Good day, and welcome to the L&T Finance Holdings Q2 FY 2024 earnings conference call. As a reminder, all participants and clients will be in listen-only mode, but there will be an opportunity for you to ask questions after the presentation concludes. If you need assistance during the call, please signal an operator by pressing Star then zero on your telephone. Please note that this conference is being recorded. We have with us today, Mr. Dinanath Dubhashi, Managing Director and CEO, and other members of the senior management team. Before we proceed, as a standard disclaimer, no unpublished price-sensitive information will be shared during the call. Only publicly available documents will be referred to for discussions during interactions in the call.
While all efforts will be made to ensure that no unpublished price-sensitive information will be shared, in the case of any inadvertent disclosure, the same would generally form part of the recording of the call. Further, some of the statements made on today's call will be forward-looking in nature. A note is provided in the Q2 results presentation sent out to all of you earlier. I would now like to invite Mr. Dinanath Dubhashi to share his thoughts on the company's performance and the strategy of the company going forward. Thank you, and over to you, sir.
Thank you. Thank you. A very good morning to all of you. Welcome to the call. I can start the call definitely by stating, without any hesitation, that we are very, very enthused about the Q2 FY 2024 results. In fact, you know, I, I read in one of, the reports written by one of you, that the results show not only quantity but also quality, and that really, reflects what, I wanted to say. We are happy, of course, that we have registered highest ever retail disbursements and excellent margins as well as reduced credit cost, thus achieving the 46% PAT growth, registering a PAT of INR 595 crore.
We are, of course, happy that we continue to achieve and exceed the Lakshya 2026 targets well ahead of time, but most importantly, we are happy qualitatively that all the steps that we have planned to make sure that our results are consistent without any negative surprises. All those steps are falling in place in an excellent manner, thanks to the excellent execution engine we have put in place. With this, let us now look at the performance of the first quarter, quarter two of FY 2024. Over the last few quarters, we have achieved several milestones in our quest to make LGF the top-class, digitally-enabled retail finance company. The strong differentiators we are creating have helped us achieve our Lakshya 2026 goals well ahead of time.
Our plan of making the company a leading, digitally-enabled retail finance company is well on course and has been tremendously strengthened by the addition of Sudipta to the team. Sudipta has now spent almost four months with the company, and as I had mentioned in the last call, the company is strongly drawing on his strengths to reimagine and redraw various customer journeys as well as internal processes. We aim to make our journeys more and more seamless, widen our customer funnel further, efficiently form our strong customer database, and most importantly, further strengthen underwriting processes by bringing new age insights into the underwriting journeys. Business cycles and seasonality are a reality of life. We believe that the above initiatives will help us make our growth relatively insulated from these, thus making it more consistent, while at the same time continuously improving our portfolio quality and further reducing credit risk.
Let me now just quickly capture the achievements against the Lakshya goals with majorly accelerated timelines. Our strategic plan, Lakshya 2026, is on four key milestones. Let us look at the performance against each one of them. The first milestone was taking retailization percentage to more than 80% by 2026. I had already indicated to you that we will in fact be exceeding 90% retailization by end of FY 2024. Most importantly, we are confident of doing the same without any negative surprise to the P&L. In keeping with that promise, we have already achieved an 88% retailization in Q2, and quite confident of going beyond 90% in Q3 itself. The second milestone was about retail growth of more than 20%.
Against this, we grew 33% YOY in this quarter, and this, let me remind you, follows up on the 34% YOY growth in Q1 and 35% YOY growth in the previous year, that is FY 2023. So the growth has been pretty consistent. We had also said that our GS3 and NS3, retail GS3 and NS3, will be below 3% and 1%. As you would see, our retail GS3 and NS3 today stand at 3.05% and 0.67%, respectively, and even on consolidated basis, this is at 3.27% and 0.82%. Last, but not the least, we had put a retail ROA target of 2.83%, and we had reached 2.95% in Q4 and 3.08% in Q1.
T his quarter, it has grown to 3.32%, and I believe that with the various steps being taken, this can only improve from here. If we look at the highlights of this quarter, our profit, retail profit after tax actually is INR 606 crore, up 36% from last year. Retail NIMs plus fees are at almost all-time high of more than 12%. We have done our highest ever quarterly retail disbursements of about INR 13,500 crore, which is up 32%. Now, let me again point out that Q2 traditionally is the weakest quarter, and we have done the highest quarterly disbursements while making sure that zero DPD collection, portfolio quality, everything remains same. This is happening largely due to the various steps we are taking, especially on farming the database and also some movement towards more prime desktops.
Book size growth. Retail book is now INR 69,400 crore, which is up 33%, and we have already talked about asset quality and ROA. Retail ROE now has reached 16.31%. If we talk consolidated performance, the consolidated tax now is once again at very high, you know, very healthy level of INR 595 crore, which is up 36%. Our capital adequacy remains strong at 25%. Our credit cost has come from further by 10 basis points on YOY basis, which is a good path to trade on. Continued with the accelerated reduction in wholesale book, a steep reduction of about INR 29,000 crore, 76% has been achieved, and now the wholesale book stands at INR 9,318 crore at the end of Q2, FY 2024.
As I am guiding, we should cross 90% by Q3 itself, and hopefully, be close to 95% by the end of the year. As the balance sheet becomes more and more retail and the wholesale books becomes less and less relevant, the overall ROA will start converging to the retail ROA. I would also like to point out that our overall ROA have now crossed 2.4%, and now this acceleration towards the conversion to retail ROA is expected to be faster as we keep reducing the wholesale book. Let me now briefly talk about the retail ROA tree and the factors contributing to the same and what kind of direction it can take. Number one, the strong NIMs plus fees.
As you will see, the retail NIMs plus fees have trended quite well and have reached an all-time high level of more than 12%. While we do expect borrowing costs to inch up slightly in the second half of the year, our treasury has been managing the costs quite efficiently, graciously locking in interest rates for medium to long term, and also making excellent use of our rural portfolio, which qualifies for PSL borrowing as well as PTCs. All this is being done while keeping CP proportion, commercial paper proportion, low at just about 6%, which provides good room or increase in this percentage if required, and hence moderation in borrowing cost. We will do this on need basis. What helps, of course, is the overall duration of the book coming down continuously because retailization.
Also, one factor which will help us sometimes is the impending merger, which is now in its last phase and will also provide tremendous synergies in treasury, ALM, and liquidity management. Very simply, we have to keep liquidity, we have to manage ALM of three companies. Instead of that, it will be one company. Obviously, it will lead to lots of synergies. All of this, coupled with the movement of the portfolio to retail and rural, has definitely helped weighted average yields. While the NIMs plus fees may moderate slightly from current levels, we do not expect a major drop in these in the future because of all these reasons that we have highlighted. On the expenses side, we have indicated over the last couple of calls that the OpEx line may remain sticky at least in near future.
The reason for that is we will continue to invest heavily in physical infrastructure and teams to aid our growth and also heavily invest in cutting-edge technology. You would have also observed higher marketing and brand visibility of our brand over the last couple of quarters, and this investment will also continue. This increase in cost will, of course, be partly offset by better, better productivity and efficiency. But on the whole, this line may remain a little sticky in the short term. We are convinced that this investment will bear excellent fruits in the future. Credit costs. This is a line where we have shown steady and continuous improvement, and we clearly and strongly expect this, that this trend will continue in the future quarter on quarter. The improvement will come with work on three vectors. Number one, further strengthen underwriting by c.
