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Aavas Financiers Ltd
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Ladies and gentlemen, good day, and welcome to Aavas Financiers Limited Q4 FY '24 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 indeed 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. 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 our participants. Thank you for participating in the earnings call to discuss the performance of our company for Q4 and FY '24. 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. Sachinder Bhinder, MD and CEO; Mr. Ghanshyam Rawat, President and CFO; Mr. Ashutosh Atre, President and CRO; Mr. Siddharth Srivastava, Chief Business Officer; Mr. Surendra Sihag, Chief Collection Officer; Mr. 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 the call with an opening remarks by our MD, Mr. Sachinder Bhinder; CFO Ghanshyam Rawat; and CRO, Ashutosh Atre, followed by a Q&A session.
With this introduction, I hand over the call to Sachinder. Over to you, Sir.
Thank you, Rakesh. Good evening, everyone. Thank you for joining the call. I take this opportunity to thank all our stakeholders for their continued trust and support. Let me now take you through the key highlights of our performance. In FY '24, we delivered robust growth of 22 percentage Y-o-Y in AUM at INR 173 billion. Along with the strong growth we have ensured best-in-class asset quality with all-time low 1-plus DPD at 3.12 percentage and GNP of 0.94 percentage. We have reported a net profit of INR 4.91 billion in FY '24, registering a growth of 15 percentage Y-o-Y.
In terms of business update, in Q4 FY '24, we have delivered robust disbursement growth of 39 percentage Q-o-Q and 20 percentage Y-o-Y. We dispersed INR 18.93 billion in quarter 4 FY '24, taking a full year disbursement to INR 55.82 billion. This was our highest ever quarterly disbursement since inception. The green shoots from month-on-month improvement in the disbursements give us confidence to steer a path to deliver strong and sustainable growth in the AUM for FY '25.
As a pan-India institutions, we are seeing a well-diversified growth in disbursement across the states. We have opened 21 new branches during FY '24 in our existing Phase II [indiscernible] reach. We have seen a strong uptick in logins led by diversified omni-channel lead generation funnel, including digital, e-Mitra, RRO and Mitra, resulting in a better disbursement growth as well as 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 sales force with 1.6 lakh plus loan applications processed through sales force. Further, we have stabilized Oracle fusion our ERP application. We have gone live with account aggregator integration and customer service integration in the sales force. Our new lead management system built in sales force and loan management system on Oracle FLEXCUBE is it advanced stage of testing and about to go live.
Technology is playing a key role in the transformation and the turnaround time improvement. Allowing to sanction the turnaround time has improved to 9 days in FY '24. And for Q2 '24 we had an impressive about 8 days off TAT. In terms of quarter's financial performance in quarter 4 FY '24, our net profit grew by 22 percentage Q-o-Q led by strong growth in net total income and AUM coupled with reduction in credit costs on the back of Pristine Asset Quality. Further our consistent efforts to optimize costs has resulted in improvement of OpEx to Asset ratio by 10 bps from 3.66% in FY '23 to 3.5 percentage in FY '24.
In terms of asset quality, it continues to be 15 with 1 plus DPD less than 4 percentage at 3.12 percentage as of March 2024. This is our lowest ever on 1 plus DPD since inception. Our G&P has improved by 15 bps quarter-on-quarter and stood at 0.94 percentage in FY '24. Credit costs, including write-off continues to remain low and below 25 bps. In terms of liabilities, we have 1 of the best well-diversified liability franchise. We have always been innovative in terms of exploring new avenues of sourcing. I'm happy to share that during the quarter, we have received the funding from an MSME sector developing institution for our MSME business. This is, of course, in the industry tie-up for MSME business.
We are a unique HFC where our tenure of liability is higher than the tenure of assets. Our incremental borrowing cost remains slightly above 8 percentage, indicating cost of borrowing, peaking out in line with the benchmark rates. As we tread the path in the coming quarters, we would like to focus on 3 key areas: delivering well-diversified geographic growth with quality and sustainable year growth of 22 to 25 percentage, improving OpEx to asset ratio to below 3% in the near to medium term by improving productivity, efficiency and by adopting tech less OpEx light approach. Delivering a sustainable ROI of 3 percentage. We are committed to support and strengthen the long-term Aavas version 3.0. I take this opportunity to thank all our stakeholders for their continued trust and support.
