Ladies and gentlemen, good day and welcome to the Bajaj Finance Conference Call for 4Q FY 'twenty Business Highlights and COVID Assessment hosted by GM Financial Institution Securities Limited. As a reminder, all participant lines will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Karan Singh from GM Financial.
Thank you, and over to you, sir. Thank you. Good evening, everybody, and welcome to Bajaj Finance's call to discuss fourth quarter FY twenty three highlights and COVID nineteen assessment. To discuss, we have on the call mister Rajiv Jain, who's the managing director, mister Sandeep Jain, who's chief financial officer, and mister Deepak Bhagati, who's president, risk and collections. May I request mister Rajeev Jain to take us through the fourth the fourth quarter key highlights and his assessment of COVID nineteen subsequent to which we
can open the floor for q and a session.
Over to you, sir.
Thank you, Karan. Good evening to all of you.
I hope you and
your families are safe. For today's call, as Karan mentioned, I'll be assisted by Sandeep, our CFO and Deepa, our CRO. Over the next twenty minutes, I'll briefly cover our assessment of COVID-nineteen on VFL. Thereafter, we'll open for questions. So, please pardon me for my monologue for the next twenty minutes.
The speed and ferocity of COVID-nineteen is representative is to say the least. One third of world population, as you are all aware, at this point is in full or partial lockdown mode, unimaginable less than twenty years ago. No continuity plans could have ever forecasted such a scenario. Nations, corporations, individuals are all faced with difficult choices on an everyday basis and have to make decisions using limited information or rely on common sense in absence of any empirical evidence of such a crisis. At BFL, we are doing the same on an everyday basis.
My articulation over the next twenty minutes will be sequenced by global impact, followed by India impact, followed by RV actions, and finally, followed by impact on VFL and various scenario plans that we have created at this juncture. Let me just quickly start with global impact. As you're all aware, COVID-nineteen is a single biggest health care since Spanish Flu of 1990. We all experienced the large big crisis in 02/2008, but it was a financial and economic crisis. As you are aware, it had material impact on financial well-being of nations, corporations and individuals.
However, twelve years later, it's difficult to even remember fully that it happened. Since then, in general, economies, corporations and individuals have all experienced vast improvement in their overall well-being. That's my brief point. These are exceptionally tough times, but they too shall pass. In the last twenty days, given the sudden shock of COVID-nineteen, at this juncture, global economy in 2020 is expected to contract by 100 to 300 basis points.
And these are, mind you, these are the This has raised the growth forecast of two fifty basis points prior to COVID-nineteen. This is also, of course, subject to all major economies taking bold fiscal measures. Every past economic crisis has seen strong fiscal stimulus, which which ensured that there was a quick and strong economic recovery. Let's get closer on to India. And the first three quarters of the economy were really slow, various fiscal stimulus measures implemented by the government aided by a good monsoon were beginning to result in revival of demand outlook by each passing month.
Clearly, in our assessment and our experience, economy was on the mend. COVID-nineteen has brought the entire economy to a grinding halt for both demand and supply. As a best case scenario, a twenty one day lockdown along with a restart lag would result in one month of nation's GDP loss. For a $2,700,000,000,000 economy, that means $200,000,000,000 to $250,000,000,000 of GDP loss as a base case scenario. As we are all as we read about it, it is possible that the lockdown could even last longer.
The cascading impact of COVID-nineteen lockdown and the likely social distancing measures are expected to be material as well. If the measures are effective and there is no second round of large scale lockdowns, we should see some demand revival by July and hopefully full normalization by September, October. Our assessment is that FY 2021 will be more like a ten to ten point five months fiscal as a base case scenario at this juncture. Clearly, in our assessment, economy needs bold, innovative and unprecedented fiscal support to navigate through this sudden shock. The fiscal measures could be short and need not be permanent.
However, without gold fiscal support, revival process could take much longer. Let me just give you a jump to RBI, actions and the sector's need. Prior to COVID-nineteen, the overall systemic liquidity was already quite strong at nearly INR 300,000 crore. RBI to provide confidence to financial sector and to ensure sufficient liquidity did targeted LTRO, reduced CRR and increased the limit under MSF, as you must be aware, overall creating additional liquidity of INR374000 crores. MPC maintained its accommodative stance and reduced policy rates to 4.4%, lowest ever report rate.
RBI also took the unprecedented measure of permitting moratorium for all loans, wholesale and retail, till May 31. We applaud them for the same. However, there are moral hazards and potential behavioral issues of borrowers that we need to be careful about. We also believe that given the severity of the shock, more such measures will be needed for the entire financial sector. In specific for MBSCs and HSCs, a direct low cost borrowing window for from RBI for up to twelve months, across the board onetime restructuring options without classification change and freezing of DPD or the customer till the moratorium till the end of moratorium period.
These additional measures would significantly reduce the possibility of any systemic division in the financial sector. Let me now jump to the home ground, which is VFL. VFL overall has had very strong three quarters of FY 2020 with balance sheet growth of 35%, profit growth of 53% and stable growth in net NPA despite a sixteen year old record low GDP growth in FY 2020. Its return on assets and return on equity have remained quite strong due to operating leverage gains, efficient risk management and tax cut. The company has faced what when I when I look back, company has faced what I would call three big challenging situations in the last four years.
BMO in '16, Ireland of Australian in '18 and a sixteen year lowest GDP growth environment in 02/2019. Its entrepreneurial culture and distinctive business strategy ensured that company profitably grew its businesses as it navigated through these challenges. While COVID nineteen crisis by far seems to be the most brutal in my assessment, I'm confident that company's entrepreneurial culture and distinctive business strategy will help it navigate this once in a lifetime, I hope, tough and challenging period. For the Q4, as you may have reviewed, we released to the stock exchange in the morning. Despite a ten day loss, the company continued to grow its assets, loans and new customer acquisition in a steady manner.
Customer franchise grew to 42,600,000.0 During the Q4, company acquired 1,900,000.0. It was a eighty day quarter only. If it is not if it is a full ninety day quarter, we would acquire 2,200,000 customers. We we could not we lost around 350,000 customers in as a result of the lockdown in last ten days. New loans booked were 6,000,000 versus 5,800,000.0.
We lost about 1,000,000 new accounts is what would have got booked in the last ten days given Guripadwa was in the office on 2026. Assets in the management grew INR147500 crores and company lost around INR4750 crores of AUM as a result of a eighty day quarter. Let me now jump to how we are approaching this crisis in the last two weeks since the lockdown. Attitudinally, a company, we're an option to be optimistic, pessimistic and cautiously optimistic. We as a company and management, along with shareholders are choosing to be cautiously optimistic, because we believe the financial institutions have to always remain open for business at all times.
