Capri Global Capital Ltd
NSE:CGCL
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Capri Global Capital Ltd
Earnings Call Analysis
Q3-2024 Analysis
Capri Global Capital Ltd
The company has shown a remarkable year-on-year surge in net profit by 82% reaching INR 680 million and has also achieved a consistent quarter-on-quarter growth of 4%. This performance could have been even stronger, factoring out the loss from the Gold Loan business which would lead to an adjusted net profit of INR 803 million. The company maintains a disciplined perspective on credit costs, keeping full-year projections in the vicinity of 1%, reflecting historical averages, despite a temporary climb to 1.25% annualized due to enhanced provisioning against non-performing assets to improve the provision coverage ratio to 34.7%.
A two-year journey in establishing systematic ESG practices is starting to show results with assistance from top consultants. This commitment to ESG metrics and technological advancements is expected to foster confidence among stakeholders and generate cost savings, especially from FY '25 onwards as new systems like Oracle's flagship LMS and a proprietary co-lending platform come into play.
With 747 Gold Loan dedicated branches, the strategy is bearing fruit as many of these branches reach breakeven points. The introduction of insurance policies as a cross-sell initiative in these branches is expected to start contributing significantly to the revenue starting April. The company anticipates a turnaround in its Gold Loan business, projecting a shift from a loss of INR 100 crores this year to a profit of INR 40-50 crores next year.
Ambitious growth is on the horizon for Gold Loan assets under management with targets set between INR 4,700 crores to INR 5,000 crores, propelled by aggressive branch expansion. The game plan to defend and improve margins includes extending co-lending operations and ramping up fee distributions from Car Loan and insurance businesses. These strategies aim to not just maintain but grow the existing margins, banking on a diversified and intricate fusion of products and collaborations.
Expected technological upgrades are projected to lower the cost-to-income ratio, targeting a reduction to about 45% in the next fiscal year, with aspirations to further reduce it to 40%. These improvements are anticipated to become evident from FY '25, thanks to the phased implementation of new technology systems designed to enhance operational efficiency.
The company efficiently manages loan processing, with a log-in to disbursement ratio of about 30% for MSME and Home Loans, while Gold Loans are immediately processed on-site. As part of their financial projections, an anticipated return on assets (ROA) is set to be between 2.75% to 3%, and return on equity (ROE) in the range of 11.5% to 12% for the next fiscal year, indicating a strong financial position moving forward.
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Ladies and gentlemen, good day, and welcome to the Capri Global Capital Limited Q3 FY '24 Earnings Conference Call hosted by Go India Advisors. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Ravikant Bhat. Thank you, and over to you, sir.
Good afternoon, everyone. This is Ravikant. I shall read out a brief disclaimer for today's call. The discussion on today's call regarding CGCL's earnings performance will be based on judgments derived from the declared results and information regarding business opportunity available to the company at this time.
The company's performance is subject to risks, uncertainties and assumptions that could cause actual results to differ materially in the future. Given these uncertainties and other factors, participants on today's call may observe due caution while interpreting the results. The full disclaimer is available on Slide 43 of Q3 FY '24 investor deck. Participants are requested to note the same.
And I request our MD, Mr. Rajesh Sharma, to present the opening remarks.
Good afternoon, friends. Let me start by wishing you all a happy new year 2024. We declared our reviewed consolidated results for Q3 FY '24 on Saturday, 27 January 2024. I hope you had a chance to go through the investor deck. We have a lot of updates to share on today's call. So my opening commentary today is going to be slightly longer than usual.
I would like to start by highlighting a few key decisions that our Board approved in its latest meeting. CGCL's Board has approved a stock split from INR 2 face value currently to INR 1 face value. The CGCL stock had last split in November 2016 from INR 10 to INR 2 face value then. The Board has also approved a bonus issuance in the ratio of 1:1.
The company's paid-up equity share capital shall increase from INR 412.5 million in Q3 FY '24 to INR 824.9 million after the split in the bonus issue. The outstanding equity shares quadrupled from the 206.23 million shares to 824.9 million shares. These measures shall aid in improving our liquidity.
Both split and bonus issuance are subject to shareholder approval. We have already published the notice for Extraordinary General Meeting of our shareholders to be held on 22nd February 2024 to seek approval for stock split and bonus issue.
