Ladies and gentlemen, good day and welcome to the PNB Housing Finance Limited Q3 and 9 Months FY24-25 Earnings Conference Call. As a reminder, all participant lines will be in the listen-only mode, and there will be an opportunity for you to ask questions after the presentation concludes. Should you need assistance during the conference call, please signal an operator by pressing star, then zero on your touch-tone phone. Please note that this conference is being recorded. I now hand the conference over to Ms. Deepika from PNB Housing Finance Limited. Thank you, and over to you.
Thank you, Yashasri. Good evening and welcome, everyone. We are here to discuss PNB Housing Finance Q3 and 9 Months FY25 results. You must have seen our business and financial performance in the presentation and the press release, which was shared on the Indian Stock Exchanges and is also available on our website. With me, we have our management team led by Mr. Girish Kousgi, our Managing Director and CEO. We'll begin this call with the performance update by the team, followed by an interactive Q&A session. Please note, this call may contain forward-looking statements which exemplify our judgment and future expectations concerning the development of our business. These forward-looking statements involve risks and uncertainties that may cause actual developments and results to differ materially from our expectations. PNB Housing Finance undertakes no obligation to publicly revise any forward-looking statement to reflect future events or circumstances.
A detailed disclaimer is on slide 51 of the investor presentation. With that, I will now hand over the call to Mr. Girish Kousgi. Over to you, sir.
Good evening to all the investors. Thank you for joining us late evening. When we started this financial year, we shared a long-term vision of achieving 17% retail loan book growth, increase in sourcing from affordable and emerging market segments to drive profitable growth, and to be one of the best in the industry with respect to asset quality. Today, I will talk about all these parameters and what we have achieved so far. During the quarter, the company surpassed its retail book growth guidance of 17% year-over-year and registered a growth of 17.5%. This is the highest retail book growth in the last 22 quarters. The retail book increased by over 10,000 crore in the last one year and crossed 70,000 crore to 70,676 crore as of 31st December 2024. This is the highest retail book ever for the company.
This is despite sporadic business headwinds in markets like Karnataka and Madhya Pradesh, impact of HYDRA in Hyderabad, elections in Maharashtra, and certain weather-related events in Bangalore. As we made our inroads in the affordable segment, we have doubled the book in the last nine months from INR 1,790 crore in March 2024 to INR 3,838 crore in December 2024. With a focused approach, we aim to take this book to 5,000 crore by the end of this financial year. Our another segment, which is merging markets, is also ramping up well, and has shown a book growth of 23% year-over-year at INR 13,169 crore. Seeing this growth, we are confident to achieve our stated target of 100,000 crore retail book by the end of FY27, with affordable segment contributing 15%, that is 15,000 crore, Emerging markets 25%, that is 25,000 crore, and the remaining from Prime business.
Retail disbursement grew by 31% year-over-year to INR 5,080 crore during Q3 FY25. Affordable and Emerging market segment contributed 38% to total retail disbursement in Q3, as compared to 29% in Q3 of last year. The company registered a decline in gross NPA quarter-on-quarter, which stood at 1.19% as of 31st December 2024, as compared to 1.24% on 30th September 2024 and 1.73% as of 31st December 2023. As per ICRA estimates, the GNP of HFCs is expected to remain stable at 2.1%-2.3% as of March 2025, with the overall resolution approach of the company, that is, recoveries, write-offs, etc., or gross NPA is expected to stay much below the industry average. The company worked with multiple vendors and received NHB sanctions of INR 5,000 crore and ECB sanctions of $350 million during the first nine months of the year. These sanctions are partially drawn.
Despite tight liquidity conditions in the market, we maintained on-book liquidity of INR 6,400 crore and had additional sanctions but undrawn lines of INR 8,000 crore as of 31st December 2024. In Q3 FY25, PAT stood at INR 483 crore, registering a growth of 43% year-over-year. NIM improved to 3.7% during Q3 FY25 in comparison to 3.68% in the previous quarter. ROE stood at 2.51% annualized in Q3 FY25 and 2.48% annualized for the first nine months. On loan book, as of 31st December 2024, the retail book is at INR 70,676 crore, with affordable and emerging market segment shares at 34% compared to 20% in the previous year. On the back of industry growth and the company performance, we maintain a guidance of 17% retail loan book growth for FY25, which might surpass 17%. The corporate loan book now stands at INR 1,241 crore.
The total loan book stood at INR 71,917 crore, and assets under management is at INR 76,840 crore. During the quarter, disbursements grew by 30% on a year-over-year basis to INR 5,380 crore. On incremental yield, we will continue to work on improving yields in all the three verticals. The incremental yield in the affordable segment increased to 12.14% in Q3 FY25, as compared to 11.6% in Q3 of last year. This is in line with our guidance of getting close to 12.5% on incremental yield for this year. The incremental yield in the emerging market segment is at 9.8% in Q3 FY25, which is 41% more than the prime segment. We currently have a strong network of 305 branches across 20 states, and we plan to open 50 branches in Q4, taking affordable branches to 200 from current 161.
With this large presence, we are ready to capitalize on the opportunity available in affordable and emerging market segments in Tier 2 and Tier 3 cities. On asset quality, our overall collection remained strong during the quarter, and we recovered INR 53 crore from retail written-off accounts, contributing to reversal in credit costs to minus 19%. The company has a written-off pool of around INR 1,250 crore in corporate and around INR 450 crore in retail. The recent extension of PMAY 2.0 reflects the government's broader vision of housing for all. We have signed an MOU with the National Housing Bank under Pradhan Mantri Awas Yojana Urban 2.0 to support the eligible beneficiaries under the interest subsidy scheme. It is an opportunity for players like us with a pan-India presence and a special focus on affordable and emerging market segments.
The scheme is applicable from 1st September 2024, and in the last four months, the company has sourced close to 5,000 applications amounting to about INR 675 crore of disbursements, which are eligible under the PNB Housing Finance Scheme. On the borrowing mix, our cost of borrowing during the quarter is at 7.83% as compared to 7.82% in the previous quarter, and reduced by 24 basis points year-over-year from Q3 of last year. The incremental cost of borrowing is at 7.82% during the quarter. Return on equity is at 11.81% annualized for nine months FY25, and capital adequacy is at 28.8% as of 31st December 2024. Overall, the company has achieved key milestones targeted for the year and continues to perform on the same.
I will now request Vinay, our CFO to talk about the financial performance.
