Aavas Financiers Ltd

NSE:AAVAS

Earnings Call Transcript 2023-Q2

[Operator]

Ladies and gentlemen, good day, and welcome to Aavas Financiers Limited Q2 FY '23 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 is being recorded.

I now hand the conference over to Mr. Sushil Kumar Agarwal, MD and CEO. Thank you, and over to you, sir.

[Sushil Agarwal, executive]

Good afternoon, everybody. Thank you for participating on the earning call to discuss the performance of our company for quarter 2 and Hl FY '23.

With me, I have Mr. Ghanshyam Rawat, CFO; Ghanshyam Gupta, Investor Relations Officer and other senior member of the management team and SGA, our investor relationship advisor.

The results and the presentations are available on the stock exchange as well as our company website. And I hope everyone has had a chance to look at it. I'm happy to inform you that during the quarter, the company's long-term credit rating was upgraded from AA- positive outlook to AA stable outlook by CARE, in line with the ICRA. I take this opportunity to thank all our stakeholders for their continued trust and support.

After witnessing 90 basis point increase in record rate in first quarter, RBI has further increased the repo rate by 100 basis points during the second quarter. Consequently, we have also increased our prime lending rate by 75 basis points during H1 FY '23 and a further increase of 50 basis points with effect from 5th October 2022.

For Q2 FY '23, we disbursed INR 11,467 crores, registering a 27% year-on-year growth and achieving 89% of the disbursement done in seasonally strong Q4 last year. We continue to grow in a calibrated manner and registered AUM growth of 24% as of September 2022. While maintaining our operating metrics and we have delivered PAT growth of 29% year-on-year for H1 FY '23. With our continued focus on collection, 1+ DPD stood at 4.45%, with an improvement of 22 basis points from first quarter. 90-day positive stood at 0.93% in September 2022, but we have also categorized 0.17% of up to 90-day past due asset as gross NPA or gross Stage 3 following RBI notification dated 12th November 2021 to harmonize IRACP norms across all lending institutions. As a result, total gross Stage 3 is 1.10% in September 2022. We'll continue our strategy of converting valid delinquencies and strive to maintain 1+ equity below 5% and 90-day past due below 1%.

I would now hand over the line to Mr. Ghanshyam-ji, CFO, to discuss various business parameters in details.

[Ghanshyam Rawat, executive]

Thank you, Sushil-ji. Good afternoon, everyone, and a warm welcome to our earning call.

During the quarter, company borrowed an incremental amount of INR 9,467 million at 7.55%. As of September 22, our average cost of borrowing stood at 6.99% on an outstanding amount of INR 109,711 million. During the quarter, our long-term rating was upgraded by CARE from AA- positive to AA stable, while ICRA continued to maintain long-term credit rating AA stable. Despite the highest short-term rating A1+, we continue to maintain 0 exposure to commercial paper as a prudent borrowing practice.

IGAAP to Ind AS reconciliation has been explained in detail for profit after tax and net worth on Slide #31 and 33 of our presentation.

Key parameters. As on 30th September 2022, total number of live accounts stood at 163,639 that is 23% year-on-year growth. Total number of branches was 321, 24 new branches added in last 12 months. Employee count 5,702, 23% year-on-year growth. Assets under management grew 44% year-on-year to INR 125,443 million as on 30th September 2022. Product-wise breakup, home loan 70.9%, other mortgage loan 29.1%.

Occupation-wise breakup, salaried 39.8%, self-employed 60.2%. Disbursement increased by [ 20,002% ] year-on-year to INR 11,467 million for Q2 FY '23 and 64.2% year-on-year to INR 22,402 million for H1 FY '23. As on 30th September 2022, average borrowing cost 6.9% against our average portfolio yield of 12.85% resulted in a spread at 5.86%.

Borrowings, access to diversified and cost-effective long-term financing, a strong relationship with the development financial institutions. During the half year, we borrowed INR 18,451 million at an average rate of 6.62%. Overall borrowing mix as on 30th September 2022 is 41.8% from term loan, 23% from assignment and securitization, 20.5% from National Housing Bank, 14.7% from net capital markets.

