Ladies and gentlemen, good day. Welcome to Aavas Financiers Limited Q3 FY 2022, 2023 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and the expectations of the company as on date. These statements are not the guarantees of future performance and involve risk and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call an operator by pressing star zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sushil Kumar Agarwal, Managing Director of the company. Thank you, and over to you, sir.
Yeah. Good afternoon, everybody. Thank you for participating on the earning call to discuss the performance of our company for quarter three and 9-month FY 23. I am very excited to make a few important announcement today. In 2011, we started our journey as AU Housing as a subsidiary of erstwhile AU Finance, which was the first stage of our journey, Aavas 1.0. Aavas has subsequently evolved into a standalone business under the ownership of Kedaara Capital Partners group, and subsequently went public in 2018, which was Aavas 2.0. Now we are preparing for the Aavas 3.0 journey. The company is evolving into a true long-term institution and has embarked on the journey to becoming one of India's largest affordable housing finance player, led by people and technology. We are today blessed with a very deep and talented management bench.
We are excited to be able to build upon and nurture this talent. In order to create additional leadership bandwidth and allow for better focus on both long-term strategy and day-to-day execution, the role of Managing Director and CEO will be splitted into two distinct roles. The updated leadership structure is designed to allow for the accelerated achievement of Aavas' long-term vision. I will continue to be Managing Director of the company and continue to focus on its overall vision and strategy for the future. I take this opportunity to introduce you our CEO, Mr. Sachindra Bhinder, who will focus on driving core execution. Sachindra has been with Aavas for over three years as Chief Executive Officer of our Aavas MSME business. He previously served as the EVP and Business Head of Home Finance at Kotak Mahindra Bank, where he built INR 400 billion AUM business.
As part of Aavas 3.0, the board has also elevated Mr. Ghanshyam Rawat to President and CFO, Ashutosh Atre to President and CRO, and Surinder Singh to Chief Collection Officer in recognition of their long-standing commitment and contributions to Aavas. I would now hand over the line to Sachindra to introduce himself.
Thank you, Sushil. Good afternoon, ladies and gentlemen. I would like to start with thanking the board and Sushil for trusting me with this opportunity. I am very happy to part of this exciting journey. I am confident that with the support of my colleagues, the board, and other stakeholders, I'll be able to work towards achieving the company's vision, mission, and customer goals. Sushil has laid down a very strong foundation for Aavas. Under Aavas 3.0, my focus will be to build on that foundation and to focus on people and technology. On people, I want to retain and build on the entrepreneurial culture in an institutionalized framework, leverage the significant upfront investments already made in human capital to drive growth and productivity, focus on engagement, training, and upskilling of the organization.
On the technology side, we'd like to contribute to focus on the completing the technology transformation projects initiated in 2022. The idea would be to achieve nonlinear growth, build technology capability equivalent to that of a bank, create a remarkable customer experience. Sushil and I are joined on this call by Ghanshyam Rawat, President and CFO, Ashutosh Atre, President and CRO, Siddharth Srivastava, Chief Business Officer, Surinder Singh , Chief Collection Officer, Ripudaman Bandral , Chief Credit Officer, Gigi Boman, Chief Technology Officer, Anshul Bhargava, Chief People Officer, Rajaram, Chief Strategy Officer and Head of Analytics, and Ghanshyam Gupta, Investor Relations. The results and the presentation are available on the stock exchanges as well as on our company website. I hope everyone had a chance to look at it. I will now hand over the line to Ghanshyam, President and CFO, to discuss the business and financials.
Over to you.
Thank you, Sachindra Ji. Thank you, Sushil Ji. Good afternoon, everyone, and a warm welcome to our earning call. The disbursement increased by 26.4% year-on-year to INR 12,024 million for quarter three, FY23, and 48.7% year-on-year to INR 34,428 million for nine months, FY23.
As on 31st December 2022, average borrowing cost 7.29% against an average portfolio yield 13.04% resulted in a spread at 5.75%. As on 31st December 2022, total number of live accounts stood at 1,75,001, that is 24% year-on-year growth. Total number of branches was 321. 23 new branches added in last 12 months. Employee count 6,082, 28% year-on-year growth in anticipation of additional 20-25 new branches in Q4 FY23. Assets under management grew 23.3% year-on-year to INR 1,30,887 million as on 31st December 2022. AUM has the impact of subsidy received of INR 2,900 million since December 2021. Previous years, INR 440 million.
