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Aavas Financiers Ltd
Earnings Call Analysis
Q1-2025 Analysis
Aavas Financiers Ltd
Aavas Financiers Limited announced a strong year-on-year growth of 22%, with Assets Under Management (AUM) reaching INR 178 billion for Q1 FY '25. This robust growth aligns with the company's ambitious target of growing AUM by 20% to 25% this fiscal year. The company also achieved a net profit of INR 1.26 billion, marking a 15% increase compared to the previous year, showcasing its overall financial health.
During the first quarter, disbursements totaled INR 12.11 billion, reflecting a 13% increase year-on-year. However, there was a noted decrease in the sanction-to-disbursement ratio to 78%, down from the typical range of 85% to 87%. The management expressed optimism, anticipating a rebound in disbursements in upcoming quarters due to robust sanction growth of 25%.
Aavas has maintained excellent asset quality, with a Gross Non-Performing Assets (GNPA) ratio standing at a commendable 1.01%. The company's 1+ Day Past Due (DPD) ratio improved slightly to 3.65%, underlining its commitment to managing credit risk effectively.
The company’s operational efficiency is on the rise, as reflected by the improved OpEx-to-Asset ratio, which fell by 52 basis points to 3.27% in Q1 FY '25. This is down from 3.79% in the same quarter last year, indicating effective cost management strategies. Aavas is committed to reducing this ratio to around 3% over the current fiscal year.
Aavas is making strides in technology with the successful adoption of Salesforce and Oracle Fusion. The company processed over 190,000 loan applications through Salesforce, translating into more efficient operations. Improvements in log-in to sanction turnaround time have been achieved, now at 8 days, indicating enhanced operational efficiency.
Looking ahead, Aavas is optimistic about continuing its growth trajectory. The management maintains its guidance for AUM growth of 20% to 25% for the fiscal year. They also expect a normalization of disbursements to occur as operational efficiencies continue to improve and market conditions stabilize.
As of June 30, 2024, Aavas maintains a strong financial standing with total borrowings at INR 158 billion. The average cost of borrowing was 8.08%, and the company demonstrated a spread of 5% against an average portfolio yield of 13.08%. Notably, the Net Interest Margin (NIM) stands at 7.31%, reflecting a slight year-on-year increase.
Overall, Aavas Financiers Limited is showing solid growth, strong performance indicators, and maintains a robust strategic direction, making it an appealing option for investors looking for sustainable growth in the financial services sector.
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Ladies and gentlemen, good day, and welcome to Aavas Financiers Limited Q1 FY '25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict.
[Operator Instructions] Please note that this conference may be recorded. I now hand the conference over to Mr. Rakesh Shinde, Head of Investor Relations at Aavas Financiers Limited. Thank you, and over to you, sir.
Good evening, everyone. I extend a very warm welcome to all participants. Thank you for participating in the earnings call to discuss the performance of our company for quarter 1 FY '25. The results and the presentation are available on the stock exchanges as well as on our company website, and I hope everyone had a chance to look at it.
With me today, I have entire management team of Aavas, including Mr. Sachinderpalsingh Bhinder, MD and CEO; Mr. Ghanshyam Rawat, President and CFO; Mr. Ashutosh Atre, President and CRO; Selvin Uthaman, Chief Business Officer; Surendra Sihag, Chief Collection Officer; Ripudaman, Chief Credit Officer; Mr. Jijy Oommen, Chief Technology Officer; Mr. Anshul Bhargava, Chief People Officer; Mr. Rajaram Balasubramaniam, Chief of Strategy and Analytics.
We will start this call with an opening remarks by our MD, Sachinder Bhinder; CFO, Ghanshyam Rawat; and CRO, Ashutosh Atre, followed by Q&A session. With this introduction, I hand over the call to Sachinder. Over to you, Sachinder.
Thank you, Rakesh, and good evening, everyone. I welcome you all to our Q1 FY '25 earnings call, and thank you for joining the call in the evening. Let me now take you through the key highlights of our performance in Q1 FY '25.
We are delighted to report a robust growth of 22 percentage Y-o-Y in AUM, reaching INR 178 billion, Along with this strong growth, we have ensured best-in-class asset quality with 1+DPD at 3.65 percentage, an improvement of 3 bps Y-o-Y and [ GNPA ] of 1.01%. Net profit for quarter 1 FY '25 stands at INR 1.26 billion, registering a growth of 15 percentage Y-o-Y.
In terms of business updates, in Q1 FY '25, we disbursals INR 12.11 billion, delivering a growth of 13 percentage Y-o-Y. At the end of Q1 FY '25, our AUM stood at INR 178.41 billion, up by 22 percentage, which aligns with our target to grow our AUM by 20 to 25 percentage. The robust 25 percentage year-on-year growth in the sanction serves as a clear indicator of our robust trajectory. This [ ensures ] confidence to deliver sustainable growth in the disbursals for the entire FY '25.
We have opened [ 4 ] new branches during quarter 1 FY '25 in our existing states to deepen our reach. We've seen a strong uptake in the logins, led by diversified omnichannel lead generation funnel, including digital e-Mitra, RRO and Mitra, resulting in better disbursement and building a healthy business pipeline.
