IndoStar Capital Finance Ltd (NSE: INDOSTAR) Q4 2025 Earnings Call dated Apr. 30, 2025
Corporate Participants:
Unidentified Speaker
Randhir Singh — Executive Vice Chairman
Karthikeyan Srinivasan — Chief Executive Officer
Jayesh Jain — Chief Financial Officer
Shreejit Menon — Chief Executive Officer
Analysts:
Unidentified Participant
Aryan Sumra — Analyst
Vivek Ramakrishnan — Analyst
Sambit Roy — Analyst
Monshree Soni — Analyst
Maitri Shah — Analyst
Varun Gajaria — Analyst
Chirag Gandhi — Analyst
Vibha Batra — Analyst
Anuj Agarwal — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to IndoStar Capital Finance Ltd. Q4FY25 earnings conference call hosted by MUFG In Time India PVT Ltd 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 than zero on your touchtone phone. I now hand the conference over to Mr. Aryan Sumra. Thank you. And over to you sir.
Aryan Sumra — Analyst
Thank you. Good morning everyone. I welcome you all to the Q4 and FY25 earnings conference call for IndoStar Capital Finance Ltd. Due to unavoidable circumstances, Mr. Karthiken Sri Dimasan couldn’t attend the call to discuss the quarter’s results performance we have from the management team. Mr. Randir Singh, Executive Vice President. Mr. Jayesh Jain, Chief Financial Officer. Mr. Srijit Minon, CEO Nivas Housing Finance Private Limited and Mr. Pashkar Joshi, CFO Nivas Housing Finance Private Limited before we proceed with the 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 details kindly refer to the investor presentation and other filings 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 remarks and we can open the floor for Q and A. Thank you. And over to you sir.
Randhir Singh — Executive Vice Chairman
Thanks Aryan. Good afternoon everyone. I welcome you all to the Q4 and full year FY25 earnings conference call for Indosta Capital Finance Limited and I sincerely appreciate your continued support on our journey. I am Randhir Singh, Executive Vice Chairman of Endosar Capital Finance. I trust you had the chance to go through our financial results and investor presentation which is available on our website as well as on the stock exchanges. With me on the call today are Mr. Jayesh Jain, our Chief Financial Officer who recently joined us in March. Mr. Srijit Menon, Chief Executive Officer of our wholly owned subsidiary Nivas Housing Finance Private Limited formerly known as IndoStat Home Finance Private Limited and Mr Piska Joshi, Chief Financial Officer of Nivas Housing Finance Private Limited.
Before I get into the core agenda items of the call, let me introduce our new CFO, Mr. Jaish Jain. Jayesh brings over two decades of experience in leading and transforming lending businesses with a proven track record of driving profitability and operational excellence. He has played a crucial role in strategic growth, financial optimization and business transformation at leading HFCs and NBFCs and fintech companies like Groove Finance, PNB Hosting Finance Hero, Fincorp and Balance Hero during their critical expansion phases. I have no doubt that his deep expertise in cost efficiency, risk management and capital allocation will accelerate the evolution of IndoStar.
A quick overview of how we have structured this call. I’ll begin by giving an overview of the macroeconomic factors and critical industry trends. After this, Jaish will share the Q4FY25 earnings update for the standalone parent entity. Srijit will then provide the Q4FY25 earnings update for Nivas Housing Finance Ltd. Post this, we will open up the call for questions. Here is a quick overview of the broader microeconomic variables and industry landscape over the last quarter, India’s economic landscape has displayed resilience. Our economy grew at 6.2% in Q3 FY25. Analysts expect FY25 annual growth numbers to come in close to 6.5%, making India the fastest growing large economy in the world.
To continue supporting the growth of the economy, the Reserve bank of India’s Monetary Policy Committee delivers a second consecutive 25 basis point cut in repo rates on April 9 following an earlier cut delivered on February 7, bringing the overnight bank lending rate to 6%. Turning to the commercial vehicle industry, While the new commercial vehicle market in India contracted by 1% in the fiscal year ending March 24, an estimate suggests the market remained flat for the fiscal ended March 25, driven by an election year which saw a slowdown in government spending on infrastructure projects, coupled with rising prices of new CVs which now meet emission standards at par with Euro 6 norms.
The outlook for FY26 is positive, with a 5% increase in new vehicle sales expected this fiscal following two consecutive years of declining in flat sales. The cuts in interest rates, which are expected to be delivered to rail customers over the course of the next six to nine months, will help in financing of new trucks and will likely spur sales. Demand for used commercial vehicles has been steady over the last fiscal and is expected to remain high in FY26. Given the high cost of buying new commercial vehicles and the implementation of the scrappage policy for the very old vehicles greater than 15 years, which is forcing transporters to trade in their older trucks for the newer models of used EVs, the economics of buying an older vehicle continue to be compelling with EMIS being up to 50% lower for an older vehicle with similar tonnage.
