India Shelter Finance Corporation Ltd (NSE: INDIASHLTR) Q1 2026 Earnings Call dated Aug. 08, 2025
Corporate Participants:
Unidentified Speaker
Rupinder Singh — Managing Director and Chief Executive Officer
Ashish Gupta — Chief Financial Officer
Analysts:
Unidentified Participant
Chintan Shah — Analyst
Varun — Analyst
Soumil Jain — Analyst
Darshan Deora — Analyst
Shubranshu Mishra — Analyst
Shreepal Doshi — Analyst
Varun Bang — Analyst
Umang Shah — Analyst
Mayank Agarwal — Analyst
Shweta — Analyst
Shailesh Kanani — Analyst
Kunal Shah — Analyst
Amant — Analyst
Mithai Lathiya — Analyst
Sakshi Goenka — Analyst
Vatsal Nagelia — Analyst
Presentation:
operator
Ladies and gentlemen, Good day and welcome to the India Shelter Q1FY26 earnings conference call hosted by ICICI Securities Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during this conference call, please signal an operator by pressing Star then zero on a touchtone phone. Please note that this call is being recorded with this. I now hand the conference over to Mr. Chintan Shah from ICICI Securities. Thank you. And over to you sir.
Chintan Shah — Analyst
Yeah, thank you Samya. Good morning everyone and welcome to the Q1FY26 results conference call for India Shelter Finance Corporation. So first of all, I would like. To thank the company for giving us the opportunity to host this call and and congratulate them on a good set of numbers. From the management. We have Mr. Rupinder Singh, MD and CEO, Mr. Ashish Gupta, CFO and Mr. Rahul Rajagopalan, head Investor Relations. So without further ado, I would now like to hand over the call to Rupinda sir for opening remarks followed by Q and A. Thank you. And over to you, sir.
Rupinder Singh — Managing Director and Chief Executive Officer
Thank you, Chintan. Good morning everyone. On behalf of the company, I extend a warm welcome to all of you. Thank you for joining us for the call today. Before we delve into the highlights of the quarter, I would like to share an overview of the current macroeconomic scenario and the sectoral outlook. As we are witnessing in the recent months, several consumer demand indicators have demonstrated some softness. In 1Q26, we observed a slowdown in UPI transaction volumes, a contraction in passenger vehicle sales and decrease in two wheeler registrations. In urban areas, wage growth has been subdued and continues to lag behind other sentiments, so contributing to slower than expected recovery in urban demand.
Despite these headwinds, inflationary pressure has continued to ease. Notably, headline CPI inflation reaches a six year low of 2.1% in June 2025, providing a stable backdrop for consumer and business alike. Rural India has shown remarkable resilience. The success of the Ravi harvest and timely widespread monsoon rain have resulted in strong rural cash flows and an optimist sentiment. These sectors have already led to a noticeable uptick in the rural consumption with FMCG volumes in rural market also beginning to rise. Meanwhile, capital expenditure has gained momentum in sectors such as steel and cement, reflecting the increased capital expenditure initiatives by both state and central governments.
This uptick in infrastructure spending is expected to create favorable conditions for broad based consumption growth moving forward, the Reserve bank of India has also played an instrumental role reducing policy rates and implementing a suite of liquidity measures. In the previous quarters. These actions have resulted in a surplus liquidity within a financial system, ensuring faster and more efficient transmission of monetary policy to credit markets. So as we look ahead, there are many reasons to remain optimistic like demand is showing signs of strengthening, policy is being prudent and supportive, and the potential for catcore in our economy is obviously immense.
Together these elements create a story, our story of a nation poised for sustained progress, steady renewal and a shared prosperity. While we have undoubtedly faced a few hiccups along the way, the challenges we discussed only make our recent progress more meaningful and affirm that the future looks brighter from here. Moving to the Sector Update Affordable housing in India continues to gain momentum supported by urbanization, rising incomes, government programs like Pradhan Mantri, Awas Vijra 1 of ICRA estimates the affordable housing finance loan portfolio stood at rupees 1.4 lakh crores as of March 2025 and the affordable housing company’s loan portfolio is expected to reach rupees 2.5 lakh crores by financial year 28 growing at a CAGR of 2022%.
On that note, let me move towards the quarterly update. We are pleased to announce that company delivered strong operational performance in the first quarter of financial 26 driven by a strong demand environment in affordable housing segment we delivered AUM growth of 34% year on year reaching an AUM of Rs. 8,712 crores in quarter one financial 26 wheat is burst 887 crores registering a growth of 24% year on year. In quarter one financial 26 we added 24 new branches as per the branch expansion strategy. With this geographic Presence stood at 290 branches as of 30 June 2025.
On profitability metrics bad for the quarter came in at rupees 119 crores registering a growth of 43% year on year and a 10% quarter on quarter. Return on equity further improved to 17.2%. This time ROE crossed 17% for the first time post listing and our net worth now stands at rupees 2,836 crores. We continue to maintain our guidance of branch addition of around 40 to 45 for the year, maintaining spread of more than 6% in the medium term, credit cost of around 40 to 50 pips, loan growth of around 30 35%. Before I hand over the call to our CFO, let me also highlight few of the recent tech initiatives that we have undertaken to further enhance our tech capabilities Technology significantly transforming operations by automating e processes, improving risk assessment, enabling faster and fairer plate decisions and eventually enhancing customer experiences.
Few of the initiatives that we implemented are like Aadhaar based Instant ekyc Enable enabling fasting, onboarding, promoting paperless process, enhancing security and fraud prevention at the same time providing a cost effective and scalable process. Machine learning based credit origination scores are to analyze financial behavior, digital payments, cash flow and non traditional data to assess borrowing risk. These are the few important objectives that we took a couple of quarters back are able to you know complete by the end of this quarter. Now I would like to hand over call to Ashish Gupta our CFO to take you through the financial metrics.
Over to Ashish.
Ashish Gupta — Chief Financial Officer
Thanks Rupinder Ji Good morning friends. Let me take you through key financial numbers. We have ended the quarter June 25 with AUM of 8,712 crore. Year on year growth in AUM is 34% while quarter on quarter growth is 6%. Total income for the quarter is up by 39%. Year on year our portfolio yield is at 15%. Marginal uptick in the yield is driven by improvement in spread of CO lending loans due to reduction in CLM cost of funds which is linked to the repo rate. Our disbursement yield is stable at 15%. Our bucket cost of fund is further down by 10 basis point in Q1 to 8.6% driven by lower marginal cost of fund and reset of our borrowing link to repo rate.
Our marginal cost of fund is at 8.5% for quarter is down by 30 basis point year on year basis. In last four months we have seen quality bips reduction in our bucket cost of fund and we expect another 20bps cut by the year end. With this our lending margins are up by 20bps to 6.4% and are consistently above 6%. In line with our guidance, net interest income has gone up by 34% year on year and 8% quarter on quarter due to growth in AUM and expansion in spreads. In terms of percentage, NIM is stable at 9% year on year in spite of improvement in leverage from 2.6 times to 2.9 times.
