Thank you, Manav. Hi.

Good evening, everyone, and welcome to Utkarsh Small Finance Bank Q1 FY '27 earnings call. On behalf of ICICI Securities, I would like to thank Utkarsh SFB management team for giving us the opportunity to host this call.

Today, we have with us the entire top management team of Utkarsh SFB, represented by Mr. Govind Singh, Managing Director and CEO; Mr.

Sarju Kumar, Executive Director; Mr. Amit Acharya, Chief Risk Officer; Mr.

Virender Sharma, Head of Microbanking; Mr. Sourav Ghosh, Head of Consumer Banking; and Mr.

Abhey Katariya, Head of Assets. I will now hand over the call to Govind ji for his opening remarks, and then we'll open the floor for Q&A.

Over to you, sir. Yeah.

Thank you. Thank you, Renish.

Thanks a lot. Good evening, everyone, and thank you for joining us for our Quarter 1 FY '27 earnings call.

The first quarter of FY '27 marks an important point in our journey. Over the last several quarters, our bank has navigated one of the most challenging operating environments faced by the microfinance industry in recent years.

Throughout this period, our focus remained firmly on protecting franchise quality, preserving balance sheet strength, improving collections, and ensuring that every strategic decision was aligned with the long-term interests of our customers, shareholders, and other stakeholders. We are encouraged by the progress achieved across multiple dimensions of our business during the quarter.

The actions undertaken over recent quarters are beginning to translate into measurable improvements in business momentum, asset quality indicators, portfolio composition, funding cost, and operating performance. While profitability has not yet fully normalized, the significant reduction in losses and the strengthening of underlying business drivers reinforce our confidence that the bank is moving in the right direction.

Over the last year, our objective has been clear: to build a stronger and more balanced institution by improving the quality of new businesses, strengthening risk management practices, diversifying revenue streams, expanding secured lending, enhancing collection infrastructure, deepening customer engagement, and improving the granularity and quality of our liability franchise. These efforts are now providing the foundation for a more sustainable growth cycle.

One of the most encouraging developments during the quarter has been the strengthening of business across both our JLG and non-JLG segments. Disbursement trends have improved significantly, reflecting both increased customer demand and our confidence in the calibrated growth.

During Quarter 1 FY '27, total disbursement grew by 49% year-on-year, supported by JLG disbursement, which grew by 5% year-on-year, and non-JLG disbursement, which registered a robust growth of 92% year-on-year. Importantly, this growth has been built on strengthened underwriting framework and improved portfolio monitoring mechanisms.

Our objective remains to grow assets of the right quality and risk profile rather than pursuing growth for its own sake. Consequently, equally encouraging are the trends visible in portfolio performance.

The improvement in business momentum has been accompanied by continuous strengthening in asset quality. During the quarter, X bucket collection efficiency in the JLG segment remained strong at 99.7%, up from 98.6% in Quarter 1 of FY '26.

SMA pools within the microbanking segment contracted to 1.2% from 1.3% in March '26 and 5.1% in June '25, reflecting strong field execution and enhanced collection processes. Along this, the total fresh NPA slippages, net of recoveries and upgradation, reduced materially to 125 crore compared with 170 crore in previous quarter and 400 crore in the corresponding quarter of the previous year.

As a result, the GNPA ratio as percentage of gross loan portfolio stood at 5.9% as of June 2026, representing an improvement of 550 basis points year-on-year and 160 basis points quarter-on-quarter. These trends demonstrate the measures implemented over the recent quarters are producing tangible outcomes.

As we assess the future shape of the bank, diversification continues to remain a central strategic priority. Over the years, we have consciously worked towards reducing concentration risk and building multiple growth avenues.

Our JLG portfolio now represents 26% of the gross loan book and 26% including BC JLG exposure compared to 88% in March 2020 and 90% including BC JLG exposure. Simultaneously, secured lending has increased to 51% of the gross loan book from 45% a year ago.

This structural transformation is changing the nature of our balance sheet, reducing margin volatility, and supporting a more resilient risk profile. Within microbanking, the growth of our microbanking business loan product continues to validate our customer life-cycle strategy.

MBBL serves customers who have demonstrated repayment discipline and are ready to graduate beyond traditional group lending structures. Further, we have expanded the product to cater to new-to-bank customers as well.

