Good morning, ladies and gentlemen. Welcome to the LIC Housing Finance Q4 FY23 Earnings Conference Call hosted by Axis Capital Limited. As a reminder, all participant lines will be in the listen only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star then zero on your touchtone phone. Please note that this conference is being recorded. I now hand the conference over to Mr. Praveen Agarwal from Axis Capital Limited. Thank you, and over to you, sir.
Thank you, Lizan. Good morning, everyone. Welcome to this earnings call of LIC Housing Finance. We have with us the management team of LIC Housing, backed by Mr. Y. Viswanatha Gowd, MD and CEO; Mr. Ashwani Ghai, COO; and Mr. Sudipto Sil, CFO. I would request Mr. Vishwanath to share his initial remarks, post which we'll open the floor for Q&A. Over to you, sir.
Yeah. Good morning. Thank you, Praveen. Thank you. Very good morning to all of you. I extend a hearty welcome to every one of you to the post-earnings conference call of our LIC Housing Finance Limited. As you are aware, LIC HFL declared its Q4 FY 2023 results yesterday. During the year 2022, 2023, we have seen significant movement in interest rate scenario due to increase in repo rates by RBI.
In the April policy, RBI has signaled a pause, post which there have been some improvement in the interest rate scenario. I would like to share the key financial highlights of the quarter, which are as follows. Total revenue from operations INR 6,415 crore as against INR 5,300 crore for the corresponding quarter of the previous year with a growth rate of 21%.
Outstanding loan portfolio stood at INR 275,047 crore as against INR 251,120 crore as on March 31, 2022, reflecting a growth of 10%. The individual home loan portfolio stood at INR 228,730 crore as against INR 204,098 crore as on March 31, 2022, it is up by 12%. It is now comprising 83% of our total loan book. Total disbursements for the quarter were INR 16,027 crore as against INR 19,315 crore for Q4 FY 2022. Out of that, disbursement in the individual home loans were INR 12,406 crore as against INR 16,341 crore for Q4 FY 2022. Project loans were INR 1,554 crore as compared to INR 428 crore in Q4 of last year.
On the net interest income front, the NII was INR 1,990.30 crore for the quarter as against INR 1,629.87 crore for Q4 of FY22. It is showing a growth of 22%. Net interest margin for the quarter stood at 2.93% as against 2.64% for Q4 of FY22. Profit before tax, PBT, for the quarter stood at INR 1,444.78 crore as against INR 1,314.41 crore, showing a growth of 10%. Profit after tax for the quarter stood at INR 1,180.28 crore as against INR 1,118.64 crore for the same period of previous year, reflecting a growth of 5.5%.
Dividend declared was 425%, that is INR 8.50 per share. In terms of asset quality, the stage three exposure at default stood at 4.37% as against 4.64% as on 31st March 2022, and 4.75% as on 31st December 2022, reflecting a sequential improvement in the same. Total provisions as on 31st March 2023 is INR 7,230.26 crore with stage three provisioning cover of 44%. During the quarter, we have written off loans to the tune of approximately INR 350 crore, taking the total write-off to around INR 540 crore for the full year. The credit costs are also likely to be lower than past years.
With the continued focus on recovery, the asset quality has become stable with an improving trend quarter-over-quarter, which has helped us in much better visibility. We have witnessed an increase in overall cost of funds by 111 basis points during last year against reported increase of 250 basis points by RBI during the same period. Incremental cost of funds stood at 7.38% for the full year and 7.84% for the quarter. Net interest margins for the year stood at 2.41% as against 2.28%. Year-on-year and also quarter-on-quarter, the improvement in spreads has been registered. During the most part of the year, the yields remained at elevated levels.
In the past one month or so, we have witnessed reduction in the yields across tenors, especially at the longer end of the yield curve. This augurs very well for the company in terms of our total management of liability. In terms of asset pricing, we have passed on 210 basis points of rate hikes during the year and a further 25 basis points in April 2023. In terms of business operations on a full year basis, there has been a growth, though asset growth was tempered due to successive hikes in interest rates impacting rate offtake, especially towards the second half of the year. With the greater stability in interest rates, we are confident of very good year ahead.
Further, I would like to bring your attention to a large number of initiatives which are undertaken and proposed to be undertaken for the current year. We are also expanding our presence in the geographical areas across the country by opening our new offices across all offices, all our area offices.
A specialized team has been formed for appraisal of high-value cases at corporate office. Implementation of SAP has been fully completed. We have also implemented a new core loan management system, LMS, to improve and smoothen the loan management process also. With all these initiatives, we are certain that the year will be far better than the earlier years. With this brief introduction, I would like to invite you for your queries. Thank you.
Thank you. Ladies and gentlemen, we will now begin with the question and answer session. Anyone wishing to ask a question may please press star and one on your touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles.
Participants, in order to ensure that the management is able to address questions from all participants in this conference, we request you to limit your questions to two per participant only. The first question is on the line of Vivek Ramakrishnan from DSP Mutual Fund. Please go ahead.
Hello, sir, this is Kunal from DSP Mutual Fund. I just have two questions. First was on the retail disbursements, which is your individual housing loans. We have seen two consecutive quarters of sequential decline. Is it just on the account of base effect or are we seeing any real slowdown happening over there?
Second question was on the NIM trajectory. First thing is obviously like you mentioned, that your long-term cost of funding has also come down and you have also passed around 210 basis points of rate increases on your asset side. What portion of your book has completely seen the impact of this rate resets, and how do you see your NIM panning out in the upcoming quarters? Yeah.
Okay. Okay. Actually, it's a very good question. As far as the disbursements are concerned, if you look at what happened, the book has of course, the overall portfolio has gone up by more than 10%. I agree. Only thing is in some pockets the disbursements were not to the extent we expected actually. Or else we would have scored better there also.
