Thank you. Okay.

Good morning, everyone, and thank you for joining us today for the Q1 FY27 investor call of L&T Finance. Joining me on the call today are our Chief Financial Officer, Mr.

Sachinn Joshi; our Chief Operating Officer, Mr. Raju Dodti; along with other members of the senior management team of L&T Finance.

Similar to our previous earnings calls, today's discussion will be divided into two sections. I will begin by sharing my thoughts on the macroeconomic environment, our business performance during the quarter, and the strategic priorities under Lakshya 2031.

This will be followed by our CFO, Mr. Sachinn Joshi, who will take you through the detailed financial performance for the quarter.

Post our commentary, we'll be happy to take questions on the call. Before we delve into the highlights of the quarter, I would like to give you some flavor of the current macroeconomic scenario and sectoral outlook, which becomes important given the volatility in the geopolitical arena and the impending worries of an uneven monsoon coupled with the impact of El Niño.

Over the past few months, the global economy has had to navigate geopolitical uncertainties, non-stop fluctuations in energy prices, disruption to supply chains, and changing trade dynamics between major economies. While these developments have introduced a period of volatility, India's macroeconomic fundamentals have continued to demonstrate resilience.

The economy has performed better than expected throughout the year, while posting a growth of 7.8% in the fourth quarter of FY26, supported by healthy government capital expenditure, improved infrastructure creation, and resilient private consumption driven by a recovery in rural demand. On the demand side, private consumption aided by discretionary spending has remained resilient so far, supported by both rural and urban demand.

Structural reforms, favorable financial conditions, and the government's thrust on infrastructure spending have aided investment activity and bodes well for sustained strength in demand conditions. The market is exhibiting strong credit growth momentum as some sectors like microfinance have emerged from a prolonged period of contraction, and most other sectors see a healthy uptick of consumer demand.

Strong growth impulses are reflected in credit momentum as well, that has picked up in recent months. Tailwinds from regulatory and government measures introduced in FY26 are expected to support credit demand going forward.

On the rural front, the progress of the southwest monsoon has remained an area of close attention for the entire financial services industry. While the season began with some regional variability and intermittent rainfall patterns, we are encouraged by the gradual improvement in monsoon activity over the past few weeks, with 70% of the country reporting normal or higher rainfall in July.

Rainfall in the first week of July '26 was 48% above the normal level, and cumulative monsoon deficit till 10th July '26 had reduced to 14% below the long-period average. Mandi arrivals of rabi crops are running 8% higher, and government procurement for kharif crops has seen a massive surge.

I'd like to call out the market concern we have seen regarding onset of El Niño and its projected impact on the monsoon. The L&T Finance team has extensively traveled in rural geographies in our core markets over the last few weeks, and we see normal economic momentum.

While the onset of the monsoon was slightly delayed, economic and agricultural activity remains strong, and current reservoir levels are sufficient to sustain normal agricultural output, and hence, protect rural cash flows. We remain hopeful that rainfall will continue to catch up during the balance of the season, supporting agriculture output, rural cash flows, and overall consumption.

Powerfully, rural demand indicators continue to remain resilient, aided by healthy government spending, continued infrastructure investments, and sustained focus on the rural economy. We're confident that resilient domestic demand and coordinated policy support will provide the wherewithal to withstand the adverse impact of such uncertainties.

Coming to this quarter's highlights, I'm pleased to share that L&T Finance has delivered another strong quarter of profitable and quality-led growth. During quarter one FY27, we recorded our highest ever quarterly consolidated profit after tax of ₹902 crores, representing a growth of 29% year-on-year.

Our consolidated book crossed another important milestone, reaching ₹1,29,634 crores, reflecting a healthy year-on-year growth of 27%, with an ROA of 2.48%, reflecting a growth of 11 basis points year-on-year. This has been achieved on the back of robust quarterly retail disbursements of ₹23,852 crores, up 36% year-on-year, with contributions from all our lines of business, demonstrating the continued strength of our diversified retail franchise.

The significant thrust in our disbursement momentum year-on-year has been a result of a continuous focus on building granular distribution channels, our ever-expanding branch footprint, expansion of our digital acquisition capabilities, duly supported by our AI-powered next-gen credit administration framework, Project Cyclops, and our continuous focus on strengthening risk guardrails, allowing us greater confidence on quality underwriting. In the last call, I had emphasized upon our trajectory of pairing of credit costs on account of implementation of structural credit policy measures in our businesses and the realization of positive dividends from the early implementation of Cyclops in two-wheeler, SME, and farm businesses.

I'm pleased to inform you that consequently, credit costs moderated to 2.54%, reflecting another quarter of sequential improvement of 10 basis points, supported by our continuous focus on strengthening credit administration, collections excellence, and AI-led portfolio management. A strong growth of 29% year-on-year in total income, with a PPOP growth of 35% year-on-year, was largely driven by sharp focus on managing yields across businesses, fee improvement, and efficient liability management.

Stable NIM plus fees at 10.47%, despite a competitive operating environment, further demonstrate the resilience of our business model. This has resulted in our ROA improvement to 2.48%, while ROE increased to 12.71%.

While these numbers are robust, I would like to emphasize that we could have grown even faster. However, given the volatility in the economy, we chose prudence over aggressive expansion, maintaining our emphasis on responsible growth, disciplined underwriting, and superior portfolio quality.

We proactively tightened our credit guardrails during the quarter, deliberately letting go of about ₹1,000 to ₹1,200 crores in potential disbursements, forgoing a few percentage points of additional growth to firmly protect our asset quality. It is important to note that through our Lakshya 2031 asset growth target is 20%-plus CAGR over the 5-year period, whenever the market and credit conditions are conducive, we would use that opportunity to grow our asset book in a risk-calibrated way at a faster pace than Lakshya goals, as has been the case during this quarter.

However, we will never compromise risk for growth, as articulated in our risk-first, tech-first approach. I would now like to share an update on our Lakshya 2031 goals, which marks our pivotal leap from transformation to delivery.

As many of you would recall, during our last earnings call, we formally launched Lakshya 2031, our 5-year strategic roadmap that marks our transition from institutional transformation towards sustained delivery. I'm pleased to state that we have begun this journey on a strong footing.

While our profitability metrics continue to improve quarter after quarter, our immediate focus remaining on maintaining consistency in execution. We recognize that Lakshya 2031 is a 5-year journey, and therefore, our endeavor remains focusing on delivering sustainable growth while steadily improving credit costs, profitability, and returns over the course of this strategic plan.

We have set ourselves a book growth target of CAGR of 20%-plus over the Lakshya period. As explained above, I'm pleased to report that we are tracking well in line with this target, achieving a robust 27% growth in Q1 FY27.

This was supported by strong disbursement momentum across all our lines of business, secured as well as unsecured products, with a 126% year-on-year growth in personal loans, a 41% year-on-year Cyclops-powered growth in two-wheeler finance segment, a 24% year-on-year growth in rural business finance, a 22% year-on-year growth in housing loans, a 23% year-on-year growth in SME finance disbursement, and a 11% year-on-year growth on farmer finance disbursement. Notably, one of the most important developments during the quarter has been the continued collection efficiency normalization of our rural business finance portfolio to pre-crisis levels, which has given us the confidence to resume the growth trajectory of the business, albeit within the MFIN guardrails and our proprietary risk and administration frameworks.

We have started the work of implementing Cyclops in our RBF vertical, and it is expected to complete before the conclusion of FY27. Across our urban business lines, we continue to maintain our sharp focus on sourcing undiscovered prime, prime, and prime-plus customers who exhibit strong credit resilience.

