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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 SBI Cards and Payment Services Limited Q3 FY 2023 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Rama Mohan Rao Amara, Managing Director and Chief Executive Officer of SBI Cards. Thank you, and over to you, sir.
Thank you, Faizan. Good afternoon, everyone. First of all, let me wish you a very happy New Year. I would like to thank you for joining us today for Q3 FY '23 earnings call, the first earnings call of the new calendar year.
The continued geopolitical tension and COVID upsurge in China, the world economy is still on stable ground. In this turbulent macroeconomic environment, India continues to be a shining beacon as one of the fastest growing major economies standing as 5th largest in the world now. It is reassuring to note that RBI measures to reduce inflationary pressures have started yielding results as evidenced by PPA inflation in December closing to 5.72% with the WPI inflation at 4.95%.
India's GDP for FY'23 has been projected to grow by around 7% as per government's advance estimates. The festive season that started from September '22 has been the strength of India's domestic consumption from strong consumer sales during Diwali season to busy holiday travel season in December India consumer spends have improved further. India's consumer confidence has been improving, which is an encouraging sign of the country's future consumption prospects.
Now talking about the digital transactions, they continue to exhibit robust growth in the country. According to report by Worldline India, digital payments grew to over 23 billion transaction in Q3 2022. This shows an 88% increase in volume as compared to Q3 2021. Among other digital payment instruments, credit cards have also registered a very healthy growth. Credit card base has expanded from 67.6 million in November '21, to 18.6 million in November '22. Since March '22, industry has been witnessing monthly spends of over INR 1 trillion reaching an all-time high of INR 1.29 trillion in the month of October 2022.
Growing customer base, and increased usage along with the new and favorable regulations, especially linking of UPI and credit cards will help the industry maintain an upbeat momentum. Given the low credit card penetration and favorable demographics, I would like to reiterate that services growth potential for the card industry is immense.
Let's now look at SBI Cards business overview in Q3 FY '23. At SBI Cards, we leverage this upbeat market momentum in Q3 to big scale both in our new card closing and spend base. This helped us partly absorb the impact of changes in the credit card industry. This quarter saw some of our traditional revenue streams base impacted. However, the steps taken by us to reset, reinvigorate and build business for the future have strengthened our acquisition caliber and added revenue generating avenues for the future. We will see the positive results of these measures accruing quarter-on-quarter in times to come.
Specifically, the quarter was marked by 3 key developments. The first one is implementation of more RBI Master Direction guidelines. We have put onus of issuers now to make the systems and processes more customer centric, leading to timely resolutions of customer issues. While these regulations have brought in many benefits for the ecosystem, the industry has seen some adverse impact on the revenue during the quarter. Example the changes limit to credit limit increase and non-capitalization of unpaid charges leveled taxes, et cetera. SBI Card had anticipated this and has already taken mitigation measures to largely offset them.
Second point, the continuation of festive season. We continue to invest in initiatives and offers arrived to customers' preferences, including national, regional and hyper local offer with a special focus on EMI transactions. Focus our efforts to grow our EMI loans portfolio is yielding results and we are striving to improve the NIM and interest revenue over the next few quarters. This customer engagement initiative required larger marketing spends as reflected in our results soon.
Third point, the interest rate hikes. As guided in the past, due to increase in the interest rate, our cost of funds has also increased. We have taken measures to transmit the increase in the cost of funds where possible by dynamically revising the pricing of our new EMI loan disbursal. Coming to specific details on our performance during Q3 FY'23, I'm happy to share that SBI Card continued to deliver robust business performance. The performance was a result of a sharp focus on key priorities. The first one, well calibrated and strong customer acquisition to improve market share. We added about 1.6 million new accounts during Q3, including a 62% year-on-year growth, the highest ever during a quarter.
Average monthly sourcing this quarter was at 5.4 lakhs per month versus 4.3 lakhs in the previous quarter. SBI sourcing was at 49.4% versus 37% in the previous quarter. We reached 15.8 million cards in force with a healthy 21% year-on-year growth. The market share for cards in force stood at 19.3% as per RBI November 2022 data. This is the result of well thought through investment and scaling up of our traditional and the digital exhibition. The results are visible, both in terms of overall numbers and the economies of scale that we have achieved.
Third, we had piloted and entered the digital acquisition platform, SBI Card SPRINT. This pilot has shaped well on expected lines, and we plan to harness its potential in a much better way in future. Our traditional open market and banker channels too have reached a steady state. Compared to 3 lakh cards per month this year, our card acquisition per month now is 5 lakh cards and we plan to maintain this run rate provided the environment is stable. This is expected to give us a net addition of 0.9 million to 1 million cards in a quarter.
Second, our steady and sustainable spends growth. Our spends growth has been steady during the quarter. Overall spends have grown by about 24% year-on-year in Q3 FY'23, reaching at another highest ever spends milestone in a quarter at INR 68,835 crores. Changing average retail spends is 2x that of pre-COVID period that is December/January'19 to February '20. Retail spends have also shown some 29% year-on-year growth at INR 54,562 crores in Q3 FY'23.
