Q1 21/22

Aug 6, 2021

Ladies and gentlemen, good day and welcome to Q1 FY22 Earnings Conference Call of Brahman Enterprises Limited. As a reminder, all participant lines will be in the listen only mode and there will be an opportunity for you to ask questions after the presentation concludes. Please note that this conference is being recorded. I now hand the conference over to Mr. Hitesh Dada, Chief Investor Relations Officer from Piramal Enterprises Limited. Thank you. And over to you, sir. Hi. Good evening, everyone. Hope you are safe and in best of your health. I'm pleased to welcome you all to this conference call to discuss results. Our results materials have been uploaded on our website and you will like to download them and refer them during our discussion. The discussion today may include some forward looking statements and these must be viewed in conjunction with the risks that our businesses face. On the call today, we have with us our Chairman, Mr. Ajay Piramal Ms. Nandini Piramal, Chairperson Piramal Pharma Limited and Executive Director, Piramal Enterprises Mr. Rajesh Laddha, Group CFO and Executive Director, Piramal Enterprises Mr. Khushlu Jejina, Executive Director, Financial Services, PEL Mr. Jairam Sridharan, CEO of our Retail Financing Business and Mr. Vivek Valsraj, CFO of our company. With that, I would like to hand it over to our Chairman and would request him to share his initial thoughts. Over to you sir. Good day. Despite the headwinds from the second wave of COVID, we have delivered a resilient performance during the quarter. Our revenues remained largely stable at INR 2,900 crores and this is a mid reduction in the wholesale loan book which is in line with our strategy of making our loan book more diversified and granular. Despite the stable top line performance, our net profit has grown by 8% year on year to INR $5.34 crores. We continue to maintain a strong balance sheet with our equity base now at approximately 35,000 crores and our net debt has gone down by 50 since March 2019, thereby bringing down our net debt to equity to 0.8 as of the end of this quarter versus two times in March 2019. It would be a good thing to look at the journey of our financial services business since September 2018 when the financial crisis hit the NBFC sector and our journey can be categorized under three phases. The Phase one is consolidation. We have now largely completed the phase of consolidation with significant process progress over the last two years. We have built a resilient business model in the wake of the liquidity tightening in COVID-nineteen and other macroeconomic headwinds. We have achieved four major outcomes in this phase. First, improving of our capital adequacy. We've raised significant amount of capital and deleveraged our balance sheet. Our capital adequacy ratio today stands at 39% versus 22 as of March 2019 making us one of the most well capitalized NBFCs and HFCs in India. We have adequate growth capital for the next five years even after the completion of the DHFL acquisition. The second point is how we have reduced our loan book concentration. Our top 10 exposures have gone down by 30% since March from INR 18,000 crores to INR 12,800 crores in June '1. Today no amounts exceed the regulatory threshold of 15% of net worth. In addition, we have built conservative provisions as of this quarter end. Our total provisions stood at INR 2,750 crores that is 5.8% of our total AUM. We have diversified and shifted the borrowing mix towards a stable long term funding sources. We raised 34,000 crores of long term borrowings since March 2019 and replaced most of our short term CP borrowings. As a result, we now have a much stronger ALN profile with significant positive ALN gap across all buckets. As part of our efforts to diversify the borrowing mix, we raised debt through our maiden public bond issue in This issue received a healthy participation from retail investors and HNIs and we could raise INR $8.00 4 crores. The Phase II of the journey of financial services business is our transition and a quantum growth. With the Phase I largely behind us, we are now in Phase II, our transition from a wholesale NBFC to a well diversified financial services business. There are three components in this phase. The first is the DHFL acquisition. This acquisition I'm happy to state has been progressing well. Our resolution plan received the approval of NCLT in June 2021. Post the NCLT approval, a monitoring committee has been formed which includes members from the COC, the administrator and members from our management team. As per the IPC law, the monitoring committee has a duration of ninety days from the NC and T approval to complete the acquisition and we feel confident that we will achieve this. With the DHFL acquisition, our retail AUM is expected to grow by 5x and we expect to become one of the top five HFCs in India. The second part of our transition is the reduction in the wholesale book. As part of our strategy of transitioning our book from a largely wholesale to well diversified financial services business, we are consciously bringing down our wholesale book. Our book has come down by 27% in the wholesale from IN March 2019 to 38,000 crores in June 2021. We are also building organic retail engine, a technology driven multi product retail lending platform. In 2020, we embarked on the journey of building this technology led retail lending business, which is digital as its core and digital at the customer's end. We are building this platform with next gen technology capabilities with AI and machine learning deeply woven into the fabric of the business. In November, we launched our multi product retail lending platform and since then the business witnessed a healthy traction. We also launched multiple retail lending products thus expanding our product portfolio and have formed partnerships with fintech and consumer tech firms. We have onboarded top quality talent from large Indian banks, global tech giants to take the business forward. Most importantly, as part of our journey, we have incorporated learnings from the current environment to build a sound business model for the post COVID world. In fact, our new lending strategy of pivoting towards affordable and mass affluent categories in Tier two and Tier three cities has made our