This disciplined approach has led to our prime customer share in our two-wheeler finance disbursement steadily increasing to 90% for quarter one FY27. Our journey towards building a prime-dominant urban portfolio that showcases true resilience across business cycles continues unabated, firmly underpinned by our robust credit and risk administration frameworks.

Secondly, on the credit cost front, we will endeavor to drive credit costs down to a level of 2% or less during the Lakshya period. Over the last few quarters, concerted effort has gone into strengthening our underwriting framework, collections infrastructure, and portfolio monitoring capabilities.

The continued moderation in credit cost and improving asset quality during the quarter provides confidence that the structural interventions are delivering the intended outcomes. Additionally, we have commenced participation in the central government's credit guarantee schemes, namely CGFMU and CGTMSE, to create an incremental safety net for select cohorts of our rural business finance and SME portfolios and shield the balance sheet from cyclical volatility.

We believe that there is still a significant headroom for further improvement. As our newer portfolios continue to season and our proprietary AI-led underwriting and portfolio intelligence engine mature further, we expect our asset quality to strengthen progressively over the coming quarters.

This remains one of the most important levers for improving our profitability metrics under Lakshya 2031. Our return on assets target remains in the range of 3% to 3.2% for FY31.

Against that, we recorded an ROA of 2.48% in quarter one FY27 versus 2.37% in the corresponding quarter in FY26, also up 11 basis points year-on-year. We remain committed to working on achieving the 2.8% ROA threshold in quarter four FY27, as communicated earlier.

Against a Lakshya '31 ROE target of delivering a return on equity in the range of 16% to 18% by FY31, ROE increased to 12.71% in quarter one FY27 from 10.86% in quarter one FY26. As we look ahead, we have identified three key strategic objectives for FY27, namely: number one, driving cross-sell and upsell; number two, productivity enhancement; and number three, embedding tech DNA across the organizations.

These capabilities are critical to achieving our short-term and long-term business targets while building sustainable capabilities for future growth. LTF has one of the largest customer franchises in the BFSI sector in India, totaling to 3 crore customers, and we see significant opportunities to deepen relationships with this large, available pool.

Cross-selling remains a major focus area for us under Lakshya 2031. We're trying to reinvent the traditional cross-selling approach through the use of a proprietary multi-agentic framework, which will help us identify, originate, and fulfill cross-sell workflows to leverage the large customer base.

We'll give more details on this later during the call. Secondly, we continue to drive productivity enhancement across all our lines of business, primarily focused on frontline employees through customized productivity dashboards.

Third, in line with the strategic objectives of embedding AI-empowered tools and processes, we have taken the task to inculcate a tech DNA in all parts of the organization to build a future-ready workforce. This will entail identifying AI champions across the organization to help proliferate the use of applicative AI directly into everyday activities.

As I've highlighted in previous quarters, our strategic investments in proprietary AI tools spanning hardware, software, and market-leading talent remain foundational to how we sell, underwrite, collect, and operate. These strategic objectives are central to our structural evolution into a risk-first, tech-first, AI-native multi-product retail financier of choice.

As we start our Lakshya 2031 journey, our objective is no longer to be merely an AI-enabled lender. Our aspiration is to build India's leading AI-native retail financial services institution.

What differentiates our approach is that we have consciously invested in building proprietary technological capabilities. Rather than deploying isolated AI use cases, we have architected an integrated intelligence platform that spans the entire lending life cycle, from customer acquisition to underwriting to portfolio management, servicing, collections, and customer engagement.

This was articulated as our technology vision statement during the Investor Digital Day in November 2024, and we have continued to execute the envisioned architecture in a disciplined fashion. Today, 2 years later, we are pleased to share that our technology platform is powered by 1,000-plus technology and data science professionals who have built an in-house deep tech stack around customer intelligence, credit intelligence, portfolio intelligence, and service intelligence.

The same has been built out on an open API and microservices-based architecture, leveraging 100-plus proprietary scorecards, seven alternate data channels, and unified customer data governance platform. The first leap of faith in this journey was architecting Project Cyclops, our next-generation AI-powered three-dimension underwriting engine, which now serves as a prime example of effective technology driving growth and building resilient credit quality.

Cyclops has now been operating for 2 years in our two-wheeler business, has underwritten a portfolio of more than ₹12,000 crores, and consistently outperforms industry risk benchmarks by a wide margin. To illustrate, performance of Cyclops in our two-wheeler portfolio has been outlined in slides 13 and 14 of the investor presentation.

Project Cyclops is also live in our farm, personal loans, and SME businesses, and exhibiting excellent headline incomes. We'll make those outcomes public as and when we cross the seasoning threshold of 24 months.

We intend to take Cyclops live in our rural business finance and mortgage businesses during FY27. Nostradamus is our second proprietary tool, completely built in-house to enable enterprise-wide portfolio intelligence.

Nostradamus is currently live in two-wheeler and personal loans in a beta mode, and we intend to implement this for our RBF, SME, and farm businesses in FY27. This platform is already delivering measurable outcomes in predicting and containing portfolio risk at a granular micro-market levels in our two-wheeler finance business, enabling our business teams to undertake automated stress testing, generate real-time collection actions, and proactively identifying emerging portfolio risks significantly earlier than traditional monitoring frameworks.

Our new initiative is to rapidly democratize AI across the organization. Rather than limiting AI capabilities to a central technology function, we are embedding intelligence directly into day-to-day workflows of our operating teams through a growing suite of proprietary AI co-pilots.

Our flagship underwriting co-pilot, Helios, has already processed approximately 39,000 underwriting files and materially reduced turnaround times across SME finance and home loans. Orion, our conversational portfolio management co-pilot built on Project Nostradamus, has already serviced more than 3,000 business queries, enabling faster portfolio insights for our operating teams.

Sheeghram has automated more than 4,000 mortgage legal files across 11 vernacular languages, while our mortgage policy and pricing assistant today services more than 200 business queries everyday across 15 Indian languages. During the quarter, we also launched Argus, an AI-powered fraud screening engine for SME finance, further strengthening our risk management capabilities.

Please refer to slide 16 of the investor presentation for further details. Another significant milestone during the quarter has been the rollout of Kanyon, our proprietary AI-powered loan origination system for gold finance.

Built entirely in-house in under 4 months, Project Kanyon combines more than 16 integrated systems, over 60 APIs, 12 business services into a scalable architecture capable of nearly supporting 30 times future business growth. More importantly, nearly 60% of its codebase has been generated using AI-assisted development tools, demonstrating how AI is increasingly transforming not only our lending decisions, but also the way we engineer technology itself.

The platform's embedded agentic AI assistant, Genie, together with the context-aware asset capture and microservices architecture, is already enabling faster turnaround times and superior customer experience while providing the flexibility to rapidly respond to future regulatory and market changes. Please refer to slide 17 of the investor presentation for further details.

As I mentioned earlier, I'm pleased to announce our next-gen agentic AI-based service and cross-sell platform, Hercules, which is being built completely in-house. The platform is designed to deliver hyper-personalized customer experiences at scale.

At its core, Hercules leverages a central data repository to build a comprehensive customer golden record. This unified data feeds into an advanced AI decisioning layer, utilizing predictive analytics and propensity models to dynamically generate precise next best offers.

Here, we are integrating agentic AI into our core orchestration layer to autonomously manage lead identification, origination, and fulfillment while executing the hyper-personalized engagement through all of our customer touchpoints: our PLANET app, WhatsApp journey, or outbound voice bots. By unifying our lead management and loan origination systems into this intelligent omnichannel ecosystem, Hercules will significantly elevate service excellence, drive operational efficiencies, and maximize cross-sell velocity across our entire portfolio.