I would now hand over to our CFO, Ghanshyam Rawat, to discuss the financial in details.
Thank you, Sachinder. Good evening everyone and warm welcome to our earnings call. To update on borrowing first. In terms of borrowing, we continue to borrow judiciously. We raised around INR 61.45 billion at 8.14% during FY '24. For Q4 FY '24, we raised around INR 18.52 billion at 8.14%. Total outstanding borrowing as on 31st March 2024, stood at INR [ 55.55 billion]. Overall borrowing weeks as of 31st March is [ purchased ] 5% from terms loans from banks, 23.9% from assignment and securitization, 19.6% from National Housing Bank as a refinancing and 9% from debt capital markets.
During the quarter, overall cost of borrowing increased by 12 basis points quarter-over-quarter to 8.07%. Our incremental cost of borrowing for Q4 is 8.14%. Lender support continued to remain extremely strong as Aavas [indiscernible] continues. There is access to diversified and cost-effective long-term financing, a strong relationship with the development financial institutions. To meet long-term business growth, we have done first ever core lending [ guides ] with a large PSU bank. And also, we had the first ever in the industry funding by MSME sector promoting all India financial institution.
As of 31st March 2024, we maintain a sufficient liquidity of INR 30.3 billion in the form of cash and cash equivalents and [ unavail ] CC limit and documented otherwise sanction from various banks, including INR 2.3 billion from National Housing Bank. In terms of the [indiscernible] as of 31st March 2024 at an average borrowing cost 8.07 against an average portfolio yield of 13.13% resulted in spread of 5.06%. We have been able to maintain our spread around 5%, in line with our guidance despite competitive pricing pressure.
We have increased our [indiscernible] 25 basis points with effect from March 1, 2024. Our margin as a percentage of total assets during FY '24 stood at 7.91%. Our NIM in absolute terms has increased by 17% year-on-year in FY '24 over FY '23. In terms of cost, our OpEx to cost ratio improved by 10 basis points to [ 3.58% ] in FY '24 versus 3.66% FY '23. We are committed to bring down our OpEx ratio in gradual manner towards 3%. Credit cost during the quarter stood at 11 basis points in quarter 4 FY '24 versus [ 21 ] basis point in Q3 FY '24, 16 basis in FY '24. In terms of other parameters, [indiscernible] during the quarter increased by 15% year-on-year to INR 1.43 billion and 15% year-on-year FY '24 to INR 4.91 billion.
ROA stood at 3.28% and ROE was 13.94% for FY '24. I get to [indiscernible] reconciliation has been explained in detail for Profit after tax and network on Slide #30 and 32 of the presentation. We are well capitalized with a net worth of INR 37,733 million and capital adequacy ratio is 43.99%. Total number of live accounts stood at INR [ 218,100 ] translating into 17% year-on-year growth. [indiscernible] bond was [ 6075 ] as of March 31, 2024 versus 6034 as of March 31, 2023
Now I would hand over to our CRO, Ashutosh Atre, to discuss assets quality.
The key portfolio is parameters, asset quality and provisioning. One day past [indiscernible] has hit all-time low at 3.12% in FY 2024 as against 3.30% in FY 2023. Gross Stage 3 stood at 0.94% and net Stage 3 stood at 0.67% as of March 31, 2024.
During financial year '22, our resolution plan was implemented for certain borrower accounts as per RBI resolution framework 2.0 dated 5th of May 2021. [indiscernible] the foresee risk and as a matter of prudence, some such accounts with an outstanding amount of INR 712.3 million as on 31st of March 2024 have been classified as Stage 2 and provided for as per regulatory guidelines.
Out of INR 712.3 million, INR 567.2 million that is 80% is already into 0 to 30 DPD bucket. The total ECL provisioning including that for COVID-19 impact as well as resolution framework 2.0 stood at INR 848.2 million as of 31st of March 2024.
Aavas is strongly placed to continue delivering industry-leading asset quality. With this, I open the floor for Q&A session.
[Operator Instructions] Our first question is from the line of Renish from ICICI.
Congrats on a good set of numbers. Sir, just 2 questions from my side. One on the [indiscernible] side of first Q4 has been a pretty strong quarter for us. But how confident we are to sort of sustain this momentum in the first half of '25 because Q4 is seasonally strong quarter. So there is still be sequential some weakness. So can you please throw some light on the first half [ lease-end ] numbers?