Now assets quality and provision. 1 day past due stood at 4.45%, growth in Stage 3 stood at 1.1%, net Stage 3 stood at 0.84% as on 30 September 2022. Gross Stage 3 of 1.1% MPU, 0.17% up to 90-days DPD, assets which has been categorized as a GNPA following RBI notification dated 12 September 2021. During FY '22, the resolution plan was implemented for certain borrower accounts as per RBI Resolution Framework 2 dated 5th May 2021. Some of such accounts with an amount outstanding of INR 1,012.5 million as on 30th September 2022 has been classified as Stage 2 and provided for as per the regulatory guideline. The ECL provision including that of COVID-19 impact as well as Resolution Framework 2.0 stood at INR 649.1 million as on 30th September 2022. Liquidity of INR 20,370 million as of 30th September 2022. Cash and cash equivalent of INR 13,270 million, unavailed CC limit of INR 1,100 million. Document unavailed sanction limit from other banks INR 14,000 million.

Profitability, PAT increased by 29% year-on-year to INR 1,962.6 million for H1 FY '23. ROA was 3.42%. ROE was 13.44% for H1 FY '23. As on 30th September 2022, we're well capitalized with a net worth of INR 30,314 million. Book value per share stood at INR 383.6.

With this, now I open the floor for Q&A session. Thank you.

[Operator]

[Operator Instructions] Our first question is from the line of Abhijit Tibrewal.

[Abhijit Tibrewal, analyst]

First thing that I wanted to understand is the absolute increase in your Stage 3B, which is greater than 90 DPD and is now up 50% in the last 2 quarters. I just wanted to understand, are these loans which have slipped from your restructured pool? Or are these customers who have defaulted because their EMIs have increased when you increased your PLR? And maybe a related question here is, from your past experience, do you think that there is a need for the industry to be worried about higher delinquency in the affordable housing segment when the EMI of the customer is increased?

[Sushil Agarwal, executive]

So Abhijit, if I'm correct, you're asking from Q4 last year to Q2 this year?

[Abhijit Tibrewal, analyst]

Yes.

[Sushil Agarwal, executive]

Yes. So Abhijit, I think we're normally in 1% here and there. And now from 1st of April, we have stopped market cater AFS which was earlier whenever any asset repossessed in the [indiscernible] we used to mark it AFS and [Foreign Language]. Otherwise it's around 0.9 [Foreign Language]. So we hope [Foreign Language]. So we thought we should be more conservative on that aspect and this is why this number is looking like this.

[Abhijit Tibrewal, analyst]

Understood. So now we don't classify any assets that we repossess as asset held for sale. They are still classified as Stage 3 norms?

[Sushil Agarwal, executive]

Yes. At about INR 12 crore.

[Abhijit Tibrewal, analyst]

Got it. You said only -- the related question that I asked that, I mean when the EMI of the customer is increased, is there a reason to be worried that it can lead to higher delinquencies in the affordable housing segment?

[Sushil Agarwal, executive]

I think it's a cycle, [Foreign Language], but mostly tenure-based [Foreign Language]. Very few cases are there where we need to increase the EMI of the customers also. That is, I think, less than 1% or 2%. So I don't think so there is much impact of that in the portfolio. And we are seeing the cycle 2 it ends now in the last 12 years.

[Abhijit Tibrewal, analyst]

Understood. Sir, my second question was on the OpEx. I'm just trying to understand that this elevated OpEx or cost-to-income ratio, is it really a function of higher [indiscernible] the attrition in the industry, especially at the field level is really high? Or is it more a function of your investments in branches in technology, which you're not really officially opened yet? And once it will be officially opened -- branches which will be official opened in the second half of this fiscal year, but the expenditure you have already recurred in the first half itself?

[Sushil Agarwal, executive]

Abhijit, I have already mentioned in the last call also that for this year, OpEx will be a little higher going forward in coming years, then the leverage will come in into the balance sheet. This year, we are spending a large much amount on the digital transformation. And last quarter, we started implementing LOS, which is [ SFDP ]. And now we have signed up for LMS, which is core-banking system. So we have more a core banking system, [ Flex-U ], which is done by the large bank like HDFC and AU. And for our accounting software also, which is now called ERP in the banking parallel. So we are shipping to Oracle Fusion, which is used by the large banks like Kotak and [indiscernible] kind of balance sheet. So while this will be implemented, I think we have already given 6 to 9 months horizon it will take for implementation out of this.

