IIFL Finance Limited (NSE: IIFL) Q2 2025 Earnings Call dated Oct. 24, 2024
Corporate Participants:
Kapish Jain — Chief Financial Officer
Nirmal Jain — Founder and Managing Director
Venkatesh N — Managing Director, IIFL Samasta Finance
Monu Ratra — Executive Director and Chief Executive Officer
Analysts:
Dhaval Gada — Analyst
Abhijit Tibrewal — Analyst
Shubhranshu Mishra — Analyst
Vivek Ramakrishnan — Analyst
Yash Dantewadia — Analyst
Anusha Raheja — Analyst
Shikhar Mundra — Analyst
Kriti Tripathi — Analyst
Kamal Mulchandani — Analyst
Raghav Garg — Analyst
Rishikesh Oza — Analyst
Shweta Daptardar — Analyst
Navneet Baya — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the IIFL Finance Q2 FY ’25 Earnings Conference Call. [Operator Instructions] Please note that this conference is being recorded.
I now hand the conference over to Mr. Kapish Jain, Chief Financial Officer, IIFL Finance. Thank you. And over to you, sir.
Kapish Jain — Chief Financial Officer
Yeah. Thank you very much. Thank you very much ladies and gentlemen for joining in our quarter two earnings call for financial year ’24-’25.
And I just would hand over the line to Mr. Nirmal Jain, our Founder and Managing Director to give you a perspective on the company’s performance for quarter two before I take it back again and talk on our numbers as well.
Nirmal Jain — Founder and Managing Director
Thank you, Kapish, and welcome, everybody, on the call.
As all of you are aware about the RBI, that RBI has put an embargo on the gold loan business in terms of sanctions disbursement on March 4th of this year and the same was lifted on 19th of September, about six and a half month later, we have been able to satisfy RBI with our compliance rectifications and all the corrections that we did and we have strengthened our compliance, as well as all assurance functions, which comprise risk and audit as well and we continue to do so.
So while this period has been challenging, but I think we emerged stronger from this and this is something that would have happened to many strong companies that they face short-term challenges. And in the last one month, what we are seeing is the resilience of the company and the team that we are coming back strongly. The customers renewed loyalty is also very heartening and satisfying. As we restarted our business in a month, you would have seen that the gold loan book, which had fallen from INR36,000 crores to around INR10,000 crores by the time the embargo was lifted is around INR12,000 odd crores now. And as you know, we could apply to banks only after the embargo was lifted and banks have a process of three weeks to four weeks. So, we expect the liquidity to improve and that will allow us to grow the book or continue to grow the book at a good pace.
In terms of — otherwise, the environment is very good for both the gold loan as well as MSME business. And all our businesses, even the affordable home loan business also we are seeing that the demand is picking up. As interest rates seem to be peaking out, we’ll see that the demand growth continues. The new government has also reintroduced a modified form of the affordable housing incentives through PLI schemes and so on.
Microfinance business has been passing through a bit of challenging times. Maybe later in the question, I suppose we can discuss this more. But primarily because, after the liberalization of loan to the microfinance or self-help group, there have been concerns about over-borrowing by these customers and then AMFI came up with the guidance of not more than four loans per customer. And that basically would have led — has led to some bit of stress in some of the borrowers. We believe that it might take maybe this quarter, next quarter, but again, the business will bounce back with strength.
With this I hand it over to Kapish for a more detailed discussion on the financials and then we’ll come — we’ll join you back for a Q and A.
Kapish Jain — Chief Financial Officer
Thanks a lot, Nirmal. Yeah. So for the second quarter fiscal ’25, IIFL Finance at a consolidated level reported a net loss before non-controlling interest of INR96 crores. So it’s down by 118% Y-o-Y and 128% quarter-on-quarter. We recorded a pre-provision operating profit of INR733 crores, which is down 21% Y-o-Y and 13% on a quarter-on-quarter basis. For the quarter, consolidated loan AUM de-grew by 8% on a Y-o-Y basis and grew by 4% on a quarter-on-quarter basis to INR66,964 crores. Our core AUM or we call the product that we are focusing on is micro finance gold, home, businesses and loan, it grew by around 7% Y-o-Y and 4% Q-on-Q, which is INR65,145 crores, forming around 97% of the total overall loan AUM.
There was one exception item, which we had reported in our financials, which is also elaborated further on Slide number 5. So, company had certain AIF investments, which were due to mature in June ’24, for which it preferred in-specie distribution of assets, so debentures of underlying companies in lieu of the AIF investment. Subsequently, these debentures were assigned to an ARC. The book value of the SRs with the same underlying assets as of September ’24 was INR586.5 crores.
The RBI Circular on December 19, 2023, on Investments in AIFs required a 100% provisioning of AIF investments if they are not liquidated within 30 days of the circular. To comply with the spirit of this circular, a provision equivalent to 100% of the book value of these SRs was made in this quarter, which caused an overall loss. However, this is an absolutely exceptional item, we do not expect this to recur and the same is disclosed henceforth and rightly as an exceptional item.
On the business and digital basis, our gross NPA stood under control at around 2.4% and net NPA around 1.1%, which is marginally up by 61 basis points and 3 basis points, respectively, compared to the same period last year. Our ECL provision gives an overall provision coverage on the NPA assets at 136%. The assigned loan book stands at around INR13,948 crores, down by 24% Y-o-Y and 5% Q-on-Q.
