Q2 2027 Poonawalla Fincorp Ltd Earnings Call

October 9, 2026

Speaker #1: Ladies and gentlemen, good day and welcome to the Poonawalla Fincorp Limited Q2 FY26–27 earnings conference call. We have with us today Mr. Arvind Kapil, Managing Director and Chief Executive Officer; Mr. Sunil Samdhani, Executive Director; Mr. Sriram Iyer, Chief Credit and Analytics Officer; Mr. Harsh Kumar, Head of Artificial Intelligence and CHRO; and other senior management officials.

Operator 2: Ladies and gentlemen, good day and welcome to Poonawalla Fincorp Limited Q2 FY2026-2027 Earnings Conference Call. We have with us today Mr. Arvind Kapil, Managing Director and Chief Executive Officer, Mr. Sunil Samdani, Executive Director, Mr. Sriram Iyer, Chief Credit and Analytics Officer, Mr. Harsh Kumar, Head Artificial Intelligence and CHRO, and other senior management officials. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Shabnam Zaman, Company Secretary of Poonawalla Fincorp Limited. Thank you, and over to Ms. Zaman.

Operator: Ladies and gentlemen, good day and welcome to Poonawalla Fincorp Limited Q2 FY2026-2027 Earnings Conference Call. We have with us today Mr. Arvind Kapil, Managing Director and Chief Executive Officer, Mr. Sunil Samdani, Executive Director, Mr. Shriram Iyer, Chief Credit and Analytics Officer, Mr. Harsh Kumar, Head Artificial Intelligence and CHRO, and other senior management officials. As a reminder, all participant lines will be in listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing star then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Shabnum Zaman, Company Secretary of Poonawalla Fincorp Limited. Thank you, and over to Ms. Zaman.

Speaker #1: As a reminder, all participant lines will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes.

Speaker #1: Should you need assistance during this conference call, please signal an operator by pressing star, then zero, on your touch-tone phone. Please note that this conference is being recorded.

Speaker #1: I now hand the conference over to Mr. Shabnam Zanam—sorry, Shabnam Zaman, Company Secretary of Poonawalla Fincorp Limited. Thank you, and over to Ms. Zaman.

Speaker #2: Thanks.

Speaker #3: Thank you. In line with good corporate governance practices, please note this presentation may contain forward-looking statements regarding the company's future business prospects, strategies, estimates, and profitability.

Shabnum Zaman: Thank you. In line with good corporate governance practices, please note, this presentation may contain forward-looking statements regarding the company's future business prospects, strategies, estimates, and profitability. It is important to note that these statements are based on certain expectations, assumptions, anticipated developments, and are subject to various risks and uncertainties. The actual results may differ significantly from what is stated in these forward-looking statements. Risks and uncertainties related to these statements include fluctuations in earnings, our ability to manage growth, competition, economic conditions in India and abroad, changes in law, rules, and regulations relating to any aspect of the company's business operations, general economic, market, and business conditions, attracting and retaining skilled professionals, as well as government policies and actions. Now, I would like to hand over to Mr. Arvind Kapil, Managing Director and Chief Executive Officer of the company.

Speaker #3: But it is important to note that these statements are based on certain expectations and assumptions, anticipated developments, and are subject to various risks and uncertainties.

Speaker #3: The actual result may differ significantly from what is stated in these forward-looking statements. Risks and uncertainties related to these statements include fluctuations in earnings, our ability to manage growth, competition, economic conditions in India and abroad, changes in laws, rules, and regulations relating to any aspect of the company's business operations, general economic, market, and business conditions, attracting and retaining skilled professionals, as well as government policies and actions.

Speaker #3: Now, I would like to hand over to Mr. Arvind Kapil, Managing Director and Chief Executive Officer of the company.

Speaker #4: Thank you, Shabnam. A very good evening, everyone, and welcome to our Q2 Financial Year 2027 earnings call. Thank you for joining us. As we step into the festive season, let me begin by wishing all of you and your families a very happy and prosperous time ahead.

Arvind Kapil: Thank you, Ms. Shabnam Zaman. A very good evening, everyone, and welcome to our Q2 Financial Year 2027 Earnings Call. Thank you for joining us. As we step into the festive season, let me begin by wishing all of you and your families a very happy and prosperous times ahead. I would like to open with a statement of where our institution stands. This quarter, in my view, marks an inflection point in establishing a self-sustaining earnings engine through the structural improvements across four key dimensions. We have delivered disciplined AUM expansion while enriching NIM and fees income optimization. Concurrently, continuous credit quality refinement coupled with collection infrastructure has driven credit costs lower, translating into a structural lift in our return on assets, ROAs. Accelerated by our maturing AI and digital edge, these foundational gains, in my view, reinforce the compounding power and long-term sustainability of our franchise.

Arvind Kapil: Thank you, Ms. Shabnum Zaman. A very good evening, everyone, and welcome to our Q2 Financial Year 2027 Earnings Call. Thank you for joining us. As we step into the festive season, let me begin by wishing all of you and your families a very happy and prosperous times ahead. I would like to open with a statement of where our institution stands. This quarter, in my view, marks an inflection point in establishing a self-sustaining earnings engine through the structural improvements across four key dimensions. We have delivered disciplined AUM expansion while enriching NIM and fees income optimization. Concurrently, continuous credit quality refinement coupled with collection infrastructure has driven credit costs lower, translating into a structural lift in our return on assets, ROAs. Accelerated by our maturing AI and digital edge, these foundational gains, in my view, reinforce the compounding power and long-term sustainability of our franchise.

Speaker #4: I'd like to open with a statement of where our institution stands. This quarter, in my view, marks an inflection point in establishing a self-sustaining earnings engine through structural improvements across four key dimensions. We've delivered disciplined AUM expansion, while enriching NIM and fee income optimization. Concurrently, continuous credit quality refinement, coupled with collection infrastructure, has driven credit costs lower—translating into a structural lift in our return on assets (ROA).

Speaker #4: Accelerated by our maturing AI and digital layer, these foundational gains, in my view, reinforce the compounding power and long-term sustainability of our franchise. Now, I think, on to our quarter-specific numbers.

Arvind Kapil: Now, I think onto our quarter specific numbers. AUM at the end of Q2 Financial Year 2027 stands at INR 74,008 crores. The new products we have launched have contributed 28% of the disbursement this quarter versus 26% the previous, and 24% the previous to that. They continue to scale steadily and add to the predictability of our future earnings. As I have said in my previous calls, our growth is not just about chasing volumes, it is about raising the margin per unit. We therefore track six key performance vectors very closely, and they continue to move in line with our plans and expectations. The first, our portfolio yield has increased by approximately 45 basis points over Q1. So it is now at 14.08%, demonstrating effective transmission of previous disbursal yield onto the portfolio yield.

Speaker #4: AUM at the end of Q2 FY27 stands at $74,000 gross. The new products we've launched have contributed 28% of the disbursement this quarter, versus 26% the previous.

Speaker #4: And 24% the previous to that. They've continued to scale steadily and add to the predictability of our future earnings. As I've said in my previous calls, our growth isn't just about chasing volumes; it's about raising the margin per unit.

Speaker #4: We therefore track six key performance vectors very closely, and they've continued to move in line with our plans and expectations. The first: our portfolio yield has increased by approximately 45 basis points over Q1.

Speaker #4: So, it's now at 14.08%, demonstrating effective transmission of previous disbursement yield onto the portfolio yield. Our disbursement yield by itself as well has further expanded by approximately 20 basis points over Q1 FY27.

Arvind Kapil: Our disbursal yield by itself as well has further expanded by approximately 20 basis points over Q1 Financial Year 2027, driven by our product mix. Just a quick reminder that this follows on top of approximately 50 basis points expansion in disbursal yields we had reported last quarter. Now moving on to the next point. Q2 Financial Year 2027, if I take NIM + fees, that has expanded by 16 basis points to 9.26% from 9.10% in Q1 Financial Year 2027. We have now sustained net income of over 9% over three quarters, reflecting our structural choices of product mix, customer segments, and channels. Noteworthy in my assessment would be our credit cost this quarter, which has declined by 25 basis points from 2.4% to 2.19%. Our GNPA for Q2 stands at 1.2% versus 1.37% the previous quarter.

Speaker #4: Driven by our product mix, just a quick reminder that this follows on top of approximately a 50 basis point expansion in disbursement yields we had reported last quarter.

Speaker #4: Now, moving on to the next point: Q2 FY27, if I take NIM plus fees, that's expanded by 16 basis points to 9.26% from 9.10% in Q1 FY27.

Speaker #4: We have now sustained net income of over 9% for three quarters, reflecting our structural choices on product mix, customer segments, and channels. Noteworthy in my assessment would be our credit costs this quarter, which have declined by 25 basis points, from 2.4% to 2.19%.

Speaker #4: Our GNPA for Q2 stands at 1.2% versus 1.37% in the previous quarter. While these are outcome metrics, we track the quality of our incremental cohorts very closely as lead indicators.

Arvind Kapil: While these are outcome metrics, we track the quality of our incremental cohorts very closely as lead indicators. The 6MOB, 30 plus of the most recent cohort is approximately 0.35%, approximately 32 basis point lower than the 0.67% that we had last quarter, which is by itself 41 basis point lower than the previous quarter. This keeps a firm downward bias on our credit cost. I wish to emphasize at this juncture, these 6MOB 30 plus numbers are computed excluding gold loans, demonstrating the true nature of our credit calibration and collection performance. Opex to AUM for the quarter stands at 4.15%. It reflects pre-investments that we have front loaded, collection capacity, AI investments, and our gold loan branch rollouts. This quarter movement sits within the 10 to 25 basis point range we had guided for.

Speaker #4: The six MOB, 30-plus of the most recent cohort, is now approximately 0.35%, about 32 basis points lower than the 0.67% that we had last quarter.

Speaker #4: Which was by itself 41 basis points lower than the previous quarter. This keeps a firm downward bias on our credit cost. I wish to emphasize at this juncture these six MOB, 30-plus numbers are computed excluding gold loans, demonstrating the true nature of our credit calibration and collection performance.

Speaker #4: OPEX to AUM for the quarter stands at 4.15%. It reflects pre-investments that we have done, collection capacity, AI investments, and our gold loan branch rollouts.

Speaker #4: This quarter’s movement sits within the 10 to 25 basis point range we had guided for. As a result, we've achieved ₹375 crore in profit after tax, recording a 22% growth quarter-on-quarter. Our ROA has moved up to 2.18%, reflecting a 20 basis point improvement over the previous quarter, and approximately a 149 basis point improvement over Q2 FY26.

Arvind Kapil: As a result, we have achieved INR 375 crores in profit after tax, recording a 32% growth quarter on quarter. Our ROA has moved up to 2.18%, reflecting a 20 basis point improvement over the previous quarter and approximately 149 improvement over Q2 Financial Year 2026. Beyond these numbers, I want to spend the next few minutes on five aspects that define this quarter, which I believe will define the quarters ahead. First, robust product traction and expansion of our distribution. Our quarterly performance reflects high quality growth across our entire product portfolio. A key driver of this performance is the seamless market adoption of our recent product launches. Each of them continues to build scale quarter on quarter, and distribution footprint continues to strengthen. Few highlights, probably to give you some sense at the ground level view.

Speaker #4: Beyond these numbers, I want to spend the next few minutes on five aspects that define this quarter, which I believe will also define the quarters ahead.

