Ladies and gentlemen, good day, and welcome to Ujjivan Small Finance Bank Q2 FY 2024 Earnings Conference Call, hosted by IIFL Securities Limited. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Ittira Davis, MD and CEO, Ujjivan Small Finance Bank. Thank you, and over to you, sir.
Thank you. Good evening, and welcome to our Q2 financial year 2024, and first half financial year 2024 earnings call. I'm happy to share that our business performance continued to display a healthy growth for the eighth quarter in a row. Disbursement at INR 5,749 crore continued its strong trend and were up 18% year-on-year, aiding in growth loan book of 27% year-on-year and 5% quarter-on-quarter. We continue to expand our customer reach through physical and digital network, enhancing our product and services suite. This, coupled with our enhanced marketing efforts, have further strengthened the bank's liabilities franchise. Despite elevated competition in the market, our total deposits grew 43% year-on-year and 9% quarter-on-quarter to INR 29,139 crore. We added 39 new branches in the last quarter, taking our branch count to 700.
Another 45 branches are expected to be added in the second half of the year. These include splitting of some micro banking branches due to the higher customer base that they have. Asset growth was driven by micro banking as well as affordable housing and FIG. While group loans in micro banking is driven by new customer acquisition, individual loan is growing faster as apart from new customer acquisition, our existing group loan borrowers are also a track record of graduating to the individual loans. This trend, we believe, will sustain going ahead. In fact, we expect mature individual loan borrowers to actually graduate to the secured loan portfolios, like Micro LAP and affordable housing. In line with this trend, we are investing in our Micro LAP business, which is now active in eight states, well, as against two states in the last financial year.
We expect this business to pick up scale in the coming quarters. Our newer offerings, like gold loan and two-wheeler loans, are also catering to growing need of this customer base, apart from new to bank customers. We are investing in our analytics division to accelerate this graduation to the secure book, apart from exploring opportunities to cross-sell and upsell additional product services like insurance, three-in-one account through our strategic partnerships. Our affordable housing continues to outperform and is now 15% of our total gross loan book. We disbursed INR 541 crore this quarter, taking our book to INR 4,036 crore. As I mentioned during our last call, the business is moving towards a hub and spoke model. We have added 10 new hubs this quarter, taking the total count of hubs to 13.
While operational efficiency is setting in, along with streamlining of processes, loans disbursed through these hubs have a much lower tax compared to loans disbursed from other channels. This has resulted in improved productivity. Also, our focus is more towards non-metro and smaller towns. Contribution of disbursements outside metro is slowly inching up. The FIG disbursed INR 293 crore, up 29% year-on-year. In a strategic business, we continue to garner good quality NBFCs with over 95% FIG customers carrying a credit rating of A minus and above, with collections stable at 100%. The revamp of the MSME vertical has taken a little longer than anticipated. Currently, we are operating in select geographies, rebuilding the team while we are simultaneously expanding our product suite. We have launched semi-formal LAP in Q1, which is now scaling up.
We have tied up with two fintech partners and are in process to commence disbursements. Expect this business to contribute significantly towards the second half of the year. We continue to evaluate more such, you know, fintech partnerships going forward. During the quarter, we launched our first nationwide brand campaign to establish Ujjivan Small Finance Bank as a leading mass-market bank. The campaign has helped increasing trust among our customers and increase our visibility. We launched premium current account and savings account products during the quarter, and the same has seen good success in terms of customer acquisition and deposit buildup. Our digital fixed deposits went live this quarter, which provides smooth onboarding of our digitally savvy and new-to-bank customers. Jointly, these efforts yielded strong results.
