Ladies and gentlemen, good day and welcome to Ujjivan Small Finance Bank Q4FY25 earnings call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on a touch tone telephone. Please note that this conference has been recorded. I now hand the conference over to Mr. Ranesh Babu from ICICI Securities. Thank you. Over to you, sir.
Yeah. Hi. Thank you. Good evening everyone and welcome to Ujjivan Small Finance Bank Q4FY25. On this call on behalf of ICICI Securities, I would like to thank Ujjivan management team for giving us the opportunity to host this call. Today we have with us the entire top management team of Ujjivan Small Finance Bank represented by Mr. Sanjeev Nautiyal, MD and CEO, Carol Furtado, Executive Director, Balakrishna Kamath, CFO Ashish Goel, Chief Credit Officer Martin P.S., Chief Operating Officer, Mr. Vibhas, Head, Micro Banking, Mr. Yendluri J, Retail Liability and Task Head, and Mr. Gaurav Shah, Lead Industrialization. I will now hand over the call to Mr. Sanjeev for his opening remarks. Then we'll open the floor for Q and A. Over to you, sir.
Thank you. Please. Good evening and welcome to our Q4 earnings call. Please be informed that references made during this address to Q3 and Q4 pertain to financial year 2024-2025. Q4 concludes an eventful year at Ujjivan Small Finance Bank. The year saw new leadership assume the positions of MD and CEO, Executive Director, Chief Financial Officer, and Head of Retail Liabilities. Infusing in Ujjivan vast management experience and exposure across banking and financial industry. Bank successfully navigated the challenging business environment in the micro banking segment. Maintaining one of the best in the industry portfolio quality. Strategic initiative to diversify and build higher share of secured loan book saw significant progress. Now contributing 44% of the loan portfolio, up from 30% last year. While the banking system liquidity continued to see challenges, this was managed at optimal levels with credit to deposit ratio improving to around 85% and LCR managed comfortably around 120%. Further, in February 2025 the bank took a major step forward by filing application with RBI to transition to a universal bank. Disbursements for Q4 have been the highest ever in history of Ujjivan at INR 7,444 crore, up 39% Q&Q and 11% YoY. The gross loan book reached INR 32,122 crore, up five percent Q&Q and eight perecent YoY. The secured book crossed INR 13,988 crore, up 17% QoQ and 56% YoY. Following are the major highlights. Housing vertical saw robust disbursement in Q4 of INR 1,130 crore, up 39% QoQ. The loan book reached INR 7,308 crore, up 14% QoQ and 48% YoY, becoming a meaningfully significant player in the affordable housing space. MSME business witnessed an impressive growth during Q4 led by revamped and newer products of LAP, working capital, and supply chain. The disbursements at INR 533 crore, up 61% QoQ, is all-time high, resulting in loan book reaching INR 2,047 crore, growth of 21% QoQ and 45% YoY. Current account balances from MSME customers grew 70% YoY, showing traction in our strategy to build liability through MSME assets. FIG continued its growth journey, reaching INR 2,785 crore, up 23% QoQ.
Another significant highlight was the performance of newer product lines of the bank, the disbursements for which contributed 11% to the bank's disbursements in Q4. Micro mortgages, higher yielding, lower ticket size product within housing, now contributes INR 723 crore, growing 37% QoQ and 258% YoY. Working capital and supply chain finance, the business banking segment now contributes more than 20% to MSME book. Vehicle finance witnessed impressive growth, reaching a book size of INR 468 crore, up 25% QoQ and 166% YoY. Agri banking reached a loan book of INR 323 crore, up 66% QoQ and 22.76% YoY. Gold loan gained momentum with disbursements up 69% QoQ, taking the loan book to INR 196 crore as of March 25, up by 70% QoQ. On the micro banking segment, as previously guided, there was robust growth in disbursement in Q4, up 38% QoQ. Within micro banking individual loan book grew five percent QoQ reaching INR 5,182 crore now constituting 28% of the overall micro banking book as of March 2025. The GL book degrew by four percent for the quarter in line with cautious approach adopted for the year reaching INR 13,090 crore. Disbursements grew to INR 2,787 crore up 37% QoQ primarily led by disbursement to good existing customers which contributed 84% in Q4 sourcing. The full implementation of MFIN Guardrail two has been completed with effect from April 1. The micro banking bucketX collection efficiency in all states other than Karnataka showed consistent improvement reaching 99.6% in March 2025. The overall bucketX collection efficiency reached 99.5% in March despite Karnataka registering only 98.7%. The branch and customer specific interventions were pivotal in managing the portfolio making it one of the best in the industry.
