AAVAS — earnings call
The transcript as filed. Every paragraph is addressable: its link names the page and the position it sits at in the call.
Prepared remarks
Moderator · Conference Operator
Ladies and gentlemen, good day and welcome to Aavas Financiers Limited Q2 & H1 FY21
Questions and answers
Moderator · Conference Operator
Thank you very much.
Ladies and gentlemen, we will now begin with the question and answer session.
The first question is from the line of Karthik Chellapa from Buena Vista Fund Management.
Please go ahead.
Karthik Chellapa
Thank you very much for the opportunity.
Sir, I have a few questions.
First is if we look at your 1+ DPD, it spiked to about 6.2% for September.
Can you give us some colour on which of the geographies or the segments that are contributing to this spike and also what percentage of your borrowers have not paid a single EMI since March.
That is my first question.
Aavas Financiers Limited October 30, 2020
Sushil Kumar Agarwal
Our September end number of 1+ is 6.2% and this is better than our expectation.
Geography wise there is almost similar trend.
There is no change across geographies, maybe 0.5% here and there.
Maharashtra is little bit 2% higher because more pandemic impact there, but we are seeing that that is also coming back to normalcy.
But there is no huge difference like we always tell 1+ is 6.2% so it is not 2% and 20% difference.
It is in between 3% to 7-8% and out of this 6.2% also in this month almost 50% of the customer has paid one installment already.
So, I think we are in a better position as of date.
Of the portfolio which was not 1+ as of 29th February but became 1+ as of 30th September, around Rs 44 Crores is the amount where customers have not paid a single installment during the moratorium period.
This is against our total portfolio of around Rs.8400 Crores.
Karthik Chellapa
So, basically about 0.5% of the portfolio has not paid a single installment?
Sushil Kumar Agarwal
Yes, and this is as of August and I will tell you in August total moratorium was around 10% of which only 3.2% remained unpaid as of September (i.e. around 70% paid in September).
Karthik Chellapa
Sir, my second question is on the opex growth that we have seen this quarter.
This quarter we have also added eight branches and the opex growth has also been quite strong and in the past, you have indicated that we wanted to focus on existing space first but it so happens that this year we have entered a new state Himachal Pradesh.
So, can you give us based on your thought process on how you are thinking of opex growth and branch additions and as well as new state penetration going forward?
Sushil Kumar Agarwal
If you see H1 to H1 comparison our opex has reduced from last year H1 3.28% to this year 2.8% and from 2.6% in Q1 to 2.8% in H1 this year.
This is normally when we told that some opex is business related.
So when disbursement has increased, so in that proportion that variable cost has increased.
And in the first two quarters also we told you that we will open 30 to 35 branches, which is our normal practice in a year, so we are on that right track.
Himachal is subset for us of Uttarakhand and Haryana.
So, there are four branches, so it is not like a new state.
So, that is as per plan.
Anyway, this five-year block where we open up new states will close on 30th March.
So, from next year onwards anyway we will take another block of four to five states for development in the next four five years.
Karthik Chellapa
I have more questions, but I will come back in the queue.
Thank you very much.
Wish you and the team all the very best.
Moderator · Conference Operator
Thank you.
The next question is from the line of Kunal Shah from ICICI Securities.
Please go ahead.
Aavas Financiers Limited October 30, 2020
Kunal Shah
Congratulations for good set of numbers.
Again, in terms of if we have to look at when we would say that we are in terms of the normalcy so disbursements are definitely back to 3% to 4% year-on-year, but if you can just give the trend in terms of how it has been in July, August and September, and are we very much into the growth phase or how it is going to be over the next couple of quarters and even in terms of the behavior of the customers, no doubt we have 1+ DPD and you have highlighted in terms of how many are not paying, but given the self-employed category; are most of them back to the business and what would be the level of collection efficiency going forward for most of them in terms of that, so maybe not collection efficiency, but in terms of their business earnings where our customers would be, and are we completely out of this entire COVID crisis?
Sushil Kumar Agarwal
Kunal, pandemic is an evolving stage, every once or every quarter it changes its shape so on that side, I will not comment, but as far as business is concerned, I think we are almost touching the normal pre-COVID level numbers.
