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Edited Transcript of SRTRANSFIN.NSE earnings conference call or presentation 8-May-19 2:30pm GMT

Full Year 2019 Shriram Transport Finance Company Ltd Earnings Call

May 28, 2019 (Thomson StreetEvents) -- Edited Transcript of Shriram Transport Finance Company Ltd earnings conference call or presentation Wednesday, May 8, 2019 at 2:30:00pm GMT

TEXT version of Transcript

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Corporate Participants

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* Parag Sharma

Shriram Transport Finance Company Limited - CFO & Executive Director

* S. Sunder

Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration

* Umesh Govind Revankar

Shriram Transport Finance Company Limited - MD, CEO & Director

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Conference Call Participants

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* Abhijit Tibrewal

ICICI Securities Limited, Research Division - Research Analyst

* Abhishek Murarka

IIFL Research - VP

* Adarsh Parasrampuria

Nomura Securities Co. Ltd., Research Division - Executive Director

* Darpin Shah

HDFC Securities Limited, Research Division - Equity Analyst

* Harshvardhan Agrawal

Infina Finance Private Limited - Investment Analyst

* Jignesh Shial

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

* Karthik Chellappa

Buena Vista Fund Management, LLC - Investment Analyst

* Kashyap Jhaveri

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

* Kunal Shah

Edelweiss Securities Ltd., Research Division - Associate Director

* Nischint Chawathe

Kotak Securities Limited, Research Division - Senior Analyst

* Pankaj Agarwal

AMBIT Capital Private Limited, Research Division - VP of Research

* Prakhar Sharma

CLSA Limited, Research Division - Research Analyst

* Pranay Rajani

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

* Rohan Mandora

Equirus Securities Private Limited, Research Division - Analyst

* Saurabh Dhole

Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst

* Shubhranshu Mishra

BOB Capital Markets Limited, Research Division - Analyst

* Umang Shah

HSBC, Research Division - Analyst of Financials

* Viral Shah

Crédit Suisse AG, 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 Shriram Transport Finance Company Limited Q4 and Annual Results for the Financial Year Ended 31st March 2019 Conference Call. (Operator Instructions) Please note that this conference is being recorded. I now hand the conference over to Mr. Umesh Revankar, Managing Director and CEO, for his opening remarks. Thank you, and over to you, sir.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [2]

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Thank you. Good evening to everyone in India, and good morning to the investors who joined us from the U.S. I hope you've already gone through the investor update, which has already been shared.

India's GDP growth for the fiscal year 2019, '20 was revised down by the Central Statistic Office, CSO, to 7% from 7.2% earlier. Data from our 3 quarters indicated GDP growth has been broad-based, and this growth accelerated to 7.9%, making up for the deceleration in services. Meanwhile, agriculture growth was robust at 4%. Even with the downward revision to 7%, India remains the fastest-growing large economy in the world.

Importantly, even as growth has moderated slightly, the second half of -- in the second half of the year, several indicators point to a stable macroeconomic environment. Inflation based on the CPA has been largely benign throughout the fiscal.

There was an improvement in the current account deficit. Currency has been stable. ISB numbers has shown some green shoots during the year. In April, Monetary Policy Committee of RBI announced its second consecutive rate cut, bringing total reduction in policy rate to 50 basis points in this ongoing rate easing cycle. The recent policy rate cuts by RBI bringing down the repo rate to 6% are expected to positively impact all sectors by valuing the demand.

However, it is likely that automobile consumer durables and industrial sector will be key beneficiary once the impact of the rate cut is transmitted through banking system. While a two-wheeler and passenger vehicle demand may see uptick over the next couple of months, the impact of commercial vehicle sales will certainly be visible as the investment cycle improves.

Starting January 2019, vehicle manufacturers hiked prices by 2% to 5%, owing to increased raw material cost and implementation of new safety features. Demand conditions were generally soft, and there was uncertainty prevailing ahead of ongoing general election. This led to subdued sentiments towards second half of financial year 2019.

Despite these issues as well as widespread liquidity crunch, commercial vehicle industry has posted double-digit growth for the full year -- for 2019. Having said that, CV volumes would have been better for the sustained slowdown -- much for this sustained slowdown in the real estate sector. Since the bulk movements of cement, steel and sand et cetera, were absent, the demand for the heavy vehicles came down and also the demand for the finished goods like AC, TV, refrigerators.

Over the past 3, 4 months, there has been dip in our vehicle sales because of that. The recent regulation for commercial vehicle have increased the actual load for the trucks, and that has helped the [industry] transporters to improve its profitability. And there has been 15% to 20% additional capacity as it has helped them to manage the increase in fuel prices, and that also helped us in improving the -- our asset quality. Even as the demand for the new vehicle was neutral, used vehicle, there's been healthy demand. The lending for used secondhand vehicle is largely dependent on the reach that we create, and we're able to create more reach by adding more number of branches in this financial year. We have added 332 new branches in this financial year and most of them beyond Tier 1 cities in the semi urban and the rural market.

The other major factor for the industry has been liquidity. Following the development in October, November around the holding finance company, we can safely say the situation has completely normalized now. Currently, we are witnessing stable liquidity. STSC has proactively explored alternate routes for our funding from the start of financial year '19 and have consistently raised adequate funds.

Over the course of financial '19, we have raised INR 5,000 crores through public issue of entity, exhausted USD 350 million limit on ECB. And recently, we launched $2 billion Global Medium Term Note Programme, of which first tranche of $500 million of senior secured notes were successfully issued and allotted. RMI has been extensively supporting liquidity, which has helped to partly mitigate the tightening of yields in the second half of the year.

Our circulation program is doing well. However, the cost of borrowing has gone up. Our pricing power in used CV is better, and increases can be easily passed on to the customer. Stronger growth in rural market, again, supports a higher yield. And we should be able to manage even a further increase in the coming year comfortably.

