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IndoStar Capital Finance Ltd
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Ladies and gentlemen, good day, and welcome to the Q4 and FY '24 Earnings Conference Call of IndoStar Capital Finance Limited. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Viral Sanklecha, from Orient Capital. Thank you, and over to you, sir.
Thank you, Manuja. Good afternoon, ladies and gentlemen. I welcome you for the Q4 and FY '24 earnings conference call of IndoStar Capital Finance. To discuss this quarter's performance, we have Mr. Karthikeyan Srinivasan, Chief Executive Officer; Mr. VinodKumar Panicker, Chief Financial Officer; Mr. Shreejit Menon, CEO of IndoStar Home Finance Private Limited; and Mr. Pushkar Joshi, CFO, IndoStar Home Finance Private Limited.
Before we proceed with this call, I would like to mention that some of the statements made in today's call may be forward-looking in nature and may involve risks and uncertainties. For more details, kindly refer to the investor presentation and other filings that can be found on the company's website.
Without further ado, I would like to hand over the call to the management for their opening remarks, and then we will open the floor for Q&A. Thank you, and over to you, Karthik sir.
Yes. Thank you. Good afternoon, everyone. I'm Karthikeyan Srinivasan, and I extend a warm welcome to all of you for joining our Q4 and FY '24 earnings call to discuss the financial performance of IndoStar Capital. I hope all of you had a chance to review our financial results and investor presentation, which are available on the stock exchanges and on our website. I'm deeply grateful to all of you for being part of our journey. .
Joining me today are Mr. Vinod Panicker, our CFO; Mr. Shreejit Menon, CEO of IndoStar Home Finance; and Mr. Pushkar Joshi, CFO of IndoStar Home Finance.
Before diving into our business update, let's touch upon the macroeconomic factors of the last quarter. The Indian economy has been on a positive trajectory, buoyed by increased government spending and growth in manufacturing and services. GST collections saw a notable 111.7% increase in FY '23/'24, while both manufacturing and services PMI remained in the growth territory.
Consumer demand has been robust driving growth across sectors. The RBI maintained its interest rate at 6.5%, with a focus on withdrawing support while slightly revising its increase in forecast.
Looking ahead, India's GDP growth for FY '25 has been revised upward to 6.8%, solidifying its position as one of the fastest-growing major economies globally.
The CV industry, which is a reflection of the economy, has witnessed a peak of the cycle and the rise of high tonnage vehicles, is poised for integration in '25/'26. The demand for M&HCVs rebounded last year, driven by predominantly infrastructure growth and replacement demand. Regulatory tightening and pre-buying strategies and anticipated price hikes underscore the industry caution and adaptation. Market dynamics are influenced by GST challenges for large fleet operators and a shift towards cost-efficient higher-tonnage vehicles.
Sector specific demand, especially from the infrastructure-related industry, drive growth in the concrete mixtures as well as the multi-axle tippers. Looking ahead, expectations for FY '25/'26 posting minimal growth without significant volume uptick.
Transitioning to the used car segment, consumer preferences lean towards used cars, reflecting rising aspirations and cost effectiveness. The market although historically unorganized is becoming more structured with around 70% of the used cars becoming organized. Dealer expansions into Tier 2 and Tier 3 cities and online platforms enhanced accessibility. However, pricing correction bloomed due to high demand and low supply.
At IndoStar, our primary focus has always been to enhance the lives of our customers, delivering world class service and sustainable value to all stakeholders. To uphold this commitment, we have embarked on various new initiatives aimed at bolstering our services and expanding our footprint.
In the current financial year, our goal is to introduce more products to address the entire customer life cycle comprehensively. This will enable us to secure funding at competitive rate, reducing dependency on the unorganized market players.
Leveraging technology has also instrumental in driving these efforts, and we anticipate phenomenal results moving forward. Furthermore, we are committed in our focus on analytics to ensure our model remains agile and scalable. Our approach blends the physical and digital touch points, catering to customers who are still adapting to evolving technologies.
In the last quarter, our company consolidated disbursement amounted to INR 1,767 crores, showing a significant 31% sequential growth. At the beginning of the year, we set out to increase our gross NPA numbers, and we have actively pursued this goal. With aggressive collections, excellent credit appraisal and control measures implemented, we have been able to reduce delinquencies, which have been aided by a vibrant economy.
We have been able to reduce the GNP on a consolidated basis to 4.1% in the standalone entity to 4.97%. In FY '24, we also successfully executed our strategies of moving towards retailization by selling a part of our corporate portfolio to an ARC, which is now standing at INR 388 crores only.
