I’m Ladies and gentlemen, good day, and welcome to the Bajaj Housing Finance Q2 FY ‘25 E arnings Conference Call, hosted by Kotak Institutional Equities. 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 call, please signal an operator by pressing star, then zero on your touchtone phone. I now hand the conference over to Mr. Nischint Chawathe from Kotak Institutional Equities. Thank you, and over to you, sir.
Hi. Thanks, Rio. Good evening. Welcome to the maiden earnings conference call of Bajaj Housing Finance Limited. We have with us the management of Bajaj Housing Finance today to discuss Q2 FY ‘25 performance, represented by Atul Jain, Managing Director, Gaurav Kalani, Chief Financial Officer, Jasminder Chahal, President, Home Loans, Vipin Arora, Executive Vice President, Commercial Real Estate and LAP, and Neeraj Aryani, Executive Vice President, Risk. I will now like to hand over the call to Atul for his opening comments.
A very good day. Thank you, Nischint, and a very good evening to all the participants on the call. This is our maiden call, the first call, so that's where a special thanks to all the participants who have joined on this call with us. The results of the company have been uploaded on BSE, NSE, along with the investor presentation deck, which again, as like I'm calling out to our first equity, presentation deck, what we've uploaded. I'll refer in first ten, fifteen minutes, few salient features of the deck, where I'll refer and then leave it for question answers to be there. I straightaway jump to panel number three, which is on the quarterly synopsis of the results. For the last quarter, company crossed two significant milestones.
One was listing, of course, and second has been the crossing of 100,000 crore AUM in seventh years of operation of the company, eighth year of the operation of the company. We continue to have strong growth with AUM growth over 26%. Absolute AUM growth was in same range of last two quarters. PBT growth was 23%. PAT was 21% because of a tax adjustment in the previous year versus the current year. While risk performance continued to remain strong at a GNPA at 29 basis points and NNPA at 12 basis points. From an operating efficiencies point of view, Opex to NPA improved to 20.5% versus 22.1% in the last year, Q2. On a scalability metric, AUM has come as 102,569 crores, 26% growth.
From a profitability, PBT was INR 708 crore and a 20.5% Opex to NIM. Asset quality, 0.29% GNPA, 1.2% NNPA. Credit cost was two basis points, which was because of an overlay release. Net of overlay release, it would have been fourteen basis points. Capital adequacy, led by because of a public issue towards the end of the quarter, last quarter, has been 28.98%. I'm moving to panel number four, which is on the business metrics. 26% AUM growth is called out. In between, as a sub-component, home loan at a 24% YOY AUM growth, loan against property at 18%, lease rental discounting at 28%, and developer finance at 56%.
In terms of a portfolio composition, it remains by and large stable, with 57.2% as a home loan and, close to 10%, as loan against property, 19.6% lease rental discounting, 11.7% developer finance, and 1.7% other. By and large, in the same range, which had been there. Disbursement for Q2 was tad lower than Q2 FY 2024, largely led by a decline in, the transactions in the LRD side of the business, for the quarter, because last year, same quarter, we had two market transactions, large transactions in the lease rental discounting business. Vis-a-vis, that is where the disbursement, has been a tad below the, last year, same quarter. I'll move to panel number five.
Cost of funds came in at 7.92%, which was five basis points higher than Q1 FY2025 at 7.87%, and year on year, 28 basis points increase, which has been there. Borrowing mix, largely 44%, 45%, 11%. 44% to the bank, 45% on the money market, and National Housing Bank at 11% has been the mix. On the gross spread basis, on a Q2 FY2025, we had 1.9% gross spread, which was stable from the last quarter, which was a Q1, 1.9%. Of course, on a year-on-year basis, the gross spread was 2.3% in Q2 FY2024. NIM at 4.1% in Q2, improved marginally from Q1, which was at 3.9%.
However, again, at Q2 FY24 point of view, it was 4.4%. Opex to NTI stood at 20.5%, which is an improvement on 22.1% in like-to-like quarter in the last year. For the first half of FY25, Opex to NTI stands at 20.7% versus 23% in H2 FY24. I'm moving to the panel number six. GNPA, NNPA is already called out. Loan loss to average loan assets, 0.2%, as of 30th December. Our net of overlay release credit cost is 14 basis points. On a ROA, 2.5% in Q2 FY25, nearly same ROA of 2.6% in Q2 FY24.
ROE, given the capital raise in December, coming down at 13% in Q2 FY 2025 versus 16% in Q2 FY 2024. Capital adequacy for the same reason, jumping up to 20, close to 29%, as on 30th December 2024, against a regulatory requirement of 15%. Company completed its IPO process, got listed on 16th September. As of 30th September, out of IPO proceeds of INR 3,560 crores, what was for the company primary raise, INR 1,500 crore was yet to be deployed, and they remained in the money market account. It's expected to be utilized during October 2024. Our profit after tax already called out, moved up by 21% against a 23% improvement in the profit before tax. I'm moving to the panel number 14.
The strategic differentiators of the company, since this is our first presentation, there are four, five differentiator what we put as a company differentiators. First is a scalable balance sheet, because we are constructed for scale, and that is where prime housing and lease rental discounting works as a scale builder for the company, and which is reflected in last seven years track record, starting a new company to a INR 100,000 crore balance sheet. We are constructed as a low-risk business model, which is underwritten from a robust underwriting and risk management performances, also from the type of asset what we choose to lend. We are constructed for medium return, which we balance the portfolio mix between operating business segments and sub-segments to deliver medium return to the shareholder.
All product suite of mortgage and within all transaction types, all sub-segments, prime, non-prime, we address, while the relative weightage on, each segment can be plus or a minus, depending upon our risk-return point of view on a segment. Our borrowing mix, our diversified borrowing mix between banks, money market, NHB and a focus on enhancing floating rate mix is the strategic differentiator. I'm moving to panel number 16, which is a quarterly financial snapshot. We have discussed the prime points. Only point out is on the half yearly performance at 26% AUM growth, 20% pre-provisioning operating profit growth, profit before tax growing at 21%, PAT growing at 13%. Just reminding last year in quarter one and quarter two, we had an exceptional tax release of previous year tax write back.
