Author: SonalMohan Jadhav

IT is a ‘wait and watch’ for us, says ICICI Pru AMC’s Anand Shah

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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According to Anand Shah, Head of PMS and AIF Investments at ICICI Pru AMC, information technology (IT) is a great business as it generates good profits, and has also been rewarding investors with dividends and buybacks etc. However, currently, the sector is facing growth challenges.

“So it is a wait and watch for us. We have not owned IT for the last 18 months. We are still looking to see what is the right time to own it,” he said.

While there is euphoria in various segments of the market, private banking has been a laggard and valuations now look reasonable, he stated.

He believes valuations are no longer as compelling as they were three years back. “To that extent, the way forward would be bottom-up, stock picking and within that market is in the mood to reward the market share gainers,” he said.

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Assuming there is a political continuity post-general elections 2024, he believes the key focus will be on manufacturing.

“As a country, we have been a large consumer of goods but weren’t the large manufacturer of goods. That is something which is changing. As a government and as a country, we are geared to get the manufacturing going in this country after a long time,” he observed.

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Shah thinks this is a good time for corporates to start with capacity expansions (capex) not only for domestic consumption, and import substitution but also for exports.

For more, watch the accompanying video

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Contributions from areas beyond top 30 metro regions drive mutual fund investment growth

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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In a notable development within the mutual fund (MF) industry, assets under management (AUM) have surpassed the significant milestone of ₹50 lakh crore. Notably, there has been a substantial contribution from B-30 cities—areas beyond India’s top 30 metro regions—highlighting a noteworthy shift in investment dynamics.

The geographical categorisation established by the Securities and Exchange Board of India (SEBI), commonly referred to as B-30, categorises cities based on various criteria such as financial infrastructure and overall development.

This classification provides insights into the distribution of mutual fund assets, offering visibility into emerging investment patterns.

Rushabh Desai, Founder of Rupee with Rushabh Investment Services, and Abhishek Tiwari, Executive Director and Chief Business Officer at PGIM India MF, provided insights into this significant trend.

Desai noted, “Between March 2023 and March 2024, we observed 35% growth in absolute terms. While B-30 cities have contributed significantly, they still represent approximately 18% of the total, with the top 30 cities accounting for a substantial 82% share. This indicates a contribution of approximately ₹45 lakh crore from the top 30 cities, with around ₹10 lakh crore originating from areas beyond these major urban centers.”

He further highlighted the increasing penetration of equity investments from B-30 cities in recent years, signaling a growing interest in financial markets within these regions.

Tiwari commented on the trajectory observed in B-30 cities, emphasising the prevalence of equity investments in their investment portfolios.

“The journey in B-30 cities has primarily been focused on equity investments. However, amidst this growth, it’s essential for the MF industry and stakeholders to prioritise education. While ‘mutual funds sahi hai’ has become a popular phrase, understanding the rationale behind investment decisions is crucial,” Tiwari explained.

As the investment landscape undergoes continual evolution, the comparison between smaller cities and their metropolitan counterparts presents an engaging narrative.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Headcount at top-4 IT companies declines for the first time in over a decade

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The headcount at India’s top four information technology companies–Tata Consultancy Services (TCS), Infosys, Wipro, and HCLTech–declined for the first time in over a decade.

From April 2023 to March 2024, the net headcount fell by over 62,000, following net increases of over 84,000 in FY23 and more than 240,000 in FY22–the year when IT companies hired aggressively in the post-pandemic digital boom.

January-March was the fifth consecutive quarter when the four leading IT companies reported an aggregate decline in headcount.

Except HCLTech, all the other three IT companies – TCS, Infosys, and Wipro reported a net headcount decline in FY24.

The biggest headcount cuts were seen in Wipro and Infosys at approximately 24,000-25,000 employees for the full year.

Let’s look at the reasons for the sharp drop in headcount

Growth slowed down materially:
As the discretionary spending environment turned adverse due to high-interest rates and cautious client consumer sentiment in their mainstay markets of the US and Europe, the growth rate declined from double-digits to low-single-digits. Wipro reported a decline in its revenue in FY24.

