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Aptus Value Housing Finance India Ltd
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Ladies and gentlemen, good day, and welcome to Aptus Value Housing Q4 FY '24 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, Manav. Good evening, everyone, and welcome to the earnings call of Aptus Value Housing to discuss its Q4 and FY '24 performance. We have with us the senior management from Aptus to share industry and business update. I would now like to hand over the call to Mr. Anandan, Executive Chairman, Aptus for his opening comments, after which we can open the floor for Q&A. Over to you, sir.
Thank you, Mona. Ladies and gentlemen, good afternoon. I am Anandan, Executive Chairman of the company. I welcome you all to the conference call to discuss the company's performance for the fourth quarter and for the year ended March '24. I have with me Mr. P Balaji, Managing Director; Mr. C T Manoharan, CBO, Chief Business Officer; and Mr. John Vijayan, CFO. The financial results and the investor presentations are already available on the website of the stock exchange as well as on the company. I hope you have a chance to look at it.
Now all of you know, affordable housing finance as an industry has a good runway for growth, considering the low mortgage penetration, more particularly in Tier 3, Tier 4 cities where we operate. This, coupled with various initiatives of the government to support the sector makes us believe where we can grow comfortably at around 30% in the years to come.
Aptus, we believe in strong growth without losing focus on the quality of loan book, good financial metrics and good growth metrics. Very happy to report that Aptus had a very good fourth quarter and full year FY '24. Sharp business focus, good distribution network, deep penetration in south markets, customer centricity, along with appropriate tech support have enabled the company to achieve good business results.
The company's performance for this period demonstrates a sustained trajectory of stability, growth and diversified income stream. Our network, as you know, stands above INR 3,700 crores, indicating robust capital adequacy. This, coupled with good support from nationalizing bank, other banks, India side, on the borrowing side and with strong ongoing demand for both home loans and small finance businesses -- small business loans gives us confidence to pursue strong growth of scalability in the coming years with sustained profitability.
I would now hand over the line to Mr. P Balaji, MD, to discuss business focus, operating and financial parameters.
Good afternoon, friends. As we have been explaining in the earlier call, we will continue to focus on key strategies mainly growing disbursement on loan book, both in housing loans and small business loans considering the large headroom available in the lower middle-income segment in Tier 3 and Tier 4 cities, increasing penetration in existing geographies by opening new branches and expanding operations consequently in the state of Orissa and Maharashtra. Strengthened analytics and digital adoption about 18% of our business in Q4 FY '24 has come from customer as well as construction ecosystem app and social media channel.
Our focus shall be to increase the lead through this channel in addition to the physical branch network, continue to focus on productivity, collection efficiency, OpEx and cost of funds. Major performance highlights for the year are as follows: AUM grew by 29% year-on-year to INR 8,722 crores. Disbursements increased by 31% year-on-year to INR 3,127 crores. NIM was up 13.45%, OpEx were at 2.7%. NPA was at 1.07, down from 1.15% in March '23. PAT was at INR 612 crores, which is a growth 22% year-on-year. ROA and ROE was at 8% from 17.25%, respectively.
Total life customers were at 1,33,000 customers. This has grown by 25% as compared to the last year. During FY '24, certain branches were opened, including our first branch in Maharashtra.
Now coming to the asset quality, collection efficiencies improved during the quarter to 100.15%, resulting in 3 plus DPD improving to 5.41% from 6.04% in December '23. This will be focused on further in the ensuing quarter. Net NPA was at 0.8%. Provision coverage maintained consistently at 1.06% as of 31st March, we are carrying a total provision of INR 92 crores, and this will supported as a percentage of NDAs to a average of almost 99%.
These are all well diversified borrowing. Of the borrowing 63% were from banks, 24% were from NHB, 13% from NCDs issued to IFC, mutual funds and securitization. We have sufficient on balance sheet liquidity of INR 1,002 crores including undrawn sanctions from INR 620 crores from other banks. As you know, we have not done any direct assignment of loans and front end of income on account of this.
Now with these remarks, I open the floor for the question-and-answer session. Thank you.
[Operator Instructions] We have a first question from the line of Rajiv Mehta from YES Securities.
Congratulations on very strong results. So my first question is, can you share your thoughts on sustainability of this disbursement momentum while also throwing light on whether the issues faced in the state of Tamil Nadu have resolved?
See, first of all, let me take the Tamil Nadu. I mean I think this might be the question of all the person. So what has happened with Tamil Nadu in the last quarter is, there has been a disbursement growth of almost 9% quarter-on-quarter. This means we have almost come back to normalcy in Tamil Nadu in terms of disbursements.
