T
Tamilnad Mercantile Bank Ltd
NSE:TMB
Tamilnad Mercantile Bank Ltd
NSE:TMB
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Earnings Call Transcript
Other Earnings Calls
Ladies and gentlemen, good day, and welcome to the Q4 and FY '25 conference call hosted by Tamilnad Mercantile Bank.
This conference call may contain certain forward-looking statements based on the beliefs, opinions and expectations as on date of this call. These statements are not the guarantees of future performance and involve certain risks and uncertainties that are difficult to predict. [Operator Instructions]
Today on the call, we have with us the following management representatives Mr. Salee S. Nair, Managing Director; Mr. Vincent Menachery Devassy, Executive Director; Mr. Sanjay Kumar Goel, Chief Financial Officer.
I now hand the conference over to Mr. Salee S. Nair, Managing Director from Tamilnad Mercantile Bank. Thank you, and over to you, sir.
Thank you. Thank you, and thank you also for the introduction. Yes, I think we have come out with our results [indiscernible] as you would see that the reservation is in line with what we had stated earlier as well. And in fact, some of the highlights I can go through before getting into the details.
This -- in FY '25, we have delivered the highest of our net profit. If you go back in history, 103 years of the bank's existence, we have been delivering profit year-on-year except for 6 years in our journey. So this year is another year where we have delivered a net profit of INR 1,183 crores and it's a 10% plus growth year-on-year.
It's also -- we've also delivered an operating profit growth of INR 1,746 crores, 18% up from the previous year. And the total income, which is 12% up from the previous year at INR 6,142 crores.
While these are highest ever numbers, if you look at the GNPA, there is lowest in the last 10 years at 1.2% GNPA, which is the lowest in the last 10 years.
If I get into some of the details here, the total business. The total business has improved 9.58% to INR 98,055 crores. If I get a bit of color on this, like I mentioned last time the [indiscernible] will double by the year-end. It has, in fact, more than doubled. If you look at 3.66% loan-to-deposit growth in FY '24, we really, really underperformed the market.
This year, FY '24 the growth, the green shoots are very, very clearly not that visible, it is taking clear routes. The number is 8.43% year-on-year. We did that INR 53,689 crores. So on the resource front, we are getting back into the game.
Even at the advances side, we have almost double, almost double what we did in FY 2024. 6.35% was in FY '24. Now we have just about at 11%. And going forward, we will align ourselves to the market. We are beginning to be aligned with the market. And FY '26, you will see that we are aligned to the market perhaps even a tad better.
So [indiscernible] on our focus in the asset portfolio, it is 93% today stands at [indiscernible], 93%. This is up less than 91%. And that's one of the reasons why our stress levels are at -- levels that we are going to I'm going to state as we go along.
The total income, as I said, 11.82% up. Then net profit at 10.35% up. The book value. The book value per share today is at -- as on 31st March is at INR 569. That's a growth the 13.805.
The CRAR, the capital risk-weight asset ratio of 32.71%. That is up 334 basis. So I think one of the best perhaps in the industry.
The SMA to gross advances, I did mention about the GNPA that we have for the 10-year low. Even the SMA is fairly good at 2.55%. So both together stressed level, SMA and NPA together is just 3.80%. So that's where we stand from a credit quality perspective.
The stress asset ratio, that includes the recent [indiscernible] is down to 2.01%. the Gross NPA, as is said earlier, is down 19 basis to 1.25%. The net NPA is 0.36%, down 49 basis, it's less than half. And the ROA for the year is at 1.88%. And I'm sure that we have growth. Of course, and the broader benefit say the proposed a dividend of 110%, which, of course, will be subject to the AGM.
So as I get into some more details, I did mention about 9.8% growth happening on the total business. And the shareholder value of the [indiscernible] net worth is [indiscernible] cost INR 9,000 crores. It was INR 7,931, it is at INR [indiscernible].
The book value per share, I just mentioned, INR 568.90 and earnings per share is INR 74.68. I think it's also an all-time pipe.
So moving on to some of the parameters. Net interest income is at INR 2,301 crores. The operating profit, I mentioned earlier, INR 1,746 crores. And the PCR, when I look at the PCR, technical write-off, that is the off-balance sheet provisioning, it is at 93.86%. But what is important is the PCR on book. It is at 71.2%. In fact, we have more than met the RBA guidelines on this because the RBA was suggesting about 70%.
31st March '25, it is 71.02%. 71% -- nearly 30% up from the previous year. And FY '24, it was only 41.33%. The PCR on book today is at 71.02%.
Return on assets I mentioned, is at 1.88%. Return on equity is about 14%. Credit cost basis 41 basis points.
