Paisalo Digital Ltd (NSE: PAISALO) Q1 2026 Earnings Call dated Jul. 22, 2025
Corporate Participants:
Unidentified Speaker
Santanu Agarwal — Deputy Managing Director
Harish Singh — Chief Financial Officer
Boris Rab — Chief Risk Officer
Analysts:
Unidentified Participant
Shweta Daktadar — Analyst
Sandy Mehta — Analyst
KAB Bupna — Analyst
Darshan Fin — Analyst
Vikas Kasturi — Analyst
Shweta Upaday — Analyst
Presentation:
operator
Ladies and gentlemen, good day and welcome to Pasalo Digital Limited Q1 FY26 earnings conference call hosted by Elara Securities Private Limited. Let me draw your attention to the facts that on this call discussion will include certain forward looking statements which are predictions, projections or other estimates about the future events. This estimate reflects management’s current expectation about the future performance of the company. Please note that this estimate involves several risks and uncertainties that could cause our actual results to differ materially from what is expected, expressed or implied. As a reminder, all participants line will be in listen only mode and there will be an opportunity for you to ask question after the presentation concludes.
Should you need assistance during this conference call, please signal an operator by pressing Star then zero on your touchtone phone. Please note that this conference is when recorded. I now hand over the conference to Ms. Shweta Daktadar from Elara Securities Private Limited. Thank you. And over to you Ma’. Am.
Shweta Daktadar — Analyst
Thank you. Pari Good evening everyone. On behalf of Ilara securities, we welcome you all to Q1FY26 earnings conference call of Pesalo Digital Limited from the esteemed management we have with us today, Mr. Shantanu Agarwal, Deputy Managing Director, Mr. Harish Singh, Executive Director and Chief Financial Officer Officer Mr. Gaurav Chaube, Chief Risk Officer. We express our gratitude towards the esteemed management of Pesalo Digital to provide us the opportunity to host this conference call. Without further ado, I now hand over the call to Mr. Shantanu Agarwal, Deputy Managing Director for his opening remarks post which we can open the floor for Q and A.
Thank you and over to you, sir.
Santanu Agarwal — Deputy Managing Director
Good afternoon and a very warm welcome to Pesado Digital’s earning conference call for the quarter ended June 30, 2025. Joining me today are Mr. Anish Singh, Executive Director and CFO and Mr. Gaurav Shaubet, Chief Risk Officer. Our earnings presentation has been uploaded to the Stock Exchange and is also available on our website. We hope you have had a chance to review it. It’s a pleasure to connect with our investors, analysts and stakeholders as we begin the new fiscal year with good momentum and renewed commitment to implicit financial growth. Let me begin with a brief overview of Tesano Digital Ltd.
And our model. Tesano Digital is specialized, digitally enabled nbsp with over three decades of operating experience in lending, underserved and financially excluded segments as well as emerging MSME and SME businesses, our core mission is to bridge the credit gap by connecting unbanked population to the financial ecosystem. We operate through a high tech iTouch model which is one of our core strategic pillars. Integrating deep on ground presence with its scalable technology platform, this hybrid model allows us to offer accessible and tailored credit products including income generation loan for new to credit consumers in rural and semi urban areas, entrepreneurial loans for small business owners and SME MSME loans focused on productivity, working capital and growth enablement.
This quarter’s performance is a strong validation of our model scalability and relevance. Our assets under management grew by 14% year on year reaching INR 52 million 302 supported by a 16% year on year increase in disbursement to INR 7581 million signaling robust lending traction and sustained demand from grassroots borrowers. Notably this quarter we have achieved an important milestone of 11 million customer franchise adding approximately 1.5 million customers in Q1 itself highlighting the growing relevance of our inclusive last mile credit and BAT model. While the microfinance industry has faced sustained challenges over the past few years ranging from asset quality deterioration, regulatory tightening to regional stress events, Pesano has remained largely insulated from these headwinds.
This is primarily give our structurally different lending models which is not centered around unsecured group lending and consumption loans but rather on individual income generating loans extended to self employed borrowers, micro entrepreneurs and small business owners. Our MFME and SME focused loan book which forms the majority of our portfolio is designed to finance real productivity economic in economic activity. These loans are typically underwritten with a strong understanding of local business ecosystem, customer cash flows and asset wide lending where applicable. As a result, our book reflects superior credit behavior, lower volatility and better asset quality quality outcomes.
