Ladies and gentlemen, good day, and welcome to the Repco Home Finance Q3 fiscal year 2026 earnings call hosted by YES Securities Limited. Please note, all participants are currently in listen-only mode. There will be an opportunity to ask questions following the conclusion of the management's opening remarks. Please note that this conference is being recorded. I now hand the conference over to Mr. Rajiv Mehta from YES Securities. Thank you, and over to you.
Good evening. Thank you all for joining this Q3 fiscal year 2026 conference call of Repco Home Finance. From the management side, we have Mr. T. Karunakaran, Managing Director and Chief Executive Officer, Mr. A. Palpandi, Chief Operating Officer, Mr. P. K. Vaidyanathan, Chief Development Officer, Mr. M. Raja, Chief Business Officer, Ms. Shanthi Srikanth, Chief Financial Officer, and Mr. Ankush Tiwari, Company Secretary and Compliance Officer. With this, I hand over the call to Mr. Karunakaran for his opening remarks. Over to you, sir.
Yeah. Thank you, Mr. Rajiv. Good evening to you all. I am extending a warm welcome to this earning call of our company to discuss both Q3 results and way forward. The numbers already available in our website. I am sure you could had a chance to go through the numbers. Before going to question-and-answer, I want to walk through our performance in the Q3. Last con call I said, if you look at our growth history or disbursements, more particularly disbursements, Q1 and Q3, we will have a lesser disbursement. Last con call I said, we want to break this trend. Yes, we have changed the trend. During the quarter ended December, we disbursed close to INR 1,069 crore, which is almost in line with our disbursement of September 2025. Again, this current financial year, our disbursement has crossed second time INR 1,000 crore mark.
If you compare our disbursement of December 2025 versus December 2024, we have seen 40% year-on-year growth in the disbursements. If you look at state-wise disbursements, what are the states are contributing for our disbursements? We have seen improvement in disbursement of Maharashtra, Madhya Pradesh, and Rajasthan. We have seen disbursements improvement in these three states. In these three states, disbursements in December quarter is better than September quarter disbursements. Tamil Nadu, in other states, our disbursements are almost flat. In Karnataka, in last minute, we expect the numbers, our disbursements numbers are not up to the mark. Actually, we set a target of disbursing close to about INR 1,090 crore- INR 1,100 crore. Because of slowdown in disbursements in Karnataka states, we could not achieve these numbers. Finally, we ended with INR 1,064 crore disbursements. Coming to the AUM.
Our AUM as end of December 2025 stood at INR 15,394 crore, as against last year December of INR 14,155 crore. Yes, we have seen growth rate of 8.8%. During the quarter, I said INR 1,064 crore we have disbursed, of which around INR 360 crore added to my loan book. Remaining thing is gone for principal written off. The BT out is almost similar, the similar trend is continuing. We have not seen any increase in BT out.
Of course, prepayments rates also in line with what we experienced in previous quarter. Coming to the recovery side. Our gross NPA as end of December stood at INR 449.53 crore as against INR 545 crore in the last year of the same period. During that quarter ended December 2025, we recovered NPA to the extent of INR 25 crore. As end of September 2025, our gross NPA in absolute term, it was INR 475 crore.
We brought it down to, the last con call I have given you a commitment that our NPA will come down around INR 444 crore. Yes, we have done. We brought it down our NPA from INR 475 crore to INR 450 crore in the end of December 2025. Even if you look at our Stage 2 numbers, which is also we have done a tremendous reduction in Stage 2 assets also. Stage 2 assets as end of December 2025 stood at INR 1,235 crore. Q2 it was INR 1,323 crore.
Almost INR 100 crore reductions we have seen in this current quarter alone. If you compare our Stage 2 number year-on-year, December Stage 2, our number was close to about INR 1,500 crore. That means INR 1,494 crore. Now it was INR 1,235 crore. Almost roughly INR 250 crore kind of reduction we have seen in Stage 2 assets also.
Our delinquencies in other buckets also, we have seen a lot of improvement. Coming to the borrowing side, our borrowings stood at INR 11,769 crore as end of December 2025. Out of total borrowings, around INR 829 crore is coming from National Housing Bank by way of refinance. Banking system borrowings stood at close to about INR 9,893 crore. And we are having a facility with Repco Bank, our parent bank, to the extent of INR 810 crore. As part of diversification, we done one CP at the year beginning, which is stood at INR 145 crore. Again, this quarter, we have diversified our liability side. We have raised about INR 93 crore by way of PTC. Our diversifications will continue. In NCDs, yes, this is also form part of our diversifications. We already having discussions with a few investors and bankers. The discussions are in advanced stage.