Coming to OPEX. Our year on year growth in OPEX is lower than growth in AUM resulting in better cost ratios. Opex to EM for the quarter is at 4.2% down by 20bps year on year. On asset quality side stage 3 is at 1.2% up at 10 basis point year on year. Credit cost for the quarter is 5 basis points in line with our guidance for medium term. Next phase 3 asset is stable at 0.9% provision coverage ratio for stage 3 asset is stable at 25%. Our total ECL is 67 crore against the regulatory threshold of 40 crore.
We have adequate provisioning buffers in place. Profit after tax for the quarter is 119 crore up by 43% year on year basis up by 10% quarter on quarter basis driven by growth in volumes, improvement in productivity, expansion in margins and stable credit cost. ROA for the quarter is 6% up by 20bps quarter on quarter. ROE for the quarter is 17.2% on annualized basis with a leverage of 2.9 times. On liquidity side we are comfortably placed with a liquidity of 650 crore plus and underall sanction of 560 crore. Our ALM is positive across all the buckets.
With this I conclude and now we can open the floor for Q and A.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and one on the Touchstone telephone. If you wish to remove yourself from the question queue you may press star and 2. Participants are requested to use handsets when asking a question. Ladies and gentlemen will wait for a moment while the question queue assembles. The first question comes from the line of varun from Kotak Securities. Please go ahead.
Varun
Hi sir, heard it right you said that there’s already 20bps moderation in cost of funds and you expect another 20bps in the next nine months. So if you can break down your overall borrowings into how much is floating and of that how much has already seen repricing and how much you expect to float within the next nine months and what’s the proportion of NCDS that are going to make sure that would be helpful and following that would be if you’re planning any PLR cuts, when are you going to implement it or when I’m going to take a call on that.
These are my questions with regard to margin and if you can also highlight what is the reason for the gross stage to rise that we see in this quarter.
Ashish Gupta
Sure Varun. To start with the borrowing mix, 90% of our borrowings are are linked to variable rate and if you look at within the variable rate about 35% of the borrowings are linked to repo rate wherein we have already seen the benefit of repo rate cut and then remaining variable rate link Borrowing are linked to banks MCLR wherein we have yet to see the pricing cut from banks. And whenever the reset will come on these MCL borrowings who remaining borrowings are, 10% of the borrowings are at fixed rate coming to the pass on of the benefit.
So if you recall, you know, when the repo has gone up by about 250 basis point, we have not passed on the, you know, impact to the customer like to the same extent. So we will, you know, hold back till the time of Q till Q3. Once we have, you know, reasonable cost of fund reduction, we will think of passing on the rate reduction to our customer. But having said this, it is worthwhile to note that out of the total loan assets that we have out of that only 15% are linked to the variable rate.
Then remaining 85% is fixed rate or semi semi fixed rate wherein the loan rates are fixed for initial 3 years then it will become variable. On the asset quality side. If you see our DPD 30 + has gone up by about 100 basis point. So you know, you know, partially on account of seasonality, you have seen you know earlier as well in Q1, Q2 generally delinquencies goes up and partially it is on account of macro, you know, macro positioning that you are seeing across the industry.
Varun
Okay. On that front, are you witnessing any particular states which see a rise in this? And the reason I’m asking you this is because Karnataka growth has also been weak for us. It’s only about 15% year on year. So and that ordinance had created a. What do you call a flutter or some kind of negative on the collections front. So are we seeing that still sustaining? Is it long to run out or is it normalized in Karnataka? And are there any other states like MP where we have seen stress that it has again shown up stress.
Rupinder Singh
So Karnataka purposely we have not expanded last year or so. Right. And the plan is to remain sustained whatever the numbers which we have for some more time before taking to the next level. The delinquency was what have increased in couple of quarter early I think six months back in Jan said when Kanaka issues arises after that we try to have a control on that side and largely it has been there. It’s not like something has gone out of and or things around that side. But yet there is always an uptick. When you see the quarter one numbers that is across.
It’s not only the Karnataka, it’s in most of the places, you know. And that we are taking a scope of that regularly and we are aware of that as the things are settling down, there’s a definitely improvement as the quarter progress. Quarter one is the very least this time because of macro sectors there is little more inch up. But what we see as we see the progress in month of July, the 30 GPD remains almost same number what was in quarter one. And if we maintain that sort of this quarter then this optimism in terms of next couple of quarter coming along.
So it’s not because of only Karnata or things on that piece overall there’s a little uptick on that side.
Varun
Okay, sure. Thanks for that.
operator
Thank you. The next question comes from the line of Sawmill Jain from Lucky Investments. Please go ahead.
Soumil Jain
Hi sir. Thank you for the opportunity and congratulations on a great set of numbers. I had a follow up question on the asset quality. 30 + DPD bucket is about 4.5% even accounting for the seasonally weak quarter that 1Q is this is significantly up from the last years, you know DPD numbers. So are you seeing that transmit into higher credit cost going forward? Are you sticking with the 4050 bips credit card guidance that you mentioned? How is the trend of those 30 plus DPD buckets in let’s say moving into quarter two? Quarter two?
Rupinder Singh
So we are going to maintain you know our you know projection of 4050 bids. When we talk about credit costs particularly July month income of 30dpd since you asked 30dbd particularly you know looks almost same number what is in quarter one basically. So there may be a two bit slower but not upper side. That’s the July month number what we see around basically. So what I since still there’s a two month for this quarter particularly I think giving exit number will be a little difficult. But what we see that as time progress we also strengthening ourselves accordingly they should not be challenged.
So we are giving the same guidance of 4050 bits of credit cost in coming time.
Soumil Jain
Got it. And secondly, just if you could reiterate on the cost of funds trend. Sorry I missed it in the last question you mentioned 90% of your book is floating it on the borrowing side.
Rupinder Singh
Yes. On the borrowing side 90% of our liabilities are variable rate. And out of that about, you know 1/3 is linked to MCLR and rest is 1/3 is linked to Rapid and 2/3 is linked to MCLr.
Soumil Jain
And you expect further 20bps reduction in cost of funds only.
Rupinder Singh
Yes.
Soumil Jain
Okay. And on branch edition we have added 20 about 24 branches this quarter. Any full year guidance for entire year.
Rupinder Singh
We planned what we also projected at the beginning of year we were Planned to open around 45 branches. 40, 45 branches. We’ll stick to that plan. Out of that, 24 has been executed in the first quarter itself. In next three quarters we are going to spread in certain portions.
Soumil Jain
Okay. Okay. All right, that’s it from my side. Thank you and all the best.
operator
Thank you. The next question comes from the line of Darshan Deora from Indwest Group. Please go ahead.
