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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the Aptus Value Housing Q4 FY '23 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions] Please note that this conference is being recorded.I now hand the conference over to Ms. Mona Khetan from Dolat Capital. Thank you, and over to you, ma'am.
Thank you, Melissa. Good evening, everyone, and welcome to the earnings conference call of Aptus Value Housing Finance Limited to discuss its Q4 FY '23 and yearly performance. We have with us the senior management from Aptus to share the industry and business update.I would now like to hand over to Mr. Anandan for his opening comments, post which we can open the floor for Q&A. Thank you, and over to you, sir.
Thank you, Mona. Good afternoon to all of you, ladies and gentlemen, I am Anandan, Executive Chairman of the company. I welcome you all to the conference call to discuss the financial performance for the quarter ended and year ended March '23. I have with me Mr. P. Balaji, Managing Director; Mr. C.T. Manoharan, CBO, Chief Business Officer; and Mr. John Vijayan, our CFO.The results and the investor presentations are available on the stock exchanges as well as our company website. I hope everyone had a chance to look at it. Aptus, as you're aware, believes in growth with due importance in the quality of loan books and with good financial metrics. Very happy to [ report ] that Aptus had a healthy and good financial year FY '23, as reflected in our financial strong results. Sharp business focus, deep penetration in served markets, customer centricity have enabled the company to achieve good growth. Enhanced digital adoption in customer sourcing, underwriting, collection and risk management also supported the business growth well.Total disbursements for the year stood at INR2,394 crores, up by 46%. And our AUM March '23, about INR6,738 crores, healthy growth of over 30% Y-o-Y. With focused collection efforts, our collection efficiency have stabilized at over 100%, resulting in reduction in our soft market outstanding as well as for overdues, the NPAs in particular. Spreads for the year was good at 14.3%, a percentage increase of 65 basis points over FY '22 despite, as you know, significant headwinds in interest rates.We have registered a consistent ROA of 8.44% and our ROE has gone up to 16.34%, up by 189 basis points Y-o-Y. This, as you must have observed, is one of the best in the industry. We've also declared a total interim dividend of INR4 per share, the face value per share is INR2 and the dividend declared is INR4 interim dividend. Our net worth stands at about INR3,300 crores, which indicates robust capital adequacy.I'm also happy to say that the Board has elevated Mr. P. Balaji as the Managing Director of the company. Further, Mr. Manoharan, who was in charge of the business development has been elevated to the position of Chief Business Officer. And Mr. John, who is currently our Chief Risk Officer, has been promoted as the Chief Financial Officer of the company -- CFO of the company. Also, the organization further strengthened senior middle management in the second level in sales, credit, technical and finance functions to pursue an extra level of our growth.I would now hand over the line to Mr. P. Balaji, our Managing Director of the company, thank you.
Thank you, sir. Good afternoon, friends. As on 31 March, '23, the total live customers were over 1,07,000, which represented a growth of 28% year-on-year. The total number of branches as on 31 March were at 231. We had added 23 branches in FY '23 and employee count was at 2,405. Major performance highlights were: AUM grew by 30% year-on-year to INR6,738 crores; disbursements increased by 46% year-on-year to INR2,394 crores; spread was at 14.31%, 0.65% increase year-on-year; OpEx to assets were at 2.75%; PAT was at INR503 crores, representing a growth of 36% year-on-year; ROA and ROE was at 8.44% and 16.34%.Now as regard to the asset quality, with focused collection efforts, 30+ DPD improved to 5.9% in March '23. This was 9.91% as of March '22. Coupled with this, there is an improvement in our GNPA, 1.15% from 1.44% as of December '22. Net NPA was at 0.86%. Provision coverage maintained at 1.06% as on 31 March, up by -- up from 0.8% in March '22. We are carrying a total provision of INR71 crores and this when computed as a percentage of NPA works out to a coverage of 90%. Outstanding restructuring book were at nominal 0.7%, and the behavior of this book is on par with our normal book.As regards to borrowings, we have well-diversified borrowing with good support from NHB. Out of the total borrowings, 60% is from banks, 26% from NHB, 10% from DFIs like IFC and large financial institutions and the balance is in the form of securitization. We enjoy a rating of AA-, both from ICRA and CARE. We have sufficient on balance sheet liquidity of INR1,186 crores, including undrawn sanction of INR625 crores from NHB and banks. As on 31 March, '23, our net worth was at INR3,300 crores.Thanks. And now with these remarks, I open the floor for the question-and-answer session.
