Q3 20/21

Feb 2, 2021

Ladies and gentlemen, good day and welcome to IIFL Finance Limited Q3 FY 'twenty one Earnings Conference Call. 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. Please note that this conference is being recorded. I now hand the conference over to the management. Thank you and over to you, sir. Good afternoon, everyone. On behalf of team IFL Finance, I thank all of you for joining us on this call. I am Rajesh Sajjad, CFO, accompanied by Mr. Nirmal Jain, Okay, Chairman. Mr. Manu Lathra, CEO, IFA Home Finance and Mr. N. Venkatesh, Managing Director at Samasta Microfinance. I'll hand over to our Chairman, Mr. Jain, to comment on the economy and the group's overall strategy and plans. Over to you, sir. Thank you, Rajiv. Good afternoon and welcome everybody on this call. So macro environment and prospects for VSafe recovery now look much brighter with the no bad news budget that we had yesterday. And also the CapEx and investment outlays that are provided in the budget that makes 11% GDP a very achievable target. Also, I would say that the execution track record of this Finance Minister and Government inspires confidence about Performance on the budget proposal next year and also later. And as economy recovers from a negative to a very strong positive growth, We should see a robust demand for credit, especially for MSME and affordable housing. And the underlying trends of digitization and formalization of the company will further boost the demand for credit. And we are fairly optimistic about our business prospects as Almost our entire business is driven by these two sectors, which is MSME and affordable housing. So if you look at microfinance, there's the first letter M of MSME is the micro businesses income generating activities that we fund. And also in gold loans, I guess almost 75% to 80% of our Loans are for short term working capital requirements of the small businesses. In this context, we are also very pleased to note that now liquidity has eased, Credit demand is global. Interest rates are falling. Collection efficiency is getting better. Our construction real estate, which had become And Achilles Heel is likely to see a substantial exit very soon and so on. But still from a longer term perspective, What we have seen in last two and a half years is that the liquidity situations can be volatile for MBSE as they depend on wholesale sources Banks, as we know, have access to stable liability sources like deposits and besides access to Lender of last resort RBI. Historically, banks have built an asset mix, which is of large corporate loans and retail with focus on priority sector. In the last few years, we have seen that they are looking at a shift in their balance sheet mix towards retail assets. And this is where partnership between NBFCs that have established large network, specialized underwriting skills In the NEICE segment, our unaccained workforce becomes a win win. While banks will grow their own network to meet requirements of the growing economy, More often than not, NBFCs will be more efficient in terms of cost and also more effective in collection and servicing When it comes to small ticket loans, as it's not surprising that in the recent past Finance Minister, RBI, State Bank of India's Chairman, everybody has emphasized core ending as way ahead for banks and NBFC's partnership. I think they all recognize this is the most optimum and viable way to channelize our bank liquidity into productive and credit start segments of the society over long term. So our experience over last few months is encouraging. While it takes enormous time to get agreements passed, legal, compliance, risk And business departments of a bank and also workflow and technology integrated. And also bank cash flow will target 10 branches and they'll scale it up to 50 and so on. But the good news is that most banks, almost all the banks that we have spoken to are very keen on the partnership and co lending And 2, the market size and opportunity is very large. So when we look at our market share and say, affordable housing or MSME is just about 1% to 2% Or even in gold load, if you look at the formal lending by banks and NBFCs, we may be about 3 to 4% in market share And similar to microfinance. So we expanded our branch network in 2019 and paused it in 2020. And we are seeing positive impact of operating leverage in the results now. Despite being at the forefront of digital technology, we see The need and opportunity to expand branch network, particularly for microfinance and also a few locations for gold loan. Typically, our branch is breakeven in 12 to 18 months, so the expansion will be gradual through 2021. In terms of provisions and write loss, we take a prudent and conservative approach, while write loss, wherever feasible as per tax laws, can give us tax break. But our recovery and collection efforts are not impacted by the accounting. Also, collection efficiency is interpreted differently by different companies. We report based on views collected for the month. And then therefore, we don't including the numerator the dues for the previous month collected this month, whereas many other companies have a different approach and they take the total amount of total cash received from the borrowers. Coming to technology, we have made substantial progress in technology and our plan to accelerate and we have plans to accelerate investment in digital technology In all the product categories in all our businesses, we are already listed on Credal as a vendor, as a certified vendor, And we plan to be on Okene network very soon. And before I sign off, I wish to highlight social impact our business is creating. And In this presentation, you'll find a separate section on that and efforts we are making towards environment and sustainability as well. It's covered in our presentation, so I'm not spending much time on it. With this, I hand over for question and answer. Thank you. Thank you very much. You'll now begin with giving A brief update on the business numbers. Yes, sorry, my apologies. Actually, our CFO has to speak about the financial numbers. And then I'll be looking at question and answer questions. So IFL Finance's net profit was INR268.3 INR0.3 crores in Q3 FY 