Cholamandalam Investment and Finance Company Ltd (CHOLAFIN) Q1 FY23 Earnings Concall Transcript

Cholamandalam Investment and Finance Company Ltd  (NSE:CHOLAFIN) Q1 FY23 Earnings Concall Aug. 01, 2022

Corporate Participants:

Vellayan Subbiah — Chairman and Non-Executive Director

Ravindra Kumar Kundu — Executive Director

Arul Selvan — Executive Vice President and Chief Financial Officer

Analysts:

Abhijit Tibrewal — Motilal Oswal Financial Services Ltd — Analyst

Mahesh — Analyst

Shreepal Doshi — Equirus Group — Analyst

Bharat Shah — ASK Investment Managers Limited — Analyst

Sharaj Singh — Laburnum Capital — Analyst

Rikin Ketan Shah — Credit Suisse — Analyst

Subramanian Iyer — Morgan Stanley India — Analyst

Nidhesh Jain — Investec India — Analyst

Kaitav Shah — Anand Rathi — Analyst

Shweta Daptardar — Elara Capital — Analyst

Param Subramanian — Macquarie Group — Analyst

Jignesh Shial — InCred Capital — Analyst

Bunty Chawla — IDBI Capital Markets & Securities Ltd. — Analyst

Alpesh Mehta — IIFL Institutional Equities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Cholamandalam Investment and Finance Company Limited, Q1 FY23 Earnings Conference Call hosted by Kotak Securities Limited. [Operator Instructions]. And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]. I now hand the conference over to Mr. Mahesh from Kotak Securities. Thank you, and over to you, sir.

Mahesh — Analyst

Hey, thank you, Renju, and good morning to all who have joined into the call today. We welcome you all to the earnings conference call of Cholamandalam Investment and Finance Company Limited. Your usual moderator, Nischint has had to step out today, and I shall handle today’s session. To discuss the first quarter’s performance of Chola and share industry and business updates, we have the senior management represented by — with us today. We have Mr. Vellayan Subbiah, the Chairman and Non-Executive Director; Mr. Ravindra Kundu, who is the Executive Director; Mr. Arul Selvan, the President and CFO.

I would now like to hand over the call to Mr. Vellayan for his opening comments, after which we shall take the Q&A. Over to you, sir.

Vellayan Subbiah — Chairman and Non-Executive Director

Thanks Mahesh, and good morning everybody. So just quickly jumping into quarter results. Disbursements for the quarter were at INR13,329 crores, which is up, obviously by 267%, just because of the base effect from the last year. Total AUM is at INR86,703 crores, up by 14%. NIM; Net Income Margin is up at INR1,640 crores, which is up 19% year-on-year and the PAT is at INR566 crores, which is up 73% year-on-year.

Overall, consumer confidence continued to improve with the Indian economy growing at 14% to 15%, in spite of higher-than-expected inflation and tightening of monetary policy. And Chola delivered its best ever first quarter disbursals, collections and profitability with domestic auto sales zooming by 55% in the current quarter, albeit on a low base, and sustained growth momentum in residential unit sales as well.

The — like we said, kind of disbursements are at INR13,329 crores and Q1 FY22 was impacted by COVID which is why it was lower in that quarter. But getting into the individual businesses, vehicle finance disbursements were at INR8,562 crores as against INR2,846 crores, which is a growth of 201%. Loan against property including Affordable LAP, disbursed INR2,169 crores as against INR386 crores, which is a growth of 462%.

The home loan business basically disbursed INR478 crores as against INR199 crores, which is a growth of 140%. SME disbursed INR1,030 crores as against INR204 crores. And our new businesses, which is our Consumer and Small Enterprise Loans and Secured Business and Personal Loans registered disbursements of INR1,055 crores and INR36 crores respectively in Q1 FY23.

AUM stood at INR86,703 crores as compared to INR75,763 crores. PAT like I mentioned was at INR566 crores compared to INR327 crores. The PBT-ROA was at 3.7% as against 2.5% in the same period last year. And ROE was at 18.9% as against 13.5%. The Company continues to hold a strong liquidity position with INR5,113 crores as cash balance as at end of June 2022, including INR1,500 crores and INR200 crores invested in Gsec and T-Bill which are shown under investments and a total liquidity position of INR11,324 crores which includes undrawn sanctioned lines. The ALM is comfortable with no negative cumulative mismatches across all time buckets.

Consolidated PAT for the quarter was at INR562 crores as against INR329 crores, which is a growth of 71%. In terms of Asset Quality, at the end of June 2022, Stage 3 assets stood at 4.16% with a provision coverage of 40.69%, as against comparable 4.37% at end of March 2022 with a provision coverage of 39.67%. The total provisions currently carried against the overall book is 2.92% as against the normal provision levels of 1.75% carried prior to the COVID-19 pandemic. Management overlay is now at INR528 crores in terms of provisions carried under books.

As per the revised RBI norms, the November 12th, circular of last year, the GNPA and NNPA percentages as at the end of June 2022 stood at 6.31% and 4.35% respectively. We carry INR736 crores higher provisions under INDAS over IRAC. As per prevailing IRAC norms the GNPA will be similar to the stage 3 numbers given above. The details of the stage-wise assets are available as part of the overall release. The Capital Adequacy Ratio for the Company was at 19.15% as against the regulatory requirement of 15%. And Tier-I Capital was at 16.3% as against the norm of 10%.

So Mahesh, I’ll stop with that. We’ll be happy to take questions from our side.

Mahesh — Analyst

Sure, sir. We can open the floor for questions now.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions]. The first question is from the line of Shreepal Doshi from Equirus. Please go ahead, sir.

Shreepal Doshi — Equirus Group — Analyst

Hello sir, good morning and thank you for giving the opportunity and congratulations on a good set of numbers. So firstly wanted to understand, what is the outstanding restructured book loan?

Vellayan Subbiah — Chairman and Non-Executive Director

Outstanding restructured book loan?

Ravindra Kumar Kundu — Executive Director

Yeah. The outstanding book stands at around INR3,500 crores, restructured book, which was at around INR5,800 crores, as you know, and we did initially [Technical Issues].

Shreepal Doshi — Equirus Group — Analyst

Sir, you’re not audible, I’m sorry.

