Note: This is a preliminary transcript and may contain inaccuracies. It will be updated with a final, fully-reviewed version soon.
IIFL Finance Limited (NSE: IIFL) Q3 2026 Earnings Call dated Jan. 22, 2026
Corporate Participants:
Kapish Jain — Chief Financial Officer
Unidentified Speaker
Nirmal Jain — Founder and Managing Director
Girish Kousgi — Managing Director and CEO
Venkatesh N. — Managing Director, IIFL Samasta Finance Limited
Analysts:
Unidentified Participant
Unidentified Participant
Unidentified Participant
Unidentified Participant
Unidentified Participant
Abhijit Tibrewal — Analyst
Deepak Poddar — Analyst
Unidentified Participant
Unidentified Participant
Unidentified Participant
Unidentified Participant
Unidentified Participant
Abhishek — Analyst
Unidentified Participant
Anusha Raheja — Analyst
Unidentified Participant
Presentation:
Operator
Ladies and gentlemen, good day and welcome to IFL Finance Limited Q3FY26 earnings conference call. As a reminder, all participants line will be in listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call please please signal an operator by pressing Start then zero on your touchstone phone. Please note that this conference has been recorded. I now hand over the conference to management. Thank you.
And over to you sir.
Kapish Jain — Chief Financial Officer
Thank you very much. My heart is welcome to all who joined the call. Ladies and gentlemen, on this call today we are joined by Mr. Nirmal Jain, our founder and MD. We also have Mr. R. Venkataraman who is our co founder and also Mr. Girish Kauzgi who is the MD for housing finance MD and CEO for a housing finance company.
Unidentified Speaker
We
Kapish Jain — Chief Financial Officer
Also have Venkatesh who is the MD CEO for Samasta Microfinance. Through this call we’re going to run you through our performance for quarter three. And before we go into the details of our financial numbers, I hand over the call to Nirmal to give you a perspective on the entire macroeconomic situation and the company’s strategy going forward.
Nirmal Jain — Founder and Managing Director
Good evening everyone and thank you for joining the call. Before we get into our quarterly performance, I want to first address the income tax spatial audit under section 142202A. As this has clearly caused concern and anxiety in the market today. I understand that the term spatial audit can sound unsettling when taken out of context. So the direction under section 1422 is a procedural step in are ongoing income tax assessment for a multi year block period. After the search, there’s always a block assessment for six years together.
So this is not a finding, this is not an allegation and not an adjudication. Such procedural audits are not uncommon for large diversified financial companies with large transaction volumes and multi years of data and complex operating structures. This provision allows the income tax authorities to appoint an independent auditor to assist them with verification and reconciliation of data. The audit report is an input to the assessment process. It is not a conclusion. There is no tax demand, no penalty, no determination against the company pursuant to this direction and at this stage there’s no financial impact that can be ascertained and we’ll fully cooperate with the special auditor.
But again, I reiterate that there’s no impact on our operations, our capital positions or growth plan. With this clarification, let me turn briefly to the macro backdrop. While markets have seen some near term Volatility. The underlying Indian macro environment remains supportive with stable growth, comfortable liquidity and improving credit conditions and particularly in our core businesses of gold and mortgages. Now against this backdrop let me turn to what truly defines the quarter and our underlying trajectory.
Quarter 3 and 9 months FY26 reflect consistent execution of our strategy with strong growth, improving asset quality and materially strengthened balance sheet. Loan assets grew 9.1% quarter on quarter driven primarily by gold loan. Asset quality has improved across the board with significant reduction in GNPA from two point. What was that? 2.14 to 1.6% and also NNPA going below 1%. And you’ll also notice that stage two and stage three are still trending down indicating further improvement in asset quality going ahead.
Provision coverage is at 92% well above the regulatory requirement. So over the past few quarters we have consistently reset the portfolio exiting high risk segments such as digital, unsecured, msme, Microlab under HFC and select MFI geographies. This is now clearly visible in numbers. More resilient portfolio, lower volatility and better risk adjusted return. From financial standpoint of view we remain well placed. Our ROE is 2.1%, ROE has been moving up and 11.3%. Our consolidated capital efficacy is 27.7%, liquidity of over 9,400 crores, net gearing of just 3.6 times.
Our funding profile continues to diversify, cost of borrowings are trending down and our ALM is comfortable surplus across all buckets. Operationally our AI led risk governance and early warning system combined with digital network of 4800 branches servicing 4.6 million customers continue to be our core strength. And this trend is also reflected in S P International Rating Agency of reaffirming our rating and revising the outlook to positive. With this context we believe that the fundamentals of the business remain strong, stable and improving.
I’ll now hand over to our CFO Cappiz for granular details of our financial results. Thank you.
Kapish Jain — Chief Financial Officer
Thank you very much Nirmal. So ladies and gentlemen for the quarter the consolidated profit after tax before non Controlling interest was 501 crore which is up 20% quarter on quarter. We recorded pre provision operating profit of 1075 which is up 101% YoY and 4% quarter on quarter. For the quarter the consolidated AUM grew by 38% and 9% quarter on quarter at 98,336 being at the cusp of 1 lakh crore largely driven by Gold loan which crossed the pre embargo level at 43,432 supported by a healthy gross NP of 0.036.
If I further dissect the AUM, the leading core products of home gold, MSME loan and microfinance, they collectively grew by 46% and up 11% quarter on quarter to 93,767. Gold in particular grew by around 26% quarter on quarter and around 189% on a YoY basis. The core segment now collectively comprises of 95% of our total AUM. As Nirmal mentioned, our gross NPA touches around 1.6% and net NPA is around 0.8 which is down 82 basis points and 26 basis points respectively from the same period last year.
The company does maintain a cautious stand on the unsecured NMFI segments and clearly focusing on recovery and collection which has been showing good resilience and been performing well every single quarter. As we progress over the last few months with the implementation of the ECL, the provision coverage ratio stands at 92%. With our strategy to partner with banks and downsell our pristine assets, our assigned loan book stands at around 21,373 which is up 71% YoY and 15% on a quarter on quarter basis.
Besides this the CO lending assets stand at around 13,176 which is up 43% YoY and 11% quarter on quarter taking the aggregate off book at around 35% of IUM on a quarterly average cost of borrowing increased by around 8 basis points from yoy basis and decreased 14 by on a quarter basis to 9.24. To briefly update on our liquidity, our liquidity stands at around 7. Sorry we raised around 20,007 crore from term loan bonds commercial paper during the quarter and around 7,774 of our assets were assigned to various banks and our liquidity stands at around 9,433 crore, adequate enough to not just meet our near term liabilities but also adequate to support and fund our growth momentum which stands quite positive.
ALM as Nimble mentioned is positive across buckets and our net gearing stands around 3.6 while the 9 month ROE is what Nimble talked about 11.3. Analyzing the last quarter ROE, our ROE stands around 14.3 and ROE was at 2.5. Our basic earning per share stands at around 10.9 and book value as of 31st of December is around 306.85. Capital positions to be healthy with the off book strategy, the Capital adequacy at a consolidated basis stands at around 27.7. For individual companies, NBSC is around 18.9, HFC is 47.7 and Samast at 30%.
