Aavas Financiers Limited (NSE: AAVAS) Q3 2025 Earnings Call dated Jan. 30, 2025
Corporate Participants:
Rakesh Shinde — Head of Investor Relations
Sachinder Bhinder — Managing Director & Chief Executive Officer
Ghanshyam Rawat — President & Chief Financial Officer
Ashutosh Atre — President & Chief Risk Officer
Analysts:
Renish Bhuva — Analyst
Shweta Daptardar — Analyst
Yash Gujarathi — Analyst
Raghav Garg — Analyst
Abhijit Tibrewal — Analyst
Rajiv Mehta — Analyst
Shreepal Doshi — Analyst
Shubhranshu Mishra — Analyst
Chandra — Analyst
Bunty Chawla — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Avas Financials Limited Q3 FY ’25 Earnings Conference Call.
This conference call may contain forward-looking statements about the company, which are based on the beliefs, opinions and expectation of the company as on-date of this call. These statements are not guarantees of future performance and involves risks and uncertainties that are difficult to predict. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need — should you need assistance during the conference call, please signal an operator by pressing the star then zero on a touchstone phone.
I now hand the conference over to Mr Rakesh Shinde, Head, Investor Relations of Financials Limited. Thank you, and over to you, sir.
Rakesh Shinde — Head of Investor Relations
Thank you, Steve. 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 quarter three and nine months FY ’25 and the business outlook going-forward. The results and the presentation are available on the stock exchanges. We have also uploaded the fact sheet along with our results on our company website, and I hope everyone had a chance to look at it.
With me today, I have entire management team of Avas. We will start this call with an opening remark by our MD, Sachindar; CFO, Rawat; and CRO, Ashuto, followed by Q&A session.
With this introduction, I hand over the call to. Over to you.
Sachinder Bhinder — Managing Director & Chief Executive Officer
Thank you, Rakesh, and very good evening and happy 2025 to everyone. I’m delighted to welcome you all to our Q3 FY ’25 earnings call and thank you for joining the call today late evening.
Quarter three FY ’25 has been a good quarter where we saw a strong traction in our log-ins and decent pickup in our disbursement, which grew 23 percentage sequentially and 17 percentage Y-o-Y. In terms of AUM growth, we have maintained our growth run-rate of 20 percentage Y-o-Y. We have completed upgradation of all major tech platforms, which are now stabilizing. This was one of the fastest tech implementations in the industry. We believe we have set the foundation for sustainable, scalable and profitable growth. We are now focusing on leveraging the state of our tech platforms by strengthening governance, driving scale, optimizing cost and boosting operating efficiencies across functions.
Ladies and gentlemen, with that preamble, I shall now take you through the quarterly performance and our assessment of the outlook. We have delivered an AUM growth of 20 percentage Y-o-Y, reaching an AUM of INR192 billion. In-quarter three FY ’25, we disbursed loans worth around INR16 billion, a growth of 17 percentage Y-o-Y with a cumulative disbursements of INR41 billion for Nine-Month period FY ’25. Our net profit for the Nine-Month FY ’25 grew by 21% Y-o-Y to INR4.2 billion. Our net-worth continues to compound quarter-after-quarter at the rate of around 16 percentage Y-o-Y.
Our calculated spreads have had improved 4 bps sequentially to 5.72 in-quarter three FY ’25. Our NIMs expanded more than 10 bps Y-o-Y during the quarter to 7.75%. Our focus continues to underwrite quality business with risk-adjusted returns. As a result, our incremental business yields have shown a growth of 25 bps across products. At the beginning of the financial year, we have guided that we’ll bring down our opex to assets ratio by-20 bps every year to reach a level below 3 percentage in our continuous endeavor of cost optimization strategy.
I’m happy to report a remarkable improvement in opex to asset ratio by 42 bps Y-o-Y to 3.21 percentage in nine months FY ’25 as a result of our good optimized cost optimization strategy execution. Our asset quality continues to be pristine with one plus DPD of less than 4 percentage at 3.85 percentage as of December 2024. Our GNPAs were at 1.14 percentage, which is quite seasonal in nature. Our endeavor to maintain the pristine core asset quality continues. Credit costs improved further to 15 bps in nine-month period of FY ’25 versus 19 bps in Nine-Month FY ’24.
We continue to guide credit cost of below 25 bps on a sustainable basis. ROA improved by-4 bps to 3.26 percentage and ROE improved by 61 bps Y-o-Y to 14.06 in the nine months FY ’25. During the year and the quarter, we have opened six new branches during nine months FY ’25 and we are opening another 20 plus branches in this quarter, quarter, predominantly in the states of Karnataka and Uttar Pradesh. We will be accelerating our branch expansion strategy by opening more branches in the calendar year.
The new PMAY 2.2 ensures that impact the last mile in a more efficient way and benefit our customers immensely. We expect more budgetary allocation and supply of affordable housing in the upcoming union budget, enabling faster and deeper penetration of housing for all. We are committed to deliver quality and profitable business growth driven by tech-led operating efficiencies and cost optimization. I’m confident that with our strong risk management practices, diversified distribution reach and execution capabilities of our time-tested team, we will achieve our milestone and deliver value to our stakeholders.
I would now hand over to our CFO, Rawat, to discuss the financials in detail.