Darshan Deora
Yeah, thanks. Firstly congratulations Rupindra, entire India shelter team, fantastic all down performance. The question I had was regarding the, you know the cost to total assets this quarter we have brought it down. A bit to 4.2% which is an. Improvement from the past quarters. But you know some of our peers. Are operating below 3%. So what is our long term aspirational cost to assets that we can achieve as a business on a steady state basis?
Rupinder Singh
So this is a continuous journey and we always keep, you know, maintaining the stand that year on year you’ll find it is coming down 50, 20 bits and we’ll stick to that. So if you see that it has to come as a stable state, I don’t think that has to be a proven thought around that piece. We feel what are the state it is you to keep have a scope of improvement that will continue to work in future also. So you know a lot of things happen in terms of technology changes and things on that piece.
So there is no stable skater on that piece. There has to be continuous improvement. And that’s our, you know, philosophy of taking it further particularly so it started from at the time of IPO it was 4.8. In fact financial 23 it was 4.8 and today we are at 4.2. So we feel in this financial year again as we keep moving around there is a scope of reducing by 15, 20 pips and eventually in the coming years it’s a long sustainable business. So it’s not about you know, for a year or two years. Let it be continuous process for coming years and coming, coming times.
Darshan Deora
And regarding employee productivity, so any insights you can share on currently, you know what is our employee productivity however the company measures it and you know what has been the trend and what is you know, the future expectation whether it is you know, files, loan officer or AUM per employee or disbursement point, however you would like to measure it.
Rupinder Singh
Normally what we see as we keep saying that most of our sourcing comes directly we don’t depend upon the DSS and third party. So we have a large set of team around that field. Today there are more than 1700 loan officers which work for us in these 290 plus branches there in what we measure in terms of number of files we are dispersing not on the volume particularly because again our ticket size is consistently stable as you might have seen in last many quarters. So what we feel that if employees able to cross two with these direct sourcing in check in terms of disbursement, I’m not talking about login, I’m talking about disbursement particularly then the things are justifiable.
So as we close last financial year that has cost even the range of beyond two also. But quarter one are normally lean and you add up many people around since you open 24 branches and things like that. So this slightly comes down less than two. But we are confident as we keep improving on this side this should definitely be the last year number. In fact quarter on quarter compared to the last year this quarter was better in terms of employee productivity.
Darshan Deora
Got it. An aspirational target for this figure would be.
Rupinder Singh
So we try to improve every year by 10% at least on that side. And we don’t say that this is a large fixed target on that piece. We put a lot of thought on the technology and ease of doing business. That’s a continuous process and I think there should not be some upper over on that side. Let’s continue in the journey around basically so you’ll find the improvement in the productivity that we can assure you.
Darshan Deora
Thank you. That’s awesome and all the best. Thank you.
operator
Thank you. The next question comes from the line of Shubranshu Mishra from Philip Capital. Please go ahead.
Shubranshu Mishra
Hi Rupinda, good morning. Thanks for giving this opportunity to ask. Questions.
operator
But your audio is not clear sir and there is a lot of background noise.
Shubranshu Mishra
Hi, can you hear me now?
operator
Yes sir, Please go ahead.
Shubranshu Mishra
Right. Good morning Rupinda Shubranshu here. So two or three questions. First that we’ve been. We’ve been hearing about asset quality stress in lap and especially you know, a ticket size around 10 to 20 lakhs. How are we faring in this lap? Any extra comfort we are taking in terms of collaterals or decreasing the LTVs and incremental disbursements. Second is that we still are running at a higher capital adequacy ratio. How do we plan to deploy this over the period of next two odd years and when? What would be our disbursement guidance for this year? If you can allude to the guidance in 27 as well.
And what will be the split between home loan and lab in that mix. Thanks.
Ashish Gupta
Thank you Shubanshuji. So we talk about asset quality stress in lab particularly she’s talking about and we also getting an MSC. Typically on state 3 side we don’t see difference between lap and HL. The number remains same the two. But yes on 30 plus side lap is a little higher than the HLPS. If we are at 4.5% of 30 plus then you can assume that HL is 3040 bits lower than 4.5 and lattice around 30 bits higher than 4.5. These are the normal trends. What we can see there beauty of this product is since LTVs are low we are maintaining LTVs around 45 47% whenever this customer moves to stage three.
We definitely have a capability of using tools like safety and thus the recovery is quite faster in that sense. And this is the reason between the two categories of Excel and Lab. When you talk about stage three there is no difference around safety. That is insane in terms of npp. On a collateral side we have all been prudent keeping in mind that LAP has to be purely on a self occupied residential property. Today we are maintaining 99% on the EM side but if we see the running disbursement then it is 100%. There is no. We are not taking any calls on anyway.
We are not taking any calls from last many quarters when it’s about lab. Apart from sorbps. If we talk about going forward we have given a projections of around 30 35% of growth from last six quarters. We are maintaining that and we feel there is a lot of scope going forward also. And this should be a continuous journey for many quarters going forward also. So we are find comfort around maintaining that 30 35% that we are going to maintain in terms of region particularly. And if we continue this piece. So your question about capital adequacy ratio because today leverage is 2.9.
It is around 57, 58%. We feel we should be back in market somewhere and after financial A28 closure for the next round that what we look forward we’ll be able to consume that piece. Once you are at A. You know 4.5 times in leverage I think you are good to go that what that is our understanding. But yes, let’s see how the time progress how we can bring bring you know potential into this entire mechanism that we are creating around at least. Sorry, you have one question from something.
Shubranshu Mishra
No, no, that was. That was missing. Yeah, you were coming to that answer.
Rupinder Singh
So actual lakh ratio we want to maintain 60 40. That is going to the trend going forward as our process, our mechanism, the market which we operate, the set of customers we are targeting, we are quite comfortable on that side. We are not going to change much around that piece yet for the pusher’s sake, we always look forward to increase by 1 or 2%. That is the progressive which we have to continue to take though we are not able to be get it as of now. But that’s not the only project is that we have to take it up in future particularly so we take a little bit here and there.
But you can continue to think about the ratio of 60, 41, 2% upper side is something which you want to take as an advantage.
Shubranshu Mishra
Right, right. And just one last question if I can slip in. Given the fact that we would be assessing customers cash flows on various other things apart from the income, so it’s basically an assessed income. What are the ranges of FOIA at the point of onboarding for home loans and what are the various mechanisms that we deploy, especially quantitative mechanisms during the tenure of the loan.
Rupinder Singh
So FY generally remains for us 50, 55% irrespective of whether the customer is a home loan customer or loan and lease property. Because we deal in the same vicinity. Particularly here. If you see the tenure for the loan against properties average coming around 10 to 11 years and for home loan it is around 15 years that we look into that size. What we have seen that the monthly income for these set of customers starts somewhere from 30, 32,000 and goes up to 65 from whichever focus area which we work around. So these are the aspects that we look into.
