Q2 18/19

Nov 2, 2018

Ladies and gentlemen, good day and welcome to IFL Holdings Limited Second Quarter Earnings Conference Call. To ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to the management Thank you. And over to you. Good afternoon, everyone. On behalf of team, I as well, I thank all of you for joining us on this call. And provide a group CFO accompanied by Merrill Jan, our group chairman, R Venkat Rahman, Managing Director, Sumit Bali, CEO of ISL Finance. And current brother, Managing Director of IS And Wealth Management. I will now pass the mic to our chairman to comment on all the of the group's strategy and plans. Thank you, Prabhu. Hi. Good morning. To all the participants and welcome. So I just shared my thoughts about the macro environment that our company and our group works in and then broadly on a strategy for our business businesses, and then I'll hand it back to, for a line by line, discussion on financials. And, also, for question and answer, I also have my colleagues, Sumeet Bali, as well as Karim Bhagat, who had our MPFC and, various businesses, respectively, and also went who's learning director, along with CFO. So the economy and market, suddenly, you know, if you were having this call about a week back, the 6 would have been really despondent, but now they're looking much better and much brighter. And one of the key reason is the crude oil prices have fallen from the recent peak of $85 to $72. And my last 33 years of experience with this are Indian economy and market is that cruise actually matters not more then, you know, even the financial RPI government for that matter. And whenever 2 prices have gone down our current account deficit, our fiscal account deficit, liquidity and everything looks better. Ruby also still does, and that gives more confidence to our foreign investors. But along with this, we are also seeing a few positive developments in global market we are seeing that the US bond here, vision of people are only are panicking that will go up to a 2 or 4% but is stabilizing at 3.15 or thereabouts. So the Hong Kong market today had one of the strongest selling. So most of the markets have started recovering. They're looking better. Back home also liquidity is looking better. I mean, it's not a that it was a few weeks ago. A few more positive developments if you see them. IDC is working as far as on big name, but there are many other resolutions are happening. I mean, it's a a democracy called India where things are moving at their own pace, but still they are moving in, right direction. And, we are seeing positive development. Corporate earnings has been a mixed bag, but still, there are quite a few sectors and companies have shown revival And whenever at most of the companies that are domestically focused are doing better, and some of the leading FMCG companies have reported very good wages. Coming to our various businesses, you know, the first MBS which has been the sector itself has been has been in the area of storm. And people started talking about, whether this sector will continue or is pass breweries over the pea there's already pea the kind of hail and mismatches they have, maybe they have exposure to real estate sector. Now, you know, they won't do the growth. They won't get any funding. But I just wanted to share some data before we get into a little more discussion on this and our company. Last year, NBS is accounted for 37% of incremental credit. So today, the situation is that private sector banks, public sector banks, and NBCs almost account for one third each. And, you know, a channel or a a vehicle or engine, which is serving 1 third the credit requirement of the country. You just can't take it away. I'm under we already want the group to be a job partners in a. Not only that. If you really look at it, the debt to equity ratio of NDC sector is around 5.7or5.8. These are the rating agencies, agreed estimate, which, you know, if you compare this bank, bank, you'll balance the requirements for capital is 7% and they require another 2.5% to manage the volatility. In case of NDC, the tier 1 capital requirement is 10% and tier 2 together capital decrease in permanent 15%. So why banks do have advantage and liquidity buffer of SLFCR CRF. But still NBS as a sector, but but okay. So important thing to note is that in the last 20 years, there are quite a few banks that were required to be merged. Otherwise, on their own, they had trouble issues. That was from 1998 till now. So the capital requirements really work very well. Now we need to ask question arises that it bank funds, whichever one this is used. But from a systemic point of view, it's very good because we have a 2 layers of capital buffer. So, you know, when banks are lending, they do their diligence, they have their capital adequacy, And then it comes to NBS and they have the capability as such. Besides the advantage of last mile, lower cost, and the specialized skills and credit collection and underwriting in certain verticals and, particularly the small retail loans. So NPSC don't typically fund large projects or big industrial the houses. And therefore, the relative share in SME, the small and medium enterprises, as well as the condensing room is much higher. And I think that is roughly the group and need for the economy. So I think NBS in a very important role to play. And, whatever, you know, in a panic situation, people can talk about, you know, in the panic situation, we can see stock market conditions of the Jared very widely. But being part of the industry, being part of the running and NBLC, I I feel very comfortable, that, you know, he's in about with us, several people against you that the sector is very wealthy. Then about the liquidity till now, there is a plan by higher the sector, you know, in terms of all kind of rumors, you know, the scam and also, whatever happened to mutual fund is still that's good. I think the industry has come out very well. So the thing, whether somebody can improve, I mean, whether one can improve the liquidity profile, of course, yes. Whether they can do some NDC, they're highly diverse or have more experience. We are still, like, that is possible. But as far as we are concerned, we see a tremendous potential for growth in, this business. And, also, if you notice, and you have seen in our presentation in the last quarter alone, We added 208 branches, for our MBFC business, which is which comprises, of course, a large number of branches of the microfinance, 135 branches, but we also had advances for our other loan product. So we continue to invest in technology, people and infrastructure as required. And in terms of our growth, our focus, we've been very consistent if you see last, several quarters we've been talking about it. There's a lot of focus on, retail lending and our focus is on SME Small ticket lending. Our ticket size is just about a final rupees. Or small ticket home loans. Again, ticket size is 20 22 Agapies or microfinanced loan and gold loans. So these are the businesses that we are focused on by And by implication of a reduction, you can see that, construction finance real estate lab or new loan against the action. These are businesses which are growing at a slower pace or be good. In terms of interest margins, you know, of course, there is a a bit of a fall last quarter, and one can see that, as the liquidity profile of liability changes, there can be somewhat pressure on this. But I will we are geared up to make sure that we have the right product mix, and we save, on our operating cost. And we make up on this. But last quarter, we also impacted because quarter before last, we had a second edition, gain coming in with The