During the quarter, there was a good record recovery. Basically, the NPA recoveries was much more because of that the loan book growth was slightly subdued. But in this quarter, FY '25, the first quarter, things will lead back to normalcy in Tamil Nadu, and we are expecting a good growth there.
And as regards to the sustainability of growth, I think it is -- I mean, we have been guiding the market at 30% year-on-year. I think this is doable considering the expansion plans of new branches, plus the branches which were opened last year will contribute for the full year. Over and above the, the productivity increase of the sales -- of the sales offices and also the increase in average ticket size and the number of files logged in first in office per month. We will also contribute to the sustainability of the growth. So we are confident of pursuing this 30% growth year-on-year.
Got it. Got it. So would it be safe to assume that Tamil Nadu portfolio in FY '25 can grow much better than last year. So last year it was 10% in FY '24. Can we expect 2025 to improve in the current Tamil Nadu portfolio?
No. We can't do that.
Okay. Okay. And just last on portfolio spread. So portfolio spreads have improved by 5 basis points quarter-on-quarter after having declined in the preceding 5 quarters. What is the outlook on the spreads basis your view on yield as well as cost of fund?
Going forward, I think the spreads are likely to be continued at these levels, considering the fact that the cost of funds might not go up and also additional funds will be raised at this rate and the rate at which we are borrowing now. And I mean, we don't have any plans to increase the rates to our customers further. So considering the fact that the cost of borrowings are going to be the same, the sales are likely to be same.
But if the interest rates come down, I think Aptus is in a better position so that the yield can be better because of the fixed rate loan book.
We have our next question from the line of Kunal Shah from Citigroup.
So firstly, maybe with respect to the branch addition. Last time also, we indicated we would be adding on to few branches. But I think the number is almost steady at 262. So what would have led, I think last time presentation says we would have already opened it in 4Q, and despite that, when we look at OpEx, both in terms of the employee cost as well as the overhead cost that has been higher. So what has led to the higher OpEx yes?
Last time, we have guided for more branches in Maharashtra in Q4, but that has slightly got delayed. In April, we have already opened 3, 4 branches. So that was the only indication we gave. And every year, the plan is to open between 31 to 35 branches, and that will be pursued and continued year-on-year.
Now just to add to it, as of 31st of March, we had 3 branches in Orissa and Maharashtra 3. And then we're planning to have about increased to about 10 branches in the first quarter. So 3 will go up to 10 in Orissa and Maharashtra. In fact, Maharashtra 4, 5 branches and I will get 5 in Maharashtra.
And as a note, given last year, that is FY '24, we have had about 31 new branches. And current year also, we are really planning to have about 35 to 40 branches actually 40 branches in the permanent or addition in the current year, particularly including not only the new markets like Maharashtra and Orissa, but even the existing states like Karnataka and Telangana, we are planning to further strengthen the brands.
So as far as OpEx is concerned, we, as a company, we've been very, very cautious more on productivity rather than increase in the cost. In fact, the current year also, we had a very good -- actually at the stage level not only the non slates are smart thing and the other support functions, namely today lease and technical collections. We are very consciously building up a good productivity levels, so the numbers have not really gone up much.
Even in HO, we are only operating about panel of 190 to 193 starts, and we have not added much there. Other than strengthening the people like the single level of the -- certain level in almost all the function including IT, code, collections kind of thing. But then basically, on the back office side, we already strengthened our IT system to handle the volumes rather than increase.
Yes. Sure. So -- and this employee cost wise, this would be more to do with the incentives during the quarter?
Because of the higher volume, the volume related incentives to the employees.
Okay. Okay. So volume-related incentives to the employees is getting reflected.
Yes.
Yes. And if you look at in terms of the overall business origination and the credit team. In fact, it's sequentially down. So is it again to do with more in terms of moving from the field level to the head office level, is that leading to sequential decline in this stuff? Or this is the attrition which is happening, which is more than the recruitments during the quarter?
See, the reduction has happened only in the business organization because of some people at the low level, which is at the level moving. But as the traditional has remained constant.
Okay. There was marginal decline so that's largely to do with attrition and -- yes, yes. So that's largely to do with the attrition and not getting replaced with the newer stuff.
Yes, maybe. Yes. Not only attrition, not we're also very conscious at every stage periodically to optimize the number of staff of the branches into whether it is sales and other support staff, particularly the large numbers in you know in the field of staff and in the collection level. And particularly field stock also, we would want to encourage them to earn more through incentives rather than adding more people.