Additionally, we have reduced our high-ticket SME portfolio to INR 485 crores through strategic sales to an ARC, minimizing the risk and quantifying our financial position. These initiatives have also contributed to improvement in our NPA ratios. We have been strengthening our financial stability and enhancing our balance sheet quarter after quarter, and this momentum will continue going forward. We are expanding our retail operations with a particular emphasis on the used commercial vehicle segment focusing primarily on Tier 3 and Tier 4 markets.
We are dedicated to scaling up our operations to drive growth while maintaining asset quality. Our goal is to sustain progress in profitability by steadily increasing our targeted return on total assets.
Looking forward, we anticipate steady growth in the used vehicle segment, with the EMI of new vehicles exceeding lakh of rupees, used vehicle EMIs have become more affordable, leading to a significant rise in the demand for BS-IV vehicles.
The transition from BS-IV to BS-VI has further fueled the demand with a notable price differential of 25% to 30%. We anticipate the used commercial vehicle pricing to remain at similar level in FY '25/'26, particularly with the entry of BS-VI vehicles into the retail market.
The introduction of technologies and the introduction of Fastag and the removal of octroi and checkposts have expanded the life span of assets, consequently increasing the resale values. Moreover, there is a significant uptick in the resale of BS-VI vehicles due to improved technical performance. We expect robust growth in the used CV space with [ V entry ] of these new vehicles in the FY year '25/'26 driven by their ability to transport same volume of goods at lower tonnes per cost and reduced downtime.
Furthermore, the useful life of CVs has increased allowing NBFCs like us to fund up to 12-year-old vehicles.
Our ability to collect payments has remained exceptionally strong, reinforcing the resilience of our business model and trust that customers have in us. Our strategic direction remains unchanged, and we are actively exploring new products and strategies to enhance returns and generate additional income. Diversifying our product range will ensure we maintain our competitive advantage and constantly deliver to our stakeholders.
Now I'll hand over the call to Mr. Vinod Panicker to present the financial performance.
Good afternoon, everybody. Thank you, Karthikeyan. I sincerely appreciate your presence at this conference call today. I intend to take you through the financial performance for the quarter ended and the full year of FY '24.
On a consolidated basis, we generated total revenue of INR 474 crores in the fourth quarter, as against INR 285 crores in the same quarter last year and INR 306 crores in the immediately preceding quarter. The operating expenses incurred were at about INR 139 crores in the fourth quarter as against INR 66 crores in the same quarter last year and INR 119 crores in the immediately preceding quarter.
The disbursements were at INR 1,767 crores, as highlighted by Karthik in the -- for the fourth quarter, as against INR 898 crores at the same time last year and INR 1,345 crores in the immediately preceding quarter.
At the consolidated level, the AUM was at about INR 8,763 crores as of March '24, as against INR 7,813 crores in March '23. And it was at about INR 8,037 crores as of December '23. On a standalone basis, we have generated a total revenue of INR 391 crores for the fourth quarter as against INR 236 crores in the same quarter last year and INR 238 crores in the immediately preceding quarter. The operating expenses were at INR 112 crores for the fourth quarter as against INR 45 crores for the fourth quarter last year and INR 91 crores immediately preceding quarter. This INR 45 crores in the same quarter last year was net of a INR 50 crore reversal of ESOP, which we had mentioned at that point of time.
The disbursements were at INR 1,465 crores for the standalone entity for the fourth quarter as against INR 750 crores in the same quarter last year and INR 1,121 crores in the immediately preceding quarter. Against the same quarter last year, the growth has been at almost doubled or more than doubled.
Our interest margin for the quarter was at about 5.4%. And for the full year, we were at about 5.5%. The revenues of the standalone includes a onetime gain of about INR 96.6 crores on account of sale of SRs in the fourth quarter, the proceeds of which was utilized for strengthening the balance sheet by creating additional provision on the loan book and SRs. The revenue also has a new component, which is revenue from cross-sell of insurance for which we have got a corporate agency license in February 2024.
We are confident that this will help us generate significant income in the quarters and the years to come. On a full year basis, the overall revenue at INR 1,104 crores was higher than the INR 968 crores in the immediately -- in the last -- compared to the last year. The disbursement was that on an overall basis was INR 4,560 crores against INR 1,612 crores, a growth of about 183%.
The AUM at INR 6,493 crores as of March '24 was after its sale -- after sales of the corporate book, which Karthik shared, and the SME book, both the delinquent one and also the standard book. The delinquent one, overall was at about INR 1,175 crores and separately in SME standard portfolio of about INR 143 crores was sold to another NBFC. All these steps were taken to ensure that the balance sheet becomes clean, the business [ fields ] go up and we get more and more retailized as we go forward.