AUM grown is 24% excluding the impact of subsidy. Product-wise break-up, home loan 70.1%, other mortgage loans 29.9%. Occupation-wise break up, salaried 39.7%, self-employed 60.3%. After witnessing 190 basis points increase in the repo rate in the first half of the year, RBI has further increased the repo rate of 35 basis points during third quarter. We have also increased our time lending rate by 125 basis points during first nine months of FY23, and further increased 35 basis points with effect from 5th January 2023. During the quarter, company borrowed an incremental amount of INR 13,364 million at 7.15%.
As on December 2022, our average borrowing cost stood at 7.29% on outstanding amount of INR 116,648 million. IGET to Ind AS reconciliations has been explained in detail for profit after tax and net worth on slide number 35-37 of our presentation. Borrowings. Access to diversified and cost-effective long-term financing. A strong relationship with development financial institutions. During the year, borrowed INR 31,815 million at an average rate of 6.84%. Overall borrowing mix as on 31st December 2022 is 42.2% from loans, long-term loans from banks, 22.3% assignment and securitization, 22% from National Housing Bank, and 13.5% from debt capital market.
Liquidity of INR 27,882 million is as on December 2022. Cash and cash equivalent balance of INR 14,682 million. Unavailed cash credit limit of INR 1,100 million. Documented and availed sanction from other banks of INR 12,100 million. Profitability. Profit after tax increased by 25.8% year-on-year to INR 3,035.4 million for 9 months of FY23. ROA 3.43% and ROE 13.59% for 9 months FY23. As on 31st December 2022, we are well capitalized with a net worth of INR 31,489 million, and capital adequacy ratio at 49.5%. Our book value per share stood at INR 398.4.
I would like to hand over line to Ashutosh Ji, President and CRO, to discuss the assets quality. Thank you.
Thank you, Ghanshyam Ji. The key portfolio risk parameter, asset quality and provisioning. One day past due stood at 4.05% as against 4.45% at the end of last quarter. Gross Stage 3 stood at 1.13% and net Stage 3 stood at 0.87% as on 31st of December 2022. Gross Stage 3 of 1.13% includes 0.19% of up to 90 DPD assets which have been categorized as GNPA following RBI notification dated 12th of November 2021. Additionally, the company has stopped recognizing assets held for sale under SARFAESI and marked them as NPA after March 2022, amounting to INR 280 million, which has an impact of 0.26% on above-stated gross Stage 3 assets.
During FY22, resolution plan was implemented for certain borrower accounts as per RBI's Resolution Framework 2.0 dated May 5, 2021. Some such accounts with an outstanding amount of INR 931.1 million as on December 31, 2022 have been classified as Stage 2 and provided for as per regulatory guidelines. Out of INR 931.1 million, INR 701.9 million is into 0-30 DPD bucket. Total ECL provisioning, including that for COVID-19 impact as well as Resolution Framework 2.0 stood at.
At INR 675.3 million as on December 31, 2022. With this, I open the floor for question and answer session.
Thank you. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Ankit Kanodia from SmartSync Services. Please go ahead.
Thank you for taking my question, and congratulations for good set of number. Sushil ji, just one question. We started a new product post the pandemic, which is related to the secured small business loan. If you can give some color as to how that product is shaping up, and what is the competitive scenario and where do we see this product shaping up in the next two, three years? Thank you.
Yeah. Good afternoon, Ankit. Ankit, as our non-home loan portfolio is around 28%-30%, 2, 3 years back, most of this portfolio was left. 3 years back, we started converting this into MSME. Now 60% of that non-home loan portfolio is MSME portfolio. MSME portfolio is, how it is different from LAP is tenure. MSME portfolio is 7 year. LAP can be up to 15 years. MSME portfolio can be used by business guy only. LAP can be used by personal users also. MSME loan is basically a priority sector loan, we get funding accordingly. That has picked up very well, we want to continue the same trajectory, 70-30 home loan and non-home loan, most of which we want to do as a MSME loan.
Sir, what would be the competitive scenario here and, how are we placed?
Ankit, as of now, the areas where we work tier two to tier five, those is a competition, but it is in small pockets. We because of our distribution and reach up to 2,500 towns, we are very well placed to cater this kind of segment. Little competition, because of distribution, we are able to take many customers which we want to build in our book.
