Q1 21/22

Aug 17, 2021

Quarterly report

Good day, ladies and gentlemen, and a very warm welcome to the ARMMAN Financial Services Q1 FY 'twenty two Earnings Conference Call hosted by MK Global Financial Services. We have with us today on the call Mr. Alok Patel, Joint Managing Director and Mr. Vivek Modi, Group CFO. Phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Jagnesh Yal from MK Global. Thank you and over to you, sir. Thanks and good evening everyone. I would like to on behalf of Ampeek Global, I would like to welcome the Vice President of Arman Financial. I shall now hand the call to Alok Patel for his opening remarks. Over to you, Alok. Thank you, Jitnis, and good evening to everyone as always. And thank you for taking the time out of your schedule to Join us for this call as we discuss our financial performance for the Q1 of fiscal 'twenty two. We issued a detailed press release and an investor presentation for the quarter and hope all of you had a chance to review it. Before I start with the usual agenda about the business during the last quarter and the financial performance, I think it's important to mention how challenging the past quarter was, as I'm sure most of you will be aware. The number and the severity of the COVID infections, especially in the rural areas this time, was very high and so were the fatalities. It is with great sadness I have the duty to report that we have lost 5 members of our team so far due to COVID, of which 4 passed away during the 2nd wave. Overall, confirmed infections in our staff were more than 140 people Almost 8% of our staff, plus uncounted number of family members and unconfirmed cases. The death of any team member is obviously a gut wrenching tragedy. However, many of our team members were taken during the time of their youth and so were our customers. I know most of the people listening to this call would have had close friends and family that would have been infected, hospitalized or in the worst case, passed away. Q1 of 2020 last year was mostly about the lockdowns and the loss of income. The second wave really hit home for most of us. So before we get into the numbers, just imagine for a minute what Q1 of 'twenty one would have been like for an average microfinance customers. No resources, minimum knowledge, lack of infrastructure, lack of access to medical care, loss of income and the list can go on and on. So many of you have logged on today to listen to me talk about repayment rates and peers and other sectors, which is completely fair. However, I ask you to keep what I said in the back of your head when you contemplate and hopefully sympathize with rural India and what a tough situation they have had to go through in the past 15 to 18 months. Even during the worst month of the Prices, the resilience of our customers was showcased when threefour of our customers chose to pay their EMIs when nobody would have blamed them if they asked for a repayment holiday. The disruption caused by COVID second wave lasted around 8 weeks. During this time, our collection efficiency was impacted on 2 grounds. 1, it was difficult for our to reach the customers due to the lockdowns and second, due to the financial strain that the customers were going through on the back of closures of their business and in some cases impact on theirs or their families' health. Moreover, we cautiously kept the disbursements low and mostly serviced our renewal clients if they were accessible. However, the situation on the ground seems to have improved and somewhat normalized now with unlocking in the most of the geographies, which is also getting reflected in the bounce back in the collections and the disbursements. I will now give a brief overview of our financial performance for the 1st quarter and post that touch upon liquidity disbursements and collections in more details. Coming to the brief overview of our financial At the end of the Q4, our consolidated loan book stands at INR 785 crores, lower by 5% year on year. As disbursements fluctuated during the year due to the ongoing COVID crisis, especially during the Q1 FY 'twenty two due to the COVID second wave. As far as the segmental AUM, our microfinance AUM stood at INR 631 crores, marginally higher by 4% year on year. Our MSME AUM stood at INR113 crores, while our 2 wheeler stands at INR 41 crores. The 2 wheeler division has seen the sharpest decline in AUM given the challenging economic environment and the lack of sales during the year along with a healthy repayment rate. Gross total income during the quarter stood at INR 50 crores at consolidated level, while microfinance increased by 12% y o y to 37 perroles due to higher average AUM. Similarly, our net total income during the quarter increased by 10% year on year at INR 30 crores aided by lower cost of funds. Including the additional provisions recognized during the Q1, Cumulative total provisions at the end of Q1 stood at almost INR 56 crores at a consolidated level, covering approximately 7.1% of the total book AUM. At the Standalone level cumulative total provisions stood at 20 crores covering 12.6% of the