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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Good day, and welcome to IIFL Finance Limited Q1 FY '24 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded. I now hand the conference over to Mr. Nirmal Jain. Thank you, and over to you, sir.
Thank you, and a warm welcome to all of you for being on the call. So I also have Kapish, who's our CFO; and Venkatesh is here today, he's our CEO of Microfinance business, and they will actually take over after I just give opening remarks.
So as all of us know that Indian economy has been doing well. And in fact, in a world where most of the economies are in bad state, India stands out. And India's intellectual standing as well as our relationship with the U.S. after PM Modi ji's visit has had a dramatic change. And in terms of the excitement about India, I think it's at an all-time high. And also our economy now is on double engine like many state governments. So till now, we were working -- we were just depending a lot on consumption, but the CapEx cycle after long time has revived, and therefore, the economic growth will have the double boost of CapEx as well as consumption. And the CapEx probably can lead from here on.
There's a feel good factor as we meet corporates and investors and also the demand for bank credits and the corporate credit, in particular, is growing. That will have a good impact, cascading impact on the SMEs and the small borrowers that constitute our customers.
Inflation has been under control, and therefore, we believe that the interest rate cycle in Indian context, at least will have a pause and probably will not see more rate hikes. Having said that, in this quarter, actually, we have seen some of the banks whose MCLR has been going up. And when there's a reset there on 1 April they have increased the interest rate. But going forward, we hope that at least it will plateau if they not come down in the near term.
In terms of our core businesses, our loan AUM has grown by 29% on a Y-o-Y basis, which I think is in line with our targets in the robust group. First quarter typically is a flat quarter for many businesses. But still on a quarter-over-quarter basis, our loan AUM has shown the 5% growth. Our profit after tax also after minority, after considering for the minority interest has also grown by the similar 29% and prior to minority has gone by 43%. But what is more important to note is that our gross NPAs have been below 2%, as per our target. And also the loan losses and provisions have now come to normal levels.
As we move gradually from direct assignment more towards co-lending, the constitution of income and our profitability is also becoming stronger and not dependent on -- or not actually having -- or may be able to have lesser component of upfront from direct assignment.
With this, I'll hand it over to Kapish, who will take you through the financial numbers, line items, and then we'll open it for Q&A. Thank you.
Thank you very much, Nirmal. Very good afternoon, ladies and gentlemen. For the quarter -- for the first quarter of fiscal '24, the consolidated profit after tax before the minority interest is INR 472 crores, up 43% Y-o-Y and up 3% quarter-on-quarter. We recorded pre-provision operating profit of INR 786.8 crore, which is up 20% Y-o-Y and up 3% quarter-on-quarter.
For the quarter, as Nirmal mentioned, the consolidated loan AUM grew by 29% on a Y-o-Y basis and on a healthy 5% on a Q-on-Q basis at INR 68,178 crore. This number is even better than I compare on our core book asset growth, which comprises of Microfinance, gold, home and the digital loan businesses, which has grown by even better at around 6%. This segment now comprises of around 95.3% of our overall AUM mix, which is up by 1.2% Y-o-Y.
On the asset quality side, you should find our gross NPA at aggregate level stands at around 1.8%, and our net NPA is around 1.1%. It would be pertinent to mention that it is below our guidance of 2% that we have given to the market. So there have been a significant improvement and the asset quality is down by 73 basis points on a Y-o-Y basis on gross NPA and around 42 basis points on a net NPA basis.
The credit provisioning has also been fairly comfortable. The ECL provision on Ind As basis gives a provision coverage ratio on our NPA at around 159%. In line with our capital optimization strategy and given that a good share of our portfolio is either qualified under private sector or our gold has zero risk weight in the bank's book, we've been able to pass on these assets to these banks in a very healthy partnership, relationship as we hold with them, both with regard to co-lending and assignments. And therefore, the total AUM under this arrangement stands at around 40%. And like what we mentioned as a guidance earlier, we will be working towards enhancing the share more towards co-lending. And therefore, the share of co-lending has moved up around 133% Y-o-Y to around INR 8,963 crores, and it's also moved up 19% just on quarter-on-quarter.
The assigned portfolio has moved up by 4% Q-on-Q and 21% quarter-on-quarter and stands at around INR 17,700. Yes, we have seen precisely during this period of June 22 to June 23, the bank repos have moved up by 250 basis point and MCLRs have moved up by close to 150 basis points. Even then, we have seen a very relative muted growth and increase on our cost of borrowing. Our cost on borrowing during this period Y-o-Y has gone up by 44 basis points. And on a quarter-on-quarter, it's gone up by 15 basis points because of the action that we have taken on some of our high-cost borrowing by either retiring them or replacing fresh borrowing at lower rates.