Thank you, Deepika. Good evening to all the participants. I am happy to report another strong financial performance during Q3, led by robust growth in business. As mentioned by MD Sir, our retail loan book has grown by 17.5% year-over-year, and disbursements grew by 31% year-over-year during the quarter. Now, 38% of disbursements are contributed by Roshni and emerging verticals. Driven by strong growth in retail book, our net interest income for the quarter has grown by 17% year-over-year to 696 crore. Cost of borrowing has further come down by one basis point and is now stabilized at around 7.83%. Most of the benefit due to rating upgrade has now been realized in the borrowing cost. During the quarter, the company received NHB sanctions of INR 5,000 crore, which we have drawn partially and plan to draw down the balance in Q4.
The company has also received ECB sanctions of around $350 million in nine months FY25, which is also partially drawn. Spreads have improved sequentially from 2.2% to 2.29% during Q3. NIM has also improved to 3.7% during Q3 in comparison to 3.68% in the previous quarter. Gross NPA is stabilized, stable at around 4.07% in Q3 versus 4.09% in Q2 FY25. In Q3 FY25, operating expenses grew by 22% to INR 203 crore versus 199 crore. This includes the cost of 100 branches opened at the end of last financial year. Our cost to AUM remains stable between 1% to 1.1% as per our guidance. Led by strong revenue growth in this quarter, our pre-provision operating profit has grown in double digits, that is 16% year-over-year now, even on an overall basis. Operating profit for the retail segment has also grown at around 17% year-over-year.
We have also given a split of retail and corporate PNB in the presentation on page 35. Credit cost remains benign even during Q3 due to the recovery of INR 53 crore from return of goods. The credit cost, after considering the recovery, is a negative 19 basis points for Q3. PAT grew 43% year-over-year to INR 43 crore. ROE stood at 2.5% in Q3, and ROE is at 11.8% annualized for nine months FY25. The company has maintained an average daily LCR of 193% for Q3 FY25 against the regulatory requirement of 100%. We have maintained an SLR of 15% on public deposits as of December 24, against the regulatory requirement of 13%. The SLR requirement has changed to 14% from FY25. Capital adequacy stays strong at 28.8%, with Tier 1 at 28%.
With this all-round robust performance during Q3, we are on track to deliver on our business and profitability guidance for the current financial year. Thank you.
I'll now request Dilip, our Chief Sales Officer for Prime and Emerging Business and Deposits, to give a performance update.
Thank you, Deepika, and good evening, friends. I appreciate you taking the time out late in the evening. I'm delighted to share with you that we had another good quarter in the prime and the emerging markets businesses for the company across disbursals, runoffs, asset quality, and margins. Like Vinay and Mr. Kousgi explained, our disbursals grew by 30-plus% year-over-year. The good thing is, in line with our strategy, the margin-accretive businesses grew at a larger pace. So, in the businesses that I'm speaking about, the emerging markets and the NHL businesses grew at a better pace. Now, this is despite some challenges faced in markets like Karnataka and Hyderabad on account of Hydra, in AP on account of rail, Maharashtra, etc. I'll go into detail on prime and emerging markets businesses and how they have fared this quarter. I'll start with emerging markets first.
Just to reiterate, we started off this business with 50 branches in April 2024. We believe that these markets can grow at a faster pace and also give us better yields on incremental disbursements. These are the branches in non-metro locations outside of the top 15-20 cities. The portfolio here, in terms of asset quality, is also on par with the prime markets. We are very pleased to report how business is faring in this business after nine months of performance. Disbursals in these markets grew at 7% quarter-on-quarter sequentially, 39% year-over-year. This growth rate in the previous quarter was 31%. So, not only has the quarter gone well, the growth rate has actually improved. The book in this side of the markets has grown by 23%. It's now at almost 13,000 crore.
This business generates a yield premium or an incremental yield of 40 to 45 basis points over the prime business. This is expected to go up in the quarters to come. Additionally, higher-yielding businesses like NHL, they're consistently going up. They form about 35% of incremental disbursements in these markets, up from 25% last year. Again, NHL is a business which fetches us 80 to 100 basis points of premium over home loans. In these markets, 60% of business is sourced by our internal team, and close to 40% is sourced by our third-party distribution, which is DMA. So, at the end of nine months of this financial year, we are very pleased to have started off this business with a separate focus. Like Mr. Kousgi explained, the Roshni and emerging markets business put together may form 23-24% of the portfolio, but are now 38% of the incremental disbursements.
You can see that the shift is towards the higher-margin businesses. This will only increase in the times to come. Now, coming to prime markets, most larger cities of the country, the metropolitan cities like MMR, NCR, Bangalore, Chennai, Hyderabad, Pune, Lucknow, etc., they fall into the prime markets for us. Now, since these are larger markets with larger real estate sales and volumes, so we witness more pricing pressure here also. The yield on incremental disbursements is a little lower here than the emerging markets. However, they contribute more to growth for us in absolute volumes, like they do for most peers as well. On the prime markets also, we had a good quarter on disbursals, runoffs, and margin improvement. Our disbursals grew by 15% in these markets. The book grew by about 11% to 53,700-plus crore. We managed to maintain our runoffs here.
The runoffs across prime and emerging markets are below 17% on an annualized basis. This is a good 100-plus basis points improvement as compared to the last year. We are also working here on increasing our yield on incremental disbursements. So, in nine months of this financial year, the yield has gone up in these markets by almost 20 basis points. Sequentially, within the quarter, the yield went up here by 5 basis points. We made an investment in new branches across both these businesses. We opened about 35 new branches in Q4 of FY24. I'm happy to share that these branches are operating well. They contributed about 12% of disbursements in the third quarter of FY25. That number was 10% in the previous quarter and 6% in the first quarter. So, clearly, they are shaping up and contributing more to our growth.
Since this investment has paid off well for us, we have decided to open 10 more branches in the emerging markets business. So, we will be at 60 branches by the end of this financial year on the emerging market side and about 100 locations in the prime market side. So, to summarize, growth in business is operating well thanks to our investment in geographies, markets, and technology. The growth in the margin-accretive businesses, emerging markets, non-housing loans, is happening as per our expectations. The shift in the customer segment and the geography mix is also happening as planned. For the first time, 53% of incremental disbursements across prime and emerging markets put together came from non-metro locations. Again, this number was about 50% last year. So, the shift is happening quarter-on-quarter, and the asset quality for these businesses continues to improve quarter-on-quarter.
So, we believe that this quarter also, our performance is a testimony to the fact that we are on the right path, and we will only move forward in these businesses on all three vectors: growth, margins, and asset quality. Thank you, and back to you, Deepika.
Thank you, Dilip. We'll request Anujai, our Business Head for Affordable Housing, to update on the performance of Affordable.
