TruCap Finance Ltd (DHANVARSHA) Q3 FY23 Earnings Concall Transcript

TruCap Finance Ltd (NSE:DHANVARSHA) Q3 FY23 Earnings Concall dated Feb. 14, 2023.

Corporate Participants:

Anuj Sonpal — Investor Relations and Chief Executive Officer of Valorem Advisors

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Analysts:

Devesh Mehta — Individual Investor — Analyst

Manav Kapasi — Individual Investor — Analyst

Karan Bhanushali — Individual Investor — Analyst

Debesh Agarwala — IDBI Capital Research — Analyst

Namit Shah — Individual Investor — Analyst

Rahil Shah — Individual Investor — Analyst

Presentation:

Operator

Ladies and gentlemen, good day and welcome to the Q3 FY ’23 Conference Call of TruCap Finance Limited. [Operator Instructions] And there will be an opportunity for you to ask questions after the presentation concludes. [Operator Instructions]

I now hand the conference over to Mr. Anuj Sonpal from Valorem Advisors. Thank you and over to you, sir.

Anuj Sonpal — Investor Relations and Chief Executive Officer of Valorem Advisors

Thank you. Good morning, everyone and a very warm welcome to you all. My name is Anuj Sonpal from Valorem Advisors. We represent the Investor Relations of TruCap Finance Limited erstwhile Dhanvarsha Finvest Limited. On behalf of the company, I would like to thank you all for participating in company’s earnings call for the third quarter and nine months ended financial year 2023.

Before we begin, let me mention a short cautionary statement. Some of the statements made in today’s call maybe forward looking in nature. Such forward-looking statements are subject to risks and uncertainties, which could cause actual results to differ from those anticipated. Such statements are based on management’s belief, as well as assumptions made by an information currently available to management. Audiences are caution not to place any undue reliance on these forward-looking statements in making any investment decisions. The purpose of today’s earnings call is purely to educate and bring awareness about the company’s fundamental business and financial quarter under review.

Let me introduce you to the management participating with us in today’s earnings call and hand it over to them for opening remarks. We have with us Mr. Rohanjeet Juneja, Managing Director and Chief Executive Officer; Mr. Sanjay Kukreja, Chief Financial Officer; Mr. Mahendra Kumar Servaiya, Chief of Credit and Risk; Mr. Bhagat — Gaurav Bhargava, Head of Gold and Branch Business.

Without any further delay, I request Mr. Rohanjeet Juneja to start with his opening remarks. Thank you and over to you sir.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you, Anuj. Welcome to our earnings call today. In fiscal 3Q23, we reported disbursements of INR2.12 billion, up from INR1.98 billion in September 2022 and INR920 million a year ago, led largely by MSME gold and business loans. We disbursed 21,838 loans in the quarter versus 22,616 loans in September 2022 averaging close to 291 loans per working day.

Total active customer count, which was 2,315 in December 2020 and 23,955 in December 2021, is up to 65,000 today. This shows the granular nature of our loan book given an average ticket size of INR0.1 million. Total AUM at the end of December 2022 was INR5.1 billion, up 12% quarter-over-quarter and up 98% year-over-year. The product composition of our loan book today, both on and off-balance sheet, is 49% in gold loans, 45% in MSME business loans and 4% in loan against property and 2% in personal loans, which are both in run-off mode.

We opened more branches than budgeted earlier in the year given the strong pipeline of lenders who we have and will be tying up with in Lending-as-a-Service. We are extremely confident that this will create substantial franchise value for us since committed lines from these relationships are large, which makes it imperative to increase our branch network.

Gross NPAs were flat at 2.8% versus 2.92% a year ago. As disclosed in prior quarters, 57% of NPAs come from our LAP and personal loan book, which today comprise about 6% of total AUM, both of these are in run-off mode. Within the LAP bucket, we have resolved three of the 12 NPA accounts and expect to resolve another two NPA accounts very shortly. This is in line with our guidance of resolving six of the 12 NPA accounts in the current [Technical Issues].