Companies overhired in FY22:

This was primarily due to elevated demand and elevated attrition. The FY22 hiring of 240,000 employees matched the total hiring by these companies from FY18 to FY21.

Attrition has meaningfully come down:

During the COVID period the great resignation gripped the tech sector. In FY22, the attrition was high, at nearly 20%. However, attrition rates have now treaded back to normal levels around low teens. Therefore, companies need to hire less to backfill.

The growth outlook continues to remain dim:

Both HCLTech and Infosys are guiding for low single-digit growth in FY25 and the current demand can be serviced by improving the utilisation of their employee base through productivity enhancement measures. The biggest reason to hire is growth, and demand so far hasn’t been forthcoming.

What the companies said during Q4 results:

TCS: “We have commenced fresher hiring from campuses and continue to recalibrate our lateral hiring focusing more on utilising the capacity that we have built over the prior years.”

Infosys: “We started the year with 77% utilisation including trainees and the demand environment was different. Our utilization has now gone up to 82%, including trainees. There is still some headroom because we have always said 85% is achievable utilisation. Attrition has significantly come down. Plus, we got some benefit from our value-based selling in terms of pricing. So, all of that has also resulted in lesser requirement in terms of headcount.”

For more, watch the accompanying video

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KFin Tech to focus on growing the more profitable value-added segment

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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KFin Technologies hopes to increase the share of the more profitable value-added services (VAS) segment to 15% of revenue over the next three years from 6% now.

Vivek Mathur, the CFO of the tech-driven financial services company, said gross margins of the VAS segment typically ranges from 60-65% and can go up to 70%.

He highlighted the scalability of these services, operating on a Software as a Service (SaaS) model, contributing significantly to overall profitability.

Mathur expects revenue growth to remain in the 15-20% range with profit margin of around 30%.

During April-March 2023-24, the company’s revenue grew 16% to ₹838 crore on a year-on-year (YoY) basis, while the net profit rose 26% to ₹246 crore over the previous year..

The company posted 20% year-on-year (YoY) revenue growth for January-March, and profit growth of 31%. The earnings before interest, tax, depreciation, and amortisation (EBITDA) margin expanded to 45.8% from 44.8%.

The overall asset under management grew to ₹17.4 lakh crore.

In a note released in March, brokerage firm Nuvama initiated coverage on the stock with a buy rating citing strong moats and potential for improved margins.

“It is set to benefit from higher retail participation in equity markets via both MF and direct investing route,” Nuvama stated in the note.

The current market capitalisation of the company is ₹12,693.34 crore. So far this year, the shares have gained over 54%.

Below is the verbatim transcript of the interview.

Q: What kind of revenue growth do you expect to see? The international business as a percentage of your total mix – what is it? Where is it headed? And in that case, what kind of impact can it have on margins?

A: We expect the revenue to continue to grow in the range of 15% to 20%. And as we have seen in FY24, we have grown around 17% YoY, we expect that will continue to grow at a pace of 15% to 20% in terms of revenue.

The international growth is evident, it used to contribute 9% of the total revenue until FY23. It has increased to 11%, and we expect that with our entry into Singapore, and once the regulatory approvals are given for IFSCA and Gift City and followed by application for Thailand, we will look at expansion beyond Southeast Asia into Europe and the US. And we expect that the international business should contribute to about 15% of the total revenue.

We have grown the number of clients and therefore, our margins overall, on an accretive basis, are also growing. We have seen our margins coming back in the last quarter to more than 45%. And we expect that in times to come the operating leverage will play out where you don’t need to incur disproportionate expense revenue. So margins should go up. Even now you see PAT margins touching 30% and we expect that the EBITDA margin and PAT margins should continue to be range bound – when the times are good, it will be 45% plus, and when the market is tough, it will be in the range of 40 to 45%.

Q: What’s your own internal assessment? Is it going to be north of 45%?