Most probably, couple of weeks time, we will roll out NCD of about another INR 100- INR 125 crore. This is about liabilities. Coming to the cost of fund. Our cost of fund at the year beginning, it was close to about 8.75% at the year beginning. At end of December, it was close to about 8.45%. We have experienced 30 basis points reduction in cost of fund in the nine months. Out of 30 basis points reduction in cost of fund, we have passed on 20 basis points to our borrowers, in the manner of 10 basis points on with effective from July 1st, 2025, and another 10 basis points with effective from February 1st, 2025. Our spread as end of December stood at 3.3%. Our yield on assets almost flat compared with September.
As end of December 2025, our yield on assets is about 12%, and September it was 12%, and December also it's also 12%. We are maintaining a spread of 3.3%, and our NIM was close to about 5.41% as end of December. Our net loan funds stood at INR 3,574 crore as end of December. Our return on assets stood at 2.89%, and return on equity stood at 13.17%. These are the broad numbers. During the current, I mean, December quarter ended, we have opened two more new branches. Our branch found at the end of December 2025 stood at 236, which is inclusive of about 31 satellite center across the country. These are the broad numbers. Now, as, I mean, coming to dividend. Last quarter, we have paid an interim dividend of about 25%.
This quarter, I'm happy to share and say that our board has declared an interim dividend of 20% again. Totally, this current financial year, so far, we declared dividend of totally 43% as against 40% in the last financial year. These are the broad numbers from my side. I'm very happy to take question-and-answer. Can open the floor for question-and-answer.
Thank you so much, sir. Ladies and gentlemen, we will now begin with the question- and- answer session. Anyone who wishes to ask a question may click on the Raise Hand icon from the Participant tab on your screen. We'll wait for a few minutes until the question queue assembles. We'll take our first question from the line of Shubhranshu Mishra of PhillipCapital. Please go ahead with your question.
Hi, sir. Good afternoon. Shubhranshu here. Quickly on the sanctions that have come off very sharply on a quarter-over-quarter basis, but the disbursement remained largely similar. Is it because of the unsanctioned disbursements last quarter that we have been able to bridge the gap? That's first. Second, how do we look at the competitive intensity in Tamil Nadu now that we have Aavas Financiers also opening up branches there? So, what do we think of the growth that will accrue from Tamil Nadu itself, and how do we think about growth in terms of disbursement going forward for us in 2027 and 2028? Third, sir, we have given roughly around 45% of dividend. Would it not be more prudent if we would have deployed this into our business in expansion and paying off employees for their motivation and getting more disbursement?
I'm not certain, why are we paying so much of dividend, sir? Thanks. These are my questions.
Shubhranshu, I'll take your question. The competitive environment in Tamil Nadu has gone up. We being a player for more than 25 years now in Tamil Nadu, we have our roots deep, and we have a very large footprint in Tamil Nadu. Yes, we do have competition, but not to the extent of it impacting my disbursement or my disbursement plans. Of course, we are also concentrating on our growth in non-TN states, like most of the branches that we are planning to open in the next financial year is going to be in the east and western section of our country. That is how we are planning. Going forward, we want to reduce the contribution percentage of Tamil Nadu by increasing the disbursement in other states. That is how we are going to handle the competition there. On the-
Yes, sir.
Coming to the disbursement for the current quarter, in first con call I said INR 4,000 crore of disbursement in the current financial year. Numbers are in line with our expectations. We are targeting INR 1,200 crore- INR 1,400 crore kind of disbursement in the current quarter, and we are targeting INR 16,200 crore AUM. Coming to the disbursement in next financial year, yes, we are setting a target of in close to about INR 5,000 crore disbursement in the next financial year.
These are the disbursements things. Dividend. Dividends, it is a conscious call taken by the board. I mean, what is the impact of this dividend is not that much. What we have given so far is about 20%, 25%, 45% of the capital, INR 62 crore. It is nothing. It will not have any impact on our financials. Of course, other salary, the salary cost and other things is as per shares we are going. It will not have the payoffs of dividends, 45% on INR 60 crore and the entire capital of INR 62 crore will not have much impact.
One last question, sir. Any guidance on credit cost and cost of funds for 2027? Thanks.
Credit cost. Right now, see these for the September, I mean December quarter, December 9 months ended. So actual credit cost is about negative. It is about INR 19.72 crore, it is a negative. I am expecting INR 25 crore reduction in the NPA going forward, INR 22-INR 25 crore of reduction in NPA. NPA reduction I am expecting. I am also expecting, we are targeting to reduce our Stage 2 assets also going forward. Right now, I wanted to bring it down to Stage 2 assets to close to 7.5% by year-end. Having said all those things, I am not expecting my credit cost will not go up. It may negative.
Cost of funds, sir?
Before I answer that-
Cost of funds.