Our strategy to build a healthy retail liability base was displayed by CASA crossing INR 7,000 crore and growing 28% year-over-year and 7% quarter-over-quarter. Further, our retail term deposits grew 56% year-over-year to INR 11,806 crore. Our recently launched app, Hello Ujjivan, is gaining acceptance among customers, with total downloads reaching 4.3 lakh and total repayments of more than INR 40 crore in the quarter, as against INR 29 crore last quarter. We have also activated loan acknowledgement on the Hello Ujjivan app, which saves the customer time of visiting branches for signing disbursement documents. This also reduces the pressure on our branches. Going ahead, we plan to introduce repeat loan facility on the app, thus bringing a significant cost saving as more than 60% of disbursements are actually repeat loans.
As the application gains usage and acceptance, it will provide field staff greater bandwidth to cross-sell to existing customers and also acquire new customers. Now, moving on to our financials. Our total income growth for the quarter was 39% year-on-year, driven by a 40% year-on-year interest income growth. Yields continued to inch up as the book gets repriced. Currently, 47% of GL, IL booked in March 2023 onwards, 28% dispersed between September 2022 and February 2023, and the balance prior to September 2022. Just to remind you, we have taken 50 basis points hike in September 2022 and another 50 basis points in March 2023. Our cost of funds continue to rise as term deposits get repriced. Going forward, the cost of fund graph should start to flatten as the TD pricing is mostly complete. Repricing is mostly complete.
This is subject to status quo in the market interest rates. Our NIMs have contracted to 8.8% for the quarter, as against 9.2% in the first quarter. This is partially due to the rising cost of funds and partially due to increased investment book. As the cost of funds start to flatten, we expect some improvement in NIMs in the second half, more towards Q4. Our asset quality continues to improve, with GNPA at 2.2%, as against 2.4% in June, and NPA remains negligible at 0.09%. Collections remain strong, with up to one EMI collection efficiency of 98.3%. Slippages for Q2 were at INR 113 crores, versus INR 103 crores in the first quarter.
For first half 2024, slippages are at INR 216 crore, with upgrades and recoveries of INR 145 crore. Bad debt recovery continues to remain strong, with INR 73 crore in the first half of the year. Now, an update on the reverse merger. Based on the order received from the honorable NCLT, the shareholders have been invited to an EGM that is being convened on the third of November by the bank, as well as by a separate one by Ujjivan Financial Services. Once the merger is approved by the shareholders of both companies, we will proceed with the remaining procedural and regulatory aspects. We expect the merger to be completed during the fourth quarter of this financial year. Here, I'd like to highlight that the merger would bring benefit to both sets of shareholders.
Our outlook, we remain. We maintain our immediate and long-term guidance given earlier. The business is on strong footing to deliver a 25% growth with a sustained ROE of 20%+. To conclude, I would add that business momentum remains strong, and we are confident of establishing Ujjivan as a leading mass market bank. Thank you.
Shall we open the floor for questions? Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking your question. Ladies and gentlemen, we'll wait for a moment while the question queue assembles. A request to all the participants: Please restrict to two questions per participant. If time permit, please come back in the question queue for a follow-up question. The first question is from the line of Suraj Das from Sundaram Mutual Fund. Please go ahead.
Yeah. Hello, sir. Thanks for the opportunity. So just two questions, and the onsite conversation on a good set of numbers.
Suresh, sorry to interrupt you. The audio is not clear. Can you please speak through the handset?
Yeah. Now is it better?
Thank you.
Yeah. Congratulations, sir, on a good set of numbers. Just two questions from my side. First is that if I see the segment-wise yield that you publish on your investor date, so there, if I see the MSE, MSME, and the affordable housing, segmental yield. So that has come down versus FY 2023, versus FY, first half of FY 2024. So sir, any rationale behind that? I mean, while we are in a rising rate, that yield is coming down. Is it more to do with the competition to spark growth? Or is it because of, let us say, slippages coming in, or what could be the rationale here? That is my first question.
Suraj, MSME, actually the business is undergoing transition, so there's hardly to a much disbursement which is going on. So we would say that take this more as an aberration. However, going forward also, what we'll suggest is that, once we are getting more into formal and semi-formal kind of a business, so there the yield will be more or less in the current range where what you're seeing, 12.5. Also, last year, second quarter, there was a good amount of, Fintech partnership which was there, where the yields are very high compared to the normal, 12.5 kind of a yield. So the blended yield was a little higher.
