MUFG INR396.18bn / 20% stake closed April 8.

On net interest margin, could you give us some guidance on where you think the exit run rate on NIMs would be by the time you reach 4Q? I see that you have used up your excess liquidity but it is not showing up in your NIMs currently. Was that reduction coming in late in September?

Yes, you are right. The reduction has come in the later part of September. So, as we guided in the last quarter, the exit of the fourth quarter, the net interest margin will reach to 8.5. So, on average, it will be anywhere between 8.25 to 8.3 for the full year.

How should we think about the next year? If you are growing new vehicles a little more than your back book, should NIMs see some pressure next year or you have more than enough cushion on cost of funds to offset that?

That will not have any impact on the net interest margin. We will protect our net interest margin to present level or try to improve on the same. We are looking at various opportunity and scope to reduce the borrowing cost and thereby do more newer vehicle. So, that is the strategy we have but not at the cost of net interest margin.

If you do get a ratings upgrade, does that help you change your business mix down the line or irrespective of the rating upgrades, your margin you want to keep it stable. How do you think about it?

See, basically, our idea of the business is to retain the customer because many of our customers remain with us for 10, 15, 20 years. Then they move out when they upgrade to new vehicles. So, we would like to have the customer retained and that is the strategy we are following. And the rating upgrade will only help us to do it much faster. But otherwise also, we would like to retain the customer by having an ideal mix of liability that will bring down the cost.

On growth, could you give us some idea what you are thinking about the second half of the year and FY'27? If you could also comment about October activity levels, that would be helpful.

See, we do see a very good demand in month of October. And if I look into the October demand, if I extrapolate, then the overall third quarter looks quite good. And I do expect a little higher growth compared to the present growth, our A UM growth was 15.74. It may be another 2% additional growth we can get for the next half of the year, the second half of the year.

In the light of reduction in the value of vehicles, now, how do we see the traction, growth traction in used CV and PV likely getting impacted in the next, you know, couple of quarters? And to respond to it, do we plan to tweak our valuation or LTV practices?

See, basically, let us understand, how much is the reduction in value of the vehicle? This first we need to understand. Now, let me give an example of a commercial vehicle. A commercial vehicle costing around 50 lakh, a larger M &HCV, if the price is 50 lakh, the OEMs that manufacturers were giving discount up to 5 lakhs, that is around 10% discount on the value of the vehicle in the past. But GST, after post -GST reduction, all the OEMs have reduced their discounting. The GST rates have come down from 28 to 18, that means 10% relief they got. And the discounts which are offered by the manufacturers have come down from 10% to around 2% or 1%. So, the OEMs have significantly reduced the discount. And therefore, net cost to the customers have not really changed much, hardly a big change for the customers, especially in the commercial vehicle. Maybe in the car, you are right, to some extent, the prices have come down for the vehicles which are less than 4 meters. And that resale value may have some impact at the hand of the customer. But on a commercial vehicle, we have not seen reduction in value even for the second-hand vehicle.

I remember you saying that the transactions in the used CV market have been low. But when I look at your growth rate in the CV portfolio, that has increased from 11% in the 4th Quarter to about 14% now in this quarter. I am just trying to understand, despite you mentioning about low market volumes, how is it that the growth rate has increased? If you can give some color, maybe some bifurcation of value growth and volume growth?

See, basically, what has happened is the number of transactions, I said it has come down because naturally what happens is if a person is owning a 10-year-old vehicle, he will upgrade and buy a seven years old vehicle after 3 to 4 years. That's the general practice. But currently, since the prices have gone up signifi cantly in the last two years, people who are having 10 years old vehicle, he's using it for further two or three years, thereby, the number of transaction has come down. But since the value of each of the transaction being higher, for us, we are able to grow the business. And also, we are having an advantage of gaining the market share from the small players at the local level. Since we have the ability to reach and we are gaining the market share, we continuously add more number of customers.

What would have been the average price growth for a used truck that you would have financed, rough number will be fine?

