CREDITACCESS GRAMEEN LIMITED (CREDITACC) Q4 FY23 Earnings Concall Transcript

CREDITACCESS GRAMEEN LIMITED (NSE:CREDITACC) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Ganesh Narayanan — Deputy Chief Executive Officer & Chief Business Officer

Analysts:

Nidhesh Jain — Analyst

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Renish Bhuva — ICICI Securities Limited — Analyst

Shreepal Doshi — Equirus Securities — Analyst

Suraj Navandar — Sampada Investments — Analyst

Shweta Daptardar — Elara Capital — Analyst

Rajiv Mehta — YES Securities — Analyst

Sagar Shah — PhillipCapital — Analyst

Piran Engineer — CLSA — Analyst

Aditya Padhi — Girik Capital — Analyst

Pooja Ahuja — Monarch Networth — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the CreditAccess Grameen Limited Q4 FY ’23 Earnings Conference Call hosted by Investec Capital Services. [Operator Instructions] I now hand the conference over to Mr. Nidhesh Jain from Investec. Thank you and over to you sir.

Nidhesh Jain — Moderator

Thank you, Bhavin. Welcome to the quarter four FY ’23 Earnings Conference Call of CreditAccess Grameen Limited to discuss the financial performance of CreditAccess Grameen and to address your queries, we have with us Mr. Udaya Kumar Hebbar, MD and CEO of CreditAccess Grameen; Mr. Ganesh Narayanan; Mr. Balakrishna Kamath, CFO; and Mr. Nilesh Dalvi, SVP and Head Investor Relations. I would no — I would now like to handover the call Mr. Udaya Kumar Hebbar for his opening comments, over to you sir. Thank you, Nidhesh. Good evening to everyone. We thank you all for joining this conference call to discuss our fourth quarter and FY ’23 financial performance. It’s comforting to acknowledge that we have once again achieved our annual performance guidance. The flow of the FY ’23 three by recording 26.7 Y-o-Y growth AUM to INR21,031 crores serving 46.2 lakhs customers. It is a historic year for us as we cross to INR27 crores AUM becoming the first pure-play microfinance institution to achieve this feat. We are the only NBFC to feature in the top-five of the Fortune India Next 500 list given our revenue — revenue profile. We recorded the highest-ever quarterly disbursement of INR7,171 crore supported by robust customer additions. We need to note that during FY ’21 and FY ’22 renewals and new customers — new business originations happened in the second half of — half due to COVID-19, hence the renewals are also stacked in the second half of this financial year. Further, we have laid emphasis on new customer additions and increase in business from 500 plus branches [Technical Issues] present here to improve productivity. As you all aware, CA Grameen and MMF merger was provided — as approved by the National Company Law Tribunal bench of Bengaluru on 15th February 2023. Going-forward, we shall be reporting all the operational and financial parameters on a consolidated basis only. Our customer-base grew 11.5% Y-o-Y as we added over 12.2 lakh consumers during FY ’23 and 8.3 Q-o-Q as we added nearly 5.5 lakh customers in Q4 FY ’23 respectively, our pursuit of creating [Indecipherable]. Around 46% of new customers added came outside the top three states, which have been a trend for last few quarters, demonstrating the result, of our diversification efforts. As I exclude the 3.4 lakh customer-driven during FY ’23 63% of which came from MMF the customer-base growth would have been 20.4%. We added about 67 [Phonetic] branches during FY ’23, majority in newer geography letting total bank network of 1,786 [Technical Issues] 352 districts in 14 states. We are gaining heavy traction in newer geographies, where are we foresee getting substantial market-share in the coming year. Our collection efficiency continues to remain normalized clocking at 98.2% excluding arrears and efficiency level similar to the last quarter. Our best-in class asset quality is driven by loyal customer-base and our execution strength, which is a testament of sticking to basics is following the classical DLC model. GNPA, is at 60 plus DPD reduced to 1.21% in March 2023 from 1.71% in December 2022, while our [Technical Issues] reduced from 1.34% in December 2022, so 0.96% in March 2023. The net NPAs fell to 0.42% in March 2023 from 0.59% in December 2022. Overall, retail stood at 1.78% at the end of Q4 FY ’23, which is again higher than our G&P. Our NIMs improved further from 11.9% in Q3 FY ’23, to 12.2% in Q4 FY ’23, one of the most competitive in the micro-finance industry. They are expected to remain the range of 12.2% going-forward. As guided our major drawdowns in the last quarter came from domestic process, helping stabilize our marginal and average cost of borrowing. Our marginal and average cost of borrowing for Q4 FY ’23 stood at 9.4% and 9.5% respectively. We would like to put on record that despite reported, 250 bps in the last 12 months our judicious mix of replacing various funding avenues has led to the average cost of borrowing increase of nearly 60 bps to 9.5% compared to 8.9% at the end-of-the March 2022. We have always tried to keep our interest-rate to our customers one of the lowest in the industry, which is a factor of efficient built throughout — efficiencies built throughout the system. We would like to inform you that ICRA has unfortunately rated our credit rating to double-A minus stable outlook from A plus positive outlook given our asset quality and earnings profile. We are now rated by both ICRA and India Ratings with double-A minus stable outlook being the highest standard one rating in the microfinance industry. Further — further our inherent DSC adherence and strong compliance standards helped us to secure DSC rating from certain analytics and S&P Global. Our AQ rating [Phonetic] in fact is better than many leading BFSI India across the world. We have also obtained second party opinion [Indecipherable] on the wholesale bond and loan framework in FY ’23. These developments will further help us to access CAGR linked funds from global lending institution and further strengthen our [Indecipherable] profile going-forward. For the, Q4 FY ’23, the NII grew by 32.7% Y-o-Y to INR690 crores while the cost-to-income ratio stood healthy at 30.2%, which is 360 bps lower Y-o-Y. PP-OP grew by 36.3% Y-o-Y to INR503 crores, demonstrating a strong operational profitability trend. For FY ’23, the NII stood at INR2,234 crores, registering a 35.1% growth while PPFE grew by 39.8% to INR1,506 crores, indicating a strong operating profit profitability trend. The credit cost in Q4 FY ’23 stood at INR105 crores including INR14 crores core management overlay on the legacy book of [Technical Issues] amounting to INR131 crores or 0.6% of total area. The credit cost was partially offset by INR16.8 crores of bad debt recovery during the fourth quarter, therefore, net credit cost for FY ’23 stood at 2.1%. Our PAT grew by 86.4% Y-o-Y and 37.5% Q-o-Q to INR297 crore during Q4 FY ’23, resulting in ROE of 5.5% and 24% respectively. For FY ’23, we delivered a PAT of INR826 crores leading to ROA of 4.2% and ROE of 18%, meeting our annual performance guidance. We are further maintaining a comfortable capital adequacy ratio of 23.6% at the end of March ’23. Our Expand Q presence across India differentiated operating model, customized product offering, highly scalable technologies tag, experienced management team, diversified liability profile, and strong balance sheet placed us at the forefront to established ourselves as the preferred financial partner to millions of underserved low-income households. Our business model based on the premise of suitable process, product and bridging along with suitable servicing has always rewarded us. Assuming a stable operating environment, we look-forward to achieve loan portfolio growth of 24% to 25% in FY ’24. Given our strong hold on the borrowing cost, we foresee the maintaining NIM in the range of 12.2% with positive income ratio between 35% to 36%. We are anticipating a credit cost of 1.6% to 1.8%. Overall, we aim to achieve an ROE of 4.7% to 4.9% and an ROE of 20% to 21% in FY ’24. So, with this I would like to open the forum for question-answers. Thank you so much.

