Poonawalla Fincorp Ltd (POONAWALLA) Q4 FY23 Earnings Concall Transcript

Poonawalla Fincorp Ltd (NSE:POONAWALLA) Q4 FY23 Earnings Concall dated Apr. 26, 2023.

Corporate Participants:

Hiren Shah — Head Investor Relations

Abhay Sureshkumar Bhutada — Managing Director

Analysts:

Sameer Bhise — JM Financial — Analyst

Abhijit Tibrewal — Motilal Oswal — Analyst

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Harshvardhan Agrawal — Bandhan AMC — Analyst

Dhaval Gada — Aditya Birla Sun Life — Analyst

Tejas Mehta — Max Life Insurance — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the Poonawalla Fincorp Q4 FY 2022/23 Results Conference Call. [Operator Instructions] I now hand the conference over to Mr. Hiren Shah, Head of Investor Relations. Thank you, and over to you, sir.

Hiren Shah — Head Investor Relations

Thank you, Vikram. Good evening, everyone. Thanks for joining this conference call. It’s our pleasure to welcome you all to discuss Poonawalla Fincorp’s business and financial performance for the quarter and the year ending March 23. To discuss all this in detail, I have with me our Managing Director; Mr. Abhay Bhutada, other Senior Management Officers and myself Hiren Shah. Now I would like to request our Managing Director, Mr. Abhay Bhutada, to brief you all about our company’s operational and financial performance, along with the development for the quarter and the year ending March 23. Over to you, sir.

Abhay Sureshkumar Bhutada — Managing Director

Thank you, Hiren. Good evening, everyone. I welcome you all to the Quarter four FY ’23 Earnings Conference Call of Poonawalla Fincorp, and trust you are all doing good. This is the first year under new management post acquisition by Poonawalla Group. During the year, we successfully transformed the organization in line with our Vision 2025. The transition has been nothing short of a spectacular performance as we hit the right course on business, technology, people and processes. The same is reflected in the way the business has shaped up, resulting in consistent growth across the metrics of disbursement, AUM, asset quality, profitability and return on assets. Our financial stand and efforts in transforming the organization have been well recognized as we have recently received long-term credit rating upgrade to AAA from CRISIL. And earlier, we received from CARE.

During the year, we started the value unlocking process of our housing finance subsidiary, and the same is expected to conclude soon within one or two months, subject to regulatory approval. We see a robust performance has ensured that we are on a strong footing and ready to leap forward to the next level of growth journey. Coming to the quarter gone by, I’m happy to share that we are right on track in line with guidance we have given in the previous quarters. We have recorded highest-ever quarterly disbursement, strong growth in AUM, with best-in-class asset quality resulting in the highest-ever PAT and highest ever ROA in Q4 FY ’23. Let me take you through the key stand-alone financial numbers for this quarter and the financial year ended 31st March 2023. Our AUM has grown by 37% year-on-year, 16% quarter-on-quarter to INR16,143 crores. Focused AUM stood at INR15,198 crores, up 73% year-on-year and 19% quarter-on-quarter, which is now 94% of our total AUM.

We continue to wind down our discontinued book, and its AUM now stands at INR945 crores, this is total AUM. On-book AUM is 640 crores, down 68% year-on-year and 21% quarter-on-quarter. And we are expecting maximum book will get run down over a period of next one to two quarters. On the compulsion of our total AUM, business loans, including LTP, is the highest at 28%, followed by preowned car, which is 17%; personal loan and LAP, 16% each and supply chain finance at 7%. With this, we are constantly focusing on to maintain a secure/unsecured ratio of secured 40% and unsecured 60%. We are focusing mainly on the prime customer segment with bureau score of 700 plus having credit-tested history. Considering the used database available, we decided to stop new-to-credit customers two quarters back. Secured-to-unsecured ratio of the total AUM, as of now, stood at 49 to 51 as on March 2023. Our AUM is well diversified geographically across MSME and consumer segment with multi-scoring channel.

During the last quarter, we reported our highest-ever disbursement of INR6,371 crores, which was up 151% year-on-year and 89% quarter-on-quarter. Entire disbursement was organically sourced and has grown over three years on a year-on-year basis. We stopped buying accretion of any other portfolio three quarters back. Disbursement under Direct Digital Program constituted 81% of the total disbursement in Q4 as compared to 66 in the previous quarter. Direct Digital Program ecosystem has accelerated the disbursement, expanded the customer base and lowering the cost of customer acquisition compared to the additional distribution model. Our GNPA is at 1.44%, down 185 bps year-on-year and 25 bps quarter-on-quarter. Similarly, net NPA is at 0.78% down 52 bps year-on-year and 11% — 11 bps quarter-on-quarter. The provision coverage ratio stood at 46.2%. Our restructured book now stands at INR122 crores only, which is 0.8% of our total AUM, out of which 50% book is in bureau bucket.

The excellent asset quality is driven by our chosen customer segment, high credit bureau score portfolio, superior collection infrastructure, close monitoring of early warning signals, coupled with proactive credit policy changes. Our cost of borrowing was at 7.9% for Q4 FY ’23, primarily due to recent 250 bps rate hike by the RBI in multiple tranches. Despite the growth in the cost of borrowing, our net interest margin has improved to 11.3% during the quarter, which is up 87 bps year-on-year and 59 bps quarter-on-quarter. For the full year, NIM stands at 10.7% as compared to 9.8% in FY ’22. Going forward, we expect, on a steady-state basis, we’ll be able to maintain NIM level of about 10%, as per our existing guidance also. The cost-to-income ratio has come down sharply by 861 bps from 56.7% in Q3 FY ’23 to 48.1% Q4 FY ’23, which includes higher op costs. Operating profit for the quarter stood at INR212 crores, which is up 84% year-on-year, 36% quarter-on-quarter. For FY ’23, operating profit was INR612 crores, which is up 35% on Y-o-Y basis. Our return on asset was at 5% for Q4 FY ’23, up 178 bps Y-o-Y and 53 bps quarter-on-quarter. For FY ’23, ROA was at 4.4% as compared to 2.7% for FY ’22. Profit after tax for the quarter stood at INR181 crores, which is up by 103%, up by 20% quarter-on-quarter basis.

For the FY ’23, PAT stood at INR585 crores, reflecting an impressive 100% growth as compared to FY ’22. Shareholders’ funds grew by 12% during the year to INR6,425 crores. Capital adequacy ratio stood at 39% as of 31st March 2023, which is much above the regulatory requirement. Now let me take you through our business strategy as a way forward. As mentioned earlier, recently, CRISIL upgraded our long-term rating to AAA, which is a revalidation of our business strategy and execution capability aimed towards building a strong consumer and MSME lending franchise. This puts us in the league of AAA-rated NBFC and should further accelerate our growth journey as India’s most trusted, profitable and leading fintech NBFC. Our business model leverages our strength of low cost of fund and low operating costs. The low cost of fund is primarily driven by our strong credit rating and branding with our low operating cost is driven by our successful transition of the organization in terms of technology, digital, along with change in the customer segment, and the product offerings.

Given our deep technology inclination, we have been able to create a truly digital organization, where the benefit of technology are visible with increased manpower productivity per employee. We achieved 151% increase in disbursement while reducing the headcount by 53% over the last one year. This inverse equation clearly classified us as India’s most profitable and leading fintech NBFC at scale in terms of our digital capabilities. However, unlike FinTech, to target high-risk customers due to their high cost of funds, Poonawalla Fincorp target low-risk customers, complemented by low cost of funds. This means while we give user experience of a fintech, we focus mainly on prime and super-prime customers, which makes us stand out from any other NBFC. This low-risk segment play, aided by with low opex, helps us get better risk-adjusted return, and the competitive pricing offer gets reflected in the lower credit cost. This position us uniquely by being a lender of choice for the customer, which offers user experience, agility of a fintech, the customer understanding and practical approach like NBFC and the fair pricing and transparency of a bank.