Cost of funds. So far we have seen in this current nine months, we have experienced 30 basis points reduction in cost of funds. During September- December quarter, yes, we have seen around 10 basis points reductions. Out of total borrowings, about another 4,600 crore bank borrowings are subject to repricing in current quarter. That means January to March. We have done once PTC at the rate of 7.75%. Keeping all those things in mind, I am expecting that my overall cost of fund may reduce another 10 basis points. We can see reduction cost happen to the extent of 10 basis points in the current quarter. That is what I want to say.
Thank you, sir.
I answered all the questions.
Thank you. We will take our next question from Vikas Kasturi of Focus Capital. Please go ahead.
Good evening, sir.
Good evening.
First of all, congratulations on another fantastic quarter, sir. You almost came close to breaking your previous quarter disbursement record. Also, secondly, I want to thank you for taking all the inputs that we have provided in the past. For example, we asked you for a split of the pre-March 2022 and post-March 2022. You have done that. You have also started providing the numbers in INR crore. Thank you for taking these suggestions, sir.
Thank you.
Thank you, sir. I had a couple of questions. First is, you had given some guidance at the start of the financial year. How likely are we to meet those targets, sir, with respect to GNPA as well as with respect to the AUM? That is the first question. My second question is, sir, more on a strategy point of view. It seems that, let's say we are giving out loans at a yield of about 12%-13%. If you increase the growth rate of the company, our OPEX is about 1.5%. Does our OPEX increase if we start to increase the growth? That is number one. The second question is would our credit costs increase if we start growing faster?
I think there is some sort of a trade-off that you as a management would do, right? For example, if you try to grow faster, then OPEX and credit costs will also go up. But if you try to keep these costs under control, then the growth will be slower. How do you think about these trade-offs, sir? These were broadly my two questions.
Coming to the guidance, in first con call of this financial year, we have given a guidance of about dispersing INR 4,000 crore disbursement, and we have given a guidance of taking our AUM to INR 16,200 crore. And we said we want to bring down our NPA to 2.5% and Stage 2 assets to 7.5%. Our numbers are in line with up to December performance, I mean, in line with our guidance. I am confident of achieving INR 4,000 crore disbursements and touching of INR 16,200 crore AUM, and bringing down to NPA of 2.5% and bringing down to Stage 2 assets to about 7.5%. I am pretty confident that whatever guidance I have given during my first con call at beginning of the year, I am confident of achieving all the guidances.
Coming to your other questions. Yes, growth. Yes, cost will increase. We have taken a lot of efforts to reduce our cost, and very recently we diversified our liability side. We have done one pass-through certificate. We got a fund at 7.75%. We are taking all our efforts, and we are exploring the possibilities to reduce our administrative and other costs. It is a balance between the growth and other things. Our objective is to maintain ROA of closely about 2.9%, and we will maintain a spread of around 3.2%-3.3% kind of spread. We will balance other things according to this.
Sir, if I may ask a follow-up question. Sir, quarter-on-quarter, in quarter three, you gave out about INR 1,060 crore of loans, but our AUM went up by only about INR 350 crore. Which means that nearly INR 600-INR 650 crore went down because of, say, BT out or repayment, prepayment, et cetera, right? If you give out INR 1,200 crore of disbursement in quarter four, our AUM might go up by only about INR 400, INR 500 crore, sir. Even then we will fall short of our guidance. How do you think about this, sir?
I will take this. See, monthly, our rundown is somewhere between INR 170 crore- INR 200 crore, which is the average rundown that we have been seeing so far. In that perspective, for Q2, of course, the guidance is INR 4,000 crore for the year, but for Q4, we are planning at doing somewhere around INR 1,200- INR 1,400, so that we achieve our goal to achieve INR 16,200. From the perspective of me taking INR 200 crore as a rundown, if I am going to do INR 1,400, then yes, I am very much there at INR 16,200. But that is something we are striving to achieve. Yes, you are right. We are striving to achieve that. Hope we do that.
If you look at our BT outs as well as principal rundown, we have not seen any significant change or principal rundown rate is high or something like that. It is almost similar. If you look at December 2025, our principal rundown rate, including borrowers' own prepayment and balance takeover, it is almost similar to previous quarter. That comfort we are having. Raja said INR 1,200 crore, it will do INR 1,200 crore kind of INR 1,300- INR 1,400 crore of disbursement. INR 16,200 crore AUM we can achieve easily. Second thing, if you look at our performance, almost around 35%- 36% of the growth will come from last quarter. Always last quarter will be the best compared with other quarters. With that, we are confident of achieving the INR 16,200 crore loan of size.
Got it, sir. One last thing, sir. I had a couple of suggestions. One is, if you could please provide your asset liability mismatch across the time buckets in the presentation. The second thing is, sir, one of the very important aspects about Repco Home Finance is that you are actually growing your AUM at a pretty fast rate. But because of these rundowns, it is not showing up. Only if somebody does this analysis, it is evident to them. If you could, in your communications, could you please highlight this, that actually the company is growing pretty fast, but because of these rundowns, the overall numbers are looking at 7% growth in AUM. These are my two suggestions, sir.