Cost of deposits has moved up in line with the market. It is at 5.91%, up 17 basis from 5.74%. And yield on advances. Yield is at 10.22%, growing a little slower than the deposits from 10.15%. That's up about 7 basis points.
The cost-to-income ratio, the efficiency of the -- by running of the bank is a dry -- is down from 47% in the previous year to 44.60% in FY '25, reduction cost-to-income ratio.
When I move on, give you some color on the asset [indiscernible]. I think the asset quality that we are delivering is -- I understand because we're one of the best in the industry, NPA is at 1.25%, net NPA is 0.36%, and the [indiscernible] ratio is just 13 basis points, which maintained that -- in the last quarter also, it was 13 basis points. In the last quarter of FY '24 is 16 basis points. So you'll see some improvement happening there. I think the 13 basis is really [indiscernible] that we are quite proud of.
When I also look at gold loan portfolio, I think because a significant amount of our portfolio is gold loan, the estimate in the gold loan portfolio is just 0.06%. We have an 18,000 plus of gold loan portfolio. The SMA is just a 0.06% and the NPA is 0.01%. Let me also tell you that during -- in FY '25, we -- after nearly 4 [indiscernible] gold loans, dual loans, and we have not made covered our principal and interest. We actually returned to INR 1.46 crores back to the borrowers, which means we are giving the -- the adequacy is the margin evidencing the request of the margin. And there was, no portfolio loss on the quality of -- on the gold loan portfolio. And I think that's the portfolio that we are watching very [indiscernible] from the LTV perspective, from the commodity risk perspective and [indiscernible] on a day-to-day basis.
When I look at the movement of NPA, I did mention that we had a 1.25% GNPA. The gross NPA that we have is INR 556 crores. And the -- it is, let me also tell you it's not because of write-offs. Write-off was just 25.59. It has been because of upgrades and cash recovery. In fact, cash recovery INR 39.16 crores write-off -- sorry, an upgradation was about INR 10 crores, but almost INR 50 crores came from hard work that we have put in, and it is more or less offset the first addition that happened.
So the closing is at INR 556. That is down about INR 20 crores from the previous year. And like I said, the GNPA is at 1.25%. NPA provision of INR 363.50 takes the -- let the NPA to 160, that is 36 basis points.
And like I said earlier, the PCR is at 71.02%. Even in the SMA as the SMA story that we would like to say because in FY '25, the SMA or the overall SMA portfolio, which was at 3.97% has come down to 2.55%, so that's a -- and then there's not just the NPA. Even on the SMA side, the bank has got it at right, and we will continue maintaining it.
And even looking at the sector-wise also, even in the retail sector, we have about 1.3% of the [ drop ] is only [indiscernible], I agree by 0.07, MSME. 1.08 and the others was at 0.10, totaling 2.55%.
SMA plus NPA, that is [indiscernible] 1 day past due, even 1 day regular. The portion of the portfolio that is 1 day regular is 3.80%, 3.80%, which is 96.20% has no irregularity whatsoever in the portfolio. I think that's the kind of quality of portfolio that we are that is [indiscernible].
[indiscernible] GNPA restructured [indiscernible] is is down from 2.70% to 2.01% I think the presentation has already been uploaded in the -- I skip some of the assets and come to -- relevant from [indiscernible] as long as your portfolio [indiscernible] which is the PCR and the collateral coverage [indiscernible].
We had -- as I mentioned earlier, we have a INR 556 crores of GNPA. That's 1.25%. And the INR 363.50 crores was the provision. But let me tell you that INR 556 crores of GNPA is conferred by the collateral of 104%. This means the provision when you get the resolved -- when the GNPA get resolved, we are looking to book this INR 300 crores plus INR 350 crores plus the provision as writeback, that is a substantial future profits sort of [indiscernible] provisions.
On the growth itself, I did mentioned earlier that we have doubled. Current account and CASA per se has been our [indiscernible]. And I will also tell you how we are trying to address that because we have lost about 300 basis plus on the CASA [indiscernible] which had a bit of an impact on the NIM. But the initiative that we have taken the last quarter, I think [indiscernible] has [indiscernible], and we saw some uptick happening towards the end of last quarter, [indiscernible] of FY '25. We have seen a growth of [ 10.9% ].
Deposit overall have grown 8.43%. And I think Tamilnad this contribute significantly to that the 7.3% of the growth coming from the time deposits at least more than compensating the CASA loss, but that's something that we will reverse -- it has beginning to show some reversal that we accelerated in the current year.