In terms of technology update, I'm happy to share that we have completed the milestone of adoption and stabilization of Salesforce with 1.9 lakh-plus loan applications processed through Salesforce.
Additionally, we have stabilized Oracle Fusion, our ERP application. Our new lead management system built in Salesforce has successfully gone live with selective branches in pilot form. Our loan management system on Oracle FLEXCUBE is at a design stage of testing and will go live in the coming quarters.
Technology is playing a key role in transformation and turnaround time improvement. Our log-in to sanction turnaround time has improved to 8 days in quarter 1 FY '25.
In terms of financial performance for the quarter, our net profit grew by 15 percentage Y-o-Y, led by growth both in interest income and noninterest income. Our consistent efforts to optimize costs have resulted in a remarkable improvement in OpEx to asset ratios by 52 bps, which is now at 3.27% in quarter 1 FY '25 from the previous year's quarter at 3.79%. Our asset quality continues to be pristine with 1+DPD at 3.65 percentage as of June '24, down by 3 bps over quarter 1 FY '24.
Our GNPA stood at [ 1.01% ] in quarter 1 FY '25, and credit costs remain at 20 bps. In terms of liability, we are one of the best well-diversified liability franchises. We have always been innovative in exploring new avenues of sourcing, and I'm happy to share that we have started exploring co-lending. Our incremental borrowing costs increased by 30 bps Y-o-Y and 17 bps Q-o-Q to 8.31%, indicating the cost of borrowing picking out in line with the benchmark rates.
The FY '25 Union Budget marks a transformative leap in addressing India's housing needs by significantly expanding the Pradhan Mantri Awas Yojana to include 30 million additional houses, the government of India's commitment to providing housing for all.
We are committed to a strong growth. And our focus on innovation, technology and cost optimization will continue to drive our success. And I'm confident with our dedicated team and strategic initiatives, we will achieve our goals and deliver value to our stakeholders.
I will now hand over to our CFO, Ghanshyam Rawat to discuss the financials in detail.
Thank you, Sachinder Ji. Good evening, everyone, and a warm welcome to our earning call. First to update on the borrowing. In terms of borrowing, we continue to borrow [ judiciously ] and raising around INR 11.35 billion at 8.31% in quarter 1 2025. Total outstanding borrowings as of 30th June 2024 stood at INR 158 billion.
Overall borrowing mix as of 30 June 2024 is 47.8% from term loans from the bank, 24% from assignment and securitization, 19.6% from NHB refinancing and 8.6% from that capital market. During the quarter, overall cost of borrowing increased by 1 basis point quarter-over-quarter to 8.08%. Our incremental cost of borrowing for quarter 1 FY '25 was 8.31%.
Lender support continued to remain extremely strong. There is [ excess ] of diversified and cost-effective long-term financing. We maintain a strong relationship with the development financial institutions. To meet long-term business growth, we have progressed on co-lending [indiscernible] bank.
As of 30 June 2024, we maintain sufficient liquidity in the form of cash and cash equivalents and unavailed cash limit of INR 17.5 billion and documented unavailed sanction of INR 12.6 billion.
In terms of spread, as of 30 June 2024, the average borrowing cost of 8.08% against an average portfolio yield of 13.08% resulted in spread of 5%. We have been able to maintain our spread around 5% in line with our guidance despite competitive pricing pressures.
Our margin, NIM, as a percentage of total assets during Q1 FY '25 stood at 7.31%. Our NIM in absolute terms has increased by 10% year-on-year Q1 FY '25. In terms of costs, our OpEx-to-asset ratio has improved 52 basis points to 3.27% in Q1 FY '25 versus 3.79% in Q1 of FY '24. We are committed to gradually bring down to OpEx ratio around 3%. Credit cost during the quarter stood at 20 basis points in Q1 FY '25 versus 16 basis points in Q1 FY '24 and Q4 FY '24.
In terms of other parameters, corporate after tax during the quarter increased by [ 15% ] year-on-year to INR 12.61 billion. ROA stood at 3.01% and ROE 13.14% in Q1 FY '25. IGAAP to India's reconciliation has been explained in detail, profit after tax and net worth on Slide #30 and #32 of our presentation. We are very well capitalized with a net worth of INR 39.03 billion and [ CAR ] at [ 44.48% ].
Total number of live accounts stood at 223,600, translating into 16% [ improvement ] year-on-year. Employee count was 5,904 as of 30 June 2024 versus 5,700, 30 June 2023.
Now I would like to hand over the line to our CRO, Ashutosh Atre, to discuss assets' quality.
Thank you, Ghanshyam Ji. Good evening, everyone. I'm pleased to share the key portfolio risk parameters with you. Asset quality and provisioning. Our asset quality, as mentioned by Sachinder Ji, continues to show improvement. The 1 day past due metric improved by 3 basis points to 3.65% in Q1 FY 2025 compared to [ 3.66 ] in Q1 FY 2024. As of 30th of June 2024, our gross Stage 3 stood at 1.01% and net [ Stage 3 ] at 0.72%.
