CREDITACCESS GRAMEEN LIMITED (NSE: CREDITACC) Q2 2025 Earnings Call dated Oct. 25, 2024
Corporate Participants:
Udaya Kumar Hebbar — Managing Director
Nilesh Dalvi — Chief Financial Officer
Analysts:
Renish Bhuva — Analyst
Dhaval Gada — Analyst
Rajiv Mehta — Analyst
Gaurav Kochar — Analyst
Abhijit Tibrewal — Analyst
Shweta Daptardar — Analyst
Nikhil Rungta — Analyst
Shreya Shivani — Analyst
Bhavik Dave — Analyst
Hardik Shah — Analyst
Gaurav Sharma — Analyst
Nidhesh Jain — Analyst
Shreepal Doshi — Analyst
Presentation:
Operator
Ladies and gentlemen, good day, and welcome to CreditAccess Grameen Limited Q2 FY ’25 Earnings Conference Call hosted by ICICI Securities Limited. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Renish Bhuva from ICICI Securities. Thank you, and over to you, sir.
Renish Bhuva — Analyst
Yeah, hi. Thanks, Neerav. Good evening, everyone, and welcome to CreditAccess Q2 FY ’25 earnings call. On behalf of ICICI Securities, I would like to thank CA Grameen management team for giving us the opportunity to host this call.
Today, we have with us the entire top management team of CA Grameen represented by Mr. Udaya Kumar, Managing Director; Mr. Ganesh Narayanan, CEO; Mr. Nilesh Dalvi, CFO; and Mr. Sahib Sharma, DGM-Investor Relations.
I will now hand over the call to Mr. Udaya Kumar for his opening remarks and then we’ll open the floor for Q&A. Over to you, sir.
Udaya Kumar Hebbar — Managing Director
Thank you, Renish. Good evening, everyone. Thank you for joining the conference call to discuss our second quarter and first half year of FY ’25 business performance.
The unsecured lending space, including microfinance marked by high-growth has been witnessing an increase in delinquency levels over the past three, four quarters. Given the short-term nature of such unsecured lending and timely calibration by various institutions, we believe this credit cycle to be transient in nature.
Taking due cognizant to this, the microfinance industry represented by MFIN implemented the guardrails in July ’24 to strengthen the underwriting norms across all the global entities. While we have been witnessing an accelerated realization of delinquencies in the last few months, we believe that the MFIN guardrails are essential for fostering a healthier environment for the industry in the medium-to-long run.
Coming to the second quarter performance, the overall AUM grew by 11.8% Y-o-Y to INR25,133 crores, with the GL book growing by 9.3% Y-o-Y to INR24,188 crores. Meanwhile, RF book or Retail Finance book continued to show robust growth driven by selective customer-base with an AUM of INR945 crore. The customer-base grew 7.2% Y-o-Y to 49.33 lakh at the end of FY ’24. On a Q-o-Q basis, we witnessed 4.4% decline in our overall AUM and 1% decline in the customer base. We added 1.4 lakh new customers during the quarter and 3.37 lakh during the half year FY ’25. Our branch infrastructure expanded to 2,031 across 398 districts as we added 55 new branches during this quarter.
The net income — net interest income grew by 20.8% Y-o-Y to INR933 crores. As guided before, our average and marginal cost of borrowings remained steady at 9.8% and 9.4% respectively. Our portfolio yield at 21.1% and interest spread 11.4% too remains stable and continued to be one of the lowest in the microfinance industry. NIM stood at 13.5% for Q2 FY ’25 compared to 13% in Q1 FY ’25 because of higher capital adequacy of 26.2% and low-base effect on account of a decline in loan portfolio. Cost-to-income ratio was 30.7%, while PPOP grew by 19.5% Y-o-Y to INR672 crore at the end of Q2 FY ’25.
We would now like to draw your attention to the Slides 6 to 10 Asset Quality Update. We have observed a temporary increase in delinquencies across various geographies on account of several factors. There have been localized disruption in repayments caused by third-party interventions in various states. Customers have been facing very tight liquidity and cash-flow constrained as lending industry has curtailed disbursement with more focus on controlling delinquencies.
Further, certain customers, especially agri laborers have also faced income variations on account of lower infall last year following the severe heat wave during the April to June ’24. Furthermore, there has been also transient impact on heavy rainfall in several regions during September quarter.
On the top of the — top of all the above, a segment of over-leveraged borrowers with lower cash flow also are part of this delinquent budget. We expect the situation to stabilize in Q3 FY ’25 and business sentiment should improve in Q4 FY ’25. The company continues to strengthen its collection effort with additional power control measures by deploying senior and experienced field staff and quality-control teams on the back of continuous customer engagement in addition to strong underwriting measures.
We try to understand the current delinquency trend by enriching [Phonetic] the customer overlap with other lenders along with leverage and vintage. The delinquency is the lowest in the case of unique customers with high vintage and high — highest in case of customers with low vintage and high velocity of loans being availed from multiple lenders.
As on September 24, CA Grameen 4 and above — + 4 four above accounted for 12.6% of our Group lending portfolio and had PAR 15 of 12.2%. Hence, the overall PAR 15+ impact on account of CA Grameen +4 above customers is 1.5% only. We have also drawn state-wise comparison of delinquency versus the microfinance industry by sourcing credit bureau data for the month of August ’24.
As visible on Slide 9, our performance has been relatively better than the industry across our top-five trades accounting for 85% of our gross loan portfolio. Our collection efficiency, excluding arrears stood at 96.3% for Q2 FY ’25, PAR 90+ at 1.74%, GNPA of 2.44% and NNP of 0.76%, both predominantly measured at 60 plus dpd. The credit cost stood at INR420 crore for Q2 FY ’25, which includes an additional INR29.8 crore provision on account of increased UCL across all three stages compared to H1 — compared to Q1 ’25. Overall, the annualized gross credit cost stood at 4.1% for H1 FY ’25.
