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Intrinsic Value is all-important and is the only logical way to evaluate the relative attractiveness of investments and businesses.
Ladies and gentlemen, good day, and welcome to the IIFL Finance Limited Earnings Conference Call. We have with us on the call today Mr. Nirmal Jain, Managing Director, IIFL Finance Limited; Mr. Monu Ratra, CEO, IIFL Home Finance Limited; Mr. Venkatesh N, CEO, IIFL [indiscernible] Finance Limited; and Mr. Kapish Jain, CFO, IIFL Finance Limited.
[Operator Instructions] Please note that the conference is being recorded. I now hand the conference over to Mr. Kapish Jain. Thank you, and over to you, sir.
Thank you very much. Good afternoon, everybody. I hope you and your family is good. Thanks for joining us on this call -- quarter 4 earnings call for fiscal 2022. I'm Kapish Jain, Group CFO for IIFL Finance. On the call, I am accompanied by Mr. Nirmal Jain, our Managing Director; Mr. Monu Ratra, our CEO for IIFL Home Finance; Mr. N Venkatesh, CEO for IIFL [indiscernible] Finance. I now hand over the mic to Nirmal to comment on the economy and the group strategy and plans. Over to you.
Thank you, Kapish, and welcome on the analyst call for the full year FY '23. So to start with my views on the macro economy. Today, there are divergent views about India's macro economy and prospects, because we are concerned about high inflation in the U.S. and Europe, and the impending or kind of moving recession period there, and also the [indiscernible] only back home.
But if I first -- my first view is that things are good in terms of macro stability are far better than ever before because, on one hand, facing [indiscernible] -- and therefore, even interest rates or peak out, and we saw that the last policy, last LPC basically falls [indiscernible]. And this is backed by our current accounts that is coming off after beginning in September. And after the [indiscernible] prices are helping us. So foreign exchange regions are in good state and the currency is also stable relatively.
IIFL margin is good, then I think the [indiscernible] demand also will come back. GDP growth may be 6.5%, the potential of India is much more. But in the world that is today, India is having a sweet spot. And on the whole, given the stable external environment, stable politics and the economy doing generally well and the inflation, and just picking out our outlook for the economy, financial services as well as trade market is positive and optimistic.
But in terms of -- there are many concerns, fear or belief, people start and ask questions about the bank credit growing too fast. What is the potential of co-lending or data becoming available to anybody, how would NBFCs grow. So I just wanted to put some numbers in perspective.
So banking sector critically is around INR 140 lakh crores today. And out of this, if you see the margin market by itself is around something like INR 24 crores, INR 25 lakh crores, which is -- so if you really -- because our share of overall margin is about INR 1 lakh crores. That was a huge potential to tap for us to grow also. And the market itself in India, the market GDP ratio is 11%, which is only the lowest. So obviously, mortgage is grossly underpenetrated.
In the last quarter, we have seen some slowdown in the affordable home and demand, primarily because of interested increase as well as the [indiscernible] price increase, the cost and the prices have not come down to make up of the interest rate increase, but this is completely fine as we see the interest rate fall. Things should come down as the demand probably can accelerate again. Overall, mortgage industry did well and the luxury segment actually much faster.
The affordable sector has come a long-term potential, as I said, the [indiscernible] 11% of GDP, in 70% of developing countries and has been above 100% in some developed projects like U.S. So there's a long, long way to go. Then if you look at MSME sector in the industry, the MSME created by banking sector, is about INR 35 lakh crores, INR 40 lakh crores on manufacturing and more INR 35 or INR 40 lakh crores for services. So together it's around 80 lakh crores. And still everybody agree from the government banks to use bank that we traded in this sector grossly underpenetrated. So again, there's a long, long way for this industry to grow. And the size of business that we have at this point in time is very, very insignificant compared to the potential.
Even though Goldman and micro finance business is primary centered to customers because they're all small businesses and some instance lending activity. Now the question is whether the entire potency can be kept by banks, or there's an opportunity or the needs in which we operate. So in my view, again, what our experience is in the last few years that we have [indiscernible] ban branches and people. They get it to very small ticket. So if you look at our ticket size all loans in business or MSMEs, digital over 3 lakh, 4 lakh or 13, 14 lakh per affordable home and 50, 65 for home [indiscernible].
