Jana Small Finance Bank Limited (NSE:JSFB)

Q1 24/25

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Jul 22, 2024

Summary

Deposits grew 41% YoY, CASA rose 9% QoQ and secured assets reached 62% of advances. Q1 PAT was INR 171 crore, while elevated NPAs reflected collection and enforcement delays; guidance remains unchanged.

Ladies and gentlemen, good day and welcome to the Q1 FY 2025 earnings conference call of Jana Small Finance Bank Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference, please signal an operator by pressing star and then zero on your touch tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Savli Mangale from Adfactors PR investor relations team. Thank you, and over to you, ma'am. A very good evening to everyone, and a warm welcome to the Q1 FY 2025 earnings call of Jana Small Finance Bank Limited. From the senior management we have with us Mr. Ajay Kanwal, Managing Director and Chief Executive Officer, Mr. Ashish Saxena, Chief Information Officer, Mr. Gopal Tripathi, Treasurer, Mr. Krishna Raman, Executive Director, Mr. Pradeep Rebello, Head Two-wheeler Finance, Mr. Sudhir Madhavan, Lead Microfinance Assets, Mr. Abhilash Sandur, Chief Financial Officer, Mr. Rinku Vachha, Head Affordable Housing Loans and Micro Housing Loans, Mr. Shrinivas Murty, President and Head, Branch Banking and Marketing, and Mr. Kamal Bandopadhyay, Senior Advisor. Before we begin the conference call, I would like to mention that some of the statements made during the course of today's call may be forward-looking in nature, including those related to the future financials and operating performances, benefits and synergies of the company's strategies, future opportunities, and the growth of the market of the companies. Further, I would like to mention that some of the statements made in today's conference call may involve risks and uncertainties. I now hand over the conference over to Mr. Ajay Kanwal. Thank you, and over to you, sir. Thank you so much, and a good evening to everyone. I'm going to start straight into the executive summary in the presentation. I'm going to refer the presentation pages so we can all be linked up. On pages which have pretty much the same data that it had in the last analyst meeting, I will run through them pretty swiftly, and I'll focus harder on where numbers have changed or there is something important for us to report. First, let me tell you that it's been a very solid and strong quarter for us. Our deposit growth rate, which has been a lot of discussion in the industry, has on a year-on-year basis grown by 41%, and a quarter-on-quarter growth of 5%. Time deposit quarter-on-quarter is up 4%, and very importantly, and you can hear from Srini the strategy, our CASA quarter-on-quarter growth is 9%. CASA has grown faster than our TDs, and as you can naturally expect, the CASA ratio, which was 19.7% in March, is now at 20.4%. Advances 25% year-on-year growth, 4% quarter-on-quarter. Deposit up 5% quarter-on-quarter, advances up 4%. Now the most important one. Quarter-on-quarter asset growth is 8% for secured assets. Unsecured is -1%. While we have grown 4% in the first quarter, which is normally a harder quarter to grow things, our secured has grown eight, unsecured one. We continue with our strategy of growing secured assets in the bank. I must say that the secured asset percentage, which was 60% in March, is now at 62%. Our secular move towards secured asset as a bank continues robustly in quarter one. Our capital adequacy is at 19.3%, with tier one being at 18.2. I must tell all of you that if I added the interim PAT, which is roughly about INR 171 crores, this capital adequacy would be at 20.2%. As we all know, these are limited reviews and these are not full audits, which is why we do not add the profit into capital adequacy. I am sure you folks will take that into account when you look at capital adequacy. While deposit growth rate has been strong, our LCR is at 296, which shows that our profile of deposits, and we have same details that we had for you even in March, showing what is non-callable, what is more than one year, how much is retail, and that will show very strong, robust liability profile of the bank. Our ROA is at 2.1% for the quarter and an ROE of 18.8. The ROE does include all the equity that has come in during the IPO, which is the first full quarter of the equity infusion for the quarter. If you take quarter four last year, the equity infusion was mid-quarter. This is like the full quarter of full equity coming in. The one homework that we have from first quarter is a slight increase in our GNPA. It is essentially driven from not having full scale burst in collections. Certainly, given that we had elections going on and does cause slowness in the way things are done. First quarter is seasonal, and we have seen a small stress in our BC book in microfinance. Having said that, something that we know will get sorted out and something that is event-driven and seasonal for us. With that, I would like to then take you through more details of year on year. Just so that we have a very clear understanding on PAT, let me tell you our PAT is at INR 171 crores. This is after we have created an additional provision of INR 54 crores and added back a DTA of 10. If you just take, had we not created the provision, we could have added INR 54 crores to our PAT, but the DTA has helped us with 10. Please be very conscious of that, of how we have decided that we will continue to create a good buffer of provision as we go along and the bank grows. I am moving on to slide number three, that gives you the year on year growth. Some interesting ones here that you should know is that last year, we did not have any DTA, so INR 10 crores is additional this year. Hence, what you will see on the first line is a PBT of INR 77, because PAT does have DTA, and we did not want to get that number wrong. Here we can see robust growth all through, where I would like to point out asset growth, which is 25.1, but the secured is now at 62. Same time last year it was 58. That is very important to us. Our liability is at 8% cost of fund. It has gone up from 7.5. Interestingly, if you go to the second last column of ratios, last box is NIM. Cost of funds up 7.5 to 8, NIM is up 7.6 to 8. So while we did have an increase of cost of funds, we did our asset mix, our improved NPA, which means less interest in suspense, has made sure that our NIM remains healthier than what it was last year. Other things to point out, of course, is I already mentioned gross NPA. You can see a provision coverage of 62.7 and the capital remains strong and healthy. I will now move on to the quarter-on-quarter, which is slide number four. We have done both so that it makes it easy for all of you to do the numbers and have a look. Here again, asset and liability growth, both have seen a very balance where, of course, deposit has done better. Cost of funds is up from 7.8 to 8 and NIM marginally down to eight. It is a bit of function of, I think, not a change of mix, but more of slightly elevated NPA. So we should remain healthy at eight even as a few quarters pass. The other thing that I would like to point out here is, we have had a few closures of our unbanked rural branches, which is why you will see the number of outlets 808 to 780. We have been trying to get these outlets sorted out for some time. We finally managed to do them this quarter. That is other important piece I thought I will mention. Capital adequacy, which is column number four at 19.3, does not include the profits of INR 171 crores. Like I mentioned earlier, if you added that profit back, then you would be at a capital adequacy of 20.2%. Very important because this is always, are we well-capitalized? The answer is yes. As you know, majority of our capital, which is nearly 90% of our capital, is in Tier 1 capital. I will move on to slide number five, which talks of the franchise. Again, just as an introduction to folks who are coming first time to our analyst meeting. So we are a national franchise. We are in 24 states. We are geographically well distributed. Our unbanked rural center, which you can see is on the right-hand side of this distribution of bank branch, a presence in unbanked rural is the title. Due to some closures of UBRs which were not working for us, you have seen a drop in UBR, but as you know, 25% is the norm for scheduled commercial banks. We are at 34.4%, enough and more room for us to grow. Next to that is our presence of MFI through BCs. Like I mentioned, some of our BCs have seen some stress. They focus their entire mind and soul and body in collections, which is why you see BCs had a slower growth or I should say negative growth in this quarter. We will see much more detail when we go to the MFI page, which Sudhir will lead. I am moving on to slide number 6. This slide is an important slide because it tells you exactly what is secured in our bank, what is it growing at. The 62% secured composition is right here. Micro LAP continues to be our biggest book at INR 4,910 crores. The average ticket size of this book is at INR 6.3 lakhs. Our next biggest business is affordable housing. That is at INR 4,738 crores. Friends, we are touching small, I would say moments away from hitting the INR 10,000 crore mark, which Rinku leads as a business. Our MSME business, which has grown 5% in this quarter, is a INR 3,486 crore business. Top three businesses were the top three growth rates. There are of course faster growth rates like two-wheeler and gold, but they are smaller businesses, hence the facilities are better. We have also grown NBFC in the first quarter. As we have mentioned in the past, it is a tactical business for us. We normally when we have too much liquidity, we tend to do a bit more of NBFC and as the momentum picks up in our Q2, Q3, we tend to do less of NBFCs. Last line you will see the unsecured advances, which has a negative growth of 1.2%. You will see the breakup of what is BC and non-BC. Again, something I would not say that -1.2% is going to be