Is it fair to assume, sir, that in the next two, three years, this category of loan will probably grow faster than the home loan portfolio because we are under-penetrated here and we already have the distribution advantage?
No. We want to maintain 70-30, say, home loan and non-home loan portfolio. In the same ratio it will grow as an overall company.
Any, any reason for the 70-30 ratio?
Normally, we want to be an proper housing finance company, that's where we want to choose more focus on the housing loan business rather than non-housing loan business.
Okay. Thank you. Thank you so much, sir, and all the best.
Thank you. Our next question comes from the line of Uday Pai from Investec. Please go ahead.
Sir, what will be the BT rate for the quarter?
Sorry?
BT rate.
BT rate is around 0.5%. Earlier, first quarter around 0.7%. Second quarter it came to 0.6%. Now it is 0.5% per month.
0.5 per month?
Yeah.
Thank you, sir. Thank you.
Thank you. Our next question comes from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yes. Good afternoon, everyone. Am I audible?
Yes, Abhijit.
Yeah. Yeah. Thank you for taking my question and congratulations to the entire management team for starting a new chapter through Aavas 3.0. Beyond numbers, there are a couple of themes that you've reported and that you've also put out slides on that I wanted to understand. Firstly, on the split of the role and responsibilities between the MD and CEO, while we understand it is a very well-intentioned and a welcome step, 2 things I kind of wanted to understand. Firstly, what was the contribution of Mr. Sachindra to Aavas over the last 3 years and what are the different functions that he's been involved with over the last 3 years?
What, I mean, now that Sushil ji, you will be moving into the MD role, exclusively MD role, what your growth vectors and strategic initiatives would now be being mapping upon? Lastly, is there something in the works even for your subsidiary Aavas Finserv , where we gathered during some of our field trips that you've already started doing some pilots in personal loans?
No. Abhijit, we applied to RBI for our NBFC license, and that's where Sachindra joined us 3 year back to build MSME business. We started building MSME business in the parent company till the time we get the license. Eventually, last quarter, RBI denied us for the NBFC license and so Sachindra is shifted to Aavas Financiers team as a CEO. Sachin has contributed building MSME business in the parent company, and he also used to take care of affordable housing and some of the direct government-led businesses in the company.
Got it. Okay, what are these newer growth vectors and strategic initiatives that we would like to now embark upon, given that, I mean, now there is a separation between the MD and the CEO role?
Yeah. Abhijit, the way we see always, the way I described that we plan for 10 years, we build for 3 year ahead, we execute for current year. In the process of thinking for long term, we take lot many initiatives, like right now we are doing the digital transformation of the company. This will enable us to scale for maybe 100x from the current level. Then, certain new product lines, new target segments, new markets identification, and new opportunity identification on which we need to work in-depth as a pilot before putting into a system which will now then scale up.
I think all those things are new initiatives and long-term thinking and vision perspective is important since by this year-end, we will be approximately around 15,000 goals, which was the first, you can say, benchmark for affordable housing that whether you can break that bridge or not. Then after that, even if we grow with 25% growth, it's almost 3, twice every 3 year or 3 and a half years. At that scale, you will need different kind of infrastructure, different kind of thinking, different kind of initiatives. For that, we have divided now our responsibilities, that Sachin will take care of day-to-day activities of business running, and I will help more from the long-term perspective company.
Okay, sir. One thing is, which is heartening is I think until last quarter, we used to talk about a 20-25% growth. Now we are at least talking about a 25% kind of a growth after we reach that INR 50,000 crore kind of a milestone. Last question from my side. I mean, given this transition to Aavas 3.0 and the related IT transformation which will enable this transition to 3.0, just wanted to understand if you can explain in some detail what are the things that you have planned under this IT transformation? What is the total investment outlay on this IT transformation, and by when do you expect this to get completed?
Because what we also heard that you plan to launch your Salesforce platform within the next few days and then gradually phase out your current Omni platform. Sir, also related, I mean, what benefits are you maybe kind of expecting to accrue from this IT transformation in your origination and underwriting? Will it significantly bring down your TAC? Like I said, I mean, like we have all along talked about that this steady and calibrated AUM growth of 20-25%, can this IT transformation help you leapfrog into a higher orbit of AUM growth?