While analyzing our credit cost figure, we would like to draw your attention to early stress recognition and conservative provisioning policy. The company currently holding 179 bps, which is INR431 core higher provisioning for PAR 90+ and 256 basis that is equal to INR629 crores higher provisioning compared to IRAC prudential norms.
Even when we compare us with the average provisioning policy adopted by NBFC MFC industry, we are currently holding additional INR102 crore provisions on account of our early recognition and higher provision rates. This will help us to recognize 70% to 75% of our current shares within the current financial year, instead of deferring it to next financial year.
We had comfortable liquidity position as on September ’24 with cash and cash equivalent of INR2,036 crore amounting to 7.6% of total assets. We have sanctions in-hand of INR3,830 crore and another INR6,918 crores worth of sanctions in pipeline. Our capital adequacy remains strong at 26.1%, further adding strength to our balance sheet.
For Q2 FY ’24, PAT stood at INR186 crore with the ROA of 2.1% and ROE of 10.7%. For H1 FY ’25, the PAT stood at INR584 crores with ROA of 4.1% and ROE of 17.1%, reflecting our strong operating profitability on the back of resilient business model.
In the light of current industry landscape and short-term challenges encountered, we have revised our estimate for FY ’25 annual performance guidance. We anticipate our loan portfolio to grow — loan show [Phonetic] a growth of 8% to 12%; NIM about 12.8% to 13%; credit cost between 4.5% to 5%; ROA 3% to 3.5%; and ROE between 12% to 14%.
We note that revised guidance is based on our estimation of stabilization of delinquencies in Q3 FY ’25, followed by improved business momentum in Q4 FY ’25. This should be on the back of improved rural economic dynamics during the second half of FY ’25, driven by healthy agricultural activities. The country has witnessed the highest monsoon rainfall over past four years — over the past four years, which should help in increased sowing activities resulting in a positive spillover effect. We reiterate our medium-term growth outlook aiming to reach INR50,000 crore mark by FY ’28 as guided earlier through a combination of both microfinance and retail finance business.
Lastly, we would like to share with you an important update related to the management team. Mr. Gururaj Rao has been elevated to the Chief Operating Officer and KMP with — effective from 1st November, who was serving as Chief Audit Officer. Also, Mr. Nagananda Kumar, currently serving as Head of Operation is now appointed as Head of Internal Audit, is effective on 1st November ’24. Both of them have been associated with the company for more than 15 years, contributing to the company’s growth and success.
I’m confident that under their leadership, we will further strengthen our market-share and deliver exceptional value to all our stakeholders. Thank you for your patient hearing. We look-forward to addressing your queries as we open the forum for question-and-answers. In the meantime, I’m requesting Nilesh to give you a five minutes brief of the asset quality spread slides what I mentioned so that he will give a little more clarity on those slides, slide number — yes.
Nilesh Dalvi — Chief Financial Officer
Yeah. Hi, good evening, everyone. So, I’ll be referring to Slide number 6 to 10. So, since there is lot of data we have shared, I thought it’s better we kind of provide you some interpretation of the data what we have provided.
So, on Slide number 6, we have given an update on how the PAR has moved up from Q1 to Q2. So overall, the PAR 0 has increased by 2.9% and PAR 90 has increased by around 1% and PAR 60 has increased by around 1.5%. These percentages are on a pre-write-off basis. Sorry, the Par 0, on a pre-write-off basis, has increased by around 2.9%. So, overall, the slippage what we say, at 60 dpd the slippage is around 1.5% and at 90 dpd the slippage is around close to 1% of the new PAR creation.
And we have also given the figures across our top-five states. So, Karnataka, it is 2.3%; Maharashtra and MP relatively, they are holding well at 4.2% and 4.6%. In TN, it has increased to 6.2% and Bihar is on the higher side at 8.9% and other states it is 8%, but here we have to also take into account that the book degrowth is higher because there are certain states where we are kind of not growing much, like Rajasthan, Gujarat, Kerala, etc. So to that extent, there is a base effect which is kind of playing out there.
Now we go to the Slide number 7. Here we have just tried to analyze the PAR by looking at the vintage lender overlap and the leverage. So, the first chart we have shown the portfolio breakup basis the lender overlap and the vintage.
So like here, we see that unique customers, they are accounting for around 27% of the book in AUM terms. And CA Grameen+4 & above, that segment is accounting to around 12.6% of the overall portfolio. Here, we see that the larger proportion of customers in 4 and above bucket, it is in the low vintage, that is between zero to four years.
And the table to the bottom-right, there we have given the PAR 15+, that is Stage 2 and Stage 3 across lender overlap and the vintage. So, again, here we see that the PAR is lower in the unique and CA Grameen+1, +2 categories, whereas it kind of inches up in the +3 and +4 & Above buckets. CA Grameen+4 & above, it is around 12.2% is the PAR 15 as on September-end. Again, here we see that the PAR is higher in the zero to four years of vintage bucket.
So, largely, what we have inferred from this is that customers who we recently onboarded over the last couple of years who have a relatively lower vintage with us, that is where, since we cannot meet their entire requirement because we will start with, say, INR40,000, INR45,000 kind of a loan. So that is where they have larger overlap with other lenders because maybe they might have a certain history in the microfinance industry and their overall funding requirement is higher.
Moving to the next slide. Yeah, one more, wanted to highlight is the CA Grameen+4 & above cohort, it is 12.6% of the overall Group loan portfolio where the PAR 15+ is 12%. So overall, CA Grameen+4 & above cohort is accounting for 1.5% PAR on the overall book. So out of whatever 5% PAR we have, out of that the impact of this cohort is around 1.5%. CA Grameen+4 & above cohort.
Now moving to Slide number 8, here we have again tried to analyze the PAR by considering the leverage. So here, as we see in the first table to the top-left, total indebtedness of more than INR2 lakh. There, it is around 9.4%, the overall borrowers and the PAR-15 for that cohort that is more than INR2 lakh, it is 6%. So, again here, as we see, the PAR is lower for high vintage customers even though their overall indebtedness is higher, as we see in the table in the bottom-left and the PAR is higher in case of low vintage customers who have taken higher leverage.