Ghanshyam Rawat — President & Chief Financial Officer
Thank you, Sachander jee. Good evening, everyone, and warm welcome to our earning call. To provide update on borrowing first, in terms of liability, we have one of the best wealth diversified liability franchise. We have always been innovative in exploring new avenues of sourcing. And I am happy to share that we have successfully raised NCD amounting to INR6.3 billion from IFC in-quarter three. This is the largest NCD raised by company till-date. This achievement will enable us to channel these funds towards promoting individual green home construction, reinforcing our unwavering commitment to sustainable and inclusive development. We are a unique housing finance company where our tenure of liability is higher than tenor of assets.
We continued to borrow judiciously, raised around INR46.2 billion at 8.41% for nine months FY ’25. Total outstanding borrowing as of 31st December 2024 stood at INR172 billion. Overall borrowing mix as of 31st December 2024 is 53% — 50.3% from term loans, 24.8% from assignment and securitizations, 15.9% from National Housing Bank and 9% from debt capital market. Lender supports continue to remain extremely strong as evolve. There is excess of diversified authortic long-term financing.
We maintain a strong relationship and development with development finance institutions. To meet long-term business growth, we have progressed on co-lending with the PSU Bank. As of 31st December 2024, we maintain a sufficient liquidity in the form of cash-and-cash equivalents and unavailable cash credit limit of INR18.95 billion and documented sanction limit of INR22.8 billion.
In terms of financial performance, our net profit of Q3 FY ’25 grew by 26% year-on-year to INR1.46 billion, led by robust growth in the net income, coupled with a sharp improvement in operating leverage. Our spread improved by-5 basis-points to 4.94%, driven by 14 basis-point expansion in the AUM yield to 13.8% on account of 25 basis-point increase in the VPLR in-quarter three FY ’25. Whereas our cost of borrowings increased by 9 basis-points in quarter-over-quarter to 8.24%.
We have 32% of our bank borrowing are linked with the ABLR such as, Repo, my and 19% are linked with a three-month MCLR, which will allow us faster repricing of 51% total bank borrowing in case of rate cut scenario. Our NIM in absolute term has increased by 16% year-on-year in-quarter three FY ’25. Our margins — NIM has as a percentage of total assets during quarter three FY ’25 stood at 7.75% and 7.4% — 7.54% during Nine-Month FY ’25. ROA of the quarter increased by 31 basis-points year-on-year to 3.37% in-quarter three FY ’25, whereas ROE improved by 115 basis-points year-on-year to 14.21% in-quarter three.
In terms of other parameters, we are well-capitalized with a net-worth of INR41.97 billion and capital adequacy ratio is at 45.56%. The total number of live accounts stood at INR2,36,000 plus, translating into 50% year-on-year growth. Employee count grew by 6% year-on-year at 6,284 as on December 2024 as against disbursement grew 11% year-on-year and AUM growth 20% year-on-year, which indicate our productivity enhancement by various efforts taken by company.
Now, I would now hand over the line to our CRO, Sir, to discuss the asset quality.
Ashutosh Atre — President & Chief Risk Officer
Thank you,. Good evening, everyone. I am pleased to share the key portfolio risk parameters with you, asset quality and provisioning. Avask is strongly positioned to continue delivering industry-leading asset quality. Our asset quality remains within the guided range with one day past-due below 4% at 3.85% as on Q3 FY ’25. The gross Stage 3 and net Stage 3 under 1.25% stood at 1.14% and 0.81% respectively. In terms of geography, average 1 plus days past-due and GNPA in our vintage states remained well below 4% and 1% of AUM respectively. Whereas other emerging states, one plus and GNPA remained well below 3% and 1% of AUM respectively.
Similarly, in terms of ticket size of more than INR15 lakhs, one plus days past-due and GNPA remained well below 4% and 0.8%, whereas in case of ticket size less than INR15 lakh, one plus days past-due 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 INR1.01 billion as of 31st of December 2024. As per our quarterly exercise of bureau scrub analysis, we have only 6.7% customers having overlapped with MFI exposure. And out of this 6.7%, only 2.2% are into 90 plus days past-due.
With this, I open the floor for Q&A session. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star N2 2. Participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles., the first question is from the line of Ranish from ICIC Bank. Please go-ahead.
Renish Bhuva
Yeah, hi, sir. Congrats on a good set of numbers. Sir, I have two questions. One on the asset quality. So though OnePlus CPD have fallen, but at the same time, there is a marginal increase in the DS3. So just wanted to understand it basically implies higher forward-flows in the delinquent buckets. So how is the underlying health of the portfolio looks like? And does this sort of possess risk to our near-term asset quality and credit cost guidance because of higher forward-flows in this quarter from the delinquent pool?
Sachinder Bhinder
Thanks, Danish. I think if you look at the OnePlus, we continue to be at less than 4 percentage, which is at 3.85 percentage. But the seasonal jump is a part of the seasonality of the increase in the G&Ps which are getting reflected. I think it was a mix of a certain part of a seasonal festive in the last couple of — in the last quarter. But I think we are confident at this period of time to deliver the continue to maintain the pistic quality. So nothing as far as any — any alarming or any disturbing parts concerned. So I think that’s
Renish Bhuva
So sequentially increase in GS3 is purely seasonal and it will sort of come back-in Q4, right?
Sachinder Bhinder
Right, that’s right.
Renish Bhuva
Okay. Okay. Sir, my second question is…
Sachinder Bhinder
Yeah. And you would see again to reiterate that if you look at the OnePlus, it’s at 3.85%. So I think that’s another one, which is a pretty good indicator for us.
