Ladies and gentlemen, good day and welcome to Aavas Financiers Limited Q2 FY22 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions, and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks 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, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Sushil Agarwal, MD and CEO. Thank you, and over to you, sir.
Thank you. Thank you for participating on the earnings call to discuss the performance of our company for Q4 and FY 2022. With me, I have Mr. Ghanshyam Rawat, CFO, Himanshu Agrawal, Investor Relations team, and other senior member of the management team, and SGA, our IR advisor. The results and the presentations are available on the stock exchange as well as our company website, and I hope everyone has had a chance to look at it. For Q4 FY 2022, we disbursed INR 27.2 crore, registering a 27% year-on-year growth, which is the highest quarterly disbursement in our history. Excluding the impact on business due to lockdowns imposed during Q1, FY 2022, due to second wave of COVID-19, our average monthly disbursement was close to INR 350 crore during the period from July 2021 to March 2022.
Having said that, we continue to adopt a cautious approach on growth and give a higher thrust to maintaining pristine asset quality and sustainable operating matrices. During the year, the average portfolio yield reduced by 51 basis points from 13.16% as of March 2021 to 12.65% as of March 2022. The average borrowing cost also reduced by 52 basis points from 7.4% as of March 2021 to 6.88% as of March 2022. As a result, the spread as of March 2022 was maintained at 5.75%, roughly same level as that of March 2021.
Further, with our robust collection efforts, we have improved 1+ DPD from 6.45% in December 2021 to 4.47% in March 2022. Similarly, our exposure to 90+ DPD assets has came down from 0.83% in December 2021 to 0.68% in March 2022. We have also categorized 0.31% of up to 90 DPD assets as GNPA following RBI's notification dated 12th November 2021 to harmonize IRACP norms across all lending institutions. As a result, total gross stage three stood at 0.99% in March 2022. We will continue our strategy of controlling the early delinquencies and strive to maintain 1+ DPD below 5%.
I would now hand over the line to Ghanshyam Ji, CFO, to discuss various business parameters in detail.
Thank you, Sushilji. Good afternoon, everyone, and a warm welcome to our earnings call. During the year, company borrowed an incremental borrowing amounting to INR 43,884 million at 6.04%. As of March 2022, our average cost of borrowing stood at 6.88% on an outstanding amount of INR 102,607 million. Our long-term credit rating continued to maintain at AA- with a positive outlook from both rating agencies, ICRA and CARE. Despite the highest short-term rating of A1+, we continue to maintain zero exposure to commercial paper as a prudent borrowing practice. IGAAP to Ind AS reconciliation has been explained in detail for profit after tax and net worth on slide number 32 and 34 of our presentation. Key parameters.
As on 31 March 2022, total number of live accounts stood at 150,837. Year-on-year growth, 20%. Total number of branches was 314. 34 new branches added in last 12 months. Employee count is 5,222, 20% growth year-on-year. Assets under management grew by 20% year-on-year to INR 113,502 million as on 31 March 2022. Product-wise breakup, home loans 72.1%, other mortgage loans 27.9%. Occupation-wise breakup, salaried 40%, self-employed 60%. During the year, disbursement has increased by 27% year-on-year.
Disbursement increased by 27% year-on-year to INR 12,872 million for quarter four and FY 2022, and by 36% year-on-year to INR 36,002 million for the FY 2022 for full year. As on March 31, 2022, average borrowing cost at 6.88% against the average portfolio yield of 12.65%, resulting in a spread of 5.77%. Borrowing side. Access to diversified and cost-effective long-term financing. Very strong relationship with the development financing institutions. Overall borrowing mix as on March 31, 2022, is 37.9% from term loans, 22.9% from assignments and securitizations, 21.5% from National Housing Bank, and 17.7% from debt capital markets. Asset quality and provisioning.
One-day past due stood at 4.47%. Gross stage three stood at 0.99%. Net stage three stood at 0.77% as on March 31, 2022. Gross stage three of 0.99% include 0.31% up to 90 days DPD assets which has been class-categorized as GNPA following RBI notification dated November 12, 2021. During the financial year, resolution plan was implemented for certain borrower's account as per the RBI Resolution Framework 2.0 dated May 5, 2021. Some of such accounts with an outstanding amount of INR 1,361 million as on March 31, 2022 have been classified in stage two and provided for as per the regulatory guideline.
