HDB Financial Services Ltd (NSE: HDBFS) Q1 2026 Earnings Call dated Jul. 15, 2025
Corporate Participants:
Vishal Patel — Sales Manager
Ramesh Ganesan — Managing Director & Chief Executive Officer
Jaykumar Shah — Chief Financial Officer
Analysts:
Abhijit Tibrewal — Analyst
Rajiv Mehta — Analyst
Renish Bhuva — Analyst
Viral Shah — Analyst
Suresh Ganapathy — Analyst
Shubhranshu Mishra — Analyst
Pranav Chawda — Analyst
Avinash Singh — Analyst
Shweta Daptardar — Analyst
Piran Engineer — Analyst
Bhuvnesh Garg — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the FY26 Q1 Earnings Conference Call hosted by HTB Financial Services. Please note this conference call is for analysts and investors only. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, Please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded.
I now hand the conference over to Mr. Vishal Patel from HDB Financial Services. Thank you and over to you Mr. Vishal.
Vishal Patel — Sales Manager
Thank you Sagar. I welcome all of you to the first earnings call of HDB Financial Services.Limited for Q2 of FY26. We have with us Mr. Girish, MD.And CEO along with Mr. Jay Kumar Shah, the CFO and the Senior Management of the company. I believe all of you would have had a chance to peruse our financial.Results, investor presentation and press release which has been filed with the stock exchanges earlier today and is also available on our website at www.dbfs.com We will start.With the management remarks and then open up the call for Q&A. the audio recording of this call will be available on our website shortly after the call ends. I would now like to welcome Mr. J. Ramesh for his opening remarks that will be followed by Mr. Jayakumar Shah who will provide a brief on the.Financial results followed by Q&A.
Ramesh Ganesan — Managing Director & Chief Executive Officer
Thank you Vishal and a very good evening to all of you joining in. Let me begin by expressing my gratitude to the investor community, our customers, our stakeholders including our regulators and our parent HDFC Bank as we engage with them on our IPO journey. Thank you all. Being the first earnings call, I will take a few minutes to give a quick overview of the company and its operations before getting into the quarterly business updates. Started in 2007, we are one of India’s largest diversified and detailed focussed NBFCs. which present through more than 1770 branches in more than 1100 cities across India. As on June 30th, 2025, we had total gross loans of value of over 1.09 lakh crore, a customer base of 20.1 million customers with an average ticket size of 164,000, which emphasizes our truly granular and retail nature. We offer lending products through our three business verticals, Enterprise Lending, Asset Finance and Consumer Finance. Enterprise Lending is the first business vertical started in 2008.
It currently constitutes 39% of our gross loan book and is focused on lending a variety of secured and unsecured loans to business customers, both individuals and businesses, as well as certain types of salaried individuals. These loans are primarily delivered through our branch network and these loans are aimed at providing finance for the growth and working capital requirements of our customers. Asset Finance Vertical, which we started in 2010, constitutes 38% of our book and is aimed at offering financing options to customers for acquiring new and used commercial vehicles, construction equipment and tractors. These are income generating assets. We have a strong OEM partnership and dealer networks spread across the country, as well as a dedicated in-house sales team. That’s peer review, our origination efforts in this vertical. Consumer finance vertical started in 2016. Today, it constitutes 23% of our book. Through this vertical, we aim at providing credit to individuals looking to finance their two-wheelers, consumer durables, digital products and cars. or other lifestyle choices. Our large network of partnerships with OEMs and dealers across the country aided by a sales team present at the point of sale backed by digitally assisted journeys from the fulcrum of sourcing in this vertical. The secured book which is loan secured by collateral accounts for 73% of our loan book while unsecured book is 27%. Broadly our secured book consists of Loan against property, gold loans in enterprise lending vertical, entire asset finance vertical, and auto and two-wheeler loans in the consumer finance vertical. We have a diversified and well-established channel tailor-made for each of the products in our suite, including pan-India branch network, telecalling teams, OEM channels, and dealer network, DSA and digital sourcing. I elaborated on our branch network channel partners and primary sourcing channel for each vertical earlier.
In addition to that, over 80% of our branches are located beyond 20 largest cities of India in line with our focus on providing credit to aspiration India. Our 38,000 plus strong secon Street sales staff helps us understand the Indian micro market and design tailor-made product offerings to fulfill customer needs. While our physical network ensures a high touch and feel factor, A process is achieved through digital or assisted digital journey, ensuring quick turnaround time and a seamless customer experience. Our mobile app, which is called HDB on the go, has crossed 10 million downloads. This makes it a truly digital company. Coming on to our credit and collections, we have a 360 degree credit assessment methodology and the credit vertical is headed by Chief Credit Officer which is independent of the business origination verticals. Our hybrid credit underwriting model includes a centralized automated system with scorecards and rule-based decision making for smaller ticket low tenure loans and an independent assessment by the branch-based credit managers, including physical evaluation for larger ticket loans.