You know, what we normally do is single, single line underwriting, which is bureau information, asset cost, and income-based underwriting. We will be augmenting this with many new age parameters, which Sudipta will talk about more. Second, excellent track record on zero DPD collections, aided by tremendous analytics input. And last but not the least, a strong collection team on the ground, which aids rollback of whatever, you know, rolls through, and recovery of bad accounts which flow in the subsequent decades. Even after very good zero DPD collection, there are accounts which obviously will flow, and this strong collection team ensures that it is recovered and credit cost is kept minimum. With all this, we clearly expect the retail ROA, which is now steadily increased to 3.32 to further inch up towards 3.5 mark over the next few quarters.
With this excellent trajectory of profitability in place, it is now important to understand exactly how we are planning to maintain this excellent rate of growth while continuously reducing credit costs and hence improving ROAs quarter on quarter. I now hand over to Sudipta for, one, taking you through the business highlights for Q2 FY 2024. two, talking about the business strengths which we have built and which have helped us achieve these results. And three, most importantly, highlighting the five pillars we are putting in place to ensure an excellent trajectory of growth, credit cost, and hence profitability in the future. Over to Sudipta.
Good afternoon and good morning to everyone in the call. Before moving to the detailed business updates for FY 2024, allow me to talk to you about our expectations of Q3 FY 2024. There are multiple things happening in India and globally, and we are going through a sort of uncertain period in terms of global geostrategics. Talking about the global scenario, you know that inflation has been staying well above the targets in major economies, geopolitical headwinds from ongoing wars, elevated crude oil prices, a strong dollar, and rising U.S. yields added to the financial market volatility. However, when you talk specifically about India, the economy has showed improved resilience in FY 2024, even as the consumption recovery showed a C-shaped pattern, owing to the state and central government's CapEx push.
During 2023, India received the lowest rains in five years, and the El Niño weather pattern made August the driest month in more than a century. Uneven rainfall further raises the risk to the kharif field, plus the depleted water reserves in several states will challenge timely sowing of the rabi crops. This does not augur well for rural incomes and food inflation in H2 FY 2024. Inflation, too, is likely to firm up in H2 FY 2024 due to a weaker monsoon and the surging global energy prices. Accordingly, some slowdown may be observed in rural demand. H2 of FY 2024 has been a mixed period for the economy. Monsoons have firmed up already, and in some sections of the urban consumer lending, there are some signs of leverage.
It will be important to approach the near future with optimism, but at the same time, with very strong risk guardians. On one hand, we have seen some very strong festive demand already in Q3, and at Larsen & Toubro Finance, we are geared up for the festive season with targeted campaigns and consumer offers. With that aside, let me quickly deep dive into the key highlights for the quarter that has gone by. Retail businesses, in terms of disbursements in Q2 FY 2024, stood at INR 13,499 crore, up 32% year-over-year. This has resulted in the retail book going 32% year-over-year, and our overall retail mix has grown to 88%, up from 58% in Q2 FY 2023.
In terms of our business lines, the Rural Business Finance, if I take the Rural Business Finance business, one of the highlights I can put now on the table is that this business is up 14+ years of vintage, and it has done its highest ever quarterly disbursements at INR 5,740 crore, up from INR 4,511 crore in the previous quarter, which was back then the highest ever quarterly disbursement. This is a result of better income mapping, persistent focus on customer retention, and streamlining business throughput. We started income mapping about 18 months back, and as you all know, and now with this income mapping, we have a very good idea of the various categories of customers and can design our products accordingly.
This quarter, we also achieved an important milestone of crossing a book size of INR 21,000 crore in this business. In Q2 FY 2024, RBF also witnessed the highest ever quarterly disbursement to HDF exclusive customers, which we call the priority customers, at about INR 1,202 crore. More importantly, I'll repeat, disbursements are close to 70% of total. 31% of disbursements are to exclusive HDF customers. This trend shows us this business has not remained as cyclical as before. In the pharma finance business, we dispersed loans upwards of INR 1,500 crore, INR 1,634 crore in FY 2024. This has led to a disbursement growth of 88% year-on-year, and a book growth of 13% year-on-year.
It is interesting to note that our top-up product, Kisan Suvidha, has seen an increase in penetration from 24% in the last quarter to 30% in Q2. And we have actually driven the penetration of this product with single-minded focus. The consistent focus on repeat borrower book growth, the disbursement from this segment had INR 95 crore in Q2 FY 2024, resulting in a 26% year-on-year growth. There's an enhanced digital collections too, as we now contribute 45% in overall collections, up by 8% year-on-year. We intend to leverage the festive season with high dealer activation by increasing dealer penetration. As you are aware, a large proportion of our business is also now in urban finance, and we are focusing on growing all the business lines in urban finance strongly.
This segment, which comprises of two-wheelers, Personal Loans, Home Loans, Loan Against Property business, saw a 17% year-on-year jump in overall disbursements, resulting in 31% year-on-year increase in book size. The two-wheeler business registered a disbursement of INR 1,817 crore in the quarter, up from INR 1,726 crore in the previous quarter, and the book crossed INR 9,500 crore, up 18% year-on-year. This is obviously in a quarter that is normally a difficult quarter for most of the consumer lending businesses.
With a higher emphasis on the prime segment and an overall enhancement in customer base quality, we have been able to grow our prime customer, customers with asset value, defined as with asset value greater than INR 1.5 lakh, 15% year-on-year from Q2 FY 2023 to Q2 FY 2024. Now, what happens with prime product is the customer gets a better LTV because they are prime customers. We get much, much lower bounce rates, maybe as low as one-third the bounce as compared to a normal two-wheeler customer from other lower-value ICE set of vehicles, and hence, as a corollary, much lower collections costs and credit costs.
We have also entered into agreements with preferred electric vehicle players like Ola and Ather, which of course, is within our plan for getting prepared for the future, but clearly also within our plan for pushing the portfolio towards more prime segments. This also furthers our goal of funding sustainably as a company. We are leveraging a lot on analytics in driving this business, and our analytics-driven dealer relationships analysis has always been our strength. And this has led to a high account share of 54% of our total disbursement from the top dealers. This business is going to become one of our main customer acquisition engines in the future, and thus holds a lot of potential and hence, see a lot of, a lot of focus from our business as well.
In the personal loans business, we have forayed into this with the objective of sort of leveraging our existing two-wheeler seasoned, two-wheeler customer base, as a, as, primary cross-sell proposition. The business with since disbursements was INR 138 crore, and the book size crossed INR 6,000 crore, an increase of 68% year-on-year. We have also launched an income assistant-based journey program to provide better offers to our customers based on their salary and max credit, increasing the average size to about INR 1.75 lakh.
We've been also working towards reimagining our customer journeys in the personal loans business by adding multiple layers, like utilizing Video KYC for customer onboarding, establishing manual underwriting centers and strategic locations to augment customer eligibility, and augmenting traditional bureau mass models with advanced bureau plus models of bureau plus models of the what we call the additional signal-based underwriting, which I'll talk a little bit later, including and also including geographic expansion. I think it is important to discuss this segment in a little more detail. As I said some earlier, some segments of this market are certainly showing signs of overheating. This is our interaction with credit bureaus. We would like to point out that the stress largely exists in the low-ticket personal loan segment, which is less than INR 50,000 or of ticket size.
and bureaus like TransUnion CIBIL estimate at a total of INR 25,000 crore outstanding in this particular ticket size segment, compared to overall Personal Loans book size of about INR 1,050,000 crore. In high ticket sizes, normally more caution is exercised while underwriting, and loss rates are significantly lower than those in less than INR 50,000 segment. As far as our portfolio is concerned, we have practically no exposure in the less than INR 50,000 ticket size segment, and we have consciously stayed away from the BNPL segment, lending in the BNPL segment. Moving on to housing, it achieved the highest ever quarterly disbursement of INR 4,734 crore, up 55% year-on-year, and the book size crossed into INR 50,000 crore mark, an increase of 30% year-on-year.
