Q3 19/20

Jan 28, 2020

Ladies and gentlemen, good day. I'm well too. IIS's advanced limited Q3 FY 2020 earnings conference call. 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 completes. If you need assistance during the conference call, please This conference is being recorded. May I know when the contact was the manager? And you, Anna, what do you use, sir? Good afternoon, everyone. On behalf of team, I as well. I thank all of you for joining us on this call. I'm Praboda Dhaval's CFO. Accompanied by Nimugan, our chairman and Smith Bali, CEO, IFL Finance. I'll now pass the mic to our chairman, to comment on overview of the group's strategy and plans. Thank you, Praful, and welcome to all. So normally as I speak about macro environment, and then how our good strategy fit into that? So obviously, the economic growth and the macro headline numbers are still outstanding. They are not what we all would like them to be. But all hopes are pinned on the budget. And the only good news or hope we can have is that government receives all the problems they're committed to make sure that the economy is back on growth path and all the sectors, all the segments, are basically relied. But coming back to Asset Finance and the credit market that we operate in, the positive thing is that the lending capacity has decrease for the system as a whole. And therefore, I would say that in the core segments that we operate operate in, the competitive intensity has eased or has become more, sober. In fact, there's too many meter players and new players, obviously, markets becomes a little more, challenging. I mean, to take, example of, for instance, loan against property market where the rates have gone down without factoring in the risk premium. So on the four segments that we work in, the operating environment seems to be much better and that is reflected in our results as well. So our strategy remains the same as we had articulated earlier. In terms of growth, we want to focus on regional small ticket granular loans. So incrementally, we are focusing on that and those loans now are almost about 87% of our portfolio. The remaining 13% primarily a developer portfolio. You know, in fact, I mean, there's a lot of apprehension about this portfolio, but I said this earlier, and we I reiterate that At least our deliver portfolio is not in the high priced segments of, Mumbai where there's a supply overhang and, you know, many large scale projects are, not selling or they're, they're stuck for energy demand. Most of our, almost entirely, our developer loans are in, suburbs of, Mumbai or, NCR or in smaller towns and cities, each and every project is monitored very carefully. And we are also working, on, whether significant part of this portfolio or entire portfolio or a substantial part of portfolio, can be transferred to an alternate investment fund. So IFL Asset Management company, which is part of our wealth, has shown interest and the diligence has started, but the more information on this as we go on. Having said this, in terms of retail business model, we are focused on using technology to leverage, growth without increasing operating costs. And that's why even in this turbulent time of last 15, 16 months, we've been able to maintain our net interest margin and our return on assets. So in the last quarter, we have seen that the volume growth in core segments of Our business is coming back and we are seeing that the outlook for this quarter is even more optimistic. And as we get the business volumes back, I think, even the margins will improve, particularly businesses like home loans where our fixed cost structure is we are not able to stretch it fully because of lower disbursals in last 9 months, but I think, as we go around, the environment is improving. Significantly for us, NetSol Housing Bank has reduced the interest rate, which will allow us to be more competitive in the home loan segment, which is more pricier to do. Now, I'll hand it over to provoke our CFO to take you through, our financial numbers in greater detail. Thank you. Thank you, Nimble. IRFL Finance net profit was INR 192 crores in 3rd quarter FY 'twenty. Up 11% Q on Q and seventy eight percent YY excluding the one time impact of reversal of deferred tax asset in second quarter FY2020. Loan AUM grew 11 percent YY and 3 percent Q on Q to rupees 36,005 crores, excluding CV Business AUM, which we divested in fourth quarter FY 2019. Our Tier 1 car stands at 17.9% and total car at 21.4%. Primary drivers of our AM growth are small ticket home loans, which grew by 10% YY, gold loans, which grew by 41% YY and microfinance loans, which grew by 70% YY. On the other hand, the share of developer and construction finance and capital market loans continues to decline. In home loans, our focus remains primarily on small ticket loans to the salaried and self employed sections. The fastest growing segment in home loans is the affordable home segment or Suraj loans with average ticket size of rupees 13 to 14 lakhs. Apple Home Finance has been a significant player in Pradamantri, Ava, Fuzana, Great Link subsidiary scheme. Till date, it has provided benefits to 34,000 customers and disbursed subsidies of nearly rupees 800 crores. Retail loans, including consumer loans and small business finance constitute 87% of our loan book. Another strong characteristic of our loan book is the large proportion of loans that are compliant with RBS priority sector lending norms About 61% of our home loans, 48% of business loans, and 92% of our micro finance loans are PSL compliant. In aggregate nearly 44% of our loans are PSL compliance. Some details on the profit loss account Our interest income comprises of gross interest, earn on loan assets and interest spread on assigned assets, loan assets, including securitized assets. Net interest income on loan asset has gone up by 5% Q on Q and declined by 13% wire wire. Net interest income on assigned book has declined by 5% Q on Q and gone up by 118% YY. This is broadly in line with Q on Q and YY growth in loan book and assigned assets. Our NIM for the 9 month period was 8.2%, excluding the 2% spread on assignment, the normalized NIM was 6.2%. Our average cost of borrowing fell by a 9 basis point Q on Q and rose by 39 basis point YY. The other income of INR 66.9 crore comprises of interest rate that is upfront amortization of interest on assigned assets of INR 21 crores, CN commission income of INR 26 crores, and other income of INR 19 crores. Interested in this quarter is lower compared to previous quarter as the volume of new assignment was lower. Operating expenses are flat Q on Q and are up 11% wirewire due to increase in the number of branches, employees, and related overheads. The number of branches has increased by 27 percent YY to 2366 as we added new branches for our microfinance and gold businesses. The number of employees increased by 9 percent YY to 18,309. The operating expenses were flat Q on Q, as our headcount and thus the salary costs are slightly down Q on Q. We were also able to cut down several discretionary expenses like marketing and advertisement and traveling expenses. Loan loss provisions that would be 34.8 crores were down 77% YY and 42% Q on Q. Effective tax rate for the quarter was 22.6% For the 9 month period, it was 23.5% versus 9 month last year of 33.4%. The other comprehensive income shows a gain of INR 4.3 crore, which