That is why the profit after tax growth is lower than the profit before tax in the first half. Moving to panel number 18. On the key financial trends, on the gross spreads, gross portfolio yield remains steady at 9.9% from our one-year Q2 FY 2024 to Q2 FY 2025. Our cost of funds have inched up from 7.6% to 7.9% over the same period. Gross spread from the same period, 2.3% to 1.9%, but stable from last two quarters, nearly stable from last two quarters at 1.9% to 2% in last three quarters.
Operating efficiencies given from our Opex to NIM, moving down to 20.5% and NIM slightly inching up in last two quarters, going near to the quarter three, FY 2024, at a 4.1%. Asset quality remains stable from a GNPA and NPA point of view, and return ratios, return on equity coming down because of our equity infusion, while return on assets are climbing up. Moving to panel number 19, which is a borrowing mix, 44% as a bank borrowing, 43% as a NCD borrowing, and 1.6% as a CP borrowing, and 11% as a NHB borrowing, is by and large our mix. With focus on a longer tenure funding through money market and NHB refinances. We have an active relationship with 17 banks on the bank lines basis.
Moving to panel number twenty-one, the sustainability ratios for the company. On a leverage ratio, our threshold is eight. We are depicting last four quarters. Of course, the right now the leverage ratio has come down because of a rights issue in the first quarter, and then followed by a public issue in the second quarter. But that's the ratios we will track at a eight-time leverage ratio as we go on. And capital adequacy from a regulatory threshold of 15%, of course, has inched up significantly because of a Q1 and a Q2 capital raise. I move to panel number twenty-two, which is depicting the portfolio mix over last one year, YOY, and also between from summer 2023 to summer- March 2024 to summer 2024, by and large, stable.
1% differential coming in, in the Home Loan mix, going down and, 2% growth in the developer, Construction Finance portfolio over a one-year period. Other assets are Lease Rental Discounting remaining stable as a part of a portfolio, Loan Against Property going down by around, 1% over the period. Moving to panel number 27. On our asset quality trend, Stage 1 assets remaining by and large stable, 99.21 from Q4 FY 2023 to 99.39, 99.37, 99.35, a stable range over last six quarters. Stage 2 assets coming down, from a year-on-year perspective from Q4 FY 2023 from 0.57 to 0.32.
Provision coverage ratios, PCR on Stage 3 assets being range-bound at 57%-59%. GNPA, NNPA numbers we have spoken about. I come to the last slide, where I'm pointing, which is slide panel number 29, which gives the asset-wise breakup on the GNPAs, NNPAs, on an asset breakup from a home loan to loan against property to the other loans. This is what I have from my side. Thank you for patient listening. I hand over to you, Nischint, for...
Thank you. We will now begin with the question-and-answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking questions. Ladies and gentlemen, we will wait for a moment while the question queue assembles. To ask questions, please press star and one. The first question is from Raghav Garg from Ambit Capital. Please go ahead.
Hey, hi, Atul and team. Thanks for giving me the opportunity and congratulations on the results and the listing as well. I have a few questions. One is, what will be disbursements growth in the home loan segment for this quarter, for the second quarter, and also if you can tell me for the first half?
So, I have readily available on the YOY numbers. On the retail side, the disbursement growth was close to 7%, while on the commercial side, the de-growth was of 9% on a YOY number. We can check on the quarter on quarter numbers and come back to you. My assumption is it will be by and large stable. By and large stable, but we can come back on the specific number. YOY numbers, we have kept ready for the call.
Right. Home Loan, you're saying, 7% YOY disbursement?
We break it in retail and commercial, rather than breaking it on the segment. So on the retail, where commercial is, which is construction finance and your lease rental discounting, versus a home loan and a loan against property. But in any case, as AUM growth also, YOY, is given of all the segments, which is by and large stable, barring construction finance, which has risen more, other than 24% is a home loan, YOY AUM growth, versus 18% loan against property, 26%, lease rental discounting, and a 58% there. At an overall company level, 26% growth. But we can come back to you on the quarter on quarter number, if you are interested.
No problem. And how are you looking at the disbursement growth in the retail side for this year as a whole?
So, we are operating in a bit of a construct because we are yet not out of the publicity guideline for forward-looking there. But I'll say that we are, because we are still in regulatory silent period, because this is a 40 days, as advised by legal counsel to us. But we will be, by and large stable. We are not seeing any major changes in the disbursements as we go forward. In fact, our view is that we should be as our SBU for a near-prime and affordable is kicking in, we should see a growth picking up a bit towards in the retail segment. Because so far it is largely led by prime, but with the affordable and near-prime segment now started delivering numbers.
As we go forward, we should have a pickup in the retail numbers.
And so, Atul, the only reason I was asking is that you've done 7% for this quarter, and you know, given the AUM growth has been at around 26%, a single digit growth would largely mean that the AUM growth slows down for the you know, that's the broad idea that one would get. So hence that question.
So, Raghav, that 7% is the past quarter, when we are seeing YOY on the retail side, but that is already reflected in the AUM growth number, what has come. Because AUM growth number is also given at a segmental level. So, I think that is a reflection of the number.
You know, as your base grows larger, you know, those concerns is that that's one of the concerns which may be there. That's all.
I think we are making a statement.
Yes. No, I think that …
as a basis, as a base grows larger, yes, of course, disbursements need to grow faster to maintain the same AUM growth. It's a mathematically correct statement as a whole you're making. But that is what we are there for. We'll try what we are. We have to do what we have to do. I'm trying to balance the response. Like I said, that since we are under a-
Yeah.
-publicity guideline, not to give a, too much of a specific future, forward-looking numbers, we can't share. That's where I'm trying to moderate my response. Not-
Understood. That's, that's fair enough. Another question is, how much further can the cost of borrowing go up from here? Because I'm looking at some of that NCD data for you, and some of your low-cost borrowings are maturing in next couple of quarters. So, you know, just in that backdrop, what is your expectation of further increase?
