CREDITACCESS GRAMEEN LIMITED (NSE: CREDITACC) Q1 2026 Earnings Call dated Jul. 22, 2025
Corporate Participants:
Unidentified Speaker
Ganesh Narayanan — CEO & MD (Designate)
Nilesh Dalvi — Chief Financial Officer
Gururaj Rao — Chief Operating Officer
Analysts:
Unidentified Participant
Shreepal Doshi — Analyst
Renish — Analyst
Abhishek — Analyst
Shreya Shivani — Analyst
Shweta D — Analyst
Nidhesh Jain — Analyst
Arvind R — Analyst
Rajiv Mehta — Analyst
Himanshu Taluja — Analyst
Abhishek — Analyst
Abhishek — Analyst
Presentation:
operator
Ladies and Gentlemen, good day and welcome to the credit access Grammon Limited check Q1 FY26 conference call hosted by Equidious Securities. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that that this conference is being recorded. This conference call may contain forward looking statements about the company which are based on the beliefs, opinions and expectation of the company as on the date of this call.
These statements are not the guarantee of future performance and involve risk and uncertainty that are difficult to predict. I now hand the conference over to Mr. Sripal Doshi for Equerious Securities. Thank you and over to you sir.
Shreepal Doshi — Analyst
Good evening everyone. I welcome you all to Q1 FR26 earnings call of Credit Access Grammy. Today we have this top management of. Credit Access grammy represented by Mr. Ganesh. Narayanan, CEO and MD designate, Mr. Guru. Raj Rao, Chief Operating Officer, Mr. Nilesh Dalhi, Chief Financial Officer and Mr. Sahib. Sharma, Head Invested Relations. I would now like to hand over the call to Mr. Ganesh for his. Opening remarks post which we can open. The forum for question and answer. Over to you sir.
Ganesh Narayanan — CEO & MD (Designate)
Thank you Sripal. A very good evening to all of you. We are pleased to welcome you to the conference call to discuss our first quarter FY26 business performance. We begin FY26 with a positive momentum setting the tone for the year ahead. Our Q1FY26 performance has created a new benchmark achieving the highest ever first quarter disbursement in our history. This is a testament to our resilience and agility that define us given that we are coming off the back of a challenging credit cycle. Before we deep dive into the first quarter performance, I will encourage all of you to go through our FY25 integrated annual report themed Being Sustainable and Responsible available on our website.
This report reinforces the principles that define us while capturing full spectrum of our financial performance, business strategy, progress in our ESG journey and commitment to robust corporate governance. We have witnessed broad based decline in power accretion rates across our operating geographies with a strong ground level execution and disciplined approach to customer engagement. The PAR 15 plus accretion rate stood at 0.46 in June 25 compared to 1.34 in November 24. Karnataka is gradually inching towards stabilization with new PAR. With new PAR 15 plus accretion rate significantly being controlled at 0.58% for the month of June 25 from a peak of 2% in February 2025.
The gradual stabilization in asset quality over the past three quarters has enabled renewed focus on our growth. Our employee base grew from 20,970 employees in March 25 to 21,333 employees by end of June 25 while maintaining lower annualized attrition rate of 27.1% in Q1 FY26. This has resulted into improved customer servicing and supporting our asset quality outcomes. We have strengthened our market position amid multiple headwinds, increasing our AUM based market share by 70 basis points during FY25 to reach 6.9% of the overall microfinance industry. This gain reflects the consistency of our approach with a continuous on new to credit customers and a strong commitment to supporting our borrowers through every stage of their credit journey.
We added 2.16 lakh borrowers in Q1FY26 of which 43% were new to credit, maintaining a consistent trend quarter after quarter. As a result, 33% or 1/3 of the borrower base is unique with Cagrami as of June 25 compared to 26% in August 24. The branch expansion is progressing well with 54 branches opened in Q1FY26 across a mix of vintage markets and newer geographies. Our retail finance portfolio, the strategic growth lever witnessed significant increase in YoY share from 2.9% to 6.8% at end of June 2025. We are pursuing a calibrated growth in the segment with strong focus on maintaining asset quality.
At the same time, it is important to highlight the increasing share of three year loans in GL book rising to 44.3% in Q1FY26 from 33.3% in Q1FY25. While the strength reflects the improvement in serviceability and long term retention, the probability of US handholding these customers into retail finance increases meaningfully given our evolved with customer philosophy. Our internal policies on placing limits on credit exposure even before MPIN galleries were implemented have resulted in a natural and steady deleveraging Trend. Referring to slides 10 and 11 GMP of borrowers with greater than three lenders stood at 11.1% in June 25 versus 25.3% in August 24.
The GLP of borrowers with greater than 2 lakh unsecured degradedness stood at 9.5% as of June 25 compared to 19.1% in August 24. Further the average total unsecured debt of CA gram in borrowers has declined 14% year on year while the average monthly obligation has declined by 6% year on year. Par 15 + in case of borrowers with four lenders stood at 14.3% as of mid June 25 versus 12.6% in March 25. Similarly, par 15 in case of borrowers with more than four lenders stood at 31.1% as of June 25 versus 27.8% end of March 25.