Even then, what happened, of course, what you say also has got some impact because the interest rate hike in some pockets actually people that wait and watch more also was continuing. With that, what happened, the disbursement across, if you see some regions, especially one or two pockets, we could not see that much of what you call the traction compared to other regions. Or else what happened, the base effect also earlier years was slightly was there.
That also one reason because last year the rates are nearly almost at 200 basis points less than the current level, especially in the affordable segment, that also would have taken some sort of hit. With all these things put together, I think, now what happened more or less the rates are stabilized.
Now the visibility is very clear that in the days to come, the traction even now we are already witnessing a very good improvement in every pocket. Even those areas which were not earlier, now there also good traction is there. With that, we are very confident of actually very good progress in our disbursements in the individual home loan book. Sudipto you want to-
Hi, Kunal. Regarding the margins, yes, as far as the asset side is concerned, we have effected one more rate hike, which is the w.e.f. April 1, 2023. That is yet to get impacted because all the others were in the previous financial year. In this financial year, we have done 25 basis points, which will be coming in Q1.
Thank you, sir, and good luck.
Thank you. The next question is on the line, Avinash Singh from Emkay Global. Please go ahead.
Yeah. Hi, good morning. Thanks for the opportunity. First question is like, you know, from what you said over in Q3 call and taking it from there. Two things have just sort of reversed. If I look at the stage three provisioning coverage ratio, you had increased it to 50% in Q3 and said that okay, you would like to be there, but again you have lowered it to 44%.
The second, in that quarter also that okay, you are kind of going slow towards the project finance disbursement is concerned. Again, in Q4 that has gone up. I mean, what has changed from Q3 to Q4 to sort of for that made you change this stance on these two things? That's my question number one.
Second, if you can just help me with, slide 18 where you have disclosed the spread and NIMs. If I see on the annual basis, the spread seems to have improved by almost like 50 basis points, but the NIMs improvement is just, I mean, 12, 13 basis points. What sort of, I mean, kind of, why is inconsistent? These are my two questions. Thank you.
Yeah, I will start with that query on the provision. Actually, if you look at it during the year, we have written off INR 540 crores. That's in the opening statement we had mentioned. If you add that INR 540 crores to the existing provisions on book, it will work out to almost 50%, 49% point something . It is not to say that the provision cover has been reduced or something. There were some cases on which 100% provisioning was done, so they have been removed. There is no change in stance per se. Number one. Number two was the query regarding the margins on a full year basis.
Project finance disbursement-
See, on a full year basis at the... Sorry?
Project finance disbursement also, that has accelerated in Q4.
Yeah.
As far as the project finance concerned, you see what happened, we too were selective. Even earlier also in the beginning of the year also we were targeting that. The year before, that is 2021, 2022, we could not do well. Of course, this small uptick was there.
Last year, what happened, actually on a selective basis we have done very well, both in terms of our construction finance and enough credit items and all. There is a good improvement in that book. That also one thing which added to our portfolio, and it is very healthy portfolio added to us.
That is actually probably the number is appearing inflated because of the base effects. A year before that there was hardly any disbursement.
Correct.
Even now, after the disbursements of third quarter or fourth quarter, if you see the overall composition to the book is hardly 3% or 4%.
Okay. Thank you.
The second point is pertaining to the margins. Margins at the beginning of this year, in the first quarter call, I think we had very clearly said on a full year basis we will certainly improve. If you see in one of the quarters, that was second quarter, there was a abnormal dip in the margins which fell down to 1.8%. Even that point in time also, we were very confident and we maintained the outlook on a full year basis will recover. You kindly compare the second half margins with the second half margins of previous year, and then really you will find that there has been significant improvement.
Okay. Okay. Okay, then. No, no, I was more kind of looking that if the numbers on your slide, that is spreads and margins, if you are, if they are indeed for the full year, then, I mean, the gap for FY2022 is close to 40 basis points as far as the NIM versus spread concerned. In FY2020-
That is the reason. In fact, if you see, again, I'm just repeating, second quarter we had some reversals on the income side, which you will find details of in the.
Yeah.
con call, transcript.
Okay.
It is because of those reversals which have happened in the second quarter, it has depressed.
Correct. Correct.
That is the reason why I'm saying that if you compare the second half with the second half, then actually you will get to see the real improvement.
Even earlier, our guidance was more or less 2.4%, 2.5%.
On a full year basis. Yes.
On a full year basis. That is our.
That guidance we have held right from the beginning of the year.
Yes. That is always held up. Okay. Okay. Any reason for sort of, a bit of...
Sorry to interrupt, Mr. Singh. May we request that you return to the question?
Sure. Okay. Thank you.
Thank you. The next question is from the line of Gaurav Kochar from Mirae Asset. Please go ahead.
Yeah. Hi, good morning, team. Congrats on the quarter, and thanks for taking my question. I have three questions. Firstly, on this margin expansion, just to clarify, there are no one-offs, right? This is the 0.93 we have reported is, does not have any one-off.
There are no one-offs.
No, no one-offs.
No one-offs.
Sure. Sure. Great. Great. Sir, from an ongoing basis, let's say, taking FY 2024 full year, the reported margins for FY 2023 was 2.41%. If I remove the impact of that second quarter, what I think Sudipto alluded to in the previous question, there was a reversal of INR 275 crore because of fixed to floating conversion. If I remove that, the NIM broadly, 2.55% is the full year-
Correct.
in FY2023. Now going ahead, given that we have exited the quarter at 2.93%, the cost of fund, if I look at it at 7.63%, on the portfolio versus incremental is at 7.8%. I mean, there should not be any material increase in cost of funds from here on. On the other hand, full year, the full benefit of yield will come in this year because the yield improvement, whatever we took, were more back-ended. Taking those cues, and given that, you know, the margins at 2.9% probably would settle at 2.6%, 2.7% on a steady state basis.