If you look at just the gold and business loan book, which is 94% of AUM today, gross NPAs would have been 1.32%. This is the good part. Now why were quarterly results softer than we anticipated? There were a few dynamics playing out from August and September 2022 that we spoke about in the prior call that impacted this quarter’s results, particularly with the net interest margin compression and higher operating expenses. On each of them individually, net interest margin compression resulted largely from both the asset and liability side. The bigger impact came from the liability side with the RBI having raised rates 250 basis points to 6.5% since early May. Most lenders started passing on these rate hikes to us from June and July. The bulk of it came from early August and September onwards. Given that it’s hard for us to pass on these rate hikes to our borrowers, especially in the gold loan product, which comprises about 70% to 75% of our disbursements today, there was margin compression in the quarter.

On the asset side, while interest income was up strongly year-over-year at INR240 million, it was flat quarter-on-quarter, because we are writing more MSME gold loans from July 2022 onwards, which are originated at a lower yield relative to business loans.

On operating expenses, which were higher than anticipated, largely due to us expediting the experiential center branch build-out. We were at 59 experiential centers on September 30, but given the strong traction and tie-ups with large lenders and Lending-as-a-Service, we felt the need to ramp up our experiential center count further and faster. We have 74 sub-centers today, 10 centers ahead of what we had planned. This means an additional 40 resources in these branches, along with INR1.2 million to INR1.3 million capex and opex for opening of each branch. To reiterate, we are extremely confident that this will create significant franchise value for us and further build out of this network to write more Lending-as-a-Service business with these large lenders as imperative.

Lastly, on the quarter, if you look at earnings on an adjusted basis, on EBITDA, it was actually higher quarter-over-quarter and year-over-year showing that the larger impact came from NIM compression. Besides quarterly earnings, which can be volatile from time to time, we wanted to give some color on where we are as an institution today and what we are looking to build.

As an organization, we have cumulatively disbursed more than INR12 billion in loans since inception to over 129,000 borrowers. Of this total INR12 billion disbursed, almost 64,000 borrowers have already repaid our loans and closed loans worth INR6.2 billion with us having seen two full repayment cycles across both the business and gold loan product. This implies healthy vintage and a proven track record in both these products.

In the gold loan vertical, our team has disbursed more than INR7 billion to over 65,000 borrowers. NPAs in the gold loan book are very low at 17 basis points and gold taken to auctions are just over INR36 million for less than 484 customers representing 0.5% of cumulative disbursements. It is noteworthy that we have recovered more than 100% of the due amount from gold sold in auctions and refunded excess recovery of principal plus interest to borrowers. We have 74 branches today spread across Maharashtra, Madhya Pradesh, Delhi NCR, Goa and Gujarat. Our expansion will continue in Gujarat and Maharashtra, while we proposed to enter Rajasthan in fiscal ’24.

Similarly in business loans, we have disbursed more than INR4 billion to over 47,000 borrowers over the last 4.5 years. Our focus on essential goods sector, which comprised of the following: retail shops catering to home and office needs like hardware, electrical, plumber, tailors, retail furniture shops, etc.; textile and apparels; education; FMCG; food and drinks like kirana stores and general stores; information technology; e-commerce; and medical shops has placed us in good stead.

As they say, better lucky than good, our focus on these sectors despite COVID and other economic headwinds has really helped with the gross NPA performance, which is at only 2.63%. To give investors more color, approximately 16% of this business loan vertical was originated in fiscal ’19 and ’20 that resulted in gross NPAs of about 6%, due to the ill effects of the lockdown from the pandemic. The remaining 85% of this book has been disbursed in fiscal ’21, ’22 and ’23 that has resulted in gross NPAs of just 0.7%. This substantial improvement in vintage performance has resulted from increased focus on the essential goods sector, which today contributes to the lion’s share of MSME business loans.