Secondly, we continue to do investment and -- like this year, again, we'll open 35 branches first half. The branches which is leased and the opening position is around 7, 8. So now second half, most of the branches will also be open. Thirdly, we are also investing in manpower and leadership, keeping in mind 5 to 7-year horizon. Also, now we are at stage of like INR 12,500 crore in the next 3 years, if the money should get double. So we are also spending money for leadership development. Like this year, we have tied up with IM Ahmadabad, where our 35 officers got the training and certification. And this will be second line, third line creation in the organization. So I think continuous investment in people, process and technology, but technology, the one big change which will compete to like next 6 to 9 months, I think from next year onwards, the OpEx decrease will also help us getting the optimization.

[Abhijit Tibrewal, analyst]

Okay. Very good to hear that we are spending or investing in manpower and kind of furthering the career progression of the leadership team. The last question that I had is that, I mean, have you availed any LLP borrowings in the first half of this fiscal year? And if you are looking at the sanctions that you have or you're expecting from LLP, what is the impact on spreads and margins that you foresee in the second half of this fiscal year? Sushil-ji, what I'm trying to understand is today, there are 2 schools of thought, one which says that it's okay if there is some spread in margin compression, but we want to focus more on growth, while another school of thought is, I mean, we kind of want to maintain the current spreads and margins that we have. So how are we thinking about these 2 things?

[Sushil Agarwal, executive]

Abhijit, in the Q1, we have borrowed around INR 400 crores. Q2, we have not borrowed any money from NHB. But recently, we have got sanctioned of around INR 900 crores from NHB for the next fiscal year. As a CEO, maybe we want to attain both, we can achieve growth also, and we can maintain our spread. And I think that given the growth in our narrated [indiscernible] 22% to 25%, we are already at 24%. And at the same time, we are able to maintain our spread and profitability.

And in the [ Elko ] and Board meetings, we continuously review what impact we will have because there are 3 kind of liability risk asset leverages. One is tenure-wise, one is fixed and surety-wise, one is earning at risk-wise. And we forecasted that next 3 to 6 months, how much price impact will get on borrowing -- in accordance with that, we have announced that from 5th of October, we are raising our prime lending rate by 50 basis point.

So I think next, till 31st December whatever things we were able to envisage as a board and as a management team on the borrowing side, we have taken into account and accordingly priced the liability or priced the assets on the variable side.

[Operator]

Our next question is from the line of Karthik Chellappa from Buena Vista Fund Management.

[Karthik Chellappa, analyst]

I have 3 questions. The first one is what would be your labor attrition rate in the second quarter? And across the industry, it seems that the attrition rate, especially at the field staff level has remained high. You talked about a few measures as far as, let's say, tying up with IM Ahmadabad et cetera. But at a field staff level, what initiatives are you planning to improve this attrition level? That's my first question.

[Sushil Agarwal, executive]

So Karthik, thankfully, Anshul joined us around 6 months back. And as a organization, we have kept one of the key operating metrics, which needs to be tracked at employee attrition that we took the target that can be reduced by 50%. And I am happy to announce that Q2 we were able to significantly reduce our attrition rate in comparison to Q1 this year and half year last year. So the measures which we have taken at the ground level in terms of earnings, in terms of incentive level changes, now we are focusing and deactivating a reason of contribute rather than performance. And everybody should contribute and we are going for an incremental -- performance increment.

So earlier, we may be to see everybody on one scale. Now we are seeing if somebody is 50 can we move him to 75 level. If somebody is 75, can we move him to 100 level. If somebody is doing 100 can we move to 125 level. And I think that has helped as a organization, though we are not at the range where we wanted to be, but we are happy with the success we got in last 4 to 5 months after our efforts on this particular piece.

[Karthik Chellappa, analyst]

Got it. Just one clarification Sushil-ji. You said the second quarter's labor attrition rate is down significantly. Could you give us some number or a range by how much is it down?

[Sushil Agarwal, executive]

Around 20% down.

[Karthik Chellappa, analyst]

Around 20%. Okay. The second question Sushil-ji, as far as your payment medium mix is concerned, have you noticed any notable change, let's say, away from mediums like NASH to either wallets or using UPI in the last couple of quarters?