Questions and Answers:

Operator

Thank you very much. [Operator Instructions] The first question is from the line of Nikhil Rungta from Nippon India Mutual Fund. Please go ahead.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Yeah, hi, sir. Thanks for the opportunity and congratulations on a great set of numbers, sir.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Yeah, few questions — two to three questions from my side. To start with, first of all, your view on both sides of margin, I mean on the lean side I mean any more increase can we see in the new disbursement rate, which currently is 21.9%, and in-turn, any more scope in the portfolio, which is at 19.7%?

And second part, you already indicated marginal cost of borrowing, so it’s down to 9.4% from 10.2% in December quarter. What are the key reasons? Do you think it will stabilize at this level or can improve any further from these? So this is the first question on the margin side.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Sure, sure. Maybe, maybe I’ll answer the margin first. The change is basically, we borrowed more offer domestic borrowings in the Q4 whereas in Q3 we borrowed, bit of international borrowings plus NCDB right. Therefore, marginal costing was higher in the Q3, whereas cost is lower in the Q4. Majority of our borrowing was domestic borrowings in Q4. Therefore, the quarter has come down. Cost of borrowing also has come down. Therefore, this has different system. So, on the yield and NIM, for yield it might go different lipid more than the Q4, but Q4, maybe a bit of benchmark with maybe 20 to 30 bps higher probability for the next financial year.

In the meantime, NIM would remain the same range of 12.2%. So, because they’re little leverage impact will be there. Therefore, we presume that it will remain around that range.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Okay, and on the marginal cost of borrowings, do you think will stabilize at these levels, if there are no more hardly any [Technical Issues] been covered. So, it might go up a bit actually?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Our estimation is it might still go up by about 20 to 30 bps because some of the — some of the MCLR, increase of the bank, who have not yet transferred because we have I mean lot of borrowings at one year [Technical Issues] clause. So with that, the goal is 2026 but we can pass-on that to the next borrowing. Therefore, we still will be able to maintain our NIM within this range.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Okay and sir on the average ticket size, we are now at 51,000, approximately 51,000, so do you think it will stabilize at these events are there, are we planning to take it through.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

