Shriram Transport Finance Company Ltd (SRTRANSFIN) Q4 FY23 Earnings Concall Transcript

Shriram Transport Finance Company Ltd (NSE:SRTRANSFIN) Q4 FY23 Earnings Concall dated Apr. 27, 2023.

Corporate Participants:

Umesh Govind Revankar — Executive Vice Chairman

Y S Chakravarti — Managing Director and Chief Executive Officer

Parag Sharma — Whole-Time Director

S. Sunder — Joint Managing Director

Analysts:

Avinash Singh — Emkay Global — Analyst

Abhiram Iyer — Deutsche Bank — Analyst

Sameer Bhise — JM Financial — Analyst

Gaurav Kochar — Mirae Asset — Analyst

Shubhranshu Mishra — PhillipCapital — Analyst

Abhijit Tibrewal — Motilal Oswal Financial Services — Analyst

Bunty Chawla — IDBI Capital — Analyst

Piran Engineer — CLSA — Analyst

Ashwin Kumar Balasubramanian — HSBC Asset Management — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Shriram Finance Limited Earnings Conference Call for the Fourth Quarter and Full Year Ending 31st March 2023. [Operator Instructions]. Please note that this conference is being recorded.

I now hand the conference over to Mr. Umesh Revankar, Executive Vice Chairman, for his initial remarks. Thank you and over to you sir.

Umesh Govind Revankar — Executive Vice Chairman

Yeah, thank you. Good evening, friends from India and Asia, and warm welcome to all of you who’ve joined this call. Greetings to those who have joining the call from the western part of the world.

Today, with me, we have Mr. Chakravarti, the Managing Director and CEO; the Joint Managing Director, Mr. Parag Sharma; Mr. Sunder; Mr. Sudarshan Holla; [Indecipherable]. We also have Ravi Subramanian, MD and CEO of Shriram Housing Finance, and Sanjay Mundra, our IR Head.

Let me first give update on the merger. At the conclusion of financial year 2023, the merger of both Shriram Transport Finance and Shriram City Union Finance plan completed. On the operation front, majority of the branches of Shriram Finance now offer at least one product more than they were handling before the merger. The IT and HR functions have been integrated.

Let me come to the growth in Indian economy. At Shriram Finance, our activities are closely linked to economic activities. And I [Indecipherable] brief commentary on the latest economic scenario. The Indian economy grew at 4.4% in the quarter ended December ’22. Recent reports by [Indecipherable] among others indicate that the economy would have grown 6.4% for the full year ’23. Now, while the pace of growth may have somewhat moderated on the account of easing of pent-up demand post COVID, but still India would continue to grow and likely to be the fastest-growing major economy with expectation of the digital growth around 6.5% in the coming year.

On the Union Budget, which was presented in the 1st of February, the government have termed it as Saptarishi, the seven sages — in the name of seven sages. The seven major announcements are Inclusive Development, Reaching the last mile, Infrastructure & Investment, Unleashing the potential of the country, Green Growth, Youth Power and development of Financial Sector. These are the seven areas [Technical Issues] and the budget. And the budget also reiterated the importance of infrastructure with investment plan of INR75,000 crores on the major — including INR15,000 crores from private sector on the major transport infrastructure project, for last-mile connectivity for port, coal, steel, fertilizer and food grain sectors, that others good for our segments. Government also revamped the credit guarantee scheme for MSME to take effect from 1st April 2023 with infusion of INR9,000 crores in the corpus. This scheme would enable additional collateral-free guaranteed credit of around INR2 lakh crore and reduce the cost of credit to MSME by around 1%.

The government also announced in the budget the Entity DigiLocker that is set up for exclusive use of MSME and the charitable trusts to store and share documents online for ensuring ease of credit flow. On inflation, the CPI in India has dropped to 15-month low of 5.66% in the month of March as compared to 6.95% a year ago. In March, rural inflation stood at 5.51%, while urban inflation stood at 5.89%.

RBI Monetary Policy Committee, MPC, in its meeting on April 6th kept the repo rate unchanged. Repo rate thus continues to be at 6.5%. Agriculture and rural economy [Indecipherable] for long has been one of the pillars of Indian economy and the Union Budget for the financial year ’24 has been cognizant of this and announcing the measures to bolster the agri sector. Some of the major mentioned and taken in the budget are setting up Agriculture Accelerator Fund to encourage agri-startups by young entrepreneurs in rural areas, creating digital infrastructure for agri, developing massive decentralized storage capacity to help farmers store their produce and realize remunerative prices through the sale at appropriate times, promoting cultivation of highly efficient cereal [Indecipherable] among others.

The government announced that total food grain production in the country is estimated for this crop year at 328 million, which is 4% more than the record food grain last crop year, that’s ’21/’22. This is significant because of the dependence of rural economy on agri and with increased MSP that augurs well for rural economy. And it also helps in controlling the inflation for the — overall country. As regards the monsoon prediction, the Indian Metallurgical Department has forecasted normal southwest monsoon this year. This again — despite some [Indecipherable] impact, this announcement is a relief.

