Secretarial Department

May 02, 2024

Ref. FEDFINA/ CS/ 103/ 2024-25

To, To,
National Stock Exchange of India Ltd., BSE Limited,
Listing Department The Corporate Relationship Dept.
Exchange Plaza, C-1, Block G, Rotunda Building,
Bandra Kurla Complex, Phiroze Jeejeebhoy Towers,
Bandra (E), Mumbai – 400 051 Dalal Street, Mumbai- 400 001

Re: Scrip Code: 544027, Symbol: FEDFINA

Sub: Transcript of Earnings Conference Call held on Monday, April 29, 2024

Dear Sir/Madam,

Pursuant to Regulation 30(6) of the SEBI (Listing Obligations and Disclosure Requirements) Regulations,
2015, as amended, please find enclosed the transcript of the earnings conference call which was held on
April 29, 2024.

The transcript of the earnings conference call shall be uploaded on the website of the Company at
https://www.fedfina.com/ under the section ‘Investor Relations’ in due course.

The above is submitted for your kind information and appropriate dissemination.

Thanking you,

Yours Faithfully
For Fedbank Financial Services Limited
Digitally signed by
RAJARAMAN RAJARAMAN
SUNDARESAN
SUNDARESAN Date: 2024.05.02 13:12:11
+05'30'

Rajaraman Sundaresan
Company Secretary & Compliance Officer
Membership No.: F3514

Registered & Corporate Office1101, 11th Floor, Cignus, Plot No. 71A, Powai Passpoli, Mumbai, Maharashtra- 400087 Maharashtra. Tel: 022 68520601
● E-mail: customercare@fedfina.com ● web: www.fedfina.com ● CIN: L65910MH1995PLC364635
 “Fedbank Financial Services Limited Q4 FY 2024
Earnings Conference Call”

April 29, 2024

MANAGEMENT: MR. ANIL KOTHURI – MANAGING DIRECTOR & CHIEF

EXECUTIVE OFFICER, FEDBANK FINANCIAL SERVICES
LIMITED
MR. C.V. GANESH – CHIEF FINANCIAL OFFICER,
FEDBANK FINANCIAL SERVICES LIMITED
MR. AMIT SINGH – HEAD (INVESTOR RELATIONS),
FEDBANK FINANCIAL SERVICES LIMITED
MODERATOR: MR. SHREEPAL DOSHI – EQUIRUS SECURITIES

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 Fedbank Financial Services Limited
April 29, 2024

Moderator: Ladies and gentlemen, good day, and welcome to Fedbank Financial Services Limited Q4 FY‘24
Earnings Conference Call, hosted by Equirus Securities.

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 the operator by pressing the
“*” then “0” on your touchtone phone. Please note that the conference is being recorded.

I now hand the conference over to Mr. Shreepal Doshi from Equirus Securities. Thank you, and
over to you, sir.

Shreepal Doshi: Thank you, Steve. Good afternoon, everyone. I welcome you all to the 4Q FY‘24 Earnings
Conference Call of Fedbank Financial Services.

Today we have the management team of Fedbank Financial Services represented by Mr. Anil
Kothuri – MD and CEO; Mr. C.V. Ganesh – CFO; and Mr. Amit Singh – the Investor Relations
Team Head.

With this brief introduction, I will now hand over the call to Mr. Anil Kothuri and the
management team for their opening remarks, post which we can open the floor for question-and-
answer. Over to you, sir.

Anil Kothuri: Thanks, Shreepal. Good evening, everybody, and welcome. I hope you have had the opportunity
to look at our Results and our Investor Deck, which were uploaded about an hour and half ago
on our website as well as on the stock exchanges.

This is a busy time of the year and we have completed an active quarter in what has been a busy
year. And I will just take you through the highlights of the quarter:

We saw a strong AUM growth in the quarter, 14% increase over the quarter gone by. Our AUM
closed at Rs. 12,191 crores. This is up from Rs. 10,748 crores at the end of Q3.

Now, this happened on the back of disbursals of Rs. 4,337 crores. If these disbursals are split as
gold loan disbursals of Rs. 2,849 crores and installment loan disbursals of Rs. 1,488 crores. So,
this takes disbursals for the year to Rs. 13,579 crores, of which Rs. 4,202 crores are installment
loan disbursals. So, this is the growth that we saw in Q4.