'twenty one, which was up 26% quarter on quarter 47% year on year. We recorded our highest ever pre provision operating profit of INR615 crores during the quarter, which was up 9 This was driven by volume growth, reduction in cost of funds and higher efficiency in management of operating costs. Our loan AUM grew 3% quarter on quarter and 17% year on year to INR42,264 crores. Our core segments grew faster at 21% year on year to INR 37,365 crores. Our disbursements Across core segments for the quarter are significantly higher than last year's same period, that is quarter 3. Home loans have Grown disbursements at 90% year on year, gold loans at 25%, business loans at 43% and microfinance Loans at 61% growth in disbursements year on year. Retail loans including consumer loans and small business finance constitutes 90% of our loan book. A strong characteristic of our loan book is a large proportion of loans that are compliant with RBI's priority sector lending norms. About 68% of our home loans, 47 Business loans and 90% of our microfinance loans are PSL compliant. In aggregate, nearly 43% of our loans are PSL compliant. The large share of retail and PSL compliant loans are a significant value in the current environment where we can sell down these loans today's long term resources. Annualized return on assets for the quarter was 2.6% and return on equity was 18.4%. Our Tier 1 capital adequacy stands at 18% and total Equity stands at 21.4 percent. Our average cost of borrowings declined 10 basis points quarter on quarter to 9% for the quarter. Consolidated GNPS and NNPS stood at 1.61% and 0.77% of loans, respectively, as against 1.81% and 0.7 percent respectively in the September quarter. Without considering effect of the Supreme Court interim order, pro form a GNPA and NPA would have been 2.8 1.46 percent respectively. Provision coverage excluding standard asset provision under India's norms on Stage 3 assets was 100 and 70% for the quarter. A brief update on liquidity. During the quarter, we raised INR 3,987 crores, term loans and refinance from banks. Cash and cash equivalents and committed credit lines from banks and institutions were INR 5,149 crores as of 31 December 2020. We continue to have nil exposure to commercial paper. We have a positive ALM across all buckets, whereby inflows cover or exceed expected outflows. A brief update on co lending and co origination strategy. In line with our strategy of growing through partnership models during the quarter, We entered into co lending arrangement with Standard Chartered Bank and ICICI Bank for extending home loans and secured MSME loans. We have already commenced business in partnership with CSB Bank for disbursing gold loans as announced last quarter. A brief update on digitization and analytics. We continue to focus on digitization and analytics to improve customer experience and enable a convenient one stop shop for customers' credit and investment needs. We have completely digitized our business loans journey right from customer onboarding to underwriting, disbursement and collections. We are collaborating with the Fintech Ecosystem to further enhance our platform and customer experience. With these strong partnerships, we intend to co create solutions for enhanced experience in SME lending. We have enabled digital top up to retain quality customers in home loan and secured MSME loans wherein the entire journey is paperless. Communication for accepting sanction letter and e agreement is sent to eligible customers sent via SMS. The disbursement is automatic with no manual intervention. Judburt Home Loans, a pan India product for instant home loans, helps all the stakeholders in the housing Industry individual home borrowers, developers and company get a loan in an instant manner. Our home loan disbursed via Jetpack loans has gained significant traction. Out of the total home loan disbursed in the month of December 2020, 89% was sourced to Jaffat loans. The corresponding percentage in January 2020 was 61%. In addition to digital top up renewal of gold loan launched earlier, During the quarter, we have launched home pickup of gold loan, wherein the loan officer would visit the applicant's home or office and the entire process tablet based, onboarding, sanction and disbursal. IFL Loans app is being increasingly used for various transactions by customers and has been especially beneficial during COVID lockdown times, giving customers ease and convenience of access. We have about 175,000 average active users on the app for the month of December. That brings an end to the update. We will now open the floor for questions. Thank you. Thank you very much. We will now begin the question and answer session. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhinav Mehro from Deutsche Bank. Please go ahead. Yes. Thank you for the opportunity. First of all, congratulations for the results. I have two questions. One is with regards to the collection efficiency that's given in slide number 15. For the business loans, it's mentioned that quarter 3 collection efficiency 75%, microfinance is 77%. First of all, are these average numbers or ending numbers? That's one. And if these are average numbers, then it seems to me that they haven't increased from September 'twenty because if you look at your last set of results, It was 75% for business growth and 38% for microfinance in September itself. So was there no improvement in the quarter? Yes. So I think this quarter, things came out of COVID. And What we have seen is that the true picture emerges only after COVID. Just one second, on Slide 16. But there's an improvement in business loan from 60% to 75% and in home loan from 81% to 90% and microfinance from 69% to 77 So these are the monthly averages, but there's a significant improvement in this quarter vis a vis the previous quarter. Yes, sir. No, I'm just trying to figure it out from the End of last quarter, last time we had given it on a monthly basis and in September it was 75% and 78% for business driven microfinance. So microfinance has actually come down over the quarter or and the business has been flat over October, November December? No. So what happens is most of the time, the collection happens mostly towards the end of the