As you have seen this year also this quarter also, though beyond quarter-on-quarter we have shown growth and we are hopeful to maintain that in Q3 and Q4 also.
We continue to focus on conservative approach on the underwriting side and we are almost sourcing another 8000 to 10000 files and disbursing 3000 files a month which is pre-COVID level number for us.
In terms of self-employed versus salaried as you have seen we published 1+ means even if customer has paid part installment, we count it in 1+.
So, that way we were not hoping this to happen this early.
We thought it will take two three quarters more to reach around 5% to 6% level of 1+ but because of the underwriting practices which we adopted in the past, and collection efforts so we are looking at normalcy at that end.
Normally collection efficiency for us is 97%, 98% in normal quarter.
We have already reached 95%, 96% and hoping to reach to earlier collection efficiency level within this quarter and also 1+ number maybe in the same trajectory as we were in the last year.
Kunal Shah
Sir in terms of reading this 1+ DPD so finally we are saying any which ways out of this also we have recovered 50% in the last month.
So, next quarter itself we will see it getting back to the normalized level, which has been there all through?
Sushil Kumar Agarwal
Yes, around 5%, which we always say that 1+ should be around 5% in the business.
Kunal Shah
Yes, so it is somewhere around 4%, so when we look at the March, June, September what we have given out in the presentation it is somewhere around 4% to 4.2%.
So, we should be more or less back to those levels?
Sushil Kumar Agarwal
Yes.
Kunal Shah
Thanks a lot.
Aavas Financiers Limited October 30, 2020
Moderator · Conference Operator
Thank you.
The next question is from the line of Bhavesh Kanani from ASK Investment Managers.
Please go ahead.
Bhavesh Kanani
Thank you for taking my question.
My question again pertains to the 1+ DPD number of 6.2%.
You have shared the flavour on geographical concentration being spread well over the areas.
Can you share some colour on the profession wise colour as well of the borrowers that within this 6.2% if there are any specific professions in which borrowers are engaged which are witnessing more stress?
And also, some colour if possible on what is your assessment on the recoverability within the 6.2%?
I do understand that even in normal business conditions we used to have 4% to 5% 1+ DPD, but ability to recover out of that 5% I would assume is tougher in the post-COVID era so I would like to hear your thoughts on the same?
Sushil Kumar Agarwal
Bhavesh, first is there is no major aberration in terms of salaried, self-employed.
So normally salaried customers are around 30% and even in 1+ DPD side 6.2% around 25% to 30% salaried customers have not paid.
Rest is self-employed.
In self-employed category also we maintain around 40+ categories of customers depending on their business profile.
There also there is no aberration.
As we have told there are around 2% to 3% or 4% portfolio is there which is hospitality industry so there it is maybe 5 basis points more but more or less in all the other segments it is almost similar and anyway we categorize them as medium, high and low risk and we are consistent.
Because of this there is no major change in our definition of any profile of medium, low and high risk.
As we always tell that whatever is 1+ number, it translates to 10% to 20% of it into NPA, so anyway it is 6%, in the good, the better collection efficiency we will achieve around 0.6%, in the difficult times 0.9% can be our NPA.
We have more than that provisioned already in the balance sheet but as a prudent management team, we will continue to review the situation in coming quarters and if required balance sheet has sufficient buffer on the profit side if more provisioning is required, but looking at the last three, four years trend, whatever is 1+ numbers mostly 10% to 20% of it become NPA.
As I have already told you 50% of the customers out of this 6% has already paid in October, so we are hopeful that we will attain our past experience, 10% to 15% maximum side going to NPA out of this number.
Bhavesh Kanani
So, in that context should we expect the provisions to now normalize there because since last three quarters, we have actually been kind of accelerating the provision?
Sushil Kumar Agarwal
Bhavesh right now we have around 31 Crores of NPA and against that around 22% is normal NPA provisioning and apart from that we have done 15 Crores of additional COVID provisioning.
So, you will see overall provisioning is sufficient for even up to 2% of NPA, but looking at the trajectory, it will be around 0.6%, 0.9% but as further quarters will come Aavas Financiers Limited October 30, 2020 we will evaluate situation and if required we will do a prudent practice and we will be conservative on that side.
