Aptus Value Housing Finance India Ltd (NSE: APTUS) Q2 2025 Earnings Call dated Nov. 06, 2024
Corporate Participants:
M Anandan — Executive Chairman
Balaji P — Managing Director
Analysts:
Mona Khetan — Analyst
Renish Bhuva — Analyst
Shubhranshu Mishra — Analyst
Unidentified Participant
Nischint Chawathe — Analyst
Nidhesh Jain — Analyst
Jigar Jani — Analyst
Rajiv Mehta — Analyst
Kushan Parikh — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to Aptus Value Housing Finance India Limited Q2 FY ’25 Earnings Conference Call hosted by Dolat Capital. [Operator Instructions]
I now hand the conference over to Mrs. Mona Khetan from Dolat Capital. Thank you, and over to you, ma’am. Please go ahead.
Mona Khetan — Analyst
[Technical Issues] earnings conference call of Aptus Value Housing Finance to discuss its Q2 and H1 FY ’25 performance. We have with us the senior management from Aptus to share their industry and business insights.
I would now like to hand over the call to Mr. Anandan, Executive Chairman, Aptus, for his opening comments. Over to you, sir.
M Anandan — Executive Chairman
Thank you. Thank you, Mona. Ladies and gentlemen, good afternoon to all of you. I’m Anandan, Executive Chairman of the company. I welcome you all to the conference call to discuss the company’s performance for quarter, half year ended September ended 2024.
I have with me Mr. P. Balaji, MD; Mr. C.T. Manoharan, ED and CBO; and Mr. John Vijayan, CFO. The financial results and the investor presentations are already available on the website of the stock exchanges as well as the company. I hope you had a chance to look at it.
With low market penetration and significant housing shortage across regions, more particularly in Tier 2, Tier 3 and 4 cities where we operate and with government initiatives, including [Indecipherable] scheme supporting the sector, we believe that we are having significant headroom for growth to serve the underserved, unserved customers largely in self-employed segments.
At Aptus, we believe in strong growth without losing the focus on the quality of loan book and good financial metrics. Very happy to record that Aptus had a very good first half year FY ’25, supported by business growth, stable asset quality and continuous focus on our productivity.
Sharp focus — business focus, good distribution network, deep penetration in served markets, customer centricity along with appropriate tech support and diversified income stream have enabled the company to achieve good business results.
As you know, our net worth stands over INR4,000 crores, resulting in robust capital adequacy. This coupled with good support from institutions like NHB, banks, mutual funds and DFI on the borrowing side, and the strong on-ground demand for both home loan and small business loans gives us confidence to pursue strong growth in the coming years with sustained profitability.
I would now hand over the line to Mr. P. Balaji, MD, to discuss the business focus, operating and financial parameters. Thank you.
Balaji P — Managing Director
Thank you, sir. Good afternoon, friends. As we have been explaining in the earlier call, we will continue to focus on key strategies namely growing disbursement on loan book both in housing loans and small business loans, considering the large headroom available in the low- and middle-income segments in Tier 3 and 4 cities, expanding operations continuously in the state of Odisha and Maharashtra, and increasing penetration in existing geographies by opening new branches.
Strengthening the analytics and digital adoption, about 20% of our business in Q2 FY ’25 has come from customer referral app, construction ecosystem app, and through social media channels. Our focus has been to increase the leads through these channels in addition to the typical branch network, continue to focus on productivity, collection efficiency, opex and cost of funds.
During the quarter, the new mobile first lead management software, which was launched in April ’24, settled well and is bringing in good improvement in terms of streamlining our processes, service delivery, asset bound, improved collection productivity, better regulatory compliance and improving overall efficiency. We are continuously monitoring the functioning of this new system to bring in more improvements.
Major performance highlights for this quarter, half year was as follows. AUM grew by 27% year on year to INR9,679 crores. Disbursements during the quarter increased by 26% year on year to INR935 crores, sequential quarter-on-quarter growth was at 39%. We have 291 branches as on date. During the quarter, we opened 24 branches, and for the half year, we have opened a total of 29 branches. Plan for the year will be to add a total of 40 branches. Total live customers were at 145,000 customers, a growth of 27% year on year. NPA was at 1.25%. In terms of asset quality, collection efficiencies were at 99.28% and our 30-plus DPD marginally improved to 6.23% as on 30 September as compared to 6.31% as on 30 June. Net NPA was at 0.94%. Provision coverage has been maintained consistently at 1.03% as on 30 September. We are carrying a total provision of around INR100 crores including a management overlay of INR45 crores. And this, when computed as a percentage of NPA, worked up to a coverage of 82%. NIM was at 13.02%. Opex to assets were at 2.65%. Portfolio after tax was at INR354 crores, representing a growth of 22% year on year. ROA was at 7.77%, and ROE was at 18.3%, which is one of the best in the industry.
In terms of funding, during the quarter, we diversified our borrowings further by issuing NCDs worth INR400 crores to mutual funds. Of the total borrowing, 59% is from banks, 19% from NHB, 11% from NCDs, which will be mutual funds and IFC and the balance in the form of securitization. Sufficient balance sheet — on-balance sheet liquidity of INR1,239 crores is maintained, including an undrawn sanction of INR550 crores from banks. As you are all aware, we have not done any direct assignment of loans, leading to contending [Phonetic] of income on account of this.
