Good afternoon, everybody. Welcome to the Can Fin Homes Q2 FY 2027 Earnings Call. I would like to hand over the call to my colleague, Nidhesh Jain.
Thank you, Ramya.
I am sorry, Nidhesh, I am butting in between. Before I say that, kindly note that this call is being recorded, and I would request you to raise your hands if you have any questions. Over to you, Nidhesh. Thank you.
Thank you, Ramya. Good afternoon, everyone. Welcome to Quarter 2 FY 2027 Earnings Conference Call of Can Fin Homes Limited, hosted by Investec Capital. As a reminder, all the participants will be in listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. For Q&A, please raise your virtual hand and we will unmute you from our side. We will start the management commentary followed by a Q&A session to discuss the financial performance of Can Fin Homes and to address your queries. We have with us Mr. Suresh Iyer, MD and CEO, and Mr. Abhishek Mishra, CFO of Can Fin Homes Limited. Please note that this call is being recorded. I would now like to hand over the call to Mr. Iyer for his opening comments. Over to you, sir.
Thank you, Nidhesh, and good afternoon, everyone. Thank you for joining the earnings call for the Q2 results of Can Fin Homes. Before we get into the question, we have a small brief on the highlights of the quarter, which I will just share, and then we can go into the question answers. The highlight of the quarter for Can Fin, obviously, has been that the entire Project Tejas, which is the IT transformation project, has gone fully live. In fact, we went in phases where July we went ahead with 11 branches, five old branches and six new branches. Thereafter, in the month of August, additional 75 old branches and 14 new branches were added.
In the month of September, 77 old branches again were added. Finally, from effective 1st of October, 93 of the remaining old branches and the five branches which have subsequently opened, new branches, have all gone live. So presently, we are completely online in the new system. All the aspects of the project, including the security aspects, the infrastructure aspects, which were already implemented earlier, and now all the operational or the functionalities which are there in the project have all been implemented, and we have gone live with the entire LOS LMS across all the branches.
Of course, this implementation has had an an impact in terms of our disbursement, particularly in each of the branches in the month where the business or the IT implementation has taken place. To this effect, we have actually given an additional slide in the presentation, that is slide number 20, as to the impact that we have had because of this IT implementation. The month in which the implementation has happened, the disbursements, they have dropped in that particular branches by about 70%-75%. Then the next month, again, it pushes back and it comes back to almost 80%, 90% of the whole disbursement. So that's the kind of thing.
As a result of this, in the months, particularly of August and September, where we had a large chunk of 75 and 77 old branches going live, there has been a major impact. As a result, the disbursements for the quarter were at only INR 2,375 crore. This, of course, is net of the INR 29 crore, which we have reduced from the disbursements because of the NHB guideline which has come saying that regarding the cancellation of DDs. So during the quarter, we have had about INR 28 odd crore of cancellations of disbursements which were earlier handed over to customers for various reasons. That has been netted off, plus also about INR 19 lakhs, which is in respect of the cancellations from the date of the closure of the quarter to the date of the announcement of the results.
So basically, combined, both these things put together is about INR 29 crore, which has also been netted off from this INR 2,375 crore. So that is the impact. In terms of the state-wise or region-wise disbursement, the demand has been quite strong. There has been no change in the demand. We observe that. In fact, on page 20 of the presentation, you will also see that particularly the branches where no impact or the IT transformation has happened in the month of October, there you will see that in the month of July, August, and September, the business has been robust. There has been an increase only as against an average of INR 435 crore, which these 93 branches were doing in Q1.
In the month of September also, they have done INR 481 crore, so INR 458 crore, INR 424 crore, and INR 481 crore. Basically, in terms of the demand or in terms of the business per se, there has been no change, but for the impact of the IT transformation, which is mainly on account of the understanding or rather the change in the flow, the additional processes that have been incorporated. Now, in fact, there are some four to five OTPs, depending on the customer and the type, which we have to take from the borrower as well as the co-borrower separately.
T hat comes to around 8- 10 OTPs additionally. Those kind of process changes which have been implemented have resulted in some time lag and things like that. Plus, in every month, since it was a migration from a legacy system, the migration data had to go through a couple of processes. Every month, we basically were able to hand over to the branches only after post-5th. That five days of gap also. Basically, these are one-time issues which have impacted, but as can be seen from the 93 branches data, the demand, there is no issue. We are still seeing a robust demand across all the geographies.
Karnataka also, which has been in the past always a point of observation, has stabilized around INR 230- INR 250 crore of disbursement consistently. The only other change during the quarter has been that in the State of Telangana there has been a new Section 22 or something, some section which has been wherein, at the time of some areas have been identified by the sub-registrar offices or by the government to have been notified for this, which is only available with the sub-registrar offices. Before execution of any document, everything has to be taken to the sub-registrar office, and they will confirm whether this can be registered or cannot be registered.
This process, before the entire process of processing, we had a lot of cases where, finally when it went for the documentation or registration, the process was stopped because then some study or, as per Section 22, the legality of those properties is being verified again. This has slightly impacted. Having said that, now we have changed the process whereby now, before we entertain any login or spend time in processing the entire case, we ask the customer only to get the item verified from the sub-registrar office and then only do it. Otherwise, a lot of cases where it came, all the effort up to the stage of documentation was done, and we had to cancel the disbursement.
Basically, that process has been changed now to adjust to this new change of Section 22. As a result of this, it is only a one-quarter impact which is there in terms of disbursement. For the full year, we continue to have the same guidance of INR 13,000 crore in terms of disbursement. To that effect, whatever corrections, whatever strengthening we have had to do, we are already initiated in October itself across all the branches so that we can push disbursements in Q3 and Q4. Another thing is that now with the entire, all branches having gone on the new system, we should now be able to pull out the people from the teams for sales also, because we were about 84 people in the month of March in the sales department.