the trend. I think we will see stabilization of the BC collections in Q2, and we could then start seeing a nominal growth. I just would like to remind everyone that Jana's unsecured growth between the day we started the bank in March 2018 to March 2024 is roughly about 2% CAGR. That has been a strategic answer for us, and that whole mindset of that we need to turn more into a secured bank with 80% secured assets is a very strong and important one for us. I am moving to the next page, which is page number 7. This basically shows you that even in the toughest times of COVID, we have grown secured book, continues to grows. On the right-hand side, you will see the distribution of states. We have very good presence in all the key markets, and Maharashtra, Tamil Nadu, Karnataka, Gujarat continue to be our top four states, with maximum concentration being 13%. Our design to remain geographically unconcentrated continues to hold true, and we are working on that every passing quarter, and it is working well for us. Best-in-class risk management, we will talk more about it probably as we go through the gross NPA, but no major changes. We continue to be steady. We do have one new version of scorecard coming in, so we are getting better at what we do in terms of both the scorecard and the way we do analytics. Other than that, we are pretty much sorted out on the risk management side. I will now pass on to Sudhir. Sudhir looks at our what we call RFS, which is retail financial services, where the primary book is MFI and gold loans. He will talk through what the portfolio looks like for us. Sudhir, over to you. Thanks, Ajay. Good evening to all of you. As the slide shows, we actually do de-grow above the 1.2%. Historically, internally, we have been very conservative in lending. The book, the last year the growth star was for us for the BC portfolio. Last two quarters, we were able to see some kind of a stress from the BC book on account of rural distress. Consciously, we started making sure that they slow down their businesses and continue the focus on collections. If you look at this quarter, the primary de-growth has come from the BC book. What we have done is we have actually made sure that they refocus their energy from the collections and start building the book on that. We expect that this trend would get normalized within a period of one quarter itself. The other factors like digital payment continues to be our focus. We currently are 23%, which are digital in nature. Our ATS are very much within control limit of INR 36,000, which is there. Let me go to the next slide just to give you a portfolio mix. It is a very healthy kind of a portfolio mix. Across the INR 9,000 crore book, INR 9,800 crore book, 56% of our book are existing customers, and almost 33% of the book what we have are actually taken more than three times the loans. So it is a very healthy kind of a portfolio mix, and we know that this portfolio, because of the focus on retaining existing customers and building an existing customer book, which has a very good payment track record, it will actually be a very sustainable and a long-term sustainable strategy for us. Now over to Rinku to speak more about the anchor banking projects, what we launched. Yeah. Sorry. Before Rinku goes live, folks, I just realized that I was looking at the slides. The page numbers have gone missing, at least on mine. If it is true for what you can see also on the website, we will now just to make sure that we are synced up in what we are saying and what you are hearing, we will also tell you the very short title of the slide. Rinku now takes over at Home 360. As a slide, it says, "Bring your bank home." Rinku, over to you. Yeah. Thanks, Ajay. Thanks, Sudhir. A very good evening to all of you. Myself, Rinku Vachha, and I manage the affordable housing and Micro LAP business for the bank. See, as a bank, we started our affordable housing business around five and a half years ago. This business over a period of time has evolved as Home 360, as you can see on the slide. Let me just briefly explain about Home 360 as a concept. If you look at affordable housing competition landscape, the main players would be typically various established housing finance companies who have the expertise in serving the semi-formal or informal segment customers. But these are all single product companies. Although we started off on same lines, we always knew that being a bank, we have a very distinct advantage over single product housing finance companies, wherein we have a suite of products to offer, be it on liability side, asset side, or insurance side for that matter. Once we got a foothold in affordable housing lending, we decided that, "No, let's just not sell home loan, but all the products which suit customers belonging to our segment." This thought process and conviction in serving the customers led to the evolution of Home 360 strategy. Under Home 360 strategy, housing loan would act as an anchor product and a very strong enabler for selling multiple products to the same customer. If you see for every individual owning a home or a property is an aspiration, and all his life decisions are anchored around it. The customer takes a home loan from you, and if you serve him well, nurture the relationship, it could last for as long as 15 to 20 years, and maybe extend to the next generation also. Now, how does Home 360 help the customer? A, he doesn't have to go to multiple banks or NBFCs for his varied financial product requirements. Here we are explaining to the customer how Jana Small Finance Bank is a one-stop shop for all his life stage financial needs and how he can bring the bank home. That's what the title of the slide suggests. The ease of landing. You take multiple products from one bank, your track is established, need for repetitive onboarding and due diligence is done away significantly. The digital transformation and customer scorecard, which Raman will speak about a little more, which is device post extensive research, has only made the transition from home loans to Home 360 faster and better. All the products which you see mentioned here complement each other, giving us a big competitive advantage. For example, a two-wheeler loan with 100% LTV. This is a one of a kind offering across the industry. We saw at the outset that our home loan LTVs are in the range of 50% and micro LAP LTVs are in early 30s. So we can very well afford to extend this unique offering to the customer. Notwithstanding, we do keep in mind the repayment capacity of the customer. He clearly has to be eligible to afford combined EMIs and of course, we do the cross-collateralization with the anchor product, which is our home loan or micro LAP. There is pre-approved business loan, which we offer to the customers who have exhibited excellent repayment behavior and character both honors and offers. With LTVs withstanding, we offer a pre-approved business loan of up to INR 5 lakhs. This is an instant loan which can be disbursed within a day's time. If you go to the next slide, which is becoming anchor bank to our customer. Numbers back our strategy, which we suggest that per customer, we are selling on an average 3.6 products. If you look at the next graph, which is CASA penetration, 99% of our housing loan and micro LAP customers have a savings or a current account with us. Then look at the average balances. If you look at the bottom right graph, average balances maintained in these accounts are to the tune of INR 16,100 for this quarter. Likewise, gold loan as well as two-wheeler, this franchise is expanding as Ajay mentioned earlier. So over a period of time, we are very bullish on growing this penetration as well. On this note, I would request Mr. Srinivas Murthy to talk about liability. Thank you, Mr. Rinku Vachha. Usually, if you see the commentary on the deposits, Q1 is considered a slow quarter, but I am very happy to share with all of you that for Jana, that's not the case. We have actually done extremely well this year, this first quarter. We've grown at 41% YOY and about 5% on the quarterly basis. Within that, the CASA has grown extremely well. We have grown at 47% YOY and at 9% for the current quarter. That also means that for the second quarter, we have grown more than the assets, leading to further reduction of LDR from 109% to 102%. If you look at the composition of deposits, we have 96% of our bulk deposits are non-callable, and similarly, out of that, 91% are one year and above, which clearly tells us the maturity profile of the bulk deposit. Similarly, on the retail, we have 98% of the retail deposits, which are one year and above. Recently, the RBI has reclassified retail at bulk, and the impact of that is about 3.4%. As a result of that, we have a retail deposit proportion of 65% on the total deposits. The cost of funds, Vivek talked about it, has gone up marginally to 8%. We presented it in the last quarter as well. Our composition of the states contributing to our business remains the same as March. The large states contribute about 60%, and rest of the states contribute 40%. This has come down from 32% in the last two years to about 40%. That is the overall composition state-wise distribution of the deposit book. If you go to the next slide, which talks about how our branch network is leveraging. As the branch vintage grows, the average deposit book of the branch as well as the CASA deposit book of the branch is showing growth. If you compare it March, obviously there is a moment between one year to two year, two to three years, and so on. But the overall trend continues to remain robust as we mature the book. As we mature the vintage, the book continues to grow. In the current quarter, we introduced a product called Legend, which is specially designed for senior citizens, offering them monthly interest rate. This is showing excellent trends, and we believe that part of our CASA growth has come from Legend. Similarly, we have launched exclusive and premier programs for HNIs, which is also showing excellent traction. In the current quarter, we have acquired nearly 5,000 HNIs, which is basically contributing to our CASA growth. We have also revamped another program, I talked about it in our last meeting, and that is also adding to our CASA mix. Clearly our product, people, productivity, and digital strategy is playing out as far as the deposit growth is concerned. We believe that we will continue to acquire more and acquire well, which will continue to add our CASA and retail growth. The last slide, which is on digital. We have continued to witness the trends that we presented last quarter. Our mobile app is 4.6 on the App Store. We have 79% growth in transaction volume. We have 59% growth in MB registrations, which is basically an enabler for CASA. Similarly, we have seen 23% growth in transaction volume on the mobile app. Our overall transaction volume growth is about 47%. On the right-hand side of the slide, if you see the usage of digital infrastructure by our team continues to remain robust. We have 99% of our savings bank accounts which are opened digitally. We have 98% of transactions which are conducted digitally. 