Thank you, Sumit. Good evening, everyone.

I welcome you all to the earnings conference call of Arman Financial Services to discuss the Q1 FY27 financial performance and business update. Today, we have Mr.

Aalok Patel, Vice Chairman and Managing Director, Mr. Vivek Modi, Executive Director and Group CFO.

I will now hand over the call to Mr. Aalok Patel for his opening remarks, post which we can open the forum for question and answer.

Over to you, sir.

Thank you, Shreepal, and a very good afternoon to everybody. Thanks to everyone for joining us today for the Arman Financial Services Q1 FY27 earnings conference call.

As Shreepal mentioned, I'm joined on the call by Mr. Vivek Modi, our ED and Group CFO, along with the Investor Relationship team.

I hope all of you have had an opportunity to review our financial results, the investor presentation, and also the press release. Let me start first with the operating environment.

Q1 of FY27 has been an encouraging start to the year, and more importantly, the improvement that we started seeing during the second half of FY26 has continued into this quarter. Collection trends have remained stable, fresh delinquencies have moderated, and borrower behavior has continued to improve across most of our operating geographies.

That said, I would still hesitate to say that the sector has completely normalized. We are clearly operating from a much stronger footing than we were a year ago, but there continues to be uncertainties in the broader economy, and we remain watchful.

Volumes have been a bit lower than expected in Q1, but that is not unusual in the first quarter of the fiscal year, particularly given our continued emphasis on quality over quantity. I made a point on our previous call which I think continues to remain relevant: the improvement that we are seeing should not necessarily be interpreted to mean that the ground-level environment has suddenly become easy.

A meaningful part of the improvement is because we are selecting better, monitoring better, and also collecting better. That is obviously encouraging, but the macroeconomic environment continues to remain complicated.

For us, the important thing is not to conclude that the cycle is behind us and simply go back to business as usual. At the same time, let me also say that cycles come and go, and they are part of the business that we have chosen.

The important thing is to learn, monitor, adapt, and to move forward. Against this backdrop, I am pleased to share that our consolidated AUM reached a record high of ₹2,925 crore as of June '26, representing a growth of 36% year-on-year.

Consolidated disbursements during the quarter were ₹686 crore, up 76% year-on-year, and represented our highest ever first quarter disbursements. Despite the strong AUM, I want to make it clear that it does not represent a change in our risk posture.

Our rejection rates continue to remain relatively high, and we are comfortable with that. We continue to see healthy traction in our individual loan portfolio, which now accounts for 33% of our overall book and is becoming an increasingly important part of our microfinance business.

The objective here is not simply to increase ticket size or move away from traditional JLG-based group lending. The objective is to move progressively towards more individualized credit assessment where we understand the customer's household cash flow, credit behavior, and repayment capacity more closely and structure the loan accordingly.

As this portfolio scales, the underwriting architecture becomes even more important. Wherever applicable, we are increasingly relying on, of course, credit history and bureau behavior, but also customer-level cash flow assessment and digital repayment mechanisms such as UPI mandates and e-NACH.

We believe that gives us a much better understanding of the individual borrower than relying purely on group behaviors or standardized one-size-fits-all credit filters. Overall collection efficiency for Q1 stood at 96.6%, and we saw a steady improvement throughout the quarter.

By June, overall collection efficiency had improved further, which gives us comfort on the behavior of the more recently originated portfolio. Our asset quality has continued to improve over the past four quarters, with consolidated GNPA now at 2.76% and NNPA improving to 0.84%.

Early stage delinquencies have also remained largely stable at approximately 99.5% 0 DPD flow forwards. One of the biggest changes that we have made over the last few quarters have been to bring greater independence and accountability into our credit and collection processes.

We have strengthened the credit function at the point of origination and separately built dedicated collection teams. This has helped us become more disciplined in borrower selection and bring greater focus to collections.

When we introduced these changes, they came with a meaningful increase in operating cost. We had said at the time that the asset quality had to take priority over near-term operating expenses.

I think we are now beginning to see the other side of that investment. The new structure is now pretty well embedded across the organization, and we are seeing better accountability, sharper credit decisions, and more focused collection execution.

At the same time, as the portfolio has started growing again, our operating cost ratios are beginning to improve as well. Apart from improving asset quality, the independent credit structure has also given us greater confidence to scale the individual loan portfolios.