Okay.
And as Mr. Davis mentioned in his opening remarks, we have already entered into two such Fintech partnerships. So once the disbursement starts in Q3, you'll see those yields coming in.
Sure. Understood. On the affordable housing side, I mean, same story, more or less has been.
Affordable housing is more or less flat. There's not much of a reduction going on there.
Okay, sure. Now, if I see the quarterly yield, so last year on average it was something like 12.8. That has come down to, let us say, 12.2 in first quarter and 12.5 in second quarter. So roughly 30 basis point, like, reduction, more or less, up to the 40 basis point. But, okay, understood.
12, 12.5. Not much of a change in affordable housing. It's more or less flat.
Sure, sir. Understood. And sir, while you have given guidance on the FY 24 in your investor deck, if you can just reiterate your medium-term guidance in terms of what kind of credit cost you are building in, in FY, going into FY 25 and 26, and what kind of, you know, ROA you are targeting. Yeah, that would be my second and last question. Thank you so much and all the best.
Suraj, we have not given ROA guidance. We have given a ROE guidance, which is 20%+ for FY 2025-2026. For this year, we have given a ROE guidance of 22%. This year credit cost, we have given less than 100 basis points, and a normalized credit cost, we have given something around 125-150 .
Okay. Sure, sir. Thanks.
Thank you. Next question is on the line of Shailesh Kanani from Centrum Broking. Please go ahead.
Good evening, everybody. Congratulations on the good set of numbers. So my question is on the yield front again. I think last time we had guided there is good amount of repricing, which is going to kick in the asset side. So can you highlight that, because you are a
Shailesh, sorry to interrupt you, but you are losing your audio.
Is this better now?
Slightly.
Yeah. So, my question is with respect to yield. Last time, in the conference call, we had guided that there is good amount of repricing, pending on the asset side, and, sequentially, the yield seems to be on the flattest side. So can we expect the repricing happening in the second half?
So, Shailesh, we mentioned in our opening remarks, Mr. Davis mentioned that 47% of the book is, which is at, March 2023 and post-March 2023 dispersed book. So the balance, 53% of the microbanking book is still to be repriced. 28% will see a 50 basis point repricing, and the balance will see a 100 basis point repricing. This will happen over a period of next 3-4 quarters.
Okay. The second question is with respect to our ATS on the individual lending segment. There is some sequential decline around nearly 11%. So how we should read into that?
So yeah, average ticket size of individual loans is INR 131,000.
Sir, sorry to interrupt you. You're sounding a little distant.
Sorry. Our average ticket size in individual loan in Q1 was INR 130,000, and it is now INR 131,000, so it remains more or less flat.
I, I, I individual lending, I thought it has come down to around INR 100,000. My data is wrong. Okay, fair enough. On the last question on reverse merger, we have extended the timeline by three months. Is that, is my understanding right?
No, the timeline was, best estimate was, the third quarter. Now, the NCLT has asked EGM to be held. EGM is being held on November 3rd. So depending on the outcome meeting, it may even close during third quarter. We're waiting for the NCLT to tell us whether anything further needs to be done or they are happy with the results of the EGM, which will be announced, soon after the November 3rd. So once we know that, we know the exact date. We are hopeful of third quarter, but, if it is for whatever reason, something else is required, we are hoping it will conclude in the fourth quarter but yes, still the stock, we still have two months to go.
Yeah. So, is it safe to assume that at least in the first half of fourth quarter, the reverse merger to be done?
Yeah, I mean, there are some formalities to be completed. We assume that that will be done in the fourth quarter.
Thanks a lot, sir.
Yeah.
Okay, thanks a lot, sir. Best of luck.
Thank you. Next question is from the line of Gautam from GCJ Financial. Please go ahead.
Good evening, everyone.
Good evening, Gautam.
