Ugro Capital Ltd (UGROCAP) Q4 FY23 Earnings Concall Transcript

Ugro Capital Ltd (NSE:UGROCAP) Q4 FY23 Earnings Concall dated May. 16, 2023.

Corporate Participants:

Kishore Lodha — Chief Financial Officer

Shachindra Nath — Vice Chairman and Manging Director

Anuj Pandey — Chief Risk Officer

Amit Mande — Chief Revenue Officer

Analysts:

Avinash Singh — Emkay Global Financial Services — Analyst

Hrishikesh — — Analyst

Nirvana Laha — — Analyst

Darshil Pandya — Finterest Capital — Analyst

Piyush Bothra — GMOPG India Pvt Ltd — Analyst

Agastya Dave — CAO Capital — Analyst

Phalguni Mahajan — Scient Capital Private Limited — Analyst

Sanjay Kumar Elangovan — ithoughtpms — Analyst

Saptarshee Chatterjee — Centrum PMS — Analyst

Presentation:

Operator

Ladies and gentlemen, good day, and welcome to the UGRO Capital Limited Q4 FY ’23 Earnings Call. [Operator Instructions] Please note that this conference is being recorded.

I now hand the conference over to Mr. Avinash Singh from Emkay Global Financial Services. Thank you, and over to you, sir.

Avinash Singh — Emkay Global Financial Services — Analyst

Thank you. Ladies and gentlemen, good afternoon. On behalf of Emkay Global Financial Services, I welcome you all to the Q4 FY ’23 results conference call of UGRO Capital Limited.

We have with us from the management, Mr. Shachindra Nath, the Vice Chairman and Managing Director; Mr. Anuj Pandey, the Chief Risk Officer; Mr. Amit Mande, the Chief Revenue Officer; and Mr. Kishore Lodha, the Chief Financial Officer.

So without any further delay, I would like to hand over the floor to the management for their opening comments. Thank you, and over to you, Kishore.

Kishore Lodha — Chief Financial Officer

Good evening to all the participants. On behalf of UGRO Capital, we thank all the participants to take time out and participate in our investor call for the result of this quarter. We continue with our growth momentum, where we have touched an AUM of INR6,000 crores versus INR3,000 crores of last year, registering a growth of over 105%.

I will continue to run you through the financial performance of the quarter as well as for the whole year. Our gross disbursements stood at around INR7,200 crores versus INR3,138 crores during the previous year. We have emerged as one of the fastest-growing and one of the largest Lending as a Service provider in co-lending space in the MSME field where our book — total portion of our book balance sheet is over 40% and on book portfolio of about 60%. Our total income increased by about 119% to INR683 crores versus INR312 crores of the previous year.

Total net income increased by about 123% to INR390 crores versus INR175 crore of the previous year. Profit before tax has increased fourfold to INR83 crores versus INR20 crores of the previous year. And profit after tax stood at INR39 crores versus INR14 crores during the previous year. This year, we have taken a one-time hit of INR20.6 crores as a write-off on deferred tax assets. If we adjust that, then our profit after tax would have been INR16 crores versus INR14 crores of the previous year.

The company has delivered a [Indecipherable] of 1.1% during the year. If we adjust with the deferred tax adjustment, then it would have been 1.7% vis a vis 0.6% of the previous year. As a result, this company has delivered ROE of 4.1% and on an adjustment basis, it is about 6.2%, and this was 1.5% during the previous year. So we have increased fourfold increase in ROE as well. Quarter-on-quarter profitability has steadily increased. Last quarter, our PBT was about INR22 crores. This time, it is about INR33 crores. So we have seen another good quarter in terms of profitability.

Our cost-to-income ratio is steadily going down. Last year, we had cost-to-income ratio of about 72%. This year, full year basis, we have come down to 62%. And on the quarterly basis, this quarter, it is roughly around 59%. And as a guidance, we will continue to have this path and, next year, we will go down to about 47% as cost-to-income ratio.

Our overall debt stood at about INR3,149 crores as on March 31, 2023 and leverage is about 3.2 times. Our capital adequacy was about 20% for the year ended March 31, 2023. This does not include the capital raise which we have done in the month of April and May. As all of you must be aware that in the month of April, we have launched a QIP and a preference issue where we have raised INR340 crores, INR240 crores has been done through the preferential issue rule, where Denmark government’s [Indecipherable] IFU participated and invested INR242 crores. And QIP was completed during the month of April where INR100 crores was raised through domestic institutions, where some of the large insurance companies participated as primary participants of the issue.

Overall, the credit quality has remained quite stable. Our gross NPA has come down from 2% to 1.6%. And net NPA has gone down from 1.6% to 0.9%, which is quite healthy. Overall, PCR has gone up from 26% to 48% during the year. Overall borrowing cost has remained more or less stable for us. During the quarter, the borrowing costs have gone up by about 7 basis points from 10.5% to 10.57%. And for the whole year basis, where the overall rate has increased by 225 basis points for the market. However, overall, borrowing costs has gone up from 10.3% to 10.57% registering about 27 basis points high for overall borrowing costs.

With this I hand it over to our Vice Chairman and Managing Director, Mr. Shachindra Nath to take you through our journey so far and our plans ahead. Over to you Mr. Nath.

Shachindra Nath — Vice Chairman and Manging Director

Thank you, Kishore. Before actually we start the formal presentation, all of you normally see quarterly results presentation which has all about the numbers. As a young company which has just started its journey, four years back, we recently launched our brand campaign, and we wanted to show you the campaign itself. The reason that why we wanted to show you the campaign is because it’s a unique proposition for customer and we have tried to deliver that proposition through what goes in lending, when we provide the instant credit. So is a film about a business owner inquiring about the unavailability of the material due to shortage of funds, he sends an SoS via his mobile phone which is represented in a bottled message and picked by a pelicon [Phonetic] how an analyst. represented by a rooster, an Emperor, how the KYC, how the large portion of data is used And then within minutes The credit is delivered is represented by this feel [Phonetic]. Please watch.

[Video Presentation]

Thanks moving on, MSME in India have traditionally been a credit to staff business segment. While MSME is employed 110 million people in account for nearly 30% of the country’s GDP, however they have generally suffered difficult time because of the late payment dispute which suffocate their cash-flow. And the lending institutions have largely been reliant upon collateral to provide loan to MSME. This is transitioning and we generally believe the next decade or two decades is the decade for MSME financing in India, what we have seen for consumer financing and we have seen multiple institutions getting built around that is the time has come, wherein have few set of a very digitalized data would explode the credit for MSME. The advent of GST in smaller entities are now finding it advantageous to report the top-line, resulting in very robust compliance. If you combine multiple other dataset, which is the banking data, which is the repayment behavior from Bureau and now there are more inputs which are getting and you have the ability to combine this, you can actually genuinely assess the repayment capacity of a borrower and that leads to the credit. While all of us as lenders continue to do pure cash-flow based lending without collateral, with collateral, but eventually, our belief is that the lending would not remain restricted purely basis the collateral. There is a massive ecosystem around okay account aggregation are getting built-up U Gro is pioneer in most of that and following video will showcase you that how actually it is functioning before we do a quick deep-dive in terms of what we have built around it.

[Video Presentation]

Thank you. I now hand over the conference to Mr. Anuj Pandey. Anuj, as you know, is our Chief Risk Officer, our entire technology team and our data analytics team also reports into him and he is not only passionate about it, but obviously, the entire ecosystem around our data and tech is built basis — the guidance, the leadership which he provides along with his team. Over to you, Anuj.

