Sir, I'm fine. We can start.

I think

Yeah, it is 3:00 already. We can start.

Thank you, Swapna. Good afternoon, everyone.

Welcome to the quarter 1 FY 2027 earnings conference call of Can Fin Homes Limited, hosted by Investec Capital. We will start with management commentary, followed by a Q&A session.

To discuss the financial performance of Can Fin Homes and to address your queries, we have with us Mr. Suresh Iyer, MD and CEO; Mr.

Shailesh Kumar Singh, Deputy MD; Mr. Prakash, President; Mr.

Uthaya Kumar, President and CRO; and Mr. Abhishek Mishra, CFO of Can Fin Homes Limited.

Please note that this call is being recorded. I would not now like to hand over the call to Mr.

Suresh Iyer for his opening comments. Over to you, sir.

Yeah. Good afternoon, everyone.

Thank you, Nidhesh. Welcome to this earnings call for Q1 FY27 performance of Can Fin.

I'll just start by giving a brief of the performance as few highlights. Obviously, all these things are covered in the investor presentation.

However, I'll just give you some brief and some commentary on these aspects also, and then we can open it up for question-answers. I'll start with disbursements.

In terms of disbursements, we had given a guidance or a projection that in Q1, we'll be doing ₹2,500 crore; Q2, ₹3,000; and ₹3,500 and ₹4,000 in the third and fourth quarters, and so on. Against ₹2,500 crore, which was, what was planned and what was projected, we have achieved ₹2,609 crores.

We have been we have been able to do more than what we had originally projected. This has been possible because of a, positive growth across all our geographies.

That is, we have 6 zones, and all the 6 zones, including Karnataka and Telangana, we've had a positive growth. Karnataka actually, with the 18% growth over Q1 of last year, is actually the lowest in terms of the growth zone-wise growth.

We've had a growth across all the geographies, plus we've also had a positive contribution coming from the sales team as well as from the new branches that were opened post-March 2023, which has helped us in achieving this disbursement. That is a positive thing which is one of the drivers for this growth.

In terms of breakup of this growth, if you see, we've had a salaried and self-employed, both have grown compared to last year corresponding period. Salaried in absolute terms has grown by at 21%.

The overall growth for the quarter has been 29%, that is against ₹2,015 crores, the current quarter, we have done ₹2,609 crore. There's a 29% growth.

Within that, the salaried segment has grown at 21%, and the SENP has grown as 44%. Similarly, if you break up between the housing and the non-housing, the housing in Q1 FY27 has grown at 28% compared to the Q1 of housing figure of last year.

Whereas non-housing, that is NHL, has grown at 32%, and combined, there's a 29% growth. Basically, across all the four 2x2 matrix if we see, there has been a growth across all the four four things.

The next if we look at, what is the challenge however has been that the prepayments or the run-down has been a little higher compared to even Q4 of last year. We had this challenge, and one of the expectation or one of our, planning was that post this conversion from annual to quarterly reset, we may probably see a reduction in our, BT-outs.

However, this has not happened. In fact, as against ₹1,730 crore run-down in in Q1 Q4 of last year, in this, this thing, we are having a run-down of ₹1,857 crore.

Basically, there is a almost ₹127 crore increase in the run-down. However, if you break up this same, run-down, there's a what what is comes out is, BT-out, which was which was ₹400 crore in Q4 of last year, has increased to ₹408.

There is not a there is no major increase or higher BT-outs which has resulted in this run-down. It is just a marginal ₹8 crore increase compared to Q4 of last year.

Same way, if we look at loan closures other than BT-out, that is cases where customers have closed their loans from their own funds, or because they're selling their property, or where we have initiated the sale under SARFAESI, that amount last year last year Q4 was ₹360 crore. As against that, it has increased to ₹377 crore.

Both these things have not actually increased in a major manner. However, what has actually increased resulting in a higher run-down is that part-prepayments from the customers and amortization particularly have resulted have have increased.

Basically, when the the amortization or the, sorry, reset happened from annual to quarterly, most of the customers were under a, change in EMI, sorry, change in tenure option. The EMI was constant and the tenure was changing.

In all these cases, when the reset changed from annual to quarterly and the rate of interest was passed on 0.5%, the tenure has actually, crashed, and the EMI has remained the same because of which higher amount of proportion has gone towards the principal. As against ₹976 crore in Q4 of last year, which was part prepayment and amortization, the number has gone up to ₹1,072 crore.

Basically, this is the main reason why the run-down has been higher, and we'll have to now work on this particular aspect. Now coming to, the AUM growth.

Last year, we had a overall AUM growth of 10.4%, and this year in Q1, it has inched up to 10.8% or 11% as we have reported, but 10.8% in real. This has obviously been because of a ₹755-odd crore which has been added to the book from the disbursements net of the run-down.

If you actually see, the disbursement was projected at ₹2,500 crore, and for the full year, we had projected that against ₹13,000 crore disbursement for the full year, ₹7,000 crore would be the run-down, which means approximately 700 ₹1,750 crore every quarter, against which this quarter, the run-down has been ₹1,857, almost ₹100 crores more than what we had anticipated. Actually, this has also been offset by the disbursement which has been higher by ₹109 crores.