A: We think so. As the market remains bullish and the consumption story in India remains intact, in terms of the guidance given by the Association of Mutual Funds in India (AMFI), the domestic mutual fund market will continue to grow. And, we expect that we will also outgrow the market, we have been outgrowing the market. And we feel that our margins should improve.

Q: I wanted to also talk about inorganic opportunities to expand your reach, are you evaluating anything because you do have cash of almost ₹400 crore on your books? What do you plan to do with that and anything in this calendar year?

A: Definitely we continue to explore opportunities in India and outside India towards M&A. And, the philosophy is that if there are new geographies, which are better to go to market through acquisition, and it is going to be value accretive then we’ll go to the inorganic route.

So either it is a client acquisition or geographical expansion or product acquisition, which helps in terms of expanding our horizon, both in terms of reaching out to our current clients with more bouquet of products, or going to new geographies and acquiring new clients rather than building the market organically. So, even now, we continue to explore at least two or three acquisitions. So, the growth capital out of ₹400 crore is set aside. So, there will be some payout for the dividend that we have declared ₹5.75 paisa per share. But beyond that, there is still enough dry powder for us to do acquisitions.

Q: So, you had said earlier that you’re looking to expand to places like US, Europe, etc. So, when you look at an acquisition, which is the geography of choice for you, and anything that will materialise in this fiscal year, FY25?

A: It depends on what kind of acquisition opportunity we get. If we get something which is small to medium with a fund administrator kind of service, which can help us foray into fund accounting in Europe and the US, we will seriously look at it. It also depends on what value it comes to and what kind of management we get rather than building the market there, we will look at it. So there’s a Business Development Strategy Committee of the board, which looks at every M&A opportunity that we bring to the table. And if we see that there is value in terms of going inorganically and developing shareholders’ value through that acquisition, then we will get a go-ahead from the board.

Q: Tell us about the plans to scale up XAlt, that’s the platform that you have.

A: XAlt is basically a fund administration platform, that is something where right from digital onboarding of clients, to front end, mid office, back office, compliance reporting, everything can be handled. It’s a unique platform that we have developed. And as you will see it’s not just this XAlt, even Guardian – the Big Four audit firms use our insider trading platform. Even the Securities and Exchange Board of India (SEBI), as a regulator has – we have built a platform called Portal for Alerts, Reports and Analytics for SEBI (PARAS) for alert reporting of the regulator. So, we have moved gears in terms of just being a registrar and transfer agency (RTA) to a tech fin company, where the diversity of business in the product innovation that we do is unique in India.

Q: Are some of these initiatives more profitable than the RTA business?

A: Definitely, value-added services are always more profitable, they have gross margins of almost 60-65% going up to 70% because you build the chassis and then you get on the customers on a SaaS basis. That’s how the overall profitability also is supposed to go up as the contribution of VAS to the total revenue is already 6% against 5.3% last year, we want to take it to about 15% In the next three years.

For more, watch the accompanying video

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Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Why goal and timeframe are important in mutual fund investments

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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The significance of having a clear goal and a defined time frame cannot be overstated when it comes to mutual fund investments. While conventional wisdom suggests that a longer timeframe allows investors to ride out market fluctuations, a judiciously chosen shorter timeframe can also yield substantial returns.

Niranjan Avasthi, Senior Vice President and Head of Product, Marketing, and Digital at Edelweiss MF, stressed on the necessity of aligning one’s investment horizon with the chosen asset class.

“Whether it’s fixed deposits, gold, real estate, or equities, the investment horizon must match the return potential and risk of the asset class,” Avasthi told CNBC-TV18.

Avasthi further explained that within the realm of mutual funds, the investment horizon plays a pivotal role.

“Equity investments require a long-term perspective, while debt investments can be approached with a shorter timeframe,” he added.

Similarly, Kshitiz Mahajan, Co-Founder of Complete Circle Consultants, echoed these sentiments by underlining the significance of setting investment goals.

Mahajan emphasised that without a clear destination in mind, investors might overlook the benefits of compounding.

