Indiabulls Housing Finance Ltd

NSE:IBULHSGFIN

Earnings Call Analysis

Sammaan Capital Q1 FY25 Update

Sammaan Capital, formerly Indiabulls Housing, reported a promising Q1 FY25. The company’s net interest income surged to INR 927 crores from INR 562 crores last year. Profit after tax rose to INR 327 crores, up from INR 296 crores. Asset quality improved with gross NPAs down to 2.68%. The company aims for a 1 lakh crore INR retail AUM by FY27 and maintains a strong liquidity position. Significant shareholder support ensures a focus on execution, targeting mid-teen ROE by FY27. Additionally, Sammaan Capital emphasizes a customer-centric approach and robust risk management, while continuing to invest in technology for improved efficiency.

The Dawn of Sammaan Capital

Sammaan Capital Limited, formerly Indiabulls Housing, has recently undergone a transformation, marked by the receipt of a new registration certificate as a Non-Banking Financial Company (NBFC) from the Reserve Bank of India. This new identity is not merely cosmetic; it signifies the company’s commitment to a customer-centric ethos, which aligns with the meaning of 'Sammaan'—respect and dignity in Hindi. This transformation coincides with the firm’s 25th anniversary, as it embarks on a rebranding strategy aimed at strengthening stakeholder relationships while reinforcing its operational foundation in the financial sector.

Strong Financial Performance and Growth Metrics

In the first quarter of FY25, Sammaan Capital reported robust financial results. The net interest income surged to INR 927 crores, up from INR 562 crores in the same period last year. Profit after tax also showed growth, increasing to INR 327 crores compared to INR 296 crores from the previous year. A key highlight is the company’s assets under management (AUM), which is expected to reach an impressive INR 1 trillion by the fiscal year 2027. They've set a target of achieving a quarterly disbursal rate of INR 5,000 crores by the end of FY25, thus laying a solid foundation for future growth.

Effective Asset Management and Quality

A main focus for Sammaan Capital is effectively managing the quality of its asset portfolio. The company has achieved its lowest gross non-performing assets (NPAs) in 16 quarters, currently at 2.68%. The net NPAs stand at 1.52%, indicating financial prudence. The company's goal is to reduce legacy AUM—defined as those sourced prior to fiscal ‘22—to a single-digit percentage of AUM by the end of FY27, leveraging tactical runoff strategies and consistent collections averaging INR 3,000 crores per quarter.

Capital Management Strategy and Partnerships

Sammaan Capital has been able to establish a diverse funding base. As of June 2024, the firm had raised nearly INR 24,000 crores through various sources, including equity and bonds, setting the stage for future growth. Key partnerships have also been integral to its strategy, illustrated by their asset-light model which lowers risk by co-lending with banks, making the capital structure resilient. The blend of funding diversification and prudent liquidity management has resulted in a liquidity coverage ratio of 211%, far exceeding the regulatory requirement.

Future Guidance and Strategic Outlook

Looking ahead, Sammaan Capital aims to achieve a mid-teen return on equity (ROE) by fiscal 2027 through strategic execution and evolved operational efficiency. The management's commitment to compliance and risk management outlines a solid framework for sustainable growth. They also indicate that dividends will range between 30% to 40% of profits as financial performance allows, reinforcing investor confidence in both the cash flow generation and shareholder value proposition.

Conclusion: A Strategic Transformation

In summary, Sammaan Capital is positioning itself as a resilient player in the non-banking finance sector, leveraging its recent transformation to drive growth and operational excellence. The foundation laid with strong financial metrics, effective asset management, and strategic partnerships reflects a well-thought-out approach to navigate future challenges. Investors can find reassurance in the company's direction, supported by a clear strategic roadmap towards fiscal 2027.

Earnings Call Transcript 2025-Q1

[Operator]

Ladies and gentlemen, good day, and welcome to Q1 FY '25 Sammaan Capital Limited Earnings Conference Call hosted by Investec. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to [ Mr. Kamal ] from Investec. Thank you, and over to you, sir.

[Unknown Attendee]

Good afternoon, everyone. Welcome to the Q1 FY '25 Earnings Conference Call of Sammaan Capital Limited to discuss the financial performance of the company and to address your queries. We have with us Mr. Gagan Banga, Vice Chairman, fMD and CEO of Sammaan Capital Limited.

I would now like to hand over the call to Mr. Gagan Banga for his opening comments. Over to you, sir.