We are getting more into the rural market. And therefore, the spread will remain healthy for us. We have reduced LTV value for lending in mid of last year, and we are continuing to pursue -- or consider to lending. And as we see good progress this financial year, we should be able to release the same and lend aggressively.

Coming to the results for the quarter. AUM stood at 1 crore, 4 lakh, 482 against 1 crore, 3 lakh, 817. The net interest income increased by 2.76 to INR 1,905 crores from INR 1,854 crores in the corresponding quarter last year. The net interest margin stood at 7.2% this quarter compared to 7.61% for the same quarter last year. Q-on-Q increase was just under 2 bps from 7.44 -- 7.22% against 7.44%.

PAT decreased by 22.43% year-on-year to INR 746 crores against INR 961 crores in Q4 FY '18 due to adoption of Ind AS, and as per IGAAP, it stood at INR 144 crores last year. The profit for quarter includes INR 109 crores of tax adjustment for the earlier year. The earnings per share are at INR 32.88 against INR 42.39 in the previous year.

Now coming to the results of full year. AUM increased by 8.54% to 1 lakh, 4,482 against 96,260. The net interest income increased by 15.07% to INR 7,807 crores against INR 6,785 crores. The net interest margin declined by 11 bps to 7.41% from 7.52%. PAT for the full year stood at INR 2,564 crores against INR 2,460 crores for the financial 2017, '18.

As per the IGAAP, it stood at INR 1,568 crores. The gross stage 3 assets stood at 8.37% against the 9.39% year-on-year, improvement of 100 basis points. And the Q -- next stage 3 assets stood at 5.49% for the Q4 in this financial year against the 6.19% year-on-year and 5.86% Q-on-Q.

We also have brought down the overall credit cost to -- from 2.25% to 1.92% in the last quarter and the -- for the full financial year to 2.16%. Our total number of branches stood at 1,545 and the employees at 26,630. STSC has proposed dividend of INR 7 per share. This in addition to interim dividend of INR 5 per share. This works out to 120% per share against the total (inaudible) of 110% in the previous year.

Looking forward, there is a huge growth potential particularly in semi urban rural market. In the central statistics from 2001 to '11, the number of towns increased from [2,500] to 7,000. That means there's more and more small towns and helps our coming in to be a commercial activity. And we should be able to reach out to all these centers and improve our reach and improve our lending and business.

The results of general election are just about 2 weeks away. With the conclusion of the process and settling in the new government, we can expect activity to resume unhindered once more. Also the initial production of good monsoon is really very good for us, especially when we are of a rural focus and having a good rural reach.

We expect that with the good monsoon and good demand from the rural market, convention would increase, and that will create better demand for the rate. Additionally, the BS-IV -- BS-VI implementation will also help us because there will be increase in price by 15% to 20%, and that should help us -- expecting a better demand. The demand should come from both the heavy vehicle and the LTVs. And used vehicle also would benefit because there will be a repricing or the initial prices of the vehicle would get repriced and will have a better asset coverage. And not only that, ticket size per vehicle would go up, and that should help us to grow our AUM. We expect around a 12% to 15% growth by September and 18% to 20% for the full financial year.

That brings me end of our opening remarks. I have with me Sunder, Parag and Sanjay to answer specific questions. I would now like to request the moderator to open the floor for analysts' questions.

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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 Rohan Mandora from Equirus Securities.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [2]

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So I have a question regarding the urban AUM growth. I think on the Slide 7 of the presentation, you have added 195 branches -- urban branches during the year. But the urban AUM growth had been almost flattish at around [2-or-so percent] year-on-year growth. So probably even on the existing branches of business, urban seems to have -- still have weakened. If you could share some color on what's happening in urban geographies that is relating to a weaker growth?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [3]

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Our focus has been, in the last 5 years, on the semi urban and the rural market because we feel that growth opportunity in this market is much larger than the urban. Urban areas are well covered by most of the other institutions and bank. So where there is credit shortage, we wanted to focus there so that we can have a niche presence. And the used vehicle demand is also much higher in semi urban and rural market, the same in the urban market. So our growth will be more towards semi urban and rural market in -- going forward.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [4]

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So in urban locations, you have added around 195 branches. If your focus was not in urban so what was the rationale in adding these branches?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [5]

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No. This is -- these are the satellite branches which were added to the urban centers. We have split the existing urban branches and created a satellite branch, which is bordering the semi urban areas.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [6]

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Okay. Okay. I think you have shared a disbursement number for the 4Q FY '19 in terms of new, preowned and other?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [7]

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Disbursements, the new vehicle is 812 crores and used is 11,024 crores. Total is 11,958 crores.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [8]

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11,958 crores.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [9]

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Increase of 25%.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [10]

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Okay. And sir, in terms of your sourcing, it looks like -- how is it still working? Is it private financiers' lending officers? And how was it working in the past for you?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [11]

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See, for our financier, there has not been much growth, but we expect now a better growth because many of these private financiers who are not able to leverage and raise resources, and they are wanting to become the -- our franchise. So I believe next couple of years, we should be able to add more private franchise into our network. And we should be able to better -- build better reach.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [12]

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Right. But sir, out of the like new disbursements, what -- the funding and refunding still are with the private financier right now?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [13]

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Right now, not significant enough.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [14]

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Okay. And what is the guidance, with the second mentioned disbursements for next year?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [15]

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Next year, we expect AUM growth of around 18% to 20% because we are factoring in the higher demand because of the BS-VI -- BS-IV to BS-VI.

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Rohan Mandora, Equirus Securities Private Limited, Research Division - Analyst [16]

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And second, in NIM? Net interest margins?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [17]

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Net interest margins would remain at present level, at around 7.2% level.

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Operator [18]

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Next question is from the line of Pratik Chheda from IIFL.

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Abhishek Murarka, IIFL Research - VP [19]

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This is Abhishek from IIFL. So sir, my question is one, what is your incremental cost of funds for the quarter? And the second thing is have you changed any PD-LGD assumptions in this quarter versus the last quarter as far as the ECL provisioning goes?