This model has further strengthened our business strategy, which focuses on risk mitigation as a starting point. Our focus on segments defined credit-tested customers, digital data collection, rule-based underwriting and greater approach to loan exposure as all of them are getting better risk-adjusted return. Strategy further clearly defines the optimal mix of secured and unsecured portfolio at 40:60, along with the tenure mix of short term versus medium and long-term loss at 2025 is a short term, long term 75% to 80%. This is not only a move towards addressing a growing market, but also focusing on the right risk segment and further leveraging it for cost of capital advantage and a driver of higher profitability. All this can be seen at work in our Q4 FY ’23 results, with consistent business growth, best-in-class asset quality and finally resulting in highest-ever ROE of 5%. We are confident that as we further execute our strategy, the way we have been doing it over the last six quarters, we will continue to deliver a superior ROE, going forward. In the last quarter, we have given guidance of manpower and branch consolidation. As we focus on a tach-led and brands-lite model, there has been a significant reduction in our manpower from 5,184 as of March 2022, to 2,452 as of March 2023.

The group structure at the top has been done away with as our housing finance business gets carved out as a separate entity, subject to the regulatory approval. Also, we have consolidated our business to the top 100 branches to increase our digital business penetration across all our product lines. This makes us future ready to deliver on our stated guidance of AUM growth of 35% to 40% and profit growth of 30%, 35%. We continue to grow and diversify ourselves across all product lines. In Q4 FY ’23, we have made steady progress as we scaled up our supply chain finance business as well. This business line helps us to penetrate deeper into the MSME ecosystem as we target downstream and upstream financing for various corporates and to add another dimension by offering short-term financing. We continue to build a well-diversified book across various product lines, tenures, segment to manage our risk better. Short-tenure book now constitutes 20% overall of total book, and this is in line with our guidance provided of approximately 20% to 25% earlier. This also helps in our liability strategy as we further optimize our borrowing mix. Short tenure loans are also driving customer accretion for the future.

The credit underwriting parameter have been optimized, based on learning from the short-term loan, thereby helping maintain best-in-class asset quality. At the same time, we will maintain secured/unsecured ratio of 40:60. The new book built over the last 20 months continued to perform well as we continue to leverage the experience of having done these products earlier within our group. We have benchmarked our performance against the industry data through the credit bureau, and I’m happy to share that we are one of the best performing portfolio in the industry as per the bureau data. This external validation further enhances our confidence in growing along with a healthy asset quality. We continue to increase our digital agenda across product lines as well as customer life cycle. We have completed about 40% of the digitalization agenda as discussed.

And as we move ahead, we have a digital journey now fully available across all the unsecured product lines. We’ve also done digitization across customer service. In customer service, we have more than 94% of the service requests coming through a channel, and branches are getting limited to only 6% back to because of the legacy balance book.Out of 94% of the service request, 79% of them are being serviced completely digitally. This is in line with the trend that we had anticipated and further strengthened our belief in our strategy. We are leveraging workshop for giving a complete do-it-yourself journey, and the results have been very promising. We now intend to take more workshop ahead across the entire life cycle for our customers. As an organization with an employee-centric culture, we have been building a strong team for the future and driving productivity across the organization. The productivity improvement is well reflected in our increase in disbursement and AUM, while the head count continued to reduce.

This is truly reflective of the real digital tech-led model that we are creating and focusing since day one. The scalability of the business that we have seen over the last two years uniquely position us for a much stronger growth, going forward. The productivity improvement and controlling manpower cost is also seen clearly in the reduction of operating costs over a period of last two quarters. And going further, it will further reduce. With strong roots created over the last two years and exemplary execution capabilities, we are now confident that we will continue to deliver across the business metrics of growth, profitability and asset quality. We continue our relentless focus on building a strong technology lead and innovation-driven retail franchise.

Thank you, everyone. And now we can start the questions.

Questions and Answers:

Operator

[Operator Instructions] Our first question from the line of Sameer Bhise with JM Financial. Please go-ahead.

Sameer Bhise — JM Financial — Analyst

Yeah, hi, thanks for the opportunity and Congrats to Abhay and team for a fantastic quarter. Just wanted to ask some numbers. In terms of the opex, what was the ESOP cost for the quarter and for the year?

Abhay Sureshkumar Bhutada — Managing Director

Okay. So ESOP cost for the quarter was around INR29 crores. And for the year, it was around INR150 crores.

Sameer Bhise — JM Financial — Analyst

Okay/I mean, adjusted for that, the normalized opex would have been roughly INR6.5 billion?

Abhay Sureshkumar Bhutada — Managing Director

Yes, yes. So for example, if you see, so the entire area, the opex was around…

Sameer Bhise — JM Financial — Analyst

803, yes.

Abhay Sureshkumar Bhutada — Managing Director

8.5. You can reduce INR150 crores.

Sameer Bhise — JM Financial — Analyst

And how does one look at the credit cost line for next year? I mean, this year, we’ve had recoveries from the written-off portfolio and the provisions that reversed. How do you see it next year? And I have another question in conjunction with that.

Abhay Sureshkumar Bhutada — Managing Director

Yes. So credit cost, as we guided earlier, it will be in the range of 0.8 to 1.2. But since the new book is performing really well, so current year, you can assume credit cost will be less than 1% on the entire portfolio.

Sameer Bhise — JM Financial — Analyst

So I think obviously, our growth has been quite phenomenal over the last eight to 12 months. What I wanted to ask is, given what’s happening on the interest rate scenario, obviously, we have not seen that kind of an impact on the liability side. But if you see generally in the environment, any segments there where you are seeing some bit of slowdown? And secondly, we also gather from our channel checks that some of the unsecured products have not seen that kind of lending rate hike as one would see, given the quantum of rate hike that has happened from the regulator. So what is your sense on the environment, going ahead, given that we are very confident about growth for F ’24?

Abhay Sureshkumar Bhutada — Managing Director

Right. So basically, if you see, our base is very low at a stand-alone level, we are at INR1,6143 crores. We have diversified all the product range at early stage. Considering the growth in across all the products, the target segment of customer is very different, and that book is performing really well. So we have passed on the rate to the customer in fee of the product. But as on this since we are able to maintain the ROA margin, the NIM margin, I think the segment which we are targeting, the logic here is the choice of lender, choice of rejection. And we have started raising funds from CP recently in the last two quarters. So right now, the focus was on a bank loan. Now it’s a recent upgrade of CRISIL to AAA that will add additional further borrowing, we can expect further optimization of 25 to 30 bps. And if you see, despite of 250 bps hike by the RBI and the repo, there is a — last March to this March, hardly, there has been increase in our cost of fund from 7.5% to 7.9% only. So we don’t see any challenge in this environment.

Our debt equity is very low at a stand-alone level. Within one to two months, we are expecting post tax of around 3,100 from the sale of housing. So considering all these things, and we don’t expect any on that front. And in fact, in the rising interest scenario when most of the NBFCs with leverage of three and above, four and above are struggling with a tight liquidity on the higher rate of interest, here, because of the low leverage, because of the brand lineage and everything, we are getting advantage because in most of the banks, still, per party exposure has not reached to that level. So I think in 10 out of — eight or nine bank are enjoying the lowest rate in the sector, and we are keeping enough liquidity. And with this CP and NCD, which we have started recently, which will further… So overall, coming back to your question, I think we don’t see any impact on our segment of customers, which we are targeting, and we don’t see any impact on our margin. And in fact, we see one quarter down the line, 25 to 30 bps further optimization of the borrowing cost.