interest comes in interest and maybe provide you with more about it. But going forward, I think there may be some impact on, margins on but we can easily be, made up by or period of time that product mix as well as having a tighter control on cost. In terms of liquidity, we repaid about more than almost more than 4000 crore of cities as a group. Some new cities that we have contacted are for 3 months or longer period. So they basically cross over, you know, December. Besides this CP salary code eventually, which, you know, fell due for a payment. They were also paid the and all the debenture CPs and bonds obviously have been paid in time. And So that way, we paid about 500 rupees of debt of short term and long term, in in this month alone, in the month of October. In terms of liquidity, I mean, we don't want to get into granular details, but I can only assure that we are very we are monitoring on a day to day basis, the core management team or my senior colleagues, And we are completing control, and comfortably place a very good margin of safety for all our businesses. Coming to our very business. Currently also there. He's probably the cash and answer and talk more about it. The velocity of the business, the flow of funds, the new money is 5000 crore, which has been similar number for our service partners. And therefore, the fundamental robustness and stability on the business. Very interesting number to note in our presentation if you've seen that over a asset base of 1 lakh 40,000 crores. We actually segregate, the changes in the EUM by showing new money as well as the market losses of profit separately. And this we've been doing for last several quarters. The market losses or the base is just about 1005 crores, which is, in last quarter, which is just about 1% on an aggregate basis. That's true that our asset allocation, with our client has been fairly prudent and there has not been excessive exposure to mid cap or equity, which probably would have resulted in larger losses. And the floor money also continues. You know, I think these are the things that we are more concerned about that we keep getting, new money and we make sure that, the business remains stable, and robust from a longer term fundamental perspective. Security business, although, I mean, people expect this business to be more volatile, but if you look at the earnings, then they exhibit similar trend in other businesses. In this business, of course, Investment Banking last quarter, there may be more impact, in this quarter because our industry banking revenues mostly, from ECM, which depends a lot on IPOs and QIP. I think at this point in time, it looks like that the, many issues might have been deferred in this quarter, maybe a tougher. But more importantly, the other two segments of sectors business that retail, equities and financial product distribution and institutional business, they're becoming less volatile. They're becoming less volatile because the dependence on foreign capital or FPI or FIS has reduced and the local mutual fund for our social equities as well as the mutual fund distribution because many retail investors we have been dealing them towards mutual funds rather than direct equity. And I think this plan will continue, which will make this business from a longer term perspective. Now coming to a corporate reorganization on our demerger on track. Most of the important accruals like RBA said, we have already been received. NCLC, which is equivalent of high court, have convened several meetings on December. Well, shareholders under the supervision of NCLC approved, I think most of the things are procedural, which basically, you know, submit the approved scheme to NCLC and then obviously, in the process of getting it listed, through exchanges. So we expect, this to be done in the last part of the financial year, which is as for the schedule that we have discussed earlier. So with this, I had all the to propose, we will take you through, financial numbers, and then we are all there for the question, ma'am. Thank you. Thanks, Nava. We are very pleased to report that 29% YY growth in our group net profit to be 301 crores for second quarter FY19. Net profit after minority interest has grown by 30% y y to rupees 230 crores. ROE was 16.4% and ROA was 2%. In our NDSC business, the loan AUM has grown 40% wire and 8% q on q to rupees 36,373 crore. Profit after tax computed as per India grew by 70% wire wire. To this 161 crop. Our Tier 1 car stands at 15.5% and total car at 18.7%. Friday drivers of our AUM growth are small ticket home loans, which grew by 59% YY, small ticket MSME loans, which grew by 113% Y y and microfinance loans, which grew by 2 59% y y. The later two products growing off a small base besides these 3 fast growing products, we also recorded good growth in gold and CV loans. On the other hand, growth in lapse and capital market loans were moderate as planned. 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 of Suraj loans with average ticket size of rupees 13 lakhs. Suraj loans accounted for 22% of our home loan disbursements in Second Quarter and 14% of closing loan AUM. Our solar Suraj product is specially designed to support the informal income segment and fulfilling their dream of owning a house I as well, Housing Finance has been a significant player in the program. Within construction and real estate finance, the mix continues to change towards construction finance for small ticket housing projects, as on 30th September 2018, we had over 7300 approved housing projects up nearly one and a half old from 5000 approved projects a year back. All our construction finance loans and 50 percent of home loans were made through these approved projects. Retail loans, including consumer loans, and small business finance cost you about 85 percent of our loan book. Another strong characteristic of our loan book is the large proportion of loans that are compliant with RBA. Priorities at the lending norms. About 50% of our home loan, 56% of laps, 86% of CV, 42% of SME, and nearly all of our MFI loans are PSL compliant. We'd aggregate nearly 46% of our loans are PSL compliant. The large share of retail and TSL compliant loans are of significant value in the current environment where we can sell down these loans to raise long term resources. The share of loans sold down currently stands at 15% of our a year, and our endeavor is to take this up to over 20% in the next few quarters. We have been selling down both PSL and non PSL loans in 6 product categories, including home loans, lab, SME, CV, gold, and microfinance. In this regard, we have an ongoing relationship with several government, private, and foreign banks. Our average cost of borrowing rose by 10 basis points Q on Q and 20 basis point wire wire to 8.7 percent. Incrementally, our borrowing costs have risen by 75 to 100 basis points due to the liquidity crunch. In a rising interest scenario, we are in a position to come and strictly reprice our loans. 46% of our loans are on a floating rate basis. In the last 4 months, we have raised our home loan rate by 90 to 100 basis points, laps, concession finance, CV gold and SME loans by 150 basis points and capital market loans by 200 basis points. Our NIM was at 6.8%. Contraction of about 50 basis point q on q and about 75 basis point y y, primarily due to upfront gain of rupees booked on direct assignment portfolio in the previous quarter. In this quarter, we did asset sales of INR 14.92 crores versus 2400 crore in the previous quarter. So the volumes were slightly lower. The upfront gain booked in the current quarter was completely offset by the reversal of gains in the previous quarter. Medium and high yielding assets currently constitute 52% of our EM. This includes micro finance MSMV loans, gold, CBN, concession finance. The other half of our annual consists of relatively low yielding assets, including home loan, lap, and capital market loans. 