In terms of geography, 1+DPD and GNPA in our core vintage states remained well below 4% and 1.1%, respectively, whereas other emerging states, 1+DPD and GNPA has remained well below 3.5% and 0.9%, respectively. Similarly, in terms of ticket size of more than INR 15 lakh, 1+DPD and GNPA remained well below 3.3% and 0.8%, whereas in case of ticket sizes, less than INR 15 lakh, 1+DPD and GNPA remained below 4% and 1.25%, respectively.
Our total ECL provisioning, including [ that of ] for COVID19 impact as well as Resolution Framework 2.0, stood at INR 907.5 million as of 30th of June 2024. Aavas is strongly positioned to continue delivering industry-leading asset quality.
With this, I open the floor for Q&A. Thank you.
[Operator Instructions] The first question is from the line of Shreepal Doshi from Equirus.
So my first question was on business momentum and particularly on disbursements. So the run rate has come off materially from the 4Q levels. And within housing, the degrowth is even higher. While I understand that 1Q tends to be soft, but what is it that led to this lower disbursements during the quarter?
Thanks, Shreepal. As you really appreciated and you highlighted, you always have a muted quarter 1. But here, I would like to highlight on against robust sanctioned growth of about 25 percentage, we had sanction to disbursement around 78%, which led to the growth being muted on the lower side actually. But as really pointed out, on a 25 percentage sanction growth, we expect the momentum to come back in the coming quarters.
So, sir, for -- if you have to look at it from a different angle on a yearly basis, what sort of a disbursement that we are targeting? And how do you see it shaping up over the quarters?
I see, as I said that the one parameter on which is that the sanction growth is there on the clients. And I said that we are at around 77 percentage on this quarter. And in the coming quarters, we'll have the sanction to disbursement ratio really covering up to the normal levels of 85%, 87%, that's a normal range, which will remain. So we are confident of bouncing back on the quarter numbers.
So what gives -- instills confidence is one is the log-in growth, and second is the sanction growth. These are the 2 parameters which really help us give that confidence of -- there. So unlike a normal one, we have a sanction [ growth ], which is already available with us, actually. And that will translate in the coming quarters.
So are you saying that there was no, I mean, material momentum decline in terms of the number of log-ins during the quarter?
No. As you reflect, as I highlighted, there is a growth in log-in and there is a growth in sanction and both of them have given the numbers out. So there's no momentum growth, if I were to really poke across. There's a decrease in the sanction-to-disbursement ratio, which has resulted into the disbursement [ bake ] on the little muted side.
Okay. And sir, the second part was pertaining to the end use of the other mortgage category that we have classified this quarter. So what would be the end use there? And -- yes.
So other mortgage, if you really look at it, it is the MSME side of the part, which is the micro MSME, where it is typically the uncertain [indiscernible], which we really focus on as a specialized [ HFC ], which is very unique to Aavas on -- which really helps in building the capital creation for the working capital customers on the micro MSME side. And you've seen the degrowth on the LAP and the top-up side, and it really has gone into the capital consumption on the MSME side, and that's around 180 on -- that's around 22 percentage.
Okay. So the end users for the MSME -- micro MSME products?
[indiscernible] to the micro MSME, right, if I have to get it...
No, I was talking about the other mortgages. So...
These are typically the loan against property and the top-up loans, which are home loans, which you have the top-up loans, which gets classified as the loan against property and the loan against property which is for the personal consumption. These are all backed by self-occupied residential properties.
Okay. Okay. So the last question was on pricing. So we had done rate hike a couple of quarters back. So I think -- so why has there not been any improvement on the yield side during the quarter? -- Which -- so that was the question, sir.
So I think if you see the disbursement yield, there is an improvement on the disbursement yield on quarter-on-quarter and compared to the previous quarter. But on the overall yield side, I think you've seen not that kind of compression which is -- which was normally there in the earlier time, so -- and maintaining a consistent spread of about 5 percentage.
Okay. Got it. I'll come in the queue if I have more questions.
The next question is from the line of Mr. [indiscernible] [ ICICI ] Bank.
Sir, congrats on a good set of numbers during an extremely challenging environment. Sir, just two questions from my side. One on the spread in the [ big ] side again. So when we look at the incremental cost of borrowing at around 8.3% versus [ blended ] cost 8.7%, which has essentially been going ahead, the blended cost will [ converse ] to what the incremental cost and when we look at the yield of -- it's trending -- down trending since last many quarters; so how confident we are about sort of maintaining this 5% spread for the full year?
I mean though we know that we've increased our PLR by 40 basis points, I think, in April, but that doesn't reflect in this quarter. Maybe it should reflect in -- from second quarter. But what is your [ internal ] assessment?
So I have the -- there are two parts of the question. The second part, I will have Ghanshyam Ji to respond. On the first part, we've been giving a guidance. Our endeavor is to maintain 5%. And as you will really appreciate that there has been a spike in the incremental cost of borrowing, and the same transmission has not been possible at the ground.