Raghav, we are back. In the cost front side, by and large, whatever, you can say, the implication of either the earlier low term, low-cost NCD maturing or the re-pricing, the peaking out of the pass-through in the cost front, that has happened. Whatever we are seeing a bit of a uptick in the current quarter is largely because of, you are aware in last three, four months, there has been a MCLR increase by the bank. There has been all the banks, most of the banks have increased MCLR. It is now catching up, whatever increase in the Q2, because whatever quarter has to be happened, has happened. There are very little number of...
I'm not even sure it is in single. It may be less than 300, 400 odd crore of a kind of a low-cost NCDs earlier, which are yet to be retired. Otherwise, everything is now. It has structurally got picked up.
Understood. And I'm assuming since you're in that forty-day period, you are also not allowed to, you know, speak about your current cost guidance. Is that correct? Otherwise, my next question would have been on that, given that the current quarterly run rate seems too low.
So, quarterly run rate, we likely called out the two basis points is looking like from because of an overlay release, a net ECL overlay release. We are by and large being stable in last four, five quarters of a 14 to 16 basis points, kind of a credit cost, net ECL overlay release. We don't see any reason because Stage 2 assets have remained at a low level or have come down over the last one, one and a half year period. We are not looking to look at a very differentiated or any significant change in the credit cost numbers as we go forward. Net ECL overlay release.
Understood.
Because overlay release can be-
That's all from my side, and thanks a lot, Atul.
Thanks.
Thank you. Deepak Gupta from SBI Pension Funds. Please go ahead.
Good evening, sir. Thank you for taking my question. My first question is on loan sourcing strategy for the company. If you could give us a sense, what percentage of loans on book and incrementally are being sourced from the branches of Bajaj Housing versus BFL? And in BFL, what would be the share of Bajaj Finance?
Because, so what we source, there is no in our kind of a sourcing, because we are largely in the prime segment, branch is not sourcing there. So branch is largely a front office, where our front office sales people come and operate from. We largely source at the counter, at the developer counter or through the distribution partner. So in that sense, and we largely in our main cities, where we operate larger part of the business, we operate from BHFL branches, not from BFL branches. Both company have different branches, or only in some places in the rural market, we take space or a sub-space from Bajaj Finance branches to operate, but that's not a BFL branches origination.
It is our people who may have been sitting in the BFL branches as a cost-sharing basis, where we don't have sufficient number of people. So the entire sourcing by BFL, not by, BFL. If the question is pertaining to, the ETB mix or the Bajaj mix, because we get consented customer on the digital leads or on the franchise customer of BFL, that sourcing in the home loan side will be between 12 to 15% kind of a sourcing mix, which remains by and large stable. The out of the home loan disbursements, whatever come through, 12 to 15% disbursements come from consented customer digital lead basis from what comes from BFL, to us. At a distribution side, there is no overlap between two companies. So both companies, mobilize business separately.
Whatever business we see from distribution for BFL is a BFL mobilization, not a BFL mobilization.
Sure, I hear you, sir. And my next question is on the fact that, given the fact that now Bajaj Housing is listed and it's arm's length between Bajaj Finance and Bajaj Housing, can Bajaj Finance also do similar business as Bajaj Housing?
See, because Bajaj Finance already does loan against property business, because both companies have their own strategic constructs. Bajaj Finance does the LAP business to primarily meet their vast customer franchise requirement and to deepen their relationship with these customers. In BFL, we primarily look at LAP for incremental returns because we are a housing finance company. Overall construct from a regulatory construct, we have to have a majority of the assets in the individual home loans, 50% plus, plus the residential assets have to be 60% plus. So for us, LAP and LID are a mix of opportunity base. So it comes as a lower priority for BFL. BFL is own space, own priority, BFL has its own priority. So both companies are not guided by each other priority.
So that's where BFL already does a significant amount of LAP business for quite some time, not from today.
Sure. Great. Thank you so much.
Thank you. Before taking the next question, we'd like to request participants to please limit your questions to one per participant. Should you have a follow-up question, we request you to rejoin the queue. The next question is from Viral Shah, from IIFL Securities. Please go ahead.
Yeah, hi, Atul. Congratulations, and BFL team. I had one question. I'll just ask that, and then maybe I'll come into the queue later on, if at all time permits. So I see your employee count has been reducing since last few years, and also, in the first half, it has reduced. So can you tell us, like, what is the data on the off-role employees? Are they exclusive to you, and like, what are the roles that they perform?
So, thanks, Viral. Viral, what we have done in our case is that we have changed our strategy. Our entry level, non-managerial positions, we have shifted to contractual employees around a year, one and a half year back. That's why where you see the employee numbers coming down, because all the replacement and all the front-end manpower comes through the manpower through outsourcing arrangements through a partner. So if you have to. The employee numbers have come down, but if you look at the total number of people deployed, if I have to add the contractual employee, we would have gone up by almost close to 400 people in between March twenty-fourth to December twenty-fourth, because more of a contractual employees, outsourced employees, have come in than the reduction.
So the reduction in the on-role employees, if I have to call out in last six months, would be close to 252, because of normal attrition and all new roles which get created or get refilled on the contractual side. While on the contractual side, increase would be 700. So net increase of close to 400-450.
Got it. And I believe you won't be able to share the numbers as of now because of that restriction.
I shared the numbers right now, with the number of employees. When you have asked the number of employees, I said that in last six months, total number of employees, including outsourced, has gone up by close to four hundred.
Okay. But, you won't be able to share the absolute number, the off-role numbers?
Off-role numbers are, we can... You give us some days to share the actual number, but in any case, if I'm calling out the four hundred numbers have gone up, you can-
Got it. Got it.
Calculate that number.
Makes sense. Makes sense. I'll come back in the queue. Thank you.
Thanks.
Thank you. The next question is from Piran Engineer from CLSA. Please go ahead.
Yeah. Hi, team. Congrats on the quarter and the successful IPO. Just one question on your floating rate loans. So what percentage would be repo linked versus internal benchmark linked, and how are you thinking about pricing in a repo rate cut environment?