We did touch upon the revision and outlook from table to positive by S and P. We also declared an interim dividend, rupees four per share, which was approved by the board of directors and will be paid in due course. With this I come to the end of the session and leave the floor open for Q and A. Thank you very much.
Questions and Answers:
Operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Nishant from Kotak Institutional Equities. Please go ahead.
Unidentified Participant
Hi. Am I audible?
Nirmal Jain
Yes, yes, very much.
Unidentified Participant
Yeah. Sorry. No, so just, you know, before the questions on the. On the business, this tax audit, you know, this will be for, you know, which financial year or how many years and any, any sense in terms of how long this continues.
Nirmal Jain
So this, I mean, if you are aware, you must be aware that last February we had an income tax surge under section 129. So after the surge, there’s always a block assessment of six years. So this text audit is not a text audit, a special audit based on their findings during the search, which will be. Which will cover the block period of six months. This is supposed to get over in 60 days time.
Unidentified Participant
And this is for, I mean, like one financial year or what?
Nirmal Jain
No, this is on the certain areas. What they want to verify is for 6 finance for the block, block period. Income tax search has happened.
Unidentified Participant
So
Nirmal Jain
Ongoing process. This is the ongoing income tax assessment. So this is always for a block period. So wherever searches happen and the assessment. Happens for six years together.
Unidentified Participant
And
Nirmal Jain
For the block period that we have filed our income tax revised return in which, you know, we have paid another 1.29 crore of tax or something.
Unidentified Participant
And any specific items that you want to call out because of which the tax liability went up
Nirmal Jain
This 1.29 12. You are saying, I mean, it’s just a recomputation based on whatever basically for six years, you know.
Unidentified Participant
Oh, okay, okay, got it. Just on the business front, you know, I was looking at your secured loans and the standalone business, which has a ticket size of somewhere closer to 2 crores and you know, earns almost like a 14 IRR. So you know, any, any texture on who these customers are. Because you know, as we understand typically there is a linkage between risk profile, ticket size and IRRs. And for such a large ticket the IRR looks a little bit on the higher side. So just curious, who are these customers and what are these properties or some texture of the business would be helpful.
Nirmal Jain
So these are SMEs and these are priority sector lendings and these are from smaller towns. And in fact this is a new. So if you really remember our historical portfolio had 18, 19% yield. So we recalibrated our entire business portfolio. And so I think the average ticket size is not 2 crores, is it? Okay, this must be including the historical data also. Okay, so these are typically between 50 lakh to 1 crore rupees or maybe can go up to 2 crores also. And because they are from smaller towns and segments that we cater to through our branches, average Yield is around 13.6 to 14.
That’s what we are getting on a continuing ongoing basis. And till now in this portfolio we don’t have any delinquency as such.
Unidentified Participant
Got it. And the secured msme, that’s done from the housing company. What is the ticket size over there? Because I think that’s, that’s, that’s sort of missing in the presentation
Nirmal Jain
That secured. MSME ticket size is 14.1 lakh just on slide.
Unidentified Participant
I, I know it’s just, just missing. Anyway, I, I got it. And just final two questions. You know, any status update on the, on the srs, any timeline that you’re looking at for you know,
Nirmal Jain
Last quarter. If you see a slide number 17
Unidentified Participant
Then they
Nirmal Jain
Have fall from 3500 to 3000 in next year, 20, 26 calendar year, I think we’ll see significant drop. Maybe Most of these SRs will get reduced.
Unidentified Participant
Got it. And finally any plans on capital assurance at this stage?
Nirmal Jain
No, at this stage, I mean we haven’t announced any capital raising plan. We are monitoring the situation very carefully but whenever appropriate will raise capital.
Unidentified Participant
But there is a particular leverage level in mind. Any particular capital issuance. I mean if one has to sort of model it, at what point of. Time one thinks of
Nirmal Jain
Our situation is such that we are very comfortable on the subsidiary companies. Because if you look at our capital holds almost 46, 47%
Unidentified Participant
And even microfinance
Nirmal Jain
Is 27, 30%. 30% is our capital adequacy.
Kapish Jain
As
Nirmal Jain
Far as the standalone company is concerned, Gold loan has grown Very rapidly. Typically if you see our strategy has been more of a bank partnership where we do co lending and direct assignment. Code ending was on a hold for last few months because RBI’s new guidelines of CLM1 have come into force. From January people are doing the integration. Once that gathers momentum then we’ll be very comfortable again on our capital adequacy. But we are monitoring it very carefully. We are open but at this point in time I don’t have any timeline that I can.
There’s nothing that board has decided and what I can tell you at this point in time.
Unidentified Participant
Got it. But I mean I’m just curious if I have to model growth going forward at any particular ratio that you would kind of urge us to see. Saying that beyond this we’ll probably look at capital.
Nirmal Jain
Your point is fair growth. Our leverage will keep it around four, four and a half. And capital adequacy would like it to be closer to 20. Right now it’s slightly lower. So we are monitoring it.
Unidentified Participant
Got it. This is very helpful. Thank you very much and all the best.
Operator
Thank you. Anyone who wishes to ask a question may press Star and one on their touchstone telephone. The next question is from the line of Digant from Green Edge Wells. Please go ahead.
Unidentified Participant
Yeah, hi. Thank you for taking my question. First question is on gold loans that you know in the tonnage have we reached the past peak tonnage? Like have we crossed the tonnage aum I understand we have comfortably crossed and moved beyond. Okay,
Nirmal Jain
Yeah, yeah. So I’ll, I’ll address this question. So I think our tonnage has been growing up very quickly, very rapidly, much faster than industry. But we are around 60 tons. We are still little short of what our tonnage was at. You know the time of embargo March end was around
Unidentified Participant
57.39.
Nirmal Jain
It was 57.39. We have crossed that and now we are at 59.59.4.
Unidentified Participant
Okay, okay, okay.
Nirmal Jain
So good to know. We have crossed our peak tonnage before the embargo.
Unidentified Participant
Okay, okay. That’s good to know. And NC my second question is this that you know, now that you know the tonnage, you know we have got all the low hanging fruits, you know those clients who had gone away from us, we would have got them back. We would have given them LTVs in relation to the new gold prices. But you know, going forward now in terms of new branches, new customers, what, what’s our strategy like? You know because it’s just that markets are getting a little competitive on the gold loan Side
Nirmal Jain
I think markets are. Very strong because loan to value has gone up. The addressable market capacity to borrow has gone up significantly because of gold prices. One, two, there has been a clampdown on the unsecured MSME and personal loan and many of these customers are also basically moving towards gold. The awareness has increased. So what I see at the ground is a strong momentum. The underlying factors, what I tell you are what I think they are. But I think if you talk to the industry, then there’s a very, very strong environment, momentum in the business and environment looks positive.
So when we talk about competition, there are a number of players that come in. But market is very large and we have a network of more than 3,000 branches catering to gold alone. In our distribution catchment I think we see significant potential to scale up.
