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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 CreditAccess Grameen Limited Q1 FY '23 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions]
Please note that this conference is being recorded.
I now hand the conference over to Mr. Renish Bhuva from ICICI Securities. Thank you, and over to you, Mr. Bhuva.
Yes. Thanks, Nirav. Hello, and good morning to everyone. Welcome to the CreditAccess Grameen Q1 FY '23 Earnings Conference Call.
From the management team, we have with us today, Mr. Udaya Kumar, MD and CEO; Mr. Balakrishna Kamath, CFO; and Mr. Nilesh Dalvi, VP, Investor Relations.
I will now request Mr. Udaya Kumar to take us through the brief highlights of Q1 FY '23, and then we'll open the floor for Q&A.
On behalf of ICICI Securities, I would like to thank the management team for giving us the opportunity to host the Q1 FY '23 earnings call.
I will now hand over the call to Mr. Udaya Kumar for the opening remarks. Over to you, sir.
Thank you, Renish. Good morning to everyone, and a very warm welcome to our conference call to discuss financial and operational performance of Q1 FY '23. Before we begin the discussion on Q1 FY '23 result, I would like to urge you all to go through our FY '22 integrated annual report available on our website, which provides a deep dive into the resiliency of our business model, cross-cycle return ratio and sustainability reporting.
Microfinance business has a vital role to play in the long-term development of the society at the bottom of the pyramid. Hence, it is important for us to make ESG as an integral part of our business strategy going forward. We have always tended towards maintaining high corporate governing standard with the independent Board structure, excellent Board supervision through the required committees.
We have transformed our ESG policy framework for effective identification and monitoring [indiscernible]. Our strategic CSR initiatives helps us to work towards betterment of our community and address environmental and segment-related opportunities and risks in the future.
Last year, we completed an extensive effort to identify our ESG monitoring, including Scope 1, 2 and 3 emissions. Based on the -- on these business figures, we aim to establish emission reduction targets and take various emission-offsetting measures through our organic business along with our CSR activities.
We believe that rural economy is poised for robust growth, owing to a healthy monsoon, improved retailer output with higher preservation, and improvement over all of the current activities. The Central Bank's quick response to curb inflation has shown positive signs and the interest rate trajectory seems to be near at this peak.
Our customer base, which is largely from rural areas and farmers, part of a self-sufficient economy, wherein their level of farmland on the local ecosystem. This, coupled with the destructured nature of their spendings, engagement in multiple income they already have in tourist helps to generate contributions in income for the accelerated sales. We have never witnessed any disruption in the payment discipline during high interest rate environment or due to volatile macroeconomic factors in our years of experience.
Our consolidated gross loan portfolio grew by 23.3% Y-o-Y to INR 15,615 crores. As indicated before, business momentum was noted during the first quarter, resulting in a decline in our loan portfolio. Historically, even during stable period, growth has been always slower during the first half. But the primary focus during F1 -- sorry, Q1 FY '23 was particularly on maintaining the strong collection discipline and ensuring complete alignment with the new microfinance guidelines announced month to date.
Within all formulation of necessary Board-approved partnership in the light of the required process changes, considering necessary technology changes to our core banking system and extensive training for our large field force in both CA Grameen and MMFL. The process dilution led to lower disbursement and new borrow addition during April and May '22. We are happy that the complete alignment of the new regulations in all aspects are insured in the 2 months.
So far, there are limited volume loan value in Q1 FY '23 majority due to minimum disbursement in Q1 FY '21 and Q1 FY '22, owing to COVID-19 pandemic. Additionally, we also undertook branch expansion during this quarter. The new process transition took a little longer time at MMFL as where we are currently operating on 2 deployed platforms, 70% book on CA Grameen tech perform and payment [indiscernible] MMFL whole tech platform.
Our consolidated borrower base witnessed Q-o-Q decline to 36.9 lakh given that 1.2 lakh borrower [indiscernible] during the first quarter, while the addition of new borrower was over 92,000. Further, renewal of loans of our 1 lakh borrower is under process, majority of them being renewed during Q2 is also reason for reduction of borrower count in June '22.
After ensuring full compliance with new RBI guidelines we have implemented in a month of April and May '22, the daily disbursement trend normalized in CA Grameen during June '22, an amendment made from June '22.
