Aavas Financiers Limited (NSE: AAVAS) Q2 2025 Earnings Call dated Nov. 07, 2024
Corporate Participants:
Mr. Rakesh Shinde — Head of Investor Relations
Mr. Sachinder Bhinder — Managing Director and Chief Executive Officer
Mr. Ghanshyam Rawat — President and Chief Financial Officer
Mr. Ashutosh Atre — President and Chief Risk Officer
Analysts:
Renish Bhuva — Analyst
Shweta Daptardar — Analyst
Abhijit Tibrewal — Analyst
Kushan Parikh — Analyst
Raghav Garg — Analyst
Yash — Analyst
Shreepal Doshi — Analyst
Mona Khetan — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Aavas Financiers’ Limited Q2 FY ’25 Earnings Conference Call. This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectations of the company as on date of this call. These statements are not the guarantees of future performance, involve risks and uncertainties that are difficult to predict. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]
I now hand the conference over to Mr. Rakesh Shinde, Head of Investor Relations at Aavas Financial Limited. Thank you, and over to you, sir.
Mr. Rakesh Shinde — Head of Investor Relations
Thank you. Good evening, everyone. I extend a very warm welcome to all participants. Thank you for participating in the earnings call to discuss the performance of our company for Q2 and H1 FY ’25. The results and the presentation are available on the stock exchanges as well as on our company website. And I hope everyone had a chance to look at it.
With me today, I have an entire management team of Aavas, including Mr. Sachinder Bhinder, MD & CEO; Ghanshyam Rawat, CFO; Ashutosh Atre, CRO; Selvin Uthaman, Chief Business Officer; Surendra Sihag, Chief Collection Officer; Ripudaman, Chief Credit Officer; Jijy Oommen, Chief Technology Officer; Anshul Bhargava, Chief People Officer; Rajaram Balasubramaniam, Chief Strategy Officer and Head of Analytics.
We will start this call with an opening remarks by our MD and CEO, Sachinder Bhinder; followed by CFO, Ghanshyam Rawat; and CRO, Ashutosh Atre. After that, we will start with the Q&A session.
With this introduction, I hand over the call to Sachinder. Over to you, Sachinder.
Mr. Sachinder Bhinder — Managing Director and Chief Executive Officer
Thank you, Rakesh, and good evening, everyone. I’m delighted to welcome you all to our Q2 FY ’25 earnings call, and thank you for joining the call on the late evening. Hope everyone has a wonderful Diwali.
Let me now take you through the key highlights of our performance in Q2 FY ’25. We delivered a growth of 20% Y-o-Y in AUM reaching INR184 billion along with the stated growth, we ensure best-in-class quality with 1+DPD below 4% at 3.97% and GNP of 1.08. Our net profit for quarter two FY ’25 stands at INR1.48 billion, registering a growth of 22% Y-o-Y.
In terms of business update, in quarter two FY ’25, we disbursed INR12.94 billion, whereas, in H1 FY ’25, we have disbursed INR25.05 billion, resulting a growth of around 8% Y-o-Y in H1 FY ’25. In Q2 FY ’25, we achieved another mile store in our upgradation journey by going live with the loan management system Oracle FLEXCUBE. The onetime elements shutdown, coupled with an extended monsoon and service parts of the country have affected building and construction activity, both of which resulted in lower fresh disbursement and car disbursement. It is one of the fundamental reasons for the muted disbursement in quarter two FY ’25.
However, we are confident of covering up on the disbursement in the second half of the financial year, which is typically a strong period for us. We have already seen green shoots with September and October cumulative disbursement growth of 22% Y-o-Y. Our focus is to underwrite quality business with risk-adjusted returns.
Our incremental business yield has gone up by 25 bps across products. We’ve opened five new branches during H1 ’25, four branches in our existing states to deepen our reach and one branch in new state of Tamil Nadu. We’ve seen a robust log-in led by a diversified omnichannel lead generation funnel, including digital, CSC, common service centers, e-Mitra, RRO and Mitra, resulting in a better disbursement growth and building a healthy business pipeline for the coming months.
Let me tell you update on the terms of technology updates. We’ve implemented bank level system with robust regulatory compliance, our loan management system, Oracle FLEXCUBE has gone live across branches and is stabilized. Our new lead management system built in sales force has successfully gone live across branches. This will allow us to integrate seamlessly with the aggregated channels.
A fully integrated system, leading to a better visibility, entertaining collaboration and seamless customer service will also play out in the coming months. Technology is playing a key role in the transformation and TAT improvement. Our login to sanction TAT has proved to eight days in quarter two FY 2025.
In terms of financial performance for the quarter and half year, our net profit in H1 FY 2025 grew by 18% Y-o-Y to INR2.74 billion, led by growth in net interest income, coupled with sharp improvement in operating leverage.
Our consistent efforts to optimize costs has resulted in a marketable improvement in opex to asset ratio by 40 bps from 3.65 in H1 FY 2024 to 3.25 in H1 FY 2025. We continue with our guidance of improving cost to asset ratio by 20 bps to 30 bps over the years.
