Q2 24/25

Oct 21, 2024

Summary

H1 PAT was INR 267 crore after additional provisioning, as MFI stress drove unsecured contraction and higher credit costs. Deposits and secured lending grew strongly; management expects lower H2 credit costs and is targeting 20% AUM and deposit growth.

Good day, and welcome to Jana Small Finance Bank Q2 H1 FY 2025 earnings conference call hosted by ICICI Securities. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing * then zero on your touchtone telephone. Please note that this conference is being recorded. I now hand the conference over to Mr. Chintan Shah from ICICI Securities. Thank you, and over to you, sir. Thank you, Tanmaya. Good evening, everyone, and welcome to the Q2 FY 2025 results conference call for Jana Small Finance Bank. I would like to thank Jana Small Finance Bank management for giving us the opportunity to host their quarterly earnings call. We have with us from the management Mr. Ajay Kanwal, Managing Director and Chief Executive Officer, along with other members from the senior management. Without further delay, I would now like to hand over the floor to the management. Thank you, and over to you, sir. Thanks, Chintan, and good evening, everyone. I would quickly introduce the management who is along with me on this call. We have Rinku Vachha, who heads our affordable housing business. We have Sridhar who looks after branch banking and marketing. We have Sudhir Madhavan, who looks after our MFI and gold business. We have Abhilash, who is our CFO. We have Raman, who is our credit and collections head. We also have Sumit Agarwal, who is our MSME and supply chain head. We have Gopal Tripathi, our treasury head, and Mr. Tamal Banerji, who is our senior advisor. That is everybody along with me on the call from Jana, and we will be happy to answer your questions later. Let me start. I am sure many of you, if not all of you, would have looked at the numbers which have been uploaded on the websites, both BSE and NSE, as well as our presentation. I will talk through the presentation. I will quickly move to slide 2. First and foremost, I must tell you that as we began the bank in 2018, it was our commitment to turn the bank into a secured bank with 80% of our assets being secured. That journey continues. We also wanted to build a very healthy liability franchise. That strategy and that delivery and execution continues. We also wanted to be an anchor bank for our customers, which means that you should see us as a broad financial services provider. That journey continues. We obviously are challenged in the MFI business, but that has not changed how we are executing on our core plan. Firstly, if we start with deposits, we have grown 31% year-on-year and 10% in the first half. Now, out of the 10% that we have grown in the first half of 2024, the time deposit growth has been 9% and the CASA 12%. So a very healthy clip, 10% first half, TD at 9 and CASA at 12. Our advances year-on-year has grown 17%, first half is 7%, with secured now becoming 65%. Now obviously, 7% growth rate is slightly lower than what we would have thought, which is mainly driven by unsecured growth at negative 7%. Our secured business grows a very strong 16% in the first half. So again, secured business moves very strongly to 16% first half growth. Unsecured business, given the environment and our reason to be conservative and cautious, has grown a negative 7%. Our capital adequacy continues to be strong at 18.8% with Tier 1 at 17.8%. And very important, quality of deposits leads to an LCR of 261% for the bank. This is as of September. ROA at 1.6 and ROE at 14.5, slightly muted over first quarter, purely because of the provisioning we have done in the second quarter. Gross NPAs at 2.86, net NPA at 0.95, and very importantly, PCR is at 67.2%. So our PCR in the second quarter is higher than the first quarter. And given advice for many of the folks on this call, we've also elevated our secured PCR to a 28%, which was approximately 18% in March. So that is one of the things that we were asked that would you look at a higher PCR in secured, which we've also done. While yes, gross NPA is up, which is largely MFI led, it is still at 2.86, net NPA at 0.95, and PCR at 67.2. Our profit for the first half post-tax is INR 267 crores after giving an additional provision of INR 115 crores to make sure our net NPA remains below 1%, and we've added a meager INR 19 crores in our DTA. Finally, if you add the PAT of INR 267 crores to our capital adequacy, it will even strengthen further to 20.3%. To sum it all, it's been a tough half, but we continue to execute very consistently and strongly on our strategy, and we'll talk more about the MFI business as we come to that particular section. I'm moving to slide 3. Where again, the highlight to my mind is really our PAT, along with an NPA of 0.95 and PCR of 67.2. And like I mentioned earlier, this is after giving INR 115 crores additional provision to make sure that our NPAs are below 1%. You can see from this page, which is on slide 3, that all parameters are functioning well and the bank is on track. If you move to slide number 4, here again, you will see that our secured is at 65%, our NIM is at 7.7%, in spite of a drop of 7% of MFI book. As you know, the MFI book is a high-yielding book, and of course, the delinquency has caused some interest in suspense. But I'm glad to report that NIM continues to be 7.7 with a stable cost of funds at around 8.1%. For the quarter, for the half, it's about 8.8%. So we're very steady on our cost of funds. Our secured business is doing very well. Our MFI business, we do think the ones which are done especially on the individual loan side on the bank, performs very well and we will talk more about that as we go along. To sum up the first half, PAT at INR 267 crores. Net NPA at 0.95%. PCR at 67.5%. Secured has now become 65% of our total book, which was at 60% in March, so a healthy growth of 5%. It has grown a bit faster than we imagined to 65% secured because the MFI book has de-grown by 7%, so obviously that ratio is looking much better. We will move to slide 5, which exhibits the national franchise that we have, well spread across 24 states. We have 4.5 million customers, roughly about 24,000 employees. On the right-hand side on page 5, you will see the BC contribution, which used to be at 9.9%, it is down to 7.4%. One of the de-growth's that as we have seen in MFI business for the bank, as well as the gross NPA, is largely through our BC network, and we will show you the numbers as we go along. Page 6. We have reformatted this page from what it was from last time because we felt that there are too many ratios, so best is given through this format. First, and very important news is our affordable housing and Micro LAP business, which is led by Rinku Vachha, has crossed the INR 10,000 crore mark. Affordable housing, which was just scaling the Micro LAP business, has become our largest business on the bank. If you see the LTVs, growth rate, gross NPAs, net NPAs of the both the businesses, that is where our primary focus has been and will continue to be. We are glad to report that it works very, very healthy for us. Our MSME loans have grown 16.5% year-on-year and has grown for the first half at 12.9%. Again, we are happy with the parameters. In the following page, we did talk to you last time that we will show you what is our supply chain versus what is our LAP business, and we will show you the differentiation on the next page. I must add that this business, given how the economy is growing, how the small manufacturing is doing, we can see lot of tailwind here. Our NBFC business, which has been always something that we have kept a reasonable proportion of, has grown for the quarter at 3.1%, and year-on-year growth at 3%. It shows a slightly accelerated growth on Q1 because we tend to grow it in the first quarter and then we tend to not grow in the balance three quarters. Our two-wheeler business, I mentioned this in the last call too. As we expand number of cities in the two-wheeler business, our two-wheeler business will see a naturally high growth rate. When I spoke to you last time, I did mention that we were in 90 cities going to 120. I must tell everyone that our total number of cities that we are present is roughly about 180. So we have enough and more cities to keep growing and expanding our two-wheeler business. So when you see the growth of the 2-wheeler business, it is about us taking the same product to multiple cities. It is not about changing the credit parameters or any such other activity which will result in such a big growth. Of course, not to mention that INR 651 crores, which is a 2-wheeler business, is not a large number, so percentages obviously are much more pleasing, so to say. Gold loans has seen a very strong growth. Gold loan, our primary sales channel is our MFI team. While we did see stress at MFI, most of our book, the collection continues to be at the 90% or 99% range. So our collectors are spending time on really encouraging customer to take more gold loans. You have seen a very healthy growth in gold loans, which is roughly about 80% for the year and 67% for the first half itself. Then loans against FD. We have now given the exact product breakup rather than lumping