Under the current situation, we are confident that improvements in this segment both from business and collections perspective shall continue to ensue. Coming to the secured portfolio, quality housing GNPA reduced year-on-year to 1.1% as of March 2025 from 1.5%. MSME saw drastic improvement with GNPA reducing to 5.5% as of March 2025 from 8.4% as of March 2024. The 24-month MSME book has only 0.1% GNPA. Bank-level NPA, gross NPA stood at 2.2% and net NPA at 0.5%. Bank effected an ARC transaction of INR 365 crore in Q4, of which INR 295 crore was from provision portfolio and INR 70 crore from written-off portfolio In terms of RBI guidelines, the bank utilized INR 690 million towards ARC transaction from floating provision pool as previously guided. Credit cost for financial year 2025 stood at 2.45% of average gross advances including accelerated provision of INR 460 million, while it was 2.12% net of bad debt recovery. Closing PCR for March 2025 is at 78%. On the liability front, the total deposit book closed at INR 37,630 crore, up nine percent quarter on quarter and 20% year on year in Q4. Impressive growth in CASA was witnessed, up 11% quarter on quarter, reaching INR 9,612 crore and now forming 25.5% of total deposits. Current account crossed an important milestone of INR 1,000 crore for the first time, reaching INR 1,118 crore as on March 25th, with impressive growth of 35% quarter on quarter and 46% year on year. Retail TD plus CASA stood at INR 26,676 crore accounting for 71% of total deposits, experiencing a 21% YoY growth. Cost of fund increased marginally by 1 basis points and is at 7.6% for Q4. On financials and margins, the total income for FY25 at INR 7,201 crore is up 11% YoY. For the quarter, total income stood at INR 1,843 crore, up 5% QoQ. Other income grew by 57% QoQ, driven by processing fee, insurance income, and treasury income. Interest expenses increased by only INR 5 crore QoQ due to active liquidity management. However, opEx increased by 11% QoQ mainly due to direct business expense on account of higher disbursement, investments in new alliance of businesses. Full year expenses, impact of the branches opened in financial year 2024, and technology investments have led to increase in operating cost.
Credit cost for financial year 2025 at INR 748 crore includes the accelerated provision of INR 46 crore and is within the limit estimated before due to change in asset mix towards secured. NIM for the financial year 2025 came in at 8.8%, down 25 basis points from March 2024. Cost to income ratio for the financial year 2025 at 62%. With this the full year PAT stands at INR 726 crore with ROA of 1.6% and ROE of 12.4%. Micro banking portfolio saw improvement in asset quality in Q4. Green shoots are visible and business momentum also picked up in Q4. However, micro banking business is still to completely navigate couple of geography specific issues and Industry Guardrail 2 mandates. Accordingly, to allow the evolving situation to stabilize and offer us a clearer perspective, we shall be giving our guidance for the year along with our Q1 financial year 2026 results. Directionally, diversification of loan book would continue at a fast pace led by housing and MSME, ably supported by higher yielding micro mortgage, vehicle, agri, and gold loan businesses. Deposits will grow in line with asset growth, keeping the CD ratio around 88%. Thank you very much. Now I hand over to the moderator, Mr. Avira.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nidhesh Jain from Investec. Please go ahead.
Thanks for the opportunity. Is there an interest income reversal this quarter and can you quantify that?
Yeah. Hi. Interest reversal for the quarter because of the slippages would be in the range of roughly INR 17 crore-INR 18 crore for the quarter.
How should we look at yields or yields next year given that there will still be migration from unsecured to secured in FY 2026. Let's say how the trajectory of yields we should play. We should build in in FY 2026 versus what we have seen in Q4.
Yes. Hi Nidhi. With the secured mix increasing and the shift towards the secured the yields will directionally get moderated a bit. Having said that we are also working on increasing the share of our higher yielding secured books of vehicle finance which is giving us a yield of roughly 20% plus. Micro mortgages within housing vertical which is also giving us a yield of 19% plus and also gold loan which is also giving us a yield of roughly 14% plus. Not only that within the micro banking segment we are also looking at increasing the share of individual loans which is roughly 100 basis points plus over group loan. All these factors put together should be balancing out the NIM the yields also for the next year.
Any range if you can give should we build 100 basis point reduction over Q4 or less than 100 basis point reduction in over Q4 next year in terms of yields.
As part of the MD speech, we mentioned that we'll be giving the guidance for the year with the Q1 result, but we'll like to reframe right now.
Sure. With respect to the credit cost, since your SMA book has started to reduce in microfinance and it is now quite similar to, let's say, marginally higher than business as usual SMA book, your asset quality experience and secured business also doing quite well. Do you see that FY 2026 we should see a business as usual credit cost, or do you still see that Q1-Q2 will be elevated credit cost because SMA book in microfinance has come down quite sharply or is quite under control now?
Yes, we have seen a good reduction in our SMA book, so we should see this trend hopefully going forward continue as we have seen in Q4. In fact, the PAR seems to have peaked in December. However, there are one or two areas which we are watching now. One is the impact of Guardrail 2.0 and a couple of geography related things which are currently evolving. Yes, there will be a difference between H1 and H2. Credit cost H1 being slightly higher than H2. However, we can come up with a firmer number by the end of Q1.
Okay, that's it for my side. Thank you. Thank you.
Thank you. Nitesh.
Next question is from the line of Rajiv Mehta from Yes Securities. Please go ahead.