[Sushil Agarwal, executive]

No. So Karthik, we -- when we gave the loan we ensured that this is present through NASH only. And any customer that gives -- which bounces, then we give the customer option either to pay through UPI, wallet, check, cash, online, website, different options. But our 100% incremental lending is supported by less funding -- NASH repayment option.

[Karthik Chellappa, analyst]

So even when it bounces, you have not noticed any change in payment through UPI? Is it like when your bounce rates go up or so people opt for UPI immediately, you have not noticed any such pattern yet?

[Sushil Agarwal, executive]

So because, anyway 1 plus number is very less. So I think wallet to UPI, yes, we will change, but overall number is so less, so that is not significant to talk about.

[Karthik Chellappa, analyst]

Okay. My last question, Sushil-ji, is basically on the economics of the sector itself. What we noticed, even for Aavas as well as other industry participants is, in the last few quarters, the OpEx growth has been higher than the AUM growth. In your case, of course, there are very specific initiatives, whether in IT platforms or training, et cetera. But this is a trend that we generally observe. Now given where spreads are and given the interest rate outlook, would it be fair to say that going forward, the PPOP growth will, to some extent, lag the AUM growth? And if not, what are the other levers that you have to actually ensure that that growth is more or less in sync?

[Sushil Agarwal, executive]

Karthik, I'm in sync with what you are saying, but I want to throw some number here. Q1 to Q2, income has increased 16%. OpEx has increased 12% and profit has increased around 20%. So the [ Jaws ] chart or increase in income, vis-a-vis increase in OpEx we are already in that -- I think that that thing is coming up. Once we are seeing cumulative number H1 I think it is looking like this. So at Aavas, we are cognizant of this. And though we are investing in people, process and technology and with a huge amount, but still, I think Q2 is showing that we are already in that -- what you can say Jaws chart favorable for the Aavas.

[Operator]

Our next question is from the line of Kunal Shah from ICICI Securities.

[Kunal Shah, analyst]

Firstly, with respect to the repricing. So as we clearly see in terms of almost INR 7,500-odd crores, INR 7,200 crores is a floating rate loan and INR 5,300 crores on a fixed side. So when we increase this lending rates by, say, 75 basis points and another 50-odd basis points, when do we see this repricing getting reflected in the INR 7,200 crores book? It will be a monthly effect or maybe a quarterly one?

[Ghanshyam Rawat, executive]

As we announced, we published the date of effective also like this [indiscernible] which is going to get announced 5th October is effective. So it will have a impact from 5th October itself on a floating loan book. As far as fixed rate book, we have a contractual agreement for each and every borrower. Every 3 years some fixed rate contract also get repriced, like in the month of October, around INR 1,300 fixed rate account, which is sanctioned 3 years back was repriced. So every year, certain fixed rate book get repriced.

[Kunal Shah, analyst]

Yes. So it would be fair to say that this INR 7,200-odd crores ex of disbursements which have been done in this quarter or maybe the last quarter, besides that, the entire book would have -- would get repriced by 125 basis points from 5th of October, yes, cumulatively?

[Ghanshyam Rawat, executive]

No, no. 5th October, we have announced 70 -- 50 basis points.

[Kunal Shah, analyst]

And earlier 75, yes.

[Ghanshyam Rawat, executive]

75 which will be announced earlier 25 basis points and then 50 basis points, those effective on those days.

[Kunal Shah, analyst]

Yes, yes, yes. Okay. Got that. And when we are seeing this, maybe this is the behavior of this INR 7,200 because we are relatively on a higher side with respect to passing on the rates compared to that of other affordable housing finance companies. So any change in terms of the BP outs or something, maybe when we did this 75 bps? Because many players have not yet increased it.

[Sushil Agarwal, executive]

So Kunal, on that side also, there is positive news, our BP out have come down. So earlier, it was around 0.6% per month, which has reduced to now 0.5%, but 0.6% down is a 7% to 8% on a yearly basis. Now the current run rate is going 0.5% or below. So that significant for the next 12 months, if everything will be in control, it's less than 6%. So there also, we are on a positive side.

[Kunal Shah, analyst]

Sure. And lastly, again, touching upon maybe in terms of the growth. So I think when we look at it in terms of the traction, it still seems to lag with the industrial peers, okay? And there is huge amount of investment, which is happening. So when do we actually see the productivity improvement as well, okay? And maybe given the kind of branch network, employee network that we have, in fact, we should get back to in terms of the disbursements for branch where we could see a significant improvement here?