19% of our AUM comprises of rooms that are secured and about 10% of loans are unsecured. We believe our AUM mix is well balanced. With some scope of the share of high yielding and answer your assets to go up. We continue to add branches in our HFC, gold, and microfinance businesses, Total number of NVFC branches have grown by 52% wire wire to 1755. Consolidated GMPA and an NPA recognized as for RBIS Prudential Lumps and provision as for the expected rate loss or ECL method prescribed in India stood at 2.2% and 1% of loans, respectively. As a result of implementation of the expected rate lock provisioning under India's, provision coverage on stage 3 assets, stood at 53 percent and on standard assets at 191 basis points. Return on assets for the MDSC was 1.9% and return on equity was 15.7%. Some day update on the liquidity position, we have a positive ALM mismatch across all our buckets On the asset side, our loan book has a relatively short maturity pattern with 28% of loans having maturity of less than 6 months and 40% of loans having maturity of less than 12 months. Our funding mix is well diversified, including 18% from NCDs, 5% from subordinated debt, 35% from bank loan and LSB refinance, 16% from off balance sheet points, and 24% from commercial paper. During the month of October, as label mentioned, we were able to contract new cities and repay old ones. In October, we have repaid and prepaid cities worth rupees 4000 125 crores. Also, we repaid NCDs worth rupees 7.95 crores. We had liquid investments of rupees 2400 crores and undrawn credit lines of INR 1535 crores as on 31st October. On digitization, We have continued our focus on digitization and encompassing every aspect of customer loan journey of the total 8.1 8.18 Lakh loans disbursed in 2nd quarter. 99% were onboarded digitally. We are focused on back end process digitization through multiple innovations as well as partnerships helping us achieve process efficiencies. With 162,000 mobile app downloads in second quarter, and 4.4 lakh cumulative downloads. IFL loan mobile app is growing steadily, fulfilling, account management, and servicing needs of our customers. Conssequent to the change in policy regarding usage of ADAR, we have moved to non ADAR based KYC processes across businesses. On analytics, we continue to drive the use of credit scores and automated decisioning across products and strengthen risk mitigation by developing and deploying behavioral scorecard for purpose of providing repeat funding of existing customers. We have retrospectively deployed advanced analytics in CD Business. We have tightened our trade approval thresholds in regions. We anticipate greater onboarding risk. There is continued focus on cross sell and win back, which are analytically driven goal of win back generating strong volumes for both gold business as well as group wide products. Analytics triggers are also being used by fraud fraud control unit or FCU to eliminate fraud applications in pre dispersal stage as well as for initiating proactive action in post disposal stage. Some commentary on the wealth management business, I call wealth back computed as per India was at rupees 100 crores. Our assets under advice management and distribution have grown 3% q on q and 23% y y. To reach 1,450,000,000,000 rupees. I also will raise equity capital of rupees 746 crores in June 2018 through a private placement to 6 institutional investors. Out of this amount, we we had a lot allotted shares were to be 6.52 crores and the same form part of network as on 30th June 2018. Alointment of the balance 94 crores worth of shares was completed in August 2018. We hired 10 bankers during the quarter, taking the total number of bankers to 358 to further drive the growth momentum. We now have presence in 24 locations and 9 geographies. IFS Health offers a broad range of production services to participate in the larger share of the client wallet. This includes financial product distribution, advisory, brokerage, asset management, trade solutions, and state planning. We don't let new money up to this 517 crores in the second quarter FY19 versus average quarterly run rate of around 6000 crores last year. EIF assets have grown 53 percent YY to be 1,300,676 crores as well as finance. Which offers loan against securities and margin funding to high net worth clientele, Blue Ridge loan book, 28% YY, and 10% q on q. To rupees 6.91 crore. Average lending rates for this book is around 10.5%. Some commentary on Capital Markets. I felt Capital Markets which largely comprises of retail broking, institutional broking, and Investment Banking Businesses. Grew its net profit by 20 percent YY. During the quarter, our average daily cash turnover was up 9% YY to rupees 13.34 crores versus 19 percent YY growth in the exchange cash turnover. Our average daily total turnover including ethanol was up to 39 percent YY through this 21,000 070 crores. Our NSE market share in the CAS segment was around 3.7% and in total, around 1.9%. We are continuously enhancing our offerings on digital and mobile platform for retail customers in our booking business, our mobile trading app, Apple market, has had over 2,100,000 downloads, presently about 44% of our retail booking customers straight through the mobile app. We completed 4 transactions in Investment Banking. With that, sir, now we'll open the floor for Q And A. Thank you very much sir. You. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question The first question is from the line of Biral Shah from Credit Suisse. Please go ahead. Hi, good afternoon. This is Sunil Tirumalai from thank you for the opportunity. So my I have three questions. Firstly, continuing on the discussion on on the liquidity situation. So we understand going ahead into November, also you have a fairly large R78000 crores out of maturities redemptions coming. Just wanted to understand how are you approaching it? I mean, is it through bank clients, what additional costs do we see over and above the 75 to 100 basis points that you mentioned in opening remarks? So we don't have 7500 metric in number, actually. Maybe if you're talking about coding CPs, it'll be different. But we got 4 hun probability with us, which 2500 crore of cash and the 15 100 crore of, you know, undrawn bank line. Besides that, as we have mentioned in our presentation, the coupon code in the second edition is going to, conclude the next, you know, maybe it's it's very advanced stage. So we should expect it in this week itself. So that meets all our requirement for the month of November. Okay. And overall, what what outlook would you give for your growth loan growth? So I think loan growth in the our focus segments will continue. Maybe last month was a bit of a, you know, everybody was, in a in a state of uncertainty, but I think it's stabilizing very soon. So mean, if you look at maybe next quarter or this quarter, next quarter, then our core business is, which is gold loan or a smart ticket, home loan or SME. That should, be back on normal except for one caveat, which is that if the interest is go up, then that can impact the demand itself. Which we're able to figure out at this point in time whether, interest will go up in a permanent way or, you know, we'll stabilize again back to the normal level. So you know, the the without that variable, I think if you keep up if you ignore that for a moment, then otherwise, the the real economy is doing well, and we don't see any write down in up. Okay. Thank you. On your G and P number, there seems to be a fairly sharp rise. I mean, just on absolute rupee scroll terms, it seems to be like an 18% to 20% jump on a quarter to quarter basis. What's happening there? Which are the segments, and, you know, you know, what was the outlook on this? Is it something that you'd be very worried about? So there are, 2 things. 