Against ₹2,500, we've done ₹2,609. Basically, whatever, was the expected increase in our AUM, which we had projected in the for the full year, the Q1 whatever we had projected, actually has the numbers net-net have been the same.

Just that on the disbursement also has been higher as and it has been offset by an equivalent amount of higher run-downs as well. We are still in line with what we had projected at 14% AUM growth.

Just that we will have to now consistently do a little more disbursements every quarter to see that we offset whatever is the higher prepayment or run-down that is there. That we will be planning.

As of now, we are projecting for ₹3,000 crore only. We will be pushing for seeing that, we cover up for the higher run-down.

The projection for the entire year, we continue to have as 14% AUM growth is what we we will be targeting. Next, we do talk about the spread and the NIM.

We had in the end of last quarter of last Q4 of last year, we had indicated that there was a high amount of portfolio which has moved from annual reset to quarterly reset and have benefited from the reduction in rate of interest, plus, there was a January 2026 rate cut also of 15 basis points. Net of that, our, yield would come down to 9.81%, which, in fact, we have been able to sustain throughout the quarter.

For the full quarter also, our yield is 9.81%. This is something which was already, envisaged and was already highlighted in the in the previous quarter earnings call.

As against that, we had, indicated that our cost of borrowing would be 6.99%, which, in fact, has ended as 6.98%. Basically, on the cost of borrowing side, we have further been able to bring down from what we were at the as on 1st April.

This has mainly happened because we also had some high-cost NCDs which have been repaid, and we also were able to time our CP fundraise at a very appropriate time. This has helped in ensuring that our cost remains low.

We do have a couple of term loans which we have or rather one term loan which we have raised at 7.25% during the quarter. None of the older borrowings have had any rate revision because there's no repo revision.

All other term loans are either linked to T-bill or are linked to repo. There is nothing which is linked to MCLR, we've not seen any increase in that.

Our spread is 2.83 as against 2.81 as we had indicated in the beginning of the year. Consequently, our NIM is is 2.

is 3.81, which also is we had we had given a guidance for 3.75. Going forward, we have a good amount of sanctions on hand from banks, and of course, NCDs and CPs are also there.

I think the banks are the currently the cheapest option we are having, of course, other than the short-term CPs. We have also got an application with NHB.

At least as of now, even considering that NHB we don't consider in Q2, we don't raise any NCD, based on the bank borrowings also, there will be a very, very marginal increase only in cost of borrowing, and that also because of the incremental loans, not on the existing loans. Keeping that in mind, we are confident we should be able to maintain the the spread and the NIM because on the yield side also, we have a couple of opportunities available by because of our change in mix, product mix and segment mix.

We are confident that the the NIM will be maintained at 3.8% plus, and we should not have a problem in that. As regards delinquency and NPA, the stage 2 and stage 3 delinquency has actually come down compared to Q to March '26 in absolute value.

While there is a little increase, about close to ₹17-₹18 crores in NPA, it is more than more than that compensated in the reduction in our SMA-2 and SMA-1. Consequently, our, provision or credit cost is is marginal.

It is much less than what it was in last year. We are confident.

In fact, the trends also indicate that our for the last six quarters continuously, our NACH bounce ratios have been coming down, and even right now, we don't see any increase in the in the in the number of delinquent accounts. Basically, we are confident that, we should be able to maintain our credit cost guidance of 10 basis points.

That's that's in a in a nutshell, the the, brief highlights of the performance. If there are any queries, we can now I I I open it up for queries.

Thank you.

Thank you, sir. We open up session for question-and-answer session.

Participants, please raise your virtual hand. I will unmute you.

Please introduce yourself and ask your question. First question is from Shripal Doshi.

Shripal, I have unmuted you. Please ask your question.

Hi, sir. Thank you for giving me the opportunity.

My first question, sir, was on the macros, which have been tough and remain uncertain. While our asset quality indicators have remained resilient, how do you see that playing out in the next 3-6 months now given and have we taken any underwriting norms or process changes in the last 2-3 months?

Also, in terms of customer profile, any filtrations or any dos and don'ts that we have tweaked there? Any particular trend in terms of salaried, self-employed segment in terms of rejection rates and aspects on the same?

How do you see the same or let's say the asset quality trends shaping up in the next 3-6 months overall and keeping in mind the points that I've highlighted?

Sure. Thank you, Shripal.

First is, in terms of macros, I think, as I indicated, across geographies, we are at least not seeing any slowdown in the demand. We're not seeing any major issues either in the project launches also.

In fact, in this quarter, that is Q1, we have added another 60 APF projects also. The projects are also there.

We are also increasing, from 271 approved projects, we now have 331 approved projects as at the end of the quarter. We don't see any major thing on the demand side.

On the interest rate side, of course, and liquidity side, liquidity also, as I mentioned, we are having a good response. Banks are, almost all our partner banks have come forward and have shown a willingness to sanction.

In fact, we've got a couple of large sanctions also. We don't see any problem in the liquidity either.

In terms of the rate of interest, yes, the rates have slightly gone up. As against 6.95% which at which we were raising in last year from the banks, we are now, the spread, they have increased, and while they can't increase on the existing loans, it's only for the new loans where the banks have been quoting anywhere between 7.25% to 7.5%.