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Unidentified Company Representative, [20]

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For the PD and LGD on the current quarter, we are almost ready to be 6.07% as against 5.83% in the previous quarter -- December quarter. And coming to the licensed PD, in March, we have 17.24% as against 17.09% in the December quarter. And the LTV, we are within 32.46% as against 34.78% in the previous December quarter. And as far as the...

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Unidentified Company Representative, [21]

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We're borrowing, in fact -- there are 2 major sources what we tap. One was the dollar bond market. Another was securitization. The securitization in the quarters current effect rate was still -- the rates were around 8.5% to 8.75%. But the dollar bond which we -- what we did for $400 million, that was hopefully -- hedge cost to us was slightly higher. It was close to around 10% because one-off transactions will -- we can't take the average if we talk about incremental. If we exclude this, then I think we're around 9.5%.

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Abhishek Murarka, IIFL Research - VP [22]

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So domestically, you would be borrowing at 9.5% incrementally for rupee fund.

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Unidentified Company Representative, [23]

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Correct. Correct. We're at around 9.5%, yes.

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Abhishek Murarka, IIFL Research - VP [24]

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Okay. And sir, so in terms of your OpEx, you have added a number of branches. And obviously, some of them are satellite branches also. But your employee strength remains almost as it is at 26,000 for the last 2, 3 quarters. So is it that going forward, you will be adding more employees to man these branches? Or is it that it's operating -- it's really better productivity. And now you don't need that many branches per -- sorry, people per branch?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [25]

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See, we have added, for the last financial year, around 3,000 people. So we did hire a little more aggressively in the first half of the year. And therefore, it was sufficient for us for the full financial year. So this year also we'll be adding another 3,000 people. So we do definitely need people because our segment of the customer need more reach and better understanding of the business also is required for us. Each individual needs to be detailed as a businessman. So therefore, our reliance on people would be there.

However, we're also adding technology to improve the efficiency and productivity of each of the field officers. Today, we can do anything and everything on the mobile at the field, and our field officers need not really come to the office at all. But still, the human touch and reach is important to understand the business and also for better collection efficiency.

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Abhishek Murarka, IIFL Research - VP [26]

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Okay. So sir, just sort of on this -- if I just look at some metric like employee per branch or something, it still gone down to 17% from 20% despite your 3,000 people addition during the year. So would you think this kind of -- at the current level of 26,000, 27,000 people, is this enough for 1,550 branches? Or are you -- how many branches, let's say, are you adding next year? Or planning to add next year?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [27]

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We will be adding 250 branches, and we'll be adding 3,000 people. So approximately 10 per new branch we need to be -- we need to have, and that is including back office, front office, field, et cetera. But as I rightly said, there is definitely productivity gain over the period. And our productivity gain will help us to reduce number of staff per branch.

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Abhishek Murarka, IIFL Research - VP [28]

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Okay. Okay. And sir, just because you said that your NIM will remain broadly at the current level, so does this also mean that the elevated amount of investments and cash that you are carrying today, that will continue through FY '20? Or are you looking to bring that down?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [29]

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No. We will be carrying additional cash. It is not just to have the, what you call, the cushion, but we also look at good scope to grow through the second half of the year. So we would like to keep the cash. And that will continue for the next financial year.

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Abhishek Murarka, IIFL Research - VP [30]

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Okay. So roughly INR 4,000-odd crores plus, minus something will remain in cash and similar amount of investments will also be there on the book.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [31]

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A little more than that. Correct, Parag? Yes. A little more than that would remain in the balance sheet.

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Operator [32]

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The next question is from the line of Kunal Shah from Edelweiss.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [33]

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Sir, 3 questions. Firstly, in terms of the interest income. So there is a sequential decline in the absolute amount. So I just wanted to get the sense, is it on account of lower lending rates? Or lower yields and shift in the portfolio mix? Or there is some component of the off-balance sheet item which is leading to this?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [34]

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Yes. Sunder would answer.

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [35]

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There are 2, 3 factors affecting this. One is that we were also carrying higher investments and cash bank balance that has contributed a lower interest yield in the current quarter. And divestments were primarily driven in the current quarter until back end of the year, March specifically. And hence, the average balances during the year -- during the quarter was comparatively lower compared to the December quarter. So these factors contributed to the lower income compared to the December quarter.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [36]

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Okay. So maybe in terms of yields, would we consider it to be more of a normalized level in terms of a Q4? Because this is despite the stage 3 assets also coming off.

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [37]

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Yes. These have been fairly stable in the current quarter.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [38]

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Okay. And secondly, in terms of ground tax, in fact, some of the customers, have they started asking for a relatively higher tenure to the loans? Or maybe in terms of the expansion of the existing tenure, is it more pan-India phenomena? Or it was just there in terms of the pockets?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [39]

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We have not really experienced that because normally when we lend itself, we do take consolidation of the customer and fix the tenure. So in between, we don't really encourage any increase in the repayment rate. And a new loan for customer asking for higher tenure doesn't happen with us because what we do is we reduce the LTV and reduce the loan amount to match the installment so that because of increased lending rate, the interest amount going up. And because of that, tenure going up doesn't happen with us.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [40]

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Okay. So we try to offset it with a relatively lower LTV?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [41]

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Yes.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [42]

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Okay. And lastly, in terms of the loan loss provisions. If we look at Q4 of last year, in fact, they had -- the provisions under the NDAs are significantly lower, maybe like 97-odd crores. So -- now what exactly -- and when we look at last 4 quarters, in fact, on an average, it's been around about 600-odd crores. So was there any change in the assumption in the Q4 of last year which is leading to this under index?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [43]

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See, there are 2 factors that contribute to a lower provision and write-off in Q4 2018. One was around 250 basis points came down in the LGD, and there are also -- compared to December 2017 quarter. And similarly, with PD levels also were again revised in the March 2018 quarter. This has contributed to a lower provisioning compared to December 2017.

