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CreditAccess Grameen Ltd
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Ladies and gentlemen, good day, and welcome to the CreditAccess Grameen Limited Q4 FY '23 Earnings Conference Call hosted by Investec Capital Services. [Operator Instructions]. Please note that this conference is being recorded.
I now hand the conference over to Mr. Nidhesh Jain from Investec. Thank you, and over to you, sir.
Thank you, [ Bhavin ]. Welcome to the quarter 4 FY '23 Earnings Conference Call of CreditAccess Grameen Limited. To discuss the financial performance of CreditAccess Grameen and to address your queries, we have with us Mr. Udaya Kumar Hebbar MD and CEO of CreditAccess Grameen; Mr. Ganesh Narayanan; Mr. Balakrishna Kamath, our CFO; and Mr. Nilesh Dalvi, VP and Head of Investor Relations.
I would now like to hand over the call to Mr. Udaya Kumar for his opening comments. Over to you, sir.
Thank you, Nidhesh. Good evening to everyone. We thank you all for joining this conference call to discuss our fourth quarter and the FY '23 financial performance. It's comforting to acknowledge that we have once again achieved our annual performance guidance. We closed the FY '23 by recording 26.7% Y-o-Y growth in AUM to INR 21,031 crores, serving 46.2 (sic) [ 42.6 ] lakh customers. It was a historic year for us as we crossed INR 20,000 crores AUM, becoming the first pure-play microfinance institution to achieve this feat. We are the only NBFC to feature in the top 5 of the Fortune India Next 500 list given our revenue profile.
We recorded the highest ever quarterly disbursement of INR 7,171 crores supported by robust customer additions. We need to note that during FY '21 and FY '22, renewals and new business originations happened in the second half due to COVID-19. Hence, the renewals are also stacked in the second half of this financial year. Further, we have laid emphasis on new customer additions and increasing business from 500 plus branches, which were opened over recent years to improve productivity. As you all are aware, the CA Grameen MMFL merger was provided by the -- approved by the National Company Law Tribunal, Bench of Bengaluru, on 15th February 2023.
Going forward, we shall be reporting all the operational and financial parameters on a consolidated basis only. Our customer base grew 11.5% Y-o-Y as we added over 12.2 lakh customers during FY '23 and 8.3 [ lakh ] Q-o-Q as we added nearly 5.5 lakh customers in Q4 FY '23. Respectively, our pursuit of creating women entrepreneurs. Around 46% of our new customers added came outside the top 3 states, which have been a trend for last few quarters, demonstrating the result of our diversification efforts.
As we exclude the 3.4 lakh customers written off during FY '23, 63% of which came from MMFL book, our customer base growth would have been 20.4%. We added [ 167 ] branches during FY '23, majority in newer geography leading to a total brand network of 1,786 spread across 352 districts in [ bordering states ].
We are gaining healthy traction in newer geographies where we foresee gaining substantial market share in the coming years. Our collection efficiency continues to remain normalized clocking at 98.2%, excluding arrears and efficiency level similar to the last quarter. Our best-in-class asset quality is driven by loyal customer base and our execution sense, which is a testament of sticking to basics by following the classical JLG model.
GNPA 60-plus DPD reduced to 1.21% in March 2023 from 1.7% in December 2022, while PAR 90 reduced from 1.34% in December 2022 to 0.96% in March 2023. The net NPA fell to 0.42% in March 2023 from 0.59% in December 2022.
Overall, ECL stood at 1.78% at the end of Q4 FY '23, which is again higher than our GNPA. Our NIM improved further from 11.9% in Q3 FY '23 to 12.2% in Q4 FY '23, one of the most competitive in the microfinance industry.
We are expected to remain in the range of 12% to 12.2% going forward. As guided, our major drawdown in the last quarter came from domestic sources, helping stabilize our marginal and average cost of borrowing. Our marginal and average cost of borrowing for Q4 FY '23 stood at 9.4% and 9.5%, respectively. We would like to put on record that despite reported pricing by [ 250 ] bps in the last 12 months, but judicious mix of replacing various funding avenues has left the average cost of borrowing increase of nearly 60 bps to 9.5% compared to 8.9% at the end of the March 2022.
We have always tried to keep our interest rate to our customers one of the lowest in the industry, which is a factor of efficient build throughout -- efficiencies built throughout the system. We would like to inform you that ICRA has also upgraded our credit rating to AA- stable outlook from A+ positive outlook, given our asset quality and earning profile. We are now rated by both ICRA and India ratings with AA- stable outlook being the highest standalone rating in the microfinance industry. Further, our eminent ESG adherence and strong complex standards helped us to secure ESG ratings from Sustainalytics and S&P Global.