So as a result of which, you do not see this incremental increase in the cost of borrowing being able to pass on to the existing set of disbursement customers. And on the yield side, on the placement, I'll have Ghanshyam Ji to really respond on the second part.
Thank you, Sachinder. This quarter, when we borrow fund, NHB contribution has always remained low than what we borrow for full-year basis. So this year, new limit will come once we complete this quarter. Then the contribution of NHB borrowing will increase in overall borrowing. So we are confident that now cost of borrowing is almost peaking out at this level, basically.
And we borrowed a good amount of money as a [ T-Bill link, repo-link ] money. So whenever the rate [ has come ], it will have a positive impact to Aavas' overall cost of borrowing basically.
And inside, if you see, last quarter to this quarter, we have almost a 17, 18 basis points higher yield on the new business we got in this quarter. So we are quite hopeful that we are going more [ to gain ], more smaller ticket going forward in our business strategy.
So I hope that, that will also help to maintain our overall yield level basically or new disbursement will have further increase in yield basically. So our endeavor is that to maintain this 5% spread going forward.
Got it. And my last question, just Sachinder, again, on the [ adjustment ] side. Sir, when you say our sanction to business line remains at [ 77% ] versus [ 85% ] normally, which means the adjustment is lower by maybe 7% to 10% this quarter because of seasonality, is that a fair assumption?
The one is the seasonality and second is the recognition of the disbursement, as you are aware. I think both of the parts have led to the current. But the positive side and the green shoot is that you have the momentum, which is there, which is reflected in the numbers.
Got it. Got it. And would you like to share the absolute business [ mind ] expectation for this year?
So we've always guided on our AUM growth of 20 to 25 percentage. I think we are confident of the fact that we will be able to deliver in that range. And I think that would come across by two parts. One is disbursements coming across quarter-on-quarter and plus the foreclosures being controlled at the rate at what we have been able to manage. I think both of them really contribute.
So we are confident on this side of delivering the growth on the yield, which we've always guided to 20 to 25 percentage with disbursements contributing and the BT out being restricted to at a level at which we are comfortable at.
Got it. And then just last [ bookkeeping ] question on what is the [indiscernible] because of the RBI circular?
I think, [indiscernible], we can discuss offline on this. Whatever is there on the RBI stipulation, we followed completely what is required as per the guideline what has been mandated, so if we follow the rules and the circular in total.
Okay. So it is right to assume that by end of June, we are fully compliant and going in the right direction and not be any...
So we are compliant on that, [indiscernible]. What we are saying is on the coming quarters, we'll have the bounce back of our disbursement coming into play.
[Operator Instructions] The next question is from the line of Shweta from Elara.
Sorry, I'm harping on the same question all over again. So we had seen a 25 bps PLR increase in Q4, right? But if I look at the yield movement, I mean, there might be one-offs in Q1. But when do you see this reflecting [ ahead ] on the [ yield ] front?
[ Can you please repeat ] the question again, please?
So we have seen 25 bps of PLR increase in Q4, right? So why is it not reflecting in the yield movement?
If you see, last quarter, we published a 13.13% and -- which -- and we increased the 25 basis point in the March itself basically. So in a contractual rate, a 5 basis point drop is on account of [indiscernible] because [indiscernible] business is still lesser than the AUM build basically. So there is a -- I don't think there's any contraction in yield reported in our investor deck.
Yes. At a [ computed ] level, if you asking at a [ computed ] level yes, obviously -- yes, at a [ computed ] level, you see, obviously, due to RBI circular, there is a certain interest cost reversal and -- some -- this March to June end, NPA also increased. So that 90-day period also got interest [ cost ] reversal. If you watch the sector there, then there is the only marginal drop, which is equivalent to my AUM drop.
Okay, fair point, Sir. Secondly, how are we placed today on the BT out cases? Has that number seen sort of spike? Because if I go by the calculations on your prepayment and repayment, so could you just throw some light on BT out for this quarter?
If you see in this quarter, overall BT in the industry is a 5.6% at annualized basis, which is within our control, which is within our last year's track record also basically. We generally assume in our budget 6% is a BT out to industry. And during the quarter, and as a customer close is partly close accounts, they fill the EMIs also. So overall, my reduction in the AUM is a 16%, so -- which is within as per the budget as per our -- within our assumption, the past [ rep ] record also.
Okay. So there is no unusual spike here, right, on BT out?
No, no unusual spike. Last year, if you see, overall 16% to 17.6% was a repayment from opening AUM to closing AUM. We still are at 16% in this quarter.
The next question is from the line of Raghav Garg, AMBIT Capital.
Just my first question, what is the total number of employees that you had as of June end? And a related question is why have the employee expenses declined on a Y-o-Y basis? Those are my first two questions.
On the employee count, as of 30th June, there were 5,904 employees and compared to the previous year, it has increased about 204. There is a onetime [ setup ], which is the long-term incentive plan and ESOP cost, which has got reversed, as a result of which there is an employee cost reduction.
Understood. Sir, my second question is from the annual report for FY '24. So what I see is that there is a certain purchase of software worth about INR 29 crores, which has been capitalized. And when I look at the intangibles under development line item also, there is about INR 20 crores or INR 23 crores worth of expenses waiting to be capitalized, I think, next year, again, related to software.