Our asset quality continues to be pristine with 1+DPD of less than 4% is 3.97 as of September 2024, our GNPA stood at 1.08 percentage in H1 FY 2025 and our credit costs improved further to 11 bps in quarter two FY 2025 from 20 days in quarter one FY 2025. We continue to guide 1+DPD of less than five percentage, our GNPA of less than 1.25 percentage and a credit cost of below 25 bps.
We have committed to a strong growth trajectory and a focus on quality business growth and cost optimization will continue to drive our success. I’m confident that with our dedicated team and strategic initiatives we achieve our goals and deliver our value to our stakeholders.
Thank you for your continued support and trust in Aavas. I now hand over the line to our CFO, Ghanshyam Rawat to discuss the financials in details. Over to you, Ghanshyamji.
Mr. Ghanshyam Rawat — President and Chief Financial Officer
Thank you, Sachinderji. Good evening, everyone, and have a warm welcome to our earning call. First, to update on borrowing side, in terms of liability, we have one of the best well-diversified liability franchise. We have always been innovative in exploring new avenue for sourcing.
And I’m happy to share that we have successfully raised NCD amounting to INR6.3 billion from IFC in October month. This is the largest debt fund raised by the company till date. This achievement will enable us to channel these funds towards affordable housing and green individual homes, reinforcing our unwavering commitment to sustainable and inclusive development.
We are unique FSC [Phonetic] where our tenure of liability is higher than the tenure of assets. We continued to borrow edaciously [Phonetic] and raising around INR25.7 billion at 8.42% in H1 FY 2025. Total outstanding borrowings as of 30 September, 2024 stood at INR161 billion. Overall borrowing mix as of 30 September, 2024 is 50% from term loan, 25% from assignment and co-lending, 18% on National Housing Bank and 6% from the supermarket.
Vendor support continues to remain extremely strong as Aavas. There is access to diversified and cost-effective long-term financing from visit lenders. We maintain strong relationships with development managed institutions to meet long-term business growth. We have progress on core lending tie-up with the PSU Bank. As of 30 September, 2024, we maintained sufficient liquidity in the form of cash and cash equivalents and underwent CC limit of INR15.1 billion and documented unavailed sanction limit of INR4.65 billion.
In terms of spread, out of 30 September, 2024 an average borrowing cost of 8.15% against an average portfolio yield of 14.04% resulted in a spread of 4.89%. This is a sequential drop in the spread by 11 basis points on account of increase in cost of funds by seven basis points quarter-over-quarter, coupled with the yield compression of four basis points quarter-over-quarter.
However, we are passing on the cost of fund increased by raising our PLR by 25 basis points with effect from October month which will result in improvement in the yields and recouping spread in coming months. We have 30% of our liability linked to external benchmark, which will allow us faster repricing of liability in case of rate cut scenario.
Our margin NIM as percentage of total assets during Q2 FY 2025 stood at 7.78%. Our NIM in absolute terms has increased by 8% year-on-year in quarter two FY 2025. In terms of cost, our opex to asset ratio improved at 29 basis points to 3.18% in Q2 FY 2025 versus 3.47% in Q2 FY 2024.
However, there are still some one-off item was reversal the 10 basis points year on improvement in Q2 FY 2025. We are committed to gradually bringing down opex ratio by below 3%. Credit cost during the quarter stood at 11 basis points in Q2 FY 2025 versus 18 basis points in Q2 FY 2024, and 20 basis points in Q1 FY 2025.
In terms of other parameters, ROA has been — has seen an improvement of 18 basis points year-on-year to 3.49% and ROE improvement by 77 basis points year-on-year to 14.87% in Q2 FY 2025.
We are well capitalized with a net worth of INR40.48 billion and CAR at INR46.48%. Total number of live accounts stood at 2,29,000, translating into 15% year-on-year growth. Employee count remained flat year-on-year at INR5,761 as of 30th September 2024.
Now, I would like to hand over the line to our CRO, Mr. Ashutosh Atre, to discuss asset quality. Yeah, Ashutosh.
Mr. Ashutosh Atre — President and Chief Risk Officer
Thank you, Ghanshyam ji. Good evening, everyone. I am pleased to share the key portfolio risk parameters with you.
Asset quality and provisioning, Aavas is strongly positioned to continue delivering industry-leading asset quality. Our asset quality remains within the guided range with one day past due below 5% at 3.97%, in Q2 FY 2025. And gross stage three and net stage three under 1.5% stood at 1.08% and 0.78%, respectively.
In terms of geography, average 1+DPD and GNPA in our vintage states remained well below 4% and 1.1%, respectively, whereas Other emerging states, 1+DPD and GNPA remained well below 3.3% and 1%, respectively.