These are aided by product and geography specific scorecards. Our proprietary underwriting and credit scoring engine is seasoned across credit cycles and is updated periodically basis our industry in the micro markets. This enables faster trade decisions. Coming to collections, this function has been part of our operating model since our inception. We have an in-house team of 12,500 plus employees in our collections vertical consisting of tele-callers and feet on street. Present at the branch, regional and national levels, ensuring sensitivity to local languages and customs. The collections team uses multiple scorecards to monitor collections across buckets. Each customer in the bucket is assigned a risk score band and is a predetermined collection strategy based on which further action is taken by the collections team. Over 95% of our collections happens through the banking channels. Our collection process is monitored and tracked through our collections application developed in-house with geotagging and e-Resite capabilities. We are a center of excellence with dedicated central collections team which is responsible for training and quality checks of collections personnel, tracking and monitoring the quality of a collections process and centralized billing and option off for asset disposals. In terms of our financing, our liabilities, we have an independent treasury department that is responsible for fundraising and liquidity management. We have diversified funding sources from various sources. including public, private sector and foreign banks, mutual funds, insurance companies, pension funds and financial institutions. We raise funds to NPDs, term loans, commercial paper, external commercial borrowings, subordinate debt and perpetual debt.
Our treasury operations are monitored by the ALCO which oversees our liquidity, interest and currency risks. To briefly touch upon our risk management, we have a robust risk management framework and a comprehensive risk management policy. Our risk management team is led by our Chief Risk Officer with oversight by the Risk Management Committee of our Board of Directors. With that, I’d like to extend my heartfelt thanks to our 80,000 plus employees, many of whom have been with us for over 18 years. Coming to the quarterly business update, with an expected stable monsoon season, higher farm incomes and consequent rural demand, we provide can provide a stimulus to rural consumption while helping moderate headline and food inflation. The recent rate reductions by the regulator augurs well for growth as economic momentum can be expected by private consumption and traction in fixed capital formation. Within consumer finance Q1, which coincides with some summer months, is typically a strong quarter for products segments like ACs and refrigerators, which is compressor products as we call them, were in traction this year was seen to be relatively lower. mortgage demand is expected to hold, especially with reduction in benchmark rates. Q1 generally tends to be a seasonally weak quarter for vehicle finance. Early indicators on volume probably indicate a relatively muted quarter this year compared to a year ago with corresponding stress on asset quality. On that note, I will now hand over to Jay Kowmara, the CFO of the company, for an update on the financials.
Jaykumar Shah — Chief Financial Officer
Thank you Ramesh and thank you very much everybody for dialing in. Moving on to the financial performance for the quarter, our customer franchise grew to 20.1 million, an increase of 5% during the quarter and 20.4% year on year. The total gross loan book as at June 30th, 2025 stood at 1,93,442 crores growing 2.3% sequentially and 14.3% year on year. Secured loans, as Ramesh mentioned, comprised 73% of the total loan book. Disbursements for the quarter ended at June 30, 2025 was 15,171 crores, down 14% sequentially and 8.1% year on year. Our branch count, as Ramesh mentioned, stood at 1771 branches spread across 1,166 cities and towns. Net interest income for the quarter was 2,092 crores, an increase of 6% quarter on quarter and 18.3% year on year. NIM for Q1 FY26 expanded to 7.7% versus 7.6% in Q4 FY25 and 7.6% in Q1 FY25.
Our cost to income ratio for the lending business was 42.7% in Q1 FY26 as compared to 42.9% in Q4 FY25 and 43.2% in Q1 FY25. Credit cost for the quarter was 670 crores as compared to 634 crores in the prior quarter. In Q1 FY26, income or BPO services contributed to 14 crores or 1.9% of a total PBT. Profit after tax for the quarter ended June 30, 2025 stood at 568 crores as against 531 crores for the prior quarter. Gross stage three, which in our case is HDB, is the same as gross NPA under IRAC norms. stood at 2.56% as of June 30, 2025 as against 2.26% as at March 31, 2025. Provision coverage on stage 3 stood at 56.7%. The return metric are after counting or accounting for primary IPO proceeds of 2,500 crores. as at June 30, 2025. ROA as at the quarter end stood at 1.94% which includes assets of approximately 9,000 crores of OFS as at the quarter end adjusted for this ROA would be 2.02%. ROE for the quarter ended June 30, 2025, annualized stood at 13.16%.
Earnings per share for the quarter was 7.1 rupees with a book value of 225.4 rupees. Our borrowing mix remains well diversified with 39% of our borrowings coming from NCDs, 39% from bank loans and rest as a mix of CPs, ECB, PPF and sub-debt as is visible from the earnings presentation that we’ve put up. We remain well capitalized with a total CRR of 20.18% as of June 30, 2025. With that, thank you once again to all our employees, the investing community and all stakeholders and shareholders, including the regulators who have assisted us on our journey. And I’ll hand it back to the operator to help us open it up for Q&A.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star then 1 on their Touchstone phone. If you wish to remove yourself from the question queue, you may press star then 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. Our first question comes from the line of Abhijeet Tebriwal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah, thank you and sir, congratulations on your first call. Just wanted to understand two things.
Operator
Your line is unmuted. Please proceed with your question.