MBBL portfolio grew by 147% year-on-year and 11% sequentially during the quarter and now constitutes more than 30% of the microbanking portfolio. With penetration still below 20% of our customer base, there remains substantial room for further expansion.

We believe this segment represents an attractive opportunity to deepen customer relationships while supporting business growth among our borrowers. Beyond microbanking, growth momentum across secured and diversified asset classes remained healthy.

Our MSME portfolio expanded by 12% year-on-year to 4,482 crore, also supported by the micro-LAP segment, which is delivering disbursement yield of around 18%. Housing loan grew by 8% year-on-year to 1,005 crore, while our BBG, the business banking portfolio, recorded strong growth of 40% year-on-year.

In commercial vehicles and construction equipment segment, we have continued refining portfolio composition with greater focus on assets demonstrating stronger risk profile. The share of used vehicle in disbursement is around 30%, reflecting our emphasis on balancing growth with prudent risk management.

Gold loan penetration is also expanding through our digital LOS aimed at improving turnaround time, controls, and operational efficiency. Collectively, these trends highlight the emergence of a broader and more diversified lending franchise capable of contributing to long-term profitability and stability.

Over the last several quarters, we have remained focused on strengthening our liabilities franchise, increasing granularity, enhancing customer engagement, and reducing dependence on bulk deposits. Total deposits grew by 3% year-on-year, supported by CASA deposits, which grew by 15% year-on-year, while retail term deposit also increased by 15% year-on-year.

Consequently, CASA plus retail term deposit ratio improved to 83% compared to 74% a year ago, and the CASA ratio strengthened to 22% as on June 2026. The benefits of the improving deposit mix are also reflecting in funding cost.

Following RBI repo rate cuts, we have phased reduction in interest rates on savings and term deposits to remain competitive while optimizing cost of funds. As a result, cost of funds declined by around 40 basis points year-on-year and around 50 basis points quarter-on-quarter to 7.7% in Quarter 1 FY '27.

We expect the full impact of repricing actions to unfold progressively over the coming quarters, providing further support to margin stability. From an earnings perspective, Quarter 1 FY '27 reflects a business that is steadily approaching normalization.

We reported a net loss of 34 crore. This represents a reduction in [more than 80%?]

both on year-on-year basis as well as sequential basis. As stated earlier also, to further derisk incremental flows, we registered under CGFMU credit guarantee scheme for eligible JLG and MBBL disbursement with effect from January 17, 2025.

60% of our microfinance book relating to disbursement up to Quarter 4 of FY '26 is already covered under CGFMU, increasing to around 80% upon including Quarter 1 FY '27 disbursement. This coverage materially reduces the risk associated with new disbursement and supports portfolio stability as we continue to scale higher quality secured lending products.

During the quarter, the CGFMU scheme provided mitigation of around 75 crore in terms of P&L impact, contributing to a reduction in the credit cost to 2.3% compared with 5.3% in Quarter 4 FY '26 and 8.5% in Quarter 1 FY '26. Importantly, the key drivers of future profitability, asset quality, credit cost, business growth, cost of fund, and portfolio mix have all moved in a favorable direction.

While pursuing growth opportunities, we have remained committed to maintaining a strong liquidity and capital position. As of June 2026, the bank maintained surplus liquidity of around 3,200 crore, an LCR of 227%, the CD ratio stood at 83.8%, and our capital adequacy remained at 17.4%, well above the regulatory threshold, providing sufficient capacity to support growth plans and absorb potential uncertainties in the operating environment.

The bank is planning to raise around 500 crore through NCDs in the current year to accelerate growth initiatives and reinforce its capital adequacy. Also, we have taken a strategic decision aimed at accelerating balance sheet clean-up through the ARC sale of stressed JLG and Wheels portfolio and ensuring that we remain focused on future growth opportunities rather than legacy stress.

We believe such actions improve transparency, strengthen the franchise, and create a clearer platform for long-term value creation. On the proposed scheme of amalgamation of holding company, UCL, with and into the bank, the NCLT at its hearing on July 23, 2026 took note of the responses received from the relevant authorities and wherever the replies were pending, granted another 10 days to file the same and, hence, fixed the matter of next hearing on August 6, 2026.

The reverse merger expected to complete in next few months, subject to NCLT proceedings. Operational excellence continues to remain a core area of focus.