So these are much bigger market above us with banks still a [indiscernible]. And these are the customers which are visited for [indiscernible], require excess to the customer, we have got the loan branches that we set up our new win-win branches with just getting on the cost structure is very come bank if there was to have a similar kind of low mobilization, sort of system. It would be far more extensive for that.
Also on data, why the data on for everybody, but people still at learn how the these data, and there are very large number of parameters that people use, and it's continuously evolving learning and emerging algorithms that for [indiscernible]. and obviously, we have invested in category and we believe that we are using the new technology infrastructure of contributors, transition data by alliances with large security players as well as our own organic marketing and getting customers.
So the digital infrastructure, the digital investment that we have, the branches that we have and people that we have, that basically gives us a moat to continue to grow our business.
Now we expanded our network of branches and people in the last 2 years with MSME. We can now slow down this expansion and still we are not capacity to sustain growth of our targeted growth of 35% in our loan yield as well as our income of bottom line. Last year we ended, we have grown our profit in line with our target. But the change that we have seen in last probably the most of analysts and investors who are working as we would see in the last couple of quarters. The [indiscernible] is increasing. And obviously, the relative share of direct assignment of sacrificing will have come down with the resell.
In terms of accounting, which we follow in the increase of assignment, we have upfront the [indiscernible] value of what is already off the book. But in case of core value and accordingly, the excise increased quarter-after-quarter. So what we will see probably over the next few quarters is that the co-lending income, the excess interest or the different content we get will keep growing, the fronting will keep reducing. And basically, that is second -- that impact on the whole will be probably be lesser and lesser as we go along.
Also, in last quarter, as we have seen for the last few quarters, the COVID impact is now over. Our asset quality is back to the normal level, which is even applying having implemented RBI is a new circular and most signing for income and asset quality. We are still at 1.8% in GSP, which is well below our target of 2%. And NNPA is above 1% and here again, our target is to keep it below 1%. Asset quality can further improve into the next few quarters.
In terms of cost of points in our margin, our margins are improved because there has been a systemic interest in and obviously, that allows us to increase the pricing of our products as well. Most of our products are small, which are relatively where it's not very difficult to pass on the interest rate hike. But at cost of fund is not one that's gone up in proposal, primarily because our rating in critically the banks have improved.
Our interest rate also has been upgraded. Also, we have fully repaid now the dollar loan, which is the MTM bonds we have issued in 2020, in aggregate about 400 million out of [indiscernible] million before margin even in 270 million has now been paid on, I think, April 31, with hedging and everything all included, the cost was very high at around 9%, that probably -- that should also help us in strengthening the increase in cost of funds, which is the impact of a rate increase across the system.
We can deploy as much infinitely as possible in our presentation as well as call. So we had these people have some downturn questions or queries about the data on the changes in number, I really appreciate if they can raise the ones thatt we have seen in social media, which is about digital loan. Now digital loan is about 3% to 4% of our portfolio, and the numbers for Q3 and Q4 and the region are in dollars.
It is not because of discontinued business, but there are some small portion of lap, which was digitally done, but we thought that there's a conflict in classification and will take lakh as a primary classification. And therefore, you will see that the Q3 numbers as lakh, the lakh has relatively lesser GMP as compared to unsecure digital loans. So the Q3 number of lakh, which was only at 3.9% at 193.48 as part of digital loan which the lakh has moved to bill.
And constant the digital loan and GNPA which are reported [indiscernible] for the last quarter have almost a [indiscernible]. It's small INR 674 crores portfolio of lakh which is digitally done. Now we classified as lakh as digital loans, and there's nothing to get excited about the 3% to 4% of loan in terms of how we present the data. We'll answer all your queries either by mail, or you can talk to our Investor Relations department or ask us questions on this call.
So with this, I hand it over to Kapish to take you through the details of the comparative numbers and then we'll take Q&A.
Thank you very much, Nirmal. So first, I'll take you through the quarterly performance numbers, followed by [indiscernible]. So as mentioned by Nirmal for the quarter, the [indiscernible] confounded loan area for the moved up by 36%. And on quarterly basis, we moved at around 12%, looking at around INR 6,638 crores. And as I further said the AUM growth in core products, gold loan and AUM and home loan AUM grew by 20% and 23%, respectively.