Abhijit, overall as a digital transformation project for Aavas, this has 5, 6 component. Overall capital outlay is around INR 120-150 crore. Out of this, 3 key projects right now are in working stage. One is Salesforce, which is transformation of all the loan origination processes. If you see last 3 years, we are stagnant 10-12 days of TAC in our loan processing. I think with this new initiative, we will be able to bring it down by 30%-40% in the first phase, and maybe second phase it can be further better out. This transformation will help us changing the customer experience because going forward, once we will be big, our competition will be or customer will see, compare us with the bank, large Fintechs and best-in-class companies.
With this software, I think we will be able to cater that fine. Other synergies are like your productivity enhancement. Today, if we have 400 underwriters and processing 16,000 files, can 400 underwriters process the 24,000 files? Today, one file is around 150 pages, and it costs around INR 1,000. With this system, 70% of file will be digital. That INR 1,000 cost may come down to INR 300-400. That itself will save INR 10-12 crore a year for us. I think there are lots of things which we want to achieve either on productivity, process, customer experience, cost reduction and scalability. I think all those purposes this will serve. Second phase is LMS.
Now we are moving to banking system, which is FLEXCUBE, which is, like HDFC Bank, AU Bank, all these larger bank platforms are using this. This will help us scaling us our branch network.
Right.
I think once we will implement this is scheduled to be implemented first quarter of next year. This will help us in scaling up with better control. In a bank, if you will go INR 1 crore cash check can be transferred by a teller. In NBFC, if you want to transfer INR 1 crore, I think it's require MD's approval. I think this will give us flexibility, and we are hoping if regulator will give us some more product line approval, like card against property, overdraft against property or some of the banking products, we are ready for that from the very first day in our journey. Third one is ERP system. We are moving to best in class Oracle Fusion, which in India, like Kotak Bank is implementing or in...
I was in Singapore. Even HSBC is implementing the same version at the current point. This will help us getting better cuts on profitability product-wise, branch-wise, people-wise, different segment-wise. It will also help us bringing India's accounting fully automated basis. Lots of help on that side. The fourth version is analytics, where we are creating a architecture which can sustain 100x growth on data from the current level with a seamless integration and speedy decision-making, maybe not days, hours, maybe in some seconds, in some kind of profiles. These are a little bit update, but maybe if you want more detail, you need to come to Jaipur or you need to write email to GG for further update on that side.
Sure, sir. I think that was a very, very detailed answer, and we'll definitely plan on it to Jaipur. Again, congratulations to the entire management team present on the call.
Thank you. Our next question comes from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Good afternoon, sir. Thank you for this opportunity. Just two or three questions. One is that, what would be the individual yield on the non-home loan portfolio? What is the time taken to break even that loan? What is the yield on home loan, and what is the time taken to break even this particular loan, sir? What is the number of loans that we have disbursed in each of the category in third quarter, sir? Thanks.
NHL yields are around 14%, and home loan yields are around 12%. We have breakeven from the very first year. It's not that, we fund and profitability start after 2, 3 years because we are not in a DMA business, DSA business. We get upfront 2%- 2.5% fee on our loan book. Our loans are positive from the first year.
Understood, sir. The number of loans in each category that we have done in this quarter, disbursement, level.
What's the question again? Excuse me.
No. Our average ticket size around 11 and INR 1,200 crore disbursement has happened out of it, 70% INR 8,400 crore. Around 9,000 cases in home loan category and around 3,000 cases in non-home loan category.
Understood, sir. Thank you so much. I'll come back in the queue.
Thank you. Our next question comes from the line of Sreepal Doshi from Equirus Securities. Please go ahead.
Hello, sir. Good afternoon, thank you for giving me the opportunity. I wanted to understand what are the rate hikes or the pricing hikes that we have taken in the last 6 months for HL and non-HL both?
Sreepal, good afternoon. As we have mentioned, we have increased our PLR by 125 basis point and further PLR increase from 5th of January around 35 basis point.
Both the products?
On both the products. It's, yeah, on all the variable rate category products.
The 125 already done and 25 is likely to happen in January, in February?
In February, 35 basis point.
75? Okay. Okay.
35.
35. Oh, sorry.
Yeah.
Does this get implemented within a month's time? Is that a fair understanding?
Yeah.
Got it, sir. How do you see the margin moving from current levels for us?
Sreepal, right now it's 5.75, and with 35 basis point increase, again, this will be 20 basis point. Last quarter, business normally brings a little bit lower, but I think we are hopeful that margins will be stable at least for next quarter.