Similarly, in terms of ticket size of more than INR15 lakhs, 1+DPD and GNPA remained well below 4% and 0.8%. Whereas in case of ticket size less than INR15 lakh, 1+DPD and GNPA remained below 4.5% and 1.25%, respectively. Our total ECL provisioning including that for COVID-19 impact as well as Resolution Framework 2.0 stood at INR946.1 million as of 30th of September 2024.
With this, I open the floor for Q&A. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Renish from ICICI. Please go ahead.
Renish Bhuva
Yeah. Hi, sir. Congrats on a good set of numbers. Sir, just two things from my side, one is on the spread. For the first time, spread fell below 5%, and it is due to the combination in asset deal still continue to moderate and cost of funds continue to rise.
And this is despite our range bound assessment of around INR1,200 crores to INR1,300 crores from past four or five quarters except Q2. So sir, what is happening on the asset deal side
Okay. On cost of borrowing, we all can understand basic prices are still elevated and banks are looking to pass on, but we just need to understand what is happening on the asset deal side, specifically because disbursement is also rebound?
Mr. Sachinder Bhinder
Yeah. Thanks, Renish. From a perspective of as you are rightly articulated on the cost of funds, I think there is an increase. I think if you look at the last two years, our disbursement yields, compared to the AUM yield, have been lower than the overall area yield. So in order to cover up that, we are trying to push that, but it is taking a lag time.
But our endeavor compared to the last H1 to the current H1, we’ve increased the disbursement yield by 25 percentage. But since I have an AUM yield of the last couple of years, which was lower than my — our disbursement yields lower than my AML, it is taking time to really cover up or as I said, our endeavor continues to increase the disbursement yield.
And that typical focus, as we’ve been speaking across, is the focus on the lower ticket size where we have risk adjusted returns and cell construction individual houses. So that’s where we have had it. Our endeavor with that will continue to be in the range of around 4.8 percentage if the rate cuts don’t happen, the 4.8% to 5% in that range bound at the state of time as we speak.
Renish Bhuva
Okay. So 4.8% to 5%, let’s say, would be in FY ’25 or slightly near term?
Mr. Sachinder Bhinder
Yes, FY ’25 for the current one. And as we see the trades picking up, the cost of funds actually coming down, we see the trajectory actually moving up actually. So there’s a conscious effort, as I’ve been talking about on every call that efforts to really increase the disbursement yield on a quarter-on-quarter basis, and we’ve seen the green shoots and is taking time for us to really cover, but our endeavor is to see that over quarters.
Renish Bhuva
Got it. Would you like to share the disbursement yield number, I think given the blended deal at 13% and back to despite 30% life book. So just wanted to get a sense whether internally how you guys think about it with 30% large book delay 13%.
Mr. Sachinder Bhinder
So Renish from that perspective, currently, it is lower by around 30 bps as we speak. And as you would really look at it, the previous year, it was 55 bps lower than the AUM yield.
Renish Bhuva
No worry. I didn’t understand basically sir. Could you please repeat?
Mr. Sachinder Bhinder
The current AUM yield stand at 13.04, the current disbursement yield of the H1 is 30 bps lower than the AUM yield. The previous year, it was 50 bps lower.
Renish Bhuva
Got it. Got it. Sir, secondly, again, now on the growth side, right, let’s say, in Q1, we were sort of guiding at ’21 to ’23 kind of a growth rate given the muted first half and if I by calculate the disbursement run rate to achieve the, let’s say, the desired growth, these numbers are out to be some INR4,000-odd crores in second half? So naturally, which means we’ll miss the guidance. So keeping in mind that scenario, what you guys, I think the entry [Phonetic] AUM growth for FY ’25 and maybe in ’26?
Mr. Sachinder Bhinder
So the Renish, as I did that September and October put together, we had a 22% Y-o-Y growth as to convention remains strong for us. So we continue our guidance for the current year of about 20 percentage plus.
Renish Bhuva
Okay. Okay. Thank you so much, Sachindersir. Thank you and best of luck.
Mr. Sachinder Bhinder
Thanks. Thanks Renish.
Operator
Thank you. Our next question is from the line of Shweta from Elara. Please go ahead.
Shweta Daptardar
Thank you sir for the opportunity and congratulations on a good quarter. Sir, I have a couple of questions. One is on the product category. So if I look year-on-year basis, LAP has declined BT and so has MSME grown sharply, so is this by demand design or increased regulatory oversight on LAP less top up loans.
My second question is [Indecipherable] Tamil Nadu. So if you look at Tamil Nadu geography, so there is pretty intense competition out there, you have active and solar and many payers, especially on the LAP front. So how distinctly Aavas will be positioning itself versus the intense commutative intensity there? And just one data keeping question. What is the rate differentiators between LAP MSME versus home loans and your BT out? Thank you.
Mr. Sachinder Bhinder
Yes. So I think — thanks, Shweta. Your three questions. The first question is about MSME. I think we are a unique MSME, unique HFC, which does — because we have been conversely underwriting self-employed bond professional. We were able to write MSME. This is micro MSME, which is backed by self-occupied residential properties. The best part about that is that this is actually helps us to do a value addition to the working capital requirements or the self-employed bond professional.
