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Edited Transcript of CANFINHOME.NSE earnings conference call or presentation 23-Jul-19 6:00am GMT

Q1 2020 Can Fin Homes Ltd Earnings Call

Bangalore Jul 27, 2019 (Thomson StreetEvents) -- Edited Transcript of Can Fin Homes Ltd earnings conference call or presentation Tuesday, July 23, 2019 at 6:00:00am GMT

TEXT version of Transcript

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Corporate Participants

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* M. Shamila

Can Fin Homes Limited - General Manager

* Prashanth Joishy

Can Fin Homes Limited - Head of Finance & Accounts

* Shreekant Mohanrao Bhandiwad

Can Fin Homes Limited - Deputy MD & Whole-Time Director

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Conference Call Participants

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* Aarsh Desai

Vallum Capital Advisors - Analyst

* Aayushi Mohta

* Amit N. Rane

Quantum Securities Private Limited, Research Division - Research Analyst

* Anirvan Sarkar

* Augustya Dave

* Bunty Chawla

Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst

* Digant Haria

Antique Stockbroking Ltd., Research Division - Assistant VP, Equity Research

* Hitesh Gulati

Haitong International Research Limited - Analyst

* Kashyap Jhaveri

Emkay Global Financial Services Ltd., Research Division - Research Analyst

* Manav Vijay

* Nischint Chawathe

Kotak Securities (Institutional Equities) - Senior Analyst

* Nitin Gandhi

* Punit Mittal

* Rahul Maheshwari

TCG Asset Management Limited - Senior Research Analyst

* Rajiv Mehta

Yes Securities (India) Limited, Research Division - Research Analyst

* Ritika Dua

Elara Securities (India) Private Limited, Research Division - Research Analyst

* Romil Jain

Systematix Shares & Stocks (I) Ltd. - Assistant VP - PMS

* Sandeep Jain

* Saurabh Dhole

* Shreepal Doshi

* Shubhranshu Mishra

BOB Capital Markets Limited, Research Division - Analyst

* SivaKumar K

Unifi Capital Pvt. Ltd. - Associate VP & Fund Manager

* Sonal Minhas

* Utsav Gogirwar

Investec Bank plc, Research Division - Analyst

* Yash Agarwal

JM Financial Institutional Securities Limited, Research Division - Research Analyst

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Presentation

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Operator [1]

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Ladies and gentlemen, good day, and welcome to the Can Fin Homes Limited Q1 FY '20 Earnings Conference Call hosted by Investec Capital Services. (Operator Instructions) Please note that this conference is being recorded.

I now hand the conference over to Mr. Utsav Gogirwar from Investec Capital Services. Thank you, and over to you, sir.

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Utsav Gogirwar, Investec Bank plc, Research Division - Analyst [2]

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Thanks, very much. Good morning, all. Welcome to the Q1 FY '20 earnings conference call of Can Fin Homes Limited. To discuss the financial performance of Can Fin Homes Limited and to address your queries, we have with us today Mr. Shreekant Bhandiwad, Deputy Managing Director.

I would now like to hand over the call to Mr. Shreekant Bhandiwad for his opening comments. Over to you, sir.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [3]

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Good morning, Utsav. With me, we have Mrs. Shamila, General Manager; Mr. Joishy, AGM; and Shilpa, Senior Manager, to assist me. The first quarter has been reasonably good. We have posted a growth of about 17% under AUM. The disbursements have gone up almost by 10 percentage points. And the overall income, that is -- it has gone up by 20%. And the expenditure also almost have gone up by same percentage points.

Profit before tax has gone up by 17%. We have reached a level of INR 131 crores, and profit after tax has risen by 11 percentage points. Compared to March, the yield has improved by 16 basis points. And cost has gone up only by 3 basis points. So because of this, the spread and NIM have improved slightly. And also, as far as asset quality is concerned, there is a slight slippage INR 113 crores, which was, as of March, has gone to INR 139 crores for the quarter end. However, when we analyze the slippages, last year, also, the whole first quarter, the slippages were to the extent of about INR 40 crores and as compared to the total slippage of about INR 50 crores net slippages during the whole year.

So this year also compared to the INR 40 crores of first year -- in the last year, this year, the slippage has been to the extent of INR 26 crores. So usually, the slippages will be maximum or more in the first 2 quarters. And once we initiate the action under SARFAESI and also improve the recovery efforts, the asset quality will improve and also the NPA percentage will come down. As we have already informed in the presentation also, in most of the cases, already we have started the SARFAESI action. And in the days to come, definitely it will give result. And we hope to bring down the NPA level to March level by the second quarter end.

And coming to the capital adequacy, almost now we are -- we have crossed 19.5%. Out of that, Tier 1 capital is 18%. And leverage has -- which was almost 10 during the last year first quarter, it has come down to now 8% -- 9% almost for this year. So in that way we are comfortable.

The company also has sufficient unavailed credit limits to match the ALM to meet the funds requirement. As on June, we have -- we had around INR 2,000 crores of unavailed limits. Additionally, after that also, we have got substantial credit limits sanctioned by banks, almost to the extent of INR 2,000 crores -- more than INR 2,000 crores. So as of now, we have around INR 4,300 crores of unavailed credit limits available with us, that will take care of the funds requirement at least to the extent of next 2 quarters.

So the growth has been almost 17% under AUM. But if you exclude Bangalore -- Karnataka, the growth has been almost to the extent of 22%. Karnataka has grown -- there is a slight improvement in Karnataka performance also. It has gone to the extent of about 7%, and overall South has grown by 15 percentage points, and non-South has grown by 20 percentage points. So overall growth has been to the extent of 17.5%. So we hope that Karnataka to do well in the remaining quarters with RERA and GST behind us and also following up -- and also, there was a report that the unsold inventory in Karnataka is depleting faster as compared to earlier. So comparing that we expect Karnataka to do better because after all, Karnataka contributes almost 30% of our book and whole South contributes about -- to almost 70% and non-South accounts for about 30% of our outstanding.

And also, under salaried and nonsalaried space, so growth are almost similar. So 70% of our outstanding is from salaried space and 30% is from nonsalaried space. And growth in both the segments is almost similar.

So with this, I think we will -- we are opened for questions and any inquiries.

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Questions and Answers

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Operator [1]

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(Operator Instructions) The first question is from the line of Augustya Dave from CAO Capital.

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Augustya Dave, [2]

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Great numbers, sir, in very difficult circumstances. Sir, I have few questions. One was on the coverage that we have, provision coverage. Earlier, few years back, we used to make sure that at least by the end of the financial year, we used to reach 0% net NPAs. So what are your thoughts on that? It is now at 0.5%. Will you be taking additional provisions? Then we have taken some additional provisions Y-o-Y this year of some INR crores 8, INR 8.5 crores. So what is that number, if you can elaborate on that? And third, sir, given the state of affairs in the industry and we are one of the very few companies who are doing well. I was at least expecting the prepayment rates to decline for us. Are you seeing that now, sir, in the markets you operate?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [3]

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Yes. So first thing is, as per the Ind As, ECL model, the total provision requirement is almost INR 47 crores. As against that, we are holding a provision of INR 107 crores. As per the IRAC norms of NHB, we are holding INR 107 crores. Out of that, INR 46 crores is for -- towards -- for NPA accounts and INR 60 crores is for standard assets. So that -- so there is a substantial increase in amount also for the overall default risk what the company is envisaging.

Second thing is, yes, there is a -- as I earlier told, the NPA has gone up from INR 113 crores to INR 139 crores. So accordingly, the provision for NPA has gone up by -- we have made a provision of INR 6.75 crores. And we have made a provision -- additional provision for standard affairs INR 1.91 crores. So put together, total, it comes to around INR 8.66 crores.