What is important for us is where we try to fund the smaller markets of TS3 tier 2, where these set of customers have their own stability in terms of their work, their past experience or maybe the collector, what they are acquiring or what they already have. So that stability piece, we always look into that piece. So these are few, three, four important items quantifiable that we always look forward to, you know, in overall macroscopic.
Shubranshu Mishra
Right, right. Thank you so much. This was very helpful. Thanks.
Rupinder Singh
Thanks.
operator
Thank you. The next question comes from the line of Sripal Doshi from Equirus. Please go ahead.
Shreepal Doshi
Good morning and thanks for giving me the opportunity. So my question was again on the lab segment. So could you please give us some color as to what would be the end use for, you know, for this category of loans for customers? As in like is it more towards MSME or is it more towards, let’s say some emergency needs of the customers that’s the question number one.
Rupinder Singh
So the market, what we are serving these customers should be a part of that ecosystem. And you know, servicing his activities to serve that market. Particularly they can be in form of small retailers, cloth merchant, sweet mart, grocery shop, small manufacturers, having late machines, all that kind of customer which is his income starts somewhere from 32,000 or something and have a vintage in those markets of at least 3, 4 years that is there and now have a aspiration to go to the next level in life whether by further acquiring of some shop, whether you know, putting a stock in his business since maybe sometimes they’re small manufacturers, they want to put some machines and all, all that kind of customer.
Because more than 95% of these customers are MSME self employed in this market. But yet being a lag profile, what we make sure that we don’t compromise on the collateral and there we make sure that we are taking a self occupied residential property with LTVs of less than 50. That is always a key that we have to keep in mind and that helps us out. Also like everyone, we also see lot of noises in market that MSME customers are in pain. But with this kind of security we have seen that when you execute your process around that fee, we are able to get back the required recoverable amount that we look forward in these kind of set of customers in kind of difficult.
So this is the way the business works.
Shreepal Doshi
Got it, Got it. So that’s a very detailed answer. Thank you for that. Also the second question was like I think you highlighted that you know, closer to 35% of our bank borrowing or liabilities are linked to repo and 20 business for benefit is what we expect for the full year. So what is the benefit that we are expecting on the spreads or margin front? Because we’ve not yet passed on any benefit to the end customer. So for full year are we looking at any benefit or that will not broadly be the case.
Rupinder Singh
So you know, so as we have already said that you know in terms of asset profile, about 85% of our total assets are at fixed rate or semi fixed rate and 15% are at variable rate. So even if we think of you know, passing some benefit in the month of say like select December 2025 select 25 business point, even in that scenario it will not be having a material impact on the overall yield at the portfolio level. So we don’t think that there will be any impact on the overall yields this year with respect to the benefit to the customer.
Shreepal Doshi
Got it. So nothing on the spread and NIM side As well.
Rupinder Singh
Right. So you know, so spread will remain briefly. So we have given a guidance that probably spread will improve by about 20 basis point further this year. And on the NIM side, NIM is a function of, you know, your leverage as well. So as the leverage will go. So you know spread and leverage will offset each other. So it will remain broadly stable at about 9%.
Shreepal Doshi
Got it, got it. So I just said the last question which was on PMAY CLSS2. So are we seeing like how is momentum in that, in that segment with respect to approvals eligibility? How many cases have we seen being approved or how many are in pipeline? If you could just give some sense on that.
Rupinder Singh
Thank you. Yeah, I think month on month traction is coming on pniwise theme also initially there were hiccups because the process. New process being laid out. Laid out and this time the process has to be more on the tech integration and things on that piece when the, you know that money has to be passed on to the end customer. So today we have shortlisted in fact there are almost 1500 applications that have been processed and quite a large chunk of that is in position to get a PMMY scheme. Almost 500 to 700 applications are still in process and we expect outcome very soon around that time in fact in 200 customers as we speak today, more than 200 customers already get a first branch of subsidy for which we applied to the bodies around for this pmm.
So we feel this is a continuous process and as the time progress, with the ease of this process and more customer getting aware we have a plan to go in these geographies more deeper to have a marketing activities around that site and convey this customer the right message which gov and not to pass where they can also get a benefit on that side. So that’s the process now we are more comfortable putting around. But till now the more action was to make the process more ease and smoother which is now picking up basically. So you can see fair traction with 200 numbers.
It is still very low those for the first couple of months. I think this you can satisfy with that but I think there’s a lot of scope going forward around this thing.
Shreepal Doshi
Thank you so much for the reply and good luck for the next quarter.
operator
Thank you. The next question comes from the line of Varun Bang from Bandhan Life Insurance. Please go ahead.
Varun Bang
Yeah, thanks for the opportunity and congrats. For the good set of numbers. Just two questions. Firstly, how do you see competition on the ground and how it is impacting us and the industry and do you sense that the quality of underwriting is deteriorating for industry at least, or at least in some cases. Some thoughts would be helpful.
Rupinder Singh
Market is enormous as we keep saying that. And we are still too small as a player, you know to feel the heat of that large competition of a bigger player. On that we have created our own niche targeting this Tier 3, Tier 02 market. We believe our productivity sets are yet to get further improved that we are working around that side. And when we go to market for source of customer, we don’t find some kind of undercutting or customer pressure on the customer to get moving from one point to other point. In terms of what happens in the larger or time ticket size that is still away in this segment, particularly where we are doing it since set of players who are focused on that type is still limited.
The same set of players operating from last 10, 12 years, those serious players, we don’t see much of action in terms of undercutting or push pull around the customers. Yes, there is always competition in terms of poaching employees from one company to other company which we also face like either on that. That is one side particularly what we see on the other side. You said that underwriting things as going down or something like that. That’s the philosophy of any organization how they want to take it up. There are short term and long term goals. The people which exist from decades and continue to give the performance, I think they know the value of the.
We don’t find any challenges there. But some new companies, some new places they want to play around that that is their way of thinking about particularly for us. We are very clear that this is a journey which has to be successful for many many years going forward. And that’s the prudently we want to take it up next level. So there’s many things happening in industry. There are many companies which do come for at least but that’s not a focus area for us.
Varun Bang
Understood. But from industry perspective it is right to say that the quality of underwriting is sort of getting impacted negatively to some extent.
Rupinder Singh
Overall macro scenario as well as seasonality sectors. There was definitely a challenge. You have seen the situation happening NFI situation happening with unsecured. Definitely that feed does come for the set of customer also since market trends are like that. So that set of feedback is there definitely there. But you have to wear your lawns accordingly and take it to the next level.
operator
Sorry to interrupt sir, but your audio is not clear. You are sounding very low.
Varun Bang
Yeah. Is it clear now?
operator
Yes, yes, it’s better now. Please.
Varun Bang
Yeah. The second question is on the attrition rate. How is the attrition rate in the. Sales team and let’s say versus last year how it is evolving.