So, it is not, 51,000. Yeah, it’s 51,000. That’s a price increase on a random budget about 9% to 10%, it will go up. Two are reasons, one is the customer will take [Technical Issues]. Two is 20% of our boost which is Madura, which is still at a low, what is the leverage, because the base of that are very low when we took over, to that extent, there can still go up a bit, but if you look at the — if you [Technical Issues] portfolio for customer, it’s a high in the top three states where we have a high usage customers, which is about 54,000, this entire balance continued fall 39,000 therefore no it’s not — it’s not a worry worrying fact for at this point of time. So, therefore, maybe more on about 8% to 10% might go up, but any loan, what do we give more than 50,000, we give a PEF loan therefore against the repayment lowered on customer also will not change. So it only further decrease to them. Therefore, we are not seeing any vulnerability here also.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Okay, and what would be our next leg of growth. Would it be expanding into newer geographies or districts or deepening the existing districts? Further do you think, Madura might see a strong growth? We have under underwritten the court order [Technical Issues]?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Madura will definitely grow faster, because it is still at a what we call less productive branches I would say, well, we have enough headroom in the Madura branches. Therefore, it will give us a very good net growth going-forward. But overall, it will be expansion plus deepening both will be there together. For example, we estimate about 14% to 15% percent customer growth, which will fuel that 24% to 25% portfolio growth, which is both expansion about 10% branch expansion and [Indecipherable] of customers in the existing branches which includes Madura quality brands that should give us extra headroom, so but it will be filled by customer acquisition on [Indecipherable]. So 14% to 15% customer acquisition will lead to 24% to 25% portfolio growth. That’s what our estimation Nikhil.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Last question, sir, on from my side. Now that we have already merged Madura with us and yesterday there were plans or thoughts that smaller MFIs are still unable to get good rate of funding enhance where there plans of making or creating a fun forward helping these small MFI. Do you plan anymore inorganic acquisitions in the near-future in next one to three years?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

So, nothing in our plan at this point of time. So actually, we don’t see any opportunity which is insignificant for our growth, because we have you on a smaller MFI acquiring is not efficient process for us. So therefore, we don’t see any inorganic growth opportunity at this point of time because unless it’s complementary in terms of geography, in terms product, in terms of culture in terms of faith, it won’t fit for us. So therefore, we don’t have any such plans at this point of time.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Got it. Got it. That’s all from my side. I’ll come back-in the queue and expect to see similar type of quarters from your side. Thank you so much sir.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

So maybe will add one more point, when we say expansion model for an earlier question. So, we still have a lot of opportunity for opening more branches in Gujarat, Rajasthan, UP, Jharkhand. That will keep continuing as our normal philosophy of contiguous growth. That will continue, which will add about eight to 8% to 10% of new branches. So that is also one of the key — key point in terms of our expansion.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Okay, okay, quite to be helpful, sir. Thank you so much sir.

Operator

Thank you. The next question is from the line of Renish Bhuva from ICICI Securities Limited. Please go ahead.

Renish Bhuva — ICICI Securities Limited — Analyst

Yeah, hi sir, thanks and congrats on a great set of numbers. Sir, two-question, one on the data side. So, this quarter we have seen other OpEx falling at 10% despite reopening — opening more than 50% branches plus… [Speech Overlap]

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Sorry, can you just repeat [Technical Issues]. No-no, sorry. I think we lost you.

Renish Bhuva — ICICI Securities Limited — Analyst

Is it — is it better now?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yes, I think you need to repeat the question fully.

Renish Bhuva — ICICI Securities Limited — Analyst

Yeah, okay, so on the other OpEx side. This quarter we have seen there is a declining OpEx despite opening more than 50 branches plus the robust disbursement growth. So what is the reason for decline of the OpEx?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

So, OpEx has come down because of the, yes, Q3 it was little high on account of the fund-raise, the NCD public raise. That explains the part of Q3. Therefore it that it will spike in that quarter. It is not reduction this quarter. Yeah, we lost you again.

Renish Bhuva — ICICI Securities Limited — Analyst

No-no, sir, I can hear you.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

You got my point no. It’s not [Technical Issues] Q3 was little spike because of the public and CD costs are coming.

Renish Bhuva — ICICI Securities Limited — Analyst

Okay, okay, okay, okay, okay. So, there was a big impact in [Technical Issues].

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Correct, correct.

Renish Bhuva — ICICI Securities Limited — Analyst

Okay and sir, last question from my side be it on the strategic front, so. As you rightly mentioned that we are the first envisioned MFI to cost INR20,000 crores AUM. So from our two to three-year perspective, do you feel that there is a need for us to, let’s say, start venturing into non-MFA product and build the non-MFI portfolio or do you feel there is enough headroom for MFI portfolio to grow at 20% to 25%.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

I think this discussion we had an year back and we already piloted [Technical Issues] lots of pilots going so the scaling, will happen. I think we explained earlier also, so we held a pilot, not many products and not many — couple of are already scaling up. [Technical Issues] we are looking at a good momentum there, so I think our view is very clear. Keep following your customers, keep enhancing the product for our matured customers and again, work within the customer segment and ecosystem and then build the non-microfinance book also. So, the idea, I think we already explained earlier also in four to five years time, we will have about 10% to 12% of the non-microfinance book and I think I think are clear on that part and we are working on that anyway. I want to add couple of things here. So already we have published this earlier also.

