ICFL/LS/00161/2024-25

October 25, 2024

BSE Limited National Stock Exchange of India Limited

Listing Department, 1st Floor, Exchange Plaza, C-1, Block G,
P J Towers, Dalal Street, Fort, Bandra Kurla Complex,
Mumbai - 400 001 Bandra (E), Mumbai – 400 051

Scrip Code: 541336 Symbol: INDOSTAR

Sub.: Transcript of analyst(s) / institutional investor(s) call held on October 21, 2024 at 12:30 p.m.
(IST)

Dear Sir / Madam,

Please find enclosed herewith transcript of analyst(s) / institutional investor(s) call held on Monday,
October 21, 2024 at 12:30 p.m. IST, pertaining to the Unaudited Financial Results of the Company for
quarter and half year ended September 30, 2024.

The transcript is also available on the website of the Company at www.indostarcapital.com.

Request you to kindly take the above on record and disseminate the same on your website.

Thanking you,

Yours faithfully,

For IndoStar Capital Finance Limited

SHIKH Digitally signed
by SHIKHA JAIN

A JAIN
Date: 2024.10.25
18:54:00 +05'30'

Shikha Jain
Company Secretary & Compliance Officer
(Membership No. A59686)

Encl: a/a

IndoStar Capital Finance Limited

Registered Office: Silver Utopia, Third Floor, Unit No 301-A, Opposite P & G Plaza, Cardinal Gracious
Road, Chakala, Andheri (E), Mumbai - 400099, India. | T +91 22 4315 7000 |
[email protected] | www.indostarcapital.com
CIN: L65100MH2009PLC268160
 “IndoStar Capital Finance Limited
Q2 and H1 FY '25 Earnings Conference Call
October 21, 2024

MANAGEMENT: MR. RANDHIR SINGH – EXECUTIVE VICE CHAIRMAN --

INDOSTAR CAPITAL FINANCE LIMITED
MR. KARTHIKEYAN SRINIVASAN – CHIEF EXECUTIVE
OFFICER – INDOSTAR CAPITAL FINANCE LIMITED
MR. VINODKUMAR PANICKER – CHIEF FINANCIAL
OFFICER – INDOSTAR CAPITAL FINANCE LIMITED
MR. SHREEJIT MENON –CHIEF EXECUTIVE OFFICER –
INDOSTAR HOME FINANCE PRIVATE LIMITED
MR. PUSHKAR JOSHI – CHIEF FINANCIAL OFFICER –
INDOSTAR HOME FINANCE PRIVATE LIMITED

MODERATOR: MR. VIRAL SANKLECHA – ORIENT CAPITAL

 IndoStar Capital Finance Limited
October 21, 2024

Moderator: Ladies and gentlemen, good day, and welcome to IndoStar Capital Finance Limited Q2 and H1
FY '25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only
mode. And there will be an opportunity for you to ask questions after the presentation concludes.
Should you need assistance during the conference call, please signal an operator by pressing star
then zero on your touch-tone phone. Please note that this conference is being recorded.

I now hand the conference over to Mr. Viral Sanklecha from Orient Capital. Thank you, and
over to you.

Viral Sanklecha: Thank you, Shilpa. Good afternoon, ladies and gentlemen. I welcome you for the Q2 and H1 FY
'25 earnings conference call of IndoStar Capital Finance Limited. To discuss this quarter's
business performance, we have from the management, Mr. Randhir Singh, Executive Vice
Chairman; Mr. Karthikeyan Srinivasan, Chief Executive Officer; Mr. Vinodkumar Panicker,
Chief Financial Officer; Mr. Shreejit Menon, CEO, IndoStar Home Finance Private Limited;
and Mr. Pushkar Joshi, CFO IndoStar Home Finance Private Limited.

Before we proceed with this call, I would like to mention that some of the statements made in
today's call may be forward-looking in nature and may involve risks and uncertainties. For more
details, kindly refer to the investor presentation and other filings that can be found on company's
website.

Without further ado, I would like to hand over the call to the management for their opening
comments, and then we will open up floor for Q&A. Thank you, and over to you, sir.

Randhir Singh: Good afternoon, ladies and gentlemen. I'm Randhir Singh, Executive Vice Chairman of IndoStar
Capital Finance Limited, and I welcome you to our Q2 FY '25 earnings call to discuss our
financial performance. I hope you had the opportunity to review our financial results and investor
presentation, which are accessible on our website and via the stock exchanges.

Joining me today are Mr. Karthikeyan Srinivasan, our Chief Executive Officer; Mr. Vinod
Panicker, our Chief Financial Officer; Mr. Shreejit Menon, the Chief Executive Officer of
IndoStar Home Finance Private Limited; and Mr. Pushkar Joshi, the Chief Financial Officer of
IndoStar Home Finance Private Limited. At the outset, let me share with you how we have
structured this call.

First, I'll briefly cover some key strategic highlights that the management team delivered over
the last quarter. Then Karthik will provide you an overview of the macroeconomic drivers and
key industry trends, setting the broader context for the financial performance of our CV business.
Vinod will then provide Q2 FY '25 earnings update for the stand-alone parent entity. This will
then be followed by Shreejit, sharing the quarter two FY '25 earnings call update for IndoStar
Home Finance Private Limited.

Post this, we will open the call for further questions. Here is an overview of some of the key
developments at IndoStar for the last quarter. First, sale of IndoStar Home Finance Ltd. to EQT.
We discussed this in our previous call on the 19th September 2024. IndoStar Capital Finance
announced the sale of its wholly owned subsidiary, IndoStar Home Finance Private Limited, to
Witkopeend BV, an affiliate of BPEA EQT Mid-Market Growth Partnership, a global private

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 IndoStar Capital Finance Limited
October 21, 2024

equity investor, for INR1,750 crores on a fully diluted basis. The transaction is subject to
customary conditions precedent, including receipt of RBI approval, consent from lenders and
shareholders.