For the full year 2024, any sort of guidance you'd like to give or maybe, is it reasonable to expect a 2.6%, 2.7% margins for full year FY 2024? That was the first question.
Yeah, I think, we'll not put out the word guidance, but certainly going by the numbers, 2.5% at the base certainly looks achievable. At the base.
Okay. 2.55% is what you did in the previous year.
Yeah. Yeah.
Going by, and that year was marred with a lot of challenges on cost of funding.
Correct. Correct.
Correct.
Is it reasonable to expect some improvement from that level is my question?
Yes. Certainly. Certainly.
Yes. Yes.
It is. We are also positive on the improvement in the margins.
Right. Right.
Ahead of 2.5% minimum.
Yeah. given that 2.93% does not have any one-off that you've delivered, I mean, some rub-off of that will also translate in the next few quarters.
Generally that happens.
Sure, sure. The second question is, with respect to the stage two. There has been an increase of almost 130 basis points in Stage two. Just wanted to understand, is it due to restructured book which is coming out of moratorium and now probably starting to fall in the overdue bucket? Is that the reason or there is some other reason?
No, restructured book earlier also was the same only. No, there was no change in that one. Now what we call now by end of June, everythsng will be getting over more or less.
Okay. Why has there been a jump in stage two assets? Stage two asset has gone up to 5.25% from 3.9% in the previous quarter. What is the reason behind that, sir?
Mostly what actually we too are looking into that. Here and there, what we could find is that because of the increase in EMI, you know, some increment now because of rate increases, EMI also increased across.
Yeah.
What happened now when these matched payments are hitting here and there, probably what we noticed is that the amounts were not fully adequate enough to get it. That's why.
Okay.
In terms of stage one, they have slightly come to stage two. Now efforts are fully on. What happened now it has been once again, we are looking at system, so now recovery is kept in place. With that again, they move up to stage one. That's quite going to happen. I think 10% or even 20% effort will be there on that, which are switched over to this. We are confident that in this quarter this effect will not be there mostly.
Okay, okay. you're saying this one-.
More of a technical impact, and that has now been addressed.
Okay. maybe in the June quarter, this number will move back to the.
Yes, yes.
December quarter.
If you see steady-state basis, it has never been this number. This number has never been in this level on a steady-state basis, I mean even during COVID period.
Okay.
This is more of a technical glitch.
Okay. large part of this will be pulled back by the next quarter?
Yes, yes. Yes, certainly.
Okay, okay. Great. Great.
Accounts are all paying accounts, there are no relief.
Yeah, yeah.
They're all paying accounts.
All regular accounts only.
They are regular and paying accounts.
Okay. Got it. Got it. Sir, just to clarify on the credit cost, the earlier participant asked, the stage three cover is 44%. Going forward, we should look at stage three PCR to be maintained at this 40%-45% level, or this will be inched up to 50% going forward? If there are no write-offs, would you like to increase it to 50% or this is what you maintain, 40%-45% PCR on the stage three?
I think we look at this matter from the credit cost point of view. Credit cost point of view, it is likely to be in the range of around 45-50 basis points.
Correct.
It will be probably across all the stages as and when required to create more balance.
Okay. You maintain 45-50 basis point credit cost for full year FY 2024?
Yes. Moreover now resolutions for all the cases also we are seeing something positive, so that probably this year there will be some good number of resolutions also, so that something will definitely, asset quality will improve also.
Okay. Same on the developer side?
Developer side also actually efforts are on there to, what you call, to reduce the NPAs. I think some good, at least four, five good relations are being worked out.
Okay. Pipeline in the NCLT.
Yeah. They are in pipeline NCLT almost, 2004 also is in NCLT almost.
Okay. Sir, any number, I mean, quantum of resolutions that you expect in this year broadly?
This year, out of the things, I think at least INR 400 crore-INR 500 crore minimum we are expecting.
Okay. INR 400 crore-INR 500 crore recovery in this year. Sure. Sure. Sir, just last question on the disbursement side again? I think one of the participant earlier also asked, the disbursement had slowed down. Do you see any pickup in FY2024? If any target that you'd like to give for full year FY2024 now that interest rates are stabilized?
Yeah, yeah.
Improvement or-
Correct. Correct. This is only a setback for some parts of our regions, not across India. What happened, some pockets we could not do very well due to some regions there. For the whole of this current year, that is FY 2024, we are certain that our growth rates will be in the individual home loan book should be at least minimum of 12%-15% going ahead. Overall, we can show a growth rate of 10%-12%. That's what we're looking at. According to that, targets also worked out. Book growth will be very healthy this year.
10%-12% disbursement growth is what you're saying?
Yeah. In the individual home loan book, we are minimum expecting around 12%-15% range.
Sorry, this is AUM or disbursement, sir? Just to clarify.
Disbursement. This one is disbursement.
Okay. Disbursement showing 12%-15% growth on individual loan book.
Yeah. Overall book also now already we are growing at 10%, a little better than 10%. At least it should go to 12% at least.
Okay. Got it. Got it, sir. On project loans, sir, this quarter, we did some disbursements. So this run rate will continue, 3%, 4% of total.
Our loan book now, project finance, okay, it is consisting around 3%- 4% only. There is slightly small uptick maybe they're not very, what do you call, a great growth rate will be there. Anyhow, we are also very selective basis. We are actually disbursing loans and also selecting the good clients and good projects for our construction finance.
Sure. Sure. Thank you so much, sir. Thanks for asking all the questions. Thanks.
Thank you. The next question is on the line of Aman Shah from Kotak Mutual Fund. Please go ahead.