To reverse the CASA, we have taken a number of initiatives. We have, I think -- last week, I did mention that we are setting up a transaction business transacting banking growth. We have impacted that up in February and it has [indiscernible], there's a significant number of our managers are onboarded process. I think there In the market, and we are beginning to see some kind of an uptick in the current accounts particularly, the government accounts and as that will get accelerated. But that government [indiscernible] this CASA is going to be tackled. We also set up the Global NRI Center, which I had done stated that in the call. That also has been set up again towards the end of the quarter, last quarter. So we are going to see significant results coming out of that.
We have also taken an additional schedules [indiscernible] growth. To ring-fence high net worth the liability franchise customers [indiscernible] customers. And not the recent ones also is to look at -- building upon the relationships and also ramping up [indiscernible].
The other piece that we are looking at to ramp up for the CASA is we are completely revamping the digital banking. We are bringing an entirely new Internet banking. We have already signed the deal I think -- in a couple of quarters, I think the entire banking space and the services that can be provided through the Internet banking is going to go under a dramatic change there.
And on the advantage portfolio, yes, 11% growth, retail at 8.35%. MSME sector is flat. But let me tell you, the MS sector -- within the MSME that we are tackling that there are 50 lakhs has shown a decent growth of 12%. So the degrowth in the unviable sector, below 50 lakhs.
And CD ratio in Q4 as the deposit momentum picks up, CD ratio has moderated at 82.64%. There's one question on the unsecured exposure bank, unsecured exposure in last December analyst call. Let me tell you that our total unsecured exposure is at INR 160.0 crores. That is 0.36% of our portfolio is only unsecured.
And if I look at the SMA, out of 160 crores, 7.70 crores or 4.79% is SMA and NPA is just 19 basis points. And if I go a little deeper into the unsecured exposure, INR 160.59 crores is just said it, KCC contributed INR 15.54 crores, INR 28 crores came from education loans, INR 41 crores from the others, INR 75 crores came from PSU, which as you know, that there's the quality is always accepted.
So INR 160 crores unsecured [indiscernible] so it's not, there's ignore exposure at all. And there were also to posted on with the experts, [indiscernible]. Let me tell you that the exposure to [indiscernible] is just INR [ 33.90 ] crores. That is just about 5 basis points of our [indiscernible].
I did mention about the last call, investor call about the carving out if some of the branches are refocusing the branches on the deposits, strengthening the deposit franchise. And I think we have already fixed on the bitcoin our experience has been quite good. We have, I think, very much almost completed the business [indiscernible], the loan origination system and loan management system has been sourced. I think it will take a couple of quarters before it comes fully on stream.
And the new tracking system, the customer experience in the retracking system has also been sourced and put in place. And so there a lot of IT initiatives that we have started in December and are going to January, February has come to an [indiscernible]. I think, for these 2 delivering results, I expect another couple of quarters. Meanwhile, I expect this bank to grow. Our growth to be aligned with the market, like I mentioned, perhaps it does higher than the market. So that is where I [indiscernible].
Apart from that, we have also taken human resource. I did give a color of that earlier that the historic media system has been implemented in FY '25. That has today 81% of the [indiscernible] of the staff [indiscernible], cost to company method.
And we have also implemented a capital management system, an automated safety management system, which apart from helping an end-to-end HR management also helps us to align the CGC pay, particularly the variable pay of the banks profit.
We are slowly getting the ground post aligned to the profit [indiscernible] of the bank. So bank management I think -- and of course, open 26 -- we did open 26 branches. We put up a few branches on hold looking for perhaps a change in the location, et cetera. And in the current year, in fact, in the current half year results, we are looking to open about 50-or-so branches. So that hopefully should take our -- this -- the number of branches to be on 600 under. Today at 578. So I will take questions. I think I'll just here, and I will take some questions here.
[Operator Instructions] The first question is from the line of Manish from Wealth care Securities.
What is the advances growth forecast for this year as well as deposit growth for cash for this year -- for the coming year?
In FY '26, we are looking at a combined growth of 13% to 14% because we believe that the initiatives that we have put in place would start taking routes. The first couple of quarters would have ever challenge we get into the change mode as a lot of initiatives are getting implemented with a bit of a disruption. But in the second half, we expect significant benefits accruing out of it. So overall for the year, we expect 13% to 14% -- 13% to 14% of growth, I mean business growth. And within that, deposit would be in the 11% to 12.5% range. and advances would be anywhere between 15% to 18%.
Okay. And what kind of guidance is there for NIM, sir?
NIM were moderate, moderate EBIT, but of course, the rates that are happening. The NIMs would moderate a bit. When I look at the kind of CASA growth, we are looking for with particularly the CPG as the Transaction Business Group in place, we expect the CASA growth to be higher than the overall deposit growth, moderating a bit, to some extent, the deposit, cost of deposits. But then it would mean that -- I would say, in the 3.80% kind of number, 3.80% to 3.906%.