Besides these, there are co-lending assets of INR8,489 crores, which is again down by 20%. All of this is led by because of the gold embargo was now being in place for the last six months. Quarterly average cost of borrowing marginally increased by 12 basis points Y-o-Y to around 9.15%. From a liquidity perspective, during the quarter, we raised around INR3,216 crores through term loan, bonds, commercial papers, including INR1,082 crores was raised through d-assignments of our loans.
From a cash and cash equivalent perspective, we hold around INR3,882 crores, which is adequate to meet our near-term liabilities. And we are looking for, as Nirmal mentioned, further mobilization of liquidity to boost our growth since embargo has been lifted. We are positive on ALM on across all our buckets. And our net gearing with the inclusion of capital that we raised in quarter one of around INR1,272 crores is comfortably placed around 2.7.
Our annualized ROE stands around 5.3% negative, while ROA was 0.7 negative. As of 30 September, our capital adequacy with the inclusion of capital stands at around 26.3%. In the housing finance portion, it’s 49% [Phonetic] and for Samasta NBFCs, it’s around 30.5%. So across all the entities, the capital adequacy is way above the minimum 15% requirement from a regulatory perspective.
So that’s all ladies and gentlemen. I’ll now open the floor for question-and-answers. Yes.
Questions and Answers:
Operator
Sure. Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from Dhaval from DSP Please go ahead.
Dhaval Gada
Yeah. Hi. Thanks for the opportunity. Just two questions. One is relating to this AIF provision that we have created. When do we expect the writeback? Any thoughts around that would be useful.
And the second question was relating to the gold book. Now that the ban has been lifted, how do we see the ramp up and when do we get back to our original size? Like, do we have a timeframe and strategy around that? Some color around that would be useful.
Nirmal Jain
Thanks. So, AIF recovery will take about — all the full recovery of the underlying assets as they get monetized, maybe about two years to three years. And gold loan, I mean, it’s very difficult to say, but I think by March quarter end, we should be back to where we were a year before. So, that is what my estimate will be. But I think nobody can really see how things will pan out from here in terms of market. But that’s what my guess would be.
Dhaval Gada
And Nirmal, just on the gold business comeback, so this — like what are the one or two big changes that we are sort of doing in terms of like the absolute quantum delta in the next few quarters that you expect is quite material. So, what are the one or two big changes? I have already seen rate, but any other points that you want to highlight to sort of see how we get back the lost business?
Nirmal Jain
So, I think we aren’t doing anything extraordinary in terms of being aggressive or whatever. We are just — customers are coming back. There’s a relationship with the customers that we have for many customers for more than 10 years. And as the term, as the loan, wherever they have taken the loan, that tenure gets over, then we see that the customers in many cases, they prefer to come back to us. And secondly, another big thing that has happened in the industry is that now I think it has become completely cashless, more or less it has become completely digital, which is easier from a long-term perspective and good for industry going forward.
And what we realized is that earlier there was a fear that if we move away from cash and customers go back to money lenders, but I think customers have digital general account or UPI. Sometimes you have to educate and make sure that the activation happens. But even the competition has gotten away from cash. So that is, I think, one healthy practice. And I think more or less the industry is now becoming fully compliant. And so that also is a good development, I would say. And given that the gold prices are firm, I think there is a demand at the ground level in the economy. Many of our customers are small businesses again. So, we see that there should not be — there will be good traction going forward in next few months.
Dhaval Gada
Sure. And just last question on the MFI business. How do you think the credit cost is likely to move in the next, like, couple of quarters and how are we looking to navigate this cycle? Any color on that would be useful.
Nirmal Jain
Yeah. I think Venkatesh who is the CEO of our Microfinance, he’ll take this question.
Venkatesh N
Yeah. I mean, if you look at most of the threats, which spanned out in quarter two, we are seeing some mild improvement in quarter three. I mean, it’s still early days for us in the month of October. Given the whole thing, if you look at — given 65% of our overall customers who borrow are agri or agri, allied and their income levels have — given the monsoons have done well, they will not see a dip and we see that these things are stabilizing. And also our fresh lending, if you look at it, we introduced our guard rails even much before MFIN bought about it. We have got it in, I think. So, our new book is still doing well. The stress is only with the older thing, which will also ease out and by the quarter three and quarter four will look much better.
Dhaval Gada
Got it. Thanks. All the best.
Operator
Thank you. The next question is from Abhijit Tibriwal from Motilal Oswal. Please go ahead.
Abhijit Tibrewal
Yeah. Good afternoon, everyone. Thank you for taking my question. Just again circling back to the gold loan business, we’ve also seen a management change in our gold loan business where Mr. Saurabh Kumar has moved to a Group role now. So, are we now looking to appoint someone internally to lead this business? Or are we looking for an external hire?
Also, I mean, earlier in the question when Dhaval asked about your outlook on gold loan business, we shared that we’re looking for normalcy to come back by March quarter and maybe go back to where we used to be prior to the bank. But are we working with some gold loan growth targets now in mind if not for this year at least from next year onwards? That is my first question.
Nirmal Jain
No, sorry, what is the second question? Next year onwards, what do you want to do? Sorry, what is the question about?
Abhijit Tibrewal
So the question is, while we said that by March quarter end, we are expecting it — expecting that we will be where we used to be prior to the ban in the gold lending business, not in terms of loan book but in terms of momentum. So, I mean, if not for this year at least from next year onwards, are we thinking about how we want to grow in terms of some loan growth targets for the gold loan business?