Thanks, Renish. I think Renish, you would have observed that on -- as we've stated earlier in our guidance, and every quarter-on-quarter, there has been an improvement, which is there. So I think in line of whatever we've started across that journey. We are confident about our strong H1 with the kind of green shoot which we've seen in the number of logins, the kind of a tech transformation, which has happened. So as a management team, we are guided by the fact that the sequential improvement, which we've seen quarter-on-quarter, I think we will be -- I believe, and I think, and we have trust in our teams and kind of logins we under sanctions which we see in the coming times, we will share the path for a strong and robust H1.
Got it. And sir, incrementally, if you just help to share the electric split between what percentage of disbursement is happening through in-house branch and what percentage is through the [indiscernible].
In that I will throw light on the OpEx line model, which we have been discussing. I think if you look at the mix of the digital, the eMitra, the Mitra and those channels, we will conventionally it around 10 percentage as we speak and we close the year, we are around 13 percentage. And these are typically the OpEx light kind of models, which are there. And rest of that is a hybrid of the direction and some part of the connected channel, which is there. So that's the broad breakup.
Okay, okay. And sir, secondly, on the spread, yes, of course, we have seen in FY '24, there has been a steady decline spread. It is right to assume that spreads have gotten out at 5.06 and maybe from Q1 onwards, [indiscernible] 25 basis point of scalar height, we should see a gradual improvement in this space?
Renish, if you would really as you -- as we've spoken about, that our focus on less than 10 like customers is there. So this will have an improvement. But as we've always guided, that we'll remain in this spread [indiscernible] from 5 percentage and we commit to that spread at around 5 percentage on the overall AUM basis.
Got it. Got it. And so just last question from my side on this 1 plus DPD, at 3.12. So is there any [ preservative ]? Or do you see this 3% odd 1 plus DPD to sustain at this level?
I think it is the conscious effort of the -- see there are 2, 3 points which are important. One is the type of sourcing, the quality sourcing, the quality underwriting and the continuous and granular efforts of the risk and collection teams to really stay that across. And I think in that journey of this, the predictive analytics, which has really helped us to sharpen our granularity and much deeper focused on our approach as far as this is concerned. So which is very different to the way we really -- we're approaching the entire set from a perspective of there.
So I think that's technology as a part of [ aided ] is actually really helping out in our journey and [ deep wave ] focus I think, right from the origination the underwriting and to the efforts of the team at the ground really to collect with the help of technology has made a difference. So it's the cumulative effort of the entire team, which is, again, based on risk architecture. And as I've been saying earlier that we are in the risk-based business, and we continue to build our risk architecture, which is stronger, sustainable and reliable over a period of time.
Got it. So basically, let's say, the restructure process led by the [indiscernible] sort of helping us to manage the risk better than [indiscernible] is that a fair conclusion sir.
So this is a part which actually helps in facilitate actually in our journey, which is more predictive analytics, which we have been saying this, along with strong risk architecture, the strong understanding of risk, which starts and onboarding, the quality underwriting, which happens and then subsequently, how do you really trail and push the entire thing in the system. Really that it's a cumulative effort of everything, but I would really put across the strong focus on risk and quality. I think it's one of the basic foray so to say.
And Renish, we've always given a guidance of in the range bound below 5 percentage. So we continue to be there in that tariff.
Our next question is from the line of Shweta Daptardar from Elara Capital.
A couple of questions. Could you throw light on the BT scenario and competitive intensity? Any particular geography of throwing any specific signal. That's question number one. Question number two. Sir, if you look at sequential basis, the incremental cost of borrowings are down from 8.24 to 8.14. I believe this should be attributed to NHB drawdowns, correct me if I'm wrong. But then its the same question which the earlier participant asked. So doesn't this mean that the spreads should actually sort of climb going forward? And what's your outlook on funding cost ahead.
I'll have these 2 questions. The first one, I'll answer and then have the other [indiscernible] answer on the second part on the cost of borrowing stuff. See, on the BT part, I think what we've done as an institution is that proper predictive analytics still to work across on the customer base. There is a propensity to really do a BT out. I think it's played a very important role.