We have strengthened our collections infrastructure, operationalized a specialized call center for overdue accounts, enhanced monitoring processes, and training program for new frontline staff, emphasized core processes such as center meetings and customer onboarding, ensuring consistent execution across the field. Our collection workforce supporting JLG and MBBL businesses exceeds 1,200 personnel.

We have also improved branch-level oversight and strengthened customer engagement mechanisms. These operational enhancements have contributed meaningfully to the improvement seen across collections, SMA trends, recoveries, and overall portfolio quality.

Technology continued to play an increasingly critical role in our transformation journey. Through the Utkarsh 2.0 technology transformation project, we are embedding greater automation, data-driven decision-making, monitoring capabilities, and process efficiency across the organization.

Enhanced digital underwriting tools are helping us identify and avoid overleveraged borrowers, while 360-degree control parameter mapping, strengthening monitoring frameworks and improving visibility across the credit cycle. The bank is also about to launch new CBS.

These investments are expected to improve customer experience, strengthen risk controls, and support scaling of the business over the coming years. We have also taken steps to improve the quality of new account sourcing and to cross-sell products through our liability-focused general banking branches, thereby increasing product penetration per customer and improving wallet share.

These actions, taken together, are designed to reduce the probability of future stress and to create a more diversified, resilient earnings base. The bank's strategy is centered on improving productivity and operating efficiency rather than branch expansion.

Employee headcount has been rationalized by around 1,700, while growth is being driven through enhanced productivity of the existing branch network, digital, and technology investments. The bank is also undertaking various product and process simplification initiatives, including workflow automation, digitization of customer journeys, reduction of manual interventions, and streamlining of operating processes to improve turnaround time, service quality, and cost efficiency.

As we look ahead, our priority remains clear. We intend to build on the positive momentum achieved during the last few quarters by sustaining collection performance, further improving asset quality, expanding secured lending, accelerating growth in diversified asset classes, and deepening our liability franchise.

At the same time, we'll maintain disciplined underwriting standards and a prudent approach to risk management. We are aiming for a loan book growth of around 25% to 30%, with the secured lending compromising 55% of the portfolio, maintain NIM of around 8%, and delivering an ROE of 15% by FY '28.

While sectoral headwinds and regulatory transitions may continue to influence near-term performance, we remain confident that the strategic direction we have charted will deliver a stronger, more sustainable franchise over the medium term. FY '27, in our view, is a year of rebuilding earnings strength and translating operational improvements into sustainable financial outcomes.

The progress achieved during Quarter 1 is encouraging because it demonstrates that the recovery process is firmly underway. We are seeing stronger disbursement, improving portfolio quality, lower fresh stress formation, better recoveries, a healthier funding mix, declining cost of funds, and increasing transaction cost across diversified businesses.

Together, these indicators point toward a franchise that is emerging stronger, more balanced, and better positioned for the future. With this, let me hand over the call for the question-and-answer session.

Thank you very much.

Hello, sir. Thank you for taking my question.

If you could just give some color onto what would be the portfolio rundown of your JLG portfolio going ahead in the year, what percent of your portfolio would it be and the overall MFI portfolio also? How much do you plan to rundown the focus with?

Just to mention, we have been talking past also. We have a strong belief that the JLG and overall microbanking has a good potential for growth also.

Our idea is to remain almost in the same range, around 25% or so, overall if you look at JLG part, over a period of next 2 to 3 months also. Sorry, not 2 to 3 years also.

Around 25% is what we expect our JLG portfolio will be.

Okay. If you're not planning to rundown much of the JLG portfolio from here on, what would be the total overall portfolio growth for this year and the next year?

As you mentioned, in case of JLG and I also add, we have microbanking business loans also. Our range is around 15% to 20% growth as far as the JLG and the microbanking is concerned.

We have mentioned that overall we expect that 25% to 30% growth will be there. JLG growth will be below 20% overall.

Okay. Yeah.

Sorry, ma'am. Just to add, I guess, maybe if you are referring to the stress that has been seen in the past in the JLG, and the fact that how are we looking at that growth in this book.

Two things. One, that environment, as we speak, all the disbursements are happening under the new guardrail, which is to say that the behavior of the new guardrail, the slippages are normalized.