92% of our loans are digitally processed, and 90% of our sales team uses some sort of mobile app or tab. Clearly, the digital ecosystem is leveraged well. We have additionally, incrementally added about 3,500 merchant QR, which has added to our CASA growth, especially the current account growth. The heartening news is 82% of those QR are active and in use. We have also seen an increase in UPI transaction. UPI volume has gone up by 40%. The NEFT transactions have also gone up by nearly 300%. Now, we do believe that when a customer opens an account and starts using a debit card, there's a clear additional CASA incremental growth that we witness. This current year, we have added 80% of customers in our debit card fold, which has led to 69% improvement in our customers using debit cards. That is as far as the deposit growth is concerned. If I put it in a nutshell, clearly our product and digital productivity branch network, all of them are coming together to give us the kind of growth that we are witnessing in deposits. Yeah. With this, I- Thanks, Srini. Before we move on to financials and talk more on our NPA, I just want to encourage all of the folks on the call to look at the last time, March versus June comparison. A lot of what Srini has talked about, you can see that his branches, which if you see the slide on deposit underserved and on service and price, have moved from the 1 to 3 bucket into the 3 to 4 bucket. The 3 to 4 has moved to more than 5. You can see parallelly how his CASA and the retail deposit growth has taken place in the last quarter. So what he's describing to you factually gets backed up with numbers when you really do the comparison, see how things are moving. I would encourage you all to also look at the digital, because while it was 99% last time and is 99% this time, most of the other things like QR codes, et cetera, the numbers are very relevant for this quarter and are looking different. That would be an easy one to see the progress that Srini is able to drive through his network. Over to our CFO, Abhilash. Thanks. Absolutely. One thing, while Ajay mentioned most of the things on highlights on the financials, one thing which I would like to add to what he said is the cost income ratio itself. Last year, when we began the year in June, first quarter, we had cost income ratio of 58%. This year, we are at 55.5%. The entire year cost income ratio last year was 67.4%. When we started the year at 58%, ended for the overall year was 57.4%. We have began the year this year at 55%, so we are expecting more and more leverage to come through during this year. 55.5%, so probably we are tending towards reducing the cost income ratio over the year. That's one key highlight which I wanted to mention on the cost income ratio slide. Second one is on the yields and the NIMs. Even though Srini mentioned there is slight impact on the cost of funds and the cost of deposits, the NIMs have held on. The current NIM is, as compared to last quarter, 8.1% has become 8%. That's where the current NIMs are at. If I go to the next slide, which is slide number 18 on GNPA and NNPA. Ajay and Sudhir mentioned about the GNPA and NNPA slightly increased during the quarter. However, the overall PCR is above 60% still. We are continuing to maintaining a high PCR ratio even though we have a good amount of secured book in the GNPA as well. That's the other key highlight which I wanted to make. Moving on to the next slide, I'll hand over to Raman. Thank you, Abhilash. Hi, this is Raman here. We are on slide 19, which talks about net NPA has 61% secured loans. So 61% of all my net NPA after my provisioning is in the form of secured loans. The BC book, that's quite clear here that the gross NPA of this book is sitting at 7.8%, contributing to the overall 2.5%. But the key aspect here to look at is also the fact that my LTV on the secured book, which is the biggest component, is 57%. On the right-hand side, the restructured portfolio continues to come down and today it is at 0.3% of the AUM with an LTV of secured at 46%. I'd just like to add to a few things that Raman said, and this is a very important slide that we should focus on. First, this will be our toughest NPA quarter, or this was our toughest NPA quarter. Things will only get better from here. What happened in the first quarter was a combination, and I cannot exactly tell you which caused what challenge. But a combination of heat waves, obviously an event which was elections, which doesn't allow us to go full blast on what we normally do. Third is first quarter always tends to be a slower quarter, and we haven't really figured out ourselves the reason why after March everybody takes it easy. But that's how it is. I also want to talk to you a bit about what has changed, and that is very important because it will give you a sense of comfort when I tell you this is probably the worst moment that you will see in this year. Let me start by saying the BC book, which is at INR 170 crore. In March, it was at INR 114 crore. So INR 56 crore have gone up in the BC book. As you know, in BC we certainly are covered from the BC in terms of service guarantees and collections, failing which he does keep deposits with us, and we will be able to use that to cover his NPA challenges. One thing when we think about was the BC strategy a good idea? I think when we look at our book today and what has happened in the last two quarters, it absolutely was the right thing to do. Because in moments like this, we as a management team and as a bank, continue to focus on our secured growth and the stress that we see in the BC book. Our BC partners are very able, very capable. They will address it. We will see them solving it in next quarter. Second is unsecured at INR 295 crore. This number in March was INR 291 crore. Just a INR 4 crore increase on our own unsecured book. Telling you that because we never grew the book fast within the bank, we really don't have a challenge. The number which really changed a bit more was the secured book at INR 181 crore. This was at INR 90 crore in March. Here is where when you actually do a SARFAESI order execution, you do a repossession, you need the local police, you need the tahsildars, you need the whole machinery to work. That machinery wasn't working full blast because everybody was very busy with the elections. Of course, there is only so much that you would like to do given the environment around. I do think that with an LTV of 57%, this secured book, which was largely to do with a slowness in actions, will come back to a much better level as we go ahead into the year. I did want to take a few minutes extra and talk about this because I really wanted to give you all the comfort. There is nothing that we see here which is not unsolvable, and we would be able to put good resolution on it in the coming quarter itself. When we went for a BC option in the past, we did give up revenue from the bank. But it did buy us in moments like this where there is some stress in a few states. That answer is managed by the BCs and the bank continues to focus on its strategic agenda of secured growth. I just thought I will add that to Raman's comments. Raman, back to you. Thank you, Ajay. The next slide, which is slide 20, is on overall credit cost. Credit cost as a percentage of AUM is at 1.9%. That's the net credit cost after taking into account removing accelerated provisioning and recovery so that you are comparing apples to apples. You are at 1.89% for the quarter annualized, which compares favorably with 1.96% in March quarter and 2.78% exactly a year ago. I think those are really the key aspects that I just wanted to address as far as credit cost is concerned. Let me hand you over back to Abhilash. Thank you. On the balance sheet side, just wanted to highlight a couple of things. One, borrowing, which we have repaid from last quarter. SLTRO borrowing last quarter was INR 800. We have paid INR 400 out of it. Other items, I think most of the items we have covered in the earlier slides. I move on to the P&L slide, which is slide number 22. I wanted to highlight one aspect. I think there were some queries about other income in the previous presentation when we did. We have given the guidance for other income. Other income from the processing fee, insurance commission, and liability-related fees is what we have seen an increase year-on-year, whereas other income from recoveries and PSLC have seen slight bit of shrinkage during the quarter as compared to the previous year. For example, processing fee has been flat, insurance commission has increased from INR 29 crore to INR 39 crore. Recoveries have reduced from INR 40 crore to INR 20 crore. The core non-interest income is moving up, whereas the non-core non-interest income is moving down. That's the one trend which I wanted to highlight. Thanks, Abhilash. If you look at the other income line, which a lot of folks had questions on. As