“Aligning your investment with a specific goal ensures that you leverage the power of compounding, which is indispensable for long-term success,” Mahajan said.

In essence, the consensus among industry experts is clear: having a goal and a time frame tailored to the chosen asset class is crucial for maximising returns and achieving financial objectives in the world of mutual funds.

For more, watch the accompanying video

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3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Mahindra Holidays CEO details capacity expansion plans and key growth areas

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Mahindra Holidays and Resorts sees public-private partnership (PPP) as an important focus area for its growth given the fairly aggressive room inventory addition plan, according to Kavinder Singh, the company’s MD and CEO.

In a chat with CNBC-TV18, Singh outlined the strategy for achieving the goal of 10,000 rooms by 2030 along with a substantial growth in member additions.

The current market capitalisation of the company is ₹8,747.54 crore.

These are the edited excerpts.

Q: You have taken Mahindra Holidays to a certain stature. For your successor, Manoj Bhat, I wanted your thoughts on what your targets for FY25 and beyond are for the new management? Things that perhaps you couldn’t have completed and you have set as targets for the ones who succeed you?

A: We are looking to grow our room inventory from 5,000 to 10,000 keys and let me build a little bit on that by 2030. We have already put in various pieces of the puzzle together as to how to get there. Number one, we are working with various state governments and the public private participation is gaining significant momentum/ We had started one resort in Janjehli in Mandi district with Himachal Pradesh (HP) government, we have got the MTDC Harihareshwar concession agreement signed, and are also looking to start two new projects in Odisha. Two pieces of land parcels as we speak have been in-principle allocated and the demarcation and few other things are going on. We are also identified a few land parcels in Uttarakhand and are working with the government as it has the land allocation policy coming out soon. We have also signed a memorandum of understanding (MoU) with the Tamil Nadu government. So public-private partnership (PPP) is going to be a very big area of focus for us as we move forward, because we have a fairly aggressive room inventory addition plan.

The second good part is that we closed this year, or rather the quarter at ₹1,383 crore of cash on our books. And this is a significant movement upwards over the years as you have been seeing us. So we are very happy that we will be growing our business from 5,000 to 10,000 keys without almost taking no recourse to debt because we generated significant amount of cash this year as well operating cash.

Also Read | Mahindra Holidays targets 5x revenue growth, says Group MD & CEO Anish Shah

Now, with these two factors at play, we hit a member additions mark of about 20,000 this year and the quarter four also turned out to be extremely robust. And as member additions accelerate in-line with the inventory additions, more cash will get generated, resulting in more investments in acquiring or building new resorts.

Q: You have told us the quarterly run rate of membership should hit around 5,000. You have achieved that. From hereon, what could the quarterly run rate look like? You said the EU business will turnaround and it did. What is the outlook from here?

A: I’m extremely happy with the Holiday Club Resorts performance in Q4. We hit almost our all-time high number of 6.8 million euro EBITDA (earnings before interest, tax, depreciation, and amortisation) in Q4 leading to five million euro EBITDA for the full year.

The war is still going on Finland and Sweden are still in recession. These are the two big areas where we are present apart from Spain. But having said that there has been a significant focus on cost reductions, significant focus on driving Timeshare sales, which was up 9%. YoY basis people are buying more Timeshare rather than buying second home. Finns love buying second home. But right now the mortgage rates are high. So there are factors which are playing out, management is extremely – they have put in lots of measures to get the Timeshare sales going and the renting sales going. So as a result of which the Holiday Club Resorts turn around, which we had promised is clearly well on its way.

And the areas that I’m even more happier about is that we have 59% of our sales coming from the digital rooms. For the full year, this number stands at 57%. We are also targeting corporate retail business in a much bigger way. So we have launched a few initiatives there.

Also Read | Mahindra Holidays shares gain over 4% amid top management changes

The product proposition is also more robust than ever, immersive experiences for extended families, friends, and the fact that we have access to more than 100 resorts for our members including European resorts the number comes to about 150.