Renish Bhuva — ICICI Securities Limited — Analyst

Got it, sir. Okay that’s it sir. And best of luck.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you. Thank you so much.

Operator

Thank you. The next question is from the line of Shreepal Doshi from Equirus Securities. Please go ahead.

Shreepal Doshi — Equirus Securities — Analyst

Hi sir, good evening and thank you for giving me the opportunity and congrats on a good quarter. Sir, my question was pertaining to yields, so I wanted to understand what is the rate hike that we have taken in the last six months and what is our current yield for the Group loan product and for the retail product?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

So, our overall yield is about 19.20 — sorry, one minute our current yield is about 21.9%. And on the new disbursements and then the overall is about 19.9%, for the quarter. Whereas the retail [Indecipherable] same only. Because compressor is higher than the as on the group portfolio so. Since it is insignificant now, it won’t make too much difference currently.

Shreepal Doshi — Equirus Securities — Analyst

Got it sir, the second question was pertaining to the [Indecipherable]. So, what is the [Indecipherable] that we have for our existing customers?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

So, I’d about — so as the regulation clearly says was not be more than 50%, but what we observed that about 70% to 75% of customers, therefore is less than 40% currently.

Shreepal Doshi — Equirus Securities — Analyst

Okay, okay, got it, sir. Those are the two questions, sir. Thank you, so much and good luck, for the quarter.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you so much.

Operator

Thank you. We have the next question is from the line of Suraj Navandar from Sampada Investments. Please go ahead.

Suraj Navandar — Sampada Investments — Analyst

Hi, good evening, sir. This is more of a [Technical Issues] related question.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Sir you may need to be little louder for it.

Suraj Navandar — Sampada Investments — Analyst

Can you hear me sir now?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, now, perfect. Thank you.

Suraj Navandar — Sampada Investments — Analyst

Sir, my question was really more of an industry related question. Other players given the smaller ones have given a very strong guidance for the industry. That’s one of the player in the [Technical Issues] that industry might grow [Technical Issues] in five years. So, my question was being the industry-leader, do you also see such kind of group coming into the overall macro finance industry? What are the triggers on-ground, which can lead to such kind of exponential growth in overall sector?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Not really, we don’t see — we don’t see definitely or ultimately it is not that for the industry. We believe that industry also will be within about 20% to 25% CAGR for next three to four years. Beyond that, probably it will further tapered down actually. This is what our view. So, our estimation is within that.

Suraj Navandar — Sampada Investments — Analyst

Okay, sir, we are also planning to go down 25%, aren’t we higher than industry range?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Maybe as a range actually, there are two-parts software growth for microfinance growth may be slightly will come down and non-microfinance will kick-in, so therefore that together, is 24% to 25% what you were talking, so therefore microfinance might come to 22%, 23% by next year and year after. So other products will actually take-over the space. The overall growth, we are talking about is 24%, 25%.

Suraj Navandar — Sampada Investments — Analyst

Okay and sir, what would be our branch expansion plans for this year?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

As I said, we normally do between 8% to 10%. Earlier we used to more, but now we actually pick-up — which is quite high. Our expansion plans are about 8% to 10% or 12% of our existing back site.

Suraj Navandar — Sampada Investments — Analyst

So, 80 to 100 branches, there about.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

No, we are at present 7% to 8% branches currently, 10% is 125 branch.

Suraj Navandar — Sampada Investments — Analyst

Sorry, yeah, sorry, sorry sir. Thank you sir. Those are my questions. Thank you.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you so much.

Operator

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

Shweta Daptardar — Elara Capital — Analyst

Thank you, sir for the opportunity and congratulations on great set of numbers. So I have two questions, one is if I look at the — so as you rightly mentioned largely the diversification is now coming by. If you look at it is obviously the present there has increased for the company as well as been positive signals coming from the northern side, especially in UP, so could you just throw light on the demographics and the positive coming from these geographies and where the consequences has been reinforced?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

So I think demographic expansion, we always go by contiguous district despite I agree that some shared publicly different in terms of economic activity. The growth the GDP expansion are changing, but we always gains the benefit from going through this process of contiguous district approach which helps us to understand the district better and then put our employees to work-in a, better way how a better control so that expansion risk and expansion cost is minimized which has helped us I think growth rate of five, we still believing in-going into contiguous. So therefore we already in UP, continue to open branches in our border district similar way we hope in Rajasthan, Gujarat, Bihar, we continue to open that. So we keep — keep actually acquiring that kind of new geography, through a district-based approach. With the — with the typical repetition of our business, we don’t see too much difference in terms of repayment or disbursement or accretion. So this has help of us to grow very sustainably in that area.