Third is, you asked about the prepayments. The takeovers balance out. It has come down substantially. But still, there are few banks and also 1 or 2 couple of NBFCs who are taking away the loans. But still, when you compare to last year, this year, it has come down substantially.

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Augustya Dave, [4]

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Sir, in the current state of affairs, do you expect to reach INR 23,000 crores? Or will we miss it by a little bit, maybe INR 22,000 crores?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [5]

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Well, it depends how the events will take shape or -- it is difficult to say now, but definitely, we are aiming to reach that level what we have set for the year-end. And we have sufficient liquidity also to reach that growth rate.

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Augustya Dave, [6]

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Yes, sir. So on that liquidity side, may I ask another question. In the slide where you have described your liquidity for the next 2 quarters, bottom of the slide, this is Slide #10, you have written in addition to the above, the company has unavailed limit of INR 4,738 crores with money markets. So sir, what's the total number then? And what is this INR 4,738 crores?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [7]

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So what I have told is, the INR 2,000 crores was available -- bank credit unavailed limits for the June end, quarter end. After that also we have bought some credit sanctioned limits from banks to the extent of INR 2,300 crores. So apart from that, we have borrowing limits CP as well as NCD. So CP limit of INR 4,500 crores and NCD limit of INR 6,000 crores. So out of that, the CP outstanding is INR 2,600 crores and the NCD outstanding is INR 3,100 crores. There is a room for us to borrow from the market as well apart from the unavailed credit limits available to us.

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Augustya Dave, [8]

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Sir, have you seen our cost of funds declining with the yields? And I am not talking about the banks. I heard your interviews on CNBC, you mentioned the MCLR part. But out of the nonbanking funds that we are raising, the way the 10-year yields have come down, are we seeing any benefits of that? And how much can we expect the cost of funds -- the overall cost of funds to decline for us this year?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [9]

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No, this year, it may not be possible to predict as of now. But definitely, the rates -- the market borrowing rates will come down in the days to come, whether it is by way of CP or by NCD. And we...

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Augustya Dave, [10]

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Can you quantify it, sir?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [11]

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No, that is -- I don't think it is possible as of now to comment on that. So but we will be watching both the bank rates as well as the money market rates. So accordingly, we raise both the spaces -- both the space we have headroom to raise the funds. Accordingly, we'll plan.

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Operator [12]

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(Operator Instructions) The next question is from the line of Aayushi Mohta from CD Equisearch.

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Aayushi Mohta, [13]

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Sir, I wanted to understand, what is the nature and type of Stage 2 loans of INR 890 crores as on 31st March?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [14]

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What is that?

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Unidentified Company Representative, [15]

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Stage 2 loans.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [16]

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What is that? I did not get you.

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Aayushi Mohta, [17]

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Sir, in your annual report, Page 192, sir, you have given the breakup of the loan, like in Stage 1, Stage 2, Stage 3. Basically, I wanted to understand what is the nature of these Stage 2 loans?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [18]

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So as per ECL model, so Stage 1 consists of standard assets and SMA-0; Stage 2 consists of SMA-1 and SMA-2; Stage 3 consists of NPA accounts.

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Aayushi Mohta, [19]

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Right, sir. On individualized, what is...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [20]

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Well, they are all individual loans. We have only builder loan exposure of only INR 11 crores. So all are individual loans.

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Aayushi Mohta, [21]

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So like, are these a LAP account or which kind of loans, can you do please...

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M. Shamila, Can Fin Homes Limited - General Manager [22]

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Housing loan. Most of them are...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [23]

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Most of it is in the housing loan only. Because -- see, our total outstanding from our HL, housing loans, is 90%. What we have in NHL is hardly 10%. So...

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Aayushi Mohta, [24]

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So you're saying that most of these loans are from housing loans?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [25]

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Yes. Housing loan only, yes.

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M. Shamila, Can Fin Homes Limited - General Manager [26]

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Yes.

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Aayushi Mohta, [27]

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Okay. Sir, for salaried, nonsalaried like...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [28]

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No, just that’s picked up.

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Unidentified Company Representative, [29]

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(inaudible)

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Unidentified Company Representative, [30]

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Salaried, there are mix of salaried and nonsalaried.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [31]

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They are all, both are there. Salaried as well as nonsalaried, both are there.

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Unidentified Company Representative, [32]

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They're salaried as well nonsalaried.

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M. Shamila, Can Fin Homes Limited - General Manager [33]

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Yes.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [34]

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Yes.

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Aayushi Mohta, [35]

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So -- but sir, like, is this phenomena confined to a group of assets?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [36]

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No. There is no such distinction in a particular segment or a particular product. So it's -- it has spread across all the products and all category of borrowers. There is no such distinction as such.

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Aayushi Mohta, [37]

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And sir, what would be the ticket size around, average ticket size?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [38]

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Average ticket size is -- HL is about 18 lakhs and NHL is less than 10 lakhs, it is about 9 lakhs. So that is the ticket size. In metros, usually it will be around 25 lakhs to 30 lakhs. And nonmetro, it will be about 10 lakhs to 15 lakhs.

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M. Shamila, Can Fin Homes Limited - General Manager [39]

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And NPA also about 14 lakhs average.

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Operator [40]

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And the next question is from the line of Rahul Maheshwari from TCG Asset Management.

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Rahul Maheshwari, TCG Asset Management Limited - Senior Research Analyst [41]

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Excellent numbers being delivered.

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Operator [42]

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Mr. Maheshwari, I'm sorry to interrupt, but we can barely hear you. Could you please speak a little louder?

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Rahul Maheshwari, TCG Asset Management Limited - Senior Research Analyst [43]

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Am I audible now?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [44]

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Yes.

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Rahul Maheshwari, TCG Asset Management Limited - Senior Research Analyst [45]

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Good set of numbers. First of all, can you give a highlight on how much of your book is towards the affordable housing, mainly towards the -- whatever the categorization is being defined by the government towards the affordable housing? And the respective color on the growth rate on ATS and disbursement which is taking place? And second thing, how much growth on Karnataka book, which is 30% of your overall book, how much during this quarter has been towards -- grow towards Karnataka and non-Karnataka, which is the remaining part of the book? And third, what is the LGD for the housing and nonhousing segment, sir?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [46]

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As far as growth is concerned, already I have told that Karnataka has grown by about 7%. But during the remaining part of the year, we expect Karnataka to do better. So -- and also, you were asking about, which is other one?

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Rahul Maheshwari, TCG Asset Management Limited - Senior Research Analyst [47]

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Average, sir.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [48]

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Average -- this one...

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Rahul Maheshwari, TCG Asset Management Limited - Senior Research Analyst [49]

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Affordable housing, how much percentage of...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [50]

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Yes. Affordable -- most of our tickets size -- even if you see the ticket size, most of our lending is towards affordable housing. So but far few exceptions, most of it is towards affordable segment because the average ticket size itself is about 18 lakhs. And in metros, it is maybe around 25 lakhs to 30 lakhs. In nonmetros, it is about 10 lakhs to 12 lakhs. So most of our lending is directed towards affordable housing. And growth, as I told, Karnataka needs to pickup a little more, that we are hoping that in the remaining 3 quarters, Karnataka will do much better. So as earlier I told that the depletion rate of the unsold inventory is now much faster as compared to earlier. So new projects, especially under affordable housing, there are good number of projects coming up in the outskirts of Bangalore and other cities. So we hope to encash on that. And our main focus is on Tier 2 and Tier 3 cities. Other than Bangalore in Karnataka, we are opening good number of branches in other than Bangalore, especially in Karnataka state, to improve our overall lending in Karnataka. And also -- but for Karnataka, the overall South has done reasonably well, and the overall growth has been about 15%. So North has grown little faster, it has reached almost 20%. So first quarter is an indicator. But I think the performance will be much, much better in the remaining quarters of the year. So overall, what guidance we have given is about INR 23,000 crores, we will be able to reach.