Q: You have cash on your books, growth is coming by European EBITDA turning around everything, any area of improvement where you think you could have done a little better. And that leaves the room open for the next person to come in and see if that area has a growth target apart from all these things that you’ve lined out.

A: Our inventory additions in the past used to be just at about 200 level, we are now at around 400 level. And I’m sure that this is going to accelerate – to my mind this is a high growth opportunity area, which in the past we could not do enough of. And the fact that we have significant cash on our books, which wasn’t there many years ago, will also act as a very big opportunity to create momentum in room additions.

Q: How is Manoj Bhat different from you?

A: I always look to see similarities than differences. We are bound by a common code, which is Mahindra Rise. The philosophies will continue and is common. All the leaders at Mahindra Group are driven to excel, to move with significant amount of collaboration, agility, as well as boldness.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Seven stocks with potential for at least 5-10% gains in the short-term

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Disclaimer: The views and investment tips expressed by investment experts on CNBCTV18.com are their own and not that of the website or its management. CNBCTV18.com advises users to check with certified experts before taking any investment decisions.

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

Mahindra Lifespace confident of beating ₹2,500 crore pre-sales target for FY25

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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With robust demand leading to new projects selling out within days, Mahindra Lifespace Developers is confident it will exceed its pre-sales growth guidance of ₹2,500 crore for the current financial year (FY25).

Amit Kumar Sinha, MD and CEO says the company’s focus will increasingly shift from affordable to mid-premium to premium. “Of the sales value, about 80% of our future projects will be premium at least in the next three years, and 20% will be affordable.”

The company reported a strong operational performance for January-March with bookings and volumes at a multi quarter high. Collections also surged 35%. The quarterly booking run-rate was above ₹1,000 crore during the quarter.

The company also last week bought a two-acre land at Whitefield in east Bengaluru with development potential of around 0.2 million square feet of saleable area and a gross development value of approximately ₹225 crore, which will mainly comprise mid-premium residential apartments.

These are the edited excerpts.

Q: Can you tell us what led to the strong operational performance in terms of bookings? How is the demand situation right now and what is the quarterly run rate that you are looking at? In Q4 it’s gone to above ₹1,000 crore in terms of bookings, what do you think you can do as a sustainable rate in FY25?

A: It’s been one of our best quarters, great on the pre-sale side. We had a great launch Mahindra Vista in Kandivali, practically sold out within days. Q4 demonstrates the buoyancy that we see in the market, especially in Mumbai, Pune and Bangalore where we are operating. We expect the momentum to continue. The absorption is very healthy in Mumbai, Pune and Bengaluru.

We launched one project each in Pune and Bengaluru in the last six to eight weeks and sold out 70 to 80% in a weekend on both projects.

For FY25, we had given a guidance of ₹2,500 crore, but given the momentum, we hope to surpass that. It’s a lumpy business. There are cycles related to land acquisition, the land-to-launch timeline could vary based on approvals. But we are confident that we will be beating our target that we had publicly announced last time around which is ₹2,500 crore pre-sales for FY25.

Q: You have a development pipeline of a little over 37 million square feet. How much of that is completed and under construction; can you break it up for us? Where are you veering towards? Is it more premium or is it towards affordable?

A: Historically, we have played a big role in affordable. But over the last two years, we are focused a lot more on mid-premium and premium. The reason it makes sense is because the per capita income and land prices are going up, and it makes sense for us to create dream homes, which match our target segment. We will continue to look at affordable. The commitment we have made to the projects are already going and we’ll be looking at those products as and when they come along. But our focus will shift from affordable to mid-premium to more and more premium. In terms of the sales value of the project, about 80% of our future projects will be premium at least in the next three years and 20% will be affordable.

Also Read | Mahindra Lifespaces ends higher on ₹800 crore sales in Mumbai residential project

Q: You have been increasingly sounding optimistic about the sales numbers. Operationally, you got things in order. But let’s focus a little bit on the balance sheet. Your debt is not too high, it’s at around ₹550 crore, but since you’ve got such a big pipeline what will this debt number look like? That’s point number one. And you had a 50-acre land in Chennai that you had planned to sell when does that take place?