Yeah. good morning, and thanks for taking my question. Two questions that I have. One is just recalling our commentary in the second quarter conference call where we did indicate that there were some competitive pressures and due to which we had to kind of restrict pass on in terms of transmission of rates, right? If we now look at the current situation, clearly the competitive intensity doesn't seem to have stopped, and visibly the demand appears to be lower, which is reflecting into our disbursement growth as well.
In this scenario, what gives us the confidence that we would be able to hold on to our yields or margins, and there will be no pressure on us to kind of further probably lower our lower our yields or probably lower our growth aspirations?
As far as the disbursement is concerned, of course, one thing we this year also, overall growth in the book is around 10% across. In the individual home loan also 12% is there. What confidence actually, we are very confident that, as the disbursements are concerned, mainly in the India home loan book, because now the rates are almost as stabilized.
We are also now everywhere, we also what we call now implemented, new systems. What we have done is now earlier, to maintain a very good, to improve our debt actually, we have come up, actually we implemented a very good system of supporting even grassroot level people.
We also have now implemented SAP and also we have implemented a very good software also, where the, as I told you earlier, our loan management system is now being improved with the new software. With all these things, actually even we are also increasing our penetration outreach by opening new offices also across all the geographies.
These things anyhow will give us a cushion that growth rate what we're expecting minimum has to come from their own end, it will come also. With all these things in place, we are very sure that as far as the book size is concerned, we'll grow at a very healthy rate of around 12%-15% as I told you already.
Asset quality-wise, if you look at what happened now because of good efforts made so far, apart from India home loan, even other loans also were able to show good progress and very good resolutions are in place. With that, I think in the next two, three quarters at least, we can witness a very good improvement in asset quality also. With these things we are very sure that all of our promises like our NIMs as well as the margins will certainly maintain.
If I can just add, just one more thing is that if you look at the prepayment rate, that has actually come down. That is indicative of a different competitive intensity as what was seen in the last maybe two years or so.
Right. My, my second question is again pertaining to margins, right? I mean, it not looking at the current quarter margins, but if I look at last five years, margins typically have been in a band. although while we appreciate that on a full year basis, we have delivered the margins that we were looking at. The margin volatility on a quarterly basis in last two years particularly has increased significantly.
Just wanted to understand that fundamentally, has there been any change into our business which is leading to this sort of a quarterly margin volatility? Because in the past also we have remained in the band of about 230, 240 basis points of margins, but the quarterly volatility wasn't so high.
As far as the quarterly volatility is concerned, if you see the exit margins of any financial year has always been on the highest among the four quarters. That I would attribute it to be the a usual phenomena which has been there for several years. That is one thing. Second thing, if you look at it on a full year basis, there has been stability. Barring last financial and barring 2021, 2022, it has been more or less increasing by 2 basis points. In 2022, 2023, we had indicated that it will be on a full year basis, much better than what we had seen in the whole of 2021, 2022, and it has come out that way.
Going forward you will see sort of stability in the margins, and we have indicated also the band in which it is likely to be there. Stability will certainly be there.
One more thing. Earlier, one or two quarters, what happened there was delay in transmission of the rate hikes. That probably also would have affected that.
Yes.
margins only. Going forward now, I think the visibility is very clear. I think such volatility where I think not at all, will not be there at all. We are very much confident of that.
I'm sure. Sorry, just one last question if I can squeeze in. At what frequency do we kind of relook or revise our PD LGD assumptions, given the fact that across buckets our provision coverage ratio be it stage one, two or three, has been again a bit too volatile? Again, I'm not looking at the fourth quarter numbers, I'm looking at probably a much longer frame, maybe about two to three years. Just wanted to understand at what frequency do we change our assumptions?
See, it is a, it is actually a dynamic model on a rolling basis. Every quarter when we sit down to draw the numbers, it is on the past 120 quarters. 120 months. That is 10 years.
The historical, our own performance-
For example, when we sit for, say, March, then it will be the previous 120 months. When we sit for June, it will be the previous 120 months from June backwards, just like that. It's on a rolling basis. You can say in effect, it gets reviewed every quarter.
All right. Sudipto, something as standard, I mean something like a stage one provision, right? Standard asset provision, typically in that line also we have seen a bit of a volatility, right? I mean last-
That is precisely what I'm saying now. Now we have ensured that there is. Earlier it was completely, I would say a very objective model. Now management overlays are also there, which ensures, which we get to see from this quarter onwards. We have already started seeing that from stage one, et cetera, also we have created sufficient buffer to ensure that there is no such volatility, even if one particular account moves from one bucket to another.
All right. Okay. Thank you so much and good luck for future quarters. Thanks.
Thank you. Thank you. Have a nice day.
Thank you. The next question is on the line of Harshvardhan from Bandhan AMC. Please go ahead.
Hi, sir. Thanks for the opportunity. Just a couple of questions. wanted to understand the CET1 ratio as of March 2023.
What is that?
Can you please speak a little louder?
Sorry to interrupt, Mr. Harshvardhan. Sir, we are not able to hear you clearly.
I want to understand the CET1 ratio for the financial year.
For the financial year, it is yesterday only numbers have come, so we'll have to first report it to the regulator. It is right now expected to be in the range of around 16%-17%. The total capital adequacy will be 18%+.
Sure. Sure. Thanks. Sir, what is the NHB allocation for the financial year of the total disbursement that we got from NHB?
For which, 2023, 2024 or 2023?
2022, 2023.
Last financial year. Last financial year around, say, INR 5,000 crores we have taken from NHB.
We expect a similar amount to come this year also?
Slightly more possibly.
Sure. Sir, just one last question on our incremental cost of funds. You mentioned that we are in quarter four we raised somewhere around 7.8%.
Yeah.
What would be the rate of, say, in quarter one, or is it around that number or it has further inched up?
Q1 of this year, I mean, current 2023-2024 Q1? Yes, yes.
Yes. Yes, sir.
It has come down by around 25 basis points.
Okay. Our incremental cost has come down.