Our ESG rating fast better than many leading BFSI companies India across the world. We have also obtained second-party opinion from Sustainalytics on the social bond and loan framework in FY 2023. These developments will further help us to assess ESG linked funds from global lending institutions and further strengthen our liability profile going forward.
For the Q4 FY '23, NII grew by 32.7% Y-o-Y to INR 690 crores, while the cost-to-income ratio stood healthy at 30.2%, which is 360 bps lower Y-o-Y.
PPOP grew by 36.3% Y-o-Y to INR 503 crores, demonstrating a strong operational profitability trend. For FY '23, NII stood at INR 2,234 crores registering a 35.1% growth, while PPOP grew by 39.8% to INR 1,506 crores, indicating a strong operating profitability trend.
The credit cost in Q4 FY '23 stood at INR 105 crores, including INR 14 crore management overlay on the legacy book of MMFL amounting to INR 131 crores for 0.6% of total AUM. The credit cost was partially offset by INR 16.8 crores of bad debt recovery during the fourth quarter. Therefore, net sales cost for FY '23 stood at 2.1%.
Our PAT grew by 86.4% Y-o-Y and 37.5% Q-o-Q to INR 297 crores during Q4 FY '23, resulting in ROA and ROE of 5.5% and 24%, respectively.
For FY '23, we delivered a PAT of INR 826 crores leading to ROA of 4.2% and ROE of 18% meeting our annual performance guidance. We are further maintaining a comfortable capital adequacy ratio of 23.6% at the end of March '23.
Our expansive presence across India, differentiated operating model, customized product offerings, highly stable technology stack, experienced management team, diversified liability profile and strong balance sheet placed us at the forefront to establish ourselves at the preferred financial partner to millions of underserved low-income households. Our business model based on the premise of suitable process, product and pricing along with suitable servicing has always rewarded us.
Assuming a stable operating environment, we look forward to achieve loan portfolio growth of 24% to 25% in FY '24. Given our strong hold on borrowing costs, we foresee maintaining NIMs in the range of 12% to 12.2%, with cost-to-income ratio between 35% to 36%. We are anticipating a base cost of 1.6% to 1.8%.
Overall, we aim to achieve ROA of 4.7% to 4.9% and an ROE of 20% to 21% in FY '24. So with this, I would like to open the forum for question and answers. Thank you so much.
[Operator Instructions] The first question is from the line of Nikhil Rungta from Nippon India Mutual Fund.
Congratulations on a great set of numbers sir. A few questions, 2 to 3 questions from my side. To start with, first of all, your view on both sides of margin, I mean, on the yield side, I mean, any more increase can we see in the new disbursement rate, which currently is 21.9%. And in turn, any more scope in the portfolio yield, which is at 19.7%.
And second part is, you already indicated marginal cost of borrowing. So it's down to 9.4% from 10.2% in December quarter. What are the key reasons? Do you think it will stabilize at this level or can improve any further from these levels? So this is the first question on the margin side.
Sure, sure. Maybe I'll answer the margin first. The change is basically we borrowed more of a domestic borrowings in Q4, whereas in Q3, we borrowed a bit of international borrowings plus NCD we raised. Therefore, margin costing was higher in the Q3, whereas cost is lower in the Q4, majority of our borrowing was domestic borrowing in Q4. Therefore, the cost has come down. Therefore, the average cost of borrowing also has come down. So therefore, this is the difference that comes.
So on the yield and NIM, so yield might go different a little bit more than the Q4, but Q4 maybe a bit of benchmark with maybe 20, 30 bps higher possibility for the next financial year. In the meantime, NIM would remain in the same range of 12% to 12.2%. So because there's -- a little leverage impact will be there. Therefore, we presume that it will remain around that range.
Okay. And on this marginal cost of borrowing, do you think we'll stabilize at these levels if there are no more or hardly any reported hike going forward?
So it might go up a bit actually, our estimation is a still go out by about 20, 30 bps because some of the MCLR increased of the bank who have not yet transferred to us because we have more -- I mean, a lot of borrowings at 1-year research class. So with that, it may go up by 20, 30 bps, but we can always pass on that with the next borrowing. Therefore, we still will be able to maintain our NIM within this range.
Okay. And sir, on the average ticket size, we are now at 51,000 -- approximately 51,000, so do you think it will stabilize at these levels? Or where are we planning to take it to?