My [indiscernible], which is more like a media segment has grown by around 59% in this year with improvement in the entire regulatory framework, which came into the segment. Digital loan and [indiscernible] property grew by around 33%, 18%, respectively. So overall, the core loan portfolio grew by 29% after securitizng, and the noncore in line with our strategy had further than by around 11% Y-o-Y and 4% Q-on-Q. And this is something which is [indiscernible] to be muted. The noncore now comprises 95% of the overall year end, gone by around 2.1% and transforming the non-loan core is comprising of 4.9% has come down.
So in accordance with our capital optimizing strategy our AUM is either assigned or under full even. And the assigned loan offsetting trends at around INR 16,979, up 19% Y-o-Y and 7% Q-on-Q. Impressively, the core loan, core lending book has increased to around INR 7,557 crores by fiscal '23, up from [ 4,845 ], a 100% jump and this company which in with mutual banks and across our products, primarily both ends where we [indiscernible] businesses.
During the quarter, we also added 2 new relationships in core lending IDBI Bank and India [indiscernible] Bank for core lending of good and micro labs, respectively. So for the quarter, our reported profit before minorities stands at around INR 457 crores, up 43% Y-o-Y and 8% on a quarter-on-quarter metrics. In this quarter, we also added across our businesses 300 branches and around 1,200 employees across -- we will get to a higher cost-to-income ratio of 43%. But going forward, our strategy is to monetize our chances, make them more operational and more efficient, along with other cost, drive initiative that we are working on companies. This should enable us to report a far lower cost to income as we go towards this fantastic [indiscernible] right?
Our cost of borrowing increased by 38 basis points Y-o-Y compared to a 250 basis points that we saw and almost more than half of that has also been passed on through the MFI [indiscernible] bank. And 14 basis points sequentially now 8.92 is the cost of growing. Gross NPL, [indiscernible] mentioned, trend at around 1.8%, down from [indiscernible] by around 1.3% and 0.24 Q-o-Q, and net NPA is around 1.1%.
The diluted earnings per share for the quarter stand at around INR 10.3, up 28% on Y-o-Y and 9% quarter-on-quarter. Just to briefly highlight this enablement on the cost of borrowing was possible only by entering healthy liquidity. We continue to maintain healthy equity and the liquidity number stands at around INR 9,356 crores.
In the quarter, [indiscernible] various sources we regulate the INR 80 crores, total loans, bonds and through referrals. And we also built around INR 390 crores of breaktime by selling retail loans to bank. Our goal [indiscernible] at home initiative, which is really progressing [indiscernible] , saw significant traction during the year with disbursement more than INR 1,000 crores. And this has been improved as well in that business. We now have monthly INR 100 crore, which considers 3.5% of our total gold loan AUM.
With this, I will now discuss the annual performance for the year 2023 consolidated tax before minority versus INR 7 crore, up 25%. And our pre-operating provisions, a pre-operating profit was Q1, which is again show an improvement around 24% Y-o-Y. As I mentioned, 95% of our loans in retail offer 70% of the loans are PSL compliant. And the rest are gold loans, which is again a asset for the bank.
More importantly, the retail and the PSL loans are of significant value in different environment, where we can scale down the kind of asset performance that we have demonstrated to our [indiscernible], we have pulled a very good relationship for those lines from delivery and performance perspective as well. Overall, the collection recovery is something we entirely are from driving the whole [indiscernible] for the bank, while the risk on the trade is completely passed on as we can deliver to them.
Our consolidated ROE for the year stands at around 19.9%, at a lower gearing because of the area INR 300 crores, INR 10 crores of primary capital team in our subsidiary company app in home. And then we reported ROA of around 3.3. Our capital adequacy sell around 20.4% in the NBFC, and a very healthy 47.3% in the housing finance subsidiary as of March 1. And you can see our CRR is well above the minimum threshold [indiscernible] needed, and with our off-balance sheet strategy and the internal approvals, we believe that we should only be able to improve with that as we progress. For the year, our average cost of volume increased by 300 basis points to 8.8% on an average basis, above 20%, as I mentioned, to be around 1.8%, which is stated because of the guidance that we gave earlier.
With the indication of the expected credit loss or entire provision coverage on [indiscernible] stand at around 1.6 specific provision. And our earning per share for the whole year was around [indiscernible] -- around INR 39.5 per share, up 25% and the book value is around 2,971, vis-à-vis [indiscernible] 20%.
