IndoStar Capital Finance Ltd (NSE: INDOSTAR) Q3 2025 Earnings Call dated Jan. 21, 2025
Corporate Participants:
Viral Sanklecha — Analyst
Randhir Singh — Executive Vice Chairman
Karthikeyan Srinivasan — Chief Executive Officer
Vinodkumar Panicker — Chief Financial Officer
Shreejit Menon — Niwas Housing Finance Private Limited
Analysts:
Vibha Batra — Analyst
Arnav Sachdev — Analyst
Danesh Mistry — Analyst
Yajash Mehta — Analyst
Monshree Soni — Analyst
Anurag Mantry — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the IndoStar Capital Finance Limited’s Q3 and Nine-Month FY ’25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the call, please signal an operator by pressing star then zero on a touchstone phone. I now hand the conference over to Mr Viral from Orient Capital.
Thank you, and over to you, sir.
Viral Sanklecha — Analyst
Thank you, Rayo. Good afternoon, ladies and gentlemen. I welcome you for the Q3 and nine months FY ’25 earnings conference call of IndoStar Capital Finance Limited. To discuss this quarter’s business performance, we have from the management Mr Randeer Singh, Executive Vice-Chairman; Mr Kartikan Srinivasan, Chief Executive Officer; Mr Kumar Panikar, Chief Financial Officer; Mr, CEO of Niwas Housing Finance Private Limited; and Mr Pushkar Joshi, CFO Niwas Housing Private Limited.
Before we present with this call, I would like to mention that some of the statements made in today’s call may be forward-looking in nature and may involve risks and uncertainties. For more detail, kindly refer to the investor presentation and other findings that can be found on the company’s website. Without further ado, I would like to hand over the call to the management for their opening comments. And then we will open the floor for Q&A.
Thank you, and over to you, sir.
Randhir Singh — Executive Vice Chairman
Thanks,. Good afternoon, ladies and gentlemen. I welcome all of you to our Q3 FY ’25 earnings call to discuss the financial performance of Indusa Capital Finance Limited. I’m Singh, Executive Vice-Chairman of Capital Finance. I hope you all had the opportunity to review our financial results and investor presentation, which are accessible on our website and also via the stock exchanges.
Joining me today are Mr Karthuki and Srinivasan, our Chief Executive Officer; Mr Vinod Panekar, our Chief Financial Officer; Mr Srijis Manan, the Chief Executive Officer of — Chief Executive Officer of our wholly-owned subsidiary; Nevas Housing Finance Private Limited; formerly known as Industar Home Finance Private Limited; and Mr Pushkar Joshi, Chief Financial Officer of Housing Finance Private Limited.
At the outset, let me share with you how we structured this call. I’ll briefly cover some key strategic highlights that the management team delivered over Q3 FY ’25. Kartik will then be giving all of you an overview of the macroeconomic drivers and key industry trends, setting the broader context for the financial performance of the CV business. Subsequently, Vinod will give you Q3 FY ’25 earnings update. This will be followed by sharing the Q3 FY ’25 earnings update for Nibas Housing Finance Private Limited. We will then open the call for questions.
Here is a quick review of some of the key developments and highlights at IndoStar through the quarter. During the quarter, the management team delivered a consolidated PAT growth of 64% vis-a-vis quarter three FY ’24 and AUM growth of 32% to INR10,625 crores and disbursements of INR1,572 crores, which is up 17% year-on-year. At the standalone ICF level, over the last one year, we’ve been able to reduce our cost of borrowings by 110 basis-points. We are also carrying significant liquidity of INR1009 crores and additional undrawn amounts of INR525 crores.
The third update would be on the all annotment of warrants to BCP Multiple Holdings PTE Limited. During the quarter, the Board approved the allotment of warrants of the company on a preferential basis by way of a private placement, the Capital Partners, a promoter of the company, the total consideration received by ICF is INR205 crores, which is 80% of the total subscription amount of INR257 crores. The company monetized SRs of INR135 crores of CL Pool while also giving up liability to fund additional about INR60 crores on the IRC transaction. With effect from November 22, 2024, the name of Industar Home Finance Private Limited, a wholly-owned subsidiary of Capital Finance has been changed to Housing Finance Private Limited.
I will now hand over the call to Kartik to take you through macroeconomic developments and emerging trends in the industry.
Karthikeyan Srinivasan — Chief Executive Officer
Thank you, Ravi, and good afternoon, everyone. I warmly welcome you all to today’s call and sincerely appreciate your continued support on our journey.
