Home First Finance Company India Ltd (HOMEFIRST) Q4 FY23 Earnings Concall Transcript

Home First Finance Company India Ltd (NSE:HOMEFIRST) Q4 FY23 Earnings Concall dated May. 03, 2023.

Corporate Participants:

Manish Kayal — Head of Investo Relations

Nutan Gaba Patwari — Chief Financial Officer

Manoj Viswanathan — Chief Executive Officer

Analysts:

Mona Khetan — Dolat Capital — Analyst

Rahul Maheshwari — Ambit Asset Management — Analyst

Renish Somanna — ICICI Bank — Analyst

Mayank Agarwal — InCred Capital — Analyst

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Kunal Shah — Citigroup — Analyst

Ravi Naredi — Naredi Investments — Analyst

Sanket Chheda — DAM Capital — Analyst

Raghav Garg — Ambit Capital — Analyst

Amit Ganatra — Invesco AMC — Analyst

Nidhesh Jain — Investec — Analyst

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

Abhijit Tibrewal — Motilal Oswal — Analyst

Nischint Chawathe — Kotak Institutional Equities — Analyst

Jatin Sangwan — Burman Capital — Analyst

Arvind R — Sundaram Alternates — Analyst

Analyst — — Analyst

Shreepal Doshi — Equirus — Analyst

Manuj Oberoi — YES Securities — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to Home First Finance Company India Limited Q4 and FY23 Earnings Conference Call. 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. [Operator Instructions] I now hand the conference over to Mr. Manish Kayal, Head Investor Relations at Home First Finance. Thank you and over to you Mr. Manish Kayal.

Manish Kayal — Head of Investo Relations

Thank you, Renu[phonetic]. Good afternoon, everyone. I hope that all of you and your families are safe and healthy. I am Manish Kayal, and I look after the Investor Relations of Home First Finance. I extend a very warm welcome to all participants on our Q4 and full-year FY 23 financial results con call. As usual Home First management is represented by MD and CEO, Mr. Manoj Viswanathan; and CFO, Ms. Nutan Gaba Patwari. I hope everybody had an opportunity to go through our investor deck and press release, which was uploaded on stock exchanges and on our website yesterday.

We will start this call with an opening remark by Manoj and then Nutan and then we will have a Q&A session. With this introduction, I hand over the call to Manoj. Over to you Manoj. Thank you, Manish. Good afternoon, everyone. I’m pleased to share that Home First has reached several notable milestones in FY23. We now take pride in having served one lakh customers since inception, with housing total loans disbursed in excess of INR10,000 crores, physical branch office distribution has crossed 100 branches, it stands at 111 branches as of 31st March, 2023, and they have disbursed more than INR3,000 crores in this financial year, demonstrating a growth of 48.4% over the previous year. This year saw the entry of International Finance Corporation, a member of the World Bank Group as a lending partner to the company with the issue of NCDs aggregating to INR280 crores. We also received our first ESG rating score under lower-risk category from Morningstar Sustainalytics. Declaring our maiden annual dividend of INR2.6 per share, which is 13% dividend payout. Moving onto FY23 financial performance the profit-after-tax at. INR228 crores was a growth of 31.1% on a year-on year basis over INR174 crores in the previous year. This translates to a return on assets of 3.9%, an increase of 30 basis-points compared to last year. As a result, ROE improved sharply by 170 basis-points to 13.5% in FY23 over 11.8% in FY22. In quarter four FY23, the company delivered an ROE of 14.2% versus 12.5% in-quarter four of FY22. Strong financial results were achieved on the back of good disbursement momentum, AUM growth, portfolio quality, and prudent management of cash and operating costs. The AUM is at INR7,198 crores, and it grew by 33.8% on a year-on year basis. Disbursal momentum continued into quarter-four 2023, with a disbursal of INR869 crores, which is a growth of 35.6% over quarter-four FY22. The portfolio has remained strong with further improvement. Bounce rates have improved to 13.6% in quarter four from 14.9% in quarter three. The one plus DPD improved to 4% from 4.4% in quarter three and it has dropped below the March 2020 pre COVID levels. 30 plus DPD improved to 2.7% from 3% in quarter three. Gross stage 3 GNPA as per the latest RBI guidelines, improved by 20 basis-points to 1.6% in-quarter four from 1.8% in quarter three. This includes INR421 million, which is currently in buckets, less than 90 DPD but they are still included in NPA due to the asset classification loans as per RBI notification dated 12th November 2021. Prior to such classification it is 0.9% and it stands below March 20 levels. We will now focus on some of the key drivers and metrics of the business and outlook for the current year. Technical — starting with technology. During quarter four FY23 digital adoption has further improved. Usage of the customer app for various activities has increased. 93% of our customers are registered on the app as of March 23, compared to 91% in December 22. Unique user logins have increased to 57% in quarter four from 55% in quarter three. 91% of our service requests were raised on the app compared to 89% in-quarter three. We continue to invest in technology and we have a number of projects lined-up for the year that will enable us to widen our moats in origination, underwriting, and collections. Coming to distribution, we added nine branches in quarter four and a total of 31 branches in the entire year. We now have 111 physical branches, 65 touchpoints are added this year, taking the total touch points to 265. Our FY23 disbursements in our core segment of INR5 to INR25 lakhs ticket size, are diversified with top 50 districts of the country — of the industry contributing to 72% of our business. The next 50 districts of the industry contributed 15% of our disbursals and the balance 13% comes from districts, which are beyond the top 100 districts of the industry. [Technical issue] of the industry contributed 62% of the disbursals in the INR5 to INR25 lakh ticket size segment for the overall industry. We continue to focus our expansion in the states of Gujarat, Maharashtra, AP, Telangana, Karnataka, and Tamil Nadu supplemented by gradual and contiguous expansion in other states where we are present. Expansion will span Tier-one, two, and three levels of comps. We are targeting to reach 400[phonetic] touchpoints by March 2025. We are targeting an AUM growth of 30% plus for FY24 to enable us to cross the [indecipherable] AUM mark in the next 12 to 18 months. We have a three-pronged approach to growth centered on expanding distribution and increasing market-share and expanding the addressable market[Phonetic]. Talking about margins FY23 full year spread stood at 5.7% which is an improvement from 5.6 of last year. Quarter two FY23 spreads were at 5.5%, it declined by 10 basis-points on a year-on year basis. We have increased our rates now by 50 basis points from April first onwards and an overall increase of 125 basis has been given to customers since July 2022, and this will stabilize the spreads going forward. We are confident of maintaining spreads of 5.25% on our loan book in the medium-term. Coming to asset quality, it is at pre-COVID levels and we intend to maintain this with a bias towards gradual improvement. Our strategy is to achieve this strengthening our data-driven risk models and filters. The stability in input parameters post COVID will enable us to accomplish this. Coming to people, we have always focused on building a high-quality team that is capable of [technical issue] taking the campus recruitment program with the connected[phonetic] rose 200 plus engineering colleges and business schools across the country. Freshers were equipped with the right knowledge and skills through a one year continuous training and testing process that will make them productive entry-level employee. A majority of our branch managers and managers[phonetic] are selected from among existing employees and they are trained on specific skills for the next post. [indecipherable] of new initiatives to further strengthen our hiring and training programs. With this, I would now like to hand over the call to Nutan to take you through the financials. Nutan over to you.

Nutan Gaba Patwari — Chief Financial Officer

Good afternoon all. I will take you through our performance in Q4 FY23. I would like to start by mentioning that now we have crossed 14% ROE and reported quarter-four ROE of 14.4%. Our Q4 net interest margin is robust at 6.1% for full-year stands at 6.4% increase from 5.4% last year on better utilization of balance sheet and PLR increase of 75 basis-points. We have taken till March 23. I will also like to convey that, we’ve taken another round of hike of 50 basis-points from first April 23. Net interest income has gone up by 44.6% in FY23 on a Y-o-Y basis. For the quarter, it increased by 30.6% on a Y-o-Y to INR101 crores.

We did direct assignment of INR81 crores during the quarter as a liquidity strategy approximately INR289 crores for FY23. We continue to have a robust demand for our portfolio. We executed for lending transaction of INR35 crores in Q4 and INR89 crores in FY23. Co-lending business is growing and expect this to contribute about 10% of business in the near-future. Opex to assets stands at 2.9% for the quarter and 3% for FY23, as guided earlier, we expect this ratio to remain in the range of 3% to 3.2% going ahead as we focus on expansion. Cost-to-income at 34.4% in Q4, decline of 130 basis-points on a Y-o-Y basis.

For FY23 it’s stands at 35.7% versus 34% in FY22. Q4 FY23 profit before provisions stands at INR91 crores, growth of 11.3% in Q3 [technical issues] and 38% on Y-o-Y basis. For full-year that is INR317 crores, growth of 26% from INR251 crores in FY22. Credit costs in Q4 is at 0.4% of 40 basis-points and is well within our guided range of 30 to 50 basis points. Our ECL provision stands at 1% of the total principal outstanding. We continue to be conservative with the provisions. Total provision coverage ratio stands at 59.5%, prior to NPA reclassification as per RBI circular provision coverage ratio stands at 104.8%.

Our adjusted PAT for Q4 is INR64 crores, a growth of 9% on a QoQ basis and 32.9% on Y-o-Y basis. For full-year FY23 adjusted PAT is INR228 crores, increase of 31% over FY22 PAT of INR174 crores. Moving to liquidity and borrowings, we continue to have diversified and cost-effective long-term financing sources. During the quarter we added South Korea Shinhan Bank and Indian Bank as a new banking partner and we continue to work towards further diversification. We continue to have a healthy borrowing mix with 58% from borrowings from banks, 15% from NHB refinance, and 19% from direct assignment.

We continue to have 0 borrowings through commercial paper. Our cost of borrowing is competitive at 7.9% despite not drawing NHB INR600 crores [indecipherable] which we have drawn in April 23. 7.9% represent increase of 70 basis-points on a year-on year basis. We pushed forward drawing the NHB funds in April 23, as we have sufficient liquidity to our lenders and NHB funds in April 23 will help us manage our cost of borrowing, better in FY24. Moving to capital, our total capital adequacy is 49.4% and Tier-one is 48.9% our March 23 network is at INR1817 crores vis a vis INR1574 as of March 22.