Even now as we speak, it is about 90 b ut all the people will now get relieved, and so we will be able to strengthen the sales team. You will see in one of the slides also that the sales team with the same set of staff has also done INR 560 crore of disbursements have come from the sales team of about 98 people. So it is about average 90 people. In terms of that, the comparison last year was for the full year, the sales team has contributed about INR 868 crore. So basically, even without much of an addition in the team, the contribution has increased from the sales team. Now with the additional staff that will be moving from the business to the sales division, we will be able to push further in terms of the sales team disbursements, and that should also support us in the Q3 and Q4.
Same also in the sense that we have 28 branches which are planned for the full year. As against that, 25 branches have already been started, and they are operational with staffing also in place. Therefore, the contribution of these 25 branches will also come in Q3, Q4, which will support in our disbursement push. So we hold the guidance of INR 13,000 crore for disbursement and we will push in Q3 and Q4 to cover up. The second thing is in terms of prepayment, you would see that in absolute value last quarter, we had a slight increase and we had indicated that we are taking certain steps in terms of converting some regular excess payment customers to deposits or some alerts and all those things.
Some impacts we are starting to see in terms of the prepayments. July was a little high at INR 655 crore, but then the next two months it has dropped to below INR 600 crore per month. For the full quarter, it has been much lower at INR 1,795 crore as compared to INR 1,857 crore in Q1 of this year. So there has been an improvement in the prepayments. Plus now with the rate hike which has been there, the gap between what the market is offering and what we are offering will come down because seventh, there was a 25 basis points increase in the repo rate, whereas we have only increased 10 basis points for our housing customers, old as well as new customers.
So basically, the gap will now start reducing, which will also help us in retaining good customers. So this is in terms of the prepayment. The AUM consequently has been impacted because of a lower disbursements and has been there, b ut with the full year guidance continuing at INR 13,000 crore, we hold the same guidance for AUM of 13%-14%, closer to 14% in terms of our AUM growth for the year. During the quarter, we received, in terms of borrowing side, we received a sanction from NHB for INR 1,350 crore. You would also have heard the news articles about NHB planning to increase the refinance as well as increase the proportion of refinance under the AHF component. This should help us positively and the INR 1,350 crore plus whatever, if an enhanced sanction can come, we will be drawing during the year.
Last year, as a strategy, we had planned to draw the entire funds only in Q4, when normally the liquidity pressures are there and the rate is slightly elevated, b ut if the sanctions are on a higher side, we will probably start drawing this year from the Q3 itself so that we can enjoy the lower rate also. In terms of the undrawn sanctions, we are having close to INR 2,500 crore of undrawn sanctions, which are also there to support the business. In terms of the rate hike, as I mentioned, we have already passed on effective 8th of October, 10 basis point for our housing customers. Basically, our endeavor will be to ensure that our NIM and the spread and NIM stays protected. Our guidance is of 2.75 and 3.75 for spread and NIM. Whereas we have been operating around 2.8 and 3.8.
So we will continue to protect our spread and NIM, and we are confident during the year we should be able to maintain that, because net impact of the rate hike would be that on a 65% of our liability side, we are impacted by this repo rate as well, or by the treasury bill rate. To that effect, it will be on the entire book, it will be about 12- 13 basis points increase, which will be there. As against which we have already increased 10 basis points. As you know, last year also when the rates were coming down, we did it in four parts of 10 basis points, 15 basis points, 15 basis points and 10 basis points. So same way, the next hike, maybe we may look at a 15 so that we can average out to about 12- 13 basis points.
So indirectly, what I am trying to say is that the NIM and spread, we will continue to maintain at 2.75 and 3.75+ , and that will be the thing. In terms of delinquency, our overall delinquency has not been impacted much, only there is a little bit of an increase in the SMA zero, which also is mainly because of the methodology of computation or flagging of these cases. Basically, we had an old system which was computing the overdues or outstanding up to the end of the month, whereas here it is on a daily basis. So, if there are customers, many times for very small amounts, what was told to the customer five days back, the customer pays today, but the five days interest is becoming a lag.
We are slightly changing the process and all those things to see that we can communicate to the customer that if you pay today, this much; if you pay by the end of the month, this much payment. Delinquency is not much of a concern. Overall, our credit costs, we have guided for 10 basis points, and for the end of the quarter, it is about 9 basis points. I think we can continue with the guidance of 10 basis points. Generally, also you will see that in H2 there is a reduction in our gross NPA. That should also help. In fact, it should reduce the NPA from the current levels. That will also help in the provisioning. Plus, if you see, in fact, the current year, the first half is always where the NPAs goes up and then starts coming down.
Last year, our increase in NPA in the first half was about INR 40 crore as against this. In the current year, the six months, it has been INR 35 crore. The pushback will come in the second half, then we will be under a more comfortable position. The last thing is about the regulatory guidelines. First, as I mentioned, there was NHB regulation or a guideline regarding the reporting of disbursements as netting off the cancellations during the quarter and the cancellations which have been from the date of the end of the quarter to the date of reporting. That we have already implemented in this quarter, and we have netted off INR 29 crore from our disbursements, which otherwise were the customers have been handed over the disbursements.
The second change is regarding the wage code, where we have not had a problem in either of the two cases, where all our staff we are having a salary more than INR 25,000. Even the joinings, entry-level salaries start from about INR 36,000. Basically, that is not impacting. Second thing is, again, earlier as last quarter also we had indicated, our basic plus DA is more than 50% of the total package. That is also no impact on the company. The third is more of a prospective or a likely impact, which is because of the insurance discussion paper wherein the insurance commissions have come down, are proposed to be brought down drastically.
There also, in fact, the entire year last year, our commission from insurance business was only to the tune of about INR 12 and odd crore, which is less than 1% of our PBT of INR 1,304 crore of last year. Basically, even if it is implemented in the way it has been shared or publicized in the media, it will not have any meaningful impact in terms of our profitability or anything because the contribution of the insurance income is, premium income is very low for us. Basically, these are the highlights of the quarter. We can open up for question- and- answer. Once again, thank you for joining this call. Back to you, Nidhesh.