So, again, the point we are trying to reiterate is that if higher leverage is aligned with vintage, then the PAR is lower. And only in early vintages if customers have taken multiple loans or they have higher leverage, that is where the PAR is relatively higher.
Now, considering the two tables on the right-hand side, wherein we have tried to understand CA Grameen+4 & above borrowers. So, 4 & above with more than INR2 lakh leverage, that is 6% of the overall borrower base. And there the PAR is — PAR 15 is around 10%. So, again in the bottom-right table, same point appears again that the PAR is higher in the low vintage buckets where the leverage is higher. And as the vintage increases, the PAR is relatively lower.
Now we go to the next slide, that is Slide number 9. Here we have tried to assess our performance versus industry during March to August. So, across all our operating states, the PAR 1-180. So we are considering 1-180 because the write-off policy varies from player to player across industry. So that is where the 180-plus there is a large variance. That’s why we are considering 1-180 bucket. And that is where as on August, CA Grameen’s PAR 1-180 was 3.4% versus 6% for industry.
In our top four states, we are doing better than the industry. In case of Bihar and UP, we are largely in-line with the industry. So, overall, top-five states which account for 85% of our portfolio, there we are relatively doing much better than the industry. This is the CRIF Highmark data what we have sourced for the month of August, which is the latest available data.
Moving to next slide, on Slide number 10, we have indicated the ECL what we have taken as on September. So here the thing is that since ECL is a forward-looking model, so we keep revising the underlying data every quarter. So we typically take a 36 data points, that is three year data we take. And as the recent data enters into the computation, the ECL rates vary.
So here, from Q1 to Q2, we had seen the ECL rates have increased across Stage 1 and Stage 2. In Stage 1, last quarter, our ECL was 0.89%, which is now 1%. And in Stage 2, it has gone to 57.5% from 56%. So, because of this, it is helping us to kind of build early provisioning buffers and that is where today we see that compared to IRAC norms, we are almost holding over INR600 crores of additional provisions. And even when we compare it with the NBFC industry norms, wherein the Stage 2 is provided after 30 days and Stage 3 is provided after 90 days.
So, compared to that, since we do early recognition, we are providing INR100 crores of additional provision by booking Stage 2 after 15 and Stage 3 after 60. So to that extent, we believe that the current delinquency, which has arisen, almost 60% of the impact has been taken in the P&L and that also kind of gives us confidence that the current delinquencies will be largely taken care in this year so that the spillover effect in the next year will be relatively limited.
So, these are the larger points I wanted to make. We can now take questions.
Udaya Kumar Hebbar — Managing Director
Thank you, Nilesh.
Operator
We’ll open the floor for questions, sir?
Udaya Kumar Hebbar — Managing Director
Yeah.
Questions and Answers:
Operator
Thank you very much. We’ll now begin with the question-and-answer session. [Operator Instructions] The first question is from the line of Dhaval from DSP Mutual Fund. Please go ahead.
Dhaval Gada
Yeah. Hi, thanks for the opportunity, and thanks for sharing all these additional data points, it’s quite useful. I had two questions. First is relating to the Slide 6 and Slide 9. So if you look at the change in the August to September in PAR, it seems quite up in certain states, the PAR increase has been quite sharp. Is that how you expect the — so first part is, when do you think this number start stabilizing based on the past experience? And — so that is one part of the question. And the second is, given that you said 60% of the recognition or at least the provisioning part is taken care, do you think this is the peak level of credit cost and we should start seeing a moderation from next quarter?
Udaya Kumar Hebbar
Okay. First question, PAR. It is not August to September, it’s June to September, I think, what you asked. The changes from June to September not in the Slide 6.
Dhaval Gada
So sir — sorry sir, what I was referring to, so if you look at state-level PAR that was shared CreditAccess versus industry, I think in Slide 9 where we have given, for example, states like Bihar and MP and Karnataka, etc. So that PAR is, as of August for the industry and for us as well. And in September, we have given PAR data in I think Slide 6. So the delta change that I’m seeing in each of the state numbers is quite sharp. Just wanted to reconcile that that is the kind of magnitude of increase that one has seen, and when do you think this will stabilize, especially in the top five states?
Udaya Kumar Hebbar
I think there are — so, that’s a data variation. So PAR 90 it’s showing as [Speech Overlap] that’s different…
Nilesh Dalvi
Dhaval, as on August, the PAR 1-180 is…
Udaya Kumar Hebbar
[Indecipherable] See, Dhaval, that’s a difference. That is 1-180, which is [Technical Issues] 1-270, okay. That’s why there is a difference between that and this chart, because we don’t have 1-290 proper data from the system — from the Highmark, which is relevant is 1-180. That is why we took it, because after 270, there is no process of people rating of proper — I mean proper — I mean comparable. That is why we took comparable data, which is 1-180 from the Highmark data. So our data is 1 to 270 days. Therefore, there will be some difference. Okay?
Dhaval Gada
Okay sir. Okay Sir. So there is sir — look, underlying question is basically this PAR increase that you would have seen PAR 0 is what I was referring to, between August and September, what would be the kind of change that you would have seen in the top five states? And when do you think this starts peaking out? That’s the underlying question actually.
Udaya Kumar Hebbar
It is also, there is a blur, may be a difference between 75 bps to 100 bps actually. That’s the difference between that. I know that every month there’s a variation of 50 bps to 75 bps actually. So maybe September was a kind of peak, it could be about — we can’t — we don’t have exact data here because quarter-to-quarter data is available it’s in here. But it could be little higher, about 75 bps, it could be higher than August to, September, okay. Just from an estimation, it may not be too different.
And on second part, you said about whether this is the peak? So, our view also it should be peak, but third quarter [Phonetic] it may not be — what I’m telling [Indecipherable] that the PAR accretion or increase should be peak as far as this quarter or maybe the trend of reversal should start from Q3. So it maybe — October maybe stabilize, November may start turning around, December maybe bit improvement. So that kind of change, we will be — we are estimating for Q3.
Dhaval Gada
And so credit cost, you’re saying that, that should peak in Q3. So credit cost-wise?