This shows that delinquencies Delinquencies have largely crystallized in case of borrowers with greater than three lenders while 80% of these customers continue to make regular payments. Out of the overall par 15% of 6.4% 35% was an account of greater than 3 lenders. Similarly, out of overall power of 60 plus 4.1% par 60 or 4.1% 36% was on account of borrowers with greater than 3 letters Our accelerated write off journey which commenced in Q3FY25 is steadily driving us towards balance sheet normalization. In Q1FY26 we undertook write off of 693 crore which included an accelerated write off of 603 crores related to 180 plus non queuing accounts leading to an additional credit cost of 193 crores for the quarter.
As highlighted in Slide 6, the share of credit cost due to new power accretion has consistently declined since Q3 FY25 whereas credit cost on account of write offs has increased. This has been in line with the Company’s aim towards balance sheet normalization through conservative provisioning and accelerated write offs. Overall, the Company continued to hold 133 bips or 331 crore higher provisions over par 90373 bips or 833 crore higher provisions compared to IRAC prudential norms and 74 crore higher provisions compared to NBFC provisioning norms. Our collection efficiency excluding arrears stood at 93.2% for Q1FY26 while being 93.5%.
For the month of June 25, par 90 stood at 3.29% GNPA of 4.70% and net NPA of 1.78% both predominantly measured at 60 plus GPD. Net interest income grew 7% quarter on quarter to 937 crore with portfolio yield at 20.3% and interest spread of 10.6%. We observed a decline of 8 bits in our average cost of borrowings to 9.7% at the end of Q1FY26 having remained stable at 9.8% over previous seventh quarters. During Q1FY26 we raised 2,570 crores which included partial drawdowns from our maintenance USD 100 billion multi currency syndicated social loan comprising of Japanese Yen and US dollars denominated coming this transaction is particularly significant as it was priced compared compared to comparable to our domestic borrowing rates and notably lower than our average cost of borrowing.
We raised money from leading banks from South Asia and Far east reflecting our strong ESE credentials and consistent impact driven record. We remain confident of building on this momentum as we work towards our strategic objective of achieving 25 to 30% foreign borrowings with financial year 28. NIM remains steady at 12.8% for Q1FY26 cost to income ratio stood at 33.5% while BPOP stood at 653 crore. In Q1FY26 the liquidity levels including cash and cash equivalents were adequate at 2025 crore amounting to 7.3% of the total assets. Additionally we have sanctions in hand of 3,093 crore and another 6,500 crore worth of thanks in wind pipeline.
The capital adequacy remains comfortable at 25.5%. We delivered a pad of 60 crore in Q1FY26 leading to ROA of 0.9% and an ROE of 3.4%. The microfinance sector is showing signs of stabilization supported by implementation of MFEN guardrails and improved lending discipline across the ecosystem. Looking ahead, the outlook for FY26 remains encouraging with favorable monsoon forecast forecast and strengthening rural sentiment laying the groundwork for sectoral revival, our strong business momentum and stabilizing asset quality position as well to deliver robust profitability in the second half of FY26 as guided. Thank you for your attention and time.
We now open the forum for questions and answers.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press STAR and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Mr. Ranish from ICICI. Please go ahead sir.
Renish
Yeah, hi. Congrats on a good set of numbers. Just two three questions from my side first on this par 15 acquisition data. So it is very clear that, you know, except Karnatak, most of the states are either stabilized or maybe better than, you know, the June 24th levels. But when we look at Karatak specifically, you know, par 15 accretion, it is still, you know, significantly higher at 58 basis point versus June 24. And also, you know, when we look at par 0 which is increased to 9.2 in June. So what, I mean, what is happening at the ground level? What are the factors, you know, which is causing this delay and does this also possess any risk to our, you know, Karnataka guidance of 1 to 1.25 which we shared last quarter?
Ganesh Narayanan
Okay. So Ranesh, at ground level the situation is consistently improving. If you see the chart we have on a month, on month basis we’ve shown improvement in Karnataka also. I agree that it is not at a normal level but we are hoping that by end of Q2 we should see further drop in new power accretion in Karnataka. And we’ll have to kind of watch Q3 to see where this will settle down. Right. So we’ll have to see whether it goes back to the earlier trend of 1520. So it’s going to kind of settle down slightly higher.
But at least the monthly trend is showing that it is consistently every month, probably on a weekly basis also it is showing very strong strength of recovery. Right. So. So the nature of car is still the same that certain section of customers are using, you know, the ordinance to kind of request for some more time. But however, what is encouraging is that you are seeing that in the early buckets, more than 40% of customers, that is before 60 days, more than 40% of customers are partially paying. So while you are accruing new part, old part is also performing through partial payments.
Right. So, so it should kind of balance out during this quarter is what we feel.
Renish
So this partial payment customers are only for Karnatak, right?