So can you tell us what is the nature of this expense? And it doesn't seem to be a onetime capital expenditure because it happened last year, it happened in FY '24, and probably you're going to capitalize it again in next year. So if you can explain what is the nature of this expense? And if this is going to be a recurring expense and why not [ expenses ] rather than capitalizing it?
Raghav, I think in last few years in the quarterly call and annual call, we explained that Aavas has took complete tech transformations in the company. First, we took Salesforce as LOS, as tech transformation. Then we took ERP [ Oracle Fusion ] as a tech transformation. As well as during this time, we took a lot of digital initiatives also to be -- have a very, let's say, different level of customer experience onboarding to exit [ off with ] customers. .
And now in this quarter, we are under progress to go live with Oracle FLEXCUBE as an LMS system basically. All 3, 4 systems -- and apart from that, [indiscernible] systems are there, like we took a [ treasury ] software along with the -- we had updated our people -- as a women software also basically.
So all put together is a total CapEx in the company, roughly. In 2 years, something we already capitalized, something will be capitalized. Put together, everything is INR 45 crores around the capitalization basically, INR 45 crores to INR 50 crores capitalization, all this put together basically.
So there is no any revenue [ expenditure ] getting capitalized. Capitalization is [indiscernible] expenditure. It's purely capital expenditure, the company will get benefit in the next 10 years. And the entire [indiscernible] will benefit to us basically.
Understood. So ideally, maybe in a couple of years or maybe after next year, this capitalization, whatever this amount, it should run down, right? It won't continue at this INR 25 crores, INR 30 crores kind of a run rate?
No, no, no. This year is final [ year of ] capitalization. In this year, by this period, 2 years put together, we will have a capitalization of INR 45 crores to INR 50 crores.
Understood. Sir, the reason why I asked is that given my limited understanding, I thought it was more of a subscription-based model. But given that this expense is going to run down after next year, maybe I'll try to understand it offline from you as to what exactly is the nature of this expense. Sir, my other question is from your annual report, it seems that the...
Mr. Garg may we request you to return to the question queue for follow-up questions? Thank you.
The next question is from the line of Abhijit Tibrewal from Motilal Oswal.
So first thing first, I mean, you spoke about disbursal yields earlier. What was the disbursal yields in 1Q?
Sorry, Abhijit. You said disbursal...
Disbursal yields in 1Q.
So Abhijit, we've always guided on our -- the spreads and on our AUM growth. The incremental disbursal yields, which really we don't comment because I think that trades off -- moves across on quarter-on-quarter. I think important is that we've been able to maintain a spread of 5 percentage on a basis of that. On a sequential -- on a basis of Q1 previous year, I can really say that it is in the range of 15 to 17 bps. Comparatively of the previous, it is higher by 17 bps actually.
Got it. This is fair. This is fair. Sir, the other question that I had was on spreads or will it be a lot of questions that come your way on spreads. But given our guidance of 5% and now that you're eventually here, just trying to understand, given the competitive intensity, which is not allowing you to transport higher cost of borrowings to customers, right, are you also doing something on the mix side to ensure that even if cost of borrowing stabilizes and the competitive intensity remains this way, which will need continued pressure on yields? Are we doing something about mix as well to see -- to ensure that the spreads can at least be maintained at 5% kind of levels?
Yes, Abhijit, you are right. I think the endeavor, as you rightly said, and I would really articulate in the form that the focus on the ticket size, which is going to be less than INR 15 lakhs to contribute [ any ] higher. And even in the buckets which we are there, incremental increase granularly on the yields or the disbursement yield is our endeavor.
And because of that, we will really see -- try to maintain our spreads, and when we see the picking out of the cost of borrowings really peak out, we'll try to maintain, and our endeavor is there, and we're working on that.
As a result of which, when we say that -- we've been able to have our disbursement [ yield up ], so there is a -- within the focus really is to work across on high-yielding products, which are there, which is within the segment which is there, which is self-occupied residential properties, home loan segments, really to build in those lines actually. So that's been our focus, and we will continue to build on that.
Got it. And sir, just one last clarification. Just trying to understand two things or two clarifications. One is, I mean, have we changed the way in which we report or compute NIM? Because for the last financial year FY '24, you have reported NIM of 7.91. For this quarter, you have reported a NIM of 7.31. So is there a change in the way we conclude and report NIMs?
No. There is no change in the reporting at a NIM basically. NIM is the same way we compute what we reported earlier, now reported. But in this quarter, NIM got impacted by the two regions. One is the assignment income for this quarter is lesser than what we see for the full-year basis because first quarter generally remain muted, assignment. But as you progress on a full year basis, it will be catch-up on the assignment income. Then on a full year basis, we will have back to that [ number ].
Secondly, obviously, cost of borrowing got increased, that is also impacted there. Secondly, as we mentioned, our spread got -- let's say, came down. So that has also impacted at a NIM level basically. But a onetime impact of assignment will come back, will come back on the full-year basis.