So it is going to finally an economic benefit use for that, and we do it with [Indecipherable] Lata, which is helpful for us. And this hopefully really helps us for the securitization feel because it qualifies as a priority cycle ending for the banks. And this has been the last four to five years kind of our focus area for the franchise, that’s one.
Secondly, your question on Tamil Nadu, if you look at the state, we’ve opened Hosur. So in line with our continuous geographic expansion strategy, we look at immediate once the geographies which we are operating. Karnataka, we’ve been operating for last four years, Hosur happens to be one of the influx for us to understand Karnataka, Tamil Nadu, and Telangana AP site. So I think from that perspective, it’s just a starting point for understanding and going into those regions.
On the kind of competition there, I think we’re uniquely poised in the segments which we serve in unserved, underserved, and partially banned. The classic case is Karnataka, where we do continue to see a good amount of growth, and that gives us good amount of confidence to really stay across in the southern state because of the kind of availability of the unique SMSE base and self-construction individual houses. So that is where our focus is.
So, getting in line with contiguous geographic expansion strategy, and this helps us to navigate in the southern region, which is there. And if you look at 372 branches across 14 states — or 14th state is Tamil Nadu, we’ve not been present in South, so that will help us in the coming months to grow. That is the second part of the question.
On the yield side, the differential between HL and the non- — NHL portion is around 200 to 250 bps, that’s a clear differential between the housing loan and non-housing loan portfolio. Hope that answer–
Shweta Daptardar
And BT number?
Mr. Sachinder Bhinder
Yes, the — sorry the fourth question of the BT out. BT out we are on a range point of 5.2 percentage. And I think the BT retention model with us really works across analytics and integrated model, Aavas have done it over a period of time. And predicting the BT out really helps us to hold the customers as a part of retention. And since it is a — what I would really say is direct source business. It also really helps us to hold the customers back into our foray. So there’s a transitioning of movement of customers is restricted. So we currently are at 5.2 percentage annualized.
Shweta Daptardar
That’s helpful, sir. Thank you so much.
Mr. Sachinder Bhinder
Thanks Shweta.
Operator
Thank you. Our next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yes, good evening everyone and thank you for taking my question. If you can again kind of laboring on the spread compression that you’ve seen this is partly explained in the prior question. But just trying to understand, our earlier long-term guidance used to be spreads of 5% for this year, we guided of 4.8% to 5%. Now, I mean, with or declining interest rate cycle ahead, I mean, although transitory, but I mean the spread could be further pressure going ahead. Plus, if you recall, sometime in March, we had taken a retail PLR increase of 25 basis points. So, if you look at GVs that has not really kind of translated into a more portfolio yields from that level, our reviews are actually down. So now if we are going to take another 25 basis points increase in retail PLR. I mean what is the confidence that we have with the regards to this kind of translating into improvement in portfolio is something I wanted to understand.
Mr. Sachinder Bhinder
I think Abhijit, I’ll answer the first question and then ask GSR really talk about the cost of funds perspective. I think as we — as I told earlier, if you look at our disbursement yields versus the EMV, which — that was last couple of years drag even with the increased RPLR, we’ve not been able to cover up that. There’s a conscious effort to really put that across by increasing the disbursement deal. So that you would rightly appreciate, it takes its own time.
Secondly, on the RPLR increase, 35 percentage of our book continues to be on the fixed rate. So the translation is only impacted by a little bit flat. And again, as I said, that last few years has been more on lower disbursement deal, that is impacting. The second part is will very important. If you look at the trajectory of Aavas over the last couple of years, the cost of funds in last two years and I’ll have Ghanshyam really talk about the cost of fund trajectory and why is that impacted from a level of 4.59% or 4.69% to 5.86% that is where Aavas seeing.
I think the cost of fund is one factor, which is one of the factors which led to the spread compression. But as I said that, even at 4.89%, we continue to guide on 5 percentage plus/minus 20% for the current year. On the cost of fund I’ll have Ghanshyam ji talk about the one. And in case the rate cut impact happens, the 30 percentage of the liabilities, which are on are repo base. We see a cost of fund decrease and resulting in the increase in the spread over to your Ghanshyam.
Mr. Ghanshyam Rawat
Yeah, Abhijit, Like, more or less now post of borrowing is stabilizing at this level basically. Like recently we’ve raised HFC money, which has came at a six-month MYS plus 148 basis points, which is a sub-8% in our cost of borrowing. So it’s more or less cost of borrowing getting stabilized. And yield site, as Sachinder ji mentioned in last two quarters we have seen a continued basis, 25 basis point improvement versus the last year basically. Another 25%, 25 basis points, we are making efforts in the coming quarters. So that will lead to almost new business yield versus AUM yield basically? So what are drag we have seen in the last couple of quarters that will get minimized in the coming quarters basically.