We were very positive AUM thereby in force or achieve most of the expected outflows across all our buckets. And the net gearing stands at around 3.5% which is only by 4.2% from fy '22. The [indiscernible] digital loans are part of unsecured loan business with an active customer count of 3.94 for fiscal '23. That's what I have, and we're happy to take more questions with this I will come the floor for Q&A and be happy to answer all questions that you have or we come back to you in [indiscernible] look on today.
[Operator Instructions] The first question is from the line of Anusha from [ Dalal and Broacha ].
Congrats on good set of numbers. Going forward on FY '24, you had a couple of outlook on the credit growth side, how do you see either panning out? And what will drive the growth? And in current fiscal, we have seen [indiscernible] very strong growth and digital loans as well.
So a broader, what is the growth guidance in each of the segments? And also, if you can elaborate more on the margin side, I think given so far well managed on the margin side. How do we see your scenario panning out in FY '24. Because I think many of the notes are taking a hit on the funding cost side. So what will be your outlook on that?
Thanks, Anusha. And one is on the credit growth side. As I said, that we expanded our network quite significantly and also invested in terminology. So our targets or our -- the goal is basically 25% credit growth.
In terms of margin, we have [indiscernible] some bit of upward pressure on the cost of [indiscernible]. But hopefully, we should be able to mitigate by savings and cost to income as we slow down our expansion. And to put things in perspective, we may, we would have set up almost 90,000 branches last year.
This number may be about INR 150 or 200 much more than that. Now why 150 or [indiscernible] is what we do in micro finance business in particular, is that the larger banking we split them in 2 from better risk and operational control. And there being certain strategic locations which are very good. So I think the number of branches will be just about, maybe around 15% of what [indiscernible] last year.
And therefore, cost-to-income ratio should mitigate the upward pressure on cost of funds. But still relative to our peers, we should be better off because we have set of our high-cost data bonds. And with our rating and credibility being better this should be [indiscernible] better than the lenders.
Okay. So still -- I mean, on the spread side, how do we see it? You'll be able to maintain FY '23 levels? Or...
I think we should -- will be able to maintain the pressure for level. And for everybody, what we have done as net interest margin, we have given the interest spread, which is different in [indiscernible] cost of borrowing percentage for full yield. Because as you say, net interest margin. And when you say net interest margin might improve, investment income and the [indiscernible] denominator, they don't match.
So I think the spread that we've given in our presentation now is more relevant and more indicative of what is our actual margin. We should be able to maintain that [indiscernible].
Okay. And how much was the benefit of this high cost on that deal?
So these are almost per costs where -- maybe Kapish will give you some small update on that.
So -- and as Nirmal mentioned, this is around $400 million of high cost bond volume that we had, some bit of it we paid [indiscernible], and the remaining period in February of this year, which was a double-digit number to saw 11%.
And we also recently had [indiscernible]. We also got another INR 100 billion. [indiscernible] the landed cost is around 90.
So a we see about 180 basis points on this what we repaid.
Okay. Sir, on the transport side, you said 50 to 200 is for total branches or only for the other side?
No, total branches.
Total branches should be...
Yes, so maybe home loan and NFI all put together.
All put together. Okay. So that will be a...
Together, we had about 900 branches, out of -- yes.
So 150, 200, that's all the run rate that you might expect over the next 1 or 2 years?
Yes, this year, for sure. And then let's see how the opportunity in that and out for next year. So our real [indiscernible]. Next year, also, I don't think we need to accelerate because we need to make the existing branches [indiscernible].
And then once we get the cost-to-income ratio to a more profitable level and then we can embark upon the next phase. And that is also depends on the economics and the business environment will depend in time.
Okay. Sir, lastly, on the asset quality side, I guess what is the credit cost, internals that you're working on? Because I guess you had mentioned that it would be closer to around 200 basis points order. So any change in that number? Or are you looking at it?
So I say we should be -- maybe this quarter, probably we are at the rate of 220 basis points. But going ahead, I think we should be at the target rate of 200 [indiscernible]
The next question is from the line of Renish from ICICI Bank.
[indiscernible] for the operative correction and the renew from ICT. Yes, so 2 questions. So one is on the -- in fact, I mean, [indiscernible] the golden bills, question as comes into effect. So any assessment how [indiscernible] because of a [indiscernible].