Now with these remarks, I open the floor for the question-and-answer session. Thank you.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Renish from ICICI. Please go ahead.
Renish Bhuva
Yeah. Hi, sir, and congrats on a good set of numbers. Sir, just two questions from my side. One, on the LAP book, right? So is it possible to share like say, what percentage of our LAP book customers might have MFI loans?
Balaji P
Actually, there is no overlap. We just did a scrub report for the live customers we have with us. Actually, there is no overlap of MFI customers with the kind of our customers.
Renish Bhuva
Okay. Okay. And secondly, given there is a lot of noises around the growth for NBFC. Do you foresee any risk to our near-term growth targets because of the regulatory pressure?
M Anandan
No, it — I think this will be a question, which will be — it will be in the minds of quite a few analysts and the persons who are in the call. I would like to explain this RBI stance, which we have understood in a certain way. I’ll just clearly explain this. I think then we can take it forward. From what we understood, RBI seems to be more uncomfortable on the following things. One is unsecured loans, MFI, unsecured loans, personal loans and — consisting of personal loans and consumer loans, including the loans given by fintech companies and secured loans with very small ticket size from, say, INR2 lakhs to INR3 lakhs. They seem to be uncomfortable if these companies want to grow at 40% or so. And they also seem to be uncomfortable about the superior interest rates charged by them at over 24%. And they are also not comfortable with netting off of loans leading to evergreening of loans, which is being practiced by some of the players in the industry.
They are also insisting on the fact about the importance of being transparent with the customers in terms of pricing and fees that is being collected from the customers. All this, I would like to have in — study — we have already studied the impact of this. In terms of impact on assets, first, we have fully secured loans, both in housing and non-housing and the second thing is mostly self-occupied residential property. And we have given a guidance of 30% AUM growth at a lower base. And they are also charging interest rates, which are reasonable across products. Our [Indecipherable] is around INR8 lakhs to INR9 lakhs with an LTV of around 35% to 40%, which means the security value is around INR30 lakhs or more. And we do not follow any netting of loans in assets.
In terms of transparency with the customers, we have been transparent in terms of communicating the interest rates and other changes, both in the sanction letter, MITP and also in the website. Further, we also communicate this in the vernacular language. Hence, we are not impacted by this RBI stance, which is being taken across companies.
Renish Bhuva
Yeah. Got it. Got it. This is very helpful, sir. And just last question. On the provisioning front, so if I remember correctly last quarter, our provisioning was lower because we have stopped creating management overlay. But then this quarter, there has been a significant jump in the provisioning. So is this due to the higher write-offs in this quarter?
Balaji P
No, no, it’s not that. See, if you look at the provisioning, it has dipped very marginally from 1.05% to 1.03%. And regarding the write-off, what has happened is if you look at the provision moment as per the provision coverage issued, there is a moment of almost INR4.78 crores and the debit in the P&L is almost INR9.51 crores. This is basically because of our conservative accounting policy of more than 24 months overdue account making technically written off. But there is also what — how we would need to look at this is you also need to look at the other income where there is increase of almost 26% [Phonetic], where the [Indecipherable] also has been factored in. If you look at that for this quarter, we have got a recovery of almost INR2.77 crores. So that’s how you need to look at it.
And the provision coverage, as I told you earlier, we are adding almost INR100 crores of provision, of that INR45 crores is the management overlay. And the actual provision required as per the ECL model is INR65 crores.
M Anandan
And to add to what Mr. Balaji said, debit to the P&L account is slightly the provision — additional provision to debit to P&L account is slightly higher than the first quarter, mainly because there is an increase in the loan book of about INR650 crores between first and second quarters. So that — and that also carries in our provision.
Renish Bhuva
Got it. Got it. No, this is very helpful, sir. Thank you and best and best luck, sir.
M Anandan
Thank you, Renish.
Operator
Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Shubhranshu Mishra
Hi, sir. Good afternoon. Thanks for the opportunity. Two or three questions. The first one is around…
Operator
Sorry for interrupting you, sir. Your voice is not clear.
Shubhranshu Mishra
Just one sec. Hello. Hello.
Operator
Hello. Yes…
M Anandan
Yeah. Please continue.
Shubhranshu Mishra
Yeah. The first question is on the yields, sir. When I look at the yield, it is around…
M Anandan
I’m not able to hear you, Shubhranshu.
Operator
Sorry for interrupting you, Shubhranshu sir, your voice is not clear.
Shubhranshu Mishra
Just [Indecipherable] Hello, is this better?
Operator
Yes, now it’s clear.
Shubhranshu Mishra
Sure. So the first part is, can we — can we [Indecipherable] of each asset class that we have on book as well as on disbursement because when I look at the yield, it’s roughly around 17.5% on the book versus blended. Any particular regulatory audit remarks that we have got because of this because the regulator has been speaking about high IRRs on various asset class?
M Anandan
You are not clear at all. Your voice is totally breaking, and not clear, Shubhranshu.
