Ladies and gentlemen, good day and welcome to 4th quarter FY22 earnings conference call of Edelweiss Financial Services Limited. As a reminder, all participant lines will be in the listen-only mode. There will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Priyadeep Chopra, President, Edelweiss Group. Thank you, and over to you, ma'am.
Thank you, Inda. Good afternoon, everyone, and a very warm welcome to our earnings call. We hope you and your families are well. Today we have with us on the call Mr. Rashesh Shah, Chairman and Managing Director of Edelweiss Group, Mr. Himanshu Kaji, Executive Director and Group COO, Ms. Ananya Suneja, CFO, Edelweiss Financial Services Limited, and Mr. Ashish Kehair, MD and CEO of our Edelweiss Wealth Management business. We hope you've had a chance to review the investor presentation as well as the addendum on our wealth management business that we filed with the exchanges on Friday. During the discussion today, we will be making references to them. Please do take a moment and review the safe harbor statements in our presentations. We will be making some statements today that may be forward-looking in nature and hence may involve certain risks and uncertainties.
With that, I will hand over to Mr. Rashesh Shah to begin the proceedings of the call. Thank you, and over to you, Rashesh.
Thank you, Priya, and very good afternoon to all of you. Welcome to this earnings call for the quarter ended and the year ended March 2022. First of all, hope you and your families are keeping well. I think for everybody, FY 2022 started in a challenging way, improved and also ended in a fairly challenging way. It was in all, I think, a very interesting year. Q1 saw through COVID wave two in India, which was really a very bleak period, and I hope all of you and your family were fairly well in that. It was a fairly, very tiring phase for India. Q2, Q3 saw some overhang but things started coming back to normal. Q4 obviously with the Ukraine war and the geopolitical escalations and inflationary pressure is what it has been.
I think even though COVID overhang is still there, I think we are starting this year, FY 2023, with what it appears to be that COVID is at least behind us. Of course, there are lot more challenges in front of us, including inflation and. I think India as a whole, and we'll talk a little bit more about it, is a lot better place than it was in the last few years. One of the things we talk about in India is, the government balance sheet and the tax revenues are very strong. The Reserve Bank of India balance sheet is fairly strong. The bank's balance sheet is very strong and the corporate balance sheets are very strong.
The only balance sheet which have got slightly impacted in COVID has been the household balance sheet, where households have had to borrow to just keep up during the COVID time. Outside of that, I think corporates and banks have the healthiest balance sheet that we have seen for quite some time. At Edelweiss, our focus has been on building resilience. As you know, last three, four years have been challenging, but we have also used these years to become stronger, make the balance sheet stronger, but also make the organization stronger by restructuring. We've spoken about that and we speak a lot more about how we are restructuring organization going forward. We want to be strong enough so that we shield against short-term disruptions and continue to focus on creating long-term value through our businesses.
We are now structured into 8 businesses, as you would have seen in the presentation, and each of those businesses has got a lot of growth opportunity around it, from NBFC to housing finance to AMC to ARC to life insurance to general insurance to wealth management and alternative asset management. All of these businesses have a fair amount of growth opportunity. All of them have done very well, except credit businesses, where we continue to scale down as part of the stated policy of bringing down the wholesale book and growing the retail book, but mainly through co-lending, and we have made a lot of progress on that.
I think this year we saw steady performance across all the businesses on the stated objectives, and we have culminated in insurance profit after tax of INR 405 crores for the year and INR 104 crores for the quarter. Overall, consolidated PAT is also healthy, INR 42 crores for the quarter. Still we have a long way to go toward our aspiration for the next few years are, but given the restructuring and the scale down in the credit business, this is a fairly good achievement in this quarter. Four years ago, credit business accounted for almost 80% of our profits. As the wholesale credit business scaled back post IL&FS, and we also decided to go asset light, we have to rebuild our profitability through different vectors rather than the credit vector.
Consolidated profit at INR 42 crore for the quarter and INR 189 crore for the whole year. Our board of directors have approved a final dividend of INR 1.20 per share, which along with the interim dividend will take the total dividend to INR 1.45 per share for the year. This year also saw an interesting milestone for us where our customer reach is now at 5 million. We have reached about INR 50 lakh customers across all the businesses of Edelweiss, and this is a 20% growth on a YoY basis. This has also helped us grow the customer assets. Because as we become asset light, our customer assets is one of the most important parameter that we watch.