It's extremely important at this point in time for us to hold our nerve and make prudent decisions in the long term interest of the company. Let me now jump to balance sheet and P and L view. Clearly, the balance sheet should be everybody's primary goal at this juncture. There are four key assets to balance sheet protection in current situation, namely liquidity, capital position, strong loss provisioning and deposit franchise. On liquidity, company ended March 31 with consolidated cash position of INR 15,900 crores.
Its CP borrowing is less than INR 2,000 crores. Its maturities over the next three months are lower than the incremental flows expected over the same period. It has another set of undrawn lines to the tune of INR 2,500 crore. So we are very sufficiently safeguarded from a liquidity standpoint. On capital, we are we are very well capitalized with a 25% capital adequacy ratio.
At this point, among we are amongst the most capitalized companies in financial sector among large companies. On loss provisioning, historically, has continued to remain extremely prudent in making provisions for anticipated losses. Given the unprecedented and sudden shock of COVID-nineteen, company is considering provisions against identified large accounts as well as a onetime provisioning for potential impact of COVID-nineteen in Q4. This will ensure that we create some degree of suspension in the balance sheet at this stage. On deposits, that's the last aspect of our balance sheet.
We ended, with a deposit tranches of INR 21,400 crores with only 28% contribution from bulk deposits, 72% of deposits are retail deposits. That's on the balance sheet quickly. Let's now talk about P and L. Given the complexity of P and L, I thought what I will do is to deconstruct the same as demand, revenue, OpEx and credit cost. Let's quickly talk about demand.
As I mentioned earlier, prior to COVID-nineteen shock, the economy was already on the mend. It was very visible and evident in semi urban and rural India. We are hopeful that if the lockdowns are not extended and we do not observe another national lockdown sometime over the next few months, we could see demand arrival in our categories starting June, July and restore hopefully to full normalcy in October, November. I covered three different scenarios of
how we
are taking how we are planning this in just a few minutes' time. Given the diversity of our businesses, know, I thought I'll just give you some texture on category of our businesses the way we see it at this point in time. If you take our two wheeler and B2B businesses, which are point of sale businesses, it's 19% of our balance sheet. All parts of this business are currently in lockdown, whether it's offline or ecom. Some portion of the lost sale could be recovered in this business in the balance fiscal, is what our view at this point in time is.
Retailers in general were well stocked with a thirty to forty five day inventory prior to lockdown. It's strange that less than thirty days ago, our entire COVID-nineteen focus was on supply side issues, whether China would have China would be able to supply goods to the air conditioners and so on and so forth, will the retail will well stocked or not. And that's changed certainly to a demand side environment. Q1 disruption, however, in our assessment will be more severe as it is a sixty year quarter. Demand outlook for balanced fiscal will be a function of length and intensity of lockdown.
The b two business of ours is highly granular with presence in 2,006 300 cities and towns in India. Our 24,000 off road staff across 2,300 cities will be at stores within forty eight hours of store opening is really how our preparedness at this point of time is. Our B2C businesses is the second aspect of our business, which is 20% of our business. In this business, we essentially lend only to existing customers with good repayment track record with us and with the banking system. Subject to credit performance reverting to pre COVID levels over the next four, five months, we can go back to growth more in this business.
Q1 loss of sales can be recovered, possibly in the balance fiscal. This business is as granular as B2B, and it's likely that smaller markets may recover lost sales faster than larger markets. MSME is the third line of our business. This business has been under severe strain since introduction of GST, which aggravated last year due to slower economy. We have continued to grow this business during this period as a result of our focus on professionals and geo expansion.
COVID-nineteen is likely to have a very severe impact on all aspects of this business, including small businesses, professionals and geographic and across geographies. Demand will be high, on the other hand, in this business as small businesses, once lockdown lifts, will want to kick start their business. But lenders are not likely to be forthcoming. Credit guarantee support from government can really ensure that lenders come back to lend easily. As we believe that the growth recovery could take anywhere between twelve to fifteen months' time.
Mortgages, which is 31% of our business, fundamentally sales process in mortgage is a thirty to forty five day walk, and thus Q1 will be a sixty day quarter only. Some kind of losses can be recovered in the balance fiscal. The challenge in this business, however, is likely to be pricing pressure from banks. While the overall balance sheet would gain as a result of lower cost of funds, this business would struggle a lot more given where rates have gone to. Risk in this business is not likely to be a challenge.
The last the second largest business of ours is rural. It's 9% of our balance sheet. Recovery in rural is likely to be fastest as rural was already doing very well in q four, given strong monsoon and stimulus by the government. Rural b two b will revert to normalcy the fastest, and b two b c will revert to normalcy in line with urban b two c. Commercial, which is 4% of the balance sheet, given the environment and potential impact in commercial clients, will work for the foreseeable period only with existing clients.
Loan against securities is 5% of the balance sheet. Given the stock market volatility, this business has already seen a reduction of 25% in the last thirty to forty five days. The portfolio is currently at a margin of 50%, which is required as required by RBI. The recovery in this business will be a function of the markets clearly. We internally are focused on building a retail brokerage business, at this point in time.
That from the demand environment, let me quickly run through revenue. Let me just make a reiterate the point that the company, due to its very strong orientation to profit and our very disciplined retail nature of its business, free orientation, cross sell book and cross sell focus has significant margin of safety across its various revenue lines. Given its strong liquidity and distinctive credit standing in the market, we do believe that we'll be able to command premium as given the liquidity that we have and the supply side is expected to be constrained. We will continue to, you know, we expect we'll be able to get some amount of premium, as things normalize. However, we will continue to carry extra liquidity over the period of next six months, resulting in extra cost of carrying our cost of online as well.
Let me just quickly jump to OpEx now. Clearly, operating expense is something over which we have greater control. Our company has created a plan to grow 7% to 8% of its total operating expenses as the lockdown lifts. As an immediate measure, we've decided to hold all our fixed costs at current levels till October. That would mean no incremental replacement hiring, no new branch expansion, no advertising and promotion, 80% reduction in travel, 80%, calibrated approach in technology expenses and a hawkish beyond incremental CapEx.
Apart from these actions, as we look further, there are suspensions in our OpEx lines due to
our overall broader operating due
to our modular operating model. As a major improvement, however, we will be further increasing our investments in collections infrastructure is really what our stand is. You also work in a plan whereby if the demand scenario is weaker than the scenarios I'm gonna talk to you about, that we should have harsher view on operating expenses, as as the next level plan if the demand environment is weaker. Let let me now come to one of the most important parts of p and l, namely credit costs. Before I come to credit costs, let me just reinforce that we are a risk driven business.