And the other factor was the write-off in Q4 2018 was comparatively lower. So these 2 factors put together resulted in a lower provision and write-off of 97 crores. And we generally revisit the LGD and PD levels on a yearly basis in the month of -- the quarter of March every year. So going forward also, there may be some divisions in the March number. So it may be...

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [44]

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Okay. So if we just look at that, so what will be the LTV of Q4 of last year and this year?

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Unidentified Company Representative, [45]

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(inaudible)

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [46]

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The LGD of March 2018 was 33.8%. And the LGD currently is 32.46%.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [47]

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Okay. And that's still on year-on-year LGD loss?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [48]

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Yes.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [49]

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Okay. And lastly, in terms of the write-off for this particular quarter?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [50]

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The write-off for the current quarter is 806 crores, and we got a write-back in the provision of 267 crores. And the net comes to 539 -- 540 crores.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [51]

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Okay. So 800 crores is the write-off during the quarter.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [52]

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Correct. Correct.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [53]

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And for full year?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [54]

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And for the full year, the write-off were 2,347 crores. And the provision incrementally was 110 crores.

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Kunal Shah, Edelweiss Securities Ltd., Research Division - Associate Director [55]

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Okay. So this is the reason for the lower tax rate as well.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [56]

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Correct. Correct.

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Operator [57]

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The next question is from the line of Shubhranshu Mishra from BOB Capital Markets.

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

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I wanted to understand your acquisition strategy and the customer acquisition strategy in the rural and semi urban areas and the cost of acquisition in the semi urban areas versus the urban areas. So what is the difference quantitative, please? That's my first question, sir.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [59]

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So basically, there is not much change in the strategy on customer acquisition. We normally build a customer network. And through customer network and reference, we keep adding or lending to or identifying the new customers. Because when there is a buying and selling transaction, either the buyer or seller, one of them will be known to us, our previous borrower, and that helps us in lending. We also take existing customer as a guarantor. And that is maybe a hindrance to faster growth, but it helps us in our future collection and putting a peer pressure. So our acquisition is basically by knowing the customer, understanding the customer, be part of the community and know each and every customer.

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

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Great. And -- or what is the difference in the cost of acquisition in rural and semi urban areas versus the urban areas, sir? Because of file size, what will be the difference -- profile, what would be the expense?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [61]

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Yes. It is mainly because of a lesser file size -- sorry, smaller ticket. The cost of acquisition as a percentage will be a little bit higher for used -- or for our rural market. But that we compensate by charging -- lending at higher rate. So we normally lend around 200 basis points more at the rural market than the urban market for a similar product.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [62]

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Just wanted -- can you quantify the cost per file in a rural area versus in urban area, sir?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [63]

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We can't quantify that because we have not done the tax rates. Yes.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [64]

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Sure, sir. And 2 housekeeping questions, sir. One is what would be your tonnage-wise split of your portfolio? And second, how do we look at the credit cost in FY '20 going forwards?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [65]

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Tonnage-wise, if we look at -- see we haven't given breakup of heavy LTVs. That is the major segments. We can't go tonnage-wise because from 1 ton to 50 tons, we have so many segments.

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Shubhranshu Mishra, BOB Capital Markets Limited, Research Division - Analyst [66]

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Right. Sure, sir. And credit cost guidance for FY '20?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [67]

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Credit cost is around 2% now. And it should remain at that level.

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Operator [68]

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The next question is from the line of Adarsh P. from Nomura.

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Adarsh Parasrampuria, Nomura Securities Co. Ltd., Research Division - Executive Director [69]

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Sir, first question is you said the incremental cost of funds are 9.5%. What was the cost of funds on book in fourth quarter? What was the -- on the stock, what's the cost of funds?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [70]

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Parag, do you want to answer?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [71]

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It'll be around 9%.

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Adarsh Parasrampuria, Nomura Securities Co. Ltd., Research Division - Executive Director [72]

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So incrementally more in like 50 bps higher than the stock, right? Okay. And what about the incremental yields on disbursement vis-a-vis the incremental yield on the book? If you can just give that as well.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [73]

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The incremental increase is around 50 basis points, almost same. If we do almost immediately on whatever increase is there, but in cost, we pass it on to the customer. But the only thing is since our lending has been a little slow, and it picked up only in the back end of the quarter. It may not get reflected in our overall NIM.

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Adarsh Parasrampuria, Nomura Securities Co. Ltd., Research Division - Executive Director [74]

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And sir, the other question is you kind of gave a very strong guidance specifically if you consider the environment today in terms of how OEM growth is. Just wanted to understand what's that based on? Because OEM numbers look pretty weak. And if you target 15%, 20% growth, what specifically happened in this quarter than -- you had similar problems with OEM growth, and your AUMs have not grown in this quarter. So why should that pick up barring an event of, say, the BS-IV to VI transition, which may happen in the second half of next year?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [75]

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See, there are multiple factors. The real estate is almost, I would call, come to a standstill. And bulk materials are not at all moving, and that has brought down -- that has slowed down the heavy vehicle movement. And the existing heavy vehicle has been used for the other business activities. That means once the real estate pick ups, there will be additional demand. And also postelection, many of these cold-related transportation also. Many of the bidding has been stopped because of the election. And postelection, I believe, most of these cold-related movement also will start moving, so that should again help us.

And infrastructure spending by the government has come to virtually a standstill because of a number -- the 4 stage or 5 stage went down election. Again, now there is an election announced -- election was announced. All these things has brought a slowdown the demand for the heavy vehicle. But if we look at the LCV, LCVs have been growing at double digit. Throughout the second half of the year when the heavy vehicle demand came down, LCV was growing at 10%. That means LCV has already crossed [5 lakh] in a year, so that means there is a good demand from the rural market. And I believe the demand from the rural market further improves because of good monsoon. Last year, monsoon was predicted normal. But it turned out to be not below normal at 91% against 97% production. So in spite of that, the demand has been -- or the LCV demand has been good. So I feel the -- with the good monsoon, the LCV demand would continue to remain strong.