Rupinder Singh
So we have always divided attrition rate into two basis. One is irritable and one is non regrettable. And yes, non rateable is always higher than the regulable. When we compare to the last year attrition rate has slightly improved but not to up towards the reception. There’s a lot what we can do about it. And yes there’s a lot of hitting market still going on. There’s no doubt of improvement compared to the last year when we see the attrition rate. So I give a Data point quarter four to quarter one. There’s improvement around 10% when I talk about attrition rate particularly again to make sure facilitation about our set of employees to engage more to make sure that they look for a long stability around that piece board has been very kind to support when they come particularly there where there’s almost what is to be 25% of employees with the stock options as to go beyond 50% that we are taking the next fund.
So all performing employees which we talk which we think that can be the critical attrition for tomorrow we are trying to rope up under the, you know, domain of employees options. So today we have around 350 employees which are under this piece which will go up to the level of 800 in this quarter itself. That is the thing that we are taking up. And thanks to both and thanks to our investors that’s been so kind in terms of supporting for this mission what we are building around.
Varun Bang
That is helpful. And if I just may know the percentage attrition rate in the sales team.
Rupinder Singh
For equitable side. Yes, it’s very heavy. Sorry, non equitable side it is very heavy. For equitable size it is around 20, 23%.
Varun Bang
Got it, got it. Thank you.
operator
Thank you. The next question comes from the line of Umang Shah from Kotak Mahindra amc. Please go ahead.
Umang Shah
Yeah. Hi, good morning. Thanks for taking my question and congratulations to the team on a good quarter. I have two questions. One is on if you could help me. What’s our asset mix split in terms of fixed variable and partly fixed come variable.
Rupinder Singh
So in terms of overall asset profile about 15% of the portfolio is variable rate. Then about 30% of the portfolio is semi variable kind of rate wherein initial 3 year is 6. So we started this product about 18 months back. So still 18 months of fixed rate. Journey is left in those loans and then remaining 55% is completely fixed.
Umang Shah
Okay, and could you help me with the fact that how much have we passed on the variable rate portfolio? Or as you mentioned at the beginning of the call that we’ll wait for the cost of funds to come down and probably then pass on reductions on the, on the variable rate book.
Rupinder Singh
So you know, so as we said that we have not passed on the entire repo wise benefit as well when the repo rate was rising. And in fact at this point of time we are still yet to see the full benefit on the cost of fund side because you know, the benefit larger part of the borrowing is linked to mclr wherein you know, banks MCLR has come down by about 10:15 basis point only and the benefit of that will come to when the reset will happen for those borrowings. So we believe that, you know, some, some, you know, some, some sizable benefit on the cost of fund will come by Q3 and then probably we will evaluate that how much we need to pass on those 15% variable rate borrowings, variable rate assets.
Umang Shah
Okay. And got it. And sir, on the, on the semi variable piece. Right. If you could help us that even on an incremental basis the proportion of semi variable lo largely similar in terms of origination or, or, or it would be lower.
Rupinder Singh
So on the incremental basis, if you look at the breakup of the total dispersion that is happening around 50 to 60% of the incremental disbursement is happening on a semi variable rate structure.
Umang Shah
Okay, all right.
Rupinder Singh
Sort of down the line. Briefly we have an expression that, that down the line two years we should have 65% of our total assets linked to variable or semi variable rate and remaining 35% get funded by a fixed rate or equity.
Umang Shah
But typically, do you really believe that whenever the semi variable rate loans become fully variable. Right. Which is typically after a period of initial three years, does that create some sort of a volatility in margins? Or you think on a proactive basis can the management depending on the rate environment at that point of time can look at, look at repricing these loans vis a vis competition.
Ashish Gupta
Umanvi, when we took this call particularly there was two thoughts. On basis of data points which were available. We have observed the customer which are speak to us for more than 30 months. They continue to run with us for pretty long time. The maximum foreclosure, the maximum balance transfer which happens within first 24 to 30 months. What happens basically? So this is one of the factor that Become a key driver. Particularly yes, we have to maintain, you know, variable fixed proportion. Also keeping in mind how is our liability franchisee, you have to always be prepared for the rainy season.
And because of that reason we come up with that fact. And when you have a customer which is engaged with us and you are giving good service, then at least you can engage for long. So I think till now, and we hope in future also this strategy should work. That is our thought and on basis of that we are working towards this.
Rupinder Singh
And just to clarify like here Uman, that you know, these semi variable rate loans are not a teaser loan kind of structure. You know, the customer is having a, you know, regular rate of interest at this point of time, which is fixed rate and after that that kind of rate of interest will just become variable.
Umang Shah
Sure, sure that helps. Sir, my second question is on, is on asset quality. Now what we have seen is that clearly there is a bit of a seasonality in the business, right? But if I just zoom out and take a slightly longer view, I mean our 30 DPD, let’s say in last three years has moved up from let’s say 2.5% to let’s say 4.5% today. And typically we do see the pullback from 1Q to 4Q happening. So I’m just comparing 1Q numbers over last three years. Right. But now I understand that there is a bit of a book seasoning which has happened and also the environment has changed quite a bit compared to last two years.
So just wanted to understand that typically on a risk adjusted basis, the kind of spreads that we are making and with the kind of customer segment that we are dealing with, how should we look at 30 DPD and stage two numbers? Right. I mean the stage two numbers are still not as high. So I am saying that should we see these movements as some bit of sort of a mean reversion on the upside or you think that even in the current environment you think you can pull it back to lower levels and it will sustain at those levels? Yeah, that’s my question.
Rupinder Singh
Two and a half is the wrong bottom at the best of times. Which happened largely in a quarter four which happened two years back. It had been happening this year it was around 3.1, 3.2, even a quarter four ending result, particularly even those times used to say that number which looks two and a half is even, you know, pleasant surprise for everyone, including us particularly. Right. What is the number today? Sustained? Yes, we are not only hopeful but are confident about that they soon to come back because this Is the time which is being infected by multiple things.
Not only seasonality, but much macro environments and things that we are hearing across. Basically we. We feel that this number is going to come and sustain around 3.2, 3.3 as we close this financial year. But yes, for this quarter, particularly if you want to understand, I think you can find this number is going to be maybe around the same number, little bit on the lower side. That is something what we feel around as we see the July progression basically. But still we have two months to come out and see how the things trends around that side, right?
Umang Shah
Yeah, but Rupinder. Sir, my question was not from let’s say next two quarter perspective or three quarter perspective. What I was trying to understand is that for the business that we are running and the customer segment that we are into, should one assume that that 30 plus a more normalized rate is run rate, let’s say on a steady state basis is between 4, 4.5 and maybe stage 2 is anywhere between 3 to 4. Is that a fair assumption to make? And I completely understand that 2.5% and 3% numbers are sort of outliers, right? I mean that’s an outcome of a very benign asset quality environment.
And rather should we be alarmed at four, four and a half or that should be more like a steady state. That is what I was trying to understand.