Speaker #4: First, robust product traction and expansion of our distribution. Our quarterly performance reflects high-quality growth across our entire product portfolio. A key driver of this performance is the seamless market adoption of our recent product launches; each of them continues to build scale quarter on quarter.

Speaker #4: And the distribution footprint continues to strengthen. A few highlights, probably to give you some sense of the ground-level feel: personal loan prime—personal loans are digital, Prime PL, 24 hours by 7, a first-of-its-kind—now contributes to 42% of the PL disbursements compared to 38% in the previous quarter, providing a significant operating leverage.

Arvind Kapil: Personal loan, prime personal loans, our digital prime PL 24 hours by seven, a first of its kind, now contributes to 42% of the PL disbursements compared to 38% the previous quarter, providing a significant operating leverage. This increase in share comes on top of a growing book. Our average monthly disbursement stands at about INR 577 crores, having grown by 8% quarter on quarter. If I take gold loan, for example, our quarterly disbursements grew INR 1,066 crores versus INR 875 crores in the previous quarter. Growth has been driven by a combination of expansion and maturing of existing branches. We launched 90 new gold loan branches this quarter alone, bringing our gold loan network to 550 branches from 460 at the end of Q1. We remain on track to add a total approximately 400 new branches in this financial year.

Speaker #4: This increase in share comes on top of a growing book. Our average monthly disbursement stands at about ₹577 crores, having grown by 8% quarter-on-quarter.

Speaker #4: If I take gold loans, for example, our quarterly disbursements grew to ₹1,066 crore versus ₹875 crore in the previous quarter. Growth has been driven by a combination of expansion and maturing of existing branches. We launched 19 new gold loan branches this quarter alone, bringing our gold loan network to 550 branches from 460 at the end of Q1.

Speaker #4: We remain on track to add a total of approximately 400 new branches in this financial year. If I take commercial vehicles, despite the backdrop of global fuel price uncertainty, we ended Q2 with an average monthly disbursement of ₹127 crore. On the distribution side, we've scaled up to over 1,250 channels and partners, up from 1,100 in the earlier quarter, and expanded our geographical footprint to 90-plus locations across 30 states.

Arvind Kapil: If I take commercial vehicles, despite the backdrop of the global fuel prices uncertainty, we ended Q2 with an average monthly disbursement of INR 127 crores. On the distribution side, we scaled up to over 1,250 channels partners, up from 1,100 in the earlier quarter and expanded our geographical footprint to 90 plus locations across 13 states. This gives us a strong foundation for continued growth in this segment. If I take education loans, average monthly disbursements have grown to INR 218 crores. We have significantly strengthened our origination capabilities, expanding our consultant network to 700 partners. Our instant sanction platform continues to drive digital adoption in the education loan segment, with now 35% of sanctions now processed fully digitally. Our consumer durables franchise has successfully scaled to 20,000 dealers across 360 locations, resulting in a total quarterly disbursements of INR 606 crores over INR 433 crores in the previous quarter.

Speaker #4: This gives us a strong foundation for continued growth in this segment. If I take education loans, average monthly disbursements have grown to ₹218 crore. We have significantly strengthened our origination capabilities, expanding our consultant network to 700 partners.

Arvind Kapil: We have significantly strengthened our origination capabilities, expanding our consultant network to 700 partners. Our instant sanction platform continues to drive digital adoption in the education loan segment, with now 35% of sanctions now processed fully digitally. Our consumer durables franchise has successfully scaled to 20,000 dealers across 360 locations, resulting in a total quarterly disbursements of INR 606 crores over INR 433 crores in the previous quarter.

Speaker #4: Our instant sanction platform continues to drive digital adoption in the education loan segment, with around 35% of sanctions now processed fully digitally. Our consumer durables franchise has successfully scaled to 20,000 dealers across 360 locations, resulting in total quarterly disbursements of ₹606 crore, up from ₹433 crore in the previous quarter.

Speaker #4: We are now beginning to see expansion in the relationship of our earlier cohorts to cross-sell our other loans. The second important point I want to highlight at this juncture is that our margins and our scale are expanding together.

Arvind Kapil: We are now beginning to see expansion in relationship of our earlier cohorts through cross-sell of other loans. The second important point I want to highlight at this junction is that our margins and our scale are expanding together. Crucially, our top-line expansion is not coming at the expense of profitability. We are experiencing margin expansion alongside balance sheet growth. In the same quarter in which our AUM grew by approximately 10%, our NIM plus fees improved, our credit cost decreased, and our ROA crossed the 2% mark. Even after front-loading significant investments into collections, which we believe is yielding very good results, and our new branches, our Opex remains within the range that we are happy with. Third important point at this junction, which I would like to share with you is risk calibration and improving asset quality, which is, I believe, the most important thing for a finance company.

Speaker #4: Crucially, our top-line expansion is not coming at the expense of profitability. We're experiencing margin expansion alongside balance sheet growth. In the same quarter in which our AUM grew by approximately 10%, our NIM plus fees improved.

Arvind Kapil: In the same quarter in which our AUM grew by approximately 10%, our NIM plus fees improved, our credit cost decreased, and our ROA crossed the 2% mark. Even after front-loading significant investments into collections, which we believe is yielding very good results, and our new branches, our Opex remains within the range that we are happy with. Third important point at this junction, which I would like to share with you is risk calibration and improving asset quality, which is, I believe, the most important thing for a finance company.

Speaker #4: Our credit costs decreased, and our ROA crossed the 2% mark. Even after front-loading significant investments into collections—which we believe is yielding very good results—and our new branches, our OPEX to AUM remains within the range that we are happy with.

Speaker #4: Third, an important point at this juncture, which I'd like to share with you, is risk calibration and improving asset quality, which I believe is the most important thing for a finance company.

Speaker #4: Our portfolio is seasoning very well, and the metrics are very encouraging across all buckets. We've registered a broad-based improvement across stage one, stage two, and stage three assets during the quarter.

Arvind Kapil: Our portfolio is seasoning very well, and the metrics are very encouraging across all buckets. We have registered a broad-based improvement across stage 1, stage 2, and stage 3 assets during the quarter. Stage 1 has improved by 26 basis point to 97.9%. Stage 2 has improved by 9 basis point to 0.95%. Stage 3 has improved by 17 basis point to 1.2%. Our stage 2 portfolio improvement is a clear validation of our risk management capability. It reflects precise credit calibration paired with high-efficiency collections and lower roll forward rates achieved through genuine organic calibration without curbing the growth. Collection continues to move from strength to strength, consistently delivering higher resolution across markets and building a strength for us. Fourth important point is the deep tech AI and automation executed on an enterprise scale. To give you a quick sense, our technology transformation accelerated significantly this quarter.

Speaker #4: Stage one has improved by 26 basis points to 97.9%; stage two has improved by 9 basis points to 0.94%; and stage three has improved by 17 basis points to 1.2%.

Speaker #4: Our stage two portfolio improvement is a clear validation of our risk management capability. It reflects precise credit calibration paired with highly efficient collections and lower roll-forward rates, achieved through genuine organic calibration without curbing growth.

Speaker #4: Collection continues to move from strength to strength, consistently delivering higher resolution across markets and building a strong foundation for us. Fourth, an important point is the deep tech, AI, and automation executed at enterprise scale. To give you a quick sense: our technology transformation accelerated significantly this quarter.

Speaker #4: We're not merely experimenting with artificial intelligence; we're operationalizing it across the enterprise now—and I mean across all departments. We've identified 42 new AI use cases this quarter, bringing our total AI project count to 143, of which 84 have been successfully implemented.

Arvind Kapil: We are not merely experimenting with artificial intelligence. We are operationalizing it across the enterprise now. I mean across all departments. We have identified 42 new AI use cases this quarter, taking our total AI projects count to 143, of which 84 have been successfully implemented. These projects span across every core function of the business and is also increasing the enhanced knowledge levels across all departments. This quarter, we have deployed agents at enterprise level scale across our digital loan funnel. Agents in the form of chatbots, videobots, and voicebots can converse seamlessly with the customers across application funnel. Total disbursements generated through AI chatbots and voicebots have been increasing every month, and we are very excited about that. The fifth important point, our multi-product cross-sell engine. Yes. Our cross-sell engine has been set up and is now beginning to fire.

Speaker #4: This project spans across every core function of the business and is also increasing the enhanced knowledge levels across all departments. This quarter we've deployed agents at an enterprise-level scale across our digital loan funding.

Speaker #4: Agents in the form of chatbots, video bots, and voice bots can converse seamlessly with customers across the application funnel. Total disbursements generated through AI chatbots and voice bots have been increasing every month.

Speaker #4: And we're very excited about that. The fifth important point: our multi-product cross-sell engine. Yes, our cross-sell engine has been set up and is now beginning to fire.

Speaker #4: Adoption across our product lines has commenced in line with our strategic roadmap. As cross-sell penetration deepens across our existing customers, it will serve as a continuous multiplier for unit economics and operating leverage.

Arvind Kapil: Adoption across our product lines has commenced in line with our strategic roadmap. As cross-sell penetration deepens across our existing customers, it will serve as a continuous multiplier for unit economics and operating leverage. The logic is simple. We have built a growing customer franchise, a set of products that serve different needs in the same household or business digitally. The cost of acquiring a customer is paid once. Every additional product that the customer takes from us improves the return on that cost. In summary, finally, this quarter marks a very firm step in our journey towards sustained, predictable profitability. ROA has strengthened to 2.18%, NIM and fees has expanded, and disbursal yields continue to rise. Credit cost, GNPA both have moved favorably with improvement across all three stages in a solid manner.

Speaker #4: The logic is simple: we've built a growing customer franchise and a set of products that serve different needs of the same households or businesses digitally.

Speaker #4: The cost of acquiring a customer is paid once. Every additional product that the customer takes from us improves the return on that cost. In summary, this quarter marks a very firm step in our journey towards sustained, predictable profitability.

Speaker #4: ROA has strengthened to 2.18%. NIM and fees have expanded, and disbursement yields continue to rise. Credit cost and GNP both have moved favorably, with improvement across all three stages in a solid manner.

Speaker #4: All elements we emphasized are moving in line with both our plan and every work we've set thus far, and we are clearly moving from strength to strength towards a solid foundation of risk-adjusted returns.

Arvind Kapil: All elements we envisaged are moving in line with both our plan and every word we have said thus far. We are clearly moving from strength to strength towards a solid foundation of risk-adjusted returns. Thank you for your continued trust and partnership. With that, let me hand over to Shriram to walk you through our credit performance and trajectory this quarter.

Speaker #4: Thank you for your continued trust and partnership. With that, let me hand over to Sriram. He'll walk you through our credit performance and trajectory this quarter.

Speaker #2: Thank you. Thank you, Arvin. Good evening, everyone. Over the past few quarters, our strategic focus on risk-first underwriting and dynamic portfolio calibration has transitioned from an operational framework into visible, compounding results.

Shriram Iyer: Thank you. Thank you, Arvind. Good evening, everyone. Over the past few quarters, our strategic focus on risk-first underwriting and dynamic portfolio calibration has transitioned from an operational framework into visible compounding results. What we are seeing today is not just incremental asset quality control, but a fundamental outperformance driven by the tight interplay between our upfront credit selection and enhanced collection efficiency. What truly sets our asset quality performance apart is not just static underwriting, but our agile closed-loop architecture. We execute a dynamic comprehensive credit calibration cycle based on changes reflecting in sourcing funnel and early risk indicator. Ground-level underwriting signals and real-time collection intelligence are fed directly back into our risk decisioning engine. This feedback loop creates an unmatched operational synchronicity, allowing us to refine policy parameters dynamically, catch early-stage behavior before it turns into default, and double down on high-performing subsegments.