quarter. Okay. And therefore, when you see monthly averages, then they will give you the correct picture of for how things are moving. And also, as I explained in my distinct that collection efficiency is measured differently by different players. So what we do is that something is due for the month of December. Obviously, you collect normal month also in December. And that is actually That happens to some extent in all our businesses. That doesn't get counted in collection efficiency. But if you look at then towards the end of the quarter, obviously, collection peaks up Picked up. And therefore, you can't really compare September with October, but you can compare September with December. So what were the numbers of December, sir? One second, December month, I'll give it to you. So December actually is 93%. This is for business loans. October was pretty up. October was down. So actually, October normal, but December picked up. So 68, 72 and 93. So this is for business loans, is it? No, microfinance. Oh, this is for microfinance. Business loan has remained So business loan is one segment which has remained a little sluggish because of so it has remained around it has rolled around 75 throughout the quarter. Got it, sir. Got it. And is there any like programs in place to correct this? Because obviously, this is sort of Okay. I'll tell you the connection. So collection is happening with some delay because these are small borrowers. So typically, so you might see the 30 DVD. But when we look at 60 90 days, then we are seeing that the collection is improving. Got it, got it, got it, sir. So basically, These are being pushed back by a month, but not exactly going into NDA status because This is a typical characteristic of smaller borrowers. There are smaller loans because you need to They are passing through now things are recovering. So we see that the correction is also improving, but it's happening with the lag. Got it. Got it. I'll join back with you, sir. Thank you. Sure. Thank you. The next question is from the line of Thomas from Aberdeen Standard Investments. Please go ahead. Yes, hi. Thank you. I have one question with regards to liquidity. You've got a slide on this topic, which is Slide 20, and it shows that your reliance on term loan On bank lending, basically, it keeps going up. And equally, Bond refinancing is trending down quite significantly. If you could share a little bit of color What the drivers are? Is it at risk appetite in the onshore bond market is still fairly muted? Or is it purely a reflection of pricing? A bit of color on that That would be helpful. Right. So a significant of our financing is now happening through securitizer assignment, which is not debt. But what we are doing is we are selling down our assets. So last quarter, we have sold down something like INR 4,400 crores and also the earlier sold down assets of INR 2,000 crores have got So that has become a significant contributor. Now coming to refinancing. Now refinancing happens in But if you really look at the refinancing from 152 in Q2, it has gone up to 500 in Q3. The debentures of bonds that you're seeing has come down, but so in Q2, we had a bond issuances to the bank under the TLTRO scheme. So when banks are funding, actually their appraisal and their whether their funding is through bonds or term loan is similar. The Q4 last year bond issue, which you see 2,000 56 is the dollar bond issue that we did, which has a foreign currency dollar denominated bond that we issued in international market, dollars 400,000,000 This obviously will do once in a while, maybe once in 2 years. Therefore, I don't think there's a significant change in mix, But the nature of business is such that sometimes you'll see some of the pieces of pipe moving in different ways. Okay. Thank you. And then would you say just on a forward looking basis, would you say that the dollar bond market remains important for the company To for refinancing purpose? Not really. Actually, to be very honest, dollar bond market is more opportunistic and more More diversification, but in fact, when the dollar bonds have been quoting at a discount, we applied to RBI to Allow us to buy back, but RBA refused us permission for that. But this is a market which is there. And When the opportunity is right and the market is favorable, we can always tap it. But we aren't really dependent on this. But over a longer time period, this can be a good source of Money in a periodic basis. So this is a market you can tap, say, once in 2 years or thereabout. Okay. Thank you. Thank you. The next question is from the line of Ashwin Kumar from HSBC. Please go ahead. Yes. Hi. My question is actually on the collection efficiency part. So just wanted to understand some of segments like This is Loewe and Joon. It's only like 75%, but if I look at your NPAs as such and even If we exclude the Supreme Court dispensation, that's a one off very significantly. So I mean, how do we look at this? Is it like A lot of customers are missing 1 or 2 installments because if it is on average 70% it means like I mean, it would mean like one customer is paying in October and another customer is paying in November and so on, right? Like I mean So 35% is 3 out of 4 customers are paying in the same And our remaining 25% customers, maybe some of them, 2022%, 23% are paying in the next, say, 2nd month or 3rd month. So they don't pay for 3 months, then only they become they get reported in as NPA. And in business loan, our loan book GMP is 2.46%. But if you look at our on a pro form a basis, 6.5%. We also take an aggressive write offs and Write downs in this segment. Because see, whenever we see that from a tax point of view and from The age of the loan point of view, I mean, it's prudent to write it off, we do that. But that doesn't affect our collection efficiency collection effort Because our collection people, they get the buckets of all the loans, so regardless of how we have done the accounting. And also Two thirds of our loan book and business loan or more than two thirds is loan against property or secured, there also we are seeing slightly lesser stress. So business loan, there is stress and that is why pro form a GP is 6.5%. But in a way, two things have basically helped