Bhavesh Kanani
Lastly, if I can squeeze in one more on opex side, along with sharp improvement in disbursements the opex have also gone up sequentially materially.
Where should be the opex to AUM ratio settle down and some color on structural savings we have generated out of realignment or restructuring of operations this pandemic might have caused?
Sushil Kumar Agarwal
Bhavesh we always tell that YoY basis there will be 35 to 40 basis point opex to AUM reduction.
So, in FY19 it was 3.8 and last year it was 3.4 and this year again we hope to reduce it by 40 basis points and for the next two, three years we are seeing the same trajectory on this part.
Till now the customer has not requested us for the restructuring of the loan; though we have got the policy approved from the board, but we are not seeing any restructuring in our books, because mostly its small ticket loan average ticket size is Rs.9 lakh; total corporate loan, non-individual book is around 0.2% of the book totally.
So, we do not see at this point of time any restructuring to be done in our book.
That is heartening to hear.
All the best.
Thanks for responses.
Thank you.
The next question is from the line of Piran Engineer from Motilal Oswal Financial Services.
Please go ahead.
Good afternoon Sushil Ji and Ghanshyam Ji.
I have two, three questions.
Firstly, can you give me a breakup of your employee count as per function wise because we have one of the largest teams on the streets about 3500 employees, last year also you added 1000, 1500 employees.
Just like to understand how many are in credit, how many are in collections, how many sales, you know, as the business grows let’s say beyond COVID 20%, 25% annually, how should we think about employees and employee cost also growing.
So that is my first question.
Piran department wise, maybe I will not be able to tell you but as a philosophy we have 2:1, so 2 persons in business and rest support team is 1 person.
So, that is the normal breakup on the employee side.
We always invest for future growth and looking at competition also we keep the bench strength.
So, for 25% business growth the number might not increase sequentially because for senior management side and supervisory level, we have sufficient bench strength and people and supervisory level staff and front level staff increases in proportion to business and certain times for investment also, so we are opening branches and they becomes fully effective in three years.
So that is the trajectory on that side.
But on opex side, as I have told you YoY basis, 35 to 40 basis points of reduction in opex to ATA.
Piran Engineer
Aavas Financiers Limited October 30, 2020 S A P N E A A P K E .
S A A T H H A M A A R A
Thank you.
My next question is how much of top up did we do this quarter.
I believe it was 31 Crores, 32 Crores last quarter.
Sushil Agarwal
This quarter the total top up is around 4-5% of the disbursements but top up under analytics led product is less than 1% of total disbursement in H1 FY21.
Piran Engineer
Sir, just lastly on slide #24 where you mentioned principle repayments of 300-odd Crores every quarter, are you factoring in some prepayments which are business as usual sort of prepayments or are we more contractual?
Ghanshyam Rawat
Are you asking for assets side or liability side?
Piran Engineer
Assets side.
Liability will be contractual.
Ghanshyam Rawat
On asset side during this COVID period as explained in the last call also we have assumed lowest prepayment rate otherwise in normal business scenario we take three year average and 75% of that we consider for factoring in the principle collections in every quarter, but during the COVID phase, we have assumed just 20% of normal prepayment rate.
It includes the normal business profit also.
Sushil Kumar Agarwal
Piran, our quarterly profit is about 65-70 Crores that you are seeing and beyond that there is a surplus of 230 Crores which is left.
Every month 30 Crores as principle installments come in; so around 40-50 Crores per month which is part payment & foreclosures, so that is there.
Piran Engineer
Sorry Sir, I missed that last part.
Sushil Kumar Agarwal
The part payment which is of 40 Crores, 50 Crores, foreclosures, BT out whatever happens that is the number, we have a profit of Rs.20 Crores to Rs.25 Crores, and Rs.25 Crores, Rs.30 Crores principal comes through installment.
So, around 40 Crores is foreclosures and part payment that we have considered.
Piran Engineer
That is all from my side.
Thank you.
All the best.
Moderator · Conference Operator
Thank you.
The next question is from the line of Antariksha Banerjee from ICICI Prudential Asset Management.
Please go ahead.
Antariksha Banerjee
Good afternoon Sir.
Sir, firstly just continuing from Piran’s question, if you can give us the number of people in your underwriting and collections team Sir.