Rupinder Singh
We should not allow as a team who are leading the businesses, basically we should always look for the positive things. But directionally what you are thinking looks, you know, practical. When we see in the market, our property is not to allow this. Our property is always to keep pushing and reducing it as far as possible. We will use further tools which are available today and how to make sure that other standards we can improve around that. So a launch is not there but your thinking is. I largely go with that.
Umang Shah
Understood? Yeah, I think I got the answer. And so just last point in terms of credit cost, right? I mean 40 to 50 basis points is what we have reiterated as a. As a more steady state credit cost number, right?
Rupinder Singh
Yes, yes, yes, absolutely.
Umang Shah
Okay. All right. Perfect, perfect. Thank you and wish you all the best for future quarters.
Rupinder Singh
Thank you. Thank you.
operator
Thank you. The next question comes from the line of Mayank Agarwal from Trust Mutual Fund. Please go ahead.
Mayank Agarwal
Hello. Thanks for the opportunity for a good set of numbers. Sir, can you throw some color on. The industries which are facing the stress, the geographies which are facing the state? Is it the urban, semi urban, rural? What kind of customer segment are facing the state? It is aggregated non aggregated some color on that. And also what gives you the confidence that will this stress and reverse for next quarter? Yeah, that’s the question from my side.
Rupinder Singh
So this is a trend what we are seeing from last many years that quarter one are normally week and week one basically and quarter two try to remain stable around that side. And the thing starts progressing from quarter three onwards. And when we compare Apple to Apple we see yes, there’s little uptick on that side but we also see how the rollbacks are happening and how things are acting in a field place particularly how the teams are getting response and things like that. On basis of that we are able to give tentative projections for the future that is there.
If you talk about this is not a phenomenon in one particular space and all. Yes, there are certain states, for example for us NP is little higher than the rest of these which we always keep mentioning and discussing. And we have tweaked few things there particularly but has not come down to the level of our expectation as of now. That will take some more time that we see that. But otherwise I don’t think there is a much difference between one state to other state across countries. For us outlier is definitely empty but rest of the state have also been a spike this quarter that what we have seen observed.
So this is a trend across in that sense. If you talk about the particular businesses that we have to evade on that piece, again there’s a trend market to market. In some markets certain businesses may have some clause or certain set of customers may have a certain flaws. So that we keep building evaluating on our underwriting side and we keep focusing on how to tweak around that side. End of the day, this is a customer which is definitely at the outer ring of the competitive environment. Basically they are someone most of them who comes with a certain income size and whoever, you know, quite a few, maybe an NPC also and maybe someone who actually are something who owns everyday living.
All those kind of customers are available there particularly. So there’s no trend like there is some orders got cancelled or some SNE got stuck out because of some macro conditions which is happening at global level. Overall things are cheating environment and because of that there’s some suppression on that side.
Mayank Agarwal
Thanks. Thanks a lot sir. Best of luck.
Rupinder Singh
Thank you. Thank you. Thank you.
operator
Thank you. The next question comes from the line of Shweta from Elara. Please go ahead.
Shweta
Thank you sir for the opportunity and congratulations on a good quarter. A couple of questions. I’ll begin with asset quality only. While you fairly Answer the question on the stage two spike and the 30 DPD spike. But the reason that it has remained slightly unusual and also now this is a new normal is what I understand. So why hasn’t our ECL provisioning or PCR sort of seen any changes or has remained unperturbed? So if you could just throw some color on assumptions on CDS and LGDs and how are you factoring these macro headwinds? Yeah, that’s my first question.
Rupinder Singh
While computing The PD and LGDs, you know, we take the data for last 12 years, which is briefly, you know, two cycle on a, on a, you know, beverage basis for these set of loads. So and while computing the lgd, you know, we consider macro factors, you know, see like gdp, housing price index, inflation, interest rates. And we find that over the period, you know, our LGDs have, you know, LGDs and PDs have a positive correlation with the market interest rates. So we have seen that, you know, say like in the time of COVID demonetization, when the rate of interest goes down, probability of default rises.
So you know, factoring these macro factors into our ECL calculation, you know, we compute our PD and LGDs and this is that, you know, we calculate our UCL. So over the period we have seen that, you know, PD has slightly gone up because of these macro factors. But correspondingly with the, you know, as the resolutions are increasing, we have seen dip in the overall lgd. So backed by the, you know, strong LTV and the strong collateral we have in the form of self occupied properties, our LGDS remain quite under control. So historically on an average we have, you know, while doing a resolution of about 2500 odd properties, we have seen an LGD of about 11% historically.
So collectively by multiplying the PD and LGD we are arriving at this kind of provision and we feel that we have built enough buffer while, you know, while applying the management overlay while computing the acl.
Shweta
Okay, I was also coming from the fact that because the book seasoning is happening now. So maybe you know, if there were any changes in those variables. But yeah, nonetheless I think you fairly answered the second question is although you did explain on Karnataka challenges so little bit more there. So is it that Q2 will be the last quarter wherein you know, Karnataka challenges beat on credit volumes or credit quality that things will be behind Because I believe it’s already peaked out. So that’s one on Karnataka. Second up MP Tamil Nadu. So these are the other three states where we have a fair presence and concentration.
Even these three states have thrown some negative signals. So could you just allude how is your experience, you know, around these three geographies. Thank you.
Rupinder Singh
So we hope that this thing should settle down for Natka piece particularly. Yes. We have built certain teams in collection also and they also giving a positive response as we added their resources particularly and I echo with you that you also believe in Q2 it’s going to settle down and we also believe largely to that extent. Let’s hope for the best around that side. Talking about the rest of the states like CN UP and NP MP is definitely we are trying to, you know, resolve it as early as possible though it has not shoot up beyond that peak.
It is around that little uptick definitely in month of quarter one. But we are hopeful that things should come up. The new leadership is settling down and you know the leadership has a recent understanding and background of collections and they are actually quite active in a field particularly about UP and Tamil Nadu up. In fact we have one of the lowest delinquencies across country among all the states. Yes, VOC is new. What we learned through the developments which happened in last 1012 years. We are trying to imply new keeping in mind that past tracks and trends around that piece though market is responding well in that slight uptick is there but things look largely under control as we see going forward and this slight uptick is more aligned with the same what is happening across countries.
It is not something bizarre or out of the control in that sense. So since you asked about statewide state, I try to give us some colors around that site. So yes there’s a multiple aspects which has come up together this time and I think the time to bounce back for which we are ready.
Shweta
Sure. So that’s very helpful. And last question if I may squeeze in in your lab portfolio or across segments, whatever the spike we have seen this particular quarter, be it soft bucket or hard bucket, do you also attribute this to multiple loan exposures at the borrower level? Is that also something which is bothering you from your customer perspective? That’s my last question.
Rupinder Singh
So generally if these kind of set of customers have multiple loans also, but normally they have a one single asset which they have to rely on. And this is the trend that we have seen in the lab, particularly the the customers which are having a multiple loans but as it become a delinquency and you execute the process around that fee, there’s a impact of a rollback instantly. And this is a reason between LAP and hl as I Mentioned in earlier answer to the question, the GNP number remains largely same. Basically if it is 1.2 in HL then it is 1.2, 1.24 in Lakh.