So it is not 51,000. Yes, it's 51,000. That's a small increase on an annual basis about 9%, 10%, it will go up. So there are 2 reasons. One is, does our customer vintages keep going on. Two is 20% of our books, which is Madura, which is still at a low, what is our leverage because the base of that was very low when you took over. To that extent, that can still go up a bit. But if you look at the -- if you [ look at ] the portfolio for customer, it's high in the top 3 states where we have a high vintage customers, which is about 54,000. The entire balance contains only 39,000. Therefore, it's not a worrying fact for us at this point of time. So therefore, maybe more on about 8%, 10% might go up. But any loan what we give more than [ INR 60,000 ], we give at previous loan. Therefore, again, the repayment load on customer also will not change. So it will only further decrease to them. Therefore, we are not seeing any vulnerability here also.
Okay. And what would be our next leg of growth? Would it be expanding into newer geographies or district or deepening into existing districts? Further, do you think Madura might see a strong growth given the recent court order on Telangana?
See, Madura will definitely grow faster because it is still at, what we call, less productive branches, I would say, or we have enough headrooms in the Madura branches. Therefore, it will give us a very good growth going forward. But overall, it will be expansion plus deepening, both will be together. For example, we estimate about 14%, 15% customer growth, which will fuel that 24%, 25% portfolio growth, which is both expansion, about 8% to 10% branch expansion, and the acquisition of customers in the existing branches, which includes Madura's [indiscernible] branches should give us extra headroom. So -- but it will be fueled by customer acquisition all across. So 14% to 15% customer acquisition will lead to 24%, 25% portfolio growth. That is what our estimation, Nikhil.
Okay. Last question, sir, from my side. Sir, now that we have already merged in Madura with us and yesterday, there were plans or talks that smaller MFIs are still unable to get a good rate of funding and hence, there are plans of making or creating a fund for helping the smaller MFIs. Do you plan or see any more inorganic acquisitions in the near future, say in next 1 to 2 years?
So nothing in our plan at this point of time. So actually, we don't see any opportunity which is insignificant for our growth because we have -- even a smaller MFI acquiring is not an efficient process for us. So therefore, we don't see any inorganic growth opportunity at this point of time because unless it's complementary in terms of the geography, in terms of product, in terms of culture, in terms of sales, it won't switch for us. So therefore, we don't have any such plans at this point of time.
Got it. Got it. That's all from my side. I'll come back in the queue and expect to see similar type of quarters from your side.
So maybe we'll add one more point. When we say expansion for your earlier question, so we still have a lot of opportunity for opening more branches in Gujarat, Rajasthan, UP, Bihar, Jharkhand. That will keep continuing as our normal philosophy of contiguous growth, that will continue, which will add about 8% to 10% of new branches. So that is also one of the key pointers in terms of our expansion.
The next question is from the line of Renish from ICICI.
Congrats on a great set of numbers. Sir, 2 questions, one on the data side. So this quarter, we have seen other OpEx sort of falling by 10% despite -- are we opening more than 50% branches plus the...
Can you just repeat, suddenly it becomes low. No, no, sorry, -- I think we lost you.
Is it better now?
No. I think you need to repeat the question fully.
Yes, yes. Okay. So on the other OpEx side, this quarter, we have seen there is a decline in other OpEx despite opening more than 50 branches plus the robust investment growth. So what is the reason for decline in other OpEx?
So OpEx has come down because of the -- yes, the Q3, it was a little high on account of the fund raise, the NCD public -- NCD, we raised now. That expense was part of Q3, therefore, it's basically a spike in that quarter. It is not reduction in this quarter. We lost you again.
No, sir, I can hear you.
Yes. You've got my point. No, it's not the reduction. Basically, the Q3 was a little spike because of the public NCD costs are coming.
Okay. Okay. Okay. So there was a big impact in basically?
Correct, correct.
Okay. And sir, last question from my side, a bit on the strategic front. So as you rightly mentioned that we are the first MFI to cross INR 20,000 crores of AUM. So from a, let's say, 2- to 3-year perspective, do you feel that there is a need for us to, let's say, start venturing into non-MFI product and build the non-MFI portfolio? Or do you feel there is enough headroom for MFI portfolio to grow at 20%, 25%?