1 is, real estate and CVs, you know, in commercial vehicles, what happens when we recognize the GMT on a 90 day basis. Many times, don't have a culture or in terms of availability also. And even one storm in this becomes, basically g n d. So there is one problem that we are dealing with and grappling with that, how do we get this under control? And other than that, the real estate sector has lumpy, loans. So these are the 2, so we also give GAP of each product category. So if you really notice, then, you know, other than these 2, most other businesses have remained stable, there's not much change. So in the real estate book, can you give some color? I mean, is it how many accounts are under a problem and which with geographies? So, we have basically so we are exposure to all of the country, but most of the accounts that we are talking about, we are adequate collateral, which is clean and, you know, in case we can declare our money. So our book that is fairly diversified. It's not very focused on, one geography. And, in in terms of borrower segment also is not really a concentrated exposure. But I think the sector has been under a bit of a stress and more from the cash flow and not from the point of view or value or the quality of collateral. So if you have time, we are confident that we'll recover all the money. Yeah. But so the real estate sector stress that you mentioned, is it something, you know, at an industry level would be worried about in terms of, liquidity for the builders, and then, you know, and probably on home home loans, people may be going slow, so maybe that's impacting some home sales. That's it. Right. Some color on that would be helpful. So I think the major issue will be in a very high price, luxury segment of, Bombay, followed by maybe, some other areas in. Is there a premium property? But I thought affordable is concerned, you know, a small ticket home loan or the builders they are building either in the suburbs of larger cities or on the smaller cities, you know, those are they're they're, I think, at least till now, things are stable and moving. And in terms of our industry, so our exposure is limited. You know, we don't have as as to the whole sector, you know, as out of our 36 times per year. The builder developer or sensitive segment is not even 10%. So, you know, I really can't talk about the industry, but obviously, what I'm hearing what you hear, there's a stress in the high priced high value segment because, of take or sales are slow and therefore cash flow is slow and that is causing concern. Thank you. And the last question is on the wealth management piece, to Curran. Having had a quarter or more to discuss with various AMCs on the CB changes on upfront commission and Tier 1, etcetera. And how is it now playing out? I mean, we see that your yields on Slide 25 is down sharply, you know, quarter on quarter. I mean, is this an effect of that? I mean, how do we see this going into the long term? Hello? Hello? Mister. Please unmute the line from your side. Yeah. Can can you hear me now? Yeah. Yeah. Yeah. So Excuse me. This is the operator, Mr. Margaret, we can't hear you. Hello? Yeah. From an AMC side, there's not too much changes from what we discussed last quarter. I think the broad, the, impact on the retro sessions and commissions has not really changed. From an yield perspective, I think, on the mutual fund side as we go forward, there will be a greater migration towards direct plans as compared to broker plans. The mutual fund part of the business is going to transition to an advisory business over the next 12 to 18 months. Where clients will essentially, as I've said earlier, put in a mix between direct plan and broker plan. And, slowly, the market will move towards advisory, flow. The small variations or the little bit changes in yield is a function a little bit more of asset class investments. So for example, in the last quarter, investments are more fixed income biased as compared to equity. That causes a little bit of variation in yields over a quarter on quarter basis. As opposed to any large change in mutual fund commissions. Mr. Shado, do you have any further questions? Sorry. Yeah. So the so the 65 basis points yield that we have now where do you see that's actually given what you said over the next 12 to 18 months, the trends? I think, retentions will be in the region. They continue to be in the region around about, 75 to 80 basis points, which will be a function of a combination of fee based income as well as fund based income. I think the fee based income on a consolidated basis will hover around the 60 basis points, 55 to 60 basis points, and the fund based income will add another 15 to 20 basis points going forward. Got it. Thank you very much, everyone. Thank you. The next question is from the line of Anita Arangan from HSBC. Please go ahead. So, hi. I had a question on slide 17 on slide 18. So in slide 17, you've mentioned that your cumulative flow is about for 600,004,584. And, in your loan maturity in the next slide, on the 0 to 600,729, So I just want to understand in the liquidity. So what is the difference between these two inflows here? So slide number 18 is based on historical past data, which is how the notes mature and, what does it look for? But in reality, it's a growing concern. So we'll also have a a flow of new disclosures as well as correction. Mhmm. So What is the amount? How what which amount we are trying to reconcile? The inflow amount in the 6 month bucket, like, cumulative info. This is 15,000 versus, like, 8700. No. This is not true. No. No. No. One second. This is true. Yeah. So just 15,000 in a 6 month cumulative packet. 8000. So this 8000 is the there's a repayment of loans, but the 15,000 is including the new loans and the Also, it includes open liquidity, which is around 4000. Okay. Okay. Understood. Understood. Okay. And, the second question is in this, slide 18, you mentioned, like, the loan book, I mean, the 0 to 6 month bucket is about 8700 crores. Does that include any prepayments here in the office of business? Based on the Target Bank. Okay. So what we've done is that you take the past visa of the foreclosures and prepayment and also the local payments. And then based on that, we work out percentages for each Mercury, and then also we keep a building as, the dream team. Okay. Okay. And Another thing I also want to understand is 4700 crores of CP which you have repaid. What's the entire repayment? Oh, there has been, like, some rollovers also, and you're able to able to get some rollovers in the market? There have been some rollovers also and some three payments also. Okay. Okay. Got it. Got it. So there are some so I'll have the 9th number. Whatever I've mentioned, we already pay, prepaid. Many of the mutual funds are reluctant to take the money back early. But the liquidity then there's a bit of negative carry. So that comprises both the the monthly payments as well as the 3 payments. Okay. And that is all over as well. Okay. And, also, one thing is when you talk about 5000, like, 1st to 5000 crores, liquidity in terms of, unused bank lines, and, security. Every everything put together. This is at a group level. Right? Or is this for, individual business? At the finance level. Is it certain? Yeah. So, yeah, we will be at the finance