To begin with, I would like to touch upon the macroeconomic conditions this quarter. The RBH MPC recently revised its growth forecast for the current fiscal year downward to 6.6% from 12.2%, while raising its inflation projection to 4.8% from 4.5%, citing concerns over food inflation. The MPC maintained a neutral stance signaling scope for potential rate cuts if the inflationary pressures ease further in the coming months. India’s retail inflation eased to a four-month low of 5.22% in December, down from 5.58% in November, primarily due to slowdown in food prices. Although price increases have moderated slightly, inflation is unlikely to return to the Central Bank’s medium-term target of 4% before the second-half of 2026.
RBI and its MPC meeting decided to keep the policy repo rate unchanged at 6.5% for the 11th consecutive time. The RBI Governor emphasized that despite the recent economic slowdown, the structural drivers of growth remain resilient. Real GDP growth is expected to recover in the third and fourth quarters of ’24, ’25, driven primarily by domestic factors such as public consumption and investments. Moreover, press tests conducted on the NBFC sector indicate a strong level of resilience with capital levels well-above the regulatory requirements even under the adverse scenarios.
However, we cannot overlook the global medium-term risks, including the geopolitical tension, market volatility, climate disruptions and rising debt levels. So at the same time, it is important to address the outlook for the NDFC sector. The report suggests that growth in the sector may slowdown in FY ’25 due to several factors. Loan disbursements are expected to decrease, particularly in the unsecured loan segment as tighter regulatory checks come into play.
Additionally, slower-growth in the vehicle and lower average selling price are expected to reduce the auto loan disbursement, especially for new IT. While the sector remains fundamentally strong. These trends highlight the need for innovation, adaptability and careful navigation of both the domestic and global challenges to ensure long-term stability and growth. Moving forward, the commercial vehicle industry and the key trend shaping its outlook, the CV has been a vital contributor to the economic activity and has shown growth over the past two years, driven by the post-COVID ’19 recovery, infrastructure development and the revival of the mining activities.
The pent-up demand is likely to kick-in anytime soon, what’s the expectation, but the pent-up demand has been quite slow. However, recent months reveals a decline in domestic CV sales, which fell by 5.2% year-on-year and 12.1% month-on-month. This is attributed to subdued market sentiment, delay in the releases of government funding and slower financing approvals. Tractors, on the other hand showed some resilience with a 2.5% year-on-year growth, driven by robust rural demand and improved agricultural liquidity.
According to the recent CRISIL rating report, vehicle finance AUM in India are projected to reach INR9.4 lakh crore by FY ’23, growing at a compounded annual growth rate of 15% to 16% over the fiscal and mixed. This growth is driven by rising demand for used vehicles and a growing preference for premium models, supported by steady sales across the commercial vehicle, car and UVs. While the recent changes in GSE on profits for used vehicles may slightly increase ownership cost for borrowers, the cost of the used vehicles will still remain much lower than that of the new ones, ensuring continuous demand in this segment.
The news — the used vehicle segment is also facing some supply-side challenges. Many transporters are now turning to used — buying used vehicles as the cost of the new vehicles has risen significantly. With the AC driver cabin coming mandatory from October ’25, the vehicle costs are — the new vehicle costs are likely to increase even further. The — this has caused a significant stress on the supply-side of the used vehicles because not enough holder vehicles are available in the market. This shortage is due to a fewer new vehicles that were sold during the COVID years, which means number of vehicles which are available for resale is also much lesser.
Additionally, the industry’s shift from BS4 to BS-VI emission norms further reduce the number of older vehicles in circulation. For smaller transporters and first-time users, financing options of older vehicles are limited, making it harder for them to buy these vehicles. At IndoStar, we remain committed driving growth by expanding our product offerings and strengthening our presence in the retail CV operator segment. To this end, we are developing ancillary products like tire financing, designed to provide comprehensive solutions for our customers. Our focus on technology continues to be a key driver of our efficiency and customer satisfaction. By integrating technology across loan origination, credit appraisal, disbursal and correction, we aim to improve our operational agility while reducing our service cost.
Let me now provide an update on our company’s operational performance. In Q3 FY ’25, our total disbursements reached INR1,572 crores, reflecting a 17% growth compared to the same period last year. Disbursements for commercial vehicle specially specifically amounted to INR1,265 crores, marking an 18% increase from INR1,074 crores in Q3 FY ’24. As of Q3 FY ’25, our GNPA stood at 4.9% for the standalone entity. However, collections were impacted due to heavy rain which impacted the truck movement, which led to increase in delinquency levels.
Now I will hand over the call to Mr. Vinod Panicker to present the financial performance.
Vinodkumar Panicker — Chief Financial Officer
Thank you,, and good afternoon to everyone. I appreciate all of you joining us for this conference call today.