Online spends continued to be strong and contribute over 57% share in our retail spends. Point of Sale too, we have seen a healthy growth across key spend categories including consumer durables, apparels, furnishing, and jewelry. Travel-related categories have grown at 32% year-on-year, driven equally by online and PoS.
Corporate spend stood at INR 14,273 crores in Q3 FY '23 with around 10% year-on-year growth. As per RBI November 2022 data, our spend market share stands at 18% for FY'23. The third pillar, engaged and active customers to build earnings asset. Our strategy of offering fee-based cards has been vindicated during the past few months. Today, we have a strong base of engaged and active customers. Our spend active rate continues to be at 50% plus. Spend per average card has grown to INR 1.79 lakhs in Q3 FY '23, around INR 1.72 lakhs in Q3 FY'22. Receivable per card has grown by around 10% to INR 24,318 in Q3 FY '23 from INR 22,133 in Q3 FY'22. Our gross credit cost percentage for the quarter is at 5.6%, down from 6.2% in Q2 FY'23. Our receivables have grown by 33% year-on-year, reaching INR 38,626 crores as of December '22, which is this as a result of changing consumer behavior on seeking attractive lending option, we have focused on increasing EMI assets, resulting in high interest bearing effect comprising of both EMI and revolver, in Q3 FY'23 at 61% compared to 59% in the previous quarter. We continued with the expansion of our credit card portfolio and partnered with Punjab & Sind Bank to launch 3 co-brand variants for millions of Punjab & Sind Bank customers. We are exploring many such customer-centric partnerships and opportunities, which we close over the next few months.
Coming to financial performance in Q3 FY'23, SBI Cards continues to focus on sustainable and profitable growth, showcasing utmost resilience despite the dynamic environment we are navigating. As I said earlier, this quarter, we have consciously invested to build, scale with an eye on future revenue. Even though we have moderated a few of our metrics in the short term, we have continued to keep our eyes on the overall long-term potential offers in the market. Our total revenues stood at INR 3,507 crores and has grown at 21% year-on-year during the quarter. Our cost of funds have increased this quarter as the lag effect of transition of market rate increases was at payers in Q3. We have shared our daily average cost of fund in Slide 16 of our presentation. And as indicated in our last earnings call, our cost of funds has increased by 50 basis points quarter-on-quarter. Operating costs were higher this quarter, 15% increase year-on-year, driven by festival spends and higher acquisitions. The company has achieved a PAT of INR 509 crores in Q3 FY'23, which is marginally lower than previous quarter.
The business moral is resilient and we absorb the impact of increase in cost and changes in levy of OVL fee through business growth this quarter would be sustainable for the future. However, we do expect our earnings to be impacted with the residual lag effect of increase in rates next quarter as well.
Cost is expected to increase by another 30 to 40 basis points in Q4, which can be largely offset through judicial pricing of new loan disbursals. On asset quality, our GNPA inched up slightly to 2.22% from 2.14% previous quarter. However, our gross credit cost percentage for the quarter is stable in our target range of 5.6%, down from 6.2% in Q2 FY'23. Return on average asset for the quarter ended December '22 is at 4.8%. Our ability potion continues to be strong, and capital adequacy is at 23.3% for the period ended December 2022. We maintained the LCR at a healthy 85%, much above the regulatory minimum throughout the quarter. In conclusion, the global economy is still reeling under uncertainty and the environment continues to be volatile. Thankfully, domestic economy has proved to be resilient, certain macroeconomic indicators are encouraging, we, at SBI Cards, have taken measured decisions and initiated actions to ensure meaningful and sustainable growth while ensuring that we continue to generate value for all our stakeholders including customers, investors and shareholders.
So Faizan, now we are open for questions.
[Operator Instructions] The first question is from the line of Dhaval from DSP Mutual Fund.
I had 3 questions. First is relating to your comments on the cost of fund increase of 30 to 40 bps next quarter. Could you just give some perspective on margins as well? So we reported about I think 11.6% margin this quarter. Do you think they have bottomed out? I mean, I didn't get exactly your comments on yield. So that was the first question. Then I'll ask the other two.
Yes. I mean given the nature of funding what we have, where 65% of the funding happens through short term, the last repo revision of 35 basis points will have an effect in next quarter. So that's the reason we are guiding for a 30 to 40 basis point increase. But during the last quarter also, we have actually changed the pricing of EMI loan disbursal. So whenever there is an opportunity, we are transmitting and particularly when there is increase in our cost, we are able to transit for the new disbursal.
But like a current portfolio unlike banks wherever it is linked to the external benchmark, it get reset -- repriced automatically, that benefit is not available to us. But to the extent of new disbursals, slowly the color of the portfolio changes. So that's the reason we were saying like next quarter, we are very confident of minimizing this compression, whatever compression we have seen, which was at 50 basis points, but we are confident of minimizing that compression. So it will hover around 11.3%, I cannot say like where it will be but at least we are very confident of managing this compression given the kind of exit rates what they have seen month-on-month.