Udaya Kumar Hebbar
Yes. That is what our estimate.
Dhaval Gada
Okay. Understood. And bulk of the pain should be — I mean, 80%, 90% of the pain should be crystalized in FY ’25? Is that how one should think about it?
Udaya Kumar Hebbar
That exactly we are talking about because we — our 15 plus it’s carrying almost 60% leverage, right, already. Every quarter, we’re already carrying more than 60% for the 15 plus dpd book. So, by default, even at the March level, we would have carried 60% plus for the 15 plus dpd already, right? So, automatically, we’ll be carrying — we will be crystalizing majority of the cost in the same financial year.
Dhaval Gada
Understood. Understood. And sir, just last question on — in terms of growth, how should one think about this current environment and going-forward for FY ’26 as well from a growth standpoint, if you have any thoughts?
Udaya Kumar Hebbar
Our — we should be — turnaround will start in this Q4, and then this continue afterwards. I think we don’t see any challenge in FY ’25, ’26. So that is why we’re reiterating the medium-term growth or medium-term what you call guidance of INR50,000 crores by ’28. We are reiterating that.
Dhaval Gada
Got it. Okay. Got it sir. Thanks, and I’ll come back in the queue. Thank you.
Udaya Kumar Hebbar
Thank you. Thank you very much.
Operator
Thank you. Next question is from the line of Rajiv Mehta from YES Securities. Please go-ahead.
Rajiv Mehta
Yeah, hi, good evening. Sir, what was the regular bucket collection efficiency in Q2 versus Q1? And is October showing an improvement in that parameter?
Udaya Kumar Hebbar
So, Q2 was 96% and Q1 was — it was 97%, so there is 1% variation.
Rajiv Mehta
Sir, I’m asking for the regular bucket, zero dpd bucket, collection efficiency, specifically, you have that number?
Nilesh Dalvi
Yes, Rajiv. So the on-time collection is 95% for September [Speech Overlap] for second quarter, it is 96%.
Rajiv Mehta
And October?
Nilesh Dalvi
As on September-end, it’s 95%. So usually, you can take it as the whatever is in PAR that will be the non-standard.
Udaya Kumar Hebbar
So, it should be 95%.
Nilesh Dalvi
Yes.
Rajiv Mehta
Okay. Yeah, yeah. Okay. Okay. And then, is it the right thing to understand that this metric has to start stabilizing and improving, so at least the fresh PAR creation will have to start stopping for the whole situation to stabilize? Is that the right way to monitor this number? And would this number be the key?
Udaya Kumar Hebbar
No, it will not stop, but it will reduce from here on, that is what our estimate is about.
Rajiv Mehta
Reduce, yeah. Reduce yeah. Correct.
Udaya Kumar Hebbar
So our view is, in its peak, maybe September is peak October is stabilizing at the same level and start coming down. This is what our estimation. And we are seeing that happening already in couple of states.
Rajiv Mehta
So what is the parameter in terms of collection metrics, which you’re looking at, which will make you start disbursing again more and more assertively?
Udaya Kumar Hebbar
No, we are actually dividing branch between the stable branch and bit of non-stable branch. In the non-stable branch and stable centers, we are actually planning to — already we are disbursing to some extent. Maybe we’ll start looking little more carefully going from this quarter actually, Q3. So our message is more of a stable branch and stable center for growth. And non-stable branch and non-stable center, it’s more of a focus on control and collections.
Rajiv Mehta
And sir, your 0-to-60 dpd…
Udaya Kumar Hebbar
For a data perspective, I’ll tell you, our 70% of centers have a zero dpd actually. So that’s where we are actually working on how to renew — well, how to renew with better underwriting and all, 73% for sake of numbers. So 73% of our customer center has zero dpd.
Rajiv Mehta
Okay. Okay. And sir, your 0 to 60 dpd bucket has felled from 1.1% as of June to 2.5% as of September. So I’m sure you’ve put a lot of collection effort there. But what is your assessment? Would it largely flow into 60 plus or can you reduce the flow because of whatever efforts you have put?
Udaya Kumar Hebbar
So, unfortunately, our view is, the flow is higher, actually, not lower because these are the type of customers, it’s more of a — as I said earlier also, it’s more customers we acquired in the last one to two years the — probably at the higher multiple lending segment. So we are not seeing the — too much of recovery from there. That is why we are very careful and providing it upfront. So it will come back to some action, but not too much. Flow is little higher compared to earlier.
Rajiv Mehta
And sir, just one last question. When I look at PAR 0 and PAR 30 figures in Bihar and the newer states, it’s pretty high versus the vintage states — versus the older states. But even in Bihar, we are on a very similar line with the industry. There is no difference between CREDAG and other payer or the industry as such. Generally, that is not — that is not something that we have seen in the vintage states. Even in the newer states, it seems like [Speech Overlap].
Udaya Kumar Hebbar
Bihar is only the exception. Bihar is only exception at this point of time. Other states…
Rajiv Mehta
Even in the newer state side, I believe that when I look at even in the newer states, which — for which you have not given the data of 1-180, I’m sure you’re very much around the industry there.
Udaya Kumar Hebbar
Yeah, there we explained where we reduce our portfolio drastically, there is an impact of the base effect also. At least 2% variation is because of the [Indecipherable] denominator impacted there. Bihar and UP largely, we are in line with the industry.
Rajiv Mehta
Okay. Okay. Yeah, yeah, that’s it. Thank you.
Udaya Kumar Hebbar
Yeah. Thank you.
Operator
Next question is from the line of Gaurav Kochar from Mirae Asset. Please go-ahead.
Gaurav Kochar
Yeah, hi, sir. Good evening. Three questions from my side. Firstly, how much of this PAR 0 buildup that you have seen in September, how much of this would you attribute to, let’s say the late monsoon that we saw and floods in various areas? And you’ve also mentioned in one of the slides that there were floods and there were collection related challenges. How much of that would you attribute? And in sync with that, let’s say in in October, has that PAR book improved?