Shubhranshu Mishra
Maybe I’ll come back in the queue as my voice is breaking.
M Anandan
If there is anything, you can give me call also, I can explain. Yeah.
Shubhranshu Mishra
Yeah, yeah. I’ll do that, sir. Sure, sure.
Operator
Thank you. The next question is from the line of Abhishek Agarwal, an individual investor [Phonetic]. Please go ahead.
Unidentified Participant
Hi. Am I audible?
M Anandan
Yes.
Operator
Yes, you are audible.
Unidentified Participant
Yeah. Congratulations on great set of numbers. So what I’ve noticed that in the few quarters that have gone by, on the borrowing side, the floating percentage of our borrowings is going up. So could you share your strategy on what number ultimately we are looking at on the floating versus fixed side?
And the other question that I would like to understand on is that the asset book. The 80% of it is fixed. So going forward, when we presumably would see a rate cut, are we confident of not losing customers who might want to refinance these loans with banks who would pay on floating interest? So those are my two questions. Thank you.
Balaji P
First, if you look at the borrowings, if you look at our leverage, it is around 1.5 times now. And we would like to — since — if you look at our capital adequacy ratio, it is 70%, which means the future growth which we are projecting for next five, six years is going to come out of borrowings. So with the result, the leverage, it is currently — the debt to equity is at around 1.5 times is likely to go up to 4 times to 5 times, and we are comfortable with that. And that will be the growth path and that will be the way in which the growth in business will be funded. So it will be totally out of borrowing. That is the first thing.
Next thing is on the yield that you’re talking about 80% is fixed, yes, I mean, I don’t think we have been following this practice right for the last 15 years. We have not lost any customers because of the rates we are charging. And if you look at our interest rate, we are charging around 15% to 15.5% on the housing loan. On the quasi [Phonetic] home loans, we are charging around 17% to 18%. And the non-housing loan, we are charging around 21%. It is comparable with the people — with the interest rates charged by the peers. And also, in the case of small business loans, it is 2% or 3% less than the market rates. So we don’t see that kind of a — that there will be a pressure on us to reduce the interest rate or we’ll be losing customers because of this.
M Anandan
Just to add to what Mr. Balaji said, on the liability side, on the funding side, up about INR6,000-odd crores, that is about 56% is only from the bank. Outside the banking system, about 45% largely coming from the NHB, the securitization. And on the other entities that are very [Indecipherable] so there is no variability in that. Within the banking — bank borrowing also, — the tenure is long term. You’ve always gone for long-term tenure, four to five years minimum. But in some cases, there is a variability coming on the interest reset linked to the either the REPO rate or the MCLR.
So when we say the variable loans, it is not really the entire loan is variable. Only that part of the loan which is taken from the bank. And within that also, partly it is fixed and partly it’s variable either linked to REPO or linked to the MCLR. In fact, last three, four months back or six months back, we decided not to really take any loans — not to take loans only mainly linked to the external benchmark like REPO rather than the internal benchmark like MCLR and all. So to that extent, the variable component is somewhat manageable and required purely to support the growth in funding.
On the asset side, you are right, 80% is a fixed rate, where in case of interest situation, reduction in interest rates as and when it happens, you may tend to get benefit, because of the fixed nature of the loans. At the same time, going by our past experience, the pre-closure rate, in our case, is much, much lower. It is not more than 2%, 3%. The overall pre-closure rate is around 7%. Of that, about 4% to 5% is the money coming from the customer, their own source. It is not really coming out of a loan transfer really. So our experience in preclosure is very limited. And to that extent, the customers are — we anticipate that annual fees change in terms of when the interest rate [Indecipherable] comes down a bit. And while we can see benefit, the risk of preclosure is much lesser. So variable is about 20% that we have [Indecipherable].
Unidentified Participant
Understood. Thank you so much, sir, and all the best.
Operator
Thank you. The next question is from the line of Shivam from Abu Dhabi Investment [Phonetic]. Please go ahead.
Unidentified Participant
Sir, can we start giving the private versus PSU bank breakup in our borrowing? Is it possible?
M Anandan
You are not clear. Voice is not clear, Shivam.
Unidentified Participant
Sir, I’m saying can we start giving the private versus PSU bank breakup in our borrowing?
Operator
Sorry for interrupting you, sir. Your voice is not clear.
Unidentified Participant
Can you hear me now? Is it better now?
Operator
Yes.
Unidentified Participant
Is it better now?
Operator
Yes, sir.
Unidentified Participant
Yeah. Sir, can you start giving the private versus PSU bank breakup in our borrowing?
M Anandan
What is that?
Balaji P
Breakup in borrowing, PSU bank.
M Anandan
PSU bank. See, if you look at my total borrowing, bank borrowing is 59%. Of that, around 25% will be from PSU bank or maybe 30% will be from PSU bank and the balance will be from private sector banks. And as I said, NHB is almost 19%, NHB borrowing, and NCDs is around 11%. The balance is in the form of securitization.
Unidentified Participant
Okay. Sir, can we start giving this number directly in our investor presentation? It will be helpful from the next quarter.