Number two, rating upgrade by CRISIL to stable. On September 9th, 2024, the long-term rating
of IndoStar Capital Finance Limited's facilities and instruments was upgraded by the rating
agency CRISIL to stable from negative while reaffirming the rating at CRISIL AA-, and short-
term rating of commercial paper is reaffirmed at A1+.

Third, issue of secured, redeemable, nonconvertible debentures. During the last quarter, the
company raised INR266 crores through its maiden public issue of secured, redeemable,
nonconvertible debentures. I will now hand over the call to Karthik.

Karthikeyan Srinivasan: Thank you, Randhir, and good afternoon, everyone. Welcome you all on this call today. I truly
appreciate all of you being part of our journey. Let me start by discussing the macroeconomic
factors this quarter, which has been quite tough. The IMF had reaffirmed India's growth forecast
for '24 at 7% in July. The improved prospects for private consumption, particularly in rural areas,
was a key factor in this forecast. The IMF expects a slight moderation of growth to 6.5% next
year.

The annual retail inflation based on the All India Consumer Price Index rose to 5.49% in
September, higher than the 3.65% in August. The key driver was food inflation that rose to
9.24% annually compared to 5.66% in August, which was triggered by the late second phase of
the monsoon that affected both vegetable output and supply to local markets. If you notice, even
in today's newspaper, there has been a discussion around how onion is getting impacted due to
late arrival as well as damage due to the monsoon.

While inflation was still within the Reserve Bank's medium-term target of 2.6%, this is the
highest-level inflation rate since December '23 when it was 5.69%. In view of this stubborn
inflation, the RBI has kept the repo rate unchanged at its monetary policy meeting on October
9th, 2024. This is the 10th consecutive meeting since February 8th, 2023, that the MPC has held
the repo rate steady at 6.5%, while it has changed the stance of the monetary policy to neutral
from withdrawal of accommodation.

The RBI Governor, in his address, pointed to the high growth the NBFC sector has witnessed in
the last few years and urged caution when he said, I quote, "A growth at any cost approach would
be detrimental." Given the tone of the regulator and the tightening of regulatory norms for bank
funding to the NBFC sector, already -- this has already impacted the NBFC's access to funds.

According to an ICRA report from August '24, the elevated cost of funds increased competitive
pressure from banks, slowing growth and resulting asset quality challenges is expected to result
in weakening profitability for the NBFCs, which is expected to decline by 25 to 45 basis points
vis-à-vis '24 level.

Now changing gears to the commercial vehicle industry. Over the past few years, especially in
'22 and '23, the CV industry saw a good growth, both in volume and tonnage terms, greatly

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October 21, 2024

expanding our foundation. This was basically the COVID rebound years where the market
wanted to invest in newer and newer commercial vehicles and BS-VI was also new.

This growth was also driven by infrastructure development, increased mining activities, a
replacement demand that got kicked in because of COVID years didn't trigger the replacement
demand. As we look forward, this replacement demand is expected to be steady, primarily driven
by aging fleet. The implementation of the scrappage policy is likely to also spur the new vehicle
growth.

Despite the strong revival of the monsoon in the second phase, we believe the CV growth in the
current year will moderate, driven by the high cost of the new BS-VI vehicles, which continues
to rise, and with the new air-conditioned driver cab rules coming into force in March next year,
we see no respite in the rise of the vehicle cost.

In addition to this, interest rates are also expected to remain high, muting growth. Given the rise
in the new vehicle cost, the used CV segment will continue to see a high demand from
transporters. The drivers for this are as follows. First and foremost, there is a scarcity of old
vehicles and fewer financing options available for the retail and FTU Profile.

Over the past two years, the used CV industry has grown by close to 30% due to price hikes,
driving limited supply. This scarcity originates from the COVID years, sale of new vehicles
being muted and driven by the move from BS-IV and the industry being impacted by COVID.
The overhang of the scrappage policy, which we are seeing each of the states coming up with
newer and newer version, will also push customers to sell their older vehicles to the -- which are
close to the 10-year mark and replace them with recent-used commercial vehicles.

At IndoStar, we are committed to our goal of exploring new products, strategies to boost returns
and diversifying our offerings to retail CV operators. We plan to launch ancillary products
around the trucking industry, like the tyre finance, so that the complete benefit of IndoStar can
get translated to our customers. We remain committed to enhancing our analytics to ensure our
model is flexible and capable for growth.

Recognizing the increasing importance of technology, we have made significant investments in

our end-to-end loan origination system, which is now digitally driven. Additionally, we are also
expanding our operations, particularly in Tier 3, Tier 4 locations, with an emphasis addressing
the rise in rural demand due to good monsoon.

The commercial vehicle disbursement for Q2 FY'25 reached INR1,499 crores, showing a growth
of 53% over the previous year of INR948 crores. We have actively pursued our goal to reduce
NPAs through the implementation of robust collection tactics, superior credit appraisal and
stringent control measures, and we have been able to reduce delinquencies quarter-on-quarter,
even though the last quarter, it has been challenging due to the delayed monsoon and the second
phase of the monsoon.

Currently, our GNPA stood at -- stands at 4.97% for FY'25 Q2 for the stand-alone entity. We
have also launched our new small business loan division with a focus on micro loans against
property, particularly targeted at Tier 3, Tier 4. This, we have launched in the Tamil Nadu

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October 21, 2024

market. This strategic shift not only ties closely with the market demand but also reflects our
dedication to expanding our footprint and supporting entrepreneurship in under served regions.

Now I hand over the call to Mr. Vinod Panicker for our financial performance.

Vinodkumar Panicker: Thank you, Karthik, and good afternoon to all of you. I sincerely appreciate your presence on
this conference call today, and I appreciate the fact that most of you have been with us over the
last several quarters. Please allow me to provide you with an overview of our financial
performance for Q2 and H1 of FY'25.

Before we begin with the financial performance, we just wanted to mention that post
announcement of HFC business sale, the consolidated numbers are presented as per Ind AS 105
noncurrent assets held for sale and discontinued operations. All consolidated numbers that I am
mentioning now would be including the housing finance business.