The GST collection continues to be good for [Indecipherable] ’23. And in March, INR1.6 lakh crores was collected being the second highest GST collection ever. The total GST collection in the financial year ’23 where to the extent of INR18.1 lakh crore, a growth of 22% over previous year.

Coming to the [Indecipherable] industry, the January to March quarter ’23, the total [Indecipherable] sales grew by 11.6% compared to Q4. The quarter saw fuel at 78,878 units being sold against 2,49,000 [Indecipherable] corresponding year last year. For the full year, the overall growth was 34.3% over the financial year ’22. The sales stood at 9,52,458 units against 7,16,568 units in the financial year ’22.

Sale of medium [Indecipherable] units in Q4 grew by 25.3%, which is 1,17,710 units being sold against [Technical Issues] units. For the full year, it grew by 49.2% for the previous year with the sale of 3,59,003 units against 2,40,577 units. Sale of light commercial vehicles grew by 3.4% over the previous quarter at 1,61,168 units compared to 1,55,832 units. For the full year, LCV grew by 26.8% for FY ’22, which is 6,03,455 units against 4,75,989 units.

Two-wheeler sales grew by 6.3% in Q4 versus previous quarter. Sales amounted to 36,04,593 units against 33,89,792 units. For the full financial year, the two-wheeler sales grew by 16.9% for FY ’22 with 1,58,62,000 units against 1,35,70,008 units.

The domestic tractor sales grew by 8.1% in Q4 over Q4 ’22, quarterly sales aggregating 2,72,910 units against 2,06,263 units in the same quarter last year. For the full financial year, tractor sales recorded 9,45,318 units compared to 8,72,256 units in FY ’22, a growth of 12.2%.

The construction equipment sales in FY ’23 grew by 25% over the last year again because of the infrastructure spend and the road building activities.

The MSME sector comprises of nearly 63 million enterprises, which contributes 30% for Indian GDP and 45% of manufacturing and 40% [Technical Issues]. It provides the employment for 113 million people as per the government data. And also as per the IFC, the International Finance Corporation, [Technical Issues] need of sector [Technical Issues] is INR32.5 lakh crore. Despite this huge demand, less than 5 million [Technical Issues] to formal credit.

I’m very happy to say that all the segments, which Shriram Finance represents an industry-leader and has significant presence, have seen healthy growth. And we expect with the recent price of vehicle, equipment and property being robust, that will create a better credit demand, plus which will also help in credit costs significantly. This year, we also have bonds — we have done the stress test and the results will — since we have integrated the two companies and we have multi products, we also have gone through — done the stress test and the results will also have that in factor.

Now, I hand over to Mr. Chakravarti to go through the operating performance. Thank you.

Y S Chakravarti — Managing Director and Chief Executive Officer

Thank you, Umesh. Welcome all to our Q4 and financial year ’23 earnings call.

We have declared our results for the quarter and year earlier today and you had an opportunity to look at the related investor presentation.

It gives us pleasure to report that the merger process has been concluded successfully and as Mr. Revankar has already mentioned in his opening remarks, the process, IT and workforce integration plan completed. The rolling out of additional products across integrated branches has commenced and we are on track with regard to the introduction in phases of these products.

Before I start my commentary on key performance areas, I would request you to note that the corresponding previous year figures are not comparable as the effective date for the merger is 1st April 2022. On the performance metrics in Q4 FY ’23, we have registered disbursement growth of 6.19% over Q3 FY ’23. Our disbursements in Q4 FY ’23 was INR31,054.10 crores as against INR29,245.26 crores in Q3 FY ’23. Our disbursements in Q4 FY ’22 were INR25,054.08 crores. For the full year ’23, our disbursements were INR1,11,848.44 crores, while in FY ’22, we had disbursed INR87,948.67 crores worth of loans.

Our [Indecipherable] 2023 grew by 4.61% over Q3 FY ’23 and it now stands at INR1,85,682.9 crores as against INR1,27,040.8 crores at the end of FY ’22. Our net interest income in Q4 FY [Technical Issues] over Q3 FY ’23. Our net interest income for the fourth quarter stands at INR4,445.89 crores as against INR4,427.88 crores in Q3 FY ’23. For Q4 FY ’22, we have registered a net interest income of INR2,627.82 crores. For the full financial year ’23, our net interest income was INR16,963.07 crores. Our net interest margin was 8.55% against 8.52% in Q3 and 6.96% in Q4 FY ’22.

Profit after tax for the fourth quarter grew by — actually de-grew a little over Q3 FY ’23. Our PAT for Q4 FY ’23 stands at INR1,308.31 crores compared to INR1,776.97 crores in Q3 FY ’23. PAT for the full financial year was INR5,979.34 crores, while in FY ’22, it was INR2,707.93 crores.

Our earnings per share stood at INR34.94 as against INR47.46 in Q3 FY ’23 and INR40.15 in Q4 FY ’22. As regards asset quality, Gross Stage 3 in Q4 FY ’23 declined by 8 basis points, and Net Stage 3 decreased by 1 basis point over Q3 FY ’23. Accordingly, Gross Stage 3 stood at 6.21% compared to 6.29% in Q3 and Net Stage 3 stood at 3.19% compared to 3.20% in Q3. Our Gross and Net Stage 3 figures as of Q4 FY ’22 were 7.07% and 3.67% respectively.