Unidentified Participant
You look at
Nirmal Jain
This way that our average loan per branch is around 12 and a half crores, which is maybe half of the market leader.
Unidentified Participant
Right, right, right. No, no, perfect, perfect. That’s, thank you for that. And then last question is just on, you know, numbers that, you know, I see that, you know, non samastama, non microfinance provisions are, you know, steady at around 300 crores. You know, they used to be around 100 crores in the past but now they are close to, you know, 250, 300 crores a quarter. So you know, when does this particular part, you know, stop bleeding? You know, I think it’s because of the unsecured MSME that this portion is slightly elevated.
Nirmal Jain
See our discontinued businesses portfolio. In one quarter only it has come down from roughly 4,000 to 3,000. And that is like short term, three year loan that we had given for in some digital partnership and personal loan. Now I mean there’s some flow from that and that is, you know, has caused the provisions or the losses other than microfinance. But if you see we are in line with our guidance because this quarter’s loan losses provision annualized are around close to I think 2.5%. And last quarter, if you remember, we had given guidance for full year at 2.8 to 3.
Next year will be less than 2. So I think we are on track for that.
Unidentified Participant
Right? No, no, perfect. I was just wondering, the gold.
Nirmal Jain
Yeah, we are on the guided path and then next year we’ll see a significant improvement as this book really runs down to a much lower number.
Unidentified Participant
Perfect, perfect, perfect. And in just this quarter the OPEX seems a little higher. Is it because, you know, we pay incentives on the gold loan originated at the start or you Know because you know the whole aum has grown wonderfully but it’s not translated into the, you know the pre provisioning profit in equally strong way. So just wanted your thoughts on that. That’s the last point.
Nirmal Jain
The point is valid but this is one time charge that we have taken for the new labor code. So I think 23 crore rupees additional cost has come for that revision in measurement of gratuity. And D I think that all companies are basically getting this which is you know the new labor code has come in force and the employee liability particularly for gratuity and etc. Has gone up. We have put that in the summary slide note also actually that there’s 22 and a half crore rupees that
Unidentified Participant
Number. I saw sir, we just wanted to. Know that you know but even apart from that 23 crores the opex was a little higher. So that’s.
Nirmal Jain
I think that then it’s pretty much in line with. You know, so OPEX has gone up by 50 crores and that is you know maybe half of that is because of that. And then there’s a normal inflationary growth.
Unidentified Participant
Right. Okay. Okay. Thank you so much.
Nirmal Jain
Sorry.
Unidentified Participant
Yeah. No, no, no. Thank you. Thank you so much for the detailed answer. Thank you.
Operator
Thank you. The next question is from the line of Abhijit from Modilal Oswald. Please go ahead.
Abhijit Tibrewal
Good evening sir. Thank you for taking my question. Again. Just kind of going back to that it special audit which has been commissioned. So sir, thank you for the clarification. But this tend and this does not have any business and regulatory risk. If I understand this side right. Because if at all after 60 days, whatever special audit happens, there could be a certain tax implementation in which you can naturally contest. But beyond that I don’t think there is any other business or regulatory risk.
Right.
Nirmal Jain
You know the incoming department will have limited resources that they need. So this is just an input to them. I don’t, I mean this has absolutely zero impact on our business or operations and there’s zero risk to that.
Abhijit Tibrewal
Got it. And then sir, I mean the second. Thing I was trying to understand is. On the housing business you also put out one one point in the notes to the council you said that as advised by NHV you have restated your March 25 NPAs and GNPAs which is more in line with show the collections only after you realize. So just trying to understand until the point that point. Right. Which is March 25th when energy we said that hey, both disbursements as well as collections should be done based on a realization basis.
Until then the entire housing industry was working on the cash received basis.
Nirmal Jain
So I won’t know about the entire industry. But what happens supposing the checks which come in the last one or two days or last few days they don’t realize till the end of the quarter of the month. And basically so this is like okay, maybe I don’t know about the existing thing but this could have been the practice of the industry which you know, NHBS advised us that this is are not correct. We will restate. We have done that. But important thing is that if you look at our December results that they are in line with the check and on the realized money and not based on the check received but not realized.
So we are now following NHB’s guided practice and in fact with that only RBs are significantly better.
Abhijit Tibrewal
This is useful. And then on the housing bit again, I mean we still seen that book is largely flat or a minor decline. I mean and microlap anyways we have discontinued and put it in I think the discontinued aem. Now when is it that we think that, I mean the cleanup is done and we can start accelerating even in our housing business.
Nirmal Jain
I think this quarter cleanup is done. So from next quarter we should see acceleration in the housing or the growth in the housing portfolio as well with a very clear strategy on focusing on certain segments that we are comfortable with and from a long term point of view.
Abhijit Tibrewal
Got it. And so have we done any PLR changes in our housing? Look, basically have you passed on any plr?
Nirmal Jain
No, no, we
Abhijit Tibrewal
Are not done. Okay, so that’s all from my side. Thank you so much for taking questions.
Operator
Thank you. The next question is from the line of Nishita from Sapphire Capital. Please go ahead.
Deepak Poddar
Yes, hello. So I just had one question today only your chief information Security officer Samir GW like resigned. Any reason for the sudden resignation and what will be the impact of that?
Nirmal Jain
No, there’s no sudden resignation. I mean it’s a normal, you know, sort of churn that happens. You know, people find better opportunities. Some people go abroad so there’s nothing, you know and then we’re very competent second line a very competent set of people that take over. So it’s very normal business.
Deepak Poddar
Okay, thank you.
Operator
Thank you. The next question is from the line of Vedant from their Belbang Securities. Please go ahead.
Unidentified Participant
Thank you for the opportunity. Am I audible?
Nirmal Jain
Yes, you are Vedant. Go ahead.
Unidentified Participant
So congratulations on a great set of numbers. We have seen a tremendous growth in our golden portfolio. So going Forward at the current gold prices. How we are seeing the growth in gold loan portfolio.
Nirmal Jain
I think the prices remain at current level even if they don’t go up from here, but they consolidate. Then we see very strong growth in the golden portfolio.
Unidentified Participant
Similar. 25, 26% growth on QR basis.
Nirmal Jain
Yeah, I think that should be a very comfortable target.
Operator
Thank you sir. Thank you. The next question is from the line of Bhaskar from Jaipuri. Please go ahead.
Unidentified Participant
Yeah. Good evening. Just one question regarding the ARC transaction during the quarter in the housing finance business. Could you give some texture? How much of that was micro LAP and how much was pertaining to the affordable housing book? That 900 crore kind of ARC deal which you did this quarter.
Nirmal Jain
So Giddies is here with me. Maybe you know, he’s our new CEO. Maybe I’ll just give a little bit of backdrop to this and then hand it to. I mean maybe Gideesh can add if there’s something. So I think with the new CEO and the board, based on the experience and whatever we have done in the past, we reviewed our entire portfolio of Housing Loan Lab and obviously there are certain segments that we had indicated last time also which is like BLC or which are that benefit Link Construction beneficiary, link construction, I.e.