I must particularly call out what happened to our gold loan business. The AUM there registered
a 17% quarter-on-quarter increase. So, we closed our gold AUM at Rs. 3,969 crores, so that’s
17% quarter-on-quarter and 33% year-on-year. The tonnage of our gold or the weight of gold
that we have in our vaults is about 9.5 tons at this point in time.

Now, on the back of all this, we recorded a net profit for the year of Rs. 244.7 crores. And for
Q4 it is Rs. 67.7 crores. So, our profit for the year is up 36% over the previous financial year,
and our profit for the quarter is up 73% year-on-year and 3% quarter-on-quarter.

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 Fedbank Financial Services Limited
April 29, 2024

Our asset quality also improved during the quarter. We ended Q3 at about 2.2% GNPA and Q4
we closed at 1.66% GNPA. So, that’s a reduction of 53 basis points over the quarter, or in
absolute terms we reduced by about Rs. 29.3 crores. Now, this reduction of Rs. 29.3 crores was
largely owing to the fact that we sold a large NPA account to an ARC that was worth Rs. 23.9
crores. So, Rs. 6 crores is the reduction that we have seen over and above the ARC sale that we
have done. The sale that we have done has been at whatever price that we have been carrying
the asset at on our books, so there has been no gain or loss owing to that sale, it just deflated our
GNPA and released our capital.

Now the progress on our off-book strategy has continued, and our off-book AUM went up from
17.4% the previous quarter to 18.7%. Now, the kind of off-book that we did change in the
quarter, this quarter’s off-book was largely gold loan co-lending, and that went up from Rs. 176
crores at the end of Q3 to Rs. 522 crores at the end of Q4, so that’s about Rs. 350-ish crores that
we have added to our co-lending book in the quarter.

We expanded our distribution further by adding 12 branches in the quarter, taking our total
branch count to 621. And while I did mention in the last call, since it’s a Q4 event I will mention
it again, we have received a rating upgrade. We are rated AA+ by CARE and India Ratings, and
CRISIL has assigned us a long-term credit rating of AA with a positive outlook.

Finally, the ROA for FY‘24 is 2.4%, ROE is 13.5%. The corresponding numbers for Q4 are
2.5% and 12.2%, respectively.

So, with that brief preamble I will open up for questions now, and we can discuss any aspect of
the business you’d like me to address now.

Moderator: Thank you very much. We will now begin the question-and-answer session. The first question
is from the line of Sneha Ganatra from SNUD Life. Please go ahead.

Sneha Ganatra: I just wanted to know, first question is, how do you see the growth going ahead? And any internal
target of the mix which we are focusing? And regarding the gold loan also, considering the
continuous uptick on the prices, how is the momentum or the growth path we are seeing going
ahead for the next fiscal year?

The second question is, what is the branch expansion strategy? And any internal target of the
cost-to-income ratio which we are targeting? And any operating leverage benefit which we
expect could be occurring in the upcoming years also? And I would like to know what your
guidance on the impairment cost is going ahead?

Anil Kothuri: That’s five different questions, and I will attempt to answer them in order. The impairment cost,
we believe, on a sustainable basis will be something like 80 basis points. So, that’s what we are
comfortable guiding ahead. That is question one.

Question two is that we believe that from where we are, we should be able to comfortably grow
at a rate of 25% plus. And we will take advantage of any tailwinds that the environment affords
us from time to time. Like in the previous quarter we saw that the gold loan business had some

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 Fedbank Financial Services Limited
April 29, 2024

advantages going for it, including an increase in gold loan prices. So, that is something that we
are comfortable guiding.

Now, with regard to the mix, we are a lender to small businessmen, and we are seeing a far
greater traction in our small mortgage business. That’s also has the highest behavioral tenor of
all our products, so which is why, with the passage of time, it will continue to dominate our
balance sheet.

Now the other two installment loan products that we have, which is medium-ticket mortgage
and unsecured, we have less than 250 people deployed to both these businesses put together. So,
whatever we originate there, we will warehouse on our balance sheet for six months, which is
the minimum period, and one or two months after that we will sell down. So, that is the strategy
pertaining to the other two businesses.