Ravindra Kumar Kundu — Executive Director

The outstanding book is at INR3,400 crores now as against INR5,800 crores when we initially did the numbers.

Shreepal Doshi — Equirus Group — Analyst

Right. Got it. And sir, just the second question on the same line, so what would be the right-off that we would have taken from the restructured book, during this quarter?

Ravindra Kumar Kundu — Executive Director

The restructured book has shown no stress different from the normal pool. It is progressing in the same way. As you know that we have discussed this earlier also, the moratorium given in the restructured books are very small, ranging predominantly to one month to three months at most. So, they — all these assets have started being tracked as part of our normal book itself. And so the Stage 3 numbers, which are already there, corresponds with whatever is in the restructured book also.

Shreepal Doshi — Equirus Group — Analyst

Okay. Okay. You give [Phonetic] guidance for less than 4% net NPA number for the year-end, so keeping that in mind, what would be the credit cost that we will be building for the year?

Vellayan Subbiah — Chairman and Non-Executive Director

The credit cost which is currently, we are seeing at around 1.2% will be the level. As I have told even in today’s morning call, we will range anywhere between 1.0% to 1.5% over the cycle, and we should be — we should be at the pre-pandemic levels now.

Shreepal Doshi — Equirus Group — Analyst

Okay, got it sir. Thank you so much and good luck for the next quarter.

Operator

Thank you. Next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.

Abhijit Tibrewal — Motilal Oswal Financial Services Ltd — Analyst

Good morning, and thank you for taking my questions. My first question is to Ravi sir. Sir, I mean, if I kind of look at the texture of the vehicle finance disbursements, so basically, I’m looking at the different sub-segments. So pre-owned vehicles HCVs and construction equipment are the three segments where we have seen a sequential decline. Again, I understand there is that seasonality expected and not really fair to compare Q4 to Q1. But I mean, having said that, I just wanted to understand that these three products that is used vehicle, HCVs and construction equipment, are they seeing, I mean, a lot of aggression from banks and some of the other listed NBFCs? And how should we kind of this read this? That’s my first question to you sir.

And second question is, I mean, how is the demand in tractors, right now? There are a few other, your peer NBFCs who are suggesting that the demand in tractor is very, very strong, while when we talk to some of the auto guys, they don’t kind of suggest the same thing. Sir, if you can just kind of give some color on the tractor demand.

Ravindra Kumar Kundu — Executive Director

Heavy commercial vehicle and construction equipment, the strategy customer or group customer or top of the pyramid customer or large fleet operator customers are always being funded by banks only. We were always financing the retail customer. And that’s the reason if you see that heavy commercial vehicle and construction equipment, our market share has been small as compared to the light commercial vehicle and used.

So when the strategy customer or large fleet operator purchase the vehicle, it is being funded by the banks only. And at this juncture, the majority of the sale which is happening is because of the replacement demand coming out from the strategy customer or large fleet operator. So the banks are operating.

But after some time when the freight availability and capacity utilization of the retail customer improves, then the retail customer also will come, which will further drive the grow, because initial drive of the commercial vehicle or construction equipment growth comes from the large fleet operator, followed by the retail customer and in that point in time, we also get into that.

Having said that, we also see that our market share has gone up in heavy commercial vehicle and construction equipment, because our customer segment also in some parts of the country started actually participating in purchase. That is from HCV and construction equipment. In the case of used vehicle, the used vehicle business is actually growing much faster, because even the strategy customer or large fleet operator who are actually buying the vehicle are not adding the fleet, but replacing the fleet. So they’re continuously selling their existing vehicle, and it is going to retail customer and retail customers are buying. And that’s the reason retail customers are not buying the new vehicles. So till such time you will see that used business is going to grow and we are expecting that this year used business will continue to grow.

Now, coming to the tractor. Tractor, monsoon has been good and at overall average, it is higher than the 100%. But in Bengal, Jharkhand, Bihar and Uttar Pradesh are not having that kind of monsoon. It is slightly deficit. So we need to wait for that, because these are the larger markets for the tractor. Once that monsoon is actually completed by say, August and September end we will be in position to say that how much demand strong-ness is there.

However, as of now, last quarter, we saw 16% growth and it’s driven by Madhya Pradesh, Rajasthan and some of the market where monsoon has been very good. We are hoping that the rest of the four states where tractor sales have been good in the past or they are actually producing more rain [Phonetic] will have a better monsoon and that will further grow — drive the tractor growth in this — in this financial year.

Abhijit Tibrewal — Motilal Oswal Financial Services Ltd — Analyst

Thanks, sir. This is good. This is useful. Sir, my last question is for Arul sir. And sir, I mean, if I kind of look at the run-off that we’ve seen in the loan book, you had suggested kind of in the last quarter that it will remain elevated for the next two quarters, which is predominantly H1 of this fiscal year and then it should revert back to the normalized level. So how should we kind of — and you’ve already seen that normalize or kind of come down in this quarter. So how should we kind of think about it? I mean that’s how, I mean, it will progress, that it will remain slightly elevated for the second quarter and then start normalizing in the second half of this fiscal year?

And sir, secondly, I mean if I look at the write-offs, what was the quantum of write-offs and you calculate write-offs, I mean, it looks like it was slightly elevated, nothing alarming, slightly elevated compared to let’s say the pre-COVID levels. So how should we kind of think about it? Those are the two questions.

Arul Selvan — Executive Vice President and Chief Financial Officer

Yeah. The run-off will be there for one quarter, for vehicle finance and it will be actually not even visible in the LAP measure, because they are [Indecipherable] The write-offs has been higher, both in Q4. But in Q1, it has not been there for vehicle finance other than the repo sale related. So those are normal in quarter on quarter levels. The 1.2% on the credit cost we will — we are conservatively saying that, that levels will be maintained over the quarters because you will see that in Q2 continuing, but Q3, Q4 should be better.

Abhijit Tibrewal — Motilal Oswal Financial Services Ltd — Analyst

Got it. Got it. And sir lastly, your tier 1 is 16% now, and the kind of growth that we’re seeing now, while you always have that room of raising Tier 2 capital, I mean, any thoughts of primary equity raise over the next 12 to 18 months?