Yeah, I have seen your presentation, but you mentioned your cashless collection is around 37%, which was like 20-odd% last year. And you also mentioned that, you know, since your NPA and reset is going down, so your collection team will get reduced. So, how much saving do you see in employee costs going forward? And with that also, I'm seeing that your employee has gone up, significantly from March to now, well, 3,000? Yeah, 3,000+ employee has gone up. So I want to know your comment on, how that will impact our employee cost, and since our collection team is getting reduced, why our hiring is so, so significant? This is the first question.
So, you know, last year we had a sizable off-role team. That is where our reduction happened, and we've reduced about 300 people from the off-role team. However, as we are building our secured book, we have strengthened our on-role team to handle the secured portfolio. So you would see a marginal increase in the number of on-role employees to handle the secured collections.
Also, I think, we have got new branches which we have opened. So all of those branches have to be staffed. We have, by the end of this financial year, we will be adding from last financial year, about 150 odd branches. So those 150 branches have to be staffed. We have crossed 700 now in overall number, so, that is also adding to the number of staff which we are hiring. In terms of cost, we are aware that, you know, these costs have to be managed, but, it is in line with all our projections. The new branches will of course, bring in new business with a small lag, and that will compensate for the higher costs.
Okay. And, your comments are on the cashless collection reduced to 37%. So, you know, looking at Digital India and, you know, everybody got a mobile and, you know, a lot of multiple vendors to make the cashless payment. Can we reach this 100% by in next two years? What is your comment on that?
We would say, Amen.
Sir, sorry, but you're not audible. You're sounding very distant from the phone.
We haven't reached 100% cashless disbursement. Also, there are few customers who still take cash disbursement. So cashless collection 100% is a very far-fetched aspiration right now. But yes, we are, pushing that as much as we can increase this 37%, we'll do that. We are any which ways, far ahead of the industry and our peers, in terms of pure digital and, customer-induced cashless collection. And this is actually bringing in a lot of efficiency on our for our field staff.
Okay. My second question is, my second question is related to new customer acquisition. The revenue is still INR 2.6 lakh- 2.7 lakh per quarter, which is just not going up, even with the, you know, opening of new branches. Can you just make your remark on it? Because last year we were adding more than INR 3 lakh every quarter, but this last two quarter, we are adding less than INR 3 lakh per quarter. Your comment on that, why we are not able to increase the numbers, even with the new opening branches?
Gautam, we added 5.3 lakh customers in the first half, which is marginally below 3 lakh. So it's not that significant change that has happened. Also last year, the benefit was that we were in a far better situation compared to our peers to add customers, as there were changes on the regulatory front, and we were far better prepared on that front. So and this we mentioned last year also, that we are far ahead of the peers because the policy changes that came in, Ujjivan has been following that since a very long time, and thus we are having that benefit.
And I just like to add that, you also talked about new branches, and as Deepak sir was mentioning, that there is a small lag when you open a branch, and the branches become mature and start generating good business, is something which is for the m ost of the branches are relatively newer, three, four months old. And you will see, you will see these branches also generating business in quarter three and quarter four of this year.
Thank you. Gautam, sorry to interrupt you. I'll request you to come back in the question queue for more follow-up question. Participants, please restrict to two questions per participant. Next question is from Manish Ostwal, from Nirmal Bang. Please go ahead.
Yes, sir. Thank you for the opportunity. I have one question on the balance sheet. So in this quarter, we have seen the sharp rise in the admission book along with the balance.
Can you comment on what we have done in this quarter?
Rajiv, so what we have seen is that, there's a high, deposit growth this quarter, and, second half for us is generally a little, hectic and a far higher disbursement. So it's just that build up for the second half. Nothing much to read on that.
Okay. And, secondly, in terms of margins, Net Interest Margin, we are seeing some dip in the margin because of the cost of funds repricing. So how do you see the margin will in the second half given the stable market rates?