Abhijit Tibrewal
Can you hear me? Am I audible? Am I audible?
Operator
Yes, sir, you’re audible. Please go ahead.
Abhijit Tibrewal
Yeah. So I don’t know if you heard me. I was trying to say, first of all, congratulations on your first annual call. I just had two questions. First is you put out your disbursement mix in the quarter.So I was seeing that asset finance. Disbursements were down almost 18%. Y-O-Y. So, what’s just trying to understand if I look at the industry numbers, the volumes are not down to that extent. So, what is it that is leading to some weakness in terms of this worstment and growth in our SX months vertical? And second, in terms of asset quality, our 30 plus DPD is up almost 90 basis points. so some weakness that we have seen in asset quality. So if you could just help us understand this is more in the nature of the seasonality that we see in the first quarter or is this more looking like some weakness in macro which is contributing to it? And also if you could help us understand this, weakness is more pronounced in vehicle financing or some other customer cohorts in consumer finance. So just these two questions. Thank you so much.
Ramesh Ganesan
So thank you for that question, Abhijit. And so specifically, if you look at relative to the book growth of about 15%, our net interest income grew by about 18.3% y o y and our net interest margin also expanded to 7.7% from 7.6% primarily on the back of higher yield. Right. The impact of some of the rate reductions that are there in the system really will not show up in Q1. We expect them to start showing up in the subsequent quarters as we replace our debt and as we replace our as our book grows and as we take on newer debt to replace the older debt which might be at a higher rate.
So specifically in commercial vehicles, what we’ve seen is anyway to seasonally be caught off. One of the things that we have done is really reorient our strategy around our product mix, which started reflecting in some of our NI and NIM numbers in terms of the mix between the various asset classes within the commercial vehicle business. So this recalibration is something that we started about a year ago, something that has started showing results in terms of in net interest margins that we are starting to see inching up in our book. Right. And so that’s something that will play out over the next few months.
So that’s largely where the asset finance space is there. And again, because it’s a seasonally weak quarter, primarily some of our increase in the early stage delinquencies are in our secured loans, which is commercial vehicles. We expect that to calibrate over the next few months as the in terms of just the seasonality and the way the business works. Anything else? Jay?
Jaykumar Shah
No, Perfect,
Abhijit Tibrewal
Got it. And just one last thing as a follow up in terms of provisioning cover, if I am seeing this correctly, provision covers on stage one and stage two have declined sequentially. So just trying to understand, is this more a function of the ECM model? Because I mean, all I’m trying to understand is if the macros are still weak, what is kind of going into the ECL model for it to churn out lower provision covers on the.
Jaykumar Shah
So Abhijit, in terms of how we do our modeling, overall ecl, we as we have very granular book in terms of overall loans. So we work on a base model. Our overall provision as you would see are 3.3% which is the same as last quarter. Our PCR is a constant. Some of the interplays that work is purely on account of book mix at every stage that works its well through. And some of the weakness that we’ve seen as Ramesh highlighted has been on the CV side which is a secured product.
Abhijit Tibrewal
That’s all. Maybe I’ll come back in the question. Thank you so much.
Jaykumar Shah
Thank you so much.
Operator
Thank you. Our next question comes from the line of Rajiv Mehta from yes, securities. Please go ahead.
Rajiv Mehta
Yeah, hi and good evening. Thank you for giving me this opportunity. Again, just coming back to the disbursement degrowth in the CV financing portfolio it seems, and I think from the ticket size, average ticket size, it seems that we predominantly do used vehicle financing in that product. So now this degrowth and disbursement in business on Y and Y basis would have been driven by, you know, seeing genuine slowdown in demand of used vehicles on the ground or was it because of factors like unsustainable competition or maybe pricing not being in line with your, you know, your expectations.
Jaykumar Shah
So two things, Rajiv. One is you’re right, there has been some weakness, you know, in the CV segment as a whole and you know, that’s coming through. Secondly, we don’t really finance large vehicles. So on the cv, space, etcetera, we’re very, very small. So I mean that’s largely in terms of how the economy has fared and you know, how the business is. There hasn’t been any other specifics that we would highlight.
Rajiv Mehta
Yeah. Okay. And in the enterprise lending segment also the disbursements are down on my basis. So is it driven by LAP or the unsecured business loans or in both segments have we seen the business being lower versus last year?
Jaykumar Shah
So two things there on the overall enterprise lending side on the unsecured business loan is where we had consciously slowed down a couple of quarters ago. We’re making sure as the economy turns around, we watch it closely and as things turn around we will move forward on that. So that. The space we’re very well entrenched into. So we’re keeping a close eye on that one. On the lab front, I think there has been reasonable growth in line with how the overall markets move. This way I would put it.
Rajiv Mehta
Okay. And can you share the 1 to 30 dbd bucket at the company level in absolute terms or percentage terms, how that has moved between June and March? Has it also significantly gone up sequentially, which is generally the case from a seasonality point of view. But is that bucket also still heavy as we get into the second quarter?