Thank you, sir. Thank you. We open up for the Q&A session. Attendees, please raise your virtual hand, and we will unmute you from our side for the Q&A. Thank you. We are taking the first question from Nipun. Yeah, Nipun, please go ahead with your question.
Yeah. Hi, sir. My first question was, our liquidity coverage ratio has gone up for some 100%. When the regulatory requirement is only 100%, is there a reason behind it?
Yeah. Nipun, basically, the only thing is it is a matter of computation. You have to just compute for the next three months or one month, actually, and see what is the kind of liabilities which are falling due. By and large, we have increased our long-term borrowings. Therefore, the short-term borrowings, which normally come up again and again, and for which we have to provide or maintain the HQLA, that figure has come down. Just to give you a small number, probably around March 2023, we had almost about 26%, 27% of our total borrowing side was short-term borrowing, which now has come down to around 12%.
You can imagine this is basically the CPs we have brought down. We have brought down the short-term borrowings from the banks and everything. Basically that is what is impacted. Also a fact that, now what we as a strategy do is instead of taking bulk borrowings of INR 1,000 crore or INR 500 crore or INR 2,000 crore, which will come for repayment in one single shot, we are taking in smaller proportions. Basically, the load in terms of providing the liquidity in any period of 30 days is kind of reduced. This helps us in managing our borrowings and basically maintaining our LCR.
Okay. What should be the steady rate of this, what is the ratio?
See, basically it is a continuous flow of thing that we have to maintain. If there are more short-term borrowings or any kind of borrowings where it falls due in the next 30 days, we have to provide the HQLA. Normally, we have a standard amount of approximately INR 2,300 crore or something that we are maintaining as our HQLA. Therefore, what happens if this figure keeps changing, this ratio also slightly keeps changing, b ut what we are maintaining HQLA will always be above 100%.
Now if in the next 30 days, if it is not there, and we have more liabilities falling due or interest payments or regulatory repayments falling due after 30 days, then it will not reflect. The LCR will reflect high. But our HQLA that we are maintaining is almost steady, and it is enough to maintain, at any given point in time, as per the current requirement, more than 100% LCR.
Maximum is 250, minimum is 135.
Okay.
That is it.
Got it. And sir, what kind of stress tests have we done on our loan book?
We have almost 12 order scenarios that we are doing in terms of how much of a flow will happen in terms of our delinquency, how much will happen. We are also doing in terms of the rate of interest impact, we are also doing in terms of delinquency. Both these kind of tests we are doing for stress testing. We also see how much it will have an impact. All these tests we are doing as per our RMCB, also we are presenting it to the RMCB.
Okay. What is the frequency of this?
We are doing it every quarter.
Okay. That's it. Thank you, sir.
We will take the next question from Renish Bhuva.
Yeah. Hi, am I audible?
Yeah.
Yeah, please go ahead.
Yeah.
Yeah, please go ahead.
Okay, sir. Good afternoon, sir. Just two things.
Yeah. Good afternoon.
One on this interest rate cycle. Two things. One, as you rightly mentioned, our ALM is such that most likely will not have any material impact on NIM. Any sense on, let us say, does this interest rate, hiking rate cycle will have any impact on the demand side? As per your, let's say, assessment, historically, whenever we are going through a rising rate cycle, does that impact demand for home loan or it's a non-event?
See, I would say a 0.25% , 0.5% is a kind of a non-event. The rates that we are seeing, I think, only once in the past we have seen a rate which is lower than this, at around once when it had touched 6.75%. Otherwise, 7.15, 7.5, 8%, these are among the lowest that we have seen. So, half a percent increase from here is not going to make much of an impact in the terms of the demand. Because once it is converted into a 15-year EMI, the impact on the EMI is very limited.
Got it.
It is not going to affect the cash flow as much. Where 0.5 percentage point increase or even a 75 basis points increase in our, this thing in terms of the EMI is not a very large amount. Of course, there is an increase. So either you can increase and start giving more of 25 and 30 year loans, so that the EMI remains the same. Or else you can, even with a little increase in the EMI, it is not too much to deter demand.
Got it. So basically, you don't see any change in customer behavior just because of rising rate cycle?
Not much. This should not have. Not much.
Okay. And sir, second thing is, on this, the El Niño impact, right? We are hearing that south is actually going through a very bad rainy season.
What is your assessment? Do you also foresee some impact because of this over next maybe 6- 12 months on demand or asset quality?
See, there is definitely an impact. Just to answer your previous one more point in your previous question. As I mentioned, a 25 basis points increase in the rate, for our loans is only about 10 basis points. As I mentioned, when the rates were coming down, we also reduced 50 basis points for our 125 basis points cut. Consequently, when the same reverse cycle happens, we will also not pass on the impact. For us, a 50 basis points might work out to about 20- 23 basis points increase for our loans. That is a customer that we offer. That is just a clarification. Yes, coming back to this.
If there is a water shortage, of course, it can impact in terms of the construction activity, but we will have to see how much, because sometimes there have been delayed rains and at least Maharashtra, Karnataka, and some of the states, yes, there has been definitely a lot of drought prone. This thing, drought has been announced in quite a few villages and stuff like that. Of course, in our case, we do not have too much of a deeper penetration into up to the tier 3, up to tier 4, tier 5, and all. We mostly restrict up to tier 1, tier 2, where at least there is water available. Of course, but still it will have an impact in the overall scene of things. It will have an impact where construction may slow down a little bit.
Okay.
But I think it is still a little early for it. It is a little early. If at all it happens, of course, it will be impacting everybody. But yeah, it is something which can impact a little bit.
