Ladies and gentlemen, good day and welcome to the Aadhar Housing Finance Limited Q3 FY 2025 earnings call hosted by Investec Capital Services. 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 this conference, please signal an operator by pressing star and then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Kamal Mulchandani from Investec Capital Services. Thank you, and over to you, sir.
Good evening, everyone. Welcome to the earnings conference call of Aadhar Housing Finance Limited. We have with us the senior management of Aadhar to discuss the financial performance. Let me welcome Mr. Deo Shankar Tripathi, Executive Vice Chairman, Mr. Rishi Anand, MD and CEO, Mr. Rajesh Viswanathan, Chief Financial Officer, and Mr. Sanjay Mulchandani, Head Financial Planning. I would now like to hand over the call to Rishi, sir, for his opening comments, after which we will take the question-and-answer session. Thank you. Over to you, sir.
Thank you so much, Kamal. Very good evening, ladies and gentlemen. On behalf of Aadhar Housing Finance, I extend a very warm welcome to all of you to our Q3 FY 2025 earnings call. We have successfully concluded the first nine months of FY 2025 with a strong growth momentum. There has been consistent growth in our AUM, which is evident as we have reached a new level this quarter of approximately INR 24,000 crore AUM, which is 21% growth YoY. Our prudent and proactive strategies have ensured a sustainable and profitable growth. As a part of our branch expansion strategy, we have opened 12 branches in Q3 and a total of 34 branches in the nine-month period. The company continues to invest and develop its digital strategy with significant investment in the information technology and data analytics.
As you would be aware, we had set a robust integrated technology platform developed by TCS in the year 2021 October, and this has proved to be scalable and, at the same time, flexible to work with various fintech offerings through APIs. We have, over the last couple of years, moved from a paper-based company to a digital lending company. For example, 100% of our onboarding today happens paperless on mobility solutions. We have provided mobility solutions to our underwriters, technical managers, collection executives, and customers. All these interventions have helped and will further help improve our efficiency and productivity. Our data analytics team is at the forefront to ensure various analytic projects like customer risk categorization, scorecards, early warning triggers on collections, customer balance transfer early warning, new branch identification, etc., and is woven into company strategy and helps in overall risk mitigation and management.
Turning to this quarter's performance, we have achieved an AUM of INR 23,976 crores, reflecting a 21% YoY growth. As a result, we retain our position as one of India's leading low-income housing finance companies. Disbursements stood strong at INR 2,094 crores in Q3 FY 2025, a significant growth of 20% on YoY basis. Despite exhibiting strong growth, we have not compromised on the loan quality book. We continue to have 100% focus on retail secured loans with no exposures to corporates or developers. Our GNPA witnessed a drop of four basis points, coming at 1.36%, with a stable collection efficiency of 98%-99%. Our average ticket size still stands at INR 10 lakhs, with an average loan-to-value ratio of 59%, with salaried customer segment contributing 56% of the portfolio.
At present, home loans represent a significant portion of our portfolio in comparison to other mortgage loans, contributing 74% and 26%, respectively. Our deeper impact strategy is working well for us and yielding positive results. It has enabled us to target niche markets in the tier four cities and beyond, catering to small talukas and districts. On a nine-month basis, we have a total of 140+ deeper impact branches across 545 districts and 21 states. In Q3 FY 2025, we have added 12 branches, which has helped us to serve more than INR 2.86 lakh live customer base across the country. None of the states is higher than 14% of AUM exposure.
We continue to focus on geographical expansion and strengthen our market presence. We have further strengthened our senior management with the induction of Head of HR, Mr. Vinod Nair, who comes with 20 years of experience in the leading financial services companies. Happy to share that Aadhar Housing Finance has been certified by Great Place to Work sixth time in a row.
Moving on to the outlook going forward, the improving macroeconomic landscape is driving the housing finance industry towards a projected growth of 16%-17% over FY 2025 and FY 2026. A significant portion of this growth is expected to come from the affordable housing segment, which is estimated to achieve a robust 22%-23% CAGR over the next two years. The affordable housing finance sector has witnessed strong growth momentum in the recent quarter attributed to urbanization and rising demand for housing loans, along with significant push given by the government. The recent budget announcements have been very positive for the affordable housing finance segment, like the income tax exemption up to an income of INR 12 lakh per annum, which is set to boost the purchasing power of LMI and EWS, driving increased demand for housing loans.