Our consolidated pre-provisioning operating profit increased to ₹77 crore during the quarter from ₹59 crore in Q4 FY26. Cost to income improved meaningfully to 44.3% from 51.7% in the previous quarter.

Of course, there's still considerable work to be done on operating efficiency. We are not exactly where we ultimately want to be, particularly in the microfinance business, but the direction is of course encouraging.

Our objective remains to bring operating costs down through a combination of portfolio scale, productivity improvements, and technology, without reversing the credit and recovery controls that have helped improve the quality of the book. We have also continued to strengthen portfolio protection through CGFMU scheme.

As of 30th June 2026, approximately 94% of the eligible microfinance portfolio was covered under the scheme. That said, I also want to mention that we do not view CGFMU as a substitute for underwriting.

The first line of defense always remains customer selection and collections. The guarantee provides an additional layer of protection against tail-end events, and over time should make credit losses more manageable and more predictable through cycles.

On the consolidated financial performance, gross total income for the quarter stood at ₹202 crore, up 34% year-on-year and 15% sequentially. Net total income increased to ₹138 crore, and PPOP, as I mentioned earlier, was ₹77 crore.

Provisions and write-off for the quarter were ₹20 crore. Profit after tax stood at 50—excuse me, ₹45 crore, compared with a loss of ₹15 crore in Q1 FY26 and ₹41 crore in Q4 FY26.

Apart from the profit numbers, it is encouraging to see that profitability has improved alongside AUM growth, better collections, low fresh delinquencies, improving asset quality, and some early improvements in operating efficiency. That combination is much healthier than a recovery driven only by lower provisionings.

Our consolidated NIM remained healthy at 17.4%, while annualized return on average AUM was 6.4%. Return on equity was 18.9% for the quarter, annualized of course.

On capital and liquidity, we remain comfortably positioned. Capital adequacy stood at 33.6% for Arman standalone and 38.8% for Namra Finance.

As of June 2026, our consolidated shareholders' equity was ₹979 crore. We also maintain a healthy liquidity position with ₹286 crore across cash and bank balances, liquid investments, and undrawn CC limits.

In addition, we have ₹335 crore of undrawn sanctions from existing lenders, providing us with sufficient headroom to support our funding requirement and growth plans. Moving on to the key financial and operational performance of Namra standalone.

AUM for the quarter stood at ₹758 crore for Arman, registering a 26% year-on-year and 4% sequential growth. Disbursements during the quarter improved to ₹156 crore, with MSME segment driving the growth.

Gross total income for the quarter stood at ₹66 crore, up 30% year-on-year, while PPOP stood at ₹24 crore. Profitability also improved, with PAT at ₹15 crore, up 17% year-on-year and 48% quarter-on-quarter.

Moving on to the key financial and operational performance of Namra Finance, our microfinance subsidiary. Namra AUM grew 39% year-on-year and 8% sequentially to ₹2,167 crore as of June 2026.

Disbursements during the quarter stood at ₹530 crore. This growth also reflected in operating performance.

Gross total income for the quarter stood at ₹138 crore, compared with ₹101 crore in Q1 FY26, registering a 35% year-on-year growth. PPOP increased ₹52 crore, up 64% year-on-year and 26% quarter-on-quarter.

The improvement in operating performance, along with lower provisions, translated into a meaningful improvement in profitability, with PAT at ₹30 crore compared to a loss of ₹28 crore in Q1 FY26. We also saw an improvement in the underlying economics of the portfolio.

NIM improved to 15.37% during the quarter, supported by better yields and growing share of individual loans in portfolio mix. On the asset quality, GNPA has improved significantly from its peak of 3.8% to 2.59% currently.

This is encouraging and reflects the steady improvement we are seeing in collection and repayment behavior across the portfolio. Overall performance across both businesses remain healthy, with stable growth, improving profitability, and continued improvement in the portfolio quality.

Looking ahead to the remainder of FY27, our approach remains largely unchanged. We want to grow, but we want that growth to be careful, calibrated, and supported by quality of the underlying portfolio.

We will continue to recalibrate growth based on what we see in collections, early delinquency trends, borrower cash flows, and of course, overall macroeconomic conditions. There have been geopolitical uncertainties, some of which we discussed last quarter, disruptions arising from the situation in West Asia and weather-related uncertainties during the quarter.

Given this operating environment, I had actually expected to see some marginal softening in the repayment behavior. Thankfully, so far, this has not shown up materially in our numbers.