Ganesh Narayanan
No, overall as a company also we have 40%. Karnataka is also similarly trending for the.
Renish
New part accretion you are saying?
Ganesh Narayanan
Yes. So less than 60 days partial paying customers at a company level as well as Karnataka is roughly around 40, 45.
Renish
Got it. Got it. And does this possess any risk to credit cost guidance in Karnatak? What we shared in Q4 of 1 to 1.25%.
Ganesh Narayanan
So we would want to keep it there. But like I said, we’ll have to see how Q2 pans out and how we stabilize in Q3. Right. So the only comforting Factor is every month we are seeing progress and we’ll have to see how this kind of tapers down over the next few months.
Renish
Got it. So second question is on the retail finance. You know you also mentioned your opening remarks about strategically scale up of this book. So can you share little more detail about, you know, which product is driving this growth with geography, you know, how are the setup, I mean internally, who is getting this, businesses, etc.
Ganesh Narayanan
Sure. So broadly today retail finance comprises of graduated customers taking unsecured business loans. It also comprises of mortgage loans, I.e. secured business loans as well as affordable home loan. Right. So so today as we speak most of the book that is more than thousand. Currently it is 1300 crores. 1300, right. Yeah. So. So the unsecured business loan book is around 1300 crores which is the graduated customers taking unsecured business loans. This is predominantly done in our core geographies which is Karnataka, Maharashtra, Tamil Nadu, mp. And during the year we will scale this up to a few more branches.
Right. So as of last year we had rolls us out in around 400, close to 500 branches. As of now we’ve rolled this out in around 735 branches. So this is one part of the retail finance. With respect to mortgage loans, that book stands at roughly around 250 crores. Right? 250 crores. This is the secured business loans and home loan stands at 100 odd crores as we speak.
Renish
Okay, got it, got it. Just to follow up on that. So this untiped business loan, what is the tenure?
Ganesh Narayanan
So this is three year tenor predominantly. You’re talking about unsecured business loans, right?
Renish
Yeah. Yes sir. Yes.
Ganesh Narayanan
Yeah. This predominantly three year tenants.
Renish
And any data to share on six month on book performance or anything.
Ganesh Narayanan
So this, this unsecured business loans as of last quarter we were roughly at a par 30 of close to 2%. And we are rangebound. I think we, we’ve seen a slight increase here predominantly because this book is also in Karnataka. But we are around 75.75bits higher than Q4. But we see that also stabilizing in the coming quarter.
Renish
So what is the part 30 you said 2 basis points.
Ganesh Narayanan
So last quarter we said it is sub 2%. Now it’s eased up by 7580 bits.
Renish
Oh okay. Okay, got it. And just a last thing, sir, there was a media article suggesting you know, many players are increasing their lending rate in mfi. So are we also contemplating any rate hike or have you think we’ve not.
Ganesh Narayanan
Increased rates for the past few quarters, that media article was kind of quoting what is published on the website as well as comparing it with portfolio yield. So on a QQ basis our average lending rates have not increased. Okay.
Renish
Okay. And we have not. I mean we are not.
Ganesh Narayanan
No, we’re not looking at in the near future.
Renish
Got it. Got it. Thank you so much, sir. And best of luck.
Ganesh Narayanan
Thank you, Ranesh.
operator
Thank you, sir. The next question is from the line of Abhishek from AB Capitals. Please go ahead, sir.
Abhishek
Yeah. Am I audible?
operator
Yes, sir, you’re audible.
Abhishek
Yeah, yeah. I know you already spoke, but just again wanted to ask this one like you think we are the challenging portion of the credit cycle. We have already crossed it. Right. And we can again grow confidently, aggressively like our path.
Ganesh Narayanan
Yes. That. That is the confidence that we are seeing consistently month on month. Right. So that is why we have been publishing monthly updates. So every month we are seeing improvement with certain amount of operation that happened in April because of year closure and holidays and that translating to slightly elevated par in May also. But I think consistently if I see as a trend we are inching towards normalcy.
Abhishek
Okay. And any other state other than Karnataka. That you would like to flag as. Of now where stress is there little bit. No.
Ganesh Narayanan
All other states have really come back quite strongly.
Abhishek
Okay, thank you.
operator
Thank you, sir. The next question is from the line of Shreya Shivani from clsa. Please go ahead, ma’. Am.
Shreya Shivani
Yeah. Thank you for the opportunity. I have three questions. My first question is on a p on one of your peers had commented in their result call that they are facing some challenges in growing the MFI book in Karnataka and Tamil Nadu. Now I understand this is your home turf, so can you help some color you can give about on, you know what kind of growth and new customer acquisition has been seen in these two geographies in the past quarter? I know in the people you give us that data for the past one year, but just for the quarter.
That’s my first question. My second question is on the employee cost. So I understand that you had been. Your employee count was increasing from fourth quarter itself. So the employee cost has come in at a elevated rate. What should be the run rate? How should we build it for the year? Was it that more variable was paid out this year? Some color on that would be useful over here. And my third question is I think you’ve partly mentioned but I still wanted to understand that last time you had mentioned that in your stage three, your provision coverage is at a 50, 60% whatever level it is because on the partially paying account you had kept lower pcr.