Except for a two wheeler business, companies focus on mass affluent customers earning 5 to 6 lakhs per annum in urban markets and 3 to 4 lakhs per annum in rural markets. 65 to 67% of our customers are salaried and 33 to 35% are self employed. 65% of our customers have Bureau scores of seven fifty and above. Rest have known Bureau score and mainly come from 75 plus markets where Bureau hits are low due to lower penetration of financial products. The SMEs that we deal with or we target have annual turnover from INR 5 to INR 16 crore.
The commercial clients we lend to are in general BBB plus clients. The home loan clients are only salaried for the last two years with annual incomes of 11 to 13 lakhs. Loan against property portfolio of ours are given to self employed with average exposures of 60 to 75 lakhs. It's quite granular. The developer finance portfolio is 0.9% of the total portfolio.
In land, the average exposure is INR 3 crores to INR 4 crores. Tooler business, of ours, which I said, is the only business where we deal with a mass customer, is a captive business. Given the customer segmentation in this business, this business is lot more vulnerable to credit shops as experienced in demonetization as well. On the credit card, before I start, I must state that the situation at this juncture is very fluid. I'll outline the way we are observing it firsthand very clearly.
I must add, before I start, I must also make a point that the customer right now is in a state of shock. None of us has ever worked from home or ever faced such a long and sudden lockdown, nor has the economy ever been stalled for such a long period in such a sudden manner. The impact clearly is very brutal. Given the uncertainty and sudden shock, customers clearly focus on saving stroke holding cash. In my twenty five years experience, behavioral sciences has never been an area of attention from risk management standpoint.
It is for now. It is our reasonable assessment that as customers and businesses get back to work, and faster they get back to work, faster situation normalize, we should get back to normalcy in short period of time. I'm confident that the economy has the resilience to navigate a twenty one day lockdown. At the end of the day, we all locked down on twenty second. In twenty days, the structural nature of the or direction of the economy cannot change.
We did experience the same during Demon. This, of course, seemed, you know, much bigger as a crisis and has a lot more uncertainties than in hindsight, DeMon had. What we are observing at this point in time from the banking that we've done so far is that the net market rate for us as a company are up two to 2.5 x across all customer segments, whether it is salaries, self employed, doctors, professionals, SMEs. This is across nature of banks, whether it's public sector bank or private sector bank. No part of the economy, given the wide diversity of the customer that we touch and the sheer volume of customer that we touch, seems untouched by this unprecedented shut in shop.
The commercial customers, despite their better rate rating, are seeking, are proactively seeking moratorium request. Only 1.1% of our retail and SME customers have so far proactively reached out for moratorium request. This is also probably one of the reasons why we are seeing elevated level of default or bounds in retail and SME. Based on our scenario planning, I'll share with you very briefly, soon, our estimates of credit cost in the next two to three minutes. The stance that we've taken as a company is to bank all customers who have not requested for moratorium.
Historically, 27% to 30% of our defaulting customers in general pay digitally. Rest, 73% of the defaulting customers walk into branches or are collected by field agents. Given the lockdown at this point in time, naturally, field and branch collections activity is halted and will resume once the lockdown is over. Customers who are unable to pay by month end will be offered moratorium for that month on a Suomoto basis till May 31. While customers may be offered moratorium benefits, the company, has decided to continue to make provisions as per its historical flow rates.
In addition, company will continue to make additional provisions, basis emerging data. I now come to three key scenarios that we have fundamentally created at this juncture. I must, however, also got hasten to add that this is subject to on ongoing change. As we see data, as we experience what's emerging, as the country takes stand on how long how long and and so on and so forth. They're just as you as you would agree, there are many important levels.
The first scenario in our assessment is that lockdown opens on April 14. In this scenario, we foresee business in April to be only 20% of our planned volumes. We expect May to run at 60% capacity and gradually return to 100% of our planned volumes by September. The impact of the on of demand, on demand is likely to be transient in this scenario. The impact on credit cost is likely to be 50 40 to 50% higher on a full year basis.
The balance rate and collection efficiencies should return to normal in this scenario by August. We may also have an opportunity regain some of the lost volume in second half of the year, albeit marginally in my assessment. The second scenario is that lockdown opens on April 30. It would have a forty day it would have been a forty day lockdown in the process, and it's likely to have a reasonable impact on customer psyche. In this scenario, we foresee business in April to be zero.
Of course, we expect May to run at 30% capacity, June at 70%, and return to 100% of our planned volumes by October. The impact on demand, however, is likely to be material. The impact on credit cost is likely to be 50% to 60% higher, on a year on year basis, on a full year basis. The bounce rates and collection efficiencies may return to normalcy by October. We are not likely in this scenario to gain any of the lockdown lost sales volume.
First scenario is that lockdown was all the way to forty nine days and opens only on May 15. In this scenario, we foresee business in April and May to be zero, of course. It is likely to have a structural impact on demand across all lines of businesses for the rest of the year. Business in April will be zero, May will be 20% of our brand volume, June at 50% and return to normalcy of 100% of planned volumes only by sometime in Q4. The company will be forced to take, in this scenario, a harsher view on OpEx and explore a 12% to 15% cut versus the current OpEx cut that I talked to you about of 7% to 8%.
The impact on credit cost is likely to be 80% to 90% higher credit cost on a full year basis. In this event, we expect, RBI will have to necessarily provide onetime restructuring option to the financial sector. I've come to the end of my, monologue. As I mentioned in the beginning, these are highly uncertain times, and we're all forced to make difficult choices and decisions on an everyday basis with limited information and without any empirical evidence, unfortunately. At BFL, as I said, we're doing the same.
The strength of the business model, I believe, agile decision making, strong execution rigor, and long term orientation, we believe is likely to be a differentiating factor. We have very patient shareholders and an exceptional management team, and we are all hands on deck to dive through the biggest crisis that we have all experienced. Thank you for patient hearing. This transcript, given the long conversation, we've I have, or the long commentary that I have done, we will be posting on the investor section of our website by sixteen today. Please do refer to it in case you missed noting down anything.
With that, I open the call for q and a. It would be my request that this point is being covered. Repeating it may not be appropriate from a efficient utilization of time standpoint, and I'll go by your judgment on that.
Sure. Thank you very much. You will now begin the question and answer session. Anyone who wishes to ask questions may press star and 1 on the touch tone telephone. If you wish to remove yourself from the question queue, you may press star and 2.