Speaker #2: What we are seeing today is not just incremental asset quality control, but a fundamental outperformance driven by the tight interplay between our upfront credit selection and enhanced collection efficiency.

Speaker #2: What truly sets our asset quality performance apart is not just static underwriting, but our agile closed-loop architecture. We execute a dynamic, comprehensive credit calibration cycle based on changes reflected in the sourcing funnel and early risk indicators.

Speaker #2: Ground-level underwriting signals and real-time collection intelligence are fed directly back into our risk decisioning engine. This feedback loop creates unmatched operational synchronicity, allowing us to refine policy parameters dynamically to catch early-stage behavior before it turns into default and double down on high-performing subsegments.

Speaker #2: The direct quantitative validation of this high-frequency calibration is evident in our slippage metrics this quarter. Our stage-one slippage ratio improved by 16% quarter-on-quarter, while our stage-three slippage ratio delivered a matching 16% quarter-on-quarter improvement.

Shriram Iyer: The direct quantitative validation of this high-frequency calibration is evident in our slippage metrics this quarter. Our stage 1 slippage ratio improved by 16% quarter on quarter, while our stage 3 slippage ratio delivered a matching 16% quarter on quarter improvement. By continually sharpening our underwriting lenses dramatically, we are converting real-time field data into predictable lower credit costs and structural balance sheet resilience. When you look beneath our headline asset quality metrics, the true strength of our portfolio lies in the quality of our fresh originations. Our early risk indicators provide compelling proof that our disciplined risk-first architecture is working right at the front door. Specifically, our 6MOB 30+ indicator for Q2 FY27 has dropped to 0.35%, a marked improvement over the preceding quarterly cohort. This is not just a static data point. It reflects a deliberate structural elevation in our origination filters.

Speaker #2: By continually sharpening our underwriting lenses, we are converting real-time field data into predictable, lower credit costs and structural balance sheet resilience. When you look beneath our headline asset quality metrics, the true strength of our portfolio lies in the quality of our fresh originations. Our early risk indicators provide compelling proof that our disciplined risk architecture is working right at the front door.

Speaker #2: Specifically, our six MOB 31st indicator for Q2 FY27 has dropped to 0.35%, a marked improvement over the preceding quarterly cohort. This isn't just a static data point; it reflects a deliberate structural elevation in our origination filters.

Speaker #2: Because each new vintage enters our book at a better credit quality, the downward slope of early strengths is flattening sequentially. As these pristine new cohorts mature, they infuse the broader balance sheet with higher resilience.

Shriram Iyer: Because each new vintage enters our book at a better credit quality, the downward slope of early stress is flattening sequentially. As these pristine new cohorts mature, they infuse the broader balance sheet with higher resilience. What we are witnessing today is a compounding benefit of high-quality origination flowing into a progressively more seasoned, predictable, and structurally resilient credit portfolio. Let me highlight the key trends. The GNPA has shown a sequential improvement to 1.20% in Q2 FY27 versus 1.37% in Q1 FY27. NNPA has improved to 0.61% in Q2 FY27 versus 0.7% in Q1 FY27. Quarter on quarter improvement across stage 1, stage 2, and stage 3 asset composition continues in the current quarter, underscoring our calibrated growth approach and robust debt management framework. Stage 1 composition in Q2 FY27 is at 97.86% versus 97.6% in Q1 FY27.

Speaker #2: What we are witnessing today is a compounding benefit of high-quality origination flowing into a progressively more seasoned, predictable, and structurally resilient credit portfolio. Let me highlight the key trends.

Speaker #2: The GNPA has shown a sequential improvement to 1.20% in Q2 FY27 versus 1.37% in Q1 FY27. NMPA has improved to 0.61% in Q2 FY27 versus 0.70% in Q1 FY27.

Speaker #2: Quarter-on-quarter improvement across Stage One, Stage Two, and Stage Three asset composition continues in the current quarter, underscoring our calibrated growth approach and robust debt management framework.

Speaker #2: Stage one composition in Q2 FY27 is at 97.86% versus 97.6% in Q1 FY27. Stage two composition in Q2 FY27 is at 0.94% versus 1.03% in Q1 FY27.

Shriram Iyer: Stage 2 composition in Q2 FY27 is at 0.94% versus 1.03% in Q1 FY27. Our Stage 3 composition in Q2 FY27 is at 1.20% versus 1.37% in Q1 FY27. The quarterly credit cost has improved to 2.19% for Q2 FY27 versus 2.40% for Q1 FY27 versus 2.51 for Q4 FY26. One of the strategic outcomes for risk is as high-quality new vintages age, they enhance overall book maturity and predictability, proving that our asset quality gains are structural rather than transient. A calibrated underwriting secures quality at the front. Our collections and recovery engine ensures resilience across the life cycle. We view collections not as a reactive back-office operation, but as a core capability driven by data, technology, and targeted execution. To that end, we are actively scaling our investments in a two-pronged collection strategy.

Speaker #2: Our stage three composition in Q2 FY27 is at 1.20%, versus 1.37% in Q1 FY27. The quarterly credit cost has improved to 2.19% for Q2 FY27, versus 2.40% for Q1 FY27, and 2.51% for Q4 FY26.

Speaker #2: One of our strategic outcomes for risk is that, as high-quality new vintages age, they enhance overall book maturity and predictability, proving that our asset quality gains are structural rather than transient.

Speaker #2: The calibrated underwriting secures quality at the front. Our collections and recovery engine ensures resilience across the lifecycle. We view collections not as a reactive back-office operation, but as a core capability driven by data, technology, and targeted execution.

Speaker #2: To that end, we are actively scaling our investments in a two-pronged collection strategy. First, on the technology front, we are deploying advanced predictive analytics, dynamic behavioral segmentation, and AI-assisted decision-making.

Shriram Iyer: First, on the technology front, we are deploying advanced predictive analytics, dynamic behavioral segmentation, and AI-assisted decision-making. By analyzing real-time payment patterns and early bounce indicators, these models route accounts to the most efficient resolution channel instantly, whether that is intelligent automated reminders, dynamic digital payment links, or tailored nudge flows. Second, technology is paired with specialized human capital. We have structured dedicated expert manpower teams segmented by product category, stage bucket, and delinquency cycle. Whether it is early-stage digital nudges, high-velocity mid-stage resolution, or specialized legal and field recovery for late-stage buckets, every product vector, from LAP and gold loans to salary, is managed by teams built specifically for those risk dynamics. This dual approach, AI intelligence, precision at scale, combined with specialized field expertise, is driving sharper resolution efficiency, lower rolled-forward rates, and protecting our net credit cost as our balance sheet continues to scale.

Speaker #2: By analyzing real-time payment patterns and early bounce indicators, these models route accounts to the most efficient resolution channel instantly—whether that is intelligent automated reminders, dynamic digital payment links, or tailored nudge flows.

Speaker #2: Second, technology is paired with specialized human capital. We are structured, dedicated, expert manpower teams segmented by product category, stage bucket, and delinquency cycle. Whether it is early-stage digital nudges, high-velocity mid-stage resolution, or specialized legal and field recovery for late-stage buckets, every product vector—from lab, gold loans, to salary scale—is managed by teams built specifically for those risk dynamics.

Speaker #2: This dual approach—AI intelligence precision at scale, combined with specialized field expertise—is driving sharper resolution efficiency, lower roll-forward rates, and protecting our net credit cost as our balance sheet continues to scale.

Speaker #2: To conclude, the structural decline in our credit cost reflects a fundamental improvement across all the stages—from improving stage one and stage two assets to accelerated stage three resolutions.

Shriram Iyer: To conclude, the structural decline in our credit costs reflects a fundamental improvement across all the stages, from improving Stage 1 and 2 assets to accelerated Stage 3 resolutions. With our latest origination cohorts demonstrating superior 6MOB performance, we are truly moving from strength to strength, and our confidence in the resilience and quality of this portfolio is on a high. Thank you so much, and I hand over to Mr. Harsh Kumar.

Speaker #2: With our latest origination cohorts demonstrating superior six MOB performance, we are truly moving from strength to strength and are confident that the resilience and quality of this portfolio is at a high.

Speaker #2: Thank you so much, and I hand over to Harsh.

Speaker #1: Thank you, Shira. Good evening, everyone. Today, I'm excited to report continued momentum in our enterprise AR program. Last quarter, I described what we are building as an AI brain for the enterprise.

Harsh Kumar: Thank you, Shriram. Good evening, everyone. Today, I am excited to report continued momentum in our enterprise AI program. Last quarter, I described what we are building as an AI brain for the enterprise. This quarter, let me make that picture more precise because it truly reflects how the architecture has matured. We are not building one single brain, we are deliberately building multiple specialized brains sitting on one common governed layer. We have ensured that our intelligence is not dependent on a single point of failure. Think of it the way our people experience it. What a user sees and works with is an AI operating system, the interface. Behind it, the specialized brains do the thinking, and that is the engine.

Speaker #1: This quarter, let me make that picture more precise, because it truly reflects how the architecture has matured. We are not building one single brain; we are deliberately building multiple specialized brains.

Speaker #1: Sitting on one common, governed layer, we have ensured that our intelligence is not dependent on a single point of failure. Think of it the way our people experience it.

Speaker #1: What a user sees and works with is an AI operating system—the interface. Behind it, the specialized brains do the thinking, and that is the engine.

Speaker #1: Governance is the nervous system that keeps every action safe and within bounds. And a flywheel underneath makes each new capability faster and cheaper to build than the last.

Harsh Kumar: Governance is the nervous system that keeps every action safe and within bounds, and a flywheel underneath makes each new capability faster and cheaper to build than the last. Every project we deliver adds to the system, which is why our AI capability compounds rather than fragments. We measure progress on three things: AI literacy across every department, measurable impact from every deployment, and an ever-wider range of problems we solve. Everything that follows is that system getting smarter. As we speak, our AI portfolio has grown from 101 to 143 projects across every core business function. Of these, 84 are now live in production and 59 are underway. We delivered 34 of these in this quarter alone, our fastest quarter yet. What matters is how.

Speaker #1: Every project we deliver adds to the system, which is why our AI capability compounds rather than fragments. We measure progress on three things: AI literacy across every department, measurable impact from every deployment, and an ever wider range of problems we solve.

Speaker #1: Everything that follows is that system getting smarter. As we speak, our AI portfolio has grown from 101 to 143 projects. Across every core business function, 84 of these are now live in production and 59 are underway.

Speaker #1: We delivered 34 of these in this quarter alone—our fastest quarter yet. What matters is how. Over the last few quarters, our focus has shifted from building individual AI solutions to building the platform that lets us create solutions repeatedly, safely, and at scale.