We now have total customer assets of INR 3.6 trillion, and it has shown a growth of 20% YoY for FY 2022. Our balance sheet is strong, the businesses are well capitalized, and our three stated priorities for the year, which was EWM value unlocking process, which is underway. The reduction of the wholesale book, which both I think reduces the size of the balance sheet but also unlocks a lot of equity which is embedded in that business. Almost 30%, INR 3,000-odd crores of equity is embedded in the wholesale book. The 3rd was to scale up asset management and insurance. On that, there has been very good progress in this year. Both our asset management businesses and both our insurance businesses have shown significant growth.
This year we also sold the remaining 9% of our insurance broking business in this quarter to Arthur J. Gallagher & Co. The other four or five highlights for this quarter, which are there in the investor presentation, I just want to spend a couple of minutes on them. One is significant improvement in asset quality. What we are very happy about is in spite of COVID wave three, in spite of all the change, all the challenges in the economy, our credit book now has a GNPA of 2.5% and NNPA of 1.8% on March 2022. If you remember, last year our GNPA was 6.7% and NNPA was 5.8%. In spite of the book growing because the denominator has come down, we have brought down the NNPA from 5.8%- 1.8%.
This, I think, is a similarly big achievement for this year. Our total provision cover is also now at 189%, which was 70% last year. We continue to be very conservative and proactive in provisioning and impairment, as we have seen over the years. Our item two after asset quality is the customer franchise. It continues to scale up well. We have invested a lot in digital ecosystem, synergistic partnership, and as I said, our customers are now 5 million customers, added almost a million customers in this year. Our mutual fund doubled the customer base. Wealth customers grew at 22%. General Insurance saw a 20% growth, and our customer assets are INR 3.6 trillion. On the digital ecosystem, our mutual fund has one of the shortest transaction journey.
Our General Insurance business, which is considered as a fintech business, has also invested a lot across the board, including in retail credit co-lending partnerships we have done with State Bank of India, Central Bank of India, Standard Chartered Bank, and this has also been a very gratifying achievement. Though in co-lending, it's early days, the numbers are small, but we expect our credit, retail credit businesses to grow a lot in partnership with banks. Rather than we borrow from banks and on-lend it, with co-lending, we will be giving loans to our customers and using the 80/20 model for partnering with banks. Item three, we have a robust balance sheet, very well-capitalized business. All our credit businesses have capital adequacy of more than 25%.
Our DE, consolidated DE is now at two times, which at the peak about four, five years ago was about 5x, has come down to 2x, and we have liquidity of about INR 5,500 crores, which is 23% of the borrowing. Our three priorities, as I said, scale down credit, wholesale credit asset, demerger of the wealth management business, and scaling up asset management insurance have done well. I think NBFC, as I said, asset quality improvement, big one, and the partnerships with banks and especially with Central Bank of India, where in this year we have disbursed INR 100 crores in the MSME book in partnership with them. We are also in advanced stages of discussion with State Bank of India, IDFC Bank. Our MSME retail collection are at 96% for March quarter.
Even on housing finance, we have grown quite a bit in that. Our profit has grown two and a half times. We have a lot of equity in this business, but as we have not grown in the last few years, now scaling up will be the vector for driving profitability. Collection efficiency was actually more than 100%. Provision cover is more than 77%. We securitized more than INR 850 crore portfolio in this year. A key other achievement in housing finance has been the co-lending partnership with State Bank of India and Standard Chartered Bank. Mutual fund has had a big growth in profit, but more than that, improved market share of 50 basis points. This is a very competitive business. Our rank of AUM for the industry at the start of the year was 15.
At the end of the year, we are at 13. We have improved quite a bit in our ranking also. Our share of equity AUM for this year was 23%, which was, I think, phenomenal. Equity AUM, earlier we had Bharat Bond and all, which was a vector for growth. For FY 2022, the mutual fund has grown with equity AUM. Alternatives asset management also has a strong growth in profitability, and we are currently in fundraising mode for three of our funds. We hope that in this year we close these three funds also. We have in ARC, we continue to focus on building our retail capabilities. Wholesale we have been a leader, but in this year, even in retail, we have a large market share. We have robust recoveries.