This measured exposure combined with a deep rooted presence in the rural and central urban areas has enabled us to achieve consistent growth and while maintaining disciplined risk mitigation. It also positions us well to capitalize on the credit demand from MSME SME sector which we believe will be a long term structural growth opportunity. We continue to deepen our institutional partnership for our Asset Light expansion strategy through the CO lending program with SBI and other banks. In Q1 we have tied up with SBI for co lending to MSME and SME operational rollout of which is expected by quarter four of financial year 26 and we believe this collaboration will significantly scale our MSME and SME loan offerings.
By blending SBI nationwide banking infrastructure and low cost of funds with Petalo’s Agile digital trade platform, we recorded our highest ever total income of INR 2,187 million reflecting a 17% year on year growth driven by continued expansion across customer segments and geographies. Our net interest income rose by 28% year on year to INR 1,244 million underpinned by prudent asset liability management and a heavy loan mix. One of the greatest pillars for our growth momentum to sustain is our Spang India distribution network with about 3,997 touch points spread across 22 states and union territories. This includes 401 branches, 2,214 distribution points, 1,382 business correspondents.
This expensive ongoing presence is central to Pesano’s mission of enabling last mile credit access, especially in Tier 2, Tier 3 towns and rural India where formal financing services are still limited. During the quarter we continue to strengthen our physical distribution network with the net addition of a record 50 new branches. Our approach to the branch expansion is deliberate, data driven and strategically aligned with the long term growth objectives. Each new location is selected through a systematic evaluation of factors such as competitive intensity, local economic activity and historical credit performance trend. Through our geospatial mapping we follow a cluster based model where we first deepen penetration within selected high potential districts, building operational density and brand familiarity before gradually expanding into adjoining geographies.
This ensures operational efficiency, better resource utilization and a strong risk oversight at the local level. Importantly, our team’s familiarity with regional demographic language and social cultural context plays a vital role in enhancing customer evaluation, engagement and servicing, ultimately resulting in improved credit outcome and a stronger borrower relationship. Our business correspondent channel forms the backbone of Telpano’s scalable and inclusive distribution strategy enabling us to deliver essential financial services from other trusted financial institutions to customers in rural and semi urban India. By partnering with State bank of India and bank of India, we leverage their brand equity, regulatory infrastructure and long standing local presence to build trust within communities.
These partnerships allow us to offer banking as a service or BAS in an efficient, compliant and cost effective manner, bringing products like deposits, remittances and credit access directly at the doorstep of our target customers. This model significantly strengthens our ability to embed ourselves within the local ecosystem as VCs are often from the same geography and act as a trusted financial intermediary. Their deep understanding of local languages, culture and social dynamics enhance customer onboarding, improve risk assessment and support ongoing engagement. As a result, the BC network is not just a distribution channel but a powerful engine for brand building first time customer activation and generating a ready pipeline for future credit demand for Petalo.
Importantly, this partnership driven approach gives Petalo the ability to scale rapidly without the fixed cost burdens of traditional branches while still maintaining strong customer connect and service quality. Over time, the B.C. model is expected to unlock greater customer lifetime value by enabling cross sell and upsell opportunities as customers move forward on their financial journey. Looking ahead, Branch led expansion will remain a key pillar of our growth strategy. Historically, our business was concentrated in select northern states with key states of Delhi, UP and Maharashtra contributing about 20% each and Rajasthan and Haryana contributing 15% each and balanced from other states where we built deep expertise, robust operational systems and strong customer relationships.
However, as our model matured and demonstrated consistent outcome, we felt the need to scale the success across newer geographies. We plan to add branches in newer geographies that align with our target customer segments, particularly in regions with low formal credit penetration and growing economic activity. This will allow us to tap into the untapped demand, diversify our portfolio geographically and further scale our presence. In parallel, we will continue to integrate our branch led strategy with our business correspondence and digital platform, ensuring that our growth remains scalable and capital efficient. Through this hybrid distribution model, Teslo is building a differentiated and scalable platform for rural and semi urban financial services.