The credit cost for the current quarter stood at 2.24% as against 1.75% for Q3 FY ’23. Our credit costs at the end of Q4 FY ’22 stood at 2.03%. Our cost-to-income ratio was 28.29% in this quarter as against 22.23% recorded in Q3. The cost-to-income ratio at the end of Q4 FY ’22 was 20%.

Regarding our subsidiary of Shriram Housing Finance, our subsidiary registered a disbursement growth of 16.43% year-on-year and 29.98% over Q3. Disbursements in Q4 FY ’23 were INR1,301.1 crore as agonist INR1,117.6 crores in Q4 FY ’22 and INR1,001 crore in Q3 FY ’23. For the full financial year 2023, disbursement growth was 51.36% over FY ’22. FY ’23 disbursements aggregated to INR4,145.96 crores versus INR2,739.2 crores in FY ’22. Shriram Housing’s asset under management as on 31st March 2023 grew by 15.26% year-on year and by 12.1% sequentially. AUM at the end of FY ’23 stood at INR8,046.6 crores as against INR5,355 crores at the end of FY ’22 and INR7,178.2 crores as of Q3 FY ’23.

The net interest income in Q4 FY ’23 showed a growth of 3.84% year-on-year and 44.62% quarter-on-quarter. Net interest income for Q4 FY ’23 was INR105.3 crores as against INR72.8 crores in Q4 FY ’22 and INR101.4 crores in Q3 FY ’23. The net interest income for the full financial year of 2023 grew by 54.98% over FY ’22, having come in at INR387.7 crores in FY ’23 versus INR250.1 crores in FY ’22.

They have registered a profit after tax growth of 68.19% year-on-year and 2.1% quarter-on-quarter. PAT for Q4 FY ’23 came in at INR37.1 crores versus INR42.1 crores in Q4 FY ’22 and INR36.3 crores in Q3 FY ’23. PAT for the full financial Year 2023 was higher by 71.45% over FY ’22, the figures being INR137.7 crores and INR80.3 crores respectively.

Their earnings per share stood at INR1.14 against INR0.78 in Q4 FY ’22 and against INR1.12 in Q3 FY ’23.

Shriram Housing’s Gross Stage 3 for Q4 FY ’23 stood at 0.39% and their Net Stage 3 was at 0.69%. These were 1.72% on gross basis and 1.32% on net basis in Q4 FY ’22 and at 1.15% on gross basis and 0.87% on net basis in Q3 FY ’23. The company is investing — the Shriram Housing Finance is investing in the expansion of its distribution through the addition of [Technical Issues] across identified key focused areas. The company has added 19 branches to its network in the second half for FY ’23 taking the total branch count to 131 as on March ’23.

Shriram Housing Finance Limited is now a dominant player across southern states and Gujarat and plans to expand distribution in selected focused geographies.

I shall now request our Whole-Time Director and CFO, Mr. Parag Sharma, to brief you on our fund-raising activities and the other liability related matters as they have evolved in the quarter. After that, our Joint Managing Director, Mr. Sunder, will give his commentary on accounting and regulatory aspects.

Over to you, Parag.

Parag Sharma — Whole-Time Director

Thank you. A few numbers on the liability side. Our total liabilities stand at INR1,57,906 crores [Technical Issues] through retail deposits, which is close to INR46,140 crores. Capital market borrowing of INR34,768 crores of liabilities. Bank loans and institution loan of INR41,000 crores, D&O quoting on 1,000, which [Indecipherable] 26% of liability and securitization of INR22,106 crores, which is 14% of liability. Rest is offshore borrowing in the form of loan and bonds, which is close to around 14% of liability. The cost of funds have gone up from 8.77% in the previous quarter to 8.82% now. So the RBI policy [Technical Issues] February by 25 basis points, which has led to increased borrowing costs. The borrowing for the quarter was INR40,000-odd crores and this is being borrowed at close to around 9% through different sources.

Liquidity on balance sheet is close to around INR17,659 crores, which is good enough to take care of more than three months of our liability repayment, which is INR16,000 crores. And LCR is at around 209% against the requirement of 70% from there and debt-equity is at 3.65% versus the previous quarter of [Technical Issues]. The ALM buckets have been positive and cumulative up to [Technical Issues] positive by INR20,000 crores.

With this, I will hand it over to Sunder for [Technical Issues].