BSC and then micro Lab that we exited completely. So all these segments, profiles of customers or geographies or areas that we have discontinued, you know, Giris and took a view which board has agreed with him that we should basically, you know, dispose of that portfolio once to ARC and where the collection can be joint effort and then we can focus on our continuing businesses on a strategic way. So almost about 900 crore rupees or something, maybe 874 crore, 875 crore rupees of total portfolio deal has happened and I think that cleans the entire thing.
And that’s why if you see our GNPA in housing has fallen from 1.4 to 0.5. That is the level that we know we would like it to be. Maybe Girish, you want to add something?
Girish Kousgi
Yeah. So basically what we’ve done is we’ve reviewed the entire portfolio and we also have a vision for next year as to which all segments we need to operate given the opportunity and in terms of what is the kind of risk that we can take given the yield. So we have identified certain goals which we think is not fitting into our line of strategy when we think of building the book for next three to four years time. So we thought we should do one time cleanup exercise. So that we can focus on energies, not towards segments where we can try and build the book.
And that is where we had done this erc. Our focus I think going forward is going to be in terms of segments broadly on impact, emerging and affordable. Affordable largely will be the priority for us which can give us ease and emerging to a certain extent which can help us in terms of growth which will be in line or maybe slightly better than the industry growth rate. So this is one. And number two in terms of products I think predominantly will be focusing on HL and Lab. So this is a focus. So we found that certain products as Laban mentioned and also in certain geographies, the product picks for example in certain locations, you know, where we need to focus on HL predominantly and less of LAP and stuff like that.
I think that is what we had identified. So we thought we will just clean up so that the path will be clear for us to grow in next three to four years time. That was the exchange what we did.
Unidentified Participant
Got it. So just to clarify that BLC portfolio it which was about 400, 500 crores I think that has entirely moved out now.
Nirmal Jain
Micro left that portfolio entirely moved out.
Unidentified Participant
Okay, okay. And so now the discontinued asset which is there primarily refers to unsecured Micro. Lab was the other area where you were kind of discontinuing and I think whatever
Nirmal Jain
Micro Lab also has more or less gone gone to the ARC in this HFC’s portfolio. So micro part of HFC portfolio.
Unidentified Participant
Right. So the discontinued now refers to mostly the.
Nirmal Jain
Unsecured business on the personal loan portfolio which is part of the parent company.
Unidentified Participant
Okay, okay, thanks a lot.
Operator
Thank you. The next question is from the line of Adarsh from Enam Capitals. Please go ahead.
Unidentified Participant
Hello? Yes sir. So the follow up question was on your this IT thing. Just wanted to clarify again that the block years that you mentioned, is it routine that after every raid you would tend to have a block or it’s specific to us that we’ve got a block of six, seven years of.
Nirmal Jain
No, no. It’s a part of income tax law that after the search there’s always a block search. Okay. You know the is very, very well defined that the search can pertain to up to six years. The search typically never for the current year and then once that’s done then the assessment is block assessment always without exception.
Unidentified Participant
Understood. And just to clarify here, this would pertain to in their view tax evasion and nothing to do with authenticity of the accounts. Is that like how would you answer that?
Nirmal Jain
So you know when the search happens under 129, which happened February last year. So that happened is a suspicion that there’s a tax evasion. And then. But it’s a suspicion. It’s not a conclusion or not an adjudication
Unidentified Participant
With
Nirmal Jain
The suspicion. They come in a surprise way, collect a lot of documents, evidence statements of the people and everything. Now the way the income tax department, the income tax processes, so the third department is supposed to collect facts and evidences, but they’re not supposed to analyze or come to any conclusion on that. So then that goes basically to the assessment department. And then they are supposed to analyze and ask the company that, okay, these are our based on our findings. What do you want to do?
You know, we give you an opportunity to file a revised return. And that has to be for a block period. So that is what we did. And you know, when the data collected from search or whatever evidence, data, document they have is something where they need some external help for reconciling, verifying, that is when they appoint special auditor.
Unidentified Participant
So which means. No, what I’m trying to understand is this is not like audit specific or, you know, checking the authenticity of the accounts. It’s more to do on.
Nirmal Jain
A special audit. Word to that extent may be misnomer. It is not anything to do with accounts is more to do with what they found in their search needs to be verified or reconciled. See, many times in the search, you know, they can take certain documents they may not get. Okay. Even if they get access to all the data and all the accounts they can’t analyze in their five, six, they. They are there.
Unidentified Participant
Understood? Understood. Thank you, sir. That’s it from my side.
Operator
Thank you. The next question is from the line of Ranjit from fib. Please go ahead.
Unidentified Participant
Yeah, yeah. Good evening. Good evening. And congratulations for your better results this time. One thing this I wanted to ask is what any scope is stipulated for the special audit. And the second thing is any preliminary assessment has been done by the company with regard to the maximum possible impact on this on account of these tax issues.
Nirmal Jain
No, sorry, first part of question. Can you repeat, please?
Unidentified Participant
Yeah. Can you just brief about the scope of the audit? Any scope of this audit is being given by the tax audit, tax department.
Nirmal Jain
No, I think the scope of audit will be restricted to the search findings. So. Okay. That report also is not fully shared with us. Whatever. When the income tax search happens, they collect certain document and statements. We would know what I mean from our point of view, whatever they taken, they’re given. But then, so the scope is always limited. To that.
Unidentified Participant
Okay, one more thing with regard to that, whether the special auditor has been already appointed or is it under the process of appointment?
Nirmal Jain
It has been appointed.
Unidentified Participant
Okay, okay. Okay. The second point with regard to the preliminary assessment about the maximum possible impact on account of these tax issues, anything company has ascertained?
Nirmal Jain
No, there’s no way to ascertain. But what we ascertain is based. Based on that we file our revised return. So that we already done.
Unidentified Participant
Okay, okay. Okay. Thanks for the clarification. Have a great quarter
Nirmal Jain
Based on whatever findings and everything we are supposed to find our revised return that we are done for six years block assessment together. But there’s nothing much, you know in terms of that revised return that we find. So that has come this preliminary assessment and now they have to verify it.
Unidentified Participant
Okay. Okay, thank you. Thank you sir. Thank you very much.
Operator
Thank you. The next question is from the line of GAO from Sconefield. Please go ahead.
Unidentified Participant
Hey, thanks for the opportunity. Am I audible?
Unidentified Participant
Yes, yes, gao, go ahead.
Unidentified Participant
Yeah, thanks. My question is on the credit cost for this quarter, our credit cost came down to 160 basis points. Odd. How should we think about the fourth quarter and also next year? Your voice is. I
Nirmal Jain
Think your voice is not clear. Maybe can you pick up the receiver and speak?
Unidentified Participant
Yeah, am I audible?
Nirmal Jain
Yes, go ahead. There’s some disturbance but yes, I can hear you.
Unidentified Participant
Good. Just on the credit cost we have came down to 260 basis points this quarter. How should we think about. And also next year credit cost.