Now on our growth path going forward. Most NBFCs at some point have to decide on what is their moat or differentiation strategy. For the large part, it comes down to capital or distribution other than technology that has been the darling in the last few years. From April 2022 onwards, we as a company decided to strongly focus on distribution and make the balance sheet more capital-efficient by tying up with large lenders and Lending as a Service.

Lending as a Service is when TruCap leverages its distribution prowess to serve as a minority capital provider, but performing the entire sourcing, servicing and collection function for large finance — for large financial institutions that contribute the lion’s share of capital lend to a borrower. At December-end, we had a Lending-as-a-Service book of INR1.2 billion versus INR848 million in September 2022 and just INR28 million a year ago.

Notably, our Lending-as-a-Service book is now being originated for three partners, up from one partner in the previous quarter and a year ago. On a monthly basis, almost 30% of disbursement volume is now being originated in Lending as a Service from these partnerships. As we continue to scale up our distribution muscle, we are fairly confident of doing more than INR1 billion in monthly disbursements from the April quarter onwards, of which almost half will be contributed by these partnerships. Through this, not only we’ll make the balance sheet more capital, but the P&L will also become more profitable, hence accretive to ROA in coming years.

How confident of doing this level of monthly disbursement from April 2023 onwards? In March 2021, we did INR404 million of quarterly disbursements, of which zero came in Lending as a Service versus INR1.4 billion in March 2022, of which only INR64 million came from Lending-as-a-Service partners.

In the most recent quarter, we did INR2.12 billion of disbursements, of which approximately 30% came from Lending-as-a-Service partners, where we are only providing 20% of capital. We have been able to achieve this, as we kept spreading our branch footprint across the states of Maharashtra, Madhya Pradesh, Delhi NCR, Goa and now, Gujarat.

In March 2021, we had 10 branches versus 37 in March 2022. We added 37 branches in the first nine months of this fiscal with 15 coming in the most recent quarter. These 74 branches are spread across 33 cities and towns, and our geographic presence is structured around a cluster-based approach in MSME-centric belts [Phonetic]. More than 75% of our network presence is in Tier 2, Tier 3 and Tier 4 towns, where there’s great untapped potential to be encashed as these towns are surrounded by 30 to 40 villages. That’s where we see the best opportunities to serve the underserved and under-penetrated market, which form the core of our strategy.

With increasing disbursement, risk and audit, which was always robust, has been bolstered further. We have a dedicated team of internal control personnel who audit the entire branch network on an unannounced frequency. In the audit checklist, we have a comprehensive list of 130 audit points divided across 12 processes. These audit points are further segregated between high, medium and low-risk criteria, which then derives the audit rating of the branch.

Lastly, the internal control team is an independent vertical that reports into the audit head who further reports into the Head of Credit and then, the MD and CEO of the organization.

With that, we conclude our prepared remarks and open the floor to questions and answers.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] The first question is from the line of Devesh Mehta as an Individual Investor. Please go ahead.

Devesh Mehta — Individual Investor — Analyst

Yeah. Hi, good morning.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Good morning.

Devesh Mehta — Individual Investor — Analyst

So as you mentioned, we’ve seen a decline in the interest income on a quarter-on-quarter basis. So if you could just throw some light on it exact — to know the exact reason why there has been a decline here? Hello.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Sorry. So if you look at our results from April 2022 onwards, the composition of disbursements has been skewed to about 70% to 75% on gold loans, which are originated at lower yield relative to an unsecured business loan. So that was one reason. The other reason also so in the October to December quarter, there usually is a faster churn on gold loan repayments and pre-payments, which come in due to the holiday and festive season, because of which there was an impact on interest income in the quarter.