[Sushil Agarwal, executive]

Kunal, as a company, we are okay with growth of 20% to 25%. We are already on 24-plus percent as agreed. So I don't think so there is a challenge on that side. I don't see from industry peers also or when we were at the size of industry peers, our growth was more than 40% when we were debt AM side. And the current AM side, we are okay with 22% to 25% growth consistently year-on-year with maintaining asset quality and maintaining operating metric.

[Kunal Shah, analyst]

Okay. Sure. And one last question was with respect to securitization. So we have adequate liquidity, but maybe I think in terms of the securitization momentum compared to that of maybe the previous year, it seems to be on a higher side. So would we see that maybe in the second half, should we assume that the run rate could be relatively lower if I have to look at it on a full year basis, is it like or similar rate might continue?

[Sushil Agarwal, executive]

[indiscernible] reply. But as a company, as a organization, I think overall ratio has not changed. Overall, 20% of book is assigned at the organization and I think we are into the trajectory as a company, as of course H1 FY '23 also. So I don't think so there is a challenge or there is change in strategy for the company on that side in terms of...

[Kunal Shah, analyst]

It's up to 23%, 25% or so, yes.

[Ghanshyam Rawat, executive]

So yes, Kunal, Sushil-ji has covered, I think, very well. Last year, we've done on a full year basis, INR 180 crores. This year, whatever we see growth in the AU similar growth you can see in assignment also, nothing -- any strategy changed. It's only 1 quarter, 2 quarters here and there that becomes because of what opportunity, what price we get from banks and institutions and then we accordingly execute that deal.

[Operator]

Our next question is from the line of Shreepal Doshi from Equirus Securities Private Limited, Research Division.

[Shreepal Doshi, analyst]

My question was, firstly, on the yield side. So we've already taken 3 rate hikes. That is, I think, 25 basis point was in June, 50 was in August and recently we took 60 -- like we'll be taking 60 basis points. But just wanted to understand what are the rates that would be prevailing for HL and LAP? So we know if you could give some range there? And what would be the differential between the 2?

[Sushil Agarwal, executive]

So our HL pricing is around 11.7% to 12% and non-HL rates are from 14% to 14.2% average.

[Ghanshyam Rawat, executive]

The new business rate.

[Shreepal Doshi, analyst]

Okay. Then these are the latest ones, right?

[Ghanshyam Rawat, executive]

Yes, the newest.

[Shreepal Doshi, analyst]

Okay. Got it. And sir, with respect to this asset held for sealed at line item that we had in the balance sheet. So I guess in the annual report that gross number was INR 30 crores. Now like I think, you highlighted to one of the participants that you have already incorporated to the Stage 3 number this asset held for sale, so that number has come down significantly? Or is it like...

[Sushil Agarwal, executive]

So 30 has come down -- so as of 31st March it was INR 29.21. And after provisioning it was 24%. Now this is INR 19 crores after provisioning.

[Shreepal Doshi, analyst]

Okay. So INR 19 crores we have...

[Sushil Agarwal, executive]

And we have lot many cases, EMD received. So I think we will see a significant reduction in this quarter also in December. Hopefully, my say by year-end this will be mostly 25% of the opening pool. The rest everything will be disposed of.

[Shreepal Doshi, analyst]

Okay. So sir, you said that this number has been added to Stage 3.

[Sushil Agarwal, executive]

No. So new -- from 1st of April. And whatever AFS is doing, we are not marking that as AFS. So only opening pool will come down and new AFS as a...

[Shreepal Doshi, analyst]

Okay. Got it. Sir, just wanted to understand like the logic behind this, like why do we have it as a separate heading in the balance sheet? Because, yes, I just wanted to understand the logic behind this.

[Ghanshyam Rawat, executive]

It's nothing or anything big any aspect, it is the normal accounting policy, which we adopted 6 years back. Now new region, we become like a socially mentioned in early remarks to become more prudent, more considerably of accounting policy. So we are keeping any AFS new assets as NPA and the old one is, as Sushil-ji mentioned, we are accelerating our disposal of those assets from today to 6 to 9 months as a time frame, it will be get disposed of.

