Created, and we are really proud of it. By the way, I'm Deepika Gupta Padhi. I am a National Head, IR and Treasury for the company, and I would now like to call upon Bhavya Taneja, who is our Head Market, National Head, Marketing, and he'll talk about what we want to show you.
Good afternoon, ladies and gentlemen. It's my pleasure to invite you all and start this event with something very, very special to us. This is our first-ever anthem, which we'll be presenting to you. This anthem represent true values as well as our purpose of the business. What's special about this is that it has been produced, it has been sung, it has been written, and it has been acted by the PNB Housing employees. Without further ado, I would like to show you the our first-ever anthem.
As Bhavya said, this is all coming from PNB Housing team. Before we start, let me just introduce the team present over here. We have Mr. Girish Kousgi. I don't think he needs an introduction. You all know him very well. We have Vinay Gupta. He is our CFO, with over 22 years of experience across various financial domains like FP&A, treasury, financial controllership. We have Dilip Vaitheeswaran. He's our Chief Sales Officer for Prime and Emerging Business. Over 15 years of experience across sales, products, collections, risk, and various other facets of business. Then we have Anujai. Anujai has over 20 years of experience. He is our Business Head for Affordable Business. He again has an experience across various verticals like sales, transformation, policies, processes. Then we have Jatul Anand.
Jatul Anand is our Chief Credit and Collections Head for Prime and Emerging. Over 22 years of experience, primarily into the mortgage domain across sales, risk, collections, and credit. Then we have Anubhav Rajput. He's our Chief Technology Officer with more than 25 years of experience in the IT domain, have handled various complex transformation projects across the functions. We have Valli Sekar. Valli Sekar is our Chief Sales and Collections Officer for Affordable Business. She has over 28 years of experience, primarily into mortgage, with 13+ years into the affordable business. We have Bhavya Taneja. I introduced you all, that he's our National Head, Marketing, with over 15 years of experience across brand management and digital marketing. And we, of course, have various other teams present over here with us.
We have Sakshi, who's a part of our admin team. We have Rajg uru, he is a part of our marketing team. We have Hina, who's a part of our investor relations team, and Payal, whom you met outside at the registration desk. So over here today in the agenda, can I have the presentation, please? So as I have been interacting with a lot of you over the last many years, the company has actually gone through many phases. We started with a high growth phase, and then we moved on to a consolidation phase, and now we are back to a balanced and a profitable growth, as we, as you can see from our numbers as well. So in today's agenda, what we would like to cover, we'll talk about our company and industry performance.
We would like to talk about the strategy going forward, the execution of that strategy, which the teams will talk about. We'll talk about how our technology is transforming various things for us, what we have done in our underwriting and collections, and how is the financial performance of the company, which is looking as of now as well as as of going forward. I'll just have one request. Please write down your questions, whichever you have, during the tenure of the presentation, because it will start with the MD and CEO on the strategy, and then by the functional heads on the execution of that strategy. Before I hand over, I would like to show you an AV, which actually talks about our FY 2024 performance, an exciting performance which we have done. So I would like to play that AV, please.
Now, let me call upon to the stage the person behind the recent performance of the company, our MD and CEO, Mr. Girish Kousgi.
Thank you, Deepika. Good afternoon, ladies and gentlemen. I must thank all the investors and all the stakeholders for being with the company through its ups and downs. Last year was very, very eventful. I'm sure all of you are aware of how the company has transformed over the last few quarters, especially in last year. Thanks for taking time out to be here today with us to discuss, you know, we will be sharing a strategy in terms of how we are going to take this company forward for next three years. So if you look at PNB Housing, there are three phases. The first phase was between FY 2016 and FY 2019, where we saw very high growth. Growth on all aspects, be it retail, be it corporate. I think it was a really, really strong growth phase.
After that, we had to course-correct because we saw stress on the corporate book, we saw stress on the retail book. There was an event which happened, and therefore, we had to really manage our portfolio better. Therefore, we thought, let's sit back, think through, and consolidate and be ready for future growth. This phase between 2020-2022, we focused on running down a corporate book, increasing retail business, trying to work on asset quality, both on corporate and retail. Now we have entered a new phase, which is very exciting. I always say that housing finance companies are in sweet spot, given the demand for this product, which is not for next three years, not for next five years, I think it is for next few decades to come.
The growth story is going to be very good for this industry, and we, as a company, want to participate in this. So we took a lot of initiatives. We got the growth back, especially on retail. If you see, a couple of years back, the growth on retail, you know, was flattish or maybe negative. In the last one year, in the last six quarters, we ensured that the focus was more on growth and getting back growth in retail. We showed a growth of 14% in the last year over the previous year, and in FY 2023, the growth was 10% on retail. Now, this story is going to continue, and for this story to continue, it was not enough that we only focus on retail.
We had to strategize and get into a few other segments, considering the fact that we have a large prime book and we had tweaked, we had made lot of changes. We had made changes on origination, on the retail side, on the collections. We did lot of changes, multiple changes. We tweaked the policy. We took certain hard calls. PNB Housing earlier was known for doing high-value cases. We moved away from it. PNB Housing was known for focusing more on super prime and prime, to a large extent on super prime and to a certain extent on prime. We completely moved away from super prime to prime, and obviously, growth had to come in with profitability, considering that our focus was not there in terms of doing high value, our focus is not there in terms of scaling up the super prime and the prime segment.
So we started affordable business called as Roshni, and we were one of the fastest to reach book of INR 1,000 crore. And in 15 months' time, that is March 2024, Roshni book was close to INR 1,800 crore. We closed March 2024 with a book of INR 1,790 crore. I am very happy to share, as I stand here in front of you, we have crossed a book of INR 2,000 crore in Roshni. And this, and this journey is going to continue in future as well. So we are talking about moving to newer segments. We launched Roshni end of last to last year. Last year, we saw how it has taken shape. Still, that was not enough because we had so many challenges if we see two years back.
And when we see now, I think broadly, given that the asset quality is going to improve from where it is today, given the fact that all the risk metrics would be in place and further improve, we had to think of something unique, something different, and therefore, we started a new vertical called Emerging Market Vertical. Now, this is going to give us a higher yield, lesser than the Roshni yield, affordable segment yield, but much, much higher than the prime. And therefore, we are guiding a CAGR growth of 17% from now till FY 2027. FY 2023 and FY 2024, if we broadly look at how the shareholding pattern has changed, we can see PNB, our promoter, for regulatory reason, the stake has slightly come down from 32.5% to 28.1%.
I think that apart, we can see a lot of interest from FIs, mutual funds, and body corporates, where the shareholding has gone up. Last year, as we are all aware, we raised capital. Market cap is approximately about INR 19,234, and the book value is INR 577. PNB Housing Finance at a glance, we are the third largest HFC by loan book. PNB, Punjab National Bank, is our promoter. We get very good support from the promoter. As I mentioned, stake went down because of regulatory reason. We also thought that if we have to grow, if we have to move towards newer segments, we need to identify segments and strengthen our branch infrastructure. So we opened branches. As of March 2024, we have 300 branches. Out of these 300 branches, 160 branches are in affordable, 50 branches in emerging markets.
That's the new vertical, which we started this year. We opened the branch, the all the branches between December to March, and the balance 90 branches would still focus on prime business. We have total employees of over 5,500. This includes both PNB Housing and PHFL. PHFL is our subsidiary company, which houses the frontline executives on sales, credit, collection. We have crossed book of INR 65,000 crore. Out of this, retail is about INR 63,350 crore, and the rest INR 2,000 crore is corporate, and AUM of INR 71,000 crore. We also ensured that we, within the portfolio, we reduce corporate share and increase retail. So today, overall portfolio, retail is 97%. Both loans and deposits put together, we have customers of over 5 lakh.
Our GNPA, which used to be about 8.13%, two years back, is now down to 1.5%. A corporate, which used to be about 1/3 , 33%, is now down to little over 3%. We just have one account, small account, which is about INR 78-INR 80 crore, which again, will get resolved in few months from now. On the retail side, our GNPA used to be 5.06% two years back, now it is down to 1.45%. Our net NPA is less than 1%, it's at 0.95%. Capital adequacy is at 29.26%, of course, post rights, and Tier 1 is 27.9%.
ROA, I think there has been significant improvement in over the last few quarters, and for FY 2024, it is 2.2%, and the book value is 577. We also got, as, you know, I had mentioned, we got upgrade in rating from AA to AA+ from 3 rating agencies. Key performance update. There's a comparison between FY 2022 and FY 2024. If you look at disbursements, there has been a significant increase. Loan book has increased from INR 58,000 crore to about INR 65,500 crore. AUM has increased from INR 67,000 crore to INR 71,000 crore. As I mentioned earlier, the retail as a percentage of overall portfolio was 87%, now it's gone up to 97%.
Retail loan growth, which used to be negative a couple of years back, and even last to last year, till about first half, it was flattish or 1% or 2%. From there, we took it up to 14.1%. We had guided slightly higher number, but yes, we had a lot of challenges. We did our best to try and better our growth rate. We were able to reach at 14.1%. Deposits, it was a conscious call. If you look at our liability mix, deposit constitutes to almost 31%-32%, so it was a conscious call. The call was to try and maintain the book, not grow too much, but bring down the cost. On gross NPA, as I mentioned, it was 8.13% two years back, now we are down to 1.5%.
Net NPA was over 5%, now it is less than 1%. ROA from 1.24% to 2.2%. ROE 8.92%, and now it is 10.9%, again, after rights. Capital adequacy 23.4% to 29.26%, and gearing ratio, which was 5.37, is down to 3.68x . Sorry. A bit on the industry, I think we've been talking about this industry. In India, mortgage penetration is very, very less. I think it moves by 0.2-0.3 points every year. Even today, it is quite low, which means huge potential. The first quadrant talks about IHL, that is, individual home loans. If you see the growth, the growth is about 14%. Huge potential.
Penetration is less, the industry is growing at 14%, there is huge scope, and this industry will generate a lot of demand for next few decades to come. HFCs, if you look at the portfolio mix, home loan as a product is about 75%, 15% is LAP, and the balance is construction finance and other products. So industry is quite good, growing at a very good rate, lot of potential, with lot of favorable government policies, not in the past, even in future to come. I think this industry will do well for next few decades to come. This is affordable focused housing finance companies. The growth has been 19%. You can see from 2019 to 2023, it's at 19%. Overall, mortgage industry growth rate is about 13.5%-14%, but affordable is at 19%. The growth is much higher.
If you look at market share by ticket size between HFCs, NBFCs, and banks, both private and public, we can see the first three blocks, that is up to INR 25 lakhs, the share of housing finance companies is quite high, which also says the potential is very high for housing finance companies for ticket size up to INR 25 lakhs, which would, in a sense, mean that there's a lot of potential for affordable and emerging markets. That's our focus going forward. Journey so far, our focus was on retail. The book grew by 14%, and we have changed the mix of the overall portfolio. Now it is largely skewed towards retail. We are trying to diversify the risk, and therefore, we thought we should focus more on retail. Now it is 97% of the entire portfolio. We launched affordable.
We were one of the first ones to reach a book of INR 1,000 crore, scaled up pretty fast, opened up more branches so that we are ready for the coming years as well. Whatever business we have done now, that was from a set of 100 branches. Now this year, we will have 60 more branches contributing to affordable business. Total branch footprint is now at 300, and better collection efficiency. We did a lot of work on collections because we knew that mortgage is a very, very safe industry. It's secured. Broadly, in mortgage, we look at two things: one is the collateral, and second is the cash flow of the customer. Importance given to both of these two parameters are almost equal, being a very simple product.
There was COVID, one of its kind in the century, that actually impacted many housing finance companies. It also impacted us. If you look at the reason as to why our retail book was under stress, leaving aside corporate, it was largely due to COVID, and therefore, collection efficiency dropped. We took lot of, lot of, action on the collection. We made lot of tweaks. We changed the structure. We got in new teams to focus on new businesses. We improved the efficiency drastically. That led to drop in GNPA to a level of 1.45% on retail and overall, 1.5%. On the focus, our focus would continue to be on retail. Within retail, in the pecking order, affordable, emerging, and prime. We would restart corporate during the year, but that will be less than 10% at its peak.
Today, the book is about INR 2,000 crore, out of total book of INR 65,350 crore. So today it is 3%. So at its peak, corporate will always be less than 10%. So our focus is going to be on retail. We have shifted to high-yielding markets like emerging. We started affordable. When we started affordable, the plan was, even though the entire team was from the industry, be it sales, be it credit or SME, legal, technical, operations, the entire team was from the affordable industry. However, they were new for PNB Housing, and therefore, we thought year one, we will try to scale up, try to get deeper into markets, understand this market, even though average experience of the entire team is more than 4-5 years in this market.
We decided that we will focus on some of the segments and not all the segments, and therefore, our yield was 11.5%-11.6%. Now, this is the second year. Now, this year, all the old 100 branches are going to focus on all the segments. In fact, that we started end of last year. We started doing business from all the segments, and that is why we are upping the yield from 11.6% to 12.6%. There might be a question: why not 13%? Why only 12.6%? I think the idea is very, very clear. Our focus is growth and margin. As a mix, we need to balance these two, and therefore, we will be pretty aggressive on growing affordable book.
Now that we have experience within PNB, even though the team is experienced, since they are from this market, that was the phase I. Phase I, we focused largely on income, to a certain extent, on informal income base. These 100 branches this year is going to focus on all the segments. Our focus would continue by also through our initiative of emerging markets, because that also would give us a higher yield. We'll come to the segmentation as to prime, emerging and affordable, but our focus is to move to high-yielding segments within prime, within emerging, and within affordable. Our plan to expand branches, because now we have opened too many branches in last two years. I think approximately, we've opened close to about 190, 195 branches in last two years.
Out of that, close to 100 branches was opened last year between December to March. Now, this year, we will open 50 more branches, and out of this 50, largely, this would be in affordable and emerging. 40 branches we will add to affordable, which will make it 200 by March 2025, and emerging, we are going to add 10 more. And not just this, I think during the course of the year, depending on the opportunity and potential, we will also try and convert some of the branches, which can give us a higher margin with volumes, which can be moved from prime to emerging and emerging to affordable. We, we keep doing this quite regularly, but the focus is going to be largely on expanding our branch network while we grow. On collections, we will continue with our effort.