Yeah. Hi. Thank you for taking my questions. Firstly, when I look at the reported yield for group loans and individual loan combined, that is actually slightly increased on Q-on-Q basis. I know there has been a change in methodology in terms of calculation. There is an increase. We had actually taken a price reduction from the 1st of January between 75 basis points and 115 basis points. All the new disbursements which we did must have come at a much lower price, or, you know, this much lower price. How come the yield have gone up Q-on-Q?
Yeah. Hi, Rajiv. Yes, we have modified the methodology on the day basis. The yields have actually gone up because of the way calculation happened. We did an ARC transaction amounting to INR 365 crore, out of which roughly INR 300 crore was within the provision pool which was still on balance sheet. The interest accrual does not happen. As we answered the previous question, also the interest reversal happens due to book moving into slippages. Due to this, the denominator effect largely, we are seeing the increase in yield happening.
On the price, on the price reduction, there is no calibration. We have gone ahead and implemented that much as we had planned.
Just to add, Rajiv, also the mix of individual loan, which is higher, has gone up. Has also gone up by 3 percentage points. That is also helping the overall yield of the micro banking segment. Yes, we have taken the rate increase also effective from the 1st of April. We have implemented that.
I mean. From the 1st of January we've taken a rate reduction of that quantum. Are you seeing that from 1st of April have we also kind of again reinstated a part, reinstated a part of that reduction?
Yes, Rajiv, you are right. We have taken increase from 1st of April for both GL and IL which is a of the small which we had given in the fourth quarter. Because you know, now it's a good business now and everything is going well. We thought we should come back to our old pricing. We had given a discount for Q4 only which we have withdrawn. That's all
okay, yeah, sure, sure. That clarifies sir. Now the outlook on NIM if you can share because if you are exiting NIM at 8.3% the average for the whole year is 8.8%. You know we are fast moving our mix towards secured products and I'm sure even in the next year the growth in secured products will be much higher versus MFI. I appreciate the fact that you know we have kind of, you know, rolled back the pricing again in MFI which will help us but from a mix perspective. As for what's your sense on how the cost of funds will move going ahead because you know, I mean the bulk TD bulk pricing has actually come off and have you taken any rate actions on the term deposits or SAF off state? If you can just kind of answer every, I mean all of these points and maybe give us some conclusion about, some outlook about how the NIMs will, you know, play out.
Yes Rajiv, we'll give you a broad sense on both the NIM side as well as the cost of fund side. NIM, yes, since the secured loan will be moving up in percentage there will be some reduction but not very material due to the fact that we have increased the rates again from 1st of April. That benefit will come. Plus we have high yielding products as explained earlier, which is a vehicle loan. The individual loan also is doing well so that will sustain that. Now coming to the cost of fund side, yes, we have given a taken a reduction both on the SAR side as well as on the TD side. Bulk deposit rates also have come down. You know, already two repo rate reductions have happened as per the RBI's, you know, rate action. We estimate that our cost of fund will definitely come down by at least 25 to 30 basis points over next year considering these two reductions. If any more happen then it will be subject to that. On the NIM side, yes, we will be more or less there. There will be only a small reduction as compared to this year.
Got that. Just one last thing sir, from a slightly longer term point of view, in the next two, three years where are we in terms of, you know, the profitability of the secured businesses, housing finance, MSME finance business. I mean, we have been doing this business for a while now and there is good growth as well. I mean, when do we achieve what level of ROA? I mean, is there some broader, you know, outlook, you know, on the secured products in terms of profitability roadmap?
Yes, we are working on it. You know we have recently again relaunched the vehicle loan. Gold loan is a new product. It will take around 18-24 months for it to come to a good profitability level. Yes, we should aim for two percent ROA for the new products also going forward. We are working on that maybe over the next two, three years once it reaches a certain level which we are aspiring to, maybe gold loan around INR 1,000 crore, vehicle loan around INR 1,500 crore. At that time we will start making good profits and will sustain going forward. Anything more you would like to know about that? No. Maybe. I'm sure once you come out with the guidance and maybe more questioning I'll have, you know, more questions I'll have at that time. This is it sir. I mean this helps right now. Thank you so much investor.
Thank you. The next question is from the line of Sagar Shah from Spark. Please go ahead.
Good evening sir and thank you for the opportunity. My first question was regarding our OpEx in this quarter. We had some sort of serious off road collection team increase also. Our employee expenditure also increased by almost 18%. Also, sequentially it increased by almost 13%. What led to the increase? Is this just some sort of a one-off in these numbers or is it just a temporary blip? Can you explain about this? This is my first question.
Yeah, I'll take that question. Yes, you rightly noted the OpEx has gone up. That is because we have made certain investments towards improving our secured book and on the liability business. For that we hired some employees. Also, on the collection side, you rightly observed we increased the manpower due to the difficult market conditions. You might have noted our power and our credit cost is almost half of what is there in the market. We have invested in that. This is directionally it will come down. As you know, our dispersal grew because last year our dispersal in the unsecured side was a little muted, though the secured was doing good. Next year both the segments should show growth. We will come out with more details of that when we give the guidance. The operating cost as a percentage will get tempered going forward.
