Ladies and gentlemen, good day and welcome to the LIC Housing Finance Q4 FY22 earnings conference call hosted by Axis Capital Limited.
As a reminder, all participant lines will be in listen-only mode. 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, Sandeep. Good morning, everyone, and welcome to the earnings call of LIC Housing Finance.
We have with us Mr. Y. Vishwanathan, Board, MD & CEO, and Mr. Sreejith Syal, CFO, to discuss the results with us. I would request the CEO to give us a brief on the results, of course, which we'll open the floor for Q&A.
Over to you, sir.
Thank you. Very good morning to you all, and thank you, Praveen.
Good morning and welcome to our post-earnings conference call of LIC Housing Finance Limited.
As you are aware, LIC HFL declared its results for Q4 2022 yesterday. Prior to detailing the operations aspects, I would like to highlight that this year began on a note of uncertainty with the second wave of COVID-19 impacting business activities.
However, during the year, the economic environment improved significantly, which is reflected in the turnaround in profitability for the company.
Asset quality marked a good improvement during the course of the year. The current year, that is FY 2023, promises to be far, far better. In spite of the hardening of interest rate scenario, the economic environment is much positive as compared to both FY 2021 and FY 2022.
The financial highlights of the quarter are as follows. Total revenue from operations, INR 5,300 crore as against INR 4,968 crore for the corresponding quarter of the previous year, showing a growth of 7%.
We are happy to inform that we have crossed two and half lakh crore mark in our AUM this quarter. Outstanding loan portfolio stood at INR 2,51,120 crore, against INR 2,32,003 crore as on 31 March 2021, reflecting a growth of 8%. The individual home loan portfolio stood at INR 2,04,230 crore as against INR 1,80,665 crore as on 31 March 2021. It is also up by 13%.
Total disbursements for the quarter were INR 19,315 crore as against INR 22,362 crore for Q4 of FY 2021 and INR 17,770 crore in Q3 FY 2022. Out of that, the disbursements in the individual home loans were INR 16,341 crore as against INR 19,010 crore for Q4 of FY 2021.
For the full year, disbursements in individual home loans, that is our core segment, clocked a growth of 14.35% from INR 46,927 crore to INR 53,662 crore. On the net interest income front, NII was INR 1,637 crore for the quarter as against INR 1,505 crore for Q4 of FY 2021, a growth of 9%.
Net interest margins for the quarter stood at 2.65% as against 2.66 for Q4 FY21. Profit before tax for the quarter stood at INR 1,314.41 crore as against INR 352 crore, growth of 273%. Profit after tax for the quarter stood at INR 1,118.64 crore as against INR 398.92 crore for the same period previous year, reflecting a growth of 180%.
Dividend declared was 425%, that is INR 8.50 per share, maintained at FY21 levels. Growth momentum continues to be positive despite rate hikes in the system and is being witnessed across the country in the individual home loan segment.
On project loan side, FY 2022 has been a cautious one. FY 2023 looks to be more promising in view of higher economic activities and share of disbursements is likely to increase from 5% to 10% in this year. In terms of asset quality, the Stage Three exposure at default stood at 4.64% as against 4.12% as on 31 March 2021, and 5.04% as on 31 December 2021, reflecting a sequential improvement in the same.
Total provisions as on 31 March 2022 is INR 5,839.10 crore, reflecting a provision coverage of 43%. This includes INR 299.18 crore for COVID-19 related provisions. ECL provision for assets recategorized as NPA as per RBI notification dated 12 November 2021 is INR 227.29 crore.
In our interaction post the Q1 earnings, we had indicated that the worst in terms of asset quality was behind us. It is heartening to note that there have been sequential improvements from Q2 onwards. This quarter, we have also been able to recover some NPAs in the builder and high value loan segment, totaling around INR 350 crore in terms of actual recovery, out of which one recovery of approximately INR 70 crore was written off account.
On provisioning cover, there has been increase from previous quarters. Overall credit cost for the quarter has also come down since a lot of provisions were front-ended during the earlier quarters of the year. Collection efficiency is being maintained and stood at 99% for the March quarter, 2022.
On the funding side, we have witnessed a reduction in overall cost of funds by 17 basis points during the Q4 FY 2022, despite hardening in the bond yields during the same period and 41 basis points during the current financial year. Incremental cost of funds stood at 5.14% for the quarter. Net interest margin for the quarter stood at 2.65% as against 2.66% over the Q4 of FY 2021.
Towards the close of this financial year, we witnessed hardening of the yields, which has further hardened in the first two months of FY 2023. On the liabilities front, there is about 50% fixed rate liabilities in the book, which will provide some cushion in a rising rate scenario. Also, more than 90% of our assets are on floating rate side.
As mentioned earlier, we are now in an increasing rate cycle. We have also increased our lending rates on fresh disbursements last week across all product categories. Project RED, the digital transformation project, is also nearing completion. With a refreshed digital footprint, the company is poised to emerge very, very stronger in this year. With this brief introduction, I would like to invite you for queries. Thank you very much.
Thank you very much. We will begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touchtone telephone. If you wish to remove yourself from the question queue, you may press star and two.
Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. The first question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah. Thank you for taking my question. Congratulations on a good quarter.
Personally, I mean, on disbursements, I mean, I would say, do you think, I mean, you could have done slightly better disbursements? Were there any particular reasons why you think, I mean, disbursements were at these levels? I mean, anything to kind of read into or do you think, I mean, this is what you were expecting and this is what you achieved at the end of the quarter?
One thing as a disbursement in Q4 you are asking, nah? Q4.
Yes, sir.
Yeah. What happened now, actually you also aware last year, financial year 2021, Q4 was almost a clear quarter where all 90 days were available for good working and all activity was full swing. Whereas what happened FY 2022, the last quarter in the month of middle of January and part of February was lost across all geographies in the entire country due to third wave. Some of the office also could not function properly. That also resulted some sort of downside as far as things are concerned.
Actually if you look at now the promising this year, FY 2023, already actually what happened, started very good positive note. We are very sure that this year that, incremental growth of nearly 15% certainly will be ensured.
You're talking about incremental growth of 15% in disbursements in FY 2023?
Yes.
Okay. Sir, the second question that I had was on the pipeline that you have in your developer and project loans. Obviously you suggested in your opening remarks that FY 2022 was more a year where you were also cautious. But at least kind of when we listen to commentary from some of the other housing financiers that you have, things are looking bright. I mean, they are talking about an improved pipeline.
What is your sense here? I mean, would you become, I mean, slightly more constructive and with your risk appetite kind of improve in the developer and project loan segment in FY 2023?
Yeah, certainly. Actually, last year we could not do very well. You are also aware that first half, most of the projects' activities were not in full swing. Only second half just slightly took shape and even because third wave here and there, some hit was there. Now the sky is very clear. What I feel in the current year, even our existing projects also may draw some more money, number one. Number two, what happened, all the pipeline, whatever we're having, I think more or less it is more than around INR 1,000-1,500 crore is there with us. With other activities across all the regions, this year we would like to at least, what you call, take the share of this project finance across, all our regions also.
Put together at least from the current level of 5% to 10% of our incremental business in the current year.
Got it. Sir, my last question was on the asset quality. I think, I mean, your credit cost guidance for FY 2023, I think will be contingent on what kind of a provision cover that you would want to maintain on your standard loans, which is stage one and stage two loans.
That was the first part of the question. The second part is, if Surit Sir, if you can share, I mean, some of the data keeping questions that we kind of keep asking you in every earnings call. Things like, I mean, what is the total outstanding pool of restructured loans, and if you can split it between retail and developer, and then a segmental split of your stage three into individual home loans, project developer, non-housing commercial and non-housing individual.
Yeah, Abhijit. You can just quickly note down. You wanted the split of NPAs, right?
Yes, sir.
As far as the split of the NPA is concerned, just on the individual home loan, IHL, it is 1.74%.
Okay.
In the non-housing commercial, which is including the project loans, it is 31, it is 18.04%. In the non-housing individual it is 8.4%. If you look at project versus retail, then the retail segment which is the IHL plus part of the non-housing individual that comes to around 3.16%. Balance is project loans.
I mean, project loans, what will be the change here?
It is around INR 4,124 crores.
INR 4,124 crores. Right. This is useful. Sir, what is the quantum of restructured loans outstanding now? If you can split it into retail and project.
Around 3%.
3%. That continues to be in the same range even last time also.
Of the total. 7 point
Total book size.
INR 78 billion, that is 7,800 approximately.
Right. Okay. sir, lastly, the question that I asked, what is the outlook on the provision cover that you would want to maintain on your stage two and stage one loans?
See, stage one, stage two, loans, if you note that also this, partly the IRAC movements have been, also, maintained there, right? Hello?
Right. I mean, what you're trying to suggest is those loans which you have not classified under stage three but are categorized as NPA as per RBI circular.
Overall PCR, if you look at on the Stage 3, right now it is around 43%. It has moved up from around 40%. We'll keep on gradually increasing it. I would say that we are nearing the targeted PCR.
Now in the stage three also almost around 43% is being maintained. What happened now as Sujit was telling correct now because of RBI circular, we are also what you call, we adopted that one fully.
Stage 1 and 2, yes. Stage 1 and 2 is also being provided for.
Right. Sir, my question was more around the cover that you want to maintain on Stage 1 and Stage 2 loans. Stage 1 we are having a provision cover of 25 basis points, and Stage 2 we have a provision cover of 3.1%.
Yeah, I think that is fairly stable. It should remain at around those levels.
Moreover, nowadays you see the recovery even our collection efficiency is almost 99% in March, and economic activities also improved. I think all our customers also nearly 70% plus are salary sector. We see a very good upside there definitely in our collection efficiency and also the stage one and will be certainly taken care, that is.
Yeah.
Sure, sir. This is very useful and thank you for patiently answering my questions. Thank you, sir.
Thank you.
Thank you.
Thank you.
I request all the participants to please limit your questions to two per participant. Should you have any further questions, we request you to come back in the queue. The next question is from the line of Mahrukh Adajania from Edelweiss. Please go ahead.
