Ladies and gentlemen, good day, and welcome to the Chola Mandalam 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. Please note that this conference is being recorded. I now hand the conference over to Mr. Nishyant from Kotak Securities Limited.
Thank you, and over to you, sir.
Good morning, everyone. Welcome to the earnings conference call of Chola Mundeleven 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. Vellante Subhaya, Chairman and Non Executive Director Mr. Ravindra Kuntu, Executive Director Mr.
Shaji Varti, President, Housing Finance Mr. Suresh Kumar F, Senior Vice President and Business Head, LAP and SME and Mr. Arun Salwan, Executive Vice President and CFO. I would now like to hand over the call to Valan for his opening comments.
Thank you, Nishin. Good morning, everybody. We'll just go through quickly the key financial results for the company for the quarter. Disbursements were at INR 3635 crores, which was marginally higher than Q1 FY 2021. Total AUM was at INR 75,763.
NIM was at INR 13.63 crores, that's up 39% for Q1 FY 2022. And pre provision operating profit was at INR 9.96 crores, which is a gross of 56%. Our PAD was at INR 3.27 crores in Q1 FY 'twenty two as against INR 4.31 crores in Q1 FY 'twenty one. And in terms of 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. So basically many of the borrowers and staff of CIFCL were impacted by the pandemic and the second wave.
And 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, it was I mean, there was a lot of challenge in terms of infrastructure, health infrastructure. So getting everything there became a priority for the company, including the teams spending a lot of the effort and getting looking at everything from oxygen to drugs, kind of getting anything that they could do to support both our employees and kind of key people during this whole effort. As a result, collection kind of disbursements, so 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 'twenty one, but 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 our BI under restructuring 2.0 was used to the extent of 3.86% of the book as of June 21. So total restructuring stood at 5.44 percent of the book and these loans have been classified as Page 2 assets by us currently. CI SPL held management overlay provisions of INR 750 crores as on December 20th. And then we created an additional overlay in March to the tune of INR 350. So we had a total of 1100.
Of this, basically, we've reversed 400 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. And additional provisions held in March 2021, which were in stage 12 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 crores in Stage 23 to manage any future contingencies. We've also witnessed a recovery in dispersal and collections during the latter part of June July, post relaxation of state wide lockdowns.
And we expect a gradual revival in subsequent quarters in FY 2022 with normalization and rollback of accounts, which have moved to higher profits. Budget. In terms of individual businesses, Medical Finance disbursed 2,846 in the quarter as against 3,231, which is a decline of 4%. LAP disbursed 386 as against 119, which is a good growth because of the challenges during 1st lockdown. HLS dispersed 199 as against 190, a growth of 5%.
And AUM was at 75,763 compared to 7826. And that was at 327 like I just discussed. PBT Rota was at 2.5 as against 3.5 as a previous year and ROE obviously dropped as a result to 13.5%. We still have a strong liquidity position with about almost INR8,000 crores of cash balances at the end of June, which includes INR1500 crores which we invested in GSEC, which we show under investments and a total liquidity position of INR16,400 crores, which includes undrawn lines. ALM is comfortable.
We have no negative mismatches. In terms
of asset quality, I think
we just talked about it. Growth Stage 3 stood at 6.79 and net asset provision coverage of 35.5%. As against 3.34 of Stage 3 here in 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.
And we've obviously kind of talked about the impact of the Supreme Court order in the past and that still remains enforced. The capital adequacy of the company was at 19.08 as against regulatory 115 and Tier 1 was at 16.6. So Nishant, I will stop there and we'd be happy to take questions.
Thank you very much.
Thank you very much. We will now begin the question and answer session. The first question is from the line of Prashant Sreedhar from SBA Mutual Funds. Please go ahead.
Yes. Thanks for my questions. I hope I'm audible. Yes. So 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, etcetera. And 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.
