Ladies and gentlemen, good day, and welcome to Q4 FY 2022 earnings conference call of Can Fin Homes Limited, hosted by Investec Capital Services. 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, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I'll now hand the conference over to Mr. Nidhesh Jain f rom Investec Capital Services. Thank you, and over to you, sir.
Thank you, Ryan. Good afternoon, everyone. Welcome to the Q4 FY 2022 earnings conference call of Can Fin Homes Limited. To discuss the financial performance of Can Fin Homes and to address your queries, we have with us today Mr. Girish Kousgi, MD and CEO, Can Fin Homes, Mr. Amitabh Chatterjee, deputy managing director, Ms. Shamila, business head, and Mr. Prashanth Joishy, CFO of Can Fin Homes, along with other members of the management team. I would now like to hand over the call to Mr. Kousgi for his opening comments. Over to you, sir.
Good afternoon to all the investors, and welcome to the earnings call of quarter four. We had a very good quarter, and if you've seen, after COVID, from October, demand picked up. Quarter four of last year we did pretty well. I think we clocked all-time high for most of the parameters. Since we had dropped rates, I think we had some impact in terms of spread and NIM for some time. Quarter one of this year, there was an issue because of COVID second wave. After that, I think the next three quarters have been pretty good. The last five quarters, four quarters have been very good. I think all-time high. Sequentially, every quarter now we've been doing pretty well. I think you know the numbers.
I would like to clarify, today I was on CNBC, there was some rumor about my exit. I've categorically clarified that I am with the company and I have not resigned. I don't intend to move out. I think that's why I made it very, very clear. There is also some rumor about the audit. We had an audit from NHB, and that is not complete. We have the discussion next week, and nothing abnormal has come out till now. This apart, we also keep having regular audits, and nothing abnormal has come out. Whatever we have found is in the normal course of business. Now, coming back to Q4 , I think Q4 was really good for us because it was all-time high disbursement in the history ever.
Both in terms of disbursements and also in terms of book growth. NIM was 4.15%. Last quarter was 3.74%. Last quarter it included 9 bps because of LCR investments. This time because of LCR investment it is about 12 bps. Net of that would be 4.03%. That's the NIM. The spread improved to 2.55% from 2.49%. I think all the parameters we have shown good performance. Last year we had provided for COVID about INR 87 crores at one point in time at the peak.
Since we started, I had told you about the trend reversal of margin because whenever you drop rates that will have lag effect and after couple of quarters you will see margins are shrinking because the entire portfolio will get repriced and therefore there'll be some pressure on margin. But from April last year, we had increased rates twice, so that had a positive impact and therefore we saw spread increasing and NIMs increasing. I had told that Q4 is a time where everything will be back to steady state. I think Q4 that has really worked out to be all the parameters in line with what I had mentioned earlier.
In terms of cost of funds, there was slight increase in cost because rates started moving up in last quarter. However, even our yields went up, and therefore we were able to increase our spread to 2.55%. Incremental cost has gone up slightly. At a portfolio level, our cost of funds is 5.56% and incrementally it is 5.03%. Incremental yield is 8.07%, and portfolio yield is 8.11%. In terms of asset quality, I think we've been seeing NPA levels coming down. At one point in time it was almost close to NPA was close to about 1%. We saw 0.91% to 0.9% to 0.78% to 0.71% to 0.64%.
As of last quarter end, our NPA was 0.64. Net NPA, which was 0.61, has come down to about 0.3% as of now. Our PCR, which was 33.47, I think over a period of quarters it is now, we have now increased to about 52.69%. In terms of book growth, I think we've grown close to about 21% in terms of book. Disbursement , if I have to compare the whole year, it's about 90% growth over the previous year. If it is YOY Q4 , then it is 35%. In terms of liability mix, nothing much has changed. I think the CP share has come down to about 11%.
NCD, we raised a lot of funds last year because it was a mandate. Whatever incremental borrowings we do, 25% will have to come by way of NCD. NCD share went up to 14%. Deposits remained at 2%. NHB, 22%, and banks, 51%. In Q4 , we raised INR 3,215 crores. In terms of liquidity, we are holding about close to INR 4,300 crores. Now, these are bank sanctions, which we have not availed. In terms of portfolio mix, HL is 90%, non-home loan is 10%. In non-HL, top-up is 4%, LAP is 4%, and site loan is 1%, and others is about 1%. Totally it comes to about 100%.
In terms of profile mix, salaried is 72, SENP is 28 at a portfolio level. SENP incrementally has come down to about 1%. I think over a period of time, I think the confidence came back and we could see a lot of demand coming back, economic activity improving. Now SENP has come back to about 28%. In terms of the ticket size, not much of change. More than INR 50 lakhs, we have about 3% of the portfolio. We significantly increased our other income, and that is the reason. That is also one reason why our NIM went up. We are focusing on insurance income. That I think quarter-over-quarter that is increasing. As well as the focus is on affordable housing.
I think that is where we've seen success in the past, many years and that we will continue to do in future. I'll be open for any questions. Hi, Ryan. Can you open the floor for Q&A?
Sure. We will now begin the question and answer session. Anyone who wishes to ask a question may press star one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Shreepal Doshi with Equirus. Please proceed.
Hello, sir. Thank you for giving the opportunity and congratulations for the great set of numbers.
Thank you.
My question was with respect to the growth that we have delivered during this quarter. Any particular geography or states that we are seeing the demand is relatively strong?
I had mentioned this earlier also. I think across the country, all geographies we are getting good demand. Only thing is we had slightly slowed down in NCR, Delhi NCR region. I think that is continuing. Otherwise, we are seeing good demand from Karnataka, TN, Andhra, Telangana, that is south, Maharashtra, Gujarat and MP and other places. Only in Delhi NCR it is slightly low, I think, but for that region we are seeing demand from all other regions.
Sir, is it in line with our thought process to, relatively grow in the non-south geographies? The growth momentum that we are getting, is it in line with that thought process?
Definitely, yes. Even today we are present in 22 states. Only thing is the concentration on south is slightly more because that has helped us in even our salaried is quite high. It's about now 72%. We are open. As long as we are able to build quality book, we are open to increase our share in other regions as well. As it is now, I think I could see maybe 65% and 35%. 65% from south and 35% from other regions.