And as we speak, we are at around 6 percentage total one. And we've got a -- so it is 0.5 percentage every month and 6 percentage of the opening area as we speak. And in that journey, I think as an institution, we have evolved to really figure that out what is that we need to hold and again, a very interesting part, we've also earlier declared is that the ones which we let them out have a 5 percentage 5x higher for 1 plus [ BPTs ] and similar account of the GNP. So we're cognizant to the fact that whoever is our customer, we would like to continue with us and with the right form, but not get it [indiscernible].
So I think at any period of time, whatever is the BT out is more from the fact that as Aavas would not have had the customer with us because it's getting old leverage, which is beyond the point of our underwriting metrics or control, which we really foresee. So I think that's the one. On the cost of burning and have [indiscernible] speak on the fact.
As you know, Aavas is a very deeply focused when we borrow the money from various sources. We tied up with a [ multilateral ] institution. We tied with NHB. And recently, in this quarter, we have further as we mentioned in the opening remarks, we tied up with the -- to fund our MSME growth, we've tied up with a large all India financial institutions, which also provide a concessional rate as NHB provide to a housing finance company.
So I think all put together, we have started during this quarter. [ BTC ] is also basically AA plus or AAA rated BTC. So those are going at a final rate in the market basically. So put together a lot of, I think, innovative funding tied up in last 6 months is helping us now containing our cost of borrowing in the interest rate rising scenario. But now more or less, we feel that it's almost picking out at the cost of borrowing basically now. So that's I think [ drift ] from our side.
The next question is from the line of Abhijit Tibrewal from Motilal Oswal.
And congratulations to Aavas team, strong quarter. Sir, just maybe 1 or 2 questions. First, you explained about the tech transformation. Just wanted to confirm what are those elements of tech transformation, which are pending or still in pipeline for this current fiscal year? Why I'm asking this is, I mean, is there anything that you foresee in the coming quarters as and when we implement remaining portion of the tech transformation, something which can really disrupt the disbursement trajectory that we saw in the fourth quarter?
Thanks, Abhijit. See, as we speak, we've gone live on the sales force, which is our [ LOA ] system. There are 2 components, which is the lead management system in the sales force, which is the 1 which is to go live and loan management system, which is Oracle FLEXCUBE is in the making. Having gone through 1.6 lakh of certifications through sales force I think we've had the system pretty stabilized. And I don't foresee anything of any nature, which will have any impact of any of the implementations of the ongoing projects, on the disbursements in the coming quarters.
Got it. And lastly, how should we think about assignment volumes, basically, I'd like to appreciate assignments along with it being a [indiscernible] income, which can lead to some volatility in the P&L So how are we thinking about signings for the next fiscal year?
Abhijit, assignment income, assignment, always we explained, assignment is a tool to fund our long-term growth basically. This is not, let's say, profitability is the outcome of that to fund our long-term business plan. And assignment transactions we are doing since 2014 and '15, basically. So we, as Aavas, I think we always maintain this [indiscernible] to fund our long-term funding to fund our mid or ALM requirement.
We keep on doing assignment every year. Initially 2, 3 years, we have maintained [ distance ] then we have grown -- as your balance size is growing, we are growing that assignment also. Last year, you also see we've grown almost 15% to 20%. This year also, we are planning to have 15%, 20% growth in our assignment book basically. Because this is, again, we have a good strong tie up with the public sector banks, private sector banks, foreign banks, all, because asset quality super, [indiscernible] goes that basically.
Secondly, I think if you referred our investor deck, I think this time we publish our home loan, MSME book also basically, which once you think we make efforts, we will [indiscernible] back. We gradually will build the MSME book. If you don't know is property book basically. Now that book has become around 17%, 18% of total AUM and last we have done a disbursement out to that. I think 23% is in MSME side. So that book also has a huge interest on the bank to take an assignment route basically.
So that I think overall our strategy towards assignment.
Got it. Just 1 last question before I hand it over to the next participant. I mean in the previous question which was asked on cost of borrowings. My line was a little bad. Did you say that cost of borrowings have now peaked out? Or do you expect that cost on borrowings will increase for the next maybe 1 or 2 quarters and then peak out?