Okay. Sir, for FY 2024, if you can give some guidance.
We need to see interest rate movement, which side it is going, but hopefully, it will be stable or if it is reduced by 25 to 30 basis points, we will bring that kind of efficiency into our OpEx.
Got it, sir. Got it. Sir, the branch expansion plan stays as it is, right? Every year, 35.
Yeah. In the current year till now I think we have opened 13.
Seven branches.
Seven. Another 23 will be open in this quarter.
Okay, sir. Thank you so much, and good luck for the next quarter, sir.
Thank you. Our next question comes from the line of Shweta Daptardar from Elara Capital. Please go ahead.
Thank you, sir, for the opportunity. Two questions from my side. Having mentioned the fact that you will be taking on strategic steps on technological transition, so how do we perceive now OpEx to asset ratio, which has sort of remained elevated for a while now, currently around 3.56%?
Shweta, in our past commentary also, we have always mentioned that because of technology transformation and capacity building up, these OPEX are elevated. From next year, third quarter onwards, we will see 25-30 basis point decrease year-on-year for next 3-4 years in that trajectory.
Sure. Noted, sir. Secondly, when do you see ratings upgrade happening for us? Are we in talks with any of the rating agencies? Any timelines, and what is the overall broader sense there?
Shweta, we have done this journey from triple B minus to double A stable, and last 2 years already 3 rating were updates. It's a journey. We will continue doing our good work and it's up to rating agencies when they will consider us for the next rating upgrade.
Sure, sir. Thank you. If I may squeeze in 1 last question. I remember you mentioning last quarter that 65% of your disbursements happen, largely, you know, in the, in the first half, right? Sorry, they happen in the second half. If I go by the current disbursement number around 200 odd crores, then, and if I extrapolate with this logic, then we are exceeding almost 25% loan CAGR for this particular year and maybe even in future. What is your growth guidance now?
Shweta, we always say that we will grow 20-25%. We always keep 25% capacity enhancement in our system. If adverse thing, market competition and all those things will not be there, we might do better than these numbers.
Sure, sir. Thank you so much and best luck.
Thank you. Our next question comes from the line of Vikas Kasturi from Focus Capital. Please go ahead.
Hello, sir. First of all, thank you very much as the CEO over the past, 7 years. Congratulations, sir, on the elevation too. Sir, I had a few questions.
Yeah, please go ahead.
First one is, so do we plan to stay in the same segment, below INR 10 lakh, or in the future as we, if we want to grow faster, would we be looking at a slightly higher ticket size specialty?
Vikas, as a Aavas, we fund from INR 3 lakh to INR 1 crore rupees ticket size. Our average ticket size comes in home loan around INR 11 lakhs and non-home loan around INR 9 lakhs. We foresee that this average ticket size can increase by inflation rate, so we are planning that way.
Okay. Thank you, sir. That's all.
Thank you. Our next question comes from the line of Mayank Agarwal from Incred Capital. Please go ahead.
Hi. Good afternoon. Thanks for the opportunity, and congratulations on the good set of number, and best of luck to the team with the new roles. My question is basically on the branch expansion. What are the states which we'll be focusing on for the newer branches in this year and next year going ahead?
Mayank, right now we are working in 13 states. Whenever we open new branches, it opens in the combination of old state versus new state. This year, like in Karnataka, we are opening around 8-10 branches, and Odisha 2. Rest, our branches are in the existing states where we are working.
Okay. Okay. Secondly, it's my question on our strategy and growth outlook with the additional management bandwidth which now we have. What kind of change in growth outlook on our products or product mix, geographical mix can we look in next three to five years as of now?
We'll continue our strategy as usual. We will open 30-35 branches every year. Every 5 years we open 4 new states. In last, this is third round, we have opened Karnataka and Odisha, and we will add 2 more state in next 3-5 years in our journey on the distribution side.
Okay. Okay. Okay. My last question is on the new branches we are opening in newer states, what is the break-even period for them? We know that it take us around 30 months for the disbursement to pick up in the newer branches. By when can these branches reach at the break-even level?
No. We have 90% of our branches break-evens in first 12 months. I will again elaborate our unit economics. Say, whenever we want to open a branch, say if it's a population of INR 1 lakh-Means divided by four, 25,000 family. We want to penetrate there for 5%, so it's around 10-12 cases per month, so INR 1 crore potential. We will get 2.5% fee, and we ensure that those in this branch expenses should not be more than INR 2-3 lakh per month. Once the branch reach 75%-80% of its potential business, we are ROE break-even. As per data, more than 12 months branches entire country, we have 94% branches which are ROE accredited.
