25 August 2020 LICHF reported 34% YoY growth in 1QFY21 PAT to INR8.2b (60% beat). The beat was driven by better-than-expected NII as well as lower credit costs. This is a key monitorable for us. This was largely driven by smaller cities (share of disbursements in the Top 7 cities declined from an average of 45% to 35%). The loan book was largely stable at INR2.1t. Note that the loan mix has been largely stable for the past six quarters. Incremental cost of funds was down ~100bp to 6.8%, in line with the rates in the economy. Overall cost of funds declined 20bp QoQ to 7.9%. Operating expenses were up 28% YoY to INR1.37b, largely driven by a 30% YoY increase in employee expenses to INR796m. However, the company did not make any large COVID-19-related provisions this quarter.