Thank you, Deepika. Good evening, everyone. It is my pleasure to take you through the excellent outcomes that we have achieved in the last quarter in our Roshni business. We have ended the last quarter at a loan book of INR 3,838 crore, with a year-on-year growth of 234% from INR 1,149 crore in Q3 of last year, and a 30% growth over the previous quarter. I'm happy to share that we have doubled our loan book in the last nine months from INR 1,790 crore in March 2024 to INR 3,838 crore in December 2024. Roshni disbursements have been witnessing a robust growth. Our disbursements in Q3 2025 stood at INR 920 crore, a year-on-year growth of 127% as we had disbursed INR 406 crore in Q3 of last financial year. Disbursements have grown 46% from the previous quarter, wherein we had disbursed INR 630 crore.
Our journey in the affordable housing finance space started in January 2023, with Roshni business disbursing INR 5 crore of loans in that month. Executing well on our strategic plan, we reached a monthly disbursement run rate of around INR 100 crore per month in about six months' time by July 2023. We reached a loan book of around INR 1,000 crore in just 11 months' time by November 2023. We opened our 100th branch in December 2023. Incidentally, this branch was also our first women-only branch that was set up in Chennai. With increased branch footprint, our loan book growth was even faster from there on, and we ended the FY 2024 at the loan book of INR 1,790 crore in March 2024. We eventually crossed the loan book of INR 2,000 crore by May 2024. In the last one year, we have opened 61 more branches.
I'm happy to share that all these new branches have been fully operationalized, and with these 161 branches across the country, we are catering to 130-plus high-potential targeted districts across 13 states in the country. In the last quarter, we had announced our plan to open 40 new branches by March 2025. I'm happy to share that we are on track to open all these branches as per the stated plan. In this round of branch expansion, we will be entering two new states, Punjab and Haryana. We look forward to developing these two high-potential regions for our Roshni business. We are operating in three zones, and contribution is almost evenly distributed amongst all these three zones. North zone accounts for 34% of our business. Contribution from the west zone is about 36%, and south accounts for the remaining 30% of our business.
We have a true national presence, and this helps us in scaling up faster across all regions in the country. In the last few quarters, we have worked hard to expand and strengthen our distribution. We have empaneled close to 2,000 connectors through our Roshni Saathi program. We have also empaneled close to 500 channel partners for DSAs partnerships. We have strengthened our vendor support network for legal, technical, FI, RCU-related checks with more than 1,000 empaneled vendors across the country. We have also used technology solutions extensively to strengthen our operational framework. The last quarter has been our best-ever quarter in terms of logins, sanctions, and disbursements. We have been able to build a robust pipeline which will support the business growth going forward as we move through the last quarter of this financial year.
Our self-employed sourcing has increased to 44% in the last quarter as compared to 42% in the previous quarter and 39% same time last year. Self-employed sourcing now accounts for more than 40% of our portfolio. Share of informal income segment has also gone up to 34% in the last quarter as compared to 25% same time last year. Informal segment now accounts for close to 30% of the portfolio. While we have grown our disbursement significantly in the last few quarters, it is important to note that we have also improved our incremental yields simultaneously. Yields for incremental business have gone up to 12.14% this quarter as compared to 11.6% same time last year and 11.95% in the previous quarter. We have been able to improve our yields through continued focus on higher-yielding segments and products.
With most of the new branches getting open in Tier 3 and Tier 4 locations, we are confident our yields will continue to improve going forward. On the portfolio quality side, we don't see any early warning signs. Our bounce rates are at close to 9%, which is in line with the expectation in this segment, and NPA stands at 0.2% in the last quarter. As I mentioned earlier, we have been able to execute really well on the strategic plan that we have for this business, and we are confident we will be closing this financial year with a loan book of close to INR 5,000 crore. Thank you.
Thank you, Anujay. I'll now request Bhavya Taneja, National Marketing, to talk about key marketing initiatives.
Thank you, Deepika. Good evening, all. Considering the dynamic landscape of housing finance industry, PNB Housing Marketing Strategy has played a pivotal role in maximizing growth opportunities for all our businesses, grounded with deep understandings, corporate reputation management, and digital communication strategies to strengthen our brand positioning. Very happy to report that this quarter, one of the key highlights of our marketing journey was the launch of our very first brand mascot named Roshni. Named after our affordable housing product, Roshni, which represents hope and positivity for our aspiring homeowners. We have rolled out a comprehensive 360-degree marketing campaign spanning television, print, outdoor media, cinema, digital, and social media. Our cross-media collaboration was targeted to capture consumer attention across all touchpoints, both online and offline. Thank you.
Thank you, Bhavya. I'll now request Jatul, our Chief Credit and Collections Officer, to talk about credit and collection performance.
Thank you, Deepika, and good evening, everyone. Credit underwriting plays a crucial role in driving business and building a strong portfolio, ensuring sustainable portfolio quality. So, the company today manages a robust and seasoned portfolio of over 70,000 crores, consistently achieving steady growth. The portfolio is well-diversified, having balanced distribution across industry segments, low and mid-ticket size cases, and a healthy mix of salaried and self-employed customer segments. The company witnessed business growth, as already talked about in Q3 of the current financial year. As in research with respect to the focus area of control, 95% of our fresh sanctioned volumes have ticket sizes of up to one crore. 84% of our incremental business had a Bureau score of more than 700.
Having all the checks and balances in place with respect to prudent appraisal norms and managing early mortalities, the delinquency in the book business booked in the last few quarters is well within the tolerable limits. To give you an idea, as of December 2024, 30 plus from last 12 months' origination is 0.11%, and NPA is mere 0.03%. If I go back and see the last 24 months' behavior, 30 plus is 0.53, and NPA from the last 24 months' origination is 0.13% only. So far, we haven't witnessed any red flags with respect to our asset qualities. And from an asset quality standpoint, to ensure effective monitoring of the portfolio and reviewing leading indicators, we conduct regular data-based industry and peer reviews, market intelligence from bureaus, industry partners. This serves us with an effective dip check for the company to measure our portfolio against industry benchmarks.
Moving to collections and recoveries, the company continued the trend of ensuring sequential reduction in NPAs on quarter-on-quarter basis. Interventions such as minimization of total bouncing through a revised pre-delinquency model, rigorous reviews on tele-calling and field resolution teams helped us deliver the better performance. At the end of the collection spectrum is the recovery from written-off pool, which involves resolution of high-delinquent accounts, high-vintage accounts imposing some legal challenges, etc. The company continues its drive to recover better, and we recorded a INR 53 crore recovery from written-off, technically written-off pool in quarter three, which is far higher than the recovery in previous two quarters. On the property repossessed asset disposal front, we again continue to beat our own performances. 152 successful auctions were done in quarter three FY25, as against 134 of quarter two.
We continued the momentum we gathered over the last few quarters in SARFAESI actions and legal, adding 251 more property possessions in Q3, wherein the customers were in pain. Considering all this, the company feels confident in saying that we have equipped our collections, legal, and recovery teams with the necessary tools and strategies around to successfully navigate and get to better performances in quarters to come. Thank you.