So, Mr. Davis also mentioned in his opening remark that, the cost of fund curve should start to flatten out, and thus, that kind of a pressure on margin should not be there. And also, as we use this, extra money that we have raised for disbursement, that pressure also from the margin should go down. So we expect margins to improve in the second half versus Q2.
Okay, thank you.
Thank you. Next question is from the line of Yash, from Dante Equity. Please go ahead.
Yeah. Hi, hi, good evening. Am I audible?
Yes, you're sounding a little distant. Can you please speak through the headset?
Yeah. Yeah, hi, congratulations on a great set of numbers. I just want to understand the NIM guidance from here onwards. Do you still stick to your 9% NIM guidance? And if yes, is the repricing of that percentage of book that you said is going to get repriced enough for you to kind of reach the 9% blended NIM guidance for H2?
Yash, hi, we are not changing any guidance, right now. So yes, to that extent, we stick to the NIM guidance. We already mentioned to the previous, query also that, second half we expect that, NIM should be better than the Q2 NIMs. First half, we are already at 9%, so nine achieving 9% for the full year, we do not really see that as a major challenge. And as far as the repricing, that, repricing is what we are building into our, NIM improvement.
Also, do you see yourself increasing the gold loan portfolio in from H2 onwards, or is that going to kick in from the next financial year? Because, ideally, a lot of you know, banks your pure size are doing a lot of work with gold finance. So where do we stand with gold finance today?
So, we are doing a lot of work on the Gold Loans. There is a huge demand there, but this financial year you will not see too much of a growth happening in the Gold Loans segment. We will first test the product by offering it to our existing customers, and then we will take on the new customers. So this financial year we'll have very much growth.
Okay. Okay, understood. I'll just come back in with you for more questions. Thank you.
Thank you. Next question is from the line of Ravi. Sorry, Rajiv Mehta from Yes Securities. Please go ahead.
Yeah, hi. Thank you. Congratulations for a very strong, consistent performance. So just two questions from my side. Firstly, is on the insurance income, we see a bump in insurance income. So how much of the bump is structural, and will sustain in the coming quarters, and whether, is, is there any one-off in these numbers?
So, Rajiv, a little bit of a bump up is there in the insurance income to because of the change in the IRDA guidelines. Some of it is because of Q1 arrears that we have received in Q2. But balance is something which is a structural improvement and should sustain. You should see that kind of a number in second half.
Okay. And when you say that kind of a number, can you normalize the number of Q2, I mean, excluding the area?
I'll get back to you on that number.
Sure, sure. And, Deepak, just one more thing on group microfinance portfolio, because the disbursement growth has been, you know, pretty hectic. The actual disbursement number has been very flattish. While we are adding new clients, I can see the ticket sizes have been stable for many, many quarters. So what is happening in the group microfinance portfolio? And when do we see a pickup, I mean, some pickup in disbursement and loan growth in the GLG portfolio?
Yeah. So if you see general trend also, generally first and second quarter is something where we have, different demand in loans, but the demand increasing in the quarter three and quarter four, as far as microfinance typical group loan is concerned. So that is, one reason. Second, in quarter two, you might have also seen that, you know, different part of the country also faced, natural calamities, including flood in various parts of the west and east. That also slowed down a little bit, but things are normal now in terms of business and collection. And we'll see, better, you know, pickup in quarter three and quarter four, as it is natural, we see it every year, that business will pick up and, we have higher, disbursement happening in quarter three and quarter four.
Mm-hmm. Okay. Thank you. Thanks for the clarification. That's it.
Thank you. Next question is from the line of Pritesh, from DAM Capital Advisors. Please go ahead.
Hi. One question was on when you have entered Andhra Pradesh this quarter. So what are the plans there? A lot of entities also want to enter that territory. How will it be different this time around?
So we have, yes, entered Andhra Pradesh with a soft launch, and we've just started our, so it's mainly going to be liability led, and based on the potential, we will also see if we can do other retail asset businesses. Microbanking is not in the picture at the moment.
Great. Okay. Second was on the margin side.