You would have seen evidence of this in our Investor Deck, Slides #24 and #25. As a percentage
of on-books, the small mortgage business is up from 24% to 29% in the current year, and that
trajectory should continue in the foreseeable future. That’s as far as the product mix is concerned.
So, I hope I’ve answered all your questions, Sneha.

Moderator: So, the current participant line has been disconnected. We will move on to the next question.
The next question is from the line of Renish from ICICI. Please go ahead.

Renish Bhuva: Congrats on a good set of numbers. Just two questions from my side, one on the disbursement
yield side. We have seen across the market; disbursement yield fell by almost 40 basis points to
50 basis points on a sequential basis. So, what is going on? I mean, since we are growing our
AUM at 14-odd-percent, is this because of that? Or there is, let’s say, increased competition is
leading to the moderation in disbursement yield?

Anil Kothuri: So, the yields on a per product basis continue to hold, Renish, okay, whether it is gold loans or
small mortgage or medium ticket mortgage or unsecured, the yields on a per product basis
continue to hold. Any changes that we see are owing to the changes in the mix that we would
have seen in the quarter. That’s basically it.

The second factor affecting yields, as calculated, would be the fact that we have embarked on
co-lending for our gold loan business. So, that is where we recognize interest income as the
spread, as opposed to the entire yield that we charge the customer. Or to give you an example,
if the customer rate is 15% on the co-lend portion of the portfolio, we only recognize 15% minus,
say, 9%, 6%. So, that is the only difference. But otherwise, I can confirm that on a per product
basis the yields have held across the spectrum.

Renish Bhuva: And second question, again, on the loss on the direct assignment portfolio. Now does it mean
that the asset quality for the already assigned portfolio has deteriorated, and hence we have to
compensate for that. Or how one should read the loss on the net gain on assigned portfolio versus
Rs. 160 odd crores of net revenue last quarter?

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 Fedbank Financial Services Limited
April 29, 2024

Anil Kothuri: It’s Rs. 16 crores, actually, last quarter. This is a net gain. The way this works, and I’m sure you
know this is that, on what you fell down in the current quarter, there’s an upfront gain that you
book. And if it is down in previous quarters, there’s a negative to the portfolio, owning to the
unwinding of the gain that you booked. Okay?

Now in quarters two and three, we had sold down a lot of our portfolio, especially because we
were getting into an IPO, and the date of the IPO was far from certain. In the month of September
‘23, our debt/equity had actually touched 5.8%. Okay? So, we sold down quite aggressively in
Q2 and Q3.

In Q4, our appetite for off-book was met through the co-lending route, okay, so which is we only
sold Rs. 284 crores. Okay? So, as a consequence of that, the unwinding and the upfronting kind
of cancelled each other out. We had a negative of about Rs. 15 lakh or so in that quarter. So, had
we stuck to the same trajectory of sell-down as Q3, we would have made, let’s say, Rs. 16 crores
more in this quarter. But from a commercial standpoint it did not make sense doing it, especially
because we were flushed with funds post-IPO and our co-lending arrangements had fructified.

Renish Bhuva: And just a last question from my side on the cost of borrowing front. So, if you can throw some
light on, let’s say, the blended cost of borrowing for this quarter and the incremental cost of
borrowing in current quarter?

Anil Kothuri: Sure. I will let Ganesh answer that, our CFO, he will answer that one.

C. V. Ganesh: Yes. Hi, Renish. Thank you for the question. So, see, on an overall basis, as you would know,
in quarter three RBI had increased risk weights on bank lending to NBFCs. As a result of that,
there has been a small increase in our cost of about 10 bps, 12 bps in terms of the blended cost
of funds. But that being said, post our credit rating upgrade, we have been able to tie up
incremental commitments at rates reasonably lower than the blended cost of funds, which gives
us confidence that slowly but surely the cost of funds, we have seen the peak, and they should
start coming down from here.

Renish Bhuva: Would you like to give the numbers?

C. V. Ganesh: It’s not in the deck. I would be a little hesitant to do that, Renish.

Moderator: Thank you. The next question is from the line of Mr. Shreepal Doshi from Equirus Securities.
Please go ahead.

Shreepal Doshi: Sir, my question was pertaining to margins. So, as you highlighted to the earlier participant that
yields are broadly sticking where they were, and COF is likely to have peaked out. So, is it fair
to assume that we will be able to hold NIMs at current levels? And if not, then what is the
guidance that we have for FY‘25 and FY‘26?