Shweta Daptardar — Elara Capital — Analyst

Yeah, sir well-understood. Sir, secondly, you did guide on cost-income at around 30% to a 35% percent. So maybe you see the — maybe you see the synergies summing you to maintain this kind of quality number. But even if I look at OpEx to assets, you are one of the lowest in the industry. So how do you see the sustainability here going-forward.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Shweta, if you look at the last, usually if you look at the five years, we still sustained that rates are low. I think already we have been with the optimal cost. So, it’s more of replicating that optimal cost and now that our ability to price-based on risk. Therefore, even though — even the margin is better compared to the earlier regime, so and. And then the credit risk, also have to come down. It’s already coming down. We are seeing that happening. And these are all these things — things held our own historic — historic quality of operations, securely maintained over a period of time and very calibrated growth, so all these will help us to manage and keep on improving the overall efficiency — overall financial results. So I think what we talked these from 36% to 35% to 34% kind of thing, which is definitely possible with the economy of operation plus quality.

Shweta Daptardar — Elara Capital — Analyst

Noted sir. One last question, what is the scenario on-the-ground in terms of center meeting attending?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

So, we have been witnessing very good improvement over a period of last — last 6 to 12 months. We had too little lesser attendance after COVID, but by and large we are back into normal. Maybe pre-COVID to post COVID the various needs maybe what 5% to 6% percent today. So, we are quite good in that.

Shweta Daptardar — Elara Capital — Analyst

Okay sir, thank you.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you so much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Rajiv Mehta from YES Securities, please go ahead.

Rajiv Mehta — YES Securities — Analyst

Yeah, hi, good evening, sir. Many congratulations on strong set of numbers. So, sir, firstly, a clarification, you spoke about 70% to 75% percent customers having a power [Phonetic] of less than 40%, this is incremental, right?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, it’s a new disbursement only Rajiv not nearly as much like, okay, we’re are not going back and taking the existing bond.

Rajiv Mehta — YES Securities — Analyst

Yeah correct, okay.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

If we see, largely we disbursed about INR70,000 crores. Yeah, [Technical Issues] largely about — about 50% of your portfolio — 75% of the portfolio is the new today. So automatically largely, it represents.

Rajiv Mehta — YES Securities — Analyst

Got it, got it. And sir, can you share the average disbursement ticket size Q4 and Q3?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

It is about 30,000 — 37,000 average ticket size, sorry about 45,000 sorry.

Rajiv Mehta — YES Securities — Analyst

And has it gone up significantly, Q4 versus Q3, because I see an 8% to 10% jump across vintages in your portfolio per borrower.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, that’s linked to vintage, would have gone up bit because it’s a natural phenomena as the customer vintage that goes up, this will go up. First we also had a good interest fund in Madura which was actually storing and aligning bad customer those customers GLP also. So to that extent if covered it might have gone up by 7% to 8%, but it will go back to together.

Rajiv Mehta — YES Securities — Analyst

No sir, actually I’m looking at the CAGR. I mean vintage wise borrower average GLP per borrower for CAGR vintage wise and across vintages, it has grown by 10% on Q-on-Q basis.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Correct, correct. You’re right. That’s correct.

Rajiv Mehta — YES Securities — Analyst

So would that be driven by higher incremental ticket sizes in this quarter?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

There is a minor change if is their input in particular, the high vintage, but it is not a big change in the what we call credit policy, not changing in the credit quality, so I think if you see Y-o-Y the increase about 8% to 10%, only. The overall GLP percent number. What has increased is in the Madura book if you see the slide.

Rajiv Mehta — YES Securities — Analyst

Well, I can see the slide.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

[Speech Overlap] No-no. I was actually coming on the fact that the stating 1,000 when he when he started operating with them.

Rajiv Mehta — YES Securities — Analyst

Correct, correct. No, so sir, actually. I was coming from the fact that now the loan ticket size is not — more determined by [Technical Issues] So then, did we have — do we have a scope for kind of going higher on the ticket sizes, because you’re also guiding for FY ’24, 8% to 10% of the portfolio growth can come from average ticket size increase. That is something we cannot predict, right, because that will be determined by the borrowers leveraged and [Technical Issues] available?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

It is determined by the vintage actually. Even vintage customer also keep increasing by 5% to 10% right. So automatically to that extent, that increase will be there. So if we [Technical Issues] on B2C, we have 88% customer retention, which means if we renew that the automatically say additional — additional limits available to them, right. So automatically, there’ll be a little bit increase. If you see the 10% growth come from renewal and increase and 15% growth will come from the new customer acquisition, this is what the normally — if you see last year also [Technical Issues] there was EBITDA operation because of write-off and mix. Other ways we are new customer acquisition, almost 20%.

Rajiv Mehta — YES Securities — Analyst

Thank you, got it. Got it sir, best of luck.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you. Thank you so much.

Operator

Thank you. The next question is from the line [Speech Overlap]

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

One more thing, Rajeev, I just wanted to just wanted to reiterate the point that we would always try and see the adequate money rather than restricted money for the vintage kind sufficiently for the [Technical Issues] as much adequate to them rather than just restricting the ticket size. So that’s only with the vintage size, their more than accordance with us. There is still [Technical Issues] there we are actually looking for the adequate funding up.

Rajiv Mehta — YES Securities — Analyst

Thank you.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yes, thank you.

Operator

The next question is from the line of Sagar Shah from PhillipCapital. Please go ahead.