[Operator Instructions] We have the first question from the line of [ Hiren Kumar Desai ], an investor.
I have a couple of questions. The first one is, I mean there is this discussion all the time about a K-shaped recovery in the economy and lower income population, which is our customer base, is having a little bit of difficulty because of inflation and scars of COVID. Are we seeing anything in our book in terms of DPDs or anything else?
Yes. We did have the impact of COVID visible in FY '21 and '22 -- early part of '22. After that, during the last 12 months, there is a consistent and very good improvement in collections, and we've been consistently collecting a little more than even 100% of the monthly [Technical Difficulty] resulting in that our outstanding, both in terms of soft bucket and NPA have come down significantly. And not only there is substantial improvement in collection and substantial reduction in the overdues, but our business also come back very well, resulting in significant growth in our business post COVID. In fact, as you must have observed, in the -- in FY '23, we had a growth of 48% in disbursements.
Yes. Okay. That answers the first question. The second question is, see, our cost of funds will be rising with a little bit of a lag compared to repo hike, et cetera, assuming that our borrowing from bank mostly will be on MCLR benchmark. Do you have an assessment as to -- at what number and around which month our blended cost of borrowing might peak out?
No. Actually, there were a couple of reasons on our liability -- we are very strong on our liability side, basically because our leverage is low on a balance sheet size of about INR7,000 crores, closer to about INR3,300 crores is our [ net worth funds ]. Of the balance INR3,700 crores also if you see, little over INR2,000 crores are really long-term fixed interest rates, particularly from institutions like NHB. We have a borrowing about INR1,000 crores loan from NHB. It's a 10-year money with a fixed interest rate. And the other aspect of borrowing the balance of about INR3,500 crores -- of the total INR4,000 crores -- little less than INR4,000 crores, as I mentioned about, fixed is about over INR2,000 crores and all, the balance only be because even that is really long-term loan of 5 years and above, we don't have any short-term borrowings at all. We don't have any CP or short term debenture, or short term working capital and things like that.So given that, we are really sort of -- and some of these are really -- in fact, even the MCLR linked to the 1-year MCLR has a shorter duration MCLR. So to that extent -- and what has happened in the month of December '21, we also [ route ] our credit rating upgrade in credit rating, that also helped us to tie up the funding at a slightly lower cost. So all these has really resulted in good control of our cost of funds, so much to say that while, as you are aware, the interest rates have gone up by 250 basis points, we have gone for a pricing correction of only 50 basis points, that -- effective November '22. Despite significant headwinds on the interest situation, we are able to -- and despite our ability to pass on, we have a good pricing power, despite that, we have really gone for a very, very modest small price increase and we are able to protect our margins, our NIMs are really maintained, our ROA is maintained.
Okay. Just a follow-up. So do we have some more sanctions available to draw from NHB, or we have used up it?
Yes. See, we had a sanction of INR500 crores sometime in December, of that we have drawn INR300 crores as of March. And if you look at our investor presentation, we have around INR625 crores of undrawn funds. Of that, INR200 crores is still to be drawn from NHB. And after that -- drawn from NHB. So that is there.
Okay. Just one last small question. So what is the thought process behind giving the dividend? See, we are generating good ROE of 16-plus-percent. And I am assuming that with the improvement in leverage, the ROE will improve further. So when we are generating such good returns, what is the idea behind giving dividend?
No, the Board has considered these aspects very carefully and deeply. And we thought, it will be in the overall interest of all concerned, particularly, shareholders. And it is a company objective to further enhance our ROE. In fact, as you rightly said, our ROE has gone up in the current year by almost about 189 basis points, if I recall the number correctly. It has moved up substantially. And in fact, this is possibly one of the best in the affordable housing finance companies -- registered housing finance companies. And our objective is to take this further forward. So to that extent, the shareholders will get benefited more.
Okay. So in the same line, one last question, sir. So what is the maximum leverage that we are comfortable with? Right now, it's very, very low. So like...
What do you mean by limit?