Anil Kothuri: So, from where it looks right now, our customer yields should stay at the current levels. Okay?
The wisdom that we have received on the trajectory of interest rates is that the rate cuts will be
more back-ended than front-ended during the course of the year, which is why we believe that

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April 29, 2024

our cost of borrowing will also stay sticky during the course of the year, which is why we believe
that our spread will stay constant. The only thing that will increase the spread is that if we do
more co-lending for gold, which is what we are in a quest for, our spreads might increase from
here on. That really is the way this will work in the course of the current year. Of course, if
interest rates correct sooner than we expect, then that’s a benefit that we all have.

The second factor I would like to overlay is that we have a large gold loan book, and our AUM
is positive based right from the first bucket itself. So, we have the inflows to borrow short-term.
As of the end of March, we have zero commercial paper, zero short-term borrowing. So, I believe
that before the long-term interest rates correct, there will be liquidity, and the short-term interest
rates will ease. That will give us a chance to borrow at the shorter end, so then that could depress
our cost of borrowings, resulting in higher spreads. So, that’s how I think it will pan out.

C. V. Ganesh: In terms of new business originated, we have had a phenomenal Q4. In fact, we disbursed
approximately Rs. 1,000 crores more than our best quarter till date. The only challenge was that
much of that business was back-ended towards the end of the quarter, which is why when you
arrive at a mathematical yield, there is an optical illusion there, which suggests a meaning which
is not actually there. When you see the income coming out of that in Q1 of this year, it may lead
to a positive surprise.

Also on the gold loan business, there are these twin tailwinds of the gold price rise as well as
one of the peers possibly going slower, which also explains why we have had a phenomenal
quarter for gold loans. I think the team is geared up to be much more aggressive in that product.
So, all of this gives us a lot of confidence entering the new fiscal year.

Moderator: Thank you. The next question is from the line of Sameer Bhise from JM Financial. Please go
ahead.

Sameer Bhise: I just wanted to understand or hear your thoughts, especially in context of the greater regulatory
scrutiny with respect to the gold business, how are you positioned and your thoughts on the same
with respect to how tightening or how tighter have your processes been. Some details there
would be helpful.

Anil Kothuri: So, Fedfina has been doing the gold loan business since 2011, okay? And we have been audited
every year since then. It’s also pertinent to note that we are audited by RBI Trivandrum as
opposed to RBI Bombay, and the large gold loan companies are all audited by RBI Trivandrum,
okay? So, in audits year-after-year our practices have got scrutinized, we have got feedback, and
things have moved on.

And obviously, recently there has been a lot of regulatory action, and there has been information
coming in about what the regulator has said and what practices exist and stuff. So, internally we
have also gone and checked as to where we stand to all this. All these issues have got discussed,
and from our standpoint, got addressed several years ago, mostly pre-COVID and stuff. So, all
of what the regulator has said and which has been in the public domain in the months of Feb and
March is really quite old hat for us, okay? And we are reasonably robust from that standpoint.

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April 29, 2024

So, our understanding of the regulations, our adherence to those regulations, as well as our
execution of the gold loan business where absolutely everything gets run out of the system right
from KYC to training people to auditing to managing the auctions, doing the auctions at taluka
level, district level, the periodicity of those auctions, the fact that we auction on a per-customer
basis, all of that is done and dusted for us. And I’m happy to confirm that, yes.

Sameer Bhise: Great. This is comforting. Also, just wanted to understand in terms of seasonality, how would
the business look, say, given that we had a very strong Q4 in terms of growth, do you expect
exceeding those in the near term in terms of disbursements? Or do you think that there could be
a meaningful dip in the near term given the way the business is shaped?

Anil Kothuri: Our gold loan business has a few different variables which drive growth, one of which is the
price of gold. And we saw the price of gold increase in the previous quarter. We believe that
impact will last till the mid of May, given that we take the 30-day average of price of gold, that’s
regulatory how your lending rate is calculated. So, the previous growth will trickle in to the
middle of May or so. So, we are in a good place there.