Additionally, the government's allocation of INR 15,000 crore to the SWAMIH Fund 2.0, along with commitments to complete over 90,000 housing units, will help resolve stalled projects, restore buyer confidence, and create new lending opportunities. Moreover, the budget allocation under PMAY will further enhance affordability initiatives, benefiting affordable housing finance companies that primarily serve the low and middle-income borrowers. The Mortgage Guarantee Scheme has also been notified by the central government, specifically targeting the EWS LIG segment, which will enable companies like us to look at those customers who fall out during the normal course of business. With these initiatives, we are optimistic that the sector will see a huge push and demand will increase significantly. We remain optimistic in the opportunities coming our way and are well poised to cater to the rising demand.
I would now like to hand over to our CFO, Rajesh Viswanathan, to take you through the financial performance of the quarter. Rajesh?
Thanks, Rishi. Good evening, everyone. I would like to take you all through the financial performance for this quarter and nine months ended December 2024. In nine months FY 2025, our AUM has grown by 21%. Our overall borrowings as of 31 December 2024 stood at INR 15,135 crore, compared to INR 13,128 crore as at 31 December 2023, which has grown by 15%. The borrowing mix at the end of 31 December 2024 is 51% from banks. The share of NHB is 25%, and NCDs make up for the balance, 24%. Our incremental borrowing for Q3 FY 2025 stood at INR 1,178 crore, which has come in at a cost of 8.28%. We have around 43 borrowing relationships working with us.
We have drawn INR 378 crores from NHB this quarter, of which the affordable housing finance fund is around 20%-22% of this borrowing, and this has come in at a blended rate of 7.8%. The cost of funds Q3 FY 2025 stood at 8.1%. In terms of fixed and floating nature of the book, 79% of our borrowing is floating, and 77% of our assets are floating. The undrawn sanctions as at 31st December 2024 is INR 1,100 crores. Liquidity for the quarter ends stood at INR 2,100 crores, which is around 10.5% of the loan asset book. Portfolio yield for this quarter as we exited is 13.9%. In terms of spreads, the exit spreads, which is the exit yield minus exit cost, have come in at 5.8%.
These are the exit spreads, and as we had explained earlier in earlier calls, we expect to end the year in a range of around 5.7%-5.75% levels. Our cost to income for this quarter stood at 34.8% as compared to 35.4% in Q3 FY 2024. This is an improvement of 60 basis points. We have mentioned in our earlier calls that we aim to drop our cost to income for the current financial year by at least 100 basis points, and we are well in course for that. As Rishi has mentioned, our GNPA as at 31st December 2024 is 1.36% as compared to 1.4% in Q3 FY 2024, improvement of 4 basis points. Our provision coverage of stage three stands currently at around 36%. Capital adequacy ratio for Q3 FY 2025 stood at 45.5% for tier one and 0.6% for tier two.
Last but not the least, for nine months FY 2025, the profit after tax has come in at INR 667 crore compared to INR 548 crore in nine months FY 2024, rendering a growth of 22% YoY. Quarter profits have come in at INR 239 crore versus INR 204 crore in Q3 FY 2024. We retain our focus on maintaining a healthy book and delivering consistent performance every quarter. With that, we can open up for questions.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchstone telephone. If you wish to withdraw yourself from the question queue, you may press star and two. Participants are requested to please use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhishek Jain from Alf Accurate Advisors Private Limited. Please go ahead.
Thanks for the opportunity and congrats for this strong set of numbers. Sir, the credit cost has increased in this quarter. What is the outlook for the credit cost for the coming quarters and the FY 2026?
From a credit cost perspective, if you look at our historical last two years, also quarter four is always a very strong quarter for the industry. In our particular case, if I tell you the numbers, we were 1.4% NPA as at 31 March 2023, and in March 2024, the NPA had dropped to 1.08%. Quarter four is a very strong quarter, not only for us, but also for the entire industry. We do expect good improvement from the credit cost, from the overall NPA number of 1.36%. We believe that overall credit cost, in terms of basis points, would be in the range of about 25-27 basis points is what we expect the credit cost to come in at.