Jaykumar Shah
So what I’ll do is, I mean there is a slide which very clearly states the stage one. Let me just look through that and I’ll come back to you. Probably we’ll try and see if we can come back by the end of the call or we’ll address it. Yeah,
Rajiv Mehta
Sure. Thank you. Thanks so much. Invest.
Operator
Thank you. Our next question comes from the line of Renesh from icici. Please go ahead.
Renish Bhuva
Yeah, hi sir. Good set of numbers. There’s two questions. One on the asset yield side, effective consequentially. So just wanted to understand, you know, falling rate cycle, sort of what is driving this petty expansion on sequential basis, is it driven by the effect mix change or we have increased the lending.
Jaykumar Shah
My apologies. Can you go a little slow? We are struggling.
Ramesh Ganesan
I can pick up the speaker because you can’t really hear.
Renish Bhuva
Is it better now, sir?
Ramesh Ganesan
Yeah, it’s better.
Jaykumar Shah
Yeah.
Renish Bhuva
Yeah. So some first question on the asset yield side, which expanded almost 30 basis points sequentially. So just wanted to understand, you know, in a falling rate cycle, what is driving this asset expansion? I mean, is it driven by the asset mix change or we have increased lending rates in some of the segments.
Ramesh Ganesan
So Ranesh, there are two factors which are driving the yield expansion. One is that within each product that we do, there’s a pretty large range of pricing that we have depending on the borrower profile and the asset profile. Right. For example, simplistic example commercial vehicles, heavy commercial vehicle to a fleet versus a used commercial vehicle which is five years old to a first time borrower. There’s a fairly large range of pricing that you have. So some of the products that we have, we have tweaked the product mix in terms of yield expansion at the product level. And that’s what really driving the yield expansion Pricing is really a function of what we find we deliver as the product mix in each product and that’s what’s really driving the need expansion.
Renish Bhuva
Okay, so is it fair to assume that. Maybe 10:20 basis point here and there. But broadly asset will remain at around 15%, I mean, in near term.
Jaykumar Shah
So Ranit Jayar, our yields are 14.1, 14.2, which is what we hold on to. Not sure where you looked at 15% from, but that’s the yield. Right. And the NIMS is what we really have been very focused on, that 7.7, which is what, you know, we’ve been very focused on as a whole.
Renish Bhuva
Okay, okay. And secondly, on the credit cost front, you know, so this quarter credit cost remains sticky at 2.5, you know, which is understandable given typical Q1 seasonality. But when we look at even on annual basis, the same is, you know, higher by 70 on this point. Just wanted to understand which product is sort of giving distress and where do we stand in terms of asset quality cycle in the products which are in distress currently and when can we expect the normalization of credit cost in some of the segments?
Jaykumar Shah
So in terms of credit cost, I would say it’s largely in line with our expectations in terms of where we ended the quarter. So. So I think that is the first important statement there in terms of products. We had, even during previous interactions with the broader community, stated that there has been past stress in unsecured business loans and a little bit on CV, which we expect to stabilize, as Ramesh said, over the coming months. So we’ll watch that space closely and move from there.
Renish Bhuva
Okay. And okay, so Apart from unsecured BL&CV, there is no other segment which is sort of showing any sign of stress. Is that fair to assume?
Jaykumar Shah
So we haven’t seen any, how would I put it? Unwarranted spikes anywhere is the way
Renish Bhuva
I would put it. And just to follow up on that, so in cv.
Jaykumar Shah
Ganesh.
Renish Bhuva
Yeah, sure.
Jaykumar Shah
Thank you.
Operator
Thank you. Our next question comes from the line of Vidal Shah from IIFL Capital. Please go ahead.
Viral Shah
Yeah, hi. First of all, thank you and congratulations on the first quarter. I had two questions. One is you mentioned that you expect that in the, especially the consumer piece of the business and somewhat in the cv, the current stress which is there, it should kind of say or is close to peaking out and it should start improving in the next few months. When I look at the consumer finance disbursements, which. Which is almost now flattish on a yoy basis and a sequential basis we have seen a growth. Are we already starting to say push the pedal of say growth or slightly loosening the filters over there?
Ramesh Ganesan
Just to clarify, Viral, the consumer finance business is doing quite well. I think where we had a lower ticket size compared to what we would have anticipated is primarily because certain products that sell quite in a large volume during the quarter we had lower traction on those products, primarily the compressor products which account for larger ticket sales. But otherwise, if you see, I think customer engagement has been quite strong during the quarter. As we mentioned, we are now 20.2 million customers up 0.9 million customers in the quarter.
So in terms of customer traction, it’s been quite healthy. I think where we have, I think the two product categories where we said where our credit cost has had an elevation in the last couple of quarters is one commercial vehicle and second is unsecured business loads. The consumer finances are categories otherwise both from a growth and quality perspective is doing quite well.
Viral Shah
Okay, got it. And you mentioned about the unsecured business loans over there also you expect say a similar kind of recovery in the second half or is that something that may take some more time?
Jaykumar Shah
So we’ll watch it closely as I mentioned. I think it has obviously the macros also playing out in it. So it’s a space we’ll watch closely. It is currently stabilized in a decent form. And let’s look through the coming months.