Yes, sir. We have taken note of your points. First thing, our ALM position was very comfortable. We are not having a gap in any ALM buckets, I want to confirm you. Off the balance sheet, on the balance sheet, we are having adequate liquidity. Off the balance sheet, we are having close to about INR 1,000 crore unutilized sanctions from at least six or seven banks, which will fuel my growth and funding requirement for at least another six or seven months in the off-balance sheet side.
On balance sheet side, we are having close to about INR 150 crore kind of investment. So our ALM position in all the buckets, we are comfortable. Anyway, we have taken note of your things. Next in the presentations, we will incorporate these details. Yes. Rundown, you rightly point out, yes, rundown rate is a little bit. But it is not alarming kind of thing.
If you compare our September rundown rate and December rundown rate, it is almost similar. It is not going up. Yes, we have taken a lot of efforts. We have articulated customer retention policy. Wherever it is possible, we are reducing interest rate of existing borrowers and retaining them. Wherever it is possible, we are giving the top-up loans and retaining them. We have done an analysis. Yes, going forward, almost the old book, we are a 25-year-old company. The rundown rate, you know well that the rundown rate in the old accounts will be higher side. Any housing loan appropriation towards interest and principal, in the beginning of the loan, interest will be high, principal will be low. Going later date, principal will be high, interest will be low. Yes, we have done a detailed analysis. Yes, we have taken adequate steps to reduce the rundown rate.
Yes, I am confident going forward, we can see improvement in loan book also, like our disbursements.
My best wishes to Mr. Raja and yourself, sir, and to the entire team of Repco.
Thank you.
Thank you, sir.
Thank you.
Thank you. We will take our next question from Badhrinarayanan Ravi of FPS Assets. Please go ahead with your question.
Hi, sir. Thank you for the opportunity. Sir, my first question regarding in our P&L year-on-year. Our other expense has been raised 38%. So what is the reason, sir?
Yes. P&L other expenditure has gone up. Last quarter, this is silver jubilee FRS. One-off expenditure to recognize our long-servicing employees. We have given rewards and awards incentive to all our employees. We have incurred expenditure to celebrate silver jubilee, which is amounting to roughly about INR 3 crore. Number two is if you look at our performance month-on-month, quarter-on-quarter, our logins are improving, sanctions are improving, disbursements are improving. To the extent we have to incur expenditure, our cost of sourcing will go up. To getting a legal opinion, I have to pay fees to lawyer. To get a valuation report, I have to pay fees to engineer. To check the credentials of the borrower, I need to take various kind of reports. For all those things, we need to incur expenditure.
Because of that our other operating expenditure is going up, which is in line with our increase in the disbursements. Sir, next question regarding- Of course. Yes, sir. Last 24 months, if you look at branch expansion, last two years, we have opened around close to about 32 branches, for which we need to incur some initial cost. Other things, we spend expenditure like this. The utilization of expenditures will not accrue immediately. It will take some more time to give results.
Got it, sir. Sir, next question regarding the revenue from operations or top-line growth. What is your guidance on next financial year, sir?
Top line. Yes, if you look at yield on certain advances, it is about 1%. We will maintain same. We got a dividend of about INR 3 crore from our subsidiary company, which is already we have taken. A similar trend will be maintained. Thank you, sir.
Thank you so much. We request participants to restrict to two questions and then return to the queue for more questions. To rejoin the queue, you may click on the "raise hand" icon again. We will take our next question from Sanket Chheda of DAM Capital. Please go ahead. Mr. Chheda, please unmute your microphone.
Yeah. Hi, sir. Congrats on steady set of numbers. What I wanted to know is that, after, say now, five to six years, maybe this will be the first year we will be able to do 10% on AUM growth, and we will be able to meet the disbursement guidance also for the first time. We have clocked 1,000+ disbursement in last couple of quarters. Wanting to know that what are we targeting for Q4 and also for fiscal year 2027 and henceforth, do we aspire to grow 12%+ in the next couple of years on that same outlook, please? Apologies if it is repetition, but yeah, just wanted to know that.
Yeah. For Q4, we are planning to disperse somewhere around INR 1,200 crore- INR 1,400 crore. That is what is our plan, and we are working on the same. Of course, yes, as you rightly said, we would like to maintain the same kind of a growth going forward. For 2027, we are setting a target of around about INR 5,000 crore, which is yet to be finalized. This is what we are working on. That is how we want to proceed much forward.
Okay. On the credit cost question earlier, did you say that you expect the credit cost to still remain in negative going ahead also?