Yeah. 20, around 20 basis points you can say.
Sure. Great. Thanks. Thanks a lot, sir. Thanks.
Thank you. The next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah. Thank you for taking my questions. Good afternoon, everyone. Raju, obviously we kind of continue to surprise us, and the good thing is that this time around we have a pleasant surprise on margins and credit cost discipline. While we have largely answered all the questions, just wanted to understand that when we said there are no one-offs in the margins of 2.93% that we reported.
Just wanted to understand, given that we follow a quarterly reset on the first day of every quarter, how is it that the computed yields, typically what we compute using the interest income number that you report, have expanded by close to 60 basis points on a Q2 basis. That's the first question that I kind of wanted to understand.
The other thing is, sir, maybe when we look at your disbursements in this quarter, I think maybe you were the first corporate at even last quarter to acknowledge that there is some sentimental moderation that we are seeing on the demand front, particularly in the higher ticket size segment.
This quarter you could have chosen to deliver a slightly higher growth rather than deliver such high margins. What is your thought there? Secondly, sir, we have kind of acknowledged that going forward, developer finance will start maybe increasing a little bit from here. Just wanted to understand for a product segment where we last reported 45% kind of NPAs, what is the rationale of again growing that book?
As far as the project finance is concerned, what happened now, of course, as I told you earlier also, we are very selective basis we are giving in some pockets where our own known customers who are having very good experience with us, number one. That book also we have to look into that because, as you know, that books offer some sort of better margin for us. That is it.
Your second question was about the disbursements and all, I agree. What happened actually, I told same thing. What happened, we are also at that time demand also was very good. We could see that the substantial increase in the demand also, improvement sentiments and all. Actually, the performance across India, if you measure what happened, one or two regions could not do very well.
That's why the numbers are not that much, what do you call, comparable, or we could not do very well overall. In other pockets we have shown excellent growth. The demand is fully utilized, the demand is fully met. That's why we are very confident that in the days to come, even this current year, the disbursement certainly will be as I promised you, that will be around in the individual home loan book, at least should be in the range of 12%-15%. Yeah. You, you had a query on NIMs, Abhijit Tibrewal. Can you kindly repeat?
Yes, sir. Sir, what I wanted to understand is, you have acknowledged that there are no one-offs, in the margins.
I got you. I remember. See, actually it is very simple. You can actually, you can actually add back, you know, if you look at the fact that we have increased by 35 basis points, which is effective from 1st of January itself on the entire book of almost INR 270,000 crores or INR 260,000 crores, plus the incremental disbursement which we have done.
You remember that we have also increased on our incremental pricing from January. That also if you see the incremental net, I would say addition to the assets, I think you will be able to come very close to the figure of the current quarter's interest income.
Moreover.
There are certain lags also. Certain lags, certain portfolios because of NPAs, et cetera, could have not been impacted in the previous quarter. They have come in this quarter. There has been improvement in the NPAs also. That way you can, I think, very easily reconcile there is no one-offs in the current quarter as far as the interest income is concerned.
One more input on your disbursement point. What happened of course, as I mentioned earlier also, the partly, what do you call, the base effect also was there because the year 2021, 2022 was if you compare to that. Secondly, of course, rate hike that also is partly attributable in some pockets of the, our geographical locations.
In the project finance or construction finance, if you ask me, nowadays we are focusing on even some LRDs, then again some sort of line of credits.
The INR 1.5 crore there the margins we are able to pick up.
There the risk is much less as compared to a core construction, finance.
Got it, sir. This is useful and maybe one last data keeping question. If you have already shared in the presentation, I can look it up. You used to share your stage three numbers for IHL, NHC, NHI and project loans.
Yeah, I can share with you. Just bear with me for a second. As far as the stage three numbers for IHL, it is 1.6%. For NHI that is 6.6%, NHC is 22% and project it is 40%. I would just like to add here that in each of these four categories it is reduction from the December numbers.
Got it. Which means that, I mean, at least in your stage three there has been some resolutions or upgrades that you have seen?
Yes.
what you were explaining.
Stage three across-
Right.
Stage three across we have collected more than INR 500 crores in the NPA accounts itself, which includes both the principal and interest as well. Yes. Good relations are there, actually.
Got it. sir this INR 540 crores of write-offs in FY2023, what was the write-off number in Q4?
The Q4 number was INR 352 crore, approximately. Plus the one that we have done in, I think,
Q2.
Q2 was INR 191 crore.
Yes, Q2.
Put together is INR 540 crores.
Got it, sir. This is very useful, sir. Thank you so much and wish you and your team the very best.
Thank you. Thank you.
Thank you, sir.
Thank you. The next question is on the line of Kunal Shah from Citigroup. Please go ahead.
Yeah. First, in terms of the proportion of the customers wherein there would have been the EMI increase versus the tenure increase, if you can just highlight that, maybe with the pass on in the rates, that would be helpful.
Total about, say, number wise it will be around, say, 12,000 customers.
1%.
Which is, about for customer number wise it is less than 1% of, the total outstanding number of live loans.
Correct. Correct.
Live loans is around INR 15 lakhs.
Okay.
It is less than 1%.
Wherein there would have been the increase in EMI?
Yes. Yes. 13,000 is the number if you know, remove.
Correct. Correct. INR 13,000.
INR 13,000.
Okay. Okay, okay. In absolute term, if we have to look at it in terms of the exposure?
Exposure wise it will be closer to around, say, INR 3,000 crore, INR 2,000 crore-INR 3,000 crore.
Average ticket size approximately.
Average ticket size will be around INR 30 lakhs.
INR 25 lakhs-INR 30 lakhs.
INR 30 lakhs.
Okay. No, because the way you highlighted in terms of this increase in stage two, maybe a part of it is because of this.
It is exactly what we said in our opening remarks also.
Yeah.