There’s no much of difference between the two particularly that is there. So there’s definitely lot of loan distribution happened in last four, five years that it is definitely there for the set of customers. But we are confident on basis of that the underlying collateral and the rules and mechanism that we have created around that. So I think worry is not about whether get a money back or whether to go forward. It is the point is how early we can come back. That is the point.
Shweta
Sure. Notice sir. Thank you so much.
operator
Thank you. The next question comes from the line of Shish Kanani from Centrum Broking. Please go ahead.
Shailesh Kanani
Good morning and thank you for the opportunity. So most of my questions have been answered. Just a couple of one question and one clarification. So could you throw some light on how the loan transition has been, how we are monitoring that post disbursement and has there any change or any color on that part?
Rupinder Singh
Sorry, I think you have to repeat the question. We couldn’t get it properly.
operator
Yeah, sorry, there is some background noise. Can you please use your headset?
Shailesh Kanani
Sure, sure.
operator
Yes sir. Thank you.
Shailesh Kanani
Is this better?
operator
Yes sir, Please go ahead.
Shailesh Kanani
Yeah, sure. So my question was can you, can you shed some light on how the loan utilization has been from the client’s perspective? Is there any post disbursement monitoring of the same and has there been any change in that?
Rupinder Singh
So definitely today, in a world when so much data is available through bureau the markets and all the data science team main core job is to assess that and give instant feedback to management which has to populate further to the ground particularly that’s a continuous activity and that become more rigorous, you know, whenever the times are little, here and there basically. So that’s the continuous process around that. Whether it’s a bureau, what kind of set of customers there are, how many are having a, you know, micro finance customer, all stuff that we take it up and accordingly keep taking it.
That’s a normal process and it’s for all kind of times that has to be the person and for that it is not something we have created. Now this is existing from last three years, the data science team which is quite corrective around that given the feedback.
Shailesh Kanani
Fair enough. And second, just a clarification. When we said the LGD is 11%, what is the denominator in that? That is including accrued interest. I’m assuming. Right. Everything included.
Rupinder Singh
Yes, yes. You know, while we compute our lgd, we consider both the principal and the interest.
Shailesh Kanani
Right.
Rupinder Singh
Technically, if the surface process is taking about, you know, nine to nine to 12 month kind of time, then we are recovering entire principal and part of the interest.
Shailesh Kanani
Okay, fair enough. That’s all from my end. Thank you.
operator
Thank you. The next question comes from the line of Kunal Shah from Citigroup. Please go ahead.
Kunal Shah
Yeah. Hi. Congratulations. So firstly when you look at it overall in terms of 30 plus DPD. So when you look at it like generally in 2Q also we see some kind of further deterioration that happens on 30 plus now. But you indicated that in July maybe we have seen an improvement. So how should we expect the trends as well in next couple of quarters? Maybe earlier you indicated that eventually you would see it settling slightly higher at 3.2, 3.3 compared to that of last year. But would the larger part of the pullback would be towards the fourth quarter and the generally the trends which we have seen in last two quarters would continue and would that be at an accelerated pace the way we saw it in the first quarter as well?
Rupinder Singh
So Kunalji, we feel this quarter should largely remain stable. That is our understanding in the past 10 as you mentioned particularly our focus is quarter three has to be better than quarter two. Obviously that’s the way going forward. If quarter two remains like what is quarter one, I think we are confident that quarter three will be going to be positive. And that’s our first indie equation that we are the first action that we are building around. So obviously quarter four normally ease down if that happens because of all the factors works, entire universe works for you.
Right. So only objective is can we bring quarter two better than quarter one. That is something we, that’s our prologative and that’s what we’re working on. But what quarter two is going to remain stable largely in quarter one? If you see on the conservative side.
Kunal Shah
Okay, okay. And if that doesn’t happen then it would be more like the macro conditions which would hardly reflect in terms of the collection efficiency here.
Rupinder Singh
So when we are having so much of discussion on that, so much of work might be going on the field. Also we have to put the things on little more alert. Today we are working with the X efficiency. Then we have to drive the efficiency as 1.2x in that terms, whether it’s.
Kunal Shah
A so that we are doing it any which way. That’s what you indicated. Okay, perfect. And secondly, what is the incremental yields currently compared to the reported yields that we have now.
Rupinder Singh
It’s same. It’s same. There’s no much change into that.
Kunal Shah
So as you mentioned like you are not tweaked the rate so it still continues to be similar. So incremental yields are not really lower than the book yields at this point.
Rupinder Singh
In time it’s same 14.9% and frankly as we progress we may like to pass on some amount, maybe five, ten bids to that fees because we are getting a benefit around that side help into developing further business and things around that. That’s a little bit weak in strategy for the positive side, nothing else.
Kunal Shah
Sure. And getting on to the state specific. So mp, you clearly indicated there was an issue and maybe now it seems to be like almost picking out and the rundown might not be that high in terms of the proportion but when we look at maybe in terms of say Gujarat and Uttarakhand, would it be more like industry wide phenomena in terms of lower credit demand compared to that of the other states or is it like more company specific measures wherein the proportion is actually coming down?
Rupinder Singh
So NP is definitely as I mentioned and you also pointed out rightly but for the rest of the stage we will not find something going here and there in terms when you’re picking up a new set of customers or we are dealing with early set of customers. Yes, in last couple of quarters or in fact 3, 4 quarters. This is a little strange when it’s about getting a collection and all. But we sorting out in our own ways and you can see we have seen that result in quarter four, quarter one definitely picked up and I hope for BIG to call on time as we progress further.
Kunal Shah
So Gujarat I was just talking with respect to the growth. So maybe growth when you look at it in terms of Gujarat MP that’s growing at a relatively slower pace compared to that of the overall AUM growth. So just wanted to understand maybe MP there is specific issue but Gujarat and Uttarakhand is it more industry specific, lower credit demand or is it more company specific? Maybe either the attrition issue or we going slow.
Rupinder Singh
So we going slow in Gujarat because we like to always maintain the spread of 6% that we realize that we have still need to build the capabilities around that side. So there is no point when entire nation what we are able to get a 6% and not able to get it in Gujarat particularly So that is there and Uttarakhand being a hilly region, there are certain set of branches which we can open which we open quite a long time and we are maintaining that we’re not expanding there particularly. So there’s a limitations around that.
Kunal Shah
Yeah. Okay, got it. Perfect. Yeah, thanks. Thanks a lot.
operator
Thank you. The next question comes from the line of amant from Philip Capital. Please go ahead.
Amant
Yeah, so congrats on a good set of numbers. I just have one question which is. On your direct assignment. So if I look at your direct assignment income for this quarter, it’s relatively high. And also on the AUM side, if I look at your direct assignment, the lab product and has increased to 43% of the total book. As I understand you do major direct assignments in the lab products. So is that a trend that we should see continuing for the medium term?