Harsh Kumar: Over the last few quarters, our focus has shifted from building individual AI solutions to building the platform that lets us create solutions repeatedly, safely, and at scale. This is platformization. Our agents and components are now reskilled, retooled, and reused rather than rebuilt each time. A capability built for one problem becomes a reusable asset for the next. Every connector, every workflow, every governance control is built once and used multiple times over. You can see it in this quarter's 24. Some came through last quarter pipeline, others were conceived and delivered within the same quarter because they were built on platforms like MyBot rather than from scratch. That is the operating system taking shape and the flywheel we spoke about last quarter now accelerating. Each new project begins ahead of where the previous one ended because output is growing faster than the resources behind it.

Speaker #1: This is platformization. Our agents and components are now reskilled, retooled, and reused, rather than rebuilt each time. A capability built for one problem becomes a reusable asset for the next.

Speaker #1: Every connector, every workflow, every governance control is built once and used multiple times over. You can see it in this quarter's 24. Some came through last quarter's pipeline; others were conceived and delivered within the same quarter.

Speaker #1: Because they were built on platforms like my bot, rather than from scratch. That is the operating system taking shape, and the flywheel we spoke about last quarter is now accelerating.

Speaker #1: Each new project begins ahead of where the previous one ended. Because output is growing faster than the resources behind it, this shows up as genuine operating leverage.

Harsh Kumar: This shows up as a genuine operating leverage. Let me come to our guardrails because governance is what earns us the right to operate at this speed in a regulated environment. Last quarter, I took you through our AI governance and security framework. I am pleased to report it now runs as a fully operational governance and testing engine. Every AI deployment passes through the same standardized life cycle in three layers. First, before we go live, our red team stress tests every solution, attack scenarios, security and data risk, business continuity, so it is production ready from inception itself. Second, at deployment, every solution sits inside our security and compliance framework with governance checkpoints built into the deployment workflow itself. Third, after go live, we monitor performance, reliability, and emerging vulnerabilities continuously with automated response and a dedicated hallucination containment framework of adversarial testing, secure data sourcing, and inference controls.

Speaker #1: Let me come to our guardrails, because governance is what earns us the right to operate at this speed in a regulated environment. Last quarter, I took you through our AI governance and security framework.

Speaker #1: I'm pleased to report it now runs as a fully operational governance and testing engine. Every AI deployment passes through the same standardized lifecycle in three layers.

Speaker #1: First, before we go live, our red team stress tests every solution—attack scenarios, security and data risk, business continuity. So it’s production-ready from inception itself.

Harsh Kumar: First, before we go live, our red team stress tests every solution, attack scenarios, security and data risk, business continuity, so it is production ready from inception itself. Second, at deployment, every solution sits inside our security and compliance framework with governance checkpoints built into the deployment workflow itself. Third, after go live, we monitor performance, reliability, and emerging vulnerabilities continuously with automated response and a dedicated hallucination containment framework of adversarial testing, secure data sourcing, and inference controls.

Speaker #1: Second, at deployment, every solution ships inside our security and compliance framework, with governance checkpoints built into the deployment workflow itself. Third, after go-live, we monitor performance, reliability, and emerging vulnerabilities continuously, with automated response and a dedicated hallucination containment framework of adversarial testing, secure data sourcing, and inference controls.

Speaker #1: All of this operates within RBI's seven sutras—innovation and governance scaled together. They are not competing priorities for us. Let me take you through where this showed up in the business.

Harsh Kumar: All of this operates within RBI's Seven Sutras. Innovation and governance scaled together, they are not competing priorities for us. Let me take you through where this showed up in the business. I will take a few examples, but each one a new skill that added to the brain. First, customer acquisition and conversion. Across our digital lending funnels, instant and prime personal loans, we have deployed conversational agents, chatbots, voice bots, and video agents. They engage customers through the journey, answer queries, and help them complete their applications. As adoption grows, the volume of disbursement influenced by AI-led channels keeps rising month on month. AI is truly becoming an active revenue contributor, not only a productivity tool. A new advancement this quarter is our voice bot dialer, which reaches out to and holds a natural conversation with stakeholders at scale, internal or external.

Speaker #1: I'll take a few examples, each representing a new skill added to the brain. First, customer acquisition and conversion. Across our digital lending funnels—instant and prime personal loans—we have deployed conversational agents, chatbots, voice bots, and video agents.

Speaker #1: They engage customers throughout the journey, answer queries, and help them complete their applications. As adoption grows, the volume of disbursements influenced by AI-led channels continues to rise month on month.

Speaker #1: AI is truly becoming an active revenue contributor, not only a productivity tool. A new advancement this quarter is our voice bot dialer, which reaches out to and holds a natural conversation with stakeholders at scale, internal or external.

Speaker #1: Second, my bot—which has taken its first real step from a knowledge assistant to an agentic platform. When we launched it, my bot's job was giving an employee access to knowledge spread across our systems and documents.

Harsh Kumar: Second, MyBot, which has taken its first real step from a knowledge assistant to an agentic platform. When we launched it, MyBot's job was giving an employee access to knowledge spread across our system and documents. Today, through an agentic integration layer, it also acts. It invokes workflows, completes routine tasks, and service requests on a user's behalf within clearly defined guardrails. What encourages us most is the adoption. This quarter, several departments built and deployed their own action-oriented agents on MyBot themselves on the same governed platform through the same checks. Business users are becoming AI builders, not just consumers. Third, our AI marketing factory. 14 specialized creative agents generate content across campaigns, channels, products, and segments. More than 2,200 assists to date, increasingly weighted towards video, with over 140 videos produced. The outcomes are what matters.

Speaker #1: Today, through an agentic integration layer, it also acts—it invokes workflows, completes routine tasks, and service requests on a user's behalf within clearly defined guardrails.

Speaker #1: What encourages us most is the adoption. This quarter, several departments built and deployed their own action-oriented agents on MyBot themselves, on the same governed platform, through the same checks. Business users are becoming AI builders, not just consumers.

Speaker #1: Third, our AI marketing factory. 14 specialized creative agents generate content across campaigns, channels, product, and segment. More than 2,200 assets to date. Increasingly, weighted towards video, with over 140 videos produced.

Speaker #1: The outcomes are what matter. AI-generated campaigns are delivering 1.5 to 2 times higher click-through rates, supporting outreach to more than 1.5 lakh customer leads every month at more than 60% lower cost than the traditional agency model.

Harsh Kumar: AI-generated campaigns are delivering 1.5 to 2 times higher click-through rates, supporting outreach to more than 15 lakh customer leads every month, at more than 60% lower cost than traditional agency models. Let me close with where we go next. The last phase of our journey was about breadth: proving value, building the platform, getting AI into every function. We now have that breadth. The next phase is depth. AI in the hands of every employee and every role, embedded in every core process as a daily partner in how work is done and decisions are made. That is how we move from deploying AI solutions to becoming an AI-native enterprise. I look forward to reporting further progress next quarter. Thank you, everyone. Now I would like to hand over to Mr. Sunil Samdani. Thank you.

Speaker #1: Let me close with where we go next. The last phase of our journey was about breadth: proving value, building the platform, getting AI into every function. We now have that breadth.

Speaker #1: The next phase is depth: AI enhancement of every employee and every role, embedded in every core process as a daily partner in how work is done and decisions are made.

Speaker #1: That is how we move from deploying AI solutions to becoming an AI-native enterprise. I look forward to reporting further progress next quarter. Thank you, everyone.

Speaker #1: Now I would like to hand over to Mr. Sunil Samdhani. Thank you.

Speaker #2: Thank you, Harsh, and good evening, everyone. Let me take you through the financial highlights for the quarter. The asset under management stood at $74,008 crore, reporting a strong growth of 10.4% quarter-on-quarter, driven by continued momentum and increase in products.

Sunil Samdani: Thank you, Harsh, and good evening, everyone. Let me take you through the financial highlights for the quarter. The assets under management stood at INR 74,008 crores, reporting a strong growth of 10.4% quarter on quarter, driven by continued momentum in retail products. On the liability side, as part of our debt strategy, our focus on long-term borrowing continues. The share of borrowings from long-term sources stands at 88.92%. This number was 88.52% in Q1 of FY27. Our net interest income, including fees and other income, continued to grow healthy, standing at INR 1,589 crores for Q2 of FY27. This is up 12.3% quarter on quarter and 75.6% year on year. The net interest margin NIMs for the quarter at 9.26% is an improvement of 16 bps quarter on quarter and 86 bps year on year. The cost of borrowing for the quarter stood at 7.76% versus 7.72% in the previous quarter.

Speaker #2: On the liability side, as part of our debt strategy, our focus on long-term borrowing continues. The share of borrowings from long-term sources stands at 88.92%.

Speaker #2: This number was 88.52% in Q1 of FY27. Our net interest income, including fees and other income, continued to grow healthily, standing at $1,589 million gross for Q2 of FY27.

Sunil Samdani: This number was 88.52% in Q1 of FY27. Our net interest income, including fees and other income, continued to grow healthy, standing at INR 1,589 crores for Q2 of FY27. This is up 12.3% quarter on quarter and 75.6% year on year. The net interest margin NIMs for the quarter at 9.26% is an improvement of 16 bps quarter on quarter and 86 bps year on year. The cost of borrowing for the quarter stood at 7.76% versus 7.72% in the previous quarter.

Speaker #2: This is up 12.3% quarter on quarter and 75.6% year on year. The net interest margin lims for the quarter at 9.26% is an improvement of 16 bips quarter on quarter and 86 bips year on year.

Speaker #2: The cost of borrowing for the quarter stood at 7.76%, versus 7.72% in the previous quarter. OPEX to average AUM was 4.15%, which shows resilience despite ongoing investments in branch, technology, collections, and AI.

Sunil Samdani: Opex to average AUM was 4.15%, which shows resilience despite ongoing investments in branch, technology, collections, and AI. The pre-provisioning operating profit during the quarter was INR 877 crores, up 11.8% increase quarter on quarter. Credit cost improved 2.19% in Q2 FY27 as compared to 2.41% in Q1 of FY27. This was 2.67% in Q2 of FY26. Asset quality continues to improve sequentially with gross NPA declining further by 17 basis points. It stood at 1.2%, a reduction of 39 bps year on year. And net NPA at 0.61% is a reduction of 9 bps quarter on quarter and 20 bps year on year. Our provisioning coverage ratio stood at 49.14%. This resulted in a profit after tax of INR 375 crores during the quarter, which is up 21.8% quarter on quarter. Our debt equity ratio stood at 4.3 times at the end of the quarter.

Speaker #2: The pre-provisioning operating profit during the quarter was $877 crore, up 18%. Increase quarter on quarter. Gross cost improved to 2.19% in Q2 FY27 as compared to 2.41% in Q1 of FY27.

Speaker #2: This was 2.67% in Q2 of FY26. Asset quality continues to improve sequentially, with gross NPA declining further by 17 basis points. This stood at 1.2%, a reduction of 39 bps year-on-year.

Speaker #2: And net NPA at 0.61% is a reduction of 9 bips quarter on quarter and 20 bips year on year. Our provisioning coverage ratio stood at 49.14%.

Speaker #2: Debts resulted in a profit after tax of $375 million gross during the quarter, which is up 21.8% quarter-on-quarter. Our debt-equity ratio stood at 4.3 times at the end of the quarter.

Speaker #2: The capital adequacy ratio continues to remain healthy and comfortably above the regulatory requirement at 18.68%. Of this, Tier 1 capital is 17.15%. This gives us enough headroom for our growth.