Devesh Mehta — Individual Investor — Analyst

Got it. Fair enough. And your fee and commission income has grown well both on quarter-on-quarter and year-on-year basis vis-a-vis the fee and commission expense has not increased so much. So why so much disparity between the two?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So as the branch count has gone up, we’ve added 37 branches in the first nine months of this fiscal. As you train all the sales personnel as well on the cross-sell of products, the fee and commission income usually goes up with that. That will continue to be a feature for us as the branch network continues to go up. It always — fees and commission will come with a lag because the first product that most sales personnel in the branches would want to sell it as a loan, post which they will start cross-selling other products.

Devesh Mehta — Individual Investor — Analyst

Okay. Got it. And also to come on your cost of borrowing, what is it currently, I’m asking this because there has been an increase in the repo, so have we increased the yield on the products?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

It’s hard for us to increase the yield on the asset side to our retail customers, given the fact that they are really small — micro, small, medium enterprise business owners, individuals, etc. So it’s hard for us to pass on the rate hike, especially in the gold loan product, due to which there was margin compression. The cost of borrowing for us has gone up. It’s about 13.1% today. The way to mitigate cost of funds from going up further would be, as we write more and more Lending-as-a-Service business with larger financials where they do 80% of the financing at a fixed hurdle rate and we do 20%. So technically, then the variable rate on the funding would be on the 20% that we would be providing, whereas the 80% funding that is provided by our larger financier gets funded at a fixed rate.

Devesh Mehta — Individual Investor — Analyst

Okay. Got it. I have more questions. I’ll come back in the queue. Thank you so much.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Manav Kapasi, an Individual Investor. Please go ahead.

Manav Kapasi — Individual Investor — Analyst

Hello. So I just wanted to understand that the current GNPA of 2.8%. How much of it is coming from LAP than personal loans and by when can we expect these loans to be eliminated? And also how could you segregate the loan book, especially in the stage 3 category in both the products?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So on your — the answer to your first question is, of the 2.8% NPA, about 57% come from the LAP and personal loan book, which is about 6% of AUM today and that’s in run-off mode. That number has been — in terms of AUM, has been declining almost every quarter, and we had said that it will be below 5% of AUM by March 2023. We are on track for that. There are two LAP loans in specific that we expect to resolve in this current quarter itself. So hopefully, you will see that reduction going forward. Again, but that has yet to happen. Sorry, could you repeat your second question please?

Manav Kapasi — Individual Investor — Analyst

So how would you segregate the loan book, especially in the stage 3 category in both the products, LAP and PL?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So the LAP is predominantly in Bombay and Pune, and the PL also is largely in the state of Maharashtra only.

Manav Kapasi — Individual Investor — Analyst

Okay. Understood. Also, what is our current provision coverage ratio as of Q3 FY ’23 and what sort of target levels can we expect in the future?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Our provision level has gone down to about 30%, as we’ve been writing more and more gold loans. We’ve taken a note to the Board on the provision on the LGD, etc., which we as a listed company have to do every year in terms of ECL coverage. So you’ll hear more about that in the next quarter’s results.

Manav Kapasi — Individual Investor — Analyst

Okay. One final question. Can you please throw some light on the gold loan segment, the increased competitive intensity in the industry, which has led to the regrowth of AUM of the big gold financials like Manappuram, etc.? So how do we sort of plan to compete here?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So, there is — yes, there is competition across industries. However, the potential is huge. And we are basically focusing more on the Tier 2, Tier 3, Tier 4 which is underserved and under-penetrated. So like around 75% of our branch network is comprising of these geographies and further also, we’ll try and focus in those geographies only. So that’s the basic logic why we have been growing consistently. And we have been trying and booking loans on a daily basis more number of loans. That’s the basic point.

Manav Kapasi — Individual Investor — Analyst

Okay. Understood. Thank you so much. All the best.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Karan Bhanushali as an Individual Investor. Please go ahead.

Karan Bhanushali — Individual Investor — Analyst

Hi, sir. Just wanted to ask, what kind of agreement have we entered with U GRO Capital, is it co-lending?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Yes. It’s a co-lending agreement.