Got it. Sir, second question was with respect to the increase in provisions during the quarter. If you look at the coverage that we are having, so last quarter it was 45% and this quarter we've inched that up to almost 53%. Why? A t 45% it was probably at a comfortable level. Why this thought process of increasing the provision buffers?
See, what happened was, actually last year during COVID, we had provisioned close to about 87 crores. Now that we had utilized in the subsequent quarters. There was a reversal in the margins. Now you could see that now it is back to steady state. We have made good, I think even an overall performance is pretty good. We thought, because we are not very sure about COVID fourth wave. We thought, so that when we are doing well, let's create some amount as provision so that we might take a call in future. I think that's the idea. Because whatever we had created last year, I think everything was utilized in the subsequent quarters.
Got it. The absolute GNPA number has come off. Have you seen some resolution or is it more of upgrade?
No, basically upgradation is very low to be very honest with you. What we have done is, from the NPA pool we have resolved. If you look at last one year, the GNPA number which was about INR 200 crores has now come down to almost about INR 170 crores. This is because of two things. One is there have been some additions, but there has been more recoveries in the NPA pool. Overall, NPA has come down. It was 0.71% in Q3 . It has come down to 0.64%.
Is it because from the resolutions suggest SARFAESI invocation would have got smoothly incorporated with it?
Exactly. It is basically SARFAESI action OTS. Very few reversals from NPA, which is early buckets to regular. Because now after the new guideline, RBI guideline, we had to collect all the EMIs what is overdue.
Right. Okay, sir. Thank you so much. I will come in the queue for more questions. Thank you, and good luck for the next quarters.
Thank you.
Thank you. Our next question is from Abhijeet V. with Sundaram Mutual Fund. Please go ahead.
Sir, thank you for taking my question. Congratulations on very strong set of numbers.
Thank you.
First question, sir. I just wanted to follow up on Shreepal's question. Has there been any change in LGD calculation, sir? Because PCR, you have taken it up to 50%. I understand that you want to have cushion, but how is the LGD behaving for the portfolio?
There is no change at all.
What is the LGD, sir, for the portfolio? Hello?
Yes, please go ahead. I'll come back. I'll just tell you the exact numbers.
Okay. Sure. Follow-up question, sir, is what will be the excess provisions you are holding which is outside PPR and outside standard asset requirement? Do you still have any cushion, like you mentioned that INR 87 crores which you had during COVID time? Do you still hold any cushion apart from PPR and standard asset provision?
No, we don't. We are not holding any provision. Only the INR 15 crores what we provided this quarter, that is the only addition. Otherwise, rest all is either NPA or standard asset or restructured pools. Restructured provisions, we're holding about INR 67 crores. Standard asset is about INR 98 crores and the rest is for NPA. LGD , for stage one is 0.33, stage 2 is 18.
0.76.
0.76 and 0.17. 0.33, 18, and 79. Stage 1, 2, and 3. That's the breakup. Ryan, can we take the next question, please?
Yes. Our next question is from Rahul Maheshwari with Ambit Asset Management. Please proceed.
Good afternoon. Am I audible?
Yes, you're audible. Please go ahead.
Yes. Thank you so much for the opportunity and fantastic delivery for the quarter. My three questions, first on the for the entire year, if you look at the OpEx growth that is taking place and that is common phenomena for the entire banking industry, can we expect the same run rate of OpEx growth that would be taking place? What are the levers that will lead to such higher OpEx growth for the upcoming year? Can you give some color on that? That is the first question. Second question, as in last quarter we had witnessed that the balance transfer out just dropped to just INR 78 crores and new normal, which you guided that it would be in the range of INR 100 crores.
What is the current quarter's balance transfer out and going forward, how you see the scenario? The third question was on branches. Can you throw light on the branch productivity currently which shows in terms of the business and in terms of the employee, is that optimum level or how far we can gain the productivity in terms of the branches so that we can come to know that what is the scope of branch addition that would be taking place from the going-forward perspective. These are my three questions. Thank you so much.
On the BT, if you look at last year was INR 543 crores. For the year which just went by, it is INR 293 crores. It has drastically come down. As I had mentioned in my earlier calls also, BT has come down because we were able to put in a team, strong team to retain customers. We had a aggressive customer retention strategy. In terms of potential, with respect to either employees or the branches, I think we still have the scope. I think it's a continuous process.
I see.
Because we constantly work on branch productivity and employee productivity, and therefore we feel that, f or example, if you look at Q3 , the average business per employee was INR 27.6 crores. It improved to INR 29.97 crores in Q4 . Average business per branch was INR 127 crores, now it improved to INR 136 crores. I think there is enough and more scope to work on efficiency at branches and also at employee level. With respect to OpEx, I think control cost optimization is a continuous effort and we are working on that since last two years and this effort will continue. It will be in line with the business as well, but yes, it will be under check.
Just to follow up on this. Can we expect the OpEx growth in line with the revenue growth that will be taking place? Also on branches, let me keep it in this way that out of the 187 branches, how many branches are that where we find the productivity or there is a scope of in terms of the old vintage where there is another scope of the productivity due to INR 136 crores, which is showing on an average basis. That we will come to whether there is a serious branch expansion needed because as earlier also you have guided just a branch expansion of 15, 16 branches you will be adding on. If you can throw some light it will be very helpful that why even the markets are strong.
Obviously, my revenue growth has to be higher than the OpEx growth. That is something we still always manage. Having said that, as we are working on the entire IT infrastructure, and therefore that will be one component in OpEx. Number two, when you tend to grow business you have to hire people as well. Employee cost also would increase in that proportion.
Yes.
Number three, your CSR. That's a normal spend every year. Our OpEx also would increase in same line, but will be slightly lesser than the revenue increase.
Yes.
Also, when we do more business, one is employee cost because we have to hire employees, and number two, we have to also pay DSA commission. It will be in line with that. With respect to branch expansion, as I mentioned, because of COVID, we had planned for six branches and in next 12-14 months we'll be opening another 10-12 branches.
Okay. Thank you so much. I'll come back in Q&A. Best wishes. Thank you.
Sure. Thank you.
Thank you. Our next question is from Nitin Jain, who's an individual investor. Please proceed with your question.