No, no leverage, means, right now our leverage is like 1.2 [ net to 1 ] equity kind of thing, right? So it's very low.
Yes. I got your point. Now -- you're right. Now we -- our objective is today to -- with a good growth to maintain in the coming years, we would want to be looking at a leverage of about 5x to 6x.
You mean up to 5 to 6x, we're comfortable.
Correct.
See, next year itself, it won't reach the 5, 6x, right? It will take a while to reach there.
Considering the profits which we are generating, it will take a while to reach that 5 to 6x level. So that's why we'll not be able to come to the market for capital. We don't want to raise further capital.
We have the next question from the line of Uday Pai from Investec.
So just 2 questions from my side. First one would be that we saw a couple of management shuffles during the results. So is there any more changes to be expected in the near term, say, 6 months? Or it is well set as now? And the second question is, are you thinking of any yield increases in Q1 or Q2, a small increase of 20 bps or so?
We didn't get the second question.
Any increase in the yields? Are you expecting to increase the yields in Q1 or Q2?
Okay, got it. Now as far as the first question is concerned, it is unlikely there will be any more senior management changes or upgrade. Actually, present one also more of really promotions from within and to assume higher responsibilities. And we don't expect to see anything happening in the short term -- first question. As far as second question also, we don't really see any increase in our lending rates or need to increase our interest rates. We are quite confident through higher disbursements and better cost control, we may not have to go for any more price increase.
[Operator Instructions] We have the next question from the line of Amit Bhatt from MIT Engineers.
Sir, under the able leadership of Mr. Anandan, company achieved many milestones. But sir, after the IPO, the stock is consistently underperforming and even after 2 years, it is 30% below the IPO price. So sir, because now Mr. Anandan also aging, so what is succession plan for this company? And we heard that some big NBFC is going to merge your company. So can you throw some light? And another thing is, why we are not growth hungry? You got your IPO at [ 55 P ]. It means we're expecting more than 40% CAGR growth from your company, and you are not delivering, you are giving dividend. We don't want dividend, we want growth, we want the price movement because most of the people asking questions, they are very [Technical Difficulty] investor, most of the big guys, they are shy away from your company. Can you throw some light why it is happening?
No. As far as the -- it is true that our prices -- market prices are lower than our IPO prices. And as you might recall, we came with an IPO sometime in July '21. And after that, we came out with 7 quarterly results, if I recall rightly, including the March '23. In all these 7 quarterly results, the performance of the company has been consistently good and very good. And we keep maintaining a very good growth rate in our disbursements, loan book, profit, return on assets, ROA, ROE, everything. So as far as the company is concerned, we continued to perform consistently well in the last 7 quarters. Those results have been calculated, it is on our website also. So as far as the company is concerned, it's best to perform and grow much better.But when it comes to the market price, you know pretty well that it is -- there are a lot of other headwinds caused by the international situation or caused by the market situation. And to an extent, the risk associated with any equity investments will be there. But we are very conscious, and we are very committed to keep performing well and also keep communicating well to all the stakeholders as to the performance of the company is concerned.
Sir, what is the succession plan, because you are now aging, sir, and only one news that Cholamandalam is coming, they actually stopped -- increased by 20%. So market is giving you clear signal that market wants growth, market wants something new out of box from the management. You can't blame only the market conditions. There are many NBFCs performing very well during this time, in the price movement I'm talking about. So sir, there must -- you please clear the succession plan, include some good management people from outside also or if you can't, then please merge with some bigger NBFC to fire. Because when you bought the IPO at promising 40% CAGR growth, now you're talking about that in future, the growth is going to be 25% to 30%. That, market doesn't like, sir.
No. I take the point. Just on the succession plan, we have -- we are really -- we have worked on that and in the last board meeting, we had really taken some decisions, and that decision what has been reflected in the form of -- in the investor presentation and in fact, what I have in my opening remarks, I did mention that there is -- Mr. Balaji has been now made as the Managing Director of the company, and we have really elevated Mr. Manoharan as the Chief Marketing Officer. And we also made -- our CFO who's been very, very experienced in this area. So in other words, the succession plan is really being put in place, and it is presented in our investor communication -- investor presentation, which is there on our website, we have given clearly the entire management team and what are the new steps that are being taken from the point of succession plan, not only at the departmental head levels -- senior levels, but even at the middle and senior management levels in credit, in lending, everything. We have taken a lot of steps that we hope we are very positive will result in a good continued growth in business as we have done in FY '23.