you can expect as years, post-COVID, the recoveries would start pacing back a bit, and we are very successfully replacing that with our insurance and other fee business. I will now move on to the guidance. There is no change in our guidance. We will hold true to our 30%-40% PAT. We will hold true to our AUM growth of 20%. We will hold true to our deposit growth of 20%. ROA, ROEs are already in the range that we have mentioned here. We will hold true to that. I can also add to this while it is not here, is that we do see a decline in credit costs that you have seen in quarter one versus last year. I think that trend will continue as we go into Q2 and Q3. There is no change in the board, but you can see all the names and the personalities there as well as in the management. This is something of our history for people attending this conference the first time, which is our history is way back into 2008 when we began an NBFC. We have been a bank since March 2018, and we have also publicly said that when we are eligible, there is one criteria of a universal bank, which is net NPA has to be less than 1%, when that hurdle is met, which should be met this year because we already meet the one year hurdle last year of 0.5% net NPA. If we continue to be below one this year, we meet all the conditions which allow us to apply for universal bank next year, we would certainly do that. Moving on to what do we think is our strength, and a good list for you here, which I think we have brought to fore in our presentation in the last 40 odd minutes. So digitalized, and we try and be as digitalized as possible. We have a pan-India presence. We have no concentration. We have a strong brand, and we do know that we continue to invest and we can do more there. Our risk is analytic-based, it is scorecard-based, and a very strong governance framework around everything we do. Our average experienced management is, average age is about 24 years in financial services and banking and a very professional board. Anchor bank is core to us. We are very focused at, while it is difficult to execute because most banks tend to get very siloed. Our bias always, since we are very early as a bank, is to make sure that our anchor-based customer-centering approach becomes a cultural way of how we work. We are committed to moving towards an 80% secured asset book. Our deposit base, as you can see very well, is showing that we have a strong ability to grow and fund ourselves. And while you can hear from Abhilash and if you see that page, we have a very good mix of our long-term borrowings. Long-term borrowings are typically from only three institutions, NABARD, SIDBI, and NHB. And these are long-term, very economically wise borrowings. They do help us lengthen the tenure of our ALM, and certainly that we do more of. Finally, all of us on this table and the 21,000 people supporting us are all very focused on execution. Our strategy has been very steady for us and something that you have been hearing from all of us as we went through the slides, so I won't repeat that. And with that, I would like to thank all of you. We have tried to make sure that we are a bit snappy about it so we can take all your questions and address them in the best possible manner. And with that, I would request Adfactors if you can open the floor up for questions so that the team here can answer. Thank you very much. We can now take questions, please. Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask question may press star and one on their touch tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handset 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 Ostwal from Nirmal Bang Securities Private Limited. Please go ahead. Yes, sir. Thank you for the opportunity. First of all, many congratulations for delivering another strong quarter, given the toughest challenges around the NPA. Many congratulations to the team, Jana Small Finance Bank. My question on the creation of floating provision in our P&L. How should we think of creation of floating provision, whether the probability is slightly higher than the normal, then we create the floating provision. What is the formula or the philosophy around that? Can you explain that? Manish, hi. Ajay here. Thank you for your compliments, and we will do our best. That is my promise to you. On the provision side, what we tend to do is we have a certain review within ourselves in the bank of what will be a harder recovery opportunity. Typically ends up being the unsecured book. Very rarely do we want to raise surplus provision for a secured book unless we are aware of some complication in the property where we think the likelihood of recovery is low. It tends to be on the unsecured side, and something that we obviously would like to make sure that we keep that as a buffer based on our understanding. Manish, since you mentioned it, we will see if in the next analyst meet, if we can bring up what our policy is and how we put a framework around it for you to see. We will certainly see if that is possible. Abhilash would like to add. Sure. We will not create something called a floating provision because floating provisions are a different segment. What we do is additional provisioning for these accounts where there is a stress, and we do not reverse from those accounts. It will continue to have a provision for those accounts, Manish. Just to address that because floating provision has a different parlance from RBI point of view and also accounting point of view. Just wanted to clarify on what Ajay said. The second thing is an accounting question, basically. In terms of tax credit of INR 10 crores in this quarter, and the last quarter it was INR 155 crores. How we should build for the full year of utilization of the DTA? Okay. For the first time ever, we created INR 155 crore last year. That is last March. Every quarter we have to assess future profits, which is based on virtual certainty as per the regulation. We assess again. What we created, we have to reverse and reassess again. Based on the reassessment, we have got a INR 10 crore net impact on the P&L. Every quarter, we go ahead and reassess the DTA impact. That's how we do and that's as per the standard as well. No worries. Manish, let me see if I can Abhilash is the chartered accountant, I am not, so I will tell you in a non-chartered accountant language. We had 160 last year. We finished the first quarter, which means that the assessment made last year, that what will be our profit this year, at least in the first quarter, we kind of more or less have met it. So 160 is the tax. If you kind of gross it up, it roughly talks about INR 600 crores of expected profit for the year. Now, when the auditors this year saw what the first quarter performance was, they made an estimate of what will be the first quarter next year, and they obviously see an increase. It is not a perfect answer because you really would like to make sure that whatever you put as DTA is kind of lower than what you anticipate should be the profit. So here you are. We are carrying now 160 crores from last year. You added 10 now. 155 last year. 155 from last year, 10 now. We are carrying 165. Next quarter, we will do the same thing. We will see what is next quarter's performance. Did our past expectation of profit from that quarter work out, which is going to be Q2? We will then assess what will be Q2 of next year. If we do think that next year Q2 will be higher than what we had anticipated in the past, then we will add more DTA to it. Let us take a fast-forward to March. INR 155 crores is existing DTA from March 2024. We have already added 10. We could add probably whatever more is there. The full carry forward DTA as of March 2025 could be maybe INR 180 crores, could be INR 200 crores, could be INR 210 crores. Then we assess it again for the following year. Importantly, we pay no tax till 2027. That and- Everything that we PBT is equal to PAT. Sure. Really appreciate your comments around the asset quality given the quarter. Thank you. Thank you so much. Thank you. The next question is from the line of Prabal, Ambit Capital. Please go ahead. Yeah, thank you. Am I audible? Very much, sir. Yeah. Thank you for the opportunity, sir. My first question was, some of the lenders have highlighted that there is buildup of over-leveraging in the system and as a consequence, they have tightened their risk matrices. Have you also tightened our filtering process? Anything from that side, sir? Yeah. It is exactly this microfinance over-leverage. To answer that question, we always give our average loan amount outstanding in our presentation, which is at 36-odd thousand. Even if you look at the installment loan, which as you know tends to be a higher loan amount in the industry, our average loan amount is? 48,000. INR 48,000. So high leverage is not our positivity. We never believe that high leverage should be the way we want to grow our business. The other important factor is how many lenders, because we may not be high leverage, but that person may have high leverage somewhere else. I can assure you that if that person has got more than three lenders, has an unsecured exposure of more than INR 1.5 lakhs, we will not do business with that borrower. So we are very tight. We are tighter in what the MFIN conditions require the banks and MFIs to be. We are also very careful and very clear in our minds that we will not lend to delinquent customers of other institutions. For us, it is not a market share game, and that is a luxury we have that we don't want to grow this business so fast, so we don't have to do extraordinary things at all. I don't know, Raman, you want to add something to that? No. Actually, the market leverage which you talked about, we do have a bureau. The bureau we pull on both the borrower as well as the co-borrower and make sure that all the household delinquencies, all the household leverage is fully captured in our credit decision. Just to add to it, because unsecured is not our mainstay, I can still grow negative 1% unsecured in the