... so in terms of our repo rate, I'll give you the specific number. I think close to 15,000 crore could be repo, 13,000 crore of core asset book would be repo-linked, which is match-funded by repo-linked liabilities, close to match-funded by repo-linked liabilities. So there is if your question is on the spread management as repo rate cuts down, it's completely hedged or balanced in that sense, from wherever, whatever the repo-linked book is there, the same is backed by repo-linked liabilities, largely.
Got it. And your internal benchmark moves in par with repo, or how does it typically move?
Internal benchmarks are linked to our cost of funds movement.
Got it, got it. Could I squeeze in one more question?
Yeah, please go ahead.
Yeah, okay. Just on the disbursement, growth being only 7% in retail, is that more a conscious decision with regards, you know, pricing or asset quality, or, is it a genuine end investors sort of, or end home buyers slowdown?
No. So there is no concern on the credit card side or the trade side. The numbers are there. There is nothing what we are envisaging or seeing as a sort of go down in terms of a year. Disbursement, rather, so my request to you would be to look at, because the earlier question was also towards the disbursement growth. Probably the portfolio AUM growth is a larger number to look at in the... As far as, you know, mortgage business are concerned. Disbursement growth sequentially or at a number-wise mean is, in our sense, less important than the AUM growth. I'll say at a AUM growth level, in the retail also at a YOY and a home loan at a 24% AUM growth level is a significantly okay number. So we don't see...
So there's no conscious decision to slow down or not. It's not getting slowed down, whether from a credit point of view or from.
No, like competition, like that's what I meant.
Competition, in any case, it remains very intense. Competition in the home loan, in the prime home loan remains very intense, which all of us remain. But that had been the status from last six, seven years, ever since we started the business and expected to remain intense. We don't see any change in the competitive stance or our competitive stance or our appetite to grow or our ability to grow.
Got it, got it. Okay, that's it from my end. Thank you, and wish you all the best.
Thanks. Thank you.
Thank you. Next question is from Abhishek M from HSBC. Please go ahead.
Yeah, hi. Thank you for taking my question. So two questions, one on provision. So just back calculating, I think the current run rate of overlay utilization is around 30 crores a quarter. If we just go by this, then maybe in the next one, one and a half quarters, the existing overlay gets, you know, exhausted. So suffice to say that next year we should be around this 14-15 with kind of run rate of provisions. That should, that is a normalized run rate of provisions that should continue, right?
Yeah. So, Abhishek, rightfully, because the overlay now remains only 10 crores, because 44 crores is inclusive of macro overlay. Till that, because as a ECL policy, that is not a, 34 crores is a part of a macro overlay or at overall ECL policy. So the discretionary overlay remains only at 10 crore. At a 25 crore release last year, last quarter, it has meant putting this upper credit cost, if we normalize that. If you look at last four, five quarters, that's, it is, other than the period when we had used the overlay release to, increase stage one non-delinquent coverage, point of view, the credit cost has been behind us in range of a 14-17 basis points.
Getting 14-17 basis points in the last 4-5 quarters, and that's what normally we should be looking at, because as the overlay release is max remaining of INR 10 crore, which is available now.
Okay, okay. So that normalization may happen quicker, maybe by next quarter itself, because the remaining overlay is just INR 10 crores.
Remaining overlay is only INR 10 crores, so 14-17 basis points is the band as a credit cost corridor.
Hundred.
If you look at last four, five quarter, normalizing overlay release, normalizing any enhancement in the Stage 1 asset cover, which is, which comes as a credit cost, but we strengthened in lot of places our Stage 1 cover as we had the overlay. As we had the overlay, we used that overlay release in few quarters to strengthen Stage 1 coverage.
Got it, got it. That's clear. The second question is just some data keeping questions. Can you share the disbursement mix in the quarter? And just a request, you know, just maybe if you can include it in your deck for future quarters, that will be really useful. But can you share it for this quarter, the 12,000 crores, how is it split between HL Lab, LRD, and developer finance?
Abhishek, we'll take a call on inclusive of the data point. Right now, I'm not having the data point right now ready, because like I said in the earlier question also, we largely go by more by AUM growth, whether when we look at a monthly internally or a quarterly internally, less of a disbursement. But if that is a requirement from most of the analysts, we'll start having the data ready when we come back.
Sure, because the flow helps us understand the direction actually. It's actually slightly more important, the stock, you know, we can sort of derive. But just to get a sense, if I look at the AUM mix, would the retail disbursements be lesser than the, you know, mix of AUM and the corporate, the developer finance LRD would be higher than the percentage mix of AUM? That is how it should play out, right?
Because the AUM mix is also published, which is from one year to six months to now. AUM mix has been largely stable, 1% drop in home loan mix, which is on the panel number 22, if you refer.
Yeah.
Which is December 2023, March 2024, and December 2024. AUM mix at a home loan is dropping by 1%, but LAP is also dropping by 1%. LRD remains stable, and the developer finance has gone up by 2%, from an AUM mix point of view. But the majority of the book, still 57 plus 10, LAP remains, retail, so it cannot be... commercial cannot have the more share, right? Because the 57.2 plus 9.8, which is 67% of the book, is still retail investment.
Right. Right. So incrementally, growth is happening. How long can this growth happen from commercial, or rather, developer finance and LRD? Or when does, you know, growth in home loan disbursement, loan against the property, when do you have to start growing it at par with LRD or developer finance? That's my, you know, basic question.
So-
Because right now it seems to be growing slower.
Abhishek, home loan in the, again, at the AUM level, we have grown 26%, home loan has grown by 24%.
No, I'm asking about disbursement, actually.
But disbursements, okay, like I said, we'll start putting disbursement because disbursement, more than disbursement, AUM is the relevant number, but we'll start putting the disbursement numbers on that. Because disbursement numbers are a indicator for a AUM growth number, because eventually earning is on a AUM for the company. But we'll start putting out the disbursement numbers from next quarter on.
Sure, sure, sure. Okay. Thanks, thanks. I'll come back in the queue.
Thank you. Before we take the next question, a reminder once again to participants, that you may please limit your questions to one per participant. For follow-up questions, we request you to rejoin the queue. The next question is from Subhranshu Mishr a from PhillipCapital. Please go ahead.