Yes. Vehicle Finance, last time also I mentioned that we are actually into a SITO category, which is actually 0 to 10 vehicle or 1 to 10 vehicle customer. So in that category, utilization level or managing the vehicle during this time when diesel prices have gone up is better. But midsize fleet operator who are actually having OpEx little higher than the Assertio customer, they are subject where the exposure is lower in our case. And second is that in the case of AV commercial vehicle, we have conducted 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 PTE has gone up in 2018, 2019 and since then we have reduced it. So we got benefited on the PTE also at overall level. So utilization level has been impacted in one segment of the customer, large fleet operator and the tattoos are better off. But 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 units of heavy commercial vehicle, so TIV has gone up. And if in case this continued, I mean, there is no COVID impact wave 3, Then obviously, heavy commercial vehicle is also expecting a replacement demand, which is due for last few months. And we will see that heavy commercial vehicle customers will benefit it in time to come. As far as the Stage 3
and Stage 2 of so, lab, Stage 2 restructuring, we
have done about 2.95 percent of the portfolio and our Stage 3 stands at about 8.86 percent for lab.
This is Shri Kumar. Your question is answered, sir. Yes.
Sure. Yes.
Thank you. The next question is from the line of Dhaval Gadda from DSP Mutual Fund. Please go ahead.
Yes. Hi. Thanks for the opportunity. I 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 mean, just wanted to understand, if you look at the moment, given that there was no moratorium this time, you would have expected both Stage 3 and restructured to increase. Just curious to know, is the extent lower than what you initially estimated? And by when do you see normalization of this trajectory? And related to that is the second question on credit costs. So you have excess provisioning of about 700 crore.
How much would that be adequate enough with the normalized credit cost for FY 2022? Yes, those are the 2 questions. Thanks.
Hi, Rahul. Good morning. So I'll just tell you the vehicle finance data so that and our 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% and in June it was 101% and in July it is 114%. So the stress came in the month of April and May, then 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 entire country was not operational, southern part of the country was under lockdown and part of east was also under lockdown like Northeast, Ulyssa and the West Bengal, it got impacted. In fact, in the month of July also, we saw lockdown partially applicable in Odisha and W. P. And stringent overall lockdown is there in Northeast. So 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. So at this point in time, at the overall book level, we have 3 times of provision. So it is adequate, more than adequate.
And the overall stress you would expect yes, sorry.
Yes, go ahead.
Yes, the overall stress, do you expect by Q2 we should start seeing normalization or it would be in the second half of the year? I mean, just directionally I mean, given that the collection trends are quite buoyant, yes.
Yes, everything cannot be done in the quarter. Every month, these resolutions are happening. So normalization has started happening in the month of June. It will take 6 months to get into 6 to 9 months to get into the exactly the similar level. What we are expecting that we will try to deliver better number than last year closing as on 31st March in this financial year closing.
Perfect, sir. Thank you and all the best.
Yes. Thank you. The next question is from the line of Chetan Ginnodia from Alpha Accredited Advisors. Please go ahead. Mr.
Chetan Gindodia, your line is unmuted, sir. Please go ahead with your question.
Hello?
Yes, sir. You may go ahead, sir.
So, there are 2 things. 1 is in terms of the competition intensity, the banks also moving aggressively in this space, how do you see that from competition perspective? And second, considering that the environment still is still looking very challenging, particularly on vehicle financing side, how do you see the trends over next 2, 3, 4 quarters? Any change in strategy from the long term perspective? If you can highlight on that, that will be useful.
Thank you. So we have mentioned that in the past that the cycle, auto cycle as far as heavy commercial vehicle is something which is going to picked up, going to start anytime and replacement demand is going to start. So heavy commercial vehicle will see better number in time to come. And this month itself, July, if you see the data, the AV Commercial Vehicle segment has registered very good number. Other than that, entry level car, entry level 2 wheeler, your tractor, used vehicle, all of them will all of them is going to do better.