As we reflect on the past year, I want to highlight the key achievements, challenges and focus areas for the future of the Standalone Indostar Capital Finance business Looking back, while we experienced some softness in business and collections during the year, we delivered strong aum growth of 21% and PPOP growth of 23%. Last FOI was our third consecutive profitable year strengthening our market perception especially among lenders. Our distribution network has expanded significantly with the addition of 54 new branches in Tier 345 towns during the year allowing us to penetrate deeper into the market. Our strong relationship with lenders helped reduce our incremental borrowing costs and a trend we expect to continue.
We onboarded six new bank lenders during the year. During there the company also launches maiden retail NC ratio of 266 crores which was well received by the debt market investor and helped us open a new source of raising funds. A major milestone this year also has been a transition to a multi product branch model. We did a successful launch of Microlab business last year. This will make our branches multi product like some of our peers and allow us to grow AUM without incurring additional branch infrastructure cost. We launched this business in Tamil Nadu last year in 62 of our existing vehicle finance branches.
We are building a low LTV secured granular book by lending to underbanked and underserved micro enterprises in semi urban and rural areas. Our average ticket size in Microlife is less than 6 lakhs, LTVs are below 50% and tenor of 5 to 7 years and yields are about 22% and in 90% plus cases we get self occupied residential property. As a collector we have built a local team of 300 plus people focus exclusively on Microlab business. We are not using D sales in this business and 100% origination is directly as of March 2025 we have close to 1000 borrowers AUM of 50 plus crores and while portfolio has limited seasoning, we have no overdue customers.
Our monthly disbursement run rate is about to touch 15 crore and we would target crossing 300 crore am by March 2026. We are also seeing early encouraging response in the potential of cross sell of this product in Tamil Nadu to our existing vehicle finance customer base. Seeing the early success, we’re looking to launch the business in at least one more state this year again using our vehicle finance branch network from the day zero in this business we have launched 100% end to end digital journey with various API integrations for this product. As we have used our existing LOS and lms, there has been no incremental technology cost for this business.
We look to eventually launch this business in all the 23 states we operate in, but of course in a very gradual calibrated and thoughtful way making Indostar a truly multi product retail nbfc. That said, I think next year our AUM on this product would be less than 5% of our total AUM but this is a journey towards a multi product retail nbsd. Last year we have also evolved from being a predominantly CV lender to a diversified vehicle financier. In SY25, 35% of our disbursements came from non CV segments like farm equipment, passenger vehicle financing, construction finance, demonstrating early success in our diversification efforts.
While we made substantial progress, some challenges remain and our operating performance lagged. Some of our well performed peers management team consider this as an opportunity. Our historic cost base cost to income ratio about 17% has been high. To address this, we have launched an internal cost optimization project where each cost line is being critically evaluated for the value creation. The goal is to become lean and efficient and achieve cost to income ratio in the 50% range. While we define our cost structure by eliminating wasteful expenditure and automation, we will continue to invest significantly in people and processes including microlab as we are confident that these investments will yield long term benefits.
Looking ahead, we are well positioned for sustained growth. Supported by strong capitalization CRR of about 28.5% and low leverage about 2x, our 446 branch network is expanding strategically to increase reach and operational efficiency. Moreover, beyond our headquarters, our experienced leadership team is present across areas, regions and zonal levels, further strengthening our capabilities. Given the large total addressable market, we aim to capitalize on emerging opportunities effectively. Several factors continue to work in our favor. We have a highly experienced and dedicated team supported by robust systems and processes ensuring smooth operations. Our AA rating and large capital base further reinforces our financial stability allowing us to approach growth with confidence.
As we said our focus next year we are proactively addressing collection softness witness in our and few other peer industry’s portfolio by credit policy adjustments. As our branch count increased by almost 150 in the last two years, along with significant manpower increases, we would look to grow our AUM in FY26 by 12 to 15% and enhance the profitability. Additionally, we will leverage our 3 year profitable track record to strengthen ties with the TSU banks and institutions providing the company with more funding options. We’ll be replacing our historical high cost debt repayments of around 800 crores in Q1FY26 which carries a coupon of about 12% by fresh borrowings at around 10%, which is a reduction of about 200 basis points.
Our profit maximization strategy will eliminate wasteful expenditure while streamlining operations over the next three years. We remain committed to sustainable business expansion and increasing investment in branch infrastructure. Strengthening our multi product branch model will remain a top priority. Another key focus area is bridging the gap between our best performing peers and us, ensuring we remain competitive within the industry. With our strong capital position, we do not anticipate any need for additional fundraising over next few years. Let me now hand over the call to Jayesh to walk you through indoor SaaS, operations and financial performance.