retail book more granular. The average sanctioned ticket size in retail for our secured lending products has declined from 75 lakh rupees to 20 lakhs. The end to end digital unsecured lending now contributes 6% of new originations by value and 75% of new customers originated into the Tiramal retail franchise. All these initiatives will result in significant change in our loan book with the share of retail lending moving closer to 50% in the near term. The third phase of our journey is to have a sustainable growth and profitability. First of all, in this third phase is the integration of DHFL and leveraging its vast network to grow the multi product retail lending business in the future. With the DHFL acquisition, we would have access to a vast network of 300 plus branches with majority of them being in Tier two, Tier three cities with 4900 employees and a sizable customer base of 1000000. Our teams will be working towards integrating our existing multi product retail lending platform with DHFL's network during the year. We aim to leverage DHFL's platform to cross sell multiple retail products offered as part of our digital platform thereby ensuring the continued future growth in the business. This would help us gradually increase scale in retail lending while addressing the diverse financing needs of the growing Bharat market. We now move towards the profitability in this next phase. We aim to deliver measured growth and profitability in the long run, while maintaining our focus on risk management, asset quality, capital adequacy and technology infrastructure and customer experience. The key factors that are expected to boost profitability in the near term post the DHML transaction include an immediate decline in the cost of borrowing, post the completion of the DHML transaction as this transaction will be partly funded by NCD's worth 19,550 growth at 6.75%. Post the completion of the DHFL transaction, we will the leverage of our financial services business will increase from 1.6 as of June to 2.5. Further with the growth in the retail loan book, the leverage could increase to 3.5% in the near to the medium term. Increased loan diversification as well, we will have about 50% retail in the near term and growth will potentially lead into lower borrowing costs in the coming years. Our change in product mix with the expansion of the product portfolio and through differentiated higher yielding products, we expect profitability of the retail lending business to improve in the medium term. Now I want to comment on our asset quality. The GNPA remains stable Q on Q with no major slippages despite the headwinds from the second COVID wave and in absolute terms remained stable. Our wholesale book declined during the quarter as I said in line with our stated strategy resulting in a marginal increase in the GNPA ratio. Also, we did not see any material slippages or write offs in the despite the challenging business environment. The key factors that have resulted in the asset quality remaining stable on this quarter are first of all in the wholesale loans, the real estate sector saw a revival of demand in the However, in the of the current year, the real estate sector has been impacted by the second wave of COVID in April 0 and May 0. The performance of our developer clients in the the sales declined quarter on quarter in line with industry. While sales dropped in April 0 and May 0 owing to the lockdown, we have seen an improving sales trend in June 0 and July 0. Our developer collections from homebuyers saw no major impact despite a quarter on quarter decline in sales. Collections at 85% to 90% of average of the past two quarters were there primarily because of the strong sales in the The construction activity and availability of labor too was not materially impacted and we are now close to pre COVID levels. However, given a potential risk of a third wave of COVID-nineteen, we continue to remain vigilant across our portfolio and maintain conservative provisioning to take care of any contingencies arising in the future. On the retail loans, the collection efficiency saw some impact due to the partial lockdowns imposed in the second wave. In June '21, it has bounced back to 96% that is nearly back to Dec. 0 levels. In collection efficiency further improved to 98% and bounce rates have normalized as well. Coming to the retail loans and DHFL, the collection efficiency at DHFL, which saw some impact in April 0 and May 0 has also seen a healthy pickup in the month of June 0. In fact, the DHFL retail portfolio is performing broadly in line with our expectations. Our near term focus now is to first effectively integrate DHFL with our financial services organization, ensure that the collections and asset quality of the combined entity remain healthy and generate synergies by cross selling our innovative product by leveraging DHFL's platform. I now want to turn to the pharma business. Our pharma business delivered a robust performance during the year during the quarter. The business registered a 31% revenue growth during the quarter delivering revenues of $13.60 crores and the pharma business contributed now 47% of PEL's top line for the This performance indicates the strength of our business model in a challenging business environment. Our EBITDA at INR 170 crores was up 56% compared to the same period last year. Fundamentally, in our pharma business, we observed seasonality in the EBITDA margin performance every year. A careful look at the trend over the last few years indicates that margins generally improved as the year progresses. The margins are broadly in line with that trajectory in fact improved over the last year. Coming to each of the businesses in the pharma space, our CDMO business grew by 17% during the quarter. We are witnessing a strong growth in the development order book driven by robust demand of sterile film finish in North America and strong demand for our API services across all geographies. We completed the acquisition of Hemopharma, a peptide API manufacturer during this quarter. We are carrying significant capacity expansion projects across multiple sites. Our integrated projects order book increased 8x from FY 2017 and our patent development program saw a 3x increase in the number of Phase three molecules from 10 in FY 2017 to 13 in the current