So and we are present over 1100 branches, 80% branches in Tier 2, Tier 3 town and 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. So we did not change the strategy very, I mean, dramatically, but we will definitely come back to some of the products which we have not done so far. And overall disbursement in the month of July, we have seen that we have delivered more than July 2019 disbursement as the organization put together the vehicle finance lab and HL. So 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.
So no major change in strategy, right, because you might have seen some more delinquency in few pockets. So 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 entities are lower. And that actually varies, it's not a static as and when we see that some product MMB is actually not giving return, we change, it will be disbursement. So that is the ongoing process.
We have a system business decision model working. Every quarter, we'll look it and then accordingly, we give the direction to the team to change their focus from market to market, product to product and MMB to MMB and customer category to category. That has been working very well. What was your guidance for the full year credit cost? It's 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.
So your question is answered?
Yes, sir.
Thank you. The next question is from the line of Manant Tejuriwala 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. As 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. So was this cost largely into the auto segment? I'm not sure if you could confirm that. And also, if you could throw some light on ECLV this time and why it has been or not been used? And lastly, would you say borrowers who availed ECLGS last time around were as stressed as anyone who availed restructuring or more?
Yes, last year, we did good amount of ECGLM because, guaranteed by government, etcetera. And so we wanted to capitalize on it. Now there is a cap on what you can do under the ECGLN. And so since we have done quite a bit last year, this year, we have kept it to the minimum. This year, we have done around 6 crores only in Q1.
So we have not scaled it up much in the current year.
The ECLC actually, we have done 2,000 crores last year. Out of that INR 1200 crores was vehicle finance INR 800 crores was a lap. In this year, we have done only INR 7 crores.
Your
Sir, lastly, if you could shed some light around how stressed you would imagine ECLGS borrower would be versus the guy who avoids restructuring?
He seems some of us are performing better than others, yes, overall.
And we don't encourage restructuring for such customers.
Yes, there is no restructuring.
There is no restructuring available for you can extend.
Okay, sir. Thank you.
Thank you. The next question is from the line of Anand Bhavanani from White Oak Capital. Please go ahead.
Thank you for the opportunity. Sir, my first question is, how we see relative attractiveness of various segments that we operate in now? We have seen that in the Tier 2 Tier 3 towns that we operate in, affordable housing has done very well. So and they have to be stood at best of the pandemic better than, let's say, vehicle finance or lab. So is the experience similar for us?
And do you think the opportunity in affordable housing is something that we would explore more vigorously going forward from here on?
Yes. Okay. While you said that we have relatively planned the interest of ROCE 199 crores of business. We understand it's 5 percentage higher than last year, but it's a very small volume. But when it comes to the opportunity, so we the LMI, lowest middle income families whom we target and whom we wish to serve, Tier 2, 3, 4 are the obvious opportunities.
If you ask me, the 4,504, we have just got the opportunity. We have only just reached out to 177 branches and just 9 states last year and we will look at 2 more states this year. The opportunity, of course, is much, much bigger and we will continue to focus there. And this is an idly preferred opportunity for us. And 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 resale. These are the large opportunities in 2, 3, 4 cities. So we are focused on that. We hope to get the numbers in the brand which we have internally planned. It's quite a good opportunity, really, I should say.
And it also comes very handy to Chola because Chola over the last what is the year has been focusing on the LMI, lower middle income. There's a good understanding of risk and an orientation of the segment too. So we work to do because we are focusing
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. So is the the question is, is our focus more and can we expect much higher growth than in the past?
Let me reframe the question
the way I have understood.
What you're asking is, for affordable housing, should there be a higher priority and increase the volume than currently planned and budget? Is that the question you're asking because it's an opportunity? Yes. Look, housing is a generic demand. There's always an opportunity.
So 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. So 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. So first priority is to establish to Western and Northern in a country in a part of the country, establish thousands of years, but 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. I think it's not a business to be just rushed in. It has to go because the 15 years is the average lending tenure.
