Ujjivan Small Finance Bank Limited (NSE: UJJIVANSFB) Q3 2025 Earnings Call dated Jan. 23, 2025
Corporate Participants:
Sanjeev Nautiyal — Managing Director & Chief Executive Officer
Carol Furtado — Whole-Time Executive Director
Unidentified Speaker
Analysts:
Rikin Shah — Analyst
Rajiv Mehta — Analyst
Renish Patel — Analyst
Sarvesh Gupta — Analyst
Analyst
Nidhesh Jain — Analyst
Deepak Poddar — Analyst
Aravind R. — Analyst
Ashlesh Sonje — Analyst
Shailesh Kanani — Analyst
Presentation:
Operator
Ladies and gentlemen, good day and welcome to the Q3 and nine months FY ’25 Earnings Conference Call of Ujjivan Small Finance Bank hosted by IIFL Securities. As a reminder, all participant lines will be in the listen-only mode and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing start and zero on your it at stone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Rikin Shah from IIFL Securities. Thank you, and over to you, sir.
Rikin Shah — Analyst
Thank you, Rutuja. Good evening, everyone, and a very warm welcome to Ujivan Small Finance 3Q FY ’25 results call. To discuss the 3Q results and the outlook post the results, we have with us the management team represented by Mr. Sanjeev Nautiyal, MD and CEO; Ms Carol Furtado, Executive Director; Mr. Martin PS, Chief Operating Officer; Mr. Ashish Goel, Chief Credit Officer; Mr. Vibhash Chandra, Head, Micro Banking; and Mr. Kamat, Chief Financial Officer.
With this, we’ll pass-on the line to the CEO. Over to you, Mr. Nautiyal, for your remarks. Thank you.
Sanjeev Nautiyal — Managing Director & Chief Executive Officer
Thank you. Good evening, and welcome to our Q3 financial year ’25 earnings call. Please note all references made during this address on-Q2, Q3 and Q4 pertains to financial year ’24-’25. Our strategy to diversify the portfolio towards a more secured book has seen accelerated results, now contributing 39% to the total loan book by end of Q3, led by affordable housing, MSME and FIG. Our overall secured book grew by 13% Q-o-Q, 33% YTD and 52% Y-o-Y. In microfinance, we saw consistent improvement in collection efficiency month-on-month during the quarter. States like West Bengal, Uttar Pradesh, Bihar and Rajasthan that earlier showed signs of stress are now witnessing improvement in collection efficiency. We expect a better performance in Q4 with higher disbursements seen in the first three weeks of January compared to similar period in any month since July 2024. Bank took a call to reduce interest rates in group loans and individual loans by approximately 115 bps and 75 bps, respectively, with effect from 1st January 2025. This will not have a major impact on profitability for a couple of factors, namely stable cost of funds with expected margin improvements due to rate cuts, strong growth expected in high-yielding products like micro mortgages, vehicle loans and secured agri offsetting the yield impact to some extent. With our interest rates one of the lowest in microfinance along with the lender cap due to guard rates, this will ensure acquisition of quality borrowers. Loans witnessed disbursement of INR2,029 crore in Q3, marking a 16% Q-o-Q decline. As of December ’24, these loans constitute 45% of the total loan portfolio. Contribution of repeat customers to overall disbursement has risen from 61% to 73% Q-o-Q. To capitalize on growth opportunities, we have enhanced our pre-qualified group loan offerings in states with higher potential and robust collection performance. Individual loans portfolio comprises 15% of our loan book and is focused on graduating group loan customers with good prepayment track-record. It is expected to grow at a faster pace compared to group loan having grown by 21% Y-o-Y. For IL Repeat customers, we have implemented a simplified self-service digital journey. This allows us to offer pre-qualified loans to existing customers, a key strategy for improving customer retention. Affordable housing and micro mortgages comprising 21% of loan book demonstrates sustained growth. In December, disbursement exceeded INR300 crores, marking a significant milestone. This book has reached INR6,393 crores as of December ’24, exhibiting a strong 11% Q-o-Q and 45% Y-o-Y growth, expected to close at INR7,000 crores as of March 31, 2025. Talking separately on affordable housing book, our highest-volume contributing secured business has grown to a book size of INR5,867 crores, up 9% Q-o-Q and 37% Y-o-Y. Micro mortgages, a high-yielding secured segment has shown promising performance growing at 34% Q-o-Q. This has a good mix of customers graduated from individual loans and also from the open-market. Our revamped approach to MSME business is contributing to the momentum, growing by 12% Q-o-Q and 21% Y-o-Y to reach INR1,694 crore. Growth has come from all products with LAP working capital and supply-chain finance. Disbursements crossed INR150 crore in December ’24. The new MSME book has nil NPA. FIG book continues to scale and reached INR2,257 crore as of December ’24, contributing 7% to the total loan book. This book grew by 11% Q-o-Q and 57% Y-o-Y. Vehicle finance business witnessed an impressive growth, reaching a book size of INR375 crore and now contributes over 1% of our asset book, growing by 43% Q-o-Q and 155% Y-o-Y. The gold loan business has experienced significant expansion with its availability increasing from 63 branches in March ’24 to 198 branches in December ’24. This book stands at INR115 crore in December ’24. Secured agri, which includes livestock and KPC has shown significant Q-o-Q growth of 27%, reaching a book of INR459 crore. Overall, investments that were made last financial year onwards towards our product diversification strategy is yielding results. Secured book is showing promising growth of around 40% over March ’24. In Q3, 46% of disbursement resulted from secured products compared to 30% in the same quarter last financial year. On asset quality, we saw encouraging signs of improving bucket ex collections in the group and individual loans. We increased our collection headcount by adding 334 staff taking the count to 2,260 as of December 2024 end. That helped us in improving resolutions in SMA oblique harder buckets. West Bengal, Uttar Pradesh and Bihar are showing good improvements month-on-month along with other states such as Punjab, Haryana and Maharashtra. This is reflecting in our Bucket X collections at 99.2% for quarter three. Slippages from GL and IL book came in at INR298 crore in Q3 versus INR197 crore in Q2. Additionally, the bank affected an ARC transaction of INR270 crore in Q3, INR207 crore from NPA book and INR63 crore from written-off portfolio. We