Understood. The second question is relating to the Revolve portfolio. So last quarter, we sort of talked about the festive season sale being there at the end of the quarter. And hence, optically, the Revolve rate percentage had come down to 24%. Just -- and you said that we need to see about 45 days, up to 60 days timeframe to see how the trends sort of play out. So could you just give some perspective as to why the percentages have not gone up, some color around that? And I see the incremental mix being shifted. At what point do you see -- start seeing uptick in your Revolve share? So that's the medium-term question, sir.
Yes. Dhaval, when you look at revolver and perhaps comparing with other players as well, I think our revolver share at 24% comes roughly around 65% of level what we used to see pre-COVID. I think it is our estimate, our information says like this is in line with best of the major players as well but having said that, we have taken several measures. It's a fact that actually some of the such kind of self employed customers who used to contribute to the revolver share, higher revolver share, the 9% of the portfolio was washed out. And the remaining second portion was actually that [indiscernible] were extended which now earlier, [indiscernible] hardly comes to percentage of [indiscernible] share. But last couple of years, we have been increasingly investing higher risk appetite, particularly, we are increasingly targeting segments like [ENP, CNP, CAP]
We are also targeting younger and well complied segments. In fact we have given in the deck as well. 36% of the new sourcing is coming from a younger population with a age of up to 30 years, similarly self-employed constitute around 34%. We are confident that the things will improve in future. But which is the quarter when we have seen like a October month was further [replace] compared to September but November, December, again, revolve rate, this is the metric, which we watch close internally. That has come back to pre-festival what we used to see So this is giving confidence that this will improve in the times to come. But as rightly said, we are, of course, leveraging the EMI portfolio that continues in order to optimize the interest revenue continue to harp on further increasing the share of EMI.
So Dhaval, just to add, increase in revolver is looking sticky at this point of time because after festival, we were also looking at the customer behavior that the incremental asset spends have happened and how do you get them converted into interest-bearing assets. So obviously, there was action at our end also where we also pushed and did a lot of programs for the customer to convert into a installment lending asset and you can see the results of that. If you look at -- and this is just to give you some numbers. So for example, if you look at on a year-on-year basis, our asset has increased by, let's say, interest-bearing asset overall has increased by almost 35% or so on a year-on-year basis.
When you look at it, it is -- the majority of the asset growth, interest bearing has happened in the installment lending, which is almost close to around 48% to 50% growth is what we see there. The balance when you're looking at even the revolver asset or the transacting asset, revolver asset is growing by almost close to 19%, 20% so that's the range at which it's growing.
And that is the range when that transacting asset is growing maybe a couple of percentage points more. So if you take out the growth of -- in the growth of asset, if you take out the -- whatever we have put it into the installment lending, the balance revolver and transactor broadly growing at the -- transactor maybe a couple of 2, 3 base percentage point higher. Now the choice which we -- the way that we are looking at is that we find interest-bearing asset from the installment lending far more stabler, it causes lesser amount of losses at a low -- it gets us more sticky customer. So if it continues to happen and we push for it, we are quite okay with it. So our view is that we would push more for this installment lending assets to go with, yes, it has a bearing of because it doesn't come at a 42% interest rate. So you will have -- you will look at that interest income from that perspective, but this is how we are looking at the portfolio growth. If revolve comes on with a due course of time, and comes -- if it comes very good, but we are looking at it like this.
Got it. And just last question is on the cost to income. So like you mentioned in the previous call that we -- given the rise in cost of funds and the other hits relating to RBI circular changes, the cost to income was supposed to move to about 57.5% to 58.5% for FY'23. Do you still hold the guidance. I see the first 9 months is about 59.3%. So just wanted to reconfirm that.
Dhaval, on that one, we do expect the numbers to be below 60%. Obviously, as it has been at year on year, the festival quarter does see a higher cost to income ratio.
I think the double -- the limit, we need to take into account is like a it's a compare the overall spends composition vis-a-vis 18 months back or 1 year back. The share of absolute amount of corporate card spends have increased substantially. I think the share is obviously at around 22% to 25% that's the overall thing, but the absolute amount because of increase in the B2B volumes, it has increased. It has an effect of increase in the cost to income. So it will not keep the bottom line because it's a -- you have both topline as well as impact on the expenses almost to the same degree. It elevates the cost to income but if you normalize for it, we are trending lower than much greater than 60% for the pure retail kind of our activities.
Also, this quarter, absolute new acquisition is also be higher. So there is an incremental spend which has happened on that also.
Sorry, just a very quick clarification. So normally, in 4Q, we see about 5% to 7% kind of sequential decline in cost compared to third quarter because of the seasonality. Do you see that happening this time given the higher originations? Or do you see things changing compared to your usual trend? I mean, very simple.
We do see a moderation in the cost-to-income ratio. I think there are 2 elements that both Girish and Sarab have called out. One is the corporate spends have been gone up in terms of absolute value. So therefore, I don't think you'll see a 6% to 7% drop, but definitely the fact that it is going to be a non-festival quarter. The cost of acquisition will stay, some of that element will -- do stay quarter 4. But the festival spending, however one-off seasonal spending, we will see a moderation in the cost to income.