The second thing, obviously, is the progress of opening branches. And we did not open branches
last year. And we intend opening up a few branches this year. So, this is the second thing that
will take up our AUM. The third is obviously productivity. Now, last year our AUM per branch
started at Rs. 6.3 crores per branch and we closed at Rs. 8.7 crores. So, we have had a ramp-up
in productivity. We’ve also had a ramp-up in the amount of new gold that’s coming to our vaults
over the previous years. So, all of these factors contribute to the increase in gold AUM.

I believe that for the current quarter there seems to be an upward bias in the price of gold, so that
should contribute. And that should counter away the fact that seasonally Q1 is a weak quarter.
The second factor is that one large player is still not disbursing loans. So, whether it’s Fedfina
or anybody else doing gold, they will see some overflow of demand coming there. So, Q1 will
be a good quarter for gold based on all of this. But I don’t think it will be comparable to Q4. In
Q4, we saw an AUM increase of Rs. 556 crores, I think, for gold. We won’t see that kind of
increase this quarter. But it will be a reasonably good quarter is my estimation.

Moderator: Thank you. The next question is from Nirmal Bari from Nuvama Asset Management. Please go
ahead.

Nirmal Bari: My first question is, if you can give the slippage and write-off numbers for the current quarter
and the full year.

Anil Kothuri: We’re just getting that. And while we get that, do you have a second question?

Nirmal Bari: Yes. Actually, I would like to understand a bit more on the net gains on direct assignments side.
I understand that an earlier participant had asked the same question and you had said that
unwinding of discount led to this. But an unwinding of discount should lead to a positive number
being added, right, because we are discounting like till Q3 in this case, and then that unwinding
should add a positive number. Shouldn’t that be the case?

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April 29, 2024

Anil Kothuri: I will just explain giving you a numerical example, okay? Let’s say in a certain quarter, Q1, you
sell Rs. 100 crores and you book a Rs. 10 crores gain on sale, okay? That is essentially the
discounted cash flow of the future receivables, assuming a certain prepayment rate and all of
that. You discounted a certain rate. That is your gain on sale. At the end of Q1, you say that this
is what it is, and that’s the gain you book.

At the end of Q2 what will happen is there will be some repayments, prepayments and stuff.
Let’s say your Rs. 100 crores portfolio comes down to Rs. 95 crores, okay? Then at the end of
Q2 you again estimate what the present value of your discounted future cash flows is. That
number will obviously be less than what you estimated at Q1, okay, because your portfolio is
lower. Now that difference you charge off to P&L, and that is the unwinding that I was alluding
to. So, while you have a gain on sale in the quarter that you book the transaction, in every
subsequent quarter you have an unwinding of that gain on sale, so that when the transaction gets
nullified you’re done and dusted. So, that’s basically how it works.

What happened in Q4 was that we did a lot of direct assignment transactions in Q2 and Q3
because, like I said, we did not have visibility to the IPO, and we wanted to secure our
debt/equity ratio. And that unwinding is what hit us in Q4. And the gain on sale just about
compensated for the unwinding that hit us, okay, which is why it was a negative Rs. 15 lakh as
opposed to a positive Rs. 16 crores in the previous quarter.

Nirmal Bari: And what was the total quantum of direct assignment done in this quarter?

Anil Kothuri: There are Rs. 284 crores.

Nirmal Bari: And my final question is, again, a data-keeping question. On the credit cost, if you can give us
a split of current quarters and full-year credit cost between standard asset provisioning, NPA-
related provisioning and the write-offs.

Anil Kothuri: Sure. First, I will give it to you for the entire year then. For the entire year we have had an ECL
impact of Rs. 6.5 crores, okay, write-offs of Rs. 73.6 crores, and a recovery of bad debts of Rs.
14.2 crores. So, the net of all these numbers is Rs. 65.9 crores, which is the total credit cost that
we had over the course of the year. The corresponding numbers for Q4 are write-offs of Rs.
28.86 crores, recoveries of Rs. 3.3 crores, and an ECL of Rs. 7.83 crores, giving us a net of Rs.
17.73 crores.

Nirmal Bari: And this Rs. 28.86 crores would include the large account that we sold to ARC?

Anil Kothuri: That’s right. It would include the large account that we sold to ARC, yes.

Nirmal Bari: And the first question on slippage, if you can give that number, I think.

Anil Kothuri: We will just get back here. We will go through the question, and we will just get back.

Moderator: Thank you. The next question is from the line of Pranav Gupta from Aionios Alpha Investment
Advisor. Please go ahead.

