Cholamandalam Investment and Finance Company Ltd Q4 2022 Earnings Call Transcript

The following is excerpted from the question-and-answer section of the transcript.

Question: Piran Engineer - CLSA Limited, Research Division - Analyst : Congrats on the quarter. Just wanted to understand regarding your small business and small enterprise loan. In a steady state, maybe 2, 3 years down the line, how many branches will you all be doing this business out of it? Is it from the same 350, 400 branches of LAP? Or from the overall branch pools that you all have? And also how should we think about per branch disbursements on a steady-state basis? And if I may squeeze in another question, the performance incentives that you spoke about, does that come only in the fourth quarter every year? Or is it paid out quarterly? So yes, these are my 2 questions. Ravindra Kumar Kundu - Cholamandalam Investment and Finance Company Limited - President, Business Head of Vehicle Finance & Executive Director Okay. See, the performance incentive is provided every quarter, but it will reflect that quarter's performance largely. So for example, in the current year if you see Q1, we did not have a large amount of profit. Actually, we had a very mild profit. So in that quarter, the incentive provisioning would be minimal. In quarter where there is PBT achievement, that NPA achievement, the disbursement achievements are higher, in those quarters, we tend to take a higher hit of this. But this is to go with the result of the company and in which -- in the pattern in which the teams are rewarded. But one part of it that field teams are getting rewarded on the -- on a month-on-month basis, while the performance incentive is more a provision, which is carried and translated and given at the end of the year. Murugappan Subbiah Yes, the secured business and personal loan, we have given a parameter of MSME ecosystem in Page #12. You will see that we are in the top of the bottom the parameter where this particular business is happening, along with the affordable housing division. So both are actually doing the -- addressing the similar type of customer whereas health of large nonprofessional customer having the properties they can offer us as a mortgage. These guys typically do a small business like saloon, electrical appliance be the groceries, no stationary shops. And their cash flows are calculated when someone is visiting them to understand how is the footfall at all. REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2022 / 4:30AM, CHLA.NS - Q4 2022 Cholamandalam Investment and Finance Company Ltd Earnings Call So these customers are not available in the town where the LAP is performing. LAP is mainly in Tier 1, Tier 2, Tier 3. And they are addressing a little larger bigger customer where the credit history is available, banking habit of the customer is very, very clearly [staff leased] and CIBIL score is also -- can be -- 100% CIBIL score is there. So therefore, the SBPL will be focusing more on Tier 2, 3, 4, 5, 6 and small business, which is what the top of the bottom of the parameter of the customer. In 3 to 4 years' time, we will be definitely covering almost 70% to 80% of the Tier 2, Tier 3 Tier 4 branches of the vehicle finance and total Chola we have today. And our disbursement will start delivering a good number by the time. As of now, in affordable housing, we are doing almost INR 200 crores per month. This number has come after 5 years. So affordable housing took 5 years to reach to this INR 200 crores. I'm not saying that we'll take 5 years to do because now we are more learning with respect to the similar type of customers. So we'll do much better than that in terms of learning curve.

Question: Parameswaran Subramanian - Macquarie Research - Analyst : So first question was on the Payswiff subsidiary. So now you've reported that the revenues were INR 45 crores for FY '22. So I just wanted to cross-check that because I think in FY '21, it was at INR 200 crores. So what is the reason for the reduction? And if you could talk about profitability for this business and how it's going to contribute for the lending -- to the lending business going forward? So that's my first question. Secondly, you also mentioned on supply chain finance and fintech partnerships aiding the supply chain panel. So what fintech partnerships are we talking about over here? Is it largely the trades platform? Or is there something else apart from that? And you said 1/3 of the new businesses are coming from fintech partnerships. How is it split between SMEs and consumer business? Sir, those were my 2 questions.

Question: Parameswaran Subramanian - Macquarie Research - Analyst : Yes. So you mentioned fintechs and supply chain partnerships. Is it largely a trades platform? Or is there some other partnership? Or is Payswiff already contributing... REFINITIV STREETEVENTS | www.refinitiv.com | Contact Us consent of Refinitiv. 'Refinitiv' and the Refinitiv logo are registered trademarks of Refinitiv and its affiliated companies. MAY 06, 2022 / 4:30AM, CHLA.NS - Q4 2022 Cholamandalam Investment and Finance Company Ltd Earnings Call Murugappan Subbiah Yes, we're exploring multiple -- including a lot of these -- there are a lot of these fintechs now that are kind of getting into the whole B2B supply chain, right? And so we are talking to a lot of those fintechs to try and see if we can do something with that.