Okay. Okay, fine sir. My second question sir was regarding our GL portfolio. Our GL portfolio obviously degrew also by sequentially. I observed there was some sort of a disbursement growth even in IL and even in micro group loans actually. First of all, can you give some color that in which geographies are you getting confidence actually and within the same geographies in FY26 will we resume growth at least in this segment?
Hi Sagar. In microfinance in both group loans and IL, first of all, IL is something which we, you know, which is our growth driver in microfinance for a long time. This is something which we have built over a period of time. This is a product which we are doing everywhere because you get good customers everywhere. It is a graduation product, and you know, which is a well-refined process where we are doing customer graduation. Even in difficult markets it works because you have good customers there as well. As far as GL is concerned, GL has degrown a little bit in this financial year. At the same time, when we look at geographies, we see that there are green shoots in various states apart from one or two states. Within those states, few districts are affected. Apart from that, we are seeing that eastern part of the country, northern part of the country, and even western part of the country is doing well for us. We see growth coming from these geographies in the coming financial year also.
Okay, so is this safe to assume? Sir, can you specify the geographies in which you are seeing green shoots? In FY26, will we see a positive trajectory as far as group loans is concerned?
We are looking at eastern part. That means West Bengal, Bihar, Jharkhand even and in north part Punjab. Issue is also over Punjab, Haryana, Rajasthan, Gujarat and Maharashtra. These are the states where our presence is good and our portfolio is doing well. As far as south is concerned, you know that Karnataka, it will take some time to completely recover and then we'll become, you know, good volume also. At the same time in South, it is something where we are looking at growth here as well.
Okay. Okay. Fine sir. My last question was regarding our floating provisions. We utilized around INR 40 crore worth of floating provision. This quarter we even did some INR 30 crore of accelerated provisions. My question was that we still hold around INR 130 crore of contingency provisions also, collectively INR 181 crore. Around INR 130 crore we have easily had. When we had such a huge credit cost in this quarter, why did not we use some more provisions actually in this quarter to at least contain our credit cost, actually?
In terms of floating provision, we have used INR 69 crore against the ARC sale which we had done during this quarter. The number is INR 69 crore. We still hold about INR 150 crore of floating provision which is earmarked towards GNPA and about INR 30 crore which is earmarked towards tier two capital. Of the INR 150 crore, we are currently using INR 130 crore for GNPA and NNPA calculation and INR 20 crore is unutilized. As far as utilization of floating provision is concerned, we cannot directly utilize floating provision. These are made for the purpose of contingencies and this can be done only after specific approval from RBI. For the ARC transaction the RBI guidelines allow the utilization of floating provisions. This is what we have done in Q4.
Okay? Okay, fine sir. Now just last bit if I can squeeze in more that I know you're not giving guidance, I'm not repeating that to give you any guidance for names or yields but as per my self calculation, our self calculated yields as per the yerma yields that you have given in the presentation and the kind of disbursements that you are seeing in the secured front, the yields are coming approximately at around 18-19%. Is it safe to assume that at least will remain in this range or still it's not short based on because of the portfolio mix that you had alluded to before that we'll stay at around 50-50 between secured and unsec. Is it safe to assume that the yields are will be in that range which I just said?
No. As already mentioned, we would like to give the guidance along with the Q1 results. At this stage, we would not be able to elaborate any further on this subject. We will give you the correct estimate along with the Q1 results. Okay?
Okay, fine sir. All the best and thank you.
Thank you Sagar.
Thank you so much. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participant. The next question is from the line of Shreepal Doshi from Equirus. Please go ahead.
Hi sir. Thank you for giving me the opportunity. My question was on collection trends in April as we've already sort of concluded the month. How has it been for microfinance given that the MFIN 2.0 guardrail could have also got implemented with respect to lender cap?
As you mentioned that apart from a few states, especially in the south, we are seeing positive momentum both in business and collection across the country. Our last quarter has been very, very good in terms of collections and we are continuing that momentum in the month of April also. We hope that this quarter will also be similar to or better than the last quarter.
Got it. Got it. The second question was on the loan book mix front. We've launched newer products such as Gold among others. How are we seeing that share inching up in the next, let's say, 12 months time period? Because these products are also not only secure but also decently positioned when it comes to ROA profile. What is our thought process in terms of their contribution by FY2026 end or by FY2027 end? If you could give some color there.
Gold Loan is a new product for us. You know we started with almost a very small book and we have scaled it up to about INR 200 crore during this year. This has got enabled by rollout of this business in four quarters. Every quarter we started opening branches and we now are currently present in about 200 branches. We will continue to open branches for Gold Loan during this quarter largely in H1 and then some branches in H2 also. You know, continuously opening branches, continuously putting people for Gold Loan acquisition. This is the plan that we have in mind. By end of next year FY2026, we expect that this book will be about 2.5%-3% of the overall AUM.