The tractor demand didn't go up, then automatically, the demand for the heavy vehicle also will start picking up. BS-IV and BS-VI movement would be a significant impact in India because the price increase is likely to be 15% to 20%. Once the manufacturers start giving guidance on the price increase, there would be a significant prebuying in the month of -- from -- or starting from August to March. So I -- because of that, I feel there will be a significant demand for the commercial vehicle, both in new and used, although we are focused more on used. The new vehicle demand will slowly percolate down and create a bigger demand. So these are all the assumption on which we are going. And plus, with the new government coming in, they will come with a lot of ideas, plan and push the economy. They will not be facing the election. So definitely, they will be bold enough to initiate a lot of economic activity to boost the economy.

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Adarsh Parasrampuria, Nomura Securities Co. Ltd., Research Division - Executive Director [76]

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Sir, just 2 questions here. When I see your AUM growth for September right from 2Q to 4Q, it's almost flat. When I compare for some time for most NDSCs it's a problem in the funding side for you the assumption would've been -- should not be and then similar is reflected in your borrowing mix, right? You've been able to borrow from capital markets to NCDs. The point I'm just trying to understand is, was any of the slowdown in the last 6 months for you also a function of funding constraint at some point of time? It doesn't seem so. I just wanted to check if that's the case because what I'm seeing for most other financial, especially banks, is that their city books have actually grown. So it's quite surprising that if you didn't have funding constraints, your AUMs have not grown for the last, whatever, 6 months.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [77]

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See, we did slowdown in the month of October, then we brought new dividend where we decreased the funding, [only to] ask more margin, more investment from the customers. Automatically, the demand would slow down. So this was basically to understand the market sentiment and then to move forward we did it, but we continued with that for last 6 months. And well, today, we're continuing with the lower activity kind of lending loans. We have not relaxed that because we wanted to wait till the election and then depend upon the market sentiment or demand activities to relax. That's the reason we choose. For first half of the last year, we grew more than 20%. And for us, definitely, there was no constraint. But we decided to carry more cash because we are not sure how long the uncertainty would continue.

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Operator [78]

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(technical difficulty)

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [79]

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We don't experience here. In between calls but now it's fine.

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Operator [80]

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All right. The next question is from the line of Pranay Rajani from Karani Securities.

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Pranay Rajani, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [81]

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Just a few nitpicking points. If you could just repeat the baseline number once again, that would be great.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [82]

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If you look at the disbursement in the new vehicle for the quarter was 812 crores.

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Operator [83]

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I'm sorry to interrupt you, but we cannot hear you.

(technical difficulty)

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [84]

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We're now clear? Yes. The disbursement for the new vehicle was 812 crores for the quarter. The used vehicle was 11,025 crores.

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

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11,025 crores.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [86]

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And others was 122 crores.

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Pranay Rajani, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [87]

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122 crores.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [88]

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So the total was 11,958 crores, an increase of 25% over the previous quarter.

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

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Okay, okay. All right, sir. Apart from this, the incremental cost of this during the quarter stood at 9.25. Am I correct?

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Unidentified Company Representative, [90]

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(inaudible)

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [91]

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9.5.

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Pranay Rajani, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [92]

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9.5. And what would be the incremental yields during the quarter?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [93]

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I believe 50 basis points, almost same.

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Pranay Rajani, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [94]

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If you could provide me a number, that would be great, approximate number.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [95]

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We'll -- Sanjay will give you the number.

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Pranay Rajani, Batlivala & Karani Securities India Pvt. Ltd., Research Division - Research Analyst [96]

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All right, sir. And on the cost, on the credit cost, where do you see it going forward in next year? And like what are your plans in the same for credit costs?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [97]

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The credit cost has already come to 2.16 for the full year in the last financial year. So we are targeting 2% in the next financial year.

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Operator [98]

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The next question is from the line of Karthik Chellappa from Buena Vista Fund Management.

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Karthik Chellappa, Buena Vista Fund Management, LLC - Investment Analyst [99]

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My first question is earlier, AUM growth guidance you alluded to around 10% to 12% for the first half of the year. How much of that would be coming from, let's say, a relaxation of increase in your LTV? Was it organic growth, was this organic growth?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [100]

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We don't really plan to relax till the election is over, and maybe once the election is over, depending upon the market condition, then we would be relaxing. Mostly if the monsoon indication is good, maybe month of July, we would like to relax. Till then we would like to have a controlled lending.

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Karthik Chellappa, Buena Vista Fund Management, LLC - Investment Analyst [101]

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Okay. Got it. And my second question is if we look at our employee expenses for the quarter, which is a little about INR 204 crores, this was almost flat year-on-year. And it has actually brought about 7% to 8% quarter-on-quarter relative to Q3. Given that we have continued to hire some employees even during the quarter and throughout the year, why is the employee expenses not growing?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [102]

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As we've seen in the last 6 months, the businesses are flat, and the AUM growth has been flat. And most of the component of the employee remuneration field, staff [compensation] is more driven by the incentive. So since the business itself was down, consequently, the incentive also was paid lower. That was the reason.

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Karthik Chellappa, Buena Vista Fund Management, LLC - Investment Analyst [103]

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And so can we say that the incentives that you have, there is a higher weight gauge for disbursement as opposed to, let's say, collections and asset quality, which is why the expenses did not grow? Because the asset quality I think held up pretty well in the collection, must have also been pretty decent. It's just the disbursements were weak.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [104]

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The weight gauge is given for all the sectors, the disbursement collections and then the quality asset quality, and so it is interlinked. So I would not say that more weight is given for development.

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Karthik Chellappa, Buena Vista Fund Management, LLC - Investment Analyst [105]

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Okay. Perfect. And sir, if I heard you right earlier, your NIM guidance for the full year is similar to our exit quarter NIM, which is about 7.2. Am I right?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [106]

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Yes. That's correct.