To that extent, the past guardrail legacy pain can be called as past. Second, in any case, we have covered this portfolio under the CGFMU guarantee scheme for any abnormality that can in future come.

One way is that we have already, as far as mix is concerned, and this was the planned trajectory of our couple of quarters, eight quarters that we'll move from unsecured to secured and we will bring the JLG or microbanking to one-third of the portfolio. We have already almost on track on that trajectory.

While we grow the portfolio on total portfolio basis, I think we will continue to keep the cap around 25, as Govind ji mentioned, but still grow this book and not thinking about running down the book as you started the question.

That was helpful. If you could just guide about what's your guidance for the NPA and the credit cost for the rest of the year?

How much provisioning do you expect to build up because of that? Ultimately, apart from the NCD fundraise that you are doing, any additional fundraises that are planned in the medium term?

On the credit cost, we would be around on a upper side, being conservative, not more than 3% or 3% to 3.5% as we grow along. On your second question, we are raising 500 crore, but we are also repaying as one of the tranche that we have of 200 crore, which is at 12.5% coupon.

We are prematurely repaying that about a year earlier. That should happen in mid of August.

We have already put this formal announcement across. That should save the bank around 20 crores as we go along.

The primarily idea was not to carry 200 plus 500, 700 crore and that 200 crore, which we are repaying or prematurely or making an early redemption, had no delta on the CR benefit. What we are going to do now is raise NCD under Tier 2 classification that helps us to boost our CRAR.

On the back of the envelope, this 500 crore should inch up the CRAR by around 250 basis points.

Got it, sir. That was helpful.

Any indications on the early signs of stress or portfolio at risk for your new lending book that you're giving away? The new lending book, any PAR numbers that you'd like to share?

Yeah. Hi,

Amit this side. We do track the pre-guardrail and post-guardrail portfolio which we have built up in the microbanking and JLG space.

If you'll see post-guardrail, that is 1st April 2025, majority of our outstanding book now belongs to that particular period in JLG in particular, and our gross NPA are below 2%. To be precise, it hovers around 1.85% to 1.9% only.

Just to add, this book now, starting January, mid of January '25, our JLG or our MBBL portfolio is covered under CGFMU. Whatever NPA is coming post April '25 is also covered under CGFMU.

Probably just a point to add that, as we speak, as of March, my CGFMU coverage on the portfolio was 60%, and if I take June, it is 80% of the portfolio is covered. This portfolio is JLG, MBBI, and MBBL, including the BC JLG.

All 80% of the portfolio, as it stands as on June, is covered under the CGFMU guarantee scheme.

Got it, sir. Thank you.

Yeah. Thank you.

Yeah. Thank you for the opportunity.

My first question, sir, was actually related to your MBBL portfolio. We are seeing a sharp jump, especially in the MBBL disbursement side, actually more than 100% growth.

Is this portfolio completely to the existing customers who have demonstrated good behavior in their JLG portfolio, or is it something like are we sourcing some new-to-banking customers also for these kind of loans?

Currently, I think it's 99.9% portfolio of our existing customers only. We are just piloted, you can say, the open market or the new-to-bank customers.

The number may not be even 100 or 200. It's primarily almost 100% is our existing customer with a history with us and, 2 to 3, what we say, cycle have been exhausted in these cases.

They are existing customers only.

Okay. Basically, on the underwriting front, how is it different from the normal JLG front?

What sort of different underwriting measures have we taken for this portfolio?

Hi, this is Virender. Primarily, this portfolio is built up on the thesis only to the people who are having a established business activity.

The credit is done by the separate underwriting team, which does the complete underwriting as is the norm in the all other unsecured loan business. We have built up this business over a period of last 4 years.

The incremental business has jumped in last 1 year after a learning experience of last 3 years, which is helping us growth in this side and our focus after the study of last 4 years 3 years on the portfolio. Additional to that, we also cover this portfolio under the CGFMU scheme.

With a very stable collection team and as well as delinquencies being closely monitored in that portfolio.

Now just to add, Virender, I guess when we are doing MBBL, we are having a dedicated collection team for MBBL business as well. If the headcount that we have spoken earlier for JLG stays with JLG, and as we grow, we do look at the necessity in terms of the support for the collection, and we have given collection headcount to teams to ensure that, net-net, their contribution and the pipes to the business remains and then NPA remains checked.