So both these two items, we will have — we will reach a recoup closer to back to 5% stretch. And obviously, we are expecting now maybe it’s difficult to predict anything, but whenever rate downward start, so it will have a positive impact on spend side, which we have seen in earlier phase also.
Abhijit Tibrewal
Got it, Ghanshyam ji. Just one follow-up question to that. So I’m just thinking now, please correct me if I’m wrong, while our BT out 5.2% annualized is indeed very good. I mean in the last one year or so, given that our disbursement engine has not fired as what we would have liked, given that we are retaining customers and which is why BT out, is reflecting in lower BT outs. Is that also one of the reasons why — I mean our yields have been under pressure. I’m just kind of trying to understand when we look at you at our size and scale, and compared with a whole host of smaller HFCs today, we’ve not seen that yield pressure for them. Is it about your size and scale, which is a little bit of a problem? Or how should we interpret that?
Mr. Sachinder Bhinder
So I’ll address the question in two parts. First part on the segment thing, second part of the Ghanshyam ji to the model, which is there, I think from a perspective of the total at 5.2 percentage there is definitely a yield compression, which comes to at around 15 bps on an annualized basis. As we speak on H1, we have about INR400 crores worth of retention the entire staff actually. So I think there is a yield compression in order to hold back.
On the second part of it, how Aavas has really navigated that at that stage and how do we maintain that? And I’ll have Rawat ji really talk about or the techniques on which we actually help us to retain the customer, predicting the the path where our AI really model is important to us.
Mr. Ghanshyam Rawat
Thank you, Sachinder. Abhijit, it is always very important to retain your performing customers basically. And we always made long back our predictive model that has helped us in our journey despite in affordable housing piece where a lot of customers come first time to us basically and we BT out always maintained less than 6% in last year, I think so many years basically.
And I want to add only one more thing here about Sachinder said, if we retain our customers, obviously, we retain only performing customers basically. And even if we reduce some rate of those customers. But in the year one itself, we recover the fee amount, which is equivalent to take care of a one-year loss basically. So it’s a win-win situation for us because we also brought down the cost of borrowing. When we lend it to those customers, our cost of borrowing used to be in double-digits basically. Now, we have cost of borrowing has come down to 8% basically. So, it always retains to that customer good strategy for us basically. And we are not losing much out of those retaining those customers.
And one more data point, I think, whosoever customer goes out, we also do assessment on those customers basically, how they are performing in the market. You will be surprised to see — those performance — those customers are much poorer than what we have customers inside our company basically. So that shows us our model is performing very well for us.
Abhijit Tibrewal
Got it. Got it. Thank you so much for answering my question. Sir, I wish you and your team a very best. Thank you.
Mr. Sachinder Bhinder
Thanks, Abhijit.
Operator
Thank you. [Operator Instructions] Our next question is from the line of Kushan Parikh from Morgan Stanley. Please go ahead.
Kushan Parikh
Thank you for taking my question. I actually have two questions. One is around the operating cost. Basically, we’ve seen a comfortable improvement in this quarter and obviously, we guide for 20% to 30% improvement in opex to assets. Just wanted to — I mean, if you could elaborate how has we driven this improvement on a quarter-on-quarter basis, especially on the employee expense side, which has had — I mean, had a sequential drop as well in employee. And how should we think about opex going forward in context of the H2 as in the 2Q improvement that you have seen? Should I also put forward my second question?
Mr. Sachinder Bhinder
Sorry? Yes, yes, yes.
Kushan Parikh
Sure. So the second question is around the credit cost. So we guide for less than 25 bps credit cost over a longer period of time. Last two, three quarters, we’ve had a couple of quarters with lower credit cost around 11-odd bps. Just wanted to understand obviously, this would be the outcome of the CRA model. Are we seeing better asset quality outcomes than what we had modeled in the ECL and hence, the provisioning requirement is reducing? Or is there an overlay component that was present earlier and which is not there now being I wanted to understand the reasons for the — and the different credit cost as well? And how sustainable that is going forward?
Mr. Sachinder Bhinder
So I’ll answer the first question. Second question, I’ll have Rawat ji to take up. On the operating leverage really pumping in opex situation, you’ve seen a sequential reduction on H1 by 40 bps. That’s around 3.25 percentage compared to the previous year 3.65 percentage. If you look at last three years, our employee strength has been constant actually at the same level. So I think that is where one which really kicks in.
Secondly, having invested in the technology, we are seeing now the green shoot has earlier guided in our conference calls and quarterly calls, we said that we’ll start seeing the green shoots really coming across from the tech implementation. So the operating leverage has started really kicking in. And as we go in the quarters ahead, we expect really to what our guided range bound of coming to below three percentage.
So again, on this, we really look at it very granularly on the cost reduction if you adjust by the ESOP cost that of the reversal, we continue to stand at 3.3 even compared with that. So one is we remove the ESOP cost reversal because which is one-time kind of thing. But the rest of them has really kicked in because of the operating leverage really coming across from the way we actually manage our staff. And wherein it has really played an important role. And we will continue to do that in the coming parts.