We are targeting rollout of this platform by Q3 FY27. To support the exponential growth of these in-house AI capabilities, we're investing in our own private cloud buildout.

Crucially, this strategic transition to an open-source private cloud will be 70% cheaper than relying on hyperscaler clouds over a 5-year total cost of operation. Concurrently, to support our intensive ML and AI workloads, specifically for running open-source LLM and SLM packages, we have initiated the design and procurement of hyper-performance GPU server augmentations.

Moving forward, we are aggressively prepared for massive cloud consolidation, targeting the migration of workloads from public to our internal private cloud infrastructure starting in Q3 and Q4 of FY27. By continuously strengthening this foundational infrastructure, we are unlocking three critical outcomes for the organization: driving sustained growth, ensuring improved credit quality, and achieving significantly reduced OpEx.

Please refer to slide 18 of the investor presentation for further details. We believe that these capabilities will progressively improve customer acquisition, strengthen portfolio quality, and reduce operating costs, and enhance operating leverage over the coming years.

As our AI models continue to mature and our proprietary data ecosystem expands, we expect technology to become an even stronger competitive advantage for L&T Finance. We firmly believe that this AI-native operating model will also become one of the defining competitive advantages of L&T Finance under Lakshya 2031.

Now, I'd like to give you a brief update on the scale-up of our gold loan business. Following the successful acquisition and integration of the portfolio last year, our focus has been on rapidly expanding our distribution footprint.

During the quarter, we expanded our gold finance network to 343 branches, adding more than 200 branches since the acquisition. The business has grown to a book size of approximately ₹3,800 crores, registering a growth of over 180% year-on-year.

On the footprint expansion front, our speed to market remains exceptional. Following the launch of 200 branches in FY26, we are now working on deploying 500 new branches in FY27, accelerating our velocity to 1.4 branches addition daily.

I will now request Mr. Sachinn Joshi, our CFO, to take you through the financial updates.

Thank you, Sudipta. As always, I'll be walking all of you through the financial performance of the company for the quarter.

Consolidated NIM plus fee for the quarter stood at 10.47% versus 10.22% for Q1 FY26 and 10.47% for Q4 FY26. Consolidated PAT for the quarter has gone up by 29% to ₹902 crores.

Quarterly retail disbursements stood at ₹23,852 crores, up 36% year-on-year. Retail book stands at ₹1,27,535 crores, up 28% year-on-year.

Our consolidated book stands at ₹1,29,634 crores, up 27% year-on-year. Consolidated ROA stands at 2.48%, up 11 basis points year-on-year.

Similarly, consolidated ROE at 12.71% is up by 185 basis points year-on-year. Talking about retail businesses, let me start with rural business finance first.

The business registered quarterly disbursements of ₹6,961 crores, up 24% year-on-year, mainly on account of improved collection efficiency and sectoral trends. The book size reached ₹32,493 crores, up 22% year-on-year in the first quarter.

Farmer finance vertical, the quarterly disbursement stood at ₹2,453 crores, up 11% year-on-year. The book size reached ₹17,514 crores, reflecting a growth rate of 11% year-on-year.

The segment which comprises two-wheeler, personal loans, and mortgages, we call it urban finance, saw a 57% year-on-year jump in overall quarterly disbursements, ₹10,787 crores in all. As a result, the overall book size increased to ₹63,615 crores in the first quarter, translating into a 32% year-on-year growth.

The two-wheeler business registered quarterly disbursements of ₹3,006 crores in the quarter, up 41% year-on-year. The book size increased to ₹15,068 crores, up 22% year-on-year, with 90% of June '26 two-wheeler disbursements in the prime segment.

We continue to prioritize high-quality growth and optimized risk-adjusted returns. In the personal loan business, we achieved our highest ever quarterly disbursement of ₹4,380 crores, translating into a stellar growth of 126% year-on-year, with the book size of ₹16,917 crores, an increase of 80% year-on-year.

In the mortgages loan business, we achieved quarterly disbursements of ₹3,401 crores, up 22% year-on-year. The book size reached ₹31,630 crores, an increase of 20% year-on-year.

In the SME business, quarterly disbursements stood at ₹1,567 crores, up 23% year-on-year. The book stood at ₹8,884 crores, up 28% year-on-year.

The growth in business volumes was aided through an increase in direct sourcing and an existing strong network of distribution channels. In the gold loan business, the quarterly disbursements stood at ₹1,928 crores, up 26% year-on-year.

The closing book reached ₹3,829 crores at the end of the quarter, representing a significant growth of 182% year-on-year. Let me now hand over the call back to Sudipta to make his closing comments.

Thank you, Sachinn. In summary, we are satisfied with our performance in quarter one FY27, where we have focused on relentless execution.

With a significant investment made across technology, engineering capability, AI infrastructure, branch expansion, and talent, we're expecting operating leverage to play an increasingly meaningful role in improving profitability, improving operating efficiency, which together with lower credit cost will be an important driver of ROA and ROE expansion over the Lakshya 2031 period. I thank you for all for a patient hearing.

The floor is now open to questions.

Thanks, sir, for such a detailed presentation and the opening remarks, particularly touching upon the entire AI initiatives. Few questions.

Firstly, in terms of the NIM plus fee, overall, it's still sustained at 10.47, but there has been the decline in the NIMs if we really look at it, while other income has actually gone up. What are the components of it?

Any impact of excess liquidity which would have been there, if you can just highlight what is leading to that kind of a deviation in NIM and the fee income and the sustainable trajectory? The second question is on growth.

Particularly on the personal loan side, the growth has been quite strong. If we can highlight some guardrails and the profile that we are keeping in mind just to ensure that asset quality out there is sustained, while at the same point in time, we had seen some slower disbursements on the SME and gold loans compared to that of last quarter.

Is it something wherein you indicated that you have let go of some disbursements? Were these in these two particular segments?

Yeah. Those are the questions.

Okay. Kunal, thank you for your comments.

Let me first take up the NIM plus fee related point. This is Sachinn here.

We can see clearly that the NIMs have reduced by 24 basis points from 8.78% in Q4 to 8.54% in Q1 FY27. The yields, if you look at, have actually gone up by 1 basis point, but our debt-equity has been rising, which is leading to interest cost going up by 25 basis points.

Actually, WAC is up just 3 basis points between the two quarters, moving from 7.17 to 7.20. Debt-equity, which was 3.73x, has gone to 3.97x, about 0.24x higher.

One reason is, of course, increased borrowing to fund the growth, and the other reason is also due to the geopolitical situation being a bit difficult on account of war in Iran. We had maintained slightly higher surplus liquidity of close to ₹4,200 crores.

The overall liquidity was ₹13,000 crores-plus. The net result has been a reduction in NIM by 24 basis points.

However, what is worth noting is that this surplus has been deployed in various instruments on which we have also earned an income and which has been booked under the head fee and other income. When you look at the NIM compression, you should actually look at in totality, and that's the reason we always request analysts and investors to actually look at the metric of NIM plus fee and other income just to make a comparison, which has actually remained at exactly the same level.

It's a coincidence, but previous quarter also it was 10.47, this quarter also it is 10.47. This other income actually includes some of the surpluses which were deployed.

The income is coming in that fee and other income. Correspondingly, the interest cost is part of the NIM.

That's the reason you see this difference. I hope I've answered the question.

Besides this, there is no element in the other income?

Any

SR recoveries or something which is there, or maybe purely on...