year. Coming to our hospital generic business which largely recovered from the COVID impact and grew 43% during the quarter. We have now grown or maintained our market share in most markets and products. We saw strong sales of sevoflurane as demand recovered in The U. S. And expansion of key products in Europe and East Asia. The revenue of the India consumer healthcare business grew by 73% year on year during the despite a challenging environment. The performance was also ahead by strong growth in the COVID care portfolio. We have witnessed a 40% year on year growth over the last twelve months driven by our strategic initiatives. We have navigated the pandemic with agility. We have reinvested our profits for future business growth. We launched 20 new products since March '20. We are now able to sell our products across 22 e commerce platforms and are continuously investing in brand building through brand ambassadors for our key products. Each of our businesses in the pharma space has a compelling plan for their growth. We expect to grow by around 20% in the current year. We have delivered a 22% EBITDA for FY 2021 and we expect to deliver a similar margin for the full year. Additionally, we plan to do a few more acquisitions in the next two to three years. In summary, I would say in conclusion, our performance over the last two quarters reflects the resilience and the significant effort made towards building a solid foundation for our long term success. We remain cautiously optimistic for FY and are in a stronger position to tap growth opportunities across both our businesses. I am confident that both businesses will emerge as two strong companies with a good runway for growth in the long term. Thank you. If you wish to remove yourself from the question queue, you may press and 2. Participants are requested to use handsets while asking a question. Ladies and gentlemen, The first question is from the line of Kunal Shah from ICICI Securities. Please go ahead. Yes, congratulations for the resilient of such quality in this quarter as well. So two quick questions. The way we have highlighted in terms of net debt to equity post the DSFL transaction going up to 2.5 from 1.6. So that indicates in terms of maybe the net asset getting added 60,000 crores. So if you can just highlight maybe what is the kind of the retail plus wholesale mix and what is the kind of markdown which we are taking and ideally what could be the structure which we can see that now most of the I think the approvals are in place. That's the first question. Yes, good evening. So I think I'm seeing about the net debt to equity. We will be adding about 19,500 crore of debt versus the DHL transaction, so that debt will get added to the overall debt and therefore our leverage will increase from roughly about 1.6 to close to about 2.5. Crores. As far as the retail and the wholesale mix etcetera DHFL book is concerned, we will be doing the purchase price allocation now based on our total consideration of some 33,500 odd crore. And at that point in time, we'll be able to share the exact number in terms of how we are going to allocate to the retail book and wholesale book of DHSS. Also you wanted to know about the losses you said? Yes, in terms of the structure, so will it entirely maybe wholesale plus retail will get merged with our entity or there are like different structures which we are evaluating? No, no, no. The structure is already finalized. In fact, it's a plan, it's a part of the overall resolution plan. What we have proposed and what has been approved both by COC and the regulators including RBI that Piramal Capital and Housing Finance Company which is our company right now will be merging into DHFL. And therefore by that merger process, DHFL will become 100% subsidiary of Tiramal Enterprises Limited. And the shares of DHFL will get delisted and the existing NCDs also will get cancelled and we will be issuing basically PCSFL will be issuing 19,500 crores of NCDs to the existing lenders of the HFL. Name will change. I mean, of course, we'll change the name of the HFL too. We'll try and get Keramal Capital name back. Sure. Okay. And second, in terms of if you can just highlight the asset quality stage, three has been very steady. But in terms of the restructuring, last time we said it was $1,700 crores anymore restructuring or what is there in the pipeline? And the moment in the Stage two, did you see some sales building upon the Stage two or it was maybe as stable as Stage three? So, I'll take that. Basically, again, there has not been any significant movement in this quarter because as we have been sharing with you all from the last from the time this first COVID has come we have been doing the stress testing. Again if you see the major hotel deals which moved to stage two again there I want to qualify that the value of that asset remains is just that we wanted to move it because we saw some stress in that portfolio not that the asset the value of the asset remains so we just moved it to stage two and actually stage three was a very small deal which we moved to stage three. Again, I can confirm that the value of that will be fully recovered. So there's not going to be any worry on that. And restructuring? What's your question on restructuring? Any additional pipeline or something which we will look at? No, no. Okay. Okay. Thank you. The next question is from the line of Alpesh from Motilal Oswal. First question, just to the extension to the Kumar's question. We would be acquiring assets of roughly INR 60,000 crores and paying around INR 33,000 crores. All the difference would be recorded at the time of merger around INR 37,000 crores? So, we will be restating the so currently whatever is the book value of DHL, we will be restating those values in our books or in the books of BCHFL based on the payer valuation of all the assets of DHL. That will include the retail wholesale and everything else. We are now able to record it at 60,000 or 70,000 whatever is the carrying value of those assets are there in DSSL group. We will be doing purchase price allocation to these assets based on the fair valuation or realizable value of these assets into our books. Okay. So, is it fair to assume there would be a decent amount of capital reserve that could be created because of this currency? There will