anything so that we are very clear. Now INR 17,000 crores of the bank asset book is secured in nature. Our unsecured is essentially microfinance. Our graduates of group loans who have got individual loans, whether they have for business or agri purposes. Because there has been obviously stress in the microfinance business, this business has de-grown to 6.5% for the first half. Gross NPA at 4.97% for microfinance, and we will talk more about it as we go to that page. So that is our book. I think the high point is affordable housing Micro LAP crossing INR 10,000 crores, and the other important piece is the development of supply chain for MSME business, which is doing very well, which I will just share with you on the next page 7. Here, I think if you notice, MSME is broken up into term loans, supply chain, and loans covered by guarantee. Loans covered by guarantee also have property backing it up, but this is additionally where we have taken guarantee from CGTMSE. Supply chain has gone from INR 378 crores to INR 597 crore business. The reason why this business does well is not just because of demand, it is also because as we get new customers and add new geographies, we have barely started the business early last year. Given that, there is enough and more room for us to grow. We continue to be very diversified geographically, which has been advantage for us, especially when we want to grow. Also, when there is concentration of portfolio, it can cause stress in the environment, and we continue to be taking advantage of our geographical spread. It has been hard work to get to so many cities and so many geographies. But I must say that the hard work is behind us, and now we are well established and have a reasonable presence in all the cities. Of course, a lot more room to grow, I must say. I am moving to the next slide, which is slide number 8. Here, I would like to bring in Sudhir Madhavan. Sudhir Madhavan looks after this business for the last 5 years. Prior to that, he used to be with Bajaj Finance, and he joined Jana in part of collections. He did a fantastic job in collections and was promoted to the business head. Sudhir, over to you. Sudhir really would like to give his view on what is happening in the MFI business from a Jana lens, and then we will go into our portfolio. But over to you, Sudhir. Thank you, Ajay. I think the last two quarters, we have adopted a very cautious kind of wait and watch attitude. If you look at the first line, the big three issues what we are sort of facing is customer leverage or BC performance and employee attrition. The next line is to look at breakdown of what you hear in industry. There is a breakdown in batch discipline. This is not very relevant to Jana because we actually from 2017, 2018, we started migrating our book more towards individual loans. 50%, 60% of my book is now individual loans. KYC issues, it does not bother us much because we are 100% eKYC, so there is no concept of any fraud coming into that place. It is not Jana relevant. A lot of actions we have taken in last two quarters specifically focused on customer leverage. We tightened down the norms, which was already very tight. One thing what we have implemented now is the exposure offers for any customers, whether it is existing to Jana or new to Jana, cannot be more than INR 50,000. Total exposure for a new-to-bank customer cannot exceed INR 1.25 lakhs, and it was initially INR 1.5 lakhs. And for an existing, it was INR 2 lakhs, which both have gone down to INR 1.25 lakhs. Total exposure of Jana, I think we should be one of the very few organizations where we look at all the bureaus, including unsecured plus MFI. Yes, we have a certain stress on the BC performance. We have 17 BCs across INR 1,900 crore of book. Two of them are slightly challenged, but well within the limits. 14 of them are doing absolutely fine, fantastic. One of them is challenged in a certain way. We have a service guarantee with all of them, and this is on disbursements and not on the portfolio. What in last two quarters we have done is we have actually shifted lot of good collection senior resources to support the BCs. Some of them sit in the BC head offices. Some of them actually shifted to their branches to help them to understand collections and the way we drive collections actually. They use our good practices across board on that. Plus, we are putting additional guardrails across for BC so that we restrict the growth which was very high last year. We are making sure that growth are controlled. I am going to slide number 9 now. Employee attrition. We have elevated our employee engagement programs. We do a lot of family connect, calling the families. We do a lot of festival celebrations. Strategically, what we have done, we have actually reduced the account collector ratio, which was somewhere around 350 to 360 in the month of March. We have actually got it down to 290, 295. We have completely improved our compensation program to making sure that it is aligned with the increased difficulty in collections. Plus now being a bank, we are able to offer a good career path to our people who are people who have done three, four years in microfinance. They actually move to two-wheeler. They actually move to gold loans. Some of the open items which is beyond our control is like even if I have a very high degree of control on unsecured exposure, of course, what we give, where some other lender comes and gives him a loan, which we cannot control much. I know MFIN introduced new guardrails, but let us see how that works out yet. Our future strategy is very clear. We will use our distribution team to grow more two-wheeler and gold. Micro LAP would be our business, which we will accelerate more and more. Increase CGTMSE guarantee for micro enterprises as we gradually move towards more and more individual loans. We currently have a book of INR 120 crores. By March end, we should be looking at INR 800 to INR 9,000 crores of books, which will be completely under guarantee program. Focusing on existing customer even short-term base. BC business would continue, but with a much more stringent guardrails. Yeah. Okay. This is Raman here, handling finance and collections. I just wanted to recap a few items from what Sudhir had said. I think the first piece is that there is some element of stress in microfinance, but particularly it is coming through in BC. In the BC, as Sudhir had said, there are 17 BC, 14 are behaving absolutely fine. If at all, there is only some slight challenge in three. Out of that, one is a little more challenged. But the key aspect is that my FLDG, my service guarantee is on the disbursed amount, whereas the current portfolio is a lot lower than the disbursed amount. We are doing a lot of streamlining. We have tightened a lot of credit. Sudhir talked about a few aspects of credit that we had tightened. INR 50,000 is my, when I am going to either a new-to-bank or an existing-to-bank, my own exposure should not exceed INR 50,000. My unsecured plus MFI exposure, we brought it down to INR 1.25 lakhs, irrespective of whether it is existing-to-bank or new-to-bank. These are really a few key aspects. And Sudhir has also outlined what we really need to do going forward in terms of the business focusing on CGTMSE. I just wanted to highlight these are the critical aspects. Thanks, Raman. Back to you, Sudhir. Okay, let me go to slide number 10. This gives a snapshot of our microfinance book. As what Ajay said, we actually de-grew our book by 6%. Year-on-year, if you look at first half to second half, we are actually flat. Strategically what we have done is the BC book is actually de-grown by 11%. Our book has almost remained flat, but because of the high degree of stress in the BC book, we have made sure that we are focused on collections, and then de-grow by this. Our GNPA is at 4.97% and NNPA at 0.49%. We still focus a lot on digital payments, which is at 25%. Our average ticket size across the book is only INR 36,000, I think should be one of the lowest in the industry. Let me go to slide number 11. This gives a snapshot of the 9,300 book. 60% of the book as compared to last year, which was 50%, are existing customers who already had a good track record with us. This gives a confidence saying that our books will remain stable and have a good collections coming in on future. Thanks. Let me pass it on to Vinku. Vinku heads our Micro LAP and affordable housing. Vinku, over to you. Thank you, Sudhir. A very good evening to all of you. We are at slide number 12. As we saw at the outset, our affordable housing loan business continues to grow at a robust pace, and so does our Micro LAP business. In the quarter gone by, we have increased our frontline field force by around 16%, in anticipation of a sizable scale-up further on for H2, which traditionally is a growth-oriented period for industry as a whole. Moreover, as Ajay mentioned, our LTV ratios continue to be amongst the best in the industry. With affordable housing loan, LTV is at 50% and Micro LAP at 36%. This healthy buffer on LTV continues to augment our Home360 offering, wherein we offer multiple products to our customers, with housing loan and Micro LAP at the core as an anchor product for the bank. With upcoming festive season, if we move to slide 