Nirmal Jain
So I think credit cost has come down and we continue to remain low. And so it’s around 2.5% for the full year. We had said that we’ll end at anywhere from 2.8 to 3 because first half credit cost was higher. But this last one one and a half years our credit cost had been unusually higher because of, you know, the turbulence in microfinance industry as well as in the micro lab. But going forward next year we expect our credit cost to be even lower, maybe further 5060 basis point decline and should be less than 2% on a steady state basis.
Unidentified Participant
Sorry, next year credit cost we’re expecting less. So
Nirmal Jain
Another 5060 basis point decline in the next financial year from the current 50 from this quarter level. Yes. So should go below. So if this quarter analyze around 250 we should go below 200.
Unidentified Participant
Got it. Thanks. Sorry, just a follow up on the tax audit. Is this a normal standard sop? Whatever There’s a rate, double checking or reassessment.
Operator
Sorry to interrupt, Mr. Cow. We are not able to hear you properly.
Unidentified Participant
Now. Your voice is cracking in between. Can you. Yeah, just. There’s
Operator
A lot of disturbance.
Unidentified Participant
How about now?
Unidentified Participant
Yeah. Please repeat it.
Unidentified Participant
Yeah. I just want to understand, on the special audit, is it a normal standard operating procedure after, you know, a kind of cease and such, is it part of the normal SOP for the tax department or. This is not typically done.
Nirmal Jain
So when income tax search is done, and the subject of the search is fairly large, complex, because our operations are really vast. We are almost more than 4 million customers and if you look at six years, the number will be even larger then. In such cases, it’s a normal thing. But in the income tax surge itself is not something. I mean, that happens exceptionally. Not that it happens on the regular, on every company, but when that happens and the operations are large and complex, then this is normal.
Unidentified Participant
I see. So for a large, complex search, special audit is typically a normal procedure.
Nirmal Jain
Yeah. Again, if the searches or the documents and the accounts that they have are relatively simpler to understand, then they may not need a special audit. So this is not something which is automatic process. This is done only when needed. So, you know, to that extent is by exception, not something which is automatic.
Unidentified Participant
Thank you so much.
Nirmal Jain
Thank you.
Operator
Thank you. The next question is from the line of Ansh from Capital One Partner. Please go ahead.
Unidentified Participant
Hello. Am I audible, sir?
Operator
Yes, you are.
Unidentified Participant
So my first question is regarding the net gain on the recognition of financial instruments. So as we See in Since FY26, in the start of FY26, there has been some movement in that line item. So going ahead, how should we model that and what could be the strategy for this?
Nirmal Jain
So this is something which is dependent on how many what assets we are able to sell to banks by way of direct assignment. And the way it happens is that you basically have certain yield on the assets, certain cost of funds or certain price at which you are sold to the bank. The difference, basically you can take NPV and reduce it by operating cost or service cost and the probable early repayment. You know, that is how it is. So maybe the simpler way to look at it is that, you know, it may vary from quarter to quarter a little bit, but maybe it will be linked to the portfolio of book assets that you assume in your model.
Unidentified Participant
Okay. And so the assumption is that it is calculated on an upfront basis. Had we amortized this value going ahead, what could.
Nirmal Jain
Yeah, it automatically gets amortized because every quarter the assets which is repaid to that extent gets amortized because the net amount which comes to profit Loss account.
Unidentified Participant
I’m sorry, so it was a bit unclear. Can you just repeat it, sir?
Nirmal Jain
It keeps getting amortized as the loans are repaid. So what you see is the new assignment minus amortization, you know, that is what you see in the profit loss account.
Unidentified Participant
So this can be the steady state number and going ahead.
Nirmal Jain
Yeah, yeah.
Unidentified Participant
Okay. So my next question would be regarding the home low, the home finance gnp, it has reduced considerably in this quarter. So can you give us some color on that?
Nirmal Jain
No, it’s primarily because that certain npa, I think as you know Girish also spoke about it that certain categories of assets that we are significantly higher in PA and delinquency is higher that we have sold to arc. So that has gone off our book in hfc.
Unidentified Participant
Okay. And sir, regarding gold loans, sir, AUM has grown considerably. Very, has grown very strongly. But keeping in mind the borrowings have not grown so strongly. So when I try to model it on a average AUM basis, when I try to get total income on an average AUM basis, I mean I’m trying to understand as to how should we model this going ahead, should this growth, if this growth continues and there is no movement in the borrowings. Is there any other way we’re looking at that?
Nirmal Jain
No, it’s a good question. So whatever growth we can fund either by borrowings or by selling assets to banks. In both cases our income or our NIM will be similar 6, 7% or whatever which will come either by way of net interest income or will come below as of you know this off book income or income from assets which are off book D or co lending. So you know what will happen. Whatever you assume, you assume 60, 40, 70, 30. So that percentage of income will go above the net interest income line and the remaining will come below the net interest line broadly in similar range.
Unidentified Participant
Okay, so at and, and these gold loans at what average gold price we would have booked them?
Nirmal Jain
No. So our gold prices at all gold prices. But gold price gain or loss is not to our account custom will take the gold back only pay as interest.
Unidentified Participant
No, I understand that sir, but I understand that. But this moment we’ve been seeing in gold since the past, in the past year. Now we’re just trying to understand is to as to in this quarter what price you would have put that loan at.
Nirmal Jain
So you know right now our LTV is just about 61%. So obviously part of it is contributed by gold prices also going up which reduces ltv. And so every day the price varies and generally we keep it sometimes below the 75% price just as being conservative. So there’s a weighted average of everything. So maybe you can look at LTV which is 61% maybe a good indication of what prices that is booked on average.
Unidentified Participant
Okay, so I think sir, we can take this offline. I think there is a bit some unclear in there, some unclarity on this. So I guess we can take this off on the gold price. There’s some unclarity here.
Nirmal Jain
Okay, maybe I’ll try to explain once again. So every day we have a gold disbursement and there are certain repayments
Unidentified Participant
Every
Nirmal Jain
Day gold price, you know, comes based RBI is already indicated that where do you take gold? So then your maximum loan amount is 75% that we can give to the customer. Typically we may end up giving little lesser say 70 or whatever. And then on this gold, as the gold prices go up, our LTV will go down. So at quarter end LTV was only 61% but on the. Because there are millions of transactions. So it’s very difficult to say that if there’s any particular loan booked at what price because they are booked at different point in time.
Partly repaid, repaid renewed. So there’s a continuous process.
Unidentified Participant
Okay, okay, thank you.
Operator
Thank you. The next question is from the line of Bavin an individual investor. Please go ahead.
Unidentified Participant
Good evening to the management team of ISL Finance post MrGo by each passing quarter I think the operating performance of the company has only been, you know, improving. My only request to the management is to if it is feasible the management can issue and clarificatory note and file it with the exchange on this income tax. Because the special auditor word has spooked the nerves of many participants in the market. And that is the reason we have seen you know, large correction in the stock price.
So while I do not have any question but I have a request to the management if a clarification note on this can be issued and filed with the exchanges. Thank you.