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April 29, 2024

Pranav Gupta: Congratulations on a good set of numbers. A couple of questions on the cost side. So, we have
seen overall OPEX remain steady for this quarter. I mean, flattish if you compare it on a Q-o-Q
basis. Could you talk about two things? One, where we are in the journey of transitioning of the
Salesforce? And secondly, is this an indication of some of the operating leverage coming in, or
is it just a function of the back-ended growth? That’s the first question.

Anil Kothuri: So, I will talk about Salesforce. Salesforce has gone live, and we did a pilot in 10 branches, to
start with. We will take -- 20 branches, sorry, to start with. And we are observing how it works,
and then we will expand it to the rest of the business. Okay? So, that’s where we are on our
Salesforce journey. And that has happened in the month of April. Okay? So, that’s as far as
Salesforce is concerned.

Now, otherwise, on our expense journey, we believe that our expenses will not increase
significantly here on in proportion. Our expenses are directly linked, 90% of our expenses are
anyway directly linked to originations and underwriting. And the platform costs are much, much
smaller. So, whatever expenses we incur has to do with the origination. So, the trajectory of
these will ebb and flow with how much we originate.

Now, for the year gone by, we were at a cost-to-income of about 58-ish-percent or a cost-to-
AUM of 5.2%, okay? Now, that is down from, I think, 5.6% a year ago. So, we want to keep
making progress on a cost as a proportion of AUM, and improve that by maybe 30, 40 basis
points during the course of the year. That is where we are.

C. V. Ganesh: So, I will just add maybe a couple of numbers from a quarterly improvement in OPEX here on.
See, as of quarter three, okay, our OPEX has a percentage of average loan book has gone down
in Q4 by 30 bps, Q4 over Q3. So, OPEX as a percentage of average AUF has improved 30 bps,
okay, Q4 over Q3. Now as Anil articulated, given that we have a program of selling of some
part of what we originate, this improvement would be a little more material when you look at
the OPEX-to-AUM. So, there again, our OPEX to average AUM has shown an improvement of
40 bps quarter-on-quarter, Q4 over Q3, right? Now that being said, typically in Q1 you have
employee-related costs, which is a step-up in salaries and all that which come in. But the way
these metrics are moving, this gives confidence that we are on the right path and the trajectory
is downwards.

Pranav Gupta: Just wanted to understand two things, mainly on the other expenses bit. That’s sort of remained
flattish for the last three quarters or so, if I look at it on an absolute basis. Is this an indication
that from here on we might see that that group might not sort of match up to the AUM bit? That’s
the first bit.

Second is, obviously, we understand that given the fact that we are transitioning from having a
slightly lower share of AUM off-book to a higher share, cost-to-AUM will move down faster.
But if you look at cost-to-assets as well, that’s even an improvement. Should one expect that
improvement to continue through FY‘25 as well? That is what I was trying to figure out.

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April 29, 2024

Anil Kothuri: I did not get your first question, Pranav. The second bit I did, but I did not get your first question.
Please repeat it.

Pranav Gupta: So, if you look at other expenses of the line item, the lines have sort of remained flattish over
the last three quarters. From here on, should we expect that probably other expenses growth is
in line with either expansion of branches or much lower than AUM growth? Or is this just
something that has stayed here for a bit and then will start in line with AUM again?

Anil Kothuri: There are two large components of the other expense lines. One is what we invest on technology,
and the second is the leases that we pay for our branches. Now, this year we have opened 50
small mortgage branches, so the expenses have gone up in line with that. And we have also done
development of our new LOS, which is Salesforce-based. So, those are the two items of expense
that we have incurred. So, next year we will open branches so, obviously, the lease expenses for
those will happen. But otherwise, I think they will stay reasonably range-bound. There is no
other head of expense that will increase. So, our other expenses are linked to, you can say, branch
expansion. And that’s the only thing that will impact this over the coming year.

Your second question was about cost as a percentage of assets. The trajectory of costs will not
increase as quickly as the trajectory of assets. So, we should see this coming down also just the
way cost as a proportion of AUM will come down.

Pranav Gupta: Just one last bit, could you give the break-up of other income?

