Any product segments wherein you see risk in Q2 or Q3 due to below-average monsoon or geopolitical conflict?
Currently, that visibility is not there what is going to happen in quarter 3 as the rainy season is not yet over. We are expecting that in July, whatever days left out and in August there will be good rain. And as you know that the prediction is 92% rain, which is slightly below average as against the 96%. If that happens, then it will not be so bad. And therefore, we are continuing to hope that the quarter 3, quarter 4 also will be good with respect to all the product segments.
With cost of funds expected flat, and CSEL mix improving and CCD conversion adding equity, can we see meaningful margin expansion on a full year basis?
I mentioned about the cost of funds first. That's what I said, it will be flat. NIM will improve. On the other side, you are right, CV is improving, gold will improve. As of now, NIM is 8.2% and we are hoping that we hold it either with the help of Arul sir or with the help of the business heads sitting here or both put together, they will help us to basically continue to achieve this growth in terms of NIM. There are other sides to it. The insurance IRDAI is coming with some things that I don't know what the impacts of that are. Let the circular come, we'll decide about it. It's not going to happen for this financial year is what I hear.
For all new products entered over 2-2.5 years, is it fair to assume gold loan will generate more than 4% PBT-ROTA in steady state?
From after 3 years. We cannot deliver that number immediately. All other gold loan companies are delivering. So obviously we have given higher target, better target. He's saying on par or better than incumbents after 3 years.
After 2-3 years of down cycle, if things start improving, it usually lasts for another 3-4 years. Do you share that view?
It is very difficult to say at this juncture because of these 2, 3 other uncertainties are also there. But what you said is right, after the 2 to 3 years of down cycle, if things start improving, it actually lasts for another 3 to 4 years. That is correct. That formula has been right so far. But we are going through a different scenario. El Nino is there, then you have a war going on and the tariff issue going on. All those things we need to consider. We are hoping that we should continue to do well what we are doing for a longer period. But that is the reason 1 or 2 quarters, I can predict as of now.
On the overall macro environment, any business impact in any product segments? And would there be any risk to the credit cost guidance of around 1.5% for FY27 given Stage 3 has increased across the board except CSEL?
The net credit cost has already come down to 1.5% from 1.8% of the last year. So, we have achieved the target. GNPA is basically a seasonal effect. It normally goes up from quarter 4 to quarter 1, and it went up significantly higher last year. As compared to that, it has gone up by only 25 basis points. So that way, our start has been fantastic in terms of Stage 3 and Stage 2 movement from quarter 4 to quarter 1. And that is the reason there has been an improvement in net credit cost as against the last year of 1.8% to 1.5%. As of now, we see that all the business line, whether it is vehicle finance or loan against property or housing loan or SME or SBPL or CSEL or g old and even consumer durable for us, we are seeing quite a good trend even in the month of July and likely to be better in the coming quarters also. We haven't seen any adverse impact on our disbursement or the growth, whatever we have been discussing that 22%, 23%, we're still holding it.
On used vehicle disbursement - it seems down sequentially and as proportion of overall vehicle finance. And home loan yields are down almost 60 basis points quarter-on-quarter. Seasonal or something to read into?
The vehicle finance disbursement has been up to the mark. Obviously, quarter 1 growth is slightly lower than quarter 3 and 4. For used vehicle or new business put together, they have grown more than 20% in disbursement. Coming to the point that mortgage business, whether it is home loan or loan against property or even SBPL and even in the case of used business, we have moved to recognize the disbursement by the cheque clearance from this quarter onwards. So, to that extent, wherever we issue the cheque and complete the formality, whether it is used business or it is home loan business or loan against property and the SBPL business, the disbursements are slightly lower. But like-to-like, if you see that they have grown more than 20%. And from next quarter onwards, you won't see this gap coming up because this is a onetime call we have taken, and now overall the disbursement will be aligned to the cheque clearance date instead of cheque disbursement date or cheque handover date.
Would the interest income also be lower because of the disbursement recognition timing change? Would that have impacted the interest income line for home loan in particular?
In the case of home loan, they are now moving to the slightly bigger ticket size also and branch expansion. Their interest income has improved from 15.5% of last financial year to 15.9%. So, in a way, their yields are higher than last year. So, the yields are not going down. And their ROA also has improved from 3.9% pretax ROA to 4.7%. Quarter-on-quarter, always across the company, across all products, what happens is that in last quarter, we do very good collection and collection income goes up. So overall disbursement goes up, the other income goes up. So, because of that, overall income always quarter 4 is higher than quarter 1. And then again, from quarter 1, it starts picking up towards quarter 4. That's a normal phenomenon.
Slippage ratio is around 0.7, same as Q1 FY26. Expectation may have been for higher improvement. Anything to highlight specifically in LAP and VF where gross Stage 3 percentages are also up Y-o-Y?