Sagar Shah — PhillipCapital — Analyst

Good evening, sir. Thank you so much for the opportunity and first of all congratulations to the entire team for, such great set of numbers actually. So my first question was related actually to our loan book. So, in our retail finance portfolio, which comprises of individual two-wheelers LAP, gold loan, affordable housing, how do you see in the next two years, scaling up, that actually has compared to macro finance you already explained actually, the entire industry is focusing towards the growth and there is demand actually on-ground. So how do you see the retail finance portfolio as part of CECL actually going-in the next few years first of all? And in terms of product also?

Ganesh Narayanan — Deputy Chief Executive Officer & Chief Business Officer

Thanks. Hi, this is Ganesh here. So, as we guided, right, so we can right now indicate for the next four to five years. Our indication over the next, four to five years, it’s around 10%, so similar. In that range probably the how we grow over the next two to three years, will also be [Technical Issues]. So right now we have 82 retail finance branches where we are doing mortgages which is loan against property as in primary products. So affordable home loan is something that we will do pilots during this year. So like, some projects will scale during this year, like your unsecured individual loan for graduated customers, two wheelers, you will see scale-up in loan against property, affordable home loan will be a pilot, gold loan anyway, long pilot for us and we don’t see a large-volume coming from it. So overall retail pillars majority will come. Growth will come from mortgage, it will come from two-wheeler. It will come from graduated customers borrowing unsecured loans from us. I hope I am [Speech Overlap]. Yes, sir absolutely. Just follow-up on that half, how are you actually classifying as a graduated customers of individual loans from the [Technical Issues]. So, this is basically not, it’s a combination of factors, if I have to put it. So it’s a mix of vintage of the customer, it’s a mix of credit behavior with us. It’s a mix of the customer profile income earning capacity to demonstrate cash-flow certain surrogates like multiple income streams, etc.,

Sagar Shah — PhillipCapital — Analyst

Okay. Okay, yeah, [Speech Overlap]

Ganesh Narayanan — Deputy Chief Executive Officer & Chief Business Officer

[Speech Overlap] who got stable business, stable income. You’ll have to look a little more, and hence we have also guided this — this unsecured loan graduated customers even in the long-term will be anywhere between 5% to 7% of our overall book, we’ll not be beyond that.

Sagar Shah — PhillipCapital — Analyst

Okay. Got it sir. So now I got an idea about how you actually plan to scale-up your vehicle finance book. Now coming on along to your portfolio yield actually although retail finance obviously offers a lower yield, but obviously, it was hardly comprises, by not on this for my estimates. Not more than 5% to 6% in the next two years on a broader level on consolidated portfolio. So, we are at 19.7% as of now. So in the next two years, do you — how do see your yield shaping up? Or maybe are we — are we planning to increase our yield in the microfinance? Actually, other players are actually — are actually offering more than you actually. The portfolio is even better than you. So basically, how do you see your yield shaping up in the next two years?

Ganesh Narayanan — Deputy Chief Executive Officer & Chief Business Officer

See our retail finance book does not dilute our yields. It is in a similar range of micro-finance, because these a different segments, we are working on right, so — so the maximum ticket size is around 20 lakh when it comes to audit average ticket is 5.5 to 6 lakhs. So, this is the affordable home segment small-ticket LAP, so this is not diluting our returns when it comes to business even two-wheeler does not dilute our return. Gold loan, we’ve already said that these are short-term in nature. And once we pick-up volumes we can borrow short-term money and hence it will not have a hit on your yield.

Again microfinance, we’ve guided a NIM of 12%, 12% to 12.2%, we should be able to manage that, right. So-so, that’s what it looks like.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, yield is depended on the pricing, you mix goes up our borrowing cost goes, probably it should go capex comes down it will come down, but what we have to look at is the NIM, which is 12.2%, which is probably the best-in the industry predict.

Sagar Shah — PhillipCapital — Analyst

Okay, okay. Sure sir. So basically, I used that point, actually one of the earlier participant had you. Actually, your cost of borrowing is down sequentially, so can you state again the reason actually? We are at 9.5, and secondly, how do we see — you already told that the 9-K raises MCLR when we account for anybody higher. So any reason for such a sequential decline in cost of borrowing?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

It has only slowly decline from March the cost from Q3 to Q4. Q3 our marginal cost is high, because we borrowed high-cost funds and also public deposit, there is a public NCD, which a higher-cost for the longer-term. Therefore, the marginal cost for Q3 was higher and come back to normal again. And that the Q4 because we did not raise that high-cost long-term funds in the Q4. That’s the only difference there.

Sagar Shah — PhillipCapital — Analyst

Okay, okay, okay. Sure, sir. And now my final question actually is very good to micro-finance. Microfinance almost as you have guided for almost about almost 24% to 25% percent both on a broader level. But on-ground of even with a higher yield, how is the demand in the rural actually shaping up now, you’re even moving to other states from Karnataka, Maharashtra and Tamil Nadu. So how do you see demand and other states? Do you see this demand sustaining in the next thing to for two to three years, or do you something. I do see that this is just something like pent up demand sort of our after almost for this almost one-two years.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

For us it looks it is sustainable at this level, because if you see even previous year we grow by 23%, last year for the ’22-’23, now we grew by 27% but organically it is about 24% to 25%. We believe it’s sustainable and with increased customer and [Technical Issues] expansion, which will help us to grow, we believe it positive for ’23 to ’24.