level. So I can. So I'm talking about 4,000 degree as of 31st October. Mhmm. And 5 1000 of your reference to September. Both the numbers are there in the presentation, so that is why. Of cash and 15 minutes on the online. This is what we have in Athens. Okay. Okay. Understood. Just one last question on the real estate side. Your average ticket size is about 11 crores here. So just want to understand, I mean, what would be the highest like, say on the peak side, what kind of lenders you would have lent to and, like, can you give some color on the geographies and kind of, apartments please, that the person are selling? So, let me go into the agreed file, but on the of 250 200 crores also. Okay. And, so, you know, there's no so this is diversified spread all over the country. And, so most of it is in the affordable segment where the apartment product will lower revenue. But any any kind of, stress or anything you're seeing in any of the larger ticket size developers? Yeah. So that is that a lot of two cases, you know, that we've seen in last quarter have gone into the NPA bucket. But as I said, that, you know, in all cases, we have adequate collateral, which end of the value of quality is good. You know, that in case we are able to recover, then we can, liquidate the collateral or maybe afford to sell the collateral So in terms of, they're actually covered, but there's a liquidity liquidity stress in the system, and real estate sector model will begin. Right. Right. Okay. Thank you. Thank you very much. Thank you. The next question is from the line of Shiva Kumar from Unifi Capital. Please go ahead. Sir, can you revisit the AUM growth target and the margin trajectory, from the, NDC point of view? So as of now, teachers are very fluid because, one doesn't really know how this will, you know, more important thing is, okay, there are 2 parameters. 1 is liquidity and the other is interest rate. So unless you are fixed or interest rate, it's very difficult to he wants the group number. Because that is something that will impact the home loan business more, which is very significant. I mean, it will be almost half of our business is coming from. So there is relatively interest sensitive because people will defer their home buying is interested both double digit and, they're very beneficial. So I think, it is too early to, you know, get on with that, but We'll wait and watch how, you know, the normal goes in terms of liquidity and how, the whole sector and industry ecommerce from this. Right. So, and how is the mutual fund industry behaving as in post to September 20th? Are are the lines with mutual funds open or they're still, figuring out as to how they should go forward? So maybe there are 2 types of major ones. So one of them are still figuring out and some of them have started doing business back, in a slightly higher yield. And, what we are seeing is that the yield is getting concentrated more than the larger mutual funds. So if you really look at a year, then some of the larger ones may be at a level higher than what they were prior to the crisis. And so the smaller funds are getting decimated completely. Right, right. Sir, and, coming to the wealth finance business, given the volatility that we are seeing in the market, how has been your risk management practices in that particular segment? Because if I if I were to take a case, we we read from the media that, the in in the case of Asha Burya intimate, you had to actually, take take ownership of the shares which were, actually, given to So have there been such cases? Have you seen an increase in such cases? And, have you taken some kind of a provision for, any losses in such cases? Given the volatility in the markets? I mean, so you have 2 different questions. So one is about as well finance and the other is about asapura. So let them be taken separately. Maybe I'll ask her to talk about our self-in-depth in a minute, but before that, I'll just talk about our program. So, again, the other area exposure to NDC, as well as to, Mahindra, in the main NDC. Now what happened to this company has been very unexpected and unusual, but the company had a business, which has been, Good Tech record and, has a brand which is which I'm referring to in, and there's none of the brand. And there are people who are rebooting on the company also. So we have not taken over the, stairs, but, you know, what we did is that we, so there's a pledge created on that. And it's because the last amount of the pledge is not reported. And what we are seeing is the pledge, that we have on those sale. And because the liquid normally, we take a much larger color. So it appears to be a very significant part of the company. But, you know, I think the the family and even the key people in the company are working on a a transition of ownership and along with that management also. So I I preferably feel that, you know, if you got any losses there, so it's just a question of the family is a company wide and passed out to which has failed, but as far as we are concerned, we're fairly well covered. You are talking about 30 to 33 percent of company's equity for cover. And I put in the whole 40 gross, from, both people together. So that is one part of it. The second part of question which you asked earlier is that how they are management and I can recognize, and I'll let him discuss a lot of it. Yeah. I'll take that number. Yeah. On the website, our loan book is fairly conservative. We work on a 50% margin. And typically, most of the book is funded back to our wealth clients against their portfolios. In India, like we typically see, clients don't typically borrow to invest. They borrow against the investment portfolios for temporary liquidity needs. We've been doing this business under the A. J. So wealth finance for the last two and a half, three years. And before that, we were kind of had a compartment within Apple Finance itself. Over the last 10 years, at least we've not had a situation even once, since 2008, where you had to, incur a single rupee of loss as of now, even in the current stress over the last 30 to 45 days, we've not really encountered a situation where, we need to or we are even on a marginal case of not being able to recover money. So there's really no need for the looking at any kind of provisions on our loan against shares book on the, as a wealth finance book. Right. Kind of staying put with the, well business what would be the mutual fund, the area, I mean, the overall area, and, what is your ballpark, effect on, the yield that we'll get to see once the city, rules on, commission or, pre commission are implemented. So our ballpark AUM of mutual funds would be in the region of around about 50 or 1000 crores, which is kind of broken up into 2 segments. 