We are now at 1.5%. Our endeavor is to bring it down to 1.1%, around 1%-1.1% by end of this year. We have built capability in collections, so much so that we can turn around in different buckets and ensure that the asset quality will be of pristine quality from the incremental business, what we do. Journey so far, I think, last year, we were able to resolve one of the large corporate account. On digital, we've moved far ahead. We've worked on end-to-end customer journey. We'll be dealing with this, you know, in the subsequent slides as to what we have done on the automation and digitization. We raised capital. I think these are some of the points which are getting repeated.
Return on equity is 10.9% in FY 2024. Our focus is going to continue. We had to take certain one-offs. We have a large pool of written-off book. The focus is to recover from that pool, and this will play out. It started playing out from quarter four of last year, and this will play out for next 5-6 quarters. Some of the automation initiative and digital initiative will bring in higher efficiency, which will enable us to grow much faster with better TATs to the customer and better customer experience. On capital, we are very well placed on capital. Our CAR is 29 odd %. Our endeavor is to increase return on equity to 15% on a steady state.
We raised capital, and therefore, you know, there is a little bit drag on that, but we will try to cover up that because now all the efforts are in the direction of improving margins and improving the growth rate. Retail growth strategy and objectives, we have a very, very experienced team. I think Deepika just introduced the team. I think only half the team is here, team which is relevant, you know, directly, in terms of engagement with the investors. We have a very, very solid management team, well-experienced from the industry, worked for different organizations within the financial space, be it HFC, be it NBFC. Our strategy will be focused on building leading retail franchise. So while on one side, we identify new segments, come out with new programs, new ways of underwriting to ensure that the risk is minimized, we have also strengthened our distribution network.
When I say distribution network, not just the branches, even on the origination side, in terms of channels, whether it is DSA, whether it is DST, every market, every segment has a different strategy. Emerging is different, prime is different, affordable is different. The strategy, what we need to have in terms of the product, process, programs, distribution strategy, I think all of these things differ. May not be largely between prime and emerging, but definitely when it comes to emerging and affordable or prime and affordable, these are very different markets, very different sort of customers, and that is why we have dedicated branches for these three verticals. The entire. We have set up a vertical for each of these businesses.
For example, in Roshni, we have a dedicated sales team, we have dedicated underwriting team, dedicated branches, because the customers are different, customer segments are different, pockets are different, the branch locations are different. The pocket of the branch within a given city, wherever, you know, there are two branches catering to two different segments, I think are very, very different. As I mentioned, our focus would be to try and scale up businesses which can give us better margins, higher yield, and therefore, our focus is going to be more on emerging and affordable. We will also try and grow the prime business. We will identify pockets within prime, segments within prime, which can give us better yield. And once emerging and affordable can catch up at a portfolio level, then slowly we'll try to moderate that so that the growth rate is maintained.
For next three years, it is 17%. Maybe after that we will tweak it depending on the need. I think that's the balancing game, what we have thought of. We have seen that most of the companies in certain segments, there is a bit of skewness towards the geography. But for us, we have a long pedigree. We've been in this space for over 35 years. We have a national presence. We are very deeply and widely present in south, in west and north, to a certain extent in east. So we have this experience amongst all the segments, and therefore, we feel that we have a unique USP to try and capitalize on this potential from each of these geographies, each of these segments, because we have a dedicated team, dedicated vertical, to run these three businesses. Emerging, we have a separate trade team, separate sales team.
Everything is separate. Prime is separate, emerging is separate. Within retail, it's like three, you know, mini companies trying to do these businesses. I think that's our focus. In terms of branch network, as I mentioned, we will keep adding branches to strengthen our retail presence. Now talking about segmentation, if you look at the market broadly, there are four segments, starting with super prime. Super prime is a very good segment. Broadly, higher ticket size, safe business, asset quality will be pristine. Growth is easy to come by. The challenge there is margin. Now, we are a HFC, and therefore, given our cost structure, we thought, I think this is not the space that we should be in, and therefore, last year, we completely moved away from super prime to prime.
While we moved from super prime to prime, we also started affordable, which was new to us. Between prime and affordable, there is one more segment, and that is emerging markets, because there, there is an opportunity. We can see the yield. There is a difference. Super prime gives us yield of 8%-9%, prime gives us yield of 9%-10%, emerging gives us yield of 10%-11%. With a mature book, I think this 9%-10% can slightly go up as well. And on the affordable, it's going to be between 12%-15%. I think this is our plan. This is our segmentation. You know, there can be a slight difference between company to company or how, you know, probably a certain set of institutions would, you know, bifurcate the market. I think this is our definition.
Our focus is going to be on prime, emerging, and affordable. Super prime, we have completely vacated. Today, we have a large prime book. We have a large prime book, and also we have customers who will attract every month, every quarter, every year. We would also have some of the customers who would come for repricing, which means at a portfolio level, the yields would drop. To offset that, we are increasing our presence in emerging and affordable, and which is why we have given a guidance of NIM of 3.5%. This will play out for few quarters. Once the mix changes, every passing quarter, this mix will change. The entire color of PNB Housing will change in next 5-6 quarters. FY 2025, we are talking about incremental business from affordable and emerging to be around 40%-42%.
If you look at the same mix at a portfolio level in FY 2027, it look very different. It will start with disbursements. Incrementally, it will start, and the book will catch up. Now, this is our segmentation. We have a very strong brand recall. As I mentioned, we are present nationwide. It's going to largely help us on the emerging and affordable because we have a nationwide presence. We are present in more than, collectively all the three businesses put together, we are present in more than 20-odd states. And we've been in this business for quite long. PNB Housing is a very old company, vintage company. Even though the focus was on prime, super prime, there was some bit in some way, in some form, you know, where we were catering to emerging and affordable, by whatever name.
So we are exposed to all these segments across all the geographies. I think that is going to help us because we have nationwide presence, we have a strong brand, we have a strong parentage, we have the experience. So this should help us to reach our goal much faster. And as I mentioned, we have invested in branches, invested in people, product, process, technology, and on the digital front. So today, if you look at as of FY 2024, that is the split between prime, emerging, and affordable. When we see emerging market book of INR 11,700 crore, it means that the business, what we have done over a period of time from these markets. If you look at the book, this book may have a slightly higher yield compared to prime, but not very different from prime.
But starting this year from these markets, because 50 branches are not old. Out of 50, there is a split between some of the existing branches are culled out, depending on the geography and the potential and customer segmentation, which can work for us from an emerging markets point of view, and we, we have opened new branches. The split is we have added 21 branches and 29 we have culled out, and therefore we have 50 branches. Now, these 50 branches will do business at a higher yield, and that is going to be at least 75-80 basis points, blended higher than the prime. And as I mentioned, affordable now we have crossed INR 2,000 crore. I think we will be able to...
I think the aim is to try to catch up incrementally and try to be one of the largest in terms of affordable, and slowly the book will catch up. Some flavor on some of these segments. These are some of the metrics which we very closely track. These are very important, you know, from a scale-up point of view, from underwriting perspective, from asset quality perspective, sourcing mix profile, average ticket size, yield, key focus markets, you know, branches, and number of employees. Our focus on prime is going to be INR 35 lakhs, emerging will be INR 25 lakhs, and affordable, INR 14 lakhs. The mix, the sourcing mix would change between in-house is our own channel, DST and the DSA, so the mix also would change. If you see affordable, we have more in-house.
What we are trying to do is that affordable. If you look at the risk between prime, emerging, and affordable, the risk is less in prime, the risk is slightly more in emerging, and the risk is slightly more than emerging in affordable. And therefore, when we talk about affordable, we have to be very, very clear on some of the processes and underwriting standards. As I mentioned, we have tweaked in prime, in emerging, and in affordable business. We have tweaked the process, we have strengthened the process in prime. And therefore, these things are very important. Since the risk is higher, obviously the risk would get offset because of higher margin, but the risk is going to be s, you know, there is a differentiated risk between these three segments. Affordable is the highest, followed by emerging, and then prime.
If you look at the profile mix, if you look at affordable, it is 50/50. 50 is salaried, 50 is self-employed, because that is affordable business, because there we'll be catering more to informal, more to business class and less on the salary, and within salary, it will be slightly skewed towards informal. So everything changes, whether it is profile, whether it is sourcing mix. Of course, there is a difference in yield. I think this is the landscape for the three businesses within retail, where we will be focusing for next few years. Emerging markets. Now, this, for us, we have coined this as emerging markets. This market is there.
Just for better understanding, when we talk about emerging markets, this can be broadly defined by geography, by customer profile, by certain segments, and by, to a certain extent, the type of collateral, and that is why there is an opportunity of getting higher yield. So the focus in emerging is going to be on Tier 2 and Tier 3. How we have done this, top 10 cities will cater to prime in Tier 1. The next 40 is going to cater to emerging, and the next 40 or 50, as we get deeper, this number could increase, and that is going to cater to affordable. We have dedicated branches, separate vertical, to focus on emerging business. The mix is going to be different within profile, within channel. The program mix is going to be different. Everything is going to be different.
This is one opportunity we thought that we should get into this business. We have a book, but maybe there we would have lost some opportunity. We want to encash on that and take it forward and try to make this bigger. We have 50 branches now, so this year we have planned to take it to 60. Affordable, I think it's a great story for us. The first month, which was January 2023, we started with a disbursement of INR 5 crore. In July 2023, we reached a run rate of INR 100 crore per month. In November 2023, we crossed book of INR 1,000 crore. In December 2023, we reached the branch count to 100 in affordable. And by March 2024, we had opened 160 branches, and the book was close to INR 1,800 crore. As we speak, the book is INR 2,000 crore.
Quickly, giving you a flavor as to what are the broad categories under affordable and how it will look like in the medium term. Within salaried, there are two segments, formal and informal. Within self-employed, there are two segments, formal and informal. If you look at FY 2024, within salary, if you talk about salaried formal, it was 59%. It was very clear. This was by design. We wanted to get into affordable, start off with safe segments to a large extent and some exposure to informal segment, which is why we can see that salaried informal was only 4%. Self-employed formal was 16%, and self-employed informal was 21%. So total informal was 25%. Now, this 25%, if you see how it will look like, salaried, for example, formal, informal, the split is going to be 40 and 60.
So within salaried, informal would be 60. That means there will be a natural progression towards informal, because that is where the yields would come in. And similarly, between salaried and self-employed, it's going to be 50/50. And the yield, what we are targeting by FY 2027, will be around 13%. Some of these points are quite common to all the businesses, so I'll not repeat. Collection was a great strategy, what we had put in place. We had a lot of challenges on corporate, on retail. We had a stressed pool. GNPA was very high, and therefore, we had to ensure two things: One, we collect or recover on the NPA pool. Number two, ensure that the slippages are the least. So it starts from bounce or X-bucket. That's the starting. When customer starts bouncing, gets into X-bucket and then gets into pre-NPA.
So what we did was, we internally, we ensured that we have different verticals to cater to different buckets of the entire customer journey once the case moves to 1 DPD. In X-bucket, the focus was very clear. The strategy was, t here are broadly three strategies. I'll not spend too much of time because Jatul is going to cover in detail. Self-cure, telecalling, and field. We strengthened all of this. So we said, "we need to be one of the best in the industry." And what we have covered now in the last 6-8 quarters is significant. We are still not the best. I think the endeavor is to ensure that we are one of the best in the industry. The idea is to try and cure cases through self-cure by using analytics.
Whatever doesn't come through by self-cure, there is somebody calling the customer, saying that, "hey, look, you know, this is the EMI which got bounced, so please pay up." And whatever is the resultant number of cases, only those few cases will have to be met by the field executive. So the idea was to use analytics, study customer behavior, and ensure that while we resolve the cost is low. While we resolve, the efficiency improves, especially on self-cure and telecalling, vis-a-vis compared to field. Now, similarly, on pre-NPA, we had to ensure the bucket movement is the least, and always we used to say that SMA-2, zero flow. It's very difficult to have zero flow, but definitely, yes, I think if you look at, March, we had reached 99.6% on SMA-2, which means only 0.4% slipped into NPA.
Whatever is in NPA pool, through our efforts through collection, the first step in NPA, while we initiate legal, is cash collection. If cash collection is not coming by, then we encourage settlements to help the customer, because nobody wants to default, nobody wants to lose the property. Because of certain situation, it could be situational, some could be intentional, but nobody would want to lose the property, and therefore, the idea is always to help the customer. It is not collection. We don't call collection. We call, we call debt service. The idea is to collect cash. If cash is not coming by, we encourage customers to come forward and settle. If settlement is not coming by, then we would help the customer by disposing the property. We have done record auctions between December to March of last year. We have done 2,000 auctions.
Number of properties which got sold in FY 2024 is 3.5x approximately compared to FY 2023. So we have really strengthened our collection capability. Now we have five verticals within collections. Every phase, you know, there is an attempt made to ensure that the flow is low, and from NPA bucket, we try to collect as much as possible. Therefore, at any given point in time, the collection is going to be more than the slippages, and therefore, the GNPA would trend down over a period of time. I think that is the entire architecture was changed. It has yielded very good results for us. And all this is in-house. The entire collection strategy was built around in-house team, including sale of property. We have a separate team, property services group. Even that was in-house. The entire collection architecture was built based on in-house team.
I could say 99.5% is in-house. The 0.5% is where, you know, we might need some help, only there we look at a model which is other than in-house. Otherwise, largely, it is in-house. Before moving to corporate, as I mentioned, FY 2024, from the written-off pool, as I mentioned, we have a large pool, both in corporate and retail. In corporate, we have about INR 1,700 crore. In retail, we have a little over INR 500 crore. So the idea is to ensure that we recover that either through settlements or through sale of property. FY 2024, we have recovered INR 100 crore. And if you look at the recovery in the last quarter, as I mentioned, recovery for us started playing out from quarter four of last year. That was the highest. And this would play out in next 5-6 quarters.
Every quarter, we will have good amount of recovery coming by. This is from the written-off pool. While we will keep the credit cost low, we have guided about 30 basis points, 30, 32 basis points, and this is outside of the recovery. Now, that's our plan. We know that we have a large prime book, and therefore, the yield drop on the portfolio would be compensated by the incremental yield we will get by doing two things. One is moving into newer segments at a higher yield and growing there. And therefore, the margin is going to be around 3.5%, but there are two more factors which will come into play. One is the credit cost, because we have taken corrective actions on the credit policy, on the process, on the team, on certain geographies, on certain programs.
