Aavas Financiers Limited (AAVAS) Q2 FY23 Earnings Concall Transcript

Aavas Financiers Limited (NSE:AAVAS) Q2 FY23 Earnings Concall dated Oct. 21, 2022

Corporate Participants:

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Ghanshyam Rawat — Chief Financial Officer

Analysts:

Abhijit Tibrewal — Motilal Oswal — Analyst

Karthik Chellappa — Buena Vista Fund Management — Analyst

Kunal Shah — ICICI Securities — Analyst

Shreepal Doshi — Equirus — Analyst

Shweta Daptardar — Elara Capital — Analyst

Rahul Maheshwari — Ambit Asset Management — Analyst

Piran Engineer — CLSA — Analyst

Mona Khetan — Dolat Capital — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to Aavas Financiers Limited Q2 FY ’23 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 the date of this call. These statements are not the guarantees of future performance and involve risks and uncertainties that are difficult to predict. [Operator Instructions]

I now hand the conference over to Mr. Sushil Kumar Agarwal, MD & CEO. Thank you, and over to you sir.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Good afternoon, everybody. Thank you for participating on the earning call to discuss the performance of our company for quarter two and H1 FY ’23. With me, I have Mr. Ghanshyam Rawat, CFO; Ghanshyam Gupta, Investor Relationship Officer; and other senior members of the management team; and SGA, our Investor Relationship Advisors. The results and the presentations are available on the stock exchanges as well as our company website. And I hope everyone has had a chance to look at it.

I am happy to inform you that during the quarter the company’s long-term credit rating was upgraded from AA minus positive outlook to AA stable outlook by CARE in-line with ICRA. I take this opportunity to thank all our stakeholders for their continued trust and support. After witnessing 90 basis points increase in the repo rate in first quarter, RBI has further increased the repo rate by 100 basis points during the second quarter. Consequently we have also increased our prime lending by 75 basis points during H1 FY ’23 and a further increase of 50 basis points with the effect from October 5, 2022.

For quarter two FY ’23 we disbursed INR1146.7 crore registering a 27% year-on-year growth in achieving 89% of the disbursement done in seasonally strong Q4 last year. We continue to grow in a calibrated manner and registered area growth of 24% as of September 2022. While maintaining our operating metrics and we have delivered PAT growth of 29% year-on year for H1 FY ’23. With our continued focus on collections, 1+ DPD stood at 4.45% with an improvement of 22 basis points from first quarter. 90 day past due stood at 0.93% in September 2022 but we have also categorized 0.17% up to 90 days past due. Asset as gross NPA or Gross stage 3 following RBI’s notification dated November 12, 2021 to harmonize IRACP norms across all lending institutions. As a result, total Gross Stage 3 is 1.10% in September 2022. We will continue our strategy of controlling the early delinquencies and strive to maintain 1+ DPD below 5% and 90 day past due below 1%.

I would now hand over the line to Ghanshyam, CFO, to discuss various business parameters in details.

Ghanshyam Rawat — Chief Financial Officer

Thank you Sushil ji. Good afternoon everyone, and a warm welcome to our earnings call. During the quarter, company borrowed an incremental amount of INR9,467 million at 7.55%. As of September ’22, our average cost of borrowing stood at 6.99% on an outstanding amount of INR1,009,711 million. During the quarter, our long-term rating was upgraded by CARE from AA minus positive to AA Stable. While ICRA continue to maintain long-term credit rating AA Stable. Despite the highest short-term rating A1 plus, we continue to maintain zero exposure to commercial paper as a prudent borrowing tactic.

IGAAP to Ind-AS reconciliation has been explained in detail for profit after tax and net worth on, slide number 31, and 33 of our presentation. Key parameters. As of September 30, 2022, total number of live account stood at 1,63,639, that is 23% year-on year growth. Total number of branches was 321. 24 new branches added in last 12 months. Employee count 5,702, 23% year-on-year growth. Assets under management grew 24% [Phonetic] year-on-year to INR1,025,443 [Phonetic] as on September 30, 2022.

Product-wise breakup. Home loan 70.9%, other mortgage loans 29.1%. Occupation-wise breakup. Salaries 39.8%, self-employed 60.2%. Disbursement increased by 27.2% year-on year to INR11,467 million for Q2 FY ’23 and 64.2% year-on year to INR22,402 million for H1 FY ’23. As on September 30, 2022 average borrowing cost 6.99% against our average portfolio 12.85% resulted in a spread at 5.86%. Borrowing. Access to diversified and cost-effective long-term financing, the strong relationship with the development financial institutions during the half year, we borrowed INR18,451 million at an average rate of 6.62%. Overall borrowing mix as on September 30, 2022 is 41.8% from term loan, 23% from assignment and securitization, 20.5% from National Housing Bank, 14.7% from debt capital markets.