So what has been the behavioral trend of this partially paying account? Do we foresee the need to provide more or it’s an improving trend? These are my three questions. Thank you.
Ganesh Narayanan
Okay, on the first question, we don’t see any specific difference in customer acquisition with respect to challenges in Karnataka, Tamil Nadu, it is like any other state. We are normatively growing across all states. And with respect to Opex, the Opex in Q4 is slightly lower because we had revisions. We had revised the provisions with respect to annual performance bonus. Given the moderation in the performance of the company, we’ve moderated that also and hence there’s a revision in the provisions accordingly. So that is kind of showing you that this elevated. Sorry, elevated OpEx. In Q1 also.
Q4 we added people and Q1 also we’ve added people. So these two put together is kind of contributing to higher OpEx. But with growth starting, you should see that this is inching lesser than 5% as we move forward. And on the third question, stage three, stage three provisioning. Today we are at roughly around 63%. It is slightly lower than the last quarter because the Karnataka book, where majority of the districts are classified as low risk has flown forward to stage three. Hence you’re seeing a slight provision. Otherwise there is no change in provisioning model as such.
Shreya Shivani
Right. Even with the partially paying accounts, you. You’re still comfortable with the level of provisions that you have kept, right?
Ganesh Narayanan
Yes, yes. You would know that we provide stage three at 60 days, not 90 days. And there is already a very high amount of provisioning in all three stages compared to whatever we are able to see in the market.
Shreya Shivani
Got it. And just one follow up. The reason why I’m stressing on Karnataka and Tamil Nadu is because you’ve given us a range of 14 to 18% growth. Right? So. So any slowdown over there would make me decide whether it’s, you know, it will help us understand whether the growth is more towards 14 and more towards 18. Do you think your peers experience of not a very normative growth in that geography could just be because of that is not their home turf or their home geography or something of that sort. Do you think competition has calmed down in many of the geographies? Any comment around that?
Ganesh Narayanan
With respect to Karnataka, I think the confidence will start coming in as people start seeing fresh fire accretion come down. So in our case, because we are seeing it coming under control month on month, our book will also grow as we move Forward Right. So so for different players it could actually pan out at slightly different point of time but I see that it will strongly come back in some time.
Shreya Shivani
Got it. This is very useful and thank you and all the.
operator
Participants. Before we move to the next question please press star and one on your touchtone phone for asking the question. Our next question is from Ms. Shweta D from Alara. Please go ahead ma’. Am.
Shweta D
Thank you sir for the opportunity. So a couple of questions. So the sanctions which you are holding say around 3000 odd crores and the pipeline of closer to 6000 can you provide the composition across JLG versus individual or retail finance loans? Second is for this 350 odd crores of provisions which have been made towards new power accretion. So again here also if you can provide some color on the customer cohort and lastly while the employee attrition has. Been declining and over 300 bits now. Quarter on quarter but can you just. Provide any color on any geographic related. Concentration here in terms of employee attrition? Thank you.
Ganesh Narayanan
I think for us I’ll take the third question first. With respect to attrition over the last two quarters we’ve been able to kind of stabilize headcount across all states. However we do see slightly higher attrition in the state of Tamil Nadu which is more or less I am seeing this as a pattern across bfsi not necessarily microfinance but we keep a slightly higher bench there to kind of manage attrition but otherwise the rest of the country is kind of quite stable for us. And with respect to the borrowing related question, the sanction in hand, I’m asking Nilesh to digital.
Nilesh Dalvi
So Shweta, with respect to the sanctions in hand and sanctions in pipeline largely all these funding lines are have an underlying as microfinance loans so we have not yet started availing loans keeping retail finance as underlying because that book is. Still. It’S in a growth phase and once we reach a certain disbursement quantum on a monthly basis then we will look at hypothecating retail finance assets for our funding. So as of now the funding is purely this is the microfinance book and your second question on the provisions on the new part. So the provisioning is again in line with our ECL policy. So as you are aware we are taking a district based provisioning approach and depending upon the classification of the district the provisioning is done. So as of now the UPAR accretion we have anyways provided the new power appreciations across various states for your Information and depending on in which district this new power comes, whether it is in a low risk, medium risk or high risk in I mean basis that the provisioning rate will be determined.
So largely as of now we are not seeing any major deviations. It’s been a normative trend over last few months.
Shweta D
Understood. Thank you so much.
operator
Thank you. The next question is from the line of Nadesh Jain from investech. Please go ahead sir.
Nidhesh Jain
Thanks for the opportunity. The first question is on customer count which has been written off this quarter and how should we think about active customer growth? When do you expect that to happen? And what is the expectation to reach active customer base by the end of this financial year?
