Highlights:

The company could have recorded higher growth but for unavailability of certain products.

The asset quality has also kept pace with the growth.

The company has continued to record consistent improvement in the growth and collection efficiency from the first quarter of last year.

The certain pressure on net interest margin is a conscious decision of the company. The company has gone into financing certain affluent customers which is putting pressure on the margins but it brings stability to the asset quality of the company. The company had already indicated about entering into this segment and the size is not too significant as of now. These assets have low operating cost and low credit cost with high quality and stable cash flows.

The company had budgeted for a 75 bps increase in cost of borrowing but there is a sharp hike in repo rate and there is a transmission lag in passing on higher cost of funds to the customer which has also impacted the margins of the company.

The company was slow in raising lending rates during festival season which is the right time to acquire good assets.

The company would see rising lending rates would support margins in the next couple of quarters.

The conscious call to store liquidity also impacted the margins and the company has moved back to 4 months of liquidity position. The company would continue to hold excess liquidity until the liquidity situation becomes comfortable. This would have an impact of 30-40 bps on margins.

However, the company expects the pre-owned vehicles segment to see improving demand and that would support margins.

The company had targeted to reduce operating expenses assets ratio to 2.5% but it has remained elevated due to higher volumes and employee cost.

The company remains focused on reducing its cost to assets ratio.

The company has a created provision of Rs 56 crore for its Sri Lanka joint venture and the business is profitable and the review of size has led to the provisioning. This is a one-time provision and the company also does not require further capital infusion.

Insurance broking business is buying stake from the partner, while some regulatory changes are leading to become the business attractive.

The company is on track to achieve FY24-25 strategy.

The SME business is growing at 35% mainly driven by the low base and the segment such as auto, agriculture, engineering, NBFCs, dealer financing have contributed to the growth.

The company uses an internal collection system, while it uses a third party collections system only for repossession.