Jayesh Jain — Chief Financial Officer
Thank you Randeep. I appreciate the warm welcome. Good afternoon everyone. Thank you for joining us today. Let me begin by sharing an Overview of our Quarter 4 and FY25 number at a concerted level. Asset under management stood at 11,053 crore which is a 4% increase from 10,624 crore in the previous quarter and a 26% growth compared to 8763 crores in the same quarter of the previous year. Total disbursements during the quarter amounted to approximately 1535 crores, slightly lower than the 1572 crores this was in the preceding quarter. Our retail lending strategy continues to yield positive results with retail loans now comprising nearly 95% of the total loan book for the quarter.
Our concerted net interest income came in at around 175 crores, representing a 4% rise over the previous quarter and a substantial 36% increase compared to the same period last year. Net interest margin is marginally up around the mark of 6%. Consolidated operating expenses stood at approximately 157 crores. We reported a consolidated net profit of about 36 crores compared to 27 crore in the preceding quarter and 35 crore in the same quarter of the previous year. Collections during the quarter reached 1356 crores up from 1265 crores in the previous quarter. Now I will talk about standalone numbers on a standalone basis.
ICF’s AUM touched 7963 crore reflecting a 1% increase quarter on quarter and 23% year on year. Disbursements for the quarter amounted to 1,081 crores as compared to 1,291 crores in the previous quarter and 1465 crores in the same period last year. Average disbursement yields stood at around 18.5% supported by continuous focus on Tier 3 Tier 4 terms along with an expanding mix of secured lower ticket size vehicles including cars, pickups light trucks and small commercial vehicles. As a result of this strategic focus, our average ticket size has steadily decreased over the last five quarters dropping from 8.2 lakhs in Q4FY24 to 5.7 lakhs in Q4FY25.
Moving to the net income, our net total income for the quarter stood at 181 crore reflecting the 0.4% increase from 180 crores in the previous quarter and a significant 22% decline compared to the same period last year. Last year we had a one time gain from redemption of HRS during the last quarter which led to kind of this decline. Operating expenses were approximately 120 crores down from 121 crore in the previous quarter and up from 112 crores in the same quarter previous year. Our capital adequacy remains Strong at around 28.5%. Our debt to equity ratio is at approximately 2x, providing ample room for future expansion.
During the quarter we repaid 1,261 crore while simultaneously raised around 1198 crore. The overall cost of funds was about 11% while the incremental cost of borrowing in Q4 was 10.3%. XIRR over the past fiscal year we successfully raised over 5284 crore at a notably lower rate. As lenders confidence in us has grown. Overall, it is encouraging to see improved fund inflow coupled with reduced cost of borrowing. We remain committed to further reducing our incremental cost of funds on a quarter on quarter basis. In the upcoming quarter our strategic focus will be on significantly increasing borrowing through banking channels.
Collections for the quarter totaled around 11. 66 crore up from 1092 crore in the previous quarter. Talking about collection efficiency, EMI to EMI collections remain steady at 91% while EMI plus overdue collections improved to 97% compared to 95% in the previous quarter. This improvement, though seen mainly in the later part of the quarter, is a positive sign for the future. Collections performance over the previous two three quarters had been impacted by multiple external sectors including severe heat waves, prolonged monsoons and broader economic fugishness. While we saw a recovery in the second half of this quarter, addressing the issues and the harder buckets from the earlier period remains a challenge in the short term.
As a result of the efforts made by our collection team, our gross stage 3 stood at approximately 4.52% and net stage 3 assets saw a slight decrease to 2.46%. Overall credit cost for coupon remain flat at 2.75%. Visa by previous quarter. With a stable asset quality, decreasing funding costs control, operating expenses and growing AUM and interest income, we anticipate stronger profitability in the upcoming quarters. Now I would like to hand over call to my colleague Srijit Menon who will provide more details on the housing finance business.
Shreejit Menon — Chief Executive Officer
Thank you Jayesh. Good afternoon ladies and gentlemen. Let me start by giving key highlights for the quarter and the year ended March 31, 2025. Financial year 2425 was a satisfying year for us in many ways as we continue delivering strong and sustainable growth. With regard to our asset book, we crossed a milestone of INR 3,000 crores as we closed this financial year at an AUM of INR 3,091 crores which is a growth of 36% on a year on year basis. During the year we disbursed loans worth INR 1,208 crores which is 29% more as compared with the last financial year.
We managed to achieve strong momentum in the last quarter where we disbursed INR 453 crores which is almost 50% more than what we disbursed in the last quarter of the last financial year. Our active customer base now stands at more than 38,460 customers depicting a granular nature of our assets with an average ticket size of INR 9 lakhs. Our core geographies of Tamil Nadu, AP, Telangana and Maharashtra continues to contribute more than 85% of our portfolio this financial year. We focused on sweating our existing branch network to improve efficiency and productivity. Accordingly, we added only 17 branches in this financial year expanding our presence to 141 branches as on March 31st, 2025.