No, so, Kunal, there is a fee which is paid to ARCs, but there are some times when we have small incentives and all. Other income, nothing really worth talking about.

Let me put it this way.

Okay. Thanks, Sachinn.

Kunal, on the growth question, personal loans continue to grow well, and that is primarily because sort of the thorough and disciplined execution of our implementations with the digital partners. Now, you see we have now got four digital partners, which is primarily CRED, GPay, PhonePe, as well as Amazon.

These are the main large ones. We have a couple of smaller ones as well, but these are four main large ones.

Now, what happens is that we have been sort of working on smoothing the digital journeys and sort of removing friction from our workflows consistently quarter after quarter. Because these are platforms which have a large number of customers, and we tend to focus on salaried customer.

Our objective is to build a large salaried personal loans book, right? We focus on our salaried customers, and with a largely frictionless, optimized channel, as and when the visibility of our loan programs increase across these platforms, the volume tends to grow.

Now, we have been adding partner after partner and optimizing this partner's velocity, it has continued to grow. We have been embedding Cyclops now into these journeys, right?

The fact is that Cyclops also has been embedded to many of these digital journeys. We are very, very confident of the credit quality that is coming through.

First thing which I mentioned was that, say, we do loans to self-employed as well, but our focus is building on predominantly salaried book in our personal loans business. We have strong guardrails.

Cyclops has been implemented. The credit parameters on the personal loan business, what it was 1 year back vis-a-vis what it is right now, there is a significant improvement.

The fact is, every credit parameter with every passing quarter is tending lower and becoming better with every passing quarter. As of now, we remain satisfied with the trajectory of this business.

Yes, you have seen some heady growth in percentage terms because of the base effect. Last year quarter one FY26, compared to that disbursement, our disbursement has grown definitely.

Again, that is attributed to a much lower base. As the base grows larger, the percentage growth rates will reduce over the next couple of quarters.

However, we remain committed to growing this business in a risk-calibrated fashion. On your question on SME and gold loans, yes, SME, we have been cautious during this quarter primarily because we were cautious about the fallout of the West Asia war on certain business lines as well as certain sectors.

We have been cautious, and we sort of on our own cut disbursements in some of the SME sort of cohorts. We have done that.

Gold finance, again, April was a month in which the new RBI guardrails came into effect, where assessing customer basis a tiered loan demand became mandatory as per RBI guidelines. It is not only us, the entire industry saw an impact of adjustment to these new guidelines.

As a result of that, we erred on the side of caution just to make sure that we are completely compliant with the RBI guidelines. Just like across the industry, some of the origination volumes fell, we saw a fall in our origination volumes in the month of April.

However, there has been continuous improvement in May and June. I expect the gold loans business to have a normal growth trajectory in Q2 FY27 because that period of adjustment and learning in Q1 FY27 is behind us.

I hope that answers your question.

Sure. Yeah.

That answers. Yeah.

Thanks a lot.

Thank you for the opportunity, and congratulations on a good set of numbers. Sir, first question is on the personal loan book itself.

What I can see is that, obviously, the Cyclops was embedded into this in 2Q '26, but your Nostradamus is only getting implemented in this quarter, right? Just wanted to understand, I understand the control you would have had at the underwriting level, but without the monitoring AI engine, what kind of confidence do you have with the book you're underwriting if you can give some color around not in the terms of salaried, non-salaried, but in terms of what's the ticket size of the book that you've been putting out through these platforms?

My second question is on the tractor business. Any color on the slightly slower trend over there?

Were we cautious? Are we taking geography-wise focus because you've mentioned monsoon, some states may have reservoir benefit, etc., other states may not have those reservoir benefit, and if the monsoon is lower, we may get hit.

Third is on the cost of funds in terms of what are we going to do going ahead. I understand the first quarter, we were piling up liquidity, etc., but going ahead, what will be our strategy, and how much decline in cost of fund can possibly happen through the next three quarters?

Those are my three questions. Thank you.

Thank you. I'll take the first two parts, and Sachinn will take the third part.

On the personal loans business, yes, Nostradamus has got just implemented. First, average ticket size on our personal loans business remains between 2.6 to 2.8 lakhs.

I can confirm that we do not do small-ticket personal loans. We are not in that very small-ticket lending business.

Out of which, our large partners, which is basically our large digital partners, have a significant part of the origination, in which, with every large digital partner, we build individual scorecards. It's not that one scorecards for the all the originators.

We look at the data and the cohort of customer each partner has, and then we build those scorecards accordingly. Then we also cherry-pick some of the customers from this particular cohorts, and then show our offers.

In a way, we underwrite the customer, pre-underwrite the customer, and then also underwrite the customer when the customer goes to the digital journey just to make sure that our digital sort of acquisition is in a very, very high quality. Yes, Nostradamus has just got implemented, but the fact is that we have been seeing dropping risk levels in our personal loans business because of the tightening of the credit guardrails.

See, one of the things which we have done is that if you look at our personal loans origination, maybe 4 years back was 50-50 self-employed and salaried. Right now, it is largely salaried.

As a basis of that pivot, the credit parameters on our personal loans business has sort of improved continuously over quarter after quarter. Now with Cyclops and on top of that, the monitoring through Nostradamus, we are very, very confident of maintaining a good headline outcome credit quality on our personal loans business.

In fact, our gross non-starters in personal loans business is lower than 3% right now. That means, for example, we lend to 100 customers, only in the first couple of months, only about 3% of customers bounce their first checks.

Again, net non-starters is much, much lower. In fact, we are sort of tracking the lowest net non-starters in our personal loans business in the last couple of quarters as of this month.

We remain very, very confident on the trajectory of our personal loans portfolio, and we will grow it in a risk-calibrated fashion. Now that Nostradamus, as well as both Cyclops are implemented, we are extremely sure that this will prevent us from biting off any sort of unnecessary risks in this business than what is warranted.

On the tractor business, you have to remember that quarter one in general is a little soft quarter for the tractor business, barring the month of June, when prior to monsoons, the business disbursements take off. However, this quarter, as you know that monsoon was slightly delayed, we saw some delayed take-off in tractor volumes in the month of June.

Towards the latter part of the June, tractor volumes started taking off as the rains finally arrived. We will see good impact of the tractor volumes in the month of July and August as the monsoon keeps on spreading.

Overall, in the tractor business, the risk numbers also remain very, very stable. The net non-starter in the tractor business also keeps on going down.

We are happy with the sort of risk trajectory of the tractor business. I hope I've answered first two parts of the question.

Sachinn, for the third part.

Okay. On the third part, on the interest rate scenario, I think it's changing by the day, frankly.

The macroeconomic environment keeps changing, and the liquidity requirements keep changing. What we had done is at the end of this quarter, first quarter itself, we had brought down the liquidity surpluses to about 9,000 levels, ₹9,000 crore levels, which is a norm for us.

There is no assurance that things will really be continuing to be normal. Depending on the situation, we will keep either increasing or maintaining the same levels as in the earlier quarters.

What the overall impact should be seen in terms of how Reserve Bank of India has actually assured that there will be enough liquidity which will be kept in the overall system. If that is the case, then I think the interest rates, especially the overall yields, will not spike, and if there is no sudden spike, we would be in a position to continue borrowing through various instruments like PSL, as well as borrowing through the other domestic financial institutions.

We have got the ratings for mobilizing funds internationally, but I think this is not the time at currently. Yes, diversification is also possible in case the situation becomes favorable.

As far as second quarter is concerned, we believe that directionally, it may move up by 5-7 basis points. Frankly, we'll have to wait and watch the situation over the next few months.