Got it. Just to follow up on that, then in that case, do you foresee any risk to our disbursement target for 2027?
See, if the overall industry is going to slow down, I think we are part of the industry, we cannot be very different, and I don't think we will then be this thing. But as of now, as I said, it's a little early to start projecting that. But as of now, there are a lot of constructions. There are other ways also, like we may maybe look at a little more of LAP or we may look at some construction, some top-ups for a short period and all. These are all things which, as a short-term strategies, we will have to adopt.
Got it. This is very useful, sir. Thank you and best of luck.
Thank you.
Just a request to all the participants to limit their questions to two per participant. The next question we'll take up from Divyesh Trivedi. Yeah, Divyesh, you may unmute yourself and go ahead with the question, please. Yeah, Divyesh, you can unmute yourself and go ahead with the question.
I think there's some issue. Maybe we can go to the next—
Yeah.
—person in the queue.
Yeah. We'll take the next question from Mr. Vijay Singh Gaur.
Hi. Good afternoon, sir. My question is
Good afternoon.
We have done an IT transformation after a long period. How the operational efficiencies are expected to play out in FY 2027 and FY 2028?
Sure. As I was mentioning, there is a lot of process change, but a lot of things in terms of the efficiency, in the sense that we have a lot of processes which were erstwhile manual, have been converted into automated processes. That is in terms of the process change. There are a lot of opportunities because all the OEMs or all the applications that we have taken are having native AI capabilities also. We are also looking at some more features which can be added. Auto form filling, things like that are definitely going to improve. This is going to open up a complete channel of digital sourcing for us because earlier it was purely a manual driven process and all those things.
Now, in fact, a lot of customer journeys in terms of digital journeys can also be incorporated, so those are things which will start now, and we will start to see some benefits. If you see one of our sourcing, we have a 10% business we are expecting to come from the digital source, so that will be an enhancement to our business. Then, in terms of efficiency, as the processes are there, a lot of activities which are manual are doing this. We will be able to pull out people from our teams for sales and on-field activities. So that is also a thing. In terms of a lot of other internal processes, there are auto form filling, auto verifications, validations which are happening.
So in terms of the compliance also, there is going to be a lot of improvements. This year, if you see, we have actually looking at an increase from 90 or 85 odd people in the sales department to take it up to 150. All this is without increasing the basic structure of the staffing at the branches that we are looking. So it is not that we are adding another 75 people or something in the sales department. What we are doing is, from the existing teams, we will be able to remove the people and put them on the field because the efficiency will start to come in. So at least in this year and part of next year, we will definitely see some improvement or some benefit in terms of more people on the field because of efficiencies coming in.
Sir, one small follow-up question here. That process has been completed for the entire organization or is it pending or due, something like that?
No, this has entirely been implemented. If you see our presentation, we have various activities which have been put, page number 19 of this presentation, slide number 19, you will see that all those things have already been fully been implemented. In fact, this implementation started from as early as prior to September 2025, where first the infrastructure parts, components started getting delivered, the security, the SOC, NOC and all started getting implemented. Then in a phased manner, by September, the risk and ALM and borrowings module got implemented. January, we had the deposits, the DMS, all those things. So basically the entire package with all the components which were part of the RFP, which we had released in 2024, and that have all been implemented.
Thank you so much, sir. It's good work. Thank you so much.
Yeah. Thank you.
One more question is here. That's related to, it's a rising interest rate scenario and what is our expectation of prepayment rates? Definitely, it's going to come down. If 100 basis points repo move up.
As I said, we will not pass on the full increase to the customers because, for us, our 65% of our liability side is linked to floating rate, 65%- odd . Whatever is the impact which we will see. 25 basis points to roughly implement about 13, 14, 15 basis points for us. Some we will pass on right now, 10 basis points to our customers is what we are passing on for our housing customers. Basically, if you look at it in terms of the prepayment, what will happen is, prior to the rates coming down, before the cycle started, the gap was about 55 basis points in terms of the rates.
That went up to by another 65-75 points because 125 was reduced by the banks and those linked to the external benchmark, whereas we reduced by only 50 basis points for our existing and new customers. This gap widened. What will happen is this gap will slowly start shrinking. Say, for example, 100 basis points increase over the next, say, one year, if it happens, then the gap will reduce by around, for us, about 60 basis points. That's basically a sizable amount of reduction because, as I said, 50- 75 basis points, I think the customers don't mind. If it is more than 1%, 1.5%, 1.25%, then the impact in terms of the EMI will be larger.
Obviously, this gap, once it starts shrinking, it will help us in our prepayments. In the past, our prepayments have been in the range of about 15.5%, 16%- odd , which has gone up to almost 17.5%. So 1.5 % reduction in our prepayments or rundown will be almost coming down to about INR 400 crore.
Any outlook for 2028? A quick question. I'm sorry, I asked three questions. Any outlook for FY 2028 in terms of AUM growth?
See, next year, at least, we are internally looking at around INR 16,000 crore disbursement for FY 2028. So that should translate to around 15%+ AUM growth for next year. Because assuming that our prepayments also goes up by, say, for example, from this to say, so INR 8,500 crore or whatever, then also the addition to the book will be a little higher. We expect that this should probably work around 15%= , closer to 15.5% or something.
Once again, congratulations for IT implementation, sir. Thank you so much.
Thank you.
Just a request to all the participants to limit their questions to two per participant. We'll take the next question from Mr. Abhijit Tibrewal. Please unmute yourself.
Hello, am I audible?
Yes, please go ahead.
Yes, sir. Hi, good afternoon. Thank you for taking my question. Sir, just two things. One is, when you say 65% of your borrowings are floating, I'm assuming we're just talking about our bank borrowings here, which, if I remember in the past, we have moved almost all of it to repo rate linked borrowings. As repo rates move up now, our bank borrowings will reprice upwards. Sir, this happens on T+1, or it usually happens the following month, following quarter? How does that work?