Anuj Pandey — Chief Risk Officer

Thank you, Shachin. Good evening, everyone. This is a good opportunity actually to go — to look back, and I wanted to tell you all when we started in 2018, our mission was, we used to call it solving the unsolved. And that solution in our mind was to make a scientific template around underwriting to MSMEs which is sustainable and scalable. And in the next few slides, I will demonstrate and tell you what all we have achieved in that direction. So this is a short highlight slide on how we have scaled-up and how the data system, ecosystem around us has also evolved. Just to give you a few numbers. In the last four years, our proprietary Gro Score has been applied to 63,000 plus customers. We have analyzed more than 1.9 lakh U Gro records. We have analyzed more than 93,000 bank statements and we have analyzed more than 34,000 GST records. And this has happened because we have been able to make a platform where onboarding of documents by customers has been made seamless with the click of a button and on the back-end, there is a technology module which is working tirelessly 24/7. This has resulted in we having 48,000 customers lives to date. The gross banking turnover the customers whom we serve is now close to 1.6 lakh crores. We are into — about 25% of the top pincodes in the country where the SME concentration is high. We serve more than 115 plus anchors and OEMs. But what I’m most excited to share is what the future is looking like and the power of network signs which we have — which we have now have the capability to see and in very short future to encash.

Just to illustrate you, today in our network of customers we have demographic records of more than 25 lakh counterparties. We cover more than 10% of India’s registered companies and this is how — this is what happens when there is a tipping — we are reaching a tipping point where, because of the GST linkages in the ecosystem, we will be able to identify and solve customers working capital needs across the trade corridor. Today in our network, we cover more than 95% of India’s top 500 companies and 19% of all GST registered companies are in one-way or other part of the GST ecosystem of the companies which we serve directly. We are all set. Our data science team is working on cutting-edge solutions and we are very confident that our stated goal of serving at least 1% of MSMEs lending market will be solved in near-future.

What I — we will do now is to give you a glimpse of our latest version of Gro Score which features [Phonetic] Gro Score 3.0 and what it is capable of. So a short video.

[Video Presentation]

So you would have watched the video, I’ll take a few minutes more to explain the building blocks of our flagship Gro Score 3.0. This is at the very heart of the underwriting model which we have developed for MSMEs. At the very basic this Gro Score is based on three components. We use GST transaction data for last 24 months which is available on a click of button through consent of the customer. We take last 12 months bank statements of the customer, which again today is possible with the click of button and the repayment history of the customer from the credit bureau. Our belief right from day-one was that we should take documents which are very easy to upload for the customer and at the same time gives us the most accurate picture of the current cash flows. So all our modelling has been done basis these three document sets. What we have done during the course and currently we are in the third-generation, that’s why it is Gro Score 3.0 is that we have invested a lot and developed a very large library which we call as future library. What it does is, it looks at all the possible parameters in the repayment history or in the Banking transaction or the GST transaction which can have correlation with the future repayment behavior of the customer and then they allow this data future library to be accessed by the in-house developed machine-learning platform. And what it does, it keeps triangulating this data and keeps checking with the corresponding future portfolio behavior of the customer and during this process, it comes up with a scorecard with the most important characteristics. The beauty of this model is that it keeps evolving on its own. The Gro Score today which we have made has a ability to predict probability of default for the next 12 months. So, typically what we do is that we allow it to run for at least a year, look at the results and the machine, then weighs in on how accurate it was and then if it — if required changes itself. So this is a self-sustaining module and it has the capacity to keep enriching itself as more-and-more data feature is discovered.

And finally, it’s very important that we keep checking whether the Gro Score which we have developed has been working well or not and for that we have arrived at a framework where not only we keep checking the repayment behavior of the customers who we approve, but also we keep checking the repayment behavior of the customers whom we have not disbursed. This allows us to not only get data of our own disbursals, but also what the customer and how the customer is behaving with other financiers.

Just to illustrate that we have made a very simple two line graphs. The bottom-line is the portfolio behavior of the customers whom we have disbursed by the risk band of Gro Score. Our Gro Score gives classification of customer in five risk bands, A, B, C, D and E. A being the best customer, the probability of default for the next 12 months would be the least and E being the worst customer where the probability of default in the next 12 months is higher. So the picture on the left hand side illustrates is that the risk ranking and the portfolio behavior as predicted by our Gro Score across risk bands A, B, C, D, E is not only holding for our own customers, but also for the customers who were scored, but not disbursed. So across the width of the data which is available, it is a proof that it is working well.

On the right hand side, it is, we have demonstrated the portfolio contribution by Gro Score and currently approximately 88% of the portfolio customers have a Gro Score A and B, which for the future gives — which is very encouraging because we know that overall the portfolio performance will continue to do well. Thank you.

Now, I hand over the mic to Amit, and he will take you through more business details. Over to you Amit.

Amit Mande — Chief Revenue Officer

So, thank you all for joining the call. As we go ahead, I just wanted to run you through our journey for last five years, This five years journey has been nothing, but eventful. As you would recollect, we raised our first capital in July 2018, a capital of INR900 crores and we said this — and we set foot for this interesting journey to really empower the MSME ecosystem. During this first-six months, we have built risk models, we have built a entire sectorial approach and we disbursed our first loan in January ’19. I think that after set-up phase when we were ready to really scale up, we saw two macroeconomic events that would have — which were disruptive and that changed — that kind of changed the course, we had one [Indecipherable] crisis that happened and then of course in March 2020, COVID set in. By then we had created a book of about INR890 crores and INR860 crores and so, once the COVID had set in, we took a little pause and we had the power of capital behind us, we decided to invest our time and energy into building infrastructure, hiring the mindset [Phonetic] of people, building our technology stacks and continually enriching our risk models. So once we have really build these blocks during our COVID times, once the COVID was passed us, we started our growth phase. Since Q3 of 2021 we’ve been growing at a very brisk phase, we’ve — all our asset engines and our investments in infra and technology have been reaping benefits, people who have been following us would see that our AUMs have seen steady growth since then with a INR6,000 crores of AUM this March. And as we now go forward we will continue to harvest the efficiency of our Gro Score 3 model. We will continue to work, scale our lending as a service model where we will have multiple partnerships in co-lending and co-origination and more importantly, now that we have launched our direct to customer model, we will start acquiring large number of customers which will only enrich our ecosystem, that Anuj spoke about through the network sciences and ensure that we have — we become a data powerhouse for the MSMEs. Now that we also supported by the capital raise that just happened in April, we are all really set to look-forward to a great 2023-’24.

So very quickly in terms of the last three pillars that will help us grow next year, at the center, of course, is the key in our proprietary Gro Score 3 model. On the asset side, the asset side continues to grow very strongly with INR4,000 crores, INR4,500 crores of disbursements last year and a INR1,400 crores plus disbursements in quarter four, somewhere the exit runrates in March are between INR550 crores to INR600 crores and they will continue to slowly inch up, so that gives a sense of where we will reach by end of next year, somewhere in the five-digit AUM range. We will continue to build our — in fact we will continue our strength, our infrastructure and digital platforms and ensure that the current opex delivers far more than what we delivered last year.