Let me now provide an overview of our financial performance for Q3 and for the first-nine months of FY ’25. Assets under management reached a figure of INR10,625 crores, which is 5% increase over INR10,112 crores of the previous quarter and 32% higher than the INR8,037 crores in the same quarter of the last year. Disbursements during the quarter totaled about INR1,572 crores compared to INR1,724 crores in the immediately preceding quarter, but it was higher than the INR1,345 crores that we did in the same quarter last year. This growth versus the last year can be attributed to our strong focus on the retail segment and consequent spreads of branches across the country.
Our retail lending strategy is successfully playing out with retail lending now constituting about 98% of our total loan portfolio. During the quarter, our consolidated net interest income from operations reached a figure of about INR241 crores, reflecting a 10% increase over the previous quarter and a 79% increase versus the same quarter last year. The net margin — net interest margin remained stable and continued to be in the 5.6% range.
Our consolidated operating expenses was at about INR155 crores and we reported a consolidated profit of about INR28 crores compared with INR3132 crores — close to INR32 crores in the immediately preceding quarter and INR16.9 crores in the same quarter last year. The collection from the — for the current year was at about INR1,265 crores, an increase from the INR1,163 crores that was there in the immediately preceding quarter. At a standalone level, ICF reached an AUM of about INR7,877 crores, an increase of 4% over the immediately preceding quarter and 31% over the same time last year.
Disbursement during the quarter was totaled at about INR1,291 crores compared to INR1,462 crores in the preceding quarter and INR1,121 crore crores in the same quarter last year. We are pleased to highlight that our average disbursement yields have been maintained at 18.5%, with a strong thrust of disbursements in tire three tire core towns and catering two secured lower-ticket products, which we call as Focus 4 which covers car pickups, light trucks and small commercial vehicles.
Consequently, our average ticket size has also gone down over the last five quarters from a figure of about 8.2 lakhs that we had in Q3 ’24 to 6.6 lakh in Q3 ’25. Incidentally, in the month of December, it had actually come down to INR6.1 lakh for the month of December. Our net total income reached a figure of INR181 crores, an increase of 9% over the INR166 crores that we did in the preceding quarter and a huge 87% increase in the — versus the same quarter last year. Operating expenses were approximately at INR121 crores compared to INR128.7 crores in the preceding quarter and INR191 crores in the same quarter last year.
Our cost-to-income has come down to 65% in the current quarter as against 94% that we recorded in the same quarter last year. Our capital adequacy continues to be robust at about 28.5% and debt-equity is in the range of 2% — 210, which gives enough headroom for future growth. We are confident that this will help us drive profit double growth in the coming quarters and years. Our emphasis on the coming quarters is to increase our borrowings from banking channel in a big way.
In the current quarter, we repaid INR12 INR150 crores and at the same time raised INR995 crores, of this 25% came from bank after overall cost which was about 10 bps lower than the immediately preceding quarters, we ended this quarter at about 10.8%. The first-nine months of the current year, we have been able to raise INR4,000 crores plus at substantially lower rates as the confidence of the banks and other lenders have improved substantially. There were sanctions of about INR575 crores, which we would be taking in the months of January and February. All-in all, it is to say that funds have started coming to us and our costs have gone down significantly.
We are hopeful of continuing down this path with an aim of getting our incremental cost of funding lower on a quarter-on-quarter basis. Our collections during the quarter was at about INR1,092 crores versus INR993 crores in the previous quarter. During the quarter, the EMI to EMI collection was at 90%, the same as it was in the previous quarter and EMI plus overdue was at about 95% versus the 92% in the negative preceding quarter, which is an indicator that things are improving though only in the latter half of the last quarter and we are hopeful that this trend continues in future as well.
Collection performance had been impacted in the last two, 3/4, first on account of heatwaves, followed by extended heavy monsoon across the industry — across the country, sluggish economy and while there was an improvement in the second-quarter of the current — second-half of the current quarter, the flow into the harder bucket in the previous quarters were tough to be corrected in a short period. This led to we continue to report the GNPA number at about 4.92% and the Stage 3 saw a bit of an increase at about 2.72%.
Our credit cost for Q3 FY ’25 stood at 2.6%. While the same is higher than the previous quarter, we believe that the second-half of the quarter gives us hope that the worst is behind us and going-forward, the credit cost will moderate. As the macro-environment evolves, we will continue to monitor our assets for early signs of risk and take appropriate measures to contain them through a robust collection mechanism. With the asset quality being maintained, cost of financing going down and the OpEx stabilizing and AUM and consequently interest income growing, we expect improved profitability in the coming quarters.