Got it. I was referring to the absolute cost but I did get the point. All the best.
The next question is from the line of Ajit Kumar from Goldman Sachs.
So first one is, recently, you have made few changes in terms of revolve points and charges. Revolve points have been reduced by half on online spends then Amazon processing fee has been increased on all merchant EMI transaction and processing fee has been introduced on all rental payments. So any calculation that you have done internally how much positive impact it would have on the bottom line? And would it be sufficient to overcome the decline in fee income coming from reduction over the mix.
So actually, two changes that you said are correct. The third one I'd like to clarify. The Amazon 10x has come down to 5x but that is only on SBI credit card, not on rest, that change does not impact any other card, SimplyCLICK is a large portfolio. We have more than a million plus cards there, but that is one portfolio where this impact is present.
The second that you're rightly saying, we have put processing fee, and we have put some other changes in revolve points but those are changes where we are -- basically where we were looking at either discouraging double dipping benefits by the customer. So the essential moot point there is wherever the customer was getting for the same spends, different kinds of benefits together and it was becoming more. That is where the double dipping is being stopped. Apart from that, there is no other changes that we have made. This will give some benefit on the bottom line, but not sufficiently to compensate for the...
Compensate for the entire loss that we have on changes [indiscernible]
Okay. And the second question is on the new sourcing mix. Proportion of new sourcing coming from Cat B within salaried segment has jumped substantially in the last few quarters. So what is the profile of these customers, their income level, et cetera? And along with this new sourcing coming from tier 3 city under 38 bracket has also increased. So do you think this will lead to higher credit costs later on compared to 67% that we have seen in steady state.
So a lot of the Cat B and all that is just an expansion that you see. I don't -- also, the banca proportion goes up this year also. However, in terms of delinquency, the criteria takes lot of that into account. Just because they have tier 3 doesn't mean that the delinquency of that portfolio is higher. I think the one thing that changed is for the collection abilities are fairly in line. So whether it's tier 1 or it's tier 3, it is the customer own score and profile that drives delinquency, not so much is the fact that it is a tier 3.
The next question is from the line of Mahrukh Adajania from Nuvama.
My first question is on your EMI. You said that yes you have enough offset to probably offset the rising cost of funds. But what has been your strategy of pricing EMI loans given that in general, there's a lot of talk about charging the customer share and not overcharging. There are statements coming from ministry. So what do you -- by what rate has your EMI interest on new disbursements gone up compared to say your cost of funds. Say, over the last 3 months, over the last 6 months, what has been the increase in EMI need on new loans?
Yes, I think RBI has been encouraging NBFCs to adopt a risk-based pricing and now I think actually everybody has fallen in line, it is where we compare with the regulation during the year. This is more like a -- you look at the intrinsic risk of the customer and align the pricing to the inherent risk of the customer. So that way, a customer having a very good score or otherwise in terms of risk -- low risk customer definitely the pricing will be attractive comparable to what alternatives he has outside whether it's a bank or NBFC. But it's slowly increased for the medium to high risk when we come out there. So that's why we look at the risk, we look at the cost of funds, we look at our ability to collect, all these efficiencies do automatically translate into related companies in the pricing.
Got it. Sir, sir. And how much would your yield have increased in the last 3 months and in the last 6 months?
I think our debt covers the overall portfolio, it's not talking about very specifically about the yield of the EMI loan, that way it gets come across but it can be calculated in a reverse way, right? In terms of...
So, between quarter 2 and quarter 3, our yield has normally remained the same because some of the higher yielding assets from the previous quarter are running off even that our book is actually largely a 9- to 12-month average kind of. And the new booking is actually happening with the implementation of the risk-based pricing that we introduced in quarter 2, so the yields quarter-to-quarter has been steady about 16.2% overall.
Got it. Perfect. And the other question I had is on your credit cost. so what do you see as a normalized level of credit cost, are we there? Is there or an analyzed level of delinquency because these are now the best time for the sector as a whole.
So I think we've been talking about it, it's better to look at a credit cost on that yield basis because there are some quarter movements that will happen. And I think that's the number we've been giving in the past. We should see around 6%. It used to be 6.5% pre-COVID. Around 6%, 5.75%, 6.25% that range is what we are comfortable with.
The next question is from the line of Piran Engineer from CLSA.
Firstly, on rental spends, since we started charging INR 99, just wanted to understand how the experience has been in terms of customer stickiness? Have we seen a decline in spend? And does that come in your spend based fee or instance based fee?
It's -- this processing fee we started charging from 15th of November. So this quarter, you have almost 45 days [indiscernible] operated into it today We have not seen any impact by charging the fees as of now. So we have [indiscernible] some people, it's gone through almost now 75 days because it's been 25 days after month end also. So we've not seen any sales, and it goes into instance based fees.