total AUM, While in microfinance, cumulative provisions stood at INR 36 crores covering 5.8% of the total issuance. Our net profit stood at INR 3.6 crores, lower mostly due to the higher provisionings and write off cost. Consolidated GNPA stood at 5.7 percent and NPA stood at 1.4% for June 21. The company provided repayment holiday between 1 3 months to March 2021 Level 1 standard customers in the microfinance loan book. These customers' tenures were pushed forward between 1 3 months. Approximately 70,000 customers were eligible for this scheme, with about 40% of them with 1 EMI deferred forward and 30% each were 2 EMIs or 3 EMIs deferred forward, respectively. There were no Repayment holidays provided for MSME were 2 wheeler customers. The disbursement and collections, which were edging towards normalcy in Q4 of FY 'twenty one were again disrupted due to the second wave. Disbursements during Q1 FY 'twenty two stood at RMB122. This was lower than our projections by at least RMB100. However, given the situation on the ground and difficulty in even accessing the customers, much less evaluating them, The overall disbursements exceeded expectations. The total MSME and 2 wheeler disbursements in Q1 were 16 crores and 7 crores, respectively, while microfinance disbursements stood at 99 crores. Our focus was to concentrate on renewal loans of existing customers. Liquidity wise, the company has a healthy liquidity position with more than KLM continues to remain positive, and the company continues to have access to new sources of funds. Additionally, the company has RMB 55 crores of undrawn sanctions from existing lenders. The company has repaid all of its debt obligations that were due in Q1 FY 2022. The debt equity ratio stood at 3 point 64x and the shareholders' equity stood at about INR 190 crores as on 30th June 2021. Coming to collections, consolidated collection efficiency that saw a normalizing trend during the Q4 of FY 'twenty one Again, saw it dipped in the months of April May to 88% 78%, respectively, due to the reasons discussed above. The collection efficiency somewhat improved and bounced back during the month of June July to 89% 90%, respectively. Collection efficiency for 2 wheeler and MSME portfolio remains robust at 90% and 93%, respectively, in the month of June and 94% and 95%, respectively, in the month of July. The sharp increase in the collection efficiency in the microfinance segment is encouraging, where repayment rates reached 88% in June from a dip of 75% in mid-twenty 21. As I have mentioned previously, the segment that we service is very resilient and has a tendency to bounce back quickly. I'm happy to report that the post COVID disbursements have bounced back to 99% plus Repayment rates as of July. To sum up, I would like to say that we are cautiously optimistic, satisfied with how we have handled past 18 months. While we hope for the best, we are always prepared for the worst. Barring a really bad 3rd wave, It is unlikely that the it is excuse me, it is very likely that the worst is behind us. The future looks bright with the new RBI white paper that deregulates the NBFC MFIs and puts them on a level playing field with other practitioners. If you haven't done so already, I would urge you to go through it if you follow the MSI space closely. Finally, as always, I would like to conclude by stressing my deep gratitude to all of our stakeholders for their continued support during these very difficult times and a special note of appreciation to the company's Now I would request the operator to open the floor for the Q and A session. Thank you very much. Ladies and gentlemen, we will now begin the question and answer First question is from the line of Anand Advnani from Wito Capital. Please go ahead. Thank you for the opportunity. Two questions, Alok. First is on collections. On the slide, the numbers that are you on collections queue, So this would not include the clients who have been given a holiday, right? You had some No. These would include. So we gave an apples So, I'm sorry, we should have mentioned that with an asset somewhere. So, the repayment rate ignores the repayment holidays. So it would Okay. Basically, you have to read them as no repayment order date was given. Okay. And secondly, if I see provision wise, cumulative provisions for Numbra are 5.8, Whereas for standalone, it is 12.6%. Now if I look at this provision cover And you know, Duxa, was it through the collection efficiency? Collection efficiency is actually a bit inferior for microfinance, Whereas it is relatively better for MSME and to be there. So shouldn't you be having more provision for the I think last year, we took as many provisions as we could in all the divisions. Overall, the microfinance AUM has increased quite a bit in Q3 and Q4 of last year. Okay. There was a little bit of a decline in the M and A portfolio during Q1. So that is one reason. The other reason also is that we have done a lot of write offs also in the microfinance. So I think you'll have to take both the provisions and the write off numbers and kind of stabilize it with the overall