Just to give you an update on our liquidity position. We stand very healthy there during the quarter. We raised close to INR 4,500 crores through term loan, bonds and refinance, all of long-term nature and around INR 4,155 crore was raised through direct assignment of loans, not only from the gold and the home loan products and also a very decent share of the Microfinance product as well.
So some of the key fundraises include INR 175 million that we raised in the form of ECB through HSBC, Union Bank of India, and Bank of Baroda. And one highlight that you will note is we had a public issue of our NCD, bulk of this money came in the form of long-term money and they were oversubscribed 1.5x aggregating around INR 452 crores for us.
So our cash and cash equivalents, including committed, undrawn credit lines from banks and financial institutions stands around INR 6,510 crore, which is more adequate to meet not only our near-term liabilities also to fund our growth and as the results go out in the market, we should be able to then get our -- get into fresh lines of credit to negotiate and discuss with our bankers. We also hold a very positive ALM with hardly any kind of exposure on the shorter side of the window and we set our net gearing of around 3.3, which is down around 3.5. We've been constantly working to see our liquidity position. And you see these numbers have come down, which is resulting in a lower negative carry as well on the balance sheet.
So our annualized ROE for this quarter stands around 19.1% at a consolidated level, supported by a strong ROE of around 3.6%. Our earnings per share for this quarter is around INR 11.2 per share, which is up 29% Y-o-Y and 3% quarter-on-quarter. On the capital adequacy side, compared to a regulatory special of 15%, we just had a healthy capital and adequacy of around 51.2% in the HFC business. And NBFC, it's around 20.6% and in Samasta Microfinance at 20%. Would like to mention that HFC, our capital adequacy has improved up from quarter 4 because of some of the reduction that we could maintain our liquidity and therefore, so the investment actually have come down as well. This clearly suggests that we are able to grow ourselves without impacting hugely on our capital position, given that we work on this capital optimizing strategy of on book and off book.
With this, I open the floor for further questions and answer. Thank you very much for your time.
[Operator Instructions] The first question is from the line of Anusha from Dalal & Broacha.
Now?
Yes. You're audible now.
Yes. Congrats on good set of numbers. Firstly, I just want to understand with respect to your loan guidance, broadly for FY '24 contains around 25% or 25%, 30%. What is the outlook there?
And secondly, on this MFI how do you see growth panning out? And how sustainable is the growth? Because I think the growth has been quite good at 63% or for you and for the industry as well. So from where the growth is coming from and the geographies and how sustainable and how long this can continue? And broadly, on the set quality side for MFI portfolio?
So Anusha, I think 3 things you're asking, one is the loan growth guidance. You are right, 25% to 30%. The asset quality -- so our focus -- I think we have achieved significant improvement from here given the product, there can be a minor improvement from here. But -- so our net NPA would like to bring it below 1%, or otherwise, more or less, we are there. And for microfinance, Venkatesh is -- maybe -- we all have Venkat -- on guidance on loan growth, Anusha.
Yes, Anusha, we will look at close to around 25% to 30% growth this year in terms of our loan book actually.
Last year was in the lower basis.
Yes, since our last year loan base was little higher, the growth was missing. Since we are already at hovering -- we closed March at around INR 10,000-odd crores. So we will be moving it up by around 25% to 30% this year.
Okay. And from which geographies it is -- the growth is more coming from and it is -- is it across all the states and districts and how is it?
See, we have a very calibrated growth in terms of things. And within -- we don't have any huge saturation in one state. So we will be looking at all the states for growth given our presence in terms of the number of branches. So with the number of branches we have, we will have a very calibrated growth. So predominantly, if you look at the top 4 states, it will be Bihar, Tamil Nadu, Karnataka and Orissa. But UP may come up this month, depends, so we are little focused on the state of UP.
Okay. And how sustainable is the growth? Any outlook there? I mean you think so that it can sustain for a year or 2, the current factor that we're seeing right now?
So on the whole microfinance side -- I mean, there has been quite a few reports on microfinance, I think one was by [ Hitech ] in their global reports also. So the penetration in India is still very -- is much lower than what it can be.
Maybe southern states are slightly more speculated or penetrated as compared to rest of India. So the growth potential 25%, 30% can continue for quite some time. And in our microfinance business, we'll also -- we are growing individual loans and the small secured loans.