These efforts yielded the desired results in the form of improvement in OPEX to AUM ratio by nearly 1%. We witnessed a marginal increase in our 90 plus days past due and GNPL levels. Our 90 plus day past due continue to be under 1% at 0.99% as on 31st March which is an increase about 16 basis point as compared with 0.83% in the previous year. Our gross stage 3 assets GNP stood at 1.35% as of 3-31-2025. On the borrowing side, we raised a total of 1229 crores during financial year through multiple borrowing channels such as bank loans, NCDs, PTCs and NHB refinance.
The liquidity position remains strong with about 200 crores in cash on the balance sheet and undrawn sanctions of about 167 crores now let me move on to our financial performance. Our total income for the quarter 4 of FY25 and year ended FY25s stood at INR 122 crores and INR 409 crore respectively. Our pre provisioning operating profit stood at INR 37.7 crores for Q4 and INR 105.6 crores for the year ended FY25. Profit after tax stood at INR 23.7 crores for the quarter and INR 67.8 crores for the entire year. Our return on asset as a consequence of this stood at 3.2% and our return on equity stood at 11.1% for the year ended FY25.
We maintain a strong capital adequacy of 49.8% and a debt to equity ratio of 3.4 times. We will continue to drive innovation, efficiency and maintain a high asset quality which are cornerstones of our success story. Looking ahead, we remain focused on executing our strategic initiatives to further enhance operational excellence, expand our customer base in our chosen geographies 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 to all of you for your continued support and participation. With this, I hand over the call to the moderator for further questions.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press Star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press STAR and two participants are requested to use handsets while asking a question. Ladies and gentlemen, we’ll wait for a moment while the question queue assembles. The first question is from the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.
Vivek Ramakrishnan
Sir, good afternoon. Congratulations on good performance. My questions are the following. I just asked them in sequence. Collection efficiency seems weak for the March quarter given the fact that traditionally it is a very good quarter, especially in the CV business. So are you still seeing some economic lags? So that’s question number one. Question number two is there was sale of assets which you did even in Q4 of CV assets which were stage 3 assets was the entire amount realized in cash and is there any progress on the previous security receipts that you had done because of security closure of the older businesses and sale of assets? The third question is on Microlab.
Can you just detail out what segment, what ticket size? Any color would be useful. And the last question I’M sorry, I’m just doing it in sequence is in terms of Brookfield just in case there’s more equity required for growth. I know there is nothing required in the near term because well capitalized and there will be proceeds from housing finance business. Will they maintain majority stake or at least maintain management control? So these are the questions that I have. Thank you.
Randhir Singh
Maybe I’ll just take the third question first on the micro lab. We did cover this during my speech. Essentially we’re looking at lending to micro enterprises in semi and rural areas. Average ticket size of less than 6 lakhs. Most of these enterprises are essentially in services business. Could be a Kirana store, it could be a small dairy business, a sweet shop, a tailoring business, a carpentry business. So these are the traditional very very local businesses. And our lending is going to be on a 100% secured basis with fairly low LTVs. Our average LTVs are below 50% in the segment with yields of about 22% plus some processing fees and we are going loans of about five to seven years.
Like we mentioned, the plan is to essentially grow this business slowly and thoughtfully but essentially use our same infrastructure that we have created for vehicle finance business for this business so that we have no incremental operating cost or even technology cost because we’re really using the same systems. And that really is the thought behind this multi product model. Vivek, does it answer your question Microlab or would you want more details?
Vivek Ramakrishnan
This is fine, this is perfect. Thank you. It gives a broad overview. I guess we’ll just wait for a few more quarters for execution. Thanks. Thank you for that.
Randhir Singh
Like I said, this is really a good start. What I would like to say we made a good start for this business with good productivity, low bounce rates of course, 0dbt. But these are early days. The book is not seasoned but like I said, early indicators are quite good. On your capital question, I think we have more than adequate capital so we do not see any near term. In near term I think for the next two, three years we do not need any need for equity capital. So I think we’ll have a very strong balance sheet especially after we get the proceeds from our HFCCM.
And where as we mentioned in the last quarter we did receive RBA approval, we are awaiting NHBA approval which should come in few days. So I think we are looking at inflow very very soon. Surely within this quarter.
Jayesh Jain
Vivek, thanks for your question. I will respond to the other two questions on our collection efficiency. As you would know in Q2, the collection efficiency had significantly gone down in terms of a CV. It had actually gone down on EMI to EMI to around 88, 89% and now this is kind of a picked up and it has reached to early 90s, 91, 92%. Yes, there is some bit of a work which can be done and which would be done to improve this further. And overall at an overview level the collection efficiency has been 97%. In terms of your question on SR, the SR outstanding today is at around 1387 crore and during the quarter we made an additional provision of 10 crore.
With that the PCR on the SR stands at around 26%. Thank you.
Vivek Ramakrishnan
So there’s no progress on resolution of SRS, is it? In the sense they remain? Because it’s been there in the books for a while. And also the other question was the CV portfolio that was sold, was it sold for cash? Fully.