As regards next financial year, though difficult to give up, but generally, if you look at our overall credit cost, it will be in the range of that number, about 25%-27% basis points.
How is the current outlook, especially on the delinquency side? Basically, we have seen that a lot of the stage on the low-ticket items. How is the current outlook in terms of the asset quality in the housing finance company?
Abhishek, on a broad basis, we are very comfortable with the assets that we are holding. If you are referring to the current last, I would say, two quarters discussion around the MFI, etc., I would want to highlight here one is that we are a 100% secure retail book. We have no exposures to personal loans, unsecured loans. That is one. Second is, if I were to, and since we monitor this very, very closely, at least on a monthly basis, our total exposure to MFI individual loans stands at less than 9,000 customers over the 286,000 customers that we hold. Out of which, if I were to further give you a data split on how many are delinquent out of these 9,000 customers, to be precise, 8,780 customers, only 707 customers are delinquent. Not NPA. They are delinquent. They will be in various buckets.
From an asset quality perspective, and the numbers that Rajesh just shared, we should be in the range of 1.1% kind of NPA numbers as of March. The asset quality looks good. The momentum, as I indicated in my initial speech, momentum of growth also looks very healthy.
What is the reason of the increase in the credit cost in this quarter, sir?
Basically, the one reason for the increase in the credit cost is the buckets of 30%- 60% and 60% - 90%, which is basically our stage two. There is a slight movement in those buckets. If you look at our stage three also, if you look at it from quarter two end to quarter three end, it has moved up from, I think, 1.3% to 1.36%. That is the reason, primary reason for increase in the credit cost in the current quarter, which has come in at around INR 18 crore-INR 19 crore. We expect that this is more or less going to be evened out as we exit quarter four.
Okay. My last question on that housing sector growth, you mentioned that there will be a 15%-16% growth in the housing industry in FY 2026 and 20%-22% growth in the affordable housing. What is your growth, what growth you are targeting for your company?
See, Abhishek, we've guided, while we can't be giving you too many guidances, but earlier also in the previous call, we've guided that from a two to three-year perspective, from a disbursement perspective, we will grow at 18%-20%, which will mean AUM growth of anywhere between 20%-22%. We will maintain that trajectory.
20%-22% for FY 2026?
That's right.
Okay, sir. Thank you.
Thank you, Abhishek.
Thank you. Ladies and gentlemen, to ask a question, you may please press star and one. We have the next question from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.
Hi. Thanks for taking my questions. Just a little bit on the fee income line. There seems to be some weakness. I believe fee income is up or almost flat for the last nine months. How should we really think about this? What are the drivers, and how should we model this going forward?
If you look at fee income, I think the best way of looking at it would be in the range of around 2%-2.1% on a sustainable basis. This quarter, we had specifically taken some one-offs on processing fee and admin fee, which we ran some contests, as a result of which about INR 7 crore-INR 8 crore of fee income has come in lesser, which we do not expect to happen in quarter four. These were more of contests and competitions run to do some acquisition to acquire businesses. To look at it on an ongoing basis, I think it is better to look at it as at 2%-2.1% levels.
A ny increase because of any other avenues going forward?
As you would know, Nischint, we do a fair amount of insurance cover, which is basically a credit shield insurance, which is for the protection of the customer, as well as property insurance, which is, again, from a customer perspective, a very important cover. Apart from housing and the life insurance, I don't think we intend to add any other products.
No new avenues for now, at least.
In terms of fee income also on the processing fee and as well as the login fees are concerned, I think we are fairly about there. There may be some movements on the fee income line because in the fourth quarter, if we aggressively collect some cheque bounce charges, which are accounted on cash basis, you may get some leg up on the cheque bounce charges in the quarter four.
Got it. Just on the spreads side, you kind of did allude to the fact that there could be a small reduction in the fourth quarter. Just curious, I mean, what is really happening? You see further increase in cost of funding? What is it that you're looking at?
I think the main driver over there will be the yields, which will be driving it more than the cost. As we had explained in the previous calls, your book is sitting at yields in the range of about 13.9% -1 4%, whereas incremental business would be done at a ratio of around 40%-45%, which is slower than that, which is true even now for a nine-month period. Basically, that will even out or add after a yield. That is the reason where yields will start dropping to a certain extent. However, we believe the spread movement downward will be sort of by 10 basis points at the end of the quarter.