Bank borrowings, it increases in the next month. This time it has happened on 7th of October. Basically from the 1st November, our rates on the bank borrowings will go up. Of course, EBLR linked to repo rate. Now, there are some which are linked to T-bills and all, which will happen at the preset quarter. We would have taken most of them are at a quarterly reset. At that time, the T-bill, whenever it's there, it will be there. Not all the floating rate liabilities are on monthly reset.
Got it. Then, sir, NHB, which is almost 14%, 15% for us, that is also largely floating only, right? Linked to NHB's PLR.
It is linked to NHB's PLR, but NHB's PLR also has not changed for some time. There was only one change, which also last time, in spite of such thing, they did it at a very fag end they did it. By and large, that is also very delayed. It doesn't happen immediately. Of course, for NHB also, we have the AHF which is fixed. It is not floating.
Right. Sure. Okay. sir, in that case, for us to keep our spreads and margins stable, whatever increase we see in our liability side and like you mentioned, predominantly banks, will have to be passed on to the customers. Otherwise, there is a risk of spread and margin compression in a rising rate cycle.
That is absolutely right. basically, seventh was the policy announcement. on eighth itself, we had our ALCO, and we have increased our rates for our existing and new customers on the housing side by 10 basis points. Obviously, the impact resultant would be around 12, 13 basis points, but we have done 10 this time. Maybe next time we'll do 15 for equivalent 25 basis points increase, because we are not doing this, it's 5, 10 or 15 basis points.
Sir, these 10 basis points that you have hiked for your borrowers, that is effective. if you've increased it on the 8th, that becomes effective on?
Basically, for new customers, of course, there are two three days of implementation in the system. 12th, effective 12th, we have to give the notice also. Effective 12th, all new customers will start getting it. Post 12th of October, whenever the reset comes for the existing 85% or 87% of our floating rate assets, as and when the reset comes, that will happen. Now we have 87% annual quarterly reset, only about 12%- odd , 12 point something percentage is in our annual reset. Within a quarter, this entire thing will be passed on from 12th of October onwards.
Got it. Sir, then the last question that I had is, you've not changed your guidance on disbursements and loan growth for this year. Sir, what I'm able to see on slide number 20 for us, there are still about 90, 95 branches which will undergo the tech upgradation or which will migrate to the new tech platform, maybe this month of October.
Yes.
Sir, in the month of October.
They've already. Yeah. Effective 1st, they have already moved to the new system.
Okay. sir, in that case, these 90, 95 branches will exhibit some weakness in disbursements in the month of October.
In this one. In the month of October.
Right.
Yeah, notwithstanding that, we are saying we will be able to push the disbursements. We are targeting for about INR 3,500 crore in this quarter, and the balance in the next quarter. The thing is that, along with this, now that the tech implementation is over, one is, we had to be clear. We had about 129 people who were deployed into this IT transformation, either in for our testing part of it or for the training part of it, or from the branch component, testing for the train the trainer module and all. Slowly, we have also started taking out some. Those people are going back to the branches and moving back to the, once they are branches or to the respective departments. As in when those because now the implementation is complete.
Now we basically require people only to maintain and, maybe for a little more longer, for maybe one or two months for support. Otherwise, basically, the testing component, the implementation, all those things are already over. those teams are going back to support the branches. As I mentioned earlier, there are two things. One is, this sales team will get support, and we will be able to push our sales team strength from 90 to around 150. In fact, by December, definitely it will cross 120 because already we have that many people who are lined up to move back into sales and all. And some more who will be joining and all. basically, that will be one support.
Plus these 25 branches which we have opened will also support in terms of disbursement because they have all been opened in the month of mostly August and September. Those branches will start delivering additional business, which is not part of the first half business. Basically, that's what it is. We have also started taking some steps in terms of some contests, some kind of support, and some decisions in terms of some fees and all those things, so that we can start pushing disbursements and cover up for the Q2 impact.
Got it, sir. That's all from my side, and I wish you and your team the very best.
Thank you.
Thank you. We'll take the next question from Mr. Shreepal Doshi. Please unmute yourself.
Hi. Good afternoon, sir. Thank you for the opportunity.
Yes.
My question was on, again, on the pricing side. If there is a 25 basis point of rate cut, how much time does it typically take for the same to get incorporated in the PLR? While you said to the earlier participant that, on the 8th of October, you revised the rate. Sorry, 7th of October, there was a revision on the cost of funds side, at least the 25 basis point increase on the 65% of our borrowing. Typically, on the mathematics, if you look at it, how much time does it take for the, let's say, any repo rate change to get implemented or incorporated in the PLR?
See, as I mentioned earlier, 62% or 65% of our borrowings on the liability side, our borrowings are linked to this, but not all of them are linked to repo. There are about 75% or 80% which is linked to repo, the remaining is linked to T-bill. So on the repo-linked borrowings, the impact will be from 1st of November. For the T-bill linked borrowings, depending on when the quarter reset happens, that date, it will start impacting. In terms of our asset side, from 12th of October onwards, as and when the three quarters you have. So you have about 99%, you say.
So 33% of the book will get repriced in 1st of November, 33% you can say on a standard basis, not to the exact 33%. Roughly, I'm saying 1/3 , 1/3 will happen in 1st of November, 1st of December, 1st of January. In the meantime, if, say, for example, something else, further addition increase in repo rate happens in December, then maybe the ones which will happen in January will have a combined impact in January.
Okay. Got it. sir, the remaining 13% of the portfolio, which is still at annual reset, when will that transition to quarterly reset?
See, basically, we are making attempts to convert those customers also into quarterly reset. Last time, when we had sent this communication, many customers either were not able to, had shown the reluctance to move to quarterly reset. probably this may not reduce further. Even if it does, it will be a very slow change. over a period now, since all incremental loans are only under quarterly reset. Basically, over a period, this percentage anyway will start coming down and the impact will be lower.