Participants are requested to use handset while asking questions. Ladies and gentlemen, we will wait for a moment while the questions you have send us. The first question is from the line of Sanket Chidra from BNK Securities. Please go ahead.
Yes, sir. Evening. My question was mainly that apart from the measures that I have already announced, you spoke of a couple of more measures that you expect them to announce one of which was a dispensation for onetime restructuring. What were the other two? The
other two was direct low cost borrowing window from RBI for up to twelve months, restructuring and freezing of DPD, till end of the moratorium period. Because there is a little bit of anomaly, that those clients who are in default can be given moratorium as of February 29, but their DPD is seasoning, which fundamentally means on June 1, they will land up moving to 90 DPD plus. You know? So, we believe it's our assessment that, this will get reviewed by our. So these are the three things that we expect.
And, sir, one more thing. The the there was there was a flag on some on the media channels that has got in touch with the bank and research data again to provide some relief on the compounding of interest on interest and reduce some burden in terms of interest cost. So have you received any such communication, and what is it? I get it pretty confusing. So We're not right now.
Yeah.
So you have eventually, we'll we all have to follow the law of the land. So we'll follow the law of the land as and when or if and when the notification appears. For long term businesses like mortgages, it will have a material impact. For short term businesses, the impact will not be material. Mainly, the impact of this will be on mortgages and and on loans which are longer than thirty six months.
And why why it would be so, sir, for mortgages?
Yeah. Because the in case of mortgage business is very long. So for example, if I'm not paid interest for the payment period, and let's say my rate of interest is 9%, I've actually not paid about two and a half percent of interest, which will get capitalized as my principal. As you would know, principal component repayment in case of mortgage business, which is let's say 120 to 185
low, is less than 2%,
3% of the overall principal. So we will take much longer in terms of from a 10% extension point of view for a customer to pay.
Okay. That helps. Thank
you. Thank
you. The next question is from the line of Sandeep Chel from MT Global. Please go ahead. Thanks for the opportunity, sir, and really a detailed one. Just two quick questions.
If I see your scenario one, two and three, you have given a a brief guidance about the kind of credit cost it could be rising. One, are you are you doing a risk of the starting exposure during q four? And number two, what would be a rough, you know, impact on the margins in in all these scenarios? Any any any major change that will happen on the margin? But I I definitely take care of it if there will be some change in the business which will impact it.
But considering that, any any rough margin is that you'll be having at any moment?
When you say margin, you mean Let me give a response to the first question. First of all, we are in a closed period. And you know, today morning, we have outlined in our in our disclosure that we are evaluating. So I cannot share specific numbers in q four. On one of the identified large accounts that you named, we had made our intentions to that as part of our q three release.
The other account has been in an NCRT proceeding for the last eighteen months with no clarity in sight. It's really what I would say on on on that. Can you just can you make the one and second question?
Okay. So we will be having a two year impact here. Obviously, there'll be a screw screw down, and then there'll be a trade cost to also be inching up. That is what credit cost you already added within, so that you want to help me. Yeah.
Just wanted to understand, can you build up a a a because the the b two b is is the most impacted in case the lockdown gets gets extended further. We do see and mortgages is something that even you also highlighted. Would you be able to you will be able to recover the ground from this financial year or related to what is on the b two b because where, you know, the actual lockdown are are more impacting you. In these scenarios, are you seeing that there will be a a major pressure coming up on your margins as well? Or you think that more or less on the operating level side, the slowdown will be more or less to do with the growth itself and less to do with your lending and and borrowing rates.
Am I
making myself clear? Yeah. Yeah. No. No.
I understand. I I've said that this that given our strong liquidity that and given our and I you know, the this note will be there, for you to refer to. And I'll repeat the point that I made so that given given our strong liquidity and distinctive right standing, we believe we'll be able to command pricing pre premium as COVID nineteen shock normalizes. So it's mainly a demand side view. We don't foresee, revenue pressure other than the mortgage business.
There we do foresee pricing pressure. In other businesses, we don't foresee pricing pressure. Probably, I guess, an expansion. Okay. You know, because there are fewer people in the market.
But in mortgage, we will see pricing pressure.
Okay. And just just just briefly confirm again. You said you lost roughly three and a half lakh customers and that new loan accounts and put put them down to 50 crores of India because of the last three days of Yes. You said that. If I add a four seven five zero, anyhow, you are just seeing still our growth number should be somewhere around 31, 32.
Yeah. Anything percent. Right. So our our previous nine months has been 35% roughly. So anything apart from this lockdown which has impacted us?
That is
my last question. I would just say that, as I said earlier, economy was in the main you know, if you look at so let me give you a sequential view. Clearly, the slower economic output, number one. And number two, the given our credit cost has gone up, we've pulled back on various businesses. If you take our Q1 growth was 41%, q two growth was 38%.
Q three was 35. And q four is look what would look like 32 to 33%. So we have pulled back, as I said, in q one and q two between 15 to 20% of our growth, we have pulled back on. So it was gradually slowing down, and actually, I believe that if COVID nineteen had not happened sometime by q two, we'll be back to a reasonably stronger growth momentum. But that's probably history for a little while now.
Thank you.
Thank you. Before we
take the next question, we'd like to inform participants to please limit your questions to one per participant. Should you ask follow-up questions, we request you to rejoin the queue. We take the next question from the line of Prashant Podar from ADIA. Please go ahead.
Hi, Rajiv. Hi, guys. Thank you for the opportunity. Quickly on, Rajiv, organization is a quite data dependent organization. And given that data will not become remain dependable in the post COVID situation, given that there will be moratorium, there will be a separate research.
Whatever. I mean, there will be
Oh, no. That's alright.
Relaxation to it. And and and come and another point is about the fact that government may take lockdown measures again after the first let's say, relaxation of lockdown. We will not be able to interpret it right now. So in that evolving situation, how would you be taking decisions in terms of incremental lending opportunity?
I think it's a very fair question. So let me just say that to begin with, we'll be very cautious as lockdown opens. At this point in time, while the risk folks in the company are working on the model, when I talked about the bounce rate, we are seeing it completely structural. 800 customers, seven seventy five customers, salaried customer, existing customer, everybody else. So it's it's not a reasonable risk.
It's very evident and clear. Our thought process is this point in time at a at a 10,000 feet level, Prashant, is that we will be very cautious. Number one, in b to b business, in general, if the model is not working, go with a 30% margin requirement. You wanna buy television, do buy. We want to be open for business, pay 30% margin.