Renish Bhuva
Yeah. Sure, sure, sir. Sure, sir. Yes, sir. So second is on the AUM by ticket size. So what percentage of our AUM is more than 15 lakh ticket size? I know in terms of number of active loans, it is 15%, but in terms of AUM, it would be higher, right? So would you like to share that number? And also the yield difference between more than INR15 lakhs and less than 15 lakhs.
Ghanshyam Rawat
Renesh, it becomes a little quite secular, but as I was to put across, we would be in the range of around 40 percentage when it comes to less than 15 lakhs. And that is where we continue to build our yields and the yields are around 200 bps higher than the normal part. So that is the between the less than 15 lakhs and more than 15 lakhs.
Renish Bhuva
Sir, can you please repeat that share in terms of AUM? I’m so sorry.
Ghanshyam Rawat
Our 80% — 80% book is at less than INR25 lakh rupees where we focus on less than INR15 lakh, we have around 45% book is less than INR15 lakh rupees. If this is our own amount and the volume we have already given in our presentation where 85% Group is less than INR15 lakh.
Sachinder Bhinder
Yeah. The slide number 17 on the investor presentation.
Renish Bhuva
Yeah, but sir, that number is in terms of active loans, right? So in terms of AUM, it will be higher. So I was just wanted to
Ghanshyam Rawat
But AUM is the same thing. And active loan and AUM is a — I updated you. On account we have already given in our presentation where 85% loans are less than INR15 lakh. And in value terms, 45% is less than INR15 lakh and 80% is less than INR25 lakh.
Renish Bhuva
Okay. Okay. Got it, sir. And 200 basis-point is a yield difference.
Ghanshyam Rawat
Yes, yes.
Renish Bhuva
Okay. That’s it from my side. Thank you and best of luck, sir.
Sachinder Bhinder
Good yeah, thanks. Thanks, Danish.
Operator
The next question is from the line of Shwetta from Elara Capital. Please go-ahead.
Shweta Daptardar
Thank you, sir for the opportunity. Sir, couple of questions. So are we changing our guidance on growth front or is it that 20% is now a new normal? And also just a related question there. So if we aim for 20% even for this current fiscal, so that would mean almost adding up INR700 odd crores of book in next 1/4. I mean, of course, seasonally second-half has been very stronger. You have demonstrated that your earlier as well, but still INR700 odd crores of run-rate is slightly on the higher side vis-a-vis our historical run-rate. So how do you — how do you sort of — if you can a light on this? That’s one.
Question number two. So I remember you have always been very articulate and impeccable in terms of BTs, restricting them to below 6%. Now in the current scheme of things, you know, wherein many of the NBFCs, AHFCs, etc., I mean, the competition is quite gaining strength and intensifying. So how do you see this the outpaces pitch going-forward and whether the current set of measures will sort of continue to help us curve below 6%?
And one last question. So you mentioned last quarter and this quarter in the opening remarks as well that you’re opening branches in Karnataka and UP. Now I understand larger part of our portfolio is below 15 lakhs and below 25 lakhs. But one of our peers, which has a portfolio about 20 lakhs has been facing a tough tailence as far as Karnataka is concerned, especially because of Iqata and other such challenges. I mean, ours is a contiguous model. I remember you explained how we are expanding to Karnataka from Tamil Nadu in the last quarter contiguously, but still are you facing any challenges considering the fact that you are sort of now moving into Karnataka. Thank you.
Sachinder Bhinder
Yeah. So your three questions. I’ll address it one-by-one. First is about the growth on the AUM. We continue to guide on a 20% to 25 percentage of AUM growth. I think the traction which we got in the Q3 and the numbers in Jan really give us confidence of delivering the guided AUM growth of 20% to 25 percentage. And as we speak, we are expecting January to be at around 15% to 20 percentage on the growth trajectory. So that’s one.
Second, on the BT out, as you reflect and we’ve been talking about our predictive models where EI has really played out very well. We’re happy to note and that the BT out percentage is at around 5.4 percentage. So I think this is one of the — one of the best — best-in-class when it compares to the industry peers. And couple of factors really go into this. One is aided by our predictive models, which we are able to predict what is the probability and chance of a BT out. And I think that is what is perfected. That is second.
Third is on the branch expansion model, I think what you reflected is. As we see and as we speak, I think we are minimal at this period of time what the Karnataka is. But going-forward, as we talk to the people across, I think that easing out of are actually moving across. It started now really getting stabilized actually. And as we go-forward, we would see that really becoming stable over a period of time. So I think we are confident with that environment by the time our branches are open up, it would be fully stable. And there is the government supply.
The other part, which is very initial part to really notice, we have a lot of affordable supply which is there where Avas is one of the strong bearer in that state and these are the properties which are directly allotment by the government authorities. And as we speak, Avas has a quite a good amount of presence in there. And Karnataka has a good amount of stock as we speak across the various districts and places and we’ll be able to maintain that along with the time the time this stabilizes as an initial output really to deliver good volumes.
Shweta Daptardar
Yeah. Sure, sir. Just I’m squeezing in one light question. So any geographic challenges are we facing? I mean, this is outside MFI and what is happening, the noise around, but any geographic challenges in the markets which we are present?
Sachinder Bhinder
Right. As our CRO mentioned, he described about the one plus ranges, nothing as glaring or anything which is alarming at this period of time, that’s what we’ve seen in our TPDs and neither in the GNPL. Sure. And what we are doing is we are cautiously optimistic and watching out wherever we feel there is a slight thing. We actually tighten our credit and underwriting norms.
Shweta Daptardar
Yeah. Sure. Thank you so much for the elaborate answer.
Sachinder Bhinder
Thanks, Vita.