not be capital reserve but there will be some amount of provision which will come. So that's the outcome which is going to be based on the purchase price allocation as I said. Okay. And are we going to enjoy the type benefit on the losses which the DHFL has recorded in the past? DHFL has recorded very insignificant. They have not recorded tax losses in their books right now. But those whatever markdown we are going to do, we will get those tax losses. How recording etcetera will be done, we are still working on those numbers. But yes, as we markdown the numbers, those losses will be available to PGS as well. So, Alpesh, we will be able to give you more understanding in detail once we announce the transaction upon the completion of this whole thing, the entire process. So that time we'll be able to give you more clarity on some of these things. Got it. Hitesh, another question on Slide number 16 then where we show that the wholesale pool declined by around 27% from March, right? And there is a footnote over there that it does not include the asset taken over or the AIS outstanding of around INR 4,400. So how this entire thing was in this entire INR 4,400 is our share or the total amount of assets which have been transferred to AI, how does it work? So, it's less than 50% in hours. So, around 8,000 out of this 1,500 and so the difference which is around 13,000, 15 thousand per rows, 8,500 or 8,800 transferred AIS and there would be certain asset cycle last quarter we talked about around 1,300 crores related to the Omkar exposure and 5,000 crores will be the proper resum in that will have come. Is my understanding correct? Yes, Kansan, I'll take that quickly and we can confirm the exact numbers to you, but this includes our 50% share in the IIM which we've created with Apollo. This also includes the Madhya transaction which we've explained to you all during the March 0 results. So it's a combination of these two, but our share in IFRS is 50%. Okay. And last question related to the fintech partnership or the consumer type partnership, are all these partnerships exclusive to us? And if not, then what are the terms that and what ensures that we get the first right of refusal for the loans which have been originated by those fintech or the consumer tech companies? Yes, I'll be able to take that. Sure. No, Alpesh, these are not exclusive partnerships. There are no exclusive partnerships right now in the fintech world. And the way to actually think about this is there are going to be a few different lenders on the platform. Each lender is going to have a set of products available and a set of tech linkages or APIs that are set up. The APIs that work the best or that give the most seamless digital experience are the ones that will end up getting a lot of the business. You have to assume that you are doing your diligence from a modeling perspective and a credit risk management perspective at your side. In general, there is a lot of infrastructure that is put in place to make sure that there is no cherry picking of assets, Not just us, but every bank in the deal is going to be making sure that there is no cherry picking of assets. So, cherry picking is very, very rare. That's not something that one should worry a lot about. What one should worry about is, are you able to give the best and most seamless integration to the customer because that's when the first round of lead will actually come through to you rather than the leftover leads. Okay. And Zeyram, for consumer, you are the face, right? Consumer, it is the Piramal enterprises It's both Alpesh. It's both the lender as well as the fintech party. So the consumer can download my app and actually see everything. The consumer can see some of the details on the customer facing app as well. So, it's both the customer signs, of course, the agreement with just with us and all the loan information, etcetera, on the loan pages will all be branded Miramar. But they can actually access this particular loan's details usually on the fintech platform as well. Okay, great. I'll come back in the queue. Thanks. And I'll do that. Thank you. The next question is from the line of Tushar Manvani from Motilag Oswal. Please go ahead. Just on the pharma side, for the quarter, how much the Hema pharma would have added? Any ballpark number you would like to share? So, Pembotala, the transaction closed on For the quarter, the revenue is just 5 crores. So it's been significant overall from the quarter's performance. Good. And accordingly also if you could just extend it for the outlook for this MS pharma in terms of integration with Piraman? So the integration activities right now have commenced and the management teams are working with Hemo's management for execution of the plan for the current financial year. And in due course of time, we could also be merging Hemo as a legal entity with Piramal Pharma. Our business development teams have already commenced Delhi manufacturing side capabilities both from a contract manufacturing side as well as from a generic API side to all our existing customers. Got it. And just secondly, I would like to understand the seasonality nature of CDMO business? So, historically, we have seen that a lot of our contract manufacturing customers, they do tend to have higher offtake in the second half of the year, which is after Sept. 0, is typically when they have a lot of requirement for commercial volumes. And that's the reason why you see that a lot of sales and therefore higher volume of margin happens in the second half of the year. And this you would observe last as many years if you pick up the results of pharma business, you will see that that kind of cyclical trend is noticed. And just lastly about the two orders. Just lastly on the two orders, which are one which are more than 10,000,000, this would be spread over what period? So the one which is there in Lexington would be delivered within this fiscal year and the second which we have one for our Diguan facility to a significant extent would be delivered within this fiscal year and the balance would move to the next fiscal year. Of course, this depends upon certain other operational aspects also, but we do expect a split to happen between that year and next year, fifty-fifty. Got it. And just lastly, while the margin guidance is given, would it