This geographical diversification serves multiple strategic objectives. First, it helps mitigate concentration risk both in terms of customer segments and regional economic cycles by spreading the exposures across a more diversified credit landscape. Second, it opens access to a larger untapped customer base in states where formal credit penetration remains low, particularly in rural and semi urban areas that align well with our product offerings and operating model. To conclude, Q1 FY26 reflects not just strong numbers but also strategic execution aligned with our mission to enable equitable credit access and support India’s growth story from the grassroots up. We remain confident in our ability to scale responsibly while maintaining superior risk management, governance and customer centric innovation.
I look forward to connecting with all of you and sharing more of our journey in upcoming quarters. With this, I’ll now hand over to Mr. Harish Singh, our executive director and CFO, to take you through the financial performance in further detail. Thank you.
Harish Singh — Chief Financial Officer
Good afternoon and thank you. I am pleased to walk you through our financial performance for the first quarter of financial year 26. We closed the quarter with asset and the management of INR 62,302 million representing a 14% year on year growth driven by sustained momentum across our core lending segments. Disbustments for the quarter stood at INA spent 581 million, a 16% increase on year on year basis signaling healthy ongoing traction and robust demand for our income generating loan products. As highlighted by Shantruji, we surpassed a significant milestone by crossing the 11 million customer mark, adding 1.5 million new customers to our franchise during the quarter.
Our growing adjacency to a large and diverse customer base is obtained a critical barrier insights when coupled with our internal data analytics engine and early warning systems, remember it significantly enhances our ability to understand customer intent, what they want, when they want it and how they prefer to engage. These insights are now deeply embedded in our decision making process, enabling more precise credit appraisals, improving customer life cycle management and helping extend our assessment of creditworthiness, character and credentials. We posted our highest ever total income at INR 2.87 million raising a 17% year on year growth underscoring the strength of our operating yield.
In line with our consistent focus on protecting and enhancing margins. Our net interest income saw a strong 20% increase rising to INR 1.244 million from INR 1,035 million in quarter one financial year 25. Moving to profitability, we delivered a profit before tax of INR 626 million of 14% over the previous year and a profit after tax of INR 472 million translating to a 14% year on year growth. This consistent profitability projectively reflects our operational driver, prudential risk management and a sharp focus on cost efficiency. We delivered a return on equity of 11.9% and a return on assets of 3.7%, maintaining healthy profitability ratios while continuing to invest in growth.
Importantly, asset quality metrics continue to improve, reinforcing the strength of our credit appraisal and collections framework. As of quarter one of addition year 26, our gross NPA and net NPA stood at 0.85% and 0.68% respectively. On the collection front, our collection efficiency remained strong at 99.8% improving from 99.2% in the same quarter last year, yet another indicator of portfolio resilience and customer discipline. Our balance sheet remains healthy and well capitalized. Total borrowings stood at INR 34,786 million with the cost of borrowing at 10.7%. Our debt to equity ratio was at comfortable 2.15 lakh, giving us adequate headroom to pursue growth without compromising balance sheet strength.
Further, our capital legacy stood at a robust 39.5% reinforcing our ability to absorb shock while continuing to expand our lending base. Overall, quarter one financial 26 reflects the strength of our operating model the scalability of our distribution strategy and the rebalance of our portfolio. We remain committed to driving sustainable growth while maintaining focus on asset quality, margin production and special education. Thank you. And with that, let me hand over the call to the moderator.
Questions and Answers:
operator
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press STAR and one on their touchstone telephone. If you wish to remove yourself from the question queue, you may press STAR and two participants are requested to use handset while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Sandy Mehta from Evaluate Research. Please go ahead.
Sandy Mehta
Yes, good afternoon. Shantanu and Harish. Congratulations on a very strong set of results all around. And also I must point out that your 48 page presentation is much more detailed than before and that is also helpful. Very helpful. I would urge all investors to look at that. My first question is you talked about expanding your co lending partnership with the State bank of India and expect that to be fully operational at a higher level from the fourth quarter of this year. So how do you see your lending loan growth perhaps accelerating with that? How do you see that impacting your loan growth going forward?