That would be very helpful if you have that data.
Aavas Financiers Limited October 30, 2020
We have about 3500 employees in which 2:1 ratio is there.
So around 2100-2200 in business, and rest 1000-1200 are in support department, 80% of support department is collections and credit.
So, 800 roughly split half, half, so 400 to 450 levels each of underwriters and collections is that a good number?
Yes.
I was actually trying to place the number of files or logins and how many per person they are doing, so it comes out to about 30 to 40 a month at a rough level?
They have to visit each case also; that is a good number.
Again, it is an average because some branches will have lesser side and some branches will be higher side, so we keep a capacity level of 50 cases per month.
So, we have that capacity buffer also for the growth.
Sir, on collections have you increased the number of people over the last two, three quarters substantially because in this environment it will be necessary?
We have added about 50 people there only because rest we have a team at the business level also, credit team also, so both those team also have helped in Q1, Q2. So, they used to do that job?
Yes.
Sir, and on your rejection rates.
You mentioned these 10000 files coming in and 3000 goes, is that 30% rate I remember used to be there during the IPO also, on an average.
So, after COVID is not the rejection rate gone up because I thought files would have been coming more because of less players in the market or may be you could have tightened some of your norms like cash salaried you will not give; is there something like that that has happened?
I think we tried to be consistent.
We have put a filter in the sourcing and in sourcing this file will not come; so those files which you are saying that should be rejected that was not included in sourcing.
But in terms of filters while sanctions or the underwriting are there some additional learning from COVID or it is what it used to be?
That is sufficient?
Aavas Financiers Limited October 30, 2020
Sushil Kumar Agarwal
In my previous talk also, I have told that earlier there was a negative list.
Now there is only a positive list.
So, we select only from positive list and rest everything we will not do.
And we improve the login filter itself.
So, these files will not even login like cash salaried and whatever you are telling.
Antariksha Banerjee
Just one more question on this 1+ DPD just to clarify my understanding, so roughly 6.2% of people as of September end has not cleared their full installment.
That is why they are 1+DPD?
Is that right?
Sushil Kumar Agarwal
Even part installment .
Antariksha Banerjee
Meaning 94% had paid in full, is that right?
Sushil Kumar Agarwal
Yes.
Antariksha Banerjee
So out of the remaining 6% about half of them have cleared full installment in October, but some more people would have got added to that list?
So, this 6.2% you are saying will go back to 5% that includes some more people coming into the pool but from old pool 50% have already cleared by whatever October 20, 2020?
Sushil Kumar Agarwal
October 25, 2020 yes.
Antariksha Banerjee
That helps.
Thank you Sir.
That is all from me.
All the best.
Moderator · Conference Operator
Thank you.
The next question is from the line of Arvindan Jagannathan from JK Capital Management.
Please go ahead.
Arvindan Jagannathan
Thank you so much for taking the call.
I just wanted to understand your ROA tree because I feel you are saying that your opex to asset ratio is actually coming down on a consistent basis, and in that case, why would your ROA drop from 4% level to 2.5% like why do you feel that?
Why are you so conservative in giving a ROA benchmark of 2.5% and above because maybe NIMs coming down as a mathematical impact of increasing leverages there, but beyond that do you feel there is intense competition or something that is going to bring down the ROA?
Because at 7%, 7.5% NIMs and 3% of opex you get 4.5% pre-tax ROA and around 3%, 3.5% post-tax ROA on a comfortable basis.
So, I want to know the reason why on your conservatism.
Why that 2.5% level?
Sushil Kumar Agarwal
Arvind, when we say 2.5% so we also say that it will be on 6 to 7 times leverage book, 2.5% ROA, since right now we are less leveraged and because we raised the capital in IPO also so that is where right now with excess capital, we are able to give excess ROA which is Acvas for this quarter is 3.2%, for H1 cumulatively it is 2.9%.
So, we want to maintain and which we have maintained in the last 36 quarters also 2.5% and above, in a fully leveraged balance sheet basis.
So, normal assumption is that 2.5% ROA gross it up by tax then your 0.5% for the credit cost then your opex that should be our lending rate minus borrowing rate and if you see we are maintaining our spread consistently, our opex is also coming down and when balance sheet will be leveraged to that extent of 6 to 7 then it will be 2.5% ROA.