first quarter and yet tell you that I will hold true to my guidance. Because from the very start, unsecured was not the way we would have kind of delivered on our numbers. I can tell you with great amount of comfort that if we see more challenge in this business, we will continue to go negative. If we need to do that, we will certainly do it. For us, maintaining quality of book is very important to us. Understood. But anything in the last three to six months that you have observed on the ground and maybe tightened your sourcing policies or something like that, sir? Because multiple lenders, multiple quality lenders indicated that in last three months they had to tighten their sourcing policy. So you would have also seen some amount of pressure building on the ground from the other side. Yes. So our bias is recent. Our policies were very tight. So we really haven't. Just to give you a sense, we were doing household debt since 2018. So for us, some of it is already in vogue. When we give an individual loan today, we actually send an underwriter home. So what you see as this INR 48,000 loan, for that, somebody has actually done a PD, which is a personal discussion, visited our client in the office or home, as it may be. In this case, it's normally a small shop or an establishment. The rejection rate by the underwriter who visits for an individual loan is between 15%-20%. That means very good customer on the bureau, perfect repayment with us, wants a loan. We visit and think that he doesn't have the cash ability, and we reject the loan. So we have been normally tight. I think what we can see is the stress in a few geographies are more elevated. For example, we can see some parts of U.P., some parts of M.P. We've tried to detune our growth there, which is where I must give credit to our BCs, even though that is a main line of business. They've slowed down and they've focused themselves on collection. It is more about our policies are already tight. We've never been in a moment of grow unsecured, so that allowed us to be tight. Where we find that there is too many MFIs operating, over-leverage going on, we kind of detune ourselves and reduce growth there. Let me give a live example where we were successful. Punjab and Haryana, we've never had lower than 99% collections except for the month of April, starting from last September, October. Because the moment we saw that stress was building up, we just stopped disbursements and put all our people onto collections. Rest assured, we are watching this space very tightly, and we have no reason why we should have anything of a bigger surprise come up ever. All right, sir. Sir, second question was on the credit cost. Just on the core credit cost of INR 190 crores or the run rate of the last two quarters. It seems that 2.5% of credit cost on a book where 60% of the book is secured is slightly on the higher side. This has been the trend from last two quarters. This quarter could have been an aberration, but last two quarters, we are seeing 2.5%, 3% run rate of core credit cost on a 60% secured book. How to think about that? See, the bulk of the credit cost still continues to come from the unsecured book, including the BC book. I think that is the key aspect that we need to keep in mind. This is really the, as Ajay said, the BC book has this collection-related service guarantee, which will eventually come back and reduce the credit cost. That's a key aspect that I wanted to highlight. As far as the secured book is concerned, as soon as the account turns NPA, I'm taking a provision of 15%+ percent. But my LTV on that book is about 55%-60%. So much of that is going to come back in terms of recoveries. These are really the two aspects that I wanted to highlight here. See, the other piece is the 1.89% as a calculation has two components. One is some of our recoveries is going to the other income line because they are fully written off accounts. Typically, when you look at what is the provision number and use that as a credit cost, you tend to miss it, and that is a big number. Which is why to resolve that issue of what the real credit cost is, we have prepared a full-scale slide. Second, we tend to, as Manish had asked the question earlier on what do we provision extra. That is again, something that we do as a precautionary measure, which fundamentally is taking away future provisions into the present. So my 1.89% credit cost that I have explained on slide number Twenty. Twenty. 20, I would think would go down lower. Like I said, this would be probably our highest credit cost quarter. That 1.89% should trend downwards every passing quarter. Possibly as you see some stabilization, then I think it will be a good time for us to see what at a 60% secured book, what is the right answer. Right. Can I squeeze in one more question, if possible? Yeah, please. My question was on liability side. You mentioned that we are able to get some HNI customers, some senior citizen customers. What other products can we cross-sell to these customers? Because I understand that HNI customers would already be banking with some of the other lenders, and therefore, it's very difficult to get them to change just because we have an 8% or 9% deposit rate with us. Yeah. Prabal, we started HNI program last quarter. On the asset side, we have two-wheeler micro and small enterprise. We have micro home loan and affordable home loan. On the transaction banking side, we have debit card, we have digital products that we offer to these customers. On the investment side, we have insurance, we have 3-in-1 account, which we offer through Axis Securities. We have the ability to offer them mutual fund and other investment products. Clearly, whether it is on the asset or on the liability side or on the investment side, we have really a large bouquet of products. We will be in a position to offer to these customers over a period of time. Currently, these customers are assigned a relationship manager who are regularly in touch with these customers, and based on their products and services needs, we are able to cater to needs. Thanks, Srini. Let me just add in, and I don't know if this was your question. Can I give a prime mortgage loan at 8.5%, 9%? The answer is no. Will I do a car loan? Possibly no. Do I have a credit card? The answer is no. Fair to say, as Srini explained, our affluent customers who are coming on the liability side will largely be a liability relationship, transaction relationship, insurance relationship, a wealth relationship. It will not be an asset relationship. You're right when you say that these affluent customers must be banking somewhere else. We aren't focusing on that. We don't have the product range, and that's not where we would like to start either. What we would like to start is to create a top-notch liability-serving mechanism where he gets the best price and our highest deposit rate now as we speak is 8.25%. We have a slew of savings and current account, which are really fully endowed. If you see the Legend for senior citizen, you see the exclusive launch that Srini has done. We think we are best in the industry, and we are really attracting good AUM from affluent clients for that. That will be an important one. There could be a side question saying, "Hey, listen, then your branches are really doing deposits, insurance, and wealth. How does that work for breakevens?" The answer really is, when we do open an affluent branch, let's say in Akbar, that is coming up next in Bombay, and the focus is to really make that into a very large, say, our 2,000-3,000 crore liability branch. Very transactional CASA in nature. To make sure the branch size is not large. Traditionally, branch sizes are very large. Then the breakeven points need a lot more assets to come in to make that happen. We have made sure that our branch sizes are very reasonable. Our marketing is largely digital, and we are making sure that our AUMs are large enough, which is what if you see on the slide, I forget the number, Srini, where you have given your AUM per employee. Fourteen. Slide 14? Slide 14. Have a look at that. I would think we would have among the higher AUMs per employee. We are going to work on the liability side with a clear understanding that will make it very efficient for us in terms of raising liabilities. Conscious that we will not give a prime mortgage or a car loan, and also very conscious that we will offer an 8.25, which is a premium of what a typical customer would get in a high-end private sector bank or a PSU bank. Got it, sir. Thank you, sir. Thank you for your answers. All the best. Thank you. The next question is from the line of Sailesh Kanani, Centrum Broking. Please go ahead. Good evening, everybody. Congratulations, Jana team. It was an excellent performance considering the macro environment. Sorry to harp again on the asset quality. Can you throw some light about how the book is performing in terms of your group lending and individual lending book? Are there any differences in terms of asset quality? Even the BC work we do, does it have any individual lending component in that? Sailesh, first, thank you for the compliments and don't be sorry to ask any question because I think you are absolutely perfect in asking question when the GNPA and NNPA goes up to say why it happened. We are very conscious of that, so no harm done there. Listen, let me answer the ones which are easy ones and then the more difficult ones, Raman will answer. First is, if you see slide Nine. Nine. Yes. I'll read out. Individual loans, the gross NPA is 4.4%, net NPA at 0.7%. If you compare that with Agri, it is 3.2%. The only thing that I would like to tell you is that in individual loan, the pricing is 2% higher than the group loans, which in this case is Agri loans. So it more than compensates the gross NPA difference. So is individual loan a good business? Yes. Does it have very differential performance over the group loans? The answer is no. Do you price individual loans slightly higher to compensate for that? You should, and that is what we