During the quarter, our consolidated net income from operations was at about INR 218.5 crores,
showing a 14% increase on a quarter-on-quarter basis and showed a net interest margin of about
5.6%.

Turning to the operating expenses. We recorded INR160.5 crores in the quarter, representing a
16% increase over the immediately preceding quarter, which was on account of both increase in
workforce and also branch expansion costs. Our overall profit -- consolidated profit stood at
INR31.7 crores as compared with INR24.9 crores in the immediately preceding quarter.

On a consol basis, our assets under management was at about INR10,112 crores as compared to
INR9,565 crores in the immediately preceding quarter and up by 31% versus the INR7,726
crores that was there in the same quarter last year. The disbursement in the current quarter was
at about INR1,724 crores on a consol basis versus about INR1,627 crores in the immediately
preceding quarter and against INR1,269 crores in the same quarter of last year. This can be
attributed to the strong focus on the retail segment. Retailization effort continues to yield
favorable results, and we are confident in sustaining profitable growth in the coming quarters.

At ICF stand-alone level, our net total income stood at INR165.9 crores, an increase of 15%
from INR143.8 crores in the immediately preceding quarter. Our operating expense was at about
INR129 crores, up from about INR112 crores from the -- which was there in the immediately
preceding quarter.

As on 30th September, we maintained a cash and cash equivalent of about INR791 crores.
Additionally, about INR512 crores was kept in bank and trust towards securitization deals as
security deposits. This is even after we repaid close to INR1,300 crores of our debt in the current
quarter.

In terms of funding, we have made substantial progress in improving our liquidity position by
improving incremental funding -- raising incremental funding of about INR2,361 crores in the
second quarter, including INR1,391 crores which came from bank, either in the form of term
loans or working capital demand loan or securitization.

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 IndoStar Capital Finance Limited
October 21, 2024

Our emphasis on the coming quarter -- in the coming quarters is to continue increased financing
from banking channels in a big way. That was one of the points which was possibly worrying
most of you when we spoke in the several quarters -- past few quarters.

Over the last 3 quarters, incrementally funds are being raised at lower levels as the confidence
of the bank and the other investors -- other lenders on IndoStar has improved. Our incremental
cost has come down from about 12.7% that was there in Q4 FY'22 to 10.1% in Q2 FY'25.

During the quarter, we -- like Randhir mentioned, we successfully completed our maiden public
issue of NCDs that we had issued at a coupon rate of anything between 10.3% to 10.7%. This
trend, we are hopeful of continuing as the business stabilizes and is seen by the lenders as such.

Our capital adequacy stood at about 25.9% and the debt equity is at above 2.26x, both of which
gives ample idea to anyone who looks at the numbers that there is ample headroom for further
growth and for further borrowing, which will lead to further growth. The more we leverage is
the more we will be able to improve our ROE going forward.

The disbursement in the vehicle finance segment was at about INR1,449 crores, like Karthik
mentioned, up by about 53% versus the same quarter last year. And for the vehicle finance, the
AUM stood at about close to INR7,000 crores, at INR6,964 crores, up by about 10% against the
immediately preceding quarter.

We are pleased to report that our yields have also improved significantly. And with our focus on
Tier 3 and Tier 4 and also focus on light commercial vehicles and other smaller assets, which
we combine and call it as Focus4, the yields have gone up to 18.5% from about 17.5% that was
there about a year back.

Notably, 99% of our CV disbursement is in the used CV space, which permits us to get better
yields. Collections have been impacted by heat wave and heavy rain across the industry, and
some of it you see now in our collections as well. We achieved a total collection of INR993
crores during the quarter as against INR905 crores in the immediately preceding quarter.

Our CV EMI to EMI collection efficiency was at about 89%, and including overdue at about
93%, which is about 200 bps lower than the immediately preceding quarter. We managed to
keep the gross Stage 3 at 4.97% while the net Stage 3 inched up slightly to about 2.5%. With net
revenue from operations improving and opex stabilizing, we expect to improve our profitability
in the next few quarters.

Now I invite my colleague, Shreejit Menon, to provide further insights into the housing finance
business, which is another key area of our business in the -- until the last quarter. Over to you,
Shreejit

Shreejit Menon: Thank you, Vinod. Good afternoon, ladies and gentlemen. I'd like to start by
taking you through the key highlights that illustrate our accomplishments during the quarter
ended September 30, 2024. Randhir mentioned about the milestone transaction, and really that's
a validation of the business and the business model and sets us up to becoming a pedigree
affordable housing finance company in the years to come.

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 IndoStar Capital Finance Limited
October 21, 2024

Now moving on to the business parameters. Despite the lean seasonality, we continued the
growth momentum from Q1 to clock INR261 crores disbursement numbers for Q2 FY'25. We
are delighted to inform that we've made strong progress across most business matrices. During
the quarter 2, with a total disbursements of INR261 crores, our assets under management reached
INR2,561 crores, representing a robust growth of 13% on a YTD basis.

Our loan book stood at INR2,047 crores. Our customer base now stands at more than 32,500,
depicting our granular nature of our assets with an average ticket size of INR9 lakhs. And we've
maintained that average ticket size now for over the last 2 years. Tamil Nadu, AP, Telangana
and Maharashtra continue to remain our core geographies, accounting for almost 85% of our
portfolio.

We continue our journey to enhance operational efficiency and embrace digital transformation.
We've now got a total branch network of 128 branches across the country as on 30th September
2024, and continue to expand radially in the chosen geographies by way of digital locations.

Maintaining excellent asset quality remains a cornerstone of our operations. Our 90-plus days
past due portfolio stands at 1% and 1 plus DPD stood at 3.9% as on 30th September '24, which
is range bound as compared with 0.9% and 3.95%, respectively, in previous quarter. Our gross
Stage 3 assets, GNPA, stood at 1.41% as on September 30, 2024.

We continue to enhance our digital infrastructure to provide a seamless experience to our valued
customers. As mentioned during the last quarter, we've now gone live with our digital connector
app to onboard connectors seamlessly starting this quarter.