1 is mutual funds, which will go under the broker plan, and second mutual funds, which will go under the direct plan where we'll function as what is called an RIA, which is a registered investment adviser. Under the broker plan, it'll be in the region of 28 to 30,000 crores. RIA would be another 2022,000 crores. Typically, on the RIA, we do not get any commissions as we speak now. We work on an advisory fee basis from the client. On the 28,000 crores are, retrocession on a trail basis because we've discontinued up front for more than a year on mutual fund. Is in the region of round about a 135 to 140 crores a year, which is around about 35 crores a quarter, which makes up round about 14 to 15% of our, overall net revenues. This may come down by around about 5.5 to 6%. So effectively, 14% of our revenue will be down there on about 5%. So there'll be an impact of around what point 8 percent of our revenues because of the, semi change in TR commission laws. Thanks, Karan. And, getting back to the holding company, sir, we have been reading the media about this commodity license issue, which is being tackled by Sabi. And also, that fit and proper clauses were under consideration would you like to comment as to how severe is the issue there? And it seems there was a meeting, between CB and the brokers about 2 weeks back. So what's the consensus there? I think, uh-uh, okay. This is my first review, but, nobody knows how the agreement verdict will come. So I don't see, a very serious or significant cost to worry there. Now this is a case which is almost now five, six year old. This is not too covered. We are not done any proprietary trading. We never had any funding exposure. But this notice was given to 5 job brokers. And now I think that we issued notices to 281 brokers. So it's a systemic issue because we will be light on NSE and then, there should be brokers, there is a more or less similar thing. Of course, any stories are there and they were hearing, but it was a way I think this is getting reported in media And obviously, I can't really know exactly who's behind that, but it's a very, somebody's trying to put it in a very exaggerated manner or a very once that manner reduce the wrong picture to the people who are reading. But the fact of the matter is that there was university investigation based on the study picked it up, So being a regular child, they have issued photos notices, and they want to investigate the matter. So they basically called the top 5 brokers. They've been hearing I think 1 or 2 rounds preparing all the hearings are over. Now, the next process is scheduled to ask for written submission occurring, which are called additional written services beyond what you have given to a a soccer notice. And based on that, we will pronounce the final verdict. If brokers are not happy, they can go to accept or they can go to a higher quote also. But interesting thing is that, now the analytics has started almost about senior brokers. So, you know, whatever will happen, I have to happen to all of them and not to just wanted to book us. Thanks. That was useful. Thank you, sir. That's it from my side. Incidentally, one more thing I'll tell you, this one, there's no commodities company, subsidiary company, which is being investigated. The county business is shifted to the parent, the step of parent company, it's a securities company under the Unified license. The next question is from the line is from Kodak Securities. Please go ahead. Hi. Just going back to, slide 17 you know, I was just wondering how one should be reading this. So let's look at the 6 month bucket. When you say cumulative outflow 12,339 crores. This means what, that these are the redemptions of your borrowings or these are the redemptions of your borrowing plus the disbursements that you need to make? And the community sales. Okay. Okay. So whatever be the disbursements that you would do in 6 months or would be over and above this? And the connections also. Of course. Yeah, sure. You know, on the NII part, you know, you did mention that there was some adjustment. I believe there was, you know, some assignment income booked in the second quarter of last year. And you did some So in 1st quarter of this year. 1st quarter of this year. Okay. And you did some assignment in the second quarter as well. But, there was effectively no assignment income booked because of some write backs. So I I didn't kind of quite follow that. Yeah. So this is actually what had happened is that, New India's accounting standards have, come into effect from this financial year. And we are also just trying to understand and get the assets, you know, stabilize in terms of how the accounting will take place. So what happened that, when the last three accounts were recastable based on the those things that provisions were created for every quarter separately. This year, 1st quarter, we had an assignment on which 40 group use of income was there upfront, which is booked. But, in hindsight, we realized that maybe this was a little aggressive booking of the income because, there's some prepayments that happen in the actual accrual may vary from quarter to quarter. And eventually, it may be a little less than in this order that there are some risks in this quarter. And, whatever new assignments we have done. So that's what Provo was mentioning that out of Forti Grove, we had a reversal this quarter of almost about 14 crores, which is more like message with the, you know, income on the new assignment. So the the so that's why you see quarter over quarter, you see a fall. In our India accounting profit for either canal. Sure. So I believe when you're doing the assignment income, you would, I guess, you know, normally be accounting for prepayments. Right? So what happens in assignment income is When you do assignment income without recourse, the risk is fully transferred to the buyer's asset, then you can take the full income upfront. But what you have to take care is, that you'll really estimate how the portfolio will behave in terms of a prepayment foreclosure. And, you know, that will become very critical in taking the income. Going forward. So I guess, the last quarter, you had not assumed the prepayments, and now we requested the portfolio to assume that you are happening on the difference. So then we are again just try to balance it properly. Sure. And just finally on the fund the mobilization side, you know, on the IFS And Wealth Business, you know, how should really be be thinking about it in terms of the, AUA growth going forward? So I think, as we've actually guided earlier, I think, around about 20 percent growth in Corpus year on year approximately, with a plus minus 5% relation is what we should be looking at. So effectively, this year, around 22, 20 5000 crores of net asset flow into the business is essentially the, guidance number, which effectively trans to round about 5000 to 6000 crores of Corpus on a quarter on quarter basis, stripped out for the mark to market impact on the portfolio. And mark to market will be there. Right? Yeah. Of course. And, incrementally, I mean, if you look at the next 6 months or possibly, you know, looking forward to the next year, which which asset classes which, kind of, you know, products you think will drive this this mobilization? Well, I think, from a from a portfolio allocation plus it's kind of a diversified portfolio with a broader mix between fixed income and equity. As we stand today, nearly, 54 to 55% the assets would be in, equity and equity constitute words. 