Total ECL provision include that of COVID-19 impact also as well as Resolution Framework 2.0 stood at INR 643.2 million as on March 31, 2022. Liquidity of INR 32,050 million as on March 31, 2022. Cash and cash equivalent of INR 15,690 million. Unavailed cash credit limit from banks, INR 1,150 million. Documented unavailed sanction from National Housing Bank, INR 4,060 million. Documented unavailed sanction from other banks, INR 11,150 million. Profitability. During the year, during FY 2021, there was a tax benefit on account of share-based payment of INR 126.8 million adjusted in profit and loss account.
Whereas for FY 2022, such tax benefit of INR 214.1 million was directly transferred to retained earnings equity. Consequently, on a like-to-like comparison, PAT for FY 2022 increased by 29% year-on-year to INR 3,575 million. ROA 3.6%, ROE 13.7% for FY 2022. As on March 31, 2022, we are well capitalized with a net worth of INR 28,086 million, and our book value per share stood at INR 355.8. With this, I open the floor for Q&A session. Thank you.
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 touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to 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 Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yes. Good afternoon, Sushilji and Shyamji. Hope both of you are doing well. Thank you for taking my questions. Firstly, congratulations to you and your team for demonstrating such a strong improvement in asset quality. I had three questions. Let me first try to solicit your views on EM growth. Sir, while everyone keeps saying that the mortgage penetration in India is low and that there is an unlimited opportunity in the affordable housing finance segment, in your view, how big is the opportunity today in the low-ticket housing finance space? Sir, I ask this because we hear very divergent views from players, and some of them even acknowledge that it is easier to build an AUM of, let's say, INR 10,000 crore, but beyond that, the climb becomes very, very steep.
Would like to hear what your views are.
Abhijit, good afternoon. Some statistics as per our knowledge and the data we collected. India has 140 crore population. Around 60 top cities have 35 crore population and around 8 crore families. Around 1.6 crore housing loan exists in that market, so around 20% penetration in that market. Rest of the India, 105 crore population, around 28 crore families and around 65-70 lakh home loans like this, so around 3% or less penetration. I think the market in which we operate, even after 75 years of independence, the penetration is somewhere around 2%-8% in different towns.
We think another 20-25 years we can sustainably grow in that market. Market is huge, but that market is, you can say, difficult in terms of so you need to have patience, you need to learn, you need to grow slowly, and you can create, n number of times a market opportunity in that market.
Thank you. Sir, the second question that I had was on the higher prepayments that we have seen during this financial year. Can you give us some color on the competitive intensity in which segment or geography and to which lenders are these customers taking balance transfers to? And what is the alternative loan yields which are being offered by the competition that you deem it wise not to retain such customers? And lastly, can these BT outs further intensify as the interest rates now rise?
Abhijit, normally the prepayment rate, how it works is around 6%-7% comes into principal repayment with the installments. Around 5%-6% comes as a part payment, prepayment from the customers from their own funds, and around 6%-7% comes from a BT out portfolio. Traditionally, if you will see, the first two components, there is not much of a thing. It's a normal phenomenon for a large HFC also, for a small HFC also. On BT out, yes, pre-COVID level we were able to contain it. Our analytics algorithm, we need to improve. We are working on that. Another 2-3% saving we can do with improved algorithm in the next 12-18 months time. That's the kind of
Not much of BT out impact. It's 2%-3% higher from the normal levels, which anyway in the very low interest rate regime you can assume. We plan our distribution business numbers growth keeping that in mind and the guidance which we have given that we can grow 20%-22%, we are still matching. I don't think so. Yes, competitive landscape will always remain there. When a kid is below the table height, nobody recognizes it. When a kid grows above the table height, everybody starts recognizing and the competitive intensity will be there. With the kind of distribution technology and niche created in last 12 years of journey, we will continue to sustain our growth levels, which we 20%-25% growth.
Thank you, sir. This is useful. Sir, the last question that I had was on the asset quality. If you'll excuse me, perhaps I'm asking you for your secret sauce on an earnings call, but I wanted to understand what aided the sharp improvement in your stage three A, which is your less than 90 DPD book. Out of the total reduction that we have seen in stage three, on a QOQ basis, 85% of the reductions have come from stage three A. What really made me curious here is that you could not have initiated SARFAESI on this loan pool, and these customers who had three installments overdue sometime in November and December when they slipped into NPA mean suddenly they have so much money that they are able to pay three EMIs and get upgraded to standard.