Arul Selvan — Executive Vice President and Chief Financial Officer

No, we have very clearly articulated that unless the tier 1 goes down below 13%, we will not be seeking capital. I think we stick to that stance.

Abhijit Tibrewal — Motilal Oswal Financial Services Ltd — Analyst

Great sir. Thank you so much and wish you and your team the very best.

Arul Selvan — Executive Vice President and Chief Financial Officer

Thank you.

Vellayan Subbiah — Chairman and Non-Executive Director

Thank you.

Operator

Thank you. [Operator Instructions]. Next question is from the line of Bharat Shah from ASK Investment Managers Limited. Please go ahead, sir.

Bharat Shah — ASK Investment Managers Limited — Analyst

Yeah, hi. Given the kind of new lines of the business that we are attempting to build up, and given our traditional strength areas, what kind of a cycle sustainable ROE, pretax ROE we see it as a range, or which is part of our business model?

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah. I think we should — we should be there in the 3.5% to 4.0% levels. We’re committed to that and we stay committed there. But there is scope to improve, but right now, we do not want to take conservatively any call on that.

Bharat Shah — ASK Investment Managers Limited — Analyst

Roughly [Phonetic] it’s about 3.5% to 4% range?

Vellayan Subbiah — Chairman and Non-Executive Director

I’m talking pretax ROTA, yeah.

Bharat Shah — ASK Investment Managers Limited — Analyst

Yeah, yeah, pretax, I’m talking about. And what kind of — given the kind of potential growth that we see in our lines of activity, plus the new lines, what kind of leveraging compared to our network, we think will be a point for capital rates? I mean, typically what is the sustainable level of leveraging we’ll prefer to keep before we go into our new capital rates?

Vellayan Subbiah — Chairman and Non-Executive Director

We are currently in the six times debt equity levels. We will continue to be around six to seven times levels, because that would give — that would be the number, actually we stood at the 13% or the sub 13% levels will take us to eight times, but we don’t intend to go there. So we can comfortably be in this six to seven times band.

That was — that’s the way we are wanting to look at. More importantly, the new businesses churn more because they are shorter tenure. So I don’t see the debt equity will be significantly impacted because of scaling up the new businesses.

Bharat Shah — ASK Investment Managers Limited — Analyst

So if [Indecipherable] came about INR6 borrowing so INR7 of total capital.

Vellayan Subbiah — Chairman and Non-Executive Director

Upto INR7. Right now — now it is around INR5.9.

Arul Selvan — Executive Vice President and Chief Financial Officer

Yeah. So they go up to INR7, which means INR8, sir.

Bharat Shah — ASK Investment Managers Limited — Analyst

Okay. So potentially up to INR8 will be of total capital and 3.5% to 4.0% range of ROE pretax which means about close to 2.7% to 3.0% post-tax return return. And therefore about sustainable ROE of about 20%.

Arul Selvan — Executive Vice President and Chief Financial Officer

Yeah, that’s correct.

Bharat Shah — ASK Investment Managers Limited — Analyst

Okay, thank you.

Operator

Thank you. The next question is from the line of Sharaj from Laburnum Capital. Please go ahead.

Sharaj Singh — Laburnum Capital — Analyst

Hello, sir. My question was around GNPA and the GST [Phonetic] numbers, which were reported. So when the new norms coming from 1st of October. Our GNPA will be the GST numbers, right, if FTG [Phonetic] is reporting right now is only — for the numbers they would be applicable, will they?

Arul Selvan — Executive Vice President and Chief Financial Officer

We have given you both the numbers, you know, the Stage 3 numbers right now, which is shown will be the pre or the current prevailing levels of net NPA and the gross NPA as per IRAC norms. New norms, if it comes through and we have put through the numbers, we will be at net NPA of 4.43% and at the overall level we will be at 6.31% on the gross NPA, as we closed at June.

The details are available in page 26 of the investor presentation, kindly run through it.

Sharaj Singh — Laburnum Capital — Analyst

Sir, just a clarification, my question was actually the reported the new — under new norms the NPAs is at 6.3%, but as on 1st of October when we [Indecipherable] taken, so the effect will start coming in post that right? So the GST should be your gross NPA numbers as on that date. I mean, if they were to come in from today, GNPA as on date will be… [Speech Overlap]

Vellayan Subbiah — Chairman and Non-Executive Director

This is a debatable point. We are — see, the gross NPA as per RBI is different from the Stage-3 numbers, which is as per INDAS. That is why we giving it as Stage-2b and Stage-1b if you see. Those two if you add, they are really under INDAS at stage-2 level of assets because they are less than 90 days. 90 days and above is shown as Stage-3, less than 90 days and more than 30 days is shown as Stage-2 and less than 30 days is shown as Stage-1.

So those assets which have attached to NPA and are in these brackets will be shown in the stage-2b and Stage-1b respectively. And there will be — if you add all three, you will get the net NPA as per RBI. We intend to present it as such unless the regulator wants us to group everything under State-3.

Sharaj Singh — Laburnum Capital — Analyst

Okay. Thank you. That was the question.

Operator

Thank you. Next question is from the line of Rikin Ketan Shah [Phonetic] from Credit Suisse. Please go ahead.

Rikin Ketan Shah — Credit Suisse — Analyst

Thank you for the opportunity. I had couple of questions. First one was on the asset yields in the vehicle finance business, if I look at it in the presentation, it seems to have come off by 50 basis points sequentially QoQ. So, any trend or color there or one-offs included there, that’s first one. Second one, the employee head count is up sharply, right. So in last one year we would have added around 8,000. But I understand that, that could be a mix of on and off tables, so any split between that?

And did I — just a clarificatory question relating to the restructure, did I hear correctly that the book is currently around INR3,400 crores now? And one last question is for Kundu sir. On the vehicle finance business side, while I understand the disbursements are strong, but the outlook seems to be a bit more cautious pertaining to lower credit availabilities, uneven rainfall, etc. So, are we expecting slowdown in the disbursements in the quarters ahead? That’s all.

Vellayan Subbiah — Chairman and Non-Executive Director

So, I will just start from the vehicle finance. In the vehicle finance industry saw 115% growth from the commercial vehicle and passenger vehicle did 41% growth, and so did other product like two-wheeler 54% and three-wheeler to 24%, tractor 16% and construction equipment 61% [Phonetic].