us to contain the damage, which is 1, is significant part of our loan book is secured and 2, we have taken aggressive write offs as required. Okay. And similarly, if you can give some color on the microfinance, but again, that also, I think it's only 77%. So I mean what kind of credit losses are you seeing there? And I mean which states are you seeing stress? Do you have any exposure to Assam as such? So microfinance, fortunately, we are all over. We have very well spread out network. And 88% of our business is from rural segments. So if you really see microfinance industry, then the performance has been very varied across the companies. But in the COVID time period, the companies that have been more dependent on urban areas got impacted more compared to companies that have been Predominantly, servicing the rural area. So if you look at industry wide, I think 46% is urban, 54% is rural. But in our case, 88% of our customers are from rural areas. Secondly, microfinance, we have done We have provided additional INR 40 crores in this quarter because and GNP has gone up to 2.4 percent 2.24%. Secondly, we are also our Akhame exposure is miniscule. And all over, we are very well distributed. We are almost there in 2025 city, yes, 25 state. Now so we aren't really dependent on any one state as such. Okay. And how much will be your exposure to make Assam or which has been on the news? Our Assam exposure, I can tell you. It's 2%. 2% is right. 2%, yes. 1.79% to be precise is Assam exposure. Okay. Maharashtra also has been very badly hit for some of the microfinanced companies. Our exposure to Maharashtra is only 2.79%. Okay. Thank you. And just one question on the microfinance. Again, the ticket sales this quarter suddenly So The last quarter probably we did a little bit of more individual loans, which had a higher ticket size. One second, Venkatesh, Vikram, you're on call? Okay. So So I can get back to you on that, but I can get back to you. Yes, the individual ticket size are slightly higher as compared to the group ticket size. Yes, sorry, I was on mute actually. I can answer I mean in terms of The ticket size going up, it was for a variety of sales. As Nirmal said, we have also added individual loans to our portfolio. And plus in certain markets where we see Traction of I think we have every state has got a segregated higher ticket size because we have gone in many of the markets We're getting into the 2nd and third cycle. We gradually increase the cycle of I mean ticket size of loans as we get into the different cycles. So that's another factor which the loans ticket prices have gone up. Okay. Thank you. Thank you. I request all the participants please restrict to 2 questions per participant. If time permits, please come back in the question queue for a follow-up question. The next question is from the line of Prashant Sreedhar from SBI Mutual Fund. Please go ahead. Yes. Good afternoon, sir. Any guidance on restructuring or the DCCO extension? No. This is your extension for what? Sorry? So I believe you have a construction finance book as well, which you're going to put around the is Vinay's book. Actually, almost significant part of our substantial part of our book will probably move it to AIF. So All these things will become irrelevant because the book will be held by an ordinary investment fund. That is what we're planning to do. Okay. And what about restructuring on the remaining book? What kind of expectations do you have? So Remaining book will continue and there we have adequate provision. So as at Just at the end, we are carrying INR 4.58 crores of provision and also we have written down and written off quite aggressively. Some of that money will also be No, we'll have potential to get collected. So I think we'll have a significant provision for the remaining so Reneeb book will have 2 parts. 1 is the smaller loans, which are, less than 20, 25 crores will be a loan, and they have been generally doing well. So very small ticket loan, we are not planning to move it to AF. And then there'll be a few residual projects. For that, we'll have adequate cover. But this will become insignificant part of our book. And as we had guided earlier that going forward, As a group, we are doing our real estate funding through ordinary investment fund, which is part of our wealth management subsidiary company, AMC. In the NBFC HFC, we might continue to do the residual funding on the project that we already financed or The green and environmentally sustainable building that we are focusing on, but also the typically small ticket construction loans in Tier 2 and Tier 3 where we can dovetail that or we can connect we can have forward linkages to our home loans. But then the prime After the transfer to this year, this book will become insignificant. Okay, understood. And you would receive Consideration for the other investors portion upfront cash or that will also be in some sort of security? What will happen is that INR 3,600 crores is the target size of the fund, out of which INR 6,200 crores is the sponsor's contribution, INR 2,400 upfront cash you get. And from an income and other point of view, So our 3,600 or our real estate book has been generating return of around 14.5%, if you see last quarter. The what we can accrue on the remaining part of the book will depend on the valuation because this year will not be managed by MBFC. It will be completely independent. And Akhoor, the our target is that the entire most of the exit will happen over 3 year type of year. Till then, The income accrual can be conservative, but at the same time, this will also save us the provisioning because in last few quarters, we have been really hit very hard by this Segment of our business in terms of provision requirement. Sorry. Did I hear that right? You said the total consideration for the RE book INR 6,600 crores? So no, no, no. The total consideration for RE book is not INR 3,600 crores. We will transfer, say, something like INR 3,000 crores of RE book to the fund, INR 600 crores of the cash or liquidity in the fund, INR 500 crores to INR 600 crores. So whatever we are transferring, we'll be transferring at book value. Wherever required write downs or write downs, we've already taken that. The remaining