So as we guided that I think a couple of quarters, we will be sure about that this is sustainable, this is consistent, and we continue our endeavor as a team to really build that part. Our digital initiatives or initiatives on digital collections or initiative on digital sourcing and after the system is going live, we’ll have reduced cost of accretion, reduce cost of collections, which really would really kick in, in the coming times. On the second part of the credit cost being low, I’ll have Rawat ji really talk about in detail.
Kushan Parikh
Before we move to that, just one question. If you could quantify the ESOP cost reversal that we had this quarter?
Mr. Ghanshyam Rawat
Yes. So as I said, the normal case scenario, we were at 3.25. If the ESOP cost if I don’t include that, I would have been at — we would have been at 3.37.
Kushan Parikh
Understood.
Mr. Ghanshyam Rawat
As you know, Aavas is always is a credit conscious company since beginning. So we have invested in underwriting, technical, legal, RTU [Phonetic]. On best of that — on top of that, we are one of the best collection team in the company basically. The top of that — we always believe that our cost of credit cost will not be more than 20 basis points. If you’ve seen them from COVID, from demonetizing, from RERA all across the time, we are not more than 20 basis points.
Yes, after the COVID everything, I think post to that quality got improved of quarter-over-quarter. We consistently maintaining PAT [Phonetic] part you less than 5%, NPA is around 1%. All this goes into model and as for the ECL model, our cost is where we are today basically. It is continuously will be maintained less than 20 basis points. Right now, we are just between 11 to 12 basis points on the reversal has come.
Mr. Sachinder Bhinder
And just to add on to what directly said I think the fundamental principle, the DNA of the company is a sound risk management principle, which is risk-adjusted returns. The sound underwriting principles laid across on the framework of putting across self-constructed individual houses to be funded, where it is occupied where the LTVs are there. So the end usage is also there. So I think a couple of factors which have been there, which become the bedrock of really building a strong fundamental franchise, which works on risk — sound risk management principles, a sound understanding of risk objective difference. Now coupled with the digital initiatives, the tech initiative, which will really help the path as we’ve crossed the 2.5 lakh plus of customer base.
And secondly, adding a reportedly an understanding of how we’ve underwrite over the last 12, 13 years, as we speak, about four lakh plus of customers, I think it sound across based on very, very diversified understanding at a macro and a micro level or what to underwrite and what to let it go. So I think as we traverse the journey, the guardrails are very clear, the guardrails are good enough that we don’t see it, but not strict enough that we don’t traverse to generate. So I think from the perspective, we would continue to traverse a path, it is risk-adjusted returns, risk-managed control and sound underwriting practices coupled with the digital and new age AI basin, which will help on our kind of cost, which we’ve been traversing.
Operator
Thank you. Our next question is from the line of Raghav Garg from Ambit Capital. Please go ahead.
Raghav Garg
Hi, good eveining. Thanks for opportunity. Sir, you mentioned about 22% reimbursement growth for September and October, is that right? And is that the number that you expect to sort of deliver in the second half? Or will it be higher?
Mr. Sachinder Bhinder
So Raghav — thanks Raghav. Raghav as I spoke that September and October cumulative — September — September and October in cumulative, we are at 22 percentage of disbursement growth as we speak. We’ve guided that for the current year, on an AUM basis, we would be 20 percentage plus. Conventionally H2 has been stronger for Aavas. And as we laid out, I think two principal factors for an elongated long monsoons in the regions which we work in the western and the northern parts of India because we are self construction final company, which fund is self-constructed ones, that’s one.
Secondly, a part of regulatory change the disbursements, I think cord cumulative put together. And the third is an MMS [Phonetic] shutdown because in the month of October that we’ve been I think resulted in this, but we are confident with what we’ve seen in September and October. We continue to guide with a 20 percentage plus for current year, the AUM growth, and we are confident of traversing the journey for the current year.
Raghav Garg
And sir, how many employees did you have in this quarter, I heard you said that your employee count has been flat.
Mr. Sachinder Bhinder
So 5761 is the exact employee count and Raghav this is been there across for the last three years if I were to really put across. So there is no — hardly a growth of about 30 to 40 — absolute employees over a period of last one year. I think this is aided by — you see our operating levels really coming across. So I give you a example of saying that kind of increase in the AUM, increase in the number of accounts. We hardly had any additional — the collections where the digital initiatives or digital collections, no touch collections, which are there, which really helped us to really be doing a such kind of stuff that is there.
I think the second leverage which we really like to kick in after the SMBC [Phonetic] the more origination system. The lead management system really going live, we’ll start seeing that really structifying into the finally operational efficiency really kicking in.
Raghav Garg
Sir, what’s the off-roll count as of September?
Mr. Sachinder Bhinder
The — the total count is 5761, Raghav
Raghav Garg
That’s on the on roll right? I’m asking off-roll because that’s something that?