Till that time, we will continue to give more ROA on that side.
Arvindan Jagannathan
My question is precisely that.
So, you are saying the compressed share of ROA is purely due to the leverage going up and the cost of funding going up, overall cost of funds, not the rate of cost of fund.
So that is the only thing.
You are not foreseeing the spread coming down below 5% in a meaningful manner.
You are not working such a factor?
Sushil Kumar Agarwal
We also tell that we anticipate that this 5% spread can go down maybe 4% but that we will compensate by reducing the similar number on opex.
By God’s grace and our working, the spread we were still able to maintain, but opex has reduced.
In future maybe three to five years down, we might not be able to maintain this 5% spread maybe it can come down by 50 basis points, 75 basis points or 100 basis points, but similar amount of balance sheet leeway we have on the opex side so it will reduce our opex by 30 to 40 basis points every year, we will match that number.
So, still we will be able to give 2.5% ROA.
Arvindan Jagannathan
You are already at 3% level of opex to assets.
So, how long can you achieve the 35bps reduction on a consistent basis.
I mean, you hit the floor at some point.
You need expenses to run a business.
So, what would be your lowest trough level of opex to assets ratio?
Sushil Kumar Agarwal
We believe in long-term running the business, so we will continue to do investment, but keeping that in mind 30 to 40 basis points is still possible for the next three to four years.
Arvindan Jagannathan
You think your opex to assets ratio can go as low as 1.5%?
Sushil Kumar Agarwal
Right now, it is around 3%, so 30 to 40 bps means 1.75% to 2% in the next 3 to 4 years.
Arvindan Jagannathan
So that low level can be achieved.
Sushil Kumar Agarwal
Yes.
Arvindan Jagannathan
That is clear.
Thank you so much.
Aavas Financiers Limited October 30, 2020
Moderator · Conference Operator
Thank you.
The next question is from the line of Bharat Shah from ASK Investment Managers.
Please go ahead.
Aavas Financiers Limited October 30, 2020
Bharat Shah
Good afternoon Sushil Ji and the entire team.
The disbursement when I see for the second quarter probably the only lending entity I have seen so far where disbursements for the second quarter has exceeded the disbursements of the last year second quarter.
So, is it an indication that we feel that basically things have normalized from our perspective and we are ready to do the business in its fullest earnestness?
Sushil Kumar Agarwal
Bharat Ji, if you see that our employee strength has increased from last year H1 to this year 1000 so we invested in our capacity building in H2 of last year.
And first quarter because of COVID and closer it was not there, but we have built our capacity to have much more business than this, so even at reduced capacity level we were able to achieve this growth in Q2 of our disbursement.
Yes, as per business terms, now again we are sourcing around 9000 to 10000 files per month.
So, that is showing the normalcy in the areas where we are working and hopefully since we always keep bench strength also looking at the competition so we will be able to continue this growth momentum if nothing unforeseen happen in H2, so we will continue that journey and this is our normal level.
We have more capacity than this, which we have built for looking at 2023 numbers because we invest in two to three years ahead in our distribution models.
Hope I have answered your question?
Bharat Shah
Yes.
Secondly Sushil Ji on technology I wanted to understand what are the efforts.
Because increasingly finance and lending is at cross section of finance along with technology.
Customer acquisition, customer analysis, scaling, disbursal, recovery, Artificial Intelligence and risk control, fraud prevention either internally or externally all of these increasingly technology is a very, very critical piece.
So, what are all the initiatives on that front?
Sushil Kumar Agarwal
Bharat Ji, as we have told in our last calls also, at Aavas we have married our brick and mortar model to technology platform.
Today our 100% leads come through mobile app, our repayments are 99.9% through digital mode and NACH.
Our 100% of MIS is coming through SAS server without any manual intervention, our 100% data is geo-tagged and we do allocations in collections through technology.
We have 80 people technology team and 15 people data analytics team in-house.
We do predictive analytics also.
Our total portfolio is on Heat Map, so earlier like MIS was two-way, country, state, district, tehsil, pin code, now you put a finger on India map and ask within 5 km of this finger how many customers you have funded and their demographic and their collection pattern for last seven years it is on click available.