On the other side, our liability platform is only getting robust by the day, apart from the term co-lending partners and the co-origination partners that support our last model which is lending as a service model. We have 66 lenders on-board now and our liability is only looking robust by the day. So with these three pillars of a very strong asset engine, a robust risk model and a very — and a liability engine that is ready to power our asset engine growth, I think next year looks extremely promising for all of us in U Gro.

Having said this, I will now let the — I’ll now open the floor for questions. I will let the moderator instruct the participants on how to take it forward.

Questions and Answers:

Operator

Thank you very much. We will now begin the question-and-answer session. [Operator Instructions] We have a first question from Vikas Mistry from Moonshot Ventures. Please go ahead. Mr. Mistry, please unmute your microphone and ask your question.

Kishore Lodha — Chief Financial Officer

Hi, Vikas, are you asking the question? Vikas if you are unable to unmute or not being able to speak, you can put your question in the chat box and we’ll respond there — those questions as well.

Operator

Thank you. We’ll take our next question from the line of Hrishikesh a retail investor. Please go ahead.

Hrishikesh — — Analyst

Hello. Am I audible?

Operator

Yes sir.

Kishore Lodha — Chief Financial Officer

Yes, you are.

Hrishikesh — — Analyst

Yes, hi, Mr. Shachin. Congratulations on a great set of numbers yet again. I do have a couple of questions with regards to how the business on the Gro X is going to be like. I mean, do we have control over what the funds are being used when its half based lending. Or is it on a particular purpose, where we actually end up paying their vendors or their suppliers.

Shachindra Nath — Vice Chairman and Manging Director

So this app based lending, which we have launched, it is basically to serve the need of this very small merchant. So think of a scenario of a small retail store, which does daily buying in the morning and does the sale for whole day and next day morning or two days when he has an excess cash he want to return the money. So we — so he can get the credit limit uploaded into the app, he can use and dispense the money through UPI and other method. So at the time of dispensation of our credit, we will not be able to control where the money is going, but what we can control that we are only aligned with them are the registered entities to avail the credit, which means that the credit is being given only to a business entity and it is not a loan to — for consumption purposes. It’s not a personal loan. Over a period of time and that is when — differentiate between bank and us, we will try to perfect and we will do very specific need based lending, but at the initial phase wherein we want to get more customer, we want our data to get more mature, we have not defined it for the end purpose, but we have presumption is that 80% to 90% loan given to business entity would be used for business purposes only.

Hrishikesh — — Analyst

Understood. Thanks a lot. I have another question. So is there any statistics available on how the Gro extreme platform is currently performing with our U Gro being a part of the deal, like deals between NBFCs and banks where U Gro is just taking of the [Indecipherable].

Shachindra Nath — Vice Chairman and Manging Director

No sir, we have not opened our platform for that purpose. So we are still not a platform play. U Gro extreme platform is predominantly connects our distribution origination to our bank partner and some of the banks actually are using third-party platform, because they don’t want to connect to just one lenders platform and so as other lenders also don’t want to connect to one lender platform. So till the time we fully mature, we have not monetized the platform as a platform play, it is currently playing a role of facilitation for U Gro ecosystem.

Hrishikesh — — Analyst

Understood. One final question if I may. So this is on the equity fund raise that was recently done from the Danish government. So I was trying to understand the background for this. I mean it is a substantial dilution in terms them becoming almost the largest shareholders now. Does this mean they would participate in future rounds, like, to reduce our cost-of-capital by way of bonds or foreign currency bonds or NCDs etcetera. Is that envision to [Indecipherable]?

Shachindra Nath — Vice Chairman and Manging Director

They are not our largest shareholder sir. Their shareholder is exactly equal to what TPG and ADV Capital have. So they will also be roughly around 16.5% or nearabout, so as the TPG and the ADV as well. Do cover purpose in this round of capital was to ensure that on our capital [Phonetic] we have certain number of shareholders who have longevity of the duration because lending as a business is a business of duration, and that’s why we founded appropriate to attract DFIs because as you know as a sovereign entities, these entities have the capacity to hold the equity stake for a very-very long period of time. Second, one of the source of our financing is impact financing, because we are building a very robust impact financing business and also we are focusing on renewable and sustainability and that’s why as the third-largest European DFI our recognition within the DFI world would increase with — they coming on our capital structure and we see that during this year, almost all large DFIs would be on the lender side,

Generally, sir, in the DFI balance when they take the equity exposure, actually, equity exposure is calculated 4 times to debt exposure and it actually reduces their capacity of debt to us. Has most of whether it is IFU DG [Indecipherable] IFC, they don’t — when they put an equity money, they don’t put that money simultaneously. But what we have also seen and we have seen this in during the period of COVID very effectively, DFIs generally support their existing what they call client at the time of stress. So all DFIs in the world have a special programs for their existing client during COVID period and they supported all their portfolio companies by debt support at that period of time and that’s why we feel confident that at this point of time when we leave money, investors like IFU would be very, very supportive.

Hrishikesh — — Analyst

All right, thank you very much. That’s part of something. Good luck for the quarters.

Operator

Thank you. [Operator Instructions] We’ll take our next question from the line of Nirvana Laha [Phonetic], an Individual Investor. Please go ahead.

Nirvana Laha — — Analyst

Hi, am I audible?

Operator

Yes, sir.

Shachindra Nath — Vice Chairman and Manging Director

Yes, sir. You are.

Nirvana Laha — — Analyst

Thank you so much for taking my question. So, what about the cost of — how do you see the cost of borrowing trending in FY ’24? And another question on the cost front, how many branches do you see opening beyond 98 and FY ’24?

Shachindra Nath — Vice Chairman and Manging Director

Kishore, Amit.

Kishore Lodha — Chief Financial Officer

As we have seen recently that inflation is getting slowly under control. So April month inflation numbers are very encouraging where the retail inflation has come down to 4.7% and in fact WPI has gone into negative which has happened after almost 18 months. And RBI has also taken a pause in their last meeting, so what we instantly believe and general release in the borrowing market is that we have plateaued as far as cost of borrowing is concerned. From here on we may see some amount of some time where the cost will be similar which is of course on the higher side and then we may see a cycle of lowering down which is periodic periods. So for this year we don’t anticipate significant increase in the cost of borrowing for our brand purpose, so we have taken it as flattish. On number of branches and cost of opex, Amit will tell you.

Amit Mande — Chief Revenue Officer

So, on the number of branches, one would have seen that over last year, post Q1 we really did not set-up any new branches and the number has been stagnant. And there was a reason. We set up about 75 branches in Q4 and Q1, Q4 of ’21 to ’22 — ’21 and ’22 and the early part of ’22 to ’23. And we wanted to see the proof of concept that these branches can breakeven between 12 to 15 months, these were essentially the microenterprises new branches. The 75 branches that we have in Rajasthan, Gujarat, Karnataka, Tamil Nadu and Telangana. As we now approach about 12 months we’ve seen that most of our branches have actually reached the breakeven point. Our average productivity where branches is higher than our peer set-off — peer set and so now we are confident that we will be able to now scale-up. We will give another quarter or so for this to really mature and understand that all our branches breakeven. But having said this in the first two quarters, we will open between 20 to 25 microenterprises branches and we will take a call in the last quarter on for that expansion, Eventually in next 24 to 30 months we will have about total 250 branches across the country.

Nirvana Laha — — Analyst

Okay. And with that number, you think you are on-track to hit cost-to-income ratio that you have targeted for FY ’25, or are you running above budget?