Our quarter-four, ROE is at 60.9[phonetic]%, our annualized ROE stands at 13.5% and quarter-four is at 14.4%. Our book-value per share is INR206.5 per share and we have declared our first-ever dividend of 2.6% — INR2.6 rupees per share. With this, I open the floor for questions and answers.

Questions and Answers:

Operator

Thank you. We will now begin the question-and-answer session. [Operator Instructions] The first question comes from the line of Mona Khetan from Dolat Capital. Please go-ahead.

Mona Khetan — Dolat Capital — Analyst

Yeah, hi, good evening and thanks for taking my questions. So firstly what percentage of AUM, has there been any decrease in EMI[phonetic] after exhausting the tenant [technical issue].

Manoj Viswanathan — Chief Executive Officer

Sorry, what percentage of AUM has?

Mona Khetan — Dolat Capital — Analyst

Sir, what percentage of AUM have we seen an increase in EMI so far after having adopted the tenure increase.

Manoj Viswanathan — Chief Executive Officer

Yeah, so we are looking at in terms of number of customers. So about 2% of our customers have undergone an increase of more than INR1,000. And another 3% between INR500 to INR1,000. The balance would be either lower than earlier or lesser than INR500.

Mona Khetan — Dolat Capital — Analyst

[technical issue]

Nutan Gaba Patwari — Chief Financial Officer

Sorry, Mona the line is not clear.

Mona Khetan — Dolat Capital — Analyst

Okay, I missed some part of [technical issue] right.

Manoj Viswanathan — Chief Executive Officer

I will repeat. So 5% of the customers have EMI increase of more than INR500 plus 2% have an increase of more than INR1,000.

Mona Khetan — Dolat Capital — Analyst

[Technical issue].

Manoj Viswanathan — Chief Executive Officer

It’s not clear, not able to hear you clearly.

Mona Khetan — Dolat Capital — Analyst

I will try again. [technical issue] understand 5% of the [technical issue] increase.

Nutan Gaba Patwari — Chief Financial Officer

Yes, yes.

Manoj Viswanathan — Chief Executive Officer

Yeah, a significant number. I mean there are about another 20% who have increased between INR0 to INR500. But a significant increase is only 5% of the performance.

Mona Khetan — Dolat Capital — Analyst

Got it. [technical issue].

Nutan Gaba Patwari — Chief Financial Officer

Mona we cannot hear you.

Manoj Viswanathan — Chief Executive Officer

Not able to hear.

Mona Khetan — Dolat Capital — Analyst

[technical issue]

Operator

Thank you. Next question comes from the line of Rahul Maheshwari from Ambit Asset Management. Please go-ahead.

Rahul Maheshwari — Ambit Asset Management — Analyst

Hi, Nutan and Manoj, good evening and excellent set of numbers. First of all, also the disclosures regarding the ESG and all, et cetera[phonetic] very fantastic. My two questions in the previous commentary last quarter, you had said in southern markets the ATS is getting stable in at least in the Tire two and Tire three cities and in Northern markets the ATS has witnessed reduction, can you give some brief color that what has happened in-quarter four and what are the insights you are getting at the start of this financial year.

Manoj Viswanathan — Chief Executive Officer

I think what I was referring to was that in northern markets, the ticket sizes are lower than Southern markets. In southern markets, the House — the size of the houses and also the material used et cetera is more expensive. So the ticket sizes tend to be — tend to be little higher. So the same trend continues. We are seeing the same trend even in this year or this quarter as well. The ticket size in the southern markets are slightly marginally higher than what we see in northern markets.

Rahul Maheshwari — Ambit Asset Management — Analyst

And on your slide, if we go in, where you have given some detailed information on the tech interventions which you have raised on cases you have developed and lead management system. Can you give some more numerical quantitative details that how it will be helping in terms of the throughput, how the trajectory would be seen going ahead. And second thing, how much leads you are getting on a monthly basis and what is the rejection rate.

Manoj Viswanathan — Chief Executive Officer

So lead management system is just to streamline the [indecipherable] we are already using Salesforce platform to track our loans. So we just thought the Lead Management System will act as a central database for all leads which are coming through and we don’t have to run all those leads through our sales force system. So that is the reason for building this lead management system, plus it also has integrations with things like SMS, WhatsApp, et cetera. So it kind of, easier to interact with the customer. So in case we have to provide certain or answer their queries et-cetera. So there are multiple features and it helps to route cases to the right person, right caller. Acts as the central repository. You can pull various details like bureau et cetera directly from that, so there are many features, which helps us to improve the productivity. That’s the lead management system is on and [multiple speakers] So it depends on the channel.

Overall, we are — our conversion rate is about 50%, 40% to 50%. So if you’re booking about 3,000 to 4,000 loans in a month and number of leads will be about double of that. But in certain channels there are very large number of leads coming through like in digital channels. So not considering that as far as the ratio is concerned.

Rahul Maheshwari — Ambit Asset Management — Analyst

And while just related to this whenever I suppose 6,000 to 8,000 leads, which you are getting and of that, only 50% is converted how much fees you’re charging at the beginning for those cases also, in case if they are not converted.

Manoj Viswanathan — Chief Executive Officer

So for the leads which get declined straight away based on initial parameters we don’t really charge any fees, we don’t charge any fees. If the loan looks feasible I mean, if the relationship manager on the ground feels that the loan is feasible to go through that satisfy some of the basic criteria then we charge a login fee, which is about INR3,000.

Rahul Maheshwari — Ambit Asset Management — Analyst

Okay, I’ll come back-in queue. Thank you so much. Thanks.

Operator

Thank you. Next question comes from the line of Renish from ICICI, Please go-ahead.

Renish Somanna — ICICI Bank — Analyst

Hello.

Nutan Gaba Patwari — Chief Financial Officer

Hi, Renish.

Renish Somanna — ICICI Bank — Analyst

Yeah, hi, hi, congrats on a great set of numbers. So just one question is on the spread. Okay, so in PPT we have mentioned that our incremental spread is sort of pretty low at 4.7, so just one thing, is that after considering this 50 basis point rate hike?

Nutan Gaba Patwari — Chief Financial Officer

No, that is for the prior quarter origination.

Renish Somanna — ICICI Bank — Analyst

Okay, okay. And secondly, which is sort of linked to this only. So, in the opening remarks, you know, we did mention about maintaining spread, at around 5.25%. But, when we look at the incremental spread at 4.7%, how confident we are that, we’ll be able to sort of meet this 5.25% spread in coming quarters.

Nutan Gaba Patwari — Chief Financial Officer

See, let me just start on this. So, 13.4% is our yield for Q4, and we have taken a 50 basis point yield increase in April ’23. So, we expect that with this increase in yield, the Q1 yield will close around 13.7% to 13.8%, that is almost 30 basis points to 40 basis points higher than the reported quarter, which is Q4.

Now, on the cost of borrowing line, because we’ve gone down NHB in Q1, and also we are able to maintain a similar marginal cost of borrowing. So, we expect that the cost of borrowing will be around the same range or at least not more than 10 basis points higher. So, essentially 5.5% spread could practically expand for a very short period in quarter 1 and quarter 2, when the cost of borrowing move up to 820, so 820 is our peak cost of borrowing, that we are projecting it can go back again to 55, 60 levels. So, that is how we are projecting this. So, we are very comfortable with the watermark that we’ve set-out for ourselves, which is 525. So, that’s the next two quarter projection on the spread that we have internally.

Now, we also have to monitor how the RBI repo rate progresses in June and August and then decide if we want to do any further changes.

Renish Somanna — ICICI Bank — Analyst

Okay. So, just some clarification, Nutan so, when we do the rate hike, what percentage of our AUM gets repriced, let’s say in a month or quarter?

Nutan Gaba Patwari — Chief Financial Officer

So, essentially, for example, for first April ’23 rate hike, all customers who were on the — in the AUM on January 31, will get repriced, with the exception of NHB funds.

Renish Somanna — ICICI Bank — Analyst

Got it. So, basically it’s a three-month reset period, kind of a thing?

Nutan Gaba Patwari — Chief Financial Officer

Two months, you can say.

Renish Somanna — ICICI Bank — Analyst

Two months. Okay, okay. And secondly, on the disbursement run rate so this quarter, of course, we have seen the improvement. So, what kind of a sequential growth we are expecting, given we have added people and branches in this quarter? So maybe first half, what sort of disbursement growth rate, we assume?

Manoj Viswanathan — Chief Executive Officer

So, we have always maintained about a 5% to 10% kind of growth on previous quarter. So, we aim to maintain that kind of number.

Renish Somanna — ICICI Bank — Analyst

Got it, got it. Okay, That’s it from my side, and best of luck.

Operator

Thank you. Next question comes from the line of Mayank Agarwal from InCred Capital. Please go ahead.

Mayank Agarwal — InCred Capital — Analyst

Hi. Thanks for taking the question. My first question is on opex. So, we have witnessed a 7% Q-o-Q growth on opex, while there was no branch addition this quarter. So, isn’t — this is because of the increase [technical issue] we might see an increased number of branches next quarter, so that opex was [indecipherable] And my second question is on margins again. So, basically your current forecast is factoring a rate [Indecipherable] is still factoring a rate hike or a rate reduction in this fiscal for the, you know what you guided for a 5.25% spread?

Nutan Gaba Patwari — Chief Financial Officer

So on the first operating cost. We’ve actually added eight branches in Q4 — Sorry, nine branches in Q4, and that is also mentioned in our presentation. So, that is where the operating cost increase is coming from. The second question on margins. It assumes that there is no rate change by RBI either upwards or downwards. We’ll have to watch how it progresses in June and then take further actions.

Mayank Agarwal — InCred Capital — Analyst

Okay. And secondly, are you witnessing any kind of increasing competition from say small regional players? Or anything which is higher than what you’ve seen witnessing a year ago? Any color on that?

Manoj Viswanathan — Chief Executive Officer

No, nothing significant. No significant change. I mean, competition has always been there in this segment so, no significant changes, actually.

Mayank Agarwal — InCred Capital — Analyst

And my last question is on the sort of DA income this quarter, it was high, you were — just because you’ve done more assignments or anything specific there?