Ganesh Narayanan
Right. So broadly I think by end of Q2 most part of the write offs would have happened and we are confident of adding roughly around 1 lakh customers on an average per month for this financial year. So hopefully we should be able to kind of maintain this trend and settle down around how much we should see. Growth in the from third and fourth quarter the customer base because the write offs will be largely done. And if you see normatively in second half, even if we add say 6 lakh customers, so it will have 6 lakh customers on a base of 45 is around close to 15% growth. But then there will also be a normative attrition on a maybe around 6 to 7% in the seventh in the second half. So we should see around 5 to 7% growth in the borrower base on a overall basis.
Nidhesh Jain
Sure. And what is the count of customer which has been written off in this quarter?
Nilesh Dalvi
4.6 lakhs.
Ganesh Narayanan
The single quarter is 4.6. 4.6 lakh we return.
Nidhesh Jain
Yeah. In Q1.
Ganesh Narayanan
Yeah.
Nidhesh Jain
Second is.
Ganesh Narayanan
My bad, it’s on a trailing twelve month basis we have written off 4.6 lakh borrowers in. In first quarter we have written up around 1.8 lakhs.
Nidhesh Jain
1.8 lakhs. Okay, sure. And what is the quantum of interest income written off in the quarter?
Ganesh Narayanan
Around 88 crores.
Nidhesh Jain
88 crores. So that should also reduce after Q3. Right. And as your return of rights of slows down, that interest income written off should also reduce from Q3 onwards?
Ganesh Narayanan
Yes, largely in Q2 we should see a similar figure. But from Q3 onwards it should taper off.
Nidhesh Jain
So in terms of cost of fund, how should you see the trajectory of cost of fund going forward?
Ganesh Narayanan
Cost of funds, directionally they should improve. However, today what we are seeing is that our borrowings are linked to MCLR and usually the reset Happens on an annual basis at different points in time. So. While the repo has fallen by 100bps, it takes at least two quarters to for the transmission to happen in MCLR. So we should see some benefit flowing in. So like in Q1 we already seen around 8 pips of benefit. So the larger benefit should come by end of the financial year and in the next, I mean the first quarter of next year.
Nidhesh Jain
Okay, sure. Thank you. That’s it for my side.
Ganesh Narayanan
Thank you.
operator
Thanks. Thank you. The next question is from the line of Arvind R from Sundaram alternates please go ahead.
Arvind R
Thank you so much for the opportunity. Considering the accelerated provisioning we have made, you know of 193 crore in this first quarter. Are we still confident of, you know, sticking to, I mean like are we still confident of you know, getting to the guidance of credit cost of 5 up to 6%? That is my first question. And then second question like you know, is with respect to higher occupancy. I understand like you know, we have made multiple efforts in terms of strengthening collections and you know, maintaining higher wind strength in Tamil Nadu geography because of higher attrition rate.
But do you think this will improve as we, as you know, the group picks up? That is the second question.
Ganesh Narayanan
Yeah. So first question we on the guidance on credit cost because we are seeing month on month improvement, we believe that we should be able to reach that. But Q2 will give us better confidence if we continue to improve the performance on this and kind of reinforce that we should be able to make this on the OPEC side. Like I said, Q3, sorry, Q3 and Q4 you will see it dropping and hence by end of the year it should drop down below 5%. So currently it is high because of two things. Like I said, one is because of higher employees added in Q2, Q4 and as well as Q1 and also because of the effect that in Q4 provisions for APB were reversed to kind of rationalize the budget for the same.
And that is kind of made Q4 employee cost lower. And we’ve also added increment provisions in Q1. So that is also kind of contributed to higher OPEX.
Nilesh Dalvi
Sure sir, but just one follow up question on credit cost. You mentioned that you know the role credit cost in the second half but it has to be as low as 3,4% for us to get to a point of 5 to 6% credit cost for the full year. That’s the reason.
Ganesh Narayanan
Yeah. The confidence for us is that given that the monsoons are better and field level issues have reduced. We are looking at lower migrations and a significant improvement in performance in Q3 and Q4. And hence we are saying that it should be maintainable. Sure.
Arvind R
If I can just ask one more question. Like this is with respect to regulatory, you know, relaxation in terms of, you know, mfi, you know, as a percentage of the overall portfolio, you know, reduced. Being reduced from certified 60%, does it mean that like, you know, you know, like industry will have much more of individual mfi, basically unsecured, you know, loans, you know, offered to the, you know, like a good set of customers as a world at the industry level. And will that happen with credit also like, you know, higher portion of a huge number five?
Ganesh Narayanan
Right. So, so you, you, you would have seen that. We’ve already laid out a 2028 plan where we’ve said that we will diversify into these asset classes and over a period of the next few years we will reach roughly around 12 to 15% of div. Similarly, with this higher room, I think a lot of players will step in to experiment into adjacent asset classes. Could be mortgage, some of them could be other asset classes that they are confident about. But I think this will grow in a phased manner. I don’t see a significant ramp up across this because all of this needs investment thought process, technology, credit policy, etc.