M Anandan
Yeah, we can do that. That is not an issue. Yes.
Unidentified Participant
Okay. And the second question is, sir, bifurcation of the variable rate borrowing between the REPO rate and the MCLR?
M Anandan
I’ll tell you. See, of the total borrowings, the borrowings linked to the external benchmark rate is around 20%, the amount borrowing linked to MCLR is around 32%, fixed is around 48%.
Unidentified Participant
Okay. And sir, right now, the — as the regulators are very hard on high interest rates. So what is the interest that we are charging on the small business loans?
M Anandan
We are charging 21%. This is reasonable according to us. Yeah.
Unidentified Participant
Okay. So there is no…
M Anandan
Large part of our portfolio being a home loan company, the large part of portfolio is really in the home loan, where we charge interest rate of around 15% to 15.5%. The second large component is the quasi home loans where we charge about 17.5%. Now then there is the smaller part in terms of the SME loans, where the interest rate is around 21%, 22%. But that really because the RBI regulatory concern is really more in terms of the unsecured loans, small loans flowing out of microfinance, flowing out of fintech companies. And the term that they use is usurious interest rates. So we don’t really come under this category.
Unidentified Participant
So we are not thinking of reducing the interest rate from 21% to something like 20%, right?
M Anandan
[Indecipherable] part of the company is operating in this segment, in that particular segment. And our rates are quite comparable. And we don’t see [Indecipherable]
Unidentified Participant
Okay. Understood. Thank you, sir. It’s been 13 quarters since we are giving the quarter-on-quarter growth. So congratulation on a good set of numbers and hope to see the good numbers in the future quarters also. And by the way, sir, 30% growth rate for the next five years is comfortable, right?
M Anandan
Yes, next five years, we’ll see. At least for the next three years, it is there, 30% will be there.
Unidentified Participant
Okay. At least for three years, okay. Thank you, sir.
M Anandan
[Indecipherable] Yeah.
Operator
Thank you. The next question is from the line of Yash from Citigroup [Phonetic]. Please go ahead.
Unidentified Participant
Hi sir. Thank you for taking the question. A couple of questions. First is on the ECL provisioning, where ECL provision to total AUM in this quarter has slightly gone down to 1.03% where as we have been guiding of comfortable range of 1.05% to 1.1%. So how do we see it moving? And I mean would it inch up in the 2H of this year?
M Anandan
It depends if you look at the — I mean, obviously, the provisioning depends on the quality of book and quality of collection, okay? So if the collections are happening very on time and if the collection efficiencies are good, I don’t think we should increase the provision. So we’ll be maintaining around to 1% to 1.03% as the provision coverage ratio. So it will be ranging between 1% to 1.03% and this will be contained because as I said earlier, if you look at the total provision which we are carrying, almost INR45 crores we are having as management overlay. The provision required as per the ECL model, it has been tested by three auditors. One was the — first, the model was tested by E&Y, then the next one was done by T.R. Chadha, then the new auditor is Sundaram & Srinivasan. So they are all okay with that model. And the requirement is only INR55 crores. So I’m having additional INR45 crores as management overlay. So I don’t think I’ll be increasing the overlay from now on.
Unidentified Participant
Got it. Got it, sir. And sir, any incremental color on the 30-plus DPD book, which is still at the elevated level in October and first week of November?
M Anandan
No, the collection efficiencies are improving. I mean, as we been saying, the third and the fourth quarter, definitely, the collections will start improving and 30-plus DPD will come down because that’s what is the focus from our point of view as well. So it will eventually come down.
Unidentified Participant
Got it. And sir, last question on the borrowings. Even in this quarter, we saw a good growth in borrowing. So were they more front ended for the 1H? Or we’ll see the similar traction in 2H as well?
M Anandan
I didn’t get your question.
Unidentified Participant
Sir, on the borrowings, so there was a good growth — sequential growth in borrowings in this quarter as well. So was it more front ended for the year? Or we’ll see the similar traction in 2H of this year as well?
M Anandan
See, normally, we maintain three months — or two months disbursements on balance sheet liquidity and another — one or two months disbursement [Indecipherable] has been undrawn sanctions. So it is [Indecipherable]. And also, we received this proposal from [Indecipherable] mutual fund for INR300 crores, which is at a very good growth. So we thought we should take that opportunity and draw that fund. So that is why our balance sheet — on-balance sheet liquidity has gone slightly.
Balaji P
Actually, [Indecipherable] seen in the presentation, the total liquidity in our system is about INR1,200 crores. Of that, close to about INR689 crores is really the unencumbered cash [Indecipherable] we have in funds with us. That includes the money that was done in the last year from the [Indecipherable] Apart from this INR689 crores, we have cash on the balance sheet, we have the unavailed sanction of INR550 crores. These funds are not drawn yet. But then — see, this INR1,239 crores is comparatively [Indecipherable] in terms of our business growth, almost given the collections and things like that, almost power up to February, March kind of, yes.
Unidentified Participant
Okay. Okay. And sir, lastly, on the attrition rate, how are we moving — have the trends improved and any new initiatives you have taken on that front?