3.8 to 3.9.
Yes. We're trying to defend.
Yes. Yes, Okay, sir. Okay. That's nice to hear, sir. And sir, about this cost of deposit and other initiatives, whatever you are talking about. So sir, at present, where are we like in the last con call you call that by the next year, you will be able to give a guidance about all the new initiatives that present -- yes.
I think I did mention some of it already, the CMC that are carving out of the projects on the branches, we have implemented in one of the regions. That is something that I [indiscernible] most time. It has already been done. In the Thoothukudi region, which is the biggest region for the bank we have already implemented that. The experience -- along with the implementation or carving out or [indiscernible] the tariff processes there.
We have put in place a significant resource for the relationship side and onboarding of new customers that's happening.
We have also put in place the LOS and the [indiscernible] because TMC would both the MSME and the agri, the entire [indiscernible], as I mentioned earlier. So that also has been inked. That is one.
And the other aspect is that we have also just about completed the construction of the business rule engine. That is undergoing testing at the moment. I think that would be towards the end of the current quarter itself, I believe that would be made available. So that would be enough to center for it.
And with the automation significant automation in the phase process, we expect the turnaround time to come down sharply and making it as a very competitive player in the market space. So that's something that we expect to get benefit of that. That's the reason I mentioned earlier that in the advances we are projecting something higher than what we saw. We got a growth of 11% in the current year -- sorry, in FY '25. We are projecting upwards of 15%. So that's on the advances side.
To drive -- to align ourselves to the market, we have also verticalize the bank in the sense that we have created 8 verticals within the bank, each driving a specific business area and not just driving the business area, also trying to get -- and within that business to what is happening in the market to check in to what is happening in the market or create new products, revise existing products to refine the processors, simplify and improve the productivity within the basic -- within that business area, we have also created, 8 verticals for each in the asset side and the liability side. So that's the other piece that I did mention earlier. That's something that we have -- we have put in place with very, very, very clear budgets [indiscernible]. And as I said earlier, 81% of the bank ground post today is on CTC with their variable pay increasingly aligned to the bank's profits.
Yes. Sir, another one question was regarding the advances growth, which you are projecting of 15% to 18%. Sir, I think the norms of Reserve Bank regarding the gold loans and everything in the recent days and our exposure to the gold loans based loans are -- is quite okay, quite good. So that makes you more confident of 15% to 18% growth and same extension to that question. And if there is a loan growth of 15% to 18% and the NIM, which you are projecting from 3.8 to 3.9 and there are a lot of hidden provisions. So we can expect a profit growth of 20%, 20% to 25% possible?
No. No. I don't think on the profit front, we are projecting that kind of -- a couple of things that we will be looking at this year. One, of course, is a significant amount of CapEx happening, right? We did spend about INR 155 crores on the IT side last year. But this year, I'm seeing a significant ramp-up of that. In fact, whatever we have contracted all the day by way of IT assets and automation processes that we are sourcing. I think some of the payments are going to happen this year.
And apart from that, some of the branches that we have the physical branches that we have, we are also looking at how we can or it towards a modern -- with a modern outlook and modern ambiance. So some amount of expenditure is going to happen that I think we are trying to look to clean up at least 50 of the branches, and reorient these branches has ESG branches, led services balances looking at high net worth [indiscernible]. So that's where some kind of the calculation is going to go there.
So while I did mention about 14%, 13% to 14% growth happening, I am not -- I think the profit will possibly be aligned to that. It will not be greater than that. In fact, I have been looking at only at a 10% to 12% growth for the -- perhaps closer to 12% for the current year because this is the year when a significant amount of CapEx is happening. But we will ensure that the CRAR is at 50% and lower than 50%.
So sir, this will be the last year of this CapEx, sir?
We ramp up the quality of the portfolio. Some -- like I said, not 3.80, 3.90%. Some moderation of the [indiscernible] will happen, which will contribute the [indiscernible].
The profits, certainly, it will be higher than the gross profit that we have delivered this year. We did deliver 10.35%. Our FY '26 profit will be higher than.
Sir, but this will be our last year of this maximum CapEx will get over in this year?
It will be over. It will be over. We'll continue to be investing, but I think they will be pulling order into the current year and 5/27 is the year that you have to watch [indiscernible].
The next question is from the line of Hitaindra Pradhan from Maximal Capital.
Sorry if I missed this. So you mentioned the cost to income would say it elevated? Or will it normalize further?
On cost to income, in fact, in the current year, we have brought it down. It is at [ 44% ] right? It might move up a little bit. But as I said, the cost/income will be maintained below 50%.
Right, sir. Right, sir. And you, sir, the guidance on ROA was around 1.5% value. So is it still at that level?