We have the next question from the line of Ankit Shah from White Equity.
Sir, my first question is on the competition. So companies like [indiscernible], et cetera, are offering loans to similar set of borrowers at much lower interest rates. So I wanted to understand why the borrowers are preferring us versus them? And why would they not shift to competition?
Look, actually, yes, you are right, there is competition. And not only from the existing players, but there are some newer players also emerging. And not only the players in the home loan finance segment, but some of the small finance banks also started entering into this home loan business, affordable home loans business in particular. So to that extent, yes, there is competition. But what we are really seeing is that, given our strength in terms of distribution and very deep presence, for example, of about 231 branches, we have 86 branches in Tamil Nadu, 86 branches in Andhra, 35 branches in Telangana and 21 branches in Karnataka. In fact, in Tamil Nadu, if you see out of the 86 branches, literally at 70, 80 kilometers -- every 70, 80 kilometers, we will have a branch.So in other words, our corporate coverage is one of the best and which is an opportunity to be closer to the customer in terms of reaping, in terms of originating the new business and also quickly provide the turnaround time and provide the best services possible to our existing customers, who in turn refers new customers to us. So given this approach, we are able to really -- and the fact that even FY '23, we had really -- our disbursement has grown by 48%, indicate that despite the competition, we have a strength to grow, given our very deep commitment and closeness to the customers.
Right. Sir, one follow-up on this. Over the next 3 to 5 years, given -- assuming that interest rates don't move much from here, do you see our yields trending lower? Or you see the yields remaining around these levels?
No, our lending rate will be around this level. In fact, in the last 10, 12 years if you look at it, we had not really gone for any lending rate increase at all, barring the small increase that we did in November, only 50 basis points against an interest rate increase of 250 basis points. We had gone for a very small increase. Barring that, we are able to maintain the same lending rates, almost over 10 years now. But what we really do is that the efficiency, the financial performance, the financial metrics, we have one of the best financial metrics, that we are able to obtain through better productivity, lower our operating costs and lower our credit cards, higher productivity of our branches and our staff. So in other words, we are very proven organization and both the volume growth and cost control helps us to maintain this kind of pricing.
Got it. Sir, next question is on the statutory auditor. Sir, would it be possible for you to give us some sense of why we shifted out from a Big Four form to some other auditor last year?
No. Actually, we -- right from the beginning, we had started with Deloitte and after 10, 11 years, we had one of the Big Four only. But consequent to the decision in terms of the number of audits being sort of restricted to the Big Four and, given our current size, we had to really look for an alternate auditor to the Big Four. And the current auditor also is one of the very well-known established. In fact, they are really auditing about, if I recall, 3, 4, home loan companies, including a home loan company, part of Tata Group itself, if I recall correctly. So in other words -- so these -- they are very well experienced in the home loan businesses, and they are an established audit firm with particular exposure to the home loan finance and all.
All right. Sir, last one from my side. So the difference between the AUM and the advances, is it only for the securitization or is there something else also? So this INR [ 146 ] crore difference is only securitization?
No, no, under IndAS, what happens is the gross loan book gets deducted by the provisions which we carry and the processing fees which gets deferred for recognition of income by the -- because of the IndAs. So those are some of the things which has got adjusted with the AUM, which we are reporting of INR6,738 crores.
[Operator Instructions] The next question is from the line of Renish Bhuva, an investor.
This is Renish from ICICI Securities. Sir, just 2 questions. So one is on this -- our geographical concentration. So sir, Karnataka exposure is actually coming down on a yearly basis. It went down [ 28% ] in FY '23 from FY '20, though in our various commentary, you've been mentioning that Karnataka is our focused state. So just wanted to understand what is happening in Karnataka specifically.