movement of the portfolio as well. Overall, we have taken as much as we can pretty much just in anticipation of COVID, Whatever losses that may come. So like we don't see any special additional COVA needed In Q rest of the quarter, Q and A. P. Vijay Kumar:] It's unlikely we'll need any other provisionings going forward as far as Armand Because as far as MSME and the 2 wheeler portfolio, micro, it remains to be seen. So we'll need Thank you. Next question is from the line of Amit Mansi from 2.2 Capital. Please go ahead. Hi, Adol. Hi, Adol. What's up? Yes. First of all, my condolences For the last 15 days, I'm sure the company is doing its best to support their families through this tough period. Thank you. So it was a rough time for everybody, I think, 20 year and business wise. So at least we are a bit far away from it now. Hopefully, it doesn't come back as bad During the 3rd wave, if it does come. Yes. So it doesn't come, let's just paint the bag. So in terms of the business, So which geographies were impacted? What is all the same geographies as earlier with Maharashtra lagging behind? So right now, if I were to rank as far as repayment rates goes, the first one would be UP followed by Gujarat, so a little bit reversal there. Earlier, it was Gujarat Was that the number one spot? Now it is UP followed by Gujarat. Then it would be No, I'm sorry. Haryana would be the number one. Excuse me. I mean Haryana is 100%, I think 2 quarters over. Right. So it would be Haryana, UPB Gujarat, followed by Radhistan, MP and Maharashtra At last stage. So yes, I mean, there are some states that have so I think the biggest hits we took was in Rajasthan and in MP, where Rajasthan was performing very well, but I think they had a very stringent lockdown Where we could not go and collect the money and incomes and everything were disrupted. So now it's something a little bit back to normal. And MP also saw kind of a larger hit. Maharashtra dipped down, but now it has gone back to what it was Pretty much barring a few percentages. Okay. And in terms of Disbursements, so has that also ended up in July? How much was the disbursements that we did in July? So July, we did about INR 75 crores in microfinance. I believe So very close. I mean picked up quite a bit. To give you an idea, I think in March month, Micro was 75 crores I'm sorry, excuse me, 85 crores. If I remember correctly, MSME was about 14 crores and 2 dealer was I think it was mid century, about 3 crores. So the investment is also normalized, it looks like. Disbursement is yes. I think that is picking up fine. It's just we are not concentrating on The repayment as far as the field is concerned. Otherwise, we should push it for a while. There is plenty of demand in the market for So this will be the, are you doing the run rate or will you further increase it from here? No. I think it will probably go up In August, there are a lot of holidays in August, but I think we are expecting to go between 80,000,85 crores in micro this month About 12 crores to 13 crores in MSME and 2 gigahertz, we are expecting about 4 crores, 4.5 crores. And your NFI yield has increased in this quarter. So how are That happened? Wasn't yield expected to come down due to decline in base rate to 8%? There has I don't think it has the yield has increased, but I think what you are seeing is if you are comparing it to the last Quarter, I believe there were a lot of reversal because of write offs and interest reversals. And overall, I think the average portfolio has increased. Amit, The last quarter, the PED, quarter 4, the average AUM was about INR 5.90 crores, While the average AUM in quarter 1 has turned out to be about RUB6.40 million, there's always a timing difference also. So that is Whatever is disclosed in February March, therefore CMIs don't come due Until April May. So there's always a little bit of a timing difference between the portfolio and if you are increasing or decreasing the disbursement by a huge amount, There is a little bit of a lag interest between interest and the EUL. And What would be the boarding yield typically? Would it be 22%, 23% boarding yield? What do you mean what is boarding yield? On paper, what is the On paper, what is the yield? Yes. It's about 22% of the 22% plus 1% processing fee. Okay. The new portfolio is as to that, but we continue to have about 40%, which is about 24% plus, 24% plus, Yes. Okay. Okay. That's fantastic. Thanks a lot. Sure. Call. The next question is from the line of Ornish Jain from Freqant Investments. Please go ahead. Thank you so much for the opportunity. So how is the demand for 2 wheeler loans right now? And also, how is the collection efficiency in August till now? Like, how do you see the trend going ahead? So as far as the demand for 2 wheelers, it's picking up. I'm not Personally, I'm not an expert on Goomi, Raj. I can have my other people do it. But Last month was about 3.5 crores, which was the highest we have done since the COVID hit us with COVID 1.0. And this, I believe, we are expecting to do about 800 vehicles. So that should be just about So it's definitely picking