Sunil Samdani: Capital adequacy ratio continues to remain healthy and comfortably above the regulatory requirement at 18.68%, of which the Tier 1 capital is 17.15%. This gives us enough headroom for our growth. The liquidity coverage ratio at 194% as of 30 September 2026, against the regulatory required 100%. On the liquidity front, we remain comfortable with positive cumulative mismatch across all buckets and a surplus liquidity of INR 6,526 crores as of 30 September 2026. Thank you. Now I would like to open the floor for question and answer sessions.

Speaker #2: The liquidity coverage ratio stood at 194% as of September 30, 2026, against the regulatory requirement of 100%. On the liquidity front, we remain comfortable with positive cumulative mismatch across all buckets and a surplus liquidity of $6,526 million gross as of September 30, 2026.

Speaker #2: Thank you. Now, I would like to open the floor for the question and answer session.

Speaker #1: Thank you very much. We'll now begin the question and answer session. Anyone who wishes to ask a question may best start in one of the customer telephone lines.

Operator 2: Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Suraj Das from Sundaram Mutual Fund. Please go ahead.

Operator: Thank you very much. We now begin the question and answer session. Anyone who wishes to ask a question may press star and one on the touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking the question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. First question is from the line of Suraj Das from Sundaram Mutual Fund. Please go ahead.

Speaker #1: If you wish to remove yourself from the question queue, you may best start in two. Participants are requested to use handsets while asking a question.

Speaker #1: Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Suraj Das from Sundaram Mutual Fund.

Speaker #1: Please go ahead.

Speaker #3: Hello, hi sir. Thanks for the opportunity. Am I audible? I have two questions. One, regarding operating leverage—as you were saying that operating leverage is in play more and more on gross sales.

Suraj Das: Hello. Hi, sir. Thanks for the opportunity. Hope I am audible. Two questions, one on this operating leverage. Sir, you were saying that operating leverage is in play with more and more cross-sells. If you can give some more color here in terms of, let us say, where we are in the journey and where we intend to be. Say, let us say product per customer. What is that number now versus a year back or maybe even two year back when you joined? Then say, what would be our, let us say, target levels here and when do we reach there? That is question number one. Second, in terms of this product level profitability, how things are stacking up?

Speaker #3: So, if you can give some more color here in terms of, let us say, where we are in the journey and where we intend to be.

Speaker #3: Let us say, product per customer—what is that number now versus a year back, or maybe even two years back, when you joined?

Speaker #3: And then say, what would be our, let us say, target level here? And then, when do we reach there? So, that is question number one.

Speaker #3: Second, in terms of, say, product-level profitability, how are things stacking up? I mean, in terms of new products that you have launched over the last year or so, how many are profitable, and probably how many will be profitable this year versus next year?

Suraj Das: I mean, in terms of new products that you have launched over the last year or so, how many are profitable and probably how many will be profitable this year versus next year and so forth. Let us say within the older products, how many are building, let us say, overall ROA higher than the company level? Once, let us say, all these new products turn profitable, how do you see the overall blended ROA? Yeah, I think those are my main questions.

Speaker #3: So on and so forth. And let us say, within the older products, how many are dealing—let us say—overall ROA higher than the company level?

Speaker #3: And once, let us say, all these new products run profitably, how do you see the overall blended ROA? So, yeah, I think those are my questions.

Speaker #4: All right. Let me attempt I could partially hear you. I think there was a fair amount of noise, but I think there were two parts of the question you're asking is operating leverage is kicked in and how this will probably play out over the next two years.

Arvind Kapil: All right. Let me attempt. I could partially hear you. I think there was a fair amount of noise, but I think there were two parts of the question you are asking is, operating leverage has kicked in and how this would probably play out over the next 2 years, I heard you. Next is you want a net profitability kind of sense on how our products are doing. Let me cover a sense in both of them, then maybe you can add. See, when you do a substantial amount of launches, which we did a year and a half back, you put in an adequate amount of fixed cost to build the kind of operating leverage that I am talking about now.

Speaker #4: I heard you. Next is, you want a net profitability kind of sense and how our products are doing. Let me cover a sense of both of them, and then maybe you can add. See, when you do a substantial amount of launches, which we did a year and a half back, you put in an adequate amount of fixed cost.

Speaker #4: To kind of build the kind of operating leverage that I'm talking about now. But remember one thing that you're running operating leverage on the infrastructure that you've constructed with the investments you're doing it, which is why you see quarter on quarter your ROAs are moving up.

Arvind Kapil: But remember one thing, that you are running operating leverage on the infrastructure that you have constructed with the investments you are doing it, which is why you see quarter on quarter, your ROAs are moving up. But simultaneously, we will be investing in gold branches. We are investing in our new businesses, whether it is consumer durables to probably double our customer franchise this year strategically, or we want to kickstart each of the businesses like education loans, personal loans prime between physical and digital. Our digital part is growing well. That also gives us both the cross-sell piece from here on, which has started in a small way, but probably quarter on quarter will keep expanding, is going to be one fundamental booster for your operating leverage. The second will be your digital journeys, which are very strong when it comes to us.

Speaker #4: But simultaneously, we will be investing in gold branches. We are investing in our new businesses, whether it's consumer durables to probably double our customer franchise this year, strategically, or we want to kickstart each of the businesses like education loans and personal loan prime, between physical and digital. Our digital part is growing well.

Speaker #4: That also gives us both the gross sale piece from here on, which is started in a small way but will probably keep expanding quarter on quarter.

Speaker #4: It is going to be one fundamental booster for your operating leverage. And the second will be your digital journeys, which are very strong when it comes to us.

Speaker #4: They also create very strong operating leverage for us because our cost structure there becomes an advantage versus the physical distribution. So yes, across businesses and gross sale and digital, we are experiencing operating leverage which should keep playing out.

Arvind Kapil: They also create very strong operating leverage for us because our cost structure there becomes an advantage versus the physical distribution. So yes, across businesses and cross-sell and digital, we are experiencing an operating leverage, which should keep playing out. Remember our NIM plus fees, the portfolio and disbursal yields itself creates a sort of a winning edge. You have almost minimum, even if I take conservatively, you have well over 200 basis points, despite showing an ROA of 2.18%. So I think it should be very visible where we are playing out. Even our Opex cost on an annualized basis looks moving exactly on course to a plan. But yes, we would be not just investing in products.

Speaker #4: And remember, nameless fees, the portfolio and disbursement deemed itself, create a sort of winning edge. You have almost a minimum—even if I take it conservatively—you have well over 200 basis points, despite showing an ROA of 2.18.

Speaker #4: So, I think it should be very visible where we are playing out. Even our OPEX costs, on an annualized basis, look to be moving exactly on course with the plan.

Speaker #4: But yes, we would be not just investing in products. You should keep in mind we'll also, very favorably, be investing to structure our collections cost quarter-on-quarter in a very prudent manner, and the outcomes are also very encouraging.

Arvind Kapil: You should keep in mind we are also very favorably investing to structure our collections cost quarter on quarter in a very prudent and the outcomes are also very encouraging. As far as the profitability, I said, I think if I remember right, I think I mentioned 28%. Now the contribution of the disbursed is new products. New products is a combination of some which probably break even in a year's time, like gold branches for us probably break even in 13 months. But remember, we are investing in 300 to 400 branches every year, so that also continues. The existing ones are obviously becoming substantially more productive.

Speaker #4: As far as the profitability, I said I think, if I remember right, I mentioned 28%. Now, the contribution of the disbursement is new products.

Speaker #4: New products is a combination of some which probably break even in a year's time, like gold branches for us, which probably break even in 13 months.

Speaker #4: But remember, we are investing in three to four hundred branches every year. So that also continues, and the existing ones start, obviously, becoming substantially more productive.

Speaker #4: But if you want a sustained profitability model which can be easily predicted for years to come, we are very committed to that model. That is why not only are we growing our ROAs, growing our operating leverage, and creating a margin expansion on NIMs, on credit cost, as well as on the opex cost.

Arvind Kapil: But if you want a sustained profitability model, which can be easily predicted for years to come, we are very committed to that model, which is why not only are we growing our ROAs, growing our operating leverage and creating a margin expansion on NIMs, on credit cost, as well as on the Opex cost. If you look at it annually and quarterly, we are building a structure where all three are moving strength to strength. But remember for that, we also invest in AI. There's a fair amount of investment done, and we won't shy away from sensible investments. I want to be very honest about that. It's not about just managing every metrics. It's about creating a sustainable, profitable model that we are committed to.

Speaker #4: If you look at it annually and quarterly, we're building a structure where all three are moving from strength to strength. But remember, for that we also invest in AI.

Speaker #4: There's a fair amount of investment stuff, and we won't shy away from sensible investments. I want to be very honest about that—it's not just about managing every metric.

Speaker #4: It's about creating a sustainable, profitable model that we are committed to.

Speaker #3: Yes, just one follow-up. I mean, if you have the number handy, or maybe I can connect offline. Do you have— I mean, what is the product per customer right now versus a year back or two years back?

Suraj Das: Sure. Just one follow-up. I mean, if you have the number handy or maybe I can connect offline. I mean, what is the product per customer right now versus a year back or 2 years back?

Speaker #4: See, remember one thing: you won't have our product per customer journey, like I said, it is just starting. Like I told you, we are just about starting a cross-sell journey—which, probably every quarter, will start moving into incremental to compounding story.

Arvind Kapil: Remember one thing, our product per customer journey, like I said, is just starting. Like I told you that we're just about starting our cross-sell journey, which probably every quarter will start moving into incremental to compounding story. So that's a phase we have just started to enter, because the first stage is to launch businesses, the second stage is to institutionalize the distribution, third stage is where the cross-sell comes in. So we've entered that phase, and the operating leverage comes out of multiple stuff, like I shared with you. It comes out of the efficiencies of your fixed to volume efficiency, it comes out of your AI cost, it comes out of your entire model of cross-sell, which I just mentioned to you.

Speaker #4: So that's a phase we have just started to enter, because the first stage is to launch businesses. The second stage is to institutionalize the distribution.

Speaker #4: The third stage is where the cross-sell comes in, so we've entered that phase. And the operating leverage comes out of multiple factors, like I shared with you.

Speaker #4: It comes out of the efficiencies of your fixed-to-volume efficiency. It comes out of your AI cost. It comes out of your entire model of cross-sell, which I just mentioned to you.

Speaker #4: So I think our product per level will be more relevant to figure a year down the line, which is, every quarter, we'll keep improving on a compounding scale.

Arvind Kapil: So I think our product per level will be more relevant to figure a year down the line, which is every quarter we'll keep improving on a compounding scale.

Speaker #3: Sure, understood. Thank you so much for answering my question.

Suraj Das: Sure, understood. Thank you so much, sir, for answering my questions.

Speaker #4: Thanks. Thanks for coming. Yeah.

Arvind Kapil: Thanks for coming in.

Speaker #2: Thank you. Next question is from the line of Pranay Mehta from Invest Tech India. Please go ahead.

Operator 2: Thank you. Next question is from the line of Pranay Mehta from Investec India. Please go ahead.

Operator: Thank you. Next question is from the line of Pranay Mehta from Investec India. Please go ahead.

Speaker #3: Hi Arvind Sir. Firstly, congratulations on a beautiful set of numbers. I think you guys have delivered as promised from day one. Congratulations to you and the team.