[Shreepal Doshi, analyst]

Got it. Sir, one last question. What is the employee base number that we have for the 2Q end? And just another question in relation to that is that we have something called manpower contracts, which is part of the annual -- which is part of the other OpEx, if I'm right. So why do we have contractual employees when our entire thought process is to sort of source internally and also collect internally?

[Sushil Agarwal, executive]

There are 2 kind of people which are on contract, one is the admin office boys [Foreign Language] and tele-calling staff. Second, in the sales side also [Foreign Language] they go out of the system.

[Shreepal Doshi, analyst]

Okay. Got it. And sir, the employee base number, if you can share?

[Sushil Agarwal, executive]

Yes, 5,702.

[Operator]

Our next question is from the line of Shweta Daptardar from Elara Capital.

[Shweta Daptardar, analyst]

Couple of questions. So if I look at disbursement trend the first half expense you have put up INR 11.5 million odd kind of number. And I remember you mentioned last time second half tends to be seasonally stronger. So do you see the overall growth metrics there for it and also, I mean, always you have mentioned the growth target to be in the range of 20% to 25%. How do you view it in terms of leverage as well? My first question.

[Sushil Agarwal, executive]

Shweta, overall last year, we disbursed INR 3,600 crores. And this year, in the past half itself, we have already disbursed around INR 2,300 crores. Mostly in a normal year, 40% to 45% is first half and another 55% to 60% in the second half. So if you go by the trajectory, the numbers will be -- you can calculate, I think, it's significantly higher than last year's number. So this kind of growth is appropriate for our 20% to 25% kind of AUM growth revenue.

[Shweta Daptardar, analyst]

Sure, sir. Sir, also if I look at your provision. So if you could throw some color on that what would be to normalize -- have to normalize in the first phase, the run rate of provisions on quarterly basis because the number is looking lower since last quarter now. So how do you think see this going forward?

[Sushil Agarwal, executive]

Shweta, you're asking for 1+ number?

[Shweta Daptardar, analyst]

No sir, I'm talking about provisions. The overall provisions.

[Sushil Agarwal, executive]

This provision you are talking, that thing?

[Shweta Daptardar, analyst]

Sir, the P&L policy?

[Ghanshyam Rawat, executive]

I think we didn't get complete question, but let's -- I will try to elaborate. I think quarter 1 to quarter 2 provisions, so we have overall provision is up because earlier years, last year, we've seen a COVID period, certain extra provision was built up. And those assets now has in normal life, like those was in September '20 was a last date when the normal cycle was started. So those pools are now shown the maturity over the last 2 years. So after that, now those provisions are going in a normal cycle basically. So we -- as such, our NPAs around -- growth NPA around 1%. And 1 day past due is already less than 5%, so we are adequately created our provisions, and we don't see any much change in our provisioning trend.

[Shweta Daptardar, analyst]

Fair point, sir. Sir, one last question in one of the previous participant's reply, you mentioned that out of the INR 5,300-odd crores fixed side, some INR 200 crores is something which is on the verge of resets this year?

[Ghanshyam Rawat, executive]

So we are not getting your questions. I think it's not audible. Either you rejoin the call then again come in the queue. We are not getting...

[Operator]

Shweta if you would like to -- can you switch to your handset if you're using a headset or any other mode -- we can hear you, but it's not...

[Shweta Daptardar, analyst]

Sure. Is it better now?

[Operator]

Sir, do you think you can hear better now?

[Ghanshyam Rawat, executive]

Yes, little better.

[Shweta Daptardar, analyst]

Okay. Sir my question was on the INR 5,300 crores fixed side book is out of that INR 1,300 crores, which is getting reset this year. You mentioned that every 3 years, your fixed book get repriced?

[Ghanshyam Rawat, executive]

Yes, you're right. Whatever contract, I think we disbursed 3 years back -- let's say, I give an example, if in the month of October '22, the loan, which is sanctioned at a fixed rate in October 2020, that will -- that book will come to reset in October 2022, so and so forth. It will continue.

[Shweta Daptardar, analyst]

So this year, that amount is INR 1,300-odd crores?

[Ghanshyam Rawat, executive]

You -- I think simply you can take 1/3. 25% is better to assume because in those years it was lower than what is there. 25%, you can take clear side.

[Operator]

Our next question is from the line of Rahul Maheshwari from Ambit Asset Management.