That is one change. To off

Hello?

Yeah.

Sir, on the asset quality side.

No, I some noise somewhere. Now what we have done is in terms of to offset this increase in the incremental borrowing cost, we have also tweaked some of our internal guidelines also.

Now whatever special rates that we are offering, which we are offering for more than ₹20 lakhs, we have increased it to more than ₹25 lakhs. That is one thing which will slightly, that ₹20 to ₹25 bucket, we will slightly get a little better yield.

We've also, in terms of customers' rerating, basically every year we have to do a customer appraisal once again and classify the customer's risk profile. There also we have re-looked at it.

One is we have added additional parameters so that we are doing a little more, EWS signals are have been added, a little more monitoring in terms of OTMS reports and all those things have been added so that we are, if anything is there, we get an early warning and we are able to take corrective action. As I said, 1 ₹20 to ₹25 lakhs we have increased.

Now we have also, in terms of CIBIL score, as against about 75-to-odd percentage, today we are 82% of our loans are now having a CIBIL score of more than 700. I think, it's more of customer selection also which is slightly improved.

that is coming from the customer's this point of view. Consequently, there will be, some indirect increase in the rejection ratios.

As we know, 80% of our customers are coming through the DSA channel. The login and everything happens only when it is basically cleared or fitting into our norms.

We don't have a very great, data value this thing that we can share about how whether the rejection rates have gone up. Basically, these are the things that we have done in terms of this.

As I mentioned, for the last six quarters, we have been monitoring. We have our, NACH bounce rates have actually come down.

We've also during the last couple of quarters, run some exercises to, see that older cases where NACH was not there, we have tried to convert those cases also into NACH. These are basically some more of, hygiene improvement that we have tried to do.

This is what we have done.

Got it, sir. Thank you, sir, for that detailed answer.

My second question was on the IT side. In the quarter, we were supposed to do a complete implementation on the LOS, LMS, and report generation.

I think we've completed the pilot already. When do we see complete implementation?

If it is in 2Q or in 3Q, would you see any impact on the business or on the disbursement targets that we have highlighted?

Sure. See, we have done a pilot of 5 branches, and of course, there have been some teething problems, but nothing which has impacted our business.

Actually, we implemented all of them on 8th of July. Today, it is just 12 days.

All the 5 branches have put through all transactions, including sanctions, disbursements, customer creation, NACH processing, collection of the EMI collection through BBPS, non-NACH transactions, loan closures. All these transactions have been put through, and while there have been some small issues which have come up and have been immediately attended to, but we have not had any kind of a problem, touch wood, where we have had to kind of where we feel that it'll impact our business.

We plan to in fact implement it across our remaining 245 branches in this current quarter only. The only thing is we don't have a weekly upgradation or weekly implementation process possible.

It has to be only at the month-end because only then we can take that data and compare it and be able to go ahead. We have done it based on the 30th June data on 8th of July.

Same way, we'll be doing it based on the 31st July data in August, and August data in September. Definitely before the next quarter's earnings call, we will be done with all the 250 branches.

Going by the experience of the 5 branches, I think we don't envisage any problems or any issues in the business because these branches also are likely to end the month July with almost the same or better business than June. We don't Because, already they're all login files, their disbursements are happening, all integrations with all other applications, including internal as well as external APIs, all of them have been functioning quite well.

We don't envisage any problem.

Got it, sir. Thank you so much, sir, for answering my question.

I'll come in the queue for more questions. Good luck for the next quarter.

Thank you, Shripal.

In case you are joining via dial-in facility, please press star and five on your phone to raise your hand. The next question is from Sonal Mehas.

Sonal, I've unmuting you. Please unmute yourself at your end and ask your question.

Sonal, you can unmute yourself from your end and ask your question. Since there's no response from Sonal, we'll move to Rajiv Mehta.

Rajiv, unmute yourself and ask your question.

Am I audible?

Thanks. Yes, Rajiv.

Please go ahead. Thanks.

Thanks.

Thanks, Nidhesh, and thank you for giving the opportunity. Sir, just few questions from my side.

In terms of this IT implementation, what was the experience in coming back to normal business volume for the 5 branches that we implemented in June? Are we already back to normal business volume or productivity in those branches so that we get to understand that when you implement it in the residual number of branches, what will be the business impact and for what length of time?

See, in

this IT implementation, as I just mentioned, it is based on the June data. We've implemented in July.

We are almost 12 12 days since we implemented. We are already kind of, I would say, on track in terms of the business for the month.

All the branches I have we have been talking to them. There are, small, small issues, but nothing major which is a showstopper.

All the processes, as I mentioned, disbursement, sanction, closures, repayment, NACH, everything has been processed, and they are very much on track to I think in this month itself, they will probably be, on track for the business. Already disbursements have also started in all the 5 branches.

There is no problem in terms of that. Going by that, experience, I think we are confident we'll not have major issues.

The only thing is, we had 5 branches. We could, give a individual attention to 5.

When we do the next 50 or 100 in the next month, we may not It will take a little longer to, do the handholding. Beyond that, we don't see any problem because the system per se system-wise, in terms of the product that has been delivered and the processing that is happening, there is no issue.