The finance cost for the quarter at INR 161.9 crores was against INR 134 crores in the same quarter last year and INR 145 crores in the immediately preceding quarter.
Turning to the operating expenses, it stood at about INR 112.3 crores in Q4 FY '24, as against INR 45.8 crores in Q4 FY '23 and INR 91.2 crores in Q3 FY '24. As I've mentioned earlier, the Q4 FY '23 caused, had a reversal of INR 50.5 crores, which was a onetime impact. On a full year basis, operating cost was at about INR 389 crores versus the INR 327 crores that we reported in FY '23.
The operating expenses are seeing some increases mainly on account of the company ramping up the number of branches and also the number of employees to drive the growth in the CV and the HFC business. Our profit after tax for the fourth quarter as a standalone profit stood at INR 19.6 crore and on full year basis stood at about INR 71.6 crores.
We achieved a total collection of INR [ 700 ] crores for the current quarter as against INR 632 crores for the immediately preceding quarter. Our collection efficiency, including overdue, reached 101% in the current quarter, showcasing our commitment to high credit standards and high operational efficiencies.
Our focus on portfolio quality has led to a decrease in the Gross Stage 3 assets to 4.97% at the end of Q4 FY '24. Furthermore, our Net Stage 3 has gone down to 2.1%. Again, it is demonstrating the effectiveness of our credit risk management strategy, an improvement from 2.8% in December '23. The reduction in the GNPA number is on account of the robust collections that we have seen on the loan book and the aggressive settlements that we have done on the old book, that is the book which was generated prior to April '22. This will ensure that the lower stress book will also lead to better, I would say, funding in the coming quarters. The credit cost stood at about INR 102 crores, which was mainly on account of additional provisions that we've created for SR and on the loan book.
In terms of funding, we have made a steady progress in improving the liquidity position by raising the incremental funding in the fourth quarter by about INR 1,609 crores. As of March 31, '24, we maintained a cash and cash equivalent of about INR 836 crores. The change in the mix over the last 2 quarters has helped us reduce the cost significantly as we movend from an incremental borrowing cost of 12.7% in Q2 FY '24 to 10.6% in Q3 and 10.9% in Q4. With the improved GNPA numbers that we mentioned above, we are confident that the cost will continue to go down further.
Our capital adequacy of 28.9% and the debt equity ratio of 2.3 gives the ample headroom for further future growth. And we are confident in driving profitable growth in the quarters and years to come. Our assets under management of INR 6,493 crores as compared to INR 5,991 crores of -- in the immediately preceding quarter shows that there is an increase. The increased disbursement of INR 1,465 crores versus the INR 1,121 crores of the preceding quarter can be attributed to our strong focus on retail segment.
Retailization will continue to yield favorable results, and we are confident of sustaining profitable growth in the quarters to come. In the Vehicle Finance segment, our AUM at the end of the fourth quarter stood at INR 5,594 crores, marking a 15% increase over the immediately preceding quarter. As previously mentioned, our emphasis remains on growing the used CV segment, and we are experiencing significant growth in the AUM, which we expect to continue.
Now I would like to invite my colleague, Shreejit Menon, to provide further insights into our housing finance business, which is another key area, a key focus area of our business. Over to you, Shreejit.
Thank you, Vinod. Good afternoon, ladies and gentlemen. I would like to start by taking you through the key highlights that illustrate our accomplishments during the quarter and year ended March 31, 2024.
The financial year gone by has been a period of remarkable growth for us. We are delighted to report that we witnessed strong momentum across most of our business matrices. During the quarter 4, we reached an important milestone by achieving a monthly disbursal run rate of INR 100 crores for the first time. The total disbursal for Q4 FY '24 amounted to INR 301 crore, contributing to a total disbursal -- disbursement of INR 937 crores for the full financial year. Our assets under management reached INR 2,269 crores, representing a robust growth of 40% year-on-year and 11% over Q3 FY '24.
Our loan book stood at INR 1,817 crores. Our customer base now stands at more than 28,000, depicting the granular nature of our assets with an average ticket size of INR 9 lakhs. Tamil Nadu, AP, Telangana and Maharashtra continue to remain our core geographies, accounting for more than 85% of our portfolio.
To enhance operational efficiency and embrace digital transformation, we undertook the rationalization of our branch structure with introduction of a 3-tiered, full-fledged, integrated and digital branch structure. This has resulted in a more efficient branch operations from both volume and cost perspective. We converted 10 of our physical branches into digital locations during last quarter. Hence, at the end of the financial year, our total branch count now stands at 124.