13, we foresee a very good uptick on pre-approved business loans, which we offer to our existing housing loan and Micro LAP customers who have exhibited excellent repayment behavior and discipline, both on us and off us. This will help to support them with their working capital requirement to grow their business for the upcoming festive season. This quarter, under our Home360 strategy, if you see our product offering per customer is at 3.7 products. That is, we sell 3.7 products on an average to a housing loan or a Micro LAP customer. This includes sustained health insurance penetration, which is not a bundled insurance product, above 90%. CASA penetration is close to 100% at 99% to be precise. Incrementally, we have seen average monthly balance per customer grow to INR 26,700 per customer. INR 26,700 per customer, from around INR 20,000 in previous quarters. On this note, may I invite my colleague, Mr. Shrinivas Murty who heads our liability business, to speak about our achievements on liability front. Yeah, hi. On the deposit side, we are clearly witnessing excellent growth. We are growing faster than the competition. Whereas the industry is growing at 12% on the total deposit, we have grown 31% YOY. Similarly, on CASA, industry growth has been at 14% YOY. We have grown at 28%, which is double the growth. For the half year ending September 2024, CASA has grown by nearly 12%. Total deposit for us grew by about nearly 10%. So deposits are clearly growing extremely well. On the CASA ratio, we are seeing stability from 19.7% in the month of March, we are around 20.1% now. Therefore, whereas the deposits are growing faster than the assets, the CD ratio has come down from 110% to nearly 100% now as we speak. So deposit growth is higher than the assets for us. Incremental CD ratio is less than 100%. Clearly, deposits are growing well. Cost of deposit is at 8%. In the month of July, we brought down our fixed deposit rates. Similarly, in the month of October, we brought down our savings bank rates, which will help us to bring down the cost of deposits further. 59% of our bulk TDs are non-callable. They offer stability. Similarly, 88% of our bulk TD is one year or above, and the 93% of our RTD is one year and above. All of this is leading to a very high LCR of 151%. On the slide 14 on the right-hand side, if you see, this tells us the concentration of states. The top three states, which are Karnataka, Maharashtra and Punjab, from 35%, they are now down to 30%. Similarly, the next four states, U.P., Delhi, West Bengal, Tamil Nadu, their share has come down to 30% from 33%. The rest of India is now up from 32% to 41%. What it tells us is that we are able to reduce dependence on few states and increase the new geographies and grow them well. This is clearly aligned with our branch expansion plan, and we are really expanding across and the business is showing up and in the upside. The key markets which are growing are Bangalore, Delhi, Mumbai, Kolkata. They are growing extremely well. Large centers like Gurgaon, Lucknow, Chandigarh, Indore, they are growing extremely well, too. What are the key drivers which are resulting into this growth? We have continued focus on optimizing our branch network, like I mentioned. We added 22 new branches in the last one year. We added four new branches in the current financial year with 16 in pipeline. The product innovation and launch of new key segments are also helping us to grow deposits. We launched something called Legend, which is a senior citizen product, which gives us monthly interest for senior citizens. We launched NRI product. We launched Exclusive Premier. We launched something called Liquid Plus FD. This is a short-term fixed deposit. I will talk more about it later. We are also improving our productivity through branch sales process. Our per employee deposits is stable at INR 9.13 crores for the last three quarters. We are also augmenting our digital ecosystem and it is playing very well for us. Like I mentioned on slide 15, this is the spread of branches as per their vintage. We have added 22 branches, which is the first bar that you see. As the vintage of the branches grow, we see increase in the average deposit both on CASA as well as on the overall deposits. If you witness, nearly 100 branches have moved from one year to three year bucket to three to four year bucket. Those set of branches will play well for us going forward. The new product that we have come up is Liquid Plus FD, which is a short-term innovative FD product, which offers liquidity and a sure return. This product, we are witnessing extremely good traction. Similarly, senior citizen product that we launched, that I talked about, Legend, is also showing excellent results. We have acquired nearly 3,000 customers under it with an average ticket size of nearly INR 9 lakhs. The staff productivity which is another key driver for us is also playing very well. We remain one of the highest per employee business as far as the deposits business is concerned. On the digital front, our mobile app has witnessed 10 lakh downloads with nearly 5 lakh active customers. On the reviews, which is a large number of reviews have rated us 4.6. This is primarily because of the easy registration process and easy interface, and therefore, it is leading to higher active users. We have added new functionalities to our mobile banking app. We have added GST payments. We have added loan EMI payments. We have added tax payments. We have also introduced what is called reward programs. One can sign on to our mobile app and redeem the rewards. In the current financial year, we have added nearly 3,000 merchants on QR, about 600 on the Soundbox. Most of these are active. Our emphasis on debit card is showing well. We have 84% acquired customers who are carded, which is leading to 71% of the base being carded. These are the key drivers, and they continue to help us stay on course on our deposit journey and play a catalytic role in our deposit growth. With this, I hand over to Abhilash, who is our CFO and homegrown. Over to you, Abhilash. Thank you. I am now moving on to slide number 18. That is what I am talking about. The unsecured business strategy what we have adopted of negative growth has led to a decline fees, decline revenue, and also we have taken additional credit cost as an additional provisioning, which has led to a lower revenue for us and also slightly higher cost-income ratio. Personally, we believe that the peak is behind us, so extrapolating this, I think it will all normalize over the next two quarters, which is next half. I think the cost-income ratio and the revenues will normalize. This is what I can call about. That is slide number 18. If I go to slide number 19, this is clearly visible in terms of disbursement. Last year in unsecured, we did INR 4,000 crore disbursement. This year it has gone down to INR 2,975 crore. That had a positive impact, which is the growth in secured business, but it had an overall impact on the revenues. In terms of GNPA, NNPA and the asset quality, 67.2% is the PCR for us, and we are holding on to the NNPA below 1%. I hand over to Raman with GNPA, NNPA. Thanks. Thanks, Abhilash. I am moving on to slide 20. I just wanted to make two, three points here on the slide. First is if I look at my secured NNPA Actually, the first thing is NNPA, 83% of that is secure. Out of INR 247 crores of NNPA, INR 204 crores, which is 83%, is in the form of secure. Second point is my LTV on the secure is at 45%. The third point I wanted to make is that my PCRs have grown pretty healthily. Ajay pointed out that last quarter we were at 18% PCR on secure, and we wanted to grow it. We've grown it to 29.7%. Unsecured also has shown an increase in PCR. The third piece is on the BC book. While we are covered 93.4% in terms of PCR, there is also a service guarantee, which we haven't really considered in all of this. At the moment, we believe that we are perfectly, and in fact, more than adequately provided. On the right-hand side, we're talking about the restructured book, which has fallen a further 10% compared to the previous quarter. And bulk of it, INR 73 crores out of INR 79 crores is secure, which has an LTV of 38%. So these are the key messages I wanted to pass on slide 20. On slide 21, again, Ajay talked about an accelerated provisioning of INR 115 crores in his introductory slide. If I adjust that and the recoveries, which is reflected in the other income line, my net credit cost is INR 247 crores for the half year, which is at about 1.9%. That is pretty much stable with what we presented in the earlier quarter as well. So these are really some key messages that I wanted to place on record as far as the GNPA, NNPA, and credit cost is concerned. I'll hand you back to Abhilash. Sure, thanks. While we have spoken about deposits and advances, one point which is also relevant is the borrowing. In the previous quarter, we have repaid SLTRO borrowings of INR 800 crore at a lower cost. That was at 4%. Even after repaying the low-cost SLTRO borrowings, we have held on to our cost of funds, which is at 8% for the half year. So that's one key takeaway which I wanted to mention. And we are expecting new sanctions and borrowing limits during this quarter. Probably it will come in end October or