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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 Q4 FY '23 Earnings Conference Call of Cholamandalam Investment and Finance Company Limited, hosted by Kotak Securities. [Operator Instructions] I now hand the conference over to Mr. Nischint Chawathe from Kotak Securities. Thank you, and over to you.
Good morning, everyone. Welcome to the earnings conference call of Cholamandalam Investment and Finance Company Limited to discuss the 4Q FY '23 performance of Chola. To share industry and business updates, we have the senior management with us. The senior management is represented by Mr. Vellayan Subbiah, Chairman and Non-Executive Director; Mr. Ravindra Kundu, Executive Director; and Mr. Arul Selvan, President and CFO.
I would now like to hand over the call to Vellayan for his opening comments, after which we can take Q&A.
Thank you, Nischint, and good morning, everybody, and welcome to the call. We're pleased to report results for the quarter and for the year.
Disbursements were at INR 21,020 crore for the quarter, up by 65% and INR 66,532 crore for the year, up by 87% year-on-year. The total AUM stood at INR 112,782 crores, which is up by 36% year-on-year. And the net income margin is up at INR 2,060 crores for the quarter, up 32% year-on-year and INR 7,229 crores for the year, up 24% year-on-year.
The PBT for the quarter is at INR 1,159 crores, which is up by 25% and INR 3,600 crores for the year, which is also up by 25%. The Chola delivered the best ever dispersal, collections and profitability in Q4. We have gained market share across the product segments in vehicle finance and other business units. The overall passenger vehicle industry sales in FY '23 rose to 38.89 lakh units, an increase of 27%. LAP and SME also witnessed strong growth in the current fiscal on the back of lower growth during the pandemic and amidst the revival in demand from smaller businesses.
Leveraging the industry growth, Chola has improved market share across product segments. The retail AUM of NBFCs is expected to grow at healthy 12% to 14% in FY '24 after a strong rebound in 2023.
In terms of performance highlights, aggregate disbursements in FY '24. We just talked about were at INR 21,020 crores, which is a growth of 65%. Vehicle finance disbursements was at INR 12,190 crores in the quarter as against INR 8,785 crore. That's a growth of 39%. And disbursements for the year were at INR 39,699 crore, which is a growth of 56% year-on-year.
LAP disbursed INR 2,762 crore in the quarter as against INR 1,870 crore in the quarter of FY '22 which is a growth of 48%. And for the year, it was at INR 9,000 crore -- disbursements were INR 9,299 crores, which is a growth of 68% year-on-year.
Home Loan, and that includes both affordable home loan and affordable LAP penetration, dispersed INR 1,405 crores for the quarter as against INR 549 crore, which is a growth of 156%. And for the year, it is per INR 3,830 crores, which is a growth of 102%
The SME business disbursed INR 2,104 crores for the quarter, that's a growth of 127%. And for the year, the growth was -- the disbursement was INR 6,388 crores, which is a growth of 232%.
Consumer and small enterprise business disbursed INR 2,364 crores for the quarter and INR 6,865 crores for the year. And secured business in personal loans disbursed INR 196 crores for the quarter, INR 451 crores for the year. Total AUM stood at INR 112,782 crore which is a growth of 36%.
So the encouraging news, as you can see, is that we've grown across businesses. So vehicle finance growth has then been bolstered by growth in Loan Against Property, home loan, SME, CSEL and SBPL. So that's very encouraging to see the secular growth across all of our business lines, and that's actually contributed to what we believe will be a reduction in cyclicality over time.
The PBT-ROA for the quarter was at 4.4% and for the year, it was at 3.8%. ROE was at 20.6% as against 20.4% in the previous year. The company continues to hold a strong liquidity position with INR 5,042 crores is cash balance at the end of March, including INR 1,500 crores invested in Gsec and INR 1,600 crores invested in TBill, which are shown under investment and a total liquidity position of INR 9,119 crores, which includes undrawn sanction lines. The ALM position is comfortable with no cumulative negative mismatches across any time buckets.
The consolidated profit before tax for the quarter was INR 1,163 crore as against INR 927 crore in the previous quarter -- year same quarter and for the year, INR 3,615 crore as against INR 2,902 crore. The Board has recommended a final dividend of INR 0.70 per share on the equity shares of the company, subject to the approval of the members of the company at the ensuing Annual General Meeting. This is in addition to the interim dividend of INR 1.30 per share which was declared on 31st January 2023.
In terms of asset quality, our Stage 3 levels have improved from 3.51% in December 2022 to 3.01% on March '23 -- at the end of March '23. GNPA as per RBI norms has come down from -- come down to 4.63% in March as against 5.37% in December. And NNPA as per RBI norms has come to 3.11% as against 3.76% in December.