Yes. Thank you for the opportunity. First of all, congratulations on a great set of numbers.
Thank you.
Sir, on one of your slides, you have spoken about digital transformation within the company. It's not quite clear as to what initiatives have been taken. If you could list out the top three initiatives, that would be very helpful. Also, in one of your media interviews you mentioned that the NIMs are expected to cool off. G oing forward, we are expected to see the central bank to increase rates. Do you see NIMs cooling off because of your cost of funds going up or in increased competition? If you could clarify. Thank you. These are my two questions.
As a company, we are working on more of automation and less of digitization. I think both are used . The only thing is for a product like home loan, we work on automation. This is one, we are changing the entire IT infrastructure in terms of entire systems lending, then deposit, everything we are changing. We are now strengthening our IT infrastructure. Number two, we will integrate with various APIs to try and do faster decisioning. This will be used for front end for sourcing and also for collection. Overall, we will also work on scan-based approval and we'll use intelligence to try and decision so before someone could actually eyeball and then take a decision. Basically, it's a part of digitization and to a large extent automation, which will be our UAT so that we can try and crash the TAT.
Okay. Just to follow up on that, sir, if you could .
In terms of NIM, in fact earlier, I used to say that for a profile like Can Fin, spread of 2.4% and NIM of 3%. W e are seeing that NIM is inching up quarter-on-quarter and now it is 4.15%. Th at's also because of some support from LCR Investments. This is because we have drastically increased our other income. On a steady state I mentioned, it's not that next quarter NIM is going to drop substantially. What I meant was on a steady state, spread will be around 2.5% and NIM will be about 3.75%. Now it is 4.15%. If we have opportunity, definitely we will always try and keep at that level and maybe slightly increase as well. On a steady state, I think NIM will be in the range of 3.7%-3.75%.
Great. Just a follow-up on the digital transformation. Is it possible to provide any numbers in terms of what is the benefit you are seeing in terms of sourcing or operational efficiency because of the automation?
Now we are using Totia. Earlier to analyze one self-employed balance sheet, we were taking about two hours. Now we take three minutes. If you see the overall TATs, the processing time will come down by at least 50%. I'll not be able to quantify in terms of number of man-hours saved or number of people number of people reduction, but definitely, yes, in the long run, definitely it will give us a lot of value add. As of now, we are in the process of transformation, IT transformation. It will take about 12-15 months' time, so we are trying to rework on the entire IT infrastructure.
Okay, that is very helpful, sir. Thank you.
Thank you. Our next question is from Devansh Nigotia from SMIPL. Please proceed.
Yes, sir. Thanks for the opportunity. Sir, if you can just help us understand how is the restructured book behaving? Out of the provision for standard assets, how much of that would be towards the restructured book?
Restructured book provisioning is about INR 67 crores. Now, from the total restructured book, INR 42 crores it has come down. That means these customers have either repaid or ... Basically repaid. Out of whatever EMIs have fallen due, as of now the collection is 100%. What we have written back this quarter is about INR 1.69 crores.
Okay.
From the provision amount.
Okay. That's very helpful. I'm just a little confused. You mentioned that incremental NIMs are at 3.75%.
No, 4.15%.
Incremental NIMs?
No . NIM is 4.15%. I told going forward on a steady state, NIM should settle around 3.75%.
Okay. What is our outlook on the credit cost for the next year?
A s of now, it is 0.4, it'll be at that level only.
Okay. 0.4% for the full year?
Yes.
Okay. If you look at in comparison to our pre-COVID level, isn't that at a very elevated level? I'm just trying to understand where this elevated credit cost is coming from. Because our mix between salaried and non-salaried is still the same.
No, earlier it was 0.36%. Now it is 0.4%. Our Tier is increasing, so that's the effect.
Okay. That's it from my side. Thank you.
Thank you. Our next question is from the line of Umang Shah with Kotak Mutual Fund. Please proceed.
Yes, hi. Congratulations on a good quarter, and thanks for taking my question. One is on our liability mix. If you could just help me, what is the residual maturity of our commercial papers?
C ommercial papers maximum is one year, so it will be on a rolling basis. We take CP starting from three months right up to one year. It's on a rolling basis. Only thing is, in Q4 , we reduced CP, which was about 16% to about 11%. At peak it was 19%. We brought it down to 11%. NCD went up because we had to raise NCD for last year based on the incremental borrowing.
Sure . Sir, the second question was regarding the capital raising exercise. If I recall correctly, in the previous quarter you had mentioned that at some point you might look at an option to raise equity capital in the current fiscal. Any plans that you have formed up around those lines?
We will raise capital. We have enabling approval from shareholders to raise up to INR 1,000 crores. We will raise a part of that amount in next 2-3 quarters' time. We will raise.
Okay. Understood. Sir, last data point. What is our outstanding restructured book as on March 2022?
It's about INR 676 crores.
INR 676 crores. We are carrying INR 67 crores of provisions around it.
Yes, 10% of that.
Okay. All right. Thank you so much, and good luck for future quarters.
Thank you.
Thank you. Our next question is from the line of Mahrukh Adajania with Edelweiss. Please proceed.
S ir, congratulations.
Thank you.
Sir, I had a couple of questions. My first question is what was your incremental cost of funds during the quarter in Q4, and any feelers on what it is in Q1 so far?
Incremental cost of funds was 5.03%, and its portfolio was 5.56%. I think in next quarter or two, rates will inch up. We feel that in next one and a half years' time, rates might go up by 100-125 basis points.
Got it. The other question was that, what is your average ticket size now?
INR 21 lakhs.
What was it last quarter?
I t used to be INR 18 lakhs earlier, then it went up to about INR 21 lakhs. It's quite stable at that level.
It's stable. I was just wondering what gave the uptake in NII other than cost of funds this quarter. I f your ticket size has reduced, if you have gone more affordable.
No, ticket size has not reduced. O ur rates have increased because we increased rates twice from April. The yields have gone up.
The insurance income that you get that's booked where?
That is for the quarter was INR 6 crores.
How much?
INR 6 crores.
INR 6 crores. Okay. That would be part of NII or other income?
No, it is other income, but part of NIM.
Part of NIM. Okay. Got it. What was it last quarter?
It was some INR 3.6 crores-INR 3.7 crores.