Mr. Ghanshyam Rawat
It’s around 1,800 employees.
Raghav Garg
Okay. 1,800 off employees. And another question. See, when I look at your intangibles right, they’re at about INR47 crores, INR48 crores, that has increased by about INR5.5 crores in last six months. I just wanted to understand this number is up 13% YTD. What is the nature of this expense?
Mr. Sachinder Bhinder
Can you come back again. I think we lost your connection we heard 47. What was that? Can you reframe the question please?
Raghav Garg
Total intangibles on your balance sheet and they are up about 13% YTD. The standard about INR47 crores, INR48 crores, one of the other affordable HFCs have such a number. I just wanted to understand what kind of expense is this, which is being capitalized. Where exactly are you spending? Or where exactly have you spent this money? To the extent of 48 crores?
Mr. Ghanshyam Rawat
Yes. In last two quarters, and in this quarter, you mentioned that we are doing attack transformations LOS, LMS, EVL and on the data where our segment transformation along with the management solution basically. Some of them has gone live, which got capitalized. Some of them are just gone live, but the hyper care period is the own. That early toward IT spend, which we have invested for IT collation basically.
Raghav Garg
What I understand from the all the investments that the affordable HFCs do — what I understand is that it is mostly subscription base, right? I mean you pay a subscription fee to your technology partner, which is salesforce or someone other. And therefore, given that, shouldn’t it be expensed through the P&L.
Mr. Ghanshyam Rawat
No, no, it is when projects get implemented till the project go live implementation partner expenses, but they always do with you plan, you develop your model for you and then made implement, it takes almost one month time basically to make program or develop then allow us. Yes, once it has gone live, then it a subscription model basically. Like salesforce is now a subscription model because it has gone live and we have capitalized this INR1 crore, which we invested in the sales force loan origination system basically. Similarly, LMS now is going live to that piece of it is triplet. Then it will go on a subscription model from January onwards, basically.
Raghav Garg
Understood. Yes. Sure, sir. That’s all from my side..
Mr. Ghanshyam Rawat
Capex we are doing around the put together what you already capitalized and which is in the pipeline will be around INR60 crore. Total amount will capitalize in the IT projects which will be amortized in the next seven years.
Raghav Garg
Understood. Sir, I have one more question. Can I ask?
Mr. Ghanshyam Rawat
Yes, please.
Raghav Garg
Sir, your repayment rates have increased in this quarter. But I heard you saying that the BT rate is still at 5.2%, which is same as Q1. So why is it that the repayment rates have increased in this quarter?
Mr. Ghanshyam Rawat
No, I think it is a steady state. We don’t see any spike, any change in overall rate. BT out is in the range of 1.2%, 1.25% every quarter. So in first half we have seen already 5% and put together full year basis it will be around 17% to 18%. And which will have a three components, one component will be the 5% to 6% BT out and around 6% customer pay out of his own pocket as a monthly EMI, or 6% generally customer pay out of whenever they are surplus money, they can pay back to me, a part payment also. Until now we are around 16%, which is a almost 2% better than what we forecast in our annual assumptions basically.
Raghav Garg
Understood, sir. That’s very helpful. Thank you.
Mr. Ghanshyam Rawat
In terms of budget piece, we take 18% in overall basis.
Mr. Sachinder Bhinder
So we are at around 16% as you speak.
Raghav Garg
Thank you.
Operator
Thank you. Our next question is from the line of Yash [Phonetic] from Citigroup. Please go ahead.
Yash
Hi, sir. Thanks for the opportunity. Just wanted to get your thoughts on incremental asset quality in the month of October, how is the collection? And also, sir, while the 1+DPD continues to be below the guided range has seen some increase of 30 bps. And so any thoughts there?
Mr. Sachinder Bhinder
So I think if you look at — as we spoke, I think you had an extended rain fall. You had an extended one, you had Diwali, which has came up. There’s a festival next season. I think there was some part of it was the — but as we speak, on the month of October, we were on 3.97. We were at around 3.8 to four. So there is a sequential decline on month on basis. So we have recruited what was being left out. And this was like an elongated period of time, which is — so we continue our guidance of less than 5 percentage. But as we speak from a 3.97, we are already at October of 3.84.
Yash
Got it. And just to follow up on that. Was there any like discreetly increase in the less than 1.5 million segment or it was broadly stable increase across the good.
Mr. Sachinder Bhinder
It was broadly stable. There’s nothing, anything which is incrementally or differential, which would really give any difference as far as our understanding and our number is really sure. Yeah, I think we track, I think we will really appreciate track it on a sequential absolute basis, actually, so to say, and across the product segment. So we have not seen anything. I think we’ve been cautiously optimistic in the approach of our underwriting perspective, really to build on the quality which we deliver. And as earlier said, we continue to guide at a 5 percentage plus 1+DPD.
Yash
Got it, sir. Thank you.