Amit Mande — Chief Revenue Officer

No, absolutely. So like I said, we are only talking about 20 incrementals for micro enterprise branches which are low cost branches that we will be expanding. So opex in that sense is really flat this year and with the AUM growth happening we will see our cost to income ratios touch the desired levels of 47%.

Nirvana Laha — — Analyst

Okay and one more follow-up question on the branches. So the prime branches, you say that it’s intermediated. So can you explain what that means is it 100% DSA or is it through our own employees?

Shachindra Nath — Vice Chairman and Manging Director

So the prime branches are multiple products. It has the standard loan against property and unsecured loans as one set of products. It also has the equipment finance and supply-chain finance as the ecosystem products in the prime branches that we have. Though buying products or rather the loan against property, and the business loan products are DSA driven and intermediated, the [Indecipherable] the supply-chain and our direct-to-customer product is there is no intermediation, so the prime branches houses both these businesses and so it — in that ratio it does have the intermedian business.

Nirvana Laha — — Analyst

Okay, so at an overall disbursement level can you tell us what percentage is sourced through DSAs and what percentage is sourced through our own employees?

Amit Mande — Chief Revenue Officer

56% at this point of time on the overall disbursement is intermediated. The rest is direct.

Kishore Lodha — Chief Financial Officer

I must add, so, I mean intermediated doesn’t mean that we don’t have distribution cost or sales front-end. Actually large portion of our sales forces and what we call the upper-end of the sales force, relative purpose in cost being higher are actually in prime branches because there is a twin level of servicing, which is required. Because we compete with the intermediaries, because they are open architecture intermediaries to get to the door and then we have to ultimately serve the customer to get through — get them accept our offer and take the loan. So actually, only the hunting part is not done by us, but post origination by the intermediary to get through the client to our system is all done by our sales forces.

Nirvana Laha — — Analyst

Okay, got it. And final question from my side. Last quarter, I think you had confirmed that the tax hits from the lapse DTAs are over. So, can you, just confirm that for this FY ’24, are we foreseeing any further tax hits?

Kishore Lodha — Chief Financial Officer

No, sir, actually the carry-forward differed tax which is still there in the balance sheet is about INR10 crores, out of which INR6.9 crore is coming for less [Phonetic] in the coming year. So profit has to be absorbed [Phonetic] for the year ’23-’24 so that part — that portion is about INR6.9 crores.

Nirvana Laha — — Analyst

Okay, all right. Thank you so much.

Operator

Thank you. [Operator Instructions] We have a next question from the line of the Darshil Pandya from Finterest Capital. Please go ahead.

Darshil Pandya — Finterest Capital — Analyst

Hello sir. Good evening. Congratulations for another good set of numbers. So I have few of the follow-up questions from the previous call. So last time you said that you are always open for evaluating any other sector to add up in the — for the loans. So have you evaluated any of the new sectors to be added up?

Shachindra Nath — Vice Chairman and Manging Director

Anuj?

Anuj Pandey — Chief Risk Officer

Hey, hi. So we keep evaluating sectors. But at this point of time, so we have nine sectors. Eight sectors which we started with and ninth we added during the course of the journey. And also as a policy of about 20% of the total portfolio we have deliberately kept it open for all other sectors, so then whenever we choose to open we have some kind of data to make rules. But at this point in time with the state of macroeconomy and the way the sectors are performing, we are not thinking of opening up anything new. Within the light engineering sector and electrical equipments, they have been very interesting subsectors which have opened up, especially on the green energy and solar and those — though our part of our large sector list have thrown open new opportunities for us. So for the near to medium-term, we don’t see any reason to open a new sector, but of course we will keep exploring interesting opportunities within other sectors which we work with.

Darshil Pandya — Finterest Capital — Analyst

Okay. And as you said on the last time, you are — you’d be increasing the mix of off-book and on-book AUM. So right now it’s at 40% to 60%. 40% is for the off-book and 60% is on the on-book. Where do you see this mix coming — like going forward?

Kishore Lodha — Chief Financial Officer

Going forward we will certainly Increase the percentages of our book and as I’ve stated objective we have said that by the year 2025, we will reach 50% has off-book and 50% on the balance sheet. So we are slightly ahead of time in terms of achieving our off-book number. So this year we have achieved slightly more than what we have envisaged on on-book side. Next year we will reach closer to 47% on off-book and 53% will remain on balance sheet, but the ultimate goal is to reach 50%-50%.

Darshil Pandya — Finterest Capital — Analyst

Okay. One final question sir.

Operator

Mr. Pandya I request you to come back in the queue sir.

Darshil Pandya — Finterest Capital — Analyst

Okay, thank you.

Operator

Thank you. We have a next question from the line of GMOPG India Private Limited. Kindly announce your name and go-ahead with your question please.

Piyush Bothra — GMOPG India Pvt Ltd — Analyst

Hello. Am I audible?

Operator

Yes, sir.

Shachindra Nath — Vice Chairman and Manging Director

Yes.

Piyush Bothra — GMOPG India Pvt Ltd — Analyst

Yes, I am Piyush Bothra from GMOPG India. So, congratulations on the tremendous growth in the AUM. My question is on the next — for this year AUM. So last year you almost tripled the AUM and this year as well it is pretty aggressive on the AUM side. So for the on-balance AUM, how much will be funded by equity and how much do you plan to funded by debt?

Kishore Lodha — Chief Financial Officer

So I will take this question, so next — for this full 12 months, so we are not envisaging further equity infusions. So that INR340 crores which has come in that would be the only equity envision for this 12 months starting from April 2023 and balance of the entire balance sheet growth from debt. So this year we have planned for raising our INR2,500 crore of fresh liability for the whole year.

Piyush Bothra — GMOPG India Pvt Ltd — Analyst

So do you feel any stress on the capital adequacy with no equity?

Kishore Lodha — Chief Financial Officer

So we ended the year with the capital adequacy of 20%, 20.23% and then over and above in April and May we have raised INR340 crores. So If I take that back into March 31, roughly we are on 30% of capital adequacy, which will be sufficient to cater all the needs for this entire year and we don’t see capital adequacy going below the current level for the full year with this equity raise.

Piyush Bothra — GMOPG India Pvt Ltd — Analyst

Okay. So 20%. Below 20% or below 30%.

Kishore Lodha — Chief Financial Officer

20%.

Piyush Bothra — GMOPG India Pvt Ltd — Analyst

Okay. Thank you.

Operator

Thank you. We have our next question from the line of Agastya Dave from CAO Capital. Please go ahead.

Agastya Dave — CAO Capital — Analyst

Hello, am I audible?

Operator

Yes.

Agastya Dave — CAO Capital — Analyst

Thank you. Thank you for the opportunity. Sir, I had one question on your machine-learning model. Can you tell us something — first of all the rejection rates. So how many people approach you and out of that how many people do not get a loan from you, because you say no, irrespective of the five buckets, irrespective of where they stand in the five buckets. How many people do you deny loans to?

Shachindra Nath — Vice Chairman and Manging Director

So on an average, this can — this varies by-product, but on an average for full portfolio, for every 100 customers who apply, we give loans to 30.

Agastya Dave — CAO Capital — Analyst

Okay, so 70% rejection rates.

Shachindra Nath — Vice Chairman and Manging Director

Yes.