Yeah, hello. My first question is on the back book repricing. When does the back book-
Mahrukh, can you speak up a little loudly, please?
Yes.
Ma'am, a bit more loudly.
Yeah. My first question is on back book repricing.
Just to interrupt. Ma'am, actually, if you're wearing earphones or any external device, we request you to remove and speak from the handset. The volume is not very clear. The audio is not very clear.
Okay. Can you hear me now?
Yeah. Please tell. We'll try to manage today.
Yes. My question is that in the back book repricing, when does the back book reprice? You increased rates on fresh loans.
Yeah. See, actually the back book repricing happens every quarter, so the next review is due on first of July. Hello?
Yes.
Yeah.
Yes. Yes. Hi.
Yeah.
Okay, one more thing. I have one more question on the cost of funds. Basically, what is the outlook on cost of funds from here on? What proportion of liabilities are repricing next year? How does it look like?
Yeah. On cost of fund side, it is very clear that we are in a increasing interest rate cycle, and interest yields, interest rates have increased across tenors, mostly in the short end, but also across in the long end also. In terms of our overall liabilities maturing in the next financial year, that is FY 2023, around INR 25,000 crore is going to get redeemed.
Because we ended with 2.65% margins, we exited 4Q with that margin. Where do you see that number settling in the next 2-3 quarters?
It will be. See, actually if you look at it, always the exit margins are on the higher side every year after year. On a full year basis, if you see, FY 2022 the margins was 2.29%. Previous two years was 2.38%-2.4%. I will place the full year margins. I'm not looking into quarters, but full year margins will be in the ballpark range of 2.4%-2.5%.
Got it. Thanks. Thanks a lot.
Thank you.
Thank you. The next question is from the line of Biran Engineer from CLSA. Please go ahead.
Yeah. Hi. Congrats on the quarter. Sir, I just first wanted to confirm whether I heard something correctly. Our project loan NPLs are INR 4,124 crores. Is that correct?
Yes, that's correct.
that translates into 31% NPL versus 27% last quarter.
Correct. Right.
Is that just because the book has shrunk? Is it a denominator effect?
You're absolutely right, Biran. The book has actually shrunk year on year as well as between December and March.
Okay. On an absolute basis, the NPL has come down.
Yes.
Just to be clear.
As we mentioned in the opening remarks, our MD, sir mentioned that we have actually been able to recover, matlab cash recovery of INR 350 crore approximately in high value and project loans, out of which of course, one of them was a written off account.
Okay. Got it. Sir, just on the NIM question, if we were to raise 3-year bonds today, you know, after the G-Sec yields rallied so much, what do you think it would be at ballpark?
See, nobody is right now in the market to be very honest. Because markets are very volatile and I would believe that there is a little bit of panic reaction to the surprise rate hike by the RBI. Markets are likely to settle down because right now the entire yield curve is in a complete disarray. I will not get into a three-year money right now. If I had to go, I think it should be upside of 6% certainly. Even maybe closer to 7%.
For three-year money?
3-year money. Certainly upside of 6.5%.
Wow. Okay, that is helpful. Sir, just secondly, in terms of our home loan book, what percentage of that would be towards builder subvention schemes?
No, we don't do builder subvention.
Subvention you don't do.
We don't do. Nil.
Okay. Great. That's all from my end. Thank you and all the best.
Thank you.
Thank you.
The next question is from the line of Rikin Shah from Credit Suisse. Please go ahead.
Thank you sir, for the opportunity. Just couple of housekeeping questions. Could you give an outstanding amount of ECLGS disbursements that we have done so far? That's the first one. The second one is, the RBI circular impact was around INR 2,500 crores on the NPAs in the last quarter. What would that number be today? Third is, the tax rate seems to be low. Is there any specific reason why the tax rate was low in this quarter?
Your first question, ECLGS outstanding as of 31 March is INR 926 crores.
Okay. Thank you.
Second query is regarding the
NPA.
Second regarding the-
Project NPA.
Project NPA, right?
No, no. It was regarding RBI circular impact. Last quarter we had mentioned.
RBI circular has been implemented. You will see the disclosures in the notes to accounts also. The provisioning that is required in terms of the IRAC provisioning for the revised IRAC norms is around INR 227 crores.
Sure. Provisioning we have included in Stage 1 and 2, but the resultant loans, are they included in Stage 1 too or they are classified as Stage 3?
No. They actually, if you look at it, what the revised circular, there was one more circular which was issued on 15th of February 2022. They said that the revised IRAC norms does not have to be applied or implemented on the Ind AS numbers.
Okay.
Ind AS numbers are different. The IRAC NPL numbers are different. The Ind AS stage three numbers are different.
Got it. Got it.
We had as a matter of prudence, we have increased the provisioning assuming those cases to be impacted. Those are all standard accounts, by the way.
Were implemented as such, sir, also, even though it is not now immediately required.
We have implemented it fully.
Still time is there up to September.
We have fully implemented.
Sure. Just on the tax rate, any reason why the tax rate was low?
I think there was some addition in higher taxes paid in anticipation of a greater project loan income which was paid during the earlier part of the year, so that has been adjusted. Net tax rate-
Okay.