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Operator [51]

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The next question is from the line of Shubhranshu Mishra from Bank of Baroda Capital Market.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [52]

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Just want to understand what is the time taken for a branch in metro versus a nonmetro location to breakeven? What is the time difference there?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [53]

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It usually takes 1, 1.5 years.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [54]

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For both the locations, sir?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [55]

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Different locations -- we are now not opening many branches in metros. So all our focus has been in the nonmetros only. These are number of branches what we have opened the last 3 years. So it'll give clear indication that our focus has shifted from metro to nonmetro. Out of the new branches opened, out of 65 branches, 53 branches are in nonmetro within the last 2, 3 years. And also business is growing much faster in nonmetro branches. So metro branches have grown by about 11%, whereas nonmetro branches have -- the business has grown by 30 percentage points.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [56]

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Right, sir. What I'm trying to get at is that, what -- given that your focus is on the nonmetros and that is where you think that the growth would come out of, you would have given some kind of targets to your sales guys.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [57]

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Yes, yes, yes.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [58]

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So what is that target like? A ballpark number will also help.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [59]

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It is not uniform. It depends upon branch to branch and also location. Some branches are doing 1.5 crores to 2 crores business a month, new branches. Some are doing little more than that. Some branches are doing less than 1 crore. They need to gear up.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [60]

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This is per month you're saying, sir?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [61]

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This is per month. This is per month. And we are continuously monitoring the performance and also because most of these branches, 22 branches were opened in the last year, that too almost now after first quarter. So they got only about 6 to 8 months of time. So this year, whole year, they'll be getting to show the performance. So in that way, we think that these branches' performance will substantially improve. There was another 16 or 18 branches, which were -- which opened in the previous year, '17, '18, they're already doing well. So in that way, these branches will contribute substantially.

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Operator [62]

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The next question is from the line of Satish (sic) [Hitesh] Gulati from Haitong Securities.

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Hitesh Gulati, Haitong International Research Limited - Analyst [63]

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This is Hitesh Gulati this side. Sir, my question is that in the last year, full year, we did not provide any additional provisioning. So if you see Q1, Q2, Q3, we did not provide anything in the P&L. And only in Q4, you provided 1 crore. Now in this quarter, Q1, you have provided 8 crores. So as you were saying that we have excess provisionings under -- compared to Ind AS, so we are having excess provisioning on our books. So what has been the need to provide this 8 crores when last year in Q1 to Q3, you have not provided anything, and Q4 also, you have just provided 1 crore additional, sir? So I just wanted to understand that.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [64]

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As per NHL or IRAC norms, we have made -- NHB/IRAC norms, we have made the additional provision. So 6.75 crores for NPAs because there is a increase in NPA compared to March level. So -- and also, standard assets, we have made a provision to the extent of about 2 crores. This is the total provision of what has been made during this first quarter. But compared to Ind AS workings, the total -- overall provisioning that require -- that is require is about 47 crores. Compared to that, we are holding excess provision, but the NHB has given a direction that we have to hold whichever is more, either of the 2, as per NHB/IRAC norms or ECL -- Ind AS ECL model. So according to that, we have made a provision, and we are holding that provision of INR 107 crores.

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Hitesh Gulati, Haitong International Research Limited - Analyst [65]

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So throughout the year, sir, we'll have to -- like as we grow our loan book, our provisioning level will have to be...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [66]

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We have to make provision for standard assets. And we think that the NPAs will come down in the remaining quarters. In that case, we can take out or withdraw the provisioning. So if the NPA comes down, I would say, we have set a target of bringing it back to the March level by second quarter end. So in that case, if it comes to INR 113 crores, for example, then whatever provision we have made on another INR 20 crores, that we will be taking it our or we'll be withdrawing back.

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Operator [67]

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The next question is from the line of Amit Rane from Quantum Securities.

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Amit N. Rane, Quantum Securities Private Limited, Research Division - Research Analyst [68]

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Just one question on the funding mix. How much is our total borrowings as of now in amount, absolute amount?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [69]

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Total borrowing is about INR 16,800 crores. Out of that, banks contribute to about 50% of our lending, INR 8,400 crores. And the market borrowing is about 34%. And NHB, almost 14%, and remaining is 2% deposits. That is a...

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Amit N. Rane, Quantum Securities Private Limited, Research Division - Research Analyst [70]

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Sir, can you tell us what is the average cost of various sources of funds?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [71]

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No. It is -- it varies few basis points that is -- there is no distinctive variation as such. The market may vary slightly, few basis points, not -- but not very huge variation.

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Amit N. Rane, Quantum Securities Private Limited, Research Division - Research Analyst [72]

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Okay. Sir, any exposure to these interest subvention scheme project?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [73]

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No. We don't have any exposure or we don't have any product to lend for such schemes. So as I clarified earlier also, we lend after seeing the building coming up or the way the construction is going on or where the -- even as I told, if you're financing for 4th or 5th floor, till the project has come up to that level, we don't finance. And also the disbursement is always restricted to the progress in construction. So there is no scheme or product wherein outright in the beginning itself will make a full disbursement.

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Operator [74]

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The next question is from the line of Punit Mittal from Global Core Capital.

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Punit Mittal, [75]

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Two questions. One is, in your annual report, you mentioned your deposits are still INR 261 crores only. I think I have asked this question before also. It doesn't seem there's much progress on that side. So if you can give us some views why is the deposit gearing is so slow?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [76]

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Yes. See the -- ultimately, the focus during the last few years was the branches to lend and the head office was to borrow from banks and market and making the funds available to the branches. The trust was not given because in [incurs] lot of cost also and time and with the limited manpower available at the branches. The direction was -- to the branches was to focus on lending and not to get a diversion for deposit because the deposits comes in small ticket sizes, and you see, if all the 175 branches put together, they're able to mobilize about INR 261 crores.

So considering that -- but at the branch level, the work involved, renewals, TDS and that involves lot of time. With that -- keeping that in mind, so branches were asked to focus on lending. But now, we have given the directions and guided the branches to go for resource mobilization also. It is not only helping the company to diversify the borrowing, but also the customers footfall will increase, inquiries will increase, and also the customer who comes for keeping the deposit, will also inquire for him or his -- for his relatives about the loan products. So the overall footfall will increase. Keeping in that mind, we are encouraging the branches to mobilize resources. We have set the targets as we have done for lending. This year and next year, hopefully, it will improve substantially.

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Operator [77]

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The next question is from the line of Digant Haria from Antique Stockbroking.

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Digant Haria, Antique Stockbroking Ltd., Research Division - Assistant VP, Equity Research [78]

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Congrats to the team. Sir, my question is that I see now it's almost 3 quarters that our spreads have been very close to 230 bps, the difference between cost of funds and lending rates. Sir, one, can we maintain this going forward? And two, is -- are we seeing this good growth because the competitive intensity is less right now? Or is it mainly the company's effort that is helping us clock this growth, which probably only one other housing finance company could be able to do?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [79]

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As far as spread is concerned, I think we'll be able to maintain this spread because the cost of borrowing is likely to ease out or likely to come down. So -- and also the asset quality, we will be focusing on that further to bring down our NPA levels. I think with that in mind, spread will be -- will they improve, there'll be -- there can be slight improvement or we'll be able to maintain at the present level. What was his another...

