Q3FY26 NTI compression revised down to 8-10 bps from 15-20 bps.

On the FY '26 guidance, AUM expectation has been cut by approximately 300 basis points versus previous assessment, margin compression another 5 bps because of additional repo, and no improvement in OPEX. Is this broad guidance understanding correct?

Broadly correct, Dhaval. 21%-23% against a medium term of 24%-26% AUM growth trajectory is correct. Margins, we are likely to see a compression of 5-10 bps which is called out. Improvement in OPEX, while on a ratio you will not see improvement, but on operating efficiency point of view, we will continue to improve. If the NII or NTI would have been the same in this Quarter 1 FY '26 the way it was in FY '25, our OPEX to NTI would have looked at 19% against a 21.2%.

On growth expectations, given the lead-lag in every rate cycle, do you see a catch-up happening in the second half of this year and maybe early 2027 from a competitive dynamic perspective?

Our hope would be that by end of Quarter 3 or so, we should be able to go back to, that is why we have not changed our medium-term guidance. There is very intense competitive activity — disbursements grew by 22% on a Y-o-Y, but AUM growth was same or flat in terms of an absolute number due to heightened competitive activities due to rate cut pressure in the segments what we operate. We estimate that it will still flow through for 1 or 2 quarters.

On the LAP growth that has been pretty strong for last many quarters, what are you doing to deliver this kind of growth? Is it expansion into new states or new customer profiles?

The way we look at LAP and lease rental discounting, we look at an interchangeable segment basis the risk-return profile. We had called out 2 quarters back, stating that as the risk-return ratios become favorable for LAP portfolio, we can increase our weight on the LAP. There is an opportunity which is risk-return metric being more positive in LAP versus LRD. LAP pricing had rectified to a certain extent in the market in the last 2 quarters, what we saw.

What would be your disbursement yield on the LAP portfolio versus the Home Loan portfolio?

Approximately, on a thumb-rule basis, I think it will be higher by 100-120. My approximate ballpark figure will be 100-120 bps. 100 bps. I said 100 to 120 bps.

On employee OPEX — when divided by average number of employees, salary expense has been growing at 30% for last many quarters. What is driving such growth?

Raghav, it is a different number. 30% is not the number what we have. 20% is the number what we have. Employee cost has year-on-year grown 20% from Rs. 113 crores to Rs. 135 crores. Where the growth is coming in the recent quarters we have seen in salary, is coming largely from the investments what we have done in SBU and also the non-metro market. It will continue to be done for the next 6 months — next 2 to 3 quarters.

Growth rate in home loans is consistently slowing from 30% in Q1 last year to around 20%-20.5% now. Is this because of heightened competition or demand not picking up?

The growth rate in HL has come down due to 3 factors. One is the real estate market has been showing some moderation over the last 2-3 quarters. Even when you look at the Bureau data for home loan disbursals in the last 2-3 quarters versus earlier, there is virtually no disbursal growth. For Q1 versus last Q1 we would have a 12% disbursal growth as far as home loans are concerned. But it is higher attrition because of competitive pricing which is one part. Second part is the market being slower than what it used to be specifically Y-o-Y.

On rate transmissions — you would have done 2 cuts; could you spell that out?

We have done 3 cuts. Third cut was done on 1 July. One part is that there is a significant amount of a book, which is linked to external benchmark even in the asset side. Internal benchmark, where the prime salaried book, we have passed on 3 cuts till now from the rate cut cycle, which is totaling a total amount of 45 bps on the existing portfolios, on internal PLR. On the external repo linked benchmark portfolio, there is a full 100 bps of transmission which has happened.

Could you spell out the incremental yield on the HL and LAP portfolio, and the disbursement growth for HL and LAP for this quarter?

Aggregate average yield is 8.76% for the quarter gone by in the incoming portfolio for HL. But it is an aggregate of segments because we operate from 7.5% onward. For LAP, it will be roughly in the range of 9.7 to 9.9, 100 to 120 bps higher than what it is in HL.

On ALCO frequency and margin compression — guided 15 to 20 bps this year versus 10-15 bps earlier. Will mitigation through product mix improvement no longer hold this year?