Santanu Agarwal
Please thanks Mr. Mehta for logging onto the call and I appreciate the comment about the investor presentation. It gives us immense confidence when our stakeholders, analysts and shareholders complement our disclosure. So thank you for that. So we have been very proudly associated with State bank of India since 2019. We initially onboarded, we were onboarded by them in April of 2019 as a coordination partner which later got converted into co lending and we were one of the first NBSCs to be onboarded by State bank of India in small income renovation priority sector loans as a co lending partner.
So as rightly pointed out and as told Also in Q1, we signed up and expanded this partnership to the MSME and SME segment. As you may know, we are not allowed to make a forward looking statement. However, based on the past performance of the AUM, with a CAGR of about 25% in the last three years and 20% in the last five years, we are confident on the growth trajectory over the time period and our recent collaboration should also allow us help stably scale the AUM at the desired level. While the existing AUM split is available in the presentation, the AUM split between the small income generation loan and MSME SME is roughly about 23% and 77%.
Since our co lending tie ups as of now are Currently more focused towards the small igl segment. The 23% comprises majorly of the off book segment which is part of the CO lending policy. With the increase with the new CO lending tie up in the MSME and SME segment, we are now expecting that the balanced MSME and SME segment should also contribute in helping us expedite the core ending growth in the portfolio.
Sandy Mehta
Okay, and one follow up question. You did very well with high net interest margins and also your NPAs were down year over year. Can you talk a little bit about your outlook on these two metrics, your margins and the NPAs and the sustainability of these metrics going forward? Thank you.
Santanu Agarwal
So our long term outlook for NPAs is. We have been talking about. So we are an nbsp which gives the only forward looking statement that we give is our long term outlook on NPAs which is less than 2% including write offs. So we are hoping to maintain our NPA levels in the same level that we are there in terms of our margins. The margins for the quarter have gained by about 31 basis points on a year on year basis to about 6.5%. We are confident of maintaining our historical performance on the same. I hope that answers your question.
Sandy Mehta
Yes. Thank you so much. All the best.
operator
Thank you. Before we take the next question, we would like to remind participants you may press star and one to ask a question. The next question is from KAB Bupna from company bmspl. Please go ahead.
KAB Bupna
Yeah, hi, thanks for taking my question. You’ve done a great job in growing your book. But I’m trying to understand how do you know, what is the management, how does management look at return on equity? Because you know, even after scaling, if we see your credit cost for this quarter and we extrapolate numbers, you know, you’re still at this 12 to 12 and a half, 13% ROEs. How do we, how do we get, what is the management plan to get to 15% plus ROE? How do you plan to achieve that? Or is that a plan at all? Basically, what are the sustainable levels of ROE you can see over the next two, three years and how do you get there?
Santanu Agarwal
Yeah, hi Kausav, thank you for logging on the call. So we closed the quarter one with a ROE of about 11.9%. So ROE is generally as a factor related to the leverage on the balance sheets and since we are in underleveraged nbsp in comparison to our peers with having about a 4x or a 5x leverage. So we feel that we are going to be Maintaining at our ROE level, at a similar level. But if you see on a year, on year performance of our ROE levels they have gone from roughly about 8, 7, 8% on a year on year basis to about 12% sustainably over the last two financial years.
So we are targeting a similar sort of a level based on our past performance. I hope that answers your question. Thank you.
KAB Bupna
Hello. Hello.
Santanu Agarwal
Yeah. Yeah, yeah.
KAB Bupna
No. So you’re saying you even after scaling your work which is going to happen over the next two, three years, you plan to, I mean because you’re relatively less leveraged versus your peers, you don’t expect to increase your ROE by 200, 300bps. You plan to stay around these. You think the business model will make you stay around this level or do you think you can move towards 15%?
Santanu Agarwal
No, no, no. The ROE will definitely expand. With the expansion of our asset light co lending model, we are definitely expecting an increase in the roe. But since we are not allowed to make a forward looking statement that exact guidance can’t be provided.
KAB Bupna
That’s fine. That’s fine. Understand. Thank you.
operator
Thank you. The next question is from Darshan Fin Interest Capital. Please go ahead.
Darshan Fin
Hi sir. Good evening. Yes, yes. On the co lending partnership side and how do you think about this business?