part of book will remain in our book as the construction finance or whatever it is. Out of this INR 3600, INR 12 100 crores will be The contribution which probably will be the AIF units, which will remain as an investment in our book, INR 2,400 crores Maybe INR 18R crores cash and INR 600 crores remaining in the fund will come to us. Understood, understood. Sure, sure. Sir, I'm sorry to interrupt you. I request you to come back in the question queue for a follow-up question. Thank you. A request to all the participants. Please restrict to 2 questions per participant. The next question is from the line of Vivek Ramakrishnan Vivek, may I request you to unmute your line from your side and go ahead with your question? Hello. Hi, is it clear now? Sir, Yes. So, may I ask you to speak a little louder? Yes. Hi. See, on the business loan portfolio, your average ticket size has been coming down, But your onboarding yield has also been coming down. Is it I mean typically would you you would think that the smaller size you'd get better yields? And then also if you see the collection efficiency has also been only gradually improving, which is part of the course for these kind of smaller customers. How do you see that? I think no, it's a good question. But what has happened in business loan that incrementally, we are doing business loans only digitally. So there are very small ticket loans done, which are like maybe a lakh rupees, 50,000 rupees, 2 lakh rupees. And that is bringing down the ticket size. So now if you see incremental business loan, there are 2 components of it. 1 is loan against property, which may be typically a crore or 2 crore. Again, there also, we focus on a smaller ticket size. So in loan against property, your average yield will be lower, but that is a major component of it. And then the smaller loans that we have started on digitally and then we'll continue. So today, We don't any longer have any sales force for unsecured business loans. So that entire thing we've phased out. And now we have been pilot testing our digital model and will aggressively expand this as we get confidence. So there are a couple of things more we have done. Also, we have tightened our credit threshold. So I know even if it's a lower yield, but we are focusing only on good quality customers. Obviously, business growth for the entire industry has been very badly impacted because of COVID. But going forward, when we do digitally, our objective will be that have a lower yield, But lower credit losses and no almost negative operating cost as far as unsecured business growth is concerned. And in secured business growth also, you may get lower yield, typically about 14%, 14.5% or maybe even lower sometimes. But then your collateral is there and the risk of ultimate loss is very limited. Okay, great. So even I guess cost income everything improves, so that's a good thing. Absolutely. Secondly, congratulations on the various tie ups you have. Incrementally, what kind of what proportion of your loans do you think will be on book and what will be through the coordination tie ups? Thank you. Today, what is happening is that we are assigning and securitizing our books. So we are selling it down. The core units and task, we started with 3 banks and probably we are looking at more. They will take, I think, 3 to 6 months before they become significant. But till then, we'll continue to sell down our books. And there's a huge market for that. So securitization and assignment also is a very big market. We'll continue to do that till this gathers momentum, but both these put together, The ratio, I think, is already 35%. So over a period of next 2, 3 years, probably this may The incremental growth is coming from here. So if you really look at loan book using our risk capital has declined in this quarter also. There may be it may remain around these levels, and incrementally, this 35% over next 2 to 3 years may become 50% to 60% also. Excellent, sir. Thank you and good luck. Thank you. Thank you. The next question is from the line of Kaush Songheera from Mahindra Manulife. Please go ahead. Hi. So I have two questions. So one is On your gold loan LTV, so on a sequential basis, I've noticed that gold loan LTV has moved up from 68% 72%. Now even if I look at the standalone 72% number, I mean, that looks too aggressive. So wanted to understand, I mean, what exactly is our strategy? How we are doing over there? No. Actually, 75 is allowed. And during moratorium, some interest will have got capitalized, which is getting collected now. And also gold prices in the last quarter so quarter before, gold prices Gold prices have gone up, and that's why you saw that LTV has been lower. But 72 is very comfortable. Today, banks are giving loan at 90% LTV. So you have your NBFCs allowed up to 75%. Should we be competitive, but this includes also the interest due is also counted as In LTV, when we look at the loans, we include the interest accrued and due but not paid. Understood. But yes, so I understand 75% is the regulatory discipline. But so one can expect the number to remain In this in the gold business, important thing is how do you value and what do you tell customers. So when there's a gold, which is, So you value it as a 20 carat or 22 carat. That can make a lot of difference in what you communicate to customers and how do you account your internally. But we are very conservative when it comes to well-being the customer's goal. So every year, we will have certain deductions for impurity or certain other things In that sense, that is where you build your cushion. But it will remain around these levels, 68 to 72. Okay. Yes, so second one is on our Stage 2 number. So on a sequential basis, if I look at absolute numbers, so Stage 2 has moved up from around RUB17 100 odd crores to RUB3 1 100 odd crores. I presume most of it would be the Which stretched both? But Generally, how do we So if you see, the stage 2 is significant component is gold loan. Now what happens in, say, home loan or business loan, Money is collected automatically through banking channel on 30th day for 30 days, 60 days or whatever, whenever it becomes due. In gold loans, still A significant part of collection happens in cash where customer either comes