I think this discussion we had a year back, and we already piloted -- lots of pilot going on, the scaling will happen. I think we explained earlier also. So we have piloted many products and couple of are already scaling up. By next financial, we are looking at a good momentum there. So I think our view is very clear, keep following our customers, keep enhancing the product for our mature customers. And again, work within the customer segment and ecosystem and then build the non-microfinance book also. So the idea, I think we already explained earlier also, 4, 5 years' time, we will have about 10% to 12% of the non-microfinance book. And I think we are clear on that path, and we are working on that anyway. Maybe Ganesh, you want to add a couple of things here.
It's okay.
Great. So it is fine. So already, we have published this earlier also.
Got it, sir.
The next question is from the line of Shreepal Doshi from Equirus Securities.
Congrats on a good quarter. So my question was pertaining to yields. So I wanted to understand what is the rate hike that we have taken in the last 6 months? And what is our current yield for the group loan product and for the retail product?
So our overall yield is about 19.7%, right? -- sorry -- our current yield overall is about 21.9% and -- on the new disbursements. And then the overall is about 19.7% for the quarter whereas the retail non-microfinance also [indiscernible] at same only. There's not too much because some places, it is higher than the group portfolio. So since it is insignificant now, it won't make too much difference currently.
Got it, sir. The second question was pertaining to the FOIR. So what is the FOIR that you -- that we have for our existing customers?
So actually, about -- so as the regulation, clearly, says was not be more than 50%. But what we observed was about 70% to 75% of customers. Therefore, it is less than 40% currently.
We have the next question from the line of Suraj Nawandhar from Sampada Investments.
Can you hear me, sir?
Yes. Yes, we can hear.
So my question was on more of industry-related question.
You may need to be a little louder, Suraj.
Can you hear me, sir, now?
Yes, now perfect.
Sir, my question was really more of an industry-related question. Other players, even the smaller ones have given a very strong guidance for the industry. Just one of the player in their call said that industry might grow 5x in 5 years. So my question was being the industry leader, do you also see such kind of growth coming into the overall microfinance industry? And if yes, then what are the triggers on ground, which can lead to such kind of exponential growth in overall sector?
Not really. We don't see. Definitely our estimation is not that for the industry. We believe that industry also will be within about 20%, 25% CAGR for next 3, 4 years. Beyond that, probably it will further taper down actually. That's what our view. So our estimation is within that.
Okay. So then we are also planning to go around 25%, aren't we planning to go up higher than industry rates?
We may be at the range actually. So there are 2 parts of our growth. For microfinance growth, maybe slightly it will come down and non-microfinance will kick in. So therefore, together, it is 24%, 25% what we are talking. So therefore, microfinance might come to 22%, 23% by next year and year after. And other products will actually take over the space. So overall growth, we are talking about 24%, 25%.
Okay. And sir, what would be your branch expansion plans for this year?
As I said, we normally do between 8% to 10%. Earlier, we used to do more, but now we actually because base is quite high, our expansion plans about 8% to 10% or 12% of our existing branch size.
So around 80 to 100 branches thereabouts.
No. We are at 1,786 branches currently, 10% is 175 branches.
[Operator Instructions] The next question is from the line of Shweta Daptardar from Elara Capital.
Congratulations on great set of numbers. I have 2 questions. One is on -- if I look at the [indiscernible]. So as you rightly mentioned, largely the diversification is now coming by. So if you look at the Easter geography, the presence there has increased for the company as well as there has been positive signals coming from the Northern base, especially UP. So could you just throw light on the demographics and the positives coming from these 2 geographies and where the confidence has been reinforced.
See, so I think demographic expansion, we always go by contiguous district despite -- I agree that some states are a little different in terms of economic activity, the growth, the GDP expansion are changing, but we always gain the benefit from going through this process of contiguous district approach, which helps us to understand the district better and then put our employees to work in the next district in a better way, have a better control for that expansion, risk and expansion cost is minimized, which helped us. I think despite those kind of spikes, we still believe in going into contiguous part. So therefore, we -- already in UP, we will continue to open branches in north bording district, Similarly, we also in Rajasthan, Gujarat, Bihar, we continue to open that. So we keep actually acquiring that kind of, what you call, new geography through a district-based approach.
With the typical replication of business, we don't see too much difference in terms of repayment or disbursement or acquisition, so -- which helped us to grow very sustainably in all these areas.
Right, sir. Well understood. So secondly, you did guide on cost income at around [ 30%, 35% ]. So where do you see the -- yes, so where do you see the synergies and triggers coming to maintain this kind of quality number because even if I look at OpEx to assets, you are one of the lowest in the industry. So how do you see the sustainability here going forward?
