are we looking at in this particular year? If you could guide there, sir. Thank you. That's my last question. Yes. No, that is not right assumption, actually. The repossession, if you know that it is actually lowest. Every year we do repossession of only 0.1% of overall assets, which is basically sold. There are 2 types of repossession. One, repossession and release. That is, there is no point in discussing because there are some customers we repossess and get back and that gets released. What is important is that we repossess and sell, which is 0.1%. If you see the stage 3 book, on the stage 3 book, the repossession is hardly 2%. On the overall book, the repossession is 0.1%. On the stage 3 book, it is hardly 2%. Rest of the customers we are collecting only either by way of normalization or by way of basically waiting for some time and then collecting it at some point in time. We are going to look at similar levels in FY 2022 as well. Correct assumption? Yes. It is going to be same only. It has been there for quite some time. In fact, that is what is the underwriting tool working on. Sure, sir. Thank you so much. Best of luck, sir. Yeah. Thank you. Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead. Yeah, hi. Firstly on restructuring, if you can just let us know in terms of what is the texture of this restructuring and how would be the flow through into the buckets, either the standard or the stress bucket going forward. In terms of the timeline in particular, is it like a 3 months, 6 months? What is the kind of a moratorium or something that we would have hoped for here? Restructuring predominantly we have only given 1-2 months. In very few cases where the underlying business is related to an industry where it is having a long-term hit like the school buses and in the case of travel tourism or something related to a hotel industry. Those cases alone we have given around 3-6 months. In none of the cases we have exceeded 6 months. This is how the whole of the restructuring has happened. Of course, the rest of this positions of the EMI not exceeding 24 months beyond et cetera, as per our guidelines and the internal board policies are being fully adhered to. This is what we have already discussed. We have done around 3% or 3.6% of the total book in Restructuring 2.0, and overall put together it is around 5.2% of the restructuring. Some amount of the first restructured book is also rundown. To that extent you will see some differences. Those arithmetically add up and say why it was adding. Some difference came back on such cases. 60% customers are at 30 days. Means they will be paying from the next month and 20% are fixed it as paying after next to next month. Over 80% is within the two months. Sorry, didn't get that. 60%? 1 month and 20% to 2 months. Yeah. Okay, 60% 1 month and 20% 2 months. Almost 80% are less than 2 months within the restructured pool. Correct. Okay, perfect. In terms of the disbursement, industry-wide data which we have shared and along with that Chola's growth. Overall, when we look at it, you said that maybe because of the safety and cautious approach, we have been slow, maybe how should we look at it? You said that we will be broadly following the industry trajectory, does it suggest that in some of the product segments we have been giving away the market share and would that be more in terms of competitiveness or that's our internal strategy? How should we look at that? In most of the industry data, we are seeing much higher volumes compared to where Chola was, okay, in the first quarter. Yeah. It's a good question. Actually, this year now inventory is getting piled up by the manufacturers. Last year they could not produce BS VI in the time, in the first quarter, and they were struggling to produce in, say, second quarter also. Now the industry is actually increasing the inventory and our numbers are on the retail sale. There is a difference between the wholesale number and retail sale. What we showed the industry number is a wholesale number, which is published by SIAM, and our numbers are scaled. When we see the retail to retail, our market share is definitely maintained at the same level and some of the product segments we have also increased. It's not a real apple-to-apple comparison. Last year we were showing the market, I mean, when we are comparing it, the wholesale numbers were not much. It was looking like our market share is going up. This problem is always going to be there, because retail numbers are not, we are getting it from any particular authentic sources. We have only one data which is published by SIAM, and our number is based on the disbursement. Obviously you will see that there is a gap between the wholesale number and Chola number because our market share are depending on the retail numbers. Thank you. Ladies and gentlemen, please limit your questions to one per participant. Should you have a follow-up question, would request you to rejoin the queue. The next question is from the line of Sunil Kothari from Unique PMS. Please go ahead. Thanks for opportunity. Mr. Vellayan Subbiah, my question is to basically your view. Basically, whenever there is a challenging time, last decade back also, you'd taken control on the company and strive really back well Chola, and then we created a team which is also managing well. Again, you are here with during this COVID time. Really, as an investor who would love to be, your presence will be very highly appreciated. Sir, my point or my question is what is the learning and lessons and area of improvement you feel Chola should do during this recent tenure and your last 10, 12 years