Then we have implemented 100% CRM and today customer app is there and on customer app customer can take 85% of their needs through that app, no need to come to the branches.
So, that is there.
Still we are improving every facet of our working because we know technology will be a survival risk for us going in future and technology will enable us for the cost reduction also.
So, we continue to put investment in that side.
Today we are on cyber security compliant at bank level kind of framework rather than HFC Aavas Financiers Limited October 30, 2020 and NBFC.
Secondly, we continue to do more and more on predictive analytics.
As we earlier told we used to predict which customer will bounce and we reach 85% accuracy on that level.
During COVID it came down to again 30% to 40%, again we are putting our learning in trying to take it back to 75%, 80%.
We predict which customer will come for foreclosure because that is the primary problem for any finance company; portfolio going out.
So, there our retention rate has increased and that has given us leeway from around reducing 50% of our portfolio going out with that technology.
Further we have introduced robotic process automation and machine learning things in some of our processes and integration.
Now our collection allocation is also based on geo tracking and we are using satellite-based software to allocate appropriately and that has helped us despite in COVID times your collection number in terms of number has increased by 50% to 80%.
We have increased our collection team only by 10%, 15% and we were able to manage that kind of numbers.
Further in every process, like HR we have now introduced Machine Learning enabled software and performance system.
So, we will continue that journey and I think that is the differentiator and that is where we are confident that we are able to reduce our opex also 40 to 50 basis points YoY despite growing book at the predicted level.
So, we will continue doing that investment in that side.
Bharat Shah
You mean to say that marriage of physical and digital is not only contemplation, but it is consummated now?
Sushil Kumar Agarwal
With increase of time, it continues to increase and ease of doing business and how to see that from the future perspective, so from three year hence what problem we will face, we are investing in today; five year hence what can be the problem we are investing in today, what are the business opportunities there.
I myself have done some course from Harvard on Fintech and our technology operations team people are also doing that.
So, we are continuously evolving and learning ourselves also and seeing what are the opportunities and best practices across the world which we can include for implementing at Aavas.
Thank you.
Delighted to know.
Congratulations for a very competent performance in tough times.
All the very best, Sushil Ji and the entire team.
Thank you.
The next question is from the line of Vikas Kasturi from Focus Capital.
Please go ahead.
I had a few questions about your business.
Sir, the first question is about the balance transfer out.
So, since your credit underwriting is so good, probably the best in the industry, do your competitors try to poach your good customers?
My second question is you have taken great things to explain your business model in the previous conference calls etc., and you have constantly mentioned that you do not outsource any leads.
So, is there any
Vikas Kasturi
Aavas Financiers Limited October 30, 2020 particular reasons why you do not source leads using DSAs?
Another question is again just to be opportunistic of the low interest rates currently, you could for example use some CPs to lower the cost of borrowing, but you have taken a decision not to have any CPs in your borrowing.
So, could you just throw some light on these?
Thank you very much.
Ghanshyam Rawat
I am taking your question one by one.
First on the balance transfer, definitely we as Aavas are creating a new market segment, rural and semi-urban areas, not competing with the banks and institutions, large HFCs and NBFCs.
In the life of customers, we are creating a true value in the system in the customers life basically because if you visit my 100 customer, you will find 95+ customers are living in those houses.
But as we grow, yes there maybe challenges on the balance transfer also as other player is also facing the similar problem.
This is a normal course of business; on an average 12% to 18% of opening AUM balance transfer happen with everyone in the industry, but we have built up certain analytics tools inside the company with the help of IT through which we forecast which customer in the next two quarters will have a foreclosure or some sort of a balance transfer request because their behavior is improving.
So, we keep engage our central team with such sorts of customers and find appropriate solution for them.
So that whenever they approach us our team can immediately address their problems, provide a solution to them.
Earlier when we see let us say, one and a half years back if similar problem is coming to us, so the customer approaches to one branch, the branch says we are forwarding your request to head office, and then the head office request comes then again they provide what is the issue, so almost five to 10 days gets lost in that period and by the time the customer has a confirmed plan with the other institution to borrow from them basically, but now within 24 hours we start to engage with that customers immediately to address those problems.