Of course, I would not conclude from this that there'll be no impact, because macro events can sometimes affect our customer segments with a lag, but at this stage, the portfolio has held up better than I had expected, and we will continue to monitor the situation very closely over the coming quarters. Overall, I believe we have entered FY27 from a considerably stronger position than we were 12 months ago.

Importantly, that strength is not just reflected in asset quality or profitability; we have also come through this cycle with a more disciplined underwriting framework, a stronger collections architecture, and better understanding of where we need to continue improving as an organization. Our priorities therefore remain very straightforward: protect asset quality, maintain underwriting discipline, improve operating efficiency, grow responsibly, and continue building a sustainable lending franchise.

With that, thank you, and I would like to open the floor for questions.

Hi. Am I audible?

Yes.

Hi. Firstly, congratulations to the team on the results.

Aalok, in your opening remarks you mentioned that things are not really behind us in terms of the cycle, but if I were to take a devil's advocate position here, it's actually not reflecting in the data which we presented or even your listed peers have published on the collection side, on the X-bucket numbers, on the PAR numbers. What is it that is making you still cautious?

Is it the scar of the last cycle or is there some data points which keeps you worried at night? Just wanted to pick up your thoughts on this one first.

Surprisingly, all the data points are favorable. Perhaps it is a little bit of PTSD.

I have no data to back it, just my own observations on the field level, that as far as income growth which you would expect to see in the rural has not been happening for a while, inflation is increasing, jobs are there but not the jobs that people want. Those kinds of factors kind of, I don't know, judgmentally, I wouldn't say scare me, but of course concern me slightly.

Apart from that, the data is favorable, the numbers are favorable, everything is good. I have no reason to be pessimistic at all.

This is just something that we have to keep in the back of our head and be careful, that's all.

Fair. Just on the asset quality again, you said asset quality will take precedence over the near-term investments in OPEX.

You're also talking about recalibrated growth, you want to focus on the quality of the growth rather than the volumes, the rejection rates continue to be high. Just in this backdrop, how do you envisage this all plays out over next two to three years?

What is the kind of expectation from a credit cost performance which you would expect, saying that this was all worth it in the end? What is that goal on the credit cost which you expect out of the entire shift of focus towards better quality book, if you could just comment?

I have commented on things like that and I have always really been wrong on it, because when cycles shift, it's never like, oh, you go from 2% credit cost to 3% and you're like, okay, another 1%, who cares, right? My balance sheet supports it, and why should I sacrifice growth today in exchange for maybe a 1% better credit cost a year down the road?

Unfortunately, it does not work like that. When things go out of control, they go out of control very, very quickly.

That is, we've made a lot of mistakes, but we are quick learners in that sense. Again, maybe I sounded more pessimistic than I should have in hindsight in my opening remarks.

I'm not talking about growth opportunities being there but being scared. I'm not scared, I'm still confident.

It's just I don't want the same euphoria that happened post-COVID where everyone including myself went a little crazy and just started disbursing left and right. That's all I was trying to communicate.

Fair. Last question before I come back in the queue is on the standalone book, on the MSME side.

Now that most of these MFI players are also talking about individual loans, talking about cash flow-based underwriting, do you see this segment become crowded over time, and probably people will start losing their credit filters to chase growth? Just how are you seeing the competitive intensity on that side of the business?

There are good players doing good business right now. I don't think anybody is going crazy in terms of sacrificing quality in exchange for growth, at least not yet.

Of course, people have short memories, 6 months, 12 months down the road. Some pressure, investor, promoter pressure, whatever it may be, will take over and people will start saying that, well, that was a year ago, that was 2 years ago, things have changed.

Let's just tweak this filter, let's reduce the scoring here. What do we gain?

What do we lose? Those kinds of decisions are very common, and I'm not immune to it myself.

I think it's basic human behavior that life goes on sometimes and you forget the bad stuff, and then you start becoming slightly more optimistic. By the time the next cycle hits, hopefully you are not in a bad shape.

Perfect. Thank you, Aalok, for your thoughts.

Best of luck to the team.

Thank you.

Thanks for the opportunity, and congratulations on a good set of numbers, sir. I just had one question.

Just on the recovery on write-offs and bad debts, how are we seeing that trending, because most of the listed peers have also recorded good recoveries in their portfolio? I just wanted to understand how is it for us and how will it be going forward?