Given that right now, the overall microfinance industry is around INR 3.5 lakh crores. We are looking at -- I mean, the overall -- if you look at today's thing, we are looking at INR 18 lakh crores as a potential market. So there's a huge thing in terms of the growth aspect of it.
So there are tremendous -- so to answer your question, this growth can be easily sustained for next 3 to 5 years.
Okay. And in the home loans, if you can just further break down to how much was the growth in pure home loans and in the LAP book?
Monu?
Yes. Yes. So home loan, if you will see, we are today are in absolute terms, we disbursed about INR 1,900 crores of disbursement we did. And we have grown by about 5% in this quarter.
The LAP has grown by 19% Y-o-Y and 2% quarter-on-quarter. So LAP here is cautious because still we bring down our NPA levels to what our target is. We've been growing slowly, but the potential for this, with the revival in the economy is very strong.
Okay. And on the margin side, I think you have quite -- the spreads there, I guess, were maintained for this quarter. So what outlook you'd be giving for the rest of the fiscal, I mean you -- current levels to continue?
Yes, margins, we, I think, we'll maintain our levels. Margins we are fairly confident that we'd be able to maintain the NIM given the product mix that we have.
Okay. And lastly, on the branch expansion side, what's the outlook there?
So today, there's a branch expansion last quarter has happened in microfinance and housing finance. In microfinance, the larger branches, we split them into 2 from a better control and management point of view. In HFC also, I think a significant part of our expansion has already taken place. So going forward, this year, branch expansion will be slow.
Okay. But still, if you can just put up some number.
Okay. So if you see our -- in the -- if you look at our NBFC branches it basically cater to gold and SME. So we had something like 2,682 branches. As of March, there we have added about 36 branches, we'll be at 2,718 and they were in the pipeline. HFC branches have gone up by 24 and the microfinance, we have set up about 85 new branches in the last quarter itself. Now in this full year, I think it will be about -- if you look at NBFC, we probably have 150 new branches.
HFC, Monu, what is the plan for the rest of the year now?
We are expecting to open not more than 15 to 20 branches because in the last 2 years, we've had a good footprint of about 180 to 200 branches.
And microfinance...
We like to consolidate.
So microfinance will be a little more, maybe around 200 more branches will come up. But these are small branches in the -- as a split branches wherever from branches becoming larger, there we have to handle the key customers and the collections. So there, probably we'll split them. So I think that is the plan.
[Operator Instructions] The next question is from the line of Deepak Poddar from Sapphire Capital.
And many congratulations for a good set of numbers, sir. So first of all, I wanted to understand on what percentage -- yes, what of our portfolio is still left for repricing in that.
Repricing -- from asset side, you are saying?
Yes, asset side.
So I think -- so okay, gold loan, microfinance, we don't expect any repricing asset. Incremental loans maybe at a different rate. But Monu, what is the home loan or LAP portfolio that you see?
We are all done, Nirmal for now, if unless a new rate hike happen, it's separate. But otherwise, we are done.
Yes. So I don't -- we don't expect any repricing as such. But yield may improve with the mix change and the new customers onboarding at a normally, maybe slightly better rate in gold loan and other businesses. But there's no repricing, unless as Monu said, if there is a rate hike by RBI.
Understood. And is there any kind of, I mean, excess liquidity that you already mentioned that you have reduced? So any more scope there that we are looking for going forward?
No. We -- see given the growth in the business and the size of our business, we maintain at these level.
Okay. So we'll maintain. So in terms of NIMs, any kind of upside potential that we see, I mean, ideally, it is because of the...
See, what is happening in the NIM -- the upside potential will happen primarily because gold loan -- last year second half and most in March quarter was booked at a very low rate. So as they come for repricing or renewals, then you get a higher price.
Similar in microfinance also the incremental loans is a typically a 2-year product. So this last year, the prices started moving up. So the yield may improve there also. Also, in digital loan as we are going granular, we'll see some improvement in yield there also. So the mix change also because microfinance has been growing little faster than others, then also we see a better average yield moving up.
So we do feel that there can be an upside potential to the NIM?
Yes, there is some upset potential in yield improvement here. .
Okay. Fair enough.
But also bear in mind that our cost of funds is also will move up more or less in tandem because the banks have -- so what happens that their MCLR rate hikes -- so there are reset date. So some loans from borrowing from banks has been repriced, as some more will get repriced during the year. So there's a slight upward pressure on cost of funds also. So NIM will be maintained at the level.