Now assets quality and provision. One day past-due stood at 4.45%, Gross Stage 3 stood at 1.1%. Net Stage 3 stood at 0.84% as on September 30, 2022. Gross Stage 3 of 1.1% includes 0.17% up to 90 days DPD, assets which has been categorized as GNPA following RBI notification dated September 12, 2021. During FY ’22, resolution plan was implemented for certain borrower accounts as per RBI’s Resolution Framework dated May 5, 2021. Some of such accounts with an amount outstanding of INR1,012.5 million as on September 30, 2022 had been classified as Stage two and provided as per the regulatory guidelines. The initial provisioning including that of COVID-19 impacts as well as Resolution Framework 2.0 stood at INR649.1 million as on September 30, 2022. Liquidity of INR28,370 million as of September 30, 2022, cash and cash equivalent of INR13,270 million, un-availed CC limit of INR1,100 million, document un-availed sanction limits from other banks, INR14,000 million.PAT increased by 29% year-on year to INR1,962.6 million for H1 FY ’23. ROA was 3.42%, ROE was 13.44% for H1 FY ’23. As on September 30, 2022 we are well-capitalized with a net-worth of INR30,314 million. Book value per share stood at INR383.6.

With this, now I open the floor for Q&A session. Thank you.

Questions and Answers:

Operator

Thank you very much, sir. Ladies and gentlemen we will now begin the question-and-answer session. [Operator Instructions] Our first question is from the line of Abhijit Tibrewal. Please go ahead.

Abhijit Tibrewal — Motilal Oswal — Analyst

Yes. Thanks for taking my questions. Good afternoon Sushil Ji and Ghanshyam ji. I hope both of you are doing well. First thing that I wanted to understand is the absolute increase in your Stage 3, which is greater than 90 DPD and is now up 50% in the last two quarters. Just wanted to understand are these loans which have slipped from the restructured pool or are these customers who have defaulted, because their EMIs have increased when you increased your PLR. And a related question here is, from your past experience, do you think that there is a need for the industry to be worried about higher delinquency in the affordable housing segment when the EMI of the customer is increased?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So, Abhijit, if I’m correct, you are asking from Q4 last year to Q2 this year?

Abhijit Tibrewal — Motilal Oswal — Analyst

Yes.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes. So Abhijit that I think, we are normally in 1% here and there. And now from April 1, we have stopped marking cases AFS, which was earlier whenever any asset we purchased in the [Indecipherable] we used to mark as AFS and based on [Foreign Speech] Otherwise, it’s around 0.9 [Foreign Speech] So we thought we should be more conservative on that aspect and that is why this number is limited.

Abhijit Tibrewal — Motilal Oswal — Analyst

Understood. Now we don’t classify any assets that we repossess as assets held-for-sale, they are still classified as Stage 3 loans?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes, yes.

Abhijit Tibrewal — Motilal Oswal — Analyst

Understood.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

That amounted INR12 crores.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it. Okay, and sir I mean the related question that I asked that I mean when the EMI of the customer is increased, is there a reason to be worried that it can lead to higher delinquencies in the affordable housing segment?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

I think as we cycle [Foreign Speech] Very few cases are there, where we need to increase the EMI of the customers also. That is, I think less than 1% or 2%. So I don’t think so there is a much impact of that in the portfolio. And we have seen this cycle 2, 3 times now in last 12 years.