We recovered INR 2,700 crore in this quarter in ARC and INR 6,900 crore for the year. Collectively over the last four years this brings our recoveries to more than INR 30,000 crore. The key focus of our ARC is recoveries, and we continue to be very strong on that. ARC has a very, very strong balance sheet and a lot of liquidity. Both our insurance business have had a very strong year. Wealth management, which is a standalone business getting de-merged in this year, has now assets under advice of more than INR 2 lakh crore. 30% growth year-over-year. Strong financial performance for this year.
As our borrowings have improved, the loan against shares book has grown by 95% on a year-over-year basis. I think with that, we continue to be very unexciting in terms of what we are achieving because we want to be very, very steady. We want over the next four, five years to continue to grow value, continue to unlock value. The eight businesses we have, each of them have a very strong platform, have strong track record. All those businesses are more than ten years old, but now have a lot of growth ahead of them in the next ten years. We do think that this is, from a macroeconomic point of view, the coming year, FY 2023, is gonna be a slightly difficult year with inflation, interest rates expected to go up, liquidity tight, foreigners selling in India.
We expect it to be a challenging market for financial assets, both equities and bonds. Things like real assets like real estate and infra assets, those will do well. A lot of our funds are focused on that. We do expect that value of real assets will go up because they are linked to inflation, while equity markets and bond markets will see challenges and headwinds as we have already seen that. At a macroeconomic level, it's gonna be a challenging year. Fortunately, at a microeconomic level, India is very well poised. The company's balance sheets are strong. Economic growth is coming back. Employment is also scaling up. All the measures the government has taken on digitization and, the India Stack and all, a lot of that is gonna drive growth.
We are seeing very robust income tax collections for the government. I think at a micro level, very strong environment. India is very well poised. There will be macro headwinds. If you look at last four, five years, the macro environment was very benign, while the micro environment, banks had huge NPAs, corporates had a lot of borrowings, growth was coming down. Last few years was a story of good macro, bad micro. I think the next two years is gonna be bad macro but good micro for India. On that, I think India, Indian companies have always done well. The Indian story of the corporate India is what we think is gonna be there for the next few years.
For us, this year the focus will be completing the Edelweiss Wealth Management demerger and listing, which is expected to be completed by February 2023. Demerger should happen by December and listing by February 2023. Continue to scale up our asset management insurance business. We continue to make our businesses very independent. They now have their own balance sheet, their own governance, their own boards, and each of the eight businesses on their own are now very strong and very well positioned within their marketplace to grow. One important part is steady reduction of wholesale. We expect to reduce the wholesale book by another INR 4,000 crore in this year ending March 2023. By March 2024 it will fall by another INR 3,500 crore.
The current wholesale book is about close to INR 10,000 crores, which will slowly come down over the next three years, and that will make our balance sheet stronger and release a lot of equity. I think, and to end it, strong balance sheet, comfortable liquidity, scale of retail businesses, asset light model are the foundation for our growth ahead. Once again, thank you all of you for your patience, for your support in the last few years. We will now open for questions to you.
Thank you very much, sir. Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may enter 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 a question. Anyone who has a question may press star and one. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take the 1st question from the line of Arun Malhotra from CapGrow Capital Advisors. Please go ahead.
Yeah. Good afternoon. Congratulations on good set of numbers. I think majority of the businesses are moving in the right direction. Couple of things, Rashesh. One is the asset reconstruction business has done exceedingly well. Is this a steady number which we can extrapolate going forward, or there will be lumpiness in this?
I think on ARC, if you see, we continue to have a fee income of about INR 800 crore a year, and now we have an equity base of INR 2,500 crore. If you see the equity of ARC business is INR 2,500 crore. It's a good business. We expect to make ROA of about 6%-7%. Unfortunately, the gearing has come down. Three years ago, the business was geared 3x. Now our gearing is only about 1x. As a result of that, we should make about 10%-12% ROE on that business. It's not just our ARC.
All ARCs are facing this issue, that it's a good ROA business, but gearing up that business because the banks don't lend to ARCs. They were dependent on bond market, and after IL&FS, the bond market has also become unsteady. The long-term borrowing, because ARCs need 5-year, 10-year borrowing. We still have some borrowing, but I personally think ARC will be geared 1:1 and will make about 6%-7% ROA. If you make 6% ROA and you have geared 1:1, you should make a 12% ROE. Ten to twelve, if you see, is what we're averaging. I think that will remain. As I said, the last part of the profit, almost 60% or 70% of the profit comes from the capital and the fee income that we get. That is going to remain steady.