In general, that's the lowest risk outcome. In b two c, we will restrain from doing cell phone plus for next three, four months. In SME, we will cut the bottom two, three designs. In commercial, we'll work only with our existing customers. So, in some of the businesses, like a discretionary, point of sale business, which is retail EMI card, we may not do for a while.
So we've got a set of actions ready as we get to, get to work. Is there a point that you're making that's a correct point that we are partially flying blind for the next, definitely, 45 away between April 15 to, early June. That is a that is a fact. I mean
you
know, does that clarify the point?
Yes. Yes. Yes. Yes. Good.
Thank you.
Thank you.
Thank you. The next question is from the line of Dabar Ghida from DFC Investment Managers. Please go ahead. Yeah. Hi, Ajit.
Couple of questions. First is on the bounce rate, this two two and a half x increases in April, I presume. Is that correct? Okay. And the sec second related question is just on the credit cost delta that is given in all the three scenarios, is that on the elevated base of FY '20 or the normalized credit cost that you would have seen in any of the other years?
So just a clarification on the credit cost impact that you have in the the 63 scenarios. Five years?
No, it's a very valid question. It is on the basis of FY 'twenty. I must just say what I was saying to Prashant earlier. We are in an uncertain zone at this point in time. We will share when we do our investor release for Q4, we will actually share February 2020 data rather than March 2020 data because March 2020 data has also is marked by Suhu Motom Auditorium, right?
So we will share and you would see in most of the businesses, we were actually seeing improvements. So so we were forecasting that by by June, July, we would see reversing to $18.19 credit costs between SME would have been the longest lag by September, October. Other than that, we we were were forecasting July, August back to 1819. So at this point in time, Rahul, to give you a clear view, it's on FY '20.
Understood. And just lastly, on OpEx reduction, could you share the top three or four items that are driving this reduction? I mean, one would be obviously the business organization. But apart from that, what
are the other major ones? Which is it? Yeah. So I talked about grade, and we'll put it up as well. But, like, you put all hiring on freeze, no branch expansion, no A and P, no travel, significantly significant calibration till October in technology, very hawkish women on CapEx.
I must just only make a point. All this is still October at this juncture. And as situation moves, we want to remain a growth oriented company. But at this point, situation demands that we take some of these harsh measures given that it's one of the few things in our control at this point
in time. Understood. Thanks and all the best. Thank you.
Thank you.
Thank you. The next question is from the line of Suresh Panapati from Macquarie Capital Securities. Please go ahead.
Yeah. Hi. Thanks for taking my question. Just one question, Rajiv. What period do you think this model has an issue with?
Because are the customers really well informed that this
is a moratorium and not a base order?
And do you really see this changing behavior or creating some kind
of a structural issue? I know it's too early, but just wanted your initial thoughts on this.
Yeah. No. It's a very fair question, Duresh. That's the only thing that worries me. You know?
And I've said this that, it is unprecedented. Somebody very senior, I was talking to The US and said he told me that this has never been tried anywhere in the world at this at this scale. Now and as I said, I applaud answer. I'm sorry. The three month moratorium Yeah.
This kind of wholesale morad, you know, at the nation's level. You see, morads have been given. Cyclone happens. Katrina happens. Morad is given.
This is the stall of the economy, and as a result, has to be offered for the broader economy only. Has never it's a experiment, let me be honest with you. It seems to be an experiment. So and, clearly, the only thing that worries me, Suresh, and I hope it's only a worry, that moratorium should not, tip into a model like that. So, you can only know this to the point that you're making when we all bank June stroke July.
You know? So what is the initial feedback on the ground? Have the customers thought this is a waiver? Yeah. No.
It's a fair question. Yeah. So, originally, people thought it's a waiver. Okay. I think we various news channels a few news channels also reported as a waiver in in local vernacular mediums.
As the dust settled, but probably partially the damage had been done. So, it is now understood that it is a not a waiver, but a moratorium. But I think for financial institutions, the work is going to be a little longer. It will, it will increase our, work a little bit. My assessment, it's a pure personal point of view at this point in time.
We are all flying blind, Suresh. That's my
view at this point.
Thanks. Thanks, Rajiv, for your input. Yeah. Thank you.
The next question is from the line of Ashish Sharma from Hinam Asset Management. Please go ahead. Yes. Hi, Ashish. Thanks for the opportunity.
Just on the collection efficiency infrastructure, you mentioned that we would want to focus on that. But just on a a a short term basis, how is it possible for for for for a company like Vazatch Finance to sort of raise the capacity? I mean, you already mentioned the bounce rate at two, two and a half times. So by the time, Norman I mean, the lockdown is over, our inter I mean I mean, collection efficiency or collection infrastructure is already up one and a half, two times. I mean, just a simple on that, sir.
Yes. So two things, Ashish. Clearly, no capacity plans allow for two, two and a half times. You know, it's fundamentally that is the reason I am we are giving an elevated view of the credit cost. You connect the two dots, that's the purpose.
That if there is increased flow, there is increased flow. Whether it is secured, unsecured, increased flow is an increased flow, you know, at a at a at an experiential level. The only thing that is so are are our collections for folks working at this point in time on on on as the lockdown lives, what is the plan? It's work in progress. That's point number one.
Point number two, the only thing I would make. You know, given our granularity, outside of 50 markets, it's much easier for us to pull it off because the numbers are much smaller by market. So on the 50% of the volume, it's easier to pull it off. The issue will be the first 25 markets. Unfortunately, however, 25 markets will be 40% of the business.
That is clearly where the bigger challenge would be. We are increasing communication with the customer. We are increasing counseling with the customer regarding the questions that they were also asking. Given some damage has been done, we've increased counseling. We've increased communication to the customer, and we are working on our planning capacity
Okay. And just one clarification. You mentioned how what percent of your retail customers have since moratorium and and this payment?
We gave to 900,000 customers in moratorium in in the month of March.
Thank you, Rajiv, and all the best.
Sandeep was correcting me. 900,000 in in non AF and 300,000 in AF. Yes. Auto finance is 300,000 and
Auto finance.
Non auto finance is 900,000.
Thank you. Thank you. The next question is from the line of Subhranshu Mishra from BOB Capital Markets. Please go ahead. Hi, Rajiv.
Thank you for for the opportunity. This question is asking to Deepak. I just wanted to understand what in the pre COVID level, what was your collection infrastructure like? And given that we have the uncertainty, but then we are paying the 2 and a half cents increase in the bounce rate. So how are we going to increase the throughput?
And if we are going to increase throughput, the
same can have an effect
on the OpEx. So how are we gonna reduce the OpEx or at least manage the OpEx to maintain the level of loss NPA?