Therefore, the credit cost going forward is going to be muted. It's going to be very low. There is an opportunity from recovery pool, from the write-off pool. On corporate, we put in a lot of efforts to run down corporate book, to resolve stress assets. We were successful in bringing down the book. At one point in time, it used to be over INR 18,000 crore to as low as INR 2,000 crore. GNPA, which was one-third of the book, is now just one account. We are very, very conscious. We know what went wrong, we know what will work, and therefore it will be a calibrated initiative effort in terms of restarting, undoing corporate business. We plan to do this year, we will do not much, a couple of 1,000 crore.
At any given point in time, within the overall portfolio, corporate is going to be less than 10%, which means our focus is going to be on retail, and within retail, high-yielding segments. Now, when we restart, we will be very, very selective, very careful. We will be focusing on few cities, few category of developers, few projects. We would ideally want to be the sole financier, not be part of consortium. I mean, that is our wish, and that is what we are going to do. We are going to focus on funding only for construction purpose and nothing else. We would not focus on LRD, for example, or loan against property, or balance sheet funding. We would be focused on construction finance, select set of builders, select geography. The ticket size would be between INR 100-200 crores.
This is our plan, and this year we have planned to restart. Given the profile of the company, size of the book, our presence in various markets would also help us to grow better, grow safely, with some exposure to corporate, and we are conscious about that, and therefore we want to have a calibrated growth within corporate. While we have been talking about coming out of consolidation phase, trying to work on various challenges, quick recap: we raised capital, we ran down corporate book, resolved corporate stress book, worked on growth on the retail side, started new segments like Roshni and Emerging. We also worked on technology and automation to be future ready. Entire loan life cycle, starting from origination right up to collections and customer service, we have worked on the entire infrastructure.
We have revamped, whether it is LOS or a mobile app, this is the front-end app for origination. We have, we have a new website now. On the loan management, LMS, we have revamped. So all of these things on the collection side, now we have a collection app, which will help our collection executive, which will help the customer so that, you know, the payment becomes easier and customer gets to know the status immediately. So we worked on all of these things. We have invested in technology, in digitization, in automation, because we have an ambition of growing this book to a level of INR 100,000 crore, largely skewed towards retail, keeping the corporate under 10%. Anubhav will take you through this in detail, you know, during his presentation on the IT transformation. After the rights issue, we are comfortably placed on capital.
Now, the outstanding equity shares are INR 26 crore. We got multiple ratings. Multiple rating agencies upgraded our rating from AA to AA+ . Our liability mix is well diversified. We have a large deposit base of INR 18,000 crore. Bank funding contributes to 40%. Last year, we were very active in the market in terms of CP and NCDs. So CP is over INR 10,000 crore, and we were pretty active on NCD. And also, last year, because of the improving financial metrics over a period of time, we were able to get funding of INR 3,000 crore from NHB. When it is from N HB, it comes at a lower cost. So well-diversified borrowing mix, we will continue to strengthen this in the quarters and years to come. And now I would request management team to discuss each of our strategy in detail.
I would request, Dilip to come over and, give some insights on Prime and Emerging as to what is our plan in terms of taking this business ahead for next few years. Thank you.
Thank you, sir. Good afternoon, friends. Very warm welcome, first of all. Like Deepika said, my name is Dilip Vaitheeswaran, I manage the Prime and the Emerging Markets business on the lending side of the organization. I also manage the deposits business here. Over the next few minutes, what we are trying to do is, I'll try and paint a picture on the Prime and the Emerging Markets business on the lending side as to where we are, where we stand today, and what are our plans for the next few years. I'm pretty excited to be here. It's an absolute privilege to be sharing this story with all of you. Okay, a little bit of context first. Over the last six quarters or so, what we have done is we've tried to get growth back on the table.
Like, Mr. Kousgi has explained, two years back, our retail book wasn't exactly growing. So when we got back to growth, we decided on two, three things as priorities for the firm. The first was to get more granular. What we learned from our portfolio, especially after COVID, was that some of the higher value cases were giving us a lot of grief on the collection side. So as you can see on the charts, cases above INR 5 crore, which used to be more than 5% of incremental disbursements five years ago, now amounted to less than 0.5% for FY 2024.
Second, for margin reasons, we said, "let's do more business in non-metro cities." So, in FY 2019, if the non-metro business used to be one-third of our business, in FY 2024, it actually contributed to almost one half of the business, at 49% of our business. This was on incremental disbursements. Third, another problem that we actively managed was runoffs. Two years back, our runoffs increased almost 24% on an annualized basis. Now, whether it was proactively reaching to customers, offering the right pricing to the right set of customers, trying to work top-up requirements for these customers, all of them put together, we managed to bring the runoff rates down. So as a result of these, we are now, y ou can see the numbers on the slide.
Compared to the journey between 2019-2022, over the last two years, our disbursements have grown at a CAGR of 20%. The loan book for this side of the business, the Prime and Emerging Market side of the business, has grown at a little over 10%. Now, like our MD explained, you add to this the fact that we raised capital last year and, the fact that our NPA is now down to less than 1.5% on the retail side. Now, this gives us comfort that now we are very, very well placed to grow over the coming years. Now, for this business, the imperatives are twofold. First is we need to get growth, we need to grow more, we need to grow at a better pace. Second is we need to improve margins on this business.
I'll speak on both of them. First is the aspect on growth. How are we gonna get growth to improve for this business? The first element is our geographical footprint. Between FY 2019 and FY 2024, our branch count came down from 135 branches to about 107 branches last year. So last year actually was the first year after 5 years, we managed to invest, like Mr. Kousgi explained, and increase our branch footprint in the country for this business. We waited for the capital return to come in, we waited for the growth to come back on the table, we waited for the NPAs to come down. In H2 is when we sought board approvals to increase our branch footprint. In Q4 is when we opened 33 branches for this business. These branches have not contributed to any disbursements last year.
These branches will now start contributing to disbursements from FY 2025 onwards. So with this, we are very confident that, growth is now gonna be back on the table at better rates. This is the first element. Second is our people factor. Now, with the existing and the new branches put together, we are now a team of 1,000 people in this business, in Prime and Emerging Markets on the roles of PNB HFL. We have 2,000 people on the roles of our subsidiary, PHFL. This is largely our front-end customer acquiring team, and we have a network of 4,000+ active distributors.
Now, for a company like ours, which has such a strong parent, which has been in the business for 30+ years with such a large team size, we really believe that among HFCs, we are very, very well placed to grow here with this team present here. Thirdly, for the existing team, to make them contribute more, we are also investing in productivity improvement in the form of technological interventions. So be it the sourcing team, the acquiring team, be it the underwriting team, be it the operations and servicing team, there's enough technological investments that are going into making the existing resources do more and contribute more for the organization. I'll actually be covering this in more details in a couple of slides from now.
So with these three elements kicking in, we really believe that growth is something that we should be able to better over the coming years. So for this business, the prime and emerging markets business, the disbursements should grow at 20%+ CAGR for the next three years, and post runoffs, the book growth for this business should be at 12%+ CAGR for the next three years. Now, because of the shift in mix that we mentioned, 60% of incremental disbursement in three years from now will be from the prime markets, 40% of the disbursements will be from emerging markets. On the loan book side, 70% of the book will be from the prime side, 30% of it will be from the emerging market side.
So these are the three elements basis which we are guiding that growth is something that we are much more comfortable of. We made some progress on it over the last six quarters or so, but with these elements kicking in, we are pretty comfortable that we should be able to grow at a better pace for the next three years. Coming to the next point, margins. So for improving acquisition yields, for improving margins on incremental disbursements, there are three elements which are going to be at play here. First is our customer segment. Like our MD explained, we are very clearly making the shift from the top of the pyramid, from the HNIs and the ultra HNIs, to the middle of the pyramid in this business, which is the middle-income group and the lower-income group.
Now, let me explain that with an example for this market or this city that we are sitting in. Three years ago, we used to have a branch in Prabhadevi. Prabhadevi's branch used to cater to customers in Lower Parel, in Worli, all of South Bombay. We used to have a branch in Western Line in Vile Parle. It used to cater to customers of Andheri, Dadar, et cetera. Both of these branches stand wound up as on date. So on the western line on Bombay, our business is from Borivali and beyond, up till Virar. On the central line, our business is from Thane and beyond, up till maybe Kalyan, Badlapur, Ambernath, Panvel, and Vashi. So clearly, the shift down the pyramid is one lever that we are going to work on. Second is a product mix change.
So on incremental disbursements in FY 2024, non-home loan, which is LAP and LRD, commercial purchase, et cetera, contributed to about one-fourth of our disbursements, 25%. Now, post-COVID, we have done a bunch of changes to our policy. We have become stricter on income assessment. We changed the norms on what kind of collaterals are admissible. We came up with our programs on doing away with much, much more tighter norms on checking the bank statements, income norms of customers, et cetera. We've been checking our NHL book for the last four years, be it bounces, be it early warning risk, be it the quick mortality. We've actually compared it to how it was for the pre-COVID book.
We are very comfortable with our non-home loan book, and this comes at a good 100-120 basis points of yield premium as compared to housing loans. So we want to do more of non-housing loan as compared to today. What is 25% today, over the next three years, will become 35% of incremental disbursements on the non-housing loan side. So that was element number two. The element number three is the geography mix, which MD spoke of. The new and existing branches put together, this business now has 140+ branches as of March 2024. What we said is, "let's carve out 50 of these branches." We are calling them emerging markets. These are going to be your Keralas, Coimbatores, Madurais, Trichys, let's say, Tamil Nadu minus Chennai, Rajasthan minus Jaipur, UP minus Lucknow, Uttarakhand, parts of Haryana.
We took 29 branches in South, 21 branches in North. These are branches where we believe that in these markets, we should be able to fetch better yields, we should be able to fetch better rate of interest from customers. Why? The customer segment should be more amenable to our target here. We'll find more customers in the middle-income group. We'll find more customers in the lower-income group. We'll find lesser customers who are employed with the super category kind of employers, lesser TCS, Cognizant, Infosys kind of employer-employees. We'll find more self-employed customers here. That was point number one. Even properties, so if you compare with Bombay's, Bangalore, Chennai's, Hyderabad's, we are, we are catering to property developers like Prestige, Brigade, Shapoorji, Godrej, Tata, et cetera.
Compared to that, in the Tier 2 and Tier 3 cities, we find more plot loans, construction loans, loans for renovations, et cetera, being done. So between the customer profile and the property profile that we are lending for or against, we believe that we will be able to fetch a significantly higher yield, a significantly higher rate of interest in these markets, which we are now going to call as emerging markets. Now these emerging markets, over the next 3 years, we are guiding that will contribute to 40% of disbursements. Incrementally, they will contribute to 40% of disbursements for this business. So on a loan book, that will come to about 30%.
30% of the loan book for Prime will be comprised by the emerging markets geographies, and when you add Roshni and corporate are at an enterprise level, emerging markets will then become 22%-25% of our loan book. Like we earlier discussed, this is going to be at higher yields. So thanks to the shift down the pyramid, more of NHL and the geography mix for this business put together, we believe that we will be able to increase our dispersal yields by 50-75 basis points over the next three years as compared to where we are today. So compared to today, with these three elements, we believe that on a steady state basis, the incremental yields will be 50-75 basis points more than where we are. This is just the yields.
So if you take into consideration the improvement in cost of funds, the spreads will actually go up on the incremental business. So the first was growth, the second was margins. So moving on, we also wanted to give you a color of how we are getting ready for this phase of growth. I want to speak to you about our operating model for this business. Now, as we get into this growth phase for the organization for the next three years, we felt it is important that we empower our people well. We have the right kind of structures to enable growth at a geography level, at a market level, but at the same time also have controls to ensure risk, governance, and quality of the highest order. And that is what I want to present to you here in the form of highlights.
All line functions of this business, be it sales, credit, operations, collections, legal assessment, technical assessment, fraud units, fraud containment units, all of them are parallelly run verticals, which go on parallelly right up till one level below the MD and CEO. We are very clear we wanted to do this to avoid conflict of interest at branch level, at regional level, geography level, et cetera. So all functions across the-- all line functions across both businesses, Prime and Emerging Markets, have parallel verticals right up till my level or my counterpart's level. That is number one. Second, and this is a shift that we have made over the last two years, we used to follow a hub-and-spoke model for underwriting. We had our underwriters present in 20-22 hubs, who were catering to 100 branches across the country.
We said, as we step into more geographies, as we get ready for more growth, it would be better if our underwriters are closer to the market, they are closer to the customer. So today, as we speak, our underwriting team is present in this business in 100+ branches across the country. The intention is that we want to keep our risk functions closer to the customer, closer to the market, so that we are able to enable good quality growth. Third, the geography mix that I spoke of. We have carved out 50 of our branches by calling them as emerging markets. We have segregated the sales and the underwriting functions for both these markets right up till my level and my counterpart's level, to ensure the adequate focus is given on these markets. I'll actually explain that to you with an example here.
What you are seeing on screen is the state of AP and Telangana. Now, three years back, actually one year back, we used to have eight, eight branches in AP and Telangana. We had four branches in Hyderabad, one in Warangal. We had three branches in the rest of Andhra Pradesh. What we said is, let's divide them into what is a prime market, which will be sort of the growth engine, which is more metro-focused. Obviously, the branches of Hyderabad and Warangal came there. We said let the other non-metro branches be the emerging markets. We opened four more branches. So we opened one branch on the prime market side. We opened three branches on the emerging market side. In fact, even in the prime side, where we opened the branch was a place called Shadnagar. It is 50 km away from Hyderabad.
Again, keeping in mind our target segment, we didn't want to be in a middle of the city where acquisition yields are different, difficult. So we opened one branch in the prime side of the market. We opened three branches on the emerging market side. Then in terms of supervision, earlier, at the geography level, there was one geography head for business, one geography head for underwriting for AP and Telangana. We carved teams out between my level and Jatul's level. We carved teams out to ensure that the sales teams, as well as the underwriting teams for both these, become separate. So there's a separate business team and an underwriting team, which looks at the prime side, which is Telangana, and which are these six branches.