See, basically, I think at a macro level, we've been consistently presenting -- explaining to the investors and analysts that we are not really -- sort of our strategy has been one of deeper presence in wherever we operate, market leadership wherever we operate rather than very thinly spread out our branch right across the country and call ourselves as a all India limited company. Now flowing out of the basic strategy is that we have really reached a very good corporate coverage in terms of -- and business participation in Tamil Nadu, now in Andhra and Telangana and Karnataka. We are -- in fact, in the current year, our focus is going to be in Telangana and Karnataka, there is -- in Andhra and Tamil Nadu, we have 86 branches in each state, our corporate coverage is one of the best and one of the highest. That provides us opportunity to almost be the market leader in affordable housing finance companies in the states -- in these states. But current year, our focus is now going to be in Telangana and Karnataka, and we see good opportunity to grow these markets also as we have grown in Tamil Nadu and in Andhra.And not only that, as part of our geographical diversification, we've also looked at the states, [ contagious ] with our present states, that's why we have really commenced on pilot projects, 2 projects or 2 branches in Odisha, and we are planning to add another 2, 3 branches in the coming quarters itself. And we are also planning to add a few pilot project basis for branches in Maharashtra as well. So these things will happen progressively. And -- but wherever -- we are very clear, wherever we operate, we will operate with lot more deeper, with lot more intensity, a lot more closeness to the customer, and we would want to be market leader in that particular state wherever we operate.
Got it. Got it. And sir, my next question is on a sort of sustainable yield side. So presently, our customer mix side, we are having almost 30% of new-to-credit customer, wherein we would be able to charge a little higher, given no credit history. But as we move along with scale, maybe this share of new-to-credit will come down and where the yield would be again lower. So sir, on a -- maybe from a medium-term perspective, what sort of sustainable yield you guys are looking at internally?
No. See, basically, if you really look at our investor presentation, very clearly there are 2 components. One is really up about, let's say, INR7,000 crores [ on loan book ], about INR1,000 crores is from really the SME customers, where we charge 21%. And that is a market rate being charged by maybe 5 other, 6 other, 7 other players as well. So we are not really charging anything more than what's being charged by the market for really providing the funds for this category of the SME customers. I can name the 6, 7 of them also. Now the other is the -- out of the INR7,000 crores, INR1,000 crores is SME, about balance INR6,000 crores is really home loan and home loan equity, where our average lending rate works out to around 14.5% to 15.5%. In fact, in the -- after the last 12 to 18 months price increase because of the interest increase, the gap between us and our competitors have really come down actually. In fact, they already moved up to 13.5% to 14%, and we may be 0.5% more or 1% -- a little -- less than 1% more.And I know for the kind of service that we provide -- because these are very small-sized loans, an average credit loan of less than INR10 lakhs should be collected over a 15-year period, involves certain transaction costs, involves certain service costs. So given that, these are well accepted by our customers also, which is reflected in the form of our loan transfers to other large housing companies or banks is hardly less than 3%. So in other words, yes, our entire pre-closures, what we call the pre-closure, is around 8%. Of the 8%, 5% comes from customer own money. They have not taken any loan from anybody to pay off our outstanding loans. The actual loan transfer to other banks, other HFCs is only about 3%. So the fact that our interest rates that have been set up is well accepted, and it is really related to the market situation, given the nature of these customers, given the nature of the operating costs in the segment.
Got it, sir. Okay. So fair to assume that the current yield is more or less sustainable, at least in near term?
Yes, yes. Yes, Renish.
We have the next question from the line of [ Manuj Oberoi ] from Yes Securities.
This is [ Rajiv ]. Congratulations on a very good set of numbers. I have a few questions. Sir, firstly, this sharp jump in small business loan book on a Q-on-Q basis. This book was pretty steady in the preceding quarters. And in this quarter, we have seen a certain big jump. What has driven this?
Basically, because of the COVID, the impact on SME we found is a lot more harsher than the home loan customers. Given that, we have really gone very consciously, we have gone slow in lending to the SME customers till about almost 6 to 12 months back, In fact, now after that, we see there is a significant change and improvement and we've really passed through -- we've seem some left-behind COVID impact. And we are seeing now the customers are coming back to normal in terms of their demand for loans and also the repayment [ terms ] more importantly. And given that we have really now activated this SME lending, we do see the SME segment as an important segment going forward for this company. In fact, we are also planning, from the future point of view, future growth point of view, like our affordable home loans, we will be focusing on the SME segment also going forward, specifically branch-by-branch and state-by-state. So we see that as a good segment to be pursued in future as well.