On an aggregate basis, FY27, I think, may go up by about 4 to 5 basis points on an overall basis. Yearly WAC may actually go up from 7.35% for FY26 to maybe about seven point anywhere between 7.35 and 7.40.

That's what we are currently envisaging.

Right. Okay.

This is useful. Thank you so much, and all the best.

Thank you.

Thank you.

Hi. Hi, Sudipta.

Good morning. One question is on your ROA, ROE journey in Lakshya 2031.

Broadly, it expect kind of a ROA to improve 60 basis points from here on a pre-tax basis, 80 basis points kind of expansion. Now over the journey, how do you see the contribution from credit cost and OpEx to come?

Because by and large, it seems given the asset mix, the NIM plus fees already where it should be. How do you see this 80 basis points kind of improvement to come from?

Of course, when SR gets kind of realized, probably that will release something. Rest, if you can explain that okay, how this 80 basis points expansion in PBT ROA is going to happen, and particularly that in the backdrop if at all there is going to be something from the insurance regulator on the commission part because insurance commissions are a reasonably healthy kind of a proportion of your fee income.

That's first question. Second, if at all, at this juncture, what's your reading on El Niño and its impact if at all going to be on your rural portfolio growth and asset quality?

I know it's too early, and rains have been kind of improving, yet your assessment so far. Thanks.

Okay. Thank you.

I'll take the second part of your question first, and then we'll come to the first. See, I've been traveling around quite a bit for the last 2 months, right?

Frankly, I see nothing wrong in the economy. In fact, I was in Jabalpur about 3 weeks back, and wherever I went, in fact, the particular two-wheeler dealer and which is also one of the largest auto dealers in Jabalpur, he said that he has had a record May and June, and he just doesn't have stocks.

Right? I traveled to rural areas also.

Rural areas, things are okay. It's not that we could see any significant headline risk emerging.

Yes, rains are delayed. El Niño is supposed to lead to a sort of a lower-than-average monsoon.

That is what is projected. The fact is that if I look at till 10th of July, rainfall is only about 14% sort of deficient.

Now the IMD projection is about 10% deficient. If I look at what we have done is that we have also very carefully projected the reservoir stocks across the country.

Because of two back-to-back good monsoons, before this year's monsoon, I think the reservoir levels are at an acceptable level across the country, right? Barring a couple of locations in South India, the reservoirs across the country are at an acceptable level.

I do believe that even if we have a 90% monsoon, things are going to remain quite okay. Things are not going to fall out or break suddenly.

You got to understand one thing. The microfinance industry has come out of a major asset quality cycle.

The microfinance industry has deleveraged from a peak book size of ₹4,40,000 crores to about ₹3,30,000 crores right now. Right?

The industry has deleveraged ₹1,10,000 crores. You always remember that during a crisis period, your underwriting guardrails go up.

The book that you generate during the period is obviously of a much higher quality. Typically, after any asset quality cycle, you typically have an 18 to 24 months of Goldilocks period where you really do not see any emergence of risk.

In fact, in the microfinance industry, in spite of whatever El Niño worries, etc., have been there, I believe that it will be a pretty normal year, and I do not see any emergence of pockets of risk anywhere. The industry is being responsible.

The industry is adhering to the MFIN guidelines. The number of customers with more than three loans outstanding, I think, is lower than 5% as of now, right, in the industry.

Overall, the industry has deleveraged. I think the worries on this are overdone, right?

Whatever our travels have told us that the economy is robust, the economic activity is robust, and I expect that to continue. Monsoon can be a little subpar, but in spite of that, things will continue as normal.

The tractor business, again, there might be localized disturbances, but overall, we expect us to have a reasonably normal year. You would note that tractor business was the second business we implemented Cyclops after two-wheeler.

Tractor business actually has been operating on Cyclops for almost 18 months now, right? The headline results, like two-wheelers, that we see of the Cyclops-generated tractor portfolio is quite good.

In fact, we had the first half-yearly collection cycle that went through on the Cyclops-generated portfolio, and the outcome is quite good. Right?

Overall, we are reasonably confident that even if El Niño, etc., marginally impacts the rainfall, it will not have a very large impact on our portfolio, and we are sufficiently well-capacitated to handle it because of our prudent generation as well as the collections framework that we have already existing in most of the areas. On your question on ROA and ROE trajectory, yes, we need to improve about 80 basis points, we are currently whatever from whatever point we are currently there, we need to improve about 80 basis points to get into that Lakshya threshold of 3% to 3.2%.

Now out of that, I do believe that 20 basis points will come from the disappearance of the drag of the ARC portfolio, and that will happen over a couple of years from now. Many of the assets are resolving, but it's another two or three-year journey for us.

So 20 basis points will come from there. I do believe that about 30 to 40 basis points will come from efficiency in credit cost as well as credit-related costs, which I call the cost of credit administration, specifically collections cost, etc., and all that stuff will come from.

That is where it will come from. Some might come from business expansion as well, right?

A small bit can come from business expansion as well, and that is how it will stack up. Right?

We're reasonably confident about achieving this, and by disciplined execution, we have been executing in a disciplined fashion so far, and it is our commitment that we'll continue the similar close, disciplined execution for the next 5 years during the Lakshya trajectory as well. Thirdly, on your question on insurance, etc., yes, we are aware of these developments.

I'd like to point out that it is not only for us, it is for the industry. I do believe that the insurance industry, along with the regulator and along with the end consumers of the insurance products, which is the BFSI industry, right, will come to some acceptable solutions and outcomes on this.

That is also the reason that we have kicked off the buildout of our payments business, because, as payments can be a large fee revenue generator, but it will continue to build for us, right? It will be at least 2 to 2.5 years before fee revenue on the payments business are visible on our balance sheets.

It is in a buildout phase. We are cognizant of some of the headline outcomes that might happen because of sort of regulatory norming.

As a business, we have factored that in into some of our plans, and we will respond accordingly. However, I'd like to point out that is more of an industry issue, and it is not an issue for L&T Finance alone.

Sachinn, you would like to take? No,

I think you've answered to that. I think you've covered.

If there is any further question on this ROA issue, then I can maybe talk about this.

No. Thanks.

Very clear.

Okay. Thanks, Abhinav.

Yeah. Good morning, sir.

Thank you for taking my question. Just two things.

One is why in the last question, you just articulated what are the levers for ROA improvement, where you spoke about 20 bps coming from disappearance of the drag of the ARC portfolio, and I think another 30, 40 basis points where you spoke about improvement in credit cost and decline in credit administration. Just trying to understand, will this also include some improvement that we will see in OpEx over a period of time?

I remember you talking about scale building in some efficiencies. The fact that you kind of continue to invest, we are building this cross-sell engine that you spoke about in your opening remarks, you are, I think, also building your private cloud now, which you mentioned over a period of 5 years is better or is more efficient.

On the OpEx bit, if you could just explain how is the trajectory looking like. The other thing that you just mentioned, sir, is that you kicked off your payments business.

Just trying to understand, overall, whatever we've seen of the payment business until now, it's not really been a business which has been accretive to ROAs for most organizations till now. Are there pockets where you're looking to operate where the burn in the payments business will be much lower?

The other thing is until now, we've seen most of corporates, at least NBFCs, acknowledge that they're using the payments business as a funnel for customer acquisition. If that is the case also for us, for which business is the payments engine going to act as a customer acquisition engine?

Those two questions, sir. Thank you so much.

Thanks. The first question again on the ROA tree, obviously, we're trying multiple things at once.