Operator
The next question is from the line of Yash from Citigroup. Please go-ahead.
Yash Gujarathi
Hi, sir. Thanks for the opportunity. Sir, just one question on the provisioning front again. So we’ve seen some increase in margin increase in provisioning on GS3. However, on GS2, it has increased sharply. So any change in policies there or how do we see it moving? And sir, just to add-on that, even our ECL provisioning is around 65 basis-points for total — of total AUM. So any — would we see it increasing as well? That’s the question on provisioning.
Sachinder Bhinder
So I’ll have to answer that on the ECL module comparison, how it spans out and what is the difference which you have made on that over to you, sir?
Ghanshyam Rawat
Thank you, Sir jee. On, I think there’s two questions on the initial provisioning change between Stage 2 and Stage 3 and over nine months-to Nine-Month. If you — during this quarter, we have moved our entire ECL provisioning model from our historical model to the. It’s a — it’s a very universally accepted Deloitte model basically which wherein — when we go-live under this, we have made three major changes in our provisioning norms.
First thing in earlier motors, there used to be point-to-point NPA slippage need to consider in the earlier model. Now in the new model, we consider every bucket flow of NPA, bucket of Stage 1 to Stage 3, State 2 Stage 3. So every bucket movement the model considers it — only it was used to consider at the point of time, but quarter-end to quarter and year to year end when we do revisit our port revisit our model basically. Now this new model do every month is reconsider the fresh data, how much in this month has case has moved, how much case has gone backward basically. So in the Real-time the modeling flow rate approach is adopted in this new model basically.
Second, the third important, I think in the earlier model, it was very difficult to adopt macroeconomic factor basically. Now in new model, we adopted model, which is a macroeconomic factor where it got tested various economic factor basically, the ultimate model has found the two-factor is very important for us, which he has adopted in a Washi model basically. Now after doing these changes, this now issual positioning is what India has described in their detailed guidance not basically. So everything got now adopted and it’s one of the best model — ECL model we adopted here.
There is one more question, Nine-Month to Nine-Month ECL in the volume provision. In last year, in the nine months, there was a few one-off items basically, which was a — there was one-off item was there in the last nine months. One of one was that key, we have the one subsidiary where — because subsidiary was difficult to — we applied to the — to close that subsidy. So we had done one-time write-off of whatever the balance was there. It was around INR1 crore was there. Secondly, we have a certain asset acquired for-sale under Surfacee, which we have provided in the last nine months. So both items put together has around INR4 crore extra provisioning in last year nine months, which not during this nine months. I hope we clarify the — yes.
Yash Gujarathi
Yes, sir. That’s. Yes, sir, that’s helpful. So sir, would we also see this 65 basis-points of provisioning on the overall portfolio also going up eventually?
Ghanshyam Rawat
No, it I think when we went to model, it considers the entire portfolio basically. So based on the current assessment, it will remain in the same level.
Yash Gujarathi
Got it. Got it, sir. And sir, second is on the margin. So we understand this BPLR hike taken in October for 25 basis-points. So is that now completely accounted for or would we also see some impact in the 4th-quarter?
Ghanshyam Rawat
Okay. It got accounted.
Yash Gujarathi
Okay, entirely.
Ghanshyam Rawat
It got — it got accounted. But if you see sequentially, we are making a better yield on our new disbursements quarter-over-quarter, quarter one, quarter two, quarter three, every quarter yield is improving on our disbursement year-on-year basis. So that’s a positive not, which will have, let’s say, not positive, but it will not — it is now a less difference between new business and the old business, right?
Yash Gujarathi
Right, got it. So sir, the disbursement yield, which was around 30 bps lower than the AUM yield. So has that difference narrowed now?
Sachinder Bhinder
So yeah, it has narrowed down, Viyash. And as pointed across various product segments and various part, we continue to focus that. In the previous first question, when I referred to around 40%, I was referring to less than INR10 lakhs focus area of 40 percentage of our loans, so where I stand corrected. So our focus continues to be there on that where we get the risk-adjusted return yields. And we see an uptick quarter-on-quarter and with the same endeavor, technology and those things are also helping us to really improve it in a right and scientific.
Yash Gujarathi
Okay. Got it, sir. Thank you so much for the clarification. That’s from my side.
Sachinder Bhinder
Thanks, Yash.
Operator
The next question is from the line of Ragav Garth from Ambit Capital. Please go-ahead.
Raghav Garg
Hi, good evening and congrats on the results. My first question is, I wanted to understand
Operator
Mr Ragav. Can you speak a bit louder? The volume is coming very
Raghav Garg
Is this better? Is this better?
Operator
Yeah, yeah. Please go-ahead.
Raghav Garg
Okay. Sir, hi, good evening. And I had my first question where I want to understand a bit more on sourcing part. So has your DSA sourcing gone up or if you can give us a number, say, compared to last quarter or last year, the reason I ask is that after several quarters, the number of loan files disbursed per branch that has registered a positive growth rate. Otherwise, if I look at last few quarters, then it was mostly a declining trend. And at the same time, when I look at some of the cost economics metrics such as OpEx per new pile disbursed, that has also declined. So what is leading to such improvement? Is it because of higher sourcing from DSA channels?
Sachinder Bhinder
I think it is multitude of factors which are there, but it is not with some of the digital channels which we have embarked on, which is typically the Metra, e-Mitra, CSE tie-up and our acquisition through the WhatsApp, chatbot and the web from our own website. I think that as a percentage of the digital part has actually started contributing and firing. We continue to be a predominant direct sourcing franchise.