Were these resolutions more in the nature of settlements and closures rather than upgrades to stage one?
No. Abhijit, as a process, any accounts which get marked NPA in the system, the SARFAESI process got initiated. After twelfth November circular, immediately next day, whichever accounts were under new regime counted as ninety-plus or stage three, we initiated SARFAESI. You know in SARFAESI there are eight stages, but within 60 days you will have first symbolic possession and auction. Customers who were already living in that house, if the price is right, property is there, customer is there, then either customer takes the initiative and forecloses or he prepays the loan. Even these customers were almost those customers which were because of some event in life, they missed 1 or 2 installments and they keep on paying 1 installment every month.
After SARFAESI proceedings, either they have closed or they have prepaid the entire outstanding. There is no secret sauce. It's a process driven and since the underwriting and process is good and in each case customer or property is existing and so recovery anyway needs to happen.
This is useful. Thank you, Sushil Ji, for patiently answering all my questions, and I wish your team and yourself the very best. Thank you.
From the line of Karthik Jalapa from Buena Vista Fund Management. Please go ahead.
Yeah. Thank you very much for the opportunity. Congrats on another good quarter, Sushil Ji and Ghanshyam-ji. I have three questions. The first one is, if we were to look at your other OpEx line this year, almost every quarter, that has been growing very strongly, almost 40%+. While I understand that the branch expansion has also resumed, it looks like there are few other expenses that are also growing fast. So on the other OpEx side, could you please help us understand what are these expense items that are growing, and how much of this is related to investments for which we will see the benefit, probably one or two years down the line?
Karthik, good afternoon.
Good afternoon.
On the OpEx question. Last year, OpEx has almost three components. One is 2021, because of COVID, there was salary reduction, less bonuses or no bonuses or incentives. In the current year, as you see, there was a large attrition across the industry. To sustain that, the salary increase, incentives, bonus, as it was normal as usual. When you compare from 2021 when because of COVID, no increments, no bonus, salary reduction, so this percentage looks high. Second, as you know, we are continuously investing in distribution. Every year, 30-35 branches that is also there. But this year we are also embarking on another transformation journey on digital side, where we are scaling up our digital and technology infra to cater to a $15 billion-$20 billion kind of size of assets.
In that journey, yes, last year also, the other OpEx and depreciation is included, and this year also will be a little bit high. We hopefully complete all this transformation journey next 12-15 months. This will help us becoming scalable infra to the size which I have told you. At the same time, it will help us in transforming the customer journey and the employee journey and experience, and also significant impact on reducing the TAT, operating cost, operating leverage. These three or two or three components are there because of which this year's numbers look like this. But we continue doing investment. The hike is because I've told you, 2021 there was no investment in technology, no investment in manpower more and reductions in salary, incentives and bonus.
When you compare from a low base to the normal base, it looks like that high.
Got it. Okay. My second question, Sushil Ji, is if I were to just look at your AUM growth of 20% and if I were to dissect it further, the AUM per branch has actually been growing at high single-digit, at least for the last 3 or 4 quarters. Now, given that some of your new branches in new geographies probably will grow faster on a lower base, this would mean that in some of your existing geographies, let's say if it is Rajasthan or Maharashtra or so, the AUM per branch growth is probably even like mid-single-digit CAGR. Why do you think this is the case?
Karthik, I think we need to see a cut of the numbers that way. The philosophy with which we work, I've told you also, that all the investors, when you open a branch, we take a 15-year view. Like some branch is in 4 lakh, 3 lakh or say 4 lakh population town. Divide by five, so around 80,000 families. In next 15 years we need 2.5% of the customers, so around 4,000 customers divided by 180, so almost 30, 40 cases per month. We go that way and then AUM growth journey will be in tandem. We don't say that this year we'll do 3%, next year we'll do 4%, next year we'll do 5%, next year we'll do 6%. Some efficiencies will always be met.