Yes. Abhijit, I think every quarter, we think now RBI and Fed will start to cut the rate is really close to peak out basically. As every quarter goes, there's 1 quarter milestones with also, it is difficulty to say where we are, but if you see, we are -- last full year, we borrowed 8.14%, and our closing cost of borrowing 8.07%. So incremental versus book either they're close to same level basically. So that giving directionally, we are almost picking out basically. And expertising RBI and all regulator Fed will start to cut the rate from somewhere maybe quarter 2 or early quarter 3, I think that will give us a positive impact. And in overall cost of borrowing, in last 1 year, we borrowed, I think, a sizable chunk on [indiscernible] and other variable benchmark, so that will help us when that will start.
Our next question is from the line of Nischint Chawathe from Kotak Institutional Equities.
Just 2. One is, again, going back to the point of spread. This year, we have clearly seen some compression in spreads and your NII growth is clearly lower than the loan that you reported. Next year, do we really see some kind of reversion and NII growth being higher than loan growth or does it -- is it equal to loan growth or kind of do you see -- or would you kind of say that maybe there is some more pressure to book?
And are you seeing any incremental pressure of higher BT outs because you probably be the only player who would have raised the benchmark rates in the last quarter.
Thanks, Nischint. I think from a perspective of the BT out as I spoke earlier, I think we continue to hold on to the right kind of customers there. So some part of rate compression, which happens because of holding the customers there, but that is where we've already invested in the customer and while the time we have actually onboarded. So that will continue that and we've not seen at this period of time, it still continues to be at around 0.5 percentage per month. So it's 6%. So we'll -- our continuous endeavor will be there to really build on the same as we go forward.
Secondly, as we discussed earlier also Nischint that focus on 10 lakh plus we want to regain that part which and where we really get our spreads and our endeavor in the coming quarters and in this year would be really to focus on that. So we get back to our stuff. And as we guided that we will all remain in the spread band of around 5 percentage in the coming quarters.
And just one last one in terms of your expense growth, do we see the improvement to kind of 3% sort of playing out in this year or 2 years out? What is the plan for that?
So I think Nischint as I spoke, I think that's our medium to long-term and if you really look at it from a 3.79 quarter 1 kind of thing to coming at around 3.5, I think sequential 20 bps of reduction year-on-year, we really look at it coming to -- in a couple of years, if I were to really put a cross the level which we spoke out, but constant endeavor has to focus on optimization of the cost and getting that to a level which we discussed at around 3 percentage in a couple of years. But yes, 20, 25 bps of reduction is that what we actually guided and we target ourselves internally to push to get that line.
Perfect. And I think just finally on the credit cost side we might kind of -- this obviously has been a good year. So fair to expect that there can be some reversion of some increase in trade costs, although obviously, you keep on sort of trying to keep it under control. So this has been a good year. So maybe that could inch up a little bit is a fair expectation.
Yes. I mean as we said, it is one of the best years in the inception. We've always guided that we'll remain in the range bound of 1 plus at less than 5 percentage and the GNP at around 1 percentage. So that's been a concern endeavor. And I think Nischint, what has really helped is the way we credit the part of using analytics and our understanding on the credit risk buying and the time the customer is there. So that is really helping us in our journey our endeavor will be to be there in that range bound stock, which is 1 plus at around 5 percentage.
And secondly, what we've really done well as a part of this is some part of digital collection, which we have a clear cut predictability on the customer base where we do not have to go on the field or really to [ telecall ]. And I think that's 1 of the very innovative ones which we have done are [indiscernible] as we perfect that it will really help us to further -- and as we speak, I think the addition of manpower and the collection part has not increased in [indiscernible] more in line with our AUM growth or number of increase in our loan accounts. So we try to effectively and efficiently use technology to really spot, predict, and then effectively collect actually.
Sure. And sir, just one last if I can ask squeeze one more, what proportion of the loan book currently [indiscernible] time?
So of the loan book currently, as we speak, is around 35 percentage. But if you look at it Nischint, it's sequentially down from the 90 percentage, but as we speak, we would like to continue to build Rajasthan, but we'll have the other states also really kicking in and built across. So Nischint what confidence in South and Karnataka which gives us is that which helps us to really build across as the pan-India institutional. And as we speak, we've had a good amount. That's [indiscernible] but I think the green shoots of Karnataka has really given us good amount of confidence and faith in the Aavas risk underwriting and the DNA, which we have actually got in there and which will help us our moment in the coming times in the certain part of India, actually.