is a partial reversal of the previous quarter's mark to market loss of INR12.7 crores on our foreign exchange loans as the foreign exchange loans are fully hedged, both principal and interest. This is just a notional gain or loss which will be eventually nullified. We completed securitization assignment transactions amounting to INR2381 crore in the third quarter. Compared to 3721 crores in Second Quarter And 4595 crores in First Quarter. We sold on both PSL and non PSL loans in five foot product categories, including home loan, lab, SME, gold and microfinance, to government, private and foreign banks. Excess to long term funding has significantly improved this quarter, We raised long term loans to the tune of INR 2721 crores in this quarter compared with INR 403 crores in first quarter and INR 1723 crores in second quarter. Our funding mix is well diversified, including 22% from NCDs, 36% from bank term loans, 4% from NHB refinance and 38% from securitization and assignment. Our asset liability maturity is well matched with surplus in all buckets. Consolidated gross NPA was at 2.27 percent of loans and net NPA at 0.98%. This was a significant improvement over the previous quarter. GNPA ratio of 2.51% and NPL ratio of 1.51%. Provisions coverage, including on standard asset stood at 95.4%. Return assets for 3rd quarter FY 2020 was at 2.5% and return on equity at 16.8% for the 9 month period. ROE was 2.26% and ROE was 16.3% in sorry, excluding the impact of one off items. As a loan app's popularity with customers is increasing customers are increasingly using it for payments and top up. This quarter, we had 1 Lakh 22,600 average monthly active users on the app We have improved customer experience and the rating on Android Play Store has gone up to 3.9 and on iOS App Store, it has gone up to 4.4. Thank you. We'll now open the floor for Q And A. Thank you. Ladies and gentlemen, we will now begin the question and answer session. You. The first question is from the line of Aniza Arangan from HSBC Asset Management. Please go ahead. Yeah. Hi. Good afternoon. The first question I had was, you had said that you had raised about 2700, sorry, 2300 crores through assignment and securitization. So, but your overall assigned book is, like, flat. So can you explain, how, this works? We raised 2300 because my long term debt, which is bank loan and the non convertible debentures bond. So that basically, is borrowing. No, this is a securitized assigned loans of 20,381. Yes. So the thing is that, yeah, so we had a new assignment securitization of 2381 crore in this quarter, but there is also a rundown of the existing book. So the net impact is that Q on Q, it is, almost a flattish kind of, off balance sheet book. So, here's a good day. I just would have not paid off as the customer pays back the money. We paid back to the I mean, it goes back to the bank. So, the number of the assets go down. Okay. So this, like, around 2300 is like a quantum, which we can see, like, maturing every, quarter. Is that So what happened, the gold loan, which was, you know, but we see the materials faster, but I was just asking. I don't understand, but I think yes. So for next quarter, I'll still discuss that number. Yes. Okay. Okay. Also, in your housing segment, can you explain, like, what kind of customer profile you'll have at a yield of, like, let's say, 11%? No, 11% is a bit of a yield on the So the voting yield is 10% is not 11%. And the profile of customers, so every ticket is 16 to 18 lakh rupees. Almost there's a fiftyfifty split, but now it's more increasing to our salaried people. Maybe slightly more than 50%. So these are maybe government employees of people in smaller towns, we're not places like Nasdaq, Macpur, or Buj, So most of our who are maybe, you know, we are, a Vira or Pangue or Tane, you know, these kind of places, is where we operate. So most of these can be either self employed, traders, businessmen, or, salaried people. You know, that's the profile of people that you'll have. I think, typically, this is in 6 to 8 Lakhity as extra 10 Lakhs is income range. Okay. Okay. Just one more question on your loan loss provision of this quarter. Are there also any write backs which you have taken this this quarter. But as compared to Q3 of FNND, it's quite small. That's just trying to understand that. Yeah. So normal course, there are right and right jobs. So they basically happen on, this thing. So there's some of the cases will have write backs. Some of the cases will have. So there are recoveries and, so and therefore, there can be some write backs. You're right. Okay. So there was, there is, like, an extension right back in this quarter. We can understand. One second. That's it. I don't need a substantial, but there's some right back. You're talking about which corporate growth you're talking about? No. Generally, your consolidated results, loan loss provision, that's what I'm trying to see. One second. Yes, you are. Trevor, do you want to talk about it? Yes, so see the thing is, you know, there will be some right back if an account is, upgraded from, you know, for example, say, from stage 2 to stage 1 or from SICR to stage 1, there will be some, right back. So that has happened in some cases, like, a 4 digit and corporate loans saying. But the provision system is less because not because the right bank are low, but, the newspapers are low. Okay. Okay. So just one more thing. When I'm trying to see your result, which you posted it like DSE, the financial results, the impairment on financial, is it just like a positive 35, crores. And, there is also a night time line item called net loss on derecognition of financial instruments. So just trying to reconcile what those items would be in this in this bill in the loan loss provision. We'll check the numbers and revert to you. I mean, the the clarification, I mean, the breakup of this. Okay. Okay. Alright. Yeah. Thank you. That's it. You're talking about week numbers. You're talking about, Yeah. There is a a under expenses category a third item called net loss on derecognition of financial instruments, which is at 49.38 crores. And then there is also another line item called impairment on financial 1st. Okay. We'll get back to you, Alteca. Sure. All right. Yeah. Thank you very much. The next question is from the line of Rajiv Agrawal from TuohrDARshi Advisors. Please go ahead. My first question is around your gold loan book. That seems to be having a very good traction. So can you compare your gold loan book to the 2 leading players of Gold Loan and how do you compare with them and what's your expectation there? So, okay, this is an interesting question, but now I'll take you back a little bit to this 3 year. So in 2015, 2016, our golden book had come down. But we do not shut down many branches. And we also expanded our branch network very recently. So if you compare the 2 leading Google players, then I still are, loan, you know, what you call principal outstanding. Per branch will be lower than them. Think we may be in the range of 4 crores, whereas the leading player may be in the range of 7 crores. So that just shows that, there's a capacity to grow I mean, we can also be in the similar range, capacity to grow, in terms of our loan assets from this brand network, you know, if you just focus on marketing and sales and being competitive in these areas. I really don't have the numbers