So if you look at the last -- even look at the last 5 years, we're still sustained within that, right? I think already we have been with the optimal cost. So it's more of replicating that optimal cost. And now that we have ability to price based on risk, therefore, even the margin is better compared to the earlier regime. So -- and then the credit risk also has to come down, it's already coming down. We are seeing that happening. And all these things and -- our own historic quality of operations, sustainability we've maintained over a period of time and very calibrated growth. So all these will help us to manage and keep on improving the overall efficiency, overall financial result. So I think what we talked is from 36% to 35% to 34% kind of thing, which is definitely possible with the economy of operation plus quality.
Got it, sir. Sir, and one last question. What is the scenario on the ground in terms of center meeting attendance?
So we have been witnessing a very good improvement over a period of last 6 to 12 months. We had a little lesser attendance just after COVID, but by and large, we are back into normal, maybe pre-COVID to post-COVID, the variation is maybe about 5%, 6% today. So we are quite good in that.
[Operator Instructions] The next question is from the line of Rajiv Mehta from Yes Securities.
Many congratulations on strong set of numbers. So sir, firstly, a clarification, you spoke about 70%, 75% customers having a FOIR of less than 40%. This is incremental, right?
Yes. It's a new disbursement only, Rajiv. We are not going back and checking the existing borrowing. If you see largely, we disbursed about INR [ INR 17,000 ] crores. Yes, [ INR, 17,000 crores, INR 18,000 crores ], so largely about 60% of the portfolio, 70% of the portfolio is new today. So automatically, largely it [ represents ].
Got it. Got it. And sir, can you share the average disbursement ticket size, Q4 and Q3?
It is about [ INR 37,000 to INR 39,000 ], average ticket size. right?
Average disbursement.
Average, about [ INR 45,000 ], sorry.
And has it gone up significantly Q4 versus Q3? Because I see an 8% to 10% jump across vintages in your portfolio per borrower?
Yes. That's linked to vintage, you would have gone up that way because it's a natural phenomenon as the customer vintage goes up, this will go up. Plus, we also had a good disbursement in Madura, which will actually slowly we are aligning [indiscernible] customers, those customers' GLP also. So to that extent, if you cover, it might have gone up by 7%, 8% considering these 2 factors together.
Sir, actually, I'm looking at CA Grameen vintage-wise borrower -- average GLP per borrower for CA Grameen vintage wise and across vintages, it has grown by 8% to 10% on a Q-on-Q basis.
Correct. Correct. You're right. That's correct.
So, would that be driven by higher incremental ticket sizes in this quarter?
There's -- a minor change is there, in particular, the high vintage [ times ], but it is not a big change in the, what we call, credit policy, it's not big change in credit policy. So I think if you see Y-o-Y, the increase is about 8% to 10% only, the overall GLP per customer. What is increase is in the Madura book, if you see the slide, there is increase about [ 28% ], that's why overall change is there. Correct. [indiscernible] [ 18,000 ] when we started operating with them.
Correct. Correct. So sir, actually, I was coming from the fact that now the loan ticket size is not -- is more determined by FOIR, then did we have -- do we have a scope for kind of going higher on the ticket size? Because you're also guiding for FY '24, that 8% to 10% of the portfolio growth can come from average ticket size increase. That is something we cannot predict, right? Because that will be determined by the borrower's leverage and the FOIR which is available.
No. It is determined by the vintage actually. Our vintage customer also keep increasing by 5% to 10%, right? So automatically, to that extent, the increase will be there. So because every renewal, if you see, we have 88% customer retention, which means if we renew that automatically, they'll say additional limits available to them, right? So automatically, there will be a little increase. If you see the 10% growth come from renewal and increase and 15% growth will come from the new customer acquisition. This is what the normal. Even if you see last year also, this is by and large around there. There was a bit aberration because of write-off and mix. Otherwise, our new customer acquisition almost 20% last year also.
Got it, sir.
The next question is from the line of...
One more thing, Rajiv, I just wanted to reiterate the point that we would always try and see the adequate money rather than restricted money. And try and see for the vintage trend sufficiently for their cycle, life cycle, and as much adequate to them rather than just restricting with the ticket size. So that's only with vintage trend, there are more than [ 4 years with us ], the risk levels are less, where we are actually looking for the adequate funding.
The next question is from the line of Sagar Shah from Phillip Capital.
First of all, congratulations to the entire team for such great set of numbers actually. So my first question was related actually to our loan book. So in our retail finance portfolio, which comprises of individual loans to 2-wheelers, lab, gold loans, affordable housing. How do you see in the next 2 years scaling up that actually as compared to microfinance, you already explained actually the entire industry is focusing towards growth, and there is demand actually on ground. So how do you see the retail finance portfolio as part of CAGL actually going in the next 2 years first of all and in terms of products also?