Nutan Gaba Patwari — Chief Financial Officer

No, just see volume and we’ve also given the volume trends. Largely we have mentioned that we will stick around this strong INR100 crore plus/minus INR20 crores. And that’s where we’ve landed. So, it is presenting the volume only.

Mayank Agarwal — InCred Capital — Analyst

Thanks. And it’s really useful. Thanks.

Manoj Viswanathan — Chief Executive Officer

Thank you.

Operator

Thank you. Next question comes from the line of Chandra from Fidelity. Please go ahead.

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Hi, good afternoon. I had a few questions. Manoj, maybe you can just help me — tell us what was our — while you have given the number in terms of rupees increase, what is the percentage increase in the EMI for these customers. One, and second is, what does this mean to the FOIR [Phonetic] at this point in time versus origination, what’s been the change in FOIR[Phonetic] if you’ve done some work around that?

Manoj Viswanathan — Chief Executive Officer

Yes, so percentage increase — so when — If you take INR500 rupees. So we basically looked at two buckets, INR500 to INR1,000 and INR1,000 plus, so INR500 increase would be like a 5% increase in the EMIs generally because EMI — average EMI is about INR10,000 and so that INR1,000 would be about 10%. So, 5% to 10% maximum 15% would be the kind of EMI increase, which is there for that 5% of the customers.

And FOIR [Phonetic] again we can calculate with average FOIR[Phonetic] is about 40%, so on 40%, if we — I mean if you were to look at it, say INR25,000, on INR25,000, there would be a 2.5% — 2.5% to 5% change in the FOIR[Phonetic].

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Right. Secondly, I mean you always said that, you know if you — once you cross sort of 14% that you’ll start — you eventually start moving to a different target segment of customers, I mean those, which you may not necessarily want to do business, given that sort of your incremental lending yields are at 14% and you want to be — you would need to be sort of disbursing at these rates, does the customer profiling start changing in any material way?

Manoj Viswanathan — Chief Executive Officer

Yes, so this where we’ve kept the incremental lending rate, at about 13%, 13.5%, we will see even for the current quarter the origination rate is 13.5%. So, we are always trying to keep it below the 14% because 14% we feel there is a psychological threshold and there you move in to a different segment. So, we originated 13 — between 13% and 14% and if we have to reprice it, we reprice it after a couple of — after a quarter or so, because then it just gets passed on as a tenure increase and not as EMI increase.

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Right, so could you just tell me, maybe what’s been the origination yield at — on HL and LAP, at this point? I mean, after the rate hike, which you have taken?

Manoj Viswanathan — Chief Executive Officer

So HL would be about — I see the blended rate is about 13.5% and LAP would be giving us about 30 basis points. So 13.2% for HL.

Chandrasekhar Sridhar — Fidelity Investments — Analyst

So even after the April increase you’re originating at 13.2%?

Manoj Viswanathan — Chief Executive Officer

No, this is before the increase, is at the origination — time of origination.

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Right, right. Okay, so even at origination for your new customers, you will be originating at slightly lower [indecipherble] increase later?

Manoj Viswanathan — Chief Executive Officer

Exactly.

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Right.

Manoj Viswanathan — Chief Executive Officer

At the time of origination we are keeping it below 14%. And then we increase it after maybe a couple of quarters. If it works.

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Right, right. And this quarter the [Indecipherable] you gave, it was a little higher. Is it just the CLS’s subsidy or is there anything else to be raising to?

Manoj Viswanathan — Chief Executive Officer

There was a big CLS subsidy tranche which came in this quarter. So which is almost, I think 8% of the — contributes 8% of the [Indecipherable].

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Right. And then just lastly. I don’t know, Nutan, when do we come up for our next ratings review? I mean, obviously we’ve just had an upgrade a while back, but it’s — trying to see that. Is it likely in a year or a couple of years? How do we just think about that? And then just within the context right now currently could you just help us what the leverage caps, which you have to be which short of informative[phonetic] you’re working with?

Nutan Gaba Patwari — Chief Financial Officer

So, Chandra, on the rating improvement, essentially it’s not an outcome of scale, subjectly we are maintaining good asset quality, like we have been diversification in terms of market also improvement in profitability, everything else remaining the same, it is a function of scale, so let’s say, once we cross INR10,000 crores, let’s say in the next 15 months, 12, 15 months and let’s say three to six months from then so give or take about 18 months broad timeline is what we think it should take for the next rating update.

Now, coming to your second question on leverage, we’re actually at 3.6%, as we speak. Now, this is really if we [indecipherable] debt-to-equity is around 2.6%, so not significant leverage and capital adequacy is also high, and we get a 35% risk-weight benefit. So in our conversations with rating agencies, they are comfortable with a debt-to-equity of almost five times. Now, we’ve also been talking about INR100 crores of assignment every quarter. We’ve also been talking about co-lending of 10% disbursement. So this really allows us to look at a very different AUM from let’s say, five years before this, some of these products couldn’t be scaled the way they can today. So, the AUM context[phonetic] to be very different, but your asset-to-equity could still operate at let’s say 5 times, 5.5 times in the next rating cycle. So, some of these questions haven’t bothered us and we are remaining focused on growth per se and we think that will happen in the next 13 months once we cross INR10,000 crores AUM.

Chandrasekhar Sridhar — Fidelity Investments — Analyst

Thank you.

Operator

Thank you. Next question comes from the line of Kunal Shah from Citigroup. Please go ahead.

Kunal Shah — Citigroup — Analyst

Yeah, hi, Manoj and Nutan. So firstly, sorry taking up on the — taking forward Chandra’s question. In terms of this CLSS subsidy, I didn’t get the number, it was 8% of AUM? What was the — can you highlight.

Nutan Gaba Patwari — Chief Financial Officer

So, INR138 crores is the absolute amount the CLSS subsidies that was listed in Q4. In FY ’23, we received INR266 crores and with this, the good news is that we’ve received everything so, no more dues on this particular line. If you look at it in percentage terms, our total asset run off was 25%, 8% of this was pertaining to CLSS and.

Manoj Viswanathan — Chief Executive Officer

This is annualized erosion rate we’ve calculated, so.

Kunal Shah — Citigroup — Analyst

Yeah. So, out of INR422 odd crores, INR138 crores is this, and then there is BT, out of 1.5 non annualized.

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Kunal Shah — Citigroup — Analyst

Okay. And when we look at this entire BT out so given that there is another further 50 odd bps kind of an increase which we have done from April. So, any risk out there in terms of elevated BT out or this is more kind of a Q4 phenomena?

Manoj Viswanathan — Chief Executive Officer

Yes, it is basically Q4 accuracy, last year Q4 also was high, actually it was higher than this Q4. If you see Q4 ’22, so it’s just a Q4 phenomenon.

Kunal Shah — Citigroup — Analyst

Okay. So rate hike would also not have too much of impact on this. And again, we should see it normalizing in the coming quarters?

Manoj Viswanathan — Chief Executive Officer

Yes, it doesn’t seem to be because last Q4, I mean, rates were low and EPT was also again high. So it’s more of a quarter-end phenomenon looks like.

Kunal Shah — Citigroup — Analyst

Sure, and then in terms of the branches, so again full year, we did almost, we added more than 30 odd branches and you have been highlighting that maybe for another couple of years, should we see similar kind of a run-rate or maybe we have done some part of it and now it should slow?

Manoj Viswanathan — Chief Executive Officer

No, I wouldn’t say slow, maybe similar kind of pace, about 20 to 30 branches, 20 odd branches, we can say.

Kunal Shah — Citigroup — Analyst

Okay, and overall in terms of the disbursement. So again, after 18, 24 months or maybe two years down the line, because when we look at it, it’s like, say, from ’19 to ’22 there have hardly been like 20 odd branches, which were added and still there is a strong run-rate of disbursements, so once this branches mature, almost like, say, 30 on 80 odd branches, which is again more than 30, 35 odd percent, so then the disbursements should see a strong uptake once the maturity is there and maybe at least this growth momentum can sustain.

Manoj Viswanathan — Chief Executive Officer

Yes. I mean, we get disbursements from all categories of branches. So I mean, we will continue to put some new branches and the growth momentum is coming in from the larger branches as well.

Kunal Shah — Citigroup — Analyst

Okay, sure. And in terms of the opex overall when we look at opex-to-expense ratio, it should stabilize. We are not seeing any maybe 3 odd percent levels which are there, obviously, from 2.7% it has gone up to 3% for the full fiscal, with the 30 odd branch expansion, so I think broadly should be able to sustain this kind of.

Manoj Viswanathan — Chief Executive Officer

See around this level, we had said when it was at 2.5%, 2.7%, we said it will go up to 3%, 3.2%, so that is what we are maintaining maybe for some more time, it’ll be a stay at these kind of levels and before it starts coming down.

Kunal Shah — Citigroup — Analyst

Sure. And lastly, in terms of the ROE trajectory. So it’s commendable that maybe 30, 50 bps kind of addition, every quarter accretion which is happening, but now incrementally, what would be the levers available, both in terms of the RO and ROE.

Nutan Gaba Patwari — Chief Financial Officer

So, some of the levers is we have to really utilize the co-lending and be at full potential. So that is one of the aspects, we are looking closely at credit cost as well. So some of those things are there, we can further optimize some of our cash utilization, so let’s see, even if we are able to hold-on the ROA at around 3.7%, 3.8% level, with the increased leverage, we are hopeful that we should be able to move towards 15% ROE trajectory in the next two to three quarters.

Kunal Shah — Citigroup — Analyst

Okay, so co-origination, securitization and secondly, you mentioned credit cost, also any levers available?

Nutan Gaba Patwari — Chief Financial Officer

So, credit cost. Kunal, if you see, we are still carrying 1% of provision of ECL as a percentage of our simple outstanding. Now when the 30 DPD is 2.7%. You know sometimes we’ll have to relook at it. So, you know, some of those areas we will take a closer look and see if there is an opportunity and the fourth area that I also mentioned was cash utilization.

Kunal Shah — Citigroup — Analyst

Sure. Okay, got it, got it. Thanks and all the best.

Operator

Thank you. Next question comes from the line of Naredi from Naredi Investments. Please go ahead.

Ravi Naredi — Naredi Investments — Analyst

Thank you to give me this opportunity. Manoj really wonderful result. My question is in quarter four. Interest income rises 47%, while net profit rise, only 7% and finance costs rise 76%.