Sameer Bhise — JM Financial — Analyst

Okay. Okay. That is helpful. So I mean, all in all, if you kind of maintain the margins around current levels, probably all through next year, you will have lower opex as well. Is it fair to expect probably maintaining this 5% kind of an ROA next year, which probably would — could transform to almost, I mean, doubling of — slightly less than doubling of profit for next year as well?

Abhay Sureshkumar Bhutada — Managing Director

If you see, we have given the ROA guidance of between 4% to 4.5%. For the entire year, it was around 4.4%. So I think whatever guidance we have given, we will be able to maintain that, we are confident. And straight away, if you see this INR3,000 crores which we will receive, on average, 7.9 mature cost of around INR240 crores we will get as a straight-away interest saving and ESOP charge will be less in the current year. And whatever 50% branches and manpower we have reduced, you will see the overall in terms of percentage reduction of opex in the current year also. So I think you are right, we will be able to maintain ROA above four, we’ll be able to maintain the [Indecipherable]. But there will be a huge increase in terms of profitability in the current year because of multiple factors and less credit cost and book growth in the asset quality.

So right now, there is no issue in terms of growth or asset quality. The focus completely is on profitability. And with this short-term tenure, if you remember two or three quarters before, we have given much guidance that we’ll have to be able to control the growth. And this is what we said last quarter, we are getting because of the segment. We have given this time in the investor presentation also, along with some illustration, what are the real problems in the segment, which we are targeting, what is the opportunity size. So considering that, I think a lot of short-term loans we have started that will give additional profitability, we stick to our guidance. But yes, whatever you said, you can expect a good amount of profitability in the current year.

Sameer Bhise — JM Financial — Analyst

Okay, this is helpful. That’s all from my side for now. Thank you and all the way. Thank you so much.

Operator

To take your next question from the line of Abhijit Tibrewal from Motilal Oswal. Please go-ahead.

Abhijit Tibrewal — Motilal Oswal — Analyst

Yeah, good evening and congratulations. to Abhay and the team for a very strong quarter. Sir, just a couple of questions. The first one is, if I kind of look at the DDP number that you gave out, if you could just explain the sourcing mix more predominantly, what proportion of your disbursement or the — today is kind of coming either through partnerships or through the DSA model? That’s the first thing, if you could kind of expand.

Abhay Sureshkumar Bhutada — Managing Director

Yes. So DDP, if you see, total is around 81%. And as per our existing provided guidance also, the secured 40-60 we have already guided. In terms of the DSA as a part, we have achieved the maximum level, so we’ll be able to maintain DDP around 80%, remaining 20% through the DSA. And again, under the Digital, overall, Direct Program, what we see out of the total AUM, we’ll be able to maintain 15% partnership in the current year because there is no credit cost, there is no opex, there is no accretion cost that is helping us to cross-sell. But going further from next financial year onwards, we’ll be able to maintain 10% partnership, 70% remaining portion and 20% DSA.So that is the breakup of DDP.

Abhijit Tibrewal — Motilal Oswal — Analyst

So going forward, it will be 10% of the AUM, which will be contributed by partnerships?

Abhay Sureshkumar Bhutada — Managing Director

Yes, in terms of AUM.

Abhijit Tibrewal — Motilal Oswal — Analyst

Another question I’d ask you, I mean, in terms of partnerships, in the last earnings call, you had shared a few names like CARS24, KreditBee. Are there any new partnerships that we have entered into in this quarter?

Abhay Sureshkumar Bhutada — Managing Director

No. So we have entered into two or three partnerships. But as I said, these are all for the short term to onboard the customers and to support the digital ecosystem. But again, it is not getting added to the AUM growth assets because the AUM growth of the future years will not be more than 10% via partnerships. But we are not going to add much partnerships, going further. We added two or three small or midsized partners where we see synergy. That is the opportunity to cross-sell.

Abhijit Tibrewal — Motilal Oswal — Analyst

And why this — I mean, I also had a question on the SAP expansion that we have seen in the yield. Again, when I say yield, I’m just calculating it as interest income divided by the average loans which are there. So I mean, almost 100, 110 basis points kind of an expansion in this. Is this partly explained by the short-term loans that you’ve been doing more extensively over the last two quarters?

Abhay Sureshkumar Bhutada — Managing Director

Yes, because — two, three things, of course, because, one, because of the short term and new products on the consumer side, on the small personal loan side, which we have added, that is giving us good IRR and good processing fees as well as cross-selling income.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it. And over the last quarter, you had shared for different product segments what is the IRR, and what is the kind of credit cost you are seeing in the respective segment, so small business loans, consumer loans, preowned cars, small personal loans, whatever kind of IRR technical. Can you share that?

Abhay Sureshkumar Bhutada — Managing Director

So sir,we continue with the same numbers, or there are no changes in the guidance.

Abhijit Tibrewal — Motilal Oswal — Analyst

Got it. Got it. And then, in your investor presentation, there are two new slides that you’ve have shared this time around. One is more on an investment that you have even on a typical customer segment. So if you could just delve deeper into that and more specifically, where you have highlighted that there are no prepayment charges and no hidden charges. If you could just explain that. I mean, is it across all the product segments that you are in? Or is it on particular products, where you don’t charge any prepayment penalties to customers, which is typically the case, I would say, in most other NBFCs? And the second slide that was given is on the opportunity sizing, where you have shared the bureau data in terms of live customers. So I mean, are we kind of using some bureau scores to understand what is the potential that we have? And along with that, if you could share, what is the current customer franchise like, so that we can kind of — I mean, try to see what’s the opportunity like versus where we are in the customer franchise?

Abhay Sureshkumar Bhutada — Managing Director

So if you see slide number 22 of our investor presentation of the overall, we have tried to explain on that illustration wherein where is my lender of choice. So if you see the parameters, loan amount flexibility, collateral-free loans, quick turnaround time, process, interest rate, no hidden charges, so on the basis of our past or previous NBFCs Poonawalla financed two year we experienced, again two years of Poonawalla experience, when we realize the why customer is coming to us and why we have the edge over other NBFCs, why we have the edge over other fintech, so it’s a combination of so many things. For example, Mr. Abhijit, with the same illustration, if somebody wants a loan at a lower rate with no hidden charges, but 100% digital process, and this is zero prepayment projects, so what are the options left in the market? The traditional bank, traditional NBFC or if you have the larger NBFCs who claims with fully digital capability or other fintech NBFC. And again, I am not seeing again, the fintech NBFC.

So here, in terms of whether you have a flexibility loan amount, whether we are able to provide collateral-free loan, yes. In the illustration, we mentioned our customers score is 783. And the expectation was for a collateral loan and some collateral free, quick approval. And considering strong profile and cash flow, he was expecting the digital mode and the lower rate and quick approval. So lower rate, flexible. So when we explore all the options, when you got to know, right now, there are no options available. If you go to either any of the typical fintechs, the IRR everybody is aware, anything from — it can be 30% to 50% kind of IRR in doing processing fees and insurance. It is, again, with the NBFC. Again, the interest rates are much, much higher as compared with bank. Again, traditional NBFC, again, that same problem continues. Traditional bank, of course, top 3, top four private banks and one or two PFC banks, they are able to offer that kind of rate. Again, small finance banks will not be able to compete in each of the product. But it will be all the parameter. Most obvious is, we are targeting a credit bureau customer, 700-plus with zero DPD, zero or — we don’t take any deviation.