So if the industry is growing in this pace for this financial year, we might touch the previous peak in terms of commercial vehicle and passenger vehicle and maybe in two-wheeler. So subject to that, we will definitely grow at the rate of 35%, if industry is growing at rate of 35%, we have an opportunity to grow slightly higher than that because there will be a value growth in terms of inflation and cost of the vehicle. And also little bit market share growth will be there.

So this is what is the industry, and now we have given you the sector outlook where we have given product by product, what is expected in terms of good and bad. In terms of tractor, suppose I’m just giving you the example you can go through the total outlook of Chola given in the presentation. So in an — overall, monsoon has been very good, actually it is higher than the 100% last year. And then, but there are four states, which is — which is actually selling more tractor is now going through the deficit of monsoon. So unless that gets corrected in next two to three-month time, we cannot say that for full year, tractor sales will be very good.

Secondly, if the crude oil prices are at this level and it doesn’t go up, and it goes down, then obviously the growth way of the commercial vehicle projected will be achieved. It might go up further. Similarly, the consumption increases, rural demand actually improved because of the better monsoon, better agricultural growth, then again, it will further improve the sale of two-wheeler, three-wheeler even cars and MUV in the rural market.

However, as of now, whatever industry is showing up, we can safely say that the industry is going to grow in this year in terms of number 35% over last year, and we will be doing better than that, but we need to also keep those thing in the mind that which can actually create problem for us. That’s the reason we’ve given the mix type of outlook. That is from the vehicle finance side. And Rikin can you repeat? You asked four questions. [Speech Overlap]

Actually, Mahesh comment on two questions, you are trying to beat it by cramping four questions into one attempt, I think that loses the whole purpose of this Mahesh’s advice on questions.

Ravindra Kumar Kundu — Executive Director

One is this straight forward answer, INR3,524 crores is the right number.

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah, INR3,524 crores okay. What was the last one?

Rikin Ketan Shah — Credit Suisse — Analyst

Sir, one was on the employee head count additions. So just wanted to get a flavor on the increase between the off payroll and on payroll and what could be the salary differential between them?

Vellayan Subbiah — Chairman and Non-Executive Director

The salary differentials and all we cannot get into now. Okay? The head count details we have given in the investor presentation.

Ravindra Kumar Kundu — Executive Director

But that is mainly…[Speech Overlap]

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah, that’s because of new business.

Ravindra Kumar Kundu — Executive Director

New business.

Vellayan Subbiah — Chairman and Non-Executive Director

And housing finance is also expanding out of south, so they are also recruiting.

Rikin Ketan Shah — Credit Suisse — Analyst

Yeah. Got it. And anything on asset deals sir, in the vehicle book it came up by 50 basis points.

Vellayan Subbiah — Chairman and Non-Executive Director

It will go up now slowly, slowly. [Speech Overlap] Marginal book started growing. [Speech Overlap] Overall, it’s a lag of six months. The marginal book, we started doing this. And there is a difference in the mix like at this juncture, when all the new vehicles are getting sold more and more because that is the industry sales, we have to participate in that as well. So overall yield is depending on one is the mix and second is the overall yield is also depending on the time when we take it to increase it.

Rikin Ketan Shah — Credit Suisse — Analyst

Got it. Thank you.

Operator

Thank you. Next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead, sir.

Subramanian Iyer — Morgan Stanley India — Analyst

Hi, thanks for the opportunity. I have two questions. The first one is what is your observation on loss given default vis-a-vis the 40% Stage 3 coverage you have considering that most vehicle financers seem to be taking accelerated write-offs and there might be a large pool of repossessed vehicles for disposal in the market. That’s my first question.

The second one is how much room do you have in your ALM in terms of moving the mix to CP to limit the rise in your portfolio cost of funds in the near-term? And at a product level, how much margin compression do you expect through the cycle or can you pass on the entire cost of funds increase to customers?

Vellayan Subbiah — Chairman and Non-Executive Director

The loss given default in the case of repo vehicles is in the range of around 32%. So — sorry, the loss incurred loss in the [Indecipherable] vehicles is around 32%. So our provision coverage is significantly higher and gives us enough headroom to cover any volatility there.

The second thing is on — sorry, on the CP headroom; CP headroom, we can go up to 15% of the borrowing book. We are right now at around 4%, sorry. [Speech Overlap]

Subramanian Iyer — Morgan Stanley India — Analyst

I think it’s 7%. Yeah.

Vellayan Subbiah — Chairman and Non-Executive Director

Sorry, sorry 4% was last quarter, yeah, 7%. So we have another 7% to 8% that we can go, but we may not go all the way up, but we’ll be in the range of around 10% to 12%.

Subramanian Iyer — Morgan Stanley India — Analyst

And at a product level, do you think you can hold the — I mean your margins by passing on entirely to the customers?

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah. What is LAP and housing finance is a floating rate which we’re doing it. [Speech Overlap]

Ravindra Kumar Kundu — Executive Director

[Speech Overlap] Yeah, that’s what. So basically like vehicle is a fixed book but then the other two books is where we basically pass on.

Subramanian Iyer — Morgan Stanley India — Analyst

Sure, through the cycle would you be able to pass?

Vellayan Subbiah — Chairman and Non-Executive Director

Vehicle finance, product level marginal rate only will go up as and when we do business that will go up. But in the vehicle finance, main important role played by the product mix. So, how much we do in the high yield business versus low yield business is important for arriving at a overall yield. And we are changing the product mix towards the high yield book continuously. So that will help us to increase the yield in next six to nine months time, because there is a lag between marginal book yield and the overall book yield.

Housing finance and affordable housing and LAP is instantaneous where we increase the rate as and when the prices of the cost of fund goes up.

Subramanian Iyer — Morgan Stanley India — Analyst

Thank you, and wish you all the best.

Operator

Thank you. Next question is from the line of Nidhesh Jain from Investec. Please go ahead, sir.

Nidhesh Jain — Investec India — Analyst

Thanks for the opportunity. Sir, on the new businesses, what sort of specifically in consumer and SME in consumer what percentage of origination that we are able to do through our own branches, our own business in India? And in SME, how much of disbursement are we able to do outside of the Murugappa Group?