Or it will still be at 1.75% yes. Of course, this year, FY '25, we delivered 1.88, but there will be some operation, 1.75 to 1.80. Yes.
And you say your credit cost and slippages have been pretty impressive. So you see it sustaining at that level or you see some surprises?
No, I think we have already factored in the surprises. Let me tell you in FY '25, the largest NPA that we have, which is almost 30% of the overall NPA of the GNPA, we have fully provided, okay? And we -- if we can't recoup that in the current year where there is a possibility, then that will be -- that will be added to the guidance [indiscernible] of 10% to 12% of net [ profit ] growth. So I think I don't find much of the surprise happening on the GNPA side. As we did, we have delivered 1.25% with a 71% PCR. Going forward as well, I think the 1.25% would be defended.
The next question is from the line of M.B. Mahesh from Kotak Securities.
Just a couple of questions and for kind of a bit late. On the -- just to kind of add on to the previous question that was asked, what is the kind of [indiscernible] you seem to be getting from your customers of the situation on the ground, especially with respect to exporters and importers?
Sorry, you had...
Hello?
Yes, go ahead. Go ahead. I can hear you.
Yes, sorry. Sorry, I'll just repeat the question yet. The question is that when you look at the situation on the ground and when you ask your business hedge of about what the feedback is with respect to the implications of your customers or what's happening on the global side, how are you looking at FY '26? And how are you responding to it, sir?
First, at the Bangalore level, I think the trade finance one area are really focusing on. Let me come to the matter a little later. That's something that we are focusing on. And we are also having -- sorry, trade finance specialists onboarded into the CMC setup. I did mention it to you come a little late. And so let me recap for you, we are putting in place credit management centers. We have already done that into [indiscernible] experience is good, and we are ramping it up to the other agents as well. We have 12 of them.
And we are putting in trade finance specialists, product specialists to ramp up. This 1 area, we believe, given the kind of planting that we have, we can really ramp up in terms of fee income, the ForEx side of it and the trade finance side of it. So that's the first part of it. So that's the only part of that.
But when I look at what is the changes that are happening across the world, particularly the U.S., the tariffs, et cetera, it just not really impacted our segment as of now. I don't see any kind of significant changes that is happening into the kind of in the export or import that is nothing to our book currently. But taking a watch on that, and we are, like I said, we have put in, we are putting in place specialist to specifically look at the movement and the changes that are happening and how we can protect our fee income from it, along with giving guidance to the customers on how they can tackle it.
Okay. Perfect. And the second question, sir, in general, have you seen an improvement in pricing for loans, deterioration in pricing of loans from -- in terms of the competitive intensity, from where we are today?
Pricing of loans, of course, we have already seen 2 rate cuts now already with the -- so that's sort of having an overhang on our pricing per se in the sense from an absolute [indiscernible] perspective. We are trying to monitor particularly the MSME pricing we did. I did mention that the NIM that we will be looking for is 3.8 to 3.9 in that range for the full year. That also, and looks at a bit of a pricing moderation for our MSME portfolio, and so the intention is to move into the market and look for new business where pricing would be a challenge. So that is really the factor it.
just even in the existing book, we have come across [indiscernible] challenges, but that is being already been tackled in the current year in FY '25. And of course, there will continue to be tackled going forward as well. And I'm confident of protecting the NIM INR 8 crores [indiscernible]
[Operator Instructions] The next question is from the line of [indiscernible] Sharma, an individual investor.
Congratulations for a good set of numbers. I just have one question or if I can ask two questions. First question is like we have 25 branches in Tamil Nadu. And the rest of the states, we have 1 or 2, some states it's double digit. What are the plans we have because we have opened this 26 branches we're doing FY '25. What is the plan for FY '26. And are we only concentrating on Tamil Nadu or some are onto some other states? Those are my first question.
We are looking to open 50 branches in the first 2 or 3 quarters itself so that we do get the 58 branches in the first 2 or 3 quarters. Hopefully, in the first 2 quarters itself. Maybe they could just be lower, but certainly before the end of December. And we are hoping to open half of these branches in potential growth areas outside the state of [indiscernible].
Okay. So what is the full year number?
Full year number would be 50. And [indiscernible] Tamil Nadu.
So my second part of the question is, what is your goal of Tamil Nadu [indiscernible] out of as where you want to have at least 300, 200 branches in next 3 years or [indiscernible]. What are the states you are targeting? That's my question. Second question.
I think when I look at the profile, with 75% of the branches within the state of Tamil Nadu. Going forward, we are trying to drop this down to 60%. That will be a 3-year venture. I think I did mention this in the last call as well.
Yes, yes, yes. So my second question, sir, what about our [indiscernible] of 10%.