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Unidentified Company Representative, [80]

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Competition in growth.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [81]

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Yes, yes. Growth, always -- when competition was there, then also we have grown at this rate. And now also we are growing at the same rate. So -- but the target what we have set in for this year, compared to that, we need to speed up or increase our lending speed. So we are hopefully in the next 3 quarters, we'll be able to do that and come -- cross or come close to the target what we have set in.

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Operator [82]

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The next question is from the line of Bunty Chawla from B&K Securities.

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Bunty Chawla, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [83]

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Congratulation on a stable set of numbers.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [84]

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Thank you.

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Bunty Chawla, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [85]

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Just a data point. Have you shared that last -- this quarter, there was -- net slippage is of INR 26 crores. And last year, same time it was INR 40 crores. Can you split that number into gross slippages and recoveries and if any write-offs if...?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [86]

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Yes. Just a minute. See, last year, the gross slippages were about INR 40 crores plus INR 50 crores -- INR 57 crores, INR 58 crores, and net -- this is whole year, whole year. Out of that, the -- we have figures only for net slippages?

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Unidentified Company Representative, [87]

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We had recovered...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [88]

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Yes. We had slippages. As of now what we are having is only net slippages. So last year, the overall slippage was around INR 50 crores. Out of that, the slippage during the first quarter itself was INR 40 crores. So compared to that, this year, it has come down to INR 26 crores.

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Bunty Chawla, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [89]

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Okay. So -- okay, we don't have gross slippages numbers, right, sir?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [90]

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I don't have at present.

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Operator [91]

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The next question is from the line of Yash Agarwal from JM Financial.

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Yash Agarwal, JM Financial Institutional Securities Limited, Research Division - Research Analyst [92]

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Sir, just wanted to ask, what is the actual incremental cost of funds? Did you state that figure in the call just now, incremental cost of funds?

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Unidentified Company Representative, [93]

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(foreign language)

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [94]

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We answered that, no. So the cost of borrowings were -- it was 7.90% for March. Now it has gone up to 7.93%. So that is the...

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Yash Agarwal, JM Financial Institutional Securities Limited, Research Division - Research Analyst [95]

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That is the average. What is the incremental...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [96]

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Incremental also, as I told, see, we have -- this quarter, our main focus has been on bank borrowings. So you can -- if you see the MCLR of banks, the movement of MCLR of banks, that will be the incremental cost of borrowing. So plus, we are -- to some extent, we are borrowing from market also, so which is coming at a much cheaper rate.

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Yash Agarwal, JM Financial Institutional Securities Limited, Research Division - Research Analyst [97]

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And sir, when will a permanent CEO be announced?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [98]

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CEO, that process is on, and hopefully, we are likely to complete the whole process shortly. Once that's completed, we'll -- it will be informed to the market.

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Operator [99]

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Next question is from the line of Aarsh Desai from Vallum Capital Advisors.

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Aarsh Desai, Vallum Capital Advisors - Analyst [100]

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Yes. As you said (inaudible) I just was to understand in Karnataka what percentage of market would be subject to (inaudible)?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [101]

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Not able to hear you properly.

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M. Shamila, Can Fin Homes Limited - General Manager [102]

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We don't have any interest subvention.

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Aarsh Desai, Vallum Capital Advisors - Analyst [103]

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Hello?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [104]

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Yes, yes.

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Aarsh Desai, Vallum Capital Advisors - Analyst [105]

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Am I clear now?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [106]

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Yes, yes, yes.

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Aarsh Desai, Vallum Capital Advisors - Analyst [107]

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My question was, I know that you all don't have anything in the interest subvention scheme, but just as a -- in terms of the overall Karnataka market, how much of the market would be subject to this interest subvention scheme? And what sort of pressure would it put on the real estate prices? And would it affect the segment in your ticket size?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [108]

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No. First of all, this interest subvention is usually for bigger ticket loans and bigger projects by...

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M. Shamila, Can Fin Homes Limited - General Manager [109]

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Big builders.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [110]

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Big builders. So our -- maybe 50 lakhs, 70 lakhs or like that. And we don't usually lend to that segment. Our segment is totally different. And as such, we don't have any exposure to that category. Second thing is that as you were asking about overall market scenario, I read in the -- today, that usually 10% to 12% of the ticket size -- of the lending happens through that interest -- sorry, subvention scheme in 8 metros. So only it is limited to the metros and that too about 10% to 12%. But Can Fin Homes as such we don't have any exposure.

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Operator [111]

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The next question is from the line of SivaKumar from Unifi Capital.

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SivaKumar K, Unifi Capital Pvt. Ltd. - Associate VP & Fund Manager [112]

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Sir, we see that the yields have improved from 10.06% at March '19 to 10.22% at June. Do you expect them to improve further for the rest of the year?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [113]

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So yield, I think because any one resetting -- we have to system of any one resetting. And whatever -- our increase was to the extent of 55 basis points in October. So still October, whatever loans were given from April to -- for example, June to October, they will come for refitting and reprice. There is one split. Another thing is, also, we have a re-risk rating. So if there is any deterioration in them or if they move to the higher-risk category, that will also be repriced accordingly. In that case, the yields can improve slightly. However, the NIM or spread will improve mainly because of reduction in the borrowing cost, rather than on the incremental increase in the yield.

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SivaKumar K, Unifi Capital Pvt. Ltd. - Associate VP & Fund Manager [114]

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Right. Sir, can you give more color on the Karnataka market? Have all the stress related to the RERA law being implemented? Has it been ironed out and developers are now able to get their projects registered very smoothly?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [115]

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If you see Karnataka RERA website, so almost 2,600 projects have been registered and it is going on at a much faster pace compared to earlier times. And most of these projects which are coming in the outskirts of Bangalore are mainly for affordable segment, so where our lending happens, and we have branches in the outskirts also. And now we are planning to move or open few more branches in the outskirts or nearer to Bangalore where growth is happening. So in that way, our main focus will be on that segment.

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Operator [116]

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The next question is from the line of Shreepal Doshi from Equirus Securities.

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Shreepal Doshi, [117]

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Sir, I wanted to understand that on the approvals side, if we see, the approvals during this quarter has come down Q-on-Q. So wanted to understand how many files or how many files we get in a month's time? And what is the rejection rate there?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [118]

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Every quarter it varies, actually. First quarter, usually it'll be not that high. The sanctions, disbursements will be very slow. Usually it picks up second quarter, and third and fourth quarter will be -- especially, third quarter it will pick up. So the rejection rates are not much -- sometimes CIBIL score maybe be because of property, titles are not clear, for that reasons the files gets rejected. Otherwise, it may not be very high.

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Shreepal Doshi, [119]

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Is there a tentative number on the number of applications that we get?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [120]

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See, last year, if you see, we did about 36,000 files. So if you take every month, it comes to about 3,000 files.

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Operator [121]

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The next question is from the line of Anirvan Sarkar from Principal Asset Management.

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Anirvan Sarkar, [122]

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My questions have been answered, sir.

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Operator [123]

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The next question is from the line of Ritika Dua from Elara Capital.

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Ritika Dua, Elara Securities (India) Private Limited, Research Division - Research Analyst [124]

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Sir, getting back again to the split question. If you could -- so all that hike which we took last year, the [BLR] hike, was it all concentrated in October or we took some hikes later as well?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [125]

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Actually, the annual resetting started from April onwards. So resetting is happening every month on the anniversary date of the loans sanctioned in that month. So -- but resetting -- the increase was only done during October to the extent of 55 basis points. So whatever loans granted after that -- before that, they will get repriced till October.

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Ritika Dua, Elara Securities (India) Private Limited, Research Division - Research Analyst [126]

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Sure, sir. And secondly, on the incremental liability fund, sir, could you share what are the incremental rates that we are drawing from the various liability sources, like incremental bank, NHB and CP, et cetera?