Continuous progress in digital capabilities remain a way of life for us. And as part of that
journey, we've developed and automated initiation of legal, technical and FI request from the
system, which is expected to further reduce the log-in to sanction TAT as we move forward.

We received our corporate agency license from IRDA on August 19, 2024, which was a key
element in the plan for financial year '24-'25. With this license, we can now distribute insurance
products to our customers, which will add to our top line.

On the liability side, we successfully raised INR495 crores during the quarter, majorly through
term loans from banks and PTCs. We're also pleased to report a strong liquidity position with
INR369 crores of cash on the balance sheet.

Now moving on to our financial performance. Our total income for the quarter 2 of FY '25 stood
at INR95 crores, with net interest income at INR55 crores. The same figures for H1 FY25 stood
at INR180 crores and INR104 crores, respectively. Pre-provision operating profits stood at
INR21 crores for quarter 2 and INR42 crores for H1 FY25.

Profit after tax stood at INR14 crores for the quarter and INR28 crores for H1 FY25. Our return
on asset as a result stood at nearly 3% for H1 FY25. We maintain a strong capital adequacy of
55.7% and a debt-to-equity ratio of 3.2x.

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In conclusion, our commitment to innovation, efficiency and maintaining a high asset quality
continues to drive our success. Looking ahead, we remain focused on executing our strategic
initiatives to further enhance our operational excellence, expand our customer base and explore
opportunities for growth. We are extremely optimistic about the future and remain dedicated to
delivering sustained value to our investors and our stakeholders.

Thank you once again for your continued support and participation. With this, I hand over the
call to the moderator for further course.

Moderator: Thank you very much Sir. We will now begin the question and answer session. Anyone who
wishes to ask a question may press star and one on their touch tone telephone. If you wish to
remove yourself from question queue, you may press star and two. Participants are requested to
use handsets while asking a question. Ladies and gentleman we will wait for a moment while
the question queue assembles.

We have the first question from the line of Mr. Vivek Ramakrishnan from DSP Mutual Funds.
Go ahead sir.

Vivek Ramakrishnan: Thank you and good afternoon. This is the first question, it's like a large question, which is
around the CV price increase and collection efficiency. Does the CV price increase mean that
the freight rates have also increased? Or will it be longer-term tenors for your customers?

The second thing is, what is the financial health of your target segment? Is that part of the
economy doing well? And importantly, this whole microfinance episode that we are hearing
about in the market. We see that Fintechs are there with the erstwhile microfinance customers,
and that is also impacting credit quality. So for your operators, do you see overleveraging as a
problem?

Karthikeyan Srinivasan: So I'll take it step by step. See, CV excessive pricing or the increase in pricing needs to get
addressed by a longer-term tenor, but NBFCs today don't have the wherewithal to give a longer-
term tenor of 7 years. 7 years will be the ideal scenario. If you look at international markets like
a Brazil or China, commercial vehicles new gets sold for 7 years because the vagaries get
managed with a lower EMI. But that's not going to happen here because I'll get into an ALM
problem.

So it will be a short-term product only, 4 years maximum or 5 years. That's the product which
we'll be offering. Because of the nature of our economy, and we don't have a comprehensive
scrappage policy. We will go through these kind of vagaries in the market. That's why it will be
restricted.

Second, collections. The extended monsoon has impacted collections. Many of the vehicles were
not able to move. That's the major problem, which we have been observing from operators. We
feel like this month, once the monsoon starts coming down, but for the southern markets, the
recovery will be good. Southern markets still last month were still holding on delinquency. There
were no problems. A few pockets of Kerala like Wayanad and all have got impacted due to the
road flood, but that will recover over a period of time.

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October 21, 2024

Are my profiles impacted by the microfinance? As of today, we have not seen any major stress
coming in there because these profiles typically are negative profiles for microfinance
companies also because typically if he is a transporter, these guys are not treated like a prime
customer even in the microfinance profile. So as of today, we have not seen. But once we get an
idea of balanced companies start coming out with the results, we'll be able to find out, but we
are not seeing anything.

The last question around freight rate increase, we have not seen any freight rate increase as of
today. The first half of the festive season has been quite muted.

Vivek Ramakrishnan: Thank you very much. So actually, what I meant was these Fintechs have landed up at the
doorsteps of a lot of companies. And so people are getting overleveraged buying consumer
durables and all, so I was wondering whether your freight operators have that issue.

Karthikeyan Srinivasan: As of now, we are not seeing any observed anything.

Vivek Ramakrishnan: Okay. Excellent. The second question, and this is to Vinod. And congratulations on increasing
your bank loans, which you really have worked hard upon. This is regarding the write-offs and
provisions that we see. So essentially, what you've done is write off the Stage 3 loans and reduce
the ECL provisions against that. Is that what you have done in this quarter? And if that is so,
could you just explain your write-off policy, please?

Vinodkumar Panicker: See, Vivek, thanks for being on the call and thanks for kind words, actually. I hope I'm audible.
See, we have done 2, 3 things. One is, definitely, we have got the policy of anything above 730,
we take 730 days outstanding or we have not received a single rupee, have an option to take a
call on that. That's something which is basis our policy. So anything which was there above 730
days outstanding DPD, that's what we have actually written off. That was one thing that we did.

And therefore, the ECL provisioning on that, there would not be any reversals because of that.
My provision that I take is only about 50 it being a pre to March '22 kind of portfolio, it would
be closer to 60%. So the additional balance of 40% would have been provided by me. That is
how we have done that. It's -- that's how we have actually got to the numbers that I gave.

Vivek Ramakrishnan: Thank a lot sir. I was just looking at the write-offs of INR57.4 crores and the ECL provision
knockoff of INR38.2 crores, so I was wondering how the math worked there…

Moderator: Sir, shall we move to the next...

Vinodkumar Panicker: No. Vivek, I think this could -- I would say, this would need to be slightly more detailed. I think
we will need to get off-line and discuss these numbers because I will possibly take you through
each and every number.