Anil Kothuri: The break-up of other income. I will just tell you what this other income includes. Broadly, it is
income that we get for distribution of Federal Bank products and marketing activities that we
do, profit on sale of G-Secs, net gain on sale of fair value charges. So, all of that is what other
income is composed of.

And I have the breakup of our credit cost. So, we started the year with a Stage-3 of Rs. 164.5
crores. We added Rs. 116.9 during the course of the year. We reduced Rs. 89 crores and wrote
off Rs. 26 crores and giving us a closing balance of Rs. 165.28 crores during the course of the
year. Okay? So, between last year and this year we have added less than Rs. 1 crores to our
Stage-3.

Moderator: The next question is from the line of Kunal Khudania from DSP Asset Managers. Please go
ahead.

Vivek Ramakrishnan: Hi, this is Vivek here. My question is on the cost-to-income. I joined the call a little late, so sorry
if we had already answered it before. Is there a cost-to-income ratio or a cost-to-AUM ratio that
you’re guiding us to? And another tricky way of asking the same question is, for a mature branch
what would be the cost-to-income or a cost-to-AUM?

Anil Kothuri: For the year gone by, we had a cost-to-AUM of 5.2%. We believe that in the coming year it
should be better by between 30 basis points and 40 basis points. Okay? So, that is the answer to
part one of your question.

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Part two of your question, we do have metrics depending on the kind of branch that we have,
but the metrics are not cost-to-income. They are more about the absolute cost that we want to
incur in each branch in relation to the AUM of that branch. And these are different for different
kinds of branches, there are gold loan branches, non-gold-loan branches. There are historical
branches in South India which were architected to be of a certain size, and rest of India branches
are a little bigger because the AUM per branch in the rest of India is a lot bigger. So, there are
different dynamics and particulars. But to abstract this at a slightly higher level, I think how you
should look at us is that we were at 5.2% on a cost-to-AUM, and that should improve by 30 basis
points, 40 basis points during the course of the year.

Moderator: Thank you. The next question is from the line of on the line of Harshvardhan Agrawal from
Bandhan AMC. Please go ahead.

Harshvardhan Agarwal: Just wanted to understand the amount of sell-downs that you have done in Q2 and Q3, this is
just to understand the negative BA income that you have got. So, just understand that flow, if
you can help us with that.

Anil Kothuri: Harsh, you will find this on Slide 40 of our Investor Deck. In Q2 we sold down Rs. 527 crores.
In Q3 we sold down Rs. 457 crores. In Q4 we sold down Rs. 284 crores.

Harshvardhan Agarwal: So, basically this Rs. 1,000 crores roughly that we sold down was yielding us Rs. 15 crores
income on a quarterly basis. Is that correct?

Anil Kothuri: Well, each quarter we disclose the net gain on sale that we get, which is upfronting minus
unwinding. For Q4, those numbers exactly cancel themselves out.

Harshvardhan Agarwal: So, sir, what I am trying to ask is, this Rs. 285 crores that we sold in Q4, would have yielded
somewhere around Rs. 15 crores, Rs. 16 crores. And the unwinding of the Rs. 1,000 crores of
the previous year were around Rs. 15 crores, Rs. 16 crores?

Anil Kothuri: Yes, the upfronting during the fourth quarter was Rs. 16.5 crores, the unwinding was about Rs.
18 crores. So, that’s how we got a negative Rs. 1.5 crores.

Moderator: Thank you. The next question is from the line of Mayank Mistry from JM Financial. Please go
ahead.

Mayank Mistry: Sir, my question is on the average ticket size of medium ticket LAP, which we have mentioned
on Slide #18 as Rs. 67 lakhs. So, basically last quarter it was at around Rs. 49 lakhs, which have
increased significantly to Rs. 67 lakhs. So, what explains this significant growth? I mean, is there
a major sell-down, or is it only on the fresh disbursals? Can you please explain this?

Anil Kothuri: So, what we did was we previously used to restrict this business up to a ticket size of about Rs.
1 crores, we now let them go up to Rs. 2 crores. So, that is what explains this inflation in ticket
size between the last two quarters.

Mayank Mistry: So, this is the on-book average ticket size of medium ticket, right?

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Anil Kothuri: That’s right.