Sir, the ticket size average will be what in the future? Currently it's contributing 21%, how higher can it reach as a proportion of AUM?
As a proportion of AUM, it will still be maintained between 21% to 23% on the consolidated book. And the yield is likely to be maintained at 21% because if you look at the competitors, they are charging slightly more than what we are charging. So I think this yield, which we are charging, which is at 21%, is sustainable for many years to come.
No, I was checking on the ticket size as well. If you can tell me what is the average ticket size?
Yes, actually, ticket size for the SMEs average around INR7 lakh and the tenor also is about 7 years.
Got it. Yes, and sir, over the last 3, 4 quarters, how has the disbursement average ticket size moved in home loans? Anything similar or?
Despite the inflation -- interest rate increase and inflation, our average size is around INR8 lakh to INR9 lakh only. It has not really moved up high. Whatever increase in our disbursements, 40% to 48% disbursement growth is mainly with the number of loans rather than the average ticket size moving up. Basically, we find a couple of reasons. One is that as we open more branches, as we go more deeper into geographies at the -- from the district level to [indiscernible] level, we find the average loan size also slightly lower in the deeper markets than in the suburbs or, let's say, metros or the bigger towers and things like that. That's one. Second thing is that we are very, very conscious in our credit underwriting in terms of income installment ratio. So while the -- because of inflation, the cost of construction would have gone up a bit, but we also have to look at it from the point of income installment ratio as well.
Sorry to interrupt. This is the operator. Sir, we have participants waiting in queue. Would you be able to come back with your questions?
Yes. Just one last question, then I'll come back. Sir, on the -- post the rating upgrade, what has been the extent of reduction you've seen on the credit spreads being charged by the bank over the MCLR, the credit spreads they were charging?
On the fresh borrowings, we were able to get a -- secure savings of around 0.25% to 0.5% [indiscernible] banks and there's negotiations which we are doing. So that is one thing which we have got. And tenor is normally 6 to 7 years we are getting from the banks.
We have the next question from the line of Kunal Shah from Citigroup.
So now -- maybe earlier your reappointment was -- maybe you are there till 24 December, 2024. So if you have to look over here maybe as an Executive Chairman, would you be continuing till that date because it doesn't mention in terms of maybe for what period? And will it be like the transitioning with Mr. Balaji over the next 1.5 years? How should we look at this?
Yes. Actually, my -- thank you. My current employment contract as approved by the Board and the shareholders for 5-year period commenced from '19 to '24 -- December '24. So I think -- December 24 and year '24 as well. It is -- I will continue till -- my intention is to continue and support the company till December '24, till completion of my tenure. And to that extent, both I and Balaji will be working together, yes.
Yes. That's very helpful. And secondly, in terms of maybe the branch expansion, which you have highlighted, so when we look at it, what could be the extent of presence which we are planning to have, say, in Odisha, Maharashtra as well as Telangana compared to where we are today? Because generally, we are seeing maybe in the [indiscernible] markets around about, say, 85, 90 odd branches. And given that at least Maharashtra and Telangana would have equal potential, where would we want to reach in terms of deepening the presence here?
Yes. See, last year, we have opened 23 branches. This year, we are planning to open at least 30 branches. Of that 3 -- about 3 more branches as was stated earlier will be in Odisha and 2 or 3 will be in Maharashtra. And the balance will come in either Telangana and Karnataka because that's going to be our focus states where we'll be growing, because Tamil Nadu and Andhra Pradesh, we already have 86 branches each, and they are contributing, they will always contribute to the growth. So basically, the other maybe 24 branches will come in -- mostly in Telangana and Karnataka.
Okay. Okay. And in terms of the employee cost, so obviously, that was higher. If you can just highlight in terms of maybe any annual incentives one-off, which could have been there, the extent, which is there, and what would be the normalized run rate over there?
See, if you look at the Q-on-Q employee cost increase, it's basically there are 2 reasons why it got slightly increased. One is we had added more branches. So because of that, more employees came in and because of that, that cost added up. Plus, because of the increase in the volume, we had to provide for a higher incentive, and that is what is getting reflected in the salary cost And -- I think I answered the question or you want to -- I don't think I can give a guidance on that because obviously, it will be a 5% to 10% increase in the salary cost can be assumed.