of two players, how they're done in terms of growth. Also, one of them is fairly more aggressive in terms of yield and the interest is typically I mean, both of them is typically tend to be higher than ours. Normally, we focus on customer relationship from a longer term perspective, where we try to cross sell medical products, including insurance, mutual fund, and other loan products. So, you know, our our approach is really different than maybe the customer segment may also be a little different because our focus maybe on more even with the Golar product on SME kind of clients where, you know, which is when we expect cash flow to basically take care of the loan. And therefore, if you really look at it, the number, I don't know whether that number will be transparently available all over or not. Is the what is the option to a loan book? So where we have something like less than 0.1%. So if you take loan in the 3 to 4 months, then typically, we'll not option more than 0.3 or 0.4% of actual loans, that we deserve. So we try and focus, you know, on more on the so that's what, I mean, I would take the numbers, but whatever I gather, in terms of reviews with our people, I think that's what I get there. Sure. But do you expect your goal loan book to continue to have traction or this is one off you just talk about what how you see the gold loan for yourself? I think gold loans will have traction because as I said, there are branches still on the, you know, in terms of the capacity, they're not fully utilized. Our low cost per branch is still low, and therefore, our OpEx is high. So we can make sure that these branches go to the optimum level. Not only that, we'll also probably set up a few more branches. So I think we'll load tax and you'll continue to receive for Maybe next year also. Got it. Got it. Now coming to, you know, how you're funding yourself. I noticed that your assignment is now almost 31% of the sources of the fact, right? So clearly, you are funding yourself significantly through assignment and securitization, where you are preparing assignment. Can you just talk to the economics of our assignment versus the securitization? And would you continue to be much more preference assignment over securitization. Just give us some sense of the economics of the 2 modes of funding. Yes. Soumit, you know, that you had just explained it to you in terms of what I said. So overall, you see now, assignment is taken over and now are the commercial borrowing on commercial paper is virtually nil going forward as assignment will be in this range and probably slightly lower. The advantage of assignment is it is a 2 sale So you transfer the risk also and it goes off your balance sheet. So it's a more capital efficient way of running the business. Having said that, at this level is where we would want it to be and we would want more assets hereafter on book. And that's our strategy going forward with easy liquidity. I think we are set for a better Q4. So how much capital do you have to set aside when you're assigning versus securitization? No, assignment is through sale. So it doesn't don't have to put aside any capital. 2nd, you will have to either over collateralize or have some cash It's basically, again, registered in the commercial. So, typically, you'll have, second adjustment slightly lower rate. In assignment, the rate is slightly higher because the risk of loss is also getting transferred to buyer of the assets. So typically, the rate happens is that Cresil or some rating agency will make an estimate of the losses on the portfolio. And then we will do it if there's a history of the business as well as portfolio. And say they say that, okay, 0.6% is, the expected loss of this portfolio, who's a entire life cycle of the portfolio. So if they are, you know, uh-uh, second is happening at X Price, then it can happen at X Plus something alternatively. Secondization will happen at the same rate, but then they will ask you for a cash collateral. So maybe typically say 5% of cash collateral will keep with them. On which what happens is that there can be bank fixed upon this. So you have a negative carrier on that, and even if your book is running down, if your book is run down to almost 0 level, the cash corridor remains stuck with the bank. So that's how security can happen. And therefore, from our point of view, assignment is a clean to sale where the risk is assessed up front. You are not blocking any cash collateral and, basically, is going off the book completely. In case the secretary is in the amount of cash corridor will get knocked down from your capital. So now, Okay. Practically speaking, what will happen if the banks that are buying the assets and they're more comfortable with you, they have done business with you for a longer term. They'll take assignment with EGM for them to take assignment and the complete load on their books. If you are a new player, they are not done business issues, and they might insist on securitization. Sometimes also when you're doing business with foreign banks, they may say, no, we don't want an assignment there are PTCs, which is part of, which is securitization then. So these are our negotiated sanctions. But more and more, I think I've given a choice of preferred assignment, given longer term, I mean, it's not really a lot of long term decisions if you see our liquidity at 3300 cash and bank in hand and almost similar amount of uncommitted line, but we are fairly comfortable. So we really don't need to We really need to weigh every transaction based on cost of funds, cost of capital and our strategic requirements. So assignment will now become stabilized at this level. They will go they won't have increase in the percentage of our total loan assets. Got it. Got it. And so, the cost of funds for you from a timer versus a categorization is similar, the capital in the short term, in the immediate listing, but So, supposing, you have been a mortgage asset assignment. You do a second question at 8%, but what you've done is 5% of cash volatility given on which you have a negative So, 8% are pulling you to 38.7 percent complete assignment. Now, what will happen? Your yield every year will be less than 70 basis points. But I'll give it to the carrier of the role. You know, you would make that up because, you know, your camera is not getting blocked. The losses are not coming to you and things like that. Got it. Got it. Fantastic. And so the assignment income, I think we talked about the assignment income was almost like 2%, right, of the name. No, not at the midpoint. Not at the midpoint. So, the 8.2%, I think 2% was a time limit. Wasn't it? Yeah. So I'll say the 8 point sorry, the 8.2 of the total of the interest income. So when you say 2%, if you ask, 8.2% is based on total loan assets, right? Yeah. 2% of the total loan asset is our assignment income. What we will do is the immediacy after this call will upload our numbers giving you breakouts. So I think that will make sense clear. Got it. Got it. And so I think this is pretty good because it is keeping on the leverage low and it seems like it is a very good way of funding. And is it fair to assume that most of the time that is happening from the home loan book because that is where it is a lot easier to do the assignment? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Actually, a lot of assignments happened from Google. You know, what happens, Google? It's completely collateralized assets. So for banks, on their balance sheet, gold rose has 0% estimated because you have a full policy. Right. Right. Right. Okay. Got it. And, you know, also, but I think it's not that it's only open. It's all three asset classes that we assigned, even microfinancing matters. So I will, just add to the, reply. What has also happened that since the assignment and securitization have, become very prominent on our funding side in the last 15 months. Now the banks also have a firsthand asset quality experience on the assets on their book. So we know that this asset is Nil, for example, gold gives them near 0 or virtually 0 losses or Homeland, they know the portfolio is good. So today when they are willing to lend money and there's overall liquidity in the system, given the fact that they've experienced our assets, that's how we've been able to have conversations and raise money in Q3 and going forward Q4 also, I think most of the conversation is that, if you want 200 goal assignment, you also give us about similar amount of Telkonet to create more assets to sell down further. So all that has been helpful in raising liability. Right, right. So I absolutely feel that given the granularity of the book that IIFL has and your ability to assign, I think that makes you one of the few players who can easily raise funding when you read it, compared to the liquidity challenges many other applications. So that's actually pretty helpful. Now coming to your provisions cost, I think the previous participant also asked this, and I also want to ask this. It is that every day in your P and L, there is a negative provision that you have been taking in the last few quarters. So if you look from Q4 twenty nineteen onwards, every quarter, you have an impairment financial instrument, which is a negative number, which basically means that you are actually reversing your position. Is that correct? And can you explain why that is Yes, yeah. This is Cabo. I'll just explain that. And there's also in response to the earlier question from Anita of HSBC. So there are 2 line items in the expenses. 1 is the net loss on derecognition of financial instruments under amortized cost category. That amount is 49.38 crores in the latest quarter. Now that comprises of 2 items. 1, there is a write off of 70.6 crores. And then there is the interest trip income of 21.2 crores. So the net amount is 49.38. That is the net loss on decommission of financial statements. And the second is impairment on financial instrument, which is a negative number, which you're seeing. That is minus 35 in the latest quarter. That is actually release of ECL. So the way it is accounted is that when you write off, you release the ECL. So there are 2 separate items. The ACL released that is a trade item and the write off happens, which is a debit item to the P and L. So this 35.8 core is the ACL release. So, and so is it because your net loss due to categorization is always higher and I'm not seeing the breakdown, is it always that The write off is equal to the negative on the impairment of financial instruments. So you're just balancing the 2 in the last There are certain assets on which we have made 100% provision in which case it will equal to the write off and there will be certain assets that have made a 70% So the write off will be slightly more than the ECL release. Got it. Got it. Okay. In on the MFI. Sorry, I'm taking too much time. If you wanted to come back and let you, I'm happy to do that. We can take, okay, one question we can take. Okay. So in the MFI loans, you have this 100% credit linked insurance coverage. Can you explain what that is and how that works? So, essentially, that is the, cover for the loan amount given So every individual is covered to the extent of loan. And in the unfortunate event that the customer was to have a customer to pass away, the loan is, waived and insurance company covers that loan. That's what. Okay. So this is only in the case of somebody passing away. So it's sort of life insurance. Sorry. Okay. I have a few more questions. I'll come back. Thank you. The next question is from the line of Salveen Jain from 2.2 capital. Please go ahead. Yeah. Yeah. Yeah. I have a question on your own business. So one is, you know, you conduct all your the entire own business through your subsidy. Right? Yes. So in that, do you also do developer financing in that subsidiary? Yes, there's a restricted finance in that facility also, but when you see these numbers, for the developer group, they are consolidated, therefore, NPSC as well as they are just put together. Okay. So the percentage that you are showing for your development construction finance that includes loan given from the subsidiary as well. That's right. Because out of that, you know, that 4000 100.80 crores from HFC and the roughly 3600 from NPSC. Okay. And second, my second question was that your yield on the home loan segment is continuously increasing from 9.3% in FY18. It has gone up to 11%. In a declining interest rate regime. So are we onboarding separate customer because this is also coinciding with the uptake in your NPA and, you know, how exactly can we manage to continue to lend to salary people at these kind of years, and obviously because our cost of funding is increasing. So how do you see it all of these dynamics playing out? So, no, I won't say supply, but even the market in the liquidity squeeze after every period increase the rate. This is the boarding. It's not the portfolio here. But already we are seeing that from this month onwards, the interest rates are coming down. And, when there was a, in last few quarters, our focus was more shifted on a very small town affordable and that PMI scheme in which a government subsidy that are interested. So if this is a biggest sub segment, it does not change much, but the relative contribution of the sub segment, which is the affordable can start from a little bit. But even there, we are seeing that interest is, as I said, is earlier in this call, that we have seen that NSE has reduced interest rates and we are passing that on to our customer. So when our cost of funds had gone up, we obviously passed on to the, customer and of, you know, in focus on certain segments that we are committed to in. But as we speak, I think things are getting normal and back to where they were. But when you have 57% of the loan book coming going to sell the segment and these people, you know, better off taking loans from banks who will also, you know, rely on the presentation to give them loans at much lower rates. So why exactly are they coming to you? This is not what we're chatting to everybody. And at the same time, most of these people seem, you know, today if you really look at it in all the larger, many larger players, you know, in the affordable home loan segment, they have, I mean, I don't want to take news or everybody knows every 2 large players. They stop disclosing new roles of their own business. And therefore, the competitive intensity in these places has gone down. These are the segments or the geography areas which are really not reached to by a blood player, or where, you know, the, your relationship with the developer and nimbleness, all those things better. And this was again the last two quarters where we have seen that the boating is at WADA in line with the market. Right. So, yeah, most of these homes are, like, stand alone units. Right? They're not, like, flats of, big buildings or something. No. Mostly there are flights and apartments in smaller towns. Okay. These are both ground. There's around 16,000,000 So the value of the house will be around 20 to 25 lakh. So there you can't expect any big, building or a bundle for that price. And what is the risk weight for these loans that you carry on your, you know, do you carry on, like, what, 50% No. The risk rate will be at, but, I would say it can be up to 75%. 