Otherwise, by and large, these customers that have either opted not to go for quarterly reset or we still have, of course, some impact where customers we could not contact or we have still to push a little bit. That we will try to do. this will now slowly be a little slower impact. Obviously, smart customers will now not want to move to a quarterly reset because the rates are on an increasing curve. basically, now the smart ones may not want to do it.
Got it. just the second question was on the PMAY 2.0. How is the scale-up of that? How are you seeing that benefiting us? Are you seeing, is it relatively, let's say, slow versus the earlier schemes?
It is a little slow. Not to the extent that we have seen in PMAY1 or CLSS1. The impact is much less. recently, the government did have a meeting to review and has taken a lot of our suggestions. I think, the process, which is a little longer, much longer compared to what it was in CLSS1. That process, of course, may see some improvement. we have some cases, but definitely whatever we have, even if we are able to convert it will be much lower than what we saw in CLSS1. That definitely is there because, again, it comes down to the locations where we are operating. The states where now there is a shortfall and where first-time homebuyers will be wanting to go for it.
Those states who have not opted for PMAY or for whom this is the first housing loan in the family. For those kind of customers, which are in the states which are there, we have a smaller presence also. the CLSS1 was very successful in states like Maharashtra, Gujarat, Karnataka, Tamil Nadu, which are already well-developed states and all. now the shortfall has considerably reduced over here. Now the shortfall is more in other states, like Odisha, Bengal, Bihar, UP and all. obviously, those states, our presence is less. At least in UP, we have increased our presence now quite a bit. We have added about 12 branches in the last year in UP. We are trying to see if we can take advantage of that.
Got it, sir. Thank you so much, sir, for answering all my questions. Good luck for the next quarter.
Thank you.
We will take the next question from Sonal Minhas. Sonal Minhas, please unmute yourself.
Hi, this is Sonal Minhas, sir. Thanks for taking my question. I hope I'm audible.
Yeah, very much audible. Please go ahead.
Sure. Sir, if I understand the data given in the deck correctly, there was a potential shortfall of INR 357 crore of loans being disbursed because of the IT impact of the software. If we add that back, basically, to the numbers that have been given, we've been growing at roughly 2% quarter-on-quarter, net of prepayment and amortization. Now, for the second half, we've given a target of roughly 5% quarter-on-quarter growth. First question is, how sure are we? Will we be hitting these numbers? Because even despite that, I think if we compare the numbers to last year and this year itself, we've been growing at 2%-3% quarter-on-quarter. What changes that gives you this confidence? That's the first part of the question. First question, sorry.
Sure. See, if you look at it that way, last year we had given that when we had given our INR 10,500 crore target, we had said we will do about INR 2,000 crore, INR 2,500 crore, INR 3,000 crore and INR 3,500 crore. That's how we had planned our business for the last year. For this year also, in the beginning, we said we'll do INR 2,500 crore, INR 3,000 crore, INR 3,500 crore and INR 4,000 crore. That is how the plan for the four quarters was prepared. Now, in the first quarter, against INR 2,500 crore, we have done INR 2,600 crore. Obviously, there's been INR 100 crore extra we have done, which is a buffer in Q2. This quarter, we have had a shortfall, but for Q3, we are sticking to the same INR 3,500 crore, which anyway we had planned.
Basically, if you look at it from that point of view, what we are targeting is about additional INR 500 crore or something odd if we are doing every quarter more than what we did in the previous corresponding quarter. That is how it is planned. So INR 3,500 crore is still in line with what we had when we began the year also. The shortfall of that INR 400 odd crore that now is there, we will now have to cover up in the Q4, which we will build up during the year. That's the plan, basically.
Got it, sir. Sir, just from our understanding, the proposals, during this period where we could not lend because of slowness or the implementation in the IT system, those proposals are in the system, or we've lost those proposals to, let's say, competition, or they've just fizzled off. So there is a pipeline, basically, is what I'm trying to get to, right? So just if you could explain that.
Sure. See, there are two things. One is the sanctioned but not disbursed. Second is the undisbursed portion of partially disbursed cases, which of course will be the same, because whatever you disburse based on that only as per stage of construction. Basically, it's the s anction not disbursed and the files in the hand, which we could not sanction because of this process change. That is the thing. Yes, there is a definite, at least in the pipeline, which has not been booked or which has not even been entered. Yes, we don't have the visibility right now. But even if you look at the numbers, I guess, if I recall it's about INR 118 crore is the extra amount that we are carrying in terms of the sanction, but not disbursed as compared to the previous quarter.
There is about INR 100 crore, INR 120 crore, which is already locked in, sanctioned and kept on hand. in the process, of course, there are some more, which partly are the old system, which will have to be re-brought into the new system and all. that is, again, something which is additional to that. there is some business. having said that, of course, when it comes to the customer, if it is not there, I'm sure some of the loans or at least a decent proportion of the loans would also have gone off the system because the customer eventually wants the money. If you are not able to give it, they would have gone elsewhere also. some of that business is definitely lost, but some of it is already booked in, and we are sitting on that, which will help us in the coming quarter.
Got it, sir. Sir, just a second part of the question, given that if you're sure about your guidance this particular year, and does a target of 15% next year seems to be something which is conservative? I'm not questioning the target, but I'm just trying to understand, bottoms up, which are the pockets where you think you can actually fire more, because you, any which way, is adding 27 branches this particular year. You'll be adding more branches next year. is this a ballpark, and if yes, then what is the subjective guidance behind that?
Okay. See, the 15% is the AUM growth that we are talking about CLSS1—
Yes.
—it is also an outcome of the rundown that is there.
Yes.
What we have in our control is the amount of disbursements that we can do.
Yeah.