Sure. Second is on the NBFC, you know, what would be the focus going forward? I know we are going to make it more granular, but, have we tightened the credit process enough so that we don't repeat the mistakes that we have done in the past? That's one. Also would like you to comment on the excess liquidity which we have on the books. Part two. Lastly, one more. You know, we have been one of the topmost brokers. You have been a very astute investor. Our stock has not done anything for last 10 years. Is the management concerned about it? Are we really looking at it that way, that there have been no return for the shareholders?
Yeah. I'll answer all of, I think, I hope I remember all the questions. We have my colleague, Ashish Kehair, also. I forgot to mention Ashish Kehair, who runs the wealth management business, and he's also on this call. In this quarter, we added an addendum on wealth management because I think as that business has become large and getting listed on its own, there is a lot of investor interest in understanding that business specifically. If there are any queries on that, Ashish Kehair is also on this call. I think I'll try and on the NBFC, obviously a lot of the, if you see, we've been doing retail like mortgages and SME for last 10 years. We have not had any stress in that, in spite of COVID and IL&FS and all that.
I think our retail NBFC has been fairly steady. Wholesale, obviously, there were a lot of asset quality issues. About 70%-75% of that were mainly because projects got stalled. There was not liquidity available, and basically the developers or the projects were weakly funded. Those obviously were the learnings we have had. A large part of that also became an ALM problem. If you look at the wholesale credit business, the credit cost, which was expected to be 2%, ended up being 4%. That was obviously a setback. But a 2% per annum credit cost is what we expected on the wholesale book. Actual experience was about 4% and slightly more than that on the wholesale credit business.
A lot of that was also ALM related because you had to repay your loans while your projects were stuck and the developers were not paying you. Fortunately, as real estate is improving, housing market has improved, a lot of the projects we have, the underlying collateral is there. That's why if you see after last year, we have not had to take any impairment for the last four quarters. I think on the wholesale side, as we are moving more and more to asset management model where you have holding power, because a lot of this requires holding power. You can't have a three-year loan, that you have to repay and you give a three-year loan to a developer because the three becomes four or five. You might still make your return.
I think the learning on the wholesale book has been, yes, underwriting some weaker projects were funded, weaker developers and maybe weak counterparties were there. That was what we learned. Credit cost was higher, which can be adjusted in the pricing. I think moving it to an asset management model, which is what we have been doing for wholesale book, has been one learning. Our retail businesses continue to do well, but we have decided that we have a lot of equity. Our credit business, we have INR 3,000 crore equity currently allocated to the wholesale business, another INR 800 crore to the mortgages business and another INR 550 crores to the SME business. The mortgage and SME business has got adequate equity and has a lot of growth, especially in the co-lending model.
There we will continue to invest. We have done a lot of work on technology. The co-lending partnerships we have with State Bank, with Standard Chartered Bank, with Tata Housing, all of that, has underscored that our underwriting and collection on the retail side has been underscored by a lot of partners. Wholesale, we have had a lot of learning both on the underwriting, but on the format. I do believe that wholesale credit business is not a right business for any bank or NBFC. It is a much better business for AIFs and funds. Which will have the holding power and the long term flexible capital on that. I think that's your answer on the NBFC. As I said, I may not remember all the questions. The other you asked about the stock price. We do acknowledge that last few years.
If you look at on a 10-year basis, obviously, NBFCs or financial services have gone out of fashion and come back. We also paid a fair amount of, you know, dividend in the last 10 years. Last four years, our earnings have come down, our balance sheet has come down. The gearing from 5x has come to 2x. We have had to make a call on whether we protect the balance sheet or we protect earnings. We have had to protect balance sheet for obvious reasons, as I'm sure you'll understand. Our earnings have deteriorated in the last few years. Now, fortunately, the trend is that we are repairing earnings. I've seen that there are two ways of valuing a company, the stock price.
Either the intrinsic value, which may be a long-term private equity investor, somebody who has a 10-20 horizon can take a call on that. Unfortunately, markets don't have enough information on that, which I acknowledge. On earnings or market growth fancies. Three years ago, NBFCs were very fancied. They were trading at 3x book value. Now most NBFCs and even banks are at book value or below book value because somewhere I think credit growth has gone, except for a few exceptions. I think for most of them, the excitement around NBFC business has come down. The credit has come down. Along with that, our earnings have come down and we are confident as we repair our earnings and we grow our earnings, the underlying value is there. We've been building value.