Ravindra Kumar Kundu — Executive Director

Consumer business, or SME business, all we’re doing it from the branches only. And with respect to the Murugappa Group versus open market group — book only supply chain finance — 60% of supply chain finance is actually related to Murugappa Group, rest are open market.

In SME, we have three product; supply chain finance, term loan and equipment finance. Supply chain finance is almost 30% of the overall book and out of 30%, 50% goes out of Murugappa, that’s the number.

Nidhesh Jain — Investec India — Analyst

Sure, sir. In consumer and consumer loans 100% of possession [Phonetic] is through our own branches now, is that correct?

Ravindra Kumar Kundu — Executive Director

All [Speech Overlap] existing MSR in vehicle finance wherein 126 branches, we have opened up, boost [Phonetic] from 127 branches, from there they are almost covering 500 towns of the vehicle finance. So you can say that 50% of the branches are vehicle finance being now covered by from CCEL, from 127 hubs and they have three models, one is the DSA model, GST model and then the partnership model. All three models they are utilizing it to acquire the business.

Nidhesh Jain — Investec India — Analyst

If you can share what percent of business [Indecipherable] partnership model that will be helpful.

Vellayan Subbiah — Chairman and Non-Executive Director

[Speech Overlap] One third of the deals [Phonetic] are coming from partnership.

Nidhesh Jain — Investec India — Analyst

Okay. Thank you sir, that’s it from us. Thank you.

Operator

Thank you. Next question is from the line of Kaitav Shah from Anand Rathi. Please go ahead, sir.

Kaitav Shah — Anand Rathi — Analyst

Good morning. Thank you for taking my question. Sir, if you can explain what are the number of new customers that have got originated in the new model under the new business.

Vellayan Subbiah — Chairman and Non-Executive Director

Almost 100,000 vehicle customer. [Speech Overlap]

Kaitav Shah — Anand Rathi — Analyst

Okay.

Vellayan Subbiah — Chairman and Non-Executive Director

In the first, 1.6 lakh customers [Speech Overlap] from one business, yeah, so basically, let’s just say, kind of, less than about 2 lakhs across all the businesses.

Kaitav Shah — Anand Rathi — Analyst

And these are the new?

Vellayan Subbiah — Chairman and Non-Executive Director

New, new.

Kaitav Shah — Anand Rathi — Analyst

Non-vehicle or non-LAP customers?

Vellayan Subbiah — Chairman and Non-Executive Director

They’re customers that don’t have any other loans.

Kaitav Shah — Anand Rathi — Analyst

Okay, okay, versus what would that run rate be say last year? Just an opine number?

Ravindra Kumar Kundu — Executive Director

Last year it was 60,000 vehicle finance only other new businesses we have not quarter basis. [Speech Overlap].

Arul Selvan — Executive Vice President and Chief Financial Officer

So this quarter had about INR1.8 lakh from vehicle finance and INR1.8 lakhs about INR2 lakhs from all the other business.

Kaitav Shah — Anand Rathi — Analyst

Okay. Lovely. Thank you. Sir, second question was related to your partnership arrangements. So the customer ownership is with the partner or with Chola? Just trying to understand the model here.

Vellayan Subbiah — Chairman and Non-Executive Director

[Indecipherable] Chola.

Kaitav Shah — Anand Rathi — Analyst

Okay. Okay. I think those were the two questions I had. Thank you so much. And all the best.

Operator

Thank you. [Operator Instructions]. Next question is from the line of Shweta Daptardar from Elara Capital. Please go ahead.

Shweta Daptardar — Elara Capital — Analyst

Thank you for the opportunity. My first question is for Kundu sir. Good morning, sir. Sir, as far as the vehicle finance, the disbursement mix is concerned why has been used vehicle financing loans quarter on quarter declined? I mean is it the Q1 phenomenon or categorically we’ve chosen to sort of take a cautious step if it’s the latter, then why so?

And my second question is on the LAP front. Sir, what is the normalized loan loss provision, we are looking at, because that’s been quite erratic for a while and therefore that’s also weighing on the overall, not only the overall profitability, but what is then the ideal PBT-ROA [Phonetic] you’re looking at. Yeah, thanks.

Vellayan Subbiah — Chairman and Non-Executive Director

Shweta, what was the first question, what is the mix, you’re talking about used?

Shweta Daptardar — Elara Capital — Analyst

Yeah. So why has been the decline in used vehicle financing disbursements quarter-on-quarter as against the industry cues which have been pretty buoyant?

Vellayan Subbiah — Chairman and Non-Executive Director

No, like you see that our product mix in terms of portfolio page number — we’ve given it in the page number 40.

Shweta Daptardar — Elara Capital — Analyst

41, yeah.

Vellayan Subbiah — Chairman and Non-Executive Director

40 is the portfolio, right-hand side is the product portfolio and left hand side the disbursement.

Shweta Daptardar — Elara Capital — Analyst

Right.

Vellayan Subbiah — Chairman and Non-Executive Director

The used vehicle, the product portfolio in terms of our asset under management is 27%. As against that we have done 29%. So our disbursement is higher than the mix of the current mix. So disbursements are higher than that. If you see the tractor is 10% in terms of our portfolio, but in terms of disbursement is 8%. So that way you can say that tractor we are little cautious as against the portfolio mix, in terms of disbursement.

But in terms of used business, we are higher than the portfolio in terms of disbursement that shows that we are quite aggressive in terms of used.

Shweta Daptardar — Elara Capital — Analyst

Okay. So maybe Q4 was always has been a stronger one, so maybe that base was pretty high.

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah. You are right in the Q4 to Q1, you can see that there has been drop in used business. But that is because of the mix in the first quarter, if you see that new vehicle sales have picked up significantly. And this has been a first time in April, May, June, it has been such a best quarter for the new vehicle sales.

So when you participate in new vehicle sale, your overall disbursement mix is actually gets fueled [Phonetic] towards the new one that is the difference, nothing else. Otherwise, if you see our portfolio versus our disbursement, our disbursements are higher than the portfolio.

Shweta Daptardar — Elara Capital — Analyst

Sure. And just one question there related, are we number two in terms of market share on the used side? Am I getting it right?

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah.

Shweta Daptardar — Elara Capital — Analyst

Yeah. Perfect. Sir my next question is on LAP front.