Because overall in terms of the growth, it was very much in line with the guided range of 30-odd percent. So maybe the additional incentives for higher volume, so -- yes, so that was the only question in terms of -- I think we have been guiding in that range and the number was also similar.
One other element is that we've been making certain investments in our -- strengthening our middle and middle management category in terms of managers and senior managers, as I mentioned in the beginning, in functions like sales, credit and collections and things like that. Consciously, we are really preparing for the next level of growth. And to that extent, we have really gone for -- both by numbers and more importantly, by the quality and seniority, we've really strengthened our middle management significantly in the last 6 months or so.
We have the next question from the line of [ Siddharth Jain ], an investor.
Just wanted to check on the NPA thing. The 30+ that we see in the presentation has gone down from, say, 6.27% in December '22 to 5.9% in March '23. However, the reduction in NPA in correspondence to that has also been significant. So if you can guide the differential between the two.
No, I didn't get your number -- question. What is it? The NPA, which is from 1.19% last year to 1.15% now. And last year, it was 8.72% Stage 2, it has come down to 4.75% as of now.
So basically, the point is that the 30+ DPD is 5.9%. However, the NPA is 1.15%. So the differential between the two is slightly higher as compared to the competition. So I just wanted to understand, is it because of the muting in the middle buckets or what is the reason for that?
If you look at it, I mean, in the last year also because of the COVID, like all other companies, we also got affected. And we had given a lesser moratorium as compared to other companies at that point of time, which RBI had announced. Because of that, the DPD fee which was available for the other companies was not available to us and with the result that the Stage 2 asset slightly ballooned. That's what is reflected and as on 31 March, '22, it was at around 8.72%. So the efforts are on now to reduce that from 8.72% to our pre-COVID levels of around 4% to 5%. So that's what is directionally happening. And from 8.72%, it has come down to 4.75% on the Stage 2, it will further come down.
Understood. Any guidance on the future numbers?
It's slightly difficult to predict because the efforts are on and for these kind of customers, what happens is paying one EMI is easy, but if you are asking them to pay 2 or 3 EMIs at one point of time, it becomes difficult. So our endeavor is to bring this down to 4%. So hopefully, we'll be able to do it.
Overall, our NPA -- we are really working towards an NPA of around 1%. That is 90 plus and we're also working towards Stage 1 of at least about 96%, around 96%, Stage 1. So the balance 4% to 5% will be there in [Technical Difficulty] 60 to 90 and above 90 also. And we are progressing very well in that direction.
We have the next question from the line of [ Ankit Bansal ] from [ AB India ].
Sir, congratulations on good set of number and over the whole year. So my question is like RBI is pausing the interest rate. Sir, we'll be able to see the credit cost decreasing? And what is your future rate of interest are you taking? How is it planned for year '24, '25? What are the -- can you please explain on this?
You are talking about the yields or you're talking about the borrowing costs?
Borrowing costs.
Yes, with the interest rate now, we have already noticed -- all of us have noticed that the 10-year paper, [ interest rate ] paper, there is a softening of interest rates by 5, 10, 15 basis points and all. So at least the increased interest environment seems to really possibly -- I won't say -- use the word behind, but at least the pause is very much there. So the increase in interest rate situation possibly is not there. But definitely, the softening will happen maybe over a period of time, related to the inflation, as you're aware. But then as far as our pricing policy is concerned, we normally -- while this reduction in interest rates will benefit us, at best, we'll pass on that to our variable contracts. On the fixed contract also, normally, we will get the benefit as -- with whatever interest rates that are coming down, on the fixed cost rate, we will get the benefit. But in the variable, we will possibly pass on whatever the reduction is.
Okay. Sir, what will be the future growth -- areas of growth that will drive the company into higher levels? Are there any plans of converting from housing company to a bank? I mean for a plan of 20 years -- 15 to 20 years, is there any plan or just sticking to a housing company?