I'm also pleased to inform that at IndoStar Home Finance, we've always believed in maintaining excellent asset quality, and that remains a cornerstone of our operations. Our 90-plus days past due portfolio now stands at 0.83%, and our 1-plus DPD stood at 3.02%.
Furthermore, our GNPA decreased to 1.13% as of March 31, '24, down by 0.12% compared to the previous year.
We are proud to announce the achievement of a significant milestone in our digital journey. In Q4, we completed the transition to 100% digital and paperless loan journey, culminating the journey that we embarked upon from Q2 last year. With the implementation of the automated loan kit, our entire loan process is now paperless, making it hassle free from a customer experience perspective.
On the liability side, we successfully raised INR 1,150 crores during the financial year across our various funding channels. We added 9 new lenders, [ stock ] investors into our borrowing program. We are pleased to report a strong liquidity position with INR 220 crores in cash on the balance sheet and an additional INR 165 crores of undrawn sanctions.
Now moving on to our financial performance. Our total income stood at INR 290 crores with interest income at INR 182 crores compared to INR 209 crores and INR 144 crores, respectively, in the previous year. Pre-provision operating profit increased to INR 63 crores from INR 51 crores last year. Profit after tax rose to INR 44 crores from INR 38 crores last year. Our return on assets stood at 2.9%. We maintain a strong capital adequacy of 57.4% and a debt-to-equity ratio of 2.6x.
In conclusion, our commitment to innovation, efficiency and maintaining high asset quality continue to drive our success. Looking ahead, we remain focused on executing our strategic initiatives to further enhance operational excellence, expand our customer base and explore opportunities for growth. We are indeed optimistic about the future and remain dedicated to delivering sustained value to our investors and stakeholders.
Thank you once again for your continued support and participation. With this, I hand over the call to the moderator for the Q&A session.
[Operator Instructions] The first question is from the line of Kunal Khudania from DSP Asset Managers.
This is Vivek Ramakrishnan. I have 3 questions. One is on this -- on your sale, where your security receipts to ARCs. So I wanted to know how much was cash because you mentioned INR 143 crores in cash to an NBFC [ via assignment ]. And how much was in terms of security receipts? And whether in any of the security receipts in the past, either in the corporate or the SME portfolio, you started getting recoveries. That's question #1.
Question #2 is that if I see the liability profile, the bank loans have not increased significantly. It still remains a small percentage. And that somehow seems to be linked to your credit ratings, so there's still a AA-, with a negative outlook from one of the rating agencies. So please comment on that.
And lastly, there was this ICICI CV portfolio that was causing some volatility in GNPA, whether that issue has been completely settled. Those are my questions.
Vivek, Vinod, here. I will possibly try and address the first 2 points, and I will request Karthikeyan to look at the or respond on the third point.
There were 2 separate transactions. One was the sale of an SR. Now that was for a total of INR 100 crores, of which INR 60 crores was in the form of cash, INR 40 crores was in the form of SRs. On which we have made a provision separately in our books.
On the INR 143 crores, which was mentioned about, that is a [ DA ] transaction which is in a [ 100:0 ] ratio, wherein, we have sold the SME portfolio to another NBFC. And the entire amount, the INR 143 crores, has come to us by way of cash.
You mentioned about the liability profile. Yes, definitely, the banks have not come to us in a full way. But then we are pretty confident that based on the number of proposals which are there in the pipeline towards which are in the final stages. We are confident that in this quarter, the bank proposals will come.
Definitely, the negative outlook of CRISIL is an issue. But then I thought that bank -- having some amount of discomfort basis the GNPA that we were reporting. Now that we are sub-5% and NNPA at very close to 2%. We are pretty confident that we will be able to give that additional comfort to the lenders, including the banks.
Vivek, Karthik here. On the ICICI fees, we have only INR 114 crore book remaining. We have tightened our -- last time I explained, we have strengthened our collection processes. Now our monitoring has started from the 1 DPD bucket. So the amount of flow that is coming into us have quite reduced. And now these -- whatever is remaining in the books of ICICI is a quite mature book. So we don't see any challenges going forward. It should keep reducing.
The quarter, probably a INR 10 crore increment should come, not beyond that on the GNPA front. That's why the ICICI portfolio. Overall, we are very comfortable with the collection. Last quarter, in ICICI, we were having a collection of Stage 1 of around 87%. So we don't see any major challenges coming in that book.
Excellent, sir. Sir Just 1 balance question was in terms of the security receipts from the past in terms of corporate portfolio or the -- whether there any settlements expected shortly.