Yeah. This quarter, I am expecting a INR 25 crore reduction in NPA to around INR 20 crore- INR 25 crore kind of NPA reduction I am expecting in current quarter. Of course, my Stage 2 assets also will come down. My target is to bring it down to 7.5% from a present level of 8.02%. Yes, I will get a reversal. But overall, my guidance for credit cost for the current quarter will be negative. I mean, and for entire financial year is a negative. I am not expecting any credit cost for the current financial year. The credit cost will be negative.
Okay. Sure, sir. While we have done a wonderful job in terms of bringing down the stress with Stage 2 plus Stage 3 quarter after quarter, but if I look at Stage 2 for the housing finance company in affordable space, the 7.5% still looks very high. Can there be some accelerated work or focused work here, wherein we could just solve what the underlying asset and resolve this asset as soon as possible? I fail to understand why it is so sticky around 7%, 8%. These kind of levels are not there even in case of vehicle financials now, as far as the Stage 2 is concerned. We being a housing finance company, it should be much easier for us to get these assets resolved. This is low-hanging fruit in my view, wherein the stress improvement can continue maybe for next five, six quarters also.
Is that the plan you are working on? Where do you see that the Stage 2 should stabilize and what should be the ideal Stage 2 in your business?
That is right, Anand. If you see the Stage 2 accounts actually 2-3 years back, it was around 14%. We have started to take so many strategies. Already we have introduced verticalization, exclusively to take care of the Stage 2 accounts, stage 1 accounts.
Because of this strategy, it has come down from 14% to now it is 8%, and we have targeted for 7.5% before the end of this financial year. That is what is the discount. As for our Stage 2 accounts, we are planning to reduce month on month basis, the opening figures. That is what we have given the target to the collection vertical as well as to the branches. It is working well. Going forward, every year, we are planning to reduce at least 2%-2.5% in Stage 2 accounts. In another one or two years, we will bring down to less than 2% or 1.5%.
Right now, in addition to that, right now we employ close to about 225 people to see the recoveries, more specifically Stage 2 assets. We have taken a lot of steps, sir. We are also discussing with the recovery agencies how we can bring down these Stage 2 numbers further. I am sure that going forward, it will come. For the period of time, you can see our Stage 2 numbers also in line with the industry. Of course, the other side, we have strengthened our credit appraisal system, which is evident from the performance of new book. Yes, these are the steps we have taken to reduce our Stage 2 numbers. Yes, you can see reductions is going forward. Very soon, our Stage 2 numbers will be in line with the industry.
One more thing. If you see last 10 quarters, whether the Stage 2 or the stage 3, it is consistent and it is continuously going in the downward trend, both Stage 2 or stage 3 accounts. Because we are concentrating on Stage 2 accounts also, not only NPA, we have taken so many strategies. As we already told in the initial, the first quarter call, we have posted separate general manager for Tamil Nadu and another GM for non-Tamil Nadu. We are giving more concentration on this, and we hope that we will reduce this figure before the end of March 2026, expected level of 7.5%.
Sure, sir. That's very comforting and wish you all the luck for sustained execution. Thanks a lot, sir.
Thank you. We request participants to restrict to two questions. We will take our next question from Saurabh Dhole of Fyers Assets. Please go ahead.
Good evening, sir. Can you hear me?
Yes, please go ahead.
Sir, two questions. One is obviously your target for this quarter ended March 2026 of INR 16,200 approximately of AUM. That is well noted. If that happens, you will obviously enter into the double-digit growth trajectory for the first time in many years. But what I want to understand is that compared to the last couple of years, what exactly has changed, which is changing the growth trajectory of the company? Obviously, in the last few quarters, you have added personnel, you have added branches. Is it all of these efforts or these investments paying off, or have you also re-looked at your credit policies?
Sorry. Can you repeat that? We lost your connection. Can you repeat again?
Hello, can you hear me?
Yeah, right now it is your voice. You are audible. Yeah.
I wanted to know what exactly is the source of this growth, because if you are at 16,200 by March 2026, you will end up doing about double-digit growth rate, which we have not seen in the company for a very long time. What exactly is contributing to this changed growth trajectory at the company? I think for fiscal year 2027 also, you expect something similar, right?
I would say the growth in disbursements is happening because of the investments that we have made last year in the sales vertical. Though the sales vertical was there, we had created a very clear-cut sourcing channels like my branch sales manager, my direct sales team, and our empowerment of corporate DSAs and all sourcing channels. Those sourcing channels are now delivering the numbers for me, and that is the backbone of our growth, what is being witnessed. Yes, we are looking at going the same lines. We have introduced a lot of new programs and schemes in line with the market so that my sourcing team gets the comfort going down to the market and having a sales pitch against my competition. That is how we will be progressing, yes.
