What could be the fourth domain which is a large, high growth area where a bank of your size will be able to have a meaningful impact?
We are evaluating multiple areas. It would be unfair for me to tell you because it is highly sensitive information. But yes, it will be an area where we will create 11% to 12% market share. For us market share means that we are number one or number two. If you look at our vehicle finance, we are at 30% market share in all the vehicles in which we operate. If you look at MFI, we have 13.5% market share. If you look at diamonds, we have 25% market share.
I think we are not going to add the domain unnecessarily. It will be a domain where we get a strategic market share. As a consequence of market share, we get client royalty, ability, pricing power as well as collection efficiency. Those are the areas where we are focussed on and you will see an announcement in the market domain space in times to come.
Let’s clear the air on Vodafone. What provisioning you have done?
We have been very vocal about it. We have an inordinate high exposure of Rs 3,450 crore on Vodafone and we have Rs 990 crore in funded and Rs 2,400 crore in non-funded as a consequence of that. Let us understand what this Vodafone exposure is. The Vodafone exposure on Rs 990 crore is where we are very comfortable on our provisions. The Rs 2,500 crore of extra provisions which we have taken covers it and what we will do in the next quarter is specifically allocate to a specific exposure on telecom, which we will do because we have created segment exposure where we have a Rs 150 crore provisions.
Here we will add Rs 700 crore into that so the market on the funded exposure will keep quiet that we have done the provisions. On the non-funded exposure, we have to see how the progress happens in this and we have to evaluate. This is a running organisation with the Rs 26 crore subscriber base, we have to see how it flows and if there is a requirement. I can assure the market that we will be very conservative in our provision and we will take the provisions upfront rather than deferring it over eight quarters. We have enough PPOP in our wallet to make sure that we take the provision up front on our chin rather than spreading it across six quarters or eight quarters.
So the entire provision you have to take if things do not work out for Vodafone would be Rs 2,500 crore?
I have enough contingency provisions in my wallet. Yes, if I take Rs 800 crore or Rs 900 crore next quarter as a provision, which I will, it is a balance sheet item which I will do. I will have Rs 2,500 crore left which I will take once we know what the progress is on the guarantee. The guarantees have to be invoked and the guarantee invoking does not happen immediately. It happens up till March 23, so it is not that it will come in one day.
Your pre-provisioning profit of the assets are at about 3.67%. Does that gives you enough elbow room even if there is a third wave?
I believe that is the strength of this organisation. That is the strength of the domain businesses which we have got. I believe that our provision PPOP margins are such that we can take any provisions right now. I do not believe that the third wave will be as vigorous as we what we saw in the Covid-2 or Covid-1. In fact, the Covid-2 impact was much lesser on the portfolios as well as on the business as Covid-1 was.
I think Covid-3 with the vaccination happening will be much lesser in impact than Covid-2. We have to be positive about our businesses and if there is a requirement, we will take the provisions upfront like we have done. We have kept excess provisions. That is something which we can give you a commitment on. We will not shy away from taking provisions upfront.
A bank of your size has no presence in the typical fee-based pockets. How do you defend that?
A very valid question. We have been asking this question to ourselves. We definitely wanted to be in para-banking activities and brokerage, non-life and AMC are upper stream because we are very large distributors of these three products. There is a time when you evaluate it, whether you want to manufacture or you want to become a distributor. We want to become a manufacturer in this. Unfortunately, the holding company guidelines are still coming out and that tax implications are not clear right now. Once we get that clarity, we will get on with that.
What you will see in some of these areas, we will take a necessary stake which is allowed by the RBI of about 10 to 20% and we will take that stake to announce our thing: that we want to be in that business. There are different ways to compete with the market. I think digital is the next foray in how you will compete with the market. We are getting into five specific areas where we believe we can differentiate ourselves against the rest on the digital area.
You got to have a differentiated preposition. We have a domain expertise in vehicle finance. We are going to launch a differentiated vehicle finance offering in our digital place aligned with the marketplace. So, I think specifically in the used car place you will see a very differentiated offering coming in the next six to nine months.
The second area is the merchant acquiring business. We are not focussed on the large merchants, we are focussed on merchants where our Bharat Finance stores can manage. So, we have Bharat Finance stores; we have already got 1,00,000 stores, we will go to 5,00,000 stores. We will have two million merchants by the end of two years. We will create a very differentiated preposition and a capability in the Bharat Finance stores.
The third business where we can do well is the SME segment. You will see us launching a very differentiated stack on the SME segment in the next six to 12 months and we are working on it. It will be segment specific aligned to marketplaces as a consequence of this.
The fourth is the individual segment. We are coming with a very differentiated payment as well as lending stack and lifestyle capability building. I think the clients will have the capability of getting all these benefits along with a very differentiated stack and experience on the payments, as well as on lifestyle benefits. That is on the fourth side.
The fifth which we have already launched is a portal as part of our digital on the credit card and personal loan, where it is a micro-based, API-based capability that we have built in. It can be used by clients, it can be used by our partners, it can be used by our employees and it is very differentiated. We have reduced the cost of processing by 80 to 85% as a consequence of that.
I think when everybody talks about how we will differentiate ourselves, we are creating a very differentiated digital stack offering. It will run under a separate brand, a separate piece altogether once we have finished our digital stack capability. You will have two types of bank. One is the traditional bank which will focus on domains, the other is the digital bank which will create on very differentiated offerings.
There is a zing in your voice. IndusInd Bank kay acche din wapis a gaye hain?
I think there is a timing and there is a phase in cycle for every business to go through. We have gone through a tough cycle. We have emerged stronger. We have emerged much more resilient and we will give back to our shareholders and our stakeholders what this bank is supposed to be and I think we are positioned for growth now.