So constantly, there is a rigorous follow-up system in terms of the optimizing the numbers, staff numbers all the time on an ongoing basis.
Okay. And one last question was NHB drawdown there during the quarter. So this INR 610-odd crores that includes NHB as well last time we used to do it separately. So this INR 300 crores of NHB, which was there last time has been drawn...
Drawn back in the last quarter. This would be conscious from the banks basically which is not...
[Operator Instructions] We have our next question from the line of Mr. Anand Doshi from Family Office.
Yes. Congratulations on a very steady state of results. Sir, very quickly, sorry, the -- my question may sound partially repetitive, the line was not very clear at my end. In terms of special distribution in terms of branches, I think you added 31 for the year. And that is actually in line with the guidance of 30 -- around 30 branches. So that's very heartening to hear.
The only question I had a little bit within that, is that you have said it would be about 3 to 4 branches in Orissa and 2 to 3 branches in Maharashtra. This was at the start of the year. So roughly around 6 to 7 branches. However, the addition has just been 1 branch. I think you mentioned that you are adding more branches in these 2 new states in this year, but I couldn't hear it well. So could you be kind enough to repeat that, please?
Yes. What we told was that is currently in Orissa and Maharashtra we have 3 branches. This will be taken up to 10, which means 5 more will come in -- 4 more will come in Maharashtra. The balance will come in Orissa in the first quarter itself. That's what they do.
Okay, sir. And sir, any -- any -- if you can outline any particular reasons -- any specific reasons? I mean to say as to why this expansion has not happened in FY '24, obviously, business is dynamic. But I just want to get a sense from you if there is any specific reason why we have gone slow for Orissa and Maharashtra for FY '24 as well?
It is not that we went slow on Orissa and Maharashtra. Yes, a lot of 1 month. I mean, as of now, we have already identified 3, 4 locations in Maharashtra. So it is a lag of 1 month. It's not the question of delay. And also, I mean, if you look at the year-end pressures of other areas because of the disbursements and recovery. So that is the reason actually. It is not that we are delaying things are happening that way.
Sure, sir. And as I said, the branch traction growth has really picked up. So heartiest congratulations on the execution on that one. Sir, secondly, I had small housekeeping question, which I had raised offline. In your presentation on Slide 9, with the title income stream with niche focus on. I think what we are doing is we are mentioning the AUM, which is, of course, of the book, but the breakup is of the revenue or the income stream part of the AUM, Am I correct?
I didn't get your question properly.
Yes. No, sir, what I'm saying is, if we are looking at a consolidated AUM of INR 8,722 crores, of which, home loans is constituting 60%, but this is not the home loans AUM, it is the income stream from the home loans AUM.
No, we have -- yes, 60% is the AUM actually. It's not the income stream. What we are planning to sell by way of the title in that slide is, after this having 2 or 3 products because of the NBFC, we have got 1 more product, which is the small business loan. And that is where the income of the company is in a diversified stream. We have got 2 or 3 sources in which we are earning the income. And the INR 6,000 crores is the AUM, so of the INR 8,722 crores, 60% is the -- we see a housing loan book.
Sir, that amount is not matching.
Just to explain, in Slide #9, HFC, what has been given a AUM of INR 6,759 crores, that is not the housing loan alone in the parent company, main company, the AUM INR 6,759 crores, that includes home loans, part home loans, insurance top-up loans. Okay. And a subsidiary company, undergone subsidiary, vis-à-vis the AUM of INR 1,963 crores adding up to INR 8,722.
So the other numbers have been given here is the AUM, are not the revenue, A. B is that if you take INR 6,759 crores a parent company, given the total loan book of 87, it work out much more than 60, but it's not just home loan alone, it also includes the top up of home loans.
Consolidation, we have been very clear, INR 8,722 crores is AUM of the 60%, and then there will be backup given by the other products.
No, sir. That is fine. So I have a follow-up question. if you look at the first pie chart, it's an HFC INR 6,759 crores of which home loans is 69...
And, what I suggest is this a data keeping question. I think I'll give you a call and explain them slightly differently. Okay?
Sure, sir.
[Operator Instructions] We have a next question from the line of Raghav Garg from Ambit Capital.
I just have 1 question. So when I look at the on balance sheet liquidity, specifically cash and investments as a percentage of borrowings, for the peers, it seems to be around 15%, 16%. And for you, it's been coming down quite sharply. It's now around 7%, 8%, what would be your comfort level in terms of where would you like to see this ratio? Because I believe that since it has come down, that has given some bit of support to your NIM had it not been the case, the margin compression would have been higher. So ideally, where would you like to see this ratio?