45 odd percent would be broken up into fixed income. Within fixed income, most of it would be in AA plus to AAA kind of categories through mutual funds or direct holdings. And on the equity side, again, it'll be a combination of mutual funds, alternative investment funds, PMSS and a little bit of direct equity. So it's a fairly diversified portfolio. I don't see any, change in that. I think clients would continue to, spread their allocation between all these instruments. On an asset allocation basis, I think, if markets continue the way they've been for the last, 30 to 45 days, you might see around about a 5% shift from equity to debt, but, that's about it. So I expect it to be in the region of, the 45 to 60% in fixed income at 45 to 55 percent in equity going forward. From an instrument perspective, Not many radical changes. Obviously, on the high network side, alternates are, alternate as an alternative investment funds, have a bigger share of, new flows as compared to, equity funds. So that's the only kind of new trend we see now the last 12 to 18 months. But barring that, really, it's it's it's it's the same old instruments. And this one last thing, on the AIS side for the for or on the PMS side, do you really see a risk of, realizations going down given the fact that mutual fund TES have come down as well? Actually, to be fair, you know, alternative investment funds and PMS fees have been much more competitive than mutual funds, for the larger ticket sizes. So contrary to a typical perception, for clients who put in a 5 crore or a 10 crore check into alternate investment funds and PMS. Unlike a mutual fund, you have a tiered fee shares of a management fee structure. Soon as the client is putting in 5 crores or 10 crores, even today, before the reduction of TR of mutual funds, he was able to get a management fee share class. Which was nearly 50 to 70 basis points cheaper, than a regular share class in mutual funds, and possibly 25 basis points cheaper to what you could get in a direct plan, you know, mutual fund. So mutual fund, PMS is an ASR in that sense of already being fairly competitive. In case direct plan fees in mutual fund come down even more. Right now, on an average, they are 125 basis points, direct plans. More or less, large clients cutting in let's say, a 5 pro check and either a PMS or an EF would already be getting that fee structure or possibly even lower. In case direct plan fee structures come even lower on the mutual funds, then we may see some, 25 basis points reduction in fees and PMS or AS. But otherwise, I really don't see it. Because that changes happened practically over the last 2 years for all large clients. Sure. Got it. That's very helpful. Thank you very much. Thank you. In this conference The next question is from the line of Keisha from MK Global. Please go ahead. You mentioned that, you see that there's some stress in high price and premium segment, developer, in many case, due to lower uptake. So do you see that continuing for some time, or how do you think it's shaping up? Yeah. I think it'll continue for some time. So the best case scenario in my opinion is a time correction that the prices remain the static and, you know, the it becomes, it's, you know, value of interest and money becomes cheaper or negative corrections. When it's a high price, the segment will not talk about the area and a lot of construction that has happened there. So we can continue for some time. Okay. And do you see any prices going down due to this situation? I guess so. I think, you know, already coming down. So if you have money, you said to go with a check, they will the price is yours. So if you today, if you really want to buy a house, a premium apartment in Bournemouth Premium Media at the heart of the city, then as I said, you know, what we, you know, maybe 2 kilometers from our office in. Then you can, you know, if you have a check, then you ask your price and get a discount. Okay. Okay. Very well. Thank you very much, sir. All the best. The next question is from the line of Atul Bara from Motilal Oswal asset management. Please go ahead. So just one clarification on this aashapura incident, does this trigger an open offer for us in any form? Is there regulatory clarification on that? No. It doesn't. Because, you know, it's just a pledge. We're not going to be on that. No. The point is that if you were to acquire the shares and resell it to anybody who's interested in No. We're not acquiring the shares. Let me stay in the market. We will never acquire the shares. Got it. And secondly, sir, on Wealth Management, what is the mix of equity in the net new money this quarter And, in on the fixed income side that we would have raised the money, is it coming in, liquid instruments, which are, like, very low yield, or is it coming in in any other structure that we would have in fixed income? I'm sorry. I won't have a exact breakup of the equity in the net new money, but in the gross flows, 6 income is a a large portion this quarter. Fixed income will be nearly 70%. 70% would be the breakup of fixed income and the gross flows. Net new money, I can come back. My quick, number would be exactly the inverse of that. It would be around about 30% approximately, but I don't have that number handy with me. I can come back. But, approximately gross flows, 65 to 70% has found its way into fixed income and related instruments. 30 odd percent in equity on the gross flow side. Net flow break up of corporate, I don't have. I will come back. And there's one more thing on the same question. In terms of fixed income, is money coming on extremely low liquid kind of instruments, or is it any other other structure that you may have No. So it's been a combination. So most of the money in the last, 30 days specifically is coming to, fixed maturity plans. So fixed majority plans, obviously, have a lot of flavor, basically a three, three and a half year, SBL kind of FMPs. So, typically, low risk FMPs is, something which has gotten a lot of attraction. We also closed a large private equity fund, was essentially a a private equity fund of, a professional entrepreneur. So really where the fund owns a majority of the business. So that that fund we closed around 1000 odd crores. So a large part of that collection happened in the last quarter. That also in a sense is immune to market levels. And the front desk model is sitting in cash right now because, we enter the business pretty much at face value. Got it. Sure. Thanks. I wish you all the best. Yeah, thank you. Thank you. The next question is from the line of Dipan Mehta from Elekta Equities. Please go ahead. Yes. My question relates to the operating expenses in IFL Finance. And those are consistently going up a quarter on quarter year on year as well at a much, much faster pace than the net interest income or even the total income. Which is the reason what results in is that flat kind of pre provisioning profits. So what is the main reason for such sharp increase in the operating I understand you're opening branches and so on and so forth, but there has to be some synchronization with the net interest income increases as well. So, you know, what you're saying is a very valid question. And, the number of branches and number of people have grown up very significantly. So if you see, the number of employees is almost 85% by the way, because the microphone has a new business that we've taken, and we are also building strength in our housing finance and But, going ahead, it's a taper off. The pace of growth will slow down for sure. So, but, you know, but in last year, if you see, then, number of people that we added has been very, very large number. So, so primary reason is the branches and people, actually, and microfinance and housing finance. These are the businesses where we are a lot more people, also gold and branches. So by what point of time do you think 2, 3, 2, 3, 2, 3, 3, 3, 3, 3, 4, the number. The process of, as I said, that the incremental growth will be slower. As compared to what I did in the past. Okay. And the second question relates to what the CFO said about the interest write back or not very clear. So is that For q 2, we would have 40 crores, more of net interest income, or what exactly was the effect on the utilization? In Q1, there's a securitization profit of $4440. Okay. Which is not there in Q2. Okay. But even if you're then assuming that is the case, then the net interest income growth is hardly 20% for Q2 over Q2 FY18. So that, I mean, is the sharp slowdown from what we've seen in earlier? As interest stripping in the interest income. The securitization gain that comes is get club with the interest income. So that's why you're seeing interest income being The next question is the line of Jahan Bada from Ermel