do. So we are very comfortable with the individual loans. The BC book does not have individual loans. These are largely small and marginal farmer. These are all done in the rural areas and these are all group loans and these are typically 10 batches of group because they're real rural. I think what you can see in terms of NPA here, the jump, and because they did jump, I must say, is largely due to the certain geographies. A bit around discipline, they could have been smarter. Discipline comes not just from collections discipline, but also to grow a little bit more slowly. I think everybody in the industry did try to grow fast. Some of our BCs probably did. Now they're just walking backwards and fixing that. Beyond that, I can tell you, even if you look at our average ticket size on the BC, which is on slide 9, it is just INR 27,664. So it is not the leverage which is the issue. If you take a BC book average ticket size of INR 27,664, it is lower than my own Agri of INR 30,226. So it is not the leverage. I do think it has got to do a mix with some impact. I said this at start, I can't put my finger on what it could have been, whether it's a heat wave or people busy with elections or first quarter being a more tepid way or a combination of three, a bit of faster growth in some BCs. But yeah, I can't say anything else. All I can tell you when I read out the numbers, my total gross NPA for unsecured was INR 290, March 2024. Sorry, INR 290. That's correct. Okay. June is 295. I have just seen a INR 5 crore increase on the microfinance book, which Jana employees directly manage in the quarter, which again tells us that if you do things in a much more stable, calmer, regular way, you should not get really challenged in this business. Yeah. Excellent. That is very helpful. Sir, one question on the liability side. For garnering liabilities, do we have tie-ups with fintech and what kind of fees do we pay? If you can share that. We have tie-up with just one fintech. I can tell you it does not work much. It will be fair to say that 99.999% is all sourced by us. We have not had any success on fintechs in the liability side. We have no fintechs on the asset side at all. I do think that is how we will continue. Fair enough. Sir, just a last question from my side. Sir, any impact of ECL coming in? Have we done any assessment or are we kind of safe there? If you can throw some light on that. Thank you so much, Shailesh. I did want to mention one thing, I did want to kind of give you guys a heads-up, and your question just triggered that. What we are doing in the individual loan side, wherever customers are small businesses and are registering for Udyam, we are registering them under CGTMSE scheme with SIDBI. The cost of the guarantee is 0.3%-0.5% range. But what you will see from September is some part of our individual loan customers who are really small businesses joining the guarantee program. This is not the question to the ECL answer, but Yeah our guarantee book obviously will have low or no ECL, number 1. So some part of our unsecured book will be under the guarantee program, and it will not be an insignificant number to our mind in the next 12-24 months. Secondly, as you know, we are building specific buffers for unsecured, which typically will be in line with what the ECL expectation would be. So while we are not very clear in our minds of when the ECL guidelines will come in, we are preparing as a team irrespective of that in a two-pronged manner. Wherever there are unsecured loans, we would like to put them under CGTMSE guarantee program. These are obviously small businesses which are Udyam-registered. Secondly is we will create buffers so that we are in a way preparing if and when the, or rather when the time comes for ECL. Can I just Please amplify this a little bit? Taking on what Ajay has talked about unsecured, currently our provision cover is 80%. Sometime back, and this was slightly dated information, we have done some loss given default calculations based on cumulative recovery, and that number is a lot lower than the 80%. So that is the comfort I wanted to give, that definitely on unsecured, I do not anticipate any incremental ECL provision at all. On the secured, on the other hand, given where we are in terms of provision cover as well as loss given default, again, I do not really see any incremental impact there. Right. That is very helpful, Raman. Raman has given a straight answer, Shailesh, which is irrespective what we are doing, even as we speak, we are well covered for an ECL guideline to come in. That is quite helpful, sir. Sir, just one small data point. On the BC book that is around INR 218 crore, what is the kind of FLDG we have or the deposit lending that we have? If you can share that. See, contractually between 4%-5%. Some are four, some are five. Some have been used up and some are not, depending on what the delinquency is or rather NPA is. I must say that only during COVID was the times where the BC, I think two BCs or three BCs, I am not sure exact number, but a few BCs had to go beyond the provided FLDG. We do not think so we are in the environment today where that number would be crossed. I must tell you this. We have a specific team in the bank which looks at BCs. We work with them, we make joint visits to their delinquent customers. We do a QA sampling on all disbursements. We are fairly well engaged with them. We do think that there will not be a moment where they will have to go beyond what they have already given us as deposits. Excellent, sir. That was quite helpful. Thanks a lot, and best of luck, sir. Thank you, Shailesh. Thank you so much. The next question is from the line of Nilesh in Investec. Please go ahead, sir. Thanks for the opportunity. A couple of data-keeping questions. What is the gross slippage for the quarter and what are the write-offs that we have done in this quarter? Sorry, Nilesh, can you repeat that? I am sorry. What is the gross slippage number for the quarter and write-offs in the quarter? Okay. We just finalized it today. I am not sure we are ready, Nilesh. Why don't we come back to you on that? I think the write-off- Sure. The second question is on the asset quality again, on the BC side. What explains such a sharp difference between your own book performance versus BC book? It is operating in the same segment of group loans. Your GNPA is around 3%, BC book GNPA is 8%. I think more slow growth. That's my simple answer, because I think we kind of were very choosy in what we were doing. I think BCs have a single business. For them, this business is their sole income generation answer. Nilesh, I will give you a number. Our March 2018 unsecured book was INR 8,000 crores, more or less. Our March 2024 unsecured book was INR 10,000 crores. Our BC book in March 2024 was INR 2,500 crores. Fundamentally, we actually had a negative growth in our microfinance book between March 2018 to March 2024. What that does is you become a bit more choosy whom you give, whom you don't give, and you really don't have an urge to grow branches or people very fast because that's the real, I think BCs have done that, some of them for sure. I think in some of the geographies, they may have faced the pressure of other lenders. I also think first quarter was a bit odd. I do think they will all have a much better Q2. We are already seeing that as we speak, and we will see a lot more recovery. But listen, the lesson here for us has been and will be that, listen, trying to grow unsecured too fast is not a good answer. It doesn't matter how good you are. Remaining within secured ambit is the right answer. There is one answer with Abhilash is ready, which is the gross write-off taken by us, which means the technical write-off is 50- INR 50 crores. It is INR 50 crores for the first quarter. Five zero. Sure. Just to understand BC gross. Yeah. Listen, all I can tell you, Nilesh, is we are not anxious on the BC book. It only tells us that strategically the right thing to do for us, given our engagement with them, we do not see any reason for them to go beyond the 4%-5% loss rate. That is very unlikely to happen. Sure. Just a follow-up on BC again, sir. What is the skin in the game or motivation for them once the GNPA crosses 6%-7%? They have already lost their and let us say there is no hope of recovery on that. So what is the motivation for them to continue in the business? Listen, first is, I will give you our own example. Even as of first quarter of 2024, we are collecting on our provisions made in 2016, which is pre-demonetization. So first is, I do not think so any of us believe that a provisioning in microfinance means it is a write-off. I can assure you that our BCs are sharper than us in this business, and they will make sure that they will recover most of it back. It will be a timing matter. You can see our own recoveries are roughly about INR 40-50 crores for the quarter. How much is it? INR 20 crores. Sorry, 20 on the other line and INR 35 crores. Yeah. We are ourselves collecting INR 35 crores on a 7.5 existing book. I do not think BCs are walking away from collections or recoveries. I do not think they are happy giving up the 4%-5% fixed deposit to us and then saying, "Okay, battle lost. Let me walk away." I think they could recover at least 2%-3% back, maybe not in the next 3-6 months, but certainly in the 6-12-month range. Secondly, remember, this is their core business here. BCs have been with us during COVID. They have lost money, but they have continued because that is their only business. Nothing that they did was their challenge. COVID did cause a special challenge for them. They continued after that, and we continued with them because they did everything in their power to get it right. The environment did not help. We do not believe as we speak here that we are negative about our BC business. They have been through a tough quarter. They will fix it, they will move on. Only thing is, for us as a bank, we chose to refinance that part of the book with a 4%-5% deposit, and that has been the right answer for us. Certainly, they have to solve their challenge, and they will. I do not see a real issue around that. Sure, sir. That's it from my side. Thank you. Thank you, Nilesh. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Renish from ICICI. Please go ahead. Yeah. Hi. Good evening, everyone. Just two questions. One is on this MFI book. If we look at it, I'm referring to page 9. When we look at the GNPA under JLG model, it is actually amongst the lowest. I mean, whether it is compared to Agri or individual. How you guys think internally, does it call for you to reassess your strategy from moving to individual loan to JLG again? No. Our JLG that you see here is really the group loans in the urban centers. Okay. These were, just to take you back into a bit of Jana history. Before we began a bank, we were an urban microfinance institution. Correct. That was our only business. What you can see in the group loans, there is a nominal portion of that left. So two things. Do we want to grow group model in the urban microfinance space? The answer is no. What we have here is our good customers from the past who have created a batch and we continue supporting them. That is about it. Also to be very clear, these are not I will give you a Bombay example. This is not Bombay City, but because it is typically a group in a Bombay city slums. This is more the branch in Palghar, or this is the branch in Hadapsar, which are outskirts of the city, still classified as urban, but really on the outskirts. So one is, do we want to grow microfinance? No. It will be a very small single-digit sensible growth. Urban microfinance group model is a no. Individual loans, like I mentioned, is good performance for us and we will continue doing that. But the overarching strategy, which has been true till 2018, has been that is not our growth business. I do know we are spending a lot of time on this call on microfinance, but it is one of our smaller books. Got it. Last question on this foreclosed. At the book level, of course, I mean July, though we are still 10 days to go. Is it fair to assume that, let's say, that July is better in terms of net foreclosed as compared to April and June? Forward flow compared to July against April, right? Should be, is my answer. We are seeing certainly a better month. The way we saw it is April, May was the tougher ones. June got better. July will get even better. Yeah. That's what I just wanted to reconfirm that given April and May, for the narrative is that the election heat etc., has impacted the collection. If sort of one has to go by that logic, then June and July has to be better. I just wanted to hear it from you guys that the on-ground experience is in that line, right? That is correct. Okay. That's it, sir. Thank you very much, sir. Thank you. Thank you. To ask a question, please press star and 1 now. The next question is from the line of Rajiv Pathak from GC Holdings. Please go ahead, sir. Hello, good evening, sir. First, a very good deposit growth, I think, in this kind of an environment, which was, I think, one of the most satisfying part in this result apart from everything else. Just a couple of questions. I think most of them has been answered. One is on your mix. Will the experience of Q1 in any way change your glide path towards changing the mix of secured-unsecured? That's number one. Number two is on your gross and net NPA headline numbers. While you alluded to all the seasonal and the one-off factors, would it be fair to assume that by the exit of March 2025, we'll definitely be keeping the net NPA to less than 1%, which is also one of the requirement, but will it be, say, even lower than March 2024? Will that be the target that you will be giving to the bank? Rajiv, the first one, no change in strategy. It is just water that we got to address better. Nothing changes for us in terms of moving towards more secured as an organization or within secured the mix. Okay. I think on being less than 1%, we are very certain we will be below 1%. Will we try and be below last year at 0.5? There is no target as such. It is more around what we will see what happens in the book. But certainly, we are below 1% is what we will continue to be. We are still below one, we will remain below one. No change in strategy really. Gross NPA moving closer to those kind of numbers? Gross NPA should obviously start scaling back a bit. That is what we would expect. Okay. Yeah. I think we should take it with that simplicity here. Okay. Thanks a lot and wish you all the best, guys. Thank you so much. The next question is from the line of Rahul Bhangadia, Lucky Investment Managers. Please go ahead. Thank you for taking my question, sir. Am I audible? Rahul, please go ahead. Okay. Sir, just a question on the secured side of the business as I see the NPA table, which is on, I think, slide 19. That itself has seen from March quarter to this quarter a reasonable jump in NPA side. I do not know if this has been touched before, but if you could help us understand that a lot of time has been spent on the unsecured and the BC side. On the secured side itself, if it will help, the absolute number has gone from 90 to 180 and the gross NPA number has moved from 0.6 to 1.1. Is this a seasonal thing or there something else that you would want to kind of explain here? Hi, this is Raman here. Ajay had talked about this earlier in the discussion about the fact that because of elections, heat wave, et cetera, there was a lot of, as far as the secure piece is concerned, the repossession, the SARFAESI proceedings, the court, all of that were going slow. That is really one of the contributors to the fact that my GNPA did not come down as rapidly as we would have expected. Right. Okay. Right. That is what I wanted to do. Thank you. Just to add to what Raman said, listen, the LTV there is 57%. We have a property which is mortgaged to us, which we can certainly sell if we do not get the money. But we do believe that we will be less required to do that because we will see a lot more normalization in this quarter. Sure. Thank you. Thank you so much. The next question is from the line of Kunal Shah, Carnelian Research. Please go ahead, sir. Hi. Thank you for the opportunity. Congratulations on the deposit side or rather the liability side and the advances growth. Few questions from my side is, first thing is what kind of recoveries we expect in the current year to come by? And what is the technical write-off pool, if you could help with that number as well. Our first quarter run rate recovery is about INR 35 crores. We would expect that run rate to hold up for this year. Because why I say that is first quarter, like we were just talking about for the last few questions, wasn't our best quarter in terms of what we did in the gross NPA, net NPA side. Things will only get better from here. I think it will be safely to say if we did 35 in first quarter, we will do 35 or better in the remaining three quarters. Got it. What about the total pool we have? Huge. We have a pool, like I said, we are also collecting from 2016 onwards. If I remember right, the total pool would be closer to between 3,500-4,000 crores. Wow. Okay. Got it. The second question that I had, while a lot has been discussed on the NPAs, but this line that shows existing customers as a percentage of overall Agri loans has got only 17.1% of basically overall customers as portfolio having of existing customers. How should one basically read that as well? Just one more question to add to it is, what is the worst-case scenario you see basically in this overall unsecured piece to go from here? Okay. Second one is easier because I think we are already in the worst-case scenario to our head. I am fairly comfortable to say that to you. Because as you can see between the two things, it is a BC book which is really challenged, not the bank book. The BC guys are very sharp folks. They will address it. That is one that I should not expect it to get worse from here. It can only get better. Okay. The first one? Yeah. When you become a bank, you have to open 25% unbanked rural branches. We were an urban microfinance and we converted to a bank. We had to open 25% unbanked rural branches. We used that to grow the rural book. When we grew these unbanked rural branches, you only get permission to grow them when there is no other bank in that vicinity. We tended to get new to bank customers, which is why you can see in the rural book a lot more new to bank customers, first-time customers. For us that's a very good thing because fundamentally we believe that low leverage new to bank customers perform a lot better than people who are doing L2s, L3s, which is cycle two, cycle three, and have more than one borrower. More than one lender. Sorry. Sudhir you can add it up. The second phase is the Agri loans. The second term borrower is still within Agri in a group which is marked as 17%. They can go also to individual loan. If you go back to the first slide, you see Agri individual loans which are coming from the Agri group to the Agri individual loans. Subir is explaining that if somebody doesn't want to stay in the group, wants a slightly more larger loan amount, then he raises his hand and goes into individual loan process. As I told you, an individual loan involves a credit process. Only then you get an individual loan. Customers who are up for it pass the process, get the individual loan. I would read first-time borrowers coming into the Agri loan business as a positive. I'd rather have those than customers who are second time, third time. Second time, third time is not so bad. It's more like second time, third time with more than one or two lenders is a problem. Okay, got it. Also in the annual report we have mentioned the total concentration. When I see the concentration of deposits, the percentage is 20.70%. A percentage of deposits of 20 largest depositors to the total deposits of the bank standing at 20.70%, which looks like a little on the higher side. If you could help elaborate a little bit as to how should one