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Operator [107]

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

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [108]

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I do have 2 questions. One is in this previous quarter, you added about 200 branches as in you already spoke about how you spare some of your urban branches. Why doesn't this reflect in your OpEx because if I see sequentially the OpEx is kind of down. So why shouldn't it offset it?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [109]

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See, many of these branches have been open through the back end of the year planning for the next financial year. So it will come subsequently.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [110]

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Okay, okay, okay. And in -- I think you already spoke about the PD that you revised or revisit I think in the month of March. So the PDs and injuries that we presume for your current stock of Stage 1, 2 and 3, those are based on this particular year? Or there are...

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [111]

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Last 5 years.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [112]

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No, no. So they are based on the revised figures? Or they will get revised in April?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [113]

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Yes. Every time -- yes, based on revised figure only. But every time we release, previous 5 years.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [114]

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Okay. So it's on a rolling basis.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [115]

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Yes. A rolling basis.

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Saurabh Dhole, Trivantage Capital Management India Pvt. Ltd - Senior Financial Sector Analyst [116]

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Okay, okay. And sir, just one last question on Slide #15 where you talk about the breakup of resources. There is that commercial paper, and you've written something like embedded with NCD, 3.4. Just wanted to understand what that is.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [117]

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These are commercial paper, which has partly paid and surely the cash [verdict] in case the commercial paper doesn't get rolled over, the full amount of NCDs get paid in. So this commercial papers are started while we're saying this is embedded because there is an NCD, which is for a longer tenure. Automatically, the CP gets rolled over every quarter. And in the case investor wishes not to renew the CD -- CP, they have to invest in the NCD for the longer tenure.

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Operator [118]

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The next question is from the line of Viral Shah from Crédit Suisse.

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Viral Shah, Crédit Suisse AG, Research Division - Research Analyst [119]

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All my questions are answered.

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Operator [120]

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The next question is from Prakhar Sharma from CLSA.

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Prakhar Sharma, CLSA Limited, Research Division - Research Analyst [121]

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My question is regarding the securitization income. I'm looking at Page 5, the AUM breakup. Just wanted to confirm a couple of things. The off-book part, which is at about 20 -- 2,100 crores right now, this is the book which is not the PTC type, right? This is a direct assignment that goes off the books.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [122]

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Yes, that's correct. It is.

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Prakhar Sharma, CLSA Limited, Research Division - Research Analyst [123]

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Right. Can I have the interest income related to this segment for the last 3 quarters, Q2 when it was very small and when post started moved up, could I have the interest because I understand that as per the Ind AS accounting, the income recognition on this happens up front.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [124]

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No, no. We are securing activity that the interest income is not booked up-front. It is to follow the tenor of the agreement. It is similar to what we were doing in the SVL securitization.

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Prakhar Sharma, CLSA Limited, Research Division - Research Analyst [125]

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Okay. So it is normalized and kind of done on a coupon sort of a basis.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [126]

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Correct, correct.

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Prakhar Sharma, CLSA Limited, Research Division - Research Analyst [127]

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Normalized. Sure. And just in the rural market side, as you present, it will be more of an LTV market is clearly understood, but you're not doing tractors, et cetera, also their award because I see from the mix, the share of tractors has gone down. And it's a popular product. So just wanted to confirm whether you're not doing it as much as you should.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [128]

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No. Tractors is a very attractive product for us. They usually is also quite good. Only thing is, the ticket size being small, it doesn't get reflected. The average used tractor ticket size is around 2 lakh, so it doesn't get reflected. But we feel that, that is very attractive product, and we should be able to add more. As we settle down in the rural market, much more what call -- much more comfortably.

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Prakhar Sharma, CLSA Limited, Research Division - Research Analyst [129]

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Last question. This working capital loan of about 60-odd percent growth. How -- basically I assume this will be -- to mostly to existing clients but based on internal checks and balances, how are you trying to ensure that this is not taken to service an existing loan?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [130]

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So basically, it is product based. And in the event somebody buy a tire, we fund him. So amount goes directly to the tire dealer or manufacturer. Similarly, we have this year now tied up to date, this year, wherein if use the fuel and we make the payment directly to the sales. So most of this working loan goes directly to either the dealer, manufacturer or the petrol pump and to the insurance companies. All this general insurance renewal we normally give as a finance package, 12-month repayments. So every 12 months, it gets renewed. So nothing goes to customer directly.

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Prakhar Sharma, CLSA Limited, Research Division - Research Analyst [131]

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The reason I was trying to check is between 4Q FY '18 to Q2, test book went up from by about like 400 crores. And now it has -- from Q2 to 4Q end, it has gone up like by 700 crores, 800 crores in a tight liquidity environment.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [132]

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No. We started aggressively on the sale in the second half of the year only. In fact, our tie-up with it was only just 6 months old. So many of the activity we started later.

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Operator [133]

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The next question is from Jignesh Shial from Emkay Global.

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Jignesh Shial, Emkay Global Financial Services Ltd., Research Division - Research Analyst [134]

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Most of the questions have been answered. Can I get the securitization done during the quarter?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [135]

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3,600 crores.

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Jignesh Shial, Emkay Global Financial Services Ltd., Research Division - Research Analyst [136]

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3,600 crores. Is this assignment, and what is the securitization? Total assets of 600 crores.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [137]

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The 800 crores assignment and balance is separate.

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Operator [138]

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Next question is from Nischint Chawathe from Kotak Securities.

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Nischint Chawathe, Kotak Securities Limited, Research Division - Senior Analyst [139]

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I didn't quite follow the reason for a lower provision in fourth quarter of FY '18, just 97 crores provision. So I was just trying to understand that math.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [140]

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FY '18, okay. Sunder?

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [141]

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In Q4 2018, we had a provision requirement of negative -- it was a write-back, in fact, of 295 crores, and the bad debt that we wrote off in the particular quarter was 384 crores. And this resulted in a lower provision write-off of 97 crores. In Q4 2018, we had revisited added 1 year the ACL approaching wherein the PD and LTV came in lower compared to the December 2017 quarter. As I was telling you every year in March, we revisit this LGD and PD computation, and there was a benefit in the previous year, and there was a lower rate in the particular quarter. These 2 factors resulted in a lower provisions and write-off.