Vivek Ramakrishnan: No problem. Thank you very much and season greetings to you and your team.

Vinodkumar Panicker: I am making a note of it. I will do one thing. Possibly post this call me and my colleagues will
actually get on a call with you.

Vivek Ramakrishnan: Thank you. Really appreciate. All the best.

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Moderator: Thank you sir. We have the next question from Mr. Shubhranshu Mishra from Phillip Capital.
Please go ahead.

Shubhranshu Mishra: This is Shubhranshu Mishra here. So I just want to extend the previous question of Vivek.
Essentially, if we are seeing a slowdown in CV, what tonnage of vehicles are these? Any
geographies you want to point out to? Is it new or used and given the fact that we are largely
catering to used vehicles which would be mostly SRTOs, these guys take the spot pricing and
the freight prices largely reflect the spot pricing of the fuel. So they shouldn't be under much of
a stress if they are taking the spot pricing. So I just wanted to understand these particular
nuances?

Karthikeyan Srinivasan: See, Hi Karthik here. See, the challenge is not the pricing. The challenge is the movement of the
vehicles. If you see many of the markets, particularly the last week of August or the first week
of September markets like Andhra got flooded. So if your vehicle goes -- get stuck there, you
don't get the return load the same month. Your vehicle is there for a particular period of time.
So you lose your revenue. That is what has impacted the market.

So we are not saying anything around the freight. We have not seen any drop in the freight rate
as of now, but the movement has got severely impacted. That has naturally impacted the overall
earnings of the operator and that's what we are meaning here. If you see the overall industry, the
new vehicle has slowed down because of the monsoon effect. We feel like this month once the
monsoon moves away -- the rains move away, the irrigation contracts will kick off fully and the
mining will also restart and we will be able to see positivity.

Shubhranshu Mishra: Okay. So in terms of the pricing and the volumes of used vehicles, do we see a similar uptick in
FY '25 as we have seen in the last 2 years or 3 years?

Karthikeyan Srinivasan: See, as of today I have not seen any factor which will impact it negatively because if you notice
recently Telegana announced a scrappage policy. So the scrappage policy is not very far away.
Once that comes in the positivity around the used commercial vehicle industry will remain. Plus
many of us are moving customers from the unorganized segment to the organized segment. That
is also going to positively impact the used vehicle segment. So I don't see any negativity coming
around for this year.

Shubhranshu Mishra: Understood. And if I can just squeeze in one last question, given the fact that you alluded to
climatic changes impacting our performance. Are we going to make some kind of reserves in
our capital buffers for any climatic changes we might be seeing in the future year because this
is seeming to impact a regular movement for quite a few guys.

Karthikeyan Srinivasan: See, in our ECL model the macroeconomic factors like all these has a -- it's a factor. So it gets
captured there. And monsoon in India is something which is known for many generations. We
all know that during this period, there is going to be an impact. So that gets captured in the ECL
model.

Shubhranshu Mishra: What I meant is the erratic nature of monsoon. Of course, I know that the monsoon gets captured
in the ECL?

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October 21, 2024

Karthikeyan Srinivasan: See -- what's his name?

Shubhranshu Mishra: Shubhranshu.

Karthikeyan Srinivasan: Sorry. Shubhranshu if there are years in the past also where there have been lower monsoons or
monsoons which have got delayed, so all these go into the ECL factor. So we don't -- it is a 5-
year factor of macro factors. So I don't see any challenge coming in there or create -- need for
creating additional provision.

Shubhranshu Mishra: Understood. Thank you so much. I will come back in the queue.

Vinodkumar Panicker: Thanks Shubhranshu.

Moderator: Thank you so much. We have the next question from Mr. Jigar Jani from B&K Securities. Please
go ahead.

Jigar Jani: Thanks for taking my questions; I had a couple of them. One is I have seen two quarters of
collection efficiency declining. I think Q1 was impacted by heatwave, Q2 by I think flood is
what you mentioned. So do we see these write-offs or credit costs moving up because of these
lower collection efficiencies in the last two quarters for the full year FY '25? Will you change
our credit cost guidance? That's the first question?

And the second is, we have also seen on the standalone entity, employee benefit expenses going
up sequentially sharply. So any one-offs there, if you could highlight? That would be the second
question? And third, any update on what we are going to do with the inflows that we receive
from the sale of the housing finance subsidiary? Have we made any decision on that?

Vinodkumar Panicker: Yes, I will take your question, Jigar. Thanks for being on the call. On the credit cost, see these
things -- this current quarter has seen some bit of increase in the cost. But then we have factored
in these kind of costs on a full year basis. So maybe quarter-to-quarter, we will see changes, but
we don't expect things to be deteriorating on a full year basis.

Q1 has seen some bit of cost, Q2 has seen some cost. There would be substantial, I would say,
improvement in the third and the fourth quarter. That's what we -- in fact, I think Karthik, in a
different context did mention about that, that things will improve as we go forward. So we don't
see it's a challenge or we don't see any need to change our credit cost guidance. We had always
said that it would be in the 2% range on an overall basis. We'll stick to that and we'll continue to
maintain that.

On the employee cost, yes, there are -- -- I think during my initial commentary itself I had
mentioned about it, saying that we have seen increased cost. It's largely because of the number
of employees that are increasing. In fact, even in this quarter, the costs have gone up because of
certain senior management hiring and also on account of hiring of the field staff. We have
actually increased the total number in the standalone from about 3,500-odd to close to 4,000-
odd.

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And then we had -- normally in the first or second quarter we normally have a rewards and
recognition kind of event. So that -- last year it was spread over the year. We added about three,
four small ones. This time we had one large one. So that is something which has been fully
charged to the P&L in the current quarter. Therefore, the cost is higher as far as employee cost
goes.

On the inflow, I will request Randhir to -- of HFC, Randhir to actually comment on that, what
is it that we are planning to do?