100% also depending on what kind of loan is it? Yes, so it varies, but it's typically, you know, the smart ticket loan can be 75%. So, current status, what is the weighted average rate of Finance book. Do you have an idea about that? No. I don't have this number, but we'll get back to you. So, see, we just wrote it down and, give this number. Okay, thank you. That's it from. Thank you. The next question is from the line of Chandra Cohen from Ashmor Please go ahead. Hi sir. In the opening comments, you mentioned that substantial developer portfolio can be moved to is it moving loan portfolio to AF or is it taking incremental lending to the same developers from AFM? Why I am asking this question? Because if you are moving loan portfolio to AIF, we need to do payroll your adjustments again. Okay. So if you look at, you know, the modules we are provided for, we are not getting loan portfolio and price more than fair value. Fair value or maybe even less than fair value is the way it's carried on our books, narrow provisions. Having said that, incremental loss, you know, for last 2, 3 years, so there are the new incremental loans we have moved to our AIF almost 2 or 3 years back. And, you know, by now, we have got almost 6 or 7 years of fund. The latest fund in the housing fund where, we had Fairfax and DG also has, sort of, core investment sponsor. You know, that is partly invested. It's not yet fully invested, but, so the new roles you're doing there, now what we're talking about is a structure that we have done with another large developer also, where, we try and move these hires, we pull together on these assets. Which are high risk high risk and high yield. And basically, there are HNI investors and the issues and investors who are looking at, slightly higher risk. And for everything in the first structure, you can have a senior and a junior unit, series series a and series B, where the cash flow timing can vary. And therefore, you know, the different risk appetite can be met there. So this is still, you know, I'm saying they're considering it, but still nothing concrete at this stage. Hopefully, we'll work that diligence and everything is over. We'll come back. We'll we'll work on this. Okay. Got it. Thank you. Thank you. The next question is from the line of Shiv Kumar from Unifi Capital. Please go ahead. Thank you for the opportunity. So, we see that in the developer finance book, the GMP has come down sequentially from 4.8% to 3.8%. So what led to this improvement? And, can we expect the same kind of a trajectory going forward in terms of asset quality improvement? Okay. I'll just pass in Balaji who heads up real estate. One second. Okay. Yeah, So, hi, Shif Kumar. So as you, recall, I think when, last time around also when we had this conversation, So there are certain periods of lumpy exposure. So sometimes what happens is that some of these transactions, you know, tend to sometimes go over the quarter some of them, then get pulled back. So this is one test instead. So there is sort of, uh-uh, I mean, otherwise, the book is, doing fine. Sometimes we do have these operations, operations of 1 or 2 transactions going up and down. So that's about it. Okay. So, can we expect this 3.8% to also trend down going forward in the next quarters? Do you have any visibility of any improvement in this quality that way? Yes, I think in the next 2 to 3 quarters, you will see improvement. So I think it should be. Right. So in Q2, you had made a mention that the dollar for finance itself would be run down to the extent of 40% over the next 6 to 12 months. Do you still stand by that commitment? It's super, I think it will take, I think it's a little lower 12 months. So I think whatever we said last time around those is that about a year or so down the line? We will be run down. So that is happening. So I think we should see that. Right. And coming to the micro finance book, we see that there is a slight spike in the JMPAs from 1% to 1.3%. You explain what is the exposure to these troubled areas, Assam and some districts in Karnataka? And how is it looking like currently in terms of asset quality? So the increase, as you rightly observed is due to the agitation in Assam, assam only accounts for about 2.4 percent of our overall portfolio, but it is, the contribution, the increase in GNPL largely comes out of Assam. So we're not doing more business there, including the Mfin is also engaged with the financial and the local government and we hope to see things settle down there. There is some also, I think, post couple of natural calamities in, in Orisa, especially, we've seen now things settled down and come on course. So by and large, we are in least they will control of the situation. Okay. And what about the Karnataka exposure? So, Karnataka, again, the problem specifically is only in the Bangalore region. Again, that is not that's close to about 3.5% of our AUM. But that also, as we speak, I think there is a fair bit of engagement with the local, bureaucracy will make it to ensure that the whole things settles down. So we don't have large exposure in these areas, but we are in control of the situation. Okay. And for the business loan segment, we see that there's hardly any growth over there with the, with the vintage G and P at 4 plus So what is the strategy going forward? Is this a course correction kind of a thing wherein you want to not grow that particular segment at while you while you look at, look to amend the asset quality issues over there? So, this is a segment where I think as broadly as an industry, especially on the secured lab product, the risk return has gone So it does not make sense from our perspective to be doing large ticket lab fees, wherein the rates are very low. So if course corrected and brought down our average ticket size now to about 20 lakh. And, we do both a secured lap and unsecured business loan So that combined, I think, now, the there is a degrowth in the portfolio, but I think more or less it is down now. So it'll be it'll be steady for some time before it starts growing, but we've identified the segments, which we want been, which is the low ticket lap and the unsecured business load, those will be our growth drivers in this segment. And currently, what will be the proportion between the lab and unsecured business loans? So about 57% also, I say 65% is a secured lab and 35% is unsecured business. Okay. And what was the ticket size in each of them? The lab also incrementally is now down to about 23 24 lag and business loans is down to about 16, 17. Right. So one last question on the capital market segment, we went into the impression that incrementally that would that entire segment has moved to IFL Wealth and we would hardly see any loans being done here. So, is there a rethink in that strategy and we can actually see capital market loans as a as a as a