S. Sunder — Joint Managing Director

Good evening, everyone. The employee count as on 31st March was 64,052 as against 60,918. The cost-to-income was higher at 28.29%, primarily because of taking in a hit of INR302.58 crores on account of amortization of the intangibles, which we had created on account of the merger. And the PD of Stage 1 was 8.04%, PD of Stage 2 of 18% and LGD was 42.27% for the quarter ended. As Mr. [Indecipherable] had mentioned in the opening remarks, we had accomplished stress testing on the entire portfolio post merger. The stress testing was done by big four, and the impact of the same was INR295 crores in the current quarter because of onetime [Technical Issues]. And hence, the credit cost for the year has gone up above 2%, [Technical Issues]. And. There has been — there will be some fair valuation differences when we — the standalone number of Shriram Finance and the standalone numbers of Shriram Housing, if you add 1%, will not be able to do, it will be slightly different. There is a difference of INR23 crores on the PAT numbers for the quarter four [Technical Issues] primarily on account of the fair valuation that we have done and for the full year, it is higher by INR32 crores again on account of fair valuation. It is more of an accounting comment [Technical Issues]. With this, we open the floor for questions.

Questions and Answers:

Operator

Thank you. [Operator Instructions]. The first question is from the line of Avinash Singh from Emkay Global. Please go ahead.

Avinash Singh — Emkay Global — Analyst

Yeah, hi, good evening. A few questions, first one will be on data keeping. If you can just provide segmental number for the quarter and for the year. And the second question on your intangible amortization that will pick — they can pull around INR295 crore for the quarter. As it relates to mostly the brand [Technical Issues] now roughly around INR1,500 crores [Technical Issues] crores, so is it like going to be a per quarter [Technical Issues] kind of what I said around it on an annual basis. And lastly if you can explain the elevated credit costs, I mean, particularly considering that you have dipped close to [Technical Issues] overlay and I feel that credit cost on the highlights. So if you explain. So these are my few questions. Thank you.

Y S Chakravarti — Managing Director and Chief Executive Officer

On the disbursement side, this quarter, commercial vehicles was at INR12,182.3 crores, passenger vehicles at INR5,592.1 crores, construction equipment at 1,945.7 crores, farm equipment at INR623.3 crores, MSME INR3,572.8 crores, two-wheeler INR2,339.50 crores, gold INR2,523.3 crores, personal loan INR2,250.1 crores and INR25 crores revolving.

S. Sunder — Joint Managing Director

And on the intangible, we have created an intangible of INR1,513 crores during the merger on account of the net worth, which we had acquired of accounts and we are amortizing it over a period of five years and the hit for the current year has come to INR302.58 crores. Going forward in the two years, four years, it will be INR75 crores per quarter, meaning INR300 crores per annum. And coming to the credit cost, a we mentioned, we had performed stress testing on the entire portfolio — loan portfolio. And the additional hit on account of it comes to INR295 crores. Consequently, due to this, the credit cost goes at 2.01%. Despite the fact that, okay, we have reduced our COVID related provisioning to INR1100 crores from the earlier INR1,650 crores. And this, as we have been guiding you earlier that this is being utilized for giving waivers to the customers who were impacted during COVID times.

Avinash Singh — Emkay Global — Analyst

Okay. Thank you.

Operator

The next question is from the line of Abhiram Iyer from Deutsche Bank. Please go ahead.

Abhiram Iyer — Deutsche Bank — Analyst

Hi sir, congratulations on a good set of results. I wanted to talk regarding your cost of funds. You mentioned that it was currently around 8.8% with growth potential 20 bps increase coming through. Given that your cost of funds all in would be somewhere around 9% right now, what are your fundraising plans going to be moving forward? You’ve done a recent private placement of USD Bond. Is the gap between INR funding and offshore funding now sufficient enough for you to test the waters in the USD market again?

Parag Sharma — Whole-Time Director

Yeah, so incremental cost of fund has been slightly high. So I didn’t expect full 25-basis-point RBI policy increase to be there for us for next quarter. There will be at least 10-basis-point increase in the cost of funds for sure from the current level. When it comes to the dollar bond, what we have done is more as of now on one private placement of bond. As of now, we are not envisaging issuing the dollar bond in the immediate future that is maybe not for sure in next month or so, because the rates still continue to be the — mandate cost is still continuing to be higher than what we have done through the loan format. So we’ll continue to look at opportunities at loan rather than looking at bond market, which until the market sufficiently [Technical Issues] the rates come down, we will not be able to tap it. Onshore liquidity continues to be good and that is what we will focus upon both in the form of retail deposits and the domestic capital market.

Abhiram Iyer — Deutsche Bank — Analyst

Got it and just a quick clarification. This is more sort of a technical question. You have given in your presentation that the NIM on AUM has slightly increased to 8.55%, despite net interest income on an absolute terms being pretty much flat quarter-on-quarter and your AUM actually growing by about 4.5% quarter-on-quarter. Am I understanding this correctly on how the NIM on AUM is calculated because it seems like they should have gone down with the higher denominator?

Parag Sharma — Whole-Time Director

So we do averaging on a daily basis and hence on an absolute number, it will be difficult for you to compute. So…

Abhiram Iyer — Deutsche Bank — Analyst

Got it. So…

Parag Sharma — Whole-Time Director

Just opening [Technical Issues] will not workout. It will be a day sales averaging and hence there will be some difference by what we [Technical Issues] and what we will be getting.

Abhiram Iyer — Deutsche Bank — Analyst

Got it. So suffice to say there were chunky disbursements, I mean, one or two days value disbursements so much higher towards the end of the month, which…

Parag Sharma — Whole-Time Director

There should be, yeah, end of the quarter, it will be [Speech Overlap].