I'd say we're already seeing all our products, and we don't -- I mean, there'll be negligible impact. There will be no impact because we are not really charging same amount of interest now. .
Okay. So we have already our product.
That's right.
Got it. And sir, secondly, in your opening remarks, you..
We never had a significant component of this, but we have further fees dependent on this anymore. .
Got it. And just secondly, your opening remarks will be mentioned about sort of ongoing the securitization and building more of equal lending book. So accounting wise, of course, this funding of income will go away. So [indiscernible], how do you see lie sustainable ROE, ROE sort of looking like in '24 and beyond? Just considering the [indiscernible] mentioned numbers.
No. So I think we'll be -- sustain our ROE. As I said, that this is -- as a takeout for a period of time. But core lending, the sort of core lending will keep growing. So whatever working we have done integrally, I don't think there will be any negative impact. So we should be able to have or maintained the profitability as well as our ROE.
Or basically ROE around 20% on a [indiscernible].
And 25% growth in water, I mean the core lending, 25% growth in the top line as well as bottom line. So that is what I think we've indicated, so we are on track. So at this point in time, we don't see any [indiscernible] to that.
Got it. Got it. And sir, on a, let's say, ongoing basis, what should be the split between on balance sheet and [indiscernible] to the year?
Yes, that's a good question. Normally, it's 60-40. Now in the home loan because you raised equity and we are sitting on a significant liquidity there. So probably this year in the home loan go down a little bit. But over medium term, it will say 60-40 and probably they can go to 55, 45 also. So 45 off book. But in the entire the homegrown fees because we have higher capital [indiscernible]. This year, probably there will be a drop in the order book there.
Okay. So at consolidated level, this year should be 65-35.
This is also probably be in the rate of 60-40, give or take 100% in there. .
Got it. And then going, it could be [indiscernible].
Yes.
The next question is from the line of Nishant Shah from MLP please go ahead.
This is Nishant from Millennium Capital. I had a question on just the gold loan business. Like the larger kind of like peers alluded to like the competitive pressure now kind of easing off a lot of the gold [indiscernible] loans, which are given out at like lower yields, also are running off. We're seeing much better growth at IIFL, but that the yields seem to be quite stable like sequentially, like let's say minor debt as well.
Could you talk about that, about your business, at what is kind of driving the growth, what is driving the kind of like relatively somber margins? And just like a broader industry comment on where do you see the competitive intensity in the gold loan business because some of the other banks, which have reported very kind of good transit gold loan growth. So any comments on like the competitive pressure, deltas?
So the competition is easy. That's a fact. And I think that should also, in fact, release the pressure on prices. I'll talk to that in a minute. And the bank, basically the bank's gold loan portfolio is around INR 90 crores which is net gold loan portfolio. And some banks actually when they have are gone with the curator still be classified every way.
So I would think that the bank's gold loan portfolio is going to portend bigger than that. So obviously, they have a much larger and maybe will be close to about a [indiscernible]. But in terms of pricing in our portfolio has grown quite well, quite aggressively -- and there has been significantly larger disbursement of the new loan, which has been at a competitive rate, one.
Two, as I just said that the penalty we have removed in terms of distribution of the changes in policy that are going to take place now. So that has impacted our [indiscernible] slightly. Also in terms of, what, product, if you have a monthly [indiscernible] product, which are not older were slightly lower.
The impact of the price increase or the increase of competitive pressure also happens only for the executive business and not for the portfolio as well. So we should see client ratio implement 17.5%, 18% is what probably long term also will be maintained. So while competitor ease is from new players, but bank competitors that's still aggressive.
So if you -- I think on a mid- to long-term basis, it might be 50 basis here and there, but this is a yield than where we'll be.
We have the next question from the line of Mona [indiscernible] from Dolat Capital.
I had a couple of questions on the gold book. So we have the of about 20,000 to 21,000 crores, how much of this would be [indiscernible]?
Out of the current book of INR 20,000 crores, maybe half of it will be also for the number be was INR 8,350 crores, which is on Slide #13. So that is gold book and the balance is off book. .
Okay. And if I have to look at the breakup of the AUM of 35 crores. But as at the breakup of this gold AUM by 65, what would be the share below 1 lakh, between 1 to 3 lakh and share above 2 lakh, if it makes sense.