Out of INR 2,146 crores disbursed during Q1 FY '23, 1,105 crore was disbursed in June '22. Similarly, out of 97% of new customer borrower added during Q1 FY '23, 44,000 are added in June '22. Again, in July '22, our disbursements INR 1,200 crores, and we added over overall new borrowers, which is historic high for July. As a result, our loan portfolio increased by more than [ INR 24,200 crores ] in July '22. We just anticipate global business momentum during Q2 FY '23 and following quarters.
As said earlier, we continue to march ahead with our branch expansion plan as we opened 50 new branches in Q1 FY '23, primarily in North shore. The 2 branches -- more than 2 branches [indiscernible], the total tally [indiscernible] -- the total tally increased to 1,681 branches that's 142. [ 56% ] of new borrower addition on a consolidated basis came outside of the top tier during the first quarter, spearing the direction of the [indiscernible].
We continue to maintain stages of healthy collections as strong asset quality during Q1. At Grameen, the collection efficiency, excluding arrears improved from 96% in Q4 to 95% in -- in Q4 to 97%. And MMFL collection efficiency excluding up in monthly collections arrears improved from 93% in Q4 to 94%. Further collection efficiency, excluding arrears and excluding nonpaying NPA customers was 99% Grameen and 96% for MMFL. On a consolidated basis, NII grew by 30.9% Y-o-Y to INR 461.5 crores and PPOP grew by 33.9% Y-o-Y to INR 289.7 crores. The credit cost was INR 100.9 crores, which also included the impact of write-off of INR 191.1 crores. The credit cost was partially offset by the INR 10.4 crore bad debt recovery during the first quarter. PAT was INR 139.6 crores, resulting in ROE of 3.1% and ROE of 13.4%.
GNPA at 60 dpd reduced from 3.61% in March '22 to 3.11% in June '22. 90 dpd reduced from 2.71% in March '22 to 2.33% in June '22, while net NPA reduced from 1.31% in March 22 to 1.15% in June '22. Overall, provisioning stood at 3.01% at the end June '22.
We are happy to announce that we have recently received a credit rating upgrade to AA- stable, the highest notch in the microfinance industry from India Ratings. This upgrade will have positive benefit in our cost and diversity of borrowings going forward. While we are currently operating with one of the lowest borrowing costs resulting in one of the lowest interest rate to our customers for future benefits occurring from the rating upgrades will also be gradually passed on to customers.
We also would like to highlight that we have been conferred with the highest level of recognition, the gold standard in client protection principles certification. It's a global framework that determines the degree of client protection practices followed across the loan cycle particularly creating capital at the bottom of the pandemic.
We continue to maintain high liquidity -- or healthy liquidity position as on June '22 with INR 1,542 crores, another INR 3,755 crores undrawn sanctions and on INR 5,393 crores of sanction in pipeline.
In the line with our liability -- in line with our liability strategy, we continue to focus on increasing the share of long-term international borrowings. On a consolidated basis, internal sources accounted for 13% of our unground sanctions and 20% of our sanctioning pipeline.
We are also working on international ratings, which we aim to complete by end of this financial year, which will further strengthen our fund raising plan in future. We remain sanguine on achieving our annual growth and profitability guidance given for FY '23. We had anticipated the muted growth during Q1 while building our annual guidance plan. Even in the case of cost of credit, we anticipate [ 50% to 60% ] of the annual paid cost to be borrowed in FY '23 and 35% to 40% to be borrowing enjoy FY '23. We expect to grow with robust new borrower additions over coming quarters.
Last of all, before we open the forum for Q&A session, I would like to briefly touch up on a minor accounting change, which we'll be implementing from Q2 FY '23. The income-generating loans were currently accounted in balance sheet using fair value through OCI method.
Under Ind AS 109, this method is primarily used when a larger proportion of loans are to be sold to -- there is a -- where there's cement for securitization. As per our liability policy, we will remain short term -- we shall maintain short-term borrowings, including the retainment or securitization only to the extent of 10% to 15% of gross premium. Hence, there have been addressed details to account the loans in our balance sheet using a mortgage cost method beginning from Q2 FY '23.