Agastya Dave — CAO Capital — Analyst

Great. A related question. How many false-positives, do you see where probably, let the error rate in your model, where you predict that default won’t happen, but it happens and the other way around, where you think the default would happen and it doesn’t happen. So all the true positives, false-positives, false-negatives and true-negatives. Do you have that data with you?

Shachindra Nath — Vice Chairman and Manging Director

So this is — it is about probabilities. And our model is giving a probability and the model has a geni-coefficient [Phonetic] and all our modules have geni-coefficient of more than 50%, but to — I get the gist of your question, broadly you are asking, by risk bands if the probability of default for next 12 months at a portfolio level was x%, do you — after 12 months, what do you see? Is that the question?

Agastya Dave — CAO Capital — Analyst

Yes, very similar.

Shachindra Nath — Vice Chairman and Manging Director

So we are seeing that it is very similar to what the model has predicted. In absolute terms, it may not match exactly, but from trending terms it is directionally what our score has been predicting.

Agastya Dave — CAO Capital — Analyst

Okay, okay, sir, given — so loss given default, what kind of losses do you see here when default happens?

Shachindra Nath — Vice Chairman and Manging Director

So our scores our probability focused on probability of default, loss given default is a function of collateral and our litigation ability. So in our own experience so far, the loss given default on secured loan is close to zero. On loss given defaults on unsecured loans is relatively higher, but it is not 100%.

Agastya Dave — CAO Capital — Analyst

And generally, what is the percentage of secured loans that you have?

Shachindra Nath — Vice Chairman and Manging Director

We — of the total portfolio 70% of the portfolio is secured.

Agastya Dave — CAO Capital — Analyst

With what kind of LTV?

Shachindra Nath — Vice Chairman and Manging Director

So. I will divide this into two. Secured is for hard collateral, either property or machinery for property on an average the portfolio LTVs are around 52%. On machinery the portfolio LTV would be closer to 70%.

Agastya Dave — CAO Capital — Analyst

Okay, okay. That’s reasonable. That’s pretty reasonable. One final question, sir. The only thing which comes from like two things which are slightly problematic at least from my point-of-view as of now, and. I could be completely wrong — proven completely wrong in the future, one is that you guys have a very low ROE and where do you see this ROE finally settling, once you reach a state which is more steady state, where do you see this ROE settling? And the second thing is the growth is like way too aggressive, way too aggressive. So where do you see like a normalized growth rate for you? How will these two numbers finally settle?

Shachindra Nath — Vice Chairman and Manging Director

Can I take this…

Agastya Dave — CAO Capital — Analyst

How and when?

Kishore Lodha — Chief Financial Officer

So think of this I presume you are in Bombay, right.

Agastya Dave — CAO Capital — Analyst

Yes, sir.

Shachindra Nath — Vice Chairman and Manging Director

Okay, so they are multiple ways people make convention centers, right or make banquet hall. So think of somebody making a small banquet hall, then that goes to full capacity, then they make another banquet hall and then make a third banquet hall, but it may so happen that the land parcel near to your first banquet hall may not be available. So that’s the one-way to do it. And second is, you have seen Jio’s convention center, right, wherein you take large land parcel and you make a large convention center and such large conversion center — then first even itself would have five, seven lakh people coming into that. So U Gro has been designed and built like that. We’ve raised significant amount of capital without having any business right on a piece of paper, 1,000 crore equal capital. Then we brought all the land and we’ll build a large building and now that large building is being utilized for its capacity. So our growth rate is not a function of surprise. It is a function of upfront capacity, which has been built, while still speaking. I still think, so that our capacity is under-utilized and it’s a function of our liability funnel and we could have been much better. We are growing at this rate, when you have just heard that our approval rate is only 30%. So for a month of March, when we just disbursed INR600 odd crores we originated INR2,400 crores loan, so which means that we have kept our credit completely tight, but it’s still the funnel is very big and that’s why it is throwing big numbers.

Second question, Kishore, can give you the numbers, is again the same. Because you have built all capacity upfront, then obviously that upfront capacity would yield little bit of time to generate the bottom-line performance. So this company has moved from a INR20 crore of PBT last year to INR86 crore, INR84 crore this year. And as you have just heard the commentary from Amit that now we are not increasing the opex and on the current run-rate basis we would touch roughly around INR10,000 crore of AUM, which means your bottom-line performance from the current INR84 crores would be at least 2.5 times to 3 times. So we would be into the median ROE, a two-digit ROE number in the current year and we’ll be near to high-double digit ROE number in a year forward. Kishore, if I’m correct?

Kishore Lodha — Chief Financial Officer

Yes, absolutely. This year we will be try our level to hit double digit from single-digit where we are and the year after we will do high teens.

Agastya Dave — CAO Capital — Analyst

Let’s say INR20,000, INR25,000 crore AUM, can you guys be around 18%, 20% ROEs. Is that the scalability metrics that I should keep my eye on whenever that happens, I’m not asking for timeline sir.

Shachindra Nath — Vice Chairman and Manging Director

No, no, but we are working on a timeline. Somewhere near about that and that’s why in few quarters back, we have actually put a very good number and that number were more aspirational, but INR1,000 crore here and there, you miss, but our target to get to the kind of ROE number is by end of 2025 or so.

Agastya Dave — CAO Capital — Analyst

Around 18%, 18% to 20%. Great sir. Thank you very much sir. The process seems very interesting. All the best. Thank you.

Operator

Thank you. We’ll take our next question from Dishanth, an Individual Investor. It’s a text question. What will your FY ’24 outlook be?

Shachindra Nath — Vice Chairman and Manging Director

Kishore you want to take that.

Kishore Lodha — Chief Financial Officer

So FY ’24, as we have discussed during our previous deliberation that how we have a robust pipeline in terms of overall infrastructure, we have closed March month within disbursement of closer to INR600 crores. So this year, full year we have planned for disbursement of close to INR6,400 crores and we’ll be achieving a AUM — try to achieve AUM of INR10,000 crores with an ROA of 3.1% and ROE of about 10%. So this is the plan which has been approved by our Board during our February meeting and we are working on that.

Operator

Thank you sir. We’ll take our next question from the line of Phalguni Mahajan from Scient Capital Private Limited. Please go ahead. Phalguni Mahajan please — yes please go ahead.

Phalguni Mahajan — Scient Capital Private Limited — Analyst

Can you guide me on your net interest margins over the year and for the quarter as well. And what is your target for FY ’24?

Kishore Lodha — Chief Financial Officer

So this year on the balance sheet basis it is roughly around 12.8% and if we take the AUM it is rougly around 9%, 8.9% for the year. So that trend will continue with some variation based on the product mix and other factors. So this is where we are and the range is slightly to be in that region.

Phalguni Mahajan — Scient Capital Private Limited — Analyst

Okay, thank you.

Operator

Thank you. We have one text question from Neeraj Jain from NJ investments. The question is, after DBZ Cypress sold its shares, what comes as an unpleasant surprise, is another major shareholder Chhattisgarh Investments Limited, which was recently allocated shares as part of the recent QIP also sold a big chunk of shares. Is the management aware of the reason why CIL sold so soon after QIP?

Shachindra Nath — Vice Chairman and Manging Director

I think so the price has gone up too quickly.

Operator

Thank you. One moment sir. We have a text question from Siddharth Arur an Independent Investor. Congratulations on strong set of numbers. Though the NPAs have reduced from 2% to 1.6% in March ’23 on absolute basis, GNPAs have increased materially. What is the company doing to arrest [Phonetic] this.