And sir, in terms of credit policies, underwriting policies, has there been any change in the last, say, seven, eight quarters?
Yes, sir. Definitely, sir. See, two, three years back, we have followed another profit and loss account. Nowadays, we see we introduce so many schemes based on gross receipt method, gross profit method, bank balance method, average income method. Introduce so many methods. We have improved our credit policies in coming days also.
We have done a lot of. We have reviewed our entire credit policy in line with present requirement. We have present need, we have done. Of course, it is a market. You know well that market, two wars is going on. One is interest rate war, another one is credit policy and SOP war.
Our policy is robust for the sake of improving the disbursement or improving the business, improving the AUM. We will not compromise on quality of the asset. That I want to confirm.
Sure. The second question is with respect to the dividends.
Mr. Dhole, sorry to interrupt, sir. We are taking only two questions per participant. You can rejoin the queue for a follow-up question, sir.
Sure, I'll do that.
Thank you so much. We'll take our next question from the line of Darshan Deora of Invest Group. Please go ahead with your question. Please unmute your microphone, Mr. Deora. Yes.
Yeah. Thank you for the opportunity, and firstly, congratulations to the team for a great performance, especially with disbursement as well as controlling the credit cost. My first question was regarding the disbursements. What percentage of our disbursements would have come from DSAs versus sourced internally by own team?
See, we are balancing anywhere between 50% between the both. A month, it may be 45%, 55%, the other month it will be 55, 45%, but on average, we are 50% as of now.
Just to understand, say if I had to compare this with the same quarter last year, like Q3 fiscal year 2025, what would that split be? I want to understand that, say-
Yeah, last year it was 35%, 65%. Now we are at 50%.
So 35% in the favor of DSAs last year?
Correct. You are right.
Okay. Got it. Essentially, a lot of our disbursement growth is coming with the empowerment of DSAs that we have done this year, basically.
Also from them, yes.
Sorry?
Yeah, they have also contributed to the growth. It is not that they have only done the growth. They have also contributed to the growth, yes.
Any growth rate you can give us for the internally sourced disbursement? What would that be versus the external sources?
You see, out of my growth, as I said, it is 50/50. 50% growth has come from my own internal sourcing. That is, I have my DSOs and DSGs, and 50% has come from my DSA sourcing channels.
Got it. My second question is, assuming we hit the INR 16,200 and we are able to do this INR 5,000 disbursement next year, essentially we could be looking at something like INR 18,000 for fiscal year 2027, give or take, in terms of our exit AUM in fiscal year 2027.
Approximate.
Okay. Last, just one suggestion. Obviously, I think the real fruit of all the efforts the management is putting in will really start coming when the AUM growth starts exceeding the ROE. We start consuming capital in our business versus accreting capital. Again, congratulations on a great disbursement figure. I hope you are able to keep it up, and I hope you are able to cross a disbursement figure which exceeds the ROE, then we can actually start growing our ROE, start leveling up the business again.
Sure.
Thank you so much. We will take our next question from the line of Varun Dubey of Shareindia Securities. Please go ahead.
Okay. Thank you, sir, and congratulations on the good set of numbers. Sir, just wanted to understand one thing. Your company had gotten approval to acquire assets, and I remember last quarter the company saying that it would acquire some assets going forward in Q4, which would actually add to a little beginning fiscal year 2026 as well. So any update on the same? This INR 5,000 crore of disbursement that you are eyeing for 2027, does it include that acquired asset as well? Can you throw some light on that?
Yes, that DA transactions, yes, we are discussing with a few companies, bank and NBFCs. Now, the matter is asset mix, what kind of assets we can take, 80:20. 80 is a home loan, 20 is the home equity loan. What price and all. For the sake of disbursement growth, for the sake of AUM growth, we will not land into trouble in the form of taking a bad loan from other companies. We will be very cautious. Yes, we are discussing with a few leading companies. If their loans match with our credit policies, their rates match with our expectations, yes, we will acquire. Some of the discussions are in advanced stage. Most probably, I will give further updates in next quarter. Coming to the second question, INR 5,000 crore disbursement, yes, which is inclusive of some portion of DA transactions also.
Okay, sir. So even without acquiring the assets in Q4, you will reach the INR 16,200 crore AUM target, right?
Yeah, that is how we have planned. But if at all it comes, it adds to our efforts.
Okay. Understood, sir. Thank you, sir. Thank you for taking my question, sir, and best of luck for the future. Thank you, sir.
Thank you.
Thank you. Our next question is coming in from the line of Anand Mundra of Soar Wealth. Please go ahead.
Good evening, sir. Congratulations on good results. Sir, I have two questions. One was on BTA of this quarter, sir.
Sir, the BTA would have been at the same rate. It has been at INR 36 crore this quarter also.