Bad debts recovery? Vivek, you have

Karthik, when you talk of bad debts recovery, it's been pretty encouraging here as well. To kind of give you a slightly detailed answer, the recent write-offs that we've seen in the last, let's say, 24 months include about ₹185 crore of write-off pool that we've done an ARC transaction on.

On these pools, we sold about ₹185 crore of pool under an ARC in March '25. There we've seen a recovery which is almost close to about 10%, and the overall recoveries in the write-off recovery has been about ₹34 crore.

Which is on a comparative basis seems to be a good recovery, and we're still not over with it. There is a good period of another at least 12 to 18 months left before these accounts kind of completely go stale.

Got it, sir. Sir, my second question is on this liquidity.

Sir, since last year, we have been a little high on liquidity because for obvious reasons. We just wanted to understand when will you start having lower liquidity and moving into a more disbursement phase?

Are you eyeing that phase now, or you still want to understand the market dynamics better and then before you move to that zone?

I think our liquidity is already sufficiently low. I would not necessarily call our liquidity high.

Probably on average we are maintaining what, Vivek, about ₹300 crore?

Yes, which is

about 1.5 months of repayment obligations, and we're maintaining one 1 month's disbursement requirement, to say. Which is, I think, a standard requirement that we've been following.

I would not necessarily call our current liquidity position as high. I would say it is probably not low either.

It's probably Goldilocks, just right.

Got it, sir. That's it from my side.

Thanks so much, and all the very best.

Hi. Am I audible?

Great. Thank you so much for the opportunity.

Before I ask the question, I'll just give some context on three points. On yield, one of the larger peers, they are weighing about a 50 basis point cut in the lending rate this particular year, and another peer, they have stopped raising rates and they may pass those gains back to the customers.

This is on yield. On funding, your current incremental borrowing cost is at 11.7%, and that has been coming down from the 12% odd levels, but purely on the level at which you borrow is higher versus the peers, of course, it also depends on the size of the book.

The third point is your OPEX. If I annualize your OPEX, it comes to about 8.5% versus the target that you're aiming for at about 7% for FY27.

With that context in mind, at about 25% to 30% AUM growth that you have guided, what is the FY27 outlook on each of those three points which I earlier mentioned, which was yield, your funding cost, and your OPEX? According to you, which is the one that will contribute the most towards profitability?

Right now, which one do you see has the most lever? Just one more thing on the cost front is, are you focusing more on

Wait. Stop.

I've already forgotten the first two-thirds of your question. Let's go one step at a time.

What was your first question?

Do we envisage reducing the coupons on the ROIs in the coming

Why?

His contention is that some of the larger ones have kind of hinted that they might do it now.

If I understood your question, listen, there are largely four components in doing this business: there is interest income, interest expense, you have your OPEX, and your credit cost, right? I think you are asking about all four at this point.

Specifically on the yields, I think the only thing that really protects you is your top line when everything hits the fan. Already we are being watched by as many people as possible to keep the rates reasonable, specifically RBI, and we are always justifying what rates we are charging and how much we are charging.

Now, the other side of the coin is, as far as the customers, are we losing customers because we are charging too high? Is it affordable to the customer?

These are all kinds of questions that we have to consider. If we reach a point where we are making too much money, I'm okay with reducing rates, but I've not given it much thought at this point.

That's I think the first line item. The second, I think you are talking about interest expense, the debt cost.

Yes, that has been marginally coming down. I think if you're comparing to the peers, a lot of it has a function of size as well.

That being said, it's a constant endeavor. Obviously, we possibly could do better in reducing it even further.

I believe we are approaching rating agencies and stuff at this point also for upgrades, hopefully that should meaningfully reduce it by, I don't know, Vivek, 20-30 bps at least.

Surely, that's already

on the plate. The important thing is that while everybody in the industry, minus let's say the top 10 players, were facing issues related to liquidity, I cannot recall the last time that we needed money and we couldn't find it, right?

Reducing interest cost obviously becomes the biggest endeavor. Now as far as OPEX, I've already mentioned in previous meetings and in my opening remarks that, yes, it is high, and it's high for a reason.

We have added the BCM structure, we have separated collection team, and over and above that, we are also subscribing to CGFMU. I think that number that is at 8% was probably closer to 9% last quarter, and it'll probably reduce further in the next quarter as well.

OPEX is not increasing as fast as AUM, from a percentage standpoint, that should start coming down further in the coming quarters. The goal is to get it down to 7%, which is what I had stated earlier, I don't know if it was one quarter or two quarters ago, by the end of March.