Udaya Kumar Hebbar
So flood related is about INR70 crore INR80 crores [Speech Overlap] no, no, no, I mean that’s in September. Now it has actually already come back to almost INR20 crores-odd. So it’s a — flood related, normally, we — okay, there’s a small impact in this number because of flood related, but that is — will not significantly impact us. It will actually come back. It has already come back to large extent. So, we should not worry about that. That is not a big part. It is small part actually in the September numbers. Then again, October, some more would have gone up in the last couple of days. But again, those will come back. It’s not a big number to worry.
Nilesh Dalvi
What was the second question?
Gaurav Kochar
Yes. I just in this — I think, think with this, let’s say, the overall October collection efficiency trend, has that improved over September so far, while there are still five more days?
Udaya Kumar Hebbar
So far, it is stable alongside in September. Gaurav. There’s not too much — that’s what I was telling. October, November, it’s more of a stability than we should look at it to improve. Maybe November we’ll see that little improve, December should have more improvement.
Gaurav Kochar
Got it. Got it. Sure. And sir, the AUM growth guidance that you’ve given, 8% to 12% for the full-year. Now even if I take the lower- end of that guidance, 8%, that is translating into 15% plus growth in the second half of this year. Given the trends currently and we are in a stabilization sort of a mode, are you comfortable to grow this portfolio by 15% over the September ’24 levels in the second-half?
Udaya Kumar Hebbar
Yeah. That’s — so our estimation, that’s again, I’ll link back to estimation is this Q3, we should be able to turnaround that is what the income [Phonetic] showing in our book as well as in the field level estimation. If that happens, we’ll get almost four months of disbursement time, which is actually quite sufficient for growing because we can — we have a very large number of customers’ renewals coming in the second half as is normally — normally in microfinance the second-half is higher renewals. So — and we have a very large number of retained customers. So, obviously, we’ll be targeting our own renewal customers. So we have a good chance of achieving it.
Gaurav Kochar
Got it. And just last question, if I can squeeze in. Your credit cost guidance of 4.5% to 5% for the full year. If I look at first half, you delivered — and if annualize that it’s closer to 4.6%, 4.7% and you’re seeing that you expect the collection trends to stabilize in 3Q and in 4Q it should improve. So, is it more on the conservative side or you believe that overall credit cost outcomes may be slightly better than that? Is it little more conservative on the guidance? Because if I do the math, it translates into, let’s say, around INR700 crores-odd or INR720 crores-odd kind of a number which is pending in the second half. So do you expect that sort of credit cost in the second- half?
Udaya Kumar Hebbar
So, that is why we kept a little larger vertical range, right? So, rather than we kept — because we — our best case could be the lower range and worst case should be the other range. So, that’s why we kept that. So, because little uncertainty is there everywhere, right? So you can’t be very persistent as of today. So that is why if you see our entire guidance has a larger range compared to our earlier guidance because there is uncertainty. We have some plans, we have some particular indications. Accordingly, we are working. So our view is, we should do better. That is why if we do better, we will be at a lower range.
Gaurav Kochar
Got it. Yeah, that’s it from my side. Thanks.
Udaya Kumar Hebbar
Thank you.
Operator
Thank you. [Operator Instructions] The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go-ahead.
Abhijit Tibrewal
Yeah, good evening, everyone. Thank you so much for taking my question. Hi, sir. Sir, two things I want to understand. First thing is, in the slides and even in your opening commentary, when you call this as a transitory or temporary increase in delinquencies, I think what we are wanting to communicate is that maybe this credit cycle that we are seeing in the MFI sector today, that would be more short-lived, could get over in this year rather than transitory in the sense that these are temporary operational difficulties and will get course corrected in the coming quarters. Is my kind of understanding correct when we use the word transient or temporary?
Udaya Kumar Hebbar
Yes, exactly, but at least not necessarily operational difficulties. It is a bit of environmental issues also there. Environment, I’m talking the whole industry sector. It’s not that microfinance industry is struggling. It’s a lot of other industry, which is finance sector, microfinance sector, individual loan sector, the personal loan sector, credit card sector, retail loan sector, you can see all of their, maybe because of the — some of the reasons which are in the nature of third-party intervention, some of the nature of the lack of income, some of the nature of the lack of liquidity and cash flow because of tight credit norms by everybody.
All these are mixed here. So that is why we are saying because these are short term loan cycles, so this cycle also should be short term and should be over in this financial year itself. That is what our view.
Yeah, Nilesh, wants to add something.
Nilesh Dalvi
Yeah, Abhijit, one more point to add here. So the thing is that the MFIN guardrails, which have been introduced in month of July, so that will or that has significantly tightened the underwriting norms in the industry. So what we are seeing is that because of this, it will be more of accelerated recognition of the stress. So maybe if — like what we have been seeing since last year September, there has been a steady- state increase in the delinquencies on account of various factors.
So, now it is more of accelerated recognition of these delinquencies, which will happen in this financial year or which has — which started in July, June and maybe it should end somewhere in third quarter. So to that extent, as you said rightly, it will be a short-lived delinquency cycle. And post that, the industry delinquency trend should be relatively better.
Udaya Kumar Hebbar
Yeah.
Operator
Thank you. Next question is from the line of Shweta from Elara Capital. Please go-ahead.
Shweta Daptardar
Yeah, thank you sir for the opportunity. Sir, two questions. One is, sir, you have implemented district-based pricing model, but if I look at Q2 versus Q1 yields, they have remained largely stable. And second question, Nilesh, to you. So, you mentioned that customers with four and above lenders are largely the low vintage portfolio customers, and the overlap with other lenders is higher primarily because your origination amount or initial amounts have been as low as INR40,000 to INR45,000- odd. So does it mean that these customers initially came to you, and then suddenly, they move to the other lenders, that’s why the number of lender count has increased because you were giving like lesser amount of loans in the initial phase? Thank you.
Nilesh Dalvi
Yeah. Shweta, I’ll take the second question first. So, the point I was trying to make is that as you know, every year, whatever new customers we are adding, so 30% to 35% of the customers are new to credit, which means that the balance, 65% to 70% customers are from the existing market.