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah, Loan Against Property, what was the question?

Ravindra Kumar Kundu — Executive Director

It was on what is the normalized loan loss provision, say once more?

Vellayan Subbiah — Chairman and Non-Executive Director

[Speech Overlap] Yeah. See, last two years, if you look at it in the investor presentation, it’s showing about 0.7% and 1.2% considering the COVID situation, but at a normalized situation, it could be about 0.4% to 0.5% on the portfolio basis.

Shweta Daptardar — Elara Capital — Analyst

So you have any targets in mind for PBT-ROTA for LAP?

Vellayan Subbiah — Chairman and Non-Executive Director

ROTA?

Ravindra Kumar Kundu — Executive Director

We are expecting Suresh to deliver at least 3.5%.

Arul Selvan — Executive Vice President and Chief Financial Officer

So, 3.5% is the expected ROTA. Currently for the current quarter we are at 4.7% because of [Speech Overlap]. On a steady state, we are expecting at 3.5%.

Vellayan Subbiah — Chairman and Non-Executive Director

3.5% to 4.0%.

Shweta Daptardar — Elara Capital — Analyst

Perfect sir. Thank you so much and best luck for future endeavors.

Operator

Thank you. Next question is from the line of Param Subramanian from Macquarie. Please go ahead.

Param Subramanian — Macquarie Group — Analyst

Hi, thank you for the opportunity. I wanted to ask firstly on the restructured book, so you’ve classified, I think it’s largely in Stage 2 and I think it’s largely repaying based on the commentary that you’ve provided. So how long will we continue classifying this on Stage 2. And do we plan to classify this back to Stage 1 and reverse 11% sort of provision cover that you have here? That’s question one.

Question two is again on the vehicle finance yield decline quarter-on-quarter, could you explain again what was the reason for the vehicle finance yield declines? I didn’t get the part on the marginal book. Are you saying the marginal book yield is lower than the existing book yield? So I just wanted to understand that.

And thirdly, also wanted to understand on the credit cost, what was the reason for the spike in the quarter. And if you could quantify the write-offs in the quarter. Yeah, those are my questions.

Vellayan Subbiah — Chairman and Non-Executive Director

We started moving those restructured books which have repaid more than 30% of the original pause. So during the quarter we have moved around INR50 crores of restructured book to Stage-1 because they completed repaying more than 30% of the pause outstanding on the date of restructure.

We will do that every quarter as they repay the — repay more than 30% levels, which is what is given by RBI as a guidance. So, rest of the book is shown in Stage 2. And some had moved into Stage 3. So this is the [Technical Issues] for me. And of course, there are lot of also around INR1,500 crores-odd have got repaid or settled out.

The spike in credit cost, this time is also because for the first time we have also started providing on the macro factors. So far during the COVID period, while we started measuring the macro impact, the macro impact had been negative that is — it was resulting in a reversal of provision, though, we did not take reversals and kept them and we did not provide anything additional. This quarter what has happened is because the interest cost hikes and then there was uncertainties, the macro model threw a provisioning requirement of around INR50 crores, which we have provided additionally as part of the ECL and that’s the reason you see the spike happening,

Arul Selvan — Executive Vice President and Chief Financial Officer

As far as the book yield is concerned of vehicle [Phonetic] for now, Q4 it was 13.99% and Q1 it is 13.91% it is almost same level before that in Q3, it was 14.26%. So from Q3 from Q4 onwards we started seeing that the new vehicle sales have picked up. So when new vehicle sales picks up, [Technical Issues] actually reduces slightly. Otherwise, it is almost same level. It has not gone down.

Param Subramanian — Macquarie Group — Analyst

Sir, Kundu sir, if I could just interject, sir, So the income yield you provided in vehicle finance in this slide, so it is down 50 basis point QoQ. So that’s the number I’m looking at. The income yield that you provided in the slide on vehicle finance.

Ravindra Kumar Kundu — Executive Director

Which slide you’re saying? You’re referring to?

Param Subramanian — Macquarie Group — Analyst

Sir, 15.4% have gone to gone to 14.9% on vehicle finance income yield.

Ravindra Kumar Kundu — Executive Director

That is quarter-on-quarter versus — it’s not Q4 versus Q1, you are talking, I think the comparison ranges from Q1 versus Q1, the mix was completely different, and that was a very small book.

Vellayan Subbiah — Chairman and Non-Executive Director

That was the COVID [Phonetic] book right.

Ravindra Kumar Kundu — Executive Director

That was influenced by the large quantum of tractors in the book at that point in time. So it will keep changing, based on the mix of the book. Of course, there have also been some small reductions in the yield, but now we will be pushing up the marginal yield as we see the interest rate hike coming up.

In downturn when interest rates are dropping, you will see that progressively the book will show the impact towards the next few quarters of the drop because the book has to change its [Indecipherable].

Param Subramanian — Macquarie Group — Analyst

Okay, got it. Sir, just one last part. On the macro provisioning, is this something that will recur quarter-on-quarter, or is this, you’re looking at more as a one-off for this quarter? That was my last question. Thank you and all the best.

Vellayan Subbiah — Chairman and Non-Executive Director

No, the macro, there is a model we’ve built factoring in various macro measures like GDP and consumption and industrial growth, etc, and influence on each of the portfolios that they have. Basis that, the models throws up and it takes into consideration the impact of the change over another one quarter or two quarters or three quarters down the road. And that is — that’s how the model throws out what is the macro provisions required for each of the sub-segments.

And that’s how we measure it. And when it comes that it can — there will be reversals, we don’t consider reversals, but when it throws off that there is a requirement, we provide for it. We continue using this model as we go ahead, because it’s integral part of the INDAS model of provisioning.

Ravindra Kumar Kundu — Executive Director

Yeah. And so, I think if you take from that, it’s not the intent to provide every quarter, but it depends on what the actual kind of variables indicate for the future outlook.

Param Subramanian — Macquarie Group — Analyst

Got it, sir. Thank you, team. Thank you so much.

Operator

Thank you. [Operator Instructions]. Next question is from the line of Jignesh Shial from InCred Capital. Please go ahead, sir.

Jignesh Shial — InCred Capital — Analyst

Yeah. Hi, am I audible?

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah.