So the 9% guidance was quite clear, but as we move along the in next year and we expect MSME and affordable housing to share to increase meaningfully, how do you see NIMs panning out, you know, next year after this second half increase, which you expect?
Well, the NIMs, I think, you know, while the lending rates or the yield on the portfolio may be slightly lower because that's a secured portfolio. But we see other sources like CASA and I mean CA especially, coming into play as far as the MSME portfolio is concerned. So that should offset some of the decline that we are seeing in the overall things to keep NIM. We expect that as the interest rates are coming down, that will also help as we go forward. So we expect NIM to continue to be at a healthy level next year as well.
Yeah, Pritesh, I am not giving any, number specific guidance for, next two years, apart from what we have already given. Got it. Thank you so much.
Thank you. Next question is from the line of Ashlesh, from Kotak Securities. Please go ahead.
Hi, team. Good evening. Firstly, on West Bengal, if I look at the EM growth that we have had there, it's been around 28 odd percent over the last year. However, at the same time, if I look at the microbanking portfolio for the entire industry in that state, in West Bengal, that has been shrinking. So it looks like we are gaining some market share in the state. Can you shed some light on who is losing market share over there?
So I would not like to take name, but yeah, we know that, you know, industry has been facing issues specific to certain organisations, both in West Bengal and Assam. If you look at our growth, our growth has been constant for the last few quarters. So it's a result of some of the peers not being very active because of issues, various issues that is happening. Too, it is very internal to the organisation, but we are gaining market share pan-India in all the new states we are working in the last 4-5 quarters after the pandemic. That is something which has happened, you know, as we are growing much better than the average industry.
Okay. Just one follow-up on that one. All these new customers which we are acquiring in West Bengal, would you say that they are all, you know, customers who have never been NPA?
Yes. So, you know, we do filtering out of all the customers who've had track records. You know, it's all based on bureau. So all customers who've had NPA track records are naturally phased out.
Okay, perfect. Thank you, sir.
Thank you. Next question is from the line of Anand from Soar Wealth Managers. Please go ahead.
Yeah, hi. Thanks. Thanks for the opportunity. Sir, I wanted to check about the bad debt recovery. How much more bad debt recovery we expect from the write-off book?
The bad debt recovery you would see in the first half has a small part of money which came in from Assam also. That was a one-off that we got, that was about INR 3 odd crores. Apart from that, you know, we said in the beginning of the year that we will try and do about INR 100 crores of bad debt recovery. We seem to be on course to do that for the remaining part of the year.
Okay. So, sir, the question was, post this INR 100 crore, do you expect this to continue also in the next year?
You know, there will be bad debt recovery, not to the extent that we currently see, because obviously the book would have aged by a year more than what we currently have. So the, you know, let's say, if you are looking at what percentage, so if it's, let's say, X percentage today, it would be something lower than that next year.
Understood.
So the rate of recovery will not be the same. So therefore, there will be a reduction in absolute numbers as well.
Okay, thanks. So the second question is with respect to slippage. The gross and net slippage, are they coming from the same pool or they are coming from a different pool? So, one is the product segment, and second is the portfolio, whether it is an old portfolio which is getting recovered and the new portfolio is getting into the gross NPA.
No, so our, you know, the book as it ages. So today, you know, the post-COVID book has very, very low slippages, and the rate of slippage is also going down. So you would see that on a percentage basis, we've been at about 50 bits consistently for the last five quarters. So this is a natural thing to happen as the book starts to age. So there will be some amount of slippages, but I would say that it will be in the same range as what we have currently.
So the current INR 216 crore slippage for the six months, it has come from the current book itself, obviously, but the recovery is coming from which book? Old book, pre-COVID book or
restructured books, sir?
No. So if you look at it this way, then, you know, the micro banking book starts slippages only after 15 MOB. In the first 12-15 MOB, there is hardly any slippages. It starts only after 15 MOB. In housing and MSME, it typically starts at 18-24 MOB. So you could say that the slippages that you see are largely representative of the 15 and 18, 24 for unsecured and secured assets.