Hi, Amit this side. Just to add again, post April 2025, if you'll see, the outstanding out of this portfolio, which is close to 1,250 crore, 1,042 crore is post April '25.

Out of that particular pool, we have only 0.4% as NPA. We do track whatever interventions in terms of process, underwriting standards we have done, what kind of outcome we are getting in terms of asset quality.

Okay.

Now my next question was related to the asset quality. We are seeing that your recovery/upgradations are getting slower, actually.

We expected this quarter to be strong in terms of recoveries, but it hasn't happened. Means the NPAs that have been showed in the past, actually, why is the recovery being so slow, or it's non-recoverable?

Is it like that way?

I guess, particularly you would see that, and I can say that as far as MB or JLG is concerned, almost all things are sorted. When it comes to retail book, we have certain accumulated recoveries from SARFAESI, and it is matter of pushing that to come back.

As we go along, when you see this litigation bucket where some amount is lying yet to be recovered, you will see that unfolding in coming quarters. That is one of the reason where it's taking time at least on the secured book side to get this encashed.

On the secured book, if it is getting time, what about the unsecured? Because every small finance bank, almost 8 on 10 small finance banks are getting stronger on recoveries, at least what the last 2 years that every bank had faced on the microfinance side.

On the microfinance side, out of the 69 crores that you reported in this quarter, how much was it on the unsecured microfinance book? How much was NPA, or how much recovery?

Close to 42 crores was from a NPA and write-off pool in the unsecured piece.

Microbanking

piece.

Out of 69, 49 was that? 42.

42.

42. Okay.

Got it. At least you expect the recoveries to pick up in the coming quarters.

I'd appreciate.

Quarter 1 was normally slow in that recoveries, but if you see that Quarter 4 was good. We expect to see the pick-up back in the Quarter 2 and Quarter 3.

That's one. I just want to add one more thing and correlate it, and I guess you buy this, is one that we had inched up our headcount about a year and a half back, obviously, to improve our collection efficiency, which last 5, 6 months has been above 99.5%.

The headcount, as we added up, stands at about, say, 1,100 headcount only on collection. I'm talking of JLG.

I just mentioned MBBL has its own source of collection headcounts that we have allocated to them. Once 1,100 headcount that is lying in JLG, and as we see normalization is happening in the credit cost, we would obviously shift some of this headcount for recovery of the NPA and write-offs.

You would see some traction there in the coming quarters, because at the normalized run rate of credit cost in JLG, probably 1,100 is a bigger ask in terms of headcount being there. We will continue to hold them and deploy them for recoveries of the past NPAs and write-offs.

I guess you should see some traction there in coming quarters. Okay.

Now just one suggestion from my side. As you highlighted on the asset quality that recoveries were taking time, if you can on the investor presentation, on every segment-wise asset quality, mention from next quarter onwards, what was the GNPA for every segment?

Because I wanted to know what was the GNPA for MSME as on this quarter?

We will do that. Point taken.

We will do that.

What is the GNPA as on 30th June for MSME?

It was around 169 crores.

169 crores out of your 44 4,482?

Yeah. If percentage-wise, you will see it, 3.8%.

You see, I just wanted to add, when Sarju said it's taking time, means there are certain cases which are legacy cases which has come into NPA in the last quarter itself. Now we have to go for SARFAESI and auction the properties and take into possession, normally it's a process of 6 to 7 months.

That is where Sarju said. Normally in secured, we have seen that when we initiate the initial notices regarding the SARFAESI, majority of the cases and the customers comes and pays the overdue amount.

That is where, because these cases have come into NPA in the last quarter itself, probably in the next 2 months, majority of them should get resolved without going for actual auction. Just wanted to add that point also.

Okay. Fine.

Just last one from my side. In Utkarsh in FY '28, you were saying 25% to 30% portfolio growth that you just highlighted on the guidance.

So 25% to 30% growth from FY '26, right?

No. We are talking year-on-year growth of around 25% to 30%.

From 20— For

FY '27 also, you are eyeing 30% growth?

Yeah. 25% to 30%, that's I'm giving a range, because market is also that way.

Because in this quarter,

in this quarter, we hardly have seen any growth, right? That is why.

We have done write-off also. Because of write-off, the portfolio goes down, which will not reflect.