Viral Shah
Got it. And my second question is with regards to basically our OpEx, and this is more I would say when I look at us and compare it with some of our peers, somehow the productivity levels seem to be a bit weaker on a relative basis. When I look at say either a per branch or a per employee and I’m looking at this, the lending business, not the overall business. So over here, do we see a pathway of structurally say the operating leverage now from here on playing out as we kind of keep growing and what is that extent of operating leverage that we can see over the next two, three years?
Jaykumar Shah
So viral, I’ll give you our side of it. The most important thing you need to look at us as HDB is we’re a very focused retail only entity. Right. With an average loan size of around 1 60, 65,000. Right. And individual 20 large customers, if you take it’s only 0.32% now that. Level of granularity when you operate through the network, it is going to be at a slightly different cost base in terms of how others might operate. And I’m no expert to comment on anybody else, but we believe at this level of how we are operating, obviously every management would look to improvising on things and getting better efficiency. But at this stage, if you look specifically in the current quarter, our cost income ratio has improved by almost 20 bits compared to the prior quarter. So we’re very seized off the fact that costs play an important role in the overall ROE metric. And at this point in time, I think we’re working through the branch network, the retail network that we have and our focus always remains on delivering the overall roi.
Viral Shah
Okay. Just a bit like the guidance in terms of the OPEX specifically over the medium term.
Jaykumar Shah
So I think we’ll take it at a future point in time. I think there is lots of interplay in the overall macro economy. I don’t think it’d be fair to provide a guidance and specific.
Viral Shah
Got it. Thank you and all the very best. Thank you so much.
Operator
Thank you. Our next question comes from the line of Suresh Ganapati from Macquarie. Please go ahead.
Suresh Ganapathy
Yeah, so just little bit on what do you think will be the eventual sustainable credit cost? Because we are already at 2.5% for this quarter and fourth quarter was, I mean, sorry, last year, full year was 2.1%. So we’re already operating at a high level and your numbers are much higher than peers. And also the ROA level at 1.9% again, it is much, much lower than peers. So is the business model inherently having higher credit costs and therefore lower ROA? Because we have touched 3% ROA also in the past. So we want to know what the. Where the reality is and where things should eventually settle because you are currently operating at 1.9% other way. That’s one point. And the. Yeah, so that’s the first question. Maybe then I’ll go for the second one. Yeah,
Jaykumar Shah
Suresh, I’ll try and answer your questions. So on the credit cost level, as I said, you know, Q1 has been weaker and almost in line with expectations. We expect, you know, things to move in the right direction from here on and stabilize through Q2 and then improve going forward? That’s our current working assumption and the piece that we’re working on, that’s one. On the ROI front, as I mentioned, the way to look at 1.9 is really 2.02 because of the 9,000 crores sitting there and as credit. Cost starts to improve, you’ll automatically see an improvement in ro. Another important thing is that on the rate reduction, as Ramesh mentioned, the benefits of that haven’t really come through at this point in time for us. And something that you will see in terms of NIM expansion over the coming quarters.
Suresh Ganapathy
Okay, and this is my last question. It’s just a qualitative understanding since you guys of course run the business. What is explaining this CV slowdown? Is the government not spending? Is the rural incomes weaker? Because we see rural incomes being very buoyant. Last year monsoon was fantastic. Still, we have had this kind of an outcome in the CV space. Is it over leveraging any kind of qualitative assessment that you can give on what has gone wrong here?
Ramesh Ganesan
So it’s very difficult for us to give a color on how and what drives certain volumes. Like for example, one of the things that we think happened, for example in the compressor space was that there were unseasonal rains, it wasn’t too hot and that led to certain lower traction that we saw on compressor product financing. So that’s relatively easier to sort of guess. Very difficult to guess what’s driving vehicle sales at any point of time. I guess there are many factors including availability and revenues that are coming. I think one of the things that’s happened in the last few years is that vehicle prices have gone up quite sharply. Also led by many technological changes. For example, one of the things is that I think the newer vehicles require an air conditioned cabin. It’s a production requirement and that will automatically increase prices, which means that vehicles are being deployed for longer than they used to be in the past.
Also maybe because vehicles are much more sturdy in terms of quality and capability as compared to maybe a couple of decades back. So something that we are watching and monitoring, one of the things that we have done internally is actually really focused on aligning our segment wise strategy in asset finance. And you know, which I explained also contribute to our NIM expansion on the yield side. Right. As I said, our NIM has expanded because our yields have improved, not because of benefit of cost of funds which will start coming from Q2 onwards.
Suresh Ganapathy
But Ramesh, that can increase credit costs also. Right. Because you are moving up the risk curve.
Ramesh Ganesan
So we really look at from a risk adjusted return. I think you’re okay with the increase in credit cost as long as the risk adjusted return is favorable.
Suresh Ganapathy
Sure. Okay, Okay. That’s clear. Thank you.
Operator
Thank you. A reminder to all the participants, if you wish to register for a question you may press star then one to join the question queue. Our next question comes from Subranchu Mishra from Philip Capital. Please go ahead.