Nirmal Jain
Okay. So firstly, the management changes are in normal course of the business. So, people, I mean, they are for long term. So, there’s nothing more than that to read into it. In terms of hiring internally or externally, these things are — unless they are done, it’s very difficult to make a statement on this because we have quite a few talent available inside also. But obviously, they are doing their jobs. And at the same time, we also understand our management team. And actually, normally all our businesses, we prefer a cross-breed of talent where we try to take it from a few very good players in the industry so that we get the best practices from multiple players. So, these are things which are very difficult to make a futuristic or a forward-looking statement because we have a very good HR team and NRC, which is Nomination and Remuneration Committee, so they look at all the senior management and take a call of that.
Second thing is how do we look at the group next year? So, one is that you would have noticed, when we say digital loans, this is our business loan and this is the MSME loan. And you know that gold loan is, in a way, many of our customers are MSME. So in terms of when we look at our standalone company, we’ll try and diversify it a little bit more. So the loan against property, which is the secured business loan and unsecured business loan, I mean, that business probably grow faster. Next year’s growth will depend on a number of factors, including gold prices as well as the economy and the economic activity. So, I’m not — we don’t want to make any guidance or a forward-looking statement, but that all depends on the industry and the economy. But in terms of strategy for a particular product, yes, we’ll grow business loan. I mean, given the small base and investment that we made in last six months, nine months, that is expected to grow faster. But that, again, as I said depends on the macro environment.
Abhijit Tibrewal
Got it. Thanks. Second question that I had was for Venkatesh sir. Sir, I mean, while you said that early days seeing mild improvement in third quarter and the fact that we already implemented those guardrails that MFIN recently came out, just trying to understand, I mean, in your assessment, I mean, what could likely credit costs be for the MFI business for this full year given that, I mean, you already saw Q2 was elevated? And when we speak to other your NBFC MFI peers, no one is really kind of giving that sense that things have already peaked out in the MFI space. So, how are you thinking about the MFI business?
Venkatesh N
Yeah. See, earlier when I answered, I said it is early signs of some kind of a stabilization. I didn’t say it is peaked out or something. But in terms of the credit cost, if you look at it, we should be hovering anywhere between around 3.75% to 4% kind of a thing for this year.
Abhijit Tibrewal
Got it. Got it. And sir, last question that I had, I mean, some of it is data keeping and some of this is on the credit costs. One is, I mean, this time around, if I go through our P&L on the other income side, some of the items like net gain on fair value changes and the assignment income that you report, they are higher. So just trying to understand, I mean, are they going to be at these levels or there is something lumpy out there?
And also on the assignment income side, have we done any assignments after the gold loan ban was lifted? It’s one thing that I wanted to understand. The other thing is, if I look at credit costs for this quarter, credit costs even in our standalone entity was elevated. So, was just trying to understand was it just some residual cleanup on the gold loan side that we did or this was predominantly coming from our CRE business?
Nirmal Jain
I think you have two questions. One was about the assignment. So the assignment was done in housing finance because home loan business has been continuing. And given our strategy where we know, we believe in maybe a 40% of off books. So, that can be either by way of a assignment or co-lending. So, assignment transactions you can expect more or less every quarter. And second coming to the lumpy payment, yes, there is one that the MSME — I mean, most significant part of it has been sold and that profit has been moved in [ January ]. It was about INR80 crores of funding. So, I think that is not recurring. But from the treasury, we have something or other, but there are opportunities. But there is one lumpy item in the fair value gain. You would recall we had MSME shares, which we sold in last quarter.
Abhijit Tibrewal
Yes, sir. Yes. I recall that. And sir, again the second question was credit costs in the standalone entity also appear a little elevated. Was it some cleanup that you have done on the gold loan side, or was it predominantly coming from the CRE portfolio?
Nirmal Jain
No, it’s coming from MSME actually. And MSME book is also growing. So, we increased our provision and we have a fairly conservative provisioning policy. So the increase in the LLC, in the standalone is primarily because of MSME. MSME was digital loans plus LAP deposits.
Abhijit Tibrewal
Got it. And sir, just one — just trying to squeeze in one last question. Sir, I mean, given how the environment is, everyone is talking about broad-based stress that they’re seeing in unsecured segments. Despite that, I mean, our guidance that we’ll continue to grow digital loans, unsecured business loans, I mean, how are we looking at it, I mean, in an environment like this?
Nirmal Jain
Well, very good question. So the worry about unsecured loan is more on the personal loan and consumer loan, which is buy now, pay later or a personal loan where many times salaried people because they offer too many loans and they get over-leveraged. Our focus of digital loan as well as unsecured loan is entirely a business loan. And there are two advantages that we have over, say, a personal loan or a unsecured — personal loan business. One is these are covered by insurance. So, I think government has two very good insurance schemes, CGFMU and CGTMSE. So the one covers loan less than INR10 lakh and the other one covers loan above INR10 lakh. We applied, and we have got the approval now. So now onwards, I think we’ll be able to — the approval has recently come. I mean, there’s a process and we are able to comply with it. So from this time onward, we’ll be able to take advantage of that also.
Secondly, all the banks because on their own, they find it difficult to achieve the MUDRA targets or MSME segment of the priority sector lending. So, we are seeing very good response from the banks to partner with these loans. And also the risk is priced in. So, there will be losses, which can go up to in a bad cycle up to 5%, 6%, but then the interest rate also is around 20% to 24%. So, our strategy basically is to make sure that we are protected by insurance cover. Of course, our credit quality also, we can be strict and not that we don’t underwrite anything but we try to leverage our distribution network to source business. And third is that the bank partnership model where risk along with the benefit of priority sector is also transferred to bank.