So we would like to go with the way we have built other businesses carefully and do in a way it is sustainable. So we are not going to rush in beyond the business plan, Alex. So that's where we look at. There is no intent to change an extra focus plan or a higher volume plan than what is currently planned and approved by the Board.
Sure. And sir, just double checking if I heard it correct, we did eCLGS of INR 700 crores in Q1, is it?
INR 700 crores. INR 700 crores.
INR 7 crores, 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.
Yes. Hi. Good morning, everyone. Just a couple of questions. One is on the understand the increase in Stage 2 and Stage 3 because of the lockdown during April May.
So just wanted to understand if you could give us some color on what proportion of these customers are paying? I understand that they will not be able to clear their previous dues and hence have rolled forward. But what proportion of the Stage 3 assets are active and paying 1 or more than 1 EMIs, if that data point that you can give? And even the same for the Stage 2, because I've seen a significant increase, but I would assume that in June 1, July when things normalize, customers would have started repaying at least one EMI. So 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. And when it comes to Stage 2, almost 80%, 85% customers are paying their current month due. So they are stabilized in the same market. And the Stage 3, which is nothing but 3% and above, there is also almost 80% customers are paying in the current month due. And also there is a little bit reposition happening, although reposition and sales is very negligible in terms of the stages.
But some customers who have not paid, they have actually committed to pay in subsequent months. That is the situation in stage 1, stage 2, stage 3. Okay, that's fair. Thank you. It is better than the trend which we have seen in the month of January, February, March July.
I'm just telling you the July trend versus the March trend. Understood. That's helpful. And secondly is on the $3,600 growth restructuring that we have. If you could just break it down between vehicle and lap, how is that breakup looking?
One second. Yes, sure. So meanwhile, one last question from my end is on the NUI investments that we've done in the Vishwakarma consortium, if we can highlight what is the roadmap or what are the thoughts there? What are we planning to do there, if at all? Anything that we can add?
Thanks.
Right now, that's a wait and see, right? Because basically, the RBI has to kind of declare who they're going to which of the consortium they're going to give a license to. And that they've said that they will do in September. So till they do that, there's nothing for us to do. But obviously, if they do announce that in September, then we will kind of come out with a more detailed strategy in terms of what Vishal kind of approach is going to be.
Perfect. That's helpful.
And there's some sense that it, I don't know, there may be delays, but we have to see, we can't dictate when that's going to happen.
So on the Stage 2, it is VF is INR 2,250 crores. Balance is I
was restructuring INR 2,000 is INR 2,000 crores.
Thank you. Thank you.
Thank you.
The next question is from the line of Subhranshu Mishra from Systematics. Please go ahead.
Hi, sir. Thank you for the opportunity. And 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 June July 2019 targets.
But 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? And 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?
And if you could give out the LGDPD assumptions for the LAP segments, which is LAP Delhi, LAP Tamil Nadu? Thank you.
See, disbursement numbers, we don't give any forward looking statements. What you will you can assume is whatever is the assumption on the industry growth, you can assume that we will be 5% better than the industry. That's how we have been our past trends and that we will maintain it in the current sales 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.
Yes. So as I mentioned that in the vehicle finance, we have the concept of using the business decision model, which is that we have got 4 variables, when you say product, then make, model, variance and 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 Gen IV model of underwriting tool. And that's the reason our roll forward rate, even in the back time like in July 2021, we have seen that our rocket roll forward or Stage 1 to Stage 2 roll forward is 1.45 percent. Early default and non status, early started showing up on downward trend.
So 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, LTV and theory of the ECL, the PD of the Stage 1 of the pre COVID level has come down in the COVID year. The last year PD has come down as compared to the previous year. And Stage 2 is slightly gone up, but HDD has improved. So in spite of bad times, our PD in stage 1 has improved, slightly Stage 2 has gone up, but HDD is actually improved.
So that is the outcome of the underwriting mechanism, which we are using it on all three businesses.
The PTA. The PTA. Yes, sir. Yes, sir. You did.