In fact, even the people there have been, 3 to 4 days is all that they they are taking to, get the hang of the system.

Sir, are we targeting a certain number of business in this quarter since it's going to be a very testing quarter from our bandwidth point of view? If we did a certain run rate, say in June, would we be able to maintain that run rate in July, August, September despite this implementation?

Can you share the number?

No, I think we are confident that 3,000 we don't want to change. We will be able to meet that number.

However, we do plan to come back somewhere in September, and maybe either we will issue a press release or we will maybe come back and have a conference like this, but we can update. We will give a proper update on how the remaining two tranches of implementation have happened in August and September also.

We are confident the way 5 branches have been able to quickly, within 10 days, come back to normal and do all the processes, I think other branches also we should be able to do it in the same month. The 3,000 crore that we are targeting for Q2 stays.

That number stays. Then

one last thing on pricing. When I look at the shift in the ticket size mix to more than ₹30 lakh loans, the proportion is going up in disbursement, and ₹50 to ₹100 lakh category, ticket size loans have also gone up in AUM.

If they're contributing higher to our growth with every passing quarter, what is the pricing here versus the overall, pricing that we get in the quarter?

Actually there's a, multiple combination. It's I would say a 2x2 or a 3x3 or whatever kind of a matrix with some Even that

blended number is okay, yeah.

As I said, blended cost is 9.81%, and last year also we had 9.82% is there. By and large, overall blended cost is coming to 9.8%.

For a salaried customer who is having a CIBIL score of more than 725, and who is probably looking for a loan of ₹25 lakh plus, because we moved it from 20 to 25, I think the best rate would be around 8.4%, but then, it goes up to around 11% also depending on the customer profile. If it is a individual customer rating is S2 or S2+ or S3, then obviously the rate would be higher.

Same way, if the customer is visa-vis a salaried is a self-employed, then it'll be a little higher. Against a housing, if it is a little, the highest rate would be for a non-salaried, non-housing customer who is having a S3 rating.

That would be probably the highest rating. Anywhere between 8.4% to around 12.5% would be the range, and blended comes to 9.8%.

Okay. Thank you and best of luck, yeah.

Yeah. Thank you.

Thank you, Rajiv.

The next question is from Shubhranshu Mishra. Shubhranshu, I'm unmuting your user ID.

Please unmute yourself and ask your question. Hi,

yeah. Thanks, Nidhesh.

Hi, Suresh. Thanks for giving this opportunity.

Two or three questions. The first one is a couple of NBFCs who have reported before you have spoken about some amount of disruptions in the IT sector hiring, especially at the entry-level mid-market management level.

Given the fact that we have a larger exposure to Bangalore and the outskirts of Bangalore, are we seeing any kind of changes in the offtake, especially in the IT sector for home loans? If so, have we changed any policies around it?

Second is can we spell out the number of home loans and the number of LAP loans, that non-home loans, that we have done in this particular quarter? What is the expected run rate for the quarterly run rate for the rest of the year?

The third question is around any kind of surprises that we might expect in the OpEx going forward in '27? Thanks.

Sure. See, in terms of the IT sector impact on the loans and everything, we've not seen any major thing.

Maybe, Karnataka, as we said, is still also growing at 18%, and Telangana has grown at a little higher than that only. Of course, to some extent it is also because of the base effect.

Having said that, it is still growing compared to last year, and it is also contributing. We've not seen any major change because of this IT.

In fact, there are job losses, that's a fact, but there are also people who are, in the mid-this thing and all who are able to, re-equip them with new this thing. Now they are also able to get better different jobs in different this thing.

There are, it's not that there are no jobs and people are absolutely having to sit at home. Far, there has been no impact.

Having said that, if you look at our Karnataka delinquency, our NPA as on 31st March '26 was lower than, in absolute value, as compared to 31st March '25. In June also, it's a very, very marginal, one-odd, two, three cases, but nothing major which is there, which also is anyway a first-quarter sequential impact.

We've not seen any major impact of that. Second, in terms of number of loans, I wouldn't be able to give you the number of loan accounts, but I can definitely share the number the amount, I can say.

As in out of ₹2,015 crores which we had done in Q1 FY26, 1,291 was how home HL, 724 was NHL, as against that, Q1 FY27, you've done ₹2,609 crores, of which 1,650 is HL and 958 is NHL. Basically in HL, we've had a 28% growth Q1 to Q1, and in NHL, we've had a 32% growth.

This is in terms of the amount, I can say. Number of accounts, I don't have right now.

The third question was around OpEx, and if I can just squeeze in one allied question, which is around the APFs. The total number of APFs you spelled out is around 331.

Per project, what is the maximum number of apartments that we can do? When does this become a major contributor, when I say major, upwards of at least 15% in our disbursement?

I think see, in terms of OpEx, I don't think there is any major surprise other than what we've been saying that ₹40 crores is yet to happen. As I said, since we have just implemented in Q1 in July of this year, we still have some of the things where sign-off is we have to still capitalize.

Some of the things we'll capitalize in this July also. That will come into by way of depreciation and all those things.

By and large, I think quite a few of the items which are there where the AMCs have also kicked in, some of the cases where payments and all have been made, which are So those things have already started. I think even this quarter, there is a little bit impact.