Santanu Agarwal
So currently Darshan, the company has five co lending arrangements. We have the primary. All five of them are under the small income generation loan segment. These five arrangements are the State bank of India, Punjab National bank, bank of Baroda, Karnataka bank and Yuko Bank. The company has just in this quarter one signed up another co lending arrangement with State bank of India for the MSME and SME segment. So we are expecting to have the MSME and SME portfolio also being now transferred to the coal lending segment. The co lending segment for the company gives us a couple of benefits which are that as a coalescence for tetanus the we have higher ROA and ROE on account of better leverage and higher spread.
It also reduces our capital dependency by downselling of the portfolio. Core lending in general also helps us take care of the three biggest risks that are present in any NVIT lending model which is a liquidity risk, ALM risk and credit cost risk. And it also strengthens our credibility and regulatory leverage. Does that answer your question? Yeah, it does.
Darshan Fin
And my second question would be you know on the kind, the. The kind of customers that we have today. 1.5 million some customers. So what are, you know I would like to know your insights on this customer retention and growth strategies. What do we, how do we plan.
Santanu Agarwal
This, how are we placed? So you know, if you take a. Take our customer base in terms of our borrowers, they are primarily split between two segments which is the small income generation loan and SME MFME loan. They constitute about 23% and 77% of the AUM mix. Whereas the small income generation loan, a typical consumer will start with our recast loan which is our first time borrower on new to credit customer and we will help him with financial literacy, we will help him guide, we will explain him in the process and everything and we will take him all the way to privacy loan which is where he becomes like a customer, like a micro business loan for us.
Secondly, if a customer is getting onboarded on the SME and MSME cycle, they typically have three kinds of loans available broadly which is they can come in as an asset backed loan wherein they can take vehicles for small loans or equipment for something on a similar level. Or they can be onboarded on the UDAN scheme or the primary SME MSMA loan wherein that’s a small business loan which is working capital, which is expansion term loans and they have a tenure of up to about 84 months. So in terms of all of that, typically a customer which comes under small income generation loan does about 2 to 3 ficus with us.
Under anybody which comes under SME MSME loans we typically have some active financing plus a small business loan with us. So in terms of our retention with the customer, of the customers that have already been financed, we have a strong retention in place. Secondly, since we have access to the BC network, every single small income generation customer has also access to the banking as a services that we provide to our business correspondent network which eases their entire financial life cycle by providing them cross sell and upsell opportunities all the way from domestic transfer, remittances, withdrawals and Social Security schemes on which the company earns a small commission which is widely spread out across Bengal state.
So this also gives us an additional point of retailing the customer, giving us an overall PPP on these kind of customer base of tools.
Darshan Fin
Okay.
Santanu Agarwal
Does that answer your question? I hope so.
Darshan Fin
Yes, yes, yes, completely. And one final question would be on, there is two part on this. One is on, you know, on the competition that we see today. How are we, you know, having an edge over this? And the second question is on, you know, preferably I met some NBFC companies a few days ago. So there is some, you know, they monitor the customers, what we can say, their behavior towards how they are making payments and how they avoid, you know, for being, you know, defaulted or something. So are we having some similar, you know, system or something that, you know, that we use so that we don’t see any issues from the customers who are lending from us?
Santanu Agarwal
Okay, so in terms of the competition, let me give you some broad numbers. So in India we have a population of roughly 1.4 billion people. Out of these 1.4 billion people we have income tax holders of about 572 million people and we have a unique credit history database of about 150 million people. So the discrepancy between the number of pan card holders, unique credit database holders gives us a difference of about 393 million people. These 393 million people are estimated to have a ticket size of roughly about 25,000 rupees which may be getting serviced. On a weighted average level, I’m seeing 25,000 rupees which may be getting serviced informally or even if they are getting serviced formally, they may be getting service in not the right way.
This gives us an estimated annual market size of about 9,82,000 crores. Right. So to service at 9 lakh 82,000 crores, even if we are targeting, let’s say a 1% or a 2% would require a lot of competitors and lot of people to come into the market who haven’t serviced the entire base. Right. So the competition is not such, is not such a big concern because we are not only better in terms of credit underwriting, we are better in terms of npa, we are better in terms of geospatial mapping and we have a large market base to address wherein we have the right to select, cherry pick the right customers which fall into the credit parameters and the risk portfolio that we require to ensure maximum repayment for us.