Manoj Viswanathan — Chief Executive Officer

So the question is, why the.

Ravi Naredi — Naredi Investments — Analyst

Quarter 4 interest income rise by 47%, net profit rise by 7% and finance costs rise by 76%. So what is the reason? This is — 204 is the interest income against 139.

Nutan Gaba Patwari — Chief Financial Officer

Sir, you were looking at quarter four versus quarter four last year or?

Ravi Naredi — Naredi Investments — Analyst

Yes quarter four last year.

Manoj Viswanathan — Chief Executive Officer

Quarter four total income is INR138.7 crores, for this year quarter four versus INR102 crores for last year quarter four. So, that’s a 35.3% increase in total income.

Ravi Naredi — Naredi Investments — Analyst

This finance cost rise is more than that.

Nutan Gaba Patwari — Chief Financial Officer

Sir that is because — let me answer this question. The finance cost has gone up because, sir, there has been a lag in the increase in cost of borrowing, if you look at our last four quarters of cost-of-borrowing. Though the repo rate has increased by 250 basis points, [Technical Issues] has increased only by approximately 70 basis points. And, there has been a very high degree of lag. We were able to maintain almost flat levels of cost-of-borrowing in Q1 and Q2, because they’re linked to MCLR borrowing throughout there has been a lot of lag and because the volume increased only Q3 and substantially in Q4. That is the reason why you are seeing a sharper increase in interest expense versus interest income. But when you look at it sir, at a full year level, the interest income has gone up by 43% and the interest expense has gone up by 41%, so we have performed better sir.

Ravi Naredi — Naredi Investments — Analyst

For this other expenses also high — very high, INR17 million — INR25 million against INR115 million.

Nutan Gaba Patwari — Chief Financial Officer

Sir, as we expand the businesses to more branches and more people, that is the reason, but sir if you see the overall quality of return that has improved sharply on a quarter-on-quarter basis, consistently.

Ravi Naredi — Naredi Investments — Analyst

Okay, and Mr. Manoj can we — assume to 30% CAGR growth is possible in next two, three years?

Manoj Viswanathan — Chief Executive Officer

Yes, sir, we are targeting AUM growth of about 30% over the next two, three years.

Ravi Naredi — Naredi Investments — Analyst

Okay, thank you. Thank you and all the best, sir.

Manoj Viswanathan — Chief Executive Officer

Thank you sir.

Operator

Thank you. Next question comes from the line of Sanket Chheda from DAM Capital. Please go ahead.

Sanket Chheda — DAM Capital — Analyst

Yes, hi, sir congrats on good set of numbers. You’re setting new standards as far as disclosures are concerned. Quite good disclosures, particularly my question was on opex, so last year, we had guided that will carry-on some investments and this year wherein the opex should be around 3 to 3.2, we have closed it at about 3% and last couple of quarters the opex has been lower at about 2.8%, 2.9% so how do we see this now over FY ’24, ’25.

Nutan Gaba Patwari — Chief Financial Officer

So, Sanket we still want to expand, let’s say from 265 touch points to 400 odd in the next two years, which will essentially mean more branch locations, for physical branch locations, more people, more travel and all of that. And as you know, that you know that is a vintage by win — by which the branch really starts to perform, on the productivity, et cetera picks up, so basis all of that we have done a bottom-up analysis and we are projecting a 3% to 3.2% operating cost. So, we have calibrated it to say that if we want to do 30% plus growth, this level of operating cost is essential today to be able to maintain this. So, operating cost will be directly variable on a growth perspective. So, this is something we have in mind.

Sanket Chheda — DAM Capital — Analyst

Okay, okay. And now that the stress is also normalize in terms of such the credit cost, what run rate do we see in ’24 ’25?

Nutan Gaba Patwari — Chief Financial Officer

30 to 40 basis points. We don’t need more than that.

Sanket Chheda — DAM Capital — Analyst

Okay to say we will maintain 30, 40 basis points.

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Sanket Chheda — DAM Capital — Analyst

Sure. I think yeah, those were the two questions from me.

Operator

Thank you. Next question comes from the line of Raghav Garg from Ambit Capital. Please go ahead.

Raghav Garg — Ambit Capital — Analyst

Yeah, hi, thanks for the opportunity. Just a couple of questions. First one on the treasury income side. So, I see that you reported about INR95 million treasury income this quarter. The run-rate usually has been about INR20 million, INE22 million in last few quarters. When, I look at that as a percentage of average assets, that’s about 1.6% versus the run-rate of about 1.1% in last several quarters. So, can you explain what is the reason behind this bump-up and whether this is sustainable or not?

Nutan Gaba Patwari — Chief Financial Officer

Right. So, Raghav, when you look at the overall treasury investment management, it essentially falls into three buckets. We look at liquid funds essentially overnight funds or very short-term liquid funds which carries no underlying risk. The second category is deposits with consortium banks and the third category is [Indecipherable] Now depending on the underlying disbursal in operating cost plan, we choose between these three products essentially depending on where we think we can maximize the returns, even if it is 10 or 20 basis-points. So in this quarter it so happens that we placed more deposits and lesser liquid funds which is why you see now reduction in mutual fund income and an increase in these deposited income in our fact sheet.

Coming to your second part of the question on sustainability at a very-high level this presents almost 6.5% to 6.6%. Of our yields on the funds placed across these three categories. So it will depend on two things, one, the rate, operating within the market. And secondly, volume. As far as volume is concerned, we don’t expect to increase it by any meaningful number. So we want to keep approximately two months of disbursals with us in cash-and-cash equivalents on the balance sheet to optimize our cash holdings. So that we will continue to do so we don’t expect the overall treasury income to be changing meaningfully, it can change between the three categories.

Raghav Garg — Ambit Capital — Analyst

Right. So is this understanding correct that, the run-rate will not be as high or whether if we look at this — the yield that you just mentioned around 5%, 6% versus around 1%, 1.5% that we’ve seen previously. Is not sustainable, is that — would that be fair to assume.

Nutan Gaba Patwari — Chief Financial Officer

No, so it will really depend on where the repo rate is, so as long as the repo rate is [Technical Issues] there is no reason why this should change. We have not seen 1.5% earlier, earlier we used to see more in the range of 4% to 4.5%, which is similar to the repo rate then, so it is really a function on the repo rate at that point of time.

Raghav Garg — Ambit Capital — Analyst

Understood. My second question is on your PLR hike so if I do the math July, you had taken about 25 basis-points. December again another 50 basis-points cumulatively, that’s about 75 basis-points that you’ve taken in FY ’23, but on your reported yields the increase is only about 60 basis-points, so can you explain whether to what extent have you been able to pass — pass-on the rate hikes that you’ve taken in FY ’23 and in light of that, how confident are you that this 50 basis-points PLR hike that you’ve taken in April 2023 to what extent will you be able to pass that on in order to mitigate any margin compression.

Nutan Gaba Patwari — Chief Financial Officer

So let me break-down this for you. So when we take any rate hike, we look at various pools of AUM, and there is one significant chunk, which is your NHB [Indecipherable] which is a fixed rate pool on asset side as well as liability side, where we do not increase the rate. Now please also remember that this particular pool had similar or better spreads to us in itself. So there is no need to worry from a spread compression on that particular part of the pool, so that pool has been about INR700 crores. More recently, it’s increased to INR900 crores. So when we take any rate hike, we have to exclude INR900 crores out of our total rate hike pool. So when you look at the blended increase in the yield line the drop from 75% to 60% represents the fact that we have not taken any increase on the pool at a — so this is how it is visible, but it does not impact the spread because it is fixed in nature on both sides.

Raghav Garg — Ambit Capital — Analyst

Sure understood[phonetic]. This INR700 crores that you’re mentioning this is as of March 2023, is it?

Nutan Gaba Patwari — Chief Financial Officer

Yes. This is as of March.

Raghav Garg — Ambit Capital — Analyst

And this would be under affordable housing fund?

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Raghav Garg — Ambit Capital — Analyst

Right. Do you have any visibility or any sense whether the — at NHB level whether this AHF fund will be rolled over or whether it will get any new deposits in FY ’24 or not.

Nutan Gaba Patwari — Chief Financial Officer

So out-of-the INR600 crores that we have drawn down in FY ’22 in the month of April, we already have received INR300 crores under this fund. This next fabrication will happened in July because we initially — refinance the year[phonetic] to July to June. So we will have to engage with the officials at that point of time, and we will only have a better understanding perhaps in Q2 of this year.

Raghav Garg — Ambit Capital — Analyst

Sure and you know if at a system-level the AHF fund does not get rolled over in FY ’24, would that mean that typically, if a company is lending under AHF then without it, there would be some kind of pressure on margins for a typical housing finance company. Would that be correct to assume?

Nutan Gaba Patwari — Chief Financial Officer

No, simply because you know, it’s a very small set of our book today if you see, like I mentioned INR700 crores as of March, out of INR7,200 and we’re able to manage the margin from the spreads in rest of the book. So, nothing mentions that there will be impacts or anything of that sort.

Raghav Garg — Ambit Capital — Analyst

Sure, thanks a lot, Nutan. That’s all from my side. Thanks.

Nutan Gaba Patwari — Chief Financial Officer

Okay, thank you.

Operator

Thank you. Next question comes from the line of Amit Ganatra from Invesco AMC. Please go ahead.

Amit Ganatra — Invesco AMC — Analyst

Yeah, couple of questions. One is that. You know I think at the beginning of the last year, so on the — during first-quarter con-call you had mentioned that rates from 5.8% can come down to 5.25%. Now if you see the spreads have come down to 5.5%. But when they have touched 5.5% your guidance seems to be that spread should remain stable. So any specific reason as to why this change in thought process when it comes to spread? So that’s my first question and I’ll ask the second question later.

Nutan Gaba Patwari — Chief Financial Officer

So, Amit, maybe I can get started. So our guidance still remains at 5.25% on the lower end what we are trying to say that the visibility for the next quarter seems to be stable on spread.

Manoj Viswanathan — Chief Executive Officer

And also I guess now I mean one year after that sitting where we are today, the overall outlook on interest-rate seems to be more that it will I mean, there may be a minor increase or just flatten out. So which is the reason for our slight change in our stance.

Amit Ganatra — Invesco AMC — Analyst

Okay, and your — on the borrowing side. I mean your reported cost of borrowing is 7.9%, right.