Hi, Atul. Hi, Gaurav. Congrats on the successful IPO. So the first question is around the developer finance and the LRD book. When we talk about the active customers or active developer relationships, are they unique corporate houses? Or how many unique corporate houses would we have in each of the books? That's the first. Second is what is the exposure of our home loans and the developer finance book to luxury housing, which will probably run four crore plus in MMR and maybe two crore plus in rest of India. And the third is a subset of this question: What is your view going forward on luxury housing growth? Because we're seeing a lot of launches in this segment.
Sorry, Subhranshu, I got your first question, which was on, you are wanting to know the corporate, developers, whether developer and the LRD book is there. So I'll answer that question, and third question I've understood. In second question, I was not able to hear correctly. But the first question, which remains, which is our, what we have given as a number of projects and also a developer relationship as well, which is given out in the, deck in terms of, the developer finance book is represented by how many numbers. Generally, lease rental discounting and developer book is not much of over 20, 20, panel number 26, which gives the active developer relationships of 451. So 693 projects represented by 451, developers. So it is, in that sense,
No, no. What I'm asking is, out of those four fifty developers, how many are unique corporate relationships? I mean, are we, do we have three or four major, exposures?
No, no. So when we call a developer relationship, that means if there is one person who owns multiple entities, it's called as one. So 451, when we are saying developer financing, that is, then in that sense, in question, your question, you can say it's the 451 corporate relationships or the developer relationships, which means-
Okay, because unique in that sense.
Yeah, 451 are unique. That's where, say, 451 representing 693 projects. So that's how, so there can be multiple people having multiple projects or the same person in the same entity executing multiple projects where we have an exposure. 451 are unique developers. Same way in the Lease Rental Discounting, 264 are the unique relationships. So there in your same example, if one corporate house has three entities where we have three relationships, it is counted as one. 264 is counted as one.
Understood. My second question was: What is our exposure of luxury houses roughly on two crore plus in India and four crore plus in developer financing and home loans?
So largely in terms of a disbursal side, in the home loan side, generally 2 crore and plus would be constituting maybe around 15 odd %. I don't have a specific number right now. I think that's the approximate number, but we'll check that number, 2 crore plus. Because largest number of disbursements, our average disbursements in the prime housing space, because there are various pieces of business, there is affordable, near-prime housing or the rural, where the ticket sizes are low. But if you have to talk about the prime housing, their average disbursement size comes at close to 70 odd lakhs, where the larger part of the customers remain between 40 lakh, 45 lakh to close to 2 crore, 2.5 crore.
Above four crore would be very minor part in the retail side, very, very minor part. And in the developer finance as well, largely the customers who would have funded above four crore unit size would again be very, very marginal. We are largely because we do developer finance for two purpose. First purpose is to act as a funnel for home loan. Largely in luxury housing, it does not act as a funnel for home loan. So that's where the portfolio mix would be very, very marginal for luxury housing. Above four crore, if you're talking about as a luxury housing.
Above two crores in construction plans, what would be the exposure?
... I won't have the ready numbers right now for me to answer. But you should assume majority of the book is towards less than two crore.
Understood. Last question on your view on luxury housing growth going forward.
We are very small to compare to the industry, so I will desist from giving an industry view in terms of how the industry is going to grow. We believe as, as of today, in a general view, what my personal view would be that all segments of industry have large leeway to grow, but I'll desist from making an industry comment.
Sure, sure. Thanks, Atul. Best of luck. Thanks.
Thank you. Next question is from Kunal Shah, from Citigroup. Please go ahead.
Yeah. Congratulations for the listing, and thanks for taking the question. So, with respect to the lease rental, the way the ticket sizes have been going up, now we are almost a hundred and three compared to, like, less than sixty few years back. So, what size, is there any particular ticket size we would be comfortable with? The developer finance, we have managed it less than fifty odd crores in terms of ATS. So anything out there? And, related to that, when we look at it, almost a zero Stage 2, Stage 3, and developer finance also hardly anything. But when we look at the history, maybe the players in this segment, asset quality has been quite patchy in terms of the, when the cycle turns.
Any plan to create provisioning at any point in time? Because today it's almost like a zero provisioning on this INR 25,000-26,000 crore of the book. Now what would be your view in terms of provisioning in these two segments?
So there are two questions what you have asked, Kunal. First is on the LRD average ticket size versus developer finance average ticket size. Because in lease rental discounting, it's largely marquee customers and a very large funds, and even the REITs. The ticket sizes are significantly higher than the construction finance, because in construction finance, there is an execution risk, versus in lease rental discounting, there is no execution risk. We don't have a particular ticket size in mind, which we target in lease rental discounting. But of course, since we target the upper end of the customers, because majority of our portfolio is in Grade A commercial, which is leased out to largely whether a Fortune 500 MNC companies or a large Indian corporates.
So the ticket sizes tend to be higher because of the type of collateral and the type of customers, we target. The number of average ticket size is an outcome. We remain open to very large ticket size also in lease rental discounting. In the developer finance, in the construction finance, given there is a construction risk also, which gets embedded in the system, we try to be as granular as possible, which is reflected in the average ticket size and the average outstanding per project, because of the method, the way we underwrite and the way we disperse, which is linked to the state of construction and also the sales portion start from the day one.
That's where at the outstanding level, at a project level, you will see it at INR 17 crore, at a developer level, INR 26 crore, versus even a sanction amount of 46 or kind of a crore number. That is on the EPS. On the history and the asset quality and the provisioning, what you're talking about, still Lease Rental Discounting at a INR 14,000 crore book, the provisioning in the Stage 1 is INR 85 crores, which is from a historic point of view, since we do not never had any Stage 2 or a Stage 3 asset, I think 0.61% kind of a ECL provisioning is significantly higher provisioning than whatever ECL models do that.
What I was calling out in earlier question, that whenever we use in two quarters to strengthen Stage 1 provisioning because of an overlay release, we use that here because there is, while as a historical on an ECL model, there is no loss numbers or a loss percentage, which we'll calculate on lease rental discounting. But the 0.61%, what you can see from panel number 28.
Yeah.