All of our branches, almost 90% of our branches are ROE positive in first 12 months. We open in second half. If we remove that part, and because of COVID also, last year also the branches we opened, the growth is little bit low. We expect them to do normal business functioning from this year end. In fact, last month, the normal business numbers were there. I think it will not be like 20% year-on-year growth from all the branches. It will always be some branch will be at 100% efficiency level, some 80%, some 65% level. Normally 3-year lag is there to achieve the 100% efficiency.
Got it. Very clear. My last question, Sushil Ji, is currently, what is the difference in the yield between our fixed versus floating rate product? Are we seeing any shift from customers towards more fixed rate loans, given that interest rates are starting to trend up?
I think normally we give all the options to customer while they apply. Between fixed and floating, there are difference of 275 basis point as a yield in the portfolio. We normally try to match our lending with the borrowing kind of pattern. The money which we can raise or we raise on fixed rate, we try to earn on that fixed rate lending. Money which we have borrowed on a floating rate basis, we try to lend. I think balance sheet is perfectly matched on per fixed and floating rate of interest-wise, but it's the customer's choice, and we are not seeing any significant difference. If you will see quarter-on-quarter basis, it's hardly 1% difference.
Got it. Okay. That's all from my side. Wish you and the team all the very best for FY 2023, Sushil Agarwal and Ghanshyam Ji. Thank you very much.
Thank you.
Thank you.
Thank you. The next question is from the line of Mayank from InCred. Please go ahead.
Hi. Hi. Am I audible?
Yeah.
Hi, sir. Basically my question is on the increasing prices of construction materials, and other inflation. What kind of challenges are you seeing on housing demand or on the under-construction property of our customers? What kind of change in cash flows are we seeing on the household due to inflation?
Nikhil?
Mayank.
Mayank, on the construction cost side, I will give you one data point. Even 10-15 years back, the construction cost for a normal home used to be around INR 1,000-INR 1,100 per sq ft. But during that time, construction material cost was 35%-40% and labor cost used to come 60%. Now, over a period of time, the material cost has increased from 35%-40%- 60%, but there is a significant reduction in labor cost because of machinery, new method development. If you will see basic construction rate on which government used to give the tender for constructing the home was around INR 1,000-INR 1,100, and even in March, government has issued the tender on 980-995 rupees cost.
Basically it's a difference of not much of that difference, but yes, maybe 5%-10% further beyond that. Over a period of time, customer affordability has also increased, even if you take inflation rate growth in income. During last two years because of COVID, some of the cash flow of the MSME was hampered. I think last nine months the recovery is better and faster. I am seeing at least in our portfolio when we discuss with all the customers and even we process some more than 40,000 customers last quarter, now cash flow levels are almost matching the pre-COVID level at the ground level, the kind of profile that you find to a customer.
What is the employee base for all in as on 31st March 2022?
Employee base. 5,222.
522.
Yeah. Thanks. That's all from me.
Thank you. The next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.
Yeah. Congratulations for good set of numbers. Firstly, the question is with respect to the OpEx again. When we look at it, maybe you highlighted that on maybe on a long-term average, we would want to be somewhere around 200-250 odd bps, and we are still at 3.9 odd percent. How should we see the overall trajectory? Maybe the investments still are gonna continue. Even for 20-25% kind of run rate on the AUM, should we really see the higher OpEx trajectory or maybe the base effect goes away and it should normalize and there should be some operating leverage that will play in now?
Kunal, good afternoon. During pre-COVID, if you see, in pre-COVID last three years, we were able to reduce our OpEx by 30 basis points year-on-year. Due to COVID in last two years, that operating leverage was not able to be visible. One is because of four and a half months in last two years went into COVID and there is a fixed cost component which is already there. But with the use of normal business trajectory, if you see last 9 months numbers, after COVID, significant recovery has happened and you see, network has grown 17% from year-on-year basis. That is there. But as Aavas, we continue to grow even in COVID phase one, phase two. Both years we opened 30-35 branches.
As I told you, now we are embarking on another digital transformation journey for the sites which I told you. That will be there. Yes, with that also, this year will be, we hope so. No, there will be no COVID impact. That will be there. 30-35 point cost efficiency we can expect.
30-35 basis points of cost efficiency. This fiscal itself?
Yeah.
Okay. This digital any estimate in terms of the cost? Because on the overall base that might not add significantly. Any cost in mind, maybe in terms of this entire digital journey?
It will be you know somewhere spread in 3-4 years' time. It's a normal technology OpEx or depreciation or put together maybe INR 24 a year. This will at least double for next 3-4 years.