The next question is from the line of Shreepal Doshi from Equirus.
Congrats on a good set of numbers. So my first question was pertaining to lending rates. So have you taken any rate hike during the last quarter?
Yes, we have increased our PLR by 25 basis points effective from 1st March.
And sir, secondly, in the same -- on the same lines, are we seeing in states like UP, Uttarakhand relatively better lending rate that we are able to get versus states like probably in the western side or in the southern side?
I think prices are not linked to state. Price is linked to more the risk-based underwriting when we do. It depends upon customer profile. It depends upon property profile, depends upon in which states -- which year we are in that state basically. Like we enter the new state, initially, we remain cautious. We remain very good quality of customers, keep focus 1 to 2 years in both market. Once we learn that market more then we deepen our project, deepen our market strategy on the high-yield product basically. So it is not a state-based pricing metrics. It's more of a product. It's more of a customer, more of an asset quality product basically.
And Shreepal just to add on to what [indiscernible] said, it's important that you price the risk, right, and there's always been the risk adjusted returns, which we really look at it and not segregate according to the state or the territory or the geography. I think one is the risk type, second is the product and really having understood the risk, how do you really price the risk and again, risk-adjusted returns.
Got it. I think that -- I mean, I was coming from the angle at competitiveness in those states are relatively low if you look at, but I get your point. Sir, the third question was pertaining to the sharp increase in employee costs during the quarter. So what is the reason behind the same? And what is the employee count today? And just one more question there -- the tax rate this quarter has been pretty low like 19%. So if you can just throw some color on that as well.
So if you look at the employee cost, employee cost has been -- if you look at the March -- the March or the April opening and the March closing, it's only the net addition of about 35 or 40 odd people. I think some part of the ESOP cost and the long-term incentive plan costs, which actually has resulted in the employee costs being higher. So it's not a stand-alone manpower addition, which has cumulatively added on to the employee cost.
On the tax rate side?
Tax rate over standard taxes if you compare it earlier year also, it's a similar tax rate. We have around 21% to 22% of tax rate [ come ].
Okay. Sir this quarter, it's almost 19%. So therefore, I just happened to...
Yes. Yes, I think during the year, certain things remain in the pipeline, certain assessments are going in the pipeline when the decision comes so then we have to take the impact in a full year basis.
Sir, one last question.
But [indiscernible] basis our tax was 21% to 22%.
[indiscernible].
Pardon?
Have you seen any increase in the NHB sanctioning interest rate for the incremental sanctioning that they are doing?
Yes. I think, as you know, interest rate is in last 18 months or let's say about 24 months. I think interest rate [indiscernible]. Accordingly, NHB has also increased interest in few products not all products basically. So they are also part and partial of a lending activity.
The next question is from the line of Rajiv Meta from Yes Securities.
Congratulations on very strong numbers. So the first question is, what is the branch expansion plan for FY '25 and which will be the [ target ] market?
Yes. Thanks, Rajiv. The branch expansion plan is around 10 percentage that's what we had. But as we go deeper in South, we will look at Karnataka and other regions in going in those regions specifically so to say, actually, that's what have been the -- and some bit of where we're already there to really look at opportunity within the existing market that we find good enough space, but specifically Karnataka, if I were to put across in this year.
And the second addition.
And I think the second addition would be in UP, Karnataka followed by UP.
Okay. And one related question is, I mean, do you think that [indiscernible] addition is slightly lower in the coming years because after this transformation, the capacity of the existing [indiscernible] and locations would have gone up, your plan has improved. You'll have more efficient is coming through from the existing brands and secondly you are also developing a lot of nonbrand [indiscernible] in the -- around the existing location. Is that the thought process when you make your branch addition plan.
Yes. See, definitely, what you say, Rajiv, if you look at even at the higher base, you are talking about only 10 percentage addition. So we're not looking at anything which is much beyond that. We will try to be there as of it line. But yes, mine's opportunity whichever is there develop that and continue with our overall continuous location expansion strategy. Where we find the market is good enough we will go and invest and set up.
But before that, we'd like to have our [ RO ] model, which gets perfected and then set up a branch. But yes, going forward, will continue to play a very significant role in helping us set a journey, which is OpEx line. And which are really digitally we're able to source and service.