Year-on-year, it will be around 5%. But last year, if you ask me, it would have been much higher because the used vehicle prices went up sharply. Between '21 to '24, it went up sharply. Between '24, '25, '26, you will see the prices increases marginal by 4% to 5%.

On the asset quality. So, during this quarter, multiple finances have said that there is some stress in the CV portfolio. And then when I look at your number also, slippage has gone up but not materially, it seems. What are some of your observations from branches and from the ground about your customers' ability to earn and service their loans?

See, truck utilization have remained quite good. It has never come down. Even if you take the urban and rural all segment, it has not come down. It is quite good. Certain geographies where there was excessive rains and some challenges due to a stoppage of transportation because of the damage, because of excessive rain, there were certain challenges. And that was a temporary, maybe for 10-15 days. And that would have impacted certain geography, not all over India. So, we also had a certain request from so me geographies that they should get some kind of a relief on making the payment and all. But one advantage what we have over others is, we have field executives who are earmarked for each of the customers. They were able to reach to them, talk to them and able to get the recovery done because what happens is, a temporary stoppage of 1 week or 15 days will not alter the business model significantly because he would get a much bigger business post 15 days.

Shriram Automotive revenues, they've been growing at 20%-30% since last two quarters. Does it in any way mean that your reposition activity has gone up or that's not the case?

Repositions have not really gone up. What I have seen is, they have created a separate retail segment where they are encouraging more buy and sale activity. And they also have introduced more what you call segments. They are not just dependent on commercial vehicle, their car segment or construction equipment segment also is doing well. So, overall, I think they are doing well. Even these gold auctions also have increased. So, since they are having multiple revenue streams, they are improving. And we have not seen significant increase in reposition. But the market is quite large for them. And I think they will have a good opportunity to grow in the next two quarters.

On this MSME piece again in this book, GST has gone up and it has been actually increasing from past two quarters. And surprisingly, when we look at historical trend, generally, GST tends to improve in second quarter. But that is not the case in this quarter. So, just wanted to know, what are the emerging trends in this segment? And given this segment has been one of the fastest growing portfolio for us, it has been driving credit growth also. So, do you think to calibrate disbursement in this portfolio given some sort of stress buildup from last two quarters?

We have been cautious with MSME segment, especially the post the tariff, US tariff, because some of the segments are dependent on US market. And some of the segments have as high as 60% of their output going into the US market, especially manufacturers and some of the service providers to them. By and large, we are financing service providers, we are not lending to manufacturers. So, we do not really see a big challenge there for us. And our growth was mainly because of wide reach we have created. Earlier, our exposure was mostly in the southern market. But today, post merger, we have large number of branches and larger geography available for the growth. And since we activated many of the branches, we are able to grow across the country.

So, this uptick in Q2 can be attributable to US tariff, maybe in context of seasonality or how you mean?

I think US tariff impact is still not there other than some of the like fisheries, prawn culture and all, there where the impact was immediate. But other segment where they were able to divert their production or the output to the domestic, they are able to manage. October has been quite good for most of them. So, we need to really watch and see what happens in November. And we also hope and wish that some kind of arrangement will be there between India and US, some truce, so that the impact will be minimized. But the reduction of GST has definitely helped MSME to divert the production or manufacturing to the domestic market and keep going.

Passenger vehicle, you're saying with the January '26 onwards, there'll be a price increase. And light commercial vehicle asset quality, the cash flows of SRTOs?

The cash flow of SRTOs is not impacted at all. It is, I believe, what ever the reading I have is that SRTOs their earnings have been studied. And therefore, there's no impact on them directly. And the price increase by OEMs, we cannot speculate because, see, there's only one reason for price increase is improvement in the technology or the government insistence on the technology upgradation for various purposes on either for the fuel emission or some other reason. If the government put in more conditions, then the vehicle prices can go up. Otherwise, it may not go up. So if the prices go up, then it is good for us because asset quality of a second -hand vehicle or our LTV coverage will be higher.