Nirmal Jain
Sure, we’ll do that. But also this analyst call a transcript will also be put up on the website. So in the beginning itself I’ll explain but yes, I think your point is taken. We’ll do that.
Unidentified Participant
Yeah, it’s my honest request if in separate filing can also be done because not many people go through the transcripts and all but anybody would go through a one pager or two pager related to this clarification. So there is no downside to this. But it can, it may protect the interest of many investors.
Nirmal Jain
Thank you.
Unidentified Participant
Sure.
Operator
Thank you. The next question is from the line of Shreya from Nomura. Please go ahead.
Unidentified Participant
Yeah, hi. Thank you for the opportunity. My question is on the MFI ISL Samasta business. So it’s to do with the liability book. One can see that the bank the term loans or probably the bank borrowings was declining till last quarter. Now that mix has sort of inched up though the cost of fund movement between the quarters has been volatile in a way. It was 9 point something 9.7 last quarter. It’s inched up this quarter. There were certain media articles which mentioned that the NBFC MFI equation with banks have not been at the best terms and probably whatever new money that they are able to raise from banks are coming at an adverse cost of fund.
So I just want to understand while it may not specifically be for that article, may not be for ifl Samasta, but I just want to understand what’s the ground reality for us and how are we viewing our liability mix on this book. Thank you.
Nirmal Jain
So it’s slight decline in the total borrowing and the refinance. Basically the earlier loans get repaid so that also gets repaid. So you know if you really look at it it looks like 44 to 46. But if you go back six months it was 52% of our total portfolio. So I would say more similar level. There is no significant change in that. And our cost of fund has, if you see the slide 31 again has gone down for microfinance also by 10. This is point. So I would say that there’s not any significant change there.
I mean they’re similar but given. Satisfactory for banks and also the parentage we have been getting new loans from banks also. You know this entire fear is more about standalone small micro finance companies which may or may not be able to survive the turmoil that happened last year. But otherwise we find liquidity comfortable.
Unidentified Participant
Right. So for us the lines are and the limits continue to be available from these banking partners. Right. I mean there are no new challenges or. Okay, okay. Fair, that’s, that’s, that’s fair enough. If I can squeeze in one more question again on the NBSC MFI performance. So in your two biggest states, second and third largest state, Karnataka and Tamil Nadu, can you help us understand if the probably the 30 plus book or 30 to 90 day book has that performance? How is that performance versus pre crisis maybe versus June of 24?
Has the trends reversed back or things have normalized or how has been your experience in these two states?
Nirmal Jain
Venkatesh will take this view of microfinancia.
Venkatesh N.
In the month of November and December. The strongest comeback I can say was in these two states though the portfolio of Tamil Nadu overall for the industry also has dipped a little. But the collection efficiencies have considerably increased. And in both the states, considering that Karnataka came out of the ordinance, what was there last MFI act of last year? The. It’s much better than the thing. So we have back in both these states at around 99.5 plus.
Unidentified Participant
Right. And the trend pretty much continues in January. Is. Would that be a fair assumption?
Venkatesh N.
Yeah, the trend continues in January too.
Unidentified Participant
All right, sir. Okay, those are my questions. Thank you so much and all the best.
Operator
Thank you. The next question is from the line of Abhishek from hsbc. Please go ahead.
Abhishek
Yeah, thank you and good and congratulations. One question on this gold loan group. And now if I correlate that to the tier one of 12.8, how far, how much can this growth continue with this kind of a tier one or does it need to necessarily now slow down or you can find something else which allows you to grow fast in gold?
Nirmal Jain
No, Abhishek. See the. Now I think it more depends on our ability to do core lending and da
Abhishek
You know,
Nirmal Jain
So that is what probably will sustain growth. And if not then we have to raise equity. So I think that’s a very simplistic answer to your question.
Abhishek
So is it urgent now to get equity or can still go say 2/4 or 3/4 without, without raising any. So
Nirmal Jain
If. No, it depends. If I were to do co lending in da then we can continue. We’ll be on the edge but we’ll continue. And we have a strong capital request in our subsidiary companies. But you know, for the time being I think the co lending engine has to start quickly and strongly.
Abhishek
Okay.
Nirmal Jain
Incrementally. Which is, you know, which you know we can do at any point in time. But alternate strategy is to work with, you know, the coal ending and DA.
Abhishek
Understood. I have one question for Venkateshan. So what is the disbursements last quarter? I mean especially if you can break it down into October, November, December.
Venkatesh N.
In October we would have done around 500 odd crores. In November we would have done around 700 and 600 odd. And November in micro finance alone we would have done 700 odd crores. Overall we would have done 800 crores in December for all products put together.
Abhishek
Okay. Okay, got it. That is, that is helpful. And then I have another question, a question for Girish. So in so you, you use the words affordable and emerging. You know, when you earlier made a comment, how do you define it here? Is it different from your previous form or how, what do you classify as affordable? What is emerging for?
Girish Kousgi
So I think if you look at the market, basically there are four segments. One is super prime, second is prime, third is emerging and fourth is affordable. So when you talk about affordable, this is a business where we would be focusing on starting from tier 2, tier 3, tier 4, kind of cities and towns. So this is where we have an opportunity for affordable. So this segmentation is quite standardized across the industry. So these segments are pretty much standard. When we talk about affordable, these are basically on the salary side income level of let’s say 20,000 to 35,000 and on the self employed side will be on similar lines.
The ticket size will be about 14 to 15 lakhs. And this also covers under BMI interest subsidy scheme where the loan is up to 25 lakhs and the property cost 35 lakhs. So this is typically the affordable segment. If you talk about the segments within this, basically this would be
Abhishek
What
Girish Kousgi
We
Abhishek
Want.
Girish Kousgi
If I talk about no, most of the companies will be focusing on yield of 12.8 to 13. So this is the affordable business. When we talk about emerging, this is a level up, you know where the E should be in the range of 11 to 11 and a half percent. Both focusing on salaried and self employed, both formal and informal. So this is the differentiation between these two segments. Ticket side should be about 20, 21 lakhs. Affordable is 14 to 15, emerging is 2021 and the next is about prime 26, 27 lakhs. And then we have super prime which is 50 lakhs.
So in terms of geography I would say no top 10 probably could be super prime and prime and the next 30 cities would give would be a emerging market and the next 200 would be affordable.
Abhishek
Okay, so when I look at the yields and the average ticket size for the home loans part that you that’s actually the blended that around, you know, 10.5, 10.6. Whereas the incremental target that you are, that you have is anything 7.5 and say 13, 11 to 13, let’s say. So should we expect that, you know, going forward the portfolio yield or at least the disbursement yields would be higher and then that should translate into portfolio yields going higher over a period of time?
Girish Kousgi
Yes, you are right. I think the plan is to ensure that in next few quarters the onboarding yield is going to go up because predominantly our focus is going to be on upward affordable and emerging which I spoke about in terms of customer segmentation, property type and the expected yield. So this would aid in the overall portfolio yield going up. But this will take some time, maybe another two to three quarters because we have started this already. Our focus would predominately be on a. Portable and then emerging
Abhishek
And the 32,000. Odd crore AUM that you have in affordable home as you reported in Islam, that is actually affordable and prime rather than. Or rather emerge prime rather than affordable as you described.