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Amit Ganatra — Invesco AMC — Analyst

And what is the incremental right now. Cost of borrowing?

Nutan Gaba Patwari — Chief Financial Officer

Around 80 [Phonetic] excluding NHB.

Amit Ganatra — Invesco AMC — Analyst

Okay. That was my other question that in terms of your borrowing mix why is it that, NHB as a percentage is continuously coming down.

Nutan Gaba Patwari — Chief Financial Officer

So if you see, March ’22, we were at around 27% and in the last four quarters, we did not draw-down any NHB which we drawdown in April ’23, so when you look at Q1, that number will go back to 20 plus level. So it’s just a function of when we have drawn down the funds.

Amit Ganatra — Invesco AMC — Analyst

Okay, okay. So during the course of the year, you did not draw-down anything and that’s why it kept on coming down. And now, once again, if you start if you — you’re saying that in April, you have drawn down, so automatically [Multiple speakers]

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Amit Ganatra — Invesco AMC — Analyst

So then if that happens, then that also helps in terms of overall cost of funds. Right?

Nutan Gaba Patwari — Chief Financial Officer

Absolutely. So that’s why we are saying that you know our quarter one cost of funds will not go up. See if you remember, Amit we’ve always said that there was a lot of lag in MCLR. So the increase actually started to happen in Q3 — Q3, Q4, Q1 should be the maximum increase given the lag. So we’ve seen the increase in Q3, Q4, but because of NHB we are saying we should be able to hold it in Q1 and then see another 20, 30 basis-points in Q2 and then that’s a flat line after that.

Amit Ganatra — Invesco AMC — Analyst

Okay. After that, okay, you are saying then there should be a flat line.

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Amit Ganatra — Invesco AMC — Analyst

And cost, you are saying that you still will be in the investment mode.

Nutan Gaba Patwari — Chief Financial Officer

Yes, we have to be right?

Amit Ganatra — Invesco AMC — Analyst

Okay, okay. So more or less from ROA perspective this year. The fact that you managed to protect ROA itself is decent, right, because overall was this possibility that ROAs could have declined. I mean, at the beginning of the year considering interest rates going up, where was this possible, but that — that has not happened. So now the important thing is that more or less we should be able to maintain ROAs at these levels and that should go up which should drive ROAs right? That should be the thought process.

Nutan Gaba Patwari — Chief Financial Officer

Absolutely. That is the thought process.

Amit Ganatra — Invesco AMC — Analyst

Okay, understood thank you.

Operator

Thank you. Next question comes from the line of Nidhesh Jain from Investec. Please go ahead.

Nidhesh Jain — Investec — Analyst

Thanks for the opportunity. Firstly on the disbursement. Can you share the disbursement per branch on three years vintage branches, the branches which we opened three years back, what is the disbursement of branch on an annual basis for FY ’23 from those branches.

Manoj Viswanathan — Chief Executive Officer

Three years plus vintage generally will be about INR3 crores plus. I mean, we don’t have the [technical issue] But just ballpark it will be about INR3 crores plus per branch.

Nidhesh Jain — Investec — Analyst

INR3 cores plus per month?

Manoj Viswanathan — Chief Executive Officer

Per month. Yes.

Nidhesh Jain — Investec — Analyst

Sure and secondly in the distribution — in the origination, so share of connectors continues to go up. So the origination mix will be coming much more concentrated towards connectors. So does it worry you or, is it a steady strategy that connectors is the best segment to originate loans.

Manoj Viswanathan — Chief Executive Officer

No the Connected Group itself is a very diversified group and it’s the distribution of loans is also very diversified, so most of the connectors are only providing us one or two loans in a month. And the connectors are also from different categories. So these are not large entities, which are giving us any concentrated business. So we are very comfortable with this channel. And if you look at the asset quality also the Connected Group’s asset quality is good or better than the overall average so we are very comfortable with this channel.

Nidhesh Jain — Investec — Analyst

And what will be the count of active connectors. For the quarter?

Manoj Viswanathan — Chief Executive Officer

Active connectors for the quarter is about 2200 [Phonetic].

Nutan Gaba Patwari — Chief Financial Officer

2382

Manoj Viswanathan — Chief Executive Officer

2382

Nidhesh Jain — Investec — Analyst

Okay if you can increase it quarter-on-quarter on active connectors in this quarter.

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Nidhesh Jain — Investec — Analyst

Or I think last quarter was in 2100 connectors.

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Manoj Viswanathan — Chief Executive Officer

Correct. About 200 plus.

Nidhesh Jain — Investec — Analyst

And lastly, on the operating cost. So when should we expect operating leverage pass towards that ratio to start improving. FY ’24 you are saying that [Indecipherable] in investment mode. But should we expect operating leverage to play-out from FY ’25 or that will also be early to expect that.

Manoj Viswanathan — Chief Executive Officer

I think from FY ’25 some operating leverage should play-out. So I mean, the objective is to bring the cost-to-income at least marginally lower in FY ’25.

Nutan Gaba Patwari — Chief Financial Officer

Nidhesh, having said that, you know, if you compare us with the larger players in the affordable housing industry or even the [Indecipherable] industry, we are actually quite competitive when it comes to operating cost, whether you look at in opex to AUM per loan offer, lack of disbursal, whichever way you slice it. So from that perspective, the focus right now is growth and of course, maintaining the right optimal levels not over stressing about operating costs from compromising growth, so it’s really a choice that we are making to focus on growth, maintain right asset quality, and then also not go overboard that operating cost, we’ve been maintaining this 3% approximately which is actually quite good.

Nidhesh Jain — Investec — Analyst

Sure, and just last question on the LAP segment, which is witnessing reasonably strong growth and the share of LAP has now increased to almost 13%. And we have guided that long-term we want to keep the share of LAP at around 15%. So if you can share what is the ticket size in LAP and is that 15% limit, still holds true for us?

Manoj Viswanathan — Chief Executive Officer

Yes, we are currently disbursing at about 15% rate and so I guess maybe in a couple of quarters the AUM will also catch-up with that — to that level. So at the moment the — our stand is that we will stay with 15%. We will see the portfolio quality, for maybe a few more quarters to — before we start taking a decision to take it further up. The ticket sizes are generally in the same range as our regular housing loans. No major difference.

Nidhesh Jain — Investec — Analyst

Sure, sure. That’s it from my side. Thank you.

Operator

Thank you. Next question comes from the line of Karthik Chellappa from Indus Capital Advisors Limited. Please go ahead.

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

Yeah, hi, thank you for the opportunity. Hi, Manoj and Nutan. Congrats on the quarter, so I have three questions, the first is, if you were to look at your 78,000 odd borrowers. How many of them either anecdotally or so would you think have either experienced a drop in their income or possibly faced a job loss.

Manoj Viswanathan — Chief Executive Officer

Because of?

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

Various other things there, it could be economic, it could be macro, but I’m just trying to see, what some of your customers based on the interactions that your field officers had with them, would have experienced a drop in income, whether it is inflationary or macro or fall in-demand or any reason.

Manoj Viswanathan — Chief Executive Officer

So generally. I mean. I would say on a — If you look at it on a steady-state basis. I mean we keep reviewing our collection cases which go into collection. Typically about 15% to 20% of the cases, the reason comes as job loss. From — I’m not talking about the collection, the ones which slip into collections. And in most of the cases, the resolution is also that the customer has got another job. So now he will catch up on his installments. So in job loss cases, we don’t normally see permanent delinquency. So this is all from our collection experience.

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

And this 15% to 20% what was this pre-COVID, has it gone up in any significant manner, or is this more or less in line with the [Technical issue]

Manoj Viswanathan — Chief Executive Officer

So, our ratios have actually come down to pre-COVID levels. I mean, if you see our one day past due is at 4%, so now since the numbers have come back to pre-COVID levels we are not seeing any different — anything different from our pre-COVID times. And 30 DPD has also come down to 2.7%. So generally, the reasons are similar. I mean job loss, temporary job loss and the customer will get back another job or he’s getting another job. The reasons are more. I mean, the problem is more permanent in cases of medical problems where there is a serious medical issue in the family et cetera. But those are also I mean the ratios are generally the same. I mean we are not seeing any particular reason going up as such.

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

Got it, [Technical Issues] if you were to just look at our AUM mix by credit history the new credit is now almost 20% and if I’m right it’s probably one of the lowest among our previous let’s say, two to three years or so typically, what is the difference in the EU to credit and customers with a credit score and at what point of time do you think you’ll be comfortable to increase this ratio.

Manoj Viswanathan — Chief Executive Officer

This ratio is actually coming down because I mean it’s more of a market phenomenon where more-and-more customers are getting some form of credit. And they end up hitting a score. So we are staying true to our segment which is you know people who are building their first home between INR20,000 to INR50,000 income levels coming with some form of informal income, et cetera. So in that segment more-and-more customers are getting credit. Either a small personal loan or a consumer loan et-cetera. As a result of which they are getting a score. So this number according to us is actually reducing secularly every quarter.

So every quarter, you’re seeing a 1%, 2% kind of a drop-in this number. So I mean, it’s just a question of time and maybe in the next six to eight quarters, it will vanish completely. I mean, we may not find customers in our segment, who don’t have a credit bureau score. So that is really the way we’re looking at it.

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

Okay, okay, interesting. And my last question is basically on channels now in the past, we have had this seperate channel which we were trying to develop our strategic [Technical issue] our officer heading that but whether the channel exclusive connectors even branches they are actually down and the strategic alliances [technical issue] constraints are actually facing and scaling up this channel if any.

Manoj Viswanathan — Chief Executive Officer

So it is I mean it’s, it’s a channel, which has multiple problems that need to be solved and the partners are also working towards it. We are also working towards it. The challenge is not getting leads I think I’ve mentioned this in the past also, that we get a very large number of leads through these channels, but the intervention that the connector provides, the connector is actually building the leads to understand which customers is [indecipherable] which customer is eligible, et cetera. So there is some valuation being provided by the connector which is absent in the other channles, in the strategical channel[phonetic] because there the leads come through without much of — much filtration. So as a result of this the conversion rates are low. So we are working with the partners to see how to address this challenge and at some point there will be a good enough solution to it, and then the channel will start giving them.