You did. Thank you. If you could give some amount of regional perspective into the lab 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 3 particular geographies?
Yes. So our NCR book is the biggest in the country and followed by actually Kawanadu. And you know it, we had challenges in April May month, especially the Lobdome were severe in these states. The good part is that June, we recovered in terms of recovery and our efficiency started improving. In fact, we have done significantly better in the month of July in both these locations.
And both locations started showing collection efficiency improvement in the last 2 months and we continue to focus on that and we'll improve.
That's for NCR, sir, in Tamil Nadu?
That's what I'm saying. Both the locations is a top priority because these are the 2 biggest groups for us in the book in the 2 biggest regions in the book. So Tamil Nadu, as you know, April was better because lockdowns are not there, but May the lockdown started, but then quickly we recovered as a state itself. So we are seeing significant traction, especially in the month of July, we saw significant traction in Tamil Nadu region as well.
Right. And if I I'm allowed to just squeeze in one more question, sir. If you could just speak about the repossessions because version of vehicles is pretty much the end of road with that customer because he is in an earn and pay segment. So what kind of repossessions are we looking at in this particular year? And if you guide there, sir?
Thank you. That's just my last question. Yes. No, that is not right assumption actually. It is just reposition, if you know that, it is actually lowest.
Every year we do reposition of only 0.1% of overall assets, which is basically sold and see, there are 2 types of reposition reposition and release. That is there is no point in discussing because there are some customers who are repurchase and get back and let's get released. What is important is that we repurchase and source themselves, which is 0.1%. And if you see the Stage 3 book, on the Stage 3 book, the reposition is hardly 2%. So on the overall book, the reposition is 0.1%.
On the Stage 3 book, it is hardly 2%. So 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.
So we are going to look at similar levels in FY 'twenty two as well, correct assumption?
Yes, It is going to be same only. It will be there in 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. Yes. Thank you.
Thank you. The next question is from the line of Kunal Shah from ICCA Securities. Please go ahead.
Yes. Hi. So firstly on restructuring, if you can just let us know in terms of what is the texture of this stress bucket going forward? In terms of the timeline in particular, so is it like a 3 month, 6 months, what is the kind of a moratorium or something that we would have offered you?
Restructuring paid availability, we have only given 1 to 2 months. In very few cases where underlying business is related to school bus and in the case of travel tourism or something related to a hotel industry. Those cases alone, we have given around 3 to 6 months. And in none of the cases, we have exceeded 6 months. So this is how the whole of the restructuring has happened.
Of course, the rest of this
positions of the EMI is not exceeding 24 months beyond, etcetera, as per our the guidance and the internal board policies are being fully agreed to. So this is what we have already discussed. We have done around 3% or 3.6% of the total bookings restructuring too. And overall, put together, it is around 5.5%, 5.4% for the restructuring. Some amount of the price restructuring book is also run down.
So to that extent, you will see some differences. So don't automatically add up and say why it's worth adding some people came back on such basis. 60% customers are already at 30 days. That means they are paying from the
next month and 20% are succeeded paying next to next month
and Almost 80% is within the 2 months.
Sorry, I didn't get that 60%?
1 month and 20% to 2 months. Yes.
Okay. 60% 1 month and 20% to 2 months. So almost 80% are less than 2 months within the restructured pool.
Correct.
Okay, perfect. And in terms of the disbursements, so industry wide data which we have shared and along with that SOLAS growth. So overall, when we look at it, you said that maybe because of the safety and cautious approach, we have been slow. But maybe how should we look at it? You said that we will be broadly following the industry trajectory.
But 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? Because in most of the industry data, we are seeing much higher volumes compared to virtual hours in the Q1.
Yes. So good question actually. This year, now inventory is getting piled up. They manufactured last year, they could not produce VS6 in the time in the Q1 and they were studying to produce in the Q2 also. So now the industry is actually increasing the inventory and our numbers are on the retail sale.