If you compare on a full year basis, it is by and large the same as compared to previous year.
Got it. Just one last one. Because of the recoveries in the developer loan accounts, from a written off account as well, were there any interest income adjustments or no one-offs in the NIM this quarter?
No, there are no one-offs in the NIM this quarter.
Perfect. Thank you very much. That's all from my side.
Thank you.
Thank you.
The next question is from the line of Shubhanshu Mishra from UBS. Please go ahead.
Hi, sir. Good morning. Thank you for the opportunity. Couple of questions.
Good morning.
The first one is on the NPAs in the builder book, sir. What vintage of these NPAs would be from the refinancing that we did post IL&FS? We are at around 31% NPA in the builder book today. Of this amount, how much is from the IL&FS refinancing book that we did after post IL&FS? That's the first. Second is, sir, would you want to comment on the demand scenario today? Do you think that we've already peaked in individual housing loans across the geographies, sir? As in not just metros, but across other cities as well. That's the second. Third is if you can tell us the PD LGD assumptions, if they have changed or what they are in this quarter versus a year ago, sir? Thanks.
Demand scenario.
Which one?
Demand scenario.
Yeah, demand scenario, if you are looking at what happened now as far as our individual loans are concerned, in our present year disbursements nearly 90% plus are only in the individual home loan segment. Even though all geographies were covered, and all, we see what you call robust demand everywhere. There's potential seen across all segments and also what you call even in all areas of our operations. Even our channels are very strong. That's why we feel we are very certain that this year we will be having very good at least minimum 15% growth over the last year. That's what we're expecting in the disbursement side.
Yeah. Your second query was pertaining to the PD LGD assumptions, right, Shubhanshu?
Yes. Yes, sir. Yes, sir.
Yeah. PD LGD assumptions actually get thrown up from the Markov model analysis, which is basically the study of the previous 20 quarters. Whatever has been the movement in accounts in the 20 quarters, that actually gets built into the PD and LGD assumptions for current quarter. If there had been a higher NPLs in the during a period of 20 quarters, then obviously the PD and LGD assumptions will be greater.
Right.
Does it answer your query?
No, sir. What is the number? What is the LGD assumption?
That is a model. That's a very complex model. It goes into various product categories, look into various parameters. It's a very complex model.
Sure, sir. Before one question-
The first query was regarding IL&FS refinancing. We have not refinanced any of the IL&FS loans.
I think he refinanced theirs.
We don't refinance any IL&FS loans.
What I meant is post IL&FS crisis, we refinanced some amount of loans which came up in the market. What is the overlap in the-
We have not done any of those loans which have been earlier financed by IL&FS or any other.
They are not in our books actually.
Because that's infrastructure, we don't do that.
Sure, sir. I'll take this offline. No problem. Thanks.
Yes.
Thank you. The next question is from the line of Kunal Shah from Carnelian Capital. Please go ahead.
Hi, sir. Thank you for the opportunity. I have two questions. One is basically on the competitive scenario. You know, in the last call you did mention that we intend to do better than the industry growth, you know, as far as loan book growth goes.
We continue to see a lot of balance transfers that are happening from our company to banks and also the incremental demand more tilted towards banks. Two-fold questions, right? One is basically what is your sense of the competitive intensity on the ground and how are we seeing our loan book growth as far as the individual segment specifically goes? Second question is obviously on the yields, right?
You did guide it for NIMs to be in the range of 2.4% kind of ballpark number on a yearly basis. Specifically on yields, how do we see that? With the question of growth versus yields, how do we see that?
Okay. Good. Good. You have got a very good question actually. What happened regarding this, what you call the market competition and other things you have mentioned correctly. As I told you, what happened Q4, even though we were having. Of course, we also earlier indicated that the growth will be better than that and all in our last earnings session with you.
What happened now, Q4 actually there was a hit because of that January and part of February was lost because of this COVID. That's why many of the offices are also closed across. It's why in that quarter only got affected. If you look at the overall for the entire year, there is a growth of around 13% at minimum. That's what happened.
Apart from that, what happened earlier quarter of 2021 also had a lot of what you call, you know, incentives, this, that and all. Then that was clear year also, clear quarter. That was there. But now looking at the present scenario, we are very confident because the demand is there seen across. Moreover, what happened now we have upgrade our systems also there in our portals.
We have given some sort of, what do you call now, more publicity and also more visibility for the builders whom we have financed. So what happened now our customers can select across which is a property they can look and buy. That's sort of what we call facility we are providing the portal for all of the, our project loan borrowers. So that gives a wide scope where we can have. Earlier it was not there.
We're expecting at least some 5%-10% of our share from that itself, number one. Number two, channel-wise also what happened, all channels are very strong. Our channel, either our tied-up channel of intermediaries or our own Financial Services Limited channel or our direct marketing channel, all channels are fully strengthened now.
With this there will be very good, what you call now, growth across. That's why competition I think we will not have much worry. I think going ahead, a minimum 15% will be there in our actually growth will be there in the books, actually our business.