So considering the use database available, considering our AUM growth, low base for the next three to five years, what is the market opportunity available as such kind of customer, first time somebody at the NBFC is thinking like a fintech, taking a call, practical call like an NBFC, niche products, niche market, practical understanding of the product, customer-based lending. At the same time, somebody is able to offer rate of a bank. Why this is possible? Because the lowest cost of funds, low operating cost. Of course, you need to exclude these the ESOP costs and the legacy, which we are consulting. But overall, you see the operating cost is pretty low on the newly generated loan, if you bifurcate. So on the basis of that, we are targeting a low customer. Acquisition cost is, again, at low, so low acquisition costs, low cost of fund, no overall opex. We’re targeting a low-risk customer, prime, super prime, which is, again, data-driven lending. And again, that is giving you the low credit cost that is reflecting in GNPA and NNPA or in most of the GNPA and NNPA, what you’re saying is because of the again, the balance legacy book.

And you are getting a higher risk-adjusted return. So here, I think there is a huge market opportunity available coming back to your question. And that segment is huge. Right now, any person with 700, 73, 750, 780 for this kind of segment, if you want quick loan right now, then you have very, very limited options available, if you want no hidden charges, zero prepayment and a better rate and in complete transparent manner. And again, complete 100% digital, starting from e-application, e-match, e-agreement and later on to everybody is giving all the customer service and all, but there are very limited options available. So I think it’s like a further disruption of the existing whatever dissipate market. Coming back to the second question on the opportunity sizing, which is bureau based, so total life consumer, on the basis of the bureau data we have mentioned, is 219 million. On the basis of that, one account of around 61% and 2-plus accounts, 39%. Out of that, because of the low base, we have very, very limited presence available at this stage because we do not want to grow anything beyond 40%, 45%.

We have given a guidance of 35% to 40%, we want to stick to that. So considering that, we have consolidated the branches and the manpower. So this bureau opportunity is available. And again, we have a choice to focus on, again, a good customer by additional data point like TD or GST, so many other data points, whatever are available, they are merging in terms of our business loan and few other products. So that is giving additional advantage. And when you see the multiple trading of the customer, there was no option available to a lot of customers. And again, there is no requirement to focus on new to credit. That is not my focus segment. Maybe once we cross maybe 70,000 crores, 80,000 crores, we will start. We did in initially two or three quarters. But later on, we stopped because of the high disbursement, because of enough choice of rejection, there is no need to focus to that segment. And we have created market for ourselves, the base like a bank, we created a structure like a bank, and we targeted a customer like a bank.

Abhijit Tibrewal — Motilal Oswal — Analyst

And so last in the interest of time, on the opex bit, in your opening remarks also, you talked about optimization, both in terms of employees as well as branches. Being the last two quarters, even on an absolute basis, we have seen your operating expenses moderate. Is this optimization complete and from next year onwards, the opex reduction will predominantly be the declining in ESOP cost? Or is there still further scope for optimization in employees in FY ’24?

Abhay Sureshkumar Bhutada — Managing Director

So I think there is a further scope for one or two quarters. And in terms of growth and other — in terms of overall percentage, it will get reduced by 1%, minimum, more. And over and above that, there is a drastic reduction of around INR70 crores to INR80 crores in terms of ESOP cost as well, because anywhere, we have given ESOP cost, next year will be almost negligible. So current year, around INR70 crores, INR80 crores will be reduction in terms of ESOP cost. And further INR30 crores, INR40 crores reduction in terms of other costs. So in terms of percentage, it will be very, very less. less.

Abhijit Tibrewal — Motilal Oswal — Analyst

5%?

Abhay Sureshkumar Bhutada — Managing Director

Less.

Abhijit Tibrewal — Motilal Oswal — Analyst

So what is this 1% to 1.5%?

Abhay Sureshkumar Bhutada — Managing Director

I just want to highlight, in absolute terms, the overall opex was INR102 crores for FY ’23. So despite of 35%, 40% growth, which we are targeting in the current year, overall opex, including ESOP charge in absolute term, will remain at the same level of INR800 crores. It will not increase.

Abhijit Tibrewal — Motilal Oswal — Analyst

Thank you.

Abhay Sureshkumar Bhutada — Managing Director

Thanks.

Operator

We take our next question from the line of Nikhil Rungta from Nippon India Mutual Fund. Please go-ahead.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Yeah, hi, sir, First of all, congrats on great set of numbers, and thanks for providing the breakup of the AUM signs. So in the AUM breakup, you have indicated the business loan LAP, asset-backed finance and supply chain financing details. So if you can just highlight any specific industry in that, which we are catering to? Or what would be the major industries we would be lending to?

Abhay Sureshkumar Bhutada — Managing Director

So basically, these are all former income segments, credit-tested customers. We have a list of negative industry, caution list of industry. We don’t focus on real estate. We don’t focus developer funding. And a lot of other negative industrialists is available with us. So excluding this 15 to 20 negative and caution list industry, we are focusing on. So if you go one by one like business loan — loan to professionals, we are targeting CEA, doctor, company security; business loan, we are targeting all GST database and small business loan. Again selective the former income segment, media banking, bureau tested and those who are paying other dues on time on the basis of their cash flow. So no real estate, no wholesale. It’s a pure retail franchise.

In preowned car, again, self-employed as well as salaried customers. In personal and consumer, majority of them are salaried customers. Again, a few of them are self-employed. Loan against property, again, we give very low ticket size. And asset-backed finance, this is the deal book which we acquired initially, if you remember, last to last year and our first quarter of the last year. And supply chain and other products, they are into SME. So as such, whatever negative industry for common for most of the top three NBFCs, top three or four private bank, considering the bureau data, considering the past industry that we have excluded, but the more focus is on our cash flow industry trend and those, again, taking a complete call on the customers, apart from the industry.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

And sir, you’ve already touched upon our cost of fund. So it has been increasing at 7.9% now. Where do you think it will stabilize? Or do you see it moving further ahead?

Abhay Sureshkumar Bhutada — Managing Director

I think maybe because of the major increase in last two quarters, you can assume 10, 20 bps increase in the first quarter. As I told you, we started raising funds at around 7.25, 7.3 via CP. The rates will further get reduced, both CRISIL rating of AAA. So Q2 onwards, we will see cost of fund will get drastically reduced by 30, 40 bps for us because of the higher focus on the short-term because we’ll have to match short-term lending with short-term borrowing as well. And another thing, Nikhil, within one or two quarters, we’ll try to pre-close prepay our high-cost borrowing, which is still at around 10.5%. Still, we are carrying that Magma existing legacy borrowing close to INR1,000 crores.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Sir, last question from my side. Recently, we have seen RBI getting cautious or making banks cautious on unsecured retail lending. So why is it so? And your comments on the same because we are also primarily into that type of segment. So where is it coming from? Are we seeing some signs of issues in the industry? Or any specific reasons for that?

Abhay Sureshkumar Bhutada — Managing Director

I think what is happening is the target segment is different. Just if it is an unsecured loan, doesn’t mean everyone is targeting the same segment. As I told you, in the sector also, we have one of the best asset quality, even if you compare with the top two or three NBFC. And right now, we are at par. Or I must say, we are one notch better than even the top four private bank. It doesn’t mean that if somebody is a bank or top NBFC, they are only targeting a good asset quality. Here, the focus is completely credit-tested focus. What you are talking is about the segmentation issue, and they have pressure. And then just, you cannot just copy everyone that everybody is focusing on unsecured loan, need to increase their margin, right? We have this understanding since the existing NBFCs in the current. So we’ve started with the approach of start small and grow big. And we are very much cautioned here also. If you see LAP, preowned car and other products also, we have increased. And that’s why we have given guidance of secured, unsecured 40:60, loan to professional, GST-tested customer, bureau tested.