The provisioning is 0.6% on entire Stage 1 assets. There's no Stage 2 and Stage 3 assets. It's more than adequate in our assessment. Same in the developer finance, it's 0.62%. We carry that. We believe 0.61% and 0.62% at a Stage 1 assets provisioning is a reasonable bit. On the asset quality cycle, Kunal, I have to call out that we believe the way we have done construction finance in terms of a granular book, we will, we can't say that in any downturn, there will be no, nothing will happen.
But by and large, if you look at what you're referring to the people who have the problem during the industry down cycle, I only request you to compare the average outstanding per project and the average ticket size per project, and number of projects they had for the size of the book, will be a rightful reflection, because we believe the way we do granular disbursement, disbursements link to the stage of the project and not overwhelming consideration. We should be better off even in an industry down cycle, and we have tested the industry down cycle earlier as well, while we were smaller at that time. But in our history, we have funded more than thousand odd projects in our history.
So far, there had been only four projects where we had encountered troubles and in the entire history of our seven years. Out of that, one or two we recovered later on, and one or two which are reflected in the Stage 2 or Stage 3, even as of today. That's what, Kunal, I have to say.
Okay, got it. Got it. Thank you.
Thank you. Next question is from Pranav Gupta, from Aionios Alpha Investment Advisors. Please go ahead.
Yeah, hi, and thanks for the opportunity. Congratulations on the successful listing. For just one question, which is a more longer-term question. With, you know, no large changes that we can expect in the asset mix, how should one think about, you know, long-term ROA and, you know, think about optimal leverage, you know, over a three, four, five-year period?
... So, Pranav, that is what we have put in our presentation in the panel number one when we give the sustainability matrix at a leverage twenty-one. Sorry, panel number twenty-one. We believe eight is the leverage which is a sustainable leverage metric, and that, whereas we go forward as we utilize the capital what has been there, we can see that before it is when we look to raise the, yes.
Right. And just on the ROE bit, with you know, leverage going up, capital getting utilized, and no even major changes expected in the asset mix, how should one think about ROE going forward?
In the last quarter, ROE, the capital raise has had a very minuscule impact because as we got listed only on sixteenth December, so sixteenth December, and that also like we have called out in the presentation, INR 1,500 crore as of thirtieth December also was unutilized.
Right.
So there was a minor impact of a ROE in the capital raise in the last quarter. So there, it's not that the last quarter ROE is driven by the capital raise of last quarter. And if you look at the overall broader number as well, on the trajectory of ROEs over the period, I think that ROEs had been in the range of between 2.3% to 2.5%, by and large, over the various,
FY twenty-three.
-FY, including... If I include FY 2023, it is largely in the stable range of between 2.3 to 2.5, 2.6, ranging between in a quarter, going up or going down slightly a bit. It has been largely stable in last two, three years.
Awesome. Thank you so much.
Thank you. Next question is from Ramesh from ICICI. Please go ahead. Ramesh, from ICICI, you may go ahead with the question. There seems to be no response from the line of Ramesh. We'll move to the next question. Next question is from Jignesh Shah from InCred Research. Please go ahead.
Yeah. Hi, and thanks for the opportunity and congratulations for the successful listing. I only had one question. Bajaj Finance has a particular product called Flexi Loans, which is an OD facility which has been provided personal loan, you know, as a, as a personal product. Do in a home loan, we do a flexi loans, and if yes, then what will be the proportion of it? Just that's the only question.
So Jignesh, in home loan as a regulatory construct, you cannot do Flexi because,
Mm.
If you, if the customer pays back to you, then it is not. It gets to be classified as a non-home loan. Only in few of the loans, if it is a balance transfer and you are opting for a top-up, in a top-up, it can be offered as a OD piece, this thing, which is not classified as a home loan because that's classified as a top-up. It will be a very minuscule part of the portfolio because only in the few customers who would have some top-up, they may have some amount of a flexi facility. It will be negligible, as a flexi in the home loan side.
So, okay. So my understanding is that then all our home loans are pure term loans, term loan kind of product. I mean, your
It has to be, it has to be term loan, Jignesh.
Okay. And no, no flexi in LRD and corporate also, right?
So, flexi, Dropline Fl exi would be there in loan against property because there's no regulatory standing there. Uncertain , I specifically called it in a home loan and a construction finance with a residential finance book, because that, there will be no flexi or a very minuscule flexi in the top-up portion within the out of 57% of the book, I think less than-
Eight or nine % is top-up book.
... very, very, very, very minuscule piece in the home loan side. No, nothing in construction finance. In lease rental discounting, there will be some piece of a Dropline f lexi which will be available to the customer because it's a non-home loan asset. You are regulatory allowed to do that. Same in loan against property as well.
LAP will be, what portion would be then, flexi? Any rough cut idea?
I'll have to check, but majority of the book there also be term loan.
Small portion.
No, majority would be term loan, but I'll check. Majority will be term loan.
That's it from my side. Thank you and all the best, sir.
Thank you.
Thank you. Before we take the next question, a reminder to participants that you may press Star and One to join the question queue. The next question is from Omkar Kamtekar, who's an individual investor. Please go ahead.
Hello. Am I audible?
You are audible, but there is a background announcement or a noise which is making the voice-
Yeah.
Now it is fine. Yeah.
Yeah, so first of all, I wanted to ask what is your definition of affordable RBI with respect to affordable housing loans?
So Omkar, the definition of affordable, there are various definitions. That's why we call prime and non-prime. That's why we call it a near prime affordable, because the definition, there's no standard definition of industry or players. So we follow a simplistic rule. Whatever is not prime is near prime or affordable. Because there's a wide variety of definitions of affordable, which is used by... There is no standard definition what we can refer. So prime is easier to define the customer who is easily bankable by all banks and largely salaried, a good salaried with a good profile and buying a very good collateral. And rest of the market is in a spread between various parts.
That's why we prefer to call it a prime and a non-prime rather than terming it anything else, because the definition can be.
Actually, I was asking from the perspective of the PMAY guidelines. If you do go for the growth for the affordable housing sector and that segment, do we look at the same guidelines the same way that it is defined by the government in the PMAY as well? That was the reason behind that question.