Pranay Mehta: Hi, Arvind sir. Firstly, congratulations on a beautiful set of numbers. I think you guys have delivered as promised from day one. Congratulations to you and the team. I have two or three questions. I will start with credit cost. Where do you think it will settle? Secondly, in terms of asset quality, I think you guys have done a phenomenal role. Wanted to understand, going forward, how will your product mix be changed? Given 18%, I think, has come from new products this time on disbursements. So how will that be panning out over the next few quarters? That is it from my end for now.

Speaker #3: I have two or three questions. I'll start with credit cost. Where do you think it will settle? And secondly, in terms of in terms of asset quality, I think you guys have done a phenomenal role.

Speaker #3: I wanted to understand, going forward, how your product mix will be changed, given that 18%—I think—has come from new products this time on disbursement.

Speaker #3: So, how will that be panning out over the next few quarters? Yeah, that's it from my end for now.

Speaker #4: Thank you so much, Pranay. On the credit cost, we've reached a substantial, I would call it the first level of milestones of 2.19, which looks more structural and stable.

Arvind Kapil: Thank you so much, Pranay. On the credit, first we reached a substantial, I would call it, the first level of milestones of 2.19, which looks more structural and stable. If you look at various vectors, and maybe I will rope in Shriram in the next minute or so, but let me give you an idea that the way we look at credit cost is very strong calibration mixed with very strong collections. If you look at the four vectors, which is your stage 1, stage 2, stage 3. Stage 2, in my experiential assessment, gives a very strong indicator of the calibration levels despite your volume growth of any finance company. Normally, stage 2 is very difficult to compress if you are growing at a healthy rate of growth. The only way you can do that is very strong credit quality and calibration.

Speaker #4: If you look at various vectors—and maybe I'll rope in Sriram in the next minute or so—but let me give you an idea that, you know, the way we look at credit cost is very strong calibration mixed with very strong collections.

Speaker #4: And if you look at the four vectors, which are your stage one, stage two, stage three—you know, stage two in my experiential assessment gives a very strong indicator of the calibration levels, despite your volume growth.

Speaker #4: For any finance company, normally stage two is very difficult to compress if you're growing at a healthy rate. The only way you can do that is through very strong credit quality and calibration.

Speaker #4: And I think it's very clearly giving us the confidence of where we're reaching. If you look at the six MOB that we normally give on a like-to-like basis, it's gone down, I think, almost close to 0.35 from 0.67, which is a substantial reduction there—almost 41 basis points.

Arvind Kapil: I think it is very clearly giving us the confidence of where we are reaching. If you look at the 6MOB that we normally give on a like-to-like basis, it has gone down, I think almost close to 0.35 from a 0.67. It is a substantial reduction there, almost 41 basis points. It has a very clear downward bias, and I think this itself, the reason we took out gold also in that data was because gold is the lowest credit cost generally in the industry. So even without that, the kind of downward trend looks very visible to where we are standing. I think, Shriram, you want to add anything in terms of how you feel about credit cost?

Speaker #4: It has a very clear downward bias, and I think this itself—the reason we took out gold also in that data—was because gold is the lowest credit cost generally in the industry.

Speaker #4: So, even without that, the kind of downward trend looks very visible from where we're standing. So, I think, Sriram, do you want to add anything in terms of how you feel about credit costs?

Speaker #5: Yeah, I think the credit cost, as we stated, you've seen the sloping curve, and we expected it to be in line with what we had planned for.

Shriram Iyer: Yeah, I think the credit cost, as we stated, you have seen the sloping curve, and we expect it in line with what we had planned for. I guess this will gradually stabilize given the portfolio calibration and strength of the collection setup. Further, we believe that our portfolio diversification with a prudent mix of secured and unsecured supports inherently lower risk and more stable behavioral patterns. Right? As the MD just spoke about 6MOB 30 plus showcasing a strong sequential improvement. One more data point can also give you a confidence that the 12MOB 90 plus for origination post September 2024, has also seen an improvement of over 53% compared to the portfolio originated 12 months prior to September 2023. So I think in my visibility, we are looking not better than what we had actually planned for. We expect that this will stabilize.

Speaker #5: And I guess this will gradually stabilize, given the portfolio calibration done and strength of the collection setup. Further, we believe that our portfolio diversification—with a prudent mix of secured and unsecured—supports inherently lower risk and more stable behavioral patterns.

Speaker #5: Right? As the MDs just spoke about, six MOB 30-plus is showcasing a strong sequential improvement. One more data point that can also give you some kind of confidence is that the 12 MOB 90-plus for origination post-September 24 has also seen an improvement of over 53% compared to the portfolio.

Speaker #5: Originated 12 months prior to September 2023. So, I think in my visibility, we are looking not better than what we had actually planned for.

Speaker #5: And we expect that this will stabilize.

Speaker #4: Coming back to your products, just one more comment. I think the unsecured book is really playing out strongly and giving a lot of confidence on both calibration and collections.

Arvind Kapil: Coming back to your products. Just one more comment. I think our unsecured book is playing out really strong and giving a lot of confidence on both calibration and collections. But coming back to your question on new products, I do not fully remember your question, but you said that a 28% of disbursement this quarter. Some of the things that is looking exciting for us in the new products is that the digital part contribution is definitely moving up despite the credit cost moving down, giving us the confidence on our filters. It is also giving us the strength that investing in, whether it is gold, whether it is education, whether it is loans against property, whether it is business loans, each of the business distribution is growing really well. Our customer franchise of the consumer durables seems to be helping us almost doubling approximately versus the previous year.

Speaker #4: But coming back to your question on new products, I don't fully remember your question, but you said that we're at 28% of disbursement this quarter.

Speaker #4: Some of the things that are looking exciting for us in the new products is that the digital part contribution is definitely moving up, despite the credit cost moving down.

Speaker #4: Giving us the confidence on our filters, it's also giving us the strength that investing in whether it's gold, whether it's education, whether it's loans against property, whether it's business loans, each of the business distribution is growing really well.

Speaker #4: Our customer franchise and the consumer durable segment seem to be helping us, almost doubling approximately versus the previous year. And that's where we'll get the funnel for the kind of cross-sell in terms of the way we grow that from here on.

Arvind Kapil: And that is where we will get the funnel for the kind of cross-sell, in terms of the way we grow that from here on. Remember, we are fairly experienced in that part of the game in terms of optimizing cross-sell and creating that operating and cost advantage from here on. So that is probably a quick sense to you. Thanks, Pranay.

Speaker #4: And remember, we are fairly experienced in that part of the game, in terms of optimizing cross-sell and creating that operating and cost advantage from here on.

Speaker #4: On that, so that's probably a quick sense to you. Thanks, Pranay.

Speaker #3: No, that's perfect. Thank you so much for such a detailed explanation. And all the best for your quarters going forward. Thank you so much.

Pranay Mehta: No, that is perfect. Thank you so much for such a detailed explanation and all the best for your quarters going forward. Thank you so much.

Speaker #4: Thank you.

Arvind Kapil: Thank you.

Speaker #2: Thank you. Participants, you may press star and one to ask a question. The next question is from the line of Abhijit Debrewal from Motilal Oswal.

Operator 2: Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Operator: Thank you. Participants, you may press star and one to ask a question. Next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Speaker #2: Please go ahead.

Speaker #5: Yeah. Good evening, sir. Thank you for taking my questions and...

Abhijit Tibrewal: Yeah. Good evening, sir. Thank you for taking my questions.

Speaker #4: Abhijit, I can't hear you. Sorry. I can just hear your voice; I can't hear what you're saying.

Arvind Kapil: Abhijit, I cannot hear you. Sorry.

Abhijit Tibrewal: Oh.

Arvind Kapil: I can just hear your voice. I cannot hear what you are saying here.

Speaker #5: Is it better now?

Abhijit Tibrewal: Is it better now?

Speaker #4: Yeah much better yeah.

Arvind Kapil: Yeah, much better. Yeah.

Speaker #5: Yeah. So, sir, I mean, first thing is, in terms of data—speaking question—first thing is, I mean, now that we have entered into a rate hike cycle, I just wanted to understand what is our mix of 16/14 liabilities, and what is the sensitivity of our cost of borrowings to, let's say, a 50 basis point hike in the repo rate.

Abhijit Tibrewal: Yeah. Sir, first thing is, in terms of a data reading question. First thing is, now that we have entered into a rate hike cycle, I just wanted to understand, what is our mix of fixed and floating liabilities and what is the sensitivity of our cost of borrowings to, let's say a 50 basis points hike in the repo rate?

Speaker #4: Abhijit, can I request you to repeat? There were parts of it where we couldn't hear you clearly.

Arvind Kapil: Abhijit, can I request you to repeat? Because there are parts of it we just couldn't hear you clearly.

Speaker #5: Yes, sir. I'll repeat myself once again. I'm saying that now we are in a rate hike cycle, an interest rate cycle. I just wanted to understand what is the mix of our floating and fixed rate liabilities, and what is the sensitivity of our cost of borrowings to, let's say, a 50 basis point hike in the repo rate.

Abhijit Tibrewal: Yeah. Sir, I will repeat myself once again. I am saying now that we are in a rate hike cycle, interest rate cycle.

Arvind Kapil: Yeah

Abhijit Tibrewal: I just wanted to understand what is the mix of our floating and fixed rate liabilities, and what is the sensitivity of our cost of borrowings to, let's say, 50 basis points hike in the repo rate?

Speaker #4: Yeah, I think Sanjay Dhuman will kick start, and then I'll join in here. So, Abhijit sir, in a rising interest rate scenario, obviously there can be upward movement in our cost of borrowing, but a couple of things I'd just like to put across.

Arvind Kapil: Yeah. I think Sanjay want to kick start and then I'll join in. Yeah.

Sanjay Miranka: Abhijit, in a rising interest rate scenario, obviously there can be upward moment in our cost of borrowing. But couple of things I'll just like to put across. One, I think we are well-placed in a diversified borrowing mix and to contain the rise in our cost of borrowing to minimum, which is also visible from last three months of tightening cycle. May not have been okay increase in repo rate, but interest rate had gone up in the environment. And the increase in our cost of borrowing was minimal. Second is, I think we should be able to pass on the hike, okay, depending on the product and the market dynamics. And third, obviously, that change in the business mix which you are already seeing in the result of that.

Speaker #4: First, I think we are well placed with a diversified borrowing mix. We have to contain the rise in our cost of borrowing to a minimum.

Speaker #4: And this is also visible from the last three months of the tightening cycle. There may not have been an increase in the repo rate, but interest rates have gone up in the environment.

Speaker #4: And the increase in our cost of borrowing was minimal. Second, I think we should be able to pass on the hike, depending on the product and the market dynamics.

Speaker #4: And third, obviously, the change in the business mix, which you are already seeing in the results of that. So overall, I think we are well placed, where it doesn't impact our profitability.

Arvind Kapil: Yeah.

Sanjay Miranka: Overall, I think we are well-placed where it doesn't impact our profits.

Speaker #4: Abhijit, two things I'd like to add to that. One is, you should remember that our HCDs are 30%. One-third is clearly HCDs, at a very favorable price that we well planned.

Arvind Kapil: Abhijit, two things I would like to add to that. One is you should remember that our NCDs are 30%. One third is clearly NCDs at a very favorable price that we well-planned over the last year and a half. That is a big strength of ours. That is a fixed rate. Second, remember that in terms of the pricing power that I have in terms of disbursal yields, if you compare it across industry, not only can I pass this 25 basis point, which we have already passed effective a week back. Also, if you see the difference, we have a 2.18 ROA and there is almost a 200 basis point difference between my portfolio yield of 14.08 and my disbursal yield at the minimum.