In case of fair value through OCI method, the outstanding loans are valued at every balance sheet date, and the fair value adjustment are transferred to equity through other comprehensive income. Important to note that there will be no impact on PAT under Ind AS accounting. Know when we shift to amortized cost method going forward, there will not be any adjustment to be made through other comprehensive income. This will reduce the noncash fluctuations in our equity.
As on June '22, OCI in our equity was negative by [ INR 63 crores ] under fair value through OCI method. Shifting to amortized cost method will lead to reversal of OCI leading to increase in our equity in Q2 FY '23, which will also add to our capital adequacy. We said that there will not be any impact on top PA.
Thank you for patient hearing this is quick round. We would like -- we would now like to open the forum for question and answer session. Thank you.
[Operator Instructions] The first question is from the line of Pooja Ahuja from Monarch Networth Capital Limited.
Sir, my questions were mainly relating to Madura Microfinance. So if I sequentially look at the nonpaying customers, that has risen Q-o-Q, and the NPAs have also remained sort of stable. So just wanted your thoughts on the asset quality in Madura Microfinance.
Thank you, Pooja. Actually, already anticipated earlier, Madura has always a little lag effect because of the model itself, but already, 73% of the book is in AC Grameen platform, which is actually more than 99% collections.
The 23% of the order book has some -- I mean, which builds, in fact. But it is reducing, and it's already provided to a large extent. So therefore, we believe that the impact -- the resale impact there is quite low. Percentage is due to a reduced in the area actually. So therefore, absolutely -- absolute value, the NPA remains stable, there also. That impact is quite negligible.
Right. And sir, on the yield front, while we've seen the other NBFC players have sort of taken a steep hike, what I could see in your stand-alone book, there is actually a decline sequentially. So just wanted to understand why is there a decline in this quarter.
Decline in this quarter was quite nominal, actually. So that is because of the little higher liquidity maintenance as we have not discussed too much of loans for April and May. Also, in the March quarter, we had actually in the transaction of [indiscernible], which also had loaded [indiscernible]. So if you nullify that factor, so you are -- excluding that, that term will change. And third is the base effect [ about 5.9% ] of the portfolio also has come down. Therefore, the base effect, the factor together very marginal decrease in NIM.
Okay. But we have taken -- for the new book, we have taken a hike, right?
Of course, yes. Of course, yes. Overall portfolio actually should go up by 50, 60 bps within the financial year. Because the impact is only in April, May, June, the department is quite low. Therefore, the new increased interest impact is yet to come in this quarter -- in the half year of -- in the financial year.
[Operator Instructions] The next question is from the line of Shreya Shivani from CLSA India.
I had a question on the repayment rate. So basically, in the last couple of quarters, you were seeing a repayment rate of around 100%. Now I mean, if we take that kind of -- its first quarter has also seen a similar kind of repayment rate. I think your AUM growth would have been -- decline would have been very different. So can you please talk about why has the repayment rate declined from plus 100% to around 75% in this quarter?
100% to 90%, there's 100% was including arrears, if at all -- if I remember correctly, because when you have modules are large, then the repayment on the modules will be so and also applies the other way. It is largely between [ 92 to 95 ]. And in the quarter ending March, it was 96% and it's moved to 95%. This increase in the collection data, I don't -- I'm just trying -- at which point you are...
The repayment rate is at 75%, sir. I mean, if I just -- if I calculate the AUM -- if I subtract the AUM and disbursement and come with the repayment number that you have made for the quarter, that comes at around 75%.
We're not able to get the point, Shreya. Maybe we can reach out to me separately.
The next question is from the line of Renish from ICICI Securities.
Sir, a couple of questions. One, on this -- the incremental growth from the newer states. So if I remember correctly, on the total book, our unique customer base used to be 40%, 45%. But when we are entering the new geographies, I mean, this unique customer base remain same? Or since we are in sort of relatively newer to the geography and the competition might have already tapped that market. So what kind of unique customer base we are seeing when you are entering new geography, sir?
Actually, our unique base is higher than our main markets because main market is the older geography where we have been operating for decades. While in newer states, our -- I mean, the new states, we are actually coming close to 50% for customers, because strong -- I mean, mainly because of the rural penetration what we have been doing.
Got it. Okay. So we are not generally second, third lender when you're entering a new geography, I mean.