And this after raising P&L by 25 basis points from 1st of March. Has there been any increase in BT request or maybe actual BT out from 1st of March? And what kind of rate differential are these customers seeking when they come for a BT request?
Rajiv, as we highlighted that our BT rate continues to be at opening of [ 0.5 percentage ] and the year it's around 6 percentage. I think we really focus on who the customer is, who we want to really held on and we will really try our stuff, which is by getting in some part of rate reduction. And where we feel it is getting overleveraged, we have left it out actually. So I think we don't see at this period of time any of that really hurting us or anything which is having any of the alarming thing at this present time.
And just lastly, how would we see -- because in the last call, you've spoken about reenergizing the core product, which is a low-ticket high-yielding home loan and increasing the ordination share of this product by 5 percentage points over a period of time, but even in Q4, the origination ticket sizes were, in fact, higher than previous quarter. So when do we see this strategy playing out in terms of what it aspire?
I think [ part ], we've opened less than 10 lakhs per [ site ]? Secondly, we really appreciate that the cost of construction in the area actually has also increase over the last couple of years. So I think that is one which is [indiscernible] but coming back [indiscernible] in the coming quarters.
The next question is from the line of [ Shubal Khanna ] from Mirabilis Investment Trust.
Just one question on the disbursement which was done over a year -- how in the experience in some of the newer states? And was it largely driven by the legacy states of Rajasthan, Maharashtra, Gujarat or there was an uptick even in the [indiscernible] states of Uttar Pradesh and Karnataka.
I think as we speak, I spoke, I think Karnataka gives us a lot of confidence as one of the institutions who have gathered claiming to be a pan-India 1. We've got a good amount of growth, which is there, but it is there on a lower base, if I were to put across, but we will continue investing in the states as we speak on Karnataka, UP. And as we see a long [ runway and mud ] available there and the opportunity which Aavas is able to mine in those markets. And we will monetize in the coming quarters and the coming years ahead, actually. So it's a well-diversified geography growth, which is there, and it gives us a new level of confidence as again for the matter of reiteration I speak out, presence in South and Karnataka being one of the major harbingers of our strategy in the South.
The next question is from the line of Jigar Jani from B&K Securities.
Congratulations on good set of numbers. Just a couple of questions. Firstly, on the debt transformation, the lead management system and the loan management system, are these on track to get completed by the first quarter? Or do we see any delay on these to go live?
I think from a tech transformation perspective from a lead management, we should be live by the first quarter and be active and taken by having successfully piloted by the time being running fully well in the quarter 2.
Side by side element also ready. It will also go live on the first week of July.
First week of July. Great. And sir, just taking a que from the previous quarters I believe that we have increased PLR rates, and we are also planning on increasing the proportion of 10 lakh ticket size loans. At the same time, our cost of borrowing is also kind of peaking out. So do you feel like spreads kind of broadening now? Or is this something that we are missing, because ideally, then spread should bottom out at these levels and should have higher next year overall. So anything that you are seeing, which can be a risk to that asset? .
So we've always been -- we've always guided about the spreads, and we will continue to do that whatever is required. And as I said, in whatever is in the risk-adjusted pattern than what we understand, what we're able to underwrite in the kind of quality metrics, which we lease and which the form has been doing that over a period of time, we will continue to build on that risk quality.
Right, sir. And this PLR rate hike gets reset every quarter. I mean how does it add? So all the customers, which are on floating rate get repriced in the next cycle, next quarter cycle, how does it work.
All customers are -- whosoever customers linked to PLR, whenever we hike the rate, and we publish our effective date of rate hiking also, on that day rate hike take place for all the customers. There is no quarterly. Until unless we increase the rate next time, it will not be reset for those customers.
Right. So the next quarter on the floating rate book, which is 60-odd, you should see this full 25-[indiscernible] starting from next quarter. If I understand you correct?
Yes. No, no rate hike already took place. But for P&L perspective, you will have a full year quarter income in the next quarter.
Yes, that's what I was asking.
For P&L perspective the first quarter, full year full quarter impact.
[Operator Instructions] The next question is from the line of Aditya from MSA Capital Partners.
Hello, am I audible?
Yes.
So just wanted to quickly understand what is the yield for -- across the 3 products that is home loan, LAP and MSME loans?
You're asking all 3 products.
ROI.