Okay, thanks. Thanks for the clarification.
Thank you. Next question is from the line of Darpin Shah from Haitong Securities. Please go ahead.
Yeah, hi, thanks for the opportunity. Congratulations on good set of numbers. Just one question. You know, a few days back, there was a media article saying that the regulator is unhappy regarding the pricing offered by MFI lenders, including banks and non-banks. Any comment would you like to make on this, or you have heard anything from the regulator about this?
Well, I mean, we don't want to comment on observations of the regulator. All what I can say is that, you know, ever since the interest rate hike cycle started, we have seen 2.5% increase in the repo rate, but our rate increase for our micro banking customers has been only 1% or 100 basis points. So net-net, you know, there's been some benefit which has been passed or not, hike has not fully been passed on. We have absorbed a lot of the hike, which is why you're seeing the, cost of funds going up slightly and net interest margin being squeezed. So all in all, you know, you know, it is something that, we have understood as part of financial inclusion, and we have built it into our financial model.
Okay, thanks. Just one last question related to this only. For our MFI customers, do we have a policy of graded pricing?
Yes, yes. We have a risk-based pricing for both group loan as well as individual loan in micro finance, where, based on the customer's score, you know, end use and score, we have differential interest rates.
Okay, great. Thanks a lot for this. Thank you.
Thank you. Next question is on the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Good evening, sir, and congratulations on a good set of numbers.
Sarvesh, can you please speak little louder? Your voice is coming little low.
Am I audible now?
Yes.
Yeah. So the first question is on the credit cost in this quarter, given that our NPAs have come back down and the floating provisions haven't gone up as well. So is it possible to give a breakup of how this INR 47-odd crore was caused?
You're talking about product-wise breakup?
Yeah, product-wise breakup, or I mean, the reason we are need, is it because of the movement in the buckets or how have you accounted for this?
So, you know, INR 47 crore is about 17-18 bits. I, I would say about 20 bits, less than that. So that's, that's a standard, you know, grade cost that we will see, because our guidance was less than 100 bits. So currently, for this quarter, the number would be in the range of 17-18 bits.
Do you expect this to be the normalized sort of, range going forward also?
So we would. You know, we said that we will, you know, maintain credit cost for the year within 100 basis points. So what you see in Q2 is about 17-18 basis points, which is largely in line with the estimates and, you know, the way we have, we have sequentially put the provision, the way we have planned for the provisions. So this is largely in line with the plan.
Understood. And on the impact of the past collection, so, you know, is it possible to give the impact on the P&L, because of the past or the legacy collection that we are doing from the write-off books for H1 and this quarter?
Write-off book, we have done about INR 71 crore in H1. This includes about INR 3 crore, which we got from Assam as part of the relief, relief package. Excluding that, it was about INR 68 crore for the first half.
Is it the collection or the impact on the P&L? I'm asking about the P&L impact specifically.
Since these are writeback accounts, every amount which is collected is actually part of the P&L.
Okay, understood. And, on the ROE guidance, so given that you've already done 29%, for the H1, so why is it set at 22%+, I mean, given that even if you do 25 for the remaining half, you should end with 27% for the full year?
Leave some upside for us as well.
Understood. Understood. And then finally, one question on the deposit strategy. So, you know, I mean, we are seeing across all SFBs and almost all banks. So Q-o-Q CASA has been relatively bad only, but in your case, I think we have seen healthy accretion. So, is it mostly because of the higher interest rates that we are offering, or is it because you are seeing more customers getting added to your CASA pool? So how is that getting driven and that trend is somewhat different from the industry?
So we have done well on the CASA side and have a quarter-on-quarter growth of around 7%. This is also because of our attention to granular retail customers and also strategy of. So we've also introduced a new product, the Maxima in the CA and SA category. Also our brand campaign has helped us a lot, I mean, it has created customer awareness and visibility. We've also made some people additions in the branches, like introduced relationship managers, and we've also been able to deepen our relationship with the customers and also acquire new customers. So all these put together, and we have a branch-wide strategy.