This is only Gold and vehicle, which is another like, I think, INR 470 crore-INR 480 crore that we have built. I am saying that new products as a category, how would that be contributing in, let's say, FY2026 or 2027? Because today as we see, that book is almost, I would say, INR 1,000 crore portfolio.
These are very important new products that we have done in the last 18 months. Vehicle loan, for example, we now are touching INR 500 crore. We have built a capacity to be able to disburse in the range of INR 70 crore-INR 80 crore during season times. We have tested ourselves last season and by season I mean September, October, November and December when the two wheeler sales are actually August, September, October, November when two wheeler sales are at their peak. During the year we have tested ourselves, we have touched INR 75 crore in a month. This year also we will go with the same momentum. This of course is a dealer based business, not a branch based one unlike Gold Loans. We have done tie ups across dealerships. This year also the distribution footprint will increase again. The growth in vehicle loans two wheeler will continue with the same pace this year also.
Got it. Just one data keeping question. What is the write off for this quarter and two year? Sorry to interrupt just once again we are checking the number. That is my last question.
362 crore for the full year. Q. Yeah. So it was INR 362 crore for the full year.
All right. Yeah. Thank you so much. Thank you. Thank you and good luck for the next.
Thank you. The next question is from the line of Shailesh Kanani from Centrum Broking. Please go ahead.
Good evening and thanks for the o pportunity. A couple of questions from my side. One on the MFI segment, as you have alluded to in the opening remarks as well, there has been a good jump in disbursement and overall also in our numbers also it is getting reflected. Is it safe to assume or is it safe to understand that the worst in terms of credit cost and MFI cycle is over and FY 2026 again we would be seeing some growth, not maybe, maybe very high, but some growth for both GLG and IL. I know it's doing well, but even on the GLG front, can you throw some light on that?
Yeah. We, you know, in Q4 the increase in disbursements has come largely on the back of repeat customers. We saw demand coming back in the market. You must have noticed that in Q2 as well as Q3, the disbursements for the industry was low. Q2 YoY disbursement was low by about 28% below normal. In Q3 it was down by about 35% below normal. Repeat customer demand had to come back and that is what we saw happening during the quarter. Now, in terms of, I'm sorry, what was the second question
in terms of if the worst or is over for the MFI segment for the full year?
Yes. There has been muted disbursement for almost nine months in the industry. There is demand coming back. We will also see some new customer acquisition during the year. That has been something that we have not done over the last nine months. We will also see collection as collection efficiency improves, branches will start to acquire more customers because, you know, in the last maybe couple of quarters, branches have been spending a lot more time in collecting some overdue customers and that has slowed down our new customer acquisition speed also. Plus we were a little more cautious. We were only servicing repeat customers all this time. On both sides, yes, in terms of customers getting added, we will see some addition this year. In terms of branches doing higher disbursements, we have already started seeing the trend and we see that this trend will continue.
Sorry to harp on this, but just to understand what we are doing different than, say, other players. Because our disbursement, if I see on year-on-year basis, GL and IL combined, it's nearly flattish, not a huge dip, right? Whereas many of the players have kind of even on year-on-year basis depicted a huge decline. Any quantitative factor which you would like to throw out means why this performance is a little bit better than the peers.
There are two or three reasons to this. One of which is we have very good geographic diversification. Because of the geography diversification, we've not got impacted in a big way in any of the states whenever there are. Lower concentration has been one of the reasons. The second, of course, is IL now contributing to 28% of the book. The impact of Guardrail 1 was largely on GL. So IL was, had a lesser impact compared to GL. So that also helped us in maintaining asset quality. The third one is as soon as we had started to see stress, we had divided our branches into green, amber and red based on their collection efficiency and, you know, the disbursements, the pace at which they would grow or degrow was largely dependent on the categorization of these branches. You know, in green branches we were doing business as normal because collections were normal. In red branches, restrictions were put throughout the last two or three quarters. That also helped us in, you know, not taking additional risks in places which are not doing well and continuing with disbursements as normal in green branches. This was one of the reasons why the disbursement trend did not show a very steep decline.
Okay, sir, just last question, one question. On the FIG front, I'm seeing a jump in the disbursement in FIG as well, considering I believe the yields would be one of the lowest. Why are we having a growth over there? Any views on that?
FIG has always been a strategic book for us and we have been, you know, looking into disbursements a little differently. We have a good hold on the FIG book. At the moment, yes, we see that the FIG book has grown and we will ensure that this book is not more than 8-10% of our total portfolio. We generally lend to NBFCs which are engaged in MSME, vehicle finance, gold. Our focus area continues to be on the higher rated entities, A plus and above, you know, and we also have a spread of around 1.25-2.75% for these loans. It is based on the credit profile of the borrowers. You know, finally, you know, this book has largely been having around A and A rated entities. We have some good names also in this book. And we did a total disbursement of around INR 1,064 crore in Q3. This book has always been a strategic book for us.
Okay, that's helpful. Thanks a lot and best of.