You will be probably looking at exit spreads in the range of about 5.7%, primarily driven by new acquisitions, which is happening in the field, which is happening about 40-45 basis points lower than the book yields.
Got it. Your cost of funding from NHB is 7.8%, or is the cost of funding under the subvention scheme at 7.8%?
No, this is a blended cost. It's 7.8%. The 25% came in at a figure of about 5.2%-5.3%. 5.5% was at 25%, and the balance came in at around 8.3%-8.4%.
Balance, you mean non-NHB?
See, out of the total, see what NHB is now doing is they are saying that out of the total allocation, anywhere between 20% - 25%, you can draw as AHF, and the balance you have to draw under the normal scheme. 75% would have been drawn under the normal scheme, which has come in at about 8.3%-8.4%. The 25%, which has come in under the AHF, has come in at a rate of about 5.5%. Hence, the blend has come in at 7.8% incremental.
Got it. Your overall incremental cost of funds at the company level you mentioned was around 8.2%?
That's right. For the quarter, it's about 8.28%.
Got it. Probably some part of the NHB fund is actually coming in at a higher rate than the incremental cost of funds for the company. That is what I think we are trying to.
That's right. That's right.
Sure. Just one last data point. Can you share the BT out ratio for the quarter?
6.3%.
6.3%. Sorry, analyzed, Nischint, the BT out was 6.3%. And I'm sure you remember last time we spoke about various initiatives that we've taken to reduce the BT out from 6.7%, it's dropped to 6.3%, and therefore it's continued. Stable state, 5.5% is the number that we would be looking at.
Got it. Got it. Thank you very much and all the best.
Thank you, Nischint.
Thank you. We have the next question from the line of Parth from Nomura. Please go ahead.
Thank you for taking my question, sir, and a great set of numbers. Sir, I'm seeing that the write-offs have been lower, which is a great thing to see. There has been some inset in the stage two assets. Are you seeing some flows from the top buckets to the lower buckets incrementally coming ahead? Sir, one more question on the budget side. I understand that on PMAY allocation, there have been some whispers that the issue is not always on the supply-demand side, a bit on the supply side too. How do you see your growth panning out with the current budget calls on the PMAY scheme and the general ground? Thank you.
Parth, you might have to repeat the PMAY question. Sorry, it was not so clear.
Yeah. On the PMAY side, post the recent budget announcement, and also on the on-ground checks, we see that the issue is not always on the demand side of the houses, but also on the supply side because it is not quite affordable for the builders to develop affordable houses. How do you see things panning out on the ground on the demand perspective in the affordable housing segment?
Let me answer the PMAY question around the credit cost. Rajesh will come in. See, PMAY traction, if you remember, PMAY got launched a couple of months back, PMAY 2.0. The traction is still building up. We, as an organization, have done roadshows across over 500 branches where it was more of an education series to the customers. Close to about 6,700 customers have shown interest in the subsidy scheme and for applications for newer applications, which means there is quite a bit of traction. If you also would recall, in the PMAY 1, we contributed close to about 88,000 customers of ours, which is almost 50% of our customer base had received the PMAY subsidy. The traction looks nice. From a perspective of MoHUA, which is the Ministry of Urban Affairs, the systems are up and running.
We have just last week started the process of uploading consumers who are eligible after 1st of September. They have been uploaded. The uploading process to the PMAY website has started, and anytime soon, the disbursement tranche will start. Obviously, the PMAY will play its own role. Now, you also had a point on the supply side. You would have heard the FM speaking about the SWAMIH scheme, which enables construction of stalled projects for the allocation of INR 15,000 crore. These are typically targeting the affordable and LIG consumer segments. There is more than even in the PMAY four verticals, PMAY's the four verticals. One of the verticals targets construction of affordable housing. There is little more than too much happening right now on the supply side as well.
We are quite bullish when it comes to the EWS LIG segment in terms of both supply side and the demand side as we move ahead in the year. Credit cost cut.