In terms of capital adequacy. As of March 31, we were at 17.13% against the regulatory requirement of 15%. And Tier 1 was at 14.78%, which then implies the Tier 2 was at 2.35%. We also successfully initiated our made in public NCD issue of secured, rated, redeemable NCDs. The prospectus was filed in Q4 amounting to INR 1,000 crores and it was oversubscribed 2.6x during the first 3 days of issue.
And so with that, bring to a conclusion kind of our opening commentary, and Nischint, we'll be happy to turn it over to you for Q&A. Thank you.
[Operator Instructions] We have our first question from the line of Suresh Ganapathy from Macquarie Capital.
Mr. Vellayan, I mean, of course, a good numbers. I mean, when everybody is talking about slowdown and consumption-related issues and stuff, where are you getting this growth from and how do you think this is going to be sustainable heading into FY '24 when you have already a INR 1 lakh crore kind of an AUM base? That's my first question, Vellayan.
Yes. So Suresh, thanks. I think broadly, what we have to look at is in more segments do we have a significantly large market share. That's the first thing. And the second thing is if you noticed most of our growth and most of our expansion is coming from Tier 3, Tier 4 cities. So all of the businesses are going deeper into Tier 3, Tier 4 cities and geographies that we don't see have as deep financial service penetration as Tier 1 and Tier 2.
So I think a combination of that is the fact that -- so first off, Suresh, like you can see one of the reasons that's driving our growth is that's not just vehicle finance anymore. It is 6 businesses, all that are growing, right? And that secular growth across the 6 businesses is what's helping -- bolster the overall CAGR levels,right? So it used to be kind of predominantly we were seen as a vehicle financial. I think that image of Chola will begin to change and is already beginning to change kind of as we observe it in the market.
So you're still on those financial services in each of these markets. And you are saying organically, you did -- you still see on the ground a lot of demand. Is that a right interpretation, I mean?
Yes. So Suresh, and like I said, I mean, previously, when we have growth numbers, it was predominantly driven by vehicle, right? Now you can see how much the other businesses are also supporting that growth. So it is moving from 1 product to now 6 products, right?
Another 2 quick questions. Can you assure us that there is absolutely no adverse selection of assets when growth is happening in such break-next speed? Because just about the newer segments, are you uber confident that, that is not something which is compromised when you're chasing growth at this stage and especially when you are penetrating into some of these unknown Tier 3, Tier 4 centers?
So Suresh, again, there's right, all of these Tier 3, Tier 4 centers are centers that we have been presenting with vehicle finance. So they're not new geographies to us, right? The second thing is, I think you know the philosophy of the company, we always tend to be more collection led in everything we do. So even for the new businesses, the first thing we did was build out that collection infrastructure. And that continues to be, I would say, central to the DNA of the way we think in Chola that its first collection then underwriting then sales. Now given that, we do see significant opportunity in these new businesses. But definitely, the thing in all of our internal reviews kind of the focus continues to be predominantly in that sequence on collections and underwriting rentals.
Okay. And final question is on capital. What is your plan? You are already at -- catering around at 15% levels, right, CAR?
That we're at 17% predominantly because we have not used a lot of Tier 2. I think it's a fair ask that we will kind of -- I mean we will obviously something that again we tend to be conservative on. So it is something that we will kind of review in this upcoming financial year.
You want to say Tier 2 or equity capital you will review?
No, that's what I said. I mean, obviously, yes, we will review equity capital and its requirements in the next financial -- in the current financial year, in the current financial year.
[Operator Instructions] We have our next question from the line of Umang Shah from Kotak Mutual Fund.
Congratulations on a yet another good quarter. Just 2 questions from my end. First is, let's say, 2 years out, how should we look at the overall AUM mix? According to you, how will it look like? And are we looking at introducing any other new products, if at all?
I think we will be -- I would say that the vehicle finance should be in the range of around 50% levels and the Loan Against Property and the Home Loan should be in the range around 30%, 35% and the India business 15% -- range of around 15%. This is what we would try to, Umang, work on.
Understood. And the second question is on the [ ED ] part. So let's say, if this is how the mix looks like, probably there is still a little bit of room for teams to expand from here on, assuming that some of the newer business are relatively into the higher yield category. Will that be a fair assumption? Or the current margin profile is something which is more or less sort of a stable margin profile that we would like to hold on to?
So see, I think the better way to look at it is that we want to focus on keeping NIMs kind of at least current levels, right? So -- because always yield and expansion again, kind of tempered with compression either due to kind of a competitive intensity or due to kind of usually what we've seen is in a rising interest rate cycles do kind of put -- increase the level of competitive intensity and therefore, reduce the spread. So our attempt will be and our kind of focus will be to keep the NIM levels at least constant which we believe at this stage should be achievable.