We have also appointed 3 distinguished leaders from the field of finance, technology and ESG as independent directors on our Board. They are Mr. L. V. Prabhakar, a career banker and former MD and CEO of Canara Bank; Mr. Shishir Priyadarshi, former IAS officer and a Director on the World Trade Organization, having a distinguished public service and a wide-ranging experience across all disciplines; and Ms. Nupur Mukherjee, former Global Managing Director at Standard Chartered and also at Barclays Bank with deep experience in critical technology, data science practices and ESG.
Their detailed profiles are available in the leadership section of our website. Please do refer to those. These appointments have added significant strength to Capri's Board and the executive management will immensely benefit from its guidance.
I would like also to inform that our newly incorporated, wholly-owned subsidiary, Capri Loans Car Platform Private Limited, became operational during Q3 FY '24 and has begun accruing income. In due course, the car loan origination entire business shall be conducted out of this subsidiary.
As intimated earlier, we have received a composite license from insurance regulator, IRDAI, to distribute life, nonlife and health insurance policies. Our insurance distribution team is already in place and we expect to generate a gross insurance fee income of at least INR 1 billion between FY '25 and '27. This will contribute significantly with strengthening our ROA structure and support our target of crossing 15% ROE by -- before FY '27.
I shall now turn the commentary on business and earning performance. Capri's performance across all verticals continued to be strong during 9 months FY '24 with overall AUM growing by 54% year-on-year to INR 13,360 crores. The overall disbursement during the 9-month FY '24 increased by 113% year-on-year to touch INR 9,983 crores assisted by adding 311 branches on a year-on-year basis, taking the total branch count to 920.
The growth momentum while strong across our verticals, Gold Loan AUM grew by 235% year-on-year to INR 2,394 crores, partially supported by addition of 298 branches year-on-year basis, Gold Loan specific branches. Home Loan AUM grew by 53% year-on-year to INR 3,490 crores, driven by growth in disbursement by 48% year-on-year to INR 1,145 crores for 9-month FY '24.
Construction Finance AUM grew by 35% year-on-year to INR 227 crores, driven by growth in disbursement by 33% year-on-year to INR 1,347 crores for 9 months for FY '24. MSME loan AUM grew by 24% year-on-year to INR 4,768 crores. On the back of a strong business momentum during 9 months FY '24, the company is targeting to clock in FY '24 AUM growth of about -- in the range of 50% year-on-year basis to INR 15,000 crores.
The strong momentum in AUM growth along with a strong trust in fee income drove 59% year-on-year growth in the total net income. Supported by focused collection effort and active monitoring of the book, our gross Stage 3 asset had shown a decline of 20 basis -- year-on-year basis to 2.1% in third quarter FY '24 versus 2.3% in third quarter FY '23.
Our Car Loan distribution business is on course to originate INR 10,000 crore business in FY '24. On behalf of 8 commercial bank partners during 9 months FY '24, the company originated car loan to the tune of INR 7,073 crores, which is up by 83% year-on-year basis. Net fee generated was INR 81 crores in 9-month period for FY '24.
The company is confident of crossing its set target of INR 10,000 crores, that is a growth of 75% year-on-year by FY '24. To further scale up the Car Loan origination business in FY '25, CGCL is planning to build a tech platform and transfer the entire business to a newly created wholly-owned subsidiary.
We also have a plan to build the insurance platform as I told earlier. CGCL has an active client base of 300,000 customers as of December 2023, of which about 137,000 customers were added in 9-month FY '24. With strong momentum in the retail lending business, the company aims to take active client base to 400,000 by the end of FY '24 and 800,000 by the end of FY '27.
CGCL's rapidly increasing client relationship offers a sizable captive base to cross-sell and improve insurance penetration. This will help CGCL to strengthen its insurance cross-sell income and deliver about INR 100 crore fee income, which will generate ROE about 2% in the span of the next 3 years.
If we talk about our cost-to-income ratio, which has declined 392 basis quarter-on-quarter and 651 basis year-on-year to 63%. In absolute terms, the operating expenses were unchanged quarter-on-quarter to INR 2,203 million. The flattening of OpEx in Q3 FY '24 is in sharp contrast with the steep increase we have reported since the launch of our Gold Loan business in Q2 FY '23.