Bank. Please go ahead. Yeah. Sir, you know, in the presentation, it is shown that the, NVFC has an ROE of 16.4 and, you know, consolidated, numb number for ROEs or Excuse me. This is the operator. Sir, may we request to use a handset fee, this one? Yeah. I wanna answer. Yeah. Sir, so broadly, sir, the NVSC and the consolidated ROE is at a similar number. So, you know, my question is on the wealth, side, and so ROE Again, over there should be a similar number. So, you know, what is the outlook going forward? Can this number, of ROD and go up to 25 hours per second and you know, what are the levers that will, you know, pull that number higher? And that is what has depressed the ROU as well and thereby for the group. So as we start using this capital more effectively on extra quarters and legacy and R will be up to the target. Okay. Okay. And do you have any targets in mind, as as to what can be the steady state ROE for the wealth business? So, the steady state Yeah. Yeah. Correct. Go ahead. As a steady state, ROE business for, ROE for the wealth business should be around the 25 to 27%. Region. Obviously, we we had a acquisition in mind, over the last 3 to 4 months. Which was a part of the reason for raising a bit of the capital. And, secondly, obviously, we wanted to kind of re even in the health finance side reduce our dependence a bit on CPs. So that essentially led us to raise a bit of capital in the second quarter of, the calendar year. And, essentially, as Lynel pointed out over the next 12, 4 months, as we chart out on our next growth path, and the third reason for, 3rd utilization of the capital is essentially to act as a sponsor for alternative investment funds. That business is going faster. We nearly got, $3,000,000,000 20,000 crores of capital commitment in that business. We end up putting 1 to 1 a half percent of sponsor money as our own capital contribution. So these three things, essentially, is where the capsule will get utilized. And as the business scales up, the ROE should move up. If you see over the last 3 to 4 years, consistently, we've been around the, early twenties in terms of ROEs. So it's just a quarter since we raised the money effectively. So over the next 12 to 18 months, we should be closer back to the 20%, 25% ROE number. The next question is from the line of Megahermani from 5 Square Investments. Please go ahead. Thank you for the opportunity. Most of my questions been answered. Just on the same IISF finance consolidated numbers, the loan loss provisioning has come down, any substantial reason for that? Yeah. Because the last year, provisioning was normally higher for the new accounting index in which, you know, we have to consider expected credit loss on each and every item. So relatively is appearing low because the last year is extraordinary high. Okay. And lastly, on the expected growth going forward, how do we see our AUM and the net interest income going going forward. So, historically, we have given, you know, a guidance of 30.95%. So I don't see any reason to change. But of course, we have seen a very extraordinary thing happening in the liquidity, of the for the sector as well as one doesn't know there's uncertainty about how interest rate trajectory will be from here on. So at this point in time, I mean, there's no change, but, And my personal view is that, you know, the sector will continue to do well, and, we'll go at that pace only, which, you know, around 25% on the top line. And if you can be managing your business efficiently through the margins, then 25% to 30% on the bottom line. Okay. And one more, if I may, on the IIFL Wealth consolidated results in the footnote you have mentioned that in Q2 FY19, we had a lower rated offshore, subsidiaries in the PBT. So is it like the offshore subsidiaries are, also slowing down for. That this is about the tax, I think you have mentioned, because the tax incidence is very high in q 2 because you provided for dividend distribution tax from the dividend receipt from our overseas subsidiary. Karen, you have the numbers you can just clarify? Yeah. Yeah. I will. So there are 3, basic impacts because of the tax, calculation. 1, we've done a dividend out from our offshore subsidiary to India. There's an incremental 15% impact on the dividend. It obviously helps us save on the, cash flow of the dividend distribution tax. Second, our, NVFC business was, taxable at 25% last year because of the business we acquired last year before the revenue was less than 250 crores. So that business is back to 24% in terms of tax. And 3rd, like you're putting it, rightly, the offshore business contribution to profit is not in the same percentage terms as it was over the last 2 years. So, it is not to say that, it is not growing the proportionate growth in the domestic business is much larger than the offshore business, which is having a small impact on the tax rate. But the larger impact on the tax rate is on account of the, dividend distribution tax and the NBS fee, moving from 25% to 24%. Any of the dividend issues and tax can be completely offset against the dividend that, wealth will pay. So because it's a very subsidiary, And I think wealth has already declared, you know, 5 rupees per share this quarter. Am I right? Yes. That's right. Yeah. I so the I so this quarter, this is paying 5 to 6%. So against that, the student issues and text will be offset. But if you see the numbers in a quarter, we why would this then the text version is one of significantly because of that. The next question is from the line of Shubranshu Mishra from Motilal Oswwell Securities. Please go ahead. Thank you for the opportunity, sir. My question is on your construction, book that you have. Can you give us, some color on it? What kind of names we have, what kind of how many SPVs we have, what kind of geographic, uh-uh, you know, domicile it is. No, sir. I can't give you the spread out. So we have to know if you And, what about the geography? I don't think it's fair to disclose the names, you know, unless there's a reason for that. Right. So what I'm trying to figure out is that do you have exposures to Amber Pali, Vatica, Supertech, or these kind of names? Not to all of them, and I don't have we don't have any experience with Supertech or Amura Palini. So, actually, we have some exposure to Avika. But as I said, let's say, you know, we these are the things, send you any issue or whatever, then obviously get classified as GMP and just reported that. And what percentage of this is exclusive charge and what percentage would be partly processed? So almost our our entire book in exclusivity, we don't, so primary charge has to be, the first charge and extremely charge. Right. And Also, the purpose that we have is is is by our internal policy. We just, you know, I mean, there there there has to be exception for being able to say, but almost entire year, predominant part of our collateral will exclusive and not curry pass. Right. And if you can just give us, what percentage of the book is in NCR, NMR, Bangalore, Puna, and so on and so forth? I don't have the breakup, with me right now. Oh, okay. Sure. But very spread out, as I said. Right. Sure. Thank you for your time, sir. I now hand the conference over to the management for closing comments. Thank you so much. And if you have any more questions, feel free to write to us. And I also take this opportunity to wish you, your families, and loved ones. Very, very happy Diwali. And a very prosperous new summer here as well. Thank you so much. Thank you very much, sir. Ladies and gentlemen on behalf of IFL Holdings Limited. That concludes this conference. Thank you for joining us and you may now disconnect your lines.