Got it. Okay, sir. Thank you. Thanks a lot.
Thank you. Our next question is from the line of Ankush Agrawal with Surge Capital. Please proceed.
Hi, sir. Thank you for taking my question and congrats on a great quarter. Again, on this NIM, if I check our Q4 of last year versus Q4 of this year, our spreads are actually lower. Our NIM has still expanded. Based on what you have told till now, obviously there's some effect of the LCR investment and then this insurance income. Still, the NIM is slightly higher. Can you just explain little bit on what's affecting this?
L ast year other income was quite low compared to this year, number one. Number two, l ast year the yields were higher and we had dropped rates and we again increased rates. W hat increase we have done is much lower than the drop what we did last year. Therefore you will see that difference.
The spreads is like 2.78% versus 2.55% this quarter.
Exactly. Correct.
Got it. This insurance income, do you believe this will be a sustaining number and it will grow from here or it's more of a one off?
No, it will grow from here because it is directly into the disbursement growth. As long as we grow disbursement even this income also will grow.
Okay. It's like i t's a product that you're selling with your home loans.
For us it's a bundled product.
Okay. It's a bundled product. Got it.
Yes.
Got it. Secondly, sir, again, on the capital raise, you mentioned INR 2,000 crores is the approval that you have, right?
INR 1,000 crores.
INR 1,000 crores. Right. Any specific quantum that you might be looking to raise?
We have not decided, but it will be part of INR 1,000 crores, not the entire amount. The first tranche, it will be part of INR 1,000 crores.
You will do it in multiple tranches ?
No. What I'm saying is, as a first tranche, we will not raise entire thousand. We will look at some amount part of thousand in next two to three quarters.
Got it. Lastly, on the core OpEx , for last three or four quarters, OpEx, the cost to income ratio has increased constantly to now, close to 20%. What are your thoughts in the medium to long- term? Would it start trending lower to the pre-COVID levels of 15% or how is it?
You're talking about cost to income or OpEx?
Cost to income.
Cost to income?
Yes.
Cost to income will be around 17%-18% on a steady state. N ow we are investing on so many things. Therefore, you'll see that cost income slightly higher. I think it will get moderated.
This IT transformation that you're doing that would not help much in reducing the cost to income ratio.
No. Initially obviously we have to spend. I think over a quarter we will start seeing.
Got it. Thank you. Lastly, just again one feedback that I gave last quarter as well, it would be very helpful if you can increase some levels of disclosure on credit, the basic metrics of your average book, average borrowing or average equity. Even if these three metrics are available, it will be very helpful.
Okay. Sure.
Thank you.
Thank you. Our next question is from the line of Shweta Daptardar with Elara Capital. Please go ahead.
Thank you, sir. Congratulations on the quarter. A couple of questions from my side. Last time I remember you mentioned that your CP has been on the higher side because of NIM management. Now that you have multiple levers on NIM accretion, where do you see the CP mix going? W ill it go down further or there is some ceiling which internally you have decided that you would not surpass the same?
We have a limit of INR 4,000 crores. As of now, it is 11%. We will see depending on the need. Now it will be about 15%-16% is where we will try to stabilize because that is only for managing cost. It is not for funding purpose. In Q4 , now we had the need to raise NCDs, and therefore, CP shares went down and NCD shares went up. This would continue in a few quarters coming up as well. We will try and balance so that we keep our costs low, at the same time comply on the NCD requirement what is required to be raised depending on the incremental borrowing in the year.
Understood. In terms of disbursement, so each quarter you've been surpassing the previous quarter level, and you've put up historically high number each quarter. Where do you see this number settling down, once, the pent-up demand sort of settles? Is it going to go beyond INR 27 billion, or how is this like?
I t's a growing concern. Demand is quite robust. I think every quarter we'll try to put up best performance compared to the previous quarter. Let's see where it ends up.
Sure. Last question from my side. Couple of quarters ago you had also highlighted the aspirations to move into higher ticket size. What is the thought process there? What is the strategy? Like, are we sort of already getting there directionally? I always wondered, why this decision, especially in a market which is also seeing competitive intensity flaring from the bank side as well. Thank you.
The work we were doing probably a few quarters back and now there has been slight increment. That is why you'll see our ticket size also going up to INR 21 lakhs, which was INR 18 lakhs earlier. I think from now onwards there is less scope for us to increase ticket size, so it will be around INR 21 lakhs-INR 22 lakhs going forward . That is where we will stabilize.
Sure. Thank you.
Thank you. Our next question is from the line of Niti Gupta with IIFL. Please go ahead.
Yes, hi, sir. Congratulations for the good numbers.
Thank you.
I just wanted to know whether the NPA numbers is including the IRAC norm numbers or excluding those numbers.
It's IRAC only.
It's IRAC only?
Yes.
Okay. Thank you.
Thank you. Our next question is from the line of Pavan Kumar with RatnaTraya Capital. Please go ahead.
O ur spread guidances going forward would be around 2.5%, is it, sir? That's what I heard.
Spread, yes, you're right.
What are the growth rates that we should expect in FY 2023?
18%- 20%.
As per the conditions now?
18%-20%.
Due to this stamp duty cuts being rolled back in some states, would that affect our growth rates as of now?
No. Not m uch. Demand is quite robust, 18%-20% growth is very much achievable. It won't impact.
Any reasons why you expect the spreads to actually roll back as of now?
E arlier, we were managing spread of slightly higher number. When COVID started, we had lot of competition from banks, and therefore we had to drop rates, so the entire portfolio has repriced. Now even today, as we speak, I think home loan rates available in the market is quite low. It's in the range of 7%-7.5%. I f you have to be competitive. I t's more of a balance between profitability and growth. That is the reason why we have slightly moderated on the spread.
Okay. On the incremental capital that you plan to raise, have you decided on how much you want to raise?
Not yet.
Okay. Fine, sir. Thank you.
Thank you. Our next question is from the line of Manoj Oberoi with Yes Securities. Please go ahead.
Yes, sir. Hi. This is Rajiv here. Thank you for taking my question, and congratulations on strong numbers. Two things. Firstly, in terms of if you can give some color about how incrementally is our portfolio changing. Maybe if you can just give more color on the quality of incremental portfolio being onboarded b ecause we are at a different rate at this point in time, say, when we were about 12 months before, and even pre-COVID in terms of our relative positioning. Have we slightly relaxed in terms of customer profile or property profile? If you just give some flavor about the quality of new portfolio being onboarded at 8.07%.