Up to 1 lakh, we are 33%. 1 to 2 lakh is 36%. Less than 2 lakhs, we are 59%. 2 to 5 lakhs is 33%, and greater than 5 lakh is 17%.
Greater than 5 lakh is 17%.
1-7 percent is above 5 lakh, 33% is below 5 lakh.
Got it. And just finally...
[indiscernible] is below 2 lakh.
Got it. And finally, again, what share of [indiscernible] would have probably moved below [indiscernible] 12%?
I think maybe it will be around 40%. Sorry, INR 4,000 crores below this, about 20%. 20% is below our [indiscernible]
[Operator Instructions] The next question is from the line of Sanket Cheda from DAM Capital.
Yes. Congrats on a good set of numbers. My query was again to the point that you alluded in the focus is now more on core lending, maybe the upfronting related income would be less, and that's visible in the revenue from operation lines that we report on net gain on the recognition.
But this quarter, there has been a sharp uptake on [indiscernible] fee and commission income and other income. So is that because of the core lending thing, wherein...
Yes, there are 2 key things there. One is that the disbursements are higher. So there's an amount of processing fee that is on disbursement, 2 [indiscernible] and 3 [indiscernible] of insurance as a peak in this quarter. So historically, also our Q4 per commission will always be higher.
Because [indiscernible] insurance also come here. I think last quarter, we did -- the insurance that is done is like maybe more than what we do in the previous 3 quarters. So that core lending as well as disbursement it is all [indiscernible] combined.
Okay. Okay. So on the, say, net gain on amortized category, so since the gains are coming down, do we expect the loss under the retina moderate or come down as we move ahead and reduce the pool there.
No, sir.
In the expense, we also recorded net loss on the retention, right, on the [indiscernible] instrument.
So normally, there will not be investment of the recognition, because that can happen and supposing that you have assumed certain longer tenure of the loan, and the loans get repaid because any prepayments or whatever much shorter. But normally conservatively on the whole, so it's unlikely that they will have any significant loss there. But in this [indiscernible] here, quarter-to-quarter, we sometimes will be gained and then will be the this is not a significant number.
Sure, sir. And lastly, since we are talking about some operating [indiscernible]
So what has happened in this thing okay. Sorry, just to explain something that Q4, we have impacted more by the MCLR increase by the bar, which is higher than the rate increase to be passed on, particularly in our model group. So what happens is that when we do [indiscernible] and we do assignment, the interest rate we just committed to the bank on the go-to bank, many [indiscernible] to [indiscernible].
Now if you look at our overboard [indiscernible], and so we actually -- when we pass on the cost increase, we are -- we all things. One, particular home loan, we don't want the assets to the default to increase; two, we also have a long-term customer where the [indiscernible] has been a repeat business; and three, we can accrue and what is the capacity to sort of an which is our margin as well as what we need to pass on.
And if we look at the environment and do that, I think that impact also from last quarter. But hopefully, this quarter onwards, we have seen that the bank still has not increase or might be corrected, I think that also not be clear.
Sure. Very clear. And lastly, I wanted to ask that since we are guiding that maybe operating efficiencies should start to kick in, where we are guiding for a lower cost to income. And also this year, despite, say, the cost of funds moving up, we have managed to grow about a little more than 3.5% ROA. So as we move ahead in FY '24 or FY '25, do you see a possibility of waiting 4% in terms of ROA with operating efficiency taking in? And maybe at some point, paid costs also may be normalizing update. So do we see that...
Consistently improve our ROA and the trend will continue. So whether -- I mean, maybe 4 or [indiscernible] what we should start in this year.
[Operator Instructions] The next question is from the line of Nischint Chawathe from Kotak.
Till date probably in the fourth quarter, how much rate hikes will you have had for your customers?
Sorry?
In the fourth quarter, that was last [indiscernible], how much of rate hikes would you have done for your customers?
So we have done 150 basis -- correct if I'm wrong, in [indiscernible], have taken 150 basis points?
Yes, but he's asking only on Q4.
In Q4, I don't think we have any data with that.
Yes. There was just a 25 bps rate hike, that's it.
25 bps rate hike in Q4. And that is relevant only for home loan because in other products, we don't do any rate hike changes.