experience with Chola? Where is a major area of improvement you would like to see? What internal change you would like to make? Yeah. Thanks, Sunil. See, I think broadly the good thing is that a lot of these basic things, right? Like Ravi was saying, our belief is that as long as wave C doesn't come back, collections will start improving now. I mean, they've already started in the month of July. Basic things like that, the team disciplines are very high and the capability to roll these things out at a field level are very high across the company. I would say that in itself is a massive strength for the company to have because I would actually kind of argue that, by far from the ability to roll out and kind of execute at a field level both on the sales front and the collection front, I don't think that there are any companies that will be stronger than Chola at doing that today. I think without that, it makes it more dangerous to do anything else. What are the opportunities? I think we've talked about this in kind of prior calls. I think there are three sets of opportunities. Perhaps kind of the first set is basically around looking at what is happening. If you take what's happened kind of with a strong field capability, some companies have gone out and kind of gone out across a whole set of verticals, right? We've traditionally been in just vehicle finance and LAP and housing loans. That is the first set of opportunities, which is can you broader base the set of verticals that we offer? That's one set of opportunities that we would look at. The second set of opportunities is like a lot of people are now obviously with these fintechs, a lot of people are trying these digital solutions and trying to kind of capture a lot of market share with them. Our sincere belief and hypothesis is that it's very difficult to pull off a fully digital solution in India. Unless you have the front-end collections capability to go out and collect against loans that don't perform in the market, we don't think that a fully digital solution will work. What we're looking at doing is seeing how we can also push out along that kind of dimension of kind of getting more digital, but backing it up with a lot more physical both kind of collections capability and field presence. I think that that marriage is going to become very important for India as we go forward. Sure. The 3rd opportunity is really around as more data becomes available, how do we use both the combination of that data to improve the effectiveness of our field force, right? How can we use that to basically improve perhaps the productivity of the frontline sales employees of the collection team, right? By using kind of a combination of first a digital front, then kind of a centralized front for collections and then a field kind of. How do we use that, whether it's collections or sales, how do we use this combination of three things to fundamentally improve the efficiency of our field forces? I would say these are the three main areas. Very detailed explanation, sir. Thanks a lot. Last, just one point. Sir, looking at this easy availability of capital because of this fees and easy money flowing from outside, then technology, then fintech, you feel any structural shift towards lower NIM maybe over next 3, 5 years, or you feel there is enough opportunity to maintain this type of 6.5, 7.5 range of net interest margin, which Chola is making since last almost 10 years? I don't think the digital players are the ones that will cause NIM compression. Predominantly because even with these NIMs, most of them are losing money. Right? I think that it'll be a while to basically kind of see if they can lower, because their approach is not to get customers by lowering the NIMs. As a matter of fact, I would say half of these guys out there are lending at higher NIMs, higher yields than us. Oh, wow. Mm-hmm. I don't think that they're going to cause NIM compression because none of them, or as far as we can tell, none of them have figured out a way of actually kind of running at a NIM that is similar to us and making money. Okay. I don't think that that's going to happen in the near term. Most of them are at higher yields. Start off with a higher NIM. Basically, some very few, I think there are literally like two that are making money in the country today. Okay. Thanks a lot, sir. Wish you good luck. Thank you. Thank you. The next question is from the line of Anand Bhavnani from White Oak Capital. Please go ahead. Just wanted to understand this more from a 2, 3-year perspective. What is the potential for us to use the existing branch network for home loans and expand the LAP franchise? Out of 1,137, I see in the presentation, we have 359 co-branded LAP facilities with vehicle finance and 144 home loan co-branded with vehicle finance. How much of the existing vehicle finance network can be used for these two and over what timelines? When it comes to home loans or for that matter, any business, the first priority is to go along with the existing infrastructure when it comes to sharing of infrastructure. That is lot of sense for us to make the existing infrastructure to be more effective. When it comes to individual businesses, mortgage business sales, we will also look at the opportunity in that market. For home loans, now we have already reached out to 177 branches. Opportunity exists everywhere. Yeah, we also need to look at our internal capacity and execute with the way it is planned. We will. The first priority always will be to follow. Even for 177 branches, except around 30 branches where we don't have physical space, hence we were forced to have