Okay. Okay. Thank you. Thank you. My last request is basically I was requesting for a Jaipur visit for all the analysts, for, you know, we can see the tech. What kind of technological changes you have made, the coalition extra on the Aavas 3.0 .
Yeah.
We can feel for that.
We are arranging that after Q4 results. Jaipur or Mumbai, that we will see.
Okay. Okay. Thank you. Thank you. Best luck to the team. That's all from my side. Thanks.
Thank you. Ladies and gentlemen, if you wish to ask a question, please press star one. Our next question comes from the line of Sreepal Doshi from Equirus Securities. Please go ahead.
Hello, sir. Thank you for giving me the opportunity once again. just want to understand Aavas. what's the thought process for Aavas Finserv? can we deploy the strategy that we have made for MSME secured product and can we shift that business to Aavas? Do we have a plan to shift that business to Aavas Finserv? at the Aavas Financiers level we'll have to maintain the HFC norms, right? is there a back of the mind thought process?
Sreepal, we applied for the NBFC license, but it has got denied by the RBI, so now we are focusing only on Aavas Financiers business.
Okay. Okay, sir. Thank you.
Thank you. Our next question comes from the line of V. Srinath from Bellwether Capital. Please go ahead.
Hi sir. Could you spend some time and help us understand the new geographies, the last three geographies? What has been the experience for us from basically disbursement, you know, to how DPDs are playing out and so on? Second is largely we have been in, say, geographies with similar language base, and as we go into South India or deep into East India, we are moving linguistically to slightly more different languages and, you know, what kind of management bandwidth are we building? If you could broadly address scalability of your business across non-Hindi geographies.
Yeah. In last two years, we have added Odisha and Karnataka. This is part of our natural contiguous distribution approach. Karnataka is adjacent to Maharashtra and we started Karnataka from which area which is adjacent to Maharashtra and from Belgaum, then Hubli-Dharwad, then Bellary, Gadag. We have this state head which was there with us five years in Maharashtra, but belongs to this market, so he has shifted there. In Karnataka 1, we started with Bangalore. We have four branches in Mysuru, Tumakuru, and in between areas we have six, seven branches. Today we have around 11 branches, and we are able to do around 15 crore INR kind of business per month. Breakeven is much faster in that market.
Why we started Karnataka, another analogy is Rajasthan state has 33 districts, 247 tehsils, six and a half crore population, and Karnataka also has 30 districts, 222 tehsils, six and a half crore population, but their entire land record is this size. We thought we will replicate Rajasthan model there. Rajasthan we have 94 branches, so we intend to open 80, 90 branches in Karnataka also in next 8-9 years. Every year, we will increase 10-12 branches there. Odisha, again, it's a contiguous distribution model. We are in Chhattisgarh, and we have branches in Raipur and reached till the border of Mahasamund, which is Chhattisgarh border. From Mahasamund to Odisha, capital Bhubaneswar, there's a straight highway, so we want to connect that through Sambalpur and other locations.
In the first phase we have opened, Bhubaneswar, Cuttack, Jajpur, Gopalpur, and in the next stage we are opening up Sambalpur and other things. All this state again, we are able to break even in the first year itself. Till now, there's no delinquency. As we have told our philosophy, first 30 months we go slow, but we ensure that no account is 30 plus. Till now we are on the acquisition side, right strategy, no delinquency on these two new states.
How about Uttar Pradesh, sir? Given that, you know, the state has had checkered record even in microfinance. You've seen couple of blow-ups in the past and in kind of non-salaried segment. What has been the credit experience, especially in Uttar Pradesh in the last 1 year, from, say, DPD zero perspective, is it in line with the 4% that we are doing at the portfolio level, or will it be slightly higher? Any broad perspective?
Uttar Pradesh, we started, I think now 4.5 years. We have had 5-year journey there. Their 1+ numbers are in line with our philosophy, less than 5%. Gross NPA is 0.54%. We are doing well. We have now more than 20 branches there and doing calibrated business in that market. We see a great opportunity there also in the long term, in 10 years horizon. UP can be INR 100 crore per month business market for us, but we will go slowly in calibrated manner in that market.