[Gagan Banga, executive]

Thank you, Kamal. A very good day to all of you, and welcome to the Quarter 1 FY '25 Earnings Call. I would request all of you to keep the earnings update handy. It's been e-mailed to most of you, it's on our website and should also be on Bloomberg.

Before moving to the numbers, I would like to cover the key highlights for the quarter. In July '24, earlier last month, following a detailed review process spanning over six months, the Reserve Bank of India issued us a certificate -- a fresh certificate of registration as an NBFC/ICC, which is a nonbank financial company, investment and credit company. With this, we are now in NBFC, supervised and regulated by the Reserve Bank.

Since a few years now, the regulatory approach is [indiscernible] based regulations. As Indiabulls Housing and HFC, we were classified as an upper layer NBFC, which will continue to remain. So in most ways, life does not change for us, particularly since over the years, RBI Trust has been to do away with any regulatory reporting or disclosure arbitrage, especially between NBFCs and housing finance companies.

Following this conversion to NBFC/ICC, the company's name has been changed to Sammaan Capital Limited. The company shares are also now being traded under the [ scrip port ] SAMMAANCAP on the stock exchanges.

Sammaan in Indian languages means respect, honor, courtesy and dignity. The company intends its brand and the meaning of the word, Sammaan, in the Indian context, to emphasize and convey to its stakeholders, a customer-centric approach, a sense of pride in Banga house or owning a business. These are the two products, which are our focus in our retail loan product suite.

We expect and hope that we are able to pass on to our customers an approach of a very dignified business conduct. As a systemically important lender, a mortgage-focused lender and a company with a varied set of stakeholders, including investors, regulators, bankers, rating agencies, et cetera, the brand name Sammaan, connotes and conveys what our business stands for and how it is done with respect to each of these stakeholders.

This is also the 25th year of our operations. The [indiscernible] intervals from which the company originates was incorporated in the year 2000. Our rebranding exercise around the new brand and our 25 years of operations is underway across various channels and our branches and points of presence. Slide 3 of the earnings update covers the entire rebranding outage.

I will now move on to the quarter's number. Would request all of you to refer to Slide 4 of our earnings update. The net worth of our company as of June end stood at INR 20,269. As most of you would be aware, the Final Call money were called and the window to pay up the call money opened on 8th of August, and will close on the 22nd of August 2024.

When this money is with the company, the net worth would rise by a further INR 2,462 crores. The AUM and loan book have resumed growth supported by retail disbursals. Net interest income has come in at INR 927 crores this quarter versus INR 562 crores quarter 1 of last year. Profit after tax for quarter 1 fiscal '25 was INR 327 crores versus INR 296 crores in quarter 1 fiscal '24. Gearing is a moderate 1.9x. Our target is to maintain it between 2x to 2.5x. Return on assets for the quarter for the overall book was 1.8% versus 1.7% in quarter 1 last year. Gross NPAs are at the lowest level in 16 quarters at 2.68% and net NPAs at 1.52%.

Now if you can please turn to Slide 5. As I mentioned in the previous quarter's results call, subsequent to the increase of the new certificate of registration from the RBI, the company will initiate a detailed business planning exercise, keeping in mind the feedback received from the RBI and various stakeholders. We have since then received the new certificate of registration and the feedback.

Through the course of planning for the right issue, and in our subsequent meetings with the large shareholders of the company as well as through the meetings with bondholders through the dollar bond issuance done by the company in March, our IPO stakeholders have given us feedback, cutting across various aspects of our business.

Our shareholders have provided us with the necessary capital buffers, which, in the short term, provide us liquidity. And over the medium term, very importantly, a practical tool to ensure the legacy book, which is the book sourced in fiscal '21 and prior. Our goal is to try and run this book down to single-digit percentage of AUM level by fiscal '27.

Some of our larger shareholders have also committed support to management in the form of either debt or equity capital, as and when required, and have asked the management to focus single-mindedly on the execution of business so as to be able to provide the mid-teen ROE to the business by fiscal '27, which is a target that we have taken upon ourselves.

Capital, both debt and equity capital, is extremely crucial for a nonbank finance company to kickstart operations, to scale them up, to make sure that one can continue to invest in the retail franchise. And I would like to thank multiple pools of capital, both debt and equity, which have worked with us. Some of them have participated in our various issuances. I'm sure in due course of time, most others would either be forming part of our lenders list or our GAAP register.

I would like to thank all of you and also thank our large shareholders who've given this assurance to the company. And now the management can therefore not worry about liquidity, et cetera, and fully focused on this execution and execution around the eight milestones that we had set up in quarter 1.