We have a next question from the line of Shalini Vasanta from DSP Mutual Fund.
This is Kunal from DSP Mutual Fund. So my question is, again, related to that capital raise only, although you answered that. So my question is, if you look at your debt-to-equity ratio, it's currently at around 6.8, 6.81x. So what is the level you are comfortable with? And at what levels basically you would seriously consider raising capital? That was it.
So again, right? I mean our Tier has always been that we strive to keep capital adequacy at about 18%. Now one of the reasons we've dropped is because we are using much less Tier 2 than we traditionally used. And so we have -- so we will do both, right? I think Suresh's specific question was on equity. So we will do both to push that number up. We will basically look at equity in the financial year, but we'll also look at pushing back Tier 2 again, which will be a combination of our PDI and sub as well. So I think that gives you an answer to the overall question, which is that 18% number is usually what we strive to hold over the cycle.
We have our next question from the line of Bhavesh Kanani from ASK.
Congratulations for great sort of numbers. With this great set of numbers also comes the challenge of sustaining them in next year and thereafter. And given the adverse trends on cost of fund, and potential upward normalization of credit cost, how do you plan to sustain what has been delivered in this fiscal? That's my first question.
And second is related to OpEx where Q4 OpEx sequential growth is appearing out of sync with the kind of business volumes we have done. So if you can help us break up the OpEx for full year as in how much of it was targeted towards new lines and may not be recruited incrementally and some sense of how OpEx can pan out in the next 1 or 2 years?
Will you answer the question on OpEx?
Yes, the OpEx is in the range of around 3% to average assets, which is a number which we sort of worked with and sort of indicated over the cycles also. I think we will keep it in the range of the 3%, 3.1% level on average asset. So that's the number we will work with. And I think we are confident of holding it there.
To your question on sustainability, right, I think the -- the way we have to look at it is this side, I mean I answered part of that question which is what Suresh asked, which is we definitely see vehicle finance, we continue to be very strong and continue to grow, but the new segments are also beginning to kick in and deliver significantly to bolster the vehicle finance growth.
And so I think a combination of those 2 is basically what's going to allow us to continue to deliver these numbers. And we feel -- obviously, you have to see kind of if rates continue to go up, but we don't see too much more of an increase on the rate front, then we do feel that we should be able to maintain NIM as well. So that is what we will strive to.
Could there be a little bit of NIM compression? It is possible, right? But it's not something that we can rule out. But what we will work towards is that and obviously, kind of the other part of the solution from our perspective is to continue to see what we can do to improve the quality of the book, which the teams have done a great job on and continue to do a great job on, but there's still headroom for improvement on that front as well.
We have our next question from the line of Sadeev Singh from WhiteOak Capital.
This is Parag here. Am I audible?
Yes. Yes.
Yes, yes. So my question is moves from the liability side. We now we are INR 1 lakh crore book. How important do you think is to have more diversified source of funding? I think you've done one public NCD, but it is one part of the sourcing could be deposits as well, it gives you a lot of diversity in that sense. So any plans there and how difficult or easy is to convert ourselves into deposit-taking NBFCs because as we grow more and more, I think we become more and more systematically important NBFCs.
Yes. I mean, I accept it, but we have stopped giving deposit-accepting licenses. And today, the trend of investing public is to move towards more [indiscernible] and more liquid assets like the public -- the debt market, and that's what we are trying to tap into. And I think the overall success that we saw in the first issue, I think we should scale up the issue, and we will do that in the days to come. And I think by the end of this year, we are targeting to have at least 5% to 10% of the borrowing coming from this.
Apart from this, the way to look at other funding sources are to look overseas. We are also initiating action towards that, and we will work through it that subject to the total overall hedged cost being competitive to participate.
Actually, I do think that given our relationship with both the banking segments and kind of money market, we do feel fairly confident about our ability to raise at these levels and for the foreseeable future.
Priority sector, et cetera.
Yes, and with the priority sector asset continues to be significant demand for that, which we tap into through both securitization and kind of direct lender.
We have our next question from the line of Gaurav Kochar from Mirae Asset.
Congratulations to the team for a great quarter. A couple of questions from my side. Firstly, if I just look at the cost of funds alluding to the margin point that you made. The cost of funds for Chola is roughly 100 basis points lower than the FY '19-'20 levels. If I look at the headline rates, REPO or Gsec or the bank MCLRs, almost all of them are near to that FY '19, FY '20 levels.
So in your opinion, based on your sort of liability mix, how much of this 100 basis point gap will you be able to sustain over the next 12 months? So that is -- that was one on liabilities and maybe I'll ask one more later.