Got it. But our presentation is actually showing a 70 basis points decline in the reported NIM.
Yes, a few basis points -- because the spread also came down. So if you take the spread reduction, which is there -- and then around 20 to 25 basis points is on account of AIS -- on account of assignment basically. So that will come back in the remaining year.
Already, I think, there was question on the spread and all these things. We always say the thing, we will maintain this spread. But you will appreciate this thing, if [ you ] just give one more commentary, if we lose at a spread, so we will [ meet ] up the same thing through OpEx leverage basically. So this quarter is -- or last few quarters, now OpEx leverage, we have around 50 basis points in this quarter.
[Operator Instructions] The next question is from the line of Jigar Jani, B&K Securities.
So on the OpEx front, we were guiding for 20 to 25 bps each year progression. But if I compare on an FY '24 basis, we were at 3.58%. This quarter, we are already at 3.27%. So we are well below what we have guided for the full year. So how should we see the OpEx-to-asset number for the full-year FY '25? That's the first question.
And secondly, the growth guidance that we are making in this, [ 22% to 25% ], how much upside would be there because of the CLSS announcement in the budget? And if you could also simultaneously share in what format if you have had any discussions with NHB on this and what format is the [ CLSS is coming ]?
So we've already guided on the AUM growth of 20 to 25 percentage. On the OpEx-to-asset ratio, we are at around [ 3.95 ] for the current quarter. Our endeavor is to continue to maintain. And some of them, I think, on the employee cost side, which was incidental in nature, which came across in this quarter; I think operationally, we will try, and this is in a long-term guidance in the coming year; to come to a level of 3%. So we continue to strive towards that and maintain that [ slice ].
And on the CLSS, I think Aavas as a normal strategy has [ ever ] built the growth based on any of the subsidy schemes or other. We are into specific ones which are going to the self-construction individual homes. Definitely, that housing for all [ PMI part ] will have a positive impact for us. But nothing on the CLSS specific, we have been guiding on those lines.
The next question is from the line of Shubhranshu Mishra, PhillipCapital.
Just to [indiscernible] some degree of budget announcements without any [indiscernible] come out, do we feel that will change our AUM, our disbursement growth guidance going forward?
Second is what really changes when you see this [indiscernible] of CLSS because when CLSS got knocked off [indiscernible] since then the developers have pivoted towars other kind of inventory. So for them to repivot back into affordable housing will take some time. So in that case, [indiscernible] disbursement at scale with this scheme would also take time. That's a fair assessment. So...
Sorry, actually, you are not audible.
Which part did you not hear? The first question or the second one? Should I repeat everything?
So on the first question, what we heard and what we hear right is that we continue to have a guidance of AUM growth of 20 to 25 percentage for the coming quarters.
No, my question was, with the [ fine print ] of CLSS coming out in the next few weeks, will you change our AUM and disbursement growth? That was the first question.
Second one was, in 2022, the CLSS got knocked off and the developers reverted towards other kinds of format, which is not affordable housing itself, so there has been a supply-side crunch. This supply-side re-pivoting itself will take some time for the developers to realign to the [ fine print ] of CLSS. So do we think that the certification of disbursement at scale will take time maybe 12 to 18 months?
I think from that perspective, we are not in the developer segment or in the segment of those builder-led supply, which is there. Aavas has a clear-cut focus. And Tier 3 to Tier 5 town is more on self-construction individual homes, which is our main stake.
And whatever is the additional, it doesn't have -- we are not projecting any growth because of any of the schemes really coming across. The ones which are there on the urban-led supply, which is a part of our affordable vertical in our business, there -- depending upon whatever the inventory comes up, they definitely do have an upside for us as a housing finance company.
So if I have understood that correctly, you won't change AUM or disbursement growth guidance basis the [ fine print ] which come out in next few [ weeks] ?
What does it mean? What do you mean...
[indiscernible].
So there, we don't have a fine print of CLSS. Whenever that comes out, we'll change our guidance.
Fine print yet to come. But in large PMI schemes and a CLSS [ subsidiary ] schemes that it has a positive impact on the growth as well as on the quality side. It has improved significantly affordability of the home when people take a loan from us basically. So we want to wait for the time frame, but it [ act ] as a very positive impact.
So the question is that will we change our growth guidance?
So I think let's wait for the fine print. As Ghanshyam said, it always has a positive impact, a, on the affordability and b, on the quality of -- which is there. So once we get the [ fine print ], I think we will come back to you on what would be the implications on the growth side.
The next question is from the line of Kunal Shah, Citigroup.
Yes. Sorry, if I'm being repetitive because I missed the earlier part. So on the non-home loan side, anything to read into in terms of the [indiscernible]? I don't know if that was answered, but there is an uptick both on a year-on-year and quarter-on-quarter. So anything -- maybe are we seeing a slightly higher sales in 1+DPD or [ 30+DPD ] In that bucket, yes?
No, Kunal. There's nothing anything substantial to read across. I think you would really appreciate that as the MSME, which is the real working capital going across on the non-home loan segment, really going for the capital consumption and really helping us in building the right kind of book.