Thank you, Jatul. I'll now request Anubhav, our Chief Technology Officer, to talk about our tech initiatives and program.
Thank you, Deepika, and a very good evening to all. PNB Housing Finance continues to thrive on the bedrock of foundational, robust, scalable, high-performing technology enablers and capabilities. All our technology investments are aligned to the business strategy and direction. We have introduced several tech-led channels for sales, collections, operations, and customer service functions. All the new platforms focus on rich functionality, features, capacity, and performance. The new and upgraded platforms are set to deliver long-term robust tech capabilities for our business segments and customers. Today, I am pleased to share that our technology transformation agenda that was initiated in Q4 FY24 is in the final stages of completion now. In the preceding quarter, we have successfully upgraded our core platform, loan management system.
With this upgrade, we are now upgraded to the latest version of the product with several functional features and capabilities, as well as upgrading to the latest tech elements within the architecture. This upgrade was successfully launched across all branches, centralized operations, CPC, in a seamless manner. We have also launched a new cloud-based LOS for our prime and emerging business segments, which is currently operating in a pilot mode across a select set of branches. Having defined clear-cut measures for monitoring the pilot, we are progressing well and focusing on user adoption and change management for the new platform. PNB HFL has been conscious of the massive change in the process and user experience that the new LOS brings, and hence the rollout shall be spread across the next few months to ensure seamless adoption across branches and minimize any potential disruption for business.
The same approach was followed for the rollout of LOS for our affordable business segment in quarter one and quarter two of FY25. We continue to focus on evolving into a data-driven enterprise, and now we have announced our capabilities in the analytics domain by having successfully created a cloud-based integrated data platform that has a curated data model integrated to all our core systems. This data platform has data services enabled and is being used for generating insights and visualization to better monitor and calibrate business decisions. This data lake setup has helped PNB Housing Finance to successfully meet timelines for all recent regulatory data reporting requirements which were there in the last quarter. We also continue to expand our footprint of robotic process automation through bots, and have recently introduced two new automations developed in-house for enhancing productivity of operations and financing, respectively.
Lastly, we remain focused on the threats of cybersecurity and have set up 24/7 information security monitoring capabilities and continue to build resilience on our technology platforms in line with the new and emerging cybersecurity landscape. Information access for users is also controlled using relevant tools, which work purely on a zero-trust architecture model. We have recently further augmented our information security capabilities by introducing additional AI-based monitoring capabilities for our email landscape as well as for our internal network traffic monitoring. Thank you.
Thank you, Anubhav. Yashasri, we can open the floor for Q&A, please.
Thank you very much. We will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their touch-tone telephone. If you wish to remove yourself from the question queue, you may press star and two. Participants are requested to use handsets while asking a question. Ladies and gentlemen, we will wait for a moment while the question queue assembles. We'll take a first question from the line of Ashwini Agarwal from Demeter Advisors LLP. Please go ahead.
Good evening, Mr. Kousgi and team. This is a phenomenal set of numbers. Congratulations to all of you.
I'm Ashwini. Mr. Agarwal, can you use your handset mode? Your voice is breaking.
Is this better now?
Yes. Please go ahead.
Yeah. No, I said, Mr. Kousgi and team, congratulations on delivering a fantastic set of numbers. The question I have is that as you look out for the next two to three years, how do you expect the various levers to move? I mean, I see revenue mix improving, margin mix improving. At the same time, cost to income should stabilize once the branch rollout is over, but credit costs should normalize. In conjunction to that, where do you see leverage going? What would be an acceptable level of leverage? And therefore, in the medium term, say two to three years from now, what kind of an ROE expectation would you have, assuming the credit cycle remains without accident?
Our plan by FY27 is to take retail book to 1 lakh crores with the mix of Roshni, which is affordable, 15%, emerging 25%, and 60% prime.
So you must have noticed since last few quarters, we are trying to do more of affordable and emerging and trying to reduce our growth rate in prime to ensure that we are profitable. So next three years' time, we should be able to cross a lakh crores on the retail side. With the shift in segment, increment in yield, we are looking at a minimum of over 4%. In terms of credit cost, it will be 0.25. We will be pretty comfortable with the leverage of five and a half to six in the next three to four years' time. I think so this is our plan. In terms of ROE, it should be mid-teens.
Okay. Thank you so much for that.
The second question I had was that what I'm seeing on the ground, I mean, I heard the comments from the credit team, and there seem to be no worries at this point. But what we are also seeing is a slowdown of industry in general. And in that context, how confident do you feel that the self-employed and the informal sector borrowers will not cause pain points? I mean, are you seeing anything on the horizon that worries you?
I think a couple of things here. If you look at the mortgage industry, I think demand is very good. Demand is robust. So there were a lot of challenges, I think, in quarter three with respect to four states. So I think we had mentioned that in Karnataka, in MP, Hyderabad, and Andhra.
So there were certain challenges to do with the entire city map, I think, redefining the city map. In terms of Karnataka and NP, there were certain challenges in terms of registration. Maharashtra, there was election, and therefore, there was a lot of challenge in terms of getting the properties registered. I think it's only because of these intermittent interventions, which were beyond control, the growth probably for the industry would look on a lower side. Otherwise, demand is quite robust. So in spite of all these challenges, we were able to put up a good show in quarter three. If these challenges weren't there, we would have done probably much more than what we have done. So I think very clearly we are seeing that this demand is there. Demand will continue for next few years to come. There is absolutely no challenge on the demand.
Thank you, sir.
And last, if I may. Yeah, I think just to answer your second question, I know there are certain challenges in the overall financial space with respect to unsecured, those stress increasing, especially on the MFI, small ticket personal loans, personal loans. So we are constantly checking our portfolio for stress levels. And also, we have a robust process of onboarding self-employed customers. So we have an effective tool of pre-delinquency management, and we also try and check for stress levels when customers are regular or current with us. So far, we have not seen any stress which will worry us on the mortgage book, be it prime or emerging or Roshni.
Thank you so much. And if I may squeeze the last one in, on the runoffs, I mean, how much of these are BTs?
Are you happy to let the BTs go, or are you putting a strategy in place to retain these loans? Any thoughts on that, please?
BT would be in the range of 5.5-6% average. We have a very strong retention team. We also have a repricing policy. Whenever a customer approaches us for repricing, if it fits into our scheme of things, we retain the customer. And if it doesn't fit, we let customers move out. We have a dual strategy here depending on at what price we need to retain the customer. But having said that, over the last few quarters, we have reduced the overall closure, which is now down to 16.5-17%, which is in line with our projection.
Out of 17%, 6% or so is BTs, and the remaining is a prepayment.
Would that be the correct understanding?