Jayesh Jain
So in terms of a resolution there is no resolution which is there. As I said, the incremental solution was only required at 10 crores only. So that kind of is performing well and the money is coming out in terms of incremental SR. Incremental SR which was done, was done in 8515 structure which was there.
Randhir Singh
And Vivek, let me just quickly add, I think we did inform that in the last. We did monetize some of our SRs but which were sold back to the. So that was one large resolution and what we basically seeing is some of these are on as we had indicated in earlier calls was in the real estate project wherein it is a slow but steady cash that we keep receiving on a month, on month as well as a quarter to quarter basis. In fact one of our large borrowers did pay about 100 crore plus which was also with one of the ERC transactions.
So yes, this is a slow burn but it is in line with what we had planned, what we had projected. These are real projects. As the construction is happening, we are getting slowly but steadily, we keep getting the cash. So you would see this. So there is no, we cannot show a large drop in just in one month or one quarter. But as you see the trend over a period of time you would slowly and steadily see that reduction. And as JH just explained we are very adequately provided for the exposure. And like we explained, this really is the last bit that we have.
Vivek Ramakrishnan
Thank you very much and wish you all good luck.
Randhir Singh
Thanks Vivek.
operator
Thank you. Reminder to all the participants, in order to ask a question you may press star and 1. The next question is from the Line of Sambit from INR Bonds. Please go ahead.
Sambit Roy
Hello, Am I audible? Yes please. Yeah. First of all, congratulations on the quarter and thank you for taking my question. My question is does the company have any plans for the coming fiscal year to raise funds via NCDs?
Randhir Singh
Yes, we do have. In fact what we’re seeing is that while we added, we are adding bank lenders, of course we added six bank lender plus last year we added one financial institution. Yet what we are seeing is that we are actually getting a very good, getting very good attractive rate in the NCD market. And that’s why we continue to sort of access that as we speak.
Our cost in the NCD market is actually lower than the bank borrowed. So while we, while we are growing our lending from the bank from keeping long term view in mind, our cost of NCD sort of has really, really come down and I would say it has come down by almost two plus percentage over the last few years. So yes, the simple answer is yes, we will continue to access NCD market. It’s a bullet repayment typically for two and a half to three years which is great for our alms and it is available at a lower cost.
Sambit Roy
Okay, thanks. I just have one, one more question. As we see, as we see in Tamil Nadu ordinance that’s also followed by Karnataka, do you see the other states to follow and will it affect the collection efficiency going forward?
Randhir Singh
See, we don’t know, you know what will happen, other release dates. But I think as we’ve seen this is obviously not really applicable for lenders like us. And typically after a few days of confusion and chaos, I think people do realize that those circulars are meant for unorganized lenders and not for formal lenders like Indosta. Okay, thanks.
operator
Thank you. Ladies and gentlemen, in order to ask a question, you may press star and 1. The next question is from the line of Monshree Soni from MK Ventures. Please go ahead.
Monshree Soni
Hello. Yes, Am I audible?
Randhir Singh
Yes, please go ahead.
operator
Yes ma’am.
Monshree Soni
Yeah, so I have a couple of questions. Firstly, what is the asset quality outlook for the UCV industry, you know, next year? Secondly, once the warrants conversion happens and also the money from the housing finance business comes in this year, how is the nims? How are the NIMS and cost of funds going to look like for this year? And thirdly, you know, in your opening remarks you mentioned that the cost of income will eventually move towards around 50%. Could you just explain that more? And lastly, what is your aspirational ROI roe for the next few years? Yeah.
Randhir Singh
Okay, so I think, you know, I’ll cover a question in the order you asked. You know, on the first was your question on the asset outlook for the UCV industry. So for the next year. So when we look at the trend that we seeing that we saw over the last year, where the last quarter was obviously showed much better trend, when I also looked at some of the commentary provided by our peers, I think they are really saying the same thing. So I think across the industry, all our peers who have declared the results, I think the consensus is that the next year does look much better over the last year.
And that trend is very clearly visible in the Q4 numbers as well. So that was the first question. And I think on the warrant conversion and hsccl, obviously essentially we will get a lot of cash. So I think the net result of that would be that we will use that cash essentially for the business which is really for disbursement as well as for loan repayment. I think we have significant, we can, we will actually have a significant interest cost reduction because in the past few years back our cost of funds was quite high. In this quarter itself which is the Q1 F26, we have about 700 crores of maturity and that itself we can replace by almost 2% lower interest rate.
So all this cash helps us in repaying our high cost borrowing and I think it also gives us an option because we will be borrowing less. We also have additionally an opportunity to have more time in negotiating with some of our lender. So I think overall this should lead to significant cost reduction on our borrowing and we are seeing that if you see our results over the last one year you would actually see a quarter on quarter reduction in the overall borrowing rate as well as on the marginal cost on the ROA and roe. Obviously the aspirational target for us of course has to be what some of our peers have demonstrated.