[Rahul Maheshwari;Ambit Asset Management, analyst]

Just 2 questions Sushil-ji. Can you give some color on the OpEx side, the kind of growth that has taken place, means when can we expect the sale to start building in terms of the same go for employee expense and other OpEx, where are the parts where such kind of high growth of the investment is taking place? And second question, on the MSME license when can we expect -- can you throw some color on that part also?

[Sushil Agarwal, executive]

Rahul, [indiscernible] and RBI and we can't comment when it is going to come. So on that part we can't do any commentary. On the first part, on the OpEx side, we have already mentioned that this quarter itself, again, the revenue increase versus OpEx increase is less. So we are already in the positive Jaws chart. And -- but we have already told that this year because of high investment in technology and some of the retention practices and leadership development, OpEx might be high, but since we are having -- we are maintaining high spreads, we thought we can invest. And once all these things will be implemented in 6 to 9 months, you will see again the downward trend of OpEx, OEM and all those ratio. But this quarter itself, we got positive Jaws on that balance sheet number.

[Rahul Maheshwari;Ambit Asset Management, analyst]

So just to break this, in case of percentage of mix, where it's going in OpEx compared to volume growth, technology spends and the branch expansion, can you break it down in terms of where the quality of investments or OpEx are going for Aavas?

[Sushil Agarwal, executive]

So Rahul, branch expansion is a normal phenomenon. Every year, we open 35 branches. Normally, we start building up from Q2. And the admin team starts giving delivery of the completed branches from Q3 and Q4. So -- but that is a normal phenomenon. Technology side, this is the very large investment after 7, 8 years in the company. The range is approx INR 100 crores. We need to see what kind of amount we will be able to capitalize and what -- because now most of the things are on cloud and annual subscription basis. So mostly will be there.

At the same time, we are also building the capability. Now we are almost at INR 400 crores to INR 500 crores per month regular [indiscernible] and giving that number for next 3 years, visibility is already there in the system. We have successfully done the condition of business also, business head [ Ram ] left in June and Siddharth joined and the entire process was smooth and business numbers are intact. So I think, obviously, effect is there, but mostly it will be technology and leadership development side.

[Rahul Maheshwari;Ambit Asset Management, analyst]

And what is the attrition rate at the junior level people who are at the branches, which have just come after the transition of being into contract labor? Can you give specific range what are the attrition levels?

[Sushil Agarwal, executive]

Rahul, that number I don't have at this point of time, but we'll get back to you on this number. But in the Board, we have seen a presentation where our attrition rate has significantly dropped this quarter, around 20% on that side.

[Rahul Maheshwari;Ambit Asset Management, analyst]

Okay. And just a second question, which was asked on the MSME license. Are things -- everything from our side has been re-presented to the RBI only the -- it's where the gap is there means in terms of the...

[Sushil Agarwal, executive]

Rahul, all those things -- because I would be with a regulator, we cannot disclose at this point of time. Anything comes from their side we will either publish at the [indiscernible] everybody.

[Operator]

Our next question is from the line of Piran Engineer from CLSA.

[Piran Engineer, analyst]

Congrats on the quarter. Just a couple of questions. Firstly, our loan yield between 4Q and 2Q is up only 20 bps, 12.65% to 12.85% [Foreign Language]. So -- but we've increased our rates by 75 bps and 60%, 70% of our loan book is floating. So what explains this?

[Ghanshyam Rawat, executive]

Yes, like we started 12.65%. We now have 12.85%. Roughly 55% floating is we immediately get passed on. So if we take 75 basis points either around 55 gets in floating rate so roughly increase to be invest rate 37, 38 basis points. But 17 basis points obviously got lost in a certain assets we put on retention, like our asset counts for the balance transfer. We found that these assets is worthwhile to retain these assets to be upward at competitive price.

So that also sometimes have -- gives us some reduction in overall AUM. So on that account, we got around 10 or 12 basis point or new asset generation is gradually picking up and changing yield basically. So that also have some basis point hit in the overall basis. So 20 basis was increase in the AUM on account of increase and roughly 17 basis we lost on account of 2 factors.

[Piran Engineer, analyst]

Okay. Okay. Got it. But sir, 0.5% per month is our BT out. This is what actually happens, what would be like the BT out applications? And how much are you able to, let's say, resolve by offering a lower rate?