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

Okay, what exactly is the difference between a connector and [technical issue].

Manoj Viswanathan — Chief Executive Officer

Sorry, connector and?

Nutan Gaba Patwari — Chief Financial Officer

So Karthik connector and?

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

And micro connector. You also have another bifurcation called micro connector, micro [technical issue]

Manoj Viswanathan — Chief Executive Officer

So just [indecipherable] micro connectors are located near the branches. I mean they are like neighborhood shops whereas these connectors are more of people who are in the real-estate segment or in the financials services segment and they are in touch with our kind of customers. So the neighborhood shops arrangement or relationship with neighborhoods are we call it as micro connectors.

Karthik Chellappa — Indus Capital Advisors Limited — Analyst

Got it, very clear. Thank you very much for the supply[phonetic] and wish you and the team all the very best for FY24. Thank you.

Manoj Viswanathan — Chief Executive Officer

Thanks, Karthik.

Operator

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

Abhijit Tibrewal — Motilal Oswal — Analyst

Hi, Manoj and Nutan congrats on a good quarter. I joined around 20 minutes late. So please let me know if some of the questions that ask is a reputation. I will kind of listen to the recording after the call.

Manoj Viswanathan — Chief Executive Officer

No worries.

Abhijit Tibrewal — Motilal Oswal — Analyst

So first things first. I mean, have you already addressed why we chose to increase the provisioning cover this quarter.

Nutan Gaba Patwari — Chief Financial Officer

We’ve kept it at the similar levels compared to what we’ve been doing last five or six quarters.

Manoj Viswanathan — Chief Executive Officer

1%, we wanted to keep it at 1% of the overall book. So we have kept it at that. We’ll see observe our delinquencies over the next four quarters, then we’ll take a call on whether to bring that down or not.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it. And secondly Nutun this other income that we seeing now, it’s a fair thing to analyze it for [multipe speakers]

Nutan Gaba Patwari — Chief Financial Officer

And annualize as well.

Abhijit Tibrewal — Motilal Oswal — Analyst

And then the other question that I had was on the branches. Some of the mature branches that we have today in terms of productivity. Do you think that they are anywhere close to their peak capabilities in terms of the kind of AUM that they manage or do you think we still have basically capabilities in even our mature branches to further scale-up.

Manoj Viswanathan — Chief Executive Officer

So we are — we are looking at the above branches reaching at least INR200 crores. Before we start thinking about them tapering off. So I think at the moment, we have only maybe one branch is approaching that number. But we have a lot of branches in the 100 to 200 category, or 100 to 150 category. So, they still have maybe at least a couple of years to go before they will I mean, we can start thinking about them. But I think every time a branch crosses a certain threshold we were able to discover new ways of making them more productive. So we are hoping that even at the INR200 crores barriers will be able to kind of push it further.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it, maybe one more question that I had was, again, I’m not trying to suggest that we should grow faster as a matter of fact I feel analysts or investors are happy if you continue to grow at maybe a 30% kind of a CAGR over the next few years, but just trying to understand, when you look at the demand, which is there in the affordable housing segment. When you look at some of your peers in the unlisted affordable housing segment and the rate at which you’re growing. So is it that we are consistently kind of trying to maintain these levels of disbursements, so that our asset quality is under control, we cherry pick our customers. We are able to pick and choose which customers we want to lend to or I mean basically, what I’m trying to read into is, given that there is so much demand, given that there is so much of disbursements that is happening, even from some of the unlisted affordable players are we making a conscious decision of keeping disbursements under check or how should we kind of read this.

Manoj Viswanathan — Chief Executive Officer

Yes, to some extent I mean they are focusing [indecipherable] bandwidth. I mean, if we put all our attention on disbursals, maybe as you mentioned, we can grow more. But we are trying to just balance it because we also have to create an organization that will be able to handle a much larger book and coming back to the question on branches, we have to start thinking what happens when a branch hits INR150 crores or INR200 crores. How do we make it more productive. So we are also spending time on answering some of those questions and getting the branches ready for that. So that occupies sometimes and plus we are also I mean, you can see our the rate of interest is also has been — been extremely glad and even though we are — I mean we have very little loan against property, our blended yields are very strong. If you see compared to our peers. So that is also another area where we kind of focus. So we are trying to get the right kind of customers, you know in this segment we’re willing to pay that kind of rate. So that also is one of the parameters that we look at.

So given all this, given that we want to create a strong foundation for our strong branch structure, get the right kind of customer who will pay us good yield. We feel comfortable with the 30% kind of growth rate.

Abhijit Tibrewal — Motilal Oswal — Analyst

One last question from me, please. Here, if we assume basically two scenarios and that going-forward there are no more repo rate hikes and assuming another 25 basis-points repo rate hike, under these scenarios versus where we are in terms of cost of borrowings, where should we be if there are no repo rate hikes and if there is a 25 basis-points repo rate hike where should that cost of borrowing stabilize and against that — against these two scenarios in case there is a 25 basis-point hike, what is the I will say, increase in yields that we would have to take to maintain or to meet that guidance of stable spreads from here on.

Nutan Gaba Patwari — Chief Financial Officer

Right, so let’s go one-by-one, the first scenario is where there is no more changes in the repo rate. So we are seeing that our customer will be covered 820[phonetic] in the next two quarters. So that is the peak. Now moving to the second scenario, if there is a 25 basis-point rate hike in repo in June let’s say we will see this 820 getting to 840. So then that takes us to the yield question. So if we want to stick to 5.25%, we frankly don’t want to do much. We don’t have to do anything, but you know it will be a call at that point of time, how we want to look at new growth versus old customers, how we want to look at this full EMI, portfolio, et cetera. And at that stage we can decide if we want to pass-on or want to absorb, but those decisions will have to come post the June rate hike, if it happens.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it. That’s all from my side. And thank you and all the very best to you and the team.

Nutan Gaba Patwari — Chief Financial Officer

Thank you.

Manoj Viswanathan — Chief Executive Officer

Thank you.

Abhijit Tibrewal — Motilal Oswal — Analyst

Thank you.

Operator

Thank you. Next question comes from the line of Nischint Chawathe from Kotak Institutional Equities. Please go ahead.

Nischint Chawathe — Kotak Institutional Equities — Analyst

Thanks for taking my question. Firstly, Nutan you mentioned that your incremental cost of funds is around 8.7% to 8.8%. Then how do you sort of expect your average cost to sort of flatten out at 8.2%. I understand that there is some support coming from NHB but if your incremental rate is higher than your weighted-average, then it should kind of start — continue to inch-up. Right?

Nutan Gaba Patwari — Chief Financial Officer

Right. So, we’ve discussed this. So there is a 50 to 70 basis-points impact that comes, because of the NHB [indecipherable] so, we’ve taken INR600 crores of NHB drawdown in April in the middle of April. So that will really help us to hold our rates at around 7.9% to 8% in quarter one. And then, of course — see because if I look at the rate today it is below 7.9% because of a sudden increase in NHB in April, but of course the lag is also being passed on. So, you know. I will touch, closer to 7.9%, 8% for the full quarter and then 8.1% to 8.2% is the peak that we are seeing in Q2. So this eventually depends on what is the mix of NHB in the overall borrowing book. So as long as I’m at 20% level broadly. I will continue to get that 60, 70 basis-points impact on the blended cost of borrowing.

Nischint Chawathe — Kotak Institutional Equities — Analyst

Got it. So basically 8.2% you are just sort of building in the annual borrowing program? [technical issue]

Nutan Gaba Patwari — Chief Financial Officer

Yes. And for the first half of this year, we’ve already drawn down in April. So it’s no longer a — it’s for a win, it’s already done.

Nischint Chawathe — Kotak Institutional Equities — Analyst

Got it. The second question is on collections, in Stage two is at around 1.1%. I think peak was as in the — the best was I think 80 or 90 basis points in 2018 or so.

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Nischint Chawathe — Kotak Institutional Equities — Analyst

So those things that were already there at the best level that we can be, better scope of improvement and it would — do we see that we are already at the best levels where we can be or can we do further? And probably how was April versus April last year?

Manoj Viswanathan — Chief Executive Officer

Yes, so we are more or less there in terms of the pre-COVID levels of course, our aim is to keep on improving and I think as the — as our experience also keeps growing, we will be able to improve it, maybe not substantially, but at least marginally we will keep improving it. Because our experience on what works, what doesn’t work will keep on increasing. So, we will implement that and we will try to bring some improvements. So yes I mean we are more or less there. We will keep trying to improve marginally from here on.

Nischint Chawathe — Kotak Institutional Equities — Analyst

And how was April versus April last year?

Manoj Viswanathan — Chief Executive Officer

April versus April last year was. I mean compared to last year was substantially — I mean. Like March versus last March has been substantially better. So the April is on that base and generally, we don’t have that kind of a skew in March. So our first quarter is generally similar to our last quarter of the previous year. So I would say. I mean, there’s nothing significant to report as far as April is concerned, it was a good month. You were talking about collection rate or about disbursal?

Nischint Chawathe — Kotak Institutional Equities — Analyst

Standout Collections.

Manoj Viswanathan — Chief Executive Officer

Collections.

Nischint Chawathe — Kotak Institutional Equities — Analyst

So the collection efficiency which I think some of your peers put out, you’ll probably say that April versus April would not be very different.

Manoj Viswanathan — Chief Executive Officer

No, it won’t be very different, be very similar. I mean, in fact, April versus March itself is very-very, very similar. I mean I would say maybe it is just a marginal difference.

Nischint Chawathe — Kotak Institutional Equities — Analyst

Sure. Got it, thank you very much.

Operator

Thank you. Next question comes from the line of Jatin Sangwan from Burman Capital. Please go ahead.

Jatin Sangwan — Burman Capital — Analyst

Hi, thanks for taking my question. I wanted to understand under the breakup of this other non-interest income, there is a section called other, it was more or less zero for the last eight quarters, now it has increased to INR4.5 crores. What is this income related to?

Nutan Gaba Patwari — Chief Financial Officer

So we started some work on using our website for marketing, et cetera. And we’re getting revenue against that. We expect that this will be consistent on aquarterly basis going-forward.