early November from refinance institutions, which is NHB and SIDBI. So that is expected during this month or early next month. Which is at a competitive rate to deposits and also it is long-term, which is helping out my ALM because I'm doing a lot of affordable housing and micro-housing, which is at a longer tenure, longer duration assets. So that's one key takeaway which I wanted to mention in slide 22. I'm moving on to slide 23, which is on the P&L statement. Key takeaway in this statement in terms of recoveries. We have mentioned, I think there was one request on providing the details of other income, so which we have provided in the slide. Comparatively, covering the other income part first, the major drop against last year is from the recoveries, which has come down from INR 80 crore to INR 44 crore. However, the PSL income has grown from INR 42 crore to INR 55 crore. Processing fee, there's a drop, which is from INR 118 crore to INR 104 crore. This is mainly because of the drop in disbursement in unsecured from INR 4,000 crore to INR 3,000 crore approximately. The insurance commission, we are doing well in terms of insurance. The other part is the other fee, which is basically the liability fees. Other than that, if you look at the provisions and contingencies, it has been elevated against last year, first half, which is from INR 343 crore to INR 406 crore. This includes INR 116 crore of additional provisioning for the first half. In Q2, we have done additional provisioning of INR 61 crore. Moving on, I will hand over to Ajay. Yeah. Slide 24. On the guidance piece, I have reiterated the guidance we had given earlier. We will work on this in quarter three and come back. Very importantly for us is to also go through quickly a few things which are more relevant from the bank's perspective, which is on slide 28. Here again, our strengths of being a digitized bank, of having a governance framework, all is bearing out in good stead. Our strategy remains very steady. There are a few things that I would like to add before I close, and it is very important for all of us to take note. First, Abhilash mentioned about what is unsecured growth in the first half being negative, what kind of challenges it has caused. First, of course, as unsecured has come down, there is drop in fee, there is drop in revenue, there is elevated collections cost, and there is, of course, an increased provisioning on this unsecured book. However, I would not extrapolate that for the next two quarters because we do not anticipate a 7% drop in portfolio. Obviously, fee will get better, revenue will get better, and at the same time, cost to income will get better. Those are three things I must add because we run the risk of taking the quarter and extrapolating ahead. I am absolutely providing that clarity. I would also like to reiterate what Raman said, which is our credit cost in the unsecured side has seen the peak. That is very important for us to take into account as we go ahead. The third thing that you heard from Abhilash is our recoveries in the first half are down versus year-on-year. This has nothing to do with our recoveries except that all our collection people are more busy trying to make D0 98% and 99%. So obviously that deserves a lot more manpower to be shifted towards early buckets, which we have. Having said that, now that we have had a good quarter of 98%, 99% for minus one, we will be seeing more recoveries come in the second half. So again, a good reason why we should not assume the first half and second half will be identical. I do think that as a management team, we responded to a stress moment. Our bias has been that we should make sure that our future is very secure. Our bias in the first half has not been to grow the unsecured book to make revenue or to keep cost to income low or any other measure. Our first half attempt, seeing the stress in the system, is to de-grow, get clear what the environment is really showing to all of us, and then decide to grow. Which is why the policy has been conservative, and our strategy has been conservative to that extent. But I do believe that with this strategy, our credit cost in the second half, our cost to income coming back towards late fifties like it used to be, should be things that one can expect, and we will be working towards that. That is a few things I wanted to add based on what some of my colleagues have mentioned. In closing, I just would like to say one simple thing, which is from a strategy perspective, we have been absolutely on track to deliver a secured bank. We are continuing to deliver on that strategy. For us, what has happened of stress in the microfinance business is a small aberration, which we will certainly be able to conquer. You can see very well that Jana's own book reflects a much healthier portfolio. Yes, I do compliment all our BCs. They have done a fabulous job. A few of them did go off track. We are bringing them back. Happens to be three out of 70. We do believe in the BC business for sure. Our liability business is growing very well, and we certainly will make sure that our second half, some of the gaps that has arrived from the stress gets fully covered. Our secured business, as I mentioned earlier, has grown a 16% clip in the first half alone, and that will continue to see the same solid growth that we have seen in the first half. With that, I would like to stop here and I would like to request Isaac to open the floor for questions. Thank you so much, sir. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and One on their touchtone telephone. If you wish to remove yourself from the question queue, you may press Star and Two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Manish Oswal from Nirmal Bang Securities. Please go ahead. Yeah. Thank you for the opportunity. My question on your comment around the second half will be better, but if the operating environment remains challenging the MFI space, what gives you confidence to do better compared to the H1 performance, especially in the credit cost, collection of money from the MFI customers, the collection cost and overall income growth because you said the fee revenue and revenue also goes down because of the situation in MFI book. Can you explain the factors which make you confident to deliver that kind of performance in the second half? Thank you, Manish. First half it has been a reaction to a stress. I think very little chance all of us got to plan. Second, given that the stress was still evolving, it's very difficult to say that is our final response. The first bias has been it's an evolving situation. Let's watch it. Let's be very conservative, and we will take our measured step on how to respond to it as we go forward once we see the full picture. I think, which is why if you see a lot of the things and we've done this special 2 slide, Manish from Sudhir, to tell you how we will respond to the microfinance situation of where we are tightening, how we are tightening. Few things I'll tell you why second half will be better. And I think it'll be significantly better. First, we will not have a drop in unsecured by 7%. Which means revenues will be better and fee income will be better. Second, we will not see an elevated provision like we saw in the first half. Because what is the biggest flow through possibility? They've all flown through. I did mention that we have seen a 98%, 99% collection this quarter too. That is the second reason, which is credit cost will be lower, disbursements will be higher, fee will be higher, interest will be higher. And the reason why it will be different is also because for us to kind of believe that everything will be okay very quickly is not real. We have taken time to respond to how we want to rebuild, and where we want to tighten, and which is what we are seeing right now, which Sudhir has clearly explained. That's the second thing. The third thing, very importantly, like I mentioned, is a lot of our staff did get diverted towards holding early buckets strong because there is no point getting early buckets weak while we collect at the deeper buckets. We obviously see more of our teams now getting focused on the deeper buckets. Deeper buckets will give us a better result, which is going to result into lower credit cost for the second half. Second half credit cost will be certainly a lot lower purely because you won't have so much to provision. Your credit cost is much better. You can see from the secured book, everything is good. Remember, out of my book, 65% is secured. That's completely a book that is very well managed, and we are very confident of it. The important thing, Manish, since you brought it up, and I would like you and everybody else to make sure that please make sure when you do credit cost calculation, kindly use this page which Raman has referred to, which is page 21. Because we run the risk of reaching the wrong credit cost in the calculation. Because a lot of the recoveries do come in the P&L line for fully written-off accounts. We will not see that in the credit cost. But obviously, they come through the P&L. When we do a credit cost extrapolation, it is best that we use the page number 21. While you use the recoveries in the credit cost to be minus, you please reduce it from the other income, so