Secondly, in terms of the overall rising interest rate environment. On the borrowing side, when we look at it, maybe you have in which is highlighted how much is the fixed and how much is the floating on asset as well as on the liability. As and when our borrowing cost goes up, what would be our endeavor? Would we tend to pass it on? How would that be? Across the board, given that home loans for many of the players are EBLR linked, the repricing on asset side is also gonna be early.
What would be our stance and maybe we would tend to pass on the benefit to the customers or still retain the spreads?
Kunal, we discussed these matters in ALCO committee and at the board level, and there is a proper governance framework where we assess our prime lending rates. It's a combination of cost of borrowing, OpEx, risk-based pricing, et c. Accordingly, ALCO and board advises for this rate. As you know, we have perfectly matched balance sheet both on fixed and floating side. If any quarter it will see impact that our floating rate of interest has increased, we will pass it on to customer base, as per ALCO and board guidance. Even in fixed side, though we have fixed rate of borrowing for longer period, but our fixed rate of lending is three-year reset allows. There also, that kind of risk is not there on the balance sheet.
We will assess the situation based on the impact, real impact on our borrowing costs. Since we have huge liquidity at this point of time, as mentioned in the sheet, around INR 3,200 crore, out of which INR 1,800 crore are fixed deposits. Immediately, I think, there will be no pressure, but we will assess situation every month and with ALCOs and board guidance, we will take the decision.
Sure. With respect to the vintage of branches, in fact, when we look at it, say in FY18, FY19, the number of branches that would have got added. Now, maybe we would have not seen that kind of a productivity scale up during COVID, but generally in three, four years of the vintage we see the significant scale up. Still maybe, if I were to look at it in terms of the vintage, in fact over the next two years, the productivity improvement can itself bring about a significant growth. Okay, looking at the additions which have been there, two years prior to or maybe a couple of years prior to COVID. Then maybe what is still leading to this 20-25% growth?
Maybe overall we should see the productivity not getting back to those levels immediately at the branch level.
Kunal, there are two points. If you will see, disbursement is growing 36% year-over-year. Even last year, 33%. Branches disbursement pattern is on right thing. Second, we have 5 categories of branches A, B, C, D, E and every branch is categorized on different potentials. When we open the branches, it's not always A category branches with the potential of INR 5 crore or more per month business. There are more C and D category branches with INR 1.5 crore or INR 75 lakh per month kind of businesses because those branches we get a good yield, lower ticket size cases and mostly new to customer, which is our kind forte and prime segment of the customers.
As per new branch productivity, I think, they are performing as per the defined structure for them, because disbursement growth is intact. Yes, AUM growth is outcome of different things, prepayment, disbursement and so once you scale up on that thing, say now around INR 11,500 crore and prior to this INR 9,500 crore. All these are factors which determine the AUM growth. Anyway, we always project that we will grow 20%-20% and we are performing on that level. Last year, 2% additional prepayment and 2% AUM growth because of one and a half month of COVID-19. Otherwise we were able to perform 20%-25% kind of growth.
If situation remains normal this year, I think we will be able to deliver that kind of growth.
Sure, sure. One last data point question. How much is the asset held for sale as of March? If you can just give the flow for this quarter in terms of the additions and the resolutions from that.
Net 23.
Net is 23 compared to that of 20 last in December.
Yeah, please.
Okay. Thanks and all the best. Yeah.
Thank you. The next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead.
Thank you, sir, for the opportunity and congratulations on great set of numbers. I apologize in advance. I will be harping on the same question of growth. I'm looking at your DuPont metrics. Look, I mean, we are at ROE of 13.7% and that has been actually constantly going up. If I just juxtapose to that your capital adequacy and leverage. We are at capital adequacy of around 50-51% odd, right? We are growing at 20%. I understand you mentioned the levers of growth in the previous remarks you made.
Keeping these three, four metrics in mind, don't you think, I mean, you know, Aavas has still huge potential to grow further and even beyond, like as to what you've been guiding, you know, as on today?
Good afternoon, Shweta. On ROE side, the number is 13.74 but if we see including the tax benefit, opening capital versus closing capital, there is a growth of 17%. In fact, Q4 ROE is around 17%. We said in our consistent guidance that ROEs will improve by 100-150 basis points on a year-on-year basis and I think we are on the right trajectory and we are delivering that number.