In line with the strategy of balancing customer mix for optimum returns, share of salaried and self-employed segments in the total disbursement stood at 58% and 42% respectively in quarter two FY 2024. We are operating mostly in the prime segments in case of disbursing Home Loans. Moving on to SME Business Finance, we'll be completing two years of SME Business Finance in Q3. As you know, the product was launched in Q3 FY 2022. Our quarter two FY 2024 disbursements stood at INR 870 crore, a 45% increase quarter two, and it has become, you know, quite large in our business. We have done about, If you recall, in the same quarter last year, we had done about INR 201 crore.
As we go ahead, here also, we have launched new products. We initially started only with unsecured business term loan. We have now launched overdraft and hybrid overdraft products, which are seeing extremely good traction as we go ahead. New locations, which are launched around the month of May 2023, contributed to about 15% disbursements in September 2023. We have opened a call center channel for targeting prospect data in August 2023. We are also launching the hybrid product in September 2023. The book now stands at about INR 2,413 crore, crossing the INR 2,000 crore milestone, up from INR 3,321 crore in Q2 FY 2023. We were added about more than about 3,500 customers in the quarter, with crossing about 12,000.
In Q3 FY 2024, we will focus on adding new funnels to complement existing channels, and we will be launching our partnership journey as well. We also aim to offer our top, launch our top offerings in this quarter. As you know, for most retail asset businesses, collections is a very key input to the entire, you know, operations of the business. On the collection side, we have observed best-in-class collections in all our regional products, and our extra collections team are putting their best efforts to enhance collections through the strategic use of analytics. This concerted approach has significantly strengthened our overall collections performance, and we have provided detailed product-wise collection solutions in our industry presentation, as well as for our retail portfolio.
As well as our retail portfolio, we have also shown the stage-based book in our investor presentation, as we have promised for the last three quarters in a row. I would like to now come to a brief commentary on our wholesale business. On the wholesale business, we now are much closer to our Lakshya 2026 goal of reaching LGS, a completely retail finance company, and we show excellent reduction in our wholesale book year-on-year. We're now very confident of crossing the 90% retailization mark by end of FY 2024. This quarter, the book size reduced to less than INR 10,000 crore from INR 40,292 crore in Q1 FY 2024, to INR 9,318 crore in a period of just one quarter. That's a 76% year-on-year reduction and a 35% reduction quarter-over-quarter sequentially.
The contribution from the wholesale team has immensely helped in taking the retailization percentage towards 88%, thus making L&T Finance a key retail finance company. The fact that the NS3 on the book is just INR 175 crore, and NS3, NS2 is just for INR 500 crore, gives us complete confidence that there will be no negative surprises coming from PNL from this segment in the future. Now, let me also talk you through the various business strengths that we have studied in the last few years. We have diligently cultivated a deep pan-India franchise over the years, and this has become a cornerstone of our operations, and our performance quarter on quarter year is testament to the strength of this franchise.
An optimum mix of strong physical presence and precise channel partners, coupled with leveraging our database, which is about 2.2 crore customers, about 1.46 crores in the rural areas and about 76 lakhs are growing with every passing month, has helped us building a superior retail franchise. We have disbursed about 6.5 lakhs to new customers in Q2 of FY 2024, and our active customer franchise now stands at about 90 lakhs. Share of cross-sell as well as upsell in total disbursements has been the highlight of this quarter, which stands at about 38% as against 34% in the last quarter. The gradual improvement underscores the enduring strength of the franchise our organization holds, and we are proud to witness its continuous success as a testament to our ongoing commitment to this.
We, of course, envisage these numbers to gradually increase as we concentrate our efforts on increasing the share of cross-sell and repeat loans, like the Pragati loans in the RBF business, the trust loans, the sanctions within our farm business, the two-wheeler loyalty to primarily for, you know, cross-sell personal loans, the consumer loans, top-up, or the personal loans top-up, as we mentioned earlier, housing loans, etc. We have built a strong cross-sell and upsell engine, great use of digital analytics, which shows the strengths that we are building to address the needs and needs of our customers of the future. This is definitely beneficial for the customer. The whole idea is quarter on quarter, we, year-on-year, we reduce the effect impact of seasonality both on, both on our business as well as on our collection.
We certainly believe that we are equipped to handle the seasonalities. However, this layer of upsell and upsell engine that we are building for, you know, for our existing customers, reduce the effect of the volatility of seasonality where maybe, and you will see on a quarter-on-quarter disbursements, which we have shown over for the last nine quarters also, you see the dependence on new disbursements is clearly coming down, and our share of cross-sell disbursements is growing quarter-on-quarter. The fact those state that our quarter disbursements are the highest that we have ever posted in a quarter, it actually shows that this is working quite well. This is just the beginning, and we'll be on our endeavor, endeavor to increase 68% of cross-sell/upsell volumes to, to higher levels as we go forward.
Obviously, the added advantage is that the acquisition cost is lower for all the cross-sell, sort of, disbursements. Of course, credit cost is also lower because these are tried and tested credit seasoned customers, and we have been seeing these customers over a couple of months on books. The strengthening of this franchise not only makes sense on the disbursement growth side, but also on the collections and asset quality side as well. Asset quality, we hope will should continuously improve going forward, leading to reduction in credit cost through continuous enhancements in underwriting, analytics-based, strong focus on zero DPD collections, and a strong ground collection teams. It makes the company resilient to external factors, and that is the one kind of company that we want to build.
Obviously, you have known and analyzed as part of our Lakshya 2026 goals, as that, you know, we want to take L&T Finance into what we call Fintech at scale. This has been our way of offering a one-stop solution for our customers. The calls, for the last couple of calls, we have talked about transforming L&T Finance into a company that relies on Fintech and implements Fintech at scale. This obviously requires not only a comprehensive strategy, but continuously putting data analytics to excellent use. We are dedicated to ensuring that no good customer is lost, and we are resolution our mission in our company tends to every phase of their engagement with our products and services in a digital manner.
This means that we not only prioritize the acquisition of customers, but also in terms, ensure their long-term satisfaction, loyalty, and sustained value realization as they navigate their financial interactions with us through our digital platform. I specifically will talk about our PLANET app right now. Our PLANET app, which is our D2C app, was launched in March 2022, has witnessed tremendous success, and it already crossed 6 million downloads since its launch, which even we had not imagined. The app actually did one million downloads in our November 2022, thre million in April 2023, four million in July 2023, and six million in October 2023. You can see that there is a lot of customer pull towards using this app, and which is sort of supplemented by the strong download trajectory that we see from our customers.