And as we speak, I think on the employee count also when we see that the employee count, whatever addition has had happened on the ROs, which is our relationship offices at the ground. So we continue to be a dominant direct sourcing part. Certain part of digital channels, which are actually started firing actually also have resulted in that mix-shift. We continue to be at 80%, 85 percentage of the direct sourcing part.
Raghav Garg
Understood. So I think, say, you’re about I think 12 files per branch per month. Is this a run-rate that one can assume going-forward at least for the first-nine months of a fiscal? I know Q4 generally tends to be higher, but at least for the first-nine months is 125 per disbursement per branch. Is that something that we can work with?
Sachinder Bhinder
Rather, I think if you look at we are widespread across 373 branches. So depending upon our understanding of the market, depending upon our location strategy, on what are the risk metrics, we really — and the kind of deployment of our resources and the market which we would like to really hold-on to. I think those risk metrics really contribute to that.
The positive side in the last nine months-to report is that we’ve seen an increased RO productivity per. I think those are the matrices we monitor because this direct averaging out becomes a little very different model altogether. So we divide it in a much micro detailed one on the market size, looking at the geography, state, our vintage in the state, the credit portfolio behavior and then really deciding what is that we really want as an output.
Raghav Garg
Okay. Understood. No, fair enough. The only reason I was asking is basis the data that made available to us, of course, you would have a much more nuanced view of how you know it works. But anyway, my last question is on the ticket size. See, when I look at the ticket size per quarter, right — sorry for this quarter on disbursements, for last two quarters, that has increased at about 4% to 6% in each of the last two quarters on a quarter-on-quarter basis, not Y-o-Y, right? So that’s a pretty steep increase in ticket size. Why is this the case that the ticket size is increasing at same as an average of 5% for each of the last two quarters.
Sachinder Bhinder
I think if you look at the real-estate inflation, it is not even meeting the real-estate inflation. And if you talk about the kind of growth which has happened in the land rates in the states which we walk across that is higher than this. So if you adjust by that, I think it is below whatever is the retail real-estate inflation which has got into the land pricing and the pricing which is prevalent in the markets which we operate. That’s one.
Secondly, some of the portions where we are present, where cost of construction is higher than what the normal one. And it is actually really inched up considering the kind of rural ability to spend and rural ability to really build good, better and bigger houses actually. So I think these two things have really contributed to one. It is output which is there, which is not determinant on what we really drive for or be focused for. So our focus is clear-cut on the input which is there and whatever comes across on the output and rightfully so in a risk-adjusted matter is what we really monitor for.
Raghav Garg
Okay. Sir, let me ask this in another way. So you’re, I think less than 15 lakh by value, the AUM mix is about 45%. What was this last year against 45% currently.
Ghanshyam Rawat
It’s not is not a much change. I think if you see on nine months-to Nine-Month, our ticket size is just increased by 6% if you see last year, December nine months or this year, December nine months, there is a 6% to 6% increase in the overall ticket size, which is a — which is a — we feel the inflation, property prices or rising income levels, all our factorings are there basically. And as far as the combination of ticket size is concerned, we are 1% to 2% here or there, doesn’t make a big change in our business model.
Raghav Garg
Fair enough. Thanks a lot for the answer.
Sachinder Bhinder
Thanks,. Thanks.
Operator
The next question is from the line of Abhijit from Motilal Oswal. Please go-ahead.
Abhijit Tibrewal
Yeah. Good evening, everyone and thank you for taking my question. So the first thing is again coming back to provisioning and asset quality, while did explain about the change in ECL model that we have done and which is where maybe it would have led to a one-time change in the PCRs across those three stages. What I wanted to understand is, if I look at the last 10 quarter data, our Stage 3 provision cover has very slowly and gradually been inching up. So while I understand this is an outcome of the ECL model that we have, but inherently what is it kind of telling us about the risk metrics?
Ghanshyam Rawat
Abhijit, it generally remained between 27% to 29% in our ECL model for Stage 3 provisioning. And as you know, company is — if you see last so many quarters, the aging of portfolio was six year, seven year, eight year, 10 years. Now today we are the 12-year, 13-year business operation basically. So aging — in ECL modeling, aging of the portfolio, aging of, let’s say, NPA assets is also increased certain level of your provisioning also basically. Apart from that, I don’t see any sort of — any sort of, let’s say, any variation or disturbing factor-in the ACL model.
Abhijit Tibrewal
Yeah. Got it. Thank you., sir, the second question that I had was obviously around the demand environment. While you did say that looking at trends in 3Q and Jan, it gives us the confidence that maybe we can be at the lower-end of our guided range of the AUM growth. But I’m just trying to understand more-and-more NBFCs and HFCs as they report, they have been talking about a weak macro-environment and given the fact that we also have a presence in the MSME segment, I’m just trying to understand how are you kind of looking at basically the risk environment today? I mean I recall you and Ashu sir have called out that at least looking at plus in GS3, you’re not seeing any significant increase in risk, but how are you looking at the broader macro-environment?
Sachinder Bhinder
Yeah. So Abhijit, there are two things. I think important to note is we are there in the part of MSME, which is micro MSME, which is the one which is backed by our understanding of risk and doing a cash flow-based underwriting and backed by self-occupied residential property. I think that’s one very big differential when it comes to the very base of risk management practice. So the Tier-3 to Tier 5 wherever we are operating, we’ve seen those demands really being coming up.