Yeah, Parth. You are right. There has been a slight slippage in stage two. We are seeing about 10%-12% basis points slippage in December. However, as I explained to the first caller, we expect that this should sort of get evened out as we exit March 2025. Hence, we are quite confident that as we end the year, our credit cost would typically come in in the range of about 25 basis points. Just to give some numbers, if you look at our credit cost line item in quarter four of last financial year, if I'm not mistaken, it was very flat or it was a negative number. If we are gunning for the NPA closure numbers, which we just discussed by Rishi, I think our credit cost line item in quarter four will be a very benign type of a line item.
Hence, we are quite confident that this is more of a sort of a seasonal type of impact. We typically see it in quarter three, which is a festival season, where we see some slippages typically happening because of Diwali and Dasara, which typically gets evened out in quarter four.
Sure, sir. This provides a lot of comfort on the growth and both the credit quality aspects. Just one more question. Sir, you mentioned that it is a good thing that BT outs have reduced from 6.7% to 6.3%, right? You also mentioned that there was a one-off on the fee income because of some scheme insurance. Is this BT out lower because of all these schemes you ran, which help you lower the fraction of customers going out? If so, and if you expect the BT out to further improve, do we expect you to expand a bit more on such schemes to retain the customers?
No, no. These schemes were basically on fresh acquisitions. BT out is not BT out acquisition or retainment is not a part of this reduction. We would love to keep the BT out in the range of about 5.75% as we exit the year. It is at 6.2%. We have seen that if you look at the industry set, it has sort of expanded for the industry set. Quarter four is always a very busy quarter for BT outs for the entire industry. We hope to sort of get it down to a sub 6% level. I said that we would do a good job here. We have employed all our various channels. One, we have a specified retention team, which is working on BT outs headed by a very senior person.
We also have data analytics working very closely with the retention team, giving a clear indication of expected customers who may BT out. Even if a customer BT outs, what is the sort of rate which can be offered to retain that customer? In that sense, we do not give an irrational rate drop. Even the rate drop is more of a risk-adjusted rate drop, which is sort of taken out by data analytics. As a part of our digital initiative, it is given to the retention team to retain the customer. Having said that, BT out has always been an issue. We have to work around it as an industry and as a company. If we end the year at sub 6%, I think we would have done a fairly decent job there.
Thank you. That was helpful. Sir, on the last question, I won't take too much time. Sir, expecting the MPC meeting tomorrow and expectations of any potential rate cuts, how do you see your cost of funds panning out since you mentioned 77% of your book is floating in nature?
We also, I think, public news, everyone is expecting some sort of rate action. Hopefully, there will be some drop downward. Our own assessment is that by the time it sort of comes from the banks to us, it would be a lag of at least three to six months. It depends on where my repricing or the readjustment of the rates takes place. I'm on six months, three months, one-year MCLR. For example, if you look at it today, one-year MCLR is about 27% of our borrowing. Six-month MCLR is 36%. Basically, it will depend on which time it comes in and when is my repricing happening. It may take, in our view, tomorrow's action may slow down in three to six months, and our slowdown to the customer may happen post that only. I don't see any immediate.
Having said that, once we get the benefit and once it becomes a meaningful passback to the customer, we are obliged, and we will definitely pass it back to the customer.
Thank you. Thank you very much, sir, and congratulations on a great set of numbers. Thank you.
Thank you, Parth.
Thank you. The next question is from the line of Chintan Shah from ICICI Securities. Please go ahead.
Yeah. Thank you for the opportunity. Sir, congratulations on a good set of numbers. Firstly, on the margin, just to again come on the margin front, what was the disbursement yield for the quarter, if you could just give that number? As compared to the previous quarter also, please.
Quarter three, as a current quarter, disbursement yield, Chintan, was 13.6%. For the year, YTD is 13.54%. You wanted the previous quarter also last year, right? Which was 13.53%.
No, quarter two, sequential quarter was 13%. Yeah, quarter two was about 13.53%. We have improved by about 6 basis points in quarter three. And nine months disbursement is 13.54%.
Basically, our overall portfolio yield is 13.9%. Incrementally, we are at 13.59%. Probably there is some chance of a slight decline in the yield. With the rate cut, probably can we expect some further cut in the yield, sir?
No, so rate cut, incremental yields, whatever we are operating at, we might not want to reduce the incremental yields further. Rate cut will eventually impact the existing book. As Rajesh just explained in the previous discussion, we will eventually have to pass on to the existing customers.