hold 100% provision in the subscribed security receipts. Asset quality in the secured book has been significantly better. The MSME new book, which forms 48% of the MSME book has nil NPAs, housing and micro mortgage portfolio continues to remain strong with 1.1% GNPA. At overall book, our GNPAs and as on December ’24 stand at 2.7% and 0.6 percentages, respectively, despite challenges specific to microfinance. We maintain our credit cost guidance at 2.3% to 2.5% for the year. Bad debt recovery continued to be strong, collecting over INR29 crore in the quarter. Bank’s total deposits reached INR34,494 crores, marking a 16% Y-o-Y growth. Notably, CASA deposits saw a 15% Y-o-Y increase, reaching INR8,662 crores, which is 25% of overall book. Retail deposits stood at INR25,74 crores, accounting for 73% of total deposits and demonstrating a 24% growth over December ’23. Retail deposits continued to stay above 70% consistently in the last eight months. The bank has relied upon strategies to enhance ease and convenience for our customers to accelerate granular deposit base, especially CASA. Among booking up digital banking products, the bank has introduced digital current accounts in addition to digital savings and digital fixed deposits. Bank is affecting structural changes to have increased focus in onboarding and servicing larger share of customers under affluent, non-residents, corporate salary and traders categories, enhancing customer acquisition through improved lead management services and customer management tools, strengthening relationship management via CRM and other tools to better manage existing customer-base. We are confident of improving CASA ratio and also reducing the cost of funds going forward. Is driving transformative change powered by analytics to accelerate business growth, faster credit assessment, enhancing productivity, identifying new geographies for expansion and relevant product offerings. On digital banking, our digital current account launched in Q3 — Q3 has a simplified journey in which account opening can be completed under 60 minutes. Digital fixed deposits and digital savings accounts have access from around 250 locations where we do not have branches. The bank’s own UPI app with G1Pay is undergoing testing and will be launched in Q4. On financials and margins, the NIM for the quarter is 8.6 percentages. The compression in yields on the overall portfolio is down to 18.2% in Q3 versus 18.9% in Q2 due to growing contribution from secured assets. Cost of funds moved up marginally by 6 basis-points to 7.57% in Q3 versus 7.51% in Q2, largely attributed to retirement of IBTC book. Operating costs increased only 1% during the quarter versus 10% increase seen in Q2 over Q1. Other income was impacted due to lower processing fee, reduced insurance income and provisions on security receipts arising due to ARC transaction. Credit cost for the bank was at INR223 crore in Q3, higher than INR151 crore recorded in Q2. In addition to this, we have taken an accelerated provision of INR30 crore. PAT for the quarter was INR109 crore and subsequently, adjusted ROA and adjusted ROE for Q3 are 1.1% and 15.1 percentages, respectively. I’m also delighted to announce that the Board has accorded approval to move the application for voluntary transition to Universal Banking in its meeting held today. We will be submitting the application to RBI shortly. Lastly, I would like to summarize the bank’s key focus areas for the last quarter. Loan book growth will be led by a secured business, which is poised to grow by around 50% during financial year ’25 and contribute around 40% to 42% by financial year end. Group loan and individual loan book to see better disbursements during Q4, credit cost to remain range-bound within 2.3 percent to 2.5 percentages as per our earlier guidance. Focus efforts towards improvement in CASA ratio with reduced cost of funds. Before I conclude, I would like to introduce Mr. Balakrishna Kamath, who has joined as CFO. He holds a varied experience over 30 years in corporate finance and corporate governance in various listed entities, including the Tata Group. His profound experience will add strength to our organization. In a similar way, I would also like to introduce Mr. Hitendra Jha as Head of Retail Liabilities and Task. He brings over 23 years of banking experience with him. For the last 17 years, he was with Kotak Mahindra Bank and his last role with Kotak was National Head Branch Banking Emerging Markets. Prior to Kotak, he has also worked with ICICI Bank and IDBI Bank, and I wish both these incumbents huge success in Ujjivan Small Finance Bank.
Thank you. Now I hand over the mic to you, Rikin. Thank you.
Rikin Shah — Analyst
Operator, we can open the call for Q&A session.
Questions and Answers:
Operator
Thank you very much. We will now begin the question-and-answer session. Anyone who wishes to ask a question may press and one on the touchstone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question and also a request to limit the questions to two per participant. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Rajiv Mehta from YES SECURITIES. Please go ahead.
Rajiv Mehta
Yeah, hi, good evening. Hope I’m audible. So my first question is on the NDA collection efficiency, which has improved in December. So have you seen the trend continuing in January? And besides adding people for collection, are we also seeing any improvement in center meeting attendance or the loan officer attrition? And just a follow-up on this, have we also started seeing any improvement in resolutions and rollbacks in the SMA buckets in the recent months.
Sanjeev Nautiyal
Yeah. So our NDA collections have seen a month-on-month improvement. July, August and September, we did see a reduction in bucket collection efficiency. October, November and December have seen a month-on-month improvement. We are expecting that the same trend will continue January onwards. In terms of center meeting attendance, we see the same trend as what we had in the earlier quarter, about 60% of attendance in the.
Rajiv Mehta
And the loan officer attrition and the resolutions in the soft buckets, are they also improving?
Sanjeev Nautiyal
Yes. So our SMA resolution, SMA zero resolution is in the range of about 30%. It has improved from about 25%. SMA-1 and 2 which were at 25% and 21%. SMA — SMA 1 has improved from 25% to 35% and SMA 2 has improved from 21% to 25% so across the SMA bucket, we have seen an improvement. And this is also we — as we mentioned we have increased the collection team. So that is also leading to a lot of efficiencies on the SME collections.