From quarter 4 to quarter 1, it is always a slight jump in there. And then from quarter 1 to quarter 2, quarter 3, it is always improving and you have seen that. In the loan against property, they have already delivered 0.3% of net profit. For the LAP business, the loan losses have been at about 30 basis points. For this first quarter, it is 37 basis points and on an annualized basis, this will be maintained at 0.3%. The other thing on a Stage 3 on LAP is it's been at the same levels, while the percentage increase in the Q1 of '26 and '27 remains almost the same in the same range between 2.3% to 2.5%. So, we are not seeing any specific stress or trend, and we are pretty confident that this will be resolved.
Can you give the vehicle finance slippages absolute numbers for this year and the same quarter last year?
Even if you see the vehicle finance number, vehicle finance as on 31st March 2025, the number was actually lower than the March closing of 2026. So, March number was 3.84%. And even the previous year, it was lower. Now if you compare the March to June 2025 last year, it was 3.52% to 3.89% which is almost 45 basis points increase from the annual closing to quarter 1 closing. As against that, it is only 20 basis points increase from 3.84% to 4.05% in June 2026 as compared to March 2026. That is what we are trying to say that the last year increase was 45 basis points, and now it is the only 25 basis points. So, it is easy for us to basically reverse it over the year.
Is there scope for further reduction in NCL given CSEL's lower share, fintech book wind-down, and vehicle finance in recovery mode?
First of all, we said we will be trying to reach 1.5% in this financial year. Luckily, we achieved it in first quarter itself. It is achieved because of the lower increase in Stage 3 compared to the last yearend hence we were able to achieve that 1.5%. So obviously, if we achieve 1.5% in the quarter 1, by end of this financial year, it will only improve. It is not only CSEL, but other businesses are also going to reduce their NCL, including the vehicle finance. CSEL itself is going to further reduce because they are continuously improving their NCL, and we are in the process of improving further in this financial year. So that part is also available.
Banks now have more pricing power on NBFC loans than 6 months back. Do you see that in your dealings with them? What does this mean for cost of funds going forward?
The cost of funds has been low, especially from banks where we borrow, we borrow mostly the priority sector loans. So, there we have a better bargaining power over them. But on the market side, cost of funds has been slightly hardening, and we are worried whether the second half, there will be a rate increase. If that happens, cost of funds may go up in the second half. Overall, cost of funds may go up by around 10 basis points. But my guess is for the full year, we will be same as last year number as a percentage to average assets. This is primarily because last year, first and second quarter were high and the third and fourth quarter were low. This year, first and second quarter will be low and third and fourth quarter may be higher.
Assuming no rate hike, cost of funds will be flat?
We are assuming rate hike of around 25 to 50 basis points. I'm talking rate hike on the repo.
Between bond and non-PSL bank borrowing, which would be cheaper today?
Right now, the bank still is cheaper. But sometimes it would be MCLR linked. If it is MCLR linked, then it becomes a little. We don't know where it will ultimately land because if there is a price increase which means the repo rate goes up, then they hike the MCLR, it can be a problem. But the bond is fixed rate. So, to that extent, we have more visibility...
In the home equity business, our yields are up 30 bps Q-o-Q and Y-o-Y. Is there some one-off DA income booked?
No. No, DA income doesn't get booked in the individual businesses. DA income is shown separately. So, DA income is not part of that business. The composition of the small ticket LAP increases as well as going deep Tier, so which is also helping us in increasing the yields.
On a like-for-like basis, what kind of disbursement growth are we seeing this quarter given the disbursement recognition definition change?
We have moved from this quarter to debit in the bank account itself of the respective cheque. So that is a provable validatable data. So that way, that has moved the disbursement number slowly. From next quarter, you will see them as per the same way we are doing it now. Once we start doing it in the same fashion, we will see the growth happening correctly. Around 20% in the case of LAP and HL. That's why the AUM growth is a better measure to watch for, and that is where we have been consistently growing because the time lag gets absorbed.
Does this definition change also impact the timing of recognizing interest income in the P&L?
In all the cases, now we will follow the debit into the bank account as the modus. What happened was still the asset is lying in the book and then it is seen as an asset lying in the book without earning interest because you're reversing the interest. So, we needed to not recognize the asset itself in the first place. So that is the reason why we are now saying we will recognize the disbursement only after the cheque is honored in the bank. Ravindra: This is not based on any RBI regulation. It is our call that we have taken in order to be more prudent. It's good for customers.
On guidance for this year, given 22% disbursement growth in Q1 despite the recognition change and credit cost at 1.5% in the seasonally weakest quarter, do you see upside risk to growth and credit cost guidance?