The flattering is also on account of the pause we have taken in our branch expansion. Since it has completed its plans, as a result, the reversal in decline in cost-to-income ratio shall continue with the Gold Loan business slightly to breakeven in Q4 FY '24.
Owing to a strong net income performance as well as a flat operating expenses, our pre-provisioning operating profit touched to INR 1,296 million, increasing by a robust 19% quarter-on-quarter and 78% year-on-year. This also allowed us to not just comfortably absorb incremental ECL provisioning requirement on account of higher NPA but also improve the provision coverage ratio.
Now I come to the credit cost and asset quality. Our GNPA ratio increased by 80 bps quarter-on-quarter to 2.10. Although it remained 22 bps lower on a year-on-year basis, in absolute terms, the gross NPA pool increased by INR 361 million quarter-on-quarter.
MSME contributed by INR 148 million to the increase, while CF and Housing contributed INR 106 million each. Some of the increase in MSME and Housing NPA was a result of the flow from restructured assets which are now fully out of moratorium since Q2 FY '24.
The standard restructured assets stood at 92 basis of on-book AUM compared to 113 bps to Q2 FY '24 and 176 bps in Q3 FY '23. Our legal and collection teams expect to resolve a chunk of legacy NPA in MSME and Housing during Q4 FY '24 with the minimal haircut on the net outstanding.
In Construction Finance, we expect to resolve nearly INR 25 million of Q3 FY '24 slippage during Q4 FY '24 and the remaining INR 81 million in the next financial year. Of the INR 160 million slippage on the Construction Finance, during Q1 FY '24, we are happy to share that the stressed project has been approved funding from the stressed asset fund of Government of India, SWAMIH Fund. And the same is also likely to be resolved during FY '24 with the likelihood of a full recovery.
Our credit cost for Q3 FY '24 stood at INR 403 million or 1.25% annualized as per the percent of average AUM. The increased credit cost was both as a result of higher NPA flow as well as from improving the provision coverage ratio.
You may recall our guidance during Q2 FY '24 conference call wherein we had indicated our target of gradually improving the PCR and stabilizing at around 37%, 40% level. Our PCR improved 243 basis in Q3 FY '24 to 34.7%. Despite our focus on improvement on the PCR, which will continue in Q4 FY '24, however, our full year credit cost in FY '24 will remain in the range of 1%, which has been our long-term average credit cost.
We have reported a net profit of INR 680 million, which is higher 82% year-on-year and 4% quarter-on-quarter. Excluding the loss incurred in the Gold Loan business, our net profit would have been INR 803 million. We reported 2% ROA and 7.3% ROE in Q3 FY '24. Our earnings performance during Q3 FY '24 can be termed as being resilient. Our efforts at diversifying our business and income stream over past 2, 3 years are now beginning to support us meaningfully as seen in Q3 FY '24.
We have coped up with a decline in spread and increase in credit costs for 2 consecutive quarter but reported a stronger bottom line. As we breakeven in the Gold Loan business in Q4 FY '24, this shall be once again strongly validated.
Now coming to technology and ESG. Our past 2 years, we have been preparing to establish a systematic ESG practice internally. Among the exercise undertaken was preparation of a materiality in GAAP assessment report with help from a Big 4 consultant.
We are moving ahead to obtain ratings under leading global ESG framework. Our Board in the latest meeting approved ESG-related policies in setting up of ESG governing framework through a dedicated ESG department. Our new Board induced -- inducts also reflect our orientation. Going ahead, we shall periodically keep our stakeholder updated on the progress we make on ESG assessment.
Technology has been another critical area for focus for us and we have a number of initiatives in the revamping our LOS/LMS collections technology process reengineering and analytics-driven decision-making has been implemented. Very soon, we shall be announcing launch of our exclusive co-lending platform that shall smoothen the co-lending process.
In coming months, we shall complete implementation of Oracle flagship LMS for our MSME business, in-house applications developed to improve log-in to disbursal and rejection and start delivering a tangible cost savings from FY '25 onwards.
We look forward to regularly sharing qualitative outcomes of our tech initiatives in a couple of quarters. With that, I conclude my remarks, and we shall now take questions.