You're not clear, what was that?
[indiscernible].
What did he say?
CEO appointment back of intent you [indiscernible]?
We'll take a call at the appropriate time. Management bandwidths now is strong, and I think that is getting also reflected in the results that we are seeing. It's strong. So I think we pretty much, all the positions at the [ ex 35% ] level now. And we will look at [indiscernible] as appropriate.
My final and last question is whether we are on track to at least 15% to 18% ROE by FY '26 or '27, sir. And when do you think we will see that number, 18% ROE, 15% to 18%.
Roe is -- FY '26, I don't anticipate that. I think FY '26, we will try and the number that we looked at in FY '25, which is about 14% is something that will continue perhaps a little better for FY '26. But FY '27 will be better, but 18%, I think, would be yearly.
[Operator Instructions] The next question is from the line of Saket Kapoor from Kapoor and Company.
[Foreign Language] Sir, I joined a bit late, so sorry for any repetitive question. But sir, you mentioned in answer to a question that FY '27 would be the year to watch in terms of the profitability growth and for the investing community as a whole. So if you could just allude to us what factors will culminate by -- from 2 years from now? Or what levers will be in play that will result in that be year to be -- year to reckon recon for the company, for the bank.
FY '27 is only a year from now, right? We're talking about next year. Why one, of course, I've also said that we would be largely aligned to the market growth in FY '26 itself. I did mention that we will have a 13% to 14% growth. That is the first part of it. And this is going to happen despite the fact that we anticipate some disruption to the changes that we are bringing in. We have gotten a lot of that [indiscernible] both on the HR side and as well as on the technology side. The processors are being automated. There's a whole lot of changes that are being made.
As the ground for gets attuned to these changes, we anticipate a bit of disruption that's happened. That is why I said that the kind of growth that we would now to see in the current year may happen only in the next year because while the ground gets acts to the changes and start delivering the productivity that we are envisaging from these changes. I think this year, we will see the bank aligning to the market is perhaps growing as a little better. But next year, I think the full benefits of the initiatives would be made available, and we see a significantly higher growth.
And for the benefit of your investors, to be outline what are the destructive changes that have been put into place? And how are they going to play out in terms of the profitability? And the Q-on-Q, we have seen that even though our net interest turn has gone up, but our operating profit was flat. So if you could just comment 2 points, and then I have two more questions, please.
Yes. Yes. The first effect is that we have created very clear 8 verticals in the bank with clear business targets. And that's on the asset side and on the liability side. That is the first thing that we have done, and each of them have been given -- look at the market look at the products in the market, refine the products that we have refine the process that we have on the delivery of these products, automate the process of delivery. I think they have given very, very specific targets of how to meet the competition that on. That is one aspect of the verticalization of the bank. It has been thought about from that perspective.
Second, that, as I think I mentioned earlier also in the last few half hour or so -- about the changes that we are bringing in the automation that we are bringing in the kind of at the credit management centers that we brought in to centralize a bit and benefit from the scale of economics, economies of scales rather, and that's on one major thing that we have brought in, in the way that we are conducting our operations.
We have also brought in a transaction business group, the Global NRI Center one in attracting, we have significant pressures where the NRIs are concentrated, and we want to take advantage of that. We have brought in the Global NRI Center.
We have now set up in this month, in the month of April as just the way back in services group, which, of course, will take a bit of time to take rules to ring-fence our high net worth individual ramp up, then for the bank in terms of both product offerings and their outstandings in CASA the term deposits. So ESG it's something that we have taken note.
And as I mentioned that the HR initiatives, we are going in for a major skilling program. We have, in fact, conducted a test across all our HR, human resources -- test conducted to understand the talent. I think this has been conducted across all the ground post that we have test conducted by the leisure banking and finance, to understand where that talent life so that we can appropriately deploy and that has just been complete, that has been completed. And our redeployment is based on significant takes inputs from the, so HR charge skilling is a major activity that we are engaged in.
As I said earlier, the wage revision that we have signed, which is historic in nature, is now has 81% of the post, HR post that we have on the CTC model. where it is aligned to the profit generation. We're able to think that component is aligned to the profit -- sorry, the profit ambition of the bank.
So a lot of initiatives have been taken and on the IT side and significant CapEx it's happening interesting has been completely rebounded a significant amount of services to be provided through the internet banking that is on. I think we will see that how we can avoid our customers coming to the brands and have all the services delivered through other channels, other digital channels, I think that's a major one. I think it will take a couple of quarters and maybe it will move into the third quarter before we see the benefits of that, benefit or the changes in that.
The automation of the credit appraisal system, as I said earlier, is on the business rule engine to tackle the low-value accounts up to 50 lakh in an automated traction destining based on the data. That's pretty much completed. It's in the testing phase.