A: Let me start with the second one. We have a huge land parcel as part of Mahindra World City Chennai which is part industrial and part residential. On industrial, we do the master development which we have done with Mahindra World City Chennai as well as North Chennai and our business is to attract global MNCs which are looking for manufacturing facilities. These are kind of plug and play industrial park. We are already selling land as part of it.

The 50 acres that you might be referring to is the residential part of the World City as well as origins. Instead of selling those land pieces we are doing a plotted development. We have done two in the last 12 months. And we are also looking for additional high rises, where the economics make sense. We are not trying to sell those pieces to a third party or any other developer.

On the balance sheet, we are very thoughtful about our debt-to-equity ratios. Our goal is to be as conservative as we can be, but for growth, we will need capital and given Mahindra Lifespaces has been designated as a growth jump at the Mahindra Group level, we expect support in the form of equity or even debt to come from the group. Ideally, equity because it aligns very well with the nature of this industry.

We have just started the discussion on raising a platform that could be supported by external fund providers.

Q: So what is this platform for?

A: We have done a couple of them already. We have done one with HDFC Capital in the past. It’s for residential projects, which have an upfront equity requirement because you will have to buy a land parcel. So this is for that. The efforts have just started. But we’re thinking bigger in terms of how we get equity in the company to support our aspirations.

Q: This is beyond that 50 acres in Chennai that you spoke about, right?

A: It’s very different from Chennai.

Q: Any new sort of redevelopment projects in Mumbai in the pipeline, which we will hear about?

A: There is a lot in the pipeline. But we have a very high guardrail for saying yes and no to these projects. We have two in the pipeline that the societies are close to finalising.

For more, watch the accompanying video

Elon Musk forms several ‘X Holdings’ companies to fund potential Twitter buyout

3 Mins Read

Thursday’s filing dispelled some doubts, though Musk still has work to do. He and his advisers will spend the coming days vetting potential investors for the equity portion of his offer, according to people familiar with the matter

KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow

CSB Bank expects more margin squeeze

KV Prasad Jun 13, 2022, 06:35 AM IST (Published)

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Private sector lender CSB Bank asset quality deteriorated in January-March, slippages were elevated, and the corporate book shrunk although deposit momentum is strong.

The bank reported a 3.1% year-on-year (YoY) dip in net profit to ₹152 crore for and a net profit of ₹156 crore.

The stock was down 3% at ₹373 today (April 26).

Pralay Mondal, MD and CEO, of CSB Bank told CNBC-TV18 that the banking sector is currently experiencing a transition in net interest margins (NIMs) primarily due to rising deposit costs.

CSB’s NIM has narrowed to around 5%, and it is anticipated to remain between 4.5% and 5% next year, leaning closer to 5%.

This impact could last for another quarter due to residual high deposit costs.

The bank’s shifting focus towards wholesale SME retail, which currently makes up nearly 48% of its portfolio, may also slightly impact the NIM, but any potential decrease is expected to be offset by an increase in fee income and business, he said.

These are the edited excerpts.

Q: The first question that shareholders have is about the deterioration in asset quality. Can you tell us what led to this surge in slippages? Was there any one-off this quarter? And what are the average slippages that the bank would have over the next few quarters?

A: Our gross NPA and net NPA did slip a little bit this quarter. But as you rightly said it is a one-off, there was one account which has a coverage of around ₹70 crore with us right now outstanding. And for some technical reasons, it slipped this quarter though it was not on our watch list at all. So that’s why we didn’t discuss it last quarter otherwise we would have given disclosure. We are pretty confident that we will reverse this definitely in this fiscal year and hopefully in the next two quarters.

And if you take this out now, how does it impact the overall non-performing assets (NPA)? There is ₹18 crore in terms of provisioning because we do ₹25 crore provisioning and there’s another ₹22 crore of around interest impact which overall takes up to ₹20 crore. If you take that ₹20 crore out, I think overall GNPA and NNPA, PCR, the coverage ratio all of that looks typically the way we have been covering for the full year.