M Anandan
See, if you look at the attrition rate, I would like to divide this between across levels. Of course, at the top management level, the attrition is nil. At the middle management level, considering the area manager, AVPs and cluster managers, it is between 5% and 10%. And of course, at the branch manager level, it is between 15% to 20%. And at the sales officer level, it is between 25% to 30%, which is less than the industry, but still a bit of challenge to be handled.
Unidentified Participant
Okay, sir. Thank you so much. That’s it from my side.
Operator
Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.
Shubhranshu Mishra
Hi, sir. Am I audible now?
M Anandan
Yeah.
Shubhranshu Mishra
The first question is around the yields, sir. The blended yield is at around 17.5%, can about the yield asset has [Indecipherable]
M Anandan
[Indecipherable] Shubhranshu, what I will do, I have your number. I’ll give you a call maybe after this…
Shubhranshu Mishra
Sure, sir. I’ll probably do that. I’ll get off the queue. You can give it to the next day [Phonetic]. Thanks.
Operator
Thank you. The next question is from the line of Nischint from Kotak Institutional Equities. Please go ahead.
Nischint Chawathe
Hi. Just two questions. One was on the LAP side, our growth is sort of a little lower at I think around 12% year on year. And I think even in case of state of Tamil Nadu, our growth sort of still lag the — significantly lags the overall company level growth. So I mean, just what are the thoughts here?
Balaji P
Nischint, not clear on the question, Nischint.
Nischint Chawathe
The LAP growth, see, if I look at your overall AUM growth, which is at around 27%. Growth in LAP is around 12%, so — which is significantly lower than the company level average. Is there any specific reason why growth is lower over year? Is there any asset quality stress, any execution stress, anything that you have seen because of…
Balaji P
No, no, no, it is nothing related to the asset quality. If you look at the collection efficiencies or if you look at the 30-plus DPD, it is all in line across products. It’s maybe 0.2% here and there, but it is in line, whether it is 30-plus DPD or whether it is NPA or Stage 1 assets. So there is no worry on the asset quality because our credit norms, whether it is a housing loan or a LAP, it is the same. See, the LTV norms are same, the installment to income ratio is same, the way in which we do the credit appraisal is the same. So there is no difference there.
So it’s basically because we have to do more housing loans because we need to do — take care of the compliance factor. It is because of that, that has happened. However, if you look at the total composition of the book, in terms of the consolidated basis, it is around 61% on the housing loan and 15% on the quasi home loan and 20% on the small business loans. So that will be continuing. So that is the way in which we need to look at the mix rather than quarter-on-quarter disbursements moving slightly here and there.
Nischint Chawathe
Yeah, got it. So basically, it is just because you wanted to comply with the 60-40 ratio and that is the simple reason why you LAP. Got it, got it. And the other thing is in the state of Tamil Nadu, I know we’ve sort of ramped up in the last two quarters. But when do you think we go back to Tamil Nadu to company-level average growth?
Balaji P
Sure. See, what is happening, first of all, let us understand this fact, in Tamil Nadu, first of all, there is no market-related issues. Market potential is good. We need to do the — so the market — the ability of us to grow in the market is very well there. But as you know, we have been — we are facing this [Indecipherable] issue in last September and they have been slowly making changes and then giving about improvement in the way that Tamil Nadu is performing. If you look at the half yearly growth, it is around 8% to 9% is the growth in disbursement. And the AUM growth half year, I mean September ’24 as compared to September ’23 is also 8%. We have made some structural changes in the team, and that is actually paying off well. And in the third quarter, we can see much more in the Tamil Nadu performance.
Nischint Chawathe
So is it something to do with internal to the team — change in team? Or is it something because the market is…
Balaji P
It’s basically our internal issue, which is getting sorted out. It is not relating to any market-related issue.
Nischint Chawathe
Got it. And just since there are a lot of questions related to the regulator that are coming up in this call, is there anything that the regulator has sort of in your discussions commented on growth or margins or asset quality? I mean if you could clarify that could just help us.
Balaji P
Let me clarify here very clearly. NHB inspection has been completed for us for the year ended March ’23. We have given their comments, and we have already submitted our response. There is nothing alarming there. And they have suggested some process improvement which we have committed that we will also do that and we will do that as well. That is on the NHB.
If you look at the RBI for the NBFC, RBI inspection took place five years back, and there were no major observations at that point in time. And of course, they have just completed the inspection now and they’ve gone back. They have yet to come back with their comments. They told they will have a call with us before finalizing on the comments. And as of — from what we got to know, the final discussion I have with the person who conducted the inspection, he was quite comfortable with the way we are doing the business, and there were no input from the RBI on either the growth or the interest rate or the yield which we are planning. So this is the status as of now.
M Anandan
Just to add to what Balaji said, so basically, our portfolio of above INR9,100 crores, INR7,300 crores, which is a foreign company, housing company, which is really secured the loan for home or for the quasi which also secured loan. And the interest rate that we charge is like any other housing company, the housing company’s interest rates never been seen as [Indecipherable] So the housing loan, quasi loans, which almost contributes about 70% of our balance sheet, which is the parent company, housing companies, regulated NHBs supervised by RBI, there is no issue. From the point you have small unsecured loan and not clear about the terms and conditions, those issues.