that you reduce other income by so much, and you reduce the credit cost by so much. It will give you a good chance to extrapolate it. Manish, I'm very confident that our second half will be a lot more different, and our first half has been absolutely what we think as a team here, something that we have to positively respond. Because we do want to make sure that not only we respond for this year, but we are also well prepared for next year. Sure. The second question on the balance sheet side, we saw borrowings and investment down by INR 1,000 crore on quarter-to-quarter basis. Can you explain what is cause to that kind of drop on both line item? Yeah. So very simple. Abhilash did mention it. There was an SLTRO which was given by RBI during COVID period. That was a four-year tenure. He got mentioned. The expiry of that happened in April. By June? July. In July, which is why the drop in borrowings has happened. We have not repaid anything. Nobody's done anything else for that. It is a repayment of RBI, which had to happen. I must also say that given there has been very strong liquidity in the bank, so as we finish our September quarter, we have INR 1,400 crores as cash. So we have enough cash as we have. So we haven't tended to borrow also in the last few months. We will be borrowing now because I think the rates are a bit better on the refinance side than they were six months to one year ago. There is nothing here except that we repaid RBI. Second, our borrowings will come this quarter. We are expecting from two refinance institutions, and our borrowings will be back up. Nothing for there, which is something for us to worry about. All I can tell you is that the borrowing cost from next quarter will be lower than what it is this half, purely because we expect better pricing. And two small data point. What is the collection efficiency for MFI book during the quarter 2 versus quarter 1? And then total slippage for H1 number and quarter 2 numbers. Thank you. 98.3, 98 point No, effect first quarter and second quarter difference was how much? 0.3%. 98.5. So we are ranging between 98.5 to 98.7, the regular book. That should be answering the question. So we are ranging between 98.5 or 98.7. What was quarter 1, sir? Quarter 1 was around 98.6% to 98%. So it is always between the range of 0.2 basis point here and there. It is always range between 98.2% and 98.7%. And total slippages for H1 and quarter 2? H1 of last year? No, H1 of at 25 currently. Sorry. Right. The total slippages in quarter 2 for MFI was roughly about 10%, Manish. Okay. Okay, sir. Thank you. That includes the BC book. That includes the BC book. Absolutely. Manish, slippage is from the BC book. If you go back to slide, I would encourage you should go to that slide because that is a very important slide to get this sorted out from us. Sure. Slide number 10, where if you look at everything on our book, which is Jana's book, it is 4.2% gross NPA, net NPA of 0.5, and 3.5 for JLG group. It is a BC book, whereas we have explained it is with a service guarantee, and the service guarantee is in form of deposits, which the bank holds and encashes as it goes into NPA. If you talk of slippage at Jana's end, it will be less than 50% of the BC book. The percentage that Raman mentioned is largely led by the BC book. Thank you so much, sir. The next question is from the line of Shailesh Kanani from Centrum Broking. Please go ahead, sir. Thanks for the opportunity. Just wanted to understand the accounting in case of tie-up with the BC. So supposition the BC book size is around INR 100 and the GNPA is INR 10. How does this FLDG of 4-5 work, and how much is getting reflected in the books? How the PCR is calculated? Can you just give some idea of the accounting on this? Yes. Shailesh, first, let me explain this. There are 17 BCs. 14 of them are nowhere close to the FLDGs or the service guarantees that they have given to the bank. 2 are on borderline, and 1 is where it will cross the amount of money he's given the bank. Now let me explain how do we take this service guarantee. It is based on disbursements and not portfolio. Which is why if you see page number 10, where while the gross NPA is 9.7%, it doesn't mean we are out of pocket, because our service guarantee is on dispersal amount and not on outstanding. So we have a lot more money than the current average outstanding of all BCs. But like I said, we do not see us being out of pocket with any BC except 1. Second, very importantly is all BCs are committed to getting recovery behind them. So full steam ahead. They are all focused on recoveries, which is why if you see their book has now shown a negative growth of 12.7%. And like Sudhir mentioned, wherever they have seen a bit of turnover, and because we had obviously a larger workforce who have seen COVID and demonetization in the past, we have lent them some of our senior collection resources to support them. Shailesh, just to answer your question, does the bank anticipate any big challenge out of if the service guarantee is surpassed, then I'm clarifying that to you that there is only 1 case where it will be surpassed. We are sure that's not a number which will change our view on the next half. And second is we also know that everyone who is close to the service guarantee provided by them or the 1 who surpassed it, they're all very committed to making sure that they bring it all within their line because it is a very important P&L item for their businesses also. There was an ancillary question on accounting on the PCR as well. Gross NPA remains Please go ahead. Gross NPA remains whatever is coming through the books at the moment an account becomes 90 DPD is gross NPA. Then thereafter, you have either the provision or the service guarantee invocation. Together, both of them get deducted to come up with a net NPA number. The net NPA number for BC book is roughly at about 0.7%. The PCR is at 93.4%. Shailesh, you must look at page 10 because the 0.7% net NPA of the BC book with a PCR of 93.4% is stated there. That will give you a good sense of the service guarantee the bank has. Again, I would also like to add, Shailesh, we should not extrapolate first half into second half. I am not saying everything is perfect. Obviously, we have seen the peak, and you can see that in the numbers here. Fair enough. I just wanted to understand, this includes the cover what we have. I got an answer for that. That is fine. Sir, again, on this BC book, as you rightly mentioned in your remarks as well in the beginning of the call, our ATS is one of the lowest in the industry. Just wondering why we have such a high GNPA in this book. Have we done some analysis because quarter-on-quarter also the quality has kind of gone down. Any thoughts on that in spite of having so low ATS and from your earlier commentary that they are the old partners for the bank. Any color you can throw on this? Good question, Shailesh. I think I should have probably covered it, but let me just check. I really want you to go back, Shailesh, to this slide which Sudhir presented. Here in the BC book, one of the BCs under challenge is really the BC who had used CSP points to support them. There has been obviously a breakdown of communication. There has been a breakdown of operating rhythm between the CSP points and the BC. Our learning really is that BC is using CSP points for collections may not be the best answer. Fortunately, this BC does not have his entire book with CSPs, but some geographies where he uses CSPs, he got a bit challenged. We have decided that we will stop CSP points for any BCs to use. They have to use their own staff. That's the one reason where one BC is challenged, and that is the one challenged BC, and this is the primary reason he's the most challenged. That question from you, Shailesh, is absolutely fair, which is why does an institution where their own book is pretty much reasonable, ATS is low, why is the BC book more challenged? One of the reasons of the most challenged BC is the use of CSP points as one of their channels, which hasn't worked well. The second is, let's talk of the two people who are on borderline. Very good institutions. We would do more business with them. I did think that going into new geographies led to new people who did not know the processes. Certainly, if they would have had a lower growth, they would have been less challenged. Which is why Sudhir mentioned that we will put guardrails on growth even if you are a BC. The challenge, obviously, if you are a BC and you are small, percentage will look high. We will obviously model it to some sensible number. But our takeaway is two. The most challenged one had CSP relationship issues. The two on the borderline had faster growth rate than the rest. As you can see, out of the 17, if you leave these three out, rest are pretty much in the 1.5%-2.5%, sorry, 1.5%-3.5% ranges of gross NPA, which is well-maintained book. That kind of reflects everything on Jana's book also. But unfortunately for us, these seem to be a little on the bigger size in terms of contribution to the book, right? These three BCs, which you are referring to. Yes. He is one of the larger ones, and he is one of the oldest ones. Okay, fair enough. I must say that for all your sake, so that you understand, the CSP model, this BC has