Even if you the opportunity, 1.5 crore GST data available, how many customers we have? Almost less than 1%. So here, if you see the — on the entire 1.5 for GST data, where 60%, 70% people are paying on time. Out of that, how many, they have the the Bureau data? Out of that, what is the market opportunity available? And our approach from Day one was a long-term approach, customer-stickiness loyalty, customer-centric solution. We’re not here for a short term. So from that perspective, I think the segmentation issue is a big issue. We cannot just give same treatment to all the lenders. Even during the entire banking system, for example, if you see the bureau data of personal loan, business loan, we cannot just check what is 30 plus, what is 90 plus, you need to see cooperative bank, small finance, private, PSU, then your foreign bank.

Then again, you need to exclude fintech separate, again the top four fintech the top five NBFCs, then the traditional NBFCs, then the regional NBFCs. So you need to do that apple-to-apple comparison. And on the basis of expectation — expected trade loss from the bureau and our own data, I think we are pretty much confident, despite the segment which we are targeting, it is much, much better than the unsecured loan of fee of the target customer of fee of the bank. So that is our own segment because most of the customers there are not — it’s not about only formal income segment or bureau data, either they have own house or either they have their own factory setup, they have the business advantage, they have the bureau advantage as well. And they have strong cash flow. The best part is opportunity total addressable market in each of the progress, we have done the GAAP assessment segment which we are operating, there is a huge opportunity available. And it is just to focus on risk-adjusted returns rather than just the IRR approach.

Nikhil Rungta — Nippon India Mutual Fund — Analyst

Perfect. Quite helpful. Thank you so much and all the best for the future.

Abhay Sureshkumar Bhutada — Managing Director

Thank you, Nick and thanks.

Operator

Take your next question from the line of Harshvardhan Agrawal from Bandhan AMC. Please go-ahead.

Harshvardhan Agrawal — Bandhan AMC — Analyst

Hi sir, thanks for the opportunity. Just two questions. One, I wanted to understand about the defocused book. Because if I remember correctly, our earlier target was to run on the book by June ’23. But now in the opening comment, I believe you said that it could take one or two quarters more. So any specific reason as to why pushed back this target?

Abhay Sureshkumar Bhutada — Managing Director

So we are not changing any targets. It is for the actual repayment. So out of this one to two quarters includes the current. Because if you see, out of the legacy book, we are trying to do maximum whatever is, 30 plus, 60 plus we did right off for the last year. And we are trying to focus only and only cleaning up of the legacy book. But more than 50% book is in zero market itself, and remaining we are trying to clean up. So you can assume it will be closer to zero around September, and we are trying to sell that, again, as legacy book. So we’re not changing any guidance. It will be — by end of June, again, it will be almost around INR200 crores, INR300 crores.

But before September, it will be closer to zero. So only 10 is left. So what is happening is we have closed these 200 branches, though we are getting AMI on time. From 300 branches, we have reduced to 100. We are not giving any top-up to these customers. So nothing to worry. And we are getting AMI on time. We have done enough this one point, whatever NPA 47 we have right now. This includes the NPA of the legacy book also. And the PCR is again 46%, 47%. So there is no stress or any issue in terms of legacy book. But there’s no change in the guidance, it is as for the customer repayment schedule.

Harshvardhan Agrawal — Bandhan AMC — Analyst

Okay. So sir, what — as you put it, like maybe 200 or 300 will be started to sell down, so that will lead to really a onetime gain in whichever quarter that still happens?

Abhay Sureshkumar Bhutada — Managing Director

That will not impact any P&L impact because if it is a zero DPD or up to a certain DPD, I don’t see any discount we will sell. I don’t see any premium we will get. You can say at part, we are trying few of the CVC tractors in the old legacy book, if we can sell via some sale route. But the — otherwise, it will get closing before September, most of the book. But there is no stress also, and there is no hurry also because that is again giving good yield also. The average yield on that book is 16%. So there is no economic loss as such.

Harshvardhan Agrawal — Bandhan AMC — Analyst

So second question is on the digital partnership disbursement. So as you mentioned 80% upon investment, what’s the DDP? So what was the nature of either one of the major partners in which bulk of the investment happened? So I believe we have only three or four partners on this side. So I believe one or two partners will be contributing to the bulk of this.

Abhay Sureshkumar Bhutada — Managing Director

So there is no as such one or two partners. It is a mix of secured and unsecured. So it’s a mix of multiple partners. But as I told you, the focus is on direct, and we are able to source a lot of customers digitally. So there is no specific importance given to them only for the disbursement. And the overall AUM is less than 15% of the total AUM as of now. And going further, it will be less than 10%. So that was an initial strategy, and we have already guided, if we see in the last quarter itself, that going further.

Harshvardhan Agrawal — Bandhan AMC — Analyst

So what you’re saying is around 15% of the current AUM is coming through the digital partners. Is that the correct understanding?

Abhay Sureshkumar Bhutada — Managing Director

Yes. So if you say total AUM of INR16,143 core, so approximate 15% is through the digital partners, wherein we don’t have any accretion cost. We don’t have any credit code because of the FLDG, and we don’t have any opex as such. So it’s completely digital. We are able to onboard the customer, we are able to test the customer. And going further, we are going to cross-sell on this customer. The question on the 16,143 is the breakup in terms of payment. Going further, I was guiding that it will be less at 10%.

Harshvardhan Agrawal — Bandhan AMC — Analyst

So just to be clear. So the 3% of AUM, this will translate into, say, somewhere around INR5,000 crores of disbursement for this quarter. Is that understanding correct?

Abhay Sureshkumar Bhutada — Managing Director

No, no. I’m talking about AUM. I don’t have the disbursement number right now. Maybe our Investor Relation then will give you offline all the details. I’m only talking about the breakup of the AUM and how the breakup will look like in future.

Harshvardhan Agrawal — Bandhan AMC — Analyst

Perfect. I’ll get-in touch with the and follow. Thank.

Abhay Sureshkumar Bhutada — Managing Director

Thank you.

Operator

We take the next question from the line of Kaitav from Anand Rathi. We take the next question from the line of Dhaval Gada from Aditya Birla Sun Life. Please go ahead. Please go-ahead.

Dhaval Gada — Aditya Birla Sun Life — Analyst

Hello, am I audible. Please go-ahead.Sorry, I was not able to hear. Congratulations, Abhay and Poonawalla Fincorp team, on great set of numbers. I just wanted a couple of data clarifications. One, you’ve presented very well on slide 12 about all our different loan — segments of loans. If I could get similar disbursement data from similar segments, whether it is business loans, preowned car, personal loans, LAP, so it would be great to look at trends. Also, I think there was a question which I wanted a little more deep dive on, which was on the slide 24, which is about opportunity sizing. The question is that I don’t see material growth in the segment, what we are looking at. So for us, it would be more — I mean, I’m saying — not growth. I mean, growth is largely around 20% mark other than a few unsecured line items, where the growth rates are a little higher. So I wanted to understand if you can explain a little at greater length that how Poonawalla Fincorp can benefit out of this in terms of either it is a market share gain strategy or market increasing strategy as well?