Karan Bhanushali — Individual Investor — Analyst

And also, can you please explain the BC model with Shivalik Small Finance Bank?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So for Shivalik, essentially we are an originator of gold loans from our branches in two states, and essentially 100% of the capital is provided by them, while we do the sourcing, servicing and collection on those notes.

Karan Bhanushali — Individual Investor — Analyst

In what ratio?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

It’s a 100% on their books, because it’s a BC relationship. So that’s not a co-lending partnership. It’s a 100/0, which is a BC. So all the loans are being written on Shivalik’s balance sheet.

Karan Bhanushali — Individual Investor — Analyst

Okay. And so, we’ve entered in a co-lending partnership with Central Bank of India for an amount of INR1,000 crores in the ratio of 80/20. So is there any amount of disbursement decided for every quarter in the agreement and also any defaults here and with the Central Bank of India, is it completed digitally interface for co-lending?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So, there is — on a quarterly basis, at this point in time, there is no fixed number that we give them. But on average, as I mentioned, we are doing about 30% of the monthly volume now for them. So in the last quarter, the disbursement number for Central Bank of India was north of INR60 crores. What we are doing now incrementally on a monthly basis is higher and higher, as the numbers go up for us. Sorry — on the other part of your question, on the tech integration, it’s still in process. That is the hardest part of the entire leg work that has to be done in any co-lending relationship, be it with any partners as the tech integration. So it’s still in the final stages of getting implemented.

Karan Bhanushali — Individual Investor — Analyst

And also, sir, just going back to the first question, what is the co-lending ratio with U Gro Capital?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

That’s a 90/10.

Karan Bhanushali — Individual Investor — Analyst

Okay. And lastly, one question, your thought process to integrate EZ Capital to TruCap, we used to do co-lending with them, right?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

In the gold loan product, correct.

Karan Bhanushali — Individual Investor — Analyst

Okay. I mean, the process to — are we planning to integrate the EZ Capital?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So that is what we have updated the Board and the investors, that is right now waiting regulatory approvals. So there’s only so much I can say on that until regulatory approval is accorded.

Karan Bhanushali — Individual Investor — Analyst

Okay, sir. Thanks.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] Next question is from the line of Devesh Mehta as an Individual Investor. Please go ahead.

Devesh Mehta — Individual Investor — Analyst

Yeah. Thank you again for taking my question. So as we’ve increased our customer base, can you please provide the breakup of customers on-boarded digitally through Dhan Setu and vis-a-vis through the offline mode?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

The majority of the increase in customer additions have largely been through the offline mode through the branch network. In Dhan Setu, I don’t have the numbers handy in terms of customer acquisition, but I can — we can certainly follow up with you post the call and give you the precise numbers on it.

Devesh Mehta — Individual Investor — Analyst

Sure. That would be helpful. And what is our current ROA and what will be the timeline to reach our targets of 5%?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So the ROA at this point is 1.37%. Obviously, our endeavor and the five-year plan that we had presented was to get to a 5% ROA. We are still on track for that in terms of how do we get there. So that’s very much on track. I don’t think there’s any deviation there. How will we be able to get there will be largely through Lending as a Service for a good chunk that we do, which makes the balance sheet a lot more capital-efficient and much more profitable on a long-term basis for us.

Devesh Mehta — Individual Investor — Analyst

And just a follow-up, what will be the target mix of the product portfolio at the target ROA levels of 5%?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So on a consolidated basis, both on and off-balance sheet AUM together, gold will be a larger percentage. But if you look at just the on-balance sheet component, it will probably be 55% business loans and 45% gold loans.

Devesh Mehta — Individual Investor — Analyst

Okay. And can you please explain the lending with technology enablement as what kind of mechanism we are using for digital underwriting or say, a credit decision?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Yeah. So there are business rule engines that are built into not just the Dhan Setu platform, but even the LMS that we’re using and the LOS platform that we’re using. So that is the way to digitally underwrite it. If you recall, I think we had spoken about it three or four quarters back, the biggest challenge that we as a small institution faced 2.5 to three years ago just before COVID came was in the lead to login process. So, that was largely manual and not digital in nature.