up. I don't think it's nowhere close to What it was pre COVID, but the demand has started returning. As far as exact percentages, you'll have to excuse me. I don't have them with me. But at least from our experience, things are picking up. If you could also throw some light on the ground situation currently in all the 3 segments, The MSME 2 wheeler and the microfinance. The ground situation. Ata, yes, you had asked about the repayment. So The month of August is obviously better than the month of July, and July was better than June. So we are improving, but It's not very large. So I think if you noticed between the month of June July, there was about a couple of percentage difference. We are expecting something similar in the month of August. So I don't think that we are Expecting to go to like March levels or anything like that in August. That will still take a couple of months, but there is an improvement at least by a couple of percentage points so far. Thank you so much, sir. That's it for my time. Sure. Thank you. The next question is from the line of Balkushna Wagesia from AxaNoun Investments. Please go ahead. Good evening, Yes. In the last annual report and in your last Hello, conference call. You mentioned about the collection returns, right? So You are trying to modify the collection mechanism which has hybrid manual as well as digital So have you made any progress on that front? Not a very lot of progress. I think what I'd like to say is that we are future ready. So in that sense, we are Our systems are in place. We have given unique QR codes to all of our customers. We have several tie ups with all these merchants and different payment banks. But It seems that our customers still prefer, largely speaking, to pay via cash. And I think it's going to be a slow burn. So I don't think that this is going to happen over a period of months or quarters. I think unless something very drastically changes on the ground level, I think it will still take I don't know how long. But no, I guess long story short, we have not made much of a progress there. And largely also, the ecosystem is still cash in the rural India. So if the ecosystem is cash driven, We really can't expect our borrowers to go digital completely. And we will not be We can't directly change that behavior because the entire system needs to kind of move towards digital, not Our only pushing will not be there. Correct. Well, it has to be convenient for them, right? I think you can have all the mechanisms in play. You can do PI and Paytm and Google Pay and there are countless solutions today. But the fact So the matter is that it was exponentially easier to convert them convert our disbursement into completely cashless because until the money Well, despite the power, the power was all on this side, right? It was all on the company side. If you told the customer, you'd have to open a bank To get a loan, they'll do it. But what typically happens is as soon as you disperse the money within 1 or 2 days, The amount is withdrawn in cash by the customer. Now the power has shifted towards the customer when I need to collect the installment. So That will be a lot harder to convert. And see, in the case of disbursement, they only need to go to the bank once to withdraw the money. In the case of repayments, we need to book the bank at least once a month or 24 times to deposit the money because frankly speaking, no matter I mean, All of these mechanisms, whether you talk about UPI or whatever platform there is to repay the money, At the end of the day, you need to have money in the bank account. Everything is connected to your bank account. So I don't think it's going to shift until it becomes more convenient for them to keep their money in their bank versus keeping it in cash. Right, right. So my next question is related to the same matter. If you assume that okay, Over a period of time, the digitization in the region area will also increase. So As the education level also increases, so would that scenario threaten our business model because if we As the digitization and access to technology increasing in rural area, banks and other more sophisticated player which has access to lower cost of funds, they would be able to lend in the rural area. Would that settle in the long term 2 hours in the long term? No, I don't think so because I think if you look at MFIs, we are very, very adaptable. I think if our customers are ready to shift their focus into a digital mode of payments, I am ready to service them. In fact, today, that would be preferable for me. Instead of having a 2,000 person team, I can make do with Probably half of that. I mean, I'm just kind of throwing numbers in the air, but it takes a lot of operations to collect on a cash So I would be the happiest person to service my customer on a cashless mode. There is just one thing which we'll have to worry about is that The high touch model, one of the reasons why the customers have a very good repayment rate barring Stuff like COVID, what I feel is that high tax model where you are not a faithless corporation, you are meeting with them at least