So that’s point number one. Can you repeat to question number two? The second point was precise. Yeah.
Darshan Fin
So the second point was precisely on the customer behavior and how are we tracking the customer behavior where we see that there might be some chances of default happening. So how are we trying to avoid this or come over this? Just wanted to understand from your side.
Santanu Agarwal
So I just hand over the point to Mr. Boris Rabi. He is a chief risk officer. He will answer this question better for you.
Boris Rab
All right. Yeah. Hi. Thanks Shantanu. We have our own proprietary triple C model that is the character, valuation and. Credibility model which we use for the underwriting of the borrowers. So we typically to analyze the character of it of the borrowers, we use geospatial mapping to under to analyze the characters. Then this is followed up with the field investigation wherein we gain the model integrity of the borrowers along with his discipline or her discipline towards the repayment. Further we use the AIML models to analyze the digital footprint of the borrowers also understanding the behavioral pattern of the borrowers. Further we have premed income to the business activities and which is supported by the account aggregator and KPIs that do various analysis coming out with a set of meaningful outputs.
Further we have multiple rule based business. Rule engine which is in house to. Us which allows us to rate the customers on multiple parameters and multiple rules allowing us to come to arrive at an internal rating of the borrower. Further we use alternate data and history to arrive at the indebtedness of the borrower. Then the loan verification also the loan end use verification also allows us to understand how the loan is going to be used whether it is being used. For the purpose that we have taken. Or not and then mapping it with the local with our EWS parameters that we have it allows us to better gauge the credibility and the attacker and take evaluation of the borrower further if you want me to I would go on to the credibility as well. So we see how the borrower performs on cefalore plus the other borrower’s behavior. That they have taken. We’ve applied automatic business figures based on early morning signal system that we have developed which is an enhanced further review, a reference check and a reputation check and certain level of AI based AI and ML based document authenticity to formulate underwriting model. This allows us to gauge the borrowers the propensity to default. Further our EWS also flags localized steps early on allowing us to take preventive measures. So I hope that answers the question.
Boris Rab
It does. Thank you. Thank you so much for the detailed answer and I wish you all the best for the next coming quarters. Thank you so much.
Boris Rab
Thank you.
Santanu Agarwal
Thank you. Thanks for being on the call.
operator
Thank you. The next question is from Vikas Kasturi from Focus Capital. Please go ahead.
Vikas Kasturi
Yeah, good evening sir and like the first speaker mentioned, so congratulations on a fantastic presentation sir. It details out a lot about the company. Sir, I had a couple of questions regarding the co lending model that you have. So you have given a split in one of the slides where you have mentioned that 23% which is a small income generation. I think that is where the CO lending is happening and whereas in the SME MSME is where you are trying to get cold lending in there. So my first question is sir, suppose you give out hundred different loans, what proportion of that would come under CO lending? Or is it all 100% under CO lending? That is question one.
And the second question is you would be incurring some costs for originating that loan, for doing the collection, underwriting, etc. So do you bear the cost or is the cost also split in the 20:80 proportion?
operator
Sorry to interrupt ladies and gentlemen, the line for the management is disconnected. Please hold while we reconnect them. Ladies and gentlemen, thank you for being on hold. The line for the management is now reconnected. Thank you. And over to you sir.
Vikas Kasturi
Good evening sir. I’m not sure how much of my questions you heard, so I’ll just repeat it. So my first question was you mentioned about that small income generation where the CO lending is happening. My question was of the small income generation loans, do all loans that you write here, do all 100% of them go under CO lending or is it the proportion of that which goes under CO lending? That is the first question. And the second question was you would be incurring some costs related to origination, underwriting, collection, etc. So who bears the cost for this? Is this cost also split in the 20:80 proportion? These are my questions sir.
Santanu Agarwal
Thanks for logging in Vikash. So I will answer your first question first. So you’re absolutely correct in saying that currently all of the CO lending is happening in the small income generation sector and we have just recently in quarter one tied up for SME and MSME sector. If you look at the investor presentation, I don’t remember the slide number, I think it was 16 or 17. The small income generation sector is broadly classified under four or five products known as Vikas Loan, Umiz Loan, Pragati Loan, Voca, Dumb Loan and GATI Loan. The majority of the CO lending in the small income generation sector is happening under Vikas Loan, UMID Loan, Pragati Loan and partially under DATI Loan.