be possible to share the overall revenue outlook as well for FY 'twenty two? So we have already guided that our revenue growth will be in excess of 15%. So 20% we've already guided that. Thank you. That's it for my The next question is from the line of Abhijit Debrewal from Moti Raul Osborn. If I hear all the discussion on DHFL right, will it be fair to say that at this point in time, maybe we are not in a position to disclose the net accretion which will be there in the loan book? Net accretion to the overall loan book will be to the extent of about close to about INR 30,000 crores. But as I said, the allocation is yet pending, which we have to do for different set of assets which JLL has including the insurance stake etcetera. But allocation part is still pending. It will be INR 30,000 to INR 32,000 crore net accretion of assets, total assets. The second question that I had is, I think one of because Mr. Terrence also said that after this acquisition, maybe it will become among the top five HFCs in the country. So I think I mean with this transaction, I'm not sure if you will be getting that deposit license that DHS has, which would mean maybe you will have to apply for a deposit license separately or any thoughts around that? As we speak, deposit taking license still continues with DHFL. It's just that RBI has told them not to accept any deposits. We still believe or we still hope that we will get it. What we have been told is that we have to go back to RDI after the process is completed. So we are still hopeful, but let's see. Sure. And the last question that I had is, because we've been guiding investors that we will be looking at a separate listing of our financial services and pharma business. I was just trying to understand, I mean, what is the structure of the listed financial entity would be like because large part of your, VHSL loan book will come and sit in EHSL, which is obviously the reverse merge into DHSL. And then you will also have this multi asset platform and I'm guessing you will want to kind of park all the other products which are non HFC related in your NBFC. So when it eventually gets listed, how will it work? Will it the HFC maybe get listed and you'll have a NBFC subsidy which will house your this multiproduct platform products or how will it work? So, I think first thing first, I think pharma demerger is the simplest one because that's a straight vertical demerger. After that what will be left with is Piramal Enterprises Limited which is a list scope. And underneath that we will have Fininvest which is an NBFC as you rightly pointed out and we will have this merged DHL and DCHF1 which is an HFC. We are still figuring out as to what will be the best structure from a regulatory standpoint because there are regulatory requirements which an HFC needs to fulfill in terms of retail mortgages, in terms of overall real estate lending etcetera. So we are still figuring out as to whether it makes sense to have NVFC HFC separately whether to merge those etcetera, etcetera. But I think we are on the drawing board as Hitesh mentioned that once this merger is completed with DHL and we will then come back and probably announce as to what is the sector we are going to follow. So this will happen in say two parts. Karma as I said is a simple one. But this part which is more dominated by regulations we have to find a right choice and right answer at this stage. I would just like to add one sentence that in all of this interest of minority shareholders will definitely be taken care well and protected. Sorry, that is cool. And just one last question to Geram, maybe if you could remind us what are the new products that you are planning to introduce in And is there any thoughts at all around how do you plan to cross sell some of your retail products, organic retail products to DHFL customers? Thanks. That will be all from my side. Yes, Abhijit, absolutely. Let me take a second question first. Yes, 100%, we plan to cross sell the rest of our retail products to the AFFL customers. In fact, it would be our intention that the cross sell should start pretty much in the very post the integration. So we are making all the plans towards that. We are coming up with both the technology as well as the cross sell propensity models, etcetera. So I'm fairly confident that we'll be ready to start cross selling some of our products, particularly on the unsecured shorter duration side to the DIABLE base pretty much in post integration. Now, in terms of what is our product mix that we are thinking about, needless to say, the moment the integration gets completed, our retail business will become very heavily home loans dominated. So, let's say about 80% will be residential home loans, about 10%, fifteen % will be loan against property and some other sort of property backed lending and there'll be a little bit of other stuff. In general, our belief is that going forward, we want to still retain or in the foreseeable future, given the size of the DHFL transaction, you will probably still see secured businesses, whether it is housing or lab or small business lending or used car financing, etcetera. All of that put together will roughly be about 80% and some of the end to end digital unsecured lending stuff will probably be around 20% of our book is probably where we are headed. In terms of specific product categories, used car financing is our most recent product category, which we launched last quarter. We are putting a lot of focus in that. We've got now two platform tie ups there. We're tying up with two more and then we are also starting to do on field physical tie ups with dealerships. So that's an area we're putting a lot of focus on. We are also keenly evaluating the two wheeler financing and education financing space where we believe there are a lot of opportunities. So, we will see how that goes. We've not made up our minds, but we haven't lost them yet. We might do a few pilots, but those are areas we are evaluating very, very closely right now. This is very useful. All the best for the entire CRM will be. Thank you. The next question is from the line of Vinod Jain from Wells Fargo Advisors. Please go ahead. Congratulations on the resilient set of numbers. My question is related to the net interest margin. The NIM for the financial year 2021 was 5.6%, but