been practicing even before he became our BC for many years. So he has got a new model he tried with us. But unfortunately, in this crisis, again, due to a mix of a few issues, it has not turned out well. So it is not a new model he tried with us. It is a model he has been doing for years. He has been our BC for over four years. We never had a challenge we got worried about. But somewhere, I think, in this stress moment, this has kind of snapped. So yeah, that is just to give you some background of both his BC as well as what happened. Okay. Just last question from my side. Sir, any targets for PCR per se, how that we should build up in our models? Also on a bookkeeping side, can you share the gross slippages, recovery write-offs for the quarter? Okay. Shailesh, one is, for your model, I would always expect Jana to have net NPA below 1%. That will be our going-in position for every other quarter after this. Whatever is required to be provisioned, we would provide for that. Like I mentioned, Shailesh, you got feedback when we were doing the calls last time around that some of the analysts would like to see our secured PCR go up. While we could have declared a higher net profit and crossed 100 for our psychological mark, et cetera, we decided that, listen, we would not do that. We would actually raise our PCR even on secured to a 27 point some percent this time. That is the second piece you should know. We would like to retain that at that levels. Thirdly, I would not assume the same flow rates as quarter 2. I will assume a very low rate, because if you look at the BC book, there is only so much more that can flow down. The worst is already behind us. That is the third piece I would do. On the slippages, again, I would like Raman to quickly work out a slippage, which is with BC, non-BC, and share that with you, but I could do that later, because I do not think so that number is ready with him right now. That is right. We will come back to you, Shailesh. Okay, sir. Thanks a lot and best of luck. Thank you so much. Thank you. The next question is from the line of Kamal Mulchandani from Investec Capital Services. Please go ahead, sir. Hello. Hi, sir. Thank you for the opportunity. Sir, can you please guide what has been the PAR 0 trends in the MFI loan book for the company? Zero. Yeah. Hi, Kamal. You are talking of PAR 0 trend in terms of, you are talking of collection ratio? What do you mean by PAR 0 trend? I think one plus. One plus bucket, right, Kamal? Yeah. Yes, sir. Give us a few seconds. If you have a follow-up question, ask while he gets the data out. He is pretty close right now. Sure. Secondly, I wanted to ask that quarter-on-quarter, we are seeing increase in GNPA for affordable housing and Micro LAP. Sir, can you please elaborate, what has been the reasons for this? Right. The increase in GNPA for affordable housing is actually in line with what we would expect. If I look at the and if I look at secured as a whole, my overall net slippages is somewhere in the region of 2.5% per annum annualized. That is broadly in line with what we expect for all these secured portfolios put together. That is one part. The second part is if I look at my LTV ratio for the GNPA, that is at about 45%. Therefore, the loss that I would expect from this portfolio is going to be very minuscule. I think these are really the two points I just wanted to highlight. I just want to add to Raman's one point. You have probably a 20 to 30 basis extra gross NPA at this point of time, purely because of slowness of getting the 13 2, 13 4 and SARFAESI activities organized in the first quarter. We do have a backlog. I had mentioned in the last call that we should clear about 60% of that backlog in quarter 2 and the balance 14% for the last quarter. We have a lot of cases where we are waiting for repossession orders. Most of the territories have cleared it. We have one or two states where it is still a backlog. Once that is done, you will see a gross NPA, which is slightly lower than where it is today. But other than that, like Raman mentioned, given our slippage is where we are, it is hardly a LGD book at all at our end. We are not seeing any microfinance rub-off on our book. I am saying this very simply because there is no connectivity we can see, and we are not feeling any challenge coming from a MFI behavior into any of our secured books. Our commonality of customer isn't large. It is something as a strategy we will do more of now, but that has not been our biggest push in the past. Okay, sir. That is what I wanted to ask. If the one plus numbers are ready, that would be great. Okay. Kamal, let us go to the next and we come back to it. Trailing, which we will send it across to you. Perfect. Cool. Thank you so much, sir. Thank you. Thank you. The next question is from the line of Rajiv Pathak from GeeCee Holdings. Please go ahead, sir. Yeah, hello. Good evening, everyone. Just to reconfirm, are you saying that in Q2, the stress levels and the credit cost in the unsecured book would have peaked and Q3 onwards, you will actually see a decline in the stress levels and the credit cost? The second part is on the secured book. I think it is very heartening to see that we have increased the PCR on the secured book. But if you were to look at the three main components of this book, the housing, the Micro LAP and the MSME, there is a quarter-on-quarter increase in the GNPL. So can you just share some thoughts on what has led to this increase and whether you will see some kind of a trend going into the second half also? Okay. Thanks, Rajiv. Rajiv, yes, I think two things will happen in second half. We will not have as much flow into gross NPL as we had in the first half. If you really look at our slide on microfinance, which is slide 10, you will see that our BC book is already sitting at a gross NPL level of 9.7%. There is not much room it goes. I will just tell you the peak number roughly was INR 2,500 crores of BC book in March. It is down to INR 1,950 crores. A lot of the tougher customers which were on the borderline have already skipped. That is one simple reason. Our book, if you take what is on Jana's own book, we pretty much are more or less steady with where we were in the first quarter. We really do not have any slippage of a serious nature there. Which is why you should expect lesser flow through. Like I mentioned earlier, lot of our collectors were basically moved to the early buckets to stem the flow. Now that the flow, like Sudhir mentioned, 98.6% to whatever, closer to 99%. We have more time with our collectors to really work on the recoveries of the deeper buckets. We should see better credit recoveries. We should see lower credit flows, which means lower demand for provisioning and better recovery. Net number will be much more positive. Okay. That is a given. Thirdly, remember, we have not grown unsecured in the first half. We have actually run negative. I have not added new customers, which will give me new NPAs. Right. While it is not flattering on the first half numbers, because I have obviously lost fee, I have lost revenue. But I do think that negative growth of first half, 7% of unsecured, will add a positive to the credit cost of second half. And we certainly are very sure of now what growth we want to build. Because now we are certain that this growth will be something that will be good credit even as we go forward. Because Rajiv, as you know, if we try and grow the way out of the problem, we can probably solve today's problem, but we'll create tomorrow's bigger problem. Yeah. Now on the secured book, listen. PCR, we happily put it there because we wanted to make sure that nobody should have any doubt that we are very committed to make sure that we are well provided, if provided slightly extra is the way we look at it. So right now I'm referring to slide 20. That PCR is increased to 29.7%. I'm sorry, I missed it earlier, but roughly 30% on secured. Yeah. 88.88% on Jana's book, and 93.4% of BC book. So we've got very good PCR coverage, and I think very well balanced now. So PCR is the same that we should anticipate. I really do not have a different answer to give you on gross NPA for secured. Okay. Except that like Raman mentioned, if you actually model it, and you look at gross NPA, net NPA increase, your LGDs will come to less than 0.1%. You just have a look, just multiply it and you see it. We will not even use a provision here. But many of the analysts said last time that other housing companies have given higher PCR. Why do not you also look at it? We have actually put PCR here. Our increase of PCR is not any reflection of what we anticipate as a loss. I just want to make sure that I clarify that. Yeah. One thing I did mention, and I said this in the last time also. First quarter of the section, 13.2, 13.4, SARFAESI was all delayed. Mainly because of elections. There is not a machinery which is supposed to give orders or work with us, whether it is the tehsildars or the law enforcement. Everybody busy with elections. I did mention last time also, I will probably solve 60% of that backlog in Q2, and the balance 40% in Q3, and which is what we will do. You will see gross NPA getting better. There is no specific action we are taking, Rajiv, which is worrying us on secured. We have a