Abhijit Tibrewal
Got it. Sir, this is very, very useful. Thank you very much, and wish you and your team the very best.
Operator
Thank you. The next question is from Shubhranshu Mishra from PhillipCapital. Please go ahead.
Shubhranshu Mishra
Hi, Nirmal. Hi, Kapish. So two questions. The first one is what is the level of provisions and write-offs you are going to see in the microfinance business going forward in the next couple of quarters. Second is on the gold loans, are we seeing any customers? Or what is the proportion of customers who are coming up and pledging their gold in order to pay up for their unsecured exposure? Thanks.
Nirmal Jain
So, I think Venkatesh spoke about around 4% — 3% to 4% of LLP in this year in terms of — which is, I think the first two quarters we have done — what is the provision that we had taken? INR300 crores already in microfinance and the book is around INR12,000 odd crores. So maybe INR12,000?
Venkatesh N
INR12,000 crores. Microfinance.
Nirmal Jain
And the total MFI? INR12,400 crores. So maybe in terms of the current expectation is another INR200 crores in next two quarters broadly. [Indecipherable].
Shubhranshu Mishra
What would be the write-off?
Nirmal Jain
Home loan to retail, we have not seen that kind of tendency. If somebody’s doing it and not disclosing is a different thing because there’s not something that will normally capture in the stated end use. But my gut feel from talking to people, I don’t think that’s — that may be exceptional. That is not the case.
Shubhranshu Mishra
Understood. And what has been the write-off in microfinance in the first two quarters and what is the write-off we are expecting in the next two to three quarters?
Nirmal Jain
So, I think the write-offs and loan loss provisions put together will be one this thing. So what are the — okay, if you want to have some of the write-offs is INR107 crores and for the full year, how much? I think two quarters, we have taken the total loan losses and provisions is INR300 crores. Write-offs is around INR200 odd crores and the overall write-offs is INR100 crores in provision.
Shubhranshu Mishra
What is the write-offs we are expecting in the next two quarters, three quarters?
Nirmal Jain
I think — Venkatesh, do you have the estimates with you or..?
Venkatesh N
See, if you look at in the last, it will be — we are trying to minimize things. I mean, if you look at in the last quarter, we were able to figure out what it could scale up to now. We have a collection mechanism where we will be working on — even there’ll be a lot of pullback terms of the 90 plus and the provisions we have made and even the write-offs we have taken. So, we don’t expect it to go drastically above from what we have already done in the first two quarters.
Shubhranshu Mishra
Understood.
Nirmal Jain
Incrementally, I think, if you see 4% as a loan losses provision. Write-off/provisions put together can be another INR200 crores in next two quarters.
Venkatesh N
Yeah, that should be enough.
Nirmal Jain
Unless — based on the current estimate. But as it being a forward-looking statement and how the industry evolves is one has to watch.
Shubhranshu Mishra
Understood. This is very helpful. Best of luck for ensuing quarters.
Nirmal Jain
Thank you.
Operator
Thank you. Next question is from Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.
Vivek Ramakrishnan
Thank you. It’s a continuing question with other questions. So, let me start with microfinance. Venkatesh, in microfinance when you say this stability, the PAR 0 going to PAR30, PAR30 going higher, as the flow start — as the momentum of flows been improving over the last few quarters, do you see any improvement from that? Another way of asking the question is whatever is there you’re going to be writing it off, but the new flow is not going to be that significant.
Venkatesh N
See, Vivek, if you look at the flows have actually not completely stopped. I mean, if you look at quarter two was the worst quarter, I mean, we have gone through. What I mentioned earlier was given that we have the October month is a lot of holiday things, we are seeing slight stabilization in terms of the flow. So, I mean, we will be at — post all the festivals getting done, so that is when the stability of the sector would be seen. So, we are seeing post somewhere around the November 15 kind of a thing where the stability we will be able to see. As of now, the collection efficiencies are slightly improved from what we saw in the month of September.
Vivek Ramakrishnan
Excellent. The second question is on the digital loan or the unsecured SME loan. Nirmal, you had mentioned about credit loss guarantees, which are there. How much does it cover in the sense that what is the typical SME loan loss in an unsecured portfolio — in your portfolio that you’re estimating and then what will be the overlay of insurance that will reduce it through going forward?
Nirmal Jain
So Vivek, it’s quite complicated scheme and I’ll try and briefly explain it to you. So there are two schemes. One above INR10 lakh rupees and one less than INR10 lakh. So above INR10 lakh, they cover only twice the premium. So, 1% is the premium. So maximum they can cover is 2%. So, broadly 1% of losses can be covered by that scheme, above INR10 lakh. You get it? Less than INR10 lakh, what they do is you can cover 15% of your portfolio in which 3% of losses will be borne by the originator like us — by the company. And out of the remaining losses, 75% is given by the insurance. So to put numbers in perspective, if you have INR1,000 crores of portfolio, you can cover maximum INR150 crores. So, that is good enough because normally one wouldn’t expect more than 15% of losses. And out of that, 3% which is about INR4.5 crores half is borne by you and say, out of the remaining losses, 75% they will pay you. So, roughly INR109 crores can come from them if you have a INR1,000 crores portfolio and your losses are maximum up to, say, 15%. But this is how the numbers work. I mean, you got it? For the less than INR10 lakh.
Vivek Ramakrishnan
Yeah. Perfect. Thank you. This is very useful.
Nirmal Jain
It maybe around 90 basis points to 100 basis points. That is for you to say.
Vivek Ramakrishnan
Okay. Yeah. Thank you. That was very useful.