Yes, I will split it into 3. One is the CV portfolio. That is collections, which were coming, and they continue to come. So that's the CV portfolio, both of them are pretty old. One was done in '20, other in '21.
On the corporate portfolio, which is the largest chunk, which was at about INR 686 crores against which we had made a provisioning earlier of 15%, subsequently. Now we have made a provision of 20%. On that, we have started getting collections. I think we have overall reduced the SR from about INR 686 crores to about INR 644 crores. So collections are coming in.
And we have, actually, in one of the cases, we actually -- I mean the ARC has actually signed the agreement with one of the borrower to actually collect the entire amount by the end of the current financial year, by February '25. So we are seeing a lot of collections happening on their front. The SME that's the third piece is something which actually happened only in December. We expect the collections or the redemption of those SRs to start only from maybe January of 2025.
The next question is from the line of Shubhranshu Mishra from PhillipCapital.
There were 3 questions. The first one is on our recent fundraise. We did QIP despite being adequately capitalized. So what was the need of the QIP? And where do we think we're going to deploy the incremental monies that we have got? That's the first.
Second is on the SR. Do we expect any kind of harmonization of regulations around SR and with banks. And would we have to provide for the SRs? Or have we already provided for the SRs that we are carrying? That's the second.
And third, we spoke about used vehicle. So what are the specific applications in terms of SRTOs and slightly larger fleet operators that we cater to. And what would be a no-go territory for us in terms of SRTO? Any specific applications like maybe alcohol industry or something?
Yes, I'll start off with the third question, the industry question. See, we are predominantly funding the market load operators who depend on agri good movement. India is the largest agrarian country where the movement of agriculture forms the most important transportation across. Plus there is a lot of the FCI goods that gets moved.
With the government of India providing free grains to most of the people who are below the poverty line. Trucks become most important aspect of distribution between hub to hub. And the products, which we fund, like the light commercial vehicles or the small commercial vehicle, take it to the last mile. So that's the most important territory which we are focusing on. We are not in the fleet operator segment. So we hardly do any deals on the fleet operator segment.
Our pure profiles are retail FTU, who are doing only retail operations or into open goods transportation. A few of the operators will also be in the local infrastructure segment, say, like somebody who is attaching tipper to the local road contractor, who is doing some activity. That's the major core focus area of us.
In terms of logo, typically, these kind of operators don't get contract from alcohol or other things. So we don't see any major challenge in terms of industry or anything coming here. There are challenges for these operators around, these pollution that happens in Delhi around October, November. So during that period, there are markets of North India where all the trucks get banned. That's not a specific issue to my borrower. That's an industry issue. So that's on the third question.
On the first and second question, Shubhranshu, actually, I will do the first question. It was not a QIP. It was a preferential allotment to one of the investors that before entry there was investment, which they wanted to do. And name like Florintree, when they want to invest in the company, when they take interest in the country, we felt that it's worth getting such a big name into the -- into the company as a shareholder. Definitely, there are a lot of things that we can learn from them. That's one thing.
So when they were to do the investment, Brookfield that if somebody else comes in, their stake goes below the 56.2% that they were currently holding. So they also came in. Definitely, while we are adequately capitalized, we believe that this additional capital will give a lot of comfort to the lenders. And today, our intention is to ensure that the lenders are comfortable with whatever we're doing. And definitely, Brookfield by putting in that additional amount, they are showing the commitment that they have for the entity.
Number two, the new investor coming in, he actually gives a lot of comfort to the lenders and other inventors also because it shows that people who have looked at the company, did their due diligence and then invested into the company. That gives us a lot of comfort. That's on the first point.
Second point, you mentioned specifically about SR. In my previous response to Vivek, I think I had mentioned about the collection figures the SRs have started, and we have been able to recover funds -- I mean the monies in the -- against the CV, as part of the corporate loan.
In the -- your question on whether we are adequately provisioned, we believe that we are adequately provisioned. And like I mentioned, possibly in my initial commentary, that the gain that we got, the onetime gain that we got, we actually used it for creating additional provisioning. We created about additional INR 75 crores.
And today, the total provisioning on SR on an overall basis is at about 31%, which we believe is significant.
Just one last question, sir, actually, is a follow-up question. Basically, if I have to infer from a SRTO categorization, we don't have a negative category of customer Pin Code or geography at all. We would just about lend to anyone. Is that a fair assessment?
No. I'm not saying that -- I didn't say that -- sorry, I said like we typically fund market load operators. There are geographies, there are pin codes where we don't fund all profiles. So that's the part of the credit appraisal process depending on our past delinquencies, depending on the kind of vehicles which will not sell there. We have a model. Currently, suppose a particular location, a particular vehicle is going to give me high delinquencies. We are not going to fund there at all.