Randhir Singh: Yes. So I think, like I said that while the inflow obviously is some time away, and we expect it
sometime in March, April next year. But really our plan is to really use it for the business, for
our core business. So the money will be used for our core business which is CV and small
businesses. So it's really towards the general business that we do, which is really toward
disbursement, loan repayment and regular opex.

So nothing kind of unusual than what we would do with any kind of liquidity. So for our regular
business is what we're going to use it for. Exactly specifically, obviously, something that we
decide once we are closer to the inflow which is, let's say, 6 months to 7 months from now.

Vinodkumar Panicker : Thanks Jigar.

Jigar Jani: Thank you so much for answering my questions. Thank you.

Moderator: Thank you so much sir. We have the next question from Mr. Prashanth from SBI. Please go
ahead.

Prashanth: Hi. Thanks for taking my question. Just broadly three questions. One the increase in write-offs
and Stage 3 numbers, if you could just increase what business is leading to that. Secondly, I see
that there's additional term loan of around INR815 crores done during the quarter. If you could
just give us some more details around that. And lastly, there was something in the public that
there's an ARC sale that was done in August '24. If you could just give us an update over that.

Vinodkumar Panicker: . I will possibly start with the last question first. You mentioned about the sale of ARC. See, we
have always wanted to close our corporate loan portfolio. And I think in the previous calls also,
Prashanth, we had mentioned that we will look at ways and means to get rid of the corporate
loan portfolio.

There were 3 loans which were there on our books. And we were looking at seeing how to look
at getting rid of them. In 2 of the cases, there are foreclosures being discussed and at advanced
stages. The third one -- so if these 2 goes away and we are confident that will go away in a
couple of quarters, we didn't want the third loan being -- to be there on the books. And therefore,
when we had an opportunity of doing a transaction with an ARC for the third loan, we thought
it is necessary to sell it off.

Along with that, there were certain old accounts prior to March '22, which were there of the CV
portfolio also, that also we actually got rid off. So that was the total of something like, all put

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together, roughly INR320-odd crores, which we actually wrote off -- which we removed from
the books and sold to an ARC.

On the second question on the bank borrowing, there you rightly said that we have borrowed
about INR815 crores of banks -- it was largely -- most of them are banks. Some of it are NBFCs.
We actually borrowed about INR50-odd crores from Suryoday. Maybe just to list the other
banks, State Bank was there. IDFC Bank was there. Canara Bank there. Karur Vysya was there.
DBS was there. And apart from that, we had one NBFC that was Tata Capital.

So all put together, it has come to about INR815 crores. Tata Capital, the total sanction was
INR350 crores, of which we have borrowed about INR230 crores. This INR815 crores considers
only INR230 crores of Tata Capital. INR120 crores is yet to be drawn.

You mentioned about Stage 3. Yes, see, I think we have responded to the previous queries also.
Myself and Karthik in different contexts have mentioned that there has been an uptick in terms
of -- I mean there was a reduction in collection efficiencies, which have seen the Stage 3 numbers
looking up. And that is seen in the overall numbers going from about -- so INR350-odd crores
to INR365 crores.

So we believe that, that has increased in the current quarter, but we are fairly confident that when
collection would see improvement in the current quarter and the next quarter, the numbers would
go down. So it's a temporary phase, and we are sure, we'll come out of it.

Prashanth: Sure. So both the Stage 3 and the write-off is primarily the CV business, if I understand.

Vinodkumar Panicker : Yes.

Karthikeyan Srinivasan: Yes. We don't have anything else, no, Prashanth.

Vinodkumar Panicker: All others we have already resolved.

Prashanth: Sure, sir. Sir, what would be the average cost for these term loans of INR815 crores? And just
on the ARC, if you could give us the total outstanding and provisions as of September end?

Vinodkumar Panicker: Cost is -- or the term loan cost would be in that 10%, 10.25% kind of thing. Its at all in, at PAPM.

Karthikeyan Srinivasan: And on the ARC, what did you want, Prashanth?

Prashanth: So what is the total outstanding SR and provisions as of the September end?

Karthikeyan Srinivasan: See, overall total was..

Vinodkumar Panicker: INR1,386 crores. And on that, we are carrying a provision of about INR348 crores, which is
about 25%.

Prashanth: Okay. And there is no P&L hit from this August sale? It's kind of neutral?

Karthikeyan Srinivasan: Correct. It is neutral.

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Moderator: Thank you so much sir. We have next question from Monshree Soni from MK Ventures. Please
go ahead.

Sumit: This is Sumit here. Thanks for Vinod and Karthik before putting this question. Since the
questions have already addressed in the previous queries, my question is largely from a 2, 3
years perspective, so we've been cutting down on our corporate book, our SME book in the past
many quarters, and now we've done this housing transaction. And we've also started with the
Micro LAP pilot project as you mentioned, in this quarter. So broadly if I'm to look at, say, next
2-, 3-year composition, how would our book look like? And what percentage of the book will
be CV finance? That is one.

Secondly, we've been giving guidance on the ROA front for the next 2 years. How does that --
so with this heavy weighting of capital and housing being -- and also we've raised funds through
warrants, so with all that capital coming in, how would our ROA tree will look like?

And also, one last question on the cost front, which you've addressed to an extent, is that we've
added almost 100 branches on the stand-alone and also almost 1,500 employees in the last 1
year. And with this addition now, going forward, how would our cost to income look like?
Basicallyif you can give the guidance for this new structure that will be very helpful.

Vinodkumar Panicker: Sumit, I think it's a long list of queries. I we should possibly get off-line on this. I will take you
line by line. But having said that, the guidance is that we will -- we are looking at growth, and
we are looking at improved profitability in the quarters to come. It is shown by several factors.
I will look at the broad things now.

The yields have started going up, number one. The cost of fund, the incremental borrowing cost
has gone down. We have started repaying a lot of the high-cost NCDs that we have procured
between, let us say, March '23 to February '24. A lot of it has gone down. In fact, I mentioned
about INR1,300 crores having been repaid in the current quarter, of which roughly INR500-odd
crores was the high-cost NCDs which were there. So that is improving a lot.