There's a separate business team and a separate underwriting team, which looks at the balance six branches, which are emerging markets. These are parallel business teams which come up till my level or my counterpart's level. Again, like I said, we wanted to ensure that we are better prepared, better ready to sort of embrace this growth as we step into this next phase of the organization. We spoke of the outcomes that we wish to achieve in this business. We spoke of the operating model that we're gonna be following. Now, while we do that, we are also making significant improvements to strengthen the core of the company.
Technology and analytics is gonna play a significantly large role in this business, and while Anubhav will speak to you about what technology is gonna do for the enterprise, in this business alone, as a consumer of technology, there are significant investments which I wish to update you of. So if you look at customer origination, we now have a platform to engage with our entire third-party sourcing network. So all our DSAs, all our connectors, engage with us with a platform called WeConnect. So whenever we wanna send communication to them, we use the platform. 100% of the payment invoices are raised through the payment platform. In fact, that gives us good name and reputation that we are one of the best lenders in the market who makes payments to vendors on time.
Second, 100% of our underwriting vendors use the platform. So be it the legal assessment, the technical assessment of the property, the field investigation, the FC reports, all of them are uploaded on a platform called uConnect. This helps ensure that the formats are standardized, it creates the correct audit trails, it helps ensure that the business governance goes on correctly. 100 days back, we introduced a platform called the mobile app. Now, a 2,000-member sales team of mine across the country is now empowered with a mobile app to update their leads on time. They'll be able to see their case status on time, they'll be able to see their incentives, et cetera. So a very, very strong mobile app to help make our sales teams more productive. Social marketing and website is now becoming an integral part of our acquisition channel.
Leads generated through them come to us through our contact center. It is now becoming an increasingly large focus for the business. For customer applications, we also use a platform called ACE. 50%+ of our applications which are brought in or originated by us today, are logged in through this platform. They are paperless. The customer can submit documents to us in the soft copy. We have API tie-ups for UID, for KYC, for eKYC. We have vendor tie-ups for bank statement scraping, we have tie-ups and APIs for ITR assessment. So digitally, to be able to peruse information of the customer, underwrite them, and make our stakeholder, which is the sourcing team, happy, is something that we've been working on very actively. Now, let's come to the next phase, which is underwriting. We are now in the process of transitioning our core loan origination system to Salesforce.
In fact, in the affordable business, we have just done a pilot of it over the last three months, and based on the early results that we are seeing, we are very confident that the underwriting team productivity will go up on account of this transition that we intend making. That's going to be a very big investment for us. Second, over the last two years, we have come out with our straight-through processing journeys for salaried customers in housing loans. This helps improve underwriting productivity. We have a fully automated business rule engine that determines whether every application has been tested as per the policy or not. If there are any deviations or not, it throws out the deviations in an automated manner. On top of this, we are also building analytics-driven scorecards for all customer segments.
So those are some of the interventions that the underwriting side of the business is going through. On service, again, we implemented Salesforce's CRM in this side of the business last year. It's been about four months since we went live, and we are very happy with the early results that we are seeing. The contact center executives' productivity has gone up. The quality of the conversations that they have had with customers has gone up because of the information being available together in one place. Our customers' feedback on us has gone up a few notches over the last three months. For retaining our customers, we are developing analytics-driven scorecards to ensure that we are able to reach out to them correctly. The correct customers are given the right offers in terms of pricing or top-ups. Last year, we also came out with a WhatsApp-based chatbot.
This was to help customers for their service requests, and we're also using it for acquisition. So, as I said, these tech investments are being made with the intention of making our business more future-ready, more sustainable. So with these kind of investments that we are making and the plans that I explained over the last few minutes, we are very confident that this side of the business, the prime in the emerging markets, will be able to grow and will be able to grow profitability along with the asset quality of the highest order in the years to come. Thank you. Thanks a lot for your time. I'd like to call Anujai Saxena, our head of the affordable business, to share his thoughts.
Thank you, Dilip. I hope I am audible? Great. Thank you. Ladies and gentlemen, my name is Anujai Saxena, and I head the Affordable Housing Business in PNB Housing. It's indeed a very great pleasure for me to take you through the exciting journey that we have initiated on the affordable housing business side. And also share some of the early success that we have achieved in the last 12-16 months that this business has been operational. And more importantly, I would also want to share my perspectives on the roadmap that we have developed for this business to achieve greater heights in future, and how we are confident that this business is going to become one of the leading and the most successful affordable housing franchise in the country.
What I'll do is, I'll start with a bit of a context setting. In financial year 2022, we started as a bit of a strategy and transformation program with the objective of improving the overall profitability profile of the organization. And one of the important deliverables that came out of that exercise was to set up and get into the affordable housing segment, which is poised to grow higher than, you know, the overall housing finance industry, and which will also help PNB Housing in terms of improving the margins, and therefore, the overall profitability profile of the organization. Whole of FY 2023, in fact, first half of FY 2023, went into, you know, designing the entire go-to-market strategy to cater to this particular target segment.
We made a lot of effort to understand the target customer segment. Who's the customer segment? What is the profile of that customer? What is the profile of the property that this particular customer segment is planning to buy, and for that they require the home loan? Which all geographies are important to run this business successfully? What are the risk parameters? How do we underwrite these set of customers? How do we underwrite these set of properties? How do we operationally manage this business? What is the optimum branch operating model? What is the distribution strategy? What is the overall operational backbone that is required to create a successful business model for this particular customer, you know, segment of the housing finance industry?
As MD also covered in one of the initial pages, from January 2023, we started offering these loans to these set of customers. A quick recap of what we did at the start of designing this program. You know, we took data from the bureau, and we looked at the target customer segment in terms of the average ticket size being less than INR 20 lakh, so somewhere around INR 5 lakh-INR 20 lakh of average ticket size. And that was the, you know, immediate time frame after the COVID scenario. This was like FY 2022, I'm talking about 2021, 2022, I'm talking about. So we looked. We also looked at the delinquency levels, you know, which were, you know, seen in those various markets.
In a nutshell, we scanned through 550+ districts, which are there, especially in the bureau data, it was, you know, visible, in the entire length and breadth of the country. Out of that, we took broadly two parameters: What is the potential of that particular district? And we defined that any district where annual disbursement for this ticket size, which is up to INR 20 lakh of home loan, is more than INR 75 crore per annum, that is like a medium or a high potential district for us. And the another cut that we put was delinquency should not be more than 3%. 3% is high, but, you know, this was the post-COVID scenario, so we took that 2.5%-3% delinquency.
If the market is higher than that delinquency level, and by delinquency, I mean 90+ delinquency, then we don't really want to focus on those markets. You know, as a result, a bit of a Pareto came out of this exercise. You know, about 80% of business, of good business, which is like low in delinquency, high on potential, is happening in about 150+ odd districts in the country. About 75% of business was concentrated in about 25% of the districts. When we looked further, we also looked at, okay, you know, where all some of the other successful, you know, affordable housing companies are operating, which all districts the branches are opened, and accordingly, we were trying to develop our own distribution strategy for this business.
We realized that out of these 156 districts, which were like high potential, low delinquency, good business districts for this segment, close to 140-odd districts were concentrated in about 14 states in the country. And we, when we looked at our competitive scenario, the competition landscape, we realized that most of these affordable housing companies, many of these regional affordable housing companies, were also operating in these 14 states. There were very few who were operating in all of these 14 states, but largely, you know, many of these companies were operating in a bunch of these states. So that gave us a lot of confidence in terms of this is the way forward to design our distribution strategy for this business. What we also did was, we divided all these 14 states into broadly two categories.
The dark, the deep red color that you see are like about the top 50% of districts are there in these geographies, and the red shade, the light red shade, is the next 20%-25% of potential lies in these geographies. And accordingly, we framed our distribution strategy. I'll just try to highlight some of the other nuances of this business before I start talking about numbers. So typically, the target segment is, you know, the EWS, the economically weaker section of the strata, the lowest part of the pyramid that was shown in one of the pages that Dilip was presenting. The lower income group, the LIG segment. So EWS and LIG, they are like the core target segment for our Roshni business.
Some part of MIG, especially MIG-I , also forms an overlapping segment for us to cater to, because many of the geographies where we are opening our branches, our prime branches are not necessarily open in all those branches, so we also cater to MIG-I profile in some of the districts. Overall, when it comes to, n ow, now let me talk about some of the early, your success that we have achieved in this business. As MD also highlighted, we have recently crossed a loan book of INR 2,000 crore, and we are the fastest affordable housing franchisee in the country to reach this mark within two years of operation. In fact, we have achieved it in about 16 months of being operational.
Many a times, you know, I get this question that how PNB Housing is able to scale up this business faster than some of the really successful affordable housing companies, you know, because we achieved INR 1,000 crore of loan book in about 11 months flat, INR 2,000 crore we are crossing in about 17 months. What I generally answer is, you know, using the example of the bamboo shoot. When a bamboo plant grows for the first few months, in fact, for the first whole of the year, you don't see any visible growth of that plant because the plant is trying to lay down the foundation.
It is strengthening its leaves and also its roots, and then once the roots are strengthened, then you know, the plant really starts growing fast. So that's the approach we have also followed here. We looked at the various operating models, and very carefully we have chosen the branch operating model for this business. And we took a lot of time to develop a very detailed strategic blueprint, and after that, the large part of FY 2023, the first two, three quarters in that year, went into execution. So we finalized the product value proposition, we finalized our distribution strategy, we finalized our policy framework, we finalized our branch operating model, we developed a very completely separate org chart for this business, completely different org structure.
And, you know, we then started executing in terms of opening the branches, hiring the right set of talent, on the sales side, credit side, and it is all completely independent from the prime business that was already running in the organization. And from January 2023, slowly and steadily, we have started growing this, business. Quick numbers. As you see on the top chart, quarter-on-quarter, we are growing, by leaps and bounds. We started in a small way. First quarter, around INR 200 crore plus of business was booked. In the final quarter of FY 2024, we have booked a business of about INR 650 crore. Of that business, around 68% of my customers are salaried, 32% are self-employed.
As we move forward, we intend to make this mix to 50% self-employed and 50% salaried. About 75% of the customer profile currently is formal income, 25% is informal income. We are moving towards a scenario where very soon 50%+ customers will be informal income, remaining 50%, 45%-50% would be formal income. Right now, because we started conservatively, as MD also talked about, that when we open the new branches, initially we focus more on the formal income segment, which is a safer segment, which is booked at a relatively lower yield, and then that explains our 11.6% yield that we are getting on this book right now.
Slowly and gradually, as the vintage of the team, vintage of the branch, increases, after six months, we start focusing more on the informal income segment. Accordingly, our yields also start improving for those branches. Right now, out of 160 branches, we divide this into two buckets: 100 branches, which are the older set of branches. These are the branches that got opened by December 2023. A large number of these branches are more than six months old now. Those are the branches that are going to contribute more in this financial year, and as compared to the recently opened 60 branches that we opened in March, and they will become disbursement active in this quarter, by June. Those 100 branches which are old, they will start focusing more on informal segment.
The new branches will follow the roadmap that was followed by the earlier set of branches, more formal income customers initially, and then gradually we shift towards informal segment. And that's how we are going to manage the yield. Right now, 11.6%. This year onwards, 12.5%-13% is the targeted yield, and we are confident that as we get into Tier 2, from Tier 2, Tier 3 locations to Tier 3, Tier 4, Tier 5 locations, and, as we start catering to more informal income profiles, as we go deeper into geographies, we'll, we will start getting higher yields. Just a quick, you know, glance into some of the important numbers. Many of these things I have already talked about.
One of the important point to note is the last metric on the page, which is 30+ delinquency. So this INR 1,800 crore of books that was booked till end of March 2023, my 30+ delinquency is almost zero. There were only two cases out of close to 14,000 cases that we have booked in the business so far. That also shows that the quality of book is really good, and there are absolutely no early warning signals that we see. Having said that, we have to continuously work on maintaining the portfolio quality and collections efficiencies typically play an important role.
Any branch that we open, right in the first month of opening of the branch, while we deploy resources on the sales, credit, and operations side, we also ensure that there is a collections executive available in the branch to initially educate the customer, because, you know, about 25% of my customers are new to credit. They're taking a loan from a formal institution for the first time, and, you know, the collection team really works with them to ensure that they maintain the requisite balance to pay EMIs on time. Some of the, you know, some of the customer segments that we are catering to, as I mentioned, formal salaried, we start with this segment. This is like customers who are teachers, working in government jobs, working in private jobs, and drawing a salary every month.
Safe business and ample amount of business that we get in these locations, followed by informal salary. These are the customers who are working in smaller organizations or smaller stores in some of these industries where they get paid in cash. So cash salary, which is the informal segment, again, we have a program to cater to their needs. And then self-employed. Self-employed, again, divided into formal income, self-employed and informal income. I'll be throwing a lot of light in the subsequent pages on these segments. Quick glance on the portfolio. The salaried portfolio, as I mentioned, right now, this portfolio is 63% of the book, and if I further break down this 63%, 14% is government salary, 45% is private salary, and around 4% is cash salary.
Government salary, typically state government, central government jobs, army, you know, various people working in army and central agencies like CISF, CRPF, et cetera. And then a lot of customers who are working in government schools and colleges, hospitals, et cetera. So around 14% of total sourcing is government salary, 45% is private salary, which are typically the starting level jobs that these customers are doing in some of the IT/ITES companies, some of the other CAD/CAM companies, banks and NBFCs, et cetera. Average salary of around INR 35,000-INR 40,000, and my loan ticket size is around INR 14 lakh. I get a yield of around 10%-11%, both on the government salaried as well as on the private salaried side.
Cash salary is the higher-yielding segment, and that's where the assessed income or, or the cash salary component typically is around INR 25,000. INR 900,000 is the average ticket size that I see in my portfolio. 35% new to credit I get there, and therefore, my yields are also higher. On the self-employed side, right now, it is around 37% of my book, and I intend to take it to 50% of my incremental sourcing as we move forward. Again, this 37%, if I have to break down, 21% is self-employed, informal. So these are the customers, they either they don't really have any documented income, or the income that they are showing in their ITR is not sufficient for the loan amount that they are trying to apply for. And therefore, my credit team.
They, when they meet the customer, they assess their business model, they develop a deep understanding of the business, the profitability, the monthly, and the annual income that this customer is operating at. Accordingly, the income is assessed, eligibility is calculated, and the loan is sanctioned. On the formal side, it is only around 16% of sourcing right now. There, the documented income is used to derive the eligibility, and accordingly, the loan is sanctioned. Formal income self-employed is giving me around 12%-13% of yield.