has gone down to 4.5% in What is the review going forward on the earnings? So, if you want to compare so let me start by saying that as a strategy, we have said and we are doing we are following that strategy where we are saying that we will be reducing our wholesale book. If you compare first point the yields and the margins that is March, then you'll find that we are almost at the same level or slightly better than March. As we are reducing our wholesale book, so the mix of the book is changing. As the structured yields are going away which were at high yields earlier and the fresh investments which are happening are happening on a very minor day but they are happening for concession finance and much more stronger deals so to say. So that's where you will find that the yields have come down. But whether it's last quarter which was March '21, now they are stable. So if you compare with June 0 where from that quarter on the book has come down and so have the yields. But if you look at the March 0 last quarter, they are stable or slightly better than March. I'll just add to what Rajesh said. So, we have consistently been saying about this strategy that the wholesale book will come down, the single borrower will come down which we are achieving quarter on quarter. Also, what to add to what Rajesh said, we have been also consistently quarter on quarter saying one thing that we are collecting a lot of money and we are also using it to complete our other projects. Because in real estate you need to complete the project. So as our portfolio becomes more and more and more mature, the interest rates will come down and which is actually a good thing, ultimately it is the portfolio becomes far more safer. So, the view is that going forward the NINs will be maintained? Yes, more or less it will be maintained, yes, as of now, yes. Yes. So my second question is related to the ROE. What can be the expected can it reach double digit in 2022, '20 '20 03/00? So, I think you must appreciate that the last two years focus has been around balance sheet strengthening and preserving cash and all what we have said has been done in last two years in terms of balance sheet numbers and ALM etcetera. As far as ROEs are concerned if you see even this quarter and I think it took us a little while, but if you see the cost of borrowings are now coming down. This quarter, the cost of borrowings have come down from 10.8% for the whole year last year to about 10.1%. Yes. As soon as DHFL happens and we are going to issue this INR 20,000 crores of liability to the lenders, existing lenders of DHFL, our overall cost of borrowing will drop to about 9.2%, nine point three % immediately. Yes. To add to that, our incremental borrowing what we are doing currently is in the range of eight fifty, eight 70 five levels even on PCH FL balance sheet. Yes. And we would be going for or we'll be pitching very strongly for a rating upgrade because our concentration between retail and wholesale would become fifty-fifty. So the minute we get a rating upgrade, another fifty-sixty bps or on a conservative side even 50 bps will get applied to the entire volume. So, it will come down from that level onwards, but that's like six months away. So, it's coming down. So, that's going to make a major impact on ROEs. Number two, as our debt to equity improves as Mr. Kiramal also said that immediately with DHL merger it's going to move from 1.6 to 2.5 and as our book grows that's going to get funded through debt and therefore the debt to equity will move from 2.5 to 3.5 in say twelve to fifteen months time. Our product mix also is going to change as Jerome was mentioning that's going to improve our yields in terms of retail lending towards the product which are going to get us higher yields. So, mix of all these three, we anticipate that ROEs will from this level should be definitely double digit in near future. Very well. Thank you. Thank you. Next question is from the line of Prakash Agarwal from Access Capital Limited. Please go ahead. Yes, hi, good evening. My question is on the growth guidance for the pharma business. So we grew about 31% for the quarter and we also would have a more full consolidation of the acquisition. We are talking about some acquisitions over the year and years after. So are we talking about 10%, twelve % growth for the remaining nine months? I mean, it works out to be around 10% kind of growth. So if you are considering the full impact of the existing acquisition, then that accounts for about 5% to 6% of the total growth that we are talking about. Yes, I mean some growth from any future acquisition and MO acquisition and the fact that you already done 21%. Our growth guidance does not include any future acquisitions. It's only based on what we have businesses in hand right now. Yes. So even if we did just MO and 31% for the quarter the remaining nine months, are we being too conservative or this is the We would rather be keen to beat the guidance that you know be very close to the margin or something like that. Okay. No, I was just thinking if there is any completion in any way As a policy our company would tend to give conservative guidance and then would perform better than the guidance that we generally give. So that's the policy that we generally try to follow. Okay. And second observation was on the margin trajectory. So as you mentioned and shown in the presentation also, it picks up given the seasonality. So seasonality is more so in which business? Is it only the CDMO or you have this complex hospital generated business in that also? And I understand the share is already high in these two businesses. So it's got to do with operating leverage, right? So the top line is also higher. So I'm just trying to connect the dots. So the seasonality is primarily in our contract manufacturing business. Though if you look at the other two businesses also, you would see that generally the sales towards the second half is particular. Overall at the pharma level is about 45% comes in the first half and about 55% comes in the second half. From an operating margin perspective, you will also see that it's about 35% in the first half and 65% in the second half, but those are primarily driven by the contract manufacturing business. Okay. Okay. Thank you. Thank you. Next question is from the line