Shubhranshu Mishra
Hi, good evening. First one is we are still in a startup phase, right? If I look at the product portfolio, only lap and end business loans are the ones that are really stable just because I’m are anywhere between two to four years. So are we going to see closure of any businesses or addition of any new business lines going forward? That’s the first. Second is around the customer segment. Out of the 20 million customers that we have, how many do we bank on a monthly basis which is match fitting their bank accounts? And what is the percentage of repeat customers in this 20? The third question is around the PCR 56 despite a large proportion of our business being secured 56% in ECL methodology was basically allude to the LGB. So are we carrying excess provision or are LGBT?
Jaykumar Shah
Sorry, I think we caught some of your questions. Some of them was not very clear. I just repeat the question so that we’re on the same page. Any closure or new businesses that we’re planning to start. That was your first question. Second question we caught out sir from current customers and then I think we lost some of the.
Shubhranshu Mishra
Right, right. From the current customer of 20 million. How many are we banking on a monthly basis? And what is the percentage of repeat customers here? The third question was around the PCR. We are at 56% PCR despite a higher proportion of secure business. So an ECL ECR would mean basically LGD. So is our LGD at 50% plus or are we carrying excellent provisions?
Jaykumar Shah
Okay, so on CCR today. So Vanshu, what we’ve done is we’ve calibrated it based on what we believe are the right levels to carry. Of course there’s a model that throws up a number and then we look at it in terms of the overall market and individual product wise and we carry provisions accordingly. So there’s no excess provisions there. As I mentioned, I think there will be some amount of, you know, product wise, specific book wise that we look at on a quarterly basis and we maintain provisions to make sure the risks are well covered.
Ramesh Ganesan
So in terms of product mix, Mr. Branch, we do evaluate new. Credit products all the time. As and when we have a new product out, we’ll put it out to the market. At this point of time there’s no product that we are considering for closure. That’s not in the plan right now. We are broadly comfortable with the product mix that we are and working towards making sure that we are not dependent on any one product or any one category to an extent that it, it impacts our balance sheet in terms of repeat customers. That really depends on some of the products. For example, within our consumer finance segment and if you’ve seen our business presentation, we have a deck on all our products. And so in consumer finance slide 17 which talks about our products. So relationship PL, which is a product which accounts about 7% of our AUM is only for existing customers of the company. So that business is 100% existing customer only product. But otherwise, you know, from just a market opportunity perspective, about more than 60% of our customers would be new to HDB customers at any point of time. And we don’t lend money to customers who don’t have a bank account. So the first option for collections is through a bank account and only if the customer is unable to pay or has missed the payment to the bank account do we pursue other collection modes.
Shubhranshu Mishra
And how many customers do we bank on a monthly basis?
Ramesh Ganesan
That would be in excess of 10 million.
Shubhranshu Mishra
Right,
Jaykumar Shah
So that’s 99%. Is we bank all our customers?
Ramesh Ganesan
I mean. Yeah, that’s a question.
Shubhranshu Mishra
We are banking 20 million customers on a monthly basis. 20 million. EMI.
Jaykumar Shah
Sorry, sorry.
Operator
So Branchu. Sir, your line was not quite audible. Could you please repeat the question once again?
Shubhranshu Mishra
How many bank accounts do we present in nat.
Ramesh Ganesan
Sorry, that’s all of them.
Jaykumar Shah
All of our customers.
Ramesh Ganesan
All of them. We collect a Nash mandate from every customer that we work with.
Shubhranshu Mishra
No. So 20 million match mandates every month is what I’m asking.
Jaykumar Shah
So 20 million is the life to date customers that we have, right? That is the overall customer.
Shubhranshu Mishra
How many do we bank on a monthly basis? How many match presentations on a monthly basis out of the 20 million?
Jaykumar Shah
So I think. Let me come back to you on that one. Right. As I said overall from a banking point of view we bank all our customers. And in specific in terms of the breakup, I think we’ll look into it and come back.
Shubhranshu Mishra
Thank you. Thank you so much.
Operator
Thank you. Our next question comes from the line of Prana. From JP Morgan. Please go ahead.
Pranav Chawda
Hello. Thank you for taking my question. So coming back to the CV benefit of it, I think you commented on what is driving the volume slowdown. But if I come back to the asset quality in terms of operator profitability, can you give us some sense of how do you expect it to move? Because you did allude to the point that the cost of ownership has materially gone up over the last few years. While freight rates may not have kept up pace with that, they move more in line with the diesel moment. So again, like any outlook on operator profitability and vehicle utilization levels and what gives you the confidence that this could improve in the coming quarters. Thank you.
Ramesh Ganesan
So you know, bulk of our customers are relatively small transporters, right? I mean typically a vehicle or two. I think their business model is fairly independent of how fleets and large operators work. So these are essentially jobbers or people picking up loads locally. They have tie ups locally with people and they’re working through moving the goods from one place to another either within a district or within a state. Our exposure to large fleets is quite small.