Nirmal Jain
So in summary, above INR10 lakh, you should try and restrict your losses to 2%. Otherwise — and there also it is like a 1% premium, 1% subsidy. In less than INR10 lakh, it can be significantly better. But of course, they will 75%. The rest 35%, still you have to bear and 35% over and above first 3% of losses.
Vivek Ramakrishnan
Okay. Got it. Thank you, and seasons greetings to all of you.
Operator
Thank you. Next question is from Yash Dantewadia from Dante Equity Capital. Please go ahead.
Yash Dantewadia
Hi. Am I audible? Hello?
Nirmal Jain
Yeah. Yeah. Go ahead.
Yash Dantewadia
Yeah. So, I wanted to know now on the gold loan side going forward, since we have a lot of capital, right, and we’ve raised capital through rights issue, etc., what I want to understand is are we going to focus on gold loan itself? Or are we going to focus on co-lending? Because right now we have no reward to focus on co-lending because we have surplus capital and we want to get profitability and co-lending is not very profitable, right? And can you put some light on that whole area, how you’re going to go forward?
Nirmal Jain
So, right now, our capital adequacy is good. But in three months to six months as we get back to the earlier level, it will get back to those, again, the older level. So as a strategy, nothing changes because we continue to focus on both co-lending as well as our own loan book in a ratio of 60:40 that we had historically for the entire portfolio.
Yash Dantewadia
But we should be focusing on gold loans itself, right? Why co-lending?
Nirmal Jain
Why co-lending? It’s liquidity and the use of capital that allows you to grow without diluting capital. So at this point in time, what you are saying is right, that this quarter, next quarter, we can see, that we can do our own book. But we want our capital adequacy also to be 15% requirement, but we want to be around 20% or more just as a margin of safety and that is where co-lending helps.
Yash Dantewadia
See, the reason I raised this point is your microfinance is clearly slowing down and I don’t see microfinance recovering for the next six months to eight months. So definitely, on the microfinance end, you’re not going to be able to increase the book size. Home loan size, that is going to grow at a steady rate of 15% to 20% from what I’m able to see. Now since the microfinance part is not growing and you don’t want to grow your unsecured book, you’re obviously going to focus on growing your secured book, which is the gold finance book at a much higher rate. So, you don’t need to co-lend at least for the six, seven months, right, because co-lending is — you’re completely right. I get the point on the capital side, but co-lending is not very profitable. So anyways, that was just one point that I wanted to raise.
Nirmal Jain
What you’re saying is right that now, I think the focus is more on the secured where gold loan as well as LAP is another product, which is also a secured product as a part of business growth.
Yash Dantewadia
SME — sorry, please go ahead.
Nirmal Jain
See, co-lending is a long-term strategy because see what happens is, if you go like our — what it allows you to leverage. So even with a reasonable ROA, your ROE can be significantly higher. But for the time being maybe like we have to see for next one or two quarters and then we will look at this strategy.
Yash Dantewadia
You’re completely right. Co-lending works. You’ve been doing it. You’ve been growing at a 30%, 35% CAGR in the gold loan space.
Nirmal Jain
Absolutely right. Then again it becomes a pace of growth. So maybe for the time being, we have to watch for next one or two quarters and then rework on the strategy.
Yash Dantewadia
Exactly, exactly. So, I was just saying at least for the first six months, I think you can focus on gold loans and take it into your own books and then maybe focus on co-lending as and when the old book is built back up. That is one thing I wanted to point out because clearly unsecured space is kind of wobbly for the next six months to nine months at least till the whole microfinance cycle plays out. So, that was point number one.
Now, can you talk more about our focus on the MSME portion? How are we planning? Are we planning to grow that at a significant pace in secured MSME, I’m talking about? How are we focusing on that whole segment? And also on the housing loan front, there have been talks about an IPO for value unlocking. I think in the last interview that I watched, you said something about two years sort of timeline. So, could you throw some light on that too?
Nirmal Jain
Okay. So MSME piece — so because we have a very large distribution network and as we roll out a product — on a small base, growth can be good. But this is something which is — because we bought 2,700 branches for gold loans and if you add up all our branches, then we have more than 4,000 branches including microfinance as a product. So the loan against property is a product, which our branches can do. And in the six months or six and a half months of embargo on gold loan, we’ve been training our people to do the unsecured as well as secured business. Now, unsecured business as a business, although unsecured, basically obviously evokes negative emotion about risk and quality of assets. But as I said that this is something, which is priority sector lending, which is what government is also pushing banks to achieve the target because that’s for the economic growth.
And just to give you perspective that despite so much of push on MSME, in India, MSME contributes 30% of GDP. In China and South Korea where the countries have grown very rapidly in last two to three decades, it’s 50% to 60% of the economy. So, MSME has a long way to go. And the only way MSME can grow is by availability of credit and distribution of credit and the 8,500 MSMEs. So the number is so large, enormous that the banking system alone cannot achieve the target or this objective or mission. So, we work in partnership and that’s why government is supporting by way of insurance schemes or by way of targets of private sector lending. What we have to do is that we have to partner with the banks and make sure that we do what we are good at. And then banks basically also — we help banks also achieve the targets and make sure that the risk is contained within the price that we charge. So that is about MSME.
What was the second question about?
Yash Dantewadia
About listing. About listing of..