I will say it's executing on all fronts. One, obviously, very important is a cross-sell engine, primarily because, as you all are aware, the acquisition costs of customers of selling products or deepening relationship with existing customers is probably 1/4 or 1/5 of acquiring a new customer.

In terms of acquisition cost, obviously, it is value accretive. Obviously, from a risk perspective also, selling to our known credit-seasoned customer from a risk perspective is also value accretive, right, because it helps us predict the credit cost outcomes far with far greater degree of certainty than getting a new customer off the street.

From both sides, it's more value accretive. Secondly, obviously, OpEx is not limited to cost of credit or credit administration.

For example, let's take this example. Our underwriting co-pilot or, for example, the legal co-pilot, like Sheeghram, right?

Average time to interpret, in case of a micro-LAP business, to interpret the title reports and do the proper title searches could take anywhere from 4 to 8 hours, right? Now with Sheeghram, that is down to 30 minutes to an hour, right?

For example, our mortgage co-pilot enables our salespeople to answer the query using their own prompt generation on the tool, right, rather than try to call back someone in the call center and try to get an answer to the query, right? Or, for example, in our collections businesses, bot-driven self-cure rate is almost high as 40% right now.

Especially in the two-wheeler business, our self-cure rate has gone up from 10% to 40%. Now we are not using any human beings to do this call.

We are only using machines, right? Overall, we expect that some of this technology sort of deployment will reduce the need for head count, though head count need to finally do the sale on ground, especially in the high touch-and-feel rural businesses will remain.

I do believe that a large proportion of our urban businesses will see efficiencies in head count as well. Over a period of time, I see a normalization in head count cost as well.

It will be not be very sharp in the next couple of years, maybe in the next two to three quarters, it will not be very sharp. As we move into FY29 and FY30, the impact of all these sort of implementations will be visible in our head count attrition as well.

In a way, it will be over the board across the organization. The private cloud that we talked about, now, see, again, it's a leap of faith as I talked about.

We are trying to build much earlier because the fact is that we have been trying to push the AI envelope much, much earlier than many other organizations. The cost issue that comes with large AI usage is also very, very well upon us.

The fact is that because we have understood that this is something that we need to address at the beginning stage itself, otherwise, it might end up undoing all the good that you want to do from an OpEx standpoint, we are starting to move towards building our own private cloud. However, can we run tier-1 applications on private cloud?

Probably the answer is no. Can we run our tier-3 and tier-2 applications on our private cloud?

Probably the answer is yes. Right?

Again, it has to go through a period of reliability testing, a period of operational effectiveness before we can sort of say it is a success. Overall, we are trying multiple things in multiple fronts.

We are not leaving any stone unturned. Maybe out of that, 80% will be a success, 20% might not be a success.

However, we are very, very confident that if 80% are a success, that trajectory of ROA improvement that we have committed is more likely to happen over the Lakshya '31 timeframe, right? We are very, very committed to it.

In terms of the payments business, yes, I understand that payments business on its margin, if you're trying to build the payments business as a soulless business, at times, it might not be value accretive. We have people with deep payments expertise within the organization.

I have done payments myself for 25 years of my career, I really understand this business very, very well, right? Our focus will be on parts of the payments business that are more value accretive, right, from a fee point of view, and we will slowly provide more color to it as we go forward.

We tend to build a payments business which is agentic in nature because we have a lot of expertise on the AI front, especially on agentic AI that our engineers are now building. We have decided to leapfrog the entire sort of normal payment and move into agentic commerce.

We do believe that the movement to agentic commerce will unlock certain revenue dimensions that are not yet hitherto explored by the industry, on which, yes, it is our thesis. Now the question is, we're trying to implement this thesis.

The thesis implementation might be a great success, it might be a partial success, or it might be a failure. We really cannot put our finger on it and say.

The fact is that given the experience that we have, we are reasonably confident of success. Overall, over the next couple of quarters, we'll slowly start working on this business.

See, our business is not to burn money to try to get customers. There are certain organizations who give cash backs on UPI, etc., and burn money and try to get customers.

That is not our model. Our model is to independently go, first and foremost thing, serve our own customers.

Because we do not have a payment stack at this current point in time, there's an OpEx drag that we have trying to facilitate payments for our customers. Now first objective is to eliminate that OpEx drag by doing that thing ourselves in-house, right?

The second thing is to intelligently build solutions through the agentic commerce model where our customers, as well as some maybe new-to-organization customers, might find benefit in those agentic commerce solutions and sign on to us in terms of the services that we provide. Last but not the least, we will test hitherto developed areas, especially in the prepaid payment area where we are very, very confident that there are revenue pools lying, especially in the fees front, which can be tapped very, very effectively by the organization.

Payments will be a step-by-step build. It will not be an all-rushing build.

It will be a careful, calibrated build, which will continue to build for the next 2 to 4 years because this is something that we are committed to in long term as a goal for diversifying our fee revenues, and this is something that we'll deliver during the Lakshya '31 period. I hope I have answered your question.

Yes, sir. That answers my questions, sir.

Thank you so much, and I wish you and your team the very best.

Yeah. Thank you for the opportunity, and congratulations on the quarter.

Firstly, on personal loans again. I just wanted to understand who are the key competitors, and how does our yield stack versus peers if you could help on that?

Secondly, what differentiates us on the personal loan front, whether it is faster TAT or customer experience? The sourcing would be largely digital only, I assume.

That's the first question on PL. Secondly, on AI investments, could you just elaborate on your AI investments, what is the current run rate of AI-related costs, and what proportion is variable based on the usage?

Yeah.

Yeah. Okay.

On the personal loans part, our key competitors is actually everyone else in the BFSI sector, right? Who does personal loans, they are our competitors, right?

Now there are models of operation, right? There are certain organizations, especially the large banks, who operate on their own customer base, right, and through the DSA channel, right?

For us, we operate on our own customer base through the cross-sell to our credit-seasoned customers. We also operate marginally through DSA.

If you see our DSA volumes, our DSA volumes are only 10% of our overall volumes. The fact is that a large portion of our origination is through the digital partners who have a very large pool of customers, as well as they're far more amenable to digital processes.

They allow very fine customer selection, primarily because they see a large amount of the customer data, right? They're able to give us a far more nuanced underwriting approach, especially on a joint scorecard development with target loss rates, I exactly know what is the customer underwriting and what is the target loss rate.

The scale-up has been primarily because of digital journeys and friction sort of removal across all our channels. Our average yield remains at about 16% and plus, though there are certain channels which deliver, again, because we operate across the spectrum, our DSA channel will probably operate at a far lower rate, right, because DSA channel we do prime salaried.

Our DSA channel will operate between 12% to 13%. Some of our digital channels will operate at about 19%.

Overall, our weighted average yield in the personal loans business is about 16% odd, 16%-plus is our weighted average in the personal loans business. In terms of the AI implementations, now, see, there are a couple of parts, right?

For example, there are core builds, right? For example, the core build would be like a machine like Cyclops or a machine like Nostradamus, right, which probably doesn't use agentic AI.

On a query base, it's agentic AI. For example, Nostradamus uses agentic AI-based query system, but the core of the machine is built using machine learning, where actually you do not have token costs that much.

The fact is that you run that machine, and you have a continuous model upgradation cost. Overall, we have spent roughly about ₹38 crores to build Cyclops, and overall, we have spent roughly about ₹28

crores... ₹33 crores.

₹33 crores for Cyclops?

Nostradamus.

Nostradamus, and

₹37 crores

for Cyclops. The fact is that we are still in the process.