If you actually see this, it is not that these accounts are not paying, but the full EMI has not been recovered because of some technical matters. Now we have addressed the issue. Now onwards this will not be recurring.
Okay. Because that delta was almost like 1.3%, 1.4%.
This actually is at 1.1% in terms of the number of accounts also as a percentage of our total live loans.
Roughly one, 1.1%. Okay. Got that. Secondly, maybe with respect to the growth, you mentioned in terms of the prepayment rates actually coming off. Maybe because of the competitive intensity, is it that also which is leading to relatively lower disbursement growth, particularly in 4 Q? Otherwise, generally, seasonally 4 Q is quite strong for us. Was it merely on account of rate compared to the competitors, or how is it?
No, it is not the rate per se. Actually if you look at it, interest rates have been going up in the system for the last three quarters, right, from the month of June onwards up to February. Every time there has been an increase in this. What actually happens is that if the interest rate on the home loans of any finance product increases very sharply within a very small space of time, then it is sometimes pushing the customers into a deferment mode. It is not that the person has canceled the decision to purchase. It is just a deferment, maybe for one quarter, maybe for two quarters. Actually if you see now the interest rate trajectory looks like it has peaked.
We have already seen that impact on the bond yields, which has come down by 30, 40 basis points at least. Taking that cue, it is likely that going forward, interest rate stability will be there and the customers have already shown indications that they have come back to the market. The other thing is that on the real estate side, you have seen price points moving up, which is also a positive factor which actually gives you an indication that demand is picking up.
No, absolutely. Compared... still in terms of the market share, it seems to be a loss. Maybe
No, it is not a loss.
Still that is.
If you see it is not a loss, because if you see-
Home loan.
Up to the third quarter, we were clocking home loan growth of around 15%. If you actually see the data in terms of housing finance sector growth, till I think November or December, it was not growing more than 15%. It was more or less in that range.
No, no, particularly for this quarter, 4 Q.
I see, I don't think one quarter gives any indication of any market share loss.
I mean, it is only here and there some, what do you call, not across even some regions have done even far, far better than it is. Some regions growth rates are more than, you know, 30% of.
On a quarterly base of, say, INR 15,000 crores. Even INR 1,000 crores extra business would have translated to a much, much higher number in terms of real numbers. Correct. If you look at it per se, then, it is not that there has been any drastic reduction or drastic decline in the disbursement. Moreover, what happened, to address it even more significantly, we have also expanded our reach. As I told you that our new expansion of the branches, Yeah, across all the regions, that also will give us more footprints across so that we'll show good growth in all regions this year.
Okay. Okay, yeah. Thank you and all the best. Yeah.
Thank you. The next question is from the line of Nischint Chawla from Kotak Institutional Equities. Please go ahead.
Yeah. Thanks for taking my question. You know, can you sort of highlight, you know, which segments have seen maximum write-offs this year?
Can you repeat the last part of your question?
Yeah. The write-off has been in which-
Write-off. Write-off we have done. See, we have. There are three categories of assets, as you know. IHL, the individual home loans, and there the write-off has been around INR 200 crores. In the non-housing corporate, which includes the project loans, there the write-off has been around INR 300 crores, little more than INR 300 crores. In the non-housing individual, the write-off has been around INR 30 crores. Totally around INR 540 crores.
Sure. Yeah, sure. you know, you mentioned that your incremental cost of borrowing is 7.84%, which is probably coming down maybe 20 basis points or so in this quarter. What would be the incremental lending rate?
Incremental lending rate, the lowest rate is 8.6% today for the highest rated CIBIL score.
I mean, 8.6% as quoted, right? The IRR could be little higher.
Yeah. IRR will be higher, plus it is at the premium segment in terms of CIBIL score.
You have raised 25 basis points, across the board, is it? Or, I mean, even for new customers from this quarter or
No, no, not for new customers. It is on the PLR from first April.
Sure. Basically I think what we are trying to say is that probably 8.6%. What you're saying is the incremental lending rate.
No. It is not. 8.6% is not the IRR.
Probably. Okay, 8.8% or something like that, and as against that you'll probably have an incremental cost-
That is for the best, that is for the best customer, and only for the individual home loans.
Your incremental rate for on the book would be how much? Sorry, as in the disbursements will be how much?
Sorry?
Incremental rate on the entire block of disbursements on the individual side would be how much?
Well, including all types of assets, I mean, all types of.
No, no. I need to get that the best customer gets 8.6%.
Yeah. It goes up to 9%. 9.1%. 9.1% means that if you annualize it will be around 9.3%.
Got it. 9.3% and, okay, 9.3% versus, your incremental cost of around 7.6% or so.
Yeah. That is only on the individual.
Sure. Which is a healthy spread, right? When you are giving a margin-
Yeah, it is. Yes.
of 2.5.
Yeah.
I'm just trying to say that, you know, probably you are kind of maybe building in some sort of a decline yield or compression yield.
It is not that way. If you see last year also we were very clear that there will be an improvement on a year-on-year basis. This year also we have indicated there will be an improvement on a year-on-year basis. Obviously the numbers are, I mean, whatever you have seen in terms of cost of funds and lending rates.
Sure. Got it. Thank you very much.
Thanks. Thank you.
Thank you. The next question is from the line of Bhavik Dave from Nippon India Mutual Fund. Please go ahead.
Hi, this is Bhavik Dave-
Sorry to interrupt. Mr. Dave, we're not able to hear you. There's a lot of disturbance from your line.
Is it better? Yeah, it is clear.
Yes, sir. Please go ahead.
Yeah. Sorry. Most of my questions have been answered. One question is on the over the last one and a half years, we've been seeing increasing dependence on banks versus NCD that we used to have. I just want to understand why that happened and because the cost of funding for banks is reasonably higher versus NCD.