Secondly, the project finance also this year because the builders were already who are there with us earlier and then our, now we have put a very good system. Actually, a special task force is selected for that to what you call now reach out to maximum number of people in all areas. We also identified some good number of our centers which can process it faster.
With that and more adoption of the digital technology across will help us to have very good growth in the project finance also.
Sir, what sort of digital will help us have growth? I mean, we always understood that yields is one of the biggest drivers for either the risk part or the growth part, right? Digital only helps improve efficiencies in terms of cost. You're saying that digital enhancement will help us have growth. Is that understanding correct?
No, no. Digital, what I meant to say, now you see if the individual loan segment if you see, we have got our HOMY app. That app is now almost what happened, 20% of business is coming through that.
That is taking care of most of the operations, even any, in any place. That is one thing. As the project loans are concerned also what happened in our own what you call portal, we have given a special access to the customers.
They can see. Actually, they can also see through all the projects where we have financed. That what happens they can select the property and also have a very good idea about that. That definitely will help him to choose, and he will become our customer immediately. That's all the digital transformation, number one.
Number two, what happened, the processing also what happened now is more or less it is seamless. With that our Project RED initiatives were taken across. There will be a substantial improvement in our operations also digitally. That's it.
Yield part, I mean, we have already reduced the rates on our offerings, competitive in the market. How do we see that going forward in the coming years?
Yeah, no, can you please kindly repeat? I could not follow the last part of your query.
What I was saying is how should one look at yield on the loans? Because we have reduced the interest rates on loans that we offer to our customers, right? Sir did guide about 2.4% on the NIM part, but specifically more on the yield part, how should one look at that?
No, we have not reduced. We have actually increased. Last week we increased by 20 basis points across all the product categories.
Product categories. Sorry, how much is the increase?
20 basis points. 20-25 basis points.
Okay. How should we look at our yields?
Yields will be in line with the interest rate movement. If you see, for example, what we mentioned in the opening part, I do not know whether you were able to, you know, hear that. We had mentioned that, 90% of our assets are on the floating rate side.
That's correct. Okay.
Obviously that provides a good, I would say, an avenue for us to transmit the rates as and when it impacts us in terms of higher input cost.
Okay, thanks. I'll join back in the queue for another question.
Thank you.
Thank you.
The next question is from the line of Shalini Vasanta from DSP Mutual Fund. Please go ahead.
Hi, this is Vivek Ramakrishnan. I have two questions. One is in terms of competitive intensity. With credit growth being more broad-based, are you seeing that the mortgage teaser rates and all that were being offered are being reduced? In the sense that the competitive intensity is being reduced, which will allow you to pass on prices.
That's the first question. And the second question is on the builder book asset quality. Given that you're saying that the picture looks very good, on the existing NPA also, do you expect even more recoveries in the coming quarters? And can you guide us in terms of how do you think that is gonna shape up, and if there are any chunky ones that are gonna get repaid? Thank you.
Your second question, I think you are asking about the project, what you call the delinquencies, I agree. Yeah, going forward now there will be good recovery. Already some systems, already some resolutions are in process. With that we see some recovery will be there certainly in that segment also. Number one, first one, what is that about? That, you are asking about-
Competitive intensity.
Actually you are asking about competitive intensity, no. That actually the market I agree now because rate curves are now on the rising scenario. There will definitely be feeling there. Historically, if you look at our own, what you call, performance in the past where the rates have gone up like that in general, our performance has been very good and then excellent growth was shown.
Our teams are across actually what you call now fully strengthened in the sense they are all fully, what you call now, equipped with all the input and other product features. With that what happen now we are having no doubt that the competitive intensity certainly we will manage, and we used to manage also earlier. Our people are more competitive. They are also totally competent to manage that.
Vivek, if I may just add, generally it has been observed that competitive intensity, I mean, competition intensifies during days of easy liquidity. Now we are withdrawing from the days of easy liquidity. To that extent, I think, there will be a little bit of easing in the competitive intensity, especially from lower rated lenders, lower rated entities who may not be able to fund themselves at attractive rates.
Okay, that's good to know. Congratulations and all the best.
Thank you.
Thank you. The next question is from the line of Ruchi Babbar from Reliance Nippon Life Insurance. Please go ahead.
Yeah, thank you for taking my questions. Congratulations on the good set of numbers. My question is pertaining to, I think, continuing on the line of our developer book. Considering the rising construction cost via the input cost and everything, do you see any issue with respect to the solvency of any of your borrowers in the developer book, because 30%, what I understand is the 31% is the NPA and the part of the restructured book roughly around, as I can see, some 4,700 is also stressed. Roughly about more than 50% is kind of a stressed book in the developer book.
Do we see those kind of a solvency issues in these developers going ahead considering the current situation?
No, no, I think actually this, we when we analyzed our own books across, in the project finance existing portfolio, no further delinquencies are almost there because what happened now out of the these things even some may become regular.
Even across the cities if you see some cities like, wherever you see like even in Bangalore, Chennai, Hyderabad, even some places in Mumbai, even some parts in Mumbai, even these, actually some resolution is already in process. With that, we don't see any further downside as far as the delinquencies are concerned, the home loan, actually this project loan front.