Against the 10,500 crore, we have targeted 13,000 this year, which is a 20%+ disbursement growth. Next year, friend, we are seeing INR 13,000 crore-INR 16,000 crore. That, again, is almost 22% growth in disbursements compared to the FY 2027. basically, disbursements will grow, but the AUMs will slowly inch up as we go ahead. It will come with a lag and that 15.5% or whatever, is more of a net income, assuming that the prepayments will remain the same or slightly elevated. Now, even if we are able to reduce on the prepayments because the rate, the gap is reducing, then in fact, it is even better. This could improve
It could be a little higher, yes
it could be better. It could be, exactly. basically, that 15% is more of a resultant figure. What we have in our control is the disbursements, where we are saying we will grow at 22% next year.
Got it, sir. I'll fall back in the queue. I have some more questions, sir. Thank you.
Thank you.
We will take the next question from Mr. Raghav Garg. Please unmute yourself. Yeah, Mr. Raghav Garg, please go on with—
Am I audible?
Yes, yes. Now you're audible, Raghav.
Okay, thanks. Sir, I have two questions. One, you've given some data on sourcing through new and old branches, old branches being the ones that were opened before March 2023. What I understand is that the disbursement productivity in the new branch is about 50%- 60% lower versus the older ones. What I want to understand is that how many years does it take for a new branch to get to the same productivity level as an old branch? Is it one year, two year, three years? What's the typical timeline that you've observed? That's my first question.
See, in terms of the productivity, of course, I think it will take about 18, normally we say 18- 24 months. Some do it much earlier. But on an average, this is what it works out to reach that kind of a level of productivity of whatever. We generally maintain our productivity of five cases per staff per month. Keeping that in mind, to reach that kind of a productivity, it is about 18 months, is what you can say. However, the other thing is that we have a category of branches. There are small branches where we only have three people staff. Once it crosses a threshold of the particular book size, then it moves to a medium branch, then a large branch, then a very large branch, and so on.
Basically, along with the movement from small to medium, the staff size increases from three to four. With a productivity of five, three-man branch will do 15 or four-man branch, then the number obviously increases to 20. It is not just a simple increase. At that time, the jump is also because the staff also will provide more. Basically, we also have that kind of a movement which will help, where more people get added because the branch has shifted from one level to the next level. But productivity, to answer your question, yes, 18 months roughly, you can say, on a blended basis. Some faster, some a little slower, some take more time. Blended about 18 months to reach a five productivity.
If I look at FY 2026 numbers, then the newer branches were disbursing about INR 20 crore of business annually. That should get to about INR 40 crore, INR 45 crore in about a year and a half, then. Thank you. Right? That's reasonable to expect?
INR 100 crore, when they cross the target of INR 100 crore, that is when they become a medium branch. So that's what is up to below INR 100 crore AUM or book size, we keep it as a small branch. But yes, the productivity will increase and, obviously— t he branches which are opened in FY 2026 will probably, by end of 2027 is when they will reach that five cases per staff per month or 15 cases in a branch kind of a thing.
Understood. Sir, my second question is that, so I think all of us understand that disbursements have been impacted because of the tech upgrade. Just before this, if you can throw some color on maybe the inquiry levels. Were they up this quarter versus same quarter last year? Something that you were referring to in the previous question about the pipeline that was there in your hands. Can you give us some flavor on how was the pipeline looking like, whether that was better than last year or not b ecause if it was, then eventually it will get converted into disbursements in the subsequent quarters, right?
Okay, so I'll just go back to the same slide number 20. If you see, the first column number three talks about the average business in the first quarter of the year. Now, if you see, the branches which went live in August, the August disbursement was more than the first quarter average business in the month of July. In July, they had a better inquiry, but because that was implemented in August, there was a dip. Same way, if you look at the branches which went live in the month of September, you see the July business as well as the August business was more than what was the average of the first quarter. Now, same way, if you look at the branches which have not gone live at all, which went live in the month of October or first of October, the INR 435 crore was the average.
The entire quarter, if you look at it, they have done actually more than that. There was a improvement. If had everything been the way without any implementation, the business would have been close to INR 3,000 crore only because, month after month, the business would have improved. I think that should answer your query. The same slide, if you look at the second last column of October, that will give you an idea that the business was definitely there. The business where no impact happened, where no implementation happened, business was inching up and moving up. There was the demand, there was no problem. The logins also were there. That's why the numbers have also gone up. The INR 435 crore, the average would have been around INR 450 crore-INR 455 crore if the same trend had continued. If you see from the Q1 INR 435 crore, it is INR 450 crore average.
Thanks a lot for those answers. Thank you.
Yeah.
We will take the last question from Mr. Rajiv Mehta. Mr. Rajiv Mehta, please unmute yourself.
Yeah. Hi. Most questions answered, but sir, firstly, some queries on the business side. Do you expect that there will be a much sharper movement towards higher ticket home loan in your quest to cover up the business and scale up the business to your guided level? Would one see more sharper movement towards higher ticket home loan and maybe even, say, non-home loans, like LAP or the other loans? In your slide of your disbursement mix, you are also now mentioning digital sourcing coming in and becoming 10% by Q4 FY 2028, which is not there right now.
What is this? What do you mean by digital sourcing, and does the new tech stack enable you to scale this channel in a meaningful way? On the sales team contribution in disbursement, currently it is 10 level. It's not a right quarter to look at, but you are projecting that it's going to become 20% in the next four, five quarters. What is the plan to scale up or to add people on the sales side?
Your first question, higher ticket business. See, over a period, if you look at it, 30 lakh+ kind of business, in terms of the incremental disbursement, has also slightly gone up, and even in terms of AUM has gone up. So yes, there is a little bit of high ticket business or the 30 lakh+ business which is coming in, and that is also because the construction cost and everything has also increased. Plus, of course, the fact that Gram Panchayat and all those things in Karnataka and even in case of Telangana, actually, there are issues. So basically, we are doing more business in the corporation areas, in the BDA and all those things, where the property prices are a little higher than what it was in the Gram Panchayat areas. So that is yes.