Okay. Understood. Understood. Understood. And I mean you just mentioned, I think, couple of questions back that, we expect growth -- this growth can be sustained for 3 to 5 years. So are we talking about any particular segment or overall what the company -- at the company level?
So overall at the company level, okay, that's where the question was in response to microfinance. But all our businesses, we think growth can be maintained and if the economy remains buoyant and the CapEx of the government goes up, which has a cascading impact, then probably we should see growth can accelerate also. So at this point in time, I think 25% is a good target for the next 2 to 3 years, forever.
So sir next 2 to 3 years are 25% CAGR growth is quite...
The loan growth that's right.
Achievable target for us.
Because we expanded our network and we'll make our network more productive and the economy has been fairly robust. So I think affordable home loan also probably, Monu, I think we should see some acceleration now. Because last 2 quarters have been little sluggish, but hopefully, things will revive now.
Yes, because if you see, we've really expanded our footprint into Tier 3, Tier 4 geographies, where the impact on affordable housing lesser and the distribution has been enhanced. So we should see sustainable growth for affordable housing as well for us.
It's relatively longer lead time product and in terms of setting up infrastructure and getting the network right and also the customer. So outlook looks good at this point in time.
Understood. And my third question revolves around your credit cost. I mean the credit cost, how do we see the credit cost this year and maybe next year?
So I think as we have guided that our credit cost will be 150 to 200 basis points over a sustainable basis. So more or less, we are in that way now, I mean, maybe a few basis points here and there. So remain to look at level.
Okay. Understood. Understood. And lastly, on the cost to income, I mean, in terms of cost to income, how do we see that? I think -- we have seen some improvement in cost to income, but it hovers around 42%, 43%, right? So you have to see next 3 to 5 years, do you expect some kind of efficiency based on your leverage or the scale that comes with it? So any kind of improvement that we can see in the cost to income. If that's so, so how much is the improvement that we are in are...
So Deepak, actually, cost to income is one area where we can see significant improvement. And again -- so every business has a different cost-to-income ratio. And also which business grows faster also will have an impact. But our original -- what we are planning is to drive path to 35% cost to income ratio. But the way things stand today and we expanded our network and there can be more opportunities also at least like HFC has been recently expanded. We'll see some improvement and maybe it takes 2 to 3 years to reach our target of 35%.
But that's excellent, right? I mean in 2 to 3 years...
Cost to income, certainly, this will improve because it was all personal expansion, which was quite aggressive till last quarter. So I think we should see impact coming from this quarter.
Yes. So, I believe that's quite an excellent improvement, right? From current level of 43% going to 35% in 3 years, I think it will improve your ROA lot, right?
Absolutely.
Next question is from the line of Krishnan ASV from HDFC Securities.
I had a query on co-lending arrangement. Just wanted to understand how does the customers pricing? I mean I'm assuming whether it's home loans, for instance. So if a home loan borrower is EBLR link for the bank, how does the pricing then get distributed between IIFL and your partner lender?
No. Sorry, what link you said?
If the home loan is -- I mean, the pricing of the home loan is linked to the EBLR, right? When the repo rate moves up 50 basis points, how does the pricing get distributed between -- I mean, what is the share that gets distributed to the lender partner versus what is it that you retain?
Monu, you want to take it?
Yes. So Krishnan, if I've understood your question right, you're saying is that -- we have our own BLR basis which basis our cost of funds, that's how we define. So obviously, it has an included impact of the repo rate also built into that into our cost of funds, and that's how we do that. So was your question to say that how is it distributed between the bank and the borrower, is it that? Was that the question, you said?
So when you are originating and then co-lending, so there is a sharing that's happening that 80% that goes to the bank.
Okay. So you're talking about specifically co-lending, Yes. So in that case what happens is, what we are doing is it's every time, if the bank increases that. So we are resetting that in the same proportion as the share is which 80-20 that if bank increases something at that level and gets passed on the -- revised weighted average is calculated and accordingly, it's given now for the -- to the borrowers.
Okay. So which means if the bank moves to 25 bps, you would have to move an identical 25 bps there?
25% -- 80% of 25 bps would be 20 bps for that customer.
Yes. So 20 bps of the attrition would go to the bank, 5 bps will go to you. Is that...
Yes. Okay. What Monu is saying that, we are not obliged to move in the same ratio. But practically, that is what will happen.