So I think this will be a phased growth. But it, it would be over a period of time. Probably most MFIs would see diversification in their portfolio per se, but I don’t see it going up very quickly. But it should take a fair growth.
Arvind R
Sure. Thank you so much. Thank you.
operator
Thank you. The next question is from the line of Rajiv Mehta from. Yes, yes, securities. Go ahead please.
Rajiv Mehta
Sure. Hi, good evening. Congratulations on very good numbers. So firstly on collections, I mean if you can comment on July collection efficiency, a power accretion trend so far. And also what we see is this reduction in the PAR15 accretion rate across markets. Is it also correlating or aligning with the fact that central meeting attendance is now coming back, their center meeting collections are improving. Can you also, you know, give us some sense around it?
Ganesh Narayanan
Sure. See, Jolie collections I would say has been stable as per our expectation and hopefully it should remain strong in August and September also. Okay, Karnataka. Okay, Karnataka is improving, but overall I think we’ve been stable in July also. And with respect to center meeting attendance today, we know that attendance has been to a certain extent, it is not as per historical level, but we’ve always maintained that center tenants today has no direct linkage to repayment. Most of our repayments are coming through centre meetings. Like we said earlier, your early morning centre meetings have better attendance.
Post 9am center meetings have. We are see, we’ve seen that the centimeter attendance has dropped. We’re also seeing an uptick in digital collections. So we reached roughly around 16% of our collections are coming through digital modes now. So we will have to see how this moves. But I don’t see that as a challenge as long as you’re investing to see what is happening and kind of complement it with digital modes of connecting with the customer. So digitalization is something that is contributing. Second is the amount of women getting employed has also significantly increased in Google markets.
So that is also resulting. But still the early morning center meeting attendance is quite encouraging. Post 9am is something that has been falling but we don’t see it so far as a implication to our repayments. Most offer repayments are happening through center meetings. And and today if you see our almost our daily collection efficiency as well as monthly collection efficiency is similar. So if you are not getting money in the meetings, this is not tenable, it’s not maintainable.
Rajiv Mehta
And we can comment on the rejection. Rate after the April bad rail, you know what, what is it you know now versus what it was before the. Guardrail came in or anything. April. And how do you see the rejection rate going forward? Because the industry’s leverage, the customer leverage is also correcting. So do you think that in the second half the rejection rates will kind of ease off allowing you to add more customers? Because the leverage would have settled by then and that would also help you for growth.
Ganesh Narayanan
Right. So so far after the Gander 2, which I think we picked up around February, not in the April, most of the industry picked up a little early. The rejection rates have gone up by around 5 to 10. And we think according to what you’re saying also our assumption is also that post Q2 because the leveraging would have dropped, it’s possible that we could see slightly better approval rates. Yeah, it may not be significantly different because you will also have to reach out much wider. So if you’re spreading out wider, probably you will have more customers and then it should balance out. But you could see a slight increase in approval rates as we think as we see.
Rajiv Mehta
This one last thing on you know our guidance and you know. Our guidance is between first half and second half and second half we are. Talking about, you know, Q3 Q4 being near 4.5% ROAS and around 18 ROEs. So in that sense, you know, are we here assuming that that the number of customer per loan office at that metric will improve and you know give us some operating leverage through cost leverage here Because I think as you said lending rates maybe you’re not changing cost of fund will gradually improve. So nim, so you’ve already guided credit costs. I think you already where we can. Land in the second half. But are we assuming some, some, some leverage from this metric that you know. The cost can be better absorbed with. The growth coming back.
Ganesh Narayanan
Right. So we should see that because post Q2 the drop because of accelerated write off would kind of slow down. Right. And you will see that the averages are inching up along with growth of new customers.
Nilesh Dalvi
See Rajiv, I’ll add a couple of points here on the operating, I mean on the OPEX to AUM question. So see largely as you see our AUM is still flat at what it was in FY24. So we are still at around 26,000 and maybe it stays at this level for another quarter because of the accelerated write offs. So while the disbursements are healthy, customer additions are happening. But maybe because the accelerated write off the denominator is at 26,000 and in second half obviously it will grow in line with the whatever disbursements we are. So it is more of a base effect in first half wherein our employee expenses on a yoy basis obviously they will go up because we’ll have our annual increments will be in place and plus whatever employee addition we did in the fourth quarter, almost thousand new employees were added in fourth quarter so obviously their salary contribution will also reflect in this year.
So so there is a normative increase in the operating expenses and also historically the branch expansion we have typically conducted in the first half. So even in Q1 we have added around 50 plus branches and we’ll have, we’ll primarily complete our branch expansion in second quarter. So even that leads to certain front loading of expenses which usually gets adjusted in the second half. So this OpEx which is today around 5.1, it may stay at that level in Q2 and then Q3 Q4 as. The growth picks up. We should see that issue again dropping. Below 5.
Ganesh Narayanan
Just to add to the. Point of. Customers per Kendra Manager, currently it stands at around 320 and the main reason being is accelerated write off what we are taking which is resulting in our lower customer base. But we do expect that post September when the accelerated write off is completed. This number will revert back to our historical average. So we should be by year end. It should reach the historical averages which will provide a better efficiency in terms of productivity for employees.