See, as a company, we would like to be prudent in how much cash balance you keep because what happens -- you all know you have higher cash balances, there is always a negative carry. So normally, we would like to have at least 1 to 1.5 months cash and cash equivalents in the balance sheet. And the balance will be in the form of undrawn sanction, which is a committed sanction. We have executed the documents and kept it ready.
So that is how we would like to maintain because we don't believe in shipping INR 2,000 crores, INR 3,000 crores at balance sheet liquidity and then having a negative drag on that. And also maintaining on housing loan OpEx for that. So that is the reason why this is our policies of 1 to 1.5 months disbursement will be carried as cash and cash equivalents in the balance sheet, and the balance will be in the form of executed funds.
Actually, in addition to that, also, in a way, while we are wanting to be very prudent to carry a required liquidity to take care of the disbursement. We also want to keep in mind the overall interest rate environment -- at this point in time, carrying a higher -- borrowing at a higher cost may not a prudent thing, particularly if there could be an interest reduction. It's not in the next 3 months, at least in the next 6 months or next 9 months should there be an interest rate reduction, we should not end up borrowing unnecessary a very high cost at this point in time line.
Sure. So is it fair to assume that this number is going to remain at this current level when I look at it as a percentage of the assets or as percentage of the total borrowings?
Actually, we -- we don't believe in the philosophy in fact, some of the companies even on the same understaffed carry -- you're right, they carry huge liquidity on their balance sheet, which we don't want to pursue not only in terms of negative caring cost, on the interest environment. But also after the revised NHB guidelines, RBI guidelines, we have to carry 60% home load in that as well because 60% the criteria and applicable are the total balance sheet size, including the cash that you can. So we also kept that in mind.
Sure. That's also -- another question, outside of South India, Orissa and Maharashtra, what would be the total number of employees that you have across thing 3 branches?
25 people, Yes.
25 people. That's all from my side.
We have our next question from the line of Renish from ICICI.
Congrats on a good read of numbers. Sir, just 1 question from my side on the geographical diversification. So what could be the next 2 to 3 states wherein we will be growing our book in an accelerated manner so that is something what had happened in Q2, Q3 in Tamil Nadu, that should not cover the AUM growth going ahead?
Actually, just to add, I saw in one of the newspapers today, of the lending credit exposure to different sectors agri sector carried percentage, the agri and related in that the highest lending was done to southern states. And you must assume that data followed by us as the subset was done for the north eastern and eastern. That will be surprised of the total lending by the bank in a term, over 50% I think was done in the southern states.
And Northern states, I think, around 18%, 20%. We just have some percentage and lease percentage this year. So in other words, we do believe that particularly where we operate Tier 3, Tire 4 cities sets them house. There is a good demand that's available in the southern part of India with good credit culture, income levels and service ability and things like that. So we still think that we are not fully -- well, we are really a geographically covered every part of Southern states.
Possibly, we would have covered in Tamil Nadu and Andhra, but we will see a gap to be covered in Telangana and Karnataka. So that's where we are going to be adding as Balaji of 40 branches significant part of the branches will get added in Telangana and Karnataka. And we're also planning to add more branches in the 2 identified states namely Maharashtra and Orissa.
So not all that even of the total branches of 262, they are in different stages of loan book. So in other words, the branches that are added in the last 1 year, the average loan book is only INR 5 crores, so that is, of course, to move it up. Again, branches where there 1 to 3 years, there is INR 17 crores to move up further. So these are our priorities. -- adding more states just for the topic is not our priority.
Okay. Okay. So basically, incremental growth will be largely driven from, let's say, Karnataka and Telangana it is in near term?
Manually we will keep expanding on a contiguous business, as we've been saying that being. Yes. I would hope that the growth in Tamil Nadu and Andhra Pradesh will also be there. It's not that it is not going to be there.
Yes. No. But on a related basis, I think these 2 states will grow at a faster...
Faster more. Yes.
We have our next question from the line of Nidhesh from Investec.
Firstly, on the small business loans, now that the share of housing loans have increased 60%, how do we plan to improve the growth in the small business loans?
See, broadly, this ratio will be maintained with 60% housing loan on a consultation book will be maintaining it. And the balance 20% or 21% will be in the small business loans and 15% to 17% will be in the quasi home loans. And the top up on insurance will almost be the same because that's the resultant of good paying customers and also insurance in protection cover.
So tradition cover. So this is basically the -- so broadly, this ratio will be maintained because we also need to take care of the compliance. So this will be the ratio at which the loan book will be progressed.