So that might be one of the disadvantages, but otherwise, there There are plenty of advantages. My operating cost will reduce. The customers' interest rates can reduce. So overall, I think If the customers are ready, we'll be ready. I don't see a threat coming externally. Okay. And my last question is related to the collection efficiency of pre COVID and post COVID loan I mean, do you have any bifurcation on that front or do you see any difference in the collection efficiency of pre code loan book and post code loan book? When I say free code, I mean the loan book which originated before the first No, I mean, I don't have a bifurcation, but all I can say is that the loan that was originated post COVID, That is performed, I mean, that repayment rate went down to about 90% during the month of May. In June, that went up to 98% and in July, it's 99% plus. So we are almost back to normal in that book. All right. Thank you so much. Good luck. Thank you. Thank you. The next Question is from the line of Rajesh Kumar from Sharegion. Please go ahead. Hi, sir. Good afternoon, sir, and thank you for giving me opportunity to ask the question. And pardon for my ignorance, you have already answered this. So I wanted to know like, sir, do we see the mix change in Between the MSME, ecofinance and dual dealers over the longer run, sir? Do we see what, I'm sorry? The mix, the business mix changing between the various segments So not in the short term, but in the medium to long term, yes. My personal opinion is that things will the customers are already starting to prefer or already starting to demand on the individual higher ticket, higher underwriting kind of loans, which is why we created the MSME to begin with. So I believe in the long run, the individual loans, which is what we are doing under MS and E, We'll start having more weightage in the overall book. Might be a few years early though, at least 2, 3 years early. Okay. That's good, sir. Sir, I also wanted to check like We have seen a very good recovery in terms of collections. And so how do you see the trend Going forward, because until July there is a good recovery, so August, how has it been cleared? And what is your outlook in the next quarter, sir? So I wouldn't call the recovery good per se. It has recovered well, But the collection efficiency, what had reached about 94%, 95% in March, I was hoping by this time we would reach like 97%, 98%. And 98% plus would be a Good repayment rate, it would be kind of a pre COVID repayment rate. And I think What I have said is basically to everybody pre COVID or I'm sorry, pre second wave was that we wanted to forget about COVID and just kind of move on from April So unfortunately, that did not happen. And I would not say we are back to square 1, but We definitely took a few steps forward and then took a couple of steps back. So that has been Kind of the theme of this entire COVID to begin with. Q2, I think July was on the July, August have started well. September will be even better. I think by the end of Q3, we should be back to at least March 21 levels, Assuming that there is a good season, you know, the Bali season and stuff. So yes, It will take maybe a quarter and a half roughly speaking. Okay, sir. Sir, on your growth expectation, so Considering the COVID disruptions and all, so like how do you see the growth in AUM panning out in FY 'twenty two and 'twenty three? Frankly, I've been so busy with the recovery. We have of course, we have projections and everything in place. Earlier target was to reach somewhere around 1200 crores. We'll definitely cross INR 1,000 crores. I don't have a doubt about that barring any kind of 3rd wave or any kind of Other disruptions, that is always going to be my disagree. But now I think somebody asked me about anything forward looking. But I don't know. I mean, there will be a the AUM will have a healthy growth, maybe Started 10%, 15%, 20% easily. So I don't think that will be a problem, but don't Would we do it? Let us see how the next couple of months go. Okay. And then sir, our provisions trend, So do you see the worst of provisioning to be behind us and now we should see better days ahead? The work itself has lost a lot of meaning in it. The moment we talk of work, I think we are surprised by the next new one since I think my answer is the same as I I gave it to the previous gentleman that I think that there is probably more than sufficient provisions at the parent Arman level for MSME and 2 wheeler. I believe there is at least one more quarter of provisioning which you will need for the Microsite at least. I think that's my answer without getting into too many other details. Okay, sir. So one just last follow-up question. On the rural front like the 2nd wave has created more challenges compared to the 1st wave. So and your business model is very much tilted toward that side. So hence, I wanted to see like Your view, sir, like do you see this setback in RULER to have any kind of permanent impact there or Like slowly, slowly, once the COVID situation get knocked, they will get back to the same situation as earlier. Any