to the branch or you can follow-up with the customer. So typically, branch people will start following up with the customer after 30 days, Should always see that 30 dpdt is high, but most of it gets collected before 90 days. So 90 dpdt will be very low. And you know, loss given default in this case is almost negligible. So gold is a peculiar business where you'll see stage 2 as a highest component, But that will not be an but that doesn't get into state 3. Okay. No, because I was just looking at this Your Our branches start reminding customers of following up with customers only after 30 days. So they'll already move into stage 2. Okay, okay. Thanks. Thank you. The next question is from the line of Savi Jain from 2.0 Capital. Please go ahead. Hello. Good, sir. You're audible. Hello. Hello? Hello? Yes. Bavi Jain, you're audible. May I request to reply with your Yes. So I have a couple of questions. One is on the dividend. I mean, you've announced quite a Large amount of dividends. So I just wanted to understand, given that our leverage is already on the higher side and We could also do with a better credit rating going forward. So given the growth ahead, I mean, isn't this A little too high. I mean just wanted to understand your thoughts there. No. I think our dividend is INR 3, and we have a dividend policy, which is The Board approved and declared that anywhere from 15% to 25% will be our dividend payout ratio. So it's around 18%. And if you look at our quarterly EPS, it's 7.1. So out of the rupees, dividend is not so significant. And debt to equity ratio net debt to equity ratio has fallen In last quarter, as our we have securitized and assigned more FX. So but dividend, we have maintained. So we have a consistent track record of dividend since listing, and We continue to do that. Okay. Now given that our stock price, I mean, at least until last week, It was not at a stage where you would probably be able want to raise more money. So Every year, we have given dividend. We will be very consistent in that. Okay. Okay. Appreciate it. And second question is on the wholesale book transfer that you talked about. So you mentioned it is at Is it still at a diligence stage? Or I mean, is it like at a very advanced stage? Or where exactly is the process right now? Yes. So there's a final diligence happening on that. So it's advanced stage, but yes, the diligence is underway. And you mentioned we would not need to take provisioning once we transfer those assets there. So how exactly will it work? It will show us investments on our book And we would need to write So the if we do if we achieve entire target and put INR 3,600 crores of fund, INR 200 crores will appear as investment in our books, as investment in alternate investment fund. So the units will be held by us, and That will appear in investment in our books, yes. And some of the and what part of the money will we get back? So what happens in the sponsors contribution, normally the other investors get paid off first and then the residual comes to you. The provision or not will depend on the fair value. So as we do, we'll understand the process, but I think those units are valued And the fair value is taken in the book and index accounting, which can be higher or lower than the cost and it depends on how the valuation comes out. Okay. And last question is on the gold loan front. I mean, so there's obviously been a lot of competition by banks in the last few quarters. So just wanted to understand, are you incrementally seeing a large degree of market share loss and growth A print off in the gold loan business, that's one. And second, is this growth by banks a result of LTV increase, which will probably reverse after 31st March? Or you think they'll continue to grow at this pace that they're growing the last few quarters. No, I think gold, we are increasing the customers and the gold tonnage also in our custody. And secondly, yes, you're right that competition has increased significantly. But there's a huge unorganized market for those form brokers, money lenders, And that is moving to the formal market, which is NBFCs and banks, which is a good trend. So in last few 4, 5 years, we are seeing that there is a underlying trend of formalization of economy where many things that were happening in informal sector are getting back to formal So while we don't have precise numbers, but I think a lot of market share is coming from there as well. Okay. And so you are continuing to see the same kind of growth that you were seeing in the last few quarters in the gold business? Okay. When the gold prices go up, obviously, the LTV goes up and all the gold loan companies will see a much robust growth. So it might taper off. It may not be as strong as the In fact, in Q3, it's already a little lower than what Q2 growth was. But there'll be healthy growth. So I think 50% to 20% growth is what one should consider as healthy growth in a year. Right. And branches, you mentioned you're planning to open. So how many branches you're planning to open in the next in this year, currently? So we can't put a number on that. But in both our businesses like microfinance business in particular and also gold loan business, We need some more branches because there are some good locations that we left out because this entire expansion plan was paused in 2020 throughout the year, All of a sudden in the early part of the year. So there are some opportunities. It will not be very aggressive expansion. Probably in 2019, we had a relative to number of branches we had, We expanded very rapidly. But so it again depends on the location study, which is done by every area, every state. And depending on that, they decide on the branch network. So I can't give a number at this point in time. But as I said, throughout this calendar year, we'll continue to grow the network. Thank you. Sorry to interrupt you, Mr. Jain. I'll request to come back in the question queue for a follow-up question. Yes, please. I request to all the The next question is from the line of Amit from Robo Capital. Please go ahead. Hello. Amit Mehindale, may I request to go ahead with your question, please? Amit, may I request to unmute your line from your side and go ahead with your question? Due to