That's why I'm saying 25% to 30% is a range for this year. Our base is small right now.

When I say small, means because we have not grown during last 2 years, base is also small. So 25% to 30% growth for this year, and very similar type of growth we expect for next year also.

Top line.

Sorry. I just want to add that if you really look at Q4, which is the beginning of, green shoots and the momentum continuing in Q1.

Q4, the disbursements across was 30%, which is Q4 our previous Q4. Q4 is the loaded volume business in a financial service sector.

Generally, Q1 is lower.

Right. It was up.

If you have a 30% total disbursement growth as we have shown, and, similarly, it remains 48% again in Q1, the trajectory obviously is turning, and our internal discussions and the management target envelope, obviously, I guess endeavor is to really pick up and H2 would be a year where the targets comes on a view to get that 25% growth that we are aspiring. The engine, and the operations infrastructure, headcount, the new technology we have switched over to the new SMA LMS systems and all of that, that improvement.

All that is now required is higher productivity, which is the same cost to get the high volume is what is going to be our key focus.

Okay. Fine, sir.

Thank you so much, and all the best.

Thank you.

Hi. Good evening.

I'd like to lead my question with a few comments here. The management commentary seems to be more focused on the liability side of the balance sheet where you are working on improving your cost of funds, increasing your deposits or so.

As shareholders, our concern seems to be more on your asset side, the quality of your assets, where we don't have enough granular information in terms of the quality of loans that you have. You still seem to be talking about growing your loan book by about 25% to 30% each year, even growing your JLG, MBL book and at probably the same rates or so rather than running it down.

What gives you this confidence that you can grow the book continuing with a net interest margin of 8%? What gives you this confidence that you can grow the book looking at the history of the industry and even specifically with respect to Utkarsh that you can continue to give a healthy asset side of your balance sheet?

No.

I think if you see the way we have done, and that's why we are using the word this is a consolidation year for us. Whatever products and services we have got, we are not adding anything new.

We have been doing these products for sometime. Whatever experience we have gained, we have utilized those experiences, and that is the basis.

In fact, some of the places, we have got more around 1,100 branches across, in fact, and the type of productivity we can get from these branches, we have not reached nowhere near optimum, actually. If I'm able to do even by 70% to 80% of the capability of my branches, we can do much, much more than this.

Because of the experience in one, we are a little slow. In fact, that's why some people are asking, Quarter 1, the growth is lower than what maybe people have anticipated.

You'll see this growth will pick up. JLG, we still have a very firm belief in JLG.

Yes, there have been challenges. Whatever challenges were there, I think I'm not trying to take a shelter of guarantee scheme, but I think guarantee scheme whenever there are, when the numbers, I'm talking the stress goes beyond average, I think then we'll get the benefit of guarantee scheme also, which was not there in past.

That will even out the challenges when there are because of cycle, there are issues. Otherwise, we see there's a huge potential.

Actually, if you really ask me, JLG, the way it has happened during last 4 to 5 years, people have not gone for new customers at all. There's a lot of potential there if you are able to do things good.

Again, we are very clear that we are not going to go out of our core geography as far as microfinance is concerned. In case I find a good potential, we'll go through partners, not through our own network.

Wherever we have got network, where we have got good experience, because people have actually not gone for new customers also, our sense is there's a good potential and there's a good requirement also. Industry has also gone down during this period.

If you see, almost 30% degrowth has happened in the industry also. There is a potential which we intend to see that, especially in the core geography of Utkarsh.

On the other part, I think we still have a very, very small base. When I talk of housing, I have only 1,000 crore.

I'm talking of BBG, we're in the same range, actually, the business banking group, which has huge potential. We are talking of gold loan.

Gold loan, we are around 300 crore right now. You can imagine the type of potential we are talking of.

I think each and every segment where we have started, we are small that way. In percentage terms, I think 30% is not a very high growth from that perspective.

These all numbers are I'll not use the word achievable. These are well within, when we talk about our plans for this year, 25% to 30% growth in the top line should not be a problem.

No. My concern is not being with respect to your ability to grow your loan book.

It's frankly your focus on growing your loan book is my concern itself, frankly. My question really is that should you be looking at growing your loan book?

Yes, obviously, in linear to the industry, for sure. The quality of the loan book itself still seems to be following the same pattern as earlier periods.