Rupinder Singh
Yes. So like you’re, you’re right that we are doing type assignment only on the lab product. So while you may be seeing increase on the quarter on quarter basis, but if you see the, you know, direct assignment income as a percentage of average total asset year on year, this is say like last time it was last Q1, FY25, it was at about 1.7%. Now this is at about 1.8%. So broadly, if you look at direct assignment as a percentage of totally dum, it remains range bound between you know, 15 to 17%. And it depends on, you know at that time at which quarter you need slightly higher funding, at which quarter you, you are not.
So you know, some modulation remain because of that.
Amant
Okay, so is it fair to assume it was majorly because your end and of course you would also have to do some hygiene checks on your portfolio. You would have moved more assets off your balance sheet this quarter then.
Rupinder Singh
So can you please come like, like come again. So we didn’t get the question.
Amant
Yeah, so my question was, so is it a seasonal thing that you have seen major income this quarter and maybe you’ll see some moderation going forward?
Rupinder Singh
No, so like, so it’s not that that much seasonal seasonality impact is there. It is more of a, you know, the market funding that like how it remains like in Q4 generally say like bank funding comes up and you do lower DA. But in the Q1 generally, you know, some loan funding proposal takes slightly longer time and then you availed here so it may remain at the same level. So generally you will see around 30, 35% growth in the DA on a year on year basis.
Amant
Okay.
Rupinder Singh
Percentage as the, as a percentage of AUM will remain in the range of 15 to 17%.
Amant
Okay, so thank you. That, that has that clear clarified. Thank you.
operator
Thank you. The next question comes from the line of Mithain Lathaiya from Factual Capital Investment please go ahead.
Mithai Lathiya
Good morning sir. Looking at the repayment rates we have had a steady improvement in the repayment rates over the years and that continues if you could sort of break that down and what is exactly getting us this better repayment rates.
Rupinder Singh
So like you know, repayment rate remain a function of you know, your prepayments, balance transfer that happen. So over the, you know, last, last 1218 month we have seen that btout remains quite under control. It is briefly ranging between 5 to 6% so at currently it is at the lower end of the range. So your rundown rate is reflecting the benefit of the same.
Mithai Lathiya
Have we also increased the tenor of the loan on an average or that remains the same broadly?
Rupinder Singh
No, contractual tenor is briefly for a lap loan is at about 10 years. For home loan it is at about 15 years. But you know the real meaning is about the BML tenor, how it is net of prepayment. So that is briefly consistent at about 6 year for lab for, for lap loan, 7 year for home loan.
Mithai Lathiya
Great sir, thank you.
operator
Thank you. The next question comes from the line of Sakshi Goenka from Sakshi Goenka. Please go ahead.
Sakshi Goenka
Yeah, thank you sir for giving me the opportunity and congrats for a good set of numbers. I just had a couple of questions. So we’ve seen for the last three quarters AUM growth in the lab segment has been materially higher than our growth in the home loan segment. Now given the soft commentary around, you know, Microlab, do you think it would be prudent to slow down growth here and focus back on the home loan segment?
Rupinder Singh
So quarter four has been better than quarter one, quarter two of the last financial year when it affords the percentage growth into home loan. Right. And yes there’s a prerogative that we are taking because ultimately on the PVP side also we have to maintain 60 40. So it is not something that we are looking in terms of that this is a risky, this is a non risky product but it is a, you know, balancing it that you have to maintain it. So we, our project is to maintain that 6040 which we are meeting slightly whether it is a 50, 1043.
So yes, we are taking certain probability that 57 goes beyond 60%.
Sakshi Goenka
Sure sir, I suppose one more thing like obviously this quarter across lenders you’ve seen commentary being soft around SME. So you think this is a recent phenomenon sometime in, you know, in the last quarter Jan Feb. Were any of your internal indicators suggestions that you know, things Are looking a little soft or you think this is more obviously there is one seasonality and more this seems like more recent phenomenon rather than we could have spotted this, you know, three to four months back.
Rupinder Singh
SME is largely been divided into a set of customers. One is SME where lot of unsecured loans been given and maybe quasi loans been given. Whether some part of the mortgage, some may not be something like that. We have only two products which is loan against property and home loans. In both of the categories we make sure that collateral is very well interest and is being given to SME. Particularly when we as female spike going up. We also realize the you know, spike between the two which is SL and NAC is not much of essential.
So principally also between the HL lakh whatever the difference used to be B that continue to remain same. And in fact the GNP ratio between the two both remain same. So technically if SME loan what you’re giving back with the right collateral, then you are what indicates are you are better better space than the if you don’t have any collector and all. So those are things that we could experience in last eight, nine years of underwriting. Whether it was BMOD and the situation like that. This looks not as heavy as it used to be earlier.
But these things are working out well. Basically that is our understanding. And on that only we are focusing.
Sakshi Goenka
Got it, sir. Thank you so much and congrats again. Thank you.
Rupinder Singh
Thank you.
operator
Thank you. The next question comes from the line of Vatsa Nagelia from Astral Mind Capital. Please go ahead.
Vatsal Nagelia
I wanted to know about if you want to maintain your ROE guidance. Is there any ROE guidance? And also like for the quarter two. Do we expect a stage three of around 1.5 since we have seen an uptick in stage this quarter.
Rupinder Singh
So you know, in terms of our ROE guidance briefly we have given that, you know, by like FY28 down the line three years from here we will we will start touching a leverage of about 4x. At that point of time Roe will be about 4.5, 4.5%. That briefly result in 2 Roe of about 18%. So that is the, you know, guidance for medium term and we continue to maintain that.
Vatsal Nagelia
And on the stage 3 for the. Quarter 2, do we expect around 1.5%. Since we have seen higher in stage 2 this quarter.
Rupinder Singh
Come again, can you please repeat this one?
Vatsal Nagelia
Like do we expect a higher stage. Three this quarter or are we improving. Our collections from the stage two to maintain the stage three?
Rupinder Singh
We would always like to have a lower than what is in quarter one. That’s a positive and we’re working towards that. Still two months to go should not come out openly that this is our expectation or not But July when we see typically on 30 TPD right. 30 TBD looks, you know, almost at the same level. What Only I can give an indication around this time.
Vatsal Nagelia
Okay. Okay. Sure. Thanks a lot.
operator
Thank you. Ladies and gentlemen, we’ll take this as the last question for today. I will now hand the conference over to the management for closing comments.
Rupinder Singh
Thank you everyone for taking your valuable time for attending our earning call. An audio recording and the transcript of this call will be uploaded on our website in due course. Looking forward to hosting you all in the next quarter. Further, if you have any questions or require additional information, please feel free to reach us out. Thank you so much. Jai Hind.
operator
Thank you on behalf of ICICI securities limited that concludes this conference. Thank you all for joining us. And you may now disconnect your lines.