And most peers in our industry of our size typically have an ROA of about 2 to 3% depending upon their life stage, how much they are investing in the growth, et cetera. And I think average ROAS obviously range between 10 to about 19%. Right. So we would like to obviously be in the top quartile aspirationally as far as this industry is concerned.
Monshree Soni
And lastly just on the cost of income.
Randhir Singh
Hi, I hope it answered your question.
Monshree Soni
Lastly, just on the cost of income, eventually 50%. Could you just explain that a bit more?
Randhir Singh
Sorry, can I. Can you please repeat the question? You’re not very clear on the call.
Monshree Soni
On the cost to Income side you mentioned in your opening remarks, it will move eventually towards 50%. Could you explain that a bit more?
Randhir Singh
Sure, sure.
Monshree Soni
Thanks.
Randhir Singh
I think. Yeah, we will. So essentially there are a few drivers for this. One is obviously, as you would note that we have invested significantly in manpower as well as branches. We have opened about 150 branches in the last two years. We have invested heavily in people. Now, some of that investment is yet to obviously factify and it would fructify, of course, in terms of growth over the next few years. Years that itself additional AUM and the loan growth and income growth obviously will improve the ratio. Second big lever is our cost of fund. We are seeing consistent reduction in our borrowing cost and we are onboarding more and more lenders.
I think it’s fair to say that for a AA minus company, we can and we would expect much better rate, you know, sort of borrowing rate over the next few years and that will have a significant sort of improvement in our cost income ratio.
Monshree Soni
Sure. Thank you.
operator
Thank you. Participants who wish to ask a question may press star and 1. The next question is from the line of Maitre Shah from Sapphire Capital. Please go ahead.
Maitri Shah
Yeah, hello. Am I audible? Yeah, hello.
Randhir Singh
Yes, Matri, please go ahead. Yes, Maitre, please go ahead.
Maitri Shah
Yeah, I had two questions. Firstly, on the AUM growth side, you said that we’ll be growing by around 12 to 15%. Could you like split it between your two standalone businesses, the IFC side and the HDS side?
Randhir Singh
Okay, Shrejit, you want to talk about HFC growth first?
Shreejit Menon
No, I think, you know, we demonstrated a growth of about 32% CAGR over the last four years and I think we will be well above that number on the HFC.
Randhir Singh
And for the standalone, we are targeting somewhere between 12 to 15% growth for the parent company.
Maitri Shah
Okay. And you said that our cost of funds will come consistently be going down for the next few quarters. So any idea where they’ll stabilize and what percentage will they be stable at?
Randhir Singh
Yeah, see, I think in the Maitri, I think in the long run, given our double A minus rating, we should essentially be borrowing once things normalize in 9% handle. So that’s really, that’s really what we are aiming for to achieve over a period of time. And I think the previous question was really on the warrant and large proceed from our HFC sale and these things will certainly help in that journey, around 9%.
Maitri Shah
And do we see passing any of these benefits forward to the yields or our yields will remain stable.
Randhir Singh
So I think we’re not, I mean you know, I think this journey from let’s say from Today’s level to 9% will happen over a period of time. And I think as part of the journey, as you’ve seen for many of the lenders, you do get an opportunity to actually target some of the segment which earlier you did not want to target given that nim. So I think we will obviously calibrate some of this can be obviously can be used to access another segment without compromising on the nim.
Maitri Shah
Yeah, that is all from my side. Thank you.
operator
Thank you ladies and gentlemen. If you wish to ask a question, you may press star and 1. The next question is from the line of Varun Gajaria from Omkara Capital. Please go ahead.
Varun Gajaria
Hi sir and thank you for the opportunity and congratulations on a good set. So just a quick question on the aum, I could see that the AUM has grown by around in all these single digits. So if you could just shed some light on why that might have happened in this quarter.Particularly
Randhir Singh
thanks for the question like you mentioned that given some of the softness we were seeing on the collection in our portfolio as well as for the broader vehicle finance and nbsp in general on a selective basis for few profiles, we have tightened our policy that has resulted in some drop and like we said, as we are seeing that as the collections improve, of course we will obviously go back to the previous policy. But in the short term it does have. It did have an impact on our disbursement and which is something we did as a proactive measure.
Varun Gajaria
Okay. So yeah, sorry, please continue.
Randhir Singh
Yeah and like I said, given our large distribution that we’ve created over a period of time, 450 plus branches in 23 states, we obviously have all the firepower to notch it up as we get sort of comfortable with the macro which is. Which is already happening as we described in the last quarter, we are already seeing very good trends on the collection not just for us but for most of the vehicle finance NBCs.
Jayesh Jain
Just to add to what Ranbir said, the AEM growth also got impacted because of the ARC transaction and the DA which we did in the quarter four. So that’s how if you look at it. While the disbursement was noted as Ranbir explained, but considering these two transactions, the EUM growth remained almost flat
Randhir Singh
and this. Was also the day is also fairly one of the transaction was actually done with a very strategic intent in mind. We do have assets which qualify as agri PSL and one of the PSU banks obviously requested that if he can sort of do a small transaction which helps them meet PSL targets with the intent to obviously provide us longer term financing. We obviously went ahead and agreed with that request.