Operator
Thank you. Our next question is from the line of Shreepal Doshi from Equirus. Please go ahead.
Shreepal Doshi
Hi, sir. Thank you for giving me the opportunity. My question was on liability side, any fresh sanctions from the NHB front incrementally?
Mr. Sachinder Bhinder
Yes, we already applied to National Housing Bank for this limit because any NHB limit once we publish our results and upload to stock exchange and the NK [Phonetic] website. So it’s in their process basically.
Shreepal Doshi
So for this year, we are able to receive again refinance.
Mr. Sachinder Bhinder
Currently refinance limit yet to be sanctioned by there.
Shreepal Doshi
Okay. Okay. Got it. And then just on the asset quality front, I mean if you look at the mortgage segment, where the NPA increase has been pretty sharp, like in the last, say, four, five quarters. So anything that you could sort of explain why is it so?
Mr. Sachinder Bhinder
You see, non-home loan majorly goes towards a self-employed. And secondly, we see that it is return basically also we make out of that to book basically. This book is already — we have given a loan almost 250 to 300 basis point at a higher rate of interest. But ultimate note, we are not seeing in last couple of years basically, recovery pattern is the same, whether it is a home loan or this is non-home loan basically.
In both the cases, security is the residential self-provided housing property basically. So yes, NPA is more, but ultimately loss is similar. Similar in both class in both the assets basically. Second thing is access is also now reach a mature because we started in four, five years back, basically. Now this asset is a beach maturity level now basically. Home loan is a last annual book. We have on the maturity term basically. So — but we are confident we don’t see any sort of risk around the NPA, NPA numbers on both the products, whether it is home loan or non-home loan.
Shreepal Doshi
Got it, sir. Sir, just last question is squeezing. In terms of product mix, will the book mix remain at where it is? Or will there be some change in the mix?
Mr. Sachinder Bhinder
It is almost at optimum level. It will remain in the same range, maybe 3% to 5% year-on-year, but it will be more or less in the same range.
Shreepal Doshi
Given the RBA norms for NBFC, HFC, I think the 75%, we are already, right, in terms of housing loans. So 60%…
Mr. Sachinder Bhinder
I think we are fully compliant as far as NHB and regulated loans on the home loan and non-home loan component. And we don’t see any change. We don’t see any change to be done at our end.
Shreepal Doshi
Got it, sir. Thank you and good luck for the next quarter.
Mr. Sachinder Bhinder
Thank you, guys. Thanks Shreepal.
Operator
Thank you. Our next question is from the line of Mona Khetan from Dolat Capital. Please go ahead.
Mona Khetan
Hi sir, good evening. As a question on the opex front. You mentioned about the store cost reverse, which has lowered the cost to assets over the last two quarters. So, is this one-off will be accounted for or we will see some more benefits from ESOP cost reversal coming in, in the subsequent quarters instead.
Mr. Sachinder Bhinder
No. ESOP cost reversal happened in the only in quarter two. Overall savings, we see on H1 to H1 level is 40 basis points. Even if we exclude this ESOP also, then we will have 30 basis going better opex improvement on H1 to H1. Is it not accounting of what has left out what is it to provide it. It remains accounted for worth of time basically, every quarter, reassessment of long-term incentive plan happens. And on that basis, whatever is a level in the — is been taken in the books of accounts, because ultimately, it’s a non-car item. Well appreciate.
Mona Khetan
Got it. So for this fiscal, is it fair to say that the improvement in opex assets will be higher than what you have certain guidance for of 20 to 25 bps given the 30 bps improvement, even ex of the ESOP impact?
Mr. Sachinder Bhinder
We — I think in the beginning of the year, we guided a 25 to 30 basis point annual saving after the time transformation for a couple of years until we reach at a 3% opex level. Full year guidance, almost we have achieved in the H1 and our — as a management differs are there to maintain this and by the year-end.
Mona Khetan
Got it sir. Thank you so much. That’s from my side. All the best.
Operator
Thank you. Ladies and gentlemen, that was our last question for today. I would now like to hand the conference over to Mr. Sachinder Bhinder, MD and CEO of Aavas Financials Limited, for closing comments.
Mr. Sachinder Bhinder
Thanks. As we conclude today’s earnings call, I want to express my heartfelt gratitude to each one of you. For the participation and engagement the dedication of our team, the trust of our shareholders and the loyalty of customers has been instrumental in growth. We aspire to reach a milestone of 1 trillion in assets under management by 2033 and broaden our horizon as of time India clear.
I express my deepest gratitude to all our regulators and stakeholders whose constant faith and support have been [Indecipherable]. We remain optimistic about the future and are confident that our strategic initiatives will continue to drive sustainable growth and create shareholder value. If you have any further questions, or require additional information, please feel free to reach out to Mr. Rakesh Shinde, our Head of Investor Relations. Thank you, and have a wonderful year ahead. God bless. Thank you.
Mr. Ghanshyam Rawat
Thank you, everyone.
Operator
[Operator Closing Remarks]