Abhay Sureshkumar Bhutada — Managing Director

So coming back to your first thing, sure, next quarter on, we’ll try to incorporate the disbursement breakup as with the product line. That is one. Second — in terms of disclosures. Second, in terms of this opportunity sizing, this is — we are trying to mention the total what is opportunity available for us by given we have discontinued new-to-credit two quarters by and what is the addition overall every year on a bureau side and while we are focusing the ever-expanding consumption base, consumer base, unsecured loans. So this is completely as per our strategy of 40-60, we want to make it considering the ROA, ROE. And we have enough capital. We are already well capitalized. Now we are overcapitalized for sale of housing.

And there’s a huge opportunity available, which we explained multiple times the segment which we are targeting. Though it is unsecured, but that book is performing better than the secured in terms of cash flow. They are better than the secured customers. If you see overall whatever data points we get from the GST, from bigger banking, from the lot of other whatever additional IT, and it depends on the customer. So here also, this is as per the strategy. We are doing almost INR250 crores per month kind of disbursement in loan against property, INR200 crores per month preowned cars. So already, we are in top two or top 3. If you do apple-to-apple comparison, their operating loan against property is at 40, 45 branches, we are at number one because we don’t do wholesale and real estate. If you see preowned car, we are at number one, if you do apple-to-apple comparing. Even if our 100 branches, if you compare with other player at the level, then still we are at number two or number three. So its is in such a short span of time, despite of not doing into credit. So I think we have done because there is no worry to increase the secured book in terms of mortgage or in terms of the preowned cars.

But in unsecured loan, there’s enough opportunity available, a lot of fintech, respect for everyone wherever they are, we respect them, because their cost of fund is 14%, 15%, so that’s why the segment which they are targeting because of the higher credit cost, the IRR goes to almost 30%, 40%, right? And they are not able to leverage more than two times their dependencies on other co-lending partner. Again, they are focusing short-term loan bank, don’t go for a short-term loan, operational issues, integration issue. So it means there’s a huge opportunity available on the business loan side, the small businesses loan side, small personal loan side, where predominantly fee of the even our two private banks, one or two NBFCs, they’ve got the advantage over a period of last 10, 15 years. But now since, as we explained in our customer diameter, wherein there is my lender of choice on 2022, since they — when we offered zero prepayment. And as per our survey, we got a choice of rejection from multiple customers, not only in personal loan profit or business loan LAP. So in such a short span of — unless we reject in out of three or four customers.

They are not applying for any NBFC. From day 1, it’s like you’re competing with top three private bank. So coming back to your question, I think this is as per the strategy, either personal loan short-term, long-term. To control the growth, I think we are playing with short term, long term, but there’s a huge opportunity available in the unsecured segment. Secured, we can grow further, but the same set of customers, the same — in terms of our repayment capacity of the cash flow, with the same set of customers, when we see the trade line of any other top NBFC, the top brand, I think with our 100% digital approach, it’s a lower rate we are able to acquire the customer. Once we’re able to acquire the customer, I think we are able to cross-sell few other products. So unsecured loans will give us a depth of our customer base. Yes, it’s an acquisition strategy. But also, it is in our revenue building strategy as well. And please note, this small growth in secured does not mean growth as ticket-size multiplier, but it’s there, right. So that’s the answer to your question. And our secured loan also, growth was more than 25% quarter-on-quarter, in terms of loan against property.

Dhaval Gada — Aditya Birla Sun Life — Analyst

Also, if you could explain on 81% sourcing through DDP, if you could explain how much is partner — if you could break that up for us in terms if how much is direct, how much is digital and how much is through partnership, would be fairly useful. And also, if you could talk about the types of partners we are engaging with…

Abhay Sureshkumar Bhutada — Managing Director

So it is — I think in terms of our tariff and — of the total disbursement, direct and digital, approximately it is at 50%; via partnership, it is at 50%. But because of the short tenure of the nature, one month, two months, three months, six months, which is the customer, as you said, in the short term, it is not actually getting added in this quarter AUM because AUM, we have not got any benefit, if you see quarter-on-quarter. But yes, you can see that number as it is. It looks like the disbursement number’s on the higher side, and AUM growth is only 16%, 19% quarter-on-quarter. So customer addition is there, we will be able to do a lot of cross-selling. And we have given this all guidance in the previous quarter that we are testing customer in a short run and does not result in AUM. But yes, we are expecting a lot of onboarding via this short-term route. And we are maintaining, again, there also 50-50. So our direct and digital approach is 50%. Again, partnership is also — comes under to digital ecosystem also, but that is again at 50%.

Dhaval Gada — Aditya Birla Sun Life — Analyst

Could you talk about types of partners, risk management around the partners? And is there any concentration with any one partner if you…

Abhay Sureshkumar Bhutada — Managing Director

Yes. So there is no concentration as such on any of the partners. And we have achieved a fixed loss — first loss default guarantee from all the partners. We have not incurred single rupee loss till that, 90-plus, across all the partners, has not crossed even 2%. And we have FLDG — most of the FLDG is between 10% to 20%. So we have a joint trade parameter. We have a complete integration. There is no manual intervention. It’s all role-based, and so risk is totally diversified there. And we’ll not allow 90-plus to cross 3% across all the partner. Against that, we have a 22% FDAs available with us. And these are all short term. So there’s no long-term risk here. And unless 90-plus crosses 10%, then there’s a risk. But that situation will never arise because this is — we have almost completed 5, six cycles because these are all very, very short-tenure nature of loans. And again, in this also, we have a lot of secured also, for example, loan against property, preowned cars. So many other products are there, 2-wheeler loans. So this is again under partnership also, the segment which we are targeting. A lot of — more than 25% is like a secure.

Dhaval Gada — Aditya Birla Sun Life — Analyst

Last question, how much outstanding overlay provisions we have? And what is the current required ECL provisioning?

Abhay Sureshkumar Bhutada — Managing Director

So INR46 crores is the extra provisioning left overlay, you can say. And the PCR is around 46%. 46.2% is the PCR. And then there is no issue on that front. And we are able to receive this the balance take of our insurance at Jaguar. So approximately INR90 crores we are yet to receive in this quarter, in the first quarter of this financial year before June. And the next will be, we will receive around INR3,100 crores net of tax from the sale of housing. So those are new book performing really well. But as I said, we’ll do slum sale of the balanced legacy book, and we can create additional management overlay. But as of right now, so there is no need, as we speak. Because the new book — I think, considering the previous experience of the same group, a three years of experience, two to three years and this two years, so a lot of customers of 24 months, 12 months, 36 months, technically, we completed more than one cycle and despite of 24 MOB. But the segment was different. So we cannot just compare with any other player. We don’t see any credit cost there. So considering that, Dhaval, we do a lot of aggressive write-up, you are aware at 90-plus in unsecured. So there will not be any surprises on that front.

Dhaval Gada — Aditya Birla Sun Life — Analyst

Sure. I mean congratulations and all the best. Thank you.

Abhay Sureshkumar Bhutada — Managing Director

Thank you so much.

Operator

We take the last question from the line of Tejas Mehta from Max Life Insurance. Please go-ahead.

Abhay Sureshkumar Bhutada — Managing Director

All right. Larry.

Tejas Mehta — Max Life Insurance — Analyst

Yeah, Greg,. So in times them for taking my my question. Just a couple of things I wanted to understand. One is, can you give segment-wise NPA data as well? Can you help us understand?

Abhay Sureshkumar Bhutada — Managing Director

Sure, sure.

Tejas Mehta — Max Life Insurance — Analyst

Okay. So should I reach out to the IR for this? Or you can give the data right now?