So those are all internal models, which typically, we use for negotiating LCV with the customer, ensuring that the bad book doesn't come to us. What we don't do is specialize the asset. Some SRTO coming in for, specialized, say somebody wants to fund a bullet tanker. I may not fund. But if he comes from a market load operator in a good geography, on the LTV, which I prefer, I surely will fund.
The next question is from the line of Saptarshee Chatterjee from Groww AMC.
My first question is on the, it was already mentioned that overall provision is around 31%. But if you can give bifurcation across books of CV, corporate and SME. But is the total amount outstanding and is the provision amount against those?
Saptarshee, thanks for being on the call. On CV, the provisioning is at about 60%. And on SME, SME and the corporate, it is at about 20%. And the last transaction that we did, which is, again, a CV, there's a -- it's a recent transaction, so there's a provisioning, its at about 30%.
Yes, understood. And -- but do you expect that on the quarters, like as we proceed on next year, there will be evaluation of the SR book, if there can be volatility in terms of further provisioning in the SR base?
We don't see for any additional provisioning. But then, here that may also mentioned -- can you -- I mentioned that there are collections coming from the SR. And therefore, we don't see any challenges going forward. We may not need to make any additional provision.
Understood. Very helpful. My last question is that you have mentioned, we are also focused on new products that it will be coming in the coming years. Can you somewhat elaborate on those that what are the new products? And on the SME part, like you're mentioning that we will be launching SME in a new avatar, and like what are the capabilities that you have built against that front?
See, on the -- thanks, Saptarshee. See on the new products, we ally the products of CV like tire, the kind of maintenance funding that is required. These are all in the pipeline because we have a large base of customers who are doing well, who are paying me on time. So those kind of customers will start our tire financing.
The new line of business on the SME, we are in the planning stages. We should launch it shortly. It will be a loan against property at the rural markets, tier 3 and tier 4 markets at a lower ticket size. Probably by the next call, I'll give you a detailed thing on what is that we have brought into the market.
The next question is from the line of Devansh from Safe Enterprises.
Sir, can you elaborate more on the liability profile? Average customer borrowing was of individual borrowers. May I know, how do you see that mix going forward? Because you are confident in bank borrowing significantly this quarter, which hasn't translated yet. So also you can share your outlook on the same.
Can you repeat because the voice was not very clear, if you don't mind.
Yes. Yes. Sir, on borrowing side, can you elaborate on the cost of borrowing of CP [ ancillary ] banks? And how do you see the mix shaping up over the next 1 to 2 years?
See, over the last couple of quarters, we have changed our mix. We have brought in PTC and commercial papers. And therefore, our overall cost of funds has actually, the incremental borrowing cost has gone down. Like I mentioned in my initial remarks that from 12.7% in Q2, which was incremental borrowing costs, it went down to 10.6% and 10.9% in the last 2 quarters.
We are expecting -- I also mentioned that with the company starting to do very well, there is NPA is going down significantly. We are expecting many more banks to come to us. We are expecting many -- other lenders to come to us. And therefore, we expect the overall cost to go down. We are expecting some amount of, I would say, funding from banks in the current quarter and in the quarters going forward.
We expect the cost to come down. I would not want to possibly give a number to it. But then definitely, what you have seen in the last couple of quarters, where the incremental costs have gone down, that will continue to keep going down. We, too, maybe kickstart the business at the beginning of the last FI '23/'24. We actually borrowed from -- through -- in the form of NCDs. And that time banks had not come to us. So our role was to ensure that -- now our job was to ensure that we get funds and we kickstart the business -- to run the business. And therefore, now whatever we wanted to achieve, we have achieved. And therefore, now we feel that the banks will come.
The PSU banks, normally, they insist on 2 years of profitability. Now that we have done 8 quarters work across showing profitability. Last 2 years has been profitable. We are confident that banks and many more banks will actually come, too.
Okay. And as in Q4, what is the cost of borrowing for banks each year [ NCD ] on a blended basis for...
On a blended basis, the overall cost of borrowing was at about 11.4%, down from about 11.7% in the immediately preceding quarter.
So Sir, what I'm trying to ask is like for the bank exposure, what was the cost of borrowing for NCD, what is the cost for borrowing for CPs what are the cost of borrowing. On marginal basis, what are the cost of borrowing for individuals?
Devansh, I think we can possibly get on to a call separately, where we can possibly get into the nitty-gritty.
[Operator Instructions] The next question is from the line of Rikesh Parikh from Rockstud Capital LLP.