Now the RBI, if you read the RBI concern — regulatory concern, largely, as you know, is from the unsecured loan given by — given to small customers by certain legal entities like microfinance companies or few fintech companies. We are not really present in any of the unsecured loan. We are not present in the small loans, the loans which I’m talking about is INR20,000 [Phonetic] to INR3 lakh, we are not present in that segment. And our interest rates are — probably is well communicated to the customer in [Indecipherable] vernacular language. All the terms are fully disclosed. And we have also made a inter-firm comparison for our terms and conditions of the loan that we do versus eight other companies. We found it our — the service charges that we charge, [Indecipherable] for example, preclosure and things like that, we are really quite comparable. And so that’s why we don’t really see any concern of — and we don’t have any loan in terms of — the other usage in terms of the loan being netting off. We don’t have — we don’t do any netting off loans. And we don’t do any — all other regulatory things are fully and totally compliant, and it is transparent to our customers and to the regulator and to us. So you don’t really see anything, any concern on that for us.
Nischint Chawathe
Got it. I think this just helps to clarify. Thank you very much and all the best.
M Anandan
Yeah. Sure. Thanks.
Operator
Thank you. The next question is from the line of Kartikeya Kumar Pandey from Ashika Broking [Phonetic]. Please go ahead.
Unidentified Participant
Hello.
Balaji P
Yeah.
Unidentified Participant
Hi, sir. Am I audible?
Balaji P
Slightly not clear. You continue, we’ll see.
Unidentified Participant
Yes. Sir, you were explaining you made…
Operator
Sorry for interrupting you, sir. Your voice is not clear. Could you speak a little loud?
Unidentified Participant
Hello.
Operator
Yes, sir.
Unidentified Participant
Yes. Sir, you were talking about the effect of [Indecipherable] on your fixed portfolio — fixed asset portfolio. So can you please explain that once again? And just — I missed out at at the beginning…
Balaji P
I’m not able to hear you properly. Sorry about this.
Unidentified Participant
Hello.
Operator
Hello.
Unidentified Participant
Hello.
Operator
Please use handset while asking a question.
Unidentified Participant
Yeah, yeah. I’m using handset. I was just trying to understand that sir was explaining regarding the effect of rate cuts on fixed rate portfolio. So can you please just explain it once again?
Balaji P
Okay. Just note down my number, you call me a little later. I’ll explain what you are referring. It’s 9791…
Unidentified Participant
Just a sec. 9791?
Balaji P
9791007160, just give me a call after this briefing. Yeah.
Unidentified Participant
Okay, sir. Thank you. Thank you.
Balaji P
Yeah.
Operator
Thank you. The next question is from the line of Nidhesh Jain from Investec. Please go ahead.
Nidhesh Jain
Thanks for the opportunity, sir. Can you share the disbursement number for Tamil Nadu for the quarter, Q1 and Q2?
Balaji P
[Indecipherable] please don’t ask by Tamil Nadu, then cluster, [Indecipherable]. So as a company as a whole, we have grown certain percentage in terms of our loan book has grown 27%, our disbursement has grown 16%. And we have given a guidance of 30%, which we will do. And given the 16% disbursement growth, we’ll move into — expect to move into 20% by third quarter, we will move into 25% in the third quarter — fourth quarter, and our loan book will go 30%. We are growing in our assets, in Andhra, we are growing in Telangana. We are going in Karnataka, we growing in — And then as far as Tamil Nadu, we have explained enough in terms of we had certain issues in terms of staff attrition. We’ll do it correctly. Beyond that, we don’t want to get drilled into in terms of Tamil Nadu, which is which cluster, which branch, which state staff. I think we need to stop it somewhere.
Nidhesh Jain
Sure, sir, sure. But in Tamil Nadu, the issue is that two years back, I think that issue has happened. And for the last two years, the growth is still…
Balaji P
Otherwise, we won’t constantly say that we will grow 30%. What is happening? See, it’s not that easy. See, it’s a business, okay? So I mean there is a problem that needs some time to get sorted out. See, the thing is, we don’t get fully experienced and good people immediately. So even if they come, they might not get adopted to the work environment. So there are issues. It’s not that — it’s not a plug-and-play model there. We just have some people and then ask them to perform and then start doing things. So it is taking time.
We have been saying it is taking some time, but we are having — we are on the right path in correcting the Tamil Nadu chain, and we are correcting it also. And there has been a growth of disbursements of 8% over the last half year. So I think we should look at that and then take it forward because it is taking some time. And we all accept that, but we are on the right track on that. So that is how we need to look at things. But that doesn’t — as I said, again, there is no market-related issues in Tamil Nadu. It is basically our own internal issues, which we are sorting it out, okay?
Nidhesh Jain
Okay. Okay. And secondly, in sourcing, there is a significant — I think there’s a sharp increase in the share of construction ecosystem. And over a period of time, customer referral share has also gone up. So what we have done there to show strong growth in these two channels?