Abhiram Iyer — Deutsche Bank — Analyst

Got it. Thank you for this.

Operator

Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go ahead.

Sameer Bhise — JM Financial — Analyst

Yeah, hi, thanks for the opportunity. So, I just wanted to understand more about this onetime hit. What led to this higher PD on the portfolio and how could — once the credit costs for FY ’24, especially when we have guided for a potential 3% plus kind of an ROE? Thanks.

S. Sunder — Joint Managing Director

PD have been again recalibrated based on the current year up to December and we are remotely [Technical Issues] and hence there will be some shift. This is an yearly activity that we do and because of that, there has been some changes in the PD. And also the mix of the portfolio also will have an impact on the PD and LGD number.

Umesh Govind Revankar — Executive Vice Chairman

See basically, when we do these stress-test, what happens is depending upon the inflation, interest rate changes, overall average cost changes, people who prepare it, they also give weightage to the kind of segment, which you are lending to and definitely it will be little conservative in the way we account it. So the PDs will be normally little higher elevated, but we take it in our stride because it is very conservative and good for us to be conservative in this environment, even though the economic activities are good, the sales cost has actually come down, but to be conservative and having a stress-test calculated and taking into account to help preparing for the worst.

Sameer Bhise — JM Financial — Analyst

Fair enough. That is helpful. And secondly on the MSME and personal loans space, just wanted to understand given that SCUF historically probably did not grow as fast, [Technical Issues] that these two segments can meaningfully pick up than [Technical Issues] has historically grown especially in these two segments. That’s it from my side.

Umesh Govind Revankar — Executive Vice Chairman

See, the basic, MSME, we have been growing it. Not that we have not grown, but what gives us the confidence that we will be able to grow it faster is the availability of number one network. Number two, availability of people with vintage within the group where we will be guided that we should be able to leverage on these two, so that means you are — since we have adjust to lot more locations and with MSME being a focused product for the organization, we feel confident that we will be able to grow it.

Sameer Bhise — JM Financial — Analyst

Okay sir, thank you and all the best. That was it from my side.

Umesh Govind Revankar — Executive Vice Chairman

Thank you.

Operator

Thank you. We have the next question from the line of Gaurav Kochar from Mirae Asset. Please go ahead.

Gaurav Kochar — Mirae Asset — Analyst

Yeah, hi, good evening, sir. Thank you for taking my question. A few questions, firstly, if I look at the credit cost for this quarter, while you mentioned you changed the PD assumptions and all the write-offs were elevated at INR629 crore, if I just calculate the differential in provisions. So going forward, what is the sort of steady-state credit cost? Because 2% is what you had always guided for, so taking cues from that and given that we are in a kind of benign environment, does this PD assumptions change that and the overall guidance I think Sameer alluded to earlier at 3% ROE, does this have any bearing on back on that number?

Umesh Govind Revankar — Executive Vice Chairman

The credit costs, if you look at it, it is 2% for the year ended March for the full year. So I’d say our guidance of credit cost at 2% will continue to remain.

Gaurav Kochar — Mirae Asset — Analyst

Okay, so going ahead also the guidance is 2%, despite the PD [Speech Overlap]?

Umesh Govind Revankar — Executive Vice Chairman

Yeah, that will remain.

Gaurav Kochar — Mirae Asset — Analyst

Okay, okay, sure, sure. And for the margin, sir, if I look at this last quarter, there was INR138 crore because of the accounting changes that we had done for acquisition or during merger, that related INR138 crore was there on the NII line. In this quarter, was there a INR109 crores positive impact on NII in this quarter?

S. Sunder — Joint Managing Director

It is INR145 crores in the current quarter.

Gaurav Kochar — Mirae Asset — Analyst

Sorry, how much is it?

S. Sunder — Joint Managing Director

145.

Gaurav Kochar — Mirae Asset — Analyst

145? Okay. So just removing INR145 crore from current quarter and removing INR138 crore from previous quarter, on a core NII, if I were to just compare that to, the NIMs have actually declined and AUM has grown by around INR8,000 crores. So net-net the NIM on AUM on average would have declined. So what would explain that, sir?

S. Sunder — Joint Managing Director

It is difficult to compare between the December quarter and the March quarter, primarily because in December quarter, you have two additional days, whereas in March quarter, you have 31 days in Jan and March, but 28 days in February and hence there is an impact of two days and [Technical Issues], so that also you need to tackle.

Gaurav Kochar — Mirae Asset — Analyst

Okay, okay, okay. Sure, sir. That would be, but still, I mean, the difference is, even if I just would add, the difference is large, because you’ve grown, the AUM has grown by around INR8,000 crores, unless the bulk of the growth came in the last week of March.

S. Sunder — Joint Managing Director

Yeah, we have reconvened, you can contact Sanjai tomorrow and then he will show that.

Umesh Govind Revankar — Executive Vice Chairman

Gaurav, we also understand that the last quarter and last few days, normally the loan booking is very high, so that need to be factored.