No, no. Because by the fact that we told last time you are now also over 40% of the new customers are actually significant, and this is higher in the newer cities.
Okay. Okay. Okay. So 40% is new to credit and 50% is sort of unique to us.
Almost in the newer states. The older states is slightly lower. Correct.
Okay. Okay. And sir, secondly, on this new regulation on the retail loans, which allow us to build 25% of the book under non-MFI category. So this is largely from the -- in fact, the liability perspective. Because let's say, all in all, we have always maintained a liability tenure of 20 to 24 months, having a tenure of 6 to 17 months.
But once we start building this book, of course, it will be a longer tenure, maybe 3 years or 5 years. So sir, what is our strategy going ahead to -- I mean, let's say, we have to purge the liability before we start asking on the retail book. So just your thoughts on the liability book would be helpful, sir.
Yes. Yes. Actually, it's important not yet for retail, of even the microfinance also, which should look a longer and stable level to what's right. We told also at least in 2 to 3 years' time, we will have at least 30%, 35% of international borrowing, which is stable and long term. Already -- we have already -- we are working on that. We think partly for microfinance, also even for retail finance also, which will help.
So I think it -- once we complete the international rating, we'll have ability to go for long-term bonds internationally, which will help us to manage kind of asset structure. So for the ALM and stable liability is going to be a key factor for stable asset management also with which we are very cautious and careful in handling that.
Got it. Got it. And sir, just last clarification on the disbursement number. So for July, you said that 2,000 crores of business and 80,000 [indiscernible].
[Foreign Language] 1,200 crores of disbursement. I don't know the exact number, but it's 1,200 crores of disbursement, 80,000-plus crores of new customers. The portfolio addition is 200. Yes, yes, portfolio increased by INR 200 crores.
[Operator Instructions] The next question is from the line of Kashyap Javeri from MK Investments.
Two questions from my side. One, if I look at your credit cost table that you have given, even in this quarter, our non-annualized credit cost was roughly about 70 basis points because of the write-offs. We have highlighted our medium-term target of about 140, 150 basis points of credit cost. I mean, would this be some -- a target which can be achieved this year? Or would it spill over to next year?
Kashyap, we anticipated or guided 2% to 2.2% for the current financial year. And the reduced rate for next financial year, considering that we still have a residual impact of COVID-19 on the book. So we also said that 60% to 65% of the credit cost for the year would come in the first half. And that 30%, 35%, 40% of the credit cost would come in the second half, considering the first 2 quarters, we would still need to write off some residual [indiscernible] 1.15% of net NPA.
So therefore, it will be between 2% to 2.2%, which is -- or not 2.2%. 1.8% to 2%, sorry. We guided 1.8% to 2% for this financial year, of which 60% to 65% will be in the first half, balance in second half. What we expect and we are not expecting to increase beyond that.
Right. And second question is on our disbursement number. So if I look at July number now on an annualized basis, it would be roughly about INR 15,000-odd crores, which would be sort of flat number. This INR 1,200 crores is stand-alone or including MMFL?
It is consolidated.
Right. So which will be equal to what we did for the full year last year. So considering that second half usually is better than the first half and March is one of the best quarters, do you think -- I mean, what could be the full year AUM growth that's possible in light of this adherence now to the new norms?
Yes, Kashyap, we have guided in the last quarter about our guidance of 24% to 25% growth, AUM growth. We don't seem to be any compromising on that number. We should be good with the guidance we already made.
Next question is from the line of Abhishek Murarka from HSBC.
My question is on the cost of funds. So I think your opening cost of funds was 8.8%. Your incrementals went up by 20 basis points to 8.6%, but it is still lower than your outstanding. But your cost of funds at the end of this quarter went up to 9%. so I just wanted to understand the walk there because I thought that the cost of funds would still come down given your incremental is lower than the outstanding.
No. Our overall cost of borrowing increased from 8.99%. It's about 0.1%. So it's because of some of the repricing by the lenders. But it will be still -- we assumed earlier also even a 1% increase of overall cost, our costs would go up by 25, 30 bps. That's what we assume. So it is in line with the 9%. We also increased lending cost of 25 bps for Q2 already.
Okay. And for your foreign borrowing, what is the all-in lending cost?