Our BT ins have improved. We are almost at the same stage.
It is similar with the last quarter. We have not experienced any kind of change in the principal rundown, including BT outs. It is almost similar.
Any number which you can give?
BT out is almost, on an average, it is about INR 30 crore. BT out is INR 30 crore. BT in is about close to
150.
INR 150 crore for the entire quarter. Net, we are gaining. We gained.
Sir, BT out is only INR 30 crore.
INR 30 crore, I am talking about INR 30 crore is per month.
Per month, okay.
Yeah. So quarter is about INR 90 crore on the BT outside. BT inside is about INR 150 crore from October 1st- December 31st. So net in net is a gain of about INR 60 crore.
Sir, what is the reason for higher operating expenses on quarter-on-quarter basis? INR 26 crore has become INR 32 crore.
Sir, you know well that last two years, we opened around 32 branches. All the branches are now stabilized. The running cost will be added to our OPEX. Last quarter, I said this 2025 year for us, we are honoring our employees. Those who have put up long services in company that contributed the growth of the company, they will be honored by giving a gift and incentives. Quarter on quarter, if you look at our numbers quarter on quarter, our disbursements are logging sanctions. Disbursement are going up, for which we have to incur substantial expenditure, like taking a legal opinion, taking a valuation fee, checking his credentials, whether he will fit for loan, all those things. All the things are cost involved. Second thing, if you look at recoveries, this quarter alone, we have done a INR 25 crore reduction in NPA.
We have seen a reduction in Stage 2 assets also. To crack old NPA accounts, we have taken lot of legal actions. We have issued notices. We have issued legal notices. All those things will involve cost. Because of all those things, these are multiple item, not a single item. Because of all multiple items, our OPEX, our operating cost is gone up. If you ask me whether we got entire benefit of increase in the expenditure or not, yes. Going forward, you can see the benefit of the expenditure. Our cost to income ratio will improve going forward.
Sir, does this include DSA payouts also? Or that is kept separate?
Yeah, that is also. You rightly said that is also cost.
Okay. Understood. And sir, with respect to our geographical mix, Karnataka and AP are not doing as compared to other geography. Any thoughts on that, sir?
Yes, sir. Karnataka, we wanted to grow faster, but we were not able to do so because E-Khata is yet to be resolved in full. Though we are able to maintain our books there and maintain our disbursement levels there, growing a bit faster is now becoming a problem there because of E-Khata. I think by March, the E-Khata issue should get sorted out. That is what is the feeling that I am getting from the ground. So maybe post that, my Karnataka should be doing good. Andhra and Telangana, they are going steady. Next year, they should start increasing their percentage of contribution. That is what we are planning, sir.
Okay. And sir, any update on credit rating upgrade? Because we have started reporting-
Mr. Mundra, sorry to interrupt. We are actually restricting to two questions, each participant.
Okay. Thank you. Sir, just one comment, sir. Congratulations on good results and also taking the note on dividend and declaring quarterly dividend, sir. Thank you, sir. Thanks very much.
Yes, thank you, sir. Thank you.
Thank you so much. We will take our next question from Akash Jain of MoneyCurve Analytics. Please go ahead with your question.
Yeah. Thank you, sir. Apologies for being a little late on the call. There was back-to-back calls, and that is why I joined late, and maybe the question I am asking has already been answered, so apologies up front for this. Sir, I have two questions. One is, obviously we have had great disbursement growth in this quarter. But I think because of our rundown on the legacy book, I think it is not translating to good AUM growth. So I just want to understand, when you look at your book today, when do you start seeing this disbursement really kicking in on AUM growth, and when do you see the impact of that legacy book rundown in the base? So that is the first question, sir. The second question, I think the previous participants anyway asked about the other OPEX. I also wanted to ask about employee cost.
Employee cost has also gone up substantially this quarter. It has been going on for the last two quarters up. Any comments on what is the reason for that, please?
Yes, last question I answer first. Yes, if you look at the employee cost, it is slightly gone up. Our September employee cost was about INR 34 crore. As end of the December, it was INR 42 crore. You know well that the Labour Codes has enacted with effective from November 2025. As for the Labour Codes, we have to make adequate provision for leave and terminal benefits, funds like leave encashment, gratuity, et cetera. We have given the data to our actual valuer. He valued and we got numbers. Based on that, we have made our provisions for leave encashment and gratuity to the extent of INR 4 crore. Of course, INR 5 crore, close to about INR 5 crore, for leave encashment and gratuity on account of Labour Codes implementations. That is, INR 4 crore is a one-off event.