More than these numbers, what matters more to us is the engagement of our customers with the services that the application has to offer. From offering service features like downloading statement of accounts and interest certificates, the app has developed into having superior engagement features, like providing monthly prices for our farmers, insurance, credit course, features like D2C journey for top- ups, PLANET app As we progress, a lot more efficiencies in personal finance journeys are going to be unleashed by this app. Let me give you a few number updates on the PLANET App. As of date, the app has done collections of about INR 500 crore, sourced loans of about more than INR 4,200 crore, and catered to about 9.4 million service requests. The app also boasts of catering to about 800,000 rural customers.
More than 26 lakh customers have checked their credit scores, more than 31 lakh customers have downloaded the repayment schedules, and more than 40 lakh statement of accounts have been downloaded from the app. It has genuinely inverted the service pyramid. So the branches just 2 or 2.5 years back, contributed to about 51% of our service requests, and digital only contributed to about 14% of our service requests. This is now completely reversed, with branches contributing 8% of our service requests and digital contributing to 81% of our service requests. So on the other hand, you know, this goes tremendously, tremendously well for our operating costs, but much more important for quality of customer service and hopefully much higher customer retention and satisfaction.
As highlighted by Didi in the last call, rural remains one area where there is a major sort of upside as well as improvement area for us. At this point in time, about 13% of total downloads are from 16,60,000, around 800,000 come from the rural areas, and this speed is likely to catch up now. With big efforts of marketing this app in rural, which has specifically been taken up as a target by the business teams as well. This will clearly change the way our customers in the rural areas engage with us and even in the manner of repayment of our loans. On the last call, Didi had spoken to you about developing digital finance delivery as a customer value proposition. As mentioned earlier, our objective is to touch every part of the customer ecosystem with superior digital infrastructure.
We have built a full 100% paperless journeys, 100% paperless journeys in Rural Business Finance, in farmer finance, and in Two-Wheeler Finance, as well as in consumer loans. As far as collections is concerned, our strength definitely lies in our feet on street network, one, through the nature of the businesses that we are in, and we are continuously boosting our digital collection capabilities. In the urban space, 92% of our urban collections happen completely digitally, which is on a steady state now. While for the rural, it would, might look like a small number, but but about 14% of our, sort of loan, rural collections is happening digitally, both in microloans and farmer finance, catching up on our digital collections as well.
Just about two years back, this number was low single digits, and I believe personally, that this is going to accelerate as we go ahead. We, as an organization, are focusing on pushing the envelope and making sure that the digital collections also grow in rural areas. In the last leg, I would like to talk about, is, about ESGs before moving on to the strategy of the five key vectors for future sustainable growth. The company's environmental, social, and governance journey started in 2018-2019. It's one of the first MBA system in sustainability. Our journey towards Lakshya, our primary objective, while it has to drive growth, but it was also while embracing the principles of environment, social, and governance success. As far as our commitment to ESG is concerned, I'd like to share with you that we continued our vow towards minimizing our ecological footprint.
An ESG policy adopted by LGFH has been a guiding framework to incorporate ESG considerations into operations and business and mitigate material impacts and risks. We won many notable awards for our ESG contribution during the quarter, including the Champions of ESG award at the Global Fintech Fest 2023, held in Mumbai. Now, what I'd like you to see is what we define as our five vectors for growth. And, you know, it is consistent in our Lakshya 2026 strategy. Now, with the results of quarter 2 FY 2024, we have now reached where we aimed to be when we formulated the Lakshya 2026 goals. The obvious question is what follows next? There is no doubt that we will be striving for LDF to reach newer and higher heights, but how will we do that?
Here I would like to address the five vectors of growth, which we'll be emphasizing on our future journey to make sure that we maintain excellent growth while keeping our portfolio quality robust. Obviously, one of the first vectors is enhancing customer acquisition. This is our primary aim going forward. We want to enhance the velocity and quality of our customer acquisition. This will include broadening the customer funnel and velocity while increasing throughput, along with harvesting our existing customers and increasing costs, while keeping risk under control. In addition to this, we'll be launching contiguous product offerings. For this, we are formulating a detailed plan, and you will see a lot of developments in this area in the next upcoming quarters.
It is very important that while we increase customer acquisition, it is also important to make management sort of improve the credit underwriting engine, and that will be our next vector of focus to further sharpen our credit underwriting. We'll be moving from a single axis underwriting to multiple axis underwriting, and movement from traditional underwriting, like the bureau-based underwriting, to a new methods of sort of 360 underwriting using Account Aggregator pools, market available behavioral signals fully within the digital lending and privacy laws that are obtained with customer consent. For this, we are developing a dynamic credit engine based on alternate data signals and ingesting this credit signals to make our underwriting model more robust in addition to our traditional underwriting. These additions will provide us with a far better credit underwriting of the customer than we are currently able to.
Obviously, increasing customer acquisition funnels and increasing the sort of the efficacy of our credit underwriting engine also makes it imperative on us to sort of build a futuristic digital architecture. And this is the third vector. The third vector will be optimizing and reimagining digital journeys to eliminate choke points and provide a superlative experience to our customers. The digital machine that we will build will not only help us externally, i.e., in terms of ensuring a seamless experience for our customers, but also internally, i.e., almost of our processes, databases, operations, et cetera, are done and stored to a central digital warehouse. In order to achieve this, we have now a dedicated team for in-house engineering, so as to enhance our time to market. The fourth pillar that we will need to build up to the next level is heightened brand activity.
We will be ensuring continuous brand presence across channels, build salience and recall for the brand that we are brand L&T Finance. We have a host of other activities planned for the coming months, where we will be conducting multiple brand and product awareness campaigns, both in the rural and urban areas, with focused targeting and ensuring optimum channel mix. The idea is to make the brand synonymous to easier lending and be the first choice of lender for our rural as well as our urban customers. And while we try to sort of build on these four vectors, obviously, one of the critical elements in this is making sure that we have the right quality people. And so the fifth and the last vector entails focus, enhanced optimization of talent pool in what we call capability building.
We will be building teams focused on artificial intelligence and machine learning, and also building additional capabilities in credit and risk management. The highly talented and specialized resource pool will ensure we have the best human talent in the company who can bring on board their individual strengths and help us in delivering our Lakshya 2026 goals and carry our organization even further than that. We have already started our work in these areas, and I'm extremely confident that these vectors will act as strong anchors, so as to enable us to become the retail competitive scale that we aspire it to be, while equipping us with reaching any challenges that may come our way in the future.
I would like to conclude by saying thank you to all of you for your support, and by reiterating the confidence that the company is well on its line for a very accelerated achievement of the Lakshya 2026 goals. LGF is on its journey to become a pure play retail company, and it is at an important junction now, with the company now having become 88% retail oriented. Now, the goals have been achieved in terms of percentages well in advance, but we aim to keep this excellent growth going forward while maintaining asset quality, further improving productivity, cost efficiency, and continuously improving our digital and analytics footprint as we go ahead. We are confident that this will lead to a secular improvement in our profitability ratios as we go ahead.
What gives us confidence to do that is all our strengths, like the deep sort of employee network and the distribution network we have, our digital capabilities and the proven management bandwidth, along with our ability to utilize and work on that customer base that we have already built, or that we are going to build through our customer acquisition engines in the future. With all these thoughts, I extend my good wishes to all of you. Wish all of you a very happy New Year, and I thank you all for your patient hearing.
Thank you very much. We will now begin with the question and answer session. Anyone who wishes to ask questions, press Star and one on your telephone. If you wish to remove yourself from the question queue, you press Star two. All participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mahrukh Adajania from Nomura. Please go ahead.