Actually, we have not changed any policy in last 2.5 years, 3 years, or even the process. We've not changed anything. Because of COVID, there were two changes, one, in terms of we had slightly tightened, and we then restored it back, especially for SENP, and this happened long back. We had done this for about six to seven months' time, and effectively this happened in only three to four months' time. As of now, I think there is no change at all. What happened was due to COVID, SENP, which was 30% incrementally also had come down to about 12%. Now that is back to about almost 28 odd %. I think a quarter or two, it will be back to again 70% salaried and 30% self-employed.
This is in the profile, side. In terms of product, we have increased non-home, which was 9% to about 10%, in last few quarters. These two are the...
Sir, maybe within, say, salaried and within self-employed risk categories, have you seen any shift or any change out there between within self-employed and salaried? Second level could be also in terms of, say, property profiles. Has this incrementally property profile slightly changing in our portfolio?
Not really.
Okay.
We've not seen no changes.
Got it. Sir, one last thing was again a rumor that...
Yes. Only thing is that demand from self-employed came down because of COVID and now slowly it is coming back. Otherwise we have not seen any change.
Sir, one more rumor that I wanted to clarify on because we've been hearing that some people have been deputed or have joined from Canara Bank at the operation level. Is this true? If they have come then, what roles they'll be playing and how should we read this?
Basically , I think there have been three people from Canara Bank. One would be part of risk team, assisting the risk team. The second person has joined the audit team, will be supporting the audit side and audit team. The third person will be in HR and other administration role. Three people have joined from Canara Bank, yes, on deputation.
Okay. T hey are for a long-term assignment or they've just come for a short stint?
They just came a couple of months back and generally when they come their term is for three years.
Got it, sir. Okay, thank you so much for answering my questions.
Thank you. Our next question is from the line of Tejas Mehta with Omkara Capital. Please go ahead.
Yes. Hi. Thanks for taking my question, sir. Just a few questions. One is, can you give me the sense of what is the quantum of the portfolio in and around Bangalore?
I'll tell you, incrementally Bangalore does about 23%-24% of the business.
On the book?
Book will be about 25%-25.5%. Which used to be 33% few quarters back.
Yes. Correct. Just wanted to check.
Now, dependency on Karnataka has come down because other regions are contributing well like Telangana, AP, then Tamil Nadu, Rajasthan, Maharashtra, they're all contributing. Earlier the dependency on Karnataka was almost 1/3, so now it has come down. Actually it started coming down more than 15 months back only.
Got it. Can you help me understand the movement of cost this time in the P&L, like employee cost dropped on a QOQ basis, but then there was a very sharp jump in other operating costs. What's the reason for that?
No. If you look at the employee, basically, one is new hiring. Actually, it's not come down, it's gone up. One is new hiring and second is the increment what they got, if you're talking about the whole year. Otherwise, OpEx has gone up because for IT spend, second is CSR.
CSR.
Third is DSA commission because we are increasing our disbursement. In line with disbursement even the DSA commission also will increase.
Yes, because cost shot up to INR 193 crores which on a QOQ basis it's like what? From INR 84 crores. That is like INR 110 crores increase in the cost. We didn't understand that. How can such a massive cost increase happen in just one quarter?
I'll give you the breakup. Actually, when we did salary revision, which happens once in five years and that call we took little late and therefore we had to pay the arrears also. I think this was clarified earlier, but again we'll be able to give you a breakup on that.
Right. Even employee cost it is actually stable at INR 180-188 crores. Last quarter it went up to INR 214 crores and now it has again come down. All right. I'll later on reach out to you personally to get the breakup.
Yes.
Got it. Sir, on the capital adequacy, what's the capital adequacy that we have today?
As of now it is 23.3%.
Tier I?
I think majority, except HDFC, everything is Tier I.
Sir, 23.3% if that is the capital adequacy, then why do we need to raise more equity then?
It's a good question. I think the only reason why we are contemplating is because of DER.
Because of what?
DER, debt equity ratio.
Okay. You don't really look at debt equity ratio in this business.
No, I understand. We've been engaging with all the bankers. Obviously, we're pretty comfortable, D ER of up to 8.5 times and therefore, we also had a backup plan. One is, if you look at capital adequacy really we are at a comfortable level, b ut we thought of raising capital, keeping in mind that one, it'll help us to be future ready in terms of growth and number two, also to try and bring down DER.
Yes, because the thing is that, i f you i ssue for INR 500-600 crores of capital and you are on INR 3,000 crores of equity today, so that's like 20% dilution on the equity. On the market cap, of course, it'll look lower, but, on the current equity it will look much larger. Basically existing equity investors will actually kind of suffer because the ROEs will drop and as well as there are other things as well. I'm not able to understand why they need to raise equity.
Exactly. The reason why we've been talking about this for the last few quarters, that's the reason why we had deferred. Whenever we raise there'll be some impact on our RE for that particular year. From next year, I think it will enable now to improve the ratios. T his is true for any company at any given point in time whenever they're going for equity raise. I think that is inbuilt. I think we look at all the numbers before we take a decision.
Got it. For next year, can we expect a INR 10 million crores plus disbursements number, FY 2023?
Yes, you can expect.
Okay. All right. Great. Thank you so much.
Thank you. Our next question is from the line of Chandrasekhar Sridhar with Fidelity International. Please go ahead.
Hi. Sir, can you just tell what the LCR at this point in time?
Sorry, come again.
What is the LCR at this point in time?
I didn't get you. LCR?
Yes.
INR 366 crores. T he requirement is about INR 350 crores, but we are holding more than INR 1,000 crores.
What is the drag on NIMs? You said that...
No, there is no drag. It's a positive carry as of now, which is why I told that 4.15% NIM is not sustainable because today the rates are favorable. It may not. As of now we're holding more because it's helping us. A lso the rates are fluctuating. As of now it's a positive carry. Therefore, out of 4.15, 12 basis points is because of LCR investments.
Okay, can you just remind me why are you guiding to 40 basis of credit cost next year? What's the logic behind it? Especially given where the asset quality is so good.