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Nischint Chawathe, Kotak Securities Limited, Research Division - Senior Analyst [142]

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Can you share the PD and LG numbers assumed in December and March?

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [143]

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Yes. The LGD of December 2017 was 35.94, and the PD was 5.95. Government PD and lifetime PD was 16.57. And up against it, the LGD in March when we revisited, it came down to 33.81%. PD was 5.81, and the PD, lifetime PD was 16.76%

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Nischint Chawathe, Kotak Securities Limited, Research Division - Senior Analyst [144]

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Okay. And for the one that you assume for this quarter?

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [145]

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Current quarter, it is 32.46%, LGD; 6.07, PD 12 months; and 17.24, lifetime PD.

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Nischint Chawathe, Kotak Securities Limited, Research Division - Senior Analyst [146]

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So there has actually been a fair amount of improvement between last 4 quarters as well. I mean I'm not doing the math up-front, but all I'm trying to say there's been a fair amount of improvement and is treated as well.

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [147]

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Yes. That has been a provision write-back in the current quarter also. If you see the provision requirement in Q4 was 267 crores. However, since we had -- there's no, however, equipment early equipment portfolio and other portfolios wherein there was settlement happening. So those are net write-off of 806 crores in the current quarter. So 806 crores and negative of 267 crores has made [507 crores of rent] provisional write-off for the Q4 2019.

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Nischint Chawathe, Kotak Securities Limited, Research Division - Senior Analyst [148]

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Okay. Got it. Just one more number. I wondered how much was the securitization that you added during the entire year?

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [149]

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Entire year was -- one second.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [150]

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15,123 crores.

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [151]

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15,123 crores.

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Nischint Chawathe, Kotak Securities Limited, Research Division - Senior Analyst [152]

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Okay, of which assignment was?

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [153]

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Assignment was 2,800? 2,800 roughly.

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Operator [154]

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Next question is from Pankaj Agarwal from AMBIT Capital.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [155]

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You were [raising] by 20% while you made roughly 20,000 crores of additional liabilities next year. How we are going to fund this, especially when mutual funds are at the redemption [rates] and banks are not investing their (inaudible) too in this. So do you think 20,000 crores will be easy to get next year?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [156]

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See, we have already raised the $500 million 2 years bonds and another $250 million we can raise. We can also go to RBA asking for additional limit. That's one thing. Second, we have a retail program. We differently come out with our NCD issue every year. Last year, we raised around INR 5,000 crores for the full year. So this year also, we'll have similar plan to raise the retail NCD issue. Then we're also deposit taking in this. We're also having good inflow of deposit. Apart from that, the securitization is one route. We look for raising the resources. And last year, we raised around INR 15,000 crores. And next financial year, this financial year also, we can look at. So the sources for us are plenty. And we need to when we plan according to the requirement.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [157]

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But if you're going for more retail in city than deposits, don't you think your cost of funds still enter because without 2 months funding costs have been in cities and banks?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [158]

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Yes, yes. We have factored in that. We are -- only if we are able to pass down to the customer, we would be able to raise it and lend it. So we are confident of passing on to the customers.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [159]

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And second thing, sir, is if you're guiding for 20% AUM growth, it's led to 30% fund growth Y-o-Y next year. Is that correct number? I mean if I back out based on your [retail inventory].

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [160]

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Yes. I think approximately it should be same.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [161]

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You are saying disbursement growth should be also around 20%, right?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [162]

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Yes. It should be around 20%.

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Pankaj Agarwal, AMBIT Capital Private Limited, Research Division - VP of Research [163]

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And given that now your disbursement will pick up, right, and earlier, you gave a reason that your disbursements are weak, and that's why use on income pressure, right, but now your disbursements are picking, and you're saying that there would be 20% AUM growth, but roughly half of your book would be ordered next year, right, where you're able to pass on increased cost of funds to your borrowers, right? And therefore, don't you think your NIM should improve? You understand.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [164]

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Since we will be carrying a little higher cash, so NIM would remain at present level. Maybe there could be some improvement. But as of now, we would like to give a guidance of maintaining the NIM.

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Operator [165]

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The next question is from the line of Abhijit Tibrewal from ICICI Securities.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division - Research Analyst [166]

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I've been hearing that your [consistent] problems in (inaudible) what process does this take?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [167]

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Our banks was slow, but of late, some of the public sector banks we have approached, and the money is coming through. So it was slow from October to January or it was difficult but now they're slightly revised. So in order that -- nothing is coming from banks. It has just now started.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division - Research Analyst [168]

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Okay. At what rate are they giving you money now?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [169]

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Which one?

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Abhijit Tibrewal, ICICI Securities Limited, Research Division - Research Analyst [170]

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At what retail banks lending.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [171]

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Banks, the lending is around 9.5 to 9.5, around 9.5.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division - Research Analyst [172]

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Okay. And is there anything else that you would like to comment on with merger evaluation?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [173]

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Nothing for now because it is only discussion point, and we're only looking at a right synergy among all the entities. Once we have a clear thought process and synergy to present, then we'll come out and discuss it openly.

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Abhijit Tibrewal, ICICI Securities Limited, Research Division - Research Analyst [174]

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And do you have any time lines in mind?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [175]

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No time lines in mind.

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Operator [176]

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Our 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 [177]

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All my questions are answered.

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Operator [178]

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Our next question is from Umang Shah from HSBC.

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Umang Shah, HSBC, Research Division - Analyst of Financials [179]

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I wanted one data point. What is the outstanding cash and cash equivalent as of March 19?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [180]

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INR 8,000 crores.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [181]

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INR 8,000 crores.

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Umang Shah, HSBC, Research Division - Analyst of Financials [182]

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Okay. And disregarding this PD LG model, what is the time series of the data based on which we calculate PD LGD?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [183]

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Higher.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [184]

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Higher.