But incrementally, we don't see so much of a difference between the quality or the performance of the portfolio at this period of time. And other thing you have to really note that this is all secured by self-occupied residential properties, which are there. So...
Okay. And secondly, on check disbursals, I'm not sure if that was touched upon, but how much was the impact? And has it normalized? And should we be -- [ read that ] disbursements coming back to normal? If you look at the July month, the disbursement, how the trend has been here?
So Kunal, the earlier part of the call, we said that on the -- we had a sanction growth of 25 percentage on the sanction part. On the sanction to disbursement, we were at around 77 percentage. So we are optimistic of whatever we have there to bounce back in the coming quarters.
Okay. But that will come immediately? So it has got normalized right from the start of this fiscal?
It will get normalized.
The next question is from the line of Anurag [ Mantry ] from [indiscernible].
Just two data-catering questions, which you can quantify. You mentioned in the employee OpEx, there was a onetime reversal, I think if I was correct, because also -- if you can just quantify that number? And the other one on the data tiering again is in the yield rate. I think you mentioned that there is some interest cost reversal due to two reasons. If you can just quantify what these numbers be in the revenue?
Your question for the sequential quarter for the -- or are you talking year-on-year?
So for this specific quarter, I'm just asking the absolute numbers. So I think in OpEx, you mentioned that there was a onetime reversal in the employee cost...
It's -- true sense, not a reversal, but it is tad key up because when certain ESOP is given, the past got mature basically. So now new provision was lesser than the last year's requirement, basically. So that was a difference in the ESOP basically. And apart from that, I think it is a normal -- when you compare quarter 4 to quarter 1, obviously, disbursement remained higher in the quarter 3, quarter 4. So in those periods, a variable cost has remained higher than the quarter 1 variable cost basically at the employee level.
Can you quantify that provision -- sorry, number, just to get a sense of how much [indiscernible] has happened because of that?
So cost in this quarter is INR 4 crore.
Got it. And the interest cost -- sorry, the new interest reversal, quantify that as well.
I think that's difficult to comment because those system-based reversal happen in the system itself, basically. So we will come back an exit amount.
The next question is from the line of Mona Khetan from Dolat Capital.
Two clarifications from my side. On the cost of borrowing, if I have to look at the bank borrowings, have the incremental changed versus last quarter? You mentioned about the incremental [indiscernible]?
Bank borrowing, I think from banks, we borrowed money from the 2, 3 benchmarks basically [ T-bill ] money, [ repo-link ] money as well as the other benchmark [ 6-month potential ] all put together. So my bank money is borrowed in this quarter is at 8.40.
Okay. And what was the same last quarter?
I think there is a 10 basis points difference there.
Sure. Secondly, sir, if I could get a share of loans above 25 lakh ticket size and [ INR 15 lakh ] tickets [ today ] and what was the number a year ago?
I think figure-size details are too granular number to say at a large forum. We have given our overall ticket size detail in our presentations, also how is our loan -- home equity has grown, home loan has grown. We have seen a natural increase in our ticket size at home around 6% to 8% in the home loan side. And MSME [ put together ], you see we have seen a 10%-plus increase in our ticket size at a year-on-year basis, basically.
Okay [indiscernible] Above 25 lakh ticket size share in AUM, is that -- if you have a rough number you have, that will be very useful.
That we can -- I think can -- because we don't have much focus on the larger ticket.
Okay. But do you have a back-of-the-envelope number or share of your amount of 25 lakh ticket size?
Yes. It's around 5% to 6% on my loan count basis.
[indiscernible].
Yes, on account. And also, let's say, 2 lakh-plus customers, they are the 5% customers, are there who has more than 25 lakhs.
Okay. On -- we've got the number of [Technical Difficulty]
Yes, number of customers.
The next question is from the line of Aditya Pal [ MSA ] Capital Partners.
Just wanted to quickly understand, what would be our geographical concentration amongst our top 3 states? And how does the management think about it ?
So as you are aware, I think we've already discussed Rajasthan, Gujarat, MP and Maharashtra are the 4 states which are there. So the AUM accordingly is lined up. And as you will really appreciate the 367, 371 branches, we have 108 branches in Rajasthan. So based on that, it really is the one which is giving the disbursement as well as AUM [ momentum ].
But the other thing to really note is that you had the other states also really coming across. So from a level of 60%, 70% a couple of years back, we are at around 30% to 35 percentage on an AUM level. And since we have 108 branches, we have definitely a contribution coming from the base states. So that's how we are [ standing ] in the 4 states that we talk about.
So these 4 states currently contribute to 35% of the AUM?
No, I'm talking about Rajasthan at loan contribution around 35% of the AUM.
Okay. Understood.
So I think you should really appreciate that I have 33 -- we have 33% of the branches of pan-India, which are there in Rajasthan, right? So I have 108 branches of the total 371 branches in Rajasthan.
Understood. And sir, how are -- sorry, please go ahead.
Yes, you were asking about 4 states. All 4 states contributes 70% to 75%.