change in the strategy or the plans of the company to tackle any impact on RULA due to RULA like I mean Per capita income or something which might be impacting the COVID to them because this time the disruption is more towards the unorganized sector and the lower income group side. So any change in strategy on how company plans to go ahead with the future growth prospects and considering these factors in mind, sir? So we are definitely rural. So primarily most of our portfolio is in the rural segment. I think I said it earlier that, yes, the rural segment is sensitive to I mean everybody is sensitive to stuff like COVID. So I want to say they are more sensitive or less sensitive. Overall, I believe that the rural segment fared better during the last FY 'twenty one lockdowns at least, I don't want to call it a first wave because it really wasn't a first wave, it was more disruptions related to loss of income due to the So I think that the rural fared better than us. As far as this time is concerned, Urban probably fared better than the rural, and this is just my I'm in Ahmedabad. So I can provide a context of where I see and where I live. I know a lot of people will be joining in Mumbai and say that, Oh my God, What are we talking about? That's not true at all. So on average, I think the urban fare better than Google this time seeking. Now as far as our strategy, I did say that we'll probably be in the coming Medium to long term, we concentrate in more of the not more, but given more weightage towards the individual loan side and sort of the higher ticket, higher underwriting kind of loan product. But we are still pretty still rural focused. And I think largely speaking, after seeing a lot of ups and downs in the last 10 years or the last 11 years for me personally, These customers are very, very resilient. So they tend to bounce back very quickly. As quickly as they get into trouble, they get out of it as well. So I'm not too worried about the long term permanent damage to the rural economy. I think that these guys are much more resilient than we are controllers are in general because they are used to dealing with such kind of situation ready, Octavio. Okay, sir. Thank you, sir. Thank you for giving me opportunity to ask the question. And thanks for your all the pre flowing answers, sir. Thanks. No problem. Thank you. Thank you. The next question is from the line of Harish Shah from HS Capital. Please go ahead. Thanks for the opportunity. I have some questions. My first question is with regards to what would be your average ticket size looking like now across our segments? So the average ticket size with the microfinance side would have increased to about 33,000 to 35,000. Now there are two reasons for that. One is, yes, the Ticket sizes for our renewal customers have increased to a small extent. The second side is also that if you look at throughout last year, Most of the year, we were concentrating on renewal loans only, and so those come in at a higher ticket size to be delivered. In the MSME segment, it has remained Somewhat consistent between INR 70,000 to INR 75,000. The 2 wheeler has we haven't done a lot of business in 2 wheeler, but What we have has been slightly higher because BS VI, the fixed and ABS and insurance and origination and all of that other stuff. So that has caused the price of the 2 wheeler to increase drastically in the last 2 to 3 years. So it went from like a 5 figure to a 6 So that ticket size is about That's about 55,000 to 60,000. Okay. And in terms of expansion, what are our CapEx plans? For Example, opening of new branches or expanding into new geographies. So if you can share some details about that would be helpful. So the good news is that we are already done with that. So in anticipation of all this amazing growth we were expecting starting from April 1, Primarily, we opened a lot of branches in Haryana and in Rajasthan. So about 30 odd branches against the planned Brand opening of about 40 to 45. So almost we are about 2 thirds to 3 quarters of the way done. Post the 2nd wave, I have put a hold on any branch openings. I think right now, it's not that I mean, You can only concentrate on so many things, right? So, I don't think that I want to clean out my operation According to middle management people to concentrate on branch openings when they should be concentrating on getting back to normal as far as repayments and installments are concerned. So the balance, 10 to 15 branches, we'll think about opening them in the next quarter, the Q3. So right now, I'm not planning to do anything. In the MSME side, yes, we do have a plan to open about 10 to 15 branches. We have started slowly opening branches this quarter. So I think we have opened up about 3 branches this month itself. And we'll probably be done by before Diwali for sure with our MSME branch extension. So as Vivek mentioned, We were in Maharashtra. Maharashtra, we only have a couple of branches, and we've kind of put a hold on the Maharashtra expansion for Amit, Ami. Instead, we are venturing into Rajasthan given our good experience we've had with the micro