Sir, just a couple of questions. One is what is the amount of security receipts we hold on our books. And I understand you have 31% provision. So any collections or recovery in this quarter from that book?
Yes. I think, Rikesh, I think I had answered this against a couple of queries earlier also. But maybe I will repeat. The total book of SR is something like INR 1,175 crores, on which we have a 31% provisioning. I also mentioned about collections happening in the CV SRs and also against the corporate loan as well.
I mentioned that SME SR collection could possibly start from January '25. Hello, Rikesh?
Okay. Yes. Got it. Second is on our number of branches, I've seen that we have now removed any common branches, we have separated branches altogether. One thing what I found is in the home loan side, the number of employees have reduced while the branches have increased. So anything we need to look into it as such?
No, actually, on the home loan side, the number of branches have come down. We started the year with [ 134 ] branches, and now it is 124. So we have actually reduced branches. We have not increased branches.
Okay. I might have looked at quarter-on-quarter, so would have come to that. Okay. And yes. Lastly, on the -- our gross stage 1 and 2, if I refer to Slide #15, as such. So we are seeing some amount of increase happening on the gross stage 1 and 2 although gross stage 3 is well under control. So anything to look into it over there?
Pardon, gross stage 1 and 2?
The absolute figure are increasing the quarterly wise. It's INR 5,985 crores gross stage 1 and 2. So as of Q4...
It will be positive phenomenon only. Because the portfolio is being able to -- my expense has come down. I'm able to -- I'm underwriting better credit because I have -- we have induced norms around what should be the CIBIL score that should come in. Overall, the market is performing well. So my gross Stage 1 is moving up. So many of the customers who were in Stage 3 also got upgraded. That's why the gross stage 1 and stage 2 are moving up.
And we expect this line to improve going forward? So I just wanted to that aspect.
Yes, we are pushing for a positive gross Stage 1 and Stage 2 number.
The next question is from the line of Deepak Poddar from Sapphire Capital.
Yes. Am I audible, sir?
Yes. You are, Deepak.
Sir, on the OpEx side, I just wanted to have some understanding. I think this quarter, I think our OpEx was close to about INR 140 crores. So how do we see the OpEx growth in FY '25?
It would be a normal one because I don't think it has gone up significantly versus the last year. Because, on a full year basis, 1/4.
So on a full year basis, your OpEx is up from INR 400 crores to around INR 490 crores amount.
You are referring to the consolidated?
Absolutely.
Give me a second. Yes. For over INR 401 crores to INR 492 crores. See, I think in my initial calls, either initial commentary, I think, I had mentioned that there was a onetime ESOP reversal last year. Now that was some -- on a full year basis, it was INR 45 crores. So if you add that, we are then talking about close to INR 450 crores. And then the growth is about 10%.
Okay. No, no. But this quarter, it was about INR 140 crores, right? So is that the base one can look at going forward? Or any FY '25, as we see?
Yes. The base would be broadly that or it will -- you will definitely see some bit of increase because both the CV business and the HFC business they are increasing insights. And therefore, there is a need to ensure that the branches go up, the number of employees go up. So all those things will definitely mean that the OpEx will go up. May not go up in the same ratio as revenues, which will grow much faster.
So maybe close to about INR 600 crores, one can expect, on an absolute level?
Yes. You can say INR 550 crores to INR 600 crores...
INR 550 crore to INR 600 crore. Fair enough. And my second question revolves around your growth in ROA that we see for FY '25. So any kind of light you can throw on that?
Like I think we have said 2 things maybe over the last 5 quarters that we will do INR 4,400 crores of disbursement. Now I'm talking about the standalone business, will do as a INR 4,400 crores. And we'll do INR 6,000 crores in the next year. INR 4,400 crores is what we have done. We'll do about [ INR 6,000 crores ].
Now that, most of the one-offs are away, I believe that -- we believe that ROA will start inching up. So we are pretty confident of the ROA going to -- improving significantly from the 0.9% that we have reported in the current quarter and on a full year basis.
So I think earlier, we have been speaking about 2% to 2.5% kind of ROA, right? But that looks difficult, correct? I mean, for FY '25?
2%, 2.5% could be more of the -- 2% would be more of a '26 phenomena.
Correct.
'25, I believe that we would be happy if we're in the 1.3% to 1.6% range. See, one thing that we need to understand is RBI, had actually come up with a circular basis which, the interest costs did go up. And that has actually led to some bit of increase in costs, correct? Number one.