That is why you see our balance transfer has been successfully reduced substantially in the last couple of quarters.
On the competition issue also some of our efforts have also gone that side, but there is no harm to assume there will be some balance transfer in a normal case business scenario.
Regarding DSA, non-DSA I think 10 years back when we formed this company; and continuously every year we will have business plan, annual discussions, we believe very strongly that in-house model where our own sales team generate the business leads at a ground level, we adopt various mechanism at the ground level starting with various in house localised models we have developed through which we generate leads.
Later on in the last two years, technology is also helping us to generate those leads through we have certain unique apps which we have made for our housing ecosystem, who has helped like all the cement suppliers, iron suppliers, water supplier, all these we have made them through our connector, lead provider for them.
For them it is not a DSA, for them it is really creating a value for their own customers also that they also create a value for those traders also in that business.
So, we strongly believe as a non-DSA model we have performed well till now.
We believe to continue with non-DSA model for at least for near future.
No CPs.
I think in Aavas Financiers Limited October 30, 2020
the last ten years we never borrowed any commercial paper.
When we are having lower long-term rating, our short-term rating was highest A1+, even then we did not borrow commercial paper, now we have AA- rating for that long-term sources, average cost of borrowing is already fallen at 7.9% with average maturity of 130 months overall liability maturity.
We do not feel like we need to adventure unnecessarily in the commercial paper, which we have seen other players have suffered a lot on that account.
Thank you.
The next question is from the line of Karthik Chellapa from Buena Vista Fund Management.
Please go ahead.
Thank you very for the opportunity again Sir.
I just have one clarification.
In the returns which you have filed with the Stock Exchange under disclosures as required by the RBI circular, there is one line item which says respective amounts where the asset classification benefit is extended as of September 30 and that amount is about 85.6 Crores.
So, is this the amount of NPL that would have slipped in September had the Supreme Court direction not been there?
Yes.
So, which means if the Supreme Court’s direction was not there, the actual NPL would be close to 1.5%.
Is that how I should interpret it?
This 85 Crores is because of all DPD freezing from February 29.
The 85 Crores is of customers who took three or more moratorium during the 6 months moratorium period so if this freezing was not provided by RBI, so this 85 Crores figure would have moved to 90+.
Just one more data point, would you have the stage 2 loans percentage for June and September?
Stage 1 is 99%, Stage 2 is 0.6% and Stage 3 is 0.47%.
Can I have the figure again, Stage 2 is 0.6% for September?
Yes.
What will it be for June?
June, just give me a couple of minutes.
0.7%.
Aavas Financiers Limited October 30, 2020
Karthik Chellapa
So, the reason I ask this is basically the amount of NPL which would have slipped without the Supreme Court direction is 1% of the loan book which is about 85 Crores but this is even larger than the Stage 2 loan.
So that means these people were probably overdue from the beginning itself, is it?
Ghanshyam Rawat
From the beginning?
Karthik Chellapa
From the beginning of March itself?
Ghanshyam Rawat
Yes obviously.
This table, RBI asked this and the circular itself says that whosoever is between 1 and 90 on February 29 need to be reported in this table.
Karthik Chellapa
Thank you very much for clarifying.
That is all from my side.
Moderator · Conference Operator
Thank you.
I would now like to hand the conference over to the management for any closing comments.
Sushil Kumar Agarwal
Thank you all for attending the call.
To summarize, at Aavas, we aim to be one of the key enablers in broadening and deepening of credit facilities to unserved and underserved customers in the semi-urban and rural areas.
We feel that our deep understanding of this segment and our in-house execution model will enable us to fulfill the aspirations of our customers and expectation of all stakeholders.
Further, we will continue to make investment in technology, analytics & digital initiatives as that will further improve the operational efficiency & enable us to serve our customers in an even better way.
Thank you so much for your time.
For any further information, we request you to get in touch with Himanshu Agrawal in our Investor Relations team or SGA, our Investor Relations Advisors and they would be happy to help you.
From entire family of Aavas, here is wishing you a very Happy Diwali in advance and a Prosperous New Year.
Thank you very much.
Moderator · Conference Operator
Thank you.
On behalf of Aavas Financiers Limited we conclude this conference.
Thank you for joining us.
You may now disconnect your lines.