So then what explains the higher change in this quarter. So if I take spends based revenue divided by spend, is it just because corporate spends have gone up?
So two things are there. There is while the online spends have also been higher in this quarter. So -- but it is similar to the last quarter. So that way, online spends due to higher interest change. Corporate is higher. So that corporate has also increased and added to the interest change percentage. So it is -- and thirdly, the travel has also gone up, which we have been talking about. So Q3, we have seen an increase in the travel side in the month of November, December. So these three have led to the increase in interest rate. It's not very high, it's marginal, but it has increased.
Got it. Got it. Okay. And my second question, last year, our instance based fees were about INR 1,800 crores. And if you could just give us broad break-up, INR 400 crores are sourced OVL, what about the remaining INR 1,400 crores, what does that look like?
So we have not given the breakup of instance based fee but it is - it cost -- there are major key components, are there late fees also one of the components in that one. You have ForEx conversion fee. There is a processing fee, which is levied there, which is also a component. OVL as talked about was also a component. So there are other such fees, now as we just talked about the processing fee on rentals is a component. I think EMI processing fee will also go there. So there are other components. So there are multiple of those. We've not given a breakup of these.
The next question is from the line of Param Subramanian from Macquarie.
My first question is, sir, this quarter, we've seen an increase in the NPA without seeing a corresponding increase in the revolver, could you explain how that is happening because obviously one would assume that the customers should revolve first. So why are we seeing an uptick in NPAs without seeing corresponding movement in the [work-force]?
So Param, this account first becomes a revolver, then becomes an NPA, you're right. But some of the transactions also move into NPA by not paying up, so that's just a route by which it becomes NPA. I think -- and that is we are seeing. We have to look at it from a range perspective, okay? Our numbers pre-COVID, when our revolve rate was still high, versus the range of 2.5% [indiscernible] quarter, we were always 2.7%. The number to look at is right now, again, look at NPA also from a range perspective, we look at it as an absolute number. If you look at we are still with the increase at 2.2% which is much lower than what we used to be.
You have to look at the credit cost, the NPA and the ECL all together, okay? If you look at our ECL which is more like the quality of portfolio metric, which is expected right now, if you look at it, that again, is down to 3.3%, and that actually sequential better from last quarter as well. Again, that number, pre-COVID, was in the range of 3.6%, 3.7%. So overall, the portfolio is trending in the way that we are comfortable with. Quarter movement between 2.14% to 2.2% is just that. It is at the end of the day, yes, we look to operate within a range and like we said the range is to allow us to be able to optimize the credit cost. We are using this buffer to go out, test a few segments, you see that the self-employed has up, you see the some of our tier 2 salaried has gone up. We are using that to test and learn a few segments because in reality we have to go back and task learning some of these segments again.
Yes, I got that. What I was getting at was, is there a higher NPA that we are seeing in the EMI bucket or is there some behavioral change which is resulting. You are saying this is on a practice, is that the correct way?
No, no. It's not like, in fact, normally, the way versus the customers who take EMI. So there are 2 types of EMI. There are one which the consumers convert the purchases to EMI. That is within that line. And then there are some good customers who we give them a loan over and above the line also. The second one anyways given only to the better customers. So that performance is actually very well. EMI customers actually tend to behave better because they're slightly more savvy customers, they choose to convert it, rather than revolve. So in terms of behavioral, you are not seeing any significant waver in shift.
Got it. My next question was on the over limit fee. So I think you're showing in your profit was INR 81 crore of PAT impact is due to the overlimit fee. So there's a post tax impact, right? So at a fee level, it's higher, right? So is it right that we lost the largely almost the entire overlimit fee and are we going to recoup this amount -- some amount of this going forward or is this on a quarterly basis, is this something that this INR 80 crore of bottom line impact. Is this something that we are going to work with going forward?
So recovery, and you are right, so majority of the over-limit fee seems to have got, it has not come back. Recovery is hardly anything. We have tried a lot of action in terms of taking consent from the customers and other things. However, as of last -- for last 2 quarters because this particular impact has started to come in from 1st of October itself. So when we see the impact for the full quarter and even January, the recovery is not much.
So 1 last question if I can just squeeze in, is it right that rental spend would be 10% to 12% of your total spend? Is that ballpark number correct?
We've not given the weightages but it is slightly higher than the number that you stated.
The next question is from the line of Shubhranshu Mishra from PhillipCapital.
A couple of questions. The first one is on the total number of cards that we've been issuing either on a monthly basis or on a quarterly basis? Is this largely to do with the activity regulations that have been put in. And actually, the net issuance would come off by a huge margin, which is why we are issuing close to 5 to 6 lakh cards that's the first point. And second is, can we please give the average balances for EMI, revolver and transactors?
To answer your first question, we're only aligning this increase in the volume to take care of attrition. We have also stated like we would like to continue this run rate, right? I mean we said like we continue -- we would like to continue to operate at 5x. We have certain natural attrition. In fact, the target is like in the past, we guided -- with the guidance first to -- say like we are targeting 300,000 to net addition per month. So we are now increasing it to 1 million. So we will operate in a broad range of 0.9 million to 1 million of net card addition in a quarter. That will be the broad range in which we will work
And the second question sir?