At the same time, if you see, I think the message from NHB is that the AHF funding is going to increase. So we are also, in fact, looking at pushing some business in the affordable AHF category because we'll also have to have the loans for availing that refinance from NHB, and we are definitely looking that as the direction which the government is having. So we are also going to look at it. So while, yes, the number of 30 lakh+ loans will increase, I think we will also have 15 lakh- 25 lakh segment also, which is under AHF, which will also go up. Okay, that's the first part. Because we are looking at, as I mentioned, some steps that we are taking. We are looking at this segment also because government is looking at the AHF to be pushed.
The second in terms of digital, yes, the new package enables us to have customer journeys, with fully digital journeys, online applications, CRM package, which will be able to be onboarded, all those included and all. So yes, digital will be something which will add in terms of the channel available to us. So that will slowly start inching up. The third is in terms of sales. So you are saying, like today it is 11%, how are we projecting a 20%? Today, if you look at it, we are targeting 90 people are there. We are targeting to increase it to about 150 people. And we are looking at about INR 1,500 crore this year, INR 1,500 crore- INR 1,600 crore coming from the sales team. Already in the first half, with the same lower staff strength also, they have contributed INR 560 crore.
With additional 60, 70 people and the second half being with the entire IT transformation behind us, I think the remaining INR 1,000 crore will come. Next year when we are looking at it, we are looking at increasing this strength from INR 150 crore-INR 250 crore. Next year, definitely, we should be having more than INR 2,500 crore of the business coming from this sales team. If you are looking at INR 16,000 crore, 20% will be INR 3,200 crore, and we are definitely looking at INR 2,500+ crore of business coming from it. 20% is what we are aiming at. Definitely it will be somewhere there because we are looking at a much more number of people, the feet on street who will be doing business from that. Once we increase it from 150- 250 people next year, obviously the numbers will be even higher.
That's how—
Sure.
—Ww are looking at the sales contributing.
Sure. Sir, my second part of my question are on liabilities. If you can firstly repeat the NHB sanction that you've received, what is the amount and what is the pricing? Second is on NCDs. You haven't spoken about the risk on liabilities, repricing happening because of NCDs, the newer NCDs for which you will have to pay a higher rate, maybe in the future. When I look at your bank loan mix, except for the repo loans, there are also special rate loans. When you say special rate loans, and that's a significant sum.
Yes, sir.
Is there a risk—
It is.
—that those special rate loans can actually get repriced, at a much higher level or, the reversion there in terms of rates, yeah, revision in terms of rates can be much sharper than just the repo loans?
See, first question, NHB refinance. We have got INR 1,350 crore of refinance right now. The rate, obviously it is a mix. Last year when we got INR 1,500 crore of refinance, which we drew last year, we had INR 400 crore under AHF and INR 1,100 crore under regular refinance. The blended cost for us came to somewhere around 6.6%-6.7%. Between that range, we got the cost. Okay. This time, the government as, or the NHB has indicated that the proportion of AHF could be higher. In which case, even the impact of the rate hike will not be impacted because, even if the regular refinance rate is slightly higher, the AHF, which is a fixed component, will be at larger proportion. Effectively, the cost may still be 6.6%-6.7% only.
Right now, we've got INR 1,350 crore, and there is a possibility now that, with the NHB looking at increasing the size of the refinance, we may in fact be able to apply a fresh for a additional refinance limit also during the current year. So that is what we are exploring. But as of now, it is INR 1,350 crore, and the cost is most likely between 6.6%-6.7%. The second thing is, regarding the liabilities, the special rates, basically these are T-bill linked. So yes, there is a possibility that depending on that, at the time of reset, whatever is there, it may slightly vary here and there. But by and large, the market prices it accordingly only, so should not be a major impact on that. And second, I think you also asked about NCDs.
NCDs actually, for the current year, while we were getting around, even after this 25 basis points increase, we are getting bank term loans at 7.65%. I think today if you go, maybe it might be 8.3% or 8.35% for an NCD. But having said that, today we are already complying with the regulatory guidelines on the 25% borrowing through the market, for this financial year.
So we are not having any compulsion to go to the market and raise at 8.3%. Of course, it is all a matter of how you read the interest rates and when do you borrow and the timing and the plan that you have. But as of the moment, at least, we are not under a compulsion to go and raise money from the NCD market because we are already complying with our 25% requirement. We will plan accordingly and see if there is a good opportunity at a good time, good price, we will then probably go for it.
The refinance has already happened in May. The refinance. You don't have a NCD. Has already happened in May only.
No, that he did not want that one.
Okay, sir. Thank you so much for answering all my questions, and best of luck.
Yeah. Thank you, Rajiv.
That was the last question for the day, so I'll just hand over the call to the management for the closing comments.
Yes, thank you to everyone for taking time out and joining this earnings call. I hope we have answered all the queries. I think it's been a quarter where it's been slightly impacted because of the IT transformation, but I think it is, in the long-term perspective of the company, I think this IT transformation was very necessary, and also is going to drive the business in the coming quarters and the coming years. I think this was very much necessary and it will bring in long-term benefits for the company. We are still confident that in the next two quarters, we'll cover up for the shortfall in the disbursements, and we have already initiated steps also in that regard. In a nutshell, I think the thing would be to protect the NIM and the spread.
At the same time, we will also push for growth. We will be looking at a 20%+ growth in terms of the disbursement, which consequently should become a 13%, 14% AUM growth this year and a 15%+ AUM growth in the next year. That's what is the attempt by the management. Once again, thank you to all of you for joining this earnings call. Thank you to Investec also, Nidhesh and team, for organizing this. Back to you, Nidhesh.
Thank you.
Thank—
Thank you very much.
—you so much, sir.
I would request for all the participants that you may exit this call. Thank you for joining today.
Yeah. Thank you.