C. V. Ganesh: So, Mayank, I will just come in here. See the point is, when you originate, it is always on-book,
right? But typically, I think we have a stated policy or strategy that for we keep the higher
yielding assets on books, and the lower yielding assets we originate higher ticket sizes where we
see appetite for an onward sale, and we optimize on that. So, obviously, after a seasoning period,
as required by the direct assignment rules, these would be available for sale. And which
opportunities we would capitalize on based on the wide array of partnerships we have who have
the appetite to buy these.

Moderator: Thank you. The next question is from the line of Aravind R from Sundaram Alternates. Please
go ahead.

Aravind R: I hope you can hear me. Sir, like the ECL provision as a percentage of assets across Stage-1,
Stage-2 and Stage-3, I can see that it has declined a bit. I just wanted to understand, are we
comfortable with the current levels? Or do we want to fortify it to the FY‘23 or above levels?
That’s my first question.

And the second question is on like what would be a branch addition and employee addition plans
for gold and non-gold businesses?

And the third question is on the other income, what are the potential opportunities you are seeing
in terms of other income, like, say, cross-selling insurance products or any other third-party
products? Is there anything in addition to whatever we are doing now, like do you see any
significant opportunities in the coming years? Thank you.

Anil Kothuri: Hi, Aravind. Yes, we have applied for a corporate agency, we will get our license hopefully in
the month of May or June. And at that point in time, we will use our distribution network of gold
and non-gold branches to also sell insurance. We currently don’t embed insurance with our gold
loan customers. And health insurance and life insurance are products that we can cross-sell to
these customers. So, that’s an opportunity that’s there.

Now, number two with regards to the ECL provision that we have. So, on Stage-1, Stage-2 and
Stage-3, each of our products will continue to maintain the same provisions that we used to
previously. So, any changes that you see is owing to the mix. It’s also owing to the fact that our
gold loan has had a stronger growth than the other products in terms of AUM and the ECL
provision required on gold loan, especially for Stage-1 is negligible.

Also on Stage-3 what has happened is that we sold one large account to the ARC that was
provided to the extent of 53% or so, okay? So, given that we sold it off, that provisioning also
has corrected itself. On Stage-2 accounts, we used to have a restructured book at a point in time,
okay, where we used to provide as per Stage-3 kind of levels. Now that book also has more or
less gone, which is why the provisioning for Stage-2 has come down. So, these are the different
variables that impact provisioning.

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But otherwise on a product-by-product basis, we continue to be provided as we used to be. And

you may recall that at the end of Q3 we actually took up our provisioning for mortgage loans
from 19.5% to 23%. That’s for Stage-3 loans. So, that’s the migration in Stage-3.

Finally, you spoke about our plans to grow and expand. In the coming years we want to open
about 50 gold loan branches and 30 small mortgage locations. So, that is the plan for the year,
and we will execute it, try and front-end that during the course of the year. That’s the intent.

Aravind R: Any color you can give on, like, which region it would be, like these branches, or is distributed
throughout the country?

Anil Kothuri: So, the approach that we followed is to try and grow efficiently this year, which means that we
are not opening any new regions, because a new region is overheads in terms of regional
leadership and all that. So, the branches that we have identified will add up as four, five, six
branches in each of our existing regions for gold loans and ditto for our non-gold businesses.
We already have leadership built out for the branches. These are the only production-related
expenses that we will incur in terms of people and premises. And that’s a more efficient way of
growing in the current year. That’s our thinking.

Aravind R: And just one last question, if I can squeeze in. What would be the credit growth guidance, like,
either segment-wise or the overall? Is there any guidance on that?

Anil Kothuri: Our cost of credit, you should assume, 80 basis points.

Aravind R: No, credit growth.

Anil Kothuri: Credit growth. Advances?

Aravind R: Yes, advances growth, yes.

Anil Kothuri: That I’ve already guided 25% growth. And we should try and top that if there are tailwinds, like
there were in the previous quarter.

Moderator: Thank you. As there are no further questions, I would now like to hand the conference over to
Mr. Shreepal Doshi for closing comments.

Shreepal Doshi: Thank you, Steve. I would like to thank the management of Fedbank Financial Services for
giving us the opportunity to host the call. And thank you to all the participants for being part of
the call. Thank you all and have a good day.

Moderator: Thank you. Ladies and gentlemen, on behalf of Equirus Securities, that concludes this
conference. Thank you for joining us. And you may now disconnect your lines. Thank you.

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