Sagar Shah — PhillipCapital — Analyst

Okay, okay, got your point sir. Thank you so much. Thank you so much and all the best, both.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you so much.

Operator

Thank you, [Operator Instructions] The next question is from the line of Piran Engineer from CLSA. Please go ahead.

Piran Engineer — CLSA — Analyst

Most of my questions have been asked and answered, just a couple pending. One is [Technical Issues] giving three [Technical Issues].

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Sorry, we missed you Piran. Can you repeat a bit louder?

Piran Engineer — CLSA — Analyst

Yeah, am I audible now?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, yeah.

Piran Engineer — CLSA — Analyst

So, my first question was that other competitors also giving three loans for higher-ticket size products? Or the industry is at two years and we are unique in this product?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

We are not sure actually, we are not sure. We have been doing this since two years actually. So currently our 29% portfolio is three years portfolio.

Piran Engineer — CLSA — Analyst

Okay, okay, fair enough. And sir, secondly just noticed between 3Q and 4Q the sharp jump-in the ticket size and retail finance from like 50,000 to 85,000 to 90,000. So am I reading that wrong or?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

You are reading right, our majority of the mortgage pilot it kicked it off in that Q3 and Q4. Therefore, the average has gone up. So the first way unsecured book which was with the lower average ticket size is running down, right and you are disbursing average ticket range 5.5 lakhs in retail finance. So the old book is running down and the new book is catching-up and you will see an increase.

Piran Engineer — CLSA — Analyst

Got it, okay, that makes sense. Thank you so much and all the best.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you, Piren.

Operator

Thank you. The next question is from the line of Nikhil Rungta from Nippon India Mutual Fund. Please go ahead.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Yeah, thank you sir again. So two things first. What will be our outstanding return off portfolio? I mean, is this the bad debt recovery? In this year it was INR58 crores last year it was INR74 crores. So going-forward, what type of things, outstanding portfolio we have and what type of recovery we have crediting?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

What is our experience, Nikhil you know, all these [Technical Issues] how been played hard for 270 days [Phonetic] before rating of. So therefore, you know experience, how the recovery we will recover, only 15% or 10% to 15% over two to three years. Today, we have about close to INR2,000 crores data book and so-far we roll already recovered against that about INR195 crores and then this keeps increasing. This may go up, a little bit, but eventually it will stay between 10% to 15% or 18% of recovery in two to three years time. It will not grow too much high also.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

So INR50 crores to INR100 approximate amount will continue to come down.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, you are right.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Okay, sir, one more question on competition now. I mean, Bajaj Finance have recently announced foray into MFI. I don’t want to your commentary on Bajaj Finance, but I want year view on the competition, which now has started coming in from the larger NBFCs, these guys have definitely presence into deep rural areas. So, your view on competition coming in from them.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, we expected this competition because after regulator recognized that the mainstream with us and made a common rule so, there is a potential that some of them will add this set for more portfolio. I don’t know, keeping our self ahead in competition, the pricing, the process, the quality, efficiency, always helps us. Our sense that the potential is [Indecipherable] we still have close to the INR10 crores household not touched by or not accept vehicle finance or formal finance. I think there’s a huge potential for growing rich [Technical Issues]. The new entrants will start in the urban and then go to rural, but being at the rural already probably have a little upper hand with the potentially better processes and better products and better prices will help us.

So, we expect from competition will go up, we expect some coexistence be their in [Technical Issues], even though we go to rural or are new to credit is still more than 30% even now. So we believe that — that will remain for at least next couple of years. And also, the other side is, 70% is coming from other MFIs who lend for them and they borrow from us, so and the lower accrued after they have stayed with us from counsel trending. We saw that in one year time-line performed per tower who borrowed from other joined to us, checked back with us, and left others. So this is going to be competitive game going-forward, slowly.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Sure, sure. Okay sir, thank you so much.

Operator

Thank you. [Operator Instructions] The next question is from the line of Aditya Padhi from Girik Capital. Please go ahead.

Aditya Padhi — Girik Capital — Analyst

Hello. Yeah, hi sir. Great set of numbers. And congratulations to the team. I just have one question on the operational front. I just wanted to understand where do you see — I’m referring to your Slide 22. Just wanted to start, where do you see the borrowers or loan officer going-forward in future? Like over a Year-over-Year, I have seen at or around 4.5% increase versus borrowers per branch, have grown by 2%. So is that the math going-forward, do you have like a big number, or rather you would invest anything in IT versus a human capital to increase the borrowing — sorry — borrowers per loan officer?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

The average numbers that you’re seeing typically goes up-and-down depending on the new branches that you opened and fresh employees you add, last two years, you also see a dip because of write-offs, higher write-offs. But a better number for you would B2C ideal state, in a state where we are for a certain period of time, a loan officer can reach anywhere between 500 to 550 customers per loan officer. So that is the number of the target over a period of time depending on the life of the branch.