portfolio there. Okay. And so what would be the cost of opening batches? You may just give me some ballpark numbers, that would be helpful. Ballpark, it's not actually very, very expensive in the I think it depends Like anything from a branch to branch perspective, I think the equipment cost somewhere around lakh rupees for the computers and that stuff, maybe another 60, 70 grand for furniture So yes, about 2.5 lakh to 3 lakhs may you'll get everything, including the SAFE and the CCTV and You know the gas and all that other stuff. So there is a template that we follow. So whenever we open a branch, there is Like a minimum amount of stuff that goes in. And then there is other things, depending on the area, there might be a say for Different sizes of it might be multiple computers if it's a regional office, More furniture. It just depends on what the need of that specific area is. But yes, ballpark about LKK 2.5 billion CapEx Investment. Essentially, CapEx is not something really important for us when it comes to expansion. It is More as to whether we can have a consistent delivery in those areas and we can have I know that's it for already coming up, which is the longer process and having the right set of employees to man these offices and thinking of future products. Yes. So then the commitment to open a branch is not dependent on the CapEx expense. [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] I think it's more dependent, as Vivek said, on the operating cost side because Opening a branch is cheap, but keeping a branch earning is not so cheap. So No. Point taken. Yes. I just have a last question. What would be what would be your outlook in terms of cost of funds? So that has been reducing. I think post COVID every quarter that has been reducing slowly. I personally actually, Vivek will be the best person to answer this since he looks very closely at the liability side of things. But my personal opinion is Kate has still room to go down in the next couple of quarters. But Vivek, I don't know what you want. I think in the last 4 quarters or so, cost of funds have consistently come down. I'm sure we look forward to kind of getting the benefits of the reduced NCLR by the larger times for these quarters to start reflecting on our new and new old ending. So that definitely is likely to go on. But along that side, if you look at it, I think the repo rate has stabilized, so we don't You're not seeing any further report cards for last few quarters. So I think from a overall larger economic background, I think The lending rates by the bank seems to have kind of bottomed out for the time being. So not And a very large room for our cost of funds to go down. There could be further more efficiencies that can come and play and bust. But the mix could also change. And the mix would also change because we've been doing a lot of other so last 4th quarter, we started doing market linked debentures. So also, structured products wherein Some smarter returns from organizations like us have seen higher increase or higher So that will definitely help us. We definitely look forward to further Nothing too drastic in the bottom line. Thank you, team, for your detailed answers. The next question is from the line of Balkrishna Bagassiar from Axanar Investments. Please go ahead. Good evening, sir. After the pandemic, okay, When we are reading the newspapers, the large narratives, national or international newspaper, they are more They are projecting that, okay, the companies are getting more bigger and stronger, are getting more stronger, okay. And they have advantages of some sort or another, Okay. So in our industry, of course, in terms of cost of funds, bigger player would have advantage. But apart from that, And do you see that bigger players have more advantage or more efficiency in terms of getting customers or more financial stability or something like that? Well, I mean, It's an interesting question, I guess. As far as the cost of funds go, Yes. I think the larger players typically have a better ratings from the rating agencies. And while I might, I will personally disagree with that. A lot of the ratings are based on size, but let's not get into that debate because we run out of time. Typically speaking, yes, they do have a better control, marginally better control over Their cost of funds, as far as their operating cost, I think in my experience, There are economies of scale to an extent. After that, It's not endless whether you are after a while, I think whether you are 2,000 crores or 5,000 crores. Unless something changes in your strategy or in your product structure, you're still going to need one FO for every 400, 500 Customers, you're going to need a chain above that, right? So overall, Economies of scale will only go up to an extent. And what we have in fact noticed is that there are at a certain level, there are diseconomies of scale. So especially when you go from a small MFI to a medium MFI, there is a lot of diseconomies of scale going on. Now how we combat that? Typically speaking, as per the current guidelines of the RBI, Whatever savings that