Gaurav Kochar — Mirae Asset — Analyst

Okay, okay, probably, I’ll take this offline and [Speech Overlap].

Umesh Govind Revankar — Executive Vice Chairman

[Speech Overlap] very high because of that.

Gaurav Kochar — Mirae Asset — Analyst

Okay, sure, I’ll take this offline probably and lastly on this goodwill or the intangible write-off that you have taken, can you tell me what is the outstanding balance of this intangible, of which INR300 crores or INR294 crore has been marked down? So what is now the balance, which is left?

S. Sunder — Joint Managing Director

We had 1,513 minus 303, it is 1210 is outstanding.

Umesh Govind Revankar — Executive Vice Chairman

This 1513, equally divided by five years.

Gaurav Kochar — Mirae Asset — Analyst

Okay, so the INR300-odd crores will come every year?

Umesh Govind Revankar — Executive Vice Chairman

Yeah, every year, correct.

S. Sunder — Joint Managing Director

Correct, every four [Phonetic] years, it will come.

Gaurav Kochar — Mirae Asset — Analyst

So this will be like a Q4 phenomena or it will be like INR75 crore each quarter?

S. Sunder — Joint Managing Director

It will be spread over each quarter, so every quarter, we will get [Speech Overlap].

Umesh Govind Revankar — Executive Vice Chairman

The last quarter, we did not take into account, therefore it has come together [Speech Overlap] full year. So full year, we have market now, so the impact of the full year has come in this quarter, but next year onwards, every quarter it will be 75.

Gaurav Kochar — Mirae Asset — Analyst

Sure, sure and on the goodwill front, that impairment is still [Speech Overlap].

S. Sunder — Joint Managing Director

That will be tested for impairment, but it should be done every year end and is unlikely to have an impact in the next few years at least, that is what we are cutting into guide.

Gaurav Kochar — Mirae Asset — Analyst

Okay, so what is different from between a goodwill impairment versus the intangible impairment that we have done now? Sorry I joined the call late, so maybe if you would explain.

S. Sunder — Joint Managing Director

The intangible primarily has been created to get the benefit of tax, so goodwill, as you are aware, it will be [Technical Issues] by the tax department and there will be an impact of tax on that, whereas the intangible, so you get a tax break, so this can be claimed as an expenditure and income tax allows that.

Gaurav Kochar — Mirae Asset — Analyst

No, no, my question was the logic of writing this off and not writing goodwill off given that the entire acquisition was done as a fund transaction.

S. Sunder — Joint Managing Director

Yeah, the intangible has been created for the usage of the network of Shriram City Union Finance branches and we have taken an independent valuer’s opinion wherein the usage of this branches will be for five years and it needs to be amortized over the life of the usual assets, that is about it. And whereas the goodwill will be tested for impairment and there again, this also we tested for impairment, it was not impaired, make sure again, we will go and test for impairment and we need to take a call at this point of time. So the accounting treatment for both are different.

Gaurav Kochar — Mirae Asset — Analyst

Right.

Parag Sharma — Whole-Time Director

So, basically as it was explained, Goodwill, you don’t get a tax break. Impairments on intangible, you get a tax break.

Gaurav Kochar — Mirae Asset — Analyst

Yeah, yeah, sure, sure. My question was more on the treatment, not on [Technical Issues] but I will take that also offline, I guess. And this final question is around growth this quarter, we saw a strong growth in AUM. So for next, let’s say, a couple of years, while you have maintained 15% growth guidance, but given that the merger synergies will play through in the next two years and slowly and steadily we will see more and more branches doing more disbursements of each other’s loan, Shriram City Union’s branches selling Transport or the Transport branches selling SCUF loan. So taking that cue, do you see any sort of improvement in the loan growth guidance that we have given at 15%?

Y S Chakravarti — Managing Director and Chief Executive Officer

No, right now, we are committed to this 15%. The other point is Shriram City Union Finance branches may not be very accretive for the commercial vehicle business, because in fact, if you look at it, Shriram Transport has much, much larger network than Shriram City Union Finance, so it will be actually the retail side, which will grow faster because of the erstwhile Shriram transport branches.

Gaurav Kochar — Mirae Asset — Analyst

Sure.

Umesh Govind Revankar — Executive Vice Chairman

Gaurav, the focus will be to improve on the net profits bottom line rather than the top line growth.

Gaurav Kochar — Mirae Asset — Analyst

Right. Perfect, perfect, sir. Thank you so much. All the best.

Operator

Thank you. The next question is from the line of Shubhranshu Mishra from PhillipCapital. Please go ahead.

Shubhranshu Mishra — PhillipCapital — Analyst

Hi, sir, thank you for this opportunity. I just want to stress upon the liabilities, then, have you done any kind of prepayment of [Technical Issues] the bond market looking at us and what kind of [Technical Issues] first. Second is on, again, you mentioned on the growth — on the growth guidance, so are we to look at some account of product mix change going forward in ’24-’25 retail [Technical Issues] that’s the second. Third is a data keeping question, if you can tell me the two-wheeler disbursement [Technical Issues].