Already the 21% sourcing that we have done on the informal self-employed side, you know, this business is giving me a yield of upwards of 14%, and around 26% new to credit customers we get in the informal segment. The point that I'm trying to highlight here is we are very confident. We have all the tools and skills in place to now start scaling up the informal income segment, both on the self-employed side and the salaried side, and accordingly the yields will also start going up. Now I'll take a pause, and I want to spend some time describing my informal income customer, a typical informal income customer, especially on the self-employed side as well as on the salaried side.
I would like to share the operational our framework, the underwriting framework that we have already developed to appraise the income of such customer segments, such customer profiles, and how we are underwriting these cases currently, what is the sort of property appraisal that happens in these cases, and accordingly, how we are managing this business. Let's take this example. You know, this is an actual customer. This customer was. You know, we got this lead through a connector. So by the way, we have empaneled more than 1,000 connectors for this business in the last one year. About 70% of my business is DST, which is proprietary sales originated business. 30% comes from DSA.
This, your DST channel typically works with the network of connectors, and these connectors, they supply the leads, and they help us solicit this business. So, this customer was sourced through a connector and, by, my Ambernath branch. We have a branch, Roshni branch in Ambernath here. The customer wanted, s o he, he runs a paan shop. He has been running a paan shop, a paan shop cum beverage shop for, more than five years, and he was looking to get a loan of about INR 9 lakh. He was intending to buy, one room, kitchen kind of a, a property in the vicinities of, you know, Ambernath. In the Thane district, there's a place called Bhiwandi.
So in Bhiwandi, there, you know, he was planning to buy a property worth around INR 12 lakh, looking for a loan of around INR 9 lakh, and he was a new to credit customer. So no documented income. So my BCM met the customer at his shop. He spent half a day there, looked at the way the business is being run, what is the business volume, looked at some of the register entry in terms of, how much supplies is he getting in a month, in the last month? How much sales he is he making every day? What are the various items, and what are the margins available for his retail business for those items?
Accordingly, he, the BCM, gained a lot of confidence in terms of what is the overall profit income for this applicant for a month. Accordingly, INR 39,000 per month of income was derived, and we also looked at various other supporting documents which were available to validate that income. Accordingly, we sanctioned the loan. We also looked at the property that he was planning to buy. A thorough legal and technical check was done, and finally, we disbursed the loan of about INR 9.3 lakh, including the insurance, which is also attached at 14.25%. Overall, LTV was around 78%.
So, one important point to note was, this is the kind of business where we need, you know, our credit team, there on the ground. You know, they have to go there, and they should have all the skill set to go meet the customer, assess the income, and take the right call for the business. Another example, I'll not spend a lot of time here. This was a tailor. There's a place in Madhya Pradesh called Ratlam. We have a branch there. The customer was planning, he already had a plot. He wanted to construct a house. And we similar approach, we looked at, how he's managing his business. The BCM went to his residence cum shop, looked at, what all does he do?
Shirt, pant, we have various other clothing items that the tailor the tailoring was being done. What are the margins? Accordingly, the income was arrived at, and because it was a plot, a plot was already, you know, there with the customer. We just financed the construction and 40% LTV, 14% ROI was there for us to book this loan. Another last profile here, this is more of a cash salaried profile. I'll just spend a couple of minutes just to give you a flavor of how these customers typically work. So, again, a lady in Tamil Nadu, Chennai, you know, this, this application was sourced by Chennai branch. She works in a lab product manufacturing unit, a local lab product manufacturing unit. This business supplies laboratory items to schools, various schools.
So she has been working there for good, from 2019 onwards, a good 4-5 years, and her husband was also working in a similar kind of a company as a delivery boy. So both were earning around INR 20,000-INR 25,000 per month as cash salary. We appraised the income, and as per our norms, we typically don't go beyond INR 15 lakh of loan for such profiles. Ultimately, around INR 12.3 lakh were sanctioned at around 13.8% of ROI and 60% LTV. So we have already booked out of INR 2,000 crore of loan book that we have. About INR 500 crore belongs to this particular customer segment, which is informal income segment.
The idea is to take it forward, start sourcing from this segment more, and, therefore, accordingly, our yields will also start going up. Some quick, you know, revision on some of the important metrics. You know, one of the important points to note is, you know, out of all the sourcing that we're doing, 70% is home loan, 30% is non-home loan, loan against property. This 70%, when we break, you know, the right-hand side bar chart gives a further breakup of what is the end use of the loan or end purpose of the loan. 70% home loan can further be you know, broken down into 54, 54% is resale. Customer is buying the house either from the builder or in a resale transaction.
Around 25% is self-construction. The customer already has a plot of land, and he's planning to construct a house and needs finance for that. 17% is plot plus construction. He's buying the plot and is intending to build a house there. Around 4% is home extension or improvement loans. The more we get into Tier 3, Tier 4 locations, deeper into the clusters where we are operating, we are likely to get more of the self-construction and plot plus construction cases, and these products operate at a yield which is higher by about 50 basis points from a normal purchase kind of a home loan. The idea is to organically keep building this portfolio.
As we expand to smaller locations, organically, you know, this product segment will grow and contributing towards the overall higher yield for the business. So, that's it from my side. And now I invite my colleague, Mr. Jatul Anand, to take us through the underwriting and collections function. Thank you.
Thank you, Anujai. Good evening, everyone. This is Jatul Anand. I take care of credit and collections for the company. For the next few slides, I'll take you through the progress made in both the functions and our readiness for the next leap. Well, underwriting, the major change when it came in the company, it was the implementation of the rule engine, which brought in the standardization and uniformity in the processing. The credit guidelines have been coded in the system, and the system ensures across the geographies, the processes, adherence, and the hygiene checks are maintained, and it allows a microscopic view on a real-time basis, how the locations are performing. So enabling the underwriting team, that is up to my level, we can tweak as we speak.
So that is the kind of power we have got with the implementation of this, and this, in turn, became the stepping stone or the foundation to move towards this STP journey for the straight-through processing, as we call, for the salaried class. So there was a set of eligible salaried customers. If you meet the criteria, all boxes tick, the machine is enabled to give you a sanction. And this is a pucca sanction, this is not an in-principle approval within 24 hours. So these kind of interventions have really helped in over a period of time, last couple of quarters, there have been a lot of interventions and, changes in the, approach as we, you know, do the incremental business in terms of underwriting. 90% and above of our approvals are less than INR 1 crore ticket size.
Overall, average ticket size of the company is less than INR 35 lakh. Modified credit guidelines, that is location-specific, considering the nuances and use of, as I said earlier, the BRE. So we are able to tweak the policies. We have exited or, you know, vacated space to an extent in terms of large ticket exposures, more particularly in cash-out loans. That is the non-housing loan, the LAPs loans, as we call, so restricted high-ticket LAPs. They avoided certain profiles in certain geographies. So those kind of interventions were done by the company, which has, you know, yielded in the right results. 85% of our sourcing is above 700 CIBIL score in prime and emerging business, so that is the set of credit-tested customers being onboarded. So this gives us, you know, a confidence and, and as a proof, it comes out in the appraisals as well.
Our INR 30,000 crore of portfolio, which is close to 47% of the book, which is originated in last 2 years, merely has any NPA. It is 0.08%, few of the cases flowing beyond control. So this is, you know, and, from the underwriting side, with this, the team feels strong and confident as we approach to cater to the business ahead on the, as we- on an incremental basis, as well as on the portfolio management side, maintaining the early mortalities, process hygienes, and, with the use of, the scorecards being built in, I think we'll be able to provide better turnaround times. We consistently have been delivering in less than four working days, be it salaried or self-employed combined. This is further being shortened to around 3.5-3 working days.
So, moving on to collections. The collections you have been seeing us from quarter to quarter, NPAs moving down from 5% to less than 1.5%, one bringing it down to 1.45% this year. But then there is lot. This was the outcome. The manifold efforts were done by the company strategically. The task was not easy in the beginning of the year. The strategic move was to divide the company, as MD also mentioned in brief, into various, divide the collections function into various buckets.
That is the initial bucket, the early resolutions, the bucket X, then pre-NPA, NPA, a dedicated vertical for sale of properties, a dedicated subteams for engaging the customers and pressurizing to get into compromise settlements, which generally nobody does that, but that yielded good results for us, and the recovery team, which is pure recovery from the written-off pool. So these all efforts have helped us in, A, bringing the NPAs down to 1.45%. But honestly, from my side, more than that, gives us confidence on various parameters. One is that we have complete grip on the portfolio. We don't allow the customers to flow. The testimony is 99.6% resolution in SMA-2, right? That is, that speaks aloud, while MD has been continuously encouraging us to reach to zero flow, so I think rounded off, it becomes zero.
So we reached there in March. NPA is 1.45%. The endeavor is to reach 1% very soon. Managing pre-NPA, the buckets, if you see the improvements in buckets quarter-on-quarter. So, A, we don't allow to flow. B, if it flows through cash collection or with use of services, the customer only has two options left, either to enter into compromise settlements or hand over the properties. Again, the testimony to what I am saying is, auctioning more than 2,000 properties in 90 days was not easy for us. And the result is we could sell 296 properties, 3x over what we did in the previous year. And let me tell you that in these cases, the recovery was more than the principal outstanding.
So that gives us confidence in, alongside the collections in the property sale group, that we'll be able to sell it off if we get the property. The margins are there. And the written-off pool, we have been asked about our written-off pool, that, and that is all technically written off, INR 500 odd crores I have in retail. When we see the recovery, INR 68 crore coming in, in cash, as against INR 19 crore previous year, that's over 3.5x . And if similar recovery is what we are eyeing this year as well, you know, quarterly, around for INR 50 odd crores coming in, will be a sizable number from the write-off pool. So I think this is all.
You all know that this is the overall, the dashboard for the company, including corporate, the how the journey has been in terms of NPA movement and the credit cost. As I said earlier, the endeavor remains to reach 1% as soon as possible, maintaining the credit cost of close to 25-30 basis points. That's all from my side. Thank you. Let me call upon Anubhav to take us through the IT interventions.
Hi, good evening, everyone. I am Anubhav Rajput. I am responsible for Technology and Information Security. I would like to spend the next few minutes taking you through our technology architecture, landscape, and how we are trying to innovate. Let me start with the vision. So we really recognize that the mortgage business, the way it is evolving in the market today, there are going to be significant changes in the distribution models, significant changes in the way products are architected, and the customer service and customer experience expands. Hence, we are trying to set up a technology backbone, which is meant for three fundamental things. The first one is, it is meant for scale and performance. As the branch operations expand, as the customer starts demanding multiple touch points, as more and more integration has to happen, the technology has to scale up.
That is what our primary objective is. Second is, we are trying to get into a platform-centric play, especially if we look at the business model that PNB Housing is following, we now are working on three different verticals: prime, emerging markets, and affordable. While there is a lot of synergy, there are specific nuances in each of these verticals that need to be underplayed and configured onto a technology layer. By having a platform-centric approach, we are able to manage significant amount of scalability, at the same time, reduce significantly the risks of technology complexity and technology obsolescence. It also helps us to keep the IT costs under control.
The third and the most important aspect is we want to create a technology landscape that is significantly easier and intuitive for the end users to adopt, whether it is by the sales team, distribution channels, customers, collection teams, so on and so forth. From a technology perspective, there are five key strategic pillars that we are focusing on. It starts with the customer experience. We want to create a landscape that is easy for our customers to reach to us. In fact, very happy to share that with the new transformation on the CRM and the customer experience side, we now have almost 16% of customer service requests, which are serviced in a self-service manner. These are requests that are not even assigned to an agent, and the customer is able to self-service and complete his or her ask directly onto the customer touch point.
We have launched a customer mobile app. We have given touch points on WhatsApp and a bot for the customer to reach out to us and get self-service capabilities. So CS continues to remain a strategic priority. The next one is we want to ensure that all our distribution channels, both our organic in-house DSC channel as well as our third-party intermediaries, whether it is DSAs or DMAs, they are enabled onto a sales platform so that the revenue generation can be made simplified, and we're able to consistently scale up across different business segments. We also recognize that as we get into different business segments, there is going to be significantly larger volume of work that will come for the credit and operations team to work on. And hence, building capabilities for underwriting at a scale is another of a key priority.
My colleague, Jatul, also talked about the business rules engine. So what we have done is we have digitized and codified the credit underwriting guidelines into form of a rule engine, which is exposed as a service across different touchpoints and platforms, so that the people dependency reduces and the consistency of decision-making significantly improves. Of course, we want to leverage analytics as much as possible across the entire life cycle. And lastly, we want to ensure that we are creating a technology and backbone that is scalable, secure, and meant for long term. On the right-hand side, what you see is the technology backbone that I would like to very quickly touch upon. So the three or four key things that are takeaways, at least from a technology side here, is we are trying to leverage cloud to a significant extent.
That gives us this phenomenal advantage of scalability and performance. We are moving towards a services-based architecture so that integration is significantly easier, and we are also significantly spending time on, w e are also spending significant time and effort on keeping our entire landscape and ecosystem safe, because cybersecurity is definitely a key challenge and a significant challenge for all of us to deal with. Very quickly, while my colleagues have talked about it, broadly, if you see, the way our entire digital transformation is working is we are trying to automate the end-to-end loan processing cycle. In our line of business, there are certain elements of the business process which cannot be automated at the moment.
For example, the home visit or the technical verification, so on and so forth, but the rest of the process we are trying to digitize and automate to the extent possible. So as part of the transformation, the entire form filling is digitized to a significant extent. We have integrated more than 150+ services to ease the process of form filling for our agents and the end customer. Also, the validations happen so that the data entry validations and the data quality is significantly higher for us to leverage on analytics in the future state. We are also trying to do the KYC and the onboarding in a digital manner, and also trying to leverage different services for the customer to get to a sanction stage in a matter of minutes, and post that, the rest of the process can follow.
Disbursement, of course, is customer dependent. For our distribution team, we are trying to create a holistic platform, which is what Dilip was also talking about, Anujai was also talking about. So right from identifying an agency, identifying an agent, onboarding that individual, lead management, the entire hierarchy to follow up, day planner, incentive structure, MIS, leaderboard, sales pitch books, play guides, product, information sheets, customer details, queries from the underwriting or credit team for additional documents or insight from the customer. The entire thing is being made available onto a simple app-based platform, so that our field staff, our agents, are productive significantly from day one, and they can start directly contributing to the business targets and the business volumes. At the same time, it significantly reduces the turnaround time to resolve customer queries and do the sanction and disbursement at a much faster pace.