We are well on track to do that. I think what was his third point on

Number

three,

are we missing out something beyond that?

Right. Thank you for the clarification.

When I look at the MSME PAR levels, I'm talking 31 to 90, so that has marginally moved up from 0.9 from 0.7 to 0.9. If I take a look at also LAP, the GNPA has doubled.

Considering that there's an LTV of 65% maximum, my question to you is, has there something seasonally changed in terms of competition or in terms of the quality of the collateral?

There are some issues going on in Telangana. Am I correct?

That would be the largest

Across it's been consistent, but Telangana we're seeing a bit of slightly higher stress, which is again, I think, sectoral. I think everybody's been reporting some concern in Telangana.

That's why you see about 10-15 basis of kind of upward.

I'm sure there are other reasons also.

There are other reasons,

but

Right. Any particular segments or pockets apart from states, where you see there is too much exuberance rather than real demand, or any initial signs that you see upfront?

None that I can think of on the spot.

Sure. Thank you so much, and wishing you all the best.

Thank you.

Hi, this is Sonal Minhas. Am I audible?

Hi. Go ahead, please.

Yeah. My first question was with regard to the provisions that we have, if we see them quarter-on-quarter, we've increased the provisions from 17.2 to 19.5.

Just wanted to understand some bit of subjective commentary on where some extra provisioning has been done on a quarter-on-quarter basis, that's one. The second question is that just like other NBFCs and other institutions, if you can add a chart or a table on your gross NPA addition, slippage, and a similar schedule for provisions, that'll just help us round this off 360 degree.

Thanks.

Provisions have increased by ₹3 crore?

You're talking of provision increasing in Arman in absolute terms?

Provisions at the consolidated level have gone up from 17.2 to 19.5. Just wanted to understand that.

Yeah.

Now you're talking of a P&L number, right?

Yes,

yes, yes. That is primarily, I think,

the portfolio would have grown,

that's why.

The portfolio has grown.

Okay. Is it linked to increase in the LAP NPA for the LAP portfolio?

No, in fact, NPAs have kind of come down. Overall the portfolio has expanded by about ₹200 crore in microfinance and about ₹100 crore in Arman standalone, so as the portfolio grows, just that absolute number would go up.

Okay. If you could just take care of the request on the schedule or disclosure for NPAs as well as provisions, that'll just help us understand the maths in a better way.

You want the disclosure on what exactly? A table on how the NPA was arrived?

Opening, closing of NPAs and opening, closing of provisions. Yeah.

All

right. Sure, we'll try to build it in.

Vivek, he's talking about the total provisions and write-offs on the P&L number, not the balance sheet number.

The balance sheet number as well, because the balance sheet number leads to the P&L number basically. See,

as far as Q4 of '26, which is what you are seeing, that was substantially lower because we had over-provided during the rest of it. For the full year, it was ₹150 crore.

It's

not really comparable. Okay.

The 17.2 and the 19.5 he was mentioning, that's a P&L

number

as in provisions and write-offs. There was too much stuff going on last year, it's not really very comparable from Q4 to Q1.

Okay. All right.

Thank you.

Sorry, I was a little confused. I was thinking of the balance sheet numbers.

All right. Thank you.

Next question, please.

Hi, sir. Thank you for the opportunity, and congratulations on a good set of numbers.

Sir, I had two questions. One is on how were the July collection trends?

Did you see any stress in any of the books as such?

Marginally there were issues related to rain in Gujarat and stuff like that, but that has subsequently been covered up. It's hard to assess, to be honest, with basis point differences.

Was July slightly lower than June? Yes, marginally, in terms of repayment rates on a static pool basis and in 0 DPD, I believe there was a 3 basis

difference,

but as two as 3 basis points can be just a blip or

Due to a downpour in south Gujarat, similarly in north UP and parts of Bihar. Those are more seasonal in nature, and I think that has been taken care of.

Yeah. Nothing that concerns me immediately.

Okay. Second is on credit cost.

Are we still maintaining the guidance at 3% or planning to improve it further for the rest of the year?

Did we give such a guidance?

No, we did say that we expect the credit cost to remain about 3% to 3.5% going forward. I think that's not a guidance that we'd like to say that way, but then

If you probably include the cost of the CGFMU, then yes, probably 3% sounds about right, maybe 2.5% if we're lucky. Let's see how the year progresses.

No, I'm not sure. I have no idea, to be honest.

Sir.