We believe that the numbers -- this -- both will ensure that my net interest income goes up
significantly. And therefore, my cost to income over a period of time will come down. One of
the factors which would definitely be the reason for the cost to income to come down will be the
funds which will flow in from the HFC sale, which is there, because that will definitely mean
that the asset, which was not yielding anything currently on our P&L, definitely, on a consol
basis, it was yielding. It will start yielding substantial, I would say, ROA to us.

And therefore, we believe that the credit cost will be in that 2% range. Everything else, if it
improves the credit cost continuing to be at about 2%, we should see a decent ROA. I would not
want to put up a number right now to say what the ROA will be, but then we will see significant
improvement in ROA as we go forward.

Sumit: So whatever guidance we have given earlier for '25 and '26 given the housing was a little lower
ROA on a stable state basis, but the guidance on ROA ideally should go up with that moving
out and high ROA retail CV book now becoming the key driver?

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Vinodkumar Panicker: Definitely, it should go up. But then I think Randhir said in a different context that we will
possibly try and value it closer to the transaction actually happening and the funds coming in.

Sumit: Sure. Thank you so much.

Vinodkumar Panicker: Thanks Sumit

Moderator: Participants if you wish to ask a question you may press star and one. The next question is from
the line of Mr. Yash Mehta from Arc Ventures. Please go ahead.

Yash Mehta: Sir, I just had one question. Sir, what is the kind of AUM growth you're targeting in vehicle
finance for FY '25 and FY '26?

Karthikeyan Srinivasan: See, FY '25, we will end up at around INR9,000 crores overall. And '26, I believe we should end
up at around INR12,000 crores company-wise.

Yash Mehta: Okay thank you sir.

Moderator: Thank you so much sir. We have the next question from Yajash Mehta from Angel One Investor
Manager. Please go head.

Yajash Mehta: Sir, just wanted to check what would be our target mix that we'd be eyeing as far as the CV and
other small business loan book is concerned, maybe say, by FY '26? And secondly, so just to
dig in, you mentioned that there are certain approvals that are pending as far as the HFC business
sale is concerned. So would you expect a very smoother sale there? Or you feel there could be
any hiccups or any issues that could crop up as far as the relevant permissions are concerned?

Randhir Singh: See, we do not expect hiccups given in the past kind of there have been a few transactions done
in the past, and those have sort of sailed smoothly. So there is no reason for us to believe that
there should be any challenges. So we do expect a smooth sailing. And I think for the next year,
at least for the next 1 year, while, of course, we have launched this Micro LAP, but the main
business would remain CV business, and I would expect Micro LAP to be less than about 5% in
the near sort of -- in the near term.

And I think maybe after 1 year from now, once we obviously have completed our expansion of
some of these Micro LAP branches, I think at that point in time, we'll be in a much better position
to give you a guidance of next second and next 3 years. But for now, you should assume that in
the near term, it will be less than 5%.

Yajash Mehta: Okay thank you so much.

Ranshir Singh: Because we would -- obviously, the idea here is that we obviously want controlled growth and
then obviously, do it in a way which is where we create a solid foundation and then grow. So
our attempt would be to have the right processes, right talent, the right cost structure. And once
we have the results and convinced, that's when we will sort of accelerate more.

Yajash Mehta: Sir, just the last point. I think last time when I had spoken to Karthikeyan, sir, he had said that
FY '26, we would be looking to do close to INR13,000 crores of AUM as far as the CV is

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concerned. And right now, it's mentioned that it's close to INR12,000 crores that we're looking
at. Anything that has changed post this quarter results that you feel that probably we've revised
the guidance?

Karthikeyan Srinivasan: Yes. Last time, we told about the company-wide, INR13,000 crores. That's including the housing
and everything we said. Now we have revised it to INR12,000 crores because the housing will
not be there.

Moderator: Thank you so much sir. We have the next question from Anil Tulsiram from ContrarianValue
Edge. Please go ahead.

Anil Tulsiram: Sir, my first question is, I think prior to 2022, you did not have much focus on Tier 3 and Tier 4
cities and was mostly into new CV. And even used CV was to the medium fleet operators. Now
our focus has shifted primarily to used CV to the first-time buyers in Tier 3 cities and below. So
do we need to close certain branches?

And the second related question is, though our yield on the disbursement is 18%, I'm talking
about stand-alone, our yield on the total AUM is much lower. So by which year do you think
the yield on the total AUM will be around 17%, 18%? Yes, that's the first two one.

Karthikeyan Srinivasan: Yes. Regarding -- thank you, Anil. The -- regarding the branch closures, the prudent calls have
been taken already. Wherever branches which are not viable, we have already exited those
branches. So that's not a challenge. Even in Bombay, there are large used vehicle transactions
that happen at the price where we want. So we don't see any changes happening there. On the
pricing portion of it, I'll request Vinod to take it.

Vinodkumar Panicker: Yes. Anil, on the pricing, the overall yield looks lower because we still have been carrying a bit
of corporate loan and SME loan, which are yielding very little. In fact, corporate is in the range
of 12%, 13%. Same is the case in the SME.

And the book -- overall book even today contains about 15% of the portfolio, which has been
acquired or generated pre-March '22, when we used to do a large number of new vehicles, and
therefore, it looks slightly lower than the 18%-plus.

But all the new disbursements that we are doing in CV, in fact, I mentioned about 18.5% being
the disbursement yield in the current quarter. And that has been the case at least for the last 2, 3
quarters, from about 17.8% that we were in the March -- no, September 2023 quarter. So the
overall yields will move towards the 18%, but it could be maybe 2, 3 quarters away.

Anil Tulsiram: Got it. Sir, and the second question is under the earlier management, we used to do co-lending
partnership with the ICICI Bank for SME and the CV funding. So what is our current strategy
for co-lending? So can you elaborate on that?

Karthikeyan Srinivasan: See, we were doing co-lending only for CV with ICICI Bank. Typically, it was a sourcing and
servicing arrangement. We suspended it in May '22. We are not keen to do that business. So
May -- post May '22, we have not done anything.