Abhijit Tibrewal — Motilal Oswal — Analyst

Understood. Sir, my second question was on the opex. I’m just trying to understand that this elevated opex or cost-to-income ratio is, a premier function of higher [Indecipherable] since the attrition in the industry, especially at the queen [Phonetic] level is really high or is it more a function of your investments in branches and taking [Indecipherable] which, you’ve not really officially opened yet and once which will be officially opened branches which will be officially opened in the second-half of this fiscal year but the expenditure you have already incurred in the first-half itself?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Abhijit, I have already mentioned in the last call also that for this year opex will be a little high and going forward in coming years then leverage will come in to the balance sheet. This year we are spending a lot much amount on the digital transformation and last quarter we started implementing LOS which is SMTC and now we have signed up for LMS which is core banking system. So we are moving to banking system Flex-U [Phonetic] which is by the large bank like HDFC and AU. And for accounting software also, which is now called ERP in the banking parallel, so we are shifting to Oracle Fusion which is used by the large banks like Kotak and [Indecipherable] kind of balance sheet. So once this will be implemented, I think we have already given six to nine months for [Indecipherable] it will take for implemantation of this. Secondly we continue to do investment and like this yeare again we will open 35 branches in the first-half. The branches which is the least in opening position is around seven, eight, so now second half most of the branches will also be open. Thirdly, we are also investing in manpower and leadership, keeping in mind five to seven year horizon. Also now we added [Indecipherable] like INR12,500 crore in the next three years the balance sheet gets doubled, so we are also spending money for leadership development like, this year we have tied-up with IIM Ahmedabad, where our 35 officers got the training and certification and this will be a second line, third line, [Technical Issues] in the organization. So I think, continuous investment in people, process and technology. But technology, the one big change which we’ll complete in the next six to nine month, I think from next year onwards the opex trajectory will also help us getting the optimization.

Abhijit Tibrewal — Motilal Oswal — Analyst

Okay. Thank you Sushil ji, I mean very good to hear that we are indeed spending or investing in manpower and furthering the career progression of the leadership team. The last question that I had, is that I mean, have you revealed any NSP borrowings in half of this fiscal year. And looking at the sanctions that you have or you are expecting from NHB. What is the impact on spreads and margins that you foresee in the second-half of this fiscal year? Sushil ji what I’m trying to understand is today there are two schools of thought, one which says that it’s okay if there is some spread in margin compression, but we want to focus more on growth. While another school of thought is, I mean we’ll kind of want to maintain the current spreads and margins that we have. So how are we thinking about these two things?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

I believe in Q1 we have borrowed around INR400 crores. Q2 we have not borrowed any money from NHB. But recently we have got sanction of around INR900 crores from NHB for the next fiscal year. As the, CEO, maybe we want to attain both, we can achieve growth also and we can maintain all this well. And I think during the growth in our narrated trajectory, 22% to 25%, we are already at 24% and at the same time we are able to maintain our spread and profitability. As in the ALCO and Board meetings we continuously review what impact we will have, because there are three kind of liability risk — asset liability risk. One is tenure wise. One is fixed and floating-wise. One is earning at risk-wise. And we forecasted that next three to six month how much price impact we’ll get on our borrowing. In accordance with that we have announced that from October 5, we are [Technical Issues] needed by 50 basis-points. So, I think max till December 31, whatever things we were able to envisage as a Board and as a management team on the borrowing side, we have taken into account and accordingly price the liability or price the assets on the variable side.

Abhijit Tibrewal — Motilal Oswal — Analyst

This is very, very useful. That’s all from my side. Thank you Sushil ji and wish you and your team a very Happy Deepavali.

Operator

Thank you very much. Our next question is from the line of Karthik Chellappa from Buena Vista Fund Management. Please go ahead.

Karthik Chellappa — Buena Vista Fund Management — Analyst

Yes. Thank you very much for the opportunity. Good afternoon Sushil ji and Ghanshyam ji. I have three questions. The first one is what would be your labor attrition rate in the second quarter and across the industry it seems that the attrition rate, especially at the feedstock level has remained high. You talked about a few measures as far as let’s say tying up with IIM Ahmedabad etc, but at the field staff level what initiatives are you planning to improve this attrition level. That’s my first question.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So Karthik, thankfully Anshul joined us around six months back and we have mentioned we have kept one of the key operating metrics business which we track this employee attrition. They took the target that can we reduce it 50% and I’m happy to announce that Q2 we were able to significantly reduce our attrition rate in comparison to Q1 this year and half year last year. So the measures which we have taken at the ground level in terms of iincentive level changes, now we are focusing and we are creating a reason of contribute rather than performer. And everybody should contribute and we are going for a incremental performance increment. So earlier maybe we used to see everybody on one scale, now we are seeing if somebody has 50 can we move them to 75 level. If somebody is 75, can we move him to 100 level and if somebody is doing 100, can we move to 125 level. And I think that has helped the organization. Though we are not at the range where we want it to be, but we are happy with the factors we got in the last four to five months, after our effort on this particular piece.

Karthik Chellappa — Buena Vista Fund Management — Analyst

Got it. Just one clarification Sushil ji, you said the second quarter the labor attrition rate is down significantly. Could you give us some number or a range by how much is it down?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Around 20% down.