Number two is we also mentioned about the ARC transactions that we did, which reduced the income. So that also has an impact on the -- all these have an impact on the ROA. So because of that, the ROA looks to be slightly subdued, but then their numbers which are firm and which will continue to improve as we go forward.
Understood. And on the AUM part, I mean, what is the AUM growth we are looking at? I mean, I think on a consol level, I think we were at about INR 8,700 crores, INR 8,800 crores, right, FY '24. So what we may look at in FY '25?
We believe that we should be in the -- that housing finance should do about INR 3,000 should be their book. And in case of the standalone, we should be in the range of about INR 7,500 crores -- INR 8,500 crore to INR 9,000 crore.
So around 11,500 to 12,000, we might target, right?
Yes, 11.5% to 12%. .
11.5% to 12%.
Next question is from the line of Ketan Athavale from RoboCapital.
Sir, I wanted the guidance figure for FY '26 on our AUM, and our guidances on [ NSE ] cost to income and credit costs for the next 2 years? .
Ketan, thanks for being on the call. We have said that maybe '26, we will do a disbursement of about INR 7,500 crores in the standalone. And on an overall basis of our INR 10,500 crores. We may not want to currently give any guidance for any other numbers in relation to FY '26. We would want to see how the year pans out before we start giving any guidance.
Okay. But can you give the figures for FY '25?
No. I think I mentioned about the ROA, I said that it would be in the 1.3% to 1.6% kind of range for the current year. However, that is FY '25.
The next question is from the line of [ Parikshit Kabra ] from [ Pkeday Advisors LLP ].
I was hoping for the standalone, the credit cost that you have shown of INR 102 crores, can you break it down between business as usual and your legacy book?
The INR 102 crores contains the extra provision which we have on the SRs also. So INR 102 crores is a combination of 2 -- largely a combination of 2 numbers. Others are, I would say, business as usual. We mentioned about a onetime income gain that we got and with us that was utilized for creating provisioning for the security receipt. So that INR 75 crores. On a conservative basis, we made an additional provision of roughly INR 26 crores on the corporate loan book. So that is about INR 101 crores. The others would be some pluses and some minuses. But then broadly, that's the number for the call.
Got it. So whatever is remaining is for the business as usual, the ongoing loans or loan book?
Yes. Some reversals happened, some additional provision happens. Then a huge disbursement, INR 1,465 crores of disbursement. So that will take away...
Stage 1 provision is also there.
You need to create provision. So that continues process.
Got it. So now that we still have about INR 500 crores SME loan book and a INR 400 crore corporate loan book, should we assume that now all overhangs have been accounted for or at a later point, we might still want to increase the provisions?
See, corporate is all real estate. We have appraised assessed and felt like there is no further need that will be required. So that's on the profit. The SME book, most of it is the DA PTC, which is there, which I'm holding in my balance sheet. So we are adequately provided there. So we don't feel any extra that is coming in.
The INR 485 crores or close to INR 500 crores of SME. Out of that own book, I would say, which is my own is INR 46 crores. On the book, which is including the PTC, it is a total of INR 316 crores. So the balance of about INR 170-odd crores is the DA, which we report as a part of the AUM, but strictly not a part of my book and on which we have no liability as such.
Except for correction.
Got it. And I'm sorry, you answered this question just now. But did you give a guidance for ROA for FY '25, or ROE or ROA, either of them?
I mentioned about we are full of 1.3% to 1.6% ROA.
For FY '25, right?
Yes, correct.
The next question is from the line of Anant Mundra from Mytemple Capital.
I just had one question. Sir, what is our collection efficiency, excluding the overdue accounts, excluding the overdue expense.
EMI-to-EMI collections on the CD book is at around 93%. We were probably 2 years back, if you had attended the call, we were at around 84%. Now it has moved up to 93%. That's because we have changed the processes. I think the last call, we explained that the detailed process around how we have improved our EMI-to-EMI collection, we are working on so that this can get improved further.
Sir what is the number that we'll be comfortable with or we're targeting to get to on the collection efficiency?
The [ profiles ] which we are dealing, 92 is a good number, but we always keep pushing for a higher fee.
Okay. Okay. And sir, what would this number be for the housing finance subsidiary?
So on a EMI-to-EMI basis, it will be about 95%. And including overdues, we would be about 99%.
In the interest of time, that will be the last question. I would now like to hand the conference over to Mr. Viral Sanklecha from Orient Capital.
[ I thank ] the management for taking their time out for this conference call today and also thanks to all the participants. If you have any query, please feel free to contact us. We are Orient Capital, Investor Relations Advisers to IndoStar Capital Finance Limited. Thank you so much.
On behalf of IndoStar Capital Finance Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.