Nirmal Jain
Yeah. Listing is again — sorry, so I don’t think we’ll do an IPO, Yash, because — unlikely. I mean, I can’t say we will not do or do because this is Board’s side. But we have an investor in our housing finance company and every investor basically needed some kind of option to exit or liquidate. But there’s no rush or no hurry. But when we do this — whatever we have discussed, as a preferred option what we have done for the group is demerger of the businesses, so that without any further dilution or without any change in the economic interest of various shareholders, the companies get separately listed. That has an advantage that it can attract different types of investors because there are some investors who are keen to invest in microfinance who are more oriented towards social goal. There are investors who are very keen on housing finance and then there are investors who are gold loans and other businesses. But I think there is a process and the process takes time. At this point in time, nothing has yet been discussed or approved by the Board. And whenever that happens, obviously, we will let everybody know.
Yash Dantewadia
Yeah. But, see, after the Bajaj Housing sort of listing, it’s very clear that HFCs that are able to grow their book at a 20% sort of run rate and that have stable asset quality get a very decent price to book. I’m pretty sure that you have more input than me in this particular thing. So, I hope you do the best for shareholders. Thank you for your time. Thank you for taking my question.
Nirmal Jain
Yes. Yes, we’ll do it at right time. Thank you.
Operator
Thank you. Next question is from Anusha Raheja from Dalal & Broacha. Please go ahead.
Anusha Raheja
Is it audible?
Nirmal Jain
Yes.
Anusha Raheja
Sir, firstly on the gold loan side, I think we had — if you can just take us to how has been the walk-ins of recently versus six months prior? And the competition has also intensified. You would have also taken away some of your market share. So in that sense, how do we see growth in this backdrop?
Nirmal Jain
Ms. Anusha, what is your question, please?
Venkatesh N
Walk-ins.
Nirmal Jain
Walk-ins. So, we have database of customers that were our customers and walk-ins are also there. And as you know, people get to know that we have resumed business as usual. So, there’s a flow of customers. So, we have seen a very healthy trend there, Anusha, and our people are really motivated and committed to get back the market share and obviously the profitability and everything depends on that. So the trend is positive.
Anusha Raheja
Okay. And the Stage-2 assets, 31 to 90 DPD, there has been a significant rise across all the loan segments and the levels are higher than what it was in Q1 as well. So, what is causing such a significant rise?
Nirmal Jain
Okay. So in gold loan, I think because we just started almost towards the end of the quarter. So, we wouldn’t force customer to liquidate the loan and obviously, they are also waiting for it. So if you see gold loan typically, these are small customers INR50,000, INR60,000 loan. They tend to pay towards just before 90 days to avoid auction or threat of liquidation. Then the construction finance, they are lumpy businesses with one of the loan basically not being paid or delayed by more than 30 days despite the number. And I think other businesses, the trend would be similar if you really look at 31 days to 90 days of the last quarter.
Anusha Raheja
And if you can just tell us what could be the blended credit…
Nirmal Jain
We had a 6%, that’s become 7%. And obviously, there is an increase in the gold loan part of it, which is a build of preceding gold loan. There is a marginal — the 6% has been cut to 7% on the whole and we are talking about straight to 31 to 90.
Anusha Raheja
Okay. And what could be blended credit costs that we can factor in for — on the overall consol book for FY ’25?
Nirmal Jain
Microfinance has moved up more than what we had expected. Other businesses remain more or less similar. So, what we are talking about 2% may become 2.5% on the whole.
Anusha Raheja
Okay. Any number to put up there, including this MFI credit cost on consol book?
Nirmal Jain
MFI consol book is around 2% of the loan assets on a steady-state basis.
Anusha Raheja
Okay. And also on this…
Nirmal Jain
There again, there is a difference in all segments of the business as you know. So, gold loan is slightly higher 2.4%. But we expect to go below 1% as the business is fully rolled out properly. And the other trends are more or less. So the business loan will remain around 3%. So, I mean, we may bring it down to 2%, 2.5% over a period of time. Yeah. Go ahead.
Anusha Raheja
Yeah. And if you can just take us through growth in across all segments. Like, you said that in gold loans, we would see by March 25, the growth will revive back and MFI is likely to see a consolidation. Some color on the growth for the home loans and digital loans and LAP loans. How do we see that segment growing in FY ’25 and in the medium term?
Nirmal Jain
Monu? Is Monu online?
Monu Ratra
Hello? Yeah. Okay, Nirmal. You go ahead, please.
Nirmal Jain
Monu, I think she’s asking for the growth in home loan segment.
Monu Ratra
Yeah. So we are seeing — as a home finance as a whole, we are expecting about the AUM growth of about 17% to 18% for this year. And all the segments would move in the same tandem. We can expect home loan about 8%, maybe a couple of percentage more, about 20% growth in home loan. And the other part of the business should be about 16% to 18%. That’s what we expect in the housing finance business.
Nirmal Jain
Okay. Other business, I think we’ve already spoken, Anusha.
Anusha Raheja
Okay.
Operator
Thank you. Next question is from Mr. Shikhar Mundra from Vivog Commercial Limited. Please go ahead.
Shikhar Mundra
Hi. Just wanted more clarity on this exceptional item. So where were these AIF investments exactly made and what is the reason for them not being liquidated?
Nirmal Jain
Sorry? AI investment was made in June 21 and it was to mature on 1 June, ’24. So in the month of March — okay. The circular of RBI came on 19 December, giving 30 days to either liquidate or make 100% provision for the same, to liquidate in the 30 days. But what happened that in the month of March when we got in in-specie distribution, then those debentures that we got in our book were also delinquent because they were delinquent in the most of them. Most of them, not entirely. So, that thing is what we sold to ARC. And I know normally all the resolution mechanism is through ARC, which is — and basically in the ARC, normally, we also invest in the security receipt. So the underlying quarter being the same, what we have tried to be is that we being conservative and follow the regulation not only in the letter, but also in-specie while the asset have changed the form of — instead of AIF, it will become security receipt. But otherwise, product is the same. So, we decided to make up for two years.