No, actually, I won't be able to -- I don't know if people will be able to really talk of 15, 20 years, sorry. But then definitely, in the immediate term, there is no plan at all for the company to really get into any unrelated financial services activities, including a bank, [ we'll say ] unrelated, where bank is a different -- totally different animal, as you are aware. We would -- our focus will continue to be in home loans. And our focus will also be in SME, to the same profile of our customers, who are really largely informal Tier 3, Tier 4, self-employed against their residential property. So we will continue to be largely in the secured loans and we'll continue to be largely in the home loans -- affordable home loans and we'll continue to be -- and [ when we enhance or break down ] our SME, and we'll continue to enhance our presence with a deeper penetration in our existing branches and seek for new branches in the adjacent states as we grow further. So our growth will be largely around home loan and the SME loans. And our growth will be largely around deeper penetration geographically.
[Foreign Language] Congratulations and hope your investor will grow also with the company.
Yes. Thank you.
We have the next question from the line of Mona Khetan.
So firstly, on the cost of fund side, assuming that there are no further rate hikes, what sort of rise in cost of funds could we expect this fiscal? And also, do we have any high-cost debt maturing in this fiscal?
Yes. There is around INR100 crores to INR150 crores of high-cost debt getting matured. So that will get replaced with a lesser cost of funds borrowings. That will happen in the second quarter -- beginning of the second quarter, July. Okay? Then as regards the -- as you know, the total -- of the total borrowing, we have almost 50% of the borrowings as a fixed rate borrowing. So there will not be any change on that. And whatever is the one which is related to the variable rate, which is linked to the 1-year MCLR, all the -- whatever is the increase that has happened, that has to happen has already happened. So it will -- if there's an increase on the -- if there's a reduction in the MCLR that is going to happen, that benefit will come in the third quarter and fourth quarter of this financial year.
Okay. And incrementally, at what rates are we borrowing from bank?
Currently at 8% to 8.2%. And currently -- I mean, we have not drawn some of the funds because we are anticipating a lesser interest rate. So we are still negotiating with the bank. The last drawn rate was at 8% without considering NHB, obviously.
Right, right. And as far as your customers are concerned, it's fair to say that they've not gone through any EMI increase so far.
Yes.
Not much, only the -- as I mentioned, we've gone for a small 50 basis point increase in our EMI from November, that is only for the variable contracts, which is around 23% of our portfolio.
Actually, there is only tenor increase, we have not gone for an EMI increase.
Right. Okay. Okay. Got it. And somewhere in the opening remarks, you mentioned about strengthening the middle management as well. So if you could highlight if there are any specific changes that have happened around that?
Yes, we -- our -- let's say, our sales and marketing organization, our entire business development, [ beside ] the sourcing department, the hierarchy is ready, we have the branches, we have the cluster managers, and we have the area managers. And then area managers reporting directly to Mr. Manoharan, who is the Chief Business Officer. What we have started there to really strengthen, we have really gone for a state head level position. In other words, for the four states now, we have decided to go for a state head. For example, now we have a person to head the Tamil Nadu state, another person to head the -- Andhra of course, we have divided into, one is the Coastal Andhra, second is the Rayalaseema. Coastal Andhra, we already have a person in place. And Telangana, we have a person in place. And even the Rayalaseema and Karnataka, we have identified the person. And so in other words, we brought in under Mr. Manoharan, who is our Chief Business Officer, 4 state heads -- 5 state heads to drive the business and to be closer to every branches.Also, what we have done is that through larger training and exposure, we have really strengthened our branch managers and the area managers. And, given the other geographical issues, wherever required, we have added a few more -- we have totally around 54 cluster managers, which we have added another 5, 6 to have a better pursuance of business not only disbursements but collections as well. So moreover if you really look up the entire sales and marketing, we've really strengthened in a way that now we can function well and be able to pursue good growth.Similar steps we have taken on the credit as well. For example, in [ central office ] we have about 30 and all credit officers who are really clearing all -- approving all the credit files. We have gone for a state-wise and product-wise like SME home loans, and we have strengthened the entire team. So similar have been done in the collection area and -- in the collection area as well.
Got it. So that was useful. And since we are running out of time, we'll just close the call as well. Thank you, everyone, for joining us today. And thank you to the management for this opportunity to host the call. Sir, over to you for any closing comments you may have.
Thank you, Mona, and [indiscernible]. I'd like to pay my sincere gratitude to all the analysts and friends who have taken time out of their busy schedule to listen to us today. Please feel free to connect with us in case you have any further questions. We would be happy to get back to you. Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.