So this is Ganesh here. So as we guided, right, so we can right now indicate for the next 4, 5 years, right? So our indication over the next 4, 5 years is around 10%. So similar -- so in that range, probably how we grow over the next 2 to 3 years will also -- we basis our experience in scale. So right now, we have [ 82 ] retail finance branches where we are doing mortgages, which is loan against property as the primary project. So affordable home loan is something that we will do pilots during this year.
So like some products will scale during the year, like your unsecured individual loan for graduated customers, 2-wheelers, you will see scale-up and loan against property. Affordable home loan will be a pilot. Gold loan is anyway a long pilot for us, and we don't see a large volume coming from it. So overall retail finance majority will come -- growth will come from mortgage. It will come from 2-wheelers, it will come from graduated customers borrowing unsecured loans from us. I hope I answered your question.
Yes, yes, absolutely. So just a follow-up on that. How are you actually classifying as graduated customers of individual loans from the [indiscernible]?
So this is basically not -- it's a combination of factors, if I have to put it. So it's a mix of vintage of the customer, it's a mix of credit behavior with us. It's a mix of the customer profile, income earnings, capacity to demonstrate cash flow, certain surrogates like multiple income streams, et cetera. So this is basically [indiscernible] customers who got stable business, stable income, right? You will have to look a little more. And hence, we have also guided this unsecured loans to graduated customers that even in the long term, will be anywhere between 5% to 7% of our overall book, will not be beyond that.
Okay. Got your point, got your point. So I got an idea about how you actually plan to scale up your retail finance book. Now coming on to your portfolio yield actually. Although retail finance obviously offers a lower yield, but obviously, it was hardly comprised, if I am not wrong as per my estimate, not more than 5% to 6% in the next 2 years on a broader level on the consolidated portfolio. So we are at 19.7% as of now. So in the next 2 years, do you -- how do see your yields shaping up or maybe are we planning to increase our yield in the microfinance as actually other players are actually offering more yields than you actually. The portfolio yield is even better than you. So basically, how do you see your yield shaping up in the next 2 years?
See, our retail finance book does not dilute our yields. It is in a similar range of microfinance because this is a different segment we are working on, right? So the maximum ticket size is around INR 20 lakhs when it comes to mortgage, average ticket size is INR 5.5 lakh, INR 6 lakhs. So this is the affordable home segment, small ticket lap. So this is not diluting our returns when it comes to business, even two-wheeler does not dilute our return.
Gold loan, we've already said that these are short-term in nature. Hence, once we pick up volumes, we can borrow short-term money and hence, it will not have a hit on our yield. Again, microfinance, we've guided a NIM of 12% to 12.2%, we should be able to manage that, right? So that's what it looks like.
The yield is dependent on the pricing. The price goes up, for example, borrowing cost goes up, probably it should go up. If price comes down, it will come on. But what do we have to look at is the NIM, which is 12% to 12.2%, which is probably the best in the industry today.
Okay. Okay. Sure, sir. So basically, I used that point actually. One of the earlier participants had asked you. Actually, your cost of borrowing is down sequentially. So can you state again the reason, actually we are at around 9.5%. And secondly, how do we see -- you already told that if the bank raises MCLR, then we will be around 20, 30 bps higher. So but any reason for such a sequential decline in cost of borrowing?
It's only declined from a marginal cost from Q3 to Q4. Q3, our marginal cost is high because we borrowed high-cost funds and also raised public deposit, there is a public NCD, which was a higher cost for the longer term. Therefore, the marginal cost for Q3 was higher, and it's come back to normal again. In the Q4 -- because we did not raise such high-cost long-term funds in the Q4. That's only difference that comes.
Okay. Okay. Okay. Sure, sir. And now my final question actually is related to microfinance. Microfinance, almost as you have guided for almost about -- almost 24%, 25% growth on a broader level, but on ground even with a higher yield, how is the demand in the rural actually shaping up? Now you're even moving to other states from Karnataka, Maharashtra, and Tamil Nadu. So how do you see demand in the other states? Do you see this demand sustaining in the next 3 to -- 2 to 3 years? Or do you -- something like do you see that this is just something like a pent-up demand sort of after almost a downfall we saw almost for 1, 2 years?