So in these businesses not really a cost per kilometer, but it’s more a availability, it’s typically a per trip or per project kind of pricing that these businesses work on and not really a cost per kilometer kind of model. So to that extent it’s a fairly different model that of customers that we work with. I mean our exposure to fleets and those kind of customers who work on large contracts is quite small. I mean that’s, that’s really how we think about it.
Pranav Chawda
But are you observing any impact on, are you observing that operator profitability is getting adversely impacted in for these small road transport operators because the cost of vehicles have moved up. And also on the, you also said it depends on the availability of trips. So on the vehicle utilization front on a year over year basis, are you noticing any improvements happening?
Jaykumar Shah
So Pranind, as Ramesh mentioned, our book is very granular. It’s slightly different to the segment I believe you may be looking at in terms of, you know, operators. I think what we can do is we can connect offline to maybe understand better and you can, you know, connect with our IR team and then we can take it forward.
Pranav Chawda
Sure. Thank you. Thank you so much.
Operator
Thank you. Our next question comes from the line of Avinash Singh from MK Global. Please go ahead.
Avinash Singh
Hi, good evening. Thanks for the opportunity. A couple of questions. The first one is again coming to that. You know, your asset quality or credit cost. I mean of course you alluded partly to the seasonality of Q1, but I mean if we were to look numbers since March 24, quarter by quarter, I mean the gross NPAs have gone up and also overall, I mean where do you see, I mean given the your customer makes your business segments, at what time, I mean or like at what levels do you think this is going to peak out? Because the question is that okay now I mean of course March 24, a pretty low level of credit cost. Now we are nearly two and a half odd percent. So at what point, I mean given the macro scenario or particular to your business, you know, stack where do you see these peaking out? Because this is not typical seasonality because even if you look quarter on quarter, it has been just inching up over the last five quarters, what level one you start to see sort of that, okay, that had peaked out and it should improve. That’s one second. If I of course you partly, I guess touched upon this question. If you look at your profitability matrix at the end of the day, I mean right now it’ a bit subpar. Now what would be the kind of, you know, your realistic, you know, goal in terms of roas and improvement from here? I mean if you can just break it down in terms of what kind of improvement you expect from name and what kind of expectation. I mean improvement expectation is from, you know, credit cost because I mean given your kind of business model, OPEX will not likely see much improvement. So how, what kind of improvement do you see in terms of NIM and credit cost and what is sort of your target roa if one can say. Thanks.
Jaykumar Shah
Thanks a lot Avinash. So Avinash, couple of things NPAs, you know, in terms of where we are, if you see our last couple of quarters, it’s been, you know, in terms of credit costs, it’s stabilized overall. The question around peaking, etc. It’s a lot more of how the overall economy functions than economic activity moves. And I wouldn’t want to double guess something, but most people that I talk to seem to be more optimistic in terms of how the next couple of quarters will play out and move forward. So let’s hope and let’s work from there in terms of the overall economic activity in the country and things moving from there. So that’s one in terms of profitability and moving forward. Couple of things we mentioned to a question which came earlier from one of your colleagues was that on the NIM side, the benefits of our rate reduction which has happened on the repo side hasn’t really come through. So that we see coming through from Q2Q onwards. And the other important thing, it’s a couple. Couple of things you look at in that mix, 77%, almost 75, 76% of our book is largely secured and is also fixed rate. Very important. Whereas today we’ve taken some benefit and if you look at last quarter versus this quarter, our bank borrowings which are completely EBLR linked have increased. So we’ve taken some benefits there and that should help us in terms of the overall profitability. Second component, as I mentioned on the asset quality side, as things start to improve, the credit cost moderates both. Those are key parameters in terms of the NIM and credit cost and that should play itself out in terms of ROE improvement.
Avinash Singh
Okay, thank you.
Jaykumar Shah
Thank you so much.
Operator
Thank you. Our next question comes from the line of Shweta from Elara securities. Please go ahead.
Shweta Daptardar
Thank you sir for the opportunity and congratulations on the first quarterly earnings. Three questions from my side. So while you alluded to the fact that not all woes are behind unsecured loans, what is your assessment of the new book behavior formation? And I’m also coming from the fact that considering stage two, stage three year on year basis have seen stark spike. Of course you have. You have attributed this to persistent CV weakness. But then any particular portfolio dominating the stage 2 spike? Second, just a related question. Any legacy slash pandemic led challenges, assets lingering in stage two or stage three? And third question, what is your AUM growth guidance and what are the levers considering there has been again stark change in disbursement mix for this particular quarter sequential basis. Thank you.
Jaykumar Shah
So Shweta, couple of things in terms of the new book behavior on unsecured, as I mentioned, things have stabilized over the last few months and we’re watching it closely to make sure it’s sustainable and take it forward from there. In terms of the spike into delinquencies of Stage 2 as such has come through on the CV side as Ramesh alluded to earlier as well. And we’re very hopeful that things move through in the right direction which is what is expected. In terms of legacy, we don’t have any legacy issues. You know, as such, in terms of guidance, we don’t have a, we have a, you know, basically a policy of not providing. Guidance as such. So I’ll keep it at that. And we’ll look at the overall economic growth as the primary indicator in terms of how things move forward.