Hi, sir. Thank you for the opportunity, and really congratulations on a great set of numbers.

My question is broadly on the industry perspective. We are seeing players diversifying away from JLG-based lending to more sorts of individual lending.

There is a talk that JLG model going to become unsustainable. I just wanted your commentary on how you are seeing this JLG lending and what is the ground level for Arman?

In the next 2-3 years, how do you see this JLG book split versus your more individual split? That is my question.

As far as JLG, I have made my feelings quite clear for I think at least the last eight odd quarters, maybe six quarters. JLG, yes, I wouldn't use the term broken and stuff, but earlier it used to provide sufficient risk mitigation where you could replace it with individualized credit assessment, if that kind of makes sense.

Today, with changing scenarios, with multiple cycles, with easy availability, with multiple players, most importantly, culture of the emerging new generations and stuff like that, it was no longer providing the kind of risk mitigation that we were used to, let's say, 10 years ago. Therefore it's okay to still do group-based lending, it still offers some advantage, especially in terms of OPEX if you are dependent on cash collections, because instead of going to one place to collect from one customer, you can go to one place and collect from multiple customers.

There are definitely advantages to still not completely dismiss JLG. In my humble opinion, and there are many in my peer groups that are more experienced who disagree with me also, and nothing wrong with that, that using JLG and not doing individualized credit assessment or relying too much on JLG's ability to mitigate risk is not sufficient in today's day and age.

My opinion is that you have to do an individualized credit assessment. What I mean by that is that you cannot have a one-size-fits-all credit policy that under ₹2 lakh is a good customer and over ₹2 lakh outstanding is a bad customer and ₹12,500 is the magic EMI that he should be servicing, stuff like that, one-size-fits-all.

Unfortunately, the business has become more complicated, and therefore just like any other lending product, each customer will require their own assessment. I hope that sufficiently answers your question.

I think I was going all over the place.

Yes. Thank you, sir.

That's it from my side. Thank you.

Hi, Aalok. Am I audible?

Yes. Hi, Shreenath.

Yeah. Congratulations on the fantastic set of numbers.

Me and Ronak are going to take you for a drink to cheer you up after that opening statement, huh? Generally wanted to get a feel that last time in 2023 towards the end, we did about ₹530 crore of disbursements with something like 275 to 280 branches.

Now we're at 400, 425 branches. With this current infrastructure and whatever extra people we have put in for credit, do you think our current infrastructure can take us to ₹700-₹750 crore kind of disbursement whenever that happens, but just do we have the infrastructure to support that kind of scale?

750 per month or per quarter?

Per quarter.

Per quarter? Yeah, 100%.

This is more than sufficient. As I mentioned that Q1 was slightly slower on the volume than I expected, but that's okay.

That's not really unexpected. With everything kind of being deleveraged and stuff like that, I was expecting slightly higher volumes.

That's fine. You cannot force these things.

Obviously, the team has also been more on collection mode than growth mode for the past 2 years. That will come back in the next couple of quarters.

I'm not too worried about that. I think the current infrastructure we have already done it.

In Q4, Q4 was

700 plus, I think.

No, I only spoke about microfinance, not the total business. Just microfinance.

Yeah. Shreenath, what

Just microfinance was how much?

Quarter four microfinance alone

638 crore. Yeah.

630. That was CGFMU.

Oh. The R&R was for CGFMU.

Yeah. Yeah.

All right. Yeah.

It's definitely doable.

Got it. We have the kind of infrastructure to support growth.

It's just about how credit and how the profiles flow to you and how comfortable you feel. Is that a fair understanding?

That is, I would say, a fair understanding, yes.

Perfect. Can you spend a little time on the

One second. One second.

Hold on,

Shreenath. Just to correct the number, I think slide 30 on the presentation itself, disbursement for microfinance Namra for quarter four was ₹738 crore.

Oh, oops. My error in my model.

Cool.

No problem. One more drink for that.

Sure. If we can broadly give some understanding of how the LAP business is doing, geographical expansion, credit experience, the experience of dealing with these loan papers, the hypothecation, and also by now I would have felt that this business would have reached a ₹40-₹50 crore disbursement per quarter.

Where are we, how do you assess our progress in the product? Complete 360 on this product would be great,

Aalok. It's not a bad product.

We have seen enough files now and done enough business. It's not an easy product for us.

We are unsecured people, right? We are microfinance.