And the unique proportion is higher in the core markets wherein we have a longer operating history. And in the newer markets, it’s relatively lower around, say, 20% to 25% or 25% to 30%. So that is where what happens is that when we grow in the newer markets and we are tapping customers from the industry, it is very much possible that the customer has been operating in the microfinance industry for five to 10 years. But since it is new to us, we have to start at level zero, wherein we will be lending anywhere between INR40,000 to INR50,000.
So that is where — since we are not able to meet their entire requirement, they might end-up availing loans from two or three lenders more. So that is the point I was trying to refer. And as the customers build higher vintage with us, their eligibility keeps increasing cycle after cycle, post which we are able to largely fulfill their entire financial requirements. So that is where in the higher vintage customers, we see that their exposure with us or their wallet share — I mean we have a higher wallet share. So that is the point I was trying to make.
Udaya Kumar Hebbar
Yeah. On, this district-based pacing, yes, we implemented already. So there is a bit of shuffle between the districts from the state level to district level now. But it should not change too much numbers because what we certainly start catching up quarter-by-quarter over a period of time, it may change a bit.
But it will actually help us to identify the risks and place us properly at a district level, at a granular level. It will not change too much on the yield immediately and it actually is not anticipated to have a yield change actually. It will remain stable because of this.
Operator
Thank you.
Udaya Kumar Hebbar
In a nutshell [Phonetic], we have not grown also, right? We actually degrown during the quarter. So it will not make too much difference.
Operator
Thank you very much, sir. The next question is from the line of Nikhil Rungta from LIC Mutual Fund. Please go-ahead.
Nikhil Rungta
Yes, hi. Thanks for the opportunity.
Udaya Kumar Hebbar
Hi Nikhil. Hi Nikhil.
Nikhil Rungta
Hi, hi. Sir, just two questions…
Operator
Nikhil, sorry to interrupt you. Can you please speak through the handset?
Nikhil Rungta
Yes, is it fine?
Operator
Better, thank you.
Nikhil Rungta
Yeah. Sir, just two questions. I’ll say it in one-go. One is, we have seen unseasonal rains in October. Of course, you have mentioned that October, the collection efficiency should be similar or better than September. But because of this unseasonal rain, do we see any impact on October efficiency as well?
Second, when will disbursement growth come back? And also, you had earlier mentioned that in every cycle, there is some or the other learning. So what’s the learning from this cycle, and how are we implementing the change?
Udaya Kumar Hebbar
Nikhil, thank you. So, recent October, see, we had almost INR80 crores of defaults in September because of the rains, because we had rains in Bihar, Madhya Pradesh, Maharashtra, West Bengal, everywhere. But that default has already come down to INR20 crores. So basically, the rains or such kind of default normally will not be a long-term. This is hardly one week or two week and next week, money will come.
Similarly even if in August, October we have — we may have some difficulty, I’m anticipating, Odisha, Bihar will have some default in the next two days. But still, this will come back. We are really — will not worry much about it. So whatever collection efficiency will remain stable even with that. So, we don’t worry much about it.
Second one is about the growth will come back. We estimate we should get at least four months of good, what we call business momentum in this financial year. Therefore, we calibrated about 8% to 12% growth potential for this financial year.
For learning perspective, the data what Nilesh explained clearly shows that the default rates are coming from the new customers whom we acquired are from a different MFIs. So there is [Indecipherable] if you see unique customer, even the new customer is behaving better. So, we need to be improving the underwriting, MFIN guidance one way is helping us also.
In some states, we have made more stringent than the MFIN guidelines, particularly in newer state so that, we will not make the similar mistake what we did before, okay? So — which should help us. We’ll continue to retain the customers, which will help us to do well. Again, data clearly shows that. So the learning is to retain our customers and have a better underwriting for the new customers in a new geography?
Nikhil Rungta
Okay. Okay. Thank you. Thank you, sir.
Operator
Thank you. Next question is from the line of Shreya Shivani from CLSA India. Please go ahead.
Shreya Shivani
Thank you for the opportunity. I just wanted to — two questions. First, I’m not sure if you’ve already shared this, but this 15.3% that you’ve shared the CredAcc + 4 borrowers, as of August ’24, what would that number be, say, a year ago or any — like year ago, 1.5 years ago? That will be useful.
And second, I wanted to understand that you spoke about, you split your branches into stable, non-stable, etc. So how — is 70% of your branches that data that you shared out, does that mean that those are stable and the group meetings are continuing over there? And in the rest 30%, there is some disruption in the group meeting. Just wanted to understand details of that 70% data that you were speaking about earlier.
Udaya Kumar Hebbar
Yeah. The first of CredAcc + 4, we said about 12% to 13%. One year before, it was about 8%, if I remember correctly, but not exactly. Maybe Nilesh will check it and let you know later.
And in case of branch, I told the centers, not the branch. 73% of centers are behaving, maybe it’s distributed in the branches. But at least 40% to 50% of our branches have a lesser PAR, okay? Those branches, we are actually enabling to do business with a better way going-forward, because at this point of time, we are actually controlling them also to be — because surrounding system is not very great at this point of time.
So we tightened there also. Maybe it’s solely by the six months they’re able to control within the 2% PAR, I think we are actually starting to work and motivate them to acquire customers and disburse more with the strong underwriting process.
Shreya Shivani
Correct. And these customer centers, which are under stress, obviously a bigger chunk would be coming from the state of Bihar, right?
Udaya Kumar Hebbar
Not necessarily. Bihar portfolio itself is only 5% of our Shreya. It’s only 5%. It won’t make it out. It’s distributed.
Shreya Shivani
Correct, correct. And sir, just last question, I wanted to understand, if I just check the CRIF Highmark data on Bihar state, the different buckets, it seems like majority of the deterioration has this happened in the past two, three months, right? Because till June, the trends are still not so worse off as it looks right now, at least from your numbers, assuming your numbers are closer to industry in that too?
Udaya Kumar Hebbar
Yes, yes. It’s the last three months. It’s actually the — even for our number also increased in the last three months.