If I may add, we are witnessing some signs of a turn in the real estate cycle. Demand has been quite sustained throughout the last two years and still continues to sustain. Sales are improving and price points are also moving up. If there is an indication of input costs increasing, then price points are also not staying at the same place.
They are also moving up. That actually is the beginning of another real estate cycle as we see some early indications of.
Right. Understood. One more thing with respect to the developer book, like last quarter it was 27% stage three assets in the developer book. If I have to just convert this, it was some INR 3,800 and, as on March 2022, it was INR 4,100. There was some slippage in the quarter which had happened.
No, there has been no slippage of any major account. In fact, there has been recoveries as we mentioned.
Because-
Moreover, we are also following up on RBS as well as IRAC, which are applicable now.
That could be the impact.
Okay. Understood. Got it. Right. Sir, lastly, if you could just help with the write-off amount for the quarter and the year.
No write-offs. No write-offs are there.
No write-offs.
No write-offs in the quarter. None.
Okay. Thank you so much for taking my questions. Very helpful.
Thank you.
Thank you.
Participants, we request you to please limit your questions to one per participant. The next question is from the line of Harshvardhan Agarwal from IDFC Asset Management. Please go ahead.
Hi, sir. Thanks for the opportunity. Just have one query. Can you please give a break-up of this restructured book into individual, developer and LRD book?
Yeah. Overall book was, I think, that is OTR. OTR is coming to around 3% in the entire portfolio or entire loan book. In the breakdown, also we'll give you.
The project outstanding OTR is around INR 3,900 crore and retail which constitutes of individual home loans and other categories is INR 3,940 crore.
50-50 almost.
Roughly, you can say 50/50 out of 7,800, which is roughly around 3% and a little bit more.
Sure, sir. Thanks. Thanks a lot.
Thank you. The next question is from the line of Subramanian Iyer from Morgan Stanley. Please go ahead.
Hi. Thanks for the opportunity. Just, I had one bookkeeping question, actually. In your exchange filing, you report a net worth number, so where the gap in FY 2021 was the impairment reserve of about INR 205 crores versus the book value that you have. This time it seems that the gap has widened to around INR 1,800 crores. I'm not sure if I'm missing something. Just wanted to clarify that.
No, there is actually certain formula which has been specified by NHB to exclude certain categories of reserves, special reserves, et cetera. That has been affected.
Okay. Does that impact Tier 1 as well?
No, no.
No. Okay. Thank you.
Thank you.
Thanks.
The next question is from the line of Kayur Asher from PNB MetLife. Please go ahead.
Yeah. Thank you for the opportunity. I just wanted to understand your comment on what is driving the quarterly variation in NIMs. I think CFOs are also alluded to Q4 typically being a better performing quarter in the past as well. What is driving this? Is this a function of some accounting policy we follow?
No, Kayur. Actually, it is not any accounting policy which is, I mean.
Yes.
See, actually, if you look at it, there are two things which happened. During the fourth quarter, we were able to get some repricing on our existing liabilities and big chunky accounts of bank loans we have been able to reduce the rates significantly. That is one reason. Second reason is on fifth of January, we have actually increased our lending rates much before market competition. We had increased our lending rates way back in January itself across all product categories. That also has resulted in certain increase in the income generation.
Understood. Understood, sir. Sir, just one quick question to follow up on that.
Recoveries always help. See, recoveries during the quarter will always add to some interest in
Understood, yeah. Just one thing on the funding from bank loans. The share of funding from this avenue has increased in recent years, so from almost 10% to 30% now. Just wanted to understand what are typically the terms here. These are mostly fixed rate loans or they are floating. Also if you could talk about duration, are these typically and predominantly longer tenure?
Yeah. They are generally five-year term loans, and they are generally floating it either with some external benchmark or with some MCLR or with some repo.
Sure, sir. Yeah. That helps. Thank you.
Thank you. The next question is from the line of Sanket Chheda from DAM Capital. Please go ahead.
Hi, sir. Congratulations on good set of numbers. My question was on NCDs. Out of the 15% NCD that we have under borrowings
Would it be possible to say how much is maturing in next 1 year? How much-
The next FY 2023, the total maturities will be around INR 25,000 crore.
Okay. Related to that, in last one year, maybe, because we were higher on NCDs, the drop in cost of funds was relatively less for us, per se, compared to other players. Now, the NCDs, maybe three-year NCDs or five-year NCDs which you would have taken pre-COVID are coming up for the maturity now in next one and a half years. Do you think that overall cost of funds will not move much in terms of maybe going up over next twelve months on a relative basis? Since we had the relatively lower fall in the cost of funds, the rise will also be relatively low. Do you see that, per se, given our borrowing mix?
I will respond this way. The FY 21, the reduction in weighted average cost of fund was 115 basis points. There was also a 115 basis points reduction in the repo. FY 22, there was no reduction in repo, but we still achieved 41 basis point decline in cost of funds on our INR 200,000 crore liability.
Mm-hmm.
Put together, it's almost INR 3,000 crore benefit to the, I mean, savings in the interest expense. Of course, partly aided by movements in the interest rates.