So like what we've spoken earlier point, we are doing a renegotiation with the banks as well as capitalizing on the priority sector asset demand. So by these factors, we have been keeping the cost lower. And I feel that we should be able to be in line with the numbers you have quoted, and we are confident to hold it there.
See, if you recall, we have committed that this year, we will not -- will not see an increase beyond 30, 40 basis points, and that's the rate where we are as compared to full year on full year or with other funds compared to last year. I think next year, you will see similar levels of increase, but that should be compensated by the yield increases that the teams have brought in place both on the LAP and vehicle and in the way to finance on the new book.
Understood. Understood. And my second question is with respect to the new book -- the new businesses that we've done, I mean, stellar performance there. If I look at the disbursement, they are well ahead of some matured businesses combined. So LAP and HL disbursement put together, the new business is as much ahead of that. So just to understand what could be the peak run rate or, let's say, over the next 4 quarters, if I were to look at it, what is the kind of run rate that you're looking at on this disbursement? And just wanted to understand how the sourcing of these loans are done? How much of it is in-house and how much of it is through the partnerships? Just a bit more color on the new business.
There are 3 differences need to follow different parts of sourcing. And I know it's a little short time to explain this in detail. But it's a midst of in-house as well as the onshore model. But right now, it's very difficult to give a very indicative number also because we are experiencing these products, and we will be looking at various factors to understand how much to scale up and grow in the next 2 to 3 years. So let's go to another year of performance on these products before we look at -- starting to look at the committed number.
Sure, sir. And is it fair to assume that large part of these would be in-house sourced through branches or large part of business through the DSAs or the fintech partnerships?
Yes. See, we have 5 because rather then the vehicle finance. And in the case of new businesses, what we are doing in CSEL, they have 2/3 coming from the traditional wherein [ DFA and DFTs ] are there and 1/3 is coming the partner with the fintech companies there. In the case of the vehicle, all 100% businesses are coming from their in-house team. In the case of fintech, where mix is like 60-40, 60% is now and 40% in still depending on outside. There is no 40% predominantly...
65% is outside.
65% is outside and 35% is in-house, this is what is in the mix. In the case of vehicle finance, we do everything in-house.
[Operator Instructions] We have a next question from the line of Avinash Singh from Emkay Global.
Couple of questions. Just -- yes, am I audible?
Yes.
Yes. So the first one is, I mean, particularly, you have been growing very strongly in our new business, largely consumer any kind of unsecured and secured. Now this is an area which we had seeing a lot of heavy traction just not for you, for your previous competitor that retail unsecured and SME piece that is perhaps the case or arguments for the formalization of credit and -- I mean democratizing of credit that [indiscernible] growth.
Now the question that would be -- do you see this kind of a strong growth momentum in this segment to continue for a longer? Or I mean in terms of -- I mean, call it was the abnormal and growth to moderate? And how do you see sort of consecutive intensity and sort of credit cost in this segment going forward?
In the new business segment, first of all, we are present in only 25% to 30% of the branches of vehicle finance. And we are testing the product as of now. And some of the products set view, our offerings have not been launched as equal to all of SMEs. So one side, we have -- you are saying that the market is slowing down or not. As of now, market is not slowing down. Second is then we need to also expand across the country and also expect in terms of geography as product offering as well.
So what we feel that these new businesses, which is driven by consumer which is being done by CECL and also we are doing the shopkeeper financing for our business loan, the deal division and SMEs also downward and equipment financing, we're doing it all with security and this is significantly likely to grow in the next 2 to 3 years for them to functionalize. And in addition to that, we have a housing finance and LAP.
In housing finance, we are doing affordable housing and affordable housing were contracted in South. Last year, we started expanding in Northeastern. We have just gone few branches in the Northeast. So we have a lot of other markets left out to be cover. During next 2 to 3 years, it will get expanded to all the brands in a vehicle finance.
In the case of Loan Against Property, maybe we are present in 55% of the vehicle finance and where when there is scope to further go to those branches. And Tier 2, Tier 3 towns are doing better interest went to affordable housing and in-homing as well. So those branches will be slowly expand in next 2 to 3 years. So one side, there is a growth coming for the industry and another side, the growth will come from tapping of the market which has impact us.
And you expect your kind of OpEx and credit cost to remain stable despite sort of mix changing a bit more earlier from vehicle towards this new segment?
As of now OpEx is still higher because back at investing -- as we start stabilizing these new businesses, ideally OpEx has to come down so that we can leverage on the branches and the people who grow and to prove that have invested in the technology. As far as the net credit cost is concerned, as of now, the credit cost is almost negligible. So what the period net credit cost will start coming up. And that is compensated by our office. Office reduction will be higher than NPL. As far as the delinquency measurement is concerned, all the new businesses are tightly controlled. So in the new or within 1 year time, it's too early to talk about the delinquency, but it is significantly better than the competition.