We have not yet converted a lot of this value into earnings. That is the job of the management. Next four, five years, we remain committed to not only convert the intrinsic value we have built into earnings, but also and grow the value, but also unlock value. Because as you can see even now, about 45% of the company is still held by insiders, and we have another INR 5 crore or INR 6 crore large investors from external investors who own another 25% of the company. All of us collectively are very committed to growing value and unlocking value. The precursor to growing value is to building value, which is what I think if you look at most of the parameters on customer addition, AUM, or we are doing all the right things. We hope those right things get converted into earnings and post earnings. As we have demonstrated with Edelweiss Wealth Management, we remain committed to unlocking value.
Sure. That was helpful. Lastly, you have, you know, passed a resolution for raising funds in the form of rights QIP. Any thoughts on that?
I think this is just an enabling resolution. We don't expect to raise any equity money. As we said, we are only at 2x here. We have a lot of equity out there. We have just taken the enabling resolution for any instrument because we have, as you can see, some borrowing which we have to roll over. Every year, like last year, we, I think, repaid about more than INR 8,000 crore-9,000 crore and raised only INR 3,000 crore-4,000 crore. Every year we are repaying more than we are raising. Some rollover we have to do. We have given a slide which explains all the borrowings we have at a group level. We expect that we will in the next three years go towards zero debt at the holding company at EFSL level. Some we have to roll over. We have just taken an enabling resolution. I personally don't think we will need to borrow more than INR 500 crore-INR 800 crore in this year.
Sure. All right. Thank you, Ashish. Thanks, team. Yeah.
Thank you. Our next question is from the line of Krish Kumar, an individual investor. Please go ahead.
Hello, Mr. Shah. I just have one question. You've spoken about value unlocking in your investor presentations in multiple occasions in the recent times. Can you please throw some light on what are the plans on that front?
I think the 1st one we have is on Edelweiss Wealth Management that we have shown. Also the insurance broking that we sold to, you know, repay debt at the whole core level, which is also because that is also building value. I think what we have done is the eight businesses, including wealth management, each of them has become independent and we remain committed to either IPOs or demergers in the coming years to unlock value in those businesses, which is the life insurance, general insurance, housing finance, NBFC, ARC. Each one will have their own contours. Like for example, currently as per RBI rules, ARCs are not allowed to IPO. They are not allowed to be listed.
We'll have to find our own way of unlocking value in that, either through dividend payouts and whatever else, you know, that business has strong earnings. I think through either dividend buybacks as well as demergers and IPOs, these are the four vectors we'll use. As we said, our idea was to make the businesses stronger, which I think we have done in the last two, three years, convert that into earnings and value creation and then unlock the value. By actually unlocking Edelweiss Wealth Management, we have demonstrated the 1st example of that.
Sure. Thank you.
Thank you. We'll take the next question from the line of Harshil Solanki from Equitree Capital. Please go ahead.
Good afternoon, team. I have one question. In your presentation, you have mentioned that you have reduced 30% of your wholesale assets in the past two years, but are projecting a 60% reduction over the next two years. I'm trying to understand what will you do differently to achieve this?
When that 30% was over INR 18,000 crore book, while now the book is only about INR 10,000 crore. 60% is about INR 6,000 crore. We've been reducing the book by about INR 3,000 crore-INR 4,000 crore every year. In this year also we expect to reduce it by INR 4,000 crore. INR 10,000 crore should become INR 6,000 crore, and then we hope to reduce another two and a half INR 3,000 crore in FY 2024. I think as we said, every year we are reducing it by INR 3,000 crore-INR 4,000 crore. At the peak in 2018, our total wholesale book was INR 22,000 crore, which has now come to INR 10,000 crore. We have in the last, say, four years, reduced about INR 11,000 crore in that book.
Okay, Solanki. Thank you.
Thank you. We'll take our next question from the line of Mahavir Jain from Astum Advisors. Please go ahead.
Yeah. Hi. Congratulations on good set of numbers. I had a question on the mutual fund business.
Mm-hmm.
Your mutual fund business has seen strong inflows, especially on the equity front in the current year. However, there is an increased volatility in the market due to global macros. How do you see the impact on the mutual fund industry in India as well as Edelweiss AMC?