We like to open branches and people come to us to borrow money. LAP is a slight change in our normal culture where in the secured side, there's a lot of competition and the TATs are very, very high.

Getting the documents prepared is also a bit of a hassle. I agree, things could have looked better.

That said, these things take time. MSME, when we started it in 2018, for 2-3 years, things were negligible in terms of disbursement, and then eventually we found our footing and things expanded.

Cannot force these things. It'll take its own time.

As I mentioned that this is not our normal cup of tea. I'm still comfortable with it, but there's a lot of competition for LAP loans and secured loans in general in the market.

Everybody wants to do it. Even MFIs want to do it, and SFBs want to do it, and banks want to do it, and fintechs want to do it.

Everybody wants to do it, there's a lot of competition.

Basically here, more than the profiles and our infrastructure, the issue is that there's basically three guys wanting to lend to the same person, and therefore that is the main issue in scaling up this product?

Correct. I would say that the main issue is probably competition, yes.

Perfect. Cool.

Thanks a lot, guys, and hope this year, even with your opening statement, it is crackers. Thank you.

Yes.

Thank you, Aalok sir and Vivek sir, for the opportunity. I have two questions.

Firstly, for the ROA, in the previous concalls, you have guided about 4.5% to 5% ROA, and this time in the investor presentation, you have mentioned 5% to 6%, and this quarter we've actually done 6.4%. Is there any structural upside that you have seen in the ROA?

Apologies, it's a little higher than we predicted. No, see, ROA is a function of leveraging also.

As the leveraging goes up, that number naturally comes down, and then ROEs tend to go up. When I say such things, sometimes I just say it.

There's not a lot of thought and calculation that goes. Neither I give tables saying that, well, at this leverage it should be this percent, and then at debt-equity ratio of this, it will go down to that.

I don't give any guidance on ROAs, very frankly. Where did we put 5% to 6%?

Historically, we've been able to deliver somewhere 5%-6% ROAs.

Sir. Secondly,

I'm sorry I didn't answer your question. Yes, ROAs were fairly good this quarter.

Do I have any guidance to give towards ROA? ROA is a function of many, many things, including leveraging, including the four things which I mentioned.

A lot of those things are in flux. It's very difficult for me to give guidance.

All I can do is say that historically we have done about 4.5% odd percent maybe on a fully leveraged basis. Today, the operating costs are slightly higher than what we are used to, let's say on a 20% capital adequacy, you might be at 3.5%-4%.

Difficult for a person like me also. Of course, we have simulations and we have business plans and a lot of things, but it's very difficult to predict these things.

Sir. Sir, one more thing.

In the microfinance JLG versus the individual business loans, can you quantify in terms of yield or gross NPA, how is it different? Is there actually a significant benefit that you're able to see in the individual business loan as compared to microfinance JLG bodies?

Without getting into specific numbers and percentages and things like NPA, I can tell you two or three things. Number one, as of today, individual is performing better than JLG.

Vivek,

I hope you agree with that. The second part is that as far as individual loans are concerned, the biggest issue is the OPEX.

We have to make sure that we are able to collect a significant portion directly from their bank accounts. When we run the NACH and the UPI mandates for the individual loans, about 68% to 70% clears.

By the end of the month, we manage clearing about 85% through cashless, and the balance, whatever, 14%, we are going door-to-door and collecting cash. Right now, OPEX is also largely under control for individual as long as we are able to maintain the cashless collections in the individual side.

It's a new product. Everything does well in the first year or two, I cannot definitively say that individual is better than JLG, but definitely, without giving long-winded disclaimers, I like it better personally.

Got it, sir. Just one last thing on the solar loan part.

This is a new product, in terms of yield or in terms of the expected gross NPA, how would this fare in relation to the other products you have? Is it in line with the yield of MSME or LAP?

How does it play? No, no,

no. Solar is just an idea at this point.

We are not doing significant volumes. We are probably doing around ₹40-₹50 lakh a month at this point in selected areas.

Far, there have been no defaults, NPA is zero. As far as the ROIs are concerned, we are doing it at what are we doing, about average of 18% to 20%?

18% to 20%.

Yeah. It's a kind of a low-risk, low-return product.

Okay. Got it, sir.

Thank you so much.

Great. Thank you everybody for joining and being part of this call, and we hope we have answered all your questions.

Thanks Shreepal and Equirus for hosting the call, and if you need any additional information, please feel free to contact us or the investor relations team. Thanks again for your time.

Sumit, please you can disconnect the call.