Sure. Sir, when we say floating, 77% of our assets are floating, could you just provide the breakup of which all benchmarks are they linked to?
For example, on the asset side?
Both on the asset as well as the liability would be helpful.
See, liability basically is one-year MCLR is about 30%. Six-month MCLR is about 36%. Three-month MCLR is 17% and balance is a combination of others. These are basically our bank term loans. NCDs, which we take from DFIs, which will be again floating. For example, I think that is 80% floating what we take from ends. Inside the 24% NCDs, approximately half of that would be from DFIs, and half of them would be floating. On the asset side, basically, mostly our non-home loan book would be fixed. The incremental book that we do on non-home loans for the last 12-18 months, we have done more of fixed non-home loans. The other portion which is fixed is because of NHB. When NHB gives us the AHF fund, we have to fix the customer at 350 basis points more than G-SEC rate.
It is a combination of NHB and the NHL loans that we do. Having said that, we believe that for the foreseeable near future, we should be in the tram line of 75%-78% fixed to floating, 75% floating, and 25% fixed to 75%-78% in the next 12 to 18 months.
Honestly, sir, I was just trying to understand if there is a rate cut. How soon would we have to pass on the rate cut to the customers?
Yeah, typically what happens is that as soon as I get a substantial rate benefit passed back to me, and we have an ALCO-determined RPLR formula, we have to apply the RPLR formula. If the RPLR formula throws that I have to pass on, say, 25 basis points back to the customer, I am obliged to pass it on to the customer. This is a complete, very transparent ALCO mechanism, which is even checked by National Housing Bank in their inspection. The gap between passed back to me and passed back to the customer may be maximum of a quarter.
These are all linked to our internal benchmark and not to any external benchmark like the repo rate or the T bill , etc.
No, no. All our assets are linked out to our own RPLR, the base of which is predominantly the incremental cost of funds and the cost of funds.
Sure. Logically, we can say that largely we are immune to the rate cut. Only it could be a lead lag of a quarter or so, right?
One is a timing difference that it would be there, which obviously the timing difference will not be from a profit strategy. It is more from making it a good operational activity and making it a significant portion of passed back to the customer. Five basis points passed back does not make sense. Slightly 10-12 basis points makes sense. Second thing is, as Rishi said, if the cost of funds, incremental cost of funds drop, hopefully my incremental yields will not drop that much. You will make up some of the loss over there, some of the yield loss over there.
That is very helpful. Just on the fee income part again, we sold around INR 7 crore-INR 8 crore . We had an impact of around INR 7 crore-INR 8 crore which we had to forego due to contest, a kind of discount to the customer for processing. Is this a kind of an annual phenomenon? Every year would we be offering near to the festive season, Diwali times, or how is it?
Yes, I think it depends on company to company in the industry. Some companies run it in the fourth quarter. We thought it opportune to run it in quarter three. We have done it majorly in quarter three. Some very small residual impact you would see in quarter four. The majority of that has gone into quarter three. This is an annual thing somewhere or the other. In the last year also we ran it. Probably we ran it more into quarter four last year. This time we ran it. We thought it is better to run it in quarter three.
Sure. Just lastly, from the branch expansion , we have around 34 branches we opened in nine months. What is the target of branch opening in next year? Just get a number on that, please.
Next year. Next year.
Next year.
Let me first complete the current year. We are already at 34 branches in 10. The way it looks, we should be closing the year at about 55 branches for the year. We will look at similar numbers in the coming year.
Sure. Yeah. That's it from my side. Thank you and all the best team.
Thank you, Chintan. Thank you.
Thank you. The next question is from the line of Yash from Citigroup. Please go ahead.
Hi, sir. Thanks for the opportunity. Just wanted to check on this collection efficiency being at 98%, 99%, and this 10-12 basis points slippage which you saw in stage two assets. Is there any specific geography which is contributing to it, or it's more broad-based and you see the recovery as well more broad-based?