emerging segment, at IFL Finance. No. So it still remains one of the synergistic segment, which is not the course code segment for us. Even when you talk of growth, overall still it is less than even 1.5% of AUM and that's I think it's likely to remain between 1% to 2%. These are largely to our retail IFL securities customers. That's what we'll do. But as I said, this will repeat in this region of up to 2.5% of the year. We'll move on to the next question. That is from the line of Aditi Agrawal from in Road Capital. Please go ahead. Hi. This is Kunal Pazkaria from Indore. The one request was there to the team at, as I've announced that, you know, on the subsequent slides where segments are shown home loans, for example, business loans, right now, we see the AUM number, you know, quarter by quarter, but it would be great if we could also see what the actual number on the balance sheet was because right now, in the deck, you're unable to see that by segment. That is because you have another table somewhere else, which just captures the segments and how they add a bit to AUM, but not how much they are on the balance sheet. If that would be there, that'd be really helpful. Yes, we'll read those numbers. And as I said earlier, and also just, the interest income break up. We'll put it up. Yes. Interest income break up. Okay. Okay. The other question was that the number that is there on slide 15 or 30th of the PDF, which is the 2% assignment gain that is put in the NIM chart on the top right. That number, that number has basically kept on going over the last 3 reporting periods, FY 2019 and 9 months FY 2020. What might that be due to the nature of the nature of the situation? Basically, this is the you know, the total assigned SSR increase, you know? The assigned, see, we made about 5% margin on the assignment. Which works up to 2% of total loan, when you look at this number, so actually, you know, when we look at near traditional way, that is what is his explanation is. But otherwise, you'll look at these numbers separately. So there's a 6.2% NIM on the balance sheet assets. And then there is about 5% margin on securitized assets. And obviously, this income will go in tandem with the the total quantum of securitize assigned assets that we have. Okay. So, no, so to be clear, is it and maybe please correct me if I'm wrong, but is it fair to look at it this way that for us to pad the two numbers together on one in one stack chart? See what happens that you define me in a particular way where you see that what is the interest income and interest to expenditure difference. And then to divide by, loan assets on your balance sheet. So you get this number 8.2. But if you ask me, analytically, this number doesn't make much sense because What is happening in this name? The interest income, we are getting net credit for assigned assets. So suppose you have assigned certain asset as 10% and my GIT is 15%. The 5% is getting into the gross income without any corresponding interest cost for that. So we separate these numbers, but when we separate these numbers, we now we are taking this 5% income on assignment as a percentage of loan assets and balance sheet. So a check diagram actually doesn't make sense. Only thing is it explains that if you calculate the NIM based on basic numbers, how would it look like? So where is the 2% extra coming from? But what I'm saying is that, as I said, today itself, we'll put in the breakup of these numbers, which are making very clear. Okay. Got it. Got it. This is interesting to our balance sheet assets. This is interest cost of balance sheet assets. So this is a net interest income. Now add that this is the income of securitized assets interest income. And then you get the total area. NIM has reported in the problem once again. We are sure to make adjustment for the CV business because, in the room area, the CV business is not there for the last year and this year, but last year's interest income and interest costs will have the CV business interest income and interest costs. So when you look at this number, number normalize, you'll be able to make sense of the issues. Okay. And, one very last question and this is a bit more on accounting that when this income is booked on assignments, any assignment transaction happens, but the result filed with the BSE, this strictly, does it show an interest income head? Yes. Is it fair on the assignment that comes with interest income as per India. Okay. And is there any amortization or is it taken as a one shot gain in that, not one shot gain, one shot transaction. Okay. Originally, whatever that asset was, 5 years, so the native gets, amortized on 5 years. Got it. Got it. Okay. Thank you. The next question is from the line of Nikkel from Sundaram Mutual Fund. Please go ahead. Yes, thanks for taking my questions. So in the press release, point number 3rd, you mentioned that during the quarter, subsidiary of, IFS subsidiary has transferred its microfinance portfolio to some Astrafinance. For a lump sum consideration of around 172 crores. So why was this done, sir? So you know what happened when we acquired this company, this company had a very small balance sheet and still, the market standing was not, you know, they were still, you know, getting established. But now, is known as I have a certificate and got a business is very established. So earlier, they were originating assets and then they are not fully capitalized. And the assets were on, MBS C guaranteed. So they were acting as agent or, so, you know, the or a core business model where microfinance assets were sitting on NPSC benefit because the MFI company did not have adequate capital. But now that capitalized and it's fully on goal, the microfinance efforts, we have transferred it back to the MFI. Okay. And, sir, second question is a data point, actually. Can you share your stage 2 assets number? What number? Stage 2 assets. Stay to us. Yeah. No, I think, I don't know. We have not disclosed this in a public domain, but we just checked it. So it's day 1, day 2, because these numbers keep changing, based on, you know, estimating every quarter. I mean, I mean, broad idea. I, you know, we are not actually given this number that we have, but if you give it, we'll give it as a part of our presenters, everybody had access to this. Okay. No problem. And third thing is, in our NCR, I believe, I think for our real estate book, we would be having around 25% of the exposure in NCR. I just wanted to check with you whether do we have any exposure in these accounts, radio, super tech, or net, audio, or mix? Which I think, one of our, other HFC have classified these as stressed accounts. So just wanted to check whether do we have any exposure in these finance? No, we don't, we can't disclose the names of the borrower, but wherever is the has any problem, then either we have provided for it or we have taken the redundancy, but, you know, I really can't, disclose the names of the borrowers in a granular what is the exposure actually? Because but as I say that if any of the certificates that they are provided for, So, out of our 46, 4700 of audiobook, we don't see any further assets slipping into NPA in the next 6, 7 months? So based on the current state, whatever we can estimate on we are going for this. So at least, you know, what we don't expect, you know, for the slippages in this. Okay. Okay. Fine, sir. That's it from my side. Thank you. The next question is from the line of Nishan Chihuati from Kodak Securities. Please go ahead. Hi. Yes, hi. Just two, three questions. One was on the home loan side, your book has been sort of almost flat for last 3, 4 quarters. So is it something where you just kind of slowed down disbursements because the rates or the offtake is low because the rates are higher or is it something that the repayments have gone up because of balance transfers? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] Actually, the board has pointed out. So we are basically trying it based on cost of funds. But yes, the uptick was primarily lower because of businesses were slower. Frankly because of the, rate being higher. 1 is 2, you know, many places, you are very cautious because, even if the builder is getting stuck and, you know, wherever at least, we are financing the upward project for finance where, then, you know, you can get that even if it is this home loan. It might get them differently. But having said that, as I said, that these is easing now. So the rate of interest also, you know, the MSC, there is a principal refinancing, organization. They will reduce the interest rate. And they also realized is that if they keep interest rates higher, then many housing can ask companies a lot to be competitive and disabled. So I then it happened, but we are seeing good positive traction from December. We have seen that in the month of December, significantly better than earlier sort of 8 months. And I think they'll continue in this quarter also. Sure. And how many cities do you operate from? So I think we operate, our gold order. All of the products from Sustain Cities but, hope not probably. It has not been all the cities, but it will be good for our cities. Maybe you had this quarter to do good cities. No, because if you really look at 200, 250 Cities, it's, I mean, obviously, fairly large footprint that you have. But, see, this footprint has recently expanded a significant part of business bill. So these are expanding. We are training people and they will start contributing meaningfully in 1 year's time. Your side of the book is not that large that if you're operating in like 2 hundred cities, you may not kind of struggle on growth or good quality developers across. I mean, you already last that you are doing. I think if you really look at it in the portable segment, we are next one is the group financing in the site. So a 50,000 crook book, when they will take a fair amount of 50 lakh rupees, the size is fairly Good. And as I said that, you know, from many of the cities as we are expanding our footprint and we'll become fully, we'll get to scale in a year's time. So that is what the tight growth as we expand our geographies footprint. This is what we're trying to say is that growth may not quality of projects or stress may not be so much of an issue given the fact that your size is small and you already have a white footprint. That's what I was trying to say. And we have been cautious in the last few months, but I think we are seeing that the environment is changing a little bit for, for, for now, no better. Sure. Just on MFA. And also one more thing, this is that, you know, the segment that we're operating in, there are some other how do you finance companies? And many of them have shut down. A couple of them at least and I have stopped disbursing. So there also is an advantage in terms of, you know, making sure that you keep your credit threshold high as it shows the business. Mhmm. So On the MFI side, when you say that your ticket size is 20,000, is it like ticket size per loan or is it average loan per borrower? Let's take a size per loan. But in every time, you don't have too many multiple loans, for whatever. Because these are most of our loans that joint the both just the it's basically group lending to the 5 even as a joint lending. There are MFS who have kind of, you know, multiple loans for war over for various needs. So I was just wondering whether we have not done that. So what happens is, you know, there are MFI regulations. So anyone, you know, can't have more than 2 or 3 loans, you know, from all the lenders, not only us alone. Mhmm. So, you know, if somebody has already got, you know, say, 2, 3 loans from other. And if so, otherwise, we can ask companies, then, you know, they won't qualify as low from us. Talking about multiple loans from our side. Sure. On the tax rate side, what really happened this quarter? So this part is a normal tax rate. Last quarter was slightly lower because the first quarter we have provided for tax high rate. No, I think the So just not as many coupons in which you have to give a tax rate. 22%. I mean, you're getting any rebate for in such a product because I think the corporate tax rate would be higher, right? No. So on some of the liquidity, if we're getting dividend, that might be tax free and kind of things. Okay. And just one final question, Praful, it was kind of clarifying this particular contamin write offs. And I think you mentioned that 70 crores of write offs and 20 crores of interest trip. So I was just trying to understand what that interest rate was. You said that 21 crore is the interest trip on the assigned asset. Okay. Okay. And that is also something which you will, but why will you write that off? No, no, that's not write off. It's just an offset. So there is a $70 write off And there is 21 crores of So the net amount is 49 crores, which has been debited. And this is the ongoing one, right? This is not on or this is on sale? No, no, so every quarter, we some gain because this quarter we did about 2300 crores assignments. So every quarter, whatever is a sort of new volume, we'll book it, interested on that. And the old also there will be some amortization, which will so the net amount this quarter was 21 crores. Got it. Got it. Sure. Great. You very much. Those are my questions and all the best. Question, that is from the line of Rajiv Agarwal from Duke Brachy Advisors. Please go ahead. Yes. Hi, thanks for giving me the opportunity here. So I just wanted to understand on the DCF portfolio. I think it was asked that your quality is improving. But there has been a lot of concern around the overall real estate, the sales. What are you seeing on your side? Are you seeing that the traction is picking up now? Or if you can just talk about the broader real estate market that you are seeing? No, you're saying that the real estate market is improving or not. That is what the question is? Yes, yes. How are you seeing the real estate market? You know, I think the project which are, you know, where, okay, there's a demand. And there's a latency, but it's not that the demand has become 0. But demand is for affordable houses because now the demand is more from end users, the investors and executives out of the market. Demand is at location is good and people think that project will get executed and they'll get their apartment or house. So actually, you know, again, Pune, Elrabas, Bengal, these markets are doing well. Montre, some of the group location, you know, they have in good traction, and not only, you know, the project funded by us, but otherwise also, the problems areas are obviously the very high priced pocket of settled Mumbai or certain areas of bulldog and maybe certain areas of Sonora is very large. So certain locations which are little, you