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Prashanth Joishy, Can Fin Homes Limited - Head of Finance & Accounts [127]

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Yes. Madam, this is Joishy here, AGM. Madam, the incremental borrowing what we availed during the quarter is mostly from the banks. And we have a policy that we'll borrow at the 3-month MCLR of the banks only at the same rate we got it in the first quarter. Couple of banks have given. So virtually, incremental cost, what we borrowed is to the extent of somewhere around INR 700 crores. It is virtually at the 3 months MCLR of the bank only. If you compare to the quarter-on-quarter, the MCLR of the banks have come down from the Q4 of last year to Q1 of current year.

So the incremental cost has come down, that is why the average cost has been eased out. If the bank goes on reducing the MCLR further, this is the trend it continues because if you see the snapshot what we put across in the presentation, our concentration is going down at banks and NHB borrowings is at 66% compared to the same 66% from the market cap couple of years back. This is the strategy we have implemented and going on smoothly. This has a effect on our cost of funds and spread also.

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Operator [128]

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The next question is from the line of Kashyap Jhaveri from Emkay Global.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division - Research Analyst [129]

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And congratulations for great numbers. Just one question. In -- let's say, this quarter's loan book growth of 70%, would this be all sort of organic growth where we would have acquired some portfolio from somewhere also?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [130]

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No, we don't have -- we have not required anything from any other housing finance company or bank. It's all the new incremental -- new asset creation. There is no balancing. We don't encourage that. And everything here is from a new housing loans or...

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M. Shamila, Can Fin Homes Limited - General Manager [131]

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Originated.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [132]

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New originated loans only.

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Kashyap Jhaveri, Emkay Global Financial Services Ltd., Research Division - Research Analyst [133]

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Okay, okay. Sure. And I just want to clarify. Does this also mean that we wouldn't have bought out portfolio also?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [134]

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No, no, no.

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Operator [135]

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The next question is from the line of Saurabh Dhole from Trivantage Capital.

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Saurabh Dhole, [136]

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Couple of questions. One is when I look at the competitive landscape in the Tier 1 cities, now these are markets where banks are very densely present. So where exactly does Can Fin stands here in terms of its customer profile? And how is your customer profile in these geographies different from those of the banks?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [137]

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See, now we are also moving towards Tier 2 and Tier 3 cities. Growth, as I told, it is 11% in metros and about 30% in nonmetros. So the growth and new business, what -- or incremental business is coming from nonmetro space. And in metro and nonmetro as well as the customer segmentation, I don't think there is any difference. We lend to both salaried and nonsalaried also. And we don't have that kind of a differentiation between customer segmentation as such.

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Unidentified Company Representative, [138]

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Bank target INR 50 lakhs and above customers.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [139]

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Yes. And also banks, they target for a bigger ticket loans usually. And that average ticket size will be about INR 40 lakhs to INR 50 lakhs, wherein metros, our ticket size will be around INR 25 lakhs to INR 30 lakhs. And in nonmetros, our ticket size will be around INR 10 lakhs to INR 15 lakhs. So though we aim or target the same segment, both banks as well as Can Fin, but because of the ticket size differentiation, we get those proposals, which banks hesitate or for them, it becomes nonviable or for them, it is -- wherein -- if the ticket size is less, for them they have to achieve their target, they have to do more number of files. And they're also burdened with many other tasks. In that way, in Can Fin Homes, it is the same target group, but the aiming for a lesser ticket size, that is what we target.

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Operator [140]

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The next question is from the line of Sonal Nilla (sic) [Sonal Minhas] from Prescient Capital.

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Sonal Minhas, [141]

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This is Sonal Minhas. I have 2 questions, one on NPA and the other on the account fees. On the NPA, I just want to understand more from a strategic perspective that the INR 140-odd crores of gross NPAs, are these largely in non-Southern states? Or the mix here is pretty even between the non-Southern states and the Southern region? So that's the first question. Would love to hear your talk -- your feedback on that.

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M. Shamila, Can Fin Homes Limited - General Manager [142]

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Yes. I would like to answer this question. The NPAs are more or less the same percentage-wise right, whether it's North -- non-South or the South. And see, we do not have agents for recoveries. Our people, our branch staff who are doing the recovery themselves. So right from the beginning, they -- we have this strategy that they follow-up the account right from the first day. That is in case there is any bouncing of NACH or whatever, it is our people who follow-up and get it. So it's a very tight set of a control that we have. And overall, it is more or less the same. It's North or the South.

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Sonal Minhas, [143]

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So now on the follow-on question on this. Are the incentives of the people who are disbursing also attached to collection? Just from a understanding the business perspective.

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M. Shamila, Can Fin Homes Limited - General Manager [144]

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Yes. We have this concept with the branches. So the branch has this overall, they have a target for lending and they have targets for recovery also. So it's like -- it's an overall -- they have to achieve all together for them to get their incentives or to get their -- any benefits. So that way the branches follow-up themselves. So it's not like -- all the tasks are given to the branch.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [145]

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And we opened a few specialized recovery offices in metros, especially like Bangalore, Chennai. And we have posted exclusively officers to take care of certain area because the -- geographically, the area is so huge, so branches also find it difficult to reach out to the -- all the corners. So considering that, we have created specialized recovery hubs in Bangalore as well as Chennai.

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Sonal Minhas, [146]

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Got it, sir. Sir, just a follow-up question on this one. The -- is there a list of watch list beyond this INR 140-odd crores, which you are also tracking, which is a larger set and this NPA is a subset of that, so -- which is like a caution list or like kind of watch list beyond the...

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M. Shamila, Can Fin Homes Limited - General Manager [147]

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Yes, yes, yes. That happens on a continuous basis. So all the accounts are followed up and the critical amounts collected in some and in some, we collect much higher than that. So to ensure that it doesn't slip to the NPA. So that's -- right from the first -- that's what I said, when -- right from the first step that is when -- wherever -- even there is with one installment due, then we keep that under our watch list, and that is followed up vigorously.

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Operator [148]

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The next question is from the line of Romil Jain from Systematix Portfolio Management.

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Romil Jain, Systematix Shares & Stocks (I) Ltd. - Assistant VP - PMS [149]

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Sir, So one question I has was on, so our North portfolio is about 30%. So are we seeing any challenges in those markets in terms of scale-up because they are very different markets, maybe some regulatory factors would be affecting? And also second, because we've seen lot of housing finance companies go down, slowdown, are we getting that market share also from the -- in both Karnataka and South and non-South markets?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [150]

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No, no. Our North is also doing equally well. And we have senior persons posted in the North, whether it is Delhi, Rajasthan, MP or Bombay. In all that places, we have a cluster concept. And each branch is monitored by senior executives. So we don't see any challenges, exclusively for North or which is not there in the South. And these branches are -- many of the branches are there in North for now almost 15 to 20 years. They know the market very well. They know the underwriting requirements in those locations very well. And also they'll be guiding the branches, which are opened recently. And we open the branch taking into consideration the manpower available and all those things.

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Romil Jain, Systematix Shares & Stocks (I) Ltd. - Assistant VP - PMS [151]

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Okay. And sir, which would be the large market in the North market, I mean non-South?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [152]

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Delhi is doing very well. We have LCR region is there. And Rajasthan is -- Jaipur is doing very well. So these are the 2 areas, which are giving a good business to us.

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Operator [153]

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The next question is from the line of Manav Vijay from Essel Mutual Fund.