I would say partially yes and partially no. It is broad-based, Yash. Certain geographies like, I would say, East, Kerala, etc., they have always been on the bottom of the pyramid when it comes to efficiencies. They continue to be at the bottom of the pyramid. Broad-based, the entire rest of the states that we are operating, which is 19+ 20, 21 states minus Kerala and East, we'll be at about 19 states. They are, I would say, in the similar pattern. You can always sort out Rajasthan being the better one. Even when you rate, Rajasthan would top, other Pradesh, Telangana would top in terms of being on the right side. Broad-based, I would say you're right.
The recovery also, as Rishi said, would be again broad-based. We don't see any laggards to the slippages. We believe that the recovery also will be broad-based.
Got it. Sir, on the yields part again, sorry to harp on that, but could you share the differential between the home loan and non-home loan yields, if possible?
For the current quarter?
Yeah, I mean, just in general. Does the non-home loan yield also lag?
Yeah. Let me give you a YTD number for the year. Home loan is at almost 12.36%. Non-home loan standard is 16.5%. The weighted will be 13.55%.
Right. Got it. And these are the YTD numbers, right?
These are YTD nine months. Nine months.
Right. Right. Even on the non-home loan side of the book, the disbursement yields would be, say, 40-50 basis points lower?
Non-home loan, I just told you, 16.5%. It's about.
I mean, the disbursement yield, the incremental yields, even those would be lower than the balance book or?
The yield is 16.99. Oh, okay, okay. AUM versus current. What I give you right now is incremental disbursement for the year. If I give you AUM, the AUM non-housing loan stands at 16.8%. My incremental number that I gave you was 16.5%. The 40 basis points that you are seeing is more evident both in home loan as well as non-home loan differentials.
Got it. Got it, sir. Sir, on the spreads front, 5.7% is what you're guiding. On a more sustainable basis, in absence of rate cut, say, not factoring in anything, would that be the more sustainable number, or should see more compression in there?
I would say, Yash, as a more sustainable number or spread to be in the range of 5.6%-5.7%, the current year exit as well as the next financial year.
See, on a sustainable basis, if you look two to three years down the line, I think this will be trending. We have guided in the past also that this should be a two to three-year basis, would be around 5.5% because on a growth engine method where we will be growing our book also. To grow a INR 22,000 crore-INR 25,000 crore book, there will be sections where we will have to play the yield again. Having said that, we will ensure that the drop in spreads is not very sudden. The drop in spreads is a much smoother one, as Rishi said, 5.7, hopefully dropping by 10-15 basis points every year. Sustainable looks in the range of about 5.4%-5.5% in the long run.
In the long run, which we want to retain as sustainable.
Got it. Sir, just last on the growth outlook, it continues to be around 25%.
Not 25%, Yash. We've guided always 22%-24% AUM, which will effectively mean 18%-20% disbursement growth.
Got it. Got it. Thank you. That's it from my side.
Thank you, Yash.
Thank you. The next question is from the line of Sonal from Asian Market Securities. Please go ahead.
Congratulations, sir. I had two questions. Can you please give out details on the type of property finance, construction, plot-plus construction, apartment, commercial, if any if you're doing? The second question was on the details on the AUM mix, in terms of tier of cities. What would be the contribution coming from tier one, tier two cities, tier three, tier four, and maybe more deeper cities?
Okay. Hi, Sonal. Let me first give you the split between the type of loans that we do. Purchase of house and flat, that is ready-built property, is about 42%. Stand-alone construction, which is self-construction, is about 25%. Plot-plus construction, which is combo loans, purchase of plot and construction, there are around about 6%. And LAP is about 24%. That is the mix of type of loans that we do. In terms of tier, while I do not have the tier data available as we speak, I can give you indicative, so close to about 64% will come from tier one. That is how we classify our main branches. Tier two would be about 23%-24%, and the balance will come from tier three and below.
Sir, what is the employee count at the end of the quarter?
Employee count.
We'll just come back on that. Please give
us a minute here. The on-call employee count is 4,450.
Okay. Sir, if I look quarter on quarter, there is not much increase in employee cost, despite our disbursements being very strong. Just wanted to get some sense, how should we look at employee benefit expenses, and what would be the proportion of fixed and variable for your employees?