... So last time also, when the PMAY CLSS, the credit subsidy scheme was there, we were a participant. We may not have been very large participant because, by definition, our larger amount of our customers are above the twenty-five lakh loan criteria, what are there. But all government schemes, we participate ideally, and we try to mobilize as much as possible, because that we take it as an opportunity to grow a part of the business. And also, we feel it is our responsibility to take the schemes coming from government or the regulator or supervisor to come into the market. So as PMAY guidelines execution starts, we'll be doing our best to mobilize what we can mobilize.
But by nature or by definition, today, our mix is significantly lower in the segment, where PMAY guidelines are applicable, the new CLSS guidelines are applicable.
Understood. And just to final things, how much of scale-up do you think as a total percentage of the AUM would be affordable be in the next three to five years? That's one. And lastly, on the LAP vertical, with respect to the ongoing fight on the end-use monetization of the LAP vertical. So what I wanted to understand, how are you monitoring, and what is the guidelines that you use with respect to making sure that the provisions that you use are well ahead of the regulatory guidelines?
I did not fully clearly understood your question, Omkar, but I'll answer on what I could a bit make out. One, your question was on the forward-looking mix in terms of a prime and a non-prime home loan mix. Like I requested earlier, we are since in a silent period, we'll desist from making any future-looking statement as of now.
No issues.
But our, that is on there. Second part, if I got you correctly, was on your LAP utilization of funds and the monitoring of funds. Is that right? I heard you right?
Yes, yes, yes. So I'm more thinking about and trying to identify how the funds for the LAP, specifically unsecured. So we don't have unsecured, but the end-use monetization for the LAP, business vertical. And most of it, the business that we do in the LAP, is this more towards consumption, consumption select for business entities and et cetera? How is that vertical in that respect?
Consumption, is the LAP loan required for consumption?
So, LAP, if it's largely most of the LAP loans go towards the self-employed segment, which is towards, as per the declared end-use funds, is whether for business purposes, which can be growth capital and/or working capital. Of course, the tracking is to that as from a self-declared kind of a thing, because individually, it's not very high-ticket kind of a loans. Average ticket size is close to INR 80 lakh to INR 1 crore kind of a number. From the individual salaried people who are using it, I'll assume that largely while they... It's going from a consumption or the personal usage of the account, and that's basically the declared purpose what they give. Because these are individuals who are borrowing, so this is a declared purpose and, that's where we track it.
But largely, most of it would be going towards the small micro, medium, and the small sector, their business requirements. To the salaried individuals who are taking the LAP loan would largely be towards consumption, in the direction.
Thank you. Next question is from Rahil Shah, from HSBC. Please go ahead. Rahil Shah from HSBC, you may go ahead.
Hello, am I audible?
Yes, please go ahead.
Yeah. Thank you for taking me on the queue. So, I just wanted to understand the indicative yields on your different segments, so home loan, LAP, Construction Finance. Can you give a sense, like a range?
Sorry, for indicative range on what?
Lending rates on home loan, LAP and construction finance and LRD.
I'm sorry I cannot share this data, but broadly I can say on the yield would be in the home loan between close to 8.8-9.2, on a loan against property between 10-10.5 broadly. On lease rental discounting between 8.5-9. That's what... And the developer finance between 11.5-12.5 or 13.
Okay. Sure. And just between LRD and construction finance, now given like what would be your like based on your risk tolerance the mix of you know till what share between these two you would be comfortable? I'm just trying to understand whether the share of LRD can increase further or this is something where you know the company would be comfortable managing the book and.
We remain bullish on lease rental discounting, because in our assessment, this has remained always a very low-risk business and a scale business, delivering optimum kind of returns to the company and with risk profile being very low, given the choice of the customers. And since it is in a way double secured, both cash flow secured, because cash flows are secured along with the executed property or executed the project or executed building, which is there. So there is no cap we have as far as we are as we look at from a lease rental discounting.
But there is a different kind of a cap which comes for us, because as a regulatory norm, 60% plus of our assets, total assets, which means close to 60%-63% of our lend assets, have to be in the residential space. Because 60% of total assets, then there is a liquidity buffer, which also gets included as an asset... So the balance assets is only what we can lend for, basis of proportionate to our risk return metric, whether loan against property or lease rental discounting or some other, other work we can do.
So the cap can come from that point of view, because if we continue to feel, as of today, our view has been that between loan against property and lease rental discounting, risk return metrics have been better for lease rental discounting, so we have chosen to grow lease rental discounting more. However, one, from an upper cap point of view, from the regulatory concept, second, if loan against property in future becomes much more attractive, it can have some mix change. But from a business concept point of view, we remain very bullish on lease rental discounting. From the construction finance, we largely do construction finance for a funnel for our home loan business, which is close to now 11.7.
Our internal view as of today would not to exceed 15 odd% kind of a mix in this business, as we even go forward. That is what I prefer to call.
Oh, sure. This was very helpful. Thank you.
Thank you. The next question is from Jigar Jani, from B&K Securities. Please go ahead.
Yeah, hi. Thanks for taking the call. And,
Jigar, we are sorry. I'm not able to... Your voice is breaking quite significantly. If you are using a speaker, I'll say, if you can use a handphone, it is-
Is this better, sir?
Yeah, this is better. This is better.
Yeah, sorry about that. So, I was asking regarding the provision coverage ratios. So, we have seen from Q1 FY 2023 the PCR from Stage 1 dropping from about 0.6% to now about 0.34%. So do we have a minimum criteria beyond which we will not drop the Stage 1 PCR, or we will be driven by the model itself? Similarly, on the Stage 3 assets as well, so it has fluctuated between, say, 58 to at max 66 also. So any internal limits beyond which you will not drop the PCRs on Stage 1 and Stage 2?
Yeah. So first, on the Stage 1, it is driven by largely ECL model. The level you are seeing dropping is because of we were carrying a overlay. As the overlay is getting consumed, it is coming as a normal, Stage 1, provision. So there is no model fluctuation which is happening here. It is only as the overlay is coming down, because overlay sits as a part of a Stage 1, coverage. So there is no otherwise model changes or a model coverage change or a dropping of the coverage. It is absolutely in line with whatever is from a... Excluding overlay, ECL comes as a model which gets refreshed every year, and there has not been any changes in the scheme.