It will be between 9.25% to 9.75% on an average, which will be minimum 3 years of what I call moratorium kind of thing and the repayment charge after the year, so it will be a [indiscernible] money. Therefore, 50 to 75 bps will still be good for us. Actually, positive for us.
Okay. And given that part of your increase is going to now flow through into 3Q and 4Q, how do you see your NIM moving for the rest of the year?
So we are expecting the NIM to move towards almost by around 50 bps for this financial year and another additional -- another 50 bps should go up in the next financial year, considering that more of our loans are 2-year loans, with the whole loan book has to run down and the new book will build. So overall, about 120 bps is supposed to be increasing over 3 years' time. [indiscernible] should come this year and balance will come next year.
Okay. And this assumes how much -- what mix of foreign borrowings, let's say, 2 years down the line from 18% are you at?
Maybe going up to about 30% -- 25% to 30% that we are expecting that. Because if you see right down already in our -- undrawn fund is already 17% new borrowings are foreign funds. And the sanction stages may have a 20% disbursement there.
So we have a good pipeline already. So it means that we should be good in terms of at least 20%, 25% in the financial itself. And yes, 20% is financial and the next year, 25%, 30% kind of thing. So with ESG as well as -- ESG compliance as well as international rating will further add to that portfolio.
Yes, absolutely. And the international rating, how much would it bring down your incremental cost of funds by foreign borrowings, sir? And what would be the benefit of the international rating in terms of...
International rating will access you for international bonds. Today, we can access only the [indiscernible] funds or from a foreign portfolio players or development organizations like IFC or [indiscernible]. So whereas if you want to accept the bonds like the green bonds or gender bonds or what you call social bonds, you need the international rating, which will reduce the cost also.
But any ballpark -- sorry, you go ahead.
I think, we have to get into that. For example, if you compare the bonds being raised by some of the lenders in India, the rates are between 7.5% to 9% kind of thing.
Okay. Okay. Understood. Sir, the second thing is on provisions. Given that Madura still has a little higher NPAs and part numbers, how do you see that coming out through the year? How much write-off would probably need to be taken? And what kind of provisions would we anticipate just from that book?
So exact value will be difficult because it's about 2 quarters -- 1 quarter lag from Grameen kind of thing. But it is insignificant because against the overall portfolio, therefore, the credit cost point of view, we are still good to have not more than 2%.
So exact value of provisioning, right now, we have about 3.8%? 5.3%. No, overall, we have 3%. We have 5.8%, I believe. That is doing 4.3% provision already against the GNP at 60 days of 5.8%. So largely, we have hopefully good coverage there already.
Okay. Okay. So basically, 2Q may be a little higher. And then as you said, 3Q, 4Q, the provision level should come down.
[Operator Instructions] Next question is from the line of Nikhil Rungta from Nippon Life Mutual Fund.
[Technical Difficulty] Okay. Sir, you have mentioned that in the newer states, you are primarily acquiring new credit customers. And also, we have been venturing into these newer states now since past 4, 5 quarters. So what's our strategy there? How is the behavior of the customers which we are lending to? And how is the competition in these newer states as these newer states basically where we are entering are already penetrated by other MFIs. So just wanted to get your views on that.
Yes. Maybe a bit comprehensive. So the way of operating continue to remain this discreet base approach to go through inch by inch, moving towards each district and go deeper in each district. So that how access to the deep rural in every district where we operate.
If you look at our branches today, it's almost 5.1 per district, probably, which is largest per district if you compare to the industry. So many of the competitors understand that there are quite a lot are there. But what we saw largely the operating in urban or [indiscernible] kind of things. So we have not seen too much competition. That in itself is the validity that we get almost 50% new to credit customers.
So we always expect to have new customers so that we can build a specific culture, what we have been. I mean discipline and training and the culture we can build properly. That is why we want to go deep and to acquire new customers so that we can grow and retain them over a long period of time.
So definitely, the newer states are giving that opportunity for us. So it [indiscernible], Tajetan, UP, Bihar with Sadanand, and we've also seen a very good traction and very good discipline in these newer geography and newer customer base.
And how is the competition there?