Now I invite my colleague, Manon to provide further insights into the offering finance business.
Shreejit Menon — Niwas Housing Finance Private Limited
Thank you, Vinod. Good afternoon, ladies and gentlemen.
Let me start by giving key highlights for the quarter and nine months ended on, 31, 2024. We continued on the path of growth to post disbursements of INR281 crores for the quarter ended December 31, which is a 25% growth over quarter three of FY ’24. With this, the disbursements for the nine months period stood at INR753 crores, a growth of 19% over the same-period last year. I’m happy to report strong business performance across the parameters, marking a strong momentum.
During the quarter three, our assets under management reached INR2,747 crores, representing a robust growth of 34% on a YTD basis. Our loan book stood at INR2,204 crores. Our customer base now stands at more than 34,700, depicting a granular nature of our assets with an average ticket size of INR9 lakhs. We continue to focus on our key geographies with Tamil Nadu, AP, and Maharashtra accounting for more than 85% of our portfolio. As a business strategy, we’ve decided to go further deep in our core geographies and hence have expanded our presence to 135 branches as on December 31. We continue to expand radially in the chosen geographies by way of digital locations.
We witnessed a marginal increase in our 90 plus days past-due and GNPA levels. Our 90 plus days past-due portfolio stands at 1.10% as on 31st December, which has increased by-10 basis-points as compared with 1% in the previous quarter. Our gross Stage 3 assets that is non-performing assets stood at 1.64% as of December 31st under the ones NPA always NPA loss. Continued progress in digital capabilities remained a way of life for us and as a part of that journey, we’ve now developed profile-based PD templates, which helps to standardize the PD format for a particular profile.
This we believe will help us scale the business in our chosen self-employed space while reducing the misses in capturing information while doing PD, and it will help in strengthening the underwriting process further. In coming quarters, we plan to templatize all our self-employed profiles from a PD perspective. We launched our new brand and company name of Housing Finance Private Limited in-quarter three of FY ’25. The word Nevas is a word which means home and is commonly used as a part of the house as a part of the house name in the self-construction segment, which is our key focus area.
Now let me go to the liability side. Having upfronted the borrowings in Q2, along with the announcement of acquisition by EQT Partners, Q3 virtually needed very significant amount of liabilities. We raised INR50 crores by way of PPC route of securitization. We have received sanctions from a couple of large private sector banks in December ’24, which were undrawn as of quarter-end. The liquidity position remained strong with INR233 crores of cash on the balance sheet and undrawn sanctions of INR136 crores.
Now moving on to our financial performance. Our total income for the quarter three of FY ’25 stood at INR107 crores and INR61 crores net of interest expenses. The same figures for nine months FY ’25 stood at INR287 crores and INR164 crores, respectively. Pre-provision operating profit stood at INR26.4 crores for Q3 and INR67.9 crores for nine months FY ’25. Our profit-after-tax stood at INR16.3 crores for the quarter and INR44 crores for the nine-month period FY ’25. Return on assets are healthy and it stood at 3% for the nine-month period FY ’25. We maintain a strong capital adequacy of 52.6% and a debt-to-equity ratio of three times.
In conclusion, our commitment to innovation, efficiency and maintaining a high asset quality continues to drive our success. Looking ahead, we remain focused on executing our strategic initiatives to further enhance operational excellence, expand our customer-base and explore opportunities for growth. We are optimistic about the future and remain dedicated to delivering sustained value to our investors and our stakeholders. Thank you once again for your continued support and participation.
With this, I hand over the call to the moderator for further calls.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask questions may press star and one on their. If you wish to remove yourself from the question queue, I press star and two. The participants are requested to use handsets while asking questions. Ladies and gentlemen, wait for a moment while the question queue assembles. To ask questions please press star and 1 the first question is from Vibha from Fair Connect. Please go-ahead.
Vibha Batra
Yeah, my question is for Industar CFO. There has been a sudden drop-in other income, if I see Q-on-Q and also financial year as in December ’23 versus ’24, it’s — it dropped to INR37 lakhs as against INR8.76 crores previous quarter. Can you please explain the reason and also the future outlook? And also the impairment, you said the worst is behind us, this INR47.94 crores or that is this quarter is exceptionally high. So is there any one-off item that you sold of the bad assets that you had to take or it is the usual credit provision?
And my third question is on cost of funding. Still at AA rating, secured asset class, your borrowing at very-high rates. Your overall cost of funding, if I were to just annualize the financials is 11%, you said 10.8% and you borrowed at lower rate. Can you please explain that at what rate did you borrow? And how do you see this cost of funding coming financial year? The three questions. Thank you.