Varun Gajaria
So what kind of provision coverage are we looking at? I suppose right now we’d be at around 47% and historically we’ve been doing around 55%. So if you could just shed some light on that.
Randhir Singh
Sorry, I’m not able to hear very well. Can you please repeat your question?
Varun Gajaria
Yeah, am I audible now? Is it better?
Randhir Singh
Yes, this is better. Please, please carry on.
Varun Gajaria
Yeah. What kind of provision coverage are we provisioning coverage are we looking at? Because currently I can see that we are at 47 for FY25 while historically we’ve been going around 55, 54, 55%. So what kind of provisioning in coming years?
Jayesh Jain
Yes, this is Jaish. Thanks for the question. We understood the question. So if you look at it, last year our provision coverage ratio on stage three used to be around 60%. This was more to do with the older assets and the older sales assets which got addressed during the year. And now large part of the provision coverage is with respect to our core business, which is business. And the provision coverage is around 47%. The ECL as you know, is mathematical and statistical exercise based on the money which is received from the customers on the bucket one, bucket two and bucket three.
So that’s where the provision coverage is assessed over last three quarters. The ECL coverage is around 47% in our estimation going forward. Also considering the recovery and the business growth, this should remain within the range of 47 to 50%. Further, in terms of company’s policy at a periodic interval, we kind of continue to revisit our model and revisit the provision coverage and in case if we see any stress or any improvement that we will change it on a case to case basis.
Varun Gajaria
Hello.
operator
Ladies and gentlemen, the management line seems to have disconnected. Please stay connected ladies and gentlemen. The management line is connected.
Randhir Singh
Sorry, sorry, we dropped off. We don’t know where we dropped off but can you hear us now?
Varun Gajaria
Yeah, you’re good.
Randhir Singh
So I think what you were explaining was that we feel very comfortable with these numbers because you know, like we’re explaining that on the stage one, stage two, our provisioning is on a conservative basis. When we compare elsev with our peers as well as the overall 3.3% again is on a conservative basis. So I think, yeah, we do feel comfortable with these numbers.
Varun Gajaria
Okay. Sir, at the start of the call you mentioned you were talking about the SRS if you could just, if you could just. I mean they’ll probably give me a little more clarity on what, what is the SR outstanding currently and, and how much does that reduce from the recent sale of stressed asset.
Jayesh Jain
So the gross, the gross value of SR outstanding as of 31st March 2025 is 1,387 crores. On that we are carrying a total ECL provision of around 365 crore which is around 25, 26% in terms of the SR resolution. We continue to work with ARCS borrowers to speed up our realization on the real estate projects or monetize the SR through any other means. So as was explained by Randir in the earlier question, also SR continues to have our focus and we continue to explore opportunities to see that how do we kind of realize it very quickly.
Having said that, the current realization in terms of these assets has been as per plan and there is no need for extra provision. These are educated provided for.
Varun Gajaria
Okay, so the recent sale of assets that you’ve mentioned in the presentations, that. That was from the SR. That was from the SR book.
Jayesh Jain
Yes, that was on the SRbook which was in the 8515 like 15% cash sales basis.
Randhir Singh
And another example that we provided was that we sold our SR to the ARC cell because they were comfortable with the progress of that particular project. That was the previous quarter.
Varun Gajaria
Okay. And so you mentioned that the CV industry is now picking up, should look better. So probably can you expect that next quarter in terms of disbursement should be better?
Randhir Singh
Yes. Yeah. I mean typically in just in terms of trend, you know, what you would see. The first half is slower. Right. For the, you know, for most of the furniture. But yes, in terms of trend, you know, as you know, in terms of trend, we should see an uptick.
Varun Gajaria
Thank you for taking the questions.
operator
Thank you. Before we take the next question, we would like to remind participants that you may press Star and one to ask a question. The next question is from the line of Chirag Gandhi from Astralit Investments. Please go ahead.
Chirag Gandhi
Hello. Am I audible?
Randhir Singh
Yes, Chirag.
Chirag Gandhi
Thank you for the opportunity. Apologies, my line got dropped in between. So I don’t know whether this question has been answered or not. So my question is around your EM guidance of around 12 to 15%. So my thought process is that since we have a lot of liquidity on our balance sheet, let’s say the sale of our housing finance company, so what restricts us from doing a higher growth, let’s say around 20, 22% versus the 15% guidance that we have given. And just one more question to that is what experience and drop in for this quarter.
These are the two questions. Thanks.
Randhir Singh
Yeah, I actually we did cover but we’ll you know we’ll sort of quickly sort of answer your question. So I think yes we there is, you know there’s not. What we explained was that there’s been no liquidity issue anyways. You know even in the past we had sufficient liquidity and NHFC of course just gives us much more firepower in terms of our future growth. It also helps us improve our cost of borrowing. The reason for slightly lower expectation and guidance release. Like we explained that we did take some policy measures and tighten some of our filters selectively in few geographies because we just and this was done seeing the trend in the market not just for us but for NBSDs in general.