I think the growth we have seen in the last two, three years maybe will get tapered, but I still think there will be growth. Because as you see, you know, I think SIPs have reached about INR 12,000 crore, and I think there is an increased commitment to SIP-based investing and all that. In our case, we have a good portfolio. I mean, our three main platforms in our mutual fund business, one is equities, which we have grown in this year. Other has been our ETF on debt, the Bharat Bond and all, which we still think, especially as bank interest rates and all, as inflation goes up, the bank deposits may not be as attractive. ETF, especially Bharat Bond has been a replacement. It is a substitute to bank deposits for a lot of investors because it's.
I mean, for retail investors, it's almost overnight liquid, and you get 100 basis points-200 basis points more on an after-tax basis on the Bharat Bond than you would get in that. We continue to think as inflation goes up, Bharat Bond will become more attractive to FDs. It may not be, bonds itself might not be that attractive, but for, I think FD to a Bharat Bond should be also a good bet to continue to grow. Our 3rd has been the Balanced Advantage Fund, which we think in this, you know, volatile times, the balanced funds will do very well because I think investors will want some certainty of steadiness with growth because it's not going to be that the equity markets will go down. There'll be increased volatility.
We do think Indian corporate earnings and all will go up, so there will be some equity upsides theoretically. Overall, I think this year, even if you see, it will be a single digit growth for the mutual fund industry, which is not bad after the last three years of more than 14%-15% growth. I think a single digit growth for AUM for the mutual fund industry is not bad. Our three planks, equity, balanced and Bharat Bond, I think we have some positive drivers in all of them.
All right. Thank you. Thank you so much.
Thank you. Any participant who has a question may enter star and one. We'll take the next question from the line of Ankit Agrawal from Yellowstone Equity. Please go ahead.
Yeah. Hello. Thank you for taking my question. First one is, what is the monthly disbursal rate we are currently doing for NBFC and housing finance businesses?
Currently, on the NBFC for this quarter, it has been mainly SME because we don't do any wholesale disbursements anymore. NBFC for this quarter was closer to INR 200 crore for the quarter. We can do more, but we want to do it in co-lending partnerships. We are allowing the partnerships on co-lending with Central Bank of India and all to keep on stabilizing. It's growing by 20%-30% every month, the co-lending disbursements out there. I think on the NBFC, we are at about close to INR 200 crore a quarter, and on housing we are at about INR 350 odd crore a quarter. Our idea on housing is to go to INR 1,000 crore a quarter and on NBFC to go to about INR 400 crore a quarter.
When you say a quarter, you mean monthly run rate?
Yeah. Divide by three. Basically, you can divide by three.
Okay.
Because what happens in the quarter is also get bunched up. We look at quarterly disbursements rather than monthly. When I say INR 350-INR 400 a quarter, it's about INR 100-INR 120 a month.
Okay.
In thousands.
Right. Okay. Just on the BMU, where does that sit? Like is it part of the standalone or is it spread across the businesses?
The BMU is standalone. It's more the Holdco. What has happened is last few years we have borrowed money at the Holdco level. We have in the last three, four years of the liquidity crunch kept about between INR 2,000 crore- INR 2,500 crore at the Holdco level for use of the businesses underlying and make sure that we never had any liquidity crunch which could be, you know, a lot more damaging. Some of this borrowing was expensive. Because it is expensive borrowing, a lot of that borrowing expires in FY 2023 and FY 2024. There's a lot of this was three-year, four-year contracted borrowing we have taken. That is largely where the Holdco is.
The Holdco also has the basically corporate and BMU also manages the liquidity and treasury for itself and also makes investment in the operations of the Holdco which oversees the businesses and all. As the businesses grow, the dividend income and all will start coming in. Currently, we are not yet pulling money out of the businesses as yet.
Right. The standalone entity does not have anything apart from BMU, right?
Yeah.
Okay. The gain from the sale of insurance broking business, that would have booked in BMU?
Yes. That was booked in BMU.
Okay. Basically the liquidity cost and other fair value changes offset the gains from the sale of insurance broking.
Yeah. As we have said in the past, Ankit, I think, the excess liquidity and the expensive liquidity that we're holding at the Holdco was annually costing us about INR 300 crores, and it's INR 300 crores a year, and we're hoping it will come down by INR 25 crores every quarter as we go forward, as we repay borrowing and all that. We had to do it because unlike others we are not a big corporate house, so we had no, you know, group company to fall back upon if we needed INR 300 crores- INR 400 crores because of any shortfall. We in 2019 and 2020 decided to hold this extra liquidity at the Holdco, at the BMU level.