Shikhar Mundra
And when can we…
Nirmal Jain
This is a one-time non-cash item.
Shikhar Mundra
Sorry?
Nirmal Jain
This is one-time exceptional provision that we are making, and this does not have any implications in cash profits or anything which is — so this is just a provision.
Shikhar Mundra
Can we expect the write-backs from this?
Nirmal Jain
I think this question asked — maybe two to three years will take to realize all of them.
Shikhar Mundra
Thank you.
Operator
Thank you. Next question is from Kriti Tripathi from NVS Brokerage. Please go ahead.
Kriti Tripathi
Hi, sir. So yeah, in continuation with the AIF question just mentioned, I wanted to know that how much was the amount invested by ourselves in the company in the AIF? Apart from that, the initial amount and then now our share of profit and loss? What is the difference between that? So can you explain on that?
Venkatesh N
So, [Indecipherable] accounts, anything? INR900 crores, INR1000 crores, out of which some repeat business happen. INR900 crores, INR1,000 crores.
Nirmal Jain
And then when we got the [Indecipherable] transfer, it was INR675 crores, but I think there was a write-down, then the ARC took it. The ARC [Indecipherable], then there was a option bidding process. So then — actually so, what we hold from that AIF was INR586.5 crores as at March NBFCs. So, there were lots of transitions in this. So, I’m giving you a broad estimate that it started close to INR900 crores to INR1,000 crores, but now it’s INR586 crores.
Kriti Tripathi
So that’s basically…
Nirmal Jain
Increments, as well as some write-downs put together.
Kriti Tripathi
Okay. Okay, sir. Thank you.
Operator
Thank you. Next question is from Kamal Mulchandani from Investec Capital Services. Please go ahead.
Kamal Mulchandani
Hello, sir. Thank you for the opportunity. I had a couple of questions regarding the gold business. Firstly, I wanted to know that have we reduced any interest rate on gold loans recently? Additionally wanted to understand how are the recent trends post the lifting of the RBI ban and if you could just brief upon the strategy around how to scale up the gold business back to where it was as earlier? I’m sorry if I may have missed the strategy-related part. Thanks.
Nirmal Jain
So, we have not resorted to cut short price competition to get the assets back. But we have a — so there are various multiple schemes that we run. Like suppose, you have a INR0.99 [Phonetic], 12% interest where it has to be a monthly interest income and now that we are in a slightly lower LPV than the other schemes. So initially, we expect the traction to be more in a lower yielding product that we have. But we are not resolving to any cut short price to get the assets back. Secondly, our strategy is very simple to focus on the customers. So, we are not really — at this point in time, we don’t see the need to be very aggressive or go out of way to focus on to get — customers are coming back and as their blows mature and elsewhere, we are seeing good traction of customers getting back to us where they were earlier.
Kamal Mulchandani
Okay. Okay. And any initial trends which you are seeing, like it’s a very small period? But how has been the disbursement trends in October?
Nirmal Jain
It’s very good, very positive. So in about a month, just when we started, obviously, it takes time to get back to the momentum. So, our loan book reserve INR10,000 crores. Has gone up to INR12,000.
Kamal Mulchandani
Okay. Perfect. Thank you so much, sir.
Operator
Thank you. Next question is from Raghav Garg from Ambit Capital. Please go ahead.
Raghav Garg
Hi. Thanks for the opportunity. Just one very small question. In the standalone business, is there any overlap between the digital gold loan customers and — sorry, the digital loan customers and the gold loan customers?
Nirmal Jain
Which customer? Digital loan and gold loan customer, all that is very minimal. I would say maybe less than 1%.
Raghav Garg
Okay. And another question is, so when I look at Slide number 12, right, which has stage-wise assets, there the digital loan assets is about INR6,500 crores. Whereas on Slide 18, the digital AUM is about INR5,400 crores. So where is the difference in which entity? I’m just trying to reconcile these two numbers. Can you help?
Nirmal Jain
INR5,400 crores is on Slide 11. Where is INR6,500 crores?
Raghav Garg
No. So on Slide number 12, the number is INR6,500 crores. And on Slide number 18, the number is INR5,400 crores.
Nirmal Jain
Just one minute. Hello?
Raghav Garg
Yeah.
Nirmal Jain
Can you hear me?
Raghav Garg
Yeah, I can hear you.
Nirmal Jain
So, there is some loans, which are sourced by Samasta Microfinance and they are booked in the parent company. So, that is a difference. So the way the individual loans which are booked through Samasta for micro lap, that is where I think there will be a reconciliation, which I’ll tell you where. Yeah. So if you go back — go to Slide number 35. Home equity, which is LAP secured, which is originated by Samasta but booked in NBFCD
Raghav Garg
Understood. Okay. Thanks. That’s all from my side.
Nirmal Jain
Yeah, I think maybe from the next presentation, we will make it little more clear in terms of how we classify and then show that.
Operator
Thank you. Next question is from Rishikesh from RoboCap. Please go ahead.
Rishikesh Oza
Hello. Am I audible?
Operator
Yes, sir. Please go ahead.
Nirmal Jain
Yes.
Rishikesh Oza
Yeah. Thank you for the opportunity. Firstly, on gold loan, so if I see NP, we were around INR20,000 crores, INR23,000 crores of loan book. Do we have any internal targets to get there again and by when?