We have a next question from the line of Abhijit Tibrewal from Motilal Oswal.
Congratulations on a very good quarter. Sir, there are just 2 things I kind of wanted to understand. You partly addressed some of those questions, but I just wanted to understand these 2 things better. One is -- I mean, if we look at our own commentary, we talked about our efforts to bring down cyclicality, but I think I mean we also acknowledge one thing that has helped us in the last couple of years is the very strong vehicle cycle. And it is anyone's dearest, I would say how long this vehicle sector will last, whether 2 years, 3 years is anyone?
So I mean I understand it's not put out a vision or a mission statement. But internally, when you look at this franchise over a 3-year or a 5-year kind of a CAGR, what is the AUM growth that we aspire for internally?
I think the AUM growth generally that we've guided in the range of about 22% to 25%, right? And so that's what we will continue to maintain. In terms of how we will do it, I think Arul also answer that question. So you asked about mix because we definitely see the mix changing and vehicle as a percentage of our mix coming down as the other businesses grow. So again, I think Arul have guided that by FY '26, you could see vehicle becoming like 50% of our overall AUM. And that is a significant shift, right? Because in FY '23, it was about 61%. So that just gives you a sense of kind of our growth. A lot of our growth like you saw is coming from businesses like housing loans, which is growing like CSEL, like LAP and the newer business is basically the region they are in now.
Okay. One last question. Maybe one question for you and one for Arul, sir. Sir, in terms of credit cost, I think somewhere, I mean, Ravi sir was also acknowledging that we understand that the newer businesses that we are building, specifically the 3 new businesses, will have higher credit costs maybe going forward. So do you think there is a merit given the kind of ROE that we're meeting in building some kind of provisioning for the newer businesses, which will come at higher credit costs going forward?
And a question for Arul, sir. Sir, I mean when we look at this interest rate trajectory given that now there are fair expectations that there could be a 25 basis point high. Just wanted to understand how are you looking at margins in FY '24 now?
So just to clarify this credit, SBPL, CSEL and SME. As of now, these are almost at a negligible level. So from there, it will slightly go up. And -- but the reduction in the OpEx will be significant because OpEx is very high, and that will come down. So what will we gain from the OpEx will be much bigger than that the cost in volume. As far as the provision is concerned, in the case of CSEL, obviously, the unsecured lending, the provision is very aggressive, and we are almost making 100% that wanted. So therefore, the provision has been just very high. But as of now the diligency level are low. So therefore, we don't have waiting problem. And we are expecting that the ROE from the new businesses will start going up which will further increase the overall of the company. Vellayan?
With regard to increasing rate, we will have to see what is going to happen and that is the sustained increase that is coming, then we will also follow suit of what we did earlier. But in the quoting rate book, we will have to increase. In the -- already in the vehicle finance book, we have started increasing that what we're saying in the morning, the mix will progressively change, and that would also give us the benefit of that being able to understand that. We will wait and watch. This is something we have to see what is happening on the growth because there are differing news on the increase.
Just to add in terms of yield, if you see that, the last year, the new vehicle sales was much higher than the used vehicle because the industry was coming back in terms of the vehicle finance. So the disbursement mix of the vehicle financial is skewed towards the new versus used. And in the past, we used to do almost 50 high yields versus low yields. But in the last year that has come down because the new vehicle sales have picked up. So now we see the vehicle sale will come to the normal level what it used to be, 10% to 15%. That will give us a bigger opportunity to play in the high-yield segment, which is like 2-wheeler, 3-wheeler, tractor and used businesses. And then the yield will go up. And we have seen that in the quarter 4 yield have started picking up. And if we continue to do this, then we will come back to the normal level of yield then what it used to be.
[Operator Instructions] We have our next question from the line of Preethi RS from UTI AMC.
My question is on the...
Preethi, you're sounding very low. Can you please use your handset?
Yes, I'm using handset. Is it any better?
A little better.
Okay. Sure. I'll be louder. So on Home Loan business, after 3 to flag disburses...
We can't hear you.
Preethi, we are unable to hear you now. We'll move to the next question from the line of Piran Engineer from CLSA.
Congrats the quarter. Just on CSEL a couple of questions. So I believe y'all said 2/3 is small enterprises, 1/3 is consumer. Just wanted to understand on the consumer part, do our fintech partners give us FLDG? And on small enterprises part, how many of these clients already have a loan from a bank or another NBFC?
Wherever it is regulatory permitted, we follow the rule, but otherwise, we do not have an effect, but that is compensated by taking higher yield on that. So we work partner by partner economics of it and then work out the pricing model around that. The underwriting guidance was also driven by us. So considering both aspects, we control the performance of the pool as well as the profitability of a respective partnership.