Please correct me on that part. Even now, when we're talking about the secured part of the book, we're talking about you looking at protection under SARFAESI and recovering money through SARFAESI, then again, which brings in certain questions on your practice of even giving secured loans as such.

Can you help me dilute my concern on these parts, sir?

No, certainly, maybe Amit can also talk about this part. The way we have done during the collection thesis, sometime there may be some periodic spurt can happen in some of the portfolio, or some of the accounts, actually.

There's a proper laid-down process. In fact, secured the challenges, it takes a little longer time to settle.

It remains in NPA status for some longer period. That's the only difference.

Let us accept this fact that in secured case also, the cases will go bad. It's not that the cases will not go bad in case of cases.

The process followed a little different in that case. The yield is lower, for sure.

I think the stability of portfolio is much better in case of secured. It takes a little longer time to settle the whatever security you have got in some of the cases.

That's the only thing what Sarju and Amit were talking about.

All right. Thank you.

Yeah.

Hi, team. Good afternoon.

Sir, a few questions on the MFI book. Your total MFI NPAs are today roughly around 740 crores.

Correct me if I'm wrong on that number. Want to know what proportion of these MFI NPAs are now covered under the CGFMU scheme, and what is the NPA provision you are carrying against these MFI NPAs?

That's the first question.

Give us 1 minute, maybe you can go to your next question by the time. We'll just take that figure.

Sure, sir. Sir, and secondly, this CGFMU scheme, does it allow you to apply a lower risk weight to the covered set of loans?

Yeah. It does, but there is a cap, Ashlesh.

You have benefit of, obviously, to the extent of the claim that is eligible, which is 72.75%, and in addition to that, you have a cap of 15% on the total disbursement made, which is obviously under the regulatory terminology called crystalized portfolio. Of that 15%, you can count and apply zero risk weightage on that.

I guess the benefit is simply given because on one hand, you have a premium which goes to your cost, and on the other hand, you have the coverage. The benefits under the RBI norms are twofold.

One is provisioning and another is zero risk weightage, but as I said, it is capped. It's not on the total portfolio.

Sir. Sarju sir, just to simplify— Yeah.

Ashlesh,

just to add to your question. Under JLG and MBBL product together, if you'll see, around 170 crore is the gross NPA amount which is covered under CGFMU.

On this, if you will see lifetime provisioning, we require is of 46 crore as per the CGFMU guidelines. Out of that, already 28 crores has been provided.

Only 17 crore is something which will come as a bucket movement every quarter.

Sir. Just trying to understand the numbers.

170 crores out of that 740 is already covered under CGFMU. Okay.

So 570 is not covered. How much provisions, NPA provisions are you carrying against this MFI NPAs which are not under CGFMU right now?

Sir, I'm just trying to understand what is the provision requirement you have on the existing MFI stress.

If you'll see, let me try to answer this in splitting before April and after April. If you'll see before 1st of April 2025 portfolio, we had gross NPA is 619 crore.

Out of that, already 407 crore has been provided. The PCR comes close to 66%.

Post April '25, the total NPA is 73 crores, which is the recent one. Out of that, already provided is 14 crore.

Between this, because we started CGFMU somewhere in mid of January '25, so that is where this number comes as 170, because certain NPA is also of the portfolio built up between January '25 to March '25.

Understood, sir. This clarifies.

Sir, just going back to the risk weight question. Sarju sir, if I were to simply add 100 rupees of MFI book incrementally going forward, what would be the risk weight assigned to that book if it is covered under CGFMU?

Out of the 100 rupees, on the 15 rupees, you will assign zero.

Okay. So 85 rupees, you'll still assign a risk weight.

Understood.

Yes, that's right. Simply speaking.

Understood, sir. Sir, and secondly, can you also split the non-MFI NPAs?

I think the total number is around 420 crores. If you can give a breakup of non-MFI NPAs across segments like CV and MSME.

In rupees is also fine for us. Yeah.

Out of this, the 738 odd crores, non-MB is 425 crores.

Sir. I want to know what's the breakup of that 425 across MSME, Wheels, and so on.

Achha.

Okay. Out of that 425, secured MSME is 168 crores.

CVC is 62 crores. WSL is 30 crores, and housing loan is another close to 49, 50 crores.

Understood, sir. Sir, and lastly, if you can share any update on your capital raising plans.