[Sushil Agarwal, executive]

No. So every time in BT retention always, there might not be a value where you need to reduce the rate. Sometimes customer comes for top-up, sometimes customers come for some other problems also. So normally around 1% to 1.25% kind of applications come every month. And we have a very strong team and DNA at the branch level, culture level, branch head level. And everybody is linked to that customer, good customers should always be with us. So out of 1.25% around 0.25% to 0.3% customers where we want them to go because they will be a continuous delinquency or their CIBIL score has already reduced between 300 to 600. Another 0.5%, maybe 60%, 40%, 60% may we need to offer the rate, 40% we need to offer either [indiscernible] or maybe if they want top-up, we provide that.

[Piran Engineer, analyst]

Got it. Got it. And sir, just one very basic question. If I take a fixed rate loan or a floating rate loan at one point in time, is the rate the same?

[Ghanshyam Rawat, executive]

No, it is due -- for the fixed rate, roughly, 200 to 300 basis point higher rate.

[Piran Engineer, analyst]

Irrespective of the cycle?

[Ghanshyam Rawat, executive]

Yes. Irrespective of cycle. Yes.

[Piran Engineer, analyst]

Okay. [Foreign Language] about 11.7% home loan rate starting, that is for floating. And if I take fixed, it will be around 13.5%, 14%.

[Sushil Agarwal, executive]

So on variable side, it is around 10% on fixed side it around 12%.

[Ghanshyam Rawat, executive]

12% plus for home loan. Non-home loan, it goes around -- it goes above 14% to 17%, 18%.

[Piran Engineer, analyst]

Okay. So floating rate home loan starts at around 10%?

[Sushil Agarwal, executive]

Floating rate starts at around 9%.

[Piran Engineer, analyst]

9%. Okay. Okay. Got it. Got it.

[Ghanshyam Rawat, executive]

[indiscernible] 10%, 12%.

[Piran Engineer, analyst]

Sorry?

[Ghanshyam Rawat, executive]

Yes, it will start at 9%, but it goes up to 10.5% or 11% average was out around 10%, 10.25% for retail. It's a home loan floating book.

[Piran Engineer, analyst]

Okay. Okay. [Foreign Language] 11.7% to 12% that is for fixed rate, is it?

[Ghanshyam Rawat, executive]

No, [Foreign Language].

[Operator]

Our next question is from the line of Mona Khetan from Dolat Capital.

[Mona Khetan, analyst]

I just have one question. So if you could share the breakup of your loan book by ticket size, what share of loans are sub 10-lakh, share of loans between 10 lakhs to 25 lakhs ticket size and above 25 lakh ticket size?

[Sushil Agarwal, executive]

One sec. On the total -- just give us one second. So I think around 72% customers are less than 15 as exit number in terms of number of customers. And for more than 25 lakh and above, I think around 7% to 8% customer for us.

[Mona Khetan, analyst]

Okay. Okay. Sure. And just a follow-up on the previous question on fixed versus floating. So is it fair to say that for a certain customer profile, if one has to choose between fixed and floating, the differential on average would be 200 to 300 bps?

[Sushil Agarwal, executive]

Yes.

[Mona Khetan, analyst]

At any point of the cycle?

[Ghanshyam Rawat, executive]

Yes.

[Sushil Agarwal, executive]

Yes.

[Ghanshyam Rawat, executive]

This is, let's say, as of now under state objectives which we adopted, but if interest scenario goes haywire, so this policy is required change and who can [indiscernible] the policy also. If the market dynamic change in a [indiscernible] scenario, so obviously we also want to change our policy around that.

[Operator]

Ladies and gentlemen, due to time constraints, that was the last question. I now hand the conference over to the management for closing comments.

[Sushil Agarwal, executive]

Thank you all for attending the call. I wish you a very happy Diwali and [indiscernible] and hope everybody keeps safety and health as a priority. For any further information, we request you to get in touch with Ghanshyam Gupta, our Investor Relationship Officer, or SGA, our investor relationship adviser, they will be happy to help you. Thank you all. Thank you for...

[Ghanshyam Rawat, executive]

Thank you, everyone, and wish you Happy Diwali.

[Operator]

Thank you very much, members of the management team. Ladies and gentlemen, on behalf of Aavas Financiers Limited, we conclude this conference call. Thank you all for joining us, and you may now disconnect your lines.