And as we speak about on a risk management framework, we cautiously monitor as to what are the trends which really show-up. If we find anything on the segment-wise strain because of the macro-environment having a waterfall effect on those economies or on those segments of customers, we actually hold-on to that. So at this period of time, what we speak, I think we are well guarded with a cautious approach of underwriting and continue to do that in a long-term period. And that will be our continuous business of a robust risk management practice. That’s one.
Secondly, when you talk about the home loan demand, I think you have to look at it from a perspective of two-parts. We are into Tier-3 to Tier 5 where it is self-construction individual house. Again, a certain part of — you would have really looked at PMAY 2.0 in two-parts, which is the ISS, which is the interest subsidy scheme where we’ve already received around 4,000 plus of applications of — to us. And the affordable piece where it is the ULB-led supply, which has really come in post all the elections being over.
So the strong self-construction individual consumption continuing to grow. Second is the government’s focus on housing for all and the PMFI 2.0 really helping in the segments which are really focused at economically weaker section where Avas operates. And third is the urban-led supply from the affordable housing, again a part of PMA. I think these are the three strong factors for us to say that where-is the real demand coming and flowing in.
Abhijit Tibrewal
Got it. So incrementally, if you look at the last maybe three to six months, I mean, after the elections have been over, you would say that the demand has improved barring the seasonality.
Sachinder Bhinder
Yeah, demand has started — yeah, demand, we see an uptick in the demand and specifically in certain segments and verticals as I speak of the PMA affordable supply, which is there. The other question which was there on the Karnataka, we said that as we are present in there, there is a supply which is there from the urban-led bodies available. And we are confident having done that business for more than we have 20,000 plus of customers in that and we have done that business right from the time when we started-off and when the supply really came in, we are confident of doing that because that’s the hard work of having the with urban local bodies and building that business. Since there’s a specific vertical which focuses on that, we will be able to cater to the inventory supply, which is really coming up and source it in a much more faster, granular and quicker manner.
Abhijit Tibrewal
Got it. Understood useful. And I just wanted to squeeze in one last question, while this has partly been addressed earlier on yields where we did take, I think a 25 basis-points PLR hike in October and that has reflected in our yields. Just trying to understand in the past, we have seen all these PLR increases that you or other HFCs have taken, they’re not really reflected in a sustained yield expansion, so as to say. And again, I think maybe that is because of the disbursement yields kind of remain below the book yields. What’s the sense now you think these yields can be absorbed or given the competitive intensity over the course of time, they will drift out?
Sachinder Bhinder
So I think you will have to really look at the PLR increase was in-line with our cost of borrowing really increasing to size upon on that side. And that was the market scenario, which was there really to have had the increase which is there. I think as I’ve been talking earlier that we continue to increase our disbursement yield on product metrics and again with risk-adjusted returns. So our endeavor really continues to do that.
And as we speak on the Nine-Month period, we are above 25 bps compared to what we were there and every quarter-on-quarter, we see that impact really on the disbursement yields coming. And secondly, on the PLR impact, what you were really referring to, we have a book which is 30 percentage fixed, so implication comes only on the rest of the book, which is a floating-rate book, which is there. So I think it is important to really build-in a right risk-adjusted manner or to increase the disbursement yields to really inch up. And we’ve seen that trajectory well in control and inching up as we progress on quarter-on-quarter basis. And again with the scale of business what we really aim for.
Abhijit Tibrewal
Got it. Thank you so much for patiently answering all my questions. And I wish you and your team the very best.
Sachinder Bhinder
Yeah, thanks.
Operator
The next question is from the line of Rajiv Mehta from YES Securities. Please go-ahead.
Rajiv Mehta
Yeah, good evening. Congrats on good results. I have a couple of questions. Sir, this 30-odd percent boost to productivity from a reduction in to sanction tax. So have you raised business targets for ROs and branches since they can execute much higher volumes now? And on the same lines, can one expect that disbursement growth be much higher in FY ’26 than the usual run-rate of 17%, 18%.
Sachinder Bhinder
Rajiv, then you are referring to which data, if you can again reariticulate the question, you’re referring to the TAT or you’re referring to the
Rajiv Mehta
Sanction TAT has come down, right, from 10 odd days to seven-odd days. Yeah. So the efficiency and productivity has gone up.
Sachinder Bhinder
So, yeah. Yeah, that is what you see in the reflect in the productivity metrics also from perspective of disbursement coming up. So I think we see that will be improving from 13 period to ’17 period, that simply frees up the efficiency both from us and the writer perspective and from side to really in a much faster predictable manner than what it used to be earlier.
Rajiv Mehta
Okay. And see on asset quality, typically in Q4, we generally pull-back one plus DPD substantially every year. Are we confident of doing that this year as well? Because see the business and liquidity backdrop for some of the delinquent customers could be challenging this year versus the preceding year. So are we looking for a very similar pullback that we generally deliver in 4Q?
Sachinder Bhinder
I think if you look at Rajiv from a perspective of quarter two to quarter three, I think OnePlus is already at around 3.85 percentage, which is well below our guided range of 5 percentage. We are below 4 percentage at 3.848.5 percentage. I think that’s a good indicator for us. And we continue to be and our endeavor is to really control and maintain the pristine quality considering the way we underwrite and the way we really collect that.
And I think couple of things there work across where technology actually has helped us to really predict the part of bouncing, the predict the parts of customer behavior and the part. So I think it gets front-ended when it comes to our collection efficiency to really have the right kind of predictive models helped by our AI, which is a proprietary led internal developer. So having perspected that, that becomes a good one.