Karthik Chellappa — Buena Vista Fund Management — Analyst

20%, okay. The second question Sushil Ji is, as far as your payment medium mix is concerned, have you noticed any notable change, let’s say away from what mediums like mash to either wallets or using UPI in the last couple of quarters?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

No. So, Karthik we — when we give the loan, we ensured that we accept payment through NASH only. And any customer that gives with bounces, then we give the customer optionalizor to pay through UPI, wallet, cash, online. That’s why different options. But over 100% incremental lending is supported by NASH as their determined option.

Karthik Chellappa — Buena Vista Fund Management — Analyst

So even when it bounces you have not noticed any change in payment through UPI. Is it like when you’re bounce rates go up or so people opt for UPI immediately. You have not noticed any such pattern yet?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So, because, anyway 1+ number is very less. So I think wallet to UPI, yes there is a change. But overall number is so less so that is not significant to talk about.

Karthik Chellappa — Buena Vista Fund Management — Analyst

Okay. Got it. My last question Sushil ji is basically on the economics of the sector itself. What we noticed even for Aavas as well as other industry participants is, in the last few quarters the opex growth has been higher than the AUM growth. In your case, of course, there are very specific initiatives, whether in IT platforms or training etc but this is a trend that we generally observe. Now given where spreads are and given the interest-rate outlook would it be fair to say that going forward the PPOP growth will to some extent lagged the AUM growth and if not what are the other levers that you have to actually ensure that that growth is more or less in sync?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Karthik, I’m in sync with what you’re saying but I want to throw some number here. Q1 to Q2, income has increased 15%, opex has increased 12%, and profit has increased around 20%. So, the jaw [Phonetic] chart increase in income vis-a-vis increase in opex, we are already in the trajectory that thing is coming up. Once we have seen cumulative number H1, I think it is looking like this. So at Aavas we are cognizant of this and though we are investing in people, process and technology and with the huge amount but still I think Q2 is showing that we are already in that — what you can say, jaw chart favorable for the Aavas.

Karthik Chellappa — Buena Vista Fund Management — Analyst

Got it. That’s all from my side. Thank you very much Sushil ji and Ghanshyam ji and wish you and the team a very, very Happy Diwali and all the best for the remaining quarters.

Ghanshyam Rawat — Chief Financial Officer

Thank you Karthik. And wish you the same.

Operator

Thank you very much. Our next question is from the line of Kunal Shah from ICICI Securities. Please go ahead.

Kunal Shah — ICICI Securities — Analyst

Yes. Good afternoon Sushil ji and Ghanshyam ji. So, firstly with respect to the repricing, so as we clearly see in terms of almost INR7,500 crores odd, INR7,200 crores is a floating rate loan and INR5,300 crores on a fixed side. So when we increase this lending rates by say 75 basis points and another 50 odd basis points, when do we see this repricing getting reflected in the INR7,200 crores book?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Look Kunal…

Kunal Shah — ICICI Securities — Analyst

It will be a monthly reset or maybe a quarterly one?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

As we announced, we’ll publish the date effective also like this 50 which is going to get announced October 5 is effective but it will have an impact on October 5 itself on a floating loan book. As far as fixed rate book, we have a contractual agreement for each and every borrower. Every three years the fixed-rate contracts also get repriced like in the month of October around INR1,306 which was sanctioned three years back more repriced. So every year certain fixed rate loan get repriced.

Kunal Shah — ICICI Securities — Analyst

Yes. So it would be fair to say that this INR7,200 crore odd ex of disbursements which have been done in this quarter or maybe last quarter, besides that the entire book would have — would get repriced by 125 basis points from October 5, yes cumulatively?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

No October 5, we have announced 50 basis points.

Kunal Shah — ICICI Securities — Analyst

Yes and earlier 75 basis points. Yes.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

75 which we have announced earlier, 25 basis points and then 50 basis points, goes effective both ways [Phonetic].

Kunal Shah — ICICI Securities — Analyst

Yes, okay got that. And when we are seeing this maybe this behavior of the INR7,200 crores, because we are relatively on a higher side with respect to passing on the rates compared to that of other affordable housing finance companies. So any change in terms of the BT outs or something? Maybe when we did the 75 bps. Because many players have not yet increased it.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So, Kunal, on that side also we have positive news. Our BT out as come down. So earlier it was around 0.6% per month which has reduced and now 0.5%, because 0.6% down at 7% to 8% on a yearly basis. Now the current run-rate is going 0.5% or below, so that significant for the next planned month, everything will be in control it’s less than 6%. So there also we are on a positive side.