of Tejas Parikh from Citi. Please go ahead. Hi, thanks for the opportunity. So post DHFL integration, your branch network will reach to close to 300. So if you could provide some color on your branch expansion strategy? And the second question would be, if you could provide us the current restructured book, where does it stand? Jairam, you want to take the Yes. Yes, let me take the branch thing and then you can jump in, Rajesh. On the branches, yes, we will start with about 300 odd branches of DHFL plus our existing branches. And we stated this a couple of quarters ago as well and I'll restate that our intention is in the next sort of three to four years, we want to be present in about 1000 centers in the country. So you will see us expanding on that. Now the 1000 centers might not necessarily need a thousand branches, it might be a little bit less than that. But you are looking at a significant expansion of the branch fees even post DHFL over the next three, four years. And it would mostly be concentrated in the Tier one and Tier two cities? No, Tier two, Tier three and Tier four cities. Tier one likely will not be doing a whole lot. Okay. Let me take the second question on your restructuring. In fact, I forgot to mention to Kunal Shah also this question, which he had asked. Last year, we had actually taken four accounts in restructuring. And as we speak today ultimately we only did two accounts, one in real estate which is around INR 158 crores and the other is the Mitra Energy where all the lenders did the restructuring. To tell you what is happening on the ground, the real estate project actually has started once again and we will be actually finishing the project in December 2021 itself. Coming to Maitra Energy, we had said this last quarter also that we were getting ready to put this asset and company up for sale because with that interest in renewable energy again today worldwide and this is one of the few assets now in India which gives a real good scale for somebody to take over. So that exercise has already started. In fact, we should be receiving before the September, the non binding bids. As of today, more than 15 top renewable companies have signed the NDAs for looking at this company. So this is the status of those two restructured accounts. So the one you said was INR 158 crores and the other one the Miter Energy? What are the $10.62. 10 60 2. And both are active accounts. They are not NPAs. Okay. Thank you, sir. Thanks a lot. The next question is from the line of Bharat Seid from Quest Investment Advisors. Please go ahead. Hi, congratulations Mr. Piramal and Piramal team. So my question first is on the pharma side. When we are talking about HMO margin, is that fair understanding, is it better higher than our overall pharma business? Can you please repeat the question? See, M. O. Margin, which we acquired in this June 2021, is that better than the overall overall Pharma business? Yes. So the overall margin profile of Hemo is higher than what is the rest of the Pharma business. For this quarter, Hemo is insignificant in terms of overall financials as I mentioned. It's just 5 crores in terms of sales. No, I understand. But going ahead we are also maintaining a margin of same as level when our generic business which is a higher margin were lower. So with growing all these two business, so don't we think is it not fair to understand that margin may go up? So, there are two things. One of course is Hemo currently constitutes less than 5% of the total sales of our pharma business. Correct. Secondly, the growth in the margins in the quarters ahead is largely driven by enhanced sales that will come in, in the second half of the year. Also, we've already given a stated guidance that in our Consumer Products business, we will be significantly increasing our sales promotion in the form of reinvesting the EBITDA so that we can get higher exponential top line growth. So to that extent, we will see erosion of margin as well as consumer product business is concerned. So that's why we have given guidance of overall maintaining margins nearly the same levels as it was in FY 'twenty one. And second point with the lot of new products coming in Phase three and which will start contributing over time, so do we think that over a period couple of two, three years, our seasonality will not be much there? So, it is difficult to predict in terms of seasonality whether all of these bakery was eventually becoming commercial. Ultimately seasonality is driven by the fact that when is the customer actually taking the products for manufacturing the end formulations that they are in and it depends upon their demand requirements. So, product moving commercial from Phase III is not necessarily an indication of the seasonality going on. Okay. And is it fair understanding to our previous participant question, the split of the company where pharma will be disintegrated and will be listed separately, so shareholder of Piramal will get the share of pharma business, is that fair understanding? Yes, existing shareholders of Piramal Enterprises Limited will get shares of the pharma, Paramount Pharma Limited separately, incrementally. Okay. And now coming to this technology platform, so one is that we are partnering and second, is it fair understanding that we are also building our own platform? Jairam? Yes, absolutely. That is the right understanding. We are building our own platform. In fact, we have built our own platform. We took six months, seven months last year before we went live to actually build the platform. And as Chairman mentioned in his opening remarks, we have put together a very strong team with of engineers based out of Bangalore. So we've got a full team in Bangalore, which does our own engineering. So a lot of our software development we are doing in house. And so we have the intention to use that team to do all of our platform development. So for example, in this quarter, we went live with our customer service app for our existing customers, existing DRAML customers and that app went live and we were able to develop it ourselves within ninety days. So it is something that is a technology product that we just created ourselves without any need to work with an external party or partner with anyone. So is it fair understanding over a period once our full