For example, as I said, for microfinance as well as mortgage, Cyclops will be implemented this year, and Nostradamus will be implemented for other lines of business apart from personal loans and two-wheeler. The cost on that continues, right?

Overall, our token consumption, as we had given out some token consumption in the last part of last presentation, I think if my memory serves me right, 244 240 crore tokens was the consumption last quarter. Now, obviously, we are on Google Cloud, and we are completely a GCP suite user.

Obviously, we have a sort of a preferential deal with Google on usage of some of the AI tools, though we use Claude Code for using some of our coding. See, right now, I would say probably we can come back offline saying that what proportion of our total IT cost is variable AI cost.

Because I don't have that exact number available with me today. However, between about ₹100 to ₹120 crores a quarter is our overall IT cost trajectory.

Right? Just to add...

Just to add, the Cyclops, Nostradamus, and all these new projects that we're working on, the total amount, taking into account the previous year capitalizations also is around ₹102 crores at this point, and there is some capital work in progress, which is there for the projects which we are currently working on. Yeah.

Sure.

Hope that answers your question.

Yeah. That answers.

Probably I'll connect offline for the fixed and variable portion. Sure.

Thank you. Yeah.

Yeah. Hello.

Am I audible?

Yeah. You're audible.

Yeah. Hi, Sudipta.

Congratulations for the quarter. My question is on this wholesale NPA.

This is a quarter where after many quarters, it has gone up a bit, although it's a small amount. The question I have is, one, if I look at the wholesale book of ₹2,000 crores, how should we think about the health of that book going forward?

Second is in your guidance of credit cost coming down, have you factored any NPA coming from that book? If not, then does that lead you to sort of rethink your guidance?

If you can share some color on the remaining book. I know it's small, it's just ₹2,000 crores, but just that any kind of color on the health of that book will be useful.

Abhishek, let me take this. Sachinn here.

The GS3 small increase that you're referring to is actually part of a settlement that we have already done, and whatever hit is to be taken has been already factored in. There is no further increase.

It's actually transitioning between the two quarters. That's the reason why it is appearing as a GS3, but you will see the same amount actually getting knocked off in the next quarter.

As far as the other assets on the books are concerned, they are all standard assets, we do not really expect any hits coming out of that. On the ARC resolutions, we already spoken about in the previous quarter, but let me just add the positive side of it.

The PCR on the SRs, the security receipts, when we started off on this resolution process, was 58%, and that has now actually gone and increased to 68%. The reason for that is that as per the RBI regulations, till the time all the assets do not get resolved, any receipts out of resolutions of the other assets need to be actually kept as part of that ARC's reserves.

Whatever resolutions are yet to happen, this goes and adds to that buffer. So 15 10% increase itself shows that there is a substantial buffer which has got created, which is actually not required because we do this mark-to-market on a regular basis.

We have that money, and that's why we are very confident that once the resolution start happening ARC by ARC, you will start seeing this credits coming into the P&L, and our assurance has been that we will not take it to the P&L, but we will utilize them to create macro-prudential provision.

Right. Okay?

I think that should give enough comfort to all of you. For

sure. That is on the SR part.

In the existing wholesale book, it's all standard,

but

in your guidance of credit cost, have you factored any slippage from this book or it is purely just the retail movement and this book is too small and it will run off, you're not factoring anything?

No. It will just run off over a period of time.

That's right.

It's not factoring anything.

Abhishek, I will add to what Sachinn says, some of these assets, etc., over in the ARC, we have seen significant movement in the resolutions, without naming the asset. One particular asset which was in Bangalore got resolved in terms of the sort of the deadlock that was there between the developer and developers, and then it has got launched.

The project is getting launched, right? That project will take 3 years to finish.

It's a massive project, right? The cover on that particular is almost three times that we have, right, in terms of current valuation.

Most of these projects will take the next 2 to 3 years to resolve, and our wholesale team, especially our resolution team, has reasonable confidence that during the Lakshya period, we'll end up getting a good amount of over-realizations than what the book value of some of these assets are. As we have committed, we will not take any of the over-realizations on these assets into the P&L.

We'll try to create a buffer if we get that particular opportunity. As Sachinn said, we have already getting resolutions from some of these assets which have gone into that asset pool.

Because the SR asset pool has a couple of other assets, though that particular SR pool cannot be closed. Obviously it shows up in increased PCR on the overall SR pools.

Again, to reiterate, the credit cost assumptions does not assume credit cost as of now from any wholesale... Because

the GS3 has only one asset, which is Supertech, which the PCR currently is at about 61%, and we believe because we keep doing this fair valuation every quarter, and there has been no further requirement to make any further provisions, and that's the reason there is no need for factoring, and hence, it has not been done.

Very clear. Just another quick question on this girl group loans, the distribution network slide, right?

There the distribution network, new villages activated, that is a flow number or a stock? Because it has gone down 5,000, 5,000.

This is on what, slide 25?

Slide 25, yeah.

This is a

flow number, right, every quarter the number of... It's a every quarter

every quarter. See, what happens is that, we have 2,20,000 villages into which we go and distribute distribute our microfinance products, right?

Now

some of those villages become inactive, in a quarter. The objective is to go and activate it once again, right?

This number is new villages which are activated, which have been absolutely brand-new villages where, previously we were not distributing, or a village where we were distributing prior to that, but the fact is that had gone, become become inactive, which we have gone ahead and activated once again.

Got it. Yeah.

This is a monthly exercise.

Monthly, okay. Got it.

Okay. Thank you so much, and all the best.

Thanks. Thanks.

Thanks.

Hi. Thanks for the opportunity, and congrats for the good set of results.

I had actually two questions predominantly. One was, Sachinn, just a clarification on two points.

You mentioned about the liquidity part initially you had at the beginning of the quarter. When I look at the LCR numbers between the two quarters, that shows a decline already of 18 percentage points.

Is that during the course of the quarter, it was high, and then towards the end of the quarter, it was reduced?

That's right, Viral, because, as the situation starts improving, we really do not need to keep the conditions. Like, just a day back, again, there has been some increase.

The ALCO has given the authority to the management committee, which is a subset of ALCO, to take this decision on increase or decrease in the liquidity to be kept on the books, because ALCO cannot keep taking these decisions on an ongoing basis. They meet once a month.

They have been given the authority to actually keep moving in and out. If there is a need, if there is an external environment change, which necessitates increasing the liquidity, then it is done.

It's basically very proactively dealt situation. The management committee actually meets every week to take care of this.

Got it. Fair.

Second, Sachinn, clarification I wanted was on the cost of fund side. You mentioned that you expect on a full-year basis say around 5 to 7 bps kind of an increase for the full year.

When I look at FY26 numbers, the cost of fund was 7.35, and 1Q, we are standing at 7.2. Does it mean that from 1Q levels, the cost of funds will go up by nearly say 20-25 basis points?

That is what we have budgeted for. If you had asked me the same question before the credit policy, I would have actually added 5-10 basis points more because the situation was grim and there was an expectation.

See, the geopolitical situation is leading to global changes, right? If the yields are going to go up internationally, then even Indian government and the regulator will have no choice but to keep increasing the yields just to remain competitive.

As things stood just 2 days back, the yields actually came down again. Last 2 days again, there has been some challenges again between Iran and US.

It has been a very volatile kind of situation. We have, for the time being, been very conservative and assumed that there could be one or two rate increases which may happen.

Even if the repo rates don't go up, players like us get impacted negatively or positively depending on how the short-term yields really go up or down. The short-term yields go up without even changing repo rates, and we have no choice but to keep borrowing.