Girish Kousgi
So basically if you look at these segments, you know one city would give you an opportunity of doing or being in two or three segments. It is those pockets in a given city which are in the opportunity opportunity. So the exceptions are when you go to tier three and tier four, predominantly 90% of business, what you do is going to be from affordable. So every city would give you a mix, let’s say top 50 to 60 cities. Would you have an opportunity of doing two or three segments within the given city.
So our new strategy going forward would be in terms of trying to increase yield and therefore the overall yield on the portfolio could. So our focus is going to be on different segments, different type of collateral, different kind of profile within the given city. We are today presenting about, we have about 315 branches. A focus in this would be on emerging and affordable. Yeah, yeah. Make it very simple. Suppose if you take let’s say Chennai. Now Chennai is a large city we all know. So in Chennai there are three segments available which is prime, emerging and affordable.
So there are affordable companies in Chennai doing only affordable business which is basically catering to outskirts areas where the property ticket size would be about let’s say 3035 lakhs and the loan could be about 1820 lakhs. Similarly slightly away from city center would have an opportunity of emerging and core city center would have an opportunity of either prime or super prime. So some of the large cities would give you opportunity the minute you go to small towns and all. I think predominantly it is affordable which comes at a higher rate.
Abhishek
Sure. So what I was trying to understand. Thank you for the explanation that from current portfolio which bought 32,000 average ticket is more or less in that affordable segment you described but the yield is lower. So was it just that underwriting was aggressive focus on that or what is the difference between the. Why is the lower than typical affordable which would be 12 and half 13%.
Girish Kousgi
So today if you look at where we are present, we are present in top Cities which includes affordable, emerging and all three. Little bit of. So it is basically focused on certain segments and certain. So there has been a new strategy which is now laid out so going. So I think your question is that no, we have a book where the yields are quite low even though we are into affordable and emerging. I think that’s the question. Now what we have done now in the revised strategy is that going forward in these locations, we are going to focus on the segments which we want to focus on.
For example, predominantly going to be affordable and then followed by emerging. So there is a change in strategy to a certain extent this does not require because they’re already present in many locations which can cater to these two segments. And within those geography, within those cities, our segment focus. Our segment focus will be little different which will get us a higher rate.
Abhishek
Got it, got it, got it. Thank you so much and all the best. Thank you.
Girish Kousgi
Thank you.
Operator
Thank you. The next question is from the line of Abhijit from Otiral Oswal. Please go ahead.
Abhijit Tibrewal
Yeah, thank you for taking the follow up. While we are at housing, what is the housing recruit that we are looking for from next year? Housing. Book growth. Yeah,
Girish Kousgi
Yeah. So on the, on the book we plan to grow by about 15, 16%. And on disbursement it will be 24, 25.
Abhijit Tibrewal
Disbursement is 24 to 25%.
Girish Kousgi
Yeah,
Abhijit Tibrewal
Got it. Then a few other clarifications that I had just trying to understand given that we received that, that special audit letter yesterday and like you mentioned, they have 60 days to complete the audit. So suffice to say, right, that in the next 60 days this, this audit will be be done with.
Nirmal Jain
Yeah, they do it and they’ll submit it to the income tax department only.
Abhijit Tibrewal
All right. The
Nirmal Jain
Report goes to the assessment department.
Abhijit Tibrewal
Okay. And then this audit is only with respect to certain points, you know, where the IT department might have a different opinion. Right. Versus what we would have filed earlier in our returns.
Nirmal Jain
So this audit is there is only related to the findings of the search. So search also was in certain specific areas where they had suspicion. So they collected data, documents and you know, whatever information and statement that they wanted and they compiled and it is restricted to that.
Unidentified Participant
See this
Nirmal Jain
Nothing to do with audit of accounts or whatever. Auditor name is generic and can capture lots of things. But here their purpose is to verify the things which are found in search, you know, or related to search findings.
Abhijit Tibrewal
Got it. Okay. And then this amount of 1.47 crore, right. That we have paid, right. Based on our Own assessment. I mean the only thing is after the special audit is complete, maybe the IT department comes back with a final amount. Right?
Nirmal Jain
Yeah. And they can raise the demand and dispute an appeal kind of thing.
Abhijit Tibrewal
Got it. And then lastly, sir, we said earlier that maybe from next year onwards there could be a 5060 basis points decline from current level of credit course of about 2.5%. But suffice to say given that, I mean like we mentioned earlier, the cleanup in the housing business is complete, the gold loan business is doing well. And then MFI also what we are hearing from others, there’s no further deterioration at the margin. The collection trends, the power creation trends are looking better. So even next quarter directionally.
Right. You should see credit costs coming down. Right. To get to that less than 2% for next year that you guided for.
Nirmal Jain
Yes. So I think the glide path has already started. So you will see further improvement. Should see further improvement quarter after quarter.
Abhijit Tibrewal
Got it. This is useful. Thank you so much for patiently answering questions and I wish you and the team the very best.
Nirmal Jain
Thank you so much.
Operator
Thank you. The next question is from the line of Anusha from Dalal and Baruch.
Anusha Raheja
Yeah, thanks for taking my question and congratulations sir on a very good set of numbers. So on the gold loans we had seen a very strong growth of around 26% on Q on Q basis. What has been tonnage wise increase there in this quarter?
Unidentified Participant
Yes. Yeah, there’s about 7% increase also.
Anusha Raheja
Okay, okay. And also on this special audit, was it the case that this special audit was supposed to follow after the RBA embargo, you know, which was there few quarters back?
Nirmal Jain
Yes. So there was special audit done by RBA also very thorough and detailed special audit and that was only related to gold loan. And for three years. Now, although this name, you know, is similar, but this is very different. This is for certain areas of you know, search documents where they want to do and is for a block period of six years.
Anusha Raheja
Okay, okay. And sir, if you can just give us some color on the overall AUM growth. Like you said that for home loans we are anticipating a growth of 15 16% in FY27. So some color on, you know, how gold loans, you know, we are anticipating growth there in FY27 even on the MFI side and on the business loans. So how do we expect overall AUM to grow over the next two years time? And also on the MFI side, I mean I believe that asset quality is in. That should have been much more better relatively because if I just compare the GNPA numbers, the relative improvement for the peers have been much more sharper.
What are thoughts on that?
Nirmal Jain
So in last two, three quarters, we have been syncing our portfolio. We have been very cautious trying to completely realign our strategy. And so our denominator has not grown, has actually shrunk. So that has exacerbated the impact of asset quality and that also reduces our profitability. We’ll be cautious. But now portfolio, as the industry environment has become more sanguine, so we’ll see our portfolio also growing and things getting better.
Anusha Raheja
Okay, but otherwise on ground you’re seeing improvement on the asset quality behavior on the MFI side?