Understood. Okay, okay. Understood. And just in terms of home loans for Monu. If you don't mind, just on your co-lending, given it's going to be incrementally a larger part of how you want -- I mean, how this playbook will be for IIFL. Could you just throw some light on what is the expectation that your -- what lender partners have from you when you're originating these loans? Are they looking for certain ticket sizes? Are they looking for -- I mean what is it that you are jointly looking for in your engines? And where are you finding that overlap best?
Sure. So Krishnan, if you know the entire co-lending was meant for the PSL book. So it any which ways is directed towards enhancing the priority sector loans. So for us and the banks, it is very much common what kind of [indiscernible] and the ticket size they are expecting.
And good for us that our -- any which ways our 95% to 97% of our natural business was priority sector loans. So we didn't have to really redirect our business model vastly in terms of the target group.
Now then comes is every bank has its own set of credit policies, which over a period of time, we've been able to map them and put them in sync. So every bank follows its own credit crits which we are able to do. And we are not feeling anything out of line that we have to really change our -- any course correction for us to do this business. I think naturally, our business fits very well into most of the bank's co-lending portfolio as well.
[Operator Instructions] Next question is from the line of Mona Khetan from Dolat Capital.
So my question was on the housing portfolio. How are you seeing the DTLs in this portfolio? Anything different versus over the last couple of quarters?
Sorry, Mona, can you repeat the question, please?
I was talking about the balance transfers in the housing book. Anything different that you're seeing?
No. Mona, really because any which ways for all the institutions, the rates have been increasing. So we are not seeing any radical change. It's very consistent as it was, say, about a year or 2 back and it's a very consistent -- we are not seeing any flight of portfolio of us, and any which way we don't target DT in much. So no aberration.
Got it. And has anything changed on ground when it comes to the competitive intensity in the gold segment? Gold portfolio?
Yes. So I think in a way, competition has eased little bit. I mean it's still intense but not as cutthroats and as -- so what happened last year that many people started a price war or a teaser rates, which were ridiculously low and obviously not sustainable for the customer.
And then I think most players they have understood the futility of it that is not going to help anybody. So to that way, market has become a little more sensible and the prices are more -- fair prices rather than the teaser prices, which are at a lower than cost and then you tried to increase it later. But I think that -- so competitive intensity has eased now. I mean it's there, but it's not as bad as it was.
Got it. And just finally, on the demand outlook on ground that you're seeing across all your core portfolios, particularly HL and gold, how is the demand environment at this point?
Demand environment is very good. Gold, in particular -- gold, microfinance, MSME is very good. Housing also is facing competition that way, it is also good and improving. So demand out of all core products is fairly good. Anyway, going forward also, it looks like that the -- in next few quarters, I think demand will remain strong.
[Operator Instructions] Next question is from the line of [ Navneet ] Individual Investor.
So it's great to see good traction in terms of your fund raise via the ECB as well as oversubscription on NCDs. I have just one question on your credit rating. I believe you are a AA by CRISIL right now. So my question was, in your discussions with these credit rating agencies, what are the triggers for an upgradation further of your credit rating too maybe AA+ or even AAA? Is it mainly size and if it is size and -- what is the size that they look at for an upgradation?
No, you're right. They look at size and the performance. And I think on all parameters, I believe that we have done well. So it's time. So maybe the result is a quite period and then after results, we need to follow up. So it's a review time from crediting agency point of view. But typically, it goes step by step. So from AA to AA+ and then it will take some time to move to AAA. But basically, scale and the quality of assets as well as performance management team, all these criteria are taken into consideration. And it's time that they take cognizance of these things.
So do you think you will be eligible for a AA+ rating in the next 12-odd months, 12 to 18 months? Do you think that would be possible?
I think for sure that we are eligible and we should -- we deserve that any point this way.
Next question is from the line of Saptarshee Chatterjee from Groww Asset Management.
Congratulations on a good set of numbers. My question is on the LAPs business, where -- in couple of years, we have reduced our ticket size significantly. But what you are seeing is the Stage 2 and 1 to 30 DPD remains quite high. So just wanted to understand what is happening in business? Are these like self-employed segmental having difficulty in the cash flows? And how we are planning to reduce it down? How is our collection infrastructure there?
I just like to tell you, if you will look at our growth of the AUM under this bracket, so we have had a very moderate growth over the last few years. So really, we've been trying to transform this business from a big ticket LAP business to more granular LAP business. So in comparison to home loan, we have seen that since from '21, it was about INR 5,400 crores, we have reached INR 6,800 crores, whereas HL has grown so much. So we've not had a denominator effect of it to balance out that. But as we are seeing quarter-on-quarter, the quality of recoveries has been improving and the GNPAs have also dropped like they were as high as 4.5% in FY '22 and now we're at 2.7%. So we are pretty confident that maybe by end of this March, we should see these numbers to be even below 2% for LAP business as well. And we are fairly in-house driven collection setup and we have been pretty successful in containment and now we should see reduction by March '24, for sure.