In fact, if you recollect, Q4 of last year also, about ₹5 to ₹6 crore of expenses had already kicked in in terms of the project because some of the project items which for which we had taken in the last quarter of last year, one year's AM first year AMC was also started. Basically, in terms of OpEx, I don't think any major new depth things are going to come.

Salary cost or rent and taxes and all those everything else other than IT cost is also well under control. There is no major surprise there.

Everything is in line with last year's thing only. In terms of APF, actually, we are looking at as such about up to 100-150 units per project also we can consider for APF.

We do have some good marquee projects also which have been approved by us, of some very Cat A builders also. Although most of the projects are of Cat B builders, but we do have some good marquee projects of Cat A builders also.

As of now, in fact, the contribution is more of they are also testing us, we are also going through the whole thing. Learning is happening.

It's a very small number. I think 15%, I think, would still take a will be a while away.

At least we have started getting a good regular trickle from these projects, which is what is a positive thing.

This 100 number is what percentage of their total apartment throughput?

That's what I'm getting at. This is the total number of apartments in the project.

What we are expecting is, to start with maybe 1, 2 because we will See, all the projects that we have tied up with mostly are already having two or three tie-ups, okay? No builder goes with a single tie-up.

Since we are not doing developer finance, obviously the first right of refusal goes to the lender who has also given the project finance, okay? No,

what I'm trying to get at, Suresh, is from a risk management perspective, what is the maximum number of apartments we can do per project? Actually

we have a dual thing. We have a 10%, and there is a number-wise also that if it is a project with 20 units, then you can go up to five, I think, four up to five or six or something.

We have a matrix for that also. We don't go by the from the risk point of view, we will never go with more than 10% in a single project.

Understood. Thank you so much.

I have one more question.

That was the point. I misunderstood your question.

Done.

Thanks.

Nidhesh, I'm done. I'll come back in the queue.

Thanks.

Thank you. The next question is from Abhijeet Tibrewal.

Abhijeet, unmute yourself and ask your question. Thanks,

Nidhesh. Am I audible?

Yes, you are.

Thank you. Sir, just two things.

One is, given the fact that we are going for a higher ticket sizes now, where we are seeing that large part of the growth coming from higher ticket sizes, I think I also heard you on the call that given that the incremental cost of borrowings are moving up, we're also trying to do some tweaks on the asset side. Basically where you said that maybe the yields that we used to charge to up to ₹20 lakh is the same yield we will charge to up to ₹25 lakhs now.

I hope that understanding was correct.

Correct. That is correct.

Also, sir,

don't you think that as we keep moving up, sir, we are facing higher competition? Basically, all I'm trying to understand is, sir, until now, the competition always used to be with banks or PSU banks.

Now a lot of these large HFCs also talk about doing, I don't want to call it affordable, but small-ticket housing, that ₹25, ₹30, ₹35 lakhs, where we are building our sweet spot. Are we not seeing higher competition from banks there, from these large HFCs there?

See, actually, in fact, it is not the banks who are the prime, players who take away our portfolio. Our main BT happens with LIC and Bajaj only.

It's always been the private sector and, players who are doing it in the NBFCs or HFC larger HFC space. The banks, of course, are there, but so far, we are not still not in that ticket size segment we are, directly in competing with them.

It's, if I ask, 50 branches, probably 30 branches would say LIC is the main competitor. Maybe another 10, 12 will say Bajaj is main competitor, and maybe a few of them will say, PNB in one or two pockets, smaller geographies, or well so rarely, you will have the number one competition or the number one entity as a bank.

We don't have that. Far, these at least these other players have not majorly been able to do a dent make a dent in our this thing.

As I also mentioned, our, prepayment or loan BT-outs has been almost stable in Q1 compared to Q4 of last year. Q4 last year, we had ₹400 crores of BT-out.

This time, it is ₹408 crores.

Got it. Sir, then, you remember you touched upon this when someone asked you if you are seeing any higher bounce rates, higher delinquencies from salaried customers in the IT sector, given that we have a very good presence in Bangalore and southern India, Telangana.

Sir, just trying to understand, have you had a chance to look at what proportion of our salaried customers are employed in the IT sector? That is one part of the question.

The other part is that if these are our customers, right, what ticket sizes, what is their basically annual income like? Because what I'm trying to understand is what kind of IT customers will typically end up going to banks, and what kind of IT salaried customers will come to us?

Sure. See, our IT sector exposure is only about, 6% in terms of the number of customers who are associated with the IT sector and have taken a loan from us, okay?

We have done, our study at least, the top companies which are in IT are definitely not the customers from those companies are not if you say whether an Infosys customer, whether a Wipro customer, whether Cognizant customer, or somebody is taking a loan from us, it's almost not there, okay? We have small IT-related entities which with whom we are there.

Obviously, yes, there are those entities also have to have will be the first ones facing the challenge whenever competition comes or whenever any new change happens. Still, so far, we have not seen any major impact of this.

At least, our check bounce ratios, as I mentioned, for the last six quarters have actually, our NACH bounce ratios have been coming down. We've not seen any major impact because of this, yeah.

Got it. Sir, then just the last thing, and the clarification to what you've said earlier.