Vinodkumar Panicker
Viwal, good afternoon. Thanks for being on the call. I see that you had about three questions. Let me answer one-by-one. You mentioned about other income. You said that has dropped significantly. Other income was — we had done a branding exercise for one of the entities and that was a — that was supposed to be there only for 1/4. So that was only — that was the income which was there last-time. That was about INR8.8 odd crores. And there is no income — corresponding income in the current quarter. So that is the reason and that we always knew that was going to be a one-off kind of income.
Second was on the credit…
Vibha Batra
I didn’t quite understand. You did a branding and you got that income. Didn’t quite understand.
Vinodkumar Panicker
So when we started our insurance, I would say cross-selling during the quarter — during a couple of quarters back and we wanted to inform all the customers that there is these products which are available for them to actually opt for when they are doing borrowing from us. They can additionally get insurance income. So we wanted — we had a tie-up with the insurance companies saying that we will be branding — we will be putting up their brands or their posters and things like that branches.
Vibha Batra
Okay.
Vinodkumar Panicker
So that is the reason — and that was — that’s not needed every time that was needed only for a quarter. So that is the reason it was done for a quarter, that’s no longer up there.
Vibha Batra
Okay. I’m sorry, but in last year also in other income, if you see the line items, the other income was quite significant for March ’24 and it was INR21 crore. And out of that, INR16.7 crore was shared service cost recovery. Is that something else at that you know or it’s again that insurance reimbursement? And that INR16.86 was for the year and now we are looking at INR37 lakhs for the quarterly.
Vinodkumar Panicker
Yeah. So shared service was something there were lot of things which are shared between us and the subsidiary.
Vibha Batra
Okay.
Vinodkumar Panicker
The cost that we were incurring, some of it was on account of the subsidiaries, which we were getting it reimbursed from them. We were charging them and getting it reimbursed from them. So that was shown as a shared service cost recovery.
Vibha Batra
But that would have gone from expenses also technically speaking. So on-net basis that shouldn’t impact you.
Vinodkumar Panicker
So if we are not permitted to net off from the expenditure, therefore it was grossed up both the end, number-one.
Vibha Batra
No, no. No, I mean to say in this quarter, it would have gone out of income as well as expenses. On-net basis, you would have been neutral on account of that. Is that understanding correct?
Vinodkumar Panicker
Partially it would have gone out of income for sure, partially out-of-the expenditure because there would be some things which would continue to be there because they have moved out separately, everything is separate. So not all expenses would have actually gone out.
Vibha Batra
Okay.
Vinodkumar Panicker
Then apart from that, there was last year, March ’24, there was always also a INR3 odd crores coming by way of income tax refund. So that was…
Vibha Batra
Yeah. Yeah.
Vinodkumar Panicker
I will now go to the second part of your query, which was the credit cost. Credit cost was definitely higher up from about INR19 crores to INR48 crores. I think both and me in our opening remarks, we did mention about delinquencies having shot up over the last two, 3/4. And while we did see a lot of improvement in the second-half of the current quarter, we believe that it was a bit late for us to actually get all the collections in-place. Therefore, credit cost was higher in the current quarter. We believe that basis the trend that we have seen in the last one-and-half months or the last — second-half of the current quarter which went by, things have improved reasonably well. And therefore going-forward, the credit cost may not be to the extent that it was there in the current quarter.
You mentioned about the funding cost. I think we need to very clearly know that definitely the 10.8% or close to 11% is definitely a high percentage and definitely the cost if you look at it on a standalone basis on a — it is definitely a high-rate. But then I think we should try to see two things saying that where did we come from. Q3 FY — Q2 FY ’24, we had an incremental cost of borrowing of about 12.7%. In fact, I don’t know whether we were a part of the previous calls that we had, but then we have said that very clearly in saying that we were confident that the cost will keep coming down. A year back, my cost of fund was at about 11.9%, we have now come to 10.8%.
We have been able to get funds from banks. We have been able to reduce our costs on other borrowings, including NCDs, something which we did that 12.5% plus a couple — year and a half back, system we did it at about 10.4%. So we are seeing costs coming down. We expect the cost to go down further. But then we believe that it is not something which can happen all of. It is a, I would say, a slow process and it will take time.
Vibha Batra
What was your incremental cost of funds during December quarter?
Vinodkumar Panicker
10.2%.
Vibha Batra
Okay. Thank you.
Vinodkumar Panicker
Thank you.
Operator
Thank you,. Thank you. Before we take the next question, a reminder to participants that you may press star and one to join the question queue. The next question is from the line of Arnav Sachdev [Phonetic] from Crews Capital [Phonetic]. Please go-ahead.