I would also like to inform all of our stakeholders is that along with quarter 2 fiscal '25 results, which is the next result, we will not only reiterate ARPU milestones for fiscal '27, provide you an update on these as I will shortly for quarter 1 and provide you an update for these for quarter 2.

We would also like to unveil a completely new corporate structure. We have, as part of the Board outcome gathered that we are merging six of our smaller subsidiaries. We've also lined up the identification process as of couple of few base businesses. And what we intent to, and for you as part of the corporate structure, is how we would continue to pursue our retail businesses as well as complement those by a bunch of fee-based businesses and what the overall structure would look like in light of the feedback received, both from RBI as well as our other stakeholders.

We had committed that hereon, starting from quarter 1, we would provide updates on eight aspects of our business. We've identified loans which we have sold prior to fiscal '22, which is up to fiscal '21, as what we would like to call legacy AUM. The distinction between the legacy AUM and the incremental AUM is large...

Can someone put this -- can everyone put yourself on mute, please?

The distinction between legacy AUM and the incremental AUM is that the incremental AUM is a very transparent book. It is a book that has been validated both by our credit team as well as the credit team of the purchasing bank or the financial institution on a case-by-case basis. To go back to the point of legacy book, the legacy book would be reduced to single-digit percentage of AUM by the end of fiscal '27.

If we look at our track record since fiscal '22 on the reduction of this book, this book has been reducing by an average INR 4,000 crores a quarter. To reduce this, we have estimated a very conservative INR 3,000 crores a quarter of collections, which we are fairly confident we should be able to achieve.

It is a dynamic world. Regulations change every day. There is geopolitical uncertainty. There are certain macro headwinds. But given the fact that the company, when itself was trying to establish a new business model, was able to collect very consistently across the last three financial years at a quarterly run rate, now with management's full focus on only this, one is fairly confident that the single-digit percentage of AUM by end of fiscal '27 for the legacy book would be achieved.

Since fiscal '22, the company has disbursed INR 35,195 crores, of which already INR 22,658 crores of disbursals have been played through co-lending assignment and securitization. As I mentioned earlier, this is a very transparent book, and a book that has been validated both by us and the purchasing partner on a case-by-case basis, including all loan application, documentation, et cetera. The collections are passing through a [ NetFlow ] account. And this is a pure and simple validation of the scale that we've already achieved in our asset-light model. The goal by fiscal '27 is to make sure that this book grows to at least INR 1 trillion.

Our incremental AUM, so we disbursed INR 35,195 crores, of which there has been run down. So our incremental AUM stands at INR 29,180 crores, of which INR 22,000 crores has been sold down. We have a runway in terms of manpower, distribution capacity to steadily ramp up the [ person ], and that's the target of 1 lakh crores or INR 1 trillion of retained AUM by fiscal '27. We can get there only by consistent disbursals.

Our quarterly disbursal as of quarter 1 stood at INR 3,115 crores and we shall be trying to ramp this up to INR 5,000 crores by the end of the current fiscal year, which is quarter 4 fiscal '25, we will be targeting a quarterly run rate of INR 5,000 crores. And if we keep growing that on a normal basis, that should add up to 1 lakh crore of retail AUM by fiscal '27.

On all of our other target parameters, such as incremental ROA, cost-to-income ratio and net NPA ratio, we have provided a clear glide path as well as an update on the incremental number that we are achieving already. And thus, we are firmly on track to achieve our target for fiscal '27.

Slide 6 contains an update on the asset-light reversal for quarter 1 fiscal '25. Under the asset-light model, we disbursed INR 2,058 crores, which is -- we did transactions of about INR 2,058 crores. Presently, the company has nine partnerships. We have had inked another partnership in quarter 1 and gotten a letter of approval in quarter 2 from another public sector bank. By the end of this quarter, we should be at about 10 functional partnerships. We also do sell down transactions with 16 banks and financial institutions. So in total, we'll have close to about 26 partners with whom we are doing business.

Moving on to the ALM and the liability part. The most important point of the liabilities part is the kind of diversity that we have been able to achieve in our incremental source of funds. If you refer to Slide 16, you would notice that we have, since April '23, which is the last five quarters, rates close to about INR 24,000 crores, of which, we pack practically each and every source of capital available to us.

We've raised equity of about INR 3,700 crores. We've done term borrowings from banks of nearly INR 5,000 crores. We've raised about INR 834 crores through retail issuance. We placed bonds on a private placement basis of nearly INR 3,000 crores, and co-lending has been going on at about INR 1,000 crores a month, almost INR 1,000 crores a month, and we have now reached INR 11,617 crores.