And those filters may remain in place for 12 quarters. And that really is the reason for slightly lower AM target for this year. Goes without saying unfortunately we’ll try and maximize our growth.
Chirag Gandhi
And one more question is on your multi product approach. So like last year we started with Microlab as a segment which are other products that we are looking to start in let’s say next couple of years.
Randhir Singh
Actually these are the only two so we will not I think you know, both our current product set which is vehicle finance as well as Microlab. I think they offer a really large addressable target market and I think the lab segment itself in some of these ticket sizes is fairly large as you can see from many of the regional NBSCs who may be concentrated in in just few geographies. And we obviously have operations in 23 states. So we do think that these two products should be sufficient for our growth ambition over the next two years.
So in other words, no plan to launch let’s say a gold loan business or a personal finance business. I think we’ll just stay focused on these because they offer a great sort of opportunity and both these are there’s a lot of adjacency not only in terms of the geographies which is really essentially same year one rural, tier three tier four tier five towns, but also in terms of profile which is essentially assessed income, lack of documented income or even sometimes a formal, you know, access to more rights. So I think these two segments for us have kind of natural adjacency and complement each other.
Chirag Gandhi
Understood. Thank you for answering my question.
operator
Thank you. The next question is from the line of Kunal Punjabi from Ionic Asset. Please go ahead Mr. Kunal’s line seems to have disconnected. Moving on to the next question, we have Anuj Agaraval from AA Investment. Please go ahead.
Anuj Agarwal
Hello.
Randhir Singh
Yes Anuj. Please go ahead.
Anuj Agarwal
Hello.
Randhir Singh
Yes Anuj, we can hear you. Please go ahead.
Anuj Agarwal
Yeah, hi.
Randhir Singh
Yes Anuj, we can hear you. Please go ahead
operator
Anuj. Mr. Anuj’s line may have disconnected. The next question is from the line of Vibha from FairConnect. Please go ahead.
Vibha Batra
Yeah, thank you for taking my question. I have one or two requests on data. One on your liability side. Can you please start including a slide on asset liability maturity profile so that one knows that what are your inflows and outflows in any case you give it in your annual report as per RPI disclosures. And the second thing is that you know the focus, I would say unnecessary focus on the housing finance business as you said that you’re just waiting for NHP approval. So as far as investor of IndoStar, I’m just concerned with your standalone performance.
So I’m actually surprised you talk about consolidated performance. Is there a doubt that deal will not go through? And if there is no doubt then possibly you should be focusing more on standalone performance. And you know how much inflows are we getting from the deal? Those are two observations. And second, third, you know I’m just trying to reconcile that how much funding would you need? If we see in terms of asset growth you said 10 to 15% AUM growth. So that’s about incremental 800 to 1200 odd crore for assets. And I don’t know what are the maturing liabilities if you could throw some light on that and how much would be the inflow from the deal and what would be your incremental net borrowing for the coming year?
Randhir Singh
Hi. Hi Vibha, thanks for your question. So Vibha, statutory we are required to declare results. You know for our subsidiary this has got nothing to do with our confidence of receiving the money. In fact fair enough shared information that you know RBI approval has already come and I think in the beginning of the call maybe you missed it that HV approval is expected anytime now and we did guide that we should surely receive the inflow in few days and surely this quarter. So we do think that this should happen very, very quickly. So there is at least as a management team we have no doubts we would.
Thanks for the suggestion on the alm. We will include that information. And I think as far as incremental bonding is concerned, I think we’re very, very well placed. We’re very well paced. Jaish. You want to provide the numbers?
Jayesh Jain
Sure. Considering the expected inflow which is large on the HFC sales and considering the 12 15% AUM growth. We would probably need to raise income into 400 of around 4,500 to 5,000 crore. Considering the asset growth and the liability.
Vibha Batra
Four and a half to 5,000.
Jayesh Jain
Yes, we will have a liability.
Randhir Singh
I think maybe Vibha is asking what will be the. What will the net increase in the borrowing. So we know the numbers that we’re telling you is the gross number. So in the sense.
Vibha Batra
Yeah, I understand. Okay. So there is lot of maturity maturing liabilities.
Randhir Singh
Exactly. And we also have significant cash flows every month. Right. So between.
Vibha Batra
Yeah. Can you please upload your ALM as an addendum?
Jayesh Jain
Sorry.
Vibha Batra
Can you please upload your ALM asset liability maturity profile? Because those that will give those numbers.
Jayesh Jain
Sure. We’ll explore or maybe otherwise, one on one, separately. We’ll speak to you.
operator
Thank you. Due to time constraints, we will end the call. Ladies and gentlemen, on behalf of MUFG In Time India Private Limited. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.