Thank you. We'll take a next question from the line of Vishal from Real Value Securities. Please go ahead.
Hi, Rashesh. Very good numbers. I was going through presentation and I had a few questions on credit side.
Mm-hmm.
Significant improvement in asset quality. What are the factors leading to this and how much that can be contributed to wholesale and retail? Are we going to see same improvement in coming quarters also or we will say it gets steady now?
I think on the credit side, as I said, retail has done very well. Retail has been steady. The improvement you are seeing from last year where NNPA was 5.8% has come to 1.8% has been largely on the wholesale side because of two, three reasons. On wholesale we in 2021 proactively provided. We I think accelerated a lot of our provisioning. You might see some other NPAs still having provisioning gap coming in. We actually up-fronted all of that, provided for that. However, the underlying portfolio, especially housing and real estate is doing well. Recoveries are strong. As the recoveries are coming, the NPAs are improving.
In fact, it's very commendable because usually when a book is shrinking your NPAs go up, they don't come down. In this year, though the credit book has shrunk, the NPA has also come down because a lot of the NPAs that we had, we have been able to recover or make them standard. Because a lot of these projects are good projects. Unfortunately, 2019, 2020 everything got stuck because of liquidity and then COVID and all. As the projects are coming, I think real estate is doing well, housing is doing very well. We expect to not have any asset quality issues, though I think as the book is shrinking a 1.8% NNPA should be as good as it gets. If our NNPA is around 2%, we'll continue to be satisfied with that.
Okay.
Thank you. Our next question is from the line of Hitesh from Citibank. Please go ahead. Hitesh, could you please unmute your line and go ahead with your question?
Hi. Good evening. Thanks, Rashesh, for your inputs, especially on the alternative side. I understand that this is a focus area for the group. You know, the AUM for FY 2022 increased only by about INR 500 crore. Given the macro conditions that you hinted in your presentation also, should we expect an increase in H1 2023 or you think that the focus will be more on deployment? If you could just add, you know, an outlook for profitability and scale that you envisage for this business.
As you know, the alternative AUM, the alternative asset management business, AUM is not like mutual fund. It doesn't come every month. It takes about a year and a half to close a fund. We have three funds under closure right now. Our stretched credit fund number two, ICIF III as we call it, our IYP II and our Credit Plus Fund. We expect to close three funds in this year. We did close almost about INR 9,000 crores-INR 10,000 crores a year before. Unfortunately in alternative asset management you might have one year where you will have AUM which is, you know, you will add INR 8,000 crores- INR 10,000 crores of AUM.
I would say in this business, along with AUM, investors should also look at the deployed capital because the deployment of capital is an important one because AUM is only that you have raised of INR 8,000 crore fund. That eight thousand crore fund will get deployed over three or four years. That is an important factor to also look at that, how much have we deployed in this year. In that sense, this year, alternative asset management has been fairly good. We have been able to deploy a fair amount of capital, also exit a fair amount of capital. That has been good performance on the alternative asset management side. I think we have a total AUM of about INR 25,000 crore, out of which 25 is deployed. That has been the good growth in this year.
I'm just looking for the number on alternatives for this year. We had a 25% increase in our fee-paying AUM, because when we raise an AUM of INR 8,000 crore, we only earn fees when we deploy the money. If you raise INR 8,000 crore and deploy INR 2,000 crore a year, your 1st year INR 2,000 crore is fee-paying AUM. In this year, our fee-paying AUM is now INR 17,600 crore, which is a 25% growth. We had deployment of INR 4,900 crore in this year, out of which INR 1,660 crore were deployed in this quarter. I think the fee-paying AUM is the one I look at the most. We may not have growth in AUM, but the fee-paying AUM had a 25% growth, and that is also reflected in the increased profit after tax for the alternatives business.
No.
Thank you. Ladies and gentlemen, we will take that as the last question. I would now like to hand the conference back to Miss Priyadeep Chopra for closing comments.
Thank you, Rashesh, and thank you very much everyone for your time today. Please feel free to write into us at Edelweiss Investor Relations for any questions or any other additional information you may need. Once again, thank you for your time. Have a great week ahead and stay safe. Bye-bye.
Bye everybody. Thank you.
Thank you, members of the management. Ladies and gentlemen, on behalf of Edelweiss Financial Services, that concludes this conference. Thank you for joining us, and you may now disconnect your lines.