Also one more data keeping question. If you can give us the microfinance slippages for this quarter.

Thank you. Those are all the questions I had.

Yeah. The total provision that has gone into my P&L for quarter is 109 crore, out of which microbanking is 45, and non-microbanking is 62.

Sorry, sir. Slippages, if you can share.

MFI slippages.

For microbanking, slippages for this quarter stood at 68 crores as compared to 153 crore of Quarter 4.

Perfect, sir. Last one was on the capital raising plan, equity.

Yeah. We just mentioned about raising 500 crore of Tier 2 NCD.

I did speak that that should, on the back of the envelope, give us about 250 basis point incremental CRAR. With the trajectory, as we spoke about, in terms of a profitable year, a clawback of profits.

There would be no otherwise a capital equity raise that we anticipate, at least till the end of FY '27.

Understood, sir. Perfect, sir.

Thank you very much for the answers. Those are all the questions.

Thanks, Ashlesh. Thanks a lot.

Yeah.

Hello, sir. Am I audible?

Yes, sir. Please go ahead.

Yeah. Sir, any guidance on FY '27 ROE or credit cost?

We have given a guidance for FY '28, which is a 15% ROE, which it's a part to profitability through FY '27, because that has to be the first milestone delivery. We are looking at more than around two-digit upwards ROE by the exit of FY '27, which builds up the case for ROE for FY '28.

Sir. One more question, sir.

Our operating profit is not rising. The growth in operating profit is very slow.

Can you please throw some light on it? Yeah.

You're right. I guess if you really look at the trend from where we were, and that's what we say the consolidation and the bouncing-back story is beginning.

Negative PPoP of around 44 in December to a positive of 12. We are at 64 this quarter, which is fivefold of Q4, signifying that the disbursements, which is the core input that builds up the portfolio, that builds up the income accrual, AUM, that trajectory is visible over the last two quarters.

As we grow along, disbursements and portfolio will continue to build up with completely normalized credit cost. There will be no clear reversals that has been a event last year.

You'll have a steady-state AUM to accrue income in a normalized fashion as growth is building up in coming quarters with added cost of fund advantage in terms of almost 60 basis point benefit accrued. My peak rate of deposits at a point in time on senior citizen was 9.1, which is 8.25 today.

The peak deposit card rate, which was 8.5, is 8 7 point and 80-ish k point of view both, 8.1. These two things, as we grow on our deposits and the new maturity gets into at the lower card rate, we continue to see benefit in the cost of funds.

The third line, this is relevant because it will come back to the part to profitability. The third line, as I mentioned, other income, is also an element of disbursement, loan processing fee, inches up as the disbursement grow up.

Correlation, I guess, the other income will again be stabilizing. Then at the same cost, which one of our colleague asked just before you, at the same cost with no expansion plans, it's a matter of getting the higher income and higher productivity, which will lead to a PPoP growth incrementally from wherever we are here.

If we just mentioned to your previous question that if I'm exiting FY '27 Q4 with a ROE of say around two-digit, that probably would be a very decent PPoP. That's the envelope in terms of the trajectory we are looking forward.

Sir. Thanks for detailed answer.

May I ask one more question if you permit?

Please. Go ahead, sir.

Okay.

Sir, you are saying that we have already enough infrastructure, cost-to-income ratio will not rise over the next 2 year even if we grow every year 30% right? That is right?

I guess, again, little relevance and thank you for asking this question, because cost-to-income actually looks elevated because the income, which is the denominator contraction has happened over last year. Once income comes back and all that we said is about getting the income, the top line growth and cost at static, you will see the cost-to-income ratio reasonably improving as we exit FY '27.

Sir. Do we intend to grow MFI space, or we will stay here, means on loan book over the 2 year?

No.

I think as I mentioned that we understand this JLG business, our ratio is very low right now, maybe around 25%. We'll continue with the microfinance to that extent, sir.

Okay.

Thank you, sir. Thank you for detailed answers.

Thank you.

Thank you, I-Sec team, for hosting this one, and thanks every investor for your queries, questions, and interest in the company. As you mentioned, I think worst is behind us, and we can see next few quarters are going to be really good quarters and better in all the parameters, all the KPIs what we talk of.

Once again, thank you very much for your support and guidance all these years. Thank you.