Speaker #4: Over the last year and a half, and that's a big strength for us. That's a fixed rate. Second, remember that in terms of the pricing power that I have in terms of disbursement deals, and if you compare it across industry—not only can I pass this 25 basis point, which we've already passed effective a week back.

Speaker #4: Also, if you see the difference, we have a 2.18% ROE, and there's almost a 200 basis point difference between my portfolio yield of 14.08% and my disbursing yield.

Speaker #4: At the minimum. And if you look at our commitment on the ROAs of June 28, I think we should be fairly strong on the NIM, and then remember our credit cost.

Abhijit Tibrewal: Yes.

Arvind Kapil: If you look at our commitment on the ROAs of 28 June, I think we should be fairly strong on the NIM. Remember our credit cost. We are a company which could probably is margin positive on all three vectors. You can be annualized margin positive on the area I just shared with you. You could be very strong on your credit cost. If I look in the next one or two years, then you could have a strength of Opex to AUM as you build scale. I think we are optimistic from here on. Remember, we are able to pass on incremental to this, and we are fairly retail biased. I think both on demand as well as our margins, we are looking confident on it as we see it right now, looking at the future.

Speaker #4: You know, we are a company which could probably be margin positive on all three vectors. You can be advertised as margin positive on the area I just shared with you.

Speaker #4: You could be very strong on your credit cost. If I look at the next one or two years, then you could have strength in OPEX to AUM as you build scale.

Speaker #4: So I think we have an optimistic outlook from here on, and remember we are able to pass on incremental benefits to this, and we are fairly retail-biased.

Speaker #4: So I think I think it looks I think both on demand as well as our margins we should we're looking confident on it as we see it right now.

Speaker #4: Looking at the future.

Speaker #5: Yeah good sir. Sir the next question that I had is I mean looking at the last maybe maybe two quarters we can very clearly see that as a franchise we are now evolving from a high growth franchise into a sustainably profitable and scaled retail NBFC.

Abhijit Tibrewal: Got it, sir. Sir, the next question that I had is, looking at the last maybe two quarters, we can very clearly see that as a franchise, we are now evolving from a high-growth franchise into a sustainably profitable and scaled retail NBFC. So which is where what I was trying to understand is, we have been saying that we target a 35% to 40% AUM CAGR over the next couple of years. If I look at this quarter, we are already growing at 55%, about INR 74,000 crores, the AUM. As the business enters its scale phase, how should we think about this trade-off between growth and profitability? I remember you always said that all the businesses, the newer businesses that you are building, the ROA is between 3%, 3.5%. So what should be the sustainable ROA that you are targeting over the medium term?

Speaker #5: So which is where I mean what I was trying to understand is we have been saying that we target a 35 to 40 percent AUM CAGR over the next couple of years.

Speaker #5: If I look at this quarter, we are already doing it—55 percent to about ₹74,000 crore in AUM. Now, as the business enters its scale phase, how should we think about this trade-off between growth and profitability?

Speaker #5: I remember you always said that all the businesses the newer businesses that you are building the ROH between Q3 and a half percent. So what should be the sustainable ROA that you are targeting over the medium term and how much of this improvement from this 2.18 2.2 percent that you have reported this quarter will come from operating leverage versus a normalization further normalization in credit costs.

Abhijit Tibrewal: How much of this improvement from this 2.18%, 2.2% that you have reported this quarter will come from operating leverage versus further normalization in credit costs?

Speaker #4: See, the way I see the ROA contributors—like I said sometime back—I see, on an annualized basis, all three vectors just as contributors for the next two years.

Arvind Kapil: The way I see the ROA contributors, like I said some time back, I see on an annualized basis all three vectors as contributors for the next two years. Do I see the core lending spread as a contributor? That is basically your portfolio yields and your disbursal yields that you are running over the last two, three quarters, and the way I am able to price it on even now. I think your whole lending spread itself is a big strength if you compare it across. If you see operating leverage, our cross-sell has just about started. If you look at our cross-sell and the kind of investments we are doing in consumer durables and the customer franchise, you can actually have a compounding effect there on the cross-sell coming in on, if I keep a one or two years perspective.

Speaker #4: I mean, do I see the core lending spread as a contributor? That's basically your portfolio yields and your disbursement yields, and you're running over the last two to three quarters.

Speaker #4: And the way I'm able to price it now—even now—I think your core lending spread itself is a big strength. If you compare it across.

Speaker #4: And if you see, operating leverage across it is just about standard. If you look at cross-sell and the kind of investments we are doing in consumer durable and the customer franchise, you can actually have a compounding effect there on the cross-sell coming in over the—if I keep a one- or two-year perspective.

Speaker #4: On the credit cost itself, I think we have a fair sense of scope for further moving strength to strength over the next one to two years.

Arvind Kapil: On the credit cost itself, I think we have a fair sense of scope for further moving strength to strength over the next one year to two years. I have all the optimism there because of the construct, the investments we have done in our collections, the constant iterative calibration that we do across each product, gives us a fair amount of strength. You have seen it across the way we have turned around that base, and I can assure you this is structural, it is not cyclical. Our choice of products also gives us strength. By the way, that is going to start playing out. This credit cost is without scaling some of the lower cost assets that are going to build from here and those ROAs start kicking in. If you see, some of our new businesses are not at full-grown ROAs.

Speaker #4: I have all the optimism there because of the construct, the investments we have done in our collections, and the constant iterative calibration that we do across each product.

Speaker #4: It gives us a fair amount of strength. You've seen it across the way we've turned around that base, and I can assure you this is structural.

Speaker #4: It's not cyclical. And a choice of products also gives us strength. By the way, that's going to start playing out. This credit cost is without scaling some of the lower-cost assets that are going to build from here, and those ROAs start kicking in.

Speaker #4: If you see, some of our new businesses are not at full-grown ROAs. So, I mean, we are almost at a stage where your peak will come in probably two and a half to three years from now.

Arvind Kapil: I mean, we are almost at a stage that your peak will come in probably two and a half, three years from now. So you are going to be in a very different position right now in terms of your ROA contributors. Look at your AUM. Today, we are investing in AI, your productivities are going up. In between the quarter, you should expect some fluctuations, and I do not think there is anything to worry about that. Look, I am not going to shy away from any sensible investments, which I would like to be very clear. Annualized, our aim is that to create a structural operating leverage and Opex to AUM should become one of the important contributors to ROA if I keep a two-year window. So for us, all three are playing out.

Speaker #4: So you're going to be in a very different position right now in terms of your ROA contributors. And look at your AUM. Today, we're investing in AI; your productivities are going up.

Speaker #4: Your annualized figures in between the quarters—you should expect some fluctuations, and I don't think there's anything to worry about there. I'm not going to shy away from any sensible investments, which I'd like to be very clear about.

Speaker #4: Because, but annualized, our aim is to create structural operating leverage, and OPEX to AUM should become one of the important contributors to ROA if I keep a two-year window.

Speaker #4: So, for us, all three are playing out. I just want to put that minor point there: it's not just one of the three, because we've got the pricing. We are fairly strong on our digital side.

Abhijit Tibrewal: Okay.

Arvind Kapil: I just want to put that minor point there. It is not just one of the three. We have got the pricing, we are fairly strong on our digital side, we are fairly strong on our physical distribution. We are very, very clear how we are building step by step, and we are consistent with what I said two years, one quarter ago to what I am telling you now.

Speaker #4: We're fairly strong on our physical distribution. We are very, very clear on how we're building, step by step. And we are consistent with what I said two years and one quarter ago to what I'm telling you now.

Speaker #5: Yes, good sir. And sir, if I can just squeeze in one last question. I mean, we've seen a very good improvement in our accessibility. You have been giving your early...

Abhijit Tibrewal: Got it. If I can just squeeze in one last question. I mean, we have seen a very good improvement in our asset quality. You have been given your early vintage.

Arvind Kapil: Louder, my friend. I cannot hear you again. Sorry. If you could be louder. Your voice suddenly went down.

Speaker #4: My friend, I can't hear you again. Sorry, sorry. If you can be louder. Your voice suddenly went down.

Speaker #5: Okay, sir, is it better now?

Abhijit Tibrewal: Okay. Sir, is it better now?

Speaker #4: Yes, please. If you can keep that voice here.

Arvind Kapil: Yes. Please, if you can keep that voice. Yeah.

Speaker #5: Yes, yes, sir. What I'm trying to say is that we have seen very consistent improvement in asset quality, with gross NPS now down to 1.2%.

Abhijit Tibrewal: Yeah. Sir, what I am trying to say is, we have seen a very consistent improvement in asset quality with gross NPL now down to 1.2%. We have obviously been reporting all the early vintage delinquency indicators, the various MOB metrics. I am just trying to understand this improvement that we are seeing in asset quality. Is it reflecting the stronger underwriting and consequently the portfolio seasoning, or do you think this is also to do with the benign credit conditions that we are seeing right now? All I am trying to understand is the different AI, ML models that we have, are they also reflecting declining actual loss rates in the portfolio?

Speaker #5: We have obviously been reporting all the early vintage delinquency indicators, the various MOB metrics. So I'm just trying to understand this improvement that we are seeing in asset quality.

Speaker #5: Is it reflecting the stronger underwriting and, consequently, the portfolio seasoning? Or do you think this is also due to the benign credit conditions that we are seeing right now?

Speaker #5: So, all I'm trying to understand is: are the different AI/ML models that we have also reflecting declining actual loss rates in the portfolio?

Speaker #4: So, I think first, your AI and ML models are adding immense value to remember proprietary models, which we use to build a very strong constant iteration to calibrate better.

Arvind Kapil: I think first, your AI, ML model are adding immense value to remember our proprietary models, which we use to build a very strong constant iteration to calibrate better and the filters improve by a very decent margin. The answer is an absolute yes. Credit quality is improving because credit quality was fundamentally one of the most important things in our head when we came. We are very clear that we will be very clear of the choice of businesses we do. We are very clear on what our strengths are. We are very clear that credit quality improves clearly with two important vectors. One is the calibration piece, which I think is the engineering skill, if I can use that word, with which all of us came.

Speaker #4: And the filters improve by a very decent margin. The answer is an absolute yes. Credit quality is improving because credit quality was fundamentally one of the most important things in our head when we came.

Speaker #4: And we are very clear that we will be very clear about the choice of businesses we do. We are very clear on what our strengths are.

Speaker #4: We are very clear that credit quality improves with two important vectors. One is the calibration piece, which I think is the engineering skill—if I can use that word—with which all of us came.

Speaker #4: And that's something which we have mastered, thanks to the Times AI and patent recognition adding to the strength of analytics, which probably historically we knew.

Arvind Kapil: That is something which we have mastered thanks to the times, AI and pattern recognition adding to the strength of analytics, which probably historically we knew, is definitely adding immense multiplier effect in creating proprietary models, which then become more institutionalized. Because it is not like having two guys who got it right. It is not having one product which got it right. When you create proprietary models, you have 30 models, you have 35 models, and you are constantly getting them better, your ability to calibrate and improve your origination with stage 2, stage 1, substantially gets better. There is no doubt about that. But we would be moving strength to strength on our credit cost from here on. The answer to your question on seasoning is yes. We have fairly seasoned most of our businesses.