Rajiv Mehta
Got it. Thank you so much. Yeah, sorry.
Ganesh Narayanan
Thank you.
Rajiv Mehta
Yeah, yeah, I’m done. Thank you.
operator
Yeah, thank you. The next question is from the line of Himanshu Taluja from Aditya Birla Sun Life AMC Limited. Please go ahead.
Himanshu Taluja
Hello sir. Thanks for the opportunity. Just few questions at my end. So if I just take whatever the new part accretion what is currently 0.46 MFA, assume that this stays at the current levels for another quarter. Is it right? Because the credit cost which you have showed in the first quarter 2.2%. And if I assume that your for the quarter your forward flow rate would be one and a half. And if you make 63 65% of the PCR probably 1% credit cost is required on a non non analyzed basis will be for the no and plus the write off switch can potentially so that.
Can we say that in the second quarter your credit cost can revert to a levels of 1 1/2% on a non analyzed and then 3rd 4th quarter potentially where we can see a massive improvement of the below 1%. Below 1%. Is it, is that understanding right?
Ganesh Narayanan
Yeah. Himanshu. So largely if things go as per what we are envisaging, this is the trajectory we should see. Because as you see, even in first quarter while there was certain provisioning with respect to the new power which came in first quarter, but there was also secondary impact of the power which came in fourth quarter and which kind of flew into the advanced buckets in the first quarter. So that’s where in first quarter there has been a little elevated impact on. The new power related provisioning. Now when we go in second quarter, obviously since the new power accretion in Q1 has been lower than what it was in Q4, so obviously the secondary impact of that will be lesser in Q2 and the primary impact of the new power which comes in Q2, obviously it will have a similar kind of provisioning. So we should see this 572 number, it will keep declining.
Himanshu Taluja
And so the idea is to understand the pace of the decline what my match stays that from going ahead quarters. Assuming if your flow rate doesn’t increase and stays at even at the current to a declining trajectory, your credit cost should materially decline from the coming quarters. Now.
Ganesh Narayanan
Yeah, so that’s what I mean. If we look at our guidance, we are saying that obviously first half the credit cost will be elevated and in second half the run rate will be three, three and a half percent. So obviously the three, three and a half percent is a run rate. The quarterly cost will be below 1%.
Himanshu Taluja
Thank you, thanks a lot for this clarification. Second is on the growth guidance. So can you help us what kind of the portfolio are you trying to build on the your retail finance? Because that proportion in the mix is also rising. Assuming the two years forward, FY26 and FY27 where you see this mix will gonna be. And if you can also help us what kind of the portfolio you are trying to build in this.
Ganesh Narayanan
Right, so right now, because our mortgage is a long journey, the book today is a little more of unsecured loans will grow faster. Your mortgage will take time to grow. But once both businesses are established, the mortgage business will run down slower whereas the unsecured business loan will run down faster. So over the medium term you should see that today I think 70% is unsecured business loans, whereas 30% is secure. 25, 25 approximately. So this should keep changing over the next few years. Right, so that’s how we envisage and in the medium term should kind of reach around 50, 50.
Himanshu Taluja
Sorry, around 15%. Over the medium term around 50, 50.
Ganesh Narayanan
Around half each.
Himanshu Taluja
Okay, okay, got it, got it, got it, got it. But where you think this mix of retail finance share can go from 3% last year to 7% currently? Can this head towards 12, 15% in the two years time frame?
Ganesh Narayanan
What we have guided is around by 2028, end of the year 2028 we should reach anywhere between 12 to 15% and we are confident of reaching that number.
Himanshu Taluja
Sorry, what percent?
Ganesh Narayanan
12 to 15% is what we’ve guided for 2028.
Himanshu Taluja
So secondly, lastly, given this guardrail one and the two probably we see potentially 20% of the borrowers has gone completely out of the system on a sustainable basis, what sort of growth one can expect assumingly the second half become normalize then if you have to really guide the growth on your MFI book, what you believe on a sustainable basis you can deliver.
Ganesh Narayanan
Yeah, I think in a normal scenario MFI books should grow in the early days, maybe around 13 to 15%. And along with retail, we projected that the overall growth should be 20% plus 20, 25% kind of range. So it will moderate to around 10 to 15% in the microfinance side.
Himanshu Taluja
Correct? Correct. Correct. Yeah. Thanks a lot sir. Thanks a lot for your for answering. Thanks.
Ganesh Narayanan
Thank you.
operator
Thank you. The next question is from the line of Mr. Abhishek from HSBC. Please go ahead.
Abhishek
Yeah, thank you. Hi, good evening everyone. So my first question is on Bihar. You’ve actually carved it out in your GLP branches and all. And there’s a clear slowdown. This is just until November, until the elections are over and then you think there’s some growth potential or you think that it’s too overheated and therefore this consolidation in the aum. So just wanted to check what’s your thoughts regarding that?