LOA to manage end-to-end per customers, that's not getting done, taken a couple of quarters before sort of specify and start delivering profits -- sorry, and the business. So there the significant -- many, many initiatives have been taken, and I anticipate all this to deliver results.
Going forward, certainly partly in the current year and certainly in [indiscernible] in the FY '27.
You did alluded to 15% growth, that is what we should envisage in the, our net profit for this financial year, sir? That is what you are looking forward?
No, 15% growth. I said territorial most larger work [indiscernible] in the current year, in the current.
I think you also spoke something about our profitability rising by May inclined to increase by 15% for this financial year. That is, I think, what I heard you mentioning that also.
I didn't say on that. I didn't say [indiscernible] 14% in the year. What I did mention is that I did mention 10% to 12% on the net profit because of the CapEx that we will be undertaking as a onetime effort both in the branches and the physical appearance of the brands as well as the digital appearance of the branch. Our digital appearance the back.
So some do have a takeaway? What I did mention was that on the GNPA front that we have a particular account with a 30% we are 30% of the our talent and GNPA it's on our part of a particular account. If we get dissolved in the current year, and it hasn't fully provided. So that will be a for. So that's what I mentioned. I did not mention about 15%.
Okay. And sir, this sector, is it I just conclude my thought,, which sector the GNPA, which you have mentioned 30% of [indiscernible].
This is others.
Other? This segment which industry, sir, that.
[indiscernible].
And then lastly, sir, are we fully funded to fund the growth or we will be needing any type of equity [indiscernible] bond issuance to fund the growth for FY '27 and onwards? And secondly, sir, the reserve bank stands on the stand on monetary policy now becoming accommodative and going ahead also going to be remain accommodative for the near future and also the abundant liquidity in the system. How do we see that playing out in terms of the profitability in terms of the NIM and other factors? Because you have already lowered the NIM trajectory to 3.8, I think for this financial year. Now with liquidity and things improving, how is our banks of our size aligned to the current monetary environment in the country?
Yes. First question part of your question about additional parts. I think with the [indiscernible]medical ratio of 32.71%. That is up 334% in the year itself. I don't think in the forseeable future, we'll be requiring funding from the capital markets. That is one.
I think a challenge is to strengthen these next 2 months that we have in terms of growth in that way, we'll be focusing on. The growth is there. I think our single-minded focus is on currently.
And I did mention -- when I mentioned NIM 3.8, 3.90. We have already factored in a possible 50 basis cut.
Yes. That is correct, sir. So I was just trying to understand earlier the NIM improved when we were in an environment where there was a tightening of liquidity. And now we are in an environment where liquidity will be in abundant and the growth from the, it will be the corporate who whose CapEx and all will be driving the growth, which is not in the annual as of now. So how is the banking system aligned, especially in terms of the small size bank of our nature, which is specific to geography. So that was my question, sir.
Yes. So that's an advantage that we have, in fact, last size bank like state bank level mirror what is happening in the market, much more constant way. But for [indiscernible] side, I think our brokers are greater when we are strong for us to within some of these pressures. On the -- what you mentioned about the liquidity easing -- yes, it is easing but [indiscernible] it's not felt on the deposit rates. We are looking at the deposit the rates continuing with the existing -- we are anticipating that in the process, the market would continue to be a challenge.
If you look at how, the CapEx line is happening, the income tax release that happened, how it is going to play out, how the mutual fund in the move towards a mutual fund in terms of the it's going to play out, the longer interesting in terms of the pricing of the deposits, the particular returns the deposit is going to play out when we look at the NIM. To put further color to it from it, I did mention that we have started the transaction business growth from focus on the current account space and the rig services book that I did mention subsequently, is going to focus on this topic. So CASA it's going to be a major focus for us, which we are trying to -- even if the deposit of the market becomes a real tight we would use the CASA as a means of getting the cost of the, and if the thing leads out, and if the anticipated the liquidity happen, the flow funds into the banking sector happens bonus for us.
Yes. Thank you, sir, for elaborating the answer we, as investors, hope that market will also start valuing the enterprise value also we are trading much below even onetime book. and taking into account, I think the 550, I think is the book value correct me there. It is a very, it is for investors waiting time for a period for a very, very long period so we get adequately rewarded. So we are still in the wet more only to reap gains from being remaining investors in TMB. That was only concluding remark that the rate has been very long for us. Yes.