Sure. So if you look at last 2, 3 years, the small business loans growth has been lower than the balance sheet growth. So are we taking any steps to further improve that growth? That was -- so we -- I think in the past, you were thinking of building a dedicated team for small business loans, et cetera. So where are we on that part?
No, we are in the process of identifying the dedicated team, we are in the process of identifying of that vertical, so may be recruiting and then taking it forward.
Sure. Secondly in the Tamilnadu state, if you can share the absolute disbursement for Q4? And what was the Y-o-Y growth in disbursement in Q4 Q-on-Q, you mentioned this around 10%, but what was the Y-o-Y growth trend in Tamil Nadu in this...
We told you earlier, the disbursement growth quarter-on-quarter. The Q4 disbursement is almost the growth is 9% in Tamil Nadu. See, the growth -- the loan book growth was subdued because of the NPA recovery that has happened, which is good for the state. And things have already come back to normalcy in terms of disbursement in Tamil Nadu. In this quarter, you can see a good traction on this loan book growth as well.
So if you can also share the absolute number of disbursement for Q4 in...
I'll call you later, offline. Yes.
Sure. And sir, what was the BT out rate for '24?
BT out rate is around 2.5%.
And what would be the dividend payout, what do see going forward?
So as a policy of the company, we will -- it's not the dividend is not really onetime. And there will be a dividend pay outage. The Board has considered that and we have put -- we have discussed and put out a broad policy in terms of the -- the company will continue to pay the dividend on a continuous basis and other payouts the reasonable and sustainable payout ratio. And that was as a result even now we are declaring a dividend of INR 2.50 and the area we declared INR 2, totally about INR 4.50 per share of INR 2 cases value, we have declared it.
So otherwise, our dividend policy will take into consideration the PAT, payout ratio and it will be our entire to continuously maintain improve -- if not the payout ratio, the quantum of the dividend going forward.
Sure. And lastly, in terms of disbursement mix, we have seen very strong growth in the customer referral channel. So what exactly have we done to drive that growth?
We will take it offline because I don't want to discuss with the public forum because you have got some certain things which we have done yes.
We have our next question from the line of Sanket Chheda from DAM Capital.
Congrats on a good set of numbers, sir. I just wanted to check in this quarter as far as the provisioning and other income, there has been some restatements for prior periods that Q3 and for 9 months FY '24, what has been the change in terms of accounting?
So basically, what has happened, we have netted of the recovery will be positioned at 9 months. Now we have crossed the top and the provision has been stated as the provision and then the bad debt recovery has been added to the other income.
Okay. So the credit cost has gone high, provisions have gone high and the term has also gone high.
There was also an equal amount that has been required out of bad debt.
Sorry, our total write-off additional provision, all put together only 0.29%. And, in fact, there is a substantial reduction given in the previous year number, if you can see from 0.57%. So in other words, our provision write-off, whatever he actually -- it's not really gone up. It has actually come down. This is actually despite the fact, we really carry a reasonable amount of management overlay.
And as Balaji said, the overall provision is we are now carrying at about 1.06% of the total assets which compares much much higher, better than comparable company.
The provision Y-o-Y would have come down. I'm saying the amount which was reported earlier versus that the numbers have gone up in terms of provisions.
Yes. But there is an equal amount of recovery that's got added to the other income, that's what I wanted to say.
Yes. Okay. Okay. And just on the question that the earlier participant alluded and slide, which we gave on say NBFC and HFC AUM. And NBFC AUM would have just small business loans and non-HL, is that correct?
Yes.
So when we add up the 2 separate pie charts to arrive at consolidated, then the share for HL comes to about 53, 54, just there was some problem in reconciliation of that if you can.
Numbers -- earlier, I think Anand was there, and I'll also take you on a call and then explain how teens...
Sure, sir. Yes, those were the 2 questions from me.
We have a next question from the line of Arul Selva from Independent Advisers.
Am I audible?
Yes.
First of all, congratulations on a good set of numbers this quarter. I just had a couple of questions. The first one is more on a qualitative level. How has been your credit underwriting experience so far in the non-Southern states, Orissa and Maharashtra. I understand that it's probably very new, and it's too early to tell, but still, I was just wondering if you could shed some light on how the experience has been so far?
Experience as we grow. So we have got -- it's a question of you've got around 60, 70 profiles of the customer whom we normally fund. And we have got the -- we've got around 60, 70 profiles of the customers will be normally fund. And the same kind of profile of being somewhere in the new state at Maharashtra or Orissa. So with the results, we are not finding any retail, but the experience has been good. And the NPAs are not there at all. And I think 95% is a 30 -- sorry, only MOD. So things are good.