Next year, we will be in line with what we had been till Q3 this year in terms of Gross NPA and net NPA. Coverage and slippages will be similar to what we are till Q3FY24.

Q: You’re saying the slippages on an average would be what you did in Q3, which was around ₹40 crore odd? That would be the average that you’re looking at over the next couple of quarters or will it be much higher than that?

A: On a percentage basis, yes. And overall GNPA will be somewhere between 1.3 and 1.4 and NNPA will be somewhere between 0.3 and 0.35. And we will be back above 70% in terms of our PCR, which is the coverage ratio.

While we’re talking about credit cost, our credit costs for the full year basis are two basis points negative. So it has not really impacted the overall yearly numbers and we hope that next year also our credit cost should be below 10 basis points.

Q: You don’t think this is exceptionally low? You don’t think that will sort of much normalise? Can you contextualise that in the context of CSB and then also talk to us about net interest margins (NIMs)? What’s your sense for that for FY25?

A: You are right. The bigger banks will have more normalised kind of numbers. For us, we must appreciate that more than 45% of our portfolio is gold loans where the slippages and NPAs are very low. Credit costs are almost close to zero. So to that extent, it helps us.

Also, if you look at the last two years, we have been closer to zero in terms of our overall credit cost. So I’m being pretty conservative when I’m talking about 10 basis points in terms of credit costs next year. Hopefully, it will be less than that.

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Coming to NIMs, yes, you’re right. I think the entire banking system is going through a little bit of a transition on the NIM because deposit costs have gone up for everybody. That is true for us as well. Our NIM has come closer to 5% now, and next year, I think we’ll be somewhere between 4.5% and 5% – closer to 5%. And that’s primarily because of two reasons. One is some tail of the deposit costs will continue to impact the entire ecosystem, including us for another quarter or so. But that will be not much. The other reason is we also are planning to shift our asset book gradually more towards wholesale SME retail. Because today the gold is almost 48%. So to that extent, I think the NIM will get a little impacted, but it will be compensated by our overall fee income and fee businesses. And hence, from our overall ROI perspective, we should close this year around 1.79. I think we should be able to hold close to that. All right.

Q: There’s another player in the gold business, which is IIFL. Have you seen any kind of shift towards banks? Have that been more inquiries for your gold loan business?

A: I think we are in a different segment of business because typically the interest, which we charge our customers is in the range of 12-12.5% or even less and non-banking financial companies’ (NBFCs) interest rates are almost 50% higher than us. So to the extent, the segments which you’re talking about are very different. So it will not necessarily give us more business.

The second question which Prashant had asked, I think I just sort of wanted to allude to is overall, I think the wholesale side of the business will grow for us next year. And SMEs also will grow next year. So to that extent, the gold portfolio impact will be a little lesser, and hence, overall, our balance sheet will look a little more balanced from that perspective. But coming through next year’s growth, I think gold growth will continue to grow for us, but not at the cost of others. We have our own ways of building our portfolio, and we’ll do that.

Q: Just wanted to ask you – are there some inorganic growth plans because there is some kind of buzz that maybe CSB is on the prowl, and maybe one of those public sector undertaking (PSU) banks could be on your radar. It’s happened in the past – if you recall – with the Bank of Maharashtra I think so. Are you on the prowl again, are you looking at any PSU bank?

A: Purely from a CSB perspective, I can tell you that we are building the bank completely organically. I can’t answer on behalf of Fairfax, which is an investing company, and they can look at whatever opportunities they want to look at. But from our perspective, we are looking at organically growing the book. And if you look at our biggest investment this year is in technology and most of our technology investments are not in line with the bank you’re talking about. Our systems are different. So to the extent had I known that something is happening, then I would have done it differently.

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KV Prasad Journo follow politics, process in Parliament and US Congress. Former Congressional APSA-Fulbright Fellow