So as I said, that's the only line in OpEx which will see investments in the short to medium term. It's likely No.
But you can explain me what is the collection infrastructure for the normal balance rate and then get the Out
of 22,000 people, four and a half thousand people in the company work in collections. We essentially run, fortunately, a lot more modular model that we don't collect. It's a agency infrastructure that collects for us, gives us greater flexibility, scalability to expand the, infrastructure. But, of course, as I said, not to the extent of is there a, scalability to the extent of 30%? The answer is yes.
Is there a scalability to the extent of, two x? The answer is no. So, so that's the level one point. There are 30,000 field staff who work for the outsourced agencies at this point in time and three and a half thousand callers. So in all directions, we're working with our agency infrastructure that as we come back on stream, whether fully or in part of the country, how will we rapidly, expand?
I must just make one point. Despite the fact that these are outsourced agency infrastructure, we've gone ahead and, all our outsourced staff, whether it is a sales outsourced staff, which is 25,000 or another 30,000 of this staff, have all been paid fully. We want to remain open for business as we come back both on the business side and on the the collection side. The I wanna make the third order point that I made earlier that 50 plus market pose much lower risk. It's the one to 50 market that will pose a much higher risk.
It's work in progress, as I said, Subanshu.
Yes. So how many agencies in the top 15 markets and
how many agencies in the me make a point. You want to make a point that when we come for our q four results, we will provide greater color. I think that's what we can at this point in time commit.
Well, sure. Sure. Fine. That was my only question. Yeah.
Thank you. The next question is from the line of Piran Engineer from Motilal Oswal Financial Services. Please go ahead.
Yes. Hi. Thanks for taking my question. I just have
one or two questions. The base case scenario wherein the lockdown ends in the next ten days and we slowly gradually pick up on these questions, what would our even growth be like an f l 71 given that, you know, bulk of our book is stuck on?
Yeah. So if it's scenario one and we all hope and pray, it is, the material impact on the growth and the p and l p and l will not be significant. You know, it'll probably be some
some growth loss, some profitability loss for for a fiscal.
The numbers to be very fair, you know, we've given you as as clear of you as we have based on credit cost, based on volumes. But it would be, if I may say so, hazardous at this point of time to give specific numbers. Give us time till our results. We should have hopefully greater clarity. See, if it opens up, we while we are in completely in touch with our b to b ecosystem, we will have to just wait to see what is the response.
You know, I have seen in Daemon that the country got back to its feet very quickly. Even the young population, and I am amazed in in hindsight about the speed of the response of the nation. I am banking that it works again. So but doing a doing a forecast, and I have already done reasonable forecast for you guys in terms of how we see impact on each line which may be specific numbers may
be inappropriate at this point in time. No. No. That that's fine. And just secondly, data point, what percentage of our SME loans is professional loans?
And professional is mostly doctors. Right?
Yes. Only doctors. And they are not chartered accountant, but chartered accountant is much smaller component. For lots of you, chartered accountant, it performs better than your doctors.
So But for 13, you didn't ask for me?
Yeah. So on 13%, eight and a half percent is business loans, and four and a half percent is doctors. You know, as I said earlier, that's one of the reasons why we've been continuing to grow. The share used to be $80.20. In the last three years, it's moved to $60.40, virtually.
In fact, I think the number is a little higher, if I'm not mistaken.
Sir, I'm guessing that 4%, you would not be able in all cautious in terms of reinforcement. Right?
Sorry. Sorry. I lost you. For for the
doctor's part of it, it will be, you know, business as usual. In your initial comments, you said that you'll be cautious on SME lending in actual '21. But I'm guessing it's only for the business loan part of it, not for the doctor's part of it.
So doctors are not doing Yes. Of course. OPD. So it's a closed for the last two weeks. Look at the severity of the impact across the ecosystem.
Hospitals are closed. You know, you would think hospitals should be the place booming business. Hospitals are closed in India at this point in time other than COVID nineteen. So the severity of impact, don't underestimate the breadth of it. You know?
So India has 1,500,000 doctors. All are at home. Other than a few who are, and who are junior in general, manning the hospitals.
Okay. That that's that's all from my end. Thank you, and have a good day. Thank you. Thank you.
Next question is from the line of Pratik Agarwal from EFK Investment Managers. Please go ahead. Yeah. Thank you. Hi, Rajiv.
I just wanted to understand how your b to b accounting works, and does the moratorium apply on that client as well?
Yeah. There is a difference.
Yeah. So far, when I when you say accounting, I'm assuming that you refer to how do we recognize revenue in case of b two business?
Yeah. Because my whole thought comes from that explicitly you say it is zero interest. So if a moratorium applies there, then nothing, you know, accrues from the balance sheet to be future received while you continue to pay your banks whatever you have, initiated.
So the account prevention or income that we get from manufacturer, retailer is for the kind of the loan, which is on the active IRR. The effective IRR is working anywhere between 24, 25% in case of b to b business. And to your specific question in terms of moratorium, whether moratorium will be offered to consumer electronic or B2B customer, answer is yes. We don't sell the product as 0% installment business. We sell it as low cost EMI.
That benefit is available to the customer for the contractual tenure of eight to nine months. If the customer pays through that time period, absolutely, it doesn't pay any cost. However, if the customer needs an expanded tenor because of, of moratorium, he'll have to bear the cost of, interest loss. That otherwise will happen to the cash finance.
Okay. So in this case, also, while it is regulatorily mandated, the client pays the interest cost. Yes. Yes. Thanks.
Thank you. The next question is from the line of Pritesh Bora from Mission Holdings. Please go ahead. Thank you for opportunity. My question is not with the COVID, but just business in general and consumer business.
What we have noticed at the the recently, there are couple of POS manufacturer have come and landed in the credit card business. They have raised the funds up to 300,000,000, and they tied up with fifteen sixteen banks to offer the credit on the credit card business, how deep credit is with respect to that particular business model?
So, you know, credit card business so we look at it a different way. The competitive intensity in the b to b business over the last two and a half, three years has increased dramatically given our dominant share in the business. We are the defenders and rest are challengers. I look at it a very simple point, what is the share of suspension from manufacturers? In general, in the consumer electronics business, 70% of the suspension pool for the last twelve years, which includes the last three years, continues to come to us.
In the digital products financing business, between 16% to 17% of the share of manufacturers' attention, from digital products, manufacturers continue to come to us. That share has not moved. Rest, if the share of business is growing, as a result of a differentiated model, so be it. It really doesn't bother me.
No. My question was, sir, my question was in respect to the recent offering. They were offering credit card business, but now they're offering on debit card also. And what they're they're tied up with the various banks. Earlier, that tied up was not there.