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Manav Vijay, [154]

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I would ask you 2 questions. First of all, in this quarter, where we have done a 17% growth, is it possible for you to breakdown this growth on a, let's say, month by month? Meaning that, let's say, if in the month of April, let's say, we had a 25% growth, let's say, in the month of May slowed down to, let's say, 20% and then further -- let's say, further slowdown in the month of June. Do you have some kind of a break that you can share, sir?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [155]

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No. I don't have those kind of figures. But usually, what happens, March is the year-end, so there will be lot of pressure on the branch managers to achieve their target disburse. So once that -- the targets are achieved, they will also need some break, isn't it? So April will be usually it will be a dull month. There -- not much happens April. But for some sanctions which -- where pending disbursements is there, that'll be done. And also there will be leave taking, transfers, promotions, everything happens in April and May. So I don't have a separate split up month-wise as such. It slowly picks up May and June.

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Manav Vijay, [156]

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Sure. We also have -- now we've also in an relation to actually raise INR 1,000 crores either by rights, QIP or preference. You have any update to share on that?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [157]

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In the AGM, members have permitted to raise INR 1,000 crores -- up to INR 1,000 crores. But beyond that, we have to take a call because as of now, capital adequacy ratio is almost 19.5 percentage points. Liquidity is also not quite sufficient. Depending upon the situation and circumstances, we will take a call how much to raise and in what way to raise, that we'll decide.

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Operator [158]

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The next question is from the line of Nischint Chawathe from Kotak Securities.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [159]

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Just 3 data questions from my side. What was the outstanding borrowing in June end?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [160]

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There is INR 16,823 crores was the outstanding borrowing.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [161]

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Okay. And you mobilize around INR 700 crores during the quarter, right, you said?

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Unidentified Company Representative, [162]

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Incremental borrowing.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [163]

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Incremental borrowing.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [164]

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Incrementally, it was INR 700 crores as compared to INR 1,200 crores to INR 1,600 crores at you are envisaging over the next 2 quarters?

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Unidentified Company Representative, [165]

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It is only a projection that we may were require that much as per the progress what we projected as such because the first quarter, as we have explained in the previous question, it'll be a little bit dull month as such, but it will pickup and start as such. The construction activities will gear on the monsoon subsides. So keeping that in mind, we have projected around INR 1,200 crores is the requirement. We have already the sanctioned, approved by the banks to the extent of INR 1,359 crores and couple of INR 1,000 crores. In fact, we have achieved in principal sanctions. The bank line only will take care of around INR 4,500 crores is readily available with us for the purpose of further lending as such. Taking into consideration the other requirements, we will take a final call in the third and fourth quarter regarding the borrowing structure as such.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [166]

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So just one last thing. What is the outstanding provision on the balance sheet?

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Unidentified Company Representative, [167]

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Provision in respect of...

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [168]

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Stage 1, Stage 2, plus Stage 3. I believe Stage 3 is around INR 47 crores.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [169]

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Total is about INR 47 crores...

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Unidentified Company Representative, [170]

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Is required as per the ECL model.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [171]

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ECl model.

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Unidentified Company Representative, [172]

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And see, we have been covered by the NHB guidelines where the instruction is clear, either the provision as per the NHB norms or the provision as per the ECL model, whichever is higher has to be maintained in the books. So as per as the ECL model, it comes to about INR 47.72 crores. As per the NHB prudential loan system to [INR 107 point crores] some amount as such. So accordingly, INR 107 crores is maintained as a provision in the books of account as of 30th of June.

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Nischint Chawathe, Kotak Securities (Institutional Equities) - Senior Analyst [173]

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Okay. So Stage 1 and Stage 2 would be like INR 67 crores, is it?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [174]

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No, no.

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Unidentified Company Representative, [175]

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Stage 1 and Stage 2 is applicable for the ECL model.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [176]

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ECL model where it's INR 47 crores.

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Unidentified Company Representative, [177]

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Yes. Whereas it is the standard, substandard, doubtful as per the NHB prudential loans. So that both are closed parallelly separately, but both cannot be interlinked.

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Operator [178]

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The next question is from the line of [Manvardhan Ved] from [Laurel Capital].

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Unidentified Analyst, [179]

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Congratulations on a good set of numbers. I wanted to slightly take the discussion on the capital adequacy ratio and the medium-term debt equity ratio that the company is targeting. I noticed that from March to June, the debt equity ratio has moved down and the capital adequacy ratio has moved up. So I was wondering if that was a conscious decision and the reason behind that.

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Unidentified Company Representative, [180]

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No. Actually, the capital adequacy ratio, if you go through our annual report, on 31st of March, we have retained some funds with the Canara Bank for the purpose of immediate commitments on 2nd and 3rd of April in the short-term deposits. So any exposure over and above 10% of that Tier 1 capital is disallowed for the purpose of calculation of capital adequacy. As such, the capital adequacy was recalculated at 16.44%, even though it is 19-plus, actually. So presently also, it is around 19.56%. The same level has been maintained factually. Technically, it has become 16.44% for that reason as such. So capital adequacy, a slight improvement of 0.12% is there as such.

Regarding the debt equity ratio, as such, you can see because of the AS 116 implementation, the lease rental as well the lease liability has to be created. And the effect of that for the previous years has to be given impact in the reserves and surplus. So that has added to the equity as such affected your debt equity ratio as such. So it is not a conscious decision. It is a implication of the companies act policies and guidelines as such.

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Operator [181]

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The next question is from the line of Nitin Gandhi from KIFS Trade Capital.

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Nitin Gandhi, [182]

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I don't know whether this question is already answered, but sorry, if it's repeated. You propose to raise INR 1,000 crore through rights or QIP. So what is the time frame for this?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [183]

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No. As such, there is no time frame set as of now. Depending upon the requirements, we will plan, if we have to go for INR 500 crores or INR 250 crores or INR 1,000 crores, that depends upon the situation. So as of now, capital adequacy ratio is also quite comfortable. So depending upon the situation and circumstances...

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Nitin Gandhi, [184]

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So it's just an enabled resolution that we are...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [185]

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Yes. In the AGM we have taken the permission. Depending upon the requirements, we'll go ahead.

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Nitin Gandhi, [186]

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Okay. And that's enabled for 1 year or it's...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [187]

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Till next AGM. It is -- the permission is available till next AGM.

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Operator [188]

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The next question is from the line of Aayushi Mohta from CD Equisearch.

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Aayushi Mohta, [189]

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Sir, what is our LAP book medium-ticket size?

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Unidentified Company Representative, [190]

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Below INR 10 lakhs.

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Aayushi Mohta, [191]

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INR 8 lakhs.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [192]

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No. Our NHL, that is -- it is less than INR 10 lakhs. The average nonhousing loan ticket size is less than INR 10 lakhs.

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Aayushi Mohta, [193]

--------------------------------------------------------------------------------

Sir, for the LAP account, right?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [194]

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Yes, including LAP, yes. We don't have any huge loan adherence to -- we don't have any huge LAP book.

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Aayushi Mohta, [195]

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No. You have a LAP book of INR 900 crores in the presentation.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [196]

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Yes, yes.

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Unidentified Company Representative, [197]

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That is not -- if it is a nonhousing loan, what we call it as such. It includes everything. Additional loan given to -- in form of personal loan to the existing customers, loans against mortgage properties, commercial properties put together. The average ticket size under that category is between INR 9 lakhs to INR 11 lakhs. Average, it comes to INR 10 lakhs as such. The mortgage loans also what the LAP loans we have given is actually refers to the additional funding is given to our own customers who have been -- closed the loans, but require some funding for the commitments what we are going to incur. So they will come back with the same property, take some loan and go as such.

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Aayushi Mohta, [198]

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So that -- the ticket size would around INR 10 lakhs, right?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [199]

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Yes, yes, yes.

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Aayushi Mohta, [200]

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And sir, how many accounts would that be?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [201]

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That we need to find out. Number of accounts.