Remaining would be, yeah, so 6%, 5.5%-6% is BT, and the remaining would be foreclosure, part closure, and natural runoff due to repayments.
Okay. Thank you so much, and all the best to you and your team for a fantastic job. Once again, congratulations. Thank you so much.
Thank you. We'll take our next question from the line of Sanket Chheda from DAM Capital. Please go ahead.
Yeah, hi, sir. I'm agreed on two sets of numbers on most of the points. My question was there was a little bit of an increase in Stage 2 of about INR 450 crores. So what was that account, and how should we look at it?
I think this was largely driven by one account on the corporate side. This account has been in SMA bucket since last two years. And if you see in this particular account, in the last two years, we have collected close to INR 200 crores on the principal. Principal has come down by INR 200 crores. We don't see any challenge.
Okay. We expect it to get resolved in the quarter of this?
Yeah. We expect this to move bucket back this quarter.
Okay. Okay. And just the second question was on disbursement. So besides, say, registration issues in a couple of states, you have managed to clock Q2 level of disbursement, which overall Q1 was itself a very strong jump. And this quarter also, YOY jump looks good. So do we expect some of the lost business in this quarter to add to the Q4, which is usually seasonally strong? How do you see it? And if you were to say quantify the hit that was there in this quarter in terms of the disbursement, like if those issues were not to be there, how much we would have done more?
So as I mentioned, there were challenges in two states. There is Karnataka, then Andhra Pradesh, Telangana, to a small extent in Chennai because of rain, then Maharashtra and Madhya Pradesh. So as we see now, I think most of the states, I think the process is eased. So we expect that quarter four will be good for the industry as well, not just PNB Housing. And I genuinely believe that whatever business the industry has lost or maybe what we would have left behind because of this procedural delays and changes, I think should come through in quarter four and quarter one of next year.
Sure, sir. That's all from me, and wish you all the best for the continued success.
Thank you.
Thank you. Next question is from the line of Ramesh from ICICI. Please go ahead.
Yeah. Hi, sir. Congrats on a great set of numbers. Sir, my first question is on the prime housing disbursement on sequential basis. If you look at it, it actually fell by a couple of percentage points. So it is fair to assume that it's because of these states wherein we saw some disturbance on temporary basis in Q3, or it is by choice?
Yeah. So our plan is to grow the book by 17%. That's the guidance. So this has broadly two metrics. One is disbursement, and second is loan closures, total closures. So disbursement would vary depending on the closures to maintain book growth. Now, to a certain extent, yes, I think all these challenges in these states have impacted on the prime and emerging side, and also on Roshni to a little extent. But I think broadly, our strategy is to grow our affordable and emerging book faster, and the growth in prime is going to be to that extent lesser. So this is in line with our strategy. Having said that, to a small extent, yes, there was impact on prime and emerging because of these interventions in these four or five states.
Got it. And sir, my second question is on the OpEx side. I mean, if you look at the other OpEx line item, which has been growing at some 15%-20%-odd % on sequential basis, which is now at 90 crores. And when we look at the sequential growth, it is actually much higher than the retail loan book growth. So where do the incremental investments are going, and where do you see the ratio settling in the item?
Ramesh, on the other OpEx, actually, it is more of a seasonal in nature. So during festive season, some marketing spend has happened, and there is some expense on the general administrative cost also, which is more one of our seasonal in nature. It will normalize back to the same levels of Q1, Q2 next quarter.
Okay. And would you want to guide us for a steady-state cost income ratio?
See, on a steady state, we have guided cost to AUM 1-1.1%. So we have been maintaining that, and that's been maintained.
Okay. And sir, just last question from my side on the sourcing. Now, in the entire retail segment disbursement, what percentage of that would be BT in?
It will be around, see, we have three segments within retail. So on the prime and emerging, the BT mix would be in the range of 17%-18%. On Roshni, it will be higher. It will be about 25%-27%. So if you can take average, maybe about 21%-22%.
Okay. I mean, internally, do we have any limits to the extent we restrict BT and look for, let's say, new-to-credit kind of a customer, or how is it?
So new-to-credit?
So at some point, BTing would impact our yields?
I mean, we don't really have a number on BTs. Depending on the opportunity and the customer profile and the financials, we take a call. We don't have a definitive number. It is more driven by market dynamics. But largely, we focus on new-to-company, new-to-credit, and also BTs. This percentage could vary segment to segment, but I think largely BTs are now more in Roshni because it's a new business, and therefore, the focus may be slightly more.
Okay, and just to follow up on the affordable side, so this 20%-27% BT intake, which is happening, is fair to assume that most of this would be coming from the HFCs? I mean, the affordable financials?
This would be largely from the affordable set of companies.
Okay. Okay. That's it from my side. Thank you, and best of luck, sir.
Thank you.
Thank you. We'll take our next question from the line of Viral Shah from IIFL Securities. Please go ahead.
Yeah. Hi. Congrats on a good set of numbers. Just one clarification first I wanted was that to the earlier question on the Stage 2 increase, this is just the same account that, say, even two or three quarters back had intermittently slipped and then again upgraded in September 2024?
Yeah. This is the account which has been in SMA bucket for, I think, almost two years. So there is significant development in the project and the sale. And also, as I mentioned, in the last two years, the principal has come down by almost close to INR 200 crores. So we don't see any challenge.
Okay. And you see this being upgraded in Q4 again?
This quarter.
Yeah. Okay. Fair enough, and the second question I had was with regards to the exposure statewide on the retail side, so we have seen that in this quarter, we had some challenges on the ground in the states of, say, Karnataka, Telangana, but on a sequential basis, I'm seeing that, of course, its mix has been increasing, so how did we manage to do this? Because we saw that, at least for our peers, these were one of the major reasons why you saw growth slow down.
So I think by design, our focus is more on south for all the three segments: prime, emerging, and Roshni. So maybe this quarter, because, see, this quarter also, there was challenge in west. There was challenge in north, and there was challenge in south as well. So we see challenge across in all the three zones, that is south, west, and north. And therefore, the mix almost, I think, it remains the same. But the focus will be slightly more on south, followed by north and then west.
Okay. Got it. And last question.
As I mentioned, and also as I mentioned, if these challenges weren't there, our numbers would have been far higher than what they have shown.
Okay. Got it. And in that same light, would you want to say, give us, I know it's just now one more quarter left, we can do the arithmetics, but say more so raising your eventual, say, loan book targets, given that we are beating this year, and we seem to be on a strong footing. So are you seeing, say, instead of 1 lakh crore, retail loan book target by FY27, any upgrades to that target?
No, no. As of now, we stick to INR 1 lakh crore by FY27. If we can do more or there is any change in the mix, I think we'll be happier. So as of now, we maintain INR 1 lakh crore by FY27.