Kunal Shah — ICICI Securities — Analyst

Sure and lastly again touching upon or maybe in terms of the growth, so, I think when we look at it in terms of the traction, it still seems to lag with the industry peers, okay and that is huge amount of investment which is happening. So when do we actually see the productivity improvement as well okay and maybe given the kind of branch network, employee network that we have, in fact we should get back to in terms of the disbursements per branch if there could — we could see a significant improvement?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Kunal as a company we are okay with growth of 20% to 25%. We are already on 24% plus trajectory. So I don’t think so there is a talent on that side. I don’t see from industry peers also when give us at the size of industry peers, our growth was more than 40% when is there a debt AUM side and the current AUM size, we are okay with 20% to 25% growth consistently year-on year with maintaining asset quality and maintaining operating metrics.

Kunal Shah — ICICI Securities — Analyst

Sure and one last question was with respect to securitization, so we have adequate liquidity but maybe I think in terms of the securitization momentum compared to that of maybe the previous years, it seems to this on a higher side. So would we see this maybe in the second-half should we assume that the run-rate could be relatively lower if I have to look at on a full-year basis, is it like…

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

No so…

Kunal Shah — ICICI Securities — Analyst

Or a similar run-rate might contain?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

As we’ve been tangible reply but as a company, as a organization, I think overall ratio has not changed. Overall 20% of book is a bank at the organization and I think we are into that trajectory as it comes as of core [Phonetic], hedge fund FY ’23 also. So, I don’t think so there is a challenge or big change in strategy from the [Indecipherable] that type.

Kunal Shah — ICICI Securities — Analyst

Yes so that may not go up to 23%, 25% also, yes.

Ghanshyam Rawat — Chief Financial Officer

So Kunal, Sushil ji has covered I think very well. Last year we’ve done a full-year basis INR780 crore. This year whatever we see growth in the AU, similar growth you can see in assignment also. Nothing — any strategy changed. It’s only one quarter, two quarter here and there that becomes because of what opportunity, what price we get from banks and institutions and then the accordingly elighiblity that it would be.

Kunal Shah — ICICI Securities — Analyst

Okay got it. Yes, thank you. Thanks and all the best and wish you a very Happy Diwali.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Thanks.

Operator

Thank you very much. Our next question is from the line of Shreepal Doshi from Equirus. Please go ahead.

Shreepal Doshi — Equirus — Analyst

Hello sir. Good afternoon and thank you for giving me the opportunity. Sir, my question was firstly on the yield side, so, we’ve already taken three rate hikes that is I think 25 basis-point was in June, 50 basis points was in August and recently we took 60 — like we will be taking 60 basis point. But just wanted to understand what are the rates that would be prevailing for HL and LAP, so if you could give some range there and what would be the differential between the two?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So our actual pricing is around 11.7% to 12% and non-actual rates are from 14% to 14.25%, average. The new business rate.

Shreepal Doshi — Equirus — Analyst

Okay, okay, then new — these are the latest ones right.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes.

Shreepal Doshi — Equirus — Analyst

Okay got it. And sir with respect to this asset held-for-sale that line-item that we had in the balance sheet, so I guess in the annual report that gross number was INR30 crore. Now like I think you highlighted to one of the participants that you have already incorporated to the Stage 3 number, this asset held-for-sale and so that number has come down significantly or is it like…

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So INR30 crore has come down. So as of March 31, we got INR29.21 crores and after provisioning it was INR24 crores, now it is INR19 crores after provisioning.

Shreepal Doshi — Equirus — Analyst

Okay. So INR19 crores we have…

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

And we have lot many cases, EMD resumed. So, I think we will see a significant reduction this quarter also in this number. Hopefully by year end this will be mostly 25% of the opening pool. Rest everything will be disposed off.

Shreepal Doshi — Equirus — Analyst

Okay. So sir you said that this number has been added to Stage 3?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

No, so new — from April 1.

Shreepal Doshi — Equirus — Analyst

Okay, okay.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

And whatever effective get going, we are not marking that as a AFL, so only opening pool will come down and new [Indecipherable] as Stage 3.

Shreepal Doshi — Equirus — Analyst

Okay, got it. Sir just wanted to understand the logic behind this that why do we have it as a separate heading in the balance sheet, because, I just wanted to understand the logic behind this?

Ghanshyam Rawat — Chief Financial Officer

There is nothing as anything big in any aspect. It is normal accounting policy which we have adopted six years back and now new regime will become, as Sushil ji mentioned in early remarks, it will become more prudent more conservative accounting policy. So we are keeping any aim as new assets as NPA also and the old one as Sushil ji mentioned, we are accelerating our disposal of those assets from today [Phonetic] to six to nine months timeframe it will be — get — dispose off.