So this entire platform is coming alive, and the entire set of sales agents are gonna leverage this platform. Another key differentiator here is we have again leveraged a platform-centric approach here. So if we are trying to partner with a DSA who does not have a technology capability, we will be able to extend this platform to that DSA agency also, so that the synergy remains significantly higher for PNB Housing Finance. Lastly, so what is this transformation really delivering for us? So if you see, we have been able to reduce the manual data entry by almost 36%-37%. We have been able to completely reduce the ability to collect physical documents.
In fact, we have a very strong OCR engine, which is bundled and built into our LOS, as well as the field sales app, so that the entire process gets digitized. By the entire set of transformation projects that we are delivering, we are able to target higher levels of efficiency and productivity across functions, whether it is credit, sales, underwriting, operations, all these functions. And, for the first time in the last one and half years, we have built an in-house engineering team capability for PNB Housing Finance, so that we have got better control to make faster releases, make changes for technology quickly, and also maintain the intellectual capital within the organization itself, i t also helps us give the ability to go and partner with different players and, have a better go-to market or a targeted offering for our end customers also.
So that's all what I had to talk about technology. If there is any question, I'll be happy to answer in the Q&A session. Thank you. I would also like to invite my colleague, Vinay, to take through the finance portion.
A very good evening to all of you. Thanks a lot for joining us today and be part of our journey so far, and, you know, and driving the future roadmap as well for the company. I'll cover briefly, you know, on the second part of the ingredients. So, so far, you have heard about the yield and, you know, how are we going to grow profitably? One part of that, obviously, is the yield. You know, how are we going to drive higher yield? The second part of this, you know, journey would be, and the key ingredient would be the borrowing cost, right? So what are we going to do on the borrowing cost, and how are we going to drive the efficiencies and improvement there?
So MD Girish spoke about the mix and the diversified borrowing profile. So as you can see, for the last three years, our borrowing profile remains well diversified. We have maintained the diversification, and our endeavor would be to maintain this consistently over the coming years. In the last year, some part of the term loans have given way to NHB borrowings, as well as, you know, the part of NCD borrowings. As our access towards debt capital market improves, now we are also looking at borrowing through these instruments more and more as we move forward. So diversification from these instruments would be maintained. The second part is in terms of the liquidity.
So as our access towards the debt capital market and towards the, you know, other instruments improved, now, we have actually brought down the excess liquidity from the levels of 8% to the levels of 3.5%-4%, which is in line with, you know, other well-managed housing finance companies. And our endeavor would be to maintain, you know, this, liquidity, that you see on the books. In terms of cost of borrowing, as you can see, last financial year, we were able to maintain the similar cost of borrowing, right? So while most of the housing finance companies saw the increase, we were able to maintain the similar trend of cost of borrowings. This has been made possible with two, three things.
One, obviously, our access towards NHB borrowing improved this year, so we have borrowed around INR 3,000 crore this year. We have also improved our borrowings or replaced by some of the high-cost borrowings of ECBs, et cetera, in the form of domestic borrowings. So this has helped us this year in terms of maintaining the cost of borrowings. Now, as you all know, at the end of Q4, you know, we have got a rating upgrade. So going forward, this gives an opportunity now, you know, to again renegotiate and, you know, go back to the market and ask for the better, cost of borrowing on the incremental basis.
So on the incremental borrowing, we expect somewhere around 15-20 basis points of improvement, in the cost of borrowings, maybe in the form of, you know, our access towards debt capital market, you know, our access towards NHB funding, and through re-negotiation of spreads and, you know, renegotiation of benchmarks. Similarly, on the portfolio basis also, we would be reaching out to our, lending partners and trying to renegotiate on the spreads and benchmarks. So definitely, you know, this is one area which we will be working on very aggressively, and, the opportunity lies ahead, and we are well, you know, placed to capitalize on this opportunity. Moving on in terms of asset liability profile, this remains, you know, very well balanced.
All our buckets remain within the board-approved limits, and we ensure, through the risk management committee tracking, that there is no breach in any of our board-approved limits from time to time. In terms of SLRs and the LCRs, also, we maintain very healthy ratios, and we ensure that, you know, we remain far ahead in terms of the requirement, so that there is no breach at any point in time. Moving on to the key ratios. So as you know, over a period of time, our ROA profile has improved. This is driven by improvement in margins, improvement in fee income, and improvement in credit cost. Some part of the margins are obviously being taken away because of the mix change as we are moving towards retail versus corporate.
So the mix is also moving towards retail, and hence, you know, you see a flat margin versus 2023 and 2024. Going forward, as you know, with higher mix of emerging and affordable coming in, obviously, there is going to be an opportunity to improve these margins. But yes, over the three years, there is definitely an improvement, and we'll definitely continue to further improve the journey. This is more now that you have heard all the management team and what all we are going to do in terms of improving the growth and improving the margins. So over a period of time, now, as you see, as we increase the share of emerging and affordable incrementally, it will start contributing maybe around 50% in terms of the disbursements.
In terms of book, these two verticals will contribute maybe in a three years' time to around 40% of our book. This change and shift will help in improving our gross margins, maybe in the range of 50-70 basis points. The operating cost also will remain stable. Actually, you know, we see an opportunity to bring it down maybe by, you know, 10-15 basis points. Reason being that since we would be investing on the affordable segment, however, at the same time, with the scale kicking in, the economies of scale will help in absorbing those incremental costs that is going to come in. So overall, we see an opportunity to further bring down the operating cost. The credit cost is going to remain constant.
So, with this mix, we expect an improvement in our ROA profile from the levels of, you know, 2.1%-2.2% right now, to go to between 2.5%-2.6%. And then, if you use a steady-state leverage of, let's say, 5x, then that gets us to somewhere around, you know, 15%+ ROE. Further, there is an opportunity of recovery from the write-off pool, which we spoke about. Obviously, since it is difficult to time it and predict it very accurately, so this is obviously an over and above opportunity, which will continue, you know, to come in in the next 6-8 quarters. So this is a brief about, you know, how our ROA profile is going to improve in the next three years time frame.
I'll also cover a bit on the human capital. As you know, you know, behind the success of any organization lies, you know, its human capital and, you know, the experience of the human capital. Human capital remains, you know, one of the key, and the most valuable asset for any organization. As you can see, you know, in terms of the mix, at a senior and mid-level, you know, we have a very good experienced team, having at least two decades of experience. In terms of, professional, mix, it is around 80%+ have the professional expertise. In terms of, you know, the attrition rates, they have significantly come down and maybe, you know, are one of the best now in the industry at around 17%-18%.
We have been continuously investing across the employee life cycle, be it through the learning hours, be it you know through ensuring and nurturing them across their you know life cycle or the journey in the organization. And if you see, you know, approach that we are adopting is more of a you know employee-first approach. Strong people initiatives have been taken across onboarding as well as employee recognition and engagement. There is a comprehensive wellness packages that are being offered to the employees to ensure you know that they are being taken care of in the organization.
In terms of capacity building, there is continuous investment in terms of upskilling them through providing the right learning opportunities through the online modules, as well as through the classroom-led trainings. So, all this is basically proof of the pudding is in terms of, you know, we have been certified as Great Place to Work last financial year. You know, our journey will continue, and we'll ensure that we further strengthen and leverage this employee talent pool to reach further heights in the organization. With this, now, you know, I hand over to Girish Sir to summarize the key takeaways based on the presentation so far.
Good evening, once again. I think, the key takeaways are very clear: growth with profitability in mind, keeping the asset quality pristine, and compliance as threshold. I think these are the key takeaways. Within growth, we'll try to grow our Roshni book and emerging vertical market, emerging markets vertical. So these two will be our focus on growth. Grow the book by 17% for next three years. Disbursement growth will be in the range of 23%-25%. As I mentioned, we are now moving into high-yield segments in all the three segments, whether it is prime or emerging or affordable, so margins will definitely improve. That is our focus area. Today, we are at 1.5% GNPA.
We want to bring that down to 1%-1.1% by end of this year, and further improve and maintain in the next few years to come. As I mentioned, of course, we will keep investing in IT, digitization, and automation. I think these are the key takeaways. Broadly, growth, improve margins, keep the book quality good, with compliance as a threshold. I think these are the top four takeaways as an organization that we would like to focus on. Thank you.
Thank you, everyone. Thank you, everyone, for the presentation. We will now open the floor for the Q&A. We'll just take a minute. We'll have just a few chairs over here so that people can sit and answer your queries.
The presentation is already there on the web, on the stock exchange's website. You might have taken a look and downloaded as well. Please do read page number two of the presentation, which is on the disclaimer or, as you call it, Safe Harbor.
Pratik Chheda from Guardian Capital Partners. Thank you for a detailed presentation. I have a few questions on the affordable housing segment. In your initial slides, you mentioned that you want to look at increasing the share of affordable to around 14%-16% on a INR 100,000 crore loan book. So that roughly turns out to around INR 14,000 crore of AUM size. Right now, we are at around INR 1,800 crore, so that is roughly around 7.5x in three years. Do you don't you think this is a bit too aggressive in a three-year timeframe?
And, secondly, currently, the yields that I see of affordable housing are at around 11.5%, and the band that you mentioned for the slide is around 12%-14% for the affordable loans. So the connected question is that, do you think that it will be, you know, easy to scale up the loan book, given that the yields are right, right now lower? Will it be easy to scale up the loan book with higher yields and aggressive growth plan?
Yeah. So on affordable, today, we are at about INR 2,000 crore. When we talk about scaling up affordable, we will be investing in branches. Now, last year, if you see, with 100 branches, we have done INR 1,650 crore. We have added INR 60 crore this year. Sorry, we've added 60 branches last year. This year, we are going to add another 40 branches. So by end of this year, we'll be at 200 branches. So every year, we'll keep adding branches. So one way to grow affordable, because it is generally said, you know, when we talk about affordable, when we talk about affordable business, beyond a particular scale, it is difficult to scale, right?
Now, we feel that up to about, let's say, INR 14,000-INR 15,000 crore, it is not difficult to scale up, provided we expand the branch network, we invest in people, we invest in process, and we take care of all the risk metrics. So by FY 2027, we will be at a book of INR 15,000 crore on affordable. That's number one. Number two, we have taken a graded approach on the affordable business. The first year of operations, we were at 11.6%, and the reason for that was largely we focused on income-based. 75% was income and 25% was informal, right? Now, that mix is going to change this year onwards, which means we are talking about yield of 12.6% this year. And this 12.6%, we are talking about 100 branches.
The old branches will focus on all the segments. The new set of 60 branches will focus on what these 100 branches focused last year. Right now, this will be on a continuous basis. So today, if you talk about the affordable market, a blended yield of around 13% is very much achievable. And that is why we feel that by FY 2027, we'll be able to reach a book of INR 15,000 crore and touch yield of 13%.
So a connected question to that is, right now, in isolation, if you look at the affordable housing segment, the number of employees are around 300 something, 330, and the branches are around 160, so around two employees per branch, which compared to your peers, is, you know, relatively low. So just wanted to understand, if, a nd also, if you are planning to do 70% in-house sourcing, do you have an aggressive hiring plan also in place over the next three years?
So if you typically look at the affordable branch, we're going to have one person managing sales. We'll have a great manager, and we have a blended approach for the disbursement. So we have, you know, in affordable, for the first year, we're going to have a localized, concentrated disbursement hubs. So one branch would typically need about three on-roll and five off-roll, so totally it will be eight. What was shown there was on-roll employees, that is PNB Housing. So we will have another five to eight executives per branch, depending on the category and potential for sourcing and processing.
Just to add, about 333 people, they are, as MD also highlighted, they are PNB Housing employees. Plus, we also have 1,000 PHFL employees who are already working in these branches, and they are our, you know, frontline sales, credit, and mainly sales and collections and operations executives.
Sure. Just one last question. On the ALM slide, also, the asset and liability in the one-year bucket seem very tight. So do you see that the, you know, the share of short-term borrowings or short tenure borrowings is restricted? Do you see it going up? I mean, it's running a pretty tight ship there. So what's your view on increasing the share of commercial papers from here?
No, so it is not going to. We are not going to increase short term. As you saw on the page, the one-year profile is almost in line. There is a small gap, but there are board-approved limits, you know, that we have set, and these are being monitored, you know, by the RMC or Risk Management Committee as well. We ensure that we remain within the board-approved limits. So it will remain in the similar range. It will not, you know, see any big change in terms of the shift.
Anyone else?
Hi, this is Nikhil Agarwal from VT Capital. Thank you for a very detailed and, and, and a very informative presentation. So there's some bit of confusion with the growth rates. So let's say if you assume INR 100,000 crore AUM by FY 2027, and as, Mr. Dilip mentioned, that prime and emerging, which is INR 61,500 crore as of FY 2024 end, would grow at a 12% CAGR, that would translate into around INR 85,000 crore portfolio, which is 85% and leaves room for 15% affordable housing. So either prime has to show some kind of slowdown or the total book has to be way above INR 100,000 crore to reach the segmentation. So some confusion here.
So I had mentioned this earlier. So our focus is going to be on all the three segments: affordable, emerging, and prime. The growth rate is going to be higher in affordable, followed by emerging and then prime. So prime, you know, to a certain extent, would act as a balancing, you know, segment to ensure that the growth of 17% is maintained.
Right. So the focus is growth in the other two segments, and prime would be the balancing figure in the target?
That's right.
Right. And one more question on affordable housing. Just, just some clarity on how the repayment schedule works in this segment, because in the 15-month period, we have disbursed, we have sanctioned INR 18,000 crore, disbursed INR 13,000 crore, and the loan book stands at INR 18,200 crore. So some clarity on how the repayment schedule works.
No, no, I think those were number of loan accounts.
Those were number of loan?
Yeah.
Also, those, the throughput funnel we had a number of customer accounts.
Okay.
Overall, the INR 2,000 crore loan book that we have, we have around 15,000 unique customer accounts.