Parag Sharma — Whole-Time Director

On the buyback of the offshore bonds, we’ve not done anything in the current quarter, we did it in the previous quarter. First previous two quarters, we did just close to around 230-odd million, which was well received by the investors. In fact, the secondaries also performed well. Current quarter, we had not done anything. We have maturities in the months of July and August and that is what we are looking at. When it comes to the other data point, [Technical Issues] disbursement, you know current — actually, that is one point that I missed out in my statements, we have disbursed nearly close to 1.2 million two-wheelers in the current financial year. So we expect this to grow by about on — see we are actually more focused on the number of two-wheelers funded rather than on the amount. So, the target for the team is also on the number of two-wheelers. So we expect it to grow by between 10% to 12% depending on how the industry is faring. See, on thing in this is the south is not — I would say, this south market — there is a degrowth in the south market. The growth is coming from Bihar, UP, Madhya Pradesh, Rajasthan. There are — some are northeastern like west Bengal. There are the states that the market is growing at a faster pace, so going forward, we will see the growth there.

Shubhranshu Mishra — PhillipCapital — Analyst

[Technical Issues] any bond issuances that we are looking at particularly in FY ’24 [Technical Issues].

Parag Sharma — Whole-Time Director

Domestic or offshore?

Shubhranshu Mishra — PhillipCapital — Analyst

Domestic, domestic.

Parag Sharma — Whole-Time Director

Domestic, we do keep doing a regular private placement, which will be continued.

Shubhranshu Mishra — PhillipCapital — Analyst

Right. Okay. Thanks.

Operator

Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal Financial Services. Please go ahead.

Abhijit Tibrewal — Motilal Oswal Financial Services — Analyst

Yes, good evening again. Thanks for taking my question. So again, even going back to the margin question [Technical Issues] again, but if you look at the reported margins, we do really not see any compression in the reported margin. As a matter of fact on the sequential basis, it is expanded by 3 basis points, but if we look at [Technical Issues] to the interest income, again, I’m just looking at the last three quarters from 2Q, 3Q and 4Q. Last quarter also we added close to, I would say, INR1,100 crores in the UM [Phonetic]. This quarter also similar number. So while we accreted INR300 crores in the interest income last quarter, we’ve not seen the same coalition in interest income this quarter. So are there any one-offs in the interest income in the form of any interest income reversals.

S. Sunder — Joint Managing Director

We will do one thing. Okay. You contact Mr. Sanjay [Technical Issues] tomorrow morning. We don’t have the number right now, we probably can tomorrow.

Abhijit Tibrewal — Motilal Oswal Financial Services — Analyst

Okay, sir. Sir, again, one last question. While we have done that stress testing and unlike the suggested taking a one-time hit of INR295 crores, if you could help understand this one-time hit is in the nature of higher provisions, driven by higher PDs, or these are in the nature of [Technical Issues] about INR295 crores that we have taken during the quarter and also a related question, in which particular product segment where it is more pronounced this stress-testing and what was the outcome of that and are there any particular product segments, which are relatively more stressed than the other?

S. Sunder — Joint Managing Director

This stress testing when it was performed, apart from the PD, LGD, what the company has been creating [Technical Issues] based on the historical data. The consultant also looked into macroeconomic factors like GDP, CPA and that lending rate. And this is that — he has performed the stress test. And the number was elevated for — marginally elevated for almost all the new products, whatever we are into. And. They had come out with the number and whatever was the differentiated provision, see, we were — let us say, we were holding INR11,000 crores of provision in our books and they were staying at INR11,295 crores, the differentiated INR295 crores was taken as a provision and not a write-off. And in case, [Indecipherable] product-wise, PD, LGD, okay, maybe we’ll try to exact that and try to give it, but as of now we don’t have it right now.

Abhijit Tibrewal — Motilal Oswal Financial Services — Analyst

No problem, sir. And sir again squeezing in one last question in the interest of time. I mean, the effective tax rate that we’ve seen in this quarter was elevated. I mean, was it anything to do the impairment of intangible assets?

S. Sunder — Joint Managing Director

No. Not to do with this. It was more to do with the benefits that we had taken over the past few years. So this tax rate will be elevated for the next couple of years. That is what we want to guide. We are developing the ECL provision, which we have already claimed in the previous years. So that we are [Technical Issues]. And hence the impacted [Technical Issues].

Abhijit Tibrewal — Motilal Oswal Financial Services — Analyst

So, sir, if kind of, I understand you right, we have taken some benefits on [Technical Issues] prior years.

S. Sunder — Joint Managing Director

Yeah, it was — earlier it was — see, we used to maintain separate set of books a few years back and we used that expenditure and the Department was allowing it. Once the NBAs came into picture, then we started moving off of maintaining two sets of book for income tax and the shareholders. And whatever benefit we got in those years, now we are required to — it is more of a timing difference. So it will be next couple of years, at least that tax rate will be at around 30% [Technical Issues].

Abhijit Tibrewal — Motilal Oswal Financial Services — Analyst

So, sir, I mean, essentially for the next few years, the effective tax rate is now going to be at 30%?

S. Sunder — Joint Managing Director

Next couple of years, yes.