Got it. And on small enterprises?
Small enterprise is done entirely in-house.
What was your question on small enterprises?
No, no, I just wanted to understand those clients. These are INR 18 lakh, INR 20 lakh loans. Are these clients -- have they taken loans from other banks or NBFCs? So I just want to understand if they're bank customers are not from a lending point of view.
And the traditional business in the small enterprise lending is around INR 8 lakhs.
Yes. So I don't think -- I think -- I don't know where you got the INR 18 to INR 20 lakh number from?
Okay, it's misinformed.
Sorry. Go ahead. Go ahead.
The average ticket price is around INR 7 to INR 8 lakhs. So to that extent, it is taken care. And we also have a policy -- stringent credit policy wherein even at the sourcing stage and the credit approval stage, we look at the number of inquiries, number of live loans. We have kept a lot of tight policy measures, where which we note all these precautions. This is -- I understand your question, but we have taken all the precautions on time.
No, no.
Retail business is actually -- we are doing consumer and -- so in that -- they have 2 channels. One is the traditional channel and partnership channel. So 2/3 traditional channel is doing both business loan and personal loan. And this business loan is given to the self employed customers and the professional as doctor and engineer. And the personal loan is very low, as we decrease the personal business loan, personal loan is given to the salaried class. So all these traditional businesses that we do in it, it is similar to what others salaries like [ DSE DSP], which is INR 8 to 10 lakh.
No, no, sorry, I may have miscommunicated. My simple question is that in the small enterprise loan segment, what percentage of customers are new to credit? And what percentage already have a loan from another bank or NBFC?
All of them are having a credit history. Without credit history, we don't fund in the CECL department. See, there are 2 business we are doing in it, 1 business is a SBPL, small business -- Secured Business and Personal Loan. In the SBPL, there are some customers who are coming first time -- coming to be -- or let's see how are credit. But that is a secure business. So we are actually giving them loan against their shop or their house and giving them a loan up to INR 5 lakh. That's a small ticket, so INR 2 lakh to INR 5 lakh. In the case -- and that's a security loan.
In the case of CECL, which is a Consumer and Small Enterprise Loans, we are giving businesses and with the business loan and personal loan to self-employed and salaried class people up to INR 8 lakh ticket and which is done in a traditional way. All of this customer has credit history, and we are not funding -- we have been 700...
96% of our customers are with the credit score of more than 700 plus in the...
And 10% is...
4% customers are between 675 to 700. Nobody is below 675. And 83% of the customers have a credit score more than 725. This is on personal loan, which is the major book which we have created as of now.
And rejection rate is 70%.
We have a rejection rate of almost 72% in our SBPL business.
[Operator Instructions] We have a question from the line of Preethi RS from UTI AMC.
My question is on the Home Loans business. So we have seen the disbursements in the quarter -- for this quarter to be higher than the whole last year. So could you help us understand what's the long-term strategy here, given intense competition in both prime markets and in affordable housing? What is the segment we want to be in as we grow? And what are the kind of ROEs that we will be targeting?
So as far as -- we are in affordable segment. And right now, what we have done, we get present himself. So major portfolio works in. So during the current financial year, we have expanded across geos and the contribution of these businesses are coming from Northeast and used to have also East and West. So right now, what we are doing it, we are expanding the footage to all the Vehicle Finance have granted and the addressing the customer need. Going forward, we are going to see numbers doubling up every financial year.
So just to add, actually, as we have done more in South, the same success we want to replicate in East and West and North. We selected some good market where vehicle finance have done very well in terms of portfolio quality to start with to see that is getting that we have replicated. In the last year, our experience has been good. So with a good experience, now we are going to go further to the other branches. As I mentioned in the earlier question also, Hme Loan as of now is covering 1/3 of the country and started covering to rest of the country. So the expansion will be happening over the period. And since we have owned the new geography, the disbursement growth will continue.
Okay. And what is the ticket segment that we would operate in and the -- in the steady-state ROE?
Our average ticket size will be around INR 15 lakhs. We are operating in that segment and the self-construction -- self-construction, self-brought will be the adverse segment where we are going to scale our numbers.
Sorry. And the ROE?
We'll have -- our ROE guidelines is not there. You have seen our numbers. As we had mentioned that we will continue to maintain our niche and credit costs. And OpEx is something which we want to improve by increasing the productivity and expanding. So therefore, we will like to maintain with the ROE we are having.
Sir, just a last question on the scale. So would we be keen to pursue an inorganic strategy in this business to very further scale?
No.
So this is something we will continue to do in-house?
Yes.
Yes.