It's less, actually. When you go deep rural, the competition is less. For example, one of the questions being asked about the rejection. New to credit, actually, we have 40% new to credit. Whereas the newer states, up almost 50%. Also rejection rate, for example, our rejection rate is less than 30%, actually. So it is an important factor that rural and the domain where we are operating have lesser competition.
Okay. Okay. And how would be our AUM diversification target, say, over a 3 period of time?
Maybe about 10% to 12%, not more than that because the microfinance book is also growing quite fast. So we anticipate about 10% growth in the period of time, maybe 12%
From the state perspective. Like right now, top 3 states contribute significantly. So from 3-year perspective?
Sorry, I was talking about retail. Yes, but Karnataka and then the -- Karnataka Marsouin on, which is close to 78%, 80% today should come down to 60% in the next 3 years' time.
Okay. Okay. And sir, how would be our ROA, ROE target for FY '23? I mean you have maintained your guidance. But at this level, what type of ROA are we seeing?
We have -- we actually -- we guided about 4% to 4.2% for this year, considering that we have a little higher rate cost, the residual of '21, '22 is still there. So therefore, for the '23, it could be between 4% to 4.2% for FY '22, whereas there will be a potential real-time increase about 50 to 60 bps going forward.
Okay. Okay. Sir, last question from my side on the credit cost. You have already indicated that out of 1.8% to 2% of credit cost in FY '23, 60% to 65% would be in 1H and then 22%, 25% in 2H. So out of this credit cost or write-offs, which you are undertaking, what type of recovery you are expecting? And do you expect it to start from FY '23 itself or in FY '24?
We should get good. Because, for example, if you see FY '22 itself, we recovered about INR 65 crores -- sorry, '22. So in '23 also, we should recover a similar amount actually across the [indiscernible]. So we expect a good amount of recovery from the retail footprint this financial year and next financial year also. So overall, in our experience, what we saw is once we write off about 10% to 15% gets recovered in 2 to 3 years' time.
[Operator Instructions] The next question is from the line of Alpesh from IIFL Securities.
Just one question, sir. What has been your experience about implementing the guideline of assessing the income to INR 3 lakh per household? And how do you see competition behaving in this parameter? And do you see any major changes as far as -- from a disbursement prospective? Any increase in the ticket size or the number of customers being added? Just some color on that.
Maybe a little too early to get overall view, including competitors, because understand, many of them have not yet fully implemented. And then only 3 of them may be implemented. So whereas we are able to implement completely and the appraisal so that thanks to core banking, what we have been operating, which helped us to completely adopt.
But the growth perspective -- [indiscernible], we have not changed any tickets. Actually, we also ensured that the same ticket like what we have been doing without any modification to that. We believe that the growth should come from customer acquisition, not from ticket side. So we anticipate about 10% to 20% customer growth this year, and 30%, 35% of the growth should come basically from 2 components: one is renewal for the customers and then the new customer acquisition.
So we have large scope available to acquire new customers across our geographies, particularly in the deep rural. And from impact perspective, so we are not seeing too much impact, but yes, there are still some manual work from a bureau perspective. Bureau not fully not aligned with the combined report, those -- some latencies are still there. It will take probably a couple of more months.
Therefore -- otherwise, we don't see any challenge. I don't think there is any impact going to happen because of the regulatory change. So for the growth or so we have enough opportunities, so we don't see any specific changes yet or challenges.
Just a related question to this. Based on the data that we have collected, what percentage of our customers are qualifying for that INR 3 lakh per household income and what percentage are going beyond that?
See, the numbers are small, but close to 70% of the renewals and the -- what do you call, renewals as well as new customers, what we acquire, together. And I think in the data are really more than 25%, at least 70% to 72% of them are in rural.
Okay. And the guys who are not eligible that -- will they qualify for the regular retail loans for as now rather than [indiscernible]?
See, it's normally at one shot. Sometimes, they may borrow lesser value and complain or they would go further non-microfinance borrowing route. So it can be dual for them. A new customer, we are not going to use the nonmicrofinance. Only for the existing good customers only we would go for a nonincrease retail loans.
Next question is from the line of Nidhesh from Investec.
Sir, the 72% the number that you mentioned, customers are eligible for loans. So what was the number prior to these guidelines?