Aside from the asset-light model, the other big achievement for the company is the fact that we have created a pool of retail bondholders, who are on retail and high net worth bondholders, who are currently contributing as much as INR 3,000 crores to our resource pool, which is close to about a INR 1,000 crores per year. And we have now close to about 45,000 investors who are holding our bond. This is a side of the asset-light structure, a real franchise, very long-term durable debt capital, which the company is sourcing on a regular basis.

Coming back to the point of ALM. At the end of June '24, on balance sheet, we carried liquidity of approximately INR 7,600 crores. As we've been detailing our ALM, our detailed 10-year ALM is on Slide 18 to 22. At the end of the first year, we have a net surplus of [ INR 9,785 crores ].

As the company is now converted into an NBFC, Sammaan Capital is required to maintain a liquidity coverage ratio of 85%. Against this, our LCR, which is strictly high-quality liquid assets, as of June '24, stood at 211%. As defined by the reserve bank, even bank fixed deposits that we keep, which would be included in our actual liquidity, are excluded from high-quality liquid assets. We manage our ALM proactively. And towards this, the company has been historically voluntarily creating prefunded pools of money.

To meet the upcoming redemption of FCCBs in September '24, since Feb of '24, the company has been setting aside 25% of the payable money every quarter. This has now built up to 75% of the maturity proceeds. And these will be duly paid on whenever the put option is maturing.

So far, if you look at the last 10 years, the company from overseas investors, over 215 overseas investors, has borrowed $3.84 billion, of which it has already repaid $3.25 billion. In the last six years, it has repaid $2.15 billion. And I assume, as our ratings improve with this kind of a track record, overseas borrowings would continue to be a large pool of capital, and periodically, it would also tend towards the coming up of viable pool of capital.

Referring to Slide 9 of the earnings update on asset quality. As at the end of June '24, our gross NPA stood at [ 17.82 crores ], translating to [ 2.868% ]. Net NPA is at INR 1.52 crores. NPAs are at a stable level of 16 quarters.

As we've been sharing, the company carries imputed provisions of 11.6% of the loan book. The freshly-raised capital further provides a company with tactical capital. And all of these provisions and this tactical capital would be deployed over the next 8 to 12 quarters to make sure that by fiscal '27, we actually do run down in the most profitable, organic and systematic manner, the legacy AUM to become an insignificant portion of the overall AUM.

Having come through this six months detailed review process, before we were granted the fresh issuance -- fresh certificate of registration, and keeping in mind the current regulatory environment, where not only is one classified as an upper layer nonbank finance company, but one is witnessing that the regulator is expecting regulated entities to keep compliance, risk management, liquidity management, et cetera, at the center of the company.

I would like to reiterate our key areas of focus. The company would continue to imbibe and deeply imbibe a culture of compliance and risk management. The business plan that we are evolving and building on since fiscal '22. And I hope that now with all strategic steps being behind us, the business plan would be keeping in mind compliance and risk management at the core, while ensuring that it remains asset-light, the capital requirements are as less as possible and the fee income generation is as diverse as possible.

The company would continue to focus on a very benign sort of ALM, and our entire borrowing plan is working towards ensuring that in no months do we borrow more than a few hundred crores such that 3 or 5 or 7 years later, in that particular month, there is no stress.

Lastly, in order to remain competitive as well as to further the cause of compliance and risk management, we are making heavy investments in technology. We've also just onboarded an adviser who is part of the RBI core group towards IT innovation. Along with him, our technology team and our Board committee are emphasizing on upgradation of our technology backbone, making sure that our various risk management modules are as good as they get. And from our customer perspective, both our relationship management and as well as the user interface on our apps, et cetera, is world-class. We will continue to give you regular updates on this [indiscernible].

That was the update for the quarter. We are now open for questions, and thank you all for your support.

[Operator]

[Operator Instructions] The first question is from the line of [ Abraham Iyer ] from Deutsche Bank.

[Unknown Analyst]

Congrats on a good set of numbers. I just wanted to clarify a couple of points. One is on your NPA numbers, do you know what the differences between what's the flag on the financial statement that the NPA is about 3.4% gross and 2% net versus the presentation that's at 2.7% gross and 1.5% net?

[Gagan Banga, executive]

So the difference could be coming -- [ Abraham ], firstly, thanks to Deutsche Bank for supporting us continuously.