So while we have not declared exact balances, average balances, but I can tell you that people who are revolving, their average balances are higher than average. Even the installment lending is close to the average balance that you see there, that is where it is. Transactor balances are slightly lower so that's how - this is what -- this is it works out. We've not given the exact numbers -- declared exact numbers for this.
Right, sir. And if I can squeeze in one last question. On Slide #10, where we give out the spend categories. Is it that the online spends have higher ticket sizes which is why despite the PoS spend growing slightly faster, the total spends are not growing as much?
No. You're making that estimate because you don't have the weightages of these categories, okay? It is not so. There is a difference in ticket size on online versus point of sale. If a offer is running, so when you run those 10% cash back offer, then you get a higher ticket size on online spend because they are the minimum qualification level itself is INR 7,500 to INR 8,000 or so, okay? So that use the whole thing. Otherwise, in a normal day, where no offers are running, this is broadly similar. So that is point one. So second thing is when you see this number here, it is actually in the interesting part is I wanted to highlight was that in last quarter, because festival season was divided into Q2 and Q3, the online spends on an overall basis were broadly at the same value. The increase of majority come from the Point of Sales rates.
The next question is from the line of Gaurav Kochar from Mirae Asset.
A couple of questions. Firstly, I think this question, one of the earlier participant also asked. So I just wanted to crosscheck. The instance based fee is down around INR 80 crores quarter-on-quarter. And on a gross basis, I am assuming the impact of over-limit charges is about INR 100 crores. So is it fair to assume that all the new fees that you have introduced during the quarter amounted to around INR 20 crores, INR 25 crores?
So we can't give the exact number, but mathematics tells you that...
Because there are other components of instance based fee that we just pointed out. There is a late fee component. There is other fees, processing fee, et cetera., which has gone in. So there is a plus, minus, in online item. I think OVL if you see, we have clearly called it out. So I don't think you need to drive anything that number is right there on the page, but it's not really a simple calculation of x minus y. There is A,B,C,D...
The reason I was asking was I wanted to understand whether the new initiatives, how much of that can recoup this INR 100 crore of gross expenses -- gross quarterly run rate that we have lost?
Some of the new initiatives we have already launched in middle of the last quarter and while we do have an estimate as we're building up our plan for this quarter and for next year as well, it's difficult for us to give you any guidance at this point in time.
Sure. Sure. Fair enough. My next question is with respect to provision. This quarter, we had about INR 5.3 billion provision. And going forward now, given that Stage 2 is already down to 6% prior to COVID, if I look at that number used to be in that 8%, 9% range. Now I mean given that Stage 2 is falling, revolve book is not building, it's about 24%, plus minus 1 or 2 percentage points. Don't you think the credit cost should actually be much lower than the historical 6%, 6.5% range that we are speaking about?
So once the 8%, 8.5% which is range, that you also included the RBI [RE] also. It is a lot of in that COVID period. Anything as RBI Re, we were considering that as stage 2. And you are right, our staged advances [indiscernible] The number is generally exactly the way we want to. And I think the point to look at is -- there is a range at which we want to operate. And like I said pre-COVID the range was much higher. We were comfortable even with a 6.5%, 6.6% that is not where we are heading at right now. We do want to be 6% already, mostly to the -- in the range of 5.75% to 6% that's the number that we are aiming for, and the way to look at it is at the end of the day, this is an unsecured business. This is a business of [indiscernible]
I'm not aiming to do anything like open up the gate and start booking everybody. But the idea is to use this buffer that we get in the credit card to test segments because the reality is that there are some fairly large cuts that we made during the COVID period in terms of self employed, second category salaried, [indiscernible] some of the outer locations that we didn't want to. The idea is to use this to test a few segments. And that is what we are saying that look at our -- on a full year basis in a range, we would be anywhere between 5.75%, maybe 6%, 6.15%. We are not aiming to be that much lower also, because when we are not utilizing that money yet.
Sure. So just mathematically, if the stage 2 falls to, let's say 5%, in the next couple of quarters. Will that not contribute to lower credit costs, just arithmetically?
Arithmetically, yes definitely.
Sure, sure. And if you could give a breakup of the OpEx into acquisition costs and the corporate spend related cost, the cash back that you give to corporates with relatively higher MDR. If you can call out or maybe as a percentage of spend, how much would that be?
Just again, you want the breakup of the OpEx between the acquisition cost and...?
And the corporate spend related OpEx.
We don't share this number, sorry Gaurav.
Okay. Just the acquisition cost if that's appropriate?
Yes, in a corporate card spend, it will be safe to presume like a whatever you get will be -- most of it will be [indiscernible] cash back to the corporates. So as we always made it more of a top line gain rather than a bottom line gain. So based on this, you can model it.
Okay. Understood. And just last question on RuPay credit card on UPI. I mean what would be the MDR eventually over there? And what is the spend contribution of RuPay cards in our overall mix right now?