Jatin Sangwan — Burman Capital — Analyst

Okay, great. And second question is around the AUM growth you’re guiding for 30% AUM growth for FY ’24, is that a conservative guidance, because on one-hand, you are guiding for 5% to 10% Q-o-Q growth for disbursements and repayment rate will come down as there will be no impact of CLSS subsidy. So just doing the back-end calculation, you would be growing at 35% 36% growth. So are you being conservative by giving like 30% growth guidance for FY ’24?

Manoj Viswanathan — Chief Executive Officer

If I say I’m conservative that means I’m giving away the game. Can’t — I can only say we are aiming for 30%.

Jatin Sangwan — Burman Capital — Analyst

Okay sure. Thank you.

Operator

Thank you. Next question comes from the line of Amit Ganatra from Invesco AMC. Please go-ahead.

Amit Ganatra — Invesco AMC — Analyst

Yes, just one question I missed was this co-lending business. Can you explain now, if you — if this business grows, then what kind of implication it has on — first of all, where does the income get booked just like any other. I mean lending that you do the entire thing gets reported in interest income, net interest expense in your proportion or how does it get recognized?

Nutan Gaba Patwari — Chief Financial Officer

Yes, so as far as reporting goes Amit, it gets reported in the respective lines, there is no upfronting in co-lending. So no striking of income or expense just on the tenure based — for our portion as well as for the portion to bank. The only portion that we get upfront is the processing fee that we collect from the customer and then we sell-down, 80% so that part of the processing fee comes towards in the quarter, where we actually transfer the loans which is not very large number.

Coming to the portion of how we are looking at it from an overall level. See, once we do the transfer to the bank. We are able to leverage our book much better. That’s one from a financial perspective. Second, we’ll able to actually address in market because we actually can look at a sizable portion of slightly high [Indecipherable] INR20 lakhs, INR25 lakhs, INR30 lakhs where the borrower expects a lower rate of interest. So that then opens up and it also improves productivity for our front end teams. So those are the broad two or three aspects on how we are looking at it. Maybe I can just request Manoj to share how we looking at expanding this.

Manoj Viswanathan — Chief Executive Officer

Yes, mainly co-lending will have the impact of helping us expand the addressable market. I mean, that’s a key — that’s a key benefit from co-lending. Because we end-up spending time on distribution — building distribution. But in some places, what happens is the same — in the same area there are adjacent ticket sizes in the same projects same areas, there are adjacent ticket sizes that come to us. So we generally operate in the INR5 lakhs to INR25 lakhs, but when the ticket size comes in the INR25 lakh to INR40 lakh range. Generally, the customers are a little more rate conscious, they are little more formal in their overall outlook and as a result of it, they are more rate conscious. So that is a segment that we have to give up. I mean, we will — we may end-up even meeting the customer, but then the customer does not take the loan from us. So that is the customer segment that we can address through co-lending and it helps us overall improve our productivity of our teams, improves our brand presence in the market, improves our plout in the market. So that is really how we are looking at co-lending and of course it is how do we accrete a product, because we know the capital allocation from our side is also very low for this product, So overall it is a win-win. And for the bank, it is very good because they get extra distribution and so it’s good for them as well.

Amit Ganatra — Invesco AMC — Analyst

But from a customer’s perspective. He is taking loan from your company only right? Or is he aware that there is a bank?

Manoj Viswanathan — Chief Executive Officer

Yes, customer is taking — I mean, we are the front face for the customer. So customer knows that he is going to interact with us through the life of the loan. He is made aware that there is — it’s a co-lending product so there are two parties involved. So that is something that we make the customer aware. So — and for that, anyway the customer is getting a benefit of a lower rate.

Amit Ganatra — Invesco AMC — Analyst

Okay. So effectively I mean a proportion of co-lending goes up, then from optical perspective, it has a deflationary impact on your yield as well as cost, right?

Manoj Viswanathan — Chief Executive Officer

Sorry what did you say? inflationary impact on the?

Amit Ganatra — Invesco AMC — Analyst

Deflationary because if the — if co-lending goes up as a proportion then the reported yields tend to go down reported cost of [Multiple speakers]

Manoj Viswanathan — Chief Executive Officer

Yes, but we are reporting the yields or the origination yields, we are reporting ex co-lending.

Nutan Gaba Patwari — Chief Financial Officer

Yes, so if you see the page 27 of the presentation, the 13.5% is excluding co-lending.

Amit Ganatra — Invesco AMC — Analyst

Okay, but from a calculated perspective when we calculate, it will get come down, right?

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Amit Ganatra — Invesco AMC — Analyst

And leverage goes up, if co-lending goes up?

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Amit Ganatra — Invesco AMC — Analyst

But leverage, why should it go up? I mean you have the same risk-weight right? So why should leverage go up?

Nutan Gaba Patwari — Chief Financial Officer

It will go up, when you look at it from an AUM perspective.

Manoj Viswanathan — Chief Executive Officer

But when we calculate also it should workout no? because the principle on our book is only 20%, so the interest that we will be getting will be measured around the 20% on [Indecipherable]. So the yield also should workout.

Nutan Gaba Patwari — Chief Financial Officer

But it’s a lower yield loan. That’s right.

Manoj Viswanathan — Chief Executive Officer

[Indecipherable] rate is the consumer but.

Nutan Gaba Patwari — Chief Financial Officer

Lower rate to the customer so the blended will go down.

Amit Ganatra — Invesco AMC — Analyst

[multiple speakers] goes down, but leverage should not necessarily go up, right? It basically — it helps you to improve your leverage faster is what I can understand.

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Manoj Viswanathan — Chief Executive Officer

Yes.

Amit Ganatra — Invesco AMC — Analyst

There was a possibility that this customer would never have been your customers, if co-lending was not a product available to you.

Nutan Gaba Patwari — Chief Financial Officer

Absolutely.

Amit Ganatra — Invesco AMC — Analyst

So it helps you to report a higher-growth. It actually helps you to improve your TAM, to some extent?

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Amit Ganatra — Invesco AMC — Analyst

And to a large extent I mean since the risk and everything is shared so to that extent, yes, it’s actually a win-win. At this stage, if it works.

Manoj Viswanathan — Chief Executive Officer

Right and the customer also is marginally better because he is a formal customer.

Amit Ganatra — Invesco AMC — Analyst

Correct. Exactly. Understood. Thanks, thanks a lot.

Operator

Thank you. Next question comes from the line of Arvind R from Sundaram Alternates. Please go ahead.

Arvind R — Sundaram Alternates — Analyst

Hi, good set of numbers. I just have one question. So like, on fee income side. I can see like a — there are some — like a INR3.6 crores in fourth quarter and INR3 crores in third quarter, but it was almost none — virtually nothing in this year’s. Like what are the driving factors behind this? Can I understand and another question is. So it’s just a clarification, so you had mentioned 50 basis point rate hike in April 1, 2023. So the overall impact on yields will be 30 to 40 basis points. And then it could be stabilized around that point?

Nutan Gaba Patwari — Chief Financial Officer

So I’ll go one-by-one on your first question on the fee income. So this largely represents the processing fee that we get on closures. So every time there is a repayment or a partial repayment or BT out or when we do assignment or co-lending or when we receive any CLSS subsidy, we get a small fees from NHB. So every time we get a — so like we get towards INR137 crores of subsidies, so that’s why you see this number going up. So that is the first part.

The second part of 50 basis points. Yes, once we take this rate hike in April 1 it will stabilize around that 30 to 40 basis-points plus levels[phonetic].

Arvind R — Sundaram Alternates — Analyst

Okay, thank you.

Analyst — — Analyst

Thank you. Next question comes from the line of Shreepal Doshi from Equirus. Please go ahead.

Shreepal Doshi — Equirus — Analyst

Hello sir, good evening and thank you for giving me the opportunity and congrats on yet another strong quarter. So my question was pertaining to the branches that we have. So what percent of our branches will be more than INR100 crore and what percent of our branches will be less than INR50 crores [Technical Issues] volumes of AUM? And secondly, in-line with the same question of what would be the KRA, like if you could highlight some KRAs of a branch or of an employee who would be operating at a matured branch versus that of a new branch?

Hello. Hello. Hello. Am I audible? [Technical issue]

Nutan Gaba Patwari — Chief Financial Officer

To the next participant.

Operator

Yes, Mr. Roshan, can you go ahead. All right. Since there is no reply from the line of Mr. Roshan, We will go with the next participant. Next comes is Mona Khetan from Dolat Capital. Please go ahead.

Mona Khetan — Dolat Capital — Analyst

Yes, hi, am I audible?

Nutan Gaba Patwari — Chief Financial Officer

Yes, Mona.

Manoj Viswanathan — Chief Executive Officer

Yes, yes.

Mona Khetan — Dolat Capital — Analyst

Yeah, so firstly, on the non-interest income. You know just component [Phonetic] have declined sharply in FY ’23. So what is the outlook here? I understand it’s partly driven by lower DA direct assignment, so could this as a percentage of assets remain same going-forward or how do you see this?

Nutan Gaba Patwari — Chief Financial Officer

So, we’ve been doing about INR100 crores of DA approximately, we will continue to maintain that. So, as a percentage, DA as a percentage will remain Ballpark around 1%.

Mona Khetan — Dolat Capital — Analyst

Okay, so what was the primary reason for non-interest income coming down so sharply this year?

Nutan Gaba Patwari — Chief Financial Officer

Are you specifically referring to net gain on DA or any specific line, because when I see non-interest income, it’s actually gone up from 1.1% to 1.3%.

Mona Khetan — Dolat Capital — Analyst

Okay. So what I see is that noninterest income for this year stands at about INR100 crore versus INR118 crore last year. Okay, fine, I’ll take it offline. The other question was on the write off. So, how much of write off has been made this year? And if you could also share the cumulative write-off the company has made so-far?

Nutan Gaba Patwari — Chief Financial Officer

So last year, we had a write off of approximately INR20 crores to INR22 crores. I think INR22 crores to be exact. And this year has been less than 50% of that. So approximately INR10 crores. Also it’s important to remember that write-offs are majorly short recoveries when we close loans and for most part of this write-off, we already have a provision, but when we actually close the loans, it appears in the write-off line and not in the net of provision line. So there is no financial impact per se. Because we replace older provisions with new provision. Your second question was the cumulative write-off, it will be approximately INR40 crores to INR45 crores. But if it is different I will have to get back to you.