good scorecard. We have a new version of that scorecard. And we are seeing good growth, as you can see in our business. All very steady, Rajiv. That point is well taken. In fact, your housing, say, gross NPA is 1.2%, Micro LAP is 2.2% and MSME is 2.4%. It is kind of well below what we have seen in the other guys in the industry. My point was that since we are already better off within these three sub-segments in terms of the gross NPL, this should still be maintained, right? We will still be clocking better than industry averages in this sub-segment, right? Absolutely. I would say that you should expect us to remain here or get better in second half. Okay. That's what I was trying to say, Rajiv. We have some backlog to clear. Okay. We are fully focused on it, and we will certainly do better, at least our sense is that from here it should remain steady at best get 20 basis points better on gross NPA. That's what I can expect. I want to repeat for unsecured because that is most important thing which should be a cause for concern. Don't extrapolate unsecured either revenue or gross income. Also realize that as a management team, we have to make sure that we have to convert to a universal bank next year. We have to have net NPAs below 1%. We have to have gross NPAs below three. We would not chance one quarter numbers to make them look nice, but then put the whole next year at risk. So we rather felt that not growing, watching, getting clarity in our minds of what's happening- is more important. Then once we are sure in our minds what has happened, then we'll respond. That is how we have seen it, which is why we're very happy telling you that second half will be different. Just one data keeping question. How much would have been the interest reversals in this quarter because of the slippages? Rajiv, interest in suspense is our RBI norms for whatever goes into NPA, the entire money is reversed. I don't have the number offhand with me, which is what is the Are you asking for a rupee value, right? Yeah, rupee value, absolutely. I don't have it unless you have it. No problem. I will take it on later. Okay, Rajiv. Thanks. Wish you all the best. I am noting down these questions so that next time we are more prepared for this. Yes. Thanks a lot, and wish you all the best. Thanks, Rajiv. Thank you so much. The next question is from the line of Ashlesh Sonje from Kotak Securities. Please go ahead, sir. Hi, team. Good evening. A couple of questions. Firstly, on the MFI book, you have said the slippages are roughly 10%. If I go by slide number 10, where the overall book is roughly INR 9,300 odd crores. Does that mean a roughly slippage of about INR 230 odd crores, assuming the 10% number was annualized? Is that right? INR 230 crores is right. Ashlesh, the thing that I've asked Raman to do is to break this into BC non-BC, that will kind of solve the problem. That will give you a good future to how to measure the two. Secondly, you mentioned that the gold loan business, one of the sales channel for that business is your MFI customer base. Can you share a rough number as to what is the proportion of your gold loan customers who would be either an existing or an erstwhile MFI customer? A rough number. Almost, right. Listen, we wanted to hazard a guess. We can tell you existing customers, so that will probably be about 15% at best. What is our old MFI customer is very difficult to say. If you ask me an active customer base right now will be MFI customer will be 15%. Understood. Perfect. Yeah. Just to confirm what you said, you are saying that while there are challenges on the unsecured piece, there is no rub-off on the secured segment, at least for now, right? Absolutely. You heard Rajiv Pathak before you. There is no challenge on the secured piece, which is why if you see we have grown at half on half growth is just 16.9% in affordable housing, 8% Micro LAP, so no real challenge there. We are not seeing any rub-off because we do not have a large proportion of MFI customers which are based. Our average ticket size is INR 6.5 lakhs to Micro LAP. So there is not a large proportion of microfinance segment customers. There is a small proportion, but nothing challenging. We had also done some study earlier where we found that existing customers of MFI actually behave very well when they borrow on Micro LAP. Even though it is a small percentage that we have, we always felt comfortable with that. That is mainly because once we are able to collect from them an unsecured loan of INR 40,000, INR 50,000, then doing a secured loan of INR 1.5 lakhs, INR 2 lakhs is not such a big issue. So I would like you to be very sure from what we have said, we do not see any challenges in secured one. Unsecured, we will not see more flow-throughs because larger flow-throughs were in the BC book where the real elephant has passed. Thank you. Those are all the questions. Operator, is there any further questions? Yes, sir. The next question is from the line of Yash Mehta from Art Ventures. Sir, I wanted to ask that on an industry level, for how long do you expect the stress in the microfinance sector to continue or when do you expect a revival in the microfinance sector? See, here is the answer that I think it will be dependent on player to player. Average ticket size will be a big determinant of how much you have leveraged up your customer. The geographies you are present will be another determinant because if there are too many players and your customer is leveraged quite highly, then the problem will be worse. I think people will try to grow out of this problem by disbursing early, may find that this may come to bite them later. That would be the third piece I think would be a differentiator. So those would be my three big reasons of saying it is very difficult to say everybody will look similar, and I think people will look extreme. I think you will find different players at different points giving their challenges because their responses will be different. Like we do know that there will be institutions who would have grown in the first quarter and the second quarter value will be grown. So our answers will be different. That is what I'm saying. I don't have a straight answer depending on the institution and the strategy they take to resolve the issue. I think the question which is important to all of us, and certainly it is to us, is saying what business model is the MFI business looking at. I think that is a bigger question because frankly, as we have seen in the past, using leverage to grow and growing your institution is not the answer. There is no hard guardrail that if you lend a small amount, somebody else will lend on top. What do you do? There is no good answer also there. I think becoming more conservative in the MFI business, both in its growth and what you wish to do is important. That will mean that all of us should, at least at Jana we think our MFI business contribution will be more guarded in the future also. While we always had a plan to get to 80% secured, our mind is to get there faster now. Because I do think there will be a bit of a question of the model, right? Which is okay, even if this stress is over, what next? We can't go back to the same model because this model causes stress. Then what is the next model? How do all of us as responsible lenders behave? Will we get the behavior from all the rest of us? May not be an easy answer right now. It's not so obvious to us. So our bias is, listen, we were anticipating to become a 67%-68% secure by end of the year. We'll probably aim between a 68% and a 70% now. Okay. Sir, one more question. Sir, will you be able to grow the advances by 20% in the second half? What kind of growth rate do you expect in the second half for advances? So if you look at our first half, first half is very clear. We were 16% secured growth, 7% negative unsecured. Composite 7%. So composite was 7%, but unsecured grew minus 7%, secured grows plus 16%. Now if we make sure our unsecured is at 0% growth, I am just being conservative. I am not saying it will be zero. And secured grows by 16%, I think we will be closer to the number you would anticipate. Now by chance if secured grows 5% in the second half and unsecured continues to grow at the first half, then you can look at the number. I can only add that first quarter in all our banks is not the strongest quarter for disbursements. It is normally Q4, which is the peak quarter, and Q3 is always a very good quarter. So I would think that our growth rate in second half on asset side will kind of cover the gap of the 20% growth in asset business that we would like to do. Thank you, sir. 16% growth on a 70% of the book is about 11%, 12%. Add that to the 7% you are already at now. Thank you very much, sir. Yeah. Thank you so much. The next question is from the line of Gautam Jain from GCJ Financial. Please go ahead, sir. Yeah. Thanks for giving opportunity. Good evening, everyone. A couple of questions. First is, can I get the yield of secured business and unsecured business? Average yield. Yield of secured and- NIM, right? Sure. Also the average portfolio yield. Yield. Yield. Range. Yeah. One sec, Gautam. First is, Gautam, thank you for asking the question and coming to this call. I am just getting Abhilash, who is the CFO, to give you