Right. And sir, last question was with regards to the corporate book. Last quarter, we announced the hiring of Mr. Rana coming from ICICI Bank to restart the corporate vertical. So, any updates on that? Because we did not see any disbursements in this quarter.
Yeah. Yeah. Hopefully, this quarter, we might see a couple of pensions and, if possible, one disbursement as well. But from this quarter, it will start.
Yeah. Great, and just one last suggestion. Of course, once we start that, it will be really helpful to get much better color on what are we intending to do separately, and also maybe hear from Mr. Rana maybe sometime next quarter when we come back.
Absolutely. I think I've already mentioned before. Definitely, we will give more color on the business, what kind of business we're going to do. I think just to talk about corporate, we'll be picky and choosy. The ticket size will be much less, very strong underwriting norms. And we will look at only very safe and strong structure. So I think once we start, we'll give more color on corporate.
Sure, sir. Great. And all the best. Thank you.
Thank you.
Thank you. Next question is from the line of Abhijit Tibrewal from Motilal Oswal. Please go ahead.
Yeah. Thank you and good evening, everyone. Sir, I mean, just trying to understand, even this Stage 1 provision coverage decline of 20 basis points is because of the same corporate accounts slipping into stage two?
Yeah. So if you see, we are also resolving a lot of accounts. And some of the accounts probably will mature in quarter four. So some of the accounts are nearing maturity. And therefore, we've seen good repayments happening in the last few quarters. And that is why ECL has been calculated accordingly.
Got it. And sir, I mean, going forward, will it remain at these levels, or do you think it will go back to the 75 basis points where we were at?
Please come again.
The provision cover on stage one was 75 basis points until last quarter. What I'm saying is now, will the new normal be 50, 55 basis points, or will we go back to 75, 80 basis points?
See, a lot of things are happening. I think we are improving on the quality of origination. This we started a little over two years back. All the accounts which were there in portfolio, we've been trying to manage, maintain them. So we have an ECL model. So we run it through the model. And as of now, as I mentioned, on the retail side, we are talking about credit costs will be contained for next few quarters. And long term, it will be about 25 basis points. On corporate, we see a lot of recoveries happening, and a lot of accounts are now nearing maturity. And therefore, depending on the model, if there is a need, only then we would be provisioning slightly higher. Otherwise, no, I don't think so we need to. But anyone got anything? Yeah.
So, Abhijit, this is largely on account of slippage of one account from stage one to stage two corporate accounts. Once it moves back to stage one next quarter, probably the percentages will get raised.
Got it. And sir, the second question that I had was, during this quarter, what was the total quantum of write-offs that we had?
This quarter, hardly anything. Hardly anything. Very, very small. Nothing material.
Got it. And sir, I mean, have you had the chance to kind of evaluate that because of Karnataka, Telangana, and a few other states that you spoke of, how much business did we lose during the quarter? And the related question, what is the status in Karnataka now? Has it improved, or are the problems in Karnataka still there?
I think if these challenges weren't there, across all the three businesses, we should have done at least about INR 500-600 crores more.
Got it. And sir, status of Karnataka, I mean, has anything improved or still, I mean, those problems continue to be there?
So in all the states, there is improvement. So the challenge what was there, let's say, two months back in Karnataka, I think now there is a lot of improvement. And same thing is true with NHL. So I don't think so quarter four should see much of challenge for these reasons.
Got it. And sir, then the last question that I had is, now that it is widely expected that we will see some repo rate cuts in India in this calendar year, I just wanted to understand how are liabilities, more particularly your bank term loans, how are they placed with regards to being linked to repo rate, T-Bills, or MCLR, and what impact will we see on our NIM if, hypothetically speaking, let's say there's a repo rate cut of 50 basis points in the next three weeks?
So, Abhijit, on the liability side, 70% plus of our liabilities are floating, first of all. So that is one. Secondly, within term loans, around one-third of our term loans are linked to repo or T-Bills. So that will get repriced immediately. And rest are also, again, very short-term benchmark, like one month or three months, MCLR. So that will also get repriced sooner than later. However, there is always a lag between repo and MCLR. So to that extent, there could be a timing gap. Depending on the timing, we expect every 25 basis points change in the repo. It will lead to 10 basis points reduction in our cost of borrowing. And we plan to pass it on. There should not be any impact on the NIM from the overall impact perspective.
Soon, if you could just repeat the last line, for every 25 basis points cut in repo rates, what is the impact on our cost of borrowings?
Around 10 basis points. Immediately, it's 10 basis points.
10 basis points. And that we expect to pass it on. And what you are expecting, then margins can be maintained at current levels. There will not be an impact on the margins.
Yeah. There should not be. I mean, that is our endeavor. We try to maintain the margins.
Got it. This is useful. Thank you very much for the detailed answers. I wish you and your team the very best.
Thank you.
Thank you. Next question is from the line of Suraj Das from Sundaram Mutual Fund. Please go ahead.
Yeah. Hi, sir. Thanks for the opportunity. I think a few questions have already been answered. Just a follow-up to Abhijit's question there. What is the return of pool outstanding for you? And if you can bifurcate in between retail and corporate? And what kind of recovery you are expecting, let us say, over the next four-to-six quarters? That would be all from my side.
The corporate is about INR 1,250 crores. So we expect a recovery of about 67%. And that we'll be able to collect in the next three years' time. Retail, the pool is INR 450 crores. So we expect about INR 45-50 crores every quarter for next three quarters.
Okay, sir. Thank you, sir.
Next question is from the line of Aditi Naval from RSPN Ventures. Please go ahead.
Yeah. Hi. Thanks for taking my question. I just had a few housekeeping questions. So one is, sequentially, your employee expenses have dropped. So what could possibly be the reason for that? And second will be on fee income. So fee income has been sort of subdued in this quarter as well. So any light on that as well? Thanks.
Fee income is not subdued. It has grown 20% year- on- year. This includes the insurance commission, which has grown around 30% year on year. Rest of the line remaining constant. That has grown well. On the employee cost perspective, there was a run-off related to some actuarial valuation of around INR 4-5 crores. The rest is we have brought down overall cost by optimizing the headcount and revisiting certain incentive structures that we have. It is based on the overall efforts being put in on this quarter.
Can you just repeat the insurance part of the fee income, sir?
So I'm saying on the fee income, overall fee income growth is 21%. Within the fee, the insurance commission has grown 30% in line with the disbursement growth.
Okay. That'll be it. Thank you so much.
Thank you. Next question is from the line of Kamal Mulchandani from Investor Capital Services. Please go ahead.