Now, there is a digital architecture that’s been built in that has business rule engine that allows you to login a file without manual intervention. That used to be the biggest pain point earlier, where most of the bandwidth would get used up, and there will be a lot of wastage of not just time and money, but also fires due to which then from the login to disbursement ratio, the process would also take quite long and the success ratio would be lower.

Now because of all the tech intervention that has happened at the front end and the back end and because of automating the go/no go process for a lead to login, the approval ratio and the disbursement ratio both to leads and login has gone up substantially. So now the question will be, what kind of appetite we have to underwrite significant volume in business loans and again, the larger chunk over there would be where we do it with larger lenders. We would piggyback off their capital using our distribution muscle.

Devesh Mehta — Individual Investor — Analyst

Got it. Thank you so much for taking all my questions, and all the best.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Debesh Agarwala from IDBI Capital. Please go ahead.

Debesh Agarwala — IDBI Capital Research — Analyst

Sir, what is the portion of co-lending in our [Speech Overlap].

Operator

Debesh, may I request you to speak up a bit? Your voice is not audible.

Debesh Agarwala — IDBI Capital Research — Analyst

Hello, am I audible? Hello.

Operator

Yes, sir.

Debesh Agarwala — IDBI Capital Research — Analyst

Yeah. Sir, what is the portion of co-lending in our total AUM mix and how do we expect to scale it further?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So today, it’s up to about 24% of total AUM. We are hoping to scale this up to 50% over the next 18 to 24 months. We have three partnerships today, which are already live and we have a few others in the pipeline that you’ll always hear about shortly.

Debesh Agarwala — IDBI Capital Research — Analyst

And what are the kind of yields that we’re experiencing in the co-lending portfolio?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Sorry, we couldn’t hear you. What are the kind of…

Debesh Agarwala — IDBI Capital Research — Analyst

Yields that we are getting on the co-leaning portfolio, is it like better than the normal portfolio or [Indecipherable]?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Yes, so far, there is also a fee that is provided for the sourcing, servicing and collection function that is provided to the partner that does the entire hard yards in terms of the checklist for sourcing, servicing, collection, etc. So the yield on the co-lending portfolio is higher than what — than what it would be if you were to write the loan on our book for 100%.

Debesh Agarwala — IDBI Capital Research — Analyst

Okay. And if I look at your AUM mix, distribution mix, so around 80% of the portfolio — AUM comes from three states of Maharashtra, Madhya Pradesh and Delhi NCR. So are we looking forward to diversify it or it would continue in the same proportion going ahead?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

No. It would get diversified. If you look at what the percentage of AUM mix was for us three years ago, we were almost 100% in Maharashtra in March 2020. Since then, we have diversified, where Maharashtra today has come to just under 40%. We have also entered — Goa is about 6% of our AUM today, which is doing very, very well for us. This is the outskirts, so places like Ponda, Sanquelim, Mapusa, Madgaon, Bicholim, etc. Then, we’ve entered Gujarat as well, which is about 3% of our AUM today. And those two states would become bigger for us. And we would be entering Rajasthan too. And with that portfolio concentration of these three states, which is Maharashtra, MP and Delhi, would come down in the total AUM mix.

Debesh Agarwala — IDBI Capital Research — Analyst

Okay, okay. Thanks a lot. Thank you for taking my questions.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] The next question is from the line of Namit Shah, as an Investor. Please go ahead. Good morning, sir. So I remember the part of your presentation, you mentioned average amount of average loan disbursement of [Phonetic] INR0.1 million. So like if you see, that’s not a very great cycling of this one line. So how do you like to scale this up or any of your commentary on this?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So the INR0.1 million average ticket size that we have today is down drastically from what we had even four and three years back. We will be maintaining in the INR1 lakh [Phonetic] to INR1.5 lakh [Phonetic] ticket, which is INR0.1 million to INR0.15 million. It’s also the kind of customer that we serve, especially in the gold loan vertical. So the gold loan, MSME customers, many of them are daily cash flow generating retail cash-and-carry businesses that have immediate requirements that needs working capital for those businesses, due to which the ticket size is lower.