Kishore Lodha — Chief Financial Officer

Okay, that. So, I am not really sure what the question meant, because on absolute terms as AUM goes up NPAs will go up, that is the business model we have, but overall from modeling perspective for each of our business vertical we have a budget, NPA budget and that is how the Gro Score models have been brought down. So as a general philosophy for an unsecured business at a ease of 19%, we are okay to go up go to 3% and 3.5% NPAs lifetime. For a secured loan backed by collateral like property we are fine to go up to 0.5% to 0.75% NPA in the lifetime. And so far we have been well below that, but our scores and our underwriting has been calibrated so that we don’t cross these benchmarks. So the absolute number of GNPA has increased, but as a percentage, it has come down and that is how this has to be looked at.

Operator

Thank you. We have a text question from Pramod Jain from Purshottam Investofin Limited. When you intend to raise next capital as you’re moving up the ladder in the world of financing, where you will face interest war? Since you are still A rated, so your cost of funds will be much higher than your peers, how will you be able to meet the competition?

Shachindra Nath — Vice Chairman and Manging Director

Kishore you want to take that?

Kishore Lodha — Chief Financial Officer

So. Next round of capital as we have said in our commentary earlier that for this full year we are not looking at raising any equity, probably in the mid of next year, we will look at another round of equity for the Group capital. On the interest rate side, of course there can be views by anyone, but as an institution what we believe and what we are working upon is that we have proven our sales to the markets to our lenders with our transparency, our governance and our underwriting model, robustness of our underwriting model and it will play — pay dividend at some point of time. I personally believe that the time has arrived where people would give some premium of all the effort that are growing that has gone into the company for last four years, the robust underwriting model that it has created the governance model the company has been demonstrating over the entire journey of five years and our transparency in disclosures and data to all sets of investor whether it is equity investors, all our lenders, where we will get some advantage. So this is my personal belief. There is no science around it, that as a team we believe that our cost of fund should come down the markets, of course it is open market, where rates can go up and down but we will have some advantage over our peers as we move forward.

Shachindra Nath — Vice Chairman and Manging Director

If I may add, Mr. Jain, I think one of the cardinal principle of lending is vintage. So there are two formats of businesses. Businesses where in the cost of borrowing is a function of parentage. So there are entities which maybe much younger, five year, six years, may have a cost of borrowing, which reflects the cost of borrowing of who their parent is. So, obviously they have a disproportionate advantage vis-a-vis us, but actually they are our partners, most of them. Although such entities are actually doing business with us. So that shows our capability. Second there is always an inflection point. I’ll give you an example of let’s say AU, which in the first 10 years of this journey actually we started as a triple B-minus company and then went to a double-A plus in current world look at five-star which is into the microest of the micro enterprises segment, which was started as a double-B plus company and now double-A minus company. As long as you continue on your vintage journey, maintain credit cost, create healthy growth and generate bottom-line performance, your cost of borrowing and rating both would start improving. So I think so with every passing year that would keep happening for us, like it has happened for many other institutions in India.

Operator

Thank you. We have a text question from Krishna Kumar Srinivasan from Lion Hill Capital. Can you give us a sense of incremental — one moment please. Can you give us a sense of incremental credit risk assessment done by your co-lenders.

Shachindra Nath — Vice Chairman and Manging Director

I can take that. So, look, the way the co-lending for regulations have been formulated and where it get differentiated between a direct assignment or a portfolio sale, banks as under the RBI circular of co-lending which is November 2020 are mandated to do customer level underwriting. So there are two things which banks have to do. One, they have to pre agree the policy framework under which the loan would be given. So now, actually all the banks look at our policy and with some variation actually adopt our policy. This is the biggest change which has come, because of our vintage of portfolio, our portfolio performance, more or less they are aligning them — themselves to our policy. Then once we disburse a customer, when the file moves either through technology or through digital formats, then they are obligated to check every parameter of the policy and whether the loan is as per policy or not. So to that extent, it is then work which banks have to do, and this is where banking system is getting more comfortable, because they are taking actual customer level risk and not the entity level risk. So that is the way it is happening right now. Kishore if you want to add or Anuj — Amit you want to add something.

Kishore Lodha — Chief Financial Officer

No this more or less covers that.

Operator

Thank you. We have a live question from the line of Sanjay Kumar Elangovan from ithoughtpms. Please go ahead.

Sanjay Kumar Elangovan — ithoughtpms — Analyst

Hi, thanks for the opportunity. First question. So if I look at prime unsecured, INR1,900 crores AUM and GNPA of 2.9%, which is roughly INR55 crores. So if I look at this absolutely. GNPA against one year-ago, AUM of INR1,000 crores prime unsecured, it is 5.5%. And even if I take six months ago AUM of INR1,200 crores roughly 4.5% GNPA, the lagged GNPA. So comments on this. Is it — do you think at least in your view that deterioration in asset quality, one. Two the covenants in our borrowing are therefore overall AUM, or is it product-specific?

Shachindra Nath — Vice Chairman and Manging Director

So I’ll take that. So out of the total INR55 crore GNPA in unsecured book, little less than INR30 crore has come out from the restructured book during COVID. So sourcing post COVID post the implemented Gro Score 2.0 is actually very, very healthy and we have hardly seen anything. So to your question of how do we foresee this? We will see some bit of recovery, because some of those restructured plus portfolio also are now coming back alive but on the new portfolio source and we have been tracking this on vintage curves very, very closely, we don’t foresee the gross NPAs for lifetime to go above 3% to 3.5%.

Sanjay Kumar Elangovan — ithoughtpms — Analyst

On the covenant?

Kishore Lodha — Chief Financial Officer

On the covenant side, there are no specific — products specific covenants, it is on the most of the time it is on AUM of the company and very few basis it would be on the on-balance sheet AUM, so no product specific covenant is there for any of our borrowing lines.

Sanjay Kumar Elangovan — ithoughtpms — Analyst

Okay sir, thank you once again on the provisions average. So we are at 49%. So how comfortable are you again looking at our overall PCR kind of SKUs because can you provide the product wise PCR, especially for the unsecured loans.

Shachindra Nath — Vice Chairman and Manging Director

So to answer the first question first, now we are hitting kind of our desired numbers on provision coverage. We are actually quite comfortable. Internally we had benchmarked it to be between 45 to 50. It is actually a function of the portfolio mix things in stage three, the kind of products and the kind of estimates from the ground of how our litigation and collection action is taken through. On a broad level for unsecured the provision coverage is closer to 65% to 70%. On secured, it would be closer to — between 20% to 30%.

Sanjay Kumar Elangovan — ithoughtpms — Analyst

Okay and…

Operator

Mr. Elangovan…

Shachindra Nath — Vice Chairman and Manging Director

It’s okay, we’ll take one more. Go ahead.

Sanjay Kumar Elangovan — ithoughtpms — Analyst

Just a product-specific question, sir. So GNPA is also higher in supply-chain financing, although the yields are very similar to your prime secured kind of wheel. So why is this divergence, sir. And why are the yields so high in micro enterprise loans?

Shachindra Nath — Vice Chairman and Manging Director

So I’ll answer the first question — second question first. On the micro segment, we do secured loans up to INR25 lakh for micro enterprises on an average yield of about 21% and we do unsecured loans up to INR5 lakh specifically for micro enterprises at around 24%. So that’s the way market is. When — the way we have defined this is on measuring the quality of cash flow, the quality of collateral and the quality of repayment behavior. So for micro customer, all these three are not standard and less than prime, and that is how the risk-based pricing has been arrived at.