Hello, sir. Thank you for the opportunity. Firstly, congrats on the good set of numbers. Most of my questions were answered. Just would like to understand the path to achieve 5,000 crore of affordable housing book by the end of FY25. I understand that by December, it's 3,800 crores, and we have done disbursals of around 900 crores this quarter. So if you could just guide the path to achieving the affordable housing AUM book.
On affordable, if you see, as of March, we were at INR 1,790 crore. Now we are at INR 3,838 crore. We have doubled the book in nine months. We disbursed about INR 925 crore or so in quarter three. To get to INR 5,000 crore, we should disburse INR 1,200 crore, which is an average of INR 400 crore per month. We see that is quite possible. Hopefully, we should get to INR 5,000 crore.
But there will be some repayments as well, right?
No, we have taken that into account.
Okay. Okay. Sure. That's all, sir. Thank you.
Thank you.
Thank you. Next in line is Mr. Anurag Mantri from Oxbow Capital. Please go ahead.
Yeah. Hi. Just one question on the overall credit cost. So basically, if I add back maybe the recoveries that you've had this quarter, both from the retail and wholesale side, I think your PPT mentioned 53 crores on the retail and maybe 58 on wholesale. I think eventually, I get about 75 crores. And if I annualize that, it seems like 40-45 basis points kind of quarterly run rate, the normal credit cost as such. And that similar trend is there for the last couple of quarters as well. So just wanted to understand that net of the write-off recoveries, why are we running at 40-50 basis points credit cost? Because I think bulk of this book is now just the retail book as such, which probably should incur much lower credit costs. Thanks.
It's not 40 basis points. It is somewhere around 30 crores, roughly, on account of the ECL strengthening under stage one, stage two, which translates to around 20 basis points annualized.
So, I mean, so you're saying that only 30 crores is the normal provisioning, and the balance is for ECL strengthening? Is that how we should look at it?
Yeah, that's right.
All right. Okay. Got it. Thank you so much.
Thank you. We'll take a next question from the line of Kunal Shah from Citi. Please go ahead.
Yeah. Hi. Thanks for taking the question. Firstly, if I were to look at it in terms of the OpEx, so if you can just broadly break up this 1.1% OpEx to assets over three segments. So in maybe affordable, what is the kind of OpEx that we are seeing, and how much would be in the prime? So broadly, just wanted to gauge in terms of where we are in terms of the profitability in the affordable housing in the emerging and in the prime segment. And the targets which you have highlighted in terms of the emerging and affordable, would there be the additional investments, branch rollouts that would be required, or it's more in terms of the productivity gains that would happen?
So if you look at strategy in terms of starting affordable, it started over two years back. Emerging, we started this year. So I think most of the investment in terms of setting up business is done on the Roshni side. On emerging also, we started with 50 branches. That was the initial investment. So now going forward, every year we'll be opening about 50-odd branches. So that is more of a BAU. So no major investment in terms of branch network as well. So if you look at the OpEx at this point in time, I think we should look at a consolidated basis. I think very soon, we will see I think we'll be able to break it up segment-wise, and then we'll be able to share. But at an overall level, we'll be able to maintain OpEx at 1%-1.1% of AUM.
Okay. So in affordable, we would be already at a break-even? Affordable and emerging?
Yeah. Affordable, we are already profitable. We are yet to get to the mature stage, which will take one or two.
Sorry?
We are already profitable on affordable, and we are moving towards the steady-state ROA, which will take maybe one more year for us to get to a steady-state ROA.
Okay. Okay. Got it. And secondly, in terms of the maybe when we if there are BTs, maybe in RBI FSR, there was an indication that when you look at it for the personal loans overdue, they have maybe some kind of retail facility, home loans as well. So any sense in terms of the customers whom we are onboarding, is there any overdue in any of the PL or maybe the small-ticket loans? And could there be any risk in terms of the reclassification? Or maybe it's like a clear-cut rejection, okay, if we see any overdue in any of the customers in any of the product segment?
See, the overall Bureau score, I think, takes into account such behavior on account of any kind of financing available. So that is appraised on a case-by-case basis as it comes through. So we said in the beginning that 84% of our onboardings are above 700 Bureau scores. That takes into account such behavior.
So in fact, irrespective of the segment, whether it is prime, emerging, or Roshni, we are very particular about credit history. So when we onboard the customer, we look at the customer's existing exposure and how is the repayment. So only with good repayment track record, we would onboard the customer. Otherwise, it's a clear no-go.
Okay. So the question was largely with respect to 12% and 10-odd%, which are in NTC and up to 700, okay, particularly on the affordable. And maybe I think you have shared similarly on the other. So it's not with respect to maybe 75%, 80%, which are any which way is better or maybe more than 700, but for the other part of the portfolio. Yeah.
I think we can't purely go by the score because you will have a lot of customers who take a small loan of about 25-30 thousand, being new to credit. And within a year's time, they will now they'll have a score of more than 720-730. So we can't really go by the score. So we need to see whether the customer is new to credit or the customer has certain exposures. If so, how is the repayment? So we will not go, for example, 750 is not the same for all the customers. Somebody having 750 with 30,000 loans may not be that good, especially compared to somebody having 750 scores with three or four loans all being serviced properly on time. So score is one of the parameters which we look into. But we will also dig deeper to understand how are the strengths.
Only then we take a call with respect to what is this.
As per the question was, maybe since we are building up the book, and there could be the risk of spillover from unsecured to secured. So given that we are growing it lately, could that risk be higher for us? Yeah. That was the primary question. Yeah.
No, because this is mortgage. This is secured. And for example, all the home loans, we know the end use. And in terms of Loan Against Property, we are very particular about the end use. And only when we are convinced about the end use, only then we take an exposure. So the chances of replacing mortgage loan with any unsecured loan, I think the chances are very, very low.
Okay. Got it. Okay. Thank you.
Thank you. Next question is from the line of Himanshu Taluja from Aditya Birla Sun Life AMC. Please go ahead.
Hi, sir. Thanks for the opportunity. Just one question at my end. If you can just give me the, maybe I'm sorry if I'm repeating the question. If you can just give the color of the corporate account which got slipped in stage two. Secondly, what is the principal outstanding on this? Any provisions which you are holding in this? This is a past corporate account. And lastly, what is the comfort that you have that this account will again get upgraded in the coming quarter? Thanks.
As I mentioned, I think I've mentioned this. So again, I've mentioned. This is an account which we are watching very closely, seeing very closely since last many years. Especially in last two years, it has been an SMA update. And the principal has come down by close to INR 200 crore in the last two years. So we are very much comfortable about this account. So there's nothing to worry about.
Okay. Any provisions which you're holding on this? Any PCR which is there in this account, particular account?
So we are holding as per the stage we're holding provision for this account as well.
Okay. Cool. Thanks, sir. Thanks. Yeah.