Like I said, we are fully alive to myself are investor in TMB. We are fully aligned to it. And whatever we are trying to do is to generate the kind of growth. Like I said, from FY '24 and '25, the growth levels in the deposits is more than. And of course, the initiatives that we have taken is [indiscernible] from that manner. This has just been in terms of our own monitoring of our business, growth internally that has generated. And what the business initiatives that we have taken start bearing in the growth we anticipate to move up further. And like you said the way, for a better valuation, I think it will get going to be over [indiscernible]. Yes, all the of will sound as we go forward, the graph we anticipate to trend upwards, but it is certainly from both a growth perspective and some profits. Give us a valuation note understand because market is, after all, we'll understand numbers better than as adjusted to give us the value that we deserve.
Ladies and gentlemen, this will be our last question. It's from the line of Manish Chan from Welcare Securities.
Sir, what percentage of our business comes through the digital channels? And where are we compared to other private banks? And what are our future initiatives in this segment, sir.
Through the digital channel, it is, I would say, very close to 0, right? 2% to 3% [indiscernible] of course, and on side is fairly those are the initiatives that we have taken. On the advances side, I've just mentioned, we have put in place a business rule engine, where -- which has just been the construction of which has just been completed, and it is under testing phase, where we intend to use data for decisioning. I think that you will see starting from later part of the quarter or in the second quarter of the calendar years will go on stream. So the significant -- particularly the low value of the below INR 5 lakh, we would be significantly using digital means to onboard and also for decisioning purpose sanctioning purpose of such loans. So I think that hopefully could significantly reduce the reduce our own operational cost of managing these accounts. So that process is on. I think that's one of the -- that is the initiative that I said, he is having that.
It's very, very low. I don't want to really nothing worth speaking about. But as we go by, I think the onboarding of customers would be significantly through the digital channel, both on the viability side, and on the asset side. In fact, we are, as I speak, we are completely revamping our onboarding journey on the current account space. We are talking about the vision right or the [indiscernible].
Yes, both.
Transition to now, it is more than 90%. We have not rolled out any product like we approved loans which is available through digital channel. And thereby, the business growth as MD mentioned 50%, but customers don't use digital channels like [indiscernible] digital forms. And transactions are normal 90% of transactions are through digital channels.
Sir, and business, you told how much 44%?
Businesses roughly [indiscernible].
Onboarding advanced customers, credit customers are notably through [indiscernible] names. Our entire initiative is that through other [indiscernible] put in place a large relationship managers. That's the part we're also looking at how we can onboard it through various other [indiscernible].
Ladies and gentlemen, that was the last question for today's conference call. I now hand the conference over to Mr. Nair for closing comments.
It was good to talk to the group. Of course, not being able to see, but the voices, they are very clear. And like I said earlier, the FY '25 has been in a year where we have seen, we have tried to break from the cost in terms of growth in business numbers. We have partly -- or rather more than that what I mentioned in the last December results call that we will look at double the deposit growth, and that has actually happened. We have more than double digit. I have mentioned 8%. We have crossed, we are at 8.40%. Overall business number is also, I think below the market, it's 3.58, but FY '26, you will see that it is aligned to the market and even better than the market.
And our stress quality, the management of our stress is perhaps as good as the best in the market, 1.25% GNPA, SMA at 2.5% or 2.55%, both combined 3.80% of is perhaps one of the best in the market. Capital adequacy ratios very good at 32.71. PCR at 71%. And finally, delivering a net profit of 10.35%. And we are -- a lot of initiatives have been taken to push up both the business result and the net profit, and I'm sure that the FY '26 numbers that we will deliver, we are confident that will be significantly, it will be better than what we have done for FY '25. And that's far [indiscernible] I think there was that a significant amount of initiatives have been taken. I did mention about verticalization. I did mention about key initiatives and of course, also about how we intend to turn our branches at least some of them into -- both in terms of appearance and in terms of orientation for business growth.
So I think we are fairly confident. I think confident in the sense that the initiative that we have taken is beginning to show some growth. Gain share very well clearly evident, and that gives us the confidence that FY '26 going to be significantly better than FY '25. And as I said initially, FY '27 is the year that you have to watch out TMB for.
So thank you much again for coming and joining us on this call. And I'm sure any other questions that we have, we can also take it offline.
Thank you. [indiscernible]. A couple of points just one the sort of year that is in terms of NPA management. We have traveled [indiscernible] primary position of INR 1,084 crores in 2021, which was [indiscernible] of our portfolio. Today, we start at a [indiscernible]. Half of what we were in 2021.
And similarly, net NPA, if you look at it, this year's position is INR 163 crores, which was against INR 375 crores [indiscernible]. You take is more than 50% reduction in net NPA. I think the investor should take note of. And thank you very much.
Thank you. On behalf of Tamilnad Mercantile Bank Limited, that concludes this conference. Thank you for joining us, and you may now disconnect your lines. Thank you.
Thank you.