Arnav Sachdev
Hello. Hello, am I audible?
Karthikeyan Srinivasan
Yeah. Good afternoon. You are.
Arnav Sachdev
Hi, sir. I have two questions. So what are the key reasons for the decline in collection efficiency, I’m sorry if you’ve answered this before, I didn’t get that. And additionally, both GNPA and NNPA have shown an increase. So could you provide a guidance on these trend.
Karthikeyan Srinivasan
If you see here. See, the challenge has been from June, then the last two quarters, we have seen bucket wise increase due to the overall situation in the economy. We know the — sir, X92 1, there was the excessive heat rates, there was elections followed by an extended monsoon. This impacted the viability of vehicles, which naturally impacted collections. So my kind of profile I am dealing with, they will not be able to update their EMI. So most of these customers are able to pay one month EMI. That’s why you’re able to see a recovery in my overview, but they will not be able to go to zero DPD so that I’ll be able to report them out of ENPA.
I believe this has caused the significant increase in our delinquencies and credit cost and as we are seeing some positivity in the second-half of the last quarter, we feel like this will start going down. But overall, if you see, there has been a significant slowdown in terms of vehicle turnarounds, there has been a significant slowdown in terms of a good movement until at least the beginning of the festival season, which overall impacted collection and that impacted us also because we are in the profiles who do — who are the last mile connectivity, who are also the last level in terms of the transportation higher.
Arnav Sachdev
Okay, understood. My next question would be, what are the future growth plans for the used cars and tractors and what other strategies do we have in-place for financing these businesses over the next two to three years?
Karthikeyan Srinivasan
See, is one-product that in the segment which we are liking. As we explained earlier, we are operating now in several states. We’ll continue to hold those seven states. We believe because the rural economy is doing much better, the used tractor industry should be doing well. We have a target basis which we are driving those numbers. Used-car is an ultra-competitive market. You are aware there are many banks, public sector, both public as well as private sector who are deep into space. Our ability to fund these used cars is coming from the Tire three, Tire 4 market. We will continue to explore opportunities in these deeper markets so that we are able to get our rate and also able to scale disbursement. These two are one of the — two of the products which are in our focus core segment, which we will continue to focus and keep growing.
Arnav Sachdev
Got it. Thank you. Thank you, sir.
Karthikeyan Srinivasan
Thank you.
Operator
Thank you. Participants who wish to ask questions may press star and one. Next question is from Danesh Mistry from Investor First Advisors. Please go-ahead.
Danesh Mistry
Hi, sir. Hi, good afternoon and thank you for taking the time-out to answer our question. So just trying to understand here a little bit on the sources of funds and on your liability mix. So if you see this quarter, for example, you said that 25% of incremental borrowing has come from banks. But in your own presentation, you’ve talked about a higher share of banks in the previous quarters. So number-one, what has changed for us over there? And number two, how do we see that panning out in the future, sir? That’s question number-one.
Vinodkumar Panicker
So yeah. Denis, good afternoon. We do here.
Danesh Mistry
Yes, sir.
Vinodkumar Panicker
Definitely this quarter about one mix of energy. Sound in the background. Can you…
Danesh Mistry
Yes, sir. Yeah. Yes, sir. Please go-ahead, sir.
Vinodkumar Panicker
Yeah I think you need to go on-mute.
Randhir Singh
There’s some ready.
Vinodkumar Panicker
If you don’t mind that because…
Danesh Mistry
No, sir, I’m in my cabin, sir. There is no sound here, here, sir.
Vinodkumar Panicker
Okay. Let’s up.
Danesh Mistry
Understood.
Vinodkumar Panicker
Okay. So 55% did come from banks and the rest came from other sources. But I also mentioned that INR575 crores of sanctions, most of it which is from banks we did not take-in the current quarter, which we would be availing. So definitely, when we try and borrow, we try and ensure that we have a mix of everything and what comes to us cheaper. So definitely, whatever comes and as and when we want, that’s the time when we borrow. We’ve — with these kind of borrowing itself, we actually ended-up with close to INR900 odd crores of bank balance at the end-of-the quarter. So we believe that things have improved and it will continue to improve as we get into the 4th-quarter.
Danesh Mistry
Got it, sir. Got it. And sir, if you can give some color now, you’ve announced the housing finance sale. So when do you see receipt of the proceeds, sir? How is that progressing?
Randhir Singh
Hi, this is Randhir. I think we covered it in our last meeting as well. So as we guided earlier that we expect the approval to come either late this quarter or sometime early Q1 in the next financial year. So that is really our assessment of that approval.
Danesh Mistry
Okay. Got it. Got it. Got it. And just to understand these proceeds will be used in our in our UCV business, right? We are not looking at any other use of proceeds?