Got it, sir. Last question from my side is, this is more, you know, when I went on a vacation to Northeast, I witnessed that there is a significant amount of single dwelling homes and a lot of construction activity of private homes in those and with a visibly younger demography. You know, is that a market that, you know, generally also you kind of see a much more peaceful environment out there. Is that a market that would interest you? Do you think that market has the necessary population depth for a operator like you to operate?
We are a long-term focused company, and we have completed our 13 year of journey, and we are in 13 state. In next 15-20 years, we want to cover entire India. We will go slowly, but we will come complete the entire India.
Got it. Okay, sir. Thanks a lot. I'll get back to the question queue.
Thank you. Our next question comes from the line of Akshay Jain from Jain Capital. Please go ahead.
Hi. I have a couple of questions. Firstly, can you please share some outlook on the domestic as well as export market?
Akshay, we are getting to domestic market only in the housing finance segment. We don't have perspective about the overseas market and the property finance market. Indian property finance market, if you will see different kind of reports from CARE, ICRA and different industry body, today industry is around INR 27 lakh crore in India and it's supposed to grow 8%-10% year-over-year. In Indian mortgage GDP ratio is around 9%-10%, which we foresee that next 5 years it can reach up to 11%-12%.
Ladies and gentlemen, the line of Akshay Jain has been disconnected. We'll move on to the next question, which is from the line of V. Srinath from Bellwether Capital. Please go ahead.
Sir, going back to the MSME business, could you help us understand the customer profile in this? Especially given the scaling up, what are the broad customer profiles and how would that, you know, be different from the LAP business? While in the LAP business, yeah, the term, the length of the term is different, so would like to understand which are the occupancies you're... Is it largely B2B customers, B2C consumer or what kind of broad customer profiles? What kind of incomes are these people having, and so on and so forth? If you could help us explain that'll be great.
Yeah. As you know, we as Aavas has more customer focus on business customers. Salaried customer is 39% and 62% is self-employed. In that self-employed category, we cater to around 40 profiles from Kirana merchants, to medical shops, to hardware, to halwai, to cargo. Everything which you will see on the street, but mostly it's B2C business, direct to customer businesses. These customer have income level from INR 20,000 per month to INR 1 lakh per month kind of income segment.
Got it. I'm not referring to the housing loan business, sir. More for the MSME side of the business.
Yeah, yeah. The MSME customer has the same profile.
Okay. So here, you know, again, so it's a loan against property, and then you assess the cash flow for the business. Are you funding working capital for the business or are you know, helping them with some sort of CapEx and, you know.
No, it's a normally working capital and term loan. We fund for different kind of business requirement, from stock to machinery to erection of yard, et cetera, machine. It can be any business requirement from working capital stocks to CapEx. We fund against the see, normally 99% securities are self-occupied residential property in that segment.
Got it. Got it. So this geographically, what kind of growth can you have? Is this model? Because it may be a slightly more complex model than the home finance model. Is this also replicatable across geographies? Where are we? Which geographies are we currently present in? You know, how do you see that moving?
Now we have created a specialized vertical that is working in around 30 branches. We can, and every year we will expand this vertical to 30 more branches. We are total year-end, we will have 350 branches. Every year we will expand this business to 30, 34 more new branches as a specialized product.
Got it. Thank you. I'll get back with the question to you.
Thank you. Ladies and gentlemen, as there are no further questions, I would now like to hand the conference over to Mr. Sushil Kumar Agarwal, Managing Director, for closing comments.
Good evening, everybody. I am happy to inform you that in collaboration with International Finance Corporation, Aavas has successfully achieved EDGE certificate for first lot of affordable green self-built home during this quarter. This is the first-ever pilot project by IFC and EDGE in collaboration with Aavas for self-built houses, which has been certified as a green homes, not just in India, but at a global level. This will further increase as we move along in this journey. We hope next five years, 15%-20% of houses which we are funding will be green certified. Thank you all for attending the call. We would also like to let you know that we are planning to host longer investor day next quarter to give all of you a chance to spend more time with the broader team.
I wish you a very happy New Year and hope everybody to keep safety and healthy as a priority. For any further information, we request you to get in touch with Ghanshyam Gupta, our investor relations team member and SDA or IR advisor. They would be happy to help you. Thank you.
Thank you, sir. On behalf of Aavas Financiers Limited, we conclude this conference. Thank you for joining us. You may now disconnect your lines.