a separate branch. Otherwise, we are co-existing. The same infrastructure, separately identified workstations and teams. That's how we operate. That will be the approach which will make the business much efficient and smarter, too. Yeah. It will also help in even employee induction and so on and so forth. Yeah, opportunity is much larger, as I said. I think previous, somebody else had also asked. We have a plan to expand and cover larger markets to serve larger customers. We will go ahead with that plan. We have a reasonably firm plan in that direction. Okay. In terms of the relative share of book coming from each of these segments, how do you see this evolving? Like three years out, would the ratios be similar or do you see one growing faster than the other? Any broad sense you can give us? Frankly, I did not really grab the question. If you're asking, all businesses have got different business plans, okay? Always business looked up, we have an internal capacity, whether are we able to make use of the internal capacity to the fullest extent. This is not about between businesses. Auto loans are very much a large-scale business, okay? Home loan, which is reasonably a new business, it will take longer time to kind of catch up there. For a small, in a new business like home loans, what we look at is what is the capacity built up, against that are we able to deliver? That's the way we will look at and not on a share between the business. I hope I have answered right. We don't really co-originate businesses because customer segment is different, the purpose of the lending is different, the nuances are different. We don't really co-originate by same team. All businesses got own origination underwriting, risk management, customer service capabilities, just that we share the physical infrastructure. I hope I understood the question right and answered it right. Is this what you were looking at? Yeah. Sure. I understand. They are planned independently and their growth rates are actually more of endogenous. There is no explicit growth target you have, if I understood you correct. They grow at their pace and then eventually they form a percentage of the book. There is no top-down target that you want to have a percentage of book in home loans or LAP or something like that. Right. Is my understanding of your answer correct? You're right. Yeah. Secondly, sir, in our home loan book, what percentage of the book would have credit-linked subsidy scheme, the Pradhan Mantri Awas Yojana? What percentage of our book or what percentage of our customer would be having that subsidy availed? Around 12% of the base has availed in a PMAY. In Q1, the INR 17.74 crore subsidy we have received, and last year we have received INR 21.39 crore. That's the PMAY penetration as of now. Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead. Yeah, thank you for taking my question. My first question is to Vellayan Subbiah, sir. You did touch upon this in one of the previous questions. Because digital is the flavor of the season, and we've also seen a few of your other peers talk about newer initiatives that they are taking, some of the newer things that they're trying to do on the digital side. I just wanted to understand, in addition to that NUE license where we have tied up in a consortium and applied for one, and where maybe the Reserve Bank of India decision is expected for the next, let's say, two months or so. Other than that, are there any other new digital initiatives that you are taking on the origination or the underwriting side that you would like to share? I think there are 2 or 3 sets of things. One is we will look at what are the opportunities to work with startups. To basically, I'd say, leverage the strengths of each of the entities. We leverage the digital startups' strengths, and we bring to bear the strengths that Chola as an NBFC has. That is 1 set of initiatives. The second is we're looking to significantly bulk up on what we're doing on the analytics front. I think we've made 1 set of movement towards analytics. There's an opportunity for us to get much more, and we're going to start taking some actions on that front as well, which is both in terms of how we start using analytics more on both on our origination and our underwriting. The third set will be to basically see how we can bring more capabilities to our own tech stack itself. I think that part is something that we're looking at and saying, are there differentiated ways in which Chola can be digitally more enhanced in its tech stack? That's slightly different from just the analytics piece. These are the three sets of initiatives that are going on right now on this front. Sure, sir, that's helpful. My next question is to Arumugam sir. If you could just help us with two data points. One is what was the write-offs or the repossession losses during the quarter? If you could just repeat the product-wise GNPA in vehicle finance, LAP, and home loans. INR 70 crore is the repo losses during the current quarter. There's not much in the LAP and HR. It is all fully provided for already, so there has not been any more additional hit to the P&L. Thank you. I would now like to hand the conference over to Mr. Nischint from Kotak Securities Limited for closing comments. Sorry, we had to wind up the call because of constraints on timing. Thank you very much for joining the call today. We thank the management for providing us an opportunity to host the call. Thank you. Thank you. Thank you so much, Nischint. Thanks, Nischint. Thank you. Thank you. Thank you. On behalf of Kotak Securities Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.