To be very honest, if you look at it on a slightly broader answer I'm giving, if you look at overall employee cost, we should look at the growth of employee cost in the range of about 17%-18% is what we would like to look at the employee cost going by. Fixed to variable depends, for example, for people who are not on incentives, who are on bonus, typically their variable would be in the range of about 20%-25%. If you look at people who are on frontline sales employees, this will be in the range of 50%-55% of their incentives they will be getting as compared to the fixed. Middle-level branch people will be again in the range of about 25%-30% of their fixed CTC they will be getting as variable.
Middle-level management, senior management in head office, everyone will be in the range of about 20%-30% variable. Frontline sales would be in the range of about 50%-55% variable.
Yeah, because the frontline, typically, Sonal works on a concept of lower fixed and higher variable.
Got it, sir. Okay. Thank you. Thank you so much.
Thank you, Sonal.
Thank you. The next question is from the line of Shreya Shivani from CLSA. Please go ahead.
Thank you for the opportunity. I just have one question. You mentioned that usually in your third quarter, given that it's a festival quarter, you see some slippages that come in, and you see it balancing out by Q4. I'm sorry. Is there any way to quantify how much rollback do you see from Q3 to Q4 over the past so many years? Is there a way to track that?
See, on a broader basis, if you look at NPA, typically last year we were about 1.4%. We moved back to 1.08%. On 1+, I think we exited the overall 1+, we exited at 5.45%. We were at the end of last year, sorry, in December, we would be around similar levels. 6.3%, if I'm not mistaken, was our 1+. We ended the year at about 5.45%. There was almost a 90 basis points improvement in. This is quite common both in the company and industry. Both on the 1+ and a 90+ level, 90+ you would see anywhere between around a 30 basis points improvement. 1+, hopefully, will see a 90 basis points to 100 basis points improvement.
Got it. That's very useful. One question that I wanted to ask is that while you're giving us, or while you've given us, the geographical mix in terms of tiers, does that tiering account for the location of the customer property or for your branch? Because your branch may end up having customers outside of that geography, right? That's a possibility.
Shreya, the way we have structured our branches, the geo limits from any branch is about 60 km. When we see the consumer and the property, it would be more or less, I would say, 95% match. There will be consumers who will be wanting to construct houses in their hometown, etc. That would hardly be about 4%-5%.
Got it. Got it. Mostly there is a big overlap between your branches and customers because people taking loans from a particular branch and going 300 kilometers away and building.
No, no, no, no. That doesn't happen. If that happens, Shreya, then we would direct the customer to the closest branch of his construction.
Got it. Got it. Okay. Okay. That's very useful. Thank you. All the best.
Thank you, Shreya.
Thank you. The next question is from the line of Rudransh Kalra from MB Investments. Please go ahead.
Evening. To be honest, Aadhar is generally seen as a high-growth company. I personally am not, I was expecting some better numbers. Do you think in the coming quarters the growth is going to be higher? What do you think going forward are going to be challenges and positive triggers for your company?
Hi, Rudransh. Thank you for that compliment of us being a high-growth company. That brings challenges on the table too because when you are on a higher base, the percentage growth might not gel with the kind of expectation the market would have. Having said that, as I've already indicated on the call twice, we would continue to grow our AUM at about 22%-24%. That's the growth number we are looking at. Quarter on quarter, the numbers can move a couple of percentages here and there. Overall, on a yearly basis, these are the kind of AUM number growth that we are looking at. In terms of challenges, we actually don't foresee too many challenges coming in from the budget. We had expectation pre-budget. We got things like Mortgage Guarantee Scheme coming in. PMAY is already there.
SWAMIH Fund got announced in the budget. All this is going to boost both the supply side and the demand side. At the company level, internally, the only challenge we see, and which worries us a little bit, is getting down the balance transfer out, which is an industry problem, not only a problem at Aadhar, to get down this number from 6.3% to 5.5%-5.7%, which is the comfort level. We are aggressively working towards it. That is the only challenge that I see. Otherwise, things are looking good and shining.
All right. Thank you so much. Wish you the very best for the future.
Thank you, Rudransh.
Thank you. Ladies and gentlemen, we will take that as our last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thanks a lot for all of you for joining this Analyst conference late in the evening at 6:30. Thanks a lot. I hope we have been in a position to answer most of the questions. We look forward to hosting you all again at the end of the financial year. Thank you and good night.
Good night, all of you. Thank you so much.
Thank you. On behalf of Investec Capital Services, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.