[Operator Instructions] The first question is from the line of Hitesh Jain from Avagrah Capital.
My first question is on the Gold Loan business. I think at what level, I mean, at a branch level, does the branch need to do business in order to breakeven? And currently, like how many branches are at that breakeven level?
I mean, I'm assuming a lot of -- there are a lot of new branches which may be at -- which maybe incurring losses. So how many branches are already at breakeven level? That's my first question.
So we start breaking even at -- currently, we have about 747 Gold Loan dedicated branches, which only book the Gold Loan businesses. And currently, out of, let's say, INR 3 crore per branch we start breaking even.
So out of 747, give me a couple of minutes, I will tell you how many branches are INR 3 crores and above. There are some branches which have even crossed INR 5 crores, so they are reasonably good, profitable. But exact number, give me a couple of minutes. Meanwhile we can take up another question and then come back to answering your question.
So -- I mean, what if a branch doesn't reach INR 3 crores? Like how much time do you all hold on to it and then decide, okay, fine, let's shut this branch?
So normally, to reach the branch to INR 3 crores is depending on the location to location, every branch doesn't have the saying formula. Some branches reach INR 3 crores within 12 months. Some branches have taken even 15 months. And some of the branches are going to take 18 months to reach that.
Have you ever closed any branches?
No, we've not closed any branches.
Okay. And what is like the cross-selling opportunities at these branches, the Gold Loan branches?
So all we know, there is an increased awareness about the insurance. And so every Gold Loan branch has capability to sell the insurance policy to their -- our borrowers. Now the customers when they come in, sometimes even Gold Loan customers, it's very easy to explain them and convince them that they take insurance policy, which take care of their medi-claim and hospital bill. And that policy will cost maybe about INR 5,000 per year.
But we explain to them, even next 10 years, they get admitted by for any reason, any of their family member, even wife, they will be able to afford good treatment. At the same time, it will turn out to be cheaper. So with that connection, we have started selling insurance policy already.
And I think from the year, April onwards, there's a focus that we should generate about INR 30 crores a year insurance policy premium income, out of which, a significant portion of the commission will accrue to us. So it is very easy. So we are targeting our cross-sell. Our technology is being -- already being in-house made for that.
And our this corporate agency license is already active now. So you will start seeing the traction. I think Q4, we should be able to report the specific number on the insurance income earned from each segment, be it Gold Loan, be it MSME, be it Home Loan or be it Construction Finance. This is going to be a very sizable income next year onwards.
Okay. Sir, just continuing with this question on the insurance. In your opening remarks, you mentioned that you will touch ROE of 15% with the help of insurance. Can you just elaborate more on that? How is that journey going to be?
So if you talk about ROE, let us go step by step. First of all, this year, our Gold Loan loss will be in the range of about INR 100 crores. Next year, our Gold Loan vertical will start delivering profit. So this entire INR 100 crore loss will go away, and we should turn into positive where we expect anything between INR 40 crores to INR 50 crores of the profit contribution for the Gold Loan next year.
So that is INR 140 crores to INR 150 crores upside from the current financial. Now Car Loan distribution will continue to grow, and that is also going to be a good amount of fee income. If you say the gross revenue from Car Loan business comes in the range of about 2.3% on the volume originated.
But this year, the gross revenue will be in the range of about INR 230 crores from the Car Loan vertical. And next year, this business again should grow 20%. Even after all the expenses and the fee, commission payment, we should be able to generate about INR 50 crores of profit from the Car Loan distribution alone.
Insurance side, by putting the dedicated people, team and license now in place, we should be able to generate income of about INR 40 crores to INR 50 crores again from the car insurance business. So the cross-sell is going to give us a fee income support from our customer base. And next year, we expect our number of customers would be in the range of about 800,000.
But when can you achieve this 15%, which year? I mean, next year or...
15% ROE, we hope to achieve by around -- between FY '26 and FY '27.
Okay. Sure. Just one last question from my side. So what was the rationale for making a separate subsidiary for auto loans?
Now I've got the data -- sorry, I've got the data of the Gold Loan branch. Out of 747, 313 branches has already crossed INR 3 crore. 113 branches were already moved. We are making -- already started contributing to P&L.
The next question is from the line of [ Rajat Roy ] from Investec.
Am I audible, sir?