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Unidentified Company Representative, [202]

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Number of accounts may not be available.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [203]

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May not be readily available. We'll -- we have to find out that.

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Aayushi Mohta, [204]

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Sir, do you have any highest exposure to any particular builder or a developer?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [205]

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Our total -- our overall builders -- exposure to builders is only INR 11 crores and 6 accounts are -- (inaudible) that much. We don't have any exposure -- huge exposure to any of the builders.

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Aayushi Mohta, [206]

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Okay. Sir, any highest exposure?

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M. Shamila, Can Fin Homes Limited - General Manager [207]

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Highest...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [208]

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Highest may be INR 4 crores.

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M. Shamila, Can Fin Homes Limited - General Manager [209]

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So one builder.

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Operator [210]

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The next question is from the line of Punit Mittal from Global Core Capital.

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Punit Mittal, [211]

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Just one more question. You said your average AUM or loan per branch is INR 112 crores, but that's an average. And you have a lot of new branches. So what's the size for a matured branch?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [212]

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No. It goes even up to INR 400 crores. There are branches with INR 600 crores also. There are branch with INR 500 crores, INR 400 crores, INR 200 crores outstanding. So we have a categorization of branches depending upon the business size. So metros, for example, we have 66 branches, and they contribute about 65%, 66% of the business. So average it comes to, say, about almost INR 200 crores.

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Punit Mittal, [213]

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Okay. So the metros are about INR 200 crores and nonmetro will be...

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Unidentified Company Representative, [214]

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INR 100 crores around...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [215]

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INR 50 crores to --- around....

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Unidentified Company Representative, [216]

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INR 50 crores to INR 100 crores.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [217]

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Yes. INR 50 crores to INR 100 crores.

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Operator [218]

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The next question is from the line of Ritika Dua from Elara Capital.

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Ritika Dua, Elara Securities (India) Private Limited, Research Division - Research Analyst [219]

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One accounting question here, sir. So because we have moved to this new -- the Ind AS 116 lease accounting change, so obviously, our depreciation has moved up there. Just wanted to know how has our other OpEx being impacted because of the same? I think some lease rentals would have moved out from there.

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Prashanth Joishy, Can Fin Homes Limited - Head of Finance & Accounts [220]

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For the first quarter, as we've done analysis, the main -- as per the Ind As 116, the rent will not come into the picture, the depreciation will come into the picture. On the other side, the lease rental will come to the picture. So because of the impact of that much is negligible, when we done an analysis in the first quarter. But going forward, we have to see how the implication may come. It may be a favorable or it may be a deficit, but what the projection has been done, it is negligible, which may not impact the P&L account to that extent.

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Operator [221]

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The next question is from the line of Sandeep Jain from Birla Sun Life Insurance.

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Sandeep Jain, [222]

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Yes. Hello? Am I audible?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [223]

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Yes.

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Sandeep Jain, [224]

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Yes. I'm sorry, I think you have given the total borrowing figure. Can you please repeat it? I just missed it.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [225]

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INR 16,823 crores is the total...

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Sandeep Jain, [226]

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INR 16,823 crores.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [227]

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Correct?

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Unidentified Company Representative, [228]

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Yes. INR 16,823 crores.

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Sandeep Jain, [229]

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Okay. And incremental cost of borrowing would be...

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Unidentified Company Representative, [230]

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It is the 3-month MCLR of the respective banks. As they -- I'm repeating the same answer. We are borrowing...

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Sandeep Jain, [231]

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Yes, yes. I missed it, yes.

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Unidentified Company Representative, [232]

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INR 700 crores is the incremental borrowings in the first quarter. All these incremental borrowings are from the banks, couple of banks only. All borrowings have 3 months MCLR of the respective bank as such.

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Operator [233]

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The next question is from the line of Anirvan Sarkar from Principal Asset Management.

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Anirvan Sarkar, [234]

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Yes. One question. For a few years in a row now, we have seen our self-employment part of the book go up. Now I understand we are still at a very comfortable position with respect to our proportion of salaried employers. But is there a thought process to increase our provision coverage accordingly in view of higher LGDs on this profile of borrowers? Or how are you viewing this? So should we expect higher PCR going ahead? Or how are you -- how should we think about this?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [235]

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In the days to come, no, we cannot restrict the exposure to -- only to the salaried. Self-employment will also go up. See, as entrepreneurs and as enterprises come up, definitely, the lending to these entrepreneurs will definitely go up. And also, we don't find a drastic distinction between the default rates of salaried and nonsalaried. There is a slight increase in the nonsalaried space. And accordingly, we -- recently, we have increased the rate of interest only for nonsalaried segment by 25 basis points to take care of that. And also, what we have done is because the nonsalaried class requires special underwriting skills, creating balance sheets and other things, that's why we are limiting the sanctioning powers of the branches and delegating that powers to centralized processing centers, where we have more experience and expertise.

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Anirvan Sarkar, [236]

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Fair enough. And do we have an internal cap or something on the proportion where we can take this to? Let's say, right now, we are at 29% of self-employed customers. So are we going to cap this at some level? Or is it going to be purely a...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [237]

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We don't have such cap -- internal cap as of now because if there is any drastic deterioration in the quality of assets, then we can think about that. So right now, there is not much differentiation between salaried and nonsalaried segment.

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M. Shamila, Can Fin Homes Limited - General Manager [238]

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We'll be reviewing this on an ongoing basis.

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Operator [239]

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The next question is from the line of [Anand Jain], who's an individual investor.

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Unidentified Participant, [240]

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Congratulations on a good set of number. The first question is on nonsalaried versus salaried. So our nonsalaried has been growing faster than the salaried. Even last year, it's moved from -- nonsalaried has grown 24% and salaried by 15%. So can you just give me some difference in terms of yield and NIMs in these both segments?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [241]

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Usually, 0.5%.

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Prashanth Joishy, Can Fin Homes Limited - Head of Finance & Accounts [242]

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0.5%.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [243]

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0.5% the products for nonsalaried class are priced at higher rate of interest by 50 basis points compared to salaried, yes. And also now recently, across all the nonsalaried loans, we have increased the rate of interest by 0.25 -- 25 basis points.

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M. Shamila, Can Fin Homes Limited - General Manager [244]

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And we keep reviewing the loan.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [245]

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And also, we also keep reviewing the performance, default rates in each product as well as segment-wise, and we take a call. And also, in our review meets and other things, we give them direction where to focus and where to lend.

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Unidentified Participant, [246]

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Sir, if I look at loan on sites, although it's a small quantum, but that also has doubled, right? And loan for sites for nonsalaried has gone up from INR 50 crores to INR 100 crores and for salaried has gone up from INR 127 crores to INR 244 crores in last 1 year. So...

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M. Shamila, Can Fin Homes Limited - General Manager [247]

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Actually, those are our existing -- we have a scheme called composite loans. That is for purchase of site and then for construction. So wherever they don't construct within the first 18 months, then automatically, it gets converted to a site loan. So that is why you will find wherever people feel that speculation is -- I mean, we keep it for speculation probably because we say that within 18 months, you should start construction of the house. Only then, you will get the benefit of the composite loan. So if they don't do that, then we convert that to a site loan. So that is why there is a increase there.

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Unidentified Participant, [248]

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Okay. The next question is on, sir, how is our loan origination both in salaried and nonsalaried, it's like salaried inclination or by DFEs like...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [249]

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No, it happens. Almost it is now 50-50. 50% of the loan proposals are sourced directly by the branch. Another 50% is sourced by the DFEs. So it is -- there is no difference as such in salaried and nonsalaried space in that.