Abhay Sureshkumar Bhutada — Managing Director

Yes. So for example, right now, the breakup is, for example, 90-plus for business loan is 0.5, loan to professional and personal loan is 0.3. So overall unsecured loan, 90-plus is just 0.5. Pre-owned car, the 90-plus is pointed, one of the best in the industry. And if you see loan against property, 90-plus is no — zero, there is no case. We started this 18 months back. The book is performing really well. Then as I told you, 90-plus overall of the partnership with just 0.5%, so I said 2%, 2.5% approximate because we have enough FLDG there 10% to 15%. But as we speak, it is only 0.5 across all the partnerships. Again, we have the full coverage. And if you see supply chain, there is no NPA, so then how the NPA is coming in at around 4.1, 4.7 level? Because if you see, there are discontinued book available, and again, the legacy, which we continue POC SME and which book — which we acquired initially, there the overall 90-plus is around 2.4%. Against the credit rating estimated loss was around 3%. So that is again in this. So because of this DA book, which we acquired long back, there 2.4% is 90-plus, discontinued in legacy is around 5.5%, and discontinued total is around 15.7%. So average comes to around approximately 1.5%.

Tejas Mehta — Max Life Insurance — Analyst

Right. How much is Magma on the Magma book, INR945 crores that you have?

Abhay Sureshkumar Bhutada — Managing Director

So that’s what the NPA — if you see, the live POS, there are two you need to understand. One is the legacy and one is the discontinued. So what is discontinued? That CVP tractor, agri, which we have not continued, that book is INR594 crores. There, you have a 90-plus of 15.7%, absolute term is less. Legacy book, which we have continued, SME Magma was doing in pre-owned car. Their 90-plus is 5.7%, right? So INR552 crores is legacy book, which we continue, and discontinued book legacy is INR594 crore. So 5.7, which is legacy continued, 15.790 plus is for discontinue. And that is the reason you see this NPA, otherwise despite of unsecured loan and started second, fiscal third cycle for most of the customers, where we have driven short-term three months, six months 12 months. And technically two year completed at 24 MOB, we don’t see. Even not about 90-plus, even the 30-plus is one of the best in the. That’s why I said in my commentary, the recent — similarly done by itself, whatever data they have given to us, and they have compared ourselves with top three NBFC top three private bank and with other player, I think the same thing we are trying to reach out to the market and explain to the market.

Though we have been unsecured, we have the funds to do the secured also. Our base is low, we can grow higher, the leverage is very less, post sale of housing deleverage will be less than one. But at the same time, the segment which we are targeting, huge opportunity available, and that is giving us very, very less — NPA, we can always add the risk premium. As I was explaining in my earlier call also, still, we are operating 1150 bps lesser than the top two NBFCs. We are almost like a bank, hardly 25, 50 bps higher than the bank. So there is enough scope available to increase the risk premium as and when required. So there is no [Indecipherable]. But considering the reduction of the opex and other things, I think we decided not to increase the rate, but better to get the choice of rejection rather than diluting our focus of a target segment.

So we have passed on a rate around approximate 100, 150 bps to the customer, with our cost of borrowing increased last month to this month only 40 bps. That, too, for the first quarter. Again, it will get reduced. For the specialty plan if you see, we’ve started raising funds at 57.25 which we are expecting to two quarters down the line that will be sub-seven or below seven, considering that the focus will be more on the short-term borrowing to reduce cost of borrowing. Legacy borrowing, If you exclude from our cost of borrowing, I think we are among the lowest in terms of cost of funds in the sector. And next time onwards, we’ll try to give whatever additional disclosure you are looking at, but I will explain you the product-wise 90-plus and 30-plus.

Tejas Mehta — Max Life Insurance — Analyst

Just one more question here. So on the Magma — sorry, your discontinued book of INR595 crores which you mentioned, 16% is the NPA you mentioned. Is that fully provided? Or is there anything left to provided there?

Abhay Sureshkumar Bhutada — Managing Director

If you see overall PCR is 46% at a 90-plus at stage three, right? So out of that, under the discontinued book, the provision is on higher side.

Tejas Mehta — Max Life Insurance — Analyst

Right. Okay. So once the book goes off in this year, I believe this book will become zero by the second quarter itself, then we’re — essentially next year, NPA will be substantially — will be comfortably below 1%, right?

Abhay Sureshkumar Bhutada — Managing Director

So if you see our long-term guidance, we have given the net NPA and GNPA guidance we have achieved much earlier. But yes, you are right. Considering the new book performing really well, I think you can expect further strong improvement in asset quality.

Tejas Mehta — Max Life Insurance — Analyst

Okay. One more thing I wanted to understand is that for — regarding the customers, if you can give data on your total lifetime customers, how many live customers you have today? And how many added new customers we added this quarter? If you can share that data, it will be good. Probably you can add it to your disclosure from next quarter onwards.

Abhay Sureshkumar Bhutada — Managing Director

Thank you so much for your suggestion. I think this time, we have added our digital metrics. If you see per employee AUM INR7.6 crores, then profit before cash per employee, 34 lakh and all the system scalability, agreement, each and other things, so we’ll try to add most of the disclosures from the next quarter onwards. Because of the legacy book, a lot of people get confused in terms of NPA of the branches or the manpower. I think we have done — 80%, 90% we are done with that. So we’ll be able to give you additional disclosure. This time, we have — so we have — if you go the quarter 4, we have added, I guess, approximate, if I remember, more than six lakh customers.

Tejas Mehta — Max Life Insurance — Analyst

You added more than six lakh customers in quarter 4. And what are the live customers to the total?

Abhay Sureshkumar Bhutada — Managing Director

Live customers, in a short span of last 18 months, I guess we have crossed more than two million. But you will see a major from here because as we explained in our investor presentation, now we are in the digital offering side, a lot of — rather than going a physical model at a store, e-commerce loan with a pre-approved offer, a lot of top e-commerce, we are in touch in terms of partnership. So there, two quarters down the line, you will see a drastic customer acquisition on that front via multiple digital offering and integrating with top 20 offline and online AUM, but completely digital mode, nothing increase in the opex cost, no manpower, no branches, nothing, completely digital.

Tejas Mehta — Max Life Insurance — Analyst

Got it. So your next question is that if you can help us understand a bit more on the co-lending partnerships that you have, what is the kind of yield share that we have with them, which — because you mentioned that you don’t have any cost in this model. We basically share the yield with the co-lenders. What is the yield share that you get with them?

Abhay Sureshkumar Bhutada — Managing Director

I think a very, very interesting question. For example, if you see all these partners, they have a partnership with almost out of top 10 NBFC, we are with six or 7. And why — like customer is giving a choice of rejections, choice of lenders, same thing we have mentioned in our presentation this quarter also, last quarter also, that all our ecosystem partners also giving us a choice of rejection. What is that? So one, we are playing there because of a low cost of fund average is 7.9%. The average rate is just 13%. It’s not like that we are getting — but there, it is completely digital in more — in 90% of the partner, unless we reject — opposite with a credit policy on Day 1. Unless we reject, it will not go to any other partner. So there, we are getting a choice of rejection. And that’s why we have maintained 90-plus is less than 5% against FLDG available about 10% average. So that’s it. Average can increase. But as I told you, right now, the problem is to control the growth. So slowly, slowly the focus, we have reduced all the partnership to the short term, except the secured one.

We are increasing the secured partnership to increase the secured on a very, very selective, very choosy while selecting the partner. Because next year onwards, as per the AUM, it will come down to next year, the total partnership we have10, then around nine, eight, seven. But because of the multiple benefits, I think it is giving us that advantage of choice of rejection. So we do not do a BC model 000. These are all co-lending. We lend only 80%, they lend around 20% or some — in some, there is 10%. There is a scheme in the game. So it’s not like that completely without any risk parameter we are lending. And these are all top players, wherein they have risks, enough rounds of equity recently, and they are in the business this long. Better than the — overall, better. So if you see customers getting acquired by us and cherrypicking partners and again, cherrypicking up their customer also. So there also we have won from day one on the conservative mindset while closing the partner. And again, we have a control on their customers, what customers they are onboarding and which customers they can push to us via this digital ecosystem against our other digital big NBFCs, those who are in this partnership business.