No, I'm only saying we are pretty confident of the restructured book and the book what we are building. I'm only saying that there won't be much changes. As of now it is 0.4%, it will continue at 0.4%. Maybe there could be 1 or 2 basis points here and there plus minus.
Yes, that's still much higher than the history. W e have already passed the COVID wave. We've done that. We've almost reasonably well. I'm just trying to understand the logic of having 40 basis when historically we've been at anywhere between 15-20 basis.
T he PCR today, what it is 53%, maybe going forward it will slightly come down because we should do the balancing act. Basically, we went up to 0.4% credit cost. PCR, which is about 33, now it is about 53. PCR going forward will come down because as of now you just created. Going forward we might draw that. I said 0.4 because currently it's 0.4% and there won't be much change in that. Maybe if at all there is a change it will be by a 1 basis or 2 basis.
A re our NBD estimates now higher than what we've had historically?
In terms of credit cost?
Yes.
Not really. Nothing has changed. E ven today I think 0.4% is quite low. Very low actually.
No, absolutely. I'm just saying versus our own history, it's still higher. W e used to run maybe 15-20 basis. Just trying to understand the logic of...
No, at that point in time when the portfolio had not matured. Now we are seeing a mature portfolio. Over a period of time it has settled down between 0.35%-0.4%.
Right. Can you help us what's the stage 2 number as of the end of the year?
Stage 2 number, just a minute. INR 1,270 crores stage 2.
Okay. Thank you very much.
Thank you.
Thank you. Our next question is from the line of Abhijit Tibrewal with Motilal Oswal. Please go ahead.
Thanks a lot. Just a couple of data-driven questions. Firstly, I joined this call a little late, please excuse me if some of these are repetitions. What's the stock of your borrowing number as of end of the quarter?
I did mention this. In Q4 we borrowed... Just a minute. INR 5,000 crores incremental. Incremental borrowing is INR 5,000 crores.
Yes, sir. You mentioned that in your own opening remarks. I was asking what's the stock today as of March 31st? What is the outstanding borrowing that's there?
INR 24,600.
Yes, sir. Thank you. Secondly, somewhere during the call, you mentioned that, other than INR 67 crores of OTR provisions, you are carrying about 90 crores of NPL provisions and around 160 crores of standard asset provisions. Will it then be fair to say that the total ACL provisions that you are holding today is about INR 273 crores?
T oday what we're holding is totally INR 270 crores of provisioning.
Right.
T his is INR 98 crores in standard assets. NPA is about INR 90 crores. Restructured pool is about INR 68 crores and additional is INR 15 crores, total is INR 270 crores.
INR 270?
Yes.
All right. Sir, sometime back to the previous participant, you mentioned the stage 2 number, which was about INR 1,270 crores. What is the provision that you're carrying on this stage two?
On stage two we are carrying 34.88%.
Okay, sir, can it be fair to say that large part of the increase that you're seeing or that 40 basis of credit cost that you're guiding for is partly driven by the fact that you now want to increase the provision cover on your standard risk, given that you suggested that PCR on stage 3 will incrementally come down?
You are partly right. Also, if you see, when we are growing the book, our provisioning on standard also goes up.
The other question that I had is, you had suggested during this call itself that you have increased the interest rate by about, I think two times during the course of the last year. If I recall from our past earnings calls, you had suggested that there is an annual reset on the interest rate that you do. Are you running a risk that given that there will be an annual reset on some of the customers that you would have probably lent at lower rates about a year back, there could be higher balance transfer request going forward?
No, it's a balancing act. Th at do happen. T o manage that, we will probably drop rates or keep the card rate lower. It's a balancing act. At the end of the day, we need to work on the yield spread, and the cost of funds. It's more of a balancing act.
All right. Just one last question here, on your liability mix. O bviously, the CP has declined to about 11% in this quarter. Like you explained earlier, sir, that this was to do with the fact that there's a requirement to borrow in the form of NCDs, a proportion of your incremental borrowings in the quarter. You subsequently also suggested that you would be looking to maintain CPs at around 15% of the liability mix. Sir, don't you think given that... A lot of questions, I'm sure in all investor interactions as well, hover around the fact that you're running a higher proportion of CPs in your liability mix.
Don't you think it will be better if you maintain CP at maybe these levels rather than looking to increase it back to about 15%-16% levels in the next year? Sir, probably one more question here is that, to the earlier participant, maybe you guided for disbursements of about INR 10,000 crores, if I recall correctly. Just wanted to understand, I'm seeing our branch network has been fairly constant for a long amount of time, for the last at least three or four years. Sir, what is leading to this better disbursements? Because, typically, it's either better distribution, deeper penetration, or improvement in efficiency that enables lenders to scale up their disbursement. What are the critical aspects, sir?
Okay. In terms of CP, CP is not for funding. CP is only used as a tool for cost leveraging. I f you see couple of years back, CP was very, very high. Now we brought it down. W hat happens is that we need to also manage the cost . Therefore, w e will definitely use CP as a tool to ensure that the cost remains low and there is no risk because CP will be only against backup, which means, sanctioned term loan limit, which is undrawn or against available OD limits. To that extent, CP of 14, 15 or 16%, I don't think it's a risk because it is not for funding purpose.
In terms of disbursement, if you look at the growth from last year to this year, I think the growth is not very substantially, it will be about some 20-odd%, and that is the guidance what we have given, as well. I also mentioned that, we are opening branches and we will open branches this year as well. Only thing is due to COVID, the pace of opening branches came down and therefore, if you see in last two years, not too many branches are open. Now, having said that, we are also working on deeper penetration and working on the employee productivity. There we feel that enough scope is there and we can take our book to close to about INR 40,000 crores with the existing set of branches. Having said that, we will also open branches and try to increase contribution from the new branches as well.
S ir. Thank you so much. This is very, very useful, and I wish you all the very best.
Thank you so much.
Thank you. Our next question is from the line of Viraj Gandhi with Samco Mutual Fund. Please go ahead.
H i. Thank you very much for taking my question. Most of the questions are answered. Just one final clarification from my side. You started this call saying that the NHB audit is going on. I just wanted to clarify or comment on this. Is it not a special audit and only a general audit which happens with most of the housing finance companies?