Operator
Thank you. Next question is from the line of Bhavik Dave from Nippon Mutual Fund. Please go ahead.
Bhavik Dave
Yeah, hi, sir. Am I audible?
Udaya Kumar Hebbar
Yes. Hello?
Operator
Yes sir. you are.
Bhavik Dave
Yeah. Sir, a couple of questions. One is on incremental growth, right? And when you see — how difficult is it to add new customers because you’ve seen new customer addition drop out? And for us to come back to the growth levels that we think about in FY ’26 maybe. In the current environment, how difficult will it be to add new customers considering 6% of our existing customers are already in that 4 plus lenders plus 2 lakh plus ticket size, right? So, even the existing customers will attrite. So a bit on how we’re thinking about growth?
Udaya Kumar Hebbar
See, the growth will come from two buckets. One is from renewals and one is from new customer acquisition. So large number of customers will come for renewal in the second quarter actually. So even if we think about 6% customer, we have to drop, so we have — already, if you look at, we are already acquiring more than 50,000, 60,000 new customers per month with the new guardrails, right?
So it’s a bit of scaling normally will happen in the second quarter — second- half. So you will have an increase in customers also, increase in renewals also. These two things should take care of our, what I call, moderate growth, what we estimated.
Operator
Thank you. Next question is from the line of Hardik Shah from Goldman Sachs. Please go ahead.
Udaya Kumar Hebbar
I think Bhavik wanted to ask one or two questions, I think. Sorry to interrupt.
Operator
Sir, one moment. Bhavik, do you have any follow-up questions?
Bhavik Dave
Hello? Yes. Yes. So another question was, sir, in terms of the customer behavior, right? And we’ve understood that customers have very- high understanding in terms of their credit scores. Is this cycle wherein the incomes have not got impacted. But obviously, some over-leveraging has taken place. Do you see customers coming back and repaying as and when they have their money in their account rather than just like going away? Is that recovery or behavior visible in this cycle because COVID incomes got impacted, so did during demon, this cycle is very different. So how is the consumer behavior — customer behavior in this cycle? If you could just talk about that?
Udaya Kumar Hebbar
I think we need to wait and see. As of now, in the last three to four months, our experience that they’re actually moving forward is much higher than the recovery here. So we have to see probably next three months and see how it changes. As of now, it’s mostly moving forward, lesser recovery we are seeing.
Bhavik Dave
Okay. Okay. That’s it. Thank you, sir.
Operator
Thank you. Next question is from the line of Hardik Shah from Goldman Sachs. Please go ahead.
Hardik Shah
Thank you for the opportunity. Am I audible, sir?
Udaya Kumar Hebbar
Yeah, yeah. Hardik, please.
Hardik Shah
Yeah. Sir, I have two questions. One is, last quarter, you alluded that your ability to access customers who was better in 2Q and hence, you were receiving partial payments. How is that trending for the delinquent customers, number one?
And number two, if I see the fresh flows across states from Q1 to Q2, that has gone up across states. Karnataka has gone, for example, from 0.3% to 0.9%; Tamil Nadu from 1% to 1.7%, Maharashtra from 0.5% to 2.6%. So what is giving you the confidence that things will stabilize in 3Q and improve in Q4 given that fresh flows are continuing to come across states?
Udaya Kumar Hebbar
The access to delinquent customer is still good. But unfortunately the recovery is little less compared to earlier actually. We thought in the June quarter, we should be able to do — able to recover, but it is not exactly what we had wished earlier. So it is not in our expected lines. We expect it to recover more.
Unfortunately, these kind of customers who have multiple lending and probably what we say overleveraged or so. I think there actually there are so many third-party interventions in many states. They are not repaying, so less repayment is coming. It’s actually — it is not as per our wish as of now.
And Second, what you said is, yes, there is an increase in the, what you’d call, Karnataka and Maharashtra also, but it’s not as high as compared to the whole industry or compared to the other states. We strongly believe that, that will still is controllable, and then we will be able to manage much better.
And already, we need to keep — we keep checking the field — we keep checking the field information how it’s moving. We are seeing the stabilization in both Karnataka, in Maharashtra and Madhya Pradesh and Chhattisgarh, the large part of — even Tamil Nadu, for example, is showing 6.2% today for zero. But it is actually, by and large, stabilized between whatever accrual addition in August or addition in September or this October is not higher than the previous month.
So, therefore, we are seeing that kind of sign in many states. So therefore, we have a strong belief that we should be able to turn around in Q3 and we should be able to grow in the Q4, unless something more different thing happens, okay, as of now.
Hardik Shah
Okay. Also, this [Speech Overlap] band made by RBI for a couple of NBFCs who are also microfinance players, will that accentuate problems in some of the states that you operate in, in terms of liquidity and hence, the problem that was accentuated by MFIN guardrails could kind of get accentuated even further?
Udaya Kumar Hebbar
Should not be because our overlap with such of — any of these players are very, very low. So therefore, we don’t see any such actions. Because our maximum overlap is only with IndusInd industrial bank. No, there — so we have even double-digit overlap actually. So we don’t have any worry about that.
Hardik Shah
Okay. And sir, last question on your retail book, which you’ve grown a lot in this quarter, although it remains a very low proportion. Any color on the asset quality there? How is that trending?
Udaya Kumar Hebbar
No, that asset quality is exactly — I mean, very, very good actually. So I think overall, within 0.6% of PAR 30 kind of thing.
Hardik Shah
Understood. Understood. Okay. Thank you. Thank you, sir.
Udaya Kumar Hebbar
Sorry, I said 0.63% it 0.3%, sorry.
Operator
Thank you. [Operator Instructions] Next question is from the line of Gaurav Sharma from HSBC. Please go-ahead.
Gaurav Sharma
Yeah. Am I audible?
Udaya Kumar Hebbar
Yeah. Yeah. Gaurav.
Gaurav Sharma
Yeah sir. Thank you for taking my question. So two questions. One is, sir, we have seen that you have increased your branches. But in the number of employees, we have seen that they have decreased from the last quarter. So what explains this divergence? That is number one.