the range of yields for both secured and unsecured. Do you have another question which I could answer in the meantime? Yeah. Also, can I get the stage 2 numbers for Q1 and Q2 of this year? You have? Stage 2 SMA, we don't. Get the yield. Gautam, third question. Third question would be, do you think there is a risk to guidance we have given? Because if I take first half, the numbers are quite low compared to what we have guided for in terms of PBT operate. Do you think we can fill that gap in second half and meet our guidance? We have given 30%-40% the PBT level growth. Among the guidance things, AUM growth of 20% I think is not a risk. It is something that I do think we will hit in second half. Deposit growth of 20%, given that the first half is more closer to 10%, I think is something that we will certainly do. I think the PAT growth is what we will watch, which we will get a good sense of in this quarter, which is largely to do with the credit cost that we have in our mind, as well as unsecured, a portion of the growth coming back. Which we will certainly see how the response is. I must tell you that in the first 21 days in October, it looks encouraging. So we will certainly have a look at that. I think fair to say the 40% may not be a possibility now. More closer we will be fighting the 30% answer, is how I look at it. Okay. The last question is, if I look at your PPOP sequence from INR 355 crore to INR 298 crore. So luckily we have a decline. There is a decline of around INR 57 crore-INR 58 crore sequentially from Q2 to Q2 to Q2. And that is mostly because of the drop in net interest income, and that again, because of high proportion of secured book. So just a question which is coming to my mind that if we continue to increase our secured book, do you think same rate of decline in yield will come and that will lead to, again, very, very marginal growth in operating profit year-over-year sequentially? So Gautam, just to clarify, so the PPOP drop is also you have to consider the sale of PSL which we did. We earned INR 40 crore in quarter one, and this quarter we have earned only INR 10 crore out of that. So that is the impacting factor for the PPOP. So Gautam, here it is. The real big change in the first half is negative 7% in the unsecured book. My rough estimate of revenue loss it has caused, if I add that with some interest and suspense, high-level estimation, it should be between INR 100 crore to INR 120 crore. That is the primary reason of change. Okay. Now, even if the second half gets back 3% or 4% of the 7% negative, we will be back to normal. I do not think so our secured book is causing any change in the mix causing problem. It is more the negative growth in unsecured. And you can do a quick number, 10,000 minus 9,300, 700 crores with a yield of 19.9%, if I remember right. That will give you the number. Slowdown in disbursement will give you the second number, because disbursement means, of course, less revenue and less fees. I want us to be very clear that once we don't grow secured aggressively, just grow enough, we will be recovering a lot of the gap in revenues, which will obviously cost to income will look better, revenues will look better, PPOP will look better. Gautam, we didn't want to do that in the first half because we didn't want to go in a very environment which is unclear of what is the depth of the issue that is surrounding us. We wanted to make sure that before we take and decide where we are going, we get clarity on that. Yes, that is the only reason I would be wanting to mark. When I'm calculating second half, I will build back some unsecured growth, and you will find a much better number across the board, whether it's cost to income, it is et cetera. The other piece I must tell you that on credit cost, you all must use our slide because if you use any other number, then we will always have a reconciliation issue amongst us. Because the recoveries we do, which goes to the fee line for the fully provisioned book, we miss that, and then we have a elevated cost of credit we should avoid. That's my only other request, Gautam. Can I expect this stage 2 number Q1 and Q2 and the yield? Let me give you the yield first. Sorry, Gautam, give me one minute. Let's see if the next question is ready. No, the cost of funds in this quarter is 8.1%. Don't you think this is much higher than even compared to our peers? Or do you think still has room to go up or this is the peak cost of funding, it declines from here? Yeah. Good point there. Yes, I think it is higher than our peers, and the reason it is high is because our LCR is at 261%, and that is also higher than our peers. Industry average is 130%. Our peer group is in the 100%-150% range of LCR. We are at 261%, Gautam, and that causes obviously a higher cost because we would like that we have a large portion of our deposit non-callable, and certainly given last year environment where, and some of it this year where the talk of the town is the growth of deposits in banking. We wanted to make sure that we do have a very solid liability book under any circumstance. So conscious strategy. Would we like to reduce our LCR and hence our costs? Slowly over the next six months as the situation eases, we will do it. Okay. But you must see that slide, and Gautam, you must have a look at it. It is slide number 14. The LCR of all the peer group that you're comparing also in the public domain, you must have a look at it. Okay. Conscious strategy of paying the extra 20, 30 basis points to buy certainty in an environment where deposit growth rate in the industry is challenged. We aren't challenged. We are doing very well, but we want to make sure that we have a bit more strength in our book, certainly on the deposit book. Just finally, everybody, I would say that our LCR at 260% is roughly two times the peer group that we talk of. Do you think that, Ajay, that Q3 will be peak quarter in terms of gross NPA, then it will fall down from that level? I think so. I think, Gautam, like I said, we are on 21 days of October over. I mentioned to Rajiv earlier, secured, nothing that disturbs our thinking. Unsecured, you take the biggest flow through is BC's. Their INR 2,500 crore book is down to INR 1,900. The worst is kind of flow through already. I can see all the BC's very focused on collection. All credit to them. I must say that they are very well coordinated. Fair to say that, yes, in Q3 will be a lower credit cost for sure from Q2. But I think it's less about the rupee value, Gautam. It's because the flows are lower, it is also giving us confidence then to start disbursement. Because for a business which is having a lot of slippages, then to focus on disbursements may not be the healthiest answer. Which is why we feel that this quarter, the book will grow, credit cost will be lower, which means revenue will be higher, interest in suspense will be lower. Recoveries will be higher, for sure in Q3. We should see a much better performance, which is why I said with deposit of 20% growth rate, yes. Asset growth rate of 20%, yes. That I would still fight for the lower range of 30%, which is because we had indicated 30%-40%. We will certainly be focused on getting that right. Thank you. Sorry. I do want to respond to Gautam. Gautam, if you take my MSME home loan and Micro LAP book, the yield is 13.41% between the three. I mentioned earlier, the yield on the unsecured book, which is largely microfinance, minus the payout to BCs because they have a portion of the revenue, is roughly about 19.9%. 19.9. I am not adding, you know, the vehicle loan, I am not giving you. I think your question was more around our top three businesses of home loan, LAP and MSME. What is the yield that the bank will get? That is 13.4%. Thank you, sir. Okay. Thank you. Ladies and gentlemen, due to time constraints, that was the last question. I would now like to hand the conference over to the MD and CEO, Mr. Ajay Kanwal, for closing comments. Thank you so much. Listen, in closing, I just would like to say a few very simple things. This small bump in the road doesn't change our strategy. Our strategy always has been growing a secured business. If anything, this six months has again proven that we have been on the right track as a strategy for the last six and a half years. We fortunately have the product, we have the geographies, we have the people in growing secured. I must say that we are fine here. I must add that in our unsecured, the peak is over. We will get better in Q3, which will include us growing the book, which will include lower credit costs, and will include more recoveries. All three will happen because that is the nature of the beast. We will remain always focused on making sure that our book is ready for application of a universal bank next year after we finish our audit. I am sure that this half is bit of a, I must say, more unexpected than we thought. We have decided that we will use this moment to really do the right thing and not really focus on how to make this quarter's profit look better. With that, thank you so much and thanks for coming for this call and hope to catch you on the next call when we declare our December numbers. Thank you so much. Thank you so much, sir. On behalf of ICICI Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.