no response, we move on to the next participant. The next question is from the line of Abhiram Iyer from Deutsche CIB. Please go ahead. Yeah. Hello. Thank you for taking some of my questions, some more of my questions. My first question was on the rating actions on the UFC loan, USC Bond, Gado. So which has placed a USC Bond on a negative rating outlook for close to 11 months now. Is there any update from the company on other than discussions for this to be removed because it's quite a long time that it's been on a So I think rating agencies basically had a negative on the entire sector or most of the Even the banks, very well known banks in India. So we'll engage with them again. Our liquidity has improved. Even our debt equity has improved. Our profitability has improved significantly. So we'll make a representation to them. But I think as I was listening to in the budget speech or maybe some India being 5th largest economy still is not investment grade. So somehow, I think rating agencies have been little, in my opinion, biased against Or maybe not done a fair rating for any for the Indian financial sectors. I'm not talking about IFL, but all the banks and BFCs. But as far as we are concerned, we'll engage with them because what you said is absolutely right that our numbers have improved significantly and it's a good time to go back to leading agencies. Got it, sir. The second question that I had was on cash flows. So, probably if I'm being a bit technical arbitrage with numbers right now. But if I look at your balance sheet and your income statement for the quarter, you've raised debt by about Close to around INR 16,000,000,000 INR. Your operating income is somewhere around So that's close to INR31 1,000,000,000 which you've received in cash and money. Whereas if I look at the other side of your balance sheet, the cash And the balance has investments have increased by only around INR4 1,000,000,000 and the loans have increased around INR10 1,000,000,000, INR10.5 billion dollars So There seems to be a discrepancy of around INR 6,000,000,000 or INR 600 crores if I look at it from if I look at it. So my question was, Is some of the income not coming in as cash? Because that's the only thing that seems to explain this. Sorry, no, I mean, I am not able to Rajesh, can you understand what is her question and what are the numbers he is referring to? What I've understood Abiram saying is that you have your cash raised, right? But what you have to take into consideration, Biren is also our AUM. Our book is growing. So we've had about INR 1400 crores of increase in AUM as well. Yes. No, no, one thing. I think yes, no, no, no. I think the discrepancy is the securitized assets as per Indes have to be taken in the book. Okay. Maybe so that is what could be causing some of the difference. So during the quarter, if you see from 1,000 crore incremental securitization was done. So what happens in securitization securitization asset is that actually the risk is off the book. But in this accounting as per our address, you can't be recognized. So you add the asset and loan both. But that's not in terms of cash, which is why there is a discrepancy. Yes, yes, yes. So that is again but in iGAAP accounting, we were not required to take securitized asset. Then our loan book would have been 27,692 instead of 30,000 odd crores that we have. Okay. Got it. Okay. Sir, let me connect back again with the offline But what we can do is maybe if we put a mail, then we can put the numbers in a reconcile them properly and put it would really help, sir. Thank you very much. Yes. Thank you. Thank you. Yes. Go ahead with the second. Amit, you had another question? Yes, sir. The next question is from the line of Siva Kumar from Unifi Capital. Please go ahead. Yes. Thanks for the opportunity. So just to clarify on the CRE AAF, You said that once the AAF takes over INR 3,000 crores of the CRE book, you'll be left with INR 1300 crores of residual CRE Loans, right? Right. And they have already seen a provision of INR458 crores. That's what you said? That's right. Okay. So then coming to your own cash infusion for the AAF, so from our side, it will be about INR 1200 crores of sponsored cash infusion. So INR 200 crores include so the way we are planning is that we are trying to estimate that what is the last mile cash flow requirement for all these projects so that The money tech can be opened and the project can get executed very fast because what we are seeing is that there's a demand for affordable housing. And in fact, housing has picked up all over. And then some of the projects we are seeing amazing spurt of sales that in last few months has come. So the idea is that provide enough liquidity last mile, so the project is completed very rapidly. So what will we do is that when we transfer certain things, so the total size is INR 3,600 crores, which include The cash required for last mile. So we'll estimate it properly and we'll provide for that in the fund itself. Okay. So roughly what Supposing the what out of $3,600 whatever is cash requirement reduced and the remaining amount will transfer it to the front. I see. And will there be any first law stipulation on the cap infusion being done as a sponsor? Come again? No. The no, no. Okay, okay. 1st, the entire 33% that way is the so okay, the way the AI is structured and Sure. And as has happened in the industry that the senior holders, they get basically fixed return And but they get a priority cash flow. So whatever cash flow is generated from the project will get paid out to Non sponsored investors, which is the 2 thirds of the fund and residual is what comes to sponsor. Okay, okay. So as a sponsor, we'll be holding the Junior Trash, right? Yes, that's right. But the senior yes, so there's a fixed there. We'll be holding the junior trans. That's right. The sponsor is a junior trans. Okay. Okay. Sir, roughly, what will be the final cash infusion after you must have done some calculations on the cash requirements of each of those projects, right? So it will be about around maybe 15% of the total thing will be the cash broadly required. 