Shweta Daptardar
Thank you, that’s very helpful.
Jaykumar Shah
Thank you.
Operator
Thank you. Our next question comes from the line of Hiran from clsa. Please go ahead.
Piran Engineer
Yeah, hi Tim, just a couple of questions on your liability side.
Operator
Sorry to interrupt. Your line is not clear.
Piran Engineer
Okay. Is it better now?
Operator
This is much better.
Piran Engineer
Yeah. Hi. So just congratulations. Firstly, secondly, some questions on your liability side. So when it comes to bank borrowings, what’s the mix between MCLR and repo linked or T bill linked borrowings?
Jaykumar Shah
So you know, 90 plus percent or 95% of our entire borrowings is EBL are linked.
Piran Engineer
Okay. And you know when your bank lines are coming up for renewal, are banks now, you know, taking an additional spread? Let’s say repos down 100bps, they can’t afford it. Are they increasing the spread by say 25 bips or whatever? Or is it the same spread over repo?
Jaykumar Shah
This is something we work through with each of our banking partners and we have very long term relationships with all our banks whom we work through.
Piran Engineer
Okay. Okay. Let me ask in another way. Is it fair to say that the EBLR book sustainably reprices downwards by hundred bips? Are you confident of that or
Jaykumar Shah
The EBLR book surely reprices in line with the markets.
Piran Engineer
Okay. Okay. Yeah. Okay. Thank you so much and all the best.
Operator
Thank you. Our next question comes from the line of Rajiv Mehta from yes, securities. Please go ahead.
Rajiv Mehta
No, I think my question is partially answered. But just one thing. In terms of, you know, in the current environment, when the asset quality trends are not very supportive in cv, what will be our growth approach? Are we, you know, cutting back or I mean, are we not taking our earlier share of volumes at the dealerships? Or is there any change in our approach of business in CV or any other product? Or have we changed maybe our, you know, filters or policies which will kind of slightly moderate our growth further in the coming few quarters? And as a response to the asset quality. What is happening here,
Jaykumar Shah
Rajiv? Again, it’s something that we look through very holistically. Obviously at the ground there will be granular strategies on various products, sub segments, etc. The main focus. Focused on the CV business as a whole. One thing that Ramesh, you know, did mention that we are also looking at, you know, doing more of used as, you know, a strategic piece and we’ll work from there.
Piran Engineer
Sure. Thank you.
Jaykumar Shah
Thank you.
Operator
Thank you. Our next question comes from the line of Bhuvanesh Garg from Magma Ventures. Please go ahead.
Bhuvnesh Garg
Yeah, thank you for the opportunity. Sir, just a couple of questions. Firstly, on your provisioning coverage. So if I look on yo, if I look at, on YoY basis, stage one coverage has gone down from say 2% to 1.5%. And similarly stage two coverage has gone down, stage three has gone down. So just want to understand is there any policy change or is it, or what is what is driving this change in provisioning level?
Jaykumar Shah
Yeah, thanks a lot. So if you look at our overall provisions, the way I’d like you to look at it is on the book. We had a 3.3% provision today also we had a 3.3%. So from March to June, PCRs have remained a constant or actually, you know, slightly in stuff. Our book is very granular, Bhubanesh, and a lot depends on the book mix in terms of which product moves in which fashion. We follow a consistent model and things could move a little bit in terms of different stages as well. So we don’t have any large assets. As I mentioned, our top 20 borrowers is 0.32%. That’s how I would want to look at it.
Bhuvnesh Garg
Yeah, I understand that on QOQ basis there is not much change. But on yoy basis, e.g. june 24 versus June 25, so that shift is quite significant across the bucket. So just want to know if there is, if there is any policy change on yearly basis.
Jaykumar Shah
So I think as I mentioned, you know, overall the way I would want you to look at it is more Q on Q because, you know, have moved in the overall economy over the last 212 months. And what would be best in terms of, you know, a credit comparison, our overall PD, LGD that get considered, etc. Would be a March to June would be a better comparison.
Bhuvnesh Garg
Okay, understood, understood. And just a second question on your asset quality. So if you, if I look at your segmental asset quality from your annual report disclosure, it seems that we have seen sharper deterioration in GNP vehicle finance, NPA compared to peers. And even for last three, four years, our asset quality performance in vehicle finance seems to be lagging the peers. So what is the reason for this? And is it a product specific, is it geography specific. And what changes are you making? To improve this performance.
Jaykumar Shah
Yeah. So I think we alluded to earlier in the call that there has been weakness in the CV segment. Right. And I mean, in terms of the higher, you know, stress in the book, we’re very seized of that opportunity in terms of, you know, work in progress that we’re working on.
Bhuvnesh Garg
Fine. That’s it. From my side. Thank you.
Jaykumar Shah
Thank you so much.
Operator
Thank you. Ladies and gentlemen, we are at the end of the allotted time. I now hand the conference over to Mr. Jaikumar Shah for closing comments.
Jaykumar Shah
Thank you very much. Really appreciate all of you taking the time today to hear us out. And thank you. Thank you so much.
Operator
[Operator Closing Remarks]