Sir, on the growth front, you know, in light of higher capital adequacy and leverage, if that is taken up higher, don't you think, you know, growth can exceed even your current guidance?
Shweta, we as a management are comfortable delivering 20%-20% growth year-on-year basis sustainability. Even if you see despite COVID year in 2021 also we were able to deliver 22% year-on-year growth where some of the peers were not able to deliver that. Yes, capital when you see adequacy-wise it looks higher, but we work in ecosystem where lenders are there, rating agencies are there and RBI norms are there and everybody sees capital in a different tangent. When you see from RBI perspective, they see capital adequacy but when you see from rating agency perspective, it is AUM divided by capital. Already INR 11,500 divided by around INR 2,500, around 5.5-6 times leverage. When we go to lender, they see it from debt to equity perspective.
When we were A rated, we were almost around 5-10x guidance and double A rated around 5.5-6x guidance on leverage term. We are following that and increasing the leverage and growth is a continuous journey. We started from triple A minus to double A minus and as we improve ratings in our journey, you can see more better capital efficiency in terms of all these three parameters.
Yes, sir. That's well put, sir. My second question and last question thereabout. You mentioned about BT out cases although they are on the lower side of 6-7%. Just because I am trying to understand the market and the areas of operations. Who are you losing out to these, you know, these BT out cases, where are they going to? Who are they going to? Secondly, just an extension to that, you know, so you have more than 30% odd new to credit customer, right? Because you are present in that niche and unique customer profile.
There might be higher possibility today in the age of digital era, you know, you might be having higher refinancing that might happen going forward because you would create history, the track record and given your high demonstration of asset quality, you know, there would be many who would want to sort of take over your portfolio. Just your thoughts on both of these points. Thank you.
Shweta, as at Aavas, we recognize that risk in our business model that risk will always exist that when we acquire a new-to-credit customer and when they demonstrate a better customer credit performance, they are prone to be de-accreted. But as an operation, over a period of last 11 years, we have developed our algorithm understandings analytics model, where we can work around this parameter and still able to retain customers or use risk-based pricing as per model approved by ALCO and board. I think in the past, and even COVID and even current year, those algorithms are working fine. We will try to improve it further better so that we can get 2%, 3% kind of benefit on a yearly basis.
That gives us the confidence, even in the difficult time, even in the more intensified competition, we will be able to sustain and retain our customer and sustain our AUM growth level going forward.
Understood, sir. Thank you so much.
Thank you. The next question is from the line of Nikhil Kothari from Mansa Capital. Please go ahead.
Hello.
Yeah, Nikhil.
Hello. Yeah, sure. Thank you so much for taking my question. In the presentation you have given that we have invested INR 15 crore in Aavas Finance and so. What's the business we are looking at in this subsidiary?
Nikhil, we have applied for a NBFC license in Aavas Finserv. As per regulatory requirement, the minimum capital is-
INR 10 crore.
In the subsidiary we intend to do secured MSME products and other customer lifestyle product.
Oh, okay. Understood, sir. Understood. That's it from my side. All the best.
Thank you. Before we take the next participant, reminder to everyone, anyone who wishes to ask a question may press star and one. The next question is from the line of Siddharth, an individual investor. Please go ahead.
Thank you for taking my question, and congratulations on great set of numbers. I just wanted to understand on the yield mix for the HL and LAP products specifically for both Q4 and FY 2022, because I was looking at the FY 2020, and you know, we have seen the yields drop by about 50 basis points year-on-year. Just wanted to understand, you know, on HL and LAP, what are the acquisition yields that we have had for both Q4 and FY 2022? Thank you.
I think, if you will see, our HL and non-HL portfolio was around 73%-27% as of last year, and currently it is 72.1% and 27.9%.
Okay.
90 basis point difference on year-on-year basis.
I just want to understand the acquisition yields of HL and LAP book.
You are asking, in non-housing, the component of HL or MSME LAP?
No, not the percentage, Ghanshyam Ji. I'm just, I just want to understand the yields at which we are acquiring the book. What is the home loan acquisition yield and the non-home loan acquisition yield?
Yeah. For non-housing-
Business loan.
For housing, 11.7% and for non-housing, 13.2%.