Nirmal Jain
Yeah, on ground there’s significant improvement in asset quality, credit culture and even the leverage of customer has fallen and the risk is much lesser. And if you see our slide on microfinance, which is slide 32, you see that the primary, the zero bucket which is due today, how much you collect out of that? And that is, that indicates the reduced tense. And that is all time. T is much better now at 99.56%.
Anusha Raheja
Okay. And how do we see overall AUM growth say for FY27 across the segments?
Nirmal Jain
You know, I would rather talk about because see, we have a little bit of diversified business model, not very widely diversified. And we have seen that, you know, sometimes, you know, some segments do much better than expected, some segments do a little bit lower than expected. On the whole, I think you should see about 20, 25% AUM growth next year.
Anusha Raheja
Okay. Okay. And. On any internal targets, you know, for ROA ROE in the near term.
Nirmal Jain
So our ROE was in the range of 18 to 20% in normal times. So, you know, we would endeavor to, you know, reach towards that. So that is our internal target in next two to three years.
Anusha Raheja
Okay. Okay, fine, sir. Thank you.
Operator
Thank you. The next question is from the line of Gaurav from hsbc. Please go ahead. Mr. Gaurav, we would request to. Please go ahead.
Unidentified Participant
Hello. Am I audible?
Unidentified Participant
Yes, you are.
Unidentified Participant
A couple of questions. First is on the gold loan stage three provision. I have seen that we have declined our provision toq from 42% to 19% in 3Q. So just wanted to know the reason or the same and going forward, should we maintain at this level only? And second, in response to one of the question you mentioned that you’re comfortable with growing gold loan book at 24, 25% QoQ. So was it, was that guidance for like 4Q FY26 or beyond that also we can maintain the same run rates these Are my two questions sir.
Nirmal Jain
So basically your pace has been significantly higher. I mean of course quarter, quarter, probably space is slow down over a period of time. Now I can’t say what will happen this quarter but longer term. Okay. In the recent past we have seen that there are two factors that are working for us. One is gold prices have been moving up and two, in our branches we are getting back our old customers and getting our productivity level back. Whatever impact was caused by embargo, we are just trying to undo it but it is very difficult to give any guidance on that going forward.
Now you said that the provision we have reduced. That’s what you say. What is it? State
Kapish Jain
Three.
Nirmal Jain
So okay, state three losses are always again dependent on gold prices as well as your historical. So you know the way ECL is computed is based on empirical data and what we have seen is that our losses have been negligible and that is why this number probably no was much higher than what it ought to be. This number could have gone up during the embargo period when the even NPAs appeared higher because many customers could not roll over and you know, three months interest backlog it becomes npa. But on a steady state basis, you know golden business typically will not have any losses.
And also the you know, the percentage is also very low so it doesn’t make any much impact actually.
Unidentified Participant
Got it sir. Okay sir, these are only my two questions. Thank you so much.
Nirmal Jain
All right, thank you.
Operator
Thank you. The next question is from the line of Pranay from Karen Capital. Please go ahead.
Unidentified Participant
Hi sir, thanks for the opportunity. So just a clarification on the previous participants question where we he was talking about the recognition. So firstly like what is the purpose like we are started doing in FY26 as opposed to FY25. And second, isn’t that a better way of raising your borrowing books as compared to a borrowing which we have a 9, 9% yield, a 9% cost of fund. So is it a better way of. It’s a less cost effective way of doing this.
Nirmal Jain
Yeah. So this is better way because it releases your capital. And secondly I think we have always been doing this. I mean obviously with the volume has gone up and in the COVID crisis and after that, after RFS crisis, after Covid and after this when the liquidity became very tight there’s a time we started doing it more aggressively and then we realized that maybe long term strategy also it makes a lot of sense because it can allow you to grow faster without really having to raise equity and dilute Very frequently because you can, you know, the assets go off the balance sheet along with risk.
Unidentified Participant
Got it. So what is the delta? Sorry, if you can say on the ballpark, what is the delta between our cost of boring versus the this we are selling the book on the one time cost of what is the delta we get on this?
Nirmal Jain
No, typical. I mean again it varies from transaction to transaction but it may be about 100 basis point more cost. But there’s to a risk and capital and everything else. But again it varies because again, you know, there’s a demand for psl, the demand for retail assets by the banks. It’s like a market, you know, where the prices fluctuate.
Unidentified Participant
So that this will be purely on which segment it should be probably on the gold.
Nirmal Jain
Both even microfinance for that matter.
Unidentified Participant
Okay. And so so once you are saying this is our capital. So basically it is. So you had mentioned it is amortized. But once you’re saying it is reducing the capital, so it is not an amortized, this is on one shot basis, right?
Nirmal Jain
Yeah. So once you sold that, so they’re off your book. So basically you’ll keep getting income on the difference of interest, you know, whatever we agreed. Then you take npv, provide for some cushion and then take it as upfront. Then what happens when the actual loans are redeemed at the time? Then you get the actual interest income and then you amortize this against that. So actually it will not be cash flow negative whenever. No, over a period of amortization. So supposing you’re sold loan for gold, loan for two years and there’s a say 5% extra interest cost or 10% is what you’re taking up front.
Every quarter amortizes. So you are getting interest income and you are reducing this that way.
Unidentified Participant
Right, Right, right.
Nirmal Jain
Understood.
Unidentified Participant
So what percentage just to. So we assume that in the current quarter what percentage of that amount amortization would be there or of the Q1 which is part of the Q3.
Nirmal Jain
So there are a number of assignments. So everything keeps getting. So I mean I won’t be able to give you one data for that because over last five years, two years, three years, tens of such transactions would have happened and everything amortized at a different pace. So every transaction actually is monitored by the bank by and as well as buyer every customer.
Unidentified Participant
Correct, Correct. So the interesting thing to see on the home finance where we have significantly improvement in our asset quality basically on the gross NPS and nps. And so which you recently mentioned that the future plan of growing the AUM book over there. So at what level of NPAs or do we expect we’ll be comfortable on investing?
Nirmal Jain
You’re saying home loan?
Unidentified Participant
Yeah. In the home finance segment,
Nirmal Jain
I think. The current level, what we achieved in this quarter will be the comfortable level.
Unidentified Participant
All right. Even in the growth, which you will be expecting a 15% AUM growth and 25% based personal growth. In that,
Nirmal Jain
I think home loan, 15 to 20% is what we have, 15 to 18%. So home loan will be slightly slower, but these are long term assets. So.
Unidentified Participant
Yeah. Oh, okay. That’s it, sir. Thank you.
Operator
Thank you, ladies and gentlemen. That was the last question for today and I now hand over the conference to management for closing comments. Thank you,
Kapish Jain
Sir. Thank you so much. And if you have any more queries, you can always get back to. Yeah. Thanks very much for joining this call and for your patient hearing. For any further queries, you can reach out to our investors there and we’ll be more than happy to clarify any further question that you might have. Have a wonderful evening. Thank you.
Operator
Thank you. On behalf of IIFL Finance limited. That concludes this conference. Thank you for joining us. And you may now disconnect your line.