But even in the other products, we have increased rates for incremental customers, right?
So in micro finance business, we increased 100 to 200 basis points. It depends on state to state. And -- so home loan make 35% rate like in micro finance, but [indiscernible] happen over the last 3, 4 quarters. So in digital loans, I think we have taken a rate hike of about 100 basis points. That was more big media.
So broadly across cross products, were around 100 to 125, or the entire [indiscernible]?
On a weighted average basis, because home loan is almost half of it, will be about maybe [ 60 ] basis points.
For the fourth quarter, you mean.
That's correct. Yes.
Okay. And the 100 basis points you said, 100 to 200 in microfinance is solely in the fourth quarter.
No, there's a couple of [indiscernible] quarter. So if you see the report yield of the product to them that will basically tell us over [indiscernible] give you [indiscernible] Yes. So our portfolio yield in the 2 microfinance has gone up from 33.2 to 33.8, so 60 basis point increase there.
But again, these are fixed rate loans, right? So more for [indiscernible]
[indiscernible] -- but yes, there is the churn is also high yield results, but we are [indiscernible] right.
Sure. So over a 4-quarter basis, very broadly over a 4-quarter basis, 100 to 125 in more [indiscernible] is what you are saying?
On the incremental loan, yes.
And in the fourth quarter.
[indiscernible] 40 basis points. But you are right, because this is the new loan. So the new loan is coming [indiscernible].
The second question will be on leverage. Based on your conversations with banks or rating agency, what kind of leverage are we comfortable with? And do they see this as the EM upon network, or do they see this as loan on balance sheet upon network, how do they really see this?
So our -- I think they are comfortable up to 4.5x, maybe in NBFC about 4.5 and [indiscernible] can be switched up to 6, 7x comfortably. And this is basically done on balance sheet. The off-balance sheet is not part of this, but this is also, again -- so network to your debt on balance sheet, that is a revenue number.
So when you [indiscernible] question arises whether in gearing or investing the [indiscernible] or the assigned pool should be taken Now if you really look at it, when we assign it, it becomes part of the bank's risk management. Because we are required for this matter and they have to take that as -- they actually allocate this capital to take that part of their gearing.
So it can be double counting. And we [indiscernible] in many countries where we bundle as of [indiscernible], obviously, there's a true sale along with the risk, then the seller basically gets off the balance sheet completely without any gearing or any risk capital.
And from a regulatory point of view, there is no cap or no restriction.
On the regulatory point of view, unless you take a lot this the pricing sector advantage also.
Got it. And there is no cap in terms of how much from an NBFC or to the order book or so, there is no cap right now?
No, there's no cap.
[Operator Instructions] The next question is from the line of [indiscernible] Shah from [ Anuguti ] Advisors.
Given that you have provided for the guidance of 25% in top line and bottom line, and also guiding about 20% ROE. But my question is with respect to the net NPAs. So we are above like 1%, we have around 1.3% of net NPAs. So going forward next year and beyond, what is the level that we can expect in case of net NPAs? Would it be going down to, say, 0.7, 0.8 or it would remain higher, given that we are lending to, say, segment because a higher yield. So what's the understanding of this net NPA part? What is the guidance about it?
We would like to bring it under 1%. No, we really can't guide you in the 70%, 80% or 90%, but we'll bring it under 1%. In basis point, it should be 2 digits and not 3 digits, so.
But our [indiscernible] coverage is significantly more than 60%. So what is happening in net NPA we are really aggressive and stay [indiscernible]. The net NPA income will have come down. But in terms of our total provision, it's significantly more than our gross NPA.
So supposing if I were to provide the management over there and I said that all is provisioned against , I think we can become 0, but that is more like a [indiscernible] optics. But speaking with our provision coverage almost 160%?
67.
167%. So what it means is that the total podium we carry on the books is 1.67x our GNPA.
[Operator Instructions]
I think it's over now, so maybe we can conclude. If there are no more questions, [indiscernible].
We do not have any further questions. I would now like to hand the conference over to the management for closing comments. Over to you, sir.
Thank you very much, and hoping it was a very meaningful content that we have in [indiscernible] further queries, feel free to write to us at an investor at [indiscernible] and we'll be happy to answer your questions and keep the engagement going.
Thank you so much. Have a good day. Thank you.
On behalf of IIFL Finance Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.