Yeah.
Now, coming to your specific query regarding the movement now, it is very obvious that, when you have a larger share of fixed rate liabilities as compared to assets in any book, in a rising rate scenario, it always gives a cushion.
Correct. My question was particularly for. I know the call was. The question I was thinking because our incremental cost, say, high of 0.1%-0.4%.
Correct.
Was the weighted average cost of still relatively higher again.
Yes.
among the peers.
Yes.
that's why I wanted to have a sense that, maybe in next one year would not be, or would be less than other-
Sure.
Players would have. Also, next thing is to see if the HDFC may go under the banking structure in next report.
Sir, your voice is breaking up.
Yeah.
Breaking up.
Yeah. Voice is breaking. Kindly, clear.
Is it clear?
Now it is.
Now it is clear.
Yes. The second question was that HDFC may move under banking structure limited in next, say, three quarters. They have about 40% NCD, so about INR 1.2-INR 1.3 trillion in size. Once they move out of banking structure, do you see that that much supply would be available wherein the cost for you could remain benign for a longer term, maybe next 1-2 years also?
Yes. Some marginal benefit could be there. It is very difficult to specify right now.
Correct.
Because only when the event happens, we will actually get to know the outcome of it.
How the situation will be?
How the situation.
Correct. Sure, sir. On the AUM growth, you are saying that your-
Sorry to interrupt again, sir. Your voice is breaking up. Actually, we are not able to hear you clearly.
Sir, the next question was on AUM growth, sir. Since we are saying that the project loans are getting up, so do we see about, say, mid-teens kind of growth in FY 2023 on AUM level?
No. Project
Can you?
It is already.
Projects? No, no. In the project finance you are asking about, right? Because last year we could not do very well. This time our, what you call, our total disbursements for the current year of FY 2023, we would like to have at least something like, the share will be around 10% from that. That's what we're expecting.
No, retail is pretty strong. We did about 10%. Now we are seeing that loan against PL will also pick up. I'm just saying wanted to have a sense on what would be the AUM growth for FY 2023 or how will it look like?
AUM growth
AUM growth in which segment?
Overall.
Overall, sir. Yeah.
Overall will be in two digits. Yeah, overall will be definitely in, actually double digits because this year we could show around 8%, but next year suddenly it will be more than double digit. Actually it will be suddenly in double digits.
Okay. Lastly, sir, there was one request on the capital adequacy.
Come back in the queue, please.
Last thing, just wanted to check on capital adequacy. Since we are still reporting September, would it be possible to give a mark-to-market subject to audit approval because all the other banks have been reporting on a real-time basis.
No, I'm not able to. We are not able to hear you clearly. Your voice is breaking up. Please speak a little bit louder so we can hear.
Sure, sir. I will come back.
Thank you. The next question is from the line of Vikram Subramanian from Spark Capital. Please go ahead.
Hello?
Your voice is very feeble.
Am I audible now?
Yeah, audible.
You can speak loudly.
Yeah. Just one question. On the PPT, page number 6, you have mentioned about the book value, which in 2022 is
4.4, 414. This doesn't reconcile with my number. I checked both on the standalone and consolidated basis. The book value should be closer to 445, 450, 448 actually. Is this to do with the impairment reserve or is there some other impairment we are taking on the net worth?
There is no impairment. We'll just check offline, but there is no impairment. Whatever is the total book value divided by the number of shares increased because number of shares have also increased.
No, no. Even accounting for that. My all the previous year calculations sums up, they tally. It's just 2022-
It's just-
It doesn't tally.
You're asking for dividend.
Sure.
Okay?
Sure.
Thank you. The next question is from the line of Bhuvnesh Garg from Investec Capital. Please go ahead.
Okay.
Yeah. Hi. Thank you for the opportunity. Just want to know that what percentage of your restructuring book has started payment. Secondly, that we see within your restructuring book, about 35.13% of the book has already flipped into NPA 24. In that context, how do you see potential asset quality challenges in this book going forward? These are two questions.
No, if you look at the restructured book, it was around 3%. Last quarter also it was there more or less. What you call the quantum remains same. Within that, what happened now if you look at, some of the high ticket size cases, even in the, what do you call, retail segment also we could recover. That is also there. Going forward, we are very sure that even actually we have put a special task people across all the areas, identified some numbers which can be regularized at the earliest. This quarter we're expecting a good turnaround there also. With that there will be suddenly improvement in this OTR category in all categories, in all the vertical, segments, be it individual or even commercial or even some part of project source.
Oh, thank you. Thank you.
Thank you. The next question is from the line of Aditya Jain from Citigroup. Please go ahead.
Hi. Thank you. I want to ask when the accounting for the cash recovery, the INR 350 crore, how much. What is the benefit to the interest income from cash recovery?
Can you please be clear or something? What is the cash you are asking about? Which cash?
In the interest income, what is the benefit from the cash recoveries which we did in this quarter?
No, mostly the cash recovery is in terms of principal.
Okay. It will be.
Small amount of interest, but mostly it is principal recovery.