Yes, sir. You are audible. You may proceed, sir.
I just wanted to sort of get an understanding on the growth in the Gold Loan business at about 250% year-on-year with regard to AUM. Could you please shed some light on, one, how this growth was achieved as well as forward guidance for what we could expect with regard to specifically Gold Loans as well as the other business segments?
So if we talk about Gold Loan growth, this year, because of the new branches have been added, about 298 branches in Gold Loan alone. On the back of that, it has started.
We expect to close our Gold Loan AUM this year about INR 3,000 crores and next year, we should achieve a Gold Loan AUM in the range of about INR 4,700 crores to INR 5,000 crores. So that is what our growth will come. So you can say next year's Gold Loan business, again, will continue to grow in the range of about 50% to 60%.
If we talk about our MSME business, which has grown about 24% and our Home Loan business has grown in the range of about 50%. Next year, if you talk about overall growth, we should -- we are confident to achieve a growth in the range of about 35% plus.
[Operator Instructions] The next question is from the line of Gaurav Sharma from HSBC.
Yes. Am I audible?
Yes, sir, you are audible.
So a couple of questions, sir. So a couple of NBFCs mentioned in their results that they're slowing down their co-lending disbursement in housing finance as they received some directions or formulas from NHB to maintain certain threshold of home loans in their own book.
So they are slowing down their co-lending disbursement. Just wanted to know whether you have also received such directions from NHB to slow down co-lending disbursement. That is question number one.
And second, sir -- second, on margin outlook, like you have seen the 40 bps compression in margin outlook. So where do you see that further margin going in FY '25? And what will be the key drivers for sustainable margins?
So we have not got any direction to slow down co-lending or otherwise the home loan disbursal at all. On the contrary, now NHB is holding the meeting of all CEOs and key management every 6 months and asking them are they facing any difficulty or how they can improve the business, how the expansion.
So I can clearly see, it is a thrust of the government, it is the thrust of the regulator that how the first home buyer can be serviced by making the credit easily available. And now affordable housing that the -- another plus point is that smaller houses are being -- getting built by developers because the people have started getting the loan.
So we see this segment will continue to grow for the next few years. And while we are growing at a 50% pace, I don't think even next year we will be slowing down this segment. So this is one part.
What was the other question? Other part of your question?
Sir, on the margin outlook, so how can you protect margin going forward? And what will be the key drivers?
So there are 2 ways to protect the margin. There are 3 things we will do rather. One is that we have currently got from the 6 banks co-lending lines. So co-lending line, efficiently, what they do is that 20% money we have to put, 80% they do.
We have got about INR 3,000 crore plus kind of a co-lending line. This will give us an ability to service even those customers we otherwise would have said no because there's low interest rate. So it will help us to control the balance transfer to the competition. Plus, it will give us an additional layer of the customer we would have said no.
And third, the Gold Loan contribution in the overall yield will continue to grow. Gold Loan realized yield in the range of about -- targeted yield for the next year in the range of about 18%. So overall, our spread will continue to improve. Fourth, our fee distribution from the Car Loan business and the insurance business will be additional support to improve overall our margins.
The next question is from the line of Satyaprakash Pandey from Haitong.
Am I audible?
Yes, sir, you're audible.
Yes. So my first question is, could you please provide further details regarding our plan for insurance business? Specifically, what policies are we intending to launch? And what is the current progress regarding the establishment of team and infrastructure to finish it?
So we are not going to be ourself insurance company. We are just partnering with the existing life, nonlife, health insurance companies to distribute their products among our customers and earn the commission out of those cross-selling the insurance business.
Okay. Okay. If I may ask one more question. Just wanted to understand your distribution and network reach in Car Loan business. Capri's presence across location is actually constant at around 715 since last few quarters. Any specific reason for not widening the presence? Additionally, I would like to understand how our new subsidiary, Capri Loans Capri Platform (sic) [ Capri Loans Car Platform ] will integrate into our existing Car Loan distribution business.
So this Car Loan distribution business, while we have about 700-plus locations where our employees are present, we have a dealership network about 1,800 locations. And I can -- with pride, I can say that right from Jammu to Kanyakumari, we have a network either of dealership or our employee on ground. So there is no place left where if there is car loan business is happening and bank branches are there, we are not there.