Jignesh Shial — InCred Capital — Analyst

Perfect. Sir, congrats on good set of numbers. Just one data point, sorry, I missed out, I joined a little late, but are you giving slippage recovery write-off number for the quarter and for the last quarter? [Technical Issues] As a total of the business [Technical Issues] whatever is available.

Vellayan Subbiah — Chairman and Non-Executive Director

We couldn’t hear your question clearly.

Jignesh Shial — InCred Capital — Analyst

Can you hear me now?

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah.

Jignesh Shial — InCred Capital — Analyst

Yeah, can I get the slippage recovery and write-off number for the quarter and for the last quarter, if it is available or you are giving it?

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah. We can tell you now. Normally, we don’t give it, it is around INR148 crores this quarter and last quarter it was around INR200 crores.

Jignesh Shial — InCred Capital — Analyst

This is net, right?

Vellayan Subbiah — Chairman and Non-Executive Director

Sorry?

Jignesh Shial — InCred Capital — Analyst

This is net slippage you are saying or this is — [Speech Overlap]

Vellayan Subbiah — Chairman and Non-Executive Director

Hello?

Jignesh Shial — InCred Capital — Analyst

This is slippage number you are saying right?

Vellayan Subbiah — Chairman and Non-Executive Director

Write-off.

Jignesh Shial — InCred Capital — Analyst

Write-off, okay.

Vellayan Subbiah — Chairman and Non-Executive Director

[Speech Overlap] Slippage, see, there are only two components, one is write-off, the other one is the provision acquisition or direction. That moves with model and the NPA number. [Speech Overlap] If it moved up, the provision is more, and NPA moves down, provision — but that’s more a notional number, write-off is the crystallized loss effect.

Jignesh Shial — InCred Capital — Analyst

Understood, understood. And second question had been you acquired Payswiff last year. So how that particular business is — how it is accommodative to us and how we are basically using it up? If you can give some color on it, that is fintech part how it is helping us out or what we are doing with this business, if you can give some color on it if possible, that would be really useful. Thanks. Thanks for this.

Vellayan Subbiah — Chairman and Non-Executive Director

I think broadly it’s still early days for Payswiff. The intent and near that[Phonetic], still continues to be our focus is that they deal with a particular profile of SME customer. And they have a fairly large distribution capability into those customers using both a combination of direct sales model and a partnership model. In some of the partnership we do have access to that customer base and some we don’t.

And the intent is to basically once we get some history with those customers to start a lending book on top of that. So, like we said, this will take some — a little more time because we need to first develop the capability to have enough data on those customers that we can start a lending book. And once we have that, then the intent is to basically see how a combination of payments product and ending product can be driven to expand our penetration in the SME segment.

Jignesh Shial — InCred Capital — Analyst

Understood. If I can squeeze in just one more thing. So these customers will be more catered to your new business line right rather than a vehicle in housing and LAP, this is more towards the new business lines that you’ll be getting to this customer, is that understanding correct?

Vellayan Subbiah — Chairman and Non-Executive Director

Absolutely. That is correct. And that’s what we’ve articulated as well that we intended to really focus on how we expand both the consumer and SME ecosystems, which is why you can see the partnership model that we’ve talked about for both our consumer and small enterprise loans business, and in some cases a structure like this is what we’re going to focus on to improve our penetration in those segments.

Jignesh Shial — InCred Capital — Analyst

So considering the kind of growth we’re seeing in new business gradually the overall portion would be tilting towards new business as well. So the mix would gradually will be changing over next two or three years, this would be a fair assumption to make, right? So right now the dominance which is there in vehicle will gradually — will be more granular in nature for Chola as a whole?

Vellayan Subbiah — Chairman and Non-Executive Director

Well, I don’t think the mixed shift will be so different in two to three years. But the intent is to move it over a period of time. So we’d like to take a longer time horizon on that.

Jignesh Shial — InCred Capital — Analyst

Understood, thanks. Thanks for this sir and all the best.

Vellayan Subbiah — Chairman and Non-Executive Director

Thank you.

Operator

Thank you. [Operator Instructions]. Next question is from the line of Bunty Chawla from IDBI. Please go ahead.

Bunty Chawla — IDBI Capital Markets & Securities Ltd. — Analyst

Thank you sir. Thank you for giving me the opportunity. Firstly on the — if you can share your thought process on the AUM growth guidance [Speech Overlap]

Vellayan Subbiah — Chairman and Non-Executive Director

Speak up a bit.

Bunty Chawla — IDBI Capital Markets & Securities Ltd. — Analyst

Is it audible sir?

Vellayan Subbiah — Chairman and Non-Executive Director

Can you speak a bit louder, please.

Bunty Chawla — IDBI Capital Markets & Securities Ltd. — Analyst

Yeah. Can you throw the guidance on the growth path, because last year there was a pressure on the prepayment, repayment. This year should be the normalization for that year and disbursement growth are picking up. So if you can share your thought process on that.

Secondly, sorry for the repetition, I missed the write-off number, if you can repeat that number for me.

Vellayan Subbiah — Chairman and Non-Executive Director

See, if you just see like we mentioned that in vehicle finance if industry deliver 35% growth over the last year, obviously vehicle finance will grow much better than that. And in that case we will get opportunity to grow more than 20% because 70% growth, 70% book is vehicle finance. In any case LAP and housing finance, they are growing over 20% as of now.

So only thing is that the moment vehicle finance start growing at the rate of 20%, it will actually improve the overall growth. We have done well in the Q1, if you have seen that as compared to the last quarter. So I’m expecting that the industry will support this year and we’ll come out of the higher run down obviously in the second quarter. So both put together, we’re likely go to safely 20%.

Ravindra Kumar Kundu — Executive Director

And like we said, there is one more quarter of run-off that we had, so early in the second half we’ll start seeing significant growth.

Bunty Chawla — IDBI Capital Markets & Securities Ltd. — Analyst

And sir, write-off number, if you can repeat for me.

Vellayan Subbiah — Chairman and Non-Executive Director

INR148 crores. [Speech Overlap]. I think INR148 crores is in Q1.

Bunty Chawla — IDBI Capital Markets & Securities Ltd. — Analyst

Thank you. Thank you very much sir, and all the best.