In general, we used to take a standard insurance policy for all our employees with minimum benefits. We thought of upgrading to one level above policy, for which we paid extra premium. The benefit will be more, which cost additional cost of about to the extent of INR 1.6 crore, as INR 1.7 crore premium we paid extra compared with the last financial year. If you look at performance, yes, our disbursements are on some month increasing, logins are increasing, sanctions are going up. If you see the NPAs, we have done a substantial reduction to the extent of INR 45 crore in the current quarter. All those things happened with the help of our team. We should honor our team members, top members, for which we have paid an incentive in the current quarter.
These are the multiple reasons our employee cost has gone up in the current quarter. On your first part of the question of what is the disbursement level that we should reach to grow faster, as I already said, my monthly runoff is anywhere between INR 170 crore- INR 200 crore. Anything more and above what I disperse adds to my book. As long as I keep dispersing more than INR 400 crore- INR 500 crore around, my book should grow faster. But the legacy issue will continue because we being a 25-year-old company, the loan keeps getting matured every year. We cannot help it. That legacy book effect will always be there, maybe to a lesser extent, when I start doing higher disbursements. Believe I have answered you. If you look at our principal rundown rate, quarter-on-quarter, almost similar.
If you look at principal rundown date in the December quarter end as well as September quarter end, it is almost similar. It is not going up. That comforts we are having.
Got it, sir. Thank you so much, sir.
Thank you so much. We will take a last question from the line of Sameer Ananthrao Hejib of Vidura Capital. Please go ahead with your question.
Hello, can you hear me?
Yes, please.
Yes, sir.
Yeah. Thank you, sir, and congratulations again for good performance in terms of AUM and NPA trajectory, et cetera, sir. The performance is in line with your guidance. Once again, congratulations. Sir, my question is, while we seem to be doing well from short-term and medium-term perspective in terms of AUM, profitability will follow, I am sure, because there is a lot of investment happening, which is showing up higher OPEX. Sir, my observation is more regarding the longer term, especially with one deal development that I wanted to bring to your notice, which you may already be aware. There is a company called Easy Home Finance, which raised about $35 million Series C. We tried to study that company a little bit, sir. It's a tech-driven home loan company, about eight to nine year old company.
Their USP is kind of leveraging technology for superior origination of home loans and faster turnaround time. Even on collections, they seem to be using technology, and they call themselves a paperless mortgage company. I mean, home loan company, paperless. While we have our huge advantages as compared to new age home loan companies because our borrowing costs are lower, we are more established, and we can leverage very well on our equity, et cetera. Just one question, sir, in terms of what work we are doing, both on leveraging technology, both on origination as well as even on collections, because there are a lot of interesting fintech companies, sir, which are helping even larger private sector banks with respect to their collections. They are also getting a lot of VC funding, which means they must be doing something right.
Can we use some of those fintech collection companies to bring down our Stage 2, et cetera? I am placing a thought, sir, because you are better placed. You may already be exploring and studying what is happening in the market. Because tech is changing so much in every sector, I thought I will just bring this to your kind attention and seek your inputs and guidance on how we as shareholders should evaluate vis-à-vis these developments.
Yeah. On the technology side of it, as you rightly said, Easy Home is doing a lot on that area. But due to my customer profile, that is, I don't target a prime customer. For me, the bulk of my customer is either cash-strapped, that is a blue-collar job, or they are a low-income group customer, so their touch and feel of the customer is very critical for my risk assessment. Yes, I can use technology, but not to the 100% extent as what the others are doing on a prime housing loan kind of thing. Because there it is a vanilla profile, solid customers, so it is very easy to assess. But for me, because of the clients or the customer segment that we have chosen, it may not be feasible for us to go 100% technology on the sourcing side of it.
We are trying to incorporate a lot of technology-driven APIs for verifying and checking the customer credentials. But still, yes, a personal discussion and the touch and feel of the customer is very critical for my risk assessment. That is on the sourcing side of it. On the collection side, yes, we have done a lot on using technology. Maybe I will ask [inaudible] to update on the technology side for collections.
Yeah. As of now, we are having a collection team of our own employees. As of now, they are doing well. On top of that, we have introduced a mobile app in our company for activities like collections, field investigations and sourcing, all those things. Technology side, a lot of developments has happened last one to 1.5 years. We have revamped our entire IT system. We are trying for end-to-end solutions. All those things are in place. Yes, your advices we have taken note of. Thank you, sir.
Thank you so much. Ladies and gentlemen, due to paucity of time, we will take that as the last question for today. I now hand it over to the management team for their closing remarks. Over to you.
Yes, we thank each and every one of you for showing interest in our company growth story. I believe and hope we have answered all your questions satisfactory. Anything is need further clarifications, we are ready to address, I think, by offline. Thank you. Thank you for active participations in the phone call.
Thank you so much. On behalf of YES Securities Limited, that concludes today's conference call. Thank you for joining us, and you can click on the leave icon now to exit the meeting. Thank you all for your participation.