Okay. All right. And one more question. From a strategic perspective, the salaried and self-employed and the formal and informal bifurcation that was given by the management, the highest focus has to be the transition from salaried formal to salaried informal segment, the highest shift mix. So in the salaried informal segment, which is like the example was given of a Medicare worker, why is this the best customer for us right now in this market?
No, as I mentioned, it was a strategy, because it's the first year for us, we focus more on formal. When we say formal, obviously, we're going to have a higher share from salary. Now, this is year two, the focus is going to shift, so it's going to be 50% salaried, 50% self-employed. And within salaried, within self-employed, the focus is going to be more on informal.
Got it. Thank you so much, and, congratulations on the sustainable numbers.
Thank you.
Thank you so much.
Hello. Sir, I have two questions, one on OpEx and second is on credit cost. So as we, as we are increasing the share of-
Not able to hear you. A little louder, please. I heard one on OpEx and one on credit cost.
Is it better now?
Yeah.
Okay. So my question was that, as we are increasing the share of lower ticket size loans in our loan book, that is obviously going to help us on margins, but don't you think that it will also increase the OpEx as well as credit cost for us?
First, on the OpEx, see, we have a very unique model. You know, we have three different lines of business. We have three different verticals. When we talk about three different verticals, the line function, basically the sales team, credit team, collection, and operations, only these would be specific to a particular vertical, and rest, all the entire infrastructure is going to be common for all of these things. For example, IT or HR. So there are a lot of shared resource, and therefore, in this model, if you see, OpEx, it's going to be much lower collectively when you compare with a similar model of any other company. For example, if you take, let's say, affordable company, OpEx will be in the range of, let's say, 2.5%, 250 basis points, or maybe at least 200+ basis points.
Now, for us also, it is going to be much higher compared to emerging, but it will be far lower compared to any other affordable company because we have one shared resource team trying to manage all these three verticals, and therefore, our OpEx is going to be lower. At an enterprise level, our OpEx will be in the range of 95-100 basis points.
Which is-
On credit cost, if you look at the risk between prime, emerging, and affordable, today, if you talk about prime, a well-managed prime company would have a credit cost ranging anywhere between, let's say, 18-22 basis points. For emerging, it will be anywhere between 25-30 basis points. For affordable companies, for a matured book, it's going to be between 40-50 basis points. So for us, when we talk about 30-32 basis points credit cost, it is at an enterprise level, so which is a blended credit cost. And that also, you know, why we are saying it will be around 30-32 is only because we have tweaked a lot of things, and we have put a lot of process controls.
For example, in affordable, every single customer, irrespective of the amount, is met by the employee, every single customer on the affordable side. If the customer happens to be a self-employed or a businessman, credit manager meets the customer and does personal discussion and then assess the income. Every single property other than the valuer is being visited by the employee. So we have put in lot of controls, and we have seen this portfolio, and therefore, we are pretty, we are confident that we'll be able to manage credit cost in the range of 30-50 basis.
Sir, and the model will be more centralized, or it will be the branches will have more authority to sanction the loan?
So it depends. For example, on the prime side, you know, we have decentralized to a large extent. It's like this: any new branch which we open, for certain months, we will keep it centralized. When I say centralized, it's not at the national level, at a zonal level, and then after six months, we decentralize. Now, this is for prime and emerging. When it comes to affordable, right from day one, we would have credit manager based out of the branch, but will not have power. After few months, once the credit manager gets experience, then we give power. So it depends on model to model, but the idea is to decentralize, but there is a constant monitoring happen on a daily basis central.
Thank you, sir. All the best.
Thank you.
I have a few questions. Can you share what is the cumulative write-off, number of properties and amount which is outstanding as on 31st March?
So I mentioned, on the corporate, it's about INR 1,700 crores, and retail is about INR 500 crores. Totally about INR 2,200 crores.
Retail is how much?
INR 500 crore.
You shared that cost to income is somewhere around 23%. How is it likely to move? Because you are on a hiring spree and stabilizing the model. So because it has moved almost 300 basis sometime in the last 4-6 quarters. So can you share where it's going to be sustainable?
See, now, the spend on the IT is largely, i t's done in the last year. So we've taken spend on IT, branch expansion, investment in people for the new branches, all of these things are baked in, and that is why as an OPEX to ATA, we said it will be in the range of 95-100 basis. So there won't be a significant increase in cost because of all these things, because these things are already baked in.
Regarding borrowing cost, you are expecting 50-20 basis reduction. That's the correct understanding? But-
Yeah, incremental.
Post-rating upgrade, which can come in four or six quarters, they should be little higher, isn't it?
Sorry, I didn't get that.
Yeah. So, so what we are trying to do is on two fronts. One is incrementally, we will be able to, you know, get, get better rates from banks, from the market, both on NCDs and CDs, A. B, Vinay also mentioned that, you know, we have been engaging with all the bankers on the, on the outstanding loans to change the spread so that the rate would come down. So the effort is on both. Overall, all put together, I think we are expecting about 10-15 basis at an overall level. Incrementally, we are talking about next few quarters, it should be in the range of around 15-20 basis.
Any thoughts on typical Bombay market, where self-development societies are there, which need between INR 10 crore-INR 35 crore for self- redevelopment, which segment is totally untouched as on date, if you see, and there's a lot of potential over there because FSI availability is significantly higher. So are you focusing any of... or have you evaluated this segment?
On the retail front, if this happens to be in any of the segments where we operate, and if it is, if the project is viable on the retail front, if legal and technical, you know, is clear, then we would fund it.
I think you're talking of redevelopment, right?
Yeah, redevelopment.
Redevelopment is a tricky, area to get into. Normally, from our experience, what we see is it takes time for consensus to get built up. Within societies, the existing residents take time to finalize whether they want to redevelop or not. Then, who's the right developer to get into the project? Then, what is the kind of deals that they will have with the developer? The right time for a lender to come in is when all of that consensus stands received, construction is commenced, and then we start funding the retail borrowers who are being sold the property, not the existing customers. There, as long as, the customers fall within our appetite of pricing and risk, there we will come in. The timing in redevelopment is right. That is the most important.
So I am referring to the self-redevelopment. I'm not referring to the developer-led redeveloped societies. The self-redevelopment, where existing people move out, arrange their home, but they need to put up a building, and where most of the people are senior citizens, and they do not have the wherewithal to own. So that's why your mortgage is whatever the loan, loan is.
Yeah, that's appraised on a case-by-case level. If it falls within our appetite of construction risk, customer risk, we will look at it.
But on the corporate side, we will not get into, you know, this kind of structure.
Yeah.
So which is what I mentioned. On the corporate side, you know, very clearly, we've told, you know, what kind of projects we will look at, what kind of developers and what kind of markets. On the retail side, that's what I mentioned, wherever legally and technically it is clear. So that stage of legal and technical clearance comes into picture once, you know, all of these things are sorted out, and if it falls into our segments, then we would do it.
Thank you.
Hi, I have two questions. First one is on affordable housing. What is the cost of disbursement per lakh rupee of loan in the last one year in affordable housing segment for us?
Cost of acquisition, we call it cost of acquisition, is around 1%-1.2%.
1%, 2% of the loan value?
Yes.
Okay.
Yes.
Average, average size of the loan is how much, sir?
Is around INR 14 lakh.
INR 14 lakh, okay, that's right. And just a second question on the affordable housing, since there are a lot of HFCs, how do you differentiate in front of your customers? And considering you are a newer player in the market, it'd be great to understand how your sales manager go there, because I'm sure those customers must be getting approached from these other sales managers as well. So if you can explain.
That's a good question. You're right, it's a crowded space, you know, the affordable housing space, and for that matter, the housing finance space is a crowded space. What is really a good USP for PNB Housing, we, while we are the late entrant into this business, but what has been really working well for the Roshni product are, you know, a combination of two or three things. One, our brand name really resonates well with these customers. It brings a lot of trust and respect. Second, our distribution is, you know, the way we have expanded the branch operating model, the way it is working is more efficient as compared to our competitors.
Third, the service levels, you know, the from login to sanction turnaround times that we are able to commit to the customer and we are able to deliver to the customer are far superior in comparison to many of the other players in the market.
Apart from whatever Anuj told, I think on the affordable space, if you go to the next 50, next 50, next 25 locations, you rarely find any competition. So affordable business is all about perfect execution. Invest in branches, invest in team, invest in process, and if you get deeper into the markets, deeper into the geography, I think it's very, m aybe the top 100 is crowded. You go beyond 100 towns, I'm saying prime, emerging, within affordable 100 towns will be crowded because you'll have 5, 6 players in each of these towns. You go to the next 50, 100, which means you need to expand your branch footprint. And once you do that, I think then it is more a question of making credit available to the needy.
You know, so I think that space is still very large, and that is where a lot of potential is there.
Just a quick follow-up on this. In terms of pricing, how do we stand? Where are we in that ladder for this segment, for this business?
See, today, if you look at the differentiation, there is no difference in pricing. Maybe 10 or 20 bips lower in each of the segments or the profiles. It is just that we had chosen to be present in certain segments, focusing on certain profiles as stage one. Now, we are into second stage, where we have opened up to all the profiles, all the segments. So we should not see any difference in pricing beyond 10, 20 bips going forward. Still, there would be a difference if we compare affordable blended yield for FY 2025 for PNB Housing and others. That is purely because of the old set of 100 branches and new 60 branches, the focus is a little different, and that is where this difference will come into picture. Otherwise, there is no difference.
Thank you. Thank you.
Yeah, Vijit.
Hello. Yeah, thank you. Vijit, the first question that I had is, I mean, very clearly, we are looking to move, like you said, between salaried and employed, 50/50, formal, informal, 50/50. We're looking to improve the proportion of non-housing, right? Which is going to aid better yields, improve margins. But very clearly, we are looking to move towards a riskier customer segment, purely from a risk perspective. The other thing that you talked about is more decentralization when it comes to underwriting, right? So while decentralization has its own benefits of maybe better customer experience, faster sanctions, faster TAT, right? One of the things that a decentralization opens you up to is also case for frauds that can happen, right?
So I mean, what I understand, right, one of the ways to mitigate frauds, right, is to build that maker-checker kind of a concept in your underwriting, right? So I mean, what are we thinking about it? What safeguards are we building in our underwriting as we move towards more decentralization?
The first question was on affordable or overall?
Overall, I think we are looking-
So, talking about retail business. So when we talk about retail business, you know, when we say self-employed, self-employed is riskier compared to salaried. So this is a known fact, and this is true for the industry. Non-home is riskier than home, right? We have a risk-based pricing. A, we price it based on the risk, number one. Number two, we also reduce the risk. For example, we have completely moved away from high value. We have completely moved away high value, non-home. And number three, within non-home, across programs and the products, we have put in a lot of filters. What I'm trying to say is that even let's say we do a small ticket, when it's a small ticket, INR 30-INR 40 lakh LAP, the risk is not significant. But suppose vis-a-vis, compared to someone doing a INR 3-INR 4 crore LAP.
Coupled, what happens is that there are multiple levels of risk. The minute we say LAP, it comes with a profile of self-employed. Self-employed is the first level of risk, and second is the product, that is loan against property. The third layer could be the program. If the program, if it is not formal, let us say informal. On the affordable side, we are saying that in informal, there is a lot of opportunity, a lot of potential. There is a risk, but the margins are such that it can easily cover the risk. On the prime side, when I say prime and emerging, there are layers of risk. If you try to deal with couple of risk and pull down the risk, you know, then non-home per se, or let's say even if it is a LAP, LAP, small ticket, income base is not very risky.
LIG, informal, when I say, you know, program-based lending, that would be risky. Add one more layer of risk, that is high value. So self-employed, LIG, the program, and high value. So there are four levels of risk sitting vis-a-vis compared to a salaried profile. So we have worked on all of these things. We have reduced the risk at a program level, A. B, at a ticket size level. And number three, we have tweaked, depending on the geography, depending on the program, depending on the policy. You know, we have tightened some of the processes, some of the parameters. And therefore, a mix of a 65-35 for a HFC on the prime or emerging, you know, business is well balanced. Whereas when you come to affordable, so definitely, you know, the informal would be higher because, you know, they don't have access to credit.
We will get into such small towns, you know, where the awareness level of the customers would not be that that we can compare with customers in a emerging market or maybe in a prime market, and therefore, that differentiation is there. Whereas, talking about some of the risk mitigants and controls, we've already put this in place. Our experience in the origination of last two years, we don't see any risk which comes out of early warning signal.
I'll just add to this, the mid-ticket size LAP, what he spoke about, is, you know, and that to a business purpose loan, not a consumption loan, like LAP to salaried, we don't do. A mid-ticket size to a small time businessman, and that to LAP goes with lesser LTVs. So that, last not even two years, if you see after COVID times, after April 2020 onwards book, we don't see any incremental risk coming in from that strata. So as he rightly said, the above two layers we are avoiding, the high-ticket LAPs we are avoiding. The LAPs, along with, coupled with the surrogate income assessments and all that, we space we have vacated. So the bottom left is not very risky proposition, and with conservative LTVs, that makes a good business deal at a higher yields.
And one point more, as you said on the decentralization and the maker and checker, the company still follows the four eye principle, maker and checker for every case. While we have said that we have moved to decentralized, we still follow the hub and spoke model. See, earlier we say that the hubs are 22 hubs, which are catering to our all the branches. We, we came across two things: one, for better business catchment, we need underwriter locally, and b, in some of the branches, from risk perspective, we need an underwriter there so that he can go and touch base, especially with the self-employed customers. So giving you an example, for example, in Bombay, our hub still remains in Goregaon, and, where 10 underwriters were together sitting under the nose of a regional head, today, one of them is sitting in Andheri branch.
That kind of a decentralization done, his thread is still attached to the same hub with the maker and checker concept.
Given the model which we operate today, it's a vertical model. Sales team is independent, credit is independent, operations team is independent, legal is independent, technical is independent, and fraud continuity is independent. So if, if, a file has to be sanctioned and disbursed, seven teams will have to look at that file. So I'm still not saying that it is not possible to collude, but collusion becomes that much more difficult because of this model. Vis-à-vis, compared to a model, you know, where one person in a branch does origination, underwriting, disbursement, collection, and customer service. You know, where one person does all, vis-à-vis compared to, b oth the models are good, both the models, you know, has pros and cons, and there are ways to mitigate. So we, we are following vertical model, where the, maker checker is inbuilt in the system.