We have a next question from the line of Nidhesh Jain from Investec.
Just a couple of data-keeping questions. Firstly, can you share the absolute loan book in CSEL, SBPL and SME as of March '23? And secondly, the interest rate hike that we have taken in our Home Loan book and LAP book -- home equity book in FY '23?
See, we have given the percentage of the new business and actually will have a internal point differences. I think it's a different number for you in the investor presentation what we have provided. The second question is on the -- sorry, what was it?
Interest rate hike.
What is the second question?
Interest rate hike that we have taken from the existing customers in Home Loan and LAP book -- home equity book in FY '23?
Maybe around 200 bps in LAP and around 150 bps in Home Loan.
We have a next question from the line of Kunal Shah from Citi Group.
Yes. So firstly, in terms of the credit cost, if you look at it in terms of the discovery level, which would have coming from yield recognized during pandemic, how -- are we almost amended that now credit costs on an overall book should normalize? And with respect to the new business segments, what is the kind of Stage 3 and credit cost, which we are looking once matures or it settles up.
Credit cost will -- we always said that the credit cost will range between 0.75% to 1.2% over a cycle, and we stick to that. And on an average, it should be in the range of 1%. But for event like pandemic and widespread and continue to impact areas. I think we are back to that levels. We are -- I think this is now at around 0.9% when we should hold around that and in a good cycle, we should drop at 0.75%. And maybe during some stress period, it should go up to 1.2%.
New businesses actually, it's very early to talk about it. In fact, how this onwards are performing in the same space, we would like to be -- senior to do better than industry itself or as aspiration as to see that.
We have a next question from the line of Sunil Kothari from Unique PMS.
Mr. Vellayan, you joined Chola by 2010, it was INR 7,000 crores. Even we crossed INR 1 lakh crore now. Very commendable achievement, sir. My question is you are now a key person from the management group, one of the power of group and you are busy with so many other organizations, which is also expanding very high. So I would like to understand what is your task for Chola for next 3, 5 years? What do you want to achieve, what you want to prepare for the next 10 years If you can talk a little bit more?
Sunil, thanks for the question. So firstly, I have no work at Chola because these guys already know everything to do, and the team is a very strong team in to -- there is a team, like you talked about 2010, the entire team that's sitting here with me is kind of -- has been there since that time. And they've actually been instrumental in driving this level of growth for the company. So the good thing with that is it kind of gives me very little work to do.
Broadly, what we focus on is just kind of broad direction setting. I think Suresh kind of asked the question earlier, and there are 2 big focus areas for us continue to be what kind of a long-term direction can be set for the company? You asked what the 10-year view, I'll talk about that in a minute. And the second is how do we begin to look at technology in quite a different way? Because what technology is opening up in India is quite phenomenal. And the implications for a business like us are very significant. So that's an area we continue to invest in very significantly.
On the 10-year view, I mean, our view on India is that we've delivered at a certain level of compounding over the past decade. And honestly, the kind of opportunity that's offering itself up in India and the strength and capabilities that Chola has now developed. We see the same opportunities on that level of compounding being achievable over the next decade as well.
So we continue to be very bullish. Some of the steps we've taken in terms of the diversification into new lines of businesses, there will be other steps that we take in that direction. Some will be technology-led, and some will be growing out in traditional businesses and become -- basically moving from to like a multiproduct view each of the products, of which kind of can be sustainable for us in the long term.
So a combination of those 2 areas is really where the key focus is at Chola as far as I'm concerned now. And I do think that over the next decade, we do see significant opportunity to maintain kind of a high level of profitable growth. So it's something that here as a team, the entire team, we are all very excited about, and we'll continue to deliver.
We have a next question from the line of Pranuj Shah from JPMorgan.
And congrats on the good set of numbers. Vellayan sir, you have alluded to building a robust collection infrastructure before moving into new lines of businesses. Would it be possible to elaborate more on this? And what -- because I think this is primarily giving me the confidence of sustaining this high growth going ahead. And on that, since I think most of the primary investments would be done. So do we expect OpEx efficiency, what we've seen in the fourth quarter to continue going ahead to?
Yes. So for the vehicle finance...
Sir, sorry to interrupt, can you come closer to the microphone, please?
Yes. So vehicle finance, if you know that we have been discussing about what is the collection strategy and how robust our collection system is that. The first is that those who understand how we have done collection in vehicle finance should be involved in the new businesses. So we have actually transferred 4 of our small business to have these business. And our Loan Against Property in the trading also, who are the -- as asset collection manager before that, and he has done the credit also. So all the businesses are in the Chola. For the last 20 years, they are all within Chola. We understand that how much important we give it to the collection. They'll come to the collection strategy. And the collection strategy varies from product to product and the long stakes of the segment.