Shreepal Doshi — Equirus — Analyst

Got it. Sir one last question. What is your employee base number that we have for the 2Q end? And just another question in relation to that is that we have something called manpower contracts which is part of the annual — which is part of the other opex if I have — if I’m right. So why do we have contractual employees when our entire thought process is to sort of source internally and also collect internally?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

We have two kind of people with long contract. One is the admin office boys, [Foreign Speech]. Second, in the sales side also the [Foreign Speech]

Shreepal Doshi — Equirus — Analyst

Okay, okay. Got it. And sir the employee base number if you can share?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes, 5,702.

Shreepal Doshi — Equirus — Analyst

Okay sir. Sir thank you so much and Happy Diwali to the entire team and good luck for the next quarters.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Okay thank you.

Operator

Thank you. Our next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead.

Shweta Daptardar — Elara Capital — Analyst

Thank you sir for the opportunity. Sir couple of questions. Sir if I look at disbursement trend, so first half of course you have put up 11.5 million in that number and I remember you mentioned last time second-half tends to be seasonally stronger, so you see the overall growth metrics [Technical Issues] and also I mean although we have mentioned the growth target to be in the range of 20 to 25, how do you view it in terms of leverage elsewhere. That’s my first question.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So Shweta, overall last year we disbursed INR3,600 crores. And this year in the first half itself we have already disbursed around INR2,300 crore. Mostly in a normal year, 40% to 45% is first half and another 55% to 60% is second half. If you go by the trajectory the numbers will be — you can calculate. I think significantly higher than last year’s numbers. So this kind of growth is appropriate for about 20% to 25% kind of AUM growth.

Shweta Daptardar — Elara Capital — Analyst

Sure sir. Sir all this in according to your provision, if you could throw some color on what would be the normalized — have the normalized in the first phase at the run-rate of provisions on quarterly basis. Because the number is looking lower since last quarter. How do you see this going forward?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Shweta you are asking for 1+ number?

Shweta Daptardar — Elara Capital — Analyst

Toward provision. The overall provision.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

You are not…

Ghanshyam Rawat — Chief Financial Officer

Provision.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

This provisioning you are talking on that thing.

Shweta Daptardar — Elara Capital — Analyst

Sir the P&L provisioning.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

I think we didn’t get your complete question but let me, I will try to elaborate. I think quarter one to quarter two risk closures, yes overall provision is up because of earlier years you know last two year we’ve seen a COVID period, certain extra provision was built-up and those assets now has in normal life like COVID one was in — September 20 was the large date when the normal cycle was started, so those pool are now — so on a majority over last two years, so after that now those projects are going-in a normal cycle basically. So we as such our NPAs around — gross NPA around 1% and one day past dues is already less than 5%, so we are adequately committed our provisions and we don’t see any much change in our provisioning trend.

Shweta Daptardar — Elara Capital — Analyst

Fair point sir. Sir one last question. In one of our — in this participant reply, you mentioned that out of the INR5,300 crores odd this side, so INR200 [Phonetic] crores or something which is on the verge of reset this year.

Ghanshyam Rawat — Chief Financial Officer

Shweta we are not getting your question. Either it is not audible or either you rejoin the call, then again come in the queue. We are not getting the question properly.

Operator

Shweta would you like to — can you switch to your handset if you’re using a headset or any other mode. We can hear you but it’s not…

Shweta Daptardar — Elara Capital — Analyst

Sure sir, is it better now?

Operator

Sir do you think you can hear her better now?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes it is better.

Shweta Daptardar — Elara Capital — Analyst

Okay. Sir my question was on the INR5,300 crores, six slide book is — out of that is 1,300 crores which is getting reset this year. You mentioned that every three years the opex to book gets repriced.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes, you are right. Whatever contract, I think we disbursed three-year back, let’s say I’ll give you an example. In the month of October ’22 loan which is sanction at a fixed-rate in, October 2020 that will that book will come to reset in October 2022. So on and so forth. It will continue.

Shweta Daptardar — Elara Capital — Analyst

So this year that amount is, INR1,300 odd crores.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

I think simply you can’t take one third, 25% is better to assume because those year disbursement definitely be lower than what is there. 25% you can take to your side [Phonetic].

Shweta Daptardar — Elara Capital — Analyst

Understood. Thank you so much.

Ghanshyam Rawat — Chief Financial Officer

Thank you.