Okay. This is for Q4 or for the full year 2022?
Full year.
Full year 2022. Okay. Thank you. Just one more second, one more question on back of a question from Nikhil. So, you know, we are setting up the affluent segment. Is there a shift in strategy from affordable to mid or this is going to be a small portion of the entire portfolio?
Nikhil, this vertical is there from last four years.
Okay.
This vertical contributes around 30-35 crore INR up to 400-450 crore INR we do. This proportion is same almost last four years.
Okay. We are going to stick with the affordable segment and there's no clear shift in strategy to the mid or affluent.
This department is also from the last four years, so not this year.
Understood. Thank you. Thank you so much and all the best.
Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Hi, sir. Thanks for allowing a follow-up question. First one is more of a data question. Can you share the geographical split of our disbursements? I mean, what was the disbursement mix basis our geographical presence in FY 2022?
Abhijit, we will just almost similar to AM level, 2%-3% here and there state-wise.
Okay. The mix will be the same as what we have in the AUM level.
Yeah, yeah.
Sir, typically have you seen your I mean, the AUM mix are typically declining in Rajasthan over the last, let's say, one or two years?
In disbursement per month, yes. AUM, it will take time. I think it's 1% or 2% year-on-year difference.
Okay. Sir, the next question again, and my last question again, is more of a, I would say, recreating of some of the questions that, I mean, participants have asked already. Typically when I look at slide number 20 where you present the spreads that you make very clearly, I mean, I would say FY 2021, FY 2022, we and including the other, I mean, HFCs have enjoyed, I mean, high spreads given that, I mean, cost of borrowings came down and we were not maybe required to pass on the reduction in cost of borrowings to that extent to our customers.
Now going forward as your, I would say, cost ratios moderate at, as you had guided by about, let's say, 30-35 basis points, you've already addressed large part of the asset quality pain which was there, because of those first and second COVID waves. Is there now a case to maintain the high level of spreads or does it make more business sense to start moderating spreads? The focus will be more on maintaining the, let's say, the ROA.
Abhijit, as I always articulate in our journey, when we started 2011, 2012, we were able to maintain 5% spread. In pre-COVID level also we were able to maintain 5% plus minus spread. During COVID, this spread increased, but we have passed on 25 basis points to our customer base in April already. We told that, due to some uncertainties which everybody looks in COVID, we retained that spread in our balance sheet. As the situation will normalize and even in current situation of interest rate hike, according to ALCO and board decision, we will do the working on PLR and all those things.
In the long run, we want to maintain around 5% spread and accordingly cost structures and everything will be playing the role in the next journey.
Thank you so much, sir. That's all from my side.
Thank you. The next question is from the line of Vikas Kasturi from Focus Capital. Please go ahead.
Namaste Sushil Ji. Namaste Ghanshyam Ji. Congratulations on a fantastic financial year. Sir, my question is more to do with the business. Could you please let us know what are the new digital initiatives that you are taking and what is the expected benefit out of those? That's it, sir. Thank you.
Vikas, good afternoon, Vikas. As a company, at Aavas we continuously invest in our digital and technology, and this is a continuous effort from the management and board side. In that journey again, when we look ahead 10- to 12-year journey, we thought the size will be at different scale. We are investing into different to prepare ourselves for that large scale and size. Similarly, RBI regulations are converging more and more NBFC norms towards the banking kind of regulation. We are making ourselves ready for those kind of adherence and corporate governance. At the same time, looking at the current customer profile and the internet journey, we see there will be a digital transformation which is required.
In last 10 years journey, we came from 23 days debt to 10 days debt. Now in the next digital journey, we are trying to reduce it by significant margin, say 50%-75% further improvement from here what we are there. This will help us bringing more efficiencies in the operation will make Aavas ready for new scaled operation, going forward. At the same time, will enable us for kind of more control and govern environment which regulator wants and readiness of data for the future growth.
Okay. Thank you for that explanation, sir.
Thank you. Ladies and gentlemen, this was the last question for today. I now hand the conference over to Mr. Sushil Agarwal for closing comments.
Thank you all for attending the call. For any further information, we request you to get in touch with Himanshu in our investor relations team or SGA or our IR advisor, and they would be happy to help you. Thank you for patient listening and your continued support and interest in Aavas.
Thank you. On behalf of Aavas Financiers Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.