Abhijit Tibrewal — Motilal Oswal Financial Services — Analyst

Got it, sir, thank you so much, sir. I’ll maybe come back in the question queue, and wish you [Technical Issues] very best.

Operator

Okay. Thank you. The next question is from the line of Bunty Chawla from IDBI Capital. Please go ahead.

Bunty Chawla — IDBI Capital — Analyst

Thank you sir, thank you for the opportunity. All my questions are answered. Just a data point, if you can share write-offs for the full-year and write-offs for the Q4 FY ’23?

S. Sunder — Joint Managing Director

And the write-off for the current quarter is INR805 [Phonetic] crores and for the full year is INR2,615 crores and the provision including the one-off provision of INR295 crores [Phonetic] is INR379 crores and for the full year, the provision is INR1.45 crores [Phonetic]. And [Technical Issues] the quarter amount, which is [Technical Issues]. And for the full year, [Technical Issues].

Bunty Chawla — IDBI Capital — Analyst

Thank you, sir. Thank you. That was very helpful.

Operator

Thank you. The next question is from the line of Piran Engineer from CLSA. Please go ahead.

Piran Engineer — CLSA — Analyst

Yeah, hi, thanks for taking my question. Just a couple on personal loans and gold loans, so in personal loans, if — what treaty gives us the confidence to grow so fast in an unsecured product? Can you give us some more color on this business in terms of these cross-sell customers? What is the average ticket size? Is there any [Technical Issues] of these customers? And secondly on gold loans, our plan was to scale it up in the last analyst meet when met. Gold prices are also up, but if we look at the book has been flat in the last two, three quarters, so [Speech Overlap]?

Y S Chakravarti — Managing Director and Chief Executive Officer

So on the personal loan, we are now almost done with that legacy book, which is a market where we were doing personal loans in the market. Today, it’s entirely in house database of our existing customers who have either completed a cycle or who have completed at least 75-plus percentage of their loans, one. Two is average ticket size is around INR55,000 today. This is also because there are also a lot of customers where — who have serviced these loans a couple of times, two, three times and they are small business and where we gave them up to INR1 lakh loan. So the average is about INR55,000 today and average tenor is about 20 odd months. So the confidence is that we have mined about close to 5%, — 4.5%, 5% of eligible database of our customers so far. So the idea is to go ahead and mine it a little more aggressively. As I said earlier, now that we also have the support of the erstwhile STFC team and the branch network, we will be able to service these customers. So that’s one. The other point on the gold loan is see, on the gold loan, yes, we are — we will scale it. We are in the process of scaling it up. So starting with setting up a gold loan, one is you need to set up the infrastructure and also train people, see, we did not, — we do not have appraisers on contract basis, we grow with our own team, we train our people on appraising the gold. Second is, we need to provide secured room, CCTV camera. So all this infrastructure, so which we are doing on a phase-wise basis. So probably by the end of the year, you will see impact of all the new branches adding to the disbursement of gold.

Does that answer your question? Hello?

Operator

Sir, the line for the current participant has disconnected. We will proceed with the next question, from the line of Ashwin Kumar Balasubramanian from HSBC Asset Management. Please go ahead.

Ashwin Kumar Balasubramanian — HSBC Asset Management — Analyst

Yeah, hey. I just wanted to understand in terms of the liquidity policy. So prior to merger, Shriram Transport used to carry about INR17,000 crores, INR18,000 crores of cash in bank balances and SCUF used to carry about INR5,000 odd crores. Now the total — currently there are about INR16,000 crores, so it has come down a little bit, so just wanted to understand, is that — any thought process in terms of as a proportion of the balance sheet, what is the liquidity that you’d like to maintain?

Parag Sharma — Whole-Time Director

So, I think we always had a policy of maintaining three months of liability repayment as liquid as cash. And that has not been changed. Only during COVID period, we announced that liquidity buffer from three months to close to around six months. So as of now, what we have is INR17,600 odd crores. I said the debt which is maturing for next three months is INR16,000 crores. So that is good enough to take care of three months of liability repayments. And that policy has been there for last, I think, more than 15 years, so that we’re not going to dilute. But there has been a constant demand that why we are carrying a higher liquidity buffer and not reduce it. But we said we will always maintain three months and that continues. So as of now, what we have is for three months of repayments, which is close to INR17,000 crores. And in case liabilities go up, this will be further increased, but not going to be diluted for three months of liability repayment.

Ashwin Kumar Balasubramanian — HSBC Asset Management — Analyst

Thank you.

Operator

Thank you. As there are no further questions, I would now like to hand the conference over to Mr. Umesh Revankar for closing comments. Over to you, sir.

Umesh Govind Revankar — Executive Vice Chairman

Yeah, thank you for participating in this call. As I was telling you, we are in — our economy is doing well and our segments, which we are in, are growing and we feel that the growth will continue. And as we’ve given guidance for three years of 15% AUM growth will continue — will be our focus and also the underlying focus will be to grow more on the bottom-line and improve our profitability. Thank you very much for participating again. Again — we will meet again in the next call. Thank you.

Operator

[Operator Closing Remarks].