So this is helping us in getting deeper into the areas that we are working in, and it's helping us build a CASA book.
Understood. Thank you, and all the best.
Thank you.
Thank you. Next question is from the line of Kanwaljit Singh from Balaji Finvestments. Please go ahead.
Good evening, and congratulations on good set of numbers. My first question is regarding the three-in-one account that you have started opening with SMC Global and which is a brokerage firm. So what is the traction you have received on that? Second, you are already doing bank insurance. Are there any other measures the company is taking to enhance the other income?
The SMC Global relationship was very recent, so we have not started acting on it. We are doing a lot of back-end activities, and once that is stable, then we will start getting deposits from there and the three-in-one accounts will start activating from there. But at the moment, this relationship, there's a lot of work that is being done at the back end. We have not started seeing the results of it yet.
So, the bank is acting as an authorized partner for SMC, or it is just an account that is getting linked? So as an authorized partner, you get a higher portion of income.
Yeah. So it
Our customer.
It's for our customers that we are opening these accounts.
Okay, so you are acting as an authorized partner for SMC, means a type of a sub-broker?
No, I mean, these are, these are our customers. We are giving them an opportunity to get it done through the SMC Global relationship.
Okay. So there is a sharing of fee with SMC?
Yes.
The brokerage? Okay. Okay. The second question is, regarding the advertisement expenditure that company might have incurred in last quarter. Are we going to see a similar run rate on advertisement?
The brand campaign cost is largely taken in, so to that extent, the marketing cost should reduce.
Okay. Thank you very much. Thank you.
Thank you. Next question is from the line of Gautam from GCJ Financial Advisors. Please go ahead.
Yeah. Thanks for giving the opportunity again. Sir.
Sorry, can't hear. Your voice is coming little muffled. Can you please speak through the handset?
Yeah. Thanks for the opportunity again. Sir, this question in regards to your reverse merger. When it happens, what is the impact on the book value in terms of net worth, overall net worth? Will it be diluted or, you know, accretive and per se book value also? Can you guide us on that?
Also, yeah, sure. There will be around 400 and a little more than INR 400 crore of addition to the equity net worth, and around INR 2.82 crores of shares will get reduced from the total base. On the book value side, this should add to the book value by around INR 2.4 or a little more than that.
Okay. Thank you so much.
Thank you. Next question is from the line of Ayush Agarwal, individual investor. Please go ahead.
So I have two questions. One was regarding your current and savings account numbers. I've noticed that current accounts make up less than 10% of your total CASA. And I was wondering if this is, this is because you're not being able to attract a lot of businesses to open accounts with you, or is there another reason?
This is an industry-wide problem, and it is not just contained to Ujjivan. We just, you know, in the, in the last quarter, we've been able to introduce a lot of product variants, mainly, you know, the Maxima and the Privilege, Privilege, accounts. We have seen the deposits coming through that. The CASA actually is increasing there. This quarter, we should see some good results on the CA side and also on the SA side. We also have introduced a separate channel in place to help us fast track the acquisition.
My second question is regarding what happens after the merger. I had read a news report where, I believe, the MD was saying that the you, you are planning to start to get a full banking license from the small finance license that you have right now. Is that still in the card?
Yeah, I think, you know, that to clarify that, I said that the board would consider the application for a universal bank license, and that stands. So in the next financial year, assuming that the reverse merger is completed in this financial year, the board would deliberate on what are the next steps, and the universal bank license is one of the options.
All right. These are the two questions. Thank you.
Thank you very much. As there are no further questions, I now hand the conference over to Mr. Davis for closing comments.
Well, I'd like to thank all, all the participants who have been on the call, for all the good questions that you have asked and made us think and respond, but it's been very good for these questions to come through. I'd like to thank IIFL for organising this call, and look forward to hearing and seeing you in the next call, which is three months away from now. Thank you.
Thank you very much. On behalf of IIFL Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.