Tejas Mehta — Max Life Insurance — Analyst

Got it. And just for just one last question I have. So while your NPA and asset quality has been pretty robust in the last few quarters, right? But from here, given the kind of disbursement growth that we are seeing, it looks like the book will grow very sharply over the next two to three years, if you keep the maintenance in pace. So while so far you have done very well, you need to understand what sort of internal checks from balance the you guys follow so that the asset quality, at any point of time, doesn’t go out of control because there could be some macro risk that comes out at some point of time or something that — we may have to kind of bulletproof our business model, right? So what goes into the stress test model that you have built in, especially because most of your collection teams have been let go, right? So there’s a very different kind of model that you all are doing. It’s not like a traditional model. So as an investor, we’d like to get some comfort on how do we build confidence on the asset quality as we scale up over the next two to three years.

Abhay Sureshkumar Bhutada — Managing Director

I think, a fantastic question. And if you see the target segment and diversification, I think first, you should keep eye on AUM rather than the disbursement because, again, to control the growth, that’s our strategy. That is one thing in our hands. Second, we do additional risk monitoring, and we started with the start small, grow big. We have done all kind of experimentation, the previous NBFC, two years, personal loans, profession. It’s not the first time we are doing this. Poonawalla Finance was an unlisted company. We told multiple times to the multiple people that we were doing INR150 crores per month of unsecured only at a five locations, different all the top five metros. It was only to scale up with some secure, and that’s why we acquire Magma.

Second, you said collection team, what we are talking about the consolidation because of the legacy book, right? For the ongoing SME LAP and unsecured book, we have collection team of enough more than 100 people, which is more than for the next three years. Unless they require through a portfolio at that level the segment which we are targeting, if required, we can always recruit. We paid so much of salary cost and admin cost and opex to the last two years, we collected the — whatever we wanted to collect maximum amount out of the legacy book. So as of now, we acquired 200, 250 people. If you see what is my zero plus? So my zero plus, what is my 30 plus? If you see on the continued total, it’s just 1.5%. 90-plus is 0.4. And if you see the guidance given of GNPA on — whatever you are saying, considering macro factor in transferring business scenario, all the factors, we have given guidance of 1.3 to 1.8. If you open page nine of our investor presentation, long-term guidance on financial metrics, including the asset quality, we mentioned net NPA of 0.5 to 0.9.

So right now, 90-plus is around 0.4 on the continued book. Because of the legacy book, it looks like 1.47. So that already — even if it is double or triple, it is within the our guidance, even if it is 4 times 0.49, it is below 1.8. And the segment which we are targeting, when zero itself is saying, it is just 15 days back, whatever they have shared the data and it was official seminar in Pune, wherein they said that you have crossed your top two private bank and peers in terms of the asset quality. But just on looking at bureau, as I told to Mr. Daval also, we cannot keep below 90-plus personal loan is XYZ percent as our business flow, cannot give same treatment for all. The segment in which we are operating, I think there, there is — there are no early delinquencies. The book is performing. But you are right. Whatever risk will be there, geopolitical, COVID-like situation or anything, I think that will be a unique risk not to us, that will be a common risk for entire industry. And the best part here is the segment which we are targeting. It is equivalent or slightly better than the top three private banks. I’m talking about only unsecured part. Secured, of course, we are going with one of the top quality in secured.

But in terms of NBFC, I think definitely, we can say we are one notch ahead than our — even the top three NBFC. We will be small in terms of AUM. But in terms of segments which we are targeting, I think there is no issue. So whatever you said right now, that risk will be there for the entire banking sector, entire NBFCs. There will not be only unique risk stores because the customer segmentation target, everyone try to focus on that segment. And why we are able to acquire, that we have explained in that chart that because of the Poonawalla’s legacy, ethic, culture, customer-centric approach, zero prepayment charges, long-term approach, because of that, I think we never thought in such a short span of time, because of this bigger factor here, trust which people trade to understand, I think the people, if they get to know, if the loan is available, like, for example, if you apply for a loan, I think either digital or by a brand or any other more, your intent will not change, your will not change, your cash flow will not change. So customer needs to fit into our stringent policy to get a loan from us. So it’s a risk-first approach that we already explained.

They’re not running off the disbursement, but running after our target segment. Otherwise, we were no need to stop the new-to-credit because we did first four quarters. We’ve never discussing any of the investor call about why we stop the new-to-credit because there is no need right now. It required — once we got INR50,000 crore, INR60,000, maybe we will start at that point of time. But even in preowned car, which is predominantly more than 30%, 40% new to credit, that also we stopped because we are getting enough choice of rejection. See, right segment maybe we will meet our all the risk-adjusted returns. And we have a preferred choice of lender now. We command the right of rejection in the entire market ecosystem. So I respect whatever you said, but I think that will be the common risk for the entire industry, the rising interest rate scenario, either any kind of geopartical situation or any kind of macro conditions.

Tejas Mehta — Max Life Insurance — Analyst

And just a last question. I mean housing finance subsidiary side, if you just do the Q-on-Q comparison, then the profit has dropped from INR32 crores to INR18 crores. I know we are selling on this business. I just wanted to understand why that happened and can there be any risk to the deal.

Abhay Sureshkumar Bhutada — Managing Director

So the entire presentation, we have given stand-alone logic of it that we have announced sale to the TPG at 3,900 valuation, and we have all be approval, except RBI approval, which we are expecting before June end this quarter. And coming back to specific, now because of the TPG since it is independent, so as per our agreement, we have started segregation of all the branches, which were commerce. We have segregation all the current level IT and a lot of other employees. the group structure, and they are also growing in terms of monthly organic disbursement. Almost they are doing more than INR250 crores. Just one year back, they were doing INR150 crore per month. So from that perspective, I think there are a lot of onetime costs, and that is the logic behind. And if it gets consolidated, so that’s why the press release as well as investor presentation, we are talking about stand-alone. But yes, there is no actual dip in the profit. It is despite of RB alignment, whatever GNPA and NPAs there, that is the best in the industry.

The book is growing, now in organ growth, complete organic. And Poonawalla is one of the best in terms of productivity as compared with any top four affordable housing. And as per the all the recent report, there’s a huge opportunity available in the affordable housing. Yes, we were not able to do cross-sell, upsell. They focus on new-to-credit. The other branches — outskirt area of the city, we are at a prime location, so there was no synergy. And we were clear from day one that value unlocking will happen in 2025. We got the opportunity, we wanted to dilute 1020 and will be diluted completely on the basis of rating rationale we have given. But actually, there is no dip because of onetime huge opex in terms of INR10 crores, INR12 crores in IT, around a few crores in employee that was onetime cost for them. And because of still — though it is held for sale, but just for one or two months, as per the guideline, we have to show under this consolidation mode, but I think you should look at only the stand-alone numbers only.

Operator

Thank you. Ladies and gentlemen, due to time constraint, that was the last question. I’d now like to hand the conference over to Mr. Hiren Shah for closing comments. Over to you, sir.

Hiren Shah — Head Investor Relations

Thank you, everyone, for joining the earnings call with us. For any further queries or communications, please write to us at investor.relations@poonawallafincorp.com. Thank you.

Operator

[Operator Closing Remarks]