My question was pertaining to pricing side. So we've already started seeing cost benefit and also liquidity on the balance sheet coming, moderating on a Q&A basis. So on the lending rate side, are we expecting or are we building in any rate cut or passing of rate cut benefit to the end customer, let's say in 3-4 quarters time period?

See, we are yet to get the lower cost in a big way. See, if you look at my liability side, 87% is fixed and 13% is floating. So the scope to get a lower rate of return, rate of borrowing comes from only 13%. And the banks are yet to pass on that advantage to us. So we have nothing much to pass on to the customer, but we would definitely love to pass on some cost benefit to the customer depending upon how much we will be able to get out of it. So immediately there's no change, but whatever we can do best to make the customer life and journey better, we will do it.

So in that case, when would we see maximum benefit on the cost coming to us, let's say with respect to the timeline?

As I was telling you, the reduction in the borrowing cost comes to us as and when we reprice the existing loan borrowings. And when it happens, we will pass on some benefit to the customer. So it is going to happen over the 18 months, not immediately.

Just one last question was pertaining to the number of customers. So there has been a decline on a sequential basis. What explains that? I mean, so it's 9.66 last quarter, it was 9.72. What explains this?

I think the two-wheeler maturity, when it's high, its numbers come down drastically. And since now in the festive period, since our lending goes up, next quarter you'll see number going up.

I will just start with the asset quality part only. During the quarter, if you could just guide us, what was the write-offs and what was the same during the last quarter as well?

The write-off in the current quarter was Rs. 456 crores as against Rs. 447 crores in the previous quarter. And the provisions was Rs. 877 crores as against Rs. 838 crores in the previous quarter.

Reposition loss is going up because of GST rate cut.

No, how are you linking GST rate cut and the reposition going up? See, the re-sale values of the vehicles have not dropped. People are not defaulting. When people are not defaulting, why should I reposses? So, the reposition rates have not increased at all in the last two quarters, if you see. And there is no linkage between G ST rate cut and the vehicle price coming down and reposition going up. So, it is all hypothetical questions.

Okay, so what I meant was if there are GST rate cuts and if we have repossessed the vehicle, so if we sell in the market, we will fetch a lower value today. So, the net credit losses would be higher than what we used to put up earlier.

Madam, I already explained in the previous questions, I do not know whether you heard or not, the vehicle prices have not come down post -GST. Anyway, whatever is the GST prices come down, the OEMs have reduced their discounts, the cost to the customer have remained same. So, second-hand values also have not come down. So, there is nothing to say that there is a repossession loss. And GST rate have happened just one month back. And do you expect people to repossess and book a loss immediately. It will take time to understand what impact it is. Right now, the resale values have not come down. So, reposition costs, reposition losses also are not there.

I just wanted to know if the segmental, if we have the segmental disbursement numbers and the total disbursement number for this quarter?

It was already announced, but still I will repeat it. The commercial vehicle was Rs. 17,325 crores, passenger vehicles Rs. 8,673 crores, construction equipment Rs. 603 crores, farm equipment Rs. 957 crores, MSME Rs. 6,907 crores, two wheelers Rs. 2,605 crores, personal loans Rs. 2 ,425 crores, totaling to Rs. 43,019 crores.

On the subsidiary, so what has been the thought process behind investing in Shriram Overseas Investment Limited? And, if you could just give us some plan that what do you plan to do through the subsidiary? And second one was on public deposits. So that is already making up 28% of your borrowing mix today. So how much further scope do you have to increase this?

Okay, on the subsidiary, we took some board permission to start a primary dealership business. And that is why this subsidiary was created. As of now, we have to get RBI approvals for starting this business. However, the subsidiary is continuing to do government securities trading. But to become a full fledged PD, the license is something which we will await from the regulator. Okay, so deposit, in fact, we were actually planning to make it to around 30% of our liabilities. So we are closer to around 28. And we will try to maintain it at that particular level. And whatever additional money is required will go through the domestic capital market route or the foreign borrowing.