And you’re going to be happy to know that we even use and others really go across collect and we are very, very clear as to what is the range and what is the method of even the collection, what it would happen. So I think technology on that side really plays a part. So it’s a mix of the right kind of technology, right kind of risk management practices and efficiencies which we really bring in to counter and deliver the pristine quality as a franchise.
Rajiv Mehta
Okay. And one last thing is on the comment that you made that the incremental business yield has been improving every quarter and across products. So how is this being achieved? I mean, are we slightly pushing on rates or some other kind of pricing efficiencies we are tapping here?
Sachinder Bhinder
I think, Rajeev, as I said that again the — it is risk-adjusted return. I think wherein we’ve gone for — we’ve implemented loan origination system by SFDC. And I think therein there is a clear visibility on the risk metrics, which really gives us a pricing import, which is because of that, it is really helping us to price it right according to the risk metrics. So I think that’s actually really played out in helping us to be much more predictable in the output which we are able to deliver.
Again, segmental focus of focusing on less than INR10 lakhs, which where you get good yield, a focus on inching up where you find that you get a right risk-adjusted returns by pricing it right. I think these are the two things which are very important and we’ve seen that moving across quarter-on-quarter and our endeavor will continue to grow that again cautiously with risk-adjusted returns.
Rajiv Mehta
Okay. Got it. Sir, thank you and best of luck.
Sachinder Bhinder
Thanks.
Operator
The next question is from the line of Shreepal Doshi from Equirus. Please go-ahead.
Shreepal Doshi
Hi, sir. Good evening and thank you for giving me the opportunity. Sir, my question was on RM level target. So when — in newer geography, what sort of RM level KRAs we said in terms of business or business sourcing versus matured branches and the level of disbursement that we have done this quarter, do you — do you aspire to maintain it going ahead like the revival in disbursements?
Ghanshyam Rawat
Yeah. No. As we — as you know, Avas when enter the new geography, we take our own time to understand that market, people behavior, geographical behavior, the local population behavior, legal and technical title. So immediately in the few — initial few quarters, we didn’t give as such any large target to them. The major focus was that, there should not be any delinquencies in the initial quarter. There should not be slippage in the initial few quarters as in any bucket. So we as a company don’t have philosophy in initially in the new geography to give targets in those markets.
But wherever we have the strength, where we have maturity, where definitely we strengthen the of our branches through process policies, through understanding, through flowback learning and then accordingly, we ask them the returns also by giving a targets basically. As a RO is a different maturity, who RO who has done one year, two-year plus in the system, they definitely have a better — a better target. So who RO comes in new in the organization, they had a lower target in the system basically.
Shreepal Doshi
Okay. So sir, especially post states like Karnataka versus Rajasthan and Gujarat and Maharashtra, but I mean, because in Karnatak also, we’ve been there for almost couple of years now. So what would be the differential in terms of branch level efficiencies in terms of business?
Ghanshyam Rawat
Karnataka is now come up — is we are in the fourth year business operations. Branches which has completed a three-year plus, they are at par with our matured state like Rajasthan, MT, Gujarat and the branches which we opened in last one year branches, those branches are showing the progress as we desired.
Shreepal Doshi
Okay. Got it. Got it. And sir, on disbursement front, like will this run-rate continue
Ghanshyam Rawat
As a Karnataka as a whole, is it doing a disbursement growth better than our overall company growth? Much better much better. As well as performance also, quality front also, Karnataka is doing fantastically well for us.
Shreepal Doshi
Got it, got it. And sir, just the second part of the question was on disbursement side. So will we be able to continue with this disbursement momentum because in the last few quarters, there have been some like ups and downs. So will we be able to continue now incrementally?
Sachinder Bhinder
Yeah so on that part, if you look at it, when you refer to ups and downs, it has always been on an upward trajectory. And every quarter-on-quarter, we’ve seen that traction really moving across. And as earlier guided that we see a good uptick in green shoots in January at this period of time and we are confident of pushing that every quarter and build that scale with quality.
Shreepal Doshi
Got it, sir. Got it. Thank you so much, sir. Good luck for the next quarter.
Sachinder Bhinder
Thanks.
Operator
The next question is from the line of Ranshu Mishra from PhillipCapital. Please go-ahead.
Shubhranshu Mishra
Hi, so what is the yield on-book for home loans, lab and MSME and what are the onboarding yields for these products.
Ghanshyam Rawat
Yeah, home loan versus, let’s say, non-home loan, which is MSME or lab, there is always difference of 250 basis-point between home loan to non-home loan. Yes, MSMA businesses give us another 75 basis-point better pricing than the lab portfolio. We do — out of non-home loan, we do around 75% business as a non — as MSME business, which is our focus area yeah on the MSMA.
Shubhranshu Mishra
So what is the home loan yield?
Ghanshyam Rawat
It remain in the range of between 11.5% to 12%.
Shubhranshu Mishra
This is on AUM and what is on disbursement for the same?
Ghanshyam Rawat
As we mentioned that is that difference between the new business versus our old business AUM, difference is 32, 32, 35 basis-point as of now.
Shubhranshu Mishra
Okay, sure. Thank you.
Sachinder Bhinder
Thanks.
Operator
The next question is from the line of Chandra from Fidelity. Please go-ahead.
Chandra
Hi, good evening. Hi. Could you just share maybe the percentage of disbursements which you had this quarter below 10% yield and maybe what it was for the previous quarter? And directionally, I think you were trying to reduce it. So if I had to look at it maybe a year out, would you think it’s a reasonable chance that the amount of what you’re disbursing below a 10% yield or in single-digit essentially would drop? That’s one.