15%. Okay. If you provide for 15% and we are safe, we'll make sure the projects get executed very, very fast. So what happens in the project, it also depends on what is the success on launch. So when you're constructing, if the launch, you get very good response and the cash flow from the The buyers only pay for the rest of the project. But if you're conservative and you say, okay, let's plan for even if the response is poor, but my project should Get affected. So then you'll try for a little more. Okay. But we don't expect it to be More than 15%, 17% kind of a thing. Okay. 15%, 13% of the total size of the Yes. It's a ballpark number. So I really don't have the precise numbers because Still, this is what is the work is underway, and maybe next few weeks, we'll have clarity on that. Any time lines of when the tariff will be tied up? So as we had indicated, a binding term set has been signed and probably will consummate this transaction in this next 2 months. Next, okay. And to that extent, the capital will be freed up for you, right, to be That's right. So the biggest advantage of this is that the capital frees up for us. And also we become focused on retail as we always said that then our core DNA and our the sweet spot for growth It is retail and digital. So then it becomes very focused business model for us. So we have 4 product segments which are core as we have already highlighted. So this non core segment which is already around 10%, We'll probably try to reduce it to as little as possible. Okay. And in the microfinance, would you continue to see the growth traction that we got to see in Q3? Yes. I think microfinance, we should see very strong growth. Okay. And No, microfinance business keeps getting local issues. But what our experience is that if you are a Pan India company with all over with your presence, which is fairly balanced, then the damage doesn't become very significant for the entire book. But we see great opportunity in microfinance business going forward. Thank you very much. I request all the participants, please restrict to 2 questions per participant. The next question is from the line of Jahan Bada from Nirmal Bank. Please go ahead. Sir, if you can sum up the asset quality, how much is the stress book and what kind of credit costs So do we foresee? Because this quarter our provisioning was really low. So and on the other hand, the collection efficiencies Seem to be a bit low. So if you can just sum up the entire thing. No, our provisioning is not low. At INR 267 crores, provisioning is Very high. Because historically, our credit losses provisioning have been around 80 to 100 basis points, which will be something INR 100 crores. So We have provided fairly aggressively in this quarter. And this significant amount of this provisioning is for CRE and MSME book. Hopefully, I think going forward, our provisioning requirements should reduce from here. Right. And the amount of stress book, According to you, would be how much? So Amorta's credit book is what we have provided for, And that is what is where we are getting our provisions. Our provision basically, if you look at Without considering Supreme Court order, then 2.87% is our GNPA. And actually, if we look at our provisions, then they fairly cover that. So you can look at that as a book which is stressful. Right. And we don't foresee this 2.87 figure to increase too much? No. This will reduce now actually as we go forward. Okay. Okay. Great. Thanks. Thank you. Thank you. The next question is from the line of Prashant Sreedhar from SBI Mutual Fund. Please go ahead. Yes. Thanks. Just Two questions from my side. One is, how would we look at the growth in disbursements? Would these have been more to existing or new customers? And number 2, Just looking at the Stage 23 excluding gold and real estate, that is almost sort of doubled. So how do we look at Restructuring expectations over there? So disbursement trend is very strong. You see Q3 disbursement basically Has been already higher than the pre COVID level in most of the businesses. Maybe goal loan Q4 was 5,000, which is now But other than that, disbursement is very good. And obviously, we add new customers every month, about Maybe a lack odd customers we had every month and there has been a trend even before COVID and that is now continuing and probably will accelerate. So as the economy recovers, you see that there are new borrowers, existing borrowers also need more money. There are some cases of balance transfer. So That is about disbursement trend. And in terms of our no, I don't know what you're saying about The split book or whatever, I mean, I'm not understanding your question. I think if you look at our GMP, they've fallen from last quarter to this quarter. Yes. My question was the Stage 2 +3 has increased excluding gold and real estate. State 2 and State 3? So State 3 is what is the GMPA, which is 4.40 now. I don't know where are you referring these numbers from because these numbers have not increased. They're actually followed. I'm just adding up the Stage 2 plus GNPA, that's what I want. What happened to Stage 2 is last quarter was moratorium in gold loan in particular. So gold loan is something which will Always still the state two numbers, so you have to look at it differently. And as I explained in the earlier question's response that A gold loan collecting effort typically starts after 30 days. So this is where you'll see a significant bulging of amount in the stage to 30 to 90 days. But most of these get collected by 90 days, and you'll see the stake fee is very minimal there. Sure. Sure. Last quarter is still coming out of moratorium. So this was not accurately reflecting in Stage 2. But what we are seeing is a normal trend in the Understood. Understood. Thank you so much. Thank you. The next question is from the line of Thomas from Aberdeen Standards. Please go ahead. It's been my question. No further questions. Thank you. Thank you very much. As there are no further questions, will now hand the conference over to the management for closing comments. Thank you so much everybody for being on the call. And as always, if you have any more questions or queries, you can always get in touch with our Investor Relations, Sandeep Purkis. Thank you. Have a good day. Thank you very much. On behalf of IFL Finance Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.