It's approximately same the case. Maybe 2%, 3% variation, but the initial date that still not fully partial. Some of the bureau side, we have to crack a lot and manually do. Probably, we will increase by another 5%. So we are not seeing any -- too much variation.
Initially, we had some challenges, but after 2, 3 months of effort, we found that it should be a similar line. So we don't see too much variation. So there may be variation between urban and rural, which we observed that. The urban it can result as close to 50%. Whereas rural, it is quite lower. So on a combined basis, about 75%.
Sure, sir. And secondly, sir, in the new geographies that we are acquiring customers from, what is the share of customers who are paying on a weekly basis in that? Is the share similar to overall company or we are seeing higher, lower share?
Yes. Yes. Yes. Similar to our company. It's about 55% to 58% are in weekly. So you're talking about Madura or Yamin?
On a consolidated basis, the new customers.
Correct. Yes, yes. The new customer acquisition, it's almost 55%, 58%. Whereas in Madura, when we converted, we have gone a little between weekly and fortnightly. Fortnightly is a little higher, actually. So because we have been in monthly, they are moving into fortnightly and weekly, a majority. Whereas new customer acquisition, both companies, 55% are weekly.
Sure, sir. And lastly, is there any trends on the customer centers in terms of meeting, how are the trends playing out?
There is a slight reduction in customer centers, about 10% lesser than earlier. But still, we have more than 70% of the centers, I mean, with the tenants more than 50% side of things. So there's not too much variation. Probably, some more time it will take us within next 3, 4 quarters, this also would get corrected.
Next question is from the line of Shweta Daptardar from Elara Capital.
Sir, my question pertains to cost. So what is the steady -- state normalized cost income that we're looking at? So I understand that there were branch additions and employee recruits this quarter. Or is it the seasonality? And a related question to that, we saw loan officers run rate quarter-on-quarter a slight decline. So is it that the new employee addition has happened more on the collection ramp-up?
Sorry. So there are 2 issues, one is about the cost actually, cost-to-income ratio. So we believe this will remain between 35% to 38%, reducing 38%, 40% kind of thing for this financial year, so that seems to be good also. And it's stable. And then the cost of operation is, by and large, stable, not too many variation, actually. So I think it's between 4.6% to 4.7% kind of thing. Maybe this year, that also will remain at the same level. May not change too much.
And the last one is about the loan officers, it's maybe in April, May, we concentrated more on training, some attrition. Recruitment probably delayed a bit. So to get totally compensated. But there is no shortfall of employees because we have already about, I think, 2% to 3% higher than the required staff what we acquired in March itself for the branch openings.
Therefore, this is an ongoing process. We don't see any -- I mean -- if you mean in getting the employees or taking the employee. Because 2 months we spent more time on concentrating to change the regulations, training, collections. So other factors are little. Therefore, it could not have taken any effect. It was a temporary impact.
Sure. If I may squeeze in one more question, which Nikhil had alluded earlier. So if I look at the [ 250, 260 ] old branch addition over the past 4 quarters, more than 80, 85 branches have been added in Bihar and UP regions. You also mentioned that the credit discipline in new geographies have been holding up. So what has been your experience in these northern geographies pertaining to credit discipline, collections and new disclosures?
Actually, 80%, 85% of branches are in Gujarat, Rajasthan, UP, Bihar, Dharka, et cetera. So all these states. And our experience has been pretty good. Particularly, we were able to go to deep rural. Able to get new to credit customers on a predominant basis. And the behavior and the culture of the customers also quite good so that it actually aligns with our operating model.
[Operator Instructions] Next question is from the line of Karthik Chellappa from Buena Vista Fund Management.
My question is basically on our borrower count. So in the last 2 years, most of the growth in AUM has basically come from ticket size. So our borrower count has been in that 3.8 million, 3.9 million range. From what point do you see a more secular growth in the borrower count?
And secondly, if we look at your presence today across these 14 states, what does it portray? And given your own mix of unique customers versus new-to-credit ratios, et cetera, what is the total market size in terms of number of borrowers that you can potentially reach?
Okay. So the last 2 years, if you remember, at least [indiscernible] non-operated proper line, so it's actually could be 1 year compared to a number of months available to acquire customers. So particularly, I'm talking with '21 and '22 financial year.