know, all those available locations. So I think the problems are more concentrated there But if you look at Central Mumbai, there is a job, large amount of, system credit. And therefore, you know, people are concerned about the whole, you know, system. And, as I said, that the improvement in traction, what we are seeing is more profitable segment. So if you look at Bombay, 1 or 2,000,000,000 is affordable. If you look at Bangalore, it may be 50 lakhs. So if it were in Delhi, it may be 75 lakhs or 50 lakhs depending on which area you are in other cities maybe 30, 40 lakhs. So every city has a different market. Got it. And what percentage of our loans would it still be under moratorium? Monitoring, you are saying this is the dilemma role? Yep. So I think there are different stages. So I'm not too many years to be on the motor So I think for most of them, there's no interest in the principle about your emails. I think it's fairly spread out. So there are different stages. And then on the business loan side, I think we had in the previous quarters indicated that the GMP went up because it was a seasonal issue, right? I think in Q1, Q2, we talked about seasonality possibly causing the GMPA to go up from 2.2% to 3.8% and then 4%. Into Q3, we are still seeing it as 4%. So are we expecting this to go down or like what is the expectation around the business book? So typically what happens on this is that some of these cases will treated legal during the course of the year, it takes about 4 to 6 months to bring the customer to the situation where either we get to sell the property or if we make it online or the balance transfer is the loan. So we expect improvement this quarter also do understand that there is, given the slowness in the economy overall, there has been there have been headwinds in this sector. So that's also has meant that we kind of slowed down our growth here, and we've remodeled our business to, look at pricing the risk appropriately, sir, we will see an increase in the boarding rate, which is largely to account for to take care of the risk in this segment. And, so our strategy continues to be, that we price we choose the risk, price it appropriately and to follow-up with strong collection. So that's how we will Got it. So should we expect higher E and therefore, and also higher credit costs going forward in this particular business? No. I had no, no, that's not the idea. So we've increased the yield, but I think, the GNPA will remain at that this level where they are will probably come down in this quarter. It depends a lot on the solution getting the case order from the arbitrator, etcetera. Got it. Got it. And this was this is one segment which was primarily cash flow based and then you were using secured lab, as you mentioned, which is at now at 65% for more than 50 lakhs. So clearly, you have brought down the ticket size here. What I understand, right, where you were getting the collateral in terms of the property. And so do you expect your secured RAC portion to continue to grow from 65% to even higher number? Like are you looking at more than the cash flow as a basis for building the world? So, cash flow assessment is necessary for every credit approval because eventually, collateral is just a different So our policy is that anything above 50 Lakh must have a collateral. Though there are cases below 50 Lakh also where we do take collateral, So cash flow assessment is necessary collateral, as I said, above 50 lakhs, much below that is also, certainly, segment of business, which we do And, that's how and we priced it appropriately and we reduced the ticket size. So this is the way forward for this business. Okay. Alright. All right. And then last question is on the home loan. I think this question came up earlier as well, which is we have a golden yield of 11% cost of fund is 9.5%. But if you were to just look at our home segment and accounting for NHP finance and everything. What would you say is the cost of fund in this particular business? In home loan? Yeah. Cost of funds, around 9% or so. So, but incrementally it's coming down. So, as I said, again, you know, what happens when NSE refinances, there were different refinance rates for different So when you are doing a very hard ticket home loan, then they give you loan for refinancing debt at a lower rate. So, hope that we just segment it and you apply different cost of funds for different segments. Right. And so what would you be shooting in terms of a return on equity for a business like the Hong Finance? Is it similar to the rest of the business or this will be a lower return on capital deployment? [SPEAKER UNIDENTIFIED COMPANY REPRESENTATIVE:] So, I think give us our ability to securitize asset as well as cross sell income on it. If you look at our balance sheet for last year and maybe this year as well, it generates similar area in our redundant equity. We don't see, you know, I mean, our target would be to, as we said earlier, to take the original revenue to 20% range, which are around 17% today, that are best for the businesses. Okay. So 80% to 30% range of return on equity very competency. And if you're able to continue the securitization, in the assignment or a period of time, then it can be improved from there also. Got it. Got it. Okay. Great. Thanks a lot. Thank you. Next question is from the line of Shiv Kumar from Unifi Capital. Please go ahead. Yes, this is a follow-up opportunity. What is the cost of funds incremental cost of borrowing in Q3 and what is the blended cost of borrowing? Incremental cost of borrowing is total cost of borrowing. Can you promote the debt status? So my total cost of borrowing is 9.45 and my incremental cost of borrowing will be close to 9.25. Okay. So with such a higher cost of borrowing, do you still think that that you would be able to grow the home loan category at presales? I'm addressing is I took as a weighted average or aggregate cost of borrowing. In whole, as I said, we are getting refinancing at a lower rate, And, so therefore, we'll look at it from that perspective. And I think, the rate that has brought down the last quarter by of the refinance organization and we are very comfortable and confident that we can grow this business from next part onward, pretty well. Okay. Sir, in Q2, you're expecting a new refinance line from Manabad, has it come? But that's not the net income. Okay, sir. And one question with regards to developer finance. Have you seen any of your clients get support from the real estate fund which was launched by the government? Not yet. Are there any proposals where you're trying to access those accounts for some of your stressed accounts? So we have submitted, a few proposals to them, as to start with, to see, the process and the mechanism that they are directly been interacting with the team also. So we will know probably sometime in the course of this quarter as to the outcome of that. All right. Thank you. So we raised 150 crore in our MFI from Nava that came through this Q2, Q3. Great. Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments. Yeah. Thank you so much, everybody. And if you have any more queries or clarifications required, Please be in touch with our investor relations. Thank you. Have a good day. Thank you. Ladies and gentlemen, on behalf of IFL Finance Limited to complete this conference call. Thank you for joining us, and you may now disconnect