With now Axis Limited going out of the market, AAA entity like us should benefit from the NCD market, and that's the understanding we have. Just want to understand, can this mix back in terms of NCDs versus banks, the way it happened over the last one and a half years, can that reverse in the second week? Is that a fair assumption?
We are not able to hear you clearly, but I just got a, I mean, understanding of what you are trying to query. See, this is part of an overall diversification plan. Some five years back, there was a huge dependence on the wholesale debt market to the extent of 80%, number one. Right. Number two is if you see the asset profile, 90% of the assets are in the floating rate side.
Our exposure in the funding was almost 80% on the fixed side. In a declining interest rate scenario, our spreads are getting severely compressed. Right. One of the reasons why we wanted to diversify was to reduce the dependence on any market segment. Now it is well diversified. We are not dependent on any market segment.
Number two, it's a natural hedge that we are building into the balance sheet. We have got 90%- Sure. -plus of assets on the floating side. Now we have got a decent amount of liabilities also in the floating side, which will come to our help significantly when the rate cycle reverses, and we are sure that the rate cycle will reverse. Maybe in the next six months, maybe in the next 12 months, maybe in the next 18 months.
It is a part of a well-thought-out strategy. It is nothing to do per se only with the cost of funds. If you've seen many of the occasions, the banks were offering significantly lower because of the liquidity that they were holding with them, and they were not able to lend to other segments. This keeps on shifting.
It is a well-thought-out strategy, and it is designed to insulate the balance sheet from two large risks. One is a concentration risk in terms of sourcing of funds from any one particular source, the second one is to diversify and mitigate against the interest rate risk.
The bank funding would be at one year MCLR, is majority of it?
No, no, no. It is a combination of link to repo rate. It is a combination of external benchmark like T-bills as well as MCLR, where we are generally marketing with the three-month MCLR. There also we have interest hedged, so any one of the benchmark moves, we will get a benefit.
Perfect. Very, very useful. Thank you so much.
Thank you.
Thank you. The next question is on the line of Kiran Engineer from CLSA. Please go ahead.
Yeah, hi. Congrats on the quarter, and thanks for taking my question. My first question is on basically what how much of your loan book is still under moratorium, which is the Restructuring 2.0 wala moratorium?
Yeah.
Yeah, now I think, it is around INR 748 crores, no? That's what I think.
INR 748 crores is yet to come out of moratorium now. All others have come out.
Okay. Out of, we had restructured I think around 7,200 or so.
Yeah.
If you can just break up now INR 748 crore is still in moratorium, so the remaining, say, INR 6,500 crores, how much of that would have moved to stage one, how much to stage two, and how much to stage three? Just a bifurcation of whatever has come out of restructuring.
Yeah, I got your point. Out of around INR 7,000 odd crore which have been, you know, implemented, about INR 1,000 crore account have been closed. Fully repaid and closed, INR 968 crore or INR 1,000 crore. INR 748 crore is yet to come out of the moratorium. Out of them, the NPA is around INR 1,500 crore.
Stage two, sir?
Stage two, everything else, we have kept them in stage two, irrespective of the fact whether they are stage one or stage two. We have kept all of them in stage two as a part of prudence.
They are provided for, not NPAs.
We have provided for also, yes.
Oh, almost INR 4,000 crores roughly will be in stage two out of it.
Yeah. Irrespective of the fact that some of them are actually fully regular. Still we have, as a matter of caution, placed them in stage two so that we are able to provide higher provisioning rate.
What is the rule from either your own board or RBI that if they pay, let's say, for 12 months regularly or 24 months regularly, they get upgraded or they never get upgraded throughout their life?
No, no. They certainly get upgraded. See, one, obviously, if the loan gets closed, if the provision gets released, it is a obvious.
Okay.
Interpretation. Secondly, if that, if it is there for one year, standard, then also it comes out of this provisioning requirement.
Waiting period.
Waiting period of one year from the point-
Yes.
It actually comes out of the moratorium.
Correct.
Okay. Got it, got it.
12 months.
Right. Okay. That, that's very clear. Second question is, our project is costing for INR 1,500 crores. How much of that would be to existing projects that we already have lent to the lender, and how much are brand new projects?
I will not say brand new project per se, because in that INR 1,500 crores we have also lent to our line of credit also. That line of credit is, you know, it's not project finance per se. Balance mostly is to existing customers.
Existing customers will be around 60% more or less.
60% of the balance. Maybe fresh customers may be hardly INR 100 crores-INR 200 crores.
Okay, that's it. Line of credit would be how much out of the INR 1,500?
line of credit around INR 700 odd crores.
This is to the corporate, not to the project, correct?
No, line of credit is to Housing Finance Companies.
Housing finance company, HFCs.
HFCs you all have given.
Yeah.
Okay. Okay. Sir, lastly, what is your-
For onward lending.
I'm sorry?
For onward lending.
For onward and... Okay. Okay, makes sense. Lastly, sir, what is your LCR today?
LCR is around average for the quarter of March, 147.
140.
140+.
Got it. Okay. That answers all my questions. Thank you and all the very best.
Thank you.
Thank you.
Thank you. The next question is from the line of Ankit Agrawal from Spark Capital. Please go ahead.
Hello. Yeah, my questions have been answered. Thank you.
Okay, fine. Thank you.
Thank you. We'll move on to the next question that is on the line of Rinesh from ICICI. Please go ahead.
Yeah, hi, sir. Just one question per se. In your opening remarks, you did mention about some of the pockets, you know, not seeing the good disbursement demand. If you can just give some more color on which geography, which pockets are seeing strength in terms of the credit updates?
Mainly, mostly what happened if you look at our traction, actually traction was good across regions like South, to some extent Central and proper here. Only thing is we could not see much traction mainly in North and to some extent in East also.