Thank you. The next question is from the line of Aravind R from Sundaram Alternates. Please go ahead.
Hello sir. Thank you so much for the opportunity. Just a clarification question. The interest rate reduction which we offered during the fourth quarter in individual and group lending, is it only a temporary thing? And now the interest rate has again reversed back to the normal rate?
Yes, you are right. We had given some discount for the fourth quarter because we wanted to improve the business and now it is more or less restored back to the normal. The discount has been withdrawn. Okay. That even after increase. Even after increase in interest rate we are one of the best interest offering, you know, organized in terms of microfinance loan in the market.
Yeah, definitely. Also do we see any repricing in any other part of the portfolio like in terms of increase reduction?
No, as of now we do not envisage any change in our pricing. We will have to wait and see how it goes. As of now we do not have any such plan.
Yes, sure, sure. Thank you.
Thank you. The next question is from the line of Ashlesh Sonje from Kotak Securities. Please go ahead.
Hi team, good evening. Our first question is a data keeping one. Can you just break out the slippages by segment? I just need the MFI slippage number. If you can share that one second we will pull it up. In the meanwhile, if I can take the second one. The second one is on slide number 24 in the presentation where you have shared the PAR trend for leveraged customers UGN +1, 2 and 3 and so on. Over there, if you see the OG1 +4 PAR number, that has climbed up to 30% as on February. Whereas the OG1+3 number is about 13% now that the 3 lender cap has been implemented. In the 13% number, which is for G1+3, that can climb up to a 30% kind of level.
Ashlesh, in terms of breakage, you know, breakup of slippages, we had about 87% of the slippages coming in from micro banking for the quarter. As you know, for the 87% of the bank slippages came in from micro banking. In terms of OG1+3, UG1+4, we've seen, you know, we've seen a decline happening in OG1+3. In the last quarter, January, we seem to have seen a higher number. It was climbing up. In February it came down, and in March it has come down further. We feel that this trend should continue. Because of Guardrail 2 implementation there might be a month or two where we can, we can find some disturbance, but overall we do not see this number going up to 30%. It should be much lower than that.
Understood, thank you. Sir, just lastly, what is the total pool of return of loans where you expect to make some recoveries?
See, this is divided into two parts, Ashlesh. One is the old ones which we had done immediately after Covid, and the second is the ones which we have done in the last two years. The sum of what we have done in the last two years is approximately INR 750 crore.
Understood, sir. Thank you.
Thank you. The next question is from the line of Sonal Minhas from Persistence Capital Investment Advisors LLP. Please go ahead.
Hi sir, this is Sonal Minhas. Am I audible?
Yes, Sonal. Hi.
My first question is with regard to the provisions. Basically I'm on slide number 23. I just wanted to understand subjectively the provisions have actually come down. The provision coverage is basically reserves have come down from INR 804 million to INR 710 million and there has been a credit cost which is reasonable in this quarter. Wanted to understand that. Are you happy? Are you satisfied with whatever provisions we have as we speak right now? This is directly going into what we should see the provisions for FY 2026 because the number is reduced meaningfully. In FY Q1, Q2, FY 2026, do we expect more provisioning district posted amount of provisioning? If you could just help directionally explain this.
Now we, you know, maintain our PCR above 70%. The PCR has come down from 80% to about 78% between Q3 and Q4. In addition to this we also have INR 21 crore of unutilized floating provision which can add a further buffer if we utilize it. We've also done, you know, accelerated provision in March in addition to what we had done in December. This quarter we have done about INR 42 crore. You know, in terms of PCR I think we are fairly covered.
Even after considering the last one year has been kind of. Yeah, I understand sir. My question was that our PCR is roughly. The absolute amount is roughly similar to where it was when this whole microfinance kind of stress started happening and hence we were at March 2024, we were at INR 690 crore and right now we are at INR 710 crore. Directionally, should we see this number go up significantly next year is broadly I wanted to understand given this has been a year of stress and we are roughly at the same point where we were in March 2023.
In terms of absolute provisions, the provisions will follow the provisioning norms. As and when slippages happen, provisions will keep going up as well as you know, and whenever interventions happen, the provisions will keep coming down. One of the interventions that we did in Q4 was the ARC transaction. You know, for us as a mandate, we will continue to maintain PCR above 70%.
Got it. Okay. My second question, quickly wanted to ask the maturity of your MSME book and your affordable housing book. While the GNPA and the PAR numbers have come down. Y o y any color there, any subjective guidance there you can give in terms of how that book is delivered that will be helpful. Yeah.