Operator

Thank you. Our next question is from the line of Rahul Maheshwari from Ambit Asset Management. Please go ahead.

Rahul Maheshwari — Ambit Asset Management — Analyst

Yes. Good afternoon — good evening. Thank you for the question. Just, two questions. Sushil ji can you give some color on the opex side, the kind of growth that is taking place. Means when can we expect the same to start building in terms of the same goes for employees expense and the other opex, where are the parts where such kind of high-growth of the investment is taking place and second question on the MSME license, when can we expect, can you throw some color on that part also?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Rahul, NBFC [Indecipherable] is threatening that any RBI — we can’t comment when it is going to come, so on that part, we can’t do any commentary. On the first part, on the opex side, we have already mentioned that this quarter itself again, the revenue increased versus opex increase is less. So we are already in the positive jaws chart and — but we have already told that this year because of high investment in technology and some of the retention active phase and leadership development, opex might be high, but since we are having — we are maintaining high spread we thought we can invest. And once all these things will limited to six to nine months, we will see again the downward trend of opex to AUM and those ratios. But this quarter itself we got positive jaws on that balance sheet number.

Rahul Maheshwari — Ambit Asset Management — Analyst

So just to break this, in case of percentage of mix where it’s going in opex compared to volume growth, technology spend and the branch expansion, can you break it down in terms of where the quality of investments or opex are going for Aavas?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So Rahul, branch expansion is a normal phenomena. Every year we open 35 branches. Normally we start building up from Q2 and the admin team starts giving delivery of completed branches from Q3 and Q4. But that is normal phenomena. [Technical Issues] this is the very large investment after seven, eight years in the company. The range is approx INR100 crore. We need to see what kind of amount we will be able to capitalize and because now most of the things are on cloud in annual subscription basis. So mostly [Indecipherable] and at the same time we are also building the capability. Now we are almost closed 100 crores to 500 crores per month revenue based and given that number for next three years visibility is already there in the system. We have successfully done the cognition [Phonetic] of business also, business head Ram left in June and Siddharth joined and entire office was so smooth and [Technical Issues]. So, I think all this clear aspects is there, but mostly it will be technology and leadership turns up very fine.

Rahul Maheshwari — Ambit Asset Management — Analyst

And what is the attrition rate at the junior level you are at the branches which has just come after the transition of being into contract labor. Can you give specific range what are the attrition?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Rahul exact number, I don’t have at this point of time, but we’ll get back to you on this number. But as yesterday in the Board, we have seen one presentation where our attrition rates have significantly got this quarter around 20% on this side.

Rahul Maheshwari — Ambit Asset Management — Analyst

Okay and just second question which was asked on the MSME license. Are things — everything from our side has been represented to the RBI only the — its where the gap is there in terms of…

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Rahul all those things, because everything is with the regulator. We cannot disclose at this point of time, anything comes from their side, we will edit and publish at the BSE, NSE to everybody.

Rahul Maheshwari — Ambit Asset Management — Analyst

Thank you so much and have Happy Diwali to the entire team.

Operator

Thank you. Our next question is from the line of Piran Engineer from CLSA. Please go ahead.

Piran Engineer — CLSA — Analyst

Hi good afternoon sir. Congrats on the quarter. Just a couple of questions. Firstly our loan yield between 4Q and 2Q is up only 20 bps, 12.65 [Foreign Speech] But we’ve increased our rates by 75 bps and 60%, 70% of our loan book is floating. So what explains this?

Ghanshyam Rawat — Chief Financial Officer

Yes. Like we started 12.65%, we now started [Phonetic] at 12.85%, roughly 55% floating-rate because very immediately get pass-on. If we take 75 basis-point, around 55% floating-rate, so roughly increase to be, let’s say, 37, 38 basis-points, but 17 basis-point obviously got lost in a certain asset we put on retention, like assets comes for balance transfer, we found that these assets is have work line to retain these assets so we offer them competitive price. So that also sometimes have a — give us some reduction in overall AUM unit. So on that account we note around 10% or 12% which is quiet new asset generation is gradually picking-up and changing unit basically. So that also [Indecipherable] overall basis. So 20 basis points increase in the AUM on account of increase roughly 17 basis point we lost on account of two factors.