For us, it looks it is sustainable at this level because if you see even previous year, we grew by 23%. Last year, we -- was at 22%, 23%, now we grew by 27%. But organic is about 24%, 25%. We believe it's sustainable and with the increased customer and geographic expansion, which will help us to grow, we believe it is possible for 24%, 25% -- sorry, 23%, 24%.
[Operator Instructions] The next question is from the line of Piran Engineer from CLSA.
Most questions have been asked and answered. Just a couple pending. One is, are our competitors also giving 3..
Sorry. Sorry, we missed you, Piran. Can you repeat a bit louder?
Yes, yes. Am I audible now?
Yes, yes.
Yes. So my first question was that are our competitors also giving 3-year loans for higher ticket size products? Or the industry is at 2 years and we are unique in this product?
We are not sure, actually. We are not sure. We have been doing this since last 2 years, actually. So currently, our 29% of portfolio is 3 years portfolio.
Okay. Okay. Fair enough. And sir, secondly, just I noticed between 3Q and 4Q, there's a sharp jump in the ticket size and retail finance from like [INR 50,000 to INR 85,000, INR 90,000 ] am I reading that wrong? Or...
You're reading right. Our majority of the mortgage pilot picked up in the Q3 and Q4, therefore the average has gone up.
The erstwhile unsecured book, which was -- with the lower average ticket size is running down, right? And you are disbursing average ticket sizes of INR 5.5 lakhs in retail finance. So the old book is running down and new book is catching up and hence, you will see an increase.
The next question is from the line of Nikhil Rungta from Nippon India Mutual Fund.
Sir, 2 things. First, what would be our outstanding return of portfolio? I mean if we see bad debt recovery this year, it was INR 58 crores. Last year, it was INR 74 crores. So going forward, what type of outstanding portfolio we have and what type of recovery we are [ suggesting ]?
So in our experience, Nikhil, all these write-offs have been played hard for 270 days before writing off. So therefore, in our experience, all the recovery, we will recover only 15% -- or 10% to 15% over 2 to 3 years. Today, we have about close to INR 2,000 crores write-off book. And so far, we already recovered against that about INR 195 crores. And then we keep increasing. Now the speed may go up a little bit, but eventually, it will stay between 10% to 15% or 18% of recovery in 2 to 3 years' time because it won't go too much high also, this is our experience.
Approximately INR 50 crores to INR 100 crores approximate amount will continue to come in, in every year?
Yes. Yes. Yes. You're right.
Okay. Sir, one more question on competition now. I mean, Bajaj Finance has recently announced foray into MFI. I don't want your commentary on Bajaj Finance, but I want your view on the competition which now has started coming in from the larger NBFCs. These guys have definitely presence into deep rural areas. So your view on competition coming in from there?
Yes. We expected this competition because after regulators recognized that the mainstream [ witnessed ] and had made a common rule, so there is a potential that some of them will add this as one more portfolio. But keeping ourselves ahead in competition, the pricing, the process, the quality efficiency always helps us. Our sense that the potential is large, we still have close to the INR 10 crore households not touched by or not accessed microfinance or formal finance, I think there's a huge potential for co-existence everywhere. Many times, the new entrants will start in the urban and then go to rural. But being at the rural already, probably have a little per hand, with the potentially better process and better products and better prices will help us.
So we expect that some competition will go up. We expect some co-existence will be there in all places. Even now when we go to rural, our new to credit is still more than 30% even now. So we believe that, that will remain for at least next couple of years. And also, other side is 70% is coming from other MFIs who lend for them and they borrow from us. So over a period of time, they will stay with us only, that's also trending, almost. We saw that in one year time, [ 11% ] of customers who borrowed from others, joined to us, stayed back with us, but left others. Okay? So I think this is going to be a competitive game going forward slowly.
[Operator Instructions] The next question is from the line of [ Aditya Padhi ] from Girik Capital.
Great set of numbers and congratulations to the team. I just have one question on the operational front. I just wanted to understand where do you see -- I'm referring to Slide 22, just wanted to ask that, where do you see the borrowers per loan officer going forward in the future? Like over a year-over-year, I have seen like around 4.5% increase versus borrowers per branch have grown by 2%. So is that the math going forward? Or do you have like a credit number or rather you would invest anything in IT versus the human capital to increase the borrowing -- sorry, borrowers per loan officer.
The average numbers that you are seeing in the PPT typically goes up and down depending on the new branches that you opened and fresh employees you had. Last 2 years, you were also seen a dip because of write-offs, higher write-offs, but a better number for you would be to see in an ideal state, in a state where we are for a certain period of time, a loan officer can reach anywhere between 500 to 550 customers per loan officer. So that is the number we target over a period of time depending on the life of the branch.