Sir, also my second question is that how are we thinking on branch productivity? So today, we have around INR 46 crores, INR 47 crores of AUM per branch. Going forward, how are we thinking? And also if you can give a bit color on branch economics, that is after completing 3 years, what is the -- generally, what is the OpEx?
I think on the granularity, we don't comment. I think you would really appreciate that the first ones which are there, which actually really help us to build, they help us to really scale up in the new markets. And in the line of our contiguous location expansion strategy, it helps us to build up the other states and other branches. And our constant endeavour is to really build that in a way which is much more granular, make them cost-effective and make them ROA accretive.
So then, sir, any color on how do we think on AUM for the [ housing ] activity, going forward?
So I think you do -- you look at the market potential, you look at the credit behaviour, look at Aavas' behaviour, I think all those metrics are one which really decide what it is there. It is not a secluded division of a numerator [indiscernible] it's more to do with our understanding of the geography in detail, local dynamics, our understanding of the market and the credit behavior. That determines the viability and accordingly, branch or size according to the market opportunity and accordingly resourced.
Sir, just understanding, so when we say 20% to 25% AUM growth, how can we understand how much will come from productivity gains and how much will come from organic?
You see, our AUM [Technical Difficulty] by 10% in, let's say, a target by 3 years as well as the [Technical Difficulty].
The next question is from the line of Nihar Shah from New Mark Capital.
Just a few questions from my side. My first question is can you tell us what the BT out this quarter was? And what is the trend in -- being over there? How are you seeing trends in BT out?
So we -- on the lines what Ghanshyam Ji really referred in the earlier -- while answering the earlier question, we continue to be at around 5% to 5.5%, and I think that is backed up by -- on an annual basis.
And this is actually backed up by our good predictive models based on our last couple of years, where we have been actually in a position to really predict what would be the customer behavior and actually stop the rightful customers, which are there. And wherever we feel that the customer is getting over-leveraged or the cash flows do not justify, we let it flow to the balance for a balance transfer.
And we really look at the ones which the customer has been over-leveraged, the performance of that in the with other -- with outside of us, actually, it's 5x worse off than it would have been there.
So I think very fact of cash flow-based lending, right kind of underwriting and retaining the right kind of customers have actually helped Aavas over a period of time. And with technology and our predictive model is really helping across to predict the behavior and hold the customer despite the competitive pressures and the market, we've been able to maintain that in a range-bound manner.
But is the number of people coming for BT out also increasing? So you are obviously retaining. Are you all retaining more customers? Or is the retention rate also sort of largely similar? Just trying to understand that more from a competitive intensity perspective.
No, no, no. We -- as you know, we have more focus in Tier 3, Tier 4, Tier 5. And we are not seeing any change in last, let's say, couple of quarters, including this quarter, any increase in the -- on the BT out requests.
Okay. Fair enough. The second question that I had was this loan sanction-to-disbursal ratio. Is there any drivers of that being so low this quarter that was just out of the ordinary? Or is there some normal seasonality or something? If you can just dive a little bit deeper into why you think that connected so sharply?
You are aware in this quarter when regulator circular was there, and we had some disbursement practices got improved in this quarter, so that has impacted us still over a certain sanctions, but not -- could not disburse basically. So those will be getting converting in the coming years basically -- coming months. Apart from that, I think there is not much to read on that ratio.
Okay. So it's largely because of the RBI circular that...
Yes, certain good amount -- we got to sanction 25% growth. But disbursement, it didn't happen because certain formalities, customer needs to be complete as for the revised what disbursements to be treated.
Got it. Got it. And is this the same thing that impacted the NIM? You mentioned that there was some RBI circular on the NIM impact. Is there a way you could quantify that potentially?
I think NIM is naturally seen -- certain compression in my yield has also impacted. Major component is also my assignment income is less in this quarter. And the cost of [indiscernible] is a natural increase we have seen basically.
So that's entire something is compression of the NIM level or spread level got majorly -- I think majorly helped us to bring down at the OpEx saving basically in the [ these ]. So ROA impact is very minimal, it's a 15 basis spent, which will be [ lead to get ] get positive in the coming quarters once we will have a better assignment income in the coming quarters.
Ladies and gentlemen, due to time constraints, that was the last question. I now hand over the conference to Mr. Sachinderpalsingh Bhinder, MD and CEO of Aavas Financiers Limited, for closing comments. Please go ahead, sir.
As we conclude today's earnings call, I want to express my heartfelt gratitude to each one of you for their participation and engagement, the dedication of our team, the trust of our shareholders, the loyalty of our customers have been instrumental in our growth.
In our Aavas 3.0 journey, we are dedicated to constructing a robust framework that supports our ambitious growth and ensures corporate governance, asset quality, sustainability and resilience. I expect my deepest gratitude to all our regulators and stakeholders whose constant faith and support have been helpful in the journey.
Together, we shall forge a new era in affordable housing and MSME finance entailing countless lives and reshaping India's socioeconomic landscape. Thank you, and have a wonderful financial year ahead.
Thank you very much. On behalf of Aavas Financiers Limited, we conclude this conference. Thank you for joining us, and you may now disconnect your lines.