Despite that, we have added a 13.4 lakhs of new customers during this 2 years' time. And also, we have dropped our attrition about 9.2 lakh. That means our net retention would have been about 4 crores, 5 crores -- sorry, 4.5-lakh customers. Unfortunately, we wrote off about 1.2 lakh of borrowers between both companies.
That is why that the aberration of number of borrowers have come in. So from now on, the writing off will be lesser and month-on-month addition started in quite a good number. So we believe this year, you will see a good number of -- already guided the potential of increasing number of borrower. So we'll be able to handle that. We are able to add on a net traditional basis.
On a -- I think you were talking about the market sizing potential. So we always believe that we still have about 90 million low-income households in this country not customers of macro finance industry. We definitely -- of that, more than 75 million are in rural, not in urban, actually.
So it means if we go deep rural and balance more in rural, we don't see any challenge to enhance the customer number. So at least for the next 4 to 5 years' point of view, industry should grow between 20% to 25% in terms of portfolio. At least 10% to 12% in terms of customer growth going forward.
Next question is from the line of Shreepal Doshi from Equirus Securities.
Sir, the question was what percentage of our portfolio will be [indiscernible] 3 years in your loans now versus a year back?
Yes. Actually, currently, our -- it was about 17%, really at 14%, I think '21. '22 it was about 24% by March, and now it is about 25%. So as you see, our customer with more than 3 years also kept on increasing due to non-acquisition of consumers in the last 2 years. We are almost 55% of our customers are more than 3 years.
Therefore, there's a high potential that the higher loans are going to 3 years. About 27% is -- about 27% of our portfolio is -- [indiscernible] portfolio is in -- standalone portfolios in 3 years. On a consolidated basis, 22% is in 3 years currently. And it's inching up due to high retention of customers.
Okay. Second question, you highlighted that there was 9.2 lakh customers, of which 7.2 lakhs have been written off. The remaining 2 lakhs would have come down due to what reason?
No, no, 2, 3 difference. 13.4% is acquisition. 9.2 lakhs is dropped it off. Basically not meeting the regulatory lines or they don't want to borrow or we don't want to hold them or default and draw multi -- whatever the regulation. 1.2 lakh was a bit hard and wrote off. So net-net, 1.4 wrote-off, 9.2 dropped off. That means 16.6 lakh customers have been dropped overall, and 13.4 was added.
Okay. Got it. One last question, if I could squeeze in. Will we be deploying the risk-based pricing in our strategy? Or we will only have a blended rate wherein we'll be taking 100 or 150 basis point of increase?
No, no, no. We already implemented risk-based pricing to our customers, based on geography, based on -- and then based on vintage already. So our pricings are between -- no, currently, 19% to 21.75% currently. So higher the risk -- high-risk exchange will have higher price, and lower risk will have lower price. Low vintage rates with a higher base, and high vintage rates in a lower price.
[Operator Instructions] The next question is from the line of Kashyap Javeri from Emkay Investment Managers.
Yes. Sorry, sir, but to harp on this question, which I had earlier. So to achieve about 24%, 25% growth in AUM, our disbursements for next 3 quarters, which is quarter 2, 3 and 4, actually to grow by about almost 30% each quarter. And most likely, we'll have to disburse about 6,000 crores and 6,500 crores a quarter.
I'm just trying to reconfirm that number. So with this number, it's possible still to grow at about 24%, 25%? Is the math correct? First of all, that we need to do about 6,000 crores, 6,500 crores a quarter kind of a disbursement on consumer.
I was just coming from you. I don't think your math is correct because our customer -- our average asset is almost 18 to 20 months. Therefore, we don't need to discuss that much of money. Probably 4.5 crores to 5 crores per quarter average, if we disburse, we will meet our target.
Sorry, I missed that number -- the number that you mentioned?
4.5 per quarter. Per month 1.5, if we disbursed, we will meet our target.
Okay. So what you're saying is that repayment would be about 18 to 24 months and which is why the overall target still can be.
Our more than 90% of loans are more than 2 years or more to continue. That's right.
I now hand the conference over to the management for closing comments.
Thank you. Thank you all for being with us for this call. I wish you all the best, and have a nice day. Thank you very much.
Thank you very much. On behalf of ICICI Securities Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.