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Operator [185]

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The next question is from the line of Sujit [Ganguli] from ICICI Lombard.

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Unidentified Analyst, [186]

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So my question is regarding liquidity position. You said total liquidity position is around INR 8,000 crores. Is it including our new [tiered] bank lines?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [187]

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Excluding.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [188]

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Excluding.

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Unidentified Analyst, [189]

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It is excluding. So if I go to the balance sheet, I'm not able to connect.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [190]

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It's in the investment book and the cash balance.

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Unidentified Analyst, [191]

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Hello? Hello? Yes.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [192]

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It's there. If you look at cash banks and other cash and cash equivalent is 2,900 and -- INR 3,000 crores roughly. And if you look at investment, it's INR 4,000 crores.

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Unidentified Analyst, [193]

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Okay, okay, okay. And how we see ALM position for next 6 months to 1 year? Will it be comfortable?

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S. Sunder, Shriram Transport Finance Company Limited - Executive Director of Accounts & Administration [194]

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ALM is comfortable. One is -- the bonds we have raised overseas is long duration. Securitization is what we largely did, and this is also matching the entire duration of assets. ALM currently is positive and all, and I don't foresee any change there. It should further improve, in fact.

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Unidentified Analyst, [195]

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Okay, okay. So because if I see around monthly outflows are higher than INR 6,000 crores. So that's why I asked how we see it going forward? It's comfortable according to you?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [196]

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What outflow? We don't get you.

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Unidentified Analyst, [197]

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Just the principal outflow if I see monthly for the company.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [198]

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I don't know where you are getting it from. But the specific question can be answered by Sanjay later because we're not able to understand it.

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Operator [199]

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The next question is from Darpin Shah from HDFC Securities.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [200]

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Disbursements have grown significantly on Q-on-Q basis, but the AUM has been flat. So what explains this?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [201]

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Look, the collections were quite strong. And that could be the reason. And the -- yes, that is first off.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [202]

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So any change in strategy or something where collections were significantly in this quarter?

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [203]

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I think we have nothing in that. The focus employee was there on collections. So no change in strategy, assets.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [204]

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Okay, okay. Fair enough. And second thing is on the borrowing mix, which you have mentioned where some CDs are embedded with NCDs. So there, do we pay any cost? Or how will be the pricing different?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [205]

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Not comparing. We don't bear any additional costs.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [206]

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So for this, the BCP and the normal regular CPs will be priced the same.

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [207]

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Yes, they're priced same.

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Darpin Shah, HDFC Securities Limited, Research Division - Equity Analyst [208]

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Hello?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [209]

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They'll be priced same.

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Operator [210]

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Next we have a follow-up question from the line of Pratik Chheda from IIFL.

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Abhishek Murarka, IIFL Research - VP [211]

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My questions have been answered.

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Operator [212]

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The next question is from [Dharvi] Agarwal, who is an individual investor.

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Unidentified Participant, [213]

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So I wanted to understand a couple of questions. One, there are loan books still qualify for propriety sector for banks. That's one. Two is what would be hedging cost of the dollar bond which issued, what level would be the bond and what the hedging cost of converting it into INR?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [214]

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Okay. When it comes to the bonds hedging, the coupon, what we did was around 5.7. And it depends upon when you are doing and with which bank you are doing the cost involved. It keeps varying. There will be 10 to 20 basis points difference between various banks and the time when we're doing it. As of now, if we look at the weighted average cost of the entire bond issue, the total cost came to us at around 10.25-odd percent. Depends upon -- I'm not saying that is the single cost across all banks but depends upon wherever we have different lines. 10.25 is overall cost to us.

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Unidentified Participant, [215]

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Okay. So also if you can shed some light on the priority sectors. There are loans qualified for priority sector banks?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [216]

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Yes. Since we lend to small truck operators, everything qualifies for private sector.

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Unidentified Participant, [217]

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So if you can shed again some light how the participant lending certificates market has developed, do you participate in that where we don't transfer the assets but just kind of?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [218]

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And this is not eligible for participating in private sector and between the banks.

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Operator [219]

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We have one last question in queue. The last question is from the line of Harsh Agrawal from Infina Finance.

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Harshvardhan Agrawal, Infina Finance Private Limited - Investment Analyst [220]

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Can you hear me?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [221]

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Yes.

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Harshvardhan Agrawal, Infina Finance Private Limited - Investment Analyst [222]

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So my query is regarding the derivative financial instruments line item on our balance sheet. For the last -- the second quarter and third quarter, we're around 3,000 crores of derivatives on our balance sheet, and this quarter, that number has positively reduced. If you can help me, what has happened on that line item?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [223]

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It was primarily related to the hedging that we had done earlier.

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Harshvardhan Agrawal, Infina Finance Private Limited - Investment Analyst [224]

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So hedging, we did it on foreign currency borrowing?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [225]

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Yes. Foreign currency borrowing.

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Harshvardhan Agrawal, Infina Finance Private Limited - Investment Analyst [226]

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But sir, during the quarter, we also raised further foreign currency borrowing. So shouldn't this line item -- would have gone up?

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Parag Sharma, Shriram Transport Finance Company Limited - CFO & Executive Director [227]

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I don't have the number open. Okay, off-line maybe Sanjay will be in touch with you on this.

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Operator [228]

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That was the last question in queue. I would now like to the hand the conference back to the management team for closing comments.

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Umesh Govind Revankar, Shriram Transport Finance Company Limited - MD, CEO & Director [229]

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Thank you for joining. We do see a strong next financial year as far as the credit demand is concerned. The postelection scenario where the new government will push the overall infrastructure is what we believe strongly. And second, the monsoon picture being good, BS-IV to BS-VI, these are 3 big things I think will create a better demand both in our urban and rural. So we are very confident that our growth rate, net interest margins, collection and overall credit quality will improve. And thank you for joining the call. That's all.

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Operator [230]

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Thank you very much. On behalf of Shriram Transport Finance, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.