Rajiv Mehta
Correct. So my second question is on the credit cost. So when we are maintaining credit cost guidance at 2.3% to 2.5%, it implies a good decline in the 4th-quarter, so I mean, so is there — so then we are trying to rule out the possibility of taking any additional provision or accelerating the current provisioning policy, would that be correct? And what levels of PCR we’ll be comfortable with maintaining? Because I can see that in this quarter the PCRs improved, but we have also shifted floating provisions from standard to the NPL bucket. So if you can also comment on what level of PCR comfortable maintaining and whether the credit cost are you implying that it’s going to go down in Q4 versus Q3?
Sanjeev Nautiyal
So in terms of PCR, the mandate is at 70% and we’ve been consistently maintaining a PCR above 70% for all — for a number of quarters now. So we will continue to maintain a PCR between 70% and 75% going forward also. In terms of credit cost, since the NPAs had gone up in Q2 and Q3, there will be a slightly higher credit cost in Q3 and Q4, but I think that will start to get normalized as we go-forward. To counter this, we have also taken some additional provisions in Q3, accelerated provisions in Q3 — Q3 to the extent of about INR30 crores. So that you know, these accelerated provisions help us clean out the expected increase that we were expecting in Q4. So largely it will now get utilized.
Rajiv Mehta
Okay. Thank you and best of luck.
Operator
Thank you. Ladies and gentlemen, we will request you to kindly limit your questions to two per participant. The next question is from the line of Renish from ICICI. Please go ahead then please go ahead with your question. Your line is unmuted.
Renish Patel
Yeah, hi. Congrats on a good set of numbers, sir. Just two things from my side. One, on the PAR zero bucket. So if we look at the group loans, it is at 6.6%, IL it is at 4.5 and now since you are also mentioning that collection is improving month-on-month, it is fair to assume that the PAR level like current numbers have picked out and going ahead from Q4 onwards, we will start seeing part portfolio coming down even write-off as well.
Sanjeev Nautiyal
So this is — a function of how the industry would show the numbers. We have seen a good improvement and we are hoping that there is going to be more disruption.
Renish Patel
Sorry sir I can’t hear you, sir.
Sanjeev Nautiyal
Is it better now? Are you able to hear us?
Renish Patel
No sir.
Sanjeev Nautiyal
Renish, are you able to hear? Is this better?
Renish Patel
Actually better, sir.
Operator
Actually you’re sounding very.
Sanjeev Nautiyal
Okay, is this — is this better? I’ve come closer to the mind?
Operator
Yes, please go ahead.
Sanjeev Nautiyal
Okay, Renish so our numbers — there will be some stability of PAR during this quarter. So we don’t expect an increase in power numbers, but the speed at which the power was increasing will stabilize during this quarter.
Renish Patel
Okay. So in other words, the stress, let’s say the incremental stress formation has picked out. I mean, is that the fair assumption?
Sanjeev Nautiyal
Yes. So see the incremental stress post July, August, September, that is when the stress has started to actually build up. October, November, December were months where the PAR numbers continue to grow. We expect that this PAR numbers will stabilize here on and start to show a declining trend in the next — maybe two or three months.
Renish Patel
Okay. And sir, would you like to share January collection data?
Sanjeev Nautiyal
It is a little early for the January collection data because we have numbers only till maybe a couple of days back. If you look at bucket X collections on microbanking, they are better than the same date December numbers.
Renish Patel
Okay. And if I — is just a reconformation, if I heard you correctly in your opening remarks, you did mention that Jan collection is the best in the entire fiscal year. I mean, is that the comment you made in your opening remarks?
Sanjeev Nautiyal
Not referring to the disbursement numbers. We started to see good demand in the market in the month of January. In fact, we started to see that towards the end of December. See, in this — we’ve seen that after a gap of funding in the market, there is a bounce-back which happens. And we see this bounce-back happening for the last four weeks. So our January disbursement numbers that we’ve seen so far are better than what we have seen during this year so far. That is what we should not be versus.
Renish Patel
Got it. And just last thing, in terms of the SRO guardrails, are we following co-lenders guardrail or we have already implemented guardrails.
Sanjeev Nautiyal
So we are following four lender guardrails, the three lender guardrails would come into effect on April. However, the other card rails of INR2 lakh indebtedness and INR2 lakh indebtedness and yeah, funding to SMA customers, we are already funding. What we have traditionally done is for the new two bank customers, we have implemented the three lender guardrails
Renish Patel
Okay. So for repeat loans, we are following four, but for new to company customers, we are following three.
Sanjeev Nautiyal
Yes, new to bank customers, we have implemented the 300s in the beginning of Jan quarter.
Renish Patel
Okay. Okay. Thank you, thank you.
Operator
Thank you. The next question is from the line of Sarvesh Gupta from Maximal Capital. Please go ahead.
Sarvesh Gupta
Good evening, sir and thank you for giving the opportunity. Just as a feedback, sir, it would have been great had we stick to the regular time because we hardly got any time to see this presentation of yours. So most of the questions that the analysts have to ask to be on asked without looking at the presentation itself. So would appreciate if we can stick to timelines from the next quarters? And secondly, sir, on the overall collection efficiency for the book on the secured side, did you see any stress in this and including January, are you seeing any spillovers of the some of the stress in the microfinance on your secured book?
Sanjeev Nautiyal
No, in fact, our collection efficiency for the affordable housing and for MSME as well as vehicle has been consistently above bucket X collection for affordable housing — affordable housing is in the range of 99.4% to 99.5% for MSME to above 99%. Vehicle finance is above 99% and we have not seen any decline. In fact, we’ve seen a marginal improvement in Q3 over Q2. So these secure products, the bucket X collection has been consistent and improving.
Sarvesh Gupta
And overall collections have also been QoQ, sir.
Sanjeev Nautiyal
Overall, see, when you look at the overall collection efficiency, you will see a dip because the PAR numbers have gone up. So when the numbers go up, we — see that the collection efficiency on the SMA and NPA buckets is lower, which weighs down on the overall collections.
Sarvesh Gupta
And similar trends, sir, for January. Hello?
Sanjeev Nautiyal
I would say it’s again very early. Hello. January, I would say it is early, but on 20th of January, the efficiency in microfinance is better than 20th of December is what I could say.
Sarvesh Gupta
Okay. Okay. And no, I was asking about secured products, sir.
Sanjeev Nautiyal
Secured products, we maintain a very consistent bucket X efficiency. So it continues to be in the range of 99% to 99.5%.
Sarvesh Gupta
Okay. And sir, this guidance on the credit cost, 2.3% to 2.5% now I did not get the chance to sort of calculate, but how much have we done till nine months against this number that you are referring to? And is it adjusted for all the ARC sale, etc or how should we read this number? If you can give us an absolute number that would be great. How much have we done till now and what we are guiding for?
Sanjeev Nautiyal
So we have a nine month credit cost is 1.55% till for nine months YTD December. In both the numbers, numbers it would be INR478 crores.
Sarvesh Gupta
Hello sir, your voice is very fable.
Sanjeev Nautiyal
Okay. Were you able to hear the first question?
Sarvesh Gupta
You said 1.55% you have done.
Sanjeev Nautiyal
Yes, yes. And in terms of value, the first-nine months was INR483 crores.
Sarvesh Gupta
And sir, this is including accelerated provision and ARC sale, the loss that we have incurred there?
Sanjeev Nautiyal
Yes, it includes both ARC sale as well as accelerated.
Sarvesh Gupta
So then in the — in the last quarter, basically you are guiding for 0.8% to 1% credit cost.
Sanjeev Nautiyal
Yes, 0.8% to 0.8% to 0.9.9%. That is right.
Sarvesh Gupta
Okay. And any guidance that you would want to give of how things can be for FY ’26?
Sanjeev Nautiyal
It will be a little premature to give a guidance for FY ’26. We can come back to you during the first-quarter for our guidance for the full-year. But as of now, it will be a little premature.
Sarvesh Gupta
Okay, sir. Thank you and all the best.
Operator
Thank you. The next question is from the line of Sural Daj from Sundaram Mutual Fund. Please go ahead.
Analyst
Yeah, hi, sir. Thanks for the opportunity. Sir, one clarification first. On Slide number 23, the collection efficiency that you have reported, this is for the overall book, right, including delinquent customers.
Sanjeev Nautiyal
You’re referring to the group loans lender-wise trend, that is slide number 23? Okay, go ahead, please.
Analyst
No I’m saying — I’m asking, this is including the delinquent book, right? This is total collection efficiency. Am I right?
Sanjeev Nautiyal
Yes, it includes — this is total collection efficiency. That is right.
Analyst
Okay, understood. And slide number 21, the collection collections table that you have reported there is this on the normal collection also there is some OD collection. What is that sir for group loan and individual loan?
Sanjeev Nautiyal
Additional collection includes overdue collection. The additional collection is what you are referring to?
Analyst
No sir, I mean second column after due there is collection where there is asterix mark and then there is additional collection separately. So what is this OD collection sir?
Sanjeev Nautiyal
Overdue collections. We were referring to overdue collections. So collections which are due for the month and collections which are ear for years. Overdue collection.
Analyst
Okay, understood. Sure. Understood, sir. And sir, the last question is, sir, in terms of if I see the yield on the affordable housing side, that has come down significantly, I mean 40 basis-point on a Q-o-Q basis. Where do you see this yield settling in, point one? And the point two is overall margin, what would be your guidance on margin going ahead now, given that probably your secured book is growing faster than the overall MFI book? So how do you see the margin trajectory probably for next six to eight quarters?
Sanjeev Nautiyal
Yeah, the housing yield has come down during the quarter. Can you hear me?
Operator
You are sounding from a distance. We cannot hear you clearly.
Sanjeev Nautiyal
Yeah, is it clear now?
Operator
Yes, it is. Please go ahead.
Sanjeev Nautiyal
Hello. Right. The housing yield has come down during the quarter due to two, three factors. The main one being is it’s a floating-rate and the EPLR has come down during the months — during this quarter due to which all the roads have been repriced and that has impacted this. And second is you also have to derecognize the interest for the slippages during the quarter. That also has been your effect.
Analyst
Sorry, sir. What EBLR has come down, what EBLR?
Sanjeev Nautiyal
So there is a base rate-based on which — it’s a floating-rate. So floating-rate as a — a base has come down by 50 bps. So that’s affected the entire book and that’s why the rate has come down. That is one point. Second one is P&L interest no longer can be charged as per the new RBI regulation. So it has been reclassified as penal charges, so it is not coming under this head anymore. And finally, there is a INR9 crore adjustment for interest which has been derecognized due to slippages during the quarter. These are the three factors.
Analyst
And sir, overall margin trajectory, how do you see that?
Sanjeev Nautiyal
It will be going steady at whatever rate it is now. It will be consistent going forward.
Analyst
And sir, on this micro mortgages par number, I think that is also being up from 20 basis points or something like 60 basis points over the last 2 quarters. So do you see this trend continuing in January also? And are there overlap between your MM customer and your…
Sanjeev Nautiyal
So the micro mortgage part is actually a very low number — are actually very, very low numbers. We see that the quality of the book has been exceptionally good. So these kind of numbers are quite competitive and very reasonable. In terms of overlap, we have about 40% to 45% of our customers who gated from individual loans to macro mortgages. And about 60%, 55% to 60% open market customers and the individual customers who move to micro mortgages at least 4 to 5 years of experience relationship with Ujjivan. So that is giving us a very good comfort in terms of underwriting those customers.
Operator
The next question is from the line of Nidhesh Jain from Investec.
Nidhesh Jain
First question is on the secured segment. What is the medium-term strategy with expect to secured? Do you see share of secured going up in FY ’26? And to what level do you expect the share of secured going up?
Carol Furtado
So currently, secured group stands at around 39%. This will be year-on-year growth. Secured in housing, MSE and the newer business clients like the gold, vehicle finance, secured are micro mortages has started contributing well. We were supposed to hit 60-40 mark in FY ’26, but with the pace at which we are going with the secured asset portfolio, we should be hitting that much earlier and yes.
Nidhesh Jain
Secured will be 60% by FY ’26?
Carol Furtado
It is 4%, which was supposed to be done in FY ’26, but we are hitting that much earlier. Secured is 40% and unsecured 60%.
Nidhesh Jain
And do you expect it to further increase in FY ’26 or at 60, you will stop?
Carol Furtado
Yes, we will be increasing the secured portion. And our newer business lines are contributing very well to this book.
Nidhesh Jain
And can you share the profitability of the secured book in terms of ROA? Because as the share of account goes up, whether the ROE of the bank will see a compression over the next 2 to 3 years. So if you can share the ROA of secured book that would help. Secured ROE, secured book or our ROE of housing and SME, whichever is convenient.
Carol Furtado
Yes, we will get back on this a little later.
Nidhesh Jain
If you can just say the ROE of the secured book on whatever transfer pricing that we use internally, that would be useful.
Carol Furtado
Will do that.
Operator
The next question is from the line of Deepak Poddar from Sapphire Capital.
Deepak Poddar
Yes. Am I audible?
Sanjeev Nautiyal
Yes.
Deepak Poddar
Sir, just first up, I wanted to understand, I mean, this 9 months, we have grown by about 10%, right? And you mentioned that you are seeing some demand coming back and some traction on your disbursement. So overall, for this year, what sort of growth range we are looking at?
Sanjeev Nautiyal
Overall growth, all considered, we should be growing by around 9% or so. But individual side, the individual loans, we would be growing somewhere around 12% or so. On group loan, we are not actually giving any guidance because it still has been volatile and a little hard to understand. But we are seeing good traction with — so the Q4 is going to be better than the earlier quarters as far as the loan business is concerned. And on higher side, we’ll be doing much better.
Deepak Poddar
And at this level, you said 9% growth is what we are looking at.
Sanjeev Nautiyal
Over on a roughened basis, 8% to 9% would be the overall growth for the entire financial year for all the things.
Deepak Poddar
So this quarter, we are expecting some decline — no, your base would be higher rate of fourth quarter. So that way, yes?
Sanjeev Nautiyal
Yes. Our plans in the last quarter, obviously would have done in the last quarter this year, obviously, would have done much, much better, right, bringing the volumes.
Deepak Poddar
And what sort of cost to income, I mean, we saw some increase in the cost-to-income ratio, right? So how do we see that going forward?
Unidentified Speaker
There are two factors here. Do you hear me? Is it celar?
Deepak Poddar
Yes, it’s clear, sir.
Unidentified Speaker
There are 2 factors here. One is the operating cost as a percentage of the average assets has actually come down during this quarter. If you look at in number 29. For Q3, it is 6.2%, whereas the earlier quarter was 6.4%. So due to the position in the microfinance industry, the company has put in place a good cost control plan and which is reflecting in that, whereas the total cost income ratio has probably due to the reason that we invested some money for growing some of our good businesses which are a secured business and the manpower branches, which we had invested on we had around 2,500 employees during the year that has reflected on the manpower cost.
And that is all for the secured business side, where we have shown a 50% growth, and that has been off. There are most the other factors. We are working on a universal banking license, so we have hired some consultants. So we have spent around INR6 crores on that. And also done some branding during this quarter, which are around INR10 crores. That is also to be a record. So most of these cost are relating to the company’s future plans, whereas all other routine costs and operating costs are well under control. And finally, if not the income also has come down, it is a percentage is always denominated and denominal little down which will also impact the cost income ratio.
Deepak Poddar
But then at absolute, how do we see that? I mean, I think if you take your operating expenses, it was close to about INR700 crores this quarter, right?
Unidentified Speaker
Yes.
Deepak Poddar
So how do we see at that level? I mean, is that the going forward rate 1 can see or we can see some decline in this?
Unidentified Speaker
Yes, it will be steady for some time to come. That’s what — it may slowly come down also part of because there could be. We have to wait and see, but it will be more or less steady. That’s what we see.
Deepak Poddar
And we have done around INR270 crores of sales, right? I mean, in this quarter, asset stressed loan assets?
Unidentified Speaker
Yes.
Deepak Poddar
So was there any loss booked in it? I mean, in this quarter on that sale?
Unidentified Speaker
So when we do sale, we are — we do full is on the FRs. So there was a lot of about INR26 crores.
Deepak Poddar
So that is included in your provision already, right?
Unidentified Speaker
Has come into other income.
Deepak Poddar
So that has come in to other income. Understood. Fair enough, I think that would be from my side.
Operator
The next question is from the line of Ritika Dua from Bank.
Analyst
Sir, 2 questions. Just trying to understand that the industry trends better. Actually, when you say that the demand revival happened in January, could you just share some trends around that, what exactly because the perception is that it’s actually not so much a demand issue but also like the fact that everybody had to meet — So when you say demand coming back, what do you mean by it? That’s the first question.
And the second question that — so obviously, because to the previous call, you said that, obviously, we are not giving the guidance for ’26, which is still — is it fair to say that maybe because you still have moved into the which obviously some of the other banks at least have. So when you actually move ’26 would not be obviously be a normal year in credit cost again. And secondly, sorry to draw parallel because I know it’s not exactly your saying that with 1 bank has versus the other, but still the kind of ’23 year from to — banks, is that the slippages of third quarter could and some there in the first quarter as well as also.
You had obviously well government professions to pilot the pain or maybe the part of something we obviously have noted. So it still — just maybe if you want to still grow from — to say that how is first quarter shipping to be so well over third quarter. So 2 questions.
Sanjeev Nautiyal
Yes. Thank you for the question. I may ask you to repeat the question again. I may missed some part. But on question number 1, how we are seeing increased demand January — in the month of January. As we said that we started witnessing from the month of December, mid-December only. And it is something which you have to do with the locations you are present and the state you are present. As we are saying that overall, the turbulence in the microfinance industry is fading, but it is not fading equally in all the states. The time period is different. And this has also hit different organizations and different customer segments very, very different.
For us, the earlier states which were creating issue with like — West Bengal. These states are doing much better in the last 3 months. We have seen improved collections and we see increased demand in these states. At the same time, I would also like to mention that the states like some pocket of Tamil Nadu, some pocket in Karnataka, — and some pockets in — for us still to see — we still see the bottom, and we are careful there. But as we are seeing increased demand in majority of state, we are — we see improved basement in the — so fast. That is something which is — we will also see happening in the coming months, that is something which we are able to see in the quarter. What was your second question?
Analyst
So you partially answered it, I was trying to understand that I acknowledge that your book is different from the other bank. But another bank has been very in kind of the thing that even the fourth quarter slippage could be as high as third quarter. So that 1 point. And the second point is that I was saying that — so if you could just maybe draws on payroll as to why you think fourth quarter is — be much better to set for you? And the second additional point on this was that because you’re still to move to the 3-year deal do you think that maybe ’26 will actually still see addition in higher slippages because of maybe moving to the lower comfort?
Sanjeev Nautiyal
So in terms of slippages, slippages come with a lag of about 20 days, 90 to 150 days from the time that an account gets into a 1 BP part. So this will happen because our bar started to increase in Q2 and Q3. So that there is a lag effect of that. So slippages has been to see a very good stage. It may come down marginally. In term growth, we want to be among the pressure to. So we have actually reduced our interest rates to be more competitive company.
Operator
The next question is from the line of.
Analyst
Sir, based on the Slide 23, you’ve given group loans land-wise strengths. Just wanted to understand the slide. Basically, when we look at our given focus above at ’26. So that ’26 basically is of somewhere from June or September, right? So when you say.
Sanjeev Nautiyal
Sorry, the first table lender borrower range refers to what is the percentage of borrowers let us say, November end, we have the 5% borrowers were unique to G1 and then you need even 1, 2, 3 and 4. So 6.6% of our borrowers are given plus — a delinquency of this set of borrowers is 26.6%. And the delinquency 1 of unique given is 3.9%. So you would see that there is a wide difference between customers who are unique to us then and customers who have taken from multiple lenders.
Analyst
So what I was just trying to allude is– so what I was saying is the 7% which you had in June as due for plus and above will have slipped over time and that would have become power, right? So what I’m saying is that 7.6% has come down to 6.6%, but then a lot of data slipped to path in that way, which has also GNPA? So that is how we have to look at it or is it very independent by 6.6% of that 26% is a part?
Sanjeev Nautiyal
No. So 6.6% of our customers out of every 100 customers, 6.f6 or multiple landers and 26% of those 6.6% have moved to part.
Analyst
And the rest of that — so part of that also the reduction which shows also will have repaid the loans, right? So that is how also it would have?
Sanjeev Nautiyal
Yes. We would repeat the loan. So this person would continue to come down because — is no longer part of the lending policy.
Analyst
Sir, second question was on the similar slide. When you — how do you basically pull the numbers here if somebody in the lender side or the other lender side would have been got repaid on the loan. So just somebody has repaid a loan at some other vendor. How will this come in as a percentage here? Will it be a cutoff? Or is it like every time you do the Bureau check and then come out to a number?
Sanjeev Nautiyal
So we do a Bureau check every time we get a bureau base on a monthly — and all the numbers that we follow are the instruct hat we do on a monthly basis. So these numbers are updated refresh every month.
Operator
The next question is from the line of Aravind R. from Sundaram Alternates.
Aravind R.
So like this slide, I can see the collection easily coming down, but when I look at along with the expected collection as we can see. So it means that like in the non-audio accounts, transaction efficiencies being stable at our — is that the right way to understand this?
Sanjeev Nautiyal
So the value of the par has gone up. So you attend since the value has gone up, we are weighing down on the overall. So even the CapEx collection direction efficiency has gone up. See the SME part has gone up is value that is driving down the overall.
Aravind R.
So like that’s the issue there is, right?
Sanjeev Nautiyal
Yes. So the collection efficiency is a weighted average of bucket, SME and NPA. So as the power goes up the overall collection efficiency comes down.
Aravind R.
Sir, I can see like the portfolio yield of MSME sales has come down significantly in this figure quarter-on-quarter basis. And I understand what you have mentioned in affordable housing like a similar thing happened in MSM also?
Carol Furtado
The similar thing happened even in the MSME, it is because of the change in the accounting treatment that we also saw a decline and also been.
Aravind R.
And this portfolio, like 14% to 15% outside the — like does the impact of growth in subsequent quarters because as per number of borrowers, out that are, I’m taking in talk on the second set of quarters also. I can see roughly 13%, 14% of the borrowers were outside the –. So does it mean that it will affect the subsequent quarters of growth at least in the negative year-on-year point of view?
Carol Furtado
See year-on-year we are 6% and 40%, 40% customers who are — or more. And apart from — another way to look at it is that like ever in past in microfinance, microfinance customers will also have to — going forward. And they will time the best 1 in terms of interesting premiums of operating in terms of product, in terms of graduation processes, in terms of the policies EBITDA. And that is something we have built over a period of time. And we expect these customers between 3 and we will use 1 of them. That is something we are looking forward and something which should be very strongly communicating to our customer panel. We have reduced our industry visibility and our processes, our product graduation program. We are excellent. And that is something that we are confident that’s not only these customers with line with us and retain, but also customers book customers from the investor also come to us.
Aravind R.
Since in MFI, you see like slightly better disbursement in January, like it means that the par ratios won’t go any further. Is it the right thing to take away from?
Carol Furtado
Yes. As we said, the part numbers will stabilize from here on. And as a denominator to start the power numbers while there were increase in part or it was also getting contributed by the decline in the overall. So now the book decline would get — would be handling — so the denominator also start to show on the overall.
Operator
The next question is from the line of Ashlesh Sonje from Kotak Securities.
Ashlesh Sonje
Congratulations. First question is on Slide number 26, where you have shown the power performance for GM versus industry and there a significant gap in those numbers between you and the industry across the states. Just a qualitative question here. When you look at these borrowers, you would say — would you say that their performance with you is better than it is at the industry level? Or would you rather say that you have a borrower base, which is of a different quality allocated, if you were to understand the difference in performance.
Carol Furtado
There are various things behind this. Also trying to refer that we are — though we are talking about that we are doing well in some other states, and we are not — we are still to see bottoming in some of states. But overall, in all the states we operate, we are much, much better than the average industry. That is the first point number one. Second, it is not — it is when you start operating in — district or an area you baseline you put editions a very important growth in overall quality of portfolio. That is what we also saw in previous crisis also during pandemic during demolition, repoints also, and that is very, very visible now as well.
As we see the statement performance also it is very, very different, almost 2.5x down for part industry, — very, very visible. This the reason behind this was, as I mentioned, the quality of customer acquired the brand that you open, the whitespace that you’re buying and then you are paying both qualities and policies around customer connections, underwriting is very important. That is something which we have been able to build over the period of time. Also, our IL gradation program and even further valuation, that is something which I would say that now after — program and filtering of customer sales is doing very well. If you look at our deal performance and they look at IL performance, IL is being better than DL our MS program is doing better than — program and our data is working fine. These are some of the reasons why you see these numbers.
Ashlesh Sonje
Just 1 follow-up on this. Would you have done any analysis to understand how the performance of your borrowers is with you versus how it is for the rest of the industry? Any color from that? Because I understand the first point which you made, 1 is that customer. But are the same customers behaving better with you versus industry? Is there any way to prove that?
Carol Furtado
We do customers paying towards not paying to others and customers paying to others and not paying to us. And what I will say that overall customer paying to us, not paying to others, is a little better. But at the same time, in geographies where it becomes a little kind of some et cetera, where we don’t have control. And there, we’ll see that they committed don’t pay to anyone. So that is something so — but overall, we see our customers behaving better than better for us compared to others.
Ashlesh Sonje
And 1 last — question. If I go to Slide 9, the chart on the — the table on the top left where you have shown 8.0% and 6.6% for — on November. Is there a rupee equivalent of this number?
Carol Furtado
We can get back to you.
Sanjeev Nautiyal
We can do the math and send it to you.
Operator
The next question is from the line of Abhishek from HSBC.
Analyst
So sorry to come back to the Slide 23. For this given the table on the left, and –, would it be a fair assumption that the portfolio mix would roughly be similar as the borrower mix? Or would there be a difference in ticket.
Sanjeev Nautiyal
We would see only a session difference there. So borrowers and value would roughly be.
Analyst
So given that you have not tried the 3 lender guarded yet and because the given-is more or less stable over the last 5, 6 months, so fair to assume that these customers are also getting repeat loans or renewal loans as of now?
Sanjeev Nautiyal
Yes, we are. As these on the credit month we have any customer who is agile for a loan get reuse. So this is based on the policy guidance, but they are all repeat. And 1 more thing is that on later is 1 thing. Then you have indebtedness limits. You also have the autonomic that we don’t limit customers. So far, we have not in to customers who are even on. Those policy also take into account the customer past behavior, and that gives you 2% better.
Analyst
But if — okay, so if that is the case, then the par trend that right? And the moment you hit April and you probably stop lending or stop giving renewal loans to these customers then can also go up sharply as what you see in 1 plus 4 and above. And that means that could lead to more credit costs in 1Q and possibly even in 2Q. So how do we read this?
Sanjeev Nautiyal
So when you look at — example, there is an 8% contribution to book. These customers, good customers from here, we would do our job to retain these customers and continue the relationship and. Customers who are in part that would be a little bit of disturbance and because the relationship will not be in. But that effect, I will this all happened during the last 1 or 2 quarters. So there would be a marginal impact, yes, but not a really significant impact.
Analyst
Because if I just think about it, the book size, let’s say, 8% and 6.5%, a similar book size, but that book size will have the sales that these 6.5 had from September or from July to November. So if you see the power movement, it really shot up after June, right, 10 went to 19 and then further increased to 22 and 25 in this 13 will have that same experience by April, from April and then that goes up with a similar trend. So that’s why.
Sanjeev Nautiyal
So we don’t have — we don’t know whether this to what extent — what we see is we probably communicate to customers and it what we have done for April onwards, we will have only senders. So if you continue our relationship with them we will give you better at this is a company that we have coming to customers. What we have also told them is if you have smaller loans with lenders and we repaid them so that we can continue the relationship with us. So these are the steps that we are taking on the lenders as of now. Some customers will — is a possibility that the bar number way goer that would be the effort that we would make continue with the asset quality. Is there a chance of testing? Yes, there is a chance, but to what extent is very difficult to say at from our side, what we would do is we have this person and give them the best votes and the event.
Operator
The next question is from the line of Sagar Shah from Spark BMW.
Analyst
First of all, I would — my question was related to the industry level. You have clearly highlighted on the — in the PPT as well as on the call that how you are far better than the industry as far as the micro finance collection is concerned. But I wanted to have a little bit of a long-term view that going forward, how do you look at this the group loan structure and how the group loans disburse going — how do you look at the business on the head after this all stabilizes in the next 2 quarters, do you see some sort of visibility in the resumption of disbursement growth as far as this business is concerned for — as well as the industry? Or how do you see it? That is my first question.
Sanjeev Nautiyal
So as we mentioned that we have already seen green stops in mid of the large states where we’re operating at industry or also the states are last. At the same time, there are a few other states which will normalize this is what we see. But at the same time, as you also asking about what will be the structure in microfinance going forward. So say that we have so far seen is that the entire — the customer aspirations have seen a lot in the last few years. It should be after pandemic. At the same time, if you look at the kind of regulation that has come in, I would say, simple innovations in form of RL10 and then 2.0 customers will be limited to 3 vendors. At the same time, as aspirations are pending — many customers are now trying to move from GM to individual.
And that is something which we could say that we have advantage there because we are very old and refined reason program. We have more than 5,000 gross of — lending. And we see a lot of potential in –. At the same time, the big customer segment, we also see that customers graduating to other products that we have within that and also the cost opportunities that we have around — we have a bank, we are also offering other products to the — segment happen. At the same time, as we go forward, we have seen this in past rights is also that some kind of — may also happen in last year.
Analyst
So you see consolidation, my second sir, would be on the NIM. As we are moving towards almost 40% of secured, I know you have highlighted that there will be no change in the NIMS but logically, when you got loans is decreasing when you’re focusing totally on the secured book, which is yielding you much lower, almost 500 bps lower than the unsecured book. So what’s your color on the NIM? Will the NIM fall below 9% at least in FY ’26 and FY ’27 when there will be balanced 50-50 between a secured and unsecuredt portfolio?
Carol Furtado
The NIM fall below 9%, but what we have done is that our book sector as a book we also have products like the retail finance, the roll, all these are high-yielding products. So this should help us in compensating the decline in the unsecured portfolio. And we have or — in our vehicle finance who are at very high — which are very high in. We should be able to maintain the limit around less 9.
Analyst
And my last question was related to our — which we categorize as other loans. Now we are also that almost you highlighted at around 120 branches. So what’s your outlook regarding vehicle and gold loans with the proportion for these 2 significantly increase but can you specify a number?
Sanjeev Nautiyal
So it is — we are live in 198 branches. And both from gold as well as microfinance, we see these 2 businesses promising business in coming in its medium-term next 3 to 5 years. And we had to have offered the good as well as when you can expand this business to branches that we only update currently at this point of time in various states. So yes, these 2 businesses are very, very promising for us. We already seeing that our housing business is 1 of the most prominent secure business that we have MSAs has started taken in. At the same time, these 2 businesses and pulling weight in the future gives us confidence that going forward, our secure versus unsecured ratio will move forward.
Operator
[Operator Instructions] The next question is from the line of Michael Kane from Candor Asset Management.
Analyst
My question is regarding the interest rates. Is there any direct indirect indication from RB or Ministry of Finance to reduce interest rates in the micro lending segment either to June to the industry?
Sanjeev Nautiyal
So the pricing of the risk is the discretion of individual lender. RBI is very clear about it. And what they would like to see is that the risk-based pricing is based on appropriate imports. And that is all what RBI looks at. So all entities would have looked at their pricing means and their competitive landscape and the business consideration. And based on these factors, they would either increase or reduce their rates of interest in different points in time. But RBI would not question the rate of interest, but it can only look at how you have calculate it.
Operator
The next question is from the line of Sonal Minhas from — Investment Advisors.
Analyst
Yes, I’m on Slide number 21. Just a keeping question is the chart on top, which talks about collection efficiency. If I think month-on-month your collection efficiency for group loans and for individual loans is going down from October to December. Am I reading this data correctly?
Sanjeev Nautiyal
Yes. Group loan and individudal showing lower.
Analyst
Yes, month-on-month is going down. Could you explain the reason for this number going down if you could just explain this in detail?
Sanjeev Nautiyal
Sometimes that I have said that in the bar goes up. Collection efficiency is a weighted average nondelinquent customers, customers in SME base and as the power has the average comes down because the SMA and the LP collection efficiency numbers are much bigger. So they are putting overall collection efficiency gets impacted.
Analyst
And as you were saying to the spin that you far is peaking, this number is expected to improve from the decent numbers as we speak is that right when you talk about January, February, March?
Sanjeev Nautiyal
Yes. So as we said, the bar is seeing, we are seeing stability in the bar now. In the last 4, 5 months, there was an increase in part. That is state now.
Operator
Ladies and gentlemen, this will be the last question for today. This is from the line of Shailesh Kanani from Centrum Broking.
Shailesh Kanani
Sir, again, on Slide number 23, I understand our individual lending RPC the group loan customers who are graduated. So when we see OG1+3 and OG14, have you done any working in terms of those customers who can be graduated towards individual lending and they might be having an income level more than the threshold of 3 lakhs, and so they can be attacked as non-MFI and those are good set of customers which can continue with?
Sanjeev Nautiyal
Yes. And this is something which we do and which we have been doing for a long now. We are the customers — we close customers on the basis of their — capacity, their loan, 1 requirement and their family income and on the basis of that, we regulate customer from DL. You are right, in this category, also the customers are looking for on different institutions. We try to compete the loans and give them the good customers who reenacted good with us with other several years.
Shailesh Kanani
So my question was have you done some kind of working on that already because we are kind of reaching the threshold posed. Any ballpark number and — that this percentage out of this pot would kind of qualify for individual lending. So they can still be customers of when you want a first set?
Sanjeev Nautiyal
So a 2-month process, if you look at even go and above, they are currently at 79%. That means that majority of them is who are paying on time, the customers who are paying on time to other also and customers have any income. That is the process we follow on the regulatory customers.
Shailesh Kanani
Sorry, just to clarify, so they will still remain customers of — post first April, much to, right?
Sanjeev Nautiyal
Not necessarily, we are part of future process and they can be given another loan. That’s a year that is the sale.
Operator
Ladies and gentlemen, as this was the last question for today. I would now like to hand the conference over to the management for the closing comments.
Sanjeev Nautiyal
Thank you for the very, very energetic interactions. As a guidance — as my concluding remarks, I would like to state that our secured book by the year-end would be 40% plus. The Y-o-Y growth on the secured book was 50%. The individual business growth should be around 20% for the entire year. Overall growth could be hovering between 8% to 9% on the overall book. Credit costs, we continue with our guidance of 2.3% to 2.5%. Our deposit growth will be in line with the requirements for the asset book in order to maintain a credit deposit ratio of around 89% or so. The NIM for the full year should be between 8.6%, 8.85 and improving the CASA ratio would be on focus less in this quarter, the last quarter as well as going forward. Thank you.
Operator
Thank you. On behalf of IIFL Securities, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.