Yeah, hello. Congratulations. So, basically, I had a couple of questions. I'll start with Sudipta's comments on unsecured loans. First of all, thanks for making those comments up front, because there's a lot of confusion. But, in your experience, because you have a very rich experience in unsecured retail and in risk. In your experience, do you think that the risk in the small ticket segment can easily spill over to the large ticket segment, or they are, they have to be viewed as two completely different segments? And does that then impact other unsecured segments like MFI as well? So that's my first question, and then I have earnings related questions.
Yeah. So, to answer your question on the Rural Business Finance segment first, you know, they're not exactly consumption loans, they're Rural Business Finance loans. So in that way, they're different really. And the collections discipline and disciplines on that business are markedly different from the urban Personal Loans. And frankly, I, you know, do not believe that the risks on the small ticket Personal Loans that we are seeing, which are mostly in nature, are actually the same quality of loans that are done by the large established financial services players. Because in addition to the sort of digital underwriting and acquisition models, there's a rich experience with large organizations have, which actually help us to sort of sift out the risky customers from those that are non-risky.
So to answer your question, I really do not see any contagion risk from the small ticket personal loans to the larger, sort of, personal loans category or the prime category. And I've looked at the risk numbers, that the risk numbers on that segment remains quite, quite stable across the financial services players, the larger financial services players.
Okay, that's very, very helpful. The other two questions are that, of course, the presentation is very detailed. If you could just highlight the value of SR, security receipts.
I will take that. So, Mahrukh, last time we had said that the SRs were about INR 6,500 crore, with the overall value of the, you know, loans which we had sold was about, you know, original cost was about INR 30,000 crore. So that was the kind of safety we had. Okay? So same thing, SRs today, net asset value of SRs will be around INR 8,000 crore, with, total loans. The cost will be upwards of INR 16,000 crore. So two things that I would like to highlight here. Number one, on entire, even if you take SRs plus loans, et cetera, we have shown a reduction of close to INR 9,000 crore, between INR 8,500-INR 9,000 crore from the beginning of the year to now. So we can even see the overall.
Second, because of these deep discounts in SRs over the original value, you would see that over the last several quarters, the reduction in, you know, the value of SR, the revaluation has been very limited. I always say that this INR 25-30 crore per quarter, INR 150-200 crore per year, is what I always say will be the cost, coming both from SRs as well as reversal of interest that we take on infra loans according to India. No negative surprises waiting. Third, for the first time, we have actually told on the call that the net, by the way, the net stage three on the book, you know, that is just about INR 175 crore. The net stage two, as Sudipta has said, is just about INR 400 crore on the book also.
So if we put all this together, we that gives us confidence, and all of us, the confidence that there is absolutely no negative surprises coming from either the book or from it. What you need to take in your model is in about INR 150 crore-INR 200 crore, negative on the PNL from, from, wholesale. And model accordingly.
Got it. That's so very helpful. Thanks a lot. Thank you.
Thank you. The next question is from the line of Rikin Shah from IIFL Securities. Please go ahead.
Hi, Rikin. Yeah.
Hi, Sudipta. Congrats on good set of numbers. Actually, I had a few questions, so probably, maybe, I'll come back into the queue later on, too many. So let me start with first of all, the other income and the fee income growth that was there in this quarter. So right now, you are now at almost 12.5% NIM plus fees. First of all, the sustainable level going ahead, and was there any one-off in the other income in this quarter? Let me start by asking this.
So one-off, I can't call it one-off, but there was a, you know, fees that we had to receive from, our partners, insurance partners, which was due over the last three quarters, but that came this quarter, was just about INR 25-34. So I don't think that is one of these things keep happening quarterly. Fees don't come every quarter. So that's about it. There were no major one-offs other than that coming. Since you asked this question, I would like to point out that another INR 25-34, in addition to business as usual, came from there. Why I'm not ready to call it one-off is because further quarters also some past dues will, will keep coming. Okay?
As far as the trend is concerned, NIMs plus fees retail, I have always been guiding, you know, around—I was initially guiding 11.5. I changed my guidance to 11.7. I was also surprised at 12.12, and we have done very, very well, right? As I said in my comments, it comes from two things. Number one is cost of funds. The other item, which may go up by maybe 20 odd basis points in H2. There is no question about that. We have managed our treasury very well based on locking certain long-term, medium-term loans.
I mean, I can tell you that when treasury was looking at locking them, I was asking them so many questions, and today we are laughing all the way to the bank, having locked some real long-term rates over the last one year. That is one. Second, our especially farm portfolio, to some extent, two-wheeler and other excellence portfolio, enables our treasury to borrow ASA, and even more importantly, PDC, which really keeps the cost of funds in control. So even if we see major hardening, not major, but 25-50 basis points hardening, further hardening in bond yields, whether the bonds will say, as you know, I already hardened. Even if you say it further angling, hardening, we will keep our cost of funds in control. It will go up, but it will be in control.
Secondly, as I pointed out, CP percentage, if you see, is just about 6%. Now, this 6%-9% was good when, our wholesale was, you know, 30, 40%. Now, with wholesale down to 12%, there is hope to increase it. At this point of time, it doesn't make much sense since the spread between CP and long-term is not that much. But that is temporary. We can always, when the CP rates come down, we can always, use them. To increase it even slightly to 9, 10%, it will work well. So this is as far as cost of funds was, is concerned. As far as trades is, I mean, as far as, yields are concerned, let me clarify that we have not come out of some major increase in yields, et cetera. Competition is, doesn't allow this.
It has come out of little bit shift in portfolio, more towards retail and, especially within retail, also towards rural. So that's clear. As far as what is sustainable, I would be perhaps foolish to say that this 12.2%, we will sustain and increase from here, but I don't see it falling much more than 12%. It will be in high, very high elevens to 12% over the next couple of quarters. That's, I think, as accurate as I can go. We have done lots of modeling. It's a conservative number that I'm giving.
Fair enough. Then, thank you for this detailed answer. The second is, in terms of, the credit costs. So over here, as you mentioned, while NIMs are benefiting from the changing book mix, not just, from wholesale to retail, but even within retail, the mix is changing towards more of MFI, two-wheeler and personal loans. And if I look at, the collection efficiencies across your tractor, two-wheeler or personal loans, they are now trending 70-100 basis points, down on a YOY basis. So I believe there won't be any seasonality to this. Now, in this scenario, what gives you the confidence that your credit costs can further go down on a BAU basis? I'm not talking about what your extra provisions you may be holding, but, on a sustainable basis.
Hundred basis points on year-over-year basis, which product? I don't get. Number one, few clarifications. You called our Rural Business Finance MFI. I would like to clarify it is no longer that. In fact, we give the breakup and a very small percentage of what we do is now microfinance. Microfinance is defined as less than INR 300,000 income, and, you know, that's less than 10% of our customers. Ninety percent of our customers are above INR 300,000 income. Close to 15% of our rural customers are above INR 1,000,000 income. This is giving us the confidence that even the increased, you know, percentage of Rural Business Finance is quite safe. As you would see, we have maintained the collection efficiencies.
I hope you are not making a issue in the colors. Collection efficiency of Rural Business Finance is absolutely steady at 99.8%.
So not in Rural Business Finance.