But on the Stage 3, as per ECL model, the number LGD is significantly lower, but we generally provide for higher kind of a number as the vintage goes up, because all are secured loan, but we still try to do that. But again, the range bound will be 50-60%. 50%-60% is what against a model of close to around 40-odd%, but 50%-60% is a PCR on a Stage 3 assets what would largely be there. And for Stage 1, like I called out, the number remains stable. It's only the overlay adjustment is what is making you look like the Stage 1 provision coverage is going down.
Yeah. So now, since the overlay is almost demolished, this should be steady state, basically, what we are seeing?
This will be steady state depending on the asset mix, because, ECL Stage 1 is different for each, different asset. For, like, we provide for a much higher, Stage 1 for if it is a commercial asset, whether a lease rental discounting or, or a construction finance, versus a Stage 1 asset provisioning for, let us say, a home loan. And which is visible if you look at the panel number 28, Stage 1 provisioning for each asset is different, from loan against property to lease rental discounting to developer finance. So a mix of a change, mix change can result into... So for example, if home loan has to grow much faster than other assets, you can look like at a consolidated level, Stage 1 coverage going down, but not other way around.
So it's a product mix, driven Stage 1 output. I hope I'm able to explain?
Yeah, yeah. Understood, sir. This was very helpful. Thank you.
Thank you. The next question is from Gaurav Jani, from Prabhudas Lilladher. Please go ahead.
Thank you, and congrats on the listing. So just wanted your outlook on the disbursements, right? So, I mean, Q2 of last year till this year, till, you know, this quarter, I mean, the disbursements have been flattish, right? First half you've done about INR 24,000 crore. So, you know, what's the outlook for the second half? That's number one. And secondly, the repayment rates are sort of, falling drastically over the last two quarters. Anything to read out there, and, you know, is this a structural thing that we're going to be out here? Thanks. So that's, that's the first.
I was not able to understand your questions very clearly.
Disbursement, H1 versus H1 is since practice, so H2.
Oh, yeah.
And second one, I...
Second. So, like I called out, Gaurav, for the first question, that we are resisting from giving a forward looking, but we called out in a roundabout way, saying that we play with a affordable and a near-prime, non-prime vertical, which has gone live. We should be okay, as far as retail disbursements are concerned. The second question, even Gaurav could not get. Can you just repeat?
Sure. So what I was trying to ask is, the repayment rates are drastically falling over the last two quarters. Anything to read out here or, you know, is this a structural thing or just, this is a reason and probably will get back to normal?
you are referring to yield, Gaurav? Again, I'm sorry, we're not able to-
No, repayment, repayment rates.
...Redeemed and rates?
Yes.
Portfolio attrition. Are you talking about portfolio attrition?
That's correct.
Okay. So portfolio attrition, like, what you see from a when you try to do this is a mix of various portfolios, like, if in case of overall portfolio attrition, when you look at a DF, DF portfolio, construction finance portfolio has a much higher portfolio attrition because which drives the total attrition, because you will not be able to do a simple mathematics of disbursement minus AUM growth to arrive at the attrition. Because in each of the product, because we are a diversified HFC having a various product mixes and at various assets can have a various kind of attrition driving driving there. Just for the retail portfolios, the attrition rate remains by and large stable.
The larger part of attrition uptick in the last one year has been driven by the construction finance portfolio because the residential sales has been very high and the agreed, there are pre-agreed fee ratios on each project at every stage, so that's where it has been more coming through the construction finance portfolio in terms of an attrition.
So, no, so just an extension to that. So last two quarters, we have seen a fall in the attrition rates. So just want to understand, anything to read into it?
The attrition rates from the retail side are by and large stable. The plus and minus of the attrition rate, what we have seen would be driven by the Construction Finance portfolio. At some point in time, if the seats are at a in a quarter, if the attrition is lower, the attrition overall might. You may calculate in a reverse way, but in the retail portfolio, in the home loan side, it's by and large stable over last three, four quarters.
And for this last question, if I may squeeze in one, you know, we haven't seen a drastic improvement in the margins despite of you raising money in Q1 and, you know, Q2, I think will come in, the benefits may come in Q3. But, you know, what we wanted to understand is, have you sort of matured borrowings on a backended basis or how do you look at margins from here on?
So the margins do not change by raising. One, the public issue has been raised only on sixteenth December, and we have called out already that money has not been utilized even as of the thirtieth December, because sixteenth December we got listed. So, the partial utilization of money has happened only between sixteenth December to thirtieth December, so it cannot have made any impact on ROA. But the margin, when we call about the gross spread, which we said is stable between the last three quarters, from 2 to 1.9 to 1.9, has nothing to do with the capital infusion. That's your lending rate minus borrowing rate.
The capital adequacy, capital being higher, would result into ROE going up for a while, which may result, which will mean consequently ROE going down, but has no impact on the spread on the capital. Capital does not have a spread, impact on the spread, in any manner, you know.
No, sure. So basically, your borrowing base would sort of change, right, once we raise capital. But I was just trying to understand that you also raised money in Q1, so, you know, did we get any benefit of that?
But Q1, we raised 2,000 core as a rights issue. We, on average, I think Q1, we grew by close to 5,000-odd crores. So that was, that needs... But from probably I'm not able to get your question in the rightful manner, because the rights capital raise has nothing to do with the spreads. This capital raise means that your leverage is low, so your absolute profit can go up or ROE can go up, but spread does not change because of a capital. Only at a NII level it.
Even on a net spread, if you compute basis, your interest income to AUM and interest cost to AUM, that also has remained flat at 2.2%, Q1 versus Q2 of current year.
No, sir, I meant the margins probably I take it off. There's a difference between the calculation of margins and spread also. Anyway, that's fine.
Sure.
I take it off. Thanks.
Thank you very much. We'll take that as the last question. I would now like to hand the conference back to Mr. Nischint Chawathe for closing comments.
Thank you, everyone, for joining the call today. We thank the management for providing us with the opportunity to host the call. Thank you very much and have a nice day.