So there is a difference between the wholesale number and retail sales. What we showed the manufacturing industry number is a wholesale number, which is the published site is Sian and our numbers are retail. So when we see the retail to retail, our market share is definitely maintained at the same level and some of the product segment we have also increased. So 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.
So it was looking like our market share is going up. So this problem is always going to be there. The retail numbers are not we are getting it from any particular authentic sources. So we have only one data which is published by SIAM and our number is based on the disbursement. So obviously, you will see that there is a gap between the wholesale number and solar number because our market share are depending on the retail numbers.
Thank you. The next question is from the line of Sunil Kothari from Unique PMS.
PMS. Mr. Elain, my question is to basically your view. Basically, whenever there is a challenging time, you last decade back also, you've taken control on the company and started really back well, Chola. And then we created a team, which is also managing well.
And again, you are here during this COVID time. So really, as an investor, I would love to be your presence will be very highly appreciated. So my point or my question is, what is the learning and lessons and area of improvement you feel Chula should do during last year this recent tenure and your last 10, 12 years experience with Chula? Where is the major area of improvement you would like to see? What internal change you would like to make?
Yes. Thanks, Sunil. So, see, I think broadly, the good thing is that a lot of these basic things, right? Like so, like Ravi was saying, our belief is that as long as Wave 3 doesn't come back, collections will start improving now. I mean, they've already started in the month of July.
And so 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. So 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 the 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. And so I think without that, it makes it more dangerous to do anything else. So what are the opportunities? I think we've talked about this in prior calls. I think there are 3 sets of opportunities.
So and perhaps kind of so the first set is basically around looking at what is happening. If you take what's happened kind of in with a strong field capability, companies, Some companies have gone out and kind of gone out across a whole set of verticals. We've traditionally been in just vehicle finance and lap and housing loans. So that is the 1st set of opportunities, which is can you broader base the set of verticals that we offer. So that's one set of opportunities that we will look at.
The second set of opportunities is like a lot of people are now 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 collection 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. So 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, because I think that that marriage is going to become very important for India as we go forward. And then the third 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? So how can we use that to basically improve perhaps the productivity of the frontline sales employees of the collections 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. So 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. So I would say these are the 3 main areas.
Very detailed explanation. Thanks a lot. Last, just one point. Looking at this easy availability of capital because of this P's and easy money flowing from outside, then technology, then FinTech. You feel any structural shift towards lower NIMs 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 July is making since last almost 10 years?
Yes. 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? So, I think that it will be a while to basically kind of see if they can lower because their approach is not to get customers by lowering the NIM. As a matter of fact, I would say half of these guys out there are lending at higher yield than us. So I don't think that they're going to cause NIM compression because none of them, I would 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.
So I don't think that that's going to happen in the near term. Most of them are at higher yield, start off with a higher NIM and then basically some very few, I think there are literally like 2 that are making money in the country today.
Thanks a lot, sir. Wish you good luck.
Thank you.
The next question is from the line of Anand Pavanani from White Oak Capital. Please go ahead.
Just wanted to understand this more from a 3 year perspective. What is the potential for us to use the existing branches of our home loans and expand the lab bench ID? So out of 11:30 1, I see in the presentation, we have 365 3.59 co branded lab facilities with vehicle finance and 144 home loans co branded with vehicle finance. So how much of the existing vehicle finance can network can be used for these 2? And over what timelines?
Okay.
When it comes to home loans or
for that matter in the business, the first priority is to go along with the existing infrastructures when it comes to sharing of infrastructure because that gives a lot of sense for us to make the existing infrastructure to be more effort safe. But when it comes to individual businesses, mortgage business, sales, we will also look at the opportunity in that market. Now, for the long loans, now we have already reached out to 177 branches. So opportunity ends with 30 where, but yes, we also need to look at our internal capacity and if you do it with the way it is planned. So we will, the first priority always will be Kiborz.