Yeah, I'm coming, I'm coming. One by one. Okay. As far as farmer finance is concerned, yes, there is a small reduction to 91.6, compared to 91.9. We have not seen any worrying factor there. This may be just, you know, last couple of months, certain small issues coming up. We expect these things to improve quite a bit in the third quarter already. Okay? One place where there is a reduction, you know, about 100 basis point reduction in, is you can see in personal loans. Now, two things have happened here, and, you know, the last time, last year, this personal loan book was just about INR 2,000 crore, and now it is INR 6,000 crore. So it is the percentage to some extent, is just the book being large, more mature, et cetera, one.
Secondly, as you would also see, we have reduced our rate of acquisition of new personal loans, quite a bit. In fact, it is down quarter-on-quarter. For us, to change and put in place many journeys, especially underwriting journeys. And once this area is complete from Q4 onwards, we will start growing. In fact, Q3, we will be again on this slow trajectory. A little bit of denominator effect. Sudipta, would you like to add to that?
Yeah. So, you know, what I would like to add is that, you know, there might be a slight quarterly fluctuation in terms of the overall disclosures. But, on an overall basis, the sort of the new improved sort of risk framework that we are putting in place to smoothen out all this sort of kinks in the system. And we expect to deliver a stable risk regime going, per quarter going forward. So, you know, I, I won't read too much into this, sort of, as, as DD said, you know, the basis which is, was, was very small. So, as we are speaking, we are working on and this is not only personal business, this is all our business lines. We are, we are strengthening the framework so that, you know, even as acquisitions go up, the risk trajectory remains stable.
Last but not least, the two-wheeler. Yes, two-wheeler, we are at 97.9, as we are talking, right, now. Very, very important, couple of facts which were in Sudipta's speech is, one, a big move is happening towards prime customers, towards prime two-wheelers. The prime two-wheeler volume you have some numbers are up.
Yeah. So if you see the prime two-wheeler volume, it has gone up to 52% as of now in Q2 FY 2024. So this is a part of our concerted strategy, where we have observed that, you know, two-wheelers above a particular ticket threshold size deliver significantly lower risk numbers than. So the organization as a whole is pushing towards that. EVs sort of exhibit one-third risk numbers of ICE engine vehicles. So as an organization, we are making a shift towards broadening those funnels and bringing more such customers in, right? Obviously, you will not see the impact of those actions immediately, but over the next couple of quarters, you will see those strategies come up in terms of risk numbers and collections efficiencies.
Does that again-
Yeah, it does. And again, thank you for the detailed answer.
It is important, no, because there are so many factors which come in finally to that, credit cost, right? And I would also say that, importantly, you would have observed that this credit cost number, the lower credit cost number, is without utilizing even INR 1 from micro credential provision. That remains.
So, does this still mean that even from this level, your credit cost can further come down?
Most definitely.
Generally. Okay, fair enough.
Most definitely.
I had another question, follow-up on this is what Sudipta had mentioned, in terms of strategy of cross-selling and top-ups.
Go ahead.
Yeah. So over there, this is what the strategy going ahead, you are referring to. When I see in terms of the personal loan disbursements, nearly 40% of those are being sourced from the, e-aggregator groups. So can you give us more color on, what are those kinds of, loans, characters of those borrowers, average ticket size? How do they differ? And, how does this align with our strategy of, doing more of up-sell to existing customers?
Sure. So I will give you the second part of the question to Sudipta. But first, see, when it moved from last year to this year, we started Account Aggregator last year. So we started this product, as I was always saying, only as a loyalty product. So it was 100% loyalty, naturally, and now we are moving to more sources. So those percentages will obviously go up. The overall characteristics remain absolutely same. We don't do new-to-credit customers. We don't do less than 50,000 loans. That remains absolutely same, whether it is, you know, obviously, loyalty cannot be new to credit because they're our customers. But as we acquire from outside, we don't do a single new-to-credit customer as far as personal loan is concerned.
As far as exactly how we aggregate or what type, what are the credit engines and how we are improving them, I will ask Sudipta to elaborate. In fact, Sudipta, why don't you take a little bit more time to say how we are improving the credit?
One of the things that we want to do, and thanks for the question, is that our average personal loan ticket size right now is about INR 1.7 lakh odd, right? Now, we are focusing as an organization on making sure that a large amount of the throughput of the customers that we get from the digital channels is primarily salaried. That is our first focus. The second focus is that we do not want, as S.D. said, we do not want any customer who does not have a footprint on the bureau or who someone else has not seen in terms of their engagement.
Now, obviously, that would entail working with some of some e-commerce players and some e-aggregators, and making sure that their credit agents have seen the customer for some time, build a transaction score or a risk behavior for that, for that customer, you know, sort of validated it through us, which were data room exercise, and, and then sort of given an offer to the customer. So the focus as, as we sort of read, sort of, sort of build the engine, acquisition engine for this business, it is very important that we are operating on two axes.
The first axis is to get the right size to loan to the right customer, and the second thing is, while we are doing that, make sure that the credit administration process is further, sort of, strengthened by not only looking at the bureau data, make sure that we are able to whenever the customer give us access to, give us an Account Aggregator pool, so that we are able to sort of analyze the AS, the bank statements with a far more degree of, clarity. And last but not the least, the behavioral signals from whichever e-commerce player or whichever e-aggregator we are pulling it from. Just making sure that, as I told in my, initial comments, that moving from a single axis underwriting to a multi-axis underwriting.
This model will obviously take some time to mature, and so we will grow gradually. There is no hurry. So as, as you have, and as SD said, you have noticed that we have sort of plateaued the acceleration rate of our personal loan business, while we put this new tools in place and sort of slowly gain experience in this new tool. So you will see a gradual increase in personal in this business while trying to keep credit cost flat.
There are two things I will add. Number one, is Sudipta has done it as a for his living for all these years, and we will obviously draw from that. Second, you know, there was a last time there were questions about yields based on the, you know, as we move to prime. So obviously, you know, the what we will do through this is it will enable us to do more risk-based pricing. So this kind of underwriting, multi-axis underwriting, not only helps taking better credit decisions, but it also helps risk-based pricing. Now, that we hope to steer the portfolio more and more towards prime with that, which will reduce absolute yields, perhaps, but will definitely make sure that risk-adjusted ROAs are superior.
So basically, delta yield will be less than the delta collection cost plus interest rate. So that's clearly in the model as we move.
Thank you so much. I think you even answered the other question that I had in terms of what changes are you making. So that's it from my side.
Thank you. Thank you.
Thank you very much. Before we take the next question, in order to ensure that the management can address questions from all participants and partners, we request participants to please limit questions to one per participant. For follow-up questions, you may rejoin the queue. We take the next question from the line of Shweta Daptardar from Elara Capital. Please go ahead.
Hello, Shweta.
Hello, sir. Thank you for the opportunity and congratulations for the comprehensive presentation. So I remember you always used to mention about market share exhaust products. If you can just jump at this point as well, and also, where we see that the growth on the retail side will converge the whole overall loan pool ahead. How do you keep the momentum now, say, in 2024, 2025?
Wow! Okay. The second one, I don't know how to answer. I can only say that we expect, this kind of, growth rate to continue. Whether we will be at 33, 34, I don't know, but we have stated always that, you know, we will keep the growth rate above 22%. And all this, all the, things that we put in place for that, you know, but at the same time, as I said, seasonality, cyclicality is a, is a fact of life. So I'm not saying anything quarter on quarter. Generally, for the four, five years going ahead, various sectors like broadening customer panel, using our database, which is increasing now every quarter, more efficiently, moving towards prime, we believe. And then last but not the least, which we didn't talk about because it is too premature, is launching new contiguous products.