Okay. Sure. So sir, that would be like a -- like how many years would you consider for a branch and a branch officer to have that around the 500 number?
3 to 4 years?
3 to 4 years. Okay perfect. So that's the growth that you see going forward, say in '25, suppose you've added a branch -- sorry, in 2021, if I added a branch, in '25, that would be ideally -- that should -- where it should be adding?
Yes, absolutely, correct. If we -- so even otherwise also, we don't look at the productivity from an angle of number of borrowers per loan officer rather than we don't want them to handle too many. So it's more of how many centers they can handle per day rather than number of borrowers they handle because this is always a relationship business. So therefore, there has to be a sufficient space for employee to work, number of customers need to be lesser other than very high. So each one of them will handle 5 to 6 centers only, 5 to 6 centers only per day. So that is the count rather the number of borrowers we watch actually.
The next question is from the line of Pooja Ahuja from Monarch Networth.
Congrats on the quarter. Most of my questions have been answered. So I just wanted to understand the attrition that we see in our borrowers, if you could provide some more color in terms of where do we see these borrowers moving to. Do you -- maybe other NBFCs or SSDs or banks, some color on that, sir?
Yes. I'll give to some extent only -- I can give the estimates actually because we do a couple of checks when you do the drop to borrower, we keep tracking them for some time, at least for a year, what they're doing. So what we saw is about 60% of dropped customers from us have no borrowing thereafter actually. So they're actually winding down from the borrowing, maybe they don't want to borrow more thereafter or suppose or somebody started borrowing so that they don't need to borrow. That could be one reason. Other 40%, we saw that some of them moving into upper segment like different NBFCs for the highest requirement. That is where our pilot started.
Because of these insights, we started this non-MFI products for such customers. So that if they are going to have a NBFC, why don't we create that product. So that is a bigger reason for us. So let us follow our customers not only who are graduating, somebody who's asking the different products than the microfinance, we can address them, whether it is housing or larger business of mortgages or 2-wheelers or individual business loan, everything they are addressing. So it's a part of our research to address this, so one of the reasons we started non-microfinance business. But frankly, 60% of them, we found that they're not borrowing.
Right, sir. So sir, out of 40%, any ballpark, if you could share, how many are moving because of higher ticket size, which we can now capture and how many could be moving to, let's say, other products?
So we have done that not kind of the demand and supply. We only checked it from Bureau point of view because they are no more with us. So what they borrow or do we have the data anyway. So we check with Bureau and [indiscernible]. So I think we have not checked beyond that.
Sure. Understood. And lastly, do you see borrowers from any second or third lender to the borrow coming to you?
Yes. Yes. We see that it's happening. One of our strong word of mouth is in favor of us. So we saw -- when I say 70% of the ETC is our new customer, there are cases of 2 lender, 3 lender also. But we look at our overall borrowing as a criteria. We kept a, what you call, breakup both for new customers, total borrowing from the household should not be more than X to join us. So that's already there. But we feel that they can enjoy our products sold and over a period of time, they may be our unique customer eventually. So that's happening. So we see that happening.
The next question is from the line of Rajiv Mehta from Yes Securities.
Yes. Sir, just one question on the industry. Sir, in your view and as per your knowledge, is the industry following this household level FOIR based loan eligibility in true spirit and whether the data availability from the bureaus is clean and complete?
We have not made -- I mean, many analysis so far actually based on the income and because it's only just last 2 quarters. But maybe some of them are following the true spirit, very difficult to define -- define because everybody claims that they are following. But right now, we don't have a clear data maybe in 3, 4 quarters together, if you start reviewing the entire data of the household, probably we will get some sense of some time because many of them started after October only. Therefore, it will take some more time to get the full insight of how this is happening.
But the leverage data of the household debt is completely available, right?
Yes. We are not seeing too much variation, but still about, yes, 10% to 12% leverage variation we saw when we compared to the -- when we take our income versus the -- and even you see the trending, but we will not know the leveraging in the other end, right? Yes. When they come to us, we have the leverage to that extent. But overall, we don't have full insights at this point of time.
Ladies and gentlemen, that was our last question for today. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you. Thank you so much for all of you for hearing us patiently and look forward for your -- any queries you can reach us to our investor desk and Nilesh will take care of any further queries if you have. So thank you so much, and have a good day.
Thank you. On behalf of Investec Capital Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.