Randhir Singh
Absolutely. We’ll only be using it for our in our business and which is really CV and MSME lab that we’re building. And really for nothing else. So…
Danesh Mistry
Got it. Got it. Okay. Thank you very much and wishing the housing finance team and the very best of luck going forward. Thank you so much. Thank you.
Karthikeyan Srinivasan
Thank you. Thank you so much.
Operator
Thank you. The next question is from Yajash Mehta from Ionic Asset Management. Please go-ahead.
Yajash Mehta
Hi, sir. First of all, thanks for the opportunity. Just wanted to check and the cost is sounding very repetitive. I think quarter-on-quarter the credit costs have massively gone up from, say, around 19.2% to 47.9%. Now though on a Y-o-Y basis, the trends are very encouraging, but you know quarter-on-quarter things don’t look very good. So just wanted to understand, we are nearly one month into this quarter as well. What are the kind of trends that we are looking at as far as this ongoing quarter is concerned? And secondly, what do we see, say, for the next two to 3/4 going ahead.
Karthikeyan Srinivasan
It’s a very tough question to answer because as things stand today, we are seeing an improvement in the overall portfolio situation. So, I want you to notice that our overdue plus EMI collection has gone up. So overdue plus EMI, which was hovering around 90% has moved up to 92% has moved up to 95%, which is a positive indicator that the economic — the overall situation in terms of credit cost is improving, but we didn’t have this in the last quarter because there was excessive range, there was not availability of loans, which I explained some time back.
In terms of this quarter, as we speak, our current the initial bucket, there has been a positive movement. We believe that if this trend continues, our credit cost will improve this quarter. And typically April to June is a average quarter in terms of collection. So it will remain at the same level. If we reach March at a good level, it will remain in the same level in the April quarter also. But all these are dependent on what kind of spending the government does, all these are dependent on the load availability. All these are dependent on diesel price not moving up. These are factors which could impact us. But of — if all these are not getting impacted, we will see an improvement this quarter and next quarter.
Yajash Mehta
Got it sir. And secondly, sir, if my apologies if I missed this, the proceeds from the sale of housing finance would come in by when? And as you just mentioned, they would be used primarily for our CV business as well, right?
Randhir Singh
Correct. So we have only two businesses, CV and MS&E and the proceeds will be used for those businesses.
Yajash Mehta
And since the proceeds will come in by?
Randhir Singh
The proceeds would come in on some — it obviously depends upon the RB approval. And as we were just explaining in the previous answer that it should come sometime. Our estimate is that it should come sometime later this quarter or only in Q1 next financial year.
Yajash Mehta
Okay. Thank you so much, sir. Thank you.
Operator
Thank you. Next question is from Soni from MK Ventures. Please go-ahead.
Monshree Soni
Hi, good afternoon. I wanted to understand our strategy for the ECL provision this quarter. I mean, last quarter it was around 50.9%. This quarter it dropped down to 46% while our GNP and NPA numbers have shot up. So can you please explain what’s the strategy going-forward?
Karthikeyan Srinivasan
Hi, I’ll take this question. See, we did an ARC transaction this year — this quarter, which was predominantly a pre-22 pool. If you remember, all our management overlay was towards those old trust pools which we had. This quarter, we did it because we got the valuation which we liked. So we did that provision — we did that ARC transaction. Since it has gone out of my book, the appropriate provision has been reduced from the management overlay. We believe that we will be able to reduce our net NPA numbers by March because as I explained in the previous answer, we — the second-half of the current quarter — last quarter has been better in terms of collection. We believe generally, Jan, Feb the momentum will continue and we’ll be able to reduce our net NBA numbers.
Monshree Soni
Got it. And can you please — for the CRC transaction, was it in the form of SRs and cash? And how much SRs do we have on the book currently?
Karthikeyan Srinivasan
See, the current transaction, we have an INR85 crore SR, of which we have already created a provision of around INR37 crores. So the balance INR48 crores is a net addition to our SR. Overall, as of today, as we discussed, we have a gross of INR1,33 crore SR with a provision of INR355 crores, which is a 27% provision on the overall balance sheet.
Monshree Soni
Got it. And our AUM guidance for FY ’26 for MSME and for — I mean MSME lap and CD businesses.
Vinodkumar Panicker
We are — we have said that in our previous communications that we are looking at a disbursement of about INR7,000 odd crores. We are in the process of finalizing our business plans or maybe when we assemble again for the Q4 call, that time we will give you our guidance on what the AUM would be by the end-of-the quarter. End-of-the next financial year.