In MSME we relaunched the product in April 2023 and post that we have built a book of almost INR 1,200 crore. In this INR 1,200 crore on the 24 MOV book we have not seen NPAs, we have seen very little PAR. NPAs are in the range of 0.1%. The book is holding well for us. You know, this has three components. One is LAP, the second is working capital which is overdraft products, and the third one is supply chain finance. In all the three products we have seen the 24 MOV book hold in terms of reduction in NPA. You know, the old book has contributed to the NPA and that is what we are seeing recoveries happening from there. In the last year itself we saw more than INR 35-37 crore of recoveries happening from the old book. We are currently, you know, we've done SARFAESI in all the NPA accounts. Almost 33% of those are in advanced stages, either waiting for auction or waiting for enforcement of security. We see that, you know, this trend of reduction of NPA should continue in the old book. The old book is now reducing at a very fast pace. The residual book is likely to have a higher NPA, but the slippages have now come under control with the new book now contributing to the overall MSME book.
Okay, the newer book as you said is behaving well. Is there a time in future, maybe next 12 months, 18 months, where the old book has been reduced significantly, margins, and this book basically starts. There is a maturity curve basically which it comes back to industry average. What would you see in MSME which is typically 3-5% trend of MVPA specifically.
No. So you know, when we look at MSME book, it is. It is. The NPAs are largely guided by the segments in which we operate. Our old book was of a INR 1,500,000 ticket size. And the moment Covid happened, it was this ticket size was the one which got impacted the most. The lower end of the segment in the book that we have relaunched, we now operate with an average ticket size of about INR 5,500,000-INR 6,000,000. On the LAP side and on the working capital which is overdraft, the average ticket size is close to about INR 10,000,000. It is a complete new segment that we are working with. Therefore, we feel that the asset quality being dependent on the segment in which we are operating should be much better than, you know, what we see across the industry the previous.
Ok ay, and what is an average in that ticket size? What is an industry?
Depending on the segment, we are operating in the INR 5 million plus segment on LAP and INR 7.5 million-10 million in working capital, maybe about INR 15 million. These segments are relatively unaffected by any small downturns that we see. We should see these, you know, this segment normally behaves very well in the industry.
Okay, so industry average numbers, they are also pretty low. Less than two percent, less than three percent. If that is the number, I just want to understand.
Yes, yes, yes, yes. The industry numbers are also very low in this. The delinquencies are low in these segments.
Got it? Okay. Okay. That's it for my side. Thank you. Thank you.
Thank you.
Thank you. Ladies and gentlemen, in order to ensure that the management is able to address questions from all participants in the conference, please limit your questions to two per participation. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Congratulations on a good set of performance.
We are not able to hear clearly. Could you. Sorry, we are not able to hear clearly.
Is it better? Are you able to hear now? Yes. Hello. Yes, hello. Yes. Yes. Pertaining to Karnataka and Tamil Nadu where these ordinances have been introduced or are in the place. How are you seeing the situation, sir? Is it like. We have seen a dip in asset quality in all the other states and that dip sort of bottomed out in the month of November. Then steadily things have been improving, as you said, in three of the four regions of the country. In these particular states, after, for example, in Karnataka, you know, we saw it in January and then February. Now is it just improving just like every other region but with a lag of one or two months, or are we seeing some other issues which we think will persist over some time? Same for Tamil Nadu. Sir, sorry,
Sarvesh, is this only for Karnataka? Yes, Karnataka. We saw dip in collection efficiency in February and it did not come back to normal in the month of March. In March also we had 98.7%. What we consider normal is in the range of 99.5% bucket tax collection efficiency. There have been about seven or eight districts in Karnataka which have still not come back to normalcy. These may probably take another two to three months before they come back to normalcy. In most of the other districts in Karnataka, we have started to see improvement. The bucket tax collection efficiency, which has actually gone down to below 97%, recovered to 98.6% only because most of the other districts started to respond well. About five or six districts still did not respond in the month of March.
What is happening on the ground? Is it like the borrowers are refusing to pay or are you not able to send your collectors to collect the money? Or is there some confusion between registered and unregistered entities? If you can throw some color on the ground situation in these districts that facing challenges.
You know, the risk around people going and meeting customers, that was a little elevated in the month of February, but we saw significant reduction in that in the month of March. People were, you know, going and meeting customers. There was no, there was no resistance in going and meeting. However, as I was saying, in about six districts, seven districts, there was lower repayment rates because people wanted some time to pay. Most of the narrative that we've been hearing is we will pay, but not now. There has been deferment of promises to pay, especially in the month of March. Okay.
Now in Tamil Nadu, if you can,
on ground, things are normal. On ground, things are normal now.
No, I was referring to Tamil Nadu. Tamil Nadu, sir, what is happening and what you have seen in the month of April, if you can throw some light on that,
Tamil Nadu is just about a, you know, week old. It has not even reached people as of now because, you know, the developments are not more than a week old. There was in Tamil, in Karnataka, it had taken about two or three months of, you know, attention by people and it had, you know, various colors happening in various districts. In Tamil Nadu, I think this has been only a week and the bill has already gone. It has already got passed. This is in Tamil Nadu. We should see a much lesser disruption if there is any because of no disturbance on the field. You know, in Karnataka it was escalating. Here it has been a very smooth, very smooth situation.