Piran Engineer — CLSA — Analyst

Okay okay, got it. Sir but 0.5% per month is our BT out this is what actually happens, what would be like the BT out applications and how much are you able to, let’s say, resolve by offering a lower rate?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

No, so every time this In BT retention phase, always there might not be a scenario where you need to reduce the rate. Some time customer come for top-ups, some customer come for some other problems also. So normally around 1% to 1.25% kind of applications come every month. And we along the team and D&A at the branch level, culture level, branch head lever and everybody’s KRA is linked to that customer, because customer should always be with us. So out of 1.25% around 0.25% to 0.8% customer where we want them to go, because they will be attending continuous delinquency or their CIBIL score has already reduced between 300 to 600. Another 0.5% may be 60-40. 60% we need to offer the rate, 40% we need to offer either [Indecipherable] or maybe if they want top-up, we provide that.

Piran Engineer — CLSA — Analyst

Got it. Got it. And sir just one very basic question. If I take a fixed-rate loan or a floating-rate loan at one point in time, is the rate the same?

Ghanshyam Rawat — Chief Financial Officer

No rate is different. On a fixed rate quota roughly 200 to 300 basis-point higher-rate.

Piran Engineer — CLSA — Analyst

Irrespective of the cycle.

Ghanshyam Rawat — Chief Financial Officer

Yes, irrespective of the cycle. Yes.

Piran Engineer — CLSA — Analyst

[Foreign Speech] 11.7% home loan rate starting that is for floating. And if I take fixed it will be around 13.5%, 14%.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So on variable side it is around 10%, on fixed it is around 12%.

Ghanshyam Rawat — Chief Financial Officer

12% plus.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

For home loan. And non-home loan it goes around — it goes above 14% to 17%, 18%.

Piran Engineer — CLSA — Analyst

Okay. So floating-rate home loans starts at around 10%.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Floating rate starts at around 9%.

Piran Engineer — CLSA — Analyst

9%, okay. Okay. Got it. Got it.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

[Speech Overlap] ARPU, 10% 12%.

Piran Engineer — CLSA — Analyst

Sorry.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes it will start at 9% but it kind of goes, let’s say, dependent our loan percent average was around, 10% 10.25% for retail, home loan floating book.

Piran Engineer — CLSA — Analyst

[Foreign Speech] 11.7% to 12% that is for fixed-rate, is it?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

[Foreign Speech]

Piran Engineer — CLSA — Analyst

Okay. Outstanding. Okay got it, got it. That’s all from my end wish you all…

Operator

Thank you. Our next question is from the line of Mona Khetan from Dolat Capital. Please go-ahead.

Mona Khetan — Dolat Capital — Analyst

Yes. Hi sir good evening. I just have one question. So if you could share the breakup of your loan book by ticket size, or what share of loan sub INR10 lakh, share of loans between INR10 lakh to INR25 lakh ticket size and above INR25 lakh ticket size?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

One sec. Just give us one second.

Mona Khetan — Dolat Capital — Analyst

Sure.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

So I think around 72% customers are less than INR15 lakh, we will give you exact numbers in terms of number of customers. And. For, more than INR25 lakh and above I think around 7% to 8% customers for us.

Mona Khetan — Dolat Capital — Analyst

Okay, okay, sure. And just to follow-up on the previous question on fixed versus floating. So is it fair to say that for a certain customer profile, if one has to choose between fixed and floating, the differential on average would be 200 to 300 bps?

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes.

Mona Khetan — Dolat Capital — Analyst

At any point of the cycle.

Ghanshyam Rawat — Chief Financial Officer

Yes.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Yes.

Mona Khetan — Dolat Capital — Analyst

Sure, thank you. That’s all from my side and all the best.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Let’s say as of now the paid objective which you adopted but if interest scenario goes haywire, so this policy it requires change [Phonetic] so ALCO can — metric can be deliberated [Phonetic] at ALCO level and change the policy also.

Mona Khetan — Dolat Capital — Analyst

Sure sir. Thank you.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Margin dynamics change in a rising interest rate scenario, so obviously we also want to change our policy around that.

Mona Khetan — Dolat Capital — Analyst

Sure, got it. Thank you.

Operator

Thank you very much. Ladies and gentlemen due to time constraints that was the last question. I now hand the conference over to the management for closing comments.

Sushil Kumar Agarwal — Managing Director & Chief Executive Officer

Thank you all for attending the call. I wish you very Happy Diwali and festivity, and hope everybody keeps safety and health as the priority. For any further information request you to get in touch with Ghanshyam Gupta, our Investor Relationship Officer or SGA or Investor Relationship Advisors. They will be happy to help you. Thank you all. Thank you for…

Ghanshyam Rawat — Chief Financial Officer

Thank you everyone and wish you Happy Diwali.

Operator

[Operator Closing Remarks]