Second is, this business might after declining for a while, the spreads have finally pinched up a little bit. Do you think it’s reasonable that at some point in time, you’ll cross 5% and you settle back to maybe 52530 at some point in time, is that a realistic possibility?
And just lastly, how — what would you think you are capacitizing sort of the business for in terms of next year just in terms of disbursements? I mean, is it maybe — I mean, obviously, first-half was a little weak because we had some issues, but I mean, are we capacitizing for maybe a growth of disbursements of maybe 17%, 18% on the base of this year? How should we think about it? Thank you.
Sachinder Bhinder
Yeah. So you have three questions. First is on the yield, but if we look at it from a ticket size perspective, I think that is the input which we really look at it. On a ticket size of less than 10 lakhs, our endeavor continues to be in the range to cover-up at around 35%. As we speak, we are in the range of 30% to 35 percentage when it comes to a ticket size less than INR10 lakhs. And this has a real right kind of risk-adjusted yielding up good spreads as well as the yields. That’s number-one.
Number two…
Chandra
So that was 30 to 35 towards 35 you’re saying. Saying is gradually you want to increase the share below 10 lakh.
Sachinder Bhinder
Yeah, our aim for is to get to 45 percentage. Currently, we are hovering between 30% to 35 percentage of the loans which are less than INR10 lakhs in the ticket size. So it’s not a yield, it’s on ticket size, okay, that’s one.
Secondly, on the part of — we are capacitized and we are looking at gain on a guidance level of continued of AUM of between 20% to 25 percentage. So we’ll continue our guidance on a AUM of 20% to 25 percentage. And as we speak, I think our concentrated efforts to really get-in the yield improvement on quarter-on-quarter basis, we will continue that in the next financial year also, again, with the risk-adjusted returns metrics and robust risk management practices.
Chandra
Sure. And on spread, do you think that getting to 520 at some point is a realistic possibility?
Sachinder Bhinder
See, Sandra, this is, I think an outcome of the cost of borrowing. And if you would have seen that is one part is there. I think we work on the input, what is that we will get, whatever the difference between would be really the ones which — and we’ve always guided that we will really look at the kind of spread which was at around 5 percentage, which we’ve guided across. It all depends upon how does the economic environment on the macro side really spans out. If the rate comes in, I think we will have the benefit. And as what really talked about, we have EBLR, a repo lean, T-build link kind of borrowings, which will have an immediate impact on our cost of borrowing. I think that is a differential which we’ll come across really spanning out on the increase in the spreads.
Chandra
Got it. Thank you.
Sachinder Bhinder
Thanks.
Operator
Thank you. The next question is from the line of Chawla from ITBI. Please go-ahead.
Bunty Chawla
Thank you for giving me the opportunity and I congrats on a good set of numbers. During this quarter we have seen there has been an inch up in the cost of borrowings. Although you have shared that we have raised the 600 crores IFC at a competitive rate which I believe it should be lower than the borrowings at the book level for you. So what is the reason behind increase in the cost of borrowings? What we observed that there has been a minimal or no MCLR hike from the banks as such during this quarter. So then also there has been an increase in the cost of borrowing during this quarter and how should shape up this cost during next quarter? And FY26
Ghanshyam Rawat
Yeah. In this quarter overall cost of borrowing is increased by 9 basis points. Yes you are right 600 crore rupees we borrow for IFC which is much lesser than what average cost of borrowing. But as you know we borrow lot of money from banks which is one year mclr, six month MCLR basically So whatever money we borrowed a year back at let’s say SBI MCLR which used to be 8.3, 8.4 today that same MCLR is reached at 9% basically so that impact pass on when the liability reset in that quarter basically. So I think by the next year most of the liability are getting repriced more what we borrowed earlier in different point of time basically so more or less we are seeing as a stabilization in cost of borrowing site few basis points here and there basically and because we hope if some cut comes that will be a positive note for us.
Bunty Chawla
That’s very helpful sir. And previously you said because of the rate cut we will be getting beneficial. Any rough sense if there is a 50bps rate cut what kind of a positive impact we have on the spreads or the margins?
Ghanshyam Rawat
As I mentioned our 50% borrowing are market link borrowing which is a repo link, T bill link and less than 3 month MCLR. So we hope that should be a positive impact within three month time frame. But it’s difficult to predict how it will be get translated when the rate cut start.
Bunty Chawla
Thank you. Thank you very much for that.
Operator
Thank you. Ladies and gentlemen, due to time constraint this was the last question for today’s conference call. Now hand the conference over to the management for their closing comments.
Sachinder Bhinder
Thanks. Ladies and gentlemen, as we conclude today’s earning call I want to express my heartfelt gratitude to each one of you for your participation and engagement. The dedication of our team, the trust of our shareholders and the loyalty of our customers have been instrumental in our growth. We aspire to reach a milestone of rupees 500 billion in assets under management in next four to five years and broaden our horizon as a Pan India player and continued our cost optimization strategy.
I express My deepest gratitude to all our regulators and stakeholders whose constant faith and support have been the wind beneath our wings. We remain optimistic about the future and are confident that our strategic initiatives will continue to drive sustainable growth and shareholder value. If you have any further questions or require additional information, please feel free to reach out to Rakesh, our head of investor relations. Thank you and have a wonderful year ahead. God bless.
Operator
On behalf of AWAAS Financial limited that concludes this conference. Thank you for joining us, and you may now disconnect your lines.