So being a third party POS machine provider for a end customer, it's a very easier thing because he of the business card, credit card he has, if the third party is a mutual guy, he can avail this facility on credit card. He does not have to pay the processing fee to Bajaj. So if
So so fundamentally, you know, keen ones, and you should try it. That's the important point I'm making, that we offer across various SKUs. We offer schemes by SKUs. The POS machine infrastructure, number one, infrastructure, credit card offerings, in general, are vanilla three to four product offering you get. That's the key difference.
Versus 12,000 SKUs across which we offer, customized solutions versus four vanilla offerings. That's the key difference.
No. My Right.
Sorry to purchase sorry to purchase on this question, but what I understand is they are increasingly raising the fund with the international investors, and they are expanding their subvention scheme and tying up with manufacturer. So I I I get your point that you still command 60 to 70% market share, but this create of pause machine is independent pause provider is real. Because earlier, if any one bank has a pause machine, the credit card of other bank does not work. But in case of a mutual guy coming and taking over post infrastructure, he can tie up with all the banks.
Yeah. That's very fair. Yeah. So, fundamentally, look, the point is not the one I said in terms of offering. Second, it's about risk management.
And third, as we're discussing on the call, it's about collections infrastructure. As far as somebody can do all three, there is no reason why, that this market needs to be constrained of competition or people should do it. So we have paid trade from banks over the last two and a half years. We'll face a trade from a technology services provider. That's fine.
Who's essentially aggregating on behalf of various, institutions. That's absolutely fine. You know, it's a new competition. Does that answer? Only thing
you mentioned about this collection Sorry? You mentioned about the collection infrastructure. That's a unique asset to us. But in this model, the collection depends upon the credit card provider. So they don't have to replicate or invest into any of the collection infrastructure because that falls on a credit card supplier.
Yeah. That's right. Yes. Now let me bring make that point that the country continues to have only 34, 31,000,000 credit cards. You know, the as you would observe from the loans that you've done, we did last year 29,000,000 loans.
The presence of cards credit cards mainly, because it doesn't exist for debit cards, Exists only in top eight cities in India. From the fifteenth city, fundamentally, the degree of the present is extremely low. If I make a request to you that just in interest of time, if, you know, you can circle offline with Sandeep, he should be able to give you a greater, clarity.
Thank you very much.
Thank you.
I'll talk to you. The next question is from the line of Reena Verma from Nergenti Asset Management. Please go ahead. Miss Reena Verma from Burgundy Asset Management, you may go ahead with your question.
Hello. Can you hear me?
Yes. Yes. I can hear you.
Yes. Thank you for the call. I have just two small questions. One is with regard to the difference between scenario three and the other two scenarios. It seems like you expect a big push back in the recovery in the in scenario three.
Is that because supply side disruptions take over, or is it because of particular geographical exposure? You can please give us some insight there. Yeah. And a small add on question is that given the reliance of your business model on on the salaried employees or the salaried professionals, could it be that you'll have significant back ended pain Because, you know, most people will not file for the next three months, but, you know, you're likely to see a lot of restructuring later in the year.
So I would just say that, as I said, as part of our three scenarios that if we can, in general scenario one is the most preferred scenario. We can all it is COVID will be part of our lives, but at least will not be part of our, you know, economic it will not have convert into an economic catastrophe as much as it's a health catastrophe. So the preference is scenario one, but it really doesn't matter what my preference is. The lagged impact so if I just articulate your question, one is you're saying is it likely that there's a lagged impact. Right?
That's first question. What is the second question, Rina, if I may?
Sir, I have two questions, Rajeev. One is that in scenario three, your Yes. Recovery to 100% of plan takes much longer, almost double the time it takes in scenario one and two. So what are those variables that change between, say, scenario one and two versus scenario three? And my second question is that the salary since they will perhaps have some form of kind of at least optical protection for the next few months, you know, do you think there could be back ended shock in terms of demand?
Yeah. No. I think the the assessment, Rina, at this point in time, what I said earlier, that behavioral science is going to play big role from a risk management standpoint. The longer it takes, longer the impact on demand, reverse demand coming back, and, risk management back to order. So in a way, longer the period of, lockdown, the impact is more like a it's it's very similar.
It will be geometric progression rather than arithmetic progression. So it will be geometric progression, yeah, as the longer it takes. From a psyche standpoint, customer is going to be what they say, customer will lose it. You know? So, clearly, some degree of, breather is expected.
Parts of India, most parts of India, phased lifting or lockdown is will be very essential is what our assessment is at this point in time. So behavioral sciences is going to start to play a very meaningful role, if I respond to your point, as time passes. So that's that's one point. On lag impact, shorter the period, less likely the impact is expected to be on jobs and so on and so forth. You're right at one level that people will pay salaries for April, May, June.
We are you know? But if it if it persists beyond May or May, companies will go into high gear by April, on working on, cuts. As I mentioned, Rina, that, this is all good till May 31. If you are going into a lot of the longer lockdown, then clearly a seven to 8% cut goes probably goes to 20% cut. You know?
Now as I said, this is all dynamic. It's fluid. And let's all hope, that given the huge self enforced lockdown that the country has experienced, we are out of trouble taking.
Rajiv, thank you very much. In the interest of time, I'll just ask you just one small follow-up, which is if everything goes as per schedule, which is the lockdown is listed immediately as as after twenty one days, overall to your business model, because of the reliance on salaried class, is there a significant risk? Because in your q three commentary, to this, you know, event or to this situation, you had mentioned that, you know, you were already kind of being very cautious with your demand commentary.
That's correct.
And I'm just worried whether, you know, this may have pushed back or kind of changed your demand outlook very significantly even if it's just a 21 shutdown?
We will never know, Rina. We will have to I believe a twenty one day the economy is more resilient than that. That a twenty one day lockdown should not eventually have a material impact, but longer, lockdowns, it's very hard to tell. So now that's our point of view. It need not be correct.
No. Definitely better than our point of view. Thank you very much for the call.
Thank you. Thank you.
Thank you. The next question is from the line of from. Please go ahead.
Yeah. Hello, sir. So just wanted to understand if you have to look at the portfolio, say, sector wise, so, like, say, tours and travels or hotels, which are very deeply affected and the recovery will be back ended in these sectors. So what percentage of borrowers or, say, the AUM, would be related to these, riskier sectors?