read that, what is the nature, would be really helpful. Yeah. Only thing I can tell you, listen, I don't have the ready answer for that, but there's one slide I do want you to look at, because if you go to slide 13 with me- It says here 96.6% of bulk deposit are non-callable. Sorry, which slide number? Which slide? Slide 13. One, three. Okay. I will wait for you to get there. Yeah, I am there. Okay, left-hand side, second last, or rather the last para, 96.6% of bulk deposits are non-callable and 90.7% of bulk deposit are one year and above. If you just take this maths, the largest depositors of the bank would typically have more than one year of deposit as a contractual with us, and they would be non-callable in nature. Okay. Got it. Which means we really don't run a risk of the carpet being pulled off under our feet here. Got it. That's helpful. There's just one more question, if you could help a little bit on this royalty that we are paying to the promoters, right? What is the nature of the same, the amount basically that we are paying and the maximum limit I'm sorry to interrupt. Mr. Shah, may I please request you to return to the question queue for the follow-up questions? Okay. Let him finish. This is the last question that I have. All right. Go ahead. No. Let him finish. It is okay. I heard your question also, so let me finish. Nobody has asked this question, so maybe some other folks are interested in the answer also. No worries. Here is the answer, which is, if you see the EGM EGM last month. EGM last month, right? Yeah. We have renegotiated the branding. The Jana brand belongs to the NGO called Jana Urban Foundation, which was really the founder who started the Urban Foundation as well as the various Jana entities. I must say, over the years, Jana Small Finance Bank has been spending on branding, has been really doing a lot of work around enhancing the brand. When we did the first negotiation on the Jana brand, we did say at some point we will renegotiate because obviously the bank would be a different entity then. It has been renegotiated. The new contract begins as of 1st of? November. November 2024. I will give you a very ballpark high-level number. So roughly what was the cost last year of about INR 12 crores, INR 12.2 crores for the brand. Yeah. Starting 1st November, that falls to INR 3.89 crores plus GST. INR 3.8 plus GST. INR 3.8 plus GST. So let's say roughly about INR 4.1 crores. That will be a static cost as long as we use the brand. We are not forced to use the brand, so we may decide that we want to change our brand if we find INR 4 crores too much or we find the brand needs a change. That is something that we already signed up. So yes, we have a INR 4 crore, which we think is a reasonable ask by the brand to be used. We are not tied in to use the brand. If we ever decide to cut the contract, it certainly would be max payment of till about INR 10 odd crores. If you think about us practically, there is unlikelihood of any brand change in Jana till we turn universal. When we turn universal, we will anyway have to rebrand. If we do have a mind to relook at the brand in any way, shape or form, it will be more likely next year. But meanwhile, we have got a good negotiation already signed off and approved by shareholders in place. Okay, got it. You are saying that INR 12 crores what we have paid in the last year will be restricted at best to about INR 10 crores per annum. No, sorry. This year because this contract is till 1st of November, there will be, say about a INR 6 crore-INR 7 crore payout. Okay The annual new contract is INR 3.89 crores plus GST annually. Sorry. Starting from INR 4.89 crore is the annual amount? INR 3.89 crore plus GST. Plus GST. Okay. Got it. But this year what will happen is you will have 7 months of the old contract and 5 months of new contract. So mota-mota this year will be around 10 odd crores. But starting next year will be INR 3.89 plus GST. Got it. Cool. Okay. Thank you so much and congratulations once again for good set of numbers. Thank you so much. I just want to finish that INR 3.89 plus GST is forever till now. It will not go for any escalation. That is part of the contract. Got it. Cool. Thank you. Thank you. No worries. The next question is from the line of Ms. Vibha from FairConnect. Please go ahead. Yeah. Thank you for taking the question. Just a suggestion, the initial analyst asked five, six questions. If you could please restrict right in the beginning so that all questions are taken. My questions are again related to asset quality. Your gross NPAs, gross NPA percentage last quarter was 7.1% and this quarter it's 1.2%. Is there a large write-off? Similarly, your active customers have come down from 5.4 million to 4.4 million. So again, is it related? That is the first part of my question. The second part is, when we see the BC book, you of course have the FLDG 5%, but if you were to see the profile of BCs, can they actually withstand the stress? Have you done profiling of the BCs? Do you do some credit scoring? Is there an external rating available? Across how many BCs is this INR 289 crore spread across? What is the outlook on eventual losses on this book? Okay. Very quickly, let me know if I miss something. You folks can add Sudhir and Raman. First, thank you for asking the customer question. We put a little note down there, dormant account which have been closed. Okay. I have also written there from next presentation, I will do a like for like, which is I close dormant both years and show you. I did not want to do that when we began there. It is actually given there as a note. I can tell you that if I do a- Understood. Right. Even if I did a dormant closure both years, I typically will see a 20 odd percent customer growth. I think one customer growth is given based on the dormant versus non-dominant. On write-off, Abhilash did mention we have taken INR 50 crore technical write-off in this quarter. There is nothing else there. Third thing is, BCs have given me a cash deposit. They do not have to pay me when something goes wrong. I upfront collect it when we start doing the business. Four, we are in this microfinance business since 2008, and at least this team is actively doing this business since 2018. Most of the folks whom we have given the BC, they are good in their business, which is why they are our partners. We do have great amount of trust in them. There is stress. We think we are in the best position to address it. Like I said in the earlier questions, we are not very worried about it. It is normal that when there is stress, there will be a rise in NPA. I think we should accept it, we should address it, and there is enough in the P&L to take care of it. Something that we are not anxious about, but something we are watching and working very closely with. Also, I must tell you that our original strategy of having a BC book of 8%-9% of our total book was to make sure the bank is de-risked for any small stress on the way. This is another small stress on the way, and absolutely the right thing for us to do. Remember, to get this small stress out of the way, we did not have to pay a premium all these years because we were shelling out a percentage of our revenue to these BCs higher than what we would have made as a bank. That has all come through today because in the time of stress, like I said, the team is still focused on what they need to do in secured, et cetera, and our minds are not getting wayward somewhere else. Okay. Just to put things in perspective, your group loan NPAs have gone down from 7.1% to 1.2% because it is a INR 50 crore write-off, not because of recovery. Correct. On BC book. Uh- The comfort is qualitative. They are not externally rated. Your BC partners are not externally rated. Qualitatively, you have comfort in them in managing their business. Your second one is absolutely right. The first one is a mix of the two. I would not say that everything is write-off. You would pick up from our presentation what we recover from our group loan customers, not as a specific segment, but I do remember that last year we would have recovered close to about 200 odd crores. You should assume that part of the drop is recovery. Part of the drop would be a technical write-off. Okay. Thank you. Fair enough. Thank you. Ladies and gentlemen, that was the last question. I now hand over the conference to Mr. Ajay Kanwal for the closing remark. Okay. Thank you so much. I just want to reiterate a few things which are very important. First, to us it has been a solid quarter. Solid in delivering on strategy. Secured asset growth has been 8%. CASA growth has been 9%. Unsecured growth has been a negative 1%, which means that we are on track to deliver what we originally began with. There has been an increase in gross NPA, largely driven through the BC book, where we have deposits to pay off if they don't get the collections right. Where our risk is, I would not say zero, but I would think it is a very nominal risk. On the secured side, the first quarter has seen a bit of external event-driven moment where our collections could not be as good as we would have liked. We do think where we are in this quarter, that will get fixed. While we have a 57% LTV, that is just a safety lever we have for the very end. But we do think customers do love their properties. These are customers who are not doing investment properties. These are affordable housing customers, the 11 lakh average and a LAP with a 6.5 lakh average. We are very certain given our past experience, including first quarter last year, where we saw an elevated first quarter gross NPA, net NPA, that we will get all this right in the ensuing quarters. With that, I would like to thank all of you and assure you that you will continue to get the results that we have put forth in our guidance in future. Thank you so much. Thank you. On behalf of the Jana Small Finance Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.

Data Source: Quartr Last updated: Jul 22, 2024

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