Sanjay Kumar Elangovan — ithoughtpms — Analyst

On the supply-chain?

Shachindra Nath — Vice Chairman and Manging Director

On the supply-chain, yes, you are right. The NPAs are higher, but if you would have seen our journey this is on account of two large anchors going burst during the — just before COVID and this NPA number used to be around, a little higher than 4%, we have been successfully able to recover part of that stressed assets and in next two to three quarters it is actually expected that we will recover more. For everything sourced after that, we have hardly seen any forward-flows.

Anuj Pandey — Chief Risk Officer

And last part of your question which you asked that yields look similar to some of our other secured product, actually we are graduating from a vendor based financing to purchase based financing, which means that we are now financing the distribution chains of anchors. So anchor to distributor, distributor to retailer, that’s why you will see an uptick in the yield curve. Second we look price and duration, both. So, one of the great advantage of supply-chain portfolio is its duration, because it’s a short tenure duration because we have to ensure that we have all liquidity profile of assets in our balance sheet, because we get all liquid — on the liability side also we get all kind of duration of loans. So, just having only long-duration loans are not sustainable. If you’re not a bank. So that’s why we mix product by LGD calculation, by collateral, we mix product by duration and we also look at what gives us the broad market access to some of our products, supply-chain machinery finance, Gro X, actually are product which are bringing the funnel of large customer bases, wherein in future massive cross-sell would happen. So every supply-chain financing or a dealer or retailer is a customer where in 12 months to 18 months time I would be able to cross-sell a machine, I’ll be able to cross-sell a rooftop solar, I’ll be able to cross-sell a secured loan, so on and so forth. So that is the philosophy why we are doing certain businesses.

Sanjay Kumar Elangovan — ithoughtpms — Analyst

Thanks for the clarification, because that was my last question, I’ll request you would add the average tenure, along with the ticket size and ROA.

Shachindra Nath — Vice Chairman and Manging Director

We will [Speech Overlap]. It was suppose to be done this time, we have missed it, we will do it, sir.

Sanjay Kumar Elangovan — ithoughtpms — Analyst

Perfect. Thank you. That’s it from my side.

Operator

Thank you. We have our next question from Saptarshee Chatterjee from Centrum PMS. Please go ahead.

Saptarshee Chatterjee — Centrum PMS — Analyst

Yes, am I audible?

Operator

Yes.

Saptarshee Chatterjee — Centrum PMS — Analyst

Thanks for the opportunity sir. Sir my question is in terms of one is, if you can talk about how much would be your in-house origination versus outside like DSA based origination?

Amit Mande — Chief Revenue Officer

Saptarshee we actually kind of touched upon and answered this question. Our intermediated origination is about 55%. The rest 45% is direct origination.

Saptarshee Chatterjee — Centrum PMS — Analyst

And if you can talk about also your collection infrastructure. I mean, what would be your maybe 30 DPD and like how many collection agencies you would be having. And so our plan like one will be touching, let’s say, 10,000 crore kind of AUM. What would be our plan to how many collection heads you will be having on the field?

Shachindra Nath — Vice Chairman and Manging Director

I’ll take that. So our total Stage one assets are around 96.1%. And if you see last few preceding quarters it has remained that way. So which basically means our 30 plus is in the range of 3.8% to 3.9% Going forward, we don’t see too much, too many changes in this kind because the way the portfolio construct is and in each product the way the risk cut offs are for approvals and rejects. On the collection infrastructure, we have a very large in-house team aided by a large litigation team and an early warning system which is developed by the in-house analytics team, which gives early morning signals for the current assets to the in-house call-center and hence so this is very large infrastructure which we have built. From numbers perspective, we have close to 180 resources in collections and as the portfolio grows up, that number will steadily go up.

Saptarshee Chatterjee — Centrum PMS — Analyst

Sure, and if you can also quantify for the year FY ’23 what would be the slippage and then the upgradation and recovery and write-off number for FY ’23?

Amit Mande — Chief Revenue Officer

So in FY ’23 we have hardly taken any write-off. So and from slippages perspective, the training which we have seen so far approximately once an account becomes an NPA, approximately 2% to 3% of that per month is what we have been able to roll-back in unsecured loans. In secured loans we have been able to roll back almost 100% of this within months.

Saptarshee Chatterjee — Centrum PMS — Analyst

And last question — last question from my side, if you can, like give us to change sides, which is like from your machine-learning models versus your Gro Score of 2.0 to Gro Score 3.0 which are the key learnings and key upgradations that you have done. Thank you.

Amit Mande — Chief Revenue Officer

So the primary addition from Gro Score 2.0 to Gro Score 3.0 is the GST parameter. So we haven’t — we have always been using GST, but primarily as an eligibility tool. But in Gro Score 3.0 what we have done is we have added that as a statistical parameter and all the data features which can emanate from the GST return, we have added that. The primary hypotheses is that the earliest warning signal for a stressed customer is not the Bureau, not the banking, but the GST. Bureau takes typically four to five months lag before a stress is reported. Banking early warning is little better, but still one doesn’t know till the cheque bounces. But in GST, the moment the sale starts going down, that is the first and your primary early warning signal. This was our hypothesis and with this we build and included that as a major parameter in Gro Score.

Saptarshee Chatterjee — Centrum PMS — Analyst

Understood, sir. Thank you and congratulations on the great set of results. Thank you.

Operator

Thank you. We have a next question from Shubam Sethi, an Individual Investor. Please go-ahead.

Shubam Sethi — — Analyst

Hi, sir, can you hear me?

Operator

Yes.

Shubam Sethi — — Analyst

Okay, so my question is regarding the — in the presentation we have given us app administration where we compare the on-balance sheet versus co-lending model. So there is a field called — so I understand the co-lending spread income, but there is some other income as well, which around 1,200 [Phonetic] This is on page number 38 of the slide, Slide 38, so I’m trying to understand what is the other income because it’s a significant part of the co-lending model.

Shachindra Nath — Vice Chairman and Manging Director

Just hold on, we are just opening the slide, hold on.

Shubam Sethi — — Analyst

Sure.

Amit Mande — Chief Revenue Officer

So it is the primary the fee == processing fees and documentation charges etcetera which is normally attached at the time of origination.

Shubam Sethi — — Analyst

Okay, so it’s a one-time thing that happens when the loan is originated, am I correct. It’s not like for the entire duration of the loan more like the spread.

Amit Mande — Chief Revenue Officer

No this is one-time.

Shubam Sethi — — Analyst

Okay. Understood. Another question. I had was, basically, in most of the banks that we have co-lending with are — I’m not going the NBFC, I’m talking about the big banks are mostly the government banks, state banks right. So like any plans to add private banks also like any or like any big banks, because that will give us even more confidence.

Shachindra Nath — Vice Chairman and Manging Director

And why you would say that?