The difference could be coming from that we report NPA as a percentage of AUM. For us, that is very strategically important to make sure that on an overall AUM basis, the NPA is maintained.

I have shared in the past with various stakeholders that have moved as far as this business is concerned is the credit quality of our AUM. And therefore, we invest lots of reuse of paper of the earning update as well on just demonstrating the quality of the overall AUM.

So one difference could be that either -- it could be coming from the fact that we declared both stand-alone as and consolidated numbers. And in the earnings deck, we report NPAs as a percentage of AUM, whereas the earnings results filed with the stock exchanges are more statutory in nature. And I believe they would be following a protocol of own book or balance sheet or something like that.

So I'm sure my Investor Relations team can clarify that view if it still requires clarification.

[Unknown Analyst]

Understood. The second question is on your current incremental funding costs. Can I just inquire what -- if you say go to the loan market or the retail market at the moment, what would you see your current incremental cost of warranty? So -- and that [indiscernible] versus last quarter?

[Gagan Banga, executive]

Yes. So again, I'll go big picture down to specifics. We are strong believers is the fact that ultimately, cost of capital can only be achieved and bought to competitive levels if there is a free flow of capital.

As a company on the asset side, the strategy that one can follow is either we become yield hunters because we are running a certain cost of capital or we continue to do prime loans that we do with higher yield loans as the exception and not the room.

So when we look at our cost of capital, given our asset-light structure, we have to look at two different aspects. One is what is the cost of capital, which is coming to fund the 80% of what we are funding. That number today would be in the handle of 8.5%. And then there's a cost of capital for the residual 20% that we are funding and holding on our balance sheet. For the balance sheet borrowings, we would be borrowing at about 9.5% today.

Between last quarter and this quarter, there has been an insignificant inch up or down. My sense is from the transformation to an NBFC, to the name change and all of that. One is clearly witnessing post the capital raise, the flow of debt capital has become a lot more abundant, a lot more free. The quantum of debt capital on a daily basis that we have been able to raise is increasing by the passing day. So it's a very comforting situation in that sense. We are not going and over borrowing in any particular month. We are very mindful of the ALM.

So keeping all of that in mind, I would imagine that the cost of final material decline that you will see would start emanating in 6 to 12 months from now. At this point in time, we are more focused on the quality of capital. I mentioned, that we've raised INR 23,000-odd crores from a diverse set of lenders. That's more the focus on the company that the borrowing mix should be as diverse, it should be coming from more and more lenders versus being skewed towards one lender type or one lender in specific.

[Unknown Analyst]

Perfect. And just one last follow-up question. In terms of your -- as you mentioned, your quality of capital and the fact that the call moneys will be called and expected by at the end of this month, your investor base entries -- you're expecting basically this amount to be [indiscernible] as you mentioned during the call that your growth plans for this year?

[Gagan Banga, executive]

Yes. So I'm pretty confident, very supremely confident that by the 22nd of August, the call window is 8th August to 22nd of August. By the 22nd of August, the money should be in the escrow account, and then there is a process with bankers as to follow. So following that process, it will take another, whatever week or so for us to get the monies in our account. That's all procedural.

This, in my mind, is [indiscernible] that's already done. What one is now working towards is seeing the commitments through which have been made to the wider set of stakeholders, including the larger shareholders, the smaller investors through these calls.

We take on targets on these calls. We take on these targets with the right earnest. It's a dynamic world. The macro keeps changing, the micro keeps changing, the framework keeps changing. The endeavor of management is to take on the targets. And to keep it very objective, we've set these eight milestones.

We are not worrying about capital anymore. We are just concerned about how efficiently and quickly can we get and achieve those eight milestones and the goals that we have set for fiscal '27, and make it as organic as possible by achieving something and making progress on every aspect, every quarter.

[Operator]

The next question is from the line of Shekhar Singh from Excelsyor Advisor.

[Unknown Analyst]

Just wanted to understand this tactical rundown of legacy book, which is mentioned in the presentation multiple times. What exactly does it mean, and what is the quantum of this [indiscernible] that had been coming?

[Gagan Banga, executive]

Why do you assume [indiscernible]? Tactical rundown means a rundown, which is organic, which is well prepared for. We do it in a planned manner. We do it leveraging our provision. We do it leveraging our capital. And if there are any provisions like we have demonstrated in the past, that even if we classify loans as NPAs or do technical write-offs, we recover those monies.