What you're saying is that this year, you're still targeting that ₹13,000 crores in disbursements, just that given that what you explained, the EMIs remain the same, the tenor comes down, the principal amortization is faster. To that end, this year, you're expecting the run-down in the book to be higher, but still targeting that 14% growth that you spoke about.

Right.

If required, we may have to push business. I think we should be able to do that.

Already in Q1, we've overshot our whatever we had targeted for. Q2 also, we are targeting ₹3,000 crore, and I think the way our IT transformation has gone, we may be able to push a little earlier than what we had anticipated.

I think we will still be able to do that ₹6,000 crore accretion to the book by the end of the year. If that means we'll have to push a little more in terms of disbursement, ₹13,000 will become ₹13,200, ₹13,400 or whatever, we will try to push for that.

Got it, sir. That answers my question.

I wish you and your team the very best.

Thank you, Abhijeet.

The next question is from Kunal, Kunal Tokas. Please unmute yourself and ask your question.

Hello, sir. Am I audible?

Yes.

Okay. Am I clear?

Yes, go ahead.

Hello? Okay.

Just two questions from my side, both long-term. First is is it correct that since 2001, Can Fin Homes has written off just about ₹20 crore in total loans?

Is that information correct?

Sir, ₹20,000?

₹20 crore.

₹20 crore?

Since 2001. Since the year 2001,

[unclear].

Written off

you're talking about? Yes, that is correct.

How, sir? We have companies who write off thousands of crores in a year.

Can you please talk about the culture or the processes of Can Fin that make it so unique?

No. I'll tell you.

One thing is, in terms of technical write-offs, there are two things over here. I will just clarify.

This is we are talking about credit frauds or credit write-offs that we are talking about. Of course, this doesn't include that ₹40 crore of Ambala, which we are talking about.

That is a non-credit issue. In terms of credit thing which affect the thing, there are two things.

One, there are frauds. There are issues where some frauds might happen, and these frauds are we are still continuing those frauds with a 100% provision, and they continue to reflect as NPAs in our books of accounts.

Our ₹300 and, 80 or ₹375 crore of NPA that we are showing, this could include some accounts which we have been flagged as fraud. We may be providing 100% provision for it, but we would not have written off those accounts.

There's a 100% provision, there is a fraud, it continues to show as an NPA, it is there in our books of account, and it is we attempts to recover from that either through, SARFAESI wherever property is available or through other, legal processes is continuing. That is one part of it.

The second is in terms of actual write-off, where this happens where one, we know that, there is no property customer, some fraud wherein nothing is possible. That is a case where we would have written off.

Or alternatively, second would be where we have sold the property, there is a difference amount, like, for example, there is a ₹22 lakh outstanding, we have sold for ₹21 lakhs through SARFAESI sale, and we don't envisage a possibility of remaining recovering the remaining ₹1 lakh, we would have written off that ₹1 lakh also. Those add up, when you add up those write-offs also, that is up to ₹20 crores only from the last, 20-25 years.

That is correct. There are additionally some frauds which are shown as frauds, reported to the regulatory authorities.

We have taken police action. They continue to show as NPA, they continue to show with 100% provisioning.

If we actually Okay, if we actually remove those kind of frauds and would have either written off, then probably we would have had another ₹60-odd crores we could have probably, which which pertain to the fraud, which pertain to all that thing, maybe about ₹50-₹60 crores could have additionally been would have written off. Had this been some other entity where there is a fraud there's a write-off policy, then in that case, if we would have had a similar policy, then another ₹50-₹60 crores would have probably been also written off, in which case our NPA, which is ₹375, would have come down to ₹310, ₹320 crores only.

That's still an a very exceptional number, especially if it is cumulative given how much total loans you've disbursed over the 20-25 years and written off just ₹100 crore cumulatively. That was my question.

Even with reliance on DSA sourcing, how have you been able to maintain such a pristine credit underwriting practice and policies over such an extended period of time? Sir, we know that financial institutions are subject to very great external pressures, human pressures and organization pressures, pressures to grow when they make mistakes.

Can Fin has been able to maintain that discipline over the last two and a half decades.

I guess yes, customer selection and that and strict tight policies, conservative policies is yes, it has impacted our growth. Sometimes we've not grown in line with what market expects, yes.

We've been a it has been a very safe lending, conservative policies, conservative lending has been followed. Perfect, sir.

The second question on the cost-to-income ratio. With the technology transformation and the movement towards more in-house sourcing, how do you see that playing out over the next few years?

See,

current year we do envisage that, it will be hovering around 19.5% cost-to-income ratio. Some of it, as we said, has already started kicking in in this quarter itself.

Therefore, from the 18%-odd numbers, we have now moved to the 19% plus cost-to-income ratio. For the year, we expect it will be around 19.5%.

Since, our project is already implemented and we've already worked out the cost, now going forward, this, the AMCs and this depreciation part and all will kind of remain stable. As the book grows, this percentage will again start to come down a little bit.

I guess, we would, in another 3 years down the line, we would again would put want to bring it to 18% or thereabouts.

That would be the long-term average. Okay.

Yes, correct. That's it.

Thank you very much and have a good day.

The next question is from Sonal. Sonal, unmute yourself and ask your question.

Hi sir, this is Sonal. I hope I'm audible.