And second, sir, you have mentioned in the medium-term that the share of retail finance would be around double digit. So — and, given your target of INR50,000 crores. So, do you think you will be growing these segment little more aggressively and their share may increase in medium-term or you’ll stick to your previous guidance over the share of decreasing finance portfolios?
Udaya Kumar Hebbar
I’ll answer the second one. Our retail finance will grow as per earlier model of what we said that by ’28, we would reach up to 15%. So that is what the way we are going. So it will not grow too fast, but it’s not too slow also. 15% reaching by ’28 means, we should reach INR7,500 crores, which is almost some INR1,000 crores to INR1,500 crores is not small. But it will grow in speed, but percentage will remain about 15%.
On the employees, it’s a small operation. I think it’s about few 100 employees have changed. There may be more training which is not comes in the number. So there is no, what you call worry about the employee attrition issues, with that.
Gaurav Sharma
Okay. And sir, hiring for these additional branches has already been done or it will come in the — like the operational [Speech Overlap]
Udaya Kumar Hebbar
Yeah, normally we start — normally start with a few employees to start a branch because normally, once you open the branch, it takes at least two months’ time to start business. So therefore, in that process, we will take employees and we’ll hire maybe one or two employees would have hired first; Branch Manager and one employee. Then, in the — within two months, we will hire employees for those branches.
Gaurav Sharma
Understood. Understood, sir. Those are my only questions. Thank you so much.
Udaya Kumar Hebbar
Thank you.
Operator
Thank you. Next question is from the line of Nidhesh Jain from Investec. Please go-ahead.
Nidhesh Jain
Hi sir. So, sir, one question. So the key issue in this time is overleverage at the customer level. And this will keep on repeating with two, three years. So what we are doing to make customer exclusive for us because the best asset quality experience is provided by the customers who are exclusive to us. So from here onward, what are the steps we are taking so that more-and-more customers are exclusive to us?
Udaya Kumar Hebbar
See, always our operating model is to acquire and retain these days. It’s only in that — it is only revaluated that is the best way of running this microfinance business. So I think it’s more of an underwriting improvement, which we already know some players they actually stringent than the MFIN guardrails, some more analytical ability we have used. So I think we will keep doing what we did and plus additional underwriting process and high-touch will remain as our core business model, which will help us to grow. So it’s temporary, but yeah, we will definitely learn some of these lessons and build more robust process to retain our employees and our customers.
Nidhesh Jain
And sir, just to add that MFIN guardrails are also pretty aggressive. They are allowing up to four lenders. So isn’t that still reasonably aggressive in my mind and up to INR2 lakh, they are allowing. So ideally we should be operating at much lower numbers, at least in number of lenders internally?
Udaya Kumar Hebbar
I think it should be calibrated. I think it is — even now, I think it’s not that time to comment on that from my side. But we should look at the vintage customer versus non-vintage and then we should work on different model. As you see from data, a vintage customer with the high leverage, still it is good that there is no delinquency or less delinquency, right? So we need to be little careful in designing it, but we’ll — at least this time it’s important to start something.
It may be three lender or four lender, there was enough debate happened. Finally, we said let’s started four lenders. Maybe over a period we will move into three lender also, depends looking at the implementation and the results actually. But the MFIN said that after Q3, they will again review and see the impact of the guardrails, whether to make it more stringent or to add more parameters, they would look at it.
Nidhesh Jain
Okay, sir. Okay. That’s it from my side.
Udaya Kumar Hebbar
Thank you.
Operator
Thank you. Next question is from the line of Shreepal Doshi from Equirus Securities. Please go-ahead.
Shreepal Doshi
Hi, sir. Good evening and thank you for giving me the opportunity. Sir, my question was on, how are the center meeting attendance trending in the month of October? And from the qualitative aspect side, is there a — like how is the inherent will to repay the loan that aspect being discussed with like with customers from your RMs or your senior RMs who are right now going at the ground level probably?
Udaya Kumar Hebbar
So, Center attendance is, there is no variation in October or September. I think largely, we are more than 60%, 65% in the southern market. So little less in the northern market. It’s maybe 50%, 55%. So there is always a little bit difference.
And willing to pay, even if you take average 50% of the 50%, 55% lender clients, your one-time collection is 95%. That itself shows there is a willingness to pay, correct? So even they ensure that they’re paying to the center actually. So if you ask me what is my door to door collection, it’s only about maybe 3% to 4%. Other than everything is paid in center and on-time.
Therefore, sometimes we need to be giving that extra space for customers, even though they are not coming to center meeting. They’re willing to pay and paying on-time in the same centers. They may have their own difficulty to attend the center meeting. So therefore, we are fine with that actually.
Shreepal Doshi
Got it. Sir, just one last question. From this 27% centers which are relatively having higher delinquency. So which state would this be coming from or would be part of?
Udaya Kumar Hebbar
This is the spread in the all states. Higher the delinquency state would have a higher percentage, lower delinquency state will have lower percentage, correct. But largely it is a little higher delinquency state like in Tamil Nadu, Bihar, and Jharkhand, Rajasthan, Kerala, these are little higher in terms of percentage of centers.
Shreepal Doshi
And what strategy we have deployed to improve our collections there?
Udaya Kumar Hebbar
So those centers which will be basically — I mean, assigned to the better, experienced employees there. They will have a higher — in a branch, higher proportion of such centers will be handled by a more experienced employee to handle and motivate the customers.
Shreepal Doshi
Got it, sir. Got it. Thank you, sir. Thank you so much for answering my question, sir.
Udaya Kumar Hebbar
Thank you, Shreepal, and take care.
Operator
Thank you very much. Ladies and gentlemen, we’ll take that as a last question. I’ll now hand the conference over to Mr. Renish Bhuva for closing comments.
Renish Bhuva
Yeah. Thank you for CreditAccess team for such a detailed answers. Thank you, everyone. We can now log off.
Udaya Kumar Hebbar
Thank you. Thanks everybody and Happy Diwali to everybody.
Operator
[Operator Closing Remarks]