And even for 177 branches, except around 30 branches where we don't have typical space, hence we were forced to have a separate branch. Otherwise, we are quite interested. The same is such a different way identified in our hostations and teams. That's how we operate. And that will be the approach which will make the business much efficient and smarter too.
You. Sure. Even employee induction and so on and so forth. So, yes, opportunity is much larger as I said. And I think 3 years, company has also asked.
We have a plan to expand and cover larger markets to serve larger customers. So we've been focused with that plan. We have a reasonably similar plan in that direction.
Okay. And in terms of the relative share of book coming from each of these segments, how do you see this evolving? Like 3 years out, would the ratios be similar? Or do you see one going 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 different business plans. Okay. So all these businesses looked up, we have an internal capacity, whether are we able to make use of the internal capacity to the fullest extent. It's not about between business and business.
Auto loans are very much of a large scale business. Okay. And home loans, which is reasonably a new business, it will take longer time to kind of catch up there. So for a small in a new business like home loans, what we look at is what is the capacity build up, and how is that available to deliver. That's the way we will look at and not on a share between the business.
I hope I have answered right. And the way we we don't really co originate businesses because customer sentiment is different, the purpose of the lending is different, the nuances are different. So we don't really co originate by the same team. So all businesses have got on origination, underwriting, risk management, customer service capabilities, just that we share with us in the current infrastructure. I hope I understood the question right and answered it right.
This is what you are looking at.
Yes, yes, sure. So I understand. They are planned independently and the growth rates are actually more of endogenous. There is no explicit growth target you have, if I understood you correct. So they grow at their pace and then eventually they form a percentage of the book.
There's no top down target that we want to have a percentage of book in home loan for a lab or something like that. So is my understanding of your answer correct?
That's correct.
Yes. And secondly, sir, in our home loan book, what percentage of the book would have credit linked subsidiaries in the Pradhan Mantri, Ava Seodhana? So what percentage of our book or what percentage of our customer would be having that subsidy
Around 12% of the base has availed in a PMA wide. In Q1, the INR 13.74 crore of subsidy we have received and last year we have received INR 21.39 crores. So that's the PMA while penetration of this now.
Thank you. The next question is from the line of Abhijit Debraval from Motilal Oswal. Please go ahead.
Yes. Thank you for taking my question. My first question is to well, I answered you did touch upon this in one of the previous questions. But because kind of digital is the flavor of the season and we've also seen few of your other peers kind of talk about newer initiatives that they are taking, some of the newer things that they are trying to do on the digital side. I just wanted to kind of understand in addition to that NAU license where we have kind of tied up in a consortium and applied for 1 and where maybe the decision is expected for the next, let's say, 2 months or so.
Other than that, are there any other new digital initiatives that we are taking on the origination or the underwriting side that you would like to share?
Yes. So I think there are 2 or 3 sets of things, right, kind of. One is we will look at what are the opportunities to work with kind of startups, right. So basically, I'd say kind of leverage the strength of each of the entities, right. The startups can we leverage the startups' strength, the digital startups' strength and kind of we bring to kind of bear the strength that Chola as an NBFC has, right.
So that is one kind of set of initiatives. The second is, we're looking to kind of significantly bulk up on kind of what we're doing on the analytics front. I think we've made one set of movement towards analytics. Now there's an opportunity for us to kind of 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. And then the 3rd set will be to basically see how we can bring more capabilities to our own tech stack itself, right?
Because I think that 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, right. And so that's actually slightly different from just the analytics piece. And so these are the 3 sets of initiatives that are going on right now on this front.
Sure, sir. That's helpful. My next question is to Arun, sir, if you could just help us with 2 data points. One is what was the write offs or the reposition losses including the quarter? And if you could just repeat the product price, GMPA in vehicles finance, lap and home loans?
70 closes are repo losses during the current quarter. There's not much in the lap and HR. And it is all fully provided for already, so there is nothing any additional hit to today's end.
Thank you. I would now like to hand the conference over to Mr. Nishant 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, Nishan. Thanks, Jason.
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