Yes.

Yes, Sonal. Please go ahead.

Yes. Sorry for I think the IT trouble earlier.

There was some issue regarding some admin issues. I have two questions, sir.

I am looking at your book run-down numbers and they have been elevated for the last four quarters. Sorry if I was out of the call because of these IT issues.

I want to understand how do you understand these numbers? How do you decipher these numbers?

What is a near-term to longer-term target of these numbers? Should this be lower than 4% over the course of next one or two years?

Is this the new normal? That's the first question.

Sure. See, first of all, as I had given in the opening remarks itself, the breakup of our run-down.

We have about ₹408 crores is coming from BT-out, ₹377 crores is from where the customers are making their own closures from their own funds, either because they're selling the property or because we are pushing them to sell the property or where generally small amounts and they are just making a payment and closing the loan to reduce their liability. The major challenge or the major portion from where our run-down is happening is actually amortization and, more importantly, part-prepayments, where customers are making more payments every month.

The loans are still with us. It's just a conservative approach from the customer's side where they just get some extra funds and they are parking with us.

This is something which, from the customer's point of view, obviously it is good because, they are able to, cut down their tenures and repay earlier, less interest burden for them. From that point of view, it is good, but at the same time, it is hurting us.

We'll have to see how it is there. What we look at is, this particular quarter, it has been the number.

Going forward, I think we will want to work on, whether we can convert some of these customers into deposit customers for us or else if we can, look at some other kind of a thing where, they can be retained without having to prepay and all. Those we will be looking at it because some of the prepayments probably we may be able to offer them a solution and see.

We are right now analyzing and talking to credit information bureaus to see if we can get an alert even at that time when they make an inquiry elsewhere so that we can contact them and try to retain them. Those efforts are going on.

Another thing which is there is today, if you look at it, before the interest rates started going down, our best rate was 8.95%, whereas the banks and bigger player larger players were offering best rate as 8.4%. The differential was a delta was 55 basis points.

Today with repo rate cut, the banks have moved from 8.4 to 7.25 or 7.15, and some of the larger players also have followed suit. We have come down from, 8.95 to 8.4.

Basically now the difference is 7.15 to 8.4 or 7.25 to 8.4. This difference, which was 55 basis points, has now increased to more than 1 percentage point, which is difficult to convince a customer.

50 to 60 basis points, we can convince a customer. Customers also don't mind because the impact on their EMI is not very large.

Over a period of time, a 1% impact is quite large if it is a 25, 20, 30 kind of ticket size loan. Therefore, it is one issue.

If, this rate differential can come down, either because PLR starts repo rate goes starts going up or something of that sort, then maybe, this might get come down a little bit. Then we may not have so much of a pressure.

Having said that, I think, the bigger challenge for us is the part-prepayment and not BT-out because BT-out is just about ₹408 crores out of ₹1,857.

Got it, sir. Sir, my second question is with regard to looking at your numbers and you talked about LIC being a competition.

I see LIC not growing, you talking about Bajaj Housing Finance being the other competition. Just want to understand one player is doing at 25-30%, which is Bajaj Housing, and what is it that you see the trade-offs they are making as a competition vis-a-vis you, because of which they are able to demonstrate aggressive growth?

We have three players. One is 25%, you are at 11-12%, and there is LIC, which is not doing at all.

From a comp set perspective, if you can just subjectively tell us what's happening and who's doing what trade-offs basically, that will just help us set the context for us, yeah. See, I think

Bajaj definitely has had a technology advantage. They have been the first movers and they have adopted technology, and that is able to give them a better, an edge in terms of TAT and all those things.

We are catching up and we have all just implemented our project has been implemented. We also will now be, starting on these journeys, and customer journeys and digital roadmaps and all.

I think that is something which we will be able to, catch up, and we would have to obviously, push for a consistently 20% plus kind of a disbursement growth over previous years for us to slowly the AUMs to start picking up and catching up. Second thing is, I think, having said that, while technology is also one matter, I think, LIC also has an issue of large prepayments, much higher prepayments, because they are directly in competition with on pure home loans with

Most of the bigger banks.

Most of the bigger banks, because the ticket sizes are also higher than ours. I guess, there they have, a pressure of one is constantly growing, having to grow, at the same time also retain, whereas, had it been a LAP book or had it been a LRD or had it been a developer finance and all, maybe that pressure would have been less for them.

I guess, only they will be in a position to exactly tell you what are the challenges they are facing. sitting here, I can I guess these are the what I see.

Sir, all else being equal with the IT background and I think more agility with regard to the software platform, would that mean that you would have higher capability of assessing risk at higher yields, apart from obviously aggression in disbursement, but would that also mean that you're able to launch more products, a little higher yield products, which are not too bad in terms of customer profile, quality of customer, but they are in the 11, 12, 13% kind of yield spectrum? Can we see that happening in the near term?

Actually, today our system, what we are now implementing, definitely gives us the chance or gives us the opportunity to launch these kind of products faster with proper controls and all those things in place, workflows and decision engines and all those things in place. When and how we'll start, I think we'll have to As of now, in fact, our IT transformation was a bigger was our first priority.

We will look at all these products, going forward. as of now, I can't comment on that because we our board has not we have not actually deliberated and taken a call at our board.