we get as far as the cost of funds, we have to pass that on to our customers. So that is the N per 10 margin or the 2.75x rules that RBI has. So overall, I mean not us, but a lot of the people in industry have become a little lazy because our customers are not very, very price sensitive. So When it comes to like getting bargaining for a better cost of funds, I think On the back of your mind, you always like, well, if I say 20 bps here, I'll have to pass on 20 bps to my customers, and my customers don't really care about 20 bps. So Why am I struggling so much? I might as well get the confirmation on those kinds of things. With the new RBI white paper that has come out, which is really a game changer as far as I'm concerned. I think it's important to note that Stuff like cost of funds will play a huge factor because that white paper is basically removing all margin caps. So if I say 1% in cost of funds, that 1% is going directly to my bottom line, which is all the incentive I need to try Look high and low for the best possible rate that we can get. So yes, I guess a little bit of a long answer, but I don't know if that helps you. Sure. Next question is related to the per branch that we have in microfinance. So basically we are growing at a very high pace in microfinance. So Our E and P branch is lower when I compare that figure with that of other players. So is it because we are expanding, so that is why it is low or is there any other our operation structure is different or Well, our structure is different. So there are many factors as far as AUM per branch. Number 1, You have to consider what is the average ticket size of the loan, right? So let's say if my average ticket size is 30,000 and the guy across the street from me is 36,000, so Apples to apples, there should be a 20% difference in the AUM per branch. The number of clients might be the same. The second thing is about how the vintage of the branch is. So how old is the branch? The third is that What's your strategy as far as branch expansion is? Are you going after the lowest hanging fruits where there are a lot of Population but lot of competition. Ahmedabad, for example, are already venturing it out into places like Kutch, Where there is a low density of population and it will take you a while, but there is no competition and in general better Kind of credit discipline. Are you rural versus urban? So urban MFI typically tend to have a much, much larger branches. Rural don't. So there are many factors to consider. And of course, Let's say I just opened 30 new branches. Those branches will have no customers and they will basically pull down the Average for the rest of it. Because a normal branch will take at least 3 quarters, 4 quarters to reach The standard benchmark for the branches. Yes. So I think typically, we reach a breakeven point between 500 to 700 So we will try to get there at least in 6 months or so, typically speaking. And after that, It's I would call it smooth sailing, but once you reach that critical mass, the growth You don't have to push so much for the growth of the bank. All right. All right. And the last question is related to Equity Fundraising, so if I'm not wrong, we passed a Board resolution recently. So can we expect Equity fundraising in next couple of months or maybe in the next quarter? So I think what you are referring to is the resolution on, A, the NCDs and B, the QIPs or other forms of so this is basically enabling resolutions that we take from the Board and the shareholders before every ATM Because otherwise, we raise a lot of NCDs, foreign NCDs in particular. And going to the shareholders every Doesn't make a lot of sense and it delays things by a huge margin and adds a lot of cost also. So for us, NCDs, term loan, whatever it is, is still debt. So we take an enabling resolution. So QIP resolution also, I think, we have been taking for the last 3 years. Let's hope to mute it this time. Typically speaking, yes, I think you can expect some equity rates coming in the next 3 to 6 months. I think that it's no big secret. We were in the market in March. Unfortunately, the timing of the 2nd wave kind of hindered our plans. And right now, we are taking a little bit of a break. But once things are stabilized and I think the investors, the equity investors are confident That voices are behind and they get a little bit more confidence around the numbers specifically. 3 to 6 months, we should be okay. I think we have sufficient equity right now for growth for at least for 6 months, 6 to 9 months. So we are not in a too big of a rush. All right. All right. That was very detailed. Thank you so much. Thanks. Thank you. As there are no further questions in queue, I now hand the conference over to the management for their closing comments. I Don't have any closing comments, but thank you, everybody. Stay safe. If you can get some travel in, get it. I just got some done, and it Thank you very much. Ladies and gentlemen, on behalf of MK Global Financial Services, that concludes this conference call for today. Thank you for joining us, and you may now disconnect your lines.