The business loan product, the average ticket size is larger, because those customers are still little more sophisticated in terms of that borrowing history, that’s number one. Number two is, they have all the documentation in terms of business [Indecipherable], banking, bureau, etc., which some of the smaller retail cash-and-carry businesses may not have today, due to which they resort to lending against gold.

In terms of guidance, we would say that the average ticket size for us would hover in the INR0.1 million to INR0.2 million ticket size, on an average ticket size basis. Obviously, there are larger ticket loans that we write as well in the business loan segment and in the business loans segment, our sweet spot is the INR1 lakh to INR20 lakhs segment where we have two products. One of them is the INR1 lakh to INR10 lakh product, and the other one is the INR10 lakh to INR20 lakh, which is for a slightly longer business vintage with some more credit borrowing history.

Namit Shah — Individual Investor — Analyst

So like this INR0.1 million to INR0.2 million amount of ticket size, is this sustainable over the long term?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Yes. It is fairly sustainable over the long term, especially in the geographies that we operate. So as mentioned earlier as well and in the presentation too, we follow a cluster-based approach in terms of where we open our branch network and physical presence, along with the digital architecture that’s built. So we don’t do anything that’s pan-India or open up in course to lend all over the — across all states. We do it very, very specifically. The states that we have chosen have been very carefully thought through with a very heavy MSME-centric built-in mind and having seen that we’ve opened the network there. In that network, it’s that average ticket size that we are targeting.

Namit Shah — Individual Investor — Analyst

Okay. So I’d like to build on this. Would it be fair to assume that you would target this growth by acquiring more customers rather than improving this average ticket size?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Totally. So that is the strategy is to get the customer into our entire ecosystem and once the customer is in the ecosystem, we’re able to fulfill a lot of their needs either through a gold loan or a small business loan, provide them various other value-added services to increase fee income for us. And we wanted to be as granular as possible. With a very simple philosophy over there is, we as an institution believe it’s better to have less severity of losses, if there are any potential severity of losses. So that should be minimized. It’s okay if your frequency of losses is slightly wider, but the severity should be a lot lesser, so that a few accounts do not dent your GNPA ratio and your provision coverage.

Namit Shah — Individual Investor — Analyst

Thank you.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. The next question is from the line of Rahil Shah as an Individual Investor. Please go ahead.

Rahil Shah — Individual Investor — Analyst

Hello, hi, sir. So just a moment. Yes, any comment in terms of outlook for FY ’24 regarding growth in overall business for specifically income or any strategies or target set, any other promising TruCap [Phonetic] is looking to pursue? Can you provide any guidance there?

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

So we would not like to give specific guidance on numbers. What I would say is we’ve had fairly healthy growth in interest income and total income, both. You should continue to see a strong buildup in income growth as we’ve seen in the past. No specific comments on precise numbers, etc. I think that you will see quarter-by-quarter. And we are on track with what we have always discussed in terms of business strategy. So there is no change over there.

Rahil Shah — Individual Investor — Analyst

Okay, okay. Thank you.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you.

Operator

Thank you. [Operator Instructions] Ladies and gentlemen, as there are no further questions from the participants, I now hand the conference back to the management from TruCap Finance Limited for closing remarks. Thank you and over to you, sir.

Rohanjeet Singh Juneja — Managing Director and Chief Executive Officer

Thank you very much for joining our earnings call today. We look forward to talking to everyone when we announce full-year 2023 results, which will most likely be in May. Thank you.

Operator

[Operator Closing Remarks]