Ganesh Narayanan
So Bihar, we had actually slowed down last year because we saw certain amount of abrasion in the credit cost in Bihar. So we had kind of strengthened the team, added people and we started growing business there. So it has nothing to do with the environment there. It is a lot more internal in our view that we saw that previous slightly higher credit cost than we had even compared to industry. So we had to kind of slow down to see what’s going on, correct our policies, people and we started growth there. So it should. It’s nothing to do with election or overheat at this point.
We are very small compared to the industry there. But I think we should be growing at some pace from now.
Abhishek
And can you highlight what is what change you made for yourself?
Ganesh Narayanan
We had a slightly higher attrition. Right. So normally with higher attrition you will have higher credit cost. So we had to evolve a certain amount of people strategy there and we strengthened the bench there and we are okay now.
Abhishek
Okay, perfect. The other question is about this year’s branch edition plan and hiring plan. Can you share that?
Ganesh Narayanan
Yeah. Every year on an average we do around 200 today also this year also we should do around 8 to 10%. So roughly around 200 branches we should add this year we’ve done 54 in Q1 and we will spread this out over the next couple of quarters.
Abhishek
Okay. And hiring of like employees
Ganesh Narayanan
typically we. Start a branch with around five field officers and one branch manager. So if you include the rest of it you can count six more. Yeah, so. So you can average assume six per branch because you also have support functions like auditors and all of them coming in. So then you can assume that kind of increase. No, but you would also be hiring for the retail finance functions which you are growing much more and those are relatively smaller. Retail today is not material. We have around 110 branches. Probably we’ll add around 10, 15 branches. That is also baked into this branch count.
Abhishek
No, I was ganesh. I was asking more from a hiring perspective, the employee addition point of view. So there is one which you explained which is JLG related but then retail finance related. How many do you need to add? Because that is where you need to really invest.
Ganesh Narayanan
What I was saying is that the branch count that we said of 200 also includes expansion in retail finance branches and we start off the retail also with a similar headcount. Right. And what we are working on, what we are working on is to see how we convert our group loan branches to contribute to mortgage for which we may add slight number of manpower because right now it is on a pilot stage. But it should be similar. If you assume around 6 per count per branch, we should be in that range. So we should be not more than that.
Nilesh Dalvi
And for retail finance the scale up will be coming from the existing branches because the mortgage book was pil. I mean the individual unsecured loans were piloted four years back but mortgage loans. Were piloted two years back. So now they will enter into a scale up mode and the existing 100 branches itself wherein there is already existing thousand member team. So the existing branches will be driving the scale up in this business. So while the new branch addition will be there. But obviously the larger component of growth. Will be coming from existing matches when it comes to.
Abhishek
And it will primarily be these two products. Right. Individual and home loans. You’re not looking to scale up any other product materially. Right now.
Ganesh Narayanan
The retail finance branches only do mortgage today be it home loan or secured business loans. As you know, we do unsecured business loans through the group loan branches but through much more stronger underwriting norms there. Right. We did a small pilot of two wheeler which we could see some amount of scale up during this year but may not be materially different. Materially high number.
Abhishek
Right, yeah, understood. Yeah. So the 12, 15% will basically be on the back of mortgage and individual.
Ganesh Narayanan
Yes, yes, perfect.
Abhishek
Got it, got it. Thanks so much and all the best. Thank you.
operator
Thank you, thank you. The next question is from the line of Abhishek from AB Capital. Please go ahead.
Abhishek
Hello.
Ganesh Narayanan
Yes, Abhishek.
Abhishek
Yeah, just wanted to ask like one of your competitors had commented in their. Con call, I think in the last. Con call questioning the viability of the. Traditional joint lending group business model in future. So do you have any doubt about it in future? Just wanted your broad opinion.
Ganesh Narayanan
See I think we have kind of stated our position on the earlier also the only change that we are seeing Abhishek is that the probability of the customer’s life in the JLG model could be shorter. Right. So we still don’t see that the JLZ liability model will become unviable. But however, we believe that once a customer comes into the formal financial system, today we have customers who are 15 years, 20 years also with us. So the vintage of the customer in microfinance could get moderated over a period of time. So they come in through the JLV model, probably spend two, three years, create a credit history and once they have a credit history, probably move up the ladder and move towards individual loan.
So this is what we envisage. Otherwise I don’t see today an alternative to JLZ for this profile of customers to run very successfully. Right. So this model I think will be an entry point. But then the graduation can become faster.
Abhishek
Okay, thank you.
operator
As there are no further questions from the participants, I now hand the conference over to Mr. Sripal Doshi for closing comments.
Shreepal Doshi
Thank you, Shruti. And thanks to the Management of Credit. Access Grameen for giving us the opportunity. To host the call. Thank you, sir. And thanks to all participants for being there on the call.
Ganesh Narayanan
Thank you all for your continuous support. Look forward to next quarter. Thank you.
operator
Thank you on behalf of Aquarius Securities. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.