Balaji P
So basically, we have formed the team at the head office. See, what happens is we have got this customer app. So there, the existing customers can refer the leads. Similarly, we have got the construction ecosystem partners, who are basically construction shop owners like paint shop owners or cement shop owners. So when somebody comes and buy something from them, they said — they ask them whether they need a housing loan and then they refer the same to us. And once the leads come in, what we do at the head office is, we go through the lead, we talk to the customer, they do a video check, and make this cold lead into a warm lead and then take it forward. So that is what — that is being done in a focused manner.
If you look up at 18% of our disbursement last quarter came through these channels, now it has become 20%. And we find that this channel is really good because the conversion ratios are also high. And the average ticket size is also high at around INR9 lakhs to INR9.5 lakhs. So we would like to focus on this channel and develop this channel, and that’s what we are doing.
Nidhesh Jain
And then lastly, how is the experience in the state of Odisha, Maharashtra? I know it is slightly still the new states. But in terms of disbursement ramp up, how — if you can share some data out there.
Balaji P
Sure. It is very encouraging. We have got — I mean, if our experience was not good, we wouldn’t have opened more branches there. So our experience in Odisha and Maharashtra has been good. And we have formed a team now. It is led by cluster managers there who are decent enough and experienced enough. We can take this to the next level.
Nidhesh Jain
Okay, sir. That’s it for my side. Thank you.
Operator
Thank you. The next question is from the line of Jigar from B&K Securities. Please go ahead.
Jigar Jani
Yeah. Hi. Congratulations, sir, on a good set of numbers. Two questions. The yields that you mentioned on HL, quasi HL and SBL of 15%, 17% and 21% to 20%. These are disbursement yields or these are book yields? And do they differ materially? Just trying to understand whether we have reduced rates?
M Anandan
Basically, this is the disbursement yield. We charge 15% to 15.5% on the housing loan. It is 17% to 17.5% or 18% of the quasi home loans and 21% on the small business loans.
Jigar Jani
Right. And we have not reduced trades recently on SBL per se, right?
M Anandan
We have not increased, yes.
Jigar Jani
No, no, we have not reduced…
M Anandan
[Indecipherable] the interest REPO, increase in the REPO rate half about 2.5%, we — our increase in interest rate is much, much less than that, roughly around 0.5% to 0.75% overall. So we have really consciously gone for a lower increase in the interest rates in [Indecipherable].
Balaji P
[Indecipherable], we did it sometime in September ’23 or October ’23. After that, we have not done anything.
Jigar Jani
Understood. Understood. And sir, on this interest rate cut and 52% of your borrowing either linked to EBLR or MCLR. So if and when the system wide rate cuts happen and it may flow through in EBLR and MCLR, our spreads definitely been increased because a large part of our book is fixed rate. So do we intend to kind of like pass it on to our customers or we will kind of maintain it the yields at the current level?
M Anandan
[Indecipherable] the last two years, we observed the interest rate [Indecipherable] largely. I mean, we [Indecipherable].
Balaji P
At that point in time, we will [Indecipherable]
Jigar Jani
Okay. Okay. And sir, any clauses you have on this fixed rate book that is — does this remain fixed throughout the tenure of the loan? Or does it get repriced one year, two year? Is there a review clause in the agreement?
M Anandan
Fixed rate contract. While the loan agreement does have a clause, so in exceptional situations, the company can raise the interest rates to recover part of the increased interest rates, in exceptional situations. So the loan agreement [Indecipherable] it is not fixed [Indecipherable] But in case of exceptional situation, the company does have the right to go for an appropriate increase to recover the cost.
Jigar Jani
Sure, sir. Thank you so much for answering the questions, and best of luck.
Operator
Thank you. The next question is from the line of Rajiv Mehta from Yes Securities. Please go ahead.
Rajiv Mehta
Yeah. Hi. good evening. Congrats on strong performance. So many of my questions are already answered, only a few left. Sir, firstly, on the employee cost, it was flat on a Q-on-Q basis despite a very sharp jump in disbursements. So can you share the employee count change on Q-on-Q basis? And how are the incentives structured for employees?
M Anandan
Incentive structures, I don’t want to tell it in the con call because it is, I mean, a company specific. Basically, incentives are being paid based on the performance, which will enhance productivity. So we increased — we are a productivity-driven organization. So anybody who performs well will earn good amount of incentives and maybe a fixed salary will be 60% to 65% and 35% will be incentives.
Balaji P
Actually, just to add on that as far the numbers are concerned, staff numbers are concerned, we have closed September with about 3,000. And in March, we possibly around 2,700 and 2,000…
M Anandan
700 to 800.
Balaji P
2,700 to 2,800. So there, the increase is about 200. And in this time, we have also added about 32 branches. So this increase also came largely and mainly in the branches and the field-level functions like sales and collections. [Indecipherable] that way. As far as incentive is concerned, we do recognize with performance, performance both in terms of quantity and quality and quality in terms of the proposal — the quality of the proposals generated, the track record of the early default, track record of installment payments and the quality of documents that have been completed, as well as just not the some disbursement number alone. It does just take into consideration other qualitative aspects as well. Even in the collections also, which is not in our receipts alone, there is the weightage given for the EMIs, EMI is more. We recognize the quantum of EMI, we recognize the number of receipts. And more importantly, we also recognize whether EMIs of the current month or previous in a collection of old EMI incentive. So the incentive structure is largely for our sales and collection, recognize these aspects of productivity and quality.