That actually leads to increase in the cost, which happened in the previous quarter, right? 3 basis points is the increase that we are showing.

I'm sure that the peer group companies who do not have the benefit of PSL may actually have a higher increase. Same thing happens when situation turns favorable.

For example, Reserve Bank of India has come up with the FCNR(B) schemes, and if we are able to mobilize huge amount of funds through that mode, ultimately, it will be AAA NBFCs like us who will finally benefit because the moneys will come to us for incremental credit to be given. The situation being very volatile, that's the reason I have said that it could be in the range of 7.35 or 7.4.

If things really get normalized, then you may see a much more favorable number that we may come across over next couple of quarters.

Got it. Just one last question, Sudipta, for you maybe.

You have been guiding for the credit cost to structurally decline, and for 4Q FY27, you have been guiding now for 2% to 2.2% kind of a credit cost, and thereafter, it will still further decline. For FY28, what is the full-year kind of credit cost?

Do you think you can deliver? Can it be we can assume a less than 2% credit cost?

See, Viral, I'm not a soothsayer, my first port of call is to get it to between 2% to 2.2%. That's my first port of call.

Now the fact is that Cyclops is in effect. Cyclops has been delivering, right?

However, we are all traveling through a geopolitical environment which is volatile. We have certain worries on the monsoon front, though I do believe that those worries are overdone, right?

However, my first target is to get it to 2% to 2.2%. Uske baad dekha jayega, uske baad, how far it goes below that is something that the numbers will tell.

In fact, the trajectory of our assets will tell around the Q3 or Q4 of this financial year. If you were to ask me this question around the middle of Q4 of this financial year, I'll be probably able to give you a far more cogent answer.

As of now, it's very difficult for me to give you an answer on that.

Fair enough. Maybe not say the extent of decline, but then would it be fair to think that FY28 could be at least a 2% 2% to 2.2% number?

For modeling exercise, yeah, you can plug that in, because that is what we are committed to. If we have said that by Q4 we are between 2% to 2.2%, then obviously in FY28, if you have to maintain our good performance, we have to be in that trajectory or lower, right?

For your modeling purpose, you can plug that number in. Right?

In Q4, please meet me. I will give you a far more nuanced answer at that point in time.

Sure. Definitely.

Thank you so much, and all the best.

Thanks.

Thanks.

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

My question was in continuation with the previous participants wherein if the cost of fund is likely to go up because of the uncertainties, what is the kind of NIM implication that we see could happen? I understand that you highlighted the uncertainties around and the volatility around.

Then what is it that we are sort of building in in terms of the range that it could be in terms of implications?

Shreepal, Sachinn here. In terms of NIM implications, we stick to the corridor of 10% to 10.5% which we have given.

There are different moving parts. Every quarter, you will at times find the cost of funds going up or down.

The yields now have come to a level where depending on which business we really accelerate, the mix now decides on what is the kind of yield movement that we will see. There's only one asset book which actually has a variable interest rate where we could pass on if there is an interest rate, which is mortgages.

Apart from that, there are a couple of levers in terms of the fee income, which can also be looked at. As Sudipta was mentioning earlier, that we are working on the payment platform.

We should start seeing some revenue flows, although we have not factored in at this point of time. From the next financial year, we are surely going to see some revenue flows coming in.

There are some moving parts, and as the situation comes over, we will try to figure out how to deal with that. The NIMs, you can stay assured that if you looked at last almost 2.5, 3 years, we have been giving a guidance and we have stuck by that guidance.

Got it. Sir, just a follow-up there.

Since you talked about the loan book mix, we have seen urban book gaining share in the overall loan book. Where do you see the mix shaping up while we've been talking about FY28 '27 end and then '28 end?

Where do you see this parameter in terms of the loan book mix shaping up by FY27 end and then FY28 end?

Just since this is a question immediately coming after the earlier one, the gold loan book is going to be one of the thrust area. Micro-LAP will be another area.

Personal loans will be a third area. If you look at, all these three are reasonably high-yielding products.

We should be in a position to use these levers. Also as far as the rural business loan book is concerned, we already at 99.8% collection efficiency.

We are not talking about decelerating the growth. We're just talking about in percentage terms just because other books will grow, this may go down to some extent.

Otherwise, growth over there also will continue. That's the reason I said there are levers of ensuring that the 10% to 10.5% corridor can be met depending on which business we accelerate in a particular quarter.

Got it, sir. Thank you so much, sir, for answering my questions, and good luck for the next quarter.

Thank you.

Yeah. Hi, team.

Thank you for taking my question, and congrats on the quarter. Just a couple of questions.

These large digital partners you work with for the personal loan business, do they also provide FLDG? If so, how much?

No, we don't work on an FLDG model with any one of them. It's completely our own credit.

See, at times working on FLDG models means compromising on credit parameters for the sake of volumes. Philosophically, we don't do that, right?

It is only we originate customers at our own credit terms and not at terms of our partners.

Understood.

We give an origination fee to that partner, nothing else.

Got it. Secondly, sir, did you mention in your opening comments something about CGFMU?

Yeah.

How much...

We have started taking CGFMU coverage for our microfinance portfolio. See, we are not taking it for 100% of our portfolio.

We have done a sort of risk metrics analysis, and we are taking coverage on a certain section of our portfolio, our softer portfolios which we think are prone to economic shocks or has some overhang of an event risk. That is where we're taking this coverage.

Just like we are taking CGFMU, we are taking CGTMSE coverage for our SME business as well. Again, not on the entire SME book, the cohort of the SME book that we think it is risky.

When we underwrite our SME book through Cyclops, it divides the book into three segments, the segments which we call premium, core, and value, and they are rank-ordered according to their risk. It is primarily in the value segment, which is the last of the cohort, that we are taking a CGTMSE coverage, because that we consider as a sort of our vulnerable segment as well.

Again, our objective of taking the CGTMSE coverage, as well as the CGFMU coverage, is to provide the optimum amount of protection with the least amount of addition to ongoing OpEx.

Got it. Sir, sorry, in MFI, can you give an example of a cohort?

Would it be only borrowers with more than three loans?

It is difficult to give an example of a cohort. See, because each and every state has its own flavor.

There might be one particular state which is more prone to floods, right? Now there are two options: you can take CGFMU coverage or you can take parametric insurance, right?

Or all new customers, for example, right? Any new customer who is coming, all new-to-credit customer, you have not seen their credit behavior before.

They are completely zero-cycle, right? Those are the customers you would like to take a CGFMU coverage.

Now once those customers go through 3 years, right, and has done one or two cycles with you, you are good enough. Their coverage, you're happy to let go of the CGFMU coverage because you know that this customer is credit-seasoned.

Right? Also, we are expanding our business in new geographies, like Rajasthan, Punjab, Haryana, MP, Gujarat, Maharashtra, Orissa.

These are the locations where we are taking CGFMU coverage because many of the customers that we are acquiring in these locations are first-time customers for us.

Just to add, since we're taking it for the first time, in this year itself, we will cover about 35% to 40% of the total disbursements that we make in the current year for the microfinance company.

Microfinance business.

Understood. Okay.

This is pretty useful. Thank you, and wish you all the best.

Thank you so much.

Thank you so much for joining the call, and thank you for your feedback and participation. I trust we have been able to address all your queries.

However, I think that in such a short timeframe is probably at times inadequate to address all the queries. Our investor relations team is always available to answer any queries, and myself and my management team are always available to meet you one-on-one or in groups to answer any additional queries that you might have.

Thank you for your participation and attendance, and with this, I would like to close the earnings call for quarter one FY27. Thank you so much, and have a nice day.