NHB, they do two types of audit. One is which is central system audit, and second is credit audit. One audit is over and that discussion is pending, and another audit is yet to start. This happens every year. This apart, there will be internal audits which will be happening. I think the special audit what you're referring to is the internal audit, so this happens on a continuous basis.
Okay. From the provisions that you have made this quarter, there's nothing allocated for this particular audit, correct?
W hatever observations we have received so far are general in nature and in the normal course of business.
That's more than. Thank you.
Thank you. Our next question is from the line of Gaurav Jani with Prabhudas Lilladher. Please go ahead.
Thank you, sir. Congrats on a good set of numbers. Just clarification first. For CD investment, income, the impact on margins versus 12 basis points, will it be safe to assume it will be about INR 8 crores on the NIM?
For the quarter, it's about INR 18 crores.
INR 18 crores. Okay. That is on the NIM, right? N ot the interest income. T he net effect is what you're saying.
NIM only.
Okay. Got it. Secondly, the NPA numbers that you have mentioned this time around. Have you reverted back to the previous recognition, or is this basically daily NPA recognition?
R olling back to current, if you're talking about that, I think that is very, very less. This is basically through legal action and foreclosing and OTS from the NPA pool. There have been some flow from SMA-2 to NPA, but the recovery is much higher and therefore the NPA has come down from 0.71% to 0.64%.
S ir. What I wanted to ask you is the 0.64%, is basis the daily NPA recognition or is it as per the previous deadline?
This is as per the new regulation only.
A s per the new regulation?
Yes. November 12, RBI circular said two things. One is NPA tagging. NPA tagging has to happen on the 90th day. Earlier, every month was taken as one month. For example, in a month, let's say for example, if you take Q1 , Q1 January is 31. April is 30, May is 31, and June is 30, so it is more than 90. NPA recognition has to be on the 90th day and we should not go by m onth-wise. That's number one. Number two, once the account becomes NPA, earlier we could have upgraded. Suppose let's say an NPA account, if you receive two EMIs, that account could have come to SMA-2. Now we have to collect four EMIs so that from NPA it will directly come.
It will become current. These two are the changes. Now this 0.64 is as per the new guideline.
Okay. Yes, sure. Because there was a relaxation, so that's why I thought of asking, but thanks for the detailed answer.
No, this we implemented from that month only, from November only. November of last year.
Sure. Got it. Sir, I mean, coming back to the provisioning guidance number of about 40 basis points. C ould you say that we are being a bit more conservative out here because frankly, assuming a 20% growth on a 40 basis point standard of provisioning, we'll be looking at 20-odd crores and we already have a 50%-odd-plus of a PCR. I just wanted your thoughts on that. Or are we being much more conservative out here?
Maybe you are right. We will try and moderate this looking at couple of more quarters.
Sure. Got that. Sir, also just two more questions from my end. One is, the repayment rate for the quarter per se seems a bit elevated, although obviously, the disbursements were, pretty strong. On an annualized basis, it was about 20%. Anything to read out here? S uddenly did the competitive advantage really go up, from banks or other SFIs or how should we sort of look at it?
No, for 2021 it was INR 543 crores. 2021-2022, it came down to INR 293 crores. What peak we saw out of this, if you take on an average, BT out is about 30-odd crores. This is part payment and foreclosure. All put together is INR 293 crores.
Okay. Nothing extraordinary for the quarter, right?
It is normalized. It is back to pre-COVID levels.
Sure. I also missed your answer on the breakup of CET1 and Tier 2. Sorry. Could you repeat that?
Tier 2 is only INR 100 crores.
Okay. Got it. Finally, the total employees number as on date?
About a little over 900.
Okay. Got it, sir. Thank you so much.
Thank you. Our next question is from the line of Ayushi Shah with Affluence Shares and Stocks. Please go ahead.
Hello.
Yes, please go ahead, ma'am.
My question is slightly on the macro level. I think everyone here is aware of the fact that the company is, like, one of the greatest beneficiaries of increasing demand in the affordable housing segment. What I would like to know is the hindrances or the problems you feel that the company is facing, especially in increasing disbursements to the various geographies that we have. How are we dealing with the increasing competition in the segment? Because the company had previously adopted a low interest rate strategy to protect its market share. Do you think it is sustainable? If not, what are the other methods that they're adopting?
Actually, competition was there always. Only thing is, during COVID time, because there was a certain constraint on mobility of people, and therefore business was not coming through, and therefore a lot of banks became aggressive on BT, and therefore there was heightened activity of BT. The competition was much higher than what it used to be. Now, from January onwards, it is back to normal. From January, competition is back to normal, which is business as usual for us. It's almost what? I think five quarters now. We do have competition. We are able to manage that. The competition, what was there in COVID two quarters and what we see now, there is a huge difference. At that point in time, there was huge competition. Now competition has come back to normal levels. Therefore, the kind of growth w e are looking at is quite possible.
Okay, sir. Sir, are we looking at any new products that we can launch in order to improve the spread that we have going forward?
Yes, we'll have to think about it, but yes, if there's an opportunity, we'll definitely look at it.
Okay, sir. Thank you.
Thank you. Our next question is from the line of Gaurav Kochar with Mirae Asset. Please go ahead.
Yes. Good evening, sir. Thanks for taking my question. Sir, sorry for persisting on this, but the credit cost guidance of 40 basis points. If I look at FY 2021 and 2022, the two years of COVID, our credit cost was up 30 basis points in each of these years. Even if I look at the net NPA number, it's 30 basis points, so nothing much to talk about. What's underlining this 40 basis point guidance? Are you seeing anything on the credit cost side or on asset quality side that you believe, maybe the restructured book or the stage 2 assets, which is leading you to guide for a 40 basis credit cost?
No. Not at all. For all we know, this 40 basis points will come down. It's because we have increased our TCR, it will have its impact. We are not seeing the impact from the restructured book. INR 42 crores, the book has come down by INR 42 crores already. Out of the EMIs which have fallen due, I think all the accounts are regular. We don't see. Initially I had mentioned out of the restructured pool, about 7% might flow to NPA, which is about INR 49 crores. I think there is no change in the plan. Probably that number could be much lower than what we had anticipated earlier. This 40 basis points can further come down.