Got it. That helps. Then on the RBI circular and IRAC norms, you mentioned that the assets which would have been NPA are in stage one and stage two, and higher provision has been made on them. We made 15% provision on them, and so nothing more is required to meet IRAC norms. Is that right?
Right.
Got it.
Right.
The last thing on the builder book decline QOQ, that is because of repayments or is there any other driver there?
Actually repayments.
Okay. No sale of account. It's.
No, no.
No, no.
There has been no sale of any account.
No sale. No write off, no sale.
Got it. Got it.
Some recoveries happened and some repayments also happened.
Okay. Thank you. Thank you.
Thank you. The next question is from the line of Krishnendu Saha from Quantum AMC. Please go ahead.
Hello.
Hello.
Hello.
Yeah.
Yeah. I'm okay. I just want some little bit of understanding. The liquidity coverage ratio increased from 230 to 549. Just on that note, sharp increase. How do we take the gearing? It's reaching 10. How do we see that in the future?
See, as far as the LCR is concerned, you will appreciate that the LCR is maintained on a day-to-day for the next 30 days. Now, what happens is that April typically is a month where committed disbursements are very low because majority of the pipeline of disbursement is exhausted by March. Secondly, during April, there are no major repayments of liabilities like NCDs or CPs. To that extent, it might appear as an aberration. On an overall quarterly basis, if you see on a daily average of 90 days between first of January and thirty-first of March, it is much lower. It is around 170%.
Right.
If you take it, for example, in the month of May, any day in the month of May, again, it will be in the range of around 120-130%.
Right. It's a point estimate. That is why it is reaching high.
It is on a particular day. Correct.
Yeah. Point estimate. Right.
You're-
Secondly, gearing, what do we look at the gearing?
Gearing, say we had done a preferential allotment in the last year, you are aware-
Yes
from the promoters. To that extent the gearing matter has been addressed and we are within the regulatory norm comfortably in terms of overall limits of gearing, which is number of times of the capital which we can lend.
Where do we see at the end of the year? With the growth in the book at the mid-teens and everything, recovery is coming and where do we aspire to be? Let's put it this way.
Even on an as is where is basis, it should improve because last two years there have been significant erosion from the tier one because of the provisions made.
Sure.
That is unlikely to replicate, in the next one year or two years. To that extent, we can say that even on a standard, even on as is where is basis, it should improve.
Sure. Thank you. Thanks for your time.
Thank you.
Thank you. The next question is from the line of Prashant Kumar from Sunidhi Securities. Please go ahead.
Thank you so much, sir, for the opportunity. Just one question on liability side. You have mentioned that INR 25,000 crore in FY 2022-23 is going to mature. I just wanted to understand that current ratio on the borrowing mix, 30% holding from banks and NCD is 53%. Where will be the more incremental borrowing that this mix will be going forward? What will be the picture on this? Because the banks and NCD, there is huge difference in weighted average cost. I think the bank will be your preferable area, but I want your outlook, sir.
Banks, all three options will be kept open because the wholesale debt market is also a very dynamic market. With positive news flows you can certainly get good deals. Nothing is ruled out. Having said that, focus this year will be on retail liabilities. About 20% of incremental borrowing is likely to come through retail liabilities incrementally.
On restructured book, INR 78 billion currently around 3%. Where is it on asset classification? Where is it exactly in stage one or two?
Which one? OTR?
Yeah. The total restructure book, INR 78 billion.
Yeah. OTR generally, OTR condition is that the account has to be standard at the time of applying the OTR. By definition itself, it will sit in either stage one or two.
Sir, just on back calculation on this one. The total stage one and two provisioning is around INR 800 crore. On the prudent manner, even on the restructure book, if I calculate, take 10%, it should be around INR 780 crore. On stage one and two, there is a very minimum, I mean, around INR 20 crore, like, you have the total after a restructure book of provision. It is very low.
There is no option. 10% provision has to be made on restructure book. There is no option of not doing it.
Yes. Yes, sir. Okay. Okay.
It's well done.
One on fee income side. There is continuously degrowth on fee. Is there any upside you look at on this one?
Yeah, certainly you can. You will get to see upside. You will certainly get to see upside.
Okay. Thank you so much, sir. That's it from my side.
Thank you.
Thank you. In the interest of time, that was the last question for today. I would now like to hand the conference over to management for closing comments.
Thank you all. I thank every one of you for active participation, then again, very good interaction with all of us. Finally, I would like to say a few words. We have gone through two different years, very, very difficult years also due to pandemic.
With the improvement economic activity and normalcy now being restored, I think FY 2023 is expected to be very, very buoyant and positive on all sides, and our company is all set and fully geared up to scale greater heights that I think in the recent past we have not seen that height we would like to reach when the sky is clear with very, very certain map is very in a sense the ground is very clear and the road also very certain that way we would like to reach. The goal also very clear.
With all the people in our offices and the committed field force everywhere, and the company is poised to scale new heights certainly this year. FY 2023 will be very, very memorable year. Thank you. Wish you all the best.
Thank you very much. On behalf of Axis Capital Limited, that concludes this conference.
Thank you.
Thank you for joining us, and you may now disconnect your lines.