ROI all 3 businesses are given to different class of customer and different property profile in different markets. But generally, for better understanding, you can assume roughly 250% to 300% difference is there between home loan to MSME, and LAP business.
Okay. So -- but if you were just to quantify a home loan would be closer to 13%, right, so 13% and MSME would be then 16%. Is that fair to assume?
Our home loan, you generally take is roughly 12.5% around. And then on home loan is around 15%. .
Understood. Understood. And if I want to understand which would be the top 3 states, so Rajasthan being the largest -- and what would be our consultation in those geographies? And more importantly, how are you looking at .
Maharashtra, Gujarat, MP all 3 are equally spread. And as Sachin as you mentioned, Karnataka and UP coming up very well on the new disbursement. Delhi is a steady state for us for the last couple of years on growth and as well as the quality.
Sir, but just I wanted to understand that top 3 states, Rajasthan, contributing 35% of the AUM. The other 2 states being Gujarat and Maharashtra assume. So combined top 3, sir, what would be the concentration?
Top 4 is around 80%, 82%. That will appreciate the kind of space, the population and the GDP type. .
The next question is from the line of Bunty Chawla from IDBI. .
Sorry to harp on the yield per se. So can you share, as we have seen, you have taken the PLR hike in the 25 bps effective 1st of March. So how much yield impact or positive impact will be in Q1 FY '25 because we believe there was only 1 month for the rate hike in Q1 will be at full impact. So how much yield positive impact will be in Q1 being 66% of our floating rate floating asset book?
You see roughly 60% book is our floating rate book. That book will have a 100% impact or 25 basis point increase. In last quarter, we have seen a P&L perspective a 1-month impact. In next quarter, it will have all 3 months positive impact on our book basically.
So roughly, we can say around 10 to 12 bps of positive impact would be there in Q1 FY '25 or the yield per se?
I think we publish our yield is a some product of loan contract and as well as on borrowing side, we publish our liability contract versus the effective rate on that day basically. So in our -- in competition, it has been taken care. But P&L prospect, it will give 2 extra month positive impact. .
Sir, secondly, on the other expenses part in Q4, we have seen a decline on a Q-on-Q basis. And if I see FY '24 versus FY '23 and '22, there has been an increase of around 18%, 19% versus '23 and '24, there was 30%, 40%. So can we say the technology part, which we are doing, which is part of other expenses already been incurred, how you will see the other expenses part growth in the next 2 years?
Other expenses, as I think last few quarters, and including this quarter, we mentioned that as technology transformation is completing, we are starting to see is the return on the OpEx side on various fronts basically start from -- even from, let's say, from scanning, from courier, from main power efficiency, from all front, we are seeing a saving on that OpEx speed as well as growth momentum is also coming back to take OpEx side mode. So we don't want to say in particular one how with OpEx. But overall, our guidance is that on OpEx to AUM, we will have another 20 basis point plus a saving in this year on a full year basis. .
So major -- so can you say major will be from the other expenses part because already we are increasing the branches and employee counts. So this will be the major lever for this 20 bps increase?
No, no, because manpower count, as you mentioned earlier, we have -- we will not increase the same manpower count as we increase our growth on business and AUM, so that will also have a denominator effect on the employee cost also basically. .
Ladies and gentlemen, we would take that as our last question for today. I would now like to hand the conference over to Mr. Sachinder Bhinder, MD and CEO of Aavas Financiers Limited, for his closing comments.
Thanks. Ladies and gentlemen, as we conclude today's earnings call, I would like to express my heartfelt gratitude to each one of you for your participation and engagement. The dedication and commitment of our team, the trust and support of our shareholders and the loyalty of our valued customers have always been instrumental in our growth story. .
Looking ahead, I want to emphasize that we will continue to maintain [ business ] focus on governance, asset quality, profitability and growth, leveraging technology and creating superior customer experience. We remain optimistic about the future and are confident that our strategic initiatives, which will continue to deliver sustainable growth and shareholder value. .
Once again, thank you for your ongoing support and belief in our vision. If you have any other further questions or require additional information, please feel free to reach out to Rakesh, our Head of Investor Relations team. Thank you, and have a wonderful financial year end. God Bless.
Thank you. On behalf of Aavas Financiers Limited, we conclude this conference. Thank you for joining us. You may now disconnect your lines.