Aditya Padhi — Girik Capital — Analyst

Okay sure. So that would be like an like how many years would you consider for a branch and branch officer to have that around the 500 number?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Three to four years.

Aditya Padhi — Girik Capital — Analyst

Three to four years. Okay, perfect. So that’s the growth that you see going-forward? In ’25, suppose you have added a branch, sorry in 2021, if I added a branch and ’25 that would be ideally that should — where it should get?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yes, absolutely correct. If even otherwise also, we don’t look at the productivity from angle of number of borrowers per loan officer, other than we don’t want them to handle too many for, it’s more of how many centers they can handle per day here, rather than number of borrowers, they handle, because this is always relationship with them. So therefore, there has to be a sufficient space per employee to work. Number of customers need to be lesser, rather than very-high. So each one of them will handle five to six centers only — five to six and only per a day, so that is the rather the number of borrowers you have.

Aditya Padhi — Girik Capital — Analyst

Got it, perfect. Thank you so much.

Operator

Thank you. The next question is from the line of Pooja Ahuja from Monarch Networth. Please go ahead.

Pooja Ahuja — Monarch Networth — Analyst

Yeah, hi, congrats on the quarter. Most of my questions have been answered, so just wanted to understand the attrition that we see in our borrowers, if you could provide some more color in terms of where do we see these borrowers was moving to. To maybe other NBFC or SNBs or banks? Some color on that, sir.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, yeah, I’ll to give to some extent, we only can, I can give estimates actually. We do a couple of checks. When they do the drop borrower, we keep tracking them, cutting them for some time at least for a year, what they’re doing. So what we saw is about 60% of drop the cut come from us, has no borrowing thereafter actual. So they actually winding down from the borrowing, maybe they don’t want to borrow more thereafter or somebody started borrowing so that they don’t need to borrow that could be one reason. Other 40%, we saw that some of them moving into upper segment like different NBFCs for the highest requirements, that is where our pilots are there.

Because of this insight, we started this non-MFI products for customers, so that if they’re going to have [Indecipherable] why don’t we create that product, so that is a bigger reason for let us follow our customers who not only who are graduating somebody. Asking the different product than the microfinance, we can address them whether it is housing or larger business of mortgages for two-wheeler or any other business loans, everything we are addressing. So it’s a part of our research to address this, that is the one of the reason we started non-microfinance business. But frankly 60% we found that they are not borrowing.

Pooja Ahuja — Monarch Networth — Analyst

Right sir. So out of this 40% any ballpark, if you could share how many moving because of higher-ticket size, which we can now capture? And how many could be moving to, let’s say, other products. So, we have not done that kind of the demand and supply. We only check from a euro point of because this is a demo result. So what they borrowed do you have the detail, so we check with Bureau and ascertain so. I think they’re not take beyond that. Fine. Sure, understood. And lastly, or do you see borrowers loan you know any second or third lender to the borrower coming through.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, yeah, we see that happening. On our strong word-of-mouth is in favor of us. So we saw, when I say 70% of the PTC is a new customer. There are cases of two lender, three lender also, but we look at our overall borrowing capacity as the criteria we kept protocols breakup, both for new customer, total borrowing from the households it has got to be more than X to join us [Indecipherable]. But we feel that they can enjoy our products. [Technical Issues] be our unique customer eventually. So that’s happening.

Pooja Ahuja — Monarch Networth — Analyst

Okay, got it, yeah, thank you so much. And that’s it from my end.

Operator

Thank you. The next question is from the line of Rajiv Mehta from YES Securities, please go ahead.

Rajiv Mehta — YES Securities — Analyst

Sir, there is just one question on the industry. Sir, in your view and as per your knowledge is the industry following this household level [Technical Issues] and whether the data availability from the bureaus is clean and complete?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

We have not made many analysis so-far actually based on the income and because it’s only just last two quarters. But maybe, some of them are following the truth spirit. Very difficult to define. No, we define because everybody claims that they’re following. But right now we don’t how any clear data, maybe in three-four quarters together if you start the entire debt of household, probably we can long sense of from that, because many of them started after October only. Therefore, it will take some more time to get the fully paid-off, how this is happening.

Rajiv Mehta — YES Securities — Analyst

But the leverage data of the household that’s completely available right?

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Yeah, we have not seen too much variation, but still about 10% to 12% leverage variation we saw when we compare to the compare — when we take our income [Technical Issues], but we will not know the leveraging in the other end right. Yeah, yes. When they come to us. We have the leverage, so that action. But overall, we don’t have full insights at this point of time.

Rajiv Mehta — YES Securities — Analyst

Okay, okay. Thank you, sir.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. Ladies and gentlemen, that was the last question for today. I would now like to hand the conference over to the management for closing comments. Over to you sir.

Udaya Kumar Hebbar — Managing Director and Chief Executive Officer

Thank you. Thank you so much for all of you for hearing us patiently and look for — any queries, you can reach us to our Investor Relations, they will take care of any further queries if you have. So thank you so much and have a good day.

Operator

[Operator Closing Remarks]