Speaker #4: It's definitely adding an immense multiplier effect in creating proprietary models, which then become more institutionalized. Because it's not like having two guys who just got it right.

Speaker #4: It's not about having one product that gets it right. When you create proprietary models—your 30 models, your 35 models—and you're constantly improving them, your ability to calibrate and improve your origination with stage two and stage one substantially gets better.

Speaker #4: So, there's no doubt about that. But we would be moving from strength to strength on our credit cost from here on, and the answer to your question on seasoning is yes.

Speaker #4: We have fairly seasoned most of our businesses. As a matter of fact, if we see some of the data from the bureau, we find that the quality of prime customers we have been able to attract at the price point for convenience is looking fairly rich compared to the industry.

Arvind Kapil: As a matter of fact, if we see some of the data from the bureau, we find that our quality of prime customers that we have been able to attract at the price point for convenience is looking fairly rich compared to the industry. Even for consumer durables, for that matter, when I looked recently at the data which said that for the last one and a half years we have been doing consumer durables from small to a larger volume, and even if you notice it is an 8, 9 months loan. The first 9 months which have got over, we find even the best bureau in India showed us that the customers who have actually finished their loans were almost 40% better credit than probably even at the industry level. I think these are the seasoning indicators are right there.

Speaker #4: Even for consumer durables, for that matter, when I looked recently at the data, it said that for the last one and a half years, we've been doing consumer durables from small to larger volume. And even if you notice, it's an eight- to nine-month loan.

Speaker #4: So the first nine months, which have got over, we find even the best bureau in India showed us that the customers who have actually finished their loans were almost 40 percent better credit than probably even at the industry level.

Speaker #4: So I think these are the seasoning indicators right there. We are obviously with two years and a quarter plus now that we have been showing our results.

Arvind Kapil: We are obviously, we are two years and a quarter plus now that we are showing our results, and we are saying that we are fairly confident from here on as well. There is a fair amount of seasoning confidence that you see Shriram Iyer and me talking about.

Speaker #4: And we are saying that we are fairly confident from here on as well. There's a fair amount of seasoned confidence that you see Sriram and me talking about.

Speaker #5: Got it, sir. That is very useful. Thank you so much, and I wish you all the very best.

Abhijit Tibrewal: Got it, sir. That is very useful. Thank you so much, and I wish you and your team the very best.

Speaker #4: Thank you.

Arvind Kapil: Thank you.

Speaker #1: Thank you. We'll take the last question from the line of Avinash Singh from MK Global. Please go ahead.

Operator 2: Thank you. We will do the last question from the line of Avinash Singh from Emkay Global. Please go ahead.

Operator: Thank you. We will do the last question from the line of Avinash Singh from Emkay Global. Please go ahead.

Speaker #2: Yes, good evening. Thank you for the opportunity. Good set of numbers.

Avinash Singh: Yes. Good evening. Thanks for the opportunity. Good set of numbers.

Speaker #1: Avinash, sorry to interrupt. Can you speak through the handset? Your audio is not clear.

Operator 2: Avinash, sorry to interrupt. Can you speak through the handset? Your audio is not clear.

Operator: Avinash, sorry to interrupt. Can you speak through the handset? Your audio is not clear.

Speaker #2: Is it better now?

Avinash Singh: Is it better now?

Speaker #1: Yes.

Operator 2: Yes.

Operator: Yes.

Speaker #2: Yeah, so just—yeah, two quick questions. One on the asset quality. I mean, okay, cost. So the numbers at 2% credit cost kind of really look good.

Avinash Singh: Yeah. Just, yeah, two quick questions. One on the asset quality, I mean, okay, cost. The numbers are 2% credit cost kind of nearly looks good or rather very good. I mean, also that one, that industry-wide is a very benign credit cycle. Second, nearly 60% to 65% of your entire book is less than 12 months seasoned. In this backdrop, and also the large part of this credit cost is, I mean, at least back of the envelope calculation suggests it is towards write-off. What explains that, I mean, when the entire book has a very little vintage, then still this write-off running at this rate. If you can just help us understand this piece.

Speaker #2: They are very good. But I also mean that, industry-wide, it is a very, very benign credit cycle. Second, nearly 60 to 65 percent of your entire book is less than 12 months seasoned.

Speaker #2: So, in this backdrop, and also

Speaker #6: Also, the large part of this credit cost is—I mean, at least back-of-the-envelope calculation suggests it was write-off. So what explains that?

Speaker #6: I mean, when this—you know, the entire book has very little vintage—then still, is this write-off running at this rate? If you can just help us understand this piece.

Speaker #6: And second, with this proposed Insurance Commission regulation, if we assume this current proposal goes through, Uh, what kind of impact do you see on your sort of, you know, uh, fees, and what else will offset this?

Avinash Singh: And second, with this proposed Insurance Commission regulation, if we assume this current proposal goes through, what kind of impact do you see on your sort of fee yields and what else will offset this? Thanks.

Speaker #6: Thank you. So your last part, can you just say it again? I missed your last part. I got the first part. Yeah, yeah, the last part is on these proposed Insurance Commission regulations.

Arvind Kapil: So your last part, can you just say it again? I missed your last part. I got the first part, yeah.

Avinash Singh: Yeah. Last part is on this proposed Insurance Commission regulations. How do you see that impacting you and if there are kind of offsetting factors or plans? Thanks.

Speaker #6: How do you see that impacting you, and are there any offsetting factors or plans?

Speaker #7: Thanks. So, I think on the credit cost, I've already shared my views. Our confidence looks high, but Sriram, do you want to add something to his context and then I'll comment on the insurance?

Arvind Kapil: So I think, on the credit costs, I have already shared my views. Our confidence looks high. But Shriram, you want to add something to his context, and then I will comment on the insurance.

Speaker #7: Yeah, sure. No, uh, so one, as I spoke about the 6 MOB and also the 12 MOB 90+ for the orientation which you have done is almost 53%.

Shriram Iyer: Yeah, sure. So one, as I spoke about the 6MOB and also the 12MOB 90 plus or the origination which you have done is almost 53% better. Importantly, the new vintages are also demonstrating stronger early vintage credit performance. This provides us the confidence that the credit quality improvements observed in the matured books are continuing to be reflected in more recently originated portfolios. Also, please note that products like loans against property, business loans, pre-owned cars, continue to have more than 36 months in our book. CD, as Mr. Arvind Kapil spoke about, we had launched 18 months back. Now we are almost seeing 10 cycles of that. So from a seasoning point.

Speaker #7: Importantly, the new vintages are also demonstrating stronger early vintage credit performance, right? This provides us the confidence that the cash quality improvements observed in the matured books are continuing to be reflected in the more recently originated portfolios.

Speaker #7: Also, please note that products like Loan Against Property, Business Loans, and Pre-Owned Cars continue to have more than 36 months in our book. And CD, as Anil spoke about, we had launched 18 months back.

Speaker #7: Now, we've almost seen 10 cycles of that. So, from a seasoning point of view, yeah, I mean, for customers which are close, then that's just about—which is, by the way, in your hierarchy of products. I've been in the business for two and a half decades, or three decades.

Arvind Kapil: Yeah.

Shriram Iyer: Yeah.

Arvind Kapil: I mean, for customers which are closed, that's just about Which is, by the way, in your hierarchy of products, being in the business for 2 and a half decades or 3 decades, one of the most relatively more riskier ones is the consumer durable in the hierarchy chain. Sorry, carry on.

Speaker #7: One of the most relatively more riskier ones is the consumer durable in the hierarchy chain. But sorry, yeah, so, uh, and, uh, coming to your point on the GNPA write-off, you are already seeing the, that the slippages have been contained across the Stage 1, Stage 2, and Stage 3, my GNPA and write-offs are coming down significantly.

Shriram Iyer: Yeah. Coming to your point on the GNPA write-offs, you are already seeing that the slippages have been contained across the stage 1, stage 2, and stage 3. My GNPA and write-offs are coming down significantly. Even if you look at our core credit cost impairment trend remains stable at an absolute basis. That is also moderate despite approximately over 10% quarter-on-quarter growth on the loan book. I think, both from a seasoning of 36 months of most of our products, including CD, we are confident that we will be able to look at our GNPA and the write-offs coming down.

Speaker #7: And even if you look at our core credit cost, the impairment trend remains stable on an absolute basis. That is also moderate despite approximately over 10% quarter-on-quarter growth in the loan book.

Speaker #7: I think, uh, this is both from a seasoning of 36 months of most of our products, including CD, and we are confident that we will be able to look at our GNPA and the write-offs coming down.

Speaker #7: Also, if you look at Stage 2, with a growing finance company, I have never seen Stage 2 getting compressed. You need to get the volumes down to compress it.

Arvind Kapil: Also, if you look at stage 2, with a growing finance company, I have never seen stage 2 getting compressed. You need to get the volumes down to compress stage 2. There is only one way you can compress stage 2 in the world, in my limited view, is you can get your calibration right. Anyway, thank you so much.

Speaker #7: There's only one way you can compress Stage 2 in the world, in my limited view, and that is to get your calibration right. Anyway, thank you so much.

Speaker #7: Yeah, and on that insurance—yeah, on that insurance. Yeah. Oh, sorry. Yes, yes, yes, my apologies. Yeah, insurance. I think insurance, uh, see, I think we all saw the possibility of that fee compression, if I can use that word, if that framework comes alive.

Avinash Singh: Yeah. On that insurance.

Arvind Kapil: Yeah. Oh, sorry. Yes, my apology. Yeah, insurance. I think insurance, see, I think we all saw the possibility of that fee compression, if I can use that word, if that framework comes alive. But I think if I look at our model of portfolio yield at 14.8 with a 200 basis point difference between disbursal yields, my assessment is that we should probably be able to comfortably be able to handle the strength of core lending spreads properly and operating leverage ensure the full earnings absorption from here on. If at all, even if it plays out. Because we are at a very different stage where there is a fair amount of stuff which can be done. Those trends are emerging from here on. So I think we could be, probably due to the situation, be in a sweet spot for that.

Speaker #7: Uh, but I think if I look at our model of portfolio yield at 14.8% with a 200 basis point difference between dispersal yields, my assessment is that we should probably be able to comfortably handle the, you know, the strength of core lending spreads, probably, and operating leverage, and show the earnings absorption from here on, uh, if at all, even if it plays out. Because we are at a very different stage where there's a fair amount of stuff which can be done; a lot of strengths are emerging from here on.

Speaker #7: So I think we could probably, due to the situation, be in a sweet spot for that. Got it. Thank you. Thank you. Thank you.

Avinash Singh: Got it. Thank you.

Arvind Kapil: Thank you. Thank you so much for coming.

Speaker #7: Thank you so much for coming. Thank you very much.

Operator 2: Thank you very much. Ladies and gentlemen, that was the last question for today. On behalf of Poonawalla Fincorp Limited, we conclude today's conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.

Operator: Thank you very much. Ladies and gentlemen, that was the last question for today. On behalf of Poonawalla Fincorp Limited, we conclude today's conference. Thank you all for joining us, and you may now disconnect your lines. Thank you.

Speaker #6: Ladies and gentlemen, that was the last question for today. On behalf of Poonawalla Fincorp Limited, we conclude today's conference. Thank you all for joining us, and you may now disconnect your lines.

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Q2 2027 Poonawalla Fincorp Ltd Earnings Call

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