Any specific states or districts or, I mean-
No, no, it's not still. Whatever metros are doing well, but only what is the, you know, some sort of, what you call tier two cities.
Okay.
These could not get good traction. Mostly we operate in the salary structure, you know, in the sense-
Correct, sir.
comes from the salary segment. Because this rate increase and our product are taking a small hit there.
I mean, if you, if I go by the presentation wherein, you know, 60% comes from metro and 40% comes from the non-metro. Basically you are saying the non-metro is not at pan-India level, but maybe some pockets are seeing-
Yeah, yeah.
to be lower trade of them.
Small, small hit. Not a very big dent. It is very minor. Minor. Yes.
Okay. Okay. Sorry, sir, just again, you know, on the NIM side. Our exit got the NIM at 2.93% and, you know, the kind of commentary or the highlights we have given in terms of the incremental cost of borrowing and the lending yields. First half 2024, you expect NIM to sustain at this level of 2.9% or, how one should look at, I mean, a first half perspective?
No, it is, it cannot be compared with an exit NIM of any year. That is something we have discussed, I mean, just few minutes back. Exit NIMs are always on the higher side, but on a full year basis it will be better than last year, full year of last year. If you look at it even on a first half basis also, the first half will be better than first half of last year.
Right. Practically, your exit NIM, should have captured all the rate hikes, on the both the sides, I mean, asset liability. I was just wondering why, that should not extrapolate to first half 2024.
Yeah. Part of it gets extrapolated, but if you look at it, there will be in some pockets of business it may not have got fully translated, so that might come with a lag. There is always a lagged impact in both the sides, increase or decrease.
Okay.
We are, there is a possibility that towards the end of the financial year, one could also see a rate decline in terms of rate cut from the RBI. That will happen only in the fourth quarter, towards the end of the year.
Got it. Got it. Ideally one should go by 2.5 as the base NIM what you have said.
Base, base. That will be base.
Okay. Okay. That's it from my side, sir. Thank you.
Thank you. The next question is from the line of Sanket Chheda from DAM Capital. Please go ahead.
Yeah. Hi, sir. My question was on again, the increase in the stage two for this quarter, where you said that there was a technical thing wherein few NACH got bounced. My question is that once it bounces for such technical reason, maybe it appears in bounce rates or maybe one plus DPD, but usually gets resolved in certain 15 days. For it to appear in stage two, it has crossed 30+ DPD. Is there any action which was not taken in 30 days and you follow up only after that? Or how to read that?
No, it is not that no action has been taken, but we have been able to address it to a significant extent. These are very technical matters, takes time, but it is now more or less, it is, I would say in Q1 you will not see this happening. That has now been fully addressed.
More of due dates will be spread across now, entire month.
Due dates might be spread across.
Entire month, no?
Uh.
Not in, not in one day.
Okay. On ACL provisioning, we said that we have created buffers. On stage one we have just reached about 26, 27 base. Isn't that a regulatory requirement or you think it's a, it's a buffer on stage two and stage one?
No, I'm not able to understand. If you can explain it, your query?
There has been reclassification in from, say, stage three provisions to stage two and stage one this quarter. We saw a quite sharp jump in stage one provisions also. From, say, 5 bps to, say, 26 bps, 27 bps. Wasn't that necessary rather than say as a measure of buffer?
There is no regulatory intervention as far as the Ind-AS concerned. Ind-AS is purely a model-based, model-driven. It is kindly a model-driven output. This was something we had voluntarily done because we felt that the stage one provisioning is very less at around 4 basis points or 3 basis points. From there we have increased it. It is to ensure that there is a buffer.
Isn't there a provision in, say, Upper Layer, for Upper Layer NBFCs?
No, no, no. There is no, there is nothing of that sort for Ind-AS.
Okay.
Indices, there is no regulatory mandate. Indices means it's a model which is based upon PD and LGD, which is the ACL. That is the Expected Credit Loss.
I'm not talking about Ind-AS, sir. I'm talking about the scale-based regulations which are there.
No, there is nothing of that.
No, nothing like that.
There is nothing.
It's only our own potential we will keep.
There is nothing.
coming up.
Okay. We maintain that it's a buffer that we have.
Yeah. Yes, certainly.
Okay. sir, those were my questions. Thanks.
Thank you.
Thank you.
Thank you. Ladies and gentlemen, we'll be taking the last question. That is on the line of Bhaskar Basu from Jefferies. Please go ahead.
Yeah. Thanks. I just had one clarification around the restructured book. I think the restructured book under moratorium was about INR 1,400 crores last quarter and about INR 740 crores is now. Would the, I mean, was the entire INR 1,400 crores already sitting in stage two or the part of the book which has come out of moratorium now moves to stage two? I mean, is the movement in stage two anything to do with the movement in restructured book?
No. They were already in stage two.
They were, the entire book was already in stage two?
Yeah. Yeah. That we have clarified, I think in, last quarter year, quarter before that, we had moved all these four tier accounts to stage two.
Okay. Okay. Secondly, just harping back on the yield question. Basically when we look at the portfolio spreads exit, there has been a 33 basis points of increase on a sequential basis versus, say, the calculated increase of about 60 basis points. Was there any additional income recognition because of recoveries or a new account, some accounts getting resolved et cetera in this quarter?
No, there was no one-offs.
Okay. Okay. Thanks. That's all from my side.
Thank you. Thank you, sir.
Thank you.
Thank you. Yeah.
Thank you. Ladies and gentlemen, that was the last question. I now hand the conference over to the management for the closing comments.
I thank every one of you for this for your arrangement of the analyst call, and wish you all the best, a very promising and also very performing the year ahead, 2023, 2024. Wish you all the best. Thank you once again.
Thank you, members of the management team. Ladies and gentlemen, on behalf of Axis Capital Limited, that concludes this conference call. We thank you for joining us and you may now disconnect your lines. Thank you.