So on the RuPay card, we have close to almost 1.3 million to 1.5 million customers out of our overall portfolio okay? So spend rate would be slightly lower on this one but broadly in that range, it will impact overall things.
On the MDR side because we are -- the conversation is there, you would have seen NPCI also declaring about it. Less than INR 2,000 for small merchants as defined by RBI. It is only in those cases that the interchange will not be available. Rest they are stated and it will be as per the normal credit card scenario. So this is how it's going to be. However, once we start doing this business, we will also see how the mix of customer spending from which categories and how the mix is coming to come to a weighted average MDR, but whatever be the case, it should all be incremental because these customers we have already incurred all the cost. We have given the cost given cost of acquisition has already incurred. So all the gains should be marginal gains. There should not be any cost impact. It should be just extra spend for that customer.
[Operator Instructions] The next question is from the line of Punit Bahlani from Nomura.
Yes. Sir, firstly, on the employee expense, that we have also witnessed a hike around 10% Q-o-Q. So what was the -- do we expect to continue seeing firstly, on the total number of employees, what is this -- have we added much? Should I expect this trend to continue since we are scaling up in tier 2, tier 3 cities, firstly on that. And second bit on the credit cost base. You've highlighted in 2Q that you will be witnessing some reversals in the stage 1 as it's on account of in the last 7 days, there was a higher increase in the receivable book and accordingly you had mentioned that. So has that happened because the number seems to be in line with the 1Q levels on credit costs. So, yes, those will be mine, 2 bits, yes.
Sorry, we didn't get the first question. The voice wasn't clear. We got the second question about the credit cost. Could you come again regarding the first question?
Right. On the first one it is -- hello? Yes, on the first -- yes, that was on the OpEx [indiscernible] employee expense has increased around 10% Q-o-Q. So like on the trend basis, should I continue to factor in this like because we are continuing to hire for scaling up in tier 2, tier 3 cities? Was this a nonrecurring one because you just hired, scaled up now, and we'll wait -- any color on that?
I'll take the second question first and we'll come to the first question later. So if you read it, one of the things we said about last quarter 6.2%, there is a large part of that then happened towards the end of the quarter, and there wasn't enough time for it to get billed, get converted to EMI and get re-billed. And that's why we have seen some increase in the stage 1 in terms of that. Overall, if you look at that number, we are actually down to 5.6%, we'll be seeing this time in the way that the NEA has grown is a little bit more even in this month. So the spend happens, it gets billed, it gets paid off, and that's why you see just bit of that normalization of the credit cost. I think stage 1 will not come down because as the NEA will increase, quality of that bill go to stage 1 only, okay? Our distribution is what we try to manage. And like i said earlier, the 94% of our book is right now is sitting in stage 1, okay? And that is one of the best distribution we had even historically. On the first question, if I get it right, your question that employee cost has gone up 10% quarter-on-quarter. You are asking us will this continue to grow in this quarter as well, in quarter 4, is that the question?
Yes.
Okay. So our employee cost is really -- I think it's dependent on the number of cards that we're acquiring because that's where the large population of our employee cost sit. So as already guided you in terms of how the card acquisition is going to be in quarter 4 for us. I think that should give you an indication that we more or less kind of at a level where the number of resources we need for that kind of an acquisition is there with us.
The next question is from the line of Shweta Daptardar from Elara Capital.
I have two questions. My first question is why we have buffers on credit cost? Why do we emphasize on EMI segment versus revolver. And secondly, if you could throw some unit economics on the newly launched SBI Cashback card. So how it must have translated into potentially new customers? And if there is any ROA dilution fee now.
Sorry, Shweta, we couldn't get your first question, you have question on the EMI credit costs.
Cashback card.
Second question?
Yes, that was the second question. First question is while we have ample buffers on credit costs, you are still lower than the anticipated level then why the emphasis on EMI segment versus revolver?
Shweta, EMI something that you could tell the customer and it will take the EMI offer, okay? Revolve is a behavior that the customer chooses to do. What we can do, and that's what I said when we said we use the buffer is we try and test new segments they're trying to get employee that engages. Some of the things while customer that you are not getting some of those customers whose propensity to revolve is higher. Again, the point is propensity to revolve. I cannot guarantee that they will revolve, [indiscernible] What we have done is we have taken a conscious decision and say rather than having no interest income, at least you will sell an EMI product and get some degree of interest income. So it's a 0-1 thing. Revolve is something that happens over the period of time, the customers chooses to revolve. I can only bring in those kind of customers. But EMI is something that I can assist and get customers converted.
On your second question on the cash back card. We are building a portfolio as I raised the status last time. So for the first 50,000 accounts that we have got on cash back card, we have seen excellent spends. They are upwards of INR 25,000 to INR 30,000 per month. We are also seeing very good activity behavior of those customers. We see almost 80% to 85% of the customers using the card every month. They are using the card both for online as well as Point of Sale. While ROA and ROE and those metrics are slightly into the future, but all the earlier metrics that we have seen for these customers are wonderful. So we will keep an eye because we also want to see how the installment lending where we are and the asset building behavior of these customers is going to be. So we will keep you posted.