Understood. Sir, the other question is on the opEx. I mean, our opEx was even trending higher before in the earlier quarters of this financial year. I think we saw some moderation and it has spiked up again. How do you see that trending out? Is it because we are running on a very low utilization for the secured business which is causing this opEx to be on the higher side? There are some one-offs related to the collection? Even in the past, post Covid crisis, we had ramped up our collection team and that had resulted in some opEx spike. How much of this sort of an opEx trend can be explained because of one.
Sorry to interrupt. Mr. Sarvesh, may we request that you return to the question? Thank you for follow up questions as there are several participants waiting for the turn.
Yeah, okay, thank you.
The next question is from the line of Chinmay Nema from Persistence Capital. Please go ahead.
Good evening, sir. Sir, I just had one question. Could you share how much out of the total provision, how much are earmarked the microfinance book?
Out of the floating provisions?
Sir, out of the total, total provisions. Just trying to understand the split of the provisions between our other retail assets under microfinance book.
W e'll come back to you. We'll come back to you on that. Okay, that is from my side this one question.
Sure, Chandra, we will come back to you on this one.
Should I take up the next question, sir?
Yes, yes, sir, I'll write a video.
The next question is from the line of Rajiv Mehta from Yes Securities. Please go ahead.
Yeah, just two things. Firstly, if you just tell us what is the overall doubler exposure at the bank level in terms of loan assets. And the second is, you know, while from a growth point of view we are highlighting that individual loans in microfinance are not covered by the MFI and guardrail and hence you can grow them faster. But from a risk point of view, do we already have tight underwriting guardrails in individual loans which will keep the PAR always below the group loans? And if you can elaborate on those guardrails that we have been, that have been in place.
Sure, Rajiv. Tamil Nadu contributes to about 14% of the overall assets for the bank. The total loans and advances for the bank. That includes Microfinance and all the other retail assets. In terms of individual loans, you know, this business for us has been almost 16-17 years old. We've been, you know, continuously improving our processes, continuously improving our underwriting standards. Most of this book, about 90% of the book in individual loans, has been graduated from group loans. We have a team of about 550 credit officers who independently assess every loan application on the ground when we have to sanction a loan. There is a dual assessment of every customer and underwriting norms are again based on the industry, on the occupation of the customer. This has worked well for us. The graduation of all the group loan customers happens typically after, not before, 36 months. The bank already has experience of good credit behavior of customers before we graduate them to individual loans.
Yeah, yeah, no, no, that's good. Yeah, yeah, that's it from my head. Thank you.
Thank you. The last question for the day is from the line of Heet Khimawat from IIFL Securities. Please go ahead.
Yeah, hi, sir, thank you for the opportunity. There's a couple of questions. One is that we've seen some reclassification from the agri book to some individual loans and other loans. Can I know the reason for that? That is first and secondly, with the MFIN 2.0 now coming in, which you've implemented from April, while we've seen some of your peers do it even before that, like maybe in the month of February or maybe even November 24 for some cases. Do you think that the growth might get impacted in some way when the plus three, plus four borrowers come for the second loan or the repeat loan? Just those two questions if you can get perspective on.
Yeah, hi. We have just reclassified, on the first question, we have just reclassified the loan so that it reflects the, you know, the grouping. Earlier our agri and allied loans given for individual business, individual loan purpose was clubbed under agri and allied. Now we have included it into individual loan and the Agri Banking now reflects only about that Agri Banking secured portfolio.
Now, as far as effect of Guardrail 2.0 is concerned, you know, first of all, we believe that the impact of Guardrail 2.0 will be much lower than Guardrail 1.0 because they overlap with each other in terms of the different, you know, benchmark. We have to say to the difference, you know, the way we are, we have to reject our customers. Second point is that if you look at our overlap, the 3 lender and 4 lender, we are one of the lowest, and the loss there in terms of customer not being eligible for repeat tone will be much lower than the average industry among those customers. Also, we have good customers. We have good graduation program. Not only IL, we have M Lab, we have other products also where we have very smooth graduation program and customers can move to other products if they are eligible and their income supports. As far as you know, this also opens up opportunity as far as we go into the month of April and this quarter going forward after implementation of Guardrail 2.0 across the industry. Customer will, I mentioned this in the last quarter also, that customer will also now choose the three best lender where they can continue with and that gives an opportunity. If you have basket of product to offer to your customers, your interest rate, your processes are faster, there are high chances that you can attract best customers in the market. Yes, we will lose some customers who are not eligible as they already have loan from four and our loan is maturing first. At the same time, we will also have opportunity to attract best customers in the market as well. This is also from the point of view that with the kind of stress the industry has gone through, there will be some market that will open up with some of the players not being able to disburse because of liquidity issue. That is something we are looking at.
Got it sir. That's helpful. Just lastly if I may ask, on the Universal Banking License, any update on that side.
As you may be aware, we have filed for the Universal Banking License in February and we await to hear from the RBI on this matter.
Okay, that helps you, sir. Thank you.
Thank you. This was the last question for the day on behalf of ICICI Securities Limited that concludes this conference. Thank you for joining us and you may now disconnect your lines.