Mona Khetan — Dolat Capital — Analyst

Sure, thank you. So FY ’23 was INR10 crore?

Nutan Gaba Patwari — Chief Financial Officer

Yes.

Mona Khetan — Dolat Capital — Analyst

Okay, got it. Thank you.

Operator

Thank you. Next question comes from the line of Manuj Oberoi from YES Securities. Please go ahead.

Manuj Oberoi — YES Securities — Analyst

Yeah, hi, congrats on great numbers. The question is on the provisioning coverage on the Phase three asset so that’s been consistently big enough, so any specific reason behind this or is this pure conservatism or is it also driven by the recovery experience on the top.

Nutan Gaba Patwari — Chief Financial Officer

So, see, we have thought that we want to keep the overall provision at 1% of the principle outstanding now. If you have to do then you have to park it against some exposures. Now in a situation where the 30 DPD is continuously improving, it becomes difficult to park it in stage two or in stage one. Because, you know, probability of default models, et cetera, showing a write-back, but then we said, okay, if you want to still continue it given the conservatism approach we want to follow. So then the only place where we can practically park is [Indecipherable] Stage three. So that’s how it ends up appearing there. As you have seen on the credit indicators, even the Stage three the [Indecipherable] back to March ’20 March ’19 level. So no indicative stress, but it’s just parking position from how we are looking at it.

Manuj Oberoi — YES Securities — Analyst

So note in which are management overlay if in case this will increase in the future. What do you did[phonetic] into Stage three provisions and shift some provisions in Stage two, or would you still — because. I mean, if it’s already allocated to stage three. Then how would you then treat those provision in the future.

Nutan Gaba Patwari — Chief Financial Officer

So see movement between stages is allowed, because it’s an overly. It’s not a big issue. I think in a situation where Stage two increases in my mind that’s a bigger issue to be resolved. So frankly, we’ll have to go back and see where the concern is and why that would happen. What we’re seeing even today based on daily collection are cash flows are actually improving. So no reason that we think that in the near-term, we should get to a stage where 30 DPD is concerning from where we are today.

Manuj Oberoi — YES Securities — Analyst

Got it, so it’s pretty much floating in that way. And just on this Karnataka and Maharashtra I mean they’re part of our core focus markets, but they kind of turning[phonetic] to grow slightly slower than the overall book. When do we see a stronger turnaround in those markets and they started growing in line with the order book.

Manoj Viswanathan — Chief Executive Officer

Maharashtra should start turning around this year. And as far as Karnataka is concerned, a large part of the business comes basically from Bangalore itself. And I think it will continue at similar levels, but in Maharashtra you should start seeing probably increase [Technical Issues].

Manuj Oberoi — YES Securities — Analyst

Okay, thank you so much, best of luck.

Manoj Viswanathan — Chief Executive Officer

Thank you.

Operator

Thank you. Next question comes from the line of Arvind R from Sundaram Alternates. Please go ahead.

Arvind R — Sundaram Alternates — Analyst

Hi, probably like the same question on fee income itself like can we expect the fee income run-rate to be around this level or like, do you think it could increase like as a percentage of or like [technical issue].

Nutan Gaba Patwari — Chief Financial Officer

So. I want to remind that this fee income is not the processing fee income that we recover from customers at the stage of onboarding that goes and gets booked in the interest line itself under the ER norms of India’s. This fee income pertains to early closures or early — any additional fee that we recover from CLSS subsidy so CLSS’ subsidy is no longer there so that portion will not come. So what I can confirm is that probably 50% of this should continue because we will not have any more CLSS subsidy going-forward.

Arvind R — Sundaram Alternates — Analyst

And because of interest-rate hike, do you expect BT out rate to go up, maybe.

Manoj Viswanathan — Chief Executive Officer

So we are not seen that happening so-far, so if you see the BT out rate, it’s more of a — there is a year end spike and otherwise it just follows the normal trend. And. even through the last year, that is our multiple interest-rate hike, we’ve not seen a — during the year, we’ve not seen any spike and the spike happened only in March or In the last quarter. So we expect the same trend to continue. And lastly, it was a year of aggressive rate hikes. This year, really it’s a — that kind of aggressively rate hike should not happen. I think. If the — mostly people are expecting maybe one round or maybe not even that.

Arvind R — Sundaram Alternates — Analyst

And lastly, just one question I think at the start of the call, you were discussing about higher disbursement rates or growth in — if a certain markets like some kind of breakdown. Can you repeat that, like.

Manoj Viswanathan — Chief Executive Officer

No. I was just — disbursement rate but discussing about ticket size, ticket size is higher in southern markets, disbursement if you see the share of disbursement, more or less, if you see FY ’23, it reflect disbursement — share of disbursement as FY ’22. So we’re not seeing any major changes geographically. In terms of share of disbursement.

Arvind R — Sundaram Alternates — Analyst

Okay, okay, because we have by AM we have the — like clearly, in your fact book, but you guy were very clear on disbursement side so that’s why I wanted understand.

Manoj Viswanathan — Chief Executive Officer

Yes, so we have — so that share of disbursement is more or less similar to what we had last year.

Arvind R — Sundaram Alternates — Analyst

Okay, okay. Thank you. Thank you so much.

Operator

Thank you. Next question comes from the line of Shreepal Doshi from Equirus. Please go ahead.

Shreepal Doshi — Equirus — Analyst

Hello, sir, thank you for taking my question. So, my question was pertaining to what percent of our branches are mature, that is more than INR100 crore AUM size and what percent of our branches will be below INR50 crore AUM size? Secondly, in the same line, what are the — if you could highlight some KRA differences for our branch, which will be mature versus a branch, which is relatively new.

Manoj Viswanathan — Chief Executive Officer

So we have about 25 branches which are INR100 plus crore but INR100 crore — I mean there is still a lot of headroom to grow because we are looking at each of these branches reaching at least INR200 crores. And if you look at the branches, which are below INR50 crores. It would be about 50 branches — 60 branches actually — 60 branches will be around less than or equal to INR50 crores of AUM.

In terms of KRAs. The larger branches would have slightly more you can say focus or bias towards collections, because the volume of collections would be higher in the larger branches. In smaller branches, the bias towards collections would be lower. I mean, it’s just a function of volume of collections. It is proportionate to the portfolio.

Shreepal Doshi — Equirus — Analyst

And sir, in terms of, say, employee targets. So like for an RM of a relatively larger branch would probably have a target — monthly target or if you could highlight that.

Manoj Viswanathan — Chief Executive Officer

Yes, so, relationship managers have broadly two sets of target one target is to achieve disbursal number for the month. And so it will be around INR50 lakhs to 70 lakhs of disbursal per month. And they also have their collection allocation. So typically our relationship manager would get about between 10 to 20 loans to be collected. So, we are talking about 75,000 plus loans and with a 13% rate it’s about 10,000 loans to be collected every month. So typically an RM would get about 10 to 20 loans to collect. So, broadly. I mean, at a very-high level, this is the KRA, there is a disbursal target, and there is a collection target. We also do on a quarterly basis we set some new priorities for them, which is either it could be a yield target or it could be a channel diversification target. It could be a number of active channels. It could be a product diversification target things like that. So that depends upon quarter-to-quarter, we change the priorities. But what remains static is basically the disbursal target and the collection target.

Shreepal Doshi — Equirus — Analyst

Got it sir. Sir second question was with respect to the LTVs. So if I look at it more than 80% LTV is close to 34% of our overall origination currently now that has been coming down. Is there a focus — is there a strategy to further bring it down?

Manoj Viswanathan — Chief Executive Officer

So this is actually AUM, so this gives you a share of AUM at the time of origination. If you look at actually our current share of cases which are greater than 80% LTV, it would be far lower than this. So I don’t have the figure right now in front of me, but my guess is, it would be around maybe 10% — 10% to 15%.

Shreepal Doshi — Equirus — Analyst

Got it, got it, sir. And the last question was with respect to the rate so you highlighted earlier in the call that there has been an increase of 5% to 10% in terms of EMI for a customer. Now, is that including the 50 basis point last rate hike that we have done?

Nutan Gaba Patwari — Chief Financial Officer

Yes, yes, after all the recent rate hike also.

Shreepal Doshi — Equirus — Analyst

Got it, sir is there any other rate hike on the cards.

Manoj Viswanathan — Chief Executive Officer

Not at the moment. I mean, we’ll have to see how the policy rates move, and then we can decide, if at all we need to increase.

Shreepal Doshi — Equirus — Analyst

Got it sir, so this quarter you’ve also like come up with dividend payouts. So what’s the strategy there in terms of payout ratio that we would want to sort of maintain?

Manoj Viswanathan — Chief Executive Officer

So we have done some analysis and we’ve said for a company of our size and which is declaring dividends for the first time this kind of a ratio is a good ratio to have. And we will maintain this for some time. So based on our analysis and dividend — our dividend policy, we arrived at a 10% dividend payout. So, we’re likely to probably keep it at these kind of levels.

Shreepal Doshi — Equirus — Analyst

Thank you so much and good luck for the next quarter.

Manoj Viswanathan — Chief Executive Officer

Thank you.

Nutan Gaba Patwari — Chief Financial Officer

Thank you.

Operator

Thank you. [Operator Instructions] Next question comes from the line of Arvind R from Sundaram Alternates. Please go ahead.

Arvind R — Sundaram Alternates — Analyst

I just have — just one last question, so you were mentioning about MCLR based loans — loans from banks. So, is that what like predominant funding from banks, like mix up like or does it also consist of repo rate or other external benchmark.

Nutan Gaba Patwari — Chief Financial Officer

So bulk of it is actually MCLR linked almost 75% of our bank loans are MCLR linked and the rest is basis an external benchmark including repo and TBIL [Phonetic].

Arvind R — Sundaram Alternates — Analyst

Okay. Thank you.

Operator

Thank you. [Operator Instructions]. Ladies and gentlemen, as there are no further questions, we have reached the end of question-and-answer session. I would now like to hand the conference over to Mr. Manoj Viswanathan for closing comments.

Manoj Viswanathan — Chief Executive Officer

Thank you. Thank you everyone for joining us on the call. I hope we have been able to answer all your queries. In case you require any further details you may get in touch with Manish Kayal, who heads the Investor Relations. Thank you.

Operator

[Operator Closing Remarks]