Operator

Thank you. Next question is from the line of Alpesh from IIFL Securities, please go ahead.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Hi, thanks for taking my question. Just two questions. What’s the average duration of this new portfolio that we are adding into our balance sheet that’s first. Secondly, in the home loan business, I see the new purchases portfolio being stable between INR1,300 crores and INR1,400 crores since last few quarters. So, and the self-construction is increasing. So any specific reason on that?

And lastly, one more question is…[Speech Overlap]

Vellayan Subbiah — Chairman and Non-Executive Director

We didn’t understand your home loan question, I’m sorry, I don’t know if it’s a volume problem at our end, but you might have to just speak up a bit for the home loan question.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Okay, sir. So the home loan portfolio mix when I see, the share of the self-construction is over the last seven, eight, quarters is increasing whereas the new purchases share is coming down, and in the absolute value that number relays between INR1,300 crores, INR1,400 crores for the last few quarters. So any specific shift in the business focus there?

And lastly, I just wanted to check, so now with all this moratorium, etc., being over, can we see the repayment and the prepayment rate across businesses being pre-COVID levels in interest of FY23 now?

Vellayan Subbiah — Chairman and Non-Executive Director

Affordable housing, self construction has been the focus area, and we have further actually improved that. And in housing affordable housing, we’re maybe working in the south zone and we started in rest of the country. In rest of the country mix was slightly lower, which we have now changed to a self-construction. That is what the affordable housing is.

Alpesh Mehta — IIFL Institutional Equities — Analyst

[Speech Overlap] And sir, what would be the average ticket size for that self-construction portfolio for us?

Vellayan Subbiah — Chairman and Non-Executive Director

INR14 lakhs.

Alpesh Mehta — IIFL Institutional Equities — Analyst

INR15 lakhs?

Vellayan Subbiah — Chairman and Non-Executive Director

INR14 lakhs.

Alpesh Mehta — IIFL Institutional Equities — Analyst

1-4? Okay. Great.

Ravindra Kumar Kundu — Executive Director

Consumer and the small enterprises, we mentioned that there are three verticals, three channels. One is partnership channel and DSA/DST and duty-free channel. In the — and partnership we’re doing 33%. Whatever we do in the partnership, mainly is the consumer loan or personal loans, which is a short-term and small ticket size it is hardly three to six months turn up.

But in the case of balance 60% which is a traditional loan, it goes up to five years. So we have both the product in the consumer side. So 33% in the small ticket is small tenant, balance 66% is the normal ticket sales and up to three to four — three years is average.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Okay. And the last question related to that prepayment repayment rate, are we formally back to the pre-COVID levels and during the COVID whatever the disruptions related to the changes into the payment schedule, are those been addressed now, completely?

Vellayan Subbiah — Chairman and Non-Executive Director

Yes. Actually the collection has been back in the — we’ve been doing 114% of billing collections and [Technical Issues] going on very well that’s the reason you’ve seen that Stage-2, Stage-3 is coming down. [Technical Issues] further improved actually in time. In first [Technical Issues] quarter one and quarter two, are always [Technical Issues] picks up after the festival. In spite of that this year, we have done collection in the June quarter and expecting that September quarter also will be good.

The next collection will happen in December and March quarter.

Alpesh Mehta — IIFL Institutional Equities — Analyst

Okay, great. Thank you so much.

Operator

Thank you. Next question is from the line of Mahesh. Please go ahead.

Mahesh — Analyst

Yeah, just two questions from my side. One is, we see some pretty healthy new vehicle sales of commercial vehicles in the market and yet at a system — I mean, industry level, we still see overdue still not reach pre-COVID. If you could just kind of tell us some qualitative answers as to what could — what could explain this that lenders are taking some time out to clear out the inventory of overdue loans in the market?

Vellayan Subbiah — Chairman and Non-Executive Director

Talking about the new vehicle sales picked up, but the overdues of the consumer has not come down, that’s what you’re saying?

Mahesh — Analyst

Yeah.

Vellayan Subbiah — Chairman and Non-Executive Director

It’s obvious, you have actually missed out during the COVID period gone into six or nine bucket. We are continuously paying one or two EMI, but it will take at least six to nine more months to come back to the normal level. However, the new requirements from the market, mainly driven by the large fleet operator from the heavy commercial vehicle and construction equipment part of it has gone up. And that’s the reason we are driving the numbers.

But this particular dry of growth will be — cannot be sustained unless the retail customer start coming up. So we are expecting that the retail customer who only purchased the used vehicle will start coming back to the market after the second half maybe after the festival, subject to the monsoon has been good and agriculture growth is there, supported by GDP growth.

So the current number is driven by the large fleet operator in commercial vehicle. And subsequently it will be driven by digital customer.

Mahesh — Analyst

Perfect sir. And one last question from my side. There is a reasonably stark difference between the way market is seeing the macro backdrop for next year, yet lenders are reasonably optimistic of the situation on the ground. How would you reconcile the two, when you’re building your business for this year and how can the portfolio be protected for next year in case there is a slow down of debt? Thanks, and that would be all.

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah, I think it’s very difficult to I mean, to actually say what is going to happen, right, in terms of I think too many people are trying to predict and we don’t know how to predict. So we are basically not trying to formulate this view. And so that’s why even Ravi said, hey listen if the market grows at x, this is what we will end up growing at, which will be slightly more than the market. But what’s actually going to happen, I don’t think anybody can stay — say at this stage, okay. I mean, it looks like basically kind of you know everybody who looks too much at the West has got kind of this view that recession is coming around. But it also looks like it won’t be as pronounced in India as it is kind of globally. And that might be causing some of the bullishness. But that’s not how we are driving internal behavior. It’s kind of actually driven by what we’re seeing on the ground, and that’s what’s kind of driving most of what’s happening for us.

Mahesh — Analyst

Thanks sir. Thank you. Thank you, Renju, you can close the call for now.

Operator

Thank you. Due to time constraints, we have reached the end of question-and-answer session. I would now like to hand the conference over to the management for closing comments.

Vellayan Subbiah — Chairman and Non-Executive Director

Yeah. Nothing specific from our side. Thanks a lot for joining. And we look forward to seeing you next quarter.

Mahesh — Analyst

Thanks a lot.

Operator

[Operator Closing Remarks].