And we have been experiencing good amount of good experience in the credit in the process.
Okay. Okay. That's great to hear. The second question that I had is that with respect to these insurance loans, I was reading -- I was reading media report which talked about the regulator looking into these bundling of insurance products along with loans. So I just wanted to ask you, so when a customer comes and get the long-term Aptus, is it mandatory for the customer to get the insurance loans? Or is it optional?
It is not mandatory. We give the option to the customer to take an insurance cover for as a product will cover because if something happens to them, the loan gets covered. And it is an option given to them. It's not a mandatory. But -- what we have done is we have got a good -- members that did a good premium for these customers with an insurance company. So if they opt for the insurance, they get that benefit. And it's a onetime premium paid for the entire tenor of the loan. So those are the benefits which we explain to the customers. And if the customers are interested, they take it.
Okay. Okay. Any -- could you give me a rough estimate as to what proportion of your customers have...
I would request you to rejoin the queue as there are several participants waiting for their turn. We have our next question from the line of Bhavya Sanghvi from Fortress Group.
Just a bookkeeping question. Could you give us the 1 plus DPD for the quarter?
It is around 7.5%.
We have our next question from the line of Nischint Chawathe from Kotak Institutional Equities.
Yes, added around 100-odd employees in the last 1 year in the collection field. So I was wondering whether we should read anything on this front.
No. Actually, see, it is not the question of -- so we wanted to strengthen the collection department excessive actually, we have brought in this middle management in the collection as well. And then we have added this 100 employees collection basically to take care of the -- we have been driving the digital collections, which needs to be taken care of by more employees.
And if you look at our cash collections, it is just 2% of the total collections. So those are the requirements, and that's why we have recruited. It's not that there have been any problems in the collection.
So there are loan use and divestments have gone around 30%. And the 100 or quarter-on-year so. But as Balaji said, some of these numbers is not going to for this year. Actually, these numbers are really for the current year FY '25 also.
Yes. Actually, that's what I was asking whether it's a catch-up or whether is it something which is sort of more on an ongoing basis. I think what you think to be possession is that life. Okay. Just 1 final just housekeeping question, if you could share the yield on loans across segments or home loan for business loans?
See if you look at the housing loans, the yields are around 15.5%. The quasi home loans is around 17.5%, and the small business loan is around 21%.
We have next question from the line of Sonal Gandhi from Centrum Broking Limited.
Am I audible?
Yes, Sonal.
Just 1 question I had. Sure. Sir, I just had 1 question. This is -- when you are entering new states, so what kind of teams do you build up? Is it like your existing employees are transferred to the new states? Or how do you go on building up the team over there?
When we get into the new state, what we do is we -- as we said, we are growing on a contiguous basis. That means the first brand that will be opened in a new state will be near to the operating brands in the already existing states. For example, in Orissa, we have opened the first branch in a clinical Brahmapur, which is 50, 60 kilometers from a place Vizag. So what will happen is the recruitment for these branches will have been from the local play, which is Brahmapur and the culture of the company will be driven from the already existing brands in Scalar.
So that's how the whole thing works and if we are able to successful in training those people, then more branches will be opened in the new state based on this. So the recruitment will be from the local place experienced -- with good experience in...
And sir -- understood. And how many employees for the new branch have and across what functions how many employees do you have?
The new brands, there are around 3 branches in Orissa and Maharashtra, all put together, they are around 25 places.
Sir, I'm talking about the new branch which you are opening. So in sales and operations, how many employees do you have over there? And how could you add it over a period of time?
We'll have around 80.
We have a next question from the line of Mr. Abhishek, shareholder.
So congratulations on a good set of numbers. So my question is regarding the housing and small business loan, how do we see scaling these up versus the competition that we are facing as I understand that one of the closest competitors is also getting into the housing stage, and we know that he has already been in the small business space. So how do we see competing with them in the South as well as North?
First of all, if you look at the competition, we'd like to take it into 2. First of all, if you look at the competition, I would like to break it into 2, one is on the housing loan. The other one is on the small business loan. The housing loan, basically I mean, wherever we are operating, there are quite a few companies who are operating. But the yields where we are targeting is almost on the same lines as other peers.
So even if the competition comes, we'll be able to manage it. But in the case of small business loans, we have a competitive edge where we are charging less than our competitors. So even if the competition come when we'll be able to handle them there.
Okay. And second question is regarding the debenture issue, which we have sought for approval from the shareholders to the tune of INR 2,500 crores. So at what rate these would be? And how do we plan to use them?
Yes. Actually, these debentures will be in -- at least at this time in time, we don't keep it mean anything from retail. It is to be raised from the institutional investors, including banks, insurance companies and we for raise. I don't think we'll be able to indicate to you at this point in time any specific rate, but given the moving market situation. So on the rate, we won't be able to give a specific number at this point in time.
Okay. I understand that, sir, but is it going to be something which is like beyond what we are paying right now? Is it something you can disclose?
No, it will be -- it will be given our performance, given our brand name, given our credit rating and financials, we are able to get some of the best ways, and we hope to contribute to leverage yet. And definitely, we won't pay INR 0.01 more than what we were to pay.
Okay. Okay. And just the last question, sir, if I can, is that is on the fixed rate loan book, we understand that as something which is -- which works with an advantage for us is that most of our asset book is towards fixed rate. And in the environment which we are today and interest rates were to drop, what is the risk the whole of people trying to or going to another competitor because they'll have to pay a fixed rate on our book.
Correct. See, till now, we have our BT outrate is only 2.59%. And we have seen both the cycles, interest rate reducing cycle and also interest rate increase cycle. We have not seen this 2.59% changing drastically over the last 15 years. So we also feel that this will not -- not change, and this will continue.
Okay. But any measures we are taking towards that? Because if someone has to consider it, for example, you take a loan of INR 10 lakhs and if interest rates dropped by 0.5% or 1%. So being on after be paying 1.5% extra.
It is on basis and then see what is what needs to be done at that point in time.
[Operator Instructions] We have our next question from the line of Mona Khetan from Dolat Capital.
Just a few clarifications. So firstly, if you could share the breakup of AUM based on ticket size that is sub INR 5 lakhs between INR 5 lakhs to INR 25 lakhs and above INR 25 lakhs?
If you look at the AUM more than -- I mean, INR 20 lakhs to INR 25 lakhs, we don't have any loan more than 25 lakhs, and 20% to 25% will be 2% to 3% of our book and most of the loan almost 70% to 80% will be between INR 5 lakhs and INR 15 lakhs. And the balance will be there between INR 15 lakhs and INR 20 lakhs.
Got it. Secondly, on the -- if you could share the incremental cost of fund during the quarter, both for the NBFC and the HFC?
See, for the housing finance, we have been raising from between 8.5% to 8.6% and in the NBFC between 9% and 9.25%.
Okay. And are you seeing the cost of funds seeking? Or could they continue to rise for a couple of quarters?
It looks like it is peaking because the recent sanctions which you have received in April was also on the same line. So it looks like it is peaking. And I don't think -- and that's why I said the spreads can be maintained.
But we're also looking our pressure and for example, satang a sanction at to 5 months go. Yes. And we refer to take this interest rate. Finally, more came down and down about how much crores?
INR 300 crores.
INR 300 crores from bank in our not recovery.
Yes. Got it. So while NIM may continue to moderate because leverage will continue to rise. Is it fair to say that the risk of spread pressures are very low in your case?
Risk of what?
Spread coming down from here?
No, it is low, yes.
We have a next question from the line of Arul Selva from Independent Advisers.
Just follow-up from my earlier question, I was talking about the life insurance aspect of our lending. I wanted to know if you could give a rough proportion of what proportion of our customers have life insurance versus the ones which don't?
We can't get into specific details, which we can't get into what customer, what percentage, what are among. What we do is certainly compliant either from ILD point of view or from our regulatory point of view.
Right, right. Because I was just trying to understand, if at all, there is some sort of an impact, if some sort of a regulatory and future. I was trying to understand...
The problem we've been going through the process last 6, 5 years. Yes. Yes. And also take it from there always on the right side of law. We don't want to be on the left side. So very clear.
Okay, sir. One more question on sir, is that I think you've given a guidance of about 30% of growth every year. Is there any sort of a breakup in terms of how much of this will come from the housing loan versus the small business loans?
We have the breakup fee. I mean, since the small business loans as low, the growth can be at between 40% there because the base is low. It's not that same housing loans can be growing at 25% to 30% there again, so resulting in an overall growth of around 30%, yes.
Okay. So I mean do you have a specific target, sir, for this loan book for FY '25?
No, no. See that obviously, we will be having it internally because that's how we will be driving the branches, right? So [indiscernible].
We have our next question from the line of Raj Patel, an individual investor.
I just wanted to understand that why is the dividend payout ratio so high for our company. We have seen phenomenal growth of about 40% CAGR for the last 5 years. And do we see that we do not have enough growth opportunities. That's why we are giving almost INR 200 crores of dividend this year?
No, not really. On the opposite, we have indicated a guidance of around 30% growth in business. And this growth, obviously one. Second thing is that in that we are -- because of the growth and our margins, it is absolutely most nearly above also that will come for a since again. Now there is -- yes. Well, you will not really come many factual given our margin and profitability. Also given the capital adequacy norms of this business, the risk weighted and a profitability of arms of the ones we're unlikely to come for capital raise.
Now coming to your point in terms of dividend payout ratio, which we have complete Board is actually, we really look up very closely. Last year, our payout ratio closer to about 40% and this year it has been 34%. Actually, it is reduced, not to increase actually. And as the business grows and the profitability grows, we will keep this in a payout ratio in mind, but the same time, while the payout be prudent, but it will not be at the cost of the business growth.
And particularly, when we see a very strong growth coming forward, we are the other part we are very strong at our faster because payout ratio as 60%. So in other words, with that kind of strong capital issue, there's nothing like now supporting growth of the business.
We have our next question from the line of Nidhesh from Investec.
Just 1 data keeping question is on what is the incremental ticket size in housing and small business loan for us for Q4?
Incremental ticket price during the quarter has increased by 5% on the housing loan and 7% of the nonhousing loan.
I couldn't hear the numbers. Can you repeat?
Absolutely. I was in from from -- 8.6 lakhs quarter, which has become 9.2 lakhs this quarter in the housing loan. And on the nonhousing loan from 8 lakhs become 8.6 lakhs.
Okay. And then lastly, do you see any impact because of the faith tires code for lenders or charging of interest on our company?
What was that? I didn't get you on this.
There was a notification issued from the RBI on charging of interest by banks NBFCs fair factors code on charging of interest on 29th April.
So you know this is really particularly those businesses which are in the unsecured business personal, consumer loan when the RBI increased the risk weighted. Some of the banks very consciously done for a higher interest rate, interest rate, given we increase seed RBI for lending is to the sectors. But we are in a secured business, something like home loan. And other than the norm increase, we have not really coming for us any excessive increased interest requirement from bank.
Also, given, as I mentioned earlier, given our performance, the credit rating and profitability, we are able to raise the additional loans at a very reasonable and compile ways.
Just to add to what Mr. Anandan told, you are enlarging the target of interest rates -- no problem.
Actually, what is happening Nidesh was from 1st April onwards, all the big segment for us happening through RTGS, which is an account to account transfer to our customers. What does this mean? We will create the security interest before the disbursement happens. The proof of security interest gets reflected and then the money gets transferred to the account. So we don't have -- we will not have a problem on the basis of this circular.
We have a last question from today -- for today from the line of [indiscernible]
Yes. Sir, just on 1 thing that carrying forward from the dividend point itself, I wanted to get a sense that for us to grow at 30% and given that our -- the overall balance sheet leverage will keep inching up. At what level are you comfortable with? Is 70% borrowing advances is more a range where we would need to think for equity raise? And also if you can help us correlate with that payout number that we paid roughly around INR 4.5 dividend this year. So we are not following a typical payout percentage policy, so is it that we should just look at that INR 3, INR 4 dividend as an amount which becomes constant over a period of time because we'll need that money in next 3 to 4 years beyond which if we don't want to increase the leverage of the balance sheet?
As you know, we are current leverage is low and our intent to really take it up to 4 to 5x. So that gives a long leeway. Considering the fact that given after dividends, we are retaining in our lab as internal cash generation. So in overarousal out of net of dividend plus the increased deliveries from current low level to level of about 5. We anticipate to maintain a reasonable amount of dividend payout. The -- but obviously, I won't be able to say x number, y number. But then our intent is really to maintain a reasonable payout going forward. And bet clearly when we lifted our number for presential numbers will continue to pay a reasonable amount of pursue there is reasonable dividend payout ratio. And at the same time, keep supporting the growth very well through the additional gearing and through operating success.
Got it. So basically, sir, what you are trying to indicate is that roughly 80% borrowing to advances is where till that point, we are comfortable in giving or maintaining the dividend payout and objective is more to get that leverage of 5x on the book.
Yes, yes, correct.
That was the last question for today, ladies and gentlemen. I now hand the conference over to management for closing comments.
Thank you, Manav, for organizing conference call. I would like to pay my sincere gratitude to all the analysts and investor friends for take some time to listen to us today. Please feel free to contact us in case if you have any further queries. Thank you.
Thank you. On behalf of Dolat Capital, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.