For example, as of now, in the case of CECL, the loan rates are as low as possible. And their job is to ensure that how can they keep loan rates at low and then collect it more digitally than physically. And in the case of affordable housing, they had an entire collection system, which is completely working along with the sales team working and going and collecting. Before disbursement, they are also involved in doing the field investigation of the properties and also ensuring that the collateral fund are paid immediately after they're doing the lending their goal.
So different, different strategies there. But without having the collection platform ready, we don't expand. So firstly, we drove the collection managers in the market and then understand that what we're going to collect. And then we start doing it. And obviously, if you want to understand the entire collection strategy for these businesses, it'll be taking a lot of time. But just to mention that in the secured business loan, which we are giving it to a shopkeeper, they are doing the lending collection by their sales team only. But in the case of affordable housing, we have a collection, the daily cases vertically.
And all the collection vertical within the businesses are completely unique and independent to them, and they are working with a different, different strategy with respect to the product behavior and the market behavior.
We have our next question from the line of Shreepal Doshi from Equiris.
Congrats on a great quarter. Sir, just wanted to understand what is the incremental lending rate for vehicle loans, LAP, HL and new business? And you also alluded that would want to maintain margins at current levels. So what are the levers for the thing?
The broad levels for NIM you've indicated.
7%, 7.5%.
Sir, what are the levers and what is it that gives you the comfort or the strategy that...
So the levers of our business obviously will change, right? The -- so vehicle is a fixed loan product, right? So once we've originated there, then kind of that rate sticks, right? So there, it's a question of kind of obviously one lever is the business mix, right? So how much do we do between used and -- so we obviously by product segment and by customer segment, we have a pretty good idea of what is the effective down to the ROA level itself, we have pretty good data.
So even at the NIM level, that's one of the controls we have where each of the geographies then have to maintain a particular NIM based on the mix that we would steer them to us. They will for some to move in towards higher yield products which would mean the used versus new mix, the mini LCV versus LCV versus 2-wheeler versus 3-wheeler mix. So each of those mixes are kind of -- it's all kind of -- I mean, obviously, it's done at a fairly granular level. So each geography, whether it's a zone, in a region, an area or a branch understand and the heads at those levels understand what they need to do to maintain the overall NIM, which is how we basically control it at a national level.
And that is an example in Vehicle Finance and then obviously, you've got the mix between businesses themselves where certain businesses have higher NIM. And therefore, we manage that as well in order to control the overall level of NIM for the company.
We have our next question from the line of Sanket Chheda from DAM Capital.
Yes. So for a acquisitions, we are calling sort of executives to describe your results every quarter. So 2 questions from my side, sir. One is that the capital burn in this quarter has been relatively lower. For the last couple of quarters, we were burning about 50 to 60 bps of Tier 1. This quarter, the burn is just 34 bps. So other than the high profit, is there anything else?
So we use multiple levers to manage our capital adequacy like securitization is a route we did last quarter and even in this quarter, we'll see a large amount of securitization happening. So these are mechanisms to ensure that our capital adequacy stays on board. And this is something we got. And of course, the profitability accretion to the bottom line also helps. So that would be the primary reasons.
Sure. And sir, other question was then on the liability side that you talked about on deposits and maybe overseas lending. But is there any interaction with the rating agencies, where we can get one not more of a rating upgrade? Because once LDFC moves out -- maybe and there would be a lot of supply on the NCD side, which being get reticulated and NBFC, one could have some better pricing. So any light there would be helpful?
No, we are in touch with the rating agencies which Mr. Vellayan had interacted with rating agencies with whom we have relationships over the last 2 or 3 quarters, I've been talking to them. I think they have their own set of processes and procedures to announce big thing. And I presume going by their internal loans, they will keep evaluating and looking at what's good and what should be done. Our work is to keep doing what we are good at, and we will continue to do our best to keep our NIMs at targeted levels.
We have our next question from the line of Bunty Chawla from IDBI.
Congrats on a set of numbers. Just a data point, if you can share, what were the write-offs during the quarter and similarly for the full year number? .
Just giving -- write-off for the quarter would be around INR 89 crores to INR 90 crores and for the full year will be around INR 550 crores.
INR 550 crores.
This is on repo sales and the write-offs or around INR 40 crores bad debts and INR 270 crores.
In settlements and write-offs. I don't know that it was the same number.
Ladies and gentlemen, that was the last question for today. I now hand the conference over to Mr. Nischint Chawathe from Kotak Securities for closing comments. Over to you.
Thank you very much to all the participants for coming in as well as overwhelming numbers. Thank you very much to the management for giving us an opportunity to host the call. Thank you.
Thank you.
Thank you.
On behalf of Kotak Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.