You know, in general, whether in we don't lend to hotels, restaurants, aviation. We, in general, are also very cautious in lending to their employees as well. So the impact of some of the sectors that you talked about, like hotels, restaurants, aviation, is likely to be, very low. I must just only articulate and reiterate that no sector is untouched by this agreement. Are in the front lines, And our as a as SMEs, we don't lend to them into our SME business.
Even to the employees of these companies, we are very, very cautious. So
that's the that is Got it. So just another question, sir. Now if you mentioned 9 lakh is the number of borrowers who have taken the moratorium on the non AF side, and 3 lakhs is roughly on the AF side. So roughly 1,200,000 borrowers. If you have to use as a percentage of bill, who was supposed to pay in this month, what percentage would be that, sir?
Percentage of customer bank, that's what you mean. Right?
Yeah. Just to understand how many actually, say 10% of the people took the moratorium or 20 or 30, sir. How should we keep at it?
So the banking is 20
18. 18. 18. 18 a half million.
20 and a half million. 20,000,000. Was 20 and a half million.
Okay.
Okay. Got it. Got it. Yeah. Thank you.
Understood. Thank you. Thank you.
Thank you.
The next question is from the line of from. Please go ahead.
Hello, sir. Thank you for the opportunity. Just two questions from my side. So you mentioned the customer franchise today stands around 43,000,000. So given the current headwinds and in light of the scenarios you presented, especially in the base case scenario where we are estimating, you know, lift lifting of the lockdown in next twenty one days.
So how do you see the customer edition run rate panning out there? Like, we moved from 1.1 to almost 2.2 in last one and a half years.
Yeah. So, clearly, as I said earlier, to begin with, we will have a very cautious view.
You know, as I
said earlier that we will, in general, for the next two, three months, clearly do lending, which is which is in the b two b business, which is really what required most number of customers for us, a 30% minimum margin requirement. So it will be slow. It will be quite it will be reasonably slow or it will be severe, as I said earlier, in q one. And, hopefully, should get back to some degree of normalcy fully by fourth quarter and if you are lucky in q three.
Okay. Okay. Sir, next, just a request. So in light of you mentioning higher credential provisioning, would you also provide during your q four investor release the LGD and other assumptions so that we could articulate and reconcile?
So we do provide stage wise breakup of the loans. You can you can very clearly see the kind of provision that we make depending on the stages of the customer. We'll keep providing it.
Yeah. Because the assumption would undergo severe change now. Right? So in light of that. And, sir, just one last thing I would like to squeeze.
What is our on book cost of funds as of today?
So let me just complete the previous question. So what we report so far is stage wise provisioning and the provisioning coverage ratio. Your question of HDD needs to be forecasted as part of macro environment framework.
A lot of the set
of provisioning will be required in stage one. So the HDD factor may still not change on the customer which are already in NPS. That's where you you actually see the HDD. Yes. Six months.
And we'll see over the next
few to six months time as to how the how the number will pan out and accordingly take more provisions if required in future.
Sure. See, fundamentally and mentally Yeah.
So far to to add to what Sandeep was saying, we used to run our ECL model once a year. We are we were anyway anyway as part of the as part of our internal as part of our internal process, we decided to run it twice a year. We will run once in August every year, and we'll run once in March. That will be our process going forward. So along with q two results, you will see a rerun ECL model, and along with March, you'll see based on the latest data.
Because if the economy or, like, in the situation, things change change too rapidly, we need minimum time to run the ECL model. That's the only limited point I would make.
Right. Right. Fair enough. So what is that on the cost of funds as of today?
Ma'am, we are in close period. I won't give you that number at this point in time. As Rajee mentioned, the focus at this point in time is maintaining abundant liquidity in the balance sheet. We have given that number, 15,800 crores as on thirty first March, provisional number, of course. We keep focusing at this point in time to remain as much liquid as possible.
In the process, of course, as Raji mentioned, part of opening remarks, we don't have a material exposure given the CP market at this point in are nearly INR 2,000. We have good runway from liquidity as well as from maintaining cost of time.
Sure. Thank you. Thanks for the call, sir.
Thank you.
Thank you. The next question is from the line of Sandeep Papad from Hill House Capital. Please go ahead. Yes. Go ahead.
Yeah. Hi. Thanks for the call. On the three scenarios, the credit costs that you articulated, any further commentary on how you sort of thought about those credit cost would be helpful. Any assumptions that you made or any commentary on that would be helpful.
Sandeep, it is premature. You know? So the the scenario plans this model will go through continuous run and rerun. Because in general, let me give you let's go to step one. Right?
As you already talked about, the the balance rate is high. If the digital payments are higher than 27 to 30%, the equation changes. If they lower, the equation changes. See, we will have to just be data dependent at this point in time. As we are, as I said earlier, we are we are we will increase engagement with the customers, given lots of them understood it to be waiver and so on and so forth.
We may see, lots of customer come back and pay digitally. We'll have to wait only for a while. Understand. And just a follow-up on that, the percentages that you gave, fifteen sixty eighty ninety, that's of one basis points or that's an absolute number in terms of increase in credit credit cost? In absolute increase in rate cost.
Oh, not not in terms of percentage. It's absolute number. Our our our if you see the nine months, the the run rate is around a 106 175
basis points. So, you know
also okay. Do you mean that it's 80 basis points? No. But in Lando being incentive on that. No.
No. What I mean is if it's 80% higher, it's, like, one seventy five multiplied by 1.8. Correct. That's correct. That's correct.
Understood. Thanks. And as I said, it's it's right now based on the based on the risk models that you're developing. Number could be Understood. And Yeah.
Understood. And just in terms of AUM, I know you you said that it's too early to say. But in the the first and second scenario, the AUM would increase year on year, or you think there is it's just hard to say too early? In scenario one, clearly, it will grow should grow reasonably. You know, I won't say well, but should grow reasonably.
Then in scenario two also, it will grow, but slower. Scenario three is where you have a bigger challenge would be both on the demand side and and on the credit cost side. And and just in one last follow-up. In terms of I know nobody really knows, but based on whatever you see on the ground, which scenario you think is the most like, scenario two you think is likely or even scenario three is possible? Sandeep, I'm not reading WhatsApp at all.
We are we're all working from home, so you guys know better than I do. We are continuing to work from home nine thirty to 07:30 with no WhatsApp. So Okay. Thanks. Your guest will be better than mine probably.
Okay. Thanks. Thanks, Harish.
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Mr. Karan Singh for closing comments.
Yeah. GM Financial, I would like to thank Rajiv Jainal, senior management team of the large finance, for joining us on the call today. Thank you all, and stay safe.
Thank you. Thank you all for patiently hearing. Thank you.
Thank you very much. On behalf of JM Financial, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.