Thank you. We'll take our next question from the line of Ankit Minocha from Adezi Ventures Family Office. Please go ahead.
Yeah. Hi. Good evening. My first question is with regard to a hypothetical rate cut situation which an earlier participant was alluding to. So you mentioned that there was a 10 basis points reduction in the cost of funds with the 25 basis points rate cut. But just wanted to understand, is there also a lag involved in this? I mean, how quickly are you able to price your assets, or how slowly are you able to price your assets versus your liabilities?
In this 10 basis points is immediate. We should be able to pass it on quickly. The remaining impact, again, it's a matter of timing. We should see the rest of the difference also to flow through in the next three to four months.
Okay. So I mean, then would not even be the possibility of any expansion in NIMs for a short period of time, right?
But depending on the competition, how they react, there could be some minor impact. But largely, our endeavor is to ensure that not. See, actually, there are three, four things happening. So one is we are trying to change the mix between prime, emerging, and affordable. And with every passing quarter, we are doing more business on the affordable and emerging compared to prime. Number two, in all the three segments, we are trying to up the yield, prime, emerging, and affordable. We will be starting corporate from this quarter, which will help us on the yield and profitability. And also, obviously, we have a large pool on corporate and retail write-off. So we are expecting good recovery. So these things we have on the positive side. And if there is a rate cut, of course, there will be some lag, which we will also pass on.
So I think this differential, we feel that we'll be able to manage because we have certain levers which can try to factor the rate cut.
Right. Thanks. Very helpful, and I understand you've given some element of guidance for FY27, but I mean, we didn't jam FY25. So just understanding, how do we see FY26 evolving? I mean, if you can just give some color on the potential book value or, I mean, even how growth kind of seems to be panning out, what you think FY26 could look like?
So as I mentioned, demand is quite good. Mortgage industry is doing well. I think this year, every quarter, there were some challenges. The other quarter one was cyclical. And quarter two, there were some challenge which some companies in the industry saw, especially on the collection side. And quarter three, there was some challenge because of procedural changes in certain states. So I think throughout the year, first nine months, there have been some challenges on the others, also coupled with the heat wave and general election in Maharashtra. So otherwise, talking about demand, demand is very good. This industry will do well. And also with PMAY interest subsidy scheme, I think demand should only grow for us, especially on the Roshni and emerging side. So we see demand to be quite robust for the next few years.
And I'll not be able to comment on what's the plan for next year. We would share with the investors at the appropriate time. But our 1 lakh crore by FY27 should be intact. And the growth should be slightly better than what we showed this year.
Okay. Yeah. Thanks for that. And my next question is about what will be the as you're getting more and more into the affordable space, what have you observed as the incremental trends in asset quality? I mean, when did you start to get into this space? And I mean, if there are any asset quality issues that might crop up, ideally, by when would they start to crop up? In terms of what are the loans in yours, etc., if you could just help us with that.
So in terms of trade cost, whereas for prime, we say it will be in the range of it will be about 18 basis points. Emerging should be about 22-23 basis points. I'm talking about once the portfolio is mature. And for affordable, it should be about 50 basis points. So if you see blended, we should be about 25 basis points. I think that is the risk what we see, and we have budgeted that. Otherwise, we don't see any incremental risk in any of these segments, including the affordable.
Okay. Okay. Fair enough. Thank you, and all the best.
Thank you. Next question is from the line of Anusha Raheja from Dalal & Broacha. Please go ahead.
Yeah. Thank you. Good evening. Sir, firstly, on this credit cost, how do you expect that to pan out in Q4? The current run rate of Q3 is likely to continue.
It will continue.
Okay. And assuming that if this corporate account gets recovered, it should be better.
No. As I mentioned to you, we are pretty much comfortable on the stage. And this quarter, it will be a rollback. So we are pretty comfortable. Credit cost will be on similar lines quarter two and quarter three.
Okay. And secondly, in non-housing loans, which sits on prime, emerging, and affordable segments, so what basically does non-housing loans comprise of?
Non-housing would have three products. One is Loan Against Property. Second is Lease Rental Discounting. And the third one is funding for corporate commercial space. But largely for us, non-housing is Loan Against Property.
Okay. All right. So do you have any unsecured personal loans? If you have it.
No, we don't have. We do only secure.
Okay. And do you expect any margin pressure to come in on the prime segment loans, assuming that you would be competing with the banks and we would be seeing a reported cut next fiscal? So I think this space is quite competitive. So you expect some sort of margin pressure because I think rates will have to bring down your lending rate as well there.
There is margin pressure on prime, which is why we moved from super prime to prime. Even in prime, there is margin pressure, and that is the reason we are growing at a slower pace compared to emerging and affordable. This margin pressure would be there because this is a space where a lot of banks also would be focusing on. This pressure is there, and it will continue. We have planned to overcome that. Our plan is to try and grow the prime book slower compared to emerging and affordable.
Okay. And so lastly, sorry if I'm repetitive, the credit cost guidance for FY26, what that number could be before recoveries? I mean, and what you have baked in credit costs, including recoveries?
So I think this trend should continue for the next few quarters on credit cost because we have a good pool of written-off book where we expect good recoveries to happen in the next few quarters. So I think for FY26 also, credit cost should be very good.
Okay, so the full year guidance for FY26, you will share post Q4?
Definitely, we will share.
Okay. And so lastly, since the growth rate has been quite strong in emerging and affordable, how do you assess that book in terms of asset quality?
The asset quality on prime and emerging should be almost similar. We don't see any change at all, and as far as affordable is concerned, it will be in line with industry. Today, we are better than the industry. Of course, it's not comparable because our book has not matured, but I think it will be in line with industry once the book matures.
Okay. Okay, sir. Thank you.
Thank you.
Thank you. We'll take our next question from the line of Vijay from Insightful Investment Managers. Please go ahead.
Yeah. Thank you so much for the opportunity. Most questions are answered. Just one thought. So for next year, FY26, given that the book mix keeps changing, will the NIMS also be slightly better in FY26?
Yes, definitely yes. Definitely yes. NIMs will be better.
Sir, how much in your estimates should the expansion be approximately?
No, short term, it is very difficult to predict. We'll be sharing plans for FY26 maybe after quarter four, but I think long term, what we mentioned, I think FY27, when we're talking about retail book of 1 lakh crore, our NIM should be about 4-4.1.
Sure. Thank you so much. Appreciate it. All the best.
Thank you. Ladies and gentlemen, we'll take that as the last question for today. I now hand the conference over to management for closing comments. Over to you.
Thank you, everyone, for joining us on the call. If you have any questions or answers, please feel free to get in touch with Investor Relations. The transcript of this call will be uploaded on our website. Thank you.
Thank you very much. On behalf of PNB Housing Finance Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines.