Just wanted to discuss the MSME side of the business because your AUM has been within the range of Rs 4,500 crore and Rs 5,000 crore and, NPAs within that segment have shot up. What strategy are you going to deploy for the MSME segment going forward?
Rajesh Sharma: If you talk about the MSME segment, some of the restructuring books have opened up, which have triggered some of the NPA. But we are hopeful that by the end of the year, we will have a lower NPA than what it is today. Plus, the MSME segment will continue to grow by about 15% this year again. And if you talk about our retail product, other products, which are micro Lap, gold loan and affordable housing, they will also continue to grow. So, overall, at balance sheet level, our NPA will be well within less than 1.5% at net NPA level.
But what about the gold loan business because that has been scaling up quite well. In fact, if I have it right, it is closer to 30% right now. What is your expectation as to where you could grow it further because there was a bit of a disruption in the industry and my guess is you might have increased your market share then also.
Rajesh Sharma: The gold loan business is growing because we opened a lot of branches. We now have about 750 branches. We are opening another 50 to 60 branches this year again. And with that, I think the gold loan portfolio will continue to grow about 30% year-on-year. In the festive season, little dip will come because people tend to get their jewellery released and then again they come back after the festive season is over. But overall, 30% growth we intend to achieve in gold loan, which we should be able to.
Your NPAs in the MSME segment is on a rise from 3.5%, what we had seen last year it has increased to around 4.9% now. What has led to this sharp rise in the NPAs and going forward where are you expecting your MSME segment specific NPAs to hover around?
Rajesh Sharma: We have done some restructuring of the loan during the COVID time because as per the RBI circular, some of the customers have opted the restructuring option available to them. When the restructuring book opened as a normal book, once the restructuring is over, some of their accounts have shown slippage into NPA.
Since all the MSME loans are collateralised backed by underlying property, we are confident that we will be able to resolve either recovery or rollback to their regular account. So, year-end, we should have a lower NPA than how it opened in the beginning of April.
Can you give us a better sense as to how the affordable housing segment is also likely to grow because right now it forms a small part of the portfolio and correct me if I am wrong, but with the PMAY scheme coming in, plus the focus on affordable housing, do you expect that contribution also to scale up?
Rajesh Sharma: For affordable housing, there is good demand plus the state and central governments are rolling out various incentive schemes and there is a push also from the developer side that a lot of houses, the smaller size are being built and loans are being made available. We expect this portfolio to grow about 40% this year again and we have added some more branches here. So, with all of that and we have also now invested a lot of money in the technology to make the turnaround time faster, with all these initiatives, we are confident to achieve 40% growth in the affordable housing segment for not only this year, but next few coming years as well.Also, wanted to get a better sense regarding the entire rate cut cycle and how it will impact you because my colleague has helpfully pointed out around 85% of your borrowing is from banks, how much of it is floating rate is what we wanted to understand and how much will the cost of funds and NIMs really get impacted once that rate cut cycle begins?
Rajesh Sharma: So, we believe that the Fed has indicated last time that they will consider the rate cut and I think the meeting is likely later tonight, so we will know whether the Fed is cutting the rate or not. And if the RBI follows suit, once the Fed does this, the interest rate will come down and I think it will pass down to the customer. If we talk about the bifurcation between our floating and fixed, floating is about 45% portfolio in the floating, where the rate cut will be passed down and we believe that the money we borrow from banks, there also our interest rate will come down. So, ultimately, the customer will benefit.
At the overall consolidated level, you have talked to us about various parts, but at the consolidated level, what will be the AUM a couple of years out from here? What kind of NIM profile should we expect from the company?
Rajesh Sharma: We are aiming for a growth of 25% to 30% year after year for the next three to four years. And at the current level, our book should be in the range of about Rs 25,000 crore to Rs 30,000 crore down the line two years from now. We are adding more products and more branches to support that. If you talk about NIM, because the gold loan portfolio is growing and also we launched the micro lap, both products are high yield products. So, there we will see that our NIM should improve and somewhere NIM should be in the range of about 8.5% to 9%.