The next question is from the line of Manuj Oberoi from YES Securities.
Yes, so the first question is on the receivable mix. So you've given the receivable mix on a closing period basis. Can we get it on a average basis for the quarter?
Average basis a receivable number?
Yes. The mix between EMI, revolvers and transactors?
I take your feedback Manuj, but let us switch into this.
Okay. And just the second part is on the corporate spend, right? So the last quarter, we called out that we will be selective here and we will avoid nonremunerated, less remunerated business. But in this quarter, we have seen corporate spend coming back quite strongly. So what is your stance here?
So if we look at like this -- even now the corporate spends are close to 20% to 21%, okay? We have always stated that we will not go beyond 25% and stay between 22% to 25% to maintain market share as well as the overall significance in that space. So when we continue to look at more profitable segments in that wherever we are able to make some margins, look at some large customers whenever we have more relationships so that we can get more actual traveler entertainment spends and where we have a deeper relationship with our customers. So that is where we are looking at all those customers. And we'll continue to maintain it between this ratio.
The next question is from the line of Anand Dama from Emkay Global.
So basically, one -- first question that I had was that I think ICICI Bank has a tie-up with Amazon and lot of other players also have tie-up with lot of these large e-comm players, where you tend to get lot of EMI transactions onboarded. Any plans to have such tie-ups with the e-comm players?
See while we are open to some of these conversations and we participate with all the RFPs as and when they come up, even if the RFPs don't come out because being a large player in this space, almost all the e-comm players get in touch with us also.
We will participate, but we also want our profitability metrics should be met on some of these accounts, okay? So we already -- as you know, we have launched a cash back card, which is a proprietary card for us, specifically targeting these segments. And the nature there was that if we have to give it to a partner just as well share that benefit with the customer itself, so this customer comes out to our [STP] journey and applies on their own. So that is the model that we would look to follow. However, if we get a partnership which is at the right profitability, matches our customer profile and brand, we would definitely get it.
Okay. But do you suggest that tie up get basically [indiscernible] with e-comm players, the overall profitability on those cards, is relatively lower than what typically you have for your cash back card.
I won't be able to comment on that portion because I don't know what they are doing, but one thing is definitely there that when we had looked at some of these partnerships in the past, at least with the large players, large e-commerce players, it was very difficult to find profitability there.
Okay. Lastly, we are seeing a series of acquisition in the top management. Any new development over there any hiring that we're doing to replace those people?
Yes, yes. I said last time. The selection process is on and at the material time, we will make announcement. So -- I mean as we have filled the position of CFO, so will be the case with any other vacancy. So we will update. We will apprise as and when they will be filled up.
Sure. And should we expect at least CRO replacement in next 3 months or so?
Yes, in fact to -- endeavor is to get the new person much earlier, but it all depends upon how it will translate. So we will let you know, we will let the largest ecosystem as and when the [indiscernible]
We'll take the next question from the line of Sagar from Anand Rathi.
My first question is on the opening commentary where you said the traditional revenue streams have been impacted and you all have consciously build scale with eye on future revenue. If you could throw some color on that? And the second question is data keeping question with regards to the overall mix -- overall in terms of cards and post mix split between salaried and self-employed?
I think the first aspect we have elaborated, we have discussed where we talked about like a major portion of OVL, we happen to see as a clawback or anything, at least for the near future, it looks like a major part it, we will not be able to reclaim. And we also talked about a couple of other measures which have kicked in on EBITDA for the last quarter in terms of introduction of processing fees, rental transaction and then processing fee, just because you made transactions for a particular tenant, and also cost rationalization, reward point rationalization bid make sense. So that is what we said. And of course, I mean, these are not deterring us from focusing on leveraging the opportunities available that's the reason we stay invested and we are making investment for the future. We found a good opportunity to grow last quarter because banca again started contributing very well. I think the banca always decide a contribution of 50%-50% from both channels and that's how we were able to accomplish last quarter. And of course this focus being increasingly on the share -- I mean acquiring the customers through the digital channels. So for that our products need to be launched, we will launch and whatever marketing we need to do, we will do. That is what we said like we have growth-focused strategy. We will try to overcome on this aspect. That is what we said.
Okay. Some data keeping question.
Your second question was break up between -- break up of cards in force, in terms of...
Salaried and self employed.
I think we are pleased to show -- I think even in terms from a CIF perspective also, the self-employed could be around...
At least as of 31st...
So the self employed from a CIF perspective would still be in the range of 21. I feel low as of now.
This data seem to be missing this quarter. That was all.
Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to Mr. Ram, MD and CEO of SBI Cards for closing comments.
Thank you all for attending this Q3 FY'23 earnings call. All the best.
Ladies and gentlemen, on behalf of SBI Cards and Payment Services Limited, that concludes this conference call. Thank you for joining us, and you may now disconnect your lines.