Monshree Soni
Okay, sure. Those are my questions. Thank you.
Vinodkumar Panicker
Thank you.
Operator
Thank you. Next question is from Anurag Mantry from Oxbow Capital. Please go-ahead.
Anurag Mantry
Yeah. Hi, thanks, sir. So two questions. One is this SR sale that you had in this quarter. Did that have any impact on the credit cost for the quarter?
Karthikeyan Srinivasan
The increase is whatever we were carrying at provision, you also carried on the SR. So that’s in the part of the credit cost.
Vinodkumar Panicker
No, I will — you are asking specifically about the sale of SR, right?
Anurag Mantry
As in this quarter, I think sold a pool of?
Vinodkumar Panicker
Are you talking about the sale to the ARC?
Anurag Mantry
Sale to the ARC, sorry. My bad.
Vinodkumar Panicker
I think in the previous question, I think Kartik answered that when we sold the book to the ARP, the valuation that we got INR85 crores out of that came in the form of SR against which we made a provision of about INR37 crores. So the balance INR48 crores is been carried on the books. And the provisioning is the same that we carried as it been — at the book been — the pool been on our books, we would have done the same provisioning.
Anurag Mantry
No, sorry, sir, just to confirm. So when the pool of these assets were on your books. They were carrying the same provisions as when they were sold or did you have to make extra provisions before selling?
Vinodkumar Panicker
Same provision? That is what is expected of us. They were doing the — maintaining the same provision.
Anurag Mantry
Got it. So all the incremental credit cost of the quarter is for the existing book, right, not for the pool that you sold?
Vinodkumar Panicker
Not because of the sale of. Good.
Anurag Mantry
And second just on the credit cost for the quarter. Generally, what kind of normal credit cost run-rate do you expect in the portfolio? Because typically, I think that 1.2% that you saw in the first two quarters, that tends — that’s probably lower than maybe what we’ve seen for some other used finance companies as well. Generally, what kind of run-rate do you expect in this portfoliday basis?
Karthikeyan Srinivasan
Yeah. I — last — we have been answering this quite often. The profiles which we are dealing with, we expect the credit cost to be around 2%, 2.5% in a regular scenario. All of us need to decide if we are in a regular scenario or an abnormal scenario as of today. So anything below 2.5% is not something we will be able to easily achieve because we are dealing with customers who are giving me 18%, 19% rate. So we expect that credit cost of around 2%, 2.5% normalized over a period of four years. So there will be years where there will be shocks where there can be higher. There will be years where it can be lower. It will be a mix of both.
Anurag Mantry
Got it. So just a follow-up on that. So why was the first-half in the standalone credit cost much lower, like 1.2% given the backwards that you mentioned that in those two quarters you saw much lower collection efficiencies because of election, etc.
Karthikeyan Srinivasan
See, when a customer starts clipping, it takes him time to reach 90 plus. He doesn’t overnight reach 90 plus because most of the vehicles whom I fund are running the vehicles for their livelihood. So if a customer starts getting impacted, it need not grow — I don’t get a straight flow. It may be — it may take four months, five months to reach 90 plus. So those whatever got impacted from March, April, they have started moving into 90 plus say probably from August, September that has got impacting my credit cost in the 3rd-quarter. That’s how the industry behaves. I don’t slip month-on-month because I get some earnings.
When I get some earnings, I automatically tend to pay my EMI so that my vehicle gets protected. That’s how overall the customers tend to operate and that’s how my customers also operate. Plus, I don’t differentiate between my Stage 3 and gross 90 plus number. So if there was a differential, my team will go hold the vehicles at the 60 to 90 DPD so that my gross GS3 is not materially impacted. That’s what is available in the market today, but IndoStar is an exception. We have GS3 equal to 90 plus. Whatever is there, we report if a customer clips into 90 plus, he remains in like Stage 3 till he becomes zero DPD. So these two differentiations create a factor-in terms of my credit cost.
Anurag Mantry
Got it. And just to reiterate, if you were to take a shot at — looking at FY ’26 credit cost, normal range would be 2% to 2.5%. Is that a fair way to think about that?
Karthikeyan Srinivasan
2% to 2.5% will be the fair assessment. If it is not — if it is a normal year, we will be in the range of to two a lot.
Anurag Mantry
Understood. Great. Thank you so much for answering the questions.
Karthikeyan Srinivasan
Thank you.
Operator
Thank you very much. Due to time constraints, we’ll have to take that as the last question. We’d like to thank all the participants for attending the call today.
On behalf of the management, and on behalf of Industa Capital Finance, that concludes the conference. Thank you for joining us. Ladies and gentlemen, you may now disconnect your lines.