Shubam Sethi — — Analyst

I mean. Like it’s just more forgive my naivity, but like if you see like most of the scams and all right, there is a perception that they happen in government banks and so that is why, like I mean — I mean I may not be 100% correct, but…

Shachindra Nath — Vice Chairman and Manging Director

Sir may I remind you that in India the banks which have undergone and have got busted were only private sector banks. Global Trust Bank, Yes Bank and multiple Cooperative Banks and so that always happens to the private sector bank. So that’s point number one. Number two, you’re also making the same assumption and the presumption that private sector banks are superior when it comes to their understanding of the credit. But you should also remember all of the people who are seeing over here and the rest of the 1,700, 1,800 people who work for U Gro also have come from the same set of the bank. So in terms of the intellectual caliber, in terms of the years which we have spent is no less than those banks. Number three, why actually the first port of call for us is public sector bank, because in India the custodial of the money is public sector bank, because all general public have more trust and faith in the public sector banking system, so that the liquidity always flow to them, but that does not necessarily mean that they have the same comparable infrastructure on the asset side. So that’s why they are more hungry on the asset side than the private sector banks. And third — last, in last five, seven years, majority of the private sector banks have grown on basis of wholesale credit and that’s why this half decade or next four, five years they are very-very focused on retail growth of their own. And that’s why there is less motivation for them to add indirect sources of origination like co-lending. But since all of you keep asking this question, over a period of next this quarter and next quarter, there’ll be at least two, three private sector banks which we would add. We have more number of private sector banks coming to us, but we are exhausted our asset side capacity to take on more co-lending partners. Sorry, I’m much tired of this question being asked multiple times. That’s why I have given you this answer.

Shubam Sethi — — Analyst

No, no. I mean I truly understand but it’s one of a perception thing and not more. I mean, it gives more-and-more confidence to investors that’s all.

Shachindra Nath — Vice Chairman and Manging Director

I understand.

Shubam Sethi — — Analyst

Thank you sir.

Operator

Thank you. We have a text question from Sujay Kamath [Phonetic]. There are two questions. Clearly you have developed some very strong tech, how much of a MOAT [Phonetic] do you think this is. How do you compare yourselves with some of the tech-driven NBFC like Bajaj Finance, PayTm. And the second question is, how much of your customer-base has an overlap with the Reliance Group, which is on the verge of entering fin?

Shachindra Nath — Vice Chairman and Manging Director

I would take that and Anuj — and Amit you can add-on to that. Number one, I think so Bajaj democratize the consumer credit. In India, starting from 2008 till 2023. In 2008, it was roughly around INR7,500 crores, it is at INR250,000 crore or INR275,000 crore, so an exponential growth of 45% CAGR continuously for almost 15 years. That has happened because of three things. Bajaj brand, cost-of-capital and third, there early adoption of data, but that data was consumer-related data. Euro existing loan data which they had and consumer behavior and that automated credit for consumer-related loans. I think so our moat is that what Bajaj was able to do in 2008, ’09, ’10, ’11 post global financial crisis and what we have been able to create post COVID crisis is exactly same. So our moat is that when it comes to the MSME financing in India, we have a Five-Year of head-start in understanding the data and underwriting credit on the basis of data and which any other player into the market have to catch-up with us. So that’s one. Second you took two names on the tech-driven NBFC, only one of them in NBFC, others is the only pure originator, so I won’t comment on that.

Operator

We have a text question from Chetan Bharat from Vishnu Bharat and Company. Has the RBI started discouraging co-lending? If yes, how does it affect U Gro.

Shachindra Nath — Vice Chairman and Manging Director

RBI is encouraging co-lending sir. So I think one media report of in Hindu Business Line, which has not been verified by anyone from RBI, does not mean that RBI has discouraged co-lending. Co-lending is, if you look at from policy perspective, government is 4.0 has a stated objective of increasing the credit dissemination for priority sector through co-lending. It has a very well-defined philosophy why both policy, which is the government and the regulator wants to increase the penetration of co-lending. This emanated from the default, which happened from DHFL, and few other large NBFCs. Banks exposure to NBFC, one has a 100% risk-weight. Second, banks ability to control the enterprise-level risk is very-very limited. So to balance that out and recognition of the fact that NBFC actually do the credit dissemination part to the disserving sector which otherwise banks are not being able to do this marriage was consummated. So this was an arranged marriage done by the regulator in the government and it was not a love marriage to begin with, but it is converting to love marriage and I don’t think so that there is any apprehension or a rethinking from a policy perspective, but every time, it is the job of the regulator that anything when it grows, the regulator has to ensure that the checks and balances are being maintained and nobody is exploiting the system, but that’s the journey that has happened for direct assignment, that has happened for securitization, that keep happening for every product into the market. But I would continue to believe that we have just seen tip of the iceberg. My presumption in next two, three years, at the current base of the newspaper report which has quoted some number, you will see at least ten-fold from there.

Operator

We have a text question from Pramod Jain from Pursottam Investofin. You just said that CIL may have exited because of quick price jump of near 10% which is negligible for a long-term investor. It appears from the trade that this apparently is a negotiated deal since the company knows CIL as they are your old investors. Is it in your knowledge, who is a new investor.

Shachindra Nath — Vice Chairman and Manging Director

Yeah, so this is true, actually CIL has been invested in our first series of capital raise. They also came in this round as well. And you know at the time of our QIP, we had more demand than what we have decided the QIP and actually CIL has already committed. Our belief is that and we have not confirmed it with CIL and not have looked at data that some of the very large market — public market investors have negotiated and bought that stake. And that’s why they were also willing to sell that stake to them.

Operator

We have a text question again from S. Bhatnagar, an Individual Investor. In the roadmap, 2025, slides shared earlier, you have mentioned a target of INR20,000 plus crores AUM by FY ’25. To reach that number, AUM after FY ’23 were supposed to be INR7,000 crores plus. We are around INR900 crores short of that target. So are we still targeting INR20,000 crore AUM for FY ’25 or that number will be revised?

Shachindra Nath — Vice Chairman and Manging Director

So I think so look, when we give the — when we gave our two-year number that was in the context of at that point of time because our base was very small. We had a large capital. We have AUM of INR1,300 only odd crore and when we were giving numbers informally, that this is the aspiration of ours, people were not feasible. We wanted to put out that number that this company capital structure it’s opex structure is take and people infrastructure is designed for a sizable organization. So I don’t think so we bill businesses as entrepreneurs for decades and multi decades and we are building a generational institution. So INR1,000 crores short in one year and INR2,000 crore excess in another year. Actually, it doesn’t matter. We are in broadly in line to that aspirational number and even much bigger than that. But we’ll see every year is a year which we have to pass and we have to complete that journey. And there are multiple factors which play in that liability, macros, overall economic scenario interest-rate cycle. But, all things remaining stable, we will be very near to that number.

Operator

Thank you sir. Ladies and gentlemen, that was the last question for today. I now hand the conference over to management for closing comments.

Shachindra Nath — Vice Chairman and Manging Director

Is it, I’m doing it, okay. So thank you very much. This was a very well spent, 1.5 hour. We saw a very big participation on our Investor Call. Our endeavor is we are a little different than most of the other lending institution and especially the NBFCUC. We are still very-very early, we are very humble, we have an aspiration to build an institution and this management team is working tirelessly to do that. They are one of the large shareholder in terms of the ESOP 8% of the company’s ownership in their hand, and we want to deliver an institution to India, and that’s why we’ve taken extra effort every now and then to keep explaining our business in detail and what is the difference and we are very thankful for all of you to listen to our, all of this, what we put up beyond what the numbers are. Thank you very much and we’ll see you in end of the first quarter again.

Operator

[Operator Closing Remarks]