A, within the team, within one team. Number two, cross-functionality, because of the given, because of the nature of the role required by each of these teams to take the file through the entire journey, right from origination till disbursement. So we have a vertical model, so that conflict of interest is not there.
Thank you for the detailed answer. Just one more thing. In this presentation, I think we touched upon all the aspects, namely OPEX, credit cost. I think one thing which we didn't maybe touch upon is the fee income side, right? While I acknowledge we are a monoline lender, right? So avenues to cross-sell are not as much, right. But how are we thinking about this fee income?
See, fee income. I say we are, this is a monoline business. We may talk about various segments, you know, within retail. It is a monoline business. So I think fee, fee will be in line with the volumes, and that's the reason separately we've not talked about it.
Got it. Thank you so much.
Hi, sir, this is Rakesh from Investec. Firstly, on the margins, you are guiding for 3.5% margins versus 3.7% last year. Why is that? Do we expect margin compression? And, what will be the margin expectation for FY 2027 when we are seeing ROE of 2.5%?
See, when we say 3.5%, this is long-term steady state. You know, we talked about steady state margin, so there can be slight ups and downs, and therefore, we are getting 3.5%.
But at 3.5% margin, 2.5% ROE looks very difficult.
That is in the near term. 3.5% is near term. I think once the mix keeps changing, because now we are getting into affordable and emerging, so obviously the yields are going to be better, margins will improve, and this entire thing will change. In the short term, we are saying that the margin is going to be around 3.5%. Give three or four quarters time, the entire thing will change because we are moving more towards, you know, segments which are giving us higher yields, A. B, the corporate book, which, which saw a huge runoff in last couple of years, which had an impact on the revenue. Now, the book has come down to about INR 2,000 crore. I think that would now get arrested.
Number three, today, the prime book is quite large, and let's say in next year and two years from now, the book will deplete, and therefore, the impact in terms of contraction of margin is not there. However, if you have to talk about, let's say, margin for FY 2026 and 2027, 2025, 2026, 2027, obviously, there will be an improvement.
Sure. Secondly, the affordable housing segment, does all the files goes to hub or, a file, does entire decision happening at the branch level itself?
On the affordable side, every single branch, right from day one, we have credit manager in the branch. We have a policy where for initial few months, the credit manager would apprise the case, do the due diligence, do everything, and then sends it to the next level for approval for a few months. Once the credit manager gets authority, decisioning would happen at the branch. The model is different, you know, for each of these businesses.
So over time, we realized that decentralization of such high level has created problems for other companies in the past, and most of the companies are now moving towards centralization of the credit decisioning. Specifically, if at a particular scale, that becomes a very important factor from a scalability point of view also. So how do you mitigate the risk? Because one guy is just doing all the decisioning, and how do you mitigate the risk of frauds or, let's say, less relaxed underwriting by that particular person?
There are two models. One is branch model and one is vertical model. Now, there are risks in branch model, there are risks in vertical model. I think the idea of either centralizing or decentralizing is more to do with the cost and not from a risk perspective, because there are risks in both the models. I'll come to the risk. So, for example, today in our affordable, the sanctioning happens at the branches, but the disbursement is centralized. So why is the disbursement centralized? It is not because of the risk, because we have an inbuilt model, which is a vertical model, where there is no conflict of interest, and therefore, the risk is lower. Nobody can say there is no risk. The risk is far, far, far, far lower. Today, we have chosen a centralized disbursement for affordable that is more from the operational efficiency and cost perspective.
So there are both the models. Both the models are exposed to certain kind of risks and, you know, for operational efficiency, they may have a blended model. Even today, in prime, in emerging, we have blended model. There are some branches, because of risk reason, which I mentioned to you, let us say a new branch, for six months will be centralized. An old branch, which has enough volumes where there is the cost impact, once you have managed the risk, it will be decentralized. So it depends on the model, but the question of, whether centralization is good or decentralized is good, I think it is, it is beyond a point, you know, beyond cost, it is a view.
But largely, people do centralized more from a cost perspective and not from a risk perspective, because both the models are exposed to risk, and there are mitigants to mitigate, you know, risks in both the models.
Also, just to add on, it's an important point, especially on the affordable housing side, as MD also highlighted, every branch has a branch credit manager. It is extremely important, especially in the informal segment, to underwrite the case locally there. We should have all the skill sets there.
So underwriting is happening locally, decentralized manner. Decisioning is not happening there. Decisioning, we have the delegation of authorities are set in a way that there is a regional credit manager, a zonal credit manager, as per the delegation of authority, the decisioning is still happening centrally.
So, when we say decentralization, decentralizing everything. When I say everything, sourcing, underwriting, which includes disbursement, sanctioning and disbursement, collection, customs, and customer service under one person or one team, that is the risk. The risk in decentralization is this. On the other side, if we don't decentralize, there is a larger risk, because on the affordable side, if you don't meet the customer, if you don't get the touch and feel of the customer, because largely it's going to be informal, unless the credit manager, not the sales manager, credit manager, who's independent of targets. So when the credit manager goes and meets the customer, he would meet the customer, understand customer's business, draws out PNL, and then would decide on the quantum of loan. If the credit managers are not there at the branches, the risk is higher.
So the whatever, you know, couple of instances what we have seen, that is not because of decentralization. That is because of 100% decentralization with one team. Again, I'm saying there is nothing called as right model or wrong model. It depends on whatever model we choose, we need to ensure that we mitigate all the risks. I think that is the difference, not because of centralization or decentralization.
Sure. Also, can you share the bounce rate and 1+ DPD in affordable housing vertical?
I think it's a very new business. You know, I can just tell you our bounce rate today is not comparable. It is much, much lower compared to industry, and therefore, it's very new business. I think once the business matures, we'll be able to share all this data.
Sure. Thank you. That's a promise.
Anyone else? Okay. This is,
Yeah.
Raj Kanika.
Sir, first question is on the corporate book. You said that from less than 2% or 3% of the overall, it will become less than 10%. So fair to assume that it will grow proportionately more than the overall book. So what is the rationale for growing faster in the, in the non-retail book? And in terms of profitability, if you can differentiate a little bit in terms of how, you know, in terms of retail and corporate, how, what is the difference in profitability of these two segments?
See, on the corporate side, I think we had almost stopped business for three years because we saw stress in the book, and we know why there was stress. So we had to deal with all the challenges. We took a pause. We stopped doing business. We worked on the portfolio, we worked on the NPA, we ran down the book, we reduced the NPA, and now we know what went wrong and why it went wrong, and therefore, in a calibrated manner, we want to start growing. I think now it is, we can't compare because the base is very small. Now, 3% going to 5%, we should not say, "kay, it is going up by 65%-70%." We should not look at that because it's a very small business.
You look at any new business, first year, second year, the growth is going to be more than 1.5x, 2x , so which means 200x . So it's a very small business. The book has shrunk. The book is very small. I think we should not look at that. I think what is important is that in terms of de-risking, you know, strategically, we want to keep corporate less than 10% at its peak. When I say at its peak, even if you look at the corporate book, let's say in FY 2026 or 2027, it is going to be under 10% in the overall portfolio. That's number one.
Number two, in terms of profitability, since we are into multiple segments, and emerging and affordable are going to be high-yielding segments, the difference between profitability, you know, from a corporate book and let's say, affordable, is not going to be very different. In the sense, we are going to focus on very safe corporate, you know. So the yield difference is not going to be much.
And sir, second question is around the affordable. You said that, when you go beyond the top 100 districts, that is where the opportunity lies. But I think there was a slide in terms of when you segregate, on overall pan-India basis, there are 500 odd districts where, there is scope for affordable, and within that, there are only 100 districts where there is enough size to do affordable or the asset quality is better. So when you try to go beyond those 100, either you face a problem of scalability or the TAM is not very high, or probably the asset quality is not up to the mark where we want to probably operate. So I, I, I'm just failing to understand where is the potential for affordable? Is it in top 100 districts or it is, or is it beyond top 100 districts?
See, the potential for affordable business is there in starting from Tier 2, when we talk about Tier 2, obviously, we should talk about pocket in the town and not heart of the town. When you talk about Tier 3, Tier 4, Tier 5, you can be in heart of the town and still you'll have potential. So when I spoke about, you know, going beyond 100, I was talking about the affordable segment, which is beyond, you know, Tier 1 and Tier 2. So I was talking about Tier 3 and Tier 4, let's say top 100 and next 100. So the minute you go to next 100, there's huge potential, A. B, you also have an opportunity of yield. In top 100, you have an opportunity on business, but because of whatever competition available, there might be slight challenge on the yield.
So when I say when you get deeper, you will actually grow better. And there's huge potential, both in terms of growth and also in terms of yield, but that requires an investment. It's a very hardworking model. As I mentioned to you, on the affordable side, every single customer has to be met, every single property has to be visited. It's a very hardworking model, and therefore, with existing set of branches, if a company wants to grow, that is very risky. So we need to invest in branches, we need to invest in people, we need to invest in process, all the risk metrics, only then growth will come back at the requisite pace. And for that to happen, if a company has to grow, because there is a challenge today, growing the book beyond a certain level, which is about, let's say, INR 15,000 crore.
If a company wants to grow beyond INR 15,000 crore, definitely we need to get deeper into geographies, and only then they can grow. Otherwise, what will happen, within the existing geography, if you have to grow, then there will be a reduction or contraction in the yield. That's where I was coming.
Just to add one more point here. The page that you are referring to, the message that we are trying to highlight there was Prime business will focus in, let's say, top 20-25 cities. Emerging markets business will focus in the next 50 cities. And Roshni business, the affordable housing business, will focus in the next 100 cities. So the sum total is still around, let's say, 150-200. So which remains, the first page that I showed, 150 or 160 districts are conducive for this business. Right now, we have around 160 branches. In my opinion, we can easily open 500+ branches in these 150 districts, because you have to get to those, you know, peripheral towns and semi-urban areas of these districts which we are targeting.
So the idea is to go deeper, not necessarily to the 100 next districts. Within these, you know, 150 defined districts, there is a lot of opportunity to open more branches and penetrate these markets better.
Got it. Thanks for your response.
Sir, can you share some thoughts on your fixed interest rate? How much is variable component and how much is fixed rate, and how is it going to be shaping up in next two or three years, including your emerging market business?
On the lending side or on the liability side?
No, no, lending side.
Lending side. Lending side, everything is floating.
All floating.
All floating.
Everything is floating.
No, what I meant is, whatever your assets acquisition, so whatever you are lending-
Sir, do you get your-
Charge to customers.
It's all floating.
All floating, all the floating.
Asset book is all floating.
What is the lead, like, relationship between passing of 25 bps? If there is a reduction of 25 bps, what is the lead, like, relationship of passing? Is it one quarter, two quarter or so?
No, no. Whenever the cost goes up, we pass on that to the customer. Whenever the cost goes down, we pass on the benefit to the customer.
It depends on what is the impact would be on our liability profile. Depending on what is the impact on our liability profile, if there is a reduction, it will be passed on. If there is an increase, it will, t hat will also be passed on.
What is the duration? Is there a 1 quarter-
Duration, you know, depends. Maybe, you know, it takes around 12 months for the complete repricing to happen.
Okay, let's say we arrive at a hypothetical scenario. Maybe you can tell me what is the probability. India gets included in the sovereign rating rates, upgraded. There is a bond inclusion, heavy inflow comes in, and interest rate drops by 200 basis points. How will you react to this say?
See, whenever there is a movement in interest, either northwards or southwards, if the rate goes up, we pass on to the customer. If the rate goes down, b ecause our loans from the banks and various, you know, channels of instrument also would go down.
So there are-
When the rate goes down, we will also pass on that to the customer.
Now, that's the normal behavior to happen. That I understand. But question is, if this has happened, where your interest rate has suddenly dropped, so your spread will be under threat?
See, we always, you know, we do stress testing, okay? We always plan for the normal scenario and one extreme scenario in terms of rate going down and one extreme scenario on the rate going up. So we do this, and if it happen, very unlikely, but if it happens, we would, we would follow the norm, and we would either increase or decrease, depending on the interest rate movement in the market. So in this case, if the rate goes down, let's say, by 200 basis points, which means my liability. Sorry.
Go ahead.
So which means even my cost is going to go down.
You are referring more on the existing book. I am referring to the business to happen thereafter.
So my incremental rate should, my incremental card rate should go down to that extent for new origination.
In worst-case scenario, you think that the spread is still maintainable?
Which is why. See, we were talking about margin.
Right.
So we were talking about margin, and for this there are two levers. One is cost of funds and one is the yield. We don't, we don't have too much of handle on the cost of funds. It depends on so many external factors, and therefore, we have a better handle on the yields. And that is why the guidance of whatever NIM we have given.
Thanks.
Nischal?
Yeah. So, you know, when you move, or when you actually increase your affordable book, do you need to reskill your employees? You know, how are you managing human resources for this business?
Reskilling the employees? So what we do is, the entire team, most of them, I would say 95%-96% of the employees in the affordable team are from affordable industry.
So these would probably come in from competition or similar banks?
From the affordable, yeah, yeah. That's right. So there might be 2% or 3% of people who would have moved from either prime or emerging to affordable.
So how comfortable are you with, you know, so many new people joining? It's practically like a new team being set up, and you're looking at exponential growth in this, in this-
Which is why year one, we went little slow. We focused on few safe segments. We were okay with slightly lower yield. We were not catering to all the segments.
Perfect. Thank you.
Just to add to this, it is true. We have added another organization in the last one year, almost 300 people on the PNB Housing side, close to 1,000 people, which are like frontline staff. Continuously, therefore, we have training programs. We have orientation programs, you know, cultural integration programs that also we keep on running in the new teams, so that the new people joining from various backgrounds, they are very well integrated with the overall culture and values of PNB Housing.
Seems we are done with the Q&A or anyone else with that? I think we are done this time. So thank you everyone, for taking out time, coming here, listening to our story. I hope we were able to talk a bit more in detail about what we said. I mean, our performance, which we have been talking about, as well as our future performance on the strategy, what we are looking at. The, this entire event will be, uploaded on our website, before the market opens tomorrow, so you can definitely have a relook at that, and the transcript will be eventually uploaded on, again, to the stock exchanges. Thank you very much for coming over here. And for any questions, anything, please reach out to Investor Relations team.
Now we will break for high tea, so I would request everyone to join us for the same. Thank you.
Thank you very much.