What do we mean by contiguous products? It's products which our existing customer segments use. We will not go suddenly looking for new customer segments, but our existing customer segments, as they need, more and more products, we will look at launching them as we go ahead. So that growth doesn't seem to be more, especially the CAGR over the last 4-5 years. I mean, we are not clairvoyant to say, okay, you know, how the fourth quarter will be, how the first quarter next year will be, but generally, CAGR is likely to remain healthy. Most difficult impact is to do this while making sure that, you know, expense productivity goes up and credit cost comes down. And the entire concentration is going to be on that, so that ROA keeps going up, keeps moving up to.
You know, by at least FY 2026, we should reach at least 3.5, if not earlier. We are probably will reach it much earlier, but at least that's the goal. So we have said 2.8-3. We should be comfortably at 3.5 levels over the next few quarters. On this topic, I would also see that even the overall ROAs, I mean, ROA, by mistake, I think I said ROE. ROA at around 6.5 levels. And overall ROAs, as you know, as the wholesale comes down over the same period, we can see going through to the 3% mark and crossing it. So which is giving us good confidence that you know, even the overall ROEs can touch mid-teens as we finish the Lakshya period.
That is the overall profitability. You asked a very specific question on market shares. Okay, we have been giving our farm market share. So our farm market share in terms of number of vehicles is around 15%. Our two-wheeler market share is around close to 10%, if we see number of vehicles. But slowly we will start also calculating it in value as we move more to prime vehicles, and we are close to 6% in Rural Business Finance. Of course, their counting market share is, I think, little bit infructuous, because the market is microfinance. They all report it as less than INR 3 lakhs, whereas our share of less than INR 3 lakhs is very small. But if you take it as reported, then it is about 6%.
I don't think we are anywhere near counting our market share for home loans or consumer loans. We are too small as well as SME also at this point. Does that answer your question?
Very much, sir. Thank you so much.
Thank you. The next question is from the line of Saurabh Kumar from JPMorgan. Please go ahead.
Just a follow-up on this SR book. So what is the time frame for this roll down? And secondly, beyond the INR 150 crore that you spoke about in terms of credit provisions, is there any fees also you pay for this SR? So I just want to know the negative carry on the fees because of this.
From the negative carry, we give the entire wholesale book profitability. So that entire negative carry is in the wholesale book profitability. It is there in the presentation.
Yeah. Okay. Now, yes, you said 150, because the book will keep running, but we keep getting this, we keep having the markdowns and the fees, right?
I don't know that kind of, you know, micro details I don't remember over the next 4-5 years. As far as when it will run down, I mean, frankly, we expect it to start doing positively after another couple of years. Because, as I said, the SR value, these are not parked SRs just because we don't like those assets. The effort on recovery is continuously on, and I would say conservatively, after another 1.5-2 years, actual recoveries will start contributing positively to the overall at the end. But I don't want to guide at this point of time. You take the wholesale loss values, which is what right now? Wholesale loss value.
Wholesale loss is about INR 58 crore per quarter.
58 crore per quarter. But conservatively, you can say continuously FY 2026. It can only come down, but not up from there.
Okay. Got it. Thank you, sir.
Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah. Thank you, and good afternoon, everyone.
Hi.
I have two questions. So one is, I mean, your wholesale GS3 just declined. So kind of congratulations for that. We just wanted to understand, last quarter you had explained, predominantly INR 1,000 crore in that was Supertech. So has that account now been sold down to another ARC or has got resolved?
Yes, the answer to that is yes. So I think it was only Supertech, and part of that Supertech is sold to ARC. We would have liked to sell the whole thing, but that we could not. So it is, it is just that. It is not that the asset is resolved. However, as you know, Supertech, we have always said that we are more than adequately provided, whether it is on the book or with ARC. It is adequately provided, and it is one of the accounts which may actually say, see recoveries, say, one year down the line from here. It is in that stage of recovery. So don't read too much into this reduction from INR 400 to INR 170. It is just part of Supertech going out there.
The important number is what we gave this time for the first time, INR 500 crore net Stage 2 in 9,500. So, last time, you know, people were saying that, okay, I am saying that there will be no negative shocks. Based on what I'm confident. I'm confident based on the, number one, the, you know, the momentum I am seeing and likely to see, but most importantly, Stage two assets are just about INR 500 crore.
Stage Two wholesale is about INR 500 crore.
That is correct.
Got you. Just one more question I had. I mean, we've all been talking long-term strategy here. I think, I mean, when Sudhir sir was making his opening remarks, I gathered that you were, I mean, a little cautious on how things could be in the second half, especially rural cash flows, and how demand could be given that inflation is going. Let's see, I had it saying that maybe in the budget more tools have also been mentioned, and even-
Just one way to kind of explain that in some more detail.
Sure. So see, number one, it, everybody knows that August rains were very bad. Also, the distribution of rain has not been very good. Yeah. Reservoir levels are quite negative from last year. These are the three negatives in rural. What are the positives? Positives is that the Kharif crop is not that down, from last year. It is more or less at last year's level. The Kharif, in fact, 0.32% up, actually. Secondly, the MSPs are at record level, as you know, now. So that, that works on the, on the other side. So that is why we would not like to paint a negative picture in rural. You know, it is very easy to paint a negative picture and then do better than that and positively surprise.
We are only saying that we need to be cautious, and see how demand progresses. What is, as a company, that is the risk, right? I mean, when you are in rural, it's good money, but you have to deal with seasonality. Now, what we are doing to deal with seasonality are various things that we have already highlighted. Number one, making sure that collection is very analytics driven and remains very strong, both zero DPD and further collections. So that is number one. Second, increasing, you know, disbursement to our zero DPD existing customers. Always, one, they are safer, they pay on time, more often than not, and thirdly, that is not seasonal.
My current farmer customer borrows more, not when there is the tractor is in season or whether the tractor is going up or down, tractor demand, it doesn't matter. Same for rural business women. We know the lady very well. We know her for one, two, three cycles, and at that point of time, we can take much better exposure. Thirdly, we are specifically making sure that in our rural business finance, the share of direct agri keeps coming down. It is around. It is the share of direct agri is now around 25%-30% at this point of time. More than 70% is non-direct agri, even though everything is rural. So the feeling I want you to give is seasonality and cyclicality is a truth of life.
I also wanted to say that what all we are doing to make sure that we smoothen out these cycles as much as possible. And there is one thing which Sudipta said, which you may not have heard, is perhaps the first 20 days of the season, we are seeing very good season actually. So the actual fact is going exactly opposite to what pundits say or what even I would have said. I am no pundit, but I would have said that. But on the ground, I am seeing very good pickup, both from two-wheelers as well as tractors.
Got it. Thank you. All are very appreciative.
Perhaps a fuzzy answer, but that's because it is something in future, and I don't want to be very emphatic about future here. But lots of factors are playing, right?
Got it, sir. Thank you so much.
Thank you. So next question is from Kunal Shah from Citi Group. Please go ahead.
Hi, Kunal. How are you?
Yeah, hi. I'm good, sir. Yeah, so, normally, you tend to comment with respect to OpEx plus credit cost in terms of the trajectory. So when we look at it, OpEx was slightly higher, credit cost was almost stable. And what Sudipta also talked about in terms of five growth vectors. And I think maybe in terms of enhancing customer acquisition or brand brand visibility and all plus optimization of talent pool, it will also involve a lot of costs. Okay, so what would be anticipated spends towards this five growth vectors? And any change in commentary with respect to OpEx plus credit cost?