Sure . This 40 basis point is only a conservative number and, based on experience in COVID, I mean, one can easily assume that credit cost should be 30 basis point or sub 30 basis point.
It could come down from 40 basis.
Okay, sure. Sir, sorry, this has been answered earlier. You mentioned that there is an NHB audit going on, but any other investigation internally or by an outsider done in the last quarter or so, apart from the NHB audit that you're talking about?
B asically, I'll tell you what. T hese kind of audits keep happening. Whenever there is a complaint, obviously the audit happens. During that audit also nothing has come out, which is other than what comes under the normal course of business. What has actually come out is some irregularity in one branch, which is Bhilwara. There we have identified about INR 3.93 crores of fraud. We're going to say for it's irregularity. Where the income tax IT returns were fake. This happens at any given point in time during any audit across any branch. This is what has come up. Apart from this, there is nothing which is unknown which has come up.
Okay. This audit was conducted by your own internal team, is it?
We do regular audit, in fact, every month, every quarter, because it's more of a concurrent audit what we keep doing across the country. This is a regular exercise.
Okay, understood. Sure, sir. Got it. Sir, last question on margins. When you say the spreads will go down to 2.5%, and margin on a sustainable basis 3.7%, is it more to do with funding costs moving up, or you believe yields could also be under pressure, given that currently at marginal yield of 8.07%. Do you see that as a risk or your funding costs at 5.5%, that as a risk when you say the spreads will come down?
Yi eld will go up, cost also will go up. We will protect margins what we have mentioned. It is basically a balance between profitability and growth. If you have to grow at that level, w e need to take slight hit on the margins and therefore I said 2.5% spread and about 3.75% NIM would look as appropriate in the steady state of business.
Okay, understood. You're saying 18%-20% growth. In order to maintain that, maybe some bit of margin compression might happen in the next year.
True. Correct .
Okay. Sure. Perfect. All the very best. Thank you.
Thank you. Our next question is from the line of Dhaval Gada with DSP. Please go ahead.
Hi, sir. Congrats on good set of numbers. I just had one question on the insurance attachment. W here would we be on the insurance attachment in FY 2022 compared to pre-COVID, and your expectation for next year?
No. We are also looking at some 20%-odd growth in the insurance income.
Yes, in terms of attachment rate, it would be 50% attached or higher or lower? Any qualitative or quantitative number if you could provide?
I nsurance is something which is optional to the customer. Therefore we will, on a best effort basis, try to grow at about 20%- odd b ecause we track based on value penetration, and for certain products on number penetration, we will try to grow at about 20%- odd .
The value penetration is more than 50%?
No . Both 20% only.
20%. Okay, fine. Okay, thanks. All the best.
Thank you.
Thank you. Our next question is from the line of Franklin Moraes with Equentis Wealth Advisory. Please go ahead.
Thanks for taking my question. I just wanted to confirm that even the volatility in rates that we had seen in the past year or so, and even the borrowing mix wherein the CP was increased and then reduced. This kind of volatility is not likely to or is likely to moderate going forward, right?
In terms of the liability mix, I think this is quite normal for us. What we saw abnormal in last two years is only COVID. Other than COVID, everything else for us is quite normal. The CP fluctuation also is well within the limit.
This 10%-20% range of that CP fluctuation, we can assume that similar range happening going forward, right?
We will keep it at 15% ± 2%.
Okay, fine. What is your average tenure of the book by both on origination and on closing out of the loan?
Average is about 8.5-9 years. On origination it will be about 20 years.
Okay.
If you look at the average loan on book, it's about 8.5-9 years.
Okay. What is the average LTV?
Average LTV at a portfolio level is about 67%.
Sorry?
67% on portfolio.
67%. Is there some scope to increase this LTV or we are happy with the current level?
It depends on the need of the customer. If there is a need, we'll increase by 1% or 2%. Otherwise, we'll go with the flow. As of now, it was 65%, now it is 67%, so we will keep at that level unless and until there is a need.
Okay. Thanks a lot.
Thank you.
Thank you. Our next question is from the line of Niti Gupta with IIFL. Please go ahead.
Sir, can you please confirm me the numbers for stage 1, 2, and 3 for this quarter?
Just a minute, please. For this quarter or previous quarter? Stage 1 is, what is it? Stage 1 is INR 25,268. Stage 2 is INR 1,270. Stage 3 is INR 170.
35268 is for stage 1?
Come again. INR 1270, that's stage 2.
Okay. Stage 3?
Stage 3 is INR 170.
Okay. Thank you.
Thank you.
Thank you. Our next question is from the line of Manoj Oberoi with Yes Securities. Please go ahead.
Yes, just one number. I wanted a Stage 2 number for December quarter, for the previous quarter ending.
I'll come back to you. Just give me some time.
Okay, sir. Yes, that's it from my side.
Thank you. Our next question is from the line of Gaurav Jani with Prabhudas Lilladher. Please go ahead.
Some quick questions. Thanks again. One is incrementally, what will be the cost of CP versus NCD for you?
The last NCD what we raised was at 6.8%, and the CP depends on tenure. One year CP comes at about... Now it's about 5%.
Okay. Sure. That's it. Secondly, on the OTR pool, basically the restructured pool, now, how should we look at FY 2023 and 2024? H ow much of it will become due in 2023 and 2024, and so on?
This year about 10% would become due, but we are seeing increase closures happening in the restructured pool.
Okay, sure. Got it. Lastly, just a number, the total risk-weighted asset number, please.
Sorry, coming in which number?
The risk-weighted assets number, please, as on date. Hello?
I'll just tell you what is the blended. Just a minute. It's about 50%.
50% of the [inaudible] . Excuse me.
Yes, book.
Okay. Got it. Thank you so much, sir. That's it.
Thank you. Our next question is from the line of Radhika Gupta with Guardian AMC. Please go ahead.
My questions have been answered. Thank you.
Thank you.
December Stage 2 numbers are INR 1,652.
That was the last question for the day. I would now like to hand the conference over to Mr. Girish Kousgi, MD and CEO, for closing comments.
Thank you, all the investors. We look forward to your same support in the future also. Thank you so much.
On behalf of Investec Capital Services, that concludes this conference. Thank you for joining us and you may now disconnect your line.