ALCO happens every month. However, there's an ALCO subcommittee which is a Management Committee, which is headed by me, which happens twice a month. We are pretty agile there. On margin compression, when we are saying 15 to 20 bps, it is largely due to reduction in other income due to lower investment income, lower investments in the current year with rate reduction, lower investment income, and also lower cash being carried because we have toned down our assessment of assignment. NIIs we are projecting to hold in line with last year.

On NIM — confirming 5 to 10 bps margin compression incremental from versus 10 to 15 you had mentioned earlier? And how does lower DA income and cash levels impact NII versus NTI?

Yes. NII we are expecting to hold. This is NTI. NII for FY '26 is largely expected to be stable and in line with FY '25. However, NIM which is NTI or a NIM as you call it, because NII is expected to be stable. This is a NIM or NTI which is going to be moderated in FY '26. We do not have a treasury income line in that sense — we do not run a treasury portfolio because we are an operating company.

On growth — how confident are you that FY '27 will go back to FY '24 kind of growth, given we would have had ~1.5 years of lower disbursement growth?

We are confident as of today for that we will be going back to the growth path by Q3 of the current year itself. Our disbursement growths are not that big a problem today because of hyper competitive activity. At a retail level we grew disbursements versus last year by 12%. But the growth has been absolute flat because of higher attrition. The impact of it is we expect to stabilize over next 2-3 months, 4 months or a max at a 5 months, 6 months kind of a level.

Given that we will be assigning lesser quantum of portfolio this year, will that impact credit cost?

Yes, yes. But that we believe is a good problem to have because it is a Stage-1 asset provisioning as long as it is not. If you assign out, you will see a lower credit cost which is actually not a lower credit cost, but it is a good asset provisioning not being there. Non-assignment will mean there will be a higher Stage-1 provisioning, which consequently may look like a higher credit cost to the P&L.

What would be 65%-70% of the HL portfolio yield, and within the 55% mix, what is pure HL and what is top-up?

Home loan overall would be around 9% at a portfolio level. 9% is mix of both home loan plus top-up included. Pure IHL portion is 50.9% out of 55.8%. Balance would be not only top-up it will also be part of a fee LAN or insurance. Top-up LAN would be close to 3%-3.5% of the portfolio. Normally top-up loans come at 100 bps higher yield or equivalent to LAP yield approximately.

What about demand in near prime and Affordable segments? Can we think of doing co-lending with smaller HFCs?

Shubhranshu, we generally prefer to build organically, and that is what we will build organically. Co-lending is not fully evolved, because whatever we generally see co-lending, which is a CLM 2 by the banks and the HFCs, we as a HFC can't do CLM 2. We have to do CLM 1 only, which has not moved significantly for at least for us as mortgage space. Demand remains robust, there is enough market space.

On attrition rate / BT-out rate — if BT out further increases in next 4-5 months, do you see downside risk to revised growth guidance for FY '26?

In our assessment, we have factored in the downward risk what we are seeing as of today and we have assessed it in our way on a conservative manner. We have assessed the situation to remain elevated for next 4 to 5 months, which is a factoring in the growth projection. We don't see further risk there. We are factoring in one more rate cut for our stress test scenario over 25 bps, additionally coming in during the year.

The gap between medium-term growth of 25% and near-term of 20-21% — how much is attributed to weaker real estate sector? And what changes in 6 months to make Q3 normalize?

The difference is 24-26 to 21-23, which is a 300 bps differential. It is largely to do with the higher competitive, lower pricing, higher attrition, less to do with the lower demand. What happens is there is always a much higher attrition or a much higher movement or a disruption in the market when the rate cut happens. Over a period, it disappears and then it gets normalized. If there is no further shock in the system, we should expect it to normalize in the next 4-5 months.

Over the last year, you reduced share of bank borrowings and borrowed more from NCDs. Counterintuitive when rates were high — what am I missing?

Basically we look at incremental borrowing rates between NCD and bank lines at the time we are borrowing. Since the price differential has been better on the NCD side, while we have been borrowing, after factoring in the reductions which may come because banks get repriced, basis MCLR movements which we have not seen much happening. The differential has been beneficial more towards the NCD side. This quarter differential would have been around 20 basis points.

In your Home Loan book, what is the percentage or absolute amount of Affordable and near prime?

In our Home Loan book, the ratio would be around 16%, which is a non-prime book, and 84% would be the prime and near prime book. So, we segregate between prime and near prime on one side and non-prime and Affordable on one side. 84-16 would be the approximate mix in the book between prime, near prime.