So we have already deeply penetrated in this. And that is the reason you can see that among the non-car dealer segment, we are the #1. And by far, margin, we are #1 in that segment. This year, we're close to INR 10,000 crores distribution. And next year, we hope we are putting all efforts to grow that business by another 20% next year.
The next question is from the line of [ Darshil Pandya ] from [ Fintree ] Capital.
Sir, I just wanted to understand how will the cost of funds evolve in the light of restrictions on bank lending? And what is the expected lag between the increase in the cost and the pass-through to the customers?
So you've seen recently, RBI has also issued the circular where the risk weightage based on the rating have been increased and that the bigger increase has happened for the AAA companies and AA companies because flatly the risk weightage have been doubled. As far as we're concerned, our risk weightage have been increased only by 5 basis points. But however, cost of fund have become costlier as compared to 6 months ago.
As far as the new lending is concerned, we are able to pass on that increase. Our existing portfolio, about 45% of the customer we are able to pass on. The rest we have to absorb it. So whereby you could have seen there's a little compression on the spread. But since Gold Loan business is going to increase in overall proportion, our spread will improve in the next year.
But a lot of efficiency is being coming from our existing branches. And our technology initiative, where about 100-plus people staying in the -- in our technology team, along with outside vendors, we are putting up our loan originating system, which will be launched in the April. That will bring a lot of efficiency in the PAT and thereby improving the productivity.
So next year, a lot of things are happening where our Gold Loan branches are going to turn positive. Since we are not going to do more expansion in the Gold Loans, so that investment losses will stop happening, plus expansion of the -- and the scale up of the insurance distribution business, and all the things we'll see a lot of positives in the FY '25.
The next question is from the line of [ Kunal. M ] from Emkay Global.
Sir, my question is your MSME contribution as a percentage of your total AUM has come down to close to 35.7% from 44.5% a year ago. So are there any intentions to further reduce this contribution? And what are the strategies the company has in place for MSME business segment? And additionally, are there any plans to expand SME lending into new geographical areas?
So since we launched the Gold Loan, new product in Gold Loan is increasing also, but overall AUM and percentage of the overall AUM and also contribution will come down. However, our MSME business, as you have seen, has also grown about 24%.
We are evaluating to utilize our existing branch network to launch the micro lab, which means the secure lending in the segment where ticket size is less than INR 7.5 lakh is under evaluation. Once we decide whichever branches and how to launch, then we set up the team but that is in the active consideration. So that is where the expansion will happen.
As far as the new geography in MSME is concerned, at the moment, we are not thinking. Next quarter, which is the first quarter FY '25, we will draw a plan, but that is only -- the consideration is still we have not chosen yet. However, overall, MSME is going to be a key contributor because there tenure of the loan is 15 years, and that is a loan with even longer horizon of the income.
So the rundown doesn't happen the way rundown happen in Gold Loan. So every -- so there is a balance happening by MSME, your average customer life despite tenure is 5 years. So I think that will continue to show a decent growth.
Got it. Just one more question. So after adjusting the Gold Loan vertical, the cost-to-income ratio remains slightly elevated at over 50%. What do you anticipate this -- like when do you anticipate this to moderate? And what would be like a sustainable level in the near future?
So I think we should have -- excluding Gold Loan, our cost-to-income ratio should come down in the range of about 45%.
Okay. And by when are you expecting this to happen in the near future?
We expect that next year because of the various initiative plus technology, I think it should come down to the next year itself. We will see the traction in the first quarter FY '25 itself.
Okay. Okay, sir. And this 45% would be a sustainable level, right?
I think we are hoping that once the technology Phase 1 comes, then another Phase 2 will come in another 6 months time. And then we see clearly our productivity level improving from the same manpower. So I don't want to give you a number, but we are working towards to bring it down in the range of 40%.
The next question is from the line of [ Tanishq Makwana ] from Elara.
Can you hear me now?
Yes, this is much better, sir. Please go ahead.
Sir, I would like to know what is the rejection rate for this quarter in our loans compared to FY '23 and what would be our credit top-up for the same?
Can you please repeat? We are not able to hear clearly.
So what will be rejection ratio for the quarter as compared to FY '23? And how are you evolving in the filtering process, how are we -- like what is basically -- on what basis are we accepting the consumer, rejecting it? And also what will the loan top-up amount to these existing customers?