Got it, sir. Thank you.

I'll fall back in the queue. Thank you, sir.

Thank you. Nidhesh, you are on mute.

Yeah. The next question is from Prachi.

Prachi, unmute yourself and ask your question.

Hello, sir. I wanted to ask that last quarter, the company has indicated an aspiration to deliver around 2.4% ROA and around 18% of ROE.

Given that the relatively softer performance in Q1 and some higher OpEx also we're expecting a little bit. Are we still confident of achieving these return ratios in FY27?

I guess this quarter, we have done 2.39% as the ROA and 18% plus in terms of ROE, at least for the quarter. Yes, you are right.

In terms of our OpEx, we it has slightly inched up. Because it has inched up a little bit compared to last year is the reason why in fact our ROA has dropped from around 2.53% last year to 2.39%.

Going forward, I think we the costs the whatever impact we had envisaged is started already reflecting. Therefore, this number is something which you will be able to do manage.

One is, we may have to, we will have to obviously ensure that our NIMs and spreads and NIM and NIM are maintained, which, as of now, definitely looks possible. In terms of credit cost also, the other variable which is there where we will have to look at it.

As of now, we don't see a problem in the credit cost either. In fact, being the first quarter also, if you look at it, last year, in Q1, we saw a ₹45 crore increase in NPA.

The year before that, again in Q1, we are we looked at we had a ₹41 crore increase in NPA. This, ₹30-₹40 crore increase in NPA has been there for as a cyclical thing every year.

This year, we have been able to, in fact, restrict it to just about ₹17-₹18 crore. Basically, what I'm trying to say is that, in terms of credit cost, we are in a much better position today.

The 10 bps that we have been talking about definitely doesn't look to be a challenge this year. I guess, as of the moment, there is no reason to believe or nothing to reflect that we may not be able to achieve it.

Also,

one more question was around the SC&P segment increase which we are looking at. I wanted to understand the portfolio, how we compare it with salaried segment in terms of the yields, spreads, the credit cost, and the returns.

They are going to be marginally accretive right over the medium term.

Correct. Actually, see, when we are talking about SC&P, we our SC&P also is not the assessed income or, surrogate income kind of a segment.

The SC&P category or the customers whom we serve actually are ones who have documented income. They also are having two to three years of IT returns.

We are verifying the IT returns from the portal. Based on that, we are assessing based on our norms.

Even the SC&P segment compared to the rest of the affordable housing finance companies would be a better segment for us, in terms of credit. This if I have to look at the credit cost and all, and the yields, self-employed would be at least 0.5% higher in terms of the ROI as compared to a housing customer, if it's everything else being the same.

If it was just a matter of, salaried versus self-employed, the differential would be 0.5 percentage point. If you look at it as to the, risk weightage, the risk, the GNPA in the salaried segment today is roughly around, 0.6% to 0.63%, whereas in case of SC&P, our current, NPA ratio is around 1.45%, 1.5%.

Roughly, factored for our credit cost also, I think, 0.5% is accretive only.

Okay. One more on the CBS platform, the branch expansion, all we have invested and the incremental operating expenses which are going up.

When do we expect the productivity benefits, it starts to reflect in my cost-to-income ratio? See,

today itself, the 5 branches that we have initiated, those 5 branches also the speed and everything is much faster. I think, in terms of the, stability, I think it'll take about 6 months for the branches to stabilize, to get fully used to it, and all those kind of things.

Having said that, I think this year itself, we should start seeing some benefits in terms of staffing itself, not to mention, the speed and better quality, more faster TAT, and all those things. That apart, I think even in terms of manpower, I think this year also itself we should be beginning to see some benefits whereby, we may not be taking adding staff for the sales team.

We will might be able to or we, in fact, intend to take all the sales, additional sales people from within the existing team sizes only. Okay.

Lastly, just one point on the tax rate. What do we see the tax rate for FY27, overall in total, I should expect?

Is it same,

21%?

Yeah, 21% together with some DTA benefits. This will be stable rate.

There are no major surprises coming

up

in the next quarters.

All right. Thank you so much.

Thank you.

Thank you, everyone. That concludes today's session.

I will hand over the call to Mr. Suresh Iyer for his closing comments.

Thank you, Nidhesh. Thank you once again to everyone for taking your time out to join this earnings call of Q1 results for Can Fin.

I hope we've been able to answer all your queries. Of course, if there are anything more, you can always feel free to write to us.

We have our this thing. We are also, in fact, meeting the whenever we are having any meeting with any investor or anything, we are uploading our transcripts of all our meetings also on our website.

I think that also is something which you can refer to for any updates and all. Second thing is, as we mentioned, that now that we have undertaken this IT transformation thing and we expect to complete it in this quarter, somewhere around September, mid-September or first week of September, we might put up some update also on that, on how it is progressing, and how many branches have gone live, how is the disbursement performance and all, in light of this, because it is a very important thing.

Having said that, we don't envisage any issues as of the moment looking at the 5 branches. We will still be putting up an update somewhere around September.

That's it. Once again, thank you.

Thank you very much for joining this call.

Thank you. Thank you, everyone.

Thank you. Thank you, Nidhesh.