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Anil Tulsiram: Sir, can you explain the rationale? Do we not find it viable or banks don't agree to it? What's the
reason we are not interested?

Karthikeyan Srinivasan: See, two things. One, first and foremost, the -- only the tire -- the plan B of the co-lending is an
easy option. Plus, I want to grow my book. So I don't want to source and service for somebody
else. I want that growth inside my own balance sheet. That's the focus. Thirdly, I am only into
used vehicles. The market wants new vehicles. I feel like in today's scenario, a retail FTU profile
cannot afford a new vehicle. So all these factors together, we have stayed away.

Anil Tulsiram: Got it. Sir, the next question is on the used car and used tractors. I think we seeded this business
sometime in early 2022. So what's the progress here? And how many branches you are
operating? What is the future growth plans? Can you elaborate on this point?

Karthikeyan Srinivasan: Used car, we have grown Pan-India month-on-month, quarter-on-quarter. Our numbers have
started growing there. On used tractors, we are focused on select markets. Our focus will remain
in those 10 markets only, which are -- where we don't see any issues around registration, where
we see end-user viability, only these markets we are focusing on.

Anil Tulsiram: Sir, in a couple of years, what percentage of book this will be, so your CV book or total AUM
stand-alone?

Karthikeyan Srinivasan: Just now Randhir answered. On the CV book, you're talking about used cars?

Anil Tulsiram: No, no. As a total AUM, what will be the used cars and the used tractors in a couple of years,
5%, 10%?

Karthikeyan Srinivasan: It should not be more than 10% each, 10% on used cars and 5% on used tractors.

Anil Tulsiram: Got it. And sir, I had last couple of questions on the CV finance. I understand 40% to 50% of
sourcing is from the channel. So do you plan to expand any direct sourcing? That is one. And a
related question is the valuation of CV is in-house and outsourced. And the last one is since we
are moving to Tier 3, Tier 4 locations, how are we managing the collection? Is it in-house or
outsourced? Because I think this is the cities where we have maximum challenge in the
collection?

Karthikeyan Srinivasan: Yes, I'll take it one by one. Valuation is completely outsourced. It is with Pan-India agencies.
We have tie-up with three major agencies who are doing the valuation, like Mahindra First
Choice kind of companies who are reputed, who are there Pan-India. So there is no in-housing
of valuation. The second question, collection is completely in-house. Only the repossession is
handled by outside people. I'm sorry, the first question I forgot.

Anil Tulsiram: Any plans to expand direct sourcing? I think it's 40% to 50% is through channels.

Karthikeyan Srinivasan: Yes, understood. See, if I have dropped my average ticket size because I'm going into smaller
and smaller products like small commercial and cars, there, the -- typically, this purchase and
sale happens through connectors who organize the sale between two individual parties. It's not
an organized market like a car. So there, my DSA penetration will go up. Once the market is

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good, the M&HCV sales goes up, I start focusing, automatically, my direct number will start
going up.

Anil Tulsiram: Sir, I have two last questions. Should I join the queue? Or can I ask?

Karthikeyan Srinivasan: You can ask. We'll see.

Anil Tulsiram: Yes. Sir, I think in a few quarters back, we said that we aim to establish a network of 1,000
branches controlled by 200 hubs. So how is this plan going? Are we on track to reach that 1,000
number?

Karthikeyan Srinivasan: 1,000, I don't remember when we said that. Post '23, we have never said that 1,000. We will be,
at the end of the year, around 480 branches. Next year, we are planning. We'll come back to you
on that.

Anil Tulsiram: Sir, and the last question is there was a comment in the CRISIL report of June 30, 2024, that our
total stressed assets remain elevated at 18%, of which we have provided 37%. So can you just
help me understand this particular comment?

Vinodkumar Panicker: That CRISIL has mentioned that they have included the securitized portfolio also, when -- we
remove it from the receivables. And when CRISIL reports, they add the securitized portfolio
also. That's -- the SR value of the -- sorry, it's not the securitized. I meant the ARC transaction
and the SR value of the portfolio also. That's the reason they talk about 18%, while we are
speaking about 5% or 4.9%.

Anil Tulsiram: And we don't expect any further provisions from the legacy book?

Vinodkumar Panicker: We don't.

Anil Tulsiram: Thanks a lot for your time and very detailed question. That's it for my side.

Moderator: Thank you. We have the next question from the line of Mr. Vivek Ramakrishnan from DSP
Mutual Funds. Please go ahead.

Vivek Ramakrishnan: So in terms of security receipts, is there anything that we can expect in the next 1, 2 quarters
because that's also consuming your capital?

Vinodkumar Panicker: We don't see any increase. We are going to see inflows against that. And we are fairly confident
that all the security receipts that we have on our books will see monetization, because that's the
only way we can possibly ensure that the ROA goes up significantly. And therefore, we are
working on that.

Vivek Ramakrishnan: That's right, sir. I meant monetization only in the sense -- is there anything expected in the next
1, 2 quarters? Are you hopeful of that?

Vinodkumar Panicker: We are working on it, because unless it actually concludes, we don't want to make a comment
on that.

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Vivek Ramakrishnan: Okay, thank you. Good luck.

Vinodkumar Panicker: Thanks, Vivek. We'll get in touch separately on the first set of questions.

Moderator: Thank you so much, sir. Ladies and gentlemen, in the interest of time, that was the last question.
I would like to now hand the conference over to Mr. Viral Sanklecha from Orient Capital for
closing comments. Please go ahead, sir.

Viral Sanklecha: Thank you, Shilpa. I would like to thank the management for taking the time out for this
conference call today. And also thanks to all the participants. If you have any queries, please
feel free to contact us. We are Orient Capital, Investor Relations advisors to IndoStar Capital
Finance Limited. Thank you so much.

Moderator: On behalf of IndoStar Capital Finance Limited, that concludes this conference. Thank you so
much for joining us. You may now disconnect your lines.

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