No, no. Same commentary, we'll tend to seven. Today, we are at 7.33. In fact, this time we went ahead and actually split, because I don't want to hide behind this OpEx plus credit cost, and, you know, prefer over the increase in OpEx. The OpEx has increased, and I'm saying that it will be, as you rightly pointed out, we are doing several investments on in brand, in IT, getting good people. It will remain sticky. I'm not necessarily saying that this percentage will go up. It will remain sticky for maybe next 1 year or so.
Yeah. It will be about a year or so.
Yeah. And then it will start coming down. And, you know, it is, but it is not going up as fast as the spending measure, because the OpEx efficiencies and productivity are also kicking in. But as a net of both these, the OpEx may remain sticky, credit cost will keep coming down, and we are hence very confident of reaching our 7% guidance by FY 2026, the Lakshya.
Okay. And, so in terms of credit cost, really maybe what is, obviously highlighted a lot with respect to, collection initiatives. But, now, was there anything maybe specific in this quarter that, you are confident with 2.74 in, Retail? So Personal has hardly seen any credit cost, during the quarter. But, Retail, when you look at it, is still 2.74, and mix is, changing more towards the, higher yielding ones. Okay, so apart from maybe on the wherein we are focusing more on prime. But what is giving you confidence, in terms of getting this down to and what will be the stable state, levels of India?
Okay. I mean, I wouldn't like to comment on what will be the stable state. Our ambitions are very high, very high and very low credit card. But, I can only say that it will trend down. You see that the reduction in this quarter is two basis points. I am not promising huge reductions every quarter. But yes, this two basis point, three basis points, five basis points, we will keep reducing steady. I mean, I'm again, not saying quarter on quarter, a particular quarter may go the other way, but continuously it will keep reducing. Main reasons, you see, component, component of HL is going up. Component of the higher, higher variety of rural business finance is going up, which continues with 99.8% collection efficiency. Home loans, as I said, is going up.
In two-wheelers, we are moving towards prime more. In tractors, percentage of Kisan Suvidha is going up. Now, as. So two things, big things is, one, as we said, products which are much higher collection efficient or contribution, number one. Repeat lending is continuously going up, and as we have always said, and we maintain, is repeat lending has credit costs of about one-third of new lending is going up. And even in new lending, the gradual shift to more prime. So that is how we have modeled it, and that's what our experience. And as I said, our ambitions and the models or the targets we have are much higher, but I wouldn't like to talk about that.
Sure. Okay. Thanks, and all the best.
Thank you. The next question is from the line of Abhishek from HSBC. Please go ahead.
Hi, Abhishek.
Hi, sir. How are you?
I'm good.
Right. So, the question on SR. So can you give some more granularity? So specifically, two things I'm looking for, I think one you anyway mentioned. One, what is the provision on this? And two, on this INR 8,000 crore, if you can give any cuts, for example, how much of it is roads, renewable, how much of it is operational? Or, I mean, may not be operational in that, but, what, what's the, let's say, completed to not completed parts, of RE? Any kind of cuts that you can give for this INR 8,000 crore, it would be helpful.
If we could give the cuts, we would have given it in the presentation if we wanted to give. But, completion-wise, I can tell you, RE completion, you said some number?
Completion of those, in RE, RE.
Thank you very much.
No, no. Sorry, sorry, sorry. So around, I would say 83%, complete is what we can talk in our real estate book. So, you know, overall, if we put, about 83% complete. Of course, you know, there are various projects, but if you put on a weighted average basis, 83% complete. That's all. But, most importantly, when the CFO, outgoing MD, and the new MD, we are all committed that wholesale losses will be maximum INR 200 crore year-on-year till FY 2026. Please understand that we have tremendous amount of confidence that no shockers are coming from this SR book.
No, sir, of course. Of course. That is not the idea. Just to get a sense of the-
But you know, more than this, I mean, you see that every quarter we are giving more and more, and we will continue to do this.
Sure. And sir, just the second thing in terms of understanding, when you give in your presentation the split between vehicle finance and rural group loans, the difference is only because you're making a difference between the 3 lakh income segment and the above higher than 3 lakhs. But in terms of ticket size or administration, you know, monthly, let's say, meetings or in terms of populations, is there any difference between these two categories?
You're right. Good question. As of now, no. But going ahead, yes. We are launching. We have launched actually, Rural LAP and business loans. These are the two products we are launching, which will be managed differently. Very differently, very different rhythm, very different way of doing business. It is being in a different team, of course. Reporting into the same business chief executive, but a different team. So, but at this point of time, the portfolio is very, very small. But you are right that the rhythm is same. But more importantly, the resilience of these people today is much, much higher, no? Now, the important thing.
You asked one question, which is very important, that even if this is more than INR 3 lakhs, their income, the overall exposure cap, yeah, we have not removed. I believe that there are some players who have removed the overall exposure cap. The overall exposure cap, exposure, I mean, not only us, but of the industry. The overall exposure cap was about INR 2 lakhs. We have kept that same. In fact, in most cases, we keep it at INR 1 lakh fifty. But maximum, you know, maximum we go is the overall exposure of INR 2 lakhs, so not our loan, overall exposure of INR 2 lakhs. That's, So you're right, we treat them, not, you know, by don't overdo to them, treat them as if they are less than relaxed.
But, the point I wanted to make is because of higher income, their ability to repay and repay on time is much, much better. I mean, you can see now INR 21,000 crore now, we are collecting 99.8% on.
What would be the difference in ticket size between the two?
It depends, no. It depends on, what-
Average ticket size, just for the microfinance versus rural group loans?
It depends, one, on the profile of the customer. Second, it depends on what other loans this person has taken, right? So, it depends on the two things. So let's say more than, because for both, our overall limits is the same. So if a microfinance customer has borrowed from somebody else INR 150,000, we will lend her only INR 40,000, or she has borrowed, you know, and it works like that. So we have not said this, okay, for RBF, there is higher ticket size, for microfinance, it is lower ticket size. It depends on what is the total exposure, what is the profile, and because of that, what is the gap that we have to lend.
Okay. Okay. Got it. Got it. Thank you, sir, and all the best.
Thank you.
Thank you very much. That was the last question. I'd like to hand the conference back to Mr. Dinanath Dubhashi for closing comments.
Thank you. So I think I will not repeat anything that has been said, other than only saying that we here are very, very confident of continuing with the growth path that we have put, and at the same time, continuously improving profitability ratios, not only of retail, but also overall profitability ratios as we keep reducing wholesale. Reduction of wholesales enables two things. One is the convergence of the profitability ratio, and second, most importantly, is any possibility whatsoever of suddenly ending. We are very confident that that is not going to happen. As we go ahead, we look at the future only positively.
Now, that is as far as the company is concerned, I would like to wish you a very, very happy Diwali, happy Dussehra before that, and more importantly, would like to also, state that it would be my, last quarterly earnings call as the MD and CEO of the company. Would like to put all my gratitude and all my thanks on record for all of you. All of you have been absolutely wonderful indicators, and it has been amazing to, speak to each one of you. I have tried to take the inputs from each one of you, learn and incorporate that in the way the company is managed.
The team is here to take the company ahead, and more importantly, Sudipta has landed with his feet running, and in the four months that he has spent here, I am very, very sure that he will take the company to new heights as we go ahead. So thank you very much. God bless you. Happy Diwali and Happy Dussehra.
Thank you very much.