Nirmal Jain
No, we don’t have any target as such. But as the business goes, we’ll get there in some time. It won’t take too long.
Rishikesh Oza
Okay. And how do you see the growth in our LAP book going ahead?
Nirmal Jain
So, LAP book had two components. One was an old LAP book, which was of a larger ticket size. So, that basically — obviously, that is tapering off. So when you see the overall LAP book, there’s only 1% growth. But the normal LAP book that we are continuing, which is a smaller ticket size is growing heavily. I think Monu said that is about 17%, 18% is the trend there.
Rishikesh Oza
Okay. So, are we expecting this to grow by 17%, 18% going ahead?
Nirmal Jain
So the overall reported LAP has the older LAP book, which is larger ticket which we discontinued. So what growth you see here will be lower. Not so much, but maybe slightly little lower.
Rishikesh Oza
Okay. And just to come again on gold loan, what growth rate are we expecting going ahead?
Nirmal Jain
No, I think, again, maybe everybody is very curious about this, but unfortunately, I’m not in a position to give any forward-looking guidance on this. Only thing is that we’ll continue to grow at a steady pace as our customers come back. And because we have a distribution network and base of customers, we do not think that it will take too long to get back what our loan assets were before the ban. But still, I can’t point — put a finger and say this is the timeframe. What we know is that we want to make sure that customers are serviced well. No compromises on the compliance and on the risk management and at whatever pace we can grow the business, that should be healthy growth. That is more important for us.
Rishikesh Oza
Got it. No problem. Thank you very much.
Nirmal Jain
Thank you.
Operator
Thank you. Next question is from Shweta D from Elara. Please go ahead.
Shweta Daptardar
Thank you, sir, for the opportunity. Sir, you actually partially answered my question. But nonetheless, so in light of regulatory forbearance and RBI calling out on interest rates, so do we see repricing of our assets on microfinance side on the lower side? And alternatively, I think you answered this. On the gold loan side, are we going to stick to competitive rates because we have seen slight drop in your yield. So in quest of growing the gold loan book, are we looking at keeping the rates competitive on the gold loan front? Thank you.
Nirmal Jain
So on the first point of interest, no, if you see Slide 40, then we have implemented the risk-based pricing and that is what actually even RBI is looking at. And we did not have any predatory pricing in any of our businesses. So those 35%, 40%, 45% rate are not for any of our businesses. So, we are very conscious about it. And also we have a Board approved policy for interest rate cap. So, that is about the higher interest rate size.
Then your second part of question is on the lower interest rate to be competitive. As I said that the customers when they come back, the early customers are more — the flow will be in the lower price scheme. But there, the requirements like the SCB are more conservative and [Indecipherable]. So the yield may fall a little bit. But as I said that we are not getting into any cut short competition. So there won’t be a dramatic impact. But yes, marginal tapering off is there in this quarter, next quarter for sure.
Shweta Daptardar
Okay. Sir, just coming back to the MFI side. So, I didn’t imply U series [Phonetic] rates or something which you’re not confirming with the RBI norms. All I meant was, are we looking at recalibration in interest rates further on our MFI thing?
Venkatesh N
We have already introduced, as Nirmal pointed out the risk-based pricing is already introduced. So, this is with the guidance with what RBI asked us to do. So, that’s already in force as we speak.
Shweta Daptardar
Sure, that helps. Thank you.
Venkatesh N
Thank you.
Operator
Thank you. The next question is from Navneet Baya [Phonetic], who’s an Individual Investor. Please go ahead.
Navneet Baya
Hi, sir. I wanted some clarity on your security receipts portfolio. So in your Slide 23, you’ve mentioned that your outstanding security receipts are about INR3,600 crores against which you have a provision of INR612 crores. So the INR3,000 crores remaining is that also at risk? Why aren’t we providing against those?
Nirmal Jain
So, securities receipts accounting is done based on the accounting principles. So, I know there’s a fair value and based on that, you have to make sure that they’re valued. So given access to it, just to make sure that RBI’s circular complies with the letter. But the other securities receipts are good and in terms of their expectations — on the whole, our portfolio, we expect it to recover fully and we don’t see any need to basically provide for it. But on Slide 23, we’ve given more color on the portfolio of securities receipts. But we make sure that if there any risk or any expectation of a loss in deployed format, but we don’t expect any loss in the portfolio.
Navneet Baya
Okay. So of the INR3,600 crores, you’ve provided for INR586 crores. So, we are saying that the remaining INR3,000 crores, we are not expecting any credit costs also to occur in our….
Nirmal Jain
INR3,600 crores of portfolio that you have, I think that will recover fully along with some interest or whatever we should accrue to the ultimate borrower. That is what I expected.
Navneet Baya
Okay. Understand. So, no further charges is what we expect on the P&L. Do I understand that correctly?
Nirmal Jain
Yes, you’re right.
Navneet Baya
Okay. Fine. Thank you. That’s all I want to check.
Nirmal Jain
Thank you so much.
Operator
Thank you very much. That was the last question in queue. I would now like to hand the conference back to Mr. Kapish Jain for any closing comments.
Kapish Jain
Yeah. Thank you very much. Thanks a lot, ladies and gentlemen, for joining our quarter two earnings call. For any further queries, we are available. You can write to us at our Investor Relations email ID, or reach out to us separately and we’ll be more than happy to clarify things anything further from the results. Thank you.
Nirmal Jain
Thank you so much. Have a good day.
Operator
[Operator Closing Remarks]