Rajiv Mehta
Sir, on this opex to asset ratio, I mean, we are at 2.65%, and we are talking about being the lowest cost to asset and cost-to-income ratios in the sector. So what is the juice left? And what will be the key drivers here? What can drive it further down and to up to what level do you see it going?
Balaji P
There is no juice left, Rajiv. I mean, each and every expense is just monitored very closely. We negotiate better and also the productivity. That’s what the secret sauce is. And I don’t think we can improve further on this.
M Anandan
Yeah. Culture, as a culture of our, we follow a proven culture that does not mean that we pay the lower salaries, we are probably one of the best possibility [Phonetic] in the industry comparable year. And our terms of employment, our salaries levels are good. Those aspects. But then our investment in IT, our investment in branch share, [Indecipherable] we will be adding about 15% of our branch size. We are beginning [Indecipherable] branches which we have. We are adding — another 40 branches we are going to add. So despite the investment and we also invested in the new software that has been mentioned with you earlier. So we do make the investments in terms of distribution in the IT. At the same time, we are very conscious that significant part of our growth has to come from the productivity of our — from the existing branches, from the existing staff and the new staff after we release turnaround time. So in other words, more of course, as an organization, we do believe in a proven culture [Phonetic] of operation.
Rajiv Mehta
Just checking and clarifying, these 201 branches that we report. Is there bifurcation — are there separate branches for the NBFC and the HFC and how does the sourcing happen across branches for all products? Can you just throw some light on that?
Balaji P
There is no separate branches for NBFC. Since the NBFC is the wholly-owned subsidiary, the cost that’s shared between the companies based on the assets under management. And as the sourcing is concerned, people are free to log in either the housing loan or a non-housing loan. Of course, there will be some push from the head office side on how much small business loans are being done at each branch and, of course, on the housing loan.
Rajiv Mehta
Okay. Understood, sir. Thank you so much, and best of luck.
Balaji P
Yeah. Thanks, Rajiv.
Operator
Thank you. The next question is from the line of Kushan from Morgan Stanley. Please go ahead.
Kushan Parikh
Thank you for taking my questions. I had two questions. One was around the loan growth. So we have guided for 30% loan growth. In the near term, if I look at that F ’25, that broadly looks like an ask rate of about INR2,400 crores, INR2,500 crores disbursement in the second half of F ’25. Is that something that we are targeting? Secondly, my second question was around the loan spreads. So over the last two, three quarters, we’ve broadly maintained a loan spread of about 8.7%. Is that something that we would like to maintain going forward as well? And in that context, I mean, how do you think cost of funds will play out from here on? And also, the higher liquidity on the balance sheet that you alluded to, over what timeframe would that come back to a more normalized level? Those are the questions.
M Anandan
Currently, we have disbursed around INR1,600 crores in these last six months and another INR2,000 crores to INR2,100 crores is a possibility, okay? So which means another — I will try to assume — do more, but this is definitely will be the INR3,700 crores. But definitely, we’ll try to touch INR4,000 crores [Indecipherable] this year. So that is the guidance which we want to give. And what is your next question, on the spread, right?
Kushan Parikh
It was on the loan spread. Yeah.
M Anandan
Yeah. See, spreads is a resultant of, what, yields and the cost of borrowing. Our spreads are likely to be maintained at around 17.3% to 17.5%, and cost of funds, currently, it is at 8.5% or 8.7%. Of course, if the rate cuts happen, then obviously this interest costs will come down, at least on the variable rate borrowing. So to that extent, there can be a NIM [Phonetic] expansion, but I’m not suffering in that as of now because the rate cut has to happen. So with the result, the spreads is likely to be maintained at 8.7%.
Kushan Parikh
Understood. And on the — lastly, just on the liquidity part.
M Anandan
What was the question on the liquidity?
Kushan Parikh
So liquidity has increased QonQ this quarter. Just wanted to understand in what time frame will that normalize to earlier levels?
M Anandan
It is basically three months business and we would like to drop business to utilize maintain as the liquidity. Whether on balance sheet or off balance sheet, it could be determined based on the market unless — based on the availability of funds and also the market dynamics. So for example, last quarter, we had to draw that money because the rates are good and the terms were good, and then it was from mutual fund. So we have to draw the money and keep it on the balance sheet. But normal plan is to have three months [Indecipherable] disbursement as the liquidity available.
Kushan Parikh
Understood, sir. [Indecipherable]
Operator
Thank you. As that was the last question, I would now like to hand the conference over to management for closing comment. Please go ahead, sir.
M Anandan
Yeah. Thank you. Thank you for organizing this conference call. I would like to pay my sincere gratitude to all analysts, investor friends who have taken time to listen to us today. Please feel free to contact Mr. Balaji [Indecipherable] in case you have any further queries. Thank you.
Balaji P
Thank you. Thank you, all.
Operator
[Operator Closing Remarks]