So you are asking about which segment?
Sir, all. Like a blended on a whole level basically. You can give us segment-wise as well, that would be very helpful.
If you talk about our MSME and the Home Loan, log-in to disbursement ratio is in the range of about 30%. Log-in to sanction ratio in the range of 40%, but disbursement ratio is 30%. And in Gold Loan, there is no log-in and disbursement because on the spot, we decide whether to do it or not do it. Whether the customer is accepting or whether we are rejecting the customer. So that happens on the spot itself. So there is no log-in and all that ratio.
No, no, sir, I wanted to know the conversion ratio. I guess if 100 consumers are there, like what is your rejection ratio? Not log-in, rejections, sir? Like how many do you reject and how many do accept on the basis of what are your like -- do you accept a CIBIL of 700 or 750, around the lines of that?
If we are saying 30%, then 70% -- our 60% you can say rejection ratio because 40% you'd sanction, 60% you'd reject it.
Does that answer your question? Mr. Tanishq Makwana, do you have any further questions?
Yes, I would like to -- yes, I have one more question. So where do you anticipate your ROA and ROE for -- ROA for basically FY '25, '26?
Members of the management, if you are speaking at the moment, you are not audible.
Yes. So next year, ROA -- ROA, we should be having in the range of 2.75% to 3%, and ROE should be in the range of about 11.5% to 12%.
[Operator Instructions] The next question is from the line of Jai Daxini from IIFL Securities.
Yes. Am I audible?
Yes, please.
My question would be what is the incremental cost of funds? And second would be is the PCR increase based on an overall level or...
Line for you is not very clear. Please use the handset mode.
Yes. Is it better now?
Sir, you're not audible clearly, sir.
Hello?
Yes, please go ahead.
Yes. What would be our incremental cost of fund for the quarter? And second would be, is the PCR increase on an overall level or led by housing and gold segment?
So PCR increased at overall level, which is about 30%...
34%.
34% overall. And our cost of funds is overall about 9.3% for CGCL, about 8.3% for the housing finance company.
On the incremental level, right?
If you talk about the incremental cost of funds, incremental cost of fund is about 9% for the housing finance and about 9.8% for the CGCL.
The next question is from the line of Kunal. M from Emkay Global.
Sir, I just wanted to understand who are your key co-lending partners for gold loan, mortgages and SMEs?
So for the gold loan, mortgage and SME are Yes Bank, State Bank of India, Union Bank of India, Punjab & Sind Bank, UCO Bank and Indian Overseas Bank.
Okay, sir. And sir, RBI has recently shown some uneasiness in digital lending and they have also shown some concerns in co-lending space. Do you see any regulatory action on this front?
So I don't think co-lending side, RBI have any concern because they are -- the RBI and banks are more keen to increase its volume for the purpose of making customers' cost of funds going down. That is their sole objective.
So we are seeing more and more line coming to us from the co-lending partners. As compared to last year, I think we have at least 5 to 6x more co-lending sanctioned by this year. So we think co-lending is going to be very acceptable and growing future between the banks and NBFC partnerships.
We have no further questions, ladies and gentlemen. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Yes. So thank you. So if you have seen, all of you would have noticed that as an organization and the management, we have shown our ability to build the new businesses. In last 3 years, we have started Gold Loan, we have build Car Loan distribution platform. Now we have launched this insurance platform based on the technology.
So we have shown as an organization successfully doing that and I think Gold Loan business in the shorter span of time, we have activated 747 branches. Now we are thinking about the micro lab, which is the same kind of a customer over a smaller ticket size to leverage our branch network.
So going forward, cross-sell and utilizing our existing customer base to reduce the cost income ratio and to improve the margins will be the focus, and we hope with the technology focus which has increased our cost-to-income ratio significantly, because we are spending a lot of money on the technology side, will come down in the next year, but the effort of the technology will be seen in the next year.
So we are quite excited that FY '25 hold lot of hopes and a lot of good things, which are translating into the better income and earnings. With that, I conclude my speech and address. Thank you so much.
Thank you. On behalf of Go India Advisors, that concludes this conference. Thank you all for joining us. You may now disconnect your lines.