app will be in a place, we may not go for a partnership and we'll leverage our whole business through our own app? I would say that there are different kinds of needs that are fulfilled by different partnerships. Each partner has their own customer access and distribution muscle. So, you do want to use some of their strengths as well. So, there will be something which we will just do ourselves, which will probably be the bulk of it. But there will be niches where you want to leverage the strength of existing partners. So, in that scenario, how do we cross sell for our customer on the partner platform and same customer on our own app? Ape? When we get into a partnership, we work out all the commercial arrangements with respect to customer ownership right upfront. Usually, the arrangement is that for the specific products that we are selling, let us say it's a short duration unsecured lending product that we are selling with a partner, that particular product, if we want to cross sell again to that customer, we will probably go through the same partner's route. But for every other product, we have full liberty to go ahead and cross sell to the customer on our platform. Okay. And how much investment do we plan because we saw in annual report that last year in this two technology company we had incurred a loss of I request you to kind of join the queue again, give other people as well to us. Thank you. The next question is from the line of Saket Mehrotra from TASK Investments Limited. Please go ahead. Thank you. I have a question for Jairam. Jairam, could you throw some light on the granularity of the retail book mix? And in terms of the fintech partnership that we have, say, for the digital lending, just wanted to understand how do the commercials work? Do you get something which is upfront and how are the risks sort of managed? Sure. So the granularity question first, the business the Chairman referred to this as well in his opening remarks. The granularity has been increasing quite substantially ever since we started this sort of this new gen business. On our home loans business, our average ticket size has now fallen to about 20 lakhs. Home loans and small business all sort of put together, our average ticket size is now about 20 lakhs for new sanctions that we are doing as opposed to the 75 lakhs average ticket size that we used to have in the sort of previous generation of our business. So in this post COVID environment, the new business that we have launched, it's a 20 lakhs average ticket size business on all of the secured sites. As far as the partnerships driven or direct to customer digital unsecured is concerned, there our average ticket size is INR 17,000. So it's a much, much smaller ticket size that we're doing and obviously it's a much shorter duration as well, anywhere from six to twelve months. So that's the way we are looking at these two pockets. Now to your question of risk management in unsecured, if it is direct to customer unsecured from our side, then it's pretty straightforward. You know how that works, so I'm not going to repeat that. In a partnership driven model, what tends to happen is there is a partnership credit scorecard that are used and we have our own credit scorecards that we overlay on top of that. And that combined thing is what is being used to actually underwrite the customer at the front end. Usually, in the initial stages of the partnership and right now we are in initial stages with all partners, so in practically all of these cases, there will be some sort of an FLG type arrangement where initial losses are covered through the partnership arrangement itself. Once we develop enough confidence in the pipeline that we are seeing through a partner, that's when we actually go past that and start taking the entire risk on our balance sheet. Okay. And would you be in a position to sort of maybe tell us the split between the products or is that too detailed? Not right now. We can talk about it offline at some point if you want. Okay. I have a question on the pharmaceutical business. We had we've sold our business to others a while back. So is there and we've spoken about the priority of reentering the domestic formulations business. So the question is do we have any pipeline for doing some sort of inorganic acquisition or are we doing it in house and is there any non compete that we have with Abid? So last thing first, the non compete which was there got over in 2018. We are free to go back in domestic market. We keep looking at opportunities as far as inorganic opportunities are concerned at the right time and the right valuation etcetera we will decide. But pipeline is there. We keep evaluating those opportunities. Okay. Thanks a lot. Thank you very much. Participants are requested to ask two questions per participant. The next question is from the line of Anand Shah from Jainan Securities. Please go ahead. Yes. Thanks for the opportunity. Sir, I have just one question pertaining to DHFL. As per the approved dissolution plan, the company has committed to infuse equity of INR 3,800 crores in DHFL within one year. How the company plans to infuse this amount of INR 3,800 crores, if you can throw light on that? So, as it is when we are acquiring DHL, we are supposed to be paying 14,700 crores of cash consideration out of 34,200 and out of 14,700 crores the cash available on DHFL balance sheet will be about 20,500 crores. So as a matter of fact, we will be paying from PCSFL balance sheet close to about 4,000 crores. On Day one itself? Yes. So, sir, this would be the equity capital infusion that would happen? It's a while it's returned that we will be choosing equity, but from a structuring standpoint it doesn't have to necessarily go as equity because in balance sheet we already have enough net worth. So, it will not go as equity, it will go as inclusion. Okay, sir. Thanks. Thank you very much. Ladies and gentlemen, due to time constraint that will be the last question for today. I will now hand the conference over to Sanitesh Dada for closing comments. Thanks, everyone. If you have more questions, please feel free to reach out to the IRF team. Thank you. Thank you very much. On behalf of Piramal Enterprises Limited, that concludes this conference. Thank you for joining us. You may now disconnect your lines. Thank you.