So we have to do it in a time-bound organic efficient manner, and make sure that we are free from the legacy, and we are able to focus and build on the INR 1 lakh crores. So I don't think anyone needs to worry about the -- given the track record of the company on recovery, on how we will be able to run down the book -- remember, this team has, from a book of INR 1,20,000 crores, which was there as of September 2018, from that book already collected INR 1,50,000 crores of principal and interest, and use that to repay INR 90,000 crores to lenders.

So we know how to collect. We will continue to collect. We also have set a goal and whatever it takes to achieve that goal, we will achieve that goal. Whatever is the planning that needs to be done in terms of achieving that goal, as I've already said, we will present to you our detailed plan next quarter as to how quarter-on-quarter are we going about achieving that, keeping in mind that we also are a regulated entity. We have lenders who have covenants as well as rating agencies who evaluate us on various capital ratios.

[Unknown Analyst]

And secondly, sir, any indication on what the dividend can be in the years to come? Or the dividend policy of the company?

[Gagan Banga, executive]

The long-term dividend policy of the company would be to keep dividends between 30% and 40% of profits. We have to use our capital and our earnings tactically. We have said that the eight milestones that we have laid out are what we are going to be focusing on achieving. If we are well on the way and quarter-on-quarter, we are achieving those targets, historically, the company has taken a lot of pride in declaring dividends. We will happily declare 30% to 40% of our profits as dividends.

[Operator]

The next question is from the line of [ Abraham Iyer ], Deutsche Bank.

[Unknown Analyst]

Just one thing, on your AUM mix, obviously, the commercial real estate loans have come down to about 29% of the book. May I know what the split of this 29% is between project construction finance and your lease rental discounting?

[Gagan Banga, executive]

No. Commercial real estate will be a combination of construction, finance, lease and discounting, loan against property loans and everything. So whatever is not home back would be here. So don't take it as -- that's the technical definition of what CRE is.

Please, if you read yesterday's circular of RBI also, they further segregate CRE resi and CRE others. So don't go by that. I would suggest that all stakeholders, and we will also change this chart from next quarter, should focus on legacy book, which is all kinds of assets, home loans, loans against properties, commercial real estate loans, et cetera, all kind of assets, which are there pre-fiscal '22. And post of fiscal '22, we have been following the asset-light model structure. So it's that.

This is what you guys and everybody else, and this is how we are also internally working. There is one team which is working on rundown, and another, which is working on scaling up the asset-light model.

[Unknown Analyst]

Got it, sir. So hopefully, you get that breakup next time on. But can we get it now if I ask what could be the percentage of...

[Operator]

Iyer, may we please request you to come back in the queue for a follow-up question?

[Gagan Banga, executive]

You can get in touch with Ramnath, and he'll provide you.

[Operator]

The next question is from the line of Narayan [ Tiwedi ], Stock Insider.

[Unknown Analyst]

Hello, sir. Am I audible?

[Gagan Banga, executive]

Yes, Mr. [ Tiwedi ], you are audible.

[Unknown Analyst]

Sir, my question on asset-light model. Sir, if we can lend the customer by ourselves, so why we are choosing co-lending? And what strategic benefits it gives us to co-lend?

[Gagan Banga, executive]

The big strategic benefit is that you are outsourcing your ALM, you don't take on the borrowing on your balance sheet. As and when the customer pays, you pay back the bank or the partner, is not this that ever a situation can come that the customer, for any reason, is not paying, but the debt obligation of repayment is on you. And therefore, your entire business, will get disrupted and is that sort of a situation.

The second big advantage is that the cost of funds of the 80% which are bank's finances, is a lot lower than the cost at which it would be willing to lend to an NBFC directly. Given this, the blended yield becomes much lower and we are able to lend to a far more prime customer, a far more, let's say, higher on the credit bureau score versus somebody who we could have lend if we were lending solely from our balance sheet.

So given both the contribution of a very high-quality assets as well as no ALM risk and therefore, a very high-quality liability, co-lending is by far the most durable structure. And it's a structure which is in line with how the Western world also finances mortgages, where the originator and the warehouse are different.

I'll take -- I hope I've answered your question. I'll take this one last question and then we'll -- you can always send us an e-mail or something.

[Operator]

Thank you very much. With that, we have come to the close of the call. You can write into the company if you have any further questions.

With that, I would like to hand over the call to the management for closing comments.

[Gagan Banga, executive]

So thank you so much. Thank you for your support through the multiple round of capital risk, and welcome to Sammaan Capital. I look forward to speaking with you all of you again at the end of quarter 2. Thank you.

[Operator]

Thank you. On behalf of Investec, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.