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Operator [250]

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The next question is from the line of Rajiv Mehta from Yes Securities.

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Rajiv Mehta, Yes Securities (India) Limited, Research Division - Research Analyst [251]

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Yes, sir. Sir, my question is on the Slide 10, which is the ALM position. So is it -- as for the behavioral pattern, which NHB allows, wherein you count prepayments in collections, and you don't count renewables on the repayment side of borrowings?

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M. Shamila, Can Fin Homes Limited - General Manager [252]

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So as per NHB...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [253]

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You're referring to Slide 10?

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Rajiv Mehta, Yes Securities (India) Limited, Research Division - Research Analyst [254]

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Yes, yes.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [255]

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Yes, about the liquidity position. This is -- liquidity position, no.. This is -- the liquidity position is not -- actually, this is the financial position how we are placed.

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Rajiv Mehta, Yes Securities (India) Limited, Research Division - Research Analyst [256]

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No. So the collections will include prepayments as well for the next 2 quarters?

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Unidentified Company Representative, [257]

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Yes, yes, yes.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [258]

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Includes all collections.

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Prashanth Joishy, Can Fin Homes Limited - Head of Finance & Accounts [259]

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Collections.

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Rajiv Mehta, Yes Securities (India) Limited, Research Division - Research Analyst [260]

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And the repayment on borrowings will not count the renewals generally, which we have seen in the past?

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Unidentified Company Representative, [261]

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No. There is no renewal. It is a term loan as well as whatever borrowing subset you might have received, Mr. Rajiv. It is term loans as well as CPs and NCDs. Term loans are recent ones that are generated off the loan, whereas CPs and NCDs are repaid. It is -- there is no question of -- so CPs or NCDs, it is repaid as such. So that is a actual cash outflow.

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Rajiv Mehta, Yes Securities (India) Limited, Research Division - Research Analyst [262]

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Okay, okay, okay. And sir, when I look at disbursements in the same slide, if I look at the progression of the disbursements, it's not showing a big increase in terms of where we want to be at the year-end. So it's not increasing much. So how should we look at this?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [263]

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So it depends upon -- first quarter, we have reached about 1,300. The same we have taken for quarter 2 also. I think here, we need to review it again. And depending upon the growth actually happening, we can revise this. Yes, as we told, this needs little bit of fine-tuning.

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Operator [264]

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The next question is from the line of [Nitin Jain], who's an individual investor.

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Unidentified Participant, [265]

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Sir, my question is more related to the overall market. As you might be observing that in the last 1 year or so, one of the largest private-sector housing finance companies have stopped lending. So my question is why we are not expanding more aggressively in the North where there is a huge vacuum created by this private-sector housing financier not lending? And we are very well capitalized, so why are we not utilizing this opportunity to grow faster?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [266]

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In North you're asking or in general?

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Unidentified Participant, [267]

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Especially in the North because that particular lender was very strong in the North.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [268]

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Okay. See, we have limited branches in North, and also, the manpower available. Depending on that, we can expand. It is not that simply just because one company has stopped lending, all borrowers will come to us and we can grow exponentially. It won't happen because the branch can handle a limited number of files. It requires a lot of internal work as well came through with this. So all of a sudden, I cannot scale up by bringing people from outside also. So in that way, it will lead to deterioration in the quality of the assets. So considering those aspects, we give a target depending upon the overall market conditions, and we advise them to work in that way.

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Unidentified Participant, [269]

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Sir, my question was more -- because you mentioned that your non-South markets are growing faster than the South markets, so that is why I had this question in mind.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [270]

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That's why we are growing now. That's why we are growing. As I told, they are growing at 20%, whereas South is growing by about 15%.

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Unidentified Participant, [271]

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Yes.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [272]

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So I cannot make it to 35%, 40% all of a sudden. See, each branch has a set of people who can handle, let's say, 50 files a month. They have to go for all kind of visits, do due diligence and...

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M. Shamila, Can Fin Homes Limited - General Manager [273]

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Manageable growth.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [274]

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Yes.

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Unidentified Company Representative, [275]

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Quality strategy.

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Unidentified Participant, [276]

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Okay. Sir, my next question is, in the investor presentation, under the strategic initiatives, you have mentioned about a foray into distribution of insurance products. So what is the update on that, sir?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [277]

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We have a -- already we have tie-up with the life insurance, CHOICE, that is Canara HSBC OBC. And we are -- the performance has increased substantially during the last year, and we could be able to get about INR 80 lakhs fee-based income out of this business. And in this year, nonlife also, we are going ahead with the -- we are recruiting 3 -- we are engaging 3 nonlife insurance companies, Tata AIG, Bajaj and Reliance. So with this, the same customer will be able to sell these products, and we will be earning by way of commission.

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Unidentified Participant, [278]

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Okay. And sir, my last question is, you have indicated you're planning to reach 200-plus branches by the end of this fiscal. So do you have any time line in mind, like when you are planning to open these branches?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [279]

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See, we -- already we have started for 20 branches, and 10 branches are almost in final stages. And within next -- and I think fortnight, we are at least planning to open at least 5 or 6 branches. So they're in different stages, and hopefully, by the quarter end, we will be able to open about 10 to 12 branches.

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Operator [280]

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The next question is from the line of [Omkar Kulkarni], who's an individual investor.

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Unidentified Participant, [281]

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My question was regarding the -- hello?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [282]

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Yes.

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Unidentified Company Representative, [283]

--------------------------------------------------------------------------------

Yes.

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Prashanth Joishy, Can Fin Homes Limited - Head of Finance & Accounts [284]

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Yes, yes.

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Unidentified Participant, [285]

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Yes, yes. As you have seen in the last to last quarter or more specifically last year, the growth in the disbursement and sanction was in the negative or you can say barely positive. So can we safely assume that the worst for sanction, disbursements and for the overall growth of the company has passed, the worst?

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Prashanth Joishy, Can Fin Homes Limited - Head of Finance & Accounts [286]

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To last year.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [287]

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See, last to last year growth...

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Prashanth Joishy, Can Fin Homes Limited - Head of Finance & Accounts [288]

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October, we had some...

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [289]

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Yes. October, it was -- because of the liquidity issues and IL&FS crisis, only that quarter, there was a slowdown. And Q4, really, we bounced back, and the -- one of the best performance was shown during that quarter. And we also told at the time, this should be the benchmark in the days to come, and we should grow over and above what we have done in the last Q4, that is last quarter of the financial year. So that phase is over. And now if you see the Q1 performance also compared to the Q1 of last year, definitely, there is a substantial increase and improvement. So this, we'll take it forward and see that the remaining quarters we'll be able to deliver much more.

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Unidentified Participant, [290]

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Sir, my question is basically regarding, are we again back on track to achieve slowly but steadily the higher growth we're used to?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [291]

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We are back on track, as you told, slow and steadily.

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Unidentified Participant, [292]

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Yes. So we can assume that, right?

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [293]

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Yes, yes, Yes.

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Operator [294]

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Thank you very much. That was the last question. I would now like to hand the conference back to the management team for closing comments.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [295]

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See, there's a -- as I told in my introduction, now we are picking up, and hopefully, the quarter 2 and quarter 3 and quarter 4 will also see the increased growth. And also, asset quality is one area wherein we want to really focus most of our energy and efforts, so that will bring it back to the March level by December. That is what we have, the team target. Hopefully, the things would be much, much better, and both the top line as well as efficiency parameters as well as profitability parameters would be more attractive when we meet next time. Thank you.

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Operator [296]

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Thank you very much. On behalf of Investec Capital Services, that concludes this conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.

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Shreekant Mohanrao Bhandiwad, Can Fin Homes Limited - Deputy MD & Whole-Time Director [297]

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Thank you.