And in the microfinance side, if you can give some colors like how much would be rural versus urban in the portfolio as well as like a cycle-wise breakup of our microfinance customers and how many customers or what percentage of customers should be exclusive to us or one lender plus that way?
I mean in terms of our urban and rural mix, we have close to around 70-odd percent rural and another close to around 80-odd percent would be viable. Even our urban mix, we don't actually operate in the proper urban. We are in the peripheries of the urban thing. So we are, again, predominantly, you can say semi-urban and rural mix kind of a portfolio.
If you look at our Cycle 1 customers across both -- since we are on boarding lot more customers given we have expanded our branch outreach to new states like UP, we have started AP and this has worked -- except Telangana. Our -- right now our Cycle 1 customers are hovering around close to around 40-odd percent. The balance of customers would be from our existing segments.
And in this one, the new to credit per se would be close to around [ 18-odd ] percent.
And sir, there, what would be like customers who would be -- like we will be the only lender as well as there will be 2 lenders, including us?
The new to credit, what I mentioned is we are the first lender in that state.
And sir, in the digital loan portfolio, where ticket size is around INR 50,000, do we get to know what are the usage of these loans? And like how do we track that? Is it kind of the BNPL loans, therefore?
So we are -- most of them are small businesses and they are used for working capital primarily. And some of them are like personal loan, but these are all -- individual, self-employed people or professionals and non-professionals. So the predominant use would be more for working capital. So BNPL we don't do much actually because it requires very deep integration with the shopping and e-commerce websites. And secondly, the space is a little crowded. We've done some bits with the partners -- if [indiscernible] now been discontinued. So BNPL is not our focus area.
Okay. And there do you use that 5% [FLDG]?
No. Because most of the -- okay, RBI has come up with guidelines that is allowing that. So most of our business is not through partners where -- so 5% [ FLDG ] is relevant when you're relying fintech partner and they basically are sourcing the customers. They're trying to make some necessary assessments on the quality of the customer. So that is there, but it's very limited. So in our case, 5% [ FLDG ] business is not much.
[Operator Instructions] Next question is from the line of Tushar Sarda from [Athena Investments].
And congratulations on excellent set of numbers. I just wanted a little bit more understanding on your cost by assets business line, right? And you've given some information on Slide 44 and 45. So what I see is for gold loan, it's almost 5%, 5.5%, whereas I think the industry operates at around 3%. So what am I missing here? Why your expenses still are a little bit on the higher side?
So Muthoot operates at 3%, 3.5%, Manappuram and other people operate at 6% or maybe thereabouts. So it's all function of scale because if you look at their size or their average cost is more than 50% have in the half. As the branches become older, you keep getting scale advantage.
But if you really look at our operating cost of gold has come down from 5.6% to 5.1%, but the trajectory is to follow Muthoot, primarily they're still 2, 3 years away. And that is what is the same thing, which is earlier question was -- that the cost to income ratio will come down.
So our primary cost in NBFC is gold loan branches. So as this goes down, we see cost to income also coming down. But on scale. So what happens, if you keep setting up big branches and our productivity per branch remains low relative to Muthoot or established player. And then we have -- our cost structure is a little higher. But it's still -- I mean it's some time away. It's not going to happen overnight. But I think what we need to see is that it keeps improving. Our cost to income ratio keeps going down.
And on microfinance, what are your thoughts?
Again, microfinance in terms of -- we have been able to bring down the cost to loan and the cost to income, both are same. But if you see last -- this quarter has come down from 7.2% to 6.7%. The established players will be at 5.5%, 6%. So we'll also have to follow that path. And so we are on the right track. Maybe I can put that way.
[Operator Instructions]
I think, we're done.
Sir, we don't have anyone in the question queue.
Okay. Sure Thank you. Maybe, yes, Kapish can give the closing remark details.
Yes. So thank you very much ladies and gentlemen, for joining and supporting us. I hope it was very interactive conversation, that we had towards the end in the Q&A. We're happy to address any further queries that you might -- you may reach out to us at our Investor Relation email and anybody else in the company, and we'll be happy to address any query that you -- any further have. Thank you very much.
Thank you very much. On behalf of IIFL Finance Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.