So the small income generation sector is contributing about 23% of our AUM. Of the 23%, about 90% is being pushed under Colandi visa list. The remaining 10% is being booked on books. And you are also absolutely correct in saying that once we operationalize the MSME SME CO lending in quarter four, we’ll also see the same numbers of performance for the MSME and SME segment in terms of your origination cost getting reimbursed. So we are getting a servicing fee and a processing fee on the CO lending portfolio which fairly covers our servicing cost. Well, I hope that answers your question.
Vikas Kasturi
Got it? Yes sir. It does answer my question, sir. And could I just request that what would be the average ticket size of these products? Sir, I know that would vary but is there something that you can give me? Something on how much is it for vikas, nominee, zone etc.
Santanu Agarwal
So the average ticket price of the entire AUM is about 2.62 lakhs. In terms of the small income generation on a product wise level maybe I’ll have the IR team get back to you on that. But on the AUM level the average equity size is 2.62 lakhs. Okay.
Vikas Kasturi
And so here I see some of these are like Dokadam is for two wheelers and there is some Dupiloan for autorickshaw. So I understand that these would be. You can call it a secured loan. So is it to be understood that the other loans are all unsecured?
Santanu Agarwal
So you know when it comes to Vikas in need of Pragati, these loans are secured by a deed of hypothecation giving us a primary charge on the stock of the shop or stock of the vendor or the stall that is there. So there is a deed of hypothecation in place. But there is no immovable collateral or a movable equipment like a two wheeler or a medical equipment or a solar available in this case. So I believe it’s up to you how you want to look at it. Okay.
Vikas Kasturi
Got it sir. Thank you. Sir, thank you for your answers. I’ll come back in the queue.
Santanu Agarwal
Thank you.
operator
Thank you. A reminder to the participants, if you wish to ask a question, you may press. The next question is from Shweta Upaday from Elara Securities. Please go ahead.
Shweta Upaday
Hi sir. Thanks for taking my question. I have two questions. Firstly, how are we placed on the liability side in this falling interest rate cycle that we are currently in? And secondly, on the MFME front, are there any geographical or regional specific challenges that we are facing? Business discussions.
Santanu Agarwal
Yeah. Thank you. Thank you Sridhar for logging in. So if you look at borrowing cost for the quarter it’s at about roughly 10.7%. And if you look at the historical performance of our borrowing cost it has come down over the last five years from about 13% to the current 10.7%. I think the same is mentioned in the presentation. Also along with the split of the liabilities, the liabilities of the company are from banks and FIs at about 68%. NCDs about 18%. We raised our first foreign currency convertible bonds USD denominated last financial year. That’s contributing about 12% and commercial paper contributing about 2%.
So that’s on the liability side. And I miss out on your second question. If you can please repeat it for me once again.
Shweta Upaday
Yeah, My second question is are there any geographical or regional specific challenges, especially in the MSME business segment?
Santanu Agarwal
No. So there aren’t any geographical or regional specific challenges in the MSME segment because if you look at it from a data point of view, we have been present in the northern states mostly and we have been trying to we have expanded our branch to the highest level branch edition of 50 branches led by our key pillars. Historically our business was concentrated in the northern states with key states being Delhi, UP and Maharashtra contributing about 20% each, Rajasthan and Haryana contributing 15% each, and the balanced states contributing about 7 to 8% each. Our model has matured and demonstrated consistent outcomes and we are now carrying the same model to other geographies where we are planning to add more branches.
So over the next couple of quarters we should see that expansion coming into place. And just to summarize, there are no operational, regional or global challenges in the segment. I hope that answers your question.
operator
Yeah, it does. Thank you ladies and gentlemen. That was the last question. I now hand the conference over to management for closing comments.
Santanu Agarwal
Thank you for logging in our analyst, investors and stakeholders. We have begun this new fiscal year with a good momentum and we remain committed to our inclusive financial growth. Thank you.
operator
On behalf of Elara Securities Private Limited. That concludes this conference. Thank you for joining us. And you may now disconnect your lines.