We are still hoping that we will continue to do well in this financial year. In terms of disbursement, second half is challenging because last year, the growth started happening from the second half only. But having said that, market is still looking very buoyant. So considering that and also now Loan Against Property, housing loan, SBPL, mortgage businesses and vehicle finance, used businesses, where from next quarter onward, there is alignment done with respect to disbursement date and disbursement recognition. So, we don't have any problem in terms of delivering the number what we are seeing as of now other than the base effect in the quarter 3 and quarter 4. So, quarter 2 will definitely be better or as good as what we have done. But after that, we have to see the market is supporting or not. If market continues to be what it is now in the current quarter or it is slightly around that, we can still deliver 22% disbursement growth even in quarter 3 and quarter 4.
From an AUM standpoint, does 23% AUM growth look doable for this year?
Yes, 23% we have already achieved, I think it is doable. We'll definitely be not going down.
Among all the NBFCs that have reported until now, many have shown better credit trends than Chola this time. Is this just normal seasonality, or are there external risks from the US war, West Asia crisis, or weak monsoons?
You need to see that what is our Stage 2 and what is our Stage 3. Stage 2 has improved from June '25 to '26 by 33 basis points. And Stage 3 has been increased from 3.16% to 3.29%, which is 13 basis points. Our delinquency level is only 6%. That means 94% are current. Even after that, our numbers have improved from quarter 1 to quarter 1 in terms of overall delinquency. So, 33 basis points has improved in Stage 2 and 13 basis points has deteriorated. Put together, the overall delinquency has improved by 20 basis points year-on-year. And that is why it is reflecting on the net credit cost. We are expecting to improve credit cost from here further. What we are seeing in this financial year -- in this quarter, that July has been better till now, and it is likely to be better. According to us, it is not impacting as of now. And therefore, we are very confident about quarter 2 and quarter 3.
To sum up, whatever we have seen this quarter is just seasonality at play, and given today's visibility, asset quality numbers will be better than March 2026 by March 2027?
See, in fact, first point, what you're making, 1 or 2 people also said that is the seasonality. What I'm seeing that even after seasonality, our performance has been good. With that, please note it down. But definitely, the quarter 4 to quarter 1, there has been some deterioration. It happens every time. In terms of delinquency, there is a U type of shape happen. It goes up from quarter 1 and then quarter 2, quarter 3 is flat and quarter 4 comes down. This time, the U is slightly started with small, and therefore, the delinquency level by quarter 4 going to go down better than quarter 4, what we have seen last quarter.
On gold loans: how are you seeing traction in that business? What are the plans? How is the competitive landscape in the gold financing space?
Gold loan, we have decided to open up another 360 branches. We have reached to INR2,000 crores plus AUM now and likely to hit INR5,000 crores in this financial year. And the branches are doing well. Our per branch AUM has been now INR12 crores to INR15 crores, which is going up continuously. That reflects the people and the productivity in the new branches. And also, the branches which we are planning to open up, they will also start to deliver. INR12 crores to INR15 crores in this financial year itself. That means by the next year-end, all the branches what we are opening this year will become profitable.
On SBPL, after continuous improvement for 2 quarters, there is again an increase in NPA. Is there anything to be worried about? And on CSEL, can we expect ROE at PAT level above group consolidated numbers?
In terms of SBPL, their PAT and numbers are much better than the company performance in terms of ROA and their NCL is at 2.3%. They will be in the range of 2.5% even in the future also because this is a high-yield business catering to very small merchants in smaller towns where the yields are also higher. Their Stage 3 number totally depends on the ARC because they don't have SARFAESI, because a small ticket size, NBFC doesn't have SARFAESI facility. So, we do it with the ARC and they work with us and then they recover it. The disbursement growth has been fantastic. They are growing more than 30% growth. In terms of CSEL, they have already improved their ROA significantly. Very soon, you will see that their ROA will be much higher than the company ROA. They are at 3.3%. We were thinking that they will start hitting 3% from the third quarter. But luckily, they have reduced their net credit cost by 2% from 6.7% to 4.7%. So both SBPL, CSEL are high return business along with the loan against property and affordable housing, all 4 businesses are meant for delivering more than the company ROA.
PBT-ROTA stood at 3.7% this quarter. Sounding optimistic about the next 3 quarters. How should one expect PBT-ROTA by exit of Q4 FY27?
See, we have been talking about 3.5% pretax ROA. We should be happy that we have delivered. It has been delivered because net credit cost has come down, cost of fund is down, income has gone up. So, it has delivered because of 3 different line items supporting that. We will try to hold it or try to improve it. So why we are saying 3.5%, that's a minimum number we have said, and we will continue to do it. But at the same time, as I mentioned, the credit cost can improve from here because the first quarter itself, we have delivered 1.5%. CSEL also want to deliver much better than that. So therefore, there is a scope.
Three questions: CSEL approval rates and FEMI numbers for new book personal loans; impact of Mudra loans up to INR20 lakhs on small ticket LAP or home equity; and bank borrowing pricing above MCLR.
Starting with the CSEL, FEMI rate, it is hovering around 3%. It continues to be at 3% for the last 15 months. So, there is no deterioration on the FEMI part. I normally track the 6 MOB and 12 MOB criteria. That is showing good improvement after our implementation of credit checks. Approval rate is around 35% to 40% for business loan. And for salaried loan, it is around 60%. On the Mudra loans, our logins have improved on the small ticket loans. These borrowers, while they want a faster turnaround time and so they want a long-term repayment. We are not seeing any trend as of now on this segment. Arul: The bank loan is around 25% to 30% of bank loan, which bank loan by itself is around 50% of the overall borrowing. It will be MCLR linked. The balance is benchmarked. We don't pay any premium on MCLR. We take it at MCLR. Short-term MCLR - 3 months or even 1 month.
Can you spell out your collection architecture? How many people do you deploy in collections?
We have around 30,000, but we can't give business-wise. Ravindra: 30,000 people are working and every business has different, different model to basically follow their collection. Good thing about CSEL is that 55% collection is happening digitally. We have 3 teams, one for soft team, one for hard, and then recovery team. Like that different, different team has a different strategy with respect to the product.
The Stage 2 and 3 PCR has declined sequentially. Is this because of a change in texture of delinquent accounts, PD/LGD changes, or was some buffer provision consumed?
Buffer provisions have not been consumed. We have stated that also. The entire INR200 crores management overlay is still intact. We'll watch it and then take a view on it at the end of this financial year. In VF, we have written off some of the 100% provided cases. So, the PCR will look slightly moderating because of that because you're removing the 100% provision on the GNPA, whereas the average rate is around 48% out there. So that is the reason why you will see some mild variations in the PCR. We don't change PD/LGD every quarter. We do it once in a year. We do it in December quarter.
On gold loan business - have you done analysis on how many of your vehicle / home loan customers also have gold loans from the system, which you can cross-sell? Or are most your customers open market?
First of all, we are not trying to basically cross-sell with our own business. But we have done the analysis and found that around INR700 crores, INR800 crores loans have been taken by our customer across the country. As of now, we are focusing on a concentrated market where we are opening the branches and totally depending on open market customers. 90% of customers that we have acquired so far is new to Chola. Because in gold loan, what happens is we did not have an overlap with our existing set of customers because we open branches in places where we find opportunity to lend against gold. We operate in a very limited micro market with, let's say, within 3 kilometres of the radius of the branch. Our focus is to entrench deep into that micro market and acquire customers in that micro market. There is a big opportunity to leverage on our existing set of customers, which we are planning to do in the days to come.
What are our yields in the gold loan business?
Our yields are on par or slightly a shade better than our competitor or peers in this industry. So, like 16%, 17%, we take it at that sort of ballpark range. Yes, yes.
On ALM mismatch - FY26 annual report data shows negative mismatch increased to about 10% versus 4-5% earlier. Any thoughts on liability strategy going forward?
Annual report is not a full-fledged ALM. It's a column which is determined by the regulator, that's what is given there. We do not have the exact ALM. What you are seeing in the investor presentation is the right one because there is a defined way of presenting where you will see some differences between that and the statement out here. So, there is no mismatches and you have to look at the mismatches one day as a cumulative mismatch. Cumulative mismatch is what matter because in buckets where you have in earlier buckets, if you have a positive mismatch, then it helps to address the negative in such a way. There is no negative cumulative mismatch in any of the buckets, and that's been our trend right throughout.
On gold loan - do we have vanilla bullet repayment as well as income-generating gold loan products?
Bullet, or EMI are 2 options that typically is available in the market at a product level. We do both consumer and income-generating loans. We've just started our income-generating loans recently. But largely, it is consumer loans. For income-generating loans, we are looking at a tenure of in the range of around anywhere between 6 to 9 months. Consumption loans typically would be in the range of around 6 and 12 months.
On branch expansion strategy for vehicle finance and gold loans?
Vehicle finance, we are continuously putting up our resident location place. We are already having 600-plus resident locations. And there is a threshold which internally we are following as and when they start hitting the disbursement number, we start converting them into permanent branches. We will be shifting around 125 resident locations